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As filed with the Securities and Exchange Commission on October 13, 2017.

Registration No. 333-          

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

 

FORM S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

 

 

Bandwidth Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware		7372		56-2242657
(State or other jurisdiction of incorporation or organization)		(Primary Standard Industrial Classification Code Number)		(I.R.S. Employer Identification Number)

900 Main Campus Drive

Raleigh, NC 27606

(800) 808-5150

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

 

 

David A. Morken

Chairman and Chief Executive Officer

Bandwidth Inc.

900 Main Campus Drive

Raleigh, NC 27606

(800) 808-5150

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

 

 

Copies to:

 

Michael Benjamin, Esq. John Chory, Esq. Shagufa Hossain, Esq. Latham & Watkins LLP 885 Third Avenue New York, NY 10022 (212) 906-1200		W. Christopher Matton, Esq. General Counsel Bandwidth Inc. 900 Main Campus Drive Raleigh, NC 27606 (800) 808-5150		Sophia Hudson, Esq. Richard D. Truesdell Jr., Esq. Davis Polk & Wardwell LLP 450 Lexington Avenue New York, NY 10017 (212) 450-4000

 

 

Approximate date of commencement of proposed sale to public: As soon as practicable after this Registration Statement is declared effective.

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

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

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

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

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

 

Large accelerated filer		☐		Accelerated filer		☐
Non-accelerated filer		☒  (Do not check if a smaller reporting company)		Smaller reporting company		☐
				Emerging growth company		☒

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 to Section 7(a)(2)(B) of the Securities Act.  ☐

 

 

CALCULATION OF REGISTRATION FEE

 

Title of Each Class of Securities to be Registered		Proposed Maximum Aggregate Offering Price(1)(2)		Amount of Registration Fee(2)
Class A common stock, $0.001 par value per share		$85,000,000		$10,583

(1)	Estimated solely for the purpose of computing the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933, as amended.

(2)	Includes the additional shares that the underwriters have the option to purchase from the Registrant, 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 of 1933 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.

 

 

 

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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.

 

PROSPECTUS (Subject to Completion)

Issued             , 2017

Class A Shares

 

CLASS A COMMON STOCK

 

 

Bandwidth 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 of Class A common stock. We anticipate that the initial public offering price will be between $                 and $                 per share.

 

 

Following this offering, we will 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 will be identical, except with respect to voting and conversion rights. Each share of Class A common stock will be entitled to one vote per share. Each share of Class B common stock is entitled to ten 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 5% stockholders, and their respective affiliates, holding approximately     % of the voting power of our capital stock following this offering.

 

 

We intend to apply to list our Class A common stock on the NASDAQ Global Select Market under the symbol “BAND.”

Upon completion of this offering, we will not be a “controlled company” under the corporate governance rules for NASDAQ-listed companies. However, within          days, we expect we will become a “controlled company” under the corporate governance rules for NASDAQ-listed companies. See “Prospectus Summary—The Offering—The Reorganizations.”

 

 

We are an “emerging growth company” as defined under the federal securities laws and, as such, have elected to comply with certain reduced public company reporting requirements for this prospectus and future filings. Investing in our Class A common stock involves risks. See “Risk Factors” beginning on page 17.

 

 

PRICE $         A SHARE

 

 

 

Price to Public

Underwriting Discounts and Commissions

Proceeds to Company(1)

Per share

$

$

$

Total

$

$

$

 

(1)	See the section titled “Underwriters” for additional information regarding compensation payable to the underwriters.

We and the selling stockholders have granted the underwriters the right to purchase up to an additional              shares of Class A common stock, of which 50% will be sold by us and the remaining 50% will be sold by the selling stockholders, to cover over-allotments at the initial public offering price less the underwriting discount. We will not receive any proceeds from the sale of shares by the selling stockholders.

Neither the Securities and Exchange Commission nor any other regulatory body has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

The underwriters expect to deliver the shares of Class A common stock to purchasers on                 , 2017.

 

 

 

MORGAN STANLEY		KEYBANC CAPITAL MARKETS		BAIRD

 

CANACCORD GENUITY		JMP SECURITIES

 

 

                , 2017.

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52 Million    PHONE NUMBERS* 99 . Billion MESSAGES** 338 EMPLOYEES* 18 Years OF BUILDING UP 26.5 Billion MINUTES** HQ RALEIGH, NC 8 Million    911-ENABLED PHONE NUMBERS* BANDWIDTH

We develop & deliver the power to communicate *As of June 30, 2017, **For the twelve months ending on June 30, 2017.

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POWERED BY bandwidth

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“Choosing Bandwidth’s APIs built atop their own network meant we could cut out an unnecessary layer of complexity and grow adoption at an even faster rate. With our original provider, we knew scalability was going to be an issue. Bandwidth was able to support our high volume of users, without impacting deliverability or our bottom line.” Jeff Zwelling Chief Operating Officer ZipRecruiter “Bandwidth shares our dedication to providing WebEx clients with the most reliable service in the conferencing industry. Their customer-centric approach to service gives us the confidence we can deliver world class services to our global customer base.” Gagan Pabla Director of Service Operations Cisco-WebEx “We’ve worked with Bandwidth for over a decade. The Bandwidth software platform and network give us the flexibility, quality, and economics essential for our success. Call quality is the backbone of Dialpad. Without it, the freedom to connect everyone, be everywhere, and create anything doesn’t stand a chance. With the help of Bandwidth, we deliver the most reliable, highest quality voice system out there.” Craig Walker Founder & Chief Executive Officer Dialpad “Bandwidth and team are true partners. They began with us at the concept stage and delivered for us all the way through launch and beyond. These are innovative guys who are more flexible, transparent, and more agile than any network provider I’veever worked with.” Greg Woock Founder & Chief Executive Officer Pinger/Sideline “One of our highest priorities at Rover is to deliver superior customer service; Bandwidth’s telecom tools allow us provide a convenient mobile experience. SMS enables sitters and pet owners to easily communicate through channels they’re used to. Bandwidth allowed us to scale and meet our growing need with minimal transition costs.” Philip Kimmey Co-Founder & Director of Software Development Rover.com WebEx THE POWER TO COMMUNICATE DEVELOP & DELIVER THE POWER TO COMMUNICATE

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Through and including                 (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.

 

 

We and the selling stockholders have not authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectuses we have prepared or have been prepared on our behalf or to which we have referred you. We, the selling stockholders and the underwriters take no responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. We and the selling stockholders 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 Class A common stock.

For investors outside the United States: None of we, the selling stockholders or any of the underwriters have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside of the United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of the shares of Class A common stock and the distribution of this prospectus outside of the United States.

 

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RISK FACTORS

Investing in our Class A common stock involves a high degree of risk. You should carefully consider the following risk factors, as well as the other information in this prospectus, before deciding to invest in our Class A common stock. The occurrence of any of the following risks could harm our business, financial condition, results of operations or prospects. In that case, the trading price of our Class A common stock could decline, and you may lose all or part of your investment.

Risks Related to Our Business

The success of our growth and expansion plans depends on a number of factors that are beyond our control.

We have grown our business considerably over the last several years. We cannot guarantee that we will be able to maintain our growth or that we will choose to target the same pace of growth in the future. Our success in achieving continued growth depends upon several factors including:

 

•

the availability and retention of qualified and effective personnel with the expertise required to sell and operate effectively or successfully;

 

•

the overall economic health of new and existing markets;

 

•

the number and effectiveness of competitors;

 

•

the pricing structure under which we will be able to purchase services required to serve our customers;

 

•

the availability to us of technologies needed to remain competitive; and

 

•

federal and state and regulatory conditions, including the maintenance of state regulation that protects us from unfair business practices by traditional network service providers or others with greater market power who have relationships with us as both competitors and suppliers.

The market in which we participate is highly competitive, and if we do not compete effectively, our business, results of operations and financial condition could be harmed.

The market for cloud communications is rapidly evolving, significantly fragmented and highly competitive, with relatively low barriers to entry in some segments. The principal competitive factors in our market include completeness of offering, credibility with developers, global reach, ease of integration and programmability, product features, platform scalability, reliability, security and performance, brand awareness and reputation, the strength of sales and marketing efforts, customer support, as well as the cost of deploying and using our services. Our competitors fall into two primary categories:

 

•

CPaaS companies, such as Twilio and Nexmo, that offer a narrower set of software APIs, less robust customer support and fewer other features while relying on third-party networks and physical infrastructure; and

 

•

network service providers that offer limited developer functionality on top of their own networks and physical infrastructure, such as AT&T, Level 3 and Verizon.

Some of our competitors and potential competitors are larger and have greater name recognition, longer operating histories, more established customer relationships, a larger global reach, larger budgets and significantly greater resources than we do. In addition, they have the operating flexibility to bundle competing products and services at little or no incremental cost, including offering them at a lower price as part of a larger sales transaction. As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or customer requirements. In addition, some competitors may offer services that address one or a limited number of functions at lower prices, with greater depth than our services or in different geographies. Our current and potential competitors may develop and

 

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market new services with comparable functionality to our services, and this could lead to us having to decrease prices in order to remain competitive. In addition, some of our competitors have lower list prices than us, which may be attractive to certain customers even if those services have different or lesser functionality. If we are unable to maintain our current pricing due to the competitive pressures, our margins will be reduced and our business, results of operations and financial condition would be adversely affected. Customers utilize our services in many ways, and use varying levels of functionality that our services offer or are capable of supporting or enabling within their applications. Customers that use many of the features of our services or use our services to support or enable core functionality for their applications may have difficulty or find it impractical to replace our services with a competitor’s services, while customers that use only limited functionality may be able to more easily replace our services with competitive offerings.

With the introduction of new services and new market entrants, we expect competition to intensify in the future. In addition, some of our customers choose to use our services and our competitors’ services at the same time. Moreover, as we expand the scope of our services, we may face additional competition. Further, customers and consumers may choose to adopt other forms of electronic communications or alternative communication platforms, including developing necessary networks and platforms in-house.

Furthermore, if our competitors were to merge such that the combined entity would be able to compete fully with our service offering, then our business, results of operations and financial condition may be adversely effected. If one or more of our competitors were to merge or partner with another of our competitors, the change in the competitive landscape could also adversely affect our ability to compete effectively. In addition, pricing pressures and increased competition generally could result in reduced revenue, reduced margins, increased losses or the failure of our services to achieve or maintain widespread market acceptance, any of which could harm our business, results of operations and financial condition.

We presently operate in the United States and provide certain limited services in Canada. Our IP voice network, which is at the core of our product offerings, is located in the United States and, absent existing or future customer demand, we have no immediate plans to expand our network internationally. Our current and potential competitors have developed and may develop in the future product solutions that are available internationally as well as domestically. To the extent that customers seek product solutions that include support and scaling internationally, they may choose to use other service providers to fill their communication service needs. Furthermore, while we believe the U.S. market is sufficiently large and expanding to allow us to continue to grow our business, we may face slower growth due to our lack of exposure to international markets. Each of these factors could lead to reduced revenue, slower growth and lower brand name recognition amongst our industry competitors, any or all of which could harm our business, results of operations and financial condition.

If we are unable to attract new customers in a cost-effective manner, then our business, results of operations and financial condition would be adversely affected.

In order to grow our business, we must continue to attract new customers in a cost-effective manner. We use a variety of marketing channels to promote our services, our Bandwidth Communications Platform, and we periodically adjust the mix of our marketing programs. If the costs of the marketing channels we use increase dramatically, then we may choose to use alternative and less expensive channels, which may not be as effective as the channels we currently use. As we add to or change the mix of our marketing strategies, we may need to expand into more expensive channels than those we are currently in, which could adversely affect our business, results of operations and financial condition. We will incur marketing expenses before we are able to recognize any revenue that the marketing initiatives may generate, and these expenses may not result in increased revenue or brand awareness. We have made in the past, and may make in the future, significant expenditures and investments in new marketing campaigns, including using a significant portion of the proceeds of this offering to expand our sales and marketing efforts as further disclosed in “Use of Proceeds.” For example, our sales and marketing efficiency, which is calculated as the result of CPaaS revenue for the year ended December 31, 2016 less CPaaS revenue for the equivalent period in the prior year divided by sales and marketing expenses for the

 

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year ended December 31, 2015, was 181%. We cannot assure you that any new investments in sales and marketing, including any increased focus on enterprise sales efforts, will lead to the cost-effective acquisition of additional customers or increased sales or that our sales and marketing efficiency will be consistent with prior periods. If we are unable to maintain effective marketing programs, then our ability to attract new customers could be materially and adversely affected, our advertising and marketing expenses could increase substantially and our results of operations may suffer.

The market for some of our services and platform is new and unproven, may decline or experience limited growth and is dependent in part on enterprises and developers continuing to adopt our platform and use our services.

We have been developing and providing a cloud-based platform that enables developers and organizations to integrate voice and messaging communications capabilities into their software applications. This market is relatively new and unproven and is subject to a number of risks and uncertainties. We believe that our future success will depend in large part on the growth, if any, of this market. For example, the utilization of software APIs by developers and organizations to build communications functionality into their applications is still relatively new, and developers and organizations may not recognize the need for, or benefits of, our services and platform. Moreover, if they do not recognize the need for and benefits of our services and platform, they may decide to adopt alternative services and/or develop the necessary services in-house to satisfy their business needs. In order to grow our business and expand our market position, we intend to focus on educating enterprise customers about the benefits of our services and platform, expanding the functionality of our services and bringing new technologies to market to increase market acceptance and use of our platform. Our ability to expand the market that our services and platform address depends upon a number of factors, including the cost, performance and perceived value associated with such services and platform. The market for our services and platform could fail to grow significantly or there could be a reduction in demand for our services and platform as a result of a lack of customer acceptance, technological changes or challenges, competing services, platforms and services, decreases in spending by current and prospective customers, weakening economic conditions and other causes. If our market does not experience significant growth or demand for our services and platform decreases, then our business, results of operations and financial condition could be adversely affected.

We must increase the network traffic and resulting revenue from the services that we offer to realize our targets for anticipated revenue growth, cash flow and operating performance.

We must increase the network traffic and resulting revenue from our inbound and outbound voice calling, text messaging, emergency voice functions, telephone numbers and related services at acceptable margins to realize our targets for anticipated revenue growth, cash flow and operating performance. If:

 

•

we do not maintain or improve our current relationships with existing key customers;

 

•

we are not able to expand the available capacity on our network to meet our customers’ demands in a timely manner;

 

•

we do not develop new large wholesale and enterprise customers; or

 

•

our customers determine to obtain these services from either their own network or from one of our competitors,

then we may be unable to increase or maintain our revenue at acceptable margins.

Our business depends on customers increasing their use of our services and any loss of customers or decline in their use of our services could materially and adversely affect our business, results of operations and financial condition.

Our ability to grow and generate incremental revenue depends, in part, on our ability to maintain and grow our relationships with existing customers and to have them increase their usage of our Bandwidth

 

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Communications Platform. If our customers do not increase their use of our services, then our revenue may decline and our results of operations may be harmed. Customers generally are charged based on the usage of our services. Most of our customers do not have long-term contractual financial commitments to us and, therefore, most of our customers may reduce or cease their use of our services at any time without penalty or termination charges. We cannot accurately predict customers’ usage levels and the loss of customers or reductions in their usage levels of our services may each have a negative impact on our business, results of operations and financial condition. If a significant number of customers cease using, or reduce their usage of, our services, then we may be required to spend significantly more on sales and marketing than we currently plan to spend in order to maintain or increase revenue from customers. Such additional sales and marketing expenditures could adversely affect our business, results of operations and financial condition.

If we are unable to increase the revenue that we derive from enterprises, our business, results of operations and financial condition may be adversely affected.

We currently generate all of our revenue from enterprise customers. Our ability to expand our sales to enterprise customers will depend, in part, on our ability to effectively organize, focus and train our sales and marketing personnel and to attract and retain sales personnel with experience selling to enterprises. We believe that there is significant competition for experienced sales professionals with the skills and technical knowledge that we require. Our ability to achieve significant revenue growth in the future will depend, in part, on our ability to recruit, train and retain a sufficient number of experienced sales professionals, particularly those with experience selling to enterprises. In addition, even if we are successful in hiring qualified sales personnel, new hires require significant training and experience before they achieve full productivity, particularly for sales efforts targeted at enterprises and new territories. Our recent hires and planned hires may not become as productive as quickly as we expect and we may be unable to hire or retain sufficient numbers of qualified individuals in the future in the markets where we do business.

With respect to enterprise customers, the decision to adopt our services may require the approval of multiple technical and business decision makers, including security, compliance, procurement, operations and IT. In addition, while enterprise customers may quickly deploy our services on a limited basis, before they will commit to deploying our services at scale, they often require extensive education about our services and significant customer support time, engage in protracted pricing negotiations and seek to secure readily available development resources. In addition, sales cycles for enterprises are inherently complex, and some enterprise customers may not generate revenue that justifies the cost to obtain such customers. In addition, these complex and resource-intensive sales efforts could place additional strain on our limited product and engineering resources. Further, enterprises, including some of our customers, may choose to develop their own solutions that do not include our services. They also may demand reductions in pricing as their usage of our services increases, which could have an adverse impact on our gross margin. Our efforts to sell to these potential customers may not be successful. If we are unable to increase the revenue that we derive from enterprises, then our business, results of operations and financial condition may be adversely affected.

If we do not develop enhancements to our services and introduce new services that achieve market acceptance, our business, results of operations and financial condition could be adversely affected.

Our ability to attract new customers and increase revenue from existing customers depends in part on our ability to enhance and improve our existing services, increase adoption and usage of our services and introduce new services. The success of any enhancements or new services depends on several factors, including timely completion, adequate quality testing, actual performance quality, market-accepted pricing levels and overall market acceptance. Enhancements and new services that we develop may not be introduced in a timely or cost-effective manner, may contain errors or defects, may have interoperability difficulties with our Bandwidth Communications Platform or other services or may not achieve the broad market acceptance necessary to generate significant revenue. In certain instances, the introduction of new services requires the successful development of new technology. To the extent that upgrades of existing technology are required for the

 

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introduction of new services, the success of these upgrades may be dependent on reaching mutually acceptable terms with vendors and on vendors meeting their obligations in a timely manner.

Furthermore, our ability to increase the usage of our services depends, in part, on the development of new use cases for our services, which may be outside of our control. Our ability to generate usage of additional services by our customers may also require increasingly sophisticated and more costly sales efforts and result in a longer sales cycle. If we are unable to successfully enhance our existing services to meet evolving customer requirements, increase adoption and usage of our services or develop new services, or if our efforts to increase the usage of our services are more expensive than we expect, then our business, results of operations and financial condition would be adversely affected.

We have experienced rapid growth and expect our growth to continue, and if we fail to effectively manage our growth, then our business, results of operations and financial condition could be adversely affected.

We have experienced substantial growth in our business since inception, which has placed and may continue to place significant demands on our corporate culture, operational infrastructure and management. We believe that our corporate culture has been a critical component of our success. We have invested substantial time and resources in building our team and nurturing our culture. As we expand our business and mature as a public company, we may find it difficult to maintain our corporate culture while managing this growth. Any failure to manage our anticipated growth and organizational changes in a manner that preserves the key aspects of our culture could hurt our chance for future success, including our ability to recruit and retain personnel, and effectively focus on and pursue our corporate objectives. This, in turn, could adversely affect our business, results of operations and financial condition.

In addition, in order to successfully manage our rapid growth, our organizational structure has become more complex. In order to manage these increasing complexities, we will need to continue to scale and adapt our operational, financial and management controls, as well as our reporting systems and procedures. The expansion of our systems and infrastructure will require us to commit substantial financial, operational and management resources before our revenue increases and without any assurances that our revenue will increase.

Finally, continued growth could strain our ability to maintain reliable service levels for our customers. If we fail to achieve the necessary level of efficiency in our organization as we grow, then our business, results of operations and financial condition could be adversely affected.

Our pricing and billing systems are complex and errors could adversely affect our revenue and profits.

Our pricing and billing efforts are complex to develop and challenging to implement. To be profitable, we must have accurate and complete information about the costs associated with voice and text communications, and properly incorporate such information into our pricing model. Our pricing model must also reflect accurate and current information about the market for our services, including the pricing of competitive alternatives for our services, as well as reliable forecasts of traffic volume. We may determine pricing for our services based on data that is outdated or otherwise flawed. Even if we have complete and accurate market information, we may not set prices to optimize both revenue and profitability. If we price our services too high, the amount of traffic that our customers may route to our network may decrease and accordingly our revenue may decline. If we price our services too low, our margins may be adversely affected, which will reduce our ability to achieve and maintain profitability.

Additionally, we rely heavily on third parties to provide us with key software and services for our billing. If these third parties cease to provide those services to us for any reason, or fail to perform billing services accurately and completely, we may not be able to deliver accurate invoices promptly. Delays in invoicing can lead to delays in revenue recognition, and inaccuracies in our billing could result in lost revenue. If we fail to adapt quickly and effectively to changes affecting our costs, pricing and billing, our profitability and cash flow will be adversely affected.

 

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We must continue to develop effective business support systems to implement customer orders and to provide and bill for services.

We depend on our ability to continue to develop effective business support systems. This complicated undertaking requires significant resources and expertise and support from third-party vendors. Following the development of the business support systems, the data migration must be completed for the full benefit of the systems to be realized. Business support systems are needed for:

 

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quoting, accepting and inputting customer orders for services;

 

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provisioning, installing and delivering services;

 

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providing customers with direct access to the information systems included in our Bandwidth Communications Platform so that they can manage the services they purchase from us, generally through web-based customer portals; and

 

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billing for services.

Because our business provides for continued rapid growth in the number of customers that we serve, the volume of services offered, as well as the integration of any acquired companies’ business support systems, if any, we must continue to develop our business support systems on a schedule sufficient to meet proposed milestone dates. If we fail to develop effective business support systems or complete the data migration into these systems, it could materially adversely affect our ability to implement our business plans, realize anticipated benefits from our acquisitions, if any, and meet our financial goals and objectives.

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

We believe that maintaining and enhancing our brand identity and increasing market awareness of our company and services are critical to achieving widespread acceptance of our company and our Bandwidth Communications Platform, as well as to strengthen our relationships with our existing customers and to our ability to attract new customers. The successful promotion of our brand will depend largely on our continued marketing efforts, our ability to continue to offer high quality services and our ability to successfully differentiate our services from competing products and services. Our brand promotion activities may not be successful or yield increased revenue. In addition, independent industry analysts often provide reviews of our services and competing products and services, which may significantly influence the perception of our services in the marketplace. If these reviews are negative or not as strong as reviews of our competitors’ services, then our brand may be harmed.

From time to time, our customers have complained about our services, such as complaints about our pricing and customer support. If we do not handle customer complaints effectively, then our brand and reputation may suffer, our customers may lose confidence in us and they may reduce or cease their use of our services. In addition, many of our customers post and discuss on social media about products and services, including our services and our Bandwidth Communications Platform. Our success depends, in part, on our ability to generate positive customer feedback and minimize negative feedback on social media channels where existing and potential customers seek and share information. If actions we take or changes we make to our services or our Bandwidth Communications Platform upset these customers, then their online commentary could negatively affect our brand and reputation. Complaints or negative publicity about us, our services or our Bandwidth Communications Platform could materially and adversely affect our ability to attract and retain customers, our business, results of operations and financial condition.

The promotion of our brand also requires us to make substantial expenditures, and we anticipate that these expenditures will increase as our market becomes more competitive and as we expand into new markets. To the extent that these activities increase revenue, this revenue still may not be enough to offset the increased expenses

 

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we incur. If we do not successfully maintain and enhance our brand, then our business may not grow, we may see our pricing power reduced relative to competitors and we may lose customers, all of which would adversely affect our business, results of operations and financial condition.

Any failure to deliver and maintain high-quality customer support may adversely affect our relationships with our customers and prospective customers and could adversely affect our reputation, business, results of operations and financial condition.

Many of our customers depend on our customer support team to assist them in deploying or using our services effectively, to help them resolve post-deployment issues quickly and to provide ongoing support. If we do not devote sufficient resources or are otherwise unsuccessful in assisting our customers effectively, it could adversely affect our ability to retain existing customers and could prevent prospective customers from adopting our services. We may be unable to respond quickly enough to accommodate short-term increases in demand for customer support. We also may be unable to modify the nature, scope and delivery of our customer support to compete with changes in the support services provided by our competitors. Increased demand for customer support, without corresponding revenue, could increase costs and adversely affect our business, results of operations and financial condition. Our sales are highly dependent on our business reputation and on positive recommendations from existing customers. Any failure to deliver and maintain high-quality customer support, or a market perception that we do not maintain high-quality customer support, could adversely affect our reputation, business, results of operations and financial condition.

Our revenue is concentrated in a limited number of enterprise customers.

A significant portion of our revenue is concentrated among a limited number of enterprise customers. For the twelve months ended June 30, 2017, our top ten customers accounted for 29.2% of our CPaaS revenue. If we lost one or more of our top ten customers, or, if one or more of these major customers significantly decreased orders for our services, our business would be materially and adversely affected.

Breaches of our networks or systems, or those of third parties upon which we rely, could degrade our ability to conduct our business, compromise the integrity of our services and our Bandwidth Communications Platform, result in significant data losses and the theft of our intellectual property, damage our reputation, expose us to liability to third parties and require us to incur significant additional costs to maintain the security of our networks and data.

We depend upon our IT systems to conduct virtually all of our business operations, ranging from our internal operations and R&D activities to our marketing and sales efforts and communications with our customers and business partners. Cyber attacks, including through the use of malware, computer viruses, dedicated denial of services attacks, credential harvesting and other means for obtaining unauthorized access to or disrupting the operation of our networks and systems and those of our suppliers, vendors and other service providers, could cause harm to our business, including by misappropriating our proprietary information or that of our customers, employees and business partners or to cause interruptions of our services and our Bandwidth Communications Platform. Cyber attacks may cause equipment failures, loss of information, including sensitive personal information of customers or employees or valuable technical and marketing information, as well as disruptions to our or our customers’ operations. Cyber attacks against companies have increased in frequency, scope and potential harm in recent years. Further, the perpetrators of cyber attacks are not restricted to particular groups or persons. These attacks may be committed by company employees or external actors operating in any geography, including jurisdictions where law enforcement measures to address such attacks are unavailable or ineffective, and may even be launched by or at the behest of nation states. While, to date, we have not been subject to cyber attacks which, individually or in the aggregate, have been material to our operations or financial condition, the preventive actions we take to reduce the risks associated with cyber attacks, including protection of our systems and networks, may be insufficient to repel or mitigate the effects of a major cyber attack in the future. Because the techniques used by such individuals or entities to access, disrupt or sabotage devices, systems

 

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and networks change frequently and may not be recognized until launched against a target, we may be unable to anticipate these techniques, and we may not become aware in a timely manner of such a security breach which could exacerbate any damage we experience. Additionally, we depend upon our employees and contractors to appropriately handle confidential and sensitive data, including customer data and customer proprietary network information pursuant to applicable federal law, and to deploy our IT resources in a safe and secure manner that does not expose our network systems to security breaches or the loss of data. Any data security incidents, including internal malfeasance by our employees, unauthorized access or usage, virus or similar breach or disruption of us or our services providers, could result in a loss of confidential information, theft of our intellectual property, damage to our reputation, loss of customers, litigation, regulatory investigations, fines, penalties and other liabilities.

Our existing general liability insurance may not cover, or may cover only a portion of, any potential claims related to security breaches to which we are exposed or may not be adequate to indemnify us for all or any portion of liabilities that may be imposed. Accordingly, if our cybersecurity measures and those of our service providers, fail to protect against unauthorized access, attacks (which may include sophisticated cyber attacks) and the mishandling of data by our employees and contractors, then our reputation, business, results of operations and financial condition could be adversely affected.

We are currently subject to litigation related to taxes and charges associated with our provision of 911 services, which could divert management’s attention and adversely affect our results of operations.

We, along with many other telecommunications companies and similar service providers, currently are subject to litigation and a civil investigation regarding our billing, collection and remittance of non-income-based taxes and other similar charges regarding 911 services alleged to apply in certain states, counties, and municipalities located in Alabama, Georgia, Illinois, Minnesota, North Carolina, Pennsylvania, Rhode Island, South Carolina and the District of Columbia. We may face similar litigation in other jurisdictions in the future. While we are vigorously defending these lawsuits, litigation is inherently uncertain. Tax assessments, penalties and interest or future requirements arising from these lawsuits, or any other lawsuits that may arise in other jurisdictions, may adversely affect our business, results of operations and financial condition.

We face a risk of litigation resulting from customer misuse of our services and software to make or send unauthorized calls and/or text messages in violation of the Telephone Consumer Protection Act.

Calls and/or text messages originated by our customers may subject us to potential risks. For example, the Telephone Consumer Protection Act of 1991 (the “TCPA”) restricts telemarketing and the use of technologies that enable automatic calling and/or SMS text messages without proper consent. This may result in civil claims against us and requests for information through third-party subpoenas or regulatory investigations. The scope and interpretation of the laws that are or may be applicable to the making and/or delivery of calls and/or text messages are continuously evolving and developing. If we do not comply with these laws or regulations or if we become liable under these laws or regulations due to the failure of our customers to comply with these laws by obtaining proper consent, we could become subject to lawsuits, fines, civil penalties, potentially significant statutory damages, consent decrees, injunctions, adverse publicity, loss of user confidence in our services, loss of users and other adverse consequences, which could materially harm our business.

The communications industry faces significant regulatory uncertainties and the resolution of these uncertainties could harm our business, results of operations and financial condition.

If current or future regulations change, the Federal Communications Commission (“FCC”) or state regulators may not grant us any required regulatory authorization or may take action against us if we are found to have provided services without obtaining the necessary authorizations, or to have violated other requirements of their rules and orders. Delays in receiving required regulatory approvals or the enactment of new adverse regulation or regulatory requirements may slow our growth and have a material adverse effect on our business, results of operations and financial condition.

 

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Proceedings before the FCC could limit our access to various network services or further increase the rates we must pay for such services. Likewise, proceedings before the FCC could impact the availability and price of special access facilities. Other proceedings before the FCC could result in an increase in the amount we pay to other carriers or a reduction in the revenue we derive from other carriers in, or retroactive liability for, access charges and reciprocal compensation. Additionally, other proceedings before the FCC could result in increases in the cost of regulatory compliance. For example, the FCC has opened a proceeding to examine how to improve the delivery of emergency 911 services and whether to expand requirements to include communications services not currently subject to emergency calling obligations. A number of states also have proceedings pending that could impact our access to and the rates we pay for network services. Other state proceedings could limit our pricing and billing flexibility. Our business would be substantially impaired if the FCC, the courts or state commissions eliminated our access to the facilities and services we use to serve our customers, substantially increased the rates we pay for facilities and services, increased the costs or complexity associated with providing emergency 911 services or adversely affected the revenue we receive from other carriers or our customers. In addition, congressional legislative efforts to rewrite the Telecommunications Act of 1996 or enact other telecommunications legislation, as well as various state legislative initiatives, may cause major industry and regulatory changes. We cannot predict the outcome of these proceedings or legislative initiatives or the effects, if any, that these proceedings or legislative initiatives may have on our business and operations.

While we believe we are currently in compliance with all federal, state and local rules and regulations, these regulations are subject to interpretation and the relevant regulators may determine that our application of these rules and regulations is not consistent with their interpretation. Additionally, in certain instances, third parties or government agencies may bring action with federal, state or local regulators if they believe a provider has breached applicable rules and regulations.

The effects of increased regulation of IP-based service providers are unknown.

While the FCC has to date generally subjected IP-based service providers to less stringent regulatory oversight than traditional common carriers, the FCC has more recently imposed certain regulatory obligations on providers of VoIP services, including the obligations to contribute to the Universal Service Fund, to provide 911 services and/or to comply with the Communications Assistance for Law Enforcement Act. Some states have imposed taxes, fees and/or surcharges on VoIP telephony services. The imposition of additional regulations could have a material adverse effect on our business.

We must obtain and maintain permits and licenses to operate our network.

If we are unable, on acceptable terms and on a timely basis, to obtain and maintain the permits and licenses needed to expand and operate our network, our business could be materially adversely affected. In addition, the cancellation or non-renewal of the permits or licenses that are obtained could materially adversely affect our business. In particular, we are currently awaiting approval from the FCC and various state public utility commissions in connection with our expected change of control. If a change of control occurs prior to receipt of regulatory approval in a jurisdiction, we may be subject to fines, penalties, enforcement actions or loss of our authorization in such jurisdiction. In the event we are the target of an acquisition, the regulatory agencies responsible for granting, renewing or transferring permits and licenses may delay or reject applications to transfer such permits or licenses and as a result these uncertainties, we may not be as attractive an acquisition target.

Our operations are subject to regulation and require us to obtain and maintain several governmental licenses and permits. If we violate those regulatory requirements or fail to obtain and maintain those licenses and permits, including payment of related fees, if any, we may not be able to conduct our business. Moreover, those regulatory requirements could change in a manner that significantly increases our costs or otherwise adversely affects our operations.

In the ordinary course of operating our network and providing our services, we must obtain and maintain a variety of telecommunications and other licenses and authorizations. We also must comply with a variety of regulatory obligations. There can be no assurance we can maintain our licenses or that they will be renewed upon their expiration. Our failure to obtain or maintain necessary licenses, authorizations or to comply with the

 

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obligations imposed upon license holders, including the payment of fees, may cause sanctions or additional costs, including the revocation of authority to provide services.

Our operations are subject to regulation at the national level and, often, at the state and local levels. Changes to existing regulations or rules, or the failure to regulate going forward in areas historically regulated on matters such as network neutrality, licensing fees, environmental, health and safety, privacy, intercarrier compensation, emergency 911 services interconnection and other areas, in general or particular to our industry, may increase costs, restrict operations or decrease revenue. Our inability or failure to comply with telecommunications and other laws and regulations could cause the temporary or permanent suspension of our operations, and if we cannot provide emergency calling functionality through our Bandwidth Communications Platform to meet any new federal or state requirements, the competitive advantages that we currently have may not persist, adversely affecting our ability to obtain and to retain enterprise customers which could have an adverse impact on our business.

Our business could suffer if we cannot obtain or retain local or toll-free numbers, are prohibited from obtaining local or toll-free numbers, or are limited to distributing local or toll-free numbers to only certain customers.

Our future success depends on our ability to procure large quantities of local and toll-free numbers in the United States in desirable locations at a reasonable cost and without restriction. Our ability to procure and distribute numbers depends on factors outside of our control, such as applicable regulations, the practices of the communications carriers that provide numbers to us in certain jurisdictions, the cost of these numbers and the level of demand for new numbers. Due to their limited availability, there are certain popular area code prefixes and specialized “vanity” toll-free numbers that we may not be able to obtain in desired quantities or at all. Our inability to acquire or retain numbers for our operations would make our services, including our Bandwidth Communications Platform, less attractive to potential customers that desire assignments of particular numbering resources. In addition, future growth of our customer base, together with growth of customer bases of other providers of communications services, has increased, which increases our dependence on needing large quantities of local and toll-free numbers associated with desirable area codes or specific toll-free numbering resources at a reasonable cost and without restriction. If we are not able to obtain or retain adequate local and toll-free numbers, or attractive subsets of such resources, our business, results of operations and financial condition could be materially adversely affected.

Intellectual property and proprietary rights of others could prevent us from using necessary technology to provide our services or subject us to expensive intellectual property litigation.

If technology that we require to provide our services, including our Bandwidth Communications Platform, was determined by a court to infringe a patent held by another entity that will not grant us a license on terms acceptable to us, we could be precluded by a court order from using that technology and we would likely be required to pay significant monetary damages to the patent holder. The successful enforcement of these patents, or our inability to negotiate a license for these patents on acceptable terms, could force us to cease (i) using the relevant technology and (ii) offering services incorporating the technology. If a claim of infringement was brought against us based on the use of our technology or against our customers based on their use of our services for which we are obligated to indemnify, we could be subject to litigation to determine whether such use or sale is, in fact, infringing. This litigation could be expensive and distracting, regardless of the outcome.

While our own limited patent portfolio may deter other operating companies from bringing such actions, patent infringement claims are increasingly being asserted by patent holding companies, which do not use technology and whose sole business is to enforce patents against operators, such as us, for monetary gain. Because such patent holding companies, commonly referred to as patent “trolls,” do not provide services or use technology, the assertion of our own patents by way of counter-claim would be largely ineffective.

 

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Our use of open source software could negatively affect our ability to sell our services and subject us to possible litigation.

Our services, including our Bandwidth Communications Platform, incorporate open source software, and we expect to continue to incorporate open source software in our services in the future. Few of the licenses applicable to open source software have been interpreted by courts, and there is a risk that these licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to commercialize our services, including our Bandwidth Communications Platform. Moreover, although we have implemented policies to regulate the use and incorporation of open source software into our services, we cannot be certain that we have not incorporated open source software in our services in a manner that is inconsistent with such policies. If we fail to comply with open source licenses, we may be subject to certain requirements, including requirements that we offer our services that incorporate the open source software for no cost, that we make available source code for modifications or derivative works we create based upon, incorporating or using the open source software and that we license such modifications or derivative works under the terms of applicable open source licenses. If an author or other third-party that distributes such open source software were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur significant legal expenses defending against such allegations and could be subject to significant damages, enjoined from generating revenue from customers using services that contained the open source software and required to comply with onerous conditions or restrictions on these services. In any of these events, we and our customers could be required to seek licenses from third parties in order to continue offering our services and to re-engineer our services or discontinue offering our services to customers in the event re-engineering cannot be accomplished on a timely basis. Any of the foregoing could require us to devote additional R&D resources to re-engineer our services, could result in customer dissatisfaction and may adversely affect our business, results of operations and financial condition.

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

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

The storage, processing and use of personal information and related data subjects us to evolving governmental laws and regulation, commercial standards, contractual obligations and other legal obligations related to consumer and data privacy, which may have a material impact on our costs, use of our services, or expose us to increased liability.

Federal, state, local and foreign laws and regulations, commercial obligations and industry standards, each provide for obligations and restrictions with respect to data privacy and security, as well as the collection, storage, retention, protection, use, processing, transmission, sharing, disclosure and protection of personal information and other customer data, including customer proprietary network information under applicable federal law. The evolving nature of these obligations and restrictions subjects us to the risk of differing interpretations, inconsistency or conflicts among countries or rules, and creates uncertainty regarding their application to our business.

 

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These obligations and restrictions may limit our ability to collect, store, process, use, transmit and share data with our customers, employees and third-party providers and to allow our customers to collect, store, retain, protect, use, process, transmit, share and disclose data with others through our services. Compliance with, and other burdens imposed by, such obligations and restrictions could increase the cost of our operations and impact our ability to market our services through effective segmentation.

Failure to comply with obligations and restrictions related to applicable data protection laws, regulations, standards, and codes of conduct, as well as our own posted privacy policies and contractual commitments could subject us to lawsuits, fines, criminal penalties, statutory damages, consent decrees, injunctions, adverse publicity, loss of user confidence in our services, and loss of users, which could materially harm our business. Because these obligations and restrictions have continued to develop and evolve rapidly, it is possible that we may not be, or may not have been, compliant with each such obligation and restriction. Additionally, third-party contractors may have access to customer or employee data. If these or other third-party vendors violate obligations and restrictions related to applicable data protection laws or our policies, such violations may also put our customers’ or employees’ information at risk and could in turn have a material and adverse effect on our business.

If we fail to protect our internally developed systems, technology and software and our patents and trademarks, we may become involved in costly litigation or our business or brand may be harmed.

Our ability to compete effectively is dependent in large part upon the maintenance and protection of systems and software that we have developed internally, including some systems and software-based on open standards. While we have eight U.S. patents and six pending U.S. patent applications, we cannot patent much of the technology that is important to our business. In addition, our pending patent applications may not be granted, and any issued patent that we own may be challenged, narrowed, invalidated or circumvented. To date, we have relied on patent, copyright and trade secret laws, as well as confidentiality procedures and licensing arrangements, to establish and protect our rights to our technology. While we typically enter into confidentiality agreements with our employees, consultants, customers, and vendors in an effort to control access to and distribution of technology, software, documentation and other information, these agreements may not effectively prevent disclosure of confidential information and may not provide an adequate remedy in the event of unauthorized disclosure of confidential information. Despite these precautions, it may be possible for a third-party to copy or otherwise obtain and use our technology without authorization. In addition, others may independently discover trade secrets and proprietary information, and in such cases we could not assert any rights against such party. Policing unauthorized use of our technology is difficult. The steps we take may not prevent misappropriation of the technology we rely on. In addition, effective protection may be unavailable or limited in some jurisdictions outside the United States. Litigation may be necessary in the future to enforce or protect our rights or to determine the validity and scope of the rights of others. That litigation could cause us to incur substantial costs and divert resources away from our daily business, which in turn could adversely affect our business, results of operations and financial condition.

The unlicensed use of our brands by third parties could harm our reputation, cause confusion among our customers or impair our ability to market our services. Accordingly, we have registered numerous trademarks and service marks and have applied for registration of our trademarks and service marks in the United States to establish and protect our brand names as part of our intellectual property strategy. We cannot assure you that our pending or future trademark applications will be approved. Although we anticipate that we would be given an opportunity to respond to any such rejections, we may be unable to overcome any such rejections. In addition, in proceedings before the United States Patent and Trademark Office third parties are given an opportunity to oppose pending trademark applications and seek to cancel registered trademarks. Opposition or cancellation proceedings may be filed against our trademarks, and our trademarks may not survive such proceedings. In the event that our trademarks are successfully challenged, we could be forced to rebrand our services, which could result in loss of brand name recognition. Moreover, successful opposition to our applications might encourage third parties to make additional oppositions or commence trademark infringement proceedings against us, which

 

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could be costly and time consuming to defend against. If we decide to take limited or no action to protect our trademarks, our trademark rights may be diluted and subject to challenge or invalidation, which could materially and adversely affect our brand in the marketplace. Certain of the trademarks we may use may become so well known by the public that their use becomes generic and they lose trademark protection. Over the long term, if we are unable to establish name recognition based on our trademark and tradenames, then we may not be able to compete effectively and our business may be adversely affected. Further, we cannot assure you that competitors will not infringe our trademarks or that we will have adequate resources to enforce our trademarks.

We are subject to litigation in the ordinary course of business, and uninsured judgments or a rise in insurance premiums may adversely affect our results of operations.

In the ordinary course of business, we are subject to various claims and litigation. Any such claims, regardless of merit, could be time-consuming and expensive to defend and could divert management’s attention and resources. In accordance with customary practice, we maintain insurance against some, but not all, of these potential claims. We may elect not to obtain insurance if we believe that the cost of available insurance is excessive relative to the risks presented. The levels of insurance we maintain may not be adequate to fully cover any and all losses or liabilities. Further, we may not be able to maintain insurance at commercially acceptable premium levels or at all. If any significant judgment, claim (or a series of claims) or other event is not fully insured or indemnified against, it could have a material adverse impact on our business, financial condition and results of operations. There can be no assurance as to the actual amount of these liabilities or the timing thereof. We cannot be certain that the outcome of current or future litigation will not have a material adverse impact on our business and results of operations.

We may be liable for the information that content owners or distributors distribute over our network.

The law relating to the liability of private network operators for information carried on or disseminated through their networks remains unsettled. While we disclaim any liability for third-party content in our services agreements, we may become subject to legal claims relating to the content disseminated on our network, even though such content is owned or distributed by our customers or a customer of our customers. For example, lawsuits may be brought against us claiming that material distributed using our network was inaccurate, offensive or violated the law or the rights of others. Claims could also involve matters such as defamation, invasion of privacy and copyright infringement. In addition, the law remains unclear over whether content may be distributed from one jurisdiction, where the content is legal, into another jurisdiction, where it is not. Companies operating private networks have been sued in the past, sometimes successfully, based on the nature of material distributed, even if the content is not owned by the network operator and the network operator has no knowledge of the content or its legality. It is not practical for us to monitor all of the content distributed using our network. We may need to take costly measures to reduce our exposure to these risks or to defend ourselves against such claims, which could adversely affect our results of operations and financial condition.

Third parties may fraudulently use our name to obtain access to customer accounts and other personal information, use our services to commit fraud or steal our services, which could damage our reputation, limit our growth or cause us to incur additional expenses.

Our customers may have been subject to “phishing,” which occurs when a third-party calls or sends an email or pop-up message to a customer that claims to be from a business or organization that provides services to the customer. The purpose of the inquiry is typically to encourage the customer to visit a bogus website designed to look like a website operated by the legitimate business or organization or provide information to the operator. At the bogus website, the operator attempts to trick the customer into divulging customer account or other personal information such as credit card information or to introduce viruses through “Trojan horse” programs to the customers’ computers. This could result in identity theft from our customers and the unauthorized use of our services. Third parties also have used our communications services to commit fraud. If we are unable to detect and prevent “phishing” and other similar methods, use of our services for fraud and similar activities, our brand

 

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reputation and growth may suffer and we may incur additional costs, including costs to increase security, or be required to credit significant amounts to customers.

Third parties also have used our communications services without paying, including by submitting fraudulent credit information and fraudulent credit card information. This has resulted in our incurring the cost of providing the services, including incurring call termination fees, without any corresponding revenue. We have implemented anti-fraud procedures in order to limit the expenses resulting from theft of service. If our procedures are not effective, theft of service could significantly increase our expenses and adversely affect our business, results of operations and financial condition.

If our customers or their end users do not accept the differences between our service and traditional telephone service, they may choose to remain with their current telephone service provider or may choose to return to service provided by traditional network service providers.

Aspects of our services based on VoIP, including our Bandwidth Communications Platform, are not the same as traditional network service providers. Our continued growth is dependent on the adoption of our services by mainstream customers and their end users, so these differences are important. For example:

 

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Our 911 calling services are different, in significant respects, from the 911 service associated with traditional wireline and wireless telephone providers and, in certain cases, with other VoIP providers.

 

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In the event of a power loss or Internet access interruption experienced by a customer, our service may be interrupted.

 

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Our customers’ end users may experience lower call quality than they are used to from traditional wireline or wireless telephone companies, including static, echoes and delays in transmissions.

 

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Our customers’ end users may not be able to call premium-rate telephone numbers such as 1-900 numbers and 976 numbers.

If customers or customers’ end users do not accept the differences between our service and traditional network service providers, they may choose to remain with their current telephone service provider or may choose to return to service provided by traditional network service providers.

We may lose customers if we experience failures of our system or Bandwidth Communications Platform that significantly disrupt the availability and quality of the services that we provide. Such failures may also cause interruptions to service delivery and the completion of other corporate functions.

Our operations depend on our ability to limit and mitigate interruptions or degradation in service for customers. Interruptions in service or performance problems, for whatever reason, could undermine our customers’ confidence in our services and cause us to lose customers or make it more difficult to attract new ones. Because many of our services are critical to the businesses or daily lives of many of our customers or our customers’ end users, any significant interruption or degradation in service also could result in lost profits or other losses to customers. Although our service agreements generally limit our liability for service failures and generally exclude any liability for “consequential” damages such as lost profits, a court might not enforce these limitations on liability, which could expose us to financial loss. We also sometimes provide our customers with committed service levels. If we fail to meet these committed service levels, we could be required to provide service credits or other compensation to our customers, which could adversely affect our results of operations.

The failure of any equipment or facility on our network, including our network operations control centers and network data storage locations, could interrupt customer service and other corporate functions until we complete necessary repairs or install replacement equipment. Our business continuity plans also may be inadequate to address a particular failure that we experience. Delays, errors or network equipment or facility failures could result from natural disasters, disease, accidents, terrorist acts, power losses, security breaches,

 

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vandalism or other illegal acts, computer viruses or other causes. These delays, errors or failures could significantly impair our business due to:

 

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service interruptions;

 

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misfunction of our Bandwidth Communications Platform on which our enterprise users rely for voice, messaging or 911 functionality;

 

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exposure to customer liability;

 

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the inability to install new service;

 

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the unavailability of employees necessary to provide services;

 

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the delay in the completion of other corporate functions such as issuing bills and the preparation of financial statements; or

 

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the need for expensive modifications to our systems and infrastructure.

Defects or errors in our services could diminish demand for our services, harm our business and results of operations and subject us to liability.

Our customers use our services for important aspects of their businesses, and any errors, defects or disruptions to our services and any other performance problems with our services could damage our customers’ businesses and, in turn, hurt our brand and reputation. We provide regular updates to our services, which have in the past contained, and may in the future contain, undetected errors, failures, vulnerabilities and bugs when first introduced or released. Real or perceived errors, failures or bugs in our services could result in negative publicity, loss of or delay in market acceptance of our platform, loss of competitive position, lower customer retention or claims by customers for losses sustained by them. In such an event, we may be required, or may choose, for customer relations or other reasons, to expend additional resources in order to help correct the problem. In addition, we may not carry insurance sufficient to compensate us for any losses that may result from claims arising from defects or disruptions in our services. As a result, our brand and reputation could be harmed, and our business, results of operations and financial condition may be adversely affected.

If our 911 services do not function properly, we may be exposed to significant liability from our users.

Certain of our IP telephony offerings, as well as the 911 solutions that we offer are subject to FCC rules governing the delivery of emergency calling services. Similar to other providers of IP telephony services, our 911 service are different from those associated with traditional telecommunications services. These differences may lead to an inability to make and complete calls that would not occur for users of traditional telephony services. For example, to provide the emergency calling services required by the FCC’s rules to our IP telephony consumers, we may use components of both the wireline and wireless infrastructure in unique ways that can result in failed connections and calls routed to incorrect emergency call centers. Routing emergency calls over the Internet may be adversely affected by power outages and network congestion that may not occur for users of traditional telephony services. Emergency call centers may not be equipped with appropriate hardware or software to accurately process and respond to emergency calls initiated by consumers of our IP telephony services, and calls routed to the incorrect emergency call center can significantly delay response times for first responders. Users of our IP telephony services from a fixed address are required to manually update their location information, and failure to do so may result in dispatching of assistance to the wrong location. Even manual updates made appropriately require a certain amount of time before the updated address appears in the relevant databases which could result in misrouting emergency calls to the wrong emergency calling center, dispatching first responders to the wrong address, or both. Moreover, the relevant rules with respect to what address information should be provided to emergency call centers when the call originates from a mobile application are unsettled. As a result, we could be subject to enforcement action by the FCC or other entities—possibly exposing us to significant monetary penalties, cease and desist orders, civil liability, loss of user

 

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confidence in our services, loss of users, and other adverse consequences, which could materially harm our business. The FCC’s rules, and some states, also impose other obligations on us, such as properly recording our customers’ registered locations, obtaining affirmative acknowledgement from customers that they are aware of the differences between emergency calling services associated with IP telephony as compared with traditional telecommunications services, and distribution of appropriate warning labels to place on or near hardware used to place IP telephony calls. Failure to comply with these requirements, or failure of our Bandwidth Communications Platform such that 911 calls did not complete or were misrouted, may result in FCC enforcement action, state attorneys’ general investigations, potential exposure to significant monetary penalties, cease and desist orders, civil liability to our users and their customers, loss of user confidence in our services, loss of users, and other adverse consequences, which could materially harm our business.

The FCC’s rules also require that we timely report certain 911 service outages. We recently reported a 911 service outage to the FCC in their automated Network Outage Reporting System on July 25, 2017, related to a 53-minute outage event on June 26, 2017, that may have met FCC reporting thresholds. The FCC may make further inquiries regarding matters related to any reported 911 service outage. Any inquiry could result in FCC enforcement action, potential monetary penalties and other adverse consequences.

Termination of relationships with key suppliers could cause delay and additional costs.

Our business is dependent on third-party suppliers for fiber, computers, software, transmission electronics and related network components, as well as providers of network colocation facilities that are integrated into our network, some of which are critical to the operation of our business. If any of these critical relationships is terminated, a supplier either exits or curtails its business as a result of economic conditions, a supplier fails to provide critical services or equipment, or the supplier is forced to stop providing services due to legal constraints, such as patent infringement, and we are unable to reach suitable alternative arrangements quickly, we may experience significant additional costs or we may not be able to provide certain services to customers. If that happens, our business, results of operations and financial condition could be materially adversely affected.

Many of our third-party suppliers do not have long-term committed contracts with us and may terminate their agreements with us without notice or by providing 30 days prior written notice. Although we expect that we could receive similar services from other third-party suppliers, if any of our arrangements with our third-party suppliers are terminated, we could experience interruptions in our ability to make our services available to customers, as well as delays and additional expenses in arranging alternative providers. If a significant portion of our third-party suppliers fail to provide these services to us on a cost-effective basis or otherwise terminate these services, the delay caused by qualifying and switching to other providers could be time consuming and costly and could adversely affect our business, results of operations and financial condition.

One of our third-party suppliers, Level 3, provides us with certain 911 call routing and termination services. Pursuant to the agreement with Level 3, Level 3 is our preferred provider for these services until December 31, 2020, after which the agreement automatically renews for consecutive one-year periods, unless terminated by either Level 3 or us. After December 31, 2020, Level 3 may cancel the agreement upon two years’ notice and we may cancel the agreement upon one year’s notice. If our agreement with Level 3 terminates for any reason other than our default, Level 3 must continue to provide these services to us for at least two years to allow us to transition to another provider. We are obligated to pay Level 3 a minimum of $100,000 per month for as long as the agreement continues. Additionally, Level 3 has a right of first refusal to provide these 911 call routing and termination services to us in additional geographic areas.

Our growth and financial health are subject to a number of economic risks.

The financial markets in the United States have experienced substantial uncertainty during recent years. This uncertainty has included, among other things, extreme volatility in securities prices, drastically reduced liquidity and credit availability, rating downgrades of certain investments and declining values with respect to others. If capital and credit

 

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markets continue to experience uncertainty and available funds remain limited, we may not be able to obtain debt or equity financing or to refinance our existing indebtedness on favorable terms or at all, which could affect our strategic operations and our financial performance and force modifications to our operations. These conditions currently have not precluded us from accessing credit markets or financing our operations, but there can be no assurance that financial markets and confidence in major economies will not deteriorate. An extended period of economic deterioration could materially adversely affect our results of operations and financial condition and exacerbate some of the other risk factors contained in this prospectus. For example, our customers might defer or entirely decline purchases of our services due to tighter credit or negative financial news or reduce demand for our services. Our customers also may not be able to obtain adequate credit, which could adversely affect the timeliness of their payments to us or ultimately result in a filing by the customer for protection from creditors under applicable insolvency or bankruptcy laws. If our customers cannot make timely payments to us, our accounts receivable could increase. The demand for, and the prices of, our services also may decline due to the actions of our competitors or otherwise.

Key vendors upon which we rely also could be unwilling or unable to provide us with the materials or services that we need to operate our Bandwidth Communications Platform or otherwise on a timely basis or on terms that we find acceptable. Our financial counterparties, insurance providers or others also may default on their contractual obligations to us. If any of our key vendors fail, we may not be able to replace them without disruptions to, or deterioration of, our services and we also may incur higher costs associated with new vendors. Transitioning to new vendors also may result in the loss of the value of assets associated with our integration of third-party services into our network or service offerings.

Our customer churn rate may increase.

Customer churn occurs when a customer discontinues service with us, whether voluntarily or involuntarily, such as a customer switching to a competitor or going out of business. Changes in the economy, increased competition from other providers, or issues with the quality of service we deliver can impact our customer churn rate. We cannot predict future pricing by our competitors, but we anticipate that price competition will continue. Lower prices offered by our competitors could contribute to an increase in customer churn. We cannot predict the timing, duration or magnitude of any deteriorated economic conditions or its impact on our target of customers. Higher customer churn rates could adversely affect our revenue growth. Higher customer churn rates could cause our dollar-based net retention rate to decline. A sustained and significant growth in the churn rate could have a material adverse effect on our business.

The market prices for certain of our services have decreased in the past and may decrease in the future, resulting in lower revenue than we anticipate.

Market prices for certain of our services have decreased over recent years. These decreases resulted from downward market pressure and other factors including:

 

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technological changes and network expansions, which have resulted in increased transmission capacity available for sale by us and by our competitors; and

 

•

some of our competitors have been willing to accept smaller operating margins in the short term in an attempt to increase long-term revenue.

To retain customers and revenue, we must sometimes reduce prices in response to market conditions and trends. We cannot predict to what extent we may need to reduce our prices to remain competitive or whether we will be able to sustain future pricing levels as our competitors introduce competing services or similar services at lower prices. Our ability to meet price competition may depend on our ability to operate at costs equal to or lower than our competitors or potential competitors. As our prices for some of our services decrease, our operating results may suffer unless we are able to either reduce our operating expenses or increase traffic volume from which we can derive additional revenue.

 

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The need to obtain additional IP circuits from other providers increases our costs. In addition, the need to interconnect our network to networks that are controlled by others could increase our costs.

We lease over 150,000 IP circuits from third parties nationwide. We could incur material expenses if we were required to locate alternative IP circuits. We may not be able to obtain reasonable alternative IP circuits if needed. Failure to obtain usage of alternative IP circuits, if necessary, could have a material adverse effect on our ability to carry on business operations. In addition, some of our agreements with other providers require the payment of amounts for services whether or not those services are used. Our reliance on third-party providers may reduce our operating flexibility, ability to make timely service changes and ability to control quality of service.

In the normal course of business, we need to enter into interconnection agreements with many local telephone companies, as well as the owners of networks that our customers desire to access to deliver their services. We are not always able to secure these interconnection agreements on favorable terms. Costs of obtaining service from other communications carriers comprise a significant proportion of the operating expenses of long distance carriers. Changes in regulation, particularly the regulation of telecommunication carriers and local access network owners, could indirectly, but significantly, affect our competitive position. These changes could increase or decrease the costs of providing our services. Further, if problems occur with our third-party providers or local telephone companies, it may cause errors or poor quality communications, and we could encounter difficulties identifying the source of the problem. The occurrence of errors or poor quality communications on our services, whether caused by our platform or a third-party provider, may result in the loss of our existing customers or the delay of adoption of our services by potential customers and may adversely affect our business, results of operations and financial condition.

We depend largely on the continued services of our senior management and other key employees, the loss of any of whom could adversely affect our business, results of operations and financial condition.

Our future performance depends on the continued services and contributions of our senior management and other key employees to execute on our business plan, to develop our platform, to deliver our services to customers, to attract and retain customers and to identify and pursue opportunities. The loss of services of senior management or other key employees could significantly delay or prevent the achievement of our development and strategic objectives. In particular, we depend to a considerable degree on the vision, skills, experience and effort of our Cofounder, Chief Executive Officer and Chairman, David A. Morken. The replacement of any of our senior management personnel would likely involve significant time and costs, and such loss could significantly delay or prevent the achievement of our business objectives. The loss of the services of our senior management or other key employees for any reason could adversely affect our business, results of operations and financial condition.

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

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

Volatility in, or lack of performance of, our stock price may also affect our ability to attract and retain key personnel. Many of our key personnel are, or will soon be, vested in a substantial amount of shares of Class A

 

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common stock, Class B common stock or stock options. Employees may be more likely to terminate their employment with us if the shares they own or the shares underlying their vested options have significantly appreciated in value relative to the original purchase prices of the shares or the exercise prices of the options, or, conversely, if the exercise prices of the options that they hold are significantly above the trading price of our Class A common stock. If we are unable to retain our employees, our business, results of operations and financial condition could be adversely affected.

Our management team has limited experience managing a public company.

Most members of our management team have limited, if any, experience managing a publicly-traded company, interacting with public company investors and complying with the increasingly complex laws pertaining to public companies. Our management team may not successfully or efficiently manage our transition to being a public company. As a result of being a public company, we will be subject to significant regulatory oversight and reporting obligations under the federal securities laws and the continuous scrutiny of securities analysts and investors. These new obligations and constituents will require significant attention from our senior management and could divert their attention away from the day-to-day management of our business, which could adversely affect our business, results of operations and financial condition.

We could be subject to liability for historic and future sales, use and similar taxes, which could adversely affect our results of operations.

We conduct operations in many tax jurisdictions throughout the United States. In many of these jurisdictions, non-income-based taxes such as sales, use and telecommunications taxes, including those associated with (or potentially associated with) VoIP telephony services or 911 services, are or may be assessed on our operations. The systems and procedures necessary to comply in these jurisdictions are complex to develop and challenging to implement. Additionally, we rely heavily on third parties to provide us with key software and services for compliance. If these third parties cease to provide those services to us for any reason, or fail to perform services accurately and completely, we may not be able to accurately bill, collect or remit applicable non-income-based taxes. Historically, we have not billed or collected certain of these taxes and, in accordance with GAAP, we have recorded a provision for our tax exposure in these jurisdictions when it is both probable that a liability has been incurred and the amount of the exposure can be reasonably estimated. These estimates include several key assumptions including, but not limited to, the taxability of our services, the jurisdictions in which we believe we have nexus, and the sourcing of revenue to those jurisdictions. In the event these jurisdictions challenge our assumptions and analysis, our actual exposure could differ materially from our current estimates.

Taxing authorities also may periodically perform audits to verify compliance and include all periods that remain open under applicable statutes, which customarily range from three to four years. At any point in time, we may undergo audits that could result in significant assessments of past taxes, fines and interest if we were found to be non-compliant. During the course of an audit, a taxing authority may, as a matter of policy, question our interpretation and/or application of their rules in a manner that, if we were not successful in substantiating our position, could potentially result in a significant financial impact to us.

Furthermore, certain jurisdictions in which we do not collect sales, use and similar taxes may assert that such taxes are applicable, which could result in tax assessments, penalties and interest, and we may be required to collect such taxes in the future. Such tax assessments, penalties and interest or future requirements may adversely affect our business, results of operations and financial condition.

 

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We may be subject to significant U.S. federal income tax-related liabilities if certain ownership changes were to occur, including as a result of subsequent issuances or acquisitions of our stock, and we may determine to forego certain transactions in light of such liabilities as well as the restrictions and obligations imposed by and under the Tax Sharing Agreement.

We may be subject to significant U.S. federal income tax-related liabilities with respect to our prior distribution of all of the issued and outstanding shares of the common stock of Republic Wireless, Inc. (“Republic Wireless”), our former subsidiary, to our stockholders as of and on November 30, 2016 (the “Spin-Off”), if certain ownership changes were to occur. In particular, even if the Spin-Off otherwise qualifies as a tax-free transaction to us and our stockholders under Section 355, Section 368(a)(1)(D) and related provisions of the U.S. Internal Revenue Code of 1986, as amended (the “Code”), it may result in corporate-level taxable gain to us under Section 355(e) of the Code (“Section 355(e)”) if there is a 50% or greater change in ownership, by vote or value, of shares of our stock or Republic Wireless’s stock occurring as part of a plan or series of related transactions that includes the Spin-Off. In addition, pursuant to the Tax Sharing Agreement, dated November 30, 2016, between us and Republic Wireless (the “Tax Sharing Agreement”), we are prohibited from taking or failing to take any action that prevents the Spin-Off from qualifying for tax-free treatment under Section 355, Section 368(a)(1)(D) and related provisions of the Code, and must generally indemnify Republic Wireless for any taxes or losses incurred by Republic Wireless (or its subsidiaries) resulting from the application of Section 355(e) to the Spin-Off as a result of subsequent actions we take or fail to take. See the section titled “Certain Relationships and Related Party Transactions—Tax Sharing Agreement” for further discussion of the Tax Sharing Agreement.

To preserve the tax-free nature of the Spin-Off to us as well as Republic Wireless (and its subsidiaries), we might forego certain transactions that might otherwise have been advantageous. In particular, we might continue to operate certain of our business operations for the foreseeable future even if a sale or discontinuance of such business might have otherwise been advantageous.

In addition, for purposes of Section 355(e), any acquisitions or issuances of our stock, including pursuant to the Pre-IPO Reorganization, this offering or the IPO-Related Reorganization, or Republic Wireless’s stock that occur within two years after the Spin-Off will generally be presumed to be part of a plan or series of related transactions with respect to the Spin-Off. Although we or Republic Wireless may be able to rebut that presumption, determining whether an acquisition or issuance is part of a plan or series of related transactions under these rules is generally complex, inherently factual and subject to interpretation of the facts and circumstances of a particular case. For this purpose, whether any increase in voting power by holders of our Class B common stock by reason of the conversion by other holders of our Class B common stock to our Class A common stock should be considered an acquisition of voting power as part of a plan or series of related transactions is unclear.

In light of the implications that would arise for us if Section 355(e) were to apply to the Spin-Off, we received an opinion from Kilpatrick Townsend & Stockton LLP, our special tax counsel, in conjunction with this offering to the effect that (i) as of the date of this offering, we will not be required to recognize gain with respect to the Spin-Off pursuant to Section 355(e), and (ii) any increases in voting power attributable to conversions of our Class B common stock to Class A common stock by those who hold our Class B common stock as of the date of this offering will not cause us to recognize gain with respect to the Spin-Off pursuant to Section 355(e) (the “Tax Opinion”). The Tax Opinion is not binding on the Internal Revenue Service (the “IRS”) or the courts, however, and the IRS or the courts may not agree with the conclusions reached in the Tax Opinion. Moreover, the Tax Opinion will be based upon, among other things, current law and certain assumptions and representations as to factual matters made by us. Any change in currently applicable law, which may be retroactive, or the failure of any such assumptions or representations to be true, could adversely affect the validity of the conclusions reached in the Tax Opinion. If the conclusions in the Tax Opinion were not correct and Section 355(e) were to apply to the Spin-Off, we would be liable for significant U.S. federal income tax related liabilities and indemnity obligations under the Tax Sharing Agreement.

 

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Even if Section 355(e) does not apply to the Spin-Off as of the date of this offering or as a result of an increase in voting power attributable to conversions of our Class B common stock by those who hold such stock as of the date of this offering, subsequent acquisitions or issuances of our stock could be treated as part of a plan or series of related transactions with respect to the Spin-Off. Accordingly, in light of the requirements of Section 355(e), we might forego share repurchases, stock issuances and other strategic transactions for some period of time following this offering. Notwithstanding the foregoing, it is possible that we, Republic Wireless or the holders of our respective stock might inadvertently cause, permit or otherwise not prevent a change in the ownership of our stock or Republic Wireless’s stock to occur, which would cause Section 355(e) to apply to the Spin-Off, thereby triggering significant U.S. federal income tax-related liabilities and indemnity obligations under the Tax Sharing Agreement.

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

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities and equity, and the amount of revenue and expenses that are not readily apparent from other sources. Significant assumptions and estimates used in preparing our consolidated financial statements include those related to revenue recognition, capitalized internal-use software costs, other non-income taxes, business combination and valuation of goodwill and purchased intangible assets and share-based compensation. Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the trading price of our Class A common stock.

If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, 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 of 2002 (the “Sarbanes-Oxley Act”), and the rules and regulations of the applicable listing standards of the NASDAQ Global Select Market. 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 and other procedures that are designed to ensure that information required to be disclosed by us 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 that information required to be disclosed in reports under the Exchange Act is accumulated and communicated to our principal executive and financial officers. We are also continuing to improve our internal control over financial reporting. In order to develop, maintain and improve the effectiveness of our disclosure controls and procedures and internal control over financial reporting, we have expended, and anticipate that we will continue to expend, significant resources, including accounting-related costs and significant management oversight.

Our current controls and any new controls that we develop may become inadequate because of changes in conditions in our business. Further, weaknesses in our disclosure controls and internal control over financial reporting may be discovered in the future. Any failure to develop or maintain effective controls or any difficulties

 

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encountered in their implementation or improvement could harm our results of operations or cause us to fail to meet our reporting obligations and may result in a restatement of our consolidated financial statements for prior periods. Any failure to implement and maintain effective internal control over financial reporting could also 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 will eventually be required to include in our periodic reports that will be filed with the SEC. 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 trading price of our Class A common stock. In addition, if we are unable to continue to meet these requirements, we may not be able to remain listed on the NASDAQ Global Select Market. We are not currently required to comply with the SEC rules that implement Section 404 of the Sarbanes-Oxley Act and are therefore not required to make a formal assessment of the effectiveness of our internal control over financial reporting for that purpose. As a public company, we will be required to provide an annual management report on the effectiveness of our internal control over financial reporting commencing with our second annual report on Form 10-K.

Our independent registered public accounting firm is not required to attest to the effectiveness of our internal control over financial reporting until after we are no longer an “emerging growth company” as defined in the JOBS Act. At such time, our independent registered public accounting firm may issue a report that is adverse in the event it is not satisfied with the level at which our internal control over financial reporting is documented, designed or operating. Any failure to maintain effective disclosure controls and internal control over financial reporting could have a material and adverse effect on our business, results of operations and financial condition and could cause a decline in the trading price of our Class A common stock.

If our goodwill or intangible assets become impaired, we may be required to record a significant charge to earnings.

We review our intangible assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. Goodwill is required to be tested for impairment at least annually. As of June 30, 2017, we carried a net $14.9 million of goodwill and intangible assets. An adverse change in market conditions, particularly if such change has the effect of changing one of our critical assumptions or estimates, could result in a change to the estimation of fair value that could result in an impairment charge to our goodwill or intangible assets. Any such charges may adversely affect our results of operations.

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

We are an “emerging growth company,” as defined in the JOBS Act, and we intend to take advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not “emerging growth companies,” including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved. We may take advantage of these exemptions for so long as we are an “emerging growth company,” which could be as long as five years following the completion of this offering. We cannot predict if investors will find our Class A common stock less attractive because we will rely on these exemptions. If some investors find our Class A common stock less attractive as a result, there may be a less active trading market for our Class A common stock and the trading price of our Class A common stock may be more volatile.

Earthquakes, hurricanes, fires, floods, power outages, terrorist attacks and other significant events could disrupt our business and ability to serve our clients.

A significant event, such as an earthquake, hurricane, a fire, a flood or a power outage, could have a material adverse effect on our business, results of operations or financial condition. Our IP network is designed to be

 

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redundant and to offer seamless backup support in an emergency. While our network is designed to withstand the loss of any one data center at any point in time, the simultaneous failure of multiple data centers could disrupt our ability to serve our clients. Additionally, certain of our capabilities cannot be made redundant feasibly or cost-effectively. Acts of physical or cyber terrorism or other geopolitical unrest also could cause disruptions in our business. The adverse impacts of these risks may increase if our disaster recovery plans prove to be inadequate.

As we have elected to avail ourselves of the JOBS Act extended accounting transition period, our financial statements may not be easily comparable to other companies.

Pursuant to the JOBS Act, as an “emerging growth company,” we can elect to avail ourselves of the extended transition period for any new or revised accounting standards that may be issued by the Public Company Accounting Oversight Board or the SEC. We have elected to avail ourselves of such extended transition period, which means that when a standard is issued or revised and it has different application dates for public or private companies, we, as an “emerging growth company,” expect to adopt the standard on the timeline for private companies. This may make comparison of our financial statements with other public companies that are not emerging growth companies or emerging growth companies that have opted out of using the extended transition period difficult or impossible because of the potential differences in accounting standards used.

Our financial condition and growth may depend upon the successful integration of acquired businesses. We may not be able to efficiently and effectively integrate acquired operations, and thus may not fully realize the anticipated benefits from such acquisitions.

Achieving the anticipated benefits of any acquisitions depends in part upon whether we can integrate new businesses in an efficient and effective manner. The integration of any acquired businesses involves a number of risks, including, but not limited to:

 

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demands on management related to any significant increase in size after the acquisition;

 

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the disruption of ongoing business and the diversion of management’s attention from the management of daily operations to management of integration activities;

 

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failure to fully achieve expected synergies and costs savings;

 

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unanticipated impediments in the integration of departments, systems, including accounting systems, technologies, books and records and procedures, as well as in maintaining uniform standards, controls, including internal control over financial reporting required by the Sarbanes-Oxley Act, procedures and policies;

 

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loss of customers or the failure of customers to order incremental services that we expect them to order;

 

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failure to provision services that are ordered by customers during the integration period;

 

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higher integration costs than anticipated; and

 

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difficulties in the assimilation and retention of highly qualified, experienced employees, many of whom may be geographically dispersed.

Successful integration of any acquired businesses or operations will depend on our ability to manage these operations, realize opportunities for revenue growth presented by strengthened service offerings and expanded geographic market coverage, obtain better terms from our vendors due to increased buying power, and eliminate redundant and excess costs to fully realize the expected synergies. Because of difficulties in combining geographically distant operations and systems which may not be fully compatible, we may not be able to achieve the financial strength and growth we anticipate from the acquisitions.

We may not realize our anticipated benefits from our acquisitions, if any, or may be unable to efficiently and effectively integrate acquired operations as planned. If we fail to integrate acquired businesses and operations

 

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efficiently and effectively or fail to realize the benefits we anticipate, we would be likely to experience material adverse effects on our business, financial condition, results of operations and future prospects.

Our credit facility contains restrictive and financial covenants that may limit our operating flexibility.

Our credit facility contains certain restrictive covenants that either limit our ability to, or require a mandatory prepayment in the event we, among other things, incur additional indebtedness, issue guarantees, create liens on assets, make certain investments, merge with or acquire other companies, change business locations, pay dividends or make certain other restricted payments, transfer or dispose of assets, enter into transactions with affiliates and enter into various specified transactions. We, therefore, may not be able to engage in any of the foregoing transactions unless we obtain the consent of our lenders or prepay the outstanding amount under our credit facility. Our credit facility also contains certain financial covenants and financial reporting requirements. Our obligations under our credit facility are secured by all of our property, with certain exceptions. We may not be able to generate sufficient cash flow or sales to meet the financial covenants or pay the principal and interest under our credit facility. Furthermore, future working capital, borrowings or equity financing could be unavailable to repay or refinance the amounts outstanding under our credit facility. In the event of a liquidation, all outstanding principal and interest would have to be repaid prior to distribution of assets to unsecured creditors, and the holders of our Class A and Class B common stock would receive a portion of any liquidation proceeds only if all of our creditors, including our lenders, were first repaid in full.

If we are unable to comply with the restrictive and financial covenants in our credit facility, there would be a default under the terms of that agreement, and this could result in an acceleration of payment of funds that have been borrowed.

If we were unable to comply with the restrictive and financial covenants in our credit facility, there would be a default under the terms of that agreement. As a result, any borrowings under other instruments that contain cross-acceleration or cross default provisions may also be accelerated and become due and payable. If any of these events occur, there can be no assurance that we would be able to make necessary payments to the lenders or that we would be able to find alternative financing. Even if we were able to obtain alternative financing, there can be no assurance that it would be on terms that are acceptable.

Risks Related to Our Initial Public Offering and Ownership of Our Class A Common Stock

An active trading market for our Class A common stock may never develop or be sustained.

We have applied to list our Class A common stock on the NASDAQ Global Select Market under the symbol “BAND”. We cannot assure you that an active trading market for our Class A common stock will develop on that exchange or elsewhere or, if developed, that any market will be sustained. Accordingly, we cannot assure you of the likelihood that an active trading market for our Class A common stock will develop or be maintained, the liquidity of any trading market, your ability to sell your shares of our Class A common stock when desired or the prices that you may obtain for your shares.

The trading price of our Class A common stock may be volatile, and you could lose all or part of your investment.

Prior to this offering, there has been no public market for shares of our Class A common stock. The initial public offering price of our Class A common stock will be determined through negotiation between us and the underwriters. This price does not necessarily reflect the price at which investors in the market will be willing to buy and sell shares of our Class A common stock following this offering. In addition, the trading price of our Class A common stock following this offering is likely to be volatile and could be subject to fluctuations in response to various factors, some of which are beyond our control. These fluctuations could cause you to lose all or part of your investment in our Class A common stock since you might be unable to sell your shares at or above

 

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the price you paid in this offering. Factors that could cause fluctuations in the trading price of our Class A common stock include the following:

 

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price and volume fluctuations in the overall stock market from time to time;

 

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volatility in the trading prices and trading volumes of technology stocks;

 

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volatility in the trading volumes of our Class A common stock;

 

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changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular;

 

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sales of shares of our Class A common stock by us or our stockholders;

 

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failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;

 

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the financial projections we may provide to the public, any changes in those projections or our failure to meet those projections;

 

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announcements by us or our competitors of new products or services;

 

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the public’s reaction to our press releases, other public announcements and filings with the SEC;

 

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rumors and market speculation involving us or other companies in our industry;

 

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actual or anticipated changes in our results of operations or fluctuations in our results of operations;

 

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

 

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litigation involving us, our industry or both;

 

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regulatory actions or developments affecting our operations, those of our competitors or our industry more broadly;

 

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developments or disputes concerning our intellectual property or other proprietary rights;

 

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announced or completed acquisitions of businesses, products, services or technologies by us or our competitors;

 

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new laws or regulations or new interpretations of existing laws or regulations applicable to our business;

 

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

 

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new rules adopted by certain index providers, such as S&P Dow Jones, that limit or preclude inclusion of companies with multi-class capital structures in certain of their indices;

 

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any significant change in our management; and

 

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general economic conditions and slow or negative growth of our markets.

In addition, in the past, securities class action litigation has often been instituted following periods of volatility in the overall market and the market price of a particular company’s securities. This litigation, if instituted against us, could result in substantial costs and a diversion of our management’s attention and resources.

 

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A substantial portion of the outstanding shares of our Class A and Class B common stock after this offering will be restricted from immediate resale, but may be sold on a stock exchange in the near future. The large number of shares eligible for public sale or subject to rights requiring us to register them for public sale could depress the market price of our Class A common stock.

The market price of our Class A common stock could decline as a result of sales of a large number of shares of our Class A common stock in the market after this offering, and the perception that these sales could occur may also depress the market price of our Class A common stock. Based on              shares of our capital stock outstanding as of June 30, 2017, we will have             shares of our Class A and Class B common stock outstanding after this offering. Our executive officers, directors and the holders of substantially all of our capital stock and securities convertible into or exchangeable for our capital stock have entered into market standoff agreements with us or have entered or will enter into lock-up agreements with the underwriters under which they have agreed, subject to specific exceptions, not to sell any of our stock for 180 days following the date of this prospectus. We refer to such period as the lock-up period. Due to these agreements and the provisions of our investors’ rights agreement described further in the section titled “Description of Capital Stock—Registration Rights,” and subject to the provisions of Rule 144 or Rule 701, shares of our Class A and Class B common stock will be available for sale in the public market as follows:

 

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shares of Class B common stock will be immediately available for sale in the public market, following conversion to Class A common stock;

 

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beginning on the date of this prospectus, all             shares of our Class A common stock sold in this offering will be immediately available for sale in the public market; and

 

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beginning 181 days after the date of this prospectus, subject to the Company Lock-up Agreements (as defined in Certain Relationships and Related Party Transactions—Company Lock-up Agreements), the remainder of the shares of our Class A and Class B common stock will be eligible for sale in the public market from time to time thereafter, subject in some cases to the volume and other restrictions of Rule 144.

Upon completion of this offering, stockholders owning an aggregate of up to 1,646,933 shares will be entitled, under contracts providing for registration rights, to require us to register shares owned by them for public sale in the United States. In addition, we intend to file a registration statement to register shares reserved for future issuance under our equity compensation plans. Upon effectiveness of that registration statement, subject to the satisfaction of applicable exercise periods and expiration of the market standoff agreements and lock-up agreements referred to above, the shares issued upon exercise of outstanding stock options will be available for immediate resale in the United States in the open market.

Sales of our shares as restrictions end or pursuant to registration rights may make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate. These sales also could cause the trading price of our Class A common stock to fall and make it more difficult for you to sell shares of our Class A common stock.

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 significant stockholders who will hold in the aggregate     % of the voting power of our capital stock following the completion of this offering. This will limit or preclude your ability to influence corporate matters, including the election of directors, amendments to our organizational documents and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring stockholder approval.

Our Class A common stock, which is the stock we are offering in this offering, has one vote per share, and our Class B common stock has ten votes per share. Following this offering, our directors, executive officers and holders of more than 5% of our common stock, and their respective affiliates, will hold in the aggregate     % of the voting power of our capital stock. Because of the ten-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

 

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combined voting power of our common stock and therefore be able to control all matters submitted to our stockholders for approval. This concentrated control will limit or preclude your ability to influence corporate matters for the foreseeable future, including the election of directors, amendments to 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 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 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.

Following the IPO-Related Reorganization, we expect that we will become controlled by Morken, whose interests may differ from other stockholders.

Following the IPO-Related Reorganization, Morken, which includes David A. Morken and certain related trusts, will control     % of the combined voting power of our outstanding capital stock (or     % if the underwriters exercise their option to purchase additional shares in full). As a result, Morken will have the ability to control the appointment of our management, the entering into of mergers, sales of substantially all or all of our assets and other extraordinary transactions and influence amendments to our certificate of incorporation and bylaws. So long as Morken continues to control a majority of the voting power of our outstanding capital stock, it will have the ability to control the vote in any election of directors and will have the ability to prevent any transaction that requires shareholder approval regardless of whether other shareholders believe the transaction is in our best interests. In any of these matters, the interests of Morken may differ from or conflict with your interests. Moreover, this concentration of ownership may also adversely affect the trading price for our Class A common stock to the extent investors perceive disadvantages in owning stock of a company with a controlling shareholder.

Following the IPO-Related Reorganization, we plan to elect to take advantage of the “controlled company” exemption to the corporate governance rules for NASDAQ-listed companies, which could make our Class A common stock less attractive to some investors or otherwise harm our stock price.

Following the IPO-Related Reorganization, we expect that we will qualify as a “controlled company” under the corporate governance rules for NASDAQ-listed companies and expect to take advantage of related exemptions to the corporate governance rules. As a result, we will not be required to have a majority of our board of directors be independent, nor will we be required to have a compensation committee or an independent nominating function. Accordingly, should the interests of our controlling stockholder differ from those of other stockholders, the other stockholders may not have the same protections afforded to stockholders of companies that are subject to all of the corporate governance rules for NASDAQ-listed companies. Our status as a controlled company could make our Class A common stock less attractive to some investors or otherwise harm our stock price.

We cannot predict the impact our capital structure may have on our stock price.

In July 2017, S&P Dow Jones, a provider of widely followed stock indices, announced that companies with multiple share classes, such as ours, will not be eligible for inclusion in certain of their indices. As a result, our Class A common stock will likely not be eligible for these stock indices. Additionally, FTSE Russell, another provider of widely followed stock indices, recently stated that it plans to require new constituents of its indices to have at least five percent of their voting rights in the hands of public stockholders. Many investment funds are precluded from investing in companies that are not included in such indices, and these funds would be unable to

 

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purchase our Class A common stock if we were not included in such indices. We cannot assure you that other stock indices will not take a similar approach to S&P Dow Jones or FTSE Russell in the future. Exclusion from indices could make our Class A common stock less attractive to investors and, as a result, the market price of our Class A common stock could be adversely affected.

If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they change their recommendations regarding our Class A common stock adversely, the trading price of our Class A common stock and trading volume could decline.

The trading market for our Class A common stock will be influenced by the research and reports that securities or industry analysts may publish about us, our business, our market or our competitors. If any of the analysts who may cover us change their recommendation regarding our Class A common stock in an adverse manner, or provide more favorable recommendations about our competitors relative to us, the trading price of our Class A common stock would likely decline. If any analyst who may cover us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause the trading price of our Class A common stock or trading volume to decline.

We may invest or spend the proceeds of this offering in ways with which you may not agree or in ways which may not yield a return.

The net proceeds from the sale of our shares of our Class A common stock by us in this offering may be used for general corporate purposes, including sales and marketing activities, including further expansion of our product development and sales and marketing organizations, repayment of indebtedness, working capital, general and administrative matters and capital expenditures. We also may use a portion of the net proceeds to acquire businesses, products, services or technologies. However, we do not have agreements or commitments for any specific acquisitions at this time. Our management will have considerable discretion in the application of the net proceeds, and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. Until the net proceeds are used, they may be placed in investments that do not produce significant income or that may lose value.

Purchasers in this offering will experience immediate and substantial dilution in the book value of their investment.

The initial public offering price of $         per share of Class A common stock, which is the midpoint of the price range set forth on the cover page of this prospectus, is substantially higher than the net tangible book value per share of our outstanding Class A common stock immediately after this offering. Therefore, if you purchase our Class A common stock in this offering, you will incur immediate dilution of $         in the net tangible book value per share of Class A common stock from the price you paid. In addition, purchasers who bought shares of Class A common stock from us in this offering will have contributed     % of the total consideration paid to us by our stockholders to purchase shares of our common stock, in exchange for acquiring approximately     % of the outstanding shares of our capital stock as of                 , 2017 after giving effect to this offering. The exercise of outstanding stock options and the vesting of restricted stock units will result in further dilution.

Anti-takeover provisions contained in our amended and restated certificate of incorporation and amended and restated bylaws, as well as provisions of Delaware law, could impair a takeover attempt.

Our amended and restated certificate of incorporation, amended and restated bylaws and Delaware law contain or will contain provisions which could have the effect of rendering more difficult, delaying, or preventing an acquisition deemed undesirable by our board of directors. Among other things, our amended and restated certificate of incorporation and amended and restated bylaws will include provisions:

 

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authorizing “blank check” preferred stock, which could be issued by our board of directors without stockholder approval and may contain voting, liquidation, dividend and other rights superior to our Class A and Class B common stock;

 

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•

limiting the liability of, and providing indemnification to, our directors and officers;

 

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limiting the ability of our stockholders to call and bring business before special meetings;

 

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providing for a dual class common stock structure in which holders of our Class B common stock 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 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;

 

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providing that our board of directors will be classified into three classes of directors with staggered three-year terms;

 

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prohibiting stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders;

 

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requiring super-majority voting to amend some provisions in our amended and restated certificate of incorporation and amended and restated bylaws;

 

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requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our board of directors; and

 

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controlling the procedures for the conduct and scheduling of board of directors and stockholder meetings.

These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or changes in our management.

As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation law, which prevents certain stockholders holding more than 15% of our outstanding common stock from engaging in certain business combinations without approval of the holders of at least two-thirds of our outstanding common stock not held by such 15% or greater stockholder.

Any provision of our amended and restated certificate of incorporation, amended and restated bylaws or Delaware law that has the effect of delaying, preventing or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our Class A common stock and could also affect the price that some investors are willing to pay for our Class A common stock.

Our amended and restated certificate of incorporation and our amended and restated bylaws will include super-majority voting provisions that will limit your ability to influence corporate matters.

Our amended and restated certificate of incorporation and our amended and restated bylaws will include provisions that require the affirmative vote of two-thirds of all of the outstanding shares of our capital stock entitled to vote to effect certain changes. These changes include amending or repealing our amended and restated bylaws or amended and restated certificate of incorporation or removing a director from office for cause. Because, following the IPO-Related Reorganization, we expect Morken will control the majority of the voting power of our outstanding capital stock, it will have the ability to prevent any such changes, which will limit your ability to influence corporate matters.

We may need additional capital in the future and such capital may be limited or unavailable. Failure to raise capital when needed could prevent us from growing in accordance with our plans.

We may require more capital in the future from equity or debt financings to fund our operations, finance investments in equipment and infrastructure, acquire complementary businesses and technologies, and respond to competitive pressures and potential strategic opportunities. If we are required to raise additional funds through

 

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further issuances of equity or other securities convertible into equity, our existing stockholders could suffer significant dilution, and any new shares we issue could have rights, preferences or privileges senior to those of the holders of our Class A common stock. The additional capital we may seek may not be available on favorable terms or at all. In addition, our credit facility limits our ability to incur additional indebtedness under certain circumstances. If we are unable to obtain capital on favorable terms or at all, we may have to reduce our operations or forego opportunities, and this may have a material adverse effect on our business, financial condition and results of operations.

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

We have never declared or paid any cash dividends on our Class A common stock and do not intend to pay any cash dividends in the foreseeable future. We anticipate that we will retain all of our future earnings for use in the development of our business and for general corporate purposes. Any determination to pay dividends in the future will be at the discretion of our board of directors. In addition, the terms of our credit facility contain restrictions on our ability to declare and pay cash dividends on our capital stock. 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.

If a large number of shares of our Class A common stock is sold in the public market, the sales could reduce the trading price of our Class A common stock and impede our ability to raise future capital.

We cannot predict what effect, if any, future issuances by us of our Class A common stock will have on the market price of our Class A common stock. In addition, shares of our Class A common stock that we issue in connection with an acquisition may not be subject to resale restrictions. The market price of our Class A common stock could drop significantly if certain large holders of our Class A common stock, or recipients of our Class A common stock in connection with an acquisition, sell all or a significant portion of their shares of Class A common stock or are perceived by the market as intending to sell these shares other than in an orderly manner. In addition, these sales could impair our ability to raise capital through the sale of additional Class A common stock in the capital markets.

 

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MARKET AND INDUSTRY DATA

The market data and other statistical information used throughout this prospectus are based on independent industry publications, reports by market research firms or other published independent sources. Some market data and statistical information are also based on our good faith estimates, which are derived from management’s knowledge of our industry and such independent sources referred to above. Certain market, ranking and industry data included in this prospectus, including the size of certain markets and our size or position and the positions of our competitors within these markets, including our services relative to our competitors, are based on estimates of our management. These estimates have been derived from our management’s knowledge and experience in the markets in which we operate, as well as information obtained from surveys, reports by market research firms, our customers, distributors, suppliers, trade and business organizations and other contacts in the markets in which we operate. References herein to our being a leader in a market or service offering refer to our belief that we have a leading market share position in each specified market, unless the context otherwise requires. In addition, the discussion herein regarding our various markets is based on how we define the markets for our services, which services may be either part of larger overall markets or markets that include other types of services.

While we believe the industry, market and competitive position data included in this prospectus is reliable and is based on reasonable assumptions, such data involves risks and uncertainties and are subject to change based on various factors, including those discussed in “Risk Factors.” These and other factors could cause results to differ materially from those expressed in the estimates made by the independent parties and by us. Information based on estimates, forecasts, projections, market research, or similar methodologies is inherently subject to uncertainties, and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. In some cases, we do not expressly refer to the sources from which data is derived.

Certain monetary amounts, percentages and other figures included in this prospectus have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables or charts may not be the arithmetic aggregation of the figures that precede them, and figures expressed as percentages in the text may not total 100% or, as applicable, when aggregated may not be the arithmetic aggregation of the percentages that precede them.

Certain information in this prospectus is contained in independent industry publications. The source of these independent industry publications is provided below:

 

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comScore, Inc., Looking Ahead to the Voice Era, July 2017.

 

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Gartner, Inc., Forecast Snapshot: VPA-Enabled Wireless Speakers, Worldwide, 2016-2021, Werner Goertz and Ranjit Atwal, August 2017.

 

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International Data Corporation, Worldwide Telecommunications Spending, August 2017.

 

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International Data Corporation, Worldwide Voice and Text Messaging Communications Platform-as-a-Service Forecast, 2017-2021, March 2017.

 

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Ovum, Mobile Messaging Traffic and Revenue Forecast: 2016-21, November 2016.

 

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Ovum, OTT VoIP Forecast: 2016-21, January 2017.

The Gartner Report described herein, (the “Gartner Report”) represents research opinions or viewpoints published, as part of a syndicated subscription service, by Gartner, Inc. (“Gartner”), and are not representations of fact. The Gartner Report speaks as of its original publication date (and not as of the date of this prospectus) and the opinions expressed in the Gartner Report are subject to change without notice.

 

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TRADEMARKS

“Bandwidth” and our other registered or common law trade names, trademarks or service marks appearing in this prospectus are our property. We own or otherwise have rights to the trademarks, service marks, copyrights and trade names, including those mentioned in this prospectus, used in conjunction with the marketing and sale of our services. This prospectus includes trademarks, which are protected under applicable intellectual property laws and are our property and the property of our subsidiaries. This prospectus also contains trademarks, service marks, copyrights and trade names of other companies, which are the property of their respective owners. Unless the context otherwise indicates, we do not intend our use or display of other companies’ trademarks, service marks, copyrights or trade names to imply a relationship with, or endorsement or sponsorship of us by, any other companies. Solely for convenience, our trademarks, service marks, trade names and copyrights referred to in this prospectus may appear without the ^®,™ or ^© symbols, but such 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, service marks, trade names and copyrights.

 

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This prospectus, including the sections entitled “Prospectus Summary,” “Risk Factors,” “Use of Proceeds,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Business,” contains forward-looking statements. In some cases you can identify these statements by forward-looking words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect” or the negative or plural of these words or similar expressions. These forward-looking statements include, but are not limited to, statements concerning the following:

 

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The market in which we participate is highly competitive, and if we do not compete effectively, our business, results of operations and financial condition could be harmed.

 

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If we are unable to attract new customers in a cost-effective manner, then our business, results of operations and financial condition would be adversely affected.

 

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The market for some of our services is new and unproven, may decline or experience limited growth and is dependent in part on developers continuing to adopt our platform and use our services.

 

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If we do not develop enhancements to our services and introduce new services that achieve market acceptance, our business, results of operations and financial condition could be adversely affected.

 

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We have experienced rapid growth and expect our growth to continue, and if we fail to effectively manage our growth, then our business, results of operations and financial condition could be adversely affected.

 

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

 

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The communications industry faces significant regulatory uncertainties and the resolution of these uncertainties could harm our business, results of operations and financial condition.

 

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The trading price of our Class A common stock may be volatile, and you could lose all or part of your investment.

 

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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 significant stockholders who will hold in the aggregate     % of the voting power of our capital stock following the completion of this offering. This will limit or preclude your ability to influence corporate matters, including the election of directors, amendments to our organizational documents and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate transaction requiring stockholder approval.

 

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Other risk factors included under “Risk Factors” in this prospectus.

These forward-looking statements are subject to a number of risks, uncertainties and assumptions, including those described in “Risk Factors.” Moreover, we operate in a very competitive and rapidly changing environment. 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. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance or events and circumstances reflected in the forward-looking statements will be achieved or occur. Moreover, except as required by law, neither we nor any other person

 

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assumes responsibility for the accuracy and completeness of the forward-looking statements. We undertake no obligation to update publicly any forward-looking statements for any reason after the date of this prospectus to conform these statements to actual results or to changes in our expectations.

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, levels of activity, performance and events and circumstances may be materially different from what we expect.

 

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USE OF PROCEEDS

We estimate that the net proceeds to us from the sale of the shares of our Class A common stock offered by us will be approximately $         million, based upon the initial public offering price of $         per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. If the underwriters’ over-allotment option to purchase additional shares in this offering is exercised in full, we estimate that our net proceeds will be approximately $         million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. We will not receive any proceeds from the sale of shares by the selling stockholders pursuant to the exercise by the underwriters of their option to purchase additional shares of our Class A common stock.

Each $1.00 increase (decrease) in the assumed initial public offering price of $         per share would increase (decrease) the net proceeds that we receive from this offering 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 discount and estimated offering expenses payable by us. Similarly, each increase (decrease) of 1,000,000 shares in the number of shares of Class A common stock offered by us would increase (decrease) the net proceeds that we receive from this offering by approximately $         million, assuming the assumed initial public offering price remains the same and after deducting the estimated underwriting discount and estimated offering expenses payable by us.

The principal purposes of this offering are to increase our capitalization and financial flexibility. As of the date of this prospectus, we cannot specify with certainty all of the particular uses for the net proceeds to us of this offering. However, we currently intend to use the net proceeds to us from this offering primarily for general corporate purposes, including sales and marketing activities, including further expansion of our product development and sales and marketing organizations, repayment of indebtedness, working capital, 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, although we have no present commitments or agreements to enter into any acquisitions or investments. We will have broad discretion over the uses of the net proceeds in 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.

KeyBanc Capital Markets Inc. and certain of its affiliates are lenders and/or agents under our credit facility, as well as an underwriter in this offering, and, to the extent proceeds from this offering are used to repay amounts outstanding thereunder, will receive a portion of the net proceeds from this offering in connection with the repayment of our credit facility. Interest for borrowings under our credit facility are determined by reference to (a) the highest of (i) the London interbank offered rate for loans in Eurodollars for a period of one month plus 1.00%, (ii) the Federal Funds Effective Rate plus 0.50% or (iii) the interest rate established by the Administrative Agent as the Administrative Agent’s prime rate plus (b) an applicable margin, which ranges from 1.25% to 1.75% per annum based on a leverage ratio. As of June 30, 2017, we had $41.5 million of outstanding indebtedness under our credit facility, consisting of $39.0 million outstanding under our term loan facility and $2.5 million outstanding under our revolving credit facility. Beginning on March 31, 2017, the term loan is payable in consecutive equal quarterly installments with the balance payable in full on November 3, 2021. See Note 7 to our consolidated financial statements included elsewhere in this prospectus for further details. The outstanding indebtedness under our credit facility was incurred for general corporate purposes and to repay existing indebtedness.

 

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DIVIDEND POLICY

We have never declared or paid, and do not anticipate declaring or paying, any cash dividends on our capital stock. Any future determination as to the declaration and payment of dividends, if any, will be at the discretion of our board of directors and will depend on a number of factors, including our financial condition, operating results, contractual restrictions, capital requirements, business prospects and other factors our board of directors may deem relevant. In addition, the terms of our credit facility contain restrictions on our ability to declare and pay cash dividends on our capital stock.

 

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CAPITALIZATION

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

 

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an actual basis;

 

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a pro forma basis, giving effect to the Pre-IPO Reorganization; and

 

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a pro forma as adjusted basis, giving effect to the pro forma adjustments set forth above, our receipt of the net proceeds from our sale of             shares of Class A common stock in this offering at an assumed initial public offering price of $         per share, which is the midpoint of the price range set forth on the cover page of this prospectus, after deducting estimated underwriting discounts and commissions and estimated offering expenses payable by us and the use of proceeds to repay existing indebtedness.

You should read this table together with our consolidated financial statements and related 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.

 

		As of June 30, 2017
		Actual				Pro Forma				Pro Forma as Adjusted
		(In thousands, except share and per share information)
Cash and cash equivalents		$	5,679			$				$
Total debt			41,500
Redeemable convertible preferred stock:
Series A preferred stock; $0.001 par value; 1,200,000 shares authorized; 710,000 shares issued and outstanding; no shares authorized, issued and outstanding, pro forma and pro forma as adjusted			21,818
Stockholders’ deficit:
Old Class A common stock, $0.001 par value; 8,000,000 shares authorized; 4,716,568 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted			5
Old Class B common stock, $0.001 par value, 1,336,510 shares authorized; 13,936 shares issued and outstanding, actual; no shares authorized, issued or outstanding, pro forma and pro forma as adjusted			—
Class A common stock, $0.001 par value; no shares authorized or issued, actual;             shares authorized and             shares issued and outstanding pro forma;             shares authorized and             shares issued and outstanding pro forma as adjusted
Class B common stock, $0.001 par value; no shares authorized or issued, actual;             shares authorized and             shares issued and outstanding, pro forma;             shares authorized and             shares issued and outstanding, pro forma as adjusted
Additional paid-in capital			9,962
Accumulated deficit			(26,806	)
Total stockholders’ deficit			(16,839	)
Total capitalization		$	46,479			$				$

The table set forth above is based on the number of common shares outstanding as of June 30, 2017. The table does not reflect                 shares of our Class A common stock reserved for issuance under the 2017 Plan, which we plan to adopt in connection with this offering.

 

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Additionally, the information presented above assumes:

 

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an initial public offering price of $             per share, which is the midpoint of the price range set forth on the cover page of this prospectus;

 

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no exercise of the option to purchase additional shares of our Class A common stock by the underwriters; and

 

•

the adoption of our amended and restated certificate of incorporation and amended and restated bylaws prior to the pricing of this offering.

Each $1.00 increase (decrease) in the assumed public offering price of $             per share, which is the midpoint of the price range set forth on the cover page of this prospectus, assuming completion of the Pre-IPO Reorganization and the common stock split, would increase (decrease) our pro forma additional paid-in capital and decrease (increase) total stockholders’ deficit by approximately $             million and $             million, respectively, and would increase (decrease) total capitalization by approximately $            million, in each case assuming that the number of common shares offered by us, as set forth on the cover page of this prospectus, remains the same, and after deducting assumed underwriting discounts and commissions and other estimated offering expenses payable by us. We may also increase (decrease) the number of common shares we are offering. Each increase (decrease) of 1,000,000 shares in the number of common shares offered by us at an assumed offering price of $             per share, which is the midpoint of the price range set forth on the cover page of this prospectus, assuming completion of the Pre-IPO Reorganization and the common stock split, would increase (decrease) our pro forma additional paid-in capital and decrease (increase) total stockholders’ deficit by approximately $            million and $             million, respectively, and would increase (decrease) total capitalization by approximately $            million. The pro forma information discussed above is illustrative only and will be adjusted based on the actual public offering price and other terms of this offering determined at pricing.

If the underwriters’ option to purchase additional shares of our Class A common stock from us and certain selling stockholders were exercised in full, pro forma as adjusted cash and cash equivalents, additional paid-in capital, total stockholders’ deficit and shares of Class A common stock outstanding as of June 30, 2017 would be $             million, $             million, $             million and                 shares, respectively.

 

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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 after this offering. Dilution results from the fact that the per share offering price of the Class A common stock is substantially in excess of the book value per share of our Class A common stock after this offering. Our pro forma net tangible book value as of June 30, 2017 was $         million, or $         per share of our Class A common stock. Pro forma net tangible book value per share represents our total tangible assets reduced by the amount of our total liabilities, divided by the total number of shares of our Class A common stock outstanding after giving effect to (i) the filing and effectiveness of our amended and restated certificate of incorporation and the effectiveness of our amended and restated bylaws, each of which will occur prior to the pricing of this offering and (ii) the automatic conversion of all outstanding shares of our convertible preferred stock into shares of Class B common stock prior to the pricing of this offering.

After giving effect to the sale of             shares of Class A common stock that we are offering at an assumed initial public offering price of $         per share, which is the midpoint of the range listed on the cover page of this prospectus, and after deducting the estimated underwriting discount and estimated offering expenses payable by us, our pro forma as adjusted net tangible book value as of June 30, 2017 would have been $         million, or $         per share of Class A common stock. This amount represents an immediate increase in pro forma net tangible book value of $         per share of Class A common stock to our existing stockholders before this offering and an immediate dilution in pro forma net tangible book value of $         per share of Class A common stock to new investors purchasing shares of Class A common stock in this offering. We determine dilution by subtracting the pro forma as adjusted net tangible book value per share of Class A common stock after this offering from the amount of cash that a new investor paid for a share of Class A common stock. The following table illustrates this dilution, assuming the underwriters do not exercise their option to purchase additional shares of Class A common stock:

 

Assumed initial public offering price per share of Class A common stock						$
Pro forma net tangible book value per share of Class A common stock as of June 30, 2017		$
Increase in pro forma net tangible book value per share of Class A common stock attributable to new investors in this offering
Pro forma as adjusted net tangible book value per share of Class A common stock immediately after this offering
Dilution in pro forma net tangible book value per share of Class A common stock to new investors in this offering						$

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

 

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If the underwriters’ option to purchase additional shares of Class A common stock from us and certain selling stockholders is exercised in full, the pro forma as adjusted net tangible book value per share of Class A common stock, as adjusted to give effect to this offering, would be $         per share, and the dilution in pro forma net tangible book value per share of Class A common stock to new investors in this offering would be $         per share.

The following table summarizes, on a pro forma basis as of June 30, 2017, the differences between the number of shares of Class A common stock purchased from us, the total consideration paid to us in cash and the average price per share that existing owners and new investors paid. The calculation below is based on an assumed initial public offering price of $         per share of Class A common stock, which is the midpoint of the range listed on the cover page of this prospectus, before deducting the estimated underwriting discount and estimated offering expenses payable by us.

 

		Shares of Class A Common Stock Purchased								Total Consideration								Average Price Per Share of Class A Common Stock
		Number				Percent				Amount				Percent
Existing stockholders								%		$						%		$
New investors
Total							100.0	%		$					100.0	%

The foregoing tables and calculations are based on the number of shares of our Class A common stock outstanding as of June 30, 2017 after giving effect to the Pre-IPO Reorganization, and excludes:

 

•

1,294,969 shares of our Class A common stock issuable upon the exercise of outstanding options as of June 30, 2017 at a weighted-average exercise price of $16.75 per share;

 

•

146,985 shares of our Class B common stock issuable upon the exercise of outstanding options as of June 30, 2017 at a weighted-average exercise price of $14.36 per share;

 

•

0 shares of our Class B common stock reserved for future issuance under our 2001 Stock Option Plan, 27,605 shares of our Class A common stock reserved for future grant or issuance under our 2010 Equity Compensation Plan and          shares of our Class A common stock reserved for future grant or issuance under our 2017 Incentive Award Plan, each as of June 30, 2017; and

 

•

25,877 shares of our Class B common stock issuable upon the exercise of outstanding warrants as of June 30, 2017 at a weighted-average exercise price of $5.76 per share.

To the extent any of these outstanding options or warrants are exercised, there will be further dilution to new investors. To the extent all of such outstanding options and warrants had been exercised as of June 30, 2017, the pro forma as adjusted net tangible book value per share of Class A common stock after this offering would be $            , and total dilution per share of Class A common stock to new investors would be $            .

Except as otherwise indicated, the above discussion and tables assume no exercise of the underwriters’ option to purchase additional shares of our Class A common stock from us and the selling stockholders. If the underwriters’ option to purchase additional shares of our Class A common stock were 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.

 

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SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

The following selected consolidated financial data should be read in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the consolidated financial statements and related notes included within this prospectus. The consolidated statements of operations data for the years ended December 31, 2015 and 2016 and the consolidated balance sheets as of December 31, 2015 and 2016, are derived from our audited consolidated financial statements included elsewhere in this prospectus. The consolidated statements of operations data for the six months ended June 30, 2016 and 2017 and the consolidated balance sheet data as of June 30, 2017, are derived from our unaudited consolidated financial statements included elsewhere in this prospectus. We have prepared the unaudited consolidated financial statements on the same basis as the audited consolidated financial statements and have included all adjustments, consisting only of normal recurring adjustments that, in our opinion, are necessary to state fairly the financial information set forth in those statements. Our historical results are not necessarily indicative of our future results, and the results of operations for the six months ended June 30, 2017, are not necessarily indicative of the results to be expected for the full year or any other period. The selected consolidated financial data in this section are not intended to replace our consolidated financial statements and the related notes, and are qualified in their entirety by the consolidated financial statements and related notes included elsewhere in this prospectus.

 

		Year ended December 31,								Six months ended June 30,
		2015				2016				2016				2017
		(In thousands, except share and per share amounts)
Consolidated Statements of Operations Data:
Revenue:
CPaaS revenue		$	101,502			$	117,078			$	56,651			$	63,194
Other revenue			36,299				35,057				18,118				15,957
Total revenue			137,801				152,135				74,769				79,151
Cost of revenue:
CPaaS cost of revenue			64,760				71,218				35,379				37,147
Other cost of revenue			14,482				14,000				7,283				6,713
Total cost of revenue			79,242				85,218				42,662				43,860
Gross profit			58,559				66,917				32,107				35,291
Operating expenses:
Research and development			7,375				8,520				3,767				5,091
Sales and marketing			8,620				9,294				4,458				4,971
General and administrative			34,602				33,859				15,672				15,894
Total operating expenses			50,597				51,673				23,897				25,956
Operating income			7,962				15,244				8,210				9,335
Other expense:
Interest expense, net			(589	)			(908	)			(369	)			(859	)
Change in fair value of shareholders’ anti-dilutive arrangement			—				—				—				(553	)
Total other expense			(589	)			(908	)			(369	)			(1,412	)
Income from continuing operations before income taxes			7,373				14,336				7,841				7,923
Income tax (provision) benefit			(408	)			11,094				(269	)			(2,987	)
Income from continuing operations			6,965				25,430				7,572				4,936
Loss from discontinued operations, net of income taxes			(13,665	)			(3,072	)			(3,011	)			—
Net (loss) income		$	(6,700	)		$	22,358			$	4,561			$	4,936
Income from continuing operations attributable to common stockholders		$	6,034			$	22,075			$	6,565			$	4,291

 

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		Year ended December 31,								Six months ended June 30,
		2015				2016				2016				2017
		(In thousands, except share and per share amounts)
Income from continuing operations attributable to participating securities			931				3,355				1,007				645
Net income from continuing operations per share attributable to common stockholders, basic		$	1.31			$	4.73			$	1.42			$	0.91
Weighted-average outstanding shares used in computing net income from continuing operations per share attributable to common stockholders, basic			4,599,518				4,671,427				4,632,313				4,722,647
Net income from continuing operations per share attributable to common stockholders, diluted		$	1.21			$	4.29			$	1.28			$	0.83
Weighted-average outstanding shares used in computing net income from continuing operations per share attributable to common stockholders, diluted			4,983,138				5,144,553				5,129,768				5,190,879

 

		As of December 31,								As of June 30,
		2015				2016				2017
		(In thousands)
Consolidated Balance Sheets Data:
Cash and cash equivalents		$	10,059			$	6,788			$	5,679
Working capital			(26,972	)			(2,427	)			4,449
Property and equipment, net			10,257				11,180				11,562
Total assets			63,146				69,973				68,238
Total stockholders’ deficit			(19,074	)			(22,374	)			(16,839	)

 

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

You should read the following discussion and analysis of our financial condition and results of operations together with the consolidated financial statements and related notes that are included elsewhere in this prospectus. This discussion contains forward-looking statements based upon current plans, expectations and beliefs that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and in other parts of this prospectus. Our fiscal year ends on December 31.

Overview

We are a leading cloud-based communications platform for enterprises in the United States. Our solutions include a broad range of software APIs for voice and text functionality and our owned and managed, purpose-built IP voice network, one of the largest in the nation. Our sophisticated and easy-to-use software APIs allow enterprises to enhance their products and services by incorporating advanced voice and text capabilities. Companies use our platform to more frequently and seamlessly connect with their end users, add voice calling capabilities to residential IoT devices, offer end users new mobile application experiences and improve employee productivity, among other use cases. By owning and operating a capital-efficient, purpose-built IP voice network, we are able to offer advanced monitoring, reporting and analytics, superior customer service, dedicated operating teams, personalized support, and flexible cost structures. Over the last ten years, we have pioneered the CPaaS space through our innovation-rich culture and focus on empowering enterprises with end-to-end communications solutions.

Our voice software APIs allow enterprises to make and receive phone calls and create advanced voice experiences. Integration with our purpose-built IP voice network ensures enterprise-grade functionality and secure, high-quality connections. Our messaging software APIs provide enterprises with advanced tools to connect with end users via messaging. Our customers also use our solutions to enable 911 response capabilities, real-time provisioning and activation of phone numbers and toll-free number messaging.

We are the only CPaaS provider in the industry with our own nationwide IP voice network, which we have purpose-built for our platform. Our network is capital-efficient and custom-built to support the applications and experiences that make a difference in the way enterprises communicate. Since a communications platform is only as strong as the network that backs it, we believe our network provides a significant competitive advantage in the control, quality, pricing power and scalability of our offering. We are able to control the quality and provide the support our customers expect, as well as efficiently meet scalability and cost requirements.

Segments

Our business is organized into two segments:

CPaaS Segment. Our CPaaS segment includes our software-powered platform, which empowers customers with highly sophisticated yet easy-to-use software APIs to customize and scale their communications solutions rapidly and securely in a seamless manner. We define and calculate our CPaaS business as all voice and text communications services we provide customers through our software API or web-based user interfaces and our IP voice network infrastructure. For the years ended December 31, 2015 and 2016 and the six months ended June 30, 2016 and 2017, CPaaS revenue accounted for 74%, 77%, 76% and 80% of our total revenue, respectively.

Other Segment. Our Other segment consists of all revenue other than that generated from our CPaaS segment. This includes our legacy services—SIP trunking, data resale and hosted voice—which require limited resources to operate and minimal to no expected investment in the future. Our Other segment also includes revenue from the carrier access billing system, SMS registration fees and other miscellaneous product lines, which we expect will continue to generate revenue even as our legacy services revenue declines.

 

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Factors Affecting Our Performance

Our financial performance will be affected by our ability to grow our business, as well as the impact of seasonality from period-to-period. We believe that the growth of our business and our future success are dependent upon a number of factors, including our ability to acquire new CPaaS customers, grow our existing CPaaS customer base and make investments for growth and scale. While each of these areas presents significant opportunities for us, they also pose important challenges that we must successfully address in order to sustain the growth of our business and improve our results of operations. Our future growth and profitability will depend upon many variables, including the success of our growth strategies and the timing and size of investments and expenditures that we choose to undertake, as well as market growth and other factors that are not within our control. We expect to use the proceeds from this offering to fund these growth strategies and to continue to expand our business.

Acquiring New CPaaS Customers

We believe that the shift from legacy communications solutions to a modern software-driven cloud-based communications platform is in its early stages. We intend to target our CPaaS solutions to large enterprises and fast-growing businesses that want to leverage our platform as a part of their service offering by continuing to invest in expanding our sales organization. We target these enterprises because they capture a substantial part of the demand for advanced communications capabilities in the United States and we believe these enterprises are likely to realize the greatest value from our enterprise-grade platform. We are also committed to supporting our expanded sales team with more robust marketing programs to improve our brand awareness.

Our business and results of operations will depend on our ability to continue to add new enterprises as CPaaS customers. In some instances, we may acquire enterprise customers that may scale their usage of our platform rapidly and may cause fluctuations in our results of operations and financial metrics and make forecasting our future results of operations and financial metrics more difficult.

Expanding Penetration Within Our Existing CPaaS Customer Base

Our CPaaS customers often start with small deployments on our platform and then expand their usage significantly as they derive value from using our platform. Our business and results of operations will depend on our ability to expand our existing customers’ use of our platform services. We believe that there is a significant opportunity to drive additional sales to existing customers, and expect to invest in sales, marketing and customer support to achieve additional revenue growth from existing customers.

Investments in Future Growth

We believe that we are only beginning to penetrate our market opportunity with large enterprises, and we intend to continue to invest to grow our customer base. We expect to continue to make significant investments in R&D activities, including by further developing our platform features to support new use cases. We also plan to continue to invest in operational and administrative functions to support our expected growth and our transition to a public company.

Investments for Scale

As our business grows, we plan to continue to invest in our IP voice network and platform optimization efforts. Ultimately, we expect to realize cost savings through economies of scale, but we may incur costs during phases of expansion and optimization. Historically, we have made minimal investments to maintain our network and platform. The majority of our investments for scale have been success-based capital expenditures fueled by customer demand, and we expect this to continue in the future.

 

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Seasonality

Although we have not historically experienced significant seasonality with respect to our revenue throughout the year, we have seen seasonality related to the usage-based revenue from our enterprise customers. Usage from our customers is affected by the number of business days in a month. Traditionally, seasonality in the fourth quarter results in lower usage revenue due to the amount of business days and number of holidays in November and December. To the extent we experience this seasonality, it may cause fluctuations in our results of operations and financial metrics. Monthly recurring charges associated with phone numbers and 911-enabled phone numbers are not dependent upon the number of business days in a month, and are therefore not subject to the seasonality related to our usage-based revenue.

Key Performance Indicators

We monitor the following KPIs to help us evaluate our business, identify trends affecting our business, formulate business plans, and make strategic decisions. We believe the following KPIs are useful in evaluating our business:

 

		Year ended December 31,								Six months ended June 30,
		2015				2016				2016				2017
		(Dollars in thousands)
Number of active CPaaS customer accounts (as of balance sheet date)			704				798				756				865
Dollar-based net retention rate			115	%			111	%			112	%			107	%
Adjusted EBITDA		$	18,912			$	23,470			$	12,269			$	12,655
Free cash flow		$	13,549			$	10,881			$	7,185			$	2,285

Number of Active CPaaS Customer Accounts

We believe that the number of active CPaaS customer accounts is an important indicator of the growth of our business, the market acceptance of our platform and our future revenue trends. We define an active CPaaS customer account at the end of any period as an individual account, as identified by a unique account identifier, for which we have recognized at least $100 of revenue in the last month of the period. We believe that the use of our platform by active CPaaS customer accounts at or above the $100 per month threshold is a stronger indicator of potential future engagement than trial usage of our platform at levels below $100 per month. A single organization may constitute multiple unique active CPaaS customer accounts if it has multiple unique account identifiers, each of which is treated as a separate active CPaaS customer account. As of June 30, 2017, with the exception of two active CPaaS customer accounts that were part of the same organization, all other active CPaaS customer accounts were related to unique organizations. Customers who pay after using our platform and customers that have credit balances are included in the number of active CPaaS customer accounts. Customers from our Other segment are excluded in the number of active CPaaS customer accounts, unless they are also CPaaS customers. In each of the years ended December 31, 2015 and 2016 and the six months ended June 30, 2017, revenue from active CPaaS customer accounts represented approximately 99% of total CPaaS revenue.

Dollar-based Net Retention Rate

Our ability to drive growth and generate incremental revenue depends, in part, on our ability to maintain and grow our relationships with our existing customers that generate CPaaS revenue and seek to increase their use of our platform. We track our performance in this area by measuring the dollar-based net retention rate for our customers who generate CPaaS revenue. Our dollar-based net retention rate compares the CPaaS revenue from customers in a quarter to the same quarter in the prior year. To calculate the dollar-based net retention rate, we first identify the cohort of customers that generate CPaaS revenue and that were customers in the same quarter of the prior year. The dollar-based net retention rate is obtained by dividing the CPaaS revenue generated from that cohort in a quarter, by the CPaaS revenue generated from that same cohort in the corresponding quarter in the prior year. When we calculate dollar-based net retention rate for periods longer than one quarter, we use the average of the quarterly dollar-based net retention rates for the quarters in such period.

 

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Our dollar-based net retention rate increases when such customers increase usage of a product, extend usage of a product to new applications or adopt a new product. Our dollar-based net retention rate decreases when such customers cease or reduce usage of a product or when we lower prices on our solutions. As our customers grow their business and extend the use of our platform, they sometimes create multiple customer accounts with us for operational or other reasons. As such, when we identify a significant customer organization (defined as a single customer organization generating more than 1% of CPaaS revenue in a quarterly reporting period) that has created a new CPaaS customer, this new customer is tied to, and CPaaS revenue from this new customer is included with, the original CPaaS customer for the purposes of calculating this metric. For the six months ended June 30, 2017, our dollar-based net retention rate was 107%, compared to 112% in the same period in 2016. The primary driver of this decrease was our decision to curtail services to strategic competitors. For the year ended December 31, 2016, our dollar-based net retention rate was 111%, compared to 115% for the year ended December 31, 2015. This decrease was driven by the decision to lower pricing in exchange for contract extensions with certain of our key customers.

Non-GAAP Financial Measures

We use adjusted EBITDA, adjusted gross profit, adjusted gross margin and free cash flow for financial and operational decision making and to evaluate period-to-period differences in our performance. Adjusted EBITDA, adjusted gross profit, adjusted gross margin and free cash flow are non-GAAP financial measures, which we believe are useful for investors in evaluating our overall financial performance. We believe these measures provide useful information about operating results, enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to key performance indicators used by management in its financial and operational decision making. For a reconciliation of each of the non-GAAP financial measures described below, see “—Reconciliation of Non-GAAP Financial Measures.”

Adjusted EBITDA

We define adjusted EBITDA as net income or losses from continuing operations, adjusted to reflect the addition or elimination of certain income statement items including, but not limited to:

 

•

income tax expense (benefit);

 

•

interest expense, net;

 

•

depreciation and amortization expense;

 

•

stock-based compensation expense;

 

•

impairment of intangible assets;

 

•

loss (gain) from disposal of property and equipment; and

 

•

change in fair value of financial instruments, including any change in shareholders’ anti-dilutive arrangements.

Adjusted EBITDA is a key measure used by management to understand and evaluate our core operating performance and trends, to generate future operating plans and to make strategic decisions regarding the allocation of capital. In particular, the exclusion of certain expenses in calculating adjusted EBITDA facilitates comparisons of our operating performance on a period-to-period basis.

Adjusted Gross Profit and Adjusted Gross Margin

GAAP defines gross profit as revenue less cost of revenue. Cost of revenue includes all expenses associated with our various service offerings as more fully described under the caption “—Key Components of Statement of

 

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Operations—Cost of Revenue and Gross Margin.” We define adjusted gross profit as gross profit after adding back the following items:

 

•

depreciation and amortization; and

 

•

stock-based compensation.

We add back depreciation and amortization and stock-based compensation because they are non-cash items. We eliminate the impact of these non-cash items because we do not consider them indicative of our core operating performance. Their exclusion facilitates comparisons of our operating performance on a period-to-period basis. Therefore, we believe that showing gross margin, as adjusted to remove the impact of these non-cash expenses, such as depreciation, amortization and stock-based compensation, is helpful to investors in assessing our gross profit and gross margin performance in a way that is similar to how management assesses our performance.

We calculate adjusted gross margin by dividing adjusted gross profit by revenue, expressed as a percentage of revenue.

Management uses adjusted gross profit and adjusted gross margin to evaluate operating performance and to determine resource allocation among our various service offerings. We believe that adjusted gross profit and adjusted gross margin provide useful information to investors and others to understand and evaluate our operating results in the same manner as our management and board of directors and allows for better comparison of financial results among our competitors. Adjusted gross profit and adjusted gross margin may not be comparable to similarly titled measures of other companies because other companies may not calculate adjusted gross profit and adjusted gross margin or similarly titled measures in the same manner as we do.

Adjusted Net Income

We define adjusted net income as net income adjusted for certain items affecting period to period comparability. Adjusted net income excludes:

 

•

losses from discontinued operations, net of income taxes;

 

•

stock-based compensation;

 

•

change in fair value of stockholders’ antidilutive arrangement;

 

•

amortization of acquired intangible assets related to the Dash acquisition;

 

•

impairment charges of intangibles assets; and

 

•

loss (gain) on disposal of property and equipment.

We believe that adjusted net income is a meaningful measure because by removing certain non-recurring charges and non-cash expenses we present our operating results directly associated with the period’s performance. We believe the use of adjusted net income may be helpful to investors because it provides consistency and comparability with past financial performance, facilitates period-to-period comparisons of results of operations and assists in comparisons with other companies, many of which use similar non-GAAP financial information to supplement their GAAP results.

Free Cash Flow

Free cash flow represents net cash provided by (used in) operating activities from continuing operations less net cash used in investing activities from continuing operations. We believe that free cash flow is a useful indicator of liquidity and provides information to management and investors about the amount of cash generated from our core operations that can be used for investing in our business. Free cash flow has certain limitations in

 

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that it does not represent the total increase or decrease in the cash balance for the period, nor does it represent the residual cash flows available for discretionary expenditures. Therefore, it is important to evaluate free cash flow along with our consolidated statements of cash flows.

Acquisitions and Dispositions

Republic Wireless

On April 20, 2015, we created a wholly owned subsidiary, Republic Wireless, Inc., which was incorporated in Delaware. On November 30, 2016, we completed a pro-rata distribution of the common stock of Republic Wireless to our shareholders of record in a tax-free spin-off. In connection with the Spin-Off, we entered into a number of services agreements with Republic Wireless (the “Transition Services Agreements”). See “Certain Relationships and Related Party Transactions—Transactions with Republic Wireless.”

Dash

On February 22, 2011, we acquired substantially all of the assets of Dash Carrier Services, LLC and related entities, together a provider of 911 services, for total consideration of $21.1 million. We used substantially all of the proceeds of our only institutional equity financing to finance the acquisition. In connection with the acquisition, we recorded $6.9 million of goodwill.

Key Components of Statements of Operations

Revenue

We derive a majority of our revenue from our CPaaS segment. For the years ended December 31, 2015 and 2016 and the six months ended June 30, 2016 and 2017 we generated 74%, 77%, 76% and 80%, respectively, of our total revenue from our CPaaS customers. CPaaS revenue is derived from voice usage, phone number services, 911-enabled phone number services, messaging services and other services. For the year ended December 31, 2016, our voice usage, phone number services, 911-enabled phone number services, messaging service and other services accounted for 53%, 22%, 18%, 4% and 3% of our CPaaS revenue, respectively. We expect voice minutes and messaging services to increase as a percentage of CPaaS revenue in the future. We derive a portion of our CPaaS revenue from usage-based fees which includes voice calling and messaging services. For the years ended December 31, 2015 and 2016 and the six months ended June 30, 2016 and 2017 we generated 55%, 56%, 56% and 57% of our CPaaS revenue, respectively, from usage-based fees. We also earn monthly fees from services such as phone number services and 911 access service. We generated 42% of our CPaaS revenue in 2015 and 41% of our CPaaS revenue in 2016 and for the six months ended June 30, 2016 and June 30, 2017 from monthly per unit fees. The remaining 2-3% of our CPaaS revenue is generated from other miscellaneous services.

The remainder of our revenue is generated by our Other segment. Other revenue made up 26%, 23%, 24% and 20% of our total revenue in the years ended December 31, 2015 and 2016 and the six months ended June 30, 2016 and 2017, respectively. Other revenue is composed of revenue earned from our legacy services and indirect revenue. For the years ended December 31, 2015 and 2016 and the six months ended June 30, 2016 and 2017 we generated $24.3 million, $20.1 million, $10.5 million and $8.9 million in revenue from our legacy services and $12.0 million, $15.0 million, $7.6 million and $7.0 million from indirect revenue, respectively. Other revenue as a percentage of total revenue is expected to continue to decline over time.

Customers typically pay for usage in arrears and pay one month in advance for monthly recurring fees and set up fees. The majority of our customers enter into contracts which specify the product they are purchasing and the rates for each product. Customers sometimes have minimum monthly usage commitments through a specified ramp-up period. Larger customers receive volume discounts in the form of monthly tiered pricing.

 

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We recognize accounts receivable at the time the customer is invoiced. Additionally, we record a receivable and revenue for unbilled revenue if the services have been delivered and are billable in subsequent periods. Unbilled revenue made up 47%, 44% and 46% of outstanding accounts receivable, net of allowance for doubtful accounts as of December 31, 2015, December 31, 2016 and June 30, 2017, respectively.

Cost of Revenue and Gross Margin

CPaaS cost of revenue consists primarily of fees paid to other network service providers from whom we buy services such as minutes of use, phone numbers, messages, porting of customer numbers and network circuits. Cost of revenue also contains costs related to support of our IP voice network, web services, cloud infrastructure, capacity planning and management, rent for network facilities, software licenses, hardware and software maintenance fees and network engineering services. Personnel costs (including non-cash stock-based compensation expenses) associated with personnel who are responsible for the delivery of services, operation and maintenance of our communications network, and customer support as well as, third-party support agreements and depreciation of network equipment, amortization of internally developed software and gain (loss) on disposal of property and equipment are also included in cost of revenue.

Other cost of revenue consists of costs supporting non-CPaaS services including leased circuit costs paid to third party providers, internet connectivity expenses, minutes of use, direct operations, contractors, regulatory fees, surcharges and other pass-through costs and software and hardware maintenance fees.

Gross margin is calculated by subtracting cost of revenue from revenue, divided by total revenue, expressed as a percentage. Our cost of revenue and gross margin have been, and will continue to be, affected by several factors, including the timing and extent of our investments in our network, our ability to manage off-network minutes of use and messaging costs, the product mix of revenue, the timing of amortization of capitalized software development costs and the extent to which we periodically choose to pass on any cost savings to our customers in the form of lower usage prices.

Operating Expenses

The most significant components of operating expenses are personnel costs, which consist of salaries, benefits, bonuses, and stock-based compensation expenses. We also incur other non-personnel costs related to our general overhead expenses, including facility expenses, software licenses, web services, depreciation and amortization of assets unrelated to delivery of our services. We expect that our operating expenses will increase in absolute dollars.

Research and Development

R&D expenses consist primarily of personnel costs (including non-cash stock-based compensation expenses), outsourced software development and engineering service and cloud infrastructure fees for staging and development of outsourced engineering services. We capitalize the portion of our software development costs in instances where we invest resources to develop software for internal use. We plan to use a portion of the net proceeds from this offering to increase our investment in R&D to enhance current product offerings and develop new services.

Sales and Marketing

Sales and marketing expenses consist primarily of personnel costs, including commissions for our sales employees and non-cash stock-based compensation expenses. Sales and marketing expenses also include expenditures related to advertising, marketing, our brand awareness activities, sales support and professional services fees.

 

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We focus our sales and marketing efforts on creating sales leads and establishing and promoting our brand. We plan to use a portion of the net proceeds from this offering to increase the investment in sales and marketing in order to expand our CPaaS customer base by growing headcount, driving our go-to-market strategies, building brand awareness, advertising and sponsoring additional marketing events.

General and Administrative

General and administrative expenses consist primarily of personnel costs, including stock-based compensation, for our accounting, finance, legal, human resources and administrative support personnel and executives. General and administrative expenses also include costs related to product management and reporting, customer billing and collection functions, information services, professional services fees, credit card processing fees, rent associated with our headquarters in Raleigh, North Carolina and our other offices, and depreciation and amortization. We expect that we will incur increased costs associated with supporting the growth of our business and to meet the increased compliance requirements associated with our transition to, and operation as, a public company.

Income Taxes

Our income tax expense and effective tax rate are impacted by the establishment or release of deferred tax asset valuation allowances. For example, in the fourth quarter of 2016, as a result of the Spin-Off, our evaluation of available positive and negative evidence resulted in a judgment that the realization of the tax benefits for deferred tax assets did meet the “more likely than not” standard and therefore we recognized a $14.1 million benefit due to the release of the deferred tax asset valuation allowance subsequent to the Spin-Off. Additionally, we have federal and state net operating loss carryforwards that expire at various dates beginning in 2035 and 2020, respectively. The federal credit carryforwards begin to expire in 2030. Our future utilization of net operating losses and credits may be limited if certain changes in ownership occur.

 

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Results of Operations

Consolidated Results of Operations

The following table sets forth the consolidated statements of operations for the periods indicated.

 

		Year ended December 31,								Six months ended June 30,
		2015				2016				2016				2017
		(In thousands)
Revenue
CPaaS revenue		$	101,502			$	117,078			$	56,651			$	63,194
Other revenue			36,299				35,057				18,118				15,957
Total revenue			137,801				152,135				74,769				79,151
Cost of revenue
CPaaS cost of revenue			64,760				71,218				35,379				37,147
Other cost of revenue			14,482				14,000				7,283				6,713
Total cost of revenue			79,242				85,218				42,662				43,860
Gross profit
CPaaS			36,742				45,860				21,272				26,047
Other			21,817				21,057				10,835				9,244
Total gross profit			58,559				66,917				32,107				35,291
Operating expenses
Research and development			7,375				8,520				3,767				5,091
Sales and marketing			8,620				9,294				4,458				4,971
General and administrative			34,602				33,859				15,672				15,894
Total operating expenses			50,597				51,673				23,897				25,956
Operating income			7,962				15,244				8,210				9,335
Other expense
Interest expense, net			(589	)			(908	)			(369	)			(859	)
Change in fair value of shareholders’ anti-dilutive arrangement			—				—				—				(553	)
Income from continuing operations before income taxes			7,373				14,336				7,841				7,923
Income tax (provision) benefit			(408	)			11,094				(269	)			(2,987	)
Income from continuing operations			6,965				25,430				7,572				4,936
(Loss) from discontinued operations, net of income tax			(13,665	)			(3,072	)			(3,011	)			—
Net (loss) income		$	(6,700	)		$	22,358			$	4,561			$	4,936

 

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The following table sets forth our results of operations as a percentage of our total revenue for the periods presented.

 

		Year ended December 31,								Six months ended June 30,
		2015				2016				2016				2017
Revenue
CPaaS revenue			74	%			77	%			76	%			80	%
Other revenue			26	%			23	%			24	%			20	%
Total revenue			100	%			100	%			100	%			100	%
Cost of revenue
CPaaS cost of revenue			64	%			61	%			62	%			59	%
Other cost of revenue			40	%			40	%			40	%			42	%
Total cost of revenue			58	%			56	%			57	%			55	%
Gross profit
CPaaS			36	%			39	%			38	%			41	%
Other			60	%			60	%			60	%			58	%
Total gross profit			42	%			44	%			43	%			45	%
Operating expenses
Research and development			5	%			6	%			5	%			6	%
Sales and marketing			6	%			6	%			6	%			6	%
General and administrative			25	%			22	%			21	%			20	%
Total operating expenses			37	%			34	%			32	%			33	%
Operating income			6	%			10	%			11	%			12	%
Other expense
Interest expense, net			0	%			(1	)%			0	%			(1	)%
Change in fair value of shareholders’ anti-dilutive arrangement			—				—				—				(1	)%
Income from continuing operations before income taxes			5	%			9	%			10	%			10	%
Income tax provision (benefit)			0	%			(7	)%			0	%			4	%
Income from continuing operations			5	%			17	%			10	%			6	%
Loss from discontinued operations, net of income tax			(10	)%			(2	)%			(4	)%			—
Net (loss) income			(5	)%			15	%			6	%			6	%

Comparison of the Six Months Ended June 30, 2016 and 2017

Revenue

 

		Six months ended June 30,
		2016				2017				Change
		(In thousands)
CPaaS revenue		$	56,651			$	63,194			$	6,543				12	%
Other revenue			18,118				15,957				(2,161	)			(12	)%
Total revenue		$	74,769			$	79,151			$	4,382				6	%

For the six months ended June 30, 2017, total revenue increased by $4.4 million, or 6%, compared to the same period in 2016. CPaaS revenue increased by $6.5 million, or 12%, compared to the same period in 2016. As a percentage of total revenue, CPaaS revenue increased from 76% to 80% from the six months ended June 30,

 

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2016 to June 30, 2017. The increase in CPaaS revenue was primarily attributable to an increase in the usage of all our service offerings, particularly our voice and messaging usage, which accounted for $7.4 million of the increase in CPaaS revenue, and additionally our phone number services and 911-enabled phone number services, which accounted for $1.8 million of the increase in CPaaS revenue. This overall increase in CPaaS revenue was partially offset by $2.6 million related to pricing decreases that we have implemented over time with our customers in the form of lower usage prices to increase the reach and scale of our platform. The changes in usage and price in the six months ended June 30, 2017 were reflected in our dollar-based net retention rate of 107%. The decline in the dollar-based net retention rate in the six months ended June 30, 2017 was primarily due to a strategic decision to no longer service a particular customer. The increase in usage was also attributable to a 14% increase in the number of active CPaaS customer accounts, from 756 as of June 30, 2016 to 865 as of June 30, 2017. In addition, revenue from new CPaaS customers contributed $2.6 million, or 5%, to CPaaS revenue for the six months ended June 30, 2017 compared to $2.1 million, or 4%, to CPaaS revenue in the same period in 2016. Other revenue decreased by $2.2 million, driven by the expected decline in legacy services of $1.6 million and decreases in indirect revenue of $0.6 million.

Cost of Revenue and Gross Margin

 

		Six months ended June 30,
		2016				2017				Change
		(In thousands)
Cost of revenue:
CPaaS cost of revenue		$	35,379			$	37,147			$	1,768				5	%
Other cost of revenue			7,283				6,713				(570	)			(8	)%
Total cost of revenue		$	42,662			$	43,860			$	1,198				3	%
Gross profit		$	32,107			$	35,291			$	3,184				10	%
Gross margin:
CPaaS			38%				41%
Other			60%				58%
Total gross margin			43%				45%

For the six months ended June 30, 2017, total cost of revenue increased by $1.2 million and total gross margin increased by 2% due to improved CPaaS gross margin. CPaaS cost of revenue increased by $1.8 million, or 5%. This increase in cost of revenue was attributable to increased customer usage, partially offset by a decline in unit costs for 911, phone numbers and voice services. CPaaS cost of revenue increases were comprised of a $0.3 million increase in network costs, a $0.4 million increase in cost of phone numbers, a $0.5 million increase in cost of messaging and a $0.4 million increase in cost of voice minutes. CPaaS gross margin increased from 38% for the six months ended June 30, 2016 to 41% for the six months ended June 30, 2017. Without taking into account the impact of depreciation of $2.3 million for the six months ended June 30, 2016 and depreciation of $2.1 million for the six months ended June 30, 2017, CPaaS adjusted gross margin would have been 42% and 45% for the six months ended June 30, 2016 and 2017, respectively, and total gross margin would have been 46% and 47% for the six months ended June 30, 2016 and 2017, respectively.

Cost of Other revenue decreased by $0.6 million as the churn in legacy services drove lower overall costs from our third-party carriers. Other gross margin declined by 2% due to revenue churn and the reduction of indirect revenue.

 

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Operating Expenses

 

		Six months ended June 30,
		2016				2017				Change
		(In thousands)
Research and development		$	3,767			$	5,091			$	1,324				35	%
Sales and marketing			4,458				4,971				513				12	%
General and administrative			15,672				15,894				222				1	%
Total operating expenses		$	23,897			$	25,956			$	2,059				9	%

For the six months ended June 30, 2017, research and development expenses increased by $1.3 million, or 35%, compared to the same period in 2016. This increase is due primarily to an increase in research and development headcount and contracted development.

For the six months ended June 30, 2017, sales and marketing expenses increased by $0.5 million, compared to the same period in 2016, also due primarily to additional headcount in the sales organization to accelerate CPaaS revenue growth.

General and administrative expenses increased by $0.2 million for the six months ended June 30, 2017 compared to the same period in 2016. This increase was due to an increase in consulting costs partially offset by billing of transition service expenses for corporate support provided to Republic Wireless under the Transition Services Agreements.

Interest Expense, Net

For the six months ended June 30, 2017 interest expense increased by $0.5 million, compared to the same period in 2016 due to increased borrowings under our credit facility that we entered into in November 2016.

Income Tax Expense

For the six months ended June 30, 2017 income tax expense increased by $2.7 million compared to the same period in 2016 due to the valuation allowance release in 2016 subsequent to the Spin-Off. The effective tax rate for the six months ended June 30, 2017 was 37.7% compared to 3.4% for the six months ended June 30, 2016.

Loss from Discontinued Operations, Net of Income Taxes

For the six months ended June 30, 2017 loss from discontinued operations decreased by $3.0 million, compared to the same period in 2016 due to the Spin-Off which occurred on November 30, 2016.

Comparison of the Years Ended December 31, 2015 and 2016

Revenue

 

		Year ended December 31,
		2015				2016				Change
		(In thousands)
CPaaS revenue		$	101,502			$	117,078			$	15,576				15	%
Other revenue			36,299				35,057				(1,242	)			(3	)%
Total revenue		$	137,801			$	152,135			$	14,334				10	%

 

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In 2016, total revenue increased by $14.3 million, or 10%, compared to 2015. CPaaS revenue increased by $15.6 million, or 15%, compared to the prior year. As a percentage of total revenue, CPaaS revenue increased from 74% to 77% year over year. The increase in CPaaS revenue was primarily attributable to an increase in the usage of all our service offerings, particularly our voice and messaging usage, which accounted for $8.6 million of the increase in CPaaS revenue, and additionally our phone number services and 911-enabled phone number services, which accounted for $7.4 million of the increase in CPaaS revenue. This overall increase in CPaaS revenue was partially offset by $0.4 million related to pricing decreases that we have implemented over time with our customers in the form of lower usage prices to increase the reach and scale of our platform, as well as in exchange for contract renewals for certain key customers. The changes in usage and price for the year ended December 31, 2016 were reflected in our dollar-based net retention rate of 111%. The increase in usage was also attributable to a 13% increase in the number of active CPaaS customer accounts, from 704 as of December 31, 2015 to 798 as of December 31, 2016. In addition, revenue from new CPaaS customers contributed $4.2 million, or 4%, to CPaaS revenue year over year. Other revenue decreased by $1.2 million, or 3%, due to declines in our legacy services of $4.2 million, partially offset by a $3.0 million increase in indirect revenue related to new messaging and toll-free number registration fees.

Cost of Revenue and Gross Margin

 

		Years ended December 31,
		2015				2016				Change
		(In thousands)
Cost of revenue:
CPaaS cost of revenue		$	64,760			$	71,218			$	6,458				10	%
Other cost of revenue			14,482				14,000				(482	)			(3	)%
Total cost of revenue		$	79,242			$	85,218			$	5,976				8	%
Gross profit		$	58,559			$	66,917			$	8,358				14	%
Gross margin:
CPaaS			36%				39%
Other			60%				60%
Total gross margin %			42%				44%

Total gross profit increased by $8.4 million in 2016 as compared to 2015 and total gross margin increased from 42% to 44% from 2015 to 2016. CPaaS cost of revenue increased by $6.5 million, or 10%, in 2016. All CPaaS services saw an increase in cost of revenue but the overall increase was largely driven by the cost for minutes of use, which increased by $3.4 million due to growth in minutes used by customers, partially offset by a slight decrease in the cost per minute. Network costs increased by $2.0 million and cost of messaging increased by $0.5 million. Cost of phone numbers increased by $0.4 million due to an increase in phone numbers used by customers, partially offset by decreased cost per phone number. 911 costs remained constant due to an increase 911-enabled phone numbers used by customers, partially offset by decreased cost per record. CPaaS gross margin increased from 36% for the year ended December 31, 2015 to 39% for the year ended December 31, 2016. Without taking into account the impact of depreciation of $5.2 million and stock-based compensation of $0.1 million for the year ended December 31, 2015 and depreciation of $4.5 million, stock-based compensation expenses of $0.1 million for the year ended December 31, 2016, CPaaS adjusted gross margin would have been 41% and 43% for the years ended December 31, 2015 and 2016, respectively, and total gross margin would have been 46% and 47% for the same periods.

Cost of Other revenue decreased by $0.5 million, which was due to a $2.1 million decrease as a result of churn in legacy services, partially offset by a $1.6 million increase in cost of indirect revenue from 2015 to 2016 related to new required messaging and toll-free number registration fees. Total gross margin was affected by churn and a reduction in indirect margins.

 

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Operating Expenses

 

		Years ended December 31,
		2015				2016				Change
		(in thousands)
Research and development		$	7,375			$	8,520			$	1,145				16	%
Sales and marketing			8,620				9,294				674				8	%
General and administrative			34,602				33,859				(743	)			(2	)%
Total operating expenses		$	50,597			$	51,673			$	1,076				2	%

For the year ended December 31, 2016, R&D expenses increased by $1.1 million, or 16%, compared to the year ended December 31, 2015. This increase was due primarily to increases in hosting software costs and increased headcount.

For the year ended December 31, 2016, sales and marketing expenses increased by $0.7 million, or 8%, compared to the year ended December 31, 2015 due to an overall increase in sales headcount.

General and administrative expenses decreased by $0.7 million for the year ended December 31, 2016, or 2%, compared to the year ended December 31, 2015 mostly due to a decrease in stock-based compensation expenses. This decrease was partially offset by increases in headcount, increases from gains on fixed asset disposals, increases in consulting fees and increased rent.

Interest Expense, Net

For the year ended December 31, 2016 interest expense increased by $0.3 million compared to the same period in 2015 due to increased borrowings on our credit facility that we entered into in November 2016.

Income Tax Expense

For the year ended December 31, 2016 income tax expense decreased by $11.5 million compared to the same period in 2015 due to the release of the valuation allowance in 2016 subsequent to the Spin-Off. The effective tax rate for the year ended December 31, 2016 was (77.4)% compared to 5.5% for the year ended December 31, 2015.

Loss from Discontinued Operations, Net of Income Tax

For the year ended December 31, 2016, loss from discontinued operations decreased by $10.6 million compared to the same period in 2015 due to the Spin-Off in December 2016.

 

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Quarterly Results

The following tables set forth our unaudited quarterly statements of operations data for each of the six quarters ended June 30, 2017. The information for each quarter has been prepared on a basis consistent with our audited consolidated financial statements included in this prospectus, and reflect, in the opinion of management, all adjustments of a normal, recurring nature that are necessary for a fair presentation of the financial information contained in those statements.

 

		Three months ended
		March 31, 2016				June 30, 2016				Sept. 30, 2016				Dec. 31, 2016				March 31, 2017				June 30, 2017
		(In thousands)
Revenue:
CPaaS revenue		$	27,735			$	28,916			$	30,249			$	30,178			$	31,647			$	31,547
Other revenue			9,204				8,914				8,354				8,585				7,978				7,979
Total revenue			36,939				37,830				38,603				38,763				39,625				39,526
Cost of revenue:
CPaaS cost of revenue			17,220				18,159				18,197				17,642				18,228				18,919
Other cost of revenue			3,792				3,491				3,317				3,400				3,338				3,375
Total cost of revenue			21,012				21,650				21,514				21,042				21,566				22,294
Gross profit:
CPaaS gross profit			10,515				10,757				12,052				12,536				13,419				12,628
Other gross profit			5,412				5,423				5,037				5,185				4,640				4,604
Total gross profit			15,927				16,180				17,089				17,721				18,059				17,232
Operating expenses:
Research and development			1,854				1,913				2,390				2,363				2,682				2,409
Sales and marketing			2,189				2,269				2,418				2,418				2,558				2,413
General and administrative			7,455				8,217				7,898				10,289				7,637				8,257
Total operating expenses			11,498				12,399				12,706				15,070				12,877				13,079
Operating income			4,429				3,781				4,383				2,651				5,182				4,153
Change in fair value of shareholders’ anti-dilutive arrangement			—				—				—				—				—				(553	)
Interest expense			(184	)			(185	)			(229	)			(310	)			(421	)			(438	)
Income from continuing operations before income taxes			4,245				3,596				4,154				2,341				4,761				3,162
Income tax (provision) benefit			(182	)			(87	)			(137	)			11,500				(1,772	)			(1,215	)
Income from continuing operations			4,063				3,509				4,017				13,841				2,989				1,947
(Loss) income from discontinued operations, net of income tax			(1,028	)			(1,983	)			(728	)			667				—				—
Net income		$	3,035			$	1,526			$	3,289			$	14,508			$	2,989			$	1,947

Liquidity and Capital Resources

To date, our principal sources of liquidity have been the free cash flow driven by payments received from customers using our services, as well as borrowings under our senior secured credit facility. We believe that our cash and cash equivalents balances, our credit facility and the cash flows generated by our operations will be sufficient to satisfy our anticipated cash needs for working capital and capital expenditures for at least the next 12 months.

 

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Statement of Cash Flows

The following table summarizes our cash flows from continuing operations for the periods indicated:

 

		Year ended December 31,								Six months ended June 30,
		2015				2016				2016				2017
		(In thousands)
Net cash provided by operating activities from continuing operations		$	18,651			$	16,942			$	10,553			$	5,080
Net cash used by investing activities from continuing operations			(5,102	)			(6,061	)			(3,368	)			(2,795	)
Net cash provided by (used in) financing activities from continuing operations			11,038				(1,053	)			(659	)			(3,394	)
Net increase (decrease) in cash and cash equivalents		$	24,587			$	9,828			$	6,526			$	(1,109	)

Cash Flows from Operating Activities

For the six months ended June 30, 2017, cash provided by operating activities from continuing operations was $5.1 million, which primarily consisted of net income of $4.9 million, depreciation and amortization of $2.8 million, deferred taxes of $2.5 million, change in fair value of shareholders’ anti-dilutive arrangement of $0.6 million and stock-based compensation expenses of $0.5 million, partially offset by a decrease in working capital of $6.2 million. Working capital consisted primarily of decreases in accounts payable of $2.9 million, accrued liabilities of $2.2 million and an increase in prepaid expenses and other assets of $1.2 million.

For the six months ended June 30, 2016, cash provided by operating activities from continuing operations was $10.6 million, which primarily consisted of net income of $4.6 million, depreciation and amortization of $3.2 million, discontinued operations of $3.0 million and $0.9 million of stock-based compensation expenses, partially offset by a decrease in working capital of $1.3 million. Working capital consisted primarily of increases in accounts receivable of $2.5 million, deferred revenue of $1.7 million, accounts payable of $1.7 million, offset by a decrease in accrued expenses and other liabilities of $1.0 million, an increase in prepaid expenses and other assets of $0.7 million and increase in deferred costs of $0.6 million.

For the year ended December 31, 2016, cash provided by operating activities from continuing operations was $16.9 million, which primarily consisted of net income of $22.4 million, depreciation and amortization of $6.1 million, $1.4 million of stock-based compensation expenses, a decrease in working capital of $5.7 million, discontinued operations of $3.1 million, and impairment of intangible asset of $0.7 million, partially offset by $11.1 million in deferred taxes. Working capital consisted primarily of increases in accounts receivable of $4.0 million, prepaid expenses of $0.8 million, deferred costs of $1.0 million and deferred revenue of $0.5 million.

For the year ended December 31, 2015, cash provided by operating activities from continuing operations was $18.7 million due to net loss of $6.7 million and $13.7 million of cash provided by discontinued operations, depreciation and amortization of $7.1 million, $3.5 million of stock-based compensation expenses, loss on disposal of property and equipment of $0.4 million, deferred taxes of $0.3 million and an increase in working capital of $0.4 million. Working capital consisted of a decrease in deferred costs of $2.9 million, an increase in accounts payable of $1.0 million and a decrease in accrued expenses and other liabilities of $2.5 million, and increases in prepaid expenses of $0.6 million and accounts receivable of $0.5 million.

We have an ongoing dispute and litigation with MCI Communications Services, Inc. d/b/a Verizon Business and Verizon Select Services, Inc. (collectively, “Verizon”), which is a carrier access billing (“CABS”) customer. Billings to Verizon were approximately $6.8 million and $10.4 million for the year ended December 31, 2015 and 2016, respectively, and $2.9 million and $4.7 million for the six months ended June 30, 2016 and 2017, respectively. We recognize revenue for this customer only to the extent to which payments have been made and/or billings are not disputed. These outstanding amounts represent disputed and unpaid billings and are fully reserved within our allowance for doubtful accounts and no revenue has been recognized related to the

 

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outstanding and disputed balances. At the time in which we and Verizon reach conclusion to the outstanding and disputed billings, we will recognize revenue resulting in an increase in cash flows from operating activities.

Cash Flows from Investing Activities

For the six months ended June 30, 2017, cash used in investing activities from continuing operations was $2.8 million from the purchase of property, plant and equipment and capitalized internally developed software costs.

For the six months ended June 30, 2016, cash used in investing activities from continuing operations was $3.4 million used to purchase property, plant and equipment and capitalized internally developed software costs.

For the year ended December 31, 2016, cash used in investing activities from continuing operations was $6.1 million used to purchase property, plant and equipment and capitalized internally developed software costs.

For the year ended December 31, 2015, cash used in investing activities from continuing operations was $5.1 million used to purchase property, plant and equipment and capitalized internally developed software costs.

Cash Flows from Financing Activities

For the six months ended June 30, 2017, cash used in financing activities from continuing operations was $3.4 million consisting primarily of net repayments of $2.5 million on our line of credit and $1.0 million in payments on our term loan.

For the six months ended June 30, 2016, cash used in financing activities from continuing operations was $0.7 million consisting primarily of net repayments of $1.5 million on our line of credit, partially offset by $0.9 million in proceeds from issuance of common stock.

For the year ended December 31, 2016, cash used in financing activities from continuing operations was $1.1 million consisting primarily of $30.0 million in cash distribution to Republic Wireless as part of the Spin-Off, net repayments of $12.0 million on our line of credit, partially offset by $40.0 million in borrowings on our term loan and $1.0 million in proceeds from issuance of common stock.

For the year ended December 31, 2015, cash provided from financing activities from continuing operations was $11.0 million due to the net $11.0 million in borrowings under our line of credit.

Debt

On November 4, 2016, we entered into a Credit and Security Agreement with a syndicate of four banks. The agreement includes a $40 million term loan, and a $25 million revolving loan, which includes a swing line of up to $1 million and limits letters of credit commitments to a maximum of $2.5 million. Substantially all assets of the Company are pledged as security to the Credit and Security Agreement. The term of the Credit and Security Agreement is five years and matures on November 3, 2021. The interest rate used for the debt is based on our election to either apply the Federal Funds Effective Rate or LIBOR plus a stated margin, as defined in the Credit and Security Agreement. This agreement requires us to meet a certain leverage ratio and minimum debt service coverage ratio each quarter on a trailing 12-month basis.

As of June 30, 2017, the Company has $39 million outstanding on the term loan and $2.5 million on the revolving loan and was in compliance with all financial covenants. The availability under the Credit and Security Agreement was $22.5 million as of June 30, 2017. Beginning on March 31, 2017, the term loan is payable in consecutive equal quarterly payment installments with the balance payable in full on the maturity date.

KeyBanc Capital Markets Inc. and certain of its affiliates are lenders and/or agents under our credit facility, as well as an underwriter in this offering, and, to the extent proceeds from this offering are used to repay amounts outstanding thereunder, will receive a portion of the net proceeds from this offering in connection with the repayment of our credit facility.

 

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Contractual Obligations and Other Commitments

The following table summarizes our non-cancelable contractual obligations as of December 31, 2016:

 

		Total				Less Than 1 Year				1 to 2 Years				3 to 5 Years				More Than 5 Years
		(In thousands)
As of December 31, 2016:
Term loan		$	40,000			$	2,000			$	3,000			$	35,000			$	—
Interest expense(1)			5,198				1,224				1,148				2,826				—
Operating leases(2)			19,933				2,992				3,632				11,417				1,892
Capital leases			165				101				64				—				—
Purchase obligations(3)			5,700				1,625				1,675				2,400				—
Total		$	70,996			$	7,942			$	9,519			$	51,643			$	1,892

 

(1)	Interest has been calculated on the term loan based on an interest rate of 3.125% which was the rate in effect as of December 31, 2016. Actual cash flows may differ significantly due to changes in underlying estimates.

(2)	Operating leases represent total future minimum rent payments under non-cancellable operating lease agreements.

(3)	Purchase obligations represent total future minimum payments under contracts to various service providers. Purchase obligations exclude agreements that are cancellable without penalty.

We lease office space under operating lease agreements in several locations within the United States, including our headquarters, which are located at 900 Main Campus Drive in Raleigh, NC. These operating lease agreements expires on various dates through 2022. These leases contain escalation clauses and various landlord. We recognize the total minimum lease payments on a straight-line basis over the term of the lease. On September 26, 2016, we amended the operating lease agreement for our headquarters with one of our landlords. The sixty-three month lease, began on April 14, 2017 and provided for an additional 40,657 square feet of office space, as well as an extension of the termination date of the lease for approximately 128,200 square feet of office space.

In conjunction with the Spin-Off, we entered into a Facilities Service Agreement with Republic Wireless in which it agrees to sub-lease 40,657 square feet of office space also in Raleigh, NC. The sub-lease is non-cancellable and extends to May 2022. We account for these receipts as a reduction to rent expense, which is included in operating expenses in the consolidated statements of operations. See “Certain Relationships and Related Party Transactions—Transactions with Republic Wireless—Facilities Sharing Agreement.”

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements and do not have any holdings in variable interest entities.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of these consolidated financial statements requires us to make estimates, judgments and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue, costs and expenses during the reported periods. In accordance with GAAP, we base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstance, including the terms of our existing contracts, our evaluation of trends in the industry, information provided by our clients and information available from outside sources as appropriate. Actual results may differ from those estimates under different assumptions or conditions, and to the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.

 

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While our significant accounting policies are more fully described in Note 2 to our consolidated financial statements on page F-8, we believe the following accounting policies are critical to the process of making significant judgments and estimates in the preparation of our consolidated financial statements.

Revenue Recognition and Deferred Revenue

We generate revenue primarily from the sale of communication services to enterprise customers. We recognize revenue when all of the following criteria are met (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred; (iii) the fee is fixed or determinable; and (iv) collection is reasonably assured. If collection is not reasonably assured, we defer revenue recognition until collectability becomes reasonably assured. Our arrangements do not contain general rights of return. We generally enter into arrangements with customers that are typically 2 to 3 years in length. Incremental direct costs incurred related to the acquisition of a customer contract are expensed as incurred.

Stock-Based Compensation

Stock options awarded to employees, directors and non-employee third parties are measured at fair value on each grant date. Options subject to service-based vesting generally vest annually over a four-year period. The determination of the fair value of stock-based compensation arrangements on the grant date requires judgment. We recognize stock-based compensation expense using the Black-Scholes option-pricing model, net of estimated forfeitures, in order to determine the fair value of stock options, the output of which is affected by a number of variables. These variables include the fair value of our common stock, expected term of the options, expected stock price volatility, risk-free interest rate and expected dividends, which are estimated as follows:

 

•

Fair value of our common stock. The fair value of the shares of our common stock underlying stock options has historically been established by our board of directors with the assistance of an independent third-party valuation firm. Because there has been no public market for our common stock, our board of directors has relied on this independent valuation and other factors to establish the fair value of our common stock at the time of grant of the option. The determination of the fair value of our common stock is discussed further below.

 

•

Expected term. The expected term was estimated using the simplified method allowed under SEC guidance as we do not have sufficient historical data to use any other method to estimate the expected term.

 

•

Expected volatility. The expected volatility is derived from an average of the historical volatilities of the common stock of several entities with characteristics similar to ours, such as the size, and operational and economic similarities to our principle business operations. We use this method because we have limited information on the volatility of our common stock.

 

•

Risk-free interest rate. The risk-free interest rate is based on the yields of U.S. Treasury securities with maturities similar to the expected term of the options for each option group.

 

•

Expected dividends. The expected dividend is assumed to be zero as we have never paid dividends and have no current plans to pay any dividends on our common stock.

In addition to the assumptions used in the Black-Scholes option-pricing model, we must also determine a forfeiture rate to calculate the stock-based compensation for awards. Through June 30, 2017, we recognized compensation for only the portion of options expected to vest using an estimated forfeiture rate that was derived from historical employee termination behavior.

Determination of the Fair Value of Common Stock

We are a private company with no active public market for our common stock, and therefore we have periodically determined for financial reporting purposes the estimated per share fair value of our common stock

 

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at various dates using contemporaneous valuations performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants Practice Aid, “Valuation of Privately-Held Company Equity Securities Issued as Compensation.” In conducting the contemporaneous valuations, we considered all objective and subjective factors that we believed to be relevant for each valuation conducted, including the following:

 

•

contemporaneous unrelated third-party valuations of our common stock;

 

•

the rights, preferences and privileges of our redeemable convertible preferred stock relative to those of our common stock;

 

•

our results of operations, financial position and capital resources;

 

•

current business conditions and projections;

 

•

the lack of marketability of our common stock;

 

•

the hiring of key personnel and the experience of our management;

 

•

the introduction of new products;

 

•

the risk inherent in the development and expansion of our products;

 

•

the fact that the option grants involve illiquid securities in a private company;

 

•

the likelihood of achieving a liquidity event, such as an initial public offering or a sale of our company, given the prevailing market conditions;

 

•

industry trends and competitive environment; and

 

•

overall economic indicators, including gross domestic product, employment, inflation and interest rates.

In valuing our common stock, we have historically determined the equity value of our Company using both the income and the market approach valuation methods:

 

•

The income approach estimates value based on the expectation of future cash flows that a company will generate. These future cash flows are discounted to their present values using a discount rate derived from an analysis of the cost of capital of comparable publicly traded companies in our industry as of each valuation date and is adjusted to reflect the risks inherent in our cash flows.

 

•

The market approach estimates value based on a comparison of the subject company to comparable public companies in a similar line of business. From the comparable companies, a representative market value multiple is determined and then applied to the subject. The estimated value for our common stock is then discounted by a non-marketability factor (discount for lack of marketability) due to the fact that stockholders of private companies do not have access to trading markets similar to those enjoyed by stockholders of public companies, which affects liquidity.

As a result of the recent determination to potentially pursue strategic financing through an IPO, in June 2017, we began using the Probability-Weighted Expected Return Method (“PWERM”) in order to estimate the value of our common stock based on various outcomes. Using the PWERM, the value of our common stock is estimated based upon a probability-weighted analysis of varying values for our common stock assuming possible future events for the company, including an initial public offering and a stay private company scenario in which operations continue as a privately held company. Application of this approach involves the use of estimates, judgment and assumptions that are highly complex and subjective, such as those regarding our expected future revenue, expenses and future cash flows, discount rates, market multiples, the selection of comparable companies and the probability of possible future events. Changes in any or all of these estimates and assumptions or the relationships between those assumptions impact our valuations as of each valuation date and may have a material impact on the valuation of our common stock.

 

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The dates of our contemporaneous valuations have not always coincided with the dates of our stock-based compensation grants. In such instances, management’s estimates have been based on the most recent contemporaneous valuation of our shares of common stock and our assessment of additional objective and subjective factors we believed were relevant as of the grant date. The additional factors considered when determining any changes in fair value between the most recent contemporaneous valuation and the grant dates included our stage of development, our operating and financial performance, current business conditions and the market performance of comparable publicly traded companies. Following this offering, we will rely on the closing price of our common stock traded in the public market on the date of grant to determine the fair value of our common stock.

Goodwill and Intangible Assets

Goodwill

Goodwill represents the excess of the aggregate fair value of consideration transferred in a business combination, over the fair value of assets acquired, net of liabilities assumed. Goodwill is not amortized, but is subject to an annual impairment test. We test goodwill for impairment annually on December 31 of each calendar year or more frequently if events or changes in business circumstances indicate the asset might be impaired. Goodwill is tested for impairment at the reporting unit level. In evaluating the recoverability of goodwill, we perform a qualitative analysis to determine whether events and circumstances exist that indicate that it is more likely than not that goodwill is impaired. The qualitative factors we consider include but are not limited to, macroeconomic conditions, industry and market conditions, company-specific events and changes in circumstances. We completed our annual goodwill impairment analysis in each of the years ended December 31, 2015 and 2016 and no impairment charges were recorded. As of June 30, 2017 goodwill was $6.9 million.

Long-Lived Assets

Long-lived assets, including intangible assets with definite lives, are amortized over their estimated useful lives and are reviewed for impairment if indicators of impairment arise.

We evaluate the recoverability of our long-lived assets for impairment whenever events or circumstances indicate that the carrying amount of the assets may not be recoverable. Recoverability of long-lived assets are measured by comparison of the carrying amount of the asset to the future undiscounted cash flows the asset is expected to generate. If the asset is considered to be impaired, the amount of any impairment is measured as the difference between the carrying value and the fair value of the impaired asset. As of June 30, 2017, intangible assets, net of accumulated amortization, were $8.1 million, which consists primarily of client relationships and client contracts. As part of our annual evaluation of intangibles, we re-evaluated our marketing and trade name assets and concluded that there was no further benefit to a trade name acquired in the Dash acquisition. As a result, we impaired the intangible asset and recognized a loss of $695. No indicators of impairment were identified for the year ended December 31, 2015 or the six months ended June 30, 2017.

Internal-Use Software Development Costs

We capitalize qualifying internal-use software development costs that are incurred during the application development stage. Capitalization of costs begins when two criteria are met: (i) the preliminary project stage is completed and (ii) it is probable that the software will be completed and used for its intended function. Capitalization ceases when the software is substantially complete and ready for its intended use, including the completion of all significant testing. We also capitalize costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality and expense costs incurred for maintenance and minor upgrades and enhancements. Costs related to preliminary project activities and post-implementation operating activities are expensed as incurred.

Capitalized costs of platform and other software applications are included in property and equipment. These costs are amortized over the estimated useful life of the software on a straight-line basis over three years, which

 

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is recorded in cost of revenue in the statement of operations. We evaluate the useful life of these assets on an annual basis and test for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets.

Income Taxes

We account for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that are included in the financial statements. Under this method, deferred tax assets and liabilities are determined based on the differences between the financial statements and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. The effect of a change in tax rates on deferred tax assets and liabilities is recognized in income in the period that includes the enactment date.

We reduce the measurement of a deferred tax asset to the extent we believe these assets will more likely than not be realized. In making such a determination, we consider all available positive and negative evidence, including projected future taxable income, the expected timing of future reversals of existing taxable temporary differences, projected future taxable income, prudent tax-planning strategies, and results of recent operations.

We account for uncertain tax positions by recognizing the financial statement effects of a tax position only when, based upon technical merits, it is more likely than not that the position will be sustained upon examination. The tax benefit recognized is measured as the largest amount of benefit determined on a cumulative probability basis that we believe is more likely than not to be realized upon ultimate settlement of the position. We recognize potential accrued interest and penalties associated with unrecognized tax positions in income tax expense.

Other Contingencies

We are subject to legal proceedings and litigation arising in the ordinary course of business. Periodically, we evaluate the status of each legal matter and assess our potential financial exposure. If the potential loss from any legal proceeding or litigation is considered probable and the amount can be reasonably estimated, we accrue a liability for the estimated loss. Significant judgment is required to determine the probability of a loss and whether the amount of the loss is reasonably estimable. The outcome of any proceeding is not determinable in advance. As a result, the assessment of a potential liability and the amount of any accruals recorded are based only on the information available to us at the time. As additional information becomes available, we reassess the potential liability related to the legal proceeding or litigation, and may revise our estimates. Any revisions could have a material effect on our results of operations.

We conduct operations in many tax jurisdictions throughout the United States. In many of these jurisdictions, non-income-based taxes and fees, such as sales and use taxes, telecommunications taxes, and regulatory fees including those associated with (or potentially associated with) VoIP telephony services or 911 services, are assessed or may be assessed on our operations. We are subject to indirect taxes, and may be subject to certain other taxes and surcharges in some of these jurisdictions. We generally bill and collect from our customers these taxes and surcharges. We record a liability for tax collected from customers but not yet paid to the appropriate jurisdiction. In addition, we record a provision for non-income based taxes and fees in jurisdictions where it is both probable that liability has been incurred and the amount of the exposure can be reasonably estimated. As a result, we have recorded a liability of $4.6 million and $2.8 million and $2.6 million as of December 31, 2015 and 2016 and for the six months ended June 30, 2017, respectively. These estimates are based on several key assumptions, including the taxability of our services, the jurisdictions in which we believe we have nexus and the sourcing of revenue to those jurisdictions. In the event these jurisdictions challenge our assumptions and analysis, our actual exposure could differ materially from our current estimates.

 

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Recent Accounting Pronouncements

Recently Adopted

In March 2016, the Financial Accounting Standards Board (“FASB”) issued ASU 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The effective date of ASU 2016-09 for public business entities is for fiscal years beginning after December 15, 2016. Early adoption is permitted and the Company adopted the amendments in ASU 2016-09 effective January 1, 2016. This standard simplifies several aspects of the accounting for equity-based payment awards, including the income tax consequences and classification on the statement of cash flows. Certain changes implemented by this standard are required to be applied retrospectively, while other changes are required to be applied prospectively. The Company elected to continue to estimate forfeitures when recording stock-based compensation expense.

In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes (Topic 740), which requires that all deferred tax assets and liabilities, including any related valuation allowance, be classified as noncurrent on the balance sheet. ASU 2015-17 is effective for fiscal years beginning after December 15, 2016 for public entities, and early adoption is permitted. We elected to early adopt ASU 2015-17 beginning with our year ended December 31, 2015.

Not Yet Adopted

In May 2017, the FASB issued ASU 2017-09, Scope of Modification Accounting, which amends the scope of modification accounting for share-based payment arrangements. ASU 2017-09 provides guidance on the types of changes to terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718, Compensation—Stock Compensation. ASU 2017-09 is effective for fiscal years and interim periods within those years beginning after December 15, 2017, and early adoption is permitted. We are evaluating the impact of this guidance on our consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU 2016-02, “Leases.” The standard will affect all entities that lease assets and will require lessees to recognize a lease liability and a right-of-use asset for all leases (except for short-term leases that have a duration of less than one year) as of the date on which the lessor makes the underlying asset available to the lessee. For lessors, accounting for leases is substantially the same as in prior periods. ASU 2016-02 is effective for fiscal years beginning after December 15, 2019, and interim periods within annual periods beginning after December 15, 2020, and early adoption is permitted. For leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, lessees and lessors must apply a modified retrospective transition approach. While we expect the adoption of this standard to result in an increase to the reported assets and liabilities, we have not yet determined the full impact that the adoption of this standard will have on our financial statements and related disclosures.

In May 2014, the FASB issued ASU 2014-09, “Revenue from Contracts with Customers.” This new guidance will replace most existing GAAP guidance on this topic. The new revenue recognition standard provides a unified model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14 “Revenue from Contracts with Customers: Deferral of the effective date”, which deferred by one year the effective date for the new revenue reporting standard for entities reporting under GAAP. In accordance with the deferral, this guidance will be effective for us beginning January 1, 2019. This guidance can be applied either retrospectively to each period presented or as a cumulative effect adjustment as of the date of adoption. Early adoption is permitted beginning on January 1, 2017. In December 2016, the FASB issued ASU 2016-20, “Revenue from Contracts with Customers, Technical Corrections and Improvements to Topic 606,” which made 12 additional technical corrections and improvements to the new revenue standard. In March 2016, the FASB issued ASU 2016-08, “Revenue from Contracts with Customers, Principal versus Agent

 

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Considerations (Reporting Revenue Gross versus Net)” clarifying the implementation guidance on principal versus agent considerations. Specifically, an entity is required to determine whether the nature of a promise is to provide the specified good or service itself (that is, the entity is a principal) or to arrange for the good or service to be provided to the customer by the other party (that is, the entity is an agent). The determination influences the timing and amount of revenue recognition. In April 2016, the FASB issued ASU 2016-10, “Revenue from Contracts with Customers, Identifying Performance Obligations and Licensing”, clarifying the implementation guidance on identifying performance obligations and licensing. Specifically, the amendments reduce the cost and complexity of identifying promised goods or services and improve the guidance for determining whether promises are separately identifiable. The amendments also provide implementation guidance on accounting for an entity’s promise to grant a license. In May 2016, the FASB issued ASU 2016-12, “Revenue from Contracts with Customers, Narrow-Scope Improvements and Practical Expedients,” clarifying guidance on assessing collectability, presentation of sales taxes, noncash consideration, completed contracts and contract modifications. The effective date and transition requirements for ASU 2016-20, ASU 2016-08 and ASU 2016-10 are the same as the effective date and transition requirements for ASU 2014-09, which will be effective for us beginning January 1, 2019.

We are still assessing all potential impacts of the new standard on our consolidated financial statements. Given the comprehensive nature of the standard, we have already taken steps to identify the impact on our consolidated financial results. We have completed a diagnostic which highlighted differences between current accounting policies and the new standard. Additionally, we have engaged a third-party service provider to assist in our evaluation of customer contracts to identify the attributes that could result in a different accounting treatment under ASU 2014-09. From an information technology perspective, we have identified the business requirements and required functionality of a new technology solution and are in the process of meeting with third-party software providers to determine which technology to implement. We have not yet reached a conclusion as to whether the quantitative effect of the adoption of the new standard on our revenue will be material. We will continue to monitor and assess the impact of the changes of the new standard and the related interpretations of its application as they become available.

JOBS Act Accounting Election

We are an emerging growth company, as defined in the JOBS Act. Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies. We have elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies until the earlier of the date we (i) are no longer an emerging growth company or (ii) affirmatively and irrevocably opt out of the extended transition period provided in the JOBS Act. As a result, our financial statements may not be comparable to companies that comply with new or revised accounting pronouncements as of public company effective dates.

Quantitative and Qualitative Disclosures about Market Risk

We are exposed to certain market risks in the ordinary course of our business. Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates and, to a lesser extent, foreign currency exchange rates and inflation:

Interest Rate Risk

Our primary exposure to market risk relates to interest rate changes. We had cash and cash equivalents totaling $5.7 million as of June 30, 2017, which were held for working capital purposes. Our cash and cash equivalents are comprised primarily of interest bearing checking accounts.

 

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Such interest-earning instruments carry a degree of interest rate risk. To date, fluctuations in interest income have not been significant. The primary objective of our investment activities is to preserve principal while maximizing income without significantly increasing risk. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. Due to the short-term nature of our investments, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates.

We had debt totaling $41.5 million as of June 30, 2017. Our debt is comprised of $2.5 million outstanding under our revolving line of credit account and $39 million outstanding under our term loan. The revolving line of credit had an interest rate based on the 1-month LIBOR rate plus 225 basis points as of June 30, 2017. The term loan had an interest rate based on the 3-month LIBOR rate plus 225 basis points. A one-eighth percentage point increase or decrease in the applicable rate for our credit facility (assuming the revolving portion of the credit facility is fully drawn) would have an annual impact of $0.1 million on cash interest expense.

Foreign Currency Risk

Our customers consume our services primarily in the United States. Our revenue and expenses are denominated in U.S. dollars and as a result we have no foreign currency risk.

Inflation

We do not believe that inflation has had a material effect on our business, financial condition or results of operations. We continue to monitor the impact of inflation in order to minimize its effects through pricing strategies, productivity improvements and cost reductions. If our costs were to become subject to significant inflationary pressures, we may not be able to fully offset such higher costs through price increases. Our inability or failure to do so could harm our business, financial condition and results of operations.

Reconciliation of Non-GAAP Financial Measures

Reconciliations of the above mentioned non-GAAP financial measures to the most directly comparable GAAP financial measures are presented in the tables below (in thousands):

Adjusted EBITDA

 

		Year ended December 31,								Six months ended June 30,
		2015				2016				2016				2017
		(In thousands)
Income from continuing operations		$	6,965			$	25,430			$	7,572			$	4,936
Income tax provision (benefit)(1)			408				(11,094	)			269				2,987
Interest expense, net			589				908				369				859
Depreciation			6,167				5,251				2,775				2,401
Amortization			908				891				446				420
Stock-based compensation			3,493				1,370				854				490
Impairment of intangible assets(2)			—				695				—				—
Loss (gain) on disposal of property and equipment			382				19				(16	)			9
Change in fair value of shareholders’ anti-dilutive arrangement(3)			—				—				—				553
Adjusted EBITDA		$	18,912			$	23,470			$	12,269			$	12,655

 

(1)	Income tax benefit was $11,094 for the year ended December 31, 2016. This benefit was primarily the result of $14,138 of benefit being recognized due to the release of the deferred tax asset valuation allowance subsequent to the Spin-Off.

(2)	The impairment of intangible assets was $695 for the year ended December 31, 2016 and was due to the Company’s evaluation that a trade name acquired during the Dash acquisition provided no further benefit.

 

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(3)

Change in fair value of shareholders’ anti-dilutive arrangement was $553 for the six months ended June 30, 2017 and relates to an antidilutive agreement which allows certain principal non-founder shareholders the ability to purchase additional common shares. See Note 2, Summary of Significant Accounting Policies, Fair Value of Financial Instruments, for further explanation.

 

		Year ended December 31,								Six months ended June 30,
		2015				2016				2016				2017
		(In thousands)
Net (loss) income		$	(6,700	)		$	22,358			$	4,561			$	4,936
Loss from discontinued operations, net of income taxes(1)			13,665				3,072				3,011				—
Stock-based compensation			3,493				1,370				854				490
Change in fair value of stockholders’ anti-dilutive arrangement(2)			—				—				—				553
Amortization of acquired intangibles			520				520				260				260
Impairment of intangible assets(3)			—				695				—				—
Loss (gain) on disposal of property and equipment			382				19				(16	)			9
Adjusted net income			$11,360				$28,034				$8,670				$6,248

 

(1)	On November 30, 2016, we completed a tax-free spin-off. Accordingly, the results of operations of Republic Wireless have been presented as discontinued operations.

(2)

Change in fair value of shareholders’ anti-dilutive arrangement was $553 for the six months ended June 30, 2017 and relates to an anti-dilutive agreement which allows certain principal non-founder shareholders the ability to purchase additional common shares. See Note 2, Summary of Significant Accounting Policies, Fair Value of Financial Instruments, for further explanation.

(3)	The impairment of intangible assets was $695 for the year ended December 31, 2016 and was due to the Company’s evaluation that a trade name acquired during the Dash acquisition provided no further benefit.

Adjusted Gross Profit and Adjusted Gross Margin

 

		Year ended December 31,								Six months ended June 30,
Consolidated		2015				2016				2016				2017
		(In thousands)
Gross profit		$	58,559			$	66,917			$	32,107			$	35,291
Depreciation			5,258				4,574				2,359				2,083
Stock-based compensation			45				61				28				41
Adjusted gross profit		$	63,862			$	71,552			$	34,494			$	37,415
Adjusted gross margin			46	%			47	%			46	%			47	%

By Segment

 

		Year ended December 31,								Six months ended June 30,
CPaaS		2015				2016				2016				2017
		(In thousands)
Gross profit		$	36,742			$	45,860			$	21,272			$	26,047
Depreciation			5,258				4,574				2,359				2,083
Stock-based compensation			45				61				28				41
Adjusted gross profit		$	42,045			$	50,495			$	23,659			$	28,171
Adjusted gross margin			41	%			43	%			42	%			45	%

 

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Other

There are no non-GAAP adjustments to gross profit for the Other segment.

 

		Year ended December 31,								Six months ended June 30,
Free Cash Flow		2015				2016				2016				2017
		(In thousands)
Net cash provided by operating activities from continuing operations		$	18,651			$	16,942			$	10,553			$	5,080
Net cash used in investing activities from continuing operations(1)			(5,102	)			(6,061	)			(3,368	)			(2,795	)
Free cash flow		$	13,549			$	10,881			$	7,185			$	2,285

 

(1)	Represents the acquisition cost of property, equipment and capitalized development costs for software for internal use.

 

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LETTER FROM THE COFOUNDER

Dear Investors,

Thank you for considering investing in Bandwidth. My name is David Morken and I’m the Cofounder, Chairman and CEO of our 338-person software company based near Research Triangle Park in Raleigh, North Carolina.

As of June 30, 2017 we served 865 active CPaaS customer accounts that use our software platform and network to add voice calls, text messages and 911 services to their applications and devices. These creative teams spend an average of more than $150,000 each year with us. We love working with them and the feeling seems mutual—once they find us (which hasn’t always been easy) they almost never leave. You might use Bandwidth today if you use Google Voice, Microsoft Office 365 Skype for Business, Ring Central or smartphone apps like Pinger, GrubHub and ZipRecruiter.

So why raise capital now? We believe we are entering a golden age of communications heralded by the rise of massive and accessible computing power and intelligent devices. We are honored to serve many of the leading companies who are ushering in this grand, new era. Our software, network and amazing team give companies like Google, Microsoft and others the powerful tools they need to deliver the highest quality voice, messaging and emergency services for any application, website or device. Simply put, we develop and deliver the power to communicate.

As we look forward, we believe the dramatic rise of voice as an interface for everything from search, to music, to calling smartphones will drive more demand for our services in the future than ever before. Amazon’s Alexa, Google Assistant, Apple’s Siri, Microsoft’s Cortana, and Facebook M are all examples of voice as an interface, the first new user interface since the mouse and touchscreen. And if the past is prologue, we are well-positioned to succeed in the future.

Over the last 12 months we’ve reached several major milestones. We’ve grown our platform and network to support 52 million active phone numbers, 27 billion minutes of calls, 10 billion text messages and 8 million 911-enabled phone numbers.

These milestones are consistent with our progress over the last 18 remarkable years. We’ve been fortunate to grow during economic highs and lows. Founded in 1999, we survived the tech bubble and by 2007 were ranked as the 4th Fastest Growing Privately Held Company from 2002 to 2007 by the Inc. 500. In 2008, we built one of the fastest growing all-IP voice networks and in 2010 were among the first to offer cloud-based business voice.

In 2011, we launched Republic Wireless, a nationwide cellular smartphone service that pioneered calling and texting over Wi-Fi. We signed up over 100,000 people for service in our first week and grew Republic Wireless annual revenue to $90 million dollars in five years before spinning it out as a separate company last year.

We have historically focused on growing profitably. When deploying capital, we follow the courage of our convictions but are impatient for profits. We have grown the business primarily out of profits and have raised a total of only $33.5 million of equity capital. For our early funding we relied on cofounders, friends and family. Since then, we funded one acquisition but fueled our organic growth with free cash flows.

How we work together is important to our success in the future. We define our culture with three Ps—Purpose, People and Principles. Our purpose is to accomplish our mission and it is our top priority. Second are our people, who are essential to accomplishing our mission. As a result, we invest heavily and happily in our people. We do this through our Whole Person framework: programs and policies designed to strengthen our

 

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body, mind and spirit. At the very heart of our company culture is our desire to grow from strength to strength through every season. Our third P stands for our principles. We are committed to strong principles which we define and share across the entire company. More importantly, we live by them.

As you consider investing with us, please allow me to thank those who have been most responsible for our success. To our many customers and our investors, thank you! To our team, you are the best—everyone should have the opportunity to work with a group of people as talented, fun, disciplined and committed to each other and to serving customers as you are. Henry Kaestner is the greatest friend and cofounder anyone could pray for, which is exactly what I did the day before we met. We would both like to thank our amazing brides, children and parents for always supporting our business. And as we have always done, Henry and I give God the glory for our work together. We know it is only because of his providence, our team’s perspiration, and our customers’ success that we can invite you to invest in Bandwidth.

Thank you,

David Morken

Cofounder, Chairman, and CEO

 

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BUSINESS

Overview

We are a leading cloud-based communications platform for enterprises in the United States. Our solutions include a broad range of software APIs for voice and text functionality and our owned and managed, purpose-built IP voice network, one of the largest in the nation. Our sophisticated and easy-to-use software APIs allow enterprises to enhance their products and services by incorporating advanced voice and text capabilities. Companies use our platform to more frequently and seamlessly connect with their end users, add voice calling capabilities to residential IoT devices, offer end users new mobile application experiences and improve employee productivity, among other use cases. By owning and operating a capital-efficient, purpose-built IP voice network, we are able to offer advanced monitoring, reporting and analytics, superior customer service, dedicated operating teams, personalized support, and flexible cost structures. Over the last ten years, we have pioneered the CPaaS space through our innovation-rich culture and focus on empowering enterprises with end-to-end communications solutions.

As technologies evolve and new mobile applications and connected devices proliferate, enterprises must adapt and innovate their communications solutions to create a “connected” experience anywhere, anytime, on any device. Enterprises looking to capitalize on trends such as voice as an interface and A2P messaging need solutions that are reliable, secure, scalable and cost-efficient. Most software-powered communications providers rely heavily on leased networks and cannot provide enterprise-grade service and support. We believe traditional large-scale network providers lack the capabilities to build robust software platforms for agile development of communications solutions. Enterprises focus on their core businesses and lack the technical know-how or strategic flexibility to build the customized solutions they require in-house. As a result, enterprises need a third-party, end-to-end, cloud-based software solution that eliminates the complexity and expense of building and maintaining their own communications platform.

Our solutions address enterprises’ communications needs, and we believe they are shaping the future of how enterprises connect through embedded voice and text for applications and devices. At the core of our solutions are our communications software APIs, which allow companies to build products and services on top of our cloud-based, out-of-the-box software. Our software APIs include pre-defined functions that are easily customizable for specific use cases without the challenge and expense of building and deploying complex code. Moreover, our platform collects and analyzes terabytes of call and messaging data records in real-time and provide a seamless integration to CRM and Business Intelligence analytics tools to provide meaningful data driven actionable insights for critical business decisions. Customers can then launch and scale applications and solutions with reliability using our own nationwide IP voice network. Our voice software APIs allow enterprises to make and receive phone calls and create advanced voice experiences. Integration with our purpose-built IP voice network ensures enterprise-grade functionality and secure, high-quality connections. Our messaging software APIs provide enterprises with advanced tools to connect with end users via messaging. Our customers also use our solutions to enable 911 response capabilities, real-time provisioning and activation of phone numbers, and toll-free number messaging.

We are the only CPaaS provider in the industry with our own nationwide IP voice network, which we have purpose-built for our platform. Our network is capital-efficient and custom-built to support the applications and experiences that make a difference in the way enterprises communicate. Since a communications platform is only as strong as the network that backs it, we believe our network provides a significant competitive advantage in the control, quality, pricing power and scalability of our offering. We are able to control the quality and provide the support our customers expect, as well as efficiently meet scalability and cost requirements.

Our customers currently include only enterprises, which includes large enterprises, small and medium-sized businesses, emerging technology companies and any other business. Our customers operate in a diverse set of industries, including technology, communications, hospitality and services, that need to launch and scale robust communications experiences. Our customers choose Bandwidth because we empower them to embed seamless communications within their products and services in a reliable, flexible, scalable and cost-efficient manner. Our

 

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customers include Google Voice, Microsoft Office 365 Skype for Business, Dialpad, GoDaddy, Kipsu, Rover and ZipRecruiter, among many others. We do not currently have any consumer or residential customers, although our enterprise customers may utilize our solutions to serve their own consumer or residential customers or end users.

Our usage-based revenue model allows us to grow with our customers and increase our revenue base as our customers deepen their usage of our solutions. Our CPaaS customers increased use of our platform from no minutes or messages in 2008 to 27 billion minutes and 10 billion messages in the twelve months ended June 30, 2017. Our dollar-based net retention rate, which measures our customers’ increased utilization of our platform, was 115%, 111% and 107% for the year ended December 31, 2015 and 2016 and the six months ended June 30, 2017, respectively.

We have continued growing our business in recent periods. For the years ended December 31, 2015 and 2016 and the six months ended June 30, 2017, our revenue was $137.8 million, $152.1 million and $79.2 million, respectively, and our net (loss) income was $(6.7) million, $22.4 million and $4.9 million, respectively.

Industry Background

Communications are the Heartbeat of How Enterprises Operate, Drive Growth and Innovate

Communications have reached a tipping point as enterprises are embedding mission-critical communications functions in their products and services. With the unprecedented growth of mobile technologies and connected devices that comprise the IoT, enterprises compete to provide real-time value to their customers across a myriad of devices. Enterprises seeking to effectively operate, drive growth and innovate must navigate the convergence of software-powered communications and the proliferation of mobile applications and smart devices that create a “connected” experience. For instance, providing enterprise customer support with automated real-time text-based messaging is the “new normal”. Enterprises such as Rover and ZipRecruiter provide a stream of real-time updates to their end users, and Ovum estimates 181 billion messages will be sent A2P in 2017 in the United States.

Additionally, voice-first user interfaces built on AI technology are becoming a natural extension of existing voice-enabled devices such as mobile phones. According to comScore, as of Q2 2017, one in two smartphone users in the United States uses voice technology on their smartphones. Of those smartphone users, 49% use it weekly and 34% use it daily. Additionally, as of March 2017, smart speakers, such as Amazon Echo or Google Home, were in 8% of connected homes in the United States. According to Gartner, by 2018, more than 2 billion people will use conversational AI to interact with VPAs, virtual customer assistants and other AI-enabled smartphones and connected devices on a regular basis. By 2019, all languages spoken in the major VPA speaker markets will be supported, increasing adoption by 25%. By 2020, more than 50% of cloud interactions in homes with VPA speakers will be conversational. Additionally, according to Gartner, enterprise use cases will start in several vertical industries over the next two to three years.

Software, in the form of APIs, plays a critical role in laying the foundation of communications across core business disciplines, from product development to customer support. The reliability, security and scalability of software-powered communications are vital for enterprise success.

Enterprises Today Operate in Real-Time with Distributed Architectures

Successful enterprises today are focused on innovating their core product offerings and building a strategic advantage to reach and empower their customers. Enterprises are adopting a distributed approach in deploying cloud-based third-party software solutions. As a result, rapidly proliferating mobile technologies, big data and cloud-based software services have transformed how these enterprises can run their businesses. Additionally, organizations can customize their offerings to customers by building on top of cloud-based, out-of-the-box software APIs. Third-party, cloud-based solutions eliminate the complexity and cost of building and maintaining their own communications solution. Enterprises are empowered by software APIs, which include pre-defined functions that are easily customizable for specific use cases without the challenge and expense of building and deploying complex code.

 

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Communications Solutions are Still a Challenge for Enterprises

Large enterprises and small and medium-sized businesses struggle to build, deploy and manage their own software-powered communications platforms. As communications have grown more sophisticated and complex, software-based APIs have become the backbone for core communications functions such as provisioning and porting phone numbers, A2P voice and messaging services, and 911 services at scale. Enterprises focus on their core businesses and lack the technical know-how or strategic flexibility to build, customize and scale these software APIs from the ground up.

Enterprises seeking to embed end-to-end communications solutions can turn to other software-powered communications providers or traditional large-scale network providers. Neither fully addresses the complex needs of the enterprise.

Software-powered communications providers that rely heavily on third-party networks act as “middlemen” between the enterprise and third-party network providers and cannot fulfill critical communications requirements, such as full service-level agreements, guaranteed levels of uptime and reliability and real-time visibility into network performance. Moreover, the lack of network ownership often makes them less cost-competitive and vulnerable to third-party price increases. Additionally, such software-powered communications providers address fewer use cases and do not provide a comprehensive, cloud-based end-to-end communications suite, including voice, text, 911 and phone number provisioning.

Similarly, traditional large-scale network providers have not evolved with today’s enterprises in mind. They have heavily invested in infrastructure and hardware, but have failed to adapt to a software-first world. We believe these incumbents lack the capabilities to build robust software platforms for agile development of communications solutions. As a result, they are unable to offer their enterprise customers scalable software-based voice and text experiences in those enterprise customers’ applications and devices.

Enterprises require the versatility of a cloud-based software platform coupled with the reliability of a network provider to address their end-to-end communications requirements.

Our Market Opportunity

To establish and maintain their competitive advantage, enterprises need to be able to leverage cloud-based software that enables superior communications products and experiences. Software is redefining communications, and CPaaS solutions are becoming critical to business communications. CPaaS allows enterprises to leverage the latest software-based tools without significant investments in their own communications solution or the need to maintain relationships with large-scale network providers. These solutions enable enterprises to embed voice, chat or messaging services within their business or consumer applications and, we believe, are the foundation for next-generation communications.

The CPaaS market is large and rapidly growing. According to IDC, the global CPaaS market will be $8.2 billion in 2021. We focus on the CPaaS market in the United States, which comprises the majority of the market opportunity in the near term. Ovum estimates that there will be 348 billion minutes of over-the-top VoIP calls in the United States in 2017 and 742 billion in 2021. Ovum also estimates that 181 billion A2P messages will be sent in the United States in 2017 and 179 billion in 2021. Assuming our current market pricing, we estimate our addressable market of minutes of over-the-top VoIP calls and messages to be $3.3 billion for those services in 2017 and $6.2 billion in 2021, a compound annual growth rate of 17%. Market growth will be driven by enterprise demand for cloud applications and the need to integrate communications services into any workflow, customer-facing application or business process.

In addition to addressing the API-driven CPaaS market, we are also disrupting network-centric telecom incumbents, which, according to IDC, together generated $1.4 trillion of revenue in 2016. Software-powered communications are displacing network-centric telecom incumbents by enabling more phone calls and messages to be generated and received within applications, and by provisioning numbers through IP voice networks.

 

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Furthermore, we believe the rapid evolution of technologies, which is delivering new and innovative messaging and voice solutions, will bolster the need for our software-powered communications platform in a variety of new use cases:

 

•

Rise of Voice as an Interface. We believe that the shift from a text-driven interface to an increasingly voice-driven interface will further expand our total addressable market. VPAs such as Amazon’s Alexa, Google’s Assistant, Microsoft’s Cortana, Apple’s Siri and Facebook’s M are examples of the first widely adopted user interface since the keyboard, mouse and touchscreen. We believe this new interface will further drive our growth as users increasingly rely on voice to communicate, including calling, messaging or using 911 services.

 

•

Integration of Voice Within Applications. Over the last decade, voice calling has migrated away from single-purpose devices such as a desk phone or a smartphone to a fully integrated solution within enterprise applications such as Google Suites, Microsoft Office 365, Facebook Workplace and Slack. Enterprise users communicate and collaborate using these applications, which use software-powered communications platforms such as our Bandwidth Communications Platform to carry out the calling and messaging functionalities.

Our Platform

Our Bandwidth Communications Platform empowers enterprises to create and scale voice or text communications services across any application and device. Our software platform and IP voice network enable our enterprise customers to rapidly develop and deploy real-time and mission-critical, software-powered communications solutions. Our sophisticated and easy-to-use software APIs allow enterprises to enhance their products and services by incorporating advanced voice and text capabilities. By owning and operating a capital-efficient, purpose-built IP voice network, we are able to offer advanced monitoring, reporting and analytics, superior customer service, dedicated operating teams, personalized support and flexible cost structures.

Our cloud-based platform is a proprietary CPaaS offering consisting of voice and messaging solutions:

Voice Software API. We provide flexible software APIs that are used to build voice calling within applications, innovative call flows between users or machines, call recording, text-to-speech for interactive voice response, call detail records, conference calling or bridging and more. We provide the ability to have customized high-quality call routing for business voice use cases and global reach. Our voice quality monitoring service provides tools and processes for network quality tests and proactive tuning. While we provide a wide range of functionalities, some of the common use cases are:

 

•

Enabling local and toll-free numbers via software API: Our platform empowers enterprises with a capability to activate and manage phone numbers instantly and at scale. On our network, we have provisioned approximately 52 million active U.S. numbers, including 3 million toll-free numbers. Using our easy to use software APIs, our enterprise customers can easily add additional lines to their business as well as for their end users.

 

•

Automating voice communication while preserving privacy: Our software APIs enable voice communication capabilities from a mobile application to an individual or a group with or without disclosing personal identity

 

•

Embedding ‘click-to-call’ communication feature: We enhance our enterprise customers mobile and web marketing capabilities by embedding click-to-call functionality in their customer outreach, including advertising campaigns that enables them to connect with consumers instantly

 

•

Real-time call analytics: We provide our enterprise customers with real-time call analytics through our dashboard that correlates the raw data from calls with CRM records, including the call duration, customer sentiment and other attributes, in order to provide meaningful contextual sales and other business insights

 

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Messaging API. Our software APIs for messaging deliver a complete wireless experience, including: delivery receipts, SMS, MMS, long text support, emoji support and bi-directional unicode (international characters) and short codes interoperability. While we provide a wide range of functionalities, some of the common use cases are:

 

•

Automated real-time notification and alerts: Our software APIs empower our enterprise customers with predefined functionalities to send and receive text messages to and from an application to an individual or a group. Our customers often build more customized use cases on top of our predefined use cases. For instance, ZipRecruiter uses this functionality to update job seekers of available jobs in real time via automated text alerts

 

•

Two-factor authentication: We enable enterprises to verify the identity and maintain security of end users through our software-based SMS verification service that sends unique codes to end users in order to log in to mobile and web applications

 

•

Group messaging: Enterprises utilize our platform to collaborate with their end users on a real-time basis by enabling group messaging within their user community to share messages, videos, carry out polls and surveys amongst other uses without leaving the application

911 Software API. We are the only software platform that provides complete communications solutions with integrated 911 services. We can instantly connect numbers or applications to emergency services with reliable and accurate emergency routing. Our Dynamic Geospatial Routing uses geocoding to enable real-time routing based on X,Y coordinates of the caller and defined Public Safety Access Point boundaries. Our Advanced “Next Generation 911” “i3”-ready NENA i2 “Enhanced” service network covers approximately 98% of the U.S.

Key Benefits of Our Software Platform

Our Bandwidth Communications Platform provides the following benefits to the enterprises we serve:

 

•

Easy to Build and Deploy. Our easy-to-use, intuitive software APIs are ready to launch and scale from day one. We enable enterprises to rapidly and easily scale communications functionalities to a vast range of applications and devices. Our technology requires minimal lines of code to build customized applications, which allows for rapid composition of customized solutions and seamless embedding within other applications.

 

•

Easy to Scale. We enable enterprises to easily scale nationwide at launch, without sacrificing quality, while meeting the most stringent requirements. We can deliver full end-to-end automation for even the largest of enterprises using our IP voice network, which is the largest of any CPaaS provider based on the number of rate centers, a measure for the footprint covered by our IP voice network. We are able to support high user volumes without impacting deliverability. Our software, built on our own IP voice network, removes complexity, eliminates performance degradation and increases cost efficiencies at scale.

 

•

Flexibility. Our software APIs are easy to deploy and use and allow for the creation of solutions to address a broad array of use cases. Our software can be implemented directly into product workflow for a variety of custom solutions such as creation of virtual call centers, group messaging and dynamic call location routing. We enable developers to easily and rapidly innovate with our platform.

Key Benefits of Our Network

Our owned and managed IP voice network provides the following benefits to the enterprises we serve:

 

•

Enhanced Quality and Reliability. We offer greater levels of quality and delivery assurance than providers offering services across the public Internet or through partnerships. As a result, the enterprises we serve have enjoyed 99.9% network uptime since January 1, 2017 and we have not experienced any material system failures in the past three years.

 

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•

Total Accountability. The ability to vertically integrate our software platform with our own IP voice network provides us with a differentiated ability to continuously monitor, report and resolve any software- or network-related issues on a real-time basis. For our enterprise customers, having a single platform solution for their entire communications requirements, including software and network, provides tremendous value with respect to time and financial resources. Our service-level agreements with our enterprise customers assures that we provide high quality service and gives them peace of mind and confidence in our service.

 

•

Lower Total Cost to Our Customers. The differentiated pairing of our software combined with owning the delivery capability through our IP voice network leads to significant savings for the enterprises we serve as compared to our competitors. Our IP voice network lowers total cost to our customers as compared to our competitors because of our reduced capital expenditure requirements and lower marginal costs at scale, which we are able to pass on to our customers.

 

•

Scale. At peak times, over 200,000 concurrent calls traverse our network. We have grown from zero phone numbers used by end users in 2008 to approximately 52 million active numbers nationwide today, representing 7.7% of the total according to the North American Number Plan Administration. Our IP voice network supported approximately 27 billion minutes and 10 billion text messages in the twelve months ended June 30, 2017 and served approximately 8 million 911-enabled phone numbers, as of June 30, 2017.

Our Competitive Strengths

In our 18 years of business, we have prided ourselves on maintaining a start-up culture and our focus on continuous innovation. We have innovated on our CPaaS offerings to empower our enterprise customers with the most comprehensive software-powered communications platform that integrates seamlessly with one of the largest IP voice networks in the U.S. that we have built and operate. Our innovation-rich culture, customer-centric solutions and track record of successful execution provide us with the following competitive strengths:

 

•

Highly Scalable Platform Built for the Enterprise. We built our Bandwidth Communications Platform from the ground up as an enterprise-grade cloud application. As a result, our deployment is fast, our software APIs are flexible and easy-to-use, and we enable enterprises to launch and scale on day one. Our software APIs allow the enterprise customers we serve to grow with flexibility and seamlessly embed communications in their applications or devices. Our scalable platform allows us to serve large-scale Internet companies and cloud service providers.

 

•

Broadest, Most Complete Solutions in the Industry. We provide enterprises the broadest, most complete communications services solutions in the industry through our integrated software and IP voice network. Our large library of voice and text APIs enables our customers to incorporate into their products and services a broad range of capabilities not otherwise attainable.

 

•

Purpose-Built IP Voice Network. Our Bandwidth Communications Platform’s IP voice network, which we own and operate nationwide, supports our ability to scale at a reliable and consistent quality for the enterprises we serve. The control and scale we have over our own IP voice network integrated with our Bandwidth Communications Platform provides us distinct competitive advantages that include consistent high quality, in-depth enterprise support, real-time network visibility and economies of scale. Our IP voice network supported approximately 27 billion minutes and 10 billion messages for the twelve months ended June 30, 2017 and approximately 52 million active phone numbers and 8 million 911-enabled phone numbers as of June 30, 2017.

 

•

Deep Experience and Expertise in Voice and Messaging. The combination of our versatile software API platform and our IP voice network control allows us to offer not just best efforts, but best-in-class voice and messaging solutions for enterprises. Our senior leadership team has a combined 135 years of industry experience and an average tenure with Bandwidth of almost 10 years. Additionally, we have approximately 80 full-time software developers and engineers focused on voice and messaging, which represents approximately 25% of our employees.

 

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•

Growing, Long-Term Relationships with Low Customer Churn. We deliver comprehensive solutions that address the unique and complex needs of the enterprises we serve. As a result, these enterprises have continued to innovate and grow with our platform over extended timeframes. Our relationship with each of the enterprises we serve often expands across different product suites, divisions and use cases over time. Our customers include large enterprises and small and medium-sized businesses across various industries, and we rarely lose customers that have been on our platform for more than three months. For example, our largest enterprise customer has been on our platform for more than ten years. Based on surveys conducted after customer interactions, since January 1, 2017, our customers have expressed a 97% satisfaction rate.

 

•

CPaaS-Based 911 Network Capabilities. We believe we are the only CPaaS software provider with 911 capabilities. We believe our 911 capabilities provide a significant advantage as compared to software platform providers that are enabling residential voice services through new connected device experiences. Moreover, our dynamic geospatial routing capability routes 911 calls based on a real-time location of the caller to produce industry-leading results.

Our Growth Strategy

 

•

Grow Our Enterprise Customer Base. We believe there is a substantial opportunity to increase our enterprise customer base across a broad range of industries and companies. Building on our strong sales and marketing efficiency foundation of 181% in 2016, we plan to continue to grow and invest in our direct sales force and marketing to increase our enterprise customer base. Sales and marketing efficiency is calculated by taking CPaaS revenue for the year ended December 31, 2016 less CPaaS revenue for the equivalent period in the prior year and dividing it by sales and marketing expenses for the year ended December 31, 2015.

 

•

Expand Existing Enterprise Relationships. We will continue to expand our relationships with our existing enterprise customers. For example, enterprises often initially purchase only our voice solution and later expand to also purchase our messaging and 911 services. Additionally, we are able to help enterprises scale efficiently and offer their solutions to more of their customers as they grow.

 

•

Continue to Innovate Our Platform. We are committed to building on our track record of leveraging our innovative product capabilities to meet our customers’ needs, just as we have done for 18 years, through dramatic waves of change in communications technology. We were early to deploy software-based networks and to offer hosted cloud-based voice services, while building out one of the fastest growing IP voice networks over the last ten years. Our team has continued to adapt to a dynamic environment to grow our business, and we intend to invest in continued development of our platform and product features to support new use cases such as VPAs and help our enterprise customers succeed as communications technologies evolve.

 

•

Continue Our Focus on Enterprise Customer Satisfaction. We intend to continue focusing on delivering world-class services and support to the enterprises we serve to ensure a high level of satisfaction. We believe that satisfied customers provide vital product feedback, purchase additional services, renew contracts at a high rate and provide broad advocacy and new customer referrals for our business.

 

•

Explore the Development and Growth of Our International Offerings. Today, our international services are limited to outbound international calling and outbound international messaging. Some of our enterprise customers operate globally or have plans to so. While we do not have specific expansion plans, we are actively exploring opportunities, including those where we might have a cost or quality advantage in serving our customers.

 

•

Pursue Acquisitions and Strategic Investments Selectively. We may selectively pursue acquisitions and strategic investments in businesses and technologies that strengthen our platform.

 

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Our Customers

We have a broad and diversified customer base. We benefit from longstanding relationships with well-recognized enterprise customers, as well as small and medium-sized businesses. Our relationships with our top 20 customers average five years, with no single customer representing more than 8% of CPaaS revenue for the twelve months ended June 30, 2017, and our top ten customers accounting for less than 30% of CPaaS revenue for the same time period. As of June 30, 2017, two active CPaaS customer accounts were part of the same organization, otherwise all active CPaaS customer accounts were related to unique organizations active CPaaS customer accounts.

Our management is highly focused on creating and maintaining strategic partnerships beyond standard transactional customer relationships. We empower enterprises to create, scale and operate voice or text communications services across any mobile application or connected device and this reinforces our customer relationships.

The majority of our customers sign master service agreements (“MSAs”) that contain standard terms and conditions, including billing and payment, default, termination, limitations of liability, confidentiality, assignment and notification, and other key terms and conditions. Customers order specific services in separate service order forms that incorporate the applicable MSA. Each service order form details the minimum contract duration, any applicable monthly recurring charge and applicable non-recurring charges. The terms and conditions for each order are also specified in the applicable service order form.

Customer Case Studies

ZipRecruiter

Challenge: Hiring platform, ZipRecruiter, wanted to be able to scale their new high-performing SMS Job Alerts feature, but their current provider could not offer the right support package and price structure to fit their large user base. Being able to scale effectively and efficiently was their top priority.

Solution: Bandwidth’s team worked hand-in-hand with ZipRecruiter to migrate the SMS Job Alerts feature seamlessly and scale at a much faster rate due to fewer cost complexities, reliable APIs, high-quality message deliverability and lower cost.

Dialpad

Challenge: Dialpad’s enterprise customers need to replace on-premises private branch exchange systems, which require physical infrastructure, regular maintenance and people to manage and which tie employees to desk phones, limiting their ability to collaborate on-the-go.

Solution: Dialpad integrates with our Bandwidth Communications Platform to deliver high-quality voice and messaging services for today’s anywhere enterprise employee. Fast, scalable and entirely cloud-based, Dialpad relies on us to enable enterprises to connect their employees and provide them with the freedom to work anywhere.

Rover

Challenge: Rover.com connects pet parents with the nation’s largest network of pet sitters and dog walkers. Through Rover, pet parents can discover, book and manage personalized care for their dogs, including pet sitting, dog walking, in-home dog boarding and doggy day care. Rover’s initial communication was web-based, and users were notified via email when they had a new message. Rover wanted to add SMS and voice-calling functionality but found that its communications partner lacked the volume pricing it needed to scale with growing consumer demand.

 

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Solution: We helped Rover to allow pet owners and sitters to communicate without disclosing their personal phone numbers. As a result, Rover now has access to a sufficient quantity of phone numbers nationwide, delivered through simple and flexible software APIs. Pet owners can check in with their pet sitter and schedule an appointment by phone call or text message, and pet sitters can send picture messages of pets to owners, all using anonymous phone numbers on their own mobile phones.

Kipsu

Challenge: Kipsu wanted to make it easier for both guests and hotel management to keep in touch throughout a guest’s visit.

Solution: Kipsu chose Bandwidth’s APIs for scalable, full-featured texting that could be incorporated quickly and easily into their existing application. Hotel guests benefit from the frictionless ease of texting to order room service, book transportation or request local restaurant recommendations. Hotels see increased engagement, and Kipsu was able to scale immediately to accommodate the needs of their major hospitality brand customers.

Sales and Marketing

Our sales and marketing teams work together to identify and establish relationships with prospects, acquire new enterprise customers, expand relationships with existing enterprises and integrate them with our Bandwidth Communications Platform. Our marketing staff generates leads through our website, online marketing campaigns, webinars, sponsored events, white papers, public relations and other outbound lead development efforts. Our marketing staff also targets companies with products that could use our services for the first time or to displace our competitors. Our marketing initiatives enhance awareness and adoption of our services.

We engage potential customers and existing customers through an enterprise sales approach. Our sales executives directly engage C-level executives and other senior business, product and technical decision makers responsible for the end user experience and financial results at their enterprises. Our sales executives work to educate these decision makers and their teams about the benefits of using our Bandwidth Communications Platform to launch and scale robust communications experiences. Our sales team includes sales development, inside sales, field sales and sales engineering personnel.

As of June 30, 2017, we had 48 employees in our sales and marketing organization, 27 of which were sales representatives and all of whom were inside sales. All inside sales representatives have incentivized sales quota requirements and are thus compensated and evaluated in terms of achieving prescribed levels of sales performance during specified periods. As of December 31, 2016, we had 38 individuals in our sales and marketing organization, of which 23 were inside sales representatives. As of December 31, 2015, we had 30 individuals in our sales and marketing organization, of which 19 were inside sales representatives.

Research and Development

Our ability to compete depends in large part on our continuous commitment to R&D. We also seek to continuously enhance our existing services and develop new products and services. Our product and network teams are responsible for the design, development, testing and release of our platform. These teams closely coordinate with our executive management, which is responsible for creating a vision for our platform, and with our sales and marketing teams, which relay enterprise demands and possible new use cases or enhancements. Our development efforts focus on the availability and resiliency of our Bandwidth Communications Platform and our IP voice network, including infrastructure, ease-of-use and flexibility, end-user experience and ability to integrate with other enterprise systems. R&D expense totaled $7.4 million, $8.5 million and $5.1 million for the years ended December 31, 2015 and 2016 and the six months ended June 30, 2017, respectively.

Competition

The CPaaS market is rapidly evolving and increasingly competitive. We believe that the principal competitive factors in our market are:

 

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platform scalability, reliability and performance;

 

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network control and quality;

 

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completeness of offering;

 

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ease of integration and programmability;

 

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product features;

 

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customer support;

 

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ability to deliver measurable value and savings;

 

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the cost of deploying and using our service offerings;

 

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the strength of sales and marketing efforts;

 

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brand awareness and reputation; and

 

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credibility with product executives and developers.

We believe that we compete favorably based on the factors listed above and believe that none of our competitors currently competes directly with us across all our product offerings.

Our competitors fall into two primary categories:

 

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CPaaS companies, such as Twilio and Nexmo, that offer a narrower set of software APIs, less robust customer support and fewer other features while relying on third-party networks and physical infrastructure; and

 

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network service providers that offer limited developer functionality on top of their own networks and physical infrastructure, such as AT&T, Level 3 and Verizon.

Some of our competitors have greater financial, technical and other resources, greater geographic reach, greater name recognition, larger sales and marketing budgets and larger intellectual property portfolios. As a result, certain of our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards or enterprise requirements. In addition, some competitors may offer products or services that address one or a limited number of functions at lower prices, with greater depth than our services or geographies where we do not operate. With the introduction of new products and services and new market entrants, we expect competition to intensify in the future. Moreover, as we expand the scope of our platform, we may face additional competition.

Intellectual Property

We rely on a combination of patent, copyright, trademark and trade secret laws in the United States and other jurisdictions, as well as license agreements and other contractual protections, to protect our proprietary technology. We also rely on registered and unregistered trademarks to protect our brand.

As of June 30, 2017, we had eight U.S. patents and six U.S. patent applications pending. In addition, as of June 30, 2017, we had 20 registered trademarks and one pending trademark application in the United States.

We seek to protect our intellectual property rights by implementing a policy that requires our employees and independent contractors involved in development of intellectual property on our behalf to enter into agreements acknowledging that all works or other intellectual property generated or conceived by them on our behalf are our property, and assigning to us any rights, including intellectual property rights, that they may claim or otherwise have in those works or property, to the extent allowable under applicable law.

Despite our efforts to protect our technology and proprietary rights through intellectual property rights, licenses and other contractual protections, unauthorized parties may still copy or otherwise obtain and use our

 

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software and other technology. Any significant impairment of our intellectual property rights could harm our business or our ability to compete. Further, companies in the communications and technology industries may own large numbers of patents, copyrights and trademarks and may frequently threaten litigation, or file suit against us based on allegations of infringement or other violations of intellectual property rights. In the future, we may face allegations that we have infringed the intellectual property rights of third parties, including our competitors and non-practicing entities.

Employees

As of June 30, 2017, we had a total of 338 employees, all of whom are located in the United States. None of our employees are represented by a labor union or covered by a collective bargaining agreement. We have not experienced any work stoppages, and we consider our relations with our employees to be good.

Facilities

Our principal executive office is in Raleigh, NC and consists of approximately 125,000 square feet of space, including approximately 35,000 square feet of space subject to a facilities sharing agreement with Republic Wireless, under a lease that expires in July 2022. In addition to our headquarters, we lease space in Denver, CO and Rochester, NY, each of which are used for both our CPaaS and Other segments. We also maintain data centers located in Raleigh, NC (including our network operations center); Los Angeles, CA; Dallas, TX; Atlanta, GA; and New York, NY.

We lease all our facilities and do not own any real property. We may procure additional space in the future as we continue to add employees or expand geographically. We believe our facilities are adequate and suitable for our current needs and that, should it be needed, suitable additional or alternative space will be available to accommodate our operations.

Regulatory

General

We and the communications services that we provide through our software APIs are subject to many U.S. federal and state and foreign laws and regulations. These laws and regulations may involve telecommunications, as well as privacy, data protection, intellectual property, competition, consumer protection, taxation or other subjects. Many of the laws and regulations to which we and the communications services that we provide through our software APIs are subject are still evolving and being tested in courts and could be interpreted in ways that could harm our business. In addition, the application and interpretation of these laws and regulations often are uncertain, particularly in the new and rapidly evolving industry in which we operate. Because laws and regulations have continued to develop and evolve rapidly, it is possible that we may not be, or may not have been, compliant with each such applicable law or regulation.

Federal Telecommunications Regulation

The FCC has jurisdiction over interstate and international telecommunications services. We have obtained FCC authorization to provide services on a facilities and resale basis, as well as via a wireless telecommunications license.

Under the Communications Act of 1934, as amended by the Telecommunications Act of 1996 (the “1996 Act”), any entity, including cable television companies and electric and gas utilities, may enter any telecommunications market, subject to reasonable state regulation of safety, quality and consumer protection. The industry continues to evolve toward new services built upon IP technologies. With these technological advances, there have been challenges to the traditional regulatory structure under the 1996 Act. One of the

 

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challenges that has arisen is fraud and abuse in the form of illegal robocalling and unwanted text messaging. The FCC has initiated several proceedings to understand and address fraud and abuse, illegal robocalling and unwanted text messaging. Much of the FCC’s efforts to thwart illegal robocalling involve or relate to the TCPA, which restricts telemarketing calls and the use of automatic text messages without the recipient’s proper consent. The scope and interpretation of these laws and regulations continue to evolve and develop. If we do not comply with these laws or regulations or if we become liable under these laws or regulations due to the failure of our customers to comply with these laws by obtaining the recipient’s proper consent, we could face direct liability.

VoIP Regulation. Some of our communications services provided through our software APIs may qualify as VoIP. The FCC has imposed various regulatory requirements on VoIP providers that previously applied only to traditional telecommunications providers, such as obligations to provide 911 functionality, to contribute to the federal universal service fund, to comply with regulations relating to local number portability, to abide by the FCC’s service discontinuance rules, to contribute to the Telecommunications Relay Services fund and to abide by the regulations concerning Customer Proprietary Network Information, outage reporting, access for persons with disabilities and the Communications Assistance for Law Enforcement Act. In some instances, these regulations indirectly affect us because they directly apply to our customers. Several state public utility commissions are conducting regulatory proceedings that could affect our rights and obligations, or the rights and obligations of our customers, with respect to IP-based voice applications. Specifically, some states have taken the position that the “local” component of VoIP service is subject to traditional regulations applicable to local telecommunications services, such as the obligation to pay intrastate universal service fees. We cannot predict whether the FCC or state public utility commissions will impose additional requirements, regulations or charges upon our provision of services related to IP communications.

Universal Service. Some of our services are subject to federal and state regulations that implement universal service support for access to communications services in rural and high-cost areas and to low-income consumers at reasonable rates; and access to advanced communications services by schools, libraries and rural health care providers. In some instances, these regulations indirectly affect us because they directly apply to our customers. The FCC assesses us a percentage of interstate and international revenue we receive from retail customers as our contribution to the Federal Universal Service Fund, which assessments we generally pass on to our customers. Additionally, the FCC has ruled that states may assess contributions to their state Universal Service Funds on VoIP providers’ intrastate revenue. Any change in the assessment methodology may affect our revenue and expenses, but at this time it is not possible to predict the extent we would be affected, if at all.

Intercarrier Compensation. Telecommunications carriers compensate one another for traffic carried on each other’s networks. Interexchange carriers pay access charges to local telephone companies for long distance calls that originate and terminate on local networks. Local telephone companies historically have charged one another for local and Internet-bound traffic terminating on each other’s networks. The methodology by which carriers have compensated one another for exchanged traffic, whether it be for local, intrastate or interstate traffic, has been under review by the FCC for over a decade and continues to be subject to on-going reform efforts.

In November 2011, the FCC released its Universal Service Fund/Intercarrier Compensation Transformation Order (the “USF/ICC Transformation Order”). Along with addressing other matters, the USF/ICC Transformation Order established a prospective intercarrier compensation framework for terminating switched access and VoIP traffic. Under the USF/ICC Transformation Order and subsequent related FCC orders, most terminating switched access charges and all reciprocal compensation charges were capped at then-current levels, and will be reduced to zero over, as relevant to us, generally a six-year transition period that began July 1, 2012.

Pursuant to the USF/ICC Transformation Order, VoIP, while remaining unclassified as either an information or a telecommunications service, was prospectively categorized as either local or non-local traffic. If “local”, then VoIP traffic is subject to reciprocal compensation; if “non-local”, then it is subject to interstate rates, thus eliminating any intrastate access rate applicable to VoIP. The USF/ICC Transformation Order did not address the treatment of VoIP retroactively. During 2015, the FCC issued clarifications concerning the rating of VoIP traffic

 

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that were favorable to us. Those clarifications were appealed, and in November 2016 the appellate court vacated the FCC’s 2015 clarification and ruled that additional action by the FCC is required. At this time, we cannot predict the outcome of the FCC actions.

State Telecommunications Regulation

The 1996 Act intended to increase competition in the telecommunications industry, especially in the local market. With respect to local services, incumbent local exchange carriers (or “ILECs”) such as AT&T are required to allow interconnection to their incumbent networks and to provide access to network facilities, as well as several other pro-competitive measures.

State regulatory agencies have jurisdiction when our facilities and services are used to provide intrastate telecommunications services. A portion of our traffic may be classified as intrastate telecommunications and therefore subject to state regulation. We are authorized to provide competitive local exchange telecommunications services in 49 states and the District of Columbia, and thus are subject to these additional regulatory regimes. Changes in applicable state regulations could affect our business.

In addition, we need to maintain interconnection agreements with ILECs where we wish to provide service, which are subject to approval by individual states and subject to state arbitration in the event of disputes. We expect that we should be able to negotiate or otherwise obtain renewals or successor agreements through adoption of others’ contracts or through arbitration proceedings, although the rates, terms and conditions applicable to interconnection and the exchange of traffic with certain ILECs could change significantly in certain cases.

Legal Proceedings

In April 2014, Phone Recovery Services, LLC (“Phone Recovery Services”) filed a complaint against us in the Superior Court of the District of Columbia. The complaint alleges that we failed to bill, collect and remit certain taxes and surcharges associated with the provision of 911 services pursuant to applicable laws of the District of Columbia. In November 2015, the Superior Court of the District of Columbia dismissed Phone Recovery Services’ complaint with prejudice. Phone Recovery Services subsequently appealed, and we are currently awaiting a decision regarding Phone Recovery Services’ appeal.

Phone Recovery Services, acting or purporting to act on behalf of applicable jurisdictions, or the applicable county or city itself, has filed similar lawsuits against us and/or one of our subsidiaries in the Superior Court of the State of Rhode Island, the Court of Common Pleas of Allegheny County, Pennsylvania and the District Court of Ramsey County, Minnesota that are currently in various stages of litigation. The case in Ramsey County, Minnesota was dismissed in November 2016; in August 2017, the Minnesota Court of Appeals affirmed that dismissal. On September 5, 2017, Phone Recovery Services filed a notice of appeal to the Minnesota Supreme Court. To date, we have not received any material adverse decision in connection with those matters.

We face similar lawsuits brought directly by various state and local governments alleging underpayment of 911 taxes and surcharges, although we understand that Phone Recovery Services is working in conjunction with each state or local government as a consultant on a contingency basis. The following county or municipal governments have named us in lawsuits associated with the collection and remittance of 911 taxes and surcharges: Birmingham Emergency Communications District, Alabama; Clayton County, Cobb County, DeKalb County, Fulton County, Gwinnett County, Macon-Bibb County, Georgia and Columbus Consolidated Government, Georgia (collectively, the “Georgia Cases”); Cook County and Kane County Illinois; City of Chicago, Illinois; the State of Illinois (collectively, the “Illinois Case”); Beaver County, Berks County, Bucks County, Butler County, Chester Co., Clarion County, Cumberland County, Dauphin County, Delaware County, Lancaster County, Lebanon County, Mercer County, Somerset County, Washington County, Westmoreland County, and York County, Pennsylvania (collectively, the “Pennsylvania Cases”); and Charleston County, South

 

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Carolina. The complaints allege that we failed to bill, collect and remit certain taxes and surcharges associated with 911 service pursuant to applicable laws. The Georgia Cases have been closed administratively during the appeal of a related case in the Georgia courts; the Georgia Cases may be reopened. We understand that Augusta-Richmond County, Bartow County, Chatham County, Cherokee County, City of Atlanta, City of Savannah, Forsyth County, Houston County and Spalding County, Georgia each intends to initiate legal proceedings against us with allegations substantially similar to those in the Georgia Cases. The Pennsylvania Case in Butler County, Pennsylvania was dismissed in August 2016; the Pennsylvania Cases have been stayed until the appeal of the dismissal of the Butler County, Pennsylvania Case is resolved. The Illinois Case was dismissed in December 2016; Phone Recovery Services timely filed a notice of appeal and the appeal is underway.

In August 2016, we received a Civil Investigative Demand from the Consumer Protection Division of the North Carolina Department of Justice, though no formal complaint has been filed in connection with that investigation. The North Carolina Department of Justice is investigating the billing, collection and remission of certain taxes and surcharges associated with 911 service pursuant to applicable laws of the State of North Carolina.

We also have ongoing litigations against MCI Communications Services, Inc. d/b/a Verizon Business and Verizon Select Services, Inc. (collectively, “Verizon”) in the United States District Court for the Northern District of Texas. In April 2016, we filed counterclaims against Verizon. We are pursuing collection of unpaid intercarrier compensation charges for providing switched access services related to the exchange of telecommunications traffic with Verizon entities across the United States. Verizon has filed a motion to permit it to assert a counterclaim against us. We intend to contest any such counterclaim vigorously. Verizon’s prior September 2014 complaint against us and other defendants regarding intercarrier compensation charges for providing switched access services related to the exchange of telecommunications traffic has been dismissed without prejudice, but remains subject to appeal.

 

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MANAGEMENT

Executive Officers and Directors

The following table provides information regarding our executive officers and directors as of October 10, 2017:

 

Name		Age				Position
David A. Morken			48			Cofounder, Chief Executive Officer and Chairman
John C. Murdock			52			President and Director
Jeff Hoffman			48			Chief Financial Officer
W. Christopher Matton			47			General Counsel
Henry R. Kaestner			47			Cofounder and Director
Brian D. Bailey			51			Director
Douglas A. Suriano			56			Director

David A. Morken is the Cofounder, Chairman and CEO of Bandwidth. Mr. Morken is also the Cofounder, Chairman and former CEO of Republic Wireless. Mr. Morken is the Cofounder of Durham Cares. Prior to founding Bandwidth in 1999, Mr. Morken served on active duty in the Marine Corps as a Judge Advocate and Headquarters Company Commander. Mr. Morken received a B.A. in Political Science from Oral Roberts University and a J.D. from the University of Notre Dame Law School. We believe that Mr. Morken is qualified to serve on our board of directors as our Cofounder and due to his knowledge of our company and our business.

John C. Murdock joined Bandwidth in 2008 and serves as President and board member. Mr. Murdock previously served as Bandwidth’s General Counsel. Additionally, Mr. Murdock serves as a board member of Republic Wireless. Prior to joining Bandwidth, Mr. Murdock founded a specialized law firm with a national level complex civil litigation practice. As a Marine officer, Mr. Murdock served on active duty, including combat service in Operation Desert Shield/Storm. Mr. Murdock obtained a B.S. in Finance from Miami University of Ohio, with an NROTC scholarship and a J.D. from the University of Notre Dame Law School. We believe that Mr. Murdock is qualified to serve on our board of directors due to his knowledge of our company and our business.

Jeff Hoffman joined Bandwidth in 2011 and serves as Chief Financial Officer. Mr. Hoffman oversees all financial operations for Bandwidth, including accounting, treasury, tax, financial analysis and reporting and is responsible for developing and implementing financial systems and reporting structures. Mr. Hoffman brings more than 18 years of financial management experience and has held senior positions with public and leading private equity sponsored companies. Before joining Bandwidth, he served as Vice President of Financial Planning & Analysis for Hawaiian Telcom where he led the company’s budgeting, financial modeling and management reporting functions. In addition, Jeff was a key contributor to Hawaiian Telcom’s capital restructuring and listing on NASDAQ in 2010. Prior to Hawaiian Telcom, Mr. Hoffman served as the Director of Finance and Planning for Madison River Communications where he was instrumental in many mergers and acquisitions throughout the company’s history including its eventual acquisition by CenturyLink in 2007. Jeff earned a B.A. in Economics and International Relations from the University of Wisconsin at Madison and an MBA from the Kellogg Graduate School of Management at Northwestern University.

W. Christopher Matton has served as General Counsel of Bandwidth since 2010. As General Counsel, Mr. Matton provides support and counsel for corporate, human resources, intellectual property, legal and regulatory matters. Prior to joining Bandwidth, Mr. Matton was a partner at Kilpatrick Stockton LLP. Mr. Matton also previously served on the founding team and board of managers of Veritas Collaborative, an eating disorder treatment hospital system. Mr. Matton has worked with companies ranging from early stage to publicly traded companies and has represented clients in connection with venture capital financings, private equity financings,

 

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mergers and acquisitions, public and private offerings of securities and other corporate matters. Mr. Matton earned a B.S. in Economics from the Wharton School of the University of Pennsylvania and a J.D. from Wake Forest University where he also served as the Executive Editor of the Wake Forest Law Review.

Henry R. Kaestner joined David Morken as Cofounder in 2001 when he merged Bandwidth International into Bandwidth.com and subsequently served as CEO until early 2008. Mr. Kaestner has served as a director of Bandwidth since 2001 and also serves as a director of Republic Wireless. Mr. Kaestner is a Cofounder and Managing Principal of Sovereign’s Capital, a private investment firm headquartered in Raleigh, North Carolina with offices in Jakarta, Indonesia and Los Gatos, California. Mr. Kaestner previously served as the CEO of Bandwidth International, an international wholesale telecommunications broker based in London, England. Mr. Kaestner was also a founder of Chapel Hill Broadband, a U.S.-based consultant and broker that specialized in dark fiber and large wholesale transactions that was sold to Cantor Fitzgerald. In addition, Mr. Kaestner was a Founder and former President and CEO of Chapel Hill Brokers, an energy broker which achieved more than $50 million in daily trade volume on more than 150 transactions, for clients including Morgan Stanley and Merrill Lynch. Chapel Hill Brokers was sold to APB Energy (now ICAP Energy) in 1999. Mr. Kaestner received a B.A. in international relations from the University of Delaware. We believe that Mr. Kaestner is qualified to serve on our board of directors as our Cofounder and due to his experience in the private equity industry and as an executive officer in other businesses.

Brian D. Bailey has served as a director of Bandwidth since February 2013. Mr. Bailey is a Cofounder and Managing Partner of Carmichael Partners, a private investment firm based in Charlotte, North Carolina. Prior to forming Carmichael Partners, he worked in private equity at The Carlyle Group in Washington, Forstmann Little & Co. in New York and Carousel Capital in Charlotte. In addition to his private equity background, Mr. Bailey previously held investment banking positions at Bowles Hollowell Conner & Co. in Charlotte and CS First Boston in New York and served in several government positions in Washington including Special Assistant to the President in the Office of the White House Chief of Staff and Director of Strategic Planning and Policy at the U.S. Small Business Administration. Mr. Bailey currently serves on the boards of Bandwidth, Bluerock Residential Growth REIT, Republic Wireless and the TDF Foundation. He has previously served on the boards of a number of private, public and nonprofit organizations. Mr. Bailey holds a B.A. degree from the University of North Carolina at Chapel Hill and an M.B.A. degree from the Stanford Graduate School of Business. We believe that Mr. Bailey is qualified to serve on our board of directors due to his experience in the private equity industry and as a director of public and private companies.

Douglas A. Suriano has served as a director of Bandwidth since October 2017. Mr. Suriano is senior vice president and general manager of Oracle Communications. Mr. Suriano joined Oracle Communications in 2013 as vice president of products following Oracle Communications’ acquisition of Tekelec, Inc. At Tekelec, Inc., Mr. Suriano served as chief technology officer and vice president of engineering. Prior to Tekelec, Inc., Mr. Suriano served as the vice president of engineering at dynamicsoft, Inc. and chief information officer for QAD, Inc. Before QAD, Inc., Mr. Suriano managed the information technology division for the United States Marine Corps. Mr. Suriano holds a B.S. degree from the U.S. Naval Academy and an M.S. in information technology from the U.S. Naval Postgraduate School. We believe that Mr. Suriano is qualified to serve on our board of directors due to his business experience in the information technology and communications industries.

Family Relationships

There are no family relationships among any of our directors or executive officers.

Director Independence

Under the listing requirements and rules of the NASDAQ Global Select Market, independent directors must comprise a majority of a listed company’s board of directors within a specified period of the completion of this offering. In addition, the rules of the NASDAQ Global Select Market require that, subject to specified

 

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exceptions, each member of a listed company’s audit, compensation and governance and nominating committees be independent.

Our board of directors has undertaken a review of its composition, the composition of its committees and the independence of each director. Based upon information requested from and provided by each director concerning his or her background, employment and affiliations, including family relationships, our board of directors has determined that Messrs. Bailey and Suriano, representing two of our five directors, do not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director and that each of these directors is “independent” as that term is defined under the applicable rules and regulations of the SEC and the listing requirements and rules of the NASDAQ Global Select Market. In making this determination, our board of directors considered the current and prior relationships that each non-employee director has with our company and all other facts and circumstances our board of directors deemed relevant in determining their independence, including the beneficial ownership of our capital stock by each non-employee director.

Board Composition

Our board of directors consists of five members. In accordance with our amended and restated certificate of incorporation, our board of directors will be divided into three classes with staggered three-year terms. At each annual general meeting of stockholders, the successors to directors whose terms then expire will be elected to serve from the time of election and qualification until the third annual meeting following election. Our directors are divided among the three classes as follows:

 

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The Class I directors are                , and their terms will expire at the annual general meeting of stockholders to be held in 2018;

 

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The Class II directors are                , and their terms will expire at the annual general meeting of stockholders to be held in 2019; and

 

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The Class III directors are                , and their terms will expire at the annual general meeting of stockholders to be held in 2020.

We expect that additional directorships resulting from an increase in the number of directors will be distributed among the three classes so that, as nearly as possible, each class will consist of one-third of the directors.

The division of our board of directors into three classes with staggered three-year terms may delay or prevent a change of our management or a change in control.

Board Oversight of Risk

One of the key functions of our board of directors is informed oversight of our risk management process. In particular, our board of directors is responsible for monitoring and assessing strategic risk exposure. Our executive officers are responsible for the day-to-day management of the material risks we face. Our board of directors administers its oversight function directly as a whole, as well as through various standing committees of our board of directors that address risks inherent in their respective areas of oversight. For example, our audit committee is responsible for overseeing the management of risks associated with our financial reporting, accounting and auditing matters; our compensation committee oversees the management of risks associated with our compensation policies and programs.

Controlled Company

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NASDAQ Global Select Market. Therefore, we will not be required to have a majority of our board of directors be independent, nor will we be required to have a compensation committee or an independent nominating function. Additionally, as described in the section entitled “Description of Capital Stock—Anti-Takeover Provisions,” so long as the outstanding shares of our Class B common stock represent a majority of the combined voting power of our common stock, Morken will be able to effectively control all matters submitted to our stockholders for a vote, as well as the overall management and direction of our company.

Board Committees

Our board of directors has established the following committees: an audit committee and a compensation committee. The composition and responsibilities of each committee are described below. Members serve on these committees until their resignation or until otherwise determined by our board of directors.

Audit Committee

Our audit committee provides oversight of our accounting and financial reporting process, the audit of our consolidated financial statements and our internal control function. Among other matters, the audit committee assists the board of directors in oversight of the independent auditors’ qualifications, independence and performance; is responsible for the engagement, retention and compensation of the independent auditors; reviews the scope of the annual audit; reviews and discusses with management and the independent auditors the results of the annual audit and the review of our quarterly consolidated financial statements including the disclosures in our annual and quarterly reports filed with the SEC; reviews our risk assessment and risk management processes; establishes procedures for receiving, retaining and investigating complaints received by us regarding accounting, internal accounting controls or audit matters; approves audit and permissible non-audit services provided by our independent auditor; and reviews and approves related party transactions under Item 404 of Regulation S-K. In addition, our audit committee oversees our internal audit function.

The current members of our audit committee are Mr. Bailey, who is the chair of the committee, and Messrs. Suriano and Murdock. Our board of directors has determined that all members of our audit committee meet the requirements for financial literacy under the applicable rules and regulations of the SEC and the NASDAQ Global Select Market. Our board of directors has determined Mr. Bailey is an audit committee financial expert as defined under the applicable rules of the SEC and has the requisite financial sophistication as defined under the rules and regulations of the NASDAQ Global Select Market. Two of the members of our audit committee are independent directors as defined under the applicable rules and regulations of the SEC and the NASDAQ Global Select Market.

Compensation Committee

Our compensation committee adopts and administers the compensation policies, plans and benefit programs for our executive officers and all other members of our executive team. In addition, among other things, our compensation committee annually evaluates, in consultation with the board of directors, the performance of our CEO, reviews and approves corporate goals and objectives relevant to compensation of our CEO and other executives and evaluates the performance of these executives in light of those goals and objectives. Our compensation committee also adopts and administers our equity compensation plans. The current members of our compensation committee are Mr. Bailey, who is the chair of the committee, and Messrs. Suriano and Morken. Two of the members of our compensation committee are independent under the applicable rules and regulations of the SEC, the NASDAQ Global Select Market, Section 16 of the Exchange Act and Section 162(m) of the Code.

Director Nominations

We do not have a standing nominating committee. In accordance with Rule 5605(e) of the NASDAQ rules and subject to the phase-in schedules for initial public offerings pursuant to Rule 5615(b)(1) of the NASDAQ

 

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rules, a majority of the independent directors may recommend a director nominee for selection by our board of directors. Our board of directors believes that the independent directors can satisfactorily carry out the responsibility of properly selecting or approving director nominees without the formation of a standing nominating committee. The directors who will participate in the consideration and recommendation of director nominees are Messrs. Bailey and Suriano. Following the IPO-Related Reorganization, we expect to become a “controlled company” within the meaning of NASDAQ’s corporate governance standards, and at such time we will be exempt from the requirement that director nominees be selected by our independent directors and will instead be decided by our full board.

Compensation Committee Interlocks and Insider Participation

None of the members of our compensation committee is or has at any time during the past year been one of our officers or employees. None of our executive officers currently serves or in the past year has served as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on our board of directors or compensation committee.

Code of Business Conduct and Ethics

Prior to the completion of this offering, we expect to adopt a code of business conduct and ethics that will be applicable to all of our employees, officers and directors, including our principal executive officer, principal financial officer and principal accounting officer. The code of business conduct and ethics will be available on our website prior to the closing of this offering. The board of directors will be responsible for overseeing the code of business conduct and ethics and must approve any waivers for employees, executive officers and directors. We expect that any amendments or waivers will be disclosed on our website or in a current report on Form 8-K.

Director Compensation

Prior to this offering, we have generally not provided any cash compensation to our non-employee directors for their service on our board. We have a policy of reimbursing all of our non-employee directors for their reasonable out-of-pocket expenses in connection with attending board of directors and committee meetings.

We have approved a compensation program for non-employee directors to become effective following our initial public offering. Pursuant to this program, non-employee directors will receive the following cash compensation:

 

Annual Retainer for Board Membership
Annual service on the board of directors		$
Annual Retainer for Committee Membership
Annual service as member of the audit committee (other than chair)		$
Annual service as chair of the audit committee		$
Annual service as member of the compensation committee (other than chair)		$
Annual service as chair of the compensation committee		$

 

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EXECUTIVE COMPENSATION

This section discusses the material components of the executive compensation program for our executive officers who are named in the “2016 Summary Compensation Table” below. In 2016, our “named executive officers” and their positions were as follows:

 

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David Morken, Chief Executive Officer;

 

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John Murdock, President;

 

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Chris Matton, General Counsel; and

 

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Jeff Hoffman, Chief Financial Officer.

We are an “emerging growth company,” within the meaning of the JOBS Act, and have elected to comply with the reduced compensation disclosure requirements available to emerging growth companies under the JOBS Act.

2016 Summary Compensation Table

 

Name and Principal Position		Year				Salary ($)				Bonus ($)(1)				Non-Equity Incentive Plan Compensation ($)(2)				All Other Compensation ($)(3)				Total
David Morken,			2016				375,000				100,000				450,000				250				925,250
Chief Executive Officer
John Murdock,			2016				304,890				100,000				208,580				—				613,470
President
Chris Matton,			2016				289,877				75,000				173,955				7,950				546,782
General Counsel
Jeff Hoffman,			2016				289,877				75,000				173,955				7,950				546,782
Chief Financial Officer

 

(1)	Amounts shown represent discretionary cash bonuses paid based on our Spin-Off in November 2016. For additional information, refer to the discussion in the “Narrative Disclosure to 2016 Summary Compensation Table” below under the heading “—2016 Transaction Bonus Awards.”

(2)	Amounts shown represent annual cash performance bonuses earned for 2016. For additional information, refer to the discussion in the “Narrative Disclosure to 2016 Summary Compensation Table” below under the heading “—2016 Annual Incentive Compensation.”

(3)	Amount shown represents 401(k) matching contributions. For additional information, refer to the discussion in the “Narrative Disclosure to 2016 Summary Compensation Table” below under the heading “—Retirement, Health, Welfare and Additional Benefits.”

Narrative Disclosure to 2016 Summary Compensation Table

The primary elements of compensation for our named executive officers are base salary, annual performance bonuses and long-term equity-based compensation awards. The named executive officers also generally participate in employee benefit plans and programs that we offer to our other full-time employees on the same basis.

Base Salaries

We pay our named executive officers a base salary that is intended to provide a fixed component of compensation reflecting the executive’s skill set, experience, role and responsibilities. Base salaries for our

 

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named executive officers have generally been set at levels deemed necessary to attract and retain the named executive officers and were originally established in each named executive officer’s employment agreement or offer letter. The following table shows the annual base salaries for 2016 and 2017 of our named executive officers.

 

Name		2016 Annual Base Salary ($)				2017 Annual Base Salary ($)
David Morken			375,000				375,000
John Murdock			304,890				340,000
Chris Matton			289,877				304,000
Jeff Hoffman			289,877				304,000

2016 Annual Incentive Compensation

Our named executive officers have the opportunity to earn annual cash bonuses to compensate them for attaining certain company and individual performance goals. The 2016 target bonus amounts for our named executive officers were 100% of annual base salary for Mr. Morken, and 50% of annual base salary for Mr. Hoffman, Mr. Matton and Mr. Murdock. Actual payout levels were determined in early 2017 based on overall 2016 performance, taking into account the Company’s achievement of its financial objectives for revenue, gross margin and adjusted EBITDA and the named executive officer’s achievement of personal objectives established by the Company relating to the strategic, tactical and functional objectives of his respective business unit or of the Company as a whole. The actual cash bonuses earned by our named executive officers for 2016 are reported under the “Non-Equity Incentive Plan Compensation” column of the 2016 Summary Compensation Table above.

2016 Transaction Bonus Awards

As part of their compensation for 2016, each of our named executive officers received a one-time discretionary transaction-related bonus based on the successful Spin-Off of Republic Wireless, Inc. in November 2016. These bonus amounts were earned as of November 2016 and were paid in December 2016. The amounts awarded to our named executive officers are reported under the “Bonus” column of the 2016 Summary Compensation Table above.

Equity Compensation

We generally offer stock options to our employees, including our named executive officers, as the long-term incentive component of our compensation program. We typically grant options to employees when they commence employment with us and may thereafter grant additional options in the discretion of our board of directors. Our stock options generally allow employees to purchase shares of our common stock at a price equal to the fair market value of our common stock on the date of grant, as determined by the board of directors, and may be intended to qualify as “incentive stock options” under the Internal Revenue Code.

Our stock options typically vest in equal annual installments over a four-year period, with the first such installment occurring on the first anniversary of the grant date (or an earlier vesting commencement date, if determined by the board of directors), subject to the holder’s continued employment with us as of each applicable vesting date. From time to time, our board of directors may also construct alternate vesting schedules as it determines are appropriate to motivate particular employees. We did not award any stock options to our named executive officers during 2016.

In connection with this offering, we intend to adopt a 2017 Incentive Award Plan, referred to below as the 2017 Plan, in order to facilitate the grant of cash and equity incentives to directors, employees (including our named executive officers) and consultants of our company and certain of its affiliates and to enable our company and certain of its affiliates to obtain and retain services of these individuals, which is essential to our long-term success. For additional information about the 2017 Plan, please see the section entitled “2017 Incentive Award Plan” below.

 

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Retirement, Health, Welfare and Additional Benefits

Our named executive officers are eligible to participate in our employee benefit plans and programs, including medical and dental benefits, flexible spending accounts, long-term care benefits, and short- and (other than Mr. Morken) long-term life insurance, to the same extent as our other full-time employees, subject to the terms and eligibility requirements of those plans. Our named executive officers are also eligible to participate in a separate long-term disability plan which we maintain for our senior executives. Mr. Morken also participates in a separate life insurance plan that we maintain.

We sponsor a 401(k) defined contribution plan in which our named executive officers may participate, subject to limits imposed by the Internal Revenue Code, to the same extent as our other full-time employees. Currently, we match     % of contributions made by participants in the 401(k) plan up to a maximum company match of             . All matching contributions are subject to vesting at the rate of approximately 33% per year of service.

Outstanding Equity Awards at 2016 Fiscal Year-End

 

		Grant Date				Option Awards
Name						Number of Securities Underlying Unexercised Options (#) Exercisable				Number of Securities Underlying Unexercised Options (#) Unexercisable				Option Exercise Price ($)				Option Expiration Date
David Morken			4/13/2012				135,000	(1)			0				14.51				4/13/2022
John Murdock			10/2/2008				45,705	(1)			0				14.51				10/2/2018
			10/2/2008				15,600	(1)			0				14.51				10/2/2018
			7/26/2010				16,000	(2)			0				14.51				7/26/2020
			3/15/2011				120,000	(1)			0				14.51				3/15/2021
Chris Matton			7/26/2010				25,000	(3)			0				14.51				7/26/2020
			7/26/2010				10,000	(4)			0				14.51				7/26/2020
			3/15/2011				30,000	(1)			0				14.51				3/15/2021
Jeff Hoffman			11/1/2011				32,609	(1)			0				14.51				11/1/2021
			6/4/2014				23,682	(4)			7,894				22.91				6/4/2024

 

(1)	The options vested in equal annual installments over a four-year period, with the first such installment occurring on the first anniversary of the grant date.

(2)	The options were fully vested as of the grant date.

(3)

The options vested in annual installments over a four-year period, commencing on July 6, 2010, with the first such installment occurring on the second anniversary of the vesting commencement date and the subsequent installments occurring on the third and fourth anniversaries of the vesting commencement date.

(4)

The options vest in equal annual installments over a four-year period, with the first such installment occurring on the first anniversary of the grant date, provided that in the event of a change in control or corporate reorganization, in either case, following the occurrence of any underwritten public offering by our company of its equity securities (including this offering), any unvested portion of the options shall vest and become exercisable immediately prior to such event, subject to Mr. Hoffman’s continued service to us.

Employment Arrangements

We have entered into employment agreements or offer letters with each of our named executive officers. Certain key terms of these agreements are described below.

David Morken

We entered into an employment agreement with David Morken as of January 1, 2015 (as amended on March 9, 2017), which has an initial term until January 1, 2018 and which will automatically renew for additional

 

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one year periods unless either Mr. Morken or we give at least 60 days’ notice of non-renewal to the other party. This agreement entitled Mr. Morken to receive an initial base salary of $375,000 and the opportunity to earn an annual performance-based bonus, with a target of 100% of base salary, subject to the achievement of individual and company performance goals to be mutually agreed by our board and Mr. Morken at the beginning of each calendar year. Mr. Morken is also entitled to receive a cash bonus of $750,000 upon the occurrence of our first firm commitment underwritten public offering resulting in gross proceeds of at least $35 million that occurs during the term of the employment agreement, which we expect will be paid in connection with this offering. Upon a liquidity event in which there is a change of control of our company with a value of at least $750 million (calculated on an enterprise basis) and the transaction commences during the term of the employment agreement and closes on or prior to December 31, 2023, Mr. Morken will additionally be entitled to receive a liquidity bonus as shown in the table below (the “Liquidity Bonus”), subject to Mr. Morken’s continued employment through the date of such liquidity event (or his earlier termination by us for any reason or his resignation for “Good Reason” (as defined in his employment agreement) following the commencement of negotiations regarding the potential transaction).

 

Value Calculated on Enterprise Basis		Liquidity Bonus
$750,000,000—$999,999,999		$	5,000,000
$1,000,000,000—$1,249,999,999		$	10,000,000
$1,250,000,000—$1,499,999,999		$	12,500,000
$1,500,000,000—$1,749,999,999		$	15,000,000
$1,750,000,000—$1,999,999,999		$	17,500,000
$2,000,000,000 or more		$	20,000,000

If payments to Mr. Morken from us would constitute an “excess parachute payment” within the meaning of Section 280G of the Code, and would be subject to the excise tax imposed by Section 4999 of the Code, then such payments (including the Liquidity Bonus) would be reduced to the extent necessary to avoid the payment of any excess parachute payments and to avoid Mr. Morken being subject to the excise tax imposed by Section 4999 of the Code.

The employment agreement with Mr. Morken provides that any then outstanding and unvested stock options or shares of restricted stock will immediately vest, and the options will be exercisable for the remainder of their full original term, upon the earliest of (i) Mr. Morken’s death during the term of the agreement, (ii) a change in control of our company, or (iii) the termination of Mr. Morken’s employment by us other than for “Cause” (as defined in his employment agreement and including our decision to not renew the term of the employment agreement) or by Mr. Morken for Good Reason. If Mr. Morken’s employment is terminated (i) by us other than for Cause, (ii) by Mr. Morken for Good Reason, or (iii) by Mr. Morken for any reason within 12 months following a change of control of our company that is not approved by at least a majority of our board of directors, then, subject to his execution of a general release of claims in our favor, Mr. Morken is entitled to receive 150% of his then-current base salary plus 150% of his target bonus for the year of termination, payable over an 18 month period following the termination. If Mr. Morken is terminated by us other than for Cause, he will also be entitled to receive company-paid basic medical insurance premiums for 18 months following his termination and a lump sum equal to 18 months of premiums for the term life insurance coverage then in effect. Mr. Morken has agreed to refrain from disclosing our confidential information during or at any time following his employment with us and from competing with us or soliciting our employees or customers during his employment and for twelve months following termination of his employment.

John Murdock

We entered into an employment agreement with John Murdock, effective October 1, 2008, which has a current term that will expire on January 1, 2018 and which will automatically renew for additional one year periods unless either Mr. Murdock or we give at least 90 days’ notice of non-renewal to the other party. This agreement entitled Mr. Murdock to receive an initial base salary of $250,000 and the opportunity to earn a

 

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performance-based bonus, with an initial target of $100,000, which will be considered and paid in 4 quarterly installments, subject to the achievement of individual and company performance goals.

The employment agreement provides that if we terminate Mr. Murdock without cause (as generally described in his employment agreement), Mr. Murdock will be entitled to receive 12 months of his then-current base salary. If Mr. Murdock terminates the employment agreement, he is entitled to receive six months of his then-current base salary. In the event of a termination of the employment agreement without cause, Mr. Murdock will be eligible to vest on a prorated basis in the portion of his stock options that would have otherwise vested in the twelve months following such termination.

Chris Matton

We entered into an employment agreement with Chris Matton, effective as of May 3, 2010, which has a current term that will expire on July 6, 2018, and which will automatically renew for additional one year periods unless either Mr. Matton or we give at least 90 days’ notice of non-renewal to the other party. This agreement entitled Mr. Matton to receive an initial base salary of $250,000 and the opportunity to earn an annual performance-based bonus, with an initial target of $125,000, subject to the achievement of individual and company performance goals.

The employment agreement provides that if Mr. Matton’s employment is terminated (i) by us without Cause or (ii) by Mr. Matton for “Good Reason” (as such capitalized terms are defined in his employment agreement), then Mr. Matton will be entitled to receive 12 months of base salary continuation. In the event of a termination of his employment without Cause, Mr. Matton will be eligible to vest on a prorated basis in the portion of his stock options that would have otherwise vested in the twelve months following such termination. Upon a sale or merger of our company, a stock exchange listing or public trading of our company’s stock (including this offering), or other similar material event, all stock options shall vest in full.

Jeff Hoffman

We entered into an offer letter agreement with Mr. Hoffman, dated as of September 16, 2011, which provides for at-will employment. This agreement entitled Mr. Hoffman to an initial base salary of $250,000 and the opportunity to earn an annual performance-based bonus, with a target of 50% of Mr. Hoffman’s base salary, subject to the achievement of management by objective performance goals. Pursuant to the terms of his offer letter agreement, if Mr. Hoffman’s employment is terminated (i) by us without “Cause,” or (ii) by Mr. Hoffman for “Good Reason,” (as such capitalized terms are defined in his employment agreement), then, subject to his execution of a general release of claims in our favor, Mr. Hoffman is entitled to receive six months of base salary continuation.

Incentive Plans

Our 2017 Incentive Award Plan

Effective prior to the first public trading date of our Class A common stock, we expect to have adopted and, our stockholders are expected to have approved, the 2017 Incentive Award Plan (the “2017 Plan”), under which we may grant cash and equity-based incentive awards to eligible service providers in order to attract, retain and motivate the persons who make important contributions to our company. The material terms of the 2017 Plan are summarized below.

Eligibility and Administration. Our employees, consultants and directors, and employees and consultants of our subsidiaries, will be eligible to receive awards under the 2017 Plan. The 2017 Plan will be administered by our board of directors, which may delegate its duties and responsibilities to one or more committees of our directors and/or officers (referred to collectively as the plan administrator below), subject to the limitations

 

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imposed under the 2017 Plan, Section 16 of the Exchange Act, stock exchange rules and other applicable laws. The plan administrator will have the authority to take all actions and make all determinations under the 2017 Plan, to interpret the 2017 Plan and award agreements and to adopt, amend and repeal rules for the administration of the 2017 Plan as it deems advisable. The plan administrator will also have the authority to determine which eligible service providers receive awards, grant awards and set the terms and conditions of all awards under the 2017 Plan, including any vesting and vesting acceleration provisions, subject to the conditions and limitations in the 2017 Plan.

Shares Available for Awards. An aggregate of              shares of our Class A common stock will initially be available for issuance under the 2017 Plan. No more than              shares of Class A common stock may be issued under the 2017 Plan upon the exercise of incentive stock options. Shares of Class A common stock issued under the 2017 Plan may be authorized but unissued shares, shares purchased on the open market or treasury shares.

If an award under the 2017 Plan expires, lapses or is terminated, exchanged for cash, surrendered, repurchased, canceled without having been fully exercised or forfeited, any unused shares subject to the award will again be available for new grants under the 2017 Plan. Awards granted under the 2017 Plan in substitution for any options or other stock or stock-based awards granted by an entity before the entity’s merger or consolidation with us or our acquisition of the entity’s property or stock will not reduce the shares of Class A common stock available for grant under the 2017 Plan, but will count against the maximum number of shares of Class A common stock that may be issued upon the exercise of incentive stock options.

In addition, the maximum aggregate grant date fair value as determined in accordance with FASB ASC Topic 718 (or any successor thereto), of awards granted to any non-employee director for services as a director pursuant to the 2017 Plan during any fiscal year may not exceed $             (or, in the fiscal year of any director’s initial service, $            ). The plan administrator may, however, make exceptions to such limit on director compensation in extraordinary circumstances, subject to the limitations in the 2017 Plan.

Awards. The 2017 Plan provides for the grant of stock options, including incentive stock options (“ISOs”) and nonqualified stock options (“NSOs”), stock appreciation rights (“SARs”), restricted stock, dividend equivalents, restricted stock units, (“RSUs”), and other stock or cash based awards. Certain awards under the 2017 Plan may constitute or provide for payment of “nonqualified deferred compensation” under Section 409A of the Code. All awards under the 2017 Plan will be set forth in award agreements, which will detail the terms and conditions of awards, including any applicable vesting and payment terms and post-termination exercise limitations. A brief description of each award type follows.

 

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Stock Options and SARs. Stock options provide for the purchase of shares of our Class A common stock in the future at an exercise price set on the grant date. ISOs, by contrast to NSOs, may provide tax deferral beyond exercise and favorable capital gains tax treatment to their holders if certain holding period and other requirements of the Code are satisfied. SARs entitle their holder, upon exercise, to receive from us an amount equal to the appreciation of the shares subject to the award between the grant date and the exercise date. The plan administrator will determine the number of shares of Class A common stock covered by each option and SAR, the exercise price of each option and SAR and the conditions and limitations applicable to the exercise of each option and SAR. The exercise price of a stock option or SAR will not be less than 100% of the fair market value of the underlying share on the grant date (or 110% in the case of ISOs granted to certain significant stockholders), except with respect to certain substitute awards granted in connection with a corporate transaction. The term of a stock option or SAR may not be longer than ten years (or five years in the case of ISOs granted to certain significant stockholders). The maximum aggregate number of shares of Class A common stock with respect to one or more options or SARs that may be granted to any one person during any fiscal year of the company will be             .

 

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Restricted Stock and RSUs. Restricted stock is an award of nontransferable shares of our Class A common stock that remain forfeitable unless and until specified conditions are met and which may be

 

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subject to a purchase price. RSUs are contractual promises to deliver shares of our Class A common stock in the future, which may also remain forfeitable unless and until specified conditions are met and may be accompanied by the right to receive the equivalent value of dividends paid on shares of our Class A common stock prior to the delivery of the underlying shares. The plan administrator may provide that the delivery of the shares of Class A common stock underlying RSUs will be deferred on a mandatory basis or at the election of the participant. The terms and conditions applicable to restricted stock and RSUs will be determined by the plan administrator, subject to the conditions and limitations contained in the 2017 Plan.

 

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Other Stock or Cash Based Awards. Other stock or cash based awards are awards of cash, fully vested shares of our Class A common stock and other awards valued wholly or partially by referring to, or otherwise based on, shares of our Class A common stock or other property. Other stock or cash based awards may be granted to participants and may also be available as a payment form in the settlement of other awards, as standalone payments and as payment in lieu of compensation to which a participant is otherwise entitled. The plan administrator will determine the terms and conditions of other stock or cash based awards, which may include any purchase price, performance goal, transfer restrictions and vesting conditions.

Performance Criteria. The plan administrator may select performance criteria for an award to establish performance goals for a performance period. Performance criteria under the 2017 Plan may include, but are not limited to, the following: net earnings or losses (either before or after one or more of interest, taxes, depreciation, amortization, and non-cash equity-based compensation expense); gross or net sales or revenue or sales or revenue growth; net income (either before or after taxes) or adjusted net income; profits (including but not limited to gross profits, net profits, profit growth, net operation profit or economic profit), profit return ratios or operating margin; budget or operating earnings (either before or after taxes or before or after allocation of corporate overhead and bonus); cash flow (including operating cash flow and free cash flow or cash flow return on capital); return on assets; return on capital or invested capital; cost of capital; return on stockholders’ equity; total stockholder return; return on sales; costs, reductions in costs and cost control measures; expenses; working capital; earnings or loss per share; adjusted earnings or loss per share; price per share or dividends per share (or appreciation in or maintenance of such price or dividends); regulatory achievements or compliance; implementation, completion or attainment of objectives relating to research, development, regulatory, commercial, or strategic milestones or developments; market share; economic value or economic value added models; division, group or corporate financial goals; customer satisfaction/growth; customer service; employee satisfaction; recruitment and maintenance of personnel; human resources management; supervision of litigation and other legal matters; strategic partnerships and transactions; financial ratios (including those measuring liquidity, activity, profitability or leverage); debt levels or reductions; sales-related goals; financing and other capital raising transactions; cash on hand; acquisition activity; investment sourcing activity; and marketing initiatives, any of which may be measured in absolute terms or as compared to any incremental increase or decrease. Such performance goals also may be based solely by reference to the company’s performance or the performance of a subsidiary, division, business segment or business unit of the company or a subsidiary, or based upon performance relative to performance of other companies or upon comparisons of any of the indicators of performance relative to performance of other companies. When determining performance goals, the plan administrator may provide for exclusion of the impact of an event or occurrence which the plan administrator determines should appropriately be excluded, including, without limitation, non-recurring charges or events, acquisitions or divestitures, changes in the corporate or capital structure, events unrelated to the business or outside of the control of management, foreign exchange considerations, and legal, regulatory, tax or accounting changes.

Certain Transactions. In connection with certain corporate transactions and events affecting our Class A common stock, including a change in control, or change in any applicable laws or accounting principles, the plan administrator has broad discretion to take action under the 2017 Plan to prevent the dilution or enlargement of intended benefits, facilitate the transaction or event or give effect to the change in applicable laws or accounting

 

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principles. This includes canceling awards for cash or property, accelerating the vesting of awards, providing for the assumption or substitution of awards by a successor entity, adjusting the number and type of shares subject to outstanding awards and/or with respect to which awards may be granted under the 2017 Plan and replacing or terminating awards under the 2017 Plan. In addition, in the event of certain non-reciprocal transactions with our stockholders, the plan administrator will make equitable adjustments to the 2017 Plan and outstanding awards as it deems appropriate to reflect the transaction.

Plan Amendment and Termination. Our board of directors may amend or terminate the 2017 Plan at any time; however, no amendment, other than an amendment that increases the number of shares available under the 2017 Plan, may materially and adversely affect an award outstanding under the 2017 Plan without the consent of the affected participant and stockholder approval will be obtained for any amendment to the extent necessary to comply with applicable laws. Further, the plan administrator can, without the approval of our stockholders, amend any outstanding stock option or SAR to reduce its price per share. The 2017 Plan will remain in effect until the tenth anniversary of its effective date, unless earlier terminated by our board of directors. No awards may be granted under the 2017 Plan after its termination.

Foreign Participants, Claw-Back Provisions, Transferability and Participant Payments. The plan administrator may modify awards granted to participants who are foreign nationals or employed outside the United States or establish subplans or procedures to address differences in laws, rules, regulations or customs of such foreign jurisdictions. All awards will be subject to any company claw-back policy as set forth in such claw-back policy or the applicable award agreement. Except as the plan administrator may determine or provide in an award agreement, awards under the 2017 Plan are generally non-transferrable, except by will or the laws of descent and distribution, or, subject to the plan administrator’s consent, pursuant to a domestic relations order, and are generally exercisable only by the participant. With regard to tax withholding obligations arising in connection with awards under the 2017 Plan, and exercise price obligations arising in connection with the exercise of stock options under the 2017 Plan, the plan administrator may, in its discretion, accept cash, wire transfer or check, shares of our common stock that meet specified conditions, a promissory note, a “market sell order,” such other consideration as the plan administrator deems suitable or any combination of the foregoing.

2010 Equity Compensation Plan

Our board of directors and stockholders have approved our 2010 Equity Compensation Plan (the “2010 Plan”), under which we may grant stock options and other stock-based awards to employees, directors and consultants of our company or its affiliates. As of June 30, 2017, we reserved a total of 1,336,510 shares of our Class A common stock for issuance under the 2010 Plan.

Following the effectiveness of the 2017 Plan, we will not make any further grants under the 2010 Plan. However, the 2010 Plan will continue to govern the terms and conditions of the outstanding awards granted under it. As discussed above, we anticipate that shares of our Class A common stock subject to awards granted under the 2010 Plan that are forfeited, lapse unexercised or are settled in cash and which following the effective date of the 2017 Plan are not issued under the 2010 Plan will be available for issuance under the 2017 Plan.

Administration

Our board of directors administers the 2010 Plan and has the authority to determine recipients of awards and the terms of awards granted under the 2010 Plan, to interpret the 2010 Plan and awards outstanding thereunder, and to make changes to awards outstanding under the 2010 Plan. The board of directors may delegate its authority under the 2010 Plan to a committee.

Types of Awards

The 2010 Plan provides for the grant of non-qualified and incentive stock options, restricted stock and other stock-based awards to employees, officers, directors, consultants and other service providers of our company. As

 

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of the date of this prospectus, only awards of incentive stock options and non-qualified stock options are outstanding under the 2010 Plan.

Certain Transactions

If certain changes are made in, or events occur with respect to, our Class A common stock, the 2010 Plan and outstanding awards will be appropriately adjusted in the class, number and, as applicable, exercise price of securities as determined by the 2010 Plan administrator. In the event of certain corporate transactions of our company, including a consolidation, merger, or a liquidation, the 2010 Plan administrator may make equitable adjustments in the class, number, terms and conditions, and, as applicable, exercise price of securities of outstanding awards.

Amendment and Termination

Our board of directors, at any time and from time to time, may amend or terminate the 2010 Plan or any portion thereof from time to time, provided that no amendment or discontinuance of the 2010 Plan or any provision thereof shall, without the written consent of the participant, adversely affect (as determined by the 2010 Plan administrator) any award previously granted to such participant under the 2010 Plan. Furthermore, no amendment, without approval by our stockholders, shall alter the group of persons eligible to participate in the 2010 Plan, increase the maximum number of shares available for issuance pursuant to awards granted under the 2010 Plan, extend the period during which incentive stock options may be granted beyond the date that is 10 years following the effective date of the 2010 Plan, limit or restrict the powers of the 2010 Plan administrator with respect to the administration of the plan, change the eligibility of who may be granted incentive stock options or increase the limit or value of shares for which an eligible participant may be granted an incentive stock option, materially increase the benefits accruing to the participants under the 2010 Plan or change any provisions of the 2010 Plan related to amending or terminating the 2010 Plan.

2001 Stock Option Plan

Our board of directors and stockholders have approved our 2001 Stock Option Plan (the “2001 Plan”), under which we may grant stock options (both non-qualified and incentive stock options) to purchase shares of our Class B common stock to employees, directors and consultants of our company or its affiliates. Following the effectiveness of the 2010 Plan, we did not make any further grants under the 2001 Plan. However, the 2001 Plan will continue to govern the terms and conditions of the outstanding awards granted under it.

Administration

Our board of directors administers the 2001 Plan and has the authority to determine recipients of awards and the terms of awards granted under the 2001 Plan, to interpret the 2001 Plan and awards outstanding thereunder, and to make changes to awards outstanding under the 2001 Plan. The board of directors may delegate its authority under the 2001 Plan to a committee.

Certain Transactions

If certain changes are made in, or events occur with respect to, our Class B common stock, the 2001 Plan and outstanding awards will be appropriately adjusted in the class, number and, as applicable, exercise price of securities to the extent that the 2001 Plan administrator determines, in good faith, that such an adjustment is necessary or appropriate.

Amendment and Termination

We may, at any time, terminate the 2001 Plan or make such changes in or additions to the 2001 Plan as we deem advisable without further action on the part of our stockholders, provided that no such termination or

 

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amendment shall adversely affect or impair any then-outstanding option without the consent of such holder and provided further that any increase in the number of shares of stock covered by the 2001 Plan shall be subject to the approval of our stockholders.

Director Compensation

Our or our subsidiaries’ officers, employees, consultants or advisors who also serve as directors do not receive additional compensation for their service as directors. Our directors who are not our or our subsidiaries’ officers, employees, consultants or advisors, who we refer to as our non-employee directors, will receive cash and equity-based compensation for their services as directors.

The following table sets forth in summary form information concerning the compensation that we paid or awarded during the year ended December 31, 2016 to each of our non-employee directors:

 

Name		Fees Earned or Paid in Cash ($)				Total ($)
Brian Bailey(1)		$	120,000			$	120,000

 

(1)	Amounts paid in respect of Mr. Bailey’s service as a director were paid to Carmichael Partners, a private investment firm based in Charlotte, North Carolina.

Our Board of Directors will approve the initial terms of our non-employee director compensation program, which is expected to consist of the following:

 

•

an annual retainer of $            ;

 

•

an additional annual retainer of $             for service as the chair of any standing committee; and

 

•

an annual equity-based award granted under our 2017 Plan, having a value as of the grant date of approximately $            .

Non-employee directors will also receive reimbursement for out-of-pocket expenses associated with attending board or committee meetings and director and officer liability insurance coverage. Each director will be fully indemnified by us for actions associated with being a director to the fullest extent permitted under Delaware law.

 

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

Our Board of Directors expects to adopt a written statement of policy, effective upon completion of this offering, for the evaluation of and the approval, disapproval and monitoring of transactions involving us and “related persons.” For the purposes of the policy, “related persons” will include our executive officers, directors and director nominees or their immediate family members, or shareholders owning five percent or more of our outstanding common shares and their immediate family members.

Transactions with Republic Wireless

Reorganization Agreement

In connection with the Spin-Off, we and Republic Wireless entered into a Reorganization Agreement (the “Reorganization Agreement”) to provide for, among other things, the principal corporate transactions (including the internal restructuring) required to effect the Spin-Off, certain conditions to the Spin-Off and provisions governing the relationship between us and Republic Wireless with respect to and resulting from the Spin-Off.

The Reorganization Agreement provides for mutual indemnification obligations, which are designed to make Republic Wireless financially responsible for substantially all of the liabilities that existed relating to the Republic Wireless business at the time of the Spin-Off together with certain other specified liabilities, as well as for all liabilities incurred by Republic Wireless after the Spin-Off, and to make us financially responsible for all potential liabilities of Republic Wireless which are not related to the Republic Wireless business, including, for example, any liabilities arising as a result of Republic Wireless having been a division of Bandwidth, together with certain other specified liabilities. These indemnification obligations exclude any matters relating to taxes, employee matters and other intercompany agreements. For a description of the allocation of tax-related obligations, please see “—Tax Sharing Agreement” below.

In addition, the Reorganization Agreement provided for each of Republic Wireless and us to preserve the confidentiality of all confidential or proprietary information of the other party for five years following the Spin-Off, subject to customary exceptions, including disclosures required by law, court order or government regulation.

Tax Sharing Agreement

We entered into a Tax Sharing Agreement with Republic Wireless that governs our and Republic Wireless’ respective rights, responsibilities and obligations with respect to taxes and tax benefits, the filing of tax returns, the control of audits and other tax matters. References in this summary (i) to the terms “tax” or “taxes” mean U.S. federal, state, local and foreign taxes as well as any interest, penalties, additions to tax or additional amounts in respect of such taxes and (ii) to the term “Tax-related losses” refer to losses arising from the failure of the Spin-Off and related restructuring transactions to be tax-free.

Under the Tax Sharing Agreement, except as described below, (i) we are allocated all taxes attributable to Bandwidth (excluding Republic Wireless) and all taxes attributable to Republic Wireless for a pre-Spin-Off period, that are reported on any consolidated, combined or unitary tax return, and (ii) each of Bandwidth and Republic Wireless is allocated all taxes attributable to it that are reported on any tax return (including any consolidated, combined or unitary tax return) that includes only itself or any of its respective affiliates and subsidiaries. Special rules apply, however, as follows:

 

•

We are allocated any taxes and Tax-related losses that result from the Spin-Off and related restructuring transactions, except that Republic Wireless is allocated any such taxes or Tax-related losses that (i) result primarily from, individually or in the aggregate, a breach by Republic Wireless of any of its covenants relating to the Spin-Off and related restructuring transactions, or (ii) result from the application of Section 355(e) of the Code to the Spin-Off as a result of the treatment of the Spin-Off as part of a plan (or series of related transactions) pursuant to which one or more persons acquire, directly or indirectly, a 50% or greater interest in the stock of Republic Wireless; and

 

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•

We and Republic Wireless are each allocated 50% of any transfer taxes arising from the Spin-Off and related restructuring transactions.

We and Republic Wireless are restricted by certain covenants related to the Spin-Off and related restructuring transactions. These restrictive covenants require that neither we, Republic Wireless nor any member of our or their respective group take, or fail to take, any action if such action, or failure to act:

 

•

would be inconsistent with or prohibit certain restructuring transactions related to the Spin-Off from qualifying for tax-free treatment for U.S. federal income tax purposes to us and our subsidiaries;

 

•

would be inconsistent with or prohibit the Spin-Off from qualifying as a tax-free transaction under Section 355, Section 368(a)(1)(D) and related provisions of the Code to us, our subsidiaries and our stockholders; or

 

•

would be inconsistent with, or otherwise cause any person to be in breach of, any representation, covenant, or material statement made in connection with the tax opinion delivered to us relating to the qualification of the Spin-Off as a tax-free transaction under Section 355, Section 368(a)(1)(D) and related provisions of the Code.

Further, each party is restricted from taking any position for tax purposes that is inconsistent with the tax opinion obtained in connection with the Spin-Off.

The parties must indemnify each other for taxes and losses allocated to them under the Tax Sharing Agreement and for taxes and losses arising from a breach by them of their respective covenants and obligations under the Tax Sharing Agreement.

Transition Services Agreements

In connection with the Spin-Off, we and Republic Wireless entered into the Transition Services Agreements, pursuant to which we provide Republic Wireless with specified services, including:

 

•

insurance administration;

 

•

other services typically performed by our legal, tax, accounting, and internal audit departments; and

 

•

such other services as we may obtain from our officers, employees and consultants in the management of our operations that Republic Wireless may from time to time request or require.

In addition, we provide to Republic Wireless certain technical and information technology services (including management information systems, computer, data storage, and network services).

In addition, Republic Wireless provides us with specified services, including insurance administration support, billing and collections support, certain customer support related to high customer impacting events associated with our Phonebooth service, other technical support and certain legal services related to intellectual property.

Republic Wireless pay us, and we pay Republic Wireless, an agreed-upon services fee under the Transition Services Agreements. We and Republic Wireless each also reimburse the other for direct out-of-pocket costs incurred by the other party for third-party services. We and Republic Wireless evaluate all charges for reasonableness semi-annually and make adjustments to these charges as we mutually agree. For the six months ended June 30, 2017, we paid Republic Wireless $0.1 million and Republic Wireless paid us $0.5 million under the Transition Services Agreement. Prior to January 1, 2017, no payments were made or due.

The Transition Services Agreements continue in effect until the close of business on the second anniversary of the Spin-Off, unless earlier terminated (1) by Republic Wireless at any time on at least 30 days’ prior written

 

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notice, (2) by us upon written notice to Republic Wireless following a change in control or certain bankruptcy or insolvency-related events affecting Republic Wireless or (3) by Republic Wireless, upon written notice to us, following certain changes in control of us or our being the subject of certain bankruptcy or insolvency—related events. However, Republic Wireless’ obligation to provide certain customer support related to high customer-impacting events associated with our Phonebooth service continues in effect only until the close of business on the first anniversary of the Spin-Off.

Facilities Sharing Agreement

In connection with the Spin-Off, we entered into a Facilities Sharing Agreement (the “Facilities Sharing Agreement”) with Republic Wireless pursuant to which Republic Wireless shares our office facilities located at 940 Main Campus Drive, Raleigh, North Carolina through May 2022. Republic Wireless pays a sharing fee for use of the office facilities based on the amounts paid by us to our landlord and sublandlord, respectively, and an estimate of the usage of the office facilities by or on behalf of Republic Wireless. For the six months ended June 30, 2017, Republic Wireless paid us $0.4 million pursuant to the Facilities Sharing Agreement. The Facilities Sharing Agreement will continue in effect until May 2022, unless earlier terminated (1) by us upon written notice to Republic Wireless following a default by Republic Wireless of any of its material obligations under the Facilities Sharing Agreement, which default remains unremedied for 30 days after written notice of such default is provided, (2) by Republic Wireless upon written notice to us, following certain changes in control of us or our being the subject of certain bankruptcy or insolvency-related events or (3) by us upon written notice to Republic Wireless, following certain changes in control of Republic Wireless or Republic Wireless being the subject of certain bankruptcy or insolvency-related events.

Employee Matters Agreement

In connection with the Spin-Off, we entered into an Employee Matters Agreement (the “Employee Matters Agreement”) with Republic Wireless. The Employee Matters Agreement addresses customary matters associated with the transition of employees from employment with us to employment with Republic Wireless, including health, welfare and other similar benefits provided to such employees prior to and following the Spin-Off.

Master Services Agreement

In connection with the Spin-Off, we entered into a Master Services Agreement (the “Master Services Agreement”) with Republic Wireless pursuant to which, on a month-to-month basis, we provide Republic Wireless with certain telecommunications services. These telecommunications services include inbound calling, outbound calling, text messaging and 911 services. The Master Services Agreement, as well as the related service order form, rate sheet, and terms and conditions each is consistent with the terms and conditions we make available to our other customers and prospective customers. We provide Republic Wireless with these telecommunications services pursuant to the Master Services Agreement at fair market value. For the six months ended June 30, 2017, Republic Wireless paid us $1.1 million pursuant to the Master Services Agreement. Republic Wireless can choose to terminate the Master Services Agreement at any time.

Consulting Services Agreement

On February 22, 2010, we entered into a consulting agreement with Carmichael Investment Partners, LLC (“Carmichael”), pursuant to which we pay Carmichael a monthly fee of $10,000 for consulting and strategic advisory services. This agreement is expected to be terminated in connection with this offering.

Bowen-Carmichael Letter Agreement

We are party to a letter agreement, dated as of November 23, 2016, by and among James A. Bowen, Susan Bowen and Carmichael. The letter agreement gives each of Mr. Bowen, Ms. Bowen and Carmichael the right to

 

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purchase a number of shares equal to his, her or its pro rata portion of any shares issued by us upon the exercise of certain options previously granted to our employees, directors, officers and consultants. The applicable pro rata portion is determined as of the date of exercise of any applicable option and equals the percentage of our outstanding capital stock owned by Mr. Bowen, Ms. Bowen or Carmichael. The letter agreement will expire upon the completion of this offering.

Investors’ Rights Agreement

We are party to an Investors’ Rights Agreement, dated as of February 22, 2011 (as amended as of September 21, 2012 and November 23, 2016), which provides, among other things, that certain holders of our capital stock have the right to demand that we file a registration statement or request that their shares of our capital stock be covered by a registration statement that we are otherwise filing. The parties to the Investors’ Rights Agreement include Carmichael, entities affiliated with James Bowen and Susan Bowen, and certain non-executive employees. See the section titled “Description of Capital Stock—Registration Rights.” Additionally, the Investors’ Rights Agreement provides that the stockholders party thereto have a right of first refusal for any proposed offering of securities in an amount up to such stockholder’s then-current ownership percentage, in accordance with the terms of the agreement. The right of first refusal will terminate immediately prior to the completion of this offering.

Buy-Sell Agreements

Substantially all of our stockholders who are not parties to the Investors’ Rights Agreement are parties to buy-sell agreements by and between such stockholder and us. Each buy-sell agreement provides, among other things, that such stockholder agrees to vote all of its shares of our capital stock in the manner described therein with respect to the size and composition of our board of directors. These agreements will terminate upon the closing of this offering.

Voting Agreement

We are party to a voting agreement, dated as of February 22, 2011, which provides, among other things, that each of the parties thereto agrees to vote all of the shares of our capital stock they hold in the manner described therein with respect to the size and composition of our board of directors. This agreement will terminate upon the closing of this offering.

Company Lock-up Agreements

In connection with this offering, the Company entered into separate agreements (the “Company Lock-up Agreements”) with certain Class B stockholders (the “Key Holders”), pursuant to which each Key Holder agreed not to take any action that would cause certain shares of Class B common stock owned by the Key Holder to convert to Class A common stock on or before December 1, 2018 (the “Conversion Lock-up Date”).

Indemnification Agreements

Our amended and restated certificate of incorporation provides that we will indemnify our directors and officers to the fullest extent permitted by law. In addition, we expect to enter into indemnification agreements with all of our directors and executive officers prior to the completion of this offering.

Executive Compensation and Employment Arrangements

For a description of the compensation arrangements we have with our executive officers, please read the section titled “Executive Compensation.”

 

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Directed Share Program

The underwriters have reserved for sale, at the initial public offering price, up to                 shares of Class A common stock, or approximately     % of the shares being offered by us pursuant to this prospectus, for sale to our directors, officers and employees and certain other persons associated with us, as designated by us. The directed share program will not limit the ability of our directors, officers and their family members, or holders of more than 5% of our capital stock, to purchase more than $120,000 in value of our Class A common stock. We do not currently know the extent to which these related persons will participate in our directed share program, if at all, or the extent to which they will purchase more than $120,000 in value of our Class A common stock.

 

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PRINCIPAL AND SELLING STOCKHOLDERS

The following table sets forth, as of                 , 2017, information regarding beneficial ownership of our capital stock by:

 

•

each person, or group of affiliated persons, known by us to beneficially own more than 5% of our Class A common stock or Class B common stock;

 

•

each of our named executive officers;

 

•

each of our directors;

 

•

all of our executive officers and directors as a group; and

 

•

each of our other selling stockholders.

Beneficial ownership is determined according to the rules of the SEC and generally means that a person has beneficial ownership of a security if he, she or it possesses sole or shared voting or investment power of that security, including options that are currently exercisable or exercisable within 60 days of             , 2017. Except as indicated by the footnotes below, we believe, based on the information furnished to us, that the persons named in the table below have sole voting and investment power with respect to all shares of Class B common stock shown that they beneficially own, subject to community property laws where applicable. The information does not necessarily indicate beneficial ownership for any other purpose, including for purposes of Sections 13(d) and 13(g) of the Securities Act of 1933, as amended (the “Securities Act”).

Our calculation of the percentage of beneficial ownership prior to this offering gives effect to the Pre-IPO Reorganization and is based on             shares of our Class A common stock and             shares of our Class B common stock outstanding as of             , 2017. We have based our calculation of the percentage of beneficial ownership after this offering and assuming completion of the Pre-IPO Reorganization on             shares of our Class A common stock and             shares of our Class B common stock outstanding immediately after the completion of this offering (assuming no exercise of the underwriters’ over-allotment option). The selling stockholders listed in the table below are not selling any shares other than in connection with the underwriters’ option to purchase additional shares.

Common stock subject to stock options currently exercisable or exercisable within 60 days of             , 2017, are deemed to be outstanding for purposes of computing the percentage ownership of the person holding these options and the percentage ownership of any group of which the holder is a member but are not deemed outstanding for computing the percentage of any other person.

 

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Unless otherwise noted below, the address for each of the stockholders in the table below is c/o Bandwidth Inc., 900 Main Campus Drive, Suite 500, Raleigh, North Carolina 27606.

 

Number of Shares Beneficially Owned(1)

Percentage of Shares Beneficially Owned(1)

Percentage of Total Voting Power(1)

Name of Beneficial Owner

Before the Offering

After the Offering Excluding Option to Purchase Additional Shares

After the Offering Including Full Exercise of Option to Purchase Additional Shares

Before the Offering

After the Offering Excluding Option to Purchase Additional Shares

After the Offering Including Full Exercise of Option to Purchase Additional Shares

Class A

Class B

Class A

Class B

Class A

Class B

Class A

Class B

Class A

Class B

Class A

Class B

Class A

Class B

Executive Officers and Directors:

David A. Morken(2)

%

%

%

%

%

%

%

%

%

%

%

%

John C. Murdock(3)

%

%

%

%

%

%

%

%

%

%

%

%

Jeff Hoffman(4)

%

%

%

%

%

%

%

%

%

%

%

%

W. Christopher Matton(5)

%

%

%

%

%

%

%

%

%

%

%

%

Henry R. Kaestner(6)

%

%

%

%

%

%

%

%

%

%

%

%

Brian D. Bailey(7)

%

%

%

%

%

%

%

%

%

%

%

%

Douglas A. Suriano

%

%

%

%

%

%

%

%

%

%

%

%

All executive officers and directors as a group

%

%

%

%

%

%

%

%

%

%

%

%

5% Stockholders:

Carmichael Investment Partners LLC(8)

%

%

%

%

%

%

%

%

%

%

%

%

James Bowen(9)

%

%

%

%

%

%

%

%

%

%

%

%

Susan Bowen(10)

%

%

%

%

%

%

%

%

%

%

%

%

Other Selling Stockholders:

All Other Selling Stockholders

%

%

%

%

%

%

%

%

%

%

%

%

 

(1)	Calculated after giving effect to the Pre-IPO Reorganization

(2)

Consists of (i)                 shares of Class B common stock held of record by Mr. Morken, (ii)                 shares of Class B common stock held of record by Mr. Morken, as trustee of the David Morken 2014 Charitable Remainder Unitrust, (iii)                 shares of Class B common stock held of record by Mr. Morken, as trustee of the 2014 David Morken Irrevocable GST Trust, (iv)                 shares of Class B common stock held of record by the 2015 Irrevocable GST Trust, Chrishelle Morken, as trustee, (v)                 shares of Class B common stock subject to outstanding options that are exercisable within 60 days of                 , 2017 and (vi)                 shares held pursuant to the proxy described below. Certain trusts associated with Mr. Morken and/or his family members have granted Mr. Morken a proxy to vote the shares held of record by them pursuant to a voting agreement, which will terminate upon the earlier of (i) the ten year anniversary of the completion of this offering, (ii) a change of control of our company or (iii) the agreement of the parties.

(3)

Consists of (i)                 shares of Class B common stock held of record by Mr. Murdock, (ii)                 shares of Class B common stock held of record by Mr. Murdock, as trustee of the John C. Murdock Family Line Trust, (iii)                 shares of Class B common stock held of record by Mr. Murdock, as trustee of Murdock Trust ‘D’ u/a dated May 16, 2005, as amended, (iv)                 shares of Class B common stock subject to outstanding options that are exercisable within 60 days of                 , 2017, (v)                 shares of Class B common stock subject to warrants that are exercisable within 60 days of             , 2017 and (vi)                 shares of Class B common stock that Mr. Murdock has the option to purchase from Mr. Morken that are exercisable within 60 days of                 , 2017.

(4)	Consists of                 shares of Class B common stock subject to outstanding options that are exercisable within 60 days of                 , 2017.

(5)	Consists of (i)                 shares of Class B common stock subject to outstanding options that are exercisable within 60 days of                 , 2017 and (ii)                 shares of Class B common stock subject to warrants that are exercisable within 60 days of                 , 2017.

(6)

Consists of (i)                 shares of Class B common stock held of record by Mr. Kaestner, (ii)                 shares of Class B common stock held of record by Mr. Kaestner, as custodian for Ford Evans Young IV, (iii)                 shares of Class B common stock held of record by Mr. Kaestner, as custodian for Caroline Young, (iv)                 shares of Class B common stock held of record by Mr. Kaestner, as custodian for Kate Young, (v)                 shares of Class B common stock held of record by Mr. Kaestner, as custodian for Alice Young, (vi)                 shares of Class B common stock held of record by Mr. Kaestner, as custodian for Eloise Young, and (vii)                 shares of Class B common stock held of record by Mr. Kaestner, as custodian for Henry Young.

(7)

Consists of shares held by the Carmichael Entities identified in Note (8). Brian D. Bailey and Kevin J. Martin are the managing partners of Carmichael Bandwidth LLC and Carmichael Partners LLC and share voting and dispositive power with respect to the shares held by the Carmichael Entities and Carmichael Partners LLC.

 

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(8)

Consists of (i)                 shares of Series A preferred stock held by Carmichael Investment Partners LLC (“CIP”) that will be converted into             shares of Class B common stock immediately after the completion of this offering, (ii)                 shares of Class B common stock held by CIP, (iii)                 shares of Class B common stock held by Carmichael Investment Partners II, LLC (“CIP II”), (iv)                 shares of Class B common stock held by Carmichael Investment Partners III, LLC (“CIP III” and, together with CIP and CIP II, the “Carmichael Entities”), (v)                 shares of Class B common stock held by Carmichael Partners LLC and (vi)                 shares of Class B common stock subject to outstanding options that are exercisable within 60 days of                 , 2017, which are held personally by Kevin J. Martin, but the economic value of which will transfer to Carmichael Partners LLC. Carmichael Bandwidth LLC is the managing member of each of the Carmichael Entities. The address for each of the Carmichael Entities and Carmichael Partners LLC is c/o Carmichael Investment Partners LLC, 4725 Piedmont Row Drive, Suite 210, Charlotte, NC 28210.

(9)

Consists of (i)                 shares of Class B common stock held of record by Mr. Bowen, (ii)                 shares of Class B common stock subject to outstanding warrants that are exercisable within 60 days of             , 2017, (iii)                 shares of Class B common stock held by First Trust Capital Partners, LLC, (iv)                 shares of Class B common stock held by FT Bandwidth Ventures, LLC, and (v)                 shares of Class B common stock held by FT Bandwidth Ventures II, LLC. The address for each of First Trust Capital Partners, LLC, FT Bandwidth Ventures, LLC and FT Bandwidth Ventures II, LLC is 120 East Liberty Drive, Suite 400, Wheaton, IL 60187.

(10)	Consists of (i)                 shares of Class B common stock held of record by Ms. Bowen and (ii)                 shares of Class B common stock subject to outstanding warrants that are exercisable within 60 days of             , 2017.

 

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DESCRIPTION OF CAPITAL STOCK

General

As of the closing of this offering, after giving effect to the Pre-IPO Reorganization, our authorized capital stock will consist of                shares of common stock, par value $0.001 per share, and                shares of preferred stock, par value $0.001 per share. Our common stock will be divided into two classes, Class A common stock and Class B common stock. Following this offering, our authorized Class A common stock will consist of                shares and our authorized Class B common stock will consist of                shares.

The following description of our capital stock and provisions of our amended and restated certificate of incorporation and amended and restated bylaws are summaries and are qualified by reference to the amended and restated certificate of incorporation and amended and restated bylaws that will become effective prior to the pricing of this offering. Copies of these documents will be filed with the Securities and Exchange Commission as exhibits to our registration statement, of which this prospectus forms a part. The description of our capital stock reflects changes to our capital structure that will occur upon the closing of this offering.

Class A Common Stock and Class B Common Stock

As of                , 2017, there were (i)                shares of our Class A common stock outstanding and held of record by                stockholders and (ii)                shares of Class B common stock outstanding and held of record by                stockholders, assuming completion of the Pre-IPO Reorganization prior to the pricing of this offering.

Voting Rights

Holders of our Class A common stock and Class B common stock have identical rights, provided that, except as otherwise expressly provided in our amended and restated certificate of incorporation or required by applicable law, on any matter that is submitted to a vote of our stockholders, holders of our Class A common stock are entitled to one vote per share of Class A common stock and holders of our Class B common stock are entitled to ten votes per share of Class B common stock. Holders of shares of Class A common stock and Class B common stock will vote together as a single class on all matters (including the election of directors) submitted to a vote of stockholders, except that there will be a separate vote of our Class A common stock and Class B common stock in the following circumstances:

 

•

if we were to seek to amend our amended and restated certificate of incorporation to increase or decrease the par value of a class of our common stock, then that class would be required to vote separately to approve the proposed amendment; and

 

•

if we were to seek to amend our amended and restated certificate of incorporation in a manner that alters or changes the powers, preferences or special rights of a class of our common stock in a manner that affected its holders adversely, then that class would be required to vote separately to approve the proposed amendment.

Upon the completion of this offering, under our amended and restated certificate of incorporation, we may not increase or decrease the authorized number of shares of Class A common stock or Class B common stock without the affirmative vote of the holders of a majority of the combined voting power of the outstanding shares of Class A common stock and Class B common stock, voting together as a single class. In addition, we may not issue any shares of Class B common stock, unless that issuance is approved by the affirmative vote of the holders of a majority of the outstanding shares of Class B common stock.

We have not provided for cumulative voting for the election of directors in our amended and restated certificate of incorporation.

 

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Economic Rights

Except as otherwise expressly provided in our amended and restated certificate of incorporation or required by applicable law, shares of Class A common stock and Class B common stock will have the same rights and privileges and rank equally, share ratably and be identical in all respects as to all matters, including, without limitation, those described below.

Dividends. Any dividend or distributions paid or payable to the holders of shares of Class A common stock and Class B common stock shall be paid pro rata, on an equal priority, pari passu basis, unless different treatment of the shares of each such class is approved by the affirmative vote of the holders of a majority of the outstanding shares of the applicable class of stock treated adversely, voting separately as a class; provided, however, that if a dividend or distribution is paid in the form of Class A common stock or Class B common stock (or rights to acquire shares of Class A common stock or Class B common stock), then the holders of the Class A common stock shall receive Class A common stock (or rights to acquire shares of Class A common stock) and holders of Class B common stock shall receive Class B common stock (or rights to acquire shares of Class B common stock).

Liquidation. In the event of our liquidation, dissolution or winding-up, upon the completion of the distributions required with respect to any series of preferred stock that may then be outstanding, our remaining assets legally available for distribution to stockholders shall be distributed on an equal priority, pro rata basis to the holders of Class A common stock and Class B common stock.

Subdivisions and Combinations. If we subdivide or combine in any manner outstanding shares of Class A common stock or Class B common stock, then the outstanding shares of all common stock will be subdivided or combined in the same proportion and manner.

Change of Control Transaction. In connection with any change of control, the holders of Class A common stock and Class B common stock will be treated equally and identically with respect to shares of Class A common stock or Class B common stock owned by them, unless different treatment of the shares of each class is approved by the affirmative vote of the holders of a majority of the outstanding shares of Class A common stock and Class B common stock, each voting separately as a class.

Conversion

Each share of Class B common stock is convertible at any time at the option of the holder into one share of Class A common stock. In addition, each share of Class B common stock will convert automatically into one share of Class A common stock upon any transfer, whether or not for value and whether voluntary or involuntary or by operation of law, except for certain transfers described in our amended and restated certificate of incorporation, including, without limitation, certain transfers for tax and estate planning purposes.

Preferred Stock

Under the terms of our amended and restated certificate of incorporation that will become effective upon the closing of this offering, our board of directors is authorized to direct us to issue shares of preferred stock in one or more series without stockholder approval. Our board of directors has the discretion to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of preferred stock.

The purpose of authorizing our board of directors to issue preferred stock and determine its rights and preferences is to eliminate delays associated with a stockholder vote on specific issuances. The issuance of preferred stock could adversely affect the voting power of holders of our common stock and the likelihood that such holders will receive dividend payments and payments upon liquidation. The issuance of preferred stock,

 

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while providing flexibility in connection with possible acquisitions, future financings and other corporate purposes, could have the effect of making it more difficult for a third-party to acquire, or could discourage a third-party from seeking to acquire, a majority of our outstanding voting stock. Upon the closing of this offering, there will be no shares of preferred stock outstanding, and we have no present plans to issue any shares of preferred stock.

Options

As of June 30, 2017, we had outstanding options to purchase (i) an aggregate of 146,985 shares of our Class B common stock under our 2001 Plan, at a weighted-average exercise price of $14.36 per share, (ii) an aggregate of 1,294,969 shares of our Class A common stock under our 2010 Plan, at a weighted-average exercise price of $16.75 per share and (iii) zero shares of our Class A common stock under out 2017 Plan.

Restricted Stock Units

As of                , 2017, we had no restricted stock units outstanding under our 2010 Plan.

Registration Rights

We entered into an Investors’ Rights Agreement with the holders of shares of our common stock issuable upon conversion of the shares of our Series A preferred stock and certain holders of our Old Class A common stock, which we refer to as registrable shares. Under the Investors’ Rights Agreement, holders of registrable shares can demand that we file a registration statement and/or can request that their registrable shares be covered by a registration statement that we are otherwise filing, as described below.

Demand Registration Rights. At any time after 180 days after the closing of this offering, the holders of registrable shares entitled to demand registration rights may request that we register all or a portion of their registrable shares for sale under the Securities Act, so long as the request for such registration is for at least 25% of all registrable shares then outstanding (or a lesser percentage if the anticipated aggregate offering price would exceed $10 million). We will effect the registration as requested unless, in the good faith judgment of our board of directors, such registration should be delayed. We may be required to effect two of these registrations. In addition, when we are eligible for the use of Form S-3, or any successor form, holders of registrable shares entitled to demand registration rights may make unlimited requests that we register all or a portion of their registrable shares for sale under the Securities Act on Form S-3, or any successor form, having an anticipated aggregate offering price, net of selling expenses, of at least $3 million so long as the request for registration is for at least 20% of all registrable shares then outstanding.

Incidental Registration Rights. In addition, if at any time after this offering we register any shares of our common stock, the holders of all registrable shares are entitled to notice of the registration and to include all or a portion of their registrable shares in the registration.

Other Provisions. In the event that any registration in which the holders of registrable shares participate pursuant to the Investors’ Rights Agreement is an underwritten public offering, the number of registrable shares to be included may, in specified circumstances, be limited due to market conditions.

We will pay all registration expenses related to any demand or incidental registration, other than underwriting discounts, selling commissions and the fees and expenses of the selling stockholders’ own counsel, other than the reasonable fees and disbursements of one counsel for the selling stockholders. Our Investors’ Rights Agreement contains customary cross-indemnification provisions, pursuant to which we are obligated to indemnify the selling stockholders in the event of material misstatements or omissions in the registration statement attributable to us, and they are obligated to indemnify us for material misstatements or omissions in the registration statement attributable to them.

 

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Anti-Takeover Provisions

Upon the closing of this offering, we will be subject to Section 203 of the Delaware General Corporation Law. Subject to certain exceptions, Section 203 prevents a publicly held Delaware corporation from engaging in a “business combination” with any “interested stockholder” for three years following the date that the person became an interested stockholder, unless the interested stockholder attained such status with the approval of our board of directors or unless the business combination is approved in a prescribed manner. A “business combination” includes, among other things, a merger or consolidation involving us and the “interested stockholder” and the sale of more than 10% of our assets. In general, an “interested stockholder” is any entity or person beneficially owning 15% or more of our outstanding voting stock and any entity or person affiliated with or controlling or controlled by such entity or person.

Removal of Directors

Our amended and restated certificate of incorporation and our amended and restated bylaws provide that a director may be removed only for cause and only by the affirmative vote of the holders of at least 66 ²⁄₃% of the votes that all of our stockholders would be entitled to cast in an annual election of directors. Any vacancy on our board of directors, including a vacancy resulting from an enlargement of our board of directors, may be filled only by vote of a majority of our directors then in office.

The limitations on the removal of directors and filling of vacancies could make it more difficult for a third party to acquire, or discourage a third party from seeking to acquire, control of our company.

Super-Majority Voting

The Delaware General Corporation Law provides generally that the affirmative vote of a majority of the shares entitled to vote on any matter is required to amend a corporation’s certificate of incorporation or bylaws, unless a corporation’s certificate of incorporation or bylaws, as the case may be, requires a greater percentage. Our amended and restated bylaws may be amended or repealed by a majority vote of our board of directors or the affirmative vote of the holders of at least 66 ²⁄₃% of the votes that all of our stockholders would be entitled to cast in an annual election of directors. In addition, the affirmative vote of the holders of at least 66 ²⁄₃% of the votes which all our stockholders would be entitled to cast in an election of directors is required to amend or repeal or to adopt any provisions inconsistent with any of the provisions of our amended and restated certificate of incorporation described in this paragraph and the prior two paragraphs.

Stockholder Action; Special Meeting of Stockholders

Our amended and restated certificate of incorporation provides that any action required or permitted to be taken by our stockholders must be effected at a duly called annual or special meeting of such stockholders and may not be effected by any consent in writing by such stockholders. Our amended and restated certificate of incorporation and our amended and restated bylaws also provide that, except as otherwise required by law, special meetings of our stockholders can only be called by our chairman of the board, our Chief Executive Officer or our board of directors.

Authorized but Unissued Shares

The authorized but unissued shares of our common stock and preferred stock are available for future issuance without stockholder approval, subject to any limitations imposed by the listing standards of the NASDAQ Global Select Market. These additional shares may be used for a variety of corporate finance transactions, acquisitions and employee benefit plans. The existence of authorized but unissued and unreserved common stock and preferred stock could make more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.

 

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Transfer Agent and Registrar

The transfer agent and registrar for our Class A common stock will be American Stock Transfer & Trust Company, LLC.

Listing

We have applied to list our Class A common stock on the NASDAQ Global Select Market under the symbol “BAND”.

 

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SHARES ELIGIBLE FOR FUTURE SALE

Prior to 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. Future sales of our Class A common stock in the public market, or the availability of such shares for sale in the public market, could adversely affect market prices prevailing from time to time. As described below, only a limited number of shares of Class A common stock will be available for sale shortly after this offering due to contractual and legal restrictions on resale. Nevertheless, sales of our Class A common stock in the public market after such restrictions lapse, or the perception that those sales may occur, could adversely affect the prevailing market price at such time and our ability to raise equity capital in the future.

After giving effect to the Pre-IPO Reorganization, based on the number of shares outstanding as of         , 2017, upon the completion of this offering,                 shares of Class A common stock and                 shares of Class B common stock will be outstanding (or                 shares of Class A common stock if the underwriters exercise their option to purchase additional shares of Class A common stock in full). Of the outstanding shares, all the shares of Class A common stock sold in this offering will be freely transferrable without restriction or registration under the Securities Act, except that any shares held by our affiliates, as that term is defined in Rule 144 under the Securities Act, may only be sold in compliance with the limitations described below.

The shares of Class B common stock outstanding as of         , 2017 will be restricted as a result of securities laws or lock-up agreements as described below. “Restricted securities” as defined under Rule 144 were issued and sold by us in reliance on exemptions from the registration requirements of the Securities Act. These shares of Class B common stock may be sold in the public market only if registered or pursuant to an exemption from registration, such as Rule 144 or Rule 701 under the Securities Act. Subject to the volume and other restrictions of Rule 144 or Rule 701, these shares will be available for sale in the public market as follows:

 

•

shares of Class B common stock will be immediately available for sale in the public market, following conversion to Class A common stock;

 

•

beginning on the date of this prospectus, all              shares of Class A common stock sold in this offering will be immediately available for sale in the public market; and

 

•

beginning 181 days after the date of this prospectus, subject to the Company Lock-up Agreements the remainder of the outstanding shares of Class A common stock and                 shares of Class B common stock will be eligible for sale in the public market from time to time thereafter, subject in some cases to the volume and other restrictions of Rule 144, as described below.

Lock-Up Agreements

All of our directors and executive officers and the holders of substantially all of our securities have entered or will enter into lock-up agreements under which they agree, subject to certain exceptions, not to sell, transfer or dispose of, directly or indirectly, any shares of our common stock or any securities convertible into or exercisable or exchangeable for shares of our common stock without the prior written consent of Morgan Stanley & Co. LLC for a period of 180 days after the date of this prospectus, subject to possible extension under certain circumstances. Morgan Stanley & Co. LLC may, in its discretion, release any of the securities subject to the lock-up agreements with the underwriters at any time. These agreements are described in the section titled “Underwriters.”

Rule 144

In general, under Rule 144 as currently in effect, once we have been subject to the public company reporting requirements of Section 13 or Section 15(d) of the Exchange Act for at least 90 days, a person who is not deemed

 

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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 of our Class A common stock proposed to be sold for at least six months 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 of Class A common stock 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 of Class A common stock 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 of our Class A common stock on behalf of our affiliates are entitled to sell upon expiration of the lock-up agreements described above, within any three-month period, a number of shares of Class A common stock 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 assuming no exercise of the underwriters’ over-allotment option; and

 

•

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 of our Class A common stock 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 our company 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 our company 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 to wait until 90 days after the date of this prospectus before selling those shares pursuant to Rule 701. Moreover, substantially all Rule 701 shares are subject to lock-up agreements with the underwriters as described above and under the section titled “Underwriters” and will not become eligible for sale until the expiration of those agreements.

Registration Rights

The holders of approximately                  shares of our outstanding capital stock, or their transferees, are entitled to certain rights with respect to the registration of those shares under the Securities Act. For a description of these registration rights, please see ”Description of Capital Stock—Registration Rights.” If these shares are registered, they will be freely tradable without restriction under the Securities Act, subject to the Rule 144 limitations applicable to affiliates, and a large number of shares may be sold into the public market.

Registration Statement on Form S-8

We intend to file a registration statement on Form S-8 under the Securities Act promptly after the completion of this offering to register shares of our Class A common stock subject to options and restricted stock units outstanding, as well as reserved for future issuance, under our equity compensation plans. The registration statement on Form S-8 is expected to become effective immediately upon filing, and shares of our Class A common stock covered by the registration statement will then become eligible for sale in the public market, subject to the Rule 144 limitations applicable to affiliates, vesting restrictions and any applicable market standoff agreements and lock-up agreements. See the section titled “Executive Compensation—Incentive Plans” for a description of our equity compensation plans.

 

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MATERIAL U.S. FEDERAL INCOME TAX CONSEQUENCES TO NON-U.S. HOLDERS OF OUR

CLASS A COMMON STOCK

The following is a summary of the material U.S. federal income tax consequences to non-U.S. holders (as defined below) of the acquisition, ownership and disposition of our Class A common stock issued pursuant to this offering, but does not purport to be a complete analysis of all potential tax effects. The effects of other U.S. federal tax laws, such as estate and gift tax consequences, and any applicable state, local or non-U.S. tax laws are not discussed. This discussion is based on the Code, Treasury Regulations promulgated thereunder, judicial decisions, and published rulings and administrative pronouncements of the IRS, all as in effect as of the date of this offering. These authorities may change or be subject to differing interpretations. Any such change or differing interpretation may be applied retroactively in a manner that could adversely affect a non-U.S. holder of our Class A common stock. No ruling has been or will be sought from the IRS with respect to the matters discussed below, and there can be no assurance that the IRS or a court will not take a contrary position regarding the tax consequences of the acquisition, ownership or disposition of our Class A common stock.

This discussion is limited to non-U.S. holders who purchase our Class A common stock issued pursuant to this offering and who hold such Class A common stock as a “capital asset” within the meaning of Section 1221 of the Code (generally, property held for investment). This discussion does not address all of the U.S. federal income tax consequences that may be relevant to a particular holder in light of such holder’s particular circumstances, including the impact of the Medicare contribution tax on net investment income. This discussion also does not consider any specific facts or circumstances that may be relevant to holders subject to special rules, including, without limitation, U.S. expatriates and former citizens or long-term residents of the United States, partnerships or other entities or arrangements treated as partnerships for U.S. federal income tax purposes (and investors therein), real estate investment trusts, regulated investment companies, “controlled foreign corporations,” “passive foreign investment companies,” corporations that accumulate earnings to avoid U.S. federal income tax, banks, financial institutions, investment funds, insurance companies, brokers, dealers or traders in securities, commodities or currencies, tax-exempt organizations or governmental organizations, tax-qualified retirement plans, persons subject to the alternative minimum tax, persons that own, or have owned, actually or constructively, more than 5% of our common stock, persons deemed to sell our common stock under the constructive sale provisions of the Code, persons who hold or receive our common stock pursuant to the exercise of any employee stock option or otherwise as compensation, “qualified foreign pension funds” as defined in Section 897(l)(2) of the Code and entities all of the interests of which are held by qualified foreign pension funds, and persons holding our common stock as part of a hedge, straddle, or other risk reduction strategy or as part of a conversion transaction or other integrated investment.

If an entity treated as a partnership for U.S. federal income tax purposes holds our Class A common stock, the tax treatment of an owner in such entity will depend on the status of such owner, the activities of such entity and certain determinations made at the owner level. Accordingly, entities treated as partnerships for U.S. federal income tax purposes holding our Class A common stock and the owners in such entities should consult their tax advisors regarding the U.S. federal income tax consequences to them.

THIS DISCUSSION IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT TAX ADVICE. INVESTORS SHOULD CONSULT THEIR TAX ADVISORS WITH RESPECT TO THE APPLICATION OF THE U.S. FEDERAL INCOME TAX LAWS TO THEIR PARTICULAR SITUATIONS AS WELL AS ANY TAX CONSEQUENCES OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF OUR CLASS A COMMON STOCK ARISING UNDER THE U.S. FEDERAL ESTATE OR GIFT TAX LAWS OR UNDER THE LAWS OF ANY STATE, LOCAL OR NON-U.S. TAXING JURISDICTION OR UNDER ANY APPLICABLE INCOME TAX TREATY.

 

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Definition of Non-U.S. Holder

For purposes of this discussion, a “non-U.S. holder” is any beneficial owner of our Class A common stock that is not a “U.S. person” or an entity treated as partnership for U.S. federal income tax purposes. A U.S. person is any person that, for U.S. federal income tax purposes, is or is treated as any of the following:

 

•

an individual who is a citizen or resident of the United States;

 

•

a corporation (or other entity treated as a corporation for U.S. federal income tax purposes) created or organized under the laws of the United States, any state thereof or the District of Columbia;

 

•

an estate, the income of which is subject to U.S. federal income tax regardless of its source; or

 

•

a trust that (1) is subject to the primary supervision of a U.S. court and the control of one or more “United States” persons (within the meaning of Section 7701(a)(30) of the Code), or (2) has a valid election in effect under applicable Treasury Regulations to be treated as a United States person for U.S. federal income tax purposes.

Distributions on Our Class A Common Stock

As described in the section entitled “Dividend Policy,” we have never declared or paid, and do not anticipate declaring or paying, any cash dividends on our Class A common stock in the foreseeable future. However, if we do make distributions of cash or property on our Class A common stock, such distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. Amounts not treated as dividends for U.S. federal income tax purposes will constitute a return of capital and first be applied against and reduce a non-U.S. holder’s adjusted tax basis in its Class A common stock, but not below zero. Any excess will be treated as capital gain and will be treated as described below under “Gain on Sale or Other Taxable Disposition of Our Class A Common Stock.”

Subject to the discussion below on effectively connected income, dividends paid to a non-U.S. holder of our Class A common stock generally will be subject to U.S. federal withholding tax at a rate of 30% of the gross amount of the dividends (or such lower rate specified by an applicable income tax treaty, provided the non-U.S. holder furnishes a valid IRS Form W-8BEN or W-8BEN-E (or other applicable documentation) certifying qualification for the lower treaty rate). A non-U.S. holder that does not timely furnish the required documentation, but that qualifies for a reduced treaty rate, may obtain a refund of any excess amounts withheld by timely filing an appropriate claim for refund with the IRS. Non-U.S. holders should consult their tax advisors regarding their entitlement to benefits under any applicable income tax treaty.

If dividends paid to a non-U.S. holder are effectively connected with the non-U.S. holder’s conduct of a trade or business within the United States (and, if required by an applicable income tax treaty, the non-U.S. holder maintains a permanent establishment in the United States to which such dividends are attributable), the non-U.S. holder will be exempt from the U.S. federal withholding tax described above. To claim the exemption, the non-U.S. holder must generally furnish to the applicable withholding agent a valid IRS Form W-8ECI, certifying that the dividends are effectively connected with the non-U.S. holder’s conduct of a trade or business within the United States.

Any such effectively connected dividends will be subject to U.S. federal income tax on a net income basis at the regular graduated rates. A non-U.S. holder that is a corporation also may be subject to a branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on such effectively connected dividends, as adjusted for certain items. Non-U.S. holders should consult their tax advisors regarding any applicable tax treaties that may provide for different rules.

 

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Gain on Sale or Other Taxable Disposition of Our Class A Common Stock

A non-U.S. holder generally will not be subject to U.S. federal income tax on any gain realized upon the sale or other taxable disposition of our Class A common stock, unless:

 

•

the gain is effectively connected with the non-U.S. holder’s conduct of a trade or business in the United States (and, if required by an applicable income tax treaty, the non-U.S. holder maintains a permanent establishment in the United States to which such gain is attributable);

 

•

the non-U.S. holder is a nonresident alien individual present in the United States for 183 days or more during the taxable year of the disposition, and certain other requirements are met; or

 

•

our Class A common stock constitutes a United States real property interest (“USRPI”) by reason of our status as a United States real property holding corporation (“USRPHC”), for U.S. federal income tax purposes.

Gain described in the first bullet point above will be subject to U.S. federal income tax on a net income basis at the regular graduated U.S. federal income tax rates. A non-U.S. holder that is a corporation also may be subject to branch profits tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty) on such effectively connected gain, as adjusted for certain items. Non-U.S. holders should consult their tax advisors regarding any applicable income tax treaties that may provide for different rules.

Gain described in the second bullet point above will be subject to U.S. federal income tax at a rate of 30% (or such lower rate specified by an applicable income tax treaty), which may be offset by U.S. source capital losses of the non-U.S. holder (even though the individual is not considered a resident of the United States), provided that the non-U.S. holder has timely filed U.S. federal income tax returns with respect to such losses.

With respect to the third bullet point above, we believe we currently are not, and do not anticipate becoming, a USRPHC. Because the determination of whether we are a USRPHC depends, however, on the fair market value of our USRPIs relative to the fair market value of our non-U.S. real property interests and our other business assets, there can be no assurance we currently are not a USRPHC or will not become one in the future. Even if we are or were to become a USRPHC, gain arising from the sale or other taxable disposition by a non-U.S. holder of our Class A common stock will not be subject to U.S. federal income tax if our Class A common stock is “regularly traded,” as defined by applicable Treasury Regulations, on an established securities market, and such non-U.S. holder owned, actually and constructively, 5% or less of our Class A common stock throughout the shorter of the five-year period ending on the date of the sale or other taxable disposition or the non-U.S. holder’s holding period.

Non-U.S. holders should consult their tax advisors regarding potentially applicable income tax treaties that may provide for different rules.

Information Reporting and Backup Withholding

Payments of dividends on our Class A common stock will not be subject to backup withholding, provided the applicable withholding agent does not have actual knowledge or reason to know the holder is a United States person and the holder either certifies its non-U.S. status, such as by furnishing a valid IRS Form W-8BEN, W-8BEN-E or W-8ECI, or otherwise establishes an exemption. However, information returns are required to be filed with the IRS in connection with any dividends on our Class A common stock paid to the non-U.S. holder, regardless of whether any tax was actually withheld. In addition, proceeds of the sale or other taxable disposition of our Class A common stock within the United States or conducted through certain U.S.-related brokers generally will not be subject to backup withholding or information reporting, if the applicable withholding agent receives the certification described above and does not have actual knowledge or reason to know that such holder is a United States person, or the holder otherwise establishes an exemption. Proceeds of a disposition of our Class A common stock conducted through a non-U.S. office of a non-U.S. broker generally will not be subject to backup withholding or information reporting.

 

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Copies of information returns that are filed with the IRS may also be made available under the provisions of an applicable treaty or agreement with the tax authorities of the country in which the non-U.S. holder resides or is established.

Backup withholding is not an additional tax. Any amounts withheld under the backup withholding rules may be allowed as a refund or a credit against a non-U.S. holder’s U.S. federal income tax liability, provided the required information is timely furnished to the IRS.

Withholdable Payments to Foreign Financial Entities and Other Foreign Entities

Withholding taxes may be imposed under Sections 1471 to 1474 of the Code (such Sections commonly referred to as the Foreign Account Tax Compliance Act, or “FATCA”) on certain types of payments 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, or gross proceeds from the sale or other disposition of, our Class A common stock paid to a “foreign financial institution” or a “non-financial foreign entity” (each as defined in the Code), unless (1) the foreign financial institution undertakes 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 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. 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 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 the applicable Treasury Regulations and administrative guidance, withholding under FATCA generally applies to payments of dividends on our Class A common stock, and will apply to payments of gross proceeds from the sale or other disposition of such stock on or after January 1, 2019.

Prospective investors should consult their tax advisors regarding the potential application of withholding under FATCA to their investment in our Class A common stock.

 

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UNDERWRITERS

Under the terms and subject to the conditions in an underwriting agreement dated the date of this prospectus, the underwriters named below, for whom Morgan Stanley & Co. LLC, KeyBanc Capital Markets Inc. and Robert W. Baird & Co. Incorporated are acting as representatives, have severally agreed to purchase, and we have agreed to sell to them, severally, the number of shares of Class A common stock indicated below:

 

Name		Number of Shares of Class A Common Stock
Morgan Stanley & Co. LLC
KeyBanc Capital Markets Inc.
Robert W. Baird & Co. Incorporated
Canaccord Genuity Inc.
JMP Securities LLC
Total:

The underwriters and the representatives are collectively referred to as the “underwriters” and the “representatives,” respectively. The underwriters are offering the shares of Class A common stock subject to their acceptance of the shares from us and subject to prior sale. The underwriting agreement provides that the obligations of the several underwriters to pay for and accept delivery of the shares of 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 of Class A common stock 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 and the selling stockholders have granted to the underwriters an option, exercisable for 30 days from the date of this prospectus, to purchase up to             additional shares of Class A common stock, of which 50% will be sold by us and 50% will be sold by the selling stockholders, 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’ option to purchase up to an additional             shares of Class A common stock.

 

Total

Per Share

No Exercise

Full Exercise

Public offering price

$

$

$

Underwriting discounts and commissions to be paid by us

$

$

$

Proceeds, before expenses, to us

$

$

$

 

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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 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 NASDAQ Global Select Market under the trading symbol “BAND”.

We have agreed that, during a period of 180 days from the date of this prospectus (the “restricted period”), we will not, without the prior written consent of Morgan Stanley & Co. LLC on behalf of the underwriters, (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 Class A common stock or any securities convertible into or exercisable or exchangeable for Class A common stock or (2) enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the Class A common stock, whether any such transaction described in clause (1) or (2) above is to be settled by delivery of Class A common stock or such other securities, in cash or otherwise or (3) file any registration statement with the SEC relating to the offering of any shares of Class A common stock or any securities convertible into or exercisable or exchangeable for Class A common stock. The foregoing sentence will not apply to (A) the shares of Class A common stock to be sold in this offering, (B) the issuance of shares of Class A common stock upon the exercise of an option or warrant (whether by cash exercise or “net” or “cashless exercise”) or the conversion of a security outstanding on the date of this prospectus of which the underwriters have been advised in writing (including pursuant to disclosures made herein), including shares of Class A common stock issuable upon conversion of Class B common stock or convertible preferred stock in connection with this offering, provided that no filing under Section 16(a) of the Exchange Act shall be required or shall be voluntarily made in connection with subsequent sales of Class A common stock or other securities acquired in such open market transactions, (C) the establishment of a trading plan pursuant to Rule 10b5-1 under the Exchange Act for the transfer of shares of Class A common stock, provided that (i) such plan does not provide for the transfer of Class A common stock during the restricted period and (ii) to the extent a public announcement or filing under the Exchange Act, if any, is required of or voluntarily made by or on behalf of the selling stockholder or us regarding the establishment of such plan, such announcement or filing shall include a statement to the effect that no transfer of Class A common stock may be made under such plan during the restricted period, (D) the issuance of equity-based awards pursuant to the equity incentive award plans described in this prospectus, (E) the filing of a registration statement on Form S-8 relating to the shares of Class A common stock granted, or options to purchase, pursuant to or reserved for issuance under our equity incentive award plans or (F) the sale or issuance of or entry into an agreement to sell or issue shares of Class A common stock or securities convertible into or exercisable or exchangeable for Class A common stock in connection with (1) mergers, (2) acquisition of securities, businesses, proper or other assets, (3) joint ventures or (4) strategic alliances; provided the aggregate number of shares of Class A common stock or securities convertible into or exercisable for Class A common stock (on an as-converted or as-exercised basis, as the case may be) that we may sell or issue or agree to sell or issue pursuant to this clause (F) shall not exceed 5% of the total number of shares of our Class A common stock issued and outstanding immediately following the completion of the offering (determined on a fully-diluted basis and as adjusted for stock splits, stock dividends and other similar events after the date of the offering); and provided further, that each recipient of shares of Class A common stock or securities convertible into or exercisable for Class A common stock pursuant to this clause (F) shall be bound by those conditions applicable to our directors, officers and holders of more than 5% of our outstanding common stock and stock options detailed below.

In addition, all directors, executive officers and the holders of more than 5% of our outstanding stock and stock options and substantially all of the other holders of our stock and stock options, including the selling

 

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stockholders, have agreed that, without the prior written consent of Morgan Stanley & Co. LLC on behalf of the underwriters, they will not, during the restricted period:

 

•

offer, pledge, sell, contract to sell, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase, lend, or otherwise transfer or dispose of, directly or indirectly, any shares of common stock beneficially owned (as such term is used in the Exchange Act), by such person or any other securities so owned convertible into or exercisable or exchangeable for common stock;

 

•

enter into any swap or other arrangement that transfers to another, in whole or in part, any of the economic consequences of ownership of the common stock;

whether any such transaction described above is to be settled by delivery of common stock or such other securities, in cash or otherwise. In addition, each such person agrees that, without the prior written consent of Morgan Stanley & Co. LLC on behalf of the underwriters, such other person will not, during the restricted period, make any demand for, or exercise any right with respect to, the registration of any shares of common stock or any security convertible into or exercisable or exchangeable for common stock.

Notwithstanding the immediately preceding paragraph, and subject to the conditions below, such person may transfer the lock-up securities without the prior written consent of Morgan Stanley & Co. LLC on behalf of the underwriters, provided that, with respect to paragraphs (i) – (vi) below, (1) Morgan Stanley & Co. LLC receives a signed lock-up agreement for the balance of the lockup period from each donee, trustee, distributee, or transferee, as the case may be and (2) no filing under Section 16(a) of the Exchange Act, reporting a reduction in beneficial ownership of shares of common stock, shall be required or shall be voluntarily made during the restricted period (other than a filing on a Form 5):

(i) as a bona fide gift; or

(ii) to any trust for the direct or indirect benefit of such person or the immediate family of such person (for this purpose, “immediate family” shall mean any relationship by blood, marriage or adoption, not more remote than first cousin); or

(iii) to any corporation, partnership, limited liability company, investment fund or other entity controlled or managed, or under common control or management by such person or the immediate family of such person; or

(iv) by will, other testamentary document or intestate succession to the legal representative, heir, beneficiary or a member of the immediate family of such person; or

(v) as distributions to such person’s partners, members, stockholders or affiliates (as such term is defined in Rule 501(b) under the Securities Act or any of its affiliates’ directors, officers and employees);

(vi) to a nominee or custodian of a person or entity to whom disposition or transfer would be permissible under (i) - (v) above; or

(vii) from an executive officer to us upon death, disability or termination of employment of such executive officer.

The restrictions described in the preceding paragraphs do not apply to:

 

•

the establishment of a trading plan pursuant to Rule 10b5-1 under the Exchange Act for the transfer of shares of common stock, provided that (i) such plan does not provide for the transfer of common stock during the restricted period and (ii) to the extent a public announcement or filing under the Exchange Act, if any, is required or voluntarily made by us regarding the establishment of such plan, such announcement or filing shall include a statement to the effect that no transfer of common stock may be made under such plan during the restricted period; or

 

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•

the exercise of options to purchase shares of common stock granted under any stock incentive plan or stock purchase plan, which plan is described in this prospectus, provided that the lock-up agreement shall apply to any securities issued upon such exercise and provided further that no filing under Section 16(a) of the Exchange Act shall be required or shall be voluntarily made during the restricted period (other than a filing on a Form 5); or

 

•

the exercise (whether for cash, cashless, or net exercise) of warrants to purchase shares of common stock (or any security convertible into or exercisable or exchangeable for common stock), which are disclosed in this prospectus, provided that the lock-up agreement shall apply to any securities issued upon such exercise; or

 

•

the transfer of shares of common stock (or any security convertible into common stock) to us in connection with a vesting event of such securities or upon the exercise of options to purchase our securities, which securities or options have been issued pursuant to an incentive plan or stock purchase plan described in this prospectus, on a “cashless” or “net exercise” basis or to cover tax withholding obligations in connection with such vesting or exercise provided that no filing under Section 16(a) of the Exchange Act shall be required or shall be voluntarily made during the restricted period (other than a filing on a Form 5); or

 

•

the transfer or disposition of shares of common stock (or any security convertible into or exercisable or exchangeable for common stock) that occurs by operation of law, pursuant to a qualified domestic order or in connection with a divorce settlement, provided that the lock-up agreement shall apply to any such securities, provided further that any associated filing under Section 16(a) of the Exchange Act shall clearly indicate in the footnotes thereto that the filing relates to the circumstances described herein; or

 

•

the conversion of the outstanding preferred stock into shares of common stock, provided that the lock-up agreement shall apply to any such securities; or

 

•

the conversion of shares of Class B common stock to Class A common stock; provided that the lock-up agreement shall apply to any such shares of Class A common stock; or

 

•

the transfer of shares of common stock (or any security convertible into or exercisable or exchangeable for common stock) pursuant to a bona fide third-party tender offer, merger, consolidation or other similar transaction made to all holders of the common stock involving a change of control of us, provided that in the event that the tender offer, merger, consolidation or other such transaction is not completed, the common stock shall remain subject to the lock-up agreement; or

 

•

the transfer or disposal of shares of common stock acquired on the open market following the offering provided that no filing under Section 16(a) of the Exchange Act shall be required or shall be voluntarily made during the restricted period (other than a filing on a Form 5).

In addition to the exceptions listed in the previous paragraph, Henry R. Kaestner’s lock-up agreement will permit transfers or dispositions of his shares of common stock (or any security convertible into or exercisable or exchangeable into common stock) to any trust for the direct or indirect benefit of one or more charitable organizations, provided that (x) each donee or distributee shall sign and deliver a lock-up letter substantially in the form of Mr. Kaestner’s lock-up agreement for the balance of the lock-up period and (y) any filing under Section 16(a) of the Exchange Act in connection with such transfers or dispositions shall explicitly reference such lock-up agreement by such donee or distributee.

Morgan Stanley & Co. LLC, in its sole discretion, may release the common stock and other securities subject to the lock-up agreements described above in whole or in part at any time.

In order to facilitate the offering of the Class A common stock, the underwriters may engage in transactions that stabilize, maintain or otherwise affect the price of the Class A common stock. Specifically, the underwriters may sell more shares of the Class A common stock than they are obligated to purchase under the underwriting

 

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agreement, creating a short position. A short sale is covered if the short position is no greater than the number of shares of the Class A common stock 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 of the Class A common stock in the open market. In determining the source of shares of the Class A common stock to close out a covered short sale, the underwriters will consider, among other things, the open market price of shares of the Class A common stock compared to the price available under the over-allotment option. The underwriters may also sell shares of the Class A common stock in excess of the over-allotment option, creating a naked short position. The underwriters must close out any naked short position by purchasing shares of the Class A common stock in the open market. A naked short position is more likely to be created if the underwriters are concerned that there may be downward pressure on the price of the 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 Class A common stock in the open market to stabilize the price of the Class A common stock. These activities may raise or maintain the market price of the Class A common stock above independent market levels or prevent or retard a decline in the market price of the 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 have agreed to indemnify each other against certain liabilities, including liabilities under the Securities Act.

A prospectus in electronic format may be made available on websites maintained by one or more underwriters, or selling group members, if any, participating in this offering. The representatives may agree to allocate a number of shares of 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.

 

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Directed Share Program

At our request, the underwriters have reserved     % of the shares of Class A common stock to be issued by the company and offered by this prospectus for sale, at the initial public offering price, to directors, officers and employees and other persons associated with us, as designated by us. The number of shares of Class A common stock available for sale to the general public will be reduced to the extent these individuals purchase such reserved shares. Any reserved shares that are 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.

Selling Restrictions

European Economic Area

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive (each, a “Relevant Member State”) an offer to the public of any shares of our Class A common stock may not be made in that Relevant Member State, except that an offer to the public in that Relevant Member State of any shares of our Class A common stock may be made at any time under the following exemptions under the Prospectus Directive, if they have been implemented in that Relevant Member State:

 

(a)

to any legal entity which is a qualified investor as defined in the Prospectus Directive; or

 

(b)

in any other circumstances falling within Article 3(2) of the Prospectus Directive, provided that no such offer of shares of our Class A common stock shall result in a requirement for the publication by us or any underwriter of a prospectus pursuant to Article 3 of the Prospectus Directive.

For the purposes of this provision, the expression an “offer to the public” in relation to any shares of our Class A common stock in any Relevant Member State means the communication in any form and by any means of sufficient information on the terms of the offer and any shares of our Class A common stock to be offered so as to enable an investor to decide to purchase any shares of our Class A common stock, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State, the expression “Prospectus Directive” means Directive 2003/71/EC (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in the Relevant Member State), and includes any relevant implementing measure in the Relevant Member State, and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.

United Kingdom

Each underwriter has represented and agreed that:

 

(a)

it has only communicated or caused to be communicated and will only communicate or cause to be communicated an invitation or inducement to engage in investment activity (within the meaning of Section 21 of the Financial Services and Markets Act 2000 (“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.

Canada

The securities 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 securities must be made in accordance with an exemption from, or in a transaction not subject to, the prospectus requirements of applicable securities laws.

 

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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 (or, in the case of securities issued or guaranteed by the government of a non-Canadian jurisdiction, section 3A.4) of National Instrument 33-105 Underwriting Conflicts (“NI 33-105”), the underwriters are not required to comply with the disclosure requirements of NI 33-105 regarding underwriter conflicts of interest in connection with this offering.

Switzerland

The shares of Class A common stock may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (“SIX”) or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the shares or the offering may be publicly distributed or otherwise made publicly available in Switzerland.

Neither this document nor any other offering or marketing material relating to the offering, us or the shares have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of shares will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA (“FINMA”) and the offer of shares has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes (“CISA”). The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of shares.

Australia

No placement document, prospectus, product disclosure statement or other disclosure document has been lodged with the Australian Securities and Investments Commission (“ASIC”) in relation to the offering. This prospectus does not constitute a prospectus, product disclosure statement or other disclosure document under 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 to 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.

 

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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.

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) (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.

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

 

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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 (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:

 

(a)

to an institutional investor or to a relevant person defined in Section 275(2) of the SFA, or to any person arising from an offer referred to in Section 275(1A) or Section 276(4)(i)(B) of the SFA;

 

(b)

where no consideration is or will be given for the transfer;

 

(c)

where the transfer is by operation of law;

 

(d)

as specified in Section 276(7) of the SFA; or

 

(e)

as specified in Regulation of the Securities and Futures (Offers of Investments) (Shares and Debentures) Regulations 2005 of Singapore.

 

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LEGAL MATTERS

The validity of the shares of Class A common stock offered hereby will be passed upon for us by Latham & Watkins LLP. The underwriters are being represented by Davis Polk & Wardwell LLP, in connection with this offering.

EXPERTS

The consolidated financial statements of Bandwidth Inc. at December 31, 2015 and 2016, and for each of the two years in the period ended December 31, 2016, appearing in this prospectus and registration statement have been audited by Ernst & Young LLP, independent registered public accounting firm, as set forth in their report thereon appearing elsewhere herein, and are included in reliance upon such report given on the authority of such firm as experts in accounting and auditing.

WHERE YOU CAN FIND MORE 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 by this prospectus. 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 and schedules to the registration statement. Please refer to the registration statement and exhibits for further information with respect to the common stock offered by this prospectus. Statements contained in this prospectus regarding the contents of any contract or other document are only summaries. With respect to any contract or document that is filed as an exhibit to the registration statement, you should refer to the exhibit for a copy of the contract or document, and each statement in this prospectus regarding that contract or document is qualified by reference to the exhibit. You may read and copy the registration statement and its exhibits and schedules at the SEC’s public reference room, located at 100 F Street, N.E., Room 1580, Washington, D.C. 20549. You may obtain information on the operation of the public reference room by calling the SEC at 1-800-SEC-0330. The SEC also maintains a website that contains reports, proxy and information statements and other information regarding issuers, like us, that file documents electronically with the SEC. The address of that website is www.sec.gov. The information on the SEC’s web site is not part of this prospectus, and any references to this web site or any other web site are inactive textual references only.

Upon completion of this offering, we will become subject to the information and reporting requirements of the Exchange Act and, in accordance with this law, will be required to file periodic reports, proxy statements and other information with the SEC. These periodic reports, proxy statements and other information will be available for inspection and copying at the SEC’s public reference facilities and the website of the SEC referred to above. We also maintain a website at www.bandwidth.com, at which you may access these materials free of charge as soon as reasonably practicable after they are electronically filed with, or furnished to, the SEC. The information contained 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. We have included our website address in this prospectus solely as an inactive textual reference.

 

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BANDWIDTH INC.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

 

		Page
Report of Independent Registered Public Accounting Firm			F-2
Consolidated Balance Sheets			F-3
Consolidated Statements of Operations and Comprehensive Income (Loss)			F-5
Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ Deficit			F-6
Consolidated Statements of Cash Flows			F-7
Notes to Consolidated Financial Statements			F-8

 

F-1

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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Board of Directors and Stockholders

Bandwidth Inc.

We have audited the accompanying consolidated balance sheets of Bandwidth Inc. as of December 31, 2015 and 2016, and the related consolidated statements of operations and comprehensive income (loss), changes in redeemable convertible preferred stock and stockholders’ deficit and cash flows for each of the two years in the period ended December 31, 2016. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Bandwidth Inc. at December 31, 2015 and 2016, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2016, in conformity with U.S. generally accepted accounting principles.

/s/ Ernst & Young LLP

 

Raleigh, North Carolina
August 16, 2017, except for the second paragraph of Note 1, as to which the date is September 21, 2017, and Note 16 as to which the date is October 10, 2017

 

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Table of Contents

BANDWIDTH INC.

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Share and per Share Amounts)

 

		December 31,								June 30, 2017
		2015				2016
										(Unaudited)
Assets
Current assets:
Cash and cash equivalents		$	10,059			$	6,788			$	5,679
Accounts receivable, net of allowance for doubtful accounts			12,795				16,838				16,968
Prepaid expenses and other current assets			1,733				2,318				3,463
Deferred costs			1,486				2,099				2,337
Current portion of assets of discontinued operations			6,068				—				—
Total current assets			32,141				28,043				28,447
Property and equipment, net			10,257				11,180				11,562
Intangible assets, net			10,068				8,482				8,063
Deferred costs, non-current			1,334				1,696				2,056
Other long-term assets			914				1,011				1,005
Goodwill			6,867				6,867				6,867
Deferred tax asset			—				12,694				10,238
Assets of discontinued operations, net of current portion			1,565				—				—
Total assets		$	63,146			$	69,973			$	68,238
Liabilities, redeemable convertible preferred stock and stockholders’ deficit
Current liabilities:
Accounts payable		$	4,445			$	4,688			$	1,765
Accrued expenses			15,591				14,649				12,671
Current portion of deferred revenue and advanced billings			4,645				4,032				4,463
Current maturities of capital lease obligations			102				101				99
Line of credit, current portion			17,000				5,000				2,500
Current portion of long-term debt			—				2,000				2,500
Current portion of liabilities of discontinued operations			17,330				—				—
Total current liabilities			59,113				30,470				23,998
Other liabilities			50				609				914
Deferred revenue, net of current portion			589				1,712				2,091
Capital lease obligations, net of current portion			33				64				42
Deferred tax liability			617				—				—
Long-term debt, net of current portion			—				37,674				36,214
Total liabilities			60,402				70,529				63,259

 

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BANDWIDTH INC.

CONSOLIDATED BALANCE SHEETS (CONTINUED)

(In Thousands, Except Share and per Share Amounts)

 

		December 31,								June 30, 2017
		2015				2016
										(Unaudited)
Redeemable convertible preferred stock:
Series A redeemable convertible preferred stock; $0.001 par value, 1,200,000 shares authorized; 710,000 shares issued and outstanding at December 31, 2015 and 2016, and June 30, 2017 (unaudited), respectively			21,818				21,818				21,818
Commitments and contingencies
Stockholders’ deficit:
Class A voting common stock; $0.001 par value, 8,000,000 shares authorized; 4,616,863, 4,711,990 and 4,716,568 shares issued and outstanding at December 31, 2015 and 2016, and June 30, 2017 (unaudited), respectively			5				5				5
Class B non-voting common stock, $0.001 par value, 1,336,510 shares authorized; 7,436, 7,436 and 13,936 shares issued and outstanding at December 31, 2015 and 2016, and June 30, 2017 (unaudited), respectively			—				—				—
Additional paid-in capital			35,441				9,363				9,962
Accumulated deficit			(54,520	)			(31,742	)			(26,806	)
Total stockholders’ deficit			(19,074	)			(22,374	)			(16,839	)
Total liabilities, redeemable convertible preferred stock and stockholders’ deficit		$	63,146			$	69,973			$	68,238

See accompanying notes.

 

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BANDWIDTH INC.

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)

(In Thousands, Except Share and per Share Amounts)

 

		Year Ended December 31,								Six Months Ended June 30,
		2015				2016				2016				2017
										(Unaudited)
Revenue:
CPaaS revenue		$	101,502			$	117,078			$	56,651			$	63,194
Other revenue			36,299				35,057				18,118				15,957
Total revenue			137,801				152,135				74,769				79,151
Cost of revenue:
CPaaS cost of revenue			64,760				71,218				35,379				37,147
Other cost of revenue			14,482				14,000				7,283				6,713
Total cost of revenue			79,242				85,218				42,662				43,860
Gross profit			58,559				66,917				32,107				35,291
Operating expenses:
Research and development			7,375				8,520				3,767				5,091
Sales and marketing			8,620				9,294				4,458				4,971
General and administrative			34,602				33,859				15,672				15,894
Total operating expenses			50,597				51,673				23,897				25,956
Operating income			7,962				15,244				8,210				9,335
Other expense:
Interest expense, net			(589	)			(908	)			(369	)			(859	)
Change in fair value of stockholders’ anti-dilutive arrangement			—				—				—				(553	)
Total other expense			(589	)			(908	)			(369	)			(1,412	)
Income from continuing operations before income taxes			7,373				14,336				7,841				7,923
Income tax (provision) benefit			(408	)			11,094				(269	)			(2,987	)
Income from continuing operations			6,965				25,430				7,572				4,936
Loss from discontinued operations, net of income taxes			(13,665	)			(3,072	)			(3,011	)			—
Net (loss) income		$	(6,700	)		$	22,358			$	4,561			$	4,936
Total comprehensive (loss) income, net of income tax		$	(6,700	)		$	22,358			$	4,561			$	4,936
Earnings (loss) per share:
Income from continuing operations		$	6,965			$	25,430			$	7,572			$	4,936
Less: income allocated to participating securities			931				3,355				1,007				645
Income from continuing operations attributable to common stockholders		$	6,034			$	22,075			$	6,565			$	4,291
Income from continuing operations per share:
Basic		$	1.31			$	4.73			$	1.42			$	0.91
Diluted		$	1.21			$	4.29			$	1.28			$	0.83
Net (loss) income		$	(6,700	)		$	22,358			$	4,561			$	4,936
Less: (loss) income allocated to participating securities			(896	)			2,950				606				645
Net (loss) income attributable to common stockholders		$	(5,804	)		$	19,408			$	3,955			$	4,291
Net (loss) income per share:
Basic		$	(1.26	)		$	4.15			$	0.85			$	0.91
Diluted		$	(1.16	)		$	3.77			$	0.77			$	0.83
Weighted average number of common shares outstanding:
Basic			4,599,518				4,671,427				4,632,313				4,722,647
Diluted			4,983,138				5,144,553				5,129,768				5,190,879

See accompanying notes.

 

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BANDWIDTH INC.

CONSOLIDATED STATEMENTS OF CHANGES IN REDEEMABLE CONVERTIBLE PREFERRED STOCK AND STOCKHOLDERS’ DEFICIT

(In Thousands Except Share Amounts)

 

		Series A redeemable convertible preferred stock												Class A voting common Stock								Class B non-voting common Stock								Additional paid-in capital				Accumulated deficit				Total stockholders’ deficit
		Shares				Amount								Shares				Amount				Shares				Amount
Balance at December 31, 2014			710,000			$	21,818								4,582,246			$	5				5,624			$	—			$	31,067			$	(47,820	)		$	(16,748	)
Issuance of common stock			—				—								27,762				—				1,812				—				161				—				161
Exercise of warrants to purchase common stock			—				—								6,855				—				—				—				—				—				—
Stock-based compensation			—				—								—				—				—				—				4,213				—				4,213
Net loss			—				—								—				—				—				—				—				(6,700	)			(6,700	)
Balance at December 31, 2015			710,000				21,818								4,616,863				5				7,436				—				35,441				(54,520	)			(19,074	)
Issuance of common stock			—				—								87,338				—				—				—				1,111				—				1,111
Exercise of warrants to purchase common stock			—				—								7,789				—				—				—				150				—				150
Distribution of Republic			—				—								—				—				—				—				(28,899	)			—				(28,899	)
Shareholders’ anti-dilutive arrangement			—				—								—				—				—				—				(324	)			—				(324	)
Cumulative effect of change in accounting principle			—				—								—				—				—				—				—				420				420
Stock-based compensation			—				—								—				—				—				—				1,884				—				1,884
Net income			—				—								—				—				—				—				—				22,358				22,358
Balance at December 31, 2016			710,000				21,818								4,711,990				5				7,436				—				9,363				(31,742	)			(22,374	)
Issuance of common stock (unaudited)			—				—								4,578				—				6,500				—				109				—				109
Stock-based compensation (unaudited)			—				—								—				—				—				—				490				—				490
Net income (unaudited)			—				—								—				—				—				—				—				4,936				4,936
Balance at June 30, 2017 (unaudited)			710,000			$	21,818								4,716,568			$	5				13,936			$	—			$	9,962			$	(26,806	)		$	(16,839	)

See accompanying notes.

 

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BANDWIDTH INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

 

		Year Ended December 31,								Six Months Ended June 30,
		2015				2016				2016				2017
										(Unaudited)
Operating activities
Net (loss) income		$	(6,700	)		$	22,358			$	4,561			$	4,936
Loss from discontinued operations, net of income taxes			13,665				3,072				3,011				—
Adjustments to reconcile net (loss) income to net cash provided by (used in) operating activities:
Depreciation and amortization			7,075				6,142				3,221				2,821
Amortization of debt issuance costs			49				52				24				64
Stock-based compensation			3,493				1,370				854				490
Change in fair value of shareholders’ anti-dilutive arrangement			—				—				—				553
Deferred taxes			304				(11,086	)			169				2,456
Loss (gain) on disposal of property and equipment			382				19				(16	)			9
Impairment of intangible asset			—				695				—				—
Changes in operating assets and liabilities:
Accounts receivable			(533	)			(4,043	)			(2,521	)			(130	)
Prepaid expenses and other assets			(570	)			(848	)			(652	)			(1,180	)
Deferred costs			2,877				(975	)			(554	)			(598	)
Accounts payable			1,041				243				1,737				(2,923	)
Accrued expenses and other liabilities			(2,540	)			(567	)			(1,029	)			(2,229	)
Deferred revenue and advance billings			108				510				1,748				811
Net cash provided by operating activities from continuing operations			18,651				16,942				10,553				5,080
Net cash used in operating activities from discontinued operations			(22,460	)			(11,788	)			(5,593	)			—
Net cash (used in) provided by operating activities			(3,809	)			5,154				4,960				5,080
Investing activities
Purchase of property and equipment			(2,091	)			(3,831	)			(2,443	)			(1,197	)
Capitalized software development costs			(3,011	)			(2,230	)			(925	)			(1,598	)
Net cash used in investing activities from continuing operations			(5,102	)			(6,061	)			(3,368	)			(2,795	)
Net cash used in investing activities from discontinued operations			(860	)			(1,311	)			(663	)			—
Net cash used in investing activities			(5,962	)			(7,372	)			(4,031	)			(2,795	)
Financing activities
Borrowings on line of credit			43,500				56,950				29,700				4,000
Repayments on line of credit			(32,500	)			(68,950	)			(31,200	)			(6,500	)
Payments on capital leases			(155	)			(102	)			(61	)			(23	)
Borrowings on term loan			—				40,000				—				—
Repayments on term loan			—				—				—				(1,000	)
Payment of debt issuance costs			(52	)			(554	)			(13	)			—
Proceeds from issuances of common stock			129				974				902				109
Proceeds from exercises of warrants			—				150				—				—
Cash distribution to Republic			—				(30,000	)			—				—
Decrease in restricted cash			116				479				13				20
Net cash provided by (used in) financing activities from continuing operations			11,038				(1,053	)			(659	)			(3,394	)
Net increase (decrease) in cash and cash equivalents			1,267				(3,271	)			270				(1,109	)
Cash and cash equivalents, beginning of period			8,792				10,059				10,059				6,788
Cash and cash equivalents, end of period		$	10,059			$	6,788			$	10,329			$	5,679
Supplemental disclosure of cash flow information
Cash paid during the year for interest		$	1,103			$	1,314			$	382			$	965
Cash paid for taxes		$	73			$	6			$	77			$	484
Supplemental disclosure of noncash financing activities
Non-cash distribution of net liabilities to Spin-Off		$	—			$	1,101			$	—			$	—
Acquisition of equipment through capital leases		$	32			$	132			$	—			$	—
Deferred initial public offering cost accruals		$	—			$	—			$	—			$	34

See accompanying notes.

 

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Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(In Thousands Except Share and per Share Amounts)

 

1. Organization and Description of Business

Bandwidth.com, Inc., (together with its subsidiaries, “Bandwidth” or the “Company”) was founded in July 2000 and incorporated in Delaware on March 29, 2001. Bandwidth.com CLEC LLC (“CLEC”), a subsidiary, was formed and incorporated in Delaware in January 2007. On February 20, 2012, Bandwidth created a wholly owned subsidiary for its broadband business, Broadband LLC (“Broadband”), which is incorporated in Delaware. IP Spectrum Solutions LLC, a subsidiary, was formed and incorporated in Delaware in January 2015. The Company is a cloud-based, software-powered communications platform-as-a-service provider (“CPaaS”) that enables enterprises to create, scale and operate voice or text communications services across any mobile application or connected device or enterprises. The Company has two operating and reportable segments, CPaaS and Other. CPaaS revenue is derived from usage and monthly services fees charged for usage of Voice, Messaging, 911 and Phone Numbers solutions through the Company’s proprietary CPaaS software application programming interfaces. Other revenue consists of fees charged for services provided such as: SIP trunking, data resale, and a hosted Voice over Internet Protocol (“VoIP”). The Other segment also includes revenue from traffic generated by other carriers (“CABS”), SMS registrations fees and other miscellaneous product lines.

On September 15, 2017, Bandwidth.com, Inc. changed its name to Bandwidth Inc.

2. Summary of Significant Accounting Policies

Basis of Presentation

The consolidated financial statements and accompanying notes were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Company had no components of other comprehensive income (loss) during any of the periods presented, as such, a consolidated statement of comprehensive income (loss) is not presented.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Bandwidth Inc. and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.

Unaudited Interim Financial Statements

The accompanying consolidated interim financial statements as of June 30, 2017 and for the six months ended June 30, 2016 and 2017 and the related interim information contained within the notes to the consolidated financial statements are unaudited. The unaudited interim consolidated financial statements have been prepared on the same basis as the audited consolidated financial statements. In the opinion of the Company’s management, the accompanying unaudited interim consolidated financial statements contain all adjustments which are necessary to present fairly the Company’s financial position as of June 30, 2017 and the results of its operations and cash flows for the six months ended June 30, 2016 and 2017. Such adjustments are of a normal and recurring nature. The results for the six months ended June 30, 2017 are not indicative of the results for the year ending December 31, 2017, or for any future period.

Use of Estimates

The preparation of the Company’s consolidated financial statements in conformity with U.S. GAAP requires the Company to make estimates and judgments that affect the amounts reported in these financial statements and accompanying notes. Although the Company believes that the estimates it uses are reasonable, due to the inherent uncertainty involved in making these estimates, actual results reported in future periods could differ

 

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Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands Except Share and per Share Amounts)

 

from those estimates. These estimates in the consolidated financial statements include, but are not limited to, allowance for doubtful accounts, recoverability of long lives and intangible assets, customer relationship period, valuation allowances on tax assets, certain accrued expenses, and contingencies.

Revenue Recognition

Revenue consists primarily of the sale of communications services to large enterprise, as well as small and medium-sized business, customers and are generally derived from usage and monthly service fees for both the CPaaS and Other segments. Usage revenue includes voice communication (primarily driven by inbound minutes, outbound minutes, toll-free minutes) and messaging communication (driven by the number of messages) that traverse the platform and network. Revenue for these services is recognized in the period the usage occurs. Monthly service fees include the provision and management of phone numbers and emergency services access, which is recognized as the service is provided. In addition, the Company earns CABS revenue by allowing interconnected telecommunication carriers to pass traffic through its network and, as such the Company is the principal in delivering communication services to such carriers. Due to the lack of timeliness of payments and the frequency of carrier disputes, the Company recognizes revenue related to this service only when collectability is probable.

When required as part of providing service, revenues and associated expenses related to nonrefundable, upfront service activation and setup fees are deferred and recognized over the longer of the associated service contract period or estimated customer life.

Revenue recognition commences when all of the following criteria are met (i) persuasive evidence of an arrangement exists; (ii) delivery has occurred; (iii) the fee is fixed or determinable; and (iv) collection is probable.

Customers generally enter into arrangements that are typically two to three years in length. Incremental direct costs incurred related to the acquisition of a customer contract are expensed as incurred.

Cost of Revenue

CPaaS cost of revenue consists primarily of fees paid to other network service providers from whom the Company buys services such as minutes of use, phone numbers, messages, porting of customer numbers, and network circuits. Cost of revenue also contains costs related to the support of the network, web services and cloud infrastructure, capacity planning and management, rent for network facilities, software licenses, hardware and software maintenance fees, and network engineering services. Personnel costs (including non-cash stock-based compensation expenses) associated with personnel who are responsible for the delivery of services, operation and maintenance of the communications network, customer support, as well as, third party support agreements, and depreciation are also recorded as cost of revenue.

Other cost of revenue consists of amortization of capital software development costs related to platform applications supporting non-CPaaS services including circuit costs paid to third party providers, internet connectivity expenses, minutes of use, contractors, regulatory fees and surcharges, depreciation, and software and hardware maintenance fees.

Operating Expenses

Research and Development

Research and development expenses consist primarily of personnel costs (including non-cash stock-based compensation expenses), outsourced software development and engineering services and cloud infrastructure fees for staging and development outsourced engineering services.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands Except Share and per Share Amounts)

 

Sales and Marketing

Sales and marketing expenses consist primarily of personnel costs, including commissions for sales employees and non-cash stock-based compensation expenses. Sales and marketing expenses also include expenditures related to advertising, marketing, brand awareness activities, sales support and professional services fees.

General and Administrative

General and administrative expenses consist primarily of personnel costs for support personnel and executives in accounting, finance, legal, human resources and administrative functions. General and administrative expenses also include costs related to product management and reporting, data services, customer billing and collection functions, legal, information services, and other professional services fees, credit card processing fees, rent associated with the Company’s headquarters in Raleigh, North Carolina, depreciation and amortization.

Cash and Cash Equivalents

The Company considers all highly liquid investments with an original or remaining maturity of three months or less at the date of purchase, as well as overnight repurchase investments, to be cash equivalents.

Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are stated at realizable value, net of an allowance for doubtful accounts. The allowance for doubtful accounts is based on management’s assessment of the collectability of accounts. The Company regularly reviews the composition of the accounts receivable aging, historical bad debts, changes in payment patterns, customer creditworthiness and current economic trends. If the financial condition of customers were to deteriorate, resulting in their inability to make required payments, additional provisions for doubtful accounts would be required and would increase bad debt expense. Management has evaluated the collectability of trade accounts receivable and determined that allowances of approximately $12,555, $22,571 and $27,513 for uncollectible accounts and customer balances that are disputed were required as of December 31, 2015, December 31, 2016 and June 30, 2017 (unaudited), respectively. The allowance for doubtful accounts primarily relates to billings for CABS services where collectability was deemed not probable. Refer to Note 4 for a rollforward of the components of the allowance for doubtful accounts for the years ended December 31, 2015 and 2016 and the six months ended June 30, 2017.

The Company includes unbilled receivables in its accounts receivable balance. Generally, these receivables represent services provided to customers, which will be billed in the next billing cycle. All amounts are considered collectible and billable. As of December 31, 2015, December 31, 2016 and June 30, 2017 (unaudited), unbilled receivables were $5,988, $7,368 and $7,732 respectively.

Concentration of Credit Risk

Financial instruments that are exposed to concentration of credit risk consist primarily of cash and cash equivalents and trade accounts receivable. Cash deposits may be in excess of insured limits. The Company believes that the financial institutions that hold its cash deposits are financially sound and, accordingly, minimal credit risk exists with respect to these balances.

With regard to customers, credit evaluation and account monitoring procedures are used to minimize the risk of loss. The Company believes that no additional credit risk beyond amounts provided for allowance for doubtful accounts are inherent in accounts receivable. The Company has an ongoing dispute and litigation with

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands Except Share and per Share Amounts)

 

MCI Communications Services, Inc. d/b/a Verizon Business and Verizon Select Services, Inc. (collectively, “Verizon”), which is one of its CABS customers. Billings to Verizon for the year ended December 31, 2015 and 2016 were approximately $6,766 and $10,366, respectively and $2,917 and $4,686 for the six months ended June 30, 2016 and 2017. These amounts billed are outstanding for the respective periods and represent disputed and unpaid billings that are fully reserved within the Company’s allowance for doubtful accounts. No revenue has been recognized related to the outstanding and disputed balances.

No individual customer represented more than 10 percent of revenues and accounts receivable at December 31, 2015, December 31, 2016 and June 30, 2017 (unaudited).

Property and Equipment, net

Property and equipment, net is stated at cost, less accumulated depreciation and amortization. Depreciation and amortization is calculated on a straight-line basis over the estimated useful lives of those assets as follows:

 

Computer hardware and software		2 to 5 years
Internal-use software development costs		3 years
Furniture and fixtures		2 to 7 years
Leasehold improvements		Shorter of the estimated lease term or useful life

Maintenance and repairs are charged to expense as incurred.

Deferred Costs

The Company defers certain direct and incremental upfront costs related to the generation of a revenue stream or obtaining a new customer agreement. These costs include installment fees, activation and other telecommunication fees. The Company capitalizes these costs and amortizes them over the longer of the term of the customer contracts or the estimated customer life, which is approximately three years.

Software Development Costs

The Company capitalizes qualifying internal-use software development costs that are incurred during the application development stage. Capitalization of costs begins when two criteria are met: (i) the preliminary project stage is completed and (ii) it is probable that the software will be completed and used for its intended function. Capitalization ceases when the software is substantially complete and ready for its intended use, including the completion of all significant testing. The Company also capitalizes costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality and expenses costs incurred for maintenance and minor upgrades and enhancements. Costs related to preliminary project activities and post-implementation operating activities are expensed as incurred.

Capitalized costs of platform and other software applications are included in property and equipment. These costs are amortized over the estimated useful life of the software on a straight-line basis over three years. Management evaluates the useful life of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets.

Debt Issuance Costs

The Company incurred debt issuance costs associated with obtaining and entering into a five-year Credit and Security Agreement in November 2016, which includes a revolving credit facility and a term loan. These

 

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costs included non-refundable structuring fees, commitment fees, up-front fees and syndication expenses, which have been deferred and are being amortized based on the effective interest method over the term of the Credit and Security Agreement. The debt issuance costs associated with the revolving credit facility are recorded as a deferred asset in the accompanying consolidated balance sheets. The unamortized debt issuance costs, which are included in prepaid expenses and other current assets in the accompanying consolidated balance sheets, were $200 and $175 as of December 31, 2016 and June 30, 2017 (unaudited), respectively. Debt issuance costs associated with the term loan are recognized as an adjustment of the yield of the loan and are reflected as a reduction of the long-term debt balance. As of December 31, 2016 and June 30, 2017 (unaudited), unamortized debt issuance costs were $326 and $286, respectively.

As of December 31, 2015, the Company had unamortized debt issuance cost of $24 from a previous credit facility that has since been repaid.

Goodwill

The Company reviews goodwill and indefinite-lived intangible assets at least annually, as of December 31, for possible impairment. Goodwill and indefinite-lived intangible assets are reviewed for possible impairment at an interim date if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit or indefinite-lived intangible asset below its carrying value. The Company tests goodwill at the reporting unit level and have determined that it has two-reporting units, CPaaS and Other. All Goodwill is allocated to the CPaaS reporting unit. Management may first evaluate qualitative factors to assess if it is more likely than not that the fair value of a reporting unit is less than its carrying amount and to determine if a two-step impairment test is necessary. Management may choose to proceed directly to the two-step evaluation, bypassing the initial qualitative assessment. The first step of the impairment test involves comparing the fair value of the reporting unit to its net book value, including goodwill. If the net book value exceeds its fair value, then the Company would perform the second step of the goodwill impairment test to determine the amount of the impairment loss. The impairment loss would be calculated by comparing the implied fair value of the goodwill to its net book value. In calculating the implied fair value of goodwill, the fair value of the entity would be allocated to all of the other assets and liabilities based on their fair values. The excess of the fair value of the entity over the amount assigned to other assets and liabilities is the implied fair value of goodwill. An impairment loss would be recognized when the carrying amount of goodwill exceeds its implied fair value.

The Company makes assumptions regarding estimated future cash flows, discount rates, long-term growth rates and market values to determine each reporting unit’s and indefinite-lived intangible asset’s estimated fair value. If these estimates or related assumptions change in the future, the Company may be required to record an impairment charge. As of December 31, 2015, December 31, 2016 and June 30, 2017 (unaudited), the Company has recorded goodwill of $6,867. No goodwill impairment charges were recorded for the years ended December 31, 2015, December 31, 2016 and the six months ended June 30, 2016 and 2017 (unaudited).

Impairment of Long-Lived Assets

The Company evaluates long-lived assets, including property and equipment and definite lived intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is measured by a comparison of the carrying amount of an asset or an asset group to estimated undiscounted future net cash flows expected to be generated by the asset or asset group. If such evaluation indicates that the carrying amount of the asset or the asset group is not recoverable, any impairment loss would be equal to the amount the carrying value exceeds the fair value.

 

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Advertising Costs

The Company expenses advertising costs as incurred. Advertising costs total $329 and $197 for the years ended December 31, 2015 and 2016, respectively, and $109 and $93 for the six months ended June 30, 2016 and 2017 (unaudited), respectively, which are included in sales and marketing expenses in the accompanying consolidated statements of operations.

Commissions

Commissions consist of variable compensation earned by sales personnel and third-party resellers. Sales commissions associated with the acquisition of a new customer contract are recognized as sales and marketing expense at the time the customer has entered into a binding agreement.

Income Taxes

The Company accounts for income taxes under the asset and liability method. Under this method, deferred tax assets and liabilities are determined based on temporary differences between the financial statement and tax basis of assets and liabilities using enacted tax rates. The Company recognizes the effect of a change in tax rates on deferred tax assets and liabilities in the period that includes the enactment date.

The Company reduces the measurement of a deferred tax asset, if necessary, by a valuation allowance if it is more likely than not that it will not realize some or all the deferred tax asset. Quarterly, the Company reviews the deferred tax assets for recoverability based on historical taxable income, projected future taxable income, the expected timing of the reversals of existing temporary differences and the implementation of prudent and feasible tax planning strategies. The evaluation of the recoverability of deferred tax assets requires judgment in assessing future profitability. Should there be a change in the ability to recover deferred tax assets, the Company’s income tax provision would increase or decrease in the period in which the assessment is changed.

The Company accounts for uncertain tax positions by recognizing the financial statement effects of a tax position only when, based upon technical merits, it is more likely than not that the position will be sustained upon examination. The tax benefit recognized is measured as the largest amount of benefit determined on a cumulative probability basis that the Company believes is more likely than not to be realized upon ultimate settlement of the position. The Company recognizes potential accrued interest and penalties associated with unrecognized tax positions in income tax expense.

Fair Value of Financial Instruments

The carrying amounts of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses approximate fair value as of December 31, 2015, December 31, 2016 and June 30, 2017 (unaudited) because of the relatively short duration of these instruments. The carrying value of long-term debt approximates fair value given interest rates are based on market rates. The rates are subject to change monthly, quarterly, semi-annually or annually at the Company’s election.

The Company uses a three-tier fair value hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The hierarchy requires use of observable inputs when available, and to minimize the use of unobservable inputs when determining fair value. The three tiers are defined as follows:

 

•

Level 1. Observable inputs based on unadjusted quoted prices in active markets for identical assets or liabilities;

 

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•

Level 2. Inputs, other than quoted prices in active markets, that are observable either directly or indirectly; and

 

•

Level 3. Unobservable inputs for which there is little or no market data, which requires the Company to develop its own assumptions.

The Company evaluated its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level in which to classify them for each reporting period. The following table summarizes the assets measured at fair value as of December 31, 2015, December 31, 2016 and the six months ended June 30, 2017 (unaudited):

 

		Fair Value Measurements on a Recurring Basis December 31, 2015
		Level 1				Level 2				Level 3				Total
Money Market Account		$	545			$	—			$	—			$	545

 

		Fair Value Measurements on a Recurring Basis December 31, 2016
		Level 1				Level 2				Level 3				Total
Money Market Account		$	63			$	—			$	—			$	63
Shareholders’ anti-dilutive arrangement			—				—				184				184
Total		$	63			$	—			$	184			$	247

 

		Fair Value Measurements on a Recurring Basis June 30, 2017 (Unaudited)
		Level 1				Level 2				Level 3				Total
Money Market Account		$	59			$	—			$	—			$	59
Shareholders’ anti-dilutive arrangement			—				—				737				737
Total		$	59			$	—			$	737			$	796

The Company monitors the availability of observable market data to assess the appropriate classification of financial instruments within the fair value hierarchy. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. In such instances, the transfer is reported at the beginning of the reporting period. There were no transfers between Levels 1, 2 or 3 during the years ended December 31, 2015, December 31, 2016 or the six months ended June 30, 2017 (unaudited).

The money market account is included in cash and cash equivalents in the consolidated balance sheets as of December 31, 2015, December 31, 2016 and June 30, 2017 (unaudited).

On February 22, 2011, the Company entered into an anti-dilutive arrangement with the Principal Non-Founder Stockholders (“Principal Stockholders”). Under the terms of the agreement, the Principal Stockholders received the right (“shareholders’ anti-dilutive arrangement”) to purchase a pro-rata number of shares based on their ownership percentage of outstanding shares, when certain option holders exercise his or her stock option. The price at which the Principal Stockholders may purchase their pro-rata shares matches the exercise price of the option exercised. The Principal Stockholders have 90 days from the date of receipt of notice to inform the Company of their intention to purchase stock under the terms of the agreement. On a quarterly basis, the Company adjusts this liability to fair value.

 

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The agreement terminates by one of the following events:

 

•

closing of a “Qualified Public Offering,” which is defined as one resulting in aggregate net proceeds to the Company equal to or greater than $20 million, or

 

•

a “true sale” as defined in the Investors’ Rights Agreement.

Upon termination of the agreement, this liability would terminate.

The shareholders’ anti-dilutive arrangement is included in other liabilities in the consolidated balance sheets as of December 31, 2016 and June 30, 2017 (unaudited). The change in fair value of the Level 3 liability resulted in $553 of additional expense for the six months ending June 30, 2017 (unaudited), which is recorded in other expense in its consolidated statements of operations and comprehensive income (loss).

The fair value of the shareholders’ anti-dilutive arrangement is estimated using the Black-Scholes-Merton option pricing model. The significant unobservable inputs used in the fair value measurement of the shareholders’ anti-dilutive arrangement are the fair value of the Company’s stock and the expected term of the options. The expected term is calculated as a weighted average of the estimated time to IPO as of the measurement date and the historical average term of options subject to the agreement which were vested and expired or were exercised. Volatility is based on the historical volatility of certain public entities that are similar to the Company as the Company does not have sufficient historical transactions of its own shares on which to base expected volatility. Significant increases (decreases) in the fair value of the Company’s stock price would result in a significantly larger (smaller) fair value liability measurement. Significant increases (decreases) in the expected term would result in a larger (smaller) fair value liability measurement.

Stock-Based Compensation

The Company accounts for stock-based compensation expense related to stock-based awards based on the estimated fair value of the award on the grant date. Stock-based compensation expense is recognized on a straight-line basis over the requisite service period, which is generally four years. The Company uses the Black-Scholes option pricing model for estimating the fair value of stock options. The use of the option valuation model requires the input of the Company’s stock price and other subjective assumptions, including the expected life of the option and the expected stock price volatility. Given the absence of a public trading market for the Company’s common stock, the Company considers objective and subjective factors to determine the fair value of the Company’s common stock at each grant date. Additionally, the recognition of expense requires the estimation of the number of awards that will ultimately vest and the number of awards that will ultimately be forfeited.

Operating Segments

Operating segments are defined as components of an enterprise for which separate financial information is available and evaluated regularly by the chief operating decision maker (“CODM”) in deciding how to make operating decisions, allocate resources and in assessing performance. The Company has two operating segments, CPaaS and Other, which are deemed to be reportable segments. The Company’s CODM is its Chief Executive Officer. The CODM evaluates the performance of the Company’s operating segments primarily based on revenue and gross profit. The Company does not analyze discrete segment balance sheet information related to long-term assets, all of which are located in the United States. All other financial information is presented on a consolidated basis.

Earnings (loss) per Share

Basic earnings (loss) per share attributable to common stockholders is calculated by dividing the net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock outstanding for the period.

 

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Diluted net income (loss) per share is calculated by giving effect to all potentially dilutive common stock when determining the weighted-average number of common shares outstanding. For purposes of the diluted net income (loss) per share calculation, options and warrants to purchase common stock and redeemable convertible preferred stock are considered to be potential common stock.

The Company has issued securities other than common stock that participate in dividends (“Participating Securities”), and therefore utilizes the two-class method to calculate net income (loss) per share. These Participating Securities include redeemable convertible preferred stock. The two-class method requires a portion of net income (loss) to be allocated to the Participating Securities to determine the net income (loss) attributable to common stockholders. Net income (loss) attributable to the common stockholders is equal to the net income (loss) less dividends paid on preferred stock with any remaining earnings allocated in accordance with the bylaws between the outstanding common and redeemable convertible preferred stock as of the end of each period.

Emerging Growth Company Status

The Company is an “emerging growth company” as defined in the Jumpstart Our Business Startups Act (“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. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. The Company has elected to avail itself of this extended transition period and, as a result, it will not adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies.

Recently Adopted Accounting Pronouncements

In March 2016, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-09, Compensation—Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The effective date of ASU 2016-09 for private business entities is for fiscal years beginning after December 15, 2017. Early adoption is permitted and the Company adopted the amendments in ASU 2016-09 effective January 1, 2016. This standard simplifies several aspects of the accounting for equity-based payment awards, including the income tax consequences and classification on the statement of cash flows. Certain changes implemented by this standard are required to be applied retrospectively, while other changes are required to be applied prospectively. The Company elected to continue to estimate forfeitures when recording stock-based compensation expense.

All excess tax benefits and tax deficiencies related to the year ended December 31, 2016 were recognized in income tax expense. Prior to the adoption of this new standard, this amount would have been recorded as additional paid-in capital. This change could create future volatility in the Company’s effective tax rate depending upon the amount of exercise or vesting activity from stock based awards.

The recognition of previously unrecognized excess tax benefits of $420 was recognized as a cumulative effect adjustment on a modified retrospective basis. The Company recorded a deferred tax asset for previously unrecognized excess tax benefits outstanding as of the January 1, 2016, with an offsetting adjustment to accumulated deficit.

In addition, cash flows related to excess tax benefits will no longer be classified as a financing activity apart from other income tax cash flows. The Company has adopted the change in presentation of excess tax benefits as an operating activity on the statements of cash flows on a prospective basis.

In November 2015, the FASB issued ASU 2015-17, Balance Sheet Classification of Deferred Taxes (Topic 740), which requires that all deferred tax assets and liabilities, including any related valuation allowance, be

 

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classified as noncurrent on the balance sheet. ASU 2015-17 is effective for fiscal years beginning after December 15, 2016 for public entities, and early adoption is permitted. The Company elected to early adopt ASU 2015-17 beginning with the year ended December 31, 2015.

In April 2015, the FASB issued ASU 2015-05, Customer’s Accounting for Fees Paid in a Cloud Computing Arrangement. This new standard, which provides guidance to customers about whether a cloud computing arrangement includes a software license, was effective January 1, 2016. If a cloud computing arrangement includes a software license, then the customer should account for the software license element of the arrangement consistent with the acquisition of other software licenses. If a cloud computing arrangement does not include a software license, the customer should account for the arrangement as a service contract. The Company prospectively adopted this standard on January 1, 2016. The adoption of this standard did not have a material impact on its consolidated financial statements.

In April 2015, the FASB issued ASU 2015-03, Simplifying the Presentation of Debt Issuance Costs, which simplifies the presentation of debt issuance costs by requiring that such costs be presented in the consolidated balance sheets as a direct deduction from the carrying value of the associated debt instrument, consistent with debt discounts. Subsequent to the issuance of ASU 2015-03, the SEC staff announced that the presentation of debt issuance costs associated with line-of-credit arrangements may be presented as an asset. This announcement was codified by the FASB in ASU 2015-15. These ASUs were effective for the year ended December 31, 2016, and their adoption did not have a material impact on the Company’s financial condition, results of operations or cash flows.

In August 2014, the FASB issued ASU 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, which amends ASC Subtopic 205-40 to provide guidance about management’s responsibility to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern and to provide related disclosures. ASU 2014-15 was effective for the year ended December 31, 2016, and its adoption did not have a material impact on the Company’s financial condition, results of operations or cash flows.

Recent Accounting Pronouncements Not Yet Adopted

In May 2017, the FASB issued ASU 2017-09, Scope of Modification Accounting, which amends the scope of modification accounting for share-based payment arrangements. The ASU provides guidance on the types of changes to terms or conditions of share-based payment awards to which an entity would be required to apply modification accounting under ASC 718, Compensation—Stock Compensation. ASU 2017-09 is effective for fiscal years and interim periods within those years beginning after December 15, 2017, and early adoption is permitted. The Company is evaluating the impact of this guidance on its consolidated financial statements and related disclosures.

In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies the accounting for goodwill impairment. The ASU requires impairment charges to be based on the first step in today’s two-step impairment test under Accounting Standards Codification (ASC) 350. ASU 2017-04 is effective for annual and interim impairment tests performed in periods beginning after December 15, 2021, and early adoption is permitted. The Company is evaluating the impact of this guidance on its consolidated financial statements and related disclosures.

In January 2017, the FASB issued ASU 2017-01, Business Combinations (Topic 805) Clarifying the Definition of a Business, which amends the guidance of FASB Accounting Standards Codification Topic 805, “Business Combinations”, adding guidance to assist entities with evaluating whether transactions should be accounted for as acquisitions or disposals of assets or businesses. The definition of a business affects many areas

 

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of accounting including acquisitions, disposals, goodwill, and consolidation. This guidance is effective for annual and interim periods beginning after December 15, 2017, and early adoption is permitted under certain circumstances. The adoption of this standard is dependent upon future transactions.

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230), Classification of Certain Cash Receipts and Cash Payments, which clarifies how entities should classify certain cash receipts and cash payments on the statement of cash flows. The guidance also clarifies how the predominance principle should be applied when cash receipts and cash payments have aspects of more than one class of cash flows. ASU 2016-15 is effective for fiscal years beginning after December 15 2018, and interim periods within fiscal years beginning after December 15, 2019, and early adoption is permitted. Entities will have to apply the guidance retrospectively, but if it is impracticable to do so for an issue, the amendments related to that issue would be applied prospectively. The Company is evaluating the impact of this guidance on its consolidated financial statements and related disclosures.

In February 2016, the FASB issued ASU 2016-02, Leases. The standard will affect all entities that lease assets and will require lessees to recognize a lease liability and a right-of-use asset for all leases (except for short-term leases that have a duration of less than one year) as of the date on which the lessor makes the underlying asset available to the lessee. For lessors, accounting for leases is substantially the same as in prior periods. ASU 2016-02 is effective for fiscal years beginning after December 15, 2019, and interim periods within annual periods beginning after December 15, 2020, and early adoption is permitted. For leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements, lessees and lessors must apply a modified retrospective transition approach. While the Company expects the adoption of this standard to result in an increase to the reported assets and liabilities, it has not yet determined the full impact that the adoption of this standard will have on its financial statements and related disclosures.

In September 2015, the FASB, issued ASU 2015-16, Business Combinations (Topic 805), Simplifying the Accounting for Measurement-Period Adjustments, which eliminates the requirement for an acquirer in a business combination to account for measurement-period adjustments retrospectively. ASU 2015-16 is effective for the year ended December 31, 2017, and interim periods within fiscal years beginning after December 15, 2017. The impact of adopting this standard is dependent upon future transactions.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers. This new guidance will replace most existing U.S. GAAP guidance on this topic. The new revenue recognition standard provides a unified model to determine when and how revenue is recognized. The core principle is that a company should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration for which the entity expects to be entitled in exchange for those goods or services. In August 2015, the FASB issued ASU 2015-14, Revenue from Contracts with Customers: Deferral of the effective date, which deferred by one year the effective date for the new revenue reporting standard for entities reporting under U.S. GAAP. In accordance with the deferral, this guidance will be effective for the Company beginning January 1, 2019. This guidance can be applied either retrospectively to each period presented or as a cumulative-effect adjustment as of the date of adoption. Early adoption is permitted beginning January 1, 2017. In December 2016, the FASB issued ASU 2016-20, Revenue from Contracts with Customers, Technical Corrections and Improvements to Topic 606, which made twelve additional technical corrections and improvements to the new revenue standard. In March 2016, the FASB issued ASU 2016-08, Revenue from Contracts with Customers, Principal versus Agent Considerations (Reporting Revenue Gross versus Net) clarifying the implementation guidance on principal versus agent considerations. Specifically, an entity is required to determine whether the nature of a promise is to provide the specified good or service itself (that is, the entity is a principal) or to arrange for the good or service to be provided to the customer by the other party (that is, the entity is an agent). The determination influences the timing and amount of revenue recognition. In April 2016, the FASB issued ASU

 

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2016-10, Revenue from Contracts with Customers, Identifying Performance Obligations and Licensing, clarifying the implementation guidance on identifying performance obligations and licensing. Specifically, the amendments reduce the cost and complexity of identifying promised goods or services and improve the guidance for determining whether promises are separately identifiable. The amendments also provide implementation guidance on accounting for an entity’s promise to grant a license. In May 2016, the FASB issued ASU 2016-12, Revenue from Contracts with Customers, Narrow-Scope Improvements and Practical Expedients, clarifying guidance on assessing collectability, presentation of sales taxes, noncash consideration, completed contracts and contract modifications. The effective date and transition requirements for ASU 2016-20, ASU 2016-08 and ASU 2016-10 are the same as the effective date and transition requirements for ASU 2014-09.

The Company is still assessing all potential impacts of the new standard on its consolidated financial statements. Given the comprehensive nature of the standard, the Company has already taken steps to begin assessing the impact on its consolidated financial results. It has begun a preliminary diagnostic, in order to highlight potential differences between current accounting policies and the new standard. Additionally, the Company engaged a third-party service provider to assist in its evaluation of customer contracts to identify the attributes that could result in a different accounting treatment under ASU 2014-09. From an information technology perspective, the Company has begun assessing the business requirements and required functionality of a new technology solution and is in the process of meeting with third party software providers to determine which technology to implement. The Company has not reached a conclusion as to whether the quantitative effect of the adoption of the new standard on its revenue streams will be material. It will continue to monitor and assess the impact of the changes of the new standard and the related interpretations of its application as they become available.

3. Discontinued Operations

On April 20, 2015, the Company created a wholly owned subsidiary, Republic Wireless, Inc. (“Republic”), which was incorporated in Delaware. On November 30, 2016, the Company completed a pro-rata distribution of the common stock of Republic to its stockholders of record as of the close of business (the “Spin-Off”). Each of its stockholders received one share of Republic common stock for each share of Bandwidth common or redeemable convertible preferred stock held as of the close of business on November 30, 2016. Accordingly, the results of operations, financial condition and cash flows of Republic have been presented as discontinued operations for all periods presented in the accompanying consolidated financial statements.

The distribution was recorded at the carrying amount of Republic’s net liabilities of $1,101 as of November 30, 2016, as follows:

 

Assets
Accounts receivable, net of allowance for doubtful accounts		$	1,199
Inventory			7,305
Prepaid expenses and other current assets			2,540
Total current assets			11,044
Property and equipment, net			1,898
Other long-term assets			196
Total assets		$	13,138

 

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Liabilities
Accounts payable		$	7,126
Accrued expenses			3,662
Deferred revenue			3,310
Total current liabilities			14,098
Other long-term liabilities			141
Total liabilities		$	14,239
Net liabilities of Republic		$	1,101

In addition, the Company distributed $30,000 in cash to Republic in connection with the Spin-Off. Accordingly, the net assets distributed to the stockholders in connection with the Spin-Off was $28,899. Bandwidth has not otherwise provided nor does it intend to provide financial support to Republic.

Given the nature of the Spin-Off transaction, the equity holders of Bandwidth are comprised of substantially the same individuals and entities that are the equity owners of Republic. The Company has determined the equity owners of Republic are related parties of Bandwidth. As described in Note 14, the Company has certain involvement with Republic via ongoing services arrangements, with these ongoing services arrangements creating a variable interest in Republic. The Company assessed the relationship with Republic under guidance for variable interest entities, and due to the fact that investors in Republic have disproportionate voting rights, the Company concluded that Republic is a variable interest entity (“VIE”).

Republic is a provider of Wi-Fi centric mobile services directly to retail consumers. Bandwidth determined it is not the primary beneficiary of Republic, as Bandwidth and its related parties do not individually have power to direct the activities that most significantly impact Republic’s economic performance and power is not shared. Bandwidth’s involvement with Republic involves providing certain support services through the Transition Services Agreement, which does not give it power over key activities. Key activities are directed by the Board of Directors Republic, which require majority approval. Bandwidth does not have direct representation on the Board of Republic and is not able to exert power over its key activities. Bandwidth does not have an implicit variable interest in Republic. Republic is financed primarily through the cash distribution in connection with the Spin-off and its own ongoing operations.

The Company’s maximum exposure to loss relating to this variable interest entity is limited to amounts due under the service agreements between Bandwidth and Republic as described in Notes 11 and 14.

The Spin-Off represents a strategic shift to Bandwidth’s business. The Company believes that for US Federal income tax purposes, the Spin-Off will qualify as tax-free for Republic, Bandwidth and its stockholders. The Company entered into a tax sharing agreement with Republic that governs rights and obligations after the Spin-Off regarding income taxes and other taxes, including tax liabilities and benefits, attributes, returns and contests.

The carrying amounts of major classes of assets included as part of discontinued operations as of December 31, 2015 are as follows:

 

Accounts receivable, net		$	682
Inventory			4,511
Prepaid expenses and other current assets			875
Property and equipment, net			1,499
Other assets			66
Assets of discontinued operations		$	7,633

 

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The carrying amounts of major classes of liabilities included as part of discontinued operations as of December 31, 2015 are as follows:

 

Accounts payable		$	4,076
Accrued expenses			10,097
Current portion of deferred revenue and advanced billings			3,157
Liabilities of discontinued operations		$	17,330

The table below provides the operating results of the discontinued operations through the date of the Spin-Off for the years ended December 31, 2015, December 31, 2016 and the six months ended June 30, 2016 (unaudited):

 

		Years ended December 31,								Six months ended June 30, 2016
		2015				2016
										(Unaudited)
Revenue		$	91,304			$	83,156			$	42,246
Direct costs of network services and equipment			(78,922	)			(61,582	)			(31,489	)
Operating expense			(24,692	)			(25,502	)			(13,240	)
Depreciation and interest			(1,355	)			(949	)			(528	)
Income tax benefit			—				1,805				—
Loss from discontinued operations		$	(13,665	)		$	(3,072	)		$	(3,011	)

4. Financial Statement Components

Accounts receivable, net of allowance for doubtful accounts consisted of the following:

 

		December 31,								June 30, 2017
		2015				2016
										(Unaudited)
Trade accounts receivable		$	19,195			$	31,734			$	36,552
Unbilled accounts receivable			5,988				7,368				7,732
Allowance for doubtful accounts			(12,555	)			(22,571	)			(27,513	)
Other accounts receivable			167				307				197
Total accounts receivable, net		$	12,795			$	16,838			$	16,968

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands Except Share and per Share Amounts)

 

		Balance at beginning of period				Charged to bad debt expense				Billings deemed not probable of collection(1)				Deductions(2)				Balance at end of period
Year ended December 31, 2015
Allowance for CABS revenue		$	5,552				—			$	7,163			$	(398	)		$	12,317
Allowance for all other customers			443				383				73				(661	)			238
Total allowance for doubtful accounts		$	5,995			$	383			$	7,236			$	(1,059	)		$	12,555
Year ended December 31, 2016
Allowance for CABS revenue		$	12,317				—			$	10,494			$	(495	)		$	22,316
Allowance for all other customers			238				238				40				(261	)			255
Total allowance for doubtful accounts		$	12,555			$	238			$	10,534			$	(756	)		$	22,571
Six months ended June 30, 2017 (unaudited)
Allowance for CABS revenue		$	22,316				—			$	5,169			$	(84	)		$	27,401
Allowance for all other customers			255				12				9				(164	)			112
Total allowance for doubtful accounts		$	22,571			$	12			$	5,178			$	(248	)		$	27,513

 

(1)	Represents amounts billed but where collectibility is not probable based on customer collection experience.

(2)	Write off of uncollectible accounts after all collection efforts have been exhausted.

 

CABS revenue		Billed				Revenue recognized				Billings deemed not probable of collection(1)
Year ended December 31, 2015		$	15,617			$	8,454			$	7,163
Year ended December 31, 2016			19,838				9,344				10,494
Six months ended June 30, 2017 (Unaudited)			9,550				4,381				5,169

 

(1)	Represents amounts billed but where collectibility is not probable based on customers’ collection experience.

Accrued expenses consisted of the following:

 

		December 31,								June 30, 2017
		2015				2016
										(Unaudited)
Accrued expense		$	5,767			$	6,853			$	6,202
Accrued compensation and benefits			4,262				4,373				2,883
Accrued sales, use, and telecom related taxes			4,647				2,769				2,635
Other accrued expenses			915				654				951
Total accrued expenses		$	15,591			$	14,649			$	12,671

 

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(In Thousands Except Share and per Share Amounts)

 

5. Property and Equipment

Property and equipment, net consist of the following:

 

		December 31,								June 30, 2017
		2015				2016
										(unaudited)
Furniture and fixtures		$	697			$	680			$	680
Computer and office equipment			8,791				7,539				7,472
Telecommunications equipment			13,376				13,718				15,208
Leasehold improvements			392				453				536
Software development costs			11,637				13,676				14,722
Automobile			10				10				10
Total cost			34,903				36,076				38,628
Less—accumulated depreciation			(24,646	)			(24,896	)			(27,066	)
Total property and equipment, net		$	10,257			$	11,180			$	11,562

The Company recognized depreciation expense, which includes amortization of capitalized software development costs, as follows:

 

		Year Ended December 31,								Six Months Ended June 30,
		2015				2016				2016				2017
										(unaudited)
Cost of revenue		$	5,258			$	4,574			$	2,359			$	2,083
Research and development			21				29				50				23
Sales and marketing			16				21				10				13
General and administrative			872				627				356				282
Total depreciation expense		$	6,167			$	5,251			$	2,775			$	2,401

The Company capitalizes the costs to design software for internal use related to the development of its platform during the application development stage of the projects. The costs are primarily comprised of salaries and benefits of the projects’ engineers and product development teams. Internally developed software is reported at cost less accumulated amortization. Amortization begins once the project is substantially complete and ready for its intended use. The Company amortizes the asset on a straight-line basis over the useful life, which is estimated to be three years. Costs incurred prior to the application development stage, maintenance activities or minor upgrades are expensed in the period incurred. Unamortized software development costs were approximately $4,843 and $4,056 as of December 31, 2015 and 2016, respectively, and $3,963 as of June 30, 2017 (unaudited). Amortization expense related to capitalized software development costs were $2,842 and $2,820 for the years ended December 31, 2015 and 2016, respectively, and $1,836 and $1,136 for the six months ended June 30, 2016 and 2017 (unaudited), respectively.

The Company recognized an impairment of $71 and $91 during the years ended December 31, 2015 and 2016, respectively, related to capitalized software development costs that provided no future benefit and therefore were impaired. This expense is reflected within general and administrative expenses in the accompanying consolidated statements of operations. No indicators of impairment were identified for the six months ended June 30, 2017 (unaudited).

 

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(In Thousands Except Share and per Share Amounts)

 

6. Intangible Assets

Intangible assets consisted of the following as of December 31, 2015:

 

		Gross Amount				Accumulated Amortization				Net Carrying Value				Amortization Period
														(Years)
Customer relationships		$	10,396			$	(2,512	)		$	7,884			20
Tradename			980				(237	)			743			20
Domain name and related trademarks			2,678				(2,004	)			674			3–7
Licenses, amortizable			341				(341	)			—			2
Non-compete agreements			139				(136	)			3			2–5
Developed technology			775				(775	)			—			3
Licenses, indefinite lives			764				—				764			Indefinite
Total intangible assets, net		$	16,073			$	(6,005	)		$	10,068

Intangible assets consisted of the following as of December 31, 2016:

 

		Gross Amount				Accumulated Amortization				Net Carrying Value				Amortization Period
														(Years)
Customer relationships		$	10,396			$	(3,032	)		$	7,364			20
Domain name and related trademarks			2,678				(2,324	)			354			3–7
Licenses, amortizable			341				(341	)			—			2
Non-compete agreements			139				(139	)			—			2–5
Developed technology			775				(775	)			—			3
Licenses, indefinite lives			764				—				764			Indefinite
Total intangible assets, net		$	15,093			$	(6,611	)		$	8,482

Intangible assets consisted of the following as of June 30, 2017 (unaudited):

 

		Gross Amount				Accumulated Amortization				Net Carrying Value				Amortization Period
														(Years)
Customer relationships		$	10,396			$	(3,292	)		$	7,104			20
Domain name and related trademarks			2,678				(2,483	)			195			3–7
Licenses, amortizable			341				(341	)			—			2
Non-compete agreements			139				(139	)			—			2–5
Developed technology			775				(775	)			—			3
Licenses, indefinite lives			764				—				764			Indefinite
Total intangible assets, net		$	15,093			$	(7,030	)		$	8,063

Amortization expense for definite lived intangible assets was $908 and $891 for the years ended December 31, 2015 and 2016, respectively, and $446 and $420 for the six months ended June 30, 2016 and 2017 (unaudited), respectively. The weighted average amortization period for all definite lived intangible assets is 19 years.

 

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(In Thousands Except Share and per Share Amounts)

 

Future estimated amortization expense subsequent to June 30, 2017 (unaudited) is as follows:

 

		Amount
2017		$	419
2018			555
2019			520
2020			520
2021			520
Thereafter			4,765
		$	7,299

Costs associated with the acquisition and transfer of the CLEC perpetual licenses from other entities have been capitalized and have an indefinite life. The Company evaluates these indefinite lived intangible assets on an annual basis to assess if any impairment exists. The Company performed its annual assessment on December 31, 2015 and 2016 and concluded no impairment exists.

As part of its annual evaluation of its intangibles, the Company re-evaluated its marketing and branding usage of the trade name assets acquired in the Dash acquisition and concluded there was no further benefit from the use of the trade name. The Company impaired the asset and recognized a loss of $695, which is reflected within general and administrative expenses in the accompanying consolidated statements of operations and comprehensive (loss) income for the year ended December 31, 2016.

7. Debt

In September 2008, the Company entered into a Loan and Security Agreement which included a revolving line of credit with a bank. Substantially all assets of the Company were pledged as a Security to the Loan and Security Agreement. This agreement was amended several times to increase the Company’s borrowing limit and extend the maturity date. On December 14, 2015, the Loan and Security Agreement was amended to increase the Company’s borrowing limit to $25,000 and to extend the maturity through December 14, 2017. The outstanding borrowing under the Loan and Security Agreement at December 31, 2015 was $17,000, and the Company was in compliance with all financial and non-financial covenants at December 31, 2015.

On February 24, 2016, the Loan and Security Agreement was amended to add the ability to include an outstanding letter of credit as an advance on the revolving line of credit. On March 28, 2016 the Loan and Security Agreement was further amended to update certain covenants for 2016 performance metrics. On December 1, 2016, the Company paid the Loan and Security Agreement in full.

On November 4, 2016, the Company entered into a Credit and Security Agreement with a syndication of four banks. The agreement includes a $40,000 term loan, and a $25,000 revolving loan, which includes a swing line of up to $1,000 and limits letters of credit commitments to a maximum of $2,500. Substantially all assets of the Company are pledged as security to the Credit and Security Agreement. The term of the Credit and Security Agreement is five years and matures on November 3, 2021. The interest rate used for the debt is based, at the Company’s election, on either the Federal Funds Effective Rate or LIBOR plus a stated margin, as defined in the Credit and Security Agreement. Once the Company repays any portion of the term loan, it cannot be re-borrowed. The Company is entitled to borrow and repay and borrow under the revolving loan at any time during the term of the Credit and Security Agreement. This agreement requires the Company to meet a certain leverage ratio and minimum debt service coverage ratio each quarter on a trailing 12-month basis.

As of December 31, 2016 and June 30, 2017 (unaudited), the Company had $40,000 and $39,000, respectively, outstanding on the term loan and $5,000 and $2,500, respectively, on the revolving loan and was in

 

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(In Thousands Except Share and per Share Amounts)

 

compliance with all financial and non-financial covenants for all periods presented. The available borrowing under the Credit and Security Agreement was $22,500 as of June 30, 2017 (unaudited). Beginning on March 31, 2017, the term loan is payable in consecutive equal quarterly installments with the balance payable in full on the term loan maturity date. Future payments under the term loan subsequent to June 30, 2017 (unaudited) are as follows:

 

		Amount
2017		$	1,000
2018			3,000
2019			3,000
2020			4,000
2021			28,000
		$	39,000

8. Segment and Geographic Information

The Company has two operating and reportable segments. Segments are evaluated based on revenue and gross profit. The CODM uses more than one measure of the segment’s profit; accordingly the Company has reported gross profit, which is the measure that is most consistent with the measure in the Company’s consolidated statements of operations. The Company does not allocate operating expenses, interest expense or income tax expense to its segments. Accordingly, the Company does not report such information. Additionally, the CODM does not evaluate the Company’s operating segments using discrete asset information. The segments share the majority of the Company’s assets. Therefore, no segment asset information is reported.

 

		Year Ended December 31,								Six Months Ended June 30,
		2015				2016				2016				2017
										(unaudited)
CPaaS
Revenue		$	101,502			$	117,078			$	56,651			$	63,194
Cost of revenue			64,760				71,218				35,379				37,147
Gross profit		$	36,742			$	45,860			$	21,272			$	26,047
Other
Revenue		$	36,299			$	35,057			$	18,118			$	15,957
Cost of revenue			14,482				14,000				7,283				6,713
Gross profit		$	21,817			$	21,057			$	10,835			$	9,244
Consolidated
Revenue		$	137,801			$	152,135			$	74,769			$	79,151
Cost of revenue			79,242				85,218				42,662				43,860
Gross profit		$	58,559			$	66,917			$	32,107			$	35,291

All assets were held in the United States during the years ended December 31, 2015, December 31, 2016, and the six months ended June 30, 2017 (unaudited).

 

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(In Thousands Except Share and per Share Amounts)

 

The Company generates its revenue primarily in the United States. Revenue by geographical area is detailed in the table below (which is determined based on the customer billing address):

 

		Year Ended December 31,								Six Months Ended June 30,
		2015				2016				2016				2017
										(Unaudited)
United States		$	137,514			$	151,618			$	74,541			$	78,903
International			287				517				228				248
Total		$	137,801			$	152,135			$	74,769			$	79,151

9. Redeemable Convertible Preferred Stock and Stockholders’ Deficit

Redeemable Convertible Preferred Stock

As of January 1, 2010, the Company had authorized 5,000,000 shares of Redeemable Convertible Preferred Stock (“Series A preferred stock”). On February 22, 2011, the Company amended and restated its Certificate of Incorporation such that the Company authorized 1,200,000 shares of preferred stock, all of which have been designated as Series A preferred stock.

On February 22, 2011, the Company completed the issuance of 663,907 shares of Series A preferred stock at $30.8358 per preferred share. On March 24, 2011, the Company completed the final closing of 46,093 shares of Series A preferred stock at $30.8358 per preferred share.

Pursuant to the Spin-Off each holder of Series A preferred stock received a share of Republic Class A voting common stock for each share of Series A preferred stock held by such holder equal to the number of shares of Class A common stock into which such share of Series A preferred stock is then convertible.

As of December 31, 2015, December 31, 2016 and June 30, 2017 (unaudited), 710,000 shares of Series A preferred stock at $30.8358 per preferred share were issued and outstanding.

Conversion

Each share of Series A preferred stock shall be convertible, at the option of the shareholder, into such number of fully paid and non-assessable shares of common stock as is determined by dividing the Series A original issue price by the Series A conversion price in effect at the time of the conversion. The Series A conversion price is initially equal to $30.8358 and is subject to adjustment related to dilutive transactions.

Each share of Series A preferred stock shall automatically be converted into fully paid, nonassessable shares of Class A common stock at the then effective conversion rate specified for such shares of Series A preferred stock (i) immediately prior to the closing of a firm commitment underwritten initial public offering pursuant to an effective registration statement filed under the Securities Act of 1933, as amended, covering the offer and sale of the Company’s common stock, provided that the per share price exceeds $61.37 or (ii) upon the receipt by the Company of a written request for such conversion from the holders of a majority of the preferred stock then outstanding.

 

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(In Thousands Except Share and per Share Amounts)

 

Liquidation Preference

In the event of any Liquidation Event or Deemed Liquidation Event, the holders of Series A, preferred stock shall be entitled to receive, in preference to any distribution of the proceeds to the holders of common stock, an amount per share equal to the greater of (1) an amount equal to the original issue price for Series A preferred stock plus declared but unpaid dividends on such share, plus the product of (a) the number of days elapsed since issuance divided by 365, multiplied by (b) 0.08 multiplied by (c) the Series A original issue price, or (2) such amount as would have been payable had all shares of Series A preferred stock had been converted to common stock immediately prior to such Liquidation or Deemed Liquidation Event. If the proceeds thus distributed among the holders of the Series A preferred stock are insufficient to permit payment to such holders of the full preferential amounts, then the entire proceeds available for distribution shall be distributed ratably. Upon completion of the distribution referred to above, all of the remaining proceeds available for distribution shall be distributed to the holders of the Company’s common stock pro rata based on the number of common stock held by each. As of December 31, 2015, December 31, 2016 and June 30, 2017, the liquidation preference totaled $30,392, $32,148 and $33,569 (unaudited), respectively.

Redemption

Shares of Series A preferred stock shall be redeemed by the Company out of funds lawfully available at a price equal to the Series A original issue price per share, plus all declared but unpaid dividends thereon, in three annual installments commencing not more than 60 days after receipt by the Company at any time on or after December 31, 2020, from the holders of a majority of the then-outstanding shares of Series A preferred stock. At each redemption date, the Company shall redeem, on a pro-rata basis in accordance with the number of shares of Series A preferred stock owned by each holder, that number of outstanding shares of Series A preferred stock determined by dividing the total number of shares of Series A preferred stock outstanding by the number of remaining redemption dates (including the redemption date to which such calculation applies).

Voting Rights

The holders of Series A preferred stock shall be entitled to cast the number of votes equal to the number of whole shares of common stock into which the shares of Series A preferred stock are convertible as of the record date for determining stockholders entitled to vote on such matter. Holders of Series A preferred stock shall vote together with the holders of common stock as a single class. The holders of record of the shares of Series A preferred stock, exclusively and as a separate class, shall be entitled to elect one director of the Company.

The Company may not, without the approval of the holders of record of a majority of the shares of Series A preferred stock, as a separate class, undertake certain actions as specified in the Certificate of Incorporation, as amended and restated as of February 22, 2011 and as subsequently amended.

Dividends

The amount of any dividend on an outstanding share of Series A preferred stock is determinable based upon the number of shares of common stock into which such Series A preferred stock is then convertible based upon the original issuance price of a share of Series A preferred stock of $30.8358 per share, subject to appropriate adjustment in the event of any stock dividend, stock split, combination or other similar recapitalization with respect to the Series A preferred stock. During the years ended December 31, 2015, December 31, 2016, six months ended June 30, 2017 (unaudited) and the year ended December 31, 2016, no dividends had been declared.

 

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Common Stock

As of January 15, 2015, the Company had authorized 9,186,510 shares of common stock, of which 8,000,000 shares have been designated as Class A common stock and 1,186,510 have been designated Class B non-voting stock. On May 6, 2015, the Company amended and restated its Certificate of Incorporation such that the Company authorized 9,236,510 shares of common stock, of which 8,000,000 shares have been designated as Class A common stock and 1,236,510 have been designated Class B non-voting stock.

On December 28, 2015, the Company amended and restated its Certificate of Incorporation such that the Company authorized 9,336,510 shares of common stock, of which 8,000,000 shares have been designated as Class A common stock and 1,336,510 have been designated Class B non-voting stock.

As of December 31, 2015, December 31, 2016 and June 30, 2017 (unaudited), 4,616,863 and 4,711,990 and 4,716,568 shares of Class A voting common stock were issued and outstanding at $0.001 par value per share, respectively.

As of December 31, 2015, December 31, 2016 and June 30, 2017 (unaudited), 7,436, 7,436 and 13,936 shares of Class B non-voting common stock were issued and outstanding at $0.001 par value per share, respectively.

The Company has reserved the following shares of common stock for issuance in connection with:

 

		Class A common stock												Class B common stock
		As of December 31,								As of June 30,				As of December 31,								As of June 30,
		2015				2016				2017				2015				2016				2017
										(Unaudited)												(Unaudited)
Series A preferred stock			710,000				710,000				710,000				—				—				—
Stock options issued and outstanding—2001 plan			245,080				155,726				146,985				—				—				—
Stock options issued and outstanding—2010 plan			—				—				—				1,218,960				1,277,180				1,294,969
Common stock warrants outstanding			33,666				25,877				25,877				—				—				—
Possible future issuances under 2010 stock option plan			—				—				—				109,292				52,708				27,605

Voting Rights

The holders of Class A common stock are entitled to one vote for each share of common stock and holders of Class B non-voting common stock shall have no voting rights. The holders of record of the shares of common stock, exclusively and as a separate class, shall be entitled to elect the remaining directors of the Company.

The Voting Agreement requires that each stockholder vote for and elect the Company’s two founders, who are stockholders and officers, as members of the Board of Directors.

Dividends

The Company shall not declare, pay or set aside any dividends on Class A voting or Class B non-voting common stock unless the holders of Series A preferred stock first receive, or simultaneously receive, a dividend on each outstanding share of Series A preferred stock. During the years ended December 31, 2015, December 31, 2016 and the six months ended June 30, 2017 (unaudited) no dividends were declared.

 

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As of November 30, 2016, dividend payments are subject to a restriction in the Company’s Loan and Security Agreement that the Company shall not pay any dividends or any other distribution or payment on account of or in redemption, retirement or purchase of any capital stock through the term of the agreement.

Stock Purchase Warrants

In connection with four notes payable issued December 20, 2010, the Company granted stock purchase warrants to the previous debt holders. The warrants were exercisable for 12,188 shares of the Company’s Class A common stock at an exercise price of $14.51 per share. The outstanding warrants to purchase 6,338 shares of the Company’s Class A common stock issued with the 2010 debt expire on December 31, 2017.

The Company granted other stock purchase warrants in 2011 that were exercisable for 17,539 shares of the Company’s Class A common stock at an exercise price $0.001 per share. The outstanding warrants to purchase 15,600 shares of the Company’s Class A common stock expire on March 25, 2018.

Further warrants to purchase 3,939 shares of the Company’s Class A common stock were granted in 2011 at an exercise price of $14.51 per share, which expire on February 22, 2018.

Pursuant to the Spin-Off, each holder of a warrant to purchase common stock was issued a warrant to purchase shares of Republic Class A voting common stock with equivalent economic terms. As of December 31, 2015, December 31, 2016 and June 30, 2017 (unaudited), a total of 33,666, 25,877 and 25,877 shares of common stock were reserved for the issuance of stock purchase warrants.

Spin-Off

Pursuant to the Spin-Off, (i) each holder of Class A common stock received one share of Republic Class A common stock for each share of Class A common stock held by such holder, (ii) each holder of Class B non-voting common stock received one share of Republic Class B non-voting common stock for each share of Class B non-voting common stock held by such holder and (iii) each holder of Series A preferred stock received a number of shares of Republic Class A voting common stock for each share of Series A preferred stock held by such holder equal to the number of shares of Class A common stock into which such share of Series A preferred stock is then convertible.

10. Stock Based Compensation

During 2001, the Company adopted the Bandwidth.com, Inc. Stock Option Plan (the 2001 Plan). As of July 26, 2010, the Company adopted the 2010 Equity Compensation Plan (the 2010 Plan). As of December 31, 2011, a total of 1,281,976 shares of common stock were reserved for issuance under the 2001 Plan and the 2010 Plan. On May 9, 2014, the 2010 Plan was amended to provide for a total of 1,186,510 shares of common stock reserved for issuance under the 2010 Plan. On May 6, 2015, the 2010 Plan was amended to provide for a total of 1,236,510 shares of common stock reserved for issuance under the 2010 Plan. On December 28, 2015, the 2010 Plan was amended to provide for a total of 1,336,510 shares of common stock reserved for issuance under the 2010 Plan. Eligible plan participants include employees, directors and consultants. The 2001 Plan and the 2010 Plan each permit the granting of incentive stock options and non-qualified stock options.

Pursuant to the Spin-Off, (i) each holder of a Bandwidth Class A voting common stock option was granted an option to purchase Republic Class A voting common stock and (ii) each holder of a Bandwidth Class B non-voting common stock option was granted an option to purchase Republic Class B non-voting common stock (together with the Republic Class A voting common stock options). Existing Bandwidth stock options were

 

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adjusted (an Adjusted Option) as follows. The spread between the value of the Bandwidth Stock for which the Bandwidth Option was exercisable and the Bandwidth Option’s exercise price (the Bandwidth Option Spread) was allocated based on the exercise price of and the number of shares subject to the applicable Bandwidth Class A voting common stock options or Bandwidth Class B non-voting common stock options, as the case may be, the pre-Distribution fair market value of Bandwidth Class A voting common stock or Bandwidth Class B non-voting common stock, based upon the valuation of the Company at November 30, 2016 and the fair market value of Republic Class A voting common stock or Republic Class B non-voting common stock, such that the pre-Distribution intrinsic value of each Bandwidth Class A voting common stock Option or Bandwidth Class B non-voting common stock option was allocated between the respective Republic Stock Option and the respective Adjusted Option. The other terms and conditions of the Republic Option and the Adjusted Option are the same as the Bandwidth Option in all material respects. The Adjusted Options, the Republic Class A voting common stock options and Republic Class B non-voting common stock options held by current option holders in Bandwidth became all non-qualified options at the time in which the modification took place.

The terms of the modification allow Company employees to continue to vest in stock options in Republic and Republic employees to continue to vest in stock options in Bandwidth, as long as the employees continue to be employed by their respective company. The Company will recognize compensation expense for all non-vested Bandwidth and Republic awards related to those employees that provide service to the Company.

The terms of the stock option grants are determined by the Company’s Board of Directors. The Company’s stock options vest based on terms in the stock option agreements, which is generally over four years. The stock options have a contractual life of ten years.

The fair value of options granted is estimated on the date of grant using the Black-Scholes-Merton option pricing model based on the assumptions in the table below.

 

		Year Ended				Six Months Ended
		December 31,				June 30,
		2015		2016		2016		2017
						(Unaudited)
Expected dividend yield		0%		0%		0%		0%
Expected stock price volatility		44%		44%		44%		47%
Average risk-free interest rate		1.5%–1.9%		1.3%–2.0%		1.3%–1.6%		1.9%–2.3%
Expected life		6.2 years		6.2 years		6.2 years		6.2 years
Fair value of common stock(1)		$23.57-23.92		$23.92-23.99		$23.92		$23.99

 

(1)	Fair value of common stock reflects adjustments to fair value as a result of the Spin-Off.

The Company uses the simplified method for purposes of determining the expected life of the options. The risk-free interest rate is based on the U.S. Treasury rates at the date of grant with maturity dates approximately equal to the expected life at the grant date. Volatility is based on the historical volatility of certain public entities that are similar to the Company as the Company does not have sufficient historical transactions of its own shares on which to base expected volatility. The Company historically has not issued any dividends and does not expect to in the future.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands Except Share and per Share Amounts)

 

The following summarizes the stock option activity for the periods presented:

 

		Number of Options Outstanding				Weighted- Average Exercise Price (per share)(1)				Weighted- Average Remaining Contract Life (in years)				Aggregate Intrinsic value (in thousands)
Balance, December 31, 2015			1,464,040			$	15.78				5.56			$	11,812
Grants			84,241				23.93
Exercised			(88,854	)			13.23								2,600
Forfeited or cancelled			(26,521	)			19.54
Balance, December 31, 2016			1,432,906				16.35				5.12				11,049
Grants			37,721				23.99
Exercised			(15,241	)			13.92								159
Forfeited or cancelled			(13,432	)			23.76
Balance, June 30, 2017 (unaudited)			1,441,954				16.51				4.74				42,713
Options vested and exercisable at December 31, 2016			1,208,285				15.15				4.49				10,785
Options vested and expected to vest as of December 31, 2016			1,423,226				16.30				5.10				11,044
Options vested and exercisable at June 30, 2017 (unaudited)			1,254,557				15.45				4.15				38,517
Options vested and expected to vest as of June 30, 2017 (unaudited)			1,433,484				16.47				4.71				42,525

 

(1)	Weighted-average exercise price (per share) reflects adjustments to exercise price as a result of the Spin-Off.

Aggregate intrinsic value represents the total pre-tax intrinsic value, which is computed based on the difference between the option exercise price and the fair value of the Company’s common stock. This amount changes based on the fair value of the Company’s stock.

The weighted average grant-date fair value (adjusted as a result of the Spin-Off) of stock options granted for the years ended December 31, 2015, December 31, 2016 and during the six months ended June 30, 2017 (unaudited) was $10.61, $10.14 and $10.84 per share, respectively.

The total estimated grant date fair value of options vested was $3,724, $2,082 and $627 during the years ended December 31, 2015 and 2016 and the six months ended June 30, 2017.

The Company recognized total stock-based compensation expense in continuing operations as follows:

 

		Year Ended December 31,								Six Months Ended June 30,
		2015				2016				2016				2017
										(Unaudited)
Cost of revenue		$	45			$	61			$	28			$	41
Research and development			189				138				78				62
Sales and marketing			239				182				104				70
General and administrative			3,020				989				644				317
Total		$	3,493			$	1,370			$	854			$	490

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands Except Share and per Share Amounts)

 

The Company will recognize $1,850 of compensation cost in the future for stock-based employee compensation over the weighted-average of 2.5 years for stock options granted before June 30, 2017.

11. Commitments and Contingencies

Operating Leases

The Company leases office space under operating lease agreements that expire at various dates beginning in 2016 and extend through 2022 in several locations within the United States including its headquarters, which is located in Raleigh, NC. On September 26, 2016, the Company amended its operating lease agreement with one of its landlords. The 63-month lease, begins on April 14, 2017, provides for an additional 40,657 square feet of office space as well as an extension of the termination date for the lease of approximately 128,200 square feet of office space. The leases contain escalation clauses and various landlord concessions including a tenant improvement allowance. The Company recognizes the total minimum lease payments on a straight-line basis over the term of the lease.

Future minimum lease payments required under the leases as of June 30, 2017 (unaudited), for each of the years ending December 31, are as follows:

 

		Amount
2017		$	1,777
2018			3,631
2019			3,700
2020			3,838
2021			3,873
2022 and thereafter			2,018
		$	18,837

The Company incurred rent expense of $1,656 and $2,003 for the years ended December 31, 2015 and 2016, respectively, and $845 and $1,380 for the six months ended June 30, 2016 and 2017 (unaudited), respectively, which is included in general and administrative expenses in the consolidated statements of operations.

In conjunction with the Spin-Off, the Company signed a Facilities Service Agreement with Republic in which the Company agreed to sub-lease 40,657 square feet of office space to Republic. The sub-lease is non-cancellable and extends to May 2022. For the year ended December 31, 2016 and the six months ended June 30, 2017 (unaudited), the Company recorded a reduction of rent expense of $47 and $446, respectively, which is included in general and administrative expenses in the consolidated statements of operations and comprehensive income (loss).

Future minimum lease receipts as of June 30, 2017 (unaudited) for each of the years ending December 31, are as follows:

 

		Amount
2017		$	460
2018			1,020
2019			1,042
2020			1,065
2021			1,089
2022 and thereafter			594
		$	5,270

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands Except Share and per Share Amounts)

 

Capital Leases

The Company leases various equipment under leases accounted for as capital leases. These leases have various expiration dates ranging from March 2016 through October 2018. As of December 31, 2015, carrying value and accumulated depreciation of the assets under capital leases recorded by the Company were $1,819 and $1,682, respectively. As of December 31, 2016, cost and accumulated depreciation of the assets under capital leases recorded by the Company were $1,951 and $1,807, respectively. For the six months ended June 30, 2017 (unaudited), cost and accumulated depreciation of the assets under capital leases recorded by the Company were $1,951 and $1,832, respectively.

Remaining payments due on the Company’s capital lease obligations as of June 30, 2017 (unaudited), for each of the years ending December 31, are as follows:

 

		Amount
2017		$	50
2018			91
Less amount representing interest			—
			141
Less current maturities			99
		$	42

Contractual Obligations

On October 25, 2015, the Company entered into an agreement with a telecommunications service provider. The service agreement requires the Company to pay a monthly recurring charge beginning on January 1, 2016 associated with the services received. The service agreement is non-cancelable and contains annual minimum commitments of $1,200 to be fulfilled over five years or for as long as the Company continues to receive services from this vendor. In addition, the Company has other noncancellable purchase obligations totaling $900 as of December 31, 2016.

Legal Matters

The Company is involved as a defendant in various lawsuits alleging that the Company failed to bill, collect and remit certain taxes and surcharges associated with the provision of 911 services pursuant to applicable laws in various jurisdictions. In August 2016, the Company received a Civil Investigative Demand from the Consumer Protection Division of the North Carolina Department of Justice, though no formal complaint has been filed in connection with that investigation. The North Carolina Department of Justice is investigating the billing, collection and remission of certain taxes and surcharges associated with 911 service pursuant to applicable laws of the State of North Carolina.

In April 2016, the Company filed counterclaims against MCI Communications Services, Inc. d/b/a Verizon Business and Verizon Select Services, Inc. (collectively, “Verizon”) in the United States District Court for the Northern District of Texas. The Company is pursuing collection of unpaid intercarrier compensation charges for providing switched access services related to the exchange of telecommunications traffic with Verizon entities across the United States. Verizon’s prior September 2014 complaint against us and other defendants regarding intercarrier compensation charges for providing switched access services related to the exchange of telecommunications traffic has been dismissed without prejudice, but remains subject to appeal.

While the results of these legal proceedings cannot be predicted with certainty, in the opinion of management, the ultimate resolution of these matters will not have a material adverse effect on the Company’s

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands Except Share and per Share Amounts)

 

financial position or results of operations. The Company cannot estimate reasonably probable losses or a range of reasonably probable loss with respect to these legal proceedings.

12. Employee Benefit Plan

The Company sponsors a defined contribution 401(k) plan, which allows eligible employees to defer a portion of their compensation. The Company, at its discretion, may make matching contributions. The Company made matching contributions of $698 and $716 for the years ended December 31, 2015 and 2016, respectively, and $382 and $415 for the six months ended June 30, 2016 and 2017 (unaudited), respectively.

13. Income Taxes

Provision (benefit) for income taxes from continuing operations consists of the following:

 

		Year Ended December 31,
		2015				2016
Current:
Federal		$	—			$	(66	)
State			104				58
Total			104				(8	)
Deferred:
Federal			272				(9,999	)
State			32				(1,087	)
Total			304				(11,086	)
Total provision (benefit) for income taxes		$	408			$	(11,094	)

As a result of the Spin-Off of Republic, the historic performance of Bandwidth and future projections; the Company determined there was sufficient evidence to support the realization of deferred tax assets and released the valuation allowance in 2016.

The following table presents a reconciliation of the statutory federal tax rate and the Company’s effective tax rate for the years ended December 31, 2015 and 2016:

 

		Year Ended December 31,
		2015				2016
Federal			34.00	%			34.00	%
State			2.52				4.18
Non-deductible expenses			1.02				5.03
Research credit			(3.17	)			(2.32	)
Stock-based compensation			11.00				(24.49	)
Change in valuation allowance			(42.45	)			(98.62	)
Deferred tax rate change			0.76				0.80
Other			1.85				4.04
Total			5.53	%			(77.38	)%

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands Except Share and per Share Amounts)

 

The following table presents the significant components of the Company’s deferred tax assets and liabilities:

 

		Year Ended December 31,
		2015				2016
Deferred tax assets:
Allowance for doubtful accounts		$	91			$	95
Accrued liabilities			1,731				2,011
Deferred revenue			78				241
Intangibles			182				237
Stock-based compensation			3,613				6,458
Tax credits			1,571				2,369
Net operating losses			7,464				4,249
Other			69				59
Total deferred tax assets			14,799				15,719
Less: valuation allowance			(12,633	)			—
Net deferred tax assets			2,166				15,719
Deferred tax liability:
Property and equipment			2,141				2,083
Goodwill			462				654
Other liability			180				288
Total deferred tax liabilities			2,783				3,025
Net deferred tax asset (liability)		$	(617	)		$	12,694

The Company’s accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of its net deferred tax assets. The Company primarily considered the impact of the Spin-Off of Republic, the historic performance of Bandwidth, the nature of the Company’s deferred tax assets and the timing, likelihood and amount (if any) of future taxable income during the periods in which those temporary differences and carryforwards become deductible. Based on an analysis of these factors, the Company determined that in 2016, subsequent to the Spin-Off of Republic, sufficient evidence existed to support the realization of all deferred tax assets and therefore released the valuation allowance in the fourth quarter of 2016. The valuation allowance decreased from $14,729 at December 31, 2015 to $0 at December 31, 2016. Of this amount, $14,138 was reflected as a component of continuing operations and $591 was transferred to Republic pursuant to the Spin-Off.

As of December 31, 2016, the Company had $11,049 in federal net operating loss carryforwards and $2,863 in federal tax credits. If not utilized, the federal net operating loss and tax credit carryforwards will expire at various dates beginning in 2035 and 2030, respectively.

As of December 31, 2016, the Company had approximately $13,172 in state net operating loss carryforwards. If not utilized, the state net operating loss carryforwards will expire at various dates beginning in 2020.

A limitation may apply to the use of the net operating loss and credit carryforwards, under Internal Revenue Code (IRC) §382 and §383, and similar state tax provisions that are applicable if the Company experiences an “ownership change”. An ownership change may occur, for example, as a result of issuance of new equity. Should these limitations apply, the carryforwards would be subject to an annual limitation; however, this limitation is not expected to impact the Company’s ability to realize these deferred tax assets.

The Company elected to early adopt ASU 2016-09 effective January 1, 2016. Subsequent to adoption, the primary tax impact will be the recognition of excess tax benefits in the provision for income tax rather than in

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands Except Share and per Share Amounts)

 

additional paid-in capital. Under this guidance all excess tax benefits (windfalls) and deficiencies (shortfalls) related to employee stock compensation will be recognized within income tax expense. Under prior guidance windfalls were recognized to additional paid-in capital to the extent they resulted in a reduction of cash tax payments and shortfalls were only recognized to the extent they exceeded the pool of windfall tax benefits. The new guidance eliminates the requirement to delay the recognition of excess tax benefits until they reduce current taxes payable. As such, the Company included $420 as a cumulative-effect adjustment for previously unrecognized excess tax benefits in opening accumulated deficit as of January 1, 2016.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

 

		2015				2016
Unrecognized tax benefits—January 1,		$	377			$	456
Gross increases—tax positions in prior period			—				104
Gross decreases—tax positions in prior period			—				—
Gross increases—tax positions in current period			79				111
Settlement			—				—
Lapse of statute of limitations			—				—
Unrecognized tax benefits—December 31,		$	456			$	671

If the $671 of unrecognized tax benefit is recognized, the effective tax rate would be impacted.

The Company had not incurred any material tax interest or penalties with respect to income taxes in the years ended December 31, 2015 and 2016.

The Company expects no material changes in its uncertain tax positions in the 12 months following December 31, 2016.

The Company files U.S. federal income tax returns, as well as income tax returns in many U.S. states. The tax years 2007-2016 remain open to examination by the major jurisdictions in which the Company is subject to tax due to the carryforward of net operating losses.

14. Related Parties

In connection with the Spin-Off on November 30, 2016, the Company and Republic entered into certain agreements in order to govern the ongoing relationships between the two companies after the Spin-Off and to provide for an orderly transition. The agreements include a Transition Services Agreement, Facilities Sharing Agreement, Tax Sharing Agreement, and Master Services Agreement. In connection with the agreements, the Company assessed the relationship with Republic under guidance for variable interest entities. The assessment determined that Republic is a VIE in which the Company is not a primary beneficiary.

The Transition Services Agreement specifies certain services to be provided by the Company for a period of up to two years from the Spin-Off. These services include insurance administration, billing and collections, and other technical support as well as legal services related to intellectual property. The Company is compensated by Republic for these services based on costs incurred by the Company. For the period of December 1, 2016 to December 31, 2016 and the six months ended June 30, 2017 (unaudited), the Company received compensation of $134 and $511, respectively.

In addition, there was approximately $0 and $51 due from Republic as of December 31, 2016 and June 30, 2017 (unaudited), respectively, which was recorded within accounts receivable in the accompanying consolidated balance sheet.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands Except Share and per Share Amounts)

 

The Facilities Sharing Agreement specifies that the Company will sublet office space to Republic for at least 63 months. During the period of December 1, 2016 to December 31, 2016 and six months ended June 30, 2017 (unaudited), the Company sublet of office space to Republic. For the year ended December 31, 2016 and the six months ended June 30, 2017 (unaudited), the Company received rental payments of $47 and $446, respectively, which is included in general and administrative expenses in the consolidated statements of operations and comprehensive income (loss). No amounts were due to the Company under the Facilities Sharing Agreement as of December 31, 2016 and June 30, 2017 (unaudited).

The Tax Sharing Agreement governs rights and obligations after the Spin-Off regarding income taxes and other taxes, including tax liabilities and benefits, attributes, returns and contests. There are no amounts outstanding or payable under this agreement as of December 31, 2016 or June 30, 2017 (unaudited).

The Master Services Agreement specifies certain wholesale telecommunications services to be provided by the Company. The agreement is cancellable at any time by either party. During the period of December 1, 2016 to December 31, 2016 and the six months ended June 30, 2017 (unaudited), the Company provided telecommunication services to Republic of $173 and $1,073, respectively. The Company recognized such amounts as revenue in the accompanying statement of operations and comprehensive income (loss) for the period of December 1, 2016 to December 31, 2016 and the six months ended June 30, 2017 (unaudited). As of June 30, 2017 (unaudited), the Company had a receivable of $191 under the Master Services Agreement.

15. Basic and Diluted Income (Loss) per Common Share

The Company uses the two-class method to compute net income (loss) per common share because it has issued securities, other than common stock, that contractually entitle the holders to participate in dividends and earnings. These participating securities include the Company’s redeemable convertible preferred stock which have non-forfeitable rights to participate in any dividends declared on the Company’s common stock. The two-class method requires earnings for the period to be allocated between common stock and participating securities based upon their respective rights to receive distributed and undistributed earnings.

Under the two-class method, for periods with net income, basic net income per common share is computed by dividing the net income attributable to common stockholders by the weighted average number of shares of common stock outstanding during the period. Net income attributable to common stockholders is computed by subtracting from net income the portion of current period earnings that the participating securities would have been entitled to receive pursuant to their dividend rights had all of the period’s earnings been distributed. No such adjustment to earnings is made during periods with a net loss, as the holders of the participating securities have no obligation to fund losses.

Diluted net income (loss) per common share is computed under the two-class method by using the weighted average number of shares of common stock outstanding, plus, for periods with net income attributable to common stockholders, the potential dilutive effects of stock options and warrants. The Company analyzed the potential dilutive effect of any outstanding dilutive securities under the “if-converted” method and treasury-stock method when calculating diluted earnings per share, in which it is assumed that the outstanding participating securities convert into common stock at the beginning of the period or date of issuance, if later. The Company reports the more dilutive of the approaches (two-class or “if-converted”) as its diluted net income per share during the period.

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands Except Share and per Share Amounts)

 

The components of basic and diluted earnings per share are as follows (in thousands, except share and per share amounts):

 

			Year ended December 31,								Six Months Ended June 30,
			2015				2016				2016				2017
										(Unaudited)
Income from Continuing Operations
Income from continuing operations		$	6,965			$	25,430			$	7,572			$	4,936
Less: income allocated to participating securities			931				3,355				1,007				645
Income from continuing operations attributable to common stockholders		$	6,034			$	22,075			$	6,565			$	4,291
Income from continuing operations per share:
Basic		$	1.31			$	4.73			$	1.42			$	0.91
Diluted		$	1.21			$	4.29			$	1.28			$	0.83
Loss from Discontinued Operations
Loss from discontinued operations		$	(13,665	)		$	(3,072	)		$	(3,011	)		$	—
Less: loss allocated to participating securities			(1,827	)			(405	)			(400	)			—
Loss from discontinued operations attributable to common stockholders		$	(11,838	)		$	(2,667	)		$	(2,611	)		$	—
Loss from discontinued operations per share attributable to stockholders:
Basic		$	(2.57	)		$	(0.57	)		$	(0.56	)		$	—
Diluted		$	(2.38	)		$	(0.52	)		$	(0.51	)		$	—
Net (Loss) Income
Net (loss) income		$	(6,700	)		$	22,358			$	4,561			$	4,936
Less: (loss) income allocated to participating securities			(896	)			2,950				606				645
Net (loss) income attributable to common stockholders		$	(5,804	)		$	19,408			$	3,955			$	4,291
Net (loss) income per share:
Basic		$	(1.26	)		$	4.15			$	0.85			$	0.91
Diluted		$	(1.16	)		$	3.77			$	0.77			$	0.83
Weighted Average Number Of Common Shares Outstanding
Basic			4,599,518				4,671,427				4,632,313				4,722,647
Dilutive effect of stock options and warrants			383,620				473,126				497,455				468,232
Diluted			4,983,138				5,144,553				5,129,768				5,190,879

The following common share equivalents have been excluded from the calculation of weighted-average common shares outstanding because the effect is anti-dilutive for the periods presented:

 

			Year ended December 31,								Six Months Ended June 30,
			2015				2016				2016				2017
										(Unaudited)
Anti-dilutive Disclosure
Series A redeemable convertible preferred stock outstanding			710,000				710,000				710,000				710,000
Stock options issued and outstanding			160,734				94,874				97,609				259,515

 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(In Thousands Except Share and per Share Amounts)

 

16. Subsequent Events

The Company has evaluated subsequent events from the consolidated balance sheet date through October 10, 2017, the date at which the audited and unaudited consolidated financial statements were available to be issued.

On August 22, 2017, a legal claim was filed in one additional jurisdiction on the basis that the Company failed to bill, collect and remit certain taxes and surcharges associated with the provision of 911 services pursuant to state law and local ordinances.

On September 1, 2017, the Company reached a separation agreement with one of its executives. The agreement resulted in a severance liability of approximately $660 and modification of the former employee’s 77,694 outstanding options to purchase common stock to accelerate the vesting period and extend the exercise term.

On September 15, 2017, Bandwidth.com, Inc. changed its name to Bandwidth Inc.

On September 19, 2017, Verizon filed a motion to permit it to assert a counterclaim against the Company in connection with the ongoing complaint related to unpaid intercarrier compensation charges.

On October 6, 2017, the Company was notified that certain additional jurisdictions within the State of Georgia intend to initiate legal proceedings against the Company in response to allegations that the Company failed to bill, collect and remit certain taxes and surcharges associated with the provision of 911 services.

 

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Number one ‘hot spot’ for tech startups in the U.S. outside San Francisco and Silicon Valley* Voted one of the best places to work in the Research Triangle for 2017**Imagine the power DEVELOP & DELIVER THE POWER TO COMMUNICATE *Triangle Business Journal 2015, **Triangle Business Journal 2017 * SelfStorage.com report, 2015 ** Triangle Business Journal, 2017. Based on an employee-survey process of all nominated companies in the Research Triangle

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PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

Item 13. Other Expenses of Issuance and Distribution

The following table sets forth the costs and expenses, other than the underwriting discounts and commissions, payable by the registrant in connection with the sale of the Class A common stock being registered. All amounts are estimates except for the Securities and Exchange Commission (“SEC”), registration fee, the FINRA filing fee and the exchange listing fee.

 

		Amount Paid or to Be Paid
SEC registration fee		$	*
FINRA filing fee			*
Exchange listing fee			*
Printing and engraving expenses			*
Legal fees and expenses			*
Accounting fees and expenses			*
Blue sky 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(a) of the Delaware General Corporation Law provides, in general, that a corporation may 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 (other than an action by or in the right of the corporation), because he or she 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, against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by the person in connection with such action, suit or proceeding, if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful.

Section 145(b) of the Delaware General Corporation Law provides, in general, that a corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor because the person 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, against expenses (including attorneys’ fees) actually and reasonably incurred by the person in connection with the defense or settlement of such action or suit if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation, except that no indemnification shall be made with respect to any claim, issue or matter as to which he or she shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or other adjudicating court determines that, despite the adjudication of liability but in view of all of the circumstances of the case, he or she is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or other adjudicating court shall deem proper.

 

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Section 145(g) of the Delaware General Corporation Law provides, in general, that a 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 against any liability asserted against such person and incurred by such person in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify the person against such liability under Section 145 of the Delaware General Corporation Law.

In connection with the sale of common stock being registered hereby, we have entered into indemnification agreements with each of our directors and our executive officers. These agreements will provide that we will indemnify each of our directors and such officers to the fullest extent permitted by law and our amended and restated certificate of incorporation and bylaws.

We also maintain a general liability insurance policy which covers certain liabilities of directors and officers of our company arising out of claims based on acts or omissions in their capacities as directors or officers.

In any underwriting agreement we enter into in connection with the sale of Class A common stock being registered hereby, the underwriters will agree to indemnify, under certain conditions, us, our directors, our officers and persons who control us within the meaning of the Securities Act of 1933, as amended, against certain liabilities.

Item 15. Recent Sales of Unregistered Securities

Since August 1, 2014, we sold the following securities on an unregistered basis:

 

•

We granted to our directors, officers, employees, and consultants options to purchase an aggregate of 276,930 shares of our Old Class B common stock under our 2010 Equity Compensation Plan at exercise prices ranging from $22.91 to $46.00 per share. The exercise prices of these options to purchase shares of our Old Class B common stock granted between August 1, 2014 and November 30, 2016 reflect adjustments to reflect the allocation of value associated with the Spin-Off of Republic Wireless. The unadjusted exercise price of these options to purchase shares of our Old Class B common stock granted between August 1, 2014 and November 30, 2016 range from $40.48 to $42.39 per share.

 

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Holders of options to purchase shares of our Old Class B common stock exercised options to purchase an aggregate of 12,312 shares of our Old Class B Common stock at exercise prices ranging from $25.64 to $29.75 per share. Each holder of these exercised options exercised the applicable option prior to the Spin-Off of Republic Wireless. Giving effect to the allocation of value associated with the Spin-Off of Republic Wireless, the adjusted exercise prices of such options would have been $14.51 to $16.84 per share.

 

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Holders of options to purchase shares of our Old Class A common stock exercised options to purchase an aggregate of 139,539 shares of our Old Class A common stock at exercise prices ranging from $4.79 to $20.75 per share. Giving effect to the allocation of value associated with the Spin-Off of Republic Wireless, the adjusted exercise prices of such options would have been $2.71 to $11.74 per share.

 

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Holders of warrants to purchase shares of our Old Class A common stock and similar rights exercised warrants and similar rights to purchase an aggregate of 15,176 shares of our Old Class A common stock at exercise prices ranging from $0.001 to $25.64 per share. Giving effect to the allocation of value associated with the Spin-Off of Republic Wireless, the adjusted exercise prices of such warrants would have been $0.001 to $14.51 per share.

None of the foregoing transactions involved any underwriters, underwriting discounts or commissions, or any public offering. We believe the offers, sales and issuances of the above securities were exempt from registration under the Securities Act (or Regulation D) by virtue of Section 4(a)(2) of the Securities Act because the issuance of securities to the recipients did not involve a public offering, or in reliance on Rule 701 because the transactions were pursuant to compensatory benefit plans or contracts relating to compensation as provided

 

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under such rule. 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. All recipients had adequate access, through their relationships with us, to information about us. The sales of these securities were made without any general solicitation or advertising.

Item 16. Exhibits and Financial Statement Schedules

(a) Exhibits.

See the Exhibit Index attached to this Registration Statement, which is incorporated by reference herein.

(b) Financial Statement Schedules.

Schedules not listed above have been omitted because the information required to be set forth therein is not applicable or is shown in the financial statements or 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 SEC 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 of whether such indemnification by it is against public policy as expressed in the Securities Act and will be governed by the final adjudication of such issue.

The undersigned Registrant hereby undertakes that:

 

(1)

For purposes of determining any liability under the Securities Act, the information omitted from the form of prospectus filed as part of this Registration Statement in reliance upon Rule 430A and contained in a form of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this Registration Statement as of the time it was declared effective.

 

(2)

For the purpose of determining any liability under the Securities Act, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof.

 

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EXHIBIT INDEX

 

Exhibit number		Description of Exhibit
1.1*		Form of Underwriting Agreement.
2.1		Reorganization Agreement, dated as of November 30, 2016, by and between Bandwidth.com, Inc. and Republic Wireless, Inc.
3.1*		Form of Second Amended and Restated Certificate of Incorporation (to be in effect upon the closing of this offering).
3.2*		Form of Second Amended and Restated Bylaws (to be in effect upon the closing of this offering).
4.1*		Form of Class A common stock certificate.
4.2		Investors’ Rights Agreement.
4.3		Form of Buy-Sell Agreement.
5.1*		Opinion of Latham & Watkins LLP.
10.1		Credit and Security Agreement among the Bandwidth.com, Inc., Keybank National Association, Keybanc Capital Markets Inc., Pacific Western Bank, Fifth Third Bank and Silicon Valley Bank, dated as of November 4, 2016.
10.2#*		Form of Indemnification Agreement between Bandwidth Inc. and each of its Executive Officers and Directors.
10.3#		2001 Stock Option Plan and forms of awards thereunder.
10.4#		2010 Equity Compensation Plan and forms of awards thereunder.
10.5#		Employment Agreement, dated as of October 1, 2008, by and between Bandwidth.com, Inc. and John Murdock.
10.6#		Employment Agreement, dated as of May 3, 2010, by and between Bandwidth.com, Inc. and W. Christopher Matton.
10.7#		Employment Agreement, dated as of September 16, 2011, by and between Bandwidth.com, Inc. and Jeff Hoffman.
10.8#		Employment Agreement, dated as of January 1, 2015, as amended on March 9, 2017, by and between Bandwidth.com, Inc. and David A. Morken.
10.9#		Employment Agreement, dated as of March 1, 2017, by and between Bandwidth.com, Inc. and Henry R. Kaestner.
10.10#		Consulting Agreement, dated as of February 22, 2010, by and between Bandwidth.com, Inc. and Carmichael Investment Partners, LLC.
10.11		Office Lease, by and between Venture Center LLC and Bandwidth.com, Inc., dated January 22, 2013, as amended to date.
10.12		Sublease, by and between Allied Telesis Capital Corporation and Bandwidth.com, Inc., dated December 1, 2015.
10.13		Facilities Sharing Agreement, by and between Bandwidth.com, Inc. and Republic Wireless, Inc., dated November 30, 2016.
10.14		Transition Services Agreement, by and between Bandwidth.com, Inc. and Republic Wireless, Inc., dated November 30, 2016.

 

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Exhibit number		Description of Exhibit
10.15		Transition Services Agreement, by and between Republic Wireless, Inc. and Bandwidth.com, Inc., dated November 30, 2016.
10.16		Tax Sharing Agreement, by and between Bandwidth.com, Inc. and Republic Wireless, Inc., dated November 30, 2016.
10.17		Employee Matters Agreement, by and between Bandwidth.com, Inc. and Republic Wireless, Inc., dated November 30, 2016.
10.18		Master Services Agreement, by and between Bandwidth.com, Inc. and Republic Wireless, Inc., dated November 30, 2016.
10.19		Master Service Agreement, by and between Level 3 Communications, LLC and Bandwidth.com, Inc, dated March 14, 2008, as amended to date.
10.20*		Form of Company Lock-up Agreement between Bandwidth Inc. and the Key Holders.
21.1		List of subsidiaries of Bandwidth Inc.
23.1		Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.
23.2*		Consent of Latham & Watkins LLP (included in Exhibit 5.1).
24.1		Power of Attorney (included on signature page).

 

*	To be filed by amendment.

#	Indicates a management contract or compensatory plan.

 

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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 Raleigh, North Carolina, on the 13th day of October, 2017.

 

SIGNATURES AND POWER OF ATTORNEY

We, the undersigned directors and officers of Bandwidth Inc. (the “Company”), hereby severally constitute and appoint David A. Morken, John C. Murdock, Jeffrey A. Hoffman, and W. Christopher Matton, and each of them singly, our true and lawful attorneys, with full power to them, and to each of them singly, to sign for us and in our names in the capacities indicated below, the registration statement on Form S-1 filed herewith, and any and all pre-effective and post-effective amendments to said registration statement, and any registration statement filed pursuant to Rule 462(b) under the Securities Act of 1933, as amended, in connection with the registration under the Securities Act of 1933, as amended, of equity securities of the Company, and to file or cause to be filed the same, with all exhibits thereto and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in connection therewith, as fully to all intents and purposes as each of us might or could do in person, and hereby ratifying and confirming all that said attorneys, and each of them, or their substitute or substitutes, shall do or cause to be done by virtue of this Power of Attorney.

Pursuant to the requirements of the Securities Act, this Registration Statement on Form S-1 has been signed by the following persons in the capacities and on the dates indicated.

 

Signature		Title		Date
/s/ David A. Morken David A. Morken		Cofounder, Chief Executive Officer and Chairman (Principal Executive Officer)		October 13, 2017
/s/ Jeffrey A. Hoffman Jeffrey A. Hoffman		Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer)		October 13, 2017
/s/ John C. Murdock John C. Murdock		President and Director		October 13, 2017
/s/ Henry R. Kaestner Henry R. Kaestner		Cofounder and Director		October 13, 2017
/s/ Brian D. Bailey Brian D. Bailey		Director		October 13, 2017
/s/ Douglas A. Suriano Douglas A. Suriano		Director		October 13, 2017

 

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Exhibit 2.1

REORGANIZATION AGREEMENT

This REORGANIZATION AGREEMENT (together with all Schedules and Exhibits hereto, this “Agreement”), dated as of November 30, 2016 is entered into by and between BANDWIDTH.COM, INC., a Delaware corporation (“BW”), and REPUBLIC WIRELESS, INC., a Delaware corporation (“Republic Wireless”). Certain capitalized terms used herein have the meanings ascribed thereto in Section 7.1.

RECITALS:

WHEREAS, Republic Wireless is and prior to the Spin-Off (as defined below) will be a wholly-owned Subsidiary of BW;

WHEREAS, the BW Board has determined that it is appropriate and in the best interests of BW and its stockholders to reorganize its assets and liabilities by means of the Spin-Off (as defined below) of Republic Wireless;

WHEREAS, the parties desire to effect the transactions contemplated by this Agreement, including the Restructuring (as defined below) and the distribution (the “Distribution”), by means of a dividend, of all of the issued and outstanding shares of common stock of Republic Wireless to the holders of record on the Record Date (as defined below) of BW’s Class A Voting Common Stock, par value $0.001 per share (“BWCA”), Class B Non-Voting Common Stock, par value $0.001 per share (“BWCB”), and Series A Convertible Preferred Stock, par value $0.001 per share (“BWSA” and together with BWCA and BWCB, the “Bandwidth Stock”);

WHEREAS, the transactions contemplated by this Agreement, including the Restructuring and the Distribution, have been approved by the BW Board and, to the extent applicable, the Republic Wireless Board, and are motivated in whole or substantial part by certain substantial corporate business purposes of BW and Republic Wireless;

WHEREAS, the transactions contemplated by this Agreement, including the Contribution and the Distribution (together, the “Spin-Off”) are intended to qualify under, among other provisions, Sections 355 and 368 of the Internal Revenue Code of 1986, as amended (the “Code”), and are expected to accomplish certain corporate business purposes of BW and Republic Wireless (which corporate business purposes are substantially unrelated to U.S. federal tax matters);

WHEREAS, this Agreement constitutes a “plan of reorganization” within the meaning of Section 368 of the Code and the Treasury Regulations promulgated thereunder; and

WHEREAS, the parties wish to set forth in this Agreement the terms on which, and the conditions subject to which, they intend to implement the measures referred to above and elsewhere herein.

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NOW, THEREFORE, in consideration of the foregoing and the mutual representations, warranties, covenants and agreements contained herein, the parties to this Agreement hereby agree as follows:

ARTICLE I

THE RESTRUCTURING

1.1 Restructuring.

(a) The parties have taken or will take, and have caused or will cause their respective Subsidiaries to take, all actions that are necessary or appropriate to implement and accomplish the transactions contemplated by each of the steps set forth in the Restructuring Plan (collectively, the “Restructuring”); provided, that all of such steps will be completed by no later than the Effective Time.

(b) The Contribution and the Distribution are intended to be part of the same plan of reorganization, even though there may be delays between the completion of certain of the transactions.

1.2 Transfer of Republic Wireless Assets and Republic Wireless Businesses; Assumption of Republic Wireless Liabilities.

On the terms and subject to the conditions of this Agreement, and in furtherance of the Restructuring and the Spin-Off:

(a) BW, by no later than immediately before the Effective Time, will cause all of its (or its Subsidiaries’) rights, title and interest in and to all of the Republic Wireless Assets and Republic Wireless Businesses to be contributed, assigned, transferred, conveyed and delivered, directly or indirectly, to Republic Wireless, and Republic Wireless agrees to accept or cause to be accepted all such rights, title and interest in and to all the Republic Wireless Assets and Republic Wireless Businesses. All Republic Wireless Assets are being transferred on an “as is, where is” basis, without any warranty whatsoever on the part of BW.

(b) BW, by no later than immediately before the Effective Time, will cause all of the Republic Wireless Liabilities to be assigned, directly or indirectly, to Republic Wireless, and Republic Wireless agrees to accept, assume, perform, discharge and fulfill all of the Republic Wireless Liabilities in accordance with their respective terms.

(c) Upon completion of the transactions contemplated by Sections 1.2(a) and (b) above: (i) Republic Wireless will own, directly or indirectly, the Republic Wireless Businesses and the Republic Wireless Assets and be subject to the Republic Wireless Liabilities; and (ii) BW will continue to own, directly or indirectly, the BW Retained Businesses and the BW Retained Assets and continue to be subject to the BW Retained Liabilities.

1.3 Third Party Consents and Government Approvals. To the extent that either the Distribution or any step in the Restructuring Plan requires a consent of any third party or a Governmental Authorization, the parties will use commercially reasonable efforts to obtain each such consent and Governmental Authorization at or prior to the time such consent or Governmental Authorization is required in order to lawfully effect the Distribution and each step in the Restructuring Plan.

1.4 Further Actions. From and after the Effective Time, upon the reasonable request of a party hereto, each other party hereto will promptly take, or cause its Subsidiaries to promptly take, all commercially reasonable actions necessary or appropriate to fully accomplish the Restructuring and to give effect to the transactions provided for in this Agreement, including each step in the Restructuring Plan, in accordance with the purposes hereof.

1.5 Restructuring Documents. All documents and instruments used to effect the Restructuring and otherwise to comply with this Agreement will be in form satisfactory to BW, Republic Wireless and any additional signatories hereto.

 

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1.6 Qualification as Reorganization. For U.S. federal income tax purposes, (1) each step of the Restructuring is generally intended to be undertaken in a manner so that no gain or loss is recognized (and no income is taken into account) by BW, Republic Wireless or their respective Subsidiaries, and (2) the Contribution and the Distribution are intended to qualify as a tax-free reorganization under Sections 368(a) and 355 of the Code.

ARTICLE II

THE DISTRIBUTION

2.1 The Distribution.

(a) The BW Board will have the authority and right: (i) to declare or refrain from declaring the Distribution; (ii) to establish and change the date and time of the record date for the Distribution (the “Record Date”); (iii) to establish and change the date and time at which the Distribution will be effective (the “Distribution Date”); and (iv) prior to the Distribution Date, to establish and change the procedures for effecting the Distribution; subject, in all cases, to the applicable provisions of the DGCL.

(b) On the Distribution Date, subject to the conditions to the Distribution set forth in Section 2.2, BW will cause to be distributed to the holders of record of Bandwidth Stock on the Record Date (such holders, the “BW Record Holders”), as a dividend, all the issued and outstanding shares of Republic Wireless Stock on the basis of (i) one share of Class A Voting Common Stock, par value $0.001 per share, of Republic Wireless (“Republic Wireless Class A Voting Common Stock”) for each share of BWCA held of record on the Record Date, (ii) one share of Class B Non-Voting Common Stock, par value $0.001 per share, of Republic Wireless (“Republic Wireless Class B Non-Voting Common Stock and together with the Republic Wireless Class A Voting Common Stock, “Republic Wireless Stock”) for each share of BWCB held of record on the Record Date, and (iii) one share of Republic Wireless Class A Voting Common Stock for each share of BWSA held of record on the Record Date, in each case with cash being issued in lieu of fractional shares of Republic Wireless Stock.

(c) Prior to the Distribution Date and in accordance with the Restructuring Plan, Republic Wireless will cause the Republic Wireless Charter to be filed with the Delaware Secretary of State, whereupon the issued and then outstanding shares of Republic Wireless Stock (all of which will be owned by BW), will automatically be reclassified into: (i) a number of shares of Republic Wireless Class A Voting Common Stock equal to the product, rounded down to the nearest whole share, of (A) the number of shares of BWCA outstanding as of the Record Date and (B) 1.00, (ii) a number of shares of Republic Wireless Class B Non-Voting Common Stock equal to the product, rounded down to the nearest whole share, of (A) the number of BWCB outstanding as of the Record Date and (B) 1.00, and (iii) a number of shares of Republic Wireless Class A Voting Common Stock equal to the product, rounded down to the nearest whole share, of (A) the number of shares of BWSA outstanding as of the Record Date and (B) 1.00.

(d) BW will take such action, if any, as may be necessary or appropriate under applicable state and foreign securities and “blue sky” laws to permit the Distribution to be effected in compliance, in all material respects, with such laws.

2.2 Conditions to the Distribution. The Distribution is subject to the satisfaction of the following conditions:

(a) the BW Board will have taken all necessary corporate action to establish the Record Date and to declare the dividends in order to effect the Distribution in accordance with the BW Charter and bylaws and the DGCL;

 

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(b) BW will have received the opinion of Skadden, Arps, Slate, Meagher & Flom LLP, in form and substance reasonably acceptable to BW, to the effect that the Spin-Off should qualify as a tax-free transaction under Section 355, Section 368(a)(1)(D) and related provisions of the Code and that, for U.S. federal income tax purposes, (i) no gain or loss will be recognized by BW upon the distribution of Republic Wireless Stock in the Spin-Off, and (ii) no gain or loss will be recognized by, and no amount will be included in the income of, holders of Bandwidth Stock upon the receipt of shares of Republic Wireless Stock in the Spin-Off (except with respect to the receipt of cash in lieu of fractional shares of Republic Wireless Stock); and

(c) any other regulatory or contractual approvals that the BW Board determines to obtain will have been so obtained and be in full force and effect.

The foregoing conditions are for the sole benefit of BW and will not in any way limit BW’s right to amend, modify or terminate this Agreement in accordance with Section 6.1. Any of the foregoing conditions set forth in Section 2.2(d) and (e) may be waived by the BW Board and any determination made by the BW Board prior to the Distribution concerning the satisfaction or waiver of any condition set forth in this Section 2.2 will be final and conclusive.

2.3 Treatment of Outstanding Equity Awards.

(a) Certain current and former employees, non-employee directors and consultants of BW have been granted options in respect of Bandwidth Stock pursuant to various stock incentive plans of BW administered by the BW Board (collectively, “Awards”). BW and Republic Wireless will use commercially reasonable efforts to take all actions necessary or appropriate so that Awards that are outstanding immediately prior to the Effective Time are adjusted as set forth in this Section 2.3.

(b) As of the Effective Time, and as determined by the BW Board pursuant to its authority granted under the applicable stock incentive plan of BW, each holder of a BW Option (whether unvested, partially vested or fully vested) (each such BW Option, an “Outstanding BW Option”), will receive an option to purchase shares of the corresponding series of Republic Wireless Stock (a “Republic Wireless Option”) and an adjustment to the Outstanding BW Option (as so adjusted, an “Adjusted BW Option”) such that the pre-Spin-Off intrinsic value of the Outstanding BW Option is allocated between the Republic Wireless Option and the Adjusted BW Option.

(c) Except as described herein, all other terms of the Republic Wireless Options and the Adjusted BW Options (including the vesting terms thereof) will, in all material respects, be the same as those of the corresponding Outstanding BW Options; provided, that (i) the terms and conditions of exercise of the Republic Wireless Options will in any event be determined in a manner consistent with Section 409A of the Code, and (ii) the terms and conditions of each Adjusted BW Option and each Republic Wireless Option will be modified as described in Section 5.1 and Section 5.2 of the Employee Matters Agreement. In the event of any conflict between Section 5.1 or Section 5.2 of such Employee Matters Agreement and this Section 2.3(c), Section 5.1 or Section 5.2 of such Employee Matters Agreement will control.

(d) From and after the Effective Time, Republic Wireless Options, regardless of by whom held, will be settled by Republic Wireless pursuant to the terms of the Republic Wireless Equity Compensation Plan. The obligation to deliver (i) shares of Republic Wireless Stock upon the exercise of Republic Wireless Options will be the sole obligation of Republic Wireless, and BW will have no Liability in respect thereof.

 

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(e) It is intended that the Republic Wireless Equity Compensation Plan be considered, as to any Republic Wireless Option, that is issued as part of the adjustment provisions of this Section 2.3, to be a successor plan to the stock incentive plan of BW pursuant to which the BW Option was issued, and Republic Wireless will be deemed to have assumed the obligations under the applicable stock incentive plans of BW to make the adjustments to the Awards set forth in this Section 2.3.

(f) With respect to Awards adjusted and any equity awards issued as a result of such adjustments (collectively, “Spin Awards”), in each case, pursuant to this Section 2.3, service after the Effective Time as an employee or non-employee director of, or consultant to, BW, Republic Wireless, or any of their respective Subsidiaries will be treated as service to BW and Republic Wireless and their respective Subsidiaries for all purposes under such Spin Awards following the Effective Time.

(g) Neither the Effective Time nor any other transaction contemplated by the Restructuring Plan or this Agreement will be considered a termination of employment for any employee of BW, Republic Wireless or any of their respective Subsidiaries for purposes of any Post Spin Award.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

3.1 Representations and Warranties of the Parties. Each party hereto represents and warrants to the other as follows:

(a) Organization and Qualification. Such party is a corporation duly organized, validly existing and in good standing under the laws of the state of Delaware, has all requisite corporate power and authority to own, use, lease or operate its properties and assets, and to conduct the business heretofore conducted by it, and is duly qualified to do business and is in good standing in each jurisdiction in which the properties owned, used, leased or operated by it or the nature of the business conducted by it requires such qualification, except in such jurisdictions where the failure to be so qualified and in good standing would not have a material adverse effect on its business, financial condition or results of operations or its ability to perform its obligations under this Agreement.

(b) Authorization and Validity of Agreement. Such party has all requisite power and authority to execute, deliver and perform its obligations under this Agreement, the agreements and instruments to which it is to be a party required to effect the Restructuring (the “Restructuring Agreements”) and the agreements to be delivered by it at the Closing pursuant to Section 5.3 (the “Other Agreements”). The execution, delivery and performance by such party of this Agreement, the Restructuring Agreements and the Other Agreements and the consummation by it of the transactions contemplated hereby and thereby have been duly and validly authorized by the board of directors, managing members or analogous governing body of such party and, to the extent required by law, its stockholders or members, and no other corporate or other action on its part is necessary to authorize the execution and delivery by such party of this Agreement, the Restructuring Agreements and the Other Agreements, the performance by it of its obligations hereunder and thereunder and the consummation by it of the transactions contemplated hereby and thereby. This Agreement has been, and each of the Restructuring Agreements and each of the Other Agreements, when executed and delivered, will be, duly executed and delivered by such party and each is, or will be, a valid and binding obligation of such party, enforceable in accordance with its terms.

3.2 No Approvals or Notices Required; No Conflict with Instruments. The execution, delivery and performance by such party of this Agreement, the Restructuring Agreements and the Other Agreements, and the consummation of the transactions contemplated hereby and thereby, do not and will not conflict with or result in a breach or violation of any of the terms or provisions of, constitute a default under, or result in the creation of any lien, charge or encumbrance upon any of its assets pursuant to the

 

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terms of, the charter or bylaws (or similar formation or governance instruments) of such party, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument to which it is a party or by which it or any of its assets are bound, or any law, rule, regulation, judgment, order or decree of any court or governmental authority having jurisdiction over it or its properties.

3.3 No Other Reliance. In determining to enter into this Agreement, the Restructuring Agreements and the Other Agreements, and to consummate the transactions contemplated hereby and thereby, such party has not relied on any representation, warranty, promise or agreement other than those expressly contained herein or therein, and no other representation, warranty, promise or agreement has been made or will be implied. Except as otherwise expressly set forth herein or in the Restructuring Agreements or the Other Agreements, all Republic Wireless Assets and Republic Wireless Businesses are being transferred on an “as is, where is” basis, at the risk of the transferee, without any warranty whatsoever on the part of the transferor and from and after the Effective Time.

ARTICLE IV

COVENANTS

4.1 Cross-Indemnities.

(a) Republic Wireless hereby covenants and agrees, on the terms and subject to the limitations set forth in this Article IV, from and after the Closing, to indemnify and hold harmless BW, its Subsidiaries and their respective current and former directors, officers and employees, and each of the heirs, executors, trustees, administrators, successors and assigns of any of the foregoing (the “BW Indemnified Parties”) from and against any Losses incurred by the BW Indemnified Parties (in their capacities as such) to the extent arising out of or resulting from any of the following:

(i) the conduct of the Republic Wireless Businesses (whether before or after the Closing);

(ii) the Republic Wireless Assets;

(iii) the Republic Wireless Liabilities (whether incurred before or after the Closing); or

(iv) any breach of, or failure to perform or comply with, any covenant, undertaking or obligation of Republic Wireless or any of its Subsidiaries under this Agreement, any Restructuring Agreement or any Other Agreement.

(b) BW hereby covenants and agrees, on the terms and subject to the limitations set forth in this Article IV, from and after the Closing, to indemnify and hold harmless Republic Wireless, its Subsidiaries and their respective current and former directors, officers and employees, and each of the heirs, executors, trustees, administrators, successors and assigns of any of the foregoing (the “Republic Wireless Indemnified Parties”) from and against any Losses incurred by the Republic Wireless Indemnified Parties (in their capacities as such) to the extent arising out of or resulting from:

(i) the conduct of the BW Retained Businesses (whether before or after the Closing);

(ii) the BW Retained Assets;

(iii) the BW Retained Liabilities (whether incurred before or after the Closing); or

 

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(iv) any breach of, or failure to perform or comply with, any covenant, undertaking or obligation of BW or any of its Subsidiaries (other than the Republic Wireless Entities) under this Agreement, any Restructuring Agreement or any Other Agreement.

(c) The indemnification provisions set forth in Sections 4.1(a) and (b) will not apply to: (i) any Losses the responsibility for which is expressly covered by the Tax Sharing Agreement or the Employee Matters Agreement; (ii) any Losses incurred by any Republic Wireless Entity pursuant to any contractual obligation (other than this Agreement, the Restructuring Agreements or the Other Agreements) existing on or after the Closing Date between (x) BW or any of its Subsidiaries or Affiliates, on the one hand, and (y) Republic Wireless or any of its Subsidiaries or Affiliates, on the other hand; and (iii) any Losses incurred by any BW Entity pursuant to any contractual obligation (other than this Agreement, the Restructuring Agreements or the Other Agreements) existing on or after the Closing Date between (x) BW or any of its Subsidiaries or Affiliates, on the one hand, and (y) Republic Wireless or any of its Subsidiaries or Affiliates, on the other hand.

(d) (i) In connection with any indemnification provided for in this Section 4.1, the party seeking indemnification (the “Indemnitee”) will give the party from which indemnification is sought (the “Indemnitor”) prompt notice whenever it comes to the attention of the Indemnitee that the Indemnitee has suffered or incurred, or may suffer or incur, any Losses for which it is entitled to indemnification under this Section 4.1, and, if and when known, the facts constituting the basis for such claim and the projected amount of such Losses (which will not be conclusive as to the amount of such Losses), in each case in reasonable detail. Without limiting the generality of the foregoing, in the case of any Action commenced by a third party for which indemnification is being sought (a “Third-Party Claim”), such notice will be given no later than ten business days following receipt by the Indemnitee of written notice of such Third-Party Claim. Failure by any Indemnitee to so notify the Indemnitor will not affect the rights of such Indemnitee hereunder except to the extent that such failure has a material prejudicial effect on the defenses or other rights available to the Indemnitor with respect to such Third Party Claim. The Indemnitee will deliver to the Indemnitor as promptly as practicable, and in any event within five business days after Indemnitee’s receipt, copies of all notices, court papers and other documents received by the Indemnitee relating to any Third-Party Claim.

(ii) After receipt of a notice pursuant to Section 4.1(d)(i) with respect to any Third-Party Claim, the Indemnitor will be entitled, if it so elects, to take control of the defense and investigation with respect to such Third-Party Claim and to employ and engage attorneys reasonably satisfactory to the Indemnitee to handle and defend such claim, at the Indemnitor’s cost, risk and expense, upon written notice to the Indemnitee of such election, which notice acknowledges the Indemnitor’s obligation to provide indemnification under this Agreement with respect to any Losses arising out of or relating to such Third-Party Claim. The Indemnitor will not settle any Third-Party Claim that is the subject of indemnification without the written consent of the Indemnitee, which consent will not be unreasonably withheld, conditioned or delayed; provided, however, that, after reasonable notice, the Indemnitor may settle a claim without the Indemnitee’s consent if such settlement (A) makes no admission or acknowledgment of Liability or culpability with respect to the Indemnitee, (B) includes a complete release of the Indemnitee and (C) does not seek any relief against the Indemnitee other than the payment of money damages to be borne by the Indemnitor. The Indemnitee will cooperate in all reasonable respects with the Indemnitor and its attorneys in the investigation, trial and defense of any lawsuit or action with respect to such Claim and any appeal arising therefrom (including the filing in the Indemnitee’s name of appropriate cross-claims and counterclaims). The Indemnitee may, at its own cost, participate in any investigation, trial and defense of any Third-Party Claim controlled by the Indemnitor and any appeal arising therefrom, including participating in the process with respect to the potential settlement or compromise thereof. If the Indemnitee has been advised by its counsel that there may be one or more legal defenses available to the Indemnitee that conflict with those available to, or that are not

 

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available to, the Indemnitor (“Separate Legal Defenses”), or that there may be actual or potential differing or conflicting interests between the Indemnitor and the Indemnitee in the conduct of the defense of such Third-Party Claim, the Indemnitee will have the right, at the expense of the Indemnitor, to engage separate counsel reasonably acceptable to the Indemnitor to handle and defend such Third-Party Claim, provided, that, if such Third-Party Claim can be reasonably separated between those portion(s) for which Separate Legal Defenses are available (“Separable Claims”) and those for which no Separate Legal Defenses are available, the Indemnitee will instead have the right, at the expense of the Indemnitor, to engage separate counsel reasonably acceptable to the Indemnitor to handle and defend the Separable Claims, and the Indemnitor will not have the right to control the defense or investigation of such Separable Claims (and, in which case, the Indemnitor will have the right to control the defense or investigation of the remaining portion(s) of such Third-Party Claim).

(iii) If, after receipt of a notice pursuant to Section 4.1(d)(i) with respect to any Third-Party Claim as to which indemnification is available hereunder, the Indemnitor does not undertake to defend the Indemnitee against such Third-Party Claim, whether by not giving the Indemnitee timely notice of its election to so defend or otherwise, the Indemnitee may, but will have no obligation to, assume its own defense, at the expense of the Indemnitor (including attorneys fees and costs), it being understood that the Indemnitee’s right to indemnification for such Third Party Claim will not be adversely affected by its assuming the defense of such Third Party Claim. The Indemnitor will be bound by the result obtained with respect thereto by the Indemnitee; provided, that the Indemnitee may not settle any lawsuit or action with respect to which the Indemnitee is entitled to indemnification hereunder without the consent of the Indemnitor, which consent will not be unreasonably withheld, conditioned or delayed; provided further, that such consent will not be required if (i) the Indemnitor had the right under this Section 4.1 to undertake control of the defense of such Third-Party Claim and, after notice, failed to do so within thirty days of receipt of such notice (or such lesser period as may be required by court proceedings in the event of a litigated matter), or (ii) (x) the Indemnitor does not have the right to control the defense of the entirety of such Third-Party Claim pursuant to Section 4.1(d)(ii) or (y) the Indemnitor does not have the right to control the defense of any Separable Claim pursuant to Section 4.1(d)(ii) (in which case such settlement may only apply to such Separable Claims), the Indemnitee provides reasonable notice to Indemnitor of the settlement, and such settlement (A) makes no admission or acknowledgment of Liability or culpability with respect to the Indemnitor, (B) does not seek any relief against the Indemnitor and (C) does not seek any relief against the Indemnitee for which the Indemnitor is responsible other than the payment of money damages.

(e) In no event will the Indemnitor be liable to any Indemnitee for any special, consequential, indirect, collateral, incidental or punitive damages, however caused and on any theory of liability arising in any way out of this Agreement, whether or not such Indemnitor was advised of the possibility of any such damages; provided, that the foregoing limitations will not limit a party’s indemnification obligations for any Losses incurred by an Indemnitee as a result of the assertion of a Third Party Claim.

(f) The Indemnitor and the Indemnitee will use commercially reasonable efforts to avoid production of confidential information, and to cause all communications among employees, counsel and others representing any party with respect to a Third Party Claim to be made so as to preserve any applicable attorney-client or work-product privilege.

(g) The Indemnitor will pay all amounts payable pursuant to this Section 4.1 by wire transfer of immediately available funds, promptly following receipt from an Indemnitee of a bill, together with all accompanying reasonably detailed backup documentation, for any Losses that are the subject of indemnification hereunder, unless the Indemnitor in good faith disputes the amount of such Losses or whether such Losses are covered by the Indemnitor’s indemnification obligation in which event the Indemnitor will promptly so notify the Indemnitee. In any event, the Indemnitor will pay to the

 

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Indemnitee, by wire transfer of immediately available funds, the amount of any Losses for which it is liable hereunder no later than three (3) days following any final determination of the amount of such Losses and the Indemnitor’s liability therefor. A “final determination” will exist when (a) the parties to the dispute have reached an agreement in writing or (b) a court of competent jurisdiction will have entered a final and non-appealable order or judgment.

(h) If the indemnification provided for in this Section 4.1 will, for any reason, be unavailable or insufficient to hold harmless an Indemnitee in respect of any Losses for which it is entitled to indemnification hereunder, then the Indemnitor will contribute to the amount paid or payable by such Indemnitee as a result of such Losses, in such proportion as will be appropriate to reflect the relative benefits received by and the relative fault of the Indemnitor on the one hand and the Indemnitee on the other hand with respect to the matter giving rise to such Losses.

(i) The remedies provided in this Section 4.1 will be cumulative and will not preclude assertion by any Indemnitee of any other rights or the seeking of any and all other remedies against an Indemnitor, subject to Section 4.1(e).

(j) The rights and obligations of the BW Indemnified Persons and the Republic Wireless Indemnified Persons under this Section 4.1 will survive the Spin-Off.

(k) For the avoidance of doubt, the provisions of this Section 4.1 are not intended to, and will not, apply to any Loss, claim or Liability to which the provisions of the Tax Sharing Agreement or the Employee Matters Agreement are applicable.

(l) To the fullest extent permitted by applicable law, the Indemnitor will indemnify the Indemnitee against any and all reasonable fees, costs and expenses (including attorneys’ fees), incurred in connection with the enforcement of his, her or its rights under this Section 4.1.

4.2 Intentionally Deleted.

4.3 Further Assurances. At any time before or after the Closing, each party hereto covenants and agrees to make, execute, acknowledge and deliver such instruments, agreements, consents, assurances and other documents, and to take all such other commercially reasonable actions, as any other party may reasonably request and as may reasonably be required in order to carry out the purposes and intent of this Agreement and to implement the terms hereof.

4.4 Specific Performance. Each party hereby acknowledges that the benefits to the other party of the performance by such party of its obligations under this Agreement are unique and that the other party is willing to enter into this Agreement only in reliance that such party will perform such obligations, and agrees that monetary damages may not afford an adequate remedy for any failure by such party to perform any of such obligations. Accordingly, each party hereby agrees that the other party will have the right to enforce the specific performance of such party’s obligations hereunder and irrevocably waives any requirement for securing or posting of any bond or other undertaking in connection with the obtaining by the other party of any injunctive or other equitable relief to enforce their rights hereunder.

4.5 Access to Information.

(a) Each party will provide to the other party, at any time before or after the Distribution Date, upon written request and promptly after the request therefor (subject in all cases, to any bona fide concerns of attorney-client or work-product privilege that any party may reasonably have and any restrictions contained in any agreements or contracts to which any party or its Subsidiaries is a party (it

 

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being understood that each of BW and Republic Wireless will use its reasonable best efforts to provide any such information in a manner that does not result in a violation of a privilege)), any information in its possession or under its control that the requesting party reasonably needs (i) to comply with reporting, filing or other requirements imposed on the requesting party by a foreign or U.S. federal, state or local judicial, regulatory or administrative authority having jurisdiction over the requesting party or its Subsidiaries, (ii) to enable the requesting party to institute or defend against any action, suit or proceeding in any foreign or U.S. federal, state or local court or (iii) to enable the requesting party to implement the transactions contemplated hereby, including but not limited to performing its obligations under this Agreement, the Restructuring Agreements and the Other Agreements.

(b) Any information belonging to a party that is provided to another party pursuant to Section 4.5(a) will remain the property of the providing party. The parties agree to cooperate in good faith to take all reasonable efforts to maintain any legal privilege that may attach to any information delivered pursuant to this Section 4.5 or which otherwise comes into the receiving party’s possession and control pursuant to this Agreement. Nothing contained in this Agreement will be construed as granting or conferring license or other rights in any such information.

(c) The party requesting any information under this Section 4.5 will reimburse the providing party for the reasonable out of pocket costs, if any, of creating, gathering and copying such information, to the extent that such costs are incurred for the benefit of the requesting party. No party will have any Liability to any other party if any information exchanged or provided pursuant to this Agreement that is an estimate or forecast, or is based on an estimate or forecast, is found to be inaccurate, absent willful misconduct or fraud by the party providing such information.

(d) For the avoidance of doubt, the provisions of this Section 4.5 are not intended to, and will not, apply to any information relating to matters governed by the Tax Sharing Agreement or the Employee Matters Agreement, which will be subject to the provisions thereof in lieu of this Section 4.5.

4.6 Confidentiality. Each party will keep confidential for five years following the Closing Date (or for three years following disclosure to such party, whichever is longer), and will use reasonable efforts to cause its officers, directors, members, employees, Affiliates and agents to keep confidential during such period, all Proprietary Information of the other party, in each case to the extent permitted by applicable law.

(a) “Proprietary Information” means any proprietary ideas, plans and information, including information of a technological or business nature, of a party (in this context, the “Disclosing Party”) (including all trade secrets, intellectual property, data, summaries, reports or mailing lists, in whatever form or medium whatsoever, including oral communications, and however produced or reproduced), that is marked proprietary or confidential, or that bears a marking of like import, or that the Disclosing Party states is to be considered proprietary or confidential, or that a reasonable and prudent person would consider proprietary or confidential under the circumstances of its disclosure. Without limiting the foregoing, all information of the types referred to in the immediately preceding sentence to the extent used by Republic Wireless or the Republic Wireless Businesses or which constitute Republic Wireless Assets on or prior to the Closing Date will constitute Proprietary Information of Republic Wireless for purposes of this Section 4.6.

(b) Anything contained herein to the contrary notwithstanding, information of a Disclosing Party will not constitute Proprietary Information (and the other party (in this context, the “Receiving Party”) will have no obligation of confidentiality with respect thereto), to the extent such information: (i) is in the public domain other than as a result of disclosure made in breach of this Agreement or breach of any other agreement relating to confidentiality between the Disclosing Party and the Receiving Party;

 

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(ii) was lawfully acquired by the Disclosing Party from a third party not bound by a confidentiality obligation; (iii) is approved for release by prior written authorization of the Disclosing Party, or (iv) is disclosed in order to comply with a judicial order issued by a court of competent jurisdiction, or to comply with the laws or regulations of any governmental authority having jurisdiction over the Receiving Party, in which event the Receiving Party will give prior written notice to the Disclosing Party of such disclosure as soon as or to the extent practicable and will cooperate with the Disclosing Party in using reasonable efforts to disclose the least amount of such information required and to obtain an appropriate protective order or equivalent, and provided that the information will continue to be Proprietary Information to the extent it is covered by a protective order or equivalent or is not so disclosed.

4.7 Notices Regarding Transferred Assets. Any transferor of an Asset or Liability in the Restructuring that receives a notice or other communication from any third party, or that otherwise becomes aware of any fact or circumstance, after the Restructuring, relating to such Asset or Liability, will use commercially reasonable efforts to promptly forward the notice or other communication to the transferee thereof or give notice to such transferee of such fact or circumstance of which it has become aware. The parties will cause their respective Subsidiaries to comply with this Section 4.7.

4.8 Treatment Of Payments. The parties agree to treat all payments made pursuant to this Agreement in accordance with Section 4.4 of the Tax Sharing Agreement and to increase or reduce any amount paid hereunder if such payment would have been required to be increased or reduced under such section if it were a payment made pursuant to the Tax Sharing Agreement.

ARTICLE V

CLOSING

5.1 Closing. Unless this Agreement is terminated and the transactions contemplated by this Agreement abandoned pursuant to the provisions of Article VI, and subject to the satisfaction or waiver of all conditions set forth in each of Sections 2.2 and 5.2, the closing of the Distribution (the “Closing”) will take place at the offices of BW, at 900 Main Campus Drive, Suite 500, Raleigh, North Carolina, at a mutually acceptable time and date to be determined by BW (the “Closing Date”).

5.2 Conditions to Closing.

(a) The obligations of the parties to complete the transactions provided for herein are conditioned upon the satisfaction or, if applicable, waiver of the conditions set forth in Section 2.2.

(b) The performance by each party of its obligations hereunder is further conditioned upon:

(i) the performance in all material respects by the other party of its covenants and agreements contained herein to the extent such are required to be performed at or prior to the Closing; and

(ii) the representations and warranties of the other party being true and complete in all material respects as of the Closing Date with the same force and effect as if made at and as of the Closing Date.

 

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5.3 Deliveries at Closing.

(a) BW. At the Closing, BW will deliver or cause to be delivered to Republic Wireless:

(i) the Tax Sharing Agreement and the Employee Matters Agreement, each duly executed by an authorized officer of BW;

(ii) the Services Agreement duly executed by an authorized officer of BW;

(iii) the Facilities Sharing Agreement duly executed by an authorized officer of BW;

(iv) a secretary’s certificate certifying that the BW Board has authorized the execution, delivery and performance by BW of this Agreement, the Restructuring Agreements and the Other Agreements, which authorization will be in full force and effect at and as of the Closing; and

(v) such other documents and instruments as Republic Wireless may reasonably request.

(b) Republic Wireless. At the Closing, Republic Wireless will deliver or cause to be delivered to BW:

(i) the Tax Sharing Agreement and the Employee Matters Agreement, each duly executed by an authorized officer of Republic Wireless;

(ii) the Services Agreement duly executed by an authorized officer of Republic Wireless;

(iii) the Facilities Sharing Agreement duly executed by an authorized officer of Republic Wireless;

(iv) a secretary’s certificate certifying that the Republic Wireless Board has authorized the execution, delivery and performance by Republic Wireless of this Agreement, the Restructuring Agreements and the Other Agreements, which authorizations will be in full force and effect at and as of the Closing; and

(v) such other documents and instruments as BW may reasonably request.

ARTICLE VI

TERMINATION

6.1 Termination. This Agreement may be terminated and the transactions contemplated hereby may be amended, modified, supplemented or abandoned at any time prior to the Effective Time by and in the sole and absolute discretion of BW without the approval of Republic Wireless. For the avoidance of doubt, from and after the Effective Time, this Agreement may not be terminated (or any provision hereof modified, amended or waived) without the written agreement of all the parties.

6.2 Effect of Termination. In the event of any termination of this Agreement in accordance with Section 6.1, this Agreement will immediately become void and the parties will have no Liability whatsoever to each other with respect to the transactions contemplated hereby.

 

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ARTICLE VII

MISCELLANEOUS

7.1 Definitions.

(a) For purposes of this Agreement, the following terms have the corresponding meanings:

“Action” means any demand, action, claim, suit, countersuit, litigation, arbitration, prosecution, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding), hearing, inquiry, audit, examination or investigation whether or not commenced, brought, conducted or heard by or before, or otherwise involving, any court, grand jury or other governmental authority or any arbitrator or arbitration panel.

“Affiliates” means with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such first Person; provided, that, for any purpose hereunder, in each case both before and after the Effective Time, none of the Persons listed in clause (i) or (ii) will be deemed to be Affiliates of any Person listed in any other such clause: (i) Republic Wireless taken together with its Subsidiaries and any of their respective Investees, or (ii) BW taken together with its Subsidiaries and their respective Investees.

“Assets” means assets, properties, interests and rights (including goodwill), wherever located, whether real, personal or mixed, tangible or intangible, movable or immovable, in each case whether or not required by GAAP to be reflected in financial statements or disclosed in the notes thereto.

“BW Board” means the Board of Directors of BW or a duly authorized committee thereof.

“BW Charter” means the Restated Certificate of Incorporation of BW, as in effect immediately prior to the Distribution Date.

“BW Entity” or “BW Entities” means and includes each of BW and its Subsidiaries (other than the Republic Wireless Entities), after giving effect to the Restructuring.

“BW Retained Assets” means all Assets which are held at the Effective Time by BW.

“BW Retained Businesses” means all businesses which are held at the Effective Time by BW.

“BW Retained Liabilities” means all Liabilities which are held at the Effective time by BW.

“BW Option” means an option to purchase shares of Bandwidth Stock pursuant to either of BW’s 2001 Stock Option Plan or BW’s 2010 Equity Compensation Plan, each as amended through and until the Effective Time.

“BW” means Bandwidth.com, Inc.

“Contribution” has the meaning given to such term in the Restructuring Plan.

“Control” means, with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through ownership of securities or partnership, membership, limited liability company, or other ownership interests, by contract or otherwise and the terms “Controlling” and “Controlled” have meanings correlative to the foregoing.

 

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“DGCL” means the Delaware General Corporation Law.

“Effective Time” means the time at which the Distribution will be effective.

“Employee Matters Agreement” means the Employee Matters Agreement to be entered into between BW and Republic Wireless, substantially in the form attached hereto as Exhibit E.

“Facilities Sharing Agreement” means the Facilities Sharing Agreement to be entered into between BW and Republic Wireless, substantially in the form attached hereto as Exhibit A.

“GAAP” means generally accepted accounting principles as in effect from time to time in the United States, consistently applied.

“Governmental Authorization” means any authorization, approval, consent, license, certificate or permit issued, granted, or otherwise made available under the authority of any court, governmental or regulatory authority, agency, stock exchange, commission or body.

“IRS” means the Internal Revenue Service.

“Investee” of any Person means any Person in which such first Person owns or controls an equity or voting interest.

“Liabilities” means any and all debts, liabilities, commitments and obligations, whether or not fixed, contingent or absolute, matured or unmatured, direct or indirect, liquidated or unliquidated, accrued or unaccrued, known or unknown, and whether or not required by GAAP to be reflected in financial statements or disclosed in the notes thereto (other than taxes).

“Losses” means any and all damages, losses, deficiencies, Liabilities, penalties, judgments, settlements, claims, payments, fines, interest, costs and expenses (including the fees and expenses of any and all actions and demands, assessments, judgments, settlements and compromises relating thereto and the costs and expenses of attorneys’, accountants’, consultants’ and other professionals’ fees and expenses incurred in the investigation or defense thereof or in asserting, preserving or enforcing an Indemnitee’s rights hereunder), whether in connection with a Third-Party Claim or otherwise.

“Order” means any order, injunction, judgment, decree or ruling of any court, governmental or regulatory authority, agency, commission or body.

“Person” means any individual, corporation, company, partnership, trust, incorporated or unincorporated association, joint venture or other entity of any kind.

“Republic Wireless Assets” means the Assets described on Schedule 2 attached hereto.

“Republic Wireless Board” means the Board of Directors of Republic Wireless or a duly authorized committee thereof.

“Republic Wireless Businesses” means the Republic Wireless business, as more completely described on Schedule 3 attached hereto.

 

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“Republic Wireless Charter” means the Restated Certificate of Incorporation of Republic Wireless to be filed with the Delaware Secretary of State immediately prior to the Effective Time, substantially in the form attached hereto as Exhibit C.

“Republic Wireless Entity” or “Republic Wireless Entities” means and includes each of Republic Wireless and its Subsidiaries, after giving effect to the Restructuring.

“Republic Wireless Liabilities” means all Liabilities of BW relating to the Republic Wireless Businesses, as more completely described on Schedule 4 attached hereto.

“Republic Wireless Option” means any option to purchase shares of Republic Wireless Stock issued pursuant to the Republic Wireless Equity Compensation Plan.

“Republic Wireless Equity Compensation Plan” means the Republic Wireless, Inc. 2016 Equity Compensation Plan.

“Restructuring Plan” means the Restructuring Plan attached hereto as Schedule 1.

“SEC” means the Securities and Exchange Commission.

“Securities Act” means the Securities Act of 1933, as amended, together with all rules and regulations promulgated thereunder.

“Services Agreement – BW for RW” means the Transition Services Agreement to be entered into between BW and Republic Wireless, substantially in the form attached hereto as Exhibit B-1.

“Services Agreement – RW for BW” means the Transition Services Agreement to be entered into between BW and Republic Wireless, substantially in the form attached hereto as Exhibit B-2.

“Subsidiary” when used with respect to any Person, means (i)(A) a corporation a majority in voting power of whose share capital or capital stock with voting power, under ordinary circumstances, to elect directors is at the time, directly or indirectly, owned by such Person, by one or more Subsidiaries of such Person, or by such Person and one or more Subsidiaries of such Person, whether or not such power is subject to a voting agreement or similar encumbrance, (B) a partnership or limited liability company in which such Person or a Subsidiary of such Person is, at the date of determination, (1) in the case of a partnership, a general partner of such partnership with the power affirmatively to direct the policies and management of such partnership or (2) in the case of a limited liability company, the managing member or, in the absence of a managing member, a member with the power affirmatively to direct the policies and management of such limited liability company, or (C) any other Person (other than a corporation) in which such Person, one or more Subsidiaries of such Person or such Person and one or more Subsidiaries of such Person, directly or indirectly, at the date of determination thereof, has or have (1) the power to elect or direct the election of a majority of the members of the governing body of such Person, whether or not such power is subject to a voting agreement or similar encumbrance, or (2) in the absence of such a governing body, at least a majority ownership interest or (ii) any other Person of which an aggregate of 50% or more of the equity interests are, at the time, directly or indirectly, owned by such Person and/or one or more Subsidiaries of such Person. For purposes of this Agreement, both prior to and after the Effective Time, none of Republic Wireless and its Subsidiaries will be deemed to be Subsidiaries of BW or any of its Subsidiaries.

 

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“Tax Sharing Agreement” means the Tax Sharing Agreement to be entered into between BW and Republic Wireless, substantially in the form attached hereto as Exhibit D.

“Treasury Regulations” means the Treasury regulations promulgated under the Code.

7.2 No Third-Party Rights. Except for the indemnification rights of the BW Indemnified Persons and the Republic Wireless Indemnified Persons pursuant to Section 4.1, nothing expressed or referred to in this Agreement is intended or will be construed to give any Person other than the parties hereto and their respective successors and assigns any legal or equitable right, remedy or claim under or with respect to this Agreement, or any provision hereof, it being the intention of the parties hereto that this Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their respective successors and assigns.

7.3 Notices. All notices and other communications hereunder will be in writing and will be delivered in person, by facsimile (with confirming copy sent by one of the other delivery methods specified herein), by overnight courier or sent by certified, registered or express air mail, postage prepaid, and will be deemed given when so delivered in person, or when so received by facsimile or courier, or, if mailed, three (3) calendar days after the date of mailing, as follows:

 

if to any BW Entity:		Bandwidth.com, Inc.
		900 Main Campus Drive, Suite 400 Raleigh, NC 27606 Attention: Legal Department Fax: 919.239.9903
if to any Republic Wireless Entity:		Republic Wireless, Inc.
		900 Main Campus Drive, Suite 500 Raleigh, NC 27606 Attention: Legal Department Fax: 919.670.3115

or to such other address as the party to whom notice is given may have previously furnished to the other party in writing in the manner set forth above.

7.4 Entire Agreement. This Agreement (including the Exhibits and Schedules attached hereto) together with the Restructuring Agreements and the Other Agreements (including the Tax Sharing Agreement) embodies the entire understanding among the parties relating to the subject matter hereof and thereof and supersedes and terminates any prior agreements and understandings among the parties with respect to such subject matter, and no party to this Agreement will have any right, responsibility or Liability under any such prior agreement or understanding. Any and all prior correspondence, conversations and memoranda are merged herein and will be without effect hereon. No promises, covenants or representations of any kind, other than those expressly stated herein, have been made to induce either party to enter into this Agreement.

7.5 Binding Effect; Assignment. This Agreement and all of the provisions hereof will be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Except with respect to a merger of a party, neither this Agreement nor any of the rights, interests or obligations hereunder will be assigned by any party hereto without the prior written consent of the other parties; provided, however, that BW and Republic Wireless may assign their respective rights, interests, duties, liabilities and obligations under this Agreement to any of their respective wholly-owned Subsidiaries, but such assignment will not relieve BW or Republic Wireless, as the assignor, of its obligations hereunder.

 

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7.6 Governing Law; Jurisdiction. This Agreement and the legal relations among the parties hereto will be governed in all respects, including validity, interpretation and effect, by the laws of the State of Delaware applicable to contracts made and performed wholly therein, without giving effect to any choice or conflict of laws provisions or rules that would cause the application of the laws of any other jurisdiction. Each of the parties hereto irrevocably agrees that any legal action or proceeding with respect to this Agreement, and the rights and obligations arising hereunder, or for recognition and enforcement of any judgment in respect of this Agreement, and the rights and obligations arising hereunder brought by the other party hereto or its successors or assigns, will be brought and determined exclusively in the Delaware Court of Chancery and any state appellate court therefrom within the State of Delaware (or, if the Delaware Court of Chancery declines to accept jurisdiction over a particular matter, any state or federal court within the State of Delaware). Each of the parties hereto hereby irrevocably submits with regard to any such action or proceeding for itself and in respect of its property, generally and unconditionally, to the personal jurisdiction of the aforesaid courts and agrees that it will not bring any action relating to this Agreement or the transactions contemplated hereby in any court other than the aforesaid courts. Each of the parties hereto hereby irrevocably waives, and agrees not to assert as a defense, counterclaim or otherwise, in any action or proceeding with respect to this Agreement (a) any claim that it is not personally subject to the jurisdiction of the above named courts for any reason other than the failure to serve in accordance with Section 7.3 and this Section 7.6, (b) any claim that it or its property is exempt or immune from jurisdiction of any such court or from any legal process commenced in such courts (whether through service of notice, attachment prior to judgment, attachment in aid of execution of judgment, execution of judgment or otherwise) and (c) to the fullest extent permitted by applicable law, any claim that (i) the suit, action or proceeding in such court is brought in an inconvenient forum, (ii) the venue of such suit, action or proceeding is improper or (iii) this Agreement or the subject matter hereof may not be enforced in or by such courts. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 7.3 will be deemed effective service of process on such party.

7.7 Waiver of Jury Trial. EACH PARTY ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND, THEREFORE, EACH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH OR RELATING TO THIS AGREEMENT. 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 SUCH ACTION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS 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 7.7.

7.8 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof. Any such prohibition or unenforceability in any jurisdiction will not invalidate or render unenforceable such provision in any other

 

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jurisdiction. Upon a determination that any provision of this Agreement is prohibited or unenforceable in any jurisdiction, the parties will negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the provisions contemplated hereby are consummated as originally contemplated to the fullest extent possible.

7.9 Amendments; Waivers. Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement, or in the case of a waiver, by the party against whom the waiver is to be effective. No failure or delay by any party in exercising any right, power or privilege hereunder will operate as a waiver thereof nor will any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. Except as otherwise provided herein, the rights and remedies herein provided will be cumulative and not exclusive of any rights or remedies provided by applicable law. Any consent provided under this Agreement must be in writing, signed by the party against whom enforcement of such consent is sought.

7.10 No Strict Construction; Interpretation.

(a) BW and Republic Wireless each acknowledge that this Agreement has been prepared jointly by the parties hereto and will not be strictly construed against any party hereto.

(b) When a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference will be to an Article of, a Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and will not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include”, “includes” or “including” are used in this Agreement, they will be deemed to be followed by the words “without limitation.” The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement will refer to this Agreement as a whole and not to any particular provision of this Agreement. All terms defined in this Agreement will have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. References to a Person are also to its permitted successors and assigns and references to a party means a party to this Agreement.

7.11 Conflicts with Tax Sharing Agreement. In the event of a conflict between this Agreement and the Tax Sharing Agreement, the provisions of the Tax Sharing Agreement will prevail.

7.12 Counterparts. This Agreement may be executed in two or more identical counterparts, each of which will be deemed to be an original, and all of which together will constitute one and the same agreement. The Agreement may be delivered by facsimile transmission of a signed copy thereof.

(The remainder of this page is intentionally left blank.)

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first above written.

 

[SIGNATURE PAGE TO REORGANIZATION AGREEMENT]

 

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LIST OF EXHIBITS AND SCHEDULES

 

Exhibit A		—		Facilities Sharing Agreement
Exhibit B-1		—		Transition Services Agreement – BW for RW
Exhibit B-2		—		Transition Services Agreement – RW for BW
Exhibit C		—		Republic Wireless Charter
Exhibit D		—		Tax Sharing Agreement
Exhibit E		—		Employee Matters Agreement
Schedule 1		—		Restructuring Plan
Schedule 2		—		Republic Wireless Assets
Schedule 3		—		Republic Wireless Businesses
Schedule 4		—		Republic Wireless Liabilities

 

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SCHEDULE 1

RESTRUCTURING PLAN

The Restructuring Plan includes the following steps in the following order:

 

•

Bandwidth.com, Inc. (“BW”) will contribute and assign to Republic Wireless, Inc. (“Republic Wireless”) the following: (1) the Republic Wireless Assets, (2) the Republic Wireless Liabilities, (3) the Republic Wireless Businesses, and (4) $30,000,000.00.

 

•

Republic Wireless will accept the Republic Wireless Assets, the Republic Wireless Businesses and $30,000,000.00 and will assume the Republic Wireless Liabilities.

 

•

In consideration for the contribution and assignment as contemplated above, RW also will issue to BW the following: (1) 5,421,988 of shares of the Class A Voting Common Stock of RW; and (2) 7,436 of shares of the Class B Non-Voting Common Stock of RW (collectively, the “RW Equity”).

 

•

Immediately following receipt of the RW Equity, BW will distribute the RW Equity pro rata to the holders of BW’s capital stock in accordance with resolutions approved by the Board of Directors of BW and by the holders of the Series A Preferred Stock of BW as follows: (1) at a rate of one share of Republic Wireless Class A Voting Common Stock for every share of BW Class A Voting Common Stock outstanding on the record date established by the BW Board of Directors, (2) at a rate of one share of Republic Wireless Class B Non-Voting Common Stock for every share of BW Class B Non-Voting Common Stock outstanding on the record date established by the BW Board of Directors, and (3) at a rate of one share of Republic Wireless Class A Voting Common Stock for every share of BW Series A Preferred Stock outstanding on the record date established by the BW Board of Directors, each subject to the conditions and provisions set forth by the BW Board of Directors.

 

•

In consideration for the contribution and assignment as contemplated above, Republic Wireless also will cause the issuance to the holders of options to purchase shares of BW a corresponding number of options to purchase shares of Republic Wireless’ Class A Voting Common Stock and Class B Non-Voting Common Stock as follows: (1) various stock options are outstanding under the BW 2001 Stock Option Plan and the BW Equity Compensation Plan (the “Bandwidth Options”); (2) in connection with the Spin-Off, it is intended that each Bandwidth Option shall be divided into two components: (i) a stock option outstanding with BW (the “Adjusted Bandwidth Option”), and (ii) a stock option granted under the Plan (the “Republic Wireless Option”); and (3) it is intended that the exercise prices of and number of shares of stock covered by each Adjusted Bandwidth Option and Republic Wireless Option shall be set in a manner that allocates the pre-Spin-Off intrinsic value of the corresponding Bandwidth Option between the Adjusted Bandwidth Option and the Republic Wireless Option in the manner described in the “Confidential Notice to Holders of Options to Purchase Shares of the Common Stock of Bandwidth.com, Inc.”

 

•

In consideration for the contribution and assignment as contemplated above, Republic Wireless also will cause the issuance to the holders of warrants to purchase shares of BW a corresponding number of warrants to purchase shares of Republic Wireless’ Class A Voting Common Stock as follows: (1) various warrants are outstanding (the “Bandwidth Warrants”); (2) in connection with the Spin-Off, it is intended that each Bandwidth Warrant shall be divided into two components: (i) a warrant outstanding with BW (the “Adjusted Bandwidth Warrant”), and (ii) a warrant outstanding with Republic Wireless (the “Republic Wireless Warrant”); and (3) it is intended that the exercise prices of and number of shares of stock covered by each Adjusted Bandwidth Warrant and Republic Wireless Warrant shall be set in a manner that allocates the pre-Spin-Off intrinsic value of the corresponding Bandwidth Warrant between the Adjusted Bandwidth Warrant and the Republic Wireless Warrant in such manner; provided, however, if any

 

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Bandwidth Warrant has an exercise price per share equal to or less than $0.01 per share, then the exercise price of the Adjusted Bandwidth Warrant and the Republic Warrant each shall have an exercise price equal to the exercise price per share of the original Bandwidth Warrant.

 

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SCHEDULE 2

REPUBLIC WIRELESS ASSETS

The Republic Wireless Assets mean and include the following:

Tangible Assets:

All tangible assets directly related to the Republic Wireless Business, including, without limitation, such tangible assets described on the list attached hereto as Schedule 1A.

Patents:

All U.S. patent applications, issued patents, PCT patent applications, and foreign patent applications or patents listed in the attached Schedule 1B.

Trademarks:

All U.S. trademark applications and trademark registrations listed in the attached Schedule 1C.

Other Intellectual Property:

All software, source code, object code, executable code, data, customer data, research and development (R&D) materials, copyrights, trade secrets, websites, domain names, blogs, and knowhow and all intellectual property associated therewith, to the extent owned by Bandwidth immediately prior to the transactions contemplated by the Agreement to which this Schedule 2 is attached, directly related to the Republic Wireless Business, including, without limitation, such assets described on the attached Schedule 1D.

Miscellaneous:

All of the following, to the extent owned by BW immediately prior to the transactions contemplated by the Agreement to which this Schedule 2 is attached:

 

•

All data owned and collected by Republic Wireless, including what is contained in Atlas. The link to Atlas’s database is http://54.164.56.156/docs/atlas_doc.html

 

•

All supply chain data related to the Republic Wireless Business, including, without limitation, the Supply Chain Data Category List on the attached Schedule 1E

 

•

All customer data related to current or former customers of the Republic Wireless Business

 

•

All marketing deliverables, information, data, and offers related to the Republic Wireless Business

 

•

All data related to the provision of Republic Wireless HR services, including, without limitation, all onboarding documentation, policies, and/or any recruitment material; provided, however, nothing herein is intended to preclude BW from the continued ownership and use of substantially similar materials used by BW in the operation of its business and from which such documentation, policies and/or material was or may have been derived

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•

All information, posts, blogs, help topics, and other information in the Republic Wireless Community Forum

 

•

All systems and models related to the Republic Wireless Business, including, without limitation, (1) Opsware and all source code related to Opsware; (2) all models used by finance to operate, predict, and manage the Republic Wireless Business; (3) all systems and models related to customer relationship management, quote and ordering of Republic Wireless products and services; (4) all human resources related systems; provided, however, nothing herein is intended to preclude BW from the continued ownership and use of substantially similar materials used by BW in the operation of its business and from which such systems and/or models was or may have been derived

 

•

All processes used in connection with the operation of the Republic Wireless Business, including but not limited to the attached Supply Chain Process List on the attached Schedule 1F; provided, however, nothing herein is intended to preclude BW from the continued ownership and use of substantially similar processes used by BW in the operation of its business and from which such processes were or may have been derived

 

•

All contracts, forms, agreements, and training documents used in connection with the operation of the Republic Wireless Business; provided, however, nothing herein is intended to preclude BW from the continued ownership and use of substantially similar materials used by BW in the operation of its business and from which such documents and/or documentation was or may have been derived

 

•

All contracts and relationships, including but not limited to (1) any applicable contracts with any customer of the Republic Wireless Businesses; and (2) the contract list attached hereto as Schedule 1G

 

•

All corporate memberships, associations, forums related to the Republic Wireless Business

 

•

All third party work on products and features designed for the Republic Wireless Business, including, without limitation, all software, designs, specifications, blueprints, ideas, knowhow, work product

 

•

Packaging of products, documentation, SIM card and SIM card documentation/design

 

•

Inventory at ModusLink and any associated tools, processes, materials and packaging, including, without limitation, the inventory described on Schedule 1H attached hereto

 

•

Security, code management, and similar tools, including, without limitation, what is commonly referred to as Ada.

 

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SCHEDULE 3

REPUBLIC WIRELESS BUSINESSES

All of the business(es) operated by the Republic Wireless business unit of Bandwidth.com, Inc., immediately prior to the Distribution, including, without limitation, (1) the business(es) described at republicwireless.com, and (2) those business(es) related to product(s) and/or service(s) not yet made available to the public by the Republic Wireless business (for example, Republic Anywhere, Republic Home, and any other similar product(s) and/or service(s)); provided, however, the “Republic Wireless Businesses” do not include the product and/or service commonly known as “Phonebooth” (for the purposes of this Schedule 3, “Phonebooth” does not include, if applicable, Phonebooth Mobile, which will, if applicable, be included within the Republic Wireless Businesses).

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SCHEDULE 4

REPUBLIC WIRELESS LIABILITIES

Republic Wireless Liabilities means all Liabilities of BW relating to the Republic Wireless Businesses, including, without limitation, the following:

 

•

All liabilities and obligations to any current or former customer of the Republic Wireless Businesses, including, without limitation, any failure or alleged failure attributable to any products and/or services provided or sold by the Republic Wireless Businesses from time to time;

 

•

All liabilities, obligations and/or payables related to the contracts assigned to and assumed by Republic Wireless;

 

•

All liabilities and/or obligations due to any actual or alleged infringement of any patents, service marks, trademarks and/or other intellectual property of any third party attributable to any products and/or services provided or sold by the Republic Wireless Businesses from time to time; and

 

•

All liabilities for any taxes, fees, or surcharges due or payable in connection with the Republic Wireless Businesses (excluding any such taxes, fees or surcharges calculated on the basis of the net income of BW).

Exhibit 4.2

BANDWIDTH.COM, INC.

INVESTORS’ RIGHTS AGREEMENT

FEBRUARY 22, 2011

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TABLE OF CONTENTS

 

		Page
1. DEFINITIONS			1
1.1. “Affiliate”			1
1.2. “Common Stock”			1
1.3. “Damages”			2
1.4. “Derivative Securities”			2
1.5. “Exchange Act”			2
1.6. “Excluded Registration”			2
1.7. “Form S-1”			2
1.8. “Form S-3”			2
1.9. “GAAP”			2
1.10. “Holder”			2
1.11. “Immediate Family Member”			2
1.12. “Initiating Holders”			2
1.13. “IPO”			3
1.14. “Key Employee”			3
1.15. “Key Holder Registrable Securities”			3
1.16. “New Securities”			3
1.17. “Person”			3
1.18. “Registrable Securities”			3
1.19. “Registrable Securities then outstanding”			3
1.20. “Restricted Securities”			4
1.21. “SEC”			4
1.22. “SEC Rule 144”			4
1.23. “SEC Rule 145”			4
1.24. “Securities Act”			4
1.25. “Selling Expenses”			4
1.26. “Series A Director”			4
1.27. “Series A Preferred Stock”			4
2. REGISTRATION RIGHTS			5
2.1. Demand Registration			5
2.2. Company Registration			6
2.3. Underwriting Requirements			7
2.4. Obligations of the Company			8
2.5. Furnish Information			9
2.6. Expenses of Registration			10
2.7. Delay of Registration			10
2.8. Indemnification			10
2.9. Reports Under Exchange Act			12
2.10. Limitations on Subsequent Registration Rights			13
2.11. “Market Stand-off” Agreement			13
2.12. Restrictions on Transfer			14
2.13. Termination of Registration Rights			15

 

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3. INFORMATION AND OBSERVER RIGHTS			16
3.1. Delivery of Financial Statements			16
3.2. Inspection			17
3.3. Advisory Board			17
3.4. Termination of Information, Observer and Advisory Board Rights			17
3.5. Confidentiality			18
4. RIGHTS TO FUTURE STOCK ISSUANCES			18
4.1. Right of First Offer			18
4.2. Termination			19
5. ADDITIONAL COVENANTS			19
5.1. Insurance			19
5.2. Employee Agreements			20
5.3. Employee Stock			20
5.4. Board Matters			20
5.5. Successor Indemnification			20
5.6. Termination of Covenants			21
6. MISCELLANEOUS			21
6.1. Successors and Assigns			21
6.2. Governing Law			21
6.3. Counterparts			21
6.4. Titles and Subtitles			21
6.5. Notices			22
6.6. Amendments and Waivers			22
6.7. Severability			23
6.8. Aggregation of Stock			23
6.9. Entire Agreement			23
6.10. Dispute Resolution			23
6.11. Delays or Omissions			24
6.12. Acknowledgment			24

 

Schedule A		—		Schedule of Investors
Schedule B		—		Schedule of Key Holders
Exhibit A		—		Form of Noncompetition and Nonsolicitation Agreement

 

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INVESTORS’ RIGHTS AGREEMENT

THIS INVESTORS’ RIGHTS AGREEMENT (the “Agreement”) is made as of February 22, 2011, by and among Bandwidth.com, Inc., a Delaware corporation (the “Company”), Carmichael Investment Partners, LLC, a Delaware limited liability company, (individually “Carmichael” or the “Investor” or, together with any subsequent successors or transferees, who become parties hereto pursuant to Section 6.1 below, the “Investors”) and each of the stockholders listed on Schedule B hereto, each of whom is referred to herein as a “Key Holder.”

RECITALS

WHEREAS, the Company and Carmichael are parties to the Series A Preferred Stock Purchase Agreement of even date herewith (the “Purchase Agreement”); and

WHEREAS, in order to induce the Company to enter into the Purchase Agreement and to induce Carmichael to invest funds in the Company pursuant to the Purchase Agreement, Carmichael 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; and

WHEREAS, each Key Holder is a party to a Buy-Sell Agreement by and between such Key Holder and the Company (each a “Buy-Sell Agreement”), which Buy-Sell Agreements include certain rights of the Key Holders to cause the Company to register shares of Common Stock held by such Key Holders, to receive certain information from the Company, and to participate in future equity offerings by the Company, as the case may be; and

WHEREAS, each Key Holder desires to terminate such Buy-Sell Agreement and become a party to this Agreement;

NOW, THEREFORE, the parties hereby agree as follows:

1. Definitions. For purposes of this Agreement:

1.1. “Affiliate” means, with respect to any specified Person, any other Person who, directly or indirectly, controls, is controlled by, or is under common control with such Person, including without limitation any general partner, managing member, officer or director of such Person or any venture capital fund now or hereafter existing that is controlled by one or more general partners or managing members of, or shares the same management company with, such Person.

1.2. “Common Stock” means shares of the Company’s common stock, par value $0.001 per share.

 

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1.3. “Damages” means any loss, damage, or liability (joint or several) to which a party hereto may become subject under the Securities Act, the Exchange Act, or other federal or state law, insofar as such loss, damage, or liability (or any action in respect thereof) arises out of or is based upon (i) any untrue statement or alleged untrue statement of a material fact contained in any registration statement of the Company, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto; (ii) an omission or alleged omission to state therein a material fact required to be stated therein, or necessary 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.

1.4. “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.

1.5. “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

1.6. “Excluded Registration” means (i) a registration relating to the sale of securities to employees of the Company or a subsidiary pursuant to a stock option, stock purchase, or similar plan; (ii) a registration relating to an SEC Rule 145 transaction; (iii) a registration on any form that does not include substantially the same information as would be required to be included in a registration statement covering the sale of the Registrable Securities; or (iv) a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of debt securities that are also being registered.

1.7. “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.

1.8. “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.

1.9. “GAAP” means generally accepted accounting principles in the United States.

1.10. “Holder” means any holder of Registrable Securities who is a party to this Agreement.

1.11. “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.

1.12. “Initiating Holders” means, collectively, Holders who properly initiate a registration request under this Agreement.

 

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1.13. “IPO” means the Company’s first underwritten public offering of its Common Stock under the Securities Act.

1.14. “Key Employee” means any executive-level employee (including division director and vice president-level positions) as well as any employee who, either alone or in concert with others, develops, invents, programs, or designs any Company Intellectual Property (as defined in the Purchase Agreement).

1.15. “Key Holder Registrable Securities” means (i) the outstanding shares of Common Stock held by the Key Holders as of the date hereof (or issuable upon the conversion or exercise of any warrant, right, or other security held by the Key Holders as of the date hereof), (ii) any Common Stock issued (or issuable upon the conversion or exercise of any warrant, right, or other security that is issued) to the Key Holders from or after the date hereof, including, without limitation, upon the conversion or exercise of any warrant, right or other security, and (iii) 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.

1.16. “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.

1.17. “Person” means any individual, corporation, partnership, trust, limited liability company, association or other entity.

1.18. “Registrable Securities” means (i) the Common Stock issuable or issued upon conversion of the Series A 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 or 2.10; 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.

1.19. “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.

1.20. “Restricted Securities” means the securities of the Company required to bear the legend set forth in Subsection 2.12(b) hereof.

 

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1.21. “SEC” means the Securities and Exchange Commission.

1.22. “SEC Rule 144” means Rule 144 promulgated by the SEC under the Securities Act.

1.23. “SEC Rule 145” means Rule 145 promulgated by the SEC under the Securities Act.

1.24. “Securities Act” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.

1.25. “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.

1.26. “Series A Director” means any director of the Company that the holders of record of the Series A Preferred Stock are entitled to elect pursuant to the Company’s Certificate of Incorporation.

1.27. “Series A Preferred Stock” means shares of the Company’s Series A Preferred Stock, par value $0.001 per share.

1.28. “True Sale” means: (a) a merger or consolidation in which (i) the Company is a constituent party, or (ii) a subsidiary of the Company is a constituent party and the Company issues shares of its capital stock pursuant to such merger or consolidation, except any such merger or consolidation involving the Company or a subsidiary in which the shares of capital stock of the Company outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, a majority, by voting power, of the capital stock of (1) the surviving or resulting corporation or (2) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation (provided that, for the purpose of this definition of “True Sale” all shares of Common Stock issuable upon exercise of Options (as defined in the Company’s Certificate of Incorporation) outstanding immediately prior to such merger or consolidation or upon conversion of Convertible Securities (as defined in the Company’s Certificate of Incorporation) outstanding immediately prior to such merger or consolidation shall be deemed to be outstanding immediately prior to such merger or consolidation and, if applicable, converted or exchanged in such merger or consolidation on the same terms as the actual outstanding shares of Common Stock are converted or exchanged); (b) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Company or any subsidiary of the Company of all or substantially all the assets of the Company and its subsidiaries taken as a whole, or the sale or disposition (whether by merger or otherwise) of one or more subsidiaries of the Company if substantially all of the assets of the Company 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

 

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Company; or (c) any other transaction that each of the Investor, James A. Bowen, FT Bandwidth Ventures, LLC and FT Bandwidth Ventures II, LLC agrees in writing constitutes a “True Sale” for the purposes of this Agreement; provided, however, no transaction described in either clause (a) or clause (b) above will constitute a “True Sale” unless, in the case of any transaction described in clause (a) above, all of the consideration to be distributed to the holders of the Company’s capital stock constitutes cash and/or marketable securities or, in the case of any transaction described in clause (b) above, all of the consideration actually paid to the Company constitutes cash and/or marketable securities.

2. Registration Rights. The Company covenants and agrees as follows:

2.1. Demand Registration.

(a) Form S-1 Demand. If at any time after the earlier of (i) five (5) years after the date of this Agreement or (ii) one hundred eighty (180) days after the effective date of the registration statement for the IPO, the Company receives a request from Holders of twenty-five percent (25%) of the Registrable Securities then outstanding that the Company file a Form S-1 registration statement, then the Company shall (i) within ten (10) days after the date such request is given, give notice thereof (the “Demand Notice”) to all Holders other than the Initiating Holders; and (ii) as soon as practicable, and in any event within sixty (60) days after the date such request is given by the Initiating Holders, file a Form S-1 registration statement under the Securities Act covering all Registrable Securities that the Initiating Holders requested to be registered and any additional Registrable Securities requested to be included in 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 twenty percent (20%) 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 $3,000,000, 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 Company’s Board of Directors it would be materially detrimental to the Company and its stockholders for such registration statement to either become effective or remain effective for as long as such registration statement otherwise would be required to remain effective, because such action would (i) materially interfere with a significant acquisition, corporate reorganization,

 

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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 twice 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 period that is sixty (60) days before the Company’s good faith estimate of the date of filing of, and ending on a date that is one hundred eighty (180) days after the effective date of, a Company-initiated registration, provided, that the Company is actively employing in good faith commercially reasonable efforts to cause such registration statement to become effective; (ii) after the Company has effected two registrations pursuant to Subsection 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 Common Stock 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.

 

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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(s) advise(s) the Initiating Holders in writing that marketing factors require a limitation on the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities that otherwise would be underwritten pursuant hereto, and the number of Registrable Securities that may be included in the underwriting shall be allocated among such Holders of Registrable Securities, including the Initiating Holders, in proportion (as nearly as practicable) to the number of Registrable Securities owned by each Holder or in such other proportion as shall mutually be agreed to by all such selling Holders; provided, however, that the number of Registrable Securities held by the Holders to be included in such underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting. To facilitate the allocation of shares in accordance with the above provisions, the Company or the underwriters may round the number of shares allocated to any Holder to the nearest 100 shares.

(b) In connection with any offering involving an underwriting of shares of the Company’s capital stock pursuant to 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, (ii) the number of Registrable Securities included in the offering be reduced below twenty percent

 

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(20%) of the total number of securities included in such offering, unless such offering is the IPO, in which case the selling Holders may be excluded further if the underwriters make the determination described above and no other stockholder’s securities are included in such offering, (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, or (iv) notwithstanding (ii) or (iii) above, any Key Holder Registrable Securities which are held by James A. Bowen, FT Bandwidth Ventures, LLC, and/or FT Bandwidth Ventures II, LLC, be excluded from such underwriting unless all other 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 365 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;

 

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(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.

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.

 

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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 $30,000, 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.

2.7. Delay of Registration. No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any registration pursuant to this Agreement as the result of any controversy that might arise with respect to the interpretation or implementation of this Section 2.

2.8. Indemnification. If any Registrable Securities are included in a registration statement under this Section 2:

(a) To the extent permitted by law, the Company will indemnify and hold harmless each selling Holder, and the partners, members, officers, directors, and stockholders of each such Holder; legal counsel and accountants for each such Holder; any underwriter (as defined in the Securities Act) for each such Holder; and each Person, if any, who controls such Holder or underwriter within the meaning of the Securities Act or the Exchange Act, against any Damages, and the Company will pay to each such Holder, underwriter, controlling Person, or other aforementioned Person any legal or other expenses reasonably incurred thereby in connection with investigating or defending any claim or proceeding from which Damages may result, as such expenses are incurred; provided, however, that the indemnity agreement contained in this 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.

 

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(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.

 

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(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;

 

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(b) use commercially reasonable efforts to file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act (at any time after the Company has become subject to such reporting requirements); and

(c) furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) to the extent accurate, a written statement by the Company that it has complied with the reporting requirements of SEC Rule 144 (at any time after ninety (90) days after the effective date of the registration statement filed by the Company for the IPO), the Securities Act, and the Exchange Act (at any time after the Company has become subject to such reporting requirements), or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after the Company so qualifies); 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 a majority of the Registrable Securities then outstanding, enter into any agreement with any holder or prospective holder of any securities of the Company that would (i) 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 6.9.

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, 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 2711(f)(4) or NYSE Rule 472(f)(4), or any successor provisions or amendments thereto), (i) lend; offer; pledge; sell; contract to sell; sell any option or contract to purchase; purchase any option or contract to sell; grant any option, right, or warrant to purchase; or otherwise transfer or dispose of, directly or indirectly, any shares of Common Stock or any securities convertible into or exercisable or exchangeable (directly or indirectly) for Common Stock held immediately before the effective date of the registration statement for such offering 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

 

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securities, in cash, or otherwise. The foregoing provisions of this Subsection 2.11 shall apply only to the IPO, shall not apply to the sale of any shares 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 uses commercially reasonable efforts to obtain a similar agreement from all stockholders individually owning more than one percent (1%) of the Company’s outstanding Common Stock (after giving effect to conversion into Common Stock of all outstanding Series A 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 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 Series A 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 Series A 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 Series A 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.

 

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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; provided, however, no such opinion of legal counsel will be required in connection with any sale, pledge or transfer to which the provisions of Subsections 2.1 and 2.2 of the Right of First Refusal and Co-Sale Agreement, dated as of the date hereof, by and among the Company, the Investor and the Key Holders named therein, do not apply pursuant to the terms and conditions of Section 3 of such Right of First Refusal and Co-Sale Agreement; (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.

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) a True Sale;

 

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(b) 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.

3. Information and Observer Rights.

3.1. Delivery of Financial Statements to Carmichael; Related Matters. The Company shall deliver to Carmichael:

(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 a comparison between (x) the actual amounts as of and for such fiscal year and (y) the comparable amounts for the prior year and as included in the Budget (as defined in Subsection 3.1(e)) for such year, with an explanation of any material differences between such amounts and a schedule as to the sources and applications of funds for such year, and (iii) a statement of stockholders’ equity as of the end of such year, all such financial statements audited and certified by independent public accountants reasonably acceptable to Carmichael (for clarity, Grant Thornton LLP will be deemed reasonably acceptable to Carmichael).

(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 forty-five (45) days after the end of each quarter of each fiscal year of the Company, a statement showing the number of shares of each class and series of capital stock and securities convertible into or exercisable for shares of capital stock outstanding at the end of the period, the Common Stock issuable upon conversion or exercise of any outstanding securities convertible or exercisable for Common Stock and the exchange ratio or exercise price applicable thereto, and the number of shares of issued stock options and stock options not yet issued but reserved for issuance, if any, all in sufficient detail as to permit Carmichael to calculate its respective percentage equity ownership in the Company;

(d) as soon as practicable, but in any event within thirty (30) days of the end of each month, an unaudited income statement and statement of cash flows for such month, and an unaudited balance sheet and statement of stockholders’ equity as of the end of such month, 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); and

 

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(e) as soon as practicable, but in any event before the end of each fiscal year, a budget and business plan for the next fiscal year (collectively, the “Budget”), approved by the Board of Directors and 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.

(f) 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.

(g) 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; 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.

3.2. Delivery of Financial Statements to Key Holders. The Company shall deliver to each Key Holder:

(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 audited and certified by the Company’s independent public accountants; and

(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).

3.3. Inspection. The Company shall permit Carmichael, at Carmichael’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 Carmichael and with reasonable advance notification; provided, however, that the Company shall not be obligated pursuant to this Subsection 3.3 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.

3.4. Advisory Board. As long as Carmichael owns not less than 250,000 shares of Series A Preferred Stock (or an equivalent amount of Common Stock issued upon conversion thereof) (subject to appropriate adjustment for stock splits, stock dividends, combinations, and other recapitalizations), Carmichael shall have the right to appoint two (2) members to the Company’s Advisory Board. The Company covenants and agrees to convene at least four (4) meetings of the Advisory Board each fiscal year.

 

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3.5. Termination of Information, Inspection and Advisory Board Rights. The covenants set forth in Subsection 3.1, Subsection 3.3, Subsection 3.3 and Subsection 3.4 shall terminate and be of no further force or effect (i) immediately before the consummation of the IPO, (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 True Sale, whichever event occurs first.

3.6. 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 from the Company pursuant to the terms of this Agreement (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 3.6 by such Investor), (b) is or has been independently developed or conceived by the Investor without use of 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; (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 3.6; (iii) to any existing or prospective Affiliate, 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 required by law, provided that the Investor promptly notifies the Company of such disclosure and takes reasonable steps to minimize the extent of any such required disclosure.

4. Rights to Future Stock Issuances.

4.1. Right of First Refusal. 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 grant to each of Carmichael and each Key Holder the right of first refusal to purchase, on the terms and conditions set forth in the Company’s Offer Notice (as defined below), up to that portion of such New Securities which equals the proportion that the Common Stock issued and held, or issuable (directly or indirectly) upon conversion and/or exercise, as applicable, of the Series A Preferred Stock and any other Derivative Securities then held, by Carmichael or such Key Holder, as the case may be, bears to the total Common Stock of the Company then outstanding (assuming full conversion and/or exercise, as applicable, of all Series A Preferred Stock and other Derivative Securities). Carmichael and each Key Holder shall be entitled to apportion the right of first refusal hereby granted to it among itself and its Affiliates in such proportions as it deems appropriate.

 

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(a) In the event the Company proposes to undertake an issuance of New Securities, the Company will give Carmichael and each Key Holder written notice (the “Offer Notice”) of its intention, describing (i) the type of New Securities which the Company proposes to issue, (ii) the number of such New Securities which the Company proposes to issue, and (iii) the price and terms, if any, upon which it proposes to offer such New Securities.

(b) Carmichael and each Key Holder will have thirty (30) days from the date of any such Offer Notice to exercise its right of first refusal pursuant to this Subsection 4.1 hereof for the price and upon the general terms specified in the Offer Notice by written notice to the Company stating therein the quantity of New Securities to be purchased by Carmichael or such Key Holder, as the case may be. The closing of any sale pursuant to this Subsection 4.1(b) shall occur within ninety (90) days of the date that the Offer Notice is given.

(c) The Company may, during the ninety (90) day period following the expiration of the period provided in Subsection 4.1(b), offer and sell all such New Securities respecting which the rights of first refusal of Carmichael or any Key Holder, as the case may be, were not exercised, at a price and upon terms no more favorable in any material respect to the purchasers thereof than specified in the Offer Notice. If the Company has not sold all such New Securities within such ninety (90) day period following the expiration of the period provided in Subsection 4.1(b), the Company will not thereafter issue or sell any New Securities without first notifying Carmichael and the Key Holders in accordance with this Subsection 4.1.

(d) The right of first refusal in this Subsection 4.1 shall not be applicable to (i) Exempted Securities (as defined in the Company’s Certificate of Incorporation); (ii) New Securities issued to Carmichael and/or James A. Bowen from time to time due to or in connection with the issuance of New Securities (including, without limitation, Exempted Securities) to the Company’s directors, employees, independent contractors, and/or advisors, or (iii) shares of Common Stock issued in the IPO.

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 the IPO, (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 True Sale, whichever event occurs first.

5. Additional Covenants. The Company covenants and agrees with Carmichael as follows:

5.1. Insurance. The Company shall use its commercially reasonable efforts to obtain, within thirty (30) days of the date hereof, from financially sound and reputable insurers Directors and Officers liability insurance and term “key-person” insurance on David A. Morken, each in an amount and on terms and conditions satisfactory to the Board of Directors, including the Series A Director, 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 including the Series A Director.

 

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5.2. Employee Agreements. The Company will cause (i) 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 and (ii) each Key Employee who receives options to purchase shares of the Company’s Common Stock to enter into a one (1) year noncompetition and nonsolicitation agreement, substantially, in the form attached hereto as Exhibit A. In addition, the Company shall not amend, modify, terminate, waive, or otherwise alter, in whole or in part, any of the above-referenced agreements or any restricted stock agreement between the Company and any employee, without the consent of the Series A Director.

5.3. 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 Company’s IPO and shall have the right to repurchase unvested shares at cost upon termination of employment of a holder of restricted stock.

5.4. Board Matters. Unless otherwise determined by the vote of a majority of the directors then in office, the Board of Directors shall meet at least quarterly in accordance with an agreed-upon schedule. The Company shall reimburse the nonemployee directors for all reasonable out-of-pocket travel expenses incurred (consistent with the Company’s travel policy) in connection with attending meetings of the Board of Directors. The Company shall cause to be established, as soon as practicable after such request, and will maintain, an audit and compensation committee, each of which shall include the Series A Director. The Series A Director shall be entitled in such person’s discretion to be a member of any Board committee. The Company shall use commercially reasonable efforts, in a manner reasonably determined by the Company’s Board of Directors to appropriately position the Company in anticipation of any then-current plans to file a registration statement in connection with an initial public offering of the Company’s Common Stock, to identify suitable persons who are not employed by the Company to serve as independent directors, each of whom will be elected by the holders of the Company’s Common Stock.

5.5. Successor Indemnification. If the Company or any of its successors or assignees consolidates with or merges into any other Person and is not the continuing or surviving corporation or entity of such consolidation or merger, then to the extent necessary, proper provision shall be made so that the successors and assignees of the Company assume the obligations of the Company with respect to indemnification of members of the Board of Directors as in effect immediately before such transaction, whether such obligations are contained in the Company’s Bylaws, its Certificate of Incorporation, or elsewhere, as the case may be.

 

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5.6. Termination of Covenants. The covenants set forth in this Section 5, except for Subsection 5.5, shall terminate and be of no further force or effect (i) immediately before the consummation of the IPO, (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 True Sale, whichever event occurs first.

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; (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 30,000 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 and any controversy arising out of or relating to this Agreement shall be governed by and construed in accordance with the General Corporation Law of the State of Delaware as to matters within the scope thereof, and as to all other matters shall be governed by and construed in accordance with the internal laws of North Carolina, without regard to conflict of law principles that would result in the application of any law other than the law of the State of North Carolina.

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.

 

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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 Schedule A hereto (or Schedule B (as applicable)), 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 shall also be sent to Attention: General Counsel, 4001 Weston Parkway, Cary, NC 27513, legal@bandwidth.com, and if notice is given to Carmichael, a copy shall also be given to John M. Fogg, Robinson, Bradshaw & Hinson, P.A., 1450 Raleigh Road, Suite 215, Chapel Hill, NC 27517, jfogg@rbh.com.

6.6. Amendments and Waivers. Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance, and either retroactively or prospectively) only with the written consent of the Company and the holders of a majority of the Registrable Securities then outstanding (excluding any Key Holder Registrable Securities for the purposes of determining the holders of a majority of the Registrable Securities then outstanding); provided that the Company may in its sole discretion waive compliance with Subsection 2.12(c) (and the Company’s failure to object promptly in writing after notification of a proposed assignment allegedly in violation of Subsection 2.12(c) shall be deemed to be a waiver); and provided further that any provision hereof may be waived by any waiving party on such party’s own behalf, without the consent of any other party. 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 without also the written consent of the holders of at least a majority of the Registrable Securities held by the Key Holders, which majority of the Registrable Securities held by the Key Holders must include James A. Bowen, FT Bandwidth Ventures, LLC and FT Bandwidth Ventures II, LLC, so long as James A. Bowen, FT Bandwidth Ventures, LLC or FT Bandwidth Ventures II, LLC, respectively, holds any Registrable Securities. In addition, (i) this Agreement may not be amended, modified or terminated and the observance of any term hereunder may not be waived with respect to any Investor or Key Holder without the written consent of such Investor or Key Holder unless such amendment, modification, termination or waiver applies to all Investors and Key Holders, respectively, in the same fashion and such amendment, modification, termination or waiver is otherwise approved pursuant to the immediately preceding sentence of this Section 6.6, and (ii) the consent of the Key Holders shall not be required for any amendment, modification, termination or waiver if such amendment, modification, termination or waiver does not apply to the Key Holders. 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 6.6 shall be binding on all parties hereto, regardless of whether any such party has consented thereto. No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision.

 

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6.7. Severability. In case any one or more of the provisions contained in this Agreement is for any reason held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality, or unenforceability shall not affect any other provision of this Agreement, and such invalid, illegal, or unenforceable provision shall be reformed and construed so that it will be valid, legal, and enforceable to the maximum extent permitted by law.

6.8. Aggregation of Stock. All shares of Registrable Securities held or acquired by Affiliates shall be aggregated together for the purpose of determining the availability of any rights under this Agreement and such Affiliated persons may apportion such rights as among themselves in any manner they deem appropriate.

6.9. 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, each of the Buy-Sell Agreements will be deemed terminated and of no further force or effect.

6.10. Dispute Resolution. The parties (a) hereby irrevocably and unconditionally submit to the jurisdiction of the state courts of North Carolina and to the jurisdiction of the United States District Court for the Eastern District of North Carolina 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 North Carolina or the United States District Court for the Eastern District of North Carolina, 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 THIS TRANSACTION, 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

 

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6.11. Delays or Omissions. No delay or omission to exercise any right, power, or remedy accruing to any party under this Agreement, upon any breach or default of any other party under this Agreement, shall impair any such right, power, or remedy of such nonbreaching or nondefaulting party, nor shall it be construed to be a waiver of or acquiescence to any such breach or default, or to any similar breach or default thereafter occurring, nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default theretofore or thereafter occurring. All remedies, whether under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

6.12. Acknowledgment. The Company acknowledges that the Investors are in the business of venture capital investing and therefore review the business plans and related proprietary information of many enterprises, including enterprises which may have products or services which compete directly or indirectly with those of the Company. Nothing in this Agreement shall preclude or in any way restrict the Investors from investing or participating in any particular enterprise whether or not such enterprise has products or services which compete with those of the Company.

[Remainder of Page Intentionally Left Blank]

 

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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above.

 

 

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KEY HOLDERS:
/s/ J. Adam Abram
J. Adam Abram
B. THOMAS M. SMITH, JR. DECLARATION OF TRUST
By:		/s/ B. Thomas M. Smith, Jr.
		B. Thomas M. Smith, Jr., Trustee
/s/ B. Thomas M. Smith
B. Thomas M. Smith
/s/ James A. Bowen
James A. Bowen
FT BANDWIDTH VENTURES, LLC
By:		/s/ James A. Bowen
		James A. Bowen, Manager
FT BANDWIDTH VENTURES II, LLC
By:		/s/ James A. Bowen
		James A. Bowen, Manager
/s/ John Alston Gardner
John Alston Gardner
/s/ Naomi Lerner
Naomi Lerner
/s/ Sarah Lerner
Sarah Lerner
/s/ Steven J. Lerner
Steven J. Lerner
/s/ David W. Smith
David W. Smith

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SCHEDULE A

Investors

Carmichael Investment Partners, LLC

6000 Fairview Road, Suite 1200

Charlotte, NC 28210

704-552-3770

brian.bailey@carmichaelpartners.com

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SCHEDULE B

Key Holders

J. Adam Abram

300 Meadowmont Village Cr.

Suite 333

Chapel Hill, North Carolina 27517

Email: jaabram@gmail.com

B. THOMAS M. SMITH, JR. DECLARATION OF TRUST

4086 Penshurt Park

Sarasota, Florida 34235

Email: new_weetartan@yahoo.com

B. Thomas M. Smith

4086 Penshurt Park

Sarasota, Florida 34235

Email: new_weetartan@yahoo.com

James A. Bowen

415 West Union

Wheaton, Illinois 60187

Email: jbowen@ftportfolios.com

FT BANDWIDTH VENTURES, LLC

c/o James A. Bowen

120 Liberty Drive

Wheaton, Illinois 60187

Email: jbowen@ftportfolios.com

FT BANDWIDTH VENTURES II, LLC

c/o James A. Bowen

120 Liberty Drive

Wheaton, Illinois 60187

Email: jbowen@ftportfolios.com

John Alston Gardner

1266 W. Paces Ferry Road

Box 459

Atlanta, Georgia 30327

Email: alstongardner@yahoo.com

Naomi Lerner

Attention: Steven J. Lerner

110 Sandy Creek Trail

Chapel Hill, North Carolina 27516

Email: slerner@bluehillgroup.com

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Sarah Lerner

Attention: Steven J. Lerner

110 Sandy Creek Trail

Chapel Hill, North Carolina 27516

Email: slerner@bluehillgroup.com

Steven J. Lerner

110 Sandy Creek Trail

Chapel Hill, North Carolina 27516

Email: slerner@bluehillgroup.com

David W. Smith

4945 SW 91^st Drive

Gainesville, Florida 32608

Email: dwsmith@ufl.edu

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AMENDMENT WITH RESPECT TO MATTERS RELATED TO

RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT

AND INVESTORS’ RIGHTS AGREEMENT

This Amendment (the “Amendment”) is made by and among (i) Bandwidth.com, Inc. (the “Company”), (ii) (A) the Key Holders (as defined in the ROFR Agreement (as defined below)) holding a majority of the shares of Transfer Stock held by all of the Key Holders as of the Amendment Effective Date (as defined below), including, James A. Bowen, FT Bandwidth Ventures, LLC and FT Bandwidth Ventures II, LLC, and (B) the Key Holders (as defined in the IR Agreement (as defined below)) holding a majority of the shares of Registrable Securities (as defined in the IR Agreement), including, James A. Bowen, FT Bandwidth Ventures, LLC and FT Bandwidth Ventures II, LLC, and (iii) Carmichael Investment Partners, LLC, as the holder of all of the shares of Common Stock issued or issuable upon conversion of the outstanding Preferred Stock. Capitalized terms not otherwise defined in this Amendment are as defined in the Right of First Refusal and Co-Sale Agreement, dated as of February 22, 2011 (the “ROFR Agreement”).

WHEREAS, in addition to the ROFR Agreement, the Company, the Investor, and certain Key Holders are parties to the Investors’ Rights Agreement, dated as of February 22, 2011 (the “IR Agreement”); and

WHEREAS, the Company, the Investor and the Key Holders desire to amend the ROFR Agreement as described in this Amendment as of the Amendment Effective Date stated on the signature page attached hereto (the “Amendment Effective Date”); and

WHEREAS, the Company, the Investor and certain Key Holders who are parties to the IR Agreement desire to amend the ROFR Agreement as described in this Amendment as of the Amendment Effective Date.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

1. Amendment to ROFR Agreement. Section 3.1 of the ROFR Agreement is hereby deleted in its entirety and the following is inserted in lieu thereof:

Exempted Transfers. Notwithstanding the foregoing or anything to the contrary herein, the provisions of Subsections 2.1 and 2.2 shall not apply: (a) in the case of a Key Holder that is an entity, upon a transfer by such Key Holder to its stockholders, members, partners or other equity holders, (b) to a repurchase of Transfer Stock from a Key Holder by the Company at a price no greater than that originally paid by such Key Holder for such Transfer Stock and pursuant to an agreement containing vesting and/or repurchase provisions approved by a majority of the Board of Directors, (c) to a pledge of Transfer Stock that creates a mere security interest in the pledged Transfer Stock, provided that the pledgee thereof agrees in writing in advance to be bound by and comply with all applicable provisions of this Agreement to the same extent as if it were the Key Holder making such pledge, (d) (i) in the case of a Key Holder that is a natural person, upon a transfer of Transfer Stock by such Key Holder made for bona fide estate planning purposes, either during his or her lifetime or on death by will or intestacy to his or her spouse, child (natural or adopted), or any other direct lineal descendant of such Key Holder (or his or her spouse) (all of the foregoing collectively referred to as “family members”), or any other person approved by the Board of Directors of the Company, including the Series A Director (as defined in the Company’s Certificate of Incorporation), or any custodian or trustee of any trust, partnership or limited liability company for the benefit of, or the ownership interests of which are owned wholly by, such Key Holder or any such family members, (ii) in the case of The 2009 Henry Rice Kaestner

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GRAT, upon a transfer of Transfer Stock by such Key Holder to Henry R. Kaestner and/or spouse, child (natural or adopted), or any other direct lineal descendant of such Key Holder (or his or her spouse) (all of the foregoing collectively referred to as “family members”), or any other person approved by the Board of Directors of the Company, including the Series A Director (as defined in the Company’s Certificate of Incorporation), or any custodian or trustee of any trust, partnership or limited liability company for the benefit of, or the ownership interests of which are owned wholly by, such Key Holder or any such family members, or (iii) in the case of The 2009 David Morken GRAT, upon a transfer of Transfer Stock by such Key Holder to David A. Morken and/or spouse, child (natural or adopted), or any other direct lineal descendant of such Key Holder (or his or her spouse) (all of the foregoing collectively referred to as “family members”), or any other person approved by the Board of Directors of the Company, including the Series A Director (as defined in the Company’s Certificate of Incorporation), or any custodian or trustee of any trust, partnership or limited liability company for the benefit of, or the ownership interests of which are owned wholly by, such Key Holder or any such family members, or (e) to the sale by the Key Holder of up to 5% of the Transfer Stock held by such Key Holder as of the date that such Key Holder first became party to this Agreement; provided, however, (i) David A. Morken, the 2009 David Morken GRAT and/or any transferee of David A. Morken and/or the 2009 David Morken GRAT permitted pursuant to clause (d) above will at all times from and after February 22, 2011 be aggregated to determine such 5% and any sales or transfers by David A. Morken, the 2009 David Morken GRAT and/or any transferee of David A. Morken and/or the 2009 David Morken GRAT permitted pursuant to clause (d) above will at all times from and after February 22, 2011 be aggregated to determine compliance with such 5%, and (ii) Henry R. Kaestner, the 2009 Henry Rice Kaestner GRAT and/or any transferee of Henry R. Kaestner and/or the 2009 Henry Rice Kaestner GRAT permitted pursuant to clause (d) above will at all times from and after February 22, 2011 be aggregated to determine such 5% and any sales or transfers by Henry R. Kaestner, the 2009 Henry Rice Kaestner GRAT and/or any transferee of Henry R. Kaestner and/or the 2009 Henry Rice Kaestner GRAT permitted pursuant to clause (d) above will at all times from and after February 22, 2011 be aggregated to determine compliance with such 5%; provided that in the case of clause(s) (a), (c), (d) or (e), the Key Holder shall deliver prior written notice to the Investors of such pledge, gift or transfer and such shares of Transfer Stock shall at all times remain subject to the terms and restrictions set forth in this Agreement and such transferee shall, as a condition to such issuance, deliver a counterpart signature page to this Agreement as confirmation that such transferee shall be bound by all the terms and conditions of this Agreement as a Key Holder (but only with respect to the securities so transferred to the transferee), including the obligations of a Key Holder with respect to Proposed Key Holder Transfers of such Transfer Stock pursuant to Section 2; and provided, further, in the case of any transfer pursuant to clause (a) or (d) above, that such transfer is made pursuant to a transaction in which there is no consideration actually paid for such transfer.

2. Amendment to IR Agreement. Section 4.1(d) of the IR Agreement is hereby deleted in its entirety and the following is inserted in lieu thereof:

The right of first refusal in this Subsection 4.1 shall not be applicable to (i) Exempted Securities (as defined in the Company’s Certificate of Incorporation); (ii) New Securities issued to Carmichael and/or James A. Bowen from time to time due to or in connection with the issuance of New Securities (including, without limitation, Exempted Securities) to the Company’s directors, employees, independent contractors, and/or advisors, (iii) shares of Common Stock issued in the IPO, or (iv) warrants to purchase up to 1,939 shares of Common Stock issued to Carmichael Investment Partners, LLC (and shares of Common Stock issuable upon exercise of such warrants).

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3. Miscellaneous. This Amendment may only be amended in writing by and among (i) the Company, (ii) the Key Holders holding a majority of the shares of Transfer Stock held by all of the Key Holders, including, James A. Bowen, FT Bandwidth Ventures, LLC and FT Bandwidth Ventures II, LLC, and (iii) Carmichael Investment Partners, LLC, as the holder of all of the shares of Common Stock issued or issuable upon conversion of the outstanding Preferred Stock. The section headings contained in this Amendment are inserted for convenience only and will not affect in any way the meaning or interpretation of this Amendment. Except as otherwise provided herein, the terms and conditions of the ROFR Agreement and the IR Agreement remain in full force and effect.

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IN WITNESS WHEREOF, the undersigned have executed this Amendment as of September 21, 2012 (the “Amendment Effective Date”).

 

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AMENDMENT WITH RESPECT TO MATTERS RELATED TO

RIGHT OF FIRST REFUSAL AND CO-SALE AGREEMENT, INVESTORS’ RIGHTS AGREEMENT AND VOTING AGREEMENT

This Amendment (the “Amendment”) is made by and among (i) Bandwidth.com, Inc. (the “Company”), (ii) (A) the Key Holders (as defined in the ROFR Agreement (as defined below)) holding a majority of the shares of Transfer Stock (as defined in the ROFR Agreement (as defined below)) held by all of the Key Holders as of the Amendment Effective Date (as defined below), including, James A. Bowen, FT Bandwidth Ventures, LLC and FT Bandwidth Ventures II, LLC, (B) the Key Holders (as defined in the IR Agreement (as defined below)) holding a majority of the shares of Registrable Securities (as defined in the IR Agreement), including, James A. Bowen, FT Bandwidth Ventures, LLC and FT Bandwidth Ventures II, LLC, and (C) the Key Holders (as defined in the Voting Agreement (as defined below)) holding a majority of the Shares (as defined in the Voting Agreement) then held by such Key Holders, including James A. Bowen, FT Bandwidth Ventures, LLC and FT Bandwidth Ventures II, LLC, and (iii) Carmichael Investment Partners, LLC, as the holder of all of the shares of Common Stock issued or issuable upon conversion of the outstanding Preferred Stock.

WHEREAS, in addition to the ROFR Agreement, the Company, the Investor, and certain Key Holders are parties to the Investors’ Rights Agreement, dated as of February 22, 2011 (as previously amended, the “IR Agreement”); and

WHEREAS, in addition to the ROFR Agreement and the IR Agreement, the Company, the Investor and certain Key Holders are parties to the Voting Agreement, dated as of February 22, 2011 (as previously amended, the “Voting Agreement”); and

WHEREAS, the Company, the Investor and the Key Holders desire to amend the ROFR Agreement as described in this Amendment as of the Amendment Effective Date stated on the signature page attached hereto (the “Amendment Effective Date”); and

WHEREAS, the Company, the Investor and certain Key Holders who are parties to the IR Agreement desire to amend the IR Agreement as described in this Amendment as of the Amendment Effective Date; and

WHEREAS, the Company, the Investor and certain Key Holders who are parties to the Voting Agreement desire to amend the Voting Agreement as described in this Amendment as of the Amendment Effective Date.

NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth herein and for good and valuable consideration, the receipt and adequacy of which are hereby acknowledged, the parties hereto agree as follows:

 

1.

Amendments to ROFR Agreement.

(a) Section 1.18 of the ROFR Agreement is hereby deleted in its entirety and the following is inserted in lieu thereof:

“True Sale” means: (a) a merger or consolidation in which (i) the Company is a constituent party, or (ii) a subsidiary of the Company is a constituent party and the Company issues shares of its Capital Stock pursuant to such merger or consolidation, except any such merger or consolidation involving the Company or a subsidiary in which the shares of Capital Stock of the Company 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

 

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owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation (provided that, for the purpose of this definition of “True Sale” all shares of Common Stock issuable upon exercise of Options (as defined in the Company’s Certificate of Incorporation) outstanding immediately prior to such merger or consolidation or upon conversion of Convertible Securities (as defined in the Company’s Certificate of Incorporation) outstanding immediately prior to such merger or consolidation shall be deemed to be outstanding immediately prior to such merger or consolidation and, if applicable, converted or exchanged in such merger or consolidation on the same terms as the actual outstanding shares of Common Stock are converted or exchanged); (b) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Company or any subsidiary of the Company of all or substantially all the assets of the Company and its subsidiaries taken as a whole, or the sale or disposition (whether by merger or otherwise) of one or more subsidiaries of the Company if substantially all of the assets of the Company 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 Company; or (c) any other transaction that each of the Investor, James A. Bowen, Susan R. Bowen, FT Bandwidth Ventures, LLC and FT Bandwidth Ventures II, LLC agrees in writing constitutes a “True Sale” for the purposes of this Agreement. Notwithstanding the foregoing, no transaction described in either clause (a) or clause (b) above will constitute a “True Sale” unless, in the case of any transaction described in clause (a) above, all of the consideration to be distributed to the holders of the Company’s capital stock constitutes cash and/or marketable securities or, in the case of any transaction described in clause (b) above, all of the consideration actually paid to the Company constitutes cash and/or marketable securities.

 

(b)

The concluding sentence of Section 2.2(a) of the ROFR Agreement is hereby deleted in its entirety and the following is inserted in lieu thereof:

For the purposes of this Section 2.2 (and any section or subsection referenced in this Section 2.2 or any other section or subsection necessarily implied for the operation of this Section 2.2) only, James A. Bowen, Susan R. Bowen, FT Bandwidth Ventures, LLC, and FT Bandwidth Ventures II, LLC, each will be deemed to be an Investor and not a Key Holder.

 

(c)

Section 6.8 of the ROFR Agreement is hereby deleted in its entirety and the following is inserted in lieu thereof:

Amendment; Waiver and Termination. This Agreement may be amended, modified or terminated (other than pursuant to Section 6.1 above) and the observance of any term hereof may be waived (either generally or in a particular instance and either retroactively or prospectively) only by a written instrument executed by (a) the Company, (b) the Key Holders holding a majority of the shares of Transfer Stock then held by all of the Key Holders, which majority of the shares of Transfer Stock held by the Key Holders must include James A. Bowen, Susan R. Bowen, FT Bandwidth Ventures, LLC and FT Bandwidth Ventures II, LLC, so long as James A. Bowen, Susan R. Bowen, FT Bandwidth Ventures, LLC or FT Bandwidth Ventures II, LLC, respectively is a Key Holder; and (c) the holders of a majority of the shares of Common Stock issued or issuable upon conversion of the then outstanding shares of Preferred Stock held by the Investors (voting as a single class and on an as-converted basis). Any amendment, modification, termination or waiver so effected shall be binding upon the Company, the Investors, the Key Holders and all of their respective successors and permitted assigns whether or not such party, assignee or other shareholder entered into or approved such amendment, modification, termination or waiver. Notwithstanding the foregoing, (i) this Agreement may not be amended, modified or terminated and the observance of any term hereunder may not be waived with respect to any Investor (including James A. Bowen, Susan R.

 

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Bowen, FT Bandwidth Ventures, LLC, and FT Bandwidth Ventures II, LLC, for the purposes of any amendment, modification, termination or waiver of any rights pursuant to Section 2.2 above), or Key Holder without the written consent of such Investor (including James A. Bowen, Susan R. Bowen, FT Bandwidth Ventures, LLC, and FT Bandwidth Ventures II, LLC, for the purposes of any amendment, modification, termination or waiver of any rights pursuant to Section 2.2 above) or Key Holder unless such amendment, modification, termination or waiver applies to all Investors (including James A. Bowen, Susan R. Bowen, FT Bandwidth Ventures, LLC, and FT Bandwidth Ventures II, LLC, for the purposes of any amendment, modification, termination or waiver of any rights pursuant to Section 2.2 above) and Key Holders, respectively, in the same fashion and such amendment, modification, termination or waiver is otherwise approved pursuant to the first sentence of this Section 6.8, and (ii) the consent of the Key Holders shall not be required for any amendment, modification, termination or waiver if such amendment, modification, termination or waiver does not apply to the Key Holders. The Company shall give prompt written notice of any amendment, modification or termination hereof or waiver hereunder to any party hereto that did not consent in writing to such amendment, modification, termination or waiver. 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.

 

2.

Amendment to IR Agreement.

(a) Section 1.28 of the IR Agreement is hereby deleted in its entirety and the following is inserted in lieu thereof:

“True Sale” means: (a) a merger or consolidation in which (i) the Company is a constituent party, or (ii) a subsidiary of the Company is a constituent party and the Company issues shares of its capital stock pursuant to such merger or consolidation, except any such merger or consolidation involving the Company or a subsidiary in which the shares of capital stock of the Company outstanding immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital stock that represent, immediately following such merger or consolidation, a majority, by voting power, of the capital stock of (1) the surviving or resulting corporation or (2) if the surviving or resulting corporation is a wholly owned subsidiary of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting corporation (provided that, for the purpose of this definition of “True Sale” all shares of Common Stock issuable upon exercise of Options (as defined in the Company’s Certificate of Incorporation) outstanding immediately prior to such merger or consolidation or upon conversion of Convertible Securities (as defined in the Company’s Certificate of Incorporation) outstanding immediately prior to such merger or consolidation shall be deemed to be outstanding immediately prior to such merger or consolidation and, if applicable, converted or exchanged in such merger or consolidation on the same terms as the actual outstanding shares of Common Stock are converted or exchanged); (b) the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions, by the Company or any subsidiary of the Company of all or substantially all the assets of the Company and its subsidiaries taken as a whole, or the sale or disposition (whether by merger or otherwise) of one or more subsidiaries of the Company if substantially all of the assets of the Company 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 Company; or (c) any other transaction that each of the Investor, James A. Bowen, Susan R. Bowen, FT Bandwidth Ventures, LLC and FT Bandwidth Ventures II, LLC agrees in writing constitutes a “True Sale” for the purposes of this Agreement. Notwithstanding the foregoing, no transaction described in either clause (a) or clause (b) above will constitute a “True Sale” unless, in the case of any transaction described in clause (a) above,

 

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all of the consideration to be distributed to the holders of the Company’s capital stock constitutes cash and/or marketable securities or, in the case of any transaction described in clause (b) above, all of the consideration actually paid to the Company constitutes cash and/or marketable securities.

 

(b)

Section 2.3(b)(iv) of the IR Agreement is hereby deleted in its entirety and the following is inserted in lieu thereof:

notwithstanding (ii) or (iii) above, any Key Holder Registrable Securities which are held by James A. Bowen, Susan R. Bowen, FT Bandwidth Ventures, LLC, and/or FT Bandwidth Ventures II, LLC, be excluded from such underwriting unless all other Key Holder Registrable Securities are first excluded from such offering.

 

(c)

Section 4.1(d) of the IR Agreement is hereby deleted in its entirety and the following is inserted in lieu thereof:

The right of first refusal in this Subsection 4.1 shall not be applicable to (i) Exempted Securities (as defined in the Company’s Certificate of Incorporation); (ii) New Securities issued to Carmichael, James A. Bowen and/or Susan R. Bowen pursuant to the letter agreement, each dated as of November 23, 2016, or (iii) shares of Common Stock issued in the IPO.

 

(d)

Section 6.6 of the IR Agreement is hereby deleted in its entirety and the following is inserted in lieu thereof:

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 a majority of the Registrable Securities then outstanding (excluding any Key Holder Registrable Securities for the purposes of determining the holders of a majority of the Registrable Securities then outstanding); provided that the Company may in its sole discretion waive compliance with Subsection 2.12(c) (and the Company’s failure to object promptly in writing after notification of a proposed assignment allegedly in violation of Subsection 2.12(c) shall be deemed to be a waiver); and provided further that any provision hereof may be waived by any waiving party on such party’s own behalf, without the consent of any other party. 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 without also the written consent of the holders of at least a majority of the Registrable Securities held by the Key Holders, which majority of the Registrable Securities held by the Key Holders must include James A. Bowen, Susan R. Bowen, FT Bandwidth Ventures, LLC and FT Bandwidth Ventures II, LLC, so long as James A. Bowen, Susan R. Bowen, FT Bandwidth Ventures, LLC or FT Bandwidth Ventures II, LLC, respectively, holds any Registrable Securities. In addition, (i) this Agreement may not be amended, modified or terminated and the observance of any term hereunder may not be waived with respect to any Investor or Key Holder without the written consent of such Investor or Key Holder unless such amendment, modification, termination or waiver applies to all Investors and Key Holders, respectively, in the same fashion and such amendment, modification, termination or waiver is otherwise approved pursuant to the immediately preceding sentence of this Section 6.6, and (ii) the consent of the Key Holders shall not be required for any amendment, modification, termination or waiver if such amendment, modification, termination or waiver does not apply to the Key Holders. 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 6.6 shall be binding on all parties hereto, regardless of whether any such party has consented thereto. No waivers of or exceptions to any term, condition, or provision of this Agreement, in any one or more instances, shall be deemed to be or construed as a further or continuing waiver of any such term, condition, or provision.

 

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3. Amendment to Voting Agreement.

 

(a)

Section (c) of the definition of “True Sale” in Section 4 of the Voting Agreement is hereby deleted in its entirety and the following is inserted in lieu thereof:

“any other transaction that each of the Investor, James A. Bowen, Susan R. Bowen, FT Bandwidth Ventures, LLC and FT Bandwidth Ventures II, LLC agrees in writing constitutes a “True Sale” for the purposes of this Agreement;”

 

(b)

Section 5.8 of the Voting Agreement is hereby deleted in its entirety and the following is inserted in lieu thereof:

This Agreement may be amended or terminated and the observance of any term hereof may be waived (either generally or in a particular instance and either retroactively or prospectively) only by a written instrument executed by (a) the Company; (b) the Key Holders holding a majority of the Shares then held by the Key Holders, which majority must include must include James A. Bowen, Susan R. Bowen, FT Bandwidth Ventures, LLC and FT Bandwidth Ventures II, LLC, so long as James A. Bowen, Susan R. Bowen, FT Bandwidth Ventures, LLC or FT Bandwidth Ventures II, LLC, respectively is a Key Holder; and (c) the holders of a majority of the shares of Common Stock issued or issuable upon conversion of the shares of Series A Preferred Stock held by the Investors (voting as a single class and on an as-converted basis). Any amendment, modification, termination or waiver so effected shall be binding upon the Company, the Investors, the Key Holders and all of their respective successors and permitted assigns whether or not such party, assignee or other shareholder entered into or approved such amendment, modification, termination or waiver. Notwithstanding the foregoing, (i) this Agreement may not be amended, modified or terminated and the observance of any term hereunder may not be waived with respect to any Investor or Key Holder without the written consent of such Investor or Key Holder unless such amendment, modification, termination or waiver applies to all Investors and Key Holders, respectively, in the same fashion and such amendment, modification, termination or waiver is otherwise approved pursuant to the first sentence of this Section 5.8, and (ii) the consent of the Key Holders shall not be required for any amendment, modification, termination or waiver if such amendment, modification, termination or waiver does not apply to the Key Holders. Notwithstanding the foregoing, Subsection 1.2(a) of this Agreement shall not be amended or waived without the written consent Carmichael Investment Partners, LLC. The Company shall give prompt written notice of any amendment, termination or waiver hereunder to any party that did not consent in writing thereto. Any amendment, termination or waiver effected in accordance with this Subsection 5.8 shall be binding on each party and all of such party’s successors and permitted assigns, whether or not any such party, successor or assignee entered into or approved such amendment, termination or waiver. For purposes of this Subsection 5.8, the requirement of a written instrument may be satisfied in the form of an action by written consent of the Stockholders circulated by the Company and executed by the Stockholder parties specified, whether or not such action by written consent makes explicit reference to the terms of this Agreement.

4. Miscellaneous. This Amendment may only be amended in writing by and among (i) the Company, (ii) the Key Holders holding a majority of the shares of Transfer Stock held by all of the Key Holders, including, James A. Bowen, Susan R. Bowen, FT Bandwidth Ventures, LLC and FT Bandwidth Ventures II, LLC, and (iii) Carmichael Investment Partners, LLC, as the holder of all of the shares of Common Stock issued or issuable upon conversion of the outstanding Preferred Stock. The section headings contained in this Amendment are inserted for convenience only and will not affect in any way the meaning or interpretation of this Amendment. Except as otherwise provided herein, the terms and conditions of the ROFR Agreement, the IR Agreement and the Voting Agreement remain in full force and effect.

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IN WITNESS WHEREOF, the undersigned have executed this Amendment as of November 23, 2016 (the “Amendment Effective Date”).

 

 

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Exhibit 4.3

BANDWIDTH.COM, INC.

BUY-SELL AGREEMENT

THIS BUY-SELL AGREEMENT (the “Agreement”) is made, entered into and effective as of the      day of                 , 2015, by and between Bandwidth.com, Inc., a Delaware corporation (the “Company”), and the undersigned stockholder of the Company (the “Stockholder”), and the Stockholder’s spouse.

RECITALS

WHEREAS, the Stockholder has acquired or may acquire shares of the Company’s Class A Voting Common Stock, $0.001 par value per share (the “Class A Common Stock” and, with the Class B Common Stock (as defined below), the “Company Stock”); and

WHEREAS, the Stockholder has acquired or may acquire shares of the Company’s Class B Non-Voting Common Stock, $0.001 par value per share (the “Class B Common Stock” and, with the Class A Common Stock, the “Company Stock”), pursuant to the terms and conditions of the Company’s 2010 Equity Compensation Plan (as amended from time to time, the “Plan”); and

WHEREAS, execution of this Agreement is a condition to the issuance of shares of Company Stock to the Stockholder under the Plan and that certain Stock Option Award Agreement of even date herewith between the Company and the Stockholder (the “Option Agreement”); and

WHEREAS, the Company and the Stockholder believe that it is in the best interests of the Company and the Stockholder to make provisions for the management and operation of the Company, the future disposition of shares of Company Stock and to restrict the transfer of shares of Company Stock in certain instances.

AGREEMENTS

In satisfaction of the foregoing recitals, and in consideration of the mutual agreements, covenants and conditions contained herein, and the issuance of shares of Company Stock to the Stockholder, the Company and the Stockholder agree as follows:

ARTICLE I

RESTRICTION ON THE TRANSFER OF SHARES

1.1 Restriction on Transfer. Except as expressly permitted pursuant to the terms and conditions of the Option Agreement and/or this Agreement, the Stockholder will not transfer any shares of Company Stock held or owned by him. For purposes of this Agreement, the term “transfer” will mean any voluntary or involuntary sale, assignment, pledge, encumbrance, gift or other transfer in any manner or by any means whatsoever (including, without limitation, by court order requiring transfer, by operation of law, by testamentary disposition, divorce, separation, equitable distribution or otherwise). With respect to any shares of Company Stock to which the Option Agreement may apply, the Stockholder will not transfer any shares of Company Stock without complying with the terms and conditions of the Option Agreement, including, without limitation, Sections 7, 8, 9 and 13 of the Option Agreement. Notwithstanding any terms or conditions of the Option Agreement to the contrary, the Stockholder will not transfer any shares of Company Stock to any person or entity that the Company’s Board of Directors reasonably determines is a competitor (or affiliated with a competitor) of the Company.

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Without limiting the effect of the foregoing prohibition against transfers, any party receiving shares of Company Stock from or through the Stockholder in compliance with the terms of this Agreement will be bound by its terms and conditions to the same extent as the Stockholder.

The Stockholder acknowledges and agrees that the restriction on the transfer of Company Stock stated in this Section 1.1 and, with respect to any shares of Company Stock to which the Option Agreement may apply, the Option Agreement is reasonable because, among other things it: (a) protects the legitimate business purposes of the Company and the interests of all the stockholders; and (b) ensures that the Company will be able to control who may participate in the Company’s business.

1.2 Grant of Option to Purchase Shares at Certain Events. The Company will have the option (but not the obligation) to purchase or arrange the purchase of the Stockholder’s shares of Company Stock upon the occurrence of any of the following events (“Option Events”):

 

a.

The filing of a petition by the Stockholder for relief as debtor or bankrupt under the U.S. Bankruptcy Code or any similar federal or state law, or other reorganization, arrangement, insolvency, adjustment of debt or liquidation law affording debtor relief proceedings; or the commencement or consent to the filing of any such involuntary action thereunder against the Stockholder (which remains unstayed or effective for a period of sixty (60) days); or the assignment of the Stockholder’s shares or assets (or portion or interest thereof) for the benefit of creditors; or the allowance of such shares (or portion or interest thereof) to become subject to any lien, encumbrance, attachment, garnishment, charging order or similar charge;

 

b.

Any act or omission by the Stockholder constituting a dishonest, immoral, fraudulent or illegal act or omission if such act or omission causes or is reasonably likely to cause the business or financial and/or tax status of the Company or the Company’s stockholders to suffer damage (or such business or financial and/or tax status are threatened with damage by reason thereof); or any breach by the Stockholder of this Agreement or any employment, non-competition, non-disclosure and/or intellectual property agreement or similar arrangement between the Company and the Stockholder; or any breach or default by the Stockholder under any note or other evidence of indebtedness owing to the Company with respect to the purchase of shares of Company Stock;

 

c.

The transfer or attempted transfer to the Stockholder’s spouse pursuant to separation, divorce, equitable distribution or similar proceedings;

 

d.

The Stockholder’s employment with the Company is terminated:

 

(i)

voluntarily by the Stockholder;

 

(ii)

by the Company with Cause (as defined in the Option Agreement); or

 

(iii)

by the Company without Cause;

 

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e.

The Stockholder’s delivery to the Company of notice of a Bona Fide Offer (as defined in the Option Agreement), which notice of such Bona Fide Offer will be accompanied by the information and materials described in the Option Agreement;

 

f.

The Stockholder’s death or disability;

 

g.

Any other transfer or attempted transfer by the Stockholder of his shares of Company Stock (or any portion thereof or interest therein) in violation of this Agreement and/or, with respect to any shares of Company Stock to which the Option Agreement may apply, the Option Agreement;

 

h.

The Stockholder’s marriage (or remarriage) after the date hereof if the Stockholder’s spouse has not executed a counterpart to this Agreement prior to such marriage, agreeing to be bound by the terms hereof and an Acknowledgement and Consent in the form attached hereto as Exhibit A; or

 

i.

The threat of occurrence, or the occurrence, of any event with respect to the Stockholder or his Company Stock that would result in the violation of applicable governmental regulations or loan requirements to the detriment of the Company or its stockholders, unless any such occurrence is susceptible to cure and is cured within a period of time which will avoid such termination or violation.

1.3 Procedure Upon Occurrence of Option Event.

a. Exercise. Upon the occurrence of any Option Event arising pursuant to Section 1.2(e) above, the terms and conditions of the Option Agreement will control. Upon the occurrence of any other Option Event, the Company will thereupon have the right to purchase (which right may be assigned by the Company in whole or in part to any other party) all, or any portion, of the Stockholder’s shares of Company Stock. Notwithstanding the foregoing, before the Company may exercise its option pursuant to Section 1.2(c), the Stockholder may first elect to purchase his spouse’s interest in the Company Stock owned by the Stockholder on the same terms and conditions as would be applicable to the Company’s purchase of such Company Stock. If the Stockholder does not elect to so purchase the Company Stock within fifteen (15) days after his spouse’s (or former spouse’s) interest in the Company Stock is established by appropriate proceedings, the Company will have the right to purchase such Company Stock at any time thereafter. If the Company wishes to exercise the right to purchase, it must give written notice of its intent to exercise the right to the Stockholder or the Stockholder’s representative within one hundred twenty (120) days after receiving actual notice of the Option Event, except for Option Events under Section 1.2(d), in which case the Company’s notice may be made at any time. The closing of the purchase and sale of shares pursuant to any option exercised by the Company hereunder will occur on a date specified by the Company, but in no event later than one hundred twenty (120) days after the Company gives the notice required by this Section 1.3(a). The exercise by the Company of any right hereunder will not result in a waiver of any other right or remedy which the Company or any other person may have against the Stockholder.

b. The per-share purchase price of any shares of Company Stock purchased under this Article I, and the terms of such sale, will be as specified under Section 1.4 below.

 

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c. In the event of a proposed transfer under Section 1.2(e) above, if all of the Stockholder’s shares of Company Stock are not purchased in accordance with the Option Agreement, then the Stockholder may, subject and subordinate to satisfaction of the conditions enumerated in this Article I, convey such shares subject to the terms and conditions of the Buy-Sell Agreement; provided, however, that if such transaction is not closed within thirty (30) days after expiration of the Company’s right to exercise its options granted herein then all of the Stockholder’s shares of Company Stock will again become subject to the terms and conditions of this Agreement and Option Agreement.

1.4 Purchase Price and Terms.

a. Subject to the last sentence of this Section 1.4(a), upon the exercise of an option granted pursuant to this Article I, the purchase price for shares of Company Stock under this Article I will be the “fair market value” of the shares as agreed upon by the Company and the Stockholder. If the Company and the Stockholder cannot reach agreement on the fair market value of the shares, fair market value will be the amount most recently determined by the Board of Directors of the Company in good faith (if the Board of Directors has not determined the fair market value of its shares, the fair market value of the shares will be determined by a duly-qualified accountant or appraiser designated by the Company and the costs of such appraisal will be borne equally by the Company and the Stockholder). Notwithstanding the foregoing, (i) if the Option Event is pursuant to Section 1.2(e) above, the terms and conditions of the Option Agreement will control with respect to the establishment of the purchase price for shares of Company Stock; provided, however, that the Company may elect to pay for the shares on the terms set forth in Section 1.4(b) below; and (ii) the purchase price as determined above will be discounted by thirty percent (30%) in the event that the Option Event resulting in the purchase is described in Section 1.2(b), (d)(i), (d)(ii) or (g) in recognition of the material detriment thereof to the Company and other stockholders, and the Stockholder acknowledges and agrees that such discount will not constitute a penalty or liquidated damages or limit other remedies and recourse as may be available to the Company and other stockholders.

b. The Stockholder will be required to transfer unencumbered title to the shares subject to purchase hereunder. In consideration of the transfer of unencumbered title to the Stockholder’s shares of Company Stock, the purchaser will pay the purchase price in cash at closing or, at the purchaser’s sole option, as follows: ten percent (10%) at closing with the balance thereof amortized and paid in ten (10) equal consecutive annual installments of principal, plus interest, the first installment of which will be payable on the one (1) year anniversary date of the closing. The deferred payments, if any, will be evidenced by a promissory note executed by the purchaser and payable to the Stockholder, or his successor, which note will bear interest at a rate equal to the minimum rate necessary to avoid the existence of “total unstated interest” or to ensure that there is “adequate stated interest” on the date of closing under the applicable provisions of the Code.

1.5 Prohibition Against Pledge of Stock. The Stockholder will not pledge, hypothecate or grant a security interest in all or any part of his shares of Company Stock other than pledges, hypothecations or security interests granted to the Company in connection with loans to purchase such shares of Company Stock.

1.6 Prohibited Transfers Void. Any purported transfer of Shares of Company Stock held by the Stockholder which contravenes in any manner any provision of this Agreement will be wholly null and void, the Company will not register the transfer on the stock register of the Company and the shares in question will remain fully subject to the terms of this Agreement.

 

4

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1.7 Binding on Successors. This Article I will bind and inure to the benefit of the parties hereto, their respective heirs, executors, administrators, successors and permitted assigns, including any transferees permitted under this Article I.

1.8 Consent by Transferee. In the event of any approved or properly executed transfer of shares of Company Stock owned by the Stockholder, there will be filed with the Company a written consent by the transferee to be bound by all of the terms and provisions of this Agreement. If such consent is not so filed, the Company will not recognize such transfer for any purpose. The Stockholder and the transferee will execute such further documents and take such further action as may be reasonably required by the Company to effectuate the transfer. All costs and expenses (including attorneys’ fees) relating to the transfer of shares of Company Stock will be borne by the Stockholder and the transferee.

1.9 Termination. The provisions of this Article I will terminate on the closing of a Public Offering (as defined in the Plan).

ARTICLE II

INSURANCE

2.1 Insurance. The Company may (but will not be required to) at any time become the applicant, owner and beneficiary of life insurance policies on the Stockholder. In the event such life insurance policies are taken out pursuant to this Agreement, the Company will give proof of payment of premium to the Stockholder whenever requested to do so after the policies are in effect. If the premium is not paid within ten (10) days after it is due, the insured will have the right to pay such premium. The Company will have the right to purchase additional insurance on the life of the Stockholder at its option. In the event such additional policies are purchased, the additional policies together with any policies originally purchased will be listed on Exhibit B attached hereto and made a part of this Agreement, along with any substitutions or withdrawals of life insurance policies subject to this Agreement. In the event the Company decides to purchase one or more life insurance policies either initially or additionally on the life of the Stockholder, the Stockholder hereby agrees to cooperate fully by performing all the requirements of the life insurer which are necessary conditions precedent to the issuance of such life insurance policies. The Company will be the sole owner of the policies issued to it and it may apply any dividends toward the payment of premiums.

ARTICLE III

BRING-ALONG RIGHTS

3.1 Notice. If other stockholders (“Selling Stockholders”) holding more than fifty percent (50%) of the Company Stock propose to sell, exchange or transfer (“Transfer”) all of their shares of Company Stock in a transaction (including, without limitation, a sale or merger) to be completed prior to the termination of this Agreement, a designee (“Designee”) of such Selling Stockholders may elect to deliver to the Stockholder a notice (“Transfer Notice”): (a) stating that the Transfer Notice is being delivered pursuant to this Article III and (b) setting forth all of the terms and conditions of the Transfer. The Stockholder will be required to offer in the proposed Transfer the number of shares of Company Stock listed in the Transfer Notice. For clarity, upon receipt of the Transfer Notice, the Stockholder will vote his or her shares of Company Stock in favor of any merger pursuant to the terms and conditions described in the Transfer Notice and will not exercise any appraisal rights, dissenter’s rights or other similar rights with respect to any such merger.

 

5

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3.2 Bring-Along Transfer Rights. The Stockholder will Transfer all shares of Company Stock owned by him on the terms and subject to the conditions of the Transfer Notice (when and if the Selling Stockholders Transfer their shares of Company Stock in accordance with the Transfer Notice) including the time of Transfer, form of consideration and per-share transfer price.

3.3 Procedures; Expenses. Upon receipt of a Transfer Notice pursuant to Section 3.1, the Stockholder will promptly take all steps described in the Transfer Notice to effectuate the transfer of his shares of Company Stock listed in the Transfer Notice, including the furnishing of information customarily provided in connection with such a transfer and the execution of customary transfer documents, with customary representations and warranties regarding title to the securities and the absence of any liens or other encumbrances thereon. All expenses of the Transfer, if not paid by the proposed transferee, will be borne and paid ratably by all Selling Stockholders and the Stockholder in accordance with their percentage ownership of the Company Stock being sold.

3.4 Expiration of Right. The provisions of this Article III will expire on the closing of a Public Offering.

ARTICLE IV

VOTING AGREEMENT

4.1. Voting for Directors. The Stockholder agrees to vote for directors in accordance with this Agreement as provided in this Section 4.1. The Stockholder will appear in person, or by proxy, at any annual or special meeting of stockholders of the Company for the purpose of obtaining a quorum and will vote the shares of Company Stock owned by him or her, either in person or by proxy, at such meeting of stockholders called for the purpose of voting on the election of directors in a manner that will result in the election of David A. Morken and Henry R. Kaestner to the Board of Directors of the Company (the “Board”). The Stockholder will vote in any solicitation of written consents consistently with the foregoing. The Stockholder acknowledges and agrees that any shares of Company Stock that are Class B Common Stock do not have any right to vote for the election of the Board as of the date of this Agreement; the terms and conditions of this Section 4.1 will apply only if such Class B Common Stock subsequently may be reclassified or exchanged for shares of the Company’s capital stock which include voting rights.

ARTICLE V

MISCELLANEOUS

5.1. Effect of Issuance of Additional Stock. The parties hereto agree that all other capital stock of the Company now owned or hereafter acquired by the Stockholder is subject to the terms of this Agreement and the certificates evidencing such stock will have endorsed thereon the endorsement provided for in Section 5.4 below. It is understood and intended by the parties that the shares subject to this Agreement will include each and every share of stock of the Company of any class or series issued or reissued to the Stockholder under any circumstance, including but not limited to, by way of recapitalization, stock dividend, stock split, purchase or other change in corporate structure, and regardless of whether or not such shares contain the legends set forth in Section 5.4 below.

 

6

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5.2 Acknowledgement of Spouse. The Stockholder agrees that he will have his spouse execute an Acknowledgement and Consent in the form attached hereto as Exhibit A and incorporated herein by reference. This obligation will apply to existing spouses and to any future spouse of the Stockholder.

5.3 Governing Law. This Agreement will be governed by and construed and enforced in accordance with the laws of the State of Delaware.

5.4 Successors and Assigns; Legend. Except as otherwise expressly provided herein, the provisions hereof will inure to the benefit of, and be binding upon, the successors, permitted assigns, heirs, executors and administrators of the parties hereto. All certificates or instruments representing shares of Company Stock held by or issued to the Stockholder, whether now outstanding or subsequently issued, will be surrendered to the Company for endorsement or be endorsed by the Company prior to their issuance with legends, including the following:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED WITHOUT REGISTRATION OR QUALIFICATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE BLUE SKY OR SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR QUALIFICATION, OR AN EXEMPTION FROM THE REGISTRATION OR QUALIFICATION REQUIREMENTS OF SUCH ACT OR LAWS, OR UNLESS SUCH ACT OR LAWS DO NOT APPLY.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND OTHER PROVISIONS CONTAINED IN AN AGREEMENT BETWEEN THE COMPANY, THE INITIAL HOLDER HEREOF AND HIS OR HER SPOUSE, IF ANY, A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY. BY ACCEPTING ANY INTEREST IN SUCH SECURITIES, THE PERSON ACCEPTING SUCH INTEREST WILL BE DEEMED TO AGREE TO AND WILL BECOME BOUND BY ALL OF THE PROVISIONS OF SAID AGREEMENT.

5.5 Entire Agreement. This Agreement, the Option Agreement (and the Non-Disclosure Agreement (as defined in the Option Agreement), and the Plan constitute the full and entire understanding and agreement among the parties with regard to the subject matter hereof. Nothing in this Agreement, express or implied, is intended to confer upon any party, other than the parties hereto and their respective successors and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein.

5.6 Severability. If any provision of this Agreement is determined by a court of appropriate jurisdiction to be invalid, illegal or unenforceable, it will to the extent practicable be modified so as to make it valid, legal and enforceable and to retain as nearly as practicable the intent of the parties, and the validity, legality and enforceability of the remaining provisions will not in any way be affected or impaired thereby.

 

7

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5.7 Equitable Relief. The Stockholder acknowledges that a breach or violation of any of the terms, covenants or other obligations under this Agreement by the Stockholder will result in immediate and irreparable harm to the Company in an amount which will be impossible to ascertain at the time of the breach or violation and that the award of monetary damages will not be adequate relief to the Company. Therefore, the failure on the part of the Stockholder to perform all of the terms, covenants and obligations established by this Agreement will give rise to a right to the Company to obtain enforcement of this Agreement in any state or federal court by a decree of specific performance or appropriate injunctive relief prohibiting the violation of the terms of this Agreement. This remedy will be cumulative and in addition to any other remedy the Company may have.

5.8 Amendment and Waiver. No changes, alterations, amendments, modifications, additions or qualifications to the terms of this Agreement will be made or be binding unless made in writing and signed by the parties hereto.

5.9 Delays or Omissions. No delay or omission to exercise any right, power or remedy accruing to the Company upon any breach, default or noncompliance of the Stockholder or any transferee under this Agreement, will impair any such right, power or remedy, nor will it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of any similar breach, default or noncompliance thereafter occurring. It is further agreed that any waiver, permit, consent or approval of any kind or character on the part of the Company or the Stockholder of any breach, default or noncompliance under this Agreement or any waiver on the Company’s or the Stockholder’s part of any provisions or conditions of this Agreement must be in writing and will be effective only to the extent specifically set forth in such writing and that all remedies, either under this Agreement, by law or otherwise afforded to the Company and the Stockholder, will be cumulative and not alternative.

5.10 Notices, etc. All notices and other communications required or permitted hereunder will be in writing and will be deemed effectively given upon personal delivery or upon confirmed delivery by facsimile or telecopy, or on the fifth day (or the tenth day if to a party with a foreign address) following mailing by registered or certified mail, return receipt requested, postage prepaid, addressed: (a) if to the Stockholder, at the Stockholder’s address as set forth on the signature page attached hereto, or at such other address as the Stockholder will have furnished to the Company in writing and (b) if to the Company, at its principal office, or at such other address as the Company will have furnished to the Stockholder in writing.

5.11 Limitations Upon Company Obligations to Purchase. If the Company is purchasing any Company Stock hereunder and it cannot satisfy the conditions precedent to acquisition of its own shares under Delaware law, or is restricted from making such purchase under any agreement by which the Company is bound, the Company may purchase as many shares as it will have legal capacity to purchase and the purchase right hereunder will remain in effect as to any unpurchased shares. Any Company Stock which the Company is unable to purchase hereunder, because of the limitations stated in this section, will be held by the owner thereof subject to the provisions of this Agreement without in any way relieving the owner thereof of the duty to sell. The purchase price of such Company Stock will not change because of the deferred payment or purchase.

5.12 Titles and Subtitles; Gender. The titles of the articles, sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement. Throughout this Agreement, the masculine gender will include the feminine and neuter (and vice versa) and the singular will include the plural (and vice versa), whenever the context requires.

 

8

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5.13 Counterparts. This Agreement may be executed in any number of counterparts, each of which will be deemed an original, but all of which together will constitute one instrument. This Agreement will be binding upon all of the parties hereto notwithstanding that all parties may not have executed the same signature pages to this Agreement, and notwithstanding that the signature page to this Agreement as executed by a party hereto may not be identical to the signature page to this Agreement executed by certain other parties hereto.

5.14 Incorporation of Exhibits. All Exhibits and other documents attached to this Agreement (for purposes of this Section 5.14, “documents”) are hereby incorporated into this Agreement in full by reference as if set forth in this Agreement verbatim. Any reference to an Exhibit made in this Agreement will mean and refer to the Exhibit attached to this Agreement which is labeled as such Exhibit. The term “Agreement” as used throughout this Agreement will include, by definition, to the extent applicable, all documents attached hereto.

5.15 Stockholder Will. Stockholder agrees to include in his will a direction and authorization to comply with the provisions of this Agreement; provided, however, that the failure of Stockholder to so direct is executor will not affect the validity or enforceability of this Agreement.

[THE NEXT PAGE IS THE SIGNATURE PAGE]

 

9

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IN WITNESS WHEREOF, each of the undersigned has hereby executed this Agreement under seal (the individual party adopting the word “SEAL” as his seal) as of the date first set forth above.

 

 

 

 

10

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EXHIBIT A

STATE OF NORTH CAROLINA

ACKNOWLEDGEMENT AND CONSENT

COUNTY OF                     

THIS ACKNOWLEDGEMENT AND CONSENT (“Acknowledgement”) is dated to be effective as of the      day of                      , 200    , by                      (“Spouse”), in favor of her/his husband/wife,                      (“Participant”) and Bandwidth.com, Inc., a Delaware corporation (“Company”).

WHEREAS, Spouse is (or intends to become) a citizen and resident of the State of North Carolina and the county set forth above; and

WHEREAS, Spouse is the husband/wife of Participant; and

WHEREAS, Participant is currently the record and beneficial owner of                                                   shares of the Company’s capital stock (the “Shares”); and

WHEREAS, the Shares are subject to the terms and provisions of that certain Stockholders’ Agreement of the Company dated                      (as the same may be amended and modified from time to time, the “Stockholders’ Agreement”);

NOW THEREFORE, in consideration of the premises, TEN DOLLARS ($10.00), the mutual promises and covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Spouse hereby agrees as follows:

1. Spouse acknowledges and agrees that Participant is the sole owner of the Shares and has been since his/her acquisition of the Shares.

2. Spouse acknowledges and understands that the Shares held by his/her husband/wife are subject to the terms of the Stockholders’ Agreement, a true and accurate copy of which is attached hereto as Annex I. Spouse acknowledges and agrees that the restrictions and obligations contained in the Stockholders’ Agreement are reasonable and necessary to (a) promote the mutual interests of the stockholders of the Company and their heirs and assigns, and (b) provide, under certain circumstances set forth in the Stockholders’ Agreement, restrictions on the transfer, and a market for the disposition, of the Shares which would not otherwise exist.

3. To the extent that Spouse has, may have or may hereafter acquire any interest in the Shares, or any other ownership interest in the Company, Spouse agrees to be bound by the terms and conditions of the Stockholders’ Agreement as if he/she were a party to the Stockholders’ Agreement from its original execution, including, but not limited to, restrictions on transfer or sale of the Shares, valuations to be placed on the Shares, either as an agreed or appraised value, and payment provisions thereunder; provided, however, that Spouse hereby waives any right that he/she may have to inspect or review for any purpose the books and records or any other information concerning the Company, its assets or its business.

4. Spouse acknowledges and agrees that this Acknowledgement will apply to the Shares and any other shares of the Company’s capital stock that Participant may hereafter acquire. Spouse further acknowledges and agrees that he/she has had a full opportunity to review this Acknowledgement and the Stockholders’ Agreement with legal counsel of his/her own selection and that she executes this Acknowledgement voluntarily.

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IN WITNESS WHEREOF, the undersigned has executed this instrument under seal, adopting the word “SEAL” as his/her seal, as of the day and year first above written.

 

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ANNEX I

Stockholders’ Agreement

(See attached)

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EXHIBIT B

Insurance Policies

Exhibit 10.1

 

 

 

CREDIT AND SECURITY AGREEMENT

among

BANDWIDTH.COM, INC.

as Borrower

THE LENDERS NAMED HEREIN

as Lenders

and

KEYBANK NATIONAL ASSOCIATION

as Administrative Agent, Swing Line Lender and Issuing Lender

KEYBANC CAPITAL MARKETS INC.

as Joint Lead Arranger and Sole Book Runner

PACIFIC WESTERN BANK

as Joint Lead Arranger and Syndication Agent

FIFTH THIRD BANK

SILICON VALLEY BANK

as Joint Lead Arrangers and Co-Documentation Agents

 

 

dated as of

November 4, 2016

 

 

 

 

 

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TABLE OF CONTENTS

 

		Page
ARTICLE I. DEFINITIONS			1
Section 1.1. Definitions			1
Section 1.2. Accounting Terms			36
Section 1.3. Terms Generally			36
ARTICLE II. AMOUNT AND TERMS OF CREDIT			36
Section 2.1. Amount and Nature of Credit			36
Section 2.2. Revolving Credit Commitment			37
Section 2.3. Term Loan Commitment			43
Section 2.4. Interest			44
Section 2.5. Evidence of Indebtedness			45
Section 2.6. Notice of Loans and Credit Events; Funding of Loans			46
Section 2.7. Payment on Loans and Other Obligations			48
Section 2.8. Prepayment			49
Section 2.9. Commitment and Other Fees			50
Section 2.10. Modifications to Commitment			50
Section 2.11. Computation of Interest and Fees			53
Section 2.12. Mandatory Payments			53
Section 2.13. Swap Obligations Keepwell Provision			55
ARTICLE III. ADDITIONAL PROVISIONS RELATING TO EURODOLLAR LOANS; INCREASED CAPITAL; TAXES			55
Section 3.1. Requirements of Law			55
Section 3.2. Taxes			57
Section 3.3. Funding Losses			60
Section 3.4. Change of Lending Office			61
Section 3.5. Eurodollar Rate Lending Unlawful; Inability to Determine Rate			61
Section 3.6. Replacement of Lenders			62
Section 3.7. Discretion of Lenders as to Manner of Funding			62
ARTICLE IV. CONDITIONS PRECEDENT			62
Section 4.1. Conditions to Each Credit Event			62
Section 4.2. Conditions to Closing			63
Section 4.3. Conditions to Initial Funding Date			65
Section 4.4. Post-Closing Conditions			67
ARTICLE V. COVENANTS			68
Section 5.1. Insurance			68
Section 5.2. Money Obligations			68
Section 5.3. Financial Statements and Information			69
Section 5.4. Financial Records			69
Section 5.5. Franchises; Change in Business			70
Section 5.6. ERISA Pension and Benefit Plan Compliance			70
Section 5.7. Financial Covenants			71
Section 5.8. Borrowing			71
Section 5.9. Liens			72
Section 5.10. Regulations T, U and X			74

 

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TABLE OF CONTENTS

 

		Page
Section 5.11. Investments, Loans and Guaranties			74
Section 5.12. Merger and Sale of Assets			75
Section 5.13. Acquisitions			76
Section 5.14. Notice			76
Section 5.15. Restricted Payments			77
Section 5.16. Environmental Compliance			77
Section 5.17. Affiliate Transactions			78
Section 5.18. Use of Proceeds			78
Section 5.19. Corporate Names and Locations of Collateral			79
Section 5.20. Subsidiary Guaranties, Security Documents and Pledge of Stock or Other Ownership Interest			79
Section 5.21. Collateral			80
Section 5.22. Property Acquired Subsequent to the Closing Date and Right to Take Additional Collateral			82
Section 5.23. Restrictive Agreements			83
Section 5.24. Other Covenants and Provisions			83
Section 5.25. Additional CLEC Covenants			84
Section 5.26. FCC Approval			84
Section 5.27. Amendment of Organizational Documents			84
Section 5.28. Fiscal Year of the Borrower			84
Section 5.29. Banking Relationship			85
Section 5.30. Further Assurances			85
ARTICLE VI. REPRESENTATIONS AND WARRANTIES			85
Section 6.1. Corporate Existence; Subsidiaries; Foreign Qualification			85
Section 6.2. Corporate Authority			85
Section 6.3. Compliance with Laws and Contracts			86
Section 6.4. Litigation and Administrative Proceedings			86
Section 6.5. Title to Assets			87
Section 6.6. Liens and Security Interests			87
Section 6.7. Tax Returns			87
Section 6.8. Environmental Laws			87
Section 6.9. Locations			88
Section 6.10. Continued Business			88
Section 6.11. Employee Benefits Plans			88
Section 6.12. Consents or Approvals			89
Section 6.13. Solvency			89
Section 6.14. Financial Statements			89
Section 6.15. Regulations			89
Section 6.16. Material Agreements			90
Section 6.17. Intellectual Property			90
Section 6.18. Insurance			90
Section 6.19. Deposit Accounts and Securities Accounts			90
Section 6.20. Accurate and Complete Statements			90
Section 6.21. Investment Company; Other Restrictions			91
Section 6.22. Defaults			91

 

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TABLE OF CONTENTS

 

		Page
ARTICLE VII. SECURITY			91
Section 7.1. Security Interest in Collateral			91
Section 7.2. Collections and Receipt of Proceeds by Borrower			91
Section 7.3. Collections and Receipt of Proceeds by Administrative Agent			92
Section 7.4. Administrative Agent’s Authority Under Pledged Notes			93
Section 7.5. Commercial Tort Claims			94
Section 7.6. Use of Inventory and Equipment			94
ARTICLE VIII. EVENTS OF DEFAULT			95
Section 8.1. Payments			95
Section 8.2. Special Covenants			95
Section 8.3. Other Covenants			95
Section 8.4. Representations and Warranties			95
Section 8.5. Cross Default			95
Section 8.6. ERISA Default			95
Section 8.7. Change in Control			95
Section 8.8. Judgments			96
Section 8.9. Security			96
Section 8.10. Validity of Loan Documents			96
Section 8.11. Solvency			96
ARTICLE IX. REMEDIES UPON DEFAULT			97
Section 9.1. Optional Defaults			97
Section 9.2. Automatic Defaults			98
Section 9.3. Letters of Credit			98
Section 9.4. Offsets			98
Section 9.5. Equalization Provisions			99
Section 9.6. Collateral			100
Section 9.7. Other Remedies			101
Section 9.8. Application of Proceeds			101
ARTICLE X. THE ADMINISTRATIVE AGENT			103
Section 10.1. Appointment and Authorization			103
Section 10.2. Note Holders			104
Section 10.3. Consultation With Counsel			104
Section 10.4. Documents			104
Section 10.5. Administrative Agent and Affiliates			104
Section 10.6. Knowledge or Notice of Default			104
Section 10.7. Action by Administrative Agent			105
Section 10.8. Release of Collateral or Guarantor of Payment			105
Section 10.9. Delegation of Duties			105
Section 10.10. Indemnification of Administrative Agent			105
Section 10.11. Successor Administrative Agent			106
Section 10.12. Issuing Lender			106
Section 10.13. Swing Line Lender			107
Section 10.14. Administrative Agent May File Proofs of Claim			107
Section 10.15. No Reliance on Administrative Agent’s Customer Identification Program			107

 

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TABLE OF CONTENTS

 

		Page
Section 10.16. Other Agents			108
ARTICLE XI. MISCELLANEOUS			108
Section 11.1. Lenders’ Independent Investigation			108
Section 11.2. No Waiver; Cumulative Remedies			108
Section 11.3. Amendments, Waivers and Consents			108
Section 11.4. Notices			110
Section 11.5. Costs, Expenses and Documentary Taxes			110
Section 11.6. Indemnification			111
Section 11.7. Obligations Several; No Fiduciary Obligations			111
Section 11.8. Execution in Counterparts			112
Section 11.9. Binding Effect; Borrower’s Assignment			112
Section 11.10. Lender Assignments			112
Section 11.11. Sale of Participations			114
Section 11.12. Replacement of Affected Lenders			115
Section 11.13. Patriot Act Notice			115
Section 11.14. Severability of Provisions; Captions; Attachments			116
Section 11.15. Investment Purpose			116
Section 11.16. Entire Agreement			116
Section 11.17. Confidentiality			116
Section 11.18. Limitations on Liability of the Issuing Lender			117
Section 11.19. General Limitation of Liability			117
Section 11.20. No Duty			118
Section 11.21. Legal Representation of Parties			118
Section 11.22. Acknowledgement and Consent to Bail-In of EEA Financial Institutions			118
Section 11.23. Governing Law; Submission to Jurisdiction			119
Jury Trial Waiver			Signature Page 1

 

Exhibit A		Form of Revolving Credit Note
Exhibit B		Form of Swing Line Note
Exhibit C		Form of Term Note
Exhibit D		Form of Notice of Loan
Exhibit E		Form of Compliance Certificate
Exhibit F		Form of Assignment and Acceptance Agreement
Exhibit G-1		Form of U.S. Tax Compliance Certificate (For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)
Exhibit G-2		Form of U.S. Tax Compliance Certificate (For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)
Exhibit G-3		Form of U.S. Tax Compliance Certificate (For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes)
Exhibit G-4		Form of U.S. Tax Compliance Certificate (For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)

 

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TABLE OF CONTENTS

 

		Page
Schedule 1 Commitments of Lenders			S-1
Schedule 2 Guarantors of Payment			S-2
Schedule 3 Pledged Securities			S-3
Schedule 5.8 Indebtedness
Schedule 5.9 Liens
Schedule 6.1 Corporate Existence; Subsidiaries; Foreign Qualification
Schedule 6.4 Litigation and Administrative Proceedings
Schedule 6.9 Locations
Schedule 6.11 Employee Benefits Plans
Schedule 6.12 Consents or Approvals
Schedule 6.16 Material Agreements
Schedule 6.17 Intellectual Property
Schedule 6.18 Insurance
Schedule 6.19 Deposit Accounts and Securities Accounts
Schedule 7.4 Pledged Notes
Schedule 7.5 Commercial Tort Claims

 

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This CREDIT AND SECURITY AGREEMENT (as the same may from time to time be amended, restated or otherwise modified, this “Agreement”) is made effective as of the 4^th day of November, 2016 among:

(a) BANDWIDTH.COM, INC., a Delaware corporation (the “Borrower”);

(b) the lenders listed on Schedule 1 hereto and each other Eligible Transferee, as hereinafter defined, that from time to time becomes a party hereto pursuant to Section 2.10(b) or 11.10 hereof (collectively, the “Lenders” and, individually, each a “Lender”); and

(c) KEYBANK NATIONAL ASSOCIATION, a national banking association, as the administrative agent for the Lenders under this Agreement (the “Administrative Agent”), the Swing Line Lender and the Issuing Lender.

WITNESSETH:

WHEREAS, the Borrower, the Administrative Agent and the Lenders desire to contract for the establishment of credits in the aggregate principal amounts hereinafter set forth, to be made available to the Borrower upon the terms and subject to the conditions hereinafter set forth;

NOW, THEREFORE, it is mutually agreed as follows:

ARTICLE I. DEFINITIONS

Section 1.1. Definitions. As used in this Agreement, the following terms shall have the meanings set forth below:

“Account” means an account, as that term is defined in the U.C.C.

“Account Debtor” means an account debtor, as that term is defined in the U.C.C., or any other Person obligated to pay all or any part of an Account in any manner and includes (without limitation) any Guarantor thereof.

“Acquisition” means any transaction or series of related transactions for the purpose of or resulting, directly or indirectly, in (a) the acquisition of all or substantially all of the assets of any Person (other than a Company), or any business or division of any Person (other than a Company), (b) the acquisition of in excess of fifty percent (50%) of the outstanding capital stock (or other equity interest) of any Person (other than a Company), or (c) the acquisition of another Person (other than a Company) by a merger, amalgamation or consolidation or any other combination with such Person.

“Additional Commitment” means that term as defined in Section 2.10(b)(i) hereof.

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“Additional Lender” means an Eligible Transferee that shall become a Lender during the Commitment Increase Period pursuant to Section 2.10(b) hereof.

“Additional Lender Assumption Agreement” means an additional lender assumption agreement, in form and substance satisfactory to the Administrative Agent, wherein an Additional Lender shall become a Lender.

“Additional Lender Assumption Effective Date” means that term as defined in Section 2.10(b)(ii) hereof.

“Additional Term Loan Facility” means that term as defined in Section 2.10(b)(i) hereof.

“Additional Term Loan Facility Amendment” means that term as defined in Section 2.10(c)(ii) hereof.

“Administrative Agent” means that term as defined in the first paragraph of this Agreement.

“Administrative Agent Fee Letter” means the Fee Letter between the Borrower, the Administrative Agent and KeyBanc Capital Markets Inc., dated as of October 5, 2016.

“Advantage” means any payment (whether made voluntarily or involuntarily, by offset of any deposit or other indebtedness or otherwise) received by any Lender (a) prior to an Equalization Event, in respect of the Applicable Debt, if such payment results in that Lender having less than its pro rata share (based upon its Applicable Commitment Percentage) of the Applicable Debt then outstanding, and (b) on and after an Equalization Event, in respect of the Obligations, if such payment results in that Lender having less than its pro rata share (based upon its Equalization Percentage) of the Obligations then outstanding.

“Affected Lender” means a Defaulting Lender or an Insolvent Lender.

“Affiliate” means any Person, directly or indirectly, controlling, controlled by or under common control with a Company and “control” (including the correlative meanings, the terms “controlling”, “controlled by” and “under common control with”) means the power, directly or indirectly, to direct or cause the direction of the management and policies of a Company, whether through the ownership of voting securities, by contract or otherwise.

“Aggregate Increase Amount” means that term as defined in Section 2.10(b)(i) hereof.

“Agreement” means that term as defined in the first paragraph of this agreement.

“Anti-Corruption Laws” means all laws, rules, and regulations of any jurisdiction applicable to the Companies from time to time concerning or relating to bribery or corruption (including, without limitation, the Foreign Corrupt Practices Act of 1977 (FCPA) (15 U.S.C. § 78dd-1, et seq.), as amended, and the rules and regulations thereunder).

 

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“Annualized Consolidated Interest Expense” means (a) for the fiscal quarter of the Borrower ending on December 31, 2016, Consolidated Interest Expense for such quarter times four, (b) for the fiscal quarter of the Borrower ending on March 31, 2017, Consolidated Interest Expense for the most recently completed two fiscal quarters times two, and (c) for the fiscal quarter of the Borrower ending on June 30, 2017, Consolidated Interest Expense for the most recently completed three fiscal quarters times one and one-third.

“Applicable Commitment Fee Rate” means:

(a) for the period from the Closing Date through April 30, 2017, thirty-seven and one-half (37.50) basis points; and

(b) commencing with the Consolidated financial statements of the Borrower for the fiscal year ending December 31, 2016, the number of basis points set forth in the following matrix, based upon the result of the computation of the Leverage Ratio as set forth in the Compliance Certificate for such fiscal period and, thereafter, as set forth in each successive Compliance Certificate, as provided below:

 

Leverage Ratio		Applicable Commitment Fee Rate
Greater than or equal to 2.25 to 1.00		37.5 basis points
Greater than or equal to 1.75 to 1.00 but less than 2.25 to 1.00		37.5 basis points
Less than 1.75 to 1.00		25.00 basis points

The first date on which the Applicable Commitment Fee Rate is subject to change is May 1, 2017. After May 1, 2017, changes to the Applicable Commitment Fee Rate shall be effective on the first day of each calendar month following the date upon which the Administrative Agent should have received, pursuant to Section 5.3(c) hereof, the Compliance Certificate. The above pricing matrix does not modify or waive, in any respect, the requirements of Section 5.7 hereof, the rights of the Administrative Agent and the Lenders to charge the Default Rate, or the rights and remedies of the Administrative Agent and the Lenders pursuant to Articles VIII and IX hereof. Notwithstanding anything herein to the contrary, (i) during any period when the Borrower shall have failed to timely deliver the Consolidated financial statements pursuant to Section 5.3(a) or (b) hereof, or the Compliance Certificate pursuant to Section 5.3(c) hereof, until such time as the appropriate Consolidated financial statements and Compliance Certificate are delivered, the Applicable Commitment Fee Rate shall, at the election of the Administrative Agent (which may be retroactively effective), be the highest rate per annum indicated in the above pricing grid regardless of the Leverage Ratio at such time, and (ii) in the event that any financial information or certification provided to the Administrative Agent in the Compliance Certificate is shown to be inaccurate (regardless of whether this Agreement or the Commitment is in effect when such inaccuracy is discovered), and such inaccuracy, if corrected, would have led to the application of a higher Applicable Commitment Fee Rate for any period (an “Applicable Commitment Fee Period”) than the Applicable Commitment Fee Rate applied for

 

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such Applicable Commitment Fee Period, then (A) the Borrower shall promptly deliver to the Administrative Agent a corrected Compliance Certificate for such Applicable Commitment Fee Period, (B) the Applicable Commitment Fee Rate shall be determined based on such corrected Compliance Certificate, and (C) the Borrower shall promptly pay to the Administrative Agent the accrued additional fees owing as a result of such increased Applicable Commitment Fee Rate for such Applicable Commitment Fee Period.

“Applicable Commitment Percentage” means, for each Lender:

(a) with respect to the Revolving Credit Commitment, the percentage, if any, set forth opposite such Lender’s name under the column headed “Revolving Credit Commitment Percentage”, as set forth on Schedule 1 hereto, subject to assignments of interests pursuant to Section 11.10 hereof, reductions pursuant to Section 2.10(a) hereof and increases pursuant to Section 2.10(b) hereof; and

(b) with respect to the Term Loan Commitment (or the Term Loan if the Term Loan Commitment is no longer in effect), the percentage, if any, set forth opposite such Lender’s name under the column headed “Term Loan Commitment Percentage”, as set forth on Schedule 1 hereto, subject to assignments of interests pursuant to Section 11.10 hereof.

“Applicable Debt” means:

(a) with respect to the Revolving Credit Commitment, collectively, (i) all Indebtedness incurred by the Borrower to the Revolving Lenders pursuant to this Agreement and the other Loan Documents, and includes, without limitation, the principal of and interest on all Revolving Loans and all Swing Loans and all obligations with respect to Letters of Credit, (ii) each extension, renewal or refinancing of the foregoing, in whole or in part, (iii) the commitment and other fees and amounts payable hereunder in connection with the Revolving Credit Commitment, and (iv) all Related Expenses incurred in connection with the foregoing; and

(b) with respect to the Term Loan Commitment, collectively, (i) all Indebtedness incurred by the Borrower to the Term Lenders pursuant to this Agreement and the other Loan Documents, and includes, without limitation, the principal of and interest on the Term Loan, (ii) each extension, renewal or refinancing of the foregoing in whole or in part, (iii) all fees and other amounts payable hereunder in connection with the Term Loan Commitment, and (iv) all Related Expenses incurred in connection with the foregoing.

“Applicable Margin” means:

(a) for the period from the Closing Date through April 30, 2017, two hundred fifty (250.00) basis points for Eurodollar Loans and one hundred fifty (150.00) basis points for Base Rate Loans; and

 

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(b) commencing with the Consolidated financial statements of the Borrower for the fiscal year ending December 31, 2016, the number of basis points (depending upon whether Loans are Eurodollar Loans or Base Rate Loans) set forth in the following matrix, based upon the result of the computation of the Leverage Ratio as set forth in the Compliance Certificate for such fiscal period and, thereafter, as set forth in each successive Compliance Certificate, as provided below:

 

Leverage Ratio		Applicable Basis Points for Eurodollar Loans		Applicable Basis Points for Base Rate Loans
Greater than or equal to 2.25 to 1.00		275.00		175.00
Greater than or equal to 1.75 to 1.00 but less than 2.25 to 1.00		250.00		150.00
Less than 1.75 to 1.00		225.00		125.00

The first date on which the Applicable Margin is subject to change is May 1, 2017. After May 1, 2017, changes to the Applicable Margin shall be effective on the first day of each calendar month following the date upon which the Administrative Agent should have received, pursuant to Section 5.3(c) hereof, the Compliance Certificate. The above pricing matrix does not modify or waive, in any respect, the requirements of Section 5.7 hereof, the rights of the Administrative Agent and the Lenders to charge the Default Rate, or the rights and remedies of the Administrative Agent and the Lenders pursuant to Articles VIII and IX hereof. Notwithstanding anything herein to the contrary, (i) during any period when the Borrower shall have failed to timely deliver the Consolidated financial statements pursuant to Section 5.3(a) or (b) hereof, or the Compliance Certificate pursuant to Section 5.3(c) hereof, until such time as the appropriate Consolidated financial statements and Compliance Certificate are delivered, the Applicable Margin shall, at the election of the Administrative Agent (which may be retroactively effective), be the highest rate per annum indicated in the above pricing grid for Loans of that type, regardless of the Leverage Ratio at such time, and (ii) in the event that any financial information or certification provided to the Administrative Agent in the Compliance Certificate is shown to be inaccurate (regardless of whether this Agreement or the Commitment is in effect when such inaccuracy is discovered), and such inaccuracy, if corrected, would have led to the application of a higher Applicable Margin for any period (an “Applicable Margin Period”) than the Applicable Margin applied for such Applicable Margin Period, then (A) the Borrower shall promptly deliver to the Administrative Agent a corrected Compliance Certificate for such Applicable Margin Period, (B) the Applicable Margin shall be determined based on such corrected Compliance Certificate, and (C) the Borrower shall promptly pay to the Administrative Agent the accrued additional interest owing as a result of such increased Applicable Margin for such Applicable Margin Period.

“Assignment Agreement” means an Assignment and Acceptance Agreement in the form of the attached Exhibit F.

“Authorized Officer” means a Financial Officer or other individual authorized by a Financial Officer in writing (with a copy to the Administrative Agent) to handle certain administrative matters in connection with this Agreement.

 

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“Bail-In Action” means the exercise of any Write-Down and Conversion Powers by the applicable EEA Resolution Authority in respect of any liability of an EEA Financial Institution.

“Bail-In Legislation” means, with respect to any EEA Member Country implementing Article 55 of Directive 2014/59/EU of the European Parliament and of the Council of the European Union, the implementing law for such EEA Member Country from time to time that is described in the EU Bail-In Legislation Schedule.

“Bailee’s Waiver” means a bailee’s waiver, in form and substance reasonably satisfactory to the Administrative Agent, delivered by a Credit Party in connection with this Agreement, as such waiver may from time to time be amended, restated or otherwise modified.

“Bank Product Agreements” means those certain cash management services and other agreements entered into from time to time between a Company and the Administrative Agent or a Lender (or an affiliate of a Lender) in connection with any of the Bank Products.

“Bank Product Obligations” means all obligations, liabilities, contingent reimbursement obligations, fees and expenses owing by a Company to the Administrative Agent or any Lender (or an affiliate of a Lender) pursuant to or evidenced by the Bank Product Agreements.

“Bank Products” means a service or facility extended to a Company by the Administrative Agent or any Lender (or an affiliate of a Lender) for (a) credit cards and credit card processing services, (b) debit cards, purchase cards and stored value cards, (c) ACH transactions, and (d) cash management, including controlled disbursement, accounts or services.

“Bankruptcy Code” means Title 11 of the United States Code entitled “Bankruptcy”, as now or hereafter in effect, or any successor thereto, as hereafter amended.

“Base Rate” means, for any day, a rate per annum equal to the highest of (a) the Prime Rate, (b) one-half of one percent (0.50%) in excess of the Federal Funds Effective Rate, and (c) one percent (1%) in excess of the London interbank offered rate for loans in Eurodollars for a period of one month (or, if such day is not a Business Day, such rate as calculated on the most recent Business Day). Any change in the Base Rate shall be effective immediately from and after such change in the Base Rate. Notwithstanding the foregoing, if at any time the Base Rate as determined above is less than zero, it shall be deemed to be zero for purposes of this Agreement.

“Base Rate Loan” means a Revolving Loan described in Section 2.2(a) hereof, or a portion of the Term Loan described in Section 2.3 hereof, that shall be denominated in Dollars and on which the Borrower shall pay interest at the Derived Base Rate.

“Borrower” means that term as defined in the first paragraph of this Agreement.

“Business Day” means a day that is not a Saturday, a Sunday or another day of the year on which national banks are authorized or required to close in Cleveland, Ohio, and, in addition, if the applicable Business Day relates to a Eurodollar Loan, is a day of the year on which dealings in Dollar deposits are carried on in the London interbank Eurodollar market.

 

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“Capital Distribution” means a payment made, liability incurred or other consideration given by a Company to any Person that is not a Company, (a) for the purchase, acquisition, redemption, repurchase, payment or retirement of any capital stock or other equity interest of such Company, or (b) as a dividend, return of capital or other distribution (other than any stock dividend, stock split, restricted stock award under any such Company’s equity compensation plans, stock distribution in connection with an Acquisition permitted by Section 5.13 hereof, or other equity distribution, in each case payable only in capital stock or other equity of such Company) in respect of such Company’s capital stock or other equity interest.

“Capitalized Lease Obligations” means obligations of the Companies for the payment of rent for any real or personal property under leases or agreements to lease that, in accordance with GAAP, have been or should be capitalized on the books of the lessee and, for purposes hereof, the amount of any such obligation shall be the capitalized amount thereof determined in accordance with GAAP. Notwithstanding the foregoing, any lease which is required to be characterized as an operating lease under GAAP as in effect on the Closing Date shall continue to be treated as an operating lease for all purposes of this Agreement after the Closing Date despite any changes in GAAP occurring after the Closing Date, and any such lease payments shall not be considered Capitalized Lease Obligations hereunder.

“Cash Collateral Account” means a commercial Deposit Account designated as a “cash collateral account” and maintained by one or more Credit Parties with the Administrative Agent, without liability by the Administrative Agent or the Lenders to pay interest thereon, from which account the Administrative Agent, on behalf of the Lenders, shall have the exclusive right to withdraw funds until all of the Secured Obligations are paid in full.

“Cash Equivalent” means cash equivalent as determined in accordance with GAAP.

“Cash Security” means all cash, instruments, Deposit Accounts, Securities Accounts and cash equivalents, in each case whether matured or unmatured, whether collected or in the process of collection, upon which a Credit Party presently has or may hereafter have any claim or interest, wherever located, including but not limited to any of the foregoing that are presently or may hereafter be existing or maintained with, issued by, drawn upon by, or in the possession of the Administrative Agent or any Lender.

“CFC” means a Controlled Foreign Corporation, as such term is defined in Section 957 of the Code.

“Change in Control” means:

(a) the acquisition of, or, if earlier, the shareholder or director approval of the acquisition of, ownership or voting control, directly or indirectly, beneficially (within the meaning of Rules 13d-3 and 13d-5 of the Exchange Act) or of record, on or after the Closing Date, by any Person or group (within the meaning of Sections 13d and 14d of the Exchange Act), of shares representing more than thirty-five percent (35%) of the aggregate ordinary Voting Power represented by the issued and outstanding equity interests of the Borrower;

 

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(b) if, at any time during any period of twenty-four (24) consecutive months, a majority of the members of the board of directors of the Borrower cease to be composed of individuals (i) who were members of that board of directors on the first day of such period, (ii) whose election or nomination to that board of directors was approved by individuals referred to in subpart (i) above that constituted, at the time of such election or nomination, at least a majority of that board of directors, or (iii) whose election or nomination to that board of directors was approved by individuals referred to in subparts (i) and (ii) above that constituted, at the time of such election or nomination, at least a majority of that board of directors;

(c) if the Borrower shall cease to directly own one hundred percent (100%) of the aggregate ordinary Voting Power represented by the issued and outstanding equity interests of each Guarantor of Payment, except in the case of any disposition or sale of any Guarantor of Payment to the extent otherwise expressly permitted pursuant to the terms of this Agreement; or

(d) the occurrence of a change in control, or other term of similar import used therein, as defined in any Material Indebtedness Agreement.

“CLEC” means Bandwidth.com CLEC, LLC, a Delaware limited liability company.

“CLEC Approval” or “CLEC Approvals” means that term as defined in Section 5.25 hereof.

“CLEC Required Approval Date” means date that is one hundred twenty (120) days (or one hundred eighty (180) days in the case of any and all consents, approvals or authorizations of the state public utility commissions in Hawaii) after the Closing Date, or such longer period as agreed to in writing by the Administrative Agent.

“CLEC Trigger Date” means the date upon which all of the CLEC Approvals have been obtained by CLEC.

“Closing Date” means the effective date of this Agreement as set forth in the first paragraph of this Agreement.

“Code” means the Internal Revenue Code of 1986, as amended, together with the rules and regulations promulgated thereunder.

“Collateral” means (a) all of the Borrower’s existing and future (i) personal property, (ii) Accounts, Investment Property, instruments, contract rights, chattel paper, documents, supporting obligations, letter-of-credit rights, Pledged Securities, Pledged Notes (if any), Commercial Tort Claims, General Intangibles, Inventory and Equipment, (iii) funds now or hereafter on deposit in the Cash Collateral Account, if any, and (iv) Cash Security; and (b) Proceeds and products of any of the foregoing; provided that Collateral shall not include Excluded Property.

 

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“Commercial Tort Claim” means a commercial tort claim, as that term is defined in the U.C.C. (Schedule 7.5 hereto lists all Commercial Tort Claims of the Credit Parties in existence as of the Closing Date.)

“Commitment” means the obligation hereunder of the Lenders, during the Commitment Period, to make Loans and to participate in Swing Loans and the issuance of Letters of Credit pursuant to the Revolving Credit Commitment and the Term Loan Commitment, up to the Total Commitment Amount.

“Commitment Increase Period” means the period from the Closing Date to the date that is six months prior to the last day of the Commitment Period.

“Commitment Period” means the period from the Closing Date to the earliest of (a) November 3, 2021, (b) the Early Termination Date, or (c) such earlier date on which the Commitment shall have been terminated pursuant to Article IX hereof.

“Commodity Exchange Act” means the Commodity Exchange Act (7 U.S.C. § 1 et seq.), as amended from time to time, together with the rules and regulations promulgated thereunder.

“Companies” means the Borrower and all Subsidiaries (other than Republic Wireless).

“Company” means the Borrower or a Subsidiary (other than Republic Wireless).

“Compliance Certificate” means a Compliance Certificate in the form of the attached Exhibit E.

“Confidential Information” means all confidential or proprietary information about the Companies and Republic Wireless that has been furnished by any Company to the Administrative Agent or any Lender, whether furnished before or after the Closing Date and regardless of the manner in which it is furnished, but does not include any such information that (a) is or becomes generally available to the public other than as a result of a disclosure by the Administrative Agent or such Lender not permitted by this Agreement, (b) was available to the Administrative Agent or such Lender on a nonconfidential basis prior to its disclosure to the Administrative Agent or such Lender, or (c) becomes available to the Administrative Agent or such Lender on a nonconfidential basis from a Person other than any Company that is not, to the knowledge of the Administrative Agent or such Lender, acting in violation of a confidentiality agreement with a Company or is not otherwise prohibited from disclosing the information to the Administrative Agent or such Lender.

“Connection Income Taxes” means Other Connection Taxes that are imposed on or measured by net income (however denominated) or that are franchise Taxes or branch profits Taxes.

 

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“Consignee’s Waiver” means a consignee’s waiver (or similar agreement), in form and substance reasonably satisfactory to the Administrative Agent, delivered by a Credit Party in connection with this Agreement, as such waiver may from time to time be amended, restated or otherwise modified.

“Consolidated” means the resultant consolidation of the financial statements of the Borrower and its Subsidiaries in accordance with GAAP, including principles of consolidation consistent with those applied in preparation of the consolidated financial statements referred to in Section 6.14 hereof.

“Consolidated Capital Expenditures” means, for any period, the amount of capital expenditures of the Borrower, as determined on a Consolidated basis; provided that Consolidated Capital Expenditures shall not include:

(a) the portion of capital expenditures made in connection with the replacement, substitution, restoration or repair of assets that are financed with insurance, condemnation awards, other settlements, or warranty proceeds paid, in each case, on account of the loss of or damage to the assets being replaced, restored or repaired;

(b) to the extent fixed assets are purchased simultaneously with the trade-in of existing fixed assets, the reduction in the purchase price or the credit granted by the seller for the fixed assets being traded in at such time;

(c) capital expenditures made with the proceeds of substantially contemporaneous sales or issuances of equity interests of the Borrower, to the extent any such sale or issuance does not result in a Change in Control;

(d) to the extent included in the foregoing definition, capital expenditures in fixed assets that are being purchased as part of an Acquisition permitted pursuant to Section 5.13 hereof; and

(e) to the extent included in the foregoing definition, capital expenditures for leasehold improvements made (wholly or partly) with the proceeds of landlord allowances or contributions (to the extent of such contributions).

“Consolidated Debt Service” means, for any period, as determined on a Consolidated basis, the aggregate, without duplication, of (a) Consolidated Interest Expense paid in cash, and (b) scheduled principal payments on Consolidated Funded Indebtedness (other than optional prepayments of the Revolving Loans); provided that, for purposes of calculating Consolidated Debt Service for the fiscal quarters of the Borrower ending on December 31, 2016, March 31, 2017 and June 30, 2017, Annualized Consolidated Interest Expense shall be used in place of Consolidated Interest Expense in such calculation.

“Consolidated Depreciation and Amortization Charges” means, for any period, the aggregate of all depreciation and amortization charges for fixed assets, leasehold improvements and general intangibles (specifically including goodwill) of the Borrower for such period, as determined on a Consolidated basis.

 

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“Consolidated EBITDA” means, for any period, as determined on a Consolidated basis:

(a) Consolidated Net Earnings for such period plus, without duplication, the aggregate amounts deducted in determining such Consolidated Net Earnings in respect of:

(i) Consolidated Interest Expense;

(ii) Consolidated Income Tax Expense;

(iii) Consolidated Depreciation and Amortization Charges;

(iv) non-recurring non-cash losses not incurred in the ordinary course of business;

(v) non-cash losses for goodwill or other impairment charges;

(vi) non-cash equity compensation charges or other non-cash expenses arising from (A) the grant, issuance or re-pricing of equity interests, stock options or other equity-based awards, (B) any amendment, modification, substitution or change of any equity interests, stock options, or (C) other equity based awards, including restricted stock awards;

(vii) transaction expenses and fees related to (A) the closing of this Agreement, the Loan Documents and the consummation of the Spin-Off, in an aggregate amount not to exceed One Million Five Hundred Thousand Dollars ($1,500,000); (B) an initial public offering and follow-on offering of the Borrower’s equity interests in an aggregate amount not to exceed Five Million Dollars ($5,000,000); and (C) any Acquisition permitted pursuant to Section 5.13 hereof, as reasonably acceptable to the Administrative Agent; and

(viii) other non-cash charges, losses, or expenses; minus

(b) to the extent included in Consolidated Net Earnings for such period, (i) cash gains on the sale of fixed assets and other cash gains not earned in the ordinary course of business, and (ii) non-cash gains;

provided that, (A) any amounts paid to the Borrower in resolution or settlement of pending litigation concerning Verizon’s non-payment of the Borrower’s intercarrier compensation charges will constitute Consolidated EBITDA when received in any applicable period, (B) for purposes of calculating Consolidated EBITDA for any period of four consecutive fiscal quarters (each, a “Reference Period”), if, during such Reference Period an Acquisition (or asset disposition (including the Spin-Off)) shall have occurred, Consolidated EBITDA for such

 

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Reference Period shall be calculated on a pro forma basis as if such Acquisition (or asset disposition) occurred on the first day of such Reference Period, and (C) Consolidated EBITDA for the quarters ended March 31, 2016, June 30, 2016 and September 30, 2016 shall be deemed to be as follows:

 

Quarter Ended		Consolidated EBITDA
March 31, 2016		$	6,474,332
June 30, 2016		$	6,278,571
September 30, 2016		$	5,677,200

“Consolidated Funded Indebtedness” means, at any date, all Indebtedness (including, but not limited to, short-term, long-term and Subordinated Indebtedness, if any) of the Borrower, as determined on a Consolidated basis; provided that Indebtedness of Republic Wireless shall be excluded from Consolidated Funded Indebtedness on and at all times after the effective date of the Spin-Off.

“Consolidated Income Tax Expense” means, for any period, all provisions for taxes based on the gross or net income of the Borrower (including, without limitation, any additions to such taxes, and any penalties and interest with respect thereto), as determined on a Consolidated basis; provided that such provisions of taxes attributable to Republic Wireless shall be excluded from Consolidated Income Tax Expense on and at all times after the effective date of the Spin-Off.

“Consolidated Interest Expense” means, for any period, the interest expense (including, without limitation, capitalized interest if and only to the extent payable in cash, the “imputed interest” portion of Capitalized Lease Obligations, synthetic leases and asset securitizations, if any, and excluding deferred financing costs) of the Borrower for such period, as determined on a Consolidated basis; provided that such interest expense of Republic Wireless shall be excluded from Consolidated Interest Expense on and at all times after the effective date of the Spin-Off.

“Consolidated Net Earnings” means, for any period, the net income (loss) of the Borrower for such period, as determined on a Consolidated basis.

“Consolidated Net Worth” means, at any date, the stockholders’ equity of the Borrower, determined as of such date on a Consolidated basis.

“Consolidated Unfunded Capital Expenditures” means, for any period, Consolidated Capital Expenditures that are not directly financed by the Companies with long-term Indebtedness (other than Revolving Loans) or Capitalized Lease Obligations, as determined on a Consolidated basis.

 

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“Control Agreement” means a Deposit Account Control Agreement or Securities Account Control Agreement.

“Controlled Group” means a Company and each Person required to be aggregated with a Company under Code Section 414(b), (c), (m) or (o).

“Credit Event” means the making by the Lenders of a Loan, the conversion by the Lenders of a Base Rate Loan to a Eurodollar Loan, the continuation by the Lenders of a Eurodollar Loan after the end of the applicable Interest Period, the making by the Swing Line Lender of a Swing Loan, or the issuance (or amendment or renewal) by the Issuing Lender of a Letter of Credit.

“Credit Exposure” means, at any time, with respect to a Specific Commitment, the sum of (a) the aggregate principal amount of all Loans outstanding under such Specific Commitment, and (b) the Letter of Credit Exposure, if any, applicable to such Specific Commitment.

“Credit Party” means the Borrower, and any Subsidiary or other Affiliate that is a Guarantor of Payment or has executed and delivered a Security Agreement.

“Debt Service Coverage Ratio” means, as determined for the most recently completed four fiscal quarters of the Borrower on a Consolidated basis, the ratio of (a) the total of (i) Consolidated EBITDA, minus (ii) Consolidated Unfunded Capital Expenditures, minus (iii) Restricted Payments paid in cash (other than the Restricted Payments permitted pursuant to Sections 5.15(b) and (c) hereof); to (b) Consolidated Debt Service.

“Default Rate” means (a) with respect to any Loan or other Obligation for which a rate is specified, a rate per annum equal to two percent (2%) in excess of the rate otherwise applicable thereto, and (b) with respect to any other amount, if no rate is specified or available, a rate per annum equal to two percent (2%) in excess of the Derived Base Rate from time to time in effect.

“Defaulting Lender” means a Lender, as reasonably determined by the Administrative Agent, that (a) has failed (which failure has not been cured) to fund any Loan or any participation interest in Letters of Credit or Swing Loans required to be made hereunder in accordance with the terms hereof (unless such Lender shall have notified the Administrative Agent and the Borrower in writing of its good faith determination that a condition under Section 4.1 hereof to its obligation to fund any Loan shall not have been satisfied); (b) has notified the Borrower or the Administrative Agent in writing that it does not intend to comply with any of its funding obligations under this Agreement or has made a public statement to the effect that it does not intend to comply with its funding obligations under this Agreement (unless such writing or public statement relates to such Lender’s obligation to fund a Loan hereunder and states that such position is based on such Lender’s determination that a condition precedent to funding (which condition precedent, together with any applicable default, shall be specifically identified in such writing or public statement) cannot be satisfied) or generally under other agreements in

 

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which it commits to extend credit; (c) has failed, within three Business Days after receipt of a written request from the Administrative Agent or the Borrower to confirm that it will comply with the terms of this Agreement relating to its obligation to fund prospective Loans or participations in Letters of Credit or Swing Loans, and such request states that the requesting party has reason to believe that the Lender receiving such request may fail to comply with such obligation, and states such reason; or (d) has failed to pay to the Administrative Agent or any other Lender when due an amount owed by such Lender to the Administrative Agent or any other Lender pursuant to the terms of this Agreement, unless such amount is subject to a good faith dispute or such failure has been cured. Any Defaulting Lender shall cease to be a Defaulting Lender when the Administrative Agent determines, in its reasonable discretion, that such Defaulting Lender is no longer a Defaulting Lender based upon the characteristics set forth in this definition.

“Deposit Account” means a deposit account, as that term is defined in the U.C.C.

“Deposit Account Control Agreement” means each Deposit Account Control Agreement (or similar agreement with respect to a Deposit Account) among a Credit Party, the Administrative Agent and a depository institution, dated on or after the Closing Date, to be in form and substance reasonably satisfactory to the Administrative Agent, as the same may from time to time be amended, restated or otherwise modified.

“Derived Base Rate” means a rate per annum equal to the sum of the Applicable Margin (from time to time in effect) for Base Rate Loans plus the Base Rate.

“Derived Eurodollar Rate” means a rate per annum equal to the sum of the Applicable Margin (from time to time in effect) for Eurodollar Loans plus the Eurodollar Rate.

“Dodd-Frank Act” means the Dodd–Frank Wall Street Reform and Consumer Protection Act (Pub.L. 111-203, H.R. 4173) signed into law on July 21, 2010, as amended from time to time.

“Dollar” or the $ sign means lawful currency of the United States.

“Domestic Subsidiary” means a Subsidiary that is not a Foreign Subsidiary.

“Dormant Subsidiary” means a Company that (a) is not a Credit Party or the direct or indirect equity holder of a Credit Party, (b) has aggregate assets of less than Two Hundred Fifty Thousand Dollars ($250,000), and (c) has no direct or indirect Subsidiaries with aggregate assets, for such Company and all such Subsidiaries, of more than Two Hundred Fifty Thousand Dollars ($250,000). As of the Closing Date, IP Spectrum Solutions, LLC is a Dormant Subsidiary and is not a Credit Party.

“Early Termination Date” means the date that is ninety (90) days after the Closing Date, if the Initial Funding Date has not occurred prior to such date.

 

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“EEA Financial Institution” means (a) any credit institution or investment firm established in any EEA Member Country which is subject to the supervision of an EEA Resolution Authority, (b) any entity established in an EEA Member Country which is a parent of an institution described in subpart (a) of this definition, or (c) any financial institution established in an EEA Member Country that is a subsidiary of an institution described in subparts (a) or (b) of this definition and is subject to consolidated supervision with its parent.

“EEA Member Country” means any of the member states of the European Union, Iceland, Liechtenstein, and Norway.

“EEA Resolution Authority” means any public administrative authority or any person entrusted with public administrative authority of any EEA Member Country (including any delegee) having responsibility for the resolution of any EEA Financial Institution.

“Eligible Transferee” means a commercial bank, financial institution or other “accredited investor” (as defined in SEC Regulation D) that is not the Borrower, a Subsidiary, an Affiliate or a natural person.

“Environmental Laws” means all provisions of law (including the common law), statutes, ordinances, codes, rules, guidelines, policies, procedures, orders-in-council, regulations, permits, licenses, judgments, writs, injunctions, decrees, orders, authorizations, certificates, approvals, registrations, awards and standards promulgated by a Governmental Authority or by any court, agency, instrumentality, regulatory authority or commission of any of the foregoing concerning environmental health or safety and protection of natural resources, or regulation of the discharge of substances into, the environment.

“Environmental Permits” means all permits, licenses, authorizations, certificates, approvals or registrations required by any Governmental Authority under any Environmental Laws.

“Equalization Event” means the earlier of (a) the occurrence of an Event of Default under Section 8.11 hereof, or (b) the acceleration of the maturity of the Obligations after the occurrence of an Event of Default.

“Equalization Maximum Amount” means that term as defined in Section 9.5(b)(i) hereof.

“Equalization Percentage” means that term as defined in Section 9.5(b)(ii) hereof.

“Equipment” means equipment, as that term is defined in the U.C.C.

“ERISA” means the Employee Retirement Income Security Act of 1974, as amended from time to time, and the regulations promulgated pursuant thereto.

“ERISA Event” means any of the following situations, occurrences or events, but only if it has a Material Adverse Effect: (a) the existence of a condition or event with respect to an ERISA Plan that presents a significant risk of the imposition of an excise tax or any other

 

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material liability on a Company or of the imposition of a Lien on the assets of a Company; (b) the engagement by a Company in a non-exempt “prohibited transaction” (as defined under ERISA Section 406 or Code Section 4975) or a breach of a fiduciary duty under ERISA that could result in liability to a Company; (c) the application by a Controlled Group member for a waiver from the minimum funding requirements of Code Section 412 or ERISA Section 302 or a Controlled Group member is required to provide security under Code Section 401(a)(29) or ERISA Section 307;); (d) the occurrence of a Reportable Event with respect to any Pension Plan administered by a Company or a Controlled Group member as to which notice is required to be provided to the PBGC; (e) the withdrawal by a Controlled Group member from a Multiemployer Plan in a “complete withdrawal” or a “partial withdrawal” (as such terms are defined in ERISA Sections 4203 and 4205, respectively); (f) the involvement of, or occurrence or existence of any event or condition that makes likely the involvement of, a Multiemployer Plan in any reorganization under ERISA Section 4241; (g) the failure of an ERISA Plan administered by a Company or a Controlled Group member (and any related trust) that is intended to be qualified under Code Sections 401 and 501 to be so qualified or the failure of any “cash or deferred arrangement” under any such ERISA Plan to meet the requirements of Code Section 401(k); (h) the taking by the PBGC of any steps to terminate a Pension Plan or appoint a trustee to administer a Pension Plan, or the taking by a Controlled Group member of any steps to terminate a Pension Plan; (i) the failure by a Controlled Group member or an ERISA Plan to satisfy any requirements of law applicable to an ERISA Plan; (j) the commencement, existence or threatening of a claim, action, suit, audit or investigation with respect to an ERISA Plan, other than a routine claim for benefits; or (k) any incurrence by or any expectation of the incurrence by a Controlled Group member of any liability for post-retirement benefits under any Welfare Plan, other than as required by ERISA Section 601, et. seq. or Code Section 4980B.

“ERISA Plan” means an “employee benefit plan” (within the meaning of ERISA Section 3(3)) that a Controlled Group member at any time sponsors, maintains, contributes to, has liability with respect to or has an obligation to contribute to such plan.

“EU Bail-In Legislation Schedule” means the EU Bail-In Legislation Schedule published by the Loan Market Association (or any successor entity), as in effect from time to time.

“Eurocurrency Liabilities” shall have the meaning assigned to that term in Regulation D of the Board of Governors of the Federal Reserve System, as in effect from time to time.

“Eurodollar” means a Dollar denominated deposit in a bank or branch outside of the United States.

“Eurodollar Loan” means a Revolving Loan described in Section 2.2(a) hereof, or a portion of the Term Loan described in Section 2.3 hereof, that shall be denominated in Dollars and on which the Borrower shall pay interest at the Derived Eurodollar Rate.

“Eurodollar Rate” means, with respect to a Eurodollar Loan, for any Interest Period, a rate per annum equal to the quotient obtained (rounded upwards, if necessary, to the nearest 1/16^th of 1%) by dividing (a) the rate of interest, determined by the Administrative Agent in accordance with its usual procedures (which determination shall be conclusive absent manifest

 

16

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error) as of approximately 11:00 A.M. (London time) two Business Days prior to the beginning of such Interest Period pertaining to such Eurodollar Loan, as listed as the London interbank offered rate, as published by Thomson Reuters or Bloomberg (or, if for any reason such rate is unavailable from Thomson Reuters or Bloomberg, from any other similar company or service that provides rate quotations comparable to those currently provided by Thomson Reuters or Bloomberg) for Dollar deposits in immediately available funds with a maturity comparable to such Interest Period, provided that, in the event that such rate quotation is not available for any reason, then the Eurodollar Rate shall be the average (rounded upward to the nearest 1/16th of 1%) of the per annum rates at which deposits in immediately available funds in Dollars for the relevant Interest Period and in the amount of the Eurodollar Loan to be disbursed or to remain outstanding during such Interest Period, as the case may be, are offered to the Administrative Agent (or an affiliate of the Administrative Agent, in the Administrative Agent’s discretion) by leading banks in any Eurodollar market reasonably selected by the Administrative Agent, determined as of 11:00 A.M. (London time) (or as soon thereafter as practicable), two Business Days prior to the beginning of the relevant Interest Period pertaining to such Eurodollar Loan; by (b) 1.00 minus the Reserve Percentage. Notwithstanding the foregoing, if at any time the Eurodollar Rate, as determined above, is less than zero, it shall be deemed to be zero for purposes of this Agreement.

“Event of Default” means an event or condition that shall constitute an event of default as defined in Article VIII hereof.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“Excluded Accounts” means (a) accounts used exclusively for payroll, payroll taxes or other employee benefit or wage payments, (b) any fiduciary or trust account held exclusively for the benefit of an unaffiliated third party, and (c) such other accounts as may be agreed to in writing by the Administrative Agent in its sole discretion. For the avoidance of doubt, an Excluded Account may be a Deposit Account or a Securities Account.

“Excluded CLEC Collateral” means any asset of CLEC located or held in the states of Georgia, Hawaii, Indiana, Maryland, New Jersey, New York or Pennsylvania, to the extent and only for so long as the grant of a security interest in such asset is prohibited by applicable law or requires any consent of a Governmental Authority that has not been obtained.

“Excluded Property” means (a) licenses and contracts which by the terms of such licenses and contracts prohibit liens on, or the assignment of, such agreements (to the extent such prohibition is enforceable at law and is in effect), including any License issued to a Credit Party by the FCC or a state public utility commission solely at such times and to the extent that a security interest in such License is not permitted under applicable law; (b) any trademark applications for which a statement of use has not been filed (but only until such statement is filed); (c) any rights or interest in any contract, lease, permit, license, or license agreement covering personal property of any Credit Party if under the terms of such contract, lease, permit, license, or license agreement, or applicable law or regulation with respect thereto, the grant of a security interest or lien therein is prohibited as a matter of law or under such regulation or under the terms of such contract, lease, permit, license, or license agreement and such prohibition or

 

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restriction has not been waived or the consent of the other party to such contract, lease, permit, license, or license agreement has not been obtained (provided that, (i) the foregoing exclusions shall in no way be construed (A) to apply to the extent that any described prohibition or restriction is unenforceable or ineffective under Section 9-406, 9-407, 9-408, or 9-409 of the UCC or other applicable law or regulation, or (B) to apply to the extent that any consent or waiver has been obtained that would permit Administrative Agent’s security interest or lien to attach thereto notwithstanding the prohibition or restriction contained in such contract, lease, permit, license, or license agreement or under applicable law or regulation, and (ii) the foregoing exclusions shall in no way be construed to limit, impair, or otherwise affect Administrative Agent’s continuing security interests in and liens upon any rights or interests of any Credit Party in or to (1) monies due or to become due under or in connection with any described contract, lease, permit, license, license agreement, or equity interests (including any Accounts), or (2) any proceeds from the collection, sale, license, lease, or other dispositions of any such contract, lease, permit, license, license agreement, or equity interests); (d) any United States intent-to-use trademark applications to the extent that, and solely during the period in which, the grant of a security interest therein would impair the validity or enforceability, or result in the abandonment, voiding or cancellation, of such intent-to-use trademark applications under applicable federal law, provided that upon submission and acceptance by the USPTO of an amendment to allege use pursuant to 15 U.S.C. Section 1060(a) (or any successor provision), such intent-to-use trademark application shall be considered Collateral; (e) any goods and related software (other than Inventory) of any Credit Party which is subject to a purchase money Lien or the rights of a lessor under a capital lease permitted under this Agreement if the grant of a security interest or Lien to Administrative Agent in such asset is prohibited by the terms of the agreement between such Credit Party and the holder of such purchase money Lien or such lessor and such prohibition has not been or is not waived, or the consent of the holder of the purchase money Lien or such lessor has not been or is not otherwise obtained; (f) the joint venture or minority equity interests of a Person (other than the a Subsidiary of the Credit Party) if the grant of a security interest or lien to Administrative Agent in such equity interests is prohibited by the terms of such Person’s organizational documents or the terms of any shareholder or similar agreement between a Credit Party and the other owners of the equity interests of such Person and such prohibition has not been or is not waived or the requisite consents to permit such security interest or lien has not been or is not otherwise obtained; (g) motor vehicles and other assets subject to a certificate of title statute with (i) an individual value of One Hundred Thousand Dollars ($100,000) or less, or (ii) an aggregate value of Five Hundred Thousand Dollars ($500,000) or less, except to the extent perfection of a security interest therein may be accomplished by filing of financing statements in appropriate form in a central filing office located in the jurisdiction in which the granting Credit Party is organized; (h) security interests in any foreign trademarks, patents or copyright if, in the reasonable judgment of Administrative Agent and the Borrower, the burden, cost or consequences of creating or perfecting such security interests in such assets is excessive in relation to the benefits to be obtained therefrom by the Administrative Agent and Lenders; and (i) until such time as the CLEC Approvals have been obtained, the Excluded CLEC Collateral (provided that, (A) the foregoing exclusion of this subpart (i) shall in no way be construed (1) to apply to the extent that any described prohibition or restriction is unenforceable or ineffective under applicable law or regulation, or (2) to apply to the extent that any consent or waiver has been obtained that would permit Administrative Agent’s security interest or lien to attach thereto notwithstanding such prohibition or restriction,

 

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and (B) the foregoing exclusions of subpart (i) shall in no way be construed to limit, impair, or otherwise affect any of Administrative Agent’s continuing security interests in and liens upon any rights or interests of any Credit Party in or to (y) monies due or to become due under or in connection with any described asset (including any Accounts or equity interests), or (z) any proceeds from the collection, sale, license, lease, or other dispositions of any such asset, in each case under the immediately preceding clauses (y) and (z), so long as such security interest or lien does not violate applicable law or require any consent or approval of any Governmental Authority which has not been obtained); provided, further that, “Excluded Property” shall not include any Proceeds, products, substitutions or replacements of any Excluded Property (unless such Proceeds, products, substitutions or replacements would constitute Excluded Property).

“Excluded Swap Obligations” means, with respect to any Credit Party, any Swap Obligation if, and to the extent that, all or a portion of the guarantee of such Credit Party of, or the grant by such Credit Party of a security interest to secure, such Swap Obligation (or any guarantee thereof) is or becomes illegal under the Commodity Exchange Act or any rule, regulation or order of the Commodity Futures Trading Commission (or the application or official interpretation of any thereof) by virtue of such Credit Party’s failure to constitute an “eligible contract participant” as defined in the Commodity Exchange Act (determined after giving effect to any “keepwell, support or other agreement” for the benefit of such Credit Party and any and all guarantees of such Credit Party’s Swap Obligations by other Credit Parties), at the time such guarantee or grant of security interest of such Credit Party becomes, or would become, effective with respect to such Swap Obligation. If a Swap Obligation arises under a master agreement governing more than one swap, such exclusion shall apply only to the portion of such Swap Obligation that is attributable to swaps for which such guarantee or security interest is, or becomes, illegal.

“Excluded Taxes” means, in the case of Recipient, (a) Taxes imposed on or measured by net income (however denominated), branch profits Taxes, and franchise Taxes imposed on it (in lieu of net income taxes), in each case (i) imposed by the jurisdiction (or any political subdivision thereof) under the laws of which such Recipient is organized or in which its principal office is located, or, in the case of any Lender, in which its applicable lending office is located or (ii) that are Other Connection Taxes, (b) in the case of a Lender, U.S. federal withholding Taxes imposed on amounts payable to or for the account of such Lender with respect to an applicable interest in a Loan or Commitment pursuant to a law in effect on the date on which (i) such Lender acquires such interest in the Loan or Commitment, or (ii) such Lender changes its lending office, except in each case to the extent that, pursuant to Section 3.2, amounts with respect to such Taxes were payable either to such Lender’s assignor immediately before such Lender acquired the applicable interest in a Loan or Commitment or became a party hereto, or to such Lender immediately before it changed its lending office, (c) Taxes attributable to such Recipient’s failure to comply with Section 3.2(c), (d), (e) and (f), or to deliver the documentation described in Section 3.2(d), and (d) any withholding Taxes imposed with respect to such Recipient pursuant to FATCA.

“FATCA” means Sections 1471 through 1474 of the Code, as in effect on the Closing Date (or any amended or successor version that is substantively comparable and not materially more onerous to comply with), and any current or future regulations or official interpretations

 

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thereof and any agreements entered into pursuant to Section 1471(b)(1) of the Code, any intergovernmental agreement entered into in connection with the implementation of such sections of the Code, and any fiscal or regulatory legislation, rules, or practices adopted pursuant to such intergovernmental agreement.

“FCC” means the Federal Communications Commission and any successor agency.

“Federal Funds Effective Rate” means, for any day, the rate per annum (rounded upward to the nearest one one-hundredth of one percent (1/100 of 1%)) announced by the Federal Reserve Bank of New York (or any successor) on such day as being the weighted average of the rates on overnight federal funds transactions arranged by federal funds brokers on the previous trading day, as computed and announced by such Federal Reserve Bank (or any successor) in substantially the same manner as such Federal Reserve Bank computes and announces the weighted average it refers to as the “Federal Funds Effective Rate” as of the Closing Date.

“Financial Officer” means any of the following officers: chief executive officer, president, chief financial officer or treasurer. Unless otherwise qualified, all references to a Financial Officer in this Agreement shall refer to a Financial Officer of the Borrower.

“Foreign Lender” means (a) if the Borrower is a U.S. Person, a Lender that is not a U.S. Person, and (b) if the Borrower is not a U.S. Person, a Lender that is resident or organized under the laws of a jurisdiction other than that in which the Borrower is resident for tax purposes.

“Foreign Subsidiary” means a Subsidiary that is organized under the laws of any jurisdiction other than the United States, any State thereof or the District of Columbia.

“GAAP” means generally accepted accounting principles in the United States as then in effect, which shall include the official interpretations thereof by the Financial Accounting Standards Board, applied on a basis consistent with the past accounting practices and procedures of the Borrower.

“General Intangibles” means (a) general intangibles, as that term is defined in the U.C.C.; and (b) choses in action, causes of action, intellectual property, customer lists, corporate or other business records, inventions, designs, patents, patent applications, service marks, registrations, trade names, trademarks, copyrights, licenses, goodwill, computer software, rights to indemnification and tax refunds.

“Governmental Authority” means any nation or government, any state, province or territory, or any local or other political subdivision thereof, any governmental agency, including the FCC and state public utility commissions, department, authority, instrumentality, regulatory body, court, central bank or other governmental entity exercising executive, legislative, judicial, taxing, regulatory or administrative powers or functions of or pertaining to government (including any supra-national bodies such as the European Union or the European Central Bank), any securities exchange and any self-regulatory organization exercising such functions, and any group or body charged with setting financial accounting or regulatory capital rules or standards (including, without limitation, the Financial Accounting Standards Board, the Bank for International Settlements or the Basel Committee on Banking Supervision or any successor or similar authority to any of the foregoing).

 

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“Guarantor” means a Person that shall have pledged its credit or property in any manner for the payment or other performance of the indebtedness, contract or other obligation of another and includes (without limitation) any guarantor (whether of payment or of collection), surety, co-maker, endorser or Person that shall have agreed conditionally or otherwise to make any purchase, loan or investment in order thereby to enable another to prevent or correct a default of any kind.

“Guarantor of Payment” means each of the Companies designated a “Guarantor of Payment” on Schedule 2 hereto, each of which is executing and delivering a Guaranty of Payment on the Closing Date, and any other Person that shall execute and deliver a Guaranty of Payment (or Guaranty of Payment Joinder) to the Administrative Agent, or become a party by joinder to the Guaranty of Payment that was executed on the Closing Date, subsequent to the Closing Date. For the avoidance of doubt, (a) Republic Wireless is not a Guarantor of Payment hereunder, and (b) CLEC shall not be a Guarantor of Payment until such time as CLEC shall have executed and delivered a Guaranty of Payment Joinder pursuant to Section 5.25(c) hereof.

“Guaranty of Payment” means each Guaranty of Payment executed and delivered on or after the Closing Date in connection with this Agreement by one or more Guarantors of Payment, as the same may from time to time be amended, restated or otherwise modified.

“Guaranty of Payment Joinder” means each Guaranty of Payment Joinder, executed and delivered by a Guarantor of Payment for the purpose of adding such Guarantor of Payment as a party to a previously executed Guaranty of Payment.

“Hedge Agreement” means any (a) hedge agreement, interest rate swap, cap, collar or floor agreement, or other interest rate management device entered into by a Company with any Person in connection with any Indebtedness of such Company, or (b) currency swap agreement, forward currency purchase agreement or similar arrangement or agreement designed to protect against fluctuations in currency exchange rates entered into by a Company.

“Indebtedness” means, for any Company, without duplication, (a) all obligations to repay borrowed money, direct or indirect, incurred, assumed, or guaranteed, (b) all obligations in respect of the deferred purchase price of property or services (other than trade accounts payable and accrued expenses, in each case incurred in the ordinary course of business), (c) all obligations under conditional sales or other title retention agreements, (d) all obligations (contingent or otherwise) under any letter of credit or banker’s acceptance, (e) all net obligations under any currency swap agreement, interest rate swap, cap, collar or floor agreement or other interest rate management device or any Hedge Agreement, (f) all synthetic leases, (g) all Capitalized Lease Obligations, (h) all obligations of such Company with respect to asset securitization financing programs to the extent that there is recourse against such Company or such Company is liable (contingent or otherwise) under any such program, (i) all obligations to advance funds to, or to purchase assets, property or services from, any other Person in order to maintain the financial condition of such Person, (j) all indebtedness of the types referred to in

 

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subparts (a) through (i) above of any partnership or joint venture (other than a joint venture that is itself a corporation or limited liability company) in which such Company is a general partner or joint venturer, unless such indebtedness is expressly made non-recourse to such Company, (k) any other transaction (including forward sale or purchase agreements) having the commercial effect of a borrowing of money entered into by such Company to finance its operations or capital requirements, and (l) any guaranty of any obligation described in subparts (a) through (k) above.

“Indemnified Taxes” means (a) Taxes, other than Excluded Taxes, imposed on or with respect to any payment made by or on account of any obligation of any Credit Party under any Loan Document, and (b) to the extent not otherwise described in the foregoing subpart (a), Other Taxes.

“Initial Funding Conditions” means all of those conditions set forth in Section 4.3 hereof.

“Initial Funding Date” means the date that all of the Initial Funding Conditions have been satisfied, as determined by the Administrative Agent.

“Insolvent Lender” means a Lender, as reasonably determined by the Administrative Agent, that (a) has become or is not Solvent or is the subsidiary of a Person that has become or is not Solvent; (b) has become the subject of a proceeding under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, or has had a receiver, conservator, trustee or custodian appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment, or is a subsidiary of a Person that has become the subject of a proceeding under the Bankruptcy Code or under any other applicable bankruptcy, insolvency or similar law now or hereafter in effect, or has had a receiver, conservator, trustee or custodian appointed for it, or has taken any action in furtherance of, or indicating its consent to, approval of or acquiescence in any such proceeding or appointment; or (c) has become the subject of a Bail-In Action; provided that a Lender shall not be an Insolvent Lender solely by virtue of the ownership or acquisition or control of an equity interest in such Lender or a parent company thereof by a Governmental Authority or an instrumentality thereof so long as such ownership interest does not result in or provide such Lender with immunity from the jurisdiction of courts within the United States or from the enforcement of judgments or writs of attachment on its assets or permit such Lender (or such Governmental Authority) to reject, repudiate, disavow or disaffirm any contracts or agreements made with such Lender. Any Insolvent Lender shall cease to be an Insolvent Lender when the Administrative Agent determines, in its reasonable discretion, that such Insolvent Lender is no longer an Insolvent Lender based upon the characteristics set forth in this definition.

“Intellectual Property Security Agreement” means each Intellectual Property Security Agreement, executed and delivered on or after the Closing Date by a Credit Party, wherein such Credit Party, as the case may be, has granted to the Administrative Agent, for the benefit of the Lenders, a security interest in all intellectual property owned by such Credit Party, as the same may from time to time be amended, restated or otherwise modified.

“Interest Adjustment Date” means the last day of each Interest Period.

 

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“Interest Period” means, with respect to a Eurodollar Loan, the period commencing on the date such Eurodollar Loan is made and ending on the last day of such period, as selected by the Borrower pursuant to the provisions hereof, and, thereafter (unless such Eurodollar Loan is converted to a Base Rate Loan), each subsequent period commencing on the last day of the immediately preceding Interest Period and ending on the last day of such period, as selected by the Borrower pursuant to the provisions hereof. The duration of each Interest Period for a Eurodollar Loan shall be one month, two months, three months or six months, in each case as the Borrower may select upon notice, as set forth in Section 2.6 hereof; provided that, if the Borrower shall fail to so select the duration of any Interest Period at least three Business Days prior to the Interest Adjustment Date applicable to such Eurodollar Loan, the Borrower shall be deemed to have converted such Eurodollar Loan to a Base Rate Loan at the end of the then current Interest Period. Notwithstanding the foregoing, no Interest Period shall extend beyond the last day of the Commitment Period.

“Interim Indebtedness” means that certain Indebtedness of the Borrower owing to Pacific Western Bank (as the successor to Square 1 Bank), as evidenced by the Interim Loan Agreement.

“Interim Liens” means the Liens granted by the Borrower and any Subsidiary thereof in favor of in favor of Pacific Western Bank (as the successor to Square 1 Bank) that secure the Interim Indebtedness and all other obligations of Borrower and Broadband, LLC under the Interim Loan Agreement and the documents executed in connection therewith.

“Interim Loan Agreement” means that certain Loan and Security Agreement, among Pacific Western Bank (as the successor to Square 1 Bank), the Borrower and Broadband, LLC, dated as of September 25, 2008, as amended.

“Inventory” means inventory, as that term is defined in the U.C.C.

“Investment Property” means investment property, as that term is defined in the U.C.C., unless the Uniform Commercial Code as in effect in another jurisdiction would govern the perfection and priority of a security interest in investment property, and, in such case, “investment property” shall be defined in accordance with the law of that jurisdiction as in effect from time to time.

“Issuing Lender” means, as to any Letter of Credit transaction hereunder, the Administrative Agent as issuer of the Letter of Credit, or, in the event that the Administrative Agent either shall be unable to issue or the Administrative Agent shall agree that another Revolving Lender may issue, a Letter of Credit, such other Revolving Lender as shall be acceptable to the Administrative Agent and shall agree to issue the Letter of Credit in its own name, but in each instance on behalf of the Revolving Lenders.

“KeyBank” means KeyBank National Association, and its successors and assigns.

“Landlord’s Waiver” means a landlord’s waiver or mortgagee’s waiver, each in form and substance reasonably satisfactory to the Administrative Agent, delivered by a Credit Party in connection with this Agreement, as such waiver may from time to time be amended, restated or otherwise modified.

 

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“Lender” means that term as defined in the first paragraph of this Agreement and, as the context requires, shall include the Issuing Lender and the Swing Line Lender.

“Lender Credit Exposure” means, for any Lender, at any time, the aggregate of such Lender’s respective pro rata shares of the Revolving Credit Exposure and the Term Loan Exposure.

“Letter of Credit” means a commercial documentary letter of credit or standby letter of credit that shall be issued by the Issuing Lender for the account of the Borrower or a Guarantor of Payment, including amendments thereto, if any, and shall have an expiration date no later than the earlier of (a) three hundred sixty-four (364) days after its date of issuance (provided that such Letter of Credit may provide for the renewal thereof for additional one year periods), or (b) thirty (30) days prior to the last day of the Commitment Period.

“Letter of Credit Commitment” means the commitment of the Issuing Lender, on behalf of the Revolving Lenders, to issue Letters of Credit in an aggregate face amount of up to Two Million Five Hundred Thousand Dollars ($2,500,000).

“Letter of Credit Exposure” means, at any time, the sum of (a) the aggregate undrawn amount of all issued and outstanding Letters of Credit, and (b) the aggregate of the draws made on Letters of Credit that have not been reimbursed by the Borrower or converted to a Revolving Loan pursuant to Section 2.2(b)(iv) hereof.

“Letter of Credit Fee” means, with respect to any Letter of Credit, for any day, an amount equal to (a) the face amount of such Letter of Credit, multiplied by (b) the Applicable Margin for Revolving Loans that are Eurodollar Loans in effect on such day divided by three hundred sixty (360).

“Leverage Ratio” means, as determined on a Consolidated basis, the ratio of (a) the total of (i) Consolidated Funded Indebtedness (for the most recently completed fiscal quarter of the Borrower), minus (ii) up to Five Million Dollars ($5,000,000) of the unencumbered (except for the Liens of the Administrative Agent, for the benefit of the Lenders), unrestricted cash on hand of the Credit Parties held at financial institutions located in the United States (as of the end of the most recently completed fiscal quarter of the Borrower); to (b) Consolidated EBITDA (for the most recently completed four fiscal quarters of the Borrower).

“License” means any license, authorization, approval, or permit granted to a Credit Party by the FCC, any state public utility commission, or other telecommunications regulatory body.

“Lien” means any mortgage, deed of trust, security interest, lien (statutory or other), charge, assignment, hypothecation, encumbrance on, pledge or deposit of, or conditional sale, lease (other than Operating Leases), sale with a right of redemption or other title retention agreement and any capitalized lease with respect to any property (real or personal) or asset.

 

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“Loan” means a Revolving Loan, a Swing Loan, the Term Loan or, if applicable, any other loan made pursuant to an Additional Term Loan Facility.

“Loan Documents” means, collectively, this Agreement, each Note, each Guaranty of Payment, each Guaranty of Payment Joinder, all documentation relating to each Letter of Credit, each Security Document and the Administrative Agent Fee Letter, as any of the foregoing may from time to time be amended, restated or otherwise modified or replaced, and any other document delivered pursuant thereto.

“Mandatory Prepayment” means that term as defined in Section 2.12(c) hereof.

“Material Adverse Effect” means a material adverse effect on (a) the business, assets, operations or, condition (financial or otherwise) of the Borrower, (b) the business, assets, operations or condition (financial or otherwise) of the Companies taken as a whole, (c) the rights and remedies of the Administrative Agent or the Lenders under any other Loan Document, (d) the ability of any Credit Party to perform its obligations under any Loan Document to which it is a party, or (e) the legality, validity, binding effect or enforceability against any Credit Party of any Loan Document to which it is a party.

“Material Indebtedness Agreement” means any debt instrument, lease (capital, operating or otherwise), guaranty, contract, commitment, agreement or other arrangement evidencing or entered into in connection with any Indebtedness of any Company or the Companies equal to or in excess of the amount of Three Million Dollars ($3,000,000).

“Material Recovery Determination Notice” means that term as defined in Section 2.12(c)(ii) hereof.

“Material Recovery Event” means (a) any casualty loss in respect of assets of a Company covered by casualty insurance, and (b) any compulsory transfer or taking under threat of compulsory transfer of any asset of a Company by any Governmental Authority; provided that, in the case of either subpart (a) or (b) hereof, the proceeds received by the Companies from such loss, transfer or taking exceeds One Hundred Thousand Dollars ($100,000).

“Maximum Amount” means, for each Lender, the amount set forth opposite such Lender’s name under the column headed “Maximum Amount” as set forth on Schedule 1 hereto, subject to (a) decreases pursuant to Section 2.10(a) hereof, (b) increases pursuant to Section 2.10(b) hereof, (c) decreases of the Term Loan by virtue of principal payments made, and (d) assignments of interests pursuant to Section 11.10 hereof; provided that the Maximum Amount for the Swing Line Lender shall exclude the Swing Line Commitment (other than its pro rata share), and the Maximum Amount of the Issuing Lender shall exclude the Letter of Credit Commitment (other than its pro rata share thereof).

“Maximum Rate” means that term as defined in Section 2.4(e) hereof.

“Moody’s” means Moody’s Investors Service, Inc., and any successor to such company.

 

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“Multiemployer Plan” means a Pension Plan that is subject to the requirements of Subtitle E of Title IV of ERISA.

“Non-Consenting Lender” means that term as defined in Section 11.3(c) hereof.

“Non-Exempt Asset Sale” means the sale or other disposition of any assets by a Company to any Person other than:

(a) sales or disposition in the ordinary course of business, including, without limitation, dispositions of obsolete and worn out equipment no longer used or useful in the business; and

(b) sales or disposition that are not in the ordinary course of business, to the extent that (i) the proceeds of such sale or other disposition are either (1) less than One Million Dollars ($1,000,000) during any fiscal year of the Borrower, or (2) both (y) less than Five Million Dollars ($5,000,000) during any fiscal year of the Borrower and Seven Million Five Hundred Thousand Dollars ($7,500,000) during the Commitment Period, and (z) committed to be reinvested in fixed assets or other similar assets within one hundred eighty (180) days of such sale or other disposition, and actually reinvested within three hundred sixty-five (365) days of such sale or other disposition.

“Note” means a Revolving Credit Note, the Swing Line Note or a Term Note, or any other promissory note delivered pursuant to this Agreement.

“Notice of Loan” means a Notice of Loan in the form of the attached Exhibit D.

“Obligations” means, collectively, (a) all Indebtedness and other obligations now owing or hereafter incurred by the Borrower to the Administrative Agent, the Swing Line Lender, the Issuing Lender, or any Lender pursuant to this Agreement and the other Loan Documents, and includes the principal of and interest on all Loans, and all obligations of the Borrower or any other Credit Party pursuant to Letters of Credit; (b) each extension, renewal, consolidation or refinancing of any of the foregoing, in whole or in part; (c) the commitment and other fees, and any prepayment fees, payable pursuant to this Agreement or any other Loan Document; (d) all fees and charges in connection with Letters of Credit; (e) every other liability, now or hereafter owing to the Administrative Agent or any Lender by any Company pursuant to this Agreement or any other Loan Document; and (f) all Related Expenses.

“Operating Leases” means all real or personal property leases under which any Company is bound or obligated as a lessee or sublessee and which, under GAAP, are not required to be capitalized on a balance sheet of such Company; provided that Operating Leases shall not include any such lease under which any Company is also bound as the lessor or sublessor.

“Organizational Documents” means, with respect to any Person (other than an individual), such Person’s Articles (Certificate) of Incorporation, operating agreement or equivalent formation documents, and Regulations (Bylaws), or equivalent governing documents, and any amendments to any of the foregoing.

 

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“Other Connection Taxes” means, with respect to any Recipient, Taxes imposed as a result of a present or former connection between the Administrative Agent or such Recipient and the jurisdiction imposing such Taxes (other than connections arising from such Recipient having executed, delivered, become a party to, performed its obligations under, received payments under, received or perfected a security interest under, engaged in any other transaction pursuant to, or enforced, any Loan Document, or sold or assigned an interest in any Loan, Letter of Credit, or any Loan Document).

“Other Taxes” means any and all present or future stamp or documentary, intangible, recording, filing or similar Taxes arising from any payment made hereunder or under any other Loan Document, or from the execution, delivery or enforcement of, or otherwise with respect to, this Agreement or any other Loan Document, except any such Taxes that are Other Connection Taxes imposed with respect to an assignment.

“Overall Commitment Percentage” means, for any Lender, the percentage determined by dividing (a) the sum, based upon such Lender’s Applicable Commitment Percentages, of (i) the principal outstanding on the Term Loan, (ii) the aggregate principal amount of Revolving Loans outstanding, (iii) the Swing Line Exposure, and (iv) the Letter of Credit Exposure; by (b) the sum of (A) the aggregate principal amount of all Loans outstanding, plus (B) the Letter of Credit Exposure.

“Participant” means that term as defined in Section 11.11 hereof.

“Participant Register” means that term as described in Section 11.11(e) hereof.

“Patriot Act” means the Uniting and Strengthening America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001, USA Patriot Act, Title III of Pub. L. 107-56, signed into law October 26, 2001, as amended from time to time.

“PBGC” means the Pension Benefit Guaranty Corporation, and its successor.

“Pension Plan” means an ERISA Plan that is a “pension plan” (within the meaning of ERISA Section 3(2)).

“Permitted Investments” means:

(a) direct obligations of the United States or any agency thereof or obligations guaranteed by the United States or any agency thereof, in each case with maturities not exceeding one year;

(b) time deposit accounts, certificates of deposit and money market deposits maturing within one hundred eighty (180) days of the date of acquisition thereof issued by a Lender that is a bank or trust company, or by any bank or trust company that is

 

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organized under the laws of the United States, or any state thereof having capital, surplus and undivided profits in excess of Five Hundred Million Dollars ($500,000,000) and whose long-term debt, or whose parent holding company’s long-term debt, is rated A (or such similar equivalent rating or higher) by at least one nationally recognized statistical rating organization (as defined in Rule 436 under the Securities Act);

(c) repurchase obligations with a term of not more than one hundred eighty (180) days for underlying securities of the types described in subpart (a) above entered into with a Lender that is a bank, or with any bank meeting the qualifications described in subpart (b) above;

(d) commercial paper, maturing not more than one year after the date of acquisition, issued by a corporation (other than an Affiliate of the Company) organized and in existence under the laws of the United States or any foreign country recognized by the United States with a rating at the time as of which any investment therein is made of P-1 (or higher) according to Moody’s, or A-1 (or higher) according to Standard & Poor’s;

(e) securities with maturities of one year or less from the date of acquisition issued or fully guaranteed by any state, commonwealth or territory of the United States, or by any political subdivision or taxing authority thereof, and rated at least A by Standard & Poor’s or A-2 by Moody’s;

(f) shares of mutual funds whose investment guidelines restrict ninety-five percent (95%) of such funds’ investments to those satisfying the provisions of subparts (a) through (e) above;

(g) money market funds that (i) comply with the criteria set forth in Rule 2a-7 under the Investment Company Act of 1940, (ii) are rated AAA by Standard & Poor’s and Aaa by Moody’s and (iii) have portfolio assets of at least Five Hundred Million Dollars ($500,000,000); and

(h) the investments by a Company set forth on Schedule 5.11 hereto.

“Person” means any individual, sole proprietorship, partnership, joint venture, unincorporated organization, corporation, limited liability company, unlimited liability company, institution, trust, estate, Governmental Authority or any other entity.

“Pledge Agreement” means each of the Pledge Agreements, relating to the Pledged Securities, executed and delivered by a Credit Party, as applicable, in favor of the Administrative Agent, for the benefit of the Lenders, dated on or after the Closing Date, as any of the foregoing may from time to time be amended, restated or otherwise modified.

“Pledged Notes” means the promissory notes payable to a Credit Party, as described on Schedule 7.4 hereto, and any additional or future promissory notes that may hereafter from time to time be payable to a Credit Party.

 

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“Pledged Securities” means all of the shares of capital stock or other equity interests of a direct Subsidiary of a Credit Party, whether now owned or hereafter acquired or created, and all proceeds thereof; provided that Pledged Securities shall exclude shares of voting capital stock or other voting equity interests in any Foreign Subsidiary that is a CFC in excess of sixty-five percent (65%) of the total outstanding shares of each class of voting capital stock or other voting equity interest of such Foreign Subsidiary, whether held directly or indirectly through a disregarded entity. (Schedule 3 hereto lists, as of the Closing Date, all of the Pledged Securities.) For the avoidance of doubt, Pledged Securities shall not include any capital stock or other equity interests of Republic Wireless.

“Prime Rate” means the interest rate established from time to time by the Administrative Agent as the Administrative Agent’s prime rate, whether or not such rate shall be publicly announced; the Prime Rate may not be the lowest interest rate charged by the Administrative Agent for commercial or other extensions of credit. Each change in the Prime Rate shall be effective immediately from and after such change.

“Proceeds” means (a) proceeds, as that term is defined in the U.C.C., and any other proceeds, and (b) whatever is received upon the sale, exchange, collection or other disposition of Collateral or proceeds, whether cash or non-cash. Cash proceeds include, without limitation, moneys, checks and Deposit Accounts. Proceeds include, without limitation, any Account arising when the right to payment is earned under a contract right, any insurance payable by reason of loss or damage to the Collateral, and any return or unearned premium upon any cancellation of insurance. Except as expressly authorized in this Agreement, the right of the Administrative Agent and the Lenders to Proceeds specifically set forth herein, or indicated in any financing statement, shall never constitute an express or implied authorization on the part of the Administrative Agent or any Lender to a Company’s sale, exchange, collection or other disposition of any or all of the collateral securing the Secured Obligations.

“Processor’s Waiver” means a processor’s waiver (or similar agreement), in form and substance reasonably satisfactory to the Administrative Agent, delivered by a Credit Party in connection with this Agreement, as such waiver may from time to time be amended, restated or otherwise modified.

“Recipient” means, as applicable (a) any Lender, or (b) the Issuing Lender.

“Register” means that term as described in Section 11.10(i) hereof.

“Regularly Scheduled Payment Date” means the last day of each March, June, September and December of each year.

“Related Expenses” means any and all reasonable out-of-pocket costs, liabilities and expenses (including, without limitation, losses, damages, penalties, claims, actions, reasonable and actual attorneys’ fees, legal expenses, judgments, suits and disbursements) (a) incurred by the Administrative Agent, or imposed upon or asserted against the Administrative Agent or any Lender, in any attempt by the Administrative Agent and the Lenders to (i) enforce this Agreement or any other Loan Document or obtain, preserve, perfect or enforce any Loan

 

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Document or any security interest evidenced by any Loan Document; (ii) obtain payment, performance or observance of any and all of the Secured Obligations; or (iii) maintain, insure, audit, collect, preserve, repossess or dispose of any of the collateral securing the Secured Obligations or any part thereof, including, without limitation, costs and expenses for appraisals, assessments and audits of any Company or any such collateral; or (b) incidental or related to subpart (a) above, including, without limitation, interest thereupon from the date incurred, imposed or asserted until paid at the Default Rate.

“Related Writing” means each Loan Document and any other assignment, mortgage, security agreement, guaranty agreement, subordination agreement, financial statement, audit report or other writing furnished by any Credit Party, or any of its officers, to the Administrative Agent or the Lenders pursuant to or otherwise in connection with this Agreement; provided that no Bank Product Agreement or Hedge Agreement shall constitute a Related Writing hereunder.

“Reportable Event” means a “reportable event” as that term is defined in Title IV of ERISA, except actions of general applicability by the Secretary of Labor under Section 110 of such Act.

“Republic Wireless” means Republic Wireless, Inc., a Delaware corporation.

“Required Lenders” means the holders, based upon each Lender’s Applicable Commitment Percentages, of more than fifty percent (50%) of an amount (the “Total Amount”) equal to the sum of:

(a) (i) during the Commitment Period, the Revolving Amount, or (ii) after the Commitment Period, the Revolving Credit Exposure; and

(b) (i) prior to the Initial Funding Date, the Term Loan Commitment, or (ii) on and after the Initial Funding Date, the principal outstanding on the Term Loan;

provided that (A) the portion of the Total Amount held or deemed to be held by any Defaulting Lender or Insolvent Lender shall be excluded for purposes of making a determination of Required Lenders, and (B) if there shall be two or more Lenders (that are not Defaulting Lenders or Insolvent Lenders), Required Lenders shall constitute at least two unaffiliated Lenders.

“Requirement of Law” means, as to any Person, any law, treaty, rule or regulation or determination or policy statement or interpretation 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.

“Reserve Percentage” means, for any day, that percentage (expressed as a decimal) that is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including, without limitation, all basic, supplemental, marginal and other reserves and taking into account any transitional adjustments or other scheduled changes in reserve requirements) for a member bank of the Federal Reserve System in Cleveland, Ohio, in respect of Eurocurrency Liabilities. The Eurodollar Rate shall be adjusted automatically on and as of the effective date of any change in the Reserve Percentage.

 

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“Restricted Payment” means, with respect to any Company, (a) any Capital Distribution paid in cash, (b) any amount paid in cash by such Company in repayment, redemption, retirement or repurchase, directly or indirectly, of any Subordinated Indebtedness, or (c) any amount paid in cash by such Company in respect of any management, consulting or other similar arrangement with any equity holder (other than a Company) of a Company or an Affiliate. For the avoidance of doubt, a payment by a Company to another Credit Party is not a Restricted Payment.

“Revolving Amount” means Twenty-Five Million Dollars ($25,000,000), as such amount may be increased pursuant to Section 2.10(b) hereof or reduced pursuant to Section 2.10(a) hereof.

“Revolving Credit Commitment” means the obligation hereunder, during the Commitment Period, of (a) the Revolving Lenders (and each Revolving Lender) to make Revolving Loans, (b) the Issuing Lender to issue, and each Revolving Lender to participate in, Letters of Credit pursuant to the Letter of Credit Commitment, and (c) the Swing Line Lender to make, and each Revolving Lender to participate in, Swing Loans pursuant to the Swing Line Commitment; up to an aggregate principal amount outstanding at any time equal to the Revolving Amount.

“Revolving Credit Exposure” means, at any time, the sum of (a) the aggregate principal amount of all Revolving Loans outstanding, (b) the Swing Line Exposure, and (c) the Letter of Credit Exposure.

“Revolving Credit Note” means a Revolving Credit Note, in the form of the attached Exhibit A, executed and delivered pursuant to Section 2.5(a) hereof.

“Revolving Lender” means a Lender with a percentage of the Revolving Credit Commitment as set forth on Schedule 1 hereto, or that acquires a percentage of the Revolving Credit Commitment pursuant to Section 2.10(b) or 11.10 hereof.

“Revolving Loan” means a loan made to the Borrower by the Revolving Lenders in accordance with Section 2.2(a) hereof.

“Sanctions” means any sanctions administered or enforced from time to time by (a) the U.S. government, including those administered by the Office of Foreign Assets Control or the U.S. Department of State or (b) the United Nations Security Council, the European Union or Her Majesty’s Treasury of the United Kingdom.

“SEC” means the United States Securities and Exchange Commission, or any governmental body or agency succeeding to any of its principal functions.

 

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“Secured Obligations” means, collectively, (a) the Obligations, (b) all obligations and liabilities of the Companies owing to a Lender (or an entity that is an affiliate of a then existing Lender) under Hedge Agreements, and (c) the Bank Product Obligations owing to a Lender (or an entity that is an affiliate of a then existing Lender) under Bank Product Agreements; provided that Secured Obligations of a Credit Party shall not include Excluded Swap Obligations owing from such Credit Party.

“Securities Account” means a securities account, as that term is defined in the U.C.C.

“Securities Account Control Agreement” means each Securities Account Control Agreement (or similar agreement with respect to a Securities Account) among a Credit Party, the Administrative Agent and a Securities Intermediary, dated on or after the Closing Date, to be in form and substance reasonably satisfactory to the Administrative Agent, as the same may from time to time be amended, restated or otherwise modified.

“Securities Intermediary” means a clearing corporation or a Person, including, without limitation, a bank or broker, that in the ordinary course of its business maintains Securities Accounts for others and is acting in that capacity.

“Security Agreement” means each Security Agreement, executed and delivered by one or more Guarantors of Payment in favor of the Administrative Agent, for the benefit of the Lenders, dated as of the Closing Date, and any other Security Agreement executed on or after the Closing Date, as the same may from time to time be amended, restated or otherwise modified.

“Security Agreement Joinder” means each Security Agreement Joinder, executed and delivered by a Guarantor of Payment for the purpose of adding such Guarantor of Payment as a party to a previously executed Security Agreement.

“Security Document” means each Security Agreement, each Security Agreement Joinder, each Pledge Agreement, each Intellectual Property Security Agreement, each Processor’s Waiver, each Consignee’s Waiver, each Landlord’s Waiver, each Bailee’s Waiver, each Control Agreement, each U.C.C. Financing Statement or similar filing as to a jurisdiction located outside of the United States filed in connection herewith or perfecting any interest created in any of the foregoing documents, and any other document pursuant to which any Lien is granted by a Company or any other Person to the Administrative Agent, for the benefit of the Lenders, as security for the Secured Obligations, or any part thereof, and each other agreement executed or provided to the Administrative Agent in connection with any of the foregoing, as any of the foregoing may from time to time be amended, restated or otherwise modified or replaced.

“Solvent” means, with respect to any Person, that (a) the fair value of such Person’s assets is in excess of the total amount of such Person’s debts, as determined in accordance with the Bankruptcy Code, (b) the present fair saleable value of such Person’s assets is in excess of the amount that will be required to pay such Person’s debts as such debts become absolute and matured, (c) such Person is able to realize upon its assets and pay its debts and other liabilities (including disputed, contingent and unliquidated liabilities) as such liabilities mature in the normal course of business, (d) such Person does not intend to, and does not believe that it will,

 

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incur debts or liabilities beyond its ability to pay as such debts and liabilities mature, and (e) such Person is not engaged in business or a transaction, and is not about to engage in business or a transaction, for which its property would constitute an unreasonably small amount of capital. As used in this definition, the term “debts” includes any legal liability, whether matured or unmatured, liquidated or unliquidated, absolute, fixed or contingent, as determined in accordance with the Bankruptcy Code.

“Specific Commitment” means the Revolving Credit Commitment or the Term Loan Commitment.

“Spin-Off” means the transfer of the equity interests of Republic Wireless, directly or indirectly, to the shareholders, option-holders and warrant-holders of the Borrower, after which Republic Wireless will no longer be a direct or indirect Subsidiary of the Borrower.

“Spin-Off Agreement” means that certain Reorganization Agreement, dated as of the date hereof, among the Borrower and Republic Wireless, as the same may from time to time be amended, restated or otherwise modified.

“Spin-Off Distribution” means that certain one-time distribution made by the Borrower in connection with the Spin-Off on the Initial Funding Date, in an aggregate amount not to exceed Thirty Million Dollars ($30,000,000).

“Spin-Off Documents” means the Spin-Off Agreement and each other document executed and delivered in connection therewith.

“Standard & Poor’s” means Standard & Poor’s Financial Services LLC, a subsidiary of The McGraw-Hill Companies, Inc., and any successor to such company.

“Subordinated Indebtedness” means Indebtedness that shall have been subordinated (by written terms or written agreement being, in either case, in form and substance reasonably satisfactory to the Administrative Agent) in favor of the prior payment in full of the Obligations.

“Subsidiary” means, with respect to any Person, (a) a corporation more than fifty percent (50%) of the Voting Power of which is owned, directly or indirectly, by such Person or by one or more other subsidiaries of such Person or by such Person and one or more subsidiaries of such Person, (b) a partnership, limited liability company or unlimited liability company of which such Person, one or more other subsidiaries of such Person or such Person and one or more subsidiaries of such Person, directly or indirectly, is a general partner or managing member, as the case may be, or otherwise has an ownership interest greater than fifty percent (50%) of all of the ownership interests in such partnership, limited liability company or unlimited liability company, or (c) any other Person (other than a corporation, partnership, limited liability company or unlimited liability company) in which such Person, one or more other subsidiaries of such Person or such Person and one or more subsidiaries of such Person, directly or indirectly, has at least a majority interest in the Voting Power or the power to elect or direct the election of a majority of directors or other governing body of such Person. Unless the context otherwise requires, Subsidiary herein shall be a reference to a Subsidiary of the Borrower.

 

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“Supporting Letter of Credit” means a standby letter of credit, in form and substance satisfactory to the Administrative Agent and the Issuing Lender, issued by an issuer satisfactory to the Administrative Agent and the Issuing Lender.

“Swap Obligations” means, with respect to any Company, any obligation to pay or perform under any agreement, contract or transaction that constitutes a “swap” within the meaning of section 1a(47) of the Commodity Exchange Act.

“Swing Line Commitment” means the commitment of the Swing Line Lender to make Swing Loans to the Borrower, on a discretionary basis, up to the aggregate amount at any time outstanding of One Million Dollars ($1,000,000).

“Swing Line Exposure” means, at any time, the aggregate principal amount of all Swing Loans outstanding.

“Swing Line Lender” means KeyBank, as holder of the Swing Line Commitment.

“Swing Line Note” means the Swing Line Note, in the form of the attached Exhibit B executed and delivered pursuant to Section 2.5(b) hereof.

“Swing Loan” means a loan that shall be denominated in Dollars made to the Borrower by the Swing Line Lender under the Swing Line Commitment, in accordance with Section 2.2(c) hereof.

“Swing Loan Maturity Date” means, with respect to any Swing Loan, the earliest of (a) thirty (30) days after the date such Swing Loan is made, (b) demand by the Swing Line Lender, or (c) the last day of the Commitment Period.

“Taxes” means any and all present or future taxes of any kind, including, but not limited to, levies, imposts, duties, surtaxes, charges, fees, deductions or withholdings now or hereafter imposed, levied, collected, withheld or assessed by any Governmental Authority (together with any interest, penalties, fines, additions to taxes or similar liabilities with respect thereto).

“Term Lender” means a Lender with a percentage of the Term Loan Commitment (or, after the Term Loan Commitment has terminated, the Term Loan) as set forth on Schedule 1 hereto, or that acquires a percentage of the Term Loan Commitment pursuant to Section 11.10 hereof.

“Term Loan” means the loan made to Borrower by the Term Lenders in accordance with Section 2.3 hereof.

“Term Loan Commitment” means the obligation hereunder of the Term Lenders to make the Term Loan in the original principal amount of Forty Million Dollars ($40,000,000), with each Term Lender’s obligation to participate therein being in the amount set forth opposite such Term Lender’s name under the column headed “Term Loan Commitment Amount” as set forth on Schedule 1 hereto, subject to assignments of interests pursuant to Section 11.10 hereof.

 

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“Term Loan Commitment Expiration Date” means the earlier of (a) the Initial Funding Date, and (b) the Early Termination Date.

“Term Loan Exposure” means, at any time, the outstanding principal amount of the Term Loan.

“Term Loan Maturity Date” means November 3, 2021.

“Term Note” means a Term Note, in the form of the attached Exhibit C executed and delivered pursuant to Section 2.5(c) hereof.

“Ticking Fee Period” means the period commencing on the date that is thirty (30) days after the Closing Date and ending on (and excluding) the earlier of the Initial Funding Date and the Term Loan Commitment Expiration Date.

“Total Commitment Amount” means the principal amount of Sixty-Five Million Dollars ($65,000,000), as such amount may be increased pursuant to Section 2.10(b) hereof, or decreased pursuant to Section 2.10(a) hereof.

“U.C.C.” means the Uniform Commercial Code, as in effect from time to time in the State of New York.

“U.C.C. Financing Statement” means a financing statement filed or to be filed in accordance with the Uniform Commercial Code, as in effect from time to time, in the relevant state or states.

“U.S. Person” means a “United States person” within the meaning of Section 7701(a)(30) of the Code.

“United States” means the United States of America.

“USPTO” means the United States Patent and Trademark Office in Alexandria, Virginia.

“Voting Power” means, with respect to any Person, the exclusive ability to control, through the ownership of shares of capital stock, partnership interests, membership interests or otherwise, the election of members of the board of directors or other similar governing body of such Person. The holding of a designated percentage of Voting Power of a Person means the ownership of shares of capital stock, partnership interests, membership interests or other interests of such Person sufficient to control exclusively the election of that percentage of the members of the board of directors or similar governing body of such Person.

“Welfare Plan” means an ERISA Plan that is a “welfare plan” within the meaning of ERISA Section 3(l).

 

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“Write-Down and Conversion Powers” means, with respect to any EEA Resolution Authority, the write-down and conversion powers of such EEA Resolution Authority from time to time under the Bail-In Legislation for the applicable EEA Member Country, which write-down and conversion powers are described in the EU Bail-In Legislation Schedule.

Section 1.2. Accounting Terms.

(a) Any accounting term not specifically defined in this Article I shall have the meaning ascribed thereto by GAAP.

(b) If any change in the rules, regulations, pronouncements, opinions or other requirements of the Financial Accounting Standards Board (or any successor thereto or agency with similar function) is made with respect to GAAP, or if the Borrower adopts the International Financial Reporting Standards, and such change or adoption results in a change in the calculation of any component (or components in the aggregate) of the financial covenants set forth in Section 5.7 hereof or the related financial definitions, at the option of the Administrative Agent, the Required Lenders or the Borrower, the parties hereto will enter into good faith negotiations to amend such financial covenants and financial definitions in such manner as the parties shall agree, each acting reasonably, in order to reflect fairly such change or adoption so that the criteria for evaluating the financial condition of the Borrower shall be the same in commercial effect after, as well as before, such change or adoption is made (in which case the method and calculating such financial covenants and definitions hereunder shall be determined in the manner so agreed); provided that, until so amended, such calculations shall continue to be computed in accordance with GAAP as in effect prior to such change or adoption. Notwithstanding the foregoing, any lease which is required to be characterized as an operating lease under GAAP as in effect on the Closing Date shall continue to be treated as an operating lease for all purposes of this Agreement after the Closing Date despite any changes in GAAP occurring after the Closing Date, and any such lease payments shall not be considered Capitalized Lease Obligations hereunder.

Section 1.3. Terms Generally. The foregoing definitions shall be applicable to the singular and plural forms of the foregoing defined terms. Unless otherwise defined in this Article I, terms that are defined in the U.C.C. are used herein as so defined.

ARTICLE II. AMOUNT AND TERMS OF CREDIT

Section 2.1. Amount and Nature of Credit.

(a) Subject to the terms and conditions of this Agreement, the Lenders, on and after the Initial Funding Date and during the remainder of the Commitment Period and to the extent hereinafter provided, shall make Loans to the Borrower, participate in Swing Loans made by the Swing Line Lender to the Borrower, and participate in Letters of Credit (or, if the Issuing Lender, issue Letters of Credit) at the request of the Borrower, in such aggregate amount as the Borrower shall request pursuant to the Commitment; provided that in no event shall the aggregate principal amount of all Loans and Letters of Credit outstanding under this Agreement be in excess of the Total Commitment Amount.

 

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(b) Each Lender, for itself and not one for any other, agrees to make Loans, participate in Swing Loans, and participate in Letters of Credit (or, if the Issuing Lender, issue Letters of Credit), during the Commitment Period, on such basis that, immediately after the completion of any borrowing by the Borrower or the issuance of a Letter of Credit:

(i) the aggregate outstanding principal amount of Loans made by such Lender (other than Swing Loans made by the Swing Line Lender), when combined with such Lender’s pro rata share, if any, of the Letter of Credit Exposure and the Swing Line Exposure, shall not be in excess of the Maximum Amount for such Lender; and

(ii) with respect to each Specific Commitment, the aggregate outstanding principal amount of Loans (other than Swing Loans) made by such Lender with respect to such Specific Commitment shall represent that percentage of the aggregate principal amount then outstanding on all Loans (other than Swing Loans) within such Specific Commitment that shall be such Lender’s Applicable Commitment Percentage.

Within each Specific Commitment, each borrowing (other than Swing Loans which shall be risk participated on a pro rata basis) from the Lenders shall be made pro rata according to the respective Applicable Commitment Percentages of the Lenders.

(c) The Loans may be made as Revolving Loans as described in Section 2.2(a) hereof, as the Term Loan as described in Section 2.3 hereof, as Swing Loans as described in Section 2.2(c) hereof, and Letters of Credit may be issued in accordance with Section 2.2(b) hereof.

Section 2.2. Revolving Credit Commitment.

(a) Revolving Loans. Subject to the terms and conditions of this Agreement, on and after the Initial Funding Date and during the remainder of the Commitment Period, the Revolving Lenders shall make a Revolving Loan or Revolving Loans to the Borrower in such amount or amounts as the Borrower, through an Authorized Officer, may from time to time request, but not exceeding in aggregate principal amount at any time outstanding hereunder the Revolving Credit Commitment, when such Revolving Loans are combined with the Letter of Credit Exposure and the Swing Line Exposure. The Borrower shall have the option, subject to the terms and conditions set forth herein, to borrow Revolving Loans, maturing on the last day of the Commitment Period, by means of any combination of Base Rate Loans or Eurodollar Loans. Subject to the provisions of this Agreement, the Borrower shall be entitled under this Section 2.2(a) to borrow Revolving Loans, repay the same in whole or in part and re-borrow Revolving Loans hereunder at any time and from time to time during the Commitment Period. The aggregate outstanding amount of all Revolving Loans shall be payable in full on the last day of the Commitment Period.

 

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(b) Letters of Credit.

(i) Generally. Subject to the terms and conditions of this Agreement, on and after the Initial Funding Date and during the remainder of the Commitment Period, the Issuing Lender shall, in its own name, on behalf of the Revolving Lenders, issue such Letters of Credit for the account of the Borrower or a Guarantor of Payment, as the Borrower may from time to time request. The Borrower shall not request any Letter of Credit (and the Issuing Lender shall not be obligated to issue any Letter of Credit) if, after giving effect thereto, (A) the Letter of Credit Exposure would exceed the Letter of Credit Commitment, or (B) the Revolving Credit Exposure would exceed the Revolving Credit Commitment. The issuance of each Letter of Credit shall confer upon each Revolving Lender the benefits and liabilities of a participation consisting of an undivided pro rata interest in the Letter of Credit to the extent of such Revolving Lender’s Applicable Commitment Percentage.

(ii) Request for Letter of Credit. Each request for a Letter of Credit shall be delivered to the Administrative Agent (and to the Issuing Lender, if the Issuing Lender is a Lender other than the Administrative Agent) by an Authorized Officer not later than 11:00 A.M. (Eastern time) three Business Days prior to the date of the proposed issuance of the Letter of Credit (or such shorter period as may be acceptable to the Issuing Lender). Each such request shall be in a form reasonably acceptable to the Administrative Agent (and the Issuing Lender, if the Issuing Lender is a Lender other than the Administrative Agent) and shall specify the face amount thereof, whether such Letter of Credit is a commercial documentary or a standby Letter of Credit, the account party, the beneficiary, the requested date of issuance, amendment, renewal or extension, the expiry date thereof, and the nature of the transaction or obligation to be supported thereby. Concurrently with each such request, the Borrower, and any Guarantor of Payment for whose account the Letter of Credit is to be issued, shall execute and deliver to the Issuing Lender an appropriate application and agreement, being in the standard form of the Issuing Lender for such letters of credit, as amended to conform to the provisions of this Agreement if required by the Administrative Agent. The Administrative Agent shall give the Issuing Lender and each Revolving Lender notice of each such request for a Letter of Credit.

(iii) Commercial Documentary Letters of Credit Fees. With respect to each Letter of Credit that shall be a commercial documentary letter of credit and the drafts thereunder, whether issued for the account of the Borrower or a Guarantor of Payment, the Borrower agrees to (A) pay to the Administrative Agent, for the pro rata benefit of the Revolving Lenders, a non-refundable commission based upon the face amount of such Letter of Credit, which shall be paid quarterly in arrears, on each Regularly Scheduled Payment Date, in an amount equal to the aggregate sum of the Letter of Credit Fee for such Letter of Credit for each day of such quarter; (B) pay to the Administrative Agent, for the sole benefit of the Issuing Lender, an additional Letter of Credit fee, which shall be paid on each date that such Letter of Credit is issued, amended or renewed, at the rate of one-eighth percent (1/8%) of the face amount of such Letter of Credit; and (C) pay to the Administrative Agent, for the sole benefit of the Issuing Lender, such other issuance, amendment, renewal, negotiation, draw, acceptance, telex, courier, postage and similar transactional fees as are customarily charged by the Issuing Lender in respect of the issuance and administration of similar letters of credit under its fee schedule as in effect from time to time.

 

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(iv) Standby Letters of Credit Fees. With respect to each Letter of Credit that shall be a standby letter of credit and the drafts thereunder, if any, whether issued for the account of the Borrower or a Guarantor of Payment, the Borrower agrees to (A) pay to the Administrative Agent, for the pro rata benefit of the Revolving Lenders, a non-refundable commission based upon the face amount of such Letter of Credit, which shall be paid quarterly in arrears, on each Regularly Scheduled Payment Date, in an amount equal to the aggregate sum of the Letter of Credit Fee for such Letter of Credit for each day of such quarter; (B) pay to the Administrative Agent, for the sole benefit of the Issuing Lender, an additional Letter of Credit fee, which shall be paid on each date that such Letter of Credit is issued, amended or renewed at the rate of one-eighth percent (1/8%) of the face amount of such Letter of Credit; and (C) pay to the Administrative Agent, for the sole benefit of the Issuing Lender, such other issuance, amendment, renewal, negotiation, draw, acceptance, telex, courier, postage and similar transactional fees as are customarily charged by the Issuing Lender in respect of the issuance and administration of similar letters of credit under its fee schedule as in effect from time to time.

(v) Refunding of Letters of Credit with Revolving Loans. Whenever a Letter of Credit shall be drawn, the Borrower shall promptly reimburse the Issuing Lender for the amount drawn. In the event that the amount drawn shall not have been reimbursed by the Borrower within one Business Day of the drawing of such Letter of Credit, the Borrower shall be deemed to have requested a Revolving Loan, subject to the provisions of Sections 2.2(a) and 2.6 hereof (other than the requirement set forth in Section 2.6(d) hereof), in the amount drawn. Such Revolving Loan shall be evidenced by the Revolving Credit Notes (or, if a Lender has not requested a Revolving Credit Note, by the records of the Administrative Agent and such Lender). Each Revolving Lender agrees to make a Revolving Loan on the date of such notice, subject to no conditions precedent whatsoever. Each Revolving Lender acknowledges and agrees that its obligation to make a Revolving Loan pursuant to Section 2.2(a) hereof when required by this subpart (v) shall be absolute and unconditional and shall not be affected by any circumstance whatsoever, including, without limitation, the occurrence and continuance of a Default or Event of Default, and that its payment to the Administrative Agent, for the account of the Issuing Lender, of the proceeds of such Revolving Loan shall be made without any offset, abatement, recoupment, counterclaim, withholding or reduction whatsoever and whether or not the Revolving Credit Commitment shall have been reduced or terminated. The Borrower irrevocably authorizes and instructs the Administrative Agent to apply the proceeds of any borrowing pursuant to this subpart (v) to reimburse, in full (other than the Issuing Lender’s pro rata share of such borrowing), the Issuing Lender for the amount drawn on such Letter of Credit. Each such Revolving Loan shall be deemed to be a Base Rate Loan unless otherwise requested by and available to the Borrower hereunder. Each Revolving Lender is hereby authorized to record on its records relating to its Revolving Credit Note (or, if such Revolving Lender has not requested a Revolving Credit Note, its records relating to Revolving Loans) such Revolving Lender’s pro rata share of the amounts paid and not reimbursed on the Letters of Credit.

 

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(vi) Participation in Letters of Credit. If, for any reason, the Administrative Agent (and the Issuing Lender if the Issuing Lender is a Revolving Lender other than the Administrative Agent) shall be unable to or, in the opinion of the Administrative Agent, it shall be impracticable to, convert any amount drawn under a Letter of Credit to a Revolving Loan pursuant to the preceding subsection, the Administrative Agent (and the Issuing Lender if the Issuing Lender is a Revolving Lender other than the Administrative Agent) shall have the right to request that each Revolving Lender fund a participation in the amount due with respect to such Letter of Credit, and the Administrative Agent shall promptly notify each Revolving Lender thereof (by facsimile or email (in each case confirmed by telephone) or telephone (confirmed in writing)). Upon such notice, but without further action, the Issuing Lender hereby agrees to grant to each Revolving Lender, and each Revolving Lender hereby agrees to acquire from the Issuing Lender, an undivided participation interest in the amount due with respect to such Letter of Credit in an amount equal to such Revolving Lender’s Applicable Commitment Percentage of the principal amount due with respect to such Letter of Credit. In consideration and in furtherance of the foregoing, each Revolving Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay to the Administrative Agent, for the account of the Issuing Lender, such Revolving Lender’s ratable share of the amount due with respect to such Letter of Credit (determined in accordance with such Revolving Lender’s Applicable Commitment Percentage). Each Revolving Lender acknowledges and agrees that its obligation to acquire participations in the amount due under any Letter of Credit that is drawn but not reimbursed by the Borrower pursuant to this subsection (vi) shall be absolute and unconditional and shall not be affected by any circumstance whatsoever, including, without limitation, the occurrence and continuance of a Default or Event of Default, and that each such payment shall be made without any offset, abatement, recoupment, counterclaim, withholding or reduction whatsoever and whether or not the Revolving Credit Commitment shall have been reduced or terminated. Each Revolving Lender shall comply with its obligation under this subsection (vi) by wire transfer of immediately available funds, in the same manner as provided in Section 2.6 hereof with respect to Revolving Loans. Each Revolving Lender is hereby authorized to record on its records such Revolving Lender’s pro rata share of the amounts paid and not reimbursed on the Letters of Credit.

(vii) Auto-Renewal Letters of Credit. If the Borrower so requests, a Letter of Credit shall have an automatic renewal provision; provided that any Letter of Credit that has an automatic renewal provision must permit the Administrative Agent (or the applicable Issuing Lender if the Issuing Lender is a Lender other than the Administrative Agent) to prevent any such renewal by giving prior notice to the beneficiary thereof not later than thirty (30) days prior to the renewal date of such Letter of Credit. Once any such Letter of Credit that has automatic renewal provisions has been issued, the Revolving Lenders shall be deemed to have authorized (but may not require) the Administrative Agent (and the Issuing Lender) to permit at any time the renewal of such Letter of Credit to an expiry date not later than one year after the last day of the Commitment Period.

 

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(viii) Letters of Credit Outstanding Beyond the Commitment Period. If any Letter of Credit is outstanding upon the termination of the Commitment, then, prior to such termination, the Borrower shall deposit with the Administrative Agent, for the benefit of the Issuing Lender, with respect to all outstanding Letters of Credit, either cash or a Supporting Letter of Credit, which, in each case, is (A) in an amount equal to one hundred five percent (105%) of the undrawn amount of the outstanding Letters of Credit, and (B) free and clear of all rights and claims of third parties. The cash shall be deposited in an escrow account at a financial institution designated by the Issuing Lender. The Issuing Lender shall be entitled to withdraw (with respect to the cash) or draw (with respect to the Supporting Letter of Credit) amounts necessary to reimburse the Issuing Lender for payments to be made under the Letters of Credit and any fees and expenses associated with such Letters of Credit, or incurred pursuant to the reimbursement agreements with respect to such Letters of Credit. The Borrower shall also execute such documentation as the Administrative Agent or the Issuing Lender may reasonably require in connection with the survival of the Letters of Credit beyond the Commitment or this Agreement. After expiration of all undrawn Letters of Credit, the Supporting Letter of Credit or the remainder of the cash, if any, as the case may be, shall promptly be returned to the Borrower.

(ix) Requests for Letters of Credit When One or More Revolving Lenders Are Affected Lenders. No Letter of Credit shall be requested or issued hereunder if any Revolving Lender is at such time an Affected Lender hereunder, unless the Administrative Agent (and the Issuing Lender) has entered into satisfactory (to the Administrative Agent) arrangements with the Borrower or such Affected Lender to eliminate or mitigate the reimbursement risk with respect to such Affected Lender (including, without limitation, the posting of cash collateral).

(x) Letters of Credit Issued and Outstanding When One or More Revolving Lenders Are Affected Lenders. With respect to any Letters of Credit that have been issued and are outstanding at the time any Revolving Lender is an Affected Lender, the Administrative Agent (and the Issuing Lender) shall have the right to require that the Borrower or such Affected Lender cash collateralize, in form and substance satisfactory to the Administrative Agent (and the Issuing Lender), such Affected Lender’s pro rata share of such Letters of Credit so as to eliminate or mitigate the reimbursement risk with respect to such Affected Lender.

(c) Swing Loans.

(i) Generally. Subject to the terms and conditions of this Agreement, during the Commitment Period, the Swing Line Lender shall make a Swing Loan or Swing Loans to the Borrower in such amount or amounts as the Borrower, through an Authorized Officer, may from time to time request and to which the Swing Line Lender may agree; provided that the Borrower shall not request any Swing Loan if, after giving

 

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effect thereto, (A) the Revolving Credit Exposure would exceed the Revolving Credit Commitment, or (B) the Swing Line Exposure would exceed the Swing Line Commitment. Each Swing Loan shall be due and payable on the Swing Loan Maturity Date applicable thereto. Each Swing Loan shall be made in Dollars.

(ii) Refunding of Swing Loans. If the Swing Line Lender so elects, by giving notice to the Borrower and the Revolving Lenders, the Borrower agrees that the Swing Line Lender shall have the right, in its sole discretion, to require that the then outstanding Swing Loans be refinanced as a Revolving Loan. Such Revolving Loan shall be a Base Rate Loan unless otherwise requested by and available to the Borrower hereunder. Upon receipt of such notice by the Borrower and the Revolving Lenders, the Borrower shall be deemed, on such day, to have requested a Revolving Loan in the principal amount of such Swing Loan in accordance with Sections 2.2(a) and 2.6 hereof (other than the requirement set forth in Section 2.6(d) hereof). Such Revolving Loan shall be evidenced by the Revolving Credit Notes (or, if a Revolving Lender has not requested a Revolving Credit Note, by the records of the Administrative Agent and such Revolving Lender). Each Revolving Lender agrees to make a Revolving Loan on the date of such notice, subject to no conditions precedent whatsoever. Each Revolving Lender acknowledges and agrees that such Revolving Lender’s obligation to make a Revolving Loan pursuant to Section 2.2(a) hereof when required by this subsection (ii) is absolute and unconditional and shall not be affected by any circumstance whatsoever, including, without limitation, the occurrence and continuance of a Default or Event of Default, and that its payment to the Administrative Agent, for the account of the Swing Line Lender, of the proceeds of such Revolving Loan shall be made without any offset, abatement, recoupment, counterclaim, withholding or reduction whatsoever and whether or not the Revolving Credit Commitment shall have been reduced or terminated. The Borrower irrevocably authorizes and instructs the Administrative Agent to apply the proceeds of any borrowing pursuant to this subsection (ii) to repay in full such Swing Loan. Each Revolving Lender is hereby authorized to record on its records relating to its Revolving Credit Note (or, if such Revolving Lender has not requested a Revolving Credit Note, its records relating to Revolving Loans) such Revolving Lender’s pro rata share of the amounts paid to refund such Swing Loan.

(iii) Participation in Swing Loans. If, for any reason, the Swing Line Lender is unable to or, in the opinion of the Administrative Agent, it is impracticable to, convert any Swing Loan to a Revolving Loan pursuant to the subsection (ii) above, then on any day that a Swing Loan is outstanding (whether before or after the maturity thereof), the Administrative Agent shall have the right to request that each Revolving Lender fund a participation in such Swing Loan, and the Administrative Agent shall promptly notify each Revolving Lender thereof (by facsimile or email (in each case confirmed by telephone) or telephone (confirmed in writing)). Upon such notice, but without further action, the Swing Line Lender hereby agrees to grant to each Revolving Lender, and each Revolving Lender hereby agrees to acquire from the Swing Line Lender, an undivided participation interest in the right to share in the payment of such Swing Loan in an amount equal to such Revolving Lender’s Applicable Commitment Percentage of the principal amount of such Swing Loan. In consideration and in furtherance of the

 

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foregoing, each Revolving Lender hereby absolutely and unconditionally agrees, upon receipt of notice as provided above, to pay to the Administrative Agent, for the benefit of the Swing Line Lender, such Revolving Lender’s ratable share of such Swing Loan (determined in accordance with such Revolving Lender’s Applicable Commitment Percentage). Each Revolving Lender acknowledges and agrees that its obligation to acquire participations in Swing Loans pursuant to this subsection (iii) is absolute and unconditional and shall not be affected by any circumstance whatsoever, including, without limitation, the occurrence and continuance of a Default or an Event of Default, and that each such payment shall be made without any offset, abatement, recoupment, counterclaim, withholding or reduction whatsoever and whether or not the Revolving Credit Commitment shall have been reduced or terminated. Each Revolving Lender shall comply with its obligation under this subsection (iii) by wire transfer of immediately available funds, in the same manner as provided in Section 2.6 hereof with respect to Revolving Loans to be made by such Revolving Lender.

(iv) Requests for Swing Loan When One or More Revolving Lenders Are Affected Lenders. No Swing Loan shall be requested or issued hereunder if any Revolving Lender is at such time an Affected Lender hereunder, unless the Administrative Agent has entered into satisfactory (to the Administrative Agent and the Swing Line Lender) arrangements with the Borrower or such Affected Lender to eliminate or mitigate the reimbursement risk with respect to such Affected Lender (including, without limitation, the posting of cash collateral).

(v) Swing Loans Outstanding When One or More Revolving Lenders Are Affected Lenders. With respect to any Swing Loans that are outstanding at the time any Revolving Lender is an Affected Lender, the Administrative Agent shall have the right to require that the Borrower or such Affected Lender cash collateralize, in form and substance reasonably satisfactory to the Administrative Agent, such Affected Lender’s pro rata share of such Swing Loans so as to eliminate or mitigate the reimbursement risk with respect to such Affected Lender.

Section 2.3. Term Loan Commitment. Subject to the terms and conditions of this Agreement, the Term Lenders shall make the Term Loan to the Borrower on the Initial Funding Date, in the amount of the Term Loan Commitment. The Term Loan shall be payable in consecutive quarterly installments, in the amounts set forth in the table below, commencing March 31, 2017, and continuing on each Regularly Scheduled Payment Date thereafter, with the balance thereof payable in full on the Term Loan Maturity Date.

 

Year		March 31				June 30				September 30				December 31
2017		$	500,000			$	500,000			$	500,000			$	500,000
2018		$	750,000			$	750,000			$	750,000			$	750,000
2019		$	750,000			$	750,000			$	750,000			$	750,000
2020		$	1,000,000			$	1,000,000			$	1,000,000			$	1,000,000
2021		$	1,000,000			$	1,000,000			$	1,000,000				n/a

 

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The Borrower shall notify the Administrative Agent, in accordance with the notice provisions of Section 2.6 hereof, whether the Term Loan will be a Base Rate Loan or one or more Eurodollar Loans. The Term Loan may be a mixture of a Base Rate Loan and one or more Eurodollar Loans. Once the Term Loan is made, any portion of the Term Loan repaid may not be re-borrowed. The Term Loan Commitment shall terminate on the earlier of (a) the date that the Term Loan has been made, and (b) the Term Loan Commitment Expiration Date.

Section 2.4. Interest.

(a) Revolving Loans.

(i) Base Rate Loan. The Borrower shall pay interest on the unpaid principal amount of a Revolving Loan that is a Base Rate Loan outstanding from time to time from the date thereof until paid at the Derived Base Rate from time to time in effect. Interest on such Base Rate Loan shall be payable, commencing December 31, 2016, and continuing on each Regularly Scheduled Payment Date thereafter and at the maturity thereof.

(ii) Eurodollar Loans. The Borrower shall pay interest on the unpaid principal amount of each Revolving Loan that is a Eurodollar Loan outstanding from time to time, with the interest rate to be fixed in advance on the first day of the Interest Period applicable thereto through the last day of the Interest Period applicable thereto (but subject to changes in the Applicable Margin for Eurodollar Loans), at the Derived Eurodollar Rate. Interest on such Eurodollar Loan shall be payable on each Interest Adjustment Date with respect to an Interest Period (provided that, if an Interest Period shall exceed three months, the interest must also be paid every three months, commencing three months from the beginning of such Interest Period).

(b) Swing Loans. The Borrower shall pay interest to the Administrative Agent, for the sole benefit of the Swing Line Lender (and any Revolving Lender that shall have funded a participation in such Swing Loan), on the unpaid principal amount of each Swing Loan outstanding from time to time from the date thereof until paid at the Derived Base Rate from time to time in effect. Interest on each Swing Loan shall be payable on the Swing Loan Maturity Date applicable thereto. Each Swing Loan shall bear interest for a minimum of one day.

(c) Term Loan.

(i) Base Rate Loan. With respect to any portion of the Term Loan that is a Base Rate Loan, the Borrower shall pay interest on the unpaid principal amount thereof outstanding from time to time from the date thereof until paid, commencing December 31, 2016, and continuing on each Regularly Scheduled Payment Date thereafter and on the Term Loan Maturity Date, at the Derived Base Rate from time to time in effect.

 

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(ii) Eurodollar Loans. With respect to any portion of the Term Loan that is a Eurodollar Loan, the Borrower shall pay interest on the unpaid principal amount of such Eurodollar Loan outstanding from time to time, with the interest rate to be fixed in advance on the first day of the Interest Period applicable thereto through the last day of the Interest Period applicable thereto (but subject to changes in the Applicable Margin for Eurodollar Loans), at the Derived Eurodollar Rate. Interest on such Eurodollar Loan shall be payable on each Interest Adjustment Date with respect to an Interest Period (provided that, if an Interest Period shall exceed three months, the interest must also be paid every three months, commencing three months from the beginning of such Interest Period).

(d) Default Rate. Anything herein to the contrary notwithstanding, if an Event of Default shall occur and be continuing, upon the election of the Administrative Agent or the Required Lenders (i) the principal of each Loan and the unpaid interest thereon shall bear interest, until paid, at the Default Rate, (ii) the fee for the aggregate undrawn amount of all issued and outstanding Letters of Credit shall be increased by two percent (2%) in excess of the rate otherwise applicable thereto, and (iii) in the case of any other amount not paid when due from the Borrower hereunder or under any other Loan Document, such amount shall bear interest at the Default Rate; provided that, during an Event of Default under Section 8.1 or 8.11 hereof, the applicable Default Rate shall apply without any election or action on the part of the Administrative Agent or any Lender.

(e) Limitation on Interest. In no event shall the rate of interest hereunder exceed the maximum rate allowable by law. Notwithstanding anything to the contrary contained in any Loan Document, the interest paid or agreed to be paid under the Loan Documents shall not exceed the maximum rate of non-usurious interest permitted by applicable law (the “Maximum Rate”). If the Administrative Agent or any Lender shall receive interest in an amount that exceeds the Maximum Rate, the excess interest shall be applied to the principal of the Loans or, if it exceeds such unpaid principal, refunded to the Borrower. In determining whether the interest contracted for, charged, or received by the Administrative Agent or a Lender exceeds the Maximum Rate, such Person may, to the extent permitted by applicable law, (i) characterize any payment that is not principal as an expense, fee, or premium rather than interest, (ii) exclude voluntary prepayments and the effects thereof, and (iii) amortize, prorate, allocate, and spread in equal or unequal parts the total amount of interest throughout the contemplated term of the Obligations.

Section 2.5. Evidence of Indebtedness.

(a) Revolving Loans. Upon the request of a Revolving Lender, to evidence the obligation of the Borrower to repay the portion of the Revolving Loans made by such Revolving Lender and to pay interest thereon, the Borrower shall execute a Revolving Credit Note, payable to the order of such Revolving Lender in the principal amount equal to its Applicable Commitment Percentage of the Revolving Amount, or, if less, the aggregate unpaid principal amount of Revolving Loans made by such Revolving Lender; provided that the failure of a Revolving Lender to request a Revolving Credit Note shall in no way detract from the Borrower’s obligations to such Revolving Lender hereunder.

 

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(b) Swing Loans. Upon the request of the Swing Line Lender, to evidence the obligation of the Borrower to repay the Swing Loans and to pay interest thereon, the Borrower shall execute a Swing Line Note, payable to the order of the Swing Line Lender in the principal amount of the Swing Line Commitment, or, if less, the aggregate unpaid principal amount of Swing Loans made by the Swing Line Lender; provided that the failure of the Swing Line Lender to request a Swing Line Note shall in no way detract from the Borrower’s obligations to the Swing Line Lender hereunder.

(c) Term Loan. Upon the request of a Term Lender, to evidence the obligation of the Borrower to repay the portion of the Term Loan made by such Term Lender and to pay interest thereon, the Borrower shall execute a Term Note, payable to the order of such Term Lender in the principal amount of its Applicable Commitment Percentage of the Term Loan Commitment; provided that the failure of such Term Lender to request a Term Note shall in no way detract from the Borrower’s obligations to such Term Lender hereunder.

Section 2.6. Notice of Loans and Credit Events; Funding of Loans.

(a) Notice of Loans and Credit Events. The Borrower, through an Authorized Officer, shall provide to the Administrative Agent a Notice of Loan prior to (i) 11:00 A.M. (Eastern time) on the proposed date of borrowing of, or conversion of a Loan to, a Base Rate Loan, (ii) 11:00 A.M. (Eastern time) three Business Days prior to the proposed date of borrowing of, continuation of, or conversion of a Loan to, a Eurodollar Loan, and (iii) 2:00 P.M. (Eastern time) on the proposed date of borrowing of a Swing Loan (or such later time as agreed to from time to time by the Swing Line Lender). An Authorized Officer of the Borrower may verbally request a Loan, so long as a Notice of Loan is received by the end of the same Business Day, and, if the Administrative Agent or any Lender provides funds or initiates funding based upon such verbal request, the Borrower shall bear the risk with respect to any information regarding such funding that is later determined to have been incorrect. The Borrower shall comply with the notice provisions set forth in Section 2.2(b) hereof with respect to Letters of Credit.

(b) Funding of Loans. The Administrative Agent shall notify the appropriate Lenders of the date, amount and Interest Period (if applicable) promptly upon the receipt of a Notice of Loan (other than for a Swing Loan, or a Revolving Loan to be funded as a Swing Loan), and, in any event, by 2:00 P.M. (Eastern time) on the date such Notice of Loan is received. On the date that the Credit Event set forth in such Notice of Loan is to occur, each such Lender shall provide to the Administrative Agent, not later than 3:00 P.M. (Eastern time), the amount in Dollars, in federal or other immediately available funds, required of it. If the Administrative Agent shall elect to advance the proceeds of such Loan prior to receiving funds from such Lender, the Administrative Agent shall have the right, upon prior notice to the Borrower, to debit any account of the Borrower or otherwise receive such amount from the Borrower, promptly after demand, in the event that such Lender shall fail to reimburse the Administrative Agent in accordance with this subsection (b). The Administrative Agent shall also have the right to receive interest from such Lender at the Federal Funds Effective Rate in the event that such Lender shall fail to provide its portion of the Loan on the date requested and the Administrative Agent shall elect to provide such funds.

 

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(c) Conversion and Continuation of Loans.

(i) At the request of the Borrower to the Administrative Agent, subject to the notice and other provisions of this Agreement, the appropriate Lenders shall convert a Base Rate Loan to one or more Eurodollar Loans at any time and shall convert a Eurodollar Loan to a Base Rate Loan on any Interest Adjustment Date applicable thereto. Swing Loans may be converted by the Swing Line Lender to Revolving Loans in accordance with Section 2.2(c)(ii) hereof.

(ii) At the request of the Borrower to the Administrative Agent, subject to the notice and other provisions of this Agreement, the appropriate Lenders shall continue one or more Eurodollar Loans as of the end of the applicable Interest Period as a new Eurodollar Loan with a new Interest Period.

(d) Minimum Amount for Loans. Each request for:

(i) a Base Rate Loan shall be in an amount of not less than Five Hundred Thousand Dollars ($500,000), increased by increments of One Hundred Thousand Dollars ($100,000);

(ii) a Eurodollar Loan shall be in an amount of not less than Five Hundred Thousand Dollars ($500,000), increased by increments of One Hundred Thousand Dollars ($100,000); and

(iii) a Swing Loan may be in any amount as may be agreed to by the Swing Line Lender.

(e) Interest Periods. The Borrower shall not request that Eurodollar Loans be outstanding for more than six different Interest Periods at the same time.

(f) Advancing of Non Pro-Rata Revolving Loans. Notwithstanding anything in this Agreement to the contrary, if the Borrower requests a Revolving Loan pursuant to Section 2.6(a) hereof (and all conditions precedent set forth in Section 4.1 hereof are met) at a time when one or more Revolving Lenders are Defaulting Lenders, the Administrative Agent shall have the option, in its sole discretion, to require the non-Defaulting Lenders to honor such request by making a non pro-rata Revolving Loan to the Borrower in an amount equal to (i) the amount requested by the Borrower, minus (ii) the portions of such Revolving Loan that should have been made by such Defaulting Lenders. For purposes of such Revolving Loans, the Revolving Lenders that are making such Revolving Loan shall do so in an amount equal to their Applicable Commitment Percentages of the amount requested by the Borrower. For the avoidance of doubt, in no event shall the aggregate outstanding principal amount of Loans made by a Lender (other than Swing Loans made by the Swing Line Lender), when combined with such Lender’s pro rata share, if any, of the Letter of Credit Exposure and the Swing Line Exposure, be in excess of the Maximum Amount for such Lender.

 

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Section 2.7. Payment on Loans and Other Obligations.

(a) Payments Generally. Each payment made hereunder or under any other Loan Document by a Credit Party shall be made without any offset, abatement, recoupment, counterclaim, withholding or reduction whatsoever.

(b) Payments from Borrower. All payments (including prepayments) to the Administrative Agent of the principal of or interest on each Loan or other payment, including but not limited to principal, interest, fees or any other amount owed by the Borrower under this Agreement, shall be made in Dollars. All payments described in this subsection (b) shall be remitted to the Administrative Agent, at the address of the Administrative Agent for notices referred to in Section 11.4 hereof for the account of the appropriate Lenders (or the Issuing Lender or the Swing Line Lender, as appropriate) not later than 1:00 P.M. (Eastern time) on the due date thereof in immediately available funds. Any such payments received by the Administrative Agent (or the Issuing Lender or the Swing Line Lender) after 1:00 P.M. (Eastern time) shall be deemed to have been made and received on the next Business Day.

(c) Payments to Lenders. Upon the Administrative Agent’s receipt of payments hereunder, the Administrative Agent shall immediately distribute to the appropriate Lenders (except with respect to Swing Loans, which shall be paid to the Swing Line Lender and any Lender that has funded a participation in the Swing Loans, or, with respect to Letters of Credit, certain of which payments shall be paid to the Issuing Lender) their respective ratable shares, if any, of the amount of principal, interest, and commitment and other fees received by the Administrative Agent for the account of such Lender. Payments received by the Administrative Agent shall be delivered to the Lenders in immediately available funds. Each appropriate Lender shall record any principal, interest or other payment, the principal amounts of Base Rate Loans, Eurodollar Loans, Swing Loans and Letters of Credit, all prepayments and the applicable dates, including Interest Periods, with respect to the Loans made, and payments received by such Lender, by such method as such Lender may generally employ; provided that failure to make any such entry shall in no way detract from the obligations of the Borrower under this Agreement or any Note. The aggregate unpaid amount of Loans, types of Loans, Interest Periods and similar information with respect to the Loans and Letters of Credit set forth on the records of the Administrative Agent shall, absent manifest error, be rebuttably presumptive evidence with respect to such information, including the amounts of principal, interest and fees owing to each Lender.

(d) Timing of Payments. Whenever any payment to be made hereunder, including, without limitation, any payment to be made on any Loan, shall be stated to be due on a day that is not a Business Day, such payment shall be made on the next Business Day and such extension of time shall in each case be included in the computation of the interest payable on such Loan; provided that, with respect to a Eurodollar Loan, if the next Business Day shall fall in the succeeding calendar month, such payment shall be made on the preceding Business Day and the relevant Interest Period shall be adjusted accordingly.

(e) Affected Lenders. To the extent that the Administrative Agent receives any payments or other amounts for the account of a Revolving Lender that is an Affected Lender, at the discretion of the Administrative Agent, such Affected Lender shall be deemed to have requested that the Administrative Agent use such payment or other amount (or any portion

 

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thereof, at the discretion of the Administrative Agent) first, to cash collateralize its unfunded risk participation in Swing Loans and the Letters of Credit pursuant to Sections 2.2(b)(vi), 2.2(c)(iii) and 2.6(b) hereof, and, with respect to any Defaulting Lender, second, to fulfill its obligations to make Loans.

(f) Payment of Non Pro-Rata Revolving Loans. Notwithstanding anything in this Agreement to the contrary, at the sole discretion of the Administrative Agent, in order to pay Revolving Loans made to the Borrower that were not advanced pro rata by the Revolving Lenders, any payment of any Loan may first be applied to such Revolving Loans that were not advanced pro rata.

Section 2.8. Prepayment.

(a) Right to Prepay.

(i) The Borrower shall have the right at any time or from time to time to prepay, on a pro rata basis for all of the appropriate Lenders (except with respect to Swing Loans, which shall be paid to the Swing Line Lender and any Revolving Lender that has funded a participation in such Swing Loan), all or any part of the principal amount of the Loans then outstanding, as designated by the Borrower, representing the obligations under any Specific Commitment with the proceeds of such prepayment to be distributed on a pro rata basis to the holders of the Specific Commitment being prepaid. Such payment shall include interest accrued on the amount so prepaid to the date of such prepayment and any amount payable under Article III hereof with respect to the amount being prepaid. Prepayments of Loans shall be without any premium or penalty, except as provided in Section 3.3 hereof with respect to Eurodollar Loans. Each prepayment of the Term Loan and the Additional Term Loan Facility (if any) shall be applied to the principal installments thereof in the inverse order of their respective maturities.

(ii) The Borrower shall have the right, at any time or from time to time, to prepay, for the benefit of the Swing Line Lender (and any Revolving Lender that has funded a participation in such Swing Loan), all or any part of the principal amount of the Swing Loans then outstanding, as designated by the Borrower, plus interest accrued on the amount so prepaid to the date of such prepayment.

(iii) Notwithstanding anything in this Section 2.8 or otherwise to the contrary, at the discretion of the Administrative Agent, in order to prepay Revolving Loans made to the Borrower that were not advanced pro rata by all of the Revolving Lenders, any prepayment of a Revolving Loan shall first be applied to Revolving Loans made by the Revolving Lenders during any period in which a Defaulting Lender or Insolvent Lender shall exist.

(b) Notice of Prepayment. The Borrower shall give the Administrative Agent irrevocable written notice of prepayment of (i) a Base Rate Loan or Swing Loan by no later than 11:00 A.M. (Eastern time) on the Business Day on which such prepayment is to be made, and (ii) a Eurodollar Loan by no later than 1:00 P.M. (Eastern time) three Business Days before the Business Day on which such prepayment is to be made. Swing Loans may be prepaid without advance notice if prepaid through a “sweep” cash management arrangement with the Administrative Agent.

 

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(c) Minimum Amount for Eurodollar Loans. Each prepayment of a Eurodollar Loan shall be in the principal amount of not less than the lesser of Five Hundred Thousand Dollars ($500,000), or the principal amount of such Loan, or, with respect to a Swing Loan, the principal balance of such Swing Loan, except in the case of a mandatory payment pursuant to Section 2.12(c) or Article III hereof.

Section 2.9. Commitment and Other Fees.

(a) Commitment Fee. The Borrower shall pay to the Administrative Agent, for the ratable account of the Revolving Lenders, as a consideration for the Revolving Credit Commitment, a commitment fee, for each day from the Closing Date through the last day of the Commitment Period, in an amount equal to (i) (A) the Revolving Amount at the end of such day, minus (B) the Revolving Credit Exposure at the end of such day, multiplied by (ii) the Applicable Commitment Fee Rate in effect on such day divided by three hundred sixty (360). The commitment fee shall be payable quarterly in arrears, commencing on December 31, 2016 and continuing on each Regularly Scheduled Payment Date thereafter, and on the last day of the Commitment Period.

(b) Ticking Fee. The Borrower shall pay to the Administrative Agent, for the ratable account of the Term Lenders, as a consideration for the Term Loan Commitment, a ticking fee which shall accrue during the Ticking Fee Period and be payable quarterly, at a rate per annum equal to (i) thirty-seven and one-half (37.50) basis points, multiplied by (ii) the aggregate amount of the Term Loan Commitment. The ticking fee shall be payable quarterly in arrears, commencing on the first Regularly Scheduled Payment Date following the commencement of the Ticking Fee Period and continuing on each Regularly Scheduled Payment Date thereafter, and on the Term Loan Commitment Expiration Date.

(c) Administrative Agent Fee. The Borrower shall pay to the Administrative Agent, for its sole benefit, the fees set forth in the Administrative Agent Fee Letter.

Section 2.10. Modifications to Commitment.

(a) Optional Reduction of Revolving Credit Commitment. The Borrower may at any time and from time to time permanently reduce in whole or ratably in part the Revolving Amount to an amount not less than the then existing Revolving Credit Exposure, by giving the Administrative Agent not fewer than three (3) Business Days’ written notice of such reduction, provided that any such partial reduction shall be in an aggregate amount, for all of the Lenders, of not less than Two Million Five Hundred Thousand Dollars ($2,500,000), increased in increments of Five Hundred Thousand Dollars ($500,000). The Administrative Agent shall promptly notify each Revolving Lender of the date of each such reduction and such Revolving Lender’s proportionate share thereof. After each such partial reduction, the commitment fees payable hereunder shall be calculated upon the Revolving Amount as so reduced. If the

 

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Borrower reduces in whole the Revolving Credit Commitment, on the effective date of such reduction (the Borrower having prepaid in full the unpaid principal balance, if any, of the Loans, together with all interest (if any) and commitment and other fees accrued and unpaid with respect thereto, and provided that no Letter of Credit Exposure or Swing Line Exposure shall exist), all of the Revolving Credit Notes shall be delivered to the Administrative Agent marked “Canceled” and the Administrative Agent shall redeliver such Revolving Credit Notes to the Borrower. Any partial reduction in the Revolving Amount shall be effective during the remainder of the Commitment Period. Upon each decrease of the Revolving Amount, the Total Commitment Amount shall be decreased by the same amount.

(b) Increase in Commitment.

(i) At any time during the Commitment Increase Period, the Borrower may request that the Administrative Agent increase the Total Commitment Amount by (A) increasing the Revolving Amount, or (B) adding an additional term loan facility to this Agreement (the “Additional Term Loan Facility”) (which Additional Term Loan Facility shall be subject to subsection (c) below); provided that the aggregate amount of all increases (revolver and term) made pursuant to this subsection (b) shall not exceed Twenty-Five Million Dollars ($25,000,000) (the “Aggregate Increase Amount”). Each such request for an increase shall be in an amount of at least Five Million Dollars ($5,000,000), increased by increments of One Million Dollars ($1,000,000), and may be made by either (1) increasing, for one or more Lenders, with their prior written consent, their respective Revolving Credit Commitments, (2) adding a new commitment for one or more Lenders, with their prior written consent, with respect to the Additional Term Loan Facility, or (3) including one or more Additional Lenders, each with a new commitment (in a minimum amount of at least Five Million Dollars ($5,000,000)) under the Revolving Credit Commitment or the Additional Term Loan Facility, as a party to this Agreement (each an “Additional Commitment” and, collectively, the “Additional Commitments”). For clarification purposes, nothing contained in this Section 2.10(b) shall be construed as a commitment by any Lender to make any Additional Commitment and any such commitment by a Lender shall be at such Lender’s sole and absolute discretion.

(ii) During the Commitment Increase Period, all of the Lenders agree that the Administrative Agent, in its sole discretion, may permit one or more Additional Commitments upon satisfaction of the following requirements: (A) each Additional Lender, if any, shall execute an Additional Lender Assumption Agreement, (B) the Administrative Agent shall provide to the Borrower and each Lender a revised Schedule 1 to this Agreement, including revised Applicable Commitment Percentages for each of the Lenders, if appropriate, at least three Business Days prior to the date of the effectiveness of such Additional Commitments (each an “Additional Lender Assumption Effective Date”), and (C) the Borrower shall execute and deliver to the Administrative Agent and the applicable Lenders such appropriate replacement or additional Revolving Credit Notes or Term Notes as shall be required by the Administrative Agent (if Notes have been requested by such Lender or Lenders). The Lenders hereby authorize the Administrative Agent to execute each Additional Lender Assumption Agreement on behalf of the Lenders.

 

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(iii) On each Additional Lender Assumption Effective Date with respect to the Specific Commitment being increased, as appropriate, the Lenders shall make adjustments among themselves with respect to the Loans then outstanding and amounts of principal, interest, commitment fees and other amounts paid or payable with respect thereto as shall be necessary, in the opinion of the Administrative Agent, in order to reallocate among the applicable Lenders such outstanding amounts, based on the revised Applicable Commitment Percentages and to otherwise carry out fully the intent and terms of this subsection (b) (and the Borrower shall pay to the applicable Lenders any amounts that would be payable pursuant to Section 3.3 hereof if such adjustments among the applicable Lenders would cause a prepayment of one or more Eurodollar Loans). In connection therewith, it is understood and agreed that the Maximum Amount of any Lender will not be increased (or decreased except pursuant to subsection (a) above) without the prior written consent of such Lender. The Borrower shall not request any increase in the Total Commitment Amount pursuant to this subsection (b) if a Default or an Event of Default shall then exist, or, after giving pro forma effect to any such increase, would exist. At the time of any such increase, at the request of the Administrative Agent, the Credit Parties and the Lenders shall enter into an appropriate amendment to evidence such increase and to address related provisions as deemed necessary or appropriate by the Administrative Agent. Upon each increase of the Revolving Amount or addition of the Additional Term Loan Facility, the Total Commitment Amount shall be increased by the same amount.

(c) Additional Term Loan Facility.

(i) The Additional Term Loan Facility (A) shall rank pari passu in right of payment with the Revolving Loans and the Term Loan, (B) shall not mature earlier than the last day of the Commitment Period (but may have amortization prior to such date), and (C) shall be treated substantially the same as (and in any event no more favorably than) the Revolving Loans and the Term Loan, including, without limitation, similar amortization and interest for the Additional Term Loan Facility.

(ii) The Additional Term Loan Facility may be added hereunder pursuant to an amendment or restatement (the “Additional Term Loan Facility Amendment”) of this Agreement and, as appropriate, the other Loan Documents, executed by the Borrower, each Lender providing a commitment with respect to the Additional Term Loan Facility, each Additional Lender providing a commitment with respect to the Additional Term Loan Facility, and the Administrative Agent. Notwithstanding anything herein to the contrary, the Additional Term Loan Facility Amendment may, without the consent of any other Lenders, effect such amendments to this Agreement and the other Loan Documents as may be necessary or appropriate, in the reasonable opinion of the Administrative Agent, to effect the provisions of Section 2.10(b) and (c) hereof (including, without limitation, amendments to the definitions in this Agreement and Section 9.8 hereof for the purpose of treating such Additional Term Loan Facility pari passu with the other Loans).

 

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Section 2.11. Computation of Interest and Fees. With the exception of Base Rate Loans, interest on Loans, Letter of Credit fees, Related Expenses and commitment and other fees and charges hereunder shall be computed on the basis of a year having three hundred sixty (360) days and calculated for the actual number of days elapsed. With respect to Base Rate Loans, interest shall be computed on the basis of a year having three hundred sixty-five (365) days or three hundred sixty-six (366) days, as the case may be, and calculated for the actual number of days elapsed.

Section 2.12. Mandatory Payments.

(a) Revolving Credit Exposure. If, at any time, the Revolving Credit Exposure shall exceed the Revolving Credit Commitment, the Borrower shall, as promptly as practicable, but in no event later than the next Business Day, pay an aggregate principal amount of the Revolving Loans sufficient to bring the Revolving Credit Exposure within the Revolving Credit Commitment.

(b) Swing Line Exposure. If, at any time, the Swing Line Exposure shall exceed the Swing Line Commitment, the Borrower shall, as promptly as practicable, but in no event later than the next Business Day, pay an aggregate principal amount of the Swing Loans sufficient to bring the Swing Line Exposure within the Swing Line Commitment.

(c) Mandatory Prepayments. The Borrower shall, until the Term Loan and the Additional Term Loan Facility (if any) are paid in full, make Mandatory Prepayments (each a “Mandatory Prepayment”) in accordance with the following provisions:

(i) Sale of Assets. Upon any Non-Exempt Asset Sale, the Borrower shall make a Mandatory Prepayment, on the date of such Non-Exempt Asset Sale, in an amount equal to one hundred percent (100%) of the proceeds of such Non-Exempt Asset Sale (net of amounts required to pay taxes and reasonable costs, fees and expenses applicable to such Non-Exempt Asset Sale).

(ii) Material Recovery Event. Within ten (10) Business Days after the occurrence of a Material Recovery Event, the Borrower shall furnish to the Administrative Agent written notice thereof. Within thirty (30) days after such Material Recovery Event, the Borrower shall notify the Administrative Agent of the Borrower’s determination as to whether or not to replace, rebuild or restore the affected property (a “Material Recovery Determination Notice”). If the Borrower decides not to replace, rebuild or restore such property, or if the Borrower has not delivered the Material Recovery Determination Notice within thirty (30) days after such Material Recovery Event, then the net proceeds of insurance paid in connection with such Material Recovery Event, when received, shall be paid to the Administrative Agent as a Mandatory Prepayment. If the Borrower decides to replace, rebuild or restore such property, then any such replacement, rebuilding or restoration must be (A) commenced within six (6) months of the date of the Material Recovery Event, and (B) substantially completed within twelve (12) months of such commencement date or such longer period of time necessary to complete the work with reasonable diligence and approved in writing by the

 

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Administrative Agent, in its reasonable discretion, with such casualty insurance proceeds and other funds available to the appropriate Companies for replacement, rebuilding or restoration of such property. Any amounts of such net insurance proceeds in connection with such Material Recovery Event not applied to the costs of replacement or restoration shall be applied as a Mandatory Prepayment.

(iii) Additional Indebtedness. If, at any time, any of the Companies shall incur Indebtedness (other than Indebtedness permitted pursuant to Section 5.8 hereof), which Indebtedness shall not be incurred without the prior written consent of the Administrative Agent and the Required Lenders, the Borrower shall make a Mandatory Prepayment, on the date that such Indebtedness is incurred, in an amount equal to one hundred percent (100%) of the net cash proceeds of such Indebtedness, net of costs and expenses related thereto.

(d) Application of Mandatory Prepayments

(i) Involving a Company Prior to an Event of Default. So long as no Event of Default shall have occurred, each Mandatory Prepayment required to be made pursuant to subsection (c) above shall be applied (A) first, on a pro rata basis among: (1) the Term Loan, and (2) the Additional Term Loan Facility, until paid in full, and (B) second, to any outstanding Revolving Loans.

(ii) Involving a Company After an Event of Default. If a Mandatory Prepayment is required to be made pursuant to subsection (c) above at the time that an Event of Default shall have occurred, then such Mandatory Prepayment shall be paid by the Borrower to the Administrative Agent to be applied to the following, on a pro rata basis among: (A) the Revolving Amount (with payments to be made in the following order: Revolving Loans, Swing Loans, and to be held by the Administrative Agent in a special account as security for any Letter of Credit Exposure pursuant to subsection (iii) hereof), (B) the unpaid principal balance of the Term Loan, and (C) the unpaid principal balance of any Additional Term Loan Facility. Unless otherwise agreed by the Required Revolving Lenders, the Revolving Credit Commitment shall be permanently reduced by the amount of such Mandatory Prepayment allocated thereto, whether or not there shall be any Credit Exposure thereunder; provided that, if there shall be no Credit Exposure under any Specific Commitment, the then remaining Mandatory Prepayment shall be paid to the other Specific Commitments.

(iii) Involving Letters of Credit. Any amounts to be distributed for application to a Revolving Lender’s liabilities with respect to any Letter of Credit Exposure as a result of a Mandatory Prepayment shall be held by the Administrative Agent in an interest bearing trust account (the “Special Trust Account”) as collateral security for such liabilities until a drawing on any Letter of Credit, at which time such amounts, together with interest accrued thereon, shall be released by the Administrative Agent and applied to such liabilities. If any such Letter of Credit shall expire without having been drawn upon in full, the amounts held in the Special Trust Account with respect to the undrawn portion of such Letter of Credit, together with interest accrued thereon, shall be applied by the Administrative Agent in accordance with the provisions of subsections (i) and (ii) above.

 

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(e) Mandatory Payments Generally. Unless otherwise designated by the Borrower, each Mandatory Prepayment made with respect to a Specific Commitment pursuant to subsection (a) or (c) above shall be applied in the following order: (i) first, to the outstanding Base Rate Loans, and (ii) second, to the outstanding Eurodollar Loans, provided that, in each case, if the outstanding principal amount of any Eurodollar Loan shall be reduced to an amount less than the minimum amount set forth in Section 2.6(d) hereof as a result of such prepayment, then such Eurodollar Loan shall be converted into a Base Rate Loan on the date of such prepayment. Any prepayment of a Eurodollar Loan or Swing Loan pursuant to this Section 2.12 shall be subject to the prepayment provisions set forth in Article III hereof. Each Mandatory Prepayment made with regard to the Term Loan and the Additional Term Loan Facility (if any) shall be applied to the payments of principal in the inverse order of their respective maturities. Anything to the contrary herein notwithstanding, in the event that a Mandatory Prepayment is required to be made after the Closing Date but prior to the Initial Funding Date, such Mandatory Prepayment shall result in a permanent reduction of the Term Loan Commitment instead of a payment of principal. For the avoidance of doubt, any amounts paid to the Borrower in settlement of (or as a judgment rendered in favor of the Borrower in connection with) pending litigation concerning the non-payment by Verizon Wireless of the Borrower’s inter-carrier compensation charges will not be subject to any mandatory prepayment or sweep requirements.

Section 2.13. Swap Obligations Keepwell Provision. The Borrower, to the extent that it is an “eligible contract participant” as defined in the Commodity Exchange Act, hereby absolutely, unconditionally and irrevocably undertakes to provide such funds or other support as may be needed from time to time by each other Credit Party in order for such Credit Party to honor its obligations under the Loan Documents in respect of the Swap Obligations. The obligations of the Borrower under this Section 2.13 shall remain in full force and effect until all Secured Obligations are paid in full. The Borrower intends that this Section 2.13 constitute, and this Section 2.13 shall be deemed to constitute, a “keepwell, support, or other agreement” for the benefit of each other Credit Party for all purposes of Section 1a(18)(A)(v)(II) of the Commodity Exchange Act.

ARTICLE III. ADDITIONAL PROVISIONS RELATING TO

EURODOLLAR LOANS; INCREASED CAPITAL; TAXES

Section 3.1. Requirements of Law.

(a) If, after the Closing Date, (i) the adoption of or any change in any Requirement of Law or in the interpretation or application thereof by a Governmental Authority, or (ii) the compliance by any Lender with any request or directive (whether or not having the force of law) from any central bank or other Governmental Authority:

(A) shall subject any Lender to any Taxes (other than (1) Indemnified Taxes, (2) Taxes described in subparts (b) through (d) of the definition of Excluded Taxes and (3) Connection Income Taxes) with respect to this Agreement, any Letter of Credit or any Eurodollar Loan made by it;

 

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(B) shall impose, modify or hold applicable any reserve, special deposit, insurance charge, compulsory loan or similar requirement against assets held by, deposits or other liabilities in or for the account of, advances, loans or other extensions of credit by, or any other acquisition of funds by, any office of such Lender that is not otherwise included in the determination of the Eurodollar Rate; or

(C) shall impose on such Lender any other condition;

and the result of any of the foregoing is to increase the cost to such Lender of making, converting into, continuing or maintaining Eurodollar Loans or issuing or participating in Letters of Credit, or to reduce any amount receivable hereunder in respect thereof, then, in any such case, the Borrower shall pay to such Lender, promptly after receipt of a written request therefor, any additional amounts necessary to compensate such Lender for such increased cost or reduced amount receivable. If any Lender becomes entitled to claim any additional amounts pursuant to this subsection (a), such Lender shall promptly notify the Borrower (with a copy to the Administrative Agent) of the event with reasonable detail by reason of which it has become so entitled.

(b) If any Lender shall have determined that, after the Closing Date, the adoption of or any change in any Requirement of Law regarding capital adequacy or liquidity, or liquidity requirements, or in the interpretation or application thereof by a Governmental Authority or compliance by such Lender or any corporation controlling such Lender with any request or directive regarding capital adequacy or liquidity (whether or not having the force of law) from any Governmental Authority shall have the effect of reducing the rate of return on such Lender’s or such corporation’s capital as a consequence of its obligations hereunder, or under or in respect of any Letter of Credit, to a level below that which such Lender or such corporation could have achieved but for such adoption, change or compliance (taking into consideration the policies of such Lender or such corporation with respect to capital adequacy and liquidity), then from time to time, upon submission by such Lender to the Borrower (with a copy to the Administrative Agent) of a written request therefor (which shall include the method for calculating such amount and reasonable detail with respect to such calculation), the Borrower shall promptly pay or cause to be paid to such Lender such additional amount or amounts as will compensate such Lender or such corporation for such reduction.

(c) For purposes of this Section 3.1 and Section 3.5(a) hereof, the Dodd-Frank Act, any requests, rules, guidelines or directives concerning capital adequacy promulgated by the Bank for International Settlements, or the Basel Committee on Banking Regulations and Supervisory Practices (or any successor or similar authority) under Basel III, and any rules, regulations, orders, requests, guidelines and directives adopted, promulgated or implemented in connection with any of the foregoing, regardless of the date adopted, issued, promulgated or implemented, are deemed to have been introduced and adopted after the Closing Date.

 

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(d) A certificate as to any additional amounts payable pursuant to this Section 3.1 together with a reasonably detailed calculation and description of such amounts contemplated by this Section 3.1, submitted by any Lender to the Borrower (with a copy to the Administrative Agent) shall be rebuttably presumptive evidence as to such additional amounts. In determining any such additional amounts, such Lender may use any method of averaging and attribution that it (in its reasonable credit judgment) shall deem applicable. The obligations of the Borrower pursuant to this Section 3.1 shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.

(e) Notwithstanding the foregoing, no Lender shall be entitled to any indemnification or reimbursement pursuant to this Section 3.1 to the extent such Lender has not made demand therefore (as set forth above) within one year after the occurrence of the event giving rise to such entitlement or, if later, such Lender having knowledge of such event.

Section 3.2. Taxes.

(a) All payments made by any Credit Party under any Loan Document shall be made free and clear of, and without deduction or withholding for any Taxes, except as required by applicable law. If any applicable law (as determined in the good faith discretion of an applicable withholding agent) requires the deduction or withholding of any Tax from any such payment by a withholding agent, then the applicable withholding agent shall be entitled to make such deduction or withholding and shall timely pay the full amount deducted or withheld to the relevant Governmental Authority in accordance with applicable law and, if such Tax is an Indemnified Tax, then the sum payable by the applicable Credit Party shall be increased as necessary so that after such deduction or withholding has been made (including such deductions and withholdings applicable to additional sums payable under this Section 3.2), the Administrative Agent or applicable Lender receives an amount equal to the sum it would have received had no such deduction or withholding been made. The Credit Parties shall timely pay to the relevant Governmental Authority in accordance with applicable law, or at the option of the Administrative Agent timely reimburse it for, Other Taxes.

(b) As promptly as possible after any payment of Taxes by any Credit Party to a Governmental Authority pursuant to this Section 3.2, such Credit Party shall deliver to the Administrative Agent the original or a certified copy of a receipt issued by such Governmental Authority evidencing such payment, a copy of the return reporting such payment, or other evidence of such payment reasonably satisfactory to the Administrative Agent. The Credit Parties shall indemnify the Administrative Agent and the appropriate Lenders promptly upon demand for the full amount of any Indemnified Taxes (including Indemnified Taxes imposed or asserted on or attributable to amounts payable under this Section 3.2) payable or paid by the Administrative Agent or such Lender or required to be withheld or deducted from a payment to the Administrative Agent or such Lender and any reasonable expenses arising therefrom or with respect thereto, whether or not such Indemnified Taxes were correctly or legally imposed or asserted by the relevant Governmental Authority. A certificate as to the amount of such payment or liability delivered to any Credit Party by a Lender (with a copy to the Administrative Agent), or by the Administrative Agent on its own behalf or on behalf of a Lender, shall be conclusive absent manifest error.

 

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(c) If any party determines, in its sole discretion exercised in good faith, that it has received a refund of any Taxes as to which it has been indemnified pursuant to this Section 3.2 (including by the payment of additional amounts pursuant to this Section 3.2), it shall pay to the indemnifying party an amount equal to such refund (but only to the extent of indemnity payments made under this Section 3.2 with respect to the Taxes giving rise to such refund), net of all out-of-pocket expenses (including Taxes) of such indemnified party and without interest (other than any interest paid by the relevant Governmental Authority with respect to such refund). Such indemnifying party, upon the request of such indemnified party, shall repay to such indemnified party the amount paid over pursuant to this subsection (c) (plus any penalties, interest or other charges imposed by the relevant Governmental Authority) in the event that such indemnified party is required to repay such refund to such Governmental Authority. Notwithstanding anything to the contrary in this subsection (c), in no event will the indemnified party be required to pay any amount to an indemnifying party pursuant to this subsection (c) the payment of which would place the indemnified party in a less favorable net after-Tax position than the indemnified party would have been in if the Tax subject to indemnification and giving rise to such refund had not been deducted, withheld or otherwise imposed and the indemnification payments or additional amounts with respect to such Tax had never been paid. This paragraph shall not be construed to require any indemnified party to make available its Tax returns (or any other information relating to its Taxes that it deems confidential) to the indemnifying party or any other Person.

(d) Any Lender that is entitled to an exemption from or reduction of withholding Tax with respect to payments made under any Loan Document shall deliver to the Borrower and the Administrative Agent, at the time or times reasonably requested by the Borrower or the Administrative Agent, such properly completed and executed documentation reasonably requested by the Borrower or the Administrative Agent as will permit such payments to be made without withholding or at a reduced rate of withholding. In addition, any Lender, if reasonably requested by the Borrower or the Administrative Agent, shall deliver such other documentation prescribed by applicable law or reasonably requested by the Borrower or the Administrative Agent as will enable the Borrower or the Administrative Agent to determine whether or not such Lender is subject to backup withholding or information reporting requirements. Notwithstanding anything to the contrary in the preceding two sentences, the completion, execution and submission of such documentation (other than such documentation set forth in Section 3.2(e)(ii)(A) and (ii)(B) and Section 3.2(f) below) shall not be required if such completion, execution or submission would subject such Lender to any material unreimbursed cost or expense or would materially prejudice the legal or commercial position of such Lender.

(e) Without limiting the generality of the foregoing, in the event that the Borrower is a U.S. Person:

(i) any Lender that is a U.S. Person shall deliver to the Borrower and the Administrative Agent on or prior to the date on which such Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed originals of IRS Form W-9 certifying that such Lender is exempt from U.S. federal backup withholding tax;

 

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(ii) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), whichever of the following is applicable:

(A) in the case of a Foreign Lender claiming the benefits of an income tax treaty to which the U.S. is a party (1) with respect to payments of interest under any Loan Document, executed originals of IRS Form W-8BEN-E establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “interest” article of such tax treaty, and (2) with respect to any other applicable payments under any Loan Document, IRS Form W-8BEN-E establishing an exemption from, or reduction of, U.S. federal withholding Tax pursuant to the “business profits” or “other income” article of such tax treaty;

(B) in the case of a Foreign Lender claiming that its extension of credit will generate U.S. effectively connected income, executed originals of IRS Form W-8ECI;

(C) in the case of a Foreign Lender claiming the benefits of the exemption for portfolio interest under Section 881(c) of the Code, (1) a certificate substantially in the form of Exhibit G-1 to the effect that such Foreign Lender is not a “bank” within the meaning of Section 881(c)(3)(A) of the Code, a “10 percent shareholder” of Borrower within the meaning of Section 881(c)(3)(B) of the Code, or a “controlled foreign corporation” described in Section 881(c)(3)(C) of the Code (a “U.S. Tax Compliance Certificate”), and (2) executed originals of IRS Form W-8BEN-E; or

(D) to the extent a Foreign Lender is not the Beneficial Owner, executed originals of IRS Form W-8IMY (latest version), accompanied by IRS Form W-8ECI (latest version), IRS Form W-8BEN-E, a U.S. Tax Compliance Certificate substantially in the form of Exhibit G-2 or Exhibit G -3, IRS Form W 9, and/or other certification documents from each Beneficial Owner, as applicable; provided that if the Foreign Lender is a partnership and one or more direct or indirect partners of such Foreign Lender are claiming the portfolio interest exemption, such Foreign Lender may provide a U.S. Tax Compliance Certificate substantially in the form of Exhibit G -4 on behalf of each such direct and indirect partner; and

(iii) any Foreign Lender shall, to the extent it is legally entitled to do so, deliver to the Borrower and the Administrative Agent (in such number of copies as shall be requested by the recipient) on or prior to the date on which such Foreign Lender becomes a Lender under this Agreement (and from time to time thereafter upon the reasonable request of the Borrower or the Administrative Agent), executed originals of

 

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any other form prescribed by applicable law as a basis for claiming exemption from or a reduction in U.S. federal withholding Tax, duly completed, together with such supplementary documentation as may be prescribed by applicable law to permit the Borrower or the Administrative Agent to determine the withholding or deduction required to be made.

(f) If a payment made to a Lender under any Loan Document would be subject to U.S. federal withholding Tax imposed by FATCA if such Lender were to fail to comply with the applicable reporting requirements of FATCA (including those contained in Section 1471(b) or 1472(b) of the Code, as applicable), such Lender shall deliver to the Borrower and the Administrative Agent at the time or times prescribed by law and at such time or times reasonably requested by the Borrower or the Administrative Agent such documentation prescribed by applicable law (including as prescribed by Section 1471(b)(3)(C)(i) of the Code) and such additional documentation reasonably requested by the Borrower or the Administrative Agent as may be necessary for the Borrower and the Administrative Agent to comply with their obligations under FATCA and to determine that such Lender has complied with such Lender’s obligations under FATCA or to determine the amount to deduct and withhold from such payment. Solely for purposes of this subsection (f), “FATCA” shall include any amendments made to FATCA after the date of this Agreement. Each Lender agrees that if any form or certification it previously delivered expires or becomes obsolete or inaccurate in any respect, it shall update such form or certification or promptly notify the Borrower and the Administrative Agent in writing of its legal inability to do so.

(g) For the purposes of this Section 3.2, (i) the term “Lender” includes any Issuing Lender, and (ii) the term “applicable law” includes FATCA.

(h) The agreements in this Section 3.2 shall survive the termination of the Loan Documents and the payment of the Loans and all other amounts payable hereunder.

Section 3.3. Funding Losses. The Borrower agrees to indemnify each Lender, promptly after receipt of a written request therefor, and to hold each Lender harmless from, any loss or expense that such Lender may sustain or incur as a consequence of (a) default by the Borrower in making a borrowing of, conversion into or continuation of Eurodollar Loans after the Borrower has given a notice (including a written or verbal notice that is subsequently revoked) requesting the same in accordance with the provisions of this Agreement, (b) default by the Borrower in making any prepayment of or conversion from Eurodollar Loans after the Borrower has given a notice (including a written or verbal notice that is subsequently revoked) thereof in accordance with the provisions of this Agreement, (c) the making of a prepayment of a Eurodollar Loan on a day that is not the last day of an Interest Period applicable thereto, or (d) any conversion of a Eurodollar Loan to a Base Rate Loan on a day that is not the last day of an Interest Period applicable thereto. Such indemnification shall be in an amount equal to the excess, if any, of (i) the amount of interest that would have accrued on the amounts so prepaid, or not so borrowed, converted or continued, for the period from the date of such prepayment or of such failure to borrow, convert or continue to the last day of such Interest Period (or, in the case of a failure to borrow, convert or continue, the Interest Period that would have commenced on the date of such failure) or the applicable Swing Loan Maturity Date in each case at the applicable rate of interest

 

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for such Loans provided for herein (excluding, however, the Applicable Margin included therein, if any) over (ii) the amount of interest (as reasonably determined by such Lender) that would have accrued to such Lender on such amount by placing such amount on deposit for a comparable period with leading banks in the appropriate London interbank market, along with any administration fee charged by such Lender. A certificate as to any amounts payable pursuant to this Section 3.3 submitted to the Borrower (with a copy to the Administrative Agent) by any Lender, together with a reasonably detailed calculation and description of such amounts, shall be rebuttably presumptive evidence as to such amounts. The obligations of the Borrower pursuant to this Section 3.3 shall survive the termination of this Agreement and the payment of the Loans and all other amounts payable hereunder.

Section 3.4. Change of Lending Office. Each Lender agrees that, upon the occurrence of any event giving rise to the operation of Section 3.1 or 3.2(a) hereof with respect to such Lender, it will, if requested by the Borrower, use reasonable efforts (subject to overall policy considerations of such Lender) to designate another lending office (or an affiliate of such Lender, if practical for such Lender) for any Loans affected by such event with the object of avoiding the consequences of such event; provided, that such designation is made on terms that, in the sole judgment of such Lender, cause such Lender and its lending office(s) to suffer no economic, legal or regulatory disadvantage; and provided, further, that nothing in this Section 3.4 shall affect or postpone any of the obligations of the Borrower or the rights of any Lender pursuant to Section 3.1 or 3.2(a) hereof.

Section 3.5. Eurodollar Rate Lending Unlawful; Inability to Determine Rate.

(a) If any Lender shall determine (which determination shall, upon notice thereof to the Borrower and the Administrative Agent, be conclusive and binding on the Borrower) that, after the Closing Date, (i) the introduction of or any change in or in the interpretation of any law makes it unlawful, or (ii) any Governmental Authority asserts that it is unlawful, for such Lender to make or continue any Loan as, or to convert (if permitted pursuant to this Agreement) any Loan into, a Eurodollar Loan, the obligations of such Lender to make, continue or convert into any such Eurodollar Loan shall, upon such determination, be suspended until such Lender shall notify the Administrative Agent that the circumstances causing such suspension no longer exist, and all outstanding Eurodollar Loans payable to such Lender shall automatically convert (if conversion is permitted under this Agreement) into a Base Rate Loan, or be repaid (if no conversion is permitted) at the end of the then current Interest Periods with respect thereto or sooner, if required by law or such assertion.

(b) If the Administrative Agent or the Required Lenders determine that for any reason adequate and reasonable means do not exist for determining the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Loan, or that the Eurodollar Rate for any requested Interest Period with respect to a proposed Eurodollar Loan does not adequately and fairly reflect the cost to the Lenders of funding such Loan, the Administrative Agent will promptly so notify the Borrower and each Lender. Thereafter, the obligation of the Lenders to make or maintain such Eurodollar Loan shall be suspended until the Administrative Agent (upon the instruction of the Required Lenders) revokes such notice. Upon receipt of such notice, the Borrower may revoke any pending request for a borrowing of, conversion to or continuation of such Eurodollar Loan or, failing that, will be deemed to have converted such request into a request for a borrowing of a Base Rate Loan in the amount specified therein.

 

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Section 3.6. Replacement of Lenders. The Borrower shall be permitted to replace any Lender that requests reimbursement for amounts owing pursuant to Section 3.1 or 3.2(a) hereof, or asserts its inability to make a Eurodollar Loan pursuant to Section 3.5 hereof; provided that (a) such replacement does not conflict with any Requirement of Law, (b) no Default or Event of Default shall have occurred and be continuing at the time of such replacement, (c) prior to any such replacement, such Lender shall have taken no action under Section 3.4 hereof so as to eliminate the continued need for payment of amounts owing pursuant to Section 3.1 or 3.2(a) hereof or, if it has taken any action, such request has still been made, (d) the replacement financial institution shall purchase, at par, all Loans and other amounts owing to such replaced Lender on or prior to the date of replacement and assume all commitments and obligations of such replaced Lender, (e) the Borrower shall be liable to such replaced Lender under Section 3.3 hereof if any Eurodollar Loan owing to such replaced Lender shall be purchased other than on the last day of the Interest Period relating thereto, (f) the replacement Lender, if not already a Lender, shall be satisfactory to the Administrative Agent, (g) the replaced Lender shall be obligated to make such replacement in accordance with the provisions of Section 11.10 hereof (provided that the Borrower (or the succeeding Lender, if such Lender is willing) shall be obligated to pay the assignment fee referred to therein), and (h) until such time as such replacement shall be consummated, the Borrower shall pay all additional amounts (if any) required pursuant to Section 3.1 or 3.2(a) hereof, as the case may be; provided that a Lender shall not be required to make any such assignment if, prior thereto, as a result of a waiver by such Lender or otherwise, the circumstances entitling the Borrower to replace such Lender cease to apply.

Section 3.7. Discretion of Lenders as to Manner of Funding. Notwithstanding any provision of this Agreement to the contrary, each Lender shall be entitled to fund and maintain its funding of all or any part of such Lender’s Loans in any manner such Lender deems to be appropriate; it being understood, however, that for the purposes of this Agreement all determinations hereunder shall be made as if such Lender had actually funded and maintained each Eurodollar Loan during the applicable Interest Period for such Loan through the purchase of deposits having a maturity corresponding to such Interest Period and bearing an interest rate equal to the Eurodollar Rate for such Interest Period.

ARTICLE IV. CONDITIONS PRECEDENT

Section 4.1. Conditions to Each Credit Event. The obligation of the Lenders, the Issuing Lender and the Swing Line Lender to participate in any Credit Event shall be conditioned, in the case of each Credit Event, upon the following:

(a) all conditions precedent as listed in Sections 4.2 and 4.3 hereof required to be satisfied prior to the first Credit Event shall have been satisfied prior to or as of the first Credit Event;

 

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(b) the Borrower shall have submitted a Notice of Loan (or with respect to a Letter of Credit, complied with the provisions of Section 2.2(b)(ii) hereof) and otherwise complied with Section 2.6 hereof;

(c) no Default or Event of Default shall then exist or immediately after such Credit Event would exist; and

(d) each of the representations and warranties contained in Article VI hereof shall be true in all material respects as if made on and as of the date of such Credit Event, except to the extent that any thereof expressly relate to an earlier date.

Each request by the Borrower for a Credit Event shall be deemed to be a representation and warranty by the Borrower as of the date of such request as to the satisfaction of the conditions precedent specified in subsections (c) and (d) above.

Section 4.2. Conditions to Closing. The Borrower shall cause the following conditions to be satisfied on or prior to the Closing Date:

(a) Notes as Requested. The Borrower shall have executed and delivered to (i) each Revolving Lender requesting a Revolving Credit Note such Revolving Lender’s Revolving Credit Note, (ii) each Term Lender requesting a Term Note such Term Lender’s Term Note, and (iii) the Swing Line Lender the Swing Line Note, if requested by the Swing Line Lender.

(b) Guaranties of Payment. Each Guarantor of Payment shall have executed and delivered to the Administrative Agent a Guaranty of Payment, in form and substance satisfactory to the Administrative Agent.

(c) Security Agreements. CLEC and each Guarantor of Payment shall have executed and delivered to the Administrative Agent a Security Agreement and such other documents or instruments, as may be required by the Administrative Agent to create or perfect the Liens of the Administrative Agent in the assets of such Guarantor of Payment, all to be in form and substance satisfactory to the Administrative Agent.

(d) Pledge Agreements. The Borrower and each other Credit Party that has a Subsidiary shall have executed and delivered to the Administrative Agent, for the benefit of the Lenders, a Pledge Agreement, in form and substance satisfactory to the Administrative Agent, with respect to the Pledged Securities.

(e) Intellectual Property Security Agreements. Each Credit Party that owns federally registered intellectual property shall have executed and delivered to the Administrative Agent, for the benefit of the Lenders, an Intellectual Property Security Agreement, in form and substance satisfactory to the Administrative Agent.

(f) Lien Searches. With respect to the property owned or leased by each Credit Party, and any other property securing the Obligations, the Borrower shall have caused to be delivered to the Administrative Agent (i) the results of Uniform Commercial Code lien searches,

 

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reasonably satisfactory to the Administrative Agent and the Lenders, (ii) the results of federal and state tax lien and judicial lien searches, reasonably satisfactory to the Administrative Agent and the Lenders, and (iii) Uniform Commercial Code termination statements reflecting termination of all U.C.C. Financing Statements previously filed by any Person and not expressly permitted pursuant to Section 5.9 hereof.

(g) Officer’s Certificate, Resolutions, Organizational Documents. The Borrower shall have delivered to the Administrative Agent an officer’s certificate (or comparable domestic or foreign documents) certifying the names of the officers of each Credit Party authorized to sign the Loan Documents, together with the true signatures of such officers and certified copies of (i) the resolutions of the board of directors (or comparable domestic or foreign documents) of such Credit Party evidencing approval of the execution, delivery and performance of the Loan Documents and the execution and performance of other Related Writings to which such Credit Party is a party, and the consummation of the transactions contemplated thereby, and (ii) the Organizational Documents of such Credit Party.

(h) Good Standing and Full Force and Effect Certificates. The Borrower shall have delivered to the Administrative Agent a good standing certificate or full force and effect certificate (or comparable document, if neither certificate is available in the applicable jurisdiction), as the case may be, for each Credit Party, issued on or about the Closing Date by the Secretary of State (or by a comparable official, if such certificates are not issued by the Secretary of State in the applicable jurisdiction) in the state or states where such Credit Party is incorporated or formed.

(i) Legal Opinion. The Borrower shall have delivered to the Administrative Agent an opinion of counsel for the Borrower and each other Credit Party, in form and substance reasonably satisfactory to the Administrative Agent and the Lenders.

(j) Financial Reports. The Borrower shall have delivered to the Administrative Agent (i) internally prepared financial statements of the Borrower for the fiscal quarter ended June 30, 2016, and (ii) audited financial statements of the Borrower for the fiscal years ended December 31, 2015, December 31, 2014 and December 31, 2013; in each case, prepared on a Consolidated basis, in form and substance reasonably satisfactory to the Administrative Agent, and (iii) all management letters and reports prepared by independent public accountants for the fiscal years ended December 31, 2015, December 31, 2014 and December 31, 2013.

(k) Pro-Forma Projections. The Borrower shall have delivered to the Administrative Agent annual pro-forma projections of financial statements (which report shall include balance sheets and statements of income (loss) and cash-flow) of the Borrower for the fiscal year ending December 31, 2016, prepared on a Consolidated basis, in form and substance reasonably satisfactory to the Administrative Agent.

(l) Quality of Earnings Report. The Borrower shall have delivered to the Administrative Agent a copy of a quality of earnings report, prepared in form and substance reasonably satisfactory to the Administrative Agent.

 

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(m) Extension of Preferred Equity Redemption Date. The Borrower shall have delivered to the Administrative Agent and the Lenders evidence, in form and substance reasonably satisfactory to the Administrative Agent, of the extension of the redemption date with respect to the existing preferred equity to a date that is no earlier than December 31, 2020, with the first payment date thereon to occur no earlier than January 1, 2021, and with such payment amount not to exceed the aggregate amount of Eight Million Dollars ($8,000,000).

(n) Advertising Permission Letter. The Borrower shall have delivered to the Administrative Agent an advertising permission letter, authorizing the Administrative Agent to publicize the transaction and specifically to use the name of the Borrower in connection with “tombstone” advertisements in one or more publications selected by the Administrative Agent.

(o) Administrative Agent Fee Letter and Other Fees. The Borrower shall have (i) paid to the Administrative Agent, for its sole account, the fees set forth in the Administrative Agent Fee Letter, (ii) paid to the Administrative Agent, for the benefit of the Lenders, the fees payable to the Lenders set forth in the Administrative Agent Fee Letter, and (iii) paid all reasonable and properly documented legal fees and expenses of the Administrative Agent in connection with the preparation and negotiation of the Loan Documents.

(p) Closing Certificate. The Borrower shall have delivered to the Administrative Agent and the Lenders an officer’s certificate certifying that, as of the Closing Date, (i) all conditions precedent set forth in Sections 4.1 and 4.2 have been satisfied, (ii) no Default or Event of Default exists or immediately after the first Credit Event will exist, and (iii) each of the representations and warranties contained in Article VI hereof are true and correct as of the Closing Date.

(q) No Material Adverse Change. No material adverse change, in the reasonable opinion of the Administrative Agent, shall have occurred in the financial condition, operations or prospects of the Companies, taken as a whole, since December 31, 2015.

(r) Miscellaneous. The Borrower shall have provided to the Administrative Agent and the Lenders such other items and shall have satisfied such other conditions as may be reasonably required by the Administrative Agent or the Lenders.

Section 4.3. Conditions to Initial Funding Date. The Borrower shall cause the following conditions to be satisfied on or prior to the Initial Funding Date. The obligation of the Lenders, the Issuing Lender and the Swing Line Lender to participate in the first Credit Event on the Initial Funding Date is subject to the Borrower satisfying each of the following conditions prior to or concurrently with the Initial Funding Date:

(a) Spin-Off Documents. The Borrower shall have provided to the Administrative Agent copies of the Spin-Off Documents, certified by a Financial Officer as true and complete, which documents shall be in form and substance reasonably satisfactory to the Administrative Agent, including evidence that the Spin-Off contemplated therein have been consummated, contemporaneously with Initial Funding Date, in accordance with the terms of the Spin-Off Agreement and in compliance with applicable law and regulatory approvals, including, without limitation, approval from existing suppliers of Republic Wireless whose approval is required by the terms and conditions of any applicable agreement between Republic Wireless and such existing supplier.

 

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(b) Pledged Securities. The Borrower and each other Credit Party that has a Subsidiary shall have (i) executed and delivered to the Administrative Agent, for the benefit of the Lenders, appropriate transfer powers for each of the Pledged Securities that are certificated, and (ii) delivered to the Administrative Agent, for the benefit of the Lenders, the Pledged Securities (to the extent such Pledged Securities are certificated).

(c) Insurance Certificates. The Borrower shall have delivered to the Administrative Agent certificates of insurance on ACORD 25 and 27 or 28 form and proof of endorsements satisfactory to the Administrative Agent and the Lenders, providing for adequate real property, personal property and liability insurance for each Company, with the Administrative Agent, on behalf of the Lenders, listed as lender’s loss payee and additional insured, as appropriate.

(d) Solvency Certificate. The Borrower shall have delivered to the Administrative Agent (i) a solvency certificate, in form and substance reasonably satisfactory to the Administrative Agent, certifying that, as of the Initial Funding Date, each of the Borrower and Republic Wireless is Solvent, in each case after giving effect to the Spin-Off, taking into account the fair value of its assets and any rights of contribution, and (ii) such other documentation relating to the solvency of the Borrower and Republic Wireless as is provided to any other third party in connection with the Spin-Off, or as otherwise may be reasonably required by the Administrative Agent.

(e) Transition Services Agreement. The Borrower shall have delivered to the Administrative Agent a Transition Services Agreement between the Borrower and Republic Wireless, in form and substance reasonably satisfactory to the Administrative Agent.

(f) Interim Indebtedness. The Borrower shall have delivered to the Administrative Agent an executed payoff letter with respect to the Interim Indebtedness, and shall have terminated any agreement executed in connection therewith, which termination shall be deemed to have occurred upon payment in full of all of the Interim Indebtedness outstanding thereunder and termination of the commitments established therein, taking into account the application of proceeds of any Loans made on the Initial Funding Date used to repay such Indebtedness.

(g) Interim Liens. The Borrower shall have caused to be delivered to the Administrative Agent Uniform Commercial Code termination statements reflecting termination of all U.C.C. Financing Statements previously filed to evidence the Interim Liens.

(h) Minimum EBITDA. The Borrower delivered to the Administrative Agent evidence, certified by a Financial Officer and evidenced by a quality of earnings report and in form and substance reasonably satisfactory to the Administrative Agent, that the Consolidated EBITDA, as determined for the most recently completed four fiscal quarters prior to the Initial Funding Date, is no less than Twenty-Million Dollars ($20,000,000), after giving pro forma effect to the Spin-Off.

 

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(i) Fees and Expenses. The Borrower shall have (i) paid to the Administrative Agent, any fees required to be paid to the Administrative Agent pursuant to the Administrative Agent Fee Letter, and (ii) paid all reasonable expenses of the Administrative Agent (including properly documented legal fees) in connection with the Credit Agreement and the other Loan Documents.

(j) Letter of Direction. The Borrower shall have delivered to the Administrative Agent a letter of direction authorizing the Administrative Agent, on behalf of the Lenders, to disburse the proceeds of the Loans, which letter of direction includes the authorization to transfer funds under this Agreement and the wire instructions that set forth the locations to which such funds shall be sent.

(k) Officer’s Certificate. The Borrower shall have delivered to the Administrative Agent and the Lenders an officer’s certificate certifying that, as of the Initial Funding Date, (i) all conditions precedent set forth in Sections 4.1, 4.2 (other than subsection (q) thereof) and 4.3 have been satisfied, (ii) no Default or Event of Default exists or immediately after the first Credit Event will exist, and (iii) each of the representations and warranties contained in Article VI hereof are true and correct as of the Initial Funding Date.

(l) Miscellaneous. The Borrower shall have provided to the Administrative Agent and the Lenders such other items and shall have satisfied such other conditions as may be reasonably required by the Administrative Agent or the Lenders.

Section 4.4. Post-Closing Conditions. On or before each of the dates specified in this Section 4.4 (unless a longer period is agreed to in writing by the Administrative Agent), the Borrowers shall satisfy each of the following items specified in the subsections below:

(a) Control Agreements. No later than sixty (60) days after the Initial Funding Date, the Borrower shall have delivered to the Administrative Agent an executed Control Agreement, in form and substance reasonably satisfactory to the Administrative Agent, for each Deposit Account and each Securities Account maintained by a Credit Party (other than (i) Excluded Accounts and (ii) Deposit Accounts and Securities Accounts where the Administrative Agent or any other Lender is depository bank or securities intermediary); provided that the Borrowers shall not be required to deliver a Control Agreement pursuant to this Section 4.4(a) if such Credit Party would not be required to deliver a Control Agreement for such Deposit Account pursuant to Section 5.21(c) hereof.

(b) Landlords’ Waivers. No later than sixty (60) days after the Initial Funding Date, the Borrower shall have delivered a Landlord’s Waiver, in form and substance satisfactory to the Administrative Agent and the Lenders, for each location of a Credit Party where any of the collateral securing any part of the Obligations is located, unless such location is owned by the Company that owns the collateral located there; provided that the Borrowers shall not be required to deliver a Landlord’s Waiver pursuant to this Section 4.4(b) if such Credit Party would not be required to deliver a Landlord’s Waiver pursuant to Section 5.21(d) hereof.

 

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ARTICLE V. COVENANTS

Section 5.1. Insurance. Each Company shall at all times maintain insurance upon its Inventory, Equipment and other personal and real property (including, if applicable, insurance required by the National Flood Insurance Reform Act of 1994) in such form, written by such companies, in such amounts, for such periods, and against such risks as is customarily maintained by comparable companies engaged in the same or similar lines of business, with provisions reasonably satisfactory to the Administrative Agent for, with respect to Credit Parties, payment of all losses thereunder to the Administrative Agent, for the benefit of the Lenders, and such Company as their interests may appear (with lender’s loss payable and additional insured endorsements, as appropriate, in favor of the Administrative Agent, for the benefit of the Lenders), and, if required by the Administrative Agent, the Borrower shall furnish copies of the policies to the Administrative Agent. Any such policies of insurance shall provide for no fewer than thirty (30) days prior written notice of cancellation to the Administrative Agent and the Lenders. Any sums received by the Administrative Agent, for the benefit of the Lenders, in payment of insurance losses, returns, or unearned premiums under the policies shall be applied as set forth in Section 2.12(b) and (c) hereof. The Administrative Agent is hereby authorized to act as attorney-in-fact for the Companies, after the occurrence and during the continuance of an Event of Default, in obtaining, adjusting, settling and canceling such insurance and indorsing any drafts. In the event of failure to provide such insurance as herein provided, the Administrative Agent may, at its option, provide such insurance and the Borrower shall pay to the Administrative Agent, upon demand, the cost thereof. Should the Borrower fail to pay such sum to the Administrative Agent upon demand, interest shall accrue thereon, from the date of demand until paid in full, at the Default Rate. Within ten (10) days of the Administrative Agent’s written request, the Borrower shall furnish to the Administrative Agent such information about the insurance of the Companies as the Administrative Agent may from time to time reasonably request, which information shall be prepared in form and detail reasonably satisfactory to the Administrative Agent and certified by a Financial Officer.

Section 5.2. Money Obligations. Each Company shall pay in full (a) prior in each case to the date when penalties would attach, all material taxes, assessments and governmental charges and levies (except only those so long as and to the extent that the same shall be contested in good faith by appropriate and timely proceedings and for which adequate provisions have been established in accordance with GAAP) for which it may be or become liable or to which any or all of its properties may be or become subject; (b) all of its material wage obligations to its employees in compliance with the Fair Labor Standards Act (29 U.S.C. §§ 206-207) or any comparable provisions (except for non-compliance being contested in good faith by appropriate and timely proceedings); and (c) all of its other material obligations calling for the payment of money (except only those so long as and to the extent that nonpayment of the same would not cause a Material Adverse Effect) before such payment becomes overdue.

 

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Section 5.3. Financial Statements and Information.

(a) Quarterly Financials. The Borrower shall deliver to the Administrative Agent and the Lenders, within forty-five (45) days after the end of the first three quarterly periods of each fiscal year of the Borrower (or, if earlier, within five days after the date on which the Borrower shall be required to submit its Form 10-Q), balance sheets of the Companies as of the end of such period and statements of income (loss), stockholders’ equity and cash flow for the quarter and fiscal year to date periods, all prepared on a Consolidated basis, in form and detail satisfactory to the Administrative Agent and the Lenders and certified by a Financial Officer; provided that delivery of a Form 10-Q filed by the Borrower with the SEC that includes the financial statements required hereunder shall be deemed to satisfy the requirements of this subsection (a).

(b) Annual Audit Report. The Borrower shall deliver to the Administrative Agent and the Lenders, within one hundred twenty (120) days after the end of each fiscal year of the Borrower (or, if earlier, within five days after the date on which the Borrower shall be required to submit its Form 10-K), an annual audit report of the Companies for that year prepared on a Consolidated basis, in form and detail reasonably satisfactory to the Administrative Agent and the Lenders and certified by an unqualified opinion of an independent public accountant reasonably satisfactory to the Administrative Agent, which report shall include balance sheets and statements of income (loss), stockholders’ equity and cash-flow for that period; provided that delivery of a Form 10-K filed by the Borrower with the SEC that includes the financial statements required hereunder shall be deemed to satisfy the requirements of this subsection (b).

(c) Compliance Certificate. The Borrower shall deliver a Compliance Certificate to the Administrative Agent and the Lenders, concurrently with the delivery (or deemed delivery) of the financial statements set forth in subsections (a) and (b) above.

(d) Management Reports. The Borrower shall deliver to the Administrative Agent and the Lenders, concurrently with the delivery of the quarterly and annual financial statements set forth in subsections (a) and (b) above, a copy of any management report, letter or similar writing furnished to the Companies by the accountants in respect of the systems, operations, financial condition or properties of the Companies.

(e) Pro-Forma Projections. The Borrower shall deliver to the Administrative Agent and the Lenders, within sixty (60) days after the end of each fiscal year of the Borrower, annual pro-forma projections of the Companies for the then current fiscal year, to be in form and detail reasonably satisfactory to the Administrative Agent.

(f) Financial Information of the Companies. The Borrower shall deliver to the Administrative Agent and the Lenders, promptly upon the written request of the Administrative Agent or any Lender, such other information about the financial condition, properties and operations of any Company as the Administrative Agent or such Lender may from time to time reasonably request, which information shall be submitted in form and detail reasonably satisfactory to the Administrative Agent or such Lender and certified by a Financial Officer of the Company or Companies in question.

Section 5.4. Financial Records. Each Company shall at all times maintain true and complete, in all material respects, records and books of account, including, without limiting the generality of the foregoing, appropriate provisions for possible losses and liabilities, all in accordance with GAAP, and at all reasonable times (during normal business hours and upon reasonable notice to such Company) permit the Administrative Agent or any Lender, or any representative of the Administrative Agent or such Lender, to examine such Company’s books and records and to make excerpts therefrom and transcripts thereof.

 

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Section 5.5. Franchises; Change in Business.

(a) Each Company (other than a Dormant Subsidiary) shall preserve and maintain at all times its existence, and its material rights and franchises necessary for its business, except as otherwise permitted pursuant to Section 5.12 hereof.

(b) No Company shall engage in any business if, as a result thereof, the general nature of the businesses of the Companies taken as a whole would be substantially changed from the general nature of the businesses the Companies are engaged in on the Closing Date, together with businesses reasonably similar or related thereto.

Section 5.6. ERISA Pension and Benefit Plan Compliance. No Company shall incur any material accumulated funding deficiency within the meaning of ERISA, or any material liability to the PBGC, established thereunder in connection with any ERISA Plan. The Borrower shall furnish to the Administrative Agent and the Lenders (a) as soon as possible and in any event within thirty (30) days after any Company knows or has reason to know that any material Reportable Event with respect to any ERISA Plan has occurred, a statement of a Financial Officer of such Company, setting forth details as to such Reportable Event and the action that such Company proposes to take with respect thereto, together with a copy of the notice of such Reportable Event given to the PBGC if a copy of such notice is available to such Company, and (b) promptly after receipt thereof, a copy of any material notice such Company, or any member of the Controlled Group may receive from the PBGC or the Internal Revenue Service with respect to any ERISA Plan administered by such Company; provided that this latter clause shall not apply to notices of general application promulgated by the PBGC or the Internal Revenue Service or to letters or notices with respect to an ERISA Plan, which do not threaten a material liability of any Company. The Borrower shall promptly notify the Administrative Agent of any material taxes assessed, proposed to be assessed or that the Borrower has reason to believe may be assessed against a Company by the Internal Revenue Service with respect to any ERISA Plan. As used in this Section 5.6 and in Section 6.11 hereof, “material” means the measure of a matter of significance that shall be determined as being an amount equal to five percent (5%) of Consolidated Net Worth. As soon as practicable, and in any event within twenty (20) days, after any Company shall become aware that an ERISA Event shall have occurred, such Company shall provide the Administrative Agent with notice of such ERISA Event with a certificate by a Financial Officer of such Company setting forth the details of the event and the action such Company or another Controlled Group member proposes to take with respect thereto. The Borrower shall, at the reasonable request of the Administrative Agent or any Lender, deliver or cause to be delivered to the Administrative Agent or such Lender, as the case may be, true and correct copies of any documents relating to the ERISA Plan, excluding any documents providing information regarding individual participants or the disclosure of which would reasonably be expected to violate applicable law.

 

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Section 5.7. Financial Covenants.

(a) Leverage Ratio. The Borrower shall not suffer or permit the Leverage Ratio, as of the most recently completed fiscal quarter of the Borrower, to exceed (i) 3.00 to 1.00 on the Closing Date through December 30, 2017, and (ii) 2.50 to 1.00 on December 31, 2017 and thereafter.

(b) Debt Service Coverage Ratio. The Borrower shall not suffer or permit the Debt Service Coverage Ratio, as of the end of any fiscal quarter of the Borrower, to be less than (i) 1.50 to 1.00 on the Closing Date through December 30, 2017, and (ii) 1.75 to 1.00 on December 31, 2017 and thereafter.

Section 5.8. Borrowing. No Company shall create, incur or have outstanding any Indebtedness of any kind; provided that this Section 5.8 shall not apply to the following:

(a) the Loans, the Letters of Credit and any other Indebtedness under this Agreement;

(b) any loans granted to, or Capitalized Lease Obligations entered into by, any Company for the purchase or lease of fixed assets (and refinancings of such loans or Capitalized Lease Obligations), which loans and Capitalized Lease Obligations shall only be secured by the fixed assets being purchased or leased, so long as the aggregate principal amount of all such loans and Capitalized Lease Obligations for all Companies shall not exceed One Million Five Hundred Thousand Dollars ($1,500,000) at any time outstanding;

(c) the Indebtedness existing on the Closing Date, in addition to the other Indebtedness permitted to be incurred pursuant to this Section 5.8, as set forth in Schedule 5.8 hereto (and any extension, renewal or refinancing thereof but only to the extent that the principal amount thereof does not increase after the Closing Date);

(d) loans to, and guaranties of Indebtedness of, a Company from a Company so long as each such Company is a Credit Party;

(e) loans to, and guaranties of Indebtedness of, a Company that is not a Credit Party from a Credit Party so long as such loans and guaranties are permitted under Section 5.11 hereof;

(f) Indebtedness under any Hedge Agreement, so long as such Hedge Agreement shall have been entered into in the ordinary course of business and not for speculative purposes;

(g) from the Closing Date to the Initial Funding Date, the Interim Indebtedness;

(h) unsecured Indebtedness resulting from the financing of insurance premiums (with the insurance company providing such financing) in the ordinary course of business and consistent with past business practices of such Company;

(i) other unsecured Indebtedness, in addition to the Indebtedness listed above, in an aggregate principal amount for all Companies not to exceed One Million Dollars ($1,000,000) at any time outstanding; and

 

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(j) guarantees by any Company of any of the Indebtedness permitted under (a) through (i) above.

Section 5.9. Liens. No Company shall create, assume or suffer to exist (upon the happening of a contingency or otherwise) any Lien upon any of its property or assets, whether now owned or hereafter acquired; provided that this Section 5.9 shall not apply to the following:

(a) Liens for taxes not yet due or that are being actively contested in good faith by appropriate proceedings and for which adequate reserves shall have been established in accordance with GAAP;

(b) other statutory Liens, including, without limitation, statutory Liens of landlords, carriers, warehousemen, utilities, mechanics, repairmen, workers and materialmen, incidental to the conduct of its business or the ownership of its property and assets that (i) were not incurred in connection with the incurring of Indebtedness or the obtaining of advances or credit, and (ii) do not in the aggregate materially detract from the value of its property or assets or materially impair the use thereof in the operation of its business;

(c) any Lien granted to the Administrative Agent, for the benefit of the Lenders (and affiliates thereof);

(d) the Liens existing on the Closing Date as set forth in Schedule 5.9 hereto and replacements, extensions, renewals, refundings or refinancings thereof, but only to the extent that the amount of debt secured thereby, and the amount and description of the property subject to such Liens, shall not be increased;

(e) Liens on deposits and purchase money Liens on fixed assets securing the loans and Capitalized Lease Obligations pursuant to Section 5.8(b) hereof, provided that such Lien is limited to the purchase price and only attaches to the property being acquired and deposits made in connection with such purchases;

(f) easements or other minor defects or irregularities in title of real property not interfering in any material respect with the use of such property in the business of any Company;

(g) any interest or title of, or Liens created by, a lessor under any leases or subleases entered into by any Company, as tenant, in the ordinary course of business;

(h) Liens arising solely by virtue of any statutory or common law provision relating to banker’s liens, rights of set-off or similar rights, including Liens of a collecting bank arising in the ordinary course of business under Section 4-208 of the U.C.C.;

(i) Liens solely on earnest money deposits made by the Borrower or any of its Subsidiaries in connection with any letter of intent or purchase agreement executed in connection with a transaction permitted by this Agreement;

 

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(j) Liens arising from precautionary U.C.C. Financing Statement filings regarding operating leases entered into by the Borrower or any of its Subsidiaries in the ordinary course of business;

(k) Liens securing the financing of insurance premiums (with the insurance company providing such financing) in the ordinary course of business and consistent with past business practices of such Company;

(l) pledges, deposits and other Liens securing liability for reimbursement or indemnification obligations of (including obligations in respect of letters of credit or bank guarantees for the benefit of) insurance carriers providing property, casualty, workmen’s compensation or liability insurance in an aggregate principal amount not to exceed Two Million Five Hundred Thousand Dollars ($2,500,000);

(m) an agreement to transfer any property in a disposition permitted under Section 5.12 hereof, to the extent that such an agreement may constitute a Lien, and Liens on earnest money deposits of cash or Cash Equivalents made by the Companies in connection with any Disposition permitted under Section 5.12 hereof;

(n) any encumbrance or restriction with respect to the equity interests of any joint venture or similar arrangement created after the Closing Date and pursuant to the joint venture or similar agreements with respect to such joint venture or similar arrangements permitted under this Agreement;

(o) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under Section 8.8 hereof;

(p) from the Closing Date to the Initial Funding Date, the Interim Liens; or

(q) other Liens, in addition to the Liens listed above, not incurred in connection with the incurring of Indebtedness, securing amounts, in the aggregate for all Companies, not to exceed Fifty Thousand Dollars ($50,000) at any time.

No Company shall enter into any contract or agreement (other than (i) a contract or agreement entered into in connection with the purchase or lease of fixed assets that prohibits Liens on such fixed assets, (ii) customary provisions in joint venture agreements restricting liens on joint venture assets (to the extent joint ventures are permitted by this Agreement), (iii) customary provisions in licenses of intellectual property that restrict the creation of liens entered into in the ordinary course of business, (iv) customary provisions restricting subletting or assignment of any lease governing a leasehold interest entered into in the ordinary course of business, and (v) customary restrictions and conditions contained in any agreement relating to the sale of any asset permitted under Section 5.12 hereof pending the consummation of such sale) that would prohibit the Administrative Agent or the Lenders from acquiring a security interest, mortgage or other Lien on, or a collateral assignment of, any of the property or assets of such Company.

 

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Section 5.10. Regulations T, U and X. No Company shall take any action that would result in any non-compliance of the Loans or Letters of Credit with Regulations T, U or X, or any other applicable regulation, of the Board of Governors of the Federal Reserve System.

Section 5.11. Investments, Loans and Guaranties. No Company shall (a) create, acquire or hold any Subsidiary, (b) make or hold any investment in any stocks, bonds or securities of any kind, (c) be or become a party to any joint venture or other partnership, (d) make or keep outstanding any advance or loan to any Person, or (e) be or become a Guarantor of any kind (other than a Guarantor of Payment under the Loan Documents); provided that this Section 5.11 shall not apply to the following:

(i) any endorsement of a check or other medium of payment for deposit or collection through normal banking channels or similar transaction in the normal course of business;

(ii) investments in Cash Equivalents;

(iii) Permitted Investments;

(iv) the holding of each of the Subsidiaries listed on Schedule 6.1 hereto, and the creation, acquisition and holding of and any investment in any new Subsidiary after the Closing Date so long as such new Subsidiary shall have been created, acquired or held, and investments made, in accordance with the terms and conditions of this Agreement;

(v) loans to, investments in and guaranties of the Indebtedness (permitted under Section 5.8(d) hereof) of, a Company from or by a Company so long as each such Company is a Credit Party;

(vi) any loans by a Company (that is not a Credit Party) to, investments by a Company (that is not a Credit Party) in, and guaranties by a Company (that is not a Credit Party) of Indebtedness of, another Company;

(vii) any advance or loan to an officer or employee of a Company as an advance on commissions, travel and other items in the ordinary course of business, so long as all such advances and loans (other than through use of company credit cards or similar purchase cards) from all Companies aggregate not more than the maximum principal sum of Five Hundred Thousand Dollars ($500,000) at any time outstanding;

(viii) any loans by a Credit Party to, investments by a Credit Party in, and guaranties by a Credit Party of Indebtedness of, a Company that is not a Credit Party, so long as the aggregate amount thereof shall not exceed Five Hundred Thousand Dollars ($500,000) at any time outstanding;

 

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(ix) the holdings of any stock or equity interest that remains following the sale or other disposition of a Company (or a majority interest therein) permitted by Section 5.12 hereof;

(x) guarantees that constitute Indebtedness permitted under Section 5.8 hereof;

(xi) accounts receivable arising and trade credit granted in the ordinary course of business and securities of account debtors received in satisfaction or partial satisfaction thereof from financially troubled account debtors or pursuant to any plan of reorganization or similar arrangement upon the bankruptcy or insolvency of such account debtors;

(xii) guaranties by a Company of operating leases (other than Capitalized Lease Obligations) or of other obligations that do not constitute Indebtedness, in each case entered into by a Company in the ordinary course of business; or

(xiii) investments in the nature of Acquisitions to the extent permitted under Section 5.13 hereof.

For purposes of this Section 5.11, the amount of any investment in equity interests shall be based upon the initial amount invested and shall not include any appreciation in value or return on such investment but shall take into account repayments, redemptions and return of capital.

Section 5.12. Merger and Sale of Assets. No Company shall merge, amalgamate or consolidate with any other Person, or sell, lease or transfer or otherwise dispose of any assets to any Person other than in the ordinary course of business, except that, if no Default or Event of Default shall then exist or immediately thereafter shall begin to exist:

(a) a Company (other than the Borrower) may merge with (i) the Borrower (provided that the Borrower shall be the continuing or surviving Person) or (ii) any one or more Guarantors of Payment (provided that at least one Guarantor of Payment shall be the continuing or surviving Person);

(b) a Company (other than the Borrower) may sell, lease, transfer or otherwise dispose of any of its assets to (i) the Borrower or (ii) any Guarantor of Payment;

(c) a Company (other than a Credit Party) may merge with or sell, lease, transfer or otherwise dispose of any of its assets to any other Company;

(d) a Company may sell, lease, transfer or otherwise dispose of any assets that are obsolete or no longer useful in such Company’s business;

(e) the Spin-Off and the transactions contemplated by the Spin-Off Documents may be effected;

 

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(f) Acquisitions may be effected in accordance with the provisions of Section 5.13 hereof; and

(g) a Company may terminate a lease of real or personal property that is not necessary for the ordinary course of business, could not reasonably be expected to have a Material Adverse Effect and does not result from a Company’s default.

Section 5.13. Acquisitions. No Company shall effect an Acquisition; provided that a Company may effect an Acquisition so long as such Acquisition meets all of the following requirements:

(a) in the case of an Acquisition that involves a merger, amalgamation or other combination including the Borrower, the Borrower shall be the surviving entity;

(b) in the case of an Acquisition that involves a merger, amalgamation or other combination including a Credit Party (other than the Borrower), a Credit Party shall be the surviving entity;

(c) the business to be acquired shall be similar to, or related to, or incidental to the lines of business of the Companies;

(d) the Companies shall be in full compliance with the Loan Documents both prior to and after giving pro forma effect to such Acquisition;

(e) no Default or Event of Default shall exist prior to or, after giving pro forma effect to such Acquisition, thereafter shall begin to exist;

(f) the Borrower shall have provided to the Administrative Agent, at least twenty (20) days prior to such Acquisition, historical financial statements of the target entity and a pro forma financial statement of the Companies accompanied by a certificate of a Financial Officer showing (i) the Leverage Ratio (A) before giving pro forma effect to the proposed Acquisition, is at least equal to the Leverage Ratio requirement then in effect pursuant to Section 5.7(a) hereof, and (B) after giving pro forma effect to such Acquisition, is at least 0.25 to 1.00 (i.e., one quarter (0.25) turn) below the Leverage Ratio requirement then in effect pursuant to Section 5.7(a) hereof, and (ii) pro forma compliance with the Debt Service Coverage Ratio pursuant to Section 5.7(b) hereof, both before and after giving effect to the proposed Acquisition; and

(g) such Acquisition is not actively opposed by the board of directors (or similar governing body) of the selling Persons or the Persons whose equity interests are to be acquired.

Section 5.14. Notice. The Borrower shall cause a Financial Officer to promptly notify the Administrative Agent and the Lenders, in writing, whenever any of the following shall occur:

(a) a Default or Event of Default has occurred hereunder or any representation or warranty made in Article VI hereof or elsewhere in this Agreement or in any Related Writing for any reason ceases in any material respect to be true and complete;

 

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(b) the Borrower learns of a litigation or proceeding against the Borrower before a court, administrative agency or arbitrator that would reasonably be expected to have a Material Adverse Effect; or

(c) the Borrower learns that there has occurred or begun to exist any event, condition or thing that is reasonably likely to have a Material Adverse Effect.

Section 5.15. Restricted Payments. No Company shall make or commit itself to make any Restricted Payment at any time, except that:

(a) on or after January 1, 2021, so long as no Default or Event of Default shall then exist or, after giving pro forma effect to such payment, thereafter shall begin to exist, the Borrowers may make Capital Distributions for the purpose of redeeming preferred equity, in an aggregate amount not to exceed Eight Million Dollars ($8,000,000);

(b) so long as no Default or Event of Default shall then exist or, after giving pro forma effect to such payment, thereafter shall begin to exist, the Borrower may make the Spin-Off Distribution;

(c) so long as no Default or Event of Default shall then exist or, after giving pro forma effect to such payment, thereafter shall begin to exist, the Borrower may make a one-time Capital Distribution on the Initial Funding Date, in addition to the Capital Distributions permitted pursuant to subsections (a) and (b) above, for the purpose of repurchasing shares of capital stock, in an aggregate amount not to exceed Two Million Five Hundred Thousand Dollars ($2,500,000);

(d) so long as no Default or Event of Default shall then exist or, after giving pro forma effect to such payment, thereafter shall begin to exist, the Borrower may pay customary and reasonable directors’ fees to directors who are not employees of a Company or an Affiliate, in an aggregate amount not to exceed Five Hundred Thousand Dollars ($500,000) in any fiscal year; and

(e) the Borrower may make Capital Distributions, in addition to the Capital Distributions permitted pursuant to subsections (a), (b), (c) and (d) above, in an aggregate amount not to exceed Five Million Dollars ($5,000,000), so long as (i) no Default or Event of Default shall then exist or, after giving pro forma effect to such payment, thereafter shall begin to exist and (ii) the Borrower shall be in compliance with the financial covenants set forth in Section 5.7 hereof, both prior to and after giving pro forma effect to such payment.

Section 5.16. Environmental Compliance. Each Company shall comply in all material respects with any and all Environmental Laws and Environmental Permits including, without limitation, all Environmental Laws in jurisdictions in which such Company owns or operates a facility or site, arranges for disposal or treatment of hazardous substances, solid waste or other wastes, accepts for transport any hazardous substances, solid waste or other wastes or holds any interest in real property or otherwise. The Borrower shall furnish to the Administrative Agent

 

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and the Lenders, promptly after receipt thereof, a copy of any notice any Company may receive from any Governmental Authority or private Person, or otherwise, that any material litigation or proceeding pertaining to any environmental, health or safety matter has been filed or is threatened against such Company, any real property in which such Company holds any interest or any past or present operation of such Company. No Company shall allow the release or disposal of hazardous waste, solid waste or other wastes on, under or to any real property in which any Company holds any ownership interest or performs any of its operations, in violation of any material provision of Environmental Law. As used in this Section 5.16, “litigation or proceeding” means any demand, claim, notice, suit, suit in equity action, administrative action, investigation or inquiry whether brought by any Governmental Authority or private Person, or otherwise. The Borrower shall defend, indemnify and hold the Administrative Agent and the Lenders harmless against all properly documented costs, expenses, claims, damages, penalties and liabilities of every kind or nature whatsoever (including attorneys’ fees) arising out of or resulting from the noncompliance of any Company with any Environmental Law. Such indemnification shall survive any termination of this Agreement.

Section 5.17. Affiliate Transactions. No Company shall, directly or indirectly, enter into or permit to exist any transaction or series of transactions (including, without limitation, the purchase, sale, lease or exchange of any property or the rendering of any service) with any Affiliate (other than a Company that is a Credit Party) on terms that shall be less favorable to such Company than those that might be obtained at the time in a transaction with a Person that is not an Affiliate; provided that the foregoing shall not prohibit (a) the payment of customary and reasonable directors’ fees to directors who are not employees of a Company or an Affiliate; (b) any employment agreement, employee benefit plan, stock option plan, officer, director, consultant or employee indemnification agreement (and the payment of indemnities and fees pursuant to such arrangements) or any similar arrangement entered into by a Company in the ordinary course of business; (c) loans to employees or officers to the extent permitted under this Agreement; (d) any transactions (i) less than an aggregate of One Hundred Thousand Dollars ($100,000) during any calendar year; or (ii) in respect of which the Borrower delivers to the Administrative Agent (for delivery to the Lenders) a letter addressed to the Board of Directors of the Borrower from an account, appraisal or investment banking firm, in each case of nationally recognized standing that is (A) in the good faith determination of the Borrower qualified to render such letter, and (B) reasonably satisfactory to the Administrative Agent, which letter states that such transaction is on terms that are no less favorable to the Borrower or such Subsidiary, as applicable, than would be obtained in a comparable arm’s-length transaction with a Person that is not an Affiliate; or (e) the Spin-Off or the transactions contemplated by any Transition Services Agreement between the Borrower and Republic Wireless or any other Spin-Off Documents, including, without limitation, the Master Service Agreement between the Borrower and Republic Wireless.

Section 5.18. Use of Proceeds. The Borrower’s use of the proceeds of the Loans shall be for working capital and other general corporate purposes (including, without limitation, share repurchases permitted pursuant to Section 5.15(c) hereof) of the Companies, for the refinancing of existing Indebtedness, for Acquisitions permitted hereunder, to fund the Spin-Off and to fund certain Capital Distributions, including but not limited to, the redemption of preferred equity pursuant to Section 5.15(b) hereof, and for certain fees and expenses associated with the

 

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transactions contemplated by this Agreement. The Borrower will not, directly or indirectly, use the proceeds of the Loans, or lend, contribute or otherwise make available such proceeds to any subsidiary, joint venture partner or other Person, (a) (i) to fund activities or business of or with any Person, or in any country or territory, that, at the time of such funding, is, or whose government is, the subject of Sanctions, or (ii) in any other manner that would result in a violation of Sanctions by any Person (including any Person participating in the Loans, whether as underwriter, advisor, investor, or otherwise); or (b) in furtherance of an offer, payment, promise to pay, or authorization of the payment or giving of money, or anything else of value, to any Person in violation of Anti-Corruption Laws.

Section 5.19. Corporate Names and Locations of Collateral. No Company shall (a) change its corporate name, or (b) change its state, province or other jurisdiction, or form of organization, or extend or continue its existence in or to any other jurisdiction (other than its jurisdiction of organization at the date of this Agreement); unless, in each case, the Borrower shall have provided the Administrative Agent with at least thirty (30) days prior written notice thereof. The Borrower shall also provide the Administrative Agent with at least thirty (30) days prior written notification of (i) any change in any location where any material amount of a Company’s Inventory or Equipment is maintained, and any new locations where any material amount of a Company’s Inventory or Equipment is to be maintained; (ii) any change in the location of the office where any Company’s records pertaining to its Accounts are kept; (iii) the location of any new places of business and the changing or closing of any of its existing places of business; and (iv) any change in the location of any Company’s chief executive office. In the event of any of the foregoing or if otherwise deemed reasonably appropriate by the Administrative Agent, the Administrative Agent is hereby authorized to file new U.C.C. Financing Statements describing the Collateral and otherwise in form and substance sufficient for recordation wherever necessary or appropriate, as determined in the Administrative Agent’s sole discretion, to perfect or continue perfected the security interest of the Administrative Agent, for the benefit of the Lenders, in the Collateral. The Borrower shall pay all filing and recording fees and taxes in connection with the filing or recordation of such U.C.C. Financing Statements and security interests and shall promptly reimburse the Administrative Agent therefor if the Administrative Agent pays the same. Such amounts not so paid or reimbursed shall be Related Expenses hereunder.

Section 5.20. Subsidiary Guaranties, Security Documents and Pledge of Stock or Other Ownership Interest.

(a) Guaranties and Security Documents. Each Subsidiary (other than (i) a Subsidiary that is a Dormant Subsidiary, (ii) a CFC or a Subsidiary that is held directly or indirectly by a CFC, (iii) Republic Wireless, or (iv) CLEC, which shall deliver a Guaranty of Payment Joinder pursuant to Section 5.25(c) hereof) created, acquired or held subsequent to the Closing Date, shall promptly execute and deliver to the Administrative Agent, for the benefit of the Lenders, a Guaranty of Payment (or a Guaranty of Payment Joinder) of all of the Obligations and a Security Agreement (or a Security Agreement Joinder), such agreements to be prepared by the Administrative Agent and in form and substance acceptable to the Administrative Agent, along with any such other supporting documentation, Security Documents, corporate governance and authorization documents, and an opinion of counsel as may reasonably be deemed necessary or

 

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advisable by the Administrative Agent. With respect to a Subsidiary that has been classified as a Dormant Subsidiary, at such time that such Subsidiary no longer meets the requirements of a Dormant Subsidiary, the Borrower shall provide to the Administrative Agent prompt written notice thereof, and shall provide, with respect to such Subsidiary, all of the documents referenced in the foregoing sentence.

(b) Pledge of Stock or Other Ownership Interest. With respect to the creation or acquisition of a Subsidiary (other than (i) any direct or indirect Subsidiary of a CFC, or (ii) Republic Wireless) after the Closing Date, the Borrower shall deliver to the Administrative Agent, for the benefit of the Lenders, all of the share certificates (or other evidence of equity) owned by a Credit Party pursuant to the terms of a Pledge Agreement prepared by the Administrative Agent and in form and substance satisfactory to the Administrative Agent, and executed by the appropriate Credit Party; provided that no such pledge shall include shares of voting capital stock or other voting equity interests of any Foreign Subsidiary that is a CFC in excess of sixty-five percent (65%) of the total outstanding shares of voting capital stock or other voting equity interest of such Foreign Subsidiary, whether held directly or indirectly through a disregarded entity.

(c) Perfection or Registration of Interest in Foreign Shares. With respect to any foreign shares pledged to the Administrative Agent, for the benefit of the Lenders, on or after the Closing Date, the Administrative Agent shall at all times, in the discretion of the Administrative Agent or the Required Lenders, have the right to perfect, at the Borrower’s cost, payable upon request therefor (including, without limitation, any foreign counsel, or foreign notary, filing, registration or similar, fees, costs or expenses), its security interest in such shares in the respective foreign jurisdiction. Such perfection may include the requirement that the applicable Company promptly execute and deliver to the Administrative Agent a separate pledge document (prepared by the Administrative Agent and in form and substance satisfactory to the Administrative Agent), covering such equity interests, that conforms to the requirements of the applicable foreign jurisdiction, together with an opinion of local counsel as to the perfection of the security interest provided for therein, and all other documentation necessary or desirable to effect the foregoing and to permit the Administrative Agent to exercise any of its rights and remedies in respect thereof. Notwithstanding the foregoing, such perfection shall not be required if, in the reasonable judgment of Administrative Agent and the Borrower, the burden, cost or consequences of creating or perfecting such pledges or security interests in such assets is excessive in relation to the benefits to be obtained therefrom by the Administrative Agent and Lenders.

Section 5.21. Collateral. Each Credit Party shall:

(a) at all reasonable times and, except after the occurrence of an Event of Default, upon reasonable notice, allow the Administrative Agent by or through any of the Administrative Agent’s officers, agents, employees, attorneys or accountants to (i) examine, inspect and make extracts from such Credit Party’s books and other records, including, without limitation, the tax returns of such Credit Party, (ii) arrange for verification of such Credit Party’s Accounts, under reasonable procedures, directly with Account Debtors or by other methods, and (iii) examine and inspect such Credit Party’s Inventory and Equipment, wherever located;

 

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(b) promptly furnish to the Administrative Agent upon request (i) additional statements and information with respect to the Collateral, and all writings and information relating to or evidencing any of such Credit Party’s Accounts (including, without limitation, computer printouts or typewritten reports listing the mailing addresses of all present Account Debtors), and (ii) any other writings and information as the Administrative Agent may reasonably request;

(c) promptly notify the Administrative Agent in writing of the existence of any Deposit Account or Securities Account of any Credit Party, and promptly (or prior to or simultaneously with the creation of any new Deposit Account or Securities Account) provide for the execution of a Deposit Account Control Agreement or Securities Account Control Agreement with respect thereto, if required by the Administrative Agent; provided that no Credit Party shall be required to deliver a Deposit Account Control Agreement or Securities Account Control Agreement (i) prior to the Initial Funding Date (or such later date as may be agreed to in writing by the Administrative Agent), (ii) with respect to any Excluded Account, or (iii) so long as (A) the aggregate balance in each Deposit Account (that is not an Excluded Account) that is not subject to a Control Agreement does not exceed One Hundred Thousand Dollars ($100,000) at any time, and (B) the aggregate balance in all Deposit Accounts (that are not Excluded Accounts) that are not subject to a Control Agreement does not exceed Five Hundred Thousand Dollars ($500,000) at any time;

(d) promptly notify the Administrative Agent in writing whenever the Equipment or Inventory of a Company, valued in excess of One Hundred Thousand Dollars ($100,000), is located at a location of a third party (other than another Company) that is not covered by an executed Landlord’s Waiver, Bailee’s Waiver, Processor’s Waiver, Consignee’s Waiver or similar document with respect thereto, and deliver to the Administrative Agent an executed Landlord’s Waiver, Bailee’s Waiver, Processor’s Waiver, Consignee’s Waiver or similar document with respect thereto or notice that may be required by the Administrative Agent; provided that no Credit Party shall be required to deliver any such agreement prior to the Initial Funding Date (or such later date as may be agreed to in writing by the Administrative Agent);

(e) promptly notify the Administrative Agent in writing of any information that the Credit Parties have or may receive with respect to the Collateral that might reasonably be determined to materially and adversely affect the value thereof or the rights of the Administrative Agent with respect thereto;

(f) maintain such Credit Party’s Equipment (other than Equipment that is obsolete or no longer useful in the Borrower’s business) in good operating condition and repair, ordinary wear and tear excepted, making all necessary replacements in management’s reasonable judgment and in the ordinary course of business thereof so that the value and operating efficiency thereof shall at all times be maintained and preserved;

(g) on and after the Initial Funding Date, deliver to the Administrative Agent, to hold as security for the Secured Obligations, all certificated Investment Property owned by a Credit Party and constituting Collateral, in suitable form for transfer by delivery, or accompanied by

 

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duly executed instruments of transfer or assignment in blank, all in form and substance satisfactory to the Administrative Agent, or in the event such Investment Property is in the possession of a Securities Intermediary or credited to a Securities Account (other than an Excluded Account), execute with the related Securities Intermediary a Securities Account Control Agreement over such Securities Account in favor of the Administrative Agent, for the benefit of the Lenders, in form and substance satisfactory to the Administrative Agent;

(h) provide to the Administrative Agent, on a quarterly basis (as necessary), a list of any patents, trademarks or copyrights that have been federally registered by the Borrower or a Domestic Subsidiary during such quarter, and provide for the execution of an appropriate Intellectual Property Security Agreement; and

(i) upon request of the Administrative Agent, promptly take such action and promptly make, execute and deliver all such additional and further items, deeds, assurances, instruments and any other writings as the Administrative Agent may from time to time deem necessary or appropriate, including, without limitation, chattel paper, to carry into effect the intention of this Agreement, or so as to completely vest in and ensure to the Administrative Agent and the Lenders their respective rights hereunder and in or to the Collateral.

Each Credit Party hereby authorizes the Administrative Agent, on behalf of the Lenders, to file U.C.C. Financing Statements or other appropriate notices with respect to the Collateral. If certificates of title or applications for title are issued or outstanding with respect to any of the Inventory or Equipment of any Credit Party constituting Collateral, such Credit Party shall, upon request of the Administrative Agent, (i) execute and deliver to the Administrative Agent a short form security agreement, prepared by the Administrative Agent and in form and substance reasonably satisfactory to the Administrative Agent, and (ii) deliver such certificate or application to the Administrative Agent and cause the interest of the Administrative Agent, for the benefit of the Lenders, to be properly noted thereon. Each Credit Party hereby authorizes the Administrative Agent or the Administrative Agent’s designated agent (but without obligation by the Administrative Agent to do so) to incur Related Expenses (whether prior to, upon, or subsequent to any Default or Event of Default), and the Borrower shall promptly repay, reimburse, and indemnify the Administrative Agent and the Lenders for any and all Related Expenses. If any Credit Party fails to keep and maintain its Equipment (other than Equipment that is obsolete or no longer useful in the Borrower’s business) in good operating condition, ordinary wear and tear excepted, the Administrative Agent may (but shall not be required to) so maintain or repair all or any part of such Credit Party’s Equipment and the cost thereof shall be a Related Expense. All Related Expenses are payable to the Administrative Agent upon demand therefor; the Administrative Agent may, at its option, debit Related Expenses directly to any Deposit Account of a Company located at the Administrative Agent or the Revolving Loans.

Section 5.22. Property Acquired Subsequent to the Closing Date and Right to Take Additional Collateral. The Borrower shall provide the Administrative Agent with prompt written notice with respect to any real or personal property (other than in the ordinary course of business and excluding Accounts, Inventory, Equipment and General Intangibles and other property acquired in the ordinary course of business) acquired by any Company subsequent to the Closing. In addition to any other right that the Administrative Agent and the Lenders may have

 

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pursuant to this Agreement or otherwise, upon written request of the Administrative Agent, whenever made, the Borrower shall, and shall cause each Guarantor of Payment to, grant to the Administrative Agent, for the benefit of the Lenders, as additional security for the Secured Obligations, a first Lien on any real property (with a fair market value in excess of One Million Dollars ($1,000,000)) or personal property of the Borrower and each Guarantor of Payment (other than for Excluded Property, leased equipment or equipment subject to a purchase money security interest in which the lessor or purchase money lender of such equipment holds a first priority security interest, in which case, the Administrative Agent shall have the right to obtain a security interest junior only to such lessor or purchase money lender), including, without limitation, such property acquired subsequent to the Closing Date, in which the Administrative Agent does not have a first priority Lien; provided that, if, at any time, the Companies own real property that is not subject to a mortgage and that has an aggregate fair market value of greater than One Million Dollars ($1,000,000), the Borrower shall promptly, upon written request of the Administrative Agent, cause one or more Companies to grant to the Administrative Agent, for the benefit of the Lenders, a first priority security interest in such real property, so that the aggregate fair market value of owned real property of the Companies that is not subject to a mortgage is less than or equal to One Million Dollars ($1,000,000). The Borrower agrees that, within ten (10) days after the date of such written request, to secure all of the Secured Obligations by delivering to the Administrative Agent security agreements, intellectual property security agreements, pledge agreements, mortgages (or deeds of trust, if applicable) or other documents, instruments or agreements or such thereof as the Administrative Agent may reasonably require with respect to any of the Credit Parties. The Borrower shall pay all recordation, legal and other expenses in connection therewith.

Section 5.23. Restrictive Agreements. Except as set forth in this Agreement, the Borrower shall not, and shall not permit any of its Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to exist or become effective any encumbrance or restriction on the ability of any Subsidiary to (a) make, directly or indirectly, any Capital Distribution to the Borrower, (b) make, directly or indirectly, loans or advances or capital contributions to the Borrower or (c) transfer, directly or indirectly, any of the properties or assets of such Subsidiary to the Borrower; except for such encumbrances or restrictions existing under or by reason of (i) applicable law, (ii) customary non-assignment provisions in leases or other agreements entered in the ordinary course of business and consistent with past practices, (iii) customary restrictions in security agreements or mortgages securing Indebtedness, or capital leases, of a Company to the extent such restrictions shall only restrict the transfer of the property subject to such security agreement, mortgage or lease, or (iv) any encumbrance or restriction with respect to the equity interests of any joint venture or similar arrangement created after the Closing Date and pursuant to the joint venture or similar agreements with respect to such joint venture or similar arrangements permitted under this Agreement.

Section 5.24. Other Covenants and Provisions. In the event that any Company shall enter into, or shall have entered into, any Material Indebtedness Agreement, wherein the financial covenants contained therein shall be more restrictive than the financial covenants set forth herein, then the Companies shall immediately be bound hereunder (without further action) by such more restrictive financial covenants with the same force and effect as if such financial covenants were written herein for so long as such Material Indebtedness Agreement remains in

 

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effect. In addition to the foregoing, the Borrower shall provide prompt written notice to the Administrative Agent of the creation or existence of any Material Indebtedness Agreement that has such more restrictive financial covenants, and shall, within fifteen (15) days thereafter (if requested by the Administrative Agent), execute and deliver to the Administrative Agent an amendment to this Agreement that incorporates such more restrictive financial covenants, with such amendment to be in form and substance satisfactory to the Administrative Agent.

Section 5.25. Additional CLEC Covenants.

(a) The Borrower shall, by no later than the CLEC Required Approval Date, cause CLEC to obtain all consents, approvals or authorizations of the state public utility commissions in Georgia, Hawaii, Indiana, Maryland, New Jersey, New York, and Pennsylvania or any other Person that are required to be obtained or completed by CLEC in order for CLEC to be permitted by such Person to enter into a Guaranty of Payment and grant a security interest to the Administrative Agent, for the benefit of the Lenders, in the Excluded CLEC Collateral (each such consent, approval or authorization, is referred to herein individually as a “CLEC Approval” and collectively as the “CLEC Approvals”).

(b) The Borrower shall deliver to the Administrative Agent, within five (5) Business Days of the receipt thereof (or such later date as Administrative Agent may agree in writing), evidence of each CLEC Approval that is obtained.

(c) Within five (5) Business Days after the CLEC Trigger Date (or such later date as Administrative Agent may agree in writing), the Borrower shall cause CLEC to deliver to the Administrative Agent, for the benefit of the Lenders, a Guaranty of Payment (or a Guaranty of Payment Joinder) to be prepared by the Administrative Agent and in form and substance reasonably acceptable to the Administrative Agent, along with any such other supporting documentation, Security Documents, corporate governance and authorization documents, and an opinion of counsel as may be deemed reasonably necessary or advisable by the Administrative Agent.

Section 5.26. FCC Approval. Each Company agrees to cooperate with, and take such action as reasonably requested by, the Administrative Agent in order to obtain from the FCC such approval as may be necessary to enable the Administrative Agent and the Lenders to exercise and enjoy the full rights and benefits granted to them by this Agreement, including the use of such Company’s commercially reasonable efforts to assist in obtaining the approval of the FCC for any action or transaction contemplated by this Agreement for which such approval is required by law.

Section 5.27. Amendment of Organizational Documents. Without the prior written consent of the Administrative Agent, no Company shall (a) amend its Organizational Documents in any manner adverse to the Lenders, or (b) amend its Organizational Documents to change its name or state, province or other jurisdiction of organization, or its form of organization.

Section 5.28. Fiscal Year of the Borrower. The Borrower shall not change the date of its fiscal year-end without the prior written consent of the Administrative Agent and the Required Lenders. As of the Closing Date, the fiscal year end of the Borrower is December 31 of each year.

 

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Section 5.29. Banking Relationship. From and after the Initial Funding Date, and until payment in full of the Obligations, the Borrower shall maintain its primary banking, depository and cash management relationship with the Administrative Agent, any other Lender or any other institution that is a Lender as of the Closing Date.

Section 5.30. Further Assurances. The Borrower shall, and shall cause each other Credit Party to, promptly upon request by the Administrative Agent, or the Required Lenders through the Administrative Agent, (a) correct any material defect or error that may be discovered in any Loan Document or in the execution, acknowledgment, filing or recordation thereof, and (b) do, execute, acknowledge, deliver, record, re-record, file, re-file, register and re-register any and all such further acts, deeds, certificates, assurances and other instruments related to any of the collateral securing the Secured Obligations as the Administrative Agent, or the Required Lenders through the Administrative Agent, may reasonably require from time to time in order to carry out more effectively the purposes of the Loan Documents.

ARTICLE VI. REPRESENTATIONS AND WARRANTIES

Section 6.1. Corporate Existence; Subsidiaries; Foreign Qualification. Each Company is duly organized, validly existing, and in good standing (or comparable concept in the applicable jurisdiction) under the laws of its state or jurisdiction of incorporation or organization, and is duly qualified and authorized to do business and is in good standing (or comparable concept in the applicable jurisdiction) as a foreign entity in the jurisdictions set forth opposite its name on Schedule 6.1 hereto, which are all of the states or jurisdictions where the character of its property or its business activities makes such qualification necessary, except where a failure to so qualify would not reasonably be expected to have a Material Adverse Effect. Schedule 6.1 hereto sets forth, as of the Closing Date, each Subsidiary of the Borrower (and whether such Subsidiary is a Dormant Subsidiary), its state (or jurisdiction) of formation, its relationship to the Borrower, including the percentage of each class of stock or other equity interest owned by a Company, each Person that owns the stock or other equity interest of each Company, its tax identification number, the location of its chief executive office and its principal place of business. Except as set forth on Schedule 6.1 hereto, as of the Closing Date, the Borrower, directly or indirectly, owns all of the equity interests of each of its Subsidiaries.

Section 6.2. Corporate Authority. Each Credit Party has the right and power and is duly authorized and empowered to enter into, execute and deliver the Loan Documents to which it is a party and to perform and observe the provisions of the Loan Documents. The Loan Documents to which each Credit Party is a party have been duly authorized and approved by such Credit Party’s board of directors or other governing body, as applicable, and are the legal, valid and binding obligations of such Credit Party, enforceable against such Credit Party in accordance with their respective terms, except as enforceability thereof may be limited by bankruptcy, insolvency or similar laws affecting the enforcement of creditors’ rights generally and by equitable principles (regardless of, whether enforcement is sought in equity or at law). The

 

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execution, delivery and performance of the Loan Documents do not conflict with, result in a breach in any of the provisions of, constitute a default under, or result in the creation of a Lien (other than Liens permitted under Section 5.9 hereof) upon any assets or property of any Company under the provisions of, such Company’s Organizational Documents or any material agreement to which such Company is a party.

Section 6.3. Compliance with Laws and Contracts. Each Company:

(a) holds permits, certificates, licenses, orders, registrations, franchises, authorizations, and other approvals from any Governmental Authority necessary for the conduct of its business and is in compliance with all applicable laws relating thereto, except where the failure to do so would not have a Material Adverse Effect;

(b) is in compliance with all federal, state, local, or foreign applicable statutes, rules, regulations, and orders including, without limitation, those relating to environmental protection, occupational safety and health, and equal employment practices, except where the failure to be in compliance would not have a Material Adverse Effect;

(c) is not in violation of or in default under any agreement to which it is a party or by which its assets are subject or bound, except with respect to any violation or default that would not have a Material Adverse Effect;

(d) has ensured that no Company, or to the knowledge of any Company, any director, officer, agent, employee or affiliate of a Company, is a Person that is, or is owned or controlled by Persons that are (i) the subject of any Sanctions, or (ii) located, organized or resident in a country or territory that is, or whose government is, the subject of Sanctions;

(e) is in compliance with all applicable Bank Secrecy Act (“BSA”) and anti-money laundering laws and regulations; and

(f) has ensured that no Company or, to the knowledge of any Company, any director, officer, agent, employee or other person acting on behalf of a Company has taken any action, directly or indirectly, that would result in a violation by such persons of Anti-Corruption Laws, and the Credit Parties have instituted and maintain policies and procedures designed to ensure continued compliance therewith; and

(g) is in compliance with the Patriot Act.

Section 6.4. Litigation and Administrative Proceedings. Except as disclosed on Schedule 6.4 hereto, there are (a) no lawsuits, actions, investigations, examinations or other proceedings pending or, to the knowledge of the Borrower, threatened against any Company, or in respect of which any Company may have any liability, in any court or before or by any Governmental Authority, arbitration board, or other tribunal that could reasonably be expected to have a Material Adverse Effect, (b) no orders, writs, injunctions, judgments, or decrees of any court or Governmental Authority to which any Company is a party or by which the property or assets of any Company are bound that could reasonably be expected to have a Material Adverse

 

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Effect, and (c) no grievances, disputes, or controversies outstanding with any union or other organization of the employees of any Company, or threats of work stoppage, strike, or pending demands for collective bargaining that could reasonably be expected to have a Material Adverse Effect.

Section 6.5. Title to Assets. Each Company has good title to and ownership of all property it purports to own, which property is free and clear of all Liens, except those permitted under Section 5.9 hereof. As of the Closing Date, the Companies do not own any real estate.

Section 6.6. Liens and Security Interests. On and after the Closing Date, except for Liens permitted pursuant to Section 5.9 hereof, (a) there is and will be no U.C.C. Financing Statement or similar notice of Lien outstanding covering any personal property of any Company; (b) there is and will be no mortgage or charge outstanding covering any real property of any Company; and (c) no real or personal property of any Company is subject to any Lien of any kind. The Administrative Agent, for the benefit of the Lenders, upon the filing of the U.C.C. Financing Statements and taking such other actions necessary to perfect its Lien against collateral of the corresponding type as authorized hereunder will have a valid and enforceable first Lien on the collateral securing the Secured Obligations subject only to Liens permitted under Section 5.9 hereof. Except with respect to Interim Liens, no Company has entered into any contract or agreement (other than a contract or agreement entered into in connection with the purchase or lease of fixed assets that prohibits Liens on such fixed assets or a contract or agreement entered into in the ordinary course of business that does not permit Liens on, or collateral assignment of, the property relating to such contract or agreement) that exists on or after the Closing Date that would prohibit the Administrative Agent or the Lenders from acquiring a Lien on, or a collateral assignment of, any of the property or assets of any Company.

Section 6.7. Tax Returns. All federal, state and local tax returns and other reports required by law to be filed in respect of the income, business, properties and employees of each Company have been timely filed (subject to valid extensions) and all taxes, assessments, fees and other governmental charges that are due and payable have been timely paid, except as otherwise permitted herein or where the failure to do so does not and will not cause or result in a Material Adverse Effect. The provision for taxes on the books of each Company is adequate for all years not closed by applicable statutes and for the current fiscal year.

Section 6.8. Environmental Laws. Each Company is in compliance with all Environmental Laws, including, without limitation, all Environmental Laws in all jurisdictions in which any Company owns or operates, or has owned or operated, a facility or site, arranges or has arranged for disposal or treatment of hazardous substances, solid waste or other wastes, accepts or has accepted for transport any hazardous substances, solid waste or other wastes or holds or has held any interest in real property or otherwise, except for such non-compliance that could not reasonably be expected to have a Material Adverse Effect. No litigation or proceeding arising under, relating to or in connection with any Environmental Law or Environmental Permit is pending or, to the best knowledge of each Company, threatened, against any Company, any real property in which any Company holds or has held an interest or any past or present operation of any Company that could reasonably be expected to have a Material Adverse Effect. No material release, threatened release or disposal of hazardous waste, solid waste or other

 

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wastes is occurring, or has occurred (other than those that are currently being remediated in accordance with Environmental Laws), on, under or to any real property in which any Company holds any interest or performs any of its operations, in violation in any material respect of any Environmental Law, in each case, except for such items that could not reasonably be expected to have a Material Adverse Effect. As used in this Section 6.8, “litigation or proceeding” means any demand, claim, notice, suit, suit in equity, action, administrative action, investigation or inquiry whether brought by any Governmental Authority or private Person, or otherwise.

Section 6.9. Locations. As of the Closing Date, the Companies have places of business or maintain their Accounts, Inventory and Equipment at the locations (including third party locations) set forth on Schedule 6.9 hereto, and each Company’s chief executive office is set forth on Schedule 6.9 hereto. Schedule 6.9 hereto further specifies whether each location, as of the Closing Date, (a) is owned by the Companies, or (b) is leased by a Company from a third party, and, if leased by a Company from a third party, if a Landlord’s Waiver is required to be delivered pursuant to the terms hereof. As of the Closing Date, Schedule 6.9 hereto correctly identifies the name and address of each third party location where assets of the Companies are located.

Section 6.10. Continued Business. There exists no actual, pending, or, to the Borrower’s knowledge, any threatened termination, cancellation or limitation of, or any modification or change (other than consistent with past business practices of the Companies and at the election of the Companies) in the business relationship of any Company and any customer or supplier, or any group of customers or suppliers, whose purchases or supplies, individually or in the aggregate, are material to the business of any Company, which could reasonably be expected to have a Material Adverse Effect, and there exists no other present condition or state of facts or circumstances that would have a Material Adverse Effect or prevent a Company from conducting such business or the transactions contemplated by this Agreement in substantially the same manner in which it was previously conducted.

Section 6.11. Employee Benefits Plans. Schedule 6.11 hereto identifies each ERISA Plan as of the Closing Date. No ERISA Event has occurred or is expected to occur with respect to an ERISA Plan. Disregarding any matters which do not have a Material Adverse Effect: (a) full payment has been made of all amounts that a Controlled Group member is required, under applicable law or under the governing documents, to have paid as a contribution to or a benefit under each ERISA Plan; (b) the liability of each Controlled Group member with respect to each ERISA Plan has been fully funded based upon reasonable and proper actuarial assumptions, has been fully insured, or has been appropriately reserved for on its financial statements; (c) no changes have occurred or are expected to occur that would cause a material increase in the cost of providing benefits under the ERISA Plan; (d) with respect to each ERISA Plan administered by a Company or a Controlled Group member that is intended to be qualified under Code Section 401(a), (i) the ERISA Plan and any associated trust operationally comply with the applicable requirements of Code Section 401(a), (ii) the ERISA Plan and any associated trust have been amended to comply with all such requirements as currently in effect, other than those requirements for which a retroactive amendment can be made within the “remedial amendment period” available under Code Section 401(b) (as extended under Treasury Regulations and other Treasury pronouncements upon which taxpayers may rely), (iii) the ERISA Plan and any

 

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associated trust have received a favorable determination letter or opinion letter from the Internal Revenue Service stating that the ERISA Plan (or a prototype or volume submitter plan utilized as the plan document for such ERISA Plan) qualifies under Code Section 401(a), that the associated trust qualifies under Code Section 501(a) and, if applicable, that any cash or deferred arrangement under the ERISA Plan qualifies under Code Section 401(k), unless the ERISA Plan was first adopted at a time for which the above-described “remedial amendment period” has not yet expired, (iv) the ERISA Plan currently satisfies the requirements of Code Section 410(b), without regard to any retroactive amendment that may be made within the above-described “remedial amendment period”, and (v) no contribution made to the ERISA Plan is subject to an excise tax under Code Section 4972; and (e) with respect to any Pension Plan, the “accumulated benefit obligation” of Controlled Group members with respect to the Pension Plan (as determined in accordance with Statement of Accounting Standards No. 87, “Employers’ Accounting for Pensions”) does not exceed the fair market value of Pension Plan assets.

Section 6.12. Consents or Approvals. Except as set forth on Schedule 6.12 hereto, and pursuant to Section 5.25 hereof, no consent, approval or authorization of, or filing, registration or qualification with, any Governmental Authority or any other Person is required to be obtained or completed by any Company in connection with the execution, delivery or performance of any of the Loan Documents, that has not already been obtained or completed, except the filing and recording of financing statements and other documents necessary in order to perfect the Liens created by this Agreement or the Security Documents.

Section 6.13. Solvency. The Borrower has received consideration that is the reasonably equivalent value of the obligations and liabilities that the Borrower has incurred to the Administrative Agent and the Lenders. The Borrower is not insolvent as defined in any applicable state, federal or relevant foreign statute, nor will the Borrower be rendered insolvent by the execution and delivery of the Loan Documents to the Administrative Agent and the Lenders. The Borrower is not engaged or about to engage in any business or transaction for which the assets retained by it are or will be an unreasonably small amount of capital, taking into consideration the obligations to the Administrative Agent and the Lenders incurred hereunder. The Borrower does not intend to, nor does it believe that it will, incur debts beyond its ability to pay such debts as they mature.

Section 6.14. Financial Statements. The audited Consolidated financial statements of the Borrower for the fiscal year ended December 31, 2015 and the unaudited Consolidated financial statements of the Borrower for the fiscal quarter ended June 30, 2016, furnished to the Administrative Agent and the Lenders, are true and complete, in all material respects, have been prepared in accordance with GAAP, and fairly present, in all material respects, the financial condition of the Companies as of the dates of such financial statements and the results of their operations for the periods then ending. Since the dates of such statements, there has been no material adverse change in any Company’s financial condition, properties or business or any change in any Company’s accounting procedures, other than as required by GAAP.

Section 6.15. Regulations. No Company is engaged principally or as one of its important activities, in the business of extending credit for the purpose of purchasing or carrying any “margin stock” (within the meaning of Regulation U of the Board of Governors of the Federal

 

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Reserve System of the United States). Neither the granting of any Loan (or any conversion thereof) or Letter of Credit nor the use of the proceeds of any Loan or Letter of Credit will violate, or be inconsistent with, the provisions of Regulation T, U or X or any other Regulation of such Board of Governors.

Section 6.16. Material Agreements. Except as disclosed on Schedule 5.8 and Schedule 6.16 hereto, as of the Closing Date, no Company is a party to any (a) debt instrument (excluding the Loan Documents); (b) lease (capital, operating or otherwise), whether as lessee or lessor thereunder; (c) contract, commitment, agreement, or other arrangement involving the purchase or sale of any inventory by it, or the license of any right to or by it other than such contracts and agreements entered into in the ordinary course of business; (d) contract, commitment, agreement, or other arrangement with any of its “Affiliates” (as such term is defined in the Exchange Act) other than a Company; (e) management or employment contract or contract for personal services with any of its Affiliates that is not otherwise terminable at will or on less than ninety (90) days’ notice without liability; (f) collective bargaining agreement; or (g) other contract, agreement, understanding, or arrangement with a third party; that, as to subparts (a) through (g) above, if violated, breached, or terminated for any reason, would have or would be reasonably expected to have a Material Adverse Effect.

Section 6.17. Intellectual Property. Each Company owns, or has the right to use, all of the material patents, patent applications, industrial designs, designs, trademarks, service marks, copyrights and licenses, and rights with respect to the foregoing, necessary for the conduct of its business without any known material conflict with the rights of others. Schedule 6.17 hereto sets forth all federally registered patents, trademarks, copyrights, service marks and license agreements owned by each Company as of the Closing Date.

Section 6.18. Insurance. Each Company maintains with financially sound and reputable insurers insurance with coverage (including, if applicable, insurance coverage required by the National Flood Insurance Reform Act of 1994) and limits as required by law and as is customary with Persons engaged in the same businesses as the Companies. Schedule 6.18 hereto sets forth all insurance carried by the Companies on the Closing Date, setting forth in detail the amount and type of such insurance.

Section 6.19. Deposit Accounts and Securities Accounts. Schedule 6.19 hereto lists all banks, other financial institutions and Securities Intermediaries at which any Company maintains Deposit Accounts or Securities Accounts as of the Closing Date, and Schedule 6.19 hereto correctly identifies the name, address and telephone number of each such financial institution or Securities Intermediary, the name in which the account is held, a description of the purpose of the account, and the complete account number therefor.

Section 6.20. Accurate and Complete Statements. Neither the Loan Documents nor any written statement made by any Company in connection with any of the Loan Documents contains any untrue statement of a material fact or, taken as a whole, omits to state a material fact necessary to make the statements contained therein or in the Loan Documents not misleading. After due inquiry by the Borrower, there is no known fact that any Company has not disclosed to the Administrative Agent and the Lenders that has or is likely to have a Material Adverse Effect.

 

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Section 6.21. Investment Company; Other Restrictions. No Company is (a) an “investment company” or a company “controlled” by an “investment company” within the meaning of the Investment Company Act of 1940, as amended, or (b) subject to any foreign, federal, state or local statute or regulation limiting its ability to incur Indebtedness, except for the consents required under applicable law in connection with the Licenses as set forth in Section 5.25 hereof.

Section 6.22. Defaults. No Default or Event of Default exists, nor will any begin to exist immediately after the execution and delivery hereof.

ARTICLE VII. SECURITY

Section 7.1. Security Interest in Collateral. In consideration of and as security for the full and complete payment of all of the Secured Obligations, the Borrower hereby grants to the Administrative Agent, for the benefit of the Lenders (and affiliates thereof that hold Secured Obligations), a security interest in the Collateral.

Section 7.2. Collections and Receipt of Proceeds by Borrower.

(a) Prior to the exercise by the Administrative Agent and the Required Lenders of their rights under Article IX hereof, both (i) the lawful collection and enforcement of all of the Borrower’s Accounts, and (ii) the lawful receipt and retention by the Borrower of all Proceeds of all of the Borrower’s Accounts and Inventory shall be as the agent of the Administrative Agent and the Lenders.

(b) Upon written notice to the Borrower from the Administrative Agent after the occurrence and during the continuance of an Event of Default, a Cash Collateral Account shall be opened by the Borrower at the main office of the Administrative Agent (or such other office as shall be designated by the Administrative Agent) and all such lawful collections of the Borrower’s Accounts and such Proceeds of the Borrower’s Accounts and Inventory shall be remitted daily by the Borrower to the Administrative Agent in the form in which they are received by the Borrower, either by mailing or by delivering such collections and Proceeds to the Administrative Agent, appropriately endorsed for deposit in the Cash Collateral Account. In the event that such notice is given to the Borrower from the Administrative Agent, the Borrower shall not commingle such collections or Proceeds with any of the Borrower’s other funds or property, but shall hold such collections and Proceeds separate and apart therefrom upon an express trust for the Administrative Agent, for the benefit of the Lenders. In such case, the Administrative Agent may, in its sole discretion, and shall, at the request of the Required Lenders, at any time and from time to time , apply all or any portion of the account balance in the Cash Collateral Account as a credit against (i) the outstanding principal or interest of the Loans, or (ii) any other Secured Obligations in accordance with this Agreement. If any remittance shall be dishonored, or if, upon final payment, any claim with respect thereto shall be made against the

 

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Administrative Agent on its warranties of collection, the Administrative Agent may charge the amount of such item against the Cash Collateral Account or any other Deposit Account maintained by the Borrower with the Administrative Agent or with any other Lender, and, in any event, retain the same and the Borrower’s interest therein as additional security for the Secured Obligations. The Administrative Agent may, in its sole discretion, at any time and from time to time, release funds from the Cash Collateral Account to the Borrower for use in the Borrower’s business. The balance in the Cash Collateral Account may be withdrawn by the Borrower upon termination of this Agreement and payment in full of all of the Secured Obligations.

(c) After the occurrence and during the continuance of an Event of Default, at the Administrative Agent’s written request, the Borrower shall cause all remittances representing collections and Proceeds of Collateral to be mailed to a lockbox at a location acceptable to the Administrative Agent, to which the Administrative Agent shall have access for the processing of such items in accordance with the provisions, terms and conditions of the customary lockbox agreement of the Administrative Agent.

(d) The Administrative Agent, or the Administrative Agent’s designated agent, is hereby constituted and appointed attorney-in-fact for the Borrower with authority and power to endorse, after the occurrence and during the continuance of an Event of Default, any and all instruments, documents, and chattel paper upon the failure of the Borrower to do so. Such authority and power, being coupled with an interest, shall be (i) irrevocable until all of the Secured Obligations are paid, (ii) exercisable by the Administrative Agent at any time and without any request upon the Borrower by the Administrative Agent to so endorse, and (iii) exercisable in the name of the Administrative Agent or the Borrower. The Borrower hereby waives presentment, demand, notice of dishonor, protest, notice of protest, and any and all other similar notices with respect thereto, regardless of the form of any endorsement thereof. Neither the Administrative Agent nor the Lenders shall be bound or obligated to take any action to preserve any rights therein against prior parties thereto.

Section 7.3. Collections and Receipt of Proceeds by Administrative Agent. Each Credit Party hereby constitutes and appoints the Administrative Agent, or the Administrative Agent’s designated agent, as the Borrower’s attorney-in-fact to exercise, at any time, after the occurrence and during the continuance of an Event of Default, all or any of the following powers which, being coupled with an interest, shall be irrevocable until the complete and full payment of all of the Secured Obligations:

(a) to receive, retain, acquire, take, endorse, assign, deliver, accept, and deposit, in the name of the Administrative Agent or such Credit Party, any and all of such Credit Party’s cash, instruments, chattel paper, documents, Proceeds of Accounts, Proceeds of Inventory, collection of Accounts, and any other writings relating to any of the Collateral. Each Credit Party hereby waives presentment, demand, notice of dishonor, protest, notice of protest, and any and all other similar notices with respect thereto, regardless of the form of any endorsement thereof. The Administrative Agent shall not be bound or obligated to take any action to preserve any rights therein against prior parties thereto;

 

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(b) to transmit to Account Debtors, on any or all of such Credit Party’s Accounts, notice of assignment to the Administrative Agent, for the benefit of the Lenders, thereof and the security interest therein, and to request from such Account Debtors at any time, in the name of the Administrative Agent or such Credit Party, information concerning the Borrower’s Accounts and the amounts owing thereon;

(c) to transmit to purchasers of any or all of such Credit Party’s Inventory, notice of the Administrative Agent’s security interest therein, and to request from such purchasers at any time, in the name of the Administrative Agent or such Credit Party, information concerning such Credit Party’s Inventory and the amounts owing thereon by such purchasers;

(d) to notify and require Account Debtors on such Credit Party’s Accounts and purchasers of such Credit Party’s Inventory to make payment of their indebtedness directly to the Administrative Agent;

(e) to enter into or assent to such amendment, compromise, extension, release or other modification of any kind of, or substitution for, the Accounts, or any thereof, as the Administrative Agent, in its sole discretion, may deem to be advisable;

(f) to enforce the Accounts or any thereof, or any other Collateral, by suit or otherwise, to maintain any such suit or other proceeding in the name of the Administrative Agent or one or more Credit Parties, and to withdraw any such suit or other proceeding. The Credit Parties agree to lend every assistance requested by the Administrative Agent in respect of the foregoing, all at no cost or expense to the Administrative Agent and including, without limitation, the furnishing of such witnesses and of such records and other writings as the Administrative Agent may reasonably require in connection with making legal proof of any Account. The Credit Parties agree to reimburse the Administrative Agent in full for all court costs and attorneys’ fees and every other cost, expense or liability, if any, incurred or paid by the Administrative Agent in connection with the foregoing, which obligation of such Credit Parties shall constitute Obligations, shall be secured by the Collateral and shall bear interest, until paid, at the Default Rate;

(g) to take or bring, in the name of the Administrative Agent or such Credit Party, all steps, actions, suits, or proceedings deemed by the Administrative Agent necessary or desirable to effect the receipt, enforcement, and collection of the Collateral; and

(h) to accept all collections in any form relating to the Collateral, including remittances that may reflect deductions, and to deposit the same into the Cash Collateral Account or, at the option of the Administrative Agent, to apply them as a payment against the Loans or any other Secured Obligations in accordance with this Agreement.

Section 7.4. Administrative Agent’s Authority Under Pledged Notes. On and after the Initial Funding Date, for the better protection of the Administrative Agent and the Lenders hereunder, each Credit Party, as appropriate, will execute, with respect to any existing or future Pledged Notes an appropriate endorsement on (or separate from) each Pledged Note and with respect to Pledged Notes in the original principal amount in excess of Two Hundred Fifty

 

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Thousand Dollars ($250,000), or upon request after the occurrence and during the continuance of an Event of Default, has deposited (or will deposit, with respect to future Pledged Notes) such Pledged Notes with the Administrative Agent, for the benefit of the Lenders. Such Credit Party irrevocably authorizes and empowers the Administrative Agent, for the benefit of the Lenders, to, after the occurrence and during the continuance of an Event of Default, (a) ask for, demand, collect and receive all payments of principal of and interest on the Pledged Notes; (b) compromise and settle any dispute arising in respect of the foregoing; (c) execute and deliver vouchers, receipts and acquittances in full discharge of the foregoing; (d) exercise, in the Administrative Agent’s discretion, any right, power or privilege granted to the holder of any Pledged Note by the provisions thereof including, without limitation, the right to demand security or to waive any default thereunder; (e) endorse such Credit Party’s name to each check or other writing received by the Administrative Agent as a payment or other proceeds of or otherwise in connection with any Pledged Note; (f) enforce delivery and payment of the principal and/or interest on the Pledged Notes, in each case by suit or otherwise as the Administrative Agent may desire; and (g) enforce the security, if any, for the Pledged Notes by instituting foreclosure proceedings, by conducting public or other sales or otherwise, and to take all other steps as the Administrative Agent, in its discretion, may deem advisable in connection with the forgoing; provided that nothing contained or implied herein or elsewhere shall obligate the Administrative Agent to institute any action, suit or proceeding or to make or do any other act or thing contemplated by this Section 7.4 or prohibit the Administrative Agent from settling, withdrawing or dismissing any action, suit or proceeding or require the Administrative Agent to preserve any other right of any kind in respect of the Pledged Notes and the security, if any, therefor.

Section 7.5. Commercial Tort Claims. If any Credit Party shall at any time hold or acquire a Commercial Tort Claim in excess of Two Hundred Fifty Thousand Dollars ($250,000), such Credit Party shall promptly notify the Administrative Agent thereof in a writing signed by such Credit Party, that sets forth the details thereof and grants to the Administrative Agent (for the benefit of the Lenders) a Lien thereon and on the Proceeds thereof, all upon the terms of this Agreement, with such writing to be prepared by and in form and substance reasonably satisfactory to the Administrative Agent.

Section 7.6. Use of Inventory and Equipment. Until the exercise by the Administrative Agent and the Required Lenders of their rights under Article IX hereof, each Credit Party may (a) retain possession of and use its Inventory and Equipment in any lawful manner not inconsistent with this Agreement or with the terms, conditions, or provisions of any policy of insurance thereon; (b) sell or lease its Inventory or Equipment in the ordinary course of business or as otherwise permitted by this Agreement; and (c) use and consume any raw materials or supplies, the use and consumption of which are necessary in order to carry on such Credit Party’s business.

Notwithstanding anything contained in this Article VII or in any other provisions of this Agreement or any other Loan Document to the contrary, the representations, warranties and covenants made by any relevant Credit Party in this Agreement with respect to the creation, perfection or priority (as applicable) of the security interest granted in favor of Administrative Agent and Lenders shall be deemed not to apply to Excluded Property or, to the extent relating to perfection, Excluded Accounts and other assets not required to be subject to Liens that are perfected pursuant to the provisions of this Agreement.

 

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ARTICLE VIII. EVENTS OF DEFAULT

Any of the following specified events shall constitute an Event of Default (each an “Event of Default”):

Section 8.1. Payments. If (a) the interest on any Loan, any commitment or other fee, or any other Obligation not listed in subpart (b) hereof, shall not be paid in full within three Business Days of any applicable date when due and payable, or (b) the principal of any Loan, or any reimbursement obligation under any Letter of Credit that has been drawn, or any amount owing pursuant to Section 2.12(a) or (b) hereof shall not be paid in full when due and payable.

Section 8.2. Special Covenants. If any Company shall fail or omit to perform and observe Section 5.7, 5.8, 5.9, 5.11, 5.12, 5.13, 5.15, 5.18, 5.24 or 5.25 hereof.

Section 8.3. Other Covenants. If any Company shall fail or omit to perform and observe any agreement or other provision (other than those referred to in Section 8.1 or 8.2 hereof) contained or referred to in this Agreement or any other Related Writing that is on such Company’s part to be complied with, and that Default shall not have been fully corrected within thirty (30) days (or fifteen (15) days with respect to Section 2.12(c) or 5.3 hereof) after the earlier of (a) any Financial Officer of such Company becomes aware of the occurrence thereof, or (b) the giving of written notice thereof to the Borrower by the Administrative Agent or the Required Lenders that the specified Default is to be remedied.

Section 8.4. Representations and Warranties. If any representation, warranty or statement made in or pursuant to this Agreement or any other Related Writing or any other material information furnished by any Company to the Administrative Agent or the Lenders, or any thereof, shall be false or erroneous, in any material respect when made or deemed made.

Section 8.5. Cross Default. If any Company shall default in the payment of principal or interest due and owing under any Material Indebtedness Agreement beyond any period of grace provided with respect thereto or in the performance or observance of any other agreement, term or condition contained in any agreement under which such obligation is created beyond any period of grace provided with respect thereto, if the effect of such default is to allow the acceleration of the maturity of such Indebtedness or to permit the holder thereof to cause such Indebtedness to become due prior to its stated maturity.

Section 8.6. ERISA Default. The occurrence of one or more ERISA Events or the imposition of a Lien on the assets of the Company in accordance with Section 430(k) of the Code of any Company.

Section 8.7. Change in Control. If any Change in Control shall occur.

 

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Section 8.8. Judgments. There is entered against any Company:

(a) a final judgment or order for the payment of money by a court of competent jurisdiction, that remains unpaid or unstayed and undischarged for a period (during which execution shall not be effectively stayed) of forty-five (45) days after the date on which the right to appeal has expired, provided that such occurrence shall constitute an Event of Default only if the aggregate of all such judgments for all such Companies, shall exceed Three Million Dollars ($3,000,000) (less any amount that will be covered by the proceeds of insurance and is not subject to dispute by the insurance provider); or

(b) any one or more non-monetary final judgments that are not covered by insurance, or, if covered by insurance, for which the insurance company has not agreed to or acknowledged coverage, and that, in either case, the Required Lenders reasonably determine have, or could be expected to have, individually or in the aggregate, a Material Adverse Effect and, in either case, (i) enforcement proceedings are commenced by the prevailing party or any creditor upon such judgment or order, or (ii) there is a period of three consecutive Business Days during which a stay of enforcement of such judgment, by reason of a pending appeal or otherwise, is not in effect.

Section 8.9. Security. If any Lien as to any material amount of Collateral (as determined by the Administrative Agent, in its reasonable discretion) granted in this Agreement or any other Loan Document in favor of the Administrative Agent, for the benefit of the Lenders, shall be determined to be (a) void, voidable or invalid, or is subordinated or not otherwise given the priority contemplated by this Agreement and the Borrower (or the appropriate Credit Party) has failed to promptly execute appropriate documents to correct such matters, or (b) unperfected as to any material amount of Collateral (as determined by the Administrative Agent, in its reasonable discretion) and the Borrower (or the appropriate Credit Party) has failed to promptly execute appropriate documents to correct such matters.

Section 8.10. Validity of Loan Documents. If (a) any material provision, in the sole opinion of the Administrative Agent, of any Loan Document shall at any time cease to be valid, binding and enforceable against any Credit Party; (b) the validity, binding effect or enforceability of any Loan Document against any Credit Party shall be contested by any Credit Party; (c) any Credit Party shall deny that it has any or further liability or obligation under any Loan Document; or (d) any Loan Document shall be terminated, invalidated or set aside, or be declared ineffective or inoperative or in any way cease to give or provide to the Administrative Agent and the Lenders any material benefits purported to be created thereby.

Section 8.11. Solvency. If any Company (other than a Dormant Subsidiary) shall (a) except as permitted pursuant to Section 5.12 hereof, discontinue business; (b) generally not pay its debts as such debts become due; (c) make a general assignment for the benefit of creditors; (d) apply for or consent to the appointment of an interim receiver, a receiver, a receiver and manager, an administrator, a sequestrator, a monitor, a custodian, a trustee, an interim trustee, a liquidator, an agent or any other similar official of all or a substantial part of its assets or of such Company; (e) be adjudicated a debtor or insolvent or have entered against it an order for relief under the Bankruptcy Code, or under any other bankruptcy insolvency, liquidation, winding-up,

 

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corporate or similar statute or law, foreign, federal, state or provincial, in any applicable jurisdiction, now or hereafter existing, as any of the foregoing may be amended from time to time, or other applicable statute for jurisdictions outside of the United States, as the case may be; (f) file a voluntary petition under the Bankruptcy Code or seek relief under any bankruptcy or insolvency or analogous law in any jurisdiction outside of the United States, or file a proposal or notice of intention to file such petition; (g) have an involuntary proceeding under the Bankruptcy Code filed against it and the same shall not be controverted within ten (10) days, or shall continue undismissed for a period of sixty (60) days from commencement of such proceeding or case; (h) file a petition, an answer, an application or a proposal seeking reorganization or an arrangement with creditors or seeking to take advantage of any other law (whether federal, provincial or state, or, if applicable, other jurisdiction) relating to relief of debtors, or admit (by answer, by default or otherwise) the material allegations of a petition filed against it in any bankruptcy, reorganization, insolvency or other proceeding (whether federal, provincial or state, or, if applicable, other jurisdiction) relating to relief of debtors; (i) suffer or permit to continue unstayed and in effect for sixty (60) consecutive days any judgment, decree or order entered by a court of competent jurisdiction, that approves a petition or an application or a proposal seeking its reorganization or appoints an interim receiver, a receiver and manager, an administrator, custodian, trustee, interim trustee or liquidator of all or a substantial part of its assets, or of such Company; (j) have an administrative receiver appointed over the whole or substantially the whole of its assets, or of such Company; (k) have assets, the fair market value of which is less than its liabilities (taking into account rights of contribution and indemnification); or (l) have a moratorium declared in respect of any of its Indebtedness, or any analogous procedure or step is taken in any jurisdiction.

ARTICLE IX. REMEDIES UPON DEFAULT

Notwithstanding any contrary provision or inference herein or elsewhere:

Section 9.1. Optional Defaults. If any Event of Default referred to in Section 8.1, 8.2, 8.3, 8.4, 8.5, 8.6, 8.7, 8.8, 8.9 or 8.10 hereof shall occur and be continuing, the Administrative Agent may, with the consent of the Required Lenders, and shall, at the written request of the Required Lenders, give written notice to the Borrower to:

(a) terminate the Commitment, if not previously terminated, and, immediately upon such election, the obligations of the Lenders, and each thereof, to make any further Loan, and the obligation of the Issuing Lender to issue any Letter of Credit, immediately shall be terminated; and/or

(b) accelerate the maturity of all of the Obligations (if the Obligations are not already due and payable), whereupon all of the Obligations shall become and thereafter be immediately due and payable in full without any presentment or demand and without any further or other notice of any kind, all of which are hereby waived by the Borrower.

 

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Section 9.2. Automatic Defaults. If any Event of Default referred to in Section 8.11 hereof shall occur:

(a) all of the Commitment shall automatically and immediately terminate, if not previously terminated, and no Lender thereafter shall be under any obligation to grant any further Loan, nor shall the Issuing Lender be obligated to issue any Letter of Credit; and

(b) the principal of and interest then outstanding on all of the Loans, and all of the other Obligations, shall thereupon become and thereafter be immediately due and payable in full (if the Obligations are not already due and payable), all without any presentment, demand or notice of any kind, which are hereby waived by the Borrower.

Section 9.3. Letters of Credit. If the maturity of the Obligations shall be accelerated pursuant to Section 9.1 or 9.2 hereof, the Borrower shall immediately deposit with the Administrative Agent, as security for the obligations of the Borrower and any Guarantor of Payment to reimburse the Administrative Agent and the Revolving Lenders for any then outstanding Letters of Credit, cash equal to one hundred five percent (105%) of the sum of the aggregate undrawn balance of any then outstanding Letters of Credit. The Administrative Agent and the Lenders are hereby authorized, at their option, to deduct any and all such amounts from any deposit balances then owing by any Lender (or any affiliate of such Lender, wherever located) to or for the credit or account of any Company, as security for the obligations of the Borrower and any Guarantor of Payment to reimburse the Administrative Agent and the Lenders for any then outstanding Letters of Credit.

Section 9.4. Offsets. If there shall occur or exist, and be continuing, any Event of Default referred to in Section 8.11 hereof or if the maturity of the Obligations is accelerated pursuant to Section 9.1 or 9.2 hereof, each Lender and its Affiliates shall have the right at any time to set-off against, and to appropriate and apply toward the payment of, any and all of the Obligations then owing by the Borrower or a Guarantor of Payment to such Lender or its Affiliate (including, without limitation, any participation purchased or to be purchased pursuant to Section 2.2(b), 2.2(c) or 9.5 hereof), whether or not the same shall then have matured, any and all deposit (general or special) balances and all other indebtedness then held or owing by such Lender or its Affiliate (including, without limitation, by branches and agencies or any affiliate of such Lender, wherever located) to or for the credit or account of the Borrower or any Guarantor of Payment, all without notice to or demand upon the Borrower or any other Person, all such notices and demands being hereby expressly waived by the Borrower. Each Lender agrees to notify the Borrower and the Administrative Agent promptly after any such set-off and application (provided that the failure to give such notice shall not affect the validity of such set-off and application). In the event that any Defaulting Lender shall exercise any such right of set-off, (a) all amounts so set-off shall be paid over immediately to the Administrative Agent for further application in accordance with the provisions of Section 2.7(e) and (f) hereof, and, pending such payment, shall be segregated by such Defaulting Lender from its other funds and deemed held in trust for the benefit of the Administrative Agent, the Issuing Lender, the Swing Line Lender and the Lenders, and (b) such Defaulting Lender shall provide promptly to the Administrative Agent a statement describing in reasonable detail the Obligations owing to such Defaulting Lender as to which it exercised such right of set-off. Each Lender, the Issuing Lender and the Swing Line Lender agrees to notify the Borrower and the Administrative Agent promptly after any such set-off and application; provided that the failure to give such notice shall not affect the validity of such set-off and application.

 

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Section 9.5. Equalization Provisions.

(a) Equalization Within Commitments Prior to an Equalization Event. Each Revolving Lender agrees with the other Revolving Lenders that, if it at any time shall obtain any Advantage over the other Revolving Lenders, or any thereof, in respect of the Applicable Debt (except as to Swing Loans and Letters of Credit prior to the Administrative Agent’s giving of notice to participate and amounts under Article III hereof and further excluding any Hedge Agreement or Bank Product Agreement), such Revolving Lender, upon written request of the Administrative Agent, shall purchase from the other Revolving Lenders, for cash and at par, such additional participation in the Applicable Debt (except as to Swing Loans and Letters of Credit prior to the Administrative Agent’s giving of notice to participate and amounts under Article III hereof and further excluding any Indebtedness under any Hedge Agreement or Bank Product Agreement) as shall be necessary to nullify the Advantage. Each Term Lender agrees with the other Term Lenders that, if it at any time shall obtain any Advantage over the other Term Lenders, or any thereof, in respect of the Applicable Debt (except as to amounts under Article III hereof and further excluding any Hedge Agreement or Bank Product Agreement), such Term Lender shall purchase from the other Term Lenders, for cash and at par, such additional participation in the Applicable Debt (except as to amounts under Article III hereof and further excluding any Indebtedness under any Hedge Agreement or Bank Product Agreement) as shall be necessary to nullify the Advantage.

(b) Equalization Between Commitments After an Equalization Event. After the occurrence of an Equalization Event, each Lender agrees with the other Lenders that, if such Lender at any time shall obtain any Advantage over the other Lenders or any thereof determined in respect of the Obligations (including Swing Loans and Letters of Credit but excluding amounts under Article III hereof and further excluding any Indebtedness under any Hedge Agreement or Bank Product Agreement) then outstanding, such Lender shall purchase from the other Lenders, for cash and at par, such additional participation in the Obligations (excluding any Indebtedness under any Hedge Agreement or Bank Product Agreement) as shall be necessary to nullify the Advantage in respect of the Obligations. For purposes of determining whether or not, after the occurrence of an Equalization Event, an Advantage in respect of the Obligations (excluding any Indebtedness under any Hedge Agreement or Bank Product Agreement) shall exist, the Administrative Agent shall, as of the date that the Equalization Event occurs:

(i) add the Revolving Credit Exposure and the Term Loan Exposure to determine the equalization maximum amount (the “Equalization Maximum Amount”); and

(ii) determine an equalization percentage (the “Equalization Percentage”) for each Lender by dividing the aggregate amount of its Lender Credit Exposure by the Equalization Maximum Amount.

 

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After the date of an Equalization Event, the Administrative Agent shall determine whether an Advantage exists among the Lenders by using the Equalization Percentage. Such determination shall be conclusive absent manifest error.

(c) Recovery of Amount. If any such Advantage resulting in the purchase of an additional participation as set forth in subsection (a) or (b) hereof shall be recovered in whole or in part from the Lender receiving the Advantage, each such purchase shall be rescinded, and the purchase price restored (but without interest unless the Lender receiving the Advantage is required to pay interest on the Advantage to the Person recovering the Advantage from such Lender) ratably to the extent of the recovery.

(d) Application and Sharing of Set-Off Amounts. Each Lender further agrees with the other Lenders that, if it at any time shall receive any payment for or on behalf of the Borrower on any Indebtedness (other than, prior to the exercise by the Administrative Agent or the Required Lenders of remedies under this Agreement, any Indebtedness under any Hedge Agreement or Bank Product Agreement) owing by the Borrower to that Lender (whether by voluntary payment, by realization upon security, by reason of offset of any deposit or other Indebtedness, by counterclaim or cross action, by enforcement of any right under any Loan Document, or otherwise), it shall apply such payment first to any and all Obligations owing by the Borrower to that Lender pursuant to this Agreement (including, without limitation, any participation purchased or to be purchased pursuant to this Section 9.5 or any other section of this Agreement). Each Credit Party agrees that any Lender so purchasing a participation from the other Lenders, or any thereof, pursuant to this Section 9.5 may exercise all of its rights of payment (including the right of set-off) with respect to such participation as fully as if such Lender were a direct creditor of such Credit Party in the amount of such participation.

Section 9.6. Collateral. The Administrative Agent and the Lenders shall at all times have the rights and remedies of a secured party under the U.C.C., in addition to the rights and remedies of a secured party provided elsewhere within this Agreement, in any other Related Writing executed by the Borrower or otherwise provided in law or equity (subject to the receipt of any consents or approvals that may be required from a Governmental Authority before the Administrative Agent may exercise certain rights in the Event of Default). Upon the occurrence and during the continuance of an Event of Default and at all times thereafter, (a) the Administrative Agent may require the Borrower to assemble the collateral securing the Secured Obligations, which the Borrower agrees to do, and make it available to the Administrative Agent and the Lenders at a reasonably convenient place to be designated by the Administrative Agent, and (b) the Administrative Agent may, with or without notice to or demand upon the Borrower and with or without the aid of legal process, make use of such force as may be necessary to enter any premises where such collateral, or any thereof, may be found and to take possession thereof (including anything found in or on such collateral that is not specifically described in this Agreement, each of which findings shall be considered to be an accession to and a part of such collateral) and for that purpose may pursue such collateral wherever the same may be found, without liability for trespass or damage caused thereby to the Borrower. After any delivery or taking of possession of the collateral securing the Secured Obligations, or any portion thereof, pursuant to this Agreement, then, with or without resort to the Borrower personally or any other Person or property, all of which the Borrower hereby waives, and upon such terms and in such

 

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manner as the Administrative Agent may deem advisable, the Administrative Agent, in its discretion, may sell, assign, transfer and deliver any of such collateral at any time, or from time to time. No prior notice need be given to the Borrower or to any other Person in the case of any sale of such collateral that the Administrative Agent determines to be perishable or to be declining speedily in value or that is customarily sold in any recognized market, but in any other case the Administrative Agent shall give the Borrower not fewer than ten (10) days prior notice of either the time and place of any public sale of such collateral or of the time after which any private sale or other intended disposition thereof is to be made. The Borrower waives advertisement of any such sale and (except to the extent specifically required by the preceding sentence) waives notice of any kind in respect of any such sale. At any such public sale, the Administrative Agent or the Lenders may purchase such collateral, or any part thereof, free from any right of redemption, all of which rights the Borrower hereby waives and releases. After deducting all Related Expenses, and after paying all claims, if any, secured by Liens having precedence over this Agreement, the Administrative Agent may apply the net proceeds of each such sale to or toward the payment of the Secured Obligations, whether or not then due, in such order and by such division as the Administrative Agent, in its sole discretion, may deem advisable. Any excess, to the extent permitted by law, shall be paid to the Borrower, and the Borrower shall remain liable for any deficiency.

Section 9.7. Other Remedies. The remedies in this Article IX are in addition to, and not in limitation of, any other right, power, privilege, or remedy, either in law, in equity, or otherwise, to which the Lenders may be entitled. The Administrative Agent shall exercise the rights under this Article IX and all other collection efforts on behalf of the Lenders and no Lender shall act independently with respect thereto, except as otherwise specifically set forth in this Agreement. In addition, the Administrative Agent shall be entitled to exercise remedies, pursuant to the Loan Documents, against collateral securing the Secured Obligations, on behalf of any affiliate of a Lender that holds Secured Obligations, and no affiliate of a Lender shall act independently with respect thereto, except as otherwise specifically set forth in this Agreement.

Section 9.8. Application of Proceeds.

(a) Payments Prior to Exercise of Remedies. Prior to the exercise by the Administrative Agent, on behalf of the Lenders, of remedies under this Agreement or the other Loan Documents, all monies received by the Administrative Agent shall be applied, unless otherwise required by the terms of the other Loan Documents or by applicable law, as follows (provided that the Administrative Agent shall have the right at all times to apply any payment received from the Borrower first to the payment of all obligations (to the extent not paid by the Borrower) incurred by the Administrative Agent pursuant to Sections 11.5 and 11.6 hereof and to the payment of Related Expenses to the Administrative Agent):

(i) with respect to payments received in connection with the Revolving Credit Commitment, to the Revolving Lenders;

(ii) with respect to payments received in connection with the Term Loan Commitment, to the Term Lenders; and

 

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(iii) with respect to payments received in connection with an Additional Term Loan Facility, to the applicable Lenders.

(b) Payments Subsequent to Exercise of Remedies. After the exercise by the Administrative Agent or the Required Lenders of remedies under this Agreement or the other Loan Documents, all monies received by the Administrative Agent shall be applied, unless otherwise required by the terms of the other Loan Documents or by applicable law, as follows:

(i) first, to the payment of all costs, expenses and other amounts (to the extent not paid by the Borrower) incurred by the Administrative Agent pursuant to Sections 11.5 and 11.6 hereof and to the payment of Related Expenses to the Administrative Agent;

(ii) second, to the payment pro rata of (A) interest then accrued and payable on the outstanding Loans, (B) any fees then accrued and payable to the Administrative Agent, (C) any fees then accrued and payable to the Issuing Lender or the holders of the Letter of Credit Commitment in respect of the Letter of Credit Exposure, (D) any commitment fees, amendment fees and similar fees shared pro rata among the Lenders entitled thereto under this Agreement that are then accrued and payable, and (E) to the extent not paid by the Borrower, to the obligations incurred by the Lenders (other than the Administrative Agent) pursuant to Sections 11.5 and 11.6 hereof;

(iii) third, for payment of (A) principal outstanding on the Loans and the Letter of Credit Exposure, on a pro rata basis to the Lenders, based upon each such Lender’s Overall Commitment Percentage, provided that the amounts payable in respect of the Letter of Credit Exposure shall be held and applied by the Administrative Agent as security for the reimbursement obligations in respect thereof, and, if any Letter of Credit shall expire without being drawn, then the amount with respect to such Letter of Credit shall be distributed to the Lenders, on a pro rata basis in accordance with this subpart (iii), (B) the Indebtedness under any Hedge Agreement with a Lender (or an entity that is an affiliate of a then existing Lender), such amount to be based upon the net termination obligation of the Borrower under such Hedge Agreement, and (C) the Bank Product Obligations owing to a Lender (or an entity that is an affiliate of a then existing Lender) under Bank Product Agreements; with such payment to be pro rata among (A), (B) and (C) of this subpart (iii);

(iv) fourth, to any remaining Secured Obligations; and

(v) finally, any remaining surplus after all of the Secured Obligations have been paid in full, to the Borrower or to whomsoever shall be lawfully entitled thereto.

Each Lender hereby agrees to promptly provide all information reasonably requested by the Administrative Agent regarding any Bank Product Obligations owing to such Lender (or affiliate of such Lender) or any Hedge Agreement entered into by a Company with such Lender (or affiliate of such Lender), and each such Lender, on behalf of itself and any of its affiliates, hereby agrees to promptly provide notice to the Administrative Agent upon such Lender (or any of its affiliates) entering into any such Hedge Agreement or cash management services agreement.

 

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ARTICLE X. THE ADMINISTRATIVE AGENT

The Lenders authorize KeyBank and KeyBank hereby agrees to act as agent for the Lenders in respect of this Agreement upon the terms and conditions set forth elsewhere in this Agreement, and upon the following terms and conditions:

Section 10.1. Appointment and Authorization.

(a) General. Each Lender hereby irrevocably appoints and authorizes the Administrative Agent to take such action as agent on its behalf and to exercise such powers hereunder as are delegated to the Administrative Agent by the terms hereof, together with such powers as are reasonably incidental thereto. Neither the Administrative Agent nor any of its affiliates, directors, officers, attorneys or employees shall (a) be liable for any action taken or omitted to be taken by it or them hereunder or in connection herewith, except for its or their own gross negligence or willful misconduct (as determined by a final non-appealable judgment of a court of competent jurisdiction), or be responsible in any manner to any of the Lenders for the effectiveness, enforceability, genuineness, validity or due execution of this Agreement or any other Loan Documents, (b) be under any obligation to any Lender to ascertain or to inquire as to the performance or observance of any of the terms, covenants or conditions hereof or thereof on the part of the Borrower or any other Company, or the financial condition of the Borrower or any other Company, or (c) be liable to any of the Companies for consequential damages resulting from any breach of contract, tort or other wrong in connection with the negotiation, documentation, administration or collection of the Loans or Letters of Credit or any of the Loan Documents. Notwithstanding any provision to the contrary contained in this Agreement or in any other Loan Document, the Administrative Agent shall not have any duty or responsibility except those expressly set forth herein, nor shall the Administrative Agent have or be deemed to have any fiduciary relationship with any Lender or participant, and no implied covenants, functions, responsibilities, duties, obligations or liabilities shall be read into this Agreement or any other Loan Document or otherwise exist against the Administrative Agent. Without limiting the generality of the foregoing sentence, the use of the term “agent” herein and in other Loan Documents with reference to the Administrative Agent is not intended to connote any fiduciary or other implied (or express) obligations arising under agency doctrine of any applicable law. Instead, such term is used merely as a matter of market custom, and is intended to create or reflect only an administrative relationship between independent contracting parties.

(b) Bank Products and Hedging Products. Each Lender that is providing Bank Products or products in connection with a Hedge Agreement (or whose affiliate is providing such products) hereby irrevocably authorizes the Administrative Agent to take such action as agent on its behalf (and its affiliate’s behalf) with respect to the collateral securing the Secured Obligations and the realization of payments with respect thereto pursuant to Section 9.8(b)(iii) hereof. The Borrower and each Lender agree that the indemnification and reimbursement provisions of this Agreement shall be equally applicable to the actions of the Administrative Agent pursuant to this subsection (b). Each Lender hereby represents and warrants to the Administrative Agent that it has the authority to authorize the Administrative Agent as set forth above.

 

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Section 10.2. Note Holders. The Administrative Agent may treat the payee of any Note as the holder thereof (or, if there is no Note, the holder of the interest as reflected on the books and records of the Administrative Agent) until written notice of transfer shall have been filed with the Administrative Agent, signed by such payee and in form satisfactory to the Administrative Agent.

Section 10.3. Consultation With Counsel. The Administrative Agent may consult with legal counsel selected by the Administrative Agent and shall not be liable for any action taken or suffered in good faith by the Administrative Agent in accordance with the opinion of such counsel, in the absence of gross negligence or willful misconduct, as determined by a final and non-appealable judgment of a court of competent jurisdiction.

Section 10.4. Documents. The Administrative Agent shall not be under any duty to examine into or pass upon the validity, effectiveness, genuineness or value of any Loan Document or any other Related Writing furnished pursuant hereto or in connection herewith or the value of any collateral obtained hereunder, and the Administrative Agent shall be entitled to assume that the same are valid, effective and genuine and what they purport to be.

Section 10.5. Administrative Agent and Affiliates. KeyBank and its affiliates may make loans to, issue letters of credit for the account of, accept deposits from, acquire equity interests in and generally engage in any kind of banking, trust, financial advisory, underwriting or other business with the Companies and Affiliates as though KeyBank were not the Administrative Agent hereunder and without notice to or consent of any Lender. Each Lender acknowledges that, pursuant to such activities, KeyBank or its affiliates may receive information regarding any Company or any Affiliate (including information that may be subject to confidentiality obligations in favor of such Company or such Affiliate) and acknowledge that the Administrative Agent shall be under no obligation to provide such information to other Lenders. With respect to Loans and Letters of Credit (if any), KeyBank and its affiliates shall have the same rights and powers under this Agreement as any other Lender and may exercise the same as though KeyBank were not the Administrative Agent, and the terms “Lender” and “Lenders” include KeyBank and its affiliates, to the extent applicable, in their individual capacities.

Section 10.6. Knowledge or Notice of Default. The Administrative Agent shall not be deemed to have knowledge or notice of the occurrence of any Default or Event of Default unless the Administrative Agent has received written notice from a Lender or the Borrower referring to this Agreement, describing such Default or Event of Default and stating that such notice is a “notice of default”. In the event that the Administrative Agent receives such a notice, the Administrative Agent shall give notice thereof to the Lenders. The Administrative Agent shall take such action with respect to such Default or Event of Default as shall be reasonably directed by the Required Lenders (or, if so specified by this Agreement, all Lenders); provided that, unless and until the Administrative Agent shall have received such directions, the Administrative Agent may (but shall not be obligated to) take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable, in its discretion, for the protection of the interests of the Lenders.

 

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Section 10.7. Action by Administrative Agent. Subject to the other terms and conditions hereof, so long as the Administrative Agent shall be entitled, pursuant to Section 10.6 hereof, to assume that no Default or Event of Default shall have occurred and be continuing, the Administrative Agent shall be entitled to use its reasonable discretion with respect to exercising or refraining from exercising any rights that may be vested in it by, or with respect to taking or refraining from taking any action or actions that it may be able to take under or in respect of, this Agreement. The Administrative Agent shall incur no liability under or in respect of this Agreement by acting upon any notice, certificate, warranty or other paper or instrument believed by it to be genuine or authentic or to be signed by the proper party or parties, or with respect to anything that it may do or refrain from doing in the reasonable exercise of its judgment, or that may seem to it to be necessary or desirable in the premises. Without limiting the foregoing, no Lender shall have any right of action whatsoever against the Administrative Agent as a result of the Administrative Agent’s acting or refraining from acting hereunder in accordance with the instructions of the Required Lenders.

Section 10.8. Release of Collateral or Guarantor of Payment. In the event of a merger, transfer of assets or other transaction permitted pursuant to Section 5.12 hereof (or otherwise permitted pursuant to this Agreement) where the proceeds of such merger, transfer or other transaction are applied in accordance with the terms of this Agreement to the extent required to be so applied, or in the event of a merger, consolidation, dissolution or similar event, permitted pursuant to this Agreement, the Administrative Agent, at the request and expense of the Borrower, is hereby authorized by the Lenders to (a) release the relevant Collateral from this Agreement or any other Loan Document, (b) release a Guarantor of Payment in connection with such permitted transfer or event, and (c) duly assign, transfer and deliver to the affected Person (without recourse and without any representation or warranty) such Collateral as is then (or has been) so transferred or released and as may be in the possession of the Administrative Agent and has not theretofore been released pursuant to this Agreement.

Section 10.9. Delegation of Duties. The Administrative Agent may execute any of its duties under this Agreement or any other Loan Document by or through agents, employees or attorneys-in-fact and shall be entitled to advice of counsel and other consultants or experts concerning all matters pertaining to such duties. The Administrative Agent shall not be responsible for the negligence or misconduct of any agent or attorney-in-fact that it selects in the absence of gross negligence or willful misconduct, as determined by a final and non-appealable judgment of a court of competent jurisdiction.

Section 10.10. Indemnification of Administrative Agent. The Lenders agree to indemnify the Administrative Agent (to the extent not reimbursed by the Borrower) ratably, according to their respective Overall Commitment Percentages, from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including reasonable attorneys’ fees and expenses) or disbursements of any kind or nature whatsoever that may be imposed on, incurred by or asserted against the Administrative Agent in its capacity as agent in any way relating to or arising out of this Agreement or any other Loan Document, or any action taken or omitted by the Administrative Agent with respect to this Agreement or any other Loan

 

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Document, provided that no Lender shall be liable for any portion of such liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including reasonable attorneys’ fees and expenses) or disbursements resulting from the Administrative Agent’s gross negligence or willful misconduct, as determined by a final and non-appealable judgment of a court of competent jurisdiction, or from any action taken or omitted by the Administrative Agent in any capacity other than as agent under this Agreement or any other Loan Document. No action taken in accordance with the directions of the Required Lenders shall be deemed to constitute gross negligence or willful misconduct for purposes of this Section 10.10. The undertaking in this Section 10.10 shall survive repayment of the Loans, cancellation of the Notes, if any, expiration or termination of the Letters of Credit, termination of the Commitment, any foreclosure under, or modification, release or discharge of, any or all of the Loan Documents, termination of this Agreement and the resignation or replacement of the agent.

Section 10.11. Successor Administrative Agent. The Administrative Agent may resign as agent hereunder by giving not fewer than thirty (30) days prior written notice to the Borrower and the Lenders. If the Administrative Agent shall resign under this Agreement, then either (a) the Required Lenders shall appoint from among the Lenders a successor agent for the Lenders (with the consent of the Borrower so long as an Event of Default does not exist and which consent shall not be unreasonably withheld), or (b) if a successor agent shall not be so appointed and approved within the thirty (30) day period following the Administrative Agent’s notice to the Lenders of its resignation, then the Administrative Agent shall appoint a successor agent that shall serve as agent until such time as the Required Lenders appoint a successor agent. If no successor agent has accepted appointment as the Administrative Agent by the date that is thirty (30) days following a retiring Administrative Agent’s notice of resignation, the retiring Administrative Agent’s resignation shall nevertheless thereupon become effective, and the Lenders shall assume and perform all of the duties of the Administrative Agent hereunder until such time, if any, as the Required Lenders appoint a successor agent as provided for above. Upon its appointment, such successor agent shall succeed to the rights, powers and duties as agent, and the term “Administrative Agent” means such successor effective upon its appointment, and the former agent’s rights, powers and duties as agent shall be terminated without any other or further act or deed on the part of such former agent or any of the parties to this Agreement. After any retiring Administrative Agent’s resignation as the Administrative Agent, the provisions of this Article X shall inure to its benefit as to any actions taken or omitted to be taken by it while it was the Administrative Agent under this Agreement and the other Loan Documents.

Section 10.12. Issuing Lender. The Issuing Lender shall act on behalf of the Revolving Lenders with respect to any Letters of Credit issued by the Issuing Lender and the documents associated therewith. The Issuing Lender shall have all of the benefits and immunities (a) provided to the Administrative Agent in this Article X with respect to any acts taken or omissions suffered by the Issuing Lender in connection with the Letters of Credit and the applications and agreements for letters of credit pertaining to such Letters of Credit as fully as if the term “Administrative Agent”, as used in this Article X, included the Issuing Lender with respect to such acts or omissions, and (b) as additionally provided in this Agreement with respect to the Issuing Lender.

 

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Section 10.13. Swing Line Lender. The Swing Line Lender shall act on behalf of the Revolving Lenders with respect to any Swing Loans. The Swing Line Lender shall have all of the benefits and immunities (a) provided to the Administrative Agent in this Article X with respect to any acts taken or omissions suffered by the Swing Line Lender in connection with the Swing Loans as fully as if the term “Administrative Agent”, as used in this Article X, included the Swing Line Lender with respect to such acts or omissions, and (b) as additionally provided in this Agreement with respect to the Swing Line Lender.

Section 10.14. Administrative Agent May File Proofs of Claim. In case of the pendency of any receivership, insolvency, liquidation, bankruptcy, reorganization, arrangement, adjustment, composition or other judicial proceeding relative to any Credit Party, (a) the Administrative Agent (irrespective of whether the principal of any Loan shall then be due and payable as herein expressed or by declaration or otherwise and irrespective of whether the Administrative Agent shall have made any demand on the Borrower) shall be entitled and empowered, by intervention in such proceeding or otherwise, to (i) file and prove a claim for the whole amount of the principal and interest owing and unpaid in respect of the Loans, and all other Obligations that are owing and unpaid and to file such other documents as may be necessary or advisable in order to have the claims of the Lenders and the Administrative Agent (including any claim for the reasonable compensation, expenses, disbursements and advances of the Lenders and the Administrative Agent and their respective agents and counsel and all other amounts due the Lenders and the Administrative Agent) allowed in such judicial proceedings, and (ii) collect and receive any monies or other property payable or deliverable on any such claims and to distribute the same; and (b) any custodian, receiver, assignee, trustee, liquidator, sequestrator or other similar official in any such judicial proceeding is hereby authorized by each Lender to make such payments to the Administrative Agent and, in the event that the Administrative Agent shall consent to the making of such payments directly to the Lenders, to pay to the Administrative Agent any amount due for the reasonable compensation, expenses, disbursements and advances of the Administrative Agent and its agents and counsel, and any other amounts due the Administrative Agent. Nothing contained herein shall be deemed to authorize the Administrative Agent to authorize or consent to or accept or adopt on behalf of any Lender any plan of reorganization, arrangement, adjustment or composition affecting the Obligations or the rights of any Lender or to authorize the Administrative Agent to vote in respect of the claim of any Lender in any such proceeding.

Section 10.15. No Reliance on Administrative Agent’s Customer Identification Program. Each Lender acknowledges and agrees that neither such Lender, nor any of its affiliates, participants or assignees, may rely on the Administrative Agent to carry out such Lender’s or its affiliate’s, participant’s or assignee’s customer identification program, or other obligations required or imposed under or pursuant to the Patriot Act or the regulations thereunder, including the regulations contained in 31 CFR 103.121 (as hereafter amended or replaced, the “CIP Regulations”), or any other anti-terrorism law, including any programs involving any of the following items relating to or in connection with the Borrower, its Affiliates or agents, the Loan Documents or the transactions hereunder: (a) any identity verification procedures, (b) any record keeping, (c) any comparisons with government lists, (d) any customer notices or (e) any other procedures required under the CIP Regulations or such other laws.

 

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Section 10.16. Other Agents. The Administrative Agent shall have the continuing right, in consultation with the Borrower, from time to time to designate one or more Lenders (or its or their affiliates) as “syndication agent”, “co-syndication agent”, “documentation agent”, “co-documentation agent”, “book runner”, “lead arranger”, “joint lead arranger”, “arrangers” or other designations for purposes hereof. Any such designation referenced in the previous sentence or listed on the cover of this Agreement shall have no substantive effect, and any such Lender and its affiliates so referenced or listed shall have no additional powers, duties, responsibilities or liabilities as a result thereof, except in its capacity, as applicable, as the Administrative Agent, a Lender, the Swing Line Lender or the Issuing Lender hereunder.

ARTICLE XI. MISCELLANEOUS

Section 11.1. Lenders’ Independent Investigation. Each Lender, by its signature to this Agreement, acknowledges and agrees that the Administrative Agent has made no representation or warranty, express or implied, with respect to the creditworthiness, financial condition, or any other condition of any Company or with respect to the statements contained in any information memorandum furnished in connection herewith or in any other oral or written communication between the Administrative Agent and such Lender. Each Lender represents that it has made and shall continue to make its own independent investigation of the creditworthiness, financial condition and affairs of the Companies in connection with the extension of credit hereunder, and agrees that the Administrative Agent has no duty or responsibility, either initially or on a continuing basis, to provide any Lender with any credit or other information with respect thereto (other than such notices as may be expressly required to be given by the Administrative Agent to the Lenders hereunder), whether coming into its possession before the first Credit Event hereunder or at any time or times thereafter. Each Lender further represents that it has reviewed each of the Loan Documents.

Section 11.2. No Waiver; Cumulative Remedies. No omission or course of dealing on the part of the Administrative Agent, any Lender or the holder of any Note (or, if there is no Note, the holder of the interest as reflected on the books and records of the Administrative Agent) in exercising any right, power or remedy hereunder or under any of the other Loan Documents shall operate as a waiver thereof; nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy hereunder or under any of the Loan Documents. The remedies herein provided are cumulative and in addition to any other rights, powers or privileges held under any of the Loan Documents or by operation of law, by contract or otherwise.

Section 11.3. Amendments, Waivers and Consents.

(a) General Rule. No amendment, modification, termination, or waiver of any provision of any Loan Document nor consent to any variance therefrom (other than pursuant to Section 2.10(b) and (c) hereof), shall be effective unless the same shall be in writing and signed by the Required Lenders and, other than with respect to waivers and consents, the Borrower, and then such waiver or consent shall be effective only in the specific instance and for the specific purpose for which given.

 

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(b) Exceptions to the General Rule. Notwithstanding the provisions of subsection (a) above, but subject to the provisions of Section 2.10(b) and (c) hereof:

(i) Consent of Affected Lenders Required. No amendment, modification, waiver or consent shall (A) extend or increase the Commitment of any Lender without the written consent of such Lender, (B) extend the date scheduled for payment of any principal (excluding mandatory prepayments) of or interest on the Loans or Letter of Credit reimbursement obligations or commitment fees payable hereunder without the written consent of each Lender directly affected thereby, (C) reduce the principal amount of any Loan, the stated rate of interest thereon (provided that the institution of the Default Rate or post default interest and a subsequent removal of the Default Rate or post default interest shall not constitute a decrease in interest rate pursuant to this Section 11.3(b)) or the stated rate of commitment fees payable hereunder, without the consent of each Lender directly affected thereby, (D) change the manner of the application of any payments made by the Borrower to the Lenders hereunder, without the consent of each Lender directly affected thereby, (E) without the unanimous consent of the Lenders, change any percentage voting requirement, voting rights, or the Required Lenders definition in this Agreement, (F) without the unanimous consent of the Lenders, release the Borrower or any Guarantor of Payment or release or subordinate any material amount of collateral securing the Secured Obligations, except in connection with a transaction specifically permitted hereunder, (G) without the unanimous consent of the Lenders, amend this Section 11.3 or Section 9.5 or 9.8 hereof, or (H) without the unanimous consent of the Lenders, permit the Borrower to assign its rights hereunder or any interest herein.

(ii) Provisions Relating to Special Rights and Duties. No provision of this Agreement affecting the Administrative Agent in its capacity as such shall be amended, modified or waived without the consent of the Administrative Agent. The Administrative Agent Fee Letter may be amended or modified by the Administrative Agent and the Borrower without the consent of any other Lender. No provision of this Agreement relating to the rights or duties of the Issuing Lender in its capacity as such shall be amended, modified or waived without the consent of the Issuing Lender. No provision of this Agreement relating to the rights or duties of the Swing Line Lender in its capacity as such shall be amended, modified or waived without the consent of the Swing Line Lender.

(iii) Technical and Conforming Modifications. Notwithstanding the foregoing, technical and conforming modifications to the Loan Documents may be made with the consent of the Borrower and the Administrative Agent (A) if such modifications are not adverse to the Lenders and are requested by Governmental Authorities, (B) to cure any ambiguity, defect or inconsistency, or (C) to the extent necessary to integrate any increase in the Commitment or new Loans pursuant to Section 2.10(b) hereof.

 

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(c) Replacement of Non-Consenting Lender. If, in connection with any proposed amendment, waiver or consent hereunder, the consent of all Lenders is required, but only the consent of Required Lenders is obtained, (any Lender withholding consent as described in this subsection (c) being referred to as a “Non-Consenting Lender”), then, so long as the Administrative Agent is not the Non-Consenting Lender, the Administrative Agent may (and shall, if requested by the Borrower), at the sole expense of the Borrower, upon notice to such Non-Consenting Lender and the Borrower, require such Non-Consenting Lender to assign and delegate, without recourse (in accordance with the restrictions contained in Section 11.10 hereof) all of its interests, rights and obligations under this Agreement to a financial institution acceptable to the Administrative Agent and the Borrower that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that such Non-Consenting Lender shall have received payment of an amount equal to the outstanding principal of its Loans, accrued interest thereon, accrued fees and all other amounts payable to it hereunder, from such financial institution (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts, including any breakage compensation under Article III hereof).

(d) Generally. Notice of amendments, waivers or consents ratified by the Lenders hereunder shall be forwarded by the Administrative Agent to all of the Lenders. Each Lender or other holder of a Note, or if there is no Note, the holder of the interest as reflected on the books and records of the Administrative Agent (or interest in any Loan or Letter of Credit) shall be bound by any amendment, waiver or consent obtained as authorized by this Section 11.3, regardless of its failure to agree thereto.

Section 11.4. Notices. All notices, requests, demands and other communications provided for hereunder shall be in writing and, if to the Borrower, mailed or delivered to it, addressed to it at the address specified on the signature pages of this Agreement, if to the Administrative Agent or a Lender, mailed or delivered to it, addressed to the address of the Administrative Agent or such Lender specified on the signature pages of this Agreement, or, as to each party, at such other address as shall be designated by such party in a written notice to each of the other parties. All notices, statements, requests, demands and other communications provided for hereunder shall be deemed to be given or made when delivered (if received during normal business hours on a Business Day, such Business Day or otherwise the following Business Day), or two Business Days after being deposited in the mails with postage prepaid by registered or certified mail, addressed as aforesaid, or sent by facsimile or electronic communication, in each case of facsimile or electronic communication with telephonic confirmation of receipt. All notices pursuant to any of the provisions hereof shall not be effective until received. For purposes of Article II hereof, the Administrative Agent shall be entitled to rely on telephonic instructions from any person that the Administrative Agent in good faith believes is an Authorized Officer, and the Borrower shall hold the Administrative Agent and each Lender harmless from any loss, cost or expense resulting from any such reliance.

Section 11.5. Costs, Expenses and Documentary Taxes. The Borrower agrees to pay on demand all reasonable out-of-pocket costs and expenses of the Administrative Agent and all Related Expenses, including but not limited to (a) reasonable syndication, administration, travel and out-of-pocket expenses, including but not limited to properly documented attorneys’ fees

 

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and expenses, of the Administrative Agent in connection with the preparation, negotiation and closing of the Loan Documents and the administration of the Loan Documents, and the collection and disbursement of all funds hereunder and the other instruments and documents to be delivered hereunder, and (b) the reasonable and actual fees and expenses of special counsel for the Administrative Agent, with respect to the foregoing, and of local counsel, if any, who may be retained by said special counsel with respect thereto. The Borrower also agrees to pay on demand all out-of-pocket costs and expenses (including Related Expenses) of the Administrative Agent and the Lenders, including reasonable and actual attorneys’ fees and expenses, in connection with the restructuring, amendment or enforcement of the Obligations, this Agreement or any other Related Writing. In addition, the Borrower shall pay any and all properly documented stamp, transfer, documentary and other similar taxes, assessments, charges and fees payable or determined to be payable in connection with the execution and delivery of the Loan Documents, and the other instruments and documents to be delivered hereunder, and agrees to hold the Administrative Agent and each Lender harmless from and against any and all liabilities with respect to or resulting from any delay in paying or failure to pay such taxes or fees, other than those liabilities resulting from the gross negligence or willful misconduct of the Administrative Agent, or, with respect to amounts owing to a Lender, such Lender, in each case as determined by a final and non-appealable judgment of a court of competent jurisdiction. All obligations provided for in this Section 11.5 shall survive any termination of this Agreement.

Section 11.6. Indemnification. The Borrower agrees to defend, indemnify and hold harmless the Administrative Agent, the Issuing Lender and the Lenders (and their respective affiliates, officers, directors, attorneys, agents and employees) from and against any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses (including reasonable attorneys’ fees) or disbursements of any kind or nature whatsoever that may be imposed on, incurred by or asserted against the Administrative Agent or any Lender in connection with any investigative, administrative or judicial proceeding (whether or not such Lender or the Administrative Agent shall be designated a party thereto) or any other claim by any Person (or any other Credit Party) relating to or arising out of any Loan Document or any actual or proposed use of proceeds of the Loans or any of the Obligations, or any activities of any Company or its Affiliates; provided that no Lender nor the Administrative Agent shall have the right to be indemnified under this Section 11.6 for its own (or its respective affiliates’, officers’, directors’, attorneys’, agents’ or employees’) gross negligence or willful misconduct, as determined by a final and non-appealable judgment of a court of competent jurisdiction. All obligations provided for in this Section 11.6 shall survive any termination of this Agreement. Notwithstanding the foregoing, the obligations provided for in this Section 11.6 shall not apply with respect to any Taxes that are Indemnified Taxes or Excluded Taxes.

Section 11.7. Obligations Several; No Fiduciary Obligations. The obligations of the Lenders hereunder are several and not joint. Nothing contained in this Agreement and no action taken by the Administrative Agent or the Lenders pursuant hereto shall be deemed to constitute the Administrative Agent or the Lenders a partnership, association, joint venture or other entity. No default by any Lender hereunder shall excuse the other Lenders from any obligation under this Agreement; but no Lender shall have or acquire any additional obligation of any kind by reason of such default. The relationship between the Borrower and the Lenders with respect to the Loan Documents and the other Related Writings is and shall be solely that of debtor and creditors, respectively, and neither the Administrative Agent nor any Lender shall have any fiduciary obligation toward any Credit Party with respect to any such documents or the transactions contemplated thereby.

 

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Section 11.8. Execution in Counterparts. This Agreement may be executed in any number of counterparts and by different parties hereto in separate counterparts, and by facsimile or other electronic signature, each of which counterparts when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement.

Section 11.9. Binding Effect; Borrower’s Assignment. This Agreement shall become effective when it shall have been executed by the Borrower, the Administrative Agent and each Lender and thereafter shall be binding upon and inure to the benefit of the Borrower, the Administrative Agent and each of the Lenders and their respective successors and permitted assigns, except that the Borrower shall not have the right to assign its rights hereunder or any interest herein without the prior written consent of the Administrative Agent and all of the Lenders.

Section 11.10. Lender Assignments.

(a) Assignments of Commitments. Each Lender shall have the right at any time or times to assign to an Eligible Transferee (other than to a Defaulting Lender), without recourse, all or a percentage of all of the following: (i) such Lender’s Commitment, (ii) all Loans made by that Lender, (iii) such Lender’s Notes, and (iv) such Lender’s interest in any Letter of Credit or Swing Loan, and any participation purchased pursuant to Section 2.2(b) or (c) or Section 9.5 hereof.

(b) Prior Consent. No assignment may be consummated pursuant to this Section 11.10 without the prior written consent of the Borrower and the Administrative Agent (other than an assignment by any Lender to any affiliate of such Lender which affiliate is an Eligible Transferee and either wholly-owned by a Lender or is wholly-owned by a Person that wholly owns, either directly or indirectly, such Lender, or to another Lender), which consent of the Borrower and the Administrative Agent shall not be unreasonably withheld; provided that (i) the consent of the Borrower shall not be required (except for an assignment to a Defaulting Lender) if, at the time of the proposed assignment, any Default or Event of Default shall then exist, and (ii) the Borrower shall be deemed to have granted its consent unless the Borrower has expressly objected to such assignment within five (5) Business Days after notice thereof. Anything herein to the contrary notwithstanding, any Lender may at any time make a collateral assignment of all or any portion of its rights under the Loan Documents to a Federal Reserve Bank, and no such assignment shall release such assigning Lender from its obligations hereunder.

(c) Minimum Amount. Each such assignment shall be in a minimum amount of the lesser of Five Million Dollars ($5,000,000) of the assignor’s Commitment and interest herein, or the entire amount of the assignor’s Commitment and interest herein.

 

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(d) Assignment Fee. Unless the assignment shall be to an affiliate of the assignor or the assignment shall be due to merger of the assignor or for regulatory purposes, either the assignor or the assignee shall remit to the Administrative Agent, for its own account, an administrative fee of Three Thousand Five Hundred Dollars ($3,500).

(e) Assignment Agreement. Unless the assignment shall be due to merger of the assignor or a collateral assignment for regulatory purposes, the assignor shall (i) cause the assignee to execute and deliver to the Borrower and the Administrative Agent an Assignment Agreement, and (ii) execute and deliver, or cause the assignee to execute and deliver, as the case may be, to the Administrative Agent such additional amendments, assurances and other writings as the Administrative Agent may reasonably require.

(f) Non-U.S. Assignee. If the assignment is to be made to an assignee that is not a U.S. Person, the assignor Lender shall cause such assignee, at least five Business Days prior to the effective date of such assignment, (i) to represent to the assignor Lender (for the benefit of the assignor Lender, the Administrative Agent and the Borrower) that under applicable law and treaties no taxes will be required to be withheld by the Administrative Agent, the Borrower or the assignor with respect to any payments to be made to such assignee in respect of the Loans hereunder, (ii) to furnish to the assignor Lender (and, in the case of any assignee registered in the Register (as defined below), the Administrative Agent and the Borrower) either U.S. Internal Revenue Service Form W-8ECI, Form W-8IMY, Form W-8BEN, or Form W-8BEN-E, as applicable (wherein such assignee claims entitlement to complete exemption from U.S. federal withholding tax on all payments hereunder), and (iii) to agree (for the benefit of the assignor, the Administrative Agent and the Borrower) to provide to the assignor Lender (and, in the case of any assignee registered in the Register, to the Administrative Agent and the Borrower) a new Form W-8ECI, Form W-8IMY, Form W-8BEN, or Form W-8BEN-E, as applicable, upon the expiration or obsolescence of any previously delivered form and comparable statements in accordance with applicable U.S. laws and regulations and amendments duly executed and completed by such assignee, and to comply from time to time with all applicable U.S. laws and regulations with regard to such withholding tax exemption.

(g) Deliveries by Borrower. Upon satisfaction of all applicable requirements specified in subsections (a) through (f) above, the Borrower shall execute and deliver (i) to the Administrative Agent, the assignor and the assignee, any consent or release (of all or a portion of the obligations of the assignor) required to be delivered by the Borrower in connection with the Assignment Agreement, and (ii) to the assignee, if requested, and the assignor, if applicable, an appropriate Note or Notes. After delivery of the new Note or Notes, the assignor’s Note or Notes, if any, being replaced shall be returned to the Borrower marked “replaced”.

(h) Effect of Assignment. Upon satisfaction of all applicable requirements set forth in subsections (a) through (g) above, and any other condition contained in this Section 11.10, (i) the assignee shall become and thereafter be deemed to be a “Lender” for the purposes of this Agreement, (ii) the assignor shall be released from its obligations hereunder to the extent that its interest has been assigned, (iii) in the event that the assignor’s entire interest has been assigned, the assignor shall cease to be and thereafter shall no longer be deemed to be a “Lender” and (iv) the signature pages hereto and Schedule 1 hereto shall be automatically amended, without further action, to reflect the result of any such assignment.

 

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(i) Administrative Agent to Maintain Register. The Administrative Agent shall maintain at the address for notices referred to in Section 11.4 hereof a copy of each Assignment Agreement delivered to it and a register (the “Register”) for the recordation of the names and addresses of the Lenders and the Commitment of, and principal amount of the Loans owing to, each Lender from time to time. The entries in the Register shall be conclusive, in the absence of manifest error, and the Borrower, the Administrative Agent and the Lenders may treat each Person whose name is recorded in the Register as the owner of the Loan recorded therein for all purposes of this Agreement. The Register shall be available for inspection by the Borrower or any Lender at any reasonable time and from time to time upon reasonable prior notice.

Section 11.11. Sale of Participations. Any Lender may, in the ordinary course of its commercial banking business and in accordance with applicable law, at any time sell participations to one or more Eligible Transferees (each a “Participant”) in all or a portion of its rights or obligations under this Agreement and the other Loan Documents (including, without limitation, all or a portion of the Commitment and the Loans and participations owing to it and the Note, if any, held by it); provided that:

(a) any such Lender’s obligations under this Agreement and the other Loan Documents shall remain unchanged;

(b) such Lender shall remain solely responsible to the other parties hereto for the performance of such obligations;

(c) the parties hereto shall continue to deal solely and directly with such Lender in connection with such Lender’s rights and obligations under this Agreement and each of the other Loan Documents;

(d) such Participant shall be bound by the provisions of Sections 3.4, 3.6 and 9.5 hereof, and the Lender selling such participation shall obtain from such Participant a written confirmation of its agreement to be so bound; and

(e) no Participant (unless such Participant is itself a Lender) shall be entitled to require such Lender to take or refrain from taking action under this Agreement or under any other Loan Document, except that such Lender may agree with such Participant that such Lender will not, without such Participant’s consent, take action of the type described as follows:

(i) increase the portion of the participation amount of any Participant over the amount thereof then in effect, or extend the Commitment Period, without the written consent of each Participant affected thereby; or

(ii) reduce the principal amount of or extend the time for any payment of principal of any Loan, or reduce the rate of interest or extend the time for payment of interest on any Loan, or reduce the commitment fee, without the written consent of each Participant affected thereby.

 

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The Borrower agrees that any Lender that sells participations pursuant to this Section 11.11 shall still be entitled to the benefits of Article III hereof, notwithstanding any such transfer; provided that the obligations of the Borrower shall not increase as a result of such transfer and the Borrower shall have no obligation to any Participant. Each Lender that sells a participation shall, acting solely for this purpose as a non-fiduciary agent of the Borrower, maintain a register on which it enters the name and address of each Participant and the principal amounts (and stated interest) of each Participant’s interest in the Loans or other obligations under the Loan Documents (the “Participant Register”); provided that no Lender shall have any obligation to disclose all or any portion of the Participant Register (including the identity of any Participant or any information relating to a Participant’s interest in any commitments, loans, letters of credit or its other obligations under any Loan Document) to any Person except to the extent that such disclosure is necessary to establish that such commitment, loan, letter of credit or other obligation is in registered form under Section 5f.103-1(c) of the United States Treasury Regulations. The entries in the Participant Register shall be conclusive absent manifest error, and such Lender shall treat each Person whose name is recorded in the Participant Register as the owner of such participation for all purposes of this Agreement notwithstanding any notice to the contrary. For the avoidance of doubt, the Administrative Agent (in its capacity as Administrative Agent) shall have no responsibility for maintaining a Participant Register.

Section 11.12. Replacement of Affected Lenders. Each Lender agrees that, during the time in which any Lender is an Affected Lender, the Administrative Agent shall have the right (and the Administrative Agent shall, if requested by the Borrower), at the sole expense of the Borrower, upon notice to such Affected Lender and the Borrower, to require that such Affected Lender assign and delegate, without recourse (in accordance with the restrictions contained in Section 11.10 hereof), all of its interests, rights and obligations under this Agreement to an Eligible Transferee, approved by the Borrower (unless an Event of Default shall exist) and the Administrative Agent, that shall assume such obligations (which assignee may be another Lender, if a Lender accepts such assignment); provided that such Affected Lender shall have received payment of an amount equal to the outstanding principal of its Loans (any such payment of principal shall be considered a prepayment of such Loans for purposes of Section 3.3 hereof), accrued interest thereon, accrued fees and all other amounts payable to it hereunder (recognizing that any Affected Lender may have given up its rights under this Agreement to receive payment of fees and other amounts pursuant to Section 2.7(e) and (f) hereof), from such Eligible Transferee (to the extent of such outstanding principal and accrued interest and fees) or the Borrower (in the case of all other amounts, including any breakage compensation under Article III hereof).

Section 11.13. Patriot Act Notice. Each Lender, and the Administrative Agent (for itself and not on behalf of any other party), hereby notifies the Credit Parties that, pursuant to the requirements of the Patriot Act, such Lender and the Administrative Agent are required to obtain, verify and record information that identifies the Credit Parties, which information includes the name and address of each of the Credit Parties and other information that will allow such Lender or the Administrative Agent, as applicable, to identify the Credit Parties in accordance with the

 

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Patriot Act. The Borrower shall provide, to the extent commercially reasonable, such information and take such actions as are reasonably requested by the Administrative Agent or a Lender in order to assist the Administrative Agent or such Lender in maintaining compliance with the Patriot Act.

Section 11.14. Severability of Provisions; Captions; Attachments. Any provision of this Agreement that shall be prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof or affecting the validity or enforceability of such provision in any other jurisdiction. The several captions to sections and subsections herein are inserted for convenience only and shall be ignored in interpreting the provisions of this Agreement. Each schedule or exhibit attached to this Agreement shall be incorporated herein and shall be deemed to be a part hereof.

Section 11.15. Investment Purpose. Each of the Lenders represents and warrants to the Borrower that such Lender is entering into this Agreement with the present intention of acquiring any Note issued pursuant hereto (or, if there is no Note, the interest as reflected on the books and records of the Administrative Agent) for investment purposes only and not for the purpose of distribution or resale, it being understood, however, that each Lender shall at all times retain full control over the disposition of its assets.

Section 11.16. Entire Agreement. This Agreement, any Note and any other Loan Document or other agreement, document or instrument attached hereto or executed on or as of the Closing Date integrate all of the terms and conditions mentioned herein or incidental hereto and supersede all oral representations and negotiations and prior writings with respect to the subject matter hereof (except with respect to any provisions of the Administrative Agent Fee Letter or any commitment letter and fee letter between the Borrower and KeyBank that by their terms survive the termination of such agreements, in each case, which shall remain in full force and effect after the Closing Date).

Section 11.17. Confidentiality. The Administrative Agent and each Lender shall hold all Confidential Information in accordance with the customary procedures of the Administrative Agent or such Lender for handling confidential information of this nature, and in accordance with safe and sound banking practices. Notwithstanding the foregoing, the Administrative Agent or any Lender may in any event make disclosures of, and furnish copies of Confidential Information (a) to another agent under this Agreement or another Lender; (b) when reasonably required by any bona fide transferee or participant in connection with the contemplated transfer of any Loans or Commitment or participation therein (provided that each such prospective transferee or participant shall have an agreement for the benefit of the Borrower with such prospective transferor Lender or participant containing substantially similar provisions to those contained in this Section 11.17); (c) to the parent corporation or other affiliates of the Administrative Agent or such Lender, and to their respective auditors, accountants and attorneys; and (d) as required or requested by any Governmental Authority or representative thereof, or pursuant to legal process, provided, that, unless specifically prohibited by applicable law or court order, the Administrative Agent or such Lender, as applicable, shall notify the chief financial officer of the Borrower of any request by any Governmental Authority or representative thereof

 

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(other than any such request in connection with an examination of the financial condition of the Administrative Agent or such Lender by such Governmental Authority), and of any other request pursuant to legal process, for disclosure of any such non-public information prior to disclosure of such Confidential Information. In no event shall the Administrative Agent or any Lender be obligated or required to return any materials furnished by or on behalf of any Company. The Borrower hereby agrees that the failure of the Administrative Agent or any Lender to comply with the provisions of this Section 11.17 shall not relieve the Borrower of any of the obligations to the Administrative Agent and the Lenders under this Agreement and the other Loan Documents.

Section 11.18. Limitations on Liability of the Issuing Lender. The Borrower assumes all risks of the acts or omissions of any beneficiary or transferee of any Letter of Credit with respect to its use of such Letters of Credit. Neither the Issuing Lender nor any of its officers or directors shall be liable or responsible for (a) the use that may be made of any Letter of Credit or any acts or omissions of any beneficiary or transferee in connection therewith; (b) the validity, sufficiency or genuineness of documents, or of any endorsement thereon, even if such documents should prove to be in any or all respects invalid, insufficient, fraudulent or forged; (c) payment by the Issuing Lender against presentation of documents that do not comply with the terms of a Letter of Credit, including failure of any documents to bear any reference or adequate reference to such Letter of Credit; or (d) any other circumstances whatsoever in making or failing to make payment under any Letter of Credit, except that the account party on such Letter of Credit shall have a claim against the Issuing Lender, and the Issuing Lender shall be liable to such account party, to the extent of any direct, but not consequential, damages suffered by such account party that such account party proves were caused by (i) the Issuing Lender’s willful misconduct or gross negligence (as determined by a final judgment of a court of competent jurisdiction) in determining whether documents presented under a Letter of Credit comply with the terms of such Letter of Credit, or (ii) the Issuing Lender’s willful failure to make lawful payment under any Letter of Credit after the presentation to it of documentation strictly complying with the terms and conditions of such Letter of Credit. In furtherance and not in limitation of the foregoing, the Issuing Lender may accept documents that appear on their face to be in order, without responsibility for further investigation.

Section 11.19. General Limitation of Liability. No claim may be made by any Credit Party or any other Person against the Administrative Agent, the Issuing Lender, or any other Lender or the affiliates, directors, officers, employees, attorneys or agents of any of them for any damages other than actual compensatory damages in respect of any claim for breach of contract or any other theory of liability arising out of or related to the transactions contemplated by this Agreement or any of the other Loan Documents, or any act, omission or event occurring in connection therewith; and the Borrower, each Lender, the Administrative Agent and the Issuing Lender hereby, to the fullest extent permitted under applicable law, waive, release and agree not to sue or counterclaim upon any such claim for any special, indirect, consequential or punitive damages, whether or not accrued and whether or not known or suspected to exist in their favor and regardless of whether any Lender, Issuing Lender, or the Administrative Agent has been advised of the likelihood of such loss of damage.

 

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Section 11.20. No Duty. All attorneys, accountants, appraisers, consultants and other professional persons (including the firms or other entities on behalf of which any such Person may act) retained by the Administrative Agent or any Lender with respect to the transactions contemplated by the Loan Documents shall have the right to act exclusively in the interest of the Administrative Agent or such Lender, as the case may be, and shall have no duty of disclosure, duty of loyalty, duty of care, or other duty or obligation of any type or nature whatsoever to the Borrower, any other Companies, or any other Person, with respect to any matters within the scope of such representation or related to their activities in connection with such representation. The Borrower agrees, on behalf of itself and its Subsidiaries, not to assert any claim or counterclaim against any such persons with regard to such matters, all such claims and counterclaims, now existing or hereafter arising, whether known or unknown, foreseen or unforeseeable, being hereby waived, released and forever discharged.

Section 11.21. Legal Representation of Parties. The Loan Documents were negotiated by the parties with the benefit of legal representation and any rule of construction or interpretation otherwise requiring this Agreement or any other Loan Document to be construed or interpreted against any party shall not apply to any construction or interpretation hereof or thereof.

Section 11.22. Acknowledgement and Consent to Bail-In of EEA Financial Institutions. Notwithstanding anything to the contrary in any Loan Document or in any other agreement, arrangement or understanding among any such parties, each party hereto acknowledges that any liability of any EEA Financial Institution arising under any Loan Document, to the extent such liability is unsecured, may be subject to the Write-Down and Conversion Powers of an EEA Resolution Authority and agrees and consents to, and acknowledges and agrees to be bound by:

(a) the application of any Write-Down and Conversion Powers by an EEA Resolution Authority to any such liabilities arising hereunder that may be payable to it by any party hereto that is an EEA Financial Institution; and

(b) the effects of any Bail-in Action on any such liability, including, if applicable:

(i) a reduction in full or in part or cancellation of any such liability;

(ii) a conversion of all, or a portion of, such liability into shares or other instruments of ownership in such EEA Financial Institution, its parent undertaking, or a bridge institution that may be issued to it or otherwise conferred on it, and that such shares or other instruments of ownership will be accepted by it in lieu of any rights with respect to any such liability under this Agreement or any other Loan Document; or

(iii) the variation of the terms of such liability in connection with the exercise of the Write-Down and Conversion Powers of any EEA Resolution Authority.

 

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Section 11.23. Governing Law; Submission to Jurisdiction.

(a) Governing Law. This Agreement, each of the Notes and any other Related Writing shall be governed by and construed in accordance with the laws of the State of New York and the respective rights and obligations of the Borrower, the Administrative Agent, and the Lenders shall be governed by New York law.

(b) Submission to Jurisdiction. The Borrower hereby irrevocably submits to the non-exclusive jurisdiction of any New York state or federal court sitting in New York County, New York, over any action or proceeding arising out of or relating to this Agreement, the Obligations or any other Related Writing, and the Borrower hereby irrevocably agrees that all claims in respect of such action or proceeding may be heard and determined in such New York state or federal court. The Borrower, on behalf of itself and its Subsidiaries, hereby irrevocably waives, to the fullest extent permitted by law, any objection it may now or hereafter have to the laying of venue in any action or proceeding in any such court as well as any right it may now or hereafter have to remove such action or proceeding, once commenced, to another court on the grounds of FORUM NON CONVENIENS or otherwise. The Borrower agrees that a final, non-appealable judgment in any such action or proceeding shall be conclusive and may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.

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JURY TRIAL WAIVER. TO THE EXTENT PERMITTED BY LAW, THE BORROWER, THE ADMINISTRATIVE AGENT AND EACH LENDER WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG THE BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS AGREEMENT OR ANY NOTE OR OTHER INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.

IN WITNESS WHEREOF, the parties have executed and delivered this Credit and Security Agreement as of the date first set forth above.

 

Address:		900 Main Campus Drive				BANDWIDTH.COM, INC.
		Suite 400 Raleigh, North Carolina 27606 Attention: General Counsel				By:		/s/ David A. Morken
								David A. Morken Chief Executive Officer
Address:		127 Public Square Cleveland, Ohio 44114-1306 Attention: Institutional Bank				KEYBANK NATIONAL ASSOCIATION as the Administrative Agent, the Swing Line Lender, the Issuing Lender and as a Lender
						By:		/s/ David A. Wild
								David A. Wild Senior Vice President

Signature Page to

Credit and Security Agreement

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Address:		Pacific Western Bank				PACIFIC WESTERN BANK
		406 Blackwell Street, Suite 240 Durham, North Carolina 27701 Attn: Loan Operations Manager FAX: (919)314-3080 Attention: loanops@square1bank.com				By:		/s/ Adam Glick
						Name:		Adam Glick
						Title:		Senior Vice President

Signature Page to

Credit and Security Agreement

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Address:		Fifth Third Bank				FIFTH THIRD BANK
		2501 Blue Ridge Rd. Raleigh, NC 29609 Suite 190 Attention: Martin Green				By:		/s/ Martin Green
						Name:		Martin Green
						Title:		Vice President

Signature Page to

Credit and Security Agreement

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Address:		275 Grove St.				SILICON VALLEY BANK
		Newton, MA 02466 Attention: Michael Shuhy				By:		/s/ Michael Shuhy
						Name:		Michael Shuhy
						Title:		Director

Signature Page to

Credit and Security Agreement

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EXHIBIT A

FORM OF

REVOLVING CREDIT NOTE

 

$		, 20

FOR VALUE RECEIVED, the undersigned, BANDWIDTH.COM, INC., a Delaware corporation (the “Borrower”), promises to pay, on the last day of the Commitment Period, as defined in the Credit Agreement (as hereinafter defined), to the order of                      (“Lender”) at the main office of KEYBANK NATIONAL ASSOCIATION, as the Administrative Agent, as hereinafter defined, 127 Public Square, Cleveland, Ohio 44114-1306 the principal sum of                                                   AND 00/100                                                   DOLLARS or the aggregate unpaid principal amount of all Revolving Loans, as defined in the Credit Agreement, made by Lender to the Borrower pursuant to Section 2.2(a) of the Credit Agreement, whichever is less, in lawful money of the United States.

As used herein, “Credit Agreement” means the Credit and Security Agreement dated as of November 4, 2016, among the Borrower, the Lenders, as defined therein, and KeyBank National Association, as the administrative agent for the Lenders (the “Administrative Agent”), as the same may from time to time be amended, restated or otherwise modified. Each capitalized term used herein that is defined in the Credit Agreement and not otherwise defined herein shall have the meaning ascribed to it in the Credit Agreement.

The Borrower also promises to pay interest on the unpaid principal amount of each Revolving Loan from time to time outstanding, from the date of such Revolving Loan until the payment in full thereof, at the rates per annum that shall be determined in accordance with the provisions of Section 2.4(a) of the Credit Agreement. Such interest shall be payable on each date provided for in such Section 2.4(a); provided that interest on any principal portion that is not paid when due shall be payable on demand.

The portions of the principal sum hereof from time to time representing Base Rate Loans and Eurodollar Loans, interest owing thereon and payments of principal and interest of any thereof, shall be shown on the records of Lender by such method as Lender may generally employ; provided that failure to make any such entry shall in no way detract from the obligations of the Borrower under this Note or the Credit Agreement.

If this Note shall not be paid at maturity, whether such maturity occurs by reason of lapse of time or by operation of any provision for acceleration of maturity contained in the Credit Agreement, the principal hereof and the unpaid interest thereon shall bear interest, pursuant to the terms of the Credit Agreement, until paid, at a rate per annum equal to the Default Rate. All payments of principal of and interest on this Note shall be made in immediately available funds.

 

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This Note is one of the Revolving Credit Notes referred to in the Credit Agreement and is entitled to the benefits thereof. Reference is made to the Credit Agreement for a description of the right of the undersigned to anticipate payments hereof, the right of the holder hereof to declare this Note due prior to its stated maturity, and other terms and conditions upon which this Note is issued.

Except as expressly provided in the Credit Agreement, the Borrower expressly waives presentment, demand, protest and notice of any kind. This Note shall be governed by and construed in accordance with the laws of the State of New York.

JURY TRIAL WAIVER. THE BORROWER, TO THE EXTENT PERMITTED BY LAW, HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG THE BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS NOTE OR ANY OTHER NOTE OR INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.

 

 

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EXHIBIT B

FORM OF

SWING LINE NOTE

 

$1,000,000		, 20

FOR VALUE RECEIVED, the undersigned, BANDWIDTH.COM, INC., a Delaware corporation (the “Borrower”), promises to pay to the order of KEYBANK NATIONAL ASSOCIATION (the “Swing Line Lender”) at the main office of KEYBANK NATIONAL ASSOCIATION, as the Administrative Agent, as hereinafter defined, 127 Public Square, Cleveland, Ohio 44114-1306 the principal sum of                                                   AND 00/100                                                   DOLLARS or the aggregate unpaid principal amount of all Swing Loans, as defined in the Credit Agreement (as hereinafter defined), made by the Swing Line Lender to the Borrower pursuant to Section 2.2(c) of the Credit Agreement, whichever is less, in lawful money of the United States on the earlier of the last day of the applicable Commitment Period, as defined in the Credit Agreement, or, with respect to each Swing Loan, the Swing Loan Maturity Date applicable thereto

As used herein, “Credit Agreement” means the Credit and Security Agreement dated as of November 4, 2016, among the Borrower, the Lenders, as defined therein, and KeyBank National Association, as the administrative agent for the Lenders (the “Administrative Agent”), as the same may from time to time be amended, restated or otherwise modified. Each capitalized term used herein that is defined in the Credit Agreement and not otherwise defined herein shall have the meaning ascribed to it in the Credit Agreement.

The Borrower also promises to pay interest on the unpaid principal amount of each Swing Loan from time to time outstanding, from the date of such Swing Loan until the payment in full thereof, at the rates per annum that shall be determined in accordance with the provisions of Section 2.4(b) of the Credit Agreement. Such interest shall be payable on each date provided for in such Section 2.4(b); provided that interest on any principal portion that is not paid when due shall be payable on demand.

The principal sum hereof from time to time, and the payments of principal and interest thereon, shall be shown on the records of the Swing Line Lender by such method as the Swing Line Lender may generally employ; provided that failure to make any such entry shall in no way detract from the obligations of the Borrower under this Note or the Credit Agreement.

If this Note shall not be paid at maturity, whether such maturity occurs by reason of lapse of time or by operation of any provision for acceleration of maturity contained in the Credit Agreement, the principal hereof and the unpaid interest thereon shall bear interest, pursuant to the terms of the Credit Agreement, until paid, at a rate per annum equal to the Default Rate. All payments of principal of and interest on this Note shall be made in immediately available funds.

 

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This Note is the Swing Line Note referred to in the Credit Agreement and is entitled to the benefits thereof. Reference is made to the Credit Agreement for a description of the right of the undersigned to anticipate payments hereof, the right of the holder hereof to declare this Note due prior to its stated maturity, and other terms and conditions upon which this Note is issued.

Except as expressly provided in the Credit Agreement, the Borrower expressly waives presentment, demand, protest and notice of any kind. This Note shall be governed by and construed in accordance with the laws of the State of New York.

JURY TRIAL WAIVER. THE BORROWER, TO THE EXTENT PERMITTED BY LAW, HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG THE BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS NOTE OR ANY OTHER NOTE OR INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.

 

 

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EXHIBIT C

FORM OF

TERM NOTE

 

$		, 20

FOR VALUE RECEIVED, the undersigned, BANDWIDTH.COM, INC., a Delaware corporation (the “Borrower”), promises to pay to the order of                      (“Lender”) at the main office of KEYBANK NATIONAL ASSOCIATION, as the Administrative Agent, as hereinafter defined, 127 Public Square, Cleveland, Ohio 44114-1306 the principal sum of                                                   AND 00/100                                                   DOLLARS in lawful money of the United States in consecutive principal payments as set forth in the Credit Agreement (as hereinafter defined).

As used herein, “Credit Agreement” means the Credit and Security Agreement dated as of November 4, 2016, among the Borrower, the Lenders, as defined therein, and KeyBank National Association, as the administrative agent for the Lenders (the “Administrative Agent”), as the same may from time to time be amended, restated or otherwise modified. Each capitalized term used herein that is defined in the Credit Agreement and not otherwise defined herein shall have the meaning ascribed to it in the Credit Agreement.

The Borrower also promises to pay interest on the unpaid principal amount of the Term Loan from time to time outstanding, from the date of the Term Loan until the payment in full thereof, at the rates per annum that shall be determined in accordance with the provisions of Section 2.4(c) of the Credit Agreement. Such interest shall be payable on each date provided for in such Section 2.4(c); provided that interest on any principal portion that is not paid when due shall be payable on demand.

The portions of the principal sum hereof from time to time representing Base Rate Loans and Eurodollar Loans, interest owing thereon, and payments of principal and interest of any thereof, shall be shown on the records of Lender by such method as Lender may generally employ; provided that failure to make any such entry shall in no way detract from the obligations of the Borrower under this Note or the Credit Agreement.

If this Note shall not be paid at maturity, whether such maturity occurs by reason of lapse of time or by operation of any provision for acceleration of maturity contained in the Credit Agreement, the principal hereof and the unpaid interest thereon shall bear interest, pursuant to the terms of the Credit Agreement, until paid, at a rate per annum equal to the Default Rate. All payments of principal of and interest on this Note shall be made in immediately available funds.

This Note is one of the Term Notes referred to in the Credit Agreement and is entitled to the benefits thereof. Reference is made to the Credit Agreement for a description of the right of the undersigned to anticipate payments hereof, the right of the holder hereof to declare this Note due prior to its stated maturity, and other terms and conditions upon which this Note is issued.

 

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The Borrower hereby designates all Indebtedness and other obligations now or hereafter incurred or otherwise outstanding under this Note, the Credit Agreement and the other Loan Documents, as defined in the Credit Agreement, to be “Senior Indebtedness” as defined in the Note Agreement.

Except as expressly provided in the Credit Agreement, the Borrower expressly waives presentment, demand, protest and notice of any kind. This Note shall be governed by and construed in accordance with the laws of the State of New York.

JURY TRIAL WAIVER. THE BORROWER, TO THE EXTENT PERMITTED BY LAW, HEREBY WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT OR OTHERWISE, AMONG THE BORROWER, THE ADMINISTRATIVE AGENT AND THE LENDERS, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS NOTE OR ANY OTHER NOTE OR INSTRUMENT, DOCUMENT OR AGREEMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THE TRANSACTIONS RELATED THERETO.

 

 

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EXHIBIT D

FORM OF

NOTICE OF LOAN

                    , 20        

KeyBank National Association, as the Administrative Agent

127 Public Square

Cleveland, Ohio 44114

Attention: Institutional Bank

Ladies and Gentlemen:

The undersigned, BANDWIDTH.COM, INC., a Delaware corporation, (the “Borrower”), refers to the Credit and Security Agreement, dated as of November 4, 2016 (as the same may from time to time be amended, restated or otherwise modified, the “Credit Agreement”, the terms defined therein being used herein as therein defined), among the undersigned, the Lenders, as defined in the Credit Agreement, and KEYBANK NATIONAL ASSOCIATION, as the administrative agent for the Lenders (the “Administrative Agent”), and hereby gives you notice, pursuant to Section 2.6 of the Credit Agreement that the Borrower hereby requests [a Loan (the “Proposed Loan”)][an interest change with respect to a portion of a Term Loan (the “Term Loan Interest Change”)], and in connection therewith sets forth below the information relating to the [Proposed Loan][Term Loan Interest Change] as required by Section 2.6 of the Credit Agreement:

 

(a)

The Business Day of the [Proposed Loan][Term Loan Interest Change] is                      , 20        .

 

(b)

The amount of the [Proposed Loan][Term Loan Interest Change] is $                    .

 

(c)

The [Proposed Loan is to be][Term Loan Interest Change is for]:

a Revolving Loan          / the Term Loan         . (Check one.)

 

(d)

The [Proposed Loan][Term Loan Interest Change] is to be a Base Rate Loan          / Eurodollar Loan          / Swing Loan         . (Check one.)

 

(e)

If the [Proposed Loan][Term Loan Interest Change] is a Eurodollar Loan, the Interest Period requested is one month         , two months         , three months         , six months         . (Check one.)

The undersigned hereby certifies on behalf of the Borrower that the following statements are true on the date hereof, and will be true on the date of the [Proposed Loan][Term Loan Interest Change]:

(i) the representations and warranties contained in each Loan Document are true and correct in all material respects as if made on and as of the date hereof, except to the extent that any thereof expressly relate to an earlier date, before and after giving effect to the [Proposed Loan][Term Loan Interest Change] and the application of the proceeds therefrom, as though made on and as of such date;

 

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(ii) no event has occurred and is continuing, or would result from such [Proposed Loan][Term Loan Interest Change], or the application of proceeds therefrom, that constitutes a Default or Event of Default; and

(iii) the conditions set forth in Section 2.6 and Article IV of the Credit Agreement have been satisfied.

 

 

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EXHIBIT E

FORM OF

COMPLIANCE CERTIFICATE

For Fiscal Quarter ended                     

THE UNDERSIGNED HEREBY CERTIFIES THAT:

(1) I am the duly appointed [Chief Executive Officer] [President] or [Chief Financial Officer] of BANDWIDTH.COM, INC., a Delaware corporation (the “Borrower”);

(2) I am familiar with the terms of that certain Credit and Security Agreement, dated as of November 4, 2016, among the Borrower, the lenders party thereto (together with their respective successors and permitted assigns, collectively, the “Lenders”), as defined in the Credit Agreement, and KEYBANK NATIONAL ASSOCIATION, as the Administrative Agent (as the same may from time to time be amended, restated or otherwise modified, the “Credit Agreement”, the terms defined therein being used herein as therein defined), and the terms of the other Loan Documents, and I have made, or have caused to be made under my supervision, a review in reasonable detail of the transactions and condition of the Borrower and its Subsidiaries during the accounting period covered by the attached financial statements;

(3) The review described in paragraph (2) above did not disclose, and I have no knowledge of, the existence of any condition or event that constitutes or constituted a Default or Event of Default, at the end of the accounting period covered by the attached financial statements or as of the date of this Certificate;

(4) The representations and warranties made by the Borrower contained in each Loan Document are true and correct in all material respects as though made on and as of the date hereof (except for those representations and warranties that relate to a specific date); and

(5) Set forth on Attachment I hereto are calculations of the financial covenants set forth in Section 5.7 of the Credit Agreement, which calculations show compliance with the terms thereof.

IN WITNESS WHEREOF, I have signed this certificate the          day of                     , 20        .

 

 

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EXHIBIT F

FORM OF

ASSIGNMENT AND ACCEPTANCE AGREEMENT

This Assignment and Acceptance Agreement (this “Assignment Agreement”) between                      (the “Assignor”) and                      (the “Assignee”) is dated as of                              , 20        . The parties hereto agree as follows:

1. Preliminary Statement. Assignor is a party to a Credit and Security Agreement, dated as of November 4, 2016 (as the same may from time to time be amended, restated or otherwise modified, the “Credit Agreement”), among Bandwidth.com, Inc., a Delaware corporation (the “Borrower”), the lenders party thereto (together with their respective successors and assigns, collectively, the “Lenders” and, individually, each a “Lender”), and KEYBANK NATIONAL ASSOCIATION, as the administrative agent for the Lenders (the “Administrative Agent”). Capitalized terms used herein and not otherwise defined herein shall have the meanings attributed to them in the Credit Agreement.

2. Assignment and Assumption. Assignor hereby sells and assigns to Assignee, and Assignee hereby purchases and assumes from Assignor, an interest in and to Assignor’s rights and obligations under the Credit Agreement, effective as of the Assignment Effective Date (as hereinafter defined), equal to the percentage interest specified on Annex 1 hereto (hereinafter, the “Assigned Percentage”) of Assignor’s right, title and interest in and to (a) the Commitment, (b) any Loan made by Assignor that is outstanding on the Assignment Effective Date, (c) Assignor’s interest in any Letter of Credit outstanding on the Assignment Effective Date, (d) any Note delivered to Assignor pursuant to the Credit Agreement, and (e) the Credit Agreement and the other Related Writings. After giving effect to such sale and assignment and on and after the Assignment Effective Date, Assignee shall be deemed to have one or more Applicable Commitment Percentages under the Credit Agreement equal to the Applicable Commitment Percentages set forth in subparts II.A and II.B on Annex 1 hereto and an Assigned Amount as set forth on subparts I.A and I.B of Annex 1 hereto (hereinafter, the “Assigned Amount”).

3. Assignment Effective Date. The Assignment Effective Date (the “Assignment Effective Date”) shall be [                             ,         ] (or such other date agreed to by the Administrative Agent). On or prior to the Assignment Effective Date, Assignor shall satisfy the following conditions:

(a) receipt by the Administrative Agent of this Assignment Agreement, including Annex 1 hereto, properly executed by Assignor and Assignee and accepted and consented to by the Administrative Agent and, if necessary pursuant to the provisions of Section 11.10(b) of the Credit Agreement, by the Borrower;

(b) receipt by the Administrative Agent from Assignor of a fee of Three Thousand Five Hundred Dollars ($3,500), if required by Section 11.10(d) of the Credit Agreement;

 

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(c) receipt by the Administrative Agent from Assignee of an administrative questionnaire, or other similar document, which shall include (i) the address for notices under the Credit Agreement, (ii) the address of its Lending Office, (iii) wire transfer instructions for delivery of funds by the Administrative Agent, and (iv) such other information as the Administrative Agent shall request; and

(d) receipt by the Administrative Agent from Assignor or Assignee of any other information required pursuant to Section 11.10 of the Credit Agreement or otherwise necessary to complete the transaction contemplated hereby.

4. Payment Obligations. In consideration for the sale and assignment of Loans hereunder, Assignee shall pay to Assignor, on the Assignment Effective Date, the amount agreed to by Assignee and Assignor. Any interest, fees and other payments accrued prior to the Assignment Effective Date with respect to the Assigned Amount shall be for the account of Assignor. Any interest, fees and other payments accrued on and after the Assignment Effective Date with respect to the Assigned Amount shall be for the account of Assignee. Each of Assignor and Assignee agrees that it will hold in trust for the other party any interest, fees or other amounts which it may receive to which the other party is entitled pursuant to the preceding sentence and to pay the other party any such amounts which it may receive promptly upon receipt thereof.

5. Credit Determination; Limitations on Assignor’s Liability. Assignee represents and warrants to Assignor, the Borrower, the Administrative Agent and the Lenders (a) that it is capable of making and has made and shall continue to make its own credit determinations and analysis based upon such information as Assignee deemed sufficient to enter into the transaction contemplated hereby and not based on any statements or representations by Assignor; (b) Assignee confirms that it meets the requirements to be an assignee as set forth in Section 11.10 of the Credit Agreement; (c) Assignee confirms that it is able to fund the Loans and the Letters of Credit as required by the Credit Agreement; (d) Assignee agrees that it will perform in accordance with their terms all of the obligations which by the terms of the Credit Agreement and the other Related Writings are required to be performed by it as a Lender thereunder; and (e) Assignee represents that it has reviewed each of the Loan Documents and by its signature to this Assignment Agreement, agrees to be bound by and subject to the terms and conditions of the Loan Documents as if it were an original party thereto. It is understood and agreed that the assignment and assumption hereunder are made without recourse to Assignor and that Assignor makes no representation or warranty of any kind to Assignee and shall not be responsible for (i) the due execution, legality, validity, enforceability, genuineness, sufficiency or collectability of the Credit Agreement or any other Related Writings, (ii) any representation, warranty or statement made in or in connection with the Credit Agreement or any of the other Related Writings, (iii) the financial condition or creditworthiness of the Borrower or any Guarantor of Payment, (iv) the performance of or compliance with any of the terms or provisions of the Credit Agreement or any of the other Related Writings, (v) the inspection of any of the property, books or records of the Borrower, or (vi) the validity, enforceability, perfection, priority, condition, value or sufficiency of any collateral securing or purporting to secure the Loans or Letters of Credit. Neither Assignor nor any of its officers, directors, employees, agents or attorneys shall be liable for any mistake, error of judgment, or action taken or omitted to be taken in connection with the Loans, the Letters of Credit, the Credit Agreement or the other Related Writings, except for its or their own gross negligence or willful misconduct. Assignee appoints the Administrative Agent to take such action as agent on its behalf and to exercise such powers under the Credit Agreement as are delegated to the Administrative Agent by the terms thereof.

 

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6. Indemnity. Assignee agrees to indemnify and hold harmless Assignor against any and all losses, cost and expenses (including, without limitation, attorneys’ fees) and liabilities incurred by Assignor in connection with or arising in any manner from Assignee’s performance or non-performance of obligations assumed under this Assignment Agreement.

7. Subsequent Assignments. After the Assignment Effective Date, Assignee shall have the right, pursuant to Section 11.10 of the Credit Agreement, to assign the rights which are assigned to Assignee hereunder, provided that (a) any such subsequent assignment does not violate any of the terms and conditions of the Credit Agreement, any of the other Related Writings, or any law, rule, regulation, order, writ, judgment, injunction or decree and that any consent required under the terms of the Credit Agreement or any of the other Related Writings has been obtained, (b) the assignee under such assignment from Assignee shall agree to assume all of Assignee’s obligations hereunder in a manner satisfactory to Assignor, and (c) Assignee is not thereby released from any of its obligations to Assignor hereunder.

8. Reductions of Aggregate Amount of Commitments. If any reduction in the Total Commitment Amount occurs between the date of this Assignment Agreement and the Assignment Effective Date, the percentage of the Total Commitment Amount assigned to Assignee shall remain the percentage specified in Section 1 hereof and the dollar amount of the Commitment of Assignee shall be recalculated based on the reduced Total Commitment Amount.

9. Acceptance of Administrative Agent; Notice by Assignor. This Assignment Agreement is conditioned upon the acceptance and consent of the Administrative Agent and, if necessary pursuant to Section 11.10 of the Credit Agreement, upon the acceptance and consent of the Borrower; provided that the execution of this Assignment Agreement by the Administrative Agent and, if necessary, by the Borrower is evidence of such acceptance and consent.

10. Entire Agreement. This Assignment Agreement embodies the entire agreement and understanding between the parties hereto and supersedes all prior agreements and understandings between the parties hereto relating to the subject matter hereof.

11. Governing Law. This Assignment Agreement shall be governed by the laws of the State of New York.

12. Notices. Notices shall be given under this Assignment Agreement in the manner set forth in the Credit Agreement. For the purpose hereof, the addresses of the parties hereto (until notice of a change is delivered) shall be the address set forth under each party’s name on the signature pages hereof.

 

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13. Counterparts. This Assignment Agreement may be executed in any number of counterparts, by different parties hereto in separate counterparts and by facsimile signature, each of which when so executed and delivered shall be deemed to be an original and all of which taken together shall constitute but one and the same agreement.

[Remainder of page intentionally left blank.]

 

F-4

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JURY TRIAL WAIVER. EACH OF THE UNDERSIGNED, TO THE EXTENT PERMITTED BY LAW, WAIVES ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, AMONG THE ADMINISTRATIVE AGENT, ANY OF THE LENDERS, AND THE BORROWER, OR ANY THEREOF, ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED AMONG THEM IN CONNECTION WITH THIS ASSIGNMENT AGREEMENT OR ANY NOTE OR OTHER AGREEMENT, INSTRUMENT OR DOCUMENT EXECUTED OR DELIVERED IN CONNECTION THEREWITH OR THE TRANSACTIONS RELATED HERETO.

IN WITNESS WHEREOF, the parties hereto have executed this Assignment Agreement by their duly authorized officers as of the date first above written.

 

								[NAME OF THE ASSIGNOR]

Address:
		Attn:						By:
		Phone:						Name:
		Fax:						Title:

 

								[NAME OF THE ASSIGNEE]

Address:
		Attn:						By:
		Phone:						Name:
		Fax:						Title:

Accepted and Consented to this          day of         , 20        :								Accepted and Consented to this          day of                     , 20        :

 

KEYBANK NATIONAL ASSOCIATION     as the Administrative Agent						BANDWIDTH.COM, INC.

By:						By:
Name:						Name:
Title:						Title:

 

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ANNEX 1

TO

ASSIGNMENT AND ACCEPTANCE AGREEMENT

On and after the Assignment Effective Date, after giving effect to all other assignments being made by Assignor on the Assignment Effective Date, the Commitment of Assignee, and, if this is less than an assignment of all of Assignor’s interest, Assignor, shall be as follows:

 

I.		INTEREST BEING ASSIGNED TO ASSIGNEE
		A.		Revolving Credit Commitment
				Applicable Commitment Percentage of Revolving Credit Commitment				%
				Assigned Amount			$
		B.		Term Loan Commitment
				Applicable Commitment Percentage of Term Loan Commitment				%
				Assigned Amount			$
II.		ASSIGNEE’S COMMITMENT (as of the Assignment Effective Date)
		A.		Revolving Credit Commitment
				Applicable Commitment Percentage of Revolving Credit Commitment				%
				Assigned Amount			$
		B.		Term Loan Commitment
				Applicable Commitment Percentage of Term Loan Commitment				%
				Assigned Amount			$
III.		ASSIGNOR’S COMMITMENT (as of the Assignment Effective Date)
		A.		Revolving Credit Commitment
				Applicable Commitment Percentage of Revolving Credit Commitment				%
				Assigned Amount			$
		B.		Term Loan Commitment
				Applicable Commitment Percentage of Term Loan Commitment				%
				Assigned Amount			$

 

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EXHIBIT G-1

FORM OF

U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Lenders That Are Not Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to that certain Credit and Security Agreement, dated as of November 4, 2016 (the “Credit Agreement”), among Bandwidth.com, Inc., a Delaware corporation (the “Borrower”), the Lenders, as defined therein, and KeyBank National Association, as the administrative agent for the Lenders (the “Administrative Agent”).

Pursuant to the provisions of Section 3.2 of the Credit Agreement, the undersigned hereby certifies that (a) it is the sole record and beneficial owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (b) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (c) it is not a ten percent (10%) shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (iv) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished the Administrative Agent and the Borrower with a certificate of its non-U.S. Person status on IRS Form W-8BEN. By executing this certificate, the undersigned agrees that (i) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Administrative Agent, and (ii) the undersigned shall have at all times furnished the Borrower and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

 

[NAME OF LENDER]
By:
		Name:
		Title:
Date:		, 20[        ]

 

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EXHIBIT G-2

FORM OF

U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Participants That Are Not Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to that certain Credit and Security Agreement, dated as of November 4, 2016 (the “Credit Agreement”), among Bandwidth.com, Inc., a Delaware corporation (the “Borrower”), the Lenders, as defined therein, and KeyBank National Association, as the administrative agent for the Lenders (the “Administrative Agent”).

Pursuant to the provisions of Section 3.2 of the Credit Agreement, the undersigned hereby certifies that (a) it is the sole record and beneficial owner of the participation in respect of which it is providing this certificate, (b) it is not a bank within the meaning of Section 881(c)(3)(A) of the Code, (c) it is not a ten percent (10%) shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code, and (d) it is not a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished its participating Lender with a certificate of its non-U.S. Person status on IRS Form W-8BEN. By executing this certificate, the undersigned agrees that (i) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender in writing, and (ii) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

 

[NAME OF PARTICIPANT]
By:
		Name:
		Title:
Date:		, 20[        ]

 

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EXHIBIT G-3

FORM OF

U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Participants That Are Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to that certain Credit and Security Agreement, dated as of November 4, 2016 (the “Credit Agreement”), among Bandwidth.com, Inc., a Delaware corporation (the “Borrower”), the Lenders, as defined therein, and KeyBank National Association, as the administrative agent for the Lenders (the “Administrative Agent”).

Pursuant to the provisions of Section 3.2 of the Credit Agreement, the undersigned hereby certifies that (a) it is the sole record owner of the participation in respect of which it is providing this certificate, (b) its direct or indirect partners/members are the sole beneficial owners of such participation, (c) with respect such participation, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (d) none of its direct or indirect partners/members is a ten percent (10%) shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (e) none of its direct or indirect partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished its participating Lender with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (A) if the information provided on this certificate changes, the undersigned shall promptly so inform such Lender and (B) the undersigned shall have at all times furnished such Lender with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

 

[NAME OF PARTICIPANT]
By:
		Name:
		Title:
Date:		, 20[        ]

 

G-3

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EXHIBIT G-4

FORM OF

U.S. TAX COMPLIANCE CERTIFICATE

(For Foreign Lenders That Are Partnerships For U.S. Federal Income Tax Purposes)

Reference is hereby made to that certain Credit and Security Agreement, dated as of November 4, 2016 (the “Credit Agreement”), among Bandwidth.com, Inc., a Delaware corporation (the “Borrower”), the Lenders, as defined therein, and KeyBank National Association, as the administrative agent for the Lenders (the “Administrative Agent”).

Pursuant to the provisions of Section 3.2 of the Credit Agreement, the undersigned hereby certifies that (a) it is the sole record owner of the Loan(s) (as well as any Note(s) evidencing such Loan(s)) in respect of which it is providing this certificate, (b) its direct or indirect partners/members are the sole beneficial owners of such Loan(s) (as well as any Note(s) evidencing such Loan(s)), (c) with respect to the extension of credit pursuant to the Credit Agreement or any other Loan Document, neither the undersigned nor any of its direct or indirect partners/members is a bank extending credit pursuant to a loan agreement entered into in the ordinary course of its trade or business within the meaning of Section 881(c)(3)(A) of the Code, (d) none of its direct or indirect partners/members is a ten percent (10%) shareholder of the Borrower within the meaning of Section 871(h)(3)(B) of the Code and (e) none of its direct or indirect partners/members is a controlled foreign corporation related to the Borrower as described in Section 881(c)(3)(C) of the Code.

The undersigned has furnished the Administrative Agent and the Borrower with IRS Form W-8IMY accompanied by one of the following forms from each of its partners/members that is claiming the portfolio interest exemption: (i) an IRS Form W-8BEN or (ii) an IRS Form W-8IMY accompanied by an IRS Form W-8BEN from each of such partner’s/member’s beneficial owners that is claiming the portfolio interest exemption. By executing this certificate, the undersigned agrees that (A) if the information provided on this certificate changes, the undersigned shall promptly so inform the Borrower and the Administrative Agent, and (B) the undersigned shall have at all times furnished the Borrower and the Administrative Agent with a properly completed and currently effective certificate in either the calendar year in which each payment is to be made to the undersigned, or in either of the two calendar years preceding such payments.

Unless otherwise defined herein, terms defined in the Credit Agreement and used herein shall have the meanings given to them in the Credit Agreement.

 

[NAME OF LENDER]
By:
		Name:
		Title:
Date:		, 20[        ]

 

G-4

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SCHEDULE 1

 

LENDERS		REVOLVING CREDIT COMMITMENT PERCENTAGE				REVOLVING CREDIT COMMITMENT AMOUNT				TERM LOAN COMMITMENT PERCENTAGE				TERM LOAN COMMITMENT AMOUNT				MAXIMUM AMOUNT
KeyBank National Association			28.4615384	%		$	7,115,384.61				28.461538475	%		$	11,384,615.39			$	18,500,000.00
Pacific Western Bank			25.3846154	%		$	6,346,153.85				25.384615375	%		$	10,153,846.15			$	16,500,000.00
Fifth Third Bank			23.0769231	%		$	5,769,230.77				23.076923075	%		$	9,230,769.23			$	15,000,000.00
Silicon Valley Bank			23.0769231	%		$	5,769,230.77				23.076923075	%		$	9,230,769.23			$	15,000,000.00
Total Commitment Amount			100	%		$	25,000,000				100	%		$	40,000,000			$	65,000,000

 

S-1

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SCHEDULE 2

GUARANTORS OF PAYMENT

Broadband, LLC, a Delaware limited liability company

After the CLEC Trigger Date, Bandwidth.com CLEC, LLC

 

S-2

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SCHEDULE 3

PLEDGED SECURITIES

 

Pledgor

Name of Subsidiary

Jurisdiction of Subsidiary

Number of Shares/ Membership Units

Certificate Number

Ownership Percentage

Bandwidth.com, Inc.

Bandwidth.com CLEC, LLC

DE

N/A

N/A

100

%

Bandwidth.com, Inc.

Broadband, LLC

DE

N/A

N/A

100

%

Bandwidth.com, Inc.

IP Spectrum Solutions, LLC

DE

N/A

N/A

100

%

 

S-3

Exhibit 10.3

BANDWIDTH.COM, INC.

2001 STOCK OPTION PLAN

1. Purpose

The Bandwidth.com, Inc. 2001 Stock Option Plan (the “Plan”) is established to advance the interests of the Company’s stockholders by creating an incentive for, and enhancing the Company’s ability to attract, retain and motivate key employees, directors and consultants or advisors of Bandwidth.com, Inc. and any successor corporations thereto (collectively, the “Company”) and any present or future parent and/or subsidiary corporations of such corporation (as defined in Sections 424(e) and 424(f) of the Internal Revenue Code of 1986, as amended, and any regulations promulgated thereunder (the “Code”)) (all of whom, along with the Company, sometimes being individually referred to as a “Participating Company” and collectively referred to as the “Participating Company Group”) by providing such individuals with equity ownership opportunities and performance-based incentives and thereby better aligning the interests of such individuals with those of the Company’s stockholders.

2. Eligibility

Individuals eligible to be granted Options (as hereinafter defined) under the Plan include any Participating Company’s employees and directors and any other individual whom the Board of Directors of the Company (the “Board”) determines is eligible under the Plan. Any individual who has been granted an Option under the Plan shall be deemed a “Participant.” The Board, in its sole discretion, shall determine which individuals shall be granted Options under the Plan. A director of a Participating Company shall be eligible to be granted an Incentive Stock Option (as hereinafter defined) only if the director is also an employee of a Participating Company. A consultant or advisor to a Participating Company or a non-employee director of a Participating Company shall be eligible to be granted only Options other than Incentive Stock Options.

3. Administration.

(a) Board of Directors. The Plan shall be administered by the Board and/or by a duly appointed committee of the Board having such powers as shall be specified by the Board. Any subsequent references herein to the Board shall also mean the committee if such committee has been appointed and, unless the powers of the committee have been specifically limited, the committee shall have all of the powers of the Board granted herein, other than the power to terminate or amend the Plan as provided in Section 8(g) hereof, subject to the terms of the Plan and any applicable limitations imposed by law. The Board shall have the authority to grant Options and to adopt, amend and repeal such administrative rules, guidelines and practices relating to the Plan as it shall deem advisable from time to time. The Board may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Option Agreement (as hereinafter defined) in the manner and to the extent it shall deem expedient to carry the Plan into effect, and it shall be the sole and final judge of such expediency. No member of the Board shall be liable for any action or determination relating to the Plan. All decisions by the Board shall be made in the Board’s sole discretion and shall be final and binding on all individuals having or claiming any interest in the Plan or in any Option. No individual acting pursuant to authority delegated by the Board shall be liable for any action or determination under the Plan made in good faith.

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(b) Company. The Chief Executive Officer or the President of the Company (or, in their absence, the Board) shall have the authority to act on behalf of the Company with respect to any matter, right, obligation or election which is the responsibility of or which is allocated to the Company herein.

4. Stock Available For Options

(a) Number of Shares. Subject to adjustment under Section 4(b), Options may be granted under the Plan for up to a maximum of One Hundred Eleven Thousand One Hundred Eleven (111,111) shares of the Company’s Class A Voting Common Stock, $0.001 par value per share (the “Class A Stock”). If any Option expires or is terminated, surrendered or canceled without having been fully exercised or is forfeited in whole or in part or results in any Class A Stock not being issued, the unused Class A Stock covered by such Option shall again be available for the grant of Options under the Plan, subject, however, in the case of Incentive Stock Options, to any limitation required under the Code.

(b) Adjustments to Class A Stock. In the event of any stock split, stock dividend, recapitalization, reorganization, merger, consolidation, combination, exchange of shares, liquidation, spin-off or other similar change in capitalization or event, or any distribution to holders of Class A Stock other than a normal cash dividend, (i) the number and class of securities available under this Plan, and (ii) the number and class of security and exercise price per share subject to each outstanding Option shall be appropriately adjusted by the Company (or substituted Options may be granted, if applicable) to the extent the Board determines, in good faith, that such an adjustment (or substitution) is necessary and appropriate. If this Section 4(b) applies and Section 7 also applies to any event, Section 7 shall be applicable to such event, and this Section 4(b) shall not be applicable.

(c) Rule 701. It is intended that the Plan shall constitute a written compensatory benefit plan within the meaning of Rule 701 promulgated under the Securities Act of 1933, as amended (“Rule 701”), and that the Plan shall otherwise be administered in compliance with the requirements of Rule 701. To ensure such compliance, the Board shall maintain a record of shares subject to outstanding Options under the Plan and the exercise price of such Options, plus a record of all shares of Class A Stock issued upon the exercise of such Options and the exercise price of such Options.

5. Stock Options

(a) General. The Board may grant to eligible persons options to purchase Class A Stock (each, an “Option”) and determine the number of shares of Class A Stock to be covered by each Option, the exercise price of each Option and the conditions and limitations applicable to the exercise of each Option, including conditions relating to applicable federal or state securities laws, as it deems necessary or advisable. An Option that is not intended to be an Incentive Stock Option shall be designated a “Nonqualified Stock Option.” All Options shall be evidenced by a written award agreement substantially in the form of the nonqualified stock option agreement attached hereto as Exhibit A or the incentive stock option agreement attached hereto as Exhibit B, as applicable, both of which are incorporated herein by reference (the “Option Agreements”) or such other form as shall be approved by the Board consistent with the terms of this Plan.

 

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(b) Incentive Stock Options. An Option that the Board intends to be an “incentive stock option” as defined in Code Section 422 (an “Incentive Stock Option”) shall only be granted to employees of Participating Companies and shall be subject to and construed consistently with the requirements of Code Section 422. The Company shall have no liability to a Participant, or any other party, if an Option (or any part thereof) which is intended to be an Incentive Stock Option is not an Incentive Stock Option.

(c) Exercise Price. The Board shall establish, in its sole discretion, the exercise price at the time each Option is granted and specify it in the applicable Option Agreement; provided, however, that (i) the exercise price per share of Class A Stock for an Incentive Stock Option shall be not less than the fair market value of a share of Class A Stock on the date of grant of such Incentive Stock Option, as determined by the Board in good faith (the “Fair Market Value”), and (ii) the exercise price per share of Class A Stock for an Incentive Stock Option granted to a Participant who at the time the Incentive Stock Option is granted owns stock possessing more than ten percent (10%) of the total combined voting power of all classes of stock of a Participating Company within the meaning of Code Section 422(b)(6) (a “Ten Percent Owner Participant”) shall be not less than one hundred ten percent (110%) of the Fair Market Value. Notwithstanding the foregoing, an Incentive Stock Option may be granted by the Board in its discretion with an exercise price lower than the minimum exercise price set forth above if such Incentive Stock Option is granted pursuant to an assumption of or substitution for another Option in a manner qualifying under the provisions of Code Section 424(a). Nothing hereinabove shall require that any assumption or modification will result in the Option having the same characteristics, attributes or tax treatment as the Option for which it is substituted.

(d) $100,000 Limitation. The aggregate Fair Market Value, determined as of the date on which an Incentive Stock Option is granted, of the shares of Class A Stock with respect to which Incentive Stock Options (determined without regard to this Section 5(d)) are first exercisable during any calendar year (under this Plan or under any other plan of the Participating Company Group) by any Participant shall not exceed $100,000. If such limitation would be exceeded with respect to a Participant for a calendar year, the Incentive Stock Option shall be deemed a Nonqualified Stock Option to the extent of such excess.

(e) Time for Granting Incentive Stock Options. All Incentive Stock Options must be granted, if at all, within ten years from the earlier of the date the Plan is adopted by the Board or the date the stockholders of the Company duly approve the Plan.

(f) Duration of Options. Each Option shall be exercisable at such times and subject to such terms and conditions as are specified in this Plan and in the applicable Option Agreement; provided, however, that (i) no Option issued to a Participant who is a Participating Company employee shall be exercisable after the Participant voluntarily terminates his or her employment with the Participating Company Group, unless the Participant terminates employment on account of retirement after attainment of age sixty-five (65) or on account of Participant’s disability (within the meaning of Code Section 22(c)(3)); (ii) no Incentive Stock Option shall be exercisable after the expiration of ten years after the date such Incentive Stock Option is granted; (iii) no Incentive Stock Option granted to a Ten Percent Owner Participant shall be exercisable after the expiration of five years after the date such Incentive Stock Option is granted; (iv) no Option issued to a Participant who is a Participating Company employee shall be exercisable after the date the Participant’s employment with the Participating Company is terminated with cause (as defined in the applicable Option Agreement); and (v) no Incentive

 

3

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Stock Option shall be exercisable after the expiration of three months after the date on which the Participant terminates employment with the Participating Company Group, unless the Participant’s employment with the Participating Company Group shall have terminated as a result of the Participant’s death or disability (within the meaning of Code Section 22(c)(3)), in which event the Option shall terminate, and cease to be exercisable no later than twelve months from the date on which the Participant’s employment terminated. For this purpose, a Participant’s employment shall be deemed to have terminated on account of death if the Participant dies within three months following the Participant’s termination of employment.

(g) Vesting Schedule. Unless otherwise specified in the applicable Option Agreement, each Option granted to an employee or director of the Company or a Participating Company under this Plan shall become vested and first exercisable by the Participant in accordance with the schedule set forth below:

 

Participant’s Years of Service		Percentage of Shares with Respect to which Option is Vested
1			20	%
2			40	%
3			60	%
4			80	%
5			100	%

Unless otherwise provided in the applicable Option Agreement, an Option granted to a person other than an employee or director of the Company or a Participating Company under this Plan shall be fully vested when granted.

For vesting purposes, a “year of service” means a twelve consecutive month period of continuous service by a Participant as an employee or director of a Participating Company. The initial computation period in determining a Participant’s vesting percentage is the first twelve consecutive month period of continuous service by the Participant measured from the date the Option is granted, or from such other date specified in the applicable Option Agreement. Except as otherwise provided in the applicable Option Agreement, service prior to the Option grant date shall be disregarded. For vesting purposes, continuous service with the Company shall include a leave of absence that is approved by the Company as well as leave taken under the Family and Medical Leave Act of 1993.

(h) Exercise of Options. Subject to the provisions of this Plan and the applicable Option Agreement, vested Options may be exercised on the last business day of any calendar quarter or on any other day specified in Section 7 hereof (the “Exercise Date”) by delivery to the Company of at least thirty (30) days’ prior written notice of exercise signed by the Participant. The Company in its discretion and on a case by case basis may establish additional Exercise Dates or waive in whole or in part the advance notice requirement. Unless otherwise provided in the applicable Option Agreement, as a condition to the exercise of any Option under this Plan the Participant shall be required to execute (1) a buy-sell agreement (the “Buy-Sell Agreement”) providing, inter alia, that shares of Class A Stock purchased under this Plan are subject to the Company’s repurchase, bring-along and other similar rights, and (2) a separate non-disclosure, non-competition and intellectual property agreement in the form specified by the Company.

 

4

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(i) Payment Upon Exercise. On the Exercise Date, the Participant shall pay for Class A Stock purchased upon the exercise of an Option granted under the Plan as follows:

(1) by delivery to the Company of the exercise price in cash or by certified check, payable to the order of the Company;

(2) to the extent permitted by the Company at the time of exercise, by delivery of an irrevocable and unconditional undertaking by a creditworthy broker to deliver promptly to the Company sufficient funds to pay the exercise price, or delivery by the Participant to the Company of a copy of irrevocable and unconditional instructions to a creditworthy broker to deliver promptly to the Company cash or a certified check sufficient to pay the exercise price;

(3) to the extent expressly permitted in an Option Agreement, by delivery of shares of Class A Stock owned by the Participant with an aggregate Fair Market Value equal to the exercise price, which Class A Stock was owned by the Participant at least six months prior to such delivery;

(4) to the extent permitted by the Company at the time of exercise and further to the extent permitted by applicable law, by delivery of a promissory note of the Participant to the Company with a face amount equal to the exercise price, and secured by valuable collateral acceptable to the Company and on such other terms as determined by the Company, or by payment of such other lawful consideration as the Company may determine; or

(5) subject to the limitations expressed above, any combination of the above-permitted forms of payment.

6. General Provisions Applicable to Options

(a) Transferability of Options. Except as the Board may otherwise provide in an Option Agreement, Options shall not be sold, assigned, transferred, pledged or otherwise encumbered by the individual to whom they are granted, either voluntarily or by operation of law, except by will or the laws of descent and distribution. During the lifetime of the Participant, an Option shall be exercisable only by the Participant.

(b) Board and Company Discretion. Except as otherwise provided by the Plan, each type of Option may be granted alone or in addition or in relation to any other type of Option. The terms of each type of Option need not be identical. In the exercise of any discretion provided to the Board or the Company under the terms of the Plan or an Option Agreement, the Board and the Company shall not be required to treat Participants uniformly.

(c) Termination of Status. The Board shall in its discretion determine the effect on an Option of the disability, death, retirement, authorized leave of absence or other change in the employment or other status of a Participant and the extent to which, and the period during which the Participant, the Participant’s legal representative, conservator, guardian or designated beneficiary may exercise rights under the Option.

 

5

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(d) Withholding. Each Participant shall pay to the Company, or make provision satisfactory to the Board for payment of, any taxes required by law to be withheld in connection with Options granted to such Participant (including but not necessarily limited to federal, state or local income and employment taxes) no later than the date of the event creating the tax liability. The Company may allow Participants to satisfy such tax obligations in whole or in part in shares of Class A Stock, including shares retained from the Option creating the tax obligation, valued at their Fair Market Value. The Company may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to a Participant.

(e) Amendment of Option. The Board may amend, modify or terminate any outstanding Option, including but not limited to, substituting therefor another Option of the same or a different type, changing the Exercise Date, and converting an Incentive Stock Option to a Nonqualified Stock Option, provided that the Participant’s consent to such action shall be required unless the Board determines that the action, taking into account any related action, would not materially and adversely affect the Participant. Notwithstanding the foregoing, the Board may amend an Option without the Participant’s consent to the extent the Board determines that the amendment is necessary to comply with applicable provisions of state or federal securities laws or regulations, or to preserve pooling treatment for accounting purposes in a Transfer of Control.

(f) Conditions on Delivery of Stock. The Company shall not be obligated to deliver any shares of Class A Stock pursuant to the Plan or to remove restrictions from shares previously delivered under the Plan until (i) all conditions of the Option have been met or removed to the satisfaction of the Company, (ii) in the opinion of the Company’s counsel, all other legal matters in connection with the issuance and delivery of such shares have been satisfied, including any applicable securities laws and any applicable securities exchange or stock market rules and regulations, and (iii) the Participant has executed and delivered to the Company such representations or agreements as the Company may consider appropriate to satisfy the requirements of any applicable laws, rules or regulations.

7. Transfer of Control.

Upon a merger, consolidation, corporate reorganization, or any transaction in which all or substantially all of the assets or stock of the Company are sold, leased, transferred or otherwise disposed of (other than a mere reincorporation transaction or one in which the holders of capital stock of the Company immediately prior to such merger or consolidation continue to hold at least a majority of the voting power of the surviving corporation) (a “Transfer of Control”), then any unexercisable portion of an outstanding Option shall become immediately exercisable as of a date prior to the Transfer of Control, which date shall be determined by the Board. The exercise of any Option that was permissible solely by reason of this Section 7 shall be conditioned upon the consummation of the Transfer of Control. The Board may further elect, in its sole discretion, to provide that any Options which become exercisable solely by reason of the Section 7 and which are not exercised as of the date of the Transfer of Control shall terminate effective as of the date of the Transfer of Control. Notwithstanding the foregoing, an outstanding Option shall not so accelerate if and to the extent (i) such Option is, in connection with a Transfer of Control, either to be assumed by the successor corporation (or parent thereof) or to be replaced with a comparable option to purchase shares of the capital stock of the successor corporation (or parent thereof), (ii) such Option is to be replaced with a cash incentive program of the successor corporation which preserves the spread existing on the unvested Option at the time of such

 

6

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Transfer of Control and provides for subsequent payout in accordance with the same vesting schedule applicable to such Option or (iii) the acceleration of such Option is subject to other limitations imposed by the Board at the time of the grant of the Option. The determination of option comparability under clause (i) shall be made by the Board, and its determination shall be final, binding and conclusive.

The Board may grant Options under the Plan in substitution for stock and stock-based awards held by employees of another corporation who become employees of a Participating Company as a result of a merger or consolidation of the employing corporation with the Participating Company or the acquisition by the Participating Company of property or stock of the employing corporation. The substitute Options shall be granted on such terms and conditions as the Board considers appropriate under the circumstances.

8. Miscellaneous

(a) No Right to Employment or Other Status. No individual shall have any claim or right to be granted an Option, and the grant of an Option shall not be construed as giving a Participant the right to continued employment or any other relationship with the Company or any Participating Company. The Company and any Participating Company expressly reserve the right at any time to dismiss or otherwise terminate its relationship with a Participant free from any liability or claim under the Plan, except as expressly provided in the applicable Option Agreement.

(b) No Rights as Stockholder. Subject to the provisions of the applicable Option Agreement, no Participant shall have any right as a stockholder with respect to any shares of Class A Stock to be distributed with respect to an Option until becoming the record holder of such shares. If the transfer or redistribution of shares of Class A Stock is restricted pursuant to applicable securities laws or any agreement binding on a Participant, certificates representing such shares of Class A Stock may bear a legend referring to such restrictions.

(c) No Rights. Except as hereinabove expressly provided in Sections 4 and 7, no Participant shall have any rights by reason of any subdivision or consolidation of shares of the capital stock of any class or the payment of any stock dividend or any other increase or decrease in the number of shares of any class or by reason of any dissolution, liquidation, merger or consolidation or spin-off of assets or stock of another corporation, and any issue by the Company of shares of stock of any class or of 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 price of shares of Class A Stock subject to any Option granted hereunder. The grant of an Option pursuant to this 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 or to merge or consolidate or to dissolve, liquidate, sell, or transfer all or any part of its business or assets.

(d) Subject to Law. The Plan and the grant of Options hereunder shall be subject to all applicable federal and state laws, rules and regulations and to such approvals by any United States government or regulatory agency, including any securities exchange or similar entity, as may be required.

 

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(e) Severability. If any provision of this Plan or an Option Agreement is or becomes or is deemed invalid, illegal or unenforceable in any jurisdiction, or would disqualify the Plan or any agreement evidencing an Option under any law deemed applicable by the Board, such provision shall be construed or deemed amended to conform to applicable laws or, if it cannot be construed or deemed amended without, in the determination of the Board, materially altering the intent of the Plan or the agreement, it shall be stricken and the remainder of the Plan or the agreement shall remain in full force and effect.

(f) Effective Date and Term of Plan. The Plan shall become effective on the date on which it is adopted by the Board, but no Incentive Stock Option granted to a Participant shall be effective unless the Plan has been approved by the Company’s stockholders within 12 months of the Plan’s adoption date. No Options shall be granted under the Plan after the completion of ten years from the earlier of (i) the date on which the Plan was adopted by the Board or (ii) the date the Plan was approved by the Company’s stockholders, but Options previously granted may extend beyond that date.

(g) Termination or Amendment of Plan. The Company may at any time terminate this Plan or make such changes in or additions to the Plan as it deems advisable without further action on the part of the stockholders of the Company, provided that no such termination or amendment shall adversely affect or impair any then outstanding Option without the consent of the person holding such Option, and provided further that any increase in the number of shares of Class A Stock covered by the Plan (other than an increase pursuant to Section 4(b) above) shall be subject to the approval of the Company’s stockholders.

(h) Reservation of Class A Stock. The Company, during the term of this Plan, will at all times reserve and keep available such number of shares of Class A Stock as shall be sufficient to satisfy the requirements of the Plan.

(i) Stockholder Approval. For purposes of this Plan, stockholder approval shall mean approval by a vote of the stockholders in accordance with the requirements of Code Section 422.

(j) Governing Law. The provisions of the Plan and all Options made hereunder shall be governed by and interpreted in accordance with the laws of the State of North Carolina, without regard to any applicable conflicts of law.

 

 

8

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EXHIBIT A

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THE SECURITY REPRESENTED BY THIS AGREEMENT HAS BEEN (OR WILL BE) ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

 

BANDWIDTH.COM, INC. NONQUALIFIED STOCK OPTION AGREEMENT

Bandwidth.com, Inc. (the “Company”) hereby grants to the Participant named below an option (the “Option”) to purchase the Number of Option Shares specified below pursuant to the Bandwidth.com, Inc. 2001 Stock Option Plan, in the manner and subject to the provisions of this Option Agreement.

 

1.	Definitions:

 

(a)

“Code” shall mean the Internal Revenue Code of 1986, as amended (all citations to sections of the Code are to such sections as they may from time to time be amended or renumbered.)

 

(b)

“Company” shall mean Bandwidth.com, Inc., a Delaware corporation, and any successor corporation thereto.

 

(c)

“Date of Option Grant” shall mean                     .

 

(d)

“Disability” shall mean disability within the meaning of Code Section 22(e)(3), as determined by the Board in its discretion.

 

(e)

“Exercise Date” shall mean the last business day of any calendar quarter or any other date as of which the Option may be exercised pursuant to Sections 5 or 7 of the Plan. The Company in its discretion and on a case by case basis may establish additional Exercise Dates.

 

(f)

“Exercise Price” shall mean                      per share as adjusted from time to time pursuant to Section 4(b) of the Plan.

 

(g)

“Number of Option Shares” shall mean                      shares of Class A Voting Common Stock of the Company (the “Class A Stock”) as adjusted from time to time pursuant to Section 4(b) of the Plan.

 

(h)

“Option Term Date” shall mean the date ten (10) years after the Date of Option Grant.

 

(i)

“Participant” shall mean                     .

 

2

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(j)

“Plan” shall mean the Bandwidth.com, Inc. 2001 Stock Option Plan.

Other capitalized terms used herein and without definition shall have the meanings ascribed to such terms in the Plan.

 

2.	Nonqualified Stock Option. This Option is intended to be a nonqualified stock option. The Participant should consult with the Participant’s own tax advisors regarding the tax effects of this Option.

 

3.	Exercise of the Option.

 

(a)

Right to Exercise. The Option shall be vest and become exercisable as follows from and after , 200___ (the “Commencement Date”) so long as the Participant’s employment with the Participating Company Group has not terminated for any reason prior to any applicable vesting date:

 

(i)

On the first anniversary of the Commencement Date, the Option will vest with respect to 33.33% of the Number of Option Shares, rounded to the next highest whole number of Number of Option Shares; and

 

(ii)

On the second anniversary of the Commencement Date, the Option will vest with respect to 33.33% of the Number of Option Shares, rounded to the next highest whole number of Number of Option Shares; and

 

(iii)

On the third anniversary of the Commencement Date, the Option will vest with respect to 33.34% of the Number of Option Shares, rounded to the next highest whole number of Number of Option Shares.

In addition, this Option shall become vested upon a Transfer of Control of the Company in accordance with (and subject to) Section 7 of the Plan. To the extent vested, the Option shall be exercisable from time to time until termination as provided in paragraph 5 below. The initial computation period in determining the Participant’s vesting under this Option Agreement shall be the first twelve consecutive month period of continuous service by the Participant measured from the Date of Option Grant.

 

(b)

Time and Method of Exercise. Subject to the provisions of the Plan and this Option Agreement, vested Options may be exercised on any Exercise Date by delivery to the Company of at least thirty (30) days’ prior written notice in the form of Exhibit I attached hereto. Such notice must state the election to exercise the Option, the number of shares for which the Option is being exercised and such other representations and agreements as to the Participant’s investment intent with respect to such shares as may be required by the Company. The written notice must be signed by the Participant and delivered in person or by certified or registered mail, return receipt requested, to the President of the Company or other authorized representative of the Participating Company Group. Exercise of the Option shall be completed on the Exercise Date by the Participant’s full payment of the Exercise Price for the number of shares being purchased, in accordance

 

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with the provisions of paragraph 3(c) below. Upon receipt of such payment, the Company will thereafter deliver or cause to be delivered to the Participant at the office of the Company, a certificate or certificates for the number of shares with respect to which this Option is being exercised, registered in the name or names of the individual or individuals exercising this Option; provided, however, that if any law or regulation or order of the Securities and Exchange Commission or other body having jurisdiction in the premises shall require the Company or the Participant to take any action in connection with the shares being purchased, the delivery of the certificate or certificates for such shares shall be delayed until such action has been taken.

 

(c)

Form of Payment of Option Price. On the Exercise Date, the Participant shall pay for the Class A Stock being purchased by delivering to the Company the full Exercise Price in cash or certified check payable to the order of the Company, or by such other method as may be permitted pursuant to Section 5(i) of the Plan.

 

(d)

Withholding. At the time the Option is exercised, in whole or in part, or at any time thereafter as requested by the Company, the Optionee hereby authorizes payroll withholding and otherwise agrees to make adequate provision for foreign, federal and state tax withholding obligations of the Company, if any, which arise in connection with the Option, including, without limitation, obligations arising upon (i) the exercise, in whole or in part, of the Option, (ii) the transfer, in whole or in part, of any shares acquired on exercise of the Option, (iii) the operation of any law or regulation providing for the imputation of interest or (iv) the lapsing of any restriction with respect to any shares acquired on exercise of the Option.

 

(e)

Certificate Registration. The certificate or certificates for the shares as to which the Option shall be exercised shall be registered in the name of the Participant, or, if applicable, the heirs of the Participant.

 

(f)

Restrictions on Grant of the Option and Issuance of Shares. The grant of the Option and the issuance of the shares upon exercise of the Option shall be subject to compliance with all applicable requirements of federal and state law with respect to such securities. The Option may not be exercised if the issuance of shares upon such exercise would constitute a violation of any applicable federal or state securities laws or other laws or regulations. In addition, the Option may not be exercised unless (i) a registration statement under the Securities Act of 1933, as amended (the “1933 Act”), shall at the time of exercise of the Option be in effect with respect to the shares issuable upon exercise of the Option, or (ii) in the opinion of legal counsel to the Company, the shares issuable upon exercise of the Option may be issued in accordance with the terms of an applicable exemption from the registration requirements of the 1933 Act.

THE PARTICIPANT IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISABLE UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE PARTICIPANT MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED.

 

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As a condition to the exercise of the Option, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate to evidence compliance with any applicable law or regulation (or exemption therefrom) and to make any representation or warranty with respect thereto as may be requested by the Company.

 

(g)

Fractional Shares. The Company shall not be required to issue fractional shares upon the exercise of the Option.

 

4.	Non-Transferability of the Option. The Option may be exercised during the Participant’s lifetime only by the Participant (except as otherwise provided in paragraph 6 below) and may not be assigned or transferred in any manner except by will or by the laws of descent and distribution.

 

5.

Termination of the Option. The Option shall terminate and may no longer be exercised on the first to occur of (a) the Option Term Date, (b) the last date for exercising the Option following termination of employment as described in paragraph 6 below, (c) termination of the Option by the Board on the effective date of a Transfer of Control; or (d) termination of the Option by the Board with the Participant’s consent.

 

6.	Termination of Employment.

 

(a)

Termination of the Option.

 

(i)

If the Participating Company Group terminates Participant’s employment other than for “Cause” (as defined below), the Option may be exercised by the Participant, to the extent unexercised and exercisable by the Participant on the date on which the Participant ceased to be an employee, within thirty (30) days after the date on which the Participant’s employment terminates (subject to earlier termination of the Option pursuant to paragraph 5 above).

 

(ii)

If the Participant voluntarily terminates his or her employment with the Participating Company Group on account of retirement after attainment of age sixty-five (65), the Option may be exercised by the Participant, to the extent unexercised and exercisable by the Participant on the date on which the Participant ceased to be an employee, within three (3) months after the date on which the Participant’s employment terminates (subject to earlier termination of the Option pursuant to paragraph 5 above).

 

(iii)

If the Participant’s employment with the Participating Company Group is terminated because of the death or Disability of the Participant, the Option may be exercised by the Participant (or the Participant’s legal representative), to the extent unexercised and exercisable by the

 

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Participant on the date on which the Participant ceased to be an employee, at any time prior to the expiration of twelve (12) months from the date the Participant’s employment terminated (subject to earlier termination pursuant to paragraph 5 above). The Participant’s employment shall be deemed to have terminated on account of death if the Participant dies within three (3) months after the Participant voluntarily terminates his or her employment with the Participating Company Group on account of retirement after attainment of age sixty-five (65) or within thirty (30) days after the Participating Company Group terminates Participant’s employment other than for “Cause.”

 

(iv)

If the Participant’s employment with the Participating Company is terminated for “Cause” (as defined below), the Participant shall forfeit 100% of the Option granted pursuant to this Agreement, whether or not vested or exercisable.

“Cause” for termination of the Participant’s employment shall exist in the event of (A) any act or omission by the Participant constituting a dishonest, immoral, fraudulent or illegal act or omission (if such act or omission causes the business, financial and/or tax status of a Participating Company to suffer substantial damage or such status is threatened with substantial damage by reason thereof); (B) any breach by the Participant of any contract or agreement between the Participant and a Participating Company (including, without limitation, the Buy-Sell Agreement or the Non-Disclosure Agreement); (C) the Participant’s disloyalty or continuing failure or neglect to devote his full time, energy and attention to his job with a Participating Company, except at such times when the Participant is on approved vacation; (D) acts or omissions by the Participant which constitute misconduct or negligence against a Participating Company; (E) the Participant’s failure to satisfy employment duties to the reasonable satisfaction of the Board; (F) the conviction of the Participant for a crime involving moral turpitude; (G) the Participant’s use of illegal drugs or abuse of alcohol; or (H) the Participant’s violation of any material Company policies or procedures. This Option Agreement shall be interpreted such that the Option ceases to vest on the date on which the Participant ceases to be an employee of the Participating Company Group for any reason, notwithstanding any period after such cessation of employment during which the Option may remain exercisable as provided in this paragraph 6.

 

(b)

Termination of Employment Defined. For purposes of this paragraph 6, the Participant’s employment shall be deemed to have terminated either upon an actual termination of employment or upon the Participant’s employer ceasing to be a Participating Company (unless the Participant immediately thereafter continues employment with another Participating Company).

 

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(c)

Leave of Absence. For purposes hereof, the Participant’s employment with the Participating Company Group shall not be deemed to terminate when the Participant takes any bona fide military leave, sick leave, or other leave of absence approved by a Participating Company as long as the leave does not extend beyond ninety (90) days.

 

(d)

Directors, Consultants and Advisors. In the event a participant is a director, con- sultant or advisor but not an employee of a Participating Company at the time the Option is granted, termination of the Participant’s status as a director, consultant or advisor shall be deemed to be termination of the Participant’s employment.

 

7.

Purchase for Investment. This Option is granted on the condition that the purchase of shares of Class A Stock hereunder shall be for the account of the Participant for investment purposes and not with a view to the resale or distribution thereof, except that such condition shall be inoperative if the offering and sale of such shares of Class A Stock subject to this Option is registered under the 1933 Act, or if in the opinion of the Company’s counsel such shares of Class A Stock may be resold without registration. At the time of any exercise of the Option, the Participant (or other individual or individuals exercising this Option) will execute such further agreements as the Company may require to implement the foregoing condition and to acknowledge the Participant’s (or other such individual’s) familiarity with restrictions on the resale of the shares of Class A Stock under applicable securities laws.

 

8.	Additional Agreements.

 

(a)

Buy-Sell Agreement. In connection with the exercise of this Option in whole or in part, the Participant (or other individuals exercising this Option) shall execute and deliver to the Company a buy-sell agreement in the form of Exhibit II attached hereto (the “Buy-Sell Agreement”). The Company shall be under no obligation to honor the exercise of this Option unless and until the Participant has executed the Buy-Sell Agreement.

 

9.	Rights as a Stockholder or Employee.

 

(a)

No Rights as Stockholder. The Participant (or other individuals exercising this Option) shall have no rights as a stockholder with respect to the shares of Class A Stock subject to this Option until the exercise of the Option in accordance with this Option Agreement and the Plan.

 

(b)

No Right to Employment or Other Status. The grant of this Option shall not be construed as giving the Participant the right to continued employment or any other relationship with any Participating Company. The Participating Company Group expressly reserves the right at any time to dismiss or otherwise terminate its relationship with the Participant free from any liability or claim under this Option Agreement or the Plan.

 

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10.

Legends. The Company may at any time place legends referencing affiliate status or any applicable federal or state securities law restrictions or applicable transfer or other restrictions under the Buy-Sell Agreement on all certificates representing shares of stock subject to the provisions of this Option Agreement. The Participant shall, at the request of the Company, promptly present to the Company any and all certificates representing shares acquired pursuant to the Option in the possession of the Participant in order to effectuate the provisions of this paragraph 10. Unless otherwise specified by the Company, legends placed on such certificates may include, but shall not be limited to, the following:

 

(a)

THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.

 

(b)

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER, RIGHTS OF FIRST REFUSAL AND OTHER RESTRICTIONS OR RIGHTS IN FAVOR OF THE COMPANY OR ITS ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.

 

11.

Initial Public Offering. The Participant hereby agrees that in the event of an initial public offering of stock made by the Company, the Participant shall not offer, sell, contract to sell, pledge, hypothecate, grant any option to purchase or make any short sale of, or otherwise dispose of any shares of stock of the Company or any rights to acquire stock of the Company for such period of time as may be established by the underwriter for such initial public offering; provided, however, that such period of time shall not exceed one hundred eighty days from the effective date of the registration statement to be filed in connection with such initial public offering. The foregoing limitation shall not apply to shares registered under the 1933 Act.

 

12.	Binding Effect. This Option Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and assigns.

 

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13.

Amendment of Option. The Board may amend or modify this Option, including but not limited to, substituting therefor another Option of the same or a different type and changing the date of exercise, provided that the Participant’s consent to such action shall be required unless the Board determines that the action, taking into account any related action, would not materially and adversely affect the Participant. Notwithstanding the foregoing, the Board may amend or modify this Option without the Participant’s consent to the extent the Board determines that the amendment is necessary to comply with applicable provisions of state or federal securities laws or regulations.

 

14.

Integrated Agreement. This Option Agreement, the Plan, the Non-Disclosure Agreement and the Buy-Sell Agreement constitute the entire understanding and agreement of the Participant and the Participating Company Group with respect to the subject matter contained herein and therein, and there are no other agreements, understandings, restrictions, representations, or warranties among the Participant and the Participating Company Group with respect to the subject matter contained herein other than those as set forth or provided for herein and therein. To the extent contemplated herein and in the Plan, the provisions of this Option Agreement and the Plan shall survive any exercise of the Option and shall remain in full force and effect.

 

15.

Notices. All notices, requests, demands, payments, and other communications hereunder shall be deemed to have been duly given if in writing and sent by certified mail to the appropriate address indicated below the parties’ signatures to this Option Agreement or to such other address as may be given in a notice sent to all parties hereto.

 

16.	Waiver. The waiver of the Company or the Participant of any breach of a provision of this Option Agreement shall not operate or be construed as a waiver of any subsequent breach by the parties.

 

17.

Terms and Conditions of Plan. The terms and conditions included in the Plan are incorporated by reference herein, and to the extent that any conflict may exist between any term or provision of this Option Agreement and any term or provision of the Plan, the term or provision of the Plan shall control.

 

18.

Severability. If any provision of this Option Agreement is or becomes or is deemed invalid, illegal or unenforceable in any jurisdiction, or would disqualify the Option Agreement or the Plan under any law deemed applicable by the Board, such provision shall be construed or deemed amended to conform to applicable laws or, if it cannot be construed or deemed amended without, in the determination of the Board, materially altering the intent of the Option Agreement or the Plan, it shall be stricken and the remainder of the Plan or the agreement shall remain in full force and effect.

 

19.	Counterparts. The Company and the Participant shall execute this Option Agreement in any number of counterparts, each one of which shall be deemed to be the original although the others shall not be produced.

 

20.	Applicable Law. This Option Agreement shall be governed by and construed in accordance with the laws of the State of North Carolina, without regard to any applicable conflicts of law.

 

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IN WITNESS WHEREOF, the Company and the Participant have caused this Option Agreement to be executed on the          day of             , 2005.

 

__________________________

__________________________

__________________________

__________________________

The Participant represents that the Participant is familiar with the terms and provisions of this Option Agreement, the Plan, the Buy-Sell Agreement, the Non-Disclosure Agreement and such other agreements executed in connection with the award of this Option, and hereby accepts the Option subject to all of the terms and provisions hereof and of the Plan. The Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board or the Company, as appropriate, made in good faith upon any questions arising under this Option Agreement or the Plan.

The undersigned hereby acknowledges receipt of a copy of the Plan.

 

Date:
								Signature of Optionee

 

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EXHIBIT I

[Date]

Bandwidth.com, Inc

4001 Weston Parkway

Suite 100

Cary, NC 27513

Re: Exercise of Nonqualified Stock Option

Dear Madams/Sirs:

Pursuant to the terms and conditions of the Nonqualified Stock Option Agreement dated as of _______________, 2001 (the “Agreement”), between ________________ (“Optionee”) and Bandwidth.com, Inc. (the “Company”), Optionee hereby agrees to purchase _________ shares (the “Shares”) of the Class A Voting Common Stock of the Company and tender payment in full for such shares in accordance with the terms of the Agreement.

The Shares are being issued to Optionee in a transaction not involving a public offering and pursuant to an exemption from registration under the Securities Act of 1933, as amended (the “1933 Act”). In connection with such purchase, Optionee represents, warrants and agrees as follows:

 

1.

The Shares are being purchased for the Optionee’s own account and not for the account of any other person, with the intent of holding the Shares for investment and not with the intent of participating, directly or indirectly, in a distribution or resale of the Shares or any portion thereof.

 

2.

The Optionee is not acquiring the Shares based upon any representation, oral or written, by any person with respect to the future value of, or income from, the Shares, but rather upon independent examination and judgment as to the prospects of the Company.

 

3.

The Optionee has had complete access to and the opportunity to review all material documents related to the business of the Company, has examined all such documents as the Optionee desired, is familiar with the business and affairs of the Company and realizes that any purchase of the Shares is a speculative investment and that any possible profit therefrom is uncertain.

 

4.

The Optionee has had the opportunity to ask questions of and receive answers from the Company and its executive officers and to obtain all information necessary for the Optionee to make an informed decision with respect to the investment in the Company represented by the Shares.

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5.

The Optionee is able to bear the economic risk of any investment in the Shares, including the risk of a complete loss of the investment, and the Optionee acknowledges that he or she may need to continue to bear the economic risk of the investment in the Shares for an indefinite period.

 

6.

The Optionee understands and agrees that the Shares are being issued and sold to the Optionee without registration under any state or federal laws relating to the registration of securities, in reliance upon exemptions from registration under appropriate state and federal laws based in part upon the representations of the Optionee made herein.

 

7.

The Company is under no obligation to register the Shares or to comply with any exemption available for sale of the Shares by the Optionee without registration, and the Company is under no obligation to act in any manner so as to make Rule 144 promulgated under the 1933 Act available with respect to any sale of the Shares by the Optionee.

 

8.

The Optionee has not relied upon the Company or an employee or agent of the Company with respect to any tax consequences related to exercise of this Option or the disposition of the Shares. The Optionee assumes full responsibility for all such tax consequences and the filing of all tax returns and elections the Optionee may be required to or find desirable to file in connection therewith.

 

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EXHIBIT II

BUY-SELL AGREEMENT

THIS BUY-SELL AGREEMENT (the “Agreement”) is made, entered into and effective as of the 9^th day of March, 2007, by and among Bandwidth.com, Inc., a Delaware corporation (the “Company”), FT Bandwidth Ventures, LLC, an Illinois limited liability company (the “Stockholder”), Henry R. Kaestner (“Kaestner”) and David A. Morken (“Morken,” together with Kaestner, the “Founding Stockholders”).

RECITALS

WHEREAS, the Stockholder has acquired or may acquire shares of the Company’s Class A Voting Common Stock, $0.001 par value per share (the “Company Stock”); and

WHEREAS, execution of this Agreement is a condition to the issuance of shares of Company Stock to the Stockholder and that certain Stock Subscription Agreement of even date herewith between the Company and the Stockholder (the “Subscription Agreement”); and

WHEREAS, the Company and the Stockholder believe that it is in the best interests of the Company and the Stockholder to make provisions for the management and operation of the Company, the future disposition of shares of Company Stock and to restrict the transfer of shares of Company Stock in certain instances.

AGREEMENTS

In satisfaction of the foregoing recitals, and in consideration of the mutual agreements, covenants and conditions contained herein, and the issuance of shares of Company Stock to the Stockholder, the Company and the Stockholder agree as follows:

4. ARTICLE I

RESTRICTION ON THE TRANSFER OF SHARES

1.1 Restriction on Transfer. The Stockholder shall not transfer any shares of Company Stock held or owned by it except as may be permitted by, and in strict compliance with, the provisions of this Agreement. For purposes of this Agreement, the term “transfer” shall mean any voluntary or involuntary sale, assignment, pledge, encumbrance, gift or other transfer in any manner or by any means whatsoever (including, without limitation, by court order requiring transfer, by operation of law, by testamentary disposition, divorce, separation, equitable distribution or otherwise). Without limiting the effect of the foregoing prohibition against transfers, any party receiving shares of Company Stock from or through the Stockholder in compliance with the terms of this Agreement shall be bound by its terms and conditions to the same extent as the Stockholder. The Stockholder acknowledges and agrees that the restriction on the transfer of Company Stock stated in this Section 1.1 is reasonable because, among other things it: (a) protects the legitimate business purposes of the Company and the interests of all the stockholders; and (b) ensures that the Company will be able to control who may participate in the Company’s business.

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Further, notwithstanding any provision herein to the contrary, no disposition of any shares of Company Stock is permitted, nor will any such purported disposition be recognized, unless each of the following conditions has first been satisfied to the satisfaction of the Company:

a. Delivery of prior written notice to the Company by the Stockholder or by the duly-appointed personal representative of the Stockholder of the details applicable to a proposed transfer, including (i) the number of shares involved; (ii) the identity, residency, legal status (e.g., individual, trust, corporation, partnership) of the person to whom the shares are proposed to be transferred, accompanied by documentation substantiating and governing such legal status and the terms and conditions applicable thereto; (iii) the circumstances, terms and conditions applicable to such proposed transfer, together with copies of all documents and agreements pertaining thereto; (iv) the proposed effective date of any proposed transfer; and (v) any other matter which the Company may reasonably require.

b. The receipt by the Company of a legal opinion, in form and substance acceptable to the Company, opining that the proposed transfer does not violate or breach applicable securities laws or other governmental regulations.

c. The receipt by the Company of a binding commitment in form reasonably acceptable to the Company of the proposed transferee agreeing to be bound by the terms of this Agreement, applicable governmental regulations and agreements and/or loan requirements affecting the Stockholder, the Company or shares of Company Stock, and assurance of compliance therewith.

d. The satisfaction of such other reasonable conditions as may be deemed by the Company to be necessary, advisable or appropriate.

1.2 Grant of Option to Purchase Shares at Certain Events. The Company shall have the option (but not the obligation) to purchase or arrange the purchase of the Stockholder’s shares of Company Stock upon the occurrence of any of the following events (“Option Events”):

a. The filing of a petition by the Stockholder for relief as debtor or bankrupt under the U.S. Bankruptcy Code or any similar federal or state law, or other reorganization, arrangement, insolvency, adjustment of debt or liquidation law affording debtor relief proceedings; or the commencement or consent to the filing of any such involuntary action thereunder against the Stockholder (which remains unstayed or effective for a period of sixty (60) days); or, if the Stockholder is a corporation, the assignment of the Stockholder’s shares or assets (or portion or interest thereof) for the benefit of creditors or the allowance of such shares (or portion or interest thereof) to become subject to any lien, encumbrance, attachment, garnishment, charging order or similar charge;

 

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b. Any conviction of the Stockholder by a court of competent jurisdiction with respect to an act or omission by the Stockholder constituting a dishonest, immoral, fraudulent or illegal act or omission if such act or omission causes or is reasonably likely to cause the business or financial and/or tax status of the Company or the Company’s stockholders to suffer material economic damage; or any material breach by the Stockholder of this Agreement or any employment, non-competition, non-disclosure and/or intellectual property agreement or similar arrangement between the Company and the Stockholder, which breach is not substantially cured within sixty (60) days after written notice of the same is provided by the Company to the Stockholder; or any material breach or material default by the Stockholder under any note or other evidence of indebtedness owing to the Company with respect to the purchase of shares of Company Stock, which breach is not substantially cured within sixty (60) days after written notice of the same is provided by the Company to the Stockholder;

c. If applicable due to any subsequent transfer from or through the Stockholder in compliance with the terms of this Agreement, the transfer or attempted transfer to the Stockholder’s spouse pursuant to separation, divorce, equitable distribution or similar proceedings;

d. Any proposed transfer by the Stockholder of shares of Company Stock (or any portion thereof or interest therein) by acceptance of a written bona-fide, third-party offer of purchase, a copy of which shall be promptly provided to the Company, together with the information set forth above in Section 1.1(a)-(d);

e. If applicable due to any subsequent transfer from or through the Stockholder in compliance with the terms of this Agreement, the Stockholder’s death or mental disability, as determined by a court of competent jurisdiction;

f. Any other transfer or attempted transfer by the Stockholder of its shares of Company Stock (or any portion thereof or interest therein) in violation of this Agreement;

g. If applicable due to any subsequent transfer from or through the Stockholder in compliance with the terms of this Agreement, the Stockholder’s marriage (or remarriage) after the date hereof if the Stockholder’s spouse has not executed a counterpart to this Agreement prior to such marriage, agreeing to be bound by the terms hereof and an Acknowledgement and Consent in a form reasonably acceptable to the Company; or

h. The occurrence of any event with respect to the Stockholder or its Company Stock that would result in the violation of applicable governmental regulations or a loan agreement of the Company that the Stockholder is a party to which would have an adverse effect on the Company or its stockholders, unless any such occurrence is susceptible to cure and is cured within a period of time which will avoid such termination or violation.

 

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1.3 Procedure Upon Occurrence of Option Event.

a. Upon the occurrence of any Option Event, the Company shall thereupon have the right to purchase (which right may be assigned by the Company in whole or in part to any other party; provided, however, the Company and the party which such right is assigned to shall be jointly and severally liable with respect to all obligations of the Company hereunder assigned to such party) all, or any portion, of the Stockholder’s shares of Company Stock. Notwithstanding the foregoing, before the Company may exercise its option pursuant to Section 1.2(c), if applicable due to any subsequent transfer from or through the Stockholder in compliance with the terms of this Agreement, the Stockholder may first elect to purchase his or her spouse’s interest in the Company Stock owned by the Stockholder on the same terms and conditions as would be applicable to the Company’s purchase of such Company Stock. If the Stockholder does not elect to so purchase the Company Stock within fifteen (15) days after his or her spouse’s (or former spouse’s) interest in the Company Stock is established by appropriate proceedings, the Company shall have the right to purchase such Company Stock pursuant to this Section 1.3. If the Company wishes to exercise the right to purchase, it must give written notice of its intent to exercise the right to the Stockholder or the Stockholder’s representative within one hundred twenty (120) days after receiving actual notice of the Option Event. The closing of the purchase and sale of shares pursuant to any option exercised by the Company hereunder shall occur on a date specified by the Company, but in no event later than one hundred twenty (120) days after the Company gives the notice required by this Section 1.3(a). The exercise by the Company of any right hereunder shall not result in a waiver of any other right or remedy which the Company or any other person may have against the Stockholder.

b. The per-share purchase price of any shares of Company Stock purchased under this Article I, and the terms of such sale, shall be as specified under Section 1.4 below.

c. In the event of a proposed transfer under Section 1.2(d) above, if all of the Stockholder’s shares of Company Stock are not purchased in accordance with the option set forth in Section 1.3(a) above, then the Stockholder may, subject and subordinate to satisfaction of the conditions enumerated in this Article I, convey such shares subject to such offer to the offering party strictly under the per-share purchase price and other terms of such offer; provided, however, that if such transaction is not closed within thirty (30) days after expiration of the Company’s right to exercise its options granted herein then all of the Stockholder’s shares of Company Stock shall again become subject to the terms and conditions of this Agreement.

1.4 Purchase Price and Terms.

a. Subject to the last sentence of this Section 1.4(a), upon the exercise of an option granted pursuant to this Article I, the purchase price for shares of Company Stock under this Article I shall be the “fair market value” of the shares as of the date of the Option Event as agreed upon by the Company and the Stockholder. If the Company and the Stockholder cannot reach agreement on the fair market value of the shares, the fair

 

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market value of the shares as of the date of the Option Event shall be determined within thirty (30) days of the Option Event by a duly-qualified accountant or appraiser mutually agreed upon by the Company and the Stockholder and the costs of such appraisal shall be borne equally by the Company and the Stockholder. In the event that either the Company or the Stockholder objects to the fair market value set forth in such appraisal for any reason and such party provides the other party with written notice of its objection to the same within thirty (30) days of its receipt of such appraisal, the fair market value of the shares as of the date of the Option Event shall be determined within ninety (90) days of the Option Event by a second duly-qualified accountant or appraiser mutually agreed upon by the Company and the Stockholder and the cost of such appraisal shall be borne entirely by the objecting party. In the event that two appraisals are obtained, the “fair market value” shall be equal to the average of the fair market value determinations of the two appraisers. In the event that the Company and the Stockholder fail to mutually agree upon a duly-qualified accountant or appraiser, such accountant or appraiser shall be selected by the American Arbitration Association. If the Option Event is pursuant to Section 1.2(d) pursuant to a bona fide, third-party offer to purchase the Stockholder’s Company Stock, the purchase price and payment terms will be those set forth in the bona fide, third-party offer. The purchase price as determined above shall be discounted by thirty percent (30%) in the event that the Option Event resulting in the purchase is described in Section 1.2(b) or (f) in recognition of the material detriment thereof to the Company and other stockholders, and the Stockholder acknowledges and agrees that such discount shall not constitute a penalty or liquidated damages or limit other remedies and recourse as may be available to the Company and other stockholders. The purchase price as determined above shall not reflect any discount for a minority interest or lack of marketability or any other similar discount, except as provided in the preceding sentence.

b. The Stockholder shall be required to transfer unencumbered title to the shares subject to purchase hereunder, other than those imposed by this Agreement. In consideration of the transfer of unencumbered title to the Stockholder’s shares of Company Stock, the purchaser shall pay the purchase price in cash at closing or, at the purchaser’s sole option, as follows: fifty percent (50%) at closing with the balance thereof amortized and paid on the first anniversary of closing. The deferred payment, if any, shall be evidenced by a promissory note executed by the purchaser and payable to the Stockholder, or its successor, which note shall bear interest at a rate equal to the minimum rate necessary to avoid the existence of “total unstated interest” or to ensure that there is “adequate stated interest” on the date of closing under the applicable provisions of the Internal Revenue Code (the “Code”).

 

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1.5 Prohibition Against Pledge of Stock. The Stockholder shall not pledge, hypothecate or grant a security interest in all or any part of its shares of Company Stock other than pledges, hypothecations or security interests granted to the Company in connection with loans to purchase such shares of Company Stock.

1.6 Prohibited Transfers Void. Any purported transfer of shares of Company Stock held by the Stockholder which contravenes in any manner any provision of this Agreement shall be wholly null and void, the Company shall not register the transfer on the stock register of the Company and the shares in question shall remain fully subject to the terms of this Agreement.

1.7 Binding on Successors. This Article I shall bind and inure to the benefit of the parties hereto, their respective heirs, executors, administrators, successors and permitted assigns, including any transferees permitted under this Article I.

1.8 Consent by Transferee. In the event of any approved or properly executed transfer of shares of Company Stock owned by the Stockholder, there shall be filed with the Company a written consent by the transferee to be bound by all of the terms and provisions of this Agreement. If such consent is not so filed, the Company will not recognize such transfer for any purpose. The Stockholder and the transferee shall execute such further documents and take such further action as may be reasonably required by the Company to effectuate the transfer. Except as provided in Section 1.4(a) hereof, all costs and expenses (including reasonable attorneys’ fees) relating to the transfer of shares of Company Stock shall be borne by the Stockholder and the transferee.

1.9 Termination. The provisions of this Article I shall terminate on the closing of a “Qualified Public Offering.” For purposes of this Agreement, “Qualified Public Offering” shall mean an underwritten public offering of the Company’s equity securities registered under the Securities Act of 1933, as amended (the “Securities Act”), resulting in aggregate net proceeds to the Company (after deduction of underwriter commissions and offering expenses) equal to or exceeding $20,000,000.00.

1.10 Piggyback Registration Rights.

a. Registration Requirement. In the event that the Company at any time proposes or is required to register any of its Company Stock, New Securities or any other securities under the Securities Act (“Registrable Securities”), whether or not for sale for its own account, in a manner that would permit registration of Registrable Securities for sale for cash to the public under the Securities Act, subject to the last sentence of this Section 1.10(a), it shall at each such time give prompt written notice (the “Piggyback Notice”) to the Stockholder of its intention to do so, which Piggyback Notice shall specify the number and class or classes (or type or types) of Registrable Securities to be registered. Upon the written request of the Stockholder made within fifteen (15) business days after receipt of the Piggyback Notice by the Stockholder (which request shall specify the number of Registrable Securities intended to be disposed of), the Company shall effect, in connection with the registration of such Registrable Securities, the registration under the Securities Act of all Registrable Securities which the Company has been so requested to register by the Stockholder; provided, that in no event shall the

 

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Company be required to register pursuant to this Section 1.10 any securities of a class or type other than the classes or types described in the Piggyback Notice. Notwithstanding anything to the contrary contained in this Section 1.10, the Company shall not be required to effect any registration of Registrable Securities under this Section 1.10 incidental to the registration of any of its securities on Forms S-4 or S-8 (or similar or successor form providing for the registration of securities in connection with mergers, acquisitions, exchange offers, subscription offers, dividend reinvestment plans or stock option or other executive or employee benefit or compensation plans) or any other form that would not be available for registration of Registrable Securities.

b. Determination Not to Effect Registration. If at any time after giving such Piggyback Notice and prior to the effective date of the registration statement filed in connection with such registration the Company shall determine for any reason not to register the securities originally intended to be included in such registration, the Company may, at its election, give written notice of such determination to the Stockholder and thereupon the Company shall be relieved of its obligation to register such Registrable Securities in connection with the registration of securities originally intended to be included in such registration.

c. Cutbacks in Company Offering. If the registration referred to in the first sentence of Section 1.10(a) is to be an underwritten registration on behalf of the Company, and the lead underwriter or managing underwriter advises the Company in writing (with a copy to each person participating in such registration) that, in such firm’s good faith view, the number of Registrable Securities requested to be included in such registration exceeds the number which can be sold in such offering without being likely to have a significant adverse effect upon the price, timing or distribution of the offering and sale of the Registrable Securities then contemplated, the Company shall include in such registration:

(i) first, all Registrable Securities the Company proposes to sell for its own account; and

(ii) second, Registrable Securities that are requested to be included in such registration pursuant to this Section 1.10 and the terms of any other registration rights agreement to which the Company is a party that can be sold without having the adverse effect referred to above, pro rata on the basis of the relative number of such Registrable Securities owned by the persons seeking such registration.

 

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d. Expiration. Notwithstanding any other provision of this Agreement, the right of the Stockholder to participate in a registration pursuant to this Section 1.10 shall expire at such time as all Registrable Securities held by such Stockholder are eligible to be sold to the public pursuant to Rule 144 without limitation as a result of the volume restrictions set forth therein.

e. Expenses of Registration. All expenses, other than underwriting discounts and commissions, incurred in connection with registrations, filings or qualifications pursuant to this Section 1.10, including, without limitation, all registration, listing, and qualifications fees, printing and engraving fees, accounting fees, and the fees and disbursements of counsel for the Company, and the reasonable fees, not to exceed $5,000, of one firm of counsel to the Stockholder shall be borne by the Company.

ARTICLE II

INTENTIONALLY DELETED

ARTICLE III

BRING-ALONG RIGHTS; TAG-ALONG RIGHTS

3.1 Bring-Along Rights.

a. Notice. If stockholders (“Selling Stockholders”) holding more than fifty percent (50%) of the Company Stock propose to transfer all of their shares of Company Stock pursuant to a bona fide third-party offer from a person or entity that is not an Affiliate of any of the Selling Stockholders in a transaction (including, without limitation, a sale or merger) to be completed prior to the termination of this Agreement, a designee of such Selling Stockholders may elect to deliver to the Stockholder a notice (“Transfer Notice”): (a) stating that the Transfer Notice is being delivered pursuant to this Article III, (b) setting forth all of the terms and conditions of the transfer and (c) including a copy of the third party’s written offer and all agreements concerning the same. The Stockholder shall be required to offer in the proposed transfer the number of shares of Company Stock listed in the Transfer Notice. As used in this Agreement, “Affiliate” will mean any corporation or non-corporate entity which controls, is controlled by, or is under common control with a specified person or entity. A corporation or non-corporate entity, as applicable, will be regarded as in control of another corporation if it owns, or directly or indirectly controls, at least fifty percent (50%) of the voting stock of the other corporation or, in the absence of the ownership of at least fifty percent (50%) of the voting stock of a corporation or in the case of a non-corporate entity, if it possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such corporation or non-corporate entity, as applicable.

b. Bring-Along Transfer Rights. The Stockholder shall transfer all shares of Company Stock owned by it on the terms and subject to the conditions of the Transfer Notice (when and if the Selling Stockholders transfer their shares of Company Stock in accordance with the Transfer Notice) including the time of transfer, form of consideration and per-share transfer price, all of which shall be the same as the terms applicable to the transfer of the Selling Stockholders’ shares of Company Stock.

 

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c. Procedures; Expenses. Upon receipt of a Transfer Notice pursuant to Section 3.1, the Stockholder shall promptly take all steps described in the Transfer Notice to effectuate the transfer of its shares of Company Stock listed in the Transfer Notice, including the furnishing of information customarily provided in connection with such a transfer and the execution of customary transfer documents, with customary representations and warranties regarding title to the securities and the absence of any liens or other encumbrances thereon, all of which shall be the same as the terms applicable to the transfer of the Selling Stockholders’ shares of Company Stock. All expenses of the transfer, if not paid by the proposed transferee, shall be borne and paid ratably by the Selling Stockholders and all other stockholders of the Company participating in such sale in accordance with their percentage ownership of the Company Stock being sold. Moreover, all indemnity obligations, if any, shall be shared among the Selling Stockholders and all other stockholders of the Company participating in such sale in accordance with their percentage ownership of the Company Stock being sold.

3.2 Tag-Along Rights.

a. Notice. If any Founding Stockholder or any Affiliate or Immediate Family Member of a Founding Stockholder (“Selling Founding Stockholder”) proposes to transfer any of its shares of Company Stock, New Securities or any other securities of the Company (“Tag Along Shares”) prior to the termination of this Agreement, such Selling Founding Stockholder shall deliver to the Stockholder in each such instance a notice (“Tag-Along Transfer Notice”): (a) stating that the Tag-Along Transfer Notice is being delivered pursuant to this Section 3.2, (b) setting forth all of the terms and conditions of the transfer and (c) including a copy of the third party’s written offer and all written agreements concerning the same.

b. Tag-Along Transfer Rights. The Stockholder shall have the right (the “Tag-Along Right”), but not the obligation, to require the transferee to purchase from the Stockholder, on the same terms and conditions offered to the Selling Founding Stockholder(s), up to that number of shares of Company Stock determined by multiplying the number of shares of Company Stock owned by the Stockholder times a fraction, the numerator of which is the number of shares of Tag Along Shares proposed to be transferred by the Selling Founding Stockholder(s) on a fully-converted basis and the denominator of which is the total number of Tag Along Shares owned by the Selling Founding Stockholder(s) on a fully-converted basis.

c. Procedures; Expenses. If the Stockholder desires to exercise its Tag-Along Right, it shall provide written notice to the Selling Founding Stockholder(s) within forty-five (45) days of its receipt of the Tag-Along Transfer Notice informing the Selling Founding Stockholder(s) of its election to exercise its Tag-Along Right and the number of shares of Company Stock the Stockholder desires to include in such sale. If the Stockholder elects to exercise its Tag-Along Right, the Stockholder shall promptly take all steps described in the Tag-Along Transfer Notice to effectuate the transfer of its

 

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shares of Company Stock listed in the Transfer Notice, including the furnishing of information customarily provided in connection with such a transfer and the execution of customary transfer documents, with customary representations and warranties regarding title to the securities and the absence of any liens or other encumbrances thereon. All expenses of the transfer, if not paid by the proposed transferee, shall be borne and paid ratably by the Selling Founding Stockholder(s) and all other stockholders of the Company participating in such transfer in accordance with their percentage ownership of Tag Along Shares being sold on a fully-converted basis. Moreover, all indemnity obligations, if any, shall be shared among the Selling Founding Stockholder(s) and all other stockholders of the Company participating in such sale in accordance with their percentage ownership of Tag Along Shares being sold on a fully-converted basis.

3.3 Expiration of Right. The provisions of this Article III shall expire on the closing of a Qualified Public Offering.

ARTICLE IV

VOTING AGREEMENT; RIGHT TO INFORMATION

4.1. Voting for Directors. The Stockholder agrees to vote for directors in accordance with this Agreement as follows. The Stockholder shall appear in person, or by proxy, at any annual or special meeting of stockholders of the Company for the purpose of obtaining a quorum and shall vote the shares of Company Stock owned by him, either in person or by proxy, at such meeting of stockholders called for the purpose of voting on the election of directors in a manner that will result in the election of David A. Morken and Henry R. Kaestner to the board of directors of the Company (the “Board”). The Stockholder shall vote in any solicitation of written consents consistently with the foregoing.

4.2. Right to Information. The Company shall provide the Stockholder with the following:

(i) unaudited quarterly financial statements of the Company, delivered within forty-five (45) days of the end of each quarter;

(ii) audited annual financial statements of the Company, delivered within one hundred twenty (120) days of the end of each fiscal year;

(iii) information reasonably necessary for the Stockholder to comply with tax reporting requirements, delivered within ninety (90) days of the end of each fiscal year; and

(iv) such other information relating to the financial condition, business prospects or corporate affairs of the Company as the Stockholder may from time to time reasonably request.

 

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ARTICLE V

INTENTIONALLY DELETED

5. ARTICLE VI

6. MISCELLANEOUS

6.1. Effect of Issuance of Additional Stock. The parties hereto agree that all other capital stock of the Company now owned or hereafter acquired by the Stockholder is subject to the terms of this Agreement and the certificates evidencing such stock shall have endorsed thereon the endorsement provided for in Section 6.4 below. It is understood and intended by the parties that the shares subject to this Agreement shall include each and every share of stock of the Company of any class or series issued or reissued to the Stockholder under any circumstance, including but not limited to, by way of recapitalization, stock dividend, stock split, purchase or other change in corporate structure, and regardless of whether or not such shares contain the legends set forth in Section 6.4 below.

6.2 Acknowledgement of Spouse. If applicable due to any subsequent transfer from or through the Stockholder in compliance with the terms of this Agreement, the Stockholder agrees that the Stockholder shall have his or her spouse execute an Acknowledgement and Consent in a form reasonably acceptable to the Company. This obligation shall apply to existing spouses and to any future spouse of the Stockholder.

6.3 Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of North Carolina as applied to agreements among North Carolina residents made and to be performed entirely within the State of North Carolina.

6.4 Successors and Assigns; Legend. Except as otherwise expressly provided herein, the provisions hereof shall inure to the benefit of, and be binding upon, the successors, permitted assigns, heirs, executors and administrators of the parties hereto. All certificates or instruments representing shares of Company Stock held by or issued to the Stockholder, whether now outstanding or subsequently issued, shall be surrendered to the Company for endorsement or be endorsed by the Company prior to their issuance with legends, including the following:

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ISSUED WITHOUT REGISTRATION OR QUALIFICATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE BLUE SKY OR SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF SUCH REGISTRATION OR QUALIFICATION, OR AN EXEMPTION FROM THE REGISTRATION OR QUALIFICATION REQUIREMENTS OF SUCH ACT OR LAWS, OR UNLESS SUCH ACT OR LAWS DO NOT APPLY.

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER AND OTHER PROVISIONS CONTAINED IN AN AGREEMENT BETWEEN THE COMPANY, THE INITIAL HOLDER HEREOF AND HIS OR HER SPOUSE, IF ANY, A COPY OF WHICH IS AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE COMPANY. BY ACCEPTING ANY INTEREST IN SUCH SECURITIES, THE PERSON ACCEPTING SUCH INTEREST SHALL BE DEEMED TO AGREE TO AND SHALL BECOME BOUND BY ALL OF THE PROVISIONS OF SAID AGREEMENT.

 

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6.5 Entire Agreement. This Agreement constitutes the full and entire understanding and agreement among the parties with regard to the subject matter hereof. Nothing in this Agreement, express or implied, is intended to confer upon any party, other than the parties hereto and their respective successors and permitted assigns, any rights, remedies, obligations or liabilities under or by reason of this Agreement, except as expressly provided herein.

6.6 Severability. If any provision of this Agreement is determined by a court of appropriate jurisdiction to be invalid, illegal or unenforceable, it shall to the extent practicable be modified so as to make it valid, legal and enforceable and to retain as nearly as practicable the intent of the parties, and the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

6.7 Equitable Relief. The Stockholder, the Founding Stockholders and the Company each acknowledge that a breach or violation of any of the terms, covenants or other obligations under this Agreement by the Stockholder, a Founding Stockholder or the Company, as the case may be, will result in immediate and irreparable harm to the Company, the Founding Stockholders or the Stockholder, as the case may be, in an amount which will be impossible to ascertain at the time of the breach or violation and that the award of monetary damages will not be adequate relief to the Company, the Founding Stockholders or the Stockholder, as the case may be. Therefore, the failure on the part of the Stockholder, the Founding Stockholders or the Company to perform all of the terms, covenants and obligations established by this Agreement shall give rise to a right to the Stockholder, the Founding Stockholders or the Company, as the case may be, to obtain enforcement of this Agreement in any state or federal court by a decree of specific performance or appropriate injunctive relief prohibiting the violation of the terms of this Agreement. This remedy shall be cumulative and in addition to any other remedy the Stockholder, the Founding Stockholders or the Company may have.

6.8 Amendment and Waiver. No changes, alterations, amendments, modifications, additions or qualifications to the terms of this Agreement shall be made or be binding unless made in writing and signed by the parties hereto.

6.9 Delays or Omissions. No delay or omission to exercise any right, power or remedy accruing to the Company, the Stockholder or the Founding Stockholders upon any breach, default or noncompliance of any other party hereto or any transferee under this Agreement, shall impair any such right, power or remedy, nor shall it be construed to be a waiver of any such breach, default or noncompliance, or any acquiescence therein, or of any similar breach, default or noncompliance thereafter occurring. It is further agreed that any waiver, permit, consent or approval of any kind or character on the part of the Company, the Stockholder or the Founding Stockholders of any breach, default or noncompliance under this Agreement or any waiver on the Company’s, the Stockholder’s or the Founding Stockholders’ part of any provisions or conditions of this Agreement must be in writing and shall be effective only to the extent specifically set forth in such writing and that all remedies, either under this Agreement, by law or otherwise afforded to the Company, the Founding Stockholders and the Stockholder, shall be cumulative and not alternative.

 

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6.10 Notices, etc. All notices and other communications required or permitted hereunder shall be in writing and shall be deemed effectively given upon personal delivery or upon confirmed delivery by facsimile or telecopy, or on the fifth day (or the tenth day if to a party with a foreign address) following mailing by registered or certified mail, return receipt requested, postage prepaid, addressed: (a) if to the Stockholder, at the Stockholder’s address as set forth on the signature page attached hereto, or at such other address as the Stockholder shall have furnished to the Company in writing and (b) if to the Company, the Founding Stockholders or the Selling Stockholders, at the Company’s principal office, or at such other address as the Company, the Founding Stockholders or the Selling Stockholders, as the case may be, shall have furnished to the Stockholder in writing.

6.11 Limitations Upon Company Obligations to Purchase. If the Company is purchasing any Company Stock hereunder and it cannot satisfy the conditions precedent to acquisition of its own shares under Delaware law, or is restricted from making such purchase under any agreement by which the Company is bound, the Company may purchase as many shares as it shall have legal capacity to purchase and the purchase right hereunder shall remain in effect as to any unpurchased shares. Any Company Stock which the Company is unable to purchase hereunder, because of the limitations stated in this section, shall be held by the owner thereof subject to the provisions of this Agreement without in any way relieving the owner thereof of the duty to sell or the Company’s duty to purchase as provided herein. The purchase price of such Company Stock shall not change because of the deferred payment or purchase.

6.12 Titles and Subtitles; Gender. The titles of the articles, sections and subsections of this Agreement are for convenience of reference only and are not to be considered in construing this Agreement. Throughout this Agreement, the masculine gender shall include the feminine and neuter (and vice versa) and the singular shall include the plural (and vice versa), whenever the context requires.

6.13 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which together shall constitute one instrument. This Agreement shall be binding upon all of the parties hereto notwithstanding that all parties may not have executed the same signature pages to this Agreement, and notwithstanding that the signature page to this Agreement as executed by a party hereto may not be identical to the signature page to this Agreement executed by certain other parties hereto.

6.14 Incorporation of Exhibits. All Exhibits and other documents attached to this Agreement (for purposes of this Section 6.14, “documents”) are hereby incorporated into this Agreement in full by reference as if set forth in this Agreement verbatim. Any reference to an Exhibit made in this Agreement shall mean and refer to the Exhibit attached to this Agreement which is labeled as such Exhibit. The term “Agreement” as used throughout this Agreement shall include, by definition, to the extent applicable, all documents attached hereto.

6.15 Independent Legal Counsel. The Stockholder expressly acknowledges that it has been advised of its individual right to obtain independent legal counsel with respect to this Agreement and the transactions contemplated hereby and that the law firm of Kilpatrick Stockton LLP has represented the Company in drafting this Agreement and has not represented the Stockholder individually. The Stockholder acknowledges that it has either retained independent legal counsel or has voluntarily waived its right to do so.

 

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6.16 Subchapter S Provisions. (a) The Stockholder acknowledges that, prior to the closing of the transactions contemplated by the Subscription Agreement, the Company elected to have the Company treated for federal (and state) income tax purposes as an S corporation, which election will terminate upon the closing of the transactions contemplated by the Subscription Agreement.

6.17 Stockholder Will. Stockholder agrees to use its best effort to include in its will, if applicable due to any subsequent transfer from or through the Stockholder in compliance with the terms of this Agreement, a direction and authorization to comply with the provisions of this Agreement; provided, however, that the failure of Stockholder to so direct is executor shall not affect the validity or enforceability of this Agreement.

[THE NEXT PAGE IS THE SIGNATURE PAGE]

 

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IN WITNESS WHEREOF, each of the undersigned has hereby executed this Agreement under seal (the individual party adopting the word “SEAL” as its seal) as of the date first set forth above.

 

						STOCKHOLDER:
								(SEAL)
						Signature
						Print Name
						Employer Identification Number
						Address:
						FOUNDING STOCKHOLDERS:
						Henry R. Kaestner
						David A. Morken
						COMPANY:
ATTEST:						BANDWIDTH.COM, INC.

				By:
(Asst.) Secretary						Name:
						Title:
[Corporate Seal]

 

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EXHIBIT B

Form of Incentive Stock Option Agreement

(See attached)

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THE SECURITY REPRESENTED BY THIS AGREEMENT HAS BEEN (OR WILL BE) ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO, OR IN CONNECTION WITH, THE SALE OR DISTRIBUTION THEREOF. NO SUCH SALE OR DISPOSITION MAY BE EFFECTED WITHOUT AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE SECURITIES ACT OF 1933, AS AMENDED.

 

 

BANDWIDTH.COM, INC. INCENTIVE STOCK OPTION AGREEMENT

Bandwidth.com, Inc. (the “Company”) hereby grants to the Participant named below an option (the “Option”) to purchase the Number of Option Shares specified below pursuant to the Bandwidth.com, Inc. 2001 Stock Option Plan, in the manner and subject to the provisions of this Option Agreement.

 

9.	Definitions:

 

(a)

“Code” shall mean the Internal Revenue Code of 1986, as amended (all citations to sections of the Code are to such sections as they may from time to time be amended or renumbered.)

 

(b)

“Company” shall mean Bandwidth.com, Inc., a Delaware corporation, and any successor corporation thereto.

 

(c)

“Date of Option Grant” shall mean                    .

 

(d)

“Disability” shall mean disability within the meaning of Code Section 22(e)(3), as determined by the Board in its discretion.

 

(e)

“Exercise Date” shall mean the last business day of any calendar quarter or any other date as of which the Option may be exercised pursuant to Sections 5 or 7 of the Plan. The Company in its discretion and on a case by case basis may establish additional Exercise Dates.

 

(f)

“Exercise Price” shall mean                    per share as adjusted from time to time pursuant to Section 4(b) of the Plan.

 

(g)

“Number of Option Shares” shall mean                    shares of Class A Voting Common Stock of the Company (the “Class A Stock”) as adjusted from time to time pursuant to Section 4(b) of the Plan.

 

(h)

“Option Term Date” shall mean the date ten (10) years after the Date of Option Grant.

 

(i)

“Participant” shall mean                    .

 

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(j)

“Plan” shall mean the Bandwidth.com, Inc. 2001 Stock Option Plan.

Other capitalized terms used herein and without definition shall have the meanings ascribed to such terms in the Plan.

 

10.

Status of the Option. This Option is intended to be an incentive stock option as described in Code Section 422, but the Company does not represent or warrant that this Option qualifies as such. The Participant should consult with the Participant’s own tax advisors regarding the tax effects of this Option and the requirements necessary to obtain favorable income tax treatment under Code Section 422, including, but not limited to, holding period requirements.

 

11.	Exercise of the Option.

 

(a)

Right to Exercise. The Option shall vest and become exercisable as follows from and after                     , 200     (the “Commencement Date”) so long as the Participant’s employment with the Participating Company Group has not terminated for any reason prior to any applicable vesting date:

 

(i)

On the first anniversary of the Commencement Date, the Option will vest with respect to 33.33% of the Number of Option Shares, rounded to the next highest whole number of Number of Option Shares; and

 

(ii)

On the second anniversary of the Commencement Date, the Option will vest with respect to 33.33% of the Number of Option Shares, rounded to the next highest whole number of Number of Option Shares; and

 

(iii)

On the third anniversary of the Commencement Date, the Option will vest with respect to 33.34% of the Number of Option Shares, rounded to the next highest whole number of Number of Option Shares.

In addition, this Option shall become vested upon a Transfer of Control of the Company in accordance with (and subject to) Section 7 of the Plan. To the extent vested, the Option shall be exercisable from time to time until termination as provided in paragraph 5 below. The initial computation period in determining the Participant’s vesting under this Option Agreement shall be the first twelve consecutive month period of continuous service by the Participant measured from the date the Participant first became employed by a Participating Company.

Notwithstanding paragraph 2 above, if the aggregate Fair Market Value, determined as of the Date of Option Grant, of the stock with respect to which the Participant may exercise incentive stock options for the first time during any calendar year (under this Plan or under any other plan of the Participating Company Group), as determined in accordance with Code Section 422(d), shall exceed one hundred thousand dollars ($100,000), the Option shall be deemed a nonqualified stock option to the extent of such excess.

 

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(b)

Time and Method of Exercise. Subject to the provisions of the Plan and this Option Agreement, vested Options may be exercised on any Exercise Date by delivery to the Company of at least thirty (30) days’ prior written notice in the form of Exhibit I attached hereto. Such notice must state the election to exercise the Option, the number of shares for which the Option is being exercised and such other representations and agreements as to the Participant’s investment intent with respect to such shares as may be required by the Company. The written notice must be signed by the Participant and delivered in person or by certified or registered mail, return receipt requested, to the President of the Company or other authorized representative of the Participating Company Group. Exercise of the Option shall be completed on the Exercise Date by the Participant’s full payment of the Exercise Price for the number of shares being purchased, in accordance with the provisions of paragraph 3(c) below. Upon receipt of such payment, the Company will thereafter deliver or cause to be delivered to the Participant at the office of the Company, a certificate or certificates for the number of shares with respect to which this Option is being exercised, registered in the name or names of the individual or individuals exercising this Option; provided, however, that if any law or regulation or order of the Securities and Exchange Commission or other body having jurisdiction in the premises shall require the Company or the Participant to take any action in connection with the shares being purchased, the delivery of the certificate or certificates for such shares shall be delayed until such action has been taken.

 

(c)

Form of Payment of Option Price. On the Exercise Date, the Participant shall pay for the Class A Stock being purchased by delivering to the Company the full Exercise Price in cash or certified check payable to the order of the Company, or by such other method as may be permitted pursuant to Section 5(i) of the Plan.

 

(d)

Withholding. At the time the Option is exercised, in whole or in part, or at any time thereafter as requested by the Company, the Optionee hereby authorizes payroll withholding and otherwise agrees to make adequate provision for foreign, federal and state tax withholding obligations of the Company, if any, which arise in connection with the Option, including, without limitation, obligations arising upon (i) the exercise, in whole or in part, of the Option, (ii) the transfer, in whole or in part, of any shares acquired on exercise of the Option, (iii) the operation of any law or regulation providing for the imputation of interest or (iv) the lapsing of any restriction with respect to any shares acquired on exercise of the Option.

 

(e)

Certificate Registration. The certificate or certificates for the shares as to which the Option shall be exercised shall be registered in the name of the Participant, or, if applicable, the heirs of the Participant.

 

(f)

Restrictions on Grant of the Option and Issuance of Shares. The grant of the Option and the issuance of the shares upon exercise of the Option shall be subject to compliance with all applicable requirements of federal and state law with respect to such securities. The Option may not be exercised if the issuance of shares upon such exercise would constitute a violation of any applicable federal or state securities laws or other laws or regulations. In addition, the Option may not be exercised unless (i) a registration statement under the Securities Act of 1933,

 

4

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as amended (the “1933 Act”), shall at the time of exercise of the Option be in effect with respect to the shares issuable upon exercise of the Option, or (ii) in the opinion of legal counsel to the Company, the shares issuable upon exercise of the Option may be issued in accordance with the terms of an applicable exemption from the registration requirements of the 1933 Act.

THE PARTICIPANT IS CAUTIONED THAT THE OPTION MAY NOT BE EXERCISABLE UNLESS THE FOREGOING CONDITIONS ARE SATISFIED. ACCORDINGLY, THE PARTICIPANT MAY NOT BE ABLE TO EXERCISE THE OPTION WHEN DESIRED EVEN THOUGH THE OPTION IS VESTED.

As a condition to the exercise of the Option, the Company may require the Participant to satisfy any qualifications that may be necessary or appropriate to evidence compliance with any applicable law or regulation (or exemption therefrom) and to make any representation or warranty with respect thereto as may be requested by the Company.

 

(g)

Fractional Shares. The Company shall not be required to issue fractional shares upon the exercise of the Option.

 

12.	Non-Transferability of the Option. The Option may be exercised during the Participant’s lifetime only by the Participant (except as otherwise provided in paragraph 6 below) and may not be assigned or transferred in any manner except by will or by the laws of descent and distribution.

 

13.

Termination of the Option. The Option shall terminate and may no longer be exercised on the first to occur of (a) the Option Term Date, (b) the last date for exercising the Option following termination of employment as described in paragraph 6 below, (c) termination of the Option by the Board on the effective date of a Transfer of Control; or (d) termination of the Option by the Board with the Participant’s consent.

 

14.	Termination of Employment.

 

(a)

Termination of the Option.

 

(i)

If the Participating Company Group terminates Participant’s employment other than for “Cause” (as defined below), the Option may be exercised by the Participant, to the extent unexercised and exercisable by the Participant on the date on which the Participant ceased to be an employee, within thirty (30) days after the date on which the Participant’s employment terminates (subject to earlier termination of the Option pursuant to paragraph 5 above).

 

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(ii)

If the Participant voluntarily terminates his or her employment with the Participating Company Group on account of retirement after attainment of age sixty-five (65), the Option may be exercised by the Participant, to the extent unexercised and exercisable by the Participant on the date on which the Participant ceased to be an employee, within three (3) months after the date on which the Participant’s employment terminates (subject to earlier termination of the Option pursuant to paragraph 5 above).

 

(iii)

If the Participant’s employment with the Participating Company Group is terminated because of the death or Disability of the Participant, the Option may be exercised by the Participant (or the Participant’s legal representative), to the extent unexercised and exercisable by the Participant on the date on which the Participant ceased to be an employee, at any time prior to the expiration of twelve (12) months from the date the Participant’s employment terminated (subject to earlier termination pursuant to paragraph 5 above). The Participant’s employment shall be deemed to have terminated on account of death if the Participant dies within three (3) months after the Participant voluntarily terminates his or her employment with the Participating Company Group on account of retirement after attainment of age sixty-five (65) or within thirty (30) days after the Participating Company Group terminates Participant’s employment other than for “Cause.”

 

(iv)

If the Participant’s employment with the Participating Company is terminated for “Cause” (as defined below), the Participant shall forfeit 100% of the Option granted pursuant to this Option Agreement, whether or not vested or exercisable.

“Cause” for termination of the Participant’s employment shall exist in the event of (A) any act or omission by the Participant constituting a dishonest, immoral, fraudulent or illegal act or omission (if such act or omission causes the business, financial and/or tax status of a Participating Company to suffer substantial damage or such status is threatened with substantial damage by reason thereof); (B) any breach by the Participant of any contract or agreement between the Participant and a Participating Company (including, without limitation, the Buy-Sell Agreement or the Non-Disclosure Agreement); (C) the Participant’s disloyalty or continuing failure or neglect to devote his full time, energy and attention to his job with a Participating Company, except at such times when the Participant is on approved vacation; (D) acts or omissions by the Participant which constitute misconduct or negligence against a Participating Company; (E) the Participant’s failure to satisfy employment duties to the reasonable satisfaction of the Board; (F) the conviction of the Participant for a crime involving moral turpitude; (G) the Participant’s use of illegal drugs or abuse of alcohol; or (H) the Participant’s violation of any material Company policies or procedures. This Option Agreement shall be interpreted such that the Option ceases to vest on the date on which the Participant ceases to be an employee of the Participating Company Group for any reason, notwithstanding any period after such cessation of employment during which the Option may remain exercisable as provided in this paragraph 6.

 

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(b)

Termination of Employment Defined. For purposes of this paragraph 6, the Participant’s employment shall be deemed to have terminated either upon an actual termination of employment or upon the Participant’s employer ceasing to be a Participating Company (unless the Participant immediately thereafter continues employment with another Participating Company).

 

(c)

Leave of Absence. For purposes hereof, the Participant’s employment with the Participating Company Group shall not be deemed to terminate when the Participant takes any bona fide military leave, sick leave, or other leave of absence approved by a Participating Company as long as the leave does not extend beyond ninety (90) days.

 

(d)

Directors, Consultants and Advisors. In the event a participant is a director, con- sultant or advisor but not an employee of a Participating Company at the time the Option is granted, termination of the Participant’s status as a director, consultant or advisor shall be deemed to be termination of the Participant’s employment.

 

15.

Purchase for Investment. This Option is granted on the condition that the purchase of shares of Class A Stock hereunder shall be for the account of the Participant for investment purposes and not with a view to the resale or distribution thereof, except that such condition shall be inoperative if the offering and sale of such shares of Class A Stock subject to this Option is registered under the 1933 Act, or if in the opinion of the Company’s counsel such shares of Class A Stock may be resold without registration. At the time of any exercise of the Option, the Participant (or other individual or individuals exercising this Option) will execute such further agreements as the Company may require to implement the foregoing condition and to acknowledge the Participant’s (or other such individual’s) familiarity with restrictions on the resale of the shares of Class A Stock under applicable securities laws.

 

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16.	Additional Agreements.

 

(a)

Confidentiality and Noncompetition Agreement. As a condition to the grant of the Option, the Participant hereby agrees to execute and deliver concurrently with the execution of this Option Agreement a Non-Disclosure, Non-Competition and Intellectual Property Agreement (the “Non-Disclosure Agreement”) in the form of Exhibit II attached hereto (unless the Participant has previously executed and delivered such an agreement).

 

(b)

Buy-Sell Agreement. In connection with the exercise of this Option in whole or in part, the Participant (or other individuals exercising this Option) shall execute and deliver to the Company a Buy-Sell Agreement in the form of Exhibit III attached hereto (the “Buy-Sell Agreement”). The Company shall be under no obligation to honor the exercise of this Option unless and until the Participant has executed the Buy-Sell Agreement.

 

9.	Rights as a Stockholder or Employee.

 

(a)

No Rights as Stockholder. The Participant (or other individuals exercising this Option) shall have no rights as a stockholder with respect to the shares of Class A Stock subject to this Option until the exercise of the Option in accordance with this Option Agreement and the Plan.

 

(b)

No Right to Employment or Other Status. The grant of this Option shall not be construed as giving the Participant the right to continued employment or any other relationship with any Participating Company. The Participating Company Group expressly reserves the right at any time to dismiss or otherwise terminate its relationship with the Participant free from any liability or claim under this Option Agreement or the Plan.

 

10.

Notice of Sales Upon Disqualifying Disposition. The Participant (or other individuals exercising this Option) shall dispose of the shares acquired pursuant to the Option only in accordance with the provisions of this Option Agreement, the Plan, and any applicable Buy-Sell Agreement or other agreement executed in connection with the grant or exercise of the Option. In addition, if any of the shares of Class A Stock acquired pursuant to the exercise of the Option are disposed of within one year from the date of exercise or within two years of the Date of Option Grant, the holder of the Class A Stock immediately prior to the disposition shall promptly notify the Company in writing of the date and terms of the disposition and shall provide such other information regarding the disposition as the Company may reasonably require. Until such time as the Participant disposes of such shares in a manner consistent with the provisions of this Option Agreement, the Participant shall hold all shares acquired pursuant to the Option in the Participant’s name (and not in the name of any nominee) for the one-year period immediately after exercise of the Option and the two-year period immediately after grant of the Option. At any time during the one-year or two-year periods set forth above, the Company may place a legend or legends on any certificate or certificates representing shares acquired pursuant to the Option requesting the transfer agent for the Company’s stock to notify the Company of

 

8

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any such transfers. The obligation of the Participant to notify the Company of any such transfer shall continue notwithstanding that a legend has been placed on the certificate or certificates pursuant to the preceding sentence. Nothing in this paragraph 10 shall be deemed to authorize the Participant to dispose of or transfer any shares acquired pursuant to the Option.

 

11.

Legends. The Company may at any time place legends referencing affiliate status or any applicable federal or state securities law restrictions or applicable transfer or other restrictions under the Buy-Sell Agreement on all certificates representing shares of stock subject to the provisions of this Option Agreement. The Participant shall, at the request of the Company, promptly present to the Company any and all certificates representing shares acquired pursuant to the Option in the possession of the Participant in order to effectuate the provisions of this paragraph 11. Unless otherwise specified by the Company, legends placed on such certificates may include, but shall not be limited to, the following:

 

(a)

THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES, THE SALE IS MADE IN ACCORDANCE WITH RULE 144 OR RULE 701 UNDER THE ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT.

 

(b)

THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON TRANSFER, RIGHTS OF FIRST REFUSAL AND OTHER RESTRICTIONS OR RIGHTS IN FAVOR OF THE COMPANY OR ITS ASSIGNEE SET FORTH IN AN AGREEMENT BETWEEN THE CORPORATION AND THE REGISTERED HOLDER, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY.

 

(c)

THE SECURITIES EVIDENCED BY THIS CERTIFICATE WERE ISSUED BY THE COMPANY TO THE REGISTERED HOLDER UPON EXERCISE OF AN INCENTIVE STOCK OPTION AS DEFINED IN SECTION 422 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED, THE TRANSFER AGENT FOR THE SHARES EVIDENCED HEREBY SHALL NOTIFY THE COMPANY IMMEDIATELY OF ANY TRANSFER OF THE SHARES BY THE REGISTERED HOLDER HEREOF MADE ON

 

9

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OR BEFORE THE REGISTERED HOLDER SHALL HAVE HELD ALL SHARES PURCHASED UNDER THE OPTION IN THE REGISTERED HOLDER’S NAME (AND NOT IN THE NAME OF ANY NOMINEE) FOR A PERIOD OF ONE YEAR FROM THE DATE OF EXERCISE OF THE OPTION OR TWO YEARS FROM THE DATE OF GRANT OF THE OPTION.

 

12.

Initial Public Offering. The Participant hereby agrees that in the event of an initial public offering of stock made by the Company, the Participant shall not offer, sell, contract to sell, pledge, hypothecate, grant any option to purchase or make any short sale of, or otherwise dispose of any shares of stock of the Company or any rights to acquire stock of the Company for such period of time as may be established by the underwriter for such initial public offering; provided, however, that such period of time shall not exceed one hundred eighty days from the effective date of the registration statement to be filed in connection with such initial public offering. The foregoing limitation shall not apply to shares registered under the 1933 Act.

 

13.	Binding Effect. This Option Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective heirs, executors, administrators, successors and assigns.

 

14.

Amendment of Option. The Board may amend or modify this Option, including but not limited to, substituting therefor another Option of the same or a different type, changing the date of exercise, and converting the Option to a nonqualified stock option, provided that the Participant’s consent to such action shall be required unless the Board determines that the action, taking into account any related action, would not materially and adversely affect the Participant. Notwithstanding the foregoing, the Board may amend or modify this Option without the Participant’s consent to the extent the Board determines that the amendment is necessary to comply with applicable provisions of state or federal securities laws or regulations.

 

15.

Integrated Agreement. This Option Agreement, the Plan, the Non-Disclosure Agreement and the Buy-Sell Agreement constitute the entire understanding and agreement of the Participant and the Participating Company Group with respect to the subject matter contained herein and therein, and there are no other agreements, understandings, restrictions, representations, or warranties among the Participant and the Participating Company Group with respect to the subject matter contained herein other than those as set forth or provided for herein and therein. To the extent contemplated herein and in the Plan, the provisions of this Option Agreement and the Plan shall survive any exercise of the Option and shall remain in full force and effect.

 

16.

Notices. All notices, requests, demands, payments, and other communications hereunder shall be deemed to have been duly given if in writing and sent by certified mail to the appropriate address indicated below the parties’ signatures to this Option Agreement or to such other address as may be given in a notice sent to all parties hereto.

 

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17.	Waiver. The waiver of the Company or the Participant of any breach of a provision of this Option Agreement shall not operate or be construed as a waiver of any subsequent breach by the parties.

 

18.

Terms and Conditions of Plan. The terms and conditions included in the Plan are incorporated by reference herein, and to the extent that any conflict may exist between any term or provision of this Option Agreement and any term or provision of the Plan, the term or provision of the Plan shall control.

 

19.

Severability. If any provision of this Option Agreement is or becomes or is deemed invalid, illegal or unenforceable in any jurisdiction, or would disqualify the Option Agreement or the Plan under any law deemed applicable by the Board, such provision shall be construed or deemed amended to conform to applicable laws or, if it cannot be construed or deemed amended without, in the determination of the Board, materially altering the intent of the Option Agreement or the Plan, it shall be stricken and the remainder of the Plan or the agreement shall remain in full force and effect.

 

20.	Counterparts. The Company and the Participant shall execute this Option Agreement in any number of counterparts, each one of which shall be deemed to be the original although the others shall not be produced.

 

21.	Applicable Law. This Option Agreement shall be governed by and construed in accordance with the laws of the State of North Carolina, without regard to any applicable conflicts of law.

 

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IN WITNESS WHEREOF, the Company and the Participant have caused this Option Agreement to be executed on the                    day of                    , 2007.

 

_______________________________________

_______________________________________

_______________________________________

_______________________________________

The Participant represents that the Participant is familiar with the terms and provisions of this Option Agreement, the Plan, the Buy-Sell Agreement, the Non-Disclosure Agreement and such other agreements executed in connection with the award of this Option, and hereby accepts the Option subject to all of the terms and provisions hereof and of the Plan. The Participant hereby agrees to accept as binding, conclusive and final all decisions or interpretations of the Board or the Company, as appropriate, made in good faith upon any questions arising under this Option Agreement or the Plan.

The undersigned hereby acknowledges receipt of a copy of the Plan.

 

Date:
				Signature of Optionee

 

 

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EXHIBIT I

[Date]

Bandwidth.com, Inc

4001 Weston Parkway

Suite 100

Cary, NC 27513

 

Re:

Exercise of Incentive Stock Option

Dear Madams/Sirs:

Pursuant to the terms and conditions of the Incentive Stock Option Agreement dated as of                    , 2006 (the “Agreement”), between                    (“Optionee”) and Bandwidth.com, Inc. (the “Company”), Optionee hereby agrees to purchase                    shares (the “Shares”) of the Class A Voting Common Stock of the Company and tender payment in full for such shares in accordance with the terms of the Agreement.

The Shares are being issued to Optionee in a transaction not involving a public offering and pursuant to an exemption from registration under the Securities Act of 1933, as amended (the “1933 Act”). In connection with such purchase, Optionee represents, warrants and agrees as follows:

 

1.

The Shares are being purchased for the Optionee’s own account and not for the account of any other person, with the intent of holding the Shares for investment and not with the intent of participating, directly or indirectly, in a distribution or resale of the Shares or any portion thereof.

 

2.

The Optionee is not acquiring the Shares based upon any representation, oral or written, by any person with respect to the future value of, or income from, the Shares, but rather upon independent examination and judgment as to the prospects of the Company.

 

3.

The Optionee has had complete access to and the opportunity to review all material documents related to the business of the Company, has examined all such documents as the Optionee desired, is familiar with the business and affairs of the Company and realizes that any purchase of the Shares is a speculative investment and that any possible profit therefrom is uncertain.

 

4.

The Optionee has had the opportunity to ask questions of and receive answers from the Company and its executive officers and to obtain all information necessary for the Optionee to make an informed decision with respect to the investment in the Company represented by the Shares.

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5.

The Optionee is able to bear the economic risk of any investment in the Shares, including the risk of a complete loss of the investment, and the Optionee acknowledges that he or she may need to continue to bear the economic risk of the investment in the Shares for an indefinite period.

 

6.

The Optionee understands and agrees that the Shares are being issued and sold to the Optionee without registration under any state or federal laws relating to the registration of securities, in reliance upon exemptions from registration under appropriate state and federal laws based in part upon the representations of the Optionee made herein.

 

7.

The Company is under no obligation to register the Shares or to comply with any exemption available for sale of the Shares by the Optionee without registration, and the Company is under no obligation to act in any manner so as to make Rule 144 promulgated under the 1933 Act available with respect to any sale of the Shares by the Optionee.

 

8.

The Optionee has not relied upon the Company or an employee or agent of the Company with respect to any tax consequences related to exercise of this Option or the disposition of the Shares. The Optionee assumes full responsibility for all such tax consequences and the filing of all tax returns and elections the Optionee may be required to or find desirable to file in connection therewith.

 

 

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AMENDMENT TO BANDWIDTH.COM, INC.

2001 STOCK OPTION PLAN

THIS AMENDMENT TO BANDWIDTH.COM, INC. 2001 STOCK OPTION PLAN is made and entered into as of the                    day of July, 2008, by Bandwidth.com, Inc., a Delaware corporation (the “Company”).

W I T N E S S E T H:

WHEREAS, the Company has previously established and adopted the Bandwidth.com, Inc. 2001 Stock Option Plan (the “Plan”); and

WHEREAS, pursuant to Section 8(g) of the Plan, the Board of Directors, pursuant to unanimous consent of the Board of Directors, dated as of the date hereof, hereby amend the Plan as described below.

NOW, THEREFORE, in consideration of the premises herein contained, the Company hereby amends the Plan as follows:

7. Section 5(f) of the Plan is hereby deleted in its entirety and the following is inserted in lieu thereof:

Duration of Options. Each Option shall be exercisable at such times and subject to such terms and conditions as are specified in this Plan and in the applicable Option Agreement; provided, however, that (i) unless otherwise specified in the applicable Option Agreement, no Option issued to a Participant who is a Participating Company employee shall be exercisable after the Participant voluntarily terminates his or her employment with the Participating Company Group, unless the Participant terminates employment on account of retirement after attainment of age sixty-five (65) or on account of Participant’s disability (within the meaning of Code Section 22(c)(3)); (ii) no Incentive Stock Option shall be exercisable after the expiration of ten years after the date such Incentive Stock Option is granted; (iii) no Incentive Stock Option granted to a Ten Percent Owner Participant shall be exercisable after the expiration of five years after the date such Incentive Stock Option is granted; (iv) unless otherwise specified in the applicable Option Agreement, no Option issued to a Participant who is a Participating Company employee shall be exercisable after the date the Participant’s employment with the Participating Company is terminated with cause (as defined in the applicable Option Agreement) but in no event shall such Option be exercisable after the expiration of ten years after the date such Option is granted; and (v) unless otherwise specified in the applicable Option Agreement, no Incentive Stock Option shall be exercisable after the expiration of three months after the date on which the Participant terminates employment with the Participating Company Group, unless the Participant’s employment with the Participating Company Group shall have terminated as a result of the Participant’s death or disability (within the meaning of Code Section 22(c)(3)), in which event the Option shall terminate, and cease to be exercisable no later than twelve months from the date on which the Participant’s employment terminated. For this purpose, a Participant’s employment shall be deemed to have terminated on account of death if the Participant dies within three months following the Participant’s termination of employment.

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8. Section 5(g) of the Plan is hereby deleted in its entirety and the following is inserted in lieu thereof:

Vesting Schedule. Unless otherwise specified in the applicable Option Agreement, including, without limitation, the vesting of any unexercisable portion of an outstanding Option upon a Transfer of Control (as defined below), with respect to the each Option granted to an employee or director of the Company or a Participating Company under this Plan shall become vested and first exercisable by the Participant in accordance with the schedule set forth below:

 

Participant’s Years of Service		Percentage of Shares with Respect to which Option is Vested
1		20%
2		40%
3		60%
4		80%
5		100%

Unless otherwise provided in the applicable Option Agreement, an Option granted to a person other than an employee or director of the Company or a Participating Company under this Plan shall be fully vested when granted.

For vesting purposes, a “year of service” means a twelve consecutive month period of continuous service by a Participant as an employee or director of a Participating Company. The initial computation period in determining a Participant’s vesting percentage is the first twelve consecutive month period of continuous service by the Participant measured from the date the Option is granted, or from such other date specified in the applicable Option Agreement. Except as otherwise provided in the applicable Option Agreement, service prior to the Option grant date shall be disregarded. For vesting purposes, continuous service with the Company shall include a leave of absence that is approved by the Company as well as leave taken under the Family and Medical Leave Act of 1993.

9. Section 7 of the Plan is hereby deleted in its entirety and the following is inserted in lieu thereof:

Upon a merger, consolidation, corporate reorganization, or any transaction in which all or substantially all of the assets or stock of the Company are sold, leased, transferred or otherwise disposed of (other than a mere reincorporation transaction or one in which the holders of capital stock of the Company immediately prior to such merger or consolidation continue to hold at least a majority of the voting power of the surviving

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corporation) (a “Transfer of Control”), then any unexercisable portion of an outstanding Option shall become immediately exercisable as of a date prior to the Transfer of Control, which date shall be determined by the Board. The exercise of any Option that was permissible solely by reason of this Section 7 shall be conditioned upon the consummation of the Transfer of Control. The Board may further elect, in its sole discretion, to provide that any Options which become exercisable solely by reason of the Section 7 and which are not exercised as of the date of the Transfer of Control shall terminate effective as of the date of the Transfer of Control. Notwithstanding the foregoing, unless otherwise specified in the applicable Option Agreement, an outstanding Option shall not so accelerate if and to the extent (i) such Option is, in connection with a Transfer of Control, either to be assumed by the successor corporation (or parent thereof) or to be replaced with a comparable option to purchase shares of the capital stock of the successor corporation (or parent thereof), (ii) such Option is to be replaced with a cash incentive program of the successor corporation which preserves the spread existing on the unvested Option at the time of such Transfer of Control and provides for subsequent payout in accordance with the same vesting schedule applicable to such Option or (iii) the acceleration of such Option is subject to other limitations imposed by the Board at the time of the grant of the Option. The determination of option comparability under clause (i) shall be made by the Board, and its determination shall be final, binding and conclusive.

The Board may grant Options under the Plan in substitution for stock and stock-based awards held by employees of another corporation who become employees of a Participating Company as a result of a merger or consolidation of the employing corporation with the Participating Company or the acquisition by the Participating Company of property or stock of the employing corporation. The substitute Options shall be granted on such terms and conditions as the Board considers appropriate under the circumstances.

10. This Amendment does not supersede the terms and conditions of the Plan, except to the extent expressly described herein.

IN WITNESS WHEREOF, the Company has caused this Amendment to be executed by its duly authorized officer, all as of the day and year first above written.

 

 

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AMENDMENT TO BANDWIDTH.COM, inc.

STOCK OPTION PLAN

THIS AMENDMENT is made and entered into this 22^nd day of January, 2010, by Bandwidth.com, Inc., a Delaware corporation (the “Corporation”).

W I T N E S S E T H:

WHEREAS, the Corporation has previously established and adopted the Bandwidth.com, Inc. 2001 Stock Option Plan (the “Plan”); and

WHEREAS, pursuant to Section 3(a) of the Plan, the Board of Directors may amend the Plan to increase the number of shares of common stock of the Corporation available for issuance pursuant to awards granted under the Plan.

NOW, THEREFORE, in consideration of the premises herein contained, the Corporation hereby amends the Plan as follows:

11. The first sentence of Section 4(a) of the Plan is hereby deleted in its entirety and the following is inserted in lieu thereof:

“Subject to adjustment under Section 4(b), Options may be granted under the Plan for up to a maximum of Eight Hundred Thousand (800,000) shares of the Company’s Class A Voting Common Stock, $0.001 par value per share (the “Class A Stock”). ”

12. This Amendment does not supersede the terms and conditions of the Plan, except to the extent expressly described herein.

IN WITNESS WHEREOF, the Corporation has caused this Amendment to be executed by its duly authorized officer, all as of the day and year first above written.

 

 

Exhibit 10.4

BANDWIDTH.COM, INC.

2010 EQUITY COMPENSATION PLAN

Effective as of July 26, 2010

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BANDWIDTH.COM, INC.

2010 EQUITY COMPENSATION PLAN

ARTICLE I - GENERAL PROVISIONS

 

1.1

The Plan is designed, for the benefit of the Company, to attract and retain for the Company personnel of exceptional ability; to motivate such personnel through added incentives to make a maximum contribution to greater profitability; to develop and maintain a highly competent management team; and to be competitive with other companies with respect to equity compensation.

 

1.2	Awards under the Plan may be made to Participants in the form of (i) Incentive Stock Options, (ii) Nonqualified Stock Options; (iii) Restricted Stock, and/or (iv) Stock Awards.

 

1.3	The Plan shall be effective July 26, 2010 (the “Effective Date”).

ARTICLE II - DEFINITIONS

Except where the context otherwise indicates, the following definitions apply:

 

2.1	“Act” means the Securities Exchange Act of 1934, as now in effect or as hereafter amended. All citations to sections of the Act or rules thereunder are to such sections or rules as they may from time to time be amended or renumbered.

 

2.2	“Agreement” means the written agreement evidencing each Award granted to a Participant under the Plan.

 

2.3	“Award” means an award granted to a Participant of a Stock Option or Restricted Stock or a Stock Award or any combination thereof.

 

2.4	“Board” means the Board of Directors of the Company.

 

2.5	“Buy-Sell Agreement” means a buy-sell agreement providing, inter alia, that shares of Stock issued pursuant to Awards granted under the Plan are subject to repurchase by the Company, “bring-along,” “drag-along” or other similar rights in a form specified by the Committee from time to time.

 

2.6	“Code” means the Internal Revenue Code of 1986, as now in effect or as hereafter amended. All citations to sections of the Code are to such sections as they may from time to time be amended or renumbered.

 

2.7

“Committee” means the committee consisting of one or more members of the Board as may be appointed by the Board to administer this Plan pursuant to Article III or for such limited purposes as may be provided by the Board. In the event the Board does not appoint such committee, all references to the “Committee” herein shall mean the Board.

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2.8	“Company” means Bandwidth.com, Inc., a Delaware corporation, and its successors and assigns.

 

2.9

“Disability,” with respect to any Incentive Stock Option, means disability as determined under Code section 22(e)(3), and with respect to any other Award, means (i) with respect to a Participant who is eligible to participate in the Employer’s program of long-term disability insurance, if any, a condition with respect to which the Participant is entitled to commence benefits under such program of long-term disability insurance, or (ii) with respect to any Participant (including a Participant who is eligible to participate in the Employer’s program of long-term disability insurance, if any), a disability as determined under procedures established by the Committee or in any Award.

 

2.10

“Eligible Participant” means an employee of the Employer (including an officer), as shall be determined by the Committee, as well as any other person, including a non-employee member of the Board or a consultant who provides or has provided services to the Employer, subject to limitations as may be provided by the Code, the Act or the Committee, as shall be determined by the Committee.

 

2.11

“Employer” means the Company and its parent and subsidiary corporations (within the meaning of Code sections 424(e) and (f)) during any relevant period. With respect to all purposes of the Plan, including, but not limited to, the establishment, amendment, termination, operation and administration of the Plan, the Company shall be authorized to act on behalf of all other entities included within the definition of “Employer.”

 

2.12	“Fair Market Value” means the value of a share of Stock, as determined in good faith by the Committee; provided, however, that

 

(a)

if the Stock is listed on a national securities exchange, Fair Market Value on a date shall be the closing sale price reported for the Stock on such exchange on such date if at least 100 shares of Stock were sold on such date or, if fewer than 100 shares of stock were sold on such date, then Fair Market Value on such date shall be the closing sale price reported for the Stock on such exchange on the last prior date on which at least 100 shares were sold, all as reported in The Wall Street Journal or such other source as the Committee deems reliable; and

 

(b)

if the Stock is not listed on a national securities exchange but is admitted to quotation on the National Association of Securities Dealers Automated Quotation System or other comparable quotation system, Fair Market Value on a date shall be the last sale price reported for the Stock on such system on such date if at least 100 shares of Stock were sold on such date or, if fewer than 100 shares of Stock were sold on such date, then Fair Market Value on such date shall be the average of the high bid and low asked prices reported for the Stock on such system on such date or, if no shares of Stock were sold on such date, then Fair Market Value on such date shall be the last sale price reported for the Stock on such system on the last date on which at least 100 shares of Stock were sold, all as reported in The Wall Street Journal or such other source as the Committee deems reliable; and

 

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(c)

If the Stock is not traded on a national securities exchange or reported by a national quotation system, if any broker-dealer makes a market for the Stock, then the Fair Market Value of the Stock on a date shall be the average of the highest and lowest quoted selling prices of the Stock in such market on such date if at least 100 shares of Stock were sold on such date or, if fewer than 100 shares of Stock were sold on such date, then Fair Market Value on such date shall be the average of the high bid and low asked prices for the Stock in such market on such date or, if no prices are quoted on such date, then Fair Market Value on such date shall be the average of the highest and lowest quoted selling prices of the Stock in such market on the last date on which at least 100 shares of Stock were sold.

The Committee shall determine Fair Market Value in connection with an Incentive Stock Option in accordance with Code section 422 and section 409A and the rules and regulations thereunder (including proposed regulations on which taxpayers may rely).

 

2.13	“Incentive Stock Option” means a Stock Option granted to an Eligible Participant under Article IV of the Plan.

 

2.14	“Non-Disclosure, Non-Competition and Intellectual Property Agreement” means a non-disclosure, non-competition and intellectual property agreement specified by the Committee from time to time.

 

2.15	“Nonqualified Stock Option” means a Stock Option granted to an Eligible Participant under Article V of the Plan.

 

2.16	“Option Grant Date” means, as to any Stock Option, the latest of:

 

(a)

the date on which the Committee takes action to grant the Stock Option to the Participant;

 

(b)

the date the Participant receiving the Stock Option becomes an employee of the Employer, to the extent employment status is a condition of the grant or a requirement of the Code or the Act; or

 

(c)

such other date (later than the dates described in (a) and (b) above) as the Committee may designate.

 

2.17	“Participant” means an Eligible Participant to whom an Award has been granted and who has entered into an Agreement evidencing the Award.

 

2.18	“Plan” means Bandwidth.com, Inc. 2010 Equity Compensation Plan, as amended from time to time.

 

2.19	“Public Offering” means any underwritten public offering by the Company of its equity securities pursuant to an effective registration statement filed under the Securities Act of 1933, including the Company’s initial public offering.

 

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2.20

“Restricted Stock” means an Award of Stock under Article VII of the Plan, which Stock is issued with such restriction(s) as the Committee, in its sole discretion, may impose, including without limitation, any restriction on the right to sell, transfer, pledge or assign such Stock, to vote such Stock, and/or to receive any cash dividends with respect to such Stock, which restrictions may lapse separately or in combination at such time or times, in installments or otherwise, as the Committee may deem appropriate.

 

2.21	“Restriction Period” means the period commencing on the date an Award of Restricted Stock is granted and ending on such date as the Committee shall determine.

 

2.22	“Retirement” means retirement from active employment with the Employer, as determined by the Committee.

 

2.23	“Stock” means shares of Class B Non-Voting Common Stock of the Company as may be adjusted pursuant to the provisions of Section 3.10.

 

2.24	“Stock Award” means an Award of Stock granted as payment of compensation, as provided in Article VIII of the Plan.

 

2.25

“Stock Option” means an Incentive Stock Option granted under Article IV or a Nonqualified Stock Option granted under Article V herein. A Stock Option granted under the Plan shall be designated as either an Incentive Stock Option or a Nonqualified Stock Option and, in the absence of such designation, shall be treated as a Nonqualified Stock Option.

 

2.26

“Termination of Service” means, with respect to a Participant, the discontinuance of the Participant’s service relationship with the Employer, including but not limited to service as an employee of the Employer, as a non-employee member of the board of directors of any entity constituting the Employer, as an independent contractor performing services for the Employer, or as a consultant to the Employer. Except to the extent provided otherwise in an Agreement or determined otherwise by the Committee, a Termination of Service shall not be deemed to have occurred if the capacity in which the Participant provides service to the Employer changes (for example, a change from consultant status to employee status) or if the Participant transfers among the various entities constituting the Employer, so long as there is no interruption in the provision of service by the Participant to the Employer. The determination of whether a Participant has incurred a Termination of Service shall be made by the Committee in its discretion. A Participant shall not be deemed to have incurred a Termination of Service if the Participant is on military leave, sick leave, or other bona fide leave of absence approved by the Employer of 90 days or fewer (or any longer period during which the Participant is guaranteed reemployment by statute or contract.) In the event a Participant’s leave of absence exceeds this period, he will be deemed to have incurred a Termination of Service on the day following the expiration date of such period. Notwithstanding the foregoing, the determination of whether a Termination of Service has occurred with respect to an Incentive Stock Option shall be made consistent with Code section 422.

 

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ARTICLE III - ADMINISTRATION

 

3.1

This Plan shall be administered by the Committee. The Committee, in its discretion, may delegate to one or more of its members such of its powers as it deems appropriate. The Committee also may limit the power of any member to the extent necessary to comply with rule 16b-3 under the Act, Code section 162(m) or any other law or for any other purpose. The Board may appoint originally, and as vacancies occur, the members of the Committee who shall serve at the pleasure of the Board. The Board may serve as the Committee if by the terms of the Plan all Board members are otherwise eligible to serve on the Committee. To the extent that a Committee has not otherwise been appointed, references to the “Committee” herein shall mean the Board.

 

3.2

The Committee shall meet at such times and places as it determines. A majority of its members shall constitute a quorum, and the decision of a majority of those present at any meeting at which a quorum is present shall constitute the decision of the Committee. A memorandum signed by all of its members shall constitute the decision of the Committee without necessity, in such event, for holding an actual meeting.

 

3.3

The Committee shall have the exclusive right to interpret, construe and administer the Plan, to select the persons who are eligible to receive an Award, and to act in all matters pertaining to the granting of an Award and the contents of the Agreement evidencing the Award, including without limitation, the determination of the number of Stock Options or shares of Stock subject to an Award and the form, terms, conditions and duration of each Award, and any amendment thereof consistent with the provisions of the Plan. All acts, determinations and decisions of the Committee made or taken pursuant to grants of authority under the Plan or with respect to any questions arising in connection with the administration and interpretation of the Plan, including the severability of any and all of the provisions thereof, shall be conclusive, final and binding upon all Participants, Eligible Participants and their estates and beneficiaries.

 

3.4	The Committee may adopt such rules, regulations and procedures of general application for the administration of this Plan, as it deems appropriate.

 

3.5

Subject to adjustment as provided in Section 3.10, the aggregate number of shares of Stock which are available for issuance pursuant to Awards granted under the Plan shall be Eight Hundred Eighty-six Thousand Five Hundred Ten (886,510) shares. Such shares of Stock shall be made available from authorized and unissued shares of Stock. If, for any reason, any shares of Stock awarded or subject to purchase under the Plan are not delivered or purchased, or are reacquired by the Company, for reasons including, but not limited to, a forfeiture of Restricted Stock or termination, expiration or cancellation of a Stock Option, such shares of Stock shall not be charged against the aggregate number of shares of Stock available for issuance pursuant to Awards granted under the Plan and shall again be available for issuance pursuant to Awards granted under the Plan. If the exercise price and/or withholding obligation under a Stock Option is satisfied by tendering shares of Stock to the Company (either by actual delivery or attestation), only the number of shares of Stock issued net of the share of Stock so tendered shall be deemed delivered for purposes of determining the maximum number of shares of Stock available for issuance under the Plan.

 

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3.6

Each Award granted under the Plan shall be evidenced by a written Agreement. Each Agreement shall be subject to and incorporate, by reference or otherwise, the applicable terms and conditions of the Plan, and any other terms and conditions, not inconsistent with the Plan, as may be imposed by the Committee.

 

3.7	The Company shall not be required to issue or deliver any certificates for shares of Stock prior to:

 

(a)

the listing of such shares on any stock exchange or national quotation system on which the Stock may then be listed; and

 

(b)

the completion of any registration or qualification of such shares of Stock under any federal or state law, or any ruling or regulation of any government body which the Company shall, in its discretion, determine to be necessary or advisable.

 

3.8

All certificates for shares of Stock delivered under the Plan shall also be subject to such stop-transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations, and other requirements of the Securities and Exchange Commission, any stock exchange or national quotation system upon which the Stock is then listed and any applicable federal or state laws, and the Committee may cause a legend or legends to be placed on any such certificates to make appropriate reference to such restrictions. In making such determination, the Committee may rely upon an opinion of counsel for the Company.

 

3.9

Subject to the restrictions on Restricted Stock, as provided in Article VII of the Plan and in the Restricted Stock Agreement, each Participant who receives an Award of Restricted Stock shall have all of the rights of a shareholder with respect to such shares of Stock, including the right to vote the shares to the extent, if any, such shares possess voting rights and receive dividends and other distributions. Except as provided otherwise in the Plan or in an Agreement, no Participant granted an Award shall have any right as a shareholder with respect to any shares of Stock pertaining to such Award prior to the date of issuance to him or her of a certificate or certificates for such shares of Stock.

 

3.10

If any reorganization, recapitalization, reclassification, stock split, stock dividend, or consolidation of shares of Stock, merger or consolidation or separation, including a spin-off, of the Company or sale or other disposition by the Company of all or a portion of its assets, any other change in the Company’s corporate structure, or any distribution to shareholders other than a cash dividend results in the outstanding shares of Stock, or any securities exchanged therefor or received in their place, being exchanged for a different number or class of shares of Stock or other securities of the Company, or for shares of Stock or other securities of any other corporation; or new, different or additional shares or other securities of the Company or of any other corporation being received by the holders of outstanding shares of Stock, then the Committee may make equitable adjustments in:

 

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(a)

the limitation on the aggregate number of shares of Stock that may be awarded as set forth in Section 3.5 of the Plan;

 

(b)

the number of shares and class of Stock that may be subject to an Award, and which have not been issued or transferred under an outstanding Award;

 

(c)

the purchase price to be paid per share of Stock under outstanding Stock Options; and

 

(d)

the terms, conditions or restrictions of any Award and Agreement, including the price payable for the acquisition of Stock;

provided, however, that all adjustments made as the result of the foregoing in respect of each Incentive Stock Option shall be made so that such Stock Option shall continue to be an incentive stock option within the meaning of Code section 422, unless the Committee takes affirmative action to treat such Stock Option instead as a Nonqualified Stock Option.

 

3.11

In addition to such other rights of indemnification as they may have as directors or as members of the Committee, the members of the Committee shall be indemnified by the Company against reasonable expenses, including attorney’s fees, actually and necessarily incurred in connection with the defense of any action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan or any Award granted thereunder, and against all amounts paid by them in settlement thereof, provided such settlement is approved by independent legal counsel selected by the Company, or paid by them in satisfaction of a judgment or settlement in any such action, suit or proceeding, except as to matters as to which the Committee member has been negligent or engaged in misconduct in the performance of his duties; provided, that within 60 days after institution of any such action, suit or proceeding, a Committee member shall in writing offer the Company the opportunity, at its own expense, to handle and defend the same.

 

3.12

The Committee may require each person purchasing shares of Stock pursuant to a Stock Option or other Award under the Plan to represent to and agree with the Company in writing that he is acquiring the shares of Stock without a view to distribution thereof and/or that he has met such other requirements as the Committee determines may be applicable to such purchase. The certificates for such shares of Stock may include any legend which the Committee deems appropriate to reflect any restrictions on transfer.

 

3.13

The Committee shall be authorized to make adjustments in performance based criteria or in the other terms and conditions of Awards in recognition of unusual or nonrecurring events affecting the Company or its financial statements or changes in applicable laws, regulations or accounting principles. The Committee may correct any defect, supply any omission or reconcile any inconsistency in the Plan or any Agreement in the manner and to the extent it shall deem desirable to carry it into effect. In the event the Company shall assume outstanding employee benefit awards or the right or obligation to make such future awards in connection with the acquisition of another corporation or business entity, the Committee may, in its discretion, make such adjustments in the terms of Awards under the Plan as it shall deem appropriate to assume the outstanding awards, rights and obligations.

 

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3.14	All outstanding Awards to any Participant may be canceled if:

 

(a)

the Participant, without the consent of the Committee, while employed by the Employer or after termination of such employment, becomes associated with, employed by, renders services to, or owns any interest in, other than any insubstantial interest, as determined by the Committee, any business that is in competition with the Employer or with any business in which the Employer has a substantial interest or that has a substantial interest in the Employer, as determined by the Committee; or

 

(b)

the Participant is terminated for cause as determined by the Committee.

 

3.15

In connection with any Public Offering, a Participant shall not sell, make any short sale of, loan, hypothecate, pledge, grant any option for the purchase of, or otherwise dispose or transfer for value or otherwise agree to engage in any of the foregoing transactions with respect to, any Stock acquired under the Plan without the prior written consent of the Company or its underwriters. Such restriction (the “Market Stand-Off”) shall be in effect for such period of time from and after the effective date of the final prospectus for the Public Offering as may be requested by the Company or such underwriters. In no event, however, shall such period exceed the period for which securities owned by the Chief Executive Officer of the Company are subject to the same restrictions. Any new, substituted or additional securities that are by reason of any recapitalization or reorganization distributed with respect to Stock acquired under the Plan shall be immediately subject to the Market Stand-Off, to the same extent the Stock acquired under the Plan is at such time covered by such provisions. In order to enforce the Market Stand-Off, the Company may impose stop-transfer restrictions with respect to the Stock acquired under the Plan until the end of the applicable stand-off period.

 

3.16	Unless otherwise provided in any applicable Agreement, as a condition to the exercise of any Stock Option, each Participant will be required to execute (i) a Buy-Sell Agreement; and (ii) a Non-Disclosure, Non-Competition and Intellectual Property Agreement.

ARTICLE IV - INCENTIVE STOCK OPTIONS

 

4.1	Each provision of this Article IV and of each Incentive Stock Option granted under the Plan shall be construed in accordance with the provisions of Code section 422, and any provision hereof that cannot be so construed shall be disregarded.

 

4.2	All or any portion of the shares of stock authorized for issuance pursuant to Section 3.5 herein shall be available for issuance pursuant to Incentive Stock Options granted under the Plan.

 

4.3	Incentive Stock Options shall be granted only to Eligible Participants who are in the active employment of the Employer, each of whom may be granted one or more such

 

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Incentive Stock Options for a reason related to his employment at such time or times determined by the Committee following the Effective Date through the date which is ten (10) years following the Effective Date, subject to the following conditions:

 

(a)

The Incentive Stock Option exercise price per share of Stock shall be set in the corresponding Agreement, but shall not be less than 100% of the Fair Market Value of the Stock on the Option Grant Date. However, if the Eligible Participant owns more than 10% of the outstanding Stock (as determined pursuant to Code section 424(d)) on the Option Grant Date, the Incentive Stock Option price per share shall not be less than 110% of the Fair Market Value of the Stock on the Option Grant Date.

 

(b)

The Incentive Stock Option may be exercised in whole or in part within ten (10) years from the Option Grant Date (five (5) years if the Eligible Participant owns more than 10% of the Stock on the Option Grant Date), or such shorter period as may be specified by the Committee in the Agreement.

 

(c)

The Committee may adopt any other terms and conditions which it determines should be imposed for the Incentive Stock Option to qualify under Code section 422, as well as any other terms and conditions not inconsistent with this Article IV as determined by the Committee.

 

4.4	The Incentive Stock Option Agreement may include any other terms and conditions not inconsistent with this Article IV or in Article VI, as determined by the Committee.

 

4.5

To the extent the aggregate Fair Market Value, determined as of the Option Grant Date, of the shares of Stock with respect to which incentive stock options (determined without regard to this subsection) are first exercisable during any calendar year (under this Plan or any other plan of the Company and its parent and subsidiary corporations (within the meaning of Code sections 424(e) and (f)) by any Participant exceeds $100,000, such Incentive Stock Options granted under the Plan shall be treated as Nonqualified Stock Options granted under Article V to the extent of such excess.

 

4.6	Any Incentive Stock Option that fails to qualify under Code section 422 shall be treated as a Nonqualified Stock Option.

ARTICLE V - NONQUALIFIED STOCK OPTIONS

 

5.1	Nonqualified Stock Options may be granted to Eligible Participants to purchase shares of Stock at such time or times determined by the Committee, subject to the terms and conditions set forth in this Article V.

 

5.2	The Nonqualified Stock Option exercise price per share of Stock shall be established in the Agreement and may be more than or equal to 100% of the Fair Market Value at the time of the grant, but may not be less than par value of the Stock.

 

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5.3

A Nonqualified Stock Option may be exercised in full or in part from time to time within such period as may be specified by the Committee in the corresponding Agreement; provided, that, in any event, the Nonqualified Stock Option shall lapse and cease to be exercisable upon a Termination of Service or within such period following a Termination of Service as shall have been specified in the Nonqualified Stock Option Agreement; provided, that such period following a Termination of Service shall in no event extend the original exercise period of the Nonqualified Stock Option.

 

5.4	The Nonqualified Stock Option Agreement may include any other terms and conditions not inconsistent with this Article V or in Article VI, as determined by the Committee.

ARTICLE VI - INCIDENTS OF STOCK OPTIONS

 

6.1

Each Stock Option shall be granted subject to such terms and conditions, if any, not inconsistent with this Plan, as shall be determined by the Committee, including any provisions as to continued employment as consideration for the grant or exercise of such Stock Option and any provisions that may be advisable to comply with applicable laws, regulations or rulings of any governmental authority.

 

6.2

Except as provided below, a Stock Option shall not be transferable by the Participant other than by will or by the laws of descent and distribution or, to the extent otherwise allowed by applicable law, pursuant to a qualified domestic relations order as defined by the Code or the Employee Retirement Income Security Act of 1974, as amended, or the rules thereunder, and shall be exercisable during the lifetime of the Participant only by him or in the event of his death or Disability, by his guardian or legal representative. However, a Nonqualified Stock Option may be transferred and exercised by the transferee to the extent permitted by the Committee and to the extent determined by the Committee to be consistent with securities and other applicable laws, rules and regulations and with Company policy.

 

6.3

Shares of Stock purchased upon exercise of a Stock Option shall be paid for at the time of exercise (or, in case of an exercise pursuant to a cashless exercise mechanism described below, as soon as practicable after such exercise) in cash or by tendering (either by actual delivery or by attestation) shares of Stock held by the Participant for the requisite period necessary to avoid a charge to the Company’s earnings for financial reporting purposes, as determined by the Committee in its discretion, and valued as of the exercise date or in any combination thereof in such amounts, at such times and upon such terms as shall be determined by the Committee, subject to limitations set forth in the corresponding Stock Option Agreement. The Committee may establish a cashless exercise mechanism by which a Participant may pay the exercise price under a Stock Option by irrevocably authorizing a third party to sell shares of Stock (or a sufficient portion of the shares) acquired upon exercise of the Stock Option and remit to the Company a sufficient portion of the sales proceeds to pay the entire exercise price and/or any tax withholding resulting from such exercise.

 

6.4

If a Stock Option Agreement so provides, the Committee may require that all or part of the shares of Stock to be issued upon the exercise of a Stock Option shall take the form of Restricted Stock, which shall be valued on the date of exercise, as determined by the Committee, on the basis of Fair Market Value of such Restricted Stock determined without regard to the forfeiture restrictions involved.

 

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6.5

No cash dividends shall be paid on shares of Stock subject to unexercised Stock Options. The Committee may provide, however, that a Participant to whom a Stock Option has been granted which is exercisable in whole or in part at a future time for shares of Stock shall be entitled to receive an amount per share equal in value to the cash dividends, if any, paid per share on issued and outstanding Stock, as of the dividend record dates occurring during the period between the date of the grant and the time each such share of Stock is delivered pursuant to exercise of such Stock Option. Such amounts (herein called “dividend equivalents”) may, in the discretion of the Committee, be:

 

(a)

paid in cash or Stock either from time to time prior to, or at the time of the delivery of, such Stock, or upon expiration of the Stock Option if it shall not have been fully exercised; or

 

(b)

converted into contingently credited shares of Stock, with respect to which dividend equivalents may accrue, in such manner, at such value, and deliverable at such time or times, as may be determined by the Committee.

Such Stock, whether delivered or contingently credited, shall be charged against the limitations set forth in Plan Section 3.5.

 

6.6	The Committee, in its sole discretion, may authorize payment of interest equivalents on dividend equivalents which are payable in cash at a future time.

 

6.7

If a Participant is required to pay to the Employer an amount with respect to income and employment tax withholding obligations in connection with exercise of a Stock Option, and/or with respect to certain dispositions of Stock acquired upon the exercise of an Incentive Stock Option, the Committee, in its discretion and subject to such rules as it may adopt, may permit the Participant to satisfy the obligation, in whole or in part, by surrendering shares of Stock which the Participant already owns or by making an irrevocable election that, in lieu of the issuance of Stock, a portion of the total Fair Market Value of the shares of Stock subject to the Stock Option and/or with respect to certain dispositions of Stock acquired upon the exercise of an Incentive Stock Option, be surrendered for cash and that such cash payment be applied to the satisfaction of the withholding obligations. The amount to be withheld shall not exceed the statutory minimum federal and state income and employment tax liability arising from the Stock Option exercise transaction.

 

6.8

The Committee may permit the voluntary surrender of all or a portion of any Stock Option granted under the Plan to be conditioned upon the granting to the Participant of a new Stock Option for the same or a different number of shares of Stock as the Stock Option surrendered, or may require such surrender as a condition precedent to a grant of a new Stock Option to such Participant. Subject to the provisions of the Plan, such new Stock Option shall be exercisable at such price, during such period and on such other terms and conditions as are specified by the Committee at the time the new Stock Option is granted. Upon surrender, the Stock Options surrendered shall be canceled and the shares of Stock previously subject to them shall be available for the grant of other Stock Options.

 

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6.9

The Committee may provide in any Stock Option Agreement entered into pursuant to the Plan, or by separate agreement, that if a Participant makes payment upon the exercise of any Stock Option granted under this Plan in whole or in part through the surrender of shares of Stock, such Participant shall automatically receive a new Stock Option for the number of shares of Stock so surrendered by him at a price equal to the Fair Market Value of the shares of Stock at the time of surrender, exercisable on the same basis and having the same terms as the underlying Stock Option or on such other basis as the Committee shall determine and provide in the Stock Option Agreement.

ARTICLE VII - RESTRICTED STOCK

 

7.1

Restricted Stock Awards may be made to Participants as incentives for the performance of future services that will contribute materially to the successful operation of the Employer. Awards of Restricted Stock may be made either alone or in addition to or in tandem with other Awards granted under the Plan.

 

7.2	With respect to Awards of Restricted Stock, the Committee shall:

 

(a)

determine the purchase price, if any, to be paid for such Restricted Stock, which may be more than, equal to or less than par value and may be zero, subject to such minimum consideration as may be required by applicable law;

 

(b)

determine the length of the Restriction Period;

 

(c)

determine any restrictions applicable to the Restricted Stock such as service or performance;

 

(d)

determine if the restrictions shall lapse as to all shares of Restricted Stock at the end of the Restriction Period or as to a portion of the shares of Restricted Stock in installments during the Restriction Period; and

 

(e)

determine if dividends and other distributions on the Restricted Stock are to be paid currently to the Participant or paid to the Company for the account of the Participant.

 

7.3

Awards of Restricted Stock must be accepted within a period of 60 days, or such other period as the Committee may specify, by executing a Restricted Stock Agreement and paying whatever price, if any, is required. The prospective recipient of a Restricted Stock Award shall not have any rights with respect to such Award, unless such recipient has executed a Restricted Stock Agreement, has delivered a fully executed copy thereof to the Committee, and has otherwise complied with the applicable terms and conditions of such Award.

 

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7.4

Except when the Committee determines otherwise, or as otherwise provided in the Restricted Stock Agreement, if a Participant terminates employment with the Employer for any reason before the expiration of the Restriction Period, all shares of Restricted Stock still subject to restriction shall be forfeited by the Participant and shall be reacquired by the Company.

 

7.5	Except as otherwise provided in this Article VII, or as otherwise provided in the Restricted Stock Agreement, no shares of Restricted Stock received by a Participant shall be sold, exchanged, transferred, pledged, hypothecated or otherwise disposed of during the Restriction Period.

 

7.6	To the extent not otherwise provided in a Restricted Stock Agreement, in cases of death, Disability or Retirement or in cases of special circumstances, the Committee may in its discretion elect to waive any or all remaining restrictions with respect to such Participant’s Restricted Stock.

 

7.7

In the event of hardship or other special circumstances of a Participant whose employment with the Employer is involuntarily terminated, the Committee may in its discretion elect to waive in whole or in part any or all remaining restrictions with respect to any or all of the Participant’s Restricted Stock, based on such factors and criteria as the Committee may deem appropriate.

 

7.8	Upon an Award of Restricted Stock to a Participant, one or more stock certificates representing the shares of Restricted Stock shall be registered in the Participant’s name. Such certificates may either:

 

(a)

be held in custody by the Company until the Restriction Period expires or until restrictions thereon otherwise lapse, and the Participant shall deliver to the Company one or more stock powers endorsed in blank relating to the Restricted Stock; and/or

 

(b)

be issued to the Participant and registered in the name of the Participant, and shall bear an appropriate restrictive legend and shall be subject to appropriate stop-transfer orders.

 

7.9

Except as provided in this Article VII or in the applicable Restricted Stock Agreement, a Participant receiving a Restricted Stock Award shall have, with respect to such Restricted Stock Award, all of the rights of a shareholder of the Company, including the right to vote the shares to the extent, if any, such shares possess voting rights and the right to receive any dividends; provided, however, the Committee may require that any dividends on such shares of Restricted Stock shall be automatically deferred and reinvested in additional Restricted Stock subject to the same restrictions as the underlying Award, or may require that dividends and other distributions on Restricted Stock shall be paid to the Company for the account of the Participant. The Committee shall determine whether interest shall be paid on such amounts, the rate of any such interest, and the other terms applicable to such amounts.

 

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7.10

If and when the Restriction Period expires without a prior forfeiture of the Restricted Stock subject to such Restriction Period, unrestricted certificates for such shares shall be delivered to the Participant; provided, however, that the Committee may cause such legend or legends to be placed on any such certificates as it may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission and any applicable federal or state law.

 

7.11

In order to better ensure that Award payments actually reflect the performance of the Company and the service of the Participant, the Committee may provide, in its sole discretion, for a tandem performance-based or other Award designed to guarantee a minimum value, payable in cash or Stock to the recipient of a Restricted Stock Award, subject to such performance, future service, deferral and other terms and conditions as may be specified by the Committee.

ARTICLE VIII - STOCK AWARDS

 

8.1	A Stock Award shall be granted only in payment of compensation that has been earned or as compensation to be earned, including without limitation, compensation awarded concurrently with or prior to the grant of the Stock Award.

 

8.2

For the purposes of this Plan, in determining the value of a Stock Award, all shares of Stock subject to such Stock Award shall be valued at not less than 100% of the Fair Market Value of such shares of Stock on the date such Stock Award is granted, regardless of whether or when such shares of Stock are issued or transferred to the Participant and whether or not such shares of Stock are subject to restrictions which affect their value.

 

8.3

Shares of Stock subject to a Stock Award may be issued or transferred to the Participant at the time the Stock Award is granted, or at any time subsequent thereto, or in installments from time to time, as the Committee shall determine. If any such issuance or transfer shall not be made to the Participant at the time the Stock Award is granted, the Committee may provide for payment to such Participant, either in cash or shares of Stock, from time to time or at the time or times such shares of Stock shall be issued or transferred to such Participant, of amounts not exceeding the dividends which would have been payable to such Participant in respect of such shares of Stock, as adjusted under Section 3.10, if such shares of Stock had been issued or transferred to such Participant at the time such Stock Award was granted.

 

8.4

A Stock Award shall be subject to such terms and conditions, including without limitation, restrictions on the sale or other disposition of the Stock Award or of the shares of Stock issued or transferred pursuant to such Stock Award, as the Committee shall determine; provided, however, that upon the issuance or transfer of shares pursuant to a Stock Award, the Participant, with respect to such shares of Stock, shall be and become a shareholder of the Company fully entitled to receive dividends, to vote to the extent, if any, such shares possess voting rights and to exercise all other rights of a shareholder except to the extent otherwise provided in the Stock Award. Each Stock Award shall be evidenced by a written Agreement in such form as the Committee shall determine.

 

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ARTICLE IX - AMENDMENT AND TERMINATION

 

9.1	The Board, at any time and from time to time, may amend or terminate the Plan. To the extent required by Code section 422 and/or the rules of the exchange upon which the Stock is traded, no amendment, without approval by the Company’s shareholders, shall:

 

(a)

alter the group of persons eligible to participate in the Plan;

 

(b)

except as provided in Plan Section 3.10, increase the maximum number of shares of Stock which are available for issuance pursuant to Awards granted under the Plan;

 

(c)

extend the period during which Incentive Stock Options may be granted beyond the date which is ten (10) years following the Effective Date;

 

(d)

limit or restrict the powers of the Committee with respect to the administration of this Plan;

 

(e)

change the definition of an Eligible Participant for the purpose of an Incentive Stock Option or increase the limit or the value of shares of Stock for which an Eligible Participant may be granted an Incentive Stock Option;

 

(f)

materially increase the benefits accruing to Participants under this Plan; or

 

(g)

change any of the provisions of this Article IX.

 

9.2	The Committee shall be entitled to create, amend or delete appendices to this Plan as specified herein.

 

9.3

No amendment to or discontinuance of this Plan or any provision thereof by the Board or the shareholders of the Company shall, without the written consent of the Participant, adversely affect, as shall be determined by the Committee, any Award previously granted to such Participant under this Plan; provided, however, the Committee retains the right and power to treat any outstanding Incentive Stock Option as a Nonqualified Stock Option as provided herein.

 

9.4

Notwithstanding anything herein to the contrary, if the right to receive or benefit from any Award, either alone or together with payments that a Participant has the right to receive from the Employer, would constitute a “parachute payment” under Code section 280G, all such payments may be reduced, in the discretion of the Committee, to the largest amount that will avoid an excise tax to the Participant under Code section 280G.

ARTICLE X - MISCELLANEOUS PROVISIONS

 

10.1

Nothing in the Plan or any Award granted under the Plan shall confer upon any Participant any right to continue in the employ of the Employer, or to serve as a director or consultant thereof, or interfere in any way with the right of the Employer to terminate his or her employment or relationship at any time. Unless otherwise agreed to by the

 

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Board, no Award granted under the Plan shall be deemed salary or compensation for the purpose of computing benefits under any employee benefit plan or other arrangement of the Employer for the benefit of its employees unless the Employer shall determine otherwise. No Participant shall have any claim to an Award until it is actually granted under the Plan. To the extent that any person acquires a right to receive payments from the Company under the Plan, such right shall, except as otherwise provided by the Committee, be no greater than the right of an unsecured general creditor of the Company. All payments to be made under the Plan shall be paid from the general funds of the Company, and no special or separate fund shall be established and no segregation of assets shall be made to assure payment of such amounts, except as provided in Article VII with respect to Restricted Stock and except as otherwise provided by the Committee.

 

10.2

The Committee or the Company may make such provisions and take such steps as it may deem necessary or appropriate for the withholding of any taxes which the Employer is required by any law or regulation of any governmental authority, whether federal, state or local, domestic or foreign, to withhold in connection with any Award or the exercise thereof, including, but not limited to, withholding the payment of all or any portion of such Award or another Award under this Plan until the Participant reimburses the Employer for the amount the Employer is required to withhold with respect to such taxes, or canceling any portion of such Award or another Award under this Plan in an amount sufficient to reimburse itself for the amount it is required to so withhold, or selling any property contingently credited by the Employer for the purpose of paying such Award or another Award under this Plan, in order to withhold or reimburse itself for the amount it is required to so withhold. The amount withheld shall not exceed the statutory minimum federal and state income and employment tax liability arising from the exercise transaction.

 

10.3	The Plan and the grant of Awards shall be subject to all applicable federal and state laws, rules, and regulations and to such approvals by any United States government or regulatory agency as may be required.

 

10.4	The terms of the Plan shall be binding upon the Employer, and its successors and assigns.

 

10.5

The Plan is intended to constitute an “unfunded” plan for incentive and deferred compensation. With respect to any payments not yet made to a Participant by the Company, nothing contained herein shall give any such Participant any rights that are greater than those of a general creditor of the Company. In its sole discretion, the Committee may authorize the creation of trusts or other arrangements to meet the obligations created under the Plan to deliver shares of Stock or payments in lieu of or with respect to Awards under the Plan; provided, however, that, unless the Committee otherwise determines with the consent of the affected Participant, the existence of such trusts or other arrangements is consistent with the “unfunded” status of the Plan.

 

10.6	Each Participant exercising an Award under the Plan agrees to give the Committee prompt written notice of any election made by such Participant under Code section 83(b), or any similar provision thereof.

 

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10.7

If any provision of this Plan or an Agreement is or becomes or is deemed invalid, illegal or unenforceable in any jurisdiction, or would disqualify the Plan or any Agreement under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws or if it cannot be construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan or the Agreement, it shall be stricken and the remainder of the Plan or the Agreement shall remain in full force and effect.

 

10.8

The Committee may incorporate additional or alternative provisions for this Plan with respect to residents of one or more individual states to the extent necessary or desirable under state securities laws. Such provisions shall be set out in one or more appendices hereto which may be amended or deleted by the Committee from time to time.

 

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IN WITNESS WHEREOF, this document is executed effective as of the date specified above.

 

				BANDWIDTH.COM, INC.
(CORPORATE SEAL)				By:		/s/ David A. Morken
						David A. Morken, President and Chief Executive Officer

 

ATTEST:

/s/ W. Christopher Matton

W. Christopher Matton, Secretary

 

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AMENDMENT TO BANDWIDTH.COM, INC.

2010 EQUITY COMPENSATION PLAN

THIS AMENDMENT TO BANDWIDTH.COM, INC. 2010 EQUITY COMPENSATION PLAN is made and entered into as of the 13^th day of April, 2012, by Bandwidth.com, Inc., a Delaware corporation (the “Company”).

W I T N E S S E T H:

WHEREAS, the Company has previously established and adopted the Bandwidth.com, Inc. 2010 Equity Compensation Plan (the “Plan”); and

WHEREAS, pursuant to Article IX of the Plan, the Board of Directors, pursuant to unanimous consent of the Board of Directors, dated as of the date hereof, hereby amend the Plan as described below.

NOW, THEREFORE, in consideration of the premises herein contained, the Company hereby amends the Plan as follows:

ARTICLE XI - The first sentence of Section 3.5 of the Plan is hereby deleted in its entirety and the following is inserted in lieu thereof:

Subject to adjustment as provided in Section 3.10, the aggregate number of shares of Stock

which are available for issuance pursuant to Awards granted under the Plan shall be One

Million One Hundred Thirty-six Thousand Five Hundred Ten (1,136,510) shares.

ARTICLE XII - This Amendment does not supersede the terms and conditions of the Plan, except to the extent expressly described herein.

IN WITNESS WHEREOF, the Company has caused this Amendment to be executed by its duly authorized officer, all as of the day and year first above written.

 

 

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AMENDMENT TO BANDWIDTH.COM, INC.

2010 EQUITY COMPENSATION PLAN

THIS AMENDMENT TO BANDWIDTH.COM, INC. 2010 EQUITY COMPENSATION PLAN is made and entered into as of the 8^th day of May, 2014, by Bandwidth.com, Inc., a Delaware corporation (the “Company”).

W I T N E S S E T H:

WHEREAS, the Company has previously established and adopted the Bandwidth.com, Inc. 2010 Equity Compensation Plan (the “Plan”); and

WHEREAS, pursuant to Article IX of the Plan, the Board of Directors, pursuant to unanimous consent of the Board of Directors, dated as of the date hereof, hereby amend the Plan as described below.

NOW, THEREFORE, in consideration of the premises herein contained, the Company hereby amends the Plan as follows:

ARTICLE XIII - The first sentence of Section 3.5 of the Plan is hereby deleted in its entirety and the following is inserted in lieu thereof:

Subject to adjustment as provided in Section 3.10, the aggregate number of shares of Stock

which are available for issuance pursuant to Awards granted under the Plan shall be One

Million One Hundred Eighty-six Thousand Five Hundred Ten (1,186,510) shares.

ARTICLE XIV - This Amendment does not supersede the terms and conditions of the Plan, except to the extent expressly described herein.

IN WITNESS WHEREOF, the Company has caused this Amendment to be executed by its duly authorized officer, all as of the day and year first above written.

 

 

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AMENDMENT TO BANDWIDTH.COM, INC.

2010 EQUITY COMPENSATION PLAN

THIS AMENDMENT TO BANDWIDTH.COM, INC. 2010 EQUITY COMPENSATION PLAN is made and entered into as of the 6^th day of May, 2015, by Bandwidth.com, Inc., a Delaware corporation (the “Company”).

W I T N E S S E T H:

WHEREAS, the Company has previously established and adopted the Bandwidth.com, Inc. 2010 Equity Compensation Plan (the “Plan”); and

WHEREAS, pursuant to Article IX of the Plan, the Board of Directors, pursuant to unanimous consent of the Board of Directors, dated as of the date hereof, hereby amend the Plan as described below.

NOW, THEREFORE, in consideration of the premises herein contained, the Company hereby amends the Plan as follows:

ARTICLE XV - The first sentence of Section 3.5 of the Plan is hereby deleted in its entirety and the following is inserted in lieu thereof:

Subject to adjustment as provided in Section 3.10, the aggregate number of shares of Stock

which are available for issuance pursuant to Awards granted under the Plan shall be One

Million Two Hundred Thirty-six Thousand Five Hundred Ten (1,236,510) shares.

ARTICLE XVI - This Amendment does not supersede the terms and conditions of the Plan, except to the extent expressly described herein.

IN WITNESS WHEREOF, the Company has caused this Amendment to be executed by its duly authorized officer, all as of the day and year first above written.

 

 

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AMENDMENT TO BANDWIDTH.COM, INC.

2010 EQUITY COMPENSATION PLAN

THIS AMENDMENT TO BANDWIDTH.COM, INC. 2010 EQUITY COMPENSATION PLAN is made and entered into as of the ___ day of December, 2015, by Bandwidth.com, Inc., a Delaware corporation (the “Company”).

W I T N E S S E T H:

WHEREAS, the Company has previously established and adopted the Bandwidth.com, Inc. 2010 Equity Compensation Plan (the “Plan”); and

WHEREAS, pursuant to Article IX of the Plan, the Board of Directors, pursuant to unanimous consent of the Board of Directors, dated as of the date hereof, hereby amend the Plan as described below.

NOW, THEREFORE, in consideration of the premises herein contained, the Company hereby amends the Plan as follows:

ARTICLE XVII - The first sentence of Section 3.5 of the Plan is hereby deleted in its entirety and the following is inserted in lieu thereof:

Subject to adjustment as provided in Section 3.10, the aggregate number of shares of Stock

which are available for issuance pursuant to Awards granted under the Plan shall be One

Million Three Hundred Thirty-six Thousand Five Hundred Ten (1,336,510) shares.

ARTICLE XVIII - This Amendment does not supersede the terms and conditions of the Plan, except to the extent expressly described herein.

IN WITNESS WHEREOF, the Company has caused this Amendment to be executed by its duly authorized officer, all as of the day and year first above written.

 

 

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AMENDMENT TO BANDWIDTH.COM, INC.

2010 EQUITY COMPENSATION PLAN

THIS AMENDMENT TO BANDWIDTH.COM, INC. 2010 EQUITY COMPENSATION PLAN is made and entered into as of the 24^th day of August, 2017, by Bandwidth.com, Inc., a Delaware corporation (the “Company”).

W I T N E S S E T H:

WHEREAS, the Company has previously established and adopted the Bandwidth.com, Inc. 2010 Equity Compensation Plan (the “Plan”); and

WHEREAS, pursuant to Article IX of the Plan, the Board of Directors, pursuant to unanimous consent of the Board of Directors, dated as of the date hereof, hereby amend the Plan as described below.

NOW, THEREFORE, in consideration of the premises herein contained, the Company hereby amends the Plan as follows:

ARTICLE XIX - The first sentence of Section 3.5 of the Plan is hereby deleted in its entirety and the following is inserted in lieu thereof:

Subject to adjustment as provided in Section 3.10, the aggregate number of shares of Stock

which are available for issuance pursuant to Awards granted under the Plan shall be One

Million Three Hundred Eighty-six Thousand Five Hundred Ten (1,386,510) shares.

ARTICLE XX - This Amendment does not supersede the terms and conditions of the Plan, except to the extent expressly described herein.

IN WITNESS WHEREOF, the Company has caused this Amendment to be executed by its duly authorized officer, all as of the day and year first above written.

 

 

Exhibit 10.5

Executive Employment Agreement

This Executive Employment Agreement (“Agreement”) is made effective as of 10/1/2008 by and between Bandwidth.com, Inc. (“Company”) and John Murdock (“Executive”).

NOW, THEREFORE, the parties hereto agree as follows:

 

1.	Employment

Company hereby agrees to initially employ Executive as its General Counsel and as the Corporate Secretary for the Company, and Executive hereby accepts such employment in accordance with the terms of this Agreement and the terms of employment applicable to regular employees of Company. In the event of any conflict or ambiguity between the terms of this Agreement and terms of employment applicable to regular employees, the terms of this Agreement shall control. Election or appointment of Executive to another office or position, such as Chief Legal Officer, and regardless of whether such office or position is inferior to Executive’s initial office or position, shall not be a breach of this Agreement.

 

2.	Duties of Executive

The Executive in his capacity as General Counsel shall have charge of all legal matters of the Company, and shall have such other duties as may be assigned from time to time by the Board of Directors. The Executive will use his best efforts to perform his duties and discharge his responsibilities pursuant to this Agreement competently, carefully and faithfully. In determining whether or not the Executive has used his best efforts hereunder, the Executive’s and the Company’s delegation of authority and all surrounding circumstances shall be taken into account and the best efforts of the Executive shall not be judged solely on the Company’s earnings or other results of the Executive’s performance.

 

A.

Position Description: The following further describes the duties for the General Counsel: The General Counsel is the responsible legal counsel for the Company and shall act in that capacity to oversee and coordinate Company legal activities and functions to ensure the Company’s compliance with and adherence to applicable law. Shall monitor and provide necessary legal services within the Company and ensure that the Company is fully represented in any legal actions. Reports directly to and advises the Chief Executive Officer on Company legal matters, and provides other officers and directors, as may be directed from time to time, with advice and guidance in identifying critical areas where the application of law minimizes legal risk and maximizes Company opportunities. Works within the Company to develop, maintain, or modify policies and procedures to conform to legal requirements. Reviews and controls the Company legal budget and expenditures and assures optimum deployment of legal resources within budget. Keeps fully informed on all legislation and regulatory developments affecting the Company’s operations, pertinent developments in corporate legal matters, and keeps all levels of management informed of applicable changes in law. Develops and directs the Company legal department to address Company demands, including proper and adequate staffing of attorneys, paralegal and legal support staff. Supervises and directs selected outside legal firms and monitors and evaluates their activities.

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B.

Travel Requirement: It is generally anticipated that Executive will work onsite at Company headquarters three days each business week; but in any event Executive shall work such number of days in accordance with the needs of the Company, including any number of days as may be determined at the discretion of the CEO. Reasonable travel expenses connected to onsite work shall be paid by Company.

 

C.

Budget: Executive shall be responsible for the Legal Budget of the company, and shall allocate funds within Executive’s discretion.

 

D.

Transition: Executive shall work fifty percent of the time, or as agreed to by Executive and CEO, required for the Position during October, November, and December of 2008 and shall receive a pro-rata percentage of his Base Salary for the period. Commencing January 1, 2009, Executive shall be considered fully transitioned and working full time in the Position of General Counsel and shall receive full Base Salary. After January 1, 2009, and strictly on a limited basis and in a fashion that will be fully coordinated with the CEO and not degrade Executive’s full time performance of Company duties, as part of the transition Executive anticipates limited involvement in highly valuable litigation work through the law firm of Murdock Goldenberg Schneider Groh, LPA (the Firm). Any such work would be pursuant to Executive’s transition agreement with the Firm. As part of the transition plan with the Firm and in connection with such work, Executive anticipates retaining the position of Partner and equity ownership with the Firm for an agreed to period.

 

3.	Compensation

Executive will be paid compensation during this Agreement as follows:

 

A.

Base Salary. A base salary of two hundred and fifty thousand dollars ($250,000) per year will be payable in installments according to the Company’s regular payroll schedule. At the discretion of the board of directors, the base salary shall be increased at the end of each year of employment, effective each year as of January 1st, to reflect cost of living, outstanding performance, or other factors as determined by the board.

 

B.

Performance Incentive. Executive is eligible to receive additional compensation of an amount equal to one hundred thousand dollars ($100,000), which will be considered and paid in 4 quarterly installments on a 3 month basis, and any such compensation is based upon the sole discretion of the board of directors. Executive shall receive constructive guidance regarding his performance at such time he is reviewed for this incentive. The board of directors, may, at its sole discretion provide additional compensation beyond $100,000, but in no event is the board obligated to do so. This performance incentive will be considered part of Executive’s base compensation. This performance incentive does not replace or

 

2

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limit the Executive’s eligibility for any benefit plans, pension, profit-sharing or incentive plans adopted by Company for the benefit of its officers and/or regular employees. Performance Incentive will be calculated and paid in whole or part based upon the board’s sole discretion, including consideration of the following criteria:

 

i.

80% – based upon the Executive’s ability, during the period, to deliver substantial monetary value or performance not otherwise anticipated by the board of directors or CEO, or expected within the annual company forecast and/or budget, due solely or substantially to the efforts of Executive.

 

ii.

20% – based upon Executive’s ability, during the period, to anticipate and avoid unexpected financial exposure not accruing within the company forecast and/or budget.

 

C.

Equity Treatment. Executive, pursuant to a prior existing stock option agreement for legal services during an evaluation period, was granted by the Company a total of 16,000 options to purchase Company stock, exercisable at a strike price of twenty-five dollars and sixty-four cents ($25.64), based on a company valuation of one hundred and twenty five million dollars ($125,000,000), and which is fully vested. In addition, the Company shall grant 61,305 options to purchase Company’s stock, exercisable at twenty five dollars and sixty four cents ($25.64) per share based on a company valuation of one hundred and twenty five million dollars ($125,000,000) and vesting over a period of 4 years, with 25% vesting each twelve month period. In the event of a termination of this Agreement as provided below, for any twelve month period herein, any otherwise unvested stock falling within such period shall vest on a pro rata basis, to be calculated based on the number of days Executive was employed by Company during such period. In addition to the foregoing, Executive shall also be eligible for additional options after every 6 months of employment with Company. The board of directors may also consider other forms of granting equity, such as stock grants or restricted stock, as may be deemed appropriate. All such options or grants shall have an acceleration feature, allowing for immediate granting and vesting in conjunction with any sale of the Company, merger, stock exchange listing or public trading of Company stock, other similar material event.

 

4.

Benefits

 

A.

Paid Time Off. Executive shall be entitled to company paid time off according to the regular policies and procedures of Company. This includes but is not limited to Holidays, Sick Leave, Jury Duty, and Bereavement.

 

B.

Vacation. Executive shall be entitled to 21 business days of paid vacation each year or such number of days as permitted at the discretion of the CEO. Vacation will accrue according to the regular policies and procedures of Company, unless otherwise allowed for at the discretion of the CEO.

 

3

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C.

Medical and Dental Insurance. Company agrees to include Executive in the group medical and dental plans of Company at no charge to Executive.

 

D.

Pension and Profit Sharing Plans. Executive shall be entitled to participate in any pension or profit sharing plan or other type of plan adopted by Company for the benefit of its officers and/or regular employees.

 

E.

Expense Reimbursement. Executive shall be entitled to reimbursement for all reasonable expenses, including travel and entertainment, incurred by Executive in the performance of Executive’s duties. Executive will maintain records and written receipt as required by the Company policy and reasonably requested by the board of directors to substantiate such expenses.

 

F.

Other. Executive shall be eligible for any and all future benefits that may be granted according to the current or any revised regular policies and procedures of Company and/or granted by the board of directors.

 

5.	Term and Termination

 

A.

The Initial Term of this Agreement shall commence on January 1, 2008 and it shall continue in effect for a period of 1 year subject, however, to earlier termination in accordance with the provisions of this Agreement. This Agreement shall automatically renew on a year-to-year basis unless terminated by either party hereto giving written notice to the other at least 90 days prior to January 1, 2009 or any January 1 thereafter.

 

B.

This Agreement and Executive’s employment may be terminated at Company’s discretion as of the above effective date through the Initial Term, provided that the Company shall pay to Executive an amount equal to payment at Executive’s base salary rate for the remainder of the Initial Term and twelve months thereafter.

 

C.

This Agreement and Executive’s employment may be terminated by Company at its discretion at any time after the Initial Term, provided that in such case, Executive shall be paid 12 months of Executive’s then applicable base salary.

 

D.

This Agreement may be terminated by Executive at Executive’s discretion by providing at least thirty (30) days prior written notice to Company. In the event of termination by Executive pursuant to this subsection, Company may immediately relieve Executive of all duties and immediately terminate this Agreement, provided that Company shall pay Executive at the then applicable base salary rate to the termination date included in Executive’s original termination notice. Effective as of October 1, 2008, in the event Executive, within his discretion, terminates this Agreement he shall be paid an additional 6 months of his current base salary, which shall serve as severance pay, to commence as of the Executive’s final day of employment and payable on a monthly basis.

 

4

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E.

In the event that Executive is in breach of any material obligation owed Company in this Agreement, habitually neglects the duties to be performed under this Agreement, engages in any conduct which is dishonest, damages the reputation or standing of the Company, or is convicted of any criminal act or engages in any act of moral turpitude, then Company may terminate this Agreement upon five (5) days’ notice to Executive. In event of termination of the agreement pursuant to this subsection, Executive shall be paid only at the then applicable base salary rate up to and including the date of termination. Executive shall not be paid any incentive salary payments or other compensation, prorated or otherwise.

 

6.

Notices

Any notice required by this Agreement or given in connection with it, shall be in writing and shall be given to the appropriate party by personal delivery or by certified mail, postage prepaid, or recognized overnight delivery services.

 

7.	Final Agreement

This Agreement terminates and supersedes all prior understandings or agreements on the subject matter hereof. This Agreement may be modified only by a further writing that is duly executed by both parties.

 

8.	Governing Law

This Agreement shall be construed and enforced in accordance with the laws of the state of North Carolina.

 

9.

Headings

Headings used in this Agreement are provided for convenience only and shall not be used to construe meaning or intent.

 

10.	No Assignment

Neither this Agreement nor any or interest in this Agreement may be assigned by Executive without the prior express written approval of Company, which may be withheld by Company at Company’s absolute discretion.

 

11.	Severability

If any term of this Agreement is held by a court of competent jurisdiction to be invalid or unenforceable, then this Agreement, including all of the remaining terms, will remain in full force and effect as if such invalid or unenforceable term had never been included.

 

12.	Arbitration

The parties agree that they will use their best efforts to amicably resolve any dispute arising out of or relating to this Agreement. Any controversy, claim or dispute that cannot be so resolved

 

5

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shall be settled by final binding arbitration in accordance with the rules of the American Arbitration Association and judgment upon the award rendered by the arbitrator or arbitrators may be entered in any court having jurisdiction thereof. Any such arbitration shall be conducted in North Carolina, or such other place as may be mutually agreed upon by the parties. Within fifteen (15) days after the commencement of the arbitration, each party shall select one person to act arbitrator, and the two arbitrators so selected shall select a third arbitrator within ten (10) days of their appointment. Each party shall bear its own costs and expenses and an equal share of the arbitrator’s expenses and administrative fees of arbitration.

 

13.	Confidentiality

Unless otherwise mutually agreed to by the parties or if necessary for required financial reporting, all terms of this Agreement shall be strictly confidential between the CEO, board of directors, and Executive.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

 

David Morken

CEO

Bandwidth.com

 

6

Exhibit 10.6

General Counsel Employment Agreement

This General Counsel Employment Agreement (“Agreement”) is made effective as of May 3, 2010 by and between Bandwidth.com, Inc. (“Company”) and W. Christopher Matton (“General Counsel”).

NOW, THEREFORE, the parties hereto agree as follows:

1. Employment

Employment by the Company shall be as General Counsel, which shall include additional duties of the Company corporate Secretary, and General Counsel hereby accepts such employment in accordance with the terms of this Agreement and the terms of employment applicable to regular employees of Company. In the event of any conflict or ambiguity between the terms of this Agreement and terms of employment applicable to regular employees, the terms of this Agreement shall control.

2. Duties of Executive

General Counsel shall have charge of all legal matters of the Company, such duties being generally described below, and shall have such other duties as may be assigned from time to time by the President, Chief Executive Officer or Chief Operating Officer. General Counsel will use his best efforts to perform his duties and discharge his responsibilities pursuant to this Agreement with a high degree of legal skill and competence, and faithfully to the Company.

 

A.

The General Counsel is the responsible legal counsel for the Company and shall act in that capacity to discharge, oversee and coordinate Company legal activities and functions to ensure the Company’s compliance with and adherence to applicable law. The General Counsel duties include:

 

i.

monitor and provide the requisite legal services and advice within the Company and ensure that the Company is fully represented in any in judicial, administrative, regulatory or similar actions or proceedings;

 

ii.

assist the Company to develop, maintain, or modify policies and procedures so as to be in compliance with or in conformance with applicable law;

 

iii.

review and control the Company legal budget and expenditures and shall endeavor to assure optimum deployment of legal resources within budget;

 

iv.

keep fully informed on all legislation and regulatory developments affecting the Company’s operations and pertinent developments in corporate legal matters, and, where needed, inform and advise affected Company management of changes in law that materially affect Company operations or business transactions;

 

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v.

develop and direct the Company legal department to address Company legal requirements, including proper and adequate staffing such as any necessary attorneys, paralegals and legal support staff; and

 

vi.

supervise and direct selected outside attorneys and monitor and evaluate their performance.

 

B.

Operationally, the General Counsel shall report directly to, primarily advise, and act at the direction of both the Chief Executive Officer and the Chief Operating Officer; provided, however for purposes of a unified chain of command, ultimate authority shall rest with the Chief Executive Officer. The General Counsel shall be responsive to, provide for, oversee, and manage the provision of legal advice and services to other Company “Chief–level” officers and the Company’s Board of Directors as may be needed from time to time.

 

C.

Budget: The General Counsel shall be responsible for the Legal Budget of the company, and shall allocate funds within his discretion.

 

D.

Transition from Private Practice: It is understood that the General Counsel is exiting the private practice of law and will thus require a transition period before starting his employment with the Company. It is anticipated that this transition period will run until July 6, 2010. General Counsel will be employed by the Company effective as of July 6, 2010; provided, however, in the event the transition period should need to be enlarged for an additional period of time, the parties shall confer and reasonably agree upon any such additional period. From and after July 6, 2010 and strictly on a limited basis and in a fashion that will be fully coordinated with the Chief Executive Officer and the Chief Operating Officer, and shall not degrade General Counsel’s full time performance of Company duties pursuant to this Agreement, as part of the transition General Counsel anticipates limited responses to General Counsel’s former firm and/or former clients of General Counsel’s former firm as reasonably necessary to transition legal services with respect to such firm and such clients.

3. Compensation

General Counsel will be paid compensation during this Agreement as follows:

 

A.

Base Salary. A base salary of two hundred and fifty thousand dollars ($250,000) per year will be payable in installments according to the Company’s regular payroll schedule. At the discretion of the Chief Executive Officer or Board of Directors, the base salary shall be adjusted at the end of each year of employment, effective each year as of January 1st.

 

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B.

Performance Incentive. General Counsel shall be eligible for additional compensation in the form of an annual lump sum performance bonus (“Performance Bonus”) for an amount up to one hundred twenty-five thousand dollars ($125,000), pro rated for any partial year during which General Counsel may be employed. General Counsel’s ability to receive any Performance Bonus is based upon the sole and unfettered discretion of the Chief Executive Officer, who in exercising such discretion, shall obtain the recommendation and advice of the Chief Operating Officer. In the event the Chief Executive Officer determines that the General Counsel’s performance was extraordinary such that it merits compensation beyond the maximum Performance Bonus, then upon approval of Board of Directors, the General Counsel may receive additional performance compensation not to exceed $25,000 (beyond the foregoing $125,000, for a total of $150,000). This performance incentive does not replace or limit eligibility for any benefit plans, pension, profit-sharing or incentive plans adopted by Company for the benefit of its officers and/or regular employees. The Performance Bonus will be calculated and paid in whole or part based upon consideration of the following criteria:

 

i.

80% - based upon the General Counsel’s performance in executing the duties of his office as set forth above; as well as the delivery of substantial monetary value and/or qualitative performance not otherwise anticipated by the Chief Executive Officer, due solely or substantially to the efforts of the General Counsel.

 

ii.

20% - based upon the overall performance of the Company during the relevant period.

 

C.

Company Equity. As of the first day of General Counsel’s employment, the Company shall grant General Counsel 25,000 options to purchase Company’s stock, exercisable at twenty five dollars and sixty four cents ($25.64) per share based on a Company valuation of approximately one hundred and twenty five million dollars ($125,000,000) and vesting over a period of 4 years, with 25% vesting each twelve month period. As of the first day of General Counsel’s employment, the Company shall grant General Counsel an additional 10,000 options to purchase Company’s stock, exercisable at twenty five dollars and sixty four cents ($25.64) per share based on a Company valuation of approximately one hundred and twenty five million dollars ($125,000,000) and vesting over a period of 3 years; provided, however, (i) none of such options shall vest until the date two (2) years immediately after the commencement of General Counsel’s employment; and (ii) the options will vest 33.33% on each of the second, third and fourth anniversary dates of the commencement of General Counsel’s employment. In the event of a termination without cause of this Agreement as provided below, for any twelve month period herein, any otherwise unvested stock falling within such period shall vest on a pro rata basis, to be calculated based on the number of days of employment during such period. In addition to

 

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the foregoing, Executive shall also be eligible for additional options at any time at the sole and unfettered discretion of the Chief Executive Officer. The board of directors may also consider other forms of granting equity, such as stock grants or restricted stock, as may be deemed appropriate. Notwithstanding any other term described above, all such options or grants shall have an acceleration feature, allowing for immediate granting and vesting in conjunction with any sale of the Company, merger, stock exchange listing or public trading of Company stock, other similar material event. For clarity, iall options will accelerate immediately in the event of a change in control of the Company; if, notwithstanding the foregoing and pursuant to the terms and conditions of any applicable equity compensation plan, any options are assumed by any applicable acquirer, and General Counsel’s employment by such acquiror terminates within twelve (12) months after the date of such change in control, then all options will accelerate upon such change in control.

4. Benefits

 

A.

Paid Time Off. General Counsel shall be entitled to Company paid time off according to the regular policies and procedures of Company. This includes but is not limited to Holidays, Sick Leave, Jury Duty, and Bereavement.

 

B.

Vacation. General Counsel shall be entitled to 21 business days of paid vacation each year or such additional number of days as permitted at the discretion of the Chief Executive Officer. Vacation will accrue according to the regular policies and procedures of Company, unless otherwise allowed for at the discretion of the Chief Executive Officer.

 

C.

Medical and Dental Insurance. Group medical and dental plans of Company will be provided at no charge pursuant to the terms of any plan applicable to regular employees of Company.

 

D.

Pension and Profit Sharing Plans. General Counsel shall be entitled to participate in any pension or profit sharing plan or other type of plan adopted by Company for the benefit of its officers and/or regular employees.

 

E.

Expense Reimbursement. General Counsel shall be reimbursed for all reasonable expenses, including travel and entertainment, incurred in the performance of employment duties. General Counsel will maintain records and written receipts as required by the Company policy.

 

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F.

Other. General Counsel shall be eligible for any and all future benefits that may be granted according to the current or any revised regular policies and procedures of Company and/or granted by the Board of Directors.

5. Term and Termination

 

A.

The Initial Term of this Agreement shall commence on the first of day of General Counsel’s full time employment, which is presently anticipated to begin on July 6, 2010, and it shall continue in effect for a period of 1 year subject, however, to earlier termination in accordance with the provisions of this Agreement. This Agreement shall automatically renew on an annual basis on each anniversary of the commencement of the Initial Term unless terminated by either party hereto giving written notice to the other at least ninety (90) days prior to such anniversary.

 

B.

If the Company in its discretion terminates this Agreement prior to the commencement of the Initial Term as contemplated in Section 5(A) above without cause, then General Counsel shall be paid $187,500 in pro rata installments over 9 months according to the Company’s regular payroll schedule.

 

C.

If during the Initial Term (or as of the completion of the Initial Term by non-renewal), (i) the Company at its discretion terminates this Agreement without cause or (ii) General Counsel terminates this Agreement with Good Reason (as defined below), then the Company shall pay General Counsel $250,000 in pro rata installments over 12 months according to the Company’s regular payroll schedule.

 

D.

If after the Initial Term, (i) the Company at its discretion terminates this Agreement without cause, or (ii) General Counsel terminates this Agreement with Good Reason, then the Company shall pay General Counsel the then existing annual base salary in pro rata installments over 12 months according to the Company’s regular payroll schedule.

 

E.

In the event that General Counsel is in breach of any material obligation owed Company in this Agreement, habitually neglects the duties to be performed under this Agreement, engages in any conduct which is dishonest, damages the reputation or standing of the Company, or is convicted of any criminal act (other than routine traffic violations) or engages in any act of moral turpitude, then Company may terminate this Agreement “for cause” upon five (5) days notice to Executive. In event of termination of this Agreement pursuant to this subsection, General Counsel shall be paid only at the then applicable base salary rate up to and including the date of termination. Executive shall not be paid any further compensation, salary, incentive pay, bonus monies, or any sums whatsoever or compensation of any kind, prorated or otherwise, including but not limited any sums set forth in this Section 5.

 

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F.

For purposes of this Agreement, “Good Reason” means: (i) General Counsel’s base salary is decreased more than five percent (5%) without consent of General Counsel, unless the salaries of all employees at a similar management level are reduced simultaneously, (ii) General Counsel’s place of work is moved more than seventy-five (75) miles from its current location without the consent of General Counsel, provided, however, that the mileage limitation in this subsection 5(F)(ii) shall not apply in the event of a change in control of the Company so long as General Counsel is not required to work at a new location that exceeds the mileage limitation in excess of twelve (12) months after such change in control, or (iii) General Counsel’s title or responsibilities are materially diminished without the consent of General Counsel. The General Counsel will be deemed to consent to the action of the Company if the General Counsel does not notify the Company in writing of the General Counsel’s intent to leave for Good Reason within thirty (30) days of such action, and upon such notice to the Company, the Company shall have fifteen (15) days to take corrective action to eliminate the Good Reason.

6. Notices

Any notice required by this Agreement or given in connection with it, shall be in writing and shall be given to the appropriate party by personal delivery or by certified mail, postage prepaid, or recognized overnight delivery services.

7. Final Agreement

This Agreement terminates and supersedes all prior understandings or agreements on the subject matter hereof. This Agreement may be modified only by a further writing that is duly executed by both parties.

8. Governing Law

This Agreement shall be construed and enforced in accordance with the laws of the State of North Carolina.

9. Headings

Headings used in this Agreement are provided for convenience only and shall not be used to construe meaning or intent.

10. No Assignment

Neither this Agreement nor any or interest in this Agreement may be assigned.

 

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11. Severability

If any term of this Agreement is held by a court of competent jurisdiction to be invalid or unenforceable, then this Agreement, including all of the remaining terms, will remain in full force and effect as if such invalid or unenforceable term had never been included.

12. Arbitration

The parties agree that they will use their best efforts to amicably resolve any dispute arising out of or relating to this Agreement. Any controversy, claim or dispute that cannot be so resolved shall be settled by final binding arbitration in accordance with the rules of the American Arbitration Association and judgment upon the award rendered by the arbitrator or arbitrators may be entered in any court having jurisdiction thereof. Any such arbitration shall be conducted in North Carolina, or such other place as may be mutually agreed upon by the parties. Within fifteen (15) days after the commencement of the arbitration, each party shall select one person to act arbitrator, and the two arbitrators so selected shall select a third arbitrator within ten (10) days of their appointment. Each party shall bear its own costs and expenses and an equal share of the arbitrator’s expenses and administrative fees of arbitration.

13. Confidentiality

Unless otherwise mutually agreed to by the parties or if necessary for required financial reporting, all terms of Agreement shall be strictly confidential between the Chief Executive Officer, President, Chief Operating Officer, Board of Directors, and the below signed General Counsel; provided, however, General Counsel may disclose this Agreement and/or its terms to General Counsel’s accountant(s), financial advisor(s) or family members if such accountant(s), financial advisor(s) or family members are made aware of the confidentiality provisions of this Agreement.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.

/s/ David Morken				/s/ W. Christopher Matton
David Morken				W. Christopher Matton
President and CEO
Bandwidth.com, Inc.

 

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Exhibit 10.7

 

		4001 Weston Parkway Suite 100 Cary, NC 27513 919-297-1100 (tel) 919-882-1438 (fax)

September 16, 2011

Jeff Hoffman

111 Hekili Street, Suite A #440

Kailua, HI 96734

Dear Jeff:

I am pleased to extend this offer of employment for you to join our team at Bandwidth.com, Inc. (“Bandwidth.com”) as Chief Financial Officer. The position reports directly to me. Your anticipated start date is Tuesday, November 1, 2011.

Work Location and Transition Period

This position is based out of our Cary, North Carolina headquarters. We are planning for you to be relocated to the area and working full time out of our Cary North Carolina office within sixty (60) days of your start date. Please plan to work three or more days out of our Cary, North Carolina Headquarters during the initial sixty (60) day transition period.

Base Salary

Your base salary will be $10,416.66 per pay period ($250,000 annualized), less applicable withholding and other similar taxes. Pay periods currently are on the 15th and last business day of the month.

Bonus Eligibility

You will be eligible for an annual MBO performance bonus of up to fifty percent (50%) of your base salary annually. Bandwidth.com bonus plans, including our MBO program are paid solely at the discretion of the CEO, COO and President and may be subject to change from time to time. Bonuses are pro rated for the first calendar year of your employment and are typically considered for payment in the first or second quarter following the MBO Plan year (the MBO Plan year is on a calendar year basis).

Severance

You will be entitled to the severance described in Appendix A attached hereto upon the termination of your employment, if applicable under the terms described in Appendix A.

Relocation Expense Reimbursement

Should you accept our offer of employment and subject to the terms and conditions of this letter agreement, Bandwidth.com will assist you in your relocation to Cary, NC. We will cover relocation expenses up to a maximum of $25,000. Relocation expenses that are eligible for reimbursement include the transport of household goods, yourself and family. The Company shall also pay for transportation and lodging for up to two house hunting trips for you and your spouse. Costs associated with the sale or purchase of a house or taxes associated with these reimbursements are not eligible for reimbursement. You shall submit actual receipt to the Company for reimbursements.

Relocation Repayment

As a condition to receipt of relocation expense reimbursement, you agree to repay to Bandwidth.com the reimbursed relocation expenses in whole or in part subject to the terms and conditions described below.

You will agree to remain employed as an employee in good standing with Bandwidth.com for twenty four (24) months following your start date.

If Bandwidth.com terminates your employment for cause (as defined in the stock option award agreement(s) granted to you in connection with your initial employment) or you voluntarily terminate your employment with Bandwidth.com prior to the date twenty four (24) months following your start date, you will repay Bandwidth.com the following portion of the relocation expenses paid on your behalf not later than thirty (30) days immediately after your last day of employment:

 

Termination of Employment After Date of Hire		Signing Bonus Repayment Equals
Less than 12 months		100% of $25,000 (i.e., $25,000)
More than 12 months but less than 18 months		75% of $25,000 (i.e., $18,750)
More than 18 months but less than 24 months		50% of $25,000 (i.e., $12,500)
More than 24 months		0%

You will be solely responsible for any income taxes due or payable with respect to the amounts advanced to you or on your behalf, including any imputed interest income, if applicable under any then-current tax law.

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By signing this letter, you agree to allow Bandwidth.com to deduct required relocation reimbursement repayments from any payments of future or final wages or other compensation payable to you.

Stock Options

We are offering to you an employee stock option grant of options to purchase 32,609 shares with an exercise price of $25.64 to be issued under the Company’s 2010 Equity Compensation Plan, subject to approval of the Company’s Board of Directors. In order to receive any grant of options, you will be required to agree to and execute an additional Non-Disclosure, Non-Competition and Intellectual Property Agreement that will be provided to you at the time options are granted. Our General Counsel Chris Matton can provide a copy of that document to you.

Health and Group Benefits Plan

You are eligible for participation in Bandwidth.com group benefits (the premiums for which are entirely paid by the company) the first day of the month following thirty days of employment with Bandwidth.com. This program includes coverage for medical, dental, life insurance, accidental death and dismemberment, long-term disability, and flexible spending accounts.

Bandwidth.com 401(k) Savings Plan

You are eligible to participate in Bandwidth.com 401(k) Savings Plan after thirty (30) days of employment. Bandwidth.com matches up to 3%, dollar for dollar, with a three (3) year vesting schedule.

Paid Time Off (PTO) Plan

You are eligible for 20 paid time off days annually, which is accrued throughout the year and pro-rated in the first year.

Offer Letter Contingent Upon Your Executed Proprietary Information, Inventions and Noncompetition Agreement and Related Matters

This offer is contingent upon your signing and submitting to us the attached Proprietary Information, Inventions and Noncompetition Agreement as well as completion of a background check resulting in satisfactory clearance for employment with Bandwidth.com.

Jeff, I am excited about your joining our team. We hope you will agree that our offer reflects our enthusiasm. Please sign below and return to Rebecca Bottorff, Chief People Officer.

Sincerely,

David Morken

Chief Executive Officer

Bandwidth.com

By signing below, I acknowledge that my employment is on an “at-will” basis and can be terminated by either me or the Company at any time and for any reason with or without cause.

I also understand and agree to the terms and conditions of the repayment of the signing bonus as described above.

I accept the position of Chief Financial Officer at Bandwidth.com.

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APPENDIX A

 

A.

If (i) the Company in its discretion terminates you without Cause (as defined below), or (ii) you terminate your employment with Good Reason (as defined below), then the Company will pay you your then-current base salary, less customary and applicable deductions, at the time of such termination for six (6) months in pro rata installments over six (6) months according to the Company’s regular payroll schedule. The Company’s obligations in this Section A will not become effective unless and until you execute and deliver a general release in favor of the Company of any and all liability that the Company and its stockholders, directors, officers, employees, consultants, subsidiaries and/or affiliates may have to you in connection with this agreement, your employment with the Company and/or your termination, which release will be in a form prescribed by the Company. The Company’s obligations in this Section A also will be subject to your compliance with any applicable Non-Disclosure, Non-Competition and Intellectual Property Agreement (or other similarly titled agreement) to which you are a party at any time.

 

B.

For purposes of this agreement, “Cause” means: (i) you have breached this agreement or the Company’s Non-Disclosure, Non-Competition and Intellectual Property Agreement (or other similarly titled agreement); (ii) you have violated the Company’s Code of Conduct and Ethics (or other similarly titled code or policy) as in effect from time to time; (iii) you have committed fraud, misappropriation or embezzlement in connection with the Company’s business or have otherwise breached any fiduciary duties to the Company; (iv) you have been convicted of or have pled guilty or nolo contendere to, an act constituting a felony under the laws of any state or of the United States of America, or any crime involving moral turpitude; (v) you continue to fail to carry out your duties in accordance with the reasonable directions of the Company’s Chief Executive Officer or the Company’s Board of Directors after written notice specifying in reasonable detail the nature of such failure and the expiration of a thirty (30) day cure period; or (vi) gross negligence or willful misconduct with respect to the Company and or your duties to the Company.

 

C.

For purposes of this Agreement, “Good Reason” means: (i) your base salary is decreased more than five percent (5%) without your consent, unless the salaries of all employees at a similar management level are reduced simultaneously, (ii) your place of work is moved more than thirty-five (35) miles from its current location in Cary, North Carolina without your consent, or (iii) your title or responsibilities are materially diminished without your consent. You will be deemed to consent to the action of the Company if you do not notify the Company in writing of your intent to leave for Good Reason within thirty (30) days of such action, and upon such notice to the Company, the Company will have fifteen (15) days to take corrective action to eliminate the Good Reason.

Exhibit 10.8

EMPLOYMENT AGREEMENT

THIS EMPLOYMENT AGREEMENT (this “Agreement”) is made and entered into as of January 1, 2015 (the “Effective Date”), by and between Bandwidth.com, Inc. (“Bandwidth”), a Delaware corporation with its principal place of business at 900 Main Campus Drive, Suite 500, Raleigh, North Carolina 27606, and David Morken (“Morken”).

BACKGROUND

A. Morken is Bandwidth’s founder and Chief Executive Officer.

B. Morken has been continuously employed by Bandwidth since its formation; however, the terms of his employment have never been formalized in a written agreement. Bandwidth and Morken now desire to enter into this Agreement in order to modify and formalize the terms and conditions of that employment.

C. All initially capitalized terms are either defined herein (but not necessarily where first used) or are defined in Exhibit A attached hereto and incorporated herein by this reference.

AGREEMENT

In consideration of the foregoing, the agreements made herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows:

1 Employment Period. Bandwidth agrees to employ Morken and Morken agrees to serve Bandwidth for the period beginning on the Effective Date and ending at 11:59 p.m., Raleigh, North Carolina, local time, on the third anniversary of the Effective Date (as may be extended, the “Employment Period”). The Employment Period will automatically extend for consecutive additional one (1) year periods unless either party provides the other with written notice to the contrary no less than sixty (60) days prior to the expiration of the then current Employment Period. If notice of non-extension is provided by Bandwidth, this Agreement and Morken’s employment shall terminate at the end of the then current Employment Period, and such termination of employment shall be treated as a termination by Bandwidth other than for Cause. This Agreement may be terminated before the expiration of the Employment Period only pursuant to Section 4. Bandwidth and Morken each acknowledges and agrees that this Agreement does not interrupt the continuity of Morken’s employment.

2 Nature of Duties.

2.1 Morken will serve as Bandwidth’s Chief Executive Officer. As such, Morken will act in conformity with the management policies, guidelines and directions issued by Bandwidth’s Board of Directors (the “Board”), and will have general charge and supervision of those functions and such other responsibilities as the Board determines and assigns; provided they are not inconsistent with the functions and duties typically performed by, and the responsibility of, Chief Executive Officers of like corporations. Morken will report to the Board. Bandwidth agrees that during the Employment Period, it will cause Morken to be nominated to the Board and, if applicable, will recommend to the shareholders of Bandwidth that Morken be elected to the Board. Morken will abstain from participating as a member of the Board in matters involving himself.

 

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2.2 Morken will work exclusively for Bandwidth on a full-time basis, with his primary office at Bandwidth’s headquarters. During normal business hours Morken will devote substantially all of his business time and attention to Bandwidth’s business. The foregoing does not prohibit Morken from engaging in civic, professional and business activities that do not interfere with his duties to Bandwidth, and that otherwise do not violate this Agreement.

2.3 Morken will perform his duties and responsibilities hereunder diligently, faithfully and loyally.

3 Compensation and Benefits.

3.1 Base Salary and Expenses.

3.1.1 During the Employment Period, Bandwidth will pay to Morken a salary at the initial rate of Three Hundred Seventy Five Thousand Dollars ($375,000) per annum (the “Base Salary”). The Base Salary will be earned and paid in arrears, in equal installments, semi-monthly, or at such other interval as the Board directs, but no less often than once each month. At the beginning of each year during the Employment Period, Morken and the Board will in good faith review the Base Salary. Base Salary will be increased to mutually agreed upon levels consistent with the growth of Bandwidth’s business. Bandwidth shall be entitled to withhold, or cause to be withheld, any amount of federal, state, city or other withholding taxes or other amounts either required by law or authorized by Morken with respect to payments made to Morken in connection with his employment hereunder.

3.1.2 Bandwidth will reimburse Morken for all reasonable out-of-pocket business expenses incurred by Morken on Bandwidth’s behalf during the Employment Period, so long as such expenses are reimbursable under Bandwidth’s policies in effect from time to time and as periodically reviewed by the Board. At Morken’s request, expenses will be advanced before an expenditure is incurred, or they will be paid by Bandwidth directly to third parties from which goods or services are being obtained.

3.2 Bonus Compensation.

3.2.1 In addition to the Base Salary, Bandwidth will pay to Morken bonus compensation each year during the Employment Period of up to one hundred percent (100%) of the Base Salary (the “Bonus Compensation”). One half of the Bonus Compensation will be based on Morken meeting individual performance objectives, and one half will be based on Bandwidth meeting its Operating Earnings target provided for in its annual Budget. The individual performance objectives will be mutually agreed by the Board and Morken at the beginning of each calendar year.

3.2.2 The Bonus Compensation will be earned, if at all, upon satisfaction of applicable criteria, as reasonably determined by the Board. The Bonus Compensation based on individual performance objectives will be earned pro-rata upon Morken attaining each objective, as reasonably determined by the Board. The Bonus Compensation based on Operating Earnings will have no pro-rata components; provided, that in any year that ninety percent (90%) or more, but less than one hundred percent (100%), of the Operating Earnings Budget is met, Morken will earn one-half of the potential Bonus Compensation applicable to that criterion, for that year. The Board will establish a Budget, including Operating Earnings, not later than March 31^st for each calendar year.

3.2.3 Bonus Compensation will be paid no later than March 15^th of the year succeeding the calendar year with respect to which the Bonus Compensation, if any, is calculated.

 

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3.2.4 In addition to the Bonus Compensation, the Board will from time to time review Morken’s efforts on behalf of Bandwidth and may within its discretion award a special bonus for extraordinary service. Special bonuses, if any, will not count as any other compensation payable under this Agreement.

3.3 Stock Options and Restricted Stock.

3.3.1 All of Morken’s then outstanding unvested Bandwidth stock options and Bandwidth restricted stock will immediately vest, and the options will be exercisable for the remainder of their full original term at grant without regard to any provision in the plan under which such securities were granted that may otherwise reduce the term, upon the earlier of:

3.3.1.1 Bandwidth’s termination of Morken other than for Cause or Morken’s resignation for Good Reason;

3.3.1.2 Morken’s death prior to termination or expiration of this Agreement; or

3.3.1.3 Change in Control.

3.3.2 This Section 3.3 is intended to be an award agreement itself, and is intended to supplement the terms and conditions of any and all other award agreements between Bandwidth and Morken relating to any options or restricted stock granted to Morken by Bandwidth, and the terms of this Section 3.3 will govern the terms of such other award agreements in the event of any conflicts, regardless of whether such other agreements are heretofore or have previously been entered into by the parties.

3.4 Severance. If Bandwidth terminates Morken other than for Cause, or Morken resigns for Good Reason, then Bandwidth will pay to Morken an amount (“Severance”) equal to (i) one hundred fifty percent (150%) the prior year’s Base Salary, plus (ii) one hundred fifty percent (150%) of the Bonus Compensation, determined based on achievement of target performance levels for the year of termination. Such amount, less any applicable taxes and other similar amounts, will be paid in equal installments over an eighteen (18) month period following the termination in accordance with Bandwidth’s standard payroll practices and procedures. After an Unapproved Change in Control, in addition to the foregoing events, Severance will also be payable if Morken terminates his employment for any reason no more than twelve (12) months after the Unapproved Change in Control. The receipt of any severance benefits provided for pursuant to this Agreement or otherwise will be dependent upon Morken’s delivery to Bandwidth of an effective general release of claims in a form reasonably satisfactory to Bandwidth not later than thirty (30) days after the date of Morken’s termination of employment (or such longer period as may be required by applicable law), and shall be paid or commence no later than thirty (30) days thereafter, with the first payment to include any amounts that would have been payable on payroll dates occurring after Morken’s termination of employment and prior to such first payment.

3.5 Initial Public Offering Bonus.

3.5.1 Not later than sixty (60) days immediately after Bandwidth’s first firm commitment underwritten public offering, if ever, resulting in gross proceeds to Bandwidth in an amount at least equal to $35,000,000 during the Employment Period, Bandwidth will pay to Morken an amount equal to $750,000, less applicable withholdings and similar deductions.

 

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3.6 Liquidity Events.

3.6.1 Bandwidth will pay to Morken a “Liquidity Bonus” calculated as described below, less applicable withholdings and similar deductions, if: (i) there is a Change in Control with a value of at least $750,000,000 calculated on an enterprise basis (i.e. the price that would be paid if the entire company were sold in the transaction on a standalone basis, regardless of the form of the actual transaction) (a “Liquidity Event”); and (ii) the transaction commences during the Employment Period and closes by December 31, 2023 (the “Incentive Deadline”). A Liquidity Event is deemed to commence upon the initiation of negotiations between Bandwidth and the potential transaction parties. To earn a Liquidity Bonus Morken must remain employed by Bandwidth until the Liquidity Event closes; provided, that, if after a Liquidity Event commences Bandwidth terminates Morken for any reason, or Morken resigns for Good Reason, then Morken will earn the Liquidity Bonus at closing even though he is no longer employed by Bandwidth. The Liquidity Bonus will be calculated as follows:

 

Value Calculated on Enterprise Basis		Liquidity Bonus
$750,000,000 - $999,999,999		$	5,000,000
$1,000,000,000 - $1,249,999,999		$	10,000,000
$1,250,000,000 - $1,499,999,999		$	12,500,000
$1,500,000,000 - $1,749,999,999		$	15,000,000
$1,750,000,000 - $1,999,999,999		$	17,500,000
$2,000,000,000 or more		$	20,000,000

Any dispute between Morken and Bandwidth regarding the amount of a Liquidity Bonus or whether it has been earned by Morken will be resolved by binding confidential arbitration with the American Arbitration Association in Raleigh, North Carolina. Morken’s right to a Liquidity Bonus will terminate if no qualifying Liquidity Event closes by the Incentive Deadline. The Liquidity Bonus will be earned, if at all, one time only upon the closing of the first qualifying Liquidity Event transaction and will be paid simultaneously with the closing of that closing.

3.7 Vacation. During the Employment Period, Morken will be entitled to take vacation time in accordance with Bandwidth’s policies, but no less than six (6) weeks of paid vacation per year. Bandwidth and Morken will reasonably agree on when vacation time can be taken, and how many weeks can be taken consecutively. In the event that all or any part of the vacation is not taken for any reason during any year, there will be no compensation paid in lieu thereof, and accrued and unused vacation time will not be carried over and added to the vacation time for the succeeding year in accordance with such policy, unless otherwise approved by the Board.

3.8 Health, Disability, Retirement, Death and Insurance Benefits.

3.8.1 Bandwidth will provide Morken with the same health, disability, retirement, death and other fringe benefits as are generally provided to the executive employees of Bandwidth in accordance with such terms, conditions and eligibility requirements as may from time to time be established or modified by Bandwidth; provided, that Bandwidth will pay the entire premium for family coverage under Bandwidth’s group health insurance plan unless Bandwidth reasonably determines that paying the entire premium would be discriminatory and could subject Morken to adverse income tax consequences. Bandwidth shall, to the

 

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extent allowable by law, regulation, contract and policy, continue to pay Morken’s basic medical insurance premiums for eighteen (18) months following a termination of Morken by Bandwidth other than for Cause, whether or not this coverage is required to be available under COBRA.

3.8.2 Upon a termination of Morken by Bandwidth other than for Cause, Bandwidth will also pay Morken a lump sum amount equal to eighteen (18) months of premiums for the term life insurance coverage Bandwidth had in effect for Morken as of the date of his termination of employment. Such amount will be payable, less applicable withholdings, with the first payment of Severance. Morken will have all rights to convert or purchase such life insurance policies as provided under the terms of the plan and policies.

3.9 Indemnification. During the Employment Period and after Morken’s termination of employment, Bandwidth shall indemnify Morken and hold Morken harmless from and against any claim, loss or cause of action arising from or out of Morken’s performance as an officer, director or employee of Bandwidth or any of its subsidiaries or other affiliates or in any other capacity, including any fiduciary capacity, in which Morken serves at Bandwidth’s request, in each case to the maximum extent permitted by law and under Bandwidth’s Articles of Incorporation and By-Laws. This indemnification right is in addition to any similar rights under any statute, Bandwidth’s Certificate of Incorporation, By-Laws and under any other applicable agreements that now exist or may exist from time to time. During the Employment Period and for at least 3 years following Morken’s termination of employment, Morken shall be covered by any policy of directors and officers’ liability insurance maintained by Bandwidth for the benefit of its officers and directors.

4 Termination.

4.1 Morken’s employment with Bandwidth will terminate automatically upon Morken’s death.

4.2 Bandwidth may terminate Morken’s employment at any time.

4.3 If at any time during the Employment Period Bandwidth (i) assigns Morken to serve in a capacity other than as Bandwidth’s Chief Executive Officer or assigns Morken to perform tasks inconsistent with such position, in each case, which results in a material diminution in Morken’s authority, duties or responsibilities, or (ii) Bandwidth materially breaches any provision of this Agreement, then Morken may resign his employment by providing notice to Bandwidth within thirty (30) days of such event of the reasons for his resignation under this provision. Bandwidth shall have thirty (30) days following receipt of such notice to remedy and cure the alleged diminution or breach. If Bandwidth does not cure such breach, Morken shall resign his employment and such resignation will be deemed to be a termination by Bandwidth other than for Cause and/or a resignation by Morken for “Good Reason.” Morken can resign at any time other than for Good Reason.

4.4 Bandwidth will have the right to terminate Morken at any time, immediately, for Cause. “Cause” will mean: (i) Morken is convicted of any felony (or Morken pleads guilty or nolo contendere thereto); (ii) Morken fails or refuses to perform, in any material respect, the written policies or directives of the Board, unless such failure is corrected within thirty (30) days following his receipt of written notice of such failure from Bandwidth that specifically identifies the manner in which the Board believes Morken has substantially failed to materially perform his duties; (iii) Morken materially breaches this Agreement or any other agreement between Bandwidth and Morken, including, without limitation, any applicable

 

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nondisclosure agreement, unless such failure is corrected within thirty (30) days following his receipt of written notice of such failure from Bandwidth that specifically identifies the manner in which the Board believes Morken has breached the agreement; or (iv) the gross or willful misconduct by Morken with regard to Bandwidth or any employee of Bandwidth that is materially injurious to Bandwidth or such employee.

5 Effects of Termination.

5.1 Upon Morken’s termination of employment for any reason (including death), he will be entitled to receive (in addition to any compensation and benefits he is entitled to receive under Section 3 above, if applicable): (i) any earned but unpaid Base Salary, (ii) any earned but unpaid Bonus Compensation, (iii) unreimbursed business expenses in accordance with Bandwidth’s policies for which expenses Morken has provided appropriate documentation, (iv) a lump sum cash amount equal to the value of his unused vacation days in accordance with the standard written policy of Bandwidth, and (v) any vested amounts or benefits to which Morken is then entitled under the terms of the benefit plans then sponsored by Bandwidth in accordance with their terms. All of Bandwidth’s other obligations under this Agreement will end immediately upon Morken’s termination of employment.

5.2 Any controversy or claim arising out of or relating to the benefits and entitlements of Morken following a Change of Control will be resolved by binding arbitration in Raleigh, North Carolina with the American Arbitration Association, pursuant to their commercial arbitration rules then in effect. The determination of the arbitrator will be conclusive and binding on Bandwidth and Morken, and judgment may be entered on the arbitrator’s award in any court of competent jurisdiction. The prevailing party may recover its attorneys’ fees and expenses incurred in such dispute, including the cost of the Arbitration if the prevailing party initiated the action.

6 Stockholder Vote. Anything in this Agreement to the contrary notwithstanding, in the event that any amounts payable to Morken hereunder, alone or together with other payments that Morken has a right to receive from Bandwidth, would constitute an “excess parachute payment” (as defined in Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”)), then Bandwidth will reduce the amounts payable to the minimum extent necessary to avoid the payment of any excess parachute payments and to avoid Morken being subject to the excise tax imposed by Section 4999 of the Code. In the event that any payment or benefit intended to be provided hereunder is required to be reduced pursuant to this Section, then the reduction shall occur in the following order: (a) reduction of cash payments described in Section 3 (with such reduction being applied to the payments in the reverse order in which they would otherwise be made, that is, later payments shall be reduced before earlier payments); (b) cancellation of acceleration of vesting on any equity awards for which the exercise price exceeds the then fair market value of the underlying equity; and (c) cancellation of acceleration of vesting of equity awards not covered under (b) above. In the event that acceleration of vesting of equity awards is to be cancelled, such acceleration of vesting shall be cancelled in the reverse order of the date of grant of such equity awards, that is, later equity awards shall be canceled before earlier equity awards. Without limiting the foregoing, if Bandwidth is not then a public company, it will use its best efforts to secure the approval of its stockholders to exempt the excess parachute payments from the loss of corporate tax deductions imposed under Section 280G and the excise tax imposed under Section 4999. If Bandwidth becomes publicly traded, it will comply with Section 951 of the Dodd-Frank Wall Street Reform and Consumer Protection Act that requires public companies subject to the federal proxy rules to provide their shareholders with an advisory vote on: executive compensation; the desired frequency of say-on-pay votes; and on golden parachute arrangements, and will seek shareholder votes under Internal Revenue Code Section 162(m), and any other law, regulation or rule that requires a shareholder vote on this Agreement, or that permits a vote to preserve tax benefits or avoid tax penalties.

 

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7 Covenant Not To Compete.

7.1 Inducement. This covenant between Morken and Bandwidth is being executed and delivered by Morken in consideration of Morken’s employment with Bandwidth and each party’s rights and obligations agreed to hereunder (including, without limitation, the Base Salary, Bonus Compensation, and other benefits and payments set forth herein). Morken acknowledges that Bandwidth’s business and Morken’s responsibilities are international in scope. Morken further acknowledges that the covenant not to compete with Bandwidth contained in this Section 7 was and has been a condition of his employment since Morken was originally employed by Bandwidth.

7.2 Restricted Activities — Duration. Except as otherwise consented to or approved by the Board in writing, Morken agrees that during the term of this Agreement and for twelve (12) months after Morken’s employment with Bandwidth ends;, regardless of the time, manner or reasons for termination, and regardless of whether terminated by Morken or Bandwidth, but only so long as Bandwidth does not breach its obligations in this Agreement, Morken will not, directly or indirectly, acting alone or as a member of a partnership or as an owner, director, officer, employee, manager, representative or consultant of any corporation or other business entity:

7.2.1 engage in any business in competition with the business that is conducted by Bandwidth in the United States, Canada or any European, Asian, Pacific or other foreign country in which Bandwidth then or thereafter transacts business or is making a bona fide attempt to do so;

7.2.2 induce, request or attempt to influence any customers or suppliers of Bandwidth to curtail or cancel their business or prospective business with Bandwidth or in any way interfere with Bandwidth’s business relationships; or

7.2.3 induce, solicit, assist or facilitate the inducement or solicitation by a third person of any employee, officer, agent or representative of Bandwidth, to terminate their respective relationship with Bandwidth or in any way interfere with Bandwidth’s employee, officer, agent or representative relationships.

7.3 Tolling; Relief of Obligations. In the event that Morken breaches any provision of this Section 7, that violation will toll the running of the restricted period set forth in Section 7.2 from the date of commencement of such violation until such violation ceases.

7.4 “Blue Penciling” or Modification. If the length of time, geographic area or scope of restricted business activity set forth in Section 7.2 is deemed unreasonably restrictive or unreasonable in any other respect in any court proceeding, Morken and Bandwidth agree and consent to such court’s modifying or reducing such restriction(s) to the extent deemed reasonable under the circumstances then presented.

 

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7.5 Definitions. As used in this Section 7, the following terms will have the following definitions:

(i) The terms “compete” or “in competition,” as used herein, will be deemed to include, without limitation, becoming or being an employee, owner, partner, consultant, agent, stockholder, director, or officer of any person, partnership, firm, corporation or other entity (other than Bandwidth) which engages in (i) the business of developing, providing, offering and selling (A) retail VoIP services, including, without limitation, IP based unified communications services and trunking services; (B) wireless services (including, without limitation, wireless services that utilize both cellular and WiFi networks); (C) wholesale VoIP services; (D) wholesale origination, termination or SMS services; (E) emergency solutions for telecommunications carriers, including, without limitation, end-to-end call control and support, real-time address validation, automated provisioning and/or geospatial routing; (F) circuit or data services, Internet connectivity services, and/or managed network services on an enterprise basis or to small and medium businesses; and/or (G) product(s) or service(s) to which any of clauses (A) through (F) apply and/or any product(s) or service(s) that perform substantially similar functions to which any of clauses (A) through (F) apply, or (ii) any other business conducted by Bandwidth immediately prior to such termination (or in which Bandwidth shall at such time be actively preparing to engage). Notwithstanding the foregoing, ownership of five (5%) percent or less of any class of securities of an entity will not constitute competition with Bandwidth.

(ii) The phrases “engage in a business” or “engage in a line of business” and similar phrases will be deemed to include marketing or otherwise selling products or researching, writing, developing, designing, distributing, testing or manufacturing products or services or otherwise preparing to market or sell products or services.

8 Nondisclosure of Confidential Information.

8.1 Morken acknowledges that the discharge of his duties under this Agreement will necessarily involve his access to Confidential Information. Morken acknowledges that the unauthorized use by him or disclosure by him of such Confidential Information to third parties might cause irreparable damage to Bandwidth and Bandwidth’s business. Accordingly, Morken agrees that at all times after the date hereof he will not copy, publish, disclose, divulge to or discuss with any third party nor use for his own benefit or that of others, without the prior express written consent of the Board, except in the normal conduct of his duties under this Agreement, any Confidential Information, it being understood and acknowledged by Morken that all Confidential Information created, compiled or obtained by Morken or Bandwidth, or furnished to Morken by any person while Morken is associated with Bandwidth remains its exclusive property.

8.2 Promptly upon termination of his employment, irrespective of the time or manner thereof or reason therefor, and whether such termination is by Bandwidth or Morken, Morken agrees to return and surrender to Bandwidth all tangible Confidential Information in any manner in his control or possession, as well as all other Bandwidth property.

 

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9 Remedies Inadequate.

9.1 Morken acknowledges that the services to be rendered by him to Bandwidth as contemplated by this Agreement are special, unique and of extraordinary character. Morken expressly agrees and understand that the remedy at law for any breach by him of Section 7 or 8 of this Agreement will be inadequate and that the damages flowing from such breach are not readily susceptible to being measured in monetary terms. Accordingly, upon adequate proof of Morken’s violation of any legally enforceable provision of Section 7 or 8, Bandwidth will be entitled to immediate injunctive relief, including, without limitation, a temporary order restraining any threatened or further breach. In the event any equitable proceedings are brought to enforce the provisions of any of Section 7, 8 or 9, Morken agrees that he will not raise in such proceedings any defense that there is an adequate remedy at law, and Morken hereby waives any such defense. Nothing in this Agreement will be deemed to limit Bandwidth’s remedies at law or in equity for any breach by Morken of any of the provisions of Section 7 or 8 which may be pursued or availed of by Bandwidth. Without limiting the generality of the immediately preceding sentence, any covenant on Morken’s part contained in Section 7 or 8, which may not be specifically enforceable will nevertheless, if breached, give rise to a cause of action for monetary damages.

9.2 Morken has carefully considered, and has had adequate time and opportunity to consult with his own counsel or other advisors regarding the nature and extent of the restrictions upon him and the rights and remedies conferred upon Bandwidth under Sections 7, 8 and 9, and hereby acknowledges and agrees that such restrictions are reasonable in time, territory and scope, are designed to eliminate competition which otherwise would be unfair to Bandwidth, do not stifle the inherent skill and experience of Morken, would not operate as a bar to Morken’s sole means of support, are fully required to protect the legitimate interests of Bandwidth and do not confer a benefit upon Bandwidth disproportionate to the detriment to Morken.

9.3 The covenants and agreements made by Morken in Sections 7, 8 and 9 will survive full payment by Bandwidth to Morken of the amounts to which Morken is entitled under this Agreement, the expiration of the Employment Period and this Agreement.

10 Rights. Morken acknowledges and agrees that any procedure, design feature, schematic, invention, improvement, development, discovery, know how, concept, idea or the like (whether or not patentable, registrable under copyright or trademark laws, or otherwise protectable under similar laws) that Morken may conceive of, suggest, make, invent, develop or implement, during the course of his service pursuant to this Agreement (whether individually or jointly with any other person or persons), relating in any way to the business of Bandwidth or to the general industry of which Bandwidth is a part, as will all physical embodiments and manifestations thereof, and all patent rights, copyrights, trademarks (or applications therefor) and similar protections therein (all of the foregoing referred to as “Work Product”), will be the sole, exclusive and absolute property of Bandwidth. All Work Product will be deemed to be works for hire and, in addition to the Work Product being works for hire, Morken hereby assigns to Bandwidth all right, title and interest in, to and under such Work Product, including without limitation, the right to obtain such patents, copyright registrations, trademark registrations or similar protections as Bandwidth may desire to obtain. Morken will immediately disclose all Work Product to Bandwidth and agrees, at any time, upon Bandwidth’s request and without additional compensation, to execute any documents and otherwise to cooperate with Bandwidth respecting the perfection of its right, title and interest in, to and under such Work Product, and in any litigation or controversy in connection therewith, all expenses incident thereto to be borne by Bandwidth.

 

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11 Assignment of Payment Rights. In no event will Bandwidth be obligated to make any payment under this Agreement to any assignee or creditor of Morken, other than to the estate of Morken after his death. Prior to the time of payment under this Agreement, neither Morken nor his legal representative will have any right by way of anticipation or otherwise to dispose of any interest under this Agreement.

12 Bandwidth’s Obligations Unfunded. Except as to any benefits that may be required to be funded under any benefit plan of Bandwidth pursuant to law, as provided for in this Agreement or pursuant to other agreements and which are not for the sole benefit of Morken, the obligations of Bandwidth under this Agreement are not funded and Bandwidth will not be required to set aside or deposit in escrow any monies in advance of the due date for payment thereof to Morken.

13 Notices. Any notice to be given hereunder by Bandwidth to Morken will be deemed to be given if delivered to Morken in person, if emailed to Morken at his business email address or if mailed or overnighted to Morken at his address last known on the records of Bandwidth, and any notice to be given by Morken to Bandwidth will be directed either to Bandwidth’s Chairman, Secretary or General Counsel, and in any case it will be deemed to be given if delivered in person, if emailed to the address at his business email address or if mailed or overnighted to the person at his address last known on the records of Bandwidth, unless any party will have duly notified the other parties in writing of a change of address. All notices are deemed given when delivered to such address, or if otherwise actually received by the addressee.

14 Section 409A.

14.1 In order to ensure compliance with Code Section 409A and the regulations and guidance promulgated thereunder (collectively “Section 409A”), the provisions of this Section 14 shall govern in all cases over any contrary or conflicting provision in this Agreement (other than a comparable Section 409A provision that is expressly intended to govern over this provision by its terms). The intent of the parties is that payments and benefits under this Agreement comply with, or be exempt from, Section 409A and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted and administered to be in compliance therewith. Morken acknowledges and agrees that Bandwidth has made no representation to Morken as to the tax treatment of the compensation and benefits provided pursuant to this Agreement and that Morken is solely responsible for all taxes due with respect to such compensation and benefits.

14.2 To the extent necessary to comply with Section 409A, references in this Agreement to “termination of employment” or “terminates employment” (and similar references) shall have the same meaning as “separation from service” under Code Section 409A(a)(2)(A)(i), and no payment subject to Section 409A that is payable upon a termination of employment shall be paid unless and until (and not later than applicable in compliance with Section 409A) when Morken incurs a “separation from service” under Code Section 409A(a)(2)(A)(i) (a “Separation from Service”). In addition, if Morken is a “specified employee” within the meaning of Section 409A at the time of his Separation from Service, any nonqualified deferred compensation subject to Section 409A that would otherwise have been payable on account of, and within the first six months following, Morken’s Separation from Service, and not by reason of another event under Section 409A, will become payable on the first business day after six months following the date of Morken’s Separation from Service or, if earlier, the date of Morken’s death.

 

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14.3 Consistent with the requirements of Section 409A, to the extent that any reimbursement or in-kind benefit provided is taxable and subject to Section 409A, unless stated otherwise – (i) reimbursements and in-kind benefits will be provided only during the period during which Morken is employed or receiving Severance; (ii) the expenses eligible for reimbursement or the in-kind benefits provided in any given calendar year will not affect the expenses eligible for reimbursement or the in-kind benefits provided in any other calendar year; (iii) the reimbursement of an eligible expense must be made no later than the last day of calendar year following the calendar year in which the expense was incurred; and (iv) the right to reimbursements or in-kind benefits cannot be liquidated or exchanged for any other benefit.

14.4 For purposes of Section 409A, Morken’s right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments. If a Separation from Service occurs prior to the date of an Unapproved Change in Control, each payment of Severance and each other payment hereunder that is made within 2-1/2 months following the end of the year that contains the date of Morken’s Separation from Service is intended to be exempt from Section 409A as a short-term deferral within the meaning of the final regulations under Section 409A, each such payment that is made later than 2-1/2 months following the end of the year that contains the date of Morken’s Separation from Service is intended to be exempt under the two-times exception of Treasury Reg. § 1.409A-1(b)(9)(iii), up to the limitation on the availability of that exception specified in the regulation, and each payment that is made after the two-times exception ceases to be available shall be subject to delay (if necessary) in accordance with Section 14.2 above. Continued medical coverage is intended to be exempt from Section 409A under the exemption for health benefits in Treas. Reg. § 1.409A-1(b)(9)(v)(B).

14.5 In no event may Morken, directly or indirectly, designate the calendar year of any payment to be made under this Agreement that is considered nonqualified deferred compensation subject to Section 409A. In no event shall the timing of Morken’s execution of the general release of claims, directly or indirectly, result in Morken designating the calendar year of payment of any nonqualified deferred compensation subject to Section 409A, and if such a payment that is subject to execution of the general release of claims could be made in more than one taxable year, payment shall be made in the later taxable year.

15 Amendments. This Agreement will not be modified or discharged, in whole or in part, except by an agreement in writing signed by all parties.

16 Entire Agreement. Except as expressly provided for herein, this Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof. The parties are not relying on any other representation, express or implied, oral or written. This Agreement supersedes any prior employment agreement, written or oral, between Morken and Bandwidth; provided, however that other non-competition, non-solicitation, confidentiality agreements, and other restrictive covenant agreements between Morken and Bandwidth remain in effect and this Agreement and such other agreements may be enforced by Bandwidth independently or simultaneously.

17 Captions; Terms. The captions contained in this Agreement are for convenience of reference only and do not affect the meaning of any terms or provisions hereof. References to “termination of employment,” “termination of Morken,” “termination of this Agreement,” “termination of the Employment Period,” and any other terms of similar meaning will all be deemed equivalent. Masculine, feminine and neuter pronouns are interchangeable as context requires.

 

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18 Binding Effect. The parties may not assign this Agreement and may not assign or delegate any right or duty hereunder and any attempt to do so is void. Subject to the foregoing, the rights and obligations of Bandwidth hereunder will inure to the benefit of, and will be binding upon, Bandwidth and its successors and assigns, and the rights and obligations of Morken hereunder will inure to the benefit of, and will be binding upon, Morken and his heirs, personal representatives and estate.

19 Severable Provisions. The provisions of this Agreement are severable, and if any one or more provisions may be determined to be illegal or otherwise unenforceable, in whole or in part, the remaining provisions and any partially enforceable provision will be binding and enforceable to the extent enforceable in any jurisdiction.

20 Governing Law and Venue. This Agreement will be interpreted, construed, and enforced in all respects in accordance with the laws of the State of North Carolina, without regard to conflict of laws. Other than disputes that by the terms of this Agreement are to be resolved through binding arbitration, any and all actions brought arising out of, or based in whole or in part upon this Agreement or the employment relationship between Morken and Bandwidth, will be brought in either a federal or state court sitting in Raleigh, North Carolina, and the parties consent to jurisdiction and venue thereof.

IN WITNESS WHEREOF, the undersigned have executed this Agreement on the day and year first above written, effective the Effective Date.

 

 

 

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EXHIBIT A

EMPLOYMENT AGREEMENT

DEFINITIONS

“Approved Change in Control” of Bandwidth means a Change in Control of Bandwidth of a nature that would be required to be reported in response to Item 5.01 of the Current Report on Form 8-K, as if in effect on the Effective Date, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) if the transaction causing such a change will have been approved by the affirmative vote of at least a majority of the Continuing Directors.

“Change in Control” means, and will be deemed to have occurred at such time as: (i) any “person” (as such term is used in Section 13(d) and 14(d) of the Exchange Act) becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of fifty percent (50%) or more prior to Bandwidth’s first underwritten public offering and twenty-five percent (25%) or more after, but not as a result of, Bandwidth’s first underwritten public offering, or more of the combined voting power of Bandwidth’s Voting Securities; (ii) sale of all or substantially all of the assets of Bandwidth, or any merger, consolidation, or reorganization to which Bandwidth is a party and as the result of which Bandwidth’s stockholders prior to the transaction do not own at least fifty percent (50%) of the voting power of the surviving entity in the election of directors; or (iii) individuals who constitute the Continuing Directors cease for any reason to constitute at least a majority of Bandwidth’s Board of Directors. Notwithstanding the foregoing, no event unilaterally caused by Morken by virtue of his stock ownership will be a Change in Control. Further notwithstanding the foregoing, a Change in Control shall not be deemed to occur unless the transaction also constitutes a change in the ownership or effective control of Bandwidth or a change in the ownership of a substantial portion of the assets of Bandwidth, each as defined in Code Section 409A(a)(2)(A)(v) and the regulations promulgated thereunder; however, a Change in Control shall be deemed to occur if the transaction constitutes a change in the ownership or effective control of Bandwidth or a change in the ownership of a substantial portion of the assets of Bandwidth, each as defined in Code Section 409A(a)(2)(A)(v) and the regulations promulgated thereunder, regardless of whether it satisfies the foregoing.

“Budget” will mean for each year, Bandwidth’s management financial targets approved by the Board for the year in question.

“Confidential Information” means all information or trade secrets of any type or description belonging to Bandwidth that are proprietary and confidential to Bandwidth and are not publicly disclosed or are only disclosed with restrictions. Without limiting the generality of the foregoing, Confidential Information includes strategic plans for carrying on business, other business plans, cost data, internal financial information, customer lists, employee lists, vendor lists, business partner or alliance lists, drawings, designs, schematics, flow charts, specifications, inventions, calculations, discoveries and any letters, papers, documents or instruments disclosing or reflecting any of the foregoing, and all information revealed to, acquired or created by Morken during Morken’s employment by Bandwidth relating to any of the foregoing.

“Continuing Directors” will mean and include the persons constituting Bandwidth’s Board of Directors as of the Effective Date, and any person who becomes a director of Bandwidth subsequent to the date hereof whose election, or nomination for election by Bandwidth’s stockholders, was approved by an affirmative vote of at least a majority of the then Continuing Directors (either by a specific vote or if

 

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Bandwidth is then subject to the proxy rules of the Exchange Act then by approval of the proxy statement of Bandwidth in which such person is named as a nominee for director or of the inclusion of such person in such Proxy Statement as such a nominee, in any case without objection by any member of such approving majority of the then Continuing Directors to the nomination of such person or the naming of such person as a director nominee).

“Voting Securities” means Bandwidth’s outstanding securities ordinarily having the right to vote at elections of directors.

“Operating Earnings” will mean earnings before interest, taxes, depreciation and amortization and excluding (i) capital expenditures, (ii) extraordinary gains and losses, and (iii) any bonus(es) paid or payable pursuant to Section 3.5 and/or Section 3.6 of the agreement to which this Exhibit A is attached, unless the Company has accrued for the payment of such bonus(es) in connection with the Company’s calculation of Operating Earnings target for the purposes of Section 3.2.

“Unapproved Change in Control” of Bandwidth will mean any Change in Control of Bandwidth that is not an Approved Change in Control.

 

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AMENDMENT TO EMPLOYMENT AGREEMENT

THIS AMENDMENT (the “Amendment”) is made and entered into as of the last date signed (“Amendment Effective Date”) by and between Bandwidth.com, Inc., a Delaware corporation, having offices at 900 Main Campus Drive, Suite 500, Raleigh, North Carolina 27606 USA (“Bandwidth”), and David A. Morken (“Morken”).

WHEREAS, Bandwidth and Morken previously entered into an Employment Agreement, dated as of January 1, 2015 (the “Morken Employment Agreement”); and

WHEREAS, pursuant to Section 15 of the Morken Employment Agreement, Bandwidth and Morken may amend the Morken Employment Agreement in writing from time to time; and

WHEREAS, each of Bandwidth and Morken wish to amend the Morken Employment Agreement as provided in this Amendment.

NOW, THEREFORE, in consideration of the premises herein contained, Bandwidth and Morken hereby agree to amend the Morken Employment Agreement as follows:

1. Section 3.2 of the Morken Employment Agreement is hereby deleted and the following is inserted in lieu thereof:

“3.2 Bonus Compensation.

3.2.1 In addition to the Base Salary, Bandwidth will pay to Morken bonus compensation each year during the Employment Period of up to one hundred percent (100%) of the Base Salary (or more if Bandwidth exceeds its Revenue, New Customer Revenue, and Operating Earnings targets and the pro-rata calculations provided in Section 3.2.2 below yield more than one hundred percent (100%) of the Base Salary) (the “Bonus Compensation”). Ten percent (10%) of the Bonus Compensation will be based on Morken meeting individual performance objectives, and ninety percent (90%) will be based on Bandwidth meeting its Revenue, New Customer Revenue, and Operating Earnings targets provided for in its annual Budget. The individual performance objectives and the relative weighting of the respective Revenue, New Customer Revenue and Operating Earnings targets will be mutually agreed by the Board and Morken at the beginning of each calendar year.

3.2.2 The Bonus Compensation will be earned, if at all, upon satisfaction of applicable criteria, as reasonably determined by the Board. The Bonus Compensation based on individual performance objectives will be earned pro-rata upon Morken attaining each objective, as reasonably determined by the Board. The Bonus Compensation based on Bandwidth meeting its Revenue, New Customer Revenue, and Operating Earnings provided for in its annual Budget will be earned pro-rata based upon the relative weighting of the respective Revenue, New Customer Revenue and Operating Earnings targets. The Board will establish a Budget, including Revenue, New Customer Revenue, and Operating Earnings, not later than March 31^st for each calendar year.

3.2.3 Bonus Compensation will be paid no later than March 15^th of the year succeeding the calendar year with respect to which the Bonus Compensation, if any, is calculated.

 

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3.2.4 In addition to the Bonus Compensation, the Board will from time to time review Morken’s efforts on behalf of Bandwidth and may within its discretion award a special bonus for extraordinary service. Special bonuses, if any, will not count as any other compensation payable under this Agreement.”

2. The following is inserted as a new Section 8.3 immediately following Section 8.2 of the Morken Employment Agreement:

“Pursuant to the Defend Trade Secrets Act of 2016, Morken understands that:

An individual may not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that: (a) is made (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney; and (ii) solely for the purpose of reporting or investigating a suspected violation of law; or (b) is made in a complaint or other document that is filed under seal in a lawsuit or other proceeding.

Further, an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the employer’s trade secrets to the attorney and use the trade secret information in the court proceeding if the individual: (a) files any document containing the trade secret under seal; and (b) does not disclose the trade secret, except pursuant to court order.”

3. The following definitions are hereby inserted in Exhibit A to the Morken Employment Agreement:

“New Customer Revenue” means Revenue generated during any applicable fiscal year attributable to any customer(s) for which Bandwidth did not have an effective master service agreement (or other similar agreement) executed with such customer as of the last business day of the immediately preceding fiscal year.

“Revenue” means revenue, as determined in accordance with generally accepted accounting principles.

4. This Amendment does not supersede the terms and conditions of the Morken Employment Agreement, except to the extent expressly described herein.

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IN WITNESS WHEREOF, Bandwidth and Morken each has caused this Amendment to be executed as of the Amendment Effective Date.

 

 

 

Exhibit 10.9

 

March 1, 2017

Henry R. Kaestner

Dear Henry:

Bandwidth.com, Inc. (“Bandwidth”) is pleased to continue your employment, which has continued since June 16, 2009. This is a full-time regular employee position, exempt from the overtime statues under the Fair Labor Standards Act.

The following outlines your continued compensation package, which has remained as described below since June 16, 2009:

Salary

This is a full-time regular employee position, exempt from the overtime statutes under the Fair Labor Standards Act. Your salary is $100,000 on an annualized basis.

Health and Group Benefits Plan

Full-Time Regular and Part-Time Regular employees scheduled to work thirty (30) hours or more per week are eligible for participation in Bandwidth benefits the first day of the month following thirty (30) days of employment with Bandwidth. Currently, Bandwidth pays 100% of the cost for benefits for you and your eligible family members. These benefits include coverage for medical, dental, life insurance, accidental death and dismemberment and long-term disability. We also offer flexible spending accounts and other benefits you can elect to pay for on your own. Bandwidth benefits, including the cost for premiums, may be subject to change solely at Bandwidth’s discretion.

Bandwidth.com 401(k) Savings Plan

As a full-time regular employee, you are eligible to participate in the Bandwidth 401(k) Savings Plan on the first day of the month following thirty (30) days employment. Bandwidth will match your 401(k) plan contributions at 100% up to the first 3% you contribute to the plan. Employer matching contributions are subject to a 3-year vesting schedule.

Please sign below as indicated.

Sincerely,

David A. Morken, Chief Executive Officer

By signing below, I acknowledge that my employment with Bandwidth is on an “at-will” basis and can be terminated by either me or Bandwidth at any time and for any reason with or without cause.

I accept employment by Bandwidth.

 

Bandwidth 900 Main Campus Drive, Suite 500, Raleigh NC 27606 (p) 800-808-5150 (f) 919-238-9910

Exhibit 10.10

CONSULTING AGREEMENT

THIS CONSULTING AGREEMENT (this “Agreement”), made effective as of February 22, 2010 by and between Bandwidth.com, Inc., a Delaware corporation (the “Company”) and Carmichael Investment Partners, LLC, a Delaware limited liability company (the “Consultant”).

RECITALS:

A. The Company desires to engage the Consultant to provide the Services as more fully set forth herein.

B. The Consultant desires to provide such Services to the Company (the Consultant and Company, collectively referred to as the “Parties”) on the terms and for the compensation set forth herein.

NOW THEREFORE, in consideration of the actual accounts and promises set forth herein, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto agree as follows:

1. Exclusive Engagement.

a. The Company hereby engages the Consultant as a consultant to perform the Services (as defined in Section 2 below) subject to the terms and conditions of this Agreement, and the Consultant hereby accepts such engagement for and in consideration of the compensation hereinafter provided and agrees to use its best efforts in performing the Services. The Consultant shall perform its obligations hereunder in compliance with the terms of this Agreement and any and all applicable laws and regulations.

b. The Consultant acknowledges that during the term of this Agreement as defined in Section 3 below, the Consultant shall provide services exclusively to the Company within the areas of the Company’s business and shall not be engaged by, or perform any services for, any company or organization involved in a substantially similar business of the Company, provided, however, that i) Consultant’s exclusivity of services (including the Services as defined in Section 2) to the Company may be waived by the Company on a case-by-case basis, and any waiver shall be acknowledged in writing by the Parties; and ii) nothing in this Section 1.b shall restrict the Consultant from performing services for his employer(s) named on Schedule A in compliance with the other provisions of this Agreement and the Proprietary Information and Inventions Agreement attached as Exhibit I. The Consultant acknowledges that this engagement is conditioned upon, and is made in reliance on, the provisions of this paragraph. The Company retains the right to appoint additional consultants as the Company, in its sole and unrestricted judgment, may from time to time determine to be in the best interests of the Company without liability or obligation to the Consultant.

2. Services and Ownership by Intellectual Property.

a. The Consultant agrees to render services of an advisory or consulting nature as described in the Statement of Work attached as Schedule A hereto and incorporated herein by reference (the “Services”). The character and scope of the Services may be revised only by a written modification to this Agreement signed by both parties.

b. The Consultant hereby acknowledges that the Company shall own the intellectual property created by the Consultant during the course of his performing the Services, and the Consultant shall execute the Company’s standard Proprietary Information and Inventions Agreement in substantially the form attached hereto as Exhibit I concurrent with the execution of this Agreement.

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3. Term. The term of this Agreement for the Services shall commence on the date hereof and shall continue so long as an Affiliate (as defined in the Investors’ Rights Agreement, dated as of the date hereof) of the Consultant serves on either the Company’s Board of Directors or the Company’s Board of Advisors; provided, however, (X) the Company may terminate this Agreement upon thirty (30) days’ prior notice to the Consultant if (i) the Consultant no longer holds at least a majority of the issued and outstanding shares of the Company’s Series A Preferred Stock; or (ii) the Company’s Series A Preferred Stock issued by the Company to the Consultant on or about the date hereof convert into shares of the Company’s Common Stock pursuant to the Company’s Amended and Restated Certificate of Incorporation (as may be amended from time to time); and (Y) this Agreement may be terminated immediately by the Company upon written notice to the Consultant of a breach or nonperformance by the Consultant of any material provision of this Agreement.

4. Compensation and Support. The Company shall compensate the Consultant for the performance of the Services at such times and in such amounts as set forth in the Statement of Compensation and Support attached as Schedule B hereto and incorporated herein by reference.

5. Status as Independent Contractor. Consultant acknowledges that it is an independent contractor to the Company and not an employee of the Company. Consultant further acknowledges that he is liable for any and all federal, state, local, social security, unemployment and other taxes assessed on, against or in connection with the consulting fees to be paid hereunder, and that the Company will not withhold any amounts from such consulting fees. Consultant agrees to indemnify and hold the Company harmless from and against any damages, claims, assessments, interest, penalties or other amounts incurred by or charged against the Company as a result of any action by any federal, state or local government in connection with the classification of Consultant or any employee, agent or representative of Consultant as an independent contractor.

6. No Conflict. The Consultant hereby represents and warrants that his service to the Company on the terms and conditions set forth herein and his execution and performance of this Agreement do not constitute a breach or violation of any other agreement, obligation or understanding with any third party. The Consultant represents that he is not bound by any agreement or any other existing or previous business relationship which conflicts with, or may conflict with, the performance of his obligations hereunder or prevents the full performance of his duties and obligations hereunder.

7. Limitations. Nothing in this Agreement shall be construed to give the Consultant authority to represent the Company before any court or governmental or regulatory agency without the express prior authorization of the Company. All files, books, accounts, records and other information of any nature, however recorded or stored, and related to the Company (the “Records”) shall at times belong to the Company and to the extent possessed by the Consultant hereunder, such possession shall be for the benefit of and as agent for the Company. The Consultant’s possession of the Records is at the will of the Company and is solely for the purpose of enabling the Consultant to perform his obligations hereunder. The Records shall be readily separable from the records of the Consultant.

8. Indemnification. The Consultant shall defend, release, indemnify and hold the Company and its directors, officers, stockholders, employees and agents and the personal representatives and assigns of each, harmless from and against any and all claims, suits, liability, costs and expenses, including, without limitation, attorneys’ fees and expenses, in connection with any act or omission of the Consultant in connection with the provision of the Services.

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9. Notices. All notices, demands, requests or other communications which may be or arc required to be given, served or sent by one party to the other party pursuant to this Agreement shall be in writing and shall be hand delivered, sent via a nationally recognized delivery service, or sent via by email or telefax (as listed below), addressed as follows:

 

If to the Company:		Bandwidth.com, Inc. 4001 Weston Parkway Cary, NC 27513 Attention: CEO/President
		Telephone: 919-297-1010 Email: dmorken@bandwidth.com Fax: 919-238-9908
		With a copy to:
		Bandwidth.com, Inc. 4001 Weston Parkway Cary, NC 27513 Attention: General Counsel
		Telephone: 919-439-2626 Email legal@bandwidth.com Fax: 919-238-9908
If to the Consultant:		Carmichael Investment Partners, LLC 6000 Fairview Road, Suite 1200 Charlotte, NC 28210 Email: brian.bailey@carmichaelpartners.com Fax: 704-552-3770

Each party may designate by notice in writing a new address to which any notice, demand, request or communication may thereafter be delivered, given or sent. Documents delivered by hand shall be deemed to have been received upon delivery; documents sent by email or telefax shall be deemed to have been received when the answer back is received; and documents sent by mail shall be deemed to have been received upon their receipt, or at such time as delivery is refused by the addressee upon presentation.

10. Security. The Consultant agrees that he will at all times comply with all security regulations in effect from time to time at the Company’s premises or applicable outside such premises, to materials belonging to the Company. The Consultant agrees not to use or disclose to any party any information, systems, equipment, ideas, processes or methods of operation observed in connection with the performance of his/her obligations hereunder.

11. Assignment. Neither this Agreement or any interest herein or any rights hereunder shall be sold or assigned by the Consultant, nor shall any of the duties of the Consultant hereunder be delegated to any person, firm or corporation, without prior notice to and consent of the Company. The Company shall have the right to assign this Agreement to its successors and assigns, and the rights and obligations of the Company under this Agreement shall inure to the benefit of, and shall be binding upon, the successors and assigns of the Company.

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12. Standard of Care. The Consultant warrants that he will exercise due diligence to perform the Services in a professional manner in compliance with all applicable laws and regulations and the highest ethical standards. In addition, the Consultant represents and warrants that any information which he may supply the Company during the term of this Agreement (i) will have been obtained by the Consultant lawfully and from publicly available sources and (ii) will not be confidential or proprietary to any third person. Nothing in this Agreement shall be construed as authorizing or encouraging the Consultant to obtain information for the Company in violation of any third party’s rights to copyright or trade secret protection.

13. Miscellaneous.

a. The provisions of this Agreement may be waived, altered, amended or repealed, in whole or in part, only on the written consent of the Company and the Consultant.

b. The provisions of this Agreement are reasonable as to duration and scope, and any breach of this Agreement by Consultant will cause irreparable damage to the Company. In the event of such breach by Consultant, the Company shall have, in addition to any and all remedies at law, the right to an injunction, specific performance or other equitable relief to prevent the violation of Consultant’s obligations hereunder.

c. Each provision of this Agreement shall be treated as a separate and independent clause, and that the unenforceability of any one clause shall in no way impair the enforceability of any of the other clauses herein. Moreover, if one or more of the provisions contained in this Agreement shall for any reason be held to be excessively broad as to scope, activity or subject so as to be unenforceable at law, such provision or provisions shall be construed by the appropriate judicial body by limiting and reducing it or them, so as to be enforceable to the maximum extent compatible with the applicable law as it shall then appear.

d. Section headings and numbers used in this Agreement are included for convenience of reference only, and, if there is any conflict between any such numbers and headings, and the text of this Agreement, the text shall control. Each of the statements set forth in the premises of this Agreement is incorporated into the Agreement as a valid and binding representation of the party or parties to whom it relates.

e. This Agreement shall be governed by and construed in accordance with the laws of the State of North Carolina without reference to the choice of law principles thereof, and the venue and forum for any legal action or any agreed to alternative dispute resolution proceeding shall lie in Wake County, North Carolina, and any judicial action or proceedings shall be before the proper state or federal court having venue for Wake County, North Carolina.

f. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.

g. This Agreement, including the Schedules hereto and together with the Proprietary Information and Inventions Agreement attached as Exhibit I hereto, represents the entire agreement of the parties with respect to the subject matter hereof and supersedes in the entirety any and all prior written or oral agreements with respect thereto.

h. Neither party shall have the right under this Agreement to use the name, servicemark, trademark or trade names of the other, unless prior written approval has been obtained. Any such approval or authorization shall cease upon termination of this Agreement.

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IN WITNESS WHEREOF, the duly authorized representatives of the parties have executed this Consulting Agreement as of the date and year first above written.

 

 

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Schedule A

STATEMENT OF WORK

In connection therewith, the Consultant’s duties shall include, without limitation:

 

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If at any time Kevin J. Martin does not serve on the Company’s Board of Directors, the Company may, subject to the appointment by the Company Board of Directors, request that an Affiliate of the Consultant serve on the Company’s Board of Advisors where such service and duties shall be at the pleasure of the Company’s Board of Directors.

 

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Provide consultation, guidance, advice and recommendations regarding: communications and telecommunications business strategy; regulatory policy and strategy at the federal and state levels; telecommunications and communications industry issues and relations; and communications and telecommunications products and services (such as those considered or offered by the Company), including internet and data services, unified communications services, VOIP communications services, wireless communications services, and managed network services.

 

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Provide exclusive representation of the Company in matters involving communications industry relations, including matters of Company strategic importance that are impacted by the positions, policies or strategic objectives of other telecommunication or communications service providers.

 

•

Make reports and recommendations to assist the Company in the implementation of such advice and recommendations in such form and at such time as the Company may request.

If requested by the Company, the Consultant will cause all such duties to be performed by Kevin J. Martin. If the Consultant is unable to cause Kevin J. Martin to perform such duties for any reason, the Company may terminate the Agreement to which this Schedule A is attached pursuant to Section 3.

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Schedule B

COMPENSATION AND SUPPORT

Cash Compensation:

Consultant shall be paid $10,000 per month for the Services. Payment shall be due on the first business day of each month in arrears and shall be pro-rated in any given month to the extent the Services are not performed by the Consultant for their entirety of such month.

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Exhibit I

PROPRIETARY INFORMATION

AND INVENTIONS AGREEMENT

Exhibit 10.11

OFFICE LEASE

1. BASIC LEASE PROVISIONS AND IDENTIFICATION OF EXHIBITS

1.01 BASIC LEASE PROVISIONS

 

A.

BUILDING AND ADDRESS:

Venture III Building of the Venture Center

900 Main Campus Drive

Raleigh, North Carolina 27606

 

B.

LANDLORD AND LANDLORD’S NOTICE ADDRESS:

Venture Center LLC, a Delaware limited liability company

c/o Heitman Capital Management LLC

191 North Wacker Drive, Suite 2500

Chicago, Illinois 60606

Attention: Dwight P. Fawcett

With a copy to:

Moore & Van Allen, PLLC

100 North Tryon St., Suite 4700

Charlotte, NC 28202-4003

Attn: Evan Bass

 

C.

RENTAL PAYMENT ADDRESS:

Venture Center LLC

Lockbox #601977

P.O. Box 601977

Charlotte, NC 28262-1977

Wiring Instructions:

Bank: Wachovia Bank

ABA#: 053000219

Account#: 2000027351895

 

D.

DATE OF LEASE: January 22, 2013

 

E.

LEASE TERM: Twenty-five (25) months with respect to the Second Floor Space (hereinafter defined) and twenty-one (21) months with respect to the Third Floor Space (hereinafter defined). Tenant has two (2) options to extend the Initial Term (hereinafter defined) for a period of three (3) years each.

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F.

COMMENCEMENT DATE OF LEASE TERM: February 1, 2015 with respect to the Second Floor Space and June 1, 2015 with respect to the Third Floor Space.

 

G.

EXPIRATION DATE OF LEASE TERM: February 28, 2017.

 

H.

MONTHLY BASE RENT: Monthly Base Rent shall be as follows:

 

Monthly Base Rent		Portion of Initial Term				Rate
$16,260.50			02/01/15 – 5/31/15			$	25.50
$27,797.13			06/01/15 – 01/31/16			$	25.50
$28,631.04			02/01/16 – 01/31/17			$	26.27
$29,489.97			02/01/17 – 02/28/17			$	27.05

 

I.

RENTABLE AREA OF THE PREMISES: Approximately 7,652 rentable square feet on the second floor of the Building (the “Second Floor Space”) and approximately 5,429 rentable square feet on the third floor of the Building (the “Third Floor Space”).

 

J.

SECURITY DEPOSIT: $27,797.13.

 

K.

FLOORS and SUITES: Floors 2 and 3, Suites 267 and 317.

 

L.

TENANT’S BROKER: Synergy Commercial Advisors, LLC

LANDLORD’S BROKER: Craig Davis Properties

 

M.

OPERATING COST BASE: To be determined pursuant to the provisions of Section 4.01F hereof.

 

N.

BASE YEAR: 2015.

 

O.

RENTABLE SQUARE FOOTAGE OF THE BUILDING: 119,812

 

P.

TENANT AND CURRENT NOTICE ADDRESS:

Bandwidth.com, Inc., a Delaware corporation

900 Main Campus Drive, Suite 500

Raleigh, NC 27606

Attention: Chief Executive Officer

 

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With a copy to:

Bandwidth.com, Inc., a Delaware corporation

900 Main Campus Drive, Suite 500

Raleigh, NC 27606

Attention: General Counsel

 

Q.

LANDLORD’S PROPERTY MANAGER: Spectrum Properties Management Company (“Manager”)

IDENTIFICATION OF EXHIBITS:

The exhibits set forth below and attached to this Lease are incorporated herein by this reference:

 

2. PREMISES AND LEASE TERM

2.01 LEASE OF PREMISES

Pursuant to this Office Lease (this “Lease”), Landlord leases to Tenant and Tenant leases from Landlord the premises (the “Premises”) depicted on Exhibit A attached hereto and incorporated herein by this reference. The Premises is contained in the office building (the “Building”) located at the address stated in Section 1.01A hereof, which Building is part of an office building complex known by the name given in Section 1.01A hereof. For purposes of this Lease, “Complex” shall collectively mean all land, buildings and improvements forming a part of the Venture Center, including but not limited to the Common Areas, Building, Venture I building, Venture II building, Venture IV building, Venture Place building and all associated land, improvements, infrastructure and parking structures. The Building is located on the real property described on Exhibit A-1 attached hereto and incorporated herein by this reference. The Premises is as shown on Exhibit A attached hereto and contains the Rentable Area as stated in Section 1.01I hereof.

2.02 LEASE TERM

A. The initial term of this Lease (the “Initial Term”) shall commence, with respect to the Second Floor Space, on February 1, 2015 and shall commence, with respect to the Third Floor Space, on June 1, 2015. The Initial Term for the entire Premises shall expire on February 28, 2017 (the “Expiration Date”). As used in this Lease, the term “Lease Year” shall mean each consecutive twelve (12) month period of the Lease Term (hereinafter defined), or any extension or renewal thereof, beginning on February 1, 2015 and each anniversary thereof. Landlord and Tenant stipulate and agree that Tenant is in possession of the Premises as of the date hereof under a sublease agreement.

 

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B. Provided that (i) this Lease is still in full force and effect, (ii) Tenant is not then in default under this Lease, (iii) Tenant has not been delinquent with its rent payment two (2) or more time(s) during the Lease Term, and (iv) the named Tenant herein has not, after the date hereof, assigned its rights under the Lease or sublet any portion of the Premises, Tenant shall be entitled to extend the Initial Term for two (2) consecutive three (3) year periods (each an “Extension Term” and collectively with the Initial Term, the “Lease Term”) upon all the same terms and conditions as set forth herein, and Tenant shall not be entitled to any additional upfitting allowance (Tenant agreeing to continue to occupy the Premises in its “as is where is” condition). Tenant must give Landlord written notice (each an “Extension Notice”) of Tenant’s election to extend the Initial Term at least six (6) months prior to the expiration of the then current Initial Term or Extension Term, as applicable. If Tenant fails to timely exercise its first or second option to extend the Initial Term, any subsequent option(s) to extend the Initial Term shall automatically terminate and shall be null and void. Monthly Base Rent for each Extension Term shall be as specified in Section 3.02 below.

3. RENT

3.01 INITIAL TERM

Tenant agrees to pay to Landlord at the address provided in Section 1.01C, or at such other place designated by Landlord, without any prior notice or demand and without any deduction or setoff whatsoever, base rent at the initial monthly rate stated in Section 1.01H hereof (“Monthly Base Rent”). Monthly Base Rent is subject to adjustment pursuant to Section 4.02 hereof, and, as adjusted, is called “Adjusted Monthly Base Rent”. Monthly Base Rent and Adjusted Monthly Base Rent shall be paid monthly in advance on the first day of each month of the Lease Term. Rent shall be deemed paid when actually received by Landlord. Monthly Base Rent and, if applicable, Adjusted Monthly Base Rent shall be prorated for partial months within the Lease Term. All charges, costs and sums required to be paid by Tenant to Landlord under this Lease in addition to Adjusted Monthly Base Rent shall be considered “Additional Rent”, and Monthly Base Rent or Adjusted Monthly Base Rent, as applicable, and Additional Rent shall be collectively called “Rent”. Tenant’s covenant to pay Rent shall be independent of every other covenant in this Lease. If Tenant shall fail to pay any monthly installment of Rent by the fifth (5^th) day of the month when due, Tenant shall pay to Landlord a late fee equal to ten percent (10%) of the Rent then due and payable; provided, however, Landlord shall waive late fees due Landlord one (1) time in any twelve (12) month period if Tenant pays any Rent due within five (5) days immediately after oral or written notice from Landlord.

3.02 EXTENSION TERM

Monthly Base Rent for each Extension Term shall be equal to the prevailing Market Rate (hereinafter defined) for the Premises as of the date the extension option is exercised, provided that, notwithstanding anything else to the contrary contained herein, the Monthly Base Rent for

 

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each Extension Term shall not be less than one hundred percent (100%) of the Monthly Base Rent in effect at the end of the then expiring Initial Term or Extension Term, as applicable. The prevailing “Market Rate” shall be based upon space of comparable age, size and quality in comparable office buildings in the Centennial Campus of North Carolina State University which has been leased, on an arms-length basis, to tenants of similar financial standing during the immediately preceding six (6) months (or such longer period of time as is necessary to account for abnormal market conditions, as determined by Landlord), taking into account the same leasehold improvement allowances, leasing commissions, free rent and other concessions as would be applicable to the Extension Term, if any. Within twenty (20) business days following Landlord’s receipt of the Extension Notice, Landlord shall provide Tenant with written notice of its determination of the prevailing Market Rate for the applicable Extension Term (the “Prevailing Market Rate Notice”). If Landlord and Tenant do not agree in writing on the prevailing Market Rate within the longer of (i) twenty (20) days following Tenant’s receipt of the Prevailing Market Rate Notice or (ii) such period of time as Landlord and Tenant are actively negotiating in good faith the Market Rate, the Extension Notice shall automatically be deemed rescinded and of no further force and effect, and thereafter this Lease shall expire as if Tenant had never exercised its extension option.

4. ADJUSTMENTS TO MONTHLY BASE RENT

4.01 DEFINITIONS

For the purposes of this Article 4, the following words and phrases shall have the following meanings:

A. “Taxes” shall mean all federal, state and local governmental taxes, assessments and charges (including transit or district taxes or assessments) of every kind or nature, whether general, special, ordinary or extraordinary, which Landlord shall pay or become obligated to pay because of or in connection with the ownership, leasing, management, control or operation of the improvements and land comprising the Complex, or of the personal property, fixtures, machinery, equipment systems and apparatus located therein or used in connection therewith (including any rental or similar taxes levied in lieu of or in addition to general real and/or personal property taxes). For purposes hereof, Taxes for any year shall be Taxes which are due for payment or paid in that year, rather than Taxes which are assessed or become a lien during such year. There shall be included in Taxes for any year the amount of all fees, costs and expenses (including reasonable attorneys’ fees) paid by Landlord during such year in seeking or obtaining any refund or reduction of Taxes. Taxes in any year, including the Base Year, shall be reduced by the net amount of any tax refund received by Landlord with regards to such year. If a special assessment payable in installments is levied against the Complex, Taxes for any year shall include only the installment of such assessment and any interest payable or paid during such year. Taxes shall not include any federal, state or local sales, use, franchise, capital stock, inheritance, general income, gift or estate taxes, except that if a change occurs in the method of taxation resulting in whole or in part in the substitution of any such taxes, or any other assessment, for any Taxes as above defined, such substituted taxes or assessments shall be included in the Taxes.

 

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B. “Adjustment Year” shall mean each calendar or partial calendar year during the Lease Term.

C. “Base Year” shall mean the year stated in Section 1.01N hereof.

D. “Operating Cost Adjustment,” shall mean the dollar increase, if any, of the actual Operating Costs over the Operating Cost Base paid or incurred by Landlord in the applicable calendar year; provided, however, any Operating Cost Adjustment attributable to an increase in controllable expenses will not exceed eight percent (8%) annually, computed on a cumulative and compounding basis. Controllable expenses shall not include those portions of Landlord’s Operating Costs which are not reasonably within Landlord’s control, including without limitation utilities, taxes, insurance, and snow removal.

E. “Operating Costs” shall mean all costs, expenses and disbursements of every kind and nature which Landlord shall pay or become obligated to pay because of or in connection with the ownership, maintenance and operation of the Complex, including but not limited to, the following:

(i) Wages, salaries (below the level of officers or executives) and related expenses (including, without limitation, benefits) of all on-site and off-site personnel engaged in the operation, maintenance and access control of the Complex, and all costs of a property management office in the Complex (including, without limitation, rent costs).

(ii) Cost of all supplies, tools, equipment and materials, whether purchased or leased, used in the operation and maintenance of the Complex.

(iii) Cost of utilities for the Complex, including but not limited to, water, steam, sewer, gas and electricity, and power for heating, lighting, air conditioning and ventilating the Complex, but excluding suite electricity for all premises in the Complex paid for separately by the occupant thereof.

(iv) Cost of all maintenance and service agreements for the Complex and the equipment therein, including but not limited to, access control service, window cleaning, janitorial service, landscape maintenance, and elevator maintenance.

(v) Legal and accounting costs of Landlord, including a reasonable allocation of off-site costs, together with the costs of annual audits of the Complex operating costs by certified public accountants.

(vi) Cost of all insurance, including but not limited to, fire, casualty, liability and rental abatement insurance applicable to the Complex and Landlord’s personal property used in connection therewith, plus the cost of all deductible payments made by Landlord in connection therewith.

(vii) Cost of repairs, replacements and general maintenance (excluding repairs, replacements and general maintenance paid for with proceeds of insurance or condemnation).

 

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(viii) Any and all common area maintenance costs related to public areas, including sidewalks and landscaping on the Complex.

(ix) Amortization of the cost, together with reasonable financing charges, of furnishing and installing capital investment items which (a) are primarily for the purpose of (i) reducing Operating Costs, or (ii) promoting safety, or (b) may be required by any governmental authority. All such costs shall be amortized over the useful life of the capital investment items with the useful life and amortization schedule being determined in accordance with generally accepted accounting principles (in no event to extend beyond the remaining useful life of the Complex).

(x) Costs of licenses, permits and inspection fees related to the Complex.

(xi) A management fee equal to four percent (4%) of the sum of all rents and charges payable by tenants of the Complex pursuant to their respective leases.

(xii) All fixed and additional rents or charges payable with respect to the Ground Lease (hereinafter defined); for informational purposes only, and not as a limitation, covenant or warranty, the base rent payable under the Ground Lease as of the date hereof increases in January of 2014 and every five (5) years thereafter.

Operating Costs shall not include the following:

(i) intentionally omitted;

(ii) capital expenditures required by Landlord’s failure to comply with laws enacted on or before the date the Building’s temporary certificate of occupancy or the equivalent is validly issued; provided, however, the capital expenditures incurred by Landlord and required by laws enacted after the date the Building’s temporary certificate of occupancy or the equivalent is validly issued shall be amortized over the useful life of such capital expenditures, such amortization amount to be considered an Operating Cost;

(iii) costs incurred by Landlord for the repair of damage to the Complex, to the extent the Landlord is reimbursed by insurance proceeds (or would have been reimbursed by insurance if Landlord carried the insurance required by this Lease);

(iv) any costs associated with leasing, marketing or promoting space in the Complex. Such costs should include tenant improvements, advertising, lease commissions, legal fees to negotiate the lease, space planning, marketing material, signs in or on the Complex identifying the owner of the Building and/or Complex or other tenants’ signs individually (except any monument or other signs that identify multiple tenants, including Tenant);

(v) interest, principal, points and fees on debts or amortization on any mortgage or mortgages or any other debt instrument encumbering the Building and/or the Complex or the property on which the Building and/or the Complex stands, including any interest or penalties incurred as a result of Landlord’s failure to pay any costs as the same become due;

 

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(vi) Landlord’s general corporate overhead and general and administrative expenses, other than charges for property management and in-house labor provided for maintenance of the Building and/or the Complex;

(vii) electric power costs for which any tenant directly contracts with the local public service company;

(viii) costs incurred in connection with upgrading the Building and/or the Complex to comply with handicap, life, fire and safety codes in effect prior to the date the final certificate of occupancy for the Building is issued;

(ix) tax penalties incurred as a result of Landlord’s failure to make payments and/or to file any tax or informational returns when due;

(x) costs arising from Landlord’s charitable or political contributions;

(xi) costs arising from earthquake insurance to the extent coverage exceed the coverage carried by landlord of other buildings comparable to the Building and/or the Complex;

(xii) federal and state income and franchise taxes of Landlord or any other such taxes not in the nature of real estate taxes, except taxes on rent which shall be paid directly by Tenant or included in Operating Costs;

(xiii) costs of selling, financing, syndicating or hypothecating the interest of Landlord in the Building and/or the Complex;

(xiv) legal and other costs associated with the mortgaging, refinancing or sale of the Building and/or the Complex or any interest therein;

(xv) any costs and expenses related to or incurred in connection with disputes with tenants of the Building and/or the Complex or any lender for the Building and/or the Complex;

(xvi) any bad debt loss, rent loss, or reserves for bad debts or rent loss, or any other reserve for anticipated future expenses;

(xvii) salaries, wages or other compensation paid to officers or executives of Landlord above the level of property manager in their respective capacities;

(xviii) any item of cost which is includable in Landlord’s Operating Costs, but which represents an amount paid to an affiliate of Landlord or an affiliate of any partner or shareholder of Landlord, to the extent the same is in excess of the fair market value of such item or service;

 

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(xix) rentals for items (except when needed in connection with normal repairs and maintenance) which if purchased, rather than rented, would constitute a capital expense that is excluded from Operating Costs (excluding, however, equipment not affixed to the Building and/or the Complex which is used in providing janitorial or similar services); costs, including permit, license and inspection costs, incurred with respect to the installation of tenants or other occupants’ improvements in the Building and/or the Complex or incurred in renovating or otherwise improving, decorating, painting or redecorating vacant space for tenants or other occupants of the Building and/or the Complex;

(xx) the cost of any electric power used by an tenant in the Building and/or the Complex for which any tenant directly contracts with the local public service company or of which any tenant is separately metered or submetered and pays Landlord directly; provided, however, that if any tenant in the Building and/or the Complex contracts directly for electric power service or is separately metered or submetered during any portion of the relevant period, the total electric power costs for the Building and/or the Complex shall be “grossed up” to reflect what those costs would have been had each tenant in the Building and/or the Complex used the Building-standard amount of electric power;

(xxi) costs arising from the negligence or intentional misconduct of other tenants or Landlord or its agents, or any vendors, contractors or providers of materials or services selected, hired or engaged by Landlord or its agents, including, without limitation, the selection of building materials, provided Landlord shall have the right to include insurance deductibles in Operating Costs;

(xxii) depreciation, amortization and interest payments, except as provided herein and except on materials, tools, supplies and vendor-type equipment purchased by Landlord to enable Landlord to supply services Landlord might otherwise contract for with a third party where such depreciation, amortization and interest payments would otherwise have been included in the charge for such third party’s services, all as determined in accordance with generally accepted accounting principles, consistently applied, and when depreciation or amortization is permitted or required, the items shall be amortized over its reasonably anticipated useful life according to generally accepted accounting practices;

(xxiii) expenses in connection with services or other benefits which are not offered to Tenant for which Tenant is charged for directly but which are provided to another tenant or occupant of the Building and/or the Complex free of charge;

(xxiv) costs incurred by Landlord due to the violation by Landlord or any tenant other than Tenant of the terms and conditions of any lease of space in the Building and/or the Complex, provided Landlord shall have the right to include insurance deductibles in Operating Costs;

 

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(xxv) costs incurred in connection with upgrading the Building and/or the Complex to comply with disability, life, fire and safety codes, ordinances, statutes or other laws in effect prior to the commencement of the Initial Term, based on the standards, requirements and interpretations thereof in effect on the commencement of the Initial Term, including, without limitation, the ADA, including penalties or damages incurred due to such non-compliance for which Landlord is liable and responsible under the Lease;

(xxvi) notwithstanding any contrary provision of the Lease, including, without limitation, any provision relating to capital expenditures, any and all costs arising from the presence of hazardous materials or substances (as defined by applicable laws in effect on the date the Lease is executed) in or about the Premises, the Building or the Complex, including, without limitation, hazardous substances in the ground water or soil, for which Landlord is liable and responsible under this Lease; and

(xxvii) costs for sculpture, paintings or other objects of art.

F. “Operating Cost Base” shall mean the actual Operating Costs paid or incurred by Landlord in the Base Year, a statement of which Operating Cost Base shall be delivered by Landlord to Tenant within a reasonable time after the end of the Base Year. The Operating Cost Base when and as determined by Landlord shall be used to determine the Operating Cost Adjustment for calendar years following the Base Year.

G. “Tenant’s Percentage Share” shall mean that percentage found by dividing the Rentable Area of the Premises by the Rentable Area of office space in the Complex.

H. “Base Year Taxes” shall mean the Taxes for the Base Year.

I. “Tax Adjustment” the dollar increase, if any, of the actual Taxes paid or incurred by Landlord in the applicable calendar year over the Base Year Taxes.

4.02 ADJUSTMENTS TO MONTHLY BASE RENT

A. Tenant shall pay to Landlord, as additional rental, Tenant’s Percentage Share of (i) the Operating Cost Adjustment, and (ii) the Tax Adjustment, in the respective calendar year (after the Base Year) in the manner and at the times herein provided.

B. Prior to the commencement of each calendar year subsequent to the Base Year, or as soon thereafter as practicable, Landlord shall give Tenant notice of Landlord’s estimate of Tenant’s Percentage Share of the Operating Cost Adjustment and Tax Adjustment for the ensuing calendar year. On or before the first day of each month during the ensuing calendar year, Tenant shall pay to Landlord one-twelfth (1/12^th) of such estimated amounts, provided that until such notice is given with respect to the ensuing calendar year, Tenant shall continue to pay the amount currently payable pursuant hereto until after the month such notice is given. If at any time or times it appears to Landlord that Tenant’s Percentage Share of the Operating Cost Adjustment and/or the Tax Adjustment for the then current calendar year will vary from

 

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Landlord’s estimate by more than five percent (5%), Landlord may, by notice to Tenant, revise its estimate for such year and subsequent payments by Tenant for such year shall be based on such revised estimate. The amounts payable by Tenant pursuant to this Section 4.02 (the Operating Cost Adjustment and Tax Adjustment), together with the Monthly Base Rent is herein referred to as the Adjusted Monthly Base Rent. Notwithstanding any provision hereof to the contrary, in no event shall the Operating Cost Adjustment or Tax Adjustment be less than zero.

C. Landlord, within one hundred twenty (120) days following the end of each calendar year (or portion thereof) during the term of this Lease, shall determine the actual Operating Cost Adjustment and Tax Adjustment during such calendar year. If Tenant shall have underpaid Landlord, Tenant shall pay the difference to Landlord within thirty (30) days of receipt of an invoice therefor, accompanied by a copy of a statement of the Operating Cost Adjustment and Tax Adjustment for the calendar year. If Tenant shall have overpaid Landlord, Landlord shall, within thirty (30) days of sending the annual statement, credit the difference against the Monthly Base Rent next coming due. The provisions of this Section 4.02.C shall survive the expiration or earlier termination of this Lease.

4.03 PARTIAL OCCUPANCY

For purposes of determining adjustments to installments of Adjusted Monthly Base Rent for any Adjustment Year, inclusive of the Operating Cost Base, in which the occupancy of the net rentable area of the Complex averages less than ninety-five percent (95%), the amount of those Operating Costs for such Adjustment Year that are variable by occupancy shall be increased to the amount that would have been payable had there been ninety-five percent (95%) occupancy in the Complex during such Adjustment Year. Notwithstanding the foregoing, in no event shall the adjustments in Operating Expenses as hereinabove described result in a profit to Landlord.

4.04 NO DECREASES IN MONTHLY BASE RENT

Notwithstanding anything to the contrary contained in this Lease, Monthly Base Rent shall not be adjusted or decreased below the amount set forth in Section 1.01H of this Lease.

4.05 AUDIT

Tenant shall have the right to audit Operating Costs and Taxes provided such audit is conducted pursuant to the following terms and conditions: (a) Tenant shall not conduct an audit if Tenant is in default of its obligations under this Lease beyond the expiration of any applicable notice and cure period; (b) Tenant shall not conduct an audit unless the Operating Cost Adjustment or Tax Adjustment has increased by more than five percent (5%) over the previous year; (c) such audit must be conducted by Tenant’s employees or a reputable accounting firm that is not being compensated by Tenant, Tenant’s guarantors (if any), its officers, directors, shareholders, partners or agents on a contingency fee basis; (d) such audit must be commenced within one (1) year after Landlord submits to Tenant the end-of-year statement described in Section 4.02(c) above and once commenced, such audit shall be completed in a diligent and expeditious manner; (e) Tenant shall supply Landlord with a copy of the result of the audit

 

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within fifteen (15) days after Tenant’s receipt of the same; (f) no audit shall be conducted if Tenant has previously conducted an audit for the same period of time; (g) such audit shall be conducted during normal business hours, at a mutually agreed upon time, at Landlord’s business address or at such other location within the continental U.S. as Landlord normally keeps its books and records of Operating Costs and Taxes; (h) such audit shall be at Tenant’s sole cost and expense and any costs or expenses incurred by Landlord in providing Tenant with the information required to perform such audit, including, but not limited to, copying costs and delivery fees, shall be paid by Tenant to Landlord within thirty (30) days after demand; provided, however, that Landlord shall reimburse Tenant for its actual and reasonable out-of-pocket costs of conducting such audit if it is determined pursuant to such audit that Landlord has overstated the actual amount of the Operating Cost Adjustment or Tax Adjustment and/or Tenant’s Percentage Share for the applicable year by in excess of five percent (5%); (i) any information obtained by Tenant as a result of such audit shall be held in strict confidence by Tenant and shall not be disseminated further except to Tenant’s accountants, attorneys and lenders, or in connection with the enforcement by Tenant of its rights under this Lease or as otherwise required by law; (j) no subtenant shall have any right to conduct an audit and no assignee shall conduct an audit for any period during which assignee was not in possession of the Premises; and (k) if it is determined pursuant to such audit that there has been an overpayment or underpayment of the Operating Cost Adjustment or Tax Adjustment, the parties shall promptly make such reconciliation payments and/or refunds as are appropriate. Further, notwithstanding the fact that Tenant has elected to conduct such audit, Tenant shall not have the right to withhold or offset any part of Tenant’s Percentage Share of the Operating Cost Adjustment or Tax Adjustment, which Tenant shall pay to Landlord as and when due and payable in accordance with the terms of this Lease.

5. SERVICES

5.01 LANDLORD’S GENERAL SERVICES

A. Subject to reimbursement in accordance with Article 4 hereof, Landlord shall provide the following services:

(1) Central heat and air conditioning (“HVAC”) in season, subject to curtailment as required by legal requirements. Landlord shall furnish such service to Tenant between the hours of 8:00 A.M. and 6:00 P.M, Monday through Friday, and between the hours of 9:00 A.M. and 12:00 P.M. on Saturday, excluding the holidays listed on Exhibit E attached hereto and incorporated herein by reference (“Building Operating Hours”). Upon written request of Tenant made in accordance with the provisions of Section 5.02 below, Landlord will furnish air conditioning, ventilation and heating at times other than Building Operating Hours, in which event Tenant shall pay Landlord the costs incurred by Landlord to provide such services subject to Section 5.02 below;

(2) City water from the regular Building fixtures for drinking, lavatory and toilet purposes only;

 

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(3) Customary cleaning and janitorial services in the Premises Monday through Friday, excluding the holidays listed on Exhibit E attached hereto, as provided in Exhibit D attached hereto;

(4) Customary cleaning, mowing, groundskeeping, snow removal and trash removal in the Common Areas;

(5) Washing of windows in the Premises, inside and outside at reasonable intervals;

(6) Adequate passenger elevator service in common with other tenants of the Building; freight elevator service during Building Operating Hours, subject to scheduling by Landlord; and

(7) Electricity for normal business usage (as described in Section 5.05 hereof) during the Building Operating Hours. Additional capacity or usage shall be provided at the option of Landlord (reasonably exercised) and at the sole cost of Tenant.

B. To the extent the services described in Section 5.01.A require electricity, water, gas, steam or other utility services supplied by public utilities, Landlord’s covenants hereunder shall impose on Landlord only the obligation to use its good faith, reasonable efforts to cause the applicable public utilities to furnish the same. Except as otherwise provided below, Landlord shall not be responsible for, and shall have no liability with respect to, the quality or condition of any services provided by such public utilities.

5.02 ADDITIONAL AND AFTER-HOURS SERVICES

Landlord shall not be obligated to furnish any services or utilities, other than those stated in Section 5.01 above. Tenant shall provide Landlord with twenty-four (24) hours prior written notice of its request for additional or after-hours electricity and HVAC. If Landlord furnishes electricity and HVAC requested by Tenant at times other than the Building Operating Hours, Tenant shall pay to Landlord as Additional Rent the then current charge for such electrical service within thirty (30) days after billing. If Tenant fails to make any such payment, Landlord may, without notice to Tenant and in addition to Landlord’s other remedies under this Lease, discontinue any or all of such after-hours services. No such discontinuance of any service shall result in any liability of Landlord to Tenant or be considered an eviction or a disturbance of Tenant’s use or occupancy of the Premises. The charge for after-hours electricity and HVAC as of the date of this Lease is Thirty-Five and No/100 Dollars ($35.00) per hour (including any partial hour), per HVAC unit, subject to reasonable increases attributable to energy costs from time to time by Landlord.CHAR2\1457482v7

5.03 DELAYS IN FURNISHING SERVICES

Failure by Landlord to any extent to furnish any services to Tenant, the Premises or the Complex, or any cessation (including any partial curtailment) thereof, shall not render Landlord liable in any respect for damages to person, property or otherwise, nor to be construed as an eviction of Tenant, nor work an abatement of rent, nor relieve Tenant from fulfillment of any

 

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covenant or agreement hereof. Should any of the equipment or machinery utilized in supplying the services listed herein break down, or for any cause cease to function properly, Landlord shall use reasonable diligence to repair the same promptly. Notwithstanding anything contained herein to the contrary, in the event of an interruption of any of the foregoing services which results directly from the gross negligence or willful misconduct of Landlord and renders the Premises untenantable for five (5) consecutive business days, provided such loss is not otherwise covered by any insurance maintained, or required hereunder to be maintained, by Tenant, then from and after the expiration of said five (5) business day period, Tenant shall have no obligation to pay any Rent hereunder until the earlier of: (i) the date such services are restored to the Premises or (ii) the date of Tenant’s occupancy of the Premises.

5.04 TELEPHONE AND INTERNET

Tenant shall make arrangements directly with a telephone company and internet service provider for telephone and internet service in the Premises desired by Tenant. Tenant shall pay for all telephone and internet service used or consumed in the Premises, including the cost of installation, maintenance and replacement of any items.

5.05 ELECTRICITY USE

A. Landlord shall furnish electrical energy required for lighting, electrical facilities, equipment, machinery, fixtures and appliances used in or for the benefit of the Premises, in accordance with the provisions of this Lease. Tenant shall not, without prior written notice to Landlord in each instance, connect to the Building electric distribution system any fixtures, appliances or equipment other than normal office machines such as desk-top computers, copiers and fax machines, or any fixtures, appliances or equipment which Tenant on a regular basis operates beyond the Building Operating Hours. In the event of any such connection, Tenant agrees to an increase in the Base Rent by an amount which will reflect the cost to Landlord of the additional electrical service to be furnished by Landlord, such increase to be effective as of the date of any such installation. If Landlord and Tenant cannot agree thereon, such amount shall be conclusively determined by a reputable independent electrical engineer or consulting firm to be selected by Landlord and paid equally by both parties, and Tenant shall pay to Landlord as Additional Rent the cost of the service.

B. Tenant’s use of electrical energy in the Premises shall not at any time exceed the capacity of any of the electrical conductors or equipment in or otherwise serving the Premises. In order to insure that such capacity is not exceeded and to avert possible adverse effect upon the Building electric service, Tenant shall not, without prior written notice to Landlord in each instance, connect to the Building electric distribution system any fixtures, appliances or equipment which operate on a voltage in excess of 120 volts nominal or make any alteration or addition to the electric system of the Premises. Unless Landlord shall object to the connection of any such fixtures, appliances or equipment, all additional risers or other equipment required therefor shall be provided by Landlord, and the cost thereof shall be paid by Tenant upon Landlord’s demand. In the event of any such connection, Tenant agrees to pay as Additional Rent the amount which will reflect the cost to Landlord of the additional service to be furnished by Landlord, such increase to be effective as of the date of any such connection. If Landlord and Tenant cannot agree thereon, such amount shall be conclusively determined by a reputable independent electrical engineer or consulting firm to be selected by Landlord and paid equally by both parties, and the cost of said consultant to the Landlord will be included in Operating Costs.

 

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C. Whenever the Base Rent is increased or decreased pursuant to any of the foregoing paragraphs of this Section, the parties agree, upon request of either, to execute and deliver each to the other an amendment to this Lease confirming such increase or decrease.

5.06 EFFECTS OF TENANT’S EQUIPMENT

If any lights, machines or equipment (including but not limited to computers) are used by Tenant in the Premises which materially affect the temperature otherwise maintained by the air conditioning system, or generate substantially more heat in the Premises than would be generated by the Building standard lights and usual fractional horsepower office equipment, Landlord shall have the right to install any machinery or equipment which Landlord reasonably deems necessary to restore temperature balance, including, but not limited to, modifications to the standard air conditioning equipment, and the cost thereof, including the cost of installation and any additional cost of operation and maintenance occasioned thereby, shall be paid by Tenant to Landlord within thirty (30) days after the date of Landlord’s invoice.

6. USE AND ENJOYMENT

6.01 USE OF PREMISES

Tenant shall occupy and use the Premises for operating general office and administrative functions only. Tenant shall not occupy or use the Premises or permit the use or occupancy of the Premises for any purpose or in any manner which: (1) is unlawful or in violation of any applicable legal, governmental or quasi-governmental requirement, ordinance or rule (including the Board of Fire Underwriters); (2) may be dangerous to persons or property; (3) may invalidate or increase the amount of premiums for any policy of insurance affecting the Building or the Complex, and if any additional amounts of insurance premiums are so incurred, Tenant shall pay to Landlord the additional amounts on demand and such payment shall not authorize such use; (4) may create a nuisance, disturb any other tenant of the Building or the Complex or the occupants of neighboring property or injure the reputation of the Building or the Complex; or (5) violates the Rules and Regulations of the Building or any restrictions of record.

6.02 QUIET ENJOYMENT

So long as there is no Event of Default by Tenant under this Lease and provided that Tenant pays the rental and other sums herein recited and performs all of Tenant’s covenants and agreements herein contained, Tenant shall be entitled to peaceful and quiet enjoyment of the Premises, subject to the terms of this Lease.

 

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6.03 COMMON AREAS

A. For purposes of this Lease “Common Areas” shall mean all areas, improvements, space, equipment and special services in or at the Complex provided by Landlord for the common or joint use and benefit of tenants, customers and other invitees, including, without limitation, the garage, access roads, driveways, entrances and exits, retaining walls, landscaped areas, truck serviceways or tunnels, loading docks, pedestrian walk-ways, atriums, walls, courtyards, stairs, ramps, sidewalks, washrooms, signs identifying or advertising the Complex, maintenance and utility rooms and closets, hallways, lobbies, elevators and their housing and rooms, common window areas, walls and ceilings in Common Areas, and trash and rubbish areas.

B. Provided there is no uncured default by Tenant under this Lease, Tenant shall be entitled to use, in common with others entitled thereto, the Common Areas as may be designated from time to time by Landlord, subject however to the terms and conditions of this Lease and to the rules and regulations for the use thereof as may be prescribed from time to time by Landlord. If the size or configuration of the Common Areas is diminished or altered, Landlord shall not be liable to Tenant therefor, nor shall Tenant be entitled to any compensation or diminution or abatement of Adjusted Monthly Base Rent, nor shall such diminution or alteration of the Common Areas be considered a constructive or actual eviction.

C. Notwithstanding anything contained in this Lease, Tenant shall not utilize more than 3.5 parking spaces in the Common Areas per 1,000 square feet of Rentable Square Feet in the Premises. In the event Tenant desires additional parking in the Common Areas, additional spaces (subject to availability) may be provided by Landlord at a cost of $50.00 per space, per month, subject to increase by Landlord from time to time; provided, however, that Landlord has no obligation to provide additional parking spaces to Tenant and Landlord may revoke additional parking spaces previously granted to Tenant at anytime, in Landlord’s sole discretion.

7. CONDITION OF PREMISES

Tenant shall be conclusively presumed to have accepted the Premises in the condition existing on the Commencement Date, and to have waived all claims relating to the condition of the Premises. No agreement of Landlord to alter, remodel, decorate, clean or improve the Premises, the Building, the Common Areas or the Complex, and no representation regarding the condition of the Premises, the Building, the Common Areas or the Complex has been made by or on behalf of Landlord to Tenant, except as stated in this Lease.

8. ASSIGNMENT AND SUBLETTING

8.01 ASSIGNMENT AND SUBLETTING

A. Without the prior written consent of Landlord, which consent shall not be unreasonably withheld, conditioned or delayed, Tenant shall not sublease the Premises, or assign, mortgage, pledge, encumber, hypothecate or otherwise transfer or permit the transfer of this Lease or the interest of Tenant in this Lease, in whole or in part, by operation of law, court decree or otherwise. In no case shall Tenant be allowed to: (i) assign its interest in this Lease nor sublet the Premises to (a) a governmental body, agency or bureau; any foreign government or subdivision thereof; any health care professional or health care service organization; schools or similar organizations; employment agencies; radio, television or other communication stations;

 

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restaurants; and retailers offering retail services from the Premises, or (b) a third party which does not maintain a use and density of the Premises reasonably comparable to Tenant; (ii) allow any lien to be placed upon Tenant’s interest hereunder; (iii) permit the use or occupancy of the Premises or any part thereof by anyone other than Tenant, its guests and/or invitees; (iv) sublease the Premises for less than sixty-seven percent (67%) of the Rent that Tenant is obligated to pay under this Lease, or (v) sublease the Premises or assign the Lease to any existing tenant of the Complex. If Tenant intends to assign its interest in this Lease or enter into any sublease of the Premises, Tenant shall deliver written notice of such intent to Landlord, together with a copy of the proposed assignment or sublease, at least thirty (30) days prior to the effective date of the proposed assignment or commencement date of the term of the proposed sublease. Any approved sublease shall be expressly subject to the terms and conditions of this Lease, and Tenant shall pay Landlord on the first day of each month during the term of the sublease or assignment fifty percent (50%) of any excess rent and other consideration due from the subtenant for such month, less the expenses, including marketing and advertising, leasing commissions, architectural fees, tenant improvements and vacancy period, reasonably related to the sublease or assignment, over that portion of the Adjusted Monthly Base Rent due under this Lease for said month which is allocable on a square footage basis to the space sublet. In the event of any sublease or assignment, Tenant shall not be released or discharged from any liability, whether past, present or future, under this Lease, including any Extension Term of this Lease.

B. Any request by Tenant for Landlord’s consent to a specific assignment or sublease shall include (i) the name of the proposed assignee, sublessee or occupant, (ii) the nature of the proposed assignee’s, sublessee’s or occupant’s business to be carried on in the Premises, (iii) a copy of the proposed assignment or sublease, (iv) such financial information (in the event of an assignment) and such other information as Landlord may reasonably request concerning the proposed assignee, sublessee or occupant or its business, and (v) an amount equal to One Thousand and No/100 Dollars ($1,000.00), which amount shall be applied towards Landlord’s costs incurred in obtaining advice and preparing documentation for such assignment or sublease. Further, Tenant shall, on demand of Landlord, reimburse Landlord for all Landlord’s reasonable costs, including reasonable attorneys’ fees, incurred by Landlord in obtaining advice and preparing documentation for each requested assignment or sublease.

C. No consent by Landlord to any assignment or sublease by Tenant, and no specification in this Lease of a right of Tenant to make any assignment or sublease, shall relieve Tenant of any obligation to be performed by Tenant under this Lease, whether arising before or after (i) the assignment or sublease or (ii) any extension of the Lease Term (pursuant to exercise of any option granted in this Lease). The consent by Landlord to any assignment or sublease shall not relieve Tenant or any successor of Tenant from the obligation to obtain Landlord’s express written consent to any other assignment or sublease.

D. Notwithstanding anything contained in this Lease, no proposed assignment or sublease shall provide for a rental or other payment for the leasing, use, occupancy or utilization of all or any portion of the Premises based, in whole or in part, on the income or profits derived by any person from the Premises so leased, used, occupied or utilized. No proposed assignment of an interest in this Lease or a sublease of the Premises shall, in the sole opinion of Landlord, (a) cause a violation of the Employee Retirement Income Security Act of 1974 or the regulations promulgated thereunder, as amended from time to time, by such proposed assignee or subtenant,

 

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by Landlord, or any person which, directly or indirectly, controls, is controlled by, or is under common control with, Landlord or any person who controls Landlord, (b) result in Landlord, or any person which, directly or indirectly, controls Landlord, receiving “unrelated business taxable income” as defined in the Internal Revenue Code, as amended, or (c) be permitted to any person or entity that is in violation of the Order (hereinafter defined). Furthermore, no assignment or sublease shall be valid until the assignee has executed and delivered an assumption of all of Tenant’s obligations hereunder.

E. Notwithstanding any contrary provision of this Section except for subsection G below, Landlord’s consent shall not be necessary for any assignment or subletting to any person or entity (i) which controls, is controlled by, or is under common control with, Tenant; or (ii) that succeeds to the interest in Tenant’s stock or assets (by merger or otherwise), provided such assignee has a tangible net worth immediately following such assignment, equal to or greater than that of Tenant as of the Commencement Date, as determined by Landlord in its reasonable discretion. In the event of an assignment or subletting pursuant to this Section 8.01E, (a) Tenant shall have notified Landlord in writing sixty (60) days prior to such assignment or subletting of its intent to effect the same, (b) at the time of assignment or subletting, no Event of Default by Tenant shall have occurred and be continuing, and (c) the proposed assignee or subtenant shall deliver to Landlord a written agreement whereby it expressly assumes all of the Tenant’s obligations under this Lease.

F. If, with the consent of Landlord, the Premises or any part thereof is sublet or occupied by any person or entity other than Tenant or this Lease is assigned, Landlord, during the continuance of an Event of Default hereunder on the part of Tenant, if any, may collect rent from the subtenant, assignee or occupant, and apply the net amount collected to rent due by Tenant to Landlord under this Lease and any other sums herein reserved. No such subletting, assignment, occupancy, or collection shall be deemed (i) a waiver of any of Tenant’s covenants contained in this Lease, (ii) a release of Tenant from further performance by Tenant of its covenants under this Lease, or (iii) a waiver of any of Landlord’s other rights hereunder.

G. Because of obligations imposed upon Landlord under the Ground Lease (as defined in Section 24.01 hereof), Tenant acknowledges and accepts that as a condition of any sublease or assignment, the business of such subtenant or assignee must at all times and in some way be connected or associated with North Carolina State University (the “University”) such that said subtenant or assignee would be qualified to lease space directly from the University in accordance with the University’s policies for leasing to tenants on Centennial Campus (a “Permitted Tenant”). In the event of a dispute concerning the qualifications of a subtenant or assignee, the question will be presented to the University’s Vice Chancellor for Research, Outreach, Extension and Economic Development for a decision. Should the subtenant or assignee be dissatisfied with the decision of the Vice Chancellor, the subtenant or assignee shall have the right to submit the question to the Chancellor of the University, whose decision shall be final. Notwithstanding the foregoing, the University has agreed that: (a) it will not deny Permitted Tenant status to any applicant for reasons other than failure to meet the criteria generally applicable to other prospective tenants within Centennial Campus; and (b) any applicant for Permitted Tenant status which, at the time of such application, is already a tenant in good standing in Centennial Campus shall be granted Permitted Tenant status automatically.

 

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8.02 RECAPTURE

Except in the event of an assignment or subletting in accordance with the terms of Section 8.01E above, if Tenant desires to enter into any sublease or assignment of the Premises, Landlord shall have the option to exclude from the Premises covered by this Lease, the space proposed to be sublet by Tenant or the entire Premises in the case of a proposed assignment by Tenant, effective as of the proposed commencement date of the sublease or assignment. Landlord may exercise said option by giving Tenant written notice within thirty (30) days after receipt by Landlord of Tenant’s notice of the proposed sublease or assignment. If Landlord exercises said option, Tenant shall surrender possession of the proposed sublease space, or the Premises in the case of a proposed assignment, to Landlord on the effective date of exclusion of said space from the Premises covered by this Lease or the effective date of the assignment, as applicable, and neither party hereto shall have any future rights or liabilities with respect to said space under this Lease. Effective as of the date of exclusion of any portion of the Premises covered by this Lease pursuant to this paragraph, (i) the Monthly Base Rent shall be reduced in the same proportion as the number of square feet of Rentable Area contained in the portion of the Premises so excluded bears to the number of square feet of Rentable Area contained in the Premises immediately prior to such exclusion, and (ii) the Rentable Area of the Premises specified in Section 1.01I hereof shall be decreased by the number of square feet of Rentable Area contained in the portion of the Premises so excluded, for all purposes under this Lease.

9. MAINTENANCE

9.01 LANDLORD’S MAINTENANCE

Landlord shall maintain the Building in a manner which is comparable with other comparable buildings in the Raleigh/Durham market, and in substantial compliance with applicable laws, regulations, ordinances and codes; however, any non-compliance shall not materially impair Tenant’s use and enjoyment of the Premises or constitute a threat or danger to the health or safety of Tenant or Tenant’s Invitees. Landlord’s repairs and replacements shall be made as soon as reasonably possible using due diligence and reasonable efforts, taking into account in each instance all circumstances surrounding the repair or replacement including without limitation, the materiality of the repair or replacement to Tenant’s use and operation of its business within the Premises and the relation thereof to the enjoyment of same, such period not to exceed 60 days after receiving written notice from Tenant of the need for repairs or such longer period of time as is reasonably necessary under the circumstances so long as Landlord is diligently pursuing the completion of same. Subject to reimbursement in accordance with the terms of Article 4 hereof, Landlord, at its expense, shall maintain and make necessary repairs to, and keep in good order, condition and repair, the Premises, the Building and the Common Areas, and, subject to Section 15.04 of this Lease, the electrical, plumbing, heating, ventilation and air conditioning systems of the Building and the Common Areas, except that:

A. Landlord shall not be responsible for the maintenance, repair or replacement of any such systems which are located within the Premises and are supplemental or special to the Building’s standard systems, or floor or wall coverings in the Premises, or any other leasehold improvements installed by Tenant;

 

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B. The cost of performing any of said maintenance or repairs caused by Tenant, its employees, agents, servants, licensees, subtenants, contractors or invitees, or the failure of Tenant to perform its obligations under this Lease shall be paid by Tenant, except to the extent waived pursuant to Section 11.03 hereof; provided, however, Landlord, at its option, may make such repairs or replacements, and Tenant shall repay Landlord on demand the actual cost thereof (including a reasonable charge for Landlord’s overhead) of such costs for administrative cost recovery); and

C. Landlord shall not be required to maintain or repair any portion of the Premises that Tenant is expressly obligated to maintain pursuant to Section 9.02 below.

9.02 TENANT’S MAINTENANCE

At Tenant’s own cost and expense, and by use of a contractor or contractors approved in writing by Landlord, Tenant shall maintain, repair and replace the Premises as needed to keep all interior, non-structural portions of the Premises in good order, condition, and repair, normal wear and tear excluded, including, without limitation, the following: (a) all leasehold improvements; (b) all fixtures, interior walls, floors, carpets, draperies, window coverings and ceilings; and (c) all interior windows, doors, entrances and plate glass. If Tenant fails to commence any such repairs within ten (10) days after written notice from Landlord, or fails thereafter to diligently proceed with such repair until completion, Landlord, at its option, may make such repair or any replacement deemed necessary by Landlord, and Tenant shall pay to Landlord on demand Landlord’s cost thereof (including a reasonable charge for Landlord’s overhead). Tenant shall not commit or allow any waste or damage to be committed on any portion of the Premises or Complex. Upon the expiration or any earlier termination of this Lease, Tenant shall return the Premises to Landlord in as good a condition as existed on the Commencement Date, ordinary wear and tear excepted.

9.03 MAINTENANCE OF COMMON AREAS

The Common Areas shall be subject to the control, management, operation and maintenance of Landlord. Landlord shall have the right from time to time to establish, modify and enforce reasonable rules and regulations with respect to the Common Areas. Tenant agrees to comply with such rules and regulations, to cause its officers, agents, contractors and employees to so comply and to use its best efforts to cause its customers, invitees, concessionaires, suppliers, and licensees to so comply. Landlord shall have the right to construct, maintain and operate lighting and other facilities in and on the Common Areas; to grant third parties temporary rights of use thereof; from time to time to change the area, level, location or arrangement of parking areas and other facilities located in the Common Areas; to close all or any portion of the Common Areas to such extent as may, in the opinion of Landlord, be legally sufficient to prevent a dedication thereof or accrual of any rights to any person or the public therein; and to do and perform such other acts in and to the Common Areas as, in the exercise of reasonable business judgment, Landlord shall determine to be advisable.

 

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10. ALTERATIONS

10.01 TENANT’S ALTERATIONS

Tenant shall not make or suffer to be made any alterations, additions or improvements to or of the Premises or any part thereof, or attach any fixtures or equipment thereto, without first obtaining Landlord’s consent, which consent shall not be unreasonably withheld with respect to interior, nonstructural alterations, additions or improvements; provided, however, Tenant shall have the right to make interior, non-structural alterations to the Premises which do not impact the Building structure or systems, do not require the issuance of a governmental permit or approval and are otherwise primarily decorative in nature (the cumulative cost of which shall not exceed Five Thousand Dollars ($5,000.00) in any given lease year upon fifteen (15) days prior written notice to Landlord (but without Landlord’s prior written consent). All such alterations, additions and improvements shall be performed by contractors and subject to reasonable conditions specified by Landlord. Landlord shall be entitled to the investment tax credit on eligible property acquired or constructed at Landlord’s expense. All such alterations, additions and improvements not so removed or required to be so removed shall immediately become Landlord’s property and, at the end of the term hereof, shall remain on the Premises without compensation to Tenant unless Landlord elects by notice to Tenant to have Tenant remove the same, in which event Tenant shall promptly restore the Premises to its condition prior to the installation of such alterations, additions and improvements.

10.02 LIENS

Tenant shall not permit any lien or claim for lien of any mechanic, laborer or supplier or any other lien to be filed against the Complex, the Building, the Common Areas, the Premises, or any part of such property arising out of work performed, or alleged to have been performed by, at the direction of, or on behalf of Tenant. If any such lien or claim for lien is filed, Tenant shall within ten (10) days after such filing either have such lien or claim for lien released of record or shall deliver to Landlord a bond or other security in form, content, amount, and issued by a company satisfactory to Landlord indemnifying Landlord and others designated by Landlord against all costs and liabilities resulting from such lien or claim for lien and the foreclosure or attempted foreclosure thereof. If Tenant fails to have such lien or claim for lien so released or to deliver such bond to Landlord, Landlord, without investigating the validity of such lien, may pay or discharge the same, the same shall constitute Additional Rent hereunder, and Tenant shall reimburse Landlord upon demand for the amount so paid by Landlord, including Landlord’s expenses and attorneys’ fees.

11. WAIVER OF CLAIMS AND INDEMNITY

11.01 WAIVER

To the full extent permitted by law, Tenant hereby releases and waives all claims against Landlord, Landlord’s lender, the Manager and their respective agents and employees for injury or damage to person, property or business sustained in or about the Complex, the Building or the

 

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Premises by Tenant, its agents or employees other than damage caused by the negligence of Landlord, Landlord’s lender, the Manager or their respective agents or employees. Notwithstanding anything to the contrary contained herein, in no event shall Landlord be liable to Tenant for any punitive or consequential damages.

11.02 INDEMNIFICATION

A. Except as expressly waived pursuant to the provisions of Section 11.03 hereof, Tenant agrees to indemnify, protect, defend and hold harmless Landlord, Landlord’s lender, the Manager and their respective agents and employees, from and against any and all liabilities, claims, demands, costs and expenses of every kind and nature (including reasonable attorneys’ fees and court costs), including those arising from any injury or damage to any person (including death), property or business (a) sustained in or about the Premises, (b) resulting from the occupancy or use by Tenant of the Premises, (c) resulting from the negligence or willful misconduct of Tenant, its employees, agents, contractors, invitees, licensees or subtenants, or (d) resulting from the failure of Tenant to perform its obligations under this Lease; provided, however, Tenant’s obligations under this Section 11.02.A. shall not apply to injury or damage resulting from the negligence or willful misconduct of Landlord, Landlord’s lender, the Manager or their respective agents or employees. With respect to the obligations of Tenant pursuant to this Section 11.02A, Tenant’s insurance shall be primary and noncontributory with regard to the Premises and Tenant’s operations. Landlord shall indemnify and save Tenant harmless against any and all claims, suits, demands, actions, fines, damages, and liabilities, and all costs and expenses thereof (including without limitation reasonable attorneys’ fees) attributable to Landlord’s to the extent caused or occasioned wholly or in part by Landlord’s (or its agent’s) gross negligence or intentional misconduct, except to the extent caused by the negligence or willful misconduct of Tenant.

B. If Landlord receives notice of a claim that is subject to indemnification under Section 11.02.A. above, Landlord shall give notice to Tenant as soon as reasonably practical. Landlord shall permit Tenant, at its expense, to assume the defense of any such claim by counsel selected by Tenant and reasonably satisfactory to Landlord, and to settle or otherwise dispose of the same; provided, however, that Landlord shall have the right to participate in such defense at its expense. Notwithstanding the foregoing, Tenant shall not, without the prior written consent of Landlord, consent to the entry to any judgment, or enter into any settlement, unless such judgment or settlement provides only for the payment of money damages by Tenant, and unless such judgment or settlement includes a release by the claimant or plaintiff of Landlord and its affiliates. If Tenant fails to undertake a defense within thirty (30) days after notice from Landlord, then Landlord shall have the right to undertake the defense of, and, compromise or settle such liability or claim on behalf of, and for the account of, Tenant.

C. The indemnification obligations under this Section 11.02 shall survive the expiration or earlier termination of the Lease Term with respect to any occurrences before the effective date of such expiration or termination.

 

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11.03 WAIVER OF SUBROGATION

Notwithstanding such waiver and indemnification or anything else to the contrary contained in this Lease:

A. Tenant shall not be responsible or liable to Landlord for any damage incurred by Landlord to the extent covered by property insurance obtained and maintained or required to be maintained under this Lease by Landlord in connection with the Building. Landlord shall cause its policy or policies of property insurance to contain effective waivers of subrogation for the benefit of Tenant.

B. Landlord, Landlord’s lender and the Manager shall not be responsible or liable to Tenant for any damage incurred by Tenant to the extent covered by property insurance required to be obtained and maintained by Tenant with respect to the Premises and its use and occupancy thereof (whether or not such property insurance is actually obtained or maintained) and the proceeds of such other insurance as is obtained and maintained by Tenant with respect to the Premises and to its use and occupancy thereof. Tenant shall provide Landlord with confirmation that waivers of subrogation have been effected by its insurers for the benefit of Landlord, Landlord’s lender and Manager, such confirmation and waivers to be in form satisfactory to Landlord.

12. EVENT OF DEFAULT

12.01 EVENTS OF DEFAULT

Each of the following shall constitute an event of default by Tenant under this Lease (each referred to herein as an “Event of Default”): (1) Tenant fails to pay within five (5) business days of its due date any rent or other sums which Tenant is obligated to pay as provided herein; provided, however, Landlord will give Tenant written notice and a five (5) day opportunity to cure its failure to pay rent or other sum due hereunder upon the first occasion in each calendar year that Tenant does not pay its rent or other sum due hereunder timely, but Landlord will not be required to give this notice more than one (1) time in any calendar year; (2) Tenant fails to observe or perform any of the other covenants, conditions or provisions of this Lease to be observed or performed by Tenant and fails to cure such default within fifteen business (15) days after written notice thereof to Tenant or such longer period (not to exceed an additional fifteen (15) business days) as may reasonably be necessary, provided Tenant is diligently pursuing a cure of such failure; (3) the interest of Tenant in this Lease is levied upon under execution or other legal process; (4) a petition is filed by or against Tenant to declare Tenant bankrupt or seeking a plan of reorganization or arrangement under any Chapter of the Bankruptcy Code, or any amendment, replacement or substitution therefor, or to delay payment of, reduce or modify Tenant’s debts, or any petition is filed or other action taken to reorganize or modify Tenant’s capital structure or upon the dissolution of Tenant; (5) Tenant is declared insolvent by law or any assignment of Tenant’s property is made for the benefit of creditors; (6) a receiver is appointed for Tenant or Tenant’s property; (7) Tenant assigns its interest in this Lease or sublets any portion of the Premises except as permitted in this Lease or Tenant shall otherwise breach the provisions of Article 8 of this Lease; or (8) Tenant abandons the Premises. Notwithstanding anything herein to the contrary, provided Tenant continues to pay rent upon vacating the Premises prior to the expiration of the Term, Landlord shall not consider such act abandonment.

 

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Notwithstanding the foregoing, no notice to Tenant shall be required, and an Event of Default shall automatically occur, if Tenant defaults under its obligations pursuant to Articles 17, 20 or 24 hereof. Any cash or other bonus, inducement or consideration for Tenant’s entering into this Lease, any rent credits, rent abatement or tenant improvement construction allowances provided to Tenant, or any and all direct and indirect costs incurred by Landlord arising out of the design or construction of any tenant improvements for the Premises (or allowances therefor) in connection with this Lease, all of which concessions are hereinafter collectively referred to as “Landlord Concessions,” shall be deemed conditioned upon Tenant’s full and faithful performance of all of the terms, covenants and conditions of this Lease to be performed by Tenant during the Term of this Lease.

12.02 LANDLORD’S REMEDIES

Upon the occurrence of an event of default by Tenant under this Lease, Landlord, at its option, without further notice or demand to Tenant and pursuant to legal process in the State of North Carolina, may in addition to all other rights and remedies provided in this Lease, at law or in equity:

A. Terminate this Lease and Tenant’s right of possession of the Premises, and recover all damages to which Landlord is entitled under law, specifically including (i) the cost of recovering the Premises (including, without limitation, reasonable attorneys’ fees and costs of suit), (ii) the cost as reasonably estimated by Landlord of any alterations of, or repairs to, the Premises which are necessary or proper to prepare the same for reletting (including repairs, alterations, improvements, additions, decorations, reasonable legal fees and brokerage commissions), (iii) the unpaid rent owed at the time of termination, plus interest thereon from the due date at the maximum rate permitted by law or fifteen percent (15%) per annum, whichever is less, (iv) the balance of the Monthly Base Rent for the remainder of the term of this Lease, (v) any other sum of money and damages owed by Tenant to Landlord, and (vi) any Landlord Concession abated, given, provided, paid or incurred by Landlord. In such case Landlord shall not be obligated to relet the Premises.

B. Terminate Tenant’s right of possession of the Premises without terminating this Lease, in which event Landlord may, but shall not be obligated to, relet the Premises, or any part thereof for the account of Tenant, for such rent and term and upon such other terms and conditions as are acceptable to Landlord. For purposes of such reletting, Landlord is authorized to redecorate, repair, alter and improve the Premises to the extent reasonably necessary. Until Landlord does relet the Premises, Tenant shall pay Landlord monthly on the first day of each month during the period that Tenant’s right of possession is terminated, a sum equal to the amount of Rent due under this Lease for such month (less any amount which Landlord could have realized if Landlord relet the Premises to a reputable, credit-worthy substitute tenant procured by Tenant and presented to Landlord in writing, which substitute tenant was ready, willing and able to lease the entire Premises from Landlord under a lease in form identical to the form of this Lease). If and when the Premises are relet and a sufficient sum is not realized from such reletting after payment of all Landlord’s expenses of reletting (including repairs, alterations, improvements, additions, decorations, legal fees and brokerage commissions) to satisfy the payment of Rent due under this Lease for any month, Tenant shall pay Landlord any such

 

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deficiency monthly upon demand. Tenant agrees that Landlord may file suit to recover any sums due to Landlord under this section from time to time and that such suit or recovery of any amount due Landlord shall not be any defense to any subsequent action brought for any amount not previously reduced to judgment in favor of Landlord. If Landlord elects to terminate Tenant’s right to possession only without terminating this Lease, Landlord may, at its option, enter into the Premises, remove Tenant’s signs and other evidences of tenancy, and take and hold possession thereof, as stated in Article 13 of this Lease; provided, however, that such entry and possession shall not terminate this Lease or release Tenant, in whole or in part, from Tenant’s obligation to pay the Rent reserved hereunder for the full Lease Term or from any other obligation of Tenant under this Lease.

C. In the event a petition is filed by or against Tenant seeking a plan of reorganization or arrangement under the Bankruptcy Code, Landlord and Tenant agree, to the extent permitted by law, that the trustee in bankruptcy shall determine within sixty (60) days after commencement of the case, whether to assume or reject this Lease.

12.03 ATTORNEYS’ FEES

Tenant shall pay, upon demand, all costs and expenses, including attorneys’ fees, actually and reasonably incurred by Landlord in enforcing Tenant’s obligations under this Lease or resulting from Tenant’s default under this Lease. Landlord shall pay, upon demand, all costs and expenses, including attorneys’ fees, actually and reasonably incurred by Tenant in enforcing Landlord’s obligations under this Lease or resulting from Landlord’s default under this Lease.

13. SURRENDER OF PREMISES

Upon the expiration or termination of this Lease or termination of Tenant’s right of possession of the Premises, Tenant shall surrender and vacate the Premises immediately and deliver possession thereof to Landlord in a clean, good and tenantable condition, ordinary wear and latent defects excepted, and shall remove from the Premises any alterations that Tenant is required to remove under the provisions of this Lease and all of Tenant’s personal property (including, without limitation, all voice and data cabling). Upon any termination which occurs other than by reason of an Event of Default, Tenant shall be entitled to remove from the Premises all unattached and movable trade fixtures and personal property of Tenant without credit or compensation from Landlord, provided Tenant shall immediately repair all damage resulting from such removal and shall restore the Premises to a tenantable condition. In the event possession of the Premises is not immediately delivered to Landlord or if Tenant shall fail to remove any unattached and movable trade fixtures or personal property which Tenant is entitled to remove, Landlord may remove same without any liability to Tenant. Any movable trade fixtures and personal property which may be removed from the Premises by Tenant but which are not so removed upon the vacancy of the Premises shall be conclusively presumed to have been abandoned by Tenant and title to such property shall pass to Landlord without any payment or credit, and Landlord may, at its option and at Tenant’s expense, store and/or dispose of such property.

 

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14. HOLDING OVER

In the event Tenant retains possession of the Premises, or any part of the Premises, after the expiration or termination of this Lease, or the termination of Tenant’s right of possession of the Premises, then Tenant shall pay one hundred fifty percent (150%) of the Adjusted Monthly Base Rent then applicable for each month or partial month during such holdover period. In addition, Tenant shall pay any Additional Rent accrued during such period of holdover. Tenant shall indemnify Landlord against all liabilities and damages sustained by Landlord by reason of such retention of possession. The provisions of this Article shall not constitute a waiver by Landlord of any re-entry rights of Landlord available under this Lease or by law. If Tenant retains possession of the Premises, or any part of the Premises, after the expiration or termination of this Lease, then such holding over shall constitute a tenancy-at-will on the same terms and conditions contained herein, terminable by Landlord at any time without any prior notice.

15. DAMAGE BY FIRE OR OTHER CASUALTY

15.01 SUBSTANTIAL UNTENANTABILITY

If either the Premises, the Building or the Complex is rendered substantially untenantable by fire or other casualty, Landlord may elect by giving Tenant written notice within one hundred twenty (120) days after the date of said fire or casualty, either to: (1) terminate this Lease as of the date of the fire or other casualty; or (2) proceed to repair or restore the Premises, the Building or the Complex (other than leasehold improvements installed by Tenant after the Commencement Date and personal property installed by Tenant) to substantially the same condition as existed immediately prior to such fire or casualty.

If Landlord elects to proceed pursuant to option (2) in the immediately preceding paragraph, Landlord’s notice shall contain Landlord’s reasonable estimate of the time required to substantially complete such repair or restoration. If such estimate indicates that the time so required will exceed one hundred eighty (180) days from the date of the casualty, then Tenant shall have the right to terminate this Lease as of the date of such casualty by giving written notice to Landlord not later than twenty (20) days after the date of the Landlord’s notice. If Landlord’s estimate indicates that the repair or restoration can be substantially completed within one hundred eighty (180) days, or if Tenant fails to exercise its said right to terminate this Lease, this Lease shall remain in force and effect.

15.02 INSUBSTANTIAL UNTENANTABILITY

If either the Premises, the Building or the Complex is damaged by fire or other casualty but the Premises is not rendered substantially untenantable, then Landlord shall diligently proceed to repair and restore the damaged portions thereof, other than the leasehold improvements installed by Tenant after the Commencement Date and personal property installed by Tenant, to substantially the same condition as existed immediately prior to such fire or casualty, unless such damage occurs during the last twelve (12) months of the Lease Term, in which event Landlord shall have the right to terminate this Lease as of the date of such fire or other casualty by giving written notice to Tenant within thirty (30) days after the date of such fire or other casualty; provided, however, that Landlord shall not be required to make repairs or restoration beyond the extent of insurance proceeds actually received by Landlord for such repairs or restoration.

 

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15.03 RENT ABATEMENT

If all or any part of the Premises is damaged by fire or other casualty and this Lease is not terminated, Adjusted Monthly Base Rent shall abate for all or that part of the Premises which is untenantable on a per diem and proportionate area basis from three (3) days after the date of the fire or other casualty until Landlord has substantially completed the repair and restoration work in the Premises which it is required to perform, provided, that as a result of such fire or other casualty, Tenant does not occupy the untenantable portion of the Premises during such period.

15.04 TENANT’S RESTORATION

If all or any part of the Premises is damaged by fire or other casualty and this Lease is not terminated, Tenant shall promptly and with due diligence repair and restore the leasehold improvements installed by Tenant after the Commencement Date and personal property previously installed by Tenant in the Premises.

16. EMINENT DOMAIN

16.01 PERMANENT TAKING

If all or any part of the Premises, the Building or the Complex is permanently taken or condemned by any competent authority for any public use or purpose (including a deed given in lieu of condemnation), which renders the Premises substantially untenantable, this Lease shall terminate as of the date title vests in such authority, and Adjusted Monthly Base Rent shall be apportioned as of such date.

16.02 INSUBSTANTIAL TAKING

If any part of the Premises, the Building or the Complex is taken or condemned for any public use or purpose (including a deed given in lieu of condemnation) and this Lease is not terminated pursuant to Section 16.01 hereof, Adjusted Monthly Base Rent shall be reduced for the period of such taking by an amount which bears the same ratio to Adjusted Monthly Base Rent then in effect as the number of square feet of Rentable Area in the Premises so taken or condemned, if any, bears to the number of square feet of Rentable Area specified in Section 1.01I of this Lease. Landlord, upon receipt and to the extent of the award in condemnation or proceeds of sale, shall make necessary repairs and restorations (exclusive of leasehold improvements and personal property installed by Tenant) to restore the Premises remaining to as near its former condition as circumstances will permit, and to the Building and Complex to the extent necessary to constitute the portion of same not so taken or condemned as a complete architectural unit. In the event of any taking or condemnation described in this Section 16.02, the Rentable Area of the Premises stated in Section 1.01I and the Rentable Area of the Building as specified in this Lease, shall be reduced, respectively, for all purposes under this Lease by the number of square feet of Rentable Area of the Premises, if any, and the Building, if any, so taken or condemned as determined and certified by an independent professional architect selected by Landlord.

 

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16.03 COMPENSATION

Landlord shall be entitled to receive the entire price or award from any such sale, taking or condemnation without any payment to Tenant, and Tenant hereby assigns to Landlord Tenant’s interest, if any, in such award; provided, however, Tenant shall have the right separately to pursue against the condemning authority an award in respect of the loss, if any, to leasehold improvements paid for by Tenant without any credit or allowance from Landlord. Under no circumstances shall the Tenant seek or be entitled to any compensation for the value of its leasehold estate.

17. TENANT’S INSURANCE

17.01 TENANT’S INSURANCE

Tenant, at its expense, shall maintain in force during the Lease Term each of the following (and in the case of A., C. and E. below, Tenant shall cause such insurance to be maintained by any contractor or vendor retained by Tenant to work on or at the Premises):

A. Commercial General Liability Insurance (2001 ISO form or its equivalent) in the amount of at least One Million and No/100 Dollars ($1,000,000.00) per occurrence, with a General Aggregate limit of at least Two Million and No/100 Dollars ($2,000,000.00), or such greater amounts as Landlord may reasonably require. Such insurance shall be on an occurrence basis with respect to the business carried on in or from the Premises and Tenant’s use and occupancy of the Premises. Tenant further agrees that such insurance shall contain fire and extended coverage legal liability insurance.

B. The equivalent of ISO Special Form Property Insurance covering Tenant’s property (including fixtures, leasehold improvements and equipment) located in the Premises, providing protection to the extent of one hundred percent (100%) of the replacement cost of such property, less a commercially reasonable deductible, not to exceed $25,000.00, and such other property insurance against such other perils and in such amounts as Landlord may from time to time reasonably require, such requirement to be made on the basis that the required insurance is customary at the time for prudent tenants of properties similar to the Building in the Raleigh, North Carolina area. Tenant further agrees that such insurance shall include extra expense coverage and Business Interruption coverage in an amount sufficient to cover the Rent and other sums payable under this Lease for a period of twelve (12) months, commencing with the date of loss.

C. Statutory Workers’ Compensation Insurance and Employer’s Liability Insurance with minimum limits of at least $500,000/$500,000/$500,000.

 

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D. Business Auto Liability Insurance which insures against bodily injury and property damage claims arising out of the ownership, maintenance or use of “any auto.” A minimum of $1,000,000 combined single limit shall apply.

E. Umbrella Liability insurance which provides excess coverage over the underlying Commercial General Liability, Automobile Liability, and Employers Liability policies previously described. The Umbrella policy should provide minimum limits of liability of $4,000,000 per occurrence and aggregate, and the aggregate limit should be provided on a “per location basis.”

Each policy of insurance required to be maintained by Tenant pursuant to this Article 17 shall be placed with insurance companies admitted to do business in the State where the Complex is located and carrying a current rating of at least A-IX in “Best’s Insurance Guide” and shall contain an endorsement requiring thirty (30) days’ written notice from the insurance company to Landlord, Landlord’s lender and the Manager prior to any cancellation or material reduction in coverage of the policy. The policy of insurance required by paragraphs A and E above shall name Landlord, Landlord’s lender, Landlord’s real estate asset manager, the Manager, and such other parties as Landlord may designate in writing from time to time as additional insureds. Prior to the Commencement Date, and annually thereafter, Tenant shall deliver to Landlord certificates of insurance evidencing the policies of insurance required by this Article 17, together with satisfactory evidence of proof of payment of premiums. Landlord reserves the right to require Tenant to maintain additional insurance coverage as deemed necessary by Landlord in its reasonable discretion. Tenant’s insurance shall be primary and non-contributory with Landlord’s insurance.

17.02 LANDLORD’S INSURANCE

At all times during the Lease Term, Landlord shall maintain in full force and effect the equivalent of ISO Special Form Property Insurance providing protection to the extent of not less than one hundred percent (100%) of the replacement cost of the Building (less the cost of foundations and footings and excluding leasehold improvements). Nothing herein shall be construed to require Landlord to insure those items that Tenant is obligated to insure pursuant to Section 17.01B above.

18. RULES AND REGULATIONS

Tenant agrees for itself and for its subtenants, employees, agents, and invitees to comply with the rules and regulations attached hereto as Exhibit B and incorporated herein by this reference (the “Rules and Regulations”).

19. LANDLORD’S RIGHTS

By way of example and not limitation, Landlord shall have the following rights exercisable without notice (except as expressly provided to the contrary) and without being deemed an eviction or disturbance of Tenant’s use or possession of the Premises or giving rise to any claim for set-off or abatement of Rent: (1) to change the name or street address of the

 

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Building or the Complex, upon thirty (30) days’ prior written notice to Tenant; (2) to install, affix and maintain all signs on the exterior and/or interior of the Building and in and about the Complex; (3) to designate and/or approve prior to installation, all types of signs, window shades, blinds, drapes, awnings or other similar items, and all internal lighting that may be visible from the exterior of the Premises; (4) to display the Premises to prospective tenants at reasonable hours during the last nine (9) months of the Lease Term; (5) to change the arrangement of entrances, doors, corridors, elevators and stairs in the Building, provided that no such change shall materially adversely affect access to the Premises; (6) to grant to any party the exclusive right to conduct any business or render any service in or to the Building, provided such exclusive right shall not operate to prohibit Tenant from using the Premises for the purposes permitted hereunder; (7) to prohibit the placing of vending or dispensing machines of any kind in or about the Premises other than for use by Tenant’s employees; (8) to have access for Landlord and other tenants of the Building to any mail chutes and boxes located in or on the Premises according to the rules of the United States Post Office; (9) to close the Building after normal business hours, except that Tenant and its employees and invitees shall be entitled to admission at all times under such reasonable regulations as Landlord prescribes for security purposes; (10) to take any and all reasonable measures including inspections and repairs to the Premises or to the Building, as may be necessary or desirable in the operation or protection thereof; (11) to retain at all times master keys or pass keys to the Premises; (12) to install, operate and maintain security systems which monitor, by closed circuit television or otherwise, all persons entering and leaving the Building or the Complex; and (13) to install and maintain pipes, ducts, conduits, wires and structural elements located in the Premises which serve other parts or other tenants of the Building.

20. ESTOPPEL CERTIFICATE

Tenant shall from time to time, upon not less than ten (10) days’ prior written request by Landlord or any mortgagee or ground lessor of the Complex, deliver to Landlord or such mortgagee or ground lessor a statement in writing certifying: (1) that this Lease is unmodified and in full force and effect or, if there have been modifications, that this Lease, as modified, is in full force and effect; (2) the amount of Adjusted Monthly Base Rent then payable under this Lease and the date to which Rent has been paid; (3) that Landlord is not in default under this Lease, or, if in default, a detailed description of such default(s); (4) whether Tenant is or is not in possession of the Premises, as the case may be; and (5) such other information as may be requested. Failure to deliver such estoppel certificate within such ten (10) day period shall be deemed Tenant’s agreement to and acknowledgment of the statements contained therein and furthermore, if Tenant shall fail to deliver such estoppel certificate within such ten (10) day period, (i) Landlord shall automatically have the right to act as Tenant’s attorney in fact and execute the estoppel certificate on behalf of Tenant, and (ii) if, within two (2) business days after Tenant’s receipt of a second notice, Tenant fails to provide the estoppel certificate, Tenant shall pay liquidated damages to Landlord equal to Ten Thousand and No/100 Dollars ($10,000.00). The parties hereby stipulate and agree that Landlord’s damages in the event Tenant fails to provide the estoppel certificate are difficult to compute, and the foregoing fee is a reasonable estimate thereof and not a penalty.

 

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21. RELOCATION OF TENANT

Intentionally omitted.

22. SECURITY DEPOSIT

As security for the performance of its obligations under this Lease, Tenant shall pay to Landlord, currently with its execution of this Lease, a security deposit (“Security Deposit”) in the amount stated in Section 1.01J hereof. The Security Deposit may be applied by Landlord to cure any Event of Default of Tenant under this Lease, and upon notice by Landlord of such application, Tenant shall replenish the Security Deposit in full by promptly paying to Landlord the amount so applied within five (5) business days of notice from Landlord. Landlord shall not pay Tenant any interest earned on the Security Deposit. The Security Deposit shall not be deemed an advance payment of Rent or a measure of damages for any default by Tenant under this Lease, nor shall it be a bar or defense to any action which Landlord may at any time commence against Tenant. Landlord shall have the right to retain a reasonable amount of the Security Deposit following the expiration or earlier termination of this Lease in order to provide security for Tenant’s payment of Tenant’s Percentage Share of Adjusted Monthly Base Rent.

23. REAL ESTATE BROKERS

Tenant represents that, except for the broker, if any, set forth in Section 1.01L hereof as Tenant’s Broker, Tenant has not dealt with any real estate broker, salesperson, or finder in connection with this Lease, and no such person initiated or participated in the negotiation of this Lease, or showed the Premises to Tenant. Tenant agrees to indemnify and hold harmless Landlord and the Manager from and against any and all liabilities and claims for commissions and fees arising out of a breach of the foregoing representation. Landlord shall only be responsible for the payment of a commission to the brokers, if any, specified in Section 1.01L hereof, which payment shall be made only in accordance with the terms of a separate agreement between Landlord (or Manager) and Landlord’s broker.

24. SUBORDINATION AND ATTORNMENT

24.01 SUBORDINATION

This Lease and the rights of Tenant and obligations of Landlord hereunder are expressly subject and subordinate to any ground lease of the land comprising the Building now or hereafter existing (specifically including but not limited to that certain Office Building Ground Lease Agreement dated March 1, 2000, by and between The Board of Trustees of the Endowment Fund of North Carolina State University, as ground lessor, and Davis Sandler Three, LLC, as ground lessee) (as amended, assigned or otherwise modified, the “Ground Lease”), and all amendments, renewals, modifications and extensions of and to any said ground lease, and to the lien and provisions of any first lien mortgage now or hereafter existing encumbering the Complex, or any part thereof, or said ground leasehold estate, and all amendments, renewals and modifications and extensions of and to any said mortgage, and to all advances made or hereafter to be made upon the security of said mortgage. Tenant agrees to execute and deliver such further instruments subordinating this Lease to any such ground lease or the lien of any such mortgage as may be requested in writing by Landlord from time to time. As used herein, the term mortgage shall mean any first lien mortgage, deed of trust, deed to secure debt or other instruments used to secure debt.

 

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24.02 ATTORNMENT

In the event of the foreclosure of any such mortgage by voluntary agreement or otherwise, or the commencement of any judicial action seeking such foreclosure, or any transfer by a deed in lieu of foreclosure, or any similar transfer that is made in anticipation or upon threat of foreclosure, or any termination of the Ground Lease by ground lessor thereunder, Tenant, at the request of the then Landlord, shall attorn to and recognize such mortgagee, purchaser or ground lessor in foreclosure or otherwise as Tenant’s Landlord under this Lease. Tenant agrees to execute and deliver at any time upon request of such mortgagee, purchaser, or their successors, any instrument to further evidence such attornment.

25. HAZARDOUS MATERIALS

25.01 GENERATION OF HAZARDOUS MATERIALS

Tenant shall not use, generate, manufacture, produce, store, release, discharge or dispose of on, in, or under the Premises or the Complex, or transport to or from the Premises or Complex, any Hazardous Materials (as defined in subparagraph 5 below), or allow any other person or entity to do so.

25.02 COMPLIANCE WITH LAWS

Tenant shall comply with all local, state and federal laws, ordinances and regulations relating to health, safety and protection of the environment, including without limitation those relating to Hazardous Materials on, in, under, about or otherwise related to the Premises.

25.03 NOTIFICATION

Tenant shall promptly notify Landlord should Tenant receive notice of, or otherwise become aware of, any: (a) pending or threatened environmental regulatory action against Tenant, the Premises or the Complex; (b) claims made or threatened by any third party relating to any loss or injury resulting from any Hazardous Material; (c) release or discharge, or threatened release or discharge, of any Hazardous Material in, on, under or about the Premises or the Complex; or (d) violation of any local, state or federal law, ordinance or regulation relating to health, safety, protection of the environment or Hazardous Materials on the Premises, in the Building or in the Complex.

25.04 INDEMNIFICATION

Tenant agrees to indemnify, defend and hold Landlord, the Manager and their respective agents and employees harmless from and against any and all liabilities, claims, demands, costs and expenses of every kind and nature (including attorneys’ fees) directly or indirectly attributable to Tenant’s failure to comply with this Section 25, including, without limitation: (a)

 

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all consequential damages; and (b) the costs of any required or necessary repair, cleanup or detoxification of the Premises and/ or the Complex, and the preparation and implementation of any closure, remedial or other required plan. The indemnity contained in this Section 25.04 shall survive the termination or expiration of this Lease.

25.05 DEFINITION OF HAZARDOUS MATERIALS

As used in this Article 25, the term “Hazardous Materials” shall mean any element, compound, mixture, solution, particle or substance which is dangerous or harmful or potentially dangerous or harmful to the health or welfare of life or environment, including but not limited to explosives, petroleum products, radioactive materials, hazardous wastes, toxic substances or related materials, including, without limitation: (1) any substances defined as or included within the definition of “hazardous substances,” “hazardous wastes,” “hazardous materials,” “toxic substances,” “hazardous pollutants” or “toxic pollutants,” or other similar terms, as those terms are used in the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Hazardous Materials Transportation Act, the Toxic Substances Control Act, the Clean Air Act and the Clean Water Act, or any amendments thereto, or any regulations promulgated thereunder, and any other law or regulation promulgated by any federal, municipal, state, county or other governmental or quasi governmental authority and/or agency or department thereof; (2) any “PCBs” or “PCB items” (as defined in 40 C.F.R. §761.3); or (3) any “asbestos” (as defined in 40 C.F.R. §763.63); provided, however, that Tenant shall not be in default hereunder if it maintains in the Premises, and Tenant is hereby permitted to retain in the Premises, common office supplies and common cleaning solvents which may be considered as Hazardous Materials.

26. NOTICES

All notices required or permitted to be given under this Lease shall be in writing and shall be deemed given and delivered, whether or not received: (i) three (3) business days after being deposited in the United States Mail, postage prepaid and properly addressed, certified mail, return receipt requested, or (ii) on the next business day after being deposited with a nationally-recognized, overnight delivery service such as FedEx or UPS, at the addresses shown in Section 1.01 hereof or such other address as either party may designate for itself from time to time by written notice to the other party. In addition, any notice may be given by hand delivery to the notice address of either party with a signed receipt obtained.

27. MISCELLANEOUS

27.01 LATE CHARGES

All delinquent Rent shall bear interest at the maximum rate permitted by law or fifteen percent (15%) per annum, whichever is less, from the date that is thirty (30) days following the due date thereof (for purposes of this Section 27.01, the date Rent is due shall be without regard to any grace period for payment) until paid.

 

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27.02 ENTIRE AGREEMENT

This Lease and the Exhibits attached hereto contain the entire agreement between Landlord and Tenant concerning the Premises and there are no other agreements, either oral or written. This Lease may not be modified except by document in writing executed by Landlord and Tenant.

27.03 NO OPTION

The execution of this Lease by Tenant and delivery of same to Landlord or Manager does not constitute a reservation of or option for the Premises or an agreement to enter into a Lease, and this Lease shall become effective only if and when Landlord executes and delivers same to Tenant; provided, however, the execution and delivery by Tenant of this Lease to Landlord or the Manager shall constitute an irrevocable offer by Tenant to lease the Premises on the terms and conditions herein contained. If Tenant is a corporation, it shall, if requested by Landlord, deliver to Landlord certified resolutions of Tenant’s directors authorizing execution and delivery of this Lease and the performance by Tenant of its obligations hereunder. If Tenant is a partnership, every general partner thereof shall execute this Lease, unless a lesser number is deemed sufficient in the reasonable opinion of Landlord’s legal counsel.

27.04 ACCORD AND SATISFACTION

No payment by Tenant or receipt by Landlord of a lesser amount than any installment or payment of Rent due shall be deemed to be other than on account of the amount due, and no endorsement or statement on any check or any letter accompanying any check or payment of Rent shall be deemed an accord and satisfaction, and Landlord may accept such check or payment without prejudice to Landlord’s right to recover the balance of such installment or payment of Rent or pursue any other remedies available to Landlord. No receipt of money by Landlord from Tenant after the termination of this Lease or Tenant’s right of possession of the Premises shall reinstate, continue or extend the Lease Term.

27.05 BINDING EFFECT

This Lease shall be binding upon and inure to the benefit of Landlord and Tenant and their respective heirs, legal representatives, successors and permitted assigns.

27.06 FORCE MAJEURE

Neither party hereto shall be deemed in default with respect to any of the terms, covenants and conditions of this Lease, if such party fails to timely perform same and such failure is due in whole or in part to any strike, lockout, labor trouble (whether legal or illegal), civil disorder, inability to procure materials, failure of power, restrictive governmental laws and regulations, riots, insurrections, war, fuel shortages, accidents, casualties, Acts of God, acts caused directly or indirectly by the other party (or such other party’s agents, employees or invitees), terrorist action, aircraft or other aerial devices or articles dropped therefrom, or any other cause beyond the commercially reasonable control of the non-performing party; provided, however, that nothing herein shall excuse Tenant’s failure to pay Adjusted Monthly Base Rent or any other charges due to Landlord hereunder.

 

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27.07 CAPTIONS

The Article and Section captions in this Lease are inserted only as a matter of convenience and in no way define, limit, construe, or describe the scope or intent of such Articles and Sections.

27.08 APPLICABLE LAW

This Lease shall be construed in accordance with the laws of the state of North Carolina. Venue shall lie in any court of competent jurisdiction within the state of North Carolina.

27.09 TIME

Time is of the essence with respect to each and every provision of this Lease and the performance of all obligations hereunder.

27.10 LANDLORD’S RIGHT TO PERFORM TENANT’S DUTIES

If Tenant fails timely to perform any of its duties under this Lease, then Landlord shall have the right (but not the obligation), after the expiration of any grace period elsewhere under this Lease expressly granted to Tenant for the performance of such duty, to perform such duty on behalf and at the expense of Tenant without further prior notice to Tenant, and all sums expended or expenses incurred by Landlord in performing such duty shall be deemed to be Additional Rent under this Lease and shall be due and payable upon demand by Landlord.

27.11 RELATIONSHIPS

The relationship between Landlord and Tenant is that of landlord and tenant and nothing herein shall be construed to give rise to any other relationship including, without limitation, a creditor and debtor relationship.

27.12 INVALIDITY

If any term(s), condition(s), covenant(s), clause(s) or provision(s) herein contained shall operate or would prospectively operate to invalidate this Lease in whole or in part, then such term(s), condition(s), covenant(s), clause(s), and provision(s) only shall be held for naught as though not herein contained, and the remainder of this Lease shall remain operative and in full force and effect.

 

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27.13 LIMITATION OF LANDLORD’S LIABILITY

Anything contained in this Lease to the contrary notwithstanding, Tenant agrees that it shall look solely to the estate and property of the Landlord in the Building and the land thereunder for the collection of any judgment (or other judicial process) requiring the payment of money by Landlord for any default or breach by Landlord of any of its obligations under this Lease, subject, however, to the prior rights of any ground or underlying landlord or the holder of any mortgage covering the Building or of Landlord’s interest therein. No other assets of the Landlord shall be subject to levy, execution or other judicial process for the satisfaction of Tenant’s claim. This provision shall not be deemed, construed or interpreted to be or constitute an agreement, express or implied between Landlord and Tenant that the Landlord’s interest hereunder and in the Building shall be subject to impressment of an equitable lien or otherwise. Nothing herein contained shall be construed to limit any right of injunction against the Landlord, where appropriate.

27.14 TRANSFER OF LANDLORD’S INTEREST

In the event of the sale, assignment or transfer by Landlord of its interest in the Building or in this Lease (other than a collateral assignment to secure a debt of Landlord) to a successor in interest who expressly assumes the obligations of Landlord hereunder, Landlord shall thereupon be released or discharged from all of its covenants and obligations hereunder, except such obligations as shall have accrued prior to any such sale, assignment or transfer; and Tenant agrees to look solely to such successor in interest of Landlord for performance of such obligations. Any securities given by Tenant to Landlord to secure performance by Tenant of its obligations hereunder may be assigned by Landlord to such successor in interest of Landlord; and, upon acknowledgment by such successor of receipt of such security and its express assumption of the obligation to account to Tenant for such security in accordance with the terms of the Lease, Landlord shall thereby be discharged of any further obligation relating thereto. Landlord’s assignment of the Lease or of any or all of its rights herein shall in no manner affect Tenant’s obligations hereunder. Tenant shall thereafter attorn and look to such assignee, as Landlord, provided Tenant has first received written notice of such assignment of Landlord’s interest. Landlord shall have the right to freely sell, assign or otherwise transfer its interest in the Building and/or this Lease.

27.15 SIGNAGE

Tenant shall not place any sign on the Building or the Premises without Landlord’s prior written consent, which shall be in Landlord’s sole discretion. Landlord shall provide signage, including suite number, for Tenant within the lobby directory, at Tenant’s sole cost and expense. The form of such signage shall be commensurate with the Building’s current listings and overall appearance as determined by Landlord. Any subtenant permitted under the provisions of Section 8 hereof shall be responsible for cost incurred in installing additional signage.

27.16 OFAC AND PATRIOT ACT

Tenant and each of its subsidiaries, members, direct and indirect owners and their respective affiliates has at all applicable times been, is now and will in the future be, in compliance with U.S. Executive Order 13224 and Title 3 of the USA Patriot Act (collectively, the “Order”) and no action, proceeding, investigation, charge, claim, report or notice has been filed, commenced or threatened against any of them alleging any failure to so comply. Neither

 

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Tenant nor any of its subsidiaries, members, direct and indirect owners and their respective affiliates has knowledge or notice of any fact, event, circumstance, situation or condition which could reasonably be expected to result in (i) any action, proceeding, investigation, charge, claim, report or notice being filed, commenced or threatened against any of them alleging any failure to comply with the Order, or (ii) the imposition of any civil or criminal penalty against any of them for any failure to so comply. Neither Tenant nor its members are included in the OFAC List set forth in the Order or 31 CFR Ch V (Part 595) Appendix A.

27.17 TENANT IMPROVEMENT ALLOWANCE

Tenant shall be entitled to an allowance equal to Sixty-Five Thousand Four Hundred Five and No/100 Dollars ($65,405.00) (the “Tenant Improvement Allowance”) to be used solely for the installation of showers and lockers in the Premises (collectively, the “Tenant Improvements”) in accordance with contractual arrangements to be made between Tenant and a contractor and architect approved by Landlord, which approval will not be unreasonably withheld, conditioned or delayed, and payment of Landlord’s construction management fee equal to 5% of the hard and soft cost of the Tenant Improvements.. To the extent the cost of the Tenant Improvements exceeds the Tenant Improvement Allowance (“Tenant’s Costs”), Tenant shall be responsible for such Tenant’s Costs. To the extent the cost of the Tenant Improvements is less than the Tenant Improvement Allowance, Landlord shall retain the difference, and Tenant shall have no right or claim thereto. Tenant shall use the Tenant Improvement Allowance within nine (9) months following the date of this Lease (during the period of time that Tenant is in possession of the Premises under a sublease that Landlord is not a party to), and Landlord shall have no obligation to pay any invoices related to the Tenant Improvements that are submitted to Landlord after such nine (9) month period. Concurrently with Tenant’s request for any portion of the Tenant Improvement Allowance, Tenant shall provide the following information to Landlord: (i) a lien waiver from the contractor(s) installing the Tenant Improvements; (ii) an invoice from the contractor(s); and (iii) such other information as is requested by Landlord. Landlord shall have the right to approve the exact plans for the Tenant Improvements prior to the installation of the same within the Premises. Tenant hereby represents and warrants to Landlord that Tenant has the right, under its sublease for the Premises, to install the Tenant Improvements within the Premises.

27.18 EXHIBITS

ALL EXHIBITS ATTACHED HERETO SHALL BE DEEMED TO BE A PART HEREOF AND HEREBY INCORPORATED HEREIN.

[Signature page follows]

 

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IN WITNESS WHEREOF, this Lease has been executed as of the date set forth in Section 1.01D hereof.

 

 

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EXHIBIT A-1

LEGAL DESCRIPTION OF THE LAND UPON WHICH THE BUILDING IS LOCATED

BEGINNING at a new iron pin in the southern right of way of Varsity Drive. Said pin lies South 85 degrees 14 minutes 28 seconds West, a distance of 327.90 feet from a North Carolina State University grid monument designated LOMBARDI which has grid coordinates of Northing: 736,749.66 feet and Easting: 2,095,852.59 based on NAD 1983.

Running thence from said point of BEGINNING, and with the southern right of way line of Varsity Drive, South 64 degrees 02 minutes 44 seconds East, a distance of 217.09 feet to a new iron; thence, with the southern right of way of Varsity Drive and the western right of way of Main Campus Drive, a curve to the right having a radius of 40.00 feet, an arc length of 51.74 feet, and a chord of South 26 degrees 59 minutes 16 seconds East a distance of 48.21 feet to a new iron; thence South 10 degrees 04 minutes 11 seconds West, a distance of 155.47 feet to survey nail set in a brick sidewalk; thence North 79 degrees 59 minutes 27 seconds West, a distance of 237.58 feet to a point; thence North 10 degrees 00 minutes 33 seconds East, a distance of 253.61 feet to the POINT OF BEGINNING and containing 1.19 acres, more or less.

 

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EXHIBIT B

RULES AND REGULATIONS

1. The Landlord may refuse admission to the Building outside of ordinary business hours to any person not known to the watchman in charge or not properly identified, and may require all persons admitted to or leaving the Building outside of ordinary business hours to register. Any person whose presence in the Building at any time shall, in the judgment of the Landlord, be prejudicial to the safety, character, reputation and interests of the Building or its tenants may be denied access to the Building or may be ejected therefrom. In case of invasion, riot, public excitement or other commotion, the Landlord may prevent all access to the Building during the continuance of the same, by closing the doors or otherwise, for the safety of the tenants, the Building and protection of property in the Building. The Landlord may require any person leaving the Building with any package or other object to exhibit a pass from the tenant from whose premises the package or object is being removed, but the establishment and enforcement of such requirement shall not impose any responsibility on the Landlord for the protection of any tenant against the removal of property from the premises of the tenant. The Landlord shall in no way be liable to any tenant for damages or loss arising from the admission, exclusion or ejection of any person to or from the tenant’s premises or the Building under the provisions of this rule.

2. Landlord reserves the right to exclude or expel from the Building any person who in the judgment of Landlord is intoxicated or under the influence of liquor or drugs.

3. Tenants shall not do or permit anything to be done in their premises or bring or keep anything therein which will in any way obstruct or interfere with the rights of other tenants, or do, or permit anything to be done in their premises which shall, in the judgment of the Landlord or its Manager, in any other way injure or annoy them, or conflict with the laws relating to fire, or with the regulations of the fire department or with any insurance policy upon the Building or any part thereof or any contents therein or conflict with any of the Rules and Ordinances of the public building or health authorities.

4. All electrical equipment used by tenants shall be U.L. approved. Nothing shall be done or permitted in any tenant’s premises, and nothing shall be brought into or kept in such premises which would impair or interfere with any of the Building services or the proper and economic heating, cooling, cleaning or other servicing of the Building or such premises. Tenants shall not use electrical portable heaters or fans in the Building.

5. Tenants shall not install or operate any steam or gas engine or boiler, or carry on any mechanical business, in the Building. The use of oil, gas or inflammable liquids for heating, lighting or any other purpose is expressly prohibited. Explosives or other articles deemed extra hazardous shall not be brought into the Building. Tenants shall not use any other method of heating than that supplied by the Landlord.

 

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6. Tenants shall give Landlord prompt notice of all accidents to or defects in air-conditioning equipment, plumbing, electric facilities or any part or appurtenances of their premises.

7. Tenants shall use electric, gas and any other form of energy only from such sources of supply as is furnished in the Building; provided, however, Tenants may, in the ordinary course of business, use either (i) use back-up generators located at the Complex as of the date of the Lease to which this Exhibit B is attached (or any back-up generator of similar size and capacity that may from time to time replace such back-up generator(s), or (ii) any back-up generators that Landlord may from time to time approve, which approval shall be in Landlord’s sole discretion.

8. All deliveries to the Building for or by any tenant are to be made through the service entrance to Building as designated by Landlord, unless special permission is granted by Landlord for the use of other Building entrances.

9. Furniture, equipment or supplies shall be moved in or out of the Building only upon the elevator designated by Landlord and then only during such hours and in such manner as may be prescribed by Landlord.

10. Should any tenant desire to place in the Building any unusually heavy equipment, including, but not limited to, large files, safes and electronic data processing equipment, it shall first obtain written approval of the Landlord to place such items within the Building, for the use of the Building elevators, and for the proposed location in which such equipment is to be installed. The Landlord shall have the power to prescribe the weight and position of any equipment that may exceed the weight load limits of the building structure, and may further require, at the tenant’s expense, the reinforcement of any flooring on which such equipment may be placed, and/or to have an engineering study performed to determine such weight and position of equipment, to determine added reinforcement required, and/or determine whether or not such equipment can be safely placed within the Building.

11. Tenants shall not place additional locks or bolts of any kind upon any of the doors of their premises and no lock on any door therein shall be changed or altered in any respect. Duplicate keys for tenant’s premises and toilet rooms (if applicable) shall be procured only from Landlord, which may make a reasonable charge therefor. Upon the termination of any tenant’s lease, all keys of such tenant’s premises and toilet rooms shall be delivered to the Landlord.

12. Tenants shall not leave any refuse in the public hallways or other areas of Building (excepting such tenant’s own premises) for disposal.

13. Landlord shall have the right to prohibit any advertising by tenants which, in Landlord’s opinion, tends to impair the reputation of the Building or its desirability as a building or offices; upon written notice from the Landlord, tenants shall refrain from or discontinue such advertising.

 

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14. If a tenant employs laborers or others outside of the Building, such tenant shall not have its employees paid in the Building, but shall arrange to pay their payrolls elsewhere. Tenants shall not advertise for laborers, giving an address at the Building.

15. Bicycles or other vehicles shall not be permitted in the offices, halls, corridors, lobbies and elevators of the Building, nor shall any obstruction of sidewalks or entrances of the Building by such be permitted.

16. The sidewalks, entries, passages, elevators and staircases shall not be obstructed or used by tenants, their servants, agents or visitors for any other purpose than ingress and egress to and from their respective offices.

17. Canvassing, soliciting and peddling in the Building is prohibited and tenants shall cooperate to prevent the same.

18. No animals, birds or pets (other than seeing-eye dogs) of any kind shall be allowed in any tenant’s premises or the Building.

19. The water closets, urinals, waste lines, vents or flues of the Building shall not be used for any purpose other than those for which they were constructed, and no rubbish, acids, vapors, newspapers or other such substances of any kind shall be thrown into them. The expense caused by any breakage, stoppage or damage resulting from a violation of this rule by any tenant, its employees, visitors, guests or licensees, shall be paid by such tenant.

20. All decorating, carpentry work, or any labor required for the installation of any tenant’s equipment, furnishings or other property shall be performed at such tenant’s expense, subject to Landlord’s prior written approval and, by Landlord’s employees or at Landlord’s option and consent by persons or contractors authorized in writing by Landlord. This shall apply to all work including but not limited to, installation of telephone or telegraph equipment, electrical devices and attachments, and all installations affecting floors, walls, windows, doors, ceilings, equipment or any other physical feature of the Building. None of this work shall be done by any tenant without Landlord’s prior written approval. A “Tenant Contractor Entrance Authorization” form [to be supplied by Landlord (or Landlord’s property manager)] will be required for any contractor or vendor who will be servicing or intending to service the Premises.

21. If any tenant desires radio signal, communication, alarm or other utility service connection installed or changed, such work shall be done at the expense of such tenant, with the prior written approval and under the direction of Landlord. No wiring shall be installed in any part of the Building without Landlord’s approval and direction. Landlord reserves the right to disconnect any radio, signal or alarm system when, in Landlord’s opinion, such installation or apparatus interferes with the proper operation of the Building or systems within the Building.

22. Except as permitted by Landlord, tenants shall not mark upon, paint signs upon, cut, drill into, drive nails or screws into, or in any way deface the walls, ceilings, partitions or floors of their premises or of the Building and the repair cost of any defacement, damage or injury caused by any tenant, its agents or employees, shall be paid for by such tenant.

 

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23. All glass, lighting fixtures, locks and trimmings in or upon the doors and windows of any tenant’s premises shall be kept whole and whenever any part thereof shall be broken through cause attributable to any tenant, its agents, guests or employees, the same shall immediately be replaced or repaired by Landlord at such tenant’s expense.

24. The cost of repairing any damage to the public portions of the Building or the public facilities or to any facilities used in common with other tenants, caused by any tenant or the employees, licensees, agents or invitees of any tenant, shall be paid by such tenant.

25. Tenants shall not remove any carpet, or wall coverings, window blinds, or window draperies in its premises without prior written approval from Landlord.

26. The sashes, sash doors, windows, side glass, glass floors and any lights or skylights that reflect or admit light into the halls or other places of Building shall not be covered or obstructed by any tenant without prior written approval from Landlord.

27. Tenants shall cooperate fully with the life safety plans of the Building as established and administered by the Landlord. This includes participation by tenants and employees of the tenants in exit drills, fire inspections, life safety orientations and other programs relating to fire safety that may be promulgated by the Landlord.

28. The garage gate code for the parking garage may only be used by Tenant and its guests.

29. Tenant shall not use the Common Areas for the display or storage of its personal property.

 

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EXHIBIT C

Intentionally Omitted

 

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EXHIBIT D

CLEANING SPECIFICATIONS

 

A.

General

1. All cleaning work will be performed between 5:00 p.m. and 12:00 midnight, Monday through Friday, unless otherwise necessary.

2. Abnormal waste removal (e.g., computer installation paper, bulk packaging, wood or cardboard crates, refuse from cafeteria operation, etc.) shall be Tenant’s responsibility.

3. On the days the building is closed due to holidays, building services are provided on an emergency basis only.

 

B.	Daily Operating (5 times per week)

 

1.

Tenant Areas

 

a.

Empty and clean all waste receptacles; wash receptacles as necessary.

 

b.

Vacuum rugs and carpeted areas in the main walkways.

 

2.

Lavatories

 

a.

Sweep and wash floors with disinfectant.

 

b.

Wash both sides of toilet seats with disinfectant.

 

c.

Wash all mirrors, basins, bowls and urinals,

 

d.

Spot clean toilet partitions.

 

e.

Empty and disinfect sanitary napkin disposal receptacles.

 

f.

Refill toilet tissue, towel, soap and sanitary napkin dispensers.

 

3.

Public Areas

 

a.

Wipe down entrance doors and clean glass (interior and exterior).

 

b.

Vacuum elevator carpets and wipe down doors and walls

 

c.

Clean water coolers.

 

C.	Operations as Needed (but not less than once per week)

 

1.

Tenant and Public Areas

 

a.

Buff all resilient floor areas.

 

D.	Weekly Operations

 

1.

Tenant Areas, Lavatories, Public Areas

 

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a.

Hand-dust and wipe clean all horizontal surfaces with treated cloths to include furniture, office equipment, windowsills, door ledges, chair rails, baseboards, convector tops, etc., within normal reach.

 

b.

Remove finger marks from private entrance doors, light switches and doorways.

 

c.

Sweep all stairways.

 

d.

Vacuum tenant offices.

 

E.	Monthly Operations

 

1.

Tenant and Public Areas

 

a.

Vacuum and dust grillwork.

 

2.

Lavatories

 

a.

Wash down interior walls and toilet partitions.

 

F.

Yearly

 

1.

Tenant and Public Areas

 

a.

Strip and wax all resilient tile floor areas

 

2.

Entire Building

 

a.

Clean inside of all windows.

 

b.

Clean outside of all windows.

NOTE: Tenant understands that Landlord may substitute, for any of the methods or devices set forth in this Exhibit D, other methods or devices which will achieve substantially the same results. Landlord shall not be required to remove any trash from tenant’s Premises generated by (1) special users of the premises, such as waste and paper disposal for computer operations, or (2) from use of the premises for more than one (1) shift, or (3) special personnel.

NOTE: Tenant understands that Landlord will not be responsible to clean any portion of the tenants leased premises which is used for, or in connection with, the preparing, dispensing or consumption of food or beverages or as an exhibition area or an auditorium or for storage, shipping room, mail room, workroom, mechanical area, conveyor, showroom, private restrooms, washroom or similar purposes, medical department, laboratory or similar purposes or which is a shop or is used for the operation of computer, data processing, reproduction, duplicating or similar equipment.

NOTE: Anything hereinabove to the contrary notwithstanding, it is understood that Landlord shall not be obligated to provide the services provided for in this Exhibit D on Saturdays, Sundays or days which are holidays under the applicable union agreements (where applicable). It being further understood that the Landlord has the right at any time and from time to time to add additional holidays and/or change any of said holidays.

 

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EXHIBIT E

LIST OF BUILDING HOLIDAYS

 

1.	Dr. Martin Luther King, Jr. Day

 

2.	Memorial Day

 

3.	Independence Day

 

4.

Labor Day

 

5.	Thanksgiving Day

 

6.	Christmas Eve Day

 

7.	Christmas Day

 

8.	New Year’s Day

 

9.	Good Friday

 

10.	President’s Day

 

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STATE OF NORTH CAROLINA		FIRST AMENDMENT TO LEASE
COUNTY OF WAKE

This FIRST AMENDMENT TO LEASE (this “First Amendment”) is made and entered into effective as of the         day of                     , 2013 (the “Effective Date”), by and between VENTURE CENTER LLC, a Delaware limited liability company (“Landlord”), and BANDWIDTH.COM, INC., a Delaware corporation (“Tenant”).

W I T N E S S E T H:

WHEREAS, Landlord, as landlord, and Tenant, as tenant, entered into that certain Office Lease dated January 22, 2013 (the “Lease”), with respect to approximately seven thousand six hundred fifty-two (7,652) rentable square feet on the second floor of the Building known as Suite 267 (defined in the Lease as the “Second Floor Space”), and approximately five thousand four hundred twenty-nine (5,429) rentable square feet on the third floor of the Building known as Suite 317 (defined in the Lease as the “Third Floor Space”), both located in the office building known as Venture III Building of the Venture Center (defined in the Lease as the “Building”), as more particularly described in the Lease; and

WHEREAS, Landlord and Tenant have agreed that Tenant will lease one (1) additional suite located on the second (2^nd) floor of the Building pursuant to the terms and conditions contained herein; and

WHEREAS, Landlord and Tenant have agreed to execute this First Amendment in order to memorialize the foregoing.

NOW, THEREFORE, in consideration of the mutual covenants and obligations of the parties contained in this First Amendment and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:

 

1.

Incorporation. The above recitals are true and complete and are incorporated herein by this reference, and this First Amendment shall be construed in light thereof.

 

2.

Definitions. Capitalized terms, unless otherwise defined herein, shall have the meanings ascribed to such terms in the Lease.

 

3.

Lease of Additional Suites. (a) Effective as of the Expansion Premises Commencement Date, Landlord leases to Tenant, and Tenant accepts and leases from Landlord, approximately eight thousand eight hundred fifty-two (8,852) rentable square feet of space located on the second (2nd) floor of the Building known as Suite 201 (the “Expansion Premises”) upon all of the terms and conditions contained in the Lease, as amended by this First Amendment. A depiction of the Expansion Premises is attached hereto as Exhibit A. Effective as of (i) the Expansion Premises Commencement Date, all references to the terms

 

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“premises,” “Premises,” and “Tenant’s Space” contained in the Lease shall be deemed to refer to the Expansion Premises; (ii) February 1, 2015, all references to the terms “premises,” “Premises,” and “Tenant’s Space” contained in the Lease shall be deemed to refer to the Expansion Premises and Second Floor Space; and (iii) June 1, 2015, all references to the terms “premises,” “Premises,” and “Tenant’s Space” contained in the Lease shall be deemed to refer to the Expansion Premises, Second Floor Space and Third Floor Space. Landlord and Tenant agree that the Premises, (i) as of the Expansion Premises Commencement Date, shall contain a total of approximately eight thousand eight hundred fifty-two (8,852) rentable square feet of space; (ii) as of February 1, 2015, shall contain a total of approximately sixteen thousand five hundred four (16,504) rentable square feet of space; and (iii) as of June 1, 2015, shall contain a total of approximately twenty-one thousand nine hundred thirty-three (21,933) rentable square feet of space. For the purposes hereof, the “Expansion Premises Commencement Date” shall mean the date Substantial Completion (as defined in the Work Letter attached hereto as Exhibit B and incorporated herein by reference) has occurred and Landlord has delivered the Expansion Premises to Tenant. The Expansion Premises Commencement Date shall occur on or before December 31, 2013.

(b) Subject to Tenant Delay (as defined in Exhibit B) and delays caused by force majeure, Landlord shall cause the improvements to be made to the Expansion Premises that are described on Exhibit B attached hereto and incorporated herein by this reference (the “Landlord’s Work”) on or before the Expansion Premises Commencement Date. Except for the Landlord’s Work, Landlord has no obligation to make any improvements to the Expansion Premises.

(c) Section 2.02.A of the Lease is hereby deleted and the following is inserted in lieu thereof: “The initial term of this Lease (the “Initial Term”) shall commence (i) with respect to the Expansion Premises, on the Expansion Premises Commencement Date; (ii) with respect to the Second Floor Space, on February 1, 2015; and (iii) with respect to the Third Floor Space, on June 1, 2015. The Initial Term for the entire Premises shall expire on February 28, 2017 (the “Expiration Date”). As used in this Lease, the term “Lease Year” shall mean each consecutive twelve (12) month period of the Lease Term (hereinafter defined), or any extension or renewal thereof, beginning on the Expansion Premises Commencement Date and each anniversary thereof. Landlord and Tenant stipulate and agree that Tenant is in possession of the Second Floor Space and the Third Floor Space as of the date hereof under a sublease agreement.”

 

4.

Renewal Option. Subject to all of the terms and conditions provided for the extension of the Initial Term (as defined in the Lease) set forth in Section 2.02.B. of the Lease, Tenant shall be entitled to extend the Initial Term with respect to the Expansion Premises for two (2) consecutive three (3) year periods (each, an “Expansion Premises Extension Term”), except that Tenant must give written notice of Tenant’s election to extend the Initial Term with respect to the Expansion Premises at least nine (9) months (rather than six (6) months) prior to

 

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the expiration of the then current Initial Term or Expansion Premises Extension Term. Monthly Base Rent with respect to the Expansion Premises during any Expansion Premises Extension Term shall be the prevailing Market Rate (as defined in Section 3.02 of the Lease) for the Expansion Premises as of the date the extension option is exercised, provided that, notwithstanding anything to else to the contrary contained herein, the Monthly Base Rent for each Expansion Premises Extension Term shall not be less than one hundred percent (100%) of the Monthly Base Rent in effect for the Expansion Premises at the end of the then expiring Initial Term or Expansion Premises Extension Term, as applicable. The procedure for determining the Market Rate for any such Expansion Premises Extension Term shall be as set forth in Section 3.02 of the Lease.

 

5.

Monthly Base Rent and Additional Rent.

(a) Effective as of the Expansion Premises Commencement Date and notwithstanding anything to the contrary contained in the Lease, Tenant agrees to pay to Landlord in advance on the first day of each month throughout the Lease term, without any notice, demand, offset or reduction whatsoever, Monthly Base Rent for the Expansion Premises (i.e., 8,852 rentable square feet) as follows:

 

Portion of Term		Monthly Base Rent Per Rentable Square Foot				Monthly Payments of Monthly Base Rent
Expansion Premises Commencement Date – November 30, 2014		$	24.25			$	17,888.42
December 1, 2014 – November 30, 2015		$	24.98			$	18,426.91
December 1, 2015 – November 30, 2016		$	25.73			$	18,980.16
December 1, 2016 – February 28, 2017		$	26.50			$	19,548.17

Tenant shall pay the above stated Monthly Base Rent to Landlord on or before the first (1st) day of each calendar month in accordance with the terms of the Lease. If the Expansion Premises Commencement Date occurs prior to December 31, 2013, the Monthly Base Rent applicable to the Expansion Premises will be pro rated with respect to the first applicable calendar month during which the Expansion Premises Commencement Date occurs. Notwithstanding the foregoing, one hundred percent (100%) of Monthly Base Rent shall be conditionally abated during the first four (4) complete calendar months following the Expansion Premises Commencement Date. The abatement of Monthly Base Rent provided for in this provision is conditioned upon Tenant’s full and timely performance of all of its obligations under the Lease. If at any time hereafter an event of default by Tenant occurs and is not cured by Tenant within any applicable cure period specified in the Lease, then the abatement of Monthly Base Rent provided for in this provision shall immediately become void, and Tenant shall promptly pay to Landlord the full amount of all Monthly Base Rent herein abated.

 

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(b) Effective as of the Expansion Premises Commencement Date and notwithstanding anything to the contrary contained in the Lease, Tenant shall pay Tenant’s Percentage Share (as defined in the Lease) of the Operating Cost Adjustment (as defined in the Lease) for the then-applicable Premises in accordance with the terms of the Lease; for clarity, neither the Second Floor Space nor the Third Floor Space possessed by Tenant as of the date hereof under a sublease agreement will be included in the calculation of Tenant’s Percentage Share unless and until the commencement of the Initial Term applicable to such space pursuant to Section 2.02A (as amended hereby).

 

6.

Right of First Offer. Tenant shall have the one-time option (the “ROFO”) to lease any space on the second (2nd) floor of the Building located adjacent to the Premises (the “ROFO Space”) that becomes available during the Initial Term, subject to the following terms and conditions:

(a) Landlord agrees to advise Tenant in writing from time to time (but not more often than once every six (6) months), upon the written request of Tenant or upon Landlord’s own initiative, of the leasing status of the ROFO Space and to advise Tenant whether the ROFO Space (or any portion thereof) is available for lease (each such notice shall be referred to herein as the “ROFO Space Notice”); provided, however, in the event Tenant’s ROFO with respect to any portion of the ROFO Space has lapsed in accordance with the terms hereof, then Landlord shall have no further obligation to submit the ROFO Space Notice to Tenant with respect to the portion of the ROFO Space for which Tenant’s ROFO has lapsed. The ROFO Space (or a portion thereof) shall be deemed available to lease to Tenant at such time as (i) all third-party lease agreements and lease rights relating to such space have expired (including but not limited to any pre-existing rights of first offer granted to other tenants) and/or (ii) Landlord is aware that such space soon will become vacant as a result of the expiration of a prior tenant’s leasehold estate relating to such space. As used herein, the “Available ROFO Space” shall refer to the ROFO Space that is identified by Landlord from time to time in the ROFO Space Notice as being available to lease pursuant to this Section 6. Landlord shall include, in the ROFO Space Notice, the base rent, lease term, the date upon which Landlord expects the Available ROFO Space to be ready for Tenant’s occupancy and any other material terms upon which Landlord would be willing to lease the Available ROFO Space to Tenant. Except as otherwise provided herein or in the ROFO Space Notice, Tenant’s lease of the Available ROFO Space shall be upon all of the terms and conditions contained in this Lease.

(b) Tenant shall be entitled to exercise its ROFO under this Section 6 only if this Lease is in full force and effect and at the time of exercise of the ROFO (i) there is no event of default under the Lease, and (ii) no event has occurred or circumstances exist which with the giving of notice or the passage of time (or both) would constitute an event of default under the Lease. If Tenant shall assign

 

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its interest in the Lease to a third party or shall have entered into a sublease with a third party for all or any portion of the Premises, then the ROFO shall be deemed null and void and of no further force and effect; provided, however, the foregoing will not apply with respect to any transaction for which Landlord’s consent shall not be necessary pursuant to Section 8.01E of the Lease.

(c) Upon receipt of the ROFO Space Notice, Tenant may exercise its ROFO by providing Landlord with written notice of its intent to lease the Available ROFO Space upon the terms and conditions contained in the ROFO Space Notice within ten (10) business days after Tenant’s receipt of Landlord’s ROFO Space Notice. The ROFO shall apply to the entire Available ROFO Space that is the subject of the ROFO Space Notice, and may not be exercised with respect to only a portion thereof. If Tenant exercises such right within such ten (10) business day period, then Tenant and Landlord agree to use their best efforts to enter into a written amendment to the Lease adding the Available ROFO Space to the Premises within thirty (30) days following the date Tenant exercises its ROFO. If Tenant rejects the offer or fails to exercise its ROFO within the above specified ten (10) business day period, or if Tenant properly exercises its ROFO but thereafter, for any reason, fails to use its best efforts to enter into a lease amendment adding the Available ROFO Space to the Lease within the thirty (30) day time period set forth above, then (i) Tenant’s ROFO shall lapse and be of no further force and effect with regard to such Available ROFO Space and (ii) Landlord shall be entitled to lease such Available ROFO Space to a third party(ies) on such terms and conditions as Landlord elects, free and clear of any further or continuing rights of Tenant under this Section 6. Time is of the essence with respect to Tenant’s ROFO obligations.

 

7.

Brokers. Tenant and Landlord each represent and warrant to the other that neither it nor its officers or agents nor anyone acting on its behalf has dealt with any real estate broker other than Craig Davis Properties, Landlord’s broker (the “Landlord’s Broker”), and Synergy Commercial Advisors, LLC, Tenant’s broker (the “Tenant’s Broker”, and collectively with the Landlord’s Broker, the “Brokers”) in negotiating or making of this First Amendment. Tenant agrees to indemnify and hold Landlord harmless against any loss, liability, damage, cost or expense (including reasonable attorneys’ fees and costs of litigation), or any claim therefore, for any leasing or other commissions, fees, charges or payments resulting from Tenant’s breach of the foregoing representation. Landlord agrees to indemnify and hold Tenant harmless against any loss, liability, damage, cost or expense (including reasonable attorneys’ fees and costs of litigation), or any claim therefore, for any leasing or other commissions, fees, charges or payments resulting form or arising out of Landlord’s actions in connection with this First Amendment.

 

8.

Ratification; Miscellaneous. The Lease, as amended by this First Amendment, shall remain enforceable in accordance with its terms. Terms and provisions of the Lease which are not expressly modified by this First Amendment shall remain in full force and effect and shall govern Tenant’s lease of the Premises. As

 

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amended by this First Amendment, all of the terms, conditions and provisions of the Lease are hereby ratified and affirmed in all respects. To the extent any terms, conditions and obligations contained in this First Amendment conflict with the terms in the Lease, those in this First Amendment shall control. This First Amendment may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become a binding agreement when one or more counterparts have been signed by and delivered to each of the parties. In the event any term or provision of this First Amendment is determined by appropriate judicial authority to be illegal or otherwise invalid, such provision shall be given its nearest legal meaning or be construed or deleted as such authority determines, and the remainder of this First Amendment shall remain in full force and effect. Landlord and Tenant hereby represent and warrant to each other that all consents or approvals required of third parties for the execution, delivery and performance of this First Amendment have been obtained and each party (including its signatory) has the right and authority to enter into and perform its covenants contained in this First Amendment.

[Signature Pages Follow]

 

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IN WITNESS WHEREOF, Landlord and Tenant have caused this First Amendment to be duly executed effective as of the day and year first above written.

 

 

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EXHIBIT A

 

 

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EXHIBIT B

WORK LETTER

This Work Letter sets forth the terms and conditions relating to the construction of the Leasehold Improvements by Landlord in the Expansion Premises.

ARTICLE 1

DEFINITIONS

1.01 “Approved Construction Drawings” means the Construction Drawings approved by Landlord pursuant to the process set forth in Article 2 below.

1.02 “Approved Space Plan” means the Space Plan approved by Landlord and attached as Exhibit A to the First Amendment of which this Work Letter is a part.

1.03 “Architect” means the architect selected by Landlord to prepare the Construction Drawings.

1.04 “Change Order” means any change, modification or addition to the Approved Construction Drawings.

1.05 “Construction Drawings” means: (a) detailed architectural drawings and specifications for Tenant’s partition plan, demolition plan, reflected ceiling plan, power, communication and telephone plan (locating of data and telephone outlets with pull boxes only), electrical outlets, finish plan, elevations, details and sections; and (b) mechanical, electrical, plumbing and lighting plans and specifications where necessary for installation to Building systems.

1.06 “Contractor” means the contractor selected by Landlord to construct the Leasehold Improvements.

1.07 “Landlord’s Representative” means Spectrum Properties, who Landlord has designated as its sole representative with respect to the matters set forth in this Work Letter, and who, until further notice to Tenant, has full authority and responsibility to act on behalf of Landlord as required in this Work Letter.

1.08 “Leasehold Improvements” means the improvements constructed and installed in the Expansion Premises in accordance with the Approved Construction Drawings.

1.09 “Legal Requirement(s)” means, either individually or collectively, any federal, state, local or foreign law, statute, code, ordinance, rule or regulation.

1.10 “Punch List” shall have the meaning defined in Section 4.04(c) hereof.

 

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1.11 “Space Plan” means a preliminary architectural drawing showing all demising walls, corridors, entrances, exits, doors and interior partitions.

1.12 “Substantial Completion” shall occur when the Leasehold Improvements have been substantially completed in accordance with the Approved Construction Drawings (other than minor Punch List items and any work which cannot be completed on such date, provided such incompletion will not substantially interfere with Tenant’s use of the Expansion Premises) and, if required for occupancy, a Certificate of Occupancy (temporary or final) has been issued by the appropriate governmental authority.

1.13 “Tenant’s Construction Costs” shall have the meaning defined in Section 4.02(a) hereof.

1.14 “Tenant’s Construction Costs Deposit” shall have the meaning defined in Section 4.02(b)(i) hereof.

1.15 “Tenant Expenditure Authorization” or “T.E.A.” means an authorization by Tenant to Landlord to expend funds on behalf of Tenant for the Leasehold Improvements, to be given on a written form in the form of that attached hereto as Schedule 1.

1.16 “Tenant Delay” shall have the meaning defined in Section 4.02(a) hereof.

1.17 “Tenant Improvement Allowance” means the allowance of Fifty-Three Thousand One Hundred Twelve and No/100 Dollars ($53,112.00), to be provided by Landlord as set forth in Section 3.01 below.

1.18 “Tenant’s Representative” means Kade Ross, who Tenant has designated as its sole representative with respect to the matters set forth in this Work Letter, and who, until further notice to Landlord, has full authority and responsibility to act on behalf of Tenant as required in this Work Letter. Tenant’s Representative is authorized to execute and deliver on behalf of Tenant any and all documents required by this Work Letter. Tenant hereby warrants and represents to Landlord that Tenant’s Representative has all of the requisite power and authority to execute and deliver such documents and that Tenant shall be bound by the execution of such documents on behalf of Tenant by Tenant’s Representative.

1.19 “Test Fit Allowance” means Eight Hundred Eighty-Five and 20/100 Dollars ($885.20), to be provided by Landlord as set forth in Section 3.02 below.

 

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ARTICLE 2

SCHEDULE

Landlord and Tenant hereby agree that time is of the essence and that the sequence and schedule specified below shall be strictly adhered to with respect to the design and development of the Construction Drawings and the construction of the Leasehold Improvements.

2.01 Space Plan. The Space Plan attached as Exhibit A to this First Amendment of which this Work Letter is a part shall be deemed to be the Approved Space Plan.

2.02 Construction Drawings; Bids; Selection of Contractor; T.E.A.

(a) Landlord shall direct the Architect to begin preparation of Construction Drawings. Within five (5) business days after its receipt of the Construction Drawings, Tenant shall notify Landlord in writing of its approval or disapproval, stating in reasonable detail the reasons for any disapproval.

(b) If Tenant disapproves the Construction Drawings, Landlord shall then resubmit revised Construction Drawings to Tenant containing such changes as are acceptable to Landlord, and Tenant shall approve or disapprove the revised Construction Drawings within two (2) business days after its receipt thereof, stating in reasonable detail the reasons for any disapproval.

(c) The foregoing process shall be repeated as many times as are necessary in order to obtain Construction Drawings which are approved by Landlord and Tenant. When approved by Landlord and Tenant, the Construction Drawings shall be deemed to be the Approved Construction Drawings.

(d) Notwithstanding any changes which it desires to effectuate in the Construction Drawings prior to their approval, or revisions which must be made to the Construction Drawings, if Tenant fails to approve the Construction Drawings on or before ten (10) days following the first date upon which they are originally submitted to Tenant by Landlord, then this failure shall be deemed a “Tenant Delay” pursuant to Article 5 below.

(e) Within five (5) business days after Landlord’s receipt of the Approved Construction Drawings, Landlord shall submit the Approved Construction Drawings to the Contractor and obtain, within a reasonable time period, a bid for constructing the Leasehold Improvements in accordance with the Approved Construction Drawings. Upon request of Landlord, Tenant shall execute and deliver to Landlord the T.E.A. and such other documents as Landlord may request to confirm the selection bid of the Contractor. Notwithstanding any renegotiation of bids Tenant wishes to pursue, if Tenant fails to approve the bid from the Contractor and execute and deliver the T.E.A. on or before the date which is five (5) business days following its receipt of the bid, then this failure shall be deemed a “Tenant Delay” pursuant to Article 5 below.

2.03 Change Orders.

(a) All changes requested by Tenant shall require Landlord’s prior written consent, not to be unreasonably withheld. Any Contractor-initiated Change Order must be reviewed and approved by Landlord and Tenant, which review and approval will not

 

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be unreasonably withheld. Landlord shall have three (3) business days after Landlord’s receipt of any Change Order to approve or disapprove such Change Order. If Landlord approves such Change Order, and if such Change Order increases or decreases the cost to Landlord of constructing the Leasehold Improvements, Landlord shall prepare and deliver to Tenant a revised bid evidencing the total costs of such Change Order, which will include any amounts incurred by Landlord in reviewing the requested changes and revising the Approved Construction Drawings and the fee provided in Section 2.03(b) below.

(b) Should any Change Order modify the Approved Construction Drawings, Tenant shall pay all additional costs thereby incurred by Landlord, plus a fee of ten percent (10%) of the additional cost for Landlord’s cost of coordination, supervision and overhead resulting from the revision to the Approved Construction Drawings, excluding any additional architectural and/or engineering fees. All revised or additional Construction Drawings are subject to Landlord’s prior review and written approval. If and when approved by Landlord, such revised or additional Construction Drawings shall be deemed to be a part of the Approved Construction Drawings.

(c) Prior to commencement of construction or installation of any of the Leasehold Improvements provided in any Change Order, Tenant shall execute and deliver to Landlord a revised T.E.A. reflecting any increases or decreases in the cost to Landlord of constructing the Leasehold Improvements.

2.04 Legal Requirements. All design, construction and installation shall conform to the requirements of the Lease, and all Legal Requirements. Landlord shall be responsible for obtaining approval of the Approved Construction Drawings by all governmental agencies having jurisdiction over the Premises and for obtaining all necessary licenses and permits in connection with the Leasehold Improvements, including temporary and permanent certificates of occupancy for the Expansion Premises. Tenant shall reasonably cooperate with Landlord in obtaining such approvals and permits.

2.05 Materials and Workmanship. All work and materials required under the Approved Construction Drawings, including all materials, finishes and workmanship shall be equal to, or of a quality superior to, Building standard. Except as approved by Landlord, all materials incorporated in the Leasehold Improvements shall be new.

2.06 Field Verification. Architect shall verify at the job site all dimensions, locations and structural members and any physical conditions affecting the Construction Drawings.

ARTICLE 3

LANDLORD’S OBLIGATIONS

3.01 Tenant Improvement Allowance. Landlord shall contribute the Tenant Improvement Allowance towards the cost of constructing the Leasehold Improvements in the Expansion Premises. Tenant may also use a portion of the Tenant Improvement

 

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Allowance not to exceed $44,260.00 towards soft costs, including, without limitation, costs associated with data cabling, furniture, IT infrastructure, moving, etc. The Tenant Improvement Allowance must be used only for the actual out-of-pocket costs (hard and soft) of constructing the Leasehold Improvements in the Expansion Premises from concrete slab to concrete deck. Landlord will apply the Tenant Improvement Allowance to pay the cost of constructing the Leasehold Improvements, as such costs are incurred. After the Tenant Improvement Allowance has been exhausted, Landlord will apply Tenant’s Construction Costs Deposit to pay Tenant’s Construction Costs as such costs are incurred. Any unused portion of the Tenant Improvement Allowance shall be retained by Landlord. Any unused portion of Tenant’s Construction Costs Deposit shall be refunded to Tenant.

3.02 Test Fit Allowance. The Test Fit Allowance may be applied to the cost of the preparation of the Space Plan. Tenant shall pay all costs incurred in preparing the Space Plan in excess of the Test Fit Allowance. Landlord shall retain any unused portion of the Test Fit Allowance.

3.03 Intentionally omitted.

3.04 Coordination. Unless otherwise agreed in writing by Landlord and Tenant, all work involved in the construction and installation of the Leasehold Improvements shall be carried out by Contractor under a contract with Landlord and under the sole direction of Landlord. Tenant shall cooperate with Landlord, Contractor and the Architect to promote the efficient and expeditious completion of such work. All work not within the scope of the normal construction trades employed for the Building, such as the furnishing and installation of draperies, furniture, telephone equipment and wiring, and office equipment, shall be furnished and installed by Tenant at Tenant’s expense.

3.05 Commencement of Construction. Landlord shall have no obligation to commence or to allow commencement of construction or installation of the Leasehold Improvements in the Expansion Premises until:

(a) Tenant has delivered to Landlord the Approved Construction Drawings, if applicable, initialed by Tenant’s Representative and Landlord’s Representative, and the executed T.E.A., and Tenant has approved the selection of the Contractor and the bid in writing, all as required pursuant to Section 2.02 above;

(b) Landlord has received from Tenant payment of all Rent then due under the Lease;

(c) Landlord has received from Tenant payment of Tenant’s Construction Costs Deposit, if any; and

(d) Landlord has completed the base building improvements (i.e., the shell) for the Building.

 

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3.06 Commencement of Change Orders. Landlord shall have no obligation to commence or to allow commencement of construction or installation of any of the Leasehold Improvements provided in any Change Order until Landlord has received from Tenant payment of the required addition to Tenant’s Construction Costs Deposit, if any, and the executed revised T.E.A., as provided in Section 2.03(c) above, with respect to such Change Order.

3.07 Substitutions. Landlord, upon prior notice to Tenant, reserves the right to make reasonable substitutions of equal or better quality and value in the event of unavailability of materials or due to field conditions.

ARTICLE 4

TENANT’S OBLIGATIONS

4.01 Leasehold Improvements. All work required by the Approved Construction Drawings shall be considered part of the Leasehold Improvements.

4.02 Payments.

(a) Tenant shall be responsible for payment of the following to the extent such costs exceed the Tenant Improvement Allowance:

(i) The costs of preparation of the Construction Drawings and all costs to complete the construction of the Leasehold Improvements, including but not limited to the cost of all labor and materials supplied by the Contractor and Landlord and their respective material suppliers, independent contractors and subcontractors to construct and complete the Leasehold Improvements, including but not limited to the cost of any Change Orders, and Contractor’s profit and overhead expenses.

(ii) A fee to Landlord as a construction management fee equal to three percent (3%) of the total of the costs set forth in this Section 4.02(a) (including Change Orders).

The costs set forth in this Section 4.02(a) are collectively referred to herein as “Tenant’s Construction Costs.”

(b) Tenant shall pay Tenant’s Construction Costs, plus any other costs owing by Tenant to Landlord in connection with the construction of the Leasehold Improvements, as follows:

(i) On the date of execution of the T.E.A., Tenant shall pay to Landlord one hundred percent (100%) of the amount by which the amount indicated on the T.E.A. exceeds the Tenant Improvement Allowance (“Tenant’s Construction Costs Deposit”);

 

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(ii) On the date of approval by Landlord of any Change Order which increases or decreases the cost of the Leasehold Improvements, Tenant shall execute a revised T.E.A., as provided in Section 2.03(c) above, evidencing such increased or decreased cost and shall deposit with Landlord, as an addition to Tenant’s Construction Costs Deposit, one hundred percent (100%) of the amount of the increased or decreased costs represented by such Change Order;

(iii) Tenant shall pay to Landlord, upon Substantial Completion of the Leasehold Improvements, the remainder, if any, of Tenant’s Construction Costs, plus any other costs owing by Tenant to Landlord in connection with the construction of the Leasehold Improvements, such amount to be indicated on a statement delivered by Landlord to Tenant and paid by Tenant. The amount shown on such statement shall be paid by Tenant within ten (10) days after receipt of such statement.

(c) Tenant agrees that in the event it fails to make any payment required in this Work Letter in a timely manner, Landlord, in addition to any and all other remedies allowed to Landlord by law or in equity, shall have the same rights and remedies against Tenant as in the case of a default in payment of Rent under the Lease.

4.03 Intentionally Deleted.

4.04 General Provisions.

(a) This Work Letter shall not be deemed applicable to:

(i) any portion of the Premises other than the Expansion Premises;

(ii) any space other than the Expansion Premises which is subsequently added to the Premises under the Lease, whether by any option or right under the Lease, including expansion options, rights of first offer and rights of first opportunity, or otherwise;

(iii) any portion of the Premises or any additions thereto in the event of a renewal or extension of the Term of the Lease, whether by any option or right under the Lease, including extension or renewal options, or otherwise, unless expressly provided in the Lease or any amendment thereto; or

(iv) any portion of the Premises which has been assigned or subleased by Tenant.

(b) Any changes to the Approved Space Plan or the Approved Construction Drawings, or any additional work required by any governmental agencies having jurisdiction over the Building or any aspect of the completion of the Leasehold Improvements may be complied with by Landlord and/or Contractor. Such changes and/or additional work shall not be deemed to be a violation of the Approved Space Plan, the Approved Construction Drawings or any other provision of this Work Letter and shall be accepted by Tenant. If such changes and/or additional work increase or decrease the cost to Landlord of constructing the Leasehold Improvements, Landlord shall prepare and deliver to Tenant a revised T.E.A. and a Change Order evidencing the total cost of such changes and/or additional work.

 

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(c) Notwithstanding any provisions to the contrary contained in this Lease, within thirty (30) days following Substantial Completion of the Leasehold Improvements, Tenant shall submit to Landlord a written itemization (the “Punch List”) of items of construction that were not properly completed. Upon receipt of the Punch List, Landlord shall cause such items to be corrected or completed. Upon completion of all items in the Punch List and at the request of Landlord, Tenant shall execute a document acknowledging the date upon which all Punch List items were completed.

(d) Tenant’s sole and exclusive remedy against Landlord for any defects in material or workmanship shall be to notify Landlord thereof, and then Landlord shall use commercially reasonable efforts to enforce the warranty given by the Contractor (which shall be a one (1) year warranty following Substantial Completion). Notwithstanding the foregoing, Landlord shall have no obligation to repair or replace such defects of material or workmanship unless Tenant submits written notice of such defects to Landlord within one (1) year after the Expansion Premises Commencement Date. LANDLORD MAKES NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, IN CONNECTION WITH THE LEASEHOLD IMPROVEMENTS EXCEPT THE WARRANTIES EXPRESSLY SET FORTH IN THIS SECTION 4.04(d). TENANT’S SOLE REMEDY FOR THE BREACH OF ANY APPLICABLE WARRANTY SHALL BE THE REMEDY SET FORTH IN THIS SECTION 4.04(d). Tenant agrees that no other remedy, including, without limitation, incidental or consequential damages for lost profits, injury to person or property or any other incidental or consequential loss shall be available to Tenant.

ARTICLE 5

TENANT DELAY

5.01 Tenant Delay. The term “Tenant Delay” shall mean each day that Substantial Completion of the Leasehold Improvements is delayed by any of the following:

(a) Tenant’s failure to respond, within the time periods prescribed by Landlord, to a request for information necessary for the completion of the Construction Drawings; or

(b) Failure for any reason to develop the Approved Construction Drawings by the dates prescribed herein; or

(c) Tenant’s failure to execute and deliver the T.E.A. by the date required in Section 2.02(e) above; or

(d) Tenant’s failure to pay the Rent as required in the Lease; or

(e) Tenant’s failure to pay Tenant’s Construction Costs Deposit by the date required in Section 4.02(b)(i) above; or

 

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(f) Changes by Tenant in the Approved Construction Drawings or Change Orders; or

(g) Requirements by Tenant for materials, finishes or installations which are not Building standard, including but not limited to any delays caused by failure to obtain or to receive delivery or installation of any such non-Building standard materials in a timely manner; or

(h) Any interference by Tenant with the performance of the construction and installation of the Leasehold Improvements; or

(i) Delay by Tenant in delivering to Landlord an executed, revised T.E.A. and paying to Landlord an addition to Tenant’s Construction Costs Deposit required by a Change Order; or

(j) Any other cause which is defined as a Tenant Delay under this Work Letter or the Lease; or

(k) Changes to the base, shell and core of the Building required by the Approved Construction Drawings; or

(l) Any other acts or omissions of Tenant, or its agents, or employees.

The date that Substantial Completion actually occurs will be accelerated for all purposes of this Lease (including, without limitation, for determination of the Expansion Premises Commencement Date and the obligation to pay Rent), on a day-for-day basis for each day of Tenant Delay.

 

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Schedule 1

of

Exhibit “C”

TENANT EXPENDITURE AUTHORIZATION

 

Project:						Date:
						T.E.A. #:
Distribution:						Prepared By:
Contractor:
Architect:

Rentable Square Feet:

Based On:

Architectural/Mechanical/Electrical/Structural Engineering Design Fees								$

Construction:

$

$

$

$

SUBTOTAL

$

Construction Management Fee

$

Contingency

$

Total Estimated Project Cost

$

Tenant Improvement Allowance

$

Tenant’s Construction Costs Deposit

$

Total Now Due and Payable

$

 

 

 

Recommendation for Authorization:				Tenant Authorization:
Landlord’s Representative		Date		Tenant’s Representative		Date

 

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STATE OF NORTH CAROLINA		SECOND AMENDMENT TO
		LEASE
COUNTY OF WAKE

This SECOND AMENDMENT TO LEASE (this “Amendment”) is made and entered into effective as of the      day of                 , 2014 (the “Effective Date”), by and between VENTURE CENTER LLC, a Delaware limited liability company (“Landlord”), and BANDWIDTH.COM, INC., a Delaware corporation (“Tenant”).

W I T N E S S E T H:

WHEREAS, Landlord, as landlord, and Tenant, as tenant, entered into that certain Office Lease dated January 22, 2013 (the “Original Lease”), with respect to approximately seven thousand six hundred fifty-two (7,652) rentable square feet on the second floor of the Building known as Suite 267 (defined in the Original Lease as the “Second Floor Space”), and approximately five thousand four hundred twenty-nine (5,429) rentable square feet on the third floor of the Building known as Suite 317 (defined in the Original Lease as the “Third Floor Space”), both located in the office building known as the Venture III Building of the Venture Center (defined in the Original Lease as the “Building”), as more particularly described in the Original Lease; and

WHEREAS, Landlord and Tenant subsequently entered into that certain First Amendment to Lease dated October 11, 2013 (the “First Amendment,” and collectively with the Original Lease, the “Lease”), pursuant to which Tenant leased an additional eight thousand eight hundred fifty-two (8,852) rentable square feet of space known as Suite 201 and located on the second (2^nd) floor of the Building (defined in the First Amendment as the “Expansion Premises”); and

WHEREAS, Landlord and Tenant have agreed that Tenant will lease one (1) additional suite located on the second (2^nd) floor of the Building pursuant to the terms and conditions contained herein; and

WHEREAS, Landlord and Tenant have agreed to execute this Amendment in order to memorialize the foregoing.

NOW, THEREFORE, in consideration of the mutual covenants and obligations of the parties contained in this Amendment and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:

 

9.

Incorporation. The above recitals are true and complete and are incorporated herein by this reference, and this Amendment shall be construed in light thereof.

 

10.

Definitions. Capitalized terms, unless otherwise defined herein, shall have the meanings ascribed to such terms in the Lease.

 

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11.

Lease of Additional Suite. (a) Effective as of the Second Amendment Expansion Premises Commencement Date (hereinafter defined), Landlord leases to Tenant, and Tenant accepts and leases from Landlord, approximately one thousand nine hundred forty-eight (1,948) rentable square feet of space located on the second (2nd) floor of the Building and known as Suite 250 (the “Second Amendment Expansion Premises”) upon all of the terms and conditions contained in the Lease, as amended by this Amendment. The Second Amendment Expansion Premises is labeled as “Suite 250 Vacant 1,948 RSF” in the depiction attached hereto as Exhibit A. Effective as of (i) the Second Amendment Expansion Premises Commencement Date, all references to the terms “premises,” “Premises,” and “Tenant’s Space” contained in the Lease shall be deemed to refer to the Second Amendment Expansion Premises and the Expansion Premises; (ii) February 1, 2015, all references to the terms “premises,” “Premises,” and “Tenant’s Space” contained in the Lease shall be deemed to refer to the Second Amendment Expansion Premises, Expansion Premises and Second Floor Space; and (iii) June 1, 2015, all references to the terms “premises,” “Premises,” and “Tenant’s Space” contained in the Lease shall be deemed to refer to the Second Amendment Expansion Premises, Expansion Premises, Second Floor Space and Third Floor Space. Landlord and Tenant agree that the Premises, (i) as of the Second Amendment Expansion Premises Commencement Date, shall contain a total of approximately ten thousand eight hundred (10,800) rentable square feet of space; (ii) as of February 1, 2015, shall contain a total of approximately eighteen thousand four hundred fifty-two (18,452) rentable square feet of space; and (iii) as of June 1, 2015, shall contain a total of approximately twenty-three thousand eight hundred eighty-one (23,881) rentable square feet of space. For the purposes hereof, the “Second Amendment Expansion Premises Commencement Date” shall mean the date Substantial Completion (as defined in the Work Letter attached hereto as Exhibit B and incorporated herein by this reference) has occurred and Landlord has delivered the Second Amendment Expansion Premises to Tenant. Subject to Tenant Delay (as defined in Exhibit B) and force majeure, Landlord anticipates that the Second Amendment Expansion Premises Commencement Date shall occur on or around November 1, 2014.

(b) Landlord shall cause the Leasehold Improvements (as defined in Exhibit B) to be made to the Second Amendment Expansion Premises in accordance with the terms of Exhibit B. Except for the Leasehold Improvements (as defined in Exhibit B), Landlord has no obligation to make any improvements to the Second Amendment Expansion Premises, and Tenant accepts the Second Amendment Expansion Premises in “as-is, where is” condition.

(c) The Initial Term of Tenant’s lease of the Second Amendment Expansion Premises shall expire co-terminously with the Expiration Date for the remainder of the Premises on February 28, 2017. Tenant shall be entitled to extend the Initial Term with respect to the Second Amendment Expansion Premises for two (2) consecutive three (3) year periods pursuant to the terms and conditions contained in Section 4 of the First Amendment.

 

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12.

Monthly Base Rent and Additional Rent.

(a) Effective as of the Second Amendment Expansion Premises Commencement Date and notwithstanding anything to the contrary contained in the Lease, Tenant agrees to pay to Landlord in advance on the first day of each month throughout the Initial Term, without any notice, demand, offset or reduction whatsoever, Monthly Base Rent for the Second Amendment Expansion Premises (i.e., 1,948 rentable square feet) as follows:

 

Portion of Initial Term		Monthly Base Rent Per Rentable Square Foot				Monthly Payments of Monthly Base Rent
Second Amendment Expansion Premises Commencement Date – November 30, 2014		$	24.25			$	3,936.58
December 1, 2014 – November 30, 2015		$	24.98			$	4,055.09
December 1, 2015 – November 30, 2016		$	25.73			$	4,176.84
December 1, 2016 – February 28, 2017		$	26.50			$	4,301.83

Tenant shall pay the above stated Monthly Base Rent to Landlord on or before the first (1st) day of each calendar month in accordance with the terms of the Lease.

(b) Effective as of the Second Amendment Expansion Premises Commencement Date and notwithstanding anything to the contrary contained in the Lease, Tenant shall pay Tenant’s Percentage Share (as defined in the Lease) of the Operating Cost Adjustment (as defined in the Lease) for the then-applicable Premises in accordance with the terms of the Lease; for clarity, neither the Second Floor Space nor the Third Floor Space possessed by Tenant as of the date hereof under a sublease agreement will be included in the calculation of Tenant’s Percentage Share unless and until the commencement of the Initial Term applicable to such space pursuant to Section 2.02A of the Original Lease. Pursuant to the terms of the Original Lease, the Base Year shall be 2015.

 

13.

Parking. Effective as of the Second Amendment Expansion Premises Commencement Date, Section 6.03(C) of the Original Lease is hereby deleted in its entirety and replaced with the following:

“Notwithstanding anything contained in this Lease, Tenant shall not utilize more than 4 parking spaces in the Common Areas per 1,000 square feet of rentable square feet in the Premises. Further, Tenant may request in writing that Landlord provide an additional sixty-five (65) parking spaces (the “Additional Parking Spaces”) and Landlord has agreed to provide the Additional Parking Spaces upon receipt of such written request; provided, however, Landlord reserves the right to revoke Tenant’s Additional Parking Spaces at anytime in Landlord’s sole

 

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discretion upon thirty (30) days prior written notice to Tenant. Tenant shall pay $25.00 per card per month for the first twenty (20) Additional Parking Spaces and $35.00 per card per month for the remaining forty-five (45) Additional Parking Spaces, provided the foregoing monthly charges shall proportionately increase from time to time based upon any increases in Landlord’s standard monthly parking charges for tenants of the Building. If Tenant desires additional parking in the Common Areas, additional spaces (subject to availability) may be provided by Landlord at a cost of $50.00 per space, per month, subject to increase by Landlord from time to time; provided, however, that Landlord has no obligation to provide additional parking spaces to Tenant and, except as provided above with respect to the Additional Parking Spaces, Landlord may revoke additional parking spaces previously granted to Tenant at anytime, in Landlord’s sole discretion.”

 

14.

Signage. Tenant shall be entitled to Building standard signage for the Second Amendment Expansion Premises pursuant to the terms of Section 27.15 of the Original Lease.

 

15.

Brokers. Tenant and Landlord each represent and warrant to the other that neither it nor its officers or agents nor anyone acting on its behalf has dealt with any real estate broker other than CB Richard Ellis, Landlord’s broker (the “Landlord’s Broker”), and Cassidy Turley, Tenant’s broker (the “Tenant’s Broker”, and collectively with the Landlord’s Broker, the “Brokers”) in negotiating or making of this Amendment. Tenant agrees to indemnify and hold Landlord harmless against any loss, liability, damage, cost or expense (including reasonable attorneys’ fees and costs of litigation), or any claim therefore, for any leasing or other commissions, fees, charges or payments resulting from Tenant’s breach of the foregoing representation. Landlord agrees to indemnify and hold Tenant harmless against any loss, liability, damage, cost or expense (including reasonable attorneys’ fees and costs of litigation), or any claim therefore, for any leasing or other commissions, fees, charges or payments resulting form or arising out of Landlord’s actions in connection with this Amendment.

 

16.

Ratification; Miscellaneous. The Lease, as amended by this Amendment, shall remain enforceable in accordance with its terms. Terms and provisions of the Lease which are not expressly modified by this Amendment shall remain in full force and effect and shall govern Tenant’s lease of the Premises. As amended by this Amendment, all of the terms, conditions and provisions of the Lease are hereby ratified and affirmed in all respects. To the extent any terms, conditions and obligations contained in this Amendment conflict with the terms in the Lease, those in this Amendment shall control. This Amendment may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become a binding agreement when one or more counterparts have been signed by and delivered to each of the parties. In the event any term or provision of this Amendment is determined by appropriate judicial authority to be illegal or otherwise invalid, such provision shall be given its nearest legal meaning or be construed or deleted as such authority determines, and the remainder of this Amendment shall remain in full force and effect. Landlord and

 

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Tenant hereby represent and warrant to each other that all consents or approvals required of third parties for the execution, delivery and performance of this Amendment have been obtained and each party (including its signatory) has the right and authority to enter into and perform its covenants contained in this Amendment.

[Signature Pages Follow]

 

5

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IN WITNESS WHEREOF, Landlord and Tenant have caused this Amendment to be duly executed effective as of the day and year first above written.

 

 

6

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Exhibit A

DEPICTION OF SECOND AMENDMENT EXPANSION PREMISES

 

 

A-1

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EXHIBIT B

WORK LETTER

[Note: to be revised if the scope of work does not require the construction plans

considered by this work letter]

This Work Letter sets forth the terms and conditions relating to the construction of the Leasehold Improvements by Landlord in the Second Amendment Expansion Premises.

ARTICLE 1

DEFINITIONS

1.01 “Approved Construction Drawings” means the Construction Drawings approved by Landlord pursuant to the process set forth in Article 2 below.

1.02 “Approved Space Plan” means the Space Plan approved by Landlord and Tenant pursuant to the process set forth in Article 2 below.

1.03 “Architect” means the architect selected by Landlord to prepare the Construction Drawings.

1.04 “Change Order” means any change, modification or addition to the Approved Construction Drawings.

1.05 “Construction Drawings” means, to the extent applicable: (a) detailed architectural drawings and specifications for Tenant’s partition plan, demolition plan, reflected ceiling plan, power, communication and telephone plan (locating of data and telephone outlets with pull boxes only), electrical outlets, finish plan, elevations, details and sections; and (b) mechanical, electrical, plumbing and lighting plans and specifications where necessary for installation to Building systems.

1.06 “Contractor” means the contractor selected by Landlord to construct the Leasehold Improvements.

1.07 “Landlord’s Representative” means CB Richard Ellis, who Landlord has designated as its sole representative with respect to the matters set forth in this Work Letter, and who, until further notice to Tenant, has full authority and responsibility to act on behalf of Landlord as required in this Work Letter.

1.08 “Leasehold Improvements” means the improvements constructed and installed in the Second Amendment Expansion Premises in accordance with the Approved Construction Drawings.

 

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1.09 “Legal Requirement(s)” means, either individually or collectively, any federal, state, local or foreign law, statute, code, ordinance, rule or regulation.

1.10 “Punch List” shall have the meaning defined in Section 4.04(c) hereof.

1.11 “Space Plan” means a preliminary architectural drawing showing all demising walls, corridors, entrances, exits, doors and interior partitions.

1.12 “Substantial Completion” shall occur when the Leasehold Improvements have been substantially completed in accordance with the Approved Construction Drawings (other than minor Punch List items and any work which cannot be completed on such date, provided such incompletion will not substantially interfere with Tenant’s use of the Second Amendment Expansion Premises) and, if required for occupancy, a Certificate of Occupancy (temporary or final) has been issued by the appropriate governmental authority.

1.13 “Tenant’s Construction Costs” shall have the meaning defined in Section 4.02(a) hereof.

1.14 “Tenant’s Construction Costs Deposit” shall have the meaning defined in Section 4.02(b)(i) hereof.

1.15 “Tenant Expenditure Authorization” or “T.E.A.” means an authorization by Tenant to Landlord to expend funds on behalf of Tenant for the Leasehold Improvements, to be given on a written form in the form of that attached hereto as Schedule 1.

1.16 “Tenant Delay” shall have the meaning defined in Section 4.02(a) hereof.

1.17 “Tenant Improvement Allowance” means the allowance of Three Thousand Eight Hundred Ninety-Six and No/100 Dollars ($3,896.00), to be provided by Landlord as set forth in Section 3.01 below.

1.18 “Tenant’s Representative” means Kade Ross, who Tenant has designated as its sole representative with respect to the matters set forth in this Work Letter, and who, until further notice to Landlord, has full authority and responsibility to act on behalf of Tenant as required in this Work Letter. Tenant’s Representative is authorized to execute and deliver on behalf of Tenant any and all documents required by this Work Letter. Tenant hereby warrants and represents to Landlord that Tenant’s Representative has all of the requisite power and authority to execute and deliver such documents and that Tenant shall be bound by the execution of such documents on behalf of Tenant by Tenant’s Representative.

 

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ARTICLE 2

SCHEDULE

Landlord and Tenant hereby agree that time is of the essence and that the sequence and schedule specified below shall be strictly adhered to with respect to the design and development of the Construction Drawings and the construction of the Leasehold Improvements.

2.01 Space Plan. Following execution of this Amendment, Tenant shall promptly and diligently work with Landlord’s Representative and the Architect to develop a Space Plan for the Leasehold Improvements. Within five (5) business days after Tenant receives the Space Plan, Tenant shall, in its reasonable discretion, approve or disapprove the Space Plan. If Tenant disapproves the Space Plan, Tenant shall return the Space Plan to Landlord, along with a statement setting forth the grounds for the disapproval. In such event, Landlord shall make such changes as are acceptable to Landlord and shall then re-submit the revised Space Plan to Tenant. This procedure shall be repeated until Tenant has delivered to Landlord written approval of the Space Plan. When approved by Tenant and Landlord, the Space Plan shall be deemed to be the Approved Space Plan.

2.03 Construction Drawings; Bids; Selection of Contractor; T.E.A.

(a) Landlord shall direct the Architect to begin preparation of Construction Drawings. Within five (5) business days after its receipt of the Construction Drawings, Tenant shall notify Landlord in writing of its approval or disapproval, stating in reasonable detail the reasons for any disapproval.

(b) If Tenant disapproves the Construction Drawings, Landlord shall then resubmit revised Construction Drawings to Tenant containing such changes as are acceptable to Landlord, and Tenant shall approve or disapprove the revised Construction Drawings within two (2) business days after its receipt thereof, stating in reasonable detail the reasons for any disapproval.

(c) The foregoing process shall be repeated as many times as are necessary in order to obtain Construction Drawings which are approved by Landlord and Tenant. When approved by Landlord and Tenant, the Construction Drawings shall be deemed to be the Approved Construction Drawings.

(d) Notwithstanding any changes which it desires to effectuate in the Construction Drawings prior to their approval, or revisions which must be made to the Construction Drawings, if Tenant fails to approve the Construction Drawings on or before ten (10) days following the first date upon which they are originally submitted to Tenant by Landlord, then this failure shall be deemed a “Tenant Delay” pursuant to Article 5 below.

 

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(e) Within five (5) business days after Landlord’s receipt of the Approved Construction Drawings, Landlord shall submit the Approved Construction Drawings to the Contractor and obtain, within a reasonable time period, a bid for constructing the Leasehold Improvements in accordance with the Approved Construction Drawings. Upon request of Landlord, Tenant shall execute and deliver to Landlord the T.E.A. and such other documents as Landlord may request to confirm the selection bid of the Contractor. Notwithstanding any renegotiation of bids Tenant wishes to pursue, if Tenant fails to approve the bid from the Contractor and execute and deliver the T.E.A. on or before the date which is five (5) business days following its receipt of the bid, then this failure shall be deemed a “Tenant Delay” pursuant to Article 5 below.

2.03 Change Orders.

(a) All changes requested by Tenant shall require Landlord’s prior written consent, not to be unreasonably withheld. Any Contractor-initiated Change Order must be reviewed and approved by Landlord and Tenant, which review and approval will not be unreasonably withheld. Landlord shall have three (3) business days after Landlord’s receipt of any Change Order to approve or disapprove such Change Order. If Landlord approves such Change Order, and if such Change Order increases or decreases the cost to Landlord of constructing the Leasehold Improvements, Landlord shall prepare and deliver to Tenant a revised bid evidencing the total costs of such Change Order, which will include any amounts incurred by Landlord in reviewing the requested changes and revising the Approved Construction Drawings and the fee provided in Section 2.03(b) below.

(b) Should any Change Order modify the Approved Construction Drawings, Tenant shall pay all additional costs thereby incurred by Landlord, plus a fee of ten percent (10%) of the additional cost for Landlord’s cost of coordination, supervision and overhead resulting from the revision to the Approved Construction Drawings, excluding any additional architectural and/or engineering fees. All revised or additional Construction Drawings are subject to Landlord’s prior review and written approval. If and when approved by Landlord, such revised or additional Construction Drawings shall be deemed to be a part of the Approved Construction Drawings.

(c) Prior to commencement of construction or installation of any of the Leasehold Improvements provided in any Change Order, Tenant shall execute and deliver to Landlord a revised T.E.A. reflecting any increases or decreases in the cost to Landlord of constructing the Leasehold Improvements.

2.04 Legal Requirements. All design, construction and installation shall conform to the requirements of the Lease and Amendment, and all Legal Requirements. Landlord shall be responsible for obtaining approval of the Approved Construction Drawings by all governmental agencies having jurisdiction over the Premises and for obtaining all necessary licenses and permits in connection with the Leasehold Improvements, including temporary and permanent certificates of occupancy for the Second Amendment Expansion Premises. Tenant shall reasonably cooperate with Landlord in obtaining such approvals and permits.

 

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2.05 Materials and Workmanship. All work and materials required under the Approved Construction Drawings, including all materials, finishes and workmanship shall be equal to, or of a quality superior to, Building standard. Except as approved by Landlord, all materials incorporated in the Leasehold Improvements shall be new.

2.06 Field Verification. Architect shall verify at the job site all dimensions, locations and structural members and any physical conditions affecting the Construction Drawings.

ARTICLE 3

LANDLORD’S OBLIGATIONS

3.01 Tenant Improvement Allowance. Landlord shall contribute the Tenant Improvement Allowance towards the cost of constructing the Leasehold Improvements in the Second Amendment Expansion Premises. Tenant may also use a portion of the Tenant Improvement Allowance not to exceed $1,948.00 towards soft costs, including, without limitation, costs associated with data cabling, furniture, IT infrastructure, moving, etc. The Tenant Improvement Allowance must be used only for the actual out-of-pocket costs (hard and soft) of constructing the Leasehold Improvements in the Second Amendment Expansion Premises from concrete slab to concrete deck. Landlord will apply the Tenant Improvement Allowance to pay the cost of constructing the Leasehold Improvements, as such costs are incurred. After the Tenant Improvement Allowance has been exhausted, Landlord will apply Tenant’s Construction Costs Deposit to pay Tenant’s Construction Costs as such costs are incurred. Any unused portion of the Tenant Improvement Allowance shall be retained by Landlord. Any unused portion of Tenant’s Construction Costs Deposit shall be refunded to Tenant.

3.02 Intentionally omitted.

3.03 Intentionally omitted.

3.04 Coordination. Unless otherwise agreed in writing by Landlord and Tenant, all work involved in the construction and installation of the Leasehold Improvements shall be carried out by Contractor under a contract with Landlord and under the sole direction of Landlord. Tenant shall cooperate with Landlord, Contractor and the Architect to promote the efficient and expeditious completion of such work. All work not within the scope of the normal construction trades employed for the Building, such as the furnishing and installation of draperies, furniture, telephone equipment and wiring, and office equipment, shall be furnished and installed by Tenant at Tenant’s expense.

3.05 Commencement of Construction. Landlord shall have no obligation to commence or to allow commencement of construction or installation of the Leasehold Improvements in the Second Amendment Expansion Premises until:

 

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(a) Tenant has delivered to Landlord the Approved Construction Drawings, if applicable, initialed by Tenant’s Representative and Landlord’s Representative, and the executed T.E.A., and Tenant has approved the selection of the Contractor and the bid in writing, all as required pursuant to Section 2.02 above;

(b) Landlord has received from Tenant payment of all Rent then due under the Lease and Amendment; and

(c) Landlord has received from Tenant payment of Tenant’s Construction Costs Deposit, if any.

3.06 Commencement of Change Orders. Landlord shall have no obligation to commence or to allow commencement of construction or installation of any of the Leasehold Improvements provided in any Change Order until Landlord has received from Tenant payment of the required addition to Tenant’s Construction Costs Deposit, if any, and the executed revised T.E.A., as provided in Section 2.03(c) above, with respect to such Change Order.

3.07 Substitutions. Landlord, upon prior notice to Tenant, reserves the right to make reasonable substitutions of equal or better quality and value in the event of unavailability of materials or due to field conditions.

ARTICLE 4

TENANT’S OBLIGATIONS

4.01 Leasehold Improvements. All work required by the Approved Construction Drawings shall be considered part of the Leasehold Improvements.

4.02 Payments.

(a) Tenant shall be responsible for payment of the following to the extent such costs exceed the Tenant Improvement Allowance:

(i) The costs of preparation of the Construction Drawings and all costs to complete the construction of the Leasehold Improvements, including but not limited to the cost of all labor and materials supplied by the Contractor and Landlord and their respective material suppliers, independent contractors and subcontractors to construct and complete the Leasehold Improvements, including but not limited to the cost of any Change Orders, and Contractor’s profit and overhead expenses.

(ii) A fee to Landlord as a construction management fee equal to four percent (4%) of the total of the costs set forth in this Section 4.02(a) (including Change Orders), which fee Landlord shall deduct from the Tenant Improvement Allowance.

The costs set forth in this Section 4.02(a) are collectively referred to herein as “Tenant’s Construction Costs.”

 

B-6

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(b) Tenant shall pay Tenant’s Construction Costs, plus any other costs owing by Tenant to Landlord in connection with the construction of the Leasehold Improvements, as follows:

(i) On the date of execution of the T.E.A., Tenant shall pay to Landlord one hundred percent (100%) of the amount by which the amount indicated on the T.E.A. exceeds the Tenant Improvement Allowance (“Tenant’s Construction Costs Deposit”);

(ii) On the date of approval by Landlord of any Change Order which increases or decreases the cost of the Leasehold Improvements, Tenant shall execute a revised T.E.A., as provided in Section 2.03(c) above, evidencing such increased or decreased cost and shall deposit with Landlord, as an addition to Tenant’s Construction Costs Deposit, one hundred percent (100%) of the amount of the increased or decreased costs represented by such Change Order;

(iii) Tenant shall pay to Landlord, upon Substantial Completion of the Leasehold Improvements, the remainder, if any, of Tenant’s Construction Costs, plus any other costs owing by Tenant to Landlord in connection with the construction of the Leasehold Improvements, such amount to be indicated on a statement delivered by Landlord to Tenant and paid by Tenant. The amount shown on such statement shall be paid by Tenant within ten (10) days after receipt of such statement.

(c) Tenant agrees that in the event it fails to make any payment required in this Work Letter in a timely manner, Landlord, in addition to any and all other remedies allowed to Landlord by law or in equity, shall have the same rights and remedies against Tenant as in the case of a default in payment of Rent under the Lease.

4.03 Intentionally Deleted.

4.04 General Provisions.

(a) This Work Letter shall not be deemed applicable to:

(i) any portion of the Premises other than the Second Amendment Expansion Premises;

(ii) any space other than the Second Amendment Expansion Premises which is subsequently added to the Premises under the Lease, whether by any option or right under the Lease, including expansion options, rights of first offer and rights of first opportunity, or otherwise;

(iii) any portion of the Premises or any additions thereto in the event of a renewal or extension of the Term of the Lease, whether by any option or right under the Lease, including extension or renewal options, or otherwise, unless expressly provided in the Lease or any amendment thereto; or

 

B-7

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(iv) any portion of the Premises which has been assigned or subleased by Tenant.

(b) Any changes to the Approved Space Plan or the Approved Construction Drawings, or any additional work required by any governmental agencies having jurisdiction over the Building or any aspect of the completion of the Leasehold Improvements may be complied with by Landlord and/or Contractor. Such changes and/or additional work shall not be deemed to be a violation of the Approved Space Plan, the Approved Construction Drawings or any other provision of this Work Letter and shall be accepted by Tenant. If such changes and/or additional work increase or decrease the cost to Landlord of constructing the Leasehold Improvements, Landlord shall prepare and deliver to Tenant a revised T.E.A. and a Change Order evidencing the total cost of such changes and/or additional work.

(c) Notwithstanding any provisions to the contrary contained in this Lease, within thirty (30) days following Substantial Completion of the Leasehold Improvements, Tenant shall submit to Landlord a written itemization (the “Punch List”) of items of construction that were not properly completed. Upon receipt of the Punch List, Landlord shall cause such items to be corrected or completed. Upon completion of all items in the Punch List and at the request of Landlord, Tenant shall execute a document acknowledging the date upon which all Punch List items were completed.

(d) Tenant’s sole and exclusive remedy against Landlord for any defects in material or workmanship shall be to notify Landlord thereof, and then Landlord shall use commercially reasonable efforts to enforce the warranty given by the Contractor (which shall be a one (1) year warranty following Substantial Completion). Notwithstanding the foregoing, Landlord shall have no obligation to repair or replace such defects of material or workmanship unless Tenant submits written notice of such defects to Landlord within one (1) year after the Second Amendment Expansion Premises Commencement Date. LANDLORD MAKES NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, IN CONNECTION WITH THE LEASEHOLD IMPROVEMENTS EXCEPT THE WARRANTIES EXPRESSLY SET FORTH IN THIS SECTION 4.04(d). TENANT’S SOLE REMEDY FOR THE BREACH OF ANY APPLICABLE WARRANTY SHALL BE THE REMEDY SET FORTH IN THIS SECTION 4.04(d). Tenant agrees that no other remedy, including, without limitation, incidental or consequential damages for lost profits, injury to person or property or any other incidental or consequential loss shall be available to Tenant.

 

B-8

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ARTICLE 5

TENANT DELAY

5.01 Tenant Delay. The term “Tenant Delay” shall mean each day that Substantial Completion of the Leasehold Improvements is delayed by any of the following:

(a) Tenant’s failure to respond, within the time periods prescribed by Landlord, to a request for information necessary for the completion of the Construction Drawings; or

(b) Failure for any reason to develop the Approved Construction Drawings by the dates prescribed herein; or

(c) Tenant’s failure to execute and deliver the T.E.A. by the date required in Section 2.02(e) above; or

(d) Tenant’s failure to pay the Rent as required in the Lease and Amendment; or

(e) Tenant’s failure to pay Tenant’s Construction Costs Deposit by the date required in Section 4.02(b)(i) above; or

(f) Changes by Tenant in the Approved Construction Drawings or Change Orders; or

(g) Requirements by Tenant for materials, finishes or installations which are not Building standard, including but not limited to any delays caused by failure to obtain or to receive delivery or installation of any such non-Building standard materials in a timely manner; or

(h) Any interference by Tenant with the performance of the construction and installation of the Leasehold Improvements; or

(i) Delay by Tenant in delivering to Landlord an executed, revised T.E.A. and paying to Landlord an addition to Tenant’s Construction Costs Deposit required by a Change Order; or

(j) Any other cause which is defined as a Tenant Delay under this Work Letter or the Amendment; or

(k) Changes to the base, shell and core of the Building required by the Approved Construction Drawings; or

(l) Any other acts or omissions of Tenant, or its agents, or employees.

The date that Substantial Completion actually occurs will be accelerated for all purposes of the Amendment (including, without limitation, for determination of the Second Amendment Expansion Premises Commencement Date and the obligation to pay Rent), on a day-for-day basis for each day of Tenant Delay.

 

B-9

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Schedule 1

of

Exhibit “C”

TENANT EXPENDITURE AUTHORIZATION

 

Project:						Date:
						T.E.A. #:
Distribution:						Prepared By:
Contractor:
Architect:

Rentable Square Feet:

Based On:

Architectural/Mechanical/Electrical/Structural Engineering Design Fees								$

Construction:

$

$

$

$

SUBTOTAL

$

Construction Management Fee

$

Contingency

$

Total Estimated Project Cost

$

Tenant Improvement Allowance

$

Tenant’s Construction Costs Deposit

$

Total Now Due and Payable

$

 

 

 

Recommendation for Authorization:				Tenant Authorization:
Landlord’s Representative		Date		Tenant’s Representative		Date

 

C-1

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STATE OF NORTH CAROLINA		THIRD AMENDMENT TO
		LEASE
COUNTY OF WAKE

This THIRD AMENDMENT TO LEASE (this “Amendment”) is made and entered into effective as of the      day of                     , 2015 (the “Effective Date”), by and between VENTURE CENTER LLC, a Delaware limited liability company (“Landlord”), and BANDWIDTH.COM, INC., a Delaware corporation (“Tenant”).

W I T N E S S E T H:

WHEREAS, Landlord, as landlord, and Tenant, as tenant, entered into that certain Office Lease dated January 22, 2013 (the “Original Lease”), with respect to approximately seven thousand six hundred fifty-two (7,652) rentable square feet on the second floor of the Building known as Suite 267 (defined in the Original Lease as the “Second Floor Space”), and approximately five thousand four hundred twenty-nine (5,429) rentable square feet on the third floor of the Building known as Suite 317 (defined in the Original Lease as the “Third Floor Space”), both located in the office building known as the Venture III Building of the Venture Center (defined in the Original Lease as the “Building”), as more particularly described in the Original Lease; and

WHEREAS, Landlord and Tenant subsequently entered into that certain First Amendment to Lease dated October 11, 2013 (the “First Amendment”), pursuant to which Tenant leased an additional approximately eight thousand eight hundred fifty-two (8,852) rentable square feet of space known as Suite 201 and located on the second (2^nd) floor of the Building (defined in the First Amendment as the “Expansion Premises”); and

WHEREAS, Landlord and Tenant subsequently entered into that certain Second Amendment to Office Lease dated September 15, 2014 (the “Second Amendment,” and collectively with the Original Lease and First Amendment, the “Lease”), pursuant to which Tenant leased an additional approximately one thousand nine hundred forty-eight (1,948) rentable square feet of space located on the second (2^nd) floor of the Building and known as Suite 250 (defined in the Second Amendment as the “Second Amendment Expansion Premises”); and

WHEREAS, Landlord and Tenant have now agreed that Tenant will lease additional space on the first, fourth and fifth floors of the Building, and the Initial Term of the Lease shall be extended for one (1) year, all pursuant to the terms and conditions more particularly described herein; and

WHEREAS, Landlord and Tenant have agreed to execute this Amendment in order to memorialize the foregoing.

NOW, THEREFORE, in consideration of the mutual covenants and obligations of the parties contained in this Amendment and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:

 

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1.

Incorporation. The above recitals are true and complete and are incorporated herein by this reference, and this Amendment shall be construed in light thereof.

 

2.

Definitions. Capitalized terms, unless otherwise defined herein, shall have the meanings ascribed to such terms in the Lease.

 

3.

Lease of Additional Suite. (a) Effective as of March 1, 2017, Landlord leases to Tenant, and Tenant accepts and leases from Landlord, approximately fifty-nine thousand three hundred thirty-seven (59,337) rentable square feet of space located on the first, fourth and fifth floors of the Building (the “Third Amendment Expansion Premises”) upon all of the terms and conditions contained in the Lease, as amended by this Amendment. The Third Amendment Expansion Premises is depicted on Exhibit A attached hereto and incorporated herein by this reference. Effective as of: (i) the Effective Date, all references to the terms “premises,” “Premises,” and “Tenant’s Space” contained in the Lease shall be deemed to refer to the Second Amendment Expansion Premises, Expansion Premises and Second Floor Space; (ii) June 1, 2015, all references to the terms “premises,” “Premises,” and “Tenant’s Space” contained in the Lease shall be deemed to refer to the Second Amendment Expansion Premises, Expansion Premises, Second Floor Space and Third Floor Space; and (iii) March 1, 2017, all references to the terms “premises,” “Premises,” and “Tenant’s Space” contained in the Lease shall be deemed to refer to the Second Amendment Expansion Premises, Expansion Premises, Second Floor Space, Third Floor Space and the Third Amendment Expansion Premises. Landlord and Tenant agree that the Premises: (i) as of the Effective Date, contains a total of approximately eighteen thousand four hundred fifty-two (18,452) rentable square feet of space; (ii) as of June 1, 2015, shall contain a total of approximately twenty-three thousand eight hundred eighty-one (23,881) rentable square feet of space; and (iii) as of March 1, 2017, shall contain a total of approximately eighty-three thousand two hundred eighteen (83,218) rentable square feet of space.

(b) Landlord has no obligation to make any improvements to the Third Amendment Expansion Premises, and Tenant accepts the Third Amendment Expansion Premises in “as-is, where is” condition.

(c) The Initial Term of Tenant’s lease of the Third Amendment Expansion Premises shall expire co-terminously with the Expiration Date for the remainder of the Premises, as further described in Section 4 below.

 

4.

Term. The Initial Term of Tenant’s lease of the Premises currently expires on February 28, 2017. Landlord and Tenant hereby extend the expiration date of the Initial Term of the Lease until February 28, 2018. Tenant shall be entitled to extend the Initial Term with respect to the entire Premises (i.e., 83,218 rentable square feet) for two (2) consecutive three (3) year periods pursuant to the terms and conditions contained in Section 4 of the First Amendment.

 

2

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5.

Monthly Base Rent and Additional Rent.

(a) Effective as of March 1, 2017, Tenant agrees to pay to Landlord in advance on the first day of each month for the remainder of the Initial Term, without any notice, demand, offset or reduction whatsoever, Monthly Base Rent for the entire Premises (i.e., 83,218 rentable square feet) as follows:

 

Portion of Initial Term		Monthly Base Rent Per Rentable Square Foot				Monthly Payments of Monthly Base Rent
March 1, 2017 – February 28, 2018		$	27.50			$	190,707.92

Tenant shall pay the above stated Monthly Base Rent to Landlord on or before the first (1st) day of each calendar month in accordance with the terms of the Lease.

(b) Effective as of March 1, 2017, Tenant shall pay Tenant’s Percentage Share (as defined in the Lease) of the Operating Cost Adjustment (as defined in the Lease) for the entire Premises (i.e., 83,218 rentable square feet) in accordance with the terms of the Lease. Pursuant to the terms of the Original Lease, the Base Year shall be 2015.

 

6.

Brokers. Tenant and Landlord each represent and warrant to the other that neither it nor its officers or agents nor anyone acting on its behalf has dealt with any real estate broker other than CB Richard Ellis – Raleigh, LLC, Landlord’s broker (the “Landlord’s Broker”), and DTZ, Tenant’s broker (the “Tenant’s Broker”, and collectively with the Landlord’s Broker, the “Brokers”) in negotiating or making of this Amendment. Tenant agrees to indemnify and hold Landlord harmless against any loss, liability, damage, cost or expense (including reasonable attorneys’ fees and costs of litigation), or any claim therefore, for any leasing or other commissions, fees, charges or payments resulting from Tenant’s breach of the foregoing representation. Landlord agrees to indemnify and hold Tenant harmless against any loss, liability, damage, cost or expense (including reasonable attorneys’ fees and costs of litigation), or any claim therefore, for any leasing or other commissions, fees, charges or payments resulting form or arising out of Landlord’s actions in connection with this Amendment.

 

7.

Ratification; Miscellaneous. The Lease, as amended by this Amendment, shall remain enforceable in accordance with its terms. Terms and provisions of the Lease which are not expressly modified by this Amendment shall remain in full force and effect and shall govern Tenant’s lease of the Premises. As amended by this Amendment, all of the terms, conditions and provisions of the Lease are hereby ratified and affirmed in all respects. To the extent any terms, conditions and obligations contained in this Amendment conflict with the terms in the Lease, those in this Amendment shall control. This Amendment may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become a binding agreement when one or more counterparts have been signed by and delivered to each of the parties. In the event any term or provision of this Amendment is determined by appropriate judicial authority to be

 

3

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illegal or otherwise invalid, such provision shall be given its nearest legal meaning or be construed or deleted as such authority determines, and the remainder of this Amendment shall remain in full force and effect. Landlord and Tenant hereby represent and warrant to each other that all consents or approvals required of third parties for the execution, delivery and performance of this Amendment have been obtained and each party (including its signatory) has the right and authority to enter into and perform its covenants contained in this Amendment.

[Signature Pages Follow]

 

4

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IN WITNESS WHEREOF, Landlord and Tenant have caused this Amendment to be duly executed effective as of the day and year first above written.

 

 

5

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Exhibit A

DEPICTION OF THIRD AMENDMENT EXPANSION PREMISES

 

A-1

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A-2

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STATE OF NORTH CAROLINA		FOURTH AMENDMENT TO
		LEASE
COUNTY OF WAKE

This FOURTH AMENDMENT TO LEASE (this “Amendment”) is made and entered into effective as of the      day of                     , 2016 (the “Effective Date”), by and between VENTURE CENTER LLC, a Delaware limited liability company (“Landlord”), and BANDWIDTH.COM, INC., a Delaware corporation (“Tenant”).

W I T N E S S E T H:

WHEREAS, Landlord, as landlord, and Tenant, as tenant, entered into that certain Office Lease dated January 22, 2013 (the “Original Lease”), with respect to approximately seven thousand six hundred fifty-two (7,652) rentable square feet on the second floor of the Building known as Suite 267 (defined in the Original Lease as the “Second Floor Space”), and approximately five thousand four hundred twenty-nine (5,429) rentable square feet on the third floor of the Building known as Suite 317 (defined in the Original Lease as the “Third Floor Space”), both located in the office building known as the Venture III Building of the Venture Center (defined in the Original Lease as the “Building”), as more particularly described in the Original Lease; and

WHEREAS, Landlord and Tenant subsequently entered into that certain First Amendment to Lease dated October 11, 2013 (the “First Amendment”), pursuant to which Tenant leased an additional approximately eight thousand eight hundred fifty-two (8,852) rentable square feet of space known as Suite 201 and located on the second (2^nd) floor of the Building (defined in the First Amendment as the “Expansion Premises”); and

WHEREAS, Landlord and Tenant subsequently entered into that certain Second Amendment to Office Lease dated September 15, 2014 (the “Second Amendment”), and that certain Third Amendment to Lease dated May 15, 2015 (the “Third Amendment,” and collectively with the Original Lease, First Amendment, Second Amendment and Third Amendment, the “Lease”), pursuant to which (amongst other things) Tenant leased an additional approximately one thousand nine hundred forty-eight (1,948) rentable square feet of space located on the second (2^nd) floor of the Building and known as Suite 250 (defined in the Second Amendment as the “Second Amendment Expansion Premises”) and approximately fifty-nine thousand three hundred thirty-seven (59,337) rentable square feet of space located on the first, fourth and fifth floors of the Building (defined in the Third Amendment as the “Third Amendment Expansion Premises”); and

WHEREAS, Tenant currently subleases approximately four thousand three hundred eighty-seven (4,387) rentable square feet of space on the third (3^rd) floor of the Building from Allied Telesis (the “Fourth Amendment Expansion Premises”), and such sublease has a term that expires on March 31, 2019; Landlord and Tenant have agreed that effective as of April 1, 2019, Tenant shall lease the Fourth Amendment Expansion Premises directly from Landlord, pursuant to the terms and conditions more particularly described herein; and

 

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WHEREAS, Landlord and Tenant have agreed to extend the Initial Term of the Lease for two (2) years, and Landlord has agreed to grant Tenant one (1) option to further extend the Initial Term for one (1) year, all pursuant to the terms and conditions contained in this Amendment; and

WHEREAS, Landlord and Tenant have agreed to execute this Amendment in order to memorialize the foregoing.

NOW, THEREFORE, in consideration of the mutual covenants and obligations of the parties contained in this Amendment and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:

 

1.

Incorporation. The above recitals are true and complete and are incorporated herein by this reference, and this Amendment shall be construed in light thereof.

 

2.

Definitions. Capitalized terms, unless otherwise defined herein, shall have the meanings ascribed to such terms in the Lease.

 

3.

Lease of Additional Suite. (a) Effective as of April 1, 2019, Landlord leases to Tenant, and Tenant accepts and leases from Landlord, the Fourth Amendment Expansion Premises upon all of the terms and conditions contained in the Lease, as amended by this Amendment. The Fourth Amendment Expansion Premises is depicted on Exhibit A attached hereto and incorporated herein by this reference. Effective as of: (i) the Effective Date, all references to the terms “premises,” “Premises,” and “Tenant’s Space” contained in the Lease shall be deemed to refer to the Second Amendment Expansion Premises, Expansion Premises, Second Floor Space and Third Floor Space; (ii) March 1, 2017, all references to the terms “premises,” “Premises,” and “Tenant’s Space” contained in the Lease shall be deemed to refer to the Second Amendment Expansion Premises, Expansion Premises, Second Floor Space, Third Floor Space and the Third Amendment Expansion Premises; and (iii) April 1, 2019, all references to the terms “premises,” “Premises,” and “Tenant’s Space” contained in the Lease shall be deemed to refer to the Second Amendment Expansion Premises, Expansion Premises, Second Floor Space, Third Floor Space, Third Amendment Expansion Premises and the Fourth Amendment Expansion Premises. Landlord and Tenant agree that the Premises: (1) as of the Effective Date, contains a total of approximately twenty-three thousand eight hundred eighty-one (23,881) rentable square feet of space; (2) as of March 1, 2017, shall contain a total of approximately eighty-three thousand two hundred eighteen (83,218) rentable square feet of space; and (3) as of April 1, 2019, shall contain a total of eighty-seven thousand six hundred five (87,605) rentable square feet of space.

(b) Landlord has no obligation to make any improvements to the Fourth Amendment Expansion Premises, and Tenant accepts the Fourth Amendment Expansion Premises in “as-is, where is” condition.

 

2

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(c) The Initial Term of Tenant’s lease of the Fourth Amendment Expansion Premises shall expire co-terminously with the Expiration Date for the remainder of the Premises, as further described in Section 4 below.    

 

4.

Term; Renewal Option.

(a) The Initial Term of Tenant’s lease of the Premises currently expires on February 28, 2018. Landlord and Tenant hereby extend the expiration date of the Initial Term of the Lease until February 29, 2020.

(b) Provided that no event of default is in existence at the time the option is exercised, Tenant shall have one (1) option to extend the Initial Term for one (1) year (the “Option Term”), which right may only be exercised for the entire Premises (i.e., 87,605 rentable square feet). If an event of default exists as of the date the Option Term is to commence, then notwithstanding the foregoing, Landlord, at its option, shall have the right to nullify and void Tenant’s exercise of the extension option by providing Tenant with written notice thereof, and thereafter the Lease shall expire on February 29, 2020 as if Tenant had never exercised its extension option. The Option Term shall be upon the same terms and conditions contained in the Lease, as amended by this Amendment, except (i) Tenant shall not have any further option to extend, (ii) any improvement allowances or other concessions under the Lease shall not apply to the Option Term, and (iii) the Monthly Base Rent during the Option Term shall be equal to $206,820.80 per month. Tenant shall exercise such option by delivering to Landlord, no later than February 28, 2019, written notice of Tenant’s desire to exercise its extension option, time being of the essence. Tenant’s failure to properly exercise its option shall be deemed a waiver of such option.

For the purpose of clarity, the foregoing renewal option is Tenant’s only option to renew or extend the Initial Term, and all other renewal and extension options contained in the Lease (including, without limitation, the renewal options contained in Section 2.02.B. of the Original Lease, Section 4 of the First Amendment, and Section 4 of the Third Amendment) are hereby deleted in their entirety and of no further force or effect.

 

5.

Monthly Base Rent and Additional Rent.

(a) Effective as of March 1, 2018, Tenant agrees to pay to Landlord in advance on the first day of each month for the remainder of the Initial Term, without any notice, demand, offset or reduction whatsoever, Monthly Base Rent for the entire Premises (the applicable rentable square footages are specified below) as follows:

 

Portion of Initial Term		Size of Premises				Monthly Base Rent Per Rentable Square Foot				Monthly Payments of Monthly Base Rent
March 1, 2018 – March 31, 2019			83,218 rsf			$	27.50			$	190,707.92
April 1, 2019 – February 29, 2020			87,605 rsf			$	27.50			$	200,761.46

 

3

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Tenant shall pay the above stated Monthly Base Rent to Landlord on or before the first (1st) day of each calendar month in accordance with the terms of the Lease.

(b) Effective as of April 1, 2019, Tenant shall pay Tenant’s Percentage Share (as defined in the Lease) of the Operating Cost Adjustment (as defined in the Lease) for the entire Premises (i.e., 87,605 rentable square feet) in accordance with the terms of the Lease. Pursuant to the terms of the Original Lease, the Base Year shall be 2015.

 

6.

Brokers. Tenant and Landlord each represent and warrant to the other that neither it nor its officers or agents nor anyone acting on its behalf has dealt with any real estate broker other than CB Richard Ellis – Raleigh, LLC, Landlord’s broker (the “Broker”) in negotiating or making of this Amendment. Tenant agrees to indemnify and hold Landlord harmless against any loss, liability, damage, cost or expense (including reasonable attorneys’ fees and costs of litigation), or any claim therefore, for any leasing or other commissions, fees, charges or payments resulting from Tenant’s breach of the foregoing representation. Landlord agrees to indemnify and hold Tenant harmless against any loss, liability, damage, cost or expense (including reasonable attorneys’ fees and costs of litigation), or any claim therefore, for any leasing or other commissions, fees, charges or payments resulting form or arising out of Landlord’s actions in connection with this Amendment.

 

7.

Ratification; Miscellaneous. The Lease, as amended by this Amendment, shall remain enforceable in accordance with its terms. Terms and provisions of the Lease which are not expressly modified by this Amendment shall remain in full force and effect and shall govern Tenant’s lease of the Premises. As amended by this Amendment, all of the terms, conditions and provisions of the Lease are hereby ratified and affirmed in all respects. To the extent any terms, conditions and obligations contained in this Amendment conflict with the terms in the Lease, those in this Amendment shall control. This Amendment may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become a binding agreement when one or more counterparts have been signed by and delivered to each of the parties. In the event any term or provision of this Amendment is determined by appropriate judicial authority to be illegal or otherwise invalid, such provision shall be given its nearest legal meaning or be construed or deleted as such authority determines, and the remainder of this Amendment shall remain in full force and effect. Landlord and Tenant hereby represent and warrant to each other that all consents or approvals required of third parties for the execution, delivery and performance of this Amendment have been obtained and each party (including its signatory) has the right and authority to enter into and perform its covenants contained in this Amendment.

[Signature Pages Follow]

 

4

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IN WITNESS WHEREOF, Landlord and Tenant have caused this Amendment to be duly executed effective as of the day and year first above written.

 

 

5

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Exhibit A

DEPICTION OF FOURTH AMENDMENT EXPANSION PREMISES

 

 

A-1

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STATE OF NORTH CAROLINA		FIFTH AMENDMENT TO
		LEASE
COUNTY OF WAKE

This FIFTH AMENDMENT TO LEASE (this “Amendment”) is made and entered into effective as of the      day of September, 2016 (the “Effective Date”), by and between VENTURE CENTER LLC, a Delaware limited liability company (“Landlord”), and BANDWIDTH.COM, INC., a Delaware corporation (“Tenant”).

W I T N E S S E T H:

WHEREAS, Landlord, as landlord, and Tenant, as tenant, entered into that certain Office Lease dated January 22, 2013 (the “Original Lease”), with respect to approximately seven thousand six hundred fifty-two (7,652) rentable square feet on the second floor of the Building known as Suite 267 (defined in the Original Lease as the “Second Floor Space”), and approximately five thousand four hundred twenty-nine (5,429) rentable square feet on the third floor of the Building known as Suite 317 (defined in the Original Lease as the “Third Floor Space”), both located in the office building known as the Venture III Building of the Venture Center (the “Venture III Building”), as more particularly described in the Original Lease; and

WHEREAS, Landlord and Tenant subsequently entered into that certain First Amendment to Lease dated October 11, 2013 (the “First Amendment”), pursuant to which Tenant leased an additional approximately eight thousand eight hundred fifty-two (8,852) rentable square feet of space known as Suite 201 and located on the second (2^nd) floor of the Building (defined in the First Amendment as the “Expansion Premises”); and

WHEREAS, Landlord and Tenant subsequently entered into that certain Second Amendment to Office Lease dated September 15, 2014 (the “Second Amendment”), and that certain Third Amendment to Lease dated May 15, 2015 (the “Third Amendment”), pursuant to which (amongst other things) Tenant leased an additional approximately one thousand nine hundred forty-eight (1,948) rentable square feet of space located on the second (2^nd) floor of the Building and known as Suite 250 (defined in the Second Amendment as the “Second Amendment Expansion Premises”) and approximately fifty-nine thousand three hundred thirty-seven (59,337) rentable square feet of space located on the first, fourth and fifth floors of the Building (defined in the Third Amendment as the “Third Amendment Expansion Premises”); and

WHEREAS, Landlord and Tenant subsequently entered into that certain Fourth Amendment to Lease dated March 21, 2016 (the “Fourth Amendment,” and collectively with the Original Lease, First Amendment, Second Amendment and Third Amendment, the “Lease”), pursuant to which Tenant agreed to lease certain space on the third (3^rd) floor of the Building containing four thousand three hundred eighty-seven (4,387) rentable square feet (defined in the Fourth Amendment as the “Fourth Amendment Expansion Premises”, and collectively with the Second Floor Space, the Third Floor Space, Expansion Premises, Second Amendment Expansion Premises and Third Amendment Expansion Premises, the “Venture III Premises”), effective as of April 1, 2019; and

 

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WHEREAS, Landlord and Tenant have now agreed that Tenant shall lease additional space containing approximately seventeen thousand seventy-three (17,073) rentable square feet on the third (3^rd) floor and twenty-three thousand five hundred eighty-four (23,584) rentable square feet on the fourth (4^th) floor (collectively, the “Venture I Premises”, which contains an aggregate of forty thousand six hundred fifty-seven (40,657) rentable square feet) of that certain office building in the Venture Center known as the Venture I building and located at 940 Main Campus Drive, Raleigh, North Carolina 27606 (the “Venture I Building”), pursuant to the terms and conditions contained herein; Landlord is the owner of the Venture I Building; and

WHEREAS, Landlord and Tenant have agreed that the term of Tenant’s lease of the Venture I Premises shall be sixty-three (63) months, and have also agreed to extend the term for the Venture III Premises to expire conterminously, pursuant to the terms and conditions contained in this Amendment; and

WHEREAS, Landlord and Tenant have agreed to execute this Amendment in order to memorialize the foregoing.

NOW, THEREFORE, in consideration of the mutual covenants and obligations of the parties contained in this Amendment and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:

 

8.

Incorporation. The above recitals are true and complete and are incorporated herein by this reference, and this Amendment shall be construed in light thereof.

 

9.

Definitions. Capitalized terms, unless otherwise defined herein, shall have the meanings ascribed to such terms in the Lease.

 

10.

Lease of Venture III Premises. (a) Effective as of the Venture I Commencement Date (defined below), Landlord leases to Tenant, and Tenant accepts and leases from Landlord, the Venture I Premises upon all of the terms and conditions contained in the Lease, as amended by this Amendment. The Venture I Premises is depicted on Exhibit A attached hereto and incorporated herein by this reference. For the purposes hereof, the “Venture I Commencement Date” shall mean the date that is the later to occur of (i) Substantial Completion (as defined in the Work Letter attached hereto as Exhibit B and incorporated herein by reference) of the Leasehold Improvements and delivery of the Venture I Premises to Tenant, and (ii) January 1, 2017. The parties anticipate that Substantial Completion of the Leasehold Improvements will occur on or around January 1, 2017. Following the Venture I Commencement Date, all references in the Lease to the “Building” or “building” shall be deemed references to both the Venture I Building and the Venture III Building, unless the context clearly requires otherwise.

 

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(b) Subject to Tenant Delay (as defined in Exhibit B) and delays caused by force majeure, Landlord shall cause the improvements to be made to the Venture I Premises and Venture III Premises that are described on Exhibit B attached hereto and incorporated herein by this reference (the “Landlord’s Work”) on or before the Venture I Commencement Date. Except for the Landlord’s Work, Landlord has no obligation to make any improvements to the Venture I Premises or the Venture III Premises.

 

11.

Square Footage of Premises.

(a) For the Venture III Premises, effective as of: (i) the Effective Date, all references to the terms “premises,” “Premises,” and “Tenant’s Space” contained in the Lease shall be deemed to refer to the Second Amendment Expansion Premises, Expansion Premises, Second Floor Space and Third Floor Space; (ii) March 1, 2017, all references to the terms “premises,” “Premises,” and “Tenant’s Space” contained in the Lease shall be deemed to refer to the Second Amendment Expansion Premises, Expansion Premises, Second Floor Space, Third Floor Space and the Third Amendment Expansion Premises; and (iii) April 1, 2019, all references to the terms “premises,” “Premises,” and “Tenant’s Space” contained in the Lease shall be deemed to refer to the Second Amendment Expansion Premises, Expansion Premises, Second Floor Space, Third Floor Space, Third Amendment Expansion Premises and the Fourth Amendment Expansion Premises. Landlord and Tenant agree that the Premises: (1) as of the Effective Date, contains a total of approximately twenty-three thousand eight hundred eighty-one (23,881) rentable square feet of space; (2) as of March 1, 2017, shall contain a total of approximately eighty-three thousand two hundred eighteen (83,218) rentable square feet of space; and (3) as of April 1, 2019, shall contain a total of eighty-seven thousand six hundred five (87,605) rentable square feet of space.

(b) Effective as of the Venture I Commencement Date, all references to the terms “premises, “Premises,” and “Tenant’s Space” contained in the Lease shall be deemed to include the Venture I Premises. Assuming the Venture I Commencement Date occurs on January 1, 2017, then effective as of (i) January 1, 2017, all references to the terms “premises,” “Premises,” and “Tenant’s Space” contained in the Lease shall be deemed to refer to the Second Amendment Expansion Premises, Expansion Premises, Second Floor Space, Third Floor Space and Venture I Premises, (ii) March 1, 2017, all references to the terms “premises,” “Premises,” and “Tenant’s Space” contained in the Lease shall be deemed to refer to the Second Amendment Expansion Premises, Expansion Premises, Second Floor Space, Third Floor Space, Third Amendment Expansion Premises and Venture I Premises; and (iii) April 1, 2019, all references to the terms “premises,” “Premises,” and “Tenant’s Space” contained in the Lease shall be deemed to refer to the Second Amendment Expansion Premises, Expansion Premises, Second Floor Space, Third Floor Space, Third Amendment Expansion Premises, Fourth Amendment Expansion Premises and Venture I Premises. Landlord and Tenant agree that, assuming the Venture I Commencement Date occurs on January 1, 2017, the Premises: (1) as of the Effective Date, contains a total of approximately twenty-three thousand eight hundred eighty-one (23,881) rentable square feet of space; (2) as of January 1, 2017 shall contain a total of approximately sixty-four

 

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thousand five hundred thirty-eight (64,538) rentable square feet of space; (3) as of March 1, 2017, shall contain a total of approximately one hundred twenty-three thousand eight hundred seventy-five (123,875) rentable square feet of space; and (4) as of April 1, 2019, shall contain a total of one hundred twenty-eight thousand two hundred sixty-two (128,262) rentable square feet of space.

 

12.

Term; Renewal Option.

(a) The Initial Term of Tenant’s lease of the Premises currently expires on February 29, 2020. Landlord and Tenant hereby extend the expiration date of the Initial Term of the Lease until the date that is sixty-three (63) months following the Venture I Commencement Date. Following the Venture I Commencement Date, Landlord and Tenant shall execute an agreement to memorialize the expiration date of the Lease Term.

(b) All renewal and extension options contained in the Lease (including, without limitation, the renewal options contained in Section 2.02.B. of the Original Lease, Section 4 of the First Amendment, Section 4 of the Third Amendment and Section 4 of the Fourth Amendment) are hereby deleted in their entirety and of no further force or effect.

 

13.

Monthly Base Rent and Additional Rent.

(a) For the Venture III Premises, until March 1, 2020 Tenant shall continue to pay Monthly Base Rent in accordance with the terms of the Lease. Effective as of March 1, 2020, the square footage of the Venture III Premises shall be included within the Monthly Base Rent calculation contained in Section 6(b) below.

(b) For the Venture I Premises, Tenant agrees to pay to Landlord in advance on the first day of each month, without any notice, demand, offset or reduction whatsoever, Monthly Base Rent as follows:

 

Months Following the Venture I Commencement Date		Square Footage of Venture I Premises				Monthly Base Rent Per Rentable Square Foot				Monthly Payments of Monthly Base Rent
Months 1 - 12			40,657			$	27.25			$	92,325.27	*
Months 13 - 24			40,657			$	27.80			$	94,188.71	**
Months 25 - 36			40,657			$	28.35			$	96,052.16	**
Months 37 - 48			40,657			$	28.92			$	97,983.37	**
Months 49 - 63			40,657			$	29.50			$	99,948.45	**

 

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*

Notwithstanding the foregoing, Monthly Base Rent shall be conditionally abated for the Venture I Premises only (but not for the Venture III Premises) for the first three (3) months following the Venture I Commencement Date. If Tenant shall default under the Lease at any time, then Tenant shall immediately pay Landlord all abated Monthly Base Rent (i.e., $276,975.81), in addition to all other remedies of Landlord.

 

**

For that portion of the Initial Term commencing on March 1, 2020, these Monthly Base Rent figures shall be adjusted as applicable to include the square footage of the Venture III Premises. For example, if March 1, 2020 falls during the thirty-ninth (39th) month following the Venture I Commencement Date, then for that month Monthly Base Rent for the entire Premises shall be computed as follows: $28.92 (psf rate) times 128,262 (square footage of entire Premises) = $309,111.42.

Tenant shall pay the above stated Monthly Base Rent to Landlord on or before the first (1st) day of each calendar month in accordance with the terms of the Lease.

(b) Tenant shall pay Tenant’s Percentage Share (as defined in the Lease) of the Operating Cost Adjustment (as defined in the Lease) for the entire Premises in accordance with the terms of the Lease; provided, however, that effective as of the Venture I Commencement Date, the Base Year for the entire Premises shall be 2017.

 

14.

Parking. Effective as of the Venture I Commencement Date, Section 5 of the Second Amendment is hereby deleted in its entirety and replaced with the following:

“Notwithstanding anything contained in this Lease, Tenant shall not utilize more than 4 parking spaces in the Common Areas per 1,000 square feet of rentable square feet in the Premises. Further, Tenant may request in writing that Landlord provide up to an additional one hundred fifty (150) parking spaces (the “Additional Parking Spaces”) and Landlord may provide the Additional Parking Spaces upon receipt of such written request. Tenant shall initially pay $30.00 per card per month for such Additional Parking Spaces. Landlord may increase such monthly parking card fee upon thirty (30) days advance written notice to Tenant, provided Landlord may not increase the fee more than one (1) time per calendar year, and each yearly increase amount shall not exceed three percent (3%) of the amount of the fee for the previous year. Notwithstanding the foregoing, Landlord may revoke Additional Parking Spaces previously granted to Tenant at any time, in Landlord’s sole discretion.”

 

15.

Brokers. Tenant and Landlord each represent and warrant to the other that neither it nor its officers or agents nor anyone acting on its behalf has dealt with any real estate broker other than CB Richard Ellis – Raleigh, LLC, Landlord’s broker (the “Broker”) in negotiating or making of this Amendment. Tenant agrees to indemnify and hold Landlord harmless against any loss, liability, damage, cost or

 

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expense (including reasonable attorneys’ fees and costs of litigation), or any claim therefore, for any leasing or other commissions, fees, charges or payments resulting from Tenant’s breach of the foregoing representation. Landlord agrees to indemnify and hold Tenant harmless against any loss, liability, damage, cost or expense (including reasonable attorneys’ fees and costs of litigation), or any claim therefore, for any leasing or other commissions, fees, charges or payments resulting form or arising out of Landlord’s actions in connection with this Amendment.

 

16.

Ratification; Miscellaneous. The Lease, as amended by this Amendment, shall remain enforceable in accordance with its terms. Terms and provisions of the Lease which are not expressly modified by this Amendment shall remain in full force and effect and shall govern Tenant’s lease of the Premises. As amended by this Amendment, all of the terms, conditions and provisions of the Lease are hereby ratified and affirmed in all respects. To the extent any terms, conditions and obligations contained in this Amendment conflict with the terms in the Lease, those in this Amendment shall control. This Amendment may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become a binding agreement when one or more counterparts have been signed by and delivered to each of the parties. In the event any term or provision of this Amendment is determined by appropriate judicial authority to be illegal or otherwise invalid, such provision shall be given its nearest legal meaning or be construed or deleted as such authority determines, and the remainder of this Amendment shall remain in full force and effect. Landlord and Tenant hereby represent and warrant to each other that all consents or approvals required of third parties for the execution, delivery and performance of this Amendment have been obtained and each party (including its signatory) has the right and authority to enter into and perform its covenants contained in this Amendment.

[Signature Pages Follow]

 

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IN WITNESS WHEREOF, Landlord and Tenant have caused this Amendment to be duly executed effective as of the day and year first above written.

 

 

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Exhibit A

DEPICTION OF VENTURE I PREMISES

 

 

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Exhibit A

WORK LETTER

This Work Letter sets forth the terms and conditions relating to the construction of the Leasehold Improvements by Landlord in the Expansion Premises.

ARTICLE 1

DEFINITIONS

1.01 “Approved Construction Drawings” means the Construction Drawings approved by Landlord pursuant to the process set forth in Article 2 below.

1.02 “Approved Space Plan” means the Space Plan approved by Landlord pursuant to the process set forth in Article 2 below.

1.03 “Architect” means the architect selected by Landlord, subject to Tenant’s reasonable approval, to prepare the Construction Drawings.

1.04 “Change Order” means any change, modification or addition to the Approved Construction Drawings.

1.05 “Construction Drawings” means: (a) detailed architectural drawings and specifications for Tenant’s partition plan, demolition plan, reflected ceiling plan, power, communication and telephone plan (locating of data and telephone outlets with pull boxes only), electrical outlets, finish plan, elevations, details and sections; and (b) mechanical, electrical, plumbing and lighting plans and specifications where necessary for installation to Building systems.

1.06 “Contractor” means the contractor selected by Landlord, subject to Tenant’s reasonable approval, to construct the Leasehold Improvements.

1.07 “Landlord’s Representative” means CB Richard Ellis—Raleigh, who Landlord has designated as its sole representative with respect to the matters set forth in this Work Letter, and who, until further notice to Tenant, has full authority and responsibility to act on behalf of Landlord as required in this Work Letter.

1.08 “Leasehold Improvements” means the improvements constructed and installed in the Venture I Premises and/or the Venture III Premises in accordance with the Approved Construction Drawings.

1.09 “Legal Requirement(s)” means, either individually or collectively, any federal, state, local or foreign law, statute, code, ordinance, rule or regulation.

1.10 “Punch List” shall have the meaning defined in Section 4.04(c) hereof.

 

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1.11 “Space Plan” means a preliminary architectural drawing showing all demising walls, corridors, entrances, exits, doors and interior partitions.

1.12 “Substantial Completion” shall occur when the Leasehold Improvements have been substantially completed in accordance with the Approved Construction Drawings (other than minor Punch List items and any work which cannot be completed on such date, provided such incompletion will not substantially interfere with Tenant’s use of the Venture I Premises or the Venture III Premises) and, if required for occupancy, a Certificate of Occupancy (temporary or final) has been issued by the appropriate governmental authority.

1.13 “Tenant’s Construction Costs” shall have the meaning defined in Section 4.02(a) hereof.

1.14 “Tenant’s Construction Costs Deposit” shall have the meaning defined in Section 4.02(b)(i) hereof.

1.15 “Tenant Expenditure Authorization” or “T.E.A.” means an authorization by Tenant to Landlord to expend funds on behalf of Tenant for the Leasehold Improvements, to be given on a written form in the form of that attached hereto as Schedule 1.

1.16 “Tenant Delay” shall have the meaning defined in Section 4.02(a) hereof.

1.17 “Tenant Improvement Allowance” means the allowance of Two Million Eight Thousand One Hundred Fifty-Five and No/100 Dollars ($2,008,155.00), to be provided by Landlord as set forth in Section 3.01 below.

1.18 “Tenant’s Representative” means Kade Ross, who Tenant has designated as its sole representative with respect to the matters set forth in this Work Letter, and who, until further notice to Landlord, has full authority and responsibility to act on behalf of Tenant as required in this Work Letter. Tenant’s Representative is authorized to execute and deliver on behalf of Tenant any and all documents required by this Work Letter. Tenant hereby warrants and represents to Landlord that Tenant’s Representative has all of the requisite power and authority to execute and deliver such documents and that Tenant shall be bound by the execution of such documents on behalf of Tenant by Tenant’s Representative.

ARTICLE 2

SCHEDULE

Landlord and Tenant hereby agree that time is of the essence and that the sequence and schedule specified below shall be strictly adhered to with respect to the design and development of the Construction Drawings and the construction of the Leasehold Improvements.

 

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2.01 Space Plan. Landlord shall cause the Architect to submit the Space Plan to Tenant for Tenant’s review and approval within a reasonable period of time following execution of this Lease. Within five (5) business days after Tenant receives the Space Plan, Tenant shall, in its reasonable discretion, approve or disapprove the Space Plan. If Tenant disapproves the Space Plan, Tenant shall return the Space Plan to Landlord, along with a statement setting forth the grounds for the disapproval. In such event, Landlord shall make such changes as are acceptable to Landlord and shall then re-submit the revised Space Plan to Tenant. This procedure shall be repeated until Tenant has delivered to Landlord written approval of the Space Plan. When approved by Tenant and Landlord, the Space Plan shall be deemed to be the Approved Space Plan.

2.04 Construction Drawings; Bids; Selection of Contractor; T.E.A.

(a) Landlord shall direct the Architect to begin preparation of Construction Drawings. Within five (5) business days after its receipt of the Construction Drawings, Tenant shall notify Landlord in writing of its approval or disapproval, stating in reasonable detail the reasons for any disapproval.

(b) If Tenant disapproves the Construction Drawings, Landlord shall then resubmit revised Construction Drawings to Tenant containing such changes as are acceptable to Landlord, and Tenant shall approve or disapprove the revised Construction Drawings within two (2) business days after its receipt thereof, stating in reasonable detail the reasons for any disapproval.

(c) The foregoing process shall be repeated as many times as are necessary in order to obtain Construction Drawings which are approved by Landlord and Tenant. When approved by Landlord and Tenant, the Construction Drawings shall be deemed to be the Approved Construction Drawings.

(d) Notwithstanding any changes which it desires to effectuate in the Construction Drawings prior to their approval, or revisions which must be made to the Construction Drawings, if Tenant fails to approve the Construction Drawings on or before ten (10) days following the first date upon which they are originally submitted to Tenant by Landlord, then this failure shall be deemed a “Tenant Delay” pursuant to Article 5 below.

(e) Within five (5) business days after Landlord’s receipt of the Approved Construction Drawings, Landlord shall submit the Approved Construction Drawings to the Contractor and obtain, within a reasonable time period, a bid for constructing the Leasehold Improvements in accordance with the Approved Construction Drawings. Upon request of Landlord, Tenant shall execute and deliver to Landlord the T.E.A. and such other documents as Landlord may reasonably request to confirm the selection bid of the Contractor. Notwithstanding any renegotiation of bids Tenant wishes to pursue, if Tenant fails to approve the bid from the Contractor and execute and deliver the T.E.A. on or before the date which is five (5) business days following its receipt of the bid, then this failure shall be deemed a “Tenant Delay” pursuant to Article 5 below.

 

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2.03 Change Orders.

(a) All changes requested by Tenant shall require Landlord’s prior written consent, not to be unreasonably withheld. Any Contractor-initiated Change Order must be reviewed and approved by Landlord and Tenant, which review and approval will not be unreasonably withheld. Landlord shall have three (3) business days after Landlord’s receipt of any Change Order to approve or disapprove such Change Order. If Landlord approves such Change Order, and if such Change Order increases or decreases the cost to Landlord of constructing the Leasehold Improvements, Landlord shall prepare and deliver to Tenant a revised bid evidencing the total costs of such Change Order, which will include any amounts incurred by Landlord in reviewing the requested changes and revising the Approved Construction Drawings.

(b) Should any Change Order modify the Approved Construction Drawings, Tenant shall pay all additional costs thereby incurred by Landlord. All revised or additional Construction Drawings are subject to Landlord’s prior review and written approval. If and when approved by Landlord, such revised or additional Construction Drawings shall be deemed to be a part of the Approved Construction Drawings.

(c) Prior to commencement of construction or installation of any of the Leasehold Improvements provided in any Change Order, Tenant shall execute and deliver to Landlord a revised T.E.A. reflecting any increases or decreases in the cost to Landlord of constructing the Leasehold Improvements.

2.04 Legal Requirements. All design, construction and installation shall conform to the requirements of the Lease, and all Legal Requirements. Landlord shall be responsible for obtaining approval of the Approved Construction Drawings by all governmental agencies having jurisdiction over the Premises and for obtaining all necessary licenses and permits in connection with the Leasehold Improvements, including temporary and permanent certificates of occupancy for the Venture I Premises and the Venture III Premises. Tenant shall reasonably cooperate with Landlord in obtaining such approvals and permits.

2.05 Materials and Workmanship. All work and materials required under the Approved Construction Drawings, including all materials, finishes and workmanship shall be equal to, or of a quality superior to, Building standard. Except as approved by Landlord, all materials incorporated in the Leasehold Improvements shall be new.

2.06 Field Verification. Architect shall verify at the job site all dimensions, locations and structural members and any physical conditions affecting the Construction Drawings.

 

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ARTICLE 3

LANDLORD’S OBLIGATIONS

3.01 Tenant Improvement Allowance. Landlord shall contribute the Tenant Improvement Allowance towards the cost of constructing the Leasehold Improvements in the Venture I Premises and/or the Venture III Premises. The Tenant Improvement Allowance must be used only for the actual out-of-pocket costs (hard and soft) of constructing the Leasehold Improvements in the Venture I Premises and/or the Venture III Premises from concrete slab to concrete deck. Landlord will apply the Tenant Improvement Allowance to pay the cost of constructing the Leasehold Improvements, as such costs are incurred. After the Tenant Improvement Allowance has been exhausted, Landlord will apply Tenant’s Construction Costs Deposit to pay Tenant’s Construction Costs as such costs are incurred. Any unused portion of the Tenant Improvement Allowance shall be retained by Landlord. Any unused portion of Tenant’s Construction Costs Deposit shall be refunded to Tenant.

3.02 Intentionally omitted.

3.03 Intentionally omitted.

3.04 Coordination. Unless otherwise agreed in writing by Landlord and Tenant, all work involved in the construction and installation of the Leasehold Improvements shall be carried out by Contractor under a contract with Landlord and under the sole direction of Landlord. Tenant shall cooperate with Landlord, Contractor and the Architect to promote the efficient and expeditious completion of such work. All work not within the scope of the normal construction trades employed for the Building, such as the furnishing and installation of draperies, furniture, telephone equipment and wiring, and office equipment, shall be furnished and installed by Tenant at Tenant’s expense.

3.05 Commencement of Construction. Landlord shall have no obligation to commence or to allow commencement of construction or installation of the Leasehold Improvements in the Venture I Premises or the Venture III Premises until:

(a) Tenant has delivered to Landlord the Approved Construction Drawings, if applicable, initialed by Tenant’s Representative and Landlord’s Representative, and the executed T.E.A., and Tenant has approved the selection of the Contractor and the bid in writing, all as required pursuant to Section 2.02 above;

(b) Landlord has received from Tenant payment of all Rent then due under the Lease; and

(c) Landlord has received from Tenant payment of Tenant’s Construction Costs Deposit, if any.

3.06 Commencement of Change Orders. Landlord shall have no obligation to commence or to allow commencement of construction or installation of any of the Leasehold Improvements provided in any Change Order until Landlord has received from Tenant payment of the required addition to Tenant’s Construction Costs Deposit, if any, and the executed revised T.E.A., as provided in Section 2.03(c) above, with respect to such Change Order.

 

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3.07 Substitutions. Landlord, upon prior notice to Tenant, reserves the right to make reasonable substitutions of equal or better quality and value in the event of unavailability of materials or due to field conditions.

ARTICLE 4

TENANT’S OBLIGATIONS

4.01 Leasehold Improvements. All work required by the Approved Construction Drawings shall be considered part of the Leasehold Improvements.

4.02 Payments.

(a) Tenant shall be responsible for payment of the following to the extent such costs exceed the Tenant Improvement Allowance:

(i) The costs of preparation of the Construction Drawings and all costs to complete the construction of the Leasehold Improvements, including but not limited to the cost of all labor and materials supplied by the Contractor and Landlord and their respective material suppliers, independent contractors and subcontractors to construct and complete the Leasehold Improvements, including but not limited to the cost of any Change Orders, and Contractor’s profit and overhead expenses.

(ii) Intentionally omitted.

The costs set forth in this Section 4.02(a) are collectively referred to herein as “Tenant’s Construction Costs.”

(b) Tenant shall pay Tenant’s Construction Costs, plus any other costs owing by Tenant to Landlord in connection with the construction of the Leasehold Improvements, as follows:

(i) On the date of execution of the T.E.A., Tenant shall pay to Landlord one hundred percent (100%) of the amount by which the amount indicated on the T.E.A. exceeds the Tenant Improvement Allowance (“Tenant’s Construction Costs Deposit”);

(ii) On the date of approval by Landlord of any Change Order which increases or decreases the cost of the Leasehold Improvements, Tenant shall execute a revised T.E.A., as provided in Section 2.03(c) above, evidencing such increased or decreased cost and shall deposit with Landlord, as an addition to Tenant’s Construction Costs Deposit, one hundred percent (100%) of the amount of the increased or decreased costs represented by such Change Order;

(iii) Tenant shall pay to Landlord, upon Substantial Completion of the Leasehold Improvements, the remainder, if any, of Tenant’s Construction Costs, plus any other costs owing by Tenant to Landlord in connection with the construction of the Leasehold Improvements, such amount to be indicated on a statement delivered by Landlord to Tenant and paid by Tenant. The amount shown on such statement shall be paid by Tenant within ten (10) days after receipt of such statement.

 

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(c) Tenant agrees that in the event it fails to make any payment required in this Work Letter in a timely manner, Landlord, in addition to any and all other remedies allowed to Landlord by law or in equity, shall have the same rights and remedies against Tenant as in the case of a default in payment of Rent under the Lease.

4.03 Intentionally Deleted.

4.04 General Provisions.

(a) This Work Letter shall not be deemed applicable to:

(i) any portion of the Premises other than the Venture I Premises and/or the Venture III Premises;

(ii) any space other than the Venture I Premises and/or the Venture III Premises which is subsequently added to the Premises under the Lease, whether by any option or right under the Lease, including expansion options, rights of first offer and rights of first opportunity, or otherwise;

(iii) any portion of the Premises or any additions thereto in the event of a renewal or extension of the Term of the Lease, whether by any option or right under the Lease, including extension or renewal options, or otherwise, unless expressly provided in the Lease or any amendment thereto; or

(iv) any portion of the Premises which has been assigned or subleased by Tenant.

(b) Any changes to the Approved Space Plan or the Approved Construction Drawings, or any additional work required by any governmental agencies having jurisdiction over the Building or any aspect of the completion of the Leasehold Improvements may be complied with by Landlord and/or Contractor. Such changes and/or additional work shall not be deemed to be a violation of the Approved Space Plan, the Approved Construction Drawings or any other provision of this Work Letter and shall be accepted by Tenant. If such changes and/or additional work increase or decrease the cost to Landlord of constructing the Leasehold Improvements, Landlord shall prepare and deliver to Tenant a revised T.E.A. and a Change Order evidencing the total cost of such changes and/or additional work.

(c) Notwithstanding any provisions to the contrary contained in this Lease, within thirty (30) days following Substantial Completion of the Leasehold Improvements, Tenant shall submit to Landlord a written itemization (the “Punch List”) of items of construction that were not properly completed. Upon receipt of the Punch List, Landlord shall cause such items to be corrected or completed. Upon completion of all items in the Punch List and at the request of Landlord, Tenant shall execute a document acknowledging the date upon which all Punch List items were completed.

 

A-8

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(d) Tenant’s sole and exclusive remedy against Landlord for any defects in material or workmanship shall be to notify Landlord thereof, and then Landlord shall use commercially reasonable efforts to enforce the warranty given by the Contractor (which shall be a one (1) year warranty following Substantial Completion). Notwithstanding the foregoing, Landlord shall have no obligation to repair or replace such defects of material or workmanship unless Tenant submits written notice of such defects to Landlord within one (1) year after the Venture I Commencement Date. LANDLORD MAKES NO WARRANTIES, EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE, IN CONNECTION WITH THE LEASEHOLD IMPROVEMENTS EXCEPT THE WARRANTIES EXPRESSLY SET FORTH IN THIS SECTION 4.04(d). TENANT’S SOLE REMEDY FOR THE BREACH OF ANY APPLICABLE WARRANTY SHALL BE THE REMEDY SET FORTH IN THIS SECTION 4.04(d). Tenant agrees that no other remedy, including, without limitation, incidental or consequential damages for lost profits, injury to person or property or any other incidental or consequential loss shall be available to Tenant.

ARTICLE 5

TENANT DELAY

5.01 Tenant Delay. The term “Tenant Delay” shall mean each day that Substantial Completion of the Leasehold Improvements is delayed by any of the following:

(a) Tenant’s failure to respond, within the time periods prescribed by Landlord, to a request for information necessary for the completion of the Construction Drawings; or

(b) Failure for any reason to develop the Approved Construction Drawings by the dates prescribed herein; or

(c) Tenant’s failure to execute and deliver the T.E.A. by the date required in Section 2.02(e) above; or

(d) Tenant’s failure to pay the Rent as required in the Lease; or

(e) Tenant’s failure to pay Tenant’s Construction Costs Deposit by the date required in Section 4.02(b)(i) above; or

(f) Changes by Tenant in the Approved Construction Drawings or Change Orders; or

(g) Requirements by Tenant for materials, finishes or installations which are not Building standard, including but not limited to any delays caused by failure to obtain or to receive delivery or installation of any such non-Building standard materials in a timely manner; or

 

A-9

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(h) Any interference by Tenant with the performance of the construction and installation of the Leasehold Improvements; or

(i) Delay by Tenant in delivering to Landlord an executed, revised T.E.A. and paying to Landlord an addition to Tenant’s Construction Costs Deposit required by a Change Order; or

(j) Any other cause which is defined as a Tenant Delay under this Work Letter or the Lease; or

(k) Changes to the base, shell and core of the Building required by the Approved Construction Drawings; or

(l) Any other acts or omissions of Tenant, or its agents, or employees.

The date that Substantial Completion actually occurs will be accelerated for all purposes of this Lease (including, without limitation, for determination of the Venture I Commencement Date and the obligation to pay Rent), on a day-for-day basis for each day of Tenant Delay.

 

A-10

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Schedule 1

of

Exhibit “C”

TENANT EXPENDITURE AUTHORIZATION

 

Project:						Date:
						T.E.A. #:
Distribution:						Prepared By:
Contractor:
Architect:

Rentable Square Feet:

Based On:

Architectural/Mechanical/Electrical/Structural Engineering Design Fees								$

Construction:

$

$

$

$

SUBTOTAL

$

Contingency

$

Total Estimated Project Cost

$

Tenant Improvement Allowance

$

Tenant’s Construction Costs Deposit

$

Total Now Due and Payable

$

 

 

 

Recommendation for Authorization:				Tenant Authorization:
Landlord’s Representative		Date		Tenant’s Representative		Date

 

C-1

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STATE OF NORTH CAROLINA		SIXTH AMENDMENT TO LEASE
COUNTY OF WAKE

This SIXTH AMENDMENT TO LEASE (this “Amendment”) is made and entered into effective as of the      day of November, 2016 (the “Effective Date”), by and between VENTURE CENTER LLC, a Delaware limited liability company (“Landlord”), and BANDWIDTH.COM, INC., a Delaware corporation (“Tenant”).

W I T N E S S E T H:

WHEREAS, Landlord, as landlord, and Tenant, as tenant, entered into that certain Office Lease dated January 22, 2013 (the “Original Lease”), with respect to approximately seven thousand six hundred fifty-two (7,652) rentable square feet on the second floor of the Building known as Suite 267 (defined in the Original Lease as the “Second Floor Space”), and approximately five thousand four hundred twenty-nine (5,429) rentable square feet on the third floor of the Building known as Suite 317 (defined in the Original Lease as the “Third Floor Space”), both located in the office building known as the Venture III Building of the Venture Center (the “Venture III Building”), as more particularly described in the Original Lease; and

WHEREAS, Landlord and Tenant subsequently entered into that certain First Amendment to Lease dated October 11, 2013 (the “First Amendment”), pursuant to which Tenant leased an additional approximately eight thousand eight hundred fifty-two (8,852) rentable square feet of space known as Suite 201 and located on the second (2^nd) floor of the Building (defined in the First Amendment as the “Expansion Premises”); and

WHEREAS, Landlord and Tenant subsequently entered into that certain Second Amendment to Office Lease dated September 15, 2014 (the “Second Amendment”), and that certain Third Amendment to Lease dated May 15, 2015 (the “Third Amendment”), pursuant to which (amongst other things) Tenant leased an additional approximately one thousand nine hundred forty-eight (1,948) rentable square feet of space located on the second (2^nd) floor of the Building and known as Suite 250 (defined in the Second Amendment as the “Second Amendment Expansion Premises”) and approximately fifty-nine thousand three hundred thirty-seven (59,337) rentable square feet of space located on the first, fourth and fifth floors of the Building (defined in the Third Amendment as the “Third Amendment Expansion Premises”); and

WHEREAS, Landlord and Tenant subsequently entered into that certain Fourth Amendment to Lease dated March 21, 2016 (the “Fourth Amendment”), pursuant to which Tenant agreed to lease certain space on the third (3^rd) floor of the Building containing four thousand three hundred eighty-seven (4,387) rentable square feet (defined in the Fourth Amendment as the “Fourth Amendment Expansion Premises”, and collectively with the Second Floor Space, the Third Floor Space, Expansion Premises, Second Amendment Expansion Premises and Third Amendment Expansion Premises, the “Venture III Premises”), effective as of April 1, 2019; and

 

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WHEREAS, Landlord and Tenant subsequently entered into that certain Fifth Amendment to Lease dated September 26, 2016 (the “Fifth Amendment,” and collectively with the Original Lease, First Amendment, Second Amendment, Third Amendment and Fourth Amendment, the “Lease”), pursuant to which the term of the Lease was extended and Tenant agreed to lease forty thousand six hundred fifty-seven (40,657) rentable square feet (defined in the Fifth Amendment as the “Venture I Premises”) in that certain office building in the Venture Center known as the Venture I building and located at 940 Main Campus Drive, Raleigh, North Carolina 27606 (the “Venture I Building”), pursuant to the terms and conditions contained therein; and

WHEREAS, pursuant to the work letter attached to the Fifth Amendment as Exhibit A, Landlord agreed to provide a Tenant Improvement Allowance to Tenant; and

WHEREAS, Landlord has now agreed to allow Tenant to use a portion of the Tenant Improvement Allowance towards the cost of purchasing and installing furniture, fixtures, equipment, and data cabling within the Venture I Premises and Venture III Premises, pursuant to the terms and conditions contained herein; and

WHEREAS, Landlord and Tenant have agreed to execute this Amendment in order to memorialize the foregoing.

NOW, THEREFORE, in consideration of the mutual covenants and obligations of the parties contained in this Amendment and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Landlord and Tenant hereby agree as follows:

 

1.

Incorporation. The above recitals are true and complete and are incorporated herein by this reference, and this Amendment shall be construed in light thereof.

 

2.

Definitions. Capitalized terms, unless otherwise defined herein, shall have the meanings ascribed to such terms in the Lease.

 

3.

Tenant Improvement Allowance. The following provision is hereby added to the end of Section 3.01 of the work letter attached to the Fifth Amendment as Exhibit A:

“Notwithstanding anything to the contrary contained in the Lease or this Work Letter, Tenant shall have the right to use a portion of the Tenant Improvement Allowance not to exceed Four Hundred Forty-Eight Thousand Nine Hundred Seventeen and No/100 Dollars ($448,917.00) (the “Cap”) towards the cost of purchasing and installing furniture, fixtures, equipment and data cabling (collectively, the “Personal Items”) within the Venture I Premises and/or the Venture III Premises. Landlord shall reimburse Tenant for the cost of such Personal Items, up to the Cap, within thirty (30) days following receipt of an invoice therefor. The Personal Items shall be the property of Landlord, provided if Tenant satisfies all of its obligations under the Lease then at the end of the term Landlord shall transfer its interest therein to Tenant upon request.”

 

2

---

4.

Brokers. Tenant and Landlord each represent and warrant to the other that neither it nor its officers or agents nor anyone acting on its behalf has dealt with any real estate broker other than CB Richard Ellis – Raleigh, LLC, Landlord’s broker (the “Broker”) in negotiating or making of this Amendment. Tenant agrees to indemnify and hold Landlord harmless against any loss, liability, damage, cost or expense (including reasonable attorneys’ fees and costs of litigation), or any claim therefore, for any leasing or other commissions, fees, charges or payments resulting from Tenant’s breach of the foregoing representation. Landlord agrees to indemnify and hold Tenant harmless against any loss, liability, damage, cost or expense (including reasonable attorneys’ fees and costs of litigation), or any claim therefore, for any leasing or other commissions, fees, charges or payments resulting form or arising out of Landlord’s actions in connection with this Amendment.

 

5.

Ratification; Miscellaneous. The Lease, as amended by this Amendment, shall remain enforceable in accordance with its terms. Terms and provisions of the Lease which are not expressly modified by this Amendment shall remain in full force and effect and shall govern Tenant’s lease of the Premises. As amended by this Amendment, all of the terms, conditions and provisions of the Lease are hereby ratified and affirmed in all respects. To the extent any terms, conditions and obligations contained in this Amendment conflict with the terms in the Lease, those in this Amendment shall control. This Amendment may be executed in one or more counterparts, all of which shall be considered one and the same agreement, and shall become a binding agreement when one or more counterparts have been signed by and delivered to each of the parties. In the event any term or provision of this Amendment is determined by appropriate judicial authority to be illegal or otherwise invalid, such provision shall be given its nearest legal meaning or be construed or deleted as such authority determines, and the remainder of this Amendment shall remain in full force and effect. Landlord and Tenant hereby represent and warrant to each other that all consents or approvals required of third parties for the execution, delivery and performance of this Amendment have been obtained and each party (including its signatory) has the right and authority to enter into and perform its covenants contained in this Amendment.

[Signature Pages Follow]

 

3

---

IN WITNESS WHEREOF, Landlord and Tenant have caused this Amendment to be duly executed effective as of the day and year first above written.

 

 

4

Exhibit 10.12

Basic Sublease Information

This Sublease Agreement is entered into as of December 1, 2015 (the “Effective Date”), by and between Allied Telesis Capital Corporation (“Sublandlord”), a Washington corporation, and Bandwidth.com, Inc. (“Subtenant”), a Delaware corporation.

 

1)

Landlord

Venture Center, LLC, “Landlord.”

 

2)

Subtenant

Bandwidth.com, Inc., “Subtenant.”

 

3)

Sublandlord

Allied Telesis Capital Corporation, “Sublandlord.”

 

4)

Building

Venture Center III “Building.”

 

5)

Premises

Approximately 3,808 rsf on the 3^rd floor as shown on Exhibit A, “Premises.”

 

6)

Sublease Commencement

1/1/2016.

 

7)

Sublease Term

Initial Space commences 1/1/2016 and terminates on March 31, 2019, “Sublease Term”)

 

8)

Early Access

Sublandlord shall use reasonable efforts to provide access to Subtenant, at Subtenant’s sole risk, for planning purposes (but not conduct of its business) starting 10/26/2015.

 

9)

Rental Rate; Rent; Default

Subtenant shall pay rent pursuant to the following schedule:

---

Bandwidth Offer         Term						Months				Rate				Sq Ft Monthly				3808 Total
1/1/16			2/28/16				2			$	—			$	—			$	—
3/1/16			12/31/16				10			$	16.00			$	5,077.33			$	50,773.33
1/1/17			12/31/17				12			$	16.48			$	5,229.65			$	62,755.84
1/1/18			12/31/18				12			$	16.97			$	5,386.54			$	64,638.52
1/1/19			3/31/19				3			$	17.48			$	5,548.14			$	16,644.42
															Total			$	194,812.11

Subtenant shall timely pay to Sublandlord such rent without notice, demand, deduction or set off (except as otherwise expressly provided herein), by good and sufficient check drawn on a national banking association at Sublandlord’s address provided for in this Sublease or as otherwise specified in writing by Sublandlord. Rent shall be payable monthly in advance. Rent shall be payable on the first day of each month beginning on April 1, 2016.

All past due payments required of Subtenant hereunder shall bear interest from the date due until paid at the lesser of fifteen percent (15%) per annum or the maximum lawful rate of interest; additionally, Sublandlord, in addition to all other rights and remedies available to it, may charge Subtenant a fee equal to five percent (5%) of the delinquent payments to reimburse Sublandlord for its cost and inconvenience incurred as a consequence of Subtenant’s delinquency. Any such late charge and interest payment shall be payable as additional rent under this lease, shall not be considered a waiver by landlord of any default by Subtenant hereunder, and shall be payable immediately on demand. In no event, however, shall the charges permitted in this section exceed the maximum lawful rate of interest.

If either (a) default shall be made in the payment of any sum to be paid by Subtenant under this Sublease for more than five (5) days after the date such payment is due, or (b) default shall be made in the performance of any of the other covenants or conditions which Subtenant is required to observe and to perform, and such default shall continue for thirty (30) days after written notice to Subtenant, then Sublandlord may treat the occurrence of any one or more of the foregoing events as a breach of this Sublease and thereupon Sublandlord may terminate this Sublease and Subtenant’s right of possession of the Premises, and recover all damages to which Sublandlord is entitled under law, specifically including (i) the cost of recovering the Premises (including, without limitation, reasonable attorneys’ fees and costs of suit), (ii) the cost as reasonably estimated by Sublandlord of any alterations of, or repairs to, the Premises which are necessary or proper to prepare the same for reletting (including repairs, alterations, improvements, additions, decorations, reasonable legal fees and brokerage commissions), (iii) the unpaid rent owed at the time of termination, plus interest thereon from the due date at the maximum rate permitted by law or ten percent (10%) per annum, whichever is less, (iv) the balance of the Rent for the remainder of the Sublease Term, and (v) any other sum of money and damages owed by Subtenant to Sublandlord.

 

10)

Security Deposit

None

 

11)

Subtenant Improvement Allowance

---

Subtenant shall accept the space in “as is” condition. Sublandlord shall be required to have the Premises in “broom clean” condition and free of equipment and other personal property not covered under this Agreement. Moreover, Sublandlord will remove all logos and trademark fixtures found in the premises, but will not be responsible for repainting. Should the removal of such items cause damage to the walls or premises, Sublandlord shall be responsible for repairing said damage. Sublandlord will also construct a demising wall at their sole expense between the Subtenant Premises and the Sublandlord.

 

12)

Operating Costs and Expenses

Sublandlord shall pay all operating expense passthroughs specified as standard items in the Prime Lease, throughout the Sublease Term. Subtenant shall pay for any additional services it specifically requests, ie, afterhours HVAC, any special requested cleaning, etc, considered to be “over and above” the standard full service amenities found in the Prime Lease.

 

13)

Parking

Three (3) spaces per 1,000 rsf of the premises, as allotted Sublandlord under the Prime Lease.

 

14)

Access to Premises

Subtenant shall have 24/7 access to the entire portion of the premises then being leased by Subtenant. Normal operating hours are 7:00 am to 7:00 pm Monday to Friday, and 9:00 to noon on Saturday, but for defined holidays, which are further detailed in the Prime Lease.

Subtenant also shall have access to Common Areas (as defined in the Prime Lease).

 

15)

Prime Lease

Sublandlord has provided a copy of the Prime Lease and Ground Lease to Subtenant.    This Sublease is subject to and subordinate to the Prime Lease. All terms and conditions of the Prime Lease are incorporated into and made part of this Sublease.

 

16)

Brokerage Disclosure

There are no brokers involved in this transaction.

 

17)

Alteration; Surrender of Premises.

Subject to the terms and conditions of the Prime Lease and Ground Lease, Subtenant shall be entitled to complete interior building alterations without the consent of the Sublandlord, that (i) are less than five thousand dollars ($5000) in total value; (ii) are non-structural in nature; and (iii) do not require approval under the Prime Lease. Sublandlord will not unreasonably withhold its consent to other alterations, provided Subtenant is solely responsible for all removal or restoration obligations, and any other requirements of Landlord or Ground Lessor.

No act of Sublandlord shall be deemed an acceptance of a surrender of the Premises, and no arrangement to accept a surrender of the Premises shall be valid unless it is in writing and signed by Sublandlord. At the expiration or earlier termination of this lease, Subtenant shall deliver to Sublandlord the Premises, and all improvements located therein, in good repair and condition, broom clean and

---

reasonable wear and tear excepted, and shall deliver to Sublandlord all keys to the Premises. Subtenant may remove all unattached trade fixtures, furniture and personal property placed in the Premises by Subtenant, excluding those items described on Exhibit B attached hereto that will remain the property of Sublandlord. Subtenant shall repair all damage caused by such removal, and shall be responsible for damage to the Premises that exceed reasonable wear and tear. All items not removed by Subtenant (excluding those items described on Exhibit B attached hereto that will remain the property of Sublandlord) shall be deemed abandoned by Subtenant and may be appropriated, stored, sold or otherwise disposed of by Sublandlord at Subtenant’s cost without notice to Subtenant.

 

18)

Sublease and Assignment

Subtenant shall have the right to assign the Sublease in its entirety or to sublease all or any portion of the premises without the consent of Sublandlord (but with at least thirty (30) days’ prior written notice, along with reasonable financial and business history information), to (a) any entity resulting from a merger or consolidation with Subtenant, and/or (b) any entity succeeding to all of the business and assets of Subtenant (excluding insolvency); provided, however, that (1) any such permitted assignee must be at least as creditworthy as Subtenant; be in the same line of business as Subtenant; and have a business history reasonably acceptable to Sublandlord; and (2) any such assignment of the Sublease requires the prior written consent of the Landlord and Ground Lessor. Any other assignment or sublease must be made with the prior written consent of the Sublandlord, Prime Landlord, and Ground Lessor, with Sublandlord’s consent not being unreasonably withheld, conditioned or delayed.

 

19)

Notices

All notices required or permitted to be given under this Sublease shall be in writing and shall be deemed given and delivered, whether or not received: (i) three (3) business days after being deposited in the United States Mail, postage prepaid and properly addressed, certified mail, return receipt requested, or (ii) on the next business day after being deposited with a nationally-recognized, overnight delivery service such as FedEx or UPS, at the addresses shown below or such other address as either party may designate for itself from time to time by written notice to the other party. In addition, any notice may be given by hand delivery to the notice address of either party with a signed receipt obtained.

Notices shall be delivered to Sublandlord at:

Allied Telesis, Inc.

3041 Orchard Parkway

San Jose, CA 95134

Attention: Ash Padwal

Notices shall be delivered to Subtenant at:

Bandwidth.com, Inc.

900 Main Campus Drive, Suite 500

Raleigh, North Carolina 27606

Attention: General Counsel

---

Sublandlord    IN WITNESS WHEREOF, this Sublease has been executed under seal by Sublandlord and Subtenant as of the Effective Date.

 

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Exhibit 10.13

BANDWIDTH.COM, INC.

900 Main Campus Drive, Suite 400

Raleigh, North Carolina 27606

November 30, 2016

Republic Wireless, Inc.

900 Main Campus Drive, Suite 400

Raleigh, North Carolina 27606

Attention: Legal Department

Re: Facilities Sharing Agreement.

Ladies and Gentlemen:

Bandwidth.com, Inc., a Delaware corporation (“Bandwidth or “Provider”), has, or will shortly, effect the spin-off (the “Spin-off”) of Republic Wireless, Inc., a Delaware corporation (“Republic Wireless”), by means of a stock dividend to the holders of Bandwidth’s Class A Voting Common Stock, Class B Non-Voting Common Stock and Series A Convertible Preferred Stock. To that end, Bandwidth and Republic Wireless have entered into a Reorganization Agreement, dated as of November 30, 2016 (the “Reorganization Agreement”), pursuant to which various assets and businesses of Bandwidth have been, or will be, transferred to Republic Wireless.

As you are aware, Bandwidth is the lessee and/or sublessee of certain space located at 900 Main Campus Drive, Raleigh, North Carolina (the “900 Main Campus Premises”) and 940 Main Campus Drive, Raleigh, North Carolina (the “940 Main Campus Premises” and, collectively with the 900 Main Campus Premises, the “Premises”) pursuant to the Office Lease, dated as of January 22, 2013 (as amended, the “Office Lease”). Republic Wireless desires to occupy and use a portion of such office and parking facilities within the Premises following the Spin-off. Bandwidth is amenable to such a sharing arrangement, on the terms and subject to the conditions set forth in this Agreement. For clarity, this Agreement (as defined below) is subject to and subordinate to the Office Lease; all applicable terms and conditions of the Office Lease are incorporated into and made a part of this Agreement.

As you are also aware, in connection with the Spin-off, Bandwidth and Republic Wireless have entered into a Transition Services Agreement, dated November 30, 2016 (the “Transition Services Agreement”), pursuant to which Bandwidth will provide to Republic Wireless the services described therein on the terms set forth therein from and after the date of the Spin-off (the “Spin-off Effective Date”).

Based on the premises and the mutual agreements of the parties, and for other good and valuable consideration the receipt of which is hereby acknowledged, Republic Wireless and Bandwidth hereby agree as follows:

Section 1. Use of Facilities. The Shared Facilities consist of: (A) through and until the date that the 940 Main Campus Premises are available to Bandwidth pursuant to the Office Lease, which Bandwidth does not anticipate to be any later than March 31, 2017, 30,055 square feet, and (B) from and after the date that the 940 Main Campus Premises are available to Bandwidth pursuant to the Office Lease, 33,568 square feet, in the aggregate, each consisting of space for staff and common areas, including the main reception area, conference facilities, hallways, stairways, restrooms, kitchenettes, the employee cafeteria, the fitness area and parking facilities (collectively, the “Shared Facilities Space”), located within the Premises.

---

Section 2. Sharing Fee. Republic Wireless will pay to Bandwidth a monthly fee (the “Sharing Fee”), by wire or intrabank transfer of funds or in such other manner as may be agreed upon by the parties, in advance on or before the first business day of each calendar month beginning with the first full calendar month following the date of the Spin-off, equal to (1) through and until the date that Republic Wireless occupies the 940 Main Campus Premises, (A) $46,753.13 for the month commencing on December 1, 2016; (B) $46,905.45 for the month commencing on January 1, 2017 and each calendar month thereafter (or pro rated if less than a complete calendar month); and (2) each calendar month thereafter, the sum of (A) the monthly amounts set forth in the following table, which each is based upon the fair market rental rate per square foot, including parking facilities, for space comparable to the Shared Facilities in Raleigh, North Carolina, plus (B) one-twelfth (or pro rated if less than a complete calendar month) the Annual Allocation Expense (as defined below):

 

Month		Monthly Amount Due
1 - 3		See amounts prior to date that Republic Wireless occupies the 940 Main Campus Premises
4 - 6		$0.00
7 - 15		$69,101.67
16 - 27		$70,640.20
28 - 39		$72,178.73
40 - 51		$73,773.21
52 - 66		$75,395.67

The foregoing amounts do not include charges for expenses related to the use of the Shared Facilities, including, but not limited to, utilities, security and janitorial services, office equipment rent, office supplies, use of the cafeteria facilities onsite at the Shared Facilities, maintenance and repairs, telephone, satellite, video and information technology (including network maintenance and data storage, computer and telephone support and maintenance, and management and information systems (servers, hardware and related software)) (“Allocations”). With respect to each calendar year during the term of this facilities sharing agreement (this “Agreement”), Republic Wireless shall reimburse Bandwidth in an amount (the “Annual Allocation Expense”) equal to the product of (x) the aggregate amount of the estimated Allocations for such year, as determined in good faith by Bandwidth and notified to Republic Wireless prior to the commencement of such calendar year, and (y) the Facilities Percentage (as defined below) applicable to such calendar year; provided that, if the Facilities Percentage changes during any calendar year, the Annual Allocation Expense applicable to such calendar year shall be adjusted accordingly.

The “Facilities Percentage” is the percentage equal to (i) the Shared Facilities Space, divided by (ii) the aggregate square feet subject to the Office Lease. The initial Facilities Percentage will be determined by the Provider on or prior to the distribution date of the Spin-off, and Provider and Republic Wireless will review and evaluate the Facilities Percentage for reasonableness semiannually during the Term and will negotiate in good faith to reach agreement on any appropriate adjustments to the Facilities Percentage. Based on such review and evaluation, Provider and Republic Wireless will agree on the appropriate effective date (which may be retroactive) of any such adjustment to the Facilities Percentage.

Provider and Republic Wireless will also review and evaluate the Annual Allocation Expense for reasonableness semi-annually during the term of this Agreement, and will negotiate in good faith to reach agreement on any appropriate adjustments to the Annual Allocation Expense based on such review and evaluation.

 

2

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The terms and conditions of this Section 2 will survive the expiration or earlier termination of this Agreement.

Section 3. Term.

(i) The term of this Agreement will commence on the Spin-off Effective Date and will continue until May 30, 2022 (the “Term”). This Agreement is subject to termination prior to the end of the Term in accordance with Section 3(ii).

(ii) This Agreement will be terminated prior to the expiration of the Term in the following events:

 

•

Concurrently with the termination of the Office Lease;

 

•

immediately upon written notice (or any time specified in such notice) by Bandwidth to Republic Wireless if Republic Wireless shall default in the performance of any of its material obligations hereunder and such default shall remain unremedied for a period of 30 days after written notice thereof is given by Bandwidth to Republic Wireless;

 

•

upon one hundred eighty (180) days’ prior written notice by Bandwidth to Republic Wireless if a Change in Control or Bankruptcy Event occurs with respect to Republic Wireless; or

 

•

upon one hundred eighty (180) days’ prior written notice by Republic Wireless to Bandwidth if a Change in Control or Bankruptcy Event occurs with respect to Bandwidth.

For purposes of this Section 3(ii), a “Change in Control” will be deemed to have occurred with respect to any natural person, corporation, limited liability corporation, partnership, trust, unincorporated organization, association, governmental authority, or other entity (a “Person”) if a merger, consolidation, binding share exchange, acquisition, or similar transaction (each, a “Transaction”), or series of related Transactions, involving such Person occurs as a result of which the voting power of all voting securities of such Person outstanding immediately prior thereto represent (either by remaining outstanding or being converted into voting securities of the surviving entity) less than 75% of the voting power of such Person or the surviving entity of the Transaction outstanding immediately after such Transaction (or if such Person or the surviving entity after giving effect to such Transaction is a subsidiary of the issuer of securities in such Transaction, then the voting power of all voting securities of such Person outstanding immediately prior to such Transaction represent (by being converted into voting securities of such issuer) less than 75% of the voting power of the issuer outstanding immediately after such Transaction).

For purposes of this Section 3(ii), a “Bankruptcy Event” will be deemed to have occurred with respect to a Person upon such Person’s insolvency, general assignment for the benefit of creditors, such Person’s voluntary commencement of any case, proceeding, or other action seeking reorganization, arrangement, adjustment, liquidation, dissolution, or consolidation of such Person’s debts under any law relating to bankruptcy, insolvency, or reorganization, or relief of debtors, or seeking appointment of a receiver, trustee, custodian, or other similar official for such Person or for all or any substantial part of such Person’s assets (each, a “Bankruptcy Proceeding”), or the involuntary filing against such Person of any Bankruptcy Proceeding that is not stayed within 60 days after such filing.

 

3

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Section 4. Miscellaneous.

(i) Entire Agreement; Severability. This Agreement, the Transition Services Agreement, the Reorganization Agreement and the Tax Sharing Agreement between Bandwidth and Republic Wireless, dated as of November 30, 2016, constitute the entire agreement among the parties hereto or thereto, as applicable with respect to the subject matter hereof and thereof, and supersedes all prior agreements and understandings, oral and written, among the parties hereto with respect to such subject matter. It is the intention of the parties hereto that the provisions of this Agreement will be enforced to the fullest extent permissible under all applicable laws and public policies, but that the unenforceability of any provision hereof (or the modification of any provision hereof to conform with such laws or public policies, as provided in the next sentence) will not render unenforceable or impair the remainder of this Agreement. Accordingly, if any provision is determined to be invalid or unenforceable either in whole or in part, this Agreement will be deemed amended to delete or modify, as necessary, the invalid or unenforceable provisions and to alter the balance of this Agreement in order to render the same valid and enforceable, consistent (to the fullest extent possible) with the intent and purposes hereof. If the cost of any service to be provided to Republic Wireless under the Transition Services Agreement is included in the Annual Allocation Expense payable hereunder, then the cost of such service shall not also be payable by Republic Wireless under the Transition Services Agreement.

(ii) Notices. All notices and communications hereunder will be in writing and will be deemed to have been duly given if delivered personally or mailed, certified or registered mail with postage prepaid, or sent by confirmed facsimile, addressed as follows:

 

if to Bandwidth:		Bandwidth.com, Inc.
		900 Main Campus Drive, Suite 400 Raleigh, NC 27606 Attention: Legal Department Fax: 919.239.9903
if to Republic Wireless:		Republic Wireless, Inc.
		900 Main Campus Drive, Suite 500
		Raleigh, NC 27606
		Attention: Legal Department Fax: 919.670.3115

or to such other address (or to the attention of such other person) as the parties may hereafter designate in writing. All such notices and communications will be deemed to have been given on the date of delivery if sent by facsimile or personal delivery, or the third day after the mailing thereof, except that any notice of a change of address will be deemed to have been given only when actually received.

(iii) Governing Law. This Agreement and the legal relations among the parties hereto will be governed in all respects, including validity, interpretation and effect, by the laws of the State of North Carolina applicable to contracts made and performed wholly therein, without giving effect to any choice or conflict of laws provisions or rules that would cause the application of the laws of any other jurisdiction.

(iv) No Third-Party Rights. Nothing expressed or referred to in this Agreement is intended or will be construed to give any person other than the parties hereto and their respective successors and permitted assigns any legal or equitable right, remedy or claim under or with respect to this Agreement, or any provision hereof, it being the intention of the parties hereto that this Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their respective successors and assigns.

 

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(v) Assignment. This Agreement will inure to the benefit of and be binding on the parties to this Agreement and their respective legal representatives, successors and permitted assigns. Except as expressly contemplated hereby, this Agreement, and the obligations arising hereunder, may not be assigned by either party to this Agreement, provided, however, that Bandwidth and Republic Wireless may assign their respective rights, interests, duties, liabilities and obligations under this Agreement to any of their respective wholly-owned Subsidiaries, but such assignment shall not relieve the assignor of its obligations hereunder.

(vi) Amendment. Any amendment, modification or supplement of or to any term or condition of this Agreement will be effective only if in writing and signed by both parties hereto.

(vii) Further Actions. The parties will execute and deliver all documents, provide all information, and take or forbear from all actions that may be necessary or appropriate to achieve the purposes of this Agreement.

(viii) Force Majeure. Neither party will be liable to the other party with respect to any nonperformance or delay in performance of its obligations under this Agreement to the extent such failure or delay is due to any action or claims by any third party, labor dispute, labor strike, weather conditions or any cause beyond a party’s reasonable control. Each party agrees that it will use all commercially reasonable efforts to continue to perform its obligations under this Agreement, to resume performance of its obligations under this Agreement, and to minimize any delay in performance of its obligations under this Agreement notwithstanding the occurrence of any such event beyond such party’s reasonable control.

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If the foregoing meets with your approval, kindly execute below and return a copy to the undersigned.

 

 

Accepted and agreed:
REPUBLIC WIRELESS, INC.
By:		/s/ Chris Chuang
		Name: Chris Chuang
		Title: Chief Executive Officer
Acknowledged and consented to pursuant to the terms and conditions of the Office Lease, dated as of January 22, 2013, as amended:

 

VENTURE CENTER, LLC
By:		/s/ Theresa Ranck
		Name: Theresa Ranck
		Title: Vice President

 

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BANDWIDTH.COM, INC.

900 Main Campus Drive, Suite 400

Raleigh, North Carolina 27606

June       , 2017

Republic Wireless, Inc.

900 Main Campus Drive, Suite 400

Raleigh, North Carolina 27606

Attention: Legal Department

 

Re:

Amendment to Facilities Sharing Agreement (the “Amendment”)

Ladies and Gentlemen:

Bandwidth.com, Inc., a Delaware corporation (“Bandwidth or “Provider”) and Republic Wireless, Inc., a Delaware corporation (“Republic Wireless”) are parties to a Facilities Sharing Agreement, dated as of November 30, 2016 (the “Facilities Sharing Agreement”). Pursuant to Section 4(vi) of the Facilities Sharing Agreement, Bandwidth and Republic Wireless may amend the Facilities Sharing Agreement in writing from time to time. Each of Bandwidth and Republic Wireless wish to amend the Facilities Sharing Agreement as provided in this Amendment. Capitalized terms not otherwise defined in this Amendment will be as defined in the Facilities Sharing Agreement.

A. Section 1of the Facilities Sharing Agreement is hereby deleted and the following is inserted in lieu thereof:

Section 1. Use of Facilities. The Shared Facilities consist of: (A) through and until the date that the 940 Main Campus Premises are available to Bandwidth pursuant to the Office Lease, which occurred on or about April 13, 2017, 30,055 square feet, and (B) from and after the date that the 940 Main Campus Premises are available to Bandwidth pursuant to the Office Lease, 40,657 square feet, in the aggregate, each consisting of space for staff and common areas, including the main reception area, conference facilities, hallways, stairways, restrooms, kitchenettes, the employee cafeteria, the fitness area and parking facilities (collectively, the “Shared Facilities Space”), located within the Premises.

B. The first paragraph (inclusive of the table concluding the first paragraph) of Section 2 of the Facilities Sharing Agreement is hereby deleted and the following is inserted in lieu thereof:

Section 2. Sharing Fee. Republic Wireless will pay to Bandwidth a monthly fee (the “Sharing Fee”), by wire or intrabank transfer of funds or in such other manner as may be agreed upon by the parties, in advance on or before the first business day of each calendar month beginning with the first full calendar month following the date of the Spin-off, equal to (1) through and until the date that Republic Wireless occupies the 940 Main Campus Premises, (A) $46,753.13 for the month commencing on December 1, 2016; and (B) $46,905.45 for the month commencing on January 1, 2017 and each calendar month thereafter (or pro rated if less than a complete calendar month if Republic Wireless occupies the 940 Main Campus on any date other than the first calendar day of a month); and (2) each calendar month thereafter, the sum of (A) the monthly amounts set forth in the following table (or pro rated if less than a complete calendar month if Republic Wireless occupies the 940 Main Campus on any date other than the first calendar day of a month), which each is based upon the fair market rental rate per square foot,

 

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including parking facilities, for space comparable to the Shared Facilities in Raleigh, North Carolina, plus (B) one-twelfth (or pro rated if less than a complete calendar month) the Annual Allocation Expense (as defined below):

 

Month		Monthly Amount Due
1 – 4		See amounts prior to date that Republic Wireless occupies the 940 Main Campus Premises
5		$32,026.08
6 – 7		$0.00
8		$41,842.83
9 – 16		$83,685.66
17		$84,617.38
18 – 28		$85,549.10
29		$86,480.83
30 – 40		$87,412.55
41		$88,378.15
42 – 52		$89,343.76
53		$90,326.30
54 – 67		$91,308.85
68		$45,654.42

C.Section 3(i) of the Facilities Sharing Agreement is hereby deleted and the following is inserted in lieu thereof:

(i) The term of this Agreement will commence on the Spin-off Effective Date and will continue until July 13, 2022 (the “Term”). This Agreement is subject to termination prior to the end of the Term in accordance with Section 3(ii).

D. This Amendment does not supersede the terms and conditions of the Facilities Sharing Agreement, except to the extent expressly described herein.

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If the foregoing meets with your approval, kindly execute below and return a copy to the undersigned.

 

 

Accepted and agreed:
REPUBLIC WIRELESS, INC.
By:		/s/ Chris Chuang
		Name: Chris Chuang
		Title: Chief Executive Officer
Acknowledged and consented to pursuant to the terms and conditions of the Office Lease, dated as of January 22, 2013, as amended:

 

VENTURE CENTER, LLC
By:		/s/ Theresa Ranck
		Name: Theresa Ranck
		Title: Vice President

 

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Exhibit 10.14

TRANSITION SERVICES AGREEMENT

TRANSITION SERVICES AGREEMENT (this “Agreement”), dated as of November 30, 2016, by and between Bandwidth.com, Inc., a Delaware corporation (the “Bandwidth”), and Republic Wireless, Inc., a Delaware corporation (“Republic Wireless”).

RECITALS

WHEREAS, on the date hereof Republic Wireless is a wholly owned subsidiary of Bandwidth as a result of the consummation of the transactions described in the Restructuring Plan set forth in Schedule 1 to the Reorganization Agreement, dated as of November 30, 2016 (the “Reorganization Agreement”), to which Bandwidth and Republic Wireless are each parties;

WHEREAS, in accordance with the Reorganization Agreement, 100% of the issued and outstanding shares of capital stock of Republic Wireless will be distributed as a pro rata dividend to the holders of Bandwidth’s capital stock, with the effect that Republic Wireless will be spun-off (the “Spin-Off”) from Bandwidth, and Bandwidth will cease to have an equity interest in Republic Wireless;

WHEREAS, Republic Wireless and Bandwidth desire that, following the Spin-Off, Republic Wireless obtain from Bandwidth the services described herein, and that Republic Wireless compensate Bandwidth for the performance of such services on the basis set forth in this Agreement; and

WHEREAS, on the date hereof a subsidiary of Bandwidth is also entering into a facilities sharing agreement with Republic Wireless with respect to 900 Main Campus Drive and 940 Main Campus Drive, Raleigh, North Carolina (the “Facilities Sharing Agreement”).

AGREEMENT

NOW THEREFORE, in consideration of the foregoing recitals, the mutual agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be bound legally, agree as follows:

ARTICLE I

ENGAGEMENT AND SERVICES

Section 1.1 Engagement. Republic Wireless engages Bandwidth to provide to Republic Wireless, commencing on the date of the Spin-Off (the “Spin-Off Effective Date”), the services set forth in Section 1.2 (collectively, the “Services”), and Bandwidth accepts such engagement, subject to and upon the terms and conditions of this Agreement. The parties acknowledge that certain of the Services will be performed by officers, employees or consultants of Bandwidth, who may also serve, from time to time, as officers, employees or consultants of other companies.

Section 1.2 Services.

(a) The Services will include the following, if and to the extent requested by Republic Wireless during the Term of this Agreement:

 

(i)

insurance administration services;

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(ii)

technical and information technology assistance (including management information systems, computer, data storage network and telecommunications services), computers, office supplies, postage, courier service and other office services;

 

(iii)

services performed by Bandwidth’s finance, accounting, payroll, treasury, cash management, legal, human resources, employee benefits, tax and facilities management departments; and

 

(iv)

such other services as Bandwidth may obtain from its officers, employees and consultants in the management of its own operations that Republic Wireless may from time to time request or require.

The Services are more completely described in Exhibit A attached hereto.

Section 1.3 Services Not to Interfere with Bandwidth’s Business; No Material Change in Activity Levels. Republic Wireless acknowledges and agrees that in providing Services hereunder Bandwidth will not be required to take any action that would disrupt, in any material respect, the orderly operation of Bandwidth’s business activities. Republic Wireless also acknowledges and agrees that Bandwidth will have no obligation to provide Services in a material volume or scope greater than needed by Republic Wireless as of the Spin-Off; for example, Bandwidth will have no obligation to provide Services in a volume or scope that might be necessary to support an acquisition by or of Republic Wireless or an initial public offering of the capital stock of Republic Wireless at any time during the Term (as defined below). Furthermore, Republic Wireless also acknowledges and agrees that Bandwidth will have no obligation to implement or support electronic tools or electronic systems related to the Services that were not utilized by Bandwidth as of the Spin-Off.

Section 1.4 Books and Records. Bandwidth will maintain books and records, in reasonable detail in accordance with Bandwidth’s standard business practices, with respect to its provision of Services to Republic Wireless pursuant to this Agreement, including records supporting the determination of the Services Fee and other costs and expenses to Republic Wireless pursuant to Article II (collectively, “Supporting Records”). Bandwidth will give Republic Wireless and its duly authorized representatives, agents, and attorneys reasonable access to all such Supporting Records during Bandwidth’s regular business hours upon Republic Wireless’s request after reasonable advance notice.

ARTICLE II

COMPENSATION

Section 2.1 Services Fee. Republic Wireless agrees to pay, and Bandwidth agrees to accept, fee(s) (the “Services Fees”) set forth on Exhibit A with respect to applicable Services utilized by Republic Wireless during the Term of this Agreement, payable in monthly installments in arrears as set forth in Section 2.3. Bandwidth and Republic Wireless will review and evaluate the Services Fees for reasonableness semiannually during the Term and will negotiate in good faith to reach agreement on any appropriate adjustments to the Services Fee. Based on such review and evaluation, Bandwidth and Republic Wireless will agree on the appropriate effective date (which may be retroactive) of any such adjustment to the Services Fees. For the avoidance of doubt, the determination of the Services Fees and any future adjustment thereto does not and will not include charges included under the Annual Allocation Expense (as such term is defined in the Facilities Sharing Agreement) payable by Republic Wireless under the Facilities Sharing Agreement.

 

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Section 2.2 Cost Reimbursement. In addition to (and without duplication of) the Services Fee payable pursuant to Section 2.1, Republic Wireless also will reimburse Bandwidth for all direct out-of-pocket costs, with no markup (“Out-of-Pocket Costs”), incurred by Bandwidth in performing the Services (e.g., postage and courier charges, travel, meals and entertainment expenses, and other miscellaneous expenses that are incurred by Bandwidth in the conduct of the Services).

Section 2.3 Payment Procedures.

(a) Republic Wireless will pay Bandwidth, by wire or intrabank transfer of funds or in such other manner specified by Bandwidth to Republic Wireless, in arrears on or before the fifth (5^th) day of each calendar month immediately following the calendar month during which Republic Wireless utilized the applicable Services, beginning with January 5, 2017, the Services Fees then in effect.

(b) Any reimbursement to be made by Republic Wireless to Bandwidth pursuant to Section 2.2 will be paid by Republic Wireless to Bandwidth within 15 days after receipt by Republic Wireless of an invoice therefor, by wire or intrabank transfer of funds or in such other manner specified by Bandwidth to Republic Wireless. Bandwidth will invoice Republic Wireless monthly for reimbursable expenses incurred by Bandwidth on behalf of Republic Wireless during the preceding calendar month as contemplated in Section 2.2; provided, however, that Bandwidth may separately invoice Republic Wireless at any time for any single reimbursable expense incurred by Bandwidth on behalf of Republic Wireless in an amount equal to or greater than $5,000.00. Any invoice or statement pursuant to this Section 2.3(b) will be accompanied by supporting documentation in reasonable detail consistent with Bandwidth’s own expense reimbursement policy.

(c) Any payments not made when due under this Section 2.3 will bear interest at the rate of 1.5% per month on the outstanding amount from and including the due date to but excluding the date paid.

Section 2.4 Survival. The terms and conditions of this Article II will survive the expiration or earlier termination of this Agreement.

ARTICLE III

TERM

Section 3.1 Term Generally. The term of this Agreement will commence on the Spin-Off Effective Date and will continue until the second anniversary of the Spin-Off Effective Date (the “Term”). This Agreement is subject to termination prior to the end of the Term in accordance with Section 3.3.

Section 3.2 Discontinuance of Select Services. At any time during the Term, on not less than thirty (30) days’ prior notice by Republic Wireless to Bandwidth, Republic Wireless may elect to discontinue obtaining any of the Services previously obtained from Bandwidth pursuant to this Agreement. In such event, Bandwidth’s obligation to provide Services that have been discontinued pursuant to this Section 3.2, and Republic Wireless’s obligation to compensate Bandwidth for such Services, will cease as of the end of such 30-day period (or such later date as may be specified in the notice), and this Agreement will remain in effect for the remainder of the Term with respect to those Services that have not been so discontinued. Bandwidth and Republic Wireless will promptly reduce the Services Fees payable by Republic Wireless as described pursuant to Exhibit A following the discontinuance of any Services. Each party will remain liable to the other for any required payment or performance accrued prior to the effective date of discontinuance of any Service.

 

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Section 3.3 Termination. This Agreement will be terminated prior to the expiration of the Term in the following events:

(a) at any time upon at least thirty (30) days’ prior written notice by Republic Wireless to Bandwidth;

(b) immediately upon written notice (or at any later time specified in such notice) by Bandwidth to Republic Wireless if a Change in Control or Bankruptcy Event occurs with respect to Republic Wireless; or

(c) immediately upon written notice (or at any later time specified in such notice) by Republic Wireless to Bandwidth if a Change in Control or Bankruptcy Event occurs with respect to Bandwidth.

For purposes of this Section 3.3, a “Change in Control” will be deemed to have occurred with respect to a party if a merger, consolidation, binding share exchange, acquisition, or similar transaction (each, a “Transaction”), or series of related Transactions, involving such party occurs as a result of which the voting power of all voting securities of such party outstanding immediately prior thereto represent (either by remaining outstanding or being converted into voting securities of the surviving entity) less than 75% of the voting power of such party or the surviving entity of the Transaction outstanding immediately after such Transaction (or if such party or the surviving entity after giving effect to such Transaction is a subsidiary of the issuer of securities in such Transaction, then the voting power of all voting securities of such party outstanding immediately prior to such Transaction represent (by being converted into voting securities of such issuer) less than 75% of the voting power of the issuer outstanding immediately after such Transaction).

For purposes of this Section 3.3, a “Bankruptcy Event” will be deemed to have occurred with respect to a party upon such party’s insolvency, general assignment for the benefit of creditors, such party’s voluntary commencement of any case, proceeding, or other action seeking reorganization, arrangement, adjustment, liquidation, dissolution, or consolidation of such party’s debts under any law relating to bankruptcy, insolvency, or reorganization, or relief of debtors, or seeking appointment of a receiver, trustee, custodian, or other similar official for such party or for all or any substantial part of such party’s assets (each, a “Bankruptcy Proceeding”), or the involuntary filing against Republic Wireless or Bandwidth, as applicable, of any Bankruptcy Proceeding that is not stayed within 60 days after such filing.

Each party will remain liable to the other for any required payment accrued prior to the termination of this Agreement.

ARTICLE IV

PERSONNEL AND EMPLOYEES

Section 4.1 Personnel to Provide Services.

(a) Bandwidth will make available to Republic Wireless, on a non-exclusive basis, the appropriate personnel (the “Personnel”) to perform the Services. The personnel made available to perform selected Services are expected to be substantially the same personnel who provide similar services in connection with the management and administration of the business and operations of Bandwidth.

 

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(b) Republic Wireless acknowledges that:

(i) certain of the Personnel also will be performing services for Bandwidth and/or other companies, from time to time, including certain Subsidiaries and Affiliates of Bandwidth, in each case, while also potentially performing services directly for Republic Wireless and certain of its Subsidiaries and Affiliates under a direct employment, consultancy or other service relationship between such Person and Republic Wireless and irrespective of this Agreement; and

(ii) Bandwidth may elect, in its discretion, to utilize independent contractors rather than employees of Bandwidth to perform Services from time to time, and such independent contractors will be deemed included within the definition of “Personnel” for all purposes of this Agreement.

Section 4.2 Bandwidth as Payor. The parties acknowledge and agree that Bandwidth, and not Republic Wireless, will be solely responsible for the payment of salaries, wages, benefits (including health insurance, retirement, and other similar benefits, if any) and other compensation applicable to all Personnel; provided, however, that Republic Wireless is responsible for the payment of the Services Fees in accordance with Section 2.1. All Personnel will be subject to the personnel policies of Bandwidth and will be eligible to participate in Bandwidth’s employee benefit plans to the same extent as similarly situated employees of Bandwidth performing services in connection with Bandwidth’s business. Except as otherwise provided by the Tax Sharing Agreement, Bandwidth will be responsible for the payment of all federal, state, and local withholding taxes on the compensation of all Personnel and other such employment related taxes as are required by law. Each of Republic Wireless and Bandwidth will cooperate with the other to facilitate the other’s compliance with applicable federal, state, and local laws, rules, regulations, and ordinances applicable to the employment or engagement of all Personnel by either party.

Section 4.3 Additional Employee Provisions. Bandwidth will have the right to terminate its employment of any Personnel at any time.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

Section 5.1 Representations and Warranties of Bandwidth. Bandwidth represents and warrants to Republic Wireless as follows:

(a) Bandwidth is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware.

(b) Bandwidth has the power and authority to enter into this Agreement and to perform its obligations under this Agreement, including the Services.

(c) Bandwidth is not subject to any contractual or other legal obligation that materially interferes with its full, prompt, and complete performance under this Agreement.

(d) The individual executing this Agreement on behalf of Bandwidth has the authority to do so.

 

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Section 5.2 Representations and Warranties of Republic Wireless. Republic Wireless represents and warrants to Bandwidth as follows:

(a) Republic Wireless is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware.

(b) Republic Wireless has the power and authority to enter into this Agreement and to perform its obligations under this Agreement.

(c) Republic Wireless is not subject to any contractual or other legal obligation that materially interferes with its full, prompt, and complete performance under this Agreement.

(d) The individual executing this Agreement on behalf of Republic Wireless has the authority to do so.

ARTICLE VI

INDEMNIFICATION

Section 6.1 Indemnification by Bandwidth. Bandwidth will indemnify, defend, and hold harmless Republic Wireless and each of its Subsidiaries, Affiliates, officers, directors, employees and agents, successors and assigns (collectively, the “Republic Wireless Indemnitees”), from and against any and all Actions, judgments, Liabilities, losses, costs, damages, or expenses, including reasonable counsel fees, disbursements, and court costs (collectively, “Losses”), that any Republic Wireless Indemnitee may suffer arising from or out of, or relating to, (a) any material breach by Bandwidth of its obligations under this Agreement, or (b) the gross negligence, willful misconduct, fraud, or bad faith of Bandwidth in connection with the performance of any provision of this Agreement except to the extent such Losses (i) are fully covered by insurance maintained by Republic Wireless or such other Republic Wireless Indemnitee or (ii) are payable by Republic Wireless pursuant to Section 7.11.

Section 6.2 Indemnification by Republic Wireless. Republic Wireless will indemnify, defend, and hold harmless Bandwidth and its Subsidiaries, Affiliates, officers, directors, employees and agents, successors and assigns (collectively, the “Bandwidth Indemnitees”), from and against any and all Losses that any Bandwidth Indemnitee may suffer arising from or out of, or relating to (a) any material breach by Republic Wireless of its obligations under this Agreement, or (b) any acts or omissions of Bandwidth in providing the Services pursuant to this Agreement (except to the extent such Losses (i) arise from or relate to any material breach by Bandwidth of its obligations under this Agreement, (ii) are attributable to the gross negligence, willful misconduct, fraud, or bad faith of Bandwidth or any other Bandwidth Indemnitee seeking indemnification under this Section 6.2, (iii) are fully covered by insurance maintained by Bandwidth or such other Bandwidth Indemnitee, or (iv) are payable by Bandwidth pursuant to Section 7.11).

Section 6.3 Indemnification Procedures.

(a) (i) In connection with any indemnification provided for in Section 6.1 or 6.2, the party seeking indemnification (the “Indemnitee”) will give the party from which indemnification is sought (the “Indemnitor”) prompt notice whenever it comes to the attention of the Indemnitee that the Indemnitee has suffered or incurred, or may suffer or incur, any Losses for which it is entitled to indemnification under Section 6.1 or 6.2, and, if and when known, the facts constituting the basis for such claim and the projected amount of such Losses (which shall not be conclusive as to the amount of such Losses), in each case in reasonable detail. Without

 

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limiting the generality of the foregoing, in the case of any Action commenced by a third party for which indemnification is being sought (a “Third-Party Claim”), such notice will be given no later than ten business days following receipt by the Indemnitee of written notice of such Third-Party Claim. Failure by any Indemnitee to so notify the Indemnitor will not affect the rights of such Indemnitee hereunder except to the extent that such failure has a material prejudicial effect on the defenses or other rights available to the Indemnitor with respect to such Third Party Claim. The Indemnitee will deliver to the Indemnitor as promptly as practicable, and in any event within five business days after Indemnitee’s receipt, copies of all notices, court papers and other documents received by the Indemnitee relating to any Third-Party Claim.

(ii) After receipt of a notice pursuant to Section 6.3(a)(i) with respect to any Third-Party Claim, the Indemnitor will be entitled, if it so elects, to take control of the defense and investigation with respect to such Third-Party Claim and to employ and engage attorneys reasonably satisfactory to the Indemnitee to handle and defend such claim, at the Indemnitor’s cost, risk and expense, upon written notice to the Indemnitee of such election, which notice acknowledges the Indemnitor’s obligation to provide indemnification under this Agreement with respect to any Losses arising out of or relating to such Third-Party Claim. The Indemnitor will not settle any Third-Party Claim that is the subject of indemnification without the written consent of the Indemnitee, which consent will not be unreasonably withheld, conditioned or delayed; provided, however, that, after reasonable notice, the Indemnitor may settle a claim without the Indemnitee’s consent if such settlement (A) makes no admission or acknowledgment of Liability or culpability with respect to the Indemnitee, (B) includes a complete release of the Indemnitee and (C) does not seek any relief against the Indemnitee other than the payment of money damages to be borne by the Indemnitor. The Indemnitee will cooperate in all reasonable respects with the Indemnitor and its attorneys in the investigation, trial and defense of any lawsuit or action with respect to such claim and any appeal arising therefrom (including the filing in the Indemnitee’s name of appropriate cross-claims and counterclaims). The Indemnitee may, at its own cost, participate in any investigation, trial and defense of any Third-Party Claim controlled by the Indemnitor and any appeal arising therefrom, including participating in the process with respect to the potential settlement or compromise thereof. If the Indemnitee has been advised by its counsel that there may be one or more legal defenses available to the Indemnitee that conflict with those available to, or that are not available to, the Indemnitor (“Separate Legal Defenses”), or that there may be actual or potential differing or conflicting interests between the Indemnitor and the Indemnitee in the conduct of the defense of such Third-Party Claim, the Indemnitee will have the right, at the expense of the Indemnitor, to engage separate counsel reasonably acceptable to the Indemnitor to handle and defend such Third-Party Claim, provided, that, if such Third-Party Claim can be reasonably separated between those portion(s) for which Separate Legal Defenses are available (“Separable Claims”) and those for which no Separate Legal Defenses are available, the Indemnitee will instead have the right, at the expense of the Indemnitor, to engage separate counsel reasonably acceptable to the Indemnitor to handle and defend the Separable Claims, and the Indemnitor will not have the right to control the defense or investigation of such Third-Party Claim or such Separable Claims, as the case may be (and, in which latter case, the Indemnitor will have the right to control the defense or investigation of the remaining portion(s) of such Third-Party Claim).

(iii) If, after receipt of a notice pursuant to Section 6.3(a)(i) with respect to any Third-Party Claim as to which indemnification is available hereunder, the Indemnitor does not undertake to defend the Indemnitee against such Third-Party Claim, whether by not giving the Indemnitee timely notice of its election to so defend or otherwise, the Indemnitee may, but will have no obligation to, assume its own defense, at the expense of the Indemnitor (including attorneys fees and costs), it being understood that the Indemnitee’s right to indemnification for

 

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such Third Party Claim shall not be adversely affected by its assuming the defense of such Third Party Claim. The Indemnitor will be bound by the result obtained with respect thereto by the Indemnitee; provided, that the Indemnitee may not settle any lawsuit or action with respect to which the Indemnitee is entitled to indemnification hereunder without the consent of the Indemnitor, which consent will not be unreasonably withheld, conditioned or delayed; provided further, that such consent shall not be required if (i) the Indemnitor had the right under this Section 6.3 to undertake control of the defense of such Third-Party Claim and, after notice, failed to do so within thirty days of receipt of such notice (or such lesser period as may be required by court proceedings in the event of a litigated matter), or (ii) (x) the Indemnitor does not have the right to control the defense of the entirety of such Third-Party Claim pursuant to Section 6.3(a)(ii) or (y) the Indemnitor does not have the right to control the defense of any Separable Claim pursuant to Section 6.3(a)(ii) (in which case such settlement may only apply to such Separable Claims), the Indemnitee provides reasonable notice to Indemnitor of the settlement, and such settlement (A) makes no admission or acknowledgment of Liability or culpability with respect to the Indemnitor, (B) does not seek any relief against the Indemnitor and (C) does not seek any relief against the Indemnitee for which the Indemnitor is responsible other than the payment of money damages.

(b) In no event will the Indemnitor be liable to any Indemnitee for any special, consequential, indirect, collateral, incidental or punitive damages, however caused and on any theory of liability arising in any way out of this Agreement, whether or not such Indemnitor was advised of the possibility of any such damages; provided, that the foregoing limitations shall not limit a party’s indemnification obligations for any Losses incurred by an Indemnitee as a result of the assertion of a Third Party Claim.

(c) The Indemnitor and the Indemnitee shall use commercially reasonable efforts to avoid production of confidential information, and to cause all communications among employees, counsel and others representing any party with respect to a Third Party Claim to be made so as to preserve any applicable attorney-client or work-product privilege.

(d) The Indemnitor shall pay all amounts payable pursuant to this Section 6.3 by wire transfer of immediately available funds, promptly following receipt from an Indemnitee of a bill, together with all accompanying reasonably detailed backup documentation, for any Losses that are the subject of indemnification hereunder, unless the Indemnitor in good faith disputes the amount of such Losses or whether such Losses are covered by the Indemnitor’s indemnification obligation in which event the Indemnitor shall promptly so notify the Indemnitee. In any event, the Indemnitor shall pay to the Indemnitee, by wire transfer of immediately available funds, the amount of any Losses for which it is liable hereunder no later than three (3) days following any final determination of the amount of such Losses and the Indemnitor’s liability therefor. A “final determination” shall exist when (a) the parties to the dispute have reached an agreement in writing or (b) a court of competent jurisdiction shall have entered a final and non-appealable order or judgment.

(e) If the indemnification provided for in this Section 6.3 shall, for any reason, be unavailable or insufficient to hold harmless an Indemnitee in respect of any Losses for which it is entitled to indemnification hereunder, then the Indemnitor shall contribute to the amount paid or payable by such Indemnitee as a result of such Losses, in such proportion as shall be appropriate to reflect the relative benefits received by and the relative fault of the Indemnitor on the one hand and the Indemnitee on the other hand with respect to the matter giving rise to such Losses.

 

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(f) The remedies provided in this Section 6.3 shall be cumulative and shall not preclude assertion by any Indemnitee of any other rights or the seeking of any and all other remedies against an Indemnitor, subject to Section 6.3(b).

(g) To the fullest extent permitted by applicable law, the Indemnitor will indemnify the Indemnitee against any and all reasonable fees, costs and expenses (including attorneys’ fees), incurred in connection with the enforcement of his, her or its rights under this Article VI.

Section 6.4 Survival. The terms and conditions of this Article VI will survive the expiration or termination of this Agreement.

ARTICLE VII

MISCELLANEOUS

Section 7.1 Defined Terms.

(a) The following terms will have the following meanings for all purposes of this Agreement:

“Action” means any demand, action, claim, suit, countersuit, litigation, arbitration, prosecution, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding), hearing, inquiry, audit, examination or investigation commenced, brought, conducted or heard by or before, or otherwise involving, any court, grand jury or other governmental authority or any arbitrator or arbitration panel.

“Affiliate” means, with respect to any Person, any other Person controlled by such first Person, with “control” for such purpose meaning the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities or voting interests, by contract, or otherwise. Notwithstanding the foregoing, for purposes of this Agreement, none of the Persons listed in clause (i) or (ii) shall be deemed to be Affiliates of any Person listed in any other such clause: (i) Bandwidth taken together with its Subsidiaries, or (ii) Republic Wireless taken together with its Subsidiaries.

“Confidential Information” means any information marked, noticed, or treated as confidential by a party which such party holds in confidence, including all trade secrets, technical, business, or other information, including customer or client information, however communicated or disclosed, relating to past, present and future research, development and business activities.

“Liabilities” means any and all debts, liabilities, commitments and obligations, whether or not fixed, contingent or absolute, matured or unmatured, direct or indirect, liquidated or unliquidated, accrued or unaccrued, known or unknown, and whether or not required by GAAP to be reflected in financial statements or disclosed in the notes thereto (other than taxes).

“Person” means any natural person, corporation, limited liability company, partnership, trust, unincorporated organization, association, governmental authority, or other entity.

“Subsidiary” when used with respect to any Person, means (i)(A) a corporation a majority in voting power of whose share capital or capital stock with voting power, under ordinary circumstances, to elect directors is at the time, directly or indirectly, owned by such Person, by one or more Subsidiaries of such Person, or by such Person and one or more Subsidiaries of such Person, whether or not such power

 

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is subject to a voting agreement or similar encumbrance, (B) a partnership or limited liability company in which such Person or a Subsidiary of such Person is, at the date of determination, (1) in the case of a partnership, a general partner of such partnership with the power affirmatively to direct the policies and management of such partnership or (2) in the case of a limited liability company, the managing member or, in the absence of a managing member, a member with the power affirmatively to direct the policies and management of such limited liability company, or (C) any other Person (other than a corporation) in which such Person, one or more Subsidiaries of such Person or such Person and one or more Subsidiaries of such Person, directly or indirectly, at the date of determination thereof, has or have (1) the power to elect or direct the election of a majority of the members of the governing body of such Person, whether or not such power is subject to a voting agreement or similar encumbrance, or (2) in the absence of such a governing body, at least a majority ownership interest or (ii) any other Person of which an aggregate of 50% or more of the equity interests are, at the time, directly or indirectly, owned by such Person and/or one or more Subsidiaries of such Person. Notwithstanding the foregoing, for purposes of this Agreement, none of the Subsidiaries of Bandwidth will be deemed to be Subsidiaries of Republic Wireless or any of its Subsidiaries, nor will any of Republic Wireless’s Subsidiaries be deemed to be Subsidiaries of Bandwidth or any of its Subsidiaries.

“Tax Sharing Agreement” means the Tax Sharing Agreement, dated as of November 30, 2016, between Bandwidth and Republic Wireless.

Section 7.2 Entire Agreement; Severability. This Agreement, the Facilities Sharing Agreement, the Tax Sharing Agreement and the Reorganization Agreement constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof, and supersedes all prior agreements and understandings, oral and written, among the parties hereto with respect to such subject matter. It is the intention of the parties hereto that the provisions of this Agreement will be enforced to the fullest extent permissible under all applicable laws and public policies, but that the unenforceability of any provision hereof (or the modification of any provision hereof to conform with such laws or public policies, as provided in the next sentence) will not render unenforceable or impair the remainder of this Agreement. Accordingly, if any provision is determined to be invalid or unenforceable either in whole or in part, this Agreement will be deemed amended to delete or modify, as necessary, the invalid or unenforceable provisions and to alter the balance of this Agreement in order to render the same valid and enforceable, consistent (to the fullest extent possible) with the intent and purposes hereof. If the provisions of this Agreement conflict with any provisions of the Facilities Sharing Agreement, the provisions of this Agreement shall control, and if the provisions of this Agreement conflict with any provisions of the Tax Sharing Agreement, the provisions of the Tax Sharing Agreement shall control.

Section 7.3 Notices. All notices and communications hereunder will be in writing and will be deemed to have been duly given if delivered personally or mailed, certified or registered mail with postage prepaid, or sent by confirmed facsimile, addressed as follows:

 

if to Bandwidth:		Bandwidth.com, Inc.
		900 Main Campus Drive, Suite 500 Raleigh, NC 27606 Attention: Legal Department Fax: 919.239.9903
if to Republic Wireless:		Republic Wireless, Inc.
		900 Main Campus Drive, Suite 500
		Raleigh, NC 27606
		Attention: Legal Department Fax: 919.670.3115

 

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or to such other address (or to the attention of such other person) as the parties may hereafter designate in writing. All such notices and communications will be deemed to have been given on the date of delivery if sent by facsimile or personal delivery, or the third day after the mailing thereof, except that any notice of a change of address will be deemed to have been given only when actually received.

Section 7.4 Governing Law. This Agreement and the legal relations among the parties hereto will be governed in all respects, including validity, interpretation and effect, by the laws of the State of North Carolina applicable to contracts made and performed wholly therein, without giving effect to any choice or conflict of laws provisions or rules that would cause the application of the laws of any other jurisdiction.

Section 7.5 Rules of Construction. The descriptive headings in this Agreement are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. Words used in this Agreement, regardless of the gender and number specifically used, will be deemed and construed to include any other gender, masculine, feminine, or neuter, and any other number, singular or plural, as the context requires. As used in this Agreement, the word “including” or any variation thereof is not limiting, and the word “or” is not exclusive. The word day means a calendar day. If the last day for giving any notice or taking any other action is a Saturday, Sunday, or a day on which banks in New York, New York or Raleigh, North Carolina are closed, the time for giving such notice or taking such action will be extended to the next day that is not such a day.

Section 7.6 No Third-Party Rights. Nothing expressed or referred to in this Agreement is intended or will be construed to give any Person other than the parties hereto and their respective successors and permitted assigns any legal or equitable right, remedy or claim under or with respect to this Agreement, or any provision hereof, it being the intention of the parties hereto that this Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their respective successors and assigns.

Section 7.7 Counterparts. This Agreement may be executed in one or more counterparts, each of which will be an original and all of which together will constitute one and the same instrument.

Section 7.8 Payment of Expenses. From and after the Spin-Off Effective Date, and except as otherwise expressly provided in this Agreement, each of the parties to this Agreement will bear its own expenses, including the fees of any attorneys and accountants engaged by such party, in connection with this Agreement.

Section 7.9 Binding Effect; Assignment.

(a) This Agreement will inure to the benefit of and be binding on the parties to this Agreement and their respective legal representatives, successors and permitted assigns.

(b) Except as expressly contemplated hereby (including by Section 4.1), this Agreement, and the obligations arising hereunder, may not be assigned by either party to this Agreement, provided, however, that Republic Wireless and Bandwidth may assign their respective rights, interests, duties, liabilities and obligations under this Agreement to any of their respective wholly-owned Subsidiaries, but such assignment shall not relieve Republic Wireless or Bandwidth, as the assignor, of its obligations hereunder.

 

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Section 7.10 Amendment, Modification, Extension or Waiver. Any amendment, modification or supplement of or to any term or condition of this Agreement will be effective only if in writing and signed by both parties hereto. Either party to this Agreement may (a) extend the time for the performance of any of the obligations or other acts of the other party to this Agreement, or (b) waive compliance by the other party with any of the agreements or conditions contained herein or any breach thereof. Any agreement on the part of either party to any such extension or waiver will be valid only if set forth in an instrument in writing signed on behalf of such party. No waiver of any term, provision or condition of this Agreement, whether by conduct or otherwise, in any one or more instance, will be deemed or construed as a further or continuing waiver of any such term, provision or condition or of any other term, provision or condition, but any party hereto may waive its rights in any particular instance by written instrument of waiver.

Section 7.11 Legal Fees; Costs. If either party to this Agreement institutes any action or proceeding to enforce any provision of this Agreement, the prevailing party will be entitled to receive from the other party reasonable attorneys’ fees, disbursements and costs incurred in such action or proceeding, whether or not such action or proceeding is prosecuted to judgment.

Section 7.12 Force Majeure. Neither party will be liable to the other party with respect to any nonperformance or delay in performance of its obligations under this Agreement to the extent such failure or delay is due to any action or claims by any third party, labor dispute, labor strike, weather conditions or any cause beyond a party’s reasonable control. Each party agrees that it will use all commercially reasonable efforts to continue to perform its obligations under this Agreement, to resume performance of its obligations under this Agreement, and to minimize any delay in performance of its obligations under this Agreement notwithstanding the occurrence of any such event beyond such party’s reasonable control.

Section 7.13 Specific Performance. Each party agrees that irreparable damage would occur and that the parties would not have any adequate remedy at law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that each of the parties shall be entitled to seek an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, this being in addition to any other remedy to which they are entitled at law or in equity.

Section 7.14 Further Actions. The parties will execute and deliver all documents, provide all information, and take or forbear from all actions that may be necessary or appropriate to achieve the purposes of this Agreement.

Section 7.15 Confidentiality.

(a) Except with the prior consent of the disclosing party, each party will:

(i) limit access to the Confidential Information of the other party disclosed to such party hereunder to its employees, agents, representatives, and consultants on a need-to-know basis;

(ii) advise its employees, agents, representatives, and consultants having access to such Confidential Information of the proprietary nature thereof and of the obligations set forth in this Agreement; and

(iii) safeguard such Confidential Information by using a reasonable degree of care to prevent disclosure of the Confidential Information to third parties, but not less than that degree of care used by that party in safeguarding its own similar information or material.

 

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(b) A party’s obligations respecting confidentiality under Section 7.15(a) will not apply to any of the Confidential Information of the other party that a party can demonstrate: (i) was, at the time of disclosure to it, in the public domain; (ii) after disclosure to it, is published or otherwise becomes part of the public domain through no fault of the receiving party; (iii) was in the possession of the receiving party at the time of disclosure to it without being subject to any obligation of confidentiality; (iv) was received after disclosure to it from a third party who, to its knowledge, had a lawful right to disclose such information to it; (v) was independently developed by the receiving party without reference to the Confidential Information; (vi) was required to be disclosed to any regulatory body having jurisdiction over a party or any of their respective clients; or (vii) was required to be disclosed by reason of legal, accounting, or regulatory requirements beyond the reasonable control of the receiving party. In the case of any disclosure pursuant to clauses (vi) or (vii) of this paragraph (b), to the extent practical, the receiving party will give prior notice to the disclosing party of the required disclosure and will use commercially reasonable efforts to obtain a protective order covering such disclosure.

(c) The provisions of this Section 7.15 will survive the expiration or termination of this Agreement.

[Signature Page Follows]

 

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IN WITNESS WHEREOF, each of the parties has signed this Agreement, or has caused this Agreement to be signed by its duly authorized officer, as of the date first above written.

 

 

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EXHIBIT A – SERVICES

 

Category of Service		Service		Applicable Service Fee (Monthly)
Insurance Administration		Insurance Administration Support		Included with Chief Financial Officer & General Counsel Support
Technical and Information Technology		Information Technology (Use of Hardware / Software / Cloud Services Made Available By Bandwidth (Other Than Pursuant to Master Services Agreement, dated as of November 30, 2016)
		-VPN Tunnel to Sprint out of RDU (access to Sprint Mapserver / Citrix / AMS		$316.48
		- MMS VMs in DFW/LAX/Lab		$889.67
		- VPN Tunnel for MMS		$357.73
		- Sprint CDR VM in RDU		Covered under VMs line item above
		- VPN to Sprint Server		$316.48
		- FTP Server (Sprint uses to pass CDRs)		Covered under VMs line item above
		ADP Platform		$1,927.50
		Corporate Technology Support		$6,373.53
		NetSuite Administration Support		$11,724.50
		Desktop Support		$397.48
Finance		Chief Financial Officer Support		$8,867.34
		Corporate Controller Support		$11,725.61
		Assistant Corporate Controller Support		$4,720.49
		Cash Applications Support		$1,622.98
		Accounts Payable Support		$4,896.48
		Revenue Assurance Support		$6,609.48
		Internal Controls Support		$557.20
		Corporate Accounting Support		$16,766.53
Tax		Tax Accounting Support (including, but not limited to Income, Regulatory, Indirect, and General)		$19.578.57
Legal		General Counsel Support		$8,867.34
		Deputy General Counsel—Regulatory Support		$2,968.06
		Vice President—Regulatory Support		$1,690.21
		Legal Compliance Support		$444.53
Human Resources		Chief People Services Officer Support		$13,167.61
		Payroll and Benefits Support		$9,172.22
		Other People Services Support		$8,343.26
		Gym Shuttle		$1,150.66
Facilities Management		General Facilities Management Support		$7,313.43
Other		Such other services as Bandwidth may obtain from its officers, employees and consultants in the management of its own operations that Republic Wireless may from time to time request or require		To be mutually agreed, but not less than fair market value

 

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Exhibit 10.15

TRANSITION SERVICES AGREEMENT

TRANSITION SERVICES AGREEMENT (this “Agreement”), dated as of November 30, 2016, by and between Bandwidth.com, Inc., a Delaware corporation (the “Bandwidth”), and Republic Wireless, Inc., a Delaware corporation (“Republic Wireless”).

RECITALS

WHEREAS, on the date hereof Republic Wireless is a wholly owned subsidiary of Bandwidth as a result of the consummation of the transactions described in the Restructuring Plan set forth in Schedule 1 to the Reorganization Agreement, dated as of November 30, 2016 (the “Reorganization Agreement”), to which Bandwidth and Republic Wireless are each parties;

WHEREAS, in accordance with the Reorganization Agreement, 100% of the issued and outstanding shares of capital stock of Republic Wireless will be distributed as a pro rata dividend to the holders of Bandwidth’s capital stock, with the effect that Republic Wireless will be spun-off (the “Spin-Off”) from Bandwidth, and Bandwidth will cease to have an equity interest in Republic Wireless; and

WHEREAS, Republic Wireless and Bandwidth desire that, following the Spin-Off, Bandwidth obtain from Republic Wireless the services described herein, and that Bandwidth compensate Republic Wireless for the performance of such services on the basis set forth in this Agreement.

AGREEMENT

NOW THEREFORE, in consideration of the foregoing recitals, the mutual agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be bound legally, agree as follows:

ARTICLE I

ENGAGEMENT AND SERVICES

Section 1.1 Engagement. Bandwidth engages Republic Wireless to provide to Bandwidth, commencing on the date of the Spin-Off (the “Spin-Off Effective Date”), the services set forth in Section 1.2 (collectively, the “Services”), and Republic Wireless accepts such engagement, subject to and upon the terms and conditions of this Agreement. The parties acknowledge that certain of the Services will be performed by officers, employees or consultants of Republic Wireless, who may also serve, from time to time, as officers, employees or consultants of other companies.

Section 1.2 Services.

(a) The Services will include the following, if and to the extent requested by Bandwidth during the Term of this Agreement:

 

(i)

technical and other similar assistance regarding any Priority 1 Event (as defined below) relating to Bandwidth’s operation of the “Phonebooth” solution after the Spin-Off Effective Date; for the purposes of this Agreement, the term “Priority 1 Event” means an error that results in an emergency condition that (A) makes the use or continued use by the end users of Phonebooth (as contrasted with any individual end user of Phonebooth) of any one or more functions of Phonebooth impossible, requires an immediate solution that is not already available to Bandwidth, and cannot be circumvented by a workaround;

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(ii)

services to be performed by Republic Wireless’ legal department regarding the development and prosecution of patents with the United States Patent and Trademark Office and such other foreign authorities as requested from time to time; and

 

(iii)

such other services as Republic Wireless may obtain from its officers, employees and consultants in the management of its own operations that Bandwidth may from time to time request or require and for which Republic Wireless may agree to provide from time to time.

The Services are more completely described in Exhibit A attached hereto.

Section 1.3 Services Not to Interfere with Republic Wireless’ Business; No Material Change in Activity Levels or Scope. Bandwidth acknowledges and agrees that in providing Services hereunder Republic Wireless will not be required to take any action that would disrupt, in any material respect, the orderly operation of Republic Wireless’ business activities. Bandwidth also acknowledges and agrees that Republic Wireless will have no obligation to provide Services in a material volume or scope greater than needed by Bandwidth as of the Spin-Off; for example, Republic Wireless will have no obligation to provide Services in a volume or scope that might be necessary to support an acquisition by or of Bandwidth or an initial public offering of the capital stock of Bandwidth at any time during the Term (as defined below). Furthermore, Bandwidth also acknowledges and agrees that Republic Wireless will have no obligation to implement or support electronic tools or electronic systems related to the Services that were not utilized by Bandwidth as of the Spin-Off.

Section 1.4 Books and Records. Republic Wireless will maintain books and records, in reasonable detail in accordance with Republic Wireless’ standard business practices, with respect to its provision of Services to Bandwidth pursuant to this Agreement, including records supporting the determination of the Services Fee and other costs and expenses to Bandwidth pursuant to Article II (collectively, “Supporting Records”). Republic Wireless will give Bandwidth and its duly authorized representatives, agents, and attorneys reasonable access to all such Supporting Records during Republic Wireless’ regular business hours upon Bandwidth’s request after reasonable advance notice.

ARTICLE II

COMPENSATION

Section 2.1 Services Fee. Bandwidth agrees to pay, and Republic Wireless agrees to accept, fee(s) (the “Services Fees”) set forth on Exhibit A with respect to applicable Services utilized by Bandwidth during the Term of this Agreement, payable in monthly installments in arrears as set forth in Section 2.3. Bandwidth and Republic Wireless will review and evaluate the Services Fees for reasonableness semiannually during the Term and will negotiate in good faith to reach agreement on any appropriate adjustments to the Services Fee. Based on such review and evaluation, Bandwidth and Republic Wireless will agree on the appropriate effective date (which may be retroactive) of any such adjustment to the Services Fees.

Section 2.2 Cost Reimbursement. In addition to (and without duplication of) the Services Fee payable pursuant to Section 2.1, Bandwidth also will reimburse Republic Wireless for all direct out-of-pocket costs, with no markup (“Out-of-Pocket Costs”), incurred by Republic Wireless in performing the Services (e.g., postage and courier charges, travel, meals and entertainment expenses, and other miscellaneous expenses that are incurred by Republic Wireless in the conduct of the Services).

 

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Section 2.3 Payment Procedures.

(a) Bandwidth will pay Republic Wireless, by wire or intrabank transfer of funds or in such other manner specified by Republic Wireless to Bandwidth, in arrears on or before the fifth (5^th) day of each calendar month immediately following the calendar month during which Bandwidth utilized the applicable Services, beginning with January 5, 2017, the Services Fees then in effect.

(b) Any reimbursement to be made by Bandwidth to Republic Wireless pursuant to Section 2.2 will be paid by Bandwidth to Republic Wireless within 15 days after receipt by Bandwidth of an invoice therefor, by wire or intrabank transfer of funds or in such other manner specified by Bandwidth to Republic Wireless. Republic Wireless will invoice Bandwidth monthly for reimbursable expenses incurred by Republic Wireless on behalf of Bandwidth during the preceding calendar month as contemplated in Section 2.2; provided, however, that Republic Wireless may separately invoice Bandwidth at any time for any single reimbursable expense incurred by Republic Wireless on behalf of Bandwidth in an amount equal to or greater than $5,000.00. Any invoice or statement pursuant to this Section 2.3(b) will be accompanied by supporting documentation in reasonable detail consistent with Bandwidth’s own expense reimbursement policy.

(c) Any payments not made when due under this Section 2.3 will bear interest at the rate of 1.5% per month on the outstanding amount from and including the due date to but excluding the date paid.

Section 2.4 Survival. The terms and conditions of this Article II will survive the expiration or earlier termination of this Agreement.

ARTICLE III

TERM

Section 3.1 Term Generally. The term of this Agreement will commence on the Spin-Off Effective Date and will continue until the second anniversary of the Spin-Off Effective Date (the “Term”); provided, however, from and after the first anniversary of the Spin-Off Effective Date, Republic Wireless will have no obligation to provide any Services other than those Services identified as “Legal” on Exhibit A attached to this Agreement. This Agreement is subject to termination prior to the end of the Term in accordance with Section 3.3.

Section 3.2 Discontinuance of Select Services. At any time during the Term, on not less than thirty (30) days’ prior notice by Bandwidth to Republic Wireless, Bandwidth may elect to discontinue obtaining any of the Services previously obtained from Republic Wireless pursuant to this Agreement. In such event, Republic Wireless’ obligation to provide Services that have been discontinued pursuant to this Section 3.2, and Bandwidth’s obligation to compensate Republic Wireless for such Services, will cease as of the end of such 30-day period (or such later date as may be specified in the notice), and this Agreement will remain in effect for the remainder of the Term with respect to those Services that have not been so discontinued. Bandwidth and Republic Wireless will promptly reduce the Services Fees payable by Bandwidth as described pursuant to Exhibit A following the discontinuance of any Services. Each party will remain liable to the other for any required payment or performance accrued prior to the effective date of discontinuance of any Service.

 

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Section 3.3 Termination. This Agreement will be terminated prior to the expiration of the Term in the following events:

(a) at any time upon at least thirty (30) days’ prior written notice by Bandwidth to Republic Wireless;

(b) immediately upon written notice (or at any later time specified in such notice) by Republic Wireless to Bandwidth if a Change in Control or Bankruptcy Event occurs with respect to Bandwidth; or

(c) immediately upon written notice (or at any later time specified in such notice) by Bandwidth to Republic Wireless if a Change in Control or Bankruptcy Event occurs with respect to Republic Wireless.

For purposes of this Section 3.3, a “Change in Control” will be deemed to have occurred with respect to a party if a merger, consolidation, binding share exchange, acquisition, or similar transaction (each, a “Transaction”), or series of related Transactions, involving such party occurs as a result of which the voting power of all voting securities of such party outstanding immediately prior thereto represent (either by remaining outstanding or being converted into voting securities of the surviving entity) less than 75% of the voting power of such party or the surviving entity of the Transaction outstanding immediately after such Transaction (or if such party or the surviving entity after giving effect to such Transaction is a subsidiary of the issuer of securities in such Transaction, then the voting power of all voting securities of such party outstanding immediately prior to such Transaction represent (by being converted into voting securities of such issuer) less than 75% of the voting power of the issuer outstanding immediately after such Transaction).

For purposes of this Section 3.3, a “Bankruptcy Event” will be deemed to have occurred with respect to a party upon such party’s insolvency, general assignment for the benefit of creditors, such party’s voluntary commencement of any case, proceeding, or other action seeking reorganization, arrangement, adjustment, liquidation, dissolution, or consolidation of such party’s debts under any law relating to bankruptcy, insolvency, or reorganization, or relief of debtors, or seeking appointment of a receiver, trustee, custodian, or other similar official for such party or for all or any substantial part of such party’s assets (each, a “Bankruptcy Proceeding”), or the involuntary filing against Bandwidth or Republic Wireless, as applicable, of any Bankruptcy Proceeding that is not stayed within 60 days after such filing.

Each party will remain liable to the other for any required payment accrued prior to the termination of this Agreement.

ARTICLE IV

PERSONNEL AND EMPLOYEES

Section 4.1 Personnel to Provide Services.

(a) Republic Wireless will make available to Bandwidth, on a non-exclusive basis, the appropriate personnel (the “Personnel”) to perform the Services. The personnel made available to perform selected Services are expected to be substantially the same personnel who provide similar services in connection with the management and administration of the business and operations of Republic Wireless.

 

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(b) Bandwidth acknowledges that:

(i) certain of the Personnel also will be performing services for Republic Wireless and/or other companies, from time to time, including certain Subsidiaries and Affiliates of Republic Wireless, in each case, while also potentially performing services directly for Bandwidth and certain of its Subsidiaries and Affiliates under a direct employment, consultancy or other service relationship between such Person and Bandwidth and irrespective of this Agreement; and

(ii) Republic Wireless may elect, in its discretion, to utilize independent contractors rather than employees of Republic Wireless to perform Services from time to time, and such independent contractors will be deemed included within the definition of “Personnel” for all purposes of this Agreement.

Section 4.2 Republic Wireless as Payor. The parties acknowledge and agree that Republic Wireless, and not Bandwidth, will be solely responsible for the payment of salaries, wages, benefits (including health insurance, retirement, and other similar benefits, if any) and other compensation applicable to all Personnel; provided, however, that Bandwidth is responsible for the payment of the Services Fees in accordance with Section 2.1. All Personnel will be subject to the personnel policies of Republic Wireless and will be eligible to participate in Republic Wireless’ employee benefit plans to the same extent as similarly situated employees of Republic Wireless performing services in connection with Republic Wireless’ business. Except as otherwise provided by the Tax Sharing Agreement, Republic Wireless will be responsible for the payment of all federal, state, and local withholding taxes on the compensation of all Personnel and other such employment related taxes as are required by law. Each of Bandwidth and Republic Wireless will cooperate with the other to facilitate the other’s compliance with applicable federal, state, and local laws, rules, regulations, and ordinances applicable to the employment or engagement of all Personnel by either party.

Section 4.3 Additional Employee Provisions. Republic Wireless will have the right to terminate its employment of any Personnel at any time.

ARTICLE V

REPRESENTATIONS AND WARRANTIES

Section 5.1 Representations and Warranties of Republic Wireless. Republic Wireless represents and warrants to Bandwidth as follows:

(a) Republic Wireless is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware.

(b) Republic Wireless has the power and authority to enter into this Agreement and to perform its obligations under this Agreement, including the Services.

(c) Republic Wireless is not subject to any contractual or other legal obligation that materially interferes with its full, prompt, and complete performance under this Agreement.

(d) The individual executing this Agreement on behalf of Republic Wireless has the authority to do so.

 

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Section 5.2 Representations and Warranties of Bandwidth. Bandwidth represents and warrants to Republic Wireless as follows:

(a) Bandwidth is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware.

(b) Bandwidth has the power and authority to enter into this Agreement and to perform its obligations under this Agreement.

(c) Bandwidth is not subject to any contractual or other legal obligation that materially interferes with its full, prompt, and complete performance under this Agreement.

(d) The individual executing this Agreement on behalf of Bandwidth has the authority to do so.

ARTICLE VI

INDEMNIFICATION

Section 6.1 Indemnification by Republic Wireless. Republic Wireless will indemnify, defend, and hold harmless Bandwidth and each of its Subsidiaries, Affiliates, officers, directors, employees and agents, successors and assigns (collectively, the “Bandwidth Indemnitees”), from and against any and all Actions, judgments, Liabilities, losses, costs, damages, or expenses, including reasonable counsel fees, disbursements, and court costs (collectively, “Losses”), that any Bandwidth Indemnitee may suffer arising from or out of, or relating to, (a) any material breach by Republic Wireless of its obligations under this Agreement, or (b) the gross negligence, willful misconduct, fraud, or bad faith of Republic Wireless in connection with the performance of any provision of this Agreement except to the extent such Losses (i) are fully covered by insurance maintained by Bandwidth or such other Bandwidth Indemnitee or (ii) are payable by Bandwidth pursuant to Section 7.11.

Section 6.2 Indemnification by Bandwidth. Bandwidth will indemnify, defend, and hold harmless Republic Wireless and its Subsidiaries, Affiliates, officers, directors, employees and agents, successors and assigns (collectively, the “Republic Wireless Indemnitees”), from and against any and all Losses that any Republic Wireless Indemnitee may suffer arising from or out of, or relating to (a) any material breach by Bandwidth of its obligations under this Agreement, or (b) any acts or omissions of Bandwidth in providing the Services pursuant to this Agreement (except to the extent such Losses (i) arise from or relate to any material breach by Republic Wireless of its obligations under this Agreement, (ii) are attributable to the gross negligence, willful misconduct, fraud, or bad faith of Republic Wireless or any other Republic Wireless Indemnitee seeking indemnification under this Section 6.2, (iii) are fully covered by insurance maintained by Republic Wireless or such other Republic Wireless Indemnitee, or (iv) are payable by Bandwidth pursuant to Section 7.11).

Section 6.3 Indemnification Procedures.

(a) (i) In connection with any indemnification provided for in Section 6.1 or 6.2, the party seeking indemnification (the “Indemnitee”) will give the party from which indemnification is sought (the “Indemnitor”) prompt notice whenever it comes to the attention of the Indemnitee that the Indemnitee has suffered or incurred, or may suffer or incur, any Losses for which it is entitled to indemnification under Section 6.1 or 6.2, and, if and when known, the facts constituting the basis for such claim and the projected amount of such Losses (which shall not be conclusive as to the amount of such Losses), in each case in reasonable detail. Without limiting the generality of the foregoing, in the case of any Action commenced by a third party for which indemnification is being sought (a “Third-Party Claim”), such notice will be given no later

 

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than ten business days following receipt by the Indemnitee of written notice of such Third-Party Claim. Failure by any Indemnitee to so notify the Indemnitor will not affect the rights of such Indemnitee hereunder except to the extent that such failure has a material prejudicial effect on the defenses or other rights available to the Indemnitor with respect to such Third Party Claim. The Indemnitee will deliver to the Indemnitor as promptly as practicable, and in any event within five business days after Indemnitee’s receipt, copies of all notices, court papers and other documents received by the Indemnitee relating to any Third-Party Claim.

(ii) After receipt of a notice pursuant to Section 6.3(a)(i) with respect to any Third-Party Claim, the Indemnitor will be entitled, if it so elects, to take control of the defense and investigation with respect to such Third-Party Claim and to employ and engage attorneys reasonably satisfactory to the Indemnitee to handle and defend such claim, at the Indemnitor’s cost, risk and expense, upon written notice to the Indemnitee of such election, which notice acknowledges the Indemnitor’s obligation to provide indemnification under this Agreement with respect to any Losses arising out of or relating to such Third-Party Claim. The Indemnitor will not settle any Third-Party Claim that is the subject of indemnification without the written consent of the Indemnitee, which consent will not be unreasonably withheld, conditioned or delayed; provided, however, that, after reasonable notice, the Indemnitor may settle a claim without the Indemnitee’s consent if such settlement (A) makes no admission or acknowledgment of Liability or culpability with respect to the Indemnitee, (B) includes a complete release of the Indemnitee and (C) does not seek any relief against the Indemnitee other than the payment of money damages to be borne by the Indemnitor. The Indemnitee will cooperate in all reasonable respects with the Indemnitor and its attorneys in the investigation, trial and defense of any lawsuit or action with respect to such claim and any appeal arising therefrom (including the filing in the Indemnitee’s name of appropriate cross-claims and counterclaims). The Indemnitee may, at its own cost, participate in any investigation, trial and defense of any Third-Party Claim controlled by the Indemnitor and any appeal arising therefrom, including participating in the process with respect to the potential settlement or compromise thereof. If the Indemnitee has been advised by its counsel that there may be one or more legal defenses available to the Indemnitee that conflict with those available to, or that are not available to, the Indemnitor (“Separate Legal Defenses”), or that there may be actual or potential differing or conflicting interests between the Indemnitor and the Indemnitee in the conduct of the defense of such Third-Party Claim, the Indemnitee will have the right, at the expense of the Indemnitor, to engage separate counsel reasonably acceptable to the Indemnitor to handle and defend such Third-Party Claim, provided, that, if such Third-Party Claim can be reasonably separated between those portion(s) for which Separate Legal Defenses are available (“Separable Claims”) and those for which no Separate Legal Defenses are available, the Indemnitee will instead have the right, at the expense of the Indemnitor, to engage separate counsel reasonably acceptable to the Indemnitor to handle and defend the Separable Claims, and the Indemnitor will not have the right to control the defense or investigation of such Third-Party Claim or such Separable Claims, as the case may be (and, in which latter case, the Indemnitor will have the right to control the defense or investigation of the remaining portion(s) of such Third-Party Claim).

(iii) If, after receipt of a notice pursuant to Section 6.3(a)(i) with respect to any Third-Party Claim as to which indemnification is available hereunder, the Indemnitor does not undertake to defend the Indemnitee against such Third-Party Claim, whether by not giving the Indemnitee timely notice of its election to so defend or otherwise, the Indemnitee may, but will have no obligation to, assume its own defense, at the expense of the Indemnitor (including attorneys fees and costs), it being understood that the Indemnitee’s right to indemnification for such Third Party Claim shall not be adversely affected by its assuming the defense of such Third Party Claim. The Indemnitor will be bound by the result obtained with respect thereto by the

 

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Indemnitee; provided, that the Indemnitee may not settle any lawsuit or action with respect to which the Indemnitee is entitled to indemnification hereunder without the consent of the Indemnitor, which consent will not be unreasonably withheld, conditioned or delayed; provided further, that such consent shall not be required if (i) the Indemnitor had the right under this Section 6.3 to undertake control of the defense of such Third-Party Claim and, after notice, failed to do so within thirty days of receipt of such notice (or such lesser period as may be required by court proceedings in the event of a litigated matter), or (ii) (x) the Indemnitor does not have the right to control the defense of the entirety of such Third-Party Claim pursuant to Section 6.3(a)(ii) or (y) the Indemnitor does not have the right to control the defense of any Separable Claim pursuant to Section 6.3(a)(ii) (in which case such settlement may only apply to such Separable Claims), the Indemnitee provides reasonable notice to Indemnitor of the settlement, and such settlement (A) makes no admission or acknowledgment of Liability or culpability with respect to the Indemnitor, (B) does not seek any relief against the Indemnitor and (C) does not seek any relief against the Indemnitee for which the Indemnitor is responsible other than the payment of money damages.

(b) In no event will the Indemnitor be liable to any Indemnitee for any special, consequential, indirect, collateral, incidental or punitive damages, however caused and on any theory of liability arising in any way out of this Agreement, whether or not such Indemnitor was advised of the possibility of any such damages; provided, that the foregoing limitations shall not limit a party’s indemnification obligations for any Losses incurred by an Indemnitee as a result of the assertion of a Third Party Claim.

(c) The Indemnitor and the Indemnitee shall use commercially reasonable efforts to avoid production of confidential information, and to cause all communications among employees, counsel and others representing any party with respect to a Third Party Claim to be made so as to preserve any applicable attorney-client or work-product privilege.

(d) The Indemnitor shall pay all amounts payable pursuant to this Section 6.3 by wire transfer of immediately available funds, promptly following receipt from an Indemnitee of a bill, together with all accompanying reasonably detailed backup documentation, for any Losses that are the subject of indemnification hereunder, unless the Indemnitor in good faith disputes the amount of such Losses or whether such Losses are covered by the Indemnitor’s indemnification obligation in which event the Indemnitor shall promptly so notify the Indemnitee. In any event, the Indemnitor shall pay to the Indemnitee, by wire transfer of immediately available funds, the amount of any Losses for which it is liable hereunder no later than three (3) days following any final determination of the amount of such Losses and the Indemnitor’s liability therefor. A “final determination” shall exist when (a) the parties to the dispute have reached an agreement in writing or (b) a court of competent jurisdiction shall have entered a final and non-appealable order or judgment.

(e) If the indemnification provided for in this Section 6.3 shall, for any reason, be unavailable or insufficient to hold harmless an Indemnitee in respect of any Losses for which it is entitled to indemnification hereunder, then the Indemnitor shall contribute to the amount paid or payable by such Indemnitee as a result of such Losses, in such proportion as shall be appropriate to reflect the relative benefits received by and the relative fault of the Indemnitor on the one hand and the Indemnitee on the other hand with respect to the matter giving rise to such Losses.

(f) The remedies provided in this Section 6.3 shall be cumulative and shall not preclude assertion by any Indemnitee of any other rights or the seeking of any and all other remedies against an Indemnitor, subject to Section 6.3(b).

 

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(g) To the fullest extent permitted by applicable law, the Indemnitor will indemnify the Indemnitee against any and all reasonable fees, costs and expenses (including attorneys’ fees), incurred in connection with the enforcement of his, her or its rights under this Article VI.

Section 6.4 Survival. The terms and conditions of this Article VI will survive the expiration or termination of this Agreement.

ARTICLE VII

MISCELLANEOUS

Section 7.1 Defined Terms.

(a) The following terms will have the following meanings for all purposes of this Agreement:

“Action” means any demand, action, claim, suit, countersuit, litigation, arbitration, prosecution, proceeding (including any civil, criminal, administrative, investigative or appellate proceeding), hearing, inquiry, audit, examination or investigation commenced, brought, conducted or heard by or before, or otherwise involving, any court, grand jury or other governmental authority or any arbitrator or arbitration panel.

“Affiliate” means, with respect to any Person, any other Person controlled by such first Person, with “control” for such purpose meaning the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities or voting interests, by contract, or otherwise. Notwithstanding the foregoing, for purposes of this Agreement, none of the Persons listed in clause (i) or (ii) shall be deemed to be Affiliates of any Person listed in any other such clause: (i) Bandwidth taken together with its Subsidiaries, or (ii) Republic Wireless taken together with its Subsidiaries.

“Confidential Information” means any information marked, noticed, or treated as confidential by a party which such party holds in confidence, including all trade secrets, technical, business, or other information, including customer or client information, however communicated or disclosed, relating to past, present and future research, development and business activities.

“Liabilities” means any and all debts, liabilities, commitments and obligations, whether or not fixed, contingent or absolute, matured or unmatured, direct or indirect, liquidated or unliquidated, accrued or unaccrued, known or unknown, and whether or not required by GAAP to be reflected in financial statements or disclosed in the notes thereto (other than taxes).

“Person” means any natural person, corporation, limited liability company, partnership, trust, unincorporated organization, association, governmental authority, or other entity.

“Subsidiary” when used with respect to any Person, means (i)(A) a corporation a majority in voting power of whose share capital or capital stock with voting power, under ordinary circumstances, to elect directors is at the time, directly or indirectly, owned by such Person, by one or more Subsidiaries of such Person, or by such Person and one or more Subsidiaries of such Person, whether or not such power is subject to a voting agreement or similar encumbrance, (B) a partnership or limited liability company in which such Person or a Subsidiary of such Person is, at the date of determination, (1) in the case of a partnership, a general partner of such partnership with the power affirmatively to direct the policies and

 

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management of such partnership or (2) in the case of a limited liability company, the managing member or, in the absence of a managing member, a member with the power affirmatively to direct the policies and management of such limited liability company, or (C) any other Person (other than a corporation) in which such Person, one or more Subsidiaries of such Person or such Person and one or more Subsidiaries of such Person, directly or indirectly, at the date of determination thereof, has or have (1) the power to elect or direct the election of a majority of the members of the governing body of such Person, whether or not such power is subject to a voting agreement or similar encumbrance, or (2) in the absence of such a governing body, at least a majority ownership interest or (ii) any other Person of which an aggregate of 50% or more of the equity interests are, at the time, directly or indirectly, owned by such Person and/or one or more Subsidiaries of such Person. Notwithstanding the foregoing, for purposes of this Agreement, none of the Subsidiaries of Bandwidth will be deemed to be Subsidiaries of Republic Wireless or any of its Subsidiaries, nor will any of Republic Wireless’s Subsidiaries be deemed to be Subsidiaries of Bandwidth or any of its Subsidiaries.

“Tax Sharing Agreement” means the Tax Sharing Agreement, dated as of November 30, 2016, between Bandwidth and Republic Wireless.

Section 7.2 Entire Agreement; Severability. This Agreement, the Facilities Sharing Agreement, the Tax Sharing Agreement and the Reorganization Agreement constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof, and supersedes all prior agreements and understandings, oral and written, among the parties hereto with respect to such subject matter. It is the intention of the parties hereto that the provisions of this Agreement will be enforced to the fullest extent permissible under all applicable laws and public policies, but that the unenforceability of any provision hereof (or the modification of any provision hereof to conform with such laws or public policies, as provided in the next sentence) will not render unenforceable or impair the remainder of this Agreement. Accordingly, if any provision is determined to be invalid or unenforceable either in whole or in part, this Agreement will be deemed amended to delete or modify, as necessary, the invalid or unenforceable provisions and to alter the balance of this Agreement in order to render the same valid and enforceable, consistent (to the fullest extent possible) with the intent and purposes hereof. If the provisions of this Agreement conflict with any provisions of the Facilities Sharing Agreement, the provisions of this Agreement shall control, and if the provisions of this Agreement conflict with any provisions of the Tax Sharing Agreement, the provisions of the Tax Sharing Agreement shall control.

Section 7.3 Notices. All notices and communications hereunder will be in writing and will be deemed to have been duly given if delivered personally or mailed, certified or registered mail with postage prepaid, or sent by confirmed facsimile, addressed as follows:

 

if to Bandwidth:		Bandwidth.com, Inc.
		900 Main Campus Drive, Suite 500 Raleigh, NC 27606 Attention: Legal Department Fax: 919.239.9903
if to Republic Wireless:		Republic Wireless, Inc.
		900 Main Campus Drive, Suite 500
		Raleigh, NC 27606
		Attention: Legal Department Fax: 919.670.3115

or to such other address (or to the attention of such other person) as the parties may hereafter designate in writing. All such notices and communications will be deemed to have been given on the date of delivery if sent by facsimile or personal delivery, or the third day after the mailing thereof, except that any notice of a change of address will be deemed to have been given only when actually received.

 

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Section 7.4 Governing Law. This Agreement and the legal relations among the parties hereto will be governed in all respects, including validity, interpretation and effect, by the laws of the State of North Carolina applicable to contracts made and performed wholly therein, without giving effect to any choice or conflict of laws provisions or rules that would cause the application of the laws of any other jurisdiction.

Section 7.5 Rules of Construction. The descriptive headings in this Agreement are inserted for convenience of reference only and are not intended to be part of or to affect the meaning or interpretation of this Agreement. Words used in this Agreement, regardless of the gender and number specifically used, will be deemed and construed to include any other gender, masculine, feminine, or neuter, and any other number, singular or plural, as the context requires. As used in this Agreement, the word “including” or any variation thereof is not limiting, and the word “or” is not exclusive. The word day means a calendar day. If the last day for giving any notice or taking any other action is a Saturday, Sunday, or a day on which banks in New York, New York or Raleigh, North Carolina are closed, the time for giving such notice or taking such action will be extended to the next day that is not such a day.

Section 7.6 No Third-Party Rights. Nothing expressed or referred to in this Agreement is intended or will be construed to give any Person other than the parties hereto and their respective successors and permitted assigns any legal or equitable right, remedy or claim under or with respect to this Agreement, or any provision hereof, it being the intention of the parties hereto that this Agreement and all of its provisions and conditions are for the sole and exclusive benefit of the parties to this Agreement and their respective successors and assigns.

Section 7.7 Counterparts. This Agreement may be executed in one or more counterparts, each of which will be an original and all of which together will constitute one and the same instrument.

Section 7.8 Payment of Expenses. From and after the Spin-Off Effective Date, and except as otherwise expressly provided in this Agreement, each of the parties to this Agreement will bear its own expenses, including the fees of any attorneys and accountants engaged by such party, in connection with this Agreement.

Section 7.9 Binding Effect; Assignment.

(a) This Agreement will inure to the benefit of and be binding on the parties to this Agreement and their respective legal representatives, successors and permitted assigns.

(b) Except as expressly contemplated hereby (including by Section 4.1), this Agreement, and the obligations arising hereunder, may not be assigned by either party to this Agreement, provided, however, that Republic Wireless and Bandwidth may assign their respective rights, interests, duties, liabilities and obligations under this Agreement to any of their respective wholly-owned Subsidiaries, but such assignment shall not relieve Republic Wireless or Bandwidth, as the assignor, of its obligations hereunder.

Section 7.10 Amendment, Modification, Extension or Waiver. Any amendment, modification or supplement of or to any term or condition of this Agreement will be effective only if in writing and signed by both parties hereto. Either party to this Agreement may (a) extend the time for the performance of any of the obligations or other acts of the other party to this Agreement, or (b) waive compliance by the other party with any of the agreements or conditions contained herein or any breach thereof. Any

 

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agreement on the part of either party to any such extension or waiver will be valid only if set forth in an instrument in writing signed on behalf of such party. No waiver of any term, provision or condition of this Agreement, whether by conduct or otherwise, in any one or more instance, will be deemed or construed as a further or continuing waiver of any such term, provision or condition or of any other term, provision or condition, but any party hereto may waive its rights in any particular instance by written instrument of waiver.

Section 7.11 Legal Fees; Costs. If either party to this Agreement institutes any action or proceeding to enforce any provision of this Agreement, the prevailing party will be entitled to receive from the other party reasonable attorneys’ fees, disbursements and costs incurred in such action or proceeding, whether or not such action or proceeding is prosecuted to judgment.

Section 7.12 Force Majeure. Neither party will be liable to the other party with respect to any nonperformance or delay in performance of its obligations under this Agreement to the extent such failure or delay is due to any action or claims by any third party, labor dispute, labor strike, weather conditions or any cause beyond a party’s reasonable control. Each party agrees that it will use all commercially reasonable efforts to continue to perform its obligations under this Agreement, to resume performance of its obligations under this Agreement, and to minimize any delay in performance of its obligations under this Agreement notwithstanding the occurrence of any such event beyond such party’s reasonable control.

Section 7.13 Specific Performance. Each party agrees that irreparable damage would occur and that the parties would not have any adequate remedy at law in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that each of the parties shall be entitled to seek an injunction or injunctions to prevent breaches of this Agreement and to enforce specifically the terms and provisions of this Agreement, this being in addition to any other remedy to which they are entitled at law or in equity.

Section 7.14 Further Actions. The parties will execute and deliver all documents, provide all information, and take or forbear from all actions that may be necessary or appropriate to achieve the purposes of this Agreement.

Section 7.15 Confidentiality.

(a) Except with the prior consent of the disclosing party, each party will:

(i) limit access to the Confidential Information of the other party disclosed to such party hereunder to its employees, agents, representatives, and consultants on a need-to-know basis;

(ii) advise its employees, agents, representatives, and consultants having access to such Confidential Information of the proprietary nature thereof and of the obligations set forth in this Agreement; and

(iii) safeguard such Confidential Information by using a reasonable degree of care to prevent disclosure of the Confidential Information to third parties, but not less than that degree of care used by that party in safeguarding its own similar information or material.

(b) A party’s obligations respecting confidentiality under Section 7.15(a) will not apply to any of the Confidential Information of the other party that a party can demonstrate: (i) was, at the time of disclosure to it, in the public domain; (ii) after disclosure to it, is published or otherwise becomes part of the public domain through no fault of the receiving party; (iii) was in the possession of the

 

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receiving party at the time of disclosure to it without being subject to any obligation of confidentiality; (iv) was received after disclosure to it from a third party who, to its knowledge, had a lawful right to disclose such information to it; (v) was independently developed by the receiving party without reference to the Confidential Information; (vi) was required to be disclosed to any regulatory body having jurisdiction over a party or any of their respective clients; or (vii) was required to be disclosed by reason of legal, accounting, or regulatory requirements beyond the reasonable control of the receiving party. In the case of any disclosure pursuant to clauses (vi) or (vii) of this paragraph (b), to the extent practical, the receiving party will give prior notice to the disclosing party of the required disclosure and will use commercially reasonable efforts to obtain a protective order covering such disclosure.

(c) The provisions of this Section 7.15 will survive the expiration or termination of this Agreement.

[Signature Page Follows]

 

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IN WITNESS WHEREOF, each of the parties has signed this Agreement, or has caused this Agreement to be signed by its duly authorized officer, as of the date first above written.

 

 

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EXHIBIT A – SERVICES

 

Category of Service		Service		Applicable Service Fee (Monthly)
Insurance Administration		Insurance Administration Support		Included with Financial Planning & Analysis Support
Technical		Software and Licenses
		- Zuora		$1,315.61
		- Salesforce.com		$2,235.00
		People and Process Support (to include the following items):		$1,441.37
		Priority 1 Support (see definition in Section 1.1(a)*
		- Network Monitoring (identifying and responding to Priority 1 issues)
		- Product Infrastructure Maintenance (Call processors, SIP proxies, HTTP proxies, Number Management, Portal and Store, CDR storage)
		- Phonebooth Stratus Maintenance (separate instance of our Stratus infrastructure for processing Phonebooth invoices and sending data to Netsuite)
Billing & Collections		People and Process Support (to include the following items):		$4,682.10
		- Invoice generation and delivery
		- Credit Card Payment processing
		- Dunning and Collections
		- Billing Support
Finance		Financial Planning & Analysis Support		$5,687.15
Legal		Intellectual Property Support		$5,012.87
Other		Such other services as Bandwidth may obtain from its officers, employees and consultants in the management of its own operations that Republic Wireless may from time to time request or require		To be mutually agreed, but not less than fair market value

 

*

Republic Wireless fails to meet its obligations with respect to any Priority 1 Event if (X) a Priority 1 Event is not resolved within three (3) hours of Republic Wireless first becoming aware of the Priority 1 Event from Bandwidth’s notification. The Applicable Service Fee during any calendar month in which a Priority 1 Event occurs will be reduced by one percent (1%) for each hour beyond the three (3) hour resolution window during which any Priority 1 Event remains unresolved.

 

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Exhibit 10.16

TAX SHARING AGREEMENT

THIS TAX SHARING AGREEMENT (this “Agreement”) is entered into as of November 30, 2016 between Bandwidth.com, Inc., a Delaware corporation (“Bandwidth”), and Republic Wireless, Inc., a Delaware corporation (“Republic Wireless”). Unless otherwise indicated, all “Section” references in this Agreement are to sections of this Agreement.

RECITALS

WHEREAS, Republic Wireless is a wholly owned subsidiary of Bandwidth that was formed to hold and operate Bandwidth’s Republic Wireless business; and

WHEREAS, the Board of Directors of Bandwidth has determined that it would be appropriate and desirable for Bandwidth to separate Bandwidth’s Republic Wireless business from its remaining businesses; and

WHEREAS, the Board of Directors of Republic Wireless has also approved such transaction; and

WHEREAS, following the Contribution, Bandwidth intends to distribute all of the issued and outstanding shares of Republic Wireless to holders of its capital stock (the “Distribution”);

WHEREAS, for U.S. federal income tax purposes, it is the intention of the parties that the Contribution and the Distribution, taken together, will qualify as a tax-free transaction described under described under Sections 368(a), 355, and 361 of the Code; and

WHEREAS, the parties set forth in the Reorganization Agreement the principal arrangements between them regarding the separation of the Republic Wireless Group from the Bandwidth Group; and

WHEREAS, the parties desire to provide for and agree upon the allocation between the parties of liabilities for Taxes arising prior to, as a result of, and subsequent to the Distribution, and to provide for and agree upon other matters relating to Taxes.

NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements set forth below, and intending to be legally bound hereby, Bandwidth and Republic Wireless hereby agree as follows:

SECTION 1. Definition of Terms. For purposes of this Agreement (including the recitals hereof), the following terms have the following meanings:

“Affiliate” means with respect to any Person, any other Person that directly or indirectly, through one or more intermediaries, Controls, is Controlled by, or is under common Control with, such first Person. For the avoidance of doubt, (x) no member of the Republic Wireless Group will be treated as an Affiliate of any member of the Bandwidth Group and (y) no member of the Bandwidth Group will be treated as an Affiliate of any member of the Republic Wireless Group.

“Agreement” has the meaning set forth in the preamble hereof.

“Bandwidth” has the meaning set forth in the preamble hereof.

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“Bandwidth Group” means Bandwidth and each Subsidiary of Bandwidth (but only while such Subsidiary is a Subsidiary of Bandwidth) other than any Person that is a member of the Republic Wireless Group (but only during the period such Person is treated as a member of the Republic Wireless Group).

“Bandwidth Indemnitees” has the meaning set forth in Section 7.3.

“Bandwidth Stock” means Bandwidth’s Class A Voting Common Stock, par value $0.001 per share, Class B Non-Voting Common Stock, par value $0.001 per share, and Series A Convertible Preferred Stock, par value $0.001 per share, and any series or class of stock into which such stock is redesignated, reclassified, converted or exchanged following the Effective Time.

“Business Day” means any day other than a Saturday, Sunday or a day on which banking institutions in New York City, New York are authorized or required by law or executive order to close.

“Code” means the U.S. Internal Revenue Code of 1986, as amended.

“Combined Return” means a consolidated, combined or unitary Tax Return that includes, by election or otherwise, one or more members of the Bandwidth Group and one or more members of the Republic Wireless Group.

“Company” means Bandwidth or Republic Wireless, as the context requires.

“Compensatory Equity Interests” means options or other rights with respect to Bandwidth Stock or Republic Wireless Stock that are granted on or prior to the Distribution Date by Bandwidth, Republic Wireless or any of their respective Subsidiaries in connection with employee, independent contractor or director compensation or other employee benefits (including, for the avoidance of doubt, options or other rights issued in respect of any of the foregoing by reason of the Distribution or any subsequent transaction).

“Contribution” means the transfer by Bandwidth to Republic Wireless of (i) all of the assets and liabilities associated with the Republic Wireless business and (ii) $30 million of cash.

“Control” means, with respect to any Person, the possession, directly or indirectly, of the power to direct or cause the direction of the management or policies of such Person, whether through ownership of securities or partnership, membership, limited liability company, or other ownership interests, by contract or otherwise and the terms “Controlling” and “Controlled” have meanings correlative to the foregoing.

 

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“Delaware Chancery Court” has the meaning set forth in Section 8.4.

“Disclosing Party” has the meaning set forth in Section 6.3.

“Distribution” has the meaning set forth in the recitals hereof.

“Distribution Date” means the date on which the Distribution occurs.

“Due Date” has the meaning set forth in Section 4.3.

“Effective Time” means the time at which the Distribution is effected on the Distribution Date.

“Employing Party” has the meaning set forth in Section 3.4(d)(i).

“Final Determination” means a determination within the meaning of Section 1313 of the Code or any similar provision of state or local Tax Law.

“Group” means the Bandwidth Group or the Republic Wireless Group, as the context requires.

“Income Tax” means all Taxes (i) based upon, measured by, or calculated with respect to, net income, net profits or deemed net profits (including any capital gains Tax, minimum Tax based upon, measured by, or calculated with respect to, net income, net profits or deemed net profits, any Tax on items of Tax preference and depreciation recapture or clawback, but not including sales, use, real or personal property, gross or net receipts, gross profits, transfer and similar Taxes), (ii) imposed by a foreign country which qualify under Section 903 of the Code or (iii) based upon, measured by, or calculated with respect to multiple bases (including, but not limited to, corporate franchise and occupation Taxes) if such Taxes may be based upon, measured by, or calculated with respect to one or more bases described in clause (i) above.

“Interest Rate” means the Rate determined below, as adjusted as of each Interest Rate Determination Date. The “Rate,” means, with respect to each period between two consecutive Interest Rate Determination Dates, a rate determined at approximately 11:00 a.m., London time, two London Business Days before the first Interest Rate Determination Date equal to the greater of: (x) the sum of (i) the six month dollar LIBOR rate as displayed on page “LR” of Bloomberg (or such other appropriate page as may replace such page), plus (ii) 2%, and (y) the interest rate that would be applicable at such time to a “large corporate underpayment” (within the meaning of Section 6621(c) of the Code) under Sections 6601 and 6621 of the Code. Interest will be calculated on the basis of a year of 365 days and the actual number of days for which due.

 

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“Interest Rate Determination Date” means the Due Date and each March 31, June 30, September 30 and December 31 thereafter.

“IRS” means the Internal Revenue Service.

“issuing corporation” has the meaning set forth in Section 3.4(d)(ii).

“Joint Claim” has the meaning set forth in Section 7.8.

“Losses” means any and all damages, losses, deficiencies, liabilities, obligations, penalties, judgments, settlements, claims, payments, fines, interest, costs and expenses (including the fees and expenses of any and all actions and demands, assessments, judgments, settlements and compromises relating thereto and the costs and expenses of attorneys’, accountants’, consultants’ and other professionals’ fees and expenses incurred in the investigation or defense thereof or the enforcement of rights hereunder); provided, however, that “Losses” shall exclude any special or punitive damages; provided, further, that the foregoing proviso will not be interpreted to limit indemnification for Losses incurred as a result of the assertion by a claimant (other than the parties hereto and their successors and assigns) in a third-party claim for special or punitive damages.

“Non-Preparer” means the Company that is not responsible for the preparation and filing of the applicable Tax Return pursuant to Sections 3.1 or 3.2.

“Payment Date” means (x) with respect to any U.S. federal income tax return, the due date for any required installment of estimated taxes determined under Code Section 6655, the due date (determined without regard to extensions) for filing the return determined under Code Section 6072, and the date the return is filed, and (y) with respect to any other Tax Return, the corresponding dates determined under the applicable Tax Law.

“Person” means any individual, corporation, company, partnership, trust, incorporated or unincorporated association, joint venture or other entity of any kind.

“Post-Distribution Period” means any Tax Year or other Taxable period beginning after the Distribution Date and, in the case of any Straddle Period, that part of the Tax Year or other taxable period that begins at the beginning of the day after the Distribution Date.

“Pre-Distribution Period” means any Tax Year or other taxable period that ends on or before the Distribution Date and, in the case of any Straddle Period, that part of the Tax Year or other taxable period through the end of the day on the Distribution Date.

 

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“Preparer” means the Company that is responsible for the preparation and filing of the applicable Tax Return pursuant to Sections 3.1 or 3.2.

“Receiving Party” has the meaning set forth in Section 6.3.

“Reorganization Agreement” means the Reorganization Agreement between Bandwidth and Republic Wireless dated November 30, 2016.

“Republic Wireless” has the meaning set forth in the preamble hereof.

“Republic Wireless Group” means (x) with respect to any Tax Year (or portion thereof) ending at or before the Effective Time, Republic Wireless and each of its Subsidiaries at the Effective Time; and (y) with respect to any Tax Year (or portion thereof) beginning after the Effective Time, Republic Wireless and each Subsidiary of Republic Wireless (but only while such Subsidiary is a Subsidiary of Republic Wireless).

“Republic Wireless Indemnitees” has the meaning set forth in Section 7.2.

“Republic Wireless Section 355(e) Event” means the application of Section 355(e) of the Code to the Distribution as a result of the Distribution being “part of a plan (or series of related transactions) pursuant to which 1 or more persons acquire directly or indirectly stock representing a 50-percent or greater interest” in Republic Wireless (within the meaning of Section 355(e) of the Code).

“Republic Wireless Stock” means Republic Wireless’s Class A Voting Common Stock, par value $0.001 per share, and Class B Non-Voting Common Stock, par value $0.001 per share, and any series or class of stock into which such stock is redesignated, reclassified, converted or exchanged following the Effective Time.

“Restructuring” has the meaning assigned to such term in the Reorganization Agreement.

“Separate Return” means (a) in the case of any Tax Return required to be filed by any member of the Bandwidth Group (including any consolidated, combined or unitary Tax Return), any such Tax Return that does not include any member of the Republic Wireless Group, and (b) in the case of any Tax Return required to be filed by any member of the Republic Wireless Group (including any consolidated, combined or unitary Tax Return), any such Tax Return that does not include any member of the Bandwidth Group.

“Straddle Period” means any Taxable period commencing on or prior to, and ending after, the Distribution Date.

 

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“Subsidiary” when used with respect to any Person, means (i)(A) a corporation a majority in voting power of whose share capital or capital stock with voting power, under ordinary circumstances, to elect directors is at the time, directly or indirectly, owned by such Person, by one or more Subsidiaries of such Person, or by such Person and one or more Subsidiaries of such Person, whether or not such power is subject to a voting agreement or similar encumbrance, (B) a partnership or limited liability company in which such Person or a Subsidiary of such Person is, at the date of determination, (1) in the case of a partnership, a general partner of such partnership with the power affirmatively to direct the policies and management of such partnership or (2) in the case of a limited liability company, the managing member or, in the absence of a managing member, a member with the power affirmatively to direct the policies and management of such limited liability company, or (C) any other Person (other than a corporation) in which such Person, one or more Subsidiaries of such Person or such Person and one or more Subsidiaries of such Person, directly or indirectly, at the date of determination thereof, has or have (1) the power to elect or direct the election of a majority of the members of the governing body of such Person, whether or not such power is subject to a voting agreement or similar encumbrance, or (2) in the absence of such a governing body, at least a majority ownership interest or (ii) any other Person of which an aggregate of 50% or more of the equity interests are, at the time, directly or indirectly, owned by such Person and/or one or more Subsidiaries of such Person.

“Tax” or “Taxes” means any net income, gross income, gross receipts, profits, capital stock, franchise, withholding, payroll, social security, workers compensation, employment, unemployment, disability, property, ad valorem, stamp, excise, severance, occupation, service, sales, use, license, lease, transfer, import, export, value added, alternative minimum, estimated or other similar tax (including any fee, assessment, or other charge in the nature of or in lieu of any tax) imposed by any Tax Authority and any interest, penalties, additions to tax, or additional amounts in respect of the foregoing.

“Tax Authority” means, with respect to any Tax, the governmental entity or political subdivision, agency, commission or authority thereof that imposes such Tax, and the agency, commission or authority (if any) charged with the assessment, determination or collection of such Tax for such entity or subdivision.

“Tax Contest” means an audit, review, examination, or any other administrative or judicial proceeding with the purpose, potential or effect of redetermining Taxes of any member of either Group (including any administrative or judicial review of any claim for refund).

“Tax Counsel” means Skadden, Arps, Slate, Meagher & Flom LLP.

“Tax Item” means, with respect to any Tax, any item of income, gain, loss, deduction, credit or other attribute that may have the effect of increasing or decreasing any Tax.

 

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“Tax Law” means the law of any governmental entity or political subdivision thereof, and any controlling judicial or administrative interpretations of such law, relating to any Tax.

“Tax Materials” means (i) the representation letters delivered to Tax Counsel in connection with the delivery of the Tax Opinion, and (ii) any other materials delivered or deliverable by Bandwidth, Republic Wireless and others in connection with the rendering by Tax Counsel of the Tax Opinion.

“Tax Opinion” means the opinion to be delivered by Tax Counsel to Bandwidth in connection with the Distribution to the effect that the Contribution and the Distribution should qualify as a tax-free transaction described under Sections 368(a) and 355 of the Code to Bandwidth and the Bandwidth stockholders.

“Tax Records” means Tax Returns, Tax Return work papers, documentation relating to any Tax Contests, and any other books of account or records required to be maintained under applicable Tax Laws (including but not limited to Section 6001 of the Code) or under any record retention agreement with any Tax Authority.

“Tax Return” means any report of Taxes due, any claims for refund of Taxes paid, any information return with respect to Taxes, or any other similar report, statement, declaration, or document filed or required to be filed (by paper, electronically or otherwise) under any applicable Tax Law, including any attachments, exhibits, or other materials submitted with any of the foregoing, and including any amendments or supplements to any of the foregoing.

“Tax Year” means, with respect to any Tax, the year, or shorter period, if applicable, for which the Tax is reported as provided under applicable Tax Law.

“Transaction Taxes” means any Taxes resulting from the Restructuring and the Distribution, other than Transfer Taxes.

“Transaction Tax-Related Losses” means any Losses resulting from the failure of (i) the Restructuring to qualify in whole for nonrecognition of income, gain and loss for U.S. federal income tax purposes to Bandwidth, Republic Wireless and each of their respective Subsidiaries immediately prior to the Distribution, (ii) the Contribution and Distribution to qualify as a tax-free transaction described under Sections 368(a), 355 and 361 of the Code, or (iii) the Contribution and Distribution to qualify in whole for nonrecognition of income, gain and loss for U.S. federal income tax purposes to Bandwidth, Republic Wireless, each of their respective Subsidiaries at the Effective Time, and the Bandwidth stockholders that receive stock of Republic Wireless in the Distribution.

 

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“Transfer Taxes” means all U.S. federal, state, local or foreign sales, use, privilege, transfer, documentary, gains, stamp, duties, recording, and similar Taxes and fees (including any penalties, interest or additions thereto) imposed upon any party hereto or any of its Subsidiaries in connection with the Restructuring or the Distribution.

“Treasury Regulations” means the regulations promulgated from time to time under the Code.

SECTION 2. Allocation of Taxes and Tax-Related Losses

2.1 Allocation of Taxes. Except as provided in Section 2.2 (Special Rules) and Section 3.4(d) (Compensatory Equity Interests), Taxes shall be allocated as follows:

(a) Combined Returns.

(i) Allocation of Taxes for Combined Returns. Bandwidth shall be allocated: (A) all Taxes that are attributable to members of the Bandwidth Group and reported on, or required to be reported on, a Combined Return; and (B) all Taxes that are attributable to members of the Republic Wireless Group for the Pre-Distribution Period and reported on, or required to be reported on, a Combined Return. Republic Wireless shall be allocated all Taxes that are attributable to members of the Republic Wireless Group for the Post-Distribution Period and reported on, or required to be reported on, a Combined Return.

(ii) Transactions Occurring on the Distribution Date. Notwithstanding the provisions of Section 2.1(a)(i) (but subject to the provisions of Section 2.2), Taxes attributable to any transaction or action taken by or with respect to any member of the Republic Wireless Group outside the ordinary course of business before the Distribution on the Distribution Date shall be allocated to the Pre-Distribution Period, and Taxes attributable to any transaction or action taken by or with respect to any member of the Republic Wireless Group outside the ordinary course of business after the Distribution on the Distribution Date shall be allocated to the Post-Distribution Period.

(b) Separate Returns.

(i) Republic Wireless Separate Returns. Republic Wireless shall be allocated all Taxes that are attributable to members of the Republic Wireless Group and reported on, or required to be reported on, a Separate Return that is required to be filed by a member of the Republic Wireless Group.

 

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(ii) Bandwidth Separate Returns. Bandwidth shall be allocated all Taxes that are attributable to members of the Bandwidth Group and reported on, or required to be reported on, a Separate Return that is required to be filed by a member of the Bandwidth Group.

(c) Taxes Not Reported on Tax Returns. Republic Wireless shall be allocated any Tax attributable to members of the Republic Wireless Group that is not required to be reported on a Tax Return, and Bandwidth shall be allocated any Tax attributable to members of the Bandwidth Group that is not required to be reported on a Tax Return.

2.2 Special Rules.

(a) Transaction Taxes and Transaction Tax-Related Losses. Notwithstanding any other provision in this Section 2:

(i) Bandwidth shall be allocated all Transaction Taxes and Transaction Tax-Related Losses other than any Transaction Taxes and Transaction Tax-Related Losses allocated to Republic Wireless pursuant to clause (ii) of this Section 2.2(a).

(ii) Republic Wireless will be allocated any Transaction Taxes (including corresponding state and local Taxes) and Transaction Tax-Related Losses that (x) result primarily from, individually or in the aggregate, any breach by Republic Wireless of any of its covenants set forth in Section 7.1 hereof, or (y) result from a Republic Wireless Section 355(e) Event.

(b) Transfer Taxes. Notwithstanding any other provision in this Section 2, all Transfer Taxes shall be allocated 50% to Republic Wireless and 50% to Bandwidth.

2.3 Tax Payments. Each Company shall pay the Taxes allocated to it by this Section 2 either to the applicable Tax Authority or to the other Company in accordance with Section 4 and the other applicable provisions of this Agreement.

SECTION 3. Preparation and Filing of Tax Returns.

3.1 Combined Returns.

(a) Preparation of Combined Returns. Bandwidth shall be responsible for preparing and filing (or causing to be prepared and filed) all Combined Returns for any Tax Year.

3.2 Separate Returns.

 

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(a) Tax Returns to be Prepared by Bandwidth. Bandwidth shall be responsible for preparing and filing (or causing to be prepared and filed) all Separate Returns which relate to one or more members of the Bandwidth Group for any Tax Year.

(b) Tax Returns to be Prepared by Republic Wireless. Republic Wireless shall be responsible for preparing and filing (or causing to be prepared and filed) all Separate Returns which relate to one or more members of the Republic Wireless Group for any Tax Year.

3.3 Provision of Information.

(a) Bandwidth shall provide to Republic Wireless, and Republic Wireless shall provide to Bandwidth, any information about members of the Bandwidth Group or the Republic Wireless Group, respectively, that the Preparer needs to determine the amount of Taxes due on any Payment Date with respect to a Tax Return for which the Preparer is responsible pursuant to Section 3.1 or 3.2 and to properly and timely file all such Tax Returns.

(b) If a member of the Republic Wireless Group supplies information to a member of the Bandwidth Group, or a member of the Bandwidth Group supplies information to a member of the Republic Wireless Group, and an officer of the requesting member intends to sign a statement or other document under penalties of perjury in reliance upon the accuracy of such information, then a duly authorized officer of the member supplying such information shall certify, to the best of such officer’s knowledge, the accuracy of the information so supplied.

3.4 Special Rules Relating to the Preparation of Tax Returns.

(a) In General. All Tax Returns that include any members of the Republic Wireless Group or Bandwidth Group, or any of their respective Affiliates, shall be prepared in a manner that is consistent with the Tax Opinion. Except as otherwise set forth in this Agreement, and subject to Sections 3.4(b) through (d), the Company responsible for preparing and filing (or causing to be prepared and filed) a Tax Return pursuant to Sections 3.1 or 3.2 shall have the right with respect to such Tax Return to determine (i) the manner in which such Tax Return shall be prepared and filed, including the elections, methods of accounting, positions, conventions and principles of taxation to be used and the manner in which any Tax Item shall be reported, (ii) whether any extensions may be requested, (iii) whether an amended Tax Return shall be filed, (iv) whether any claims for refund shall be made, (v) whether any refunds shall be paid by way of refund or credited against any liability for the related Tax and (vi) whether to retain outside firms to prepare or review such Tax Return.

 

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(b) Republic Wireless Tax Returns. With respect to any Separate Return for which Republic Wireless is responsible pursuant to Section 3.2(b), Republic Wireless and the other members of the Republic Wireless Group must allocate Tax Items between such Separate Return for which Republic Wireless is responsible pursuant to Section 3.2(b) and any related Combined Return for which Bandwidth is responsible pursuant to Section 3.1 that are filed with respect to the same Tax Year in a manner that is consistent with the reporting of such Tax Items on the related Combined Return for which Bandwidth is responsible pursuant to Section 3.1.

(c) Election to File Consolidated, Combined or Unitary Tax Returns. Bandwidth shall have the sole discretion of filing any Tax Return on a consolidated, combined or unitary basis, if such Tax Return would include at least one member of each Group and the filing of such Tax Return is elective under the relevant Tax Law.

(d) Compensatory Equity Interests.

(i) Deductions Related to Compensatory Equity Interests. Deductions Related to Compensatory Equity Interests. To the extent permitted by applicable Tax Law, Income Tax deductions with respect to the issuance after the Distribution Date of any Compensatory Equity Interests held by any Person shall be claimed solely by the Group that employs such Person at the time of such issuance, as applicable. To the extent permitted by applicable Tax Law, Income Tax deductions with respect to the issuance before the Distribution Date of any Compensatory Equity Interests held by any Person shall be claimed by the Group that incurred the book expense at the time of vesting (in the event that the option vested partially at each group, the tax deduction shall be allocated based on the proportion of book expense incurred at each respective group), as applicable.

(ii) Withholding and Reporting. For any Tax Year (or portion thereof), the corporation that is the issuer or obligor under the Compensatory Equity Interest (the “issuing corporation”) shall (A) satisfy, or shall cause to be satisfied, all applicable Tax reporting obligations with respect to the issuance, exercise, vesting or settlement of Compensatory Equity Interests and (B) satisfy, or cause to be satisfied, all liabilities for Taxes imposed in connection with such issuance, exercise, vesting or settlement (including the employer portion of any employment taxes); provided that, in the event Compensatory Equity Interests are settled by the corporation that is not the employer of the applicable individual as of the event resulting in liabilities for Taxes (or was not the most recent employer of the applicable individual as of the event resulting in liabilities for Taxes, if arising after the termination of employment) (the “Employing Party”), the Employing Party shall promptly remit to the issuing corporation an amount of cash equal to the amount required to be withheld in respect of any withholding Taxes upon written notice from the issuing corporation. Bandwidth shall promptly notify Republic Wireless, and Republic Wireless shall promptly notify Bandwidth, regarding the exercise of any option or the issuance, vesting, exercise or settlement of any other Compensatory Equity Interest to the extent that, as a result of such issuance, exercise, vesting or settlement, any other party may be entitled to a deduction or required to pay any Tax, or such information otherwise may be relevant to the preparation of any Tax Return or payment of any Tax by such other party or parties. Bandwidth and Republic Wireless each will, not later than the twentieth (20^th) day immediately following the last day of each calendar quarter

 

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(March 31^st, June 30^th, September 30^th, and December 31^st) provide to the other the following information: (1) a list of each non-employee who holds options in Bandwidth or Republic Wireless, as the case may be (i.e., a former Bandwidth employee holding options in Republic Wireless); (2) options that are vested; (3) the amount remaining to be vested; and (4) the options that expired, were cancelled or were exercised in each calendar quarter, including the applicable exercise price.

(iii) Bandwidth Employees. For purposes of this Section 3.4(d), (x) except as described in clause (y) of this Section 3.4(d)(iii), if a Person is an officer or employee of Bandwidth or any member of the Bandwidth Group for any Tax Year (or portion thereof), then such officer or employee will exclusively be considered to be employed by Bandwidth (or the applicable member of the Bandwidth Group) for such Tax Year (or portion thereof).

3.5 Refunds, Credits or Offsets.

(a) Except as otherwise contemplated by this Section 3.5 or Section 3.6, any refunds, credits or offsets with respect to Taxes of any member of (i) the Bandwidth Group that were reported on any Combined Return shall be for the account of Bandwidth, (ii) the Republic Wireless Group that were reported on any Combined Return and are attributable to the Pre-Distribution Period shall be for the account of Bandwidth, (iii) the Republic Wireless Group that were reported on any Combined Return and are attributable to the Post-Distribution Period shall be for the account of Republic Wireless, (iv) the Bandwidth Group that were reported on any Separate Return required to be filed by a member of the Bandwidth Group shall be for the account of Bandwidth, and (v) the Republic Wireless Group that were reported on any Separate Return required to be filed by a member of the Republic Wireless Group shall be for the account of Republic Wireless. Neither Bandwidth nor Republic Wireless will take any action inconsistent with the Section 41(f) letters attached to this Agreement as Annex I.

(b) Notwithstanding Section 3.5(a), (i) any refunds, credits or offsets with respect to Taxes, including Transaction Taxes, allocated to, and actually paid by, Bandwidth pursuant to this Agreement shall be for the account of Bandwidth, and (ii) any refunds, credits or offsets with respect to Taxes, including Transaction Taxes, allocated to, and actually paid by, Republic Wireless pursuant to this Agreement shall be for the account of Republic Wireless.

(c) Bandwidth shall forward to Republic Wireless, or reimburse Republic Wireless for, any such refunds, credits or offsets, plus any interest received thereon, net of any Taxes incurred with respect to the receipt or accrual thereof and any expenses incurred in connection therewith, that are for the account of Republic Wireless within five Business Days from receipt thereof by Bandwidth or any of its Affiliates. Republic Wireless shall forward to Bandwidth, or reimburse Bandwidth for, any refunds, credits or offsets, plus any interest received thereon, net of any Taxes incurred with respect to the receipt or accrual thereof and any expenses incurred in connection therewith, that are for the account of Bandwidth within five Business Days from receipt thereof by Republic

 

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Wireless or any of its Affiliates. Any refunds, credits or offsets, plus any interest received thereon, or reimbursements not forwarded or made within the five Business Day period specified above shall bear interest from the date received by the refunding or reimbursing party (or its Affiliates) through and including the date of payment at the Interest Rate (treating the date received as the Due Date for purposes of determining such Interest Rate). If, subsequent to a Tax Authority’s allowance of a refund, credit or offset, such Tax Authority reduces or eliminates such allowance, any refund, credit or offset, plus any interest received thereon, forwarded or reimbursed under this Section 3.5 shall be returned to the party who had forwarded or reimbursed such refund, credit or offset and interest upon the request of such forwarding party in an amount equal to the applicable reduction, including any interest received thereon.

3.6 Carrybacks. If and to the extent that Republic Wireless requests in writing that Bandwidth or any of its Affiliates obtain a refund, credit or offset of Taxes with respect to the carryback of any Tax attribute of the members of the Republic Wireless Group arising in a Post-Distribution Period to a Pre-Distribution Period, and provided that Bandwidth or any of its Affiliates would not otherwise be required to forego a refund, credit or offset of Taxes for its own account or otherwise be adversely affected as a result of such carryback, then (i) Bandwidth (or its Affiliate) shall take all reasonable measures to obtain a refund, credit or offset of Tax with respect to such carryback (including by filing an amended Tax Return), and (ii) to the extent that Bandwidth or any of its Affiliates receives any refund, credit or offset of Taxes attributable (on a last dollar basis) to such carryback, Bandwidth shall pay such refund, credit or offset, plus any interest received thereon, to Republic Wireless within five Business Days from receipt thereof by Bandwidth or any of its Affiliates; provided, however, that Bandwidth shall be entitled to reduce the amount of any such refund, credit or offset for its reasonable out-of-pocket costs and expenses incurred in connection therewith and any Taxes incurred with respect to the receipt or accrual thereof; and provided further, that Republic Wireless, upon the request of Bandwidth, agrees to repay such refund, credit or offset, plus any interest received thereon and net of Taxes, to Bandwidth in the event, and to the extent, that Bandwidth is required to repay such refund, credit or offset, plus any interest received thereon, to a Tax Authority.

3.7 Amended Returns. Any amended Tax Return or claim for Tax refund, credit or offset with respect to any member of the Republic Wireless Group may be made only by the Company (or its Subsidiaries) responsible for preparing the original Tax Return with respect to such member pursuant to Sections 3.1 and 3.2. Republic Wireless (or its Subsidiaries) shall not, without the prior written consent of Bandwidth (which consent shall not be unreasonably withheld or delayed), file, or cause to be filed, any such amended Tax Return or claim for Tax refund, credit or offset to the extent that such filing, if accepted, is likely to increase the Taxes allocated to, or the Tax indemnity obligations under this Agreement of, Bandwidth for any Tax Year (or portion thereof) by more than a de minimis amount; provided, however, that such consent need not be obtained if Republic Wireless agrees to indemnify Bandwidth for the incremental Taxes allocated to, or the incremental Tax indemnity obligation resulting under this Agreement to, Bandwidth as a result of the filing of such amended Tax Return.

 

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SECTION 4. Tax Payments.

4.1 Payment of Taxes to Tax Authority. Bandwidth shall be responsible for remitting to the proper Tax Authority the Tax shown on any Tax Return for which it is responsible for the preparation and filing pursuant to Section 3.1 or Section 3.2, and Republic Wireless shall be responsible for remitting to the proper Tax Authority the Tax shown on any Tax Return for which it is responsible for the preparation and filing pursuant to Section 3.2.

4.2 Indemnification Payments.

(a) Tax Payments Made by the Bandwidth Group. If any member of the Bandwidth Group is required to make a payment to a Tax Authority for Taxes allocated to Republic Wireless under this Agreement, Republic Wireless will pay the amount of Taxes allocated to it to Bandwidth not later than the later of (i) five Business Days after receiving notification requesting such amount, and (ii) one Business Day prior to the date such payment is required to be made to such Tax Authority.

(b) Tax Payments Made by the Republic Wireless Group. If any member of the Republic Wireless Group is required to make a payment to a Tax Authority for Taxes allocated to Bandwidth under this Agreement, Bandwidth will pay the amount of Taxes allocated to it to Republic Wireless not later than the later of (i) five Business Days after receiving notification requesting such amount, and (ii) one Business Day prior to the date such payment is required to be made to such Tax Authority.

4.3 Interest on Late Payments. Payments pursuant to this Agreement that are not made by the date prescribed in this Agreement or, if no such date is prescribed, not later than five Business Days after demand for payment is made (the “Due Date”) shall bear interest for the period from and including the date immediately following the Due Date through and including the date of payment at the Interest Rate. Such interest will be payable at the same time as the payment to which it relates.

4.4 Tax Consequences of Payments. For all Tax purposes and to the extent permitted by applicable Tax Law, the parties hereto shall treat any payment made pursuant to this Agreement as a capital contribution or a distribution, as the case may be, immediately prior to the Distribution. If the receipt or accrual of any indemnity payment under this Agreement causes, directly or indirectly, an increase in the taxable income of the recipient under one or more applicable Tax Laws, such payment shall be increased so that, after the payment of any Taxes with respect to the payment, the recipient thereof shall have realized the same net amount it would have realized had the payment not resulted in taxable income. To the extent that Taxes for which any party hereto (the indemnifying party) is required to pay another party (the indemnified party) pursuant to this Agreement may be deducted or credited in

 

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determining the amount of any other Taxes required to be paid by the indemnified party (for example, state Taxes which are permitted to be deducted in determining federal Taxes), the amount of any payment made to the indemnified party by the indemnifying party shall be decreased by taking into account any resulting reduction in other Taxes of the indemnified party. If such a reduction in Taxes of the indemnified party occurs following the payment made to the indemnified Party with respect to the relevant indemnified Taxes, the indemnified party shall promptly repay the indemnifying party the amount of such reduction when actually realized. If the Tax benefit arising from the foregoing reduction of Taxes described in this Section 4.4 is subsequently decreased or eliminated, then the indemnifying party shall promptly pay the indemnified party the amount of the decrease in such Tax benefit.

SECTION 5. Assistance and Cooperation.

5.1 Cooperation. In addition to the obligations enumerated in Sections 3.3 and 7.7, Bandwidth and Republic Wireless will cooperate (and cause their respective Subsidiaries and Affiliates to cooperate) with each other and with each other’s agents, including accounting firms and legal counsel, in connection with Tax matters, including provision of relevant documents and information in their possession and making available to each other, as reasonably requested and available, personnel (including officers, directors, employees and agents of the parties or their respective Subsidiaries or Affiliates) responsible for preparing, maintaining, and interpreting information and documents relevant to Taxes, and personnel reasonably required as witnesses or for purposes of providing information or documents in connection with any administrative or judicial proceedings relating to Taxes. In addition to the foregoing, on or before December 31, 2017, Bandwidth will deliver to Republic Wireless the Earnings and Profits Analysis / Report, which will be subject to Republic Wireless’ approval, which will not be unreasonably withheld; upon approval, Republic Wireless will reimburse Bandwidth for Bandwidth’s reasonable out-of-pocket costs incurred in connection with the preparation of the Earnings and Profits Analysis / Report, which will not exceed $25,000. Republic Wireless will provide to Bandwidth such assistance and information as Bandwidth may reasonably request in connection with the preparation of any Combined Return or Separate Return regarding any applicable refunds, credits or offsets.

SECTION 6. Tax Records.

6.1 Retention of Tax Records. Each of Bandwidth and Republic Wireless shall preserve, and shall cause their respective Subsidiaries to preserve, all Tax Records that are in their possession, and that could affect the liability of any member of the other Group for Taxes, for as long as the contents thereof may become material in the administration of any matter under applicable Tax Law, but in any event until the later of (x) the expiration of any applicable statutes of limitation, as extended, and (y) seven years after the Distribution Date.

 

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6.2 Access to Tax Records. Republic Wireless shall make available, and cause its Subsidiaries to make available, to members of the Bandwidth Group for inspection and copying (x) all Tax Records in their possession that relate to a Pre-Distribution Period, and (y) the portion of any Tax Record in their possession that relates to a Post-Distribution Period and which is reasonably necessary for the preparation of a Tax Return by a member of the Bandwidth Group or any of their Affiliates or with respect to a Tax Contest by a Tax Authority of such return. Bandwidth shall make available, and cause its Subsidiaries to make available, to members of the Republic Wireless Group for inspection and copying the portion of any Tax Record in their possession that relates to a Pre-Distribution Period and which is reasonably necessary for the preparation of a Tax Return by a member of the Republic Wireless Group or any of their Affiliates or with respect to a Tax Contest by a Tax Authority of such return.

6.3 Confidentiality. Each party hereby agrees that it will hold, and shall use its reasonable best efforts to cause its officers, directors, employees, accountants, counsel, consultants, advisors and agents to hold, in confidence all records and information prepared and shared by and among the parties in carrying out the intent of this Agreement, except as may otherwise be necessary in connection with the filing of Tax Returns or any administrative or judicial proceedings relating to Taxes or unless disclosure is compelled by a governmental authority. Information and documents of one party (the “Disclosing Party”) shall not be deemed to be confidential for purposes of this Section 6.3 to the extent such information or document (i) is previously known to or in the possession of the other party or parties (the “Receiving Party”) and is not otherwise subject to a requirement to be kept confidential, (ii) becomes publicly available by means other than unauthorized disclosure under this Agreement by the Receiving Party or (iii) is received from a third party without, to the knowledge of the Receiving Party after reasonable diligence, a duty of confidentiality owed to the Disclosing Party.

6.4 Delivery of Tax Records. Within five Business Days after receiving notification from Republic Wireless requesting any applicable Tax Records described below which are in the possession of a member of the Bandwidth Group, Bandwidth shall provide to Republic Wireless (to the extent not previously provided or held by any member of the Republic Wireless Group on the Distribution Date) copies of (i) the Separate Returns of any member of the Republic Wireless Group, (ii) the relevant portions of any other Tax Returns with respect to any member of the Republic Wireless Group, and (iii) other existing Tax Records (or the relevant portions thereof) reasonably necessary to prepare and file any Tax Returns of, or with respect to, the members of the Republic Wireless Group, or to defend or contest Tax matters relevant to the members of the Republic Wireless Group, including in each case, all Tax Records related to Tax attributes of the members of the Republic Wireless Group and any and all communications or agreements with, or rulings by, any Tax Authority with respect to any member of the Republic Wireless Group.

SECTION 7. Restriction on Certain Actions of Bandwidth and Republic Wireless; Indemnity.

7.1 Restrictive Covenants.

 

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(a) General Restrictions. Following the Effective Time, Republic Wireless shall not, and shall cause the members of the Republic Wireless Group and their Affiliates not to, and Bandwidth shall not, and shall cause the members of the Bandwidth Group and their Affiliates not to, take any action that, or fail to take any action the failure of which, (i) would cause Bandwidth or any Subsidiary of Bandwidth immediately prior to the Distribution to recognize gain or loss, or otherwise include any amount in income, as a result of the Restructuring for U.S. federal income tax purposes, (ii) would be inconsistent with the Contribution and Distribution qualifying, or would preclude the Contribution and Distribution from qualifying, as a tax-free transaction described under Sections 368(a), 355 and 361 of the Code, or (iii) would cause Bandwidth, Republic Wireless, any of their respective Subsidiaries at the Effective Time, or the Bandwidth stockholders that receive stock of Republic Wireless in the Distribution, to recognize gain or loss, or otherwise include any amount in income, as a result of the Contribution and/or the Distribution for U.S. federal income tax purposes.

(b) Restricted Actions. Without limiting the provisions of Section 7.1(a) hereof, following the Effective Time, Republic Wireless shall not, and shall cause the members of the Republic Wireless Group and their Affiliates not to, and Bandwidth shall not, and shall cause the members of the Bandwidth Group and their Affiliates not to, take any action that, or fail to take any action the failure of which, would be inconsistent with, or would cause any Person to be in breach of, any representation or covenant, or any material statement, made in the Tax Materials.

(c) Reporting. Unless and until there has been a Final Determination to the contrary, each party agrees not to take any position on any Tax Return, in connection with any Tax Contest, or otherwise for Tax purposes (in each case, excluding any position taken for financial accounting purposes) that is inconsistent with the Tax Opinion. If Bandwidth determines, in its sole discretion, that a protective election under Section 336(e) of the Code shall be made with respect to the Distribution, Republic Wireless agrees to take any such action that is necessary to effect such election, including any corresponding election with respect to any of its Subsidiaries, as determined by Bandwidth. If such a protective election is made, this Agreement shall be amended in such a manner as is determined by Bandwidth in its good faith to compensate Bandwidth for any tax benefits realized by Republic Wireless as a result of such election.

7.2 Bandwidth Indemnity. Bandwidth agrees to indemnify and hold harmless each member of the Republic Wireless Group and their respective directors, officers, employees, agents, successors and assigns (the “Republic Wireless Indemnitees”) from and against any and all (without duplication) (a) Taxes allocated to Bandwidth pursuant to Section 2.1, (b) Transaction Taxes and Transaction Tax-Related Losses allocated to Bandwidth pursuant to Section 2.2, (c) Taxes and Losses arising out of or based upon any breach or nonperformance of any covenant or agreement made or to be performed by Bandwidth contained in this Agreement, (d) Transfer Taxes allocated to Bandwidth pursuant to Section 2.2, and (e) reasonable out-of-pocket legal, accounting and other advisory and court fees and expenses incurred in connection with the items described in clauses (a) through (d); provided,

 

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however, that notwithstanding clauses (a), (c) and (e) of this Section 7.2, Bandwidth shall not be responsible for, and shall have no obligation to indemnify or hold harmless any Republic Wireless Indemnitee for, (x) any Transaction Taxes or Transaction Tax-Related Losses that are allocated to Republic Wireless pursuant to Section 2.2, or (y) any Taxes or Losses arising out of or based upon any breach or nonperformance of any covenant or agreement made or to be performed by Republic Wireless contained in this Agreement.

7.3 Republic Wireless Indemnity. Republic Wireless agrees to indemnify and hold harmless each member of the Bandwidth Group and their respective directors, officers, employees, agents, successors and assigns (the “Bandwidth Indemnitees”) from and against any and all (without duplication) (a) Taxes allocated to Republic Wireless pursuant to Section 2.1, (b) Transaction Taxes and Transaction Tax-Related Losses allocated to Republic Wireless pursuant to Section 2.2, (c) Taxes and Losses arising out of or based upon any breach or nonperformance of any covenant or agreement made or to be performed by Republic Wireless contained in this Agreement, (d) Transfer Taxes allocated to Republic Wireless pursuant to Section 2.2, and (e) reasonable out-of-pocket legal, accounting and other advisory and court fees and expenses incurred in connection with the items described in clauses (a) through (d); provided, however, that notwithstanding clauses (a), (c) and (e) of this Section 7.3, Republic Wireless shall not be responsible for, and shall have no obligation to indemnify or hold harmless any Bandwidth Indemnitee for, (x) any Transaction Taxes or Transaction Tax-Related Losses that are allocated to Bandwidth pursuant to Section 2.2, or (y) any Taxes or Losses arising out of or based upon any breach or nonperformance of any covenant or agreement made or to be performed by Bandwidth contained in this Agreement.

7.4 Scope. The provisions of this Section 7 are intended to be for the benefit of, and shall be enforceable by, each Bandwidth Indemnitee and its successors in interest and each Republic Wireless Indemnitee and its successors in interest.

7.5 Notices of Tax Contests (Other than Joint Claims). Each Company shall provide prompt notice to the other Company of any pending or threatened Tax audit, assessment or proceeding or other Tax Contest of which it becomes aware relating to Taxes for which it is or may be indemnified by such other Company hereunder (other than any Transaction Taxes which shall be governed by Section 7.8). Such notice shall contain factual information (to the extent known) describing any asserted Tax liability in reasonable detail and shall be accompanied by copies of any notice and other documents received from any Tax Authority in respect of any such matters; provided, however, that failure to give such notification shall not affect the indemnification provided hereunder except, and only to the extent that, the indemnifying Company shall have been actually prejudiced as a result of such failure. Thereafter, the indemnified Company shall deliver to the indemnifying Company such additional information with respect to such Tax Contest in its possession that the indemnifying Company may reasonably request.

 

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7.6 Control of Tax Contests (Other than Joint Claims).

(a) General Rule. Except as provided in Sections 7.6(b) and 7.8, each Company (or the appropriate member of its Group) shall have full responsibility, control and discretion in handling, defending, settling or contesting any Tax Contest involving a Tax reported (or that, it is asserted, should have been reported) on a Tax Return for which such Company is responsible for preparing and filing (or causing to be prepared and filed) pursuant to Section 3 of this Agreement.

(b) Non-Preparer Participation Rights. With respect to a Tax Contest (other than with respect to a Joint Claim) of any Tax Return which could result in a Tax liability for which the Non-Preparer may be liable under this Agreement, (i) the Non-Preparer shall, at its own cost and expense, be entitled to participate in such Tax Contest, (ii) the Preparer shall keep the Non-Preparer updated and informed, and shall consult with the Non-Preparer, (iii) the Preparer shall act in good faith with a view to the merits in connection with the Tax Contest, and (iv) the Preparer shall not settle or compromise such Tax Contest without the prior written consent of the Non-Preparer (which consent shall not be unreasonably withheld or delayed) if the settlement or compromise could have a more than de minimis impact on the Non-Preparer or its Affiliates.

7.7 Cooperation. The parties shall provide each other with all information relating to a Tax Contest which is needed by the other party or parties to handle, participate in, defend, settle or contest the Tax Contest. At the request of any party, the other parties shall take any action (e.g., executing a power of attorney) that is reasonably necessary in order for the requesting party to exercise its rights under this Agreement in respect of a Tax Contest. Republic Wireless shall assist Bandwidth, and Bandwidth shall assist Republic Wireless, in taking any remedial actions that are necessary or desirable to minimize the effects of any adjustment made by a Tax Authority. The indemnifying party or parties shall reimburse the indemnified party or parties for any reasonable out-of-pocket costs and expenses incurred in complying with this Section 7.7.

7.8 Joint Claims. Each Company shall promptly give notice to the other Company of any pending or threatened Tax Contest, claim, action, suit, investigation or proceeding brought by a third party relating to any Transaction Taxes or Transaction Tax-Related Losses for which such Company is or may be indemnified by the other Company under this Section 7 (each, a “Joint Claim”). Such notice shall contain (i) factual information (to the extent known) describing any asserted Tax liability or other claim in reasonable detail and shall be accompanied by copies of any notice and other documents received from any Tax Authority or third party relating to the Joint Claim, and (ii) the amount of the Joint Claim. Such notice shall be given within a reasonable period of time after notice thereof was received by such Company, but any failure to give timely notice shall not affect the indemnities given hereunder except, and only to the extent that, the indemnifying Company shall have been actually prejudiced as a result of such failure. Thereafter, each Company shall deliver to the other Company such additional information with respect to such Joint Claim in its possession that the other Company may reasonably

 

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request. Bandwidth and Republic Wireless will have the right to jointly control the defense, compromise or settlement of any Joint Claim. No indemnified Company shall settle or compromise or consent to entry of any judgment with respect to any such Joint Claim without the prior written consent of the indemnifying Company, which consent may be withheld in the indemnifying Company’s sole discretion. No indemnifying Company shall settle or compromise or consent to entry of any judgment with respect to any such Joint Claim without the prior written consent of the indemnified Company, which consent may not be unreasonably withheld or delayed.

SECTION 8. General Provisions.

8.1 Termination. This Agreement shall terminate at such time as all obligations and liabilities of the parties hereto have been satisfied. The obligations and liabilities of the parties arising under this Agreement shall continue in full force and effect until all such obligations have been satisfied and such liabilities have been paid in full, whether by expiration of time, operation of law, or otherwise.

8.2 Predecessors or Successors. Any reference to Bandwidth, Republic Wireless, a Person, or a Subsidiary in this Agreement shall include any predecessors or successors (e.g., by merger or other reorganization, liquidation, conversion, or election under Treasury Regulations Section 301.7701-3) of Bandwidth, Republic Wireless, such Person, or such Subsidiary, respectively.

8.3 Expenses. Except as otherwise expressly provided for herein, each party and its Subsidiaries shall bear their own expenses incurred in connection with preparation of Tax Returns and other matters related to Taxes under the provisions of this Agreement for which they are liable.

8.4 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE, WITHOUT GIVING EFFECT TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF. Any suit, action or proceeding seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement will be brought exclusively in the Court of Chancery of the State of Delaware (the “Delaware Chancery Court”), or, if the Delaware Chancery Court does not have subject matter jurisdiction, in the federal courts located in the State of Delaware. Each of the parties hereby consents to personal jurisdiction in any such action, suit or proceeding brought in any such court (and of the appropriate appellate courts therefrom) and irrevocably waives, to the fullest extent permitted by law, any objection that it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each party agrees that service of process on such party as provided in Section 8.6 shall be deemed effective service of process on such party.

 

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8.5 Waiver of Jury Trial. EACH PARTY HERETO ACKNOWLEDGES AND AGREES THAT ANY CONTROVERSY WHICH MAY ARISE UNDER THIS AGREEMENT IS LIKELY TO INVOLVE COMPLICATED AND DIFFICULT ISSUES, AND, THEREFORE, EACH SUCH PARTY HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT SUCH PARTY MAY HAVE TO A TRIAL BY JURY IN RESPECT TO ANY ACTION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH OR RELATING TO THIS AGREEMENT. EACH PARTY HERETO CERTIFIES AND ACKNOWLEDGES THAT (A) NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HERETO HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF SUCH ACTION, SEEK TO ENFORCE THE FOREGOING WAIVER, (B) EACH SUCH PARTY UNDERSTANDS AND HAS CONSIDERED THE IMPLICATIONS OF THIS WAIVER, (C) EACH SUCH PARTY MAKES THIS WAIVER VOLUNTARILY, AND (D) EACH SUCH PARTY HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 8.5.

8.6 Notices. All notices and other communications hereunder shall be in writing and shall be delivered in person, by facsimile (with confirming copy sent by one of the other delivery methods specified herein), by overnight courier or sent by certified, registered or express air mail, postage prepaid, and shall be deemed given when so delivered in person, or when so received by facsimile or courier, or, if mailed, three (3) calendar days after the date of mailing, as follows:

 

if to Bandwidth:		Bandwidth.com, Inc.
		900 Main Campus Drive, Suite 400 Raleigh, NC 27606 Attention: Legal Department Fax: 919.239.9903
if to Republic Wireless:		Republic Wireless, Inc.
		900 Main Campus Drive, Suite 500
		Raleigh, NC 27606
		Attention: Legal Department Fax: 919.670.3115

or to such other address as the party to whom notice is given may have previously furnished to the other parties in writing in the manner set forth above.

8.7 Counterparts. This Agreement may be executed in two or more identical counterparts, each of which shall be deemed to be an original, and all of which together shall constitute one and the same agreement. The Agreement may be delivered by facsimile transmission of a signed copy thereof.

 

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8.8 Binding Effect; Assignment. This Agreement and all of the provisions hereof shall be binding upon and inure to the benefit of the parties hereto and their respective successors and permitted assigns. Except with respect to a merger of a party, neither this Agreement nor any of the rights, interests or obligations hereunder shall be assigned by any party hereto without the prior written consent of the other parties; provided, however, that each of Bandwidth and Republic Wireless may assign its respective rights, interests, duties, liabilities and obligations under this Agreement to any other member of their Group, but such assignment shall not relieve Bandwidth or Republic Wireless, as the assignor, of its liabilities or obligations hereunder.

8.9 Severability. Any provision of this Agreement which is prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof. Any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. Upon a determination that any provision of this Agreement is prohibited or unenforceable in any jurisdiction, the parties shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the provisions contemplated hereby are consummated as originally contemplated to the fullest extent possible.

8.10 Amendments; Waivers. Any provision of this Agreement may be amended or waived if, but only if, such amendment or waiver is in writing and is signed, in the case of an amendment, by each party to this Agreement, or in the case of a waiver, by the party against whom the waiver is to be effective. No failure or delay by any party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. Except as otherwise provided herein, the rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by applicable law. Any consent provided under this Agreement must be in writing, signed by the party against whom enforcement of such consent is sought.

8.11 Effective Date. This Agreement shall become effective on the date recited above on which the parties entered into this Agreement.

8.12 Change in Law. Any reference to a provision of the Code or any other Tax Law shall include a reference to any applicable successor provision or law.

8.13 Authorization, Etc. Each of the parties hereto hereby represents and warrants that it has the power and authority to execute, deliver and perform this Agreement, that this Agreement

 

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has been duly authorized by all necessary corporate action on the part of such party, that this Agreement constitutes a legal, valid and binding obligation of such party and that the execution, delivery and performance of this Agreement by such party does not contravene or conflict with any provision of law or of its charter or bylaws or any agreement, instrument or order binding such party.

8.14 No Third Party Beneficiaries. Except as provided in Sections 7.2 and 7.3 of this Agreement, this Agreement is solely for the benefit of Bandwidth, Republic Wireless, and their Subsidiaries and is not intended to confer upon any other Person any rights or remedies hereunder. Notwithstanding anything in this Agreement to the contrary, this Agreement is not intended to confer upon any Republic Wireless Indemnitees any rights or remedies against Republic Wireless hereunder, and this Agreement is not intended to confer upon any Bandwidth Indemnitees any rights or remedies against Bandwidth hereunder.

8.15 Entire Agreement. This Agreement embodies the entire understanding among the parties relating to its subject matter and supersedes and terminates any prior agreements and understandings among the parties with respect to such subject matter, and no party to this Agreement shall have any right, responsibility, obligation or liability under any such prior agreement or understanding. Any and all prior correspondence, conversations and memoranda are merged herein and shall be without effect hereon. No promises, covenants or representations of any kind, other than those expressly stated herein, have been made to induce any party to enter into this Agreement.

8.16 No Strict Construction; Interpretation.

(a) Bandwidth and Republic Wireless each acknowledge that this Agreement has been prepared jointly by the parties hereto and shall not be strictly construed against any party hereto.

(b) When a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference shall be to an Article of, a Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated. The table of contents and headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. Whenever the words “include”, “includes” or “including” are used in this Agreement, they shall be deemed to be followed by the words “without limitation”. The words “hereof”, “herein” and “hereunder” and words of similar import when used in this Agreement shall refer to this Agreement as a whole and not to any particular provision of this Agreement. All terms defined in this Agreement shall have the defined meanings when used in any certificate or other document made or delivered pursuant hereto unless otherwise defined therein. The definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms and to the masculine as well as to the feminine and neuter genders of such term. Any agreement, instrument or statute defined or referred to herein or in any agreement or instrument that is referred to herein means such agreement, instrument or statute as from time to time amended, modified or supplemented, including (in the case of agreements or instruments) by

 

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waiver or consent and (in the case of statutes) by succession of comparable successor statutes and references to all attachments thereto and instruments incorporated therein. References to a Person are also to its permitted successors and assigns.

8.17 Headings. The headings contained in this Agreement are for reference purposes only and will not affect in any way the meaning or interpretation of this Agreement.

(The remainder of this page is intentionally left blank.)

 

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IN WITNESS WHEREOF, the parties have caused this Agreement to be executed by the respective officers as of the date set forth above.

 

 

 

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ANNEX 1

Bandwidth.com Inc. (“Bandwidth”) intends to claim a Research and Development (“R&D”) tax credit under Internal Revenue Code (“IRC”) Section 41 for its tax year 2016. Accordingly, Bandwidth is seeking to exclude qualified research expenses (“QREs”) from its base period generated by Republic Wireless (“Republic”) during the tax years 2013-2015, due to the spin-off of Republic from Bandwidth in November 2016.

Republic will be required under IRC Sec. 41(c)(5)(A) to report its respective QREs for this period as part of its base period. IRC Sec. 41(f)(3)(B) requires Bandwidth provide a letter to Republic in order to remove the Republic QREs from its base period. Accordingly, Table 1 below summarizes the QREs generated by Republic during the base period, which must be included in Republic’s base period calculation.

Thank you for your assistance in this matter.

Table 1.

 

Republic QREs		2013				2014				2015				Total
Wage			2,298,657				3,321,741				3,701,853				9,322,251
Supplies			—				—				—				—
Contract @ 65%			—				—				—				—
Total			2,298,657				3,321,741				3,701,853				9,322,251

 

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Republic Wireless (“Republic”) would like to inquire as to whether Bandwidth.com Inc. (“Bandwidth”) claimed a Research and Development (“R&D”) Tax Credit under Internal Revenue Code (“IRC”) Section 41 for tax years 2013 through 2015. If Bandwidth did claim an IRC Section 41 R&D Credit, the question arises as to whether the business unit Republic, which was spun-off in November of 2016, had any qualified research expenses (“QREs”) that were included in the Bandwidth R&D Credit calculation.

Republic intends to claim an R&D tax credit under Internal Revenue Code section 41 for its tax year 2016. We respectfully request that Bandwidth provide the Republic QREs from the years 2013 through 2015. Republic will be required under IRC Sec. 41(c)(5)(A) to report its respective QRE’s for this period as part of its base period. IRC Sec. 41(f)(3)(B) requires that Bandwidth provide a letter to Republic in order to remove the Republic QREs from its base period.

Thank you for your assistance with this request.

Exhibit 10.17

EMPLOYEE MATTERS AGREEMENT

THIS EMPLOYEE MATTERS AGREEMENT, dated as of November 30, 2016, is entered into by and between Bandwidth.com, Inc. (“Bandwidth”), and Republic Wireless, Inc. (“Republic Wireless”). Bandwidth and Republic Wireless are also referred to in this Agreement individually as a “Party” and collectively as the “Parties.”

RECITALS

WHEREAS, Bandwidth has determined that it would be appropriate, desirable and in the best interests of Bandwidth and the stockholders of Bandwidth to separate the Republic Wireless Business (as defined below) from Bandwidth;

WHEREAS, Bandwidth and Republic Wireless have entered into the Reorganization Agreement, dated as of November 30, 2016 (the “Reorganization Agreement”), in connection with the separation of the Republic Wireless Business from Bandwidth (the “Transaction”) and the Distribution (as defined below) of Republic Wireless Common Stock (as defined below) to stockholders of Bandwidth;

WHEREAS, the Reorganization Agreement also provides for the execution and delivery of certain other agreements, including this Agreement, in order to facilitate and provide for the separation of Republic Wireless from Bandwidth; and

WHEREAS, to ensure an orderly transition under the Reorganization Agreement, it will be necessary for the Parties to allocate between them Assets (as defined below), Liabilities (as defined below) and responsibilities with respect to certain employee compensation and benefit plans and programs, and certain other employment matters.

NOW, THEREFORE, in consideration of the foregoing and the covenants and agreements set forth below and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, and intending to be legally bound hereby, the Parties hereby agree as follows:

ARTICLE I

DEFINITIONS

Section 1.1. Definitions. As used in this Agreement, the following terms will have the meanings set forth in this Section 1.1. Capitalized terms not otherwise defined herein will have the meaning ascribed to such terms in the Reorganization Agreement.

“Adjusted Bandwidth Option” has the meaning set forth in Section 5.2(b)(I).

“Affiliate” has the meaning set forth in the Reorganization Agreement.

“Agreement” means this Employee Matters Agreement, together with all schedules hereto and all amendments, modifications, and changes hereto entered into pursuant to Section 15.9.

“Assets” has the meaning set forth in the Reorganization Agreement.

“Bandwidth” has the meaning set forth in the preamble to this Agreement.

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“Bandwidth Benefit Plan” means any Benefit Plan sponsored or maintained by Bandwidth immediately prior to the Effective Time, excluding any such Benefit Plan that becomes a Republic Wireless Benefit Plan.

“Bandwidth Bonus Plan” means any bonus or similar plan provided by Bandwidth, as may be amended from time to time.

“Bandwidth Common Stock” means the Class A Voting Common Stock, par value $0.001 per share of Bandwidth, and/or the Class B Non-Voting Common Stock, par value $0.001 per share, of Bandwidth.

“Bandwidth Director” means any individual who is or was previously a non-employee member of the board of directors of Bandwidth.

“Bandwidth Employee” means any individual who is or was previously employed by Bandwidth immediately prior to the Effective Time, excluding any Republic Wireless Employee.

“Bandwidth Entity” means Bandwidth.

“Bandwidth Equity Plan” means any equity incentive plan sponsored or maintained by Bandwidth immediately prior to the Effective Time.

“Bandwidth FSA” has the meaning set forth in Section 9.3(a)(I).

“Bandwidth Options” means options to purchase Bandwidth Common Stock granted pursuant to any Bandwidth Equity Plan.

“Bandwidth Post-Distribution Share Value” means (1) with respect to the Class A Voting Common Stock, par value $0.001 per share, $24.66; or (2) with respect to the Class B Non-Voting Common Stock, par value $0.001 per share, $23.99.

“Bandwidth Pre-Distribution Share Value” means (1) with respect to the Class A Voting Common Stock, par value $0.001 per share, $43.57; or (2) with respect to the Class B Non-Voting Common Stock, par value $0.001 per share, $42.39.

“Bandwidth Ratio” means the quotient obtained by dividing the Bandwidth Post-Distribution Share Value by the Bandwidth Pre-Distribution Share Value.

“Bandwidth Welfare Plan” means any Welfare Plan sponsored or maintained by any one or more Bandwidth as of immediately prior to the Effective Time.

“Beneficial Owner” will have the meaning ascribed to such term in Rule 13d-3 of the General Rules and Regulations under the Exchange Act.

“Benefit Management Records” has the meaning set forth in Section 4.3(b).

“Benefit Plan” means any contract, agreement, policy, practice, program, plan, trust, commitment or arrangement providing for benefits, perquisites or compensation of any nature to any Employee, or to any eligible family member, dependent, or beneficiary of any such Employee, including pension plans (qualified and nonqualified), thrift plans, deferred compensation plans (qualified and nonqualified), supplemental pension plans and welfare plans, and contracts, agreements, policies, practices, programs, plans, trusts, commitments and arrangements providing for terms of employment, fringe benefits,

 

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severance benefits, change in control protections or benefits, medical, retiree medical, dental, vision, travel and accident, life, disability and accident insurance, tuition reimbursement, travel reimbursement, vacation, sick, personal or bereavement days, leaves of absences and holidays of Bandwidth or Republic Wireless, as applicable.

“Business Day” means any day other than a Saturday or Sunday or a day on which banking institutions in Raleigh, North Carolina are authorized or requested by Law to close.

“Change in Control” will be deemed to have occurred as of the first day that any one or more of the following conditions have been satisfied:

(a) a report on Schedule 13D will be filed with the Securities and Exchange Commission pursuant to Section 13(d) of the Exchange Act disclosing that any Person, other than Republic Wireless or any employee benefit plan sponsored by Republic Wireless, is the Beneficial Owner directly or indirectly of twenty percent (20%) or more of the outstanding shares of Republic Wireless Common Stock;

(b) any Person, other than Republic Wireless, or any employee benefit plan sponsored by Republic Wireless, will purchase shares pursuant to a tender offer or exchange offer to acquire any shares of Republic Wireless Common Stock (or securities convertible into shares of Republic Wireless Common Stock) for cash, securities or any other consideration, provided that after consummation of the offer, the Person in question is the Beneficial Owner, directly or indirectly, of twenty percent (20%) or more of the outstanding shares of Republic Wireless Common Stock (calculated as provided in paragraph (d) of Rule 13d-3 under the Exchange Act in the case of rights to acquire shares of Republic Wireless Common Stock);

(c) the consummation of:

(I) any consolidation, business combination or merger involving Republic Wireless, other than a consolidation, business combination or merger involving Republic Wireless in which holders of shares of Republic Wireless Common Stock immediately prior to the consolidation, business combination or merger (x) hold fifty percent (50%) or more of the combined voting power of Republic Wireless (or the corporation resulting from the consolidation, business combination or merger or the parent of such corporation) after the merger and (y) have the same proportionate ownership of common stock of Republic Wireless (or the corporation resulting from the consolidation, business combination or merger or the parent of such corporation), relative to other holders of shares of Republic Wireless Common Stock immediately prior to the consolidation, business combination or merger, immediately after the consolidation, business combination or merger as immediately before;

(II) any sale, lease, exchange or other transfer (in one transaction or a series of related transactions) of all or substantially all the assets of Republic Wireless; or

(III) there will have been a change in a majority of the members of the board of directors of Republic Wireless within a 12-month period unless the election or nomination for election by Republic Wireless’ stockholders of each new director during such 12-month period was approved by the vote of two-thirds of the directors then still in office who (x) were directors at the beginning of such 12-month period or (y) whose nomination for election or election as directors was recommended or approved by a majority of the directors who were directors at the beginning of such 12-month period; or

 

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(d) any Person, other than Republic Wireless or any employee benefit plan sponsored by Republic Wireless, becomes the Beneficial Owner of twenty percent (20%) or more of the shares of Republic Wireless Common Stock.

“COBRA” means the U.S. Consolidated Omnibus Budget Reconciliation Act of 1985, as codified at Section 601 et seq. of ERISA and at Section 4980B of the Code.

“Code” means the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder.

“Disability Medical Benefits” means medical, dental and vision benefits provided before the Welfare Plan Implementation Date by an Bandwidth Welfare Plan or, after the Welfare Plan Implementation Date, by a Republic Wireless Welfare Plan, to Republic Wireless Employees who are Former Management Benefitted Employees and who became disabled under an Bandwidth Welfare Plan that provided long-term disability benefits before the Welfare Plan Implementation Date.

“Distribution” has the meaning set forth in the Reorganization Agreement.

“Distribution Date” has the meaning set forth in the Reorganization Agreement.

“Effective Time” means the effective time of the Distribution.

“Employee” means any Bandwidth Employee, Former Bandwidth Employee or Republic Wireless Employee.

“ERISA” means the U.S. Employee Retirement Income Security Act of 1974, as amended, and the regulations promulgated thereunder.

“Exchange Act” means the Securities Exchange Act of 1934, as amended.

“FICA” has the meaning set forth in Section 4.1(f).

“FMLA” means the U.S. Family and Medical Leave Act, as amended, and the regulations promulgated thereunder.

“Former Bandwidth Employee” means all former employees of Bandwidth who have an employment end date on or before the Effective Time, excluding all Republic Wireless Employees.

“Former Management Benefitted Employee” means a former Employee who (i) would have been a Management Benefitted Employee, but instead becomes entitled to long-term disability benefits under an Bandwidth Welfare Plan or (ii) who is or would have been a Management Benefitted Employee, but instead experiences a Qualifying Event prior to the Welfare Plan Implementation Date.

“FUTA” has the meaning set forth in Section 4.1(f).

“HIPAA” means the Health Insurance Portability and Accountability Act of 1996, as amended, and the regulations promulgated thereunder.

“IRS” means the Internal Revenue Service.

“Law” has the meaning set forth in the Reorganization Agreement.

 

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“Liabilities” has the meaning set forth in the Reorganization Agreement.

“Management Benefitted Employee” means any Republic Wireless Employee who, as of the Effective Time or after the Effective Time but before the Welfare Plan Implementation Date, is providing or commences to provide, as the case may be, services to Republic Wireless.

“Notice of Creditable Coverage” means a certificate of creditable coverage issued in accordance with HIPAA.

“Party” or “Parties” has the meaning set forth in the preamble to this Agreement.

“Person” has the meaning set forth in the Reorganization Agreement.

“Privacy Contract” means any contract entered into in connection with applicable privacy protection Laws or regulations.

“Qualified Beneficiary” has the meaning set forth in Treasury Regulation Section 54.4980B-3, Q&A-1.

“Qualifying Event” has the same meaning as set forth in Treasury Regulation Section 54.4980B-4, Q&A-1.

“Reorganization Agreement” has the meaning set forth in the recitals to this Agreement.

“Tax” has the meaning set forth in the Tax Matters Agreement.

“Tax Matters Agreement” means the Tax Matters Agreement, dated as of November 30, 2016, by and between Bandwidth and Republic Wireless.

“Transaction” has the meaning set forth in the recitals to this Agreement.

“Transition Services Agreement” has the meaning set forth in the Reorganization Agreement.

“U.S.” means the United States of America.

“Republic Wireless” has the meaning set forth in the preamble to this Agreement.

“Republic Wireless 401(k) Plan” means any 401(k) plan to be established by Republic Wireless at any time.

“Republic Wireless 401(k) Plan Beneficiaries” has the meaning set forth in Section 8.2.

“Republic Wireless Benefit Plan” means any Benefit Plan sponsored or maintained by Republic Wireless following the Effective Time.

“Republic Wireless Business” has the meaning set forth in the Reorganization Agreement.

“Republic Wireless Common Stock” means the Class A Voting Common Stock, par value $0.001 per share of Republic Wireless, and/or the Class B Non-Voting Common Stock, par value $0.001 per share, of Republic Wireless.

 

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“Republic Wireless Employee” means any individual employed by Republic Wireless immediately following the Effective Time.

“Republic Wireless Option” has the meaning set forth in Section 5.2(b)(II).

“Republic Wireless Equity Plan” means the plan adopted by Republic Wireless prior to the Effective Time under which the Republic Wireless equity-based awards described in Article V will be issued.

“Republic Wireless Post-Distribution Share Value” means (1) with respect to the Class A Voting Common Stock, par value $0.001 per share, $18.91; or (2) with respect to the Class B Non-Voting Common Stock, par value $0.001 per share, $18.40.

“Republic Wireless Ratio” means the quotient obtained by dividing the Republic Wireless Post-Distribution Share Value by the Bandwidth Pre-Distribution Share Value.

“Republic Wireless Welfare Plan” means any Welfare Plan sponsored or maintained by any one or more Republic Wireless immediately after the Effective Time.

“Republic Wireless Welfare Plan Participant” means each Management Benefitted Employee and their eligible spouses, domestic partners and dependents, as the case may be, who is a participant in any of the Bandwidth Welfare Plans or the Republic Wireless Welfare Plans, as the case may be, prior to a Welfare Plan Implementation Date.

“WARN” means the U.S. Worker Adjustment and Retraining Notification Act, as amended, and the regulations promulgated thereunder, and any applicable state or local Law equivalent.

“Welfare Plan” means, where applicable, a “welfare plan” (as defined in Section 3(1) of ERISA) or a “cafeteria plan” under Section 125 of the Code, and any benefits offered thereunder, and any other plan offering health benefits (including medical, funding mechanism for a health savings account, a health care reimbursement account, wellness, prescription drug, dental, vision, and mental health and substance abuse coverage), disability benefits, life, accidental death and dismemberment or death benefits, business travel insurance, medical and dependent care flexible spending arrangements (including any associated group medial or dependent care plan), employee assistance programs, and paid time off programs, as applicable.

“Welfare Plan Implementation Date” means December 1, 2016.

Section 1.2. Interpretation. In this Agreement, unless the context clearly indicates otherwise:

(a) words used in the singular include the plural and words used in the plural include the singular;

(b) if a word or phrase is defined in this Agreement, its other grammatical forms, as used in this Agreement, will have a corresponding meaning;

(c) reference to any gender includes the other gender and the neuter;

(d) the words “include,” “includes” and “including” will be deemed to be followed by the words “without limitation”;

(e) the words “will” and “will” are used interchangeably and have the same meaning;

 

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(f) the word “or” will have the inclusive meaning represented by the phrase “and/or”;

(g) relative to the determination of any period of time, “from” means “from and including,” “to” means “to but excluding” and “through” means “through and including”;

(h) all references to a specific time of day in this Agreement will be based upon Eastern Standard Time or Eastern Daylight Saving Time, as applicable, on the date in question;

(i) whenever this Agreement refers to a number of days, such number will refer to calendar days unless Business Days are specified;

(j) accounting terms used herein will have the meanings historically ascribed to them by Bandwidth and/or Republic Wireless for this purpose, in its and their internal accounting and financial policies and procedures in effect immediately prior to the date of this Agreement;

(k) reference to any Article, Section or schedule means such Article or Section of, or such schedule to, this Agreement, as the case may be, and references in any Section or definition to any clause means such clause of such Section or definition;

(l) the words “this Agreement,” “herein,” “hereunder,” “hereof,” “hereto” and words of similar import will be deemed references to this Agreement as a whole and not to any particular Section or other provision of this Agreement;

(m) the term “commercially reasonable efforts” means efforts which are commercially reasonable to enable a Party, directly or indirectly, to satisfy a condition to, or otherwise assist in, the consummation of a desired result and which do not require the performing Party to expend funds or assume Liabilities other than expenditures and Liabilities which are customary and reasonable in nature and amount in the context of a series of related transactions similar to the Distribution;

(n) reference to any agreement, instrument or other document means such agreement, instrument or other document as amended, supplemented and modified from time to time to the extent permitted by the provisions thereof and not prohibited by this Agreement;

(o) reference to any Law (including statutes and ordinances) means such Law (including any and all rules and regulations promulgated thereunder) as amended, modified, codified or reenacted, in whole or in part, and in effect at the time of determining compliance or applicability;

(p) references to any Person include such Person’s successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement; a reference to such Person’s “Affiliates” will be deemed to mean such Person’s Affiliates following the Distribution and any reference to a third party will be deemed to mean a Person who is not a Party or an Affiliate of a Party;

(q) if there is any conflict between the provisions of the main body of this Agreement and the schedules hereto, the provisions of the main body of this Agreement will control unless explicitly stated otherwise in such schedule;

(r) unless otherwise specified in this Agreement, all references to dollar amounts herein will be in respect of lawful currency of the U.S.;

(s) the titles to Articles and headings of Sections contained in this Agreement, in any schedule and Exhibit and in the table of contents to this Agreement have been inserted for convenience of reference only and will not be deemed to be a part of or to affect the meaning or interpretation of this Agreement; and

 

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(t) any portion of this Agreement obligating a Party to take any action or refrain from taking any action, as the case may be, will mean that such Party will also be obligated to cause its relevant Subsidiaries to take such action or refrain from taking such action, as the case may be.

ARTICLE II

GENERAL PRINCIPLES FOR ALLOCATION OF LIABILITIES

Section 2.1. General Principles. It is the intention of Bandwidth and Republic Wireless that all employment-related Liabilities associated with Republic Wireless Employees, whether prior to, on or after the Effective Time, are to be assumed by Republic Wireless, except as otherwise specifically set forth herein. Bandwidth and Republic Wireless will take any and all reasonable action as will be necessary or appropriate so that active participation in the Bandwidth Benefit Plans by all Republic Wireless Employees will terminate in connection with the Distribution as and when provided under this Agreement (or if not specifically provided under this Agreement, as of the Effective Time).

(a) Except as otherwise provided in this Agreement, effective as of the Effective Time, Republic Wireless will assume, or continue the sponsorship of, and Bandwidth will not have any further Liability with respect to, or under, and Republic Wireless will indemnify Bandwidth, and the officers, directors, and employees of Bandwidth, and hold them harmless with respect to any and all:

(I) individual agreements entered into between Bandwidth and any Republic Wireless Employee;

(II) agreements entered into between Bandwidth and any individual who is an independent contractor, or leasing organization, providing services primarily for the business activities of Republic Wireless;

(III) collective bargaining agreements, collective agreements, trade union or works council agreements entered into Bandwidth and any union, works council or other body representing only Republic Wireless Employees;

(IV) wages, salaries, incentive compensation (as the same may be modified by this Agreement), commissions, bonuses, and any other employee compensation or benefits payable to or on behalf of any Republic Wireless Employees after the Effective Time, without regard to when such wages, salaries, incentive compensation, commissions, bonuses, or other employee compensation or benefits are or may have been earned;

(V) moving expenses and obligations including those related to taxes (foreign and home), relocation, repatriation, international assignments, transfers or similar items incurred by or owed to any Republic Wireless Employees that have not been paid prior to the Effective Time;

(VI) immigration-related, visa, work application or similar rights, obligations and Liabilities related to any Republic Wireless Employees;

(VII) Liabilities under any Republic Wireless Benefit Plan; and

(VIII) Liabilities and obligations whatsoever with respect to claims made by, or with respect to any Republic Wireless Employees, in connection with any Bandwidth Benefit Plan, including but not limited to, such Liabilities relating to actions or omissions of or by Republic Wireless or any officer, director, employee or agent thereof on or prior to the Effective Time.

 

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(b) Except as otherwise provided in this Agreement, effective as of the Effective Time, Republic Wireless will not have any further Liability for, and Bandwidth will indemnify Republic Wireless, and the officers, directors, and employees of Republic Wireless, and hold them harmless with respect to any and all Liabilities and obligations whatsoever with respect to, claims made by or with respect to any Bandwidth Employees or Former Bandwidth Employees in connection with any Bandwidth Benefit Plan (other than with respect to Liabilities relating to Republic Wireless Employees), including such Liabilities relating to actions or omissions of or by Bandwidth or any officer, director, employee or agent thereof prior to, on or after the Effective Time.

Section 2.2. Service Credit.

(a) Service for Eligibility, Vesting, and Benefit Purposes. Except as otherwise provided in any other provision of this Agreement, the Republic Wireless Benefit Plans will, and Republic Wireless will cause Republic Wireless to, recognize each Republic Wireless Employee’s full service history with Bandwidth for purposes of eligibility, vesting, determination of level of benefits and, to the extent applicable and subject to Section 2.4, benefit accruals under any Republic Wireless Benefit Plan for such Republic Wireless Employee’s service with Bandwidth on or prior to the Effective Time to the same extent such service would be credited under the Bandwidth Benefit Plans, as applicable. Notwithstanding anything to the contrary, in connection with any Employee’s break in service, any determination as to service credit will be made under and in accordance with the applicable Republic Wireless Benefit Plan document, the terms of which will control in the case of any conflict with this Section 2.2.

(b) Evidence of Prior Service. Notwithstanding anything to the contrary, but subject to applicable Law, upon reasonable request by one Party to the other Party, the first Party will provide to the other Party copies of any records reasonably available to the first Party to document such service, plan participation and membership of such Employees and reasonably cooperate with the first Party to resolve any discrepancies or obtain any missing data for purposes of determining benefit eligibility, participation, vesting and calculation of benefits with respect to any Employee.

Section 2.3. Plan Administration.

(a) Transition Services. The Parties acknowledge that Bandwidth or Republic Wireless may provide administrative services for certain of the other Party’s benefit programs for a transitional period under the terms of the Transition Services Agreement. The Parties agree to enter into a business associate agreement (if required by HIPAA or other applicable health information privacy Laws) in connection with such Transition Services Agreement.

(b) Participant Elections and Beneficiary Designations. Prior to the Effective Time, each participant in a Republic Wireless Benefit Plan will execute such elections and beneficiary designations as are promulgated by the administrator of each Republic Wireless Benefit Plan, if applicable. Notwithstanding the foregoing, if and to the extent a Republic Wireless Benefit Plan participant has failed to execute and file an updated election and/or designation, the participant elections and beneficiary designations made under any corresponding Bandwidth Benefit Plan prior to the Effective Time with respect to which Assets or Liabilities are transferred or allocated to Republic Wireless Benefit Plans in accordance with this Agreement will continue in effect under the applicable Republic Wireless Benefit Plan to the extent permitted under the applicable Republic Wireless Benefit Plan, including deferral and payment form elections, dividend elections, coverage options and levels, beneficiary designations and the rights of alternate payees under qualified domestic relations orders, in each case, to the extent allowed by applicable Law.

 

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Section 2.4. No Duplication or Acceleration of Benefits. Notwithstanding anything to the contrary in this Agreement or the Reorganization Agreement, no participant in the Republic Wireless Benefit Plans will receive benefits that duplicate benefits provided by the corresponding Bandwidth Benefit Plan. Furthermore, unless expressly provided for in this Agreement, the Reorganization Agreement or required by applicable Law, no provision in this Agreement will be construed to create any right to accelerate vesting, distribution of benefits or entitlements to any compensation or Benefit Plan on the part of any Bandwidth Employee, Former Bandwidth Employee, or Republic Wireless Employee.

Section 2.5. No Expansion of Participation. Unless otherwise expressly provided in this Agreement, as otherwise determined or agreed to by Bandwidth and Republic Wireless, as required by applicable Law, or as explicitly set forth in a Republic Wireless Benefit Plan, a Republic Wireless Employee will be entitled to participate in the Republic Wireless Benefit Plans only to the extent that such Employee was entitled to participate in the corresponding Bandwidth Benefit Plan as in effect immediately prior to the Effective Time, with it being the intent of the Parties that this Agreement does not result in any expansion of the number of Republic Wireless Employees participating or the participation rights therein that they had prior to the Effective Time.

Section 2.6. Special Provisions. Notwithstanding any other provision in this Agreement to the contrary, each of the Chief Executive Officer, President, Chief People Officer, General Counsel and Secretary of Bandwidth will have the discretion, power and authority to adopt and implement special provisions, rules or procedures applicable to the employment, compensation and benefit arrangements of one or more individuals as are deemed equitable, necessary or advisable to give effect to the intentions of this Agreement, including without limitation, special provisions relating to (i) different equitable adjustments than as set forth in Article V, in the case of a grantee who has outstanding equity-based awards granted under any Bandwidth Equity Plan, where such grantee’s circumstances warrant a different treatment to the extent that such Chief Executive Officer, President, Chief People Officer, General Counsel and Secretary of Bandwidth deem such different treatment to be equitable, necessary or advisable, based on the advice of counsel; (ii) the good faith determination of the employer or former employer, as applicable, of each Employee; (iii) errors in the timing of employment transfers; (iv) issues pertaining to immigration Law requirements; (v) compliance with foreign, state and/or local Laws and (vi) any other decisions regarding the employment, compensation and benefit arrangements of one or more individuals as are deemed equitable, necessary or advisable that are not otherwise contemplated by this Agreement.

ARTICLE III

INTENTIONALLY DELETED

ARTICLE IV

ASSIGNMENT OF EMPLOYEES

Section 4.1. Active Employees.

(a) Republic Wireless Employees. Except as otherwise set forth in this Agreement, effective not later than immediately preceding the Effective Time, the employment of each Republic Wireless Employee will be continued by Republic Wireless or will be assigned and transferred to Republic Wireless.

 

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(b) Bandwidth Employees. Except as otherwise set forth in this Agreement, effective not later than immediately preceding the Effective Time, the employment of each Bandwidth Employee will be continued by Bandwidth.

(c) At-Will Status. Notwithstanding the above or any other provision of this Agreement, nothing in this Agreement will create any obligation on the part of Bandwidth or Republic Wireless to (i) continue the employment of any Employee or permit the return from a leave of absence for any period following the date of this Agreement or the Effective Time (except as required by applicable Law) or (ii) change the employment status of any Employee from “at will,” to the extent such Employee is an “at will” employee under applicable Law.

(d) Severance. The Parties acknowledge and agree that the Distribution and the assignment, transfer or continuation of the employment of Employees as contemplated by this Section 4.1 will not be deemed a severance of employment of any Employee for purposes of this Agreement or any Benefit Plan of Bandwidth or Republic Wireless.

(e) Not a Change of Control/Change in Control. The Parties acknowledge and agree that neither the consummation of the Distribution nor any transaction in connection with the Distribution will be deemed a “change of control,” “change in control,” “acceleration event” or term of similar import for purposes of any Bandwidth Benefit Plan, Republic Wireless Benefit Plan, Bandwidth Equity Plan or Republic Wireless Equity Plan.

(f) Payroll and Related Taxes. With respect to each Republic Wireless Employee, Bandwidth and Republic Wireless will, and will cause their respective Affiliates to (to the extent permitted by applicable Law and practicable) (a) treat Republic Wireless as a “successor employer” and Bandwidth as a “predecessor,” within the meaning of Sections 3121(a)(1) and 3306(b)(1) of the Code, to the extent appropriate, for purposes of Taxes imposed under the United States Federal Insurance Contributions Act, as amended (“FICA”), or the United States Federal Unemployment Tax Act, as amended (“FUTA”) and (b) file tax returns, exchange wage payment information, and report wage payments made by the respective predecessor and successor employer on separate IRS Forms W-2 or similar earnings statements to each such Republic Wireless Employee for the tax year in which the Effective Time occurs, in a manner provided in Section 4.02(l) of Revenue Procedure 2004-53. For the avoidance of doubt, the collection of payroll taxes under FICA and FUTA will not restart upon or following the Effective Time with respect to each Republic Wireless Employee for the tax year during which the Effective Time occurs.

(g) Employment and Severance Arrangements. Republic Wireless will assume and honor, or will cause a Republic Wireless Entity to assume and honor, any agreements to which any Republic Wireless Employee is party with Bandwidth, including any (i) employment contract or (ii) retention, release or severance arrangement.

Section 4.2. Employment Law Obligations.

(a) WARN. After the Effective Time, (i) Bandwidth will be responsible for providing any necessary WARN notice (and meeting any similar state Law notice requirements) with respect to any termination of employment of any Bandwidth Employee and (ii) Republic Wireless will be responsible for providing any necessary WARN notice (and meeting any similar state Law notice requirements) with respect to any termination of employment of any Republic Wireless Employee.

(b) Compliance with Employment Laws. On and after the Effective Time, (i) Bandwidth will be responsible for adopting and maintaining any policies or practices, and for all other actions and

 

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inactions, necessary to comply with employment-related Laws and requirements relating to the employment of Bandwidth Employees and the treatment of any applicable Former Bandwidth Employees in respect of their former employment, and (ii) Republic Wireless will be responsible for adopting and maintaining any policies or practices, and for all other actions and inactions, necessary to comply with employment-related Laws and requirements relating to the employment of Republic Wireless Employees.

Section 4.3. Employee Records.

(a) Sharing of Information. Subject to any limitations imposed by applicable Law, Bandwidth and Republic Wireless will provide to the other and their respective agents and vendors all information necessary for the Parties to perform their respective duties under this Agreement. The Parties also hereby agree to enter into any business associate arrangements that may be required for the sharing of any information pursuant to this Agreement to comply with the requirements of HIPAA.

(b) Transfer of Personnel Records and Authorization. Subject to any limitation imposed by applicable Law, as of the Effective Time or as soon as administratively practicable thereafter, Bandwidth will transfer and assign to Republic Wireless all personnel records, all immigration documents, including I-9 forms and work authorizations, all payroll deduction authorizations and elections, whether voluntary or mandated by Law, including but not limited to W-4 forms and deductions for benefits under the applicable Republic Wireless Benefit Plan and all absence management records, Family and Medical Leave Act records, insurance beneficiary designations, flexible spending account enrollment confirmations, attendance, and return to work information relating to Republic Wireless Employees who participate in Republic Wireless Benefit Plans (“Benefit Management Records”). Subject to any limitations imposed by applicable Law, Bandwidth, however, may retain originals of, copies of, or access to personnel records, immigration records, payroll forms and Benefit Management Records as long as necessary to provide services to Republic Wireless (acting on its behalf pursuant to the Transition Services Agreement between the Parties entered into as of the date of this Agreement). Immigration records will, if and as appropriate, become a part of Republic Wireless’ public access file. Republic Wireless will use personnel records, payroll forms and Benefit Management Records for lawful purposes only, including calculation of withholdings from wages and personnel management. It is understood that following the Effective Time, Bandwidth records so transferred and assigned may be maintained by Republic Wireless (acting directly or through one of its Subsidiaries) pursuant to Republic Wireless’ applicable records retention policy.

(c) Access to Records. To the extent not inconsistent with this Agreement and any applicable privacy protection Laws or regulations or Privacy Contracts, reasonable access to Employee-related records after the Effective Time will be provided to Bandwidth and Republic Wireless pursuant to the terms and conditions of the Reorganization Agreement. In addition, notwithstanding anything to the contrary, Republic Wireless will provide Bandwidth with reasonable access to those records necessary for its administration of any Benefit Plans or programs, or employment and compensation matters, on behalf of Bandwidth Employees and Former Bandwidth Employees after the Effective Time as permitted by any applicable privacy protection Laws or regulations or Privacy Contracts. Bandwidth will also be permitted to retain copies of all restrictive covenant agreements with any Republic Wireless Employee in which Bandwidth has a valid business interest. In addition, Bandwidth will provide Republic Wireless with reasonable access to those records necessary for its administration of any Benefit Plans or programs, or employment and compensation matters, on behalf of Republic Wireless Employees after the Effective Time as permitted by any applicable privacy protection Laws or regulations or Privacy Contracts. Republic Wireless will also be permitted to retain copies of all restrictive covenant agreements with any Bandwidth Employee in which Republic Wireless has a valid business interest.

 

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(d) Maintenance of Records. With respect to retaining, destroying, transferring, sharing, copying and permitting access to all Employee-related information, Bandwidth and Republic Wireless will comply with all applicable Laws, regulations and internal policies, and will indemnify and hold harmless each other from and against any and all Liability, claims, actions, and damages that arise from a failure (by the indemnifying party or their respective agents) to so comply with all applicable Laws, regulations, Privacy Contracts and internal policies applicable to such information.

(e) Confidentiality. Except as otherwise set forth in this Agreement, all records and data relating to Employees will, in each case, be subject to the confidentiality provisions of the Reorganization Agreement and any other applicable agreement and applicable Law, and the provisions of this Section 4.3 will be in addition to, and not in derogation of, the provisions of the Reorganization Agreement governing confidential information, including any applicable provision of the Reorganization Agreement.

(f) Cooperation. Each Party will use commercially reasonable efforts to cooperate in sharing, retaining, and maintaining data and records that are necessary or appropriate to further the purposes of this Section 4.3 and for each Party to administer its respective Benefit Plans to the extent consistent with this Agreement and applicable Law, and each Party agrees to cooperate as long as is reasonably necessary to further the purposes of this Section 4.3. No Party will charge another Party a fee for such cooperation.

(g) Labor Relations. To the extent required by applicable Law or any agreement with a labor union, works council or similar employee organization, Republic Wireless will provide notice, engage in consultation and take any similar action which may be required on its part in connection with the Distribution and will fully indemnify Bandwidth against any Liabilities arising from its failure to comply with such requirements.

ARTICLE V

EQUITY AND EQUITY-BASED COMPENSATION

Section 5.1. General Principles.

(a) Bandwidth and Republic Wireless will take any and all reasonable actions as will be necessary and appropriate to further the provisions of this Article V, including, to the extent practicable, providing written notice or similar communication to each Employee or director who holds one or more awards granted under any Bandwidth Equity Plan informing such Employee or director, as applicable, of (i) the actions contemplated by this Article V with respect to such awards and (ii) whether (and during what time period) any “blackout” period will be imposed upon holders of awards granted under any Bandwidth Equity Plan during which time awards may not be exercised or settled, as the case may be.

(b) Following the Effective Time, a grantee who has outstanding equity-based awards under one or more of the Bandwidth Equity Plans and/or replacement equity-based awards under the Republic Wireless Equity Plan will be considered to have been employed by the applicable plan sponsor before and after the Effective Time for purposes of vesting.

(c) No award described in this Article V, whether outstanding or to be issued, adjusted, substituted or cancelled by reason of or in connection with the Distribution, will be adjusted, settled, cancelled, or exercisable, until in the judgment of the administrator of the applicable plan or program such action is consistent with all applicable Laws, including federal securities Laws. With respect to each outstanding stock option, the period during which such option is exercisable and the ultimate expiration date of the option will not be extended.

 

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(d) From and after the Effective Time, all awards adjusted pursuant to this Article V will be subject to the terms and conditions set forth in the applicable Bandwidth Equity Plan or Republic Wireless Equity Plan and corresponding award agreements. Without limiting the generality of the foregoing, from and after the Effective Time, all references to the applicable company in such Bandwidth Equity Plan or Republic Wireless Equity Plan, as applicable, and other administrative provisions requiring interpretation will refer to the appropriate company to reflect the Transaction.

(e) The adjustment or conversion of Bandwidth Options will be effected in a manner that is intended to avoid the imposition of any accelerated, additional, penalty or other Taxes on the holders thereof pursuant to Section 409A of the Code.

Section 5.2. Stock Options.

(a) General Principles. The adjustments provided for in this Section 5.2 with respect to the Bandwidth Options and Republic Wireless Options are intended to be effected in a manner compliant with Section 424(a) of the Code.

(b) Treatment of Stock Options Held by Bandwidth Employees, Former Bandwidth Employees, Bandwidth Directors and Republic Wireless Employees. Each Bandwidth Option held by a Bandwidth Employee, a Former Bandwidth Employee, a Bandwidth Director or a Republic Wireless Employee immediately prior to the Effective Time will be converted as of the Effective Time into (i) an option to purchase Bandwidth Common Stock issued pursuant to the applicable Bandwidth Equity Plan (each such option, an “Adjusted Bandwidth Option”); and (ii) an option to purchase Republic Wireless Common Stock (each such option, a “Republic Wireless Option”) issued pursuant to the terms of the Republic Wireless Equity Plan.

Subject to Section 5.1, each Adjusted Bandwidth Option will be subject to the same terms and conditions from and after the Effective Time as the terms and conditions applicable to the corresponding Bandwidth Option immediately prior to the Effective Time; provided, however, that from and after the Effective Time: (x) each such Adjusted Bandwidth Option will continue to vest from and after the Effective Time so long as the holder of such Adjusted Bandwidth Option remains either a Bandwidth Employee or a Republic Wireless Employee; (y) each such Adjusted Bandwidth Option will remain exercisable until the date ninety (90) days immediately following the termination of employment of the holder of such Adjusted Bandwidth Option by either Bandwidth or Republic Wireless, unless earlier terminated pursuant to the terms of any such Adjusted Bandwidth Option, including, without limitation, due to any termination of employment for cause (or other similar term in any applicable Bandwidth Equity Plan); provided, however, the foregoing will not apply with respect to any termination of employment attributable to Death (as defined in any applicable Bandwidth Equity Plan; and (z) the per-share exercise price of each such Adjusted Bandwidth Option will be equal to (A) the per-share exercise price of the corresponding Bandwidth Option immediately prior to the Effective Time multiplied by (B) the Bandwidth Ratio, rounded up to the fourth decimal place.

Subject to Section 5.1, each Republic Wireless Option will be subject to the same terms and conditions from and after the Effective Time as the terms and conditions applicable to the corresponding Bandwidth Option immediately prior to the Effective Time; provided, however, that from and after the Effective Time: (x) each such Republic Wireless Option will continue to vest from and after the Effective Time so long as the holder of such Republic Wireless Option remains either a Bandwidth Employee or a Republic Wireless Employee; (y) each such Republic Wireless Option will remain exercisable until the date ninety (90) days immediately following the termination of employment of the holder of such Republic Wireless Option by either Bandwidth or Republic Wireless, unless earlier terminated pursuant to the terms of any such Republic Wireless Option, including, without limitation, due to any termination of

 

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employment for cause (or other similar term in the Republic Wireless Equity Plan); provided, however, the foregoing will not apply with respect to any termination of employment attributable to Death (as defined in the Republic Wireless Equity Plan; and (z) the per-share exercise price of each such Republic Wireless Option will be equal to (A) the per-share exercise price of the corresponding Bandwidth Option immediately prior to the Effective Time multiplied by (B) the Republic Wireless Ratio, rounded up to the fourth decimal place.

Section 5.3. Liabilities for Settlement of Awards.

(a) Settlement of Adjusted Bandwidth Options. Bandwidth will be responsible for all Liabilities associated with Adjusted Bandwidth Options (regardless of the holder of such awards), including any option exercise, share delivery, registration or other obligations related to the exercise of the Adjusted Bandwidth Options.

(b) Settlement of Republic Wireless Options. Republic Wireless will be responsible for all Liabilities associated with Republic Wireless Options (regardless of the holder of such awards), including any option exercise, share delivery, registration or other obligations related to the exercise of the Republic Wireless Options.

Section 5.4. Tax Reporting and Withholding for Equity-Based Awards. Unless otherwise required by applicable Law, Bandwidth will be responsible for all income, payroll, fringe benefit, social, payment on account or other tax reporting related to income of or otherwise owed by Bandwidth Employees or Former Bandwidth Employees from equity-based awards, and Republic Wireless will be responsible for all income, payroll, fringe benefit, social, payment on account or other tax reporting related to or otherwise owed on income of Republic Wireless Employees from equity-based awards. Further, Bandwidth will be responsible for remitting applicable tax withholdings and related payments for Bandwidth Employees to each applicable taxing authority, and Republic Wireless will be responsible for remitting applicable tax withholdings and related payments for Republic Wireless Employees to each applicable taxing authority; provided, however, that to the extent necessary (and permissible) to effectuate the foregoing, either Bandwidth or Republic Wireless may act as agent for the other company by remitting amounts withheld in the form of shares or in conjunction with an exercise transaction and related payments to an appropriate taxing authority. For non-employee directors of Bandwidth or Republic Wireless, all compensation income realized from either Bandwidth equity-based awards or Republic Wireless equity-based awards will be reflected by a Form 1099 provided to such non-employee director by Bandwidth or Republic Wireless, as applicable, for each year. There will be no tax withholding made by either Bandwidth or Republic Wireless with respect to any equity-based awards for non-employee directors of Bandwidth or Republic Wireless.

Section 5.5. Cooperation. Each Party acknowledges and agrees to use commercially reasonable efforts to cooperate with each other and with third-party providers to effect withholding and remittance of Taxes, as well as required tax reporting, in a timely, efficient and appropriate manner to further the purposes of this Article V and to administer all employee equity awards that are outstanding immediately following the Effective Time (including all such equity awards that are adjusted in accordance with this Article V) to the extent consistent with this Agreement and applicable Law, for as long as is reasonably necessary to further the purposes of this Article V. No Party will charge another Party a fee for such cooperation.

 

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ARTICLE VI

INTENTIONALLY DELETED

ARTICLE VII

TREATMENT OF ANNUAL BONUSES FOR FISCAL YEAR 2016

As of the Effective Time, with respect to each Republic Wireless Employee who is eligible to receive an annual bonus pursuant to the terms of the Bandwidth Bonus Plan immediately prior to the Effective Time, Republic Wireless will (a) assume any such annual bonus liability, and (b) establish a new annual bonus plan with the same financial metrics applicable to each Republic Wireless Employee, payment provisions and other terms and conditions, in each case, as in effect under the Bandwidth Bonus Plan immediately prior to the Distribution, such that, subject to the required determinations by the compensation committee of the board of directors of Republic Wireless, such annual bonuses will be paid to each Republic Wireless Employee in accordance with the terms of such annual bonus plan.

ARTICLE VIII

U.S. QUALIFIED DEFINED CONTRIBUTION PLANS

Section 8.1. Republic Wireless 401(k) Plan. From and after the Effective Time, if at any time Republic Wireless implements a Republic Wireless 401(k) Plan, Republic Wireless (acting directly or through its Affiliates) will be responsible for any and all Liabilities and other obligations with respect to such Republic Wireless 401(k) Plan.

Section 8.2. Tax Qualified Status. Republic Wireless will take all steps and make any necessary filings with the IRS to maintain the Republic Wireless 401(k) Plan, if any, so that such plan remains qualified under Section 401(a) of the Code and the related trust remains tax-exempt under Section 501(a) of the Code, including timely seeking and obtaining a favorable determination letter from the IRS as to such qualification at the times prescribed under Revenue Procedure 2007-44, 2007-28 I.R.B. 54, or corresponding successor guidance.

Section 8.3. Remission of Funds to Bandwidth Regarding Outstanding Loans Pursuant to 401(k) Plan. If at the Effective Time, there are any loans outstanding from any 401(k) plan administered by Bandwidth with respect to any Republic Wireless Employee, Republic Wireless will deduct from amounts due to such Republic Wireless employee such amounts as are necessary to repay such outstanding loans in accordance with Bandwidth’s practices prior to the Effective Time and will, upon such deduction, timely remit such amounts to Bandwidth for application to the applicable outstanding loans.

ARTICLE IX

U.S. WELFARE PLANS

Section 9.1. Establishment of Republic Wireless Welfare Plans.

(a) Management Benefitted Employees. On the Welfare Plan Implementation Date, Republic Wireless will cause the Republic Wireless Welfare Plan Participants who are Management Benefitted Employees to become covered by a corresponding Republic Wireless Welfare Plan under terms and conditions that are similar to those of the Bandwidth Welfare Plans. The Bandwidth Welfare Plans will cover the Republic Wireless Welfare Plan Participants who are Management Benefitted Employees for the portion of the 2016 calendar year following the Effective Time, as set forth in this Article IX, and to the extent not set forth in this Article IX, pursuant to a Transition Services Agreement, so that Management Benefitted Employees will not experience an interruption in coverage. Schedule 9.1(a) sets forth all Republic Wireless Welfare Plans, all Bandwidth Welfare Plans and identifies the participating employers in each, before and after the Welfare Plan Implementation Date.

 

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(b) Coordination for Cessation of Coverages. For the avoidance of doubt, Republic Wireless Welfare Plan Participants who are:

(I) Subject to the conditions set forth in Section 9.2(a) and notwithstanding Section 9.2(i)(III), Management Benefitted Employees will not participate in any Bandwidth Welfare Plan on or after the relevant Welfare Plan Implementation Date that applies to a corresponding Republic Wireless Welfare Plan; and

(II) Bandwidth Employees will not participate in any Republic Wireless Welfare Plans at any time on or after the Effective Time.

Section 9.2. Transitional Matters Under Republic Wireless Welfare Plans and Bandwidth Welfare Plans; Treatment of Claims Incurred and Other Miscellaneous Matters.

(a) Liability for Claims Incurred Under Bandwidth Welfare Plans. The applicable Bandwidth Welfare Plans will remain responsible for the adjudication and/or payment of unpaid covered claims that any Management Benefitted Employee incurs under any of the Bandwidth Welfare Plans before the Welfare Plan Implementation Date. Bandwidth will cause such Bandwidth Welfare Plans to fully perform, pay and discharge all such claims. Claims for ongoing care for a Management Benefitted Employee under any of the Bandwidth Welfare Plans will be allocated as follows:

(I) Outpatient Care. The applicable Bandwidth Welfare Plan will be liable for the portion of ongoing outpatient care that is provided before the Welfare Plan Implementation Date, and the applicable Republic Wireless Welfare Plan will be responsible for the portion of ongoing outpatient care that is provided after the Welfare Plan Implementation Date.

(II) Inpatient Care. The applicable Bandwidth Welfare Plan will be liable for the portion of ongoing inpatient care that is provided before the Welfare Plan Implementation Date, and the applicable Republic Wireless Welfare Plan will be responsible for the portion of ongoing inpatient care that is provided after the Welfare Plan Implementation Date.

(III) Claims Incurred. For purposes of this Section 9.2(a), a claim or expense is deemed to be incurred (A) with respect to medical (including continuous hospitalization), dental, vision and/or prescription drug benefits, upon the rendering of health services giving rise to such claim or expense; (B) with respect to life insurance, accidental death and dismemberment and business travel accident insurance, upon the occurrence of the event giving rise to such claim or expense; and (C) with respect to long-term disability benefits, upon the date of an individual’s disability, as determined by the disability benefit insurance carrier or claims administrator, giving rise to such claim or expense.

(b) Credit for Deductibles and Other Limits. With respect to each Management Benefitted Employee, Republic Wireless and Bandwidth will use reasonable efforts to provide that for purposes of any maximum benefit payable under any of the Republic Wireless Welfare Plans, the Republic Wireless Welfare Plans will recognize any expenses paid or reimbursed by the Bandwidth Welfare Plans with respect to such participant before the Welfare Plan Implementation Date, to the same extent such expense payments or reimbursements would be recognized in respect of an active plan participant under any of the applicable Bandwidth Welfare Plans.

(c) COBRA.

 

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(I) Bandwidth will be responsible for complying with the group health coverage continuation requirements of COBRA for Qualifying Events occurring before the Welfare Plan Implementation Date affecting a Management Benefitted Employee or a Former Management Benefitted Employee or his or her Qualified Beneficiaries with respect to each Management Benefitted Employee and Former Management Benefitted Employee who becomes a Qualified Beneficiary before the Welfare Plan Implementation Date.

(II) Republic Wireless will be responsible for complying with the group health coverage continuation requirements of COBRA for Qualifying Events occurring on or after the Welfare Plan Implementation Date affecting a Management Benefitted Employee or his or her Qualified Beneficiaries with respect to each Management Benefitted Employee who becomes a Qualified Beneficiary on or after the Welfare Plan Implementation Date.

(III) For the avoidance of doubt, Bandwidth and Republic Wireless will cause such Bandwidth Welfare Plans or Republic Wireless Welfare Plans, as the case may be, to fully perform, pay and discharge all such claims for any Management Benefitted Employees, as set forth under subsections (I) through (III) of this subsection (c) for the duration of COBRA continuation coverage, as determined pursuant to Treasury Regulation Section 4980B-7, so that the Republic Wireless Welfare Plans will not be liable for the payment of claims incurred under the Bandwidth Welfare Plans pursuant to subsections (I) of this subsection (c) and the Bandwidth Welfare Plans will not be liable for the payment of claims incurred under the Republic Wireless Welfare Plans for claims incurred pursuant to subsections (II) of this subsection (c).

(d) HIPAA Notices of Creditable Coverage. The Bandwidth Welfare Plans will be responsible for providing Notices of Creditable Coverage to all Management Benefitted Employees after the Welfare Plan Implementation Date, if required. The Republic Wireless Welfare Plans will be responsible for providing Notices of Creditable Coverage to all Management Benefitted Employees on and after the Welfare Plan Implementation Date; provided, however, that for periods during which coverage for Management Benefitted Employees under the Bandwidth Welfare Plans is at issue, Bandwidth will cooperate and use commercially reasonable efforts to provide Republic Wireless with information necessary for the Republic Wireless Welfare Plans to issue correct and complete Notices of Creditable Coverage.

(e) Assumption of Liability for Disability Medical Benefits. Effective as of the Welfare Plan Implementation Date, any liability to provide Disability Medical Benefits to any Former Management Benefitted Employees who, under Section 9.2(i)(III) began receiving long-term disability benefits under an Bandwidth Welfare Plan before the Welfare Plan Implementation Date, will be transferred to Republic Wireless, and Bandwidth will not have any obligations with respect thereto; provided, however, that neither Republic Wireless nor Republic Wireless will have any obligation pursuant to the terms of this Agreement to continue any Disability Medical Benefits on or after the Welfare Plan Implementation Date.

(i) Employees on Vacation, Leave or Disability.

(I) As of the Effective Time, Republic Wireless will assume all Liabilities with respect to any Republic Wireless Employee who is a

 

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Management Benefitted Employee and, as of or following the Effective Time and prior to the Welfare Plan Implementation Date, who is or goes on vacation or who is on or commences an approved leave of absence, whether paid or unpaid (including leave under FMLA or corresponding state Law, short-term disability, military leave and other approved leave, including Liabilities for salary continuation, paid leave or continuing Benefit Plans).

(II) As of the Effective Time and until the Welfare Plan Implementation Date, Bandwidth will cause the Bandwidth Welfare Plans to treat any Republic Wireless Employee who is a Management Benefitted Employee and, as of or following the Effective Time and prior to the Welfare Plan Implementation Date, who is or goes on vacation or who is on or commences an approved leave of absence, whether paid or unpaid (including leave under FMLA or corresponding state Law, short-term disability, military leave and other approved leave, including Liabilities for salary continuation, paid leave or continuing Benefit Plans) the same as a Bandwidth Employee or Former Bandwidth Employee would be treated under the Bandwidth Welfare Plans in the same or similar circumstance.

(III) For the avoidance of doubt, any Republic Wireless Employees who are Former Management Benefitted Employees and who qualify before the Welfare Plan Implementation Date for long-term disability benefits under a Bandwidth Welfare Plan will remain in such long-term disability plan.

(IV) Notwithstanding subsections (I) and (II) above, any individual residing in California or another jurisdiction with specific rules that are not reflected in this provision and that must be followed, as the case may be, who would have become a Republic Wireless Employee as of the Effective Time but was on an approved leave of absence at the Effective Time will become a Republic Wireless Employee following the conclusion of his or her approved leave or as Bandwidth and Republic Wireless will agree pursuant to Section 2.6, as the case may be.

Section 9.3. Continuity of Benefits.

(a) Additional Details Regarding Flexible Spending Accounts.

(I) Pursuant to Section 9.1, Bandwidth will cause its health care flexible spending account or dependent care flexible spending account (each, an “Bandwidth FSA”) benefits to be continued for Republic Wireless Welfare Plan Participants who are Management Benefitted Employees through February 28, 2017, pursuant to a Transition Services Agreement. Bandwidth will bear the burden of experience losses and the benefit of experience gains for each Bandwidth FSA for the entirety of 2017.

(II) Effective as of the Effective Time, Republic Wireless or another Republic Wireless Entity will withhold payroll deductions made pursuant to the terms of the Bandwidth FSAs as in effect prior to and after the Effective Time and remit such amounts to the Bandwidth FSAs within the period required by Labor Regulation Section 2510.3-102(a)(1) and any other applicable guidance for the health care flexible spending account and as soon as practicable for the dependent care flexible spending account.

 

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(III) Effective March 1, 2017, Republic Wireless or another Republic Wireless Entity will cause Republic Wireless Welfare Plan Participants who are Management Benefitted Employees to become eligible for health care flexible spending account benefits and dependent care flexible spending account benefits.

(b) Intentionally Deleted.

(c) Employer Non-Elective Contributions.

(I) As of the Effective Time, Republic Wireless will cause any Republic Wireless Welfare Plans that constitute a “cafeteria plan” under Section 125 of the Code to recognize and give effect to all non-elective employer contributions credited toward coverage of a Republic Wireless Welfare Plan Participant who is a Management Benefitted Employee under the corresponding Bandwidth Welfare Plan that is a cafeteria plan under Section 125 of the Code for the applicable plan year.

(II) For the avoidance of doubt, Republic Wireless will cause all contributions for coverage made before the Welfare Plan Implementation Date for all Republic Wireless Welfare Plan Participants who are Management Benefitted Employees participating in Bandwidth Welfare Plans to be remitted to Bandwidth within the period required by Labor Regulation Section 2510.3-102(a)(1) and any other applicable guidance.

(d) Waiver of Conditions or Restrictions. Unless prohibited by applicable Law, the Republic Wireless Welfare Plans will waive all limitations, exclusions, service conditions, waiting period limitations or evidence of insurability requirements that would otherwise be applicable to a Republic Wireless Welfare Plan Participant who is a Management Benefitted Employee following the Welfare Plan Implementation Date to the extent that such Employee had previously satisfied such limitations under the corresponding Bandwidth Welfare Plans.

Section 9.4. Welfare Plan Implementation Date. For the avoidance of doubt, the Parties may vary the Welfare Plan Implementation Date for each of the Republic Wireless Welfare Plans.

ARTICLE X

INTENTIONALLY DELETED

ARTICLE XI

INTENTIONALLY DELETED

ARTICLE XII

WORKERS’ COMPENSATION AND UNEMPLOYMENT COMPENSATION

Section 12.1. Republic Wireless Workers’ Compensation. Effective as of the Effective Time, Republic Wireless will be responsible for: (a) the obligations for all claims and Liabilities relating to unemployment compensation benefits for all Republic Wireless Employees employed by Republic Wireless and (b) obtaining workers’ compensation insurance, including providing all collateral required by the insurance carriers.

 

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Section 12.2. Republic Wireless Unemployment Compensation. Effective as of the Effective Time, Republic Wireless will be responsible for the obligations for all claims and Liabilities relating to unemployment compensation benefits for all Republic Wireless Employees employed by Republic Wireless. Effective as of the Effective Time, Republic Wireless will be responsible for establishing new or transferred unemployment insurance employer accounts, policies and claims handling contracts with the applicable government agencies.

Section 12.3. Bandwidth Workers’ Compensation. Effective as of the Effective Time, Bandwidth will have the obligations for all claims and Liabilities relating to workers’ compensation for all Bandwidth Employees and Former Bandwidth Employees. Effective as of the Effective Time, Bandwidth will have the obligations for all claims and Liabilities relating to workers’ compensation for all Former Bandwidth Employees.

Section 12.4. Bandwidth Unemployment Compensation. Effective as of the Effective Time, Bandwidth will have the obligations for all claims and Liabilities relating to unemployment compensation benefits for all Bandwidth Employees and Former Bandwidth Employees. Effective as of the Effective Time, Bandwidth will have the obligations for all claims and Liabilities relating to unemployment compensation benefits for all Former Bandwidth Employees.

Section 12.5. Assignment of Contribution Rights. Bandwidth will transfer and assign (or cause another member of Bandwidth to transfer and assign) to Republic Wireless all rights to seek contribution or damages from any applicable third party (such as a third party who aggravates an injury to a worker who makes a workers’ compensation claim) with respect to any workers’ compensation claim for which Republic Wireless is responsible pursuant to this Article XII. Republic Wireless will transfer and assign to Bandwidth all rights to seek contribution or damages from any applicable third party (such as a third party who aggravates an injury to a worker who makes a workers’ compensation claim) with respect to any workers’ compensation claim for which Bandwidth is responsible pursuant to this Article XII.

Section 12.6. Collateral. On and after the Effective Time, Republic Wireless will be responsible for providing all collateral required by insurance carriers in connection with workers’ compensation claims for which Liability is allocated to Republic Wireless under this Article XII. Bandwidth will be responsible for providing all collateral required by insurance carriers in connection with workers’ compensation claims for which Liability is allocated to Bandwidth under this Article XII.

Section 12.7. Cooperation. Republic Wireless and Bandwidth will use commercially reasonable efforts to provide that workers’ compensation and unemployment insurance costs are not adversely affected for either of them by reason of the Distribution.

ARTICLE XIII

SEVERANCE

Bandwidth will have no Liability or obligation under any Bandwidth severance plan(s) or policies with respect to Republic Wireless Employees who did not have a termination event prior to the Effective Time giving rise to a severance payment under such Bandwidth severance plan(s) or policies. Republic Wireless will be liable for all severance payments to be paid to any Republic Wireless Employee under the applicable Bandwidth severance plan(s) or policies in which such Republic Wireless Employee participated immediately prior to the Effective Time, if, and to the extent that, the events giving rise to such severance payments occurred prior to the Effective Time. By no later than the Effective Time, Republic Wireless will adopt severance plan(s) or policies under which Republic Wireless Employees who, immediately prior to the Effective Time, will be eligible to participate immediately following the Effective Time. Such Republic Wireless severance plan(s) or policies will

 

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provide terms and conditions for Republic Wireless Employees who are severed from Republic Wireless following the Effective Time that are substantially similar to the terms and conditions provided under the applicable Bandwidth severance plan(s) or policies in which such Republic Wireless Employees participated immediately prior to the Effective Time. For the avoidance of doubt, the Distribution and the assignment, transfer or continuation of the employment of Republic Wireless Employees contemplated by Section 4.1 will not be deemed a severance of employment for purposes of this Agreement and, effective as of the Effective Time, Republic Wireless Employees will not be eligible to receive any severance payments or other benefits under any Bandwidth severance arrangements, plans, policies or guidelines, or agreements.

ARTICLE XIV

BENEFIT ARRANGEMENTS AND OTHER MATTERS

Section 14.1. Termination of Participation. Except as otherwise provided under this Agreement, effective as of immediately after the Effective Time, Republic Wireless Employees will not be eligible to participate in any Bandwidth Benefit Plan.

Section 14.2. Restrictive Covenants in Employment and Other Agreements. To the fullest extent permitted by the agreements described in this Section 14.2 and applicable Law, Bandwidth will assign to Republic Wireless all agreements containing restrictive covenants (including confidentiality, non-competition and non-solicitation provisions) between Bandwidth and a Republic Wireless Employee, with such assignment to be effective as of the Effective Time. To the extent that assignment of such agreements is not permitted, effective as of the Effective Time, Republic Wireless will be considered to be a successor to Bandwidth for purposes of, and a third-party beneficiary with respect to, all agreements containing restrictive covenants (including confidentiality, non-competition and non-solicitation provisions) between Bandwidth and a Republic Wireless Employee, such that Republic Wireless will enjoy all the rights and benefits under such agreements (including rights and benefits as a third-party beneficiary), with respect to the business operations of Republic Wireless; provided, however, that in no event will Bandwidth be permitted to enforce such restrictive covenant agreements against Republic Wireless Employees for action taken in their capacity as employees of Republic Wireless; provided, further, that for three (3) years following the Effective Time, Bandwidth and Republic Wireless will not be considered competitors under any non-competition provision applicable to any Bandwidth Employee or Republic Wireless Employee.

ARTICLE XV

GENERAL PROVISIONS

Section 15.1. Preservation of Rights to Amend. The rights of Bandwidth and Republic Wireless to amend, waive, or terminate any Benefit Plan will not be limited in any way by this Agreement.

Section 15.2. Confidentiality. Each Party agrees that any information conveyed or otherwise received by or on behalf of a Party in conjunction herewith that is not otherwise public through no fault of such Party is confidential and is subject to the terms of the confidentiality provisions set forth herein and in the Reorganization Agreement.

Section 15.3. Administrative Complaints/Litigation. Except as otherwise provided in this Agreement, on and after the Effective Time, Republic Wireless will assume, and be solely liable for, the handling, administration, investigation, and defense of actions, including ERISA, occupational safety and health, employment standards, union grievances, wrongful dismissal, discrimination or human rights, and unemployment compensation claims asserted at any time against Bandwidth or Bandwidth by any

 

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Republic Wireless Employee (including any dependent or beneficiary of any such Employee) or any other person, to the extent such actions or claims arise out of or relate to employment or the provision of services (whether as an employee, contractor, consultant, or otherwise) to or with respect to the business activities of Republic Wireless after the Effective Time. To the extent that any legal action relates to a putative or certified class of plaintiffs, which includes both Bandwidth Employees (or Former Bandwidth Employees) and Republic Wireless Employees and such action involves employment or benefit plan related claims, reasonable costs and expenses incurred by the Parties in responding to such legal action will be allocated among the Parties equitably in proportion to a reasonable assessment of the relative proportion of Employees included in or represented by the putative or certified plaintiff class. The procedures contained in the indemnification and related litigation cooperation provisions of the Reorganization Agreement will apply with respect to each Party’s indemnification obligations under this Section 15.3.

Section 15.4. Reimbursement and Indemnification. Each Party agrees to reimburse the other Party, within 30 days of receipt from the other Party of reasonable verification or except as otherwise provided in the Transition Services Agreement, for all costs and expenses which the other Party may incur on its behalf as a result of any of the respective Bandwidth and Republic Wireless Welfare Plans, 401(k) plans, savings plans, retirement plans, Benefit Plans, and pension plans and, as contemplated by Article XIII, any termination or severance payments or benefits. All Liabilities retained, assumed, or indemnified against by Republic Wireless pursuant to this Agreement, and all Liabilities retained, assumed, or indemnified against by Bandwidth pursuant to this Agreement, will in each case be subject to the indemnification provisions of the Reorganization Agreement. Notwithstanding anything to the contrary, (i) no provision of this Agreement will require Republic Wireless to pay or reimburse to Bandwidth any benefit-related cost item that Republic Wireless has paid or reimbursed to Bandwidth prior to the Effective Time; and (ii) no provision of this Agreement will require Bandwidth to pay or reimburse to Republic Wireless any benefit-related cost item that Bandwidth has paid or reimbursed to Republic Wireless prior to the Effective Time.

Section 15.5. Costs of Compliance with Agreement. Except as otherwise provided in this Agreement, each Party will pay its own expenses in fulfilling its obligations under this Agreement.

Section 15.6. Fiduciary Matters. Bandwidth and Republic Wireless each acknowledges that actions required to be taken pursuant to this Agreement may be subject to fiduciary duties or standards of conduct under ERISA or other applicable Law, and no Party will be deemed to be in violation of this Agreement if it fails to comply with any provisions hereof based upon its good-faith determination (as supported by advice from counsel experienced in such matters) that to do so would violate such a fiduciary duty or standard. Each Party will be responsible for taking such actions as are deemed necessary and appropriate to comply with its own fiduciary responsibilities and will fully release and indemnify the other Party for any Liabilities caused by the failure to satisfy any such responsibility.

Section 15.7. Entire Agreement. This Agreement, together with the documents referenced herein (including the Reorganization Agreement and the Benefit Plans), constitutes the entire agreement and understanding among the Parties with respect to the subject matter hereof and supersedes all prior written and oral and all contemporaneous oral agreements and understandings with respect to the subject matter hereof. To the extent any provision of this Agreement conflicts with the provisions of the Reorganization Agreement, the provisions of this Agreement will be deemed to control with respect to the subject matter hereof.

Section 15.8. Binding Effect; No Third-Party Beneficiaries; Assignment. This Agreement will inure to the benefit of and be binding upon the Parties and their respective successors and permitted assigns. Except as otherwise expressly provided in this Agreement, this Agreement is solely for the

 

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benefit of the Parties and should not be deemed to confer upon any third parties any remedy, claim, liability, reimbursement, cause of action, or other right in excess of those existing without reference to this Agreement. Nothing in this Agreement is intended to amend any Benefit Plan or affect the applicable plan sponsor’s right to amend or terminate any Benefit Plan pursuant to the terms of such plan. The provisions of this Agreement are solely for the benefit of the Parties, and no current or former Employee, officer, director, or independent contractor or any other individual associated therewith will be regarded for any purpose as a third-party beneficiary of this Agreement. This Agreement may not be assigned by any Party, except with the prior written consent of the other Parties.

Section 15.9. Amendment; Waivers. No change or amendment may be made to this Agreement except by an instrument in writing signed on behalf of each of the Parties. Any Party may, at any time, (i) extend the time for the performance of any of the obligations or other acts of another Party, (ii) waive any inaccuracies in the representations and warranties of another Party contained herein or in any document delivered pursuant hereto, and (iii) waive compliance by another Party with any of the agreements, covenants, or conditions contained herein. Any such extension or waiver will be valid only if set forth in an instrument in writing signed by an authorized person of the Party to be bound thereby. No failure or delay on the part of any Party in the exercise of any right hereunder will impair such right or be construed to be a waiver of, or acquiescence in, any breach of any representation, warranty, covenant, or agreement contained herein, nor will any single or partial exercise of any such right preclude other or further exercises thereof or of any other right.

Section 15.10. Remedies Cumulative. All rights and remedies existing under this Agreement or the schedules attached hereto are cumulative to, and not exclusive of, any rights or remedies otherwise available.

Section 15.11. Notices. Unless otherwise expressly provided herein, all notices, claims, certificates, requests, demands and other communications hereunder will be in writing and will be deemed to be duly given: (i) when personally delivered, (ii) if mailed by registered or certified mail, postage prepaid, return receipt requested, on the date the return receipt is executed or the letter is refused by the addressee or its agent, (iii) if sent by overnight courier which delivers only upon the executed receipt of the addressee, on the date the receipt acknowledgment is executed or refused by the addressee or its agent, or (iv) if sent by facsimile or electronic mail, on the date confirmation of transmission is received (provided that a copy of any notice delivered pursuant to this clause (iv) will also be sent pursuant to clause (i), (ii) or (iii)), addressed to the attention of the addressee’s General Counsel at the address of its principal executive office or to such other address or facsimile number for a Party as it will have specified by like notice.

Section 15.12. Counterparts. This Agreement, including the schedules hereto and the other documents referred to herein, may be executed in multiple counterparts, each of which when executed will be deemed to be an original but all of which together will constitute one and the same agreement.

Section 15.13. Severability. If any term or other provision of this Agreement or the schedules attached hereto is determined by a non-appealable decision by a court, administrative agency, or arbitrator to be invalid, illegal, or incapable of being enforced by any rule of Law or public policy, all other conditions and provisions of this Agreement will nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any Party. Upon such determination that any term or other provision is invalid, illegal, or incapable of being enforced, the court, administrative agency, or arbitrator will interpret this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the fullest extent possible. If any sentence in this Agreement is so broad as to be unenforceable, the provision will be interpreted to be only so broad as is enforceable.

 

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Section 15.14. Governing Law. This Agreement will be governed by and construed in accordance with the Laws, but not the Laws governing conflicts of Laws, of the State of North Carolina; provided that the Delaware General Corporation Law, including the provisions thereof governing the fiduciary duties of directors of a Delaware corporation, will govern, as applicable, the internal affairs of Bandwidth and Republic Wireless, as the case may be.

Section 15.15. Performance. Each of Bandwidth and Republic Wireless will cause to be performed, and hereby guarantees the performance of, all actions, agreements and obligations set forth herein to be performed by Bandwidth and Republic Wireless, respectively. The Parties each agree to take such further actions and to execute, acknowledge, and deliver, or to cause to be executed, acknowledged, and delivered, all such further documents as are reasonably requested by the other for carrying out the purposes of this Agreement or of any document delivered pursuant to this Agreement.

Section 15.16. Construction. This Agreement will be construed as if jointly drafted by the Parties and no rule of construction or strict interpretation will be applied against any Party.

Section 15.17. Effect if Distribution Does Not Occur. Notwithstanding anything in this Agreement to the contrary, if the Reorganization Agreement is terminated prior to the Effective Time, this Agreement will be of no further force and effect and will be void ab initio.

Section 15.18. Code Sections 162(m) and 409A. Notwithstanding anything in this Agreement to the contrary (including the treatment of non-qualified deferred compensation plans, outstanding long-term incentive awards and annual incentive awards as described herein), Bandwidth and Republic Wireless agree to negotiate in good faith regarding the need for any treatment different from that otherwise provided herein to ensure that (i) a federal income tax deduction for the payment of any non-qualified deferred compensation plan, long-term incentive award, annual incentive award or other compensation is, to the extent prescribed under the terms of the applicable plan and award agreement, not limited by reason of Section 162(m) of the Code, and (ii) the treatment of any non-qualified deferred compensation plan, long-term incentive award, annual incentive award or other compensation does not cause the imposition of a penalty tax under Section 409A of the Code.

(The remainder of this page is intentionally left blank.)

 

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IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in their names by a duly authorized officer as of the date first written above.

 

[Signature Page to Employee Matters Agreement]

 

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Schedule 9.1(a)

Republic Wireless Group Medical Plan

Republic Wireless Group Dental Plan

Republic Wireless Group Life Plan

Republic Wireless Group Disability Plan

Republic Wireless Allstate Accident Plan

Republic Wireless Deductible Reimbursement Account

 

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Exhibit 10.18

MASTER SERVICE AGREEMENT

This Master Services Agreement is made effective as of November 30, 2016 (the “Effective Date”), by and between Bandwidth.com, Inc., a Delaware corporation with its principal office located at 900 Main Campus Drive, Suite 500, Raleigh, NC 27606 (“Provider”), and Republic Wireless, Inc., a Delaware corporation with its principal office located at 900 Main Campus Drive, Suite 500, Raleigh, NC 27606 (on behalf of itself and its affiliates, “Customer”). Both Provider and Customer may also be referred to as “party” or “Party”, or when referred to collectively or together, may also be referred to as either the “parties” or “Parties”. Capitalized terms not otherwise defined in this Agreement (as defined below) will be as defined in Exhibit A attached to this Agreement.

Customer desires to purchase, and Provider desires to supply, certain communications services identified pursuant to this Agreement from time to time as described in this Agreement (“Services”) under the following terms and conditions.

THIS AGREEMENT GOVERNS CUSTOMER PURCHASES OF PRODUCTS AND/OR SERVICE(S) FROM PROVIDER THROUGH PROVIDER’S WEBSITE, API, PORTAL, OR BY CUSTOMER SUBMISSION OF A SERVICE ORDER FORM VIA PHONE, FACSIMILE, EMAIL, MAIL, OR ANY OTHER MEANS.

1. TERM. The term of this Agreement will commence on the Effective Date and will continue for the longer of (i) twelve (12) months, or (ii) the term of any SOF(s) (as defined below) entered into pursuant to this Agreement (the “Initial Term”). The Initial Term will automatically extend thereafter upon the same terms and conditions applicable during the Initial Term for additional consecutive term(s) (each a “Renewal Term”) of one (1) month until this Agreement is terminated pursuant to Section 7 below (the Initial Term and all Renewal Terms collectively referred to herein as the “Term”). For clarity, if any SOF automatically renews during the Initial Term or any applicable Renewal Term for a period longer than contemplated in the immediately preceding sentence, then, effective as of such automatic renewal of such SOF, this Agreement will automatically extend for a term at least coterminous with such SOF. Provider will not accept any new SOFs from Customer at any time after (i) either Party has notified the other of the termination of this Agreement pursuant to Section 7 below; or (ii) Provider has notified Customer of a Default (as defined below), unless such Default will thereafter be timely cured by Customer or waived in writing by Provider.

2. SERVICE ORDER PROCEDURE; RATES.

(a) During the Term, Customer may submit to Provider service order(s) requesting Service(s) as described in Service Order Forms (and/or the Terms and Conditions incorporated therein by reference) (each individually an “SOF” and collectively the “SOFs”), Rate Sheets, Terms and Conditions, Exhibits, any other attachments to this Agreement, and Provider’s Acceptable Use Policy (“AUP”) posted by Provider from time to time at www.bandwidth.com/resources/legal, all of which are fully incorporated by reference within this Agreement between Customer and Provider (collectively referred to herein as the “Agreement”). Provider reserves the right in its sole discretion to reject or request modifications to any SOF(s) and/or Terms and Conditions Customer presents from time to time during the Term prior to acceptance of the applicable SOF by Provider. Provider will notify Customer of acceptance (in writing or electronically) of any applicable SOF. Upon acceptance of an SOF, Provider will use commercially reasonable efforts to meet Customer’s requested service start date(s), and will notify Customer if Provider does not anticipate that Provider can meet any requested service start date(s). Customer’s obligation for payment of Service(s) and the term of each SOF will commence on the applicable service start date (or any other commencement date provided in the applicable SOF) (“Service Commencement Date”). Any SOF not accepted by Provider will not be a valid SOF pursuant to this Agreement and Provider will have no liability or other obligations with respect to such SOF; provided, however, if Customer utilizes Service(s) without first submitting an SOF accepted by Provider, Provider’s standard Terms and Conditions applicable to such Service(s) will apply and Customer will remain obligated to pay for such Service(s) pursuant to this Agreement.

(b) All Service(s) will be provided in accordance with applicable SOFs, Terms and Conditions and Rate Sheets and any applicable Tariffs (collectively referred to herein as the “Rates”) for the applicable jurisdictions in which Service(s) are provided, in accordance with the applicable provisions of this Agreement. If no applicable Rates are attached (or Customer utilizes Service(s) without first submitting an SOF accepted by Provider), Provider’s standard rates will apply and will constitute the “Rates” for the purposes of such Service(s). Miscellaneous charges and/or fees imposed by any third party carrier or any underlying provider from time to time, whether charged to or against Provider, will be payable by Customer, including, without limitation, any cost recovery fee which will represent an accurate and non-inflated recovery of the miscellaneous charges and/or fees to or against Provider associated with the provision of Service(s) by Provider to Customer. Provider will use commercially reasonable efforts to provide to Customer information regarding any such miscellaneous charges and/or fees, including, without limitation, prior notice of any such charges and/or fees if reasonably practicable under the circumstances.

 

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Bandwidth - Proprietary & Confidential Information

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3. PAYMENT.

(a) Unless the Terms and Conditions of any applicable SOF provide for prepayment to Provider by Customer with respect to any applicable Service(s), Customer will pay for all Service(s) not later than the date thirty (30) calendar days immediately after the invoice date reflected on Provider’s invoice (“Due Date”), which invoice Provider will promptly deliver to Customer. If any Customer payment is not received by any applicable Due Date, Provider may impose a late payment charge of the lesser of (i) 1.5% per month, or (ii) the highest legally permissible rate, and apply such charge to the amount past due. It will not be a defense to nonpayment that all or any portion of charges for Service(s) were incurred by unauthorized users. Customer will reimburse Provider for reasonable attorneys’ fees and any other costs associated with collecting delinquent or dishonored payments. Restrictive endorsements or other statements on checks accepted by Provider will not apply.

(b) Except for taxes based on Provider’s net income (and/or unless expressly provided otherwise in any applicable SOF or Rate Sheet), all applicable federal, state or local taxes and all use, sales, commercial, gross receipts, privilege, surcharges, or other similar taxes, license fees, miscellaneous fees, and surcharges, including, without limitation, costs allocable or allocated to Provider in connection with any system mandated by any federal, state or local authority if administered by any such federal, state or local authority or by any third party, whether charged to or against Provider, will be payable by Customer, including, without limitation, any cost recovery fee which will represent an accurate and non-inflated recovery of Provider’s, or any underlying provider’s, miscellaneous tax, surcharge, and fee payments to federal, state or local governmental authorities associated with the provision of Service(s) by Provider to Customer pursuant to this Agreement. Provider retains the right to invoice Customer for costs incurred by Provider from time to time related to Provider’s compliance with court orders and other actions of governmental agencies or entities, including, without limitation, subpoenas duces tecum (and similar subpoenas), related to telephone numbers and other information related to or associated with Customer or Customer’s customers and/or End Users if such court orders and other actions of governmental agencies or entities with respect to Customer or Customer’s customers and/or End Users materially exceed customary industry standards.

(c) Notwithstanding the foregoing provisions of Section 3(b) above, if Customer intends to resell Service(s) and provides Provider written documentation of Customer’s tax-exempt status in a form reasonably acceptable to Provider, Provider will not charge Customer any taxes exempted due to Customer’s request and supporting documentation. Such documentation of Customer’s tax-exempt status will include a valid and properly executed tax exemption certificate(s) and/or statement(s) of indemnification for any taxes from which Customer seeks exemption. Customer will pay any and all remaining non-exempt charges. For clarity, the establishment of exemption from any taxes is the sole responsibility of Customer and Provider is not obligated to consider any retroactive request for tax exemption.

(d) Provider may require that Customer provide Provider with credit information as requested by Provider. Provider may require Customer to make a security deposit as a condition of Provider’s acceptance of any SOF, which security deposit will not exceed the amounts anticipated to be invoiced in two (2) calendar months.

(e) Provider retains the right to invoice, including any amended or corrected invoices, for Service(s) for a period of up to six (6) months after the date Provider provided the Service(s) to Customer; provided, however, Provider retains the right to invoice, including any amended or corrected invoices, (i) for a period of up to twelve (12) months with respect to any charges or surcharges pursuant to any applicable SOF with respect to any calls and/or Usage sent to Provider by Customer for termination that are not IP Originated; and (ii) for a period of up to nine (9) months with respect to any charges pursuant to any applicable SOF with respect to Average Call Duration, any Short Duration Call or Abandoned Calls, any payphone calls, and/or any surcharge. Provider will retain such rights for such period notwithstanding any prior invoices to Customer for the same period(s) and regardless of any otherwise conflicting terms or conditions of this Agreement. For the duration of this period, Provider will not be deemed to have waived any rights with regard to invoicing for the provided Service(s) that are subject to this period, nor will any legal or equitable doctrines apply, including estoppel or laches.

4. BILLING DISPUTES. If Customer disputes any invoiced charges, Customer may withhold any amounts disputed in good faith, will pay in full all undisputed charges invoiced by the applicable Due Date, and will submit written notification on or before the applicable Due Date through Provider’s customer portal found at https://support.bandwidth.com/home (or such other means Provider may provide to Customer from time to time by written notice). Such notification will include Customer’s complete contact information, the specific dollar amount in dispute, detailed supporting reasons for the dispute, and any supporting documentation, if available. The Parties will work together in good faith to investigate any disputed charges and use commercially reasonable efforts to resolve any payment dispute within thirty (30) calendar days after receipt of such notification from Customer. Any dispute resolved in favor of Customer will be credited to Customer’s next invoice(s); any disputed amounts resolved in favor of Provider will be due and payable by Customer immediately.

5. DEFAULT; REMEDIES. Upon the occurrence of a Default, the non-defaulting Party may, in addition to delivering an Escalation Notice pursuant to Section 17(a) below: (i) if the defaulting Party is Customer, suspend Provider’s performance of any or all Service(s) without liability or further obligation immediately; (ii) terminate any or all SOF(s) (or any portion thereof) without liability or further obligation immediately upon written notification of termination to Customer; and/or (ii) terminate this Agreement without liability or further obligation immediately upon written notification of termination to the other Party. All remedies expressed in this Agreement are without exclusion as to any rights or remedies that the parties may have under this Agreement or which may be recognized under controlling law.

 

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6. ACCEPTABLE USE POLICY. All use of Service(s) must comply with Provider’s Acceptable Use Policy (“AUP”) posted by Provider from time to time at www.bandwidth.com/resources/legal. The AUP is incorporated herein by reference and subject to change. Provider reserves the right to cooperate with legal authorities and/or injured third parties in the investigation of any suspected crime or civil wrong, including, without limitation, due to or arising as a result of any violation of the AUP.

7. TERMINATION.

(a) Customer may terminate this Agreement or any applicable SOF(s) (1) as of the end of the Term (or the term of any applicable SOF(s)) by written notice to Provider through Provider’s customer portal found at https://support.bandwidth.com/home (or such other means Provider may provide to Customer from time to time by written notice) not less than thirty (30) calendar days prior to the end of the Term and/or thirty (30) calendar days prior to the expiration of any applicable SOF(s), as the case may be; or (2) at any time upon thirty (30) days’ prior written notice. Provider will disconnect, or will cause to be disconnected, such Service(s), pursuant to such written notice. Customer will notify Provider of any and all requests for termination or disconnection of Services, including, without limitation, the porting out of billable telephone numbers (also referred to as DIDs), whether port outs are known or unknown by Customer; Customer remains solely responsible for all billable charges related to ported out DIDs.

(b) Provider may terminate this Agreement or any applicable SOF(s) (or any portion thereof) (1) as of the end of the Term (or the term of any applicable SOF(s)) by written notice to Customer (via email or other written notice) not less than thirty (30) calendar days prior to the end of the Term and/or thirty (30) calendar days prior to the expiration of any applicable SOF(s), as the case may be; or (2) at any time upon thirty (30) days’ prior written notice.

(c) In addition to any other rights that Provider has or may have pursuant to this Agreement, including, without limitation, Section 5 above, if Provider determines, in its discretion, that Customer’s use of any Service(s) (or the specific method or technology utilized by Customer and/or Customer’s customers and/or End Users) materially and adversely interferes with or otherwise places in jeopardy Provider’s network, other customers, partners and/or the overall business(es) of Provider or any of Provider’s other customers or partners, Provider may suspend or terminate this Agreement, any applicable SOF(s) and/or any or all Service(s) immediately upon as much prior notification to Customer as is practicable under the circumstances, if any.

(d) Upon termination of this Agreement and/or any applicable SOF(s), then Provider may collect from Customer: (i) all amounts due and payable pursuant to this Agreement, including, without limitation, any document incorporated by reference into this Agreement, for Service(s) provided prior to such termination, including, without limitation, any past due balance at the time of such termination; (ii) the applicable monthly minimum commitment(s), if any, for any Service(s) for the remainder of the Term applicable pursuant to any applicable SOF(s), Terms and Conditions or any other document or agreement between Customer and Provider, multiplied by the number of months remaining in the Initial SOF Term (pro rated for any partial months remaining in the Initial SOF Term); and (iii) any early termination charges, if any, specified in any applicable SOF(s), Terms and Conditions, or any other document or agreement between Customer and Provider (“Early Termination Charges”). Customer acknowledges and agrees that the damages arising due to the early termination of this Agreement would be difficult to determine and, therefore, for the sake of efficiency, economy and convenience, any Early Termination Charges constitute liquidated damages and are not intended as a penalty or to be punitive in nature.

(e) If this Agreement is terminated for any reason other than Default attributable to the acts or omissions of Customer, Provider will continue to provide the Service(s) for a ninety (90) day period immediately after such termination (the “Wind Down Period”) to enable Customer to locate and transition to an alternative provider. During the Wind Down Period, the charges set forth and payment terms prescribed in this Agreement, any applicable SOF, Terms and Conditions, or any other applicable document or agreement will remain applicable, including, without limitation, any then-applicable monthly minimum commitment. A Wind Down Period will not apply upon the expiration of the Initial Term or any Renewal Term if Customer gives notice of nonrenewal to Provider pursuant to Section 1 and Section 7(a) above; for clarity, a Wind Down Period will apply upon the expiration of the Initial Term or any Renewal Term if Provider gives notice of nonrenewal to Customer pursuant to Section 1 and Section 7(b) above. If a Default attributable to the acts or omissions of Customer occurs during the Wind Down Period, then Provider may immediately terminate the Wind Down Period.

8. MAINTENANCE; SERVICE MODIFICATIONS.

(a) Provider may from time to time interrupt or otherwise impact Service(s) for routine maintenance. Provider will make commercially reasonable efforts to provide to Customer reasonable advance notification (via phone, email or other means) of such maintenance. Provider will use commercially reasonable efforts to perform such maintenance in a manner that will not unreasonably interrupt Service(s). Provider normally will perform maintenance between the hours of 12:00 AM and 6:00 AM Eastern. If Provider determines that emergency maintenance is necessary for any reason, Provider will make commercially reasonable efforts to notify Customer with respect to the anticipated down-time and/or other information pertinent to the affected Service(s). Customer will provide Provider contact(s) for communications contemplated by this Section 8(a). Customer authorizes Provider to monitor and record calls to or from Provider concerning the Services for Provider’s training and quality control purposes.

 

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(b) Unless the terms of an SOF(s) or applicable Terms and Conditions expressly provide otherwise, Provider may amend or modify Service(s), any applicable SOF(s), any Rate Sheets, any Terms and Conditions and/or any Addendum(a) attached or applicable to any Service(s) or any SOF(s) thirty (30) calendar days after written notice to Customer. However, except as otherwise expressly provided in this Section 8(b), if the amendment or modification (i) materially adversely affects any applicable Service(s), or (ii) increases the cost of such Service(s) (other than increases to Rates pursuant to any Terms and Conditions applicable to any applicable SOF(s) or as otherwise provided below), Customer may terminate the applicable SOF(s) without obligation for any otherwise applicable Early Termination Charge by written notice delivered to Provider not later than the date thirty (30) days immediately after Customer’s receipt of Provider’s written notice of such amendment or modification. If Customer terminates any applicable SOF(s) pursuant to the immediately preceding sentence, Customer will pay Provider promptly all amounts due and payable pursuant to this Agreement for Service(s) provided prior to such termination. If Customer does not notify Provider of the termination of the applicable SOF(s) prior to the date thirty (30) days immediately after Customer’s receipt of Provider’s written notice of such amendment or modification, Customer will be deemed to have received and accepted such amendment or modification. Notwithstanding the foregoing provisions of this Section 8(b), Customer will have no right to terminate if the applicable amendment or modification (i) is imposed or required by any governmental, industry, regulatory or other similar authority; (ii) increases the costs of any Service(s) attributable to fees, taxes or any other charges imposed or required by any governmental, industry, regulatory or other similar authority, or (iii) is expressly provided for under the terms of an SOF(s) or applicable Terms and Conditions.

9. LIMITATION OF LIABILITY; NO WARRANTIES; INDEMNIFICATION.

(a) Unless caused by Provider’s willful misconduct or gross negligence, Provider will not be liable for (i) delays in the installation, commencement or restoration of any Service(s); (ii) any temporary or permanent cessation of any Service(s); (iii) errors, malfunctions, delays or defects in the transmission of any Service(s); and (iv) to the fullest extent permitted by applicable law, for injury to or death of any person and/or damage to or loss of any property arising out of or attributable to any Service(s) and/or performance pursuant to this Agreement. Provider will not be liable for loss or damage occasioned by any Force Majeure Event.

(b) Except due to (i) damages caused by Provider’s willful misconduct or gross negligence; (ii) Provider’s breach of its obligations pursuant to Section 18 below; and/or (iii) with respect to any indemnification obligation of Provider, the aggregate liability of Provider hereunder, for any and all causes of action and/or claims, liabilities (including reasonable attorneys’ fees), expenses, damages, costs or losses arising out of or relating to this Agreement, whether based in contract, warranty, negligence or otherwise, including, without limitation, intellectual property infringement (if any indemnity is expressly provided pursuant to Section 9(f) below)), will in no event exceed (i) except as provided in clause (ii) or clause (iii) below, in the aggregate an amount equal to six (6) times the aggregate amount invoiced by Provider for Service(s) rendered during the calendar month prior to the calendar month in which the event giving rise to liability occurred, (ii) if the event giving rise to liability relates to 911 / E911 Services, in the aggregate an amount equal to the amount invoiced by Provider for such Service(s) rendered during the calendar month prior to the calendar month in which the event giving rise to liability occurred, or (iii) if applicable, the replacement value of any Customer Equipment (as defined below) lost or damaged as a result of Provider’s willful misconduct.

(c) EXCEPT DUE TO (I) DAMAGES CAUSED BY A PARTY’S WILLFUL MISCONDUCT OR GROSS NEGLIGENCE, (I) A PARTY’S BREACH OF ITS OBLIGATIONS PURSUANT TO SECTION 18 BELOW AND/OR (III) WITH RESPECT TO ANY INDEMNIFICATION, NEITHER PARTY WILL BE LIABLE TO THE OTHER PARTY FOR ANY INDIRECT, CONSEQUENTIAL, SPECIAL, INCIDENTAL, RELIANCE OR PUNITIVE DAMAGES OF ANY KIND OR NATURE, INCLUDING, WITHOUT LIMITATION, ANY LOST PROFITS, LOST REVENUES, LOST SAVINGS OR HARM TO BUSINESS AND WHETHER LIABILITY IS ASSERTED IN, AMONG OTHER THINGS, CONTRACT OR TORT (INCLUDING BUT NOT LIMITED TO NEGLIGENCE AND STRICT PRODUCT LIABILITY) AND WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF ANY SUCH LOSS OR DAMAGE. EACH PARTY HEREBY RELEASES THE OTHER PARTY, ITS SUBSIDIARIES AND AFFILIATES AND THEIR RESPECTIVE OFFICERS, DIRECTORS, MANAGERS, EMPLOYEES AND AGENTS FROM ANY SUCH CLAIM TO THE EXTENT EXCLUDED BY THE FOREGOING EXCLUSION OF NON-DIRECT DAMAGES. WITH RESPECT TO ANY INDEMNIFICATION, THE INDEMNIFYING PARTY ONLY WILL BE LIABLE TO THE OTHER PARTY FOR THE LOSSES INCURRED BY THE INDEMNIFIED PARTY AND SUBJECT TO INDEMNIFICATION. THE PARTIES WAIVE ANY CLAIM THAT THE EXCLUSIONS OR LIMITATIONS OF THIS SECTION 9 DEPRIVE IT OF AN ADEQUATE REMEDY OR CAUSE THIS AGREEMENT TO FAIL OF ITS ESSENTIAL PURPOSE.

(d) PROVIDER MAKES NO WARRANTIES, EXPRESS OR IMPLIED, FOR THE SERVICE(S) (INCLUDING CUSTOMER EQUIPMENT) PROVIDED PURSUANT TO THIS AGREEMENT AND SPECIFICALLY DISCLAIMS ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. PROVIDER DOES NOT WARRANT THAT THE SERVICE(S) WILL BE UNINTERRUPTED OR ERROR-FREE, OR THAT THE SERVICE(S) WILL MEET CUSTOMER’S REQUIREMENTS OR THAT THE SERVICE(S) WILL PREVENT UNAUTHORIZED ACCESS BY THIRD PARTIES. PROVIDER EXERCISES NO CONTROL OVER, AND HEREBY DISCLAIMS ANY RESPONSIBILITY FOR, THE ACCURACY AND QUALITY OF ANY INFORMATION TRANSMITTED WITH THE USE OF THE SERVICE(S). CUSTOMER ASSUMES TOTAL RESPONSIBILITY AND RISK FOR CUSTOMER’S OR ITS CUSTOMER’S AND/OR END USER’S USE OF THE SERVICES, INCLUDING ANY INFORMATION TRANSMITTED, PROVIDED BY PROVIDER. PROVIDER HAS NO CONTROL OVER AND EXPRESSLY DISCLAIMS ANY LIABILITY OR RESPONSIBILITY WHATSOEVER FOR THE ACTIONS OF THIRD-PARTY TELECOMMUNICATIONS SERVICE PROVIDERS.

 

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(e) EXCEPT AS OTHERWISE SET FORTH OR PROVIDED UNDER THIS AGREEMENT, THE SERVICE(S) ARE PROVIDED ON AN “AS IS” AND “AS AVAILABLE” BASIS.

(f) Each Party will defend, indemnify and hold the other Party, its subsidiaries and affiliates and their respective directors, officers, employees, agents, successors and assigns harmless from and against any and all actual or alleged costs, damages, expenses, losses, and/or liabilities of any kind, including, without limitation, reasonable attorneys’ fees, arising from any action, claim, suit or proceeding commenced by any third party for damages to any tangible property or bodily injury to or death of any person arising out of or caused by the indemnifying Party’s gross negligence or willful misconduct, except for those costs, damages, expenses, losses, and/or liabilities of any kind contributorily caused by any act or omission of the indemnified Party or its directors, officers, employees, agents or unless otherwise specified in any applicable SOF or Terms and Conditions. The indemnified Party will promptly notify the indemnifying Party in writing of any such action, claim, suit or proceeding. The indemnifying Party will control the response to any such action, claim, suit or proceeding and the defense thereof, including, without limitation, any agreement relating to the settlement thereof. In addition to the foregoing general indemnity, Provider agrees to defend, indemnify and hold Customer, and its and their respective officers, directors, employees and agents harmless from claims arising from any third party claims of intellectual property rights infringement arising from the Services or materials being provided by Provider under this Agreement. Notwithstanding the foregoing, Provider has no obligation to indemnify Customer for claims for intellectual property infringement arising from (i) use of the Services by Customer in a manner other than as contemplated or prescribed by this Agreement; (ii) Provider’s compliance with Customer specific (i.e., not generally used or applied by other third party customers of Provider) designs where such claims would not have arisen but for such compliance; or (iii) infringement arising from a combination with, addition to, or modification of the Services by or for Customer without Provider’s knowledge and/or consent. If any Service becomes, or is likely to become, the subject of a claim of infringement of intellectual property, Provider will, in addition to indemnifying Customer as provided in this Section 9(f), promptly at Provider’s expense use best efforts to: (x) secure the right to continue using the Service; or (y) replace or modify the Service to make it non-infringing, provided that any such replacement or modification will not degrade the performance or quality of the affected component of the Services. In the event neither of such actions can be accomplished by Provider, and only in such event, either Provider or Customer may at its option terminate this Agreement without liability upon notice to the other. In addition to the foregoing general indemnity, Customer will at all times defend, indemnify and hold Provider, its subsidiaries and affiliates and their respective directors, officers, employees, agents, successors and assigns harmless from all claims arising out of or due to the utilization by any other person or entity to which Customer provides any services in connection with or utilizing any Service provided to Customer pursuant to this Agreement (including, without limitation, any of Customer’s customers and/or End Users), including, without limitation, due to (i) the failure of Customer or any of Customer’s customers and/or End Users to comply with any applicable laws; (ii) claims for libel, slander, and/or invasion of privacy; (iii) claims for infringement of copyright and/or trademark; (iv) claims for infringement of patents arising from combining or using services or equipment furnished by Provider with services and/or equipment furnished by any other person or entity; and (v) claims arising from any failure, breakdown, interruption or deterioration of service provided by Provider to Customer or by Customer to Customer’s customers and/or End Users. Customer will indemnify and hold harmless Provider from and against any actual or alleged losses, costs, claims, liability of any kind, damages, or expenses or fees (including, without limitation, reasonable attorneys’ fees) on the part of or which may be incurred by Customer, Provider or any third-party relating to or arising from the use or operation of the Customer Equipment (as defined below). Customer’s indemnification in this subsection includes any alleged or actual losses or claims in connection with or arising due to the unauthorized access to or use of the Service(s) by any third-party through or in connection with the Customer Equipment, whether or not such unauthorized access is accidental, intentional, unintentional, or by fraud and whether or not Customer had or should have had knowledge of such unauthorized access. In all such cases of unauthorized access, Customer retains full and sole responsibility for any and all charges for the Service(s) provided by Provider incurred due to such unauthorized access.

10. EQUIPMENT AND ELECTRONIC TOOLS.

(a) Customer has the sole and exclusive responsibility for the installation, configuration, security (including, without limitation, firewall security policies, even if Customer uses a third party to configure and implement such measures), and integrity of all Customer facilities, systems, equipment, proxy servers, software, networks, network configurations and the like (the “Customer Equipment”) used in conjunction with or related to the Service(s) provided by Provider, including, without limitation, Customer’s connectivity to Customer’s customers and/or End Users.

(b) If Provider grants Customer access, either by online access, by API or access by any other means, to a service ordering/management system and/or any other electronic tools or computer software in connection with the Service(s) or the use of any Service(s) (collectively, the “Electronic Tools”), the following apply:

(i) Subject to Customer’s compliance with this Agreement, Provider grants Customer a non-exclusive, non-transferable license to use such Electronic Tools solely in connection with Customer’s internal use of the Service(s) during the Term. The Electronic Tools may be incorporated into, and may incorporate itself, software and other technology owned or controlled by third parties. Any such third party software or technology incorporated in

 

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such Electronic Tools falls under the scope of this Agreement. Any and all other third party software will be subject to Customer’s acceptance of a license agreement with such third party. Customer will use the Electronic Tools solely for lawful purposes in connection with Customer’s internal use of the Service(s) during the Term. Customer will not, directly or indirectly: (A) reverse engineer, decompile, disassemble or otherwise attempt to discover the source code or underlying ideas or algorithms of the Electronic Tools; (B) modify, translate or create derivative works based on the Electronic Tools; (C) rent, lease, distribute, sell, resell, assign, display, host, outsource, disclose or otherwise commercially exploit or otherwise transfer rights to the Electronic Tools or make the Electronic Tools available to any third party; (D) use the Electronic Tools for timesharing or service bureau purposes or otherwise for the benefit of a third party; (E) remove any proprietary notices or labels on any Electronic Tools; or (F) copy, reproduce, post or transmit any Electronic Tools in any form or by any means, including, without limitation, electronic, mechanical, photocopying, recording or other means.

(ii) Each Electronic Tool is the intellectual property of Provider. Customer will not delete or in any manner alter the copyright, trademark, and other proprietary rights notices or markings appearing on or in connection with any Electronic Tool. Any third party intellectual property included in any Electronic Tool is the property of the respective owner of such intellectual property and may be protected by applicable law. Nothing in this Agreement gives Customer any right or license to any trademarks and/or trade names (whether registered or unregistered), signs, logos, icons, slogans, banners, screen shots, trade dress, links or other brand features of Provider, without the prior written consent of Provider, which consent may be withheld in Provider’s sole discretion for any reason. If Customer from time to time provides suggestions, comments and/or other feedback to Provider with respect to the Service(s) and/or any Electronic Tool, Provider may, in connection with any of its products or services, freely use, copy, disclose, license, distribute and/or exploit any such suggestions, comments and/or other feedback in any manner and without any obligation or restriction based on intellectual property rights or otherwise. Provider will retain sole ownership of any such suggestions, comments and/or other feedback and Customer will not provide any such suggestions, comments and/or other feedback subject to any terms that would impose any obligation on Provider or any of its customers or partners. Customer agrees to (and to cause its employees, agents and contractors to) sign, execute and acknowledge documents and perform such acts as may be reasonably necessary to perfect the foregoing assignment and to obtain, enforce and defend Provider’s intellectual property rights in connection with any Electronic Tool.

(iii) Customer is fully and exclusively responsible for all information accuracy, charges, costs, transactions, and activities conducted through or with such Electronic Tools. Customer is fully and exclusively responsible to safeguard, monitor, manage, and maintain access to the Electronic Tools, and to only allow authorized use of the Electronic Tools to persons that Customer designates.

11. SERVICE OUTAGES. When Customer believes that a loss or material degradation of any Service(s) has occurred (“Service Outage”), Customer will first conduct customary problem isolation, resolution and troubleshooting activities. If Customer believes that the Service Outage is attributable to or related to Provider or Provider’s network, Customer will notify Provider’s Customer Care department through Provider’s customer portal found at https://support.bandwidth.com/home (or such other means Provider may provide to Customer from time to time by written notice), by calling (855) 864-7776 (or any other phone number specified in any applicable SOF or Terms and Conditions or otherwise provided by Provider from time to time), or by any Electronic Tools provided by Provider from time to time, to report the Service Outage(s) and initiate an investigation of the cause and remedy of such Service Outage (“Trouble Ticket”). Once a Trouble Ticket(s) has been opened, Provider’s appropriate personnel will initiate diagnostic testing and isolation activities to determine the source and severity of the Service Outage(s) and suggest a remedy to, or enact a remedy on behalf of, Customer; Provider and Customer will cooperate to restore Service(s) as soon as reasonably practicable.

12. FORCE MAJEURE. If either Party’s performance under this Agreement is delayed, prevented, obstructed or inhibited because of any act of God, governmental action or any other cause beyond either party’s reasonable control (“Force Majeure Event”), such Party will not be in default of this Agreement or any applicable SOF; provided, however, such Party will exercise commercially reasonable efforts to prepare for, perform in spite of, and resume performance after the Force Majeure Event. For avoidance of doubt, Customer will ensure proper protection and conformity to industry standards to protect the integrity of Customer’s network; Customer’s failure to do so for any reason will not be considered a Force Majeure Event and any incurred charges for Service(s) will be deemed valid and due in accordance with the terms of this Agreement. If a Force Majeure Event materially impacts performance for ten (10) business days or more (“Extended Delay”), either Party may terminate the affected Service(s) without penalty or further obligation upon written notification to the other Party. During a Force Majeure Event, all payment obligations will abate with respect to the impacted Service(s).

13. GOVERNING LAW; VENUE.

(a) This Agreement will be governed by, construed under and enforced in accordance with the laws of the State of North Carolina without reference to its choice of law principles or the United Nations Convention on the International Sale of Goods. This Agreement also is subject to all applicable federal, state and local laws and to all applicable regulations, rules, orders and other relevant actions of governmental agencies or entities (except that the parties retain their rights with respect thereto as provided pursuant to this Agreement). Each Party will obtain, file and maintain any necessary tariffs, permits, certifications, authorizations, licenses or similar documentation as may be required by any governmental authority having jurisdiction over its business.

 

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(b) If any Party brings a civil action or initiates judicial proceedings of any kind related to this Agreement (except for actions to enter or collect on judgments), the Parties consent to the exclusive personal jurisdiction and venue of the federal and/or state courts located in Wake County, North Carolina.

14. CHANGE IN LAW. If any statute, regulation, decision, rule or order by a court of law or governmental authority, including, without limitation, the FCC or any state regulatory agency or PUC: (a) prohibits performance pursuant to this Agreement or any applicable SOF(s) or Terms and Conditions, (b) makes such performance illegal, impossible or impractical, or (c) materially adversely impacts either Party’s performance of its obligations under this Agreement, including, without limitation, the costs incurred by a Party to perform its obligations under this Agreement or any applicable SOF(s) or Terms and Conditions, the Parties will use their commercially reasonable efforts, to amend this Agreement or any applicable SOF(s) or Terms and Conditions so that: (i) performance pursuant to this Agreement or any applicable SOF(s) or Terms and Conditions is no longer prohibited, illegal, impossible, impractical or is no longer materially adversely impacted, and (ii) the Agreement or any applicable SOF(s) or Terms and Conditions preserves, to the maximum extent possible, the original intent of the Parties. If the Parties are unable to amend this Agreement or any applicable SOF(s) or Terms and Conditions as contemplated above, then the Party whose performance or use of Service(s) is rendered prohibited, illegal, impossible, impractical or materially adversely impacted may, in its sole discretion and upon thirty (30) calendar days (or less if required by law) prior written notification to the other Party, cease performance of any such obligations or Service(s) pursuant to any applicable SOF(s) or Terms and Conditions without further obligation or liability, excluding payment of any charges for Service(s) received by Customer prior to notification of change in law. The Parties will continue to perform all such obligations and Service(s) under this Agreement or any applicable SOF(s) or Terms and Conditions that are not so prohibited, impossible, impractical or materially adversely affected; provided, however, if a material part of the rights and obligations under this Agreement are suspended in accordance with the above and the performance of the remaining obligations would not reasonably maintain the respective original intent of the Parties or would not serve the essential purpose of this Agreement, then either Party will have the right to, at its sole discretion and upon thirty (30) calendar days written notification to the other Party, terminate this Agreement without further obligation or liability, excluding payment for charges for Service(s) received by Customer prior to termination of this Agreement.

15. TARIFF APPLICATION. Both Parties acknowledge that the Service(s) provided may be subject, in whole or in part, to one or more provisions of state or federal tariffs. In the event of any conflict between any provision of this Agreement or any applicable SOF(s) and any such tariff(s), such tariff(s) will prevail.

16. CONFLICT OF TERMS AND SEVERABILITY. Except as expressly provided in Section 15, any applicable SOF(s), Terms and Conditions and/or any Addendum(a), if this Agreement conflicts with any terms or conditions incorporated by reference into this Agreement, this Agreement will control. If any provision of this Agreement is held invalid, illegal or unenforceable, the unaffected provisions will remain in full force and effect.

17. DISPUTE RESOLUTION PROCESS.

(a) The Parties wish to promptly and fully resolve any dispute arising in connection with this Agreement in good faith, confidentially, and informally with minimal transaction costs. Neither Party may make any public statement regarding any such dispute and/or the existence of any such dispute except as otherwise expressly provided in this Section 17. If either Party determines that any dispute cannot be resolved informally, then such Party will initiate an escalation process by giving written notice (“Escalation Notice”) to the other Party. Each Party then will name one (1) representative, which representative will be an executive knowledgeable of the subject matter in dispute and with authority to discuss the dispute (hereinafter the “Officers”). The Officers will meet in person or by conference call, together with any persons assisting them as determined by such Officers respectively, not later than fifteen (15) calendar days after delivery of the Escalation Notice. All negotiations conducted by the Officers will be confidential and will be treated as compromise and settlement negotiations for purposes of the Federal Rules of Evidence and any other applicable rules of evidence. The Officers will conduct such additional meetings as they deem necessary to exchange relevant information, will appoint their respective staff to attempt to resolve any disputed facts, and will attempt to resolve the dispute. Should the Officers be unable to resolve the dispute within fifteen (15) days, or such additional time as the Parties may otherwise agree in writing, either Party may demand mediation by written notice to the other Party, whereupon the parties will, in good faith, mediate the dispute no later than thirty (30) days after such demand through the services of a mutually selected mediator, the cost of whom will be borne equally by the Parties, at a date and location selected by the mediator after consultation with the Parties. If the dispute is not resolved after applying the escalation procedures set forth above (or if either Party fails to timely appoint Officers, comply with a demand for mediation or otherwise fail to meet its obligations pursuant to this Section 17(a)), the Parties agree to waive any right to trial by jury in any judicial proceeding arising under or related to the subject matter of this Agreement, and will submit all controversies, claims, disputes and matters of difference to arbitration according to the commercial rules and practices of the AAA. Arbitration hereunder will occur within sixty (60) days of the date of submission before a single neutral arbitrator having significant experience in the subject matter of this Agreement and who will be selected in accordance with applicable AAA rules. Arbitration proceedings will take place in Wake County, North Carolina. Discovery will be permitted, including the use of interrogatories, requests for admission and production of documents and depositions. If the disputed amount is less than $500,000, all applicable expedited procedures of the AAA will apply. The

 

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arbitrator’s fees and costs of the arbitration will be borne by the Party against whom the award is rendered; provided, however, if the arbitrator grants partial relief to both Parties, the arbitrator will equitably allocate the arbitrator’s fees and other costs. Each Party will pay its attorney’s fees related to any dispute related to this Agreement. The arbitration award will be final and binding on both Parties, will not be subject to any appeal and will be enforceable in any court of competent jurisdiction.

(b) Notwithstanding any term or condition of this Agreement to the contrary, including, without limitation, Section 17(a) above:

(i) Upon the occurrence of a Default, either Party may, in addition to delivering an Escalation Notice pursuant to Section 17(a) above, pursue any and all actions and/or remedies pursuant to Section 5 above.

(ii) Provider may, but will not be obligated, to utilize the dispute resolution proceedings contemplated by Section 17(a) above in connection with any collection of amounts not paid or properly disputed prior to any applicable Due Date. For clarity, Provider may utilize civil actions and/or judicial proceedings in connection with any collection of amounts not paid or properly disputed prior to any applicable Due Date.

(iii) ANY DISPUTE RESOLUTION PROCEEDINGS, WHETHER IN ARBITRATION OR IN COURT, WILL BE CONDUCTED ONLY ON AN INDIVIDUAL BASIS AND NOT IN A CLASS ACTION OR REPRESENTATIVE ACTION OR AS A MEMBER IN A CLASS, CONSOLIDATED OR REPRESENTATIVE ACTION. CUSTOMER WILL NOT BE A CLASS REPRESENTATIVE, CLASS MEMBER OR OTHERWISE PARTICIPATE IN A CLASS, CONSOLIDATED OR REPRESENTATIVE PROCEEDING.

18. CONFIDENTIALITY; LAW ENFORCEMENT MATTERS; PUBLICITY.

(a) This Agreement and its terms, together with any attachments, including, without limitation, any Exhibits, SOFs, Rate Sheets, and Terms and Conditions, but excluding only such information that may be available to the public on Provider’s website from time to time, is designated as proprietary and confidential information of each party. The Parties agree that such information will not be disclosed by either party, either directly or indirectly, by any means, to any third person(s) without the express written permission of the other party. To the extent agreed to by the Parties in writing from time to time, Customer or Provider may further designate as proprietary or confidential such information as set forth in a Confidentiality Agreement, if any. During the performance of this Agreement, it may be necessary for Provider to transfer, process and store billing and utilization data and other data necessary for Provider’s operation of its network and for the performance of its obligations under this Agreement. The transfer, processing and storing of such data may be to or from the United States. Customer hereby consents that Provider may (i) transfer, store and process such data in the United States; and (ii) use such data for its own internal purposes as allowed by law.

(b) Law Enforcement Related Matters.

 

(1)

If Provider receives a Law Enforcement Request related to the Services provided to Customer by Provider pursuant to this Agreement that names Provider, Provider will, unless prohibited by applicable law, refer the applicable law enforcement agency or other governmental entity to Customer as Provider’s customer of record and request that such agency or other governmental entity instead deliver or serve the Law Enforcement Request to or on Customer. Upon any subsequent request from Customer, Provider will use commercially reasonable efforts to cooperate with Customer in Customer’s response to any Law Enforcement Request.

 

(2)

If Provider receives a Law Enforcement Request related to the Services provided to Customer by Provider pursuant to this Agreement that names Provider, and if the agency or other governmental entity declines Provider’s request to deliver or serve the Law Enforcement Request to or on Customer, then, (i) Provider will, unless prohibited by applicable law, use commercially reasonable efforts to promptly notify Customer of the Law Enforcement Request and, unless prohibited by applicable law, provide to Customer a copy of the Law Enforcement Request, (ii) if Provider notifies Customer of the Law Enforcement Request pursuant to the preceding clause (i), Provider may, in Provider’s reasonable discretion, object to the Law Enforcement Request if timely requested by Customer in good faith; provided, however, (A) this clause (ii) will not in any manner obligate Provider to incur any out-of-pocket expenses in connection with any requested objection to any Law Enforcement Request; and (B) if Provider reasonably concludes that any objection to any applicable Law Enforcement Request will be reasonably likely to require Provider to incur any out-of-pocket expenses, Provider will notify Customer and Provider will consult with Customer, and consider in good faith, any input provided by Customer regarding action that may be taken by Provider and/or Customer, if any; and (iii) Provider may provide a recommendation that the applicable agency or other governmental entity contact Customer. If Provider does not object as requested by Customer, Customer will have the right to terminate the Agreement or this Agreement immediately upon written notice to Provider. If Provider objects and is unsuccessful, then, unless prohibited by applicable law, Provider will consult with Customer, and consider in good faith any input provided by Customer, in connection with Provider’s response to the Law Enforcement Request.

 

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(3)

Provider is solely responsible for complying with any Surveillance Order related to the Services provided to Customer by Provider pursuant to this Agreement that names Provider. If Provider receives a Surveillance Order applicable to the Services provided by Provider that names Provider, Provider will, unless prohibited by applicable law, use commercially reasonable efforts to promptly notify Customer and, unless prohibited by applicable law, provide to Customer a copy of the Surveillance Order, and Provider will comply with such Surveillance Order. If Customer receives a Surveillance Order applicable to the Services provided by Provider that names Provider, Customer will, unless prohibited by applicable law, promptly notify Provider and, unless prohibited by applicable law, provide to Provider a copy of the Surveillance Order; Provider will comply with any such Surveillance Order (x) if such Surveillance Order names Provider, and (y) to the extent applicable to Provider and/or the Services provided by Provider. If Provider notifies Customer of the Surveillance Order pursuant to the preceding sentences of this Section 18(b)(3), Provider may, in Provider’s reasonable discretion, object to a Surveillance Order if timely requested by Customer in good faith; provided, however, (A) the foregoing clause will not in any manner obligate Provider to incur any out-of-pocket expenses in connection with any requested objection to any Surveillance Order; and (B) if Provider reasonably concludes that any objection to any applicable Surveillance Order will be reasonably likely to require Provider to incur any out-of-pocket expenses, Provider will notify Customer and Provider will consult with Customer, and consider in good faith, any input provided by Customer regarding action that may be taken by Provider and/or Customer, if any. If Provider fails to comply with any obligation set forth in this Section 18(b)(3), including but not limited to any applicable obligation to notify and any applicable obligation to object as requested by Customer, Customer will have the right to terminate the Agreement or this Agreement immediately upon written notice to Provider. Provider will at all times during the term of the Agreement maintain the required capability to comply with any such Surveillance Order.

 

(4)

Provider will not disclose any information about Customer or about Customer’s customers (including any End User), or the use of any TNs, TFNs, and/or other Services provided to Customer by Provider for use by Customer or by Customer’s customers (including any End User) pursuant to this Agreement, except pursuant to a Law Enforcement Request or Surveillance Order, or as otherwise expressly permitted under the Agreement or this Agreement. Customer acknowledges that Provider may under some circumstances be unable to advise Customer of either the implementation or the termination of any applicable disclosure in response to any Law Enforcement Request and/or Surveillance Order.

 

(5)

If Provider issues any reports to the public regarding the Law Enforcement Requests or Surveillance Orders received by Provider, then Provider will not include any data regarding Law Enforcement Requests received and processed by Customer. Upon Customer’s request, Provider will provide Customer with information regarding the volumes of Law Enforcement Requests or Surveillance Orders received by Provider related to the Services, each in ranges in accordance with customary industry standards for transparency and other similar reports, if applicable, and Customer may include that information in any of its reports, including reports it issues to the public; provided, however, such information to be provided by Provider upon Customer’s request will not be required to include any information regarding Law Enforcement Requests and/or Surveillance Orders that merely informally request the identification of Provider’s customer of record as contemplated pursuant to Section 18(b)(1) above.

 

(6)

Nothing in this Section 18(b) will require Provider to do anything that is prohibited by law. In the event of any conflict between the terms and conditions of this Section 18(b) and any Law Enforcement Request, any Surveillance Order, or any other applicable law, such Law Enforcement Request, Surveillance Order or other applicable law will control and Provider will comply with such Law Enforcement Request, Surveillance Order or other applicable law.

(c) Notwithstanding any term or condition of this Agreement to the contrary, including, without limitation, Section 18(a) above, Customer grants Provider the right to use Customer’s name, mark and logo on Provider’s website(s) and in Provider’s marketing materials and to publicly identify Customer as Provider’s customer from time to time.

19. REPRESENTATIONS AND WARRANTIES OF THE PARTIES; INDEPENDENT CONTRACTOR; COMPLIANCE WITH LAWS. Provider represents and warrants to Customer that Provider has the right to provide the Service(s) specified herein, is duly organized and validly exists in good standing under the laws of its state of incorporation, with the ability to enter into and perform its obligations under this Agreement in accordance with its terms and conditions, including any documents incorporated by reference into this Agreement. Customer represents and warrants to Provider that Customer is duly organized and validly exists in good standing under the laws of its state of incorporation, with the ability to enter into and perform its obligations under this Agreement in accordance with its terms and conditions, including any documents incorporated by reference into this Agreement. Each Party agrees that it will perform its obligations hereunder as an independent contractor and not as the agent, employee or servant of the other Party and that no joint venture or partnership is or has been expressed or

 

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implied. Customer will comply with all laws and regulations applicable to Customer and/or Customer’s utilization of any Services; Customer will be directly responsible for compliance with applicable laws and regulations as such laws and regulations relate to Customer, Customer’s utilization of any Services, Customer’s customers and/or End Users’ utilization of any Services, and/or the utilization by any other person or entity to which Customer provides any services in connection with or utilizing any Service provided to Customer pursuant to this Agreement.

20. ASSIGNMENT. A Party may not assign this Agreement or any obligations or rights therein, in whole or part, without the prior written consent of the other Party, which will not be unreasonably withheld, conditioned or delayed. Notwithstanding the foregoing, a Party may assign this Agreement, without consent, to an affiliate, or an entity which acquires all or substantially all of the stock or assets of the assigning Party, or to a successor in a merger, acquisition or restructuring of the assigning Party; provided, however, (i) the assigning Party will give notice of any such assignment to the other Party not later than ten (10) business days immediately after such assignment; and (ii) in the event of any such assignment by Customer, (A) Provider may require the assignee to (i) be additionally and separately bound in writing to all the terms and conditions of this Agreement, including any additional provisions incorporated into this Agreement by reference, (ii) immediately cure all defaults and/or outstanding obligations of Customer pursuant to this Agreement; and (B) Provider reserves the right to review and consider the assignee according to Provider’s practices and procedures, including, without limitation, a credit profile evaluation; Provider may, in Provider’s discretion, impose additional contractual requirements as a condition to Provider’s consent to any such assignment, including, without limitation, modification of payment terms, the imposition of a security deposit or the modification any existing security deposit, and/or the discontinuation of Service(s) without notice if any assignee fails to respond in a timely manner or otherwise cooperate with Provider during Provider’s review.

21. 911 / E911 MATTERS. CUSTOMER ACKNOWLEDGES, UNDERSTANDS, AND AGREES THAT PROVIDER’S VOICE SERVICE IS INTERNET BASED AND THEREFORE 911/E911 SERVICES ARE DIFFERENT FROM TRADITIONAL WIRELINE BASED SERVICES AND ARE OR MAY BE ONLY PROVIDED WITH CERTAIN SERVICES IF SPECIFICALLY DEFINED IN ADDENDUM(S), EXHIBIT(S), SCHEDULES, SOFS, TERMS AND CONDITIONS, SERVICE AGREEMENTS, AND ATTACHMENTS TO THIS AGREEMENT, AND INCLUDING OTHER APPLICABLE ADDENDA, AND APPLICABLE ONLINE TERMS & CONDITIONS, ALL OF WHICH ARE FULLY INCORPORATED HEREIN BY REFERENCE. CUSTOMER ACKNOWLEDGES AND AGREES THAT NEITHER PROVIDER, ITS UNDERLYING CARRIER(S), NOR ANY OTHER THIRD PARTIES INVOLVED IN THE ROUTING, HANDLING, DELIVERY, OR ANSWERING OF EMERGENCY SERVICES OR IN RESPONDING TO EMERGENCY CALLS, NOR THEIR OFFICERS OR EMPLOYEES, MAY BE HELD LIABLE FOR ANY CLAIM, DAMAGE, LOSS, FINE, PENALTY OR COST (INCLUDING, WITHOUT LIMITATION, ATTORNEYS FEES) AND CUSTOMER HEREBY WAIVES ANY AND ALL SUCH CLAIMS OR CAUSES OF ACTION, ARISING FROM OR RELATING TO THE PROVISION OF ALL TYPES OF EMERGENCY SERVICES TO CUSTOMER. CUSTOMER FURTHER AGREES AND ACKNOWLEDGES THAT IT IS INDEMNIFYING AND HOLDING HARMLESS PROVIDER FROM ANY CLAIM OR ACTION FOR ANY CALLER PLACING SUCH A CALL WITHOUT REGARD TO WHETHER THE CALLER IS AN EMPLOYEE OR CUSTOMER OF CUSTOMER. CUSTOMER ACKNOWLEDGES AND AGREES THAT ANY INJURY ARISING OUT OF A LACK OF OR MISROUTING OF 911 CALLS, REGARDLESS OF WHETHER THE CALL FAILED OR WAS ROUTED BY A PUBLIC SAFETY ANSWERING POINT OR AN OFFICIAL EMERGENCY OPERATOR, IS NEITHER THE FAULT NOR LIABILITY OF PROVIDER AND CUSTOMER HOLDS PROVIDER AND ITS SUBSIDIARIES AND AFFILIATES, AS WELL AS THEIR RESPECTIVE OFFICERS, DIRECTORS, MANAGERS, EMPLOYEES AND AGENTS HARMLESS FROM ANY DAMAGES OR LIABILITIES. THE LIMITATIONS APPLY TO ALL CLAIMS REGARDLESS OF WHETHER THEY ARE BASED ON BREACH OF CONTRACT, BREACH OF WARRANTY, PRODUCT LIABILITY, TORT AND ANY OTHER THEORIES OF LIABILITY.

22. SERVICE MOVES. Service(s) may not be moved from a contracted Service address without written notification from Customer to Provider. Should Customer fail to notify Provider of a service move, then Provider, in its sole discretion, may immediately suspend any applicable Service(s) until such time as Provider processes a “move order” initiated by Customer. Failure to notify Provider of an intended service move may result in Service(s) being 911/E911 non-compliant, if otherwise applicable. Customer understands that said failure may cause incorrect routing of emergency services and any consequences of such rest solely with Customer. Additionally, Customer understands that continuation of Service with respect to any existing DIDs may be restricted by the location of the moved service.

23. THIRD PARTY BENEFICIARIES. The Parties do not intend by the execution, delivery, or performance of this Agreement to confer any benefit, incur any obligation or duty under law or otherwise, direct or incidental, upon any third-party, person or entity not a party to this Agreement, including, without limitation, Customer’s customers and/or End Users.

24. NON-EXCLUSIVE AGREEMENT. This Agreement is not exclusive. Except as may be expressly provided in any applicable SOF(s) and/or Terms and Conditions from time to time with respect to Customer only, nothing in this Agreement will prevent Customer or Provider from entering into similar arrangements with, or otherwise providing services to, any other person or entity.

 

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25. NOTICES. Any notice(s) by a party as set forth in this Agreement will be sent to each Party at the address provided on the signature page of this Agreement and to any additional address(es) as may be specified on the signature page of this Agreement. Unless otherwise expressly provided otherwise in this Agreement, notice will be deemed to be delivered when sent via one or any combination of the following: (i) email address(es) of record, (ii) facsimile number of record, and/or, (iii) overnight delivery to the physical address of record by nationally recognized overnight delivery service.

26. SURVIVAL. Sections 3, 4, 5, 9, 15, 16, 17, 18, 19, 21, 23, 24, 25, 26, 27 and 28 will survive any expiration or termination of this Agreement. Notwithstanding the foregoing, the expiration or termination of this Agreement will not relieve the parties of any liability or obligation that accrued prior to such expiration or termination.

27. MISCELLANEOUS. This Agreement, together with any attachments, including, without limitation, any Exhibits, SOFs, Rate Sheets, and/or Terms and Conditions, incorporated herein by reference, constitute the entire understanding between the Parties with respect to Service(s) provided herein and supersedes any prior agreements or understandings pursuant to Section 28 below. Customer will receive the Service(s) detailed in an executed SOF(s) and Terms and Conditions pursuant to this Agreement only and Customer is not relying on any affirmation of fact, promise or description from any person or entity, nor any other oral or written representation other than what is contained in this Agreement and any incorporated documents. Handwritten alterations or additions by Customer to this Agreement or any applicable SOF(s) or Terms and Conditions will not be considered binding; such modifications must be provided by Customer in a separate written document and executed by both Parties. This Agreement will be binding on the parties hereto and their respective personal and legal representatives, successors and permitted assigns. Agreement headings are provided for reference purposes only. This Agreement may be executed in counterparts, each and all of which constitute the full executed Agreement, and the Parties agree that a digitized (electronic) or facsimile copy of the executed Agreement will be the same as an original copy. The failure of Provider to give notification of Default and/or to enforce compliance with any of the terms or conditions of this Agreement will not be considered the waiver of such Default and/or any further Default and/or enforcement or other term or condition of this Agreement. No waiver of Provider will be effective unless in writing and signed by an authorized representative of Provider. No amendment to this Agreement will be effective or binding unless it is made in writing and executed by authorized representatives of both Parties.

28. PRIOR AGREEMENTS. The Parties to this Agreement agree that in the event of any Prior Agreements, then any such Prior Agreements are hereby superseded by this Agreement immediately as of the Effective Date of this Agreement. Customer hereby represents and warrants that Customer has the full authority to agree to the supersession of all such agreements, directly or on the behalf of all such entities or persons that have entered into all Prior Agreements. In the event of any such Prior Agreements then such Prior Agreements include but are not limited to those which are set forth in the pertinent Exhibit(s). Customer agrees that any and all amounts due and owing under the Prior Agreements will remain due and payable under the terms of this Agreement. Customer agrees and understands that the effective date of any pricing or rates changes may depend upon individual SOFs or Terms and Conditions and rate change timeframes set forth therein.

(The remainder of this page is intentionally left blank.)

 

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SIGNATURE PAGE

IN WITNESS WHEREOF, the parties have executed this Master Service Agreement as of the date first written above.

 

PROVIDER: BANDWIDTH.COM, INC.						CUSTOMER: REPUBLIC WIRELESS, INC.
By:						By:
Name:						Name:
Title:						Title:
Date:						Date:
Address:   900 Main Campus Drive, Suite 400 Raleigh, North Carolina 27606 Attention: General Counsel						Address :   900 Main Campus Drive, Suite 500 Raleigh, North Carolina 27606 Attention: General Counsel
Additional Provider Parties for Notice:						Additional Customer Parties for Notice:
Email: legal@bandwidth.com						Email:
Fax: 919-238-9903						Fax:

 

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EXHIBIT A—DEFINITIONS

For the purposes of this Agreement, any SOFs, Rate Sheets, Terms and Conditions and/or other documents incorporated in the Agreement by reference, the following terms will have the following meanings if not otherwise defined in the Agreement:

“1010xxx” means a code to manually choose a long distance provider for an outbound call.

“411” means a directory services allowing the lookup of residential or business contact information.

“511” means the FCC-designated nationwide telephone number for traveler information.

“711” means a Telecommunications Relay Services (TRS) which permits persons with a hearing or speech disability to use the telephone system via a text telephone (TTY), or other device, to call persons with or without such disabilities.

“900” means a premium rate area code that is charged at a higher rate than normal.

“911 / E911” means functionality that allows End Users to contact emergency services.

“976” means a premium rate exchange that is charged at a higher rate than normal.

“AAA” means the American Arbitration Association.

“Abandoned Call” means any call attempt that is received by Provider for completion, but which is abandoned and/or canceled by the calling party for any reason prior to completion.

“Agreement” means (i) the Master Service Agreement to which this Exhibit A is attached, and (ii) any document incorporated therein by reference pursuant to the Master Service Agreement.

“ANI” means automatic number identification.

“API” mean an application program interface(s) and is the system(s) provided by Provider that enables Customer to remotely transmit requests to Provider’s interfacing system(s) to perform certain transactions.

“Average Call Duration” means the average call duration, as calculated with respect to all Customer’s completed calls in an applicable billing cycle.

“CALEA” means Communications Assistance for Law Enforcement Act regulated by the FCC.

“Call Detail Record (CDR)” means the electronic record of individual telephone calls, and may include such call components as: from, to, date/time, destination, and duration of call.

“Call Signaling” means the process of sending control information during a call. Call signaling may be in band (muting the audio while sending control information) or out of band (on a separate signaling channel (such as SS7) during the call. Provider utilizes Session Initiation Protocol (SIP) Call Signaling, as defined in RFC 3261.

“Call Traffic” means the transmission of telephone calls over Provider’s network, and generally is descriptive of patterns of Usage, such as: time of day, call duration, minutes of use. (May also be known as Voice Traffic).

“Class 5 Features” means additional phones features beyond standard routing and audio. For example, both call hunting and voicemail are Class 5 Features.

“CNAM” means Caller ID with Name.

“Collect Calling” means a service in which calling party is able to place a call at the called party’s expense.

“Concurrent Call” or “Concurrent Call Channel” means the number of active calls at any given moment which may be supported by Customer service as contracted depending upon number of channels ordered (a Concurrent Call Channel is the same as a Session).

“CPN” means called party number.

 

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“CPNI” means Customer Proprietary Network Information and is defined and regulated by the FCC and includes such data as: CDRs, the type of services/network a Customer subscribes to, and any other information that appears on a Customer’s invoice.

“Dedicated Interconnection” means a dedicated data connection between Customer and Provider used to pass Voice Traffic.

“Default” means (and will occur), with respect to Customer: (i) if Customer fails to make any payment for Service(s) not disputed in good faith pursuant to Section 4 of the Agreement more than five (5) business days immediately after the applicable Due Date, or any other payment contemplated by this Agreement on or before the date five (5) business days immediately after any applicable required date, including, without limitation, pursuant to Section 3(d) of the Agreement; (ii) if Customer (or any customer and/or End User of Customer) violates the AUP; (iii) if Customer fails to perform or observe any term or obligation of this Agreement, including, without limitation, any document incorporated by reference into this Agreement, not otherwise specified in clauses (i) or (ii) above and applicable to the Service(s), which failure remains uncured thirty (30) calendar days after Customer’s receipt of written notification from Provider informing Customer of such failure; (iv) upon the institution of bankruptcy, receivership, insolvency, reorganization or other similar proceedings, by or against Customer, unless such proceedings have been dismissed or discharged not later than the date thirty (30) calendar days immediately after the commencement of such proceeding; (v) upon the making of an assignment for the benefit of creditors, adjudication of insolvency, or institution of any reorganization arrangement or other readjustment of debt plan, of or by Customer; and/or (vi) upon the appointment of a receiver for all or substantially all of Customer’s assets. “Default” means (and will occur), with respect to Provider: (i) if Provider fails to perform or observe any term or obligation of this Agreement, including, without limitation, any document incorporated by reference into this Agreement and applicable to the Service(s), which failure remains uncured thirty (30) calendar days after Provider’s receipt of written notification from Customer informing Provider of such failure; (ii) upon the institution of bankruptcy, receivership, insolvency, reorganization or other similar proceedings, by or against Provider, unless such proceedings have been dismissed or discharged not later than the date thirty (30) calendar days immediately after the commencement of such proceeding; (iii) upon the making of an assignment for the benefit of creditors, adjudication of insolvency, or institution of any reorganization arrangement or other readjustment of debt plan, of or by Provider; and/or (iv) upon the appointment of a receiver for all or substantially all of Provider’s assets.

“DID” or “DID/DOD” means “Direct Inward Dialing” and “Direct Inward Dialing / Direct Outward Dialing” associated with a telephone number assigned by Provider to Customer for use by Customer and/or an End User.

“Directory Listing” means the inclusion of Customer’s activated TN in the United States or Canada and associated subscriber name in a relevant public database for directory listing.

“Disconnect Charge” means a non-recurring charge charged by Provider and payable by Customer for any request to disconnect a Provider-assigned DID, DID/DOD, TFN or TN, including any port outs from Provider.

“End User” means an entity or individual receiving service from Customer.

“Excessive Non-Completed Intrastate / Interstate Toll Free Call Surcharge” means a surcharge, in addition to Customer’s current Rates, applicable if more than ten percent (10%) of Customer’s Toll Free calls are not completed for any reason, which Provider reserves the right to charge, and Customer will pay if charged, per excessive non-completed Intrastate or Interstate Toll Free call.

“Excessive Non-Completed International Toll Free Call Surcharge” means a surcharge, in addition to Customer’s current Rates, applicable if more than ten percent (10%) of Customer’s Toll Free calls are not completed for any reason, which Provider reserves the right to charge, and Customer will pay if charged, per excessive non-completed International Toll Free call.

“FCC” means the Federal Communications Commission.

“Flat Rate Type” means a fixed per minute pricing format whereby the rate is delineated by Interstate and Intrastate jurisdiction regardless of NPA-NXX or LATA/OCN.

“Improper Calls” means call types that (i) would result in Provider incurring originating access charges, local exchange carrier “DIP” fees or other call types that may be subject to a reverse billing process, (ii) 911 / E911 or other emergency service calls; (iii) any unauthorized or fraudulent communications on pay-per-call numbers, information service calls, directory assistance calls or the like; and/or (iv) mass calling events, excessive non-completed and invalid calls and failed calls due to inadequate Customer capacity.

“Inbound Calling” (or “Inbound Calls”) means a call from the PSTN through Provider or another IP endpoint to Customer.

 

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“Information Services” is defined in the Telecommunications Act of 1996, as amended, and means the offering of a capability for generating, acquiring, storing, transforming, processing, retrieving, utilizing, or making available information via telecommunications, and includes electronic publishing, but does not include any use of any such capability for the management, control, or operation of a telecommunications system or the management of a telecommunications service.

“Initial SOF Term” will have the meaning provided in any applicable SOF.

“Intermediate Number” means a TN provisioned by Provider to Customer pursuant to this Agreement or any applicable SOF (i.e., on a wholesale basis), but which neither Provider nor Customer can appropriately demonstrate has been assigned to an End User.

“International Call Termination” means outbound calls destined for anywhere outside of the domestic United States.

“Interoperability” means the ability to exchange calls between Customer and Provider effectively.

“Interstate” means a call which is originated and terminated in different states.

“Intrastate” means a call which is originated and terminated in the same state.

“IP” means Internet Protocol.

“IP Originated” means traffic utilizing TCP/IP as a transmission protocol from the originating equipment (i.e. SIP phones, SIP PBX, TDM to SIP Gateway, IP-adapter, etc.) to a TCP/IP gateway, for termination to an IP destination or the PSTN.

“LATA” means Local Access Transport Area. A geographic area within a telephone company’s franchised territory which has been established in accordance with the Modification of Final Judgment (MFJ) for the purpose of defining the area within which a telephone company may offer services.

“LATA/OCN Rate Type” means a pricing format where rates per minute are set for each unique OCN within a LATA for Interstate and Intrastate calling.

“LCA” (or “Local Calling Area”) means the local calling area defined geographically by the telecommunications industry standards.

“LIDB” means Line Information Database.

“LNP” means Local Number Portability as defined by the FCC.

“Local” means any call that originates and terminates within the same Local Calling Area.

“Location Routing Number (LRN)” means a telephone number (e.g. 10 digit number) that is used to route calls to an end office switch that allows for the processing of portable (assignable) telephone numbers.

“MRC” means monthly recurring charge.

“NADP” means the North American Dialing (or Numbering) Plan.

“NPA-NXX” means the area code and exchange of a telephone number.

“NPA-NXX-X” means the area code, exchange and first digit of the station code of a telephone number.

“NPA-NXX-X Rate Type” means a pricing format where rates per minute are set for each unique NPA-NXX-X (area code – exchange – 1^st digit of station code) for Interstate and Intrastate calling.

“NRC” means non-recurring charge.

“OCN” means Operating Company Number. A four-character code assigned by the National Exchange Carrier Association (NECA) to any telecommunications provider.

“On-Net” means calls that are connected on a single network (such as calls through the Internet).

“Operator Assisted Calling” means a telephone call during which an operator places a call for the caller.

 

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“Operator Intercept” means a service by which a caller is routed to an operator when a call error or special handling request is received.

“Operator Services” means live operator assistance to caller usually when dialing “0”.

“Originating” means the party initiating a call or request for service.

“Origination” or “Voice Origination” means a service which includes TNs to provide Inbound Calling.

“Originating Equipment” means equipment beginning a call session.

“Prior Agreements” means any prior contractual agreements for communications services between Provider and Customer, including, without limitation, any SOF(s) or other service agreements.

“PSTN” means the Public Switched Telephone Network.

“Public Internet” means a global system of interconnected computer networks that interchange data by packet switching using the standardized protocols.

“PUC” means a public utilities commission (or other similar governmental agency).

“Rate Center” means a geographic area (determined by the applicable ILEC) within an LCA or market that is associated with one or more specific NPA/NXX codes. A list of available Rate Centers is available upon request.

“Rate Sheet” means the rate sheet describing the Rates applicable to Services and attached to an applicable SOF.

“Rate Type” means the rate format option delivered to Customer, which will be either “NPA-NXX-X or LATA/OCN.

“RBOC / Wireless Thresholds Surcharge (Flat Rate Only)” means a surcharge, in addition to Customer’s current Rates, applicable if Customer has any quoted Flat Rate Types and less than seventy-five percent (75%) of Customer’s calls terminate on either an RBOC or wireless PSTN during any billing cycle, which Provider reserves the right to charge, and Customer will pay if charged, per minute on the number of minutes needed to meet the seventy-five percent (75%) threshold.

“Responsible Organization” means the party hereto that is responsible for managing and administering the account records in the Toll Free Service Management System Database.

“Session” means mean one (1) Concurrent Call Channel.

“Short Duration Call” means any call of a duration of less than or equal to six (6) seconds.

“Short Message Service” or “SMS” is the text communication service component of mobile communication systems that allows the exchange of short text messages between fixed line or mobile phone devices.

“SIP” means “Session Initiation Protocol” which is the signaling protocol established in RFC 3261 used between networks (such as VoIP networks) to establish, control and terminate signaling for SIP-based services such as voice calls and SMS messages.

“SMPP” means Short Message Peer-to-Peer protocol which is an open message-transfer protocol that enables short message entities to establish, control and terminate signaling for SMPP-based services like SMS.

“Subscriber” means an individual End User of Customer’s service assigned a DID/DOD.

“Tariff” means an open contract between telecommunications carriers and the FCC. Tariffs contain the rates, terms and conditions of certain services provided by telecommunications carriers.

“TCP/IP” means Transmission Control Protocol / Internet Protocol.

“TFN” means a Toll Free number that assigned by Provider to Customer (or that Customer ports to Provider) for use with the Provider Toll Free Service.

“TN” means a telephone number assigned by Provider to Customer (or that Customer ports to Provider) (other than a TFN) and is used by Customer in connection with any applicable Service.

“Toll Free Calling” or “Toll Free” means a call placed to a Toll Free number.

 

Page 16 of 17

Bandwidth - Proprietary & Confidential Information

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“Toll Free Service” means an IP termination service for PSTN originated calls to terminate to TFNs provided by Provider.

“Usage” means call traffic (including SMS) measured in units, usually in minutes or seconds (except with respect to SMS).

“Voice Termination” (or “Termination”) means outbound calling from Customer to Provider’s network for purposes of delivering (terminating) the call on the PSTN or another IP endpoint.

“VoIP” means Voice over Internet Protocol.

“Wholesale” means frequent volume purchases in large quantities for Customer resale or repurpose.

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Page 17 of 17

Bandwidth - Proprietary & Confidential Information

		Exhibit 10.19

Master Service Agreement

(SFMSA Version 5.1 – July 13, 2006)

This Master Service Agreement (“Agreement”) is made this 14th day of March, 2008 between LEVEL 3 COMMUNICATIONS, LLC (“Level 3”) and Vixxi Solutions Inc. (“Customer”). This Agreement provides the general terms and conditions applicable to Customer’s purchase of communications services (“Service”) from Level 3.

ARTICLE 1. ORDERS FOR AND DELIVERY OF SERVICE

1.1     Submission and Acceptance of Customer Order(s). Customer may submit requests for Service in a form designated by Level 3 (“Customer Order”). The Customer Order shall contain the duration for which Service is ordered (“Service Term”) and pricing for Service; Service will continue on a month to month basis at the expiration of the Service Term at Level 3’s then current rates. Level 3 will notify Customer of acceptance (in writing or electronically) of the Customer Order and the date by which Level 3 will install Service (the “Customer Commit Date”); renewal Customer Orders will be accepted by Level 3’s continuation of Service. If Customer submits Customer Orders electronically, Customer shall assure that any passwords or access devices are available only to those having authority to submit Customer Orders.

1.2    Credit Approval and Deposits. Customer will provide Level 3 with credit information as requested. Level 3 may require Customer to make a deposit as a condition of Level 3’s acceptance of any Customer Order or continuation of: a) any usage-based Service; or b) any non-usage based Service where Customer fails to timely make any payment due hereunder or Level 3 reasonably determines that Customer has had an adverse change in financial condition. Deposits will not exceed 2 months’ estimated charges for Service and will be due upon Level 3’s written request. When Service is discontinued, the deposit will be credited to Customer’s account and the balance refunded.

1.3    Customer Premises. If access to non-Level 3 facilities is required for the installation, maintenance or removal of Level 3 equipment, Customer shall, at its expense, secure such right of access and shall arrange for the provision and maintenance of power and HVAC as needed for the proper operation of such equipment.

1.4    Scheduled Maintenance and Local Access. Scheduled maintenance will not normally result in Service interruption. If scheduled maintenance requires Service interruption, Level 3 will (i) provide Customer 7 days’ prior written notice, (ii) work with Customer to try to minimize Service interruptions and (iii) use commercially reasonable efforts to perform such maintenance between midnight and 6:00 a.m. local time. If third party provided local access services are obtained by Customer, Customer will: (i) provide Level 3 with circuit facility information, firm order commitment information and necessary design layout records to enable cross-connects to Level 3 Service(s) (such cross connects being provided by Level 3 subject to applicable charges), (ii) cooperate with Level 3 (including providing necessary LOA’s) in connection with Level 3 circuit grooming, and (iii) where a related Service is disconnected or terminated, promptly provide Level 3 a written disconnection firm order commitment from the relevant third party provider.

ARTICLE 2. BILLING AND PAYMENT

2.1     Commencement of Billing. Level 3 will deliver written or electronic notice (a “Connection Notice”) to Customer upon installation of Service, at which time billing will commence (“Service Commencement Date”), regardless of whether Customer is prepared to accept delivery of Service. If Customer notifies Level 3 within 3 days after delivery of the Connection Notice that Service is not functioning properly (and such Service is not functioning properly), Level 3 will correct any deficiencies and, upon Customer’s request, credit Customer’s account in the amount of 1/30 of the applicable MRC for each day the Service did not function properly.

2.2     Payment of Invoices and Disputes. Invoices are delivered monthly and due 30 days after the date of invoice. Fixed charges are billed in advance and usage-based charges are billed in arrears. Billing for partial months is prorated. Past due amounts bear interest at 1.5% per month or the highest rate allowed by law (whichever is less). Customer is responsible for all charges respecting the Service, even if incurred as the result of unauthorized use. If Customer reasonably disputes an invoice, Customer must pay the undisputed amount and submit written notice of the disputed amount (with details of the nature of the dispute and the Services and invoice(s) disputed). Disputes must be submitted in writing within 90 days from the date of the invoice. If the dispute is resolved against Customer, Customer shall pay such amounts plus interest from the date originally due.

2.3    Taxes and Fees. Except for taxes based on Level 3’s net income, Customer will be responsible for all taxes and fees that arise in any jurisdiction, including value added, consumption, sales, use, gross receipts, foreign withholding (which will be grossed up), excise, access, bypass, franchise or other taxes, fees, duties, charges or surcharges imposed on or incident to the provision, sale or use of Service (whether imposed on Level 3 or any affiliate of Level 3). Such charges may be shown on invoices as cost recovery fees. Charges for Service are exclusive of taxes. Customer may present Level 3 a valid exemption certificate and Level 3 will give effect thereto prospectively.

2.4    Regulatory and Legal Changes. If any change in applicable law, regulation, rule or order materially affects delivery of Service, the parties will negotiate appropriate changes to this Agreement. If the parties are unable to reach agreement within 30 days after Level 3’s delivery of written notice requesting renegotiation: (a) Level 3 may pass any increased costs relating to delivery of Service through to Customer and (b) if Level 3 does so, Customer may terminate the affected Service without termination liability by delivering written notice to Level 3 within 30 days.

2.5    Cancellation and Termination Charges.

(A)    Customer may cancel a Customer Order (or portion thereof) prior to delivery of the Connection Notice upon written notice to Level 3 identifying the affected Customer Order and Service. If Customer does so, Customer shall pay Level 3 a cancellation charge

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equal to the sum of: (i) for “off-net” Service, third party termination charges for the cancelled Service; (ii) for “on-net” Service, 1 month’s monthly recurring charges for the cancelled Service; (iii) the non-recurring charges for the cancelled Service; and (iv) Level 3’s out of pocket costs (if any) incurred in constructing facilities necessary for Service delivery.

(B)    Customer may terminate Service after delivery of the Connection Notice upon 30 days’ written notice to Level 3 identifying the terminated Service. If Customer does so, or if Service is terminated by Level 3 as the result of an uncured default by Customer, Customer shall pay Level 3 a termination charge equal to the sum of: (i) all unpaid amounts for Service provided through the date of termination; (ii) 100% of the remaining monthly recurring charges for months 1-12 of the Service Term; and (iii) 50% of the remaining monthly recurring charges for month 13 through the end of the Service Term. The parties agree that the charges in this Section are a genuine estimate of Level 3’s actual damages and are not a penalty.

ARTICLE 3. DEFAULT

If (A) Customer fails to make any payment when due and such failure continues for 5 business days after written notice from Level 3, or (B) either party fails to observe or perform any other material term of this Agreement and such failure continues for 30 days after written notice from the other party, then the non-defaulting party may: (i) terminate this Agreement and/or any Customer Order, in whole or in part, and/or (ii) subject to Section 4.1, pursue any remedies it may have at law or in equity.

ARTICLE 4. LIABILITIES AND SERVICE LEVELS

4.1    No Special Damages. Neither party shall be liable for any damages for lost profits, lost revenues, loss of goodwill, loss of anticipated savings, loss of data or cost of purchasing replacement services, or any indirect, incidental, special, consequential, exemplary or punitive damages arising out of the performance or failure to perform under this Agreement or any Customer Order.

4.2    Disclaimer of Warranties. LEVEL 3 MAKES NO WARRANTIES OR REPRESENTATIONS, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, STATUTORY OR OTHERWISE, INCLUDING WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE, EXCEPT THOSE EXPRESSLY SET FORTH IN THIS AGREEMENT OR ANY APPLICABLE SERVICE SCHEDULE.

4.3    Service Levels. The “Service Level” commitments applicable to the Services are found in Level 3’s Service Schedules for each Service. If Level 3 does not achieve a Service Level, a credit will be issued to Customer as set forth in the applicable Service Schedule upon Customer’s request. Level 3’s maintenance log and trouble ticketing systems will be used for calculating any Service Level events. To request a credit, Customer must contact Level 3 Customer Service (contact information can be found at www.level3.com) or deliver a written request (with sufficient detail necessary to identify the affected Service) within 60 days after the end of the month in which the credit was earned. In no event shall the total credits issued to Customer per month exceed the non-recurring and monthly recurring charges for the affected Service for that month. Customer’s sole remedies for any outages, failures to deliver or defects in Service are contained in the Service Levels applicable to the affected Service.

4.4    Right of Termination for Installation Delay. In lieu of any Service Level credits for installation delays, if Level 3’s installation of Service is delayed for more than 30 business days beyond the Customer Commit Date, Customer may terminate the affected Service upon written notice to Level 3 and without payment of any applicable termination charge, provided such written notice is delivered prior to Level 3 delivering a Connection Notice for the affected Service. This Section shall not apply to any Service where Level 3 has agreed to construct network facilities in or to a new location not previously served by Level 3.

ARTICLE 5. GENERAL TERMS

5.1    Force Majeure. Neither party shall be liable, nor shall any credit allowance or other remedy be extended, for any failure of performance or equipment due to causes beyond such party’s reasonable control (“force majeure event”). In the event Level 3 is unable to deliver Service as a result of a force majeure event, Customer shall not be obligated to pay Level 3 for the affected Service for so long as Level 3 is unable to deliver the affected Service. Force majeure events along with scheduled maintenance under section 1.4 shall be considered “Excused Outages.”

5.2    Assignment and Resale. Customer may not assign its rights or obligations under this Agreement or any Customer Order without the prior written consent of Level 3, which will not be unreasonably withheld. This Agreement shall apply to any permitted transferees or assignees. Customer may resell or otherwise provide the Service to third parties, provided that Customer shall indemnify, defend and hold Level 3 and its affiliates harmless from any claims arising from any Services resold or otherwise provided by Customer. If Customer resells telecommunications services, Customer certifies that it has filed all required documentation and will at all relevant times have the requisite authority with appropriate regulatory agencies respecting the same. Nothing in this Agreement, express or implied, is intended to or shall confer upon any third party any right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.

5.3    Affiliates. Service may be provided to Customer pursuant to this Agreement by an affiliate of Level 3, but Level 3 shall remain responsible to Customer for the delivery and performance of the Service. Customer’s affiliates may purchase Service pursuant to this Agreement. Customer shall be jointly and severally liable for all claims and liabilities related to Service ordered by any Customer affiliate, and any default under this Agreement by any Customer affiliate shall also be a default by Customer.

5.4    Notices. All notices shall be in writing and sufficient and received if delivered in person, or when sent via facsimile, pre-paid overnight courier, electronic mail (if an e-mail address is provided below) or sent by U.S. Postal Service (or First Class International Post (as applicable)), addressed as follows:

 

Page 2

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IF TO LEVEL 3:		IF TO CUSTOMER:
For billing inquiries/disputes, requests for Service Level credits and/or requests for disconnection of Service (other than for default):

 

		Level 3 Communications, LLC 1025 Eldorado Blvd. Broomfield, Colorado 80021 Attn: Director, Billing Facsimile: (877) 460-9867 E-mail: billing@level3.com

For all other notices:

 

 

Either party may change its notice address upon notice to the other party. All notices shall be deemed to have been given on (i) the date delivered if delivered personally, by facsimile or e-mail (one business day after delivery if delivered on a weekend or legal holiday), (ii) the business day after dispatch if sent by overnight courier, or (iii) the third business day after posting if sent by U.S. Postal Service (or other applicable postal delivery service).

5.5    Acceptable Use Policy; Data Protection. Customer’s use of Service shall comply with Level 3’s Acceptable Use Policy and Privacy Policy, as communicated in writing to Customer from time to time and which are also available through Level 3’s web site at www.level3.com. Level 3 may transfer, process and store billing and utilization data and other data necessary for Level 3’s operation of its network and for the performance of its obligations under this Agreement to or from the United States. Customer consents that Level 3 may (i) transfer, store and process such data in the United States; and (ii) use such data for its own internal purposes and as allowed by law. This data will not be disclosed to third parties.

5.6    Marks and Publicity; Non-Disclosure. Neither party shall have the right to use the other party’s or its affiliates’ trademarks, service marks or trade names without the prior written consent of the other party. Neither party shall issue any press release or other public statement relating to this Agreement, except as may be required by law or agreed between the parties in writing. Any information or documentation disclosed between the parties during the performance of this Agreement (including this Agreement) shall be subject to the terms and conditions of the applicable non-disclosure agreement then in effect between the parties.

5.7    Governing Law; Amendment. This Agreement shall be governed and construed in accordance with the laws of the State of Colorado, without regard to its choice of law rules. This Agreement, including any Service Schedule(s) and Customer Order(s) executed hereunder, constitutes the entire and final agreement and understanding between the parties with respect to the Service and supersedes all prior agreements relating to the Service. This Agreement may only be modified or supplemented by an instrument executed by an authorized representative of each party. No failure by either party to enforce any right(s) hereunder shall constitute a waiver of such right(s).

5.8    Relationship of the Parties. The relationship between Customer and Level 3 shall not be that of partners, agents, or joint venturers for one another, and nothing contained in this Agreement shall be deemed to constitute a partnership or agency agreement between them for any purposes.

5.9    Counterparts. This Agreement may be executed in one or more counterparts, all of which taken together shall constitute one and the same instrument. Facsimile signatures shall be sufficient to bind the parties to this Agreement.

 

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Page 4

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ADDENDUM TO MASTER SERVICE AGREEMENT

This Addendum (“Addendum”) is entered into this 16^th day of October, 2009 (the “Addendum Effective Date”) by and between LEVEL 3 COMMUNICATIONS, LLC (“Level 3”) and Vixxi Solutions Inc. (“Customer”) and modifies that certain Master Service Agreement dated as of March 14, 2008 (as amended or otherwise modified to date, the “Agreement”) by and between Level 3 and Customer (together, the “Parties”). Capitalized terms used herein and not otherwise defined shall have the meaning set forth in the Agreement.

WHEREAS THE PARTIES ENTERED INTO THE Agreement for the provision of certain communications services provided by Level 3 to Customer;

WHEREAS THE PARTIES NOW WISH TO MODIFY THE Agreement to include revised terms applicable to Level 3 12 E-911 Direct Services;

NOW THEREFORE, the Parties agree to modify the Agreement in the following limited respects:

1.    Revisions to Level 3 12 E-911 Direct Service Schedule. The Level 3 12 E-911 Direct Service Schedule which was attached to the Agreement shall be amended to include the following revisions:

1.1    The last paragraph of Section 3(C), Customer Responsibilities, shall be deleted and replaced with the following new paragraph:

Customer agrees to use 12 E-911 Direct exclusively (in all areas in which Level 3 has Selective Router Coverage) to support any 911 Services Customer offers to its End Users or other potential customers and, upon reasonable request, Customer will provide Level 3 with written adequate assurance that Customer is using 12 E-911 Direct exclusively as required by this Agreement. Exceptions to the exclusivity requirement set forth herein are as follows: 1) In the event the Customer’s customer has network facilities in place for selective router connectivity, and delivery of 911 service from the Customer to the Customer’s customer requires the use of such facilities, the Customer may utilize its customer’s network facilities for call delivery. 2) Customer is not required to use Level 3 12 E-911 Direct exclusively in areas not initially served by Level 3, in which the Customer first establishes network connectivity, and then Level 3 subsequently establishes network connectivity.

1.2    Section 4(b), Monthly Recurring Charges, shall be deleted and replaced with the following:

 

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Tiers by Number of Calls		MRC per call in each tier
1 – 10,000		$4.50
10,001 – 20,000		$4.00
20,001 – 50,000		$3.50
50,001 – 80,000		$3.00
Over 80,000		$2.25

Level 3 will bill Customer for Nomadic E-911 Direct monthly, based on MRC associated with the total number of calls within a given month, measured as of the end of the 25^th day of the month immediately prior to the month in which Level 3 shall bill Customer. For audit purposes and in a timely manner, Customer shall provide Level 3 with call-related information upon Level 3 request. Customer shall maintain true and accurate books and records reflecting such data as is necessary to support calculation of the number of calls sent to Level 3.

1.3    The new Service Term for 12 E-911 Direct Services purchased from Level 3 by Customer shall be two (2) years from the Effective Date of this Addendum.

1.4    Section 6, Minimum Revenue Commitment, the first sentence shall be deleted and replaced with the following new sentence:

Customer shall pay Level 3 minimum Monthly Recurring Charges for 12 E-911 Direct Service (“Monthly Revenue Commitment”) so long as the Customer is purchasing 12 E-911 Direct Service from Level 3 (either during the effective service term or a month-month term for 12 E-911 Direct Service). For months 1-6 of the Service Term, the Monthly Revenue Commitment shall be $25,000; for months 7-18, the Monthly Revenue Commitment shall be $32,000; for months 19 and after, the Monthly Revenue Commitment shall be $36,000.

2.    Service Credit. Level 3 shall provide Customer with and Customer shall accept a credit in the amount of $179,664.40 to settle all currently outstanding billing disputes.

3.    Additional Terms Unaffected. All other terms and conditions set forth in the Agreement shall remain in full force and effect except as modified by the terms of this Addendum.

 

 

2

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2^nd Amendment to Master Service Agreement

This 2^nd Amendment to Master Service Agreement (“Amendment”), dated as of the date of full execution, is entered into between LEVEL 3 COMMUNICATIONS, LLC (“Level 3”) and BANDWIDTH.COM, INC. as the assignee of the assets of VIXXI SOLUTIONS INC. as of February 22, 2011 (“Customer”) for the purpose of modifying the Master Service Agreement between the parties dated March 14, 2008 (as amended to-date, the “Agreement”) as set forth below. Capitalized terms used but not defined in this Amendment shall have the meaning set forth in the Agreement.

Modifications to Level 3 i2 E-911 Direct Service Schedule.

 

1.5

The last paragraph of Section 3(C), Customer Responsibilities as amended in the Addendum to the Agreement dated October 16, 2009, shall be deleted and replaced with the following:

Except as set forth below, Customer agrees to use i2 E-911 Direct exclusively (in all areas in which Level 3 has Selective Router Coverage) to support any 911 Services Customer offers to its End Users or other potential customers for those PSAP locations identified in Exhibit B to this Amendment. This exclusivity requirement shall not apply to PSAP locations identified in Exhibit A. Further, Customer shall not be required to use i2 E-911 Direct for PSAP locations in Exhibit B: (i) in situations where Customer’s customer (who must not be an affiliate of Customer) already has network facilities in place for selective router connectivity and delivery of 911 service from Customer to such customer requires the use of those facilities, in which event Customer may utilize its customer’s network facilities for call delivery rather than i2 E-911 Direct; and (iii) where a next generation selective router provider delivers traffic to the PSAP and enables carriers to interconnect to the next generation selective router via SIP. In addition, Customer agrees that it will not build its own network facilities for connectivity to the PSAP locations in Exhibit B for use as the primary connection, however, Customer may build network to selective routers serving PSAPS in Appendix B for the sole purpose of backup to the i2 E911 Direct service. Upon reasonable request, Customer will provide Level 3 with written adequate assurance that Customer is using i2 E-911 Direct exclusively as required by this Agreement. In the event that Customer does not use i2 E-911 Direct exclusively in any particular PSAP location (subject to the preceding exceptions), Level 3 may invoice and Customer shall pay a charge of $5,000 per month per applicable PSAP location for the remainder of the Pricing Term or until cured, whichever is sooner. The parties may, by mutual written agreement, augment the list of PSAPs in Exhibit A and/or Exhibit B at any time; provided, however, that Level 3 shall not be obligated to provide i2 E-911 Direct to any PSAP location not identified in Exhibit B.

 

1.6

Section 4(b) (Monthly Recurring Charges), the current version of which is set forth in the Addendum to the Agreement dated October 16, 2009, shall be deleted and replaced with the following:

 

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Tiers by Number of Calls		MRC per call in each tier
1 – 10,000		$4.25
10,001 – 20,000		$3.75
20,001 – 40,000		$3.25
40,001 – 60,000		$3.00
60,001 – 80,000		$2.75
80,001 – 100,000		$2.15
100,001 – 150,000		$2.10
Over 150,000		$2.00

Level 3 will bill Customer for E-911 Direct Service monthly, based on the monthly recurring charge (MRC) associated with the total number of calls within a given month, measured as of the end of the 25^th day of the month immediately prior to the month in which Level 3 shall bill Customer. For audit purposes and in a timely manner, Customer shall provide Level 3 with call-related information upon Level 3’s request. Customer shall maintain true and accurate books and records reflecting such data as is necessary to support calculation of the number of calls sent to Level 3.

Commencing on the 2^nd Amendment Effective Date and continuing through the longer of (i) 36 months (“Pricing Term”) or (ii) as long as Customer continues to receive E-911 Direct Service, Customer commits to have no less than the following amounts in monthly invoiced MRCs for E-911 Direct Service (“Monthly Revenue Commitment”): (a) for months 1 to 12 of the Pricing Term, the Monthly Revenue Commitment shall be $50,000; and (b) for months 12 to 36 of the Pricing Term and during monthly renewal periods thereafter, the Monthly Revenue Commitment shall be $75,000. The Monthly Revenue Commitment is a take-or-pay commitment, and each month Customer shall pay the higher of (i) Customer’s actual invoiced MRCs for E-911 Direct Service or (ii) the Monthly Revenue Commitment. Customer is obligated for 100% of the Monthly Revenue Commitment and is not responsible for any separate cancellation charges for E-911 Direct Service. Level 3 agrees that if Customer executes a Level 3 “tandem service” agreement as mutually negotiated and agreed upon by the parties, monthly revenue associated with such Level 3 tandem services (based upon the amount of the applicable credit issued to Customer that month) will contribute towards the satisfaction of the applicable Monthly Revenue Commitment.

Effective Date. The pricing and the Monthly Revenue Commitment shall become effective on the first day of the first full billing cycle after full execution of this Amendment (“2^nd Amendment Effective Date”).

Miscellaneous. Except as modified by this Amendment, all terms and conditions of the Agreement shall remain unchanged.

 

2

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3

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Exhibit A

PSAPS not included in Exclusivity, where Bandwidth.com has coverage

 

AL		124		Adamsville Police Department
AL		125		Alabaster Police Department
AL		130		Athens Police Department
AL		131		Atmore Police Department
AL		132		Auburn Police Department
AL		133		Autauga 9-1-1
AL		134		Baldwin County Emergency Communications District
AL		136		Bessemer City Police Department
AL		137		Bibb County Communications Center
AL		138		Birmingham Police Department
AL		139		Blount County 9-1-1
AL		141		Brewton Police Department
AL		144		Camden Police Department
AL		145		Chambers County 9-1-1
AL		149		Chilton County E9-1-1 Center
AL		151		Choctaw County 9-1-1 Center
AL		152		Choctaw County Sheriffs Office
AL		153		City Of Homewood Fire Department
AL		154		Clarke County 9-1-1 Center
AL		159		Colbert County E9-1-1 Center
AL		164		Crenshaw County Emergency Center
AL		165		Cullman City Police Dispatch
AL		166		Cullman County Sheriffs Office
AL		167		Cullman Ems
AL		171		Morgan County Central Dispatch
AL		173		East Alabama Fire District
AL		174		East Brewton Police Department
AL		176		Elmore County Sheriffs Office
AL		178		Escambia County Sheriffs Department
AL		180		Eufaula Police Department
AL		183		Fairfield Police Department
AL		184		Fayette County 9-1-1
AL		185		Flomaton Police Department
AL		187		Florence Police Department
AL		189		Franklin County Sheriffs Office
AL		193		Gardendale Police Department
AL		195		Georgiana Police Department
AL		197		Graysville Police Department

 

A-1

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AL		198		Greene County E9-1-1
AL		199		Greenville Police Department
AL		201		Hale County E9-1-1
AL		203		Hanceville Police Department
AL		208		Homewood City
AL		209		Hoover Police Department
AL		211		Hueytown Police Department
AL		212		Huntsville-Madison County 9-1-1 Center
AL		213		Irondale Police Department
AL		214		Jackson County 9-1-1
AL		215		Jefferson County Sheriff
AL		216		Lafayette 9-1-1
AL		218		Lanett Police Department
AL		219		Lauderdale County E9-1-1
AL		221		Lawrence County E9-1-1
AL		223		Lee County Sheriffs Office
AL		224		Leeds Police Department
AL		225		Limestone County Sheriffs Office
AL		227		Livingston Police Department
AL		228		Lowndes County E9-1-1
AL		230		Macon County Sheriffs Office
AL		231		Marengo County Emergency Communications District
AL		234		Marshall County 9-1-1
AL		236		Midfield Police Department
AL		237		Millbrook Police Department
AL		238		Mobile County Communication District
AL		240		Monroe County E9-1-1
AL		242		Montgomery City Fire Department
AL		243		Montgomery County Sheriffs Office
AL		244		Montgomery Police Department.
AL		246		Moundville Police Department
AL		247		Mountain Brook Police Department
AL		248		Northport Police Department
AL		249		Notasulga Police Department
AL		250		Oneonta Police Department
AL		251		Opelika Police Department
AL		254		Pelham Police Department
AL		255		Phenix City Police Department
AL		256		Pickens County 9-1-1
AL		257		Pickens County Sheriffs Office
AL		258		Pike County Communications District

 

A-2

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AL		259		Pleasant Grove Police Department
AL		261		Randolph County E9-1-1
AL		262		Robertsdale Police Department
AL		263		Russell County Sheriffs Office
AL		264		Selma-Dallas Communications Center
AL		265		Shelby County 9-1-1
AL		268		Sumter County Sheriffs Office
AL		273		Tallassee Police Department
AL		274		Tarrant City Police And Fire Department
AL		275		Troy Police Department
AL		276		Tuscaloosa County Sheriffs Office
AL		277		Tuscaloosa Police Department
AL		278		Tuskegee City Police Department
AL		279		Union Springs Police Department
AL		280		Valley Police Department
AL		281		Vestavia Police And Fire Department
AL		282		Walker County E9-1-1
AL		283		Washington County Sheriff
AL		284		Wetumpka Police Department
AL		285		Wilcox County E9-1-1 Communications District
AL		286		Winston County 9-1-1
AL		7996		Eclectic Police Department
AL		7997		Elmore County E911
AL		7998		Scottsboro Police Department
AL		8166		Conecuh County Emergency Operations Center
AL		8230		Shorter Police Department
AL		8234		Perry County E9-1-1
CA		538		Atherton Police Department
CA		542		Avalon Fire Department
CA		553		Bell Police Department
CA		554		Belmont Police Department
CA		557		Beverly Hills Fire Station #2
CA		558		Beverly Hills Police/fire Department
CA		565		Broadmoor Police Department
CA		569		Burlingame Police Department
CA		580		Camp Pendleton Fire Department
CA		582		Carlsbad Police Department
CA		586		Carson Sheriffs Station
CA		588		San Francisco Cecc
CA		591		Cdf Fresno-kings Unit
CA		599		Cdf San Diego

 

A-3

---

CA		608		Century Sheriffs Station
CA		613		Chowchilla Police Department
CA		618		Chp-capitol Operations Center
CA		650		Chula Vista Police-fire Department
CA		655		Clovis Police Department
CA		658		Coalinga Police Department
CA		659		Colma Police Department
CA		662		Compton Sheriff Station
CA		671		Coronado Police Department
CA		678		Csu Dominguez Hills
CA		679		Csu Fresno Police Department
CA		684		CSU San Diego Police Department
CA		688		Culver City Police Department
CA		690		Daly City Police Department
CA		691		Davis Police Department
CA		701		El Cajon Cdf
CA		702		El Cajon Police Department
CA		703		El Camino Community College Police Department
CA		710		El Segundo City Police Department
CA		713		Escondido Police Department
CA		720		Federal Fire Department
CA		722		Firebaugh Police Department
CA		723		Folsom Police Department
CA		727		Foster City Police Department
CA		731		Fresno County EMS
CA		732		Fresno County Sheriffs Department
CA		733		Fresno Police Department
CA		738		Galt Police Department
CA		751		Heartland Communications Authority
CA		754		Hillsborough Police Department
CA		761		Huron Police Department
CA		766		Inglewood Police Department
CA		772		Kings County Sheriffs Department
CA		773		Kingsburg Police Department
CA		775		La Mesa Police Department
CA		784		Lennox Sheriffs Station
CA		789		Lodi Police Department
CA		790		Lomita Sheriffs Station
CA		800		Los Angeles Police Department Central Dispatch Center
CA		803		Madera County Sheriffs Department
CA		804		Madera Police Department

 

A-4

---

CA		806		Manteca Police Department
CA		812		Mariposa County Sheriffs Department
CA		824		Millbrae Police Department
CA		842		National City Police Department
CA		848		North Central Fire Protection District
CA		854		Oceanside Police Department
CA		862		Pacifica Police Department
CA		892		Redwood City Police Department
CA		893		Reedley Police Department
CA		899		Ripon Police Department
CA		905		Sacramento County Sheriff
CA		906		Sacramento Police Department
CA		907		Sacramento Regional Fire-ems Communications Center
CA		918		San Bruno Police Department
CA		920		San Carlos Police Department
CA		923		San Diego County Sheriff
CA		924		San Diego Fire Communications
CA		925		San Diego Police Department
CA		929		San Francisco State University
CA		930		San Gabriel Fire Department
CA		933		San Joaquin County Sheriffs Department
CA		934		San Jose Fire Communications
CA		940		San Mateo County Public Safety Communications
CA		941		San Mateo Police Department
CA		946		Sanger Police Department
CA		966		Selma Police Department
CA		980		South Bay Regional Public Communications Authority
CA		985		South San Francisco Police Department
CA		989		Stockton Police Department
CA		999		Torrance Fire Department
CA		1000		Torrance Police Department
CA		1001		Tracy Police Department
CA		1013		Uc Davis Police Department
CA		1017		Uc San Diego Police Department
CA		1018		Uc San Francisco Police Department
CA		1025		Us Park Presidio Of San Francisco
CA		1045		West Hollywood Sheriffs Station
CA		1051		Yolo County Communications
CA		1052		Yolo County Sheriff
CA		1053		Yosemite National Park
CA		7999		Mountain View Fire Department

 

A-5

---

CA		8123		Usmc Miramar Fire/police Department
CA		8125		San Francisco International Airport
CA		8155		Elk Grove Police Department
CA		8255		Citrus Heights Police Department
CA		8256		CSU San Marcos Police Department
CT		1295		Ansonia Police Department
CT		1296		Avon Police Department
CT		1297		Berlin Police Department
CT		1299		Bethel Police Department
CT		1300		Bethel Volunteer Fire Department
CT		1301		Bloomfield Police Department
CT		1302		Branford Fire Department
CT		1303		Branford Police Department
CT		1304		Bridgeport Fire Department
CT		1305		Bridgeport Police Computer Aided Dispatch
CT		1306		Bridgeport Police Department
CT		1307		Bristol Police Department
CT		1308		Brookfield Police Department
CT		1310		Canton Police Department
CT		1311		Cheshire Police Department
CT		1312		Clinton Police Department-ecc
CT		1313		Colchester Emergency Communications Center
CT		1315		Connecticut State Police-a Troop
CT		1324		Connecticut State Police-w Troop
CT		1325		Cromwell Fire Department
CT		1326		Cromwell Police Department
CT		1327		Danbury Fire Department
CT		1328		Danbury Police Department
CT		1329		Darien Police Department
CT		1331		Derby Police Department
CT		1332		East Granby Police Department
CT		1333		East Hartford Police Department
CT		1334		East Haven Fire Department
CT		1335		East Haven Police Department
CT		1336		East Lyme Emergency Communication Center
CT		1337		East Windsor Police Department
CT		1338		Easton Police Department
CT		1339		Enfield Police Department
CT		1340		Fairfield Emergency Communications Center
CT		1341		Farmington Police Department
CT		1342		Glastonbury Police Department

 

A-6

---

CT		1343		Granby Police Department
CT		1344		Greenwich Police Department
CT		1345		Groton Emergency Communications Center
CT		1346		Guilford Ecc
CT		1347		Hamden Emergency Communication Center
CT		1348		Hartford Emergency Communications Center
CT		1349		Ledyard Emergency Communications Center
CT		1350		Litchfield County Dispatch
CT		1351		Madison Police Department
CT		1352		Manchester Police Department
CT		1354		Meriden Police Department
CT		1355		Middlebury Police Department
CT		1356		Middletown Fire Department
CT		1357		Middletown Police Department
CT		1358		Milford Fire Department
CT		1359		Monroe Police Department
CT		1360		Montville Emergency Communications Center
CT		1361		Naugatuck Police Department
CT		1362		New Britain Emergency Response Center
CT		1363		New Canaan Police Department
CT		1364		New Fairfield Communications Center
CT		1365		New Haven ERC
CT		1366		New London Police Department
CT		1367		New Milford Police Department
CT		1368		Newington Police Department
CT		1369		Newtown Fire And Ems
CT		1370		Newtown Police Department
CT		1371		North Branford Police Department
CT		1372		North Haven Police And Fire
CT		1373		Northwest Connecticut Public Safety Emergency Communications Cen
CT		1374		Norwalk Police Department
CT		1375		Norwich Police Department
CT		1376		Old Saybrook Police Department
CT		1377		Orange Police Department
CT		1378		Plainville Police Department
CT		1379		Plymouth Police Department
CT		1383		Putnam Police Department
CT		1384		Quinebaug Valley Emergency Communications Center
CT		1385		Redding Emergency Communications Center
CT		1386		Ridgefield Police Department
CT		1387		Rocky Hill Police Department

 

A-7

---

CT		1388		Seymour Police Department
CT		1389		Shelton Police Department
CT		1391		Simsbury Police Department
CT		1392		South Central Connecticut Regional Emergency Communications Cent
CT		1393		South Windsor Police Department
CT		1394		Southbury Police Department
CT		1395		Southington Police Department
CT		1396		Stamford Emergency Communication Center
CT		1397		Stonington Police Department
CT		1398		Stratford Emergency Communications Center
CT		1399		Suffield Police Department
CT		1400		Thomaston Police Department
CT		1401		Tolland County Mutual Aid Emergency Communication Center
CT		1402		Tolland Town Law Enforcement
CT		1403		Torrington Police Department
CT		1404		Trumbull Police Department
CT		1405		University Of Connecticut Police Department
CT		1406		Valley Shore Emergency Communications Center
CT		1407		Vernon Police Department
CT		1408		Wallingford Fire Department
CT		1409		Waterbury Police Department
CT		1410		Waterford Emergency Communications Center
CT		1411		Watertown Police Department
CT		1412		West Hartford Police Department
CT		1413		West Haven Ers
CT		1414		Weston Emergency Communications Center
CT		1415		Weston Police Department
CT		1416		Westport Fire Department
CT		1417		Westport Police Department
CT		1418		Wethersfield Police Department
CT		1419		Willimantic Switchboard Emergency Communication Center
CT		1420		Wilton Police Department
CT		1422		Windsor Locks Police Department
CT		1423		Windsor Police Department
CT		1424		Winsted Police Department
CT		1425		Wolcott Police Department
CT		1426		Woodbridge Police Department
CT		8004		Groton City Police Department
CT		500044		Wallingford Police Department
FL		1442		Alachua County Fire Rescue
FL		1443		Alachua County Sheriffs Office - Combined Comm. Ctr.

 

A-8

---

FL		1444		Altamonte Springs Police
FL		1445		Apopka Police And Fire Departments
FL		1446		Atlantic Beach Police
FL		1460		Bradford County Cdc
FL		1462		Brevard County Fire-rescue-ems
FL		1463		Brevard County Sheriffs Department
FL		1464		Brooksville Police Department
FL		1472		Casselberry Police Department
FL		1474		Chiefland Police Department
FL		1479		Clay County Fire And Rescue
FL		1480		Clay County Sheriffs Department
FL		1482		Cocoa Beach Police
FL		1483		Cocoa City Police
FL		1486		Columbia County 9-1-1 - Eoc
FL		1487		Coral Gables Police And Fire
FL		1496		Dixie County Emergency Services
FL		1499		Duval County Emergency 9-1-1
FL		1502		Escambia County Emergency Management
FL		1503		Escambia County Ems
FL		1504		Escambia County Sheriff
FL		1515		Gainesville Police Department
FL		1516		Gilchrist County Sheriffs Office
FL		1518		Greater Orlando Airport Authority
FL		1519		Green Cove Springs Police Department
FL		1524		Hamilton County Sheriffs Office
FL		1528		Hernando County Sheriffs Department
FL		1529		Hialeah Fire
FL		1530		Hialeah Police
FL		1538		Indialantic Police
FL		1539		Indian Harbour Beach Police
FL		1543		Jacksonville Beach Police
FL		1544		Jacksonville Fire And Rescue
FL		1545		Jacksonville Police
FL		1549		Key West Police Department
FL		1556		Lake Mary Police Department
FL		1568		Levy County Sheriffs Office
FL		1573		Maitland Police
FL		1576		Monroe County Sheriff’s Office
FL		1582		Melbourne Police
FL		1583		Miami Beach Fire-rescue Department
FL		1584		Miami Beach Police Department

 

A-9

---

FL		1585		Miami Fire College
FL		1586		Miami Police Department
FL		1587		Miami-Dade Communications Center
FL		1594		Nassau County Sheriff’s Dept.
FL		1595		Neptune Beach Police
FL		1602		Ocoee Police Department
FL		1606		Orange County 9-1-1 Systems
FL		1607		Orange County Fire Rescue
FL		1608		Orange County Sheriffs Office
FL		1609		Orange Park Police Department
FL		1610		Orlando Fire Department
FL		1611		Orlando Police Department
FL		1614		Oviedo Police Department
FL		1616		Palm Bay Police
FL		1627		Pensacola Police Department
FL		1629		Pinecrest Village Police Department
FL		1640		Putnam County Sheriffs Office
FL		1642		Rockledge Police
FL		1644		Sanford Police Department
FL		1646		Santa Rosa County Emergency Comm. Center
FL		1650		Satellite Beach Police
FL		1652		Seminole County Public Safety
FL		1653		Seminole County Sheriffs Office
FL		1658		Springhill Fire And Rescue
FL		1659		St Augustine Police Department
FL		1661		St Johns County Sheriffs Office
FL		1673		Titusville Police
FL		1674		Union County Sheriffs Office
FL		1675		University Of Central Florida Police Department
FL		1684		Williston Police Department
FL		1685		Winter Garden Police Department
FL		1688		Winter Park Police Department
FL		1689		Winter Springs Police Department
FL		1690		Yulee Police Department
FL		7908		Starke Police Dept.
FL		7909		Brevard County
FL		7927		Ocean Reef Public Safety
FL		7937		Orange County 911 Administration
FL		7943		Palatka Police Dept.
FL		7944		Santa Rosa County Sheriff’s Office
FL		7945		Milton Police Dept.

 

A-10

---

FL		7946		Gulf Breeze Police Dept.
FL		8219		Aventura Police Department
GA		1691		Bacon County E9-1-1 Communications Center
GA		1692		Alpharetta Police Department
GA		1694		Appling County 9-1-1
GA		1697		Atlanta Fire Department
GA		1698		Atlanta Police E9-1-1
GA		1699		Augusta-Richmond County 9-1-1
GA		1700		Austell
GA		1702		Baldwin County Sheriffs Department
GA		1708		Bleckley County Sheriffs Department
GA		1709		Brantley County Eoc
GA		1712		Bryan County Sheriffs Department
GA		1713		Bulloch County Public Safety
GA		1714		Burke County E9-1-1
GA		1715		Butts County 911
GA		1717		Camden County
GA		1718		Candler County Sheriffs Office
GA		1720		Catoosa County
GA		1721		Charlton County Sheriffs Department
GA		1725		Cherokee County E9-1-1
GA		1726		City Of Chamblee
GA		1728		Clayton County E9-1-1
GA		1730		Cobb County E9-1-1
GA		1731		Coffee County 9-1-1
GA		1732		College Park Police Department
GA		1734		Columbia County
GA		1735		Conyers E9-1-1
GA		1740		Dade County 9-1-1
GA		1742		De Kalb County Public Safety
GA		1743		Decatur Police Department
GA		1745		Dodge-wilcox 9-1-1
GA		1749		Douglas County Board Of Commissioners
GA		1751		East Point E9-1-1
GA		1752		Effingham County Sheriff
GA		1754		Emanuel County
GA		1755		Evans County Sheriffs Department
GA		1756		Fairburn City
GA		1758		Fayette County E9-1-1
GA		1759		Fayette County Sheriffs Department
GA		1762		Forest Park City

 

A-11

---

GA		1764		Fort Stewart 9-1-1
GA		1767		Fulton County Emergency Communications
GA		1770		Glynn County E9-1-1
GA		1771		Glynn-Brunswick 9-1-1 Center
GA		1774		Gwinnett County E9-1-1
GA		1776		Hall County 9-1-1
GA		1777		Hancock County Sheriffs Department
GA		1778		Hapeville Police Department
GA		1780		Haralson County Sheriffs Office
GA		1784		Henry County E9-1-1
GA		1785		Houston County 9-1-1
GA		1789		Jeff Davis County 9-1-1
GA		1790		Jefferson County
GA		1791		Jenkins County Sheriffs Department
GA		1793		Jones County Sheriffs Department
GA		1794		Kennesaw
GA		1795		Lamar County Sheriffs Office Dispatch-e9-1-1 Center
GA		1796		Tri-county 9-1-1
GA		1797		Laurens County E9-1-1
GA		1799		Liberty County 9-1-1
GA		1805		Macon-Bibb County E9-1-1 Center
GA		1807		Marietta Emergency Communications Department
GA		1809		Mcduffie County
GA		1810		Mcintosh County Sheriffs Department
GA		1813		Millen Police Department- Jenkins 9-1-1
GA		1816		Monroe County Sheriffs Department
GA		1819		Morrow Emergency Communications
GA		1826		Paulding County 9-1-1
GA		1827		Peach County
GA		1828		Peachtree City Police Department
GA		1830		Pierce County 9-1-1
GA		1831		Pike County Sheriffs Department
GA		1833		Powder Springs Police Department
GA		1839		Riverdale 9-1-1
GA		1840		Rockdale County 9-1-1
GA		1841		Roswell E9-1-1
GA		1843		Savannah -Chatham Metro Police
GA		1845		Screven County Communications Center
GA		1847		Smyrna 9-1-1 Communications Center
GA		1848		Smyrna Fire Station #4
GA		1849		Spalding County-griffin E9-1-1

 

A-12

---

GA		1854		Tattnall Communications
GA		1862		Toombs County 9-1-1
GA		1864		Treutlen County Sheriffs Department
GA		1867		Twiggs County Sheriffs Department
GA		1868		Union City
GA		1871		Walker County 9-1-1
GA		1872		Walton County 9-1-1
GA		1873		Ware County E911
GA		1874		Warren County Sheriffs Department
GA		1875		Washington County 9-1-1
GA		1876		Wayne County E9-1-1
GA		7667		Alma-bacon 9-1-1
GA		8110		City Of Tybee Island
GA		8227		City Of Doraville E 9-1-1
GA		8228		Chattahoochee River 9-1-1 Authority (ChatComm)
GA		8272		Wiregrass E-911
GA		105970		Richmond Hill Communications Center
IL		2115		Bartonville Police Department
IL		2145		Canton Police Department
IL		2171		Chillicothe Police
IL		2230		Fulton County Sheriff
IL		2383		Peoria ECC
IL		2384		Peoria Heights Police Department
IN		2505		Alexandria Police Department
IN		2507		Anderson Police Communications
IN		2508		Attica Police Department
IN		2511		Bartholomew County Emergency Operations Center
IN		2514		Bedford Police Department
IN		2515		Beech Grove Police Department
IN		2516		Benton County Sheriffs Office
IN		2517		Blackford County Sheriff
IN		2518		Bluffton Police Department
IN		2519		Boone County Sheriff
IN		2520		Brown County Sheriff
IN		2523		Carmel Police Communications
IN		2524		Carroll County 9-1-1
IN		2533		Clinton County 9-1-1
IN		2534		Clinton Police Department
IN		2543		Delaware County 9-1-1
IN		2547		Edinburgh Police Department
IN		2550		Elwood Police Department

 

A-13

---

IN		2554		Fountain County Regional Dispatch Center
IN		2555		Frankfort Police Department
IN		2557		Franklin Police Department
IN		2563		Grant County Sheriffs Office
IN		2564		Greene County Sheriff
IN		2565		Greenfield Police Department
IN		2567		Greenwood Police Department
IN		2569		Hamilton County Sheriff
IN		2571		Hancock County Sheriffs Office
IN		2573		Hendricks County Communications Center
IN		2574		Henry County 9-1-1
IN		2578		Howard County Sheriff
IN		2579		Huntington County Sheriffs Office
IN		2580		Huntington Police Department
IN		2581		Indiana State Police-bloomington
IN		2586		Indiana University Police
IN		2587		Indianapolis Fire Department
IN		2589		Indianapolis-Marion County Communications
IN		2597		Johnson County Sheriff
IN		2599		Kokomo Police Department
IN		2606		Lawrence County Sheriffs Department
IN		2607		Lawrence Police Department
IN		2608		Linton Police
IN		2611		Madison County Sheriffs Department
IN		2612		Marion Police Department
IN		2615		Martinsville Police Department
IN		2618		Metropolitan Emergency Communications Agency
IN		2619		Miami County E9-1-1
IN		2622		Mitchell Police
IN		2623		Monroe Cedc
IN		2624		Montgomery County 9-1-1
IN		2625		Mooresville Police
IN		2626		Morgan County Sheriffs Department
IN		2633		New Whiteland Police Department
IN		2636		Noblesville Police Communications
IN		2641		Owen County Sheriff
IN		2644		Peru Police Department
IN		2662		Shelby County Sheriff
IN		2664		Shelbyville Police Department
IN		2666		Speedway Police
IN		2682		Vermillion County Sheriffs Office

 

A-14

---

IN		2690		Wayne Township Fire
IN		7959		Castleton Police Department
IN		8177		Airport Communications
IN		500008		Bloomington Police Department
IN		500009		Crawfordsville Police Department
KS		2695		Iola Allen County 911 Dispatch Center
KS		2698		Andover City Police Department
KS		2699		Arkansas City Police Department
KS		2701		Augusta Police Department
KS		2702		Barber County Sheriffs Office
KS		2703		Barton County Communications Center
KS		2706		Bourbon County Sheriffs Office
KS		2708		Butler County Emergency Communications
KS		2711		Chautauqua County Sheriffs Office
KS		2714		Clark County Sheriffs Office
KS		2720		Comanche County Sheriffs Department
KS		2722		Crawford County Sheriffs Department
KS		2727		Edwards County Sheriffs Office
KS		2728		Elk County Emergency Services
KS		2732		Emporia Police Department
KS		2733		Ford County Communications Center
KS		2738		Garden City Police Department
KS		2743		Gray County Sheriffs Office
KS		2744		Greeley County Sheriffs Office
KS		2745		Greenwood County Sheriffs Office
KS		2747		Harper County Sheriffs Office
KS		2748		Harvey County 9-1-1 Communications
KS		2749		Haskell County Sheriffs Office
KS		2751		Hodgeman County Sheriffs Office
KS		2753		Hutchinson Police Department
KS		2754		Independence Police Department
KS		2765		Kingman County Sheriffs Office
KS		2766		Kiowa County Sheriffs Department
KS		2768		Labette County Sheriffs Office
KS		2769		Lane County Sheriffs Office
KS		2770		Larned Police Department
KS		2776		Liberal Fire Department
KS		2781		Marion County Communications
KS		2783		Mcpherson County Communications
KS		2785		Meade County Sheriffs Office
KS		2792		Neosho County Communications

 

A-15

---

KS		2806		Parsons Police Department
KS		2807		Pawnee County Sheriffs Office
KS		2809		Pittsburg Police Department
KS		2813		Pratt County Sheriffs Office
KS		2816		Rice County 9-1-1 Emergency Communications
KS		2826		Scott County Sheriffs Office
KS		2827		Sedgwick County Backup PSAP
KS		2828		Sedgwick County Emergency Communications
KS		2829		Seward County Emergency Communications
KS		2841		Stafford County Sheriffs Office
KS		2844		Sumner County 9-1-1
KS		2853		Wichita County Sheriffs Office
KS		2854		Wilson County Sheriffs Office
KS		2855		Winfield Police Department
KS		2856		Woodson County Sheriffs Office
KS		8132		Fort Scott Police Department
KS		103481		Mulvane Police Department
KY		2863		Anchorage Police Department
KY		2864		Anderson County Ambulance Service
KY		2901		Elizabethtown Police Department
KY		2933		Jefferson County Sheriffs Department
KY		2934		Jeffersontown Police Department
KY		2961		Kentucky State Police-trimble County
KY		2977		Louisville Police Department
KY		2978		Louisville-jefferson County Emergency Operations Center
KY		3000		Nelson County Dispatch Center
KY		3027		Shively Police-fire
KY		3031		St Mathews Police Department
LA		3045		Ascension Parish Communications District
LA		3046		Ascension Parish Sheriffs Office
LA		3047		Assumption Parish Detention Center
LA		3049		Baker Police Department
LA		3051		Baton Rouge Department Of Emergency Medical Services
LA		3054		Bienville Parish Sheriffs Office
LA		3055		Bogalusa Police Department
LA		3056		Bossier Parish Communication District
LA		3059		Caddo Parish Sheriffs Department
LA		3065		Chitimacha Tribal Police Department
LA		3066		Claiborne Parish Sheriff
LA		3070		Covington Police Department
LA		3071		Denham Springs Police Department

 

A-16

---

LA		3072		Desoto Parish Communication Department
LA		3075		East Feliciana Parish Prison
LA		3081		Gretna Police Department
LA		3083		Iberville Office Of Emergency Preparedness
LA		3086		Jefferson Parish
LA		3087		Kenner Police Department
LA		3090		Lafourche Communications District
LA		3091		Lafourche Fire District #1
LA		3095		Mandeville Police Department
LA		3099		Natchitoches Parish Communication And Sheriff
LA		3101		New Orleans Fire Department
LA		3102		New Orleans Police Department
LA		3106		Pearl River Police Department
LA		3108		Plaquemine Police Department
LA		3109		Plaquemines Parish Communications District
LA		3110		Pointe Coupee Communication District
LA		3111		Port Allen Police Department
LA		3115		Red River Parish Sheriff
LA		3119		Sabine Parish Sheriff Dispatch
LA		3120		Slidell Police Department
LA		3121		St Bernard Fire Department
LA		3122		St Bernard Parish Sheriff And Communications
LA		3124		St Charles Parish Communications District
LA		3125		St Helena Parish Sheriff
LA		3126		St James Parish 9-1-1
LA		3127		St John Parish Sheriffs Office
LA		3130		St Mary Parish Communications District
LA		3131		St Mary Sheriffs Office
LA		3132		St Tammany Parish Communication District
LA		3133		Tangipahoa Communication District
LA		3135		Terrebonne Parish Communications District
LA		3140		Washington Parish Sheriff’s Office
LA		3141		Webster Parish Police Department
LA		3142		West Baton Rouge Sheriffs Office
LA		3144		West Feliciana Parish Sheriffs Office
LA		3148		Zachary Police Department
LA		8024		St. Tammany Parish Sheriff’s Office
LA		8099		Livingston Parish Sheriff Office
LA		8162		Franklinton Police Department
LA		500053		Leesville Police Department
MI		3307		Albion Department Of Public Safety

 

A-17

---

MI		3310		Allegan County Central Dispatch
MI		3311		Allen Park Fire Department
MI		3312		Allen Park Police Department
MI		3315		Ann Arbor Police Department
MI		3317		Arenac County Central Dispatch
MI		3321		Barry County Central Dispatch
MI		3324		Bay County Central Dispatch
MI		3326		Belding Police Department
MI		3327		Belleville Police Department
MI		3328		Benton Harbor Police Department
MI		3329		Benton Township Police Department
MI		3332		Berrien County Sheriffs Department
MI		3338		Brownstown Township Police Department
MI		3340		Calhoun County Central Dispatch
MI		3341		Canton Township Public Safety
MI		3350		Chelsea Police Department
MI		3354		Clare County Central Dispatch
MI		3363		Dearborn Department Of Communication
MI		3364		Dearborn Heights Police Department
MI		3366		Detroit Metropolitan Wayne County Airport Police
MI		3367		Detroit Police Department
MI		3371		East Lansing Police Department
MI		3372		Eastern Michigan University Police Department
MI		3374		Eaton County Central Dispatch
MI		3375		Ecorse Police Department
MI		3384		Flat Rock Police And Fire
MI		3389		Garden City Police Department
MI		3391		Gibraltar Police Department
MI		3392		Gladwin County E9-1-1
MI		3394		Grand Rapids City Police And Fire
MI		3398		Greenville Department Of Public Safety
MI		3399		Grosse Ile Police Department
MI		3400		Grosse Pointe City Police And Fire Department
MI		3401		Grosse Pointe Farms Police Department
MI		3402		Grosse Pointe Park Public Safety
MI		3403		Grosse Pointe Shores Police Department
MI		3404		Grosse Pointe Woods Police Department
MI		3405		Hamtramck Police Department
MI		3407		Harper Woods Police Department
MI		3409		Highland Park Police Department
MI		3410		Hillsdale County Central Dispatch

 

A-18

---

MI		3415		Huron County Central Dispatch
MI		3416		Huron Township Police-fire
MI		3419		Ionia County Central Dispatch
MI		3420		Iosco County 9-1-1
MI		3421		Iosco County Sheriffs Office
MI		3424		Jackson City Police Department
MI		3425		Jackson County Sheriffs Department
MI		3426		Kalamazoo Consolidated Dispatch
MI		3427		Kalamazoo Department Of Public Safety
MI		3428		Kalamazoo Township Police Department
MI		3439		Lansing Police Department Communications Center
MI		3440		Lapeer County E9-1-1 Central Dispatch
MI		3445		Lincoln Park Police Department
MI		3446		Livingston County E9-1-1
MI		3447		Livonia Police Department
MI		3457		Marshall Police Department
MI		3463		Melvindale Police Department
MI		3465		Meridian Township Police Department
MI		3466		Michigan State Police - Bridgeport
MI		3472		Michigan State Police - Hastings
MI		3474		Michigan State Police - Metro Dispatch
MI		3476		Michigan State Police - Operations Center
MI		3478		Michigan State Police - Rockford
MI		3481		Michigan State University Police Department
MI		3482		Midland County Central Dispatch
MI		3485		Milan Police Department
MI		3489		Monroe County Central Dispatch
MI		3490		Monroe Emergency Management Center
MI		3491		Monroe Police
MI		3506		Niles City Police Department
MI		3507		Northville Police Department
MI		3508		Northville Township Police Department
MI		3515		Ogemaw County Sheriffs Department
MI		3520		Ottawa County Central Dispatch
MI		3521		Ottawa County Emergency Services
MI		3524		Pittsfield Township Department Of Public Safety
MI		3526		Plymouth Community Communications Center (pccc)
MI		3530		Portage Police Department
MI		3532		Redford Township Police Department
MI		3534		River Rouge Police Department
MI		3535		Riverview Police Department

 

A-19

---

MI		3539		Rockwood Police Department
MI		3541		Romulus Police Department
MI		3546		Saginaw 9-1-1 Central Dispatch
MI		3549		Saline Police Department
MI		3550		Sanilac County Central Dispatch
MI		3558		Southgate Police Department
MI		3563		St Joseph Police Department
MI		3567		Sumpter Township Police Department
MI		3568		Taylor Police Department
MI		3569		Trenton Fire Department
MI		3570		Trenton Police Department
MI		3572		Tuscola County Central Dispatch
MI		3573		University Of Michigan Dps
MI		3576		Van Buren Township Department Of Public Safety
MI		3577		Walker Police Department
MI		3580		Washtenaw Central Dispatch
MI		3582		Wayne County Central Communications
MI		3583		Wayne Police Department
MI		3585		Western Michigan University Police Department
MI		3586		Westland Police Department
MI		3591		Woodhaven Police Department
MI		3592		Wyandotte Police Department
MI		3593		Wyoming Police Department
MI		3594		Ypsilanti Police Department
MI		8025		Lansing- Ingham County Central Dispatch
MI		500074		Northfield Township Police Department
MO		3745		Aurora Police Department
MO		3747		Barry County Sheriffs Office
MO		3748		Barton County
MO		3781		Christian County Emergency Services
MO		3788		Cooper County Ema
MO		3819		Hickory County Sheriffs Department
MO		3829		Jasper County 9-1-1 Center
MO		3834		Joplin Police Department
MO		3844		Lawrence County 9-1-1
MO		3861		Mc Donald County 9-1-1
MO		3868		Monett Police Department
MO		3875		Nevada Police Department
MO		3877		Newton County Central Dispatch
MO		3894		Pettis County Sheriffs Office
MO		3900		Polk County Communications

 

A-20

---

MO		3923		Sedalia Police Department
MO		3929		Springfield-Greene County 9-1-1
MO		3953		Vernon County Sheriff
MO		8112		Republic 9-1-1
MS		3966		Aaa Ambulance Service
MS		3970		Amite County Sheriffs Department
MS		3977		Brandon Police Department
MS		3979		Canton Police Department
MS		3985		Claiborne County Sheriffs Department
MS		3988		Clinton Fire Department
MS		3989		Clinton Police Department
MS		3991		Columbia Police Department
MS		3992		Copiah County
MS		3994		Covington County Sheriff
MS		3997		Flowood Police Department
MS		3998		Forrest County
MS		4002		George County Sheriffs Office
MS		4003		Greene County Sheriffs Office
MS		4010		Hattiesburg Police Department
MS		4014		Hinds County Sheriffs Department
MS		4019		Humphreys County Sheriffs Department
MS		4022		Jackson County Sheriff’s Office-Main
MS		4023		Jackson County Sheriffs Office - West
MS		4024		Jackson Police Department
MS		4025		Jasper County Sheriffs Office
MS		4026		Jefferson County Sheriffs Department
MS		4027		Jefferson Davis County Sheriffs Office
MS		4028		Jones County Sheriffs Office
MS		4033		Lamar County Sheriffs Office
MS		4037		Laurel Police Department
MS		4039		Lawrence County Sheriff
MS		4040		Leake County Communications Center
MS		4044		Lincoln County Sheriffs Office
MS		4048		Madison County Sheriffs Office
MS		4049		Madison Police Department
MS		4050		Marion County Sheriffs Office
MS		4052		Mccomb Police Department
MS		4053		Mississippi Highway Patrol-district #1
MS		4058		Natchez Police Department
MS		4060		Newton County Emergency Management Agency E9-1-1
MS		4071		Pearl Police Department

 

A-21

---

MS		4072		Pearl River County Sheriffs Department
MS		4073		Perry County Sheriffs Department
MS		4074		Petal Police Department
MS		4077		Picayune Police Department
MS		4078		Pike County Sheriffs Office
MS		4082		Rankin County Sheriffs Office
MS		4083		Richland Police Department
MS		4085		Ridgeland Police Department
MS		4087		Scott County Sheriffs Office
MS		4089		Simpson County Sheriffs Office
MS		4090		Smith County Sheriffs Office
MS		4093		Stone County 9-1-1
MS		4101		Vicksburg-Warren E9-1-1 Communications Center
MS		4102		Walthall County Sheriffs Office
MS		4108		Wilkinson County Sheriffs Office
MS		4110		Yazoo City Police Department
MS		7973		Monticello Police Department
MS		102219		Mendenhall Police Department
MS		106431		University of Southern Mississippi
NC		4175		Alexander County E9-1-1 Communications
NC		4178		Apex Police Communications
NC		4184		Avery County Communications
NC		4187		Beech Mountain Police Department
NC		4195		Boone Police Department
NC		4200		Burke County Emergency Communications
NC		4201		Burke County Sheriffs Communications
NC		4204		Cabarrus County Sheriffs Department
NC		4205		Caldwell County Sheriffs Communications
NC		4210		Carolinas Medical Center-med Center Air
NC		4212		Cary Emergency Communications Center
NC		4214		Catawba County E9-1-1 Center
NC		4216		Charlotte Fire Department Communications
NC		4217		Charlotte-Mecklenburg Police Department
NC		4224		City Of Cornelius
NC		4225		City Of Pineville
NC		4228		Cleveland County Communications Center
NC		4232		Concord Police Communications
NC		4245		Davidson County Emergency Communications
NC		4246		Davidson Police Communications
NC		4256		Eden Police-fire Communications
NC		4270		Forsyth County Fire Department and Ambulance

 

A-22

---

NC		4271		Forsyth County Sheriffs Communications
NC		4274		Fuquay Varina Police Dispatch Center
NC		4276		Gaston County Police Communications
NC		4277		Gastonia Police-fire Communications
NC		4283		Granite Falls Fire Department
NC		4284		Granite Falls Police
NC		4301		Hickory Police Communications
NC		4302		High Point Police-Fire Communications
NC		4305		Iredell County Emergency Communications
NC		4314		Kannapolis Police Communications
NC		4315		Kernersville Police Communications
NC		4318		Kings Mountain Police-Fire Communications
NC		4324		Lenoir Fire Department
NC		4325		Lenoir Police Department
NC		4326		Lexington Police Department
NC		4327		Lincoln County Communications
NC		4335		Matthews Police Communications
NC		4341		Mecklenberg County Ems Communications
NC		4343		Mecklenberg Ems Agency
NC		4351		Mooresville Police Communications
NC		4353		Morganton Department Of Public Safety
NC		4355		Mt Holly Police Communications
NC		4380		North Carolina State University Department Of Public Safety
NC		4407		Polk County Communications
NC		4411		Raleigh-Wake County Communications
NC		4415		Reidsville Police Department
NC		4421		Rockingham County 9-1-1
NC		4422		Rockingham County Sheriffs Communications
NC		4425		Rowan County Telecommunications
NC		4428		Rutherford County Sheriffs Communications
NC		4429		Salisbury Police Communications
NC		4438		Shelby Police Communications
NC		4447		Stanly County E9-1-1 Emergency Communications
NC		4448		Stanly County Sheriffs Communications
NC		4449		State Capital Police Communications
NC		4450		Statesville Police Communications
NC		4456		Thomasville Police-fire Communications
NC		4461		Unc-chapel Hill Police Communications
NC		4465		Valdese Public Safety Service Center And Police
NC		4466		Wake County Emergency Management
NC		4467		Wake County Sheriffs Communications

 

A-23

---

NC		4468		Wake Forest Police Communications
NC		4474		Watauga County Sheriffs Communications
NC		4478		Wendell Police Communications
NC		4486		Winston-Salem Police-Fire Communications
NC		8170		Guilford Metro 9-1-1
NV		4993		Carson City Sheriffs Office
NV		4998		Douglas County Communications
NV		5003		Eureka County Sheriffs Office
NV		5013		Lyon County Dispatch Center
NV		5017		Nye County Sheriff
NV		5019		Reno Communications Center
NV		5021		Sparks Police Department
NV		5022		Storey County 9-1-1
NV		5024		Washoe County Sheriff-incline Village Substation
OH		5236		Akron Police Department
OH		5245		Aurora Police Department
OH		5246		Austintown Police Department
OH		5248		Barberton Police Department
OH		5249		Barnesville Police Department
OH		5250		Bath Police Department
OH		5251		Bay Village Police Department
OH		5252		Beachwood Police Department
OH		5253		Beaver Township Police Department
OH		5254		Beavercreek Police Department
OH		5255		Bedford Heights Police
OH		5256		Bedford Police Department
OH		5257		Bellaire Police Department
OH		5258		Bellbrook Communications Center
OH		5261		Belmont County Communications Center
OH		5262		Belpre Police Department
OH		5263		Berea Police Department
OH		5264		Bexley Police Department
OH		5265		Boardman Township Police Department
OH		5266		Bratenahl Police
OH		5267		Brecksville Police
OH		5268		Bridgeport Police Department
OH		5269		Broadview Heights Police Department
OH		5271		Brook Park Police And Fire
OH		5272		Brookville Police
OH		5279		Canfield Police Department
OH		5281		Cedar Point Police Department

 

A-24

---

OH		5282		Centerville Police
OH		5283		Chagrin Falls Police
OH		5284		Champaign Countywide Communications Center
OH		5289		City Of Brooklyn Police Department
OH		5290		City Of Canton Police
OH		5293		City Of Sylvania-police Division
OH		5299		Cleveland Heights Police
OH		5300		Cleveland Police Department
OH		5302		Clyde Police Department
OH		5304		Columbus Police Department
OH		5306		Copley Police Department
OH		5307		Coshocton County Sheriffs Office
OH		5311		CECOM
OH		5312		Cuyahoga Falls Police Department
OH		5313		Cuyahoga Heights Police
OH		5316		Dayton Police
OH		5322		Dublin Police Communications Center
OH		5323		East Cleveland Fire And Police
OH		5324		Eastlake Police And Fire
OH		5327		Erie County Sheriffs Office
OH		5328		Euclid Police
OH		5329		Fairborn Police And Fire Department
OH		5330		Fairfield County Sheriffs Office
OH		5332		Fairlawn Police Department
OH		5333		Fairview Park Fire And Police
OH		5334		Fayette County Sheriffs Department
OH		5335		Findlay Police Department
OH		5336		Franklin County Communications Center
OH		5337		Franklin Township Police Department
OH		5338		Fremont Police Department
OH		5340		Gahanna Police Department
OH		5342		Gallia County E9-1-1 Communications Center
OH		5343		Garfield Heights Police
OH		5344		Gates Mills Police
OH		5347		Germantown Police
OH		5348		Grandview Heights Police Department
OH		5349		Greene County Dispatch
OH		5353		Grove City Police Department
OH		5357		Hancock Sheriffs Office
OH		5364		Highland Heights Police Department
OH		5365		Hilliard Police Department

 

A-25

---

OH		5367		Hillsboro Police Department
OH		5371		Huber Heights Police
OH		5372		Hudson Police Department
OH		5375		Huron Police Department
OH		5376		Independence Police And Fire
OH		5380		Jefferson County 9-1-1
OH		5382		Kent Police Department
OH		5383		Kent State University Police
OH		5385		Kettering Fire
OH		5386		Kettering Police
OH		5387		Kirtland Police
OH		5389		Lake County Communications Center
OH		5390		Lakewood Police
OH		5391		Lancaster Police Department
OH		5392		Lawrence County 9-1-1
OH		5397		London Police
OH		5401		Lucas County Sheriff
OH		5402		Lyndhurst Police
OH		5403		Macedonia Police Department
OH		5404		Madison County Sheriff
OH		5405		Mahoning County E9-1-1
OH		5408		Maple Heights Police Department
OH		5409		Margareta Township Fire And Police Department
OH		5412		Martins Ferry Police Department
OH		5414		Maumee Police Department
OH		5415		Mayfield Heights Police
OH		5416		Mayfield Village Police And Fire
OH		5420		Mentor On The Lake Police
OH		5421		Mentor Police
OH		5424		Miami Township Police
OH		5425		Miamisburg Police And Fire
OH		5426		Middleburg Heights Police Department
OH		5431		Monroe County Sheriff Department
OH		5432		Montgomery County Sheriff
OH		5433		Moraine Police
OH		5440		Muskingum County Sheriff
OH		5442		New Albany Communications Center
OH		5443		New Lexington Police Department
OH		5445		Newburgh Heights Police
OH		5447		North Central Ems
OH		5448		North Olmsted Police

 

A-26

---

OH		5449		North Randall Police
OH		5450		North Royalton Police
OH		5451		Norton Police Department
OH		5454		Oakwood Police And Fire
OH		5455		Oakwood Police Department
OH		5464		Ohio State University Police
OH		5465		Olmsted Falls Police
OH		5466		Olmsted Township Police
OH		5468		Oregon Fire-police
OH		5471		Ottawa Hills Police Department
OH		5473		Parma Communications Center
OH		5474		Parma Heights Police And Fire
OH		5477		Pepper Pike Police Department
OH		5478		Perkins Township Police Department
OH		5479		Perry County Sheriffs Office
OH		5480		Perry Police And Communications Center
OH		5484		Pickerington Police Department
OH		5486		Portage County Sheriffs Office
OH		5489		Ravenna Police Department
OH		5490		Reynoldsburg Police Department
OH		5491		Richfield Village Police Department
OH		5493		Richmond Heights Police
OH		5496		Rocky River Fire Department
OH		5498		Sagamore Hills Police Department
OH		5499		Sandusky County Sheriff
OH		5501		Sebring Police
OH		5503		Seneca County Sheriff
OH		5504		Shadyside Police Department
OH		5505		Shaker Heights Police
OH		5509		Solon Police
OH		5510		South Euclid Police Department
OH		5513		Springfield Fire Department
OH		5514		St Clairsville Police Department
OH		5516		Stark County Emergency Center
OH		5517		Stark County Sheriff
OH		5518		Stow Police And Fire Department
OH		5519		Streetsboro Police And Fire
OH		5520		Strongsville Police Department
OH		5521		Struthers Police Department
OH		5522		Sugarcreek Township Police Department
OH		5523		Summit County Sheriffs Office

 

A-27

---

OH		5524		Tallmadge Police Department
OH		5525		Toledo Police Department Communications
OH		5529		Twinsburg Police Department
OH		5532		University Heights Police Department
OH		5533		Upper Arlington Police Department
OH		5534		Upper Sandusky Police Department
OH		5538		Vandalia Police
OH		5539		Vermilion Police Department
OH		5541		Walton Hills Police Department
OH		5544		Warrensville Heights Police And Fire Department
OH		5545		Washington County Sheriffs Office
OH		5546		Washington Court House Police Department
OH		5553		West Carrolton Police
OH		5556		Westerville Communications Center
OH		5558		Westlake Police Department
OH		5559		Whitehall Police Department
OH		5560		Wickliffe Police
OH		5563		Willoughby Hills Police Department
OH		5564		Willoughby Police
OH		5565		Willowick Police
OH		5569		Worthington Police Department
OH		5572		Wyandot County Sheriffs Office
OH		5574		Youngstown Fire And Police
OH		5575		Zanesville Police
OH		8133		Sylvania Township Police
OH		8161		Marietta Police Department
OH		104013		Sandusky Police Department
OH		106129		Columbus Municipal Airport Authority
OH		500077		Tiffin Police Department
OK		5588		Bartlesville Police Department
OK		5593		Bixby Police Department
OK		5612		City Of Clinton Police Department
OK		5614		Claremore Police Department
OK		5618		Collinsville Police Department
OK		5626		Cushing Police Department
OK		5628		Delaware County Sheriffs Office
OK		5643		Glenpool Police Department
OK		5652		Henryetta Police Department
OK		5661		Jenks Police Department
OK		5698		Okmulgee County 9-1-1
OK		5705		Owasso Police Department

 

A-28

---

OK		5722		Rogers County Sheriffs Office
OK		5725		Sand Springs Police Department
OK		5726		Sapulpa Police Department
OK		5727		Sayre Police Department
OK		5732		Skiatook Police Department
OK		5738		Tulsa Public Safety Response Center-city
OK		5739		Tulsa Public Safety Response Center-county
OK		5741		Vinita Police Department
OK		5744		Weatherford Police Department
OK		8134		Elk City Police Department
OK		8183		Pottawatomie County E9-1-1 System
SC		6015		Aiken County Sheriff
SC		6016		Aiken Public Safety
SC		6017		Allendale County 9-1-1
SC		6023		Bamberg County Emergency Services
SC		6024		Barnwell County Sheriffs Office
SC		6025		Batesburg Police
SC		6028		Berkeley County Communications E9-1-1
SC		6029		Calhoun County Sheriffs Office
SC		6030		Cayce Police
SC		6031		Charleston AFB Fire Department
SC		6032		Charleston City Police Department And Fire Department
SC		6033		Charleston County Communications Center
SC		6034		Charleston County Sheriffs Office
SC		6035		Charleston Ems
SC		6044		Colleton County Sheriffs Office
SC		6045		Columbia-Richland 9-1-1 Communications Center
SC		6048		Dorchester County E9-1-1
SC		6050		Edgefield County Sheriff
SC		6051		Edgefield Police Department
SC		6056		Forest Acres Police
SC		6059		Goose Creek Police Department
SC		6066		Hanahan City Police And Fire
SC		6069		Isle Of Palms Police Department
SC		6071		Kershaw County Public Safety
SC		6072		Lancaster City Police
SC		6076		Lexington County Public Safety
SC		6077		Lexington County Sheriff
SC		6083		Mt Pleasant Police
SC		6084		Newberry County E9-1-1
SC		6085		Newberry Fire Department

 

A-29

---

SC		6086		North Augusta Public Safety
SC		6087		North Charleston Police Department
SC		6089		Orangeburg County 9-1-1
SC		6092		Richland County EOC
SC		6099		Summerville Police and Fire
SC		6103		West Columbia Police Department
TN		6203		Anderson County Sheriffs Office
TN		6204		Athens-mcminn Communications
TN		6205		Bartlett Police
TN		6206		Bedford County Communications
TN		6207		Bedford County Sheriffs Department
TN		6211		Blount County Sheriffs Office
TN		6213		Bradley County 9-1-1
TN		6214		Brentwood City Police Department
TN		6217		Campbell County 9-1-1
TN		6221		Carthage Police Department
TN		6222		Centerville Police Department
TN		6223		Chattanooga Police Department
TN		6224		Cheatham County 9-1-1
TN		6226		City Of Clinton E9-1-1
TN		6227		City Of La Follette E9-1-1
TN		6228		Claiborne County 9-1-1
TN		6231		Cleveland Police Department
TN		6232		Cocke County 9-1-1
TN		6233		Coffee County Administration Plaza (sheriff)
TN		6234		Coffee County Emergency Communications
TN		6235		Collierville Police
TN		6239		Nashville/Davidson County Emergency Communications Center (Compton)
TN		6243		Dickson County Emergency Communications
TN		6244		Ducktown Courthouse
TN		6246		East Ridge Police Department
TN		6247		Etowah Police Department
TN		6250		Franklin City Police
TN		6251		Franklin County 9-1-1
TN		6252		Gallatin Police Department
TN		6253		Gatlinburg Police Department
TN		6254		Germantown Police
TN		6256		Giles County 9-1-1
TN		6257		Goodlettsville Police Department
TN		6258		Grainger County Emergency Communication District
TN		6261		Hamblen County 9-1-1

 

A-30

---

TN		6262		Hamilton County 9-1-1
TN		6265		Hancock County Sheriffs Office
TN		6267		Hawkins County 9-1-1
TN		6271		Hendersonville Police Department
TN		6274		Hickman County 9-1-1
TN		6275		Hohenwald Police Department
TN		6276		Houston County Central Communications
TN		6277		Humphreys County 9-1-1
TN		6278		Humphreys County Sheriff
TN		6282		Jefferson County Eoc
TN		6285		Knox County 9-1-1
TN		6286		Knoxville Police Department
TN		6287		La Vergne Police Department
TN		6288		Lake City Police Department
TN		6291		Lawrence County Emergency Communications District
TN		6292		Lawrence County Sheriffs Department
TN		6293		Lewis County 9-1-1
TN		6295		Lincoln County E9-1-1 Center
TN		6298		Lookout Mountain Police Department
TN		6299		Loudon County E9-1-1
TN		6302		Marion County 9-1-1
TN		6303		Marion County Sheriffs Department
TN		6304		Marshall County 9-1-1
TN		6306		Maury County E9-1-1
TN		6307		Mcminn County Emergency Communications District
TN		6311		Meigs County 9-1-1
TN		6312		Memphis Fire Communications
TN		6313		Memphis Police Communications
TN		6315		Millington Police
TN		6316		Monroe County 9-1-1
TN		6317		Montgomery County
TN		6318		Montgomery County EMS
TN		6319		Moore County Sheriffs Department
TN		6320		Morgan County 9-1-1 Center
TN		6322		Murfreesboro Police Department
TN		6323		Nashville Metro Police Department
TN		6326		Oak Ridge
TN		6332		Pigeon Forge Police Department
TN		6333		Polk County Sheriffs Department
TN		6334		Portland Police Department
TN		6335		Pulaski Police Department

 

A-31

---

TN		6338		Rhea County 9-1-1
TN		6340		Roane County E9-1-1
TN		6341		Roane County Eoc
TN		6342		Robertson County Sheriff-Central Communications
TN		6343		Rogersville Police Department
TN		6344		Rutherford County Ems
TN		6345		Rutherford County Sheriffs Department
TN		6350		Sevier County Sheriffs Office
TN		6351		Sevierville Police Department
TN		6352		Shelby County Ecd
TN		6353		Shelby County Emergency Managment Agency
TN		6354		Shelby County Fire Department
TN		6355		Shelby County Sheriffs Department
TN		6356		Signal Mountain Police Department
TN		6357		Smith County Emergency Services
TN		6358		Smyrna Police Department
TN		6359		Soddy Daisy Police Department
TN		6361		Springfield Police And Fire
TN		6362		Springfield Police Department
TN		6363		Stewart County 9-1-1
TN		6365		Sumner County Emergency Communications District
TN		6366		Sumner County Sheriffs Office
TN		6369		Trousdale County 9-1-1
TN		6370		Trousdale County Sheriffs Department
TN		6372		Union County 9-1-1
TN		6381		Williamson County Emergency Communications
TN		6382		Wilson County 9-1-1
TN		6384		Winchester Police Department
TN		7961		Clinton Police Department
TN		7962		La Follette Police Department
TN		7989		Anderson County EMS
TN		500093		Spring Hill Emergency Communications
TX		6385		Abilene Police Department
TX		6386		Addison Police Department
TX		6387		Alamo Heights Police Department
TX		6388		Alamo Police Department
TX		6389		Alice Police Department
TX		6390		Allen Police Department
TX		6391		Alpine Police Department
TX		6392		Alton Police Department
TX		6394		Alvin Police Department

 

A-32

---

TX		6403		Andrews County Sheriffs Office
TX		6406		Aransas County Sheriffs Office
TX		6407		Aransas Pass Police Department
TX		6408		Archer County Sheriffs Office
TX		6412		Atascosa County Sheriffs Office
TX		6415		Austin County Sheriffs Department
TX		6420		Balch Springs Police Department
TX		6421		Balcones Heights Police Department
TX		6422		Bandera County Sheriffs Office
TX		6425		Baylor County Sheriffs Office
TX		6427		Beaumont Fire Department
TX		6428		Beaumont Police Department
TX		6430		Bee County Sheriffs Office
TX		6431		Beeville Police Department
TX		6432		Bell County Communications Center
TX		6434		Bellaire Police Department
TX		6439		Bexar County Sheriffs Department
TX		6443		Boerne Police Department-kendall County
TX		6444		Bonham Police Department
TX		6447		Bowie Police Department
TX		6452		Brenham Emergency Communications Department
TX		6453		Bridge City Police Department
TX		6456		Brooks County Sheriffs Office
TX		6457		Brookshire Police Department
TX		6459		Brownfield Police Department
TX		6460		Brownsville Police Department
TX		6463		Burkburnett Police Department
TX		6468		Calhoun County Sheriffs Department
TX		6469		Callahan County Sheriffs Office
TX		6470		Cameron County Sheriffs Office
TX		6471		Cameron Police Department
TX		6475		Carrollton Police Department
TX		6479		Castle Hills Police Department
TX		6482		Chambers County Sheriffs Office
TX		6484		Childress Police Department
TX		6486		Clay County Sheriffs Office
TX		6488		Cleveland Police Department
TX		6490		Cochran County Sheriffs Office
TX		6491		Cockrell Hill Police Department
TX		6495		Collin County Sheriffs Department
TX		6497		Colorado City Police Department

 

A-33

---

TX		6498		Colorado County Sheriffs Office
TX		6499		Comal County Sheriffs Office
TX		6504		Conroe PD
TX		6505		Conroe Police Department
TX		6508		Copperas Cove Police Department
TX		6509		Metrocom
TX		6511		Corsicana Police Department
TX		6516		Crane Police Department
TX		6518		Crosby County Sheriffs Office
TX		6520		Crystal City Police Department
TX		6521		Culberson County Sheriffs Office
TX		6524		Dallas County Sheriffs Department
TX		6525		Dallas Emergency Communications Office
TX		6526		Dallas Fire Dispatch Office
TX		6527		Dallas Neutral
TX		6528		Dallas - Ft Worth International Airport DPS
TX		6529		Dallas-ft Worth International Airport Dps East
TX		6531		Dayton Police Department
TX		6534		Del Rio Police Department
TX		6536		Denison Fire Department
TX		6537		Denton County Sheriffs Department
TX		6538		Denton Police Department
TX		6539		Denver City Police Department
TX		6542		Dewitt County Sheriffs Office
TX		6544		Dickens County Sheriffs Office
TX		6546		Dimmit County Sheriffs Office
TX		6548		Donna Police Department
TX		6551		Duval County Sheriffs Office
TX		6552		Eagle Pass Police Department
TX		6558		Edinburg Police Department
TX		6559		Edwards County Sheriffs Office
TX		6561		El Paso County 9-1-1 District
TX		6562		El Paso County Sheriffs Department
TX		6566		Electra Police Department
TX		6568		Ellis County Sheriffs Office
TX		6569		Elsa Police Department
TX		6570		Ennis Fire Department
TX		6571		Ennis Police Department
TX		6575		Falls County Sheriffs Office
TX		6576		Fannin County Sheriffs Department
TX		6577		Farmers Branch Police Department

 

A-34

---

TX		6579		Fisher County Sheriffs Office
TX		6580		Flower Mound Police Department
TX		6581		Floyd County Sheriffs Office
TX		6586		Freer Police Department
TX		6587		Freestone County Sheriffs Office
TX		6588		Friendswood Police Department
TX		6589		Frio County Sheriffs Office
TX		6591		Frisco Police Department
TX		6594		Ft Stockton Police Department
TX		6598		Gaines County Sheriffs Office
TX		6600		Galena Park Police Department
TX		6603		Garland Police Department
TX		6604		Garza County Sheriffs Office
TX		6605		Gatesville Police Department
TX		6607		Gillespie County Sheriffs Office
TX		6610		Glenn Heights Police Department
TX		6611		Goliad County Sheriffs Office
TX		6612		Gonzales County Sheriffs Office
TX		6613		Grand Prairie Police Department
TX		6616		Grayson County Sheriffs Office
TX		6620		Grimes County Sheriffs Office
TX		6621		Guadalupe County Sheriffs Department
TX		6623		Hale County Sheriffs Office
TX		6629		Hardeman County Sheriffs Office
TX		6631		Harlingen Ems Office
TX		6632		Harlingen Police Department
TX		6633		Harris County Neutral
TX		6634		Harris County Sheriffs Department
TX		6636		Haskell County Sheriffs Department
TX		6639		Hedwig Village Police Department
TX		6644		Hewitt Police Department
TX		6645		Hidalgo County Sheriffs Office
TX		6646		Hidalgo Police Department
TX		6647		Highland Park Department Of Public Safety
TX		6648		Highland Village Police Department
TX		6649		Hill County Sheriffs Office
TX		6650		Hillsboro Police Department
TX		6655		Houston City Neutral
TX		6657		Houston Ems-fire Department
TX		6661		Hudspeth County Sheriffs Office
TX		6662		Humble Police Department

 

A-35

---

TX		6663		Hunt County Sheriffs Department
TX		6666		Hutchins Police Department
TX		6667		Ingleside Police Department
TX		6668		Iowa Park Police Department
TX		6670		Irving Police Department
TX		6672		Jacinto City Police Department
TX		6673		Jack County Sheriffs Office
TX		6674		Jackson County Sheriffs Office
TX		6676		Jasper County Sheriffs Department
TX		6678		Jefferson County Sheriffs Office
TX		6679		Jersey Village Police Department
TX		6680		Jim Hogg Sheriffs Office
TX		6681		Jim Wells County Sheriffs Office
TX		6682		Johnson County Sheriffs Department
TX		6683		Jones County 9-1-1 Communications Center
TX		6685		Karnes County Sheriffs Office
TX		6687		Katy Police Department
TX		6688		Kaufman County Sheriffs Department
TX		6689		Kaufman Police Department
TX		6694		Kermit Police Department
TX		6695		Kerr County Emergency 9-1-1 Network
TX		6700		Kingsville Police Department
TX		6701		Kinney County Sheriffs Office
TX		6702		Kirby Police Department
TX		6703		Kleberg County Sheriffs Office
TX		6704		Knox County Central Dispatch
TX		6705		La Feria Police Department
TX		6706		La Joya Police Department
TX		6709		La Salle County Sheriffs Office
TX		6711		Lake Dallas Police Department
TX		6716		Lamesa Police Department
TX		6719		Lancaster Fire-police Department
TX		6721		Laredo Police Department
TX		6722		Lavaca County Sheriffs Office
TX		6725		Lee County Sheriffs Office
TX		6726		Leon County Sheriffs Office
TX		6727		Leon Valley Police Department
TX		6728		Levelland Law Enforcement Center
TX		6729		Lewisville Police Department
TX		6730		Liberty County Sheriffs Office
TX		6731		Liberty Police Department

 

A-36

---

TX		6733		Limestone County Sheriffs Office
TX		6736		Littlefield Police Department
TX		6737		Live Oak County Sheriffs Office
TX		6738		Live Oak Police Department
TX		6743		Los Fresnos Police Department
TX		6744		Lubbock County Sheriffs Department
TX		6745		Lubbock Ems Office
TX		6746		Lubbock Police Department
TX		6747		Lufkin Police-Fire-EMS
TX		6749		Lynn County Sheriffs Office
TX		6755		Martin County Sheriffs Office
TX		6757		Matagorda County Sheriffs Office
TX		6758		Mathis Police Department
TX		6759		Maverick County Sheriffs Office
TX		6760		Mcallen Police Department
TX		6762		Mcgregor Police Department
TX		6763		Mckinney Police Department
TX		6764		Mclennan County Sheriffs Office
TX		6765		Meadows Police Department
TX		6766		Medina County Sheriffs Department
TX		6770		Mercedes Police Department
TX		6771		Mesquite Police Department
TX		6772		Mexia Police Department
TX		6774		Midland Emergency Communications District
TX		6775		Midlothian Police Department
TX		6779		Mission Police Department
TX		6780		Missouri City Police Department
TX		6781		Monahans Police Department
TX		6782		Mont Belvieu Police Department
TX		6783		Montague County Sheriffs Department
TX		6784		Montgomery County Emergency Communication District
TX		6785		Montgomery County Ems
TX		6789		Muleshoe Police Department
TX		6793		Naval Air Station Corpus Christi
TX		6794		Nassau Bay Police Department
TX		6796		Navarro County Sheriffs Department
TX		6797		Navasota Police Department
TX		6798		Nederland Police Department
TX		6800		New Braunfels Police Department
TX		6801		Newton County Sheriffs Office
TX		6805		Odessa Communications Center

 

A-37

---

TX		6806		Old Abilene Fire Station #1
TX		6808		Olney Police Department
TX		6809		Orange County Sheriff
TX		6810		Orange Police Department
TX		6813		Paducah City Hall
TX		6815		Palmview Police Department
TX		6826		Pecos Police Department
TX		6829		Pharr Fire Department
TX		6830		Pharr Police Department
TX		6831		Pinehurst Police Department
TX		6832		Plainview Police Department
TX		6833		Plano Public Safety Communications
TX		6835		Port Aransas Police Department
TX		6836		Port Arthur Police Department
TX		6837		Port Isabel Police Department
TX		6840		Presidio County Sheriffs Office
TX		6845		Randolph Air Force Base
TX		6846		Raymondville Police Department
TX		6849		Real County Sheriffs Office
TX		6850		Red Oak Police Department
TX		6851		Refugio County Sheriffs Office
TX		6852		Richardson Police Department
TX		6854		Richmond Police Department
TX		6855		Rio Grande City Police Department
TX		6858		Roanoke Police Department
TX		6862		Robertson County Sheriff Office
TX		6863		Robinson Police Department
TX		6864		Robstown Police Department
TX		6866		Rockport Police Department
TX		6867		Rockwall County Sheriffs Department
TX		6869		Roma Police Department
TX		6870		Rosenberg Police Department
TX		6875		Sabine County Sheriffs Office
TX		6880		San Antonio Fire Department
TX		6881		San Antonio Police Department
TX		6883		San Benito Police Department
TX		6885		San Juan Police Department
TX		6887		San Patricio County Sheriffs Department
TX		6891		Schertz Police Department
TX		6893		Scurry County Sheriffs Department
TX		6895		Seagoville Police Department

 

A-38

---

TX		6896		Seguin Police Department
TX		6897		Shackelford County Sheriffs Office
TX		6900		Sheppard Air Force Base Fire Department
TX		6904		Silsbee Police Department
TX		6906		Slaton Police Department
TX		6912		South Houston Police Department
TX		6913		South Padre Island Police Department
TX		6917		Southside Place Police Department
TX		6918		Southwest Regional Communication Center
TX		6919		Spring Valley Police Department
TX		6921		Stafford Police
TX		6922		Starr County Sheriffs Office
TX		6927		Stonewall County Sheriffs Office
TX		6928		Sugar Land Police Department
TX		6932		Sweetwater Police Department
TX		6936		Taylor County Sheriffs Department
TX		6938		Terrell County Sheriffs Office
TX		6944		Texas Tech University Police Department
TX		6946		The Colony Police Department
TX		6947		Throckmorton County Sheriffs Office
TX		6948		Tomball Police Department
TX		6951		Tulia Police Department
TX		6952		Tyler County Sheriffs Office
TX		6953		Tyler Police And Fire Department
TX		6955		Universal City Police Department
TX		6958		University Of Texas- San Antonio
TX		6960		University Park Police Department
TX		6962		Upton County Sheriffs Office
TX		6963		Uvalde Police Department
TX		6964		Val Verde County Sheriffs Office
TX		6966		Van Zandt Sheriffs Office
TX		6968		Vernon Police Department
TX		6969		Victoria County Sheriffs Office
TX		6970		Victoria Police Department
TX		6971		Vidor Police Department
TX		6972		Village Fire Department
TX		6973		Village Police Department
TX		6974		Waco Police Department
TX		6976		Waller County Sheriffs Office
TX		6981		Waxahachie Police Department
TX		6984		Webb County Sheriffs Office

 

A-39

---

TX		6986		Weslaco Police Department
TX		6989		West University Police Department
TX		7001		Wichita Falls Police Department
TX		7002		Willacy Sheriffs Department
TX		7004		Wilmer Police Department
TX		7005		Wilson County Sheriffs Office
TX		7006		Windcrest Police Department
TX		7011		Woodway Public Safety Department
TX		7013		Yoakum Police Department
TX		7014		Young County Sheriffs Office
TX		7015		Zapata County Sheriffs Office
TX		7902		Lower Rio Grande Development Council Training Psap(training Center)
TX		7903		North Central Texas Council Of Governments (nctcog) Training Psap (training Center)
TX		7963		Memorial Village Police Department
TX		7974		Lacy-lakeview Police Department
TX		7975		Belle Meade Police Department
TX		8044		Bexar Metro 9-1-1 Network District
TX		8045		Denton Area 9-1-1 District
TX		8167		Portland Police Department
TX		8196		Converse Police Department
TX		8214		Town of Prosper Police Department
TX		8232		Fort Sam Houston Police
TX		8273		Helotes Police Department
TX		8326		Kent County Sheriff’s Office
TX		500010		Bexar Metro Training PSAP-Position
TX		500011		Bexar Metro Training-Lucent Palladium
TX		500013		DENCO Lab #2
TX		500014		DENCO Lab #1
TX		500015		DENCO Training
TX		500018		GHC Training Lab #1
TX		500019		GHC Training Lab #2
TX		500020		GHC Training Lab #3
TX		500021		GHC Training Lab #4
TX		500022		Beaumont Training
TX		500027		Cameron County Training
TX		500029		Big Spring Police Department
TX		500032		Hockley County Sheriff’s Office
WI		7393		Bayside Village Police Department
WI		7394		Beaver Dam Police Department
WI		7396		Brodhead Police Department
WI		7398		Brown Deer Police

 

A-40

---

WI		7400		Burlington Police
WI		7402		Butler Police Department
WI		7403		Caledonia Police
WI		7405		Cedarburg Police
WI		7408		City Of Brookfield Police
WI		7412		Columbus Police Department
WI		7415		Dane County Public Safety Communications
WI		7416		Delavan Police Department
WI		7417		Dodge County Sheriffs Department
WI		7422		Elm Grove Police
WI		7424		Fond Du Lac County Sheriff
WI		7425		Fond Du Lac Police Department
WI		7429		Franklin Police
WI		7430		Ft Atkinson Police
WI		7431		Germantown Police
WI		7433		Grafton Police
WI		7437		Greendale Police And Fire
WI		7438		Greenfield Police Department
WI		7439		Hales Corners Police
WI		7440		Hartford Police Department
WI		7445		Jefferson County Sheriffs Department
WI		7447		Kenosha County
WI		7452		Lake Area Communications
WI		7453		Lake Geneva Police
WI		7464		Menomonee Falls Police Department
WI		7465		Mequon Police
WI		7466		Middleton Police
WI		7467		Milwaukee County Sheriff
WI		7468		Milwaukee Police Department
WI		7469		Monona Police
WI		7471		Mt Pleasant Police Department
WI		7472		Muskego Police Department
WI		7474		New Berlin Police Department
WI		7476		North Shore Public Safety Communications
WI		7477		Oak Creek Police
WI		7478		Oconomowoc City Police Department
WI		7484		Ozaukee County Sheriff
WI		7489		Port Washington Police
WI		7491		Portage Police Department
WI		7494		Racine County Sheriff
WI		7495		Racine Emergency Services

 

A-41

---

WI		7499		Ripon Police Department
WI		7500		Rock County 9-1-1 Communications Center
WI		7502		Sauk County
WI		7506		Sheboygan County Sheriffs Department
WI		7507		Sheboygan Police
WI		7508		South Milwaukee Police Department
WI		7511		St Francis Police
WI		7514		Sturtevant Police
WI		7515		Sun Prairie Police
WI		7517		Thiensville Police
WI		7525		Walworth County Sheriffs Department
WI		7527		Washington County Sheriffs Department
WI		7528		Watertown Police Department
WI		7529		Waukesha County Sheriffs Department
WI		7530		Waukesha Police Department
WI		7532		Waupun Police Department
WI		7534		Wauwatosa Police
WI		7535		West Allis Police And Fire
WI		7536		West Bend Police Department
WI		7537		West Milwaukee Police
WI		7538		Whitewater Police Department
WI		106457		University of Wisconsin
WI		106468		Mukwonago Police Department

 

A-42

---

Exhibit B

Exclusive Use PSAPS

 

AL		126		Albertville Police Department
AL		127		Alexander City Police Department
AL		140		Boaz Police
AL		142		Butler County Emergency Communications District
AL		143		Calhoun County 9-1-1 District
AL		147		Cherokee County 9-1-1
AL		148		Childersburg Police Department
AL		155		Clay County E9-1-1
AL		156		Clay County Sheriffs Office
AL		157		Cleburne County 9-1-1 Center
AL		161		Coosa County Sheriffs Office
AL		170		De Kalb County E9-1-1
AL		179		Etowah County Communications District E9-1-1
AL		190		Ft Payne Police Department
AL		191		Fyffe Police Department
AL		192		Gadsden Police Department
AL		196		Goodwater Police Department
AL		200		Guntersville Police
AL		226		Lincoln Police Department
AL		267		St Clair County E9-1-1
AL		269		Sylacauga Police Department
AL		270		Talladega County Sheriffs Office
AL		271		Talladega Police Department
AL		272		Tallapoosa County Sheriffs Office
AR		289		Arkadelphia Police Department
AR		292		Batesville Central Dispatch
AR		294		Benton County Central Communications
AR		295		Bentonville City Police Department
AR		296		Boone County 9-1-1
AR		298		Cabot Police Department
AR		300		Carroll County Sheriffs Office
AR		301		Washington County Central Ems
AR		302		North Little Rock 9-1-1
AR		303		Clark County Sheriffs Department
AR		309		Conway Police Department
AR		317		Eureka Springs Police Department
AR		318		Faulkner County Sheriffs Office
AR		319		Fayetteville E9-1-1

 

A-43

---

AR		324		Garland County Sheriffs Department
AR		327		Heber Springs Police Department
AR		329		Hope Police Department
AR		330		Hot Spring County 9-1-1
AR		331		Hot Springs Police Department
AR		332		Howard County Sheriffs Office
AR		334		Jacksonville 9-1-1 Center
AR		341		Little River County Sheriffs Department
AR		342		Little Rock Police Department
AR		344		Lonoke County Sheriffs Department
AR		345		Lonoke Police Department
AR		346		Madison County Sheriffs Office
AR		349		Maumelle Department Of Public Safety
AR		350		Maumelle Ems
AR		353		Miller County Sheriffs Department
AR		356		Montgomery County Sheriffs Office
AR		358		Morrilton Police Department
AR		359		Nevada County Sheriffs Office
AR		364		Perry County Sheriffs Office
AR		366		Pike County Sheriffs Office
AR		368		Polk County Sheriffs Office
AR		369		Pope County 9-1-1
AR		370		Prairie County Sheriffs
AR		371		Pulaski County Sheriffs Office
AR		373		Rogers City Police Department
AR		374		Saline County Central
AR		376		Searcy Police Department
AR		378		Sevier County Sheriffs Office
AR		381		Sherwood Police Department
AR		382		Siloam Springs Police Department
AR		383		Springdale Police Department
AR		385		Stone County Sheriffs Department
AR		386		Arkansas County 911
AR		387		Fairfield Bay Police Department
AR		390		Washington County Sheriffs Department
AR		392		White County Sheriffs Department
AR		394		Dardenelle Police Department
AR		395		Yell County Sheriff’s Office
AZ		396		Ak-chin Police Department
AZ		397		Apache County Sheriffs Office
AZ		399		Apache Junction Police Department

 

A-44

---

AZ		400		Arizona State University Police Department
AZ		401		Avondale Police Department
AZ		402		Benson Police Department
AZ		406		Buckeye Police Department
AZ		407		Bullhead City Police And Fire
AZ		408		Camp Verde Marshals Office
AZ		409		Capitol Police
AZ		410		Casa Grande Police Department
AZ		411		Central Yavapai Fire District
AZ		412		Chandler Police Department
AZ		413		City of Tucson Communications Center
AZ		414		Clifton Police Department
AZ		415		Cochise County Sheriffs Office
AZ		419		Coolidge Police Department
AZ		421		Cottonwood Police Department
AZ		423		Department Of Public Safety
AZ		424		Douglas Police Department
AZ		425		Drexel Heights Fire Department
AZ		426		El Mirage Police Department
AZ		427		Eloy Police Department
AZ		428		Flagstaff-Coconino County Communications Center
AZ		429		Florence Police Department
AZ		430		Ft Huachuca
AZ		431		Ft Mcdowell Police Department
AZ		433		Gila County Sheriffs Department-Payson
AZ		434		Gila County Sheriffs Office-Globe
AZ		435		Gila River Tribal Police
AZ		436		Gilbert Police Department
AZ		437		Glendale Police Department
AZ		438		Globe Police Department
AZ		439		Goodyear Police Department
AZ		440		Graham County Sheriffs Office
AZ		441		Grand Canyon National Park Service
AZ		442		Greenlee County Sheriffs Office
AZ		444		Holbrook Police Department
AZ		446		Huachuca City Police Department
AZ		448		Kearney Police Department
AZ		449		Kingman Police Department
AZ		452		Lake Havasu Police Department
AZ		454		Luke Air Force Base Fire Department
AZ		455		Mammoth Police Department

 

A-45

---

AZ		456		Marana Police Department
AZ		457		Maricopa County Sheriffs Office
AZ		458		Mesa Police Department
AZ		459		Mohave County Sheriffs Office
AZ		461		Navajo County Sheriffs Office
AZ		467		Nogales Police Department
AZ		468		Oro Valley Police Department
AZ		469		Page Police Department
AZ		470		Paradise Valley Police Department
AZ		471		Pascuq Yaqui Tribal Police Department
AZ		472		Payson Police Department
AZ		473		Peoria Police Department
AZ		475		Phoenix Fire Department
AZ		476		Phoenix Police Department
AZ		478		Pima County Sheriffs Office-ajo
AZ		479		Pima County Sheriffs Office-tucson
AZ		480		Pinal County Sheriffs Office
AZ		481		Pinetop-lakeside Police
AZ		483		Prescott Fire Department
AZ		484		Prescott Police Department
AZ		486		Rural Metro Fire Department-pima
AZ		487		Rural Metro Fire Department-yuma
AZ		489		San Luis Police Department
AZ		490		Santa Cruz County Sheriffs Office
AZ		491		Scottsdale Police Department
AZ		492		Sedona Fire District
AZ		493		Sedona Fire District
AZ		494		Sedona Police Department
AZ		495		Show Low Police Department
AZ		496		Sierra Vista Police Department
AZ		497		Snowflake Police Department
AZ		498		Somerton Police Department
AZ		499		South Tucson City Department Of Public Safety
AZ		500		Rural Metro
AZ		501		Superior Police Department
AZ		502		Surprise Police Department
AZ		503		Tempe Police Department
AZ		504		Tohona Odham Police Department
AZ		505		Tolleson Police Department
AZ		507		Tucson Fire Medics
AZ		508		Tucson Police Department

 

A-46

---

AZ		509		University Of Arizona Police
AZ		510		White River Tribal Police
AZ		511		Wickenburg Police Department
AZ		512		Willcox Police Department
AZ		513		Williams Police Department
AZ		514		Winslow Fire Department
AZ		515		Winslow Police Department
AZ		516		Yavapai County Sheriffs Office
AZ		520		Yuma County Sheriffs Office
AZ		521		Yuma Police Department
CA		523		Alameda County Sheriffs Office
CA		524		Alameda Police Department
CA		525		Albany Police Department
CA		526		Alhambra Police Department
CA		530		Anaheim Police Department
CA		531		Anderson Police Department
CA		532		Antioch Police Department
CA		533		Arcadia Communications Center
CA		534		Arcata Police Department
CA		544		Azusa Police Department
CA		546		Baldwin Park Police Department
CA		547		Banning Police Department
CA		548		Barstow Police Department
CA		551		Beaumont Police Department
CA		552		Bell Gardens Police Department
CA		555		Benicia Police Department
CA		556		Berkeley Police-fire Communications
CA		563		Brea Police-fire Communications
CA		566		Buena Park Fire Department
CA		567		Buena Park Police Department
CA		568		Burbank Police Department
CA		573		Cal State Poly Pomona University
CA		579		Calistoga Police Department
CA		581		Campbell Police Department
CA		595		CDF Napa
CA		597		Cdf Riverside
CA		598		Cdf San Bernardino
CA		601		Cdf San Mateo-santa Cruz Unit
CA		602		CDF Santa Clara
CA		612		Chino Police Department
CA		628		Chp-los Angeles Communications Center-antelope Valley

 

A-47

---

CA		651		City Of Burbank Police Communications
CA		652		City of Industry Sheriffs Station
CA		653		Claremont Police Department
CA		654		Cloverdale Police Department
CA		660		Colton Police Department
CA		663		Concord Police Department
CA		664		Contra Costa County Communications Center
CA		665		Contra Costa County Fire Department
CA		666		Contra Costa County Sheriff Department
CA		667		Corcoran Police Department
CA		670		Corona Police Department
CA		672		Costa Mesa Communications Center
CA		673		Cotati Police Department
CA		674		Covina Police/fire Department
CA		676		Crescenta Valley Sheriffs Station
CA		680		Csu Fullerton Police Department
CA		681		Csu Los Angeles
CA		682		Csu Northridge University Police
CA		683		Csu San Bernardino Police Department
CA		685		CSU San Jose Police Department
CA		686		Csu Sonoma
CA		694		Dinuba Police Department
CA		695		Downey Fire Department
CA		696		Downey Police Department
CA		697		East Bay Regional Park District
CA		698		Los Angeles Sheriffs Station
CA		709		El Monte Police Department
CA		711		Emeryville Police Department
CA		715		Eureka Police Department
CA		716		Exeter Police Department
CA		717		Fairfax Police Department
CA		718		Fairfield Police Department
CA		719		Farmersville Police Department
CA		724		Fontana Police Department
CA		726		Fortuna Police Department
CA		728		Fountain Valley Police Department
CA		729		Fremont Fire Department
CA		730		Fremont Police Department
CA		735		Ft Irwin Fire Department
CA		737		Fullerton Police Department
CA		739		Garden Grove Police Department

 

A-48

---

CA		740		Gilroy Police Department
CA		741		Glendale Police Department
CA		742		Glendora Police Department
CA		748		Hanford Police Department
CA		749		Hayward Police Department
CA		750		Healdsburg Police Department
CA		752		Hemet Police Department
CA		757		Humboldt County Sheriffs Department
CA		758		Humboldt State University Police Department
CA		759		Huntington Beach Police Department
CA		760		Huntington Park Police Department
CA		762		Idyllwild Fire Protection District
CA		768		Irvine Police Department
CA		769		Irwindale Police Department
CA		774		La Habra Police-fire Department
CA		776		La Palma Police Department
CA		777		La Verne Police Department
CA		778		Laguna Beach Police-fire Department
CA		779		Lake County Sheriffs Department
CA		780		Lakewood Sheriffs Station
CA		781		Lancaster Sheriffs Station
CA		783		US Naval Air Station Lemoore
CA		786		Lindsay Police Department
CA		787		Livermore Police Department
CA		792		Long Beach Fire Department
CA		794		Long Beach Police Dispatch
CA		796		Los Altos Police Department
CA		799		Los Angeles Fire Department
CA		802		Los Gatos/ Monte Sereno Police Department
CA		805		Malibu-lost Hills Sheriffs Station
CA		808		Marin County Fire Department Headquarters
CA		810		Marin County Sheriffs Department
CA		811		Marina Del Rey Sheriffs Station
CA		813		Martinez Police Department
CA		817		Menlo Park Police Department
CA		822		Metro Net Fire Communications Center
CA		825		Milpitas Police Department
CA		826		Modoc County Sheriffs Department
CA		828		Monrovia Police Department
CA		829		Montclair Police Department
CA		830		Montebello Police Department

 

A-49

---

CA		834		Monterey Park Police Department
CA		836		Morgan Hill Police Department
CA		838		Mountain View Police Department
CA		839		Mt Shasta Police Department
CA		840		Murrieta Police Department
CA		841		Napa County Sheriffs Department
CA		846		Newark Police-fire Department
CA		847		Newport Beach Police Department
CA		849		Norwalk Sheriffs Station
CA		850		Novato Police Department
CA		852		Oakland Fire Department
CA		853		Oakland Police Department
CA		856		Ontario Police And Fire Communications
CA		857		Orange County Fire Department
CA		858		Orange County Sheriffs Department
CA		859		Orange Police Department
CA		861		Oxnard Police Department
CA		864		Palmdale Sheriffs Station
CA		865		Palo Alto Police Department
CA		866		Palos Verdes Estates Police Department
CA		868		Pasadena Police Department
CA		871		Petaluma Police Department
CA		872		Pico Rivera Sheriffs Station
CA		873		Piedmont Police Department
CA		874		Pinole Police Department
CA		876		Placentia Police Department
CA		879		Pleasant Hill Police Department
CA		880		Pleasanton Police Department
CA		882		Pomona Police Department
CA		883		Port Hueneme Police Department
CA		884		Port Hueneme Usn
CA		885		Porterville Police Department
CA		889		Redlands Police Department
CA		890		Redondo Beach Fire Department Station #2
CA		891		Redondo Beach Police Department
CA		894		Regional Fire Protection Authority-victorville
CA		895		Rialto Police Department
CA		897		Richmond Police Department
CA		900		Riverside County Sheriff
CA		901		Riverside Police Department
CA		903		Rohnert Park Police Department

 

A-50

---

CA		908		San Anselmo Police Department
CA		911		San Bernardino County Fire Department
CA		912		San Bernardino County Sheriff - Rialto
CA		913		San Bernardino County Sheriff-barstow
CA		915		San Bernardino County Sheriff -Victor Valley Station (Victorville)
CA		916		San Bernardino Fire Department
CA		917		San Bernardino Police Department
CA		926		San Dimas Sheriffs Station
CA		927		San Fernando Police Department
CA		931		San Gabriel Police Department
CA		935		San Jose Police Department
CA		936		San Leandro Police Department
CA		939		San Marino Police Department
CA		943		San Rafael Fire Department
CA		944		San Rafael Police Department
CA		947		Santa Ana Fire Department
CA		948		Santa Ana Police Department
CA		952		Santa Clara County Communications
CA		953		Santa Clara County Sheriff
CA		954		Santa Clara Police Department
CA		955		Santa Clarita Valley Sheriffs Station
CA		956		Santa Cruz Consolidated Emergency Center
CA		957		Santa Cruz County Sheriffs Department
CA		959		Santa Monica Fire Department
CA		960		Santa Monica Police Department
CA		961		Santa Paula Police Department
CA		962		Santa Rosa Police Department
CA		963		Saratoga Fire District
CA		964		Scotts Valley Police Department
CA		965		Sebastopol Police Department
CA		969		Shascom
CA		972		Sierra Madre Police And Fire Departments
CA		973		Signal Hill Police Department
CA		974		Simi Valley Police Department
CA		975		Siskiyou County Sheriffs Department
CA		976		Solano County Sheriffs Office
CA		977		Sonoma County Sheriff-Santa Rosa
CA		981		South Gate Police Department
CA		984		South Pasadena Police Department
CA		986		St Helena Police Department
CA		990		Suisun City Police Department

 

A-51

---

CA		991		Sunnyvale Police Department
CA		997		Temple Sheriffs Station
CA		1002		Travis Air Force Base
CA		1003		Trinity County Sheriffs Department
CA		1004		Cdf Visalia
CA		1005		Tulare County Sheriffs Department
CA		1006		Tulare Police Department
CA		1010		Tustin Police Department
CA		1011		Twin Cities Police Department
CA		1012		Uc Berkeley
CA		1014		Uc Irvine Police Department
CA		1015		Uc Los Angeles
CA		1016		Uc Riverside
CA		1020		Uc Santa Cruz
CA		1022		Union City Police-fire Department
CA		1023		Upland Police Department
CA		1029		Vacaville Police Department
CA		1030		Vallejo Police Department
CA		1032		Ventura County Sheriffs Department
CA		1033		Ventura Fire Protection District
CA		1034		Ventura Police Department
CA		1036		Vernon Police Department
CA		1037		Victorville Fire Department
CA		1038		Visalia Police Department
CA		1039		Walnut Creek Police Department
CA		1040		Walnut-Diamond Bar Sheriffs Station
CA		1042		Weed Police Department
CA		1043		West Cities Police Communications
CA		1044		West Covina Police Department
CA		1046		Westminster Police Department
CA		1047		Whittier Police Department
CA		1050		Woodlake Police Department
CA		1054		Yreka Police Department
CO		1057		Adams County Communications Center
CO		1059		Air Force Academy Fire Department
CO		1061		Alamosa County Sheriffs Office
CO		1063		American Medical Response
CO		1065		Arapahoe County Sheriffs Department
CO		1066		Archuleta County Sheriffs Office
CO		1067		Arvada Fire Protection District
CO		1068		Arvada Police Department

 

A-52

---

CO		1070		Aspen-Pitkin County Communications Center
CO		1073		Aurora Public Safety Communications
CO		1074		Aurora Fire Department
CO		1076		Baca County Sheriffs Office
CO		1077		Back Up Communications Center
CO		1080		Bent County Sheriffs Office
CO		1081		Berthoud Police Department
CO		1083		Black Hawk Police Department
CO		1085		Boulder County Communications Center
CO		1086		Boulder Police Communications Center
CO		1088		Broomfield Police Department
CO		1093		Canon City Police Department
CO		1094		Castle Rock Police Department
CO		1098		Chaffee County Sheriffs Office
CO		1099		Cheyenne County Sheriffs Office
CO		1100		Clear Creek County Sheriffs Office
CO		1103		Colorado Springs Police Department
CO		1104		Colorado State Patrol-alamosa
CO		1105		Colorado State Patrol-craig
CO		1107		Colorado State Patrol-montrose
CO		1108		Colorado State University Police Department
CO		1110		Cortez Police Department Dispatch
CO		1114		Cripple Creek Police Department
CO		1115		Crowley County Dispatch
CO		1117		Custer County Sheriffs Office
CO		1119		De Beque Marshals Office
CO		1121		Delta County Sheriffs Office
CO		1122		Denver Combined Communications
CO		1123		Department Of Public Safety University Of Colorado-boulder
CO		1126		Dolores County Sheriff Department
CO		1127		Douglas County Sheriffs Office
CO		1128		Durango Police Department
CO		1129		Durango - La Plata Emergency Communications Center
CO		1131		Eagle County Sheriffs Office
CO		1134		Edgewater Police Department
CO		1135		El Paso County Sheriffs Office
CO		1136		Elbert County Communications
CO		1139		Englewood Police Department
CO		1140		Erie Police Department
CO		1141		Estes Park Police Department
CO		1143		Evergreen Fire Protection District

 

A-53

---

CO		1145		Federal Heights Police Department
CO		1147		Florence Police Department
CO		1148		Fountain Police Department
CO		1149		Fowler Police Department
CO		1152		Fruita Police Department
CO		1153		Ft Carson Fire Department
CO		1157		Garfield County Emergency Communications Authority-garco
CO		1160		Gilpin County Sheriffs Office
CO		1161		Glendale Police Department
CO		1162		Golden Police Department
CO		1164		Grand County Sheriffs Office
CO		1165		Grand Junction Regional Communications Center
CO		1168		Greenwood Village Police Department
CO		1169		Gunnison Communications Center
CO		1175		Huerfano County Sheriffs Office
CO		1176		Hugo Marshals Office
CO		1179		Jackson County Sheriffs Office
CO		1180		Jefferson County Sheriffs Office
CO		1184		Kit Carson County Dispatch Board
CO		1187		La Junta Police Department
CO		1188		La Plata County Sheriffs Office
CO		1191		Lafayette Police Department
CO		1192		Lake County Sheriffs Office
CO		1193		Lakeside Police Department
CO		1194		Lakewood Communications Center
CO		1196		Larimer County Sheriffs Office
CO		1197		Las Animas County Sheriffs Office
CO		1199		Leadville Fire Department
CO		1201		Limon Police Department
CO		1202		Lincoln County Sheriffs Office
CO		1203		Littleton Fire Rescue
CO		1204		Littleton Police Department
CO		1207		Longmont Emergency Communications
CO		1208		Louisville Police Department
CO		1209		Loveland Police Department
CO		1211		Manitou Springs Police Department
CO		1212		Manzanola Police Department
CO		1214		Mesa County Sheriffs Office
CO		1219		Montrose County Sheriffs Office
CO		1220		Montrose Police Department
CO		1222		Morgan County Communications Center

 

A-54

---

CO		1223		Morrison Police Department
CO		1224		Mountain View Police Department
CO		1227		Nederland Marshals Office
CO		1229		Nucla Communications Center
CO		1232		Olathe Police Department
CO		1233		Otero County Sheriffs Office
CO		1237		Palisade Police Department
CO		1240		Park County Communications Center
CO		1242		Parker Police Department
CO		1243		Peterson Air Force Base
CO		1244		Phillips County Communication Center
CO		1247		Poudre Emergency Communications Center-Ft Collins
CO		1248		Prowers County Combined Communications
CO		1250		Pueblo County Sheriffs Office
CO		1251		Pueblo Police Department
CO		1252		Rangely Police Department
CO		1253		Red Rocks Community College Police Department
CO		1255		Rio Blanco County Sheriffs Office
CO		1257		Rocky Ford Police Department
CO		1258		Routt County Communications Center
CO		1261		San Juan County Sheriffs Department
CO		1262		San Miguel County Sheriffs Office
CO		1264		Sedgwick County Sheriffs Department
CO		1265		Sheridan Police Department
CO		1272		Sterling Police Department
CO		1274		Summit County Communications Center
CO		1275		Teller County Sheriffs Office
CO		1277		Trinidad Police Department
CO		1281		Vail Communications Center
CO		1286		Washington-yuma Combined Communications
CO		1287		Weld County Communications Center
CO		1288		West Metro-lakewood Fire Department
CO		1289		Westminster Police Department
CO		1290		Wheat Ridge Police Department
CO		1293		Woodland Park Police Department
CT		1353		Mashantucket Pequot Police Department
DC		1432		Washington DC Public Safety Communications Center
DE		1433		Dover Police 911 Center
DE		1434		Kent County Emergency Operations Center
DE		1435		New Castle County Emergency Operations Center
DE		1436		Newark 9-1-1 Center-newark Police Department

 

A-55

---

DE		1437		Rehoboth 9-1-1 Center-rehoboth Police Department
DE		1438		Seaford 9-1-1 Center-seaford Police Department
DE		1439		Sussex County Emergency Operations Center
DE		1440		University Of Delaware 9-1-1 Center
DE		1441		Wilmington 9-1-1 Center
FL		1447		Atlantis Police Department
FL		1449		Auburndale Police Department
FL		1450		Avon Park Police Department
FL		1453		Bartow Police Department
FL		1454		Bay County Emergency Medical Center
FL		1455		Bay County Emergency Services
FL		1456		Bay County Sheriffs Department
FL		1457		Belle Glade Police Department
FL		1458		Boca Raton Communications Center
FL		1459		Boynton Beach Communications Center
FL		1465		Broward County Fire And Rescue
FL		1466		Broward County Sheriffs Office
FL		1470		Cape Coral Police Department
FL		1473		Charlotte County Sheriffs Office
FL		1475		Citrus County Emergency Operations
FL		1476		City Of New Port Richey Police Department
FL		1477		City Of Port Richey Police Department
FL		1478		City Of Zephyrhills Police Department
FL		1481		Clewiston Police Department
FL		1484		Coconut Creek Police Department
FL		1485		Collier County Sheriffs Office
FL		1488		Coral Springs Police
FL		1489		Daytona Beach Police
FL		1490		Daytona Beach Shores Police
FL		1491		De Land Police Department
FL		1492		Deerfield Beach Fire Rescue
FL		1493		Delray Beach Police Department
FL		1495		Desoto County Sheriffs Office
FL		1498		Dundee Police Department
FL		1500		Edgewater Police
FL		1501		Emergency Communications System
FL		1505		Eustis Police Department
FL		1506		Flagler County Operations Center
FL		1508		Fort Meade Police Department
FL		1511		Frostproof Police Department
FL		1512		Ft Lauderdale Police

 

A-56

---

FL		1513		Ft Myers Police Department
FL		1514		Gadsden County Sheriffs Office
FL		1517		Glades County Sheriffs Office
FL		1520		Greenacres Public Safety
FL		1522		Haines City Fire Department
FL		1523		Haines City Police Department
FL		1526		Hardee County Sheriffs Office
FL		1527		Hendry County Sheriffs Office
FL		1531		Highlands County Sheriffs Office
FL		1533		Hillsborough County Sheriff
FL		1534		Holly Hill Police
FL		1535		Hollywood Police Department #1
FL		1536		Hollywood Police Department #2
FL		1537		Holmes County Sheriffs Department
FL		1540		Indian River County Sheriffs Office
FL		1542		Jackson County 9-1-1
FL		1546		Jefferson County Sheriff
FL		1547		Juno Beach Police Department
FL		1548		Jupiter Police Department
FL		1550		Kissimmee Police Department
FL		1551		Lady Lake Police Department
FL		1554		Lake Alfred Police Department
FL		1555		Lake County Sheriffs Department
FL		1557		Lake Park Police Department
FL		1558		Lake Wales Fire Department
FL		1559		Lake Wales Police Department
FL		1560		Lake Worth Police
FL		1562		Lakeland Police Department
FL		1563		Lantana Police Department
FL		1564		Largo Police Department
FL		1565		Lee County Sheriffs Office
FL		1566		Leesburg Police Department
FL		1567		Leon County Sheriffs Office
FL		1570		Lighthouse Point Police
FL		1571		Macdill Air Force Base Communications Center
FL		1572		Madison County E9-1-1
FL		1574		Manalapan Public Safety Department
FL		1575		Manatee County Sheriffs Department
FL		1577		Margate Police Department
FL		1579		Marion County Sheriffs Department
FL		1580		Martin County Fire And Rescue-eoc

 

A-57

---

FL		1581		Martin County Sheriffs Office
FL		1590		Mount Dora Police Department
FL		1592		Mulberry Police Department
FL		1593		Naples Police And Emergency Services
FL		1596		New Smyrna Beach Police
FL		1597		North Palm Beach Public Safety Department
FL		1598		Oakland Park Police
FL		1599		Oakland Park Public Safety
FL		1600		Ocala Police Department
FL		1601		Ocean Ridge Public Safety Department
FL		1604		Okeechobee County Sheriffs Department
FL		1605		Orange City Police
FL		1612		Ormond Beach Police
FL		1613		Osceola County Sheriffs Office
FL		1615		Pahokee Police
FL		1617		Palm Beach County Fire-rescue & Ems Dispatch Center
FL		1618		Palm Beach County Sheriffs Office (central)
FL		1619		Palm Beach County Sheriffs Office (glades)
FL		1620		Palm Beach Gardens Police Department
FL		1621		Palm Beach Police Department
FL		1622		Palm Beach Shores Public Safety Department
FL		1623		Palm Coast Fire Department
FL		1624		Palm Springs Public Safety Department
FL		1625		Panama City Police
FL		1626		Pasco County Emergency Communications
FL		1630		Pinellas County Emergency Communications 9-1-1
FL		1631		Plant City Police Department
FL		1632		Plantation Police
FL		1633		Polk County 9-1-1-sheriffs Department
FL		1634		Polk County Ems
FL		1635		Polk County Fire Department
FL		1636		Pompano Beach Police Department
FL		1637		Ponce Inlet Police
FL		1639		Punta Gorda Police Department
FL		1641		Riviera Beach Police Department
FL		1643		Royal Palm Beach Police Department
FL		1645		Sanibel Police Department
FL		1648		Sarasota County Consolidated Communications Center
FL		1649		Sarasota County Government
FL		1651		Sebring Police Department
FL		1656		South Daytona Beach Police

 

A-58

---

FL		1657		Southeast Regional Communications Center
FL		1660		St Cloud Police Department
FL		1662		St Lucie County 9-1-1
FL		1663		Stuart Police Department
FL		1664		Sumter County 9-1-1
FL		1665		Sunrise Police Department
FL		1667		Tallahassee Police Department
FL		1668		Tampa International Airport Police
FL		1669		Tampa Police Department
FL		1671		Temple Terrace Police Department
FL		1672		Tequesta Police Department
FL		1676		University Of South Florida Police Department
FL		1677		Vero Beach Police
FL		1678		Volusia County Evac
FL		1679		Volusia County Sheriffs Department
FL		1680		Wakulla County Sheriffs Department
FL		1681		Walton County 9-1-1
FL		1682		Washington County Sheriffs Office
FL		1683		West Palm Beach Police Department
FL		1686		Winter Haven Fire Department
FL		1687		Winter Haven Police Department
GA		1695		Athens-clarke County
GA		1703		Banks County E9-1-1
GA		1704		Barrow County Central Communications
GA		1705		Bartow County E9-1-1
GA		1706		Ben Hill County 9-1-1
GA		1707		Berrien County Sheriffs Department
GA		1710		Brooks County 9-1-1
GA		1719		Carroll County E9-1-1
GA		1723		Chattahoochee County Sheriffs Department
GA		1724		Chattooga 9-1-1
GA		1733		Colquitt County 9-1-1
GA		1736		Cook County E-911
GA		1737		Coweta County E9-1-1
GA		1739		Crisp County E9-1-1
GA		1741		Dawson County Sheriff
GA		1744		Decatur-grady Counties E9-1-1
GA		1748		Dougherty County
GA		1750		Early-Calhoun 9-1-1
GA		1753		Elbert County Emergency Management Agency
GA		1757		Fannin County 9-1-1

 

A-59

---

GA		1760		Floyd County E9-1-1
GA		1763		Forsyth County
GA		1765		Franklin County E9-1-1
GA		1766		Ft Benning
GA		1769		Gilmer County 9-1-1
GA		1772		Gordon County 9-1-1
GA		1773		Greene County E9-1-1
GA		1775		Habersham County
GA		1779		Haralson County 9-1-1
GA		1781		Harris County
GA		1782		Hart County E9-1-1
GA		1783		Heard County 9-1-1
GA		1786		Irwin County Sheriffs Department
GA		1787		Jackson County E9-1-1
GA		1788		Jasper County 9-1-1
GA		1798		Lee County
GA		1802		Lowndes County 9-1-1 Emergency Management Center
GA		1804		Lumpkin County 9-1-1
GA		1806		Madison County Sheriffs Department
GA		1811		Meriwether County E9-1-1
GA		1814		Miller County Sheriffs Department
GA		1815		Mitchell County Communications Center
GA		1818		Morgan County Commissioners
GA		1820		Murray County 9-1-1
GA		1821		Muscogee County Public Safety Communications
GA		1822		Newton County E9-1-1
GA		1824		Oconee County 9-1-1
GA		1825		Oglethorpe County 9-1-1
GA		1829		Pickens County 9-1-1
GA		1832		Polk County 9-1-1
GA		1835		Putnam County Sheriff
GA		1837		Rabun County 9-1-1
GA		1844		Middle Flint Regional E9-1-1 Center
GA		1846		Seminole County Sheriffs Department
GA		1856		Telfair - Wheeler County E911
GA		1857		Terrell County Ems
GA		1858		Thomas County E9-1-1
GA		1859		Thomas County EMS
GA		1860		Tift County 9-1-1
GA		1865		Troup County E9-1-1
GA		1866		Turner County Central Communications

 

A-60

---

GA		1870		Upson County 9-1-1
GA		1878		West Point Ico
GA		1880		White County Communications
GA		1881		Whitfield County E9-1-1
GA		1885		Worth County 9-1-1
HI		1887		Honolulu Police Department
ID		2034		Ada County Sheriffs Department
ID		2035		Adams County Sheriffs Department
ID		2037		Bannock County Sheriff
ID		2040		Bingham County Sheriffs Office
ID		2041		Blaine County Sheriff
ID		2045		Bonneville County E9-1-1
ID		2049		Caldwell Police
ID		2050		Camas County
ID		2051		Canyon County Sheriffs Office
ID		2052		Caribou County Sheriff Department
ID		2054		Cassia County Sheriff
ID		2055		Chubbuck Police Department
ID		2056		Clark County Sheriffs Department
ID		2057		Clearwater County Sheriffs Department
ID		2058		Custer County Sheriffs Office
ID		2059		Elmore County Sheriffs Department
ID		2060		Franklin County Sheriff
ID		2061		Fremont County Law Enforcement
ID		2062		Gem County Sheriff
ID		2065		Idaho County Sheriffs Department
ID		2067		Jefferson County Sheriff
ID		2072		Kootenai County 9-1-1
ID		2074		Lemhi County Sheriffs Office
ID		2075		Lewis County Sheriff
ID		2076		Lewiston Police Department
ID		2078		Madison County Sheriff
ID		2079		Minidoka County Sheriffs Department
ID		2082		Nampa Police Department
ID		2083		Nez Perce County
ID		2086		Owyhee County Sheriffs Department
ID		2087		Payette County Sheriff
ID		2088		Payette Police Department
ID		2089		Pocatello Dispatch
ID		2090		Post Falls Police
ID		2091		Power County Sheriff

 

A-61

---

ID		2095		Southern Idaho Regional Communications Center-sircomm
ID		2098		Teton County Sheriff
ID		2099		Twin Falls Sheriffs Office
ID		2100		Valley County Sheriff Department
ID		2102		Washington County Sheriff
IL		2105		Addison Fire Protection District
IL		2106		Addison Police Department
IL		2109		Alsip Police Department
IL		2110		Alton Police Department
IL		2111		Antioch Police
IL		2112		Auburn Police Department
IL		2113		Aurora Police Department
IL		2114		Barrington Hills Police Department
IL		2116		Bedford Park Police Department
IL		2117		Belleville Police Department
IL		2119		Bensenville Police Department
IL		2120		Benton Police Department
IL		2121		Berkeley Police Department
IL		2122		Berwyn Police Department
IL		2123		Bethalto Police Department
IL		2124		Bloomingdale Fire Department
IL		2125		Bloomingdale Police Department
IL		2127		Blue Island Police Department
IL		2128		Bolingbrook Police
IL		2129		Boone County E9-1-1
IL		2130		Bourbonnais Police
IL		2131		Bradley Police
IL		2132		Braidwood Police Department
IL		2133		Breese Police Department
IL		2135		Broadview Etsb
IL		2136		Brookfield Etsb
IL		2138		Buffalo Grove
IL		2140		Burnham Police
IL		2141		Cahokia Police Department
IL		2143		Calumet City Police
IL		2144		Calumet Park Police
IL		2149		Caseyville Police Department
IL		2150		Cass County 9-1-1
IL		2151		Cencom
IL		2152		Cencom E9-1-1
IL		2154		Centralia Police Department

 

A-62

---

IL		2155		Centreville Police Department
IL		2157		Chicago Heights Police Department
IL		2158		Chicago Office Of Emergency Communication-zone 1
IL		2159		Office Of Emergency Management and Communications
IL		2160		Chicago Office Of Emergency Communication-zone 11
IL		2161		Chicago Office Of Emergency Communication-zone 12
IL		2162		Chicago Office Of Emergency Communication-zone 13
IL		2163		Chicago Office Of Emergency Communication-zone 2
IL		2164		Chicago Office Of Emergency Communication-zone 3
IL		2165		Chicago Office Of Emergency Communication-zone 4
IL		2166		Chicago Office Of Emergency Communication-zone 5
IL		2167		Chicago Office Of Emergency Communication-zone 6
IL		2168		Chicago Office Of Emergency Communication-zone 7
IL		2169		Chicago Office Of Emergency Communication-zone 8
IL		2170		Chicago Office Of Emergency Communication-zone 9
IL		2173		Christopher Central Dispatch
IL		2174		Cicero Police Department
IL		2177		Clinton County Sheriffs Office
IL		2178		Coal City Police Department
IL		2180		Collinsville
IL		2182		Cook County Sheriffs Communications Center
IL		2183		Country Club Hills Police Department
IL		2184		Countryside Police Department
IL		2187		Crete Police
IL		2190		Danville-vermilion County Communications Center
IL		2191		Darien Area Dispatch Center
IL		2192		De Kalb County Sheriffs Office
IL		2193		De Kalb Police Department
IL		2194		Decatur Police Department
IL		2195		Deerfield Police Department
IL		2196		Dolton Police Department
IL		2198		Downers Grove Police
IL		2199		Du Quione Police Department
IL		2200		Ducomm Zone 1
IL		2202		Dupage County Sheriff
IL		2203		Earlville Police Department
IL		2204		East Alton Police Department
IL		2207		East St Louis Police Department
IL		2208		Eastcom
IL		2211		Edwardsville Police Department
IL		2214		Elgin Police Department

 

A-63

---

IL		2217		Elmwood Park Public Safety Center
IL		2218		Evanston Police-fire
IL		2220		Fairview Heights Police Department
IL		2225		Forest Park Police Department
IL		2226		Forest View Police
IL		2227		Fox Lake Police
IL		2228		Franklin County Sheriffs Department
IL		2229		Franklin Park Police Department
IL		2235		Glen Carbon Police Department
IL		2236		Glencoe Department Of Public Safety
IL		2237		Glendale Heights
IL		2239		Granite City Police Department
IL		2240		Grayslake Police
IL		2242		Great Lakes
IL		2245		Grundy County Sheriff
IL		2246		Gurnee Police Department
IL		2250		Harvard
IL		2251		Harvey Police Department
IL		2252		Harwood Heights Police Department
IL		2256		Herrin Police Department
IL		2257		Hickory Hills
IL		2258		Highland Park
IL		2259		Highland Police Department
IL		2262		Hillside
IL		2263		Hinsdale Police
IL		2264		Hodgkins
IL		2266		Hometown Etsb
IL		2268		Hoopeston Police
IL		2269		Illinois State Police
IL		2271		Illinois State Police District 9
IL		2273		Illinois State Police-district 22
IL		2274		Illinois State Police-district Chicago
IL		2275		Indian Head Park Police
IL		2276		Iroquois County 9-1-1
IL		2277		Itasca Police
IL		2278		Jackson County Sheriff’s Office
IL		2282		Jersey County Sheriffs Department
IL		2284		Johnson County 9-1-1
IL		2285		Joliet Communications
IL		2286		Justice ETSB
IL		2287		Kancomm

 

A-64

---

IL		2288		Kane County Sheriff
IL		2289		Kencom Public Safety Dispatch Center
IL		2290		Kenilworth Police Department
IL		2292		Lagrange Park Police Department
IL		2293		Lagrange Police Department
IL		2294		Lake Bluff Police Department
IL		2295		Lake County Sheriffs Office
IL		2296		Lake Forest Police Department
IL		2297		Lake In The Hills Police Department
IL		2298		Lake Zurich Police Department
IL		2299		Lansing Police Department
IL		2300		Lasalle County Sheriffs Department
IL		2301		Lasalle Police Department
IL		2303		Lebanon
IL		2306		Libertyville Police Department
IL		2307		Lincolnshire Police Department
IL		2308		Lincolnway Police Dispatch
IL		2309		Lincolnwood Police Department
IL		2312		Loves Park Police Department
IL		2313		Lynwood-Thornton East Hazel Crest Police Fire EMS
IL		2314		Lyons Police Department
IL		2317		Madison County Sheriffs Department
IL		2318		Madison Police Department
IL		2319		Marengo
IL		2320		Marion
IL		2321		Markham
IL		2322		Marseilles Police Department
IL		2324		Maryville Police Department
IL		2326		Massac County Sheriffs Department
IL		2327		Matteson Police Department
IL		2328		Maywood Police Department
IL		2329		Mccook
IL		2330		Mchenry County Sheriff
IL		2331		Mchenry Police Department
IL		2333		Melrose Park Police Department
IL		2334		Menard County Sheriffs Department
IL		2337		Merrionette Park
IL		2338		Metcad
IL		2339		Midlothian Police Department
IL		2344		Montgomery Police Department
IL		2346		Morris City Police Department

 

A-65

---

IL		2347		Morton Grove Police Department
IL		2355		Mundelein Police Department
IL		2356		Murphysboro Police Deptartment
IL		2357		Naperville Police Department
IL		2358		Niles Police Department
IL		2359		Niu Police Department
IL		2361		Norridge Police Department
IL		2362		North Chicago Police Department
IL		2363		North Riverside Police Department
IL		2364		North Suburban Emergency Communication Center
IL		2365		Northbrook Police Department
IL		2366		Northfield Police Department
IL		2367		Northwest Central Dispatch Systems
IL		2368		O’Fallon Police Department
IL		2369		Oak Brook Communications Center
IL		2370		Oak Forest Police Department
IL		2371		Oak Lawn Central Dispatch
IL		2372		Ogle County ETSB
IL		2373		Oglesby Police Department
IL		2376		Orland ETSB
IL		2377		Ottawa Police Department
IL		2380		Park City Police Department
IL		2381		Park Forest Police Department
IL		2382		Park Ridge Police Department
IL		2385		Peotone Police
IL		2386		Perry County Sheriffs Office
IL		2387		Peru Police Department
IL		2390		Plano Police Department
IL		2391		Pleasantview Fire
IL		2392		Pontoon Beach Police Department
IL		2396		Pulaski County 9-1-1
IL		2398		Quadcomm 9-1-1
IL		2399		Quincy-adams County 9-1-1
IL		2400		Randolph County Sheriffs Department
IL		2401		Rantoul Police Department
IL		2402		Red Center
IL		2404		Richton Park Police Department
IL		2405		River Grove Police Department
IL		2407		Riverside Police Department
IL		2409		Rochelle Police Department
IL		2413		Rockford 9-1-1

 

A-66

---

IL		2414		Rolling Meadows Police Department
IL		2415		Romeoville Police Department
IL		2416		Roselle Police Department
IL		2417		Rosemont Public Safety Department
IL		2418		Salem Police Department
IL		2419		Saline County 9-1-1
IL		2420		Sandwich Police Department
IL		2421		Sangamon County Central Dispatch System
IL		2422		Sauk Village Police Department
IL		2424		Schaumburg Police Department
IL		2425		Scott Air Force Base
IL		2427		Seneca Etsb
IL		2431		Siu Edwardsville Police Department
IL		2432		Skokie Police And Fire
IL		2433		South Chicago Heights Police Department
IL		2434		South Elgin Police Department
IL		2436		Southcom Combined Dispatch
IL		2437		Southwest Central 9-1-1 System
IL		2438		Sparta Police Department
IL		2439		Spring Valley Police Department
IL		2440		St Clair ETSB
IL		2443		Steger Police Department
IL		2444		Stephenson County 9-1-1
IL		2445		Stephenson County Sheriffs Department
IL		2447		Stickney Police Department
IL		2452		Summit Police Department
IL		2453		Swansea Police Department
IL		2454		Sycamore Police Department
IL		2455		Tazcomm-Tazewell County Communications Center
IL		2457		Tri-com Central Dispatch
IL		2458		Tri-state Fire
IL		2459		Troy Police Department
IL		2460		Union County Sheriffs Department
IL		2463		Venice Police Department
IL		2464		Vermillion County 9-1-1 Center
IL		2465		Vernon Hills Police Department
IL		2466		Village Of Bellwood Police Department
IL		2467		Village Of Glenview Emergency Communications Center
IL		2468		Village Of Schiller Park Police Department
IL		2469		Village Of Tinley Park Command Center
IL		2470		Village Of Wheeling Fire Department

 

A-67

---

IL		2471		Village Of Willow Springs Police Department
IL		2472		Village Of Winthrop Harbor Police Department
IL		2479		Wauconda Police Department
IL		2480		Waukegan Police Department
IL		2482		Wescom
IL		2484		West Suburban Consolidated Dispatch Center (Wes-Com)
IL		2485		Westchester Police Department
IL		2486		Western Springs Police Department
IL		2487		Westmont Police
IL		2490		Will County Sheriff
IL		2491		Williamson County Sheriffs Department
IL		2492		Wilmette Police Department
IL		2493		Wilmington Police
IL		2494		Winnebago County Sheriff 9-1-1
IL		2495		Winnetka Police Department
IL		2496		Wood Dale Fire
IL		2497		Wood Dale Police Department
IL		2498		Wood River Police Department
IL		2500		Woodridge Police
IL		2501		Woodstock Police Department
IL		2502		Yorkville Police Department
IL		2503		Zion Police Department
IN		2504		Adams County Sheriffs Department
IN		2506		Allen County Sheriffs Communications
IN		2509		Auburn Police Department
IN		2512		Batesville Police Department
IN		2513		Battle Ground Police Department
IN		2522		Brownstown Police
IN		2525		Cass County Sheriffs Office
IN		2526		Cedar Lake Police Department
IN		2527		Charlestown Police Department
IN		2528		Clark County E9-1-1
IN		2530		Clarksville Police Department
IN		2536		Crothersville Police Department
IN		2537		Crown Point Police Department
IN		2539		Daviess County Sheriffs Department
IN		2540		Dearborn County Communications
IN		2541		Decatur County Sheriffs Department
IN		2542		Dekalb County Sheriff
IN		2545		Dyer Police
IN		2546		East Chicago Dispatch

 

A-68

---

IN		2548		Elkhart City Communications Center
IN		2549		Elkhart County Public Safety Communications Center
IN		2551		Evansville-vanderburgh County Central Dispatch
IN		2552		Fayette County 9-1-1
IN		2553		Floyd County Sheriffs Office
IN		2556		Franklin County 9-1-1
IN		2558		Ft Wayne Communications
IN		2559		Fulton County Communications
IN		2560		Gary Police
IN		2562		Glenwood Police Department
IN		2566		Greensburg Police Department
IN		2568		Griffith Police
IN		2570		Hammond Police
IN		2576		Highland Police
IN		2577		Hobart Police Department
IN		2583		Indiana State Police-Seymour
IN		2585		Indiana State Police-west Lafayette
IN		2590		Jackson County Sheriff
IN		2591		Jasper County
IN		2593		Jay County Sheriff
IN		2594		Jefferson County 9-1-1
IN		2595		Jeffersonville Police Department
IN		2596		Jennings County 9-1-1
IN		2598		Knox County Central Dispatch
IN		2600		Kosciusko Communication Center
IN		2601		La Porte County 9-1-1
IN		2602		Lafayette Police Department
IN		2603		Lagrange County Communications Center
IN		2604		Lake County Sheriff
IN		2605		Lake Station Police
IN		2609		Logansport Police Department
IN		2610		Lowell Police Department
IN		2613		Marshall County Sheriff
IN		2616		Medora Police Department
IN		2617		Merrillville Police Department
IN		2620		Mishawaka Fire
IN		2621		Mishawaka Police Department
IN		2627		Munster Police
IN		2628		Nappanee Police Department
IN		2629		New Albany Police Department
IN		2630		New Chicago Police

 

A-69

---

IN		2631		New Haven Police Department
IN		2632		New Washington Police Department
IN		2634		Newton County Sheriffs Department
IN		2635		Noble County
IN		2638		Ohio County Communications
IN		2640		Otterbein Police Department
IN		2647		Portage Police Department
IN		2648		Porter County 9-1-1
IN		2649		Posey County RDC
IN		2651		Pulaski County Sheriffs Department
IN		2652		Purdue University Police
IN		2653		Putnam County 9-1-1
IN		2654		Randolph County Communications
IN		2655		Ripley County Communications Center
IN		2656		Rush County Sheriffs Office
IN		2657		Rushville Police Department
IN		2658		Schererville Police
IN		2659		Scott County Emergency Communications
IN		2660		Sellersburg Police
IN		2661		Seymour Police Department
IN		2665		South Bend Police Department
IN		2667		Spencer County Sheriffs Office
IN		2668		St John Police
IN		2669		St Joseph County Fire Dispatch
IN		2670		St Joseph County Sheriff
IN		2671		Starke County Sheriffs Department
IN		2672		State Police District 55
IN		2675		Switzerland County Communications
IN		2676		Tell City Police
IN		2678		Tippecanoe County Sheriff
IN		2680		Union County Sheriffs Office
IN		2681		Valparaiso Police Department
IN		2686		Warrick Central Dispatch
IN		2687		Washington County Sheriffs Office
IN		2688		Washington Police Department
IN		2689		Wayne County Emergency Communications Department
IN		2691		West Lafayette Police Department
IN		2692		White County Communications
IN		2693		Whiting Police
IN		2694		Whitley County
KS		2700		Atchison County Communications Center

 

A-70

---

KS		2716		Coffey County Sheriffs Office
KS		2726		Douglas County Emergency Communication Center
KS		2735		Franklin County Sheriff
KS		2736		Ft Leavenworth Provost Marshals Office
KS		2760		Johnson County Sheriffs Office
KS		2772		Leavenworth County Sheriffs Office
KS		2773		Leavenworth Police Department
KS		2774		Leawood Police Department
KS		2775		Lenexa Police Department
KS		2782		Marshall County Sheriffs Office
KS		2786		Miami County Sheriffs Office
KS		2789		Morris County Sheriffs Office
KS		2791		Nemaha County Sheriffs Office
KS		2804		Overland Park Police Department
KS		2812		Prairie Village Police Department
KS		2817		Riley County 9-1-1
KS		2824		Salina Police Department
KS		2830		Shawnee County Courthouse
KS		2831		Shawnee County Emergency Communications Center
KS		2833		Shawnee Police Department
KS		2852		Washington County Sheriff
KY		2859		Adair County 9-1-1 Center
KY		2860		Albany Police Department
KY		2861		Allen County Police Department
KY		2866		Barbourville Police Department
KY		2868		Barren-Metcalfe E9-1-1
KY		2869		Bath County Dispatch
KY		2870		Beattyville Police Department
KY		2872		Berea Police Department
KY		2873		Boone County Public Safety Communication Center
KY		2874		Bowling Green Police Department
KY		2875		Bracken County Dispatch
KY		2876		Breathitt County Sheriffs Office
KY		2878		Bullitt County E9-1-1 Center
KY		2879		Burkesville Police Department
KY		2880		Butler County EOC
KY		2881		Caldwell County Ems
KY		2882		Campbell County Consolidated Dispatch Center Board
KY		2883		Campbell County Police
KY		2884		Campbellsville 9-1-1 Communications
KY		2885		Carlisle County Emergency Services

 

A-71

---

KY		2887		Carroll County Department Of Public Safety
KY		2888		Carrollton City Police
KY		2890		Casey County Dispatch
KY		2891		Cincinnati-northern Kentucky International Airport Police
KY		2892		Clay County Communications
KY		2894		Corbin Eoc
KY		2895		Covington Police Department
KY		2897		Cynthiana-Harrison County E9-1-1
KY		2898		Danville-Boyle County 9-1-1 Center
KY		2904		Erlanger
KY		2905		Estill County Central Dispatch
KY		2907		Fleming County Dispatch
KY		2908		Floyd County E9-1-1
KY		2909		Frankfort-Franklin County 9-1-1
KY		2910		Franklin Police Department
KY		2911		Ft Campbell EOC
KY		2913		Gallatin County Dispatch
KY		2915		Grant County Public Safety Communications Center
KY		2916		Greensburg Police Department
KY		2920		Hardin County 9-1-1
KY		2921		Harlan Police Department
KY		2922		Harrodsburg Police Department
KY		2929		Hopkinsville Fire Department
KY		2930		Hopkinsville-Christian County EOC
KY		2931		Jackson County 9-1-1
KY		2932		Jefferson County Police-fire-ems Communications Center
KY		2935		Jessamine County Emergency Services Division
KY		2937		Kenton County Police Department
KY		2938		Kentucky State Police Post 10-harlan
KY		2939		Kentucky State Police Post 11-london
KY		2940		Kentucky State Police Post 12-frankfort
KY		2941		Kentucky State Police Post 13-hazard
KY		2942		Kentucky State Police Post 14-ashland
KY		2943		Kentucky State Police Post 15-columbia
KY		2947		Kentucky State Police Post 3-bowling Green
KY		2948		Kentucky State Police Post 4 - Elizabethtown
KY		2949		Kentucky State Police Post 5-Campbellsburg
KY		2950		Kentucky State Police Post 6 - Dry Ridge
KY		2951		Kentucky State Police Post 7-richmond
KY		2952		Kentucky State Police Post 8-morehead
KY		2953		Kentucky State Police Post 9-Pikeville

 

A-72

---

KY		2962		Lancaster Garrard 9-1-1
KY		2963		Larue County Dispatch
KY		2964		Laurel County E9-1-1
KY		2965		Lawrence County 9-1-1 Center
KY		2966		Lawrenceburg Police Department
KY		2968		Lee County
KY		2969		Leitchfield Police Department
KY		2971		Lexington-Fayette UCG-Division of Police
KY		2972		Lincoln County 9-1-1
KY		2973		Livingston County
KY		2974		Logan County Emergency Operations Center
KY		2975		Louisa Police Department
KY		2979		Madison County E9-1-1
KY		2980		Madisonville Police Department
KY		2982		Marion Police Department
KY		2984		Martin County 9-1-1
KY		2986		Maysville Emergency Services
KY		2989		Meade County 9-1-1
KY		2990		Menifee County Fire Dispatch
KY		2991		Middlesboro Police Department
KY		2992		Monroe County Ambulance And 9-1-1 Center
KY		2993		Monticello-Wayne County Dispatch Center
KY		2994		Morehead Police Department
KY		2996		Morganfield Police Department
KY		2997		Mt Sterling Police Department
KY		2998		Muhlenberg County 9-1-1
KY		3004		Oldham County Central Dispatch
KY		3008		Paintsville Johnson County 9-1-1
KY		3009		Paris-Bourbon County E9-1-1
KY		3010		Pendleton County Dispatch Center
KY		3011		Perry County 9-1-1
KY		3012		Pike County Sheriffs Department
KY		3013		Pikeville Police Department
KY		3014		Pineville Police Department
KY		3015		Powell County Emergency Center
KY		3017		Pulaski County 9-1-1
KY		3018		Regional Public Safety Communications Center-Boyd County
KY		3019		Richmond Police Department
KY		3020		Robertson County Ems
KY		3021		Rockcastle County 9-1-1
KY		3023		Russell County Dispatch

 

A-73

---

KY		3025		Scott County E9-1-1
KY		3026		Shelby County E9-1-1
KY		3028		Simpson Emergency Communications Center
KY		3029		Spencer County
KY		3030		Springfield-Washington County E9-1-1
KY		3032		Todd County Emergency Services
KY		3033		Trigg County E9-1-1
KY		3035		Versailles Police Department
KY		3036		Warren County Sheriffs Office
KY		3037		Webster County 9-1-1
KY		3038		West Liberty Police Department
KY		3039		Whitley County E9-1-1
KY		3040		Winchester Police Department
KY		3041		Wolfe County Dispatch
LA		3042		Acadia Parish Communication District
LA		3044		Allen Parish Sheriffs Office
LA		3048		Avoyelles Parish Communication District
LA		3050		Bastrop Police Department
LA		3053		Beaureguard Parish Communications District
LA		3060		Calcasieu Parish Communication District
LA		3062		Caldwell Parish Communications
LA		3063		Cameron Parish Sheriff
LA		3064		Catahoula Parish Sheriff
LA		3074		East Carroll Parish Sheriffs Office
LA		3077		Evangeline Parish 9-1-1
LA		3079		Franklin Parish Communication
LA		3082		Iberia Parish Communications District
LA		3084		Jackson Parish Communication And Sheriff
LA		3085		Jefferson Davis Parish E9-1-1
LA		3089		Lafayette Parish Communication District
LA		3092		Lasalle Parish Sheriff
LA		3093		Lincoln Parish Sheriffs Office
LA		3094		Madison Parish Sheriff
LA		3096		Monroe Police Department
LA		3097		Morehouse Parish Communication And Sheriff
LA		3104		Ouachita Parish 9-1-1 Communications District
LA		3105		Ouachita Parish Sheriff
LA		3113		Rapides Parish Communication District
LA		3116		Richland Parish Sheriff
LA		3117		Ruston Police Department
LA		3128		St Landry Parish 9-1-1

 

A-74

---

LA		3129		St Martin Parish Sheriffs Office
LA		3134		Tensas Parish Sheriff
LA		3137		Union Parish Sheriff
LA		3138		Vermilion Parish Communications District
LA		3139		Vernon Parish Communications
LA		3143		West Carroll Parish Communication District
LA		3145		West Monroe Police Department
LA		3147		Winn Parish Sheriffs Office
MA		3149		Acushnet Police Department
MA		3150		Ashland Police Department
MA		3151		Barnstable County Sheriffs Department
MA		3152		Barnstable Police Department
MA		3153		Bellingham Police Department
MA		3154		Berkshire County Sheriff Communication Center
MA		3156		Boston Police Department
MA		3157		Cambridge Police Department
MA		3158		Canton Police Department
MA		3159		Dalton Communication Center
MA		3160		Dartmouth Police Department
MA		3161		Dennis Police Department
MA		3162		Dover Police Department
MA		3164		Fairhaven Police Department
MA		3165		Fall River Police Department
MA		3166		Falmouth Police Department
MA		3167		Framingham Police Department
MA		3168		Franklin Police Department
MA		3169		Freetown Police Department
MA		3170		Holliston Police Department
MA		3171		Hopkinton Police Department
MA		3172		Lee Communication Center
MA		3173		Marion Police Department
MA		3175		Massachusetts State Police - Framingham
MA		3177		Massachusetts State Police - Middleboro
MA		3178		Massachusetts State Police - Northampton
MA		3179		Massachusetts State Police - Shelburne Falls
MA		3181		Medfield Police Department
MA		3182		Medway Police Department
MA		3183		Millis Police Department
MA		3184		Natick Police Department
MA		3185		New Bedford Police Department
MA		3186		Norfolk Police Department

 

A-75

---

MA		3187		Norwood Police Department
MA		3188		Pittsfield Police Department
MA		3191		Sharon Police Department
MA		3192		Sherborn Police Department
MA		3193		Somerset Police Department
MA		3194		Somerville Police Department
MA		3196		Springfield Police Department
MA		3198		Stoughton Police Department
MA		3199		Swansea Police Department
MA		3200		Walpole Police Department
MA		3201		Wareham Police Department
MA		3202		Westport Police Department
MA		3203		Worcester Department Of Communications
MA		3204		Wrentham Central Dispatch
MD		3205		Allegany County Emerg Services Mgt & Civil Def
MD		3206		Allegany County Sheriffs Department
MD		3207		Annapolis City Police Department
MD		3208		Anne Arundel County Police Department
MD		3209		Baltimore Acc
MD		3210		Baltimore City Police Department
MD		3211		Baltimore County 9-1-1 Center
MD		3212		Calvert County Dept Of Public Safety
MD		3214		Caroline County Dept Emergency Management
MD		3215		Carroll County Emergency Service
MD		3216		Cecil County Emergency Mgmt & Civil Defense
MD		3217		Cecil County Sheriffs Department
MD		3218		Charles County 911 Communications Center
MD		3220		Frederick County Emergency Operations Center
MD		3221		Frederick Police Department
MD		3222		Garrett County
MD		3223		Garrett County Emergency Operations Center
MD		3224		Greenbelt Police Department
MD		3225		Harford County Emergency Operations
MD		3226		Howard County Emergency Communications Center
MD		3228		Montgomery County Police Communications Center
MD		3230		Prince Georges County Emerg Communications Center
MD		3232		Somerset County Department Of Emergency Services
MD		3233		St Marys County Emergency Management
MD		3235		Talbot County Emergency Management Agency
MD		3236		Washington County Fire Rescue and Communications
MD		3237		Washington County Sheriffs Office

 

A-76

---

MD		3239		Worcester County 9-1-1 Center
MI		3308		Alcona County Sheriffs Department
MI		3309		Alger County Central Dispatch
MI		3313		Alpena County Central Dispatch
MI		3318		Auburn Hills Police Department
MI		3323		Battle Creek Ang
MI		3330		Benzie County Sheriffs Department
MI		3331		Berkley Department Of Public Safety
MI		3333		Beverly Hills Department Of Public Safety
MI		3334		Birmingham Police Department
MI		3335		Bloomfield Hills Department Of Public Safety
MI		3336		Bloomfield Township Police Department
MI		3337		Branch County Central Dispatch
MI		3342		Cass County Sheriffs Department
MI		3343		Cassopolis Police Department
MI		3344		Cce Central Dispatch-charlevoix
MI		3347		Center Line Police Department
MI		3351		Chesterfield Township Police Department
MI		3352		Chippewa County Central Dispatch
MI		3355		Clawson Police Department
MI		3356		Clay Township Police Department
MI		3357		Clinton County Central Dispatch
MI		3358		Clinton Township Police Department
MI		3361		Crawford Emergency Central Dispatch
MI		3365		Delta County Central Dispatch
MI		3369		Dickinson County Sheriffs Office
MI		3373		Eastpointe Police Department
MI		3378		Farmington City Police Department
MI		3379		Farmington Hills Police Department
MI		3381		Fenton Police Department
MI		3382		Ferndale Police Department
MI		3385		Flint City 9-1-1
MI		3386		Flint Fire Department
MI		3388		Fraser Department Of Public Safety
MI		3390		Genesee County 9-1-1
MI		3396		Grand Traverse County Central Dispatch
MI		3397		Gratiot County Central Dispatch
MI		3408		Hazel Park Police Department
MI		3411		Hillsdale County Sheriffs Department
MI		3412		Holly Police Department
MI		3413		Houghton County Central Dispatch

 

A-77

---

MI		3414		Huntington Woods Department Of Public Safety
MI		3422		Iron County 9-1-1
MI		3423		Isabella County Central Dispatch
MI		3429		Kalkaska County Central Dispatch
MI		3430		Keego Harbor Police Department
MI		3431		Kent County Sheriffs Department
MI		3436		Lake County 9-1-1 Central Dispatch
MI		3438		Lake Orion Police Department
MI		3442		Leelanau County Sheriffs Department
MI		3443		Lenawee County Sheriffs Department
MI		3452		Macomb County Sheriffs Department
MI		3453		Madison Heights Police Department
MI		3454		Manistee County Central Dispatch
MI		3456		Michigan State Police - Negaunee Regional Dispatch
MI		3460		Mason-Oceana 9-1-1 - Oceana
MI		3461		Meceola Consolidated Central Dispatch - Mecosta
MI		3462		Meceola Central Dispatch-osceola
MI		3464		Menominee County Central Dispatch
MI		3468		Michigan State Police - Coldwater
MI		3470		Michigan State Police - Gaylord
MI		3475		Michigan State Police - Niles
MI		3477		Michigan State Police - Paw Paw
MI		3486		Milford Police Department
MI		3487		Missaukee County Sheriffs Department
MI		3492		Montcalm County Central Dispatch
MI		3493		Montmorency County Sheriffs Department
MI		3494		Mt Clemens Police Department
MI		3495		Muskegon Central Dispatch
MI		3504		Newaygo County 9-1-1 Central Dispatch
MI		3509		Novi Regional Communications
MI		3510		Oak Park Department Of Public Safety
MI		3511		Oakland County Sheriff
MI		3512		Oakland County Sheriff-rochester Hills Fire Department
MI		3513		Oakland University Police Department
MI		3518		Oscoda County Sheriffs Department
MI		3519		Otsego County 9-1-1
MI		3522		Oxford Police Department
MI		3525		Pleasant Ridge Police Department
MI		3528		Pontiac Police Department
MI		3529		Port Huron Police Communications
MI		3531		Presque Isle Sheriffs Department

 

A-78

---

MI		3533		Richmond Police Department
MI		3536		Rochester Hills Fire Department
MI		3537		Rochester Police Department
MI		3540		Romeo Police Department
MI		3542		Roscommon County Central Dispatch
MI		3543		Roseville Police Department
MI		3544		Royal Oak Police Department
MI		3545		Royal Oak Township Fire Department
MI		3554		Shelby Township Police Department
MI		3555		Shiawassee County Central Dispatch
MI		3556		South Haven Police Department
MI		3557		Southfield Public Safety
MI		3559		St Clair County Med-com
MI		3560		St Clair County Sheriffs Department
MI		3561		St Clair Shores Police Department
MI		3562		St Joseph County Central Dispatch
MI		3564		Sterling Heights Fire Department
MI		3565		Sterling Heights Police Department
MI		3566		Sturgis Police Department
MI		3571		Troy Police Department
MI		3574		Utica Police Department
MI		3575		Van Buren County Central Dispatch
MI		3578		Walled Lake Police Department
MI		3579		Warren Police Department
MI		3581		Waterford Township Police Department
MI		3584		West Bloomfield Police Department
MI		3587		Wexford County Central Dispatch
MI		3588		White Lake Township Police Department
MI		3589		Wixom Police Department
MI		3590		Wolverine Lake Police Department
MN		3597		Allina Medical Transportation
MN		3598		Anoka County Central Communications
MN		3602		Benton County Sheriffs Office
MN		3604		Bloomington Police Department
MN		3607		Brooklyn Center Police Department
MN		3609		Dakota Communications Center Zone 2
MN		3611		Carver County Sheriffs Office
MN		3614		Chisago County Sheriffs Office
MN		3618		Cottage Grove Police Department
MN		3621		Dakota Communications Center Zone 3
MN		3622		Dodge County Sheriffs Office

 

A-79

---

MN		3624		Dakota Communications Center Zone 1
MN		3625		Eden Prairie Police Department
MN		3626		Edina Police Department
MN		3631		Freeborn County Law Enforcement Center
MN		3632		Goodhue County Sheriffs Office
MN		3634		Hennepin County East
MN		3635		Hennepin County Medical Center-EMS
MN		3636		Hennepin County North
MN		3637		Hennepin County South
MN		3638		Hopkins Police Department
MN		3642		Isanti County Sheriffs Office
MN		3665		Meeker County Sheriffs Office
MN		3669		Minneapolis Emergency Communications
MN		3670		Minneapolis St Paul Airport Communications Center
MN		3683		Minnetonka Police Department
MN		3686		Mower County Law Enforcement Center
MN		3692		North Memorial Medical Center
MN		3694		Olmsted County Law Enforcement Center
MN		3696		Pearl Street 9-1-1 Center
MN		3703		Ramsey County Emergency Communications Center
MN		3708		Richfield Police Department
MN		3709		Rochester Police Department
MN		3712		Scott County Sheriffs Office
MN		3713		Sherburne County Sheriffs Office
MN		3718		St Louis Park Police Department
MN		3721		Stearns County Sheriffs Office
MN		3722		Rice / Steele County Combined 911 Center
MN		3728		University Of Minnesota Police Department
MN		3729		Wabasha County Sheriffs Office
MN		3732		Washington County Sheriffs Office
MN		3734		West St Paul Police Department
MN		3735		White Bear Lake Police Department
MN		3738		Winona County Sheriffs Office
MN		3739		Wright County Sheriffs Office
MO		3744		Audrain County Communications Center
MO		3746		Ballwin Police Department
MO		3750		Belton Police Department
MO		3753		Berkeley Police Department
MO		3754		Blue Springs Police Department
MO		3755		Bollinger County Sheriffs Office
MO		3757		Brentwood Police Department

 

A-80

---

MO		3758		Bridgeton Police Department
MO		3759		Linn County/ Brookfield Police
MO		3761		Butler County Sheriffs Office
MO		3764		Callaway Eoc
MO		3765		Camden County Sheriffs Office
MO		3767		Cape Girardeau County Sheriffs Office
MO		3768		Cape Girardeau Police Department
MO		3772		Cass County Sheriffs Office
MO		3775		Central Missouri State University Department Of Public Safety
MO		3779		Charleston Department Of Public Safety
MO		3780		Chillicothe Police Department
MO		3783		Clay County Sheriffs Office
MO		3789		Crawford County E9-1-1
MO		3790		Crestwood Police Department
MO		3791		Creve Coeur Police Department
MO		3794		Daviess County Central Communications
MO		3797		Des Peres Police Department
MO		3800		Dunklin County 9-1-1 Communications
MO		3801		East Prairie Police Department
MO		3804		Excelsior Springs Police Department
MO		3805		Farmington Police Department
MO		3806		Ferguson Police Department
MO		3807		Florissant Police Department
MO		3808		Franklin County Sheriffs Office
MO		3809		Frontenac Police Department
MO		3810		Gasconade County E9-1-1 Central Communications
MO		3811		Gentry County 9-1-1
MO		3812		Gladstone Department Of Public Safety
MO		3813		Glendale Police Department
MO		3814		Grandview Police Department
MO		3815		Harrison County 9-1-1
MO		3816		Harrisonville Police Department
MO		3817		Hazelwood Police Department
MO		3823		Howard County 9-1-1
MO		3825		Independence Emergency Communications Center
MO		3826		Iron County Sheriffs Department
MO		3827		Jackson County Sheriff
MO		3828		Jackson Police Department
MO		3831		Jefferson City /Cole County 911
MO		3832		Jefferson County 9-1-1
MO		3835		Kansas City Police Department

 

A-81

---

MO		3836		Kennett Police Department
MO		3837		Kirksville-Adair County E9-1-1 Joint Communications Center
MO		3838		Kirkwood City Police Department
MO		3839		Knob Noster Police Department
MO		3840		Knox County Sheriffs Department
MO		3841		Laclede County Communications Center
MO		3842		Ladue Police Department
MO		3846		Lees Summit Police Department
MO		3847		Lewis County 9-1-1
MO		3848		Liberty Police Department
MO		3849		Lincoln County 9-1-1 Communications Center
MO		3851		Livingston County Sheriffs Office
MO		3852		Louisiana Police Department
MO		3854		Madison County 9-1-1
MO		3856		Maries County Sheriffs Department
MO		3857		Marion County 9-1-1
MO		3859		Maryland Heights Police Department
MO		3862		Mercer County Sheriffs Office
MO		3863		Miller County 9-1-1
MO		3864		Miner Police Department
MO		3867		Moberly Police Department
MO		3869		Moniteau County Communications
MO		3870		Monroe County 9-1-1
MO		3871		Montgomery County Sheriffs Office
MO		3872		Morgan County 9-1-1
MO		3874		Municipal Radio System (mrs)
MO		3876		New Madrid County Sheriffs Department
MO		3880		North Kansas City Police Department
MO		3882		Olivette Police Department
MO		3885		Osage Beach Department Of Public Safety
MO		3886		Osage County Sheriffs Department
MO		3887		Overland Police Department
MO		3889		Pacific City Police Department
MO		3891		Pemiscot County Sheriffs Department
MO		3892		Perry County Sheriffs Department
MO		3893		Perryville Police Department
MO		3895		Pike County Sheriffs Department
MO		3897		Platte County Sheriffs Department
MO		3898		Pleasant Hill Police Department
MO		3899		Pleasant Valley Police Department
MO		3901		Poplar Bluff Police Department

 

A-82

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MO		3902		Portageville Police Department
MO		3903		Pulaski County 9-1-1 Communications
MO		3904		Putnam County E9-1-1
MO		3905		Ralls County 9-1-1
MO		3906		Ray County 9-1-1
MO		3907		Raymore Police Department
MO		3908		Raytown Police Department
MO		3910		Richmond Heights Police Department
MO		3912		Riverside Department Of Public Safety
MO		3915		Rolla Police Department
MO		3919		Scotland County Sheriffs Department
MO		3920		Scott City Police Department
MO		3921		Scott County E9-1-1
MO		3925		Shelby County E9-1-1
MO		3926		Sikeston Public Safety
MO		3930		St Ann Police Department
MO		3931		St Charles County Dispatch
MO		3932		St Charles County Sheriffs Office
MO		3933		St Charles Police Department
MO		3935		St Francois County Communications Center
MO		3936		St Joseph Emergency Communications Center
MO		3937		St Louis Metro Police
MO		3938		St Peters City Police Department
MO		3939		Ste Genevieve 9-1-1 Communications
MO		3940		Stoddard County 9-1-1 Services
MO		3943		Sugar Creek Police Department
MO		3944		Sullivan County Sheriffs Department
MO		3945		Sunset Hills Police Department
MO		3949		Town And Country Police Department
MO		3950		Grundy County / Trenton Police Department 9-1-1
MO		3951		University City Police Department
MO		3952		Vandalia Police Department
MO		3954		Warren County 9-1-1
MO		3956		Washington County 9-1-1
MO		3957		Washington Police Department
MO		3958		Wayne County Sheriffs Department
MS		3967		Alcorn County 9-1-1
MS		3968		Alcorn County Sheriffs Department
MS		3972		Batesville Police Department
MS		3973		Bay St Louis Police Department
MS		3974		Benton County Sheriffs Department

 

A-83

---

MS		3975		Biloxi Police Department
MS		3976		Bolivar County Sheriffs Office
MS		3980		Carroll County Emergency Operations Center
MS		3981		Chickasaw County E9-1-1
MS		3983		Choctaw County E911 Service
MS		3984		Choctaw 911
MS		3986		Clarke County
MS		3987		Cleveland Police Department
MS		3990		Coahoma County E9-1-1
MS		3996		De Soto County Sheriffs Office-Hernando
MS		4001		Gautier Police Department
MS		4004		Greenville Police Department
MS		4005		Grenada Central Communications
MS		4006		Grenada County Sheriffs Office
MS		4007		Gulfport Police Department
MS		4008		Hancock County Central Dispatching
MS		4009		Harrison County Sheriffs Office
MS		4012		Hernando Police Department
MS		4016		Hollandale Police Department
MS		4017		Holmes E9-1-1
MS		4018		Horn Lake Police Department
MS		4020		Indianola Police Department
MS		4021		Itawamba County Sheriffs Office
MS		4029		Keesler Air Force Base
MS		4031		Kosciusko Police Department
MS		4032		Lafayette County 9-1-1
MS		4036		Lauderdale Emergency Management Center
MS		4041		Lee County Communication E9-1-1 Center
MS		4042		Leflore County Sheriffs Department
MS		4043		Leland Police Department
MS		4045		Long Beach Police Department
MS		4046		Louisville-Winston E9-1-1
MS		4047		Lowndes County E9-1-1
MS		4051		Marshall County E9-1-1
MS		4054		Monroe County 9-1-1
MS		4056		Montgomery County EOC
MS		4057		Moss Point Police Department
MS		4059		Neshoba County 9-1-1
MS		4061		Newton Police Department
MS		4064		Ocean Springs Police Department
MS		4065		Oktibbeha County E9-1-1

 

A-84

---

MS		4066		Oktibbeha County EOC
MS		4067		Olive Branch Police Department
MS		4068		Panola County Sheriff
MS		4069		Pascagoula Police Department
MS		4070		Pass Christian Police Department
MS		4079		Pontotoc County Sheriffs Office
MS		4080		Prentiss County 9-1-1
MS		4086		Sardis Police Department
MS		4091		Southaven Police Department
MS		4092		Starkville Police Department
MS		4094		Sunflower County Sheriff
MS		4095		Tallahatchie County Sheriffs Office
MS		4096		Tate County Sheriffs Office
MS		4097		Tippah County Sheriffs Office
MS		4098		Tishomingo County Sheriffs Office
MS		4099		Tunica County Sheriffs Office
MS		4100		Union County EOC
MS		4103		Washington County EOC
MS		4105		Waveland Police Department
MS		4106		Wayne County Sheriffs Office
MS		4107		Webster County Sheriffs Department
MS		4109		Yalobusha County Sheriffs Office
MT		4112		Anaconda-Deer Lodge Law Enforcement
MT		4113		Beaverhead County Sheriff
MT		4117		Yellowstone County 9-1-1 Center
MT		4118		Black Feet Law Enforcement
MT		4119		Blaine County Sheriff
MT		4120		Broadwater County Sheriff
MT		4121		Butte-silver Bow Law Enforcement
MT		4123		Chouteau County Sheriff
MT		4125		Daniels County Sheriffs Office
MT		4127		Eureka Police Department
MT		4128		Fallon County Dispatch Center
MT		4131		Gallatin County-City Of Bozeman 9-1-1
MT		4132		Glacier County Sheriffs Office
MT		4133		Dawson County
MT		4134		Granite County Sheriffs Office
MT		4135		Great Falls/Cascade County 9-1-1
MT		4136		Lewis & Clark County
MT		4137		Hill County Sheriffs Office
MT		4138		Jefferson County Sheriff

 

A-85

---

MT		4139		Lake County Sheriffs Office
MT		4140		Laurel Police Department
MT		4141		Central Montana - Lewistown Police Department
MT		4142		Liberty County 9-1-1
MT		4143		Lincoln County Sheriffs Department
MT		4144		Madison County Sheriff
MT		4145		Malmstrom Air Force Base
MT		4147		Custer/Garfield County
MT		4149		Missoula County 9-1-1 Center
MT		4151		Musselshell County Sheriff
MT		4153		Park County Dispatch
MT		4154		Phillips County Sheriffs Office
MT		4155		Pondera County Sheriff
MT		4156		Powder River County Sheriffs Office
MT		4157		Powell County Sheriff
MT		4159		Ravalli County Sheriff
MT		4160		Richland County Sheriff
MT		4161		Rocky Boy Police Department
MT		4162		Roosevelt County Sheriff Department
MT		4163		Rosebud/Treasure County
MT		4165		Sheridan County Sheriffs Office
MT		4166		Stillwater County Sheriff
MT		4168		Teton County Sheriff
MT		4169		Toole County Sheriff
MT		4170		Troy Area Dispatch
MT		4171		Valley County Sheriffs Department
MT		4172		West Yellowstone, Town Of
MT		4173		Wheatland/Golden Valley County
NC		4174		Alamance County Central Communications
NC		4177		Anson County Emergency Communications
NC		4183		Atlantic Beach Police Communications
NC		4185		Ayden Police Department
NC		4186		Beaufort County Communications Center
NC		4190		Bertie County Sheriffs Office
NC		4193		Bladen County Sheriffs Department
NC		4197		Brunswick Emergency Services
NC		4198		Buncombe County Emergency Communications
NC		4202		Burlington Police-fire Communications
NC		4203		Butner Public Safety Communications
NC		4208		Carolina Beach Police Communications
NC		4211		Carteret County Sheriffs Communications

 

A-86

---

NC		4213		Caswell County 9-1-1 Communications
NC		4218		Chatham County Sheriffs Department
NC		4219		Cherokee County 9-1-1 Dispatch
NC		4221		Cherokee Tribal Dispatch
NC		4223		Chowan Central Communications
NC		4226		Clay County Sheriffs Communications
NC		4231		Columbus Central Communications
NC		4234		Craven County Sheriffs Communications
NC		4237		Cumberland County Emergency Communications
NC		4239		Currituck County Central Communications
NC		4243		Dare County Sheriffs Office - Communications Division
NC		4249		Duke Public Safety Communications
NC		4251		Dunn Police Communications
NC		4252		Duplin County Communications
NC		4253		Durham County Sheriffs Communications
NC		4254		Durham Emergency Communications Center
NC		4257		Edgecombe Central Communications
NC		4260		Emerald Isle Police Communications
NC		4264		Fairmont Police
NC		4266		Farmville Police Communications
NC		4267		Fayetteville City Communications
NC		4272		Franklin County 9-1-1 Communications
NC		4278		Gates County Central Communications
NC		4279		Gibonsville Police Communications
NC		4280		Goldsboro City Communications
NC		4282		Graham County Communications
NC		4285		Granville County Emergency Communications
NC		4286		Greene County Sheriffs Communications
NC		4290		Halifax County Central Communications
NC		4291		Hamlet Police Communications
NC		4294		Harnett County Sheriffs Communications
NC		4295		Havelock Police Department
NC		4296		Haywood County Emergency Operations Center
NC		4297		Henderson County Sheriffs Communications
NC		4298		Henderson-Vance 9-1-1 Center
NC		4300		Hertford County Sheriffs Office
NC		4303		Hoke County Emergency Communications
NC		4304		Hyde County Sheriffs Office
NC		4306		Jackson County Emergency Communications
NC		4307		Jacksonville Fire-police
NC		4309		Johnston County E9-1-1 Communications

 

A-87

---

NC		4311		Jones County Sheriffs Office
NC		4321		Laurinburg Police Department
NC		4322		Lee County Sheriffs Communications
NC		4323		Lenoir County Central Communications
NC		4329		Lumberton Emergency Communications
NC		4330		Macon County Communications
NC		4331		Madison County Eoc
NC		4332		Madison County Sheriffs Communications
NC		4333		Marion Police
NC		4334		Martin County Communications
NC		4336		Maxton Police Department
NC		4338		Mcdowell County Emergency Services
NC		4339		Mcdowell County Sheriffs Communications
NC		4340		Mebane Police Department
NC		4346		Mitchell County Central Communications
NC		4348		Montgomery County Emergency Communications
NC		4349		Moore County Public Safety
NC		4352		Morehead City Police Communications
NC		4357		Mt Olive Police Communications
NC		4358		Nash County Central Communication
NC		4359		New Bern Police Department
NC		4360		New Hanover County Public Safety Communications
NC		4383		Northampton County Sheriffs Office
NC		4384		Oak Island Police Communications
NC		4386		Onslow County 9-1-1 Communications
NC		4388		Orange County Emergency Communications
NC		4390		Pamlico County Communications
NC		4391		Pamlico County Sheriffs Communications
NC		4392		Pasquotank-camden-elizabeth City Central Communications Center
NC		4393		Pembroke Police Communications
NC		4395		Pender County Sheriffs Office
NC		4396		Perquimans County Communications
NC		4397		Person County 9-1-1
NC		4404		Pitt County 9-1-1 Communications
NC		4412		Randolph County Emergency Communications
NC		4414		Red Springs Police Department
NC		4416		Richmond County Emergency Communications Center
NC		4417		Richmond County Sheriffs Communications
NC		4419		Robeson County E9-1-1 Center
NC		4423		Rockingham Police Communications
NC		4424		Rocky Mount Police Communications

 

A-88

---

NC		4430		Sampson County 9-1-1 Center
NC		4431		Sanford Police-Fire-EMS Communications
NC		4432		Scotland County Emergency Communications
NC		4433		Scotland County Sheriffs Communications
NC		4436		Seymour Johnson Afb
NC		4442		Southport Police Communications Center
NC		4443		Spring Lake Police Department
NC		4445		St Pauls Police Communications
NC		4454		Swain County Sheriffs Office
NC		4455		Tarboro Police-fire Communications
NC		4459		Tyrrell County Sheriffs Office
NC		4464		Union County Emergency Communications
NC		4470		Warren County Sheriffs Office
NC		4471		Warsaw Police Department
NC		4472		Washington County Communications
NC		4473		Washington Police Communications
NC		4475		Wayne County Communications
NC		4484		Wilmington Police Department
NC		4485		Wilson County Emergency Communications
NC		4488		Wrightsville Beach Police-fire Communications Center
NC		4490		Yancey County Sheriffs Office
ND		4498		Bismarck - Burleigh Emerg. Mgmt & Combined Communications
ND		4500		Bottineau/Renville County PSAP
ND		4504		Cavalier County Sheriffs Office
ND		4512		Grand Forks County Psap
ND		4517		Lake Region 9-1-1
ND		4522		Mckenzie County Sheriffs Department
ND		4523		Mclean County Sheriff
ND		4524		Mercer Oliver Combined Communications
ND		4525		Minot City - Ward County
ND		4526		Morton County Communications
ND		4527		Mountrail County Sheriff
ND		4529		North Dakota State Radio Communications
ND		4531		Pembina County
ND		4532		Pierce County Sheriff
ND		4535		Richland County Communications
ND		4536		Rolette County Sheriff
ND		4540		Sioux County Sheriffs Department
ND		4542		Stark - Dunn E9-1-1
ND		4544		Stutsman County Communications
ND		4546		Traill County Sheriffs Office

 

A-89

---

ND		4548		Valley City Police Department
ND		4549		Walsh County Communications
ND		4551		West Fargo Police Department
ND		4552		Williams County Sheriff
NE		4556		Antelope County Sheriffs Office
NE		4558		Beatrice Communications/gage County
NE		4560		Boone County
NE		4563		Boyd/ Holt County 9-1-1
NE		4564		Brown County
NE		4566		Burt County 911
NE		4567		Butler County
NE		4568		Cass County Sheriff’s Dept
NE		4569		Cedar County Sheriffs 911
NE		4572		Cherry County
NE		4574		Clay County
NE		4575		Colfax County Sheriffs Department
NE		4576		Columbus Police Dept/ Platte County
NE		4578		Cuming County 911
NE		4580		Dakota County Lec
NE		4581		David City Volunteer Fire Department
NE		4585		Dixon County Sheriffs Department
NE		4586		Dodge County Sheriff
NE		4587		Douglas County 9-1-1 Communications Center
NE		4589		Falls City Police Department
NE		4590		Fillmore County
NE		4592		Fremont Police Dept 911
NE		4605		Hastings 9-1-1 Center/ Adams County
NE		4611		Jefferson County
NE		4612		Johnson County
NE		4615		Keya Paha
NE		4618		Knox County
NE		4619		Lancaster Communications
NE		4622		Lincoln - Lancaster 9-1-1
NE		4623		Madison County
NE		4627		Mid Rivers 9-1-1
NE		4629		Nance County
NE		4630		Nebraska City Fire Department
NE		4631		Nemaha County
NE		4632		Norfolk Police Dept/ Stanton/ Pierce Counties
NE		4635		Nuckolls County
NE		4639		Otoe County

 

A-90

---

NE		4643		Polk County
NE		4646		Rock County Sheriff’s Office
NE		4647		Saline County
NE		4648		Sarpy County 9-1-1
NE		4650		Saunders County
NE		4652		Seward County
NE		4658		Thayer County
NE		4660		Thurston County
NE		4662		Washington County 911
NE		4663		Wayne Police Department
NE		4666		York County
NE		4667		City Of York Police Department
NH		4668		Belknap County Sheriffs Office
NH		4669		Grafton County Sheriffs Department
NH		4670		New Hampshire Bureau Of Emergency Communications
NH		4671		Rockingham County Sheriffs Department
NJ		4672		Absecon City Police Department
NJ		4673		Andover Police Department
NJ		4674		Atlantic City Police Department
NJ		4675		Avalon Police Department
NJ		4676		Bayonne Police Department
NJ		4677		Belleville Police Department
NJ		4678		Bellmawr Police Department
NJ		4679		Bergen County Emergency Management
NJ		4680		Bergenfield Police Department
NJ		4681		Berkeley Heights Police Department
NJ		4682		Bernards Township Police Department
NJ		4683		Bernardsville Borough Police Department
NJ		4684		Bloomfield Police Department
NJ		4685		Boonton Township Police Department
NJ		4686		Bound Brook Police Department
NJ		4687		Bridgewater Police Department
NJ		4688		Brigantine Police Department
NJ		4689		Buena Borough Police Department
NJ		4690		Burlington County Communications
NJ		4691		Burlington Police Department
NJ		4692		Butler Police Department
NJ		4693		Caldwell Police Department
NJ		4694		Camden County Communications
NJ		4695		Camden Police Department
NJ		4696		Cape May Communications Center

 

A-91

---

NJ		4697		Cape May Police Department
NJ		4698		Carlstadt Borough
NJ		4699		Carteret Borough
NJ		4700		Cedar Grove Police Department
NJ		4701		Chatham Borough Police
NJ		4702		Chatham Township Police Department
NJ		4703		Cherry Hill Police
NJ		4704		Clark Police Department
NJ		4705		Clifton Police Department
NJ		4706		Closter Police Department
NJ		4707		Cranford Police Department
NJ		4708		Cumberland County 9-1-1 Communications and Training Center
NJ		4709		Denville Township Police Department
NJ		4710		Dumont Borough Police Department
NJ		4711		Dunellen Police Department
NJ		4712		East Brunswick Police Department
NJ		4713		East Orange Police Department
NJ		4714		East Windsor Township Police Department
NJ		4715		Edison Police Department
NJ		4716		Egg Harbor City
NJ		4717		Egg Harbor Township Police Department
NJ		4718		Elizabeth Police Department
NJ		4719		Elmwood Park Police Department
NJ		4721		Emerson Police Department
NJ		4722		Englewood Cliffs Police Department
NJ		4723		Englewood Police Department
NJ		4724		Essex Fells Police Department
NJ		4725		Ewing Township Police Department
NJ		4726		Fair Lawn Police Department
NJ		4727		Fairfield Police Department
NJ		4728		Fanwood Borough Police Department
NJ		4729		Florham Park
NJ		4730		Franklin Township Police Department
NJ		4731		Freehold Township Police Department
NJ		4732		Ft Lee Borough Police Department
NJ		4733		Galloway Township
NJ		4734		Garfield Police Department
NJ		4735		Garwood Borough Police Department
NJ		4736		Glen Ridge Police Department
NJ		4737		Gloucester County Communications Center
NJ		4738		Gloucester Township Police Department

 

A-92

---

NJ		4739		Green Brook Police Department
NJ		4740		Hackensack Police Department
NJ		4741		Haledon Borough
NJ		4742		Hamilton Township Police Department-atlantic County
NJ		4743		Hamilton Township Police Department-mercer County
NJ		4744		Hammonton Police Department
NJ		4745		Hanover Township Police Department
NJ		4746		Hardyston Township Police Department
NJ		4747		Hasbrouck Heights Police Department
NJ		4748		Hawthorne Police Department
NJ		4749		Hazlet Township
NJ		4750		Highland Park Police Department
NJ		4751		Hightstown Police Department
NJ		4752		Hillsborough Township
NJ		4753		Hillside Township Police Department
NJ		4754		Hopatcong Borough Police Department
NJ		4755		Hopewell Township Police Department
NJ		4756		Howell Township Police Department
NJ		4757		Hudson County Communications Center
NJ		4758		Hunterdon County Communications Center
NJ		4759		Irvington Township Police Department
NJ		4760		Jefferson Township Police Department
NJ		4761		Jersey City Police Department
NJ		4762		Kenilworth Borough Police Department
NJ		4763		Lawrence Township Police Department
NJ		4764		Leonia Borough Police Department
NJ		4766		Linden City Police Department
NJ		4767		Linwood City Police Department
NJ		4768		Little Egg Harbor Township Police Department
NJ		4769		Little Falls Police Department
NJ		4770		Livingston Township Police Department
NJ		4771		Lodi Borough Police Department
NJ		4772		Long Hill Township Police Department
NJ		4773		Longport Borough Police Department
NJ		4774		Lower Township Police Department
NJ		4775		Madison Borough Police Department
NJ		4776		Mahwah Township Police Department
NJ		4777		Manville Borough Police Department
NJ		4778		Maplewood Police Department
NJ		4779		Margate City Police Department
NJ		4780		Marlboro Township Police Department

 

A-93

---

NJ		4781		Maywood Borough Police Department
NJ		4782		Medford Township Police Department
NJ		4783		Metuchen Borough Police Department
NJ		4784		Middle Township Police Department
NJ		4785		Middlesex Borough Police Department
NJ		4786		Middletown Township Police Department
NJ		4787		Millburn Township Police Department
NJ		4788		Milltown Police Department
NJ		4789		Monmouth County Communications Center
NJ		4790		Montclair Township Police Department
NJ		4791		Montgomery Township Police Department
NJ		4792		Montville Township Police Department
NJ		4793		Morris County Telecom Center
NJ		4794		Morris Plains Police Department
NJ		4795		Morris Township Police Department
NJ		4796		Morristown Police Department
NJ		4797		Mountain Lakes Police Department
NJ		4798		Mountainside Police Department
NJ		4799		Mt Olive Township Police Department
NJ		4800		Neptune Police Department
NJ		4801		New Brunswick Police Department
NJ		4803		New Jersey State Police-troop A Buena Vista
NJ		4804		New Jersey State Police-troop B Totowa
NJ		4805		New Jersey State Police-troop C West Trenton
NJ		4806		New Providence Police Department
NJ		4807		Newark City Police Department
NJ		4808		Newton Police Department
NJ		4809		North Brunswick Police Department
NJ		4810		North Caldwell Police Department
NJ		4811		North Plainfield Police Department
NJ		4812		North Wildwood Police Department
NJ		4813		Nutley Police Department
NJ		4814		Ocean City Police Department
NJ		4815		Ocean County Communications Center
NJ		4816		Office Of Emergency Management Monroe Township Police Department
NJ		4817		Old Bridge Township Police Department
NJ		4818		Orange City Police Department
NJ		4819		Paramus Borough Police Department
NJ		4820		Park Ridge Police Department
NJ		4821		Parsippany Police Department
NJ		4822		Passaic City Police Department

 

A-94

---

NJ		4823		Passaic County Sheriffs Department
NJ		4824		Paterson City Fire Department
NJ		4825		Paterson City Police Department
NJ		4826		Pennsauken Township Police Department
NJ		4827		Pequannock Township Police Department
NJ		4828		Perth Amboy Police Department
NJ		4829		Phillipsburg Town Police Department
NJ		4830		Piscataway Township Police Department
NJ		4831		Plainfield Police Department
NJ		4832		Plainsboro Township Police Department
NJ		4833		Pleasantville City Police Department
NJ		4834		Pompton Lakes Police Department
NJ		4835		Princeton Borough Police Department
NJ		4836		Princeton Township Police Department
NJ		4837		Rahway City Police Department
NJ		4838		Randolph Township Police Department
NJ		4839		Ridgefield Borough Police Department
NJ		4840		Ridgewood Police Department
NJ		4841		Ringwood Borough Police Department
NJ		4842		River Vale Township Police Department
NJ		4843		Rockaway Township Police Department
NJ		4844		Roseland Borough Police Department
NJ		4845		Roselle Borough Police Department
NJ		4846		Roselle Park Police Department
NJ		4847		Roxbury Township Police Department
NJ		4848		Rutgers University Police Department
NJ		4849		Saddle Brook Police Department
NJ		4850		Salem County Communications Center
NJ		4851		Sayreville Borough Police Department
NJ		4852		Scotch Plains Police Department
NJ		4853		Sea Isle City Police Department
NJ		4854		Secaucus Town Police Department
NJ		4855		Somers Point Police Department
NJ		4856		Somerset County Communications
NJ		4857		Somerville Borough Police Department
NJ		4858		South Amboy City Police Department
NJ		4859		South Brunswick Township Police Department
NJ		4860		South Orange Police Department
NJ		4861		South Plainfield Police Department
NJ		4862		South River Police Department
NJ		4863		Sparta Police Department

 

A-95

---

NJ		4864		Spotswood Police Department
NJ		4865		Springfield Police Department
NJ		4866		Stone Harbor Police Department
NJ		4867		Summit City Fire Department
NJ		4868		Teaneck Township Police Department
NJ		4869		Trenton Police Department
NJ		4870		Union Township Police Department
NJ		4871		Ventnor City Police Department
NJ		4872		Vernon Township Police Department
NJ		4873		Verona Township Police Department
NJ		4874		Vineland Police Department
NJ		4875		Voorhees Township Police Department
NJ		4876		Warren County Communications Center
NJ		4877		Warren Township Police Department
NJ		4878		Washington Township-bergen County
NJ		4879		Washington Township-mercer County
NJ		4880		Washington Township-morris County
NJ		4881		Watchung Police Department
NJ		4882		Wayne Township Police Department
NJ		4883		West Caldwell Police Department
NJ		4884		West Milford Township Police
NJ		4885		West Orange Police
NJ		4886		West Windsor Township
NJ		4887		Westfield Police Department
NJ		4888		Westwood Police Department
NJ		4889		Wildwood City Police Department
NJ		4890		Wildwood Crest Police Department
NJ		4891		Winslow Township Police Department
NJ		4892		Woodbridge Township Police Department
NM		4894		Alamogordo Department Of Public Safety
NM		4896		Albuquerque Police Department
NM		4898		Artesia Police Department
NM		4899		Belen Police Department
NM		4900		Bernalillo Communications Center
NM		4901		Bernalillo Police Department
NM		4903		Cannon Air Force Base Fire Department
NM		4904		Carlsbad Police Department
NM		4905		Catron County Sheriffs Department
NM		4906		Pecos Valley Regional Communications Center
NM		4907		Cibola County Sheriff
NM		4908		Clayton Police Department

 

A-96

---

NM		4909		Clovis Police Department
NM		4911		Debaca County Sheriffs Office
NM		4912		Eddy County Central Communications Authority
NM		4913		Espanola-rio Arriba 9-1-1 Center
NM		4915		Grant County Regional Dispatch
NM		4916		Grants Police Department
NM		4918		Hidalgo County Sheriffs Office
NM		4919		Hobbs Police And Fire
NM		4920		Holloman Air Force Base Police
NM		4923		Jicarilla Apache Nation Police Department
NM		4926		Las Vegas City Police Department
NM		4927		Lea County Sheriff
NM		4928		Lincoln County Sheriffs Department
NM		4929		Los Alamos County Communications
NM		4931		Los Lunas Police Department
NM		4933		Luna County Central Dispatch
NM		4935		Mckinley Metro Dispatch
NM		4936		Mescalero Apache Tribal Police
NM		4937		Mesilla Valley Regional Dispatch Authority
NM		4942		Otero County Sheriffs Office
NM		4945		Portales Police Department
NM		4947		Quay County Regional Emergency Communications Center
NM		4950		Raton Police Department
NM		4951		Red River Marshals Office
NM		4953		Roswell Police Department
NM		4955		Ruidoso Police Department
NM		4956		San Juan County Communications Authority Board
NM		4960		Sandoval County Regional Emergency Communications Center
NM		4965		Santa Fe Regional Emergency Communications Center
NM		4966		Santa Rosa Police Department
NM		4967		Sierra County Regional Dispatch Authority
NM		4969		Socorro Police Department
NM		4970		State Police-albuquerque
NM		4974		State Police-las Vegas
NM		4979		Sunland Park Police Department
NM		4980		Taos Central Communications
NM		4985		Torrance County 9-1-1
NM		4986		Tucumcari Police Department
NM		4987		Unm Police Department
NM		4988		Valencia County E-911 Regional Emergency Communications Center
NM		4989		Zuni Tribal Police Department

 

A-97

---

NV		4992		Boulder City Police Department
NV		4997		Clark County Sheriffs Department
NV		5004		Henderson Police Department
NV		5007		Las Vegas Fire Department
NV		5008		Las Vegas Metropolitan Police Department
NV		5016		North Las Vegas Police Department
NY		5028		Albany City
NY		5029		Albany County Sheriffs Office
NY		5031		Allegany County Sheriff’s Office
NY		5032		Amherst
NY		5033		Amityville Police Department
NY		5034		Ardsley Village Police Department
NY		5035		Baldwinsville
NY		5036		Ballston Spa
NY		5037		Batavia Police Department
NY		5038		Bedford Township Police Department
NY		5039		Bethlehem Police Department
NY		5040		Binghamton
NY		5042		Briarcliff Manor Police Department
NY		5043		Bronxville Village Police Department
NY		5044		Broome County Emergency Services
NY		5045		Buffalo Police Department
NY		5047		Camden
NY		5048		Cattaraugus County Sheriffs Office
NY		5049		Cayuga County Sheriffs Office
NY		5050		Central Police Services Buffalo 9-1-1
NY		5051		Chautauqua County Sheriffs Office
NY		5052		Cheektowaga Police
NY		5053		Chemung County Office Of Fire And Emergency Management
NY		5054		Chenango County Sheriff
NY		5055		Clarkstown Police
NY		5056		Clinton County Primary Safety Answering Point
NY		5057		Colonie
NY		5058		Columbia County 9-1-1
NY		5060		Corinth Village
NY		5061		Cortland County Sheriffs Department
NY		5062		Cortland Police Department
NY		5063		Croton Police Department
NY		5064		Delaware County Sheriffs Office
NY		5065		Depew Police Department
NY		5066		Dobbs Ferry Village Police Department

 

A-98

---

NY		5067		Dunkirk Police Department
NY		5068		Dutchess County Department of Emergency Response
NY		5069		East Aurora Police Department
NY		5071		East Hampton Village Police Department
NY		5072		Eastchester Township Police Department
NY		5073		Endicott Police Department
NY		5074		Erie County Sheriffs Office
NY		5075		Essex County Emergency Services
NY		5076		Evans Police Department
NY		5078		Franklin County Emergency Services
NY		5079		Fredonia Police Department
NY		5080		Freeport Police Department
NY		5083		Garden City
NY		5084		Genesee County Sheriffs Office
NY		5085		Glens Falls Police Department
NY		5086		Glenville Police Department
NY		5087		Gouverneur Police Department
NY		5088		Grand Island Fire Department
NY		5089		Green Island
NY		5090		Greenburgh Township Police Department
NY		5091		Guilderland Police Department
NY		5092		Hamburg
NY		5093		Hamburg Public Safety
NY		5095		Harrison Township Police Department
NY		5096		Hastings-on-hudson Village Police Department
NY		5097		Haverstraw Town Police
NY		5098		Haverstraw Village Police Department
NY		5099		Hempstead Village Police
NY		5100		Herkimer County 9-1-1
NY		5104		Hudson Police Department
NY		5105		Irvington Village Police Department
NY		5106		Jamestown Police Department
NY		5107		Jefferson County 9-1-1
NY		5108		Johnson City Police Department
NY		5109		Kenmore Police Department
NY		5110		Lackawanna Police Department
NY		5112		Lancaster Village Police Department
NY		5113		Larchmont Village Police Department
NY		5114		Leroy Dispatch Office
NY		5115		Lewis County Sheriffs Department
NY		5116		Liverpool

 

A-99

---

NY		5117		Livingston County Sheriff’s Office 9-1-1 Center
NY		5119		Lockport Police Department
NY		5120		Lyons Police Department
NY		5121		Madison County Sheriffs Department
NY		5122		Mamaroneck Township Police Department
NY		5123		Mamaroneck Village Police Department
NY		5124		Mechanicville Police
NY		5125		Medina Police Department
NY		5126		Menands
NY		5127		Monroe County 9-1-1 Center
NY		5129		Sullivan County E-911
NY		5130		Mt Kisco Police Department
NY		5131		Mt Pleasant Township Police Department
NY		5132		Mt Vernon City Police Department
NY		5133		Nassau County Police Department
NY		5134		New Castle Township Police Department
NY		5135		New Hartford
NY		5136		New York City Police Department - Bronx
NY		5137		New York City Police Department - Brooklyn
NY		5138		New York City Police Department - Manhattan
NY		5139		New York City Police Department - Queens
NY		5140		New York City Police Department - Staten Island
NY		5141		New York State Police-Albany
NY		5142		New York State Police-Auburn
NY		5143		New York State Police-Clarence
NY		5144		New York State Police-Hawthorne
NY		5146		New York State Police-Oneida
NY		5147		New York State Police-Princetown
NY		5149		New York State Police-Somers
NY		5150		New York State Police-South Cairo
NY		5151		New York State Police-Wilton
NY		5152		Niagara County Sheriffs Department
NY		5153		Niagara Falls Police Department
NY		5154		Niskayuna 9-1-1
NY		5155		North Castle Township Police Department
NY		5156		North Syracuse
NY		5157		North Tonawanda Police Department
NY		5158		Northport Police Department
NY		5159		Ogdensburg
NY		5160		Old Brookville Police Department
NY		5161		Old Westbury

 

A-100

---

NY		5162		Olean Police Department
NY		5163		Oneida County Sheriffs Office
NY		5165		Onondaga County Department Of Emergency Communications
NY		5166		Ontario County 9-1-1 Center
NY		5167		Orangetown
NY		5168		Orchard Park Police Department
NY		5169		Orleans County Civil Defense Center
NY		5170		Orleans County Sheriffs Office
NY		5171		Ossining Village Police Department
NY		5172		Oswego County E9-1-1 Center
NY		5173		Otsego County Public Safety Communications
NY		5174		Peekskill City Police Department
NY		5175		Pelham Manor Village Police Department
NY		5176		Pelham Village Police Department
NY		5178		Plattsburgh Police Department
NY		5179		Pleasantville Village Police Department
NY		5180		Port Chester Village Police Department
NY		5181		Potsdam Police Department
NY		5183		Putnam County Sheriffs Office
NY		5184		Ramapo
NY		5185		Rensselaer County Bureau Of Public Safety
NY		5186		Riverhead Town Police Department
NY		5187		Rockland County Sheriffs Office
NY		5189		Rotterdam Police Department
NY		5190		Rye City Police Department
NY		5191		Salamanca Police Department
NY		5193		Saratoga County Sheriffs Office
NY		5194		Saratoga Springs
NY		5195		Scarsdale Village Police Department
NY		5196		Schenectady City 9-1-1
NY		5197		Schoharie County Sheriffs Department
NY		5198		Schuyler County Sheriffs Office
NY		5200		Seneca County Sheriffs Office
NY		5201		Sleepy Hollow Police Department
NY		5202		South Hampton Village Police Department
NY		5204		Southampton Town Police Department
NY		5205		Southold Town Police Department
NY		5206		Spring Valley Police Department
NY		5207		St Lawrence County Dispatch
NY		5209		Stony Point
NY		5211		Suffolk County Police Department

 

A-101

---

NY		5212		Syracuse
NY		5213		Tarrytown Village Police Department
NY		5215		Tioga County 9-1-1
NY		5216		Tompkins County 9-1-1
NY		5217		Tonawanda
NY		5218		Tonawanda Police Department
NY		5219		Tuckahoe Village Police Department
NY		5220		Ulster County Emergency Communication Center At Golden Hill
NY		5221		Utica Police Department
NY		5222		Vestal
NY		5223		Warren County Sheriff
NY		5224		Washington County Sheriffs Department
NY		5225		Wayne County 9-1-1
NY		5226		Wellsville Village Police Department
NY		5228		Westchester County Police Department
NY		5230		Wyoming County Sheriffs Office
NY		5231		Yates County Sheriffs Office
NY		5232		Yonkers City Police Department
NY		5233		Yorktown Police Department
OH		5234		Adams County Sheriffs Office
OH		5237		Allen County Sheriffs Office
OH		5238		Amberly Village Police Department
OH		5239		Ashland County Sheriffs Department
OH		5240		Ashtabula County Sheriffs Department
OH		5241		Ashtabula Police Department
OH		5242		Athens County Emergency Communications
OH		5247		Bainbridge Township Police Department
OH		5259		Bellefontaine Police Department
OH		5260		Bellevue Police Department
OH		5273		Brown County 9-1-1
OH		5274		Brunswick Police Department
OH		5275		Bryan Police Department
OH		5276		Bucyrus Police Department
OH		5277		Butler County Sheriffs Office
OH		5278		Cambridge Police Department
OH		5280		Carroll County Sheriffs Office
OH		5285		Chester Township Police Department
OH		5287		Circleville Police Department
OH		5291		City Of Chardon Police Department
OH		5292		City Of Cincinnati 9-1-1 Center
OH		5294		Clark County Sheriffs Office

 

A-102

---

OH		5295		Clermont County Communications Center
OH		5301		Clinton County Sheriffs Department
OH		5305		Conneaut Police Department
OH		5309		Crawford County Sheriffs Office
OH		5310		Crestline Police Department
OH		5314		Darke County Sheriffs Office
OH		5317		Defiance County E911 Communications Center
OH		5319		Delaware County 9-1-1 Center
OH		5320		Delaware Police Department
OH		5325		Eaton Police Department
OH		5326		Englewood Police
OH		5331		Fairfield Police Department
OH		5339		Fulton County Sheriffs Office
OH		5341		Galion Police Station
OH		5345		Geauga County Des 9-1-1
OH		5346		Geneva Police Department
OH		5352		Greenville Police Department
OH		5354		Guernsey County Sheriffs Department
OH		5355		Hamilton County Communications Center
OH		5356		Hamilton Police And Fire Communications Center
OH		5358		Hardin County Sheriffs Office
OH		5359		Harrison County Sheriffs Office
OH		5361		Heath Police Department
OH		5362		Henry County Sheriffs Office
OH		5363		Highland County Sheriffs Office
OH		5368		Hinckley Township Police Department
OH		5369		Hocking County 9-1-1
OH		5370		Holmes County Sheriffs Office
OH		5374		Huron County Sheriffs Office
OH		5378		Jackson County Sheriffs Office
OH		5379		Jackson Police Department
OH		5384		Kenton Police Department
OH		5388		Knox County Sheriffs Office
OH		5393		Licking County 9-1-1 Communications Center
OH		5394		Licking County Sheriffs Office
OH		5395		Lima Police Department
OH		5396		Logan County Sheriff
OH		5400		Loudonville Police Department
OH		5406		Mansfield Police Department
OH		5410		Marion County Sheriffs Department
OH		5411		Marion Police Department

 

A-103

---

OH		5413		Marysville Police Department
OH		5417		Medina County Sheriff
OH		5418		Medina Police Department
OH		5419		Meigs County EMS
OH		5422		Mercer County Sheriffs Office
OH		5423		Miami County Communications Center
OH		5427		Middlefield Police Department
OH		5428		Middlefield Village Fire Department
OH		5429		Middletown Police Department
OH		5430		Millerburg Police Department
OH		5435		Morgan County Sheriffs Office
OH		5436		Morrow County 9-1-1 Center
OH		5437		Morrow County Sheriffs Office
OH		5439		Mt Vernon Police
OH		5441		Napoleon Police Department
OH		5444		Newark Police Department
OH		5446		Noble County Sheriffs Office
OH		5452		Norwalk Police Department
OH		5453		Norwood Police Department
OH		5469		Orrville Police Department
OH		5470		Ottawa County Sheriffs Office
OH		5472		Oxford Police Department
OH		5483		Pickaway County Sheriff
OH		5485		Pike County Sheriff
OH		5487		Preble County Sheriffs Office
OH		5488		Putnam County Sheriffs Office
OH		5492		Richland County Dispatch Center
OH		5494		Rittman Police Department
OH		5500		Scioto County Sheriffs Office
OH		5506		Shelby County Sheriffs Office
OH		5507		Sidney Police Department
OH		5511		Springboro Police Department
OH		5512		Springfield Communications Center
OH		5527		Trumbull County Dispatch
OH		5528		Tuscarawas County 9-1-1 Center
OH		5530		Union County Sheriffs Office
OH		5531		Union Township Police Department
OH		5536		Van Wert County 9-1-1 Operations
OH		5537		Van Wert Police Department
OH		5540		Wadsworth Police
OH		5542		Warren County Communications Center

 

A-104

---

OH		5543		Warren Police Department
OH		5550		Waverly Police
OH		5551		Wayne County Justice Center
OH		5552		Wellston Police Department
OH		5555		Westchester Township Police Department
OH		5561		Willard Police
OH		5562		Williams County Communications
OH		5566		Wilmington Police Department
OH		5567		Wood County Sheriff
OH		5573		Wyoming Police Department
OK		5577		Pontotoc County Ada 911
OK		5580		Altus Police Department
OK		5585		Ardmore Police Department
OK		5586		Atoka County Sheriffs Office
OK		5592		Bethany Police Department
OK		5594		Blackwell Police Department
OK		5596		Bristow Police Department
OK		5597		Broken Arrow Police Department
OK		5602		Chandler Police Department
OK		5603		Cherokee City Police Department
OK		5608		Chickasha Police Department
OK		5611		City Of Choctaw
OK		5615		Cleveland County Sheriffs Office
OK		5616		Cleveland Police Department
OK		5619		Comanche County Sheriffs Office
OK		5623		Coweta Police Department
OK		5627		Del City Police Department
OK		5629		Dewey County Sheriffs Office
OK		5630		Duncan City Police Department
OK		5631		Durant Police Department
OK		5633		Edmond Central Communications
OK		5634		El Reno Police Department
OK		5636		Enid Police Department
OK		5640		Tillman County E9-1-1
OK		5644		Grady County Sheriffs Department
OK		5646		Greer County Sheriffs Department
OK		5648		Guthrie Police Department
OK		5649		Guymon City Police Department
OK		5653		Hobart Police Department
OK		5655		Hollis Police Department
OK		5657		Hugo Police Department

 

A-105

---

OK		5658		Iowa Tribal Police Department
OK		5659		Jefferson County Sheriffs Office
OK		5662		Johnston County Sheriffs Department
OK		5665		Kingfisher County Sheriff Department
OK		5666		Kiowa County Sheriffs Department
OK		5671		Lincoln County Sheriff
OK		5672		Love County Sheriff Department
OK		5674		Marshall County Sheriffs Office
OK		5679		Midwest City Emergency Operations Center
OK		5680		Moore Police Department
OK		5682		Murray County Sheriff
OK		5685		Mustang Police Department
OK		5686		Newcastle Police Department
OK		5687		Nichols Hills Police Department
OK		5688		Noble County Sheriff
OK		5689		Noble Police Department
OK		5690		Norman Police Department
OK		5691		Nowata County Sheriffs Department
OK		5693		Oklahoma City Police Department
OK		5694		Oklahoma County Sheriffs Office
OK		5700		Osage County Enhanced 9-1-1
OK		5701		Osage County Sheriffs Office
OK		5710		Payne County Sheriffs Department
OK		5711		Perkins Police Department - Iowa Tribe
OK		5712		Perry Police Department
OK		5714		Ponca City Police Department
OK		5719		Pryor Police Department
OK		5721		Roger Mills County Sheriffs Department
OK		5730		Shawnee Police Department
OK		5731		Skiatook Police Department
OK		5733		Stephens County Sheriff
OK		5734		Stillwater Police Department
OK		5736		The Village Police Department
OK		5737		Tinker Afb Fire Department
OK		5740		Tuttle Police Department
OK		5742		Wagoner Police Department
OK		5743		Warr Acres Police Department
OK		5746		Woodward Police Department
OK		5749		Yukon Police Department
OR		5750		Albany Police Department
OR		5753		Astoria Police Department

 

A-106

---

OR		5754		Baker City Fire Department
OR		5755		Baker City Police Department
OR		5756		Baker County Consolidated E911
OR		5758		Brookings Police Department
OR		5759		Harney County Sheriff’s Office 9-1-1
OR		5762		Central Lane Communications Center
OR		5763		Central Lane Communications Center - Backup
OR		5765		Clackamas County Communications
OR		5766		Columbia 9-1-1 Communications District
OR		5767		Coos County Sheriff’s Office
OR		5770		Corvallis Regional Communications Center-Benton County
OR		5771		South Lane County 9-1-1
OR		5772		Curry County Sheriffs Office
OR		5773		Department Of Public Safety
OR		5774		Deschutes County 9-1-1
OR		5775		Douglas County Sheriffs Communications 9-1-1
OR		5777		Florence Police Department- West Lane County
OR		5780		Gladstone Police Department
OR		5781		Hermiston Police Department
OR		5782		Hood River County Dispatch Center
OR		5783		Hood River Fire Department
OR		5784		Jefferson County 9-1-1
OR		5785		John Day Police Department
OR		5786		Josephine County 9-1-1 Agency
OR		5787		Junction City Police
OR		5788		Klamath County 9-1-1 Communications
OR		5790		Lake Oswego Communications
OR		5791		Lakeview Police Department
OR		5792		Lane County Sheriffs Office
OR		5793		Lebanon Police Department
OR		5795		Lincoln County Communications Agency
OR		5796		Linn County Sheriffs Office
OR		5797		Malheur County Sheriffs Office-vale
OR		5798		Rouge Valley Consolidated Communications
OR		5800		Merrill Police Department
OR		5801		Milton - Freewater Police Department
OR		5802		Milwaukie Police Department
OR		5803		Morrow County Sheriffs Office
OR		5806		Newberg PD
OR		5807		Norcom
OR		5810		North Coos County 9-1-1

 

A-107

---

OR		5811		Eastern Lane County 911
OR		5812		Ontario Police Department
OR		5813		Oregon State Police Regional Dispatch-bend
OR		5814		Oregon State Police - Oakridge
OR		5816		Oregon State Police-springfield
OR		5817		Oregon State Police-western Regional Dispatch Center
OR		5818		Pendleton Police Department
OR		5821		Portland - Bureau Of Emergency Communications
OR		5822		Prineville Police Department
OR		5824		Santiam Canyon Communications
OR		5825		South Clatsop County Communications
OR		5829		Silver Falls 9-1-1
OR		5830		Southern Oregon Regional Communications
OR		5831		Springfield Police Department
OR		5832		Sweet Home Police Department
OR		5834		Toledo Police Department
OR		5835		Umatilla County Sheriffs Office
OR		5836		Umatilla Police Department
OR		5837		Umatilla Tribal Police Department
OR		5838		Union County Communications
OR		5840		Warm Springs Tribal Police Department
OR		5841		Wasco County Communications
OR		5842		WCCCA
OR		5845		Willamette Valley Communications Center
OR		5847		YCOM
PA		5848		Adams County Department of Emergency Services
PA		5849		Allegheny County Emergency Management
PA		5850		Allentown Police Department
PA		5852		Beaver County Emergency Services Center
PA		5853		Bedford County 9-1-1
PA		5854		Berks County 9-1-1
PA		5856		Blair County 9-1-1
PA		5857		Bradford County Department of Emergency Services
PA		5858		Brookhaven Police Department
PA		5859		Bucks County 9-1-1 Emergency Response
PA		5860		Butler County Emergency Services
PA		5861		Butler Police Department
PA		5862		Cambria County Department of Emergency Services
PA		5864		Carbon County Communications Center
PA		5865		Centre County Department of Public Safety
PA		5866		Cheltenham Township Police Department

 

A-108

---

PA		5867		Chester County Department of Emergency Service
PA		5868		Chester County Sheriffs Department
PA		5869		City of Philadelphia
PA		5871		Clarion County Office Of Emergency Services
PA		5872		Clearfield County Communications
PA		5873		Clinton County Communications
PA		5875		Columbia County Department Of Public Safety
PA		5878		Crawford County Office of Emergency Services
PA		5879		Cumberland County Office of Emergency Preparedness
PA		5880		Dauphin County Emergency Management Agency
PA		5881		Delaware County Courthouse
PA		5882		Delaware County Emergency Communications Center
PA		5885		Elk County Communications
PA		5887		Erie County 9-1-1 Center
PA		5888		Fayette County Emergency Management Agency
PA		5890		Franklin County Emergency Services
PA		5891		Fulton County Emergency Management Agency
PA		5895		Huntingdon County 9-1-1
PA		5896		Indiana County Emergency Management Agency
PA		5897		Jefferson County Communications
PA		5898		Juniata County Department Of Emergency Services
PA		5899		Lackawanna County Department Of Emergency Services
PA		5902		Lawrence County 9-1-1 Center
PA		5903		Lebanon County Emergency Management Agency
PA		5904		Lehigh County Communications Center
PA		5905		Luzerne County 9-1-1
PA		5906		Lycoming County Department Of Public Safety
PA		5907		Mckean County 9-1-1
PA		5908		Mercer County Central 9-1-1
PA		5909		Mifflin County Office Of Public Safety
PA		5910		Monongahela Police Department
PA		5911		Monroe County Control Center
PA		5912		Montgomery County Emergency Dispatch Services
PA		5913		Montour County Department Of Emergency Services
PA		5914		Northampton County 9-1-1 Center
PA		5915		Northumberland County Department Of Public Safety
PA		5917		Parkside Boro Police Department
PA		5919		Perry County Emergency Management Agency
PA		5920		Pike County 9-1-1 Center
PA		5923		Schuylkill County Office Of Public Safety
PA		5924		Snyder County Emergency Management Agency

 

A-109

---

PA		5925		Somerset County Department of Emergency Services
PA		5927		Sullivan County Emergency Management Agency
PA		5930		Tioga County Department Of Emergency Services
PA		5931		Union County Emergency Services
PA		5932		Venango County Emergency Management Center
PA		5933		Warren County Sheriff
PA		5934		Washington County Department of Public Safety
PA		5935		Wayne County Communications Center
PA		5936		Westmoreland County Department of Public Safety
PA		5937		Westmoreland County Department Of Public Safety-backup Psap
PA		5938		Wilkes-barre City Police
PA		5939		Wyoming County Communications Center
PA		5940		York County 9-1-1
PA		5941		York County 9-1-1 Alternate Psap
RI		5943		Barrington Police Fire And Rescue Department
RI		5944		Bristol Police Fire And Rescue Department
RI		5945		Burrillville Police Fire And Rescue Department
RI		5946		Central Falls Fire And Rescue Department
RI		5947		Central Falls Police Department
RI		5948		Charlestown Police Fire And Rescue Department
RI		5949		Coventry Fire And Rescue Department
RI		5951		Cranston Fire And Rescue Department
RI		5952		Cranston Police Department
RI		5953		Cumberland Police Fire And Rescue Department
RI		5954		East Greenwich Fire And Rescue Department
RI		5955		East Greenwich Police Department
RI		5956		East Providence Police Fire And Rescue Department
RI		5957		Exeter Fire And Rescue Department
RI		5958		Foster Police Fire And Rescue Department
RI		5959		Glocester Police Fire And Rescue Department
RI		5960		Hopkinton Fire And Rescue Department
RI		5961		Hopkinton Police Department
RI		5962		Jamestown Fire And Rescue Department
RI		5963		Jamestown Police Department
RI		5964		Johnston Fire And Rescue Department
RI		5965		Johnston Police Department
RI		5966		Lincoln Police Fire And Rescue Department
RI		5967		Little Compton Police Fire And Rescue Department
RI		5968		Middletown Fire And Rescue Department
RI		5969		Middletown Police Department
RI		5970		Narragansett Police Fire And Rescue Department

 

A-110

---

RI		5971		New Shoreham Police Fire Rescue Department
RI		5972		Newport Fire And Rescue Department
RI		5975		Newport Police Department
RI		5976		North Kingstown Fire And Rescue Department
RI		5977		North Kingstown Police Department
RI		5978		North Providence Fire And Rescue Department
RI		5979		North Providence Police Department
RI		5980		North Smithfield Fire And Rescue Department
RI		5981		North Smithfield Police Department
RI		5982		Pawtucket Fire And Rescue Department
RI		5983		Pawtucket Police Department
RI		5984		Portsmouth Fire Department
RI		5985		Portsmouth Police Department
RI		5986		Providence Fire And Rescue Department
RI		5987		Providence Police Department
RI		5988		Rhode Island 9-1-1 Emergency Telephone System Alternate Psap
RI		5989		Rhode Island E9-1-1 Emergency Telephone System
RI		5990		Rhode Island State Police-exeter
RI		5991		Richmond Police Department
RI		5992		Scituate Police Fire And Rescue
RI		5993		Smithfield Fire And Rescue Department
RI		5994		Smithfield Police Department
RI		5995		South Kingstown Police Fire And Rescue
RI		5996		State Police-hope Valley Barracks
RI		5997		State Police-lincoln Barracks
RI		5998		State Police-scituate Barracks
RI		5999		State Police-wickford Barracks
RI		6001		Tiverton Fire Department
RI		6002		Tiverton Police Department
RI		6003		Warren Police Fire And Rescue
RI		6004		Warwick Fire And Rescue Department
RI		6005		Warwick Police Department
RI		6006		West Greenwich Police Fire And Rescue
RI		6007		West Warwick Fire Department
RI		6008		West Warwick Police Department
RI		6009		Westerly Police Department
RI		6010		Westerly Voluntary Ambulance Corps
RI		6011		Woonsocket Fire And Rescue Department
RI		6012		Woonsocket Police Department
SC		6013		Abbeville County 9-1-1
SC		6018		Anderson City Fire Department

 

A-111

---

SC		6019		Anderson City Police Department
SC		6020		Anderson County 9-1-1
SC		6021		Anderson County Ems
SC		6022		Anderson County Fire Department
SC		6036		Cheraw Police Department
SC		6037		Cherokee County Department of Communications
SC		6038		Chester County E9-1-1
SC		6039		Chesterfield County Sheriffs Department
SC		6040		Chesterfield Police Department
SC		6041		Clarendon County Emergency Services
SC		6042		Clemson Police Department
SC		6046		Darlington County Central Communications
SC		6047		Dillon County E9-1-1
SC		6049		Easley Police
SC		6052		Fairfield County Emergency Management
SC		6053		Florence City Police
SC		6054		Florence County Central Dispatch
SC		6055		Florence County Emergency Preparedness
SC		6057		Fountain Inn Police
SC		6058		Georgetown County Communications E9-1-1
SC		6060		Greenville County Emergency Medical Services
SC		6061		Greenville County Sheriffs Office
SC		6062		Greenville Police Department
SC		6063		Greenwood County 9-1-1
SC		6064		Greer Police Department
SC		6068		Horry County 9-1-1 Communications
SC		6073		Lancaster County Sheriff
SC		6074		Laurens County 9-1-1
SC		6075		Lee County E9-1-1 Communication Center
SC		6078		Marion County 9-1-1
SC		6079		Marlboro Dispatch Center
SC		6080		Marlboro Sheriffs Office
SC		6081		Mauldin Police Department
SC		6088		Oconee County Sheriff
SC		6091		Pickens County Sheriff
SC		6093		Saluda County Sheriffs Office
SC		6095		Seneca Police
SC		6096		Simpsonville Police
SC		6097		Spartanburg Communications 9-1-1 Department
SC		6100		Sumter County Police
SC		6101		Travelers Rest Police Department

 

A-112

---

SC		6102		Union County Dispatch
SC		6104		Williamsburg County 9-1-1
SC		6106		York County Office of Emergency Management
TN		6208		Benton County Sheriffs Department
TN		6212		Bolivar Police Department
TN		6215		Bristol Emergency Communications District
TN		6216		Camden Police Department
TN		6219		Carroll County 9-1-1
TN		6220		Carter County 9-1-1
TN		6225		Chester County 9-1-1
TN		6236		Crockett County
TN		6237		Crockett County E9-1-1
TN		6245		Dyer County Sheriffs Department
TN		6248		Fayette County Sheriff
TN		6255		Gibson County 9-1-1
TN		6259		Greene County Emergency Communications
TN		6266		Hardeman County 9-1-1
TN		6268		Haywood County Eoc
TN		6269		Henderson County E9-1-1
TN		6270		Henderson Police Department
TN		6272		Henry County 9-1-1
TN		6273		Henry County Sheriffs Office
TN		6280		Jackson Central Dispatch
TN		6283		Johnson County Dispatch
TN		6284		Kingsport 9-1-1
TN		6289		Lake County Sheriffs Office
TN		6290		Lauderdale County 9-1-1
TN		6301		Madison County Sheriffs Department
TN		6305		Martin Police Department
TN		6308		Mcnairy County Sheriffs Office
TN		6327		Obion County 9-1-1
TN		6330		Paris Police Department
TN		6346		Savannah Police Department
TN		6364		Sullivan County 9-1-1
TN		6368		Tipton County 9-1-1
TN		6371		Unicoi County 9-1-1
TN		6376		Washington County Emergency Communications
TN		6377		Washington County EOC
TN		6379		Weakley County Emergency Communications District
TX		6393		Alvarado Police Department
TX		6395		Amarillo Department Of Public Safety Office

 

A-113

---

TX		6397		Amarillo Fire Department
TX		6399		Amarillo Police Department
TX		6401		American Medical Response
TX		6402		Anderson County Sheriffs Office
TX		6404		Angelina County Sheriffs Department
TX		6405		Angleton Police Department
TX		6410		Arlington Police Department
TX		6411		Armstrong County Sheriffs Office
TX		6413		Athens Police Department
TX		6414		Atlanta Police Department
TX		6416		Austin Fire Department
TX		6417		Austin Police Department
TX		6418		Austin-travis County Ems-cetcc
TX		6419		Azle Police Department
TX		6423		Bastrop County Sheriffs Office
TX		6424		Bay City Police Department
TX		6426		Baytown Public Safety Communications-police Department
TX		6429		Bedford Police-fire Department
TX		6437		Benbrook Police Department
TX		6440		Bi-state Information Center
TX		6441		Blanco County Sheriffs Office
TX		6442		Blue Mound Police Department
TX		6445		Borger Police Department
TX		6446		Bosque County Sheriffs Office
TX		6448		Brazoria County Sheriffs Department
TX		6449		Brazoria Police Department
TX		6450		Brazos County ECD Office
TX		6451		Breckenridge Police Department
TX		6454		Bridgeport Police Department
TX		6462		Brownwood Police Department
TX		6464		Burleson County Sheriffs Office
TX		6465		Burleson Police Department
TX		6466		Burnet County Sheriffs Office
TX		6467		Caldwell County Sheriffs Office
TX		6472		Camp County Sheriffs Office
TX		6473		Canton Police Department
TX		6476		Carson County Sheriffs Office
TX		6477		Carthage Police Department
TX		6478		Cass County Sheriffs Office
TX		6480		Castro Sheriffs Office
TX		6481		Cedar Park Police Department

 

A-114

---

TX		6483		Cherokee County Sheriffs Office
TX		6485		Clarksville Police Department
TX		6487		Cleburne Police Department
TX		6489		Clute Police Department
TX		6492		Coleman Police Department
TX		6493		College Station Police Department
TX		6494		Colleyville Police Department
TX		6496		Collingsworth County Sheriffs Office
TX		6500		Comanche County Sheriffs Office
TX		6501		Commerce Police Department
TX		6506		Cooke County Sheriffs Office
TX		6507		Coppell Police Department
TX		6519		Crowley Police Department
TX		6523		Dallam County Sheriffs Office
TX		6530		Dalworthington Gardens Police Department
TX		6532		Decatur Police Department
TX		6533		Deer Park Police Department
TX		6535		Delta County Sheriffs Office
TX		6543		Diboll Police Department
TX		6545		Dickinson Police Department
TX		6547		Donley County Sheriffs Office
TX		6549		Dublin Police Department
TX		6555		Eastland County Central Dispatch
TX		6560		El Campo Police Department
TX		6567		Elgin Police Department
TX		6572		Erath County Sheriffs Office
TX		6573		Euless Police Department
TX		6574		Everman Police Department
TX		6578		Fayette County Sheriffs Office
TX		6582		Forest Hills Police Department
TX		6583		Forney Police Department
TX		6584		Franklin County Sheriffs Office
TX		6585		Freeport Police Department
TX		6590		Friona Police Department
TX		6592		Ft Bend County Sheriffs Office
TX		6596		Ft Worth Fire Department
TX		6597		Ft Worth Police Department
TX		6599		Gainesville Police Department
TX		6601		Galveston County Sheriffs Department
TX		6602		Galveston Police Department
TX		6606		Georgetown Police Department

 

A-115

---

TX		6608		Gladewater Police Department
TX		6615		Grapevine Police Department
TX		6618		Greenville Police Department
TX		6619		Gregg County Sheriffs Office
TX		6622		Gun Barrel City Police Department
TX		6624		Hall County Sheriffs Office
TX		6626		Haltom City Police Department
TX		6627		Hamilton County Sheriffs Office
TX		6628		Hansford County Sheriffs Office
TX		6630		Hardin County Sheriffs Office
TX		6635		Harrison County Sheriffs Department
TX		6637		Hays County Sheriffs Office
TX		6640		Hemphill County Sheriffs Office
TX		6641		Henderson County Sheriffs Department
TX		6642		Henderson Police Department
TX		6643		Hereford Police Department
TX		6651		Hitchcock Police Department
TX		6653		Hood County Sheriffs Department
TX		6654		Hopkins County Sheriffs Office
TX		6656		Houston County Sheriffs Office
TX		6658		Houston Police Department
TX		6665		Hurst Police Department
TX		6675		Jacksonville Police Department
TX		6690		Keene Police Department
TX		6691		Keller Police Department
TX		6692		Kemah Police Department
TX		6693		Kennedale Police Department
TX		6696		Kilgore Police Department
TX		6698		Kimble County Sheriffs Office
TX		6707		La Marque Police Department
TX		6708		La Porte Police Department
TX		6710		Lago Vista Police Department
TX		6712		Lake Jackson Police Department
TX		6713		Lake Worth Police Department
TX		6714		Lakeview Police Department
TX		6715		Lakeway Police Department
TX		6717		Lampasas County Sheriffs Office
TX		6718		Lampasas Police Department
TX		6723		League City Police Department
TX		6724		Leander Police Department
TX		6734		Lindale Police Department

 

A-116

---

TX		6735		Lipscomb County Sheriffs Office
TX		6739		Llano County Sheriffs Office
TX		6741		Lockhart Police Department
TX		6742		Longview Public Safety Communications
TX		6748		Luling Police Department
TX		6750		Madison County Sheriffs Office
TX		6751		Mansfield Police Department
TX		6752		Marble Falls Police Department
TX		6753		Marion County Sheriffs Department
TX		6754		Marshall Police Department
TX		6777		Mineola Police Department
TX		6778		Mineral Wells Police Department
TX		6786		Moore County Sheriffs Office
TX		6787		Morris County Sheriffs Office
TX		6788		Mt Pleasant Police Department
TX		6790		Nacogdoches County Sheriffs Office
TX		6791		Nacogdoches Hospital District
TX		6792		Nacogdoches Police Department
TX		6795		Naval Air Station - Ft Worth
TX		6799		New Boston Police Department
TX		6802		North Richland Hills Police Department
TX		6807		Oldham County Sheriffs Office
TX		6811		Overton Police Department
TX		6814		Palestine Police Department
TX		6816		Palo Pinto County
TX		6817		Pampa Police Department
TX		6818		Panola Sheriffs Office
TX		6819		Pantego Police Department
TX		6820		Paris Police Department
TX		6821		Parker County Sheriffs Department
TX		6822		Parker Lifecare
TX		6823		Pasadena Police Department
TX		6825		Pearland Police Department
TX		6827		Perryton Police Department
TX		6828		Pflugerville Police Department
TX		6834		Polk County Sheriffs Department
TX		6839		Potter County Sheriffs Office
TX		6842		Rains County Sheriffs Office
TX		6843		Randall County Sheriffs Office
TX		6853		Richland Hills Police Department
TX		6857		River Oaks Police Department

 

A-117

---

TX		6861		Roberts County Sheriffs Office
TX		6865		Rockdale Police Department
TX		6868		Rockwall Police Department
TX		6871		Round Rock Police Department
TX		6872		Rowlett Police-fire Communications Center
TX		6873		Runnels County Jail
TX		6874		Rusk County Sheriffs Department
TX		6876		Sachse Police Department
TX		6877		Saginaw Police Department
TX		6882		San Augustine County Sheriffs Office
TX		6884		San Jacinto County Sheriffs Office
TX		6886		San Marcos Police Department
TX		6889		Sansom Park Police Department
TX		6890		Santa Fe Police Department
TX		6894		Seabrook Police Department
TX		6898		Shamrock Police Department
TX		6899		Shelby County Sheriffs Office
TX		6901		Sherman County Sheriffs Office
TX		6902		Sherman Police Department
TX		6907		Smith County Sheriffs Department
TX		6908		Smithville Police Department
TX		6911		Somervell County Sheriffs Department
TX		6915		South West Texas State University Police Department
TX		6916		Southlake Fire And Police Department
TX		6920		Springtown Police Department
TX		6924		Stephenville Police Department
TX		6929		Sulphur Springs Police Department
TX		6934		Tarrant County Fire Alarm Center
TX		6935		Tarrant County Sheriffs Department
TX		6937		Taylor Police Department
TX		6939		Terrell Police Department
TX		6942		Texas City Police Department
TX		6949		Travis County Sheriff - CETCC
TX		6950		Trinity County Sheriffs Office
TX		6954		Tyler Police Department
TX		6961		Upshur County Sheriffs Office
TX		6978		Washington County Sheriffs Department
TX		6979		Watauga Department Of Public Safety
TX		6983		Weatherford Police Department
TX		6985		Webster Police Department
TX		6988		West Columbia Police Department

 

A-118

---

TX		6990		Westlake Hills Police Department
TX		6991		Westover Hills Police Department
TX		6992		Westworth Village Police Department
TX		6993		Wharton County Sheriffs Office
TX		6994		Wharton Police Department
TX		6995		Wheeler County Sheriffs Office
TX		6996		White Oak Police Department
TX		6997		White Settlement Police Department
TX		6998		Whitehouse Police Department
TX		6999		Whitesboro Police Department
TX		7003		Williamson County Sheriffs Office
TX		7008		Wise County Sheriffs Department
TX		7009		Wood County Sheriffs Office
TX		7012		Wylie Police And Fire Communications Center
UT		7017		Beaver County Sheriffs Office Dispatch
UT		7018		Bountiful Police Department
UT		7019		Box Elder Communications
UT		7022		Carbon County Public Safety
UT		7023		Cedar Consolidated Communications Center
UT		7025		Clearfield Dispatch
UT		7028		Davis County Sheriffs Office Dispatch
UT		7030		Duchesne County Sheriffs Office
UT		7031		Emery County Sheriffs Office Dispatch
UT		7033		Garfield County Sheriffs Office Dispatch
UT		7037		Juab County Sheriffs Office Dispatch
UT		7038		Kane County Sheriffs Office Dispatch
UT		7040		Layton Police Department Dispatch
UT		7041		Logan City Police Communications
UT		7042		Millard County Sheriffs Office Dispatch
UT		7043		Orem Department Of Public Safety Dispatch
UT		7044		Park City Police Department Dispatch
UT		7045		Pleasant Grove Police Department
UT		7047		Provo Police Department
UT		7048		Rich County Sheriffs Office
UT		7049		Richfield Consolidated Dispatch Center
UT		7051		Salt Lake City Emergency Communication Center
UT		7055		Salt Lake County Sheriffs Office Dispatch
UT		7057		Sanpete County 9-1-1
UT		7058		Sevier County Dispatch
UT		7061		Springville City Police Department Dispatch
UT		7062		St George Police Department

 

A-119

---

UT		7063		Summit County Sheriffs Office Dispatch
UT		7064		Tooele County Sheriffs Office Dispatch
UT		7065		Uintah Basin Communications Center
UT		7067		Utah County Sheriffs Office Dispatch
UT		7070		Valley Emergency Communications Center
UT		7072		Wasatch County Sheriffs Office Dispatch
UT		7074		Weber Area Consolidated Dispatch Center
VA		7078		Alexandria Fire Communications
VA		7079		Alexandria Police Department
VA		7081		Amelia County Sheriffs Office
VA		7082		Amherst County Emergency Communications
VA		7083		Appomattox County Sheriffs Department
VA		7084		Arlington County Emergency Communications Center
VA		7085		Augusta County Emergency Operations Center
VA		7086		Bath County Sheriffs Department
VA		7087		Bedford Communications
VA		7088		Blacksburg Police Department
VA		7089		Bland County Sheriff
VA		7090		Botetourt County Emergency Communications Center
VA		7091		Bristol 9-1-1 Communications
VA		7092		Brunswick County Sheriffs Department
VA		7095		Campbell County Communications
VA		7096		Caroline County 9-1-1
VA		7097		Carroll County Sheriffs Office
VA		7098		Charles City County Sheriff
VA		7099		Charlotte County Sheriffs Office
VA		7100		Charlottesville Fire Department
VA		7101		Charlottesville - UVA - Albemarle County ECC
VA		7102		Chesapeake Police Communications
VA		7103		Chesterfield County ECC
VA		7104		Chincoteague Police Communications
VA		7106		Suffolk Police Department
VA		7107		Clarke County 9-1-1
VA		7109		Colonial Beach Police Communications
VA		7110		Colonial Heights 9-1-1 Communications
VA		7114		Culpeper Joint 9-1-1 Center
VA		7115		Cumberland County Sheriff
VA		7116		Danville Emergency Services
VA		7118		Dinwiddie County Sheriff
VA		7119		Eastern Shore Va 9-1-1 Communications Center
VA		7120		Emporia Police Department

 

A-120

---

VA		7121		Essex County Sheriffs Office
VA		7122		Fairfax City Police Communications
VA		7123		Fairfax County Public Safety Communications Center
VA		7124		Falls Church Police Communications
VA		7125		Farmville Police Department
VA		7126		Fauquier County Sheriffs Department
VA		7127		Floyd County Sheriffs Office
VA		7128		Fluvanna County Sheriff
VA		7129		Franklin County Communications Center
VA		7130		Franklin Police Department
VA		7131		Frederick County Department of Public Safety Communications
VA		7132		Fredericksburg City Police Department
VA		7133		Galax City Police Department
VA		7135		Gloucester County Sheriff
VA		7136		Goochland County Sheriffs Office
VA		7137		Grayson County Sheriffs Office
VA		7139		Greene Emergency Communications Center
VA		7140		Greensville County Sheriffs Office
VA		7141		Halifax County Sheriff Department
VA		7142		Hampton Police Communications
VA		7143		Hanover County Emergency Communications Center
VA		7144		Harrisonburg Rockingham Emergency Operations Center
VA		7145		Henrico County Police Department
VA		7147		Hopewell Police Communications
VA		7148		Isle of Wight County Sheriffs Office
VA		7149		James City County Police Department
VA		7150		James City Emergency Communications
VA		7151		King And Queen County Sheriffs Office
VA		7152		King George County Sheriff
VA		7153		King William County Sheriff
VA		7154		Lancaster County Sheriffs Office
VA		7155		Langley Air Force Base
VA		7157		Loudoun County 9-1-1
VA		7158		Louisa County Sheriff
VA		7160		Lynchburg Emergency Communications Center
VA		7161		Madison County E911
VA		7162		Manassas City Police Communications
VA		7163		Manassas Park Police Communications
VA		7164		Martinsville-Henry County 9-1-1
VA		7165		Mathews County
VA		7166		Mecklenburg E9-1-1 Communication

 

A-121

---

VA		7167		Middlesex County Sheriffs Office
VA		7168		Montgomery County Sheriffs Office
VA		7169		Nelson County Emergency Communications
VA		7170		New Kent County Sheriffs Office
VA		7171		Newport News Police
VA		7172		Norfolk City Emergency Services
VA		7173		Northumberland County Sheriffs Office
VA		7175		Nottoway County Sheriff
VA		7176		Orange County Emergency Communications Center
VA		7177		Page County Emergency Operations Center
VA		7179		Patrick County Sheriff
VA		7180		Petersburg Police Communications
VA		7181		Pittsylvania County Emergency Operations Center
VA		7182		Poquoson Police Communications
VA		7183		Portsmouth Police Communications
VA		7184		Powhatan County Emergency Services
VA		7185		Prince George County Police Department
VA		7186		Prince William County Public Safety Communications
VA		7187		Pulaski County Sheriff
VA		7188		Radford City Police Department
VA		7189		Rappahannock County Sheriff
VA		7190		Richmond County Sheriffs Office
VA		7191		Richmond Department of Emergency Communications
VA		7192		Roanoke City Communications
VA		7193		Roanoke County Police Department
VA		7194		Rockbridge Regional Public Safety Communications Center
VA		7196		Salem Police Communications
VA		7197		Scott County
VA		7199		Smithfield Police Department Dispatch
VA		7200		Smyth County 9-1-1
VA		7201		South Boston Police Communications
VA		7202		Southampton County Sheriff
VA		7203		Spotsylvania Emergency Communications
VA		7204		Stafford County Sheriffs Communications
VA		7211		Staunton 9-1-1 Communications
VA		7212		Surry County Sheriff
VA		7213		Sussex County Sheriffs Office
VA		7215		Twin County E9-1-1
VA		7216		Vienna Police Communications
VA		7217		Vinton 9-1-1 Communications
VA		7218		Virginia Beach Police Department

 

A-122

---

VA		7220		Warren County Sheriffs Office
VA		7221		Warrenton-Fauquier Joint Communications Center
VA		7222		Washington County Communications
VA		7224		West Point 9-1-1 Communications
VA		7225		Westmoreland County Sheriffs Office
VA		7226		Williamsburg Public Safety Communications Center
VA		7227		Winchester Emergency Communications Center
VA		7228		Winchester Fire-rescue Communications Center
VA		7230		Wythe County Sheriffs Office
VA		7231		Wytheville Public Safety E9-1-1
VA		7232		York County Fire Communications
VT		7233		Hartford Police Department
VT		7234		Lamoille County Sheriff
VT		7235		Montpelier City Police
VT		7237		Shelburne Police Department
VT		7238		Springfield Police Department
VT		7239		St Albans Police
VT		7240		Vermont State Police-rockingham
VT		7241		Vermont State Police-Rutland
VT		7242		Vermont State Police-Williston
WA		7243		Adams County Sheriffs Office
WA		7245		Bellevue Police Department Communications Center
WA		7247		Blaine Police Department
WA		7249		Bothell Police Department
WA		7250		Buckley Police Department
WA		7252		Chelan County Sheriffs Office
WA		7254		Clark Regional Emergency Services Agency
WA		7257		College Place Police Department
WA		7258		Columbia County Sheriffs Office
WA		7260		Cowlitz County 9-1-1 Center
WA		7261		Creston Fire Department
WA		7265		Enumclaw Police Department
WA		7266		Ferry County E9-1-1
WA		7267		Fife Police Department
WA		7268		Fire Department #7-fertile Valley
WA		7269		Fire District #1-elk
WA		7270		Fire District #3-sequim
WA		7271		Fire District #4-dalkena
WA		7272		Fire District #5-cusick
WA		7273		Fire District #6-furport
WA		7274		Fire District #8

 

A-123

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WA		7276		Franklin County Sheriffs Office
WA		7278		Garfield County Sheriffs Office
WA		7279		Grays Harbor Communications
WA		7281		Ione Fire Department
WA		7282		Ione Police Department
WA		7283		Island County Emergency Services Communications Center
WA		7284		Issaquah Police Department
WA		7285		Jeffcom 9-1-1 Communications
WA		7286		Kalispel Tribal Police Department
WA		7287		King County Fire Protection District 10
WA		7288		King County Fire Protection District 13
WA		7289		King County Sheriff’s Office
WA		7290		King County Sheriffs Office South East
WA		7291		King County Sheriffs Office South West
WA		7292		Kirkland Police Department
WA		7293		Kitsap County-Cencom
WA		7294		Kittcom
WA		7295		Klickitat County Sheriffs Office
WA		7297		Lakewood Fire Communications
WA		7299		Law Enforcement Support Agency
WA		7300		Lewis County 9-1-1 Communications Division
WA		7301		Lincoln County Fire Department #7-wilbur
WA		7302		Lincoln County Fpd #1-sprague
WA		7303		Lincoln County Fpd #8 Almira
WA		7304		Lincoln County Sheriffs Office
WA		7305		Lummi Law And Order
WA		7306		Lynden Police Department
WA		7308		Marysville Police Department
WA		7313		Metaline Falls Fire Department
WA		7314		Metaline Falls Police Department
WA		7315		Metaline Fire Department
WA		7316		Multi Agency Communications Center
WA		7319		Newport Fire Department
WA		7320		Newport Police Department
WA		7321		Nisqually Police Department
WA		7322		Oak Harbor Police Department
WA		7323		Odessa Memorial Hospital
WA		7324		Okanogan County Sheriffs Office
WA		7327		Pacific County Sheriffs Office
WA		7328		Pencom-Clallam County
WA		7329		Pend Oreille 9-1-1

 

A-124

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WA		7331		Port Of Seattle Fire Department
WA		7332		Port Of Seattle Police Department
WA		7334		Prospect Fire-ems Dispatch-bellingham Fire Department
WA		7337		Puyallup Communications
WA		7338		Puyallup Nation Law Enforcement
WA		7341		Redmond Police Department
WA		7343		San Juan County Sheriffs Office
WA		7345		Seattle Fire Department
WA		7346		Seattle Police Department
WA		7347		Shelton Police Department Shelcom
WA		7348		Shoalwater Bay Tribal Police Department
WA		7349		Skagit County 9-1-1 Emergency Communications Center
WA		7350		Skamania County Sheriffs Office
WA		7351		Skokomish Tribal Police
WA		7352		Snocom
WA		7353		Snohomish County-Snopac
WA		7355		Southeast Communications Center
WA		7356		Spokane County 9-1-1 Emergency Communications
WA		7357		Spokane Fire Department
WA		7358		Squaxin Island Police Department
WA		7359		Stevens County Department Of Emergency Services
WA		7360		Sumas Police Department
WA		7361		Sumner Communications
WA		7365		Thurston County-Capcom
WA		7367		University Of Washington Police Department
WA		7370		Valley Communications Center-King County
WA		7371		Wahkiakum County Sheriffs Office
WA		7373		Walla Walla Emergency Services Communications Center
WA		7375		Washington State Patrol-king County
WA		7377		Washington State Patrol-Snohomish County
WA		7382		Western Washington University Police
WA		7383		What-Comm Communications Center
WA		7384		Whitcom
WA		7385		Yakama Nation Tribal Police
WA		7386		Yakima Public Safety Communications
WI		7392		Bayfield County Communications Center
WI		7397		Brown County Sheriff
WI		7399		Buffalo County Sheriffs Department
WI		7404		Calumet County Sheriffs Department
WI		7406		Chippewa County Sheriffs Office
WI		7407		Chippewa Falls Police Department

 

A-125

---

WI		7409		City of Eau Claire
WI		7418		Door County Sheriff
WI		7419		Douglas County-city Of Superior Dispatch Center
WI		7420		Dunn County Emergency Communications
WI		7436		Green Lake Sheriffs Office
WI		7448		Kewaunee County Sheriffs Department
WI		7456		Manitowoc County Public Safety Joint Services
WI		7458		Marinette County Sheriffs Department
WI		7462		Menominee Emergency Communications Dispatch
WI		7475		New Holstein Police Department
WI		7479		Oconto County Sheriff
WI		7483		Outagamie County Sheriffs Department
WI		7485		Pepin County Sheriffs Office
WI		7486		Pierce County Sheriff
WI		7490		Portage County Sheriffs Department
WI		7505		Shawano County Sheriffs Department
WI		7509		St Croix County 9-1-1
WI		7512		Stevens Point Police Department
WI		7531		Waupaca County Sheriff
WI		7539		Winnebago County Sheriff
WV		7543		Barbour County Communications Center
WV		7544		Berkeley County 911
WV		7545		Boone County Emergency Operations Center
WV		7546		Braxton County 911
WV		7547		Brooke County Sheriffs Office
WV		7548		CCERC 9-1-1
WV		7551		Clay County 911
WV		7552		Fayette County OES
WV		7555		Greenbrier County 9-1-1
WV		7556		Hampshire County 9-1-1
WV		7557		Hancock County 911
WV		7559		Harrison County Emergency Services
WV		7560		Jackson County Emergency Services
WV		7561		Jefferson County Emergency Communications
WV		7564		Lewis County 9-1-1
WV		7565		Lincoln County 9-1-1
WV		7566		Logan County Emergency Operations Center
WV		7567		Marion County Central Communications
WV		7568		Marshall County 9-1-1
WV		7569		Martinsburg Fire Department
WV		7570		Martinsburg Police Department

 

A-126

---

WV		7571		Mason County 9-1-1
WV		7572		Mcdowell County Emergency Communications
WV		7573		Mecca 9-1-1
WV		7574		Mercer County 9-1-1
WV		7575		Metro Emergency Operations
WV		7577		Mineral County Emergency Services
WV		7578		Mingo County 9-1-1
WV		7579		Monroe County 9-1-1
WV		7580		Morgan County 9-1-1
WV		7581		Morgantown Police Department
WV		7583		Nicholas County 9-1-1
WV		7584		Parkersburg Police Department
WV		7585		Pendleton County 9-1-1
WV		7587		Wirt County 911
WV		7588		Pocahontas County 9-1-1
WV		7589		Preston County 9-1-1
WV		7590		Putnam County 9-1-1 Center
WV		7591		Raleigh County Emergency Services
WV		7592		Randolph County 911
WV		7594		Roane County 9-1-1 OES
WV		7595		Summers County 9-1-1
WV		7597		Tucker County E9-1-1
WV		7598		Tyler County 911
WV		7599		Upshur County 911
WV		7600		Wayne County E9-1-1 Center
WV		7601		Webster County 9-1-1 Center
WV		7604		Werc 9-1-1
WV		7606		Hardy County E9-1-1
WV		7608		Wetzel County Emergency Services
WV		7609		Wheeling / Ohio County 9-1-1 Center
WV		7610		Central Telecommunications Center Of Wood County
WY		7615		Campbell County Sheriffs Department
WY		7617		Carbon County Sheriffs Office
WY		7618		Casper Police Department
WY		7619		Casper Public Safety Communications Center
WY		7620		Cheyenne City Police
WY		7621		Converse County Sheriffs Office
WY		7623		Douglas Police Department
WY		7624		Fremont County Sheriffs Office
WY		7631		Hot Springs County Sheriff
WY		7633		Johnson County Law Enforcement Center

 

A-127

---

WY		7634		Kemmerer 9-1-1-lincoln County Sheriff
WY		7636		Laramie County 9-1-1 Emergency Center
WY		7637		Laramie-albany County Records And Communications
WY		7640		Newcastle Police Department
WY		7641		Niobrara County Sheriffs Office
WY		7642		Park County Sheriffs Office
WY		7643		Pine Bluffs Police Department
WY		7644		Platte County Communications
WY		7645		Powell Police Department
WY		7646		Rawlins Police Department
WY		7647		Riverton Police Department
WY		7648		Rock Springs Police Department
WY		7650		Sheridan Law Enforcement Center
WY		7652		Sweetwater County Sheriffs Office
WY		7654		Teton County Sheriffs Office
WY		7661		Washakie County Sheriffs Department
MA		7669		Abington Police
MA		7670		Acton Police
MA		7671		Adams Police
MA		7672		Agawam Police
MA		7673		Amesbury Police
MA		7674		Amherst Communications
MA		7675		Andover Police
MA		7676		Arlington Communications
MA		7677		Ashburnham Police
MA		7678		Ashby Police
MA		7679		Athol Police
MA		7680		Attleboro Police
MA		7681		Auburn Police
MA		7682		Avon Police
MA		7683		Ayer Police
MA		7684		Barre Police
MA		7685		Bedford Police
MA		7686		Belchertown Police
MA		7687		Belmont Public Safety
MA		7688		Berkley Police
MA		7689		Berlin Police
MA		7690		Beverly Police
MA		7691		Billerica Police
MA		7692		Blackstone Police
MA		7693		Bolton Police

 

A-128

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MA		7694		Bourne Police
MA		7695		Boxborough Police
MA		7696		Boxford Police
MA		7697		Boylston Police
MA		7698		Braintree Police
MA		7699		Brewster Police
MA		7700		Bridgewater Police
MA		7701		Brockton Police
MA		7702		Brookline Police
MA		7703		Burlington Police
MA		7704		Carlisle Police
MA		7705		Carver Police
MA		7706		Charlton Police
MA		7707		Chelmsford Police
MA		7708		Chelsea Emergency Communications
MA		7709		Chicopee Police
MA		7710		Clinton Police
MA		7711		Cohasset Police
MA		7712		Concord Police
MA		7713		Danvers Police
MA		7714		Dedham Police
MA		7715		Devens
MA		7716		Dighton Police
MA		7717		Douglas Police
MA		7718		Dracut Police
MA		7719		Dudley Police
MA		7720		Dukes County Sheriff
MA		7721		Duxbury Police
MA		7722		East Bridgewater Police
MA		7723		East Longmeadow Police
MA		7724		Eastham Police
MA		7725		Easthampton Police
MA		7726		Easton Police
MA		7727		Essex Communications
MA		7728		Everett Communications
MA		7729		Fitchburg Police
MA		7730		Foxboro Police
MA		7731		Gardner Police
MA		7732		Georgetown Police
MA		7733		Gloucester Police
MA		7734		Grafton Police

 

A-129

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MA		7735		Granby Police
MA		7736		Great Barrington Police
MA		7737		Greenfield Police
MA		7738		Groton Police
MA		7739		Groveland Police
MA		7740		Hadley Police
MA		7741		Halifax Police
MA		7742		Hamilton/wenham Police
MA		7743		Hampden Police
MA		7744		Hanover Police
MA		7745		Hanscom Afb (military)
MA		7746		Hanson Police
MA		7747		Harvard Police
MA		7748		Haverhill Police
MA		7749		Hingham Police
MA		7750		Holbrook Police
MA		7751		Holden Police
MA		7752		Holyoke Police
MA		7753		Hopedale Police
MA		7754		Hubbardston Police
MA		7755		Hudson Police
MA		7756		Hull Police
MA		7757		Ipswich Police
MA		7758		Kingston Police
MA		7759		Lakeville Police
MA		7760		Lancaster Communications
MA		7761		Lawrence Police
MA		7762		Leicester Police
MA		7763		Leominster Police
MA		7764		Lexington Police
MA		7765		Lincoln Police
MA		7766		Littleton Police
MA		7767		Longmeadow Police
MA		7768		Lowell Police
MA		7769		Ludlow Police
MA		7770		Lunenburg Fire
MA		7771		Lynn Police
MA		7772		Lynnfield Police
MA		7773		Malden Police
MA		7774		Manchester Police
MA		7775		Mansfield Police

 

A-130

---

MA		7776		Marblehead Police
MA		7777		Marlboro Police
MA		7778		Marshfield Police
MA		7779		Mattapoisett Police
MA		7780		Maynard Police
MA		7781		Medford Police
MA		7782		Melrose Police
MA		7783		Mendon Police
MA		7784		Merrimac Police
MA		7785		Methuen Police
MA		7786		Middleboro Police
MA		7787		Middleton Fire
MA		7788		Milford Police
MA		7789		Millbury Police
MA		7790		Millville Police
MA		7791		Milton Police
MA		7792		Monson Police
MA		7793		Montague Police
MA		7794		Nahant Police
MA		7795		Nantucket Police
MA		7796		Needham Police
MA		7797		New Braintree State Police
MA		7798		Newbury Police
MA		7799		Newburyport Police
MA		7800		Newton Police
MA		7801		North Adams Police
MA		7802		North Andover Police
MA		7803		North Attleboro Police
MA		7804		North Reading Police
MA		7805		Northampton Communications
MA		7806		Northboro Police
MA		7807		Northbridge Police
MA		7808		Norton Communications
MA		7809		Norwell Police
MA		7810		Oxford Police
MA		7811		Palmer Police
MA		7812		Paxton Communications
MA		7813		Peabody Police
MA		7814		Pembroke Police
MA		7815		Pepperell Police
MA		7816		Plainville Police

 

A-131

---

MA		7817		Princeton Police
MA		7818		Provincetown Police
MA		7819		Quincy Police
MA		7820		Randolph Police
MA		7821		Raynham Police
MA		7822		Reading Police
MA		7823		Rehoboth Police
MA		7824		Revere Fire
MA		7825		Rochester Communications
MA		7826		Rockland Police
MA		7827		Rockport Police
MA		7828		Rowley Police
MA		7829		Rutland Fire
MA		7830		Salem Police
MA		7831		Salisbury Police
MA		7832		Sandwich Police
MA		7833		Saugus Police
MA		7834		Scituate Police
MA		7835		Seekonk Police
MA		7836		Shirley Communications
MA		7837		Shrewsbury Police
MA		7838		South Hadley Police
MA		7839		Southampton Police
MA		7840		Southboro Police
MA		7841		Southbridge Police
MA		7842		Southwick Police
MA		7843		Spencer Police
MA		7844		Sterling Communications
MA		7845		Stoneham Police
MA		7846		Stow Police
MA		7847		Sturbridge Police
MA		7848		Sudbury Police
MA		7849		Sutton Police
MA		7850		Swampscott Police
MA		7851		Taunton Fire
MA		7852		Templeton Police
MA		7853		Tewksbury Police
MA		7854		Topsfield Police
MA		7855		Townsend Police
MA		7856		Truro Police
MA		7857		Tyngsboro Police

 

A-132

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MA		7858		Upton Police
MA		7859		Uxbridge Police
MA		7860		Wakefield Police
MA		7861		Waltham Communications
MA		7862		Ware Police
MA		7863		Warren Police
MA		7864		Watertown Police
MA		7865		Wayland Police
MA		7866		Webster Police
MA		7867		Wellesley Police
MA		7868		Wellfleet Police
MA		7869		West Boylston Police
MA		7870		West Bridgewater Police
MA		7871		West Newbury Police
MA		7872		West Springfield Police
MA		7873		Westboro Police
MA		7874		Westfield Police
MA		7875		Westford Police
MA		7876		Westminster Police
MA		7877		Weston Police
MA		7878		Westwood Police
MA		7879		Weymouth Police
MA		7880		Wilbraham Police
MA		7881		Williamstown Police
MA		7882		Wilmington Police
MA		7883		Winchendon Police
MA		7884		Winchester Police
MA		7885		Winthrop Police
MA		7886		Woburn Police
MA		7887		Yarmouth Police
AZ		7888		Colorado City Police Department
AZ		7889		Salt River Tribal Police
AZ		7891		Department Of Public Safety - Tucson
AZ		7892		Department Of Public Safety - Yuma
AZ		7893		Bisbee Police Department
AZ		7894		Glen Canyon National Parks Service
TX		7899		Austin/travis County Combined Transport &emerg Comm Ctr(ctecc)
TX		7900		Austin Emergency Operations Center
TX		7901		University Of Texas Police Department
MA		7905		Plymouth Police
NY		7906		Greene County Emergency Operations Center

 

A-133

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AZ		7907		Rural Metro Fire Department-scottsdale
FL		7910		Broward County Central Backup
FL		7911		Broward County South Backup
FL		7913		Chattahoochee Center
FL		7914		Big Cypress Indian Reservation
FL		7915		Tampa Fire Rescue
FL		7916		Lake Sumter EMS
FL		7917		Clermont Police Dept.
FL		7918		Groveland Police Dept.
FL		7919		Lee County Emergency Dispatch Center
FL		7924		Bradenton Police Dept.
FL		7926		Indiantown Sheriff’s Dept.
FL		7938		New Port Richey Police Dept.
FL		7939		Pasco County Sheriff’s Office
FL		7940		Port Richey Police Dept.
FL		7941		Dade City Police Dept.
FL		7950		Wildwood Police Dept.
FL		7953		Evac Ambulance Co.
FL		7954		Walton County Sheriff’s Office
AR		7956		Arkansas State Police Troop A
IL		7958		Des Plaines Police Department
PA		7960		Bethlehem Police Department
VA		7964		Ablemarle Emergency Communications Center
VT		7966		Vermont State Police - Derby
WA		7967		Rivercom
IN		7969		Garrett Police And Fire Department
IN		7971		Kendallville Police Department
IN		7972		Columbia City Police Department
IL		7976		Bellwood Police Department
IL		7977		Glenview Fire
IL		7978		Village of Tinley Park Police Department
CO		7985		Fort Collins Police Department
NY		7987		Eden Police Department
NY		7988		West Seneca Police Department
TN		7990		Dyersburg Police Department
TN		7991		Newburn Police Department
CO		8000		Boulder Regional Emergency Telephone Service Authority
CO		8002		Broomfield Police Department
CO		8003		Westminister Police Department
FL		8005		Tampa Fire Department
FL		8006		Ocala Fire Department

 

A-134

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FL		8007		Osceola County Fire Department
FL		8008		Dade City Police Department
FL		8009		Wild Woods Police Department
IL		8011		Oak Park Police Department
IL		8013		West Frankfort Police Department
IL		8014		Carbondale Police Department
IL		8015		Southern Illinois University Police Department
IL		8018		Macon County PSAP
IN		8021		Madison Police Department
KS		8022		Unified Government Of Wyandotte County
MO		8027		St. Louis County Police Department Bureau Of Communications
ND		8028		Red River Regional Dispatch Center
NJ		8035		Monroe Township Police Department
NJ		8038		Kean University Campus Police
RI		8039		Coventry Police Department
RI		8040		Narrangansett Tribal Police
TN		8043		Hardin County Central Dispatch
WA		8055		Spokane County Combined Fire Dispatch
WV		8056		Central Communications, Inc.
AR		8059		City Of Benton
OR		8073		Tri-county Communications
CA		8074		Csu - Channel Islands Police Department
KY		8076		Pennyrile Emergency Assistance Center
NC		8077		Holly Springs Department Of Public Safety
AR		8078		Arkansas State Police - Troop L
NE		8080		Crete Police Dept
NE		8081		Pawnee County
AR		8086		England Police Department
AR		8087		Ward Police Department
AR		8088		Carlisle Police Department
AR		8092		Hot Springs Village Police Department
AR		8093		Life Mobile Ems
NY		8095		Steuben County E911
CA		8096		Verugo Fire Department
OK		8097		Mcclain County 9-1-1
MO		8101		Arnold Police Department
MO		8102		Crystal City Police Department
MO		8103		Desoto Police Department
MO		8104		Festus Police Department
MO		8105		Pevely Police Department
MO		8106		Saline County E911

 

A-135

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MO		8107		Wentzville Police Department
MO		8108		Lake St. Louis Police Department
MO		8109		O’fallon Police Department
AR		8113		Searcy County Sheriff’s Office
CA		8114		Bart Police Department
CA		8115		Csu Hayward Police Department
CA		8116		Cerritos College Police Department
CA		8117		Cerritos Sheriff’s Station
CA		8118		Csu Long Beach University Police
CA		8122		Nebo Barstow Marine Base
CA		8126		Nasa Ames Police Department
NY		8127		Orange County Department Of Emergency Services
NY		8128		Washington County Department Of Public Safety
IL		8131		E-com Dispatch Center
KY		8136		Greenup County E-911
NC		8138		Ahoskie Police Department
OH		8139		Girard City Police Department
OH		8140		Hubbard City Police Department
OH		8141		Liberty Township Police Department
OH		8142		Lordstown Village Police Department
OH		8143		Newton Falls Police Department
OH		8144		Niles City Police Department
OK		8145		Seminole County 911
ID		8146		Twin Falls City Communications Center
OH		8149		Vinton County Sheriff’s Office
OH		8152		Hocking County Sheriff Office
MT		8154		Havre Police Department
IL		8158		SEECOM
TX		8159		Murphy Police Department
DC		8160		Washington DC Office of Unified Communications
TX		8168		Walker County Public Safety Communications Center
NJ		8175		Belleplain Emergency Corporation
NY		8176		Town of Waterford Police Department
TX		8181		Kyle Police Department
NC		8187		Integrated Incident Management Center - Ft Bragg
NC		8188		Murfreesboro Police Department
NC		8190		Marine Corps Base Camp Lejeune
KY		8192		Fort Knox Fire Department
FL		8193		Pembroke Pines Fire Department
OR		8197		Coos Bay Police Department
KY		8218		Prestonsburg E9-1-1 Center

 

A-136

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CA		8225		Alameda County Regional Emergency Communications Center
CO		8226		City of Thornton 911 Emergency Communications Center
GA		8238		Lower Chattahoochee Regional E911 Center
MS		8239		Clay County E911
CA		8257		Orange County Sheriff - Harbor Patrol/Newport Beach
CA		8258		San Diego Harbor Police Department
KY		8277		Bell County 911
IL		8300		Metropolis Police Department
KY		8302		Dawson Springs Police Department
MT		8303		Colstrip Police Department
MS		100151		Drew Police Department
MS		100152		Ruleville Police Department
OH		100638		Lebanon Police Department
NY		101036		New Rochelle 9-1-1
NY		101046		Elmsford Police Department
NY		101047		Rye Brook Police Department
NY		101070		State Police - Cortlandt
MO		101565		Sullivan Police Department
PA		101655		Abington Township Police Department
CA		101831		Net-Comm
NJ		103104		Jamesburg Police Department
NY		103401		Village of Lynbrook Police Department
OH		103433		Franklin Police Department
OH		103441		Seville Police Department
WY		103718		Lincoln County Sheriff’s Office/ Star Valley Sub Station
NY		103740		Suffern Police Department
NJ		103955		Northfield Police Department
OH		103989		Fostoria Police Station
OH		104102		Port Clinton Police Department
OH		104103		Oak Harbor Village Police
OK		105567		Marlow Police and Fire Department
OK		105868		Sulphur Police Department
MO		106057		Ripley County Sheriff’s Office
NY		106086		Floral Park Police Department
NY		106087		Glen Cove Police Department
NY		106095		Great Neck Estates Police Department
NY		106096		Kings Point Police Department
NY		106097		Lake Success Police Department
NY		106098		Long Beach Police Department
NY		106099		Malverne Police Department
NY		106101		Rockville Centre Police Department

 

A-137

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NY		106102		Sands Point Police Department
NY		106103		Port Washington Police Department
NY		106212		Catskill Police Department
NY		106215		East Greenbush Police Department
NY		106220		White Plains P.D.
OK		106295		Yale Police Department
OK		106307		Tonkawa Police Department
OK		106310		Davis Police Department
OK		106312		Mayes County Ambulance
OK		106333		Woods County 9-1-1
OK		106337		Washita County Sheriffs Office
SC		106420		Clemson University Police Department
OK		106433		Garvin County Sheriffs Office
OK		106455		Blanchard Police Department
NJ		106579		McGuire Air Force Base
TX		500023		Austin Police Department Training
TX		500024		CAPCOG Training
TX		500025		TC-911 Training - LL - 140
TX		500026		TC-911 Trng - MAARS - 393
IL		500030		Carlyle Police Department
AR		500039		Independence County Sheriffs Office
FL		500046		Okeechobee Police Department
NC		500066		Hope Mills Police Department
IL		500069		Wheeling Police Department
MI		500071		Three Rivers Police Department
UT		500075		Cache County Sheriff’s Office
WI		500076		Eau Claire Sheriff’s Office
LA		500078		Tallulah Police Department
MI		500082		Marquette County Central Dispatch
IN		500086		DeMotte Police Department
IN		500087		Rensselaer Police Department
KY		500091		Morgantown Police Department
MO		500096		Malden Police Department
KY		500102		Leslie County
MS		500104		Columbus Air Force Base
GA		600000		Stephens County E911
IL		600001		NORCOMM 911 Dispatch

 

A-138

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THIRD AMENDMENT TO

MASTER SERVICE AGREEMENT

This Third Amendment to Master Service Agreement (this “Third Amendment”) is entered into this 1^st day of June, 2015 (the “Third Amendment Effective Date”), by and between LEVEL 3 COMMUNICATIONS, LLC (“Level 3”) and BANDWIDTH.COM INC., the successor-in-interest to VIXXI SOLUTIONS, INC. (“Customer”). This Amendment modifies the Master Service Agreement between the parties dated March 14, 2008, as amended to date (the “Agreement”). Capitalized terms used but not defined herein shall have the meanings set forth in the Agreement.

WHEREAS, the parties entered into the Agreement for the provision of certain communications services provided by Level 3 to Customer, including the Level 3 12 E-911 Direct Service (“12 E-911 Direct Service”);

WHEREAS, the parties entered into Addendum to Master Service Agreement dated October 16, 2009 to modify certain terms of the 12 E-911 Direct Service;

WHEREAS, the parties entered into 2^nd Amendment to Master Service Agreement dated March 29, 2013 (the “2^nd Amendment”) to further modify certain terms of the 12 E-911 Direct Service; and

WHEREAS, the parties desire to further amend certain terms of the 12 E-911 Direct Service as described herein.

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree to modify the Agreement as follows:

4.    Pricing Term Extension. The current 12 E-911 Direct Services Pricing Term ends on March 28, 2016. The parties desire to extend the Service Term an additional 12 months. Therefore, as of the Third Amendment Effective Date, the Service Term for the 12 E-911 Direct Services shall now end on March 27, 2017.

5.    Service Term and Revenue Commitment. As of the Third Amendment Effective Date, the 2nd full paragraph of Section 1 (b) of the Second Amendment is hereby deleted in its entirety and replaced with the following new 2^nd full paragraph of Section 1 (b):

Commencing upon the 3^rd Amendment Effective Date and continuing through the longer of (i) March 27, 2017 (the “Pricing Term”) or (ii) as long as the Customer continues to receive the 12 E-911 Direct Service on a month-to-month basis following the Pricing Term, Customer commits to have no less than $100,000.00 in invoiced, monthly recurring charges for the 12 E-911 Direct Service (the “Monthly Revenue Commitment”). The Monthly Revenue Commitment is a take-or-pay commitment and each month Customer shall pay the higher of (i) Customer’s actual invoiced monthly recurring charges for the 12 E-911 Direct Service or (ii) the Monthly Revenue Commitment. Customer is obligated for 100% for the Monthly Revenue commitment and is not responsible for any separate cancellation charges for the 12 E-911 Direct Service.

 

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6.    PSAP Exclusivity Removal. As of the Third Amendment Effective Date, Section 1 a) of the Second Amendment shall be deleted in its entirety. Customer shall have access to the entire Level 3 PSAP footprint. Customer agrees to only send 12 E-911 Direct Service calls to PSAPs identified in the Level 3 PSAP footprint.

7.    Exhibit Deletions. Exhibits A and B to the Second Amendment (including their pricing schedules) are hereby deleted in their entirety.

8.    Additional Terms Unaffected. All other terms and conditions set forth in the Agreement shall remain in full force and effect, except as modified by the terms of this Third Amendment.

[SIGNATURE BLOCK FOLLOWS ON NEXT PAGE]

 

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These terms and conditions have been read, are understood and are hereby accepted.

 

 

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FOURTH AMENDMENT TO

MASTER SERVICE AGREEMENT

This Fourth Amendment to Master Service Agreement (this “Amendment”) is entered into this 30 day of October, 2015 (the “Amendment Effective Date”), by and between LEVEL 3 COMMUNICATIONS, LLC (“Level 3”) and BANDWIDTH.COM, INC., as the assignee of the assets of VIXXI SOLUTIONS INC. (“Customer”). This Amendment modifies the Master Service Agreement between the parties dated March 14, 2008, as amended to date (the “Agreement”). Capitalized terms used but not defined herein shall have the meanings set forth in the Agreement.

WHEREAS, the parties entered into the Agreement for the provision of certain communications services provided by Level 3 to Customer, including Level 3 12 E-911 Direct Service (“E911 Service”);

WHEREAS, the parties modified the E911 Service Schedule in Addendum to Master Service Agreement, dated October 16, 2009;

WHEREAS, the parties replaced pricing for the E911 Service and modified other terms in the E911 Service Schedule in the Second Amendment to Master Service Agreement, dated March 29, 2013 (the “Second Amendment”);

WHEREAS, the parties made further modifications to the E911 Service Schedule in the Third Amendment to Master Service Agreement, dated June 1, 2015 (the “Third Amendment”); and

WHEREAS, the parties desire to make additional modifications to the E911 Service Schedule as set forth in greater detail herein.

NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree to modify the Agreement as follows.

9.    Modifications to the E911 Service Schedule. As of the Amendment Effective Date, Section 1 of the Third Amendment is hereby deleted in its entirety. As of December 31, 2015, Section 2 of the Third Amendment and Section 1b of the Second Amendment are deleted in their entirety. For clarity, because the Second Amendment and the Third Amendment modified and replaced certain sections of the E911 Service Schedule and in turn are being replaced by this Amendment, the following changes are hereby made to the E911 Service Schedule:

 

a)

Because Section 6 of the E911 Service Schedule had been replaced by now-deleted sections of the Second Amendment and the Third Amendment, the following new Section 6 is hereby added to the E911 Service Schedule as of the Amendment Effective Date:

6.    Pricing Terms/Renewal/Extension/Termination.

a.    The current pricing term expires on December 31, 2015 (“Current Pricing Term”). Beginning on January 1, 2016, the new pricing term is five (5) years (“New Pricing Term”). During the Current Pricing Term and the New Pricing Term, Customer agrees that Level 3 will be the preferred provider of 911 service to Customer and Customer agrees to give Level 3 the first right of refusal to provide 911 Service to new service areas.

 

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b.    Following the New Pricing Term, this E911 Service Schedule shall renew under the same terms and conditions for additional consecutive terms of twelve (12) months until terminated by either party as set forth herein.

c.    Following the New Pricing Term or any renewal term thereafter, Customer may terminate this E911 Service Schedule by providing Level 3 twelve (12) months written notice. Following the New Pricing Term or any renewal thereafter, Level 3 may terminate this E911 Service Schedule by twenty-four (24) month written notice to Customer.

d.     If this E911 Service Schedule is terminated for any reason other than Customer’s default, Level 3 agrees to provide the Services hereunder for up to twenty-four (24) months to allow Customer to transition to a new service provider.

 

b)

The following new Section 7 is hereby added to added to the E911 Service Schedule and will become effective as of January 1, 2016:

7.    Revenue Commitment. Commencing upon January 1, 2016, and continuing through the longer of five (5) years or (ii) as long as the Customer continues to receive the Level 3 12 E-911 Direct Service on an annual renewal term following the New Pricing Term (as defined in the Fourth Amendment to Master Service Agreement), Customer commits to have no less than $100,000.00 in invoiced, monthly recurring charges for the 12 E-911 Direct Service (the “Monthly Revenue Commitment”). The Monthly Revenue Commitment is a take-or-pay commitment and each month Customer shall pay the higher of (i) Customer’s actual invoiced monthly recurring charges for the 12 E-911 Direct Service or (ii) the Monthly Revenue Commitment. Customer is obligated for 100% for the Monthly Revenue commitment and is not responsible for any separate cancellation charges for the 12 E-911 Direct Service for the duration of the New Pricing Term and any annual renewal term thereafter.

 

c)

As of January 1, 2016, the following new pricing table is inserted into Section 4 (b) of the E911 Service Schedule replacing the existing table:

 

Monthly Call Volume		2016 Per Call MRC				2017 Per Call MRC				2018 Per Call MRC				2019 Per Call MRC				2020 Per Call MRC
1-25,000			$2.25				$2.00				$2.00				$1.90				$1.66
25,001-50,000			$2.10				$1.70				$1.65				$1.55				$1.37
50,001-75,000			$1.80				$1.40				$1.35				$1.25				$1.07
75,001-100,000			$1.65				$1.25				$1.10				$1.00				$0.84
100,001-125,000			$1.50				$1.10				$0.95				$0.85				$0.73
125,001-150,000			$1.35				$0.95				$0.80				$0.70				$0.58
150,001-175,000			$1.25				$0.85				$0.70				$0.60				$0.50
175,001-200,000			$1.20				$0.80				$0.65				$0.55				$0.46
200,001-225,000			$1.15				$0.75				$0.60				$0.50				$0.42
225,001-250,000			$1.12				$0.72				$0.57				$0.47				$0.39
250,001-275,000			$1.09				$0.69				$0.54				$0.44				$0.37
275,001-300,000			$1.07				$0.67				$0.52				$0.42				$0.35
300,000 and greater			$1.05				$0.65				$0.50				$0.40				$0.33

 

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d)

The following new paragraph is added to the end of Section 5 following the SLA table:

Miscellaneous. Level 3 agrees to provide Customer all available connectivity to any PSAP currently available to Level 3. When available, Level 3 will provide written notice to Customer if connectivity to any PSAP is reduced or terminated. Level 3 agrees, upon Customer’s request, to provide monthly reports to Customer regarding capacity to Selective Routers. Level 3 agrees to augment capacity as necessary within sixty (60) days of Customer’s notification to Level 3 that Customer has received written notice of insufficient capacity to a PSAP. Upon the submission of a trouble ticket by Customer, Level 3 agrees to investigate and resolve any PSAP complaints received by Customer related to capacity and routing of 911 calls to a PSAP.

Except for when a call is refused by a Selective Router or PSAP with SIP Error Code 486/busy or 487/Cancel, or equivalent release cause indication for trunking that is not SIP based, any 911 call routed to Level 3 by Customer that (i) Level 3 fails to complete to a PSAP covered by Level 3;

(ii) is returned to Customer; and (iii) answered by the Emergency Call Center (an entity under Customer’s control), will be billed by Customer to Level 3 at $35.00 per call.

Level 3 will also maintain route diversity of its network facilities to the Selective Routers in accordance with industry best practices and regulatory requirements.

10.    Additional Terms Unaffected. All other terms and conditions set forth in the Agreement shall remain in full force and effect, except as modified by the terms of this Amendment.

 

 

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Exhibit 21.1

 

Subsidiary Name		State of Incorporation or Organization
Bandwidth.com CLEC, LLC		Delaware
Broadband, LLC		Delaware
IP Spectrum Solutions, LLC		Delaware

Exhibit 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the reference to our firm under the caption “Experts” and to the use of our report dated August 16, 2017 (except for the second paragraph of Note 1, as to which the date is September 21, 2017, and Note 16 as to which the date is October 10, 2017), in the Registration Statement (Form S-1) and the related Prospectus of Bandwidth Inc. for the registration of its common stock.

/s/ Ernst & Young LLP

Raleigh, North Carolina

October 13, 2017