Document:

exhregistrationrights.rtf

VIXEL CORPORATION

REGISTRATION RIGHTS AGREEMENT

February 14, 2003

 

 

 

VIXEL CORPORATION

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (this “Agreement”) is made as of the
14th day of February, 2003 by and among Vixel Corporation, a
Delaware corporation (the “Company”) and the holders of Series B Convertible Preferred Stock of the Company, par value $0.001 per share (the “Series B Preferred
Stock”) listed on Exhibit A hereto (the “Investors”).

RECITALS

WHEREAS, the Company and the Investors are entering into a Series B Convertible Preferred Stock and Warrant Purchase Agreement (the “Series B
Purchase Agreement”) of even date herewith pursuant to which the Company shall sell to the Investors and the Investors shall purchase from the Company shares of the Company’s Series B
Preferred Stock and Warrants (the “Warrants”) to purchase shares of the Company’s Common Stock, par value $0.0015 per share (the “Common Stock”).  A
condition to the Investors’ obligations under the Series B Purchase Agreement is that the Company and the Investors enter into this Agreement in order to provide the Investors certain rights to
register shares of the Common Stock, issuable upon conversion of the Preferred Stock and exercise of the Warrants held by the Investors.

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, the Company and the Investors hereby agree as follows:

AGREEMENT

The parties hereby agree as follows:

1.    Registration Rights.  The Company and the Investors covenant and agree as follows:

       
1.1    Definitions.  For purposes of this Section 1:

           
(a)    The terms “register,” “registered,” and “registration” refer to a registration effected by preparing and filing a registration statement or
similar document in compliance with the Securities Act of 1933, as amended (the “Securities Act”), and the declaration or ordering of effectiveness of such registration statement
or document;

           
(b)    The term “Registrable Securities” means (i) the shares of Common Stock issuable or issued upon conversion of the Company’s Series B Preferred Stock or exercise of the
Warrants, other than shares for which registration rights have terminated pursuant to Section 1 hereof, (ii) any other shares of Common Stock of the Company issued as (or issuable upon the conversion
or exercise of any warrant, right or other security which is issued as) a dividend or other distribution with respect to, or in exchange for or in replacement of, the securities listed in (i), or
(iii) any other shares of Common Stock of the Company issued as a result of the provisions related to the failure by the Company to file and/or have declared effective a registration statement
pursuant to Section 1.2 hereof; provided, however, that the foregoing definition shall exclude in all cases any Registrable Securities sold by a person in a transaction in which his or
her rights under this Agreement are not assigned.  Notwithstanding the foregoing, Common Stock or other securities shall only be treated as Registrable Securities if and so long 

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 as they have not
been (A) sold to or through a broker or dealer or underwriter in a public distribution or a public securities transaction, or (B) sold in a transaction exempt from the registration and prospectus
delivery requirements of the Securities Act under Section 4(1) thereof so that all transfer restrictions, and restrictive legends with respect thereto, if any, are removed upon the consummation of
such sale;

           
(c)    The number of shares of “Registrable Securities then outstanding” shall be determined by the number of shares of Common Stock outstanding which are, and the number of shares of
Common Stock issuable pursuant to then exercisable or convertible securities which are, Registrable Securities;

           
(d)    The term “Holder” means any person owning or having the right to acquire Registrable Securities or any assignee thereof in accordance with Section 1 of this Agreement;

           
(e)    The term “Form S-3” means such form under the Securities Act as in effect on the date hereof or any successor form under the Securities Act that permits significant
incorporation by reference of the Company’s subsequent public filings under the Securities Exchange Act of 1934, as amended (the “Exchange Act”);

           
(f)    The term “Registration Expenses” means all expenses incurred by the Company in complying with Sections 1.2, 1.3 and 1.4 hereof, including without limitation, all registration
and filing fees, printing expenses, fees and disbursements of counsel for the Company, reasonable fees and disbursements not to exceed thirty-five thousand dollars ($35,000.00) of a single special
counsel for the Holders, blue sky fees and expenses and the expense of any special audits incident to or required by any such registration (but excluding the compensation of regular employees of the
Company which shall be paid in any event by the Company); and

           
(g)    The term “SEC” means the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act.

       
1.2    Shelf Registration.   

           
(a)     The Company shall prepare and, as soon as practicable but in no event later than 45 calendar days after the
Closing Date (as defined in the Series B Purchase Agreement), file with the SEC a registration statement (the “Shelf Registration Statement”) or registration statements (as is
necessary) on Form S-3 (or if such form is unavailable, such other form as is available for registration for resale of the Registrable Securities) covering the resale by the Holders of all of the
Registrable Securities eligible to be registered on their behalf on such form as of such date (the “Eligible Securities”).    If the Shelf Registration Statement is
not filed with the SEC within 45 days, if Form S-3, or 75 days, if other than Form S-3, after the Closing Date, the Company shall pay to the Holders for each day after such 45 or 75 day deadline
until such filing is made, either at the Company’s option (i) an aggregate of $5,000 each day in liquidated damages (to be distributed pro rata 

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 among the Holders in proportion to the number of
Registrable Securities held by each such Holder), or (ii) additional shares of Series B Preferred Stock having an aggregate value of $5,000 each day based upon a per share price of $2.10 (to be
distributed pro rata among the Holders in proportion to the number of Registrable Securities held by each such Holder).

           
(b)        The Company shall use its best efforts to have the Shelf Registration Statement declared effective by the SEC as
soon as practicable.  The Company’s best efforts will include, but not be limited to, promptly responding to all comments received from the staff of the SEC.  If the Shelf
Registration Statement is not declared effective by the SEC within 120 days after the Closing Date (the “Required Effective Date”), the Company shall pay to the Holders for each
day after the Required Effective Date until such Shelf Registration Statement is declared effective by the SEC, at the Company’s option either (i) an aggregate of $7,500 each day in liquidated
damages  (to be distributed pro rata among the Holders in proportion to the number of Registrable Securities held by each such Holder), or (ii) additional shares of Series B Preferred Stock
having an aggregate value of $7,500 each day based upon a per share price of $2.10 (to be distributed pro rata among the Holders in proportion to the number of Registrable Securities held by each
such Holder).  Notwithstanding anything herein to the contrary, the aggregate of liquidated damages to be paid pursuant to this Section 1.2 shall not exceed $1,000,000 (or
additional shares of Series B Preferred Stock having an aggregate value of $1,000,000 based upon a per share price of $2.10) and any liquidated damages periods shall be tolled for any delays caused
by Holders failure to timely furnish to the Company complete and accurate information regarding itself and the Registrable Securities held by it.

           
(c)        Upon receipt by the Company of a legal opinion addressed to the Company from counsel representing any Holder
whose Registrable Securities were not Eligible Securities at the time of the filing of the Shelf Registration Statement, stating that such Registrable Securities (the “Newly Eligible
Securities”) have become eligible for registration on Form S-3, the Company shall, at its option, (1) amend the Shelf Registration Statement filed pursuant to Section 1.2(a) to include as
selling stockholders those Holders who hold Newly Eligible Securities and register the sale of such Newly Eligible Securities or (2) file with the SEC an additional registration statement or
registration statements (as is necessary) on Form S-3 (or if such form is unavailable, such other form as is available for registration) covering the resale of all of the Newly Eligible
Securities.

           
(d)        The Company shall use its best efforts to
maintain the effectiveness of the Shelf Registration Statement until the earliest of (i) the date on which all such Registrable Securities have been sold thereunder, or (ii) the date on which the
registration rights under this Agreement terminate pursuant to Section 1.14.

            (e)        Notwithstanding the foregoing, the Company
shall be entitled to suspend effectiveness of the Shelf Registration Statement for up to 30 days if the Company shall furnish to the Holders a certificate signed by the Chairman of the Company
stating that in the good faith judgment of the Board of Directors of the Company, it would be seriously detrimental to the Company and its stockholders for such Shelf Registration Statement to
continue to be effective because (i) the Company is engaged in any activity or transaction or preparations or negotiations for any activity or transaction (“Company Activity”) that the
Company desires to keep confidential for business reasons, and the Company determines in good faith that the public disclosure requirement imposed on the Company pursuant to the Shelf Registration
Statement would 

 

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 require disclosure of the Company Activity; or (ii) the Company files a Registration Statement (other than a Registration Statement on Form S-4 or Form S-8, or any successor form)
with the SEC for the purpose of registering under the Securities Act any securities to be publicly offered and sold by the Company.

           
(f)         Notwithstanding Section 1.2(e) above, the Company may not utilize the right to suspend the effectiveness
of the Shelf Registration Statement more than once in any twelve-month period, and the Holders shall be reimbursed for all Registration Expenses incurred prior to the receipt of such
certificate.

       
1.3    Request for Registration.

           
(a)    At any time after the Required Effective Date that there is not in existence an effective registration statement (or registration statements) allowing for the registration and sale of all
Registrable Securities held by the Holders, if the Company shall receive, a written request from the Holders of at least thirty percent (30%) of the Registrable Securities then outstanding and not
eligible for such registration, that the Company file a registration statement under the Securities Act covering the registration of all or a portion of such Registrable Securities which have an
aggregate offering price, net of underwriting discounts and commissions, of at least $2,000,000 then the Company shall, within ten (10) days of the receipt thereof, give written notice of such
request to all Holders and shall, subject to the limitations of subsection 1.3(b), use its best efforts to effect as soon as practicable, and in any event within 60 days of the receipt of such
request, the registration under the Securities Act of all Registrable Securities which the Holders request to be registered within twenty (20) days of the mailing of such notice by the Company in
accordance with Section 2.4.

           
(b)    If the Holders initiating the registration request hereunder (“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 this Section 1.3 and the Company shall include such information in the written notice referred to in
subsection 1.3(a).  The underwriter will be selected by a majority in interest of the Initiating Holders and shall be reasonably acceptable to the Company.  In such event, the right of any
Holder to include his 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 (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder) to the extent provided herein.  All Holders proposing to
distribute their securities through such underwriting shall (together with the Company as provided in subsection 1.6(e)) enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting.  Notwithstanding any other provision of this Section 1.3, if the underwriter advises the Initiating Holders in writing that marketing factors require
a limitation of the number of shares to be underwritten, then the Initiating Holders shall so advise all Holders of Registrable Securities which would otherwise be underwritten pursuant hereto, and
the number of shares of Registrable Securities that may be included in the underwriting shall be allocated among all Holders thereof, including the Initiating Holders, in proportion (as nearly as
practicable) to the amount of Registrable Securities of the Company owned by each Holder; provided, however, that the number of shares of 

 

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 Registrable Securities to be included in such
underwriting shall not be reduced unless all other securities are first entirely excluded from the underwriting.  If any Holders would thus be entitled to include more securities than such
Holder requested to be registered, the excess shall be allocated among the other remaining requesting Holders in the manner described in the immediately preceding sentence.

           
(c)    Notwithstanding the foregoing, if the Company shall furnish to Holders requesting a registration statement pursuant to this Section 1.3, a certificate signed by the President of the Company
stating that the Company is engaged in any activity that, in the good faith judgment of the Board of Directors of the Company (the “Board”), is material and nonpublic and would be
required to be disclosed in the applicable registration statement and such disclosure would be seriously detrimental to the Company and its stockholders, then the Company may direct that such request
to register Registrable Securities be delayed for a period of not more than 90 days after receipt of the request of the Initiating Holders; provided, however, that the Company may not
utilize this right more than once in any twelve-month period.

           
(d)    In addition, the Company shall not be obligated to effect, or to take any action to effect, any registration pursuant to this Section 1.3:

               
(i)    After the Company has effected two (2) such registrations on behalf of the Holders pursuant to this Section 1.3 and each such registration has been declared or ordered effective, provided
that the Registrable Securities requested for inclusion in such registration were so included; and provided further that if such a registration statement has become effective but the
contemplated public offering is withdrawn prior to the completion thereof because of material adverse developments affecting the Company that were not known to the participating holders prior to such
effectiveness, then such registration shall not count as one registration under this Section 1.3.

               
(ii)    During the period starting with the date sixty (60) days prior to the Company’s good faith estimate of the date of filing of, and ending on a date one hundred eighty (180) days after the
effective date of, a Company initiated registration subject to Section 1.4 hereof; provided that the Company is actively employing in good faith its best efforts to cause such registration
statement to become effective and that the Company’s estimate of the date of filing such registration statement is made in good faith; 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 registration in accordance with Section 1.2 above.

       
1.4    Company Registration.  At any time after the Required Effective Date that there is not in existence an effective registration statement (or registration statements) covering a
Holder’s Registrable Securities (a “Precluded Holder”), 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 stock under the Securities Act in connection with the public offering of such securities solely for cash (other than a registration relating solely to
the sale of securities to participants in a Company stock plan or a transaction covered by Rule 145 under the Securities Act, a registration in which the only stock being registered is Common Stock 

 

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issuable upon conversion of debt securities which are also being registered, or any registration on any form which 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), the Company shall, at such time, promptly give each such Precluded Holder written notice of such
registration.  Upon the written request of each Precluded Holder given within fifteen (15) days after mailing of such notice by the Company in accordance with Section 2.4, the Company shall,
subject to the provisions of Section 1.7, cause to be registered under the Securities Act all of the Registrable Securities that each such Precluded Holder has requested to be registered;
provided, however, that in connection with any offering involving an underwriting of shares of the Company’s capital stock, the Company shall not be required under this Section
1.4 to include any of the Precluded Holders’ securities in such underwriting unless they accept the terms of the underwriting as agreed upon between the Company and the underwriters selected by
it (or by other persons entitled to select the underwriters), and then only in such quantity as the underwriters determine will not jeopardize the success of the offering by the Company. If the total
amount of securities, including Registrable Securities, requested by stockholders to be included in such offering exceeds the amount of securities sold other than by the Company that the underwriters
determine is compatible with the success of the offering, then the Company shall be required to include in the offering only that number of such securities, including Registrable Securities, which
the underwriters determine will not jeopardize the success of the offering (the securities so included to be apportioned pro rata among the selling stockholders according to the total amount of
securities entitled to be included therein owned by each selling stockholder or in such other proportions as shall mutually be agreed to by such selling stockholders) but in no event shall the amount
of securities of the selling Precluded Holders included in the offering be reduced below thirty percent (30%) of the total amount of securities included in such offering, unless such offering does
not include the shares of any other selling shareholders, in which event any or all of Holder’s Registrable Securities may be excluded..

       
1.5    [RESERVED]

       
1.6    Obligations of the Company.  Whenever required under this Section 1 to effect the registration of any Registrable Securities, the Company shall, as expeditiously as reasonably
possible:

           
(a)    Prepare and file with the SEC a registration statement with respect to such Registrable Securities and use its best efforts to cause such registration statement to become effective, and, in the
case of registrations pursuant to Section 1.3keep such registration statement effective until the distribution is completed, but not more than one hundred twenty (120) days, provided that such
120-day period shall be extended for a period of time equal to the period the Holder refrains from selling any Registrable Securities included in such registration statement due to circumstances
described in Section 1.6(f). 

           
(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 provisions of the Securities Act with respect to the disposition of all securities covered by such registration statement; provided however, that with respect to amendments or supplements
required for updating the list of selling security holders, the Company shall only be required to make such amendment or supplement once each calendar quarter.

 

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(c)    Furnish to the Holders such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such other documents as they may
reasonably request in order to facilitate the disposition of Registrable Securities owned by them that are included in such registration.

           
(d)    Use its best efforts to register and qualify the securities covered by such registration statement under such other securities or Blue Sky laws of such jurisdictions as shall be reasonably
requested by the Holders, provided that the Company shall not be required in connection therewith or as a condition thereto to qualify to do business or to file a general consent to service of
process in any such states or jurisdiction, 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 managing underwriter of such
offering and cause its officers and other employees to participate in any “road shows”, as the managing underwriters may reasonably request.

           
(f)    Notify each Holder of Registrable Securities covered by such registration statement (and each underwriter in the case of an underwritten offering) at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event as a result of which the prospectus included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading in the light of the circumstances then
existing, and, following such notification, promptly deliver to each Holder and each such underwriter that number of copies of all amendments or supplements referred in paragraphs (b) and (c) of this
Section 1.6 as may be necessary so that, as thereafter delivered to the purchaser of such Registrable Securities, such prospectus shall not include and untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the statements therein not misleading in light of the circumstances then existing.

           
(g)    Cause all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange on which similar securities issued by the Company are then listed.

           
(h)    [Reserved]

           
(i)    Furnish, at the request of any Holder requesting registration of Registrable Securities pursuant to this Section 1, on the date that such Registrable Securities are delivered to the underwriters
for sale, if such securities are being sold through underwriters, or on the date that the registration statement becomes effective, if such securities are not being sold through underwriters, (i) an
opinion, dated such date, of the counsel representing the Company for the purposes of such registration, in form and substance as is customarily given to underwriters in an underwritten public
offering, addressed to the underwriters, if any, and if there are no underwriters, to the Holders requesting registration of Registrable Securities and (ii) a “comfort” 

 

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 letter dated such
date, from the independent certified public accountants of the Company, in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten
public offering, addressed to the underwriters, if any, and if there are no underwriters, to the Holders requesting registration of Registrable Securities.

       
1.7    Furnish Information.  It shall be a condition precedent to the obligations of the Company to take any action pursuant to this Section 1 with respect to the Registrable
Securities of any selling Holder that such Holder shall furnish to the Company such information regarding itself, the Registrable Securities held by it, and the intended method of disposition of such
securities as shall be required to timely effect the registration of such Holder’s Registrable Securities.

       
1.8    Expenses of Registration.  All Registration Expenses incurred in connection with shelf registrations and all issuances off the shelf  (pursuant to Section 1.2), two
demand registrations (pursuant to Section 1.3) and any piggyback registrations (pursuant to Section 1.4), shall be borne by the Company.

       
1.9    Delay of Registration.  No Holder shall have any right to obtain or seek an injunction restraining or otherwise delaying any such registration as the result of any controversy
that might arise with respect to the interpretation or implementation of this Section 1.

   
1.10    Indemnification.  In the event any Registrable Securities are included in a registration statement under this Section 1:

           
(a)    To the extent permitted by law, the Company will indemnify and hold harmless each Holder, any underwriter (as defined in the Securities Act) for 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 losses, claims, damages, or liabilities (joint or several) to which they may become subject under
the Securities Act, the Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the
following statements, omissions or violations (collectively a “Violation”): (i) any untrue statement or alleged untrue statement of a material fact contained in such registration
statement, including any preliminary prospectus or final prospectus contained therein or any amendments or supplements thereto, (ii) the 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 Company 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; and the Company will pay to each such Holder, underwriter or
controlling person, as incurred, any legal or other expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability, or action;
provided, however, that the indemnity agreement contained in this subsection 1.10(a) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability, or action
if such settlement is effected without the consent of the Company (which consent shall not be unreasonably withheld), nor shall the Company be liable to any Holder, underwriter or controlling person
for any such loss, claim, damage, liability, or action to the extent that it arises out of or is based upon a Violation which occurs in reliance upon and in 

 

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 conformity with written information
furnished expressly for use in connection with such registration by such Holder, underwriter or controlling person.

           
(b)    To the extent permitted by law, each selling Holder will indemnify and hold harmless the Company, 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, any underwriter, any other Holder selling securities in such registration statement and any controlling person of
any such underwriter or other Holder, against any losses, claims, damages, or liabilities (joint or several) to which any of the foregoing persons may become subject, under the Securities Act, the
Exchange Act or other federal or state law, insofar as such losses, claims, damages, or liabilities (or actions in respect thereto) arise out of or are based upon any Violation, in each case to the
extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder expressly for use in connection with such registration;
and each such Holder will pay, as incurred, any legal or other expenses reasonably incurred by any person intended to be indemnified pursuant to this subsection 1.10(b), in connection with
investigating or defending any such loss, claim, damage, liability, or action; provided, however, that the indemnity agreement contained in this subsection 1.10(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement is effected without the consent of the Holder, which consent shall not be unreasonably withheld or
delayed; provided, further that such consent shall not be deemed to have been unreasonably withheld or delayed if any settlement (i) does not include as an unconditional term thereof,
the giving by the plaintiff or claimant to the Holder of a release from all liability in respect of such loss, claim, damage, liability or action or (ii) includes an admission of guilt on behalf of
the Holder; provided, further that in no event shall any indemnity under this subsection 1.10(b) exceed the net proceeds from the offering received by such Holder, except in the case of
willful fraud by such Holder.

          
(c)    Promptly after receipt by an indemnified party under this Section 1.10 of notice of the commencement of any action (including any governmental action), such indemnified party will, if a claim in
respect thereof is to be made against any indemnifying party under this Section 1.10, deliver to the indemnifying party a written notice of the commencement thereof and the indemnifying party shall
have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume the defense thereof with counsel
mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties which may be represented without conflict by one counsel)
shall have the right to retain one separate counsel, with the reasonable fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the counsel retained by
the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such proceeding. 
The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action, if prejudicial to its ability to defend such action, shall relieve
such indemnifying party of any liability to the indemnified party under this Section 1.10, but the omission so to deliver written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 1.10.

 

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(d)    If the indemnification provided for in this Section 1.10 is held by a court of competent jurisdiction to be unavailable to an indemnified party with respect to any loss, liability, claim, damage
or expense referred to therein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall contribute to the amount paid or payable by such indemnified party as a
result of such loss, liability, claim, damage, or expense in such proportion as is appropriate to reflect the relative fault of the indemnifying party on the one hand and of the indemnified party on
the other in connection with the statements or omissions that resulted in such loss, liability, claim, damage or expense as well as any other relevant equitable considerations; provided, that
in no event shall any contribution by a Holder under this Subsection 1.10(d) exceed the net proceeds from the offering received by such Holder, except in the case of willful fraud by such
Holder.  The relative fault of the indemnifying party and of the indemnified party shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission to state 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.

           
(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 for the parties to such agreement.

           
(f)    The obligations of the Company and Holders under this Section 1.10 shall survive the completion of any offering of Registrable Securities in a registration statement under this Section 1, and
otherwise.

       
1.11    Reports Under Securities Exchange Act of 1934.  With a view to making available to the Holders the benefits of Rule 144 promulgated under the Securities Act 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 agrees
to:

            
(a)    make and keep public information available, as those terms are understood and defined in SEC Rule 144, at all times;

           
(b)    take such action, including the voluntary registration of its Common Stock under Section 12 of the Exchange Act, as is necessary to enable the Holders to utilize Form S-3 for the sale of their
Registrable Securities, such action to be taken as soon as practicable;

           
(c)    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; and

           
(d)    furnish to any Holder, so long as the Holder owns any Registrable Securities, forthwith upon request (i) a written statement by the Company that it has complied with the reporting requirements of
SEC Rule 144, the Securities Act and the Exchange Act, or that it qualifies as a registrant whose securities may be resold pursuant to Form S-3 (at any time after it so qualifies), (ii) a copy of the
most recent annual or quarterly report of the Company and such other reports and documents so 

 

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 filed by the Company, and (iii) such other information as may be reasonably requested in availing any
Holder of any rule or regulation of the SEC which permits the selling of any such securities without registration or pursuant to such form.

       
1.12    Assignment of Registration and Information Rights.  The rights to cause the Company to register Registrable Securities pursuant to this Section 1 may be assigned (but only with
all related obligations) by a Holder to transferee or assignee of  Registrable Securities that (a) is a subsidiary, parent, general partner, limited partner, member, or stockholder of a Holder
(including any side-by side or co-invest fund also managed by such Holder or an affiliate thereof), or (b) acquires at least 250,000 shares of Registrable Securities (as adjusted for stock splits and
combinations); provided the Company is, within 10 days after such transfer, furnished with written notice of the name and address of such transferee or assignee and the securities with respect
to which such registration rights are being assigned; and provided, further, that such assignment shall be effective only if immediately following such transfer the further disposition
of such securities by the transferee or assignee is restricted under the Securities Act and agrees to be bound by all relevant stockholder agreements.

       
1.13    Limitations on Subsequent Registration Rights.  From and after the date of this Agreement, the Company shall not, without the prior written consent of the Holders of a majority
of the outstanding Registrable Securities, enter into any agreement with any holder or prospective holder of any securities of the Company which would allow such holder or prospective holder (a) to
have registration rights superior to the registration rights of the Holders granted herein, (b) to include such securities in any registration filed under Section 1.2 hereof, unless under the terms
of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of his securities will not reduce the amount of the
Registrable Securities of the Holders which is included or (c) to make a demand registration which could result in such registration statement being declared effective prior to the earlier of either
of the dates set forth in subsection 1.2(a) or within one hundred eighty (180) days of the effective date of any registration effected pursuant to Section 1.2.

       
1.14    Termination of Registration Rights.  No Holder shall be entitled to exercise any right provided for in this Section 1 after (i) such time as such Holder (together with its
affiliates) may sell all of its Registrable Securities during a three-month period without registration, pursuant to Rule 144 or another similar exemption under the Securities Act, or (ii) upon
termination of the entire Agreement upon a change in control of the Company as provided in Section 2.1.

    2.   
Miscellaneous.

       
2.1    Termination of Entire Agreement Upon Change of Control.  This Agreement shall terminate, and have no further force and effect, when the Company shall sell, convey, or otherwise
dispose of all or substantially all of its assets or merge with or into or consolidate with any other corporation (other than a wholly-owned subsidiary corporation) or effect any other transaction or
series of related transactions in which more than 50% of the voting power of the Company is disposed of and the Company is not the survivor, provided that this Agreement shall not be
terminated following (i) a merger effected solely for the purpose of changing the domicile of the Company, (ii) a transaction in which the shareholders of the Company 

 

12

 immediately prior to the
transaction own, directly or indirectly, 50% or more of the voting power of the surviving corporation following the transaction or (iii) a transaction in which the consideration paid to the Holders
consists entirely, or in part, of securities and such securities are not freely tradeable by the Holders whether due to the nature of such securities or the status of any Holder as an affiliate of
the Company.

       
2.2    Successors and Assigns.  Except as otherwise provided in this Agreement, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the
respective permitted successors and assigns of the parties (including transferees of any series of preferred stock or any Common Stock issued upon conversion thereof).  Nothing in this
Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or
by reason of this Agreement, except as expressly provided in this Agreement.

       
2.3    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 outstanding Registrable Securities.  Any amendment or waiver effected
in accordance with this paragraph shall be binding upon each party to the Agreement, whether or not such party has signed such amendment or waiver, each future holder of all such Registrable
Securities, and the Company.

       
2.4    Notices.  Unless otherwise provided, any notice required or permitted by this Agreement shall be in writing and shall be deemed sufficient upon delivery, when delivered
personally, or by overnight courier, or sent by telegram, or fax or e-mail with confirmation of receipt, or forty-eight (48) hours after being deposited in the U.S. mail as certified or registered
mail with postage prepaid, and addressed to the party to be notified at such party’s address or fax number as set forth on Exhibit A hereto or as subsequently modified by written notice,
and if to the Company, with a copy to Heller Ehrman White & McAuliff LLP, 701 Fifth Avenue, Suite 6100, Seattle, Washington  98104-7098, Attn:  Jeffry Shelby, (fax: 206-447-0849), and
if to the Investors, with a copy to each of Brown Raysman Millstein Felder & Steiner LLP, 900 Third Avenue, New York, NY 10022, Attn: Stuart Bressman (fax: 212-895-2900).

       
2.5    Severability.  If one or more provisions of this Agreement are held to be unenforceable under applicable law, the parties agree to renegotiate such provision in good
faith.  In the event that the parties cannot reach a mutually agreeable and enforceable replacement for such provision, then (a) such provision shall be excluded from this Agreement, (b) the
balance of the Agreement shall be interpreted as if such provision were so excluded and (c) the balance of the Agreement shall be enforceable in accordance with its terms.

       
2.6    Governing Law.  This Agreement and all acts and transactions pursuant hereto shall be governed, construed and interpreted in accordance with the laws of the State of New York,
without giving effect to principles of conflicts of laws.

 

13

       
2.7    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.

       
2.8    Titles and Subtitles.  The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this
Agreement.

       
2.9    Aggregation of Stock.  All shares of the Series B Preferred Stock held or acquired by affiliated entities or persons shall be aggregated together for the purpose of determining
the availability of any rights under this Agreement.  The share numbers set forth in Sections 1 (determining minimum shareholding amounts for certain rights) shall be proportionately adjusted
for any stock split, combination, or other recapitalization or the like.

       
2.10    Entire Agreement.  This Agreement constitutes the full and entire understanding and agreement between the parties with regard to the subject hereof.

[Signature Page Follows]

 

 

 

 

14

 

    The parties have executed this Registration Rights Agreement as of the date first above written.

	
COMPANY:

	

	
VIXEL CORPORATION

	

	

	
By: /s/ Kurtis L.
Adams                                                      

	
Name:  Kurtis L. Adams

	
Title:    Chief
Financial Officer

	
Address:

	
11911 North Creek Parkway South

	
Bothell, Washington  98011

	

Fax: (425) 806-4001

 

SIGNATURE PAGE TO
REGISTRATION RIGHTS AGREEMENT

 

	
INVESTORS:

	

	
THE GOLDMAN SACHS GROUP, INC.

	
 

By: /s/ Joe DiSabato                                                      

	
Name: Joe DiSabato

	
Title:   Attorney-in-Fact

	
Address:

	
85 Broad Street

	
New York, New York  10004

	

Attn:  Tara Harrison

	
Fax: (212) 357-5505

 

	
GOLDMAN SACHS DIRECT INVESTMENT

FUND 2000, L.P.

	
 

By: /s/ Joe DiSabato                                                      

	
Name: Joe DiSabato

	
Title:   Attorney-in-Fact

	
Address:

	
85 Broad Street

	
New York, New York  10004

	
Attn:  Tara Harrison

	
Fax: (212) 357-5505

 

 

SIGNATURE PAGE TO
REGISTRATION RIGHTS AGREEMENT

 

 

	
HOWARD HUGHES MEDICAL INSTITUTE

	

	
By:  Wellington Management Company,
LLP,

as investment advisor

	
 

By:  /s/ Julie
Jenkins                                                      

	
Name: Julie A. Jenkins

	
Title:    Vice
President and Counsel

	
Address:

	
75 State Street

	
Boston, MA  02109

 

	
NEW YORK STATE NURSES ASSOCIATION

PENSION PLAN

	
       

	
 By: Wellington Management
Company, LLP,

       as investment advisor

	
 

By: /s/ Julie
Jenkins                                                      

	
Name: Julie A. Jenkins

	
Title:    Vice
President and Counsel

	
Address:

	
75 State Street

	
Boston, MA  02109

 

 

SIGNATURE PAGE TO
REGISTRATION RIGHTS AGREEMENT

 

 

	
OHIO CARPENTERS' PENSION FUND

	

	
By: Wellington Management Company, LLP,

       as investment advisor

	
 

By: /s/ Julie
Jenkins                                                      

	
Name: Julie A. Jenkins

	
Title:    Vice
President and Counsel

	
Address:

	
75 State Street

	
Boston, MA  02109

 

	
LABORERS' DISTRICT COUNCIL AND

CONTRACTORS' OF OHIO PENSION FUND

	
       

	
By: Wellington Management Company, LLP,

       as investment advisor

	
 

By: /s/ Julie
Jenkins                                                      

	
Name: Julie A. Jenkins

	
Title:    Vice
President and Counsel

	
Address:

	
75 State Street

	
Boston, MA  02109

 

 

SIGNATURE PAGE TO
REGISTRATION RIGHTS AGREEMENT

 

	
AUSTRALIAN RETIREMENT FUND

	

	
By: Wellington Management Company, LLP,

       as investment advisor

	
 

By: /s/ Julie
Jenkins                                                      

	
Name: Julie A. Jenkins

	
Title:    Vice
President and Counsel

	
Address:

	
75 State Street

	
Boston, MA  02109

 

	
ESSS GLOBAL SMALL COMPANIES

	
       

	
By: Wellington Management Company, LLP,

       as investment advisor

	
 

By: /s/ Julie
Jenkins                                                      

	
Name: Julie A. Jenkins

	
Title:    Vice
President and Counsel

	
Address:

	
75 State Street

	
Boston, MA  02109

 

 

SIGNATURE PAGE TO
REGISTRATION RIGHTS AGREEMENT

 

EXHIBIT A

INVESTORS:

THE GOLDMAN SACHS GROUP, INC.

GOLDMAN SACHS DIRECT INVESTMENT FUND 2000, L.P.

HOWARD HUGHES MEDICAL INSTITUTE

NEW YORK STATE NURSES ASSOCIATION PENSION PLAN

OHIO CARPENTERS’ PENSION FUND

LABORERS’ DISTRICT COUNCIL AND

CONTRACTORS’ OF OHIO PENSION FUND

AUSTRALIAN RETIREMENT FUND

ESSS GLOBAL SMALL COMPANIESexhstockpurchaseagr.rtf

VIXEL
CORPORATION

                        SERIES B CONVERTIBLE PREFERRED STOCK AND WARRANT

 PURCHASE AGREEMENT

FEBRUARY 14, 2003

VIXEL
CORPORATION

                        SERIES B CONVERTIBLE PREFERRED  STOCK AND WARRANT

 PURCHASE AGREEMENT

        This
Series B Convertible Preferred Stock and Warrant Purchase Agreement (this
“Agreement”) is made as of February 14, 2003, by
and among VIXEL CORPORATION, a Delaware corporation (the
“Company”) with its principal office at 11911
North Creek Parkway South, Bothell, Washington 98011, and the persons listed on
the Schedule of Purchasers attached hereto as Exhibit A
(each a “Purchaser” and collectively, the
“Purchasers”). 

WHEREAS:

                  A.       The Company and the Purchasers  are executing and delivering  this Agreement in reliance
upon  the  exemption  from  securities  registration  afforded  by Rule 506 of  Regulation  D  ("Regulation  D") as
promulgated by the United States  Securities and Exchange  Commission (the "SEC") under the Securities Act of 1933,
as amended (the "Securities Act");

                  B.       The  Purchasers  wish  to  purchase,  upon  the  terms  and  conditions  stated  in this
Agreement,  up to an aggregate of $8 million of the Company's  Series B  Convertible  Preferred  Stock,  $0.001 par
value per share (the  "Preferred  Shares")  at a per share price of $2.10 and in the  respective  amounts set forth
opposite each  Purchaser's  name on the Schedule of  Purchasers.  The Preferred  Shares shall be  convertible  into
shares of the Common  Stock of the  Company,  par value  $0.0015  per share  (the  "Common  Stock").  The shares of
Common  Stock  issued upon  conversion  of the  Preferred  Shares are  hereinafter  referred to as the  "Conversion
Shares";

                  C.       The Company  shall  authorize as of the Closing the  issuance of Common  Stock  Purchase
Warrants to the Purchasers  (the  "Warrants"),  each in the form attached hereto as
 Exhibit B, to acquire shares of
Common Stock (such shares of Common Stock issued upon exercise of the Warrants are  hereinafter  referred to as the
"Warrant  Shares").  The Preferred Shares,  the Conversion Shares and the Warrant Shares are collectively  referred
to herein as the "Shares".  The Shares and the Warrants are  collectively  referred to herein as the  "Securities";
and

                  D.       Contemporaneously  with the  execution  and  delivery  of this  Agreement,  the  parties
hereto will execute and deliver a  Registration  Rights  Agreement in  substantially  the form  attached  hereto as
Exhibit C (the  "Registration  Rights  Agreement"),  pursuant to which the  Company  has agreed to provide  certain
registration rights under the Securities Act and the rules and regulations promulgated  thereunder,  and applicable
state securities laws.

                  NOW, THEREFORE, the Company and the Purchasers hereby agree as follows:

 

ARTICLE 1

AUTHORIZATION
AND SALE OF PREFERRED SHARES AND WARRANTS

    1.1  Sale of
Preferred Shares and Warrants. Subject to the terms and conditions of this
Agreement, the Company agrees to issue and sell to each Purchaser and each
Purchaser severally agrees to purchase from the Company:

       
(a)      Preferred  Shares in the  amount  and at the  purchase  price set  forth  opposite  each
Purchaser's name on Exhibit A; and

    1.2  (b)
Warrants to purchase shares of Common Stock in the amount set forth opposite
each Purchaser’s name on Exhibit A, at an exercise price equal
to $2.63 per share of Common Stock.

ARTICLE 2

CLOSING
DATE; DELIVERY

    2.1  Closing
Date. The closing of the purchase and sale of the Preferred Shares and
Warrants hereunder (the “Closing”) shall be held
at the offices of Brown Raysman Millstein Felder & Steiner LLP, 900 Third
Avenue, New York, New York 10022, at 10:00 a.m. New York time on February 19,
2003 or at such other time and place upon which the Company and the Purchasers
shall agree, subject to satisfaction or waiver of all of the conditions set
forth in Article 5. The date of the Closing is hereinafter referred to as the
“Closing Date”.

    2.2

Delivery. Subject to the satisfaction or waiver of each of the
conditions hereof, at the Closing, the Company will deliver to each Purchaser:
(i) a duly executed Warrant and a certificate representing the number of
Preferred Shares to be purchased by such Purchaser, registered in the
Purchaser’s name as shown on Exhibit A, (ii) each of the
certificates, instruments and agreements required to be delivered by the Company
pursuant to Article 5 hereof, (iii) filed copies of the Series B Certificate of
Designations of the Company (the “Certificate”) and (iv) such other
documents as the Purchasers may reasonably request in connection with the
Closing. Such delivery shall be against payment of the purchase price therefor
by wire transfer of immediately available funds to the Company in accordance
with the Company’s written wiring instructions in the amounts set forth on
Exhibit A. 

ARTICLE 3

REPRESENTATIONS
AND WARRANTIES OF THE COMPANY

        The
Company represents and warrants to each of the Purchasers as of the date hereof
and as of the Closing Date, as follows: 

    3.1

Organization and Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the requisite corporate power and authority to own its
properties and to carry on its business as it is now being conducted. The
Company is duly qualified and licensed as a foreign corporation to do business,
and is in good standing, in each jurisdiction in which the nature of the
business conducted by it makes such qualification necessary, except where the
failure to so qualify or be licensed, individually or in the aggregate, has not
had and would not reasonably be expected to have a Material Adverse Effect. As
used in this

2

 

 Agreement, “Material Adverse Effect”
means any material adverse effect on, or a material adverse change in, or a
group of such effects on or changes in, (i) the business, operations, financial
condition, results of operations, assets or liabilities of the Company, taken as
a whole or (ii) the ability of the Company to perform its obligations hereunder,
under the Registration Rights Agreement or the Warrants. Other than Arxcel
Technologies, Inc., with respect to which, as of the date hereof, there is no
activity, the Company has no subsidiaries as such term is defined in Regulation
S-X promulgated under the Securities Act of 1933, as amended.

    3.2  Due
Authorization. The Company has all right, corporate power and authority
and has taken all requisite corporate action to execute and deliver this
Agreement and the Registration Rights Agreement, to sell and issue the Preferred
Shares and Warrants, to issue the Conversion Shares upon conversion of the
Preferred Shares in accordance with the terms of the Certificate, to issue the
Warrant Shares upon exercise of the Warrants in accordance with the terms of
such Warrants and to carry out and perform all of its obligations under this
Agreement and the Registration Rights Agreement. The execution and delivery by
the Company of this Agreement and the Registration Rights Agreement, and the
compliance by the Company with each of the provisions of this Agreement and the
Registration Rights Agreement (i) are within the corporate power and authority
of the Company and (ii) have been duly authorized by all necessary corporate
action of the Company. This Agreement has been and the Registration Rights
Agreement, when executed and delivered by the Company, will be, duly and validly
executed and delivered by the Company. This Agreement constitutes, and the
Registration Rights Agreement, when executed and delivered by the Company will
constitute, a legal, valid and binding obligation of the Company, enforceable in
accordance with its terms, except (a) as limited by applicable bankruptcy,
insolvency, reorganization or similar laws relating to or affecting the
enforcement of creditors’ rights generally and (b) as limited by
equitable principles generally.

    3.3  Issuance
and Delivery of the Shares. The Securities have been duly authorized by
the Company and, when issued, sold and delivered in accordance with this
Agreement, the Preferred Shares and the Warrants will be (i) validly issued (in
the case of the Preferred Shares and the Warrants), fully paid and nonassessable
(in the case of the Preferred Shares), (ii) free from all taxes, liens and
charges with respect to the issue thereof, and shall not be subject to
preemptive rights or other similar rights of stockholders of the Company or any
liens or encumbrances and (iii) entitled to the rights set forth in the
Certificate and the Warrants, as the case may be. At the Closing, no further
approval or authority of the stockholders or the Board of Directors under the
Delaware General Corporation Law (the “DGCL”),
the rules and regulations of the National Association of Securities Dealers
Automated Quotation Systems (the “NASDAQ”) or the
consent of any other party will be required for the issuance of the Securities.
The Conversion Shares have been duly authorized and reserved by the Company and,
when issued upon conversion of the Preferred Shares in accordance with the
Certificate, will be validly issued, fully paid and nonassessable. At the
Closing, except in connection with the vote of the common stockholders as may be
required under Section 5(d)(vi) of the Certificate, no further approval or
authority of the stockholders or the Board of Directors under the DGCL, the
rules and regulations of the NASDAQ or the consent 

3

 

 of any other party other than
the approval of the Nasdaq National Market of the listing of such shares of
Common Stock, will be required for the issuance of the Conversion Shares. The
Warrant Shares have been duly authorized and reserved by the Company and, when
issued upon exercise of the Warrant in accordance with the terms of the Warrant,
will be validly issued, fully paid and nonassessable.

    3.4  SEC
Documents; Financial Statements. Since September 29, 2002, the Company
has filed in a timely manner all documents that the Company was required to file
with the SEC pursuant to the reporting requirements of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”).
Since October 1, 1999, all documents filed or submitted by the Company with the
SEC (including all exhibits included therein and financial statements and
schedules thereto and documents incorporated by reference therein) (the
“SEC Documents”) as of their respective filing
dates complied in all material respects with the requirements of the Exchange
Act or the Securities Act, as applicable. None of the SEC Documents as of their
respective dates contained any untrue statement of material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company (including any
related schedules and/or notes) included in the SEC Documents (the
“Financial Statements”) have been prepared in
accordance with United States generally accepted accounting principles
(“GAAP”) consistently followed throughout the periods involved (except
as may be indicated in the notes thereto) and fairly present in accordance with
GAAP, the financial position of the Company at the dates thereof and the results
of its operations and cash flows for the respective periods then ended (except
as may be indicated in the notes thereto and except, in the case of interim
statements, for the absence of footnotes and as permitted by Form 10-Q and
subject to changes resulting from year-end adjustments, none of which are
material in amount or effect).

    3.5  No
Violations; Consents. The execution and delivery of this Agreement and
the Registration Rights Agreement, and the consummation of the transactions
contemplated hereby and thereby (including, without limitation, the issuance of
the Securities) do not and will not: (i) conflict with, or result in a breach or
violation of, any provision of the Company’s Certificate of Incorporation,
as amended and as in effect on the date hereof (the “Certificate of
Incorporation”) or the Company’s By-laws, as in effect
on the date hereof (the “Bylaws”) or any other
organizational documents of the Company or (ii) constitute, with or without
notice or the passage of time or both, a breach, violation or default, create an
encumbrance or lien, or give rise to any right of termination, modification,
cancellation, prepayment, suspension, limitation, revocation or acceleration
under (A) any statute, law, rule or regulation, state or federal order, judgment
or decree to which the Company or any of its properties is subject or (B) any
provision of any indenture, mortgage, lease or other material agreement or
instrument to which the Company is a party or pursuant to which any of them or
any of their assets or properties is subject, where such breach, violation or
default, creation of an encumbrance or lien, or right of termination,
modification, cancellation, prepayment, suspension, limitation, revocation or
acceleration, individually or in the aggregate, has not had and would not
reasonably be expected to have a Material Adverse Effect. No consent, approval,
order or authorization of, or registration, qualification, designation,
declaration or filing with, any federal, state, or local governmental authority
on the part of the Company is required in connection with the consummation of
the transactions contemplated by this Agreement and the Registration Rights
Agreement except for (a) the filing of the Certificate with the Secretary of
State of the State of Delaware, (b) the filing of the Nasdaq National Market
Notification Form with the Nasdaq National Market, (c) compliance with the
securities

4

 

 and blue sky laws in the states in which the Preferred Shares and
Warrants are offered and/or sold, which compliance will be effected in
accordance with such laws and (d) any filings, consents, approvals or
authorizations of, notifications to, or exemptions or waivers by any federal,
state, or local governmental authority or any other person which are not,
individually or in the aggregate, material to the consummation of the
transactions contemplated hereby or thereby. The Company has obtained a waiver
of Section 3.15 of the Amended and Restated Investors’ Rights Agreement,
dated as of February 17, 1998, among the Company and the parties thereto, as
amended by the First Amendment to the Amended and Restated Investors Rights
Agreement, dated as of February 17, 1998 (the “Prior Rights
Agreement”) from the holder(s) of a majority of the
Registrable Securities (as such term is defined in the Prior Rights Agreement)
outstanding as of the date hereof.

    3.6  No
Material Adverse Change. Except as otherwise disclosed herein, on
Schedule 3.6 attached hereto or in the SEC Documents, since September 29, 2002,
there have not been any changes in the assets, liabilities, financial condition,
business prospects or operations of the Company from that reflected in the
Financial Statements included in the Company’s Quarterly Report on Form 10Q
for the period ending September 29, 2002, except changes which could not have,
either individually or in the aggregate, a Material Adverse Effect. Except for
the transactions contemplated by this Agreement, no event or circumstance has
occurred or information exists with respect to the Company or its business,
properties, operations or financial condition, which, under applicable law, rule
or regulation, requires public disclosure or announcement by the Company but
which has not been so publicly announced or disclosed.

    3.7  Authorized
Capital Stock. As of the date hereof and immediately prior to the
issuance of the Preferred Shares and Warrants hereunder, the authorized capital
stock of the Company consists of 60,000,000 shares of Common Stock, of which as
of January 31, 2003, 23,229,982 shares are issued and outstanding (which such
number reflects a repurchase of 1,359,160 shares by the Company from its Chief
Financial Officer and its Chief Executive Officer), and 5,000,000 shares of
Preferred Stock, of which as of the date hereof no shares are issued or
outstanding. All of the outstanding shares have been validly issued and are
fully paid and nonassessable. Except as set forth in the SEC Documents, no
shares of Common Stock or Preferred Stock are subject to preemptive rights or
any other similar rights or any liens or encumbrances suffered or permitted by
the Company. Except as set forth in the SEC Documents, as of the date hereof,
(i) there are no outstanding options (except for options granted under the
Company’s existing equity incentive plans), warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company, or contracts, commitments, understandings or arrangements by which the
Company is or may become bound to issue additional shares of capital stock of
the Company and (ii) there are no agreements or arrangements under which the
Company is obligated to register the sale of any of their securities under the
Securities Act (except the Registration Rights Agreement). There are no
securities or instruments containing anti-dilution or similar provisions that
will be triggered by the issuance of any of the Securities as described in this
Agreement. The Company has furnished to the Purchasers true and correct copies
of the Company’s Certificate of Incorporation, and the Company’s
By-laws.

5

 

    3.8

Litigation. Except as disclosed in the SEC Documents, there are no
actions, suits proceedings or investigations pending or, to the Company’s
knowledge, threatened against the Company or involving any of their respective
properties or assets before or by any court or arbitrator or any governmental
body, agency or official which (i) in any manner challenges or seeks to prevent,
enjoin, alter or materially delay the transactions contemplated by this
Agreement or (ii) if resolved adversely to the Company, would reasonably be
expected to have a Material Adverse Effect. Except as disclosed in the SEC
Documents, the Company is not in default under or in breach of any order,
judgment or decree of any court, arbitrator or governmental body, except for
defaults or breaches, which, individually or in the aggregate, have not had and
would not reasonably be expected to have a Material Adverse Effect.

    3.9

Intellectual Property. The Company owns or possesses adequate
rights to use all material patents, patent rights, inventions, trade secrets,
know-how, trademarks, service marks, trade names, copyrights or other
information (collectively, “Intellectual
Property”), which are necessary to conduct its businesses as
currently conducted. The Company has not received any notice of, and has no
knowledge of, any infringement of or conflict with asserted rights of others
with respect to any Intellectual Property and the Company is unaware of any
facts or circumstances which might give rise to the foregoing. To the
Company’s knowledge, none of the patent rights owned or licensed by the
Company are unenforceable or invalid. The Company has taken reasonable security
measures to protect the secrecy, confidentiality and value of all of its
Intellectual Property.

    3.10  Title to
Property and Assets. The Company owns or possesses the necessary rights
to all properties, assets, licenses, permits and the like required to operate
its business as currently operated, except where the failure to own or possess
such rights, would not reasonably be expected to have a Material Adverse Effect.
The properties and assets of the Company are owned by the Company free and clear
of all mortgages, deeds of trust, liens, charges, encumbrances and security
interests except for statutory liens for the payment of current taxes that are
not yet delinquent and liens, encumbrances and security interests that arise in
the ordinary course of business and have not had and would not reasonably be
expected to have a Material Adverse Effect. With respect to the property and
assets it leases, the Company is in compliance with such leases in all material
respects.

    3.11

Taxes. The Company has timely filed all necessary federal,
state, and foreign income and franchise tax returns due prior to the date hereof
and has paid or accrued all taxes shown as due thereon. To the Company’s
knowledge, there are no unpaid taxes in any material amount claimed to be due by
the taxing authority of any jurisdiction. The Company has not been notified that
any of its tax returns is currently being audited by any taxing authority.

    3.12  Real
Property Holding Corporation; Investment Company. The Company is not,
and has not been at any time during the past five years, a “United States
real property holding corporation” within the meaning of Section 897(c)(2)
of the Code. The Company is not, and after immediate application of the proceeds
of the sale of the Preferred Shares and Warrants will not be, an
“investment company” or an “affiliated person” of, or
“promoter” or “principal underwriter” for an investment
company, or, a company “controlled by” an “investment
company” (other than the Purchaser) within the meaning of the Investment
Company Act of 1940, as amended.

6

 

    3.13

Insurance. The Company is insured by recognized, financially sound
and reputable institutions with policies in the amounts and with such
deductibles and covering such risks that the Company reasonably believes is
prudent and adequate for its business, all of which insurance is in full force
and effect. The Company has no reason to believe that it will not be able to
renew its existing insurance coverage as and when such policies expire.

    3.14

Acknowledgment Regarding Purchasers’ Purchase of the
Securities. The Company acknowledges and agrees that each of the
Purchasers is acting solely in the capacity of arm’s length purchaser with
respect to this Agreement and the transactions contemplated hereby. The Company
further acknowledges that each Purchaser is not acting as a financial advisor or
fiduciary of the Company (or in any similar capacity) with respect to this
Agreement and the transactions contemplated hereby and any advice given by any
of the Purchasers or any of their respective representatives or agents in
connection with this Agreement and the transactions contemplated hereby is
merely incidental to such Purchaser’s purchase of the Securities. The
Company further represents to each Purchaser that the Company’s decision to
enter into this Agreement has been based solely on an independent evaluation by
the Company and its representatives.

    3.15  General
Solicitation; No Integration; Registration and Qualification. Neither
the Company nor any other person or entity authorized by the Company to act on
its behalf has engaged or will engage in any form of general solicitation or
general advertising (within the meaning of Rule 502(c) of the Securities Act) of
investors with respect to offers or sales of the Preferred Shares and the
Warrants. The Company has not, directly or through any agent, sold, offered for
sale, solicited offers to buy or otherwise negotiated in respect of, any
security (as defined in the Securities Act), under circumstances that would
require registration of any of the Securities under the Securities Act or which,
to its knowledge, is or will be integrated with the shares sold pursuant to this
Agreement for purposes of the Securities Act. Assuming the accuracy of the
representations and warranties set forth in Article 4 hereof, it is not
necessary in connection with the offer, sale and delivery of the Securities to
the Purchasers in the manner contemplated by this Agreement to register the
Securities under the Securities Act or the securities laws of any state thereof.

    3.16

Accounting Controls. The Company maintains a system of internal
accounting controls sufficient to provide reasonable assurances that (i)
transactions are executed in accordance with management’s general or
specific authorizations, (ii) transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted
accounting principles and to maintain asset accountability, (iii) access to
assets is permitted only in accordance with management’s general or
specific authorization and (iv) the recorded accountability for assets is
compared with the existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.

    3.17

Employment Matters. To the Company’s knowledge, the
Company is in compliance with all federal, state, local and foreign laws and
regulations respecting employment and employment practices, terms and conditions
of employment and wages and hours except where failure to be in compliance would
not have a Material Adverse Effect. To the Company’s knowledge, there are
no pending investigations involving the Company by the U.S. Department of Labor
or any other governmental agency responsible for the enforcement of such
federal, state, local or foreign laws and regulations. There is no unfair labor
practice charge or complaint against the Company pending before the National
Labor Relations Board or any strike, picketing, boycott, dispute, slowdown or
stoppage pending or, to the Company’s knowledge, threatened against or
involving the Company.

7

 

    3.18  Transfer
Taxes. On the Closing Date, all stock transfer or other taxes (other
than income taxes) that are required to be paid in connection with the sale and
transfer of the Preferred Shares and the Warrants to be sold to the Purchasers
under this Agreement will be, or will have been, fully paid or provided for by
the Company and all laws imposing such taxes will be or will have been fully
complied with.

    3.19

Compliance. Except as disclosed in the SEC documents, the Company
is in compliance with all applicable Federal, state, local and foreign statutes,
laws, rules, regulations, ordinances, codes, decisions, decrees, directives and
orders, including, but not limited to, all United States Department of Commerce
export control licenses and similar export approvals, except where the failure
to be in compliance would not, singly or in the aggregate, result in a Material
Adverse Effect.

    3.20  Foreign
Corrupt Practices. To the Company’s knowledge, neither the Company
nor any director, officer, agent, employee or other person acting on behalf of
the Company has, in the course of his or her actions for, or on behalf of, the
Company used any corporate funds for any unlawful contribution, gift,
entertainment or other unlawful expenses relating to political activity; made
any direct or indirect unlawful payment to any foreign or domestic government
official or employee from corporate funds; violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977; or made any bribe,
rebate, payoff, influence payment, kickback or other unlawful payment to any
foreign or domestic government official or employee.

    3.21      Broker
Fees.  The  Company  neither  is nor  will be  obligated  for any  broker's  or  finder's  fees or
commission in connection with the transactions contemplated herein.

    3.22

Transactions With Affiliates. Except as set forth in the SEC
Documents and except for events as to which the amounts involved are not
material to the Company, since September 29, 2002, no event has occurred that
would be required to be reported as a “Certain Relationship or Related
Transaction” pursuant to Item 404 of Regulation S-K promulgated by the SEC.

    3.23  ERISA
Compliance. Each employee benefit and/or compensation plan,
arrangement, policy and/or agreement maintained or contributed to by the Company
or with respect to which the Company could have any liability (each, a
“Plan” and collectively, the
“Plans”) has been maintained and operated in
accordance with its terms and pursuant to the requirements of all applicable
laws, including but not limited to the Employee Retirement Income Security Act
of 1974, as amended (“ERISA”) and the Code. No
material liability has been, or could reasonably be expected to be, incurred
under Title IV of ERISA (other than for Pension Benefit Guaranty Corporation
premiums payable in the ordinary course) or Section 412(f) or (n) of the Code.
No Plan has incurred an “accumulated funding deficiency” (within the
meaning of Section 302 of ERISA or Section 412 of the Code), whether or not
waived.

 

8

 

ARTICLE 4

REPRESENTATIONS,
WARRANTIES AND COVENANTS OF THE PURCHASERS

        Each
Purchaser hereby represents and warrants to the Company, separately and not
jointly, effective as of the date hereof and as of the Closing Date, as follows: 

    4.1

Organization of the Purchaser. Such Purchaser is duly organized
and validly existing under the laws of the jurisdiction of its organization and
has the requisite power and authority to carry on its business as now being
conducted.

    4.2

Authorization. Such Purchaser has all right, power and authority
to enter into this Agreement and the Registration Rights Agreement and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery by such Purchaser of this Agreement and the Registration Rights
Agreement, and the compliance by such Purchaser with each of the provisions of
this Agreement and the Registration Rights Agreement (a) are within the power
and authority of such Purchaser and (b) have been duly authorized by all
necessary action on the part of such Purchaser. This Agreement has been, and the
Registration Rights Agreement when executed and delivered by such Purchaser at
the Closing in accordance with the terms of this Agreement will be, duly and
validly executed and delivered by such Purchaser, and this Agreement
constitutes, and the Registration Rights Agreement when executed and delivered
by such Purchaser, will constitute, a valid and legally binding agreement of
such Purchaser enforceable in accordance with its terms, except (a) as
limited by applicable bankruptcy, insolvency, reorganization or similar laws
relating to or affecting the enforcement of creditors’ rights generally and
(b) as limited by equitable principles generally.

    4.3  Investment
Experience. Such Purchaser qualifies as an “accredited
investor” as such term is defined in Section 2(15) of the Securities Act
and Rule 501(a) of Regulation D promulgated thereunder. Such Purchaser’s
financial condition and investments are such that it is in a position to bear
the economic risks of the investment and withstand the complete loss of the
investment. Such Purchaser has extensive knowledge and experience in financial
and business matters and has the capability to evaluate the merits and risks of
an investment in the Preferred Shares and Warrants.

    4.4  Investment
Intent. Such Purchaser is purchasing the Preferred Shares and the
Warrants and, upon conversion of the Preferred Shares and/or exercise of the
Warrants, will acquire the Conversion Shares and/or the Warrant Shares, then
issuable for its own account as principal, for investment purposes only, and not
with a present view to, or for, resale, distribution or fractionalization
thereof, in whole or in part, within the meaning of the Securities Act, other
than as contemplated in the Registration Rights Agreement; provided,
however, that by making the representations herein, such Purchaser does not
agree to hold any Securities for any minimum or specific term and reserves the
right to dispose of the Securities at any time in accordance with or pursuant to
a registration statement or an exemption under the Securities Act.

 

9

 

    4.5

Registration or Exemption Requirements. Such Purchaser understands
and agrees that except as provided in the Registration Rights Agreement: (i) the
Securities have not been and are not being registered under the Securities Act
or registered or qualified under any state securities laws in reliance on
specific exemptions therefrom, which exemptions may depend upon, among other
things, the bona fide nature of such Purchaser’s investment intent as
expressed herein, and may not be offered for sale, sold, assigned or transferred
unless (A) subsequently registered thereunder, (B) such Purchaser shall have
delivered to the Company an opinion of counsel, in a form reasonably acceptable
to the Company, to the effect that such Securities to be sold, assigned or
transferred may be sold, assigned or transferred pursuant to an exemption from
such registration, or (C) such securities can be sold, assigned or transferred
pursuant to Rule 144 promulgated under the Securities Act (or a successor rule
thereto) (“Rule 144”); (ii) any sale of such
securities made in reliance on Rule 144 may be made only in accordance with the
terms of Rule 144 and further, if Rule 144 is not applicable, any resale of such
securities under circumstances in which the seller (or the person through whom
the sale is made) may be deemed to be an underwriter (as that term is defined in
the Securities Act) may require compliance with some other exemption under the
Securities Act or the rules and regulations of the SEC thereunder; and (iii)
neither the Company nor any other person is under any obligation to register
such securities under the Securities Act or any state securities laws or to
comply with the terms and conditions of any exemption thereunder.

    4.6  No Legal,
Tax or Investment Advice. Such Purchaser understands that nothing in
this Agreement or any other materials presented to such Purchaser in connection
with the purchase and sale of the Preferred Shares and the Warrants constitutes
legal, tax or investment advice. Such Purchaser has consulted such legal, tax
and investment advisors as it, in its sole discretion, has deemed necessary or
appropriate in connection with its purchase of the Preferred Shares and the
Warrants.

    4.7

Information. Such Purchaser and its advisors, if any, have been
furnished with all materials relating to the business, finances and operations
of the Company and materials relating to the offer and sale of the Preferred
Shares and the Warrants which have been specifically requested by such
Purchaser. Such Purchaser and its advisors, if any, have been afforded the
opportunity to ask questions of the Company. Neither such inquiries nor any
other due diligence investigations conducted by such Purchaser or its advisors,
if any, or its representatives shall modify, amend or affect such
Purchaser’s right to rely on the Company’s representations and
warranties contained in Section 3 above.

    4.8

Governmental Review. Such Purchaser understands that no
United States federal or state agency or any other government or governmental
agency has passed upon or made any recommendation or endorsement of the
Preferred Shares or the Warrants or the fairness or suitability of the
investment in the Securities nor have such authorities passed upon or endorsed
the merits of the offering of the Preferred shares and the Warrants.

    4.9

Legend. Such Purchaser understands that, until such time as the
Registration Statement (as defined below) has been declared effective or the
Securities may be sold pursuant to Rule 144 under the Securities Act without any
restriction as to the number of securities as of a particular date that can then
be immediately sold, the Securities may bear a restrictive legend in
substantially the following form (and a stop transfer order may be placed
against transfer of the certificates for the Shares): 

 

10

 

  
            “THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF ANY STATE OF THE
UNITED STATES OR IN ANY OTHER JURISDICTION. THE SECURITIES REPRESENTED HEREBY
MAY NOT BE OFFERED, SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE
REGISTRATION STATEMENT FOR THE SECURITIES UNDER APPLICABLE SECURITIES LAWS
UNLESS OFFERED, SOLD OR TRANSFERRED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS, THE AVAILABILITY OF WHICH IS TO BE
ESTABLISHED TO THE SATISFACTION OF THE COMPANY.” 
  

The legend set forth above
shall be removed and the Company shall issue a certificate without such legend
to the holder of any Securities upon which it is stamped, if (i) the resale or
transfer of Securities is registered pursuant to an effective registration
statement and the holder represents in writing to the Company that such
securities have been or are being sold pursuant to such registration statement,
(ii) in connection with a sale transaction, such holder provides the Company
with an opinion of counsel, in a form reasonably acceptable to the Company, to
the effect that a public sale, assignment or transfer of such Securities may be
made in compliance with an exemption under the Securities Act, or (iii) any of
the Securities can be sold pursuant to Rule 144 without any restriction as to
the number of securities acquired as of a particular date that can then be
immediately sold. Each Purchaser acknowledges, covenants and agrees to sell any
of the Securities represented by a certificate(s) from which the legend has been
removed, only pursuant to (i) a registration statement effective under the
Securities Act, or (ii) advice of counsel that such sale is exempt from
registration required by Section 5 of the Securities Act. In the event the above
legend is removed from any of the Securities, the Company may, upon reasonable
advance notice to the holder, require that the above legend be placed on any of
the Securities that cannot then be sold pursuant to an effective registration
statement or Rule 144(k) under the Securities Act (or any successor rule
thereto). 

    4.10  Short
Sales. Each Purchaser hereby covenants and agrees with the Company not
to, directly or indirectly, short sell any Registrable Securities (as defined in
the Registration Rights Agreement) prior to the date on which the Shelf
Registration Statement (as defined in Section 1.2(a) of the Registration Rights
Agreement) is declared effective.

 

11

 

ARTICLE 5

CONDITIONS
TO CLOSING OBLIGATIONS OF PURCHASERS

        Each
Purchaser’s obligation to purchase the Preferred Shares and the Warrants at
the Closing is, at the option of such Purchaser, subject to the fulfillment or
waiver of the following conditions: 

    5.1

Representations and Warranties. The representations made by the
Company in Article 3 hereof shall be true and correct in all material
respects (except to the extent that any of such representations and warranties
is already qualified as to materiality in Section 3 above, in which case such
representations and warranties shall be true and correct without further
qualification), in each case as of the date of this Agreement and as of the
Closing Date, as if made at and as of such time, except to the extent expressly
made as of an earlier date, in which case as of such date.

    5.2

Covenants. All covenants, agreements and conditions
contained in this Agreement to be performed by the Company on or prior to the
Closing Date shall have been performed or complied with in all material
respects.

    5.3  Compliance
Certificate. The Company will have delivered to the Purchasers at
Closing, a certificate signed on its behalf by its Chief Executive Officer or
Chief Financial Officer certifying that the conditions specified in Articles 5.1
and 5.2 hereof have been fulfilled.

    5.4

Certificates and Warrants. The Company shall have delivered
to the Purchasers (a) duly executed certificates for the Preferred Shares and
(b) the Warrants in substantially the form attached hereto as Exhibit B,
(each, in such denominations as set forth opposite each Purchaser’s name on
Exhibit A).

    5.5  Legal
Opinion. The Purchasers shall have received on the Closing Date
an opinion of Heller Ehrman White & McAuliffe LLP, counsel for the Company,
dated the Closing Date and addressed to each Purchaser, in the form attached
hereto as Exhibit D.

    5.6  Board of
Directors. Upon the Closing, the authorized size of the Board of
Directors of the Company shall be eight (8) members and a designee of Goldman
Sachs & Co. (the “Goldman Designee”), which
shall initially be Peter Perrone, shall be a member of the Board of Directors.

    5.7

Certificate of Designation. The Certificate shall be in
form and substance satisfactory to the Purchasers, shall have been duly filed
with the Secretary of State of the State of Delaware and shall have become
effective and in full force and effect.

    5.8

Transaction Documents. At or prior to the Closing, the
Company shall have delivered to each of the Purchasers originals of each of this
Agreement and the Registration Rights Agreement, in each case, duly executed by
the Company.

    5.9  Nasdaq
Listing. The Company shall have made application to NASDAQ
National Market for inclusion of the shares of Common Stock issuable upon
conversion of the Preferred Shares and exercise of the Warrants on said market,
subject to official notice of issuance.

 

12

 

    5.10 Laws. The transactions  contemplated  hereby shall not violate any law, regulation or order then in effect
and applicable to Purchasers or the Company.

5.11     Resolutions.      The Board of  Directors  of the Company  shall have adopted  resolutions  approving  the
transaction, in form and substance satisfactory to Purchasers in their sole discretion.

    5.12

Reservation of Shares. As of the Closing Date, the Company
shall have reserved out of its authorized and unissued Common Stock for the
purpose of effecting the conversion of the Preferred Shares and the exercise of
the Warrants, sufficient shares of Common Stock to provide for the issuance of
the Conversion Shares and the Warrant Shares in accordance with the terms of
this Agreement and the Warrants.

    5.13  Good
Standing. At the Closing, the Company shall deliver a certificate
from the Company’s Secretary having attached thereto good standing
certificate in Delaware and Certificate of Existence in Washington (certifying
the Company’s qualification to do business in the State of Washington).

    5.14      Tax
Allocation.  At the Closing,  the Company and the Purchasers  shall use their  reasonable  efforts to
agree to an  allocation of the purchase  price with respect to the  Preferred  Stock and Warrants for United States
tax purposes.

ARTICLE 6

CONDITIONS
TO CLOSING OBLIGATIONS OF COMPANY

        The
Company’s obligation to sell and issue the Preferred Shares and the
Warrants to each Purchaser at the Closing is, at the option of the Company,
subject to the fulfillment or waiver of the following conditions: 

    6.1  Receipt of
Payment. Each Purchaser shall have delivered payment of the purchase
price to the Company for the Preferred Shares and the Warrants being issued
hereunder to it.

    6.2

Representations and Warranties. The representations made by each
Purchaser in Article 4 hereof shall be true and correct in all material
respects (except to the extent that any of such representations and warranties
is already qualified as to materiality in Article 4 above, in which case such
representations and warranties shall be true and correct without further
qualification), in each case as of the date of this Agreement and as of the
Closing Date, as if made at and as of such time, except to the extent expressly
made as of an earlier date, in which case as of such date.

    6.3

Covenants. All covenants, agreements and conditions contained in
this Agreement to be performed by the Purchasers on or prior to the Closing Date
shall have been performed or complied with in all material respects.

 

13

 

    6.4

Transaction Documents. At or prior to the Closing, each of
the Purchasers shall have delivered to the Company originals of each of the
Agreement and the Registration Rights Agreement, in each case, duly executed by
such Purchaser.

    6.5  Nasdaq
Listing. The Company shall have made application to NASDAQ
National Market for inclusion of the shares of Common Stock issuable upon
conversion of the Preferred Shares and exercise of the Warrants on said market,
subject to official notice of issuance.

    6.6

Laws. The transactions contemplated hereby shall not
violate any law, regulation or order then in effect and applicable to such
Purchaser or the Company.

ARTICLE 7

COVENANTS

    7.1

Efforts. Each party shall use commercially reasonable
efforts to timely satisfy each of the conditions to be satisfied by it as
provided in Sections 5 and 6 of this Agreement.

    7.2  Form D and
Blue Sky. The Company agrees to file a Form D with respect to the
Securities as required under Regulation D of the Securities Act and to provide a
copy thereof to each Purchaser promptly after such filing.

    7.3

Reservation of Shares. The Company shall take all action
necessary to at all times have authorized, and reserved for the purpose of
issuance, no less than 100% of the number of shares of Common Stock needed to
provide for the issuance of the Conversion Shares and the Warrant Shares.

    7.4  Filing of
Form 8-K. On the business day following the Closing Date, the
Company shall file a Current Report on Form 8-K with the SEC describing the
terms of the transactions contemplated by this Agreement and including as
exhibits to such Current Report on Form 8-K this Agreement, the form of Warrants
and the Registration Rights Agreement, and the schedules hereto and thereto in
the form required by the Exchange Act.

    7.5  Directors
and Officers Insurance. So long as a representative of Goldman
Sachs is serving on the Board of Directors, the Company will maintain at all
times directors’ and officers’ liability insurance coverage for its
officers and directors. The Company shall enter into an indemnification contract
with the Goldman Designee in substantially the form previously filed with the
SEC.

    7.6 Expenses.  Within ten (10) days after the Closing,  the Company  shall pay the legal fees of Brown Raysman
Millstein Felder & Steiner LLP (special counsel to Goldman Sachs & Co.) in an amount not exceeding $50,000.

    7.7

Transactions With Affiliates. So long as Preferred Shares
are outstanding, the Company shall not enter into, amend, modify or supplement,
any agreement, transaction, commitment or arrangement with any of its officers,
directors, persons who were officers or directors at any time during the
previous two years, stockholders who beneficially own 10% or more of the Common
Stock, or their affiliates, or with any

14

 

 individual related by blood, marriage or
adoption to any such individual or with any entity in which any such entity or
individual owns a 10% or more beneficial interest (each, a “Related
Party”), except for (a) employment arrangements and benefit programs on
reasonable terms, (b) any agreement, transaction, commitment or arrangement
which is approved by the audit committee of the Board of Directors or by a
majority of the disinterested directors of the Company or (c) any agreement,
transaction, commitment or arrangement on an arm’s-length basis on terms no
less favorable than terms which would have been obtainable from a person other
than such Related Party. For purposes hereof, any director who is also an
officer of the Company shall not be a disinterested director with respect to any
such agreement, transaction, commitment or arrangement.
“Affiliate” for purposes hereof means, with respect to any
person or entity, another person or entity that, directly or indirectly, (i) has
a 10% or more equity interest in that person or entity, (ii) has 10% or more
common ownership with that person or entity, (iii) controls that person or
entity, or (iv) shares common control with that person or entity.
“Control” or “controls” for purposes hereof means that a
person or entity has the power, direct or indirect, to conduct or govern the
policies of another person or entity.

    7.8       No
Integration.  The Company  will not  conduct  any future  offering  that will be  integrated  with the
issuance of the Securities for purposes of the rules promulgated by the SEC or NASDAQ.

    7.9  Compliance
with Certificate. In the event of an issuance of Common Stock in
excess of the Excess Amount (as defined in Section 5(c)(vi) of the Certificate),
the Company shall comply in all respects with the provisions of Section 5(c)(vi)
of the Certificate.

    7.10  Board
Representation. So long as at least 1,450,000 shares of the
Preferred Shares remain outstanding, the Company shall use its best efforts to
cause and maintain the election to the Board of Directors a representative of
the Preferred Shares, which such representative shall at all times be designated
by Goldman Sachs (as defined in Section 8.14 hereof).

    7.11  Nasdaq
Listing. The Company shall use its best efforts to have the
shares of Common Stock issuable upon conversion of the Preferred Shares and
exercise of the Warrants approved for listing on the Nasdaq National Market.

ARTICLE 8

MISCELLANEOUS

    8.1       Governing
Law. This  Agreement  shall be governed by and  interpreted  in accordance  with the laws of the
State of New York without regard to the principles of conflict of laws.

    8.2

Counterparts. This Agreement may be executed in two or more
identical counterparts, all of which shall be considered one and the same
agreement and shall become effective when counterparts have been signed by each
party and delivered to the other party. In the event any signature page is
delivered by facsimile transmission, the party using such means of delivery
shall cause four (4) additional original executed signature pages to be
physically delivered to the other party within five (5) days of the execution
and delivery hereof.

 

15

 

    8.3 Headings.  The headings of this  Agreement  are for  convenience  of reference and shall not form part of,
or affect the interpretation of, this Agreement.

    8.4

Severability. If any provision of this Agreement shall be
invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall not affect the validity or enforceability of the
remainder of this Agreement in that jurisdiction or the validity or
enforceability of any provision of this Agreement in any other jurisdiction.

    8.5  Entire
Agreement; Amendments. This Agreement supersedes all other prior
oral or written agreements between the Purchasers and the Company, their
affiliates and persons acting on their behalf with respect to the matters
discussed herein, and this Agreement and the documents referenced herein contain
the entire understanding of the parties with respect to the matters covered
herein and therein and, except as specifically set forth herein or therein,
neither the Company nor any Purchaser makes any representation, warranty,
covenant or undertaking with respect to such matters. No provision of this
Agreement may be waived or amended other than by an instrument in writing signed
by the party to be charged with enforcement.

    8.6

Notices. Any notices, consents, waivers or other
communications required or permitted to be given under the terms of this
Agreement shall be in writing and will be deemed to have been delivered (i) upon
receipt, when delivered personally; (ii) upon receipt, when sent by facsimile if
received prior to 5:00 p.m. (if a mechanically generated confirmation is
generated) on a business day; (iii) three days after being sent by U.S.
certified mail, return receipt requested, or (iv) one day after deposit with a
nationally recognized overnight delivery service, in each case properly
addressed to the party to receive the same. The addresses and facsimile numbers
for such communications shall be:

  

                  If to the Company:
  
    Vixel Corporation

    11911 North Creek Parkway South

    Bothell, Washington 98011

    Telephone:  (425) 806-4528

    Facsimile:  (425) 806-4001

    Attention:  Kurtis L. Adams,

    Chief Financial Officer

  

  With a copy to:

  
    Heller Ehrman White & McAuliffe LLP

    701 Fifth Avenue

    Suite 6100

    Seattle, Washington  98104-7098

    Telephone:  (206) 389-6049

    Facsimile:  (206) 497-0849

    Attention:  Jeffry Shelby, Esq.

  

16

 

If to a  Purchaser,  to its address and  facsimile  number on the  Schedule of  Purchasers,  with
copies to such Purchaser's counsel as set forth on the Schedule of Purchasers:

                  Each party  shall  provide  five days' prior  written  notice to the other party of any change in
address or facsimile number.

    8.7  Successors
and Assigns. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors and assigns,
including any purchasers of the Securities. The Company shall not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of the Purchasers. A Purchaser may assign some or all of its rights
hereunder without the consent of the Company, provided, however,
that (i) any such assignment shall not release such Purchaser from its
obligations hereunder unless such obligations are assumed by such assignee and
the Company has consented to such assignment and assumption, (ii) no Purchaser
may assign its rights hereunder in a manner that would cause the offering of
Securities hereunder to be required to be registered under the Securities Act
and (iii) such assignee is not a direct competitor of the Company.

    8.8       No Third  Party
Beneficiaries.  This  Agreement  is intended  for the  benefit of the parties  hereto and
their respective  permitted  successors and assigns, and is not for the benefit of, nor may any provision hereof be
enforced by, any other person.

    8.9

Survival. The representations and warranties of the Company
and the Purchasers contained herein, shall survive until May 1, 2005. Each
Purchaser shall be responsible only for its own representations, warranties,
agreements and covenants hereunder.

    8.10

Publicity. The Company and each Purchaser shall have the
right to approve before issuance any press releases or any other public
statements with respect to the transactions contemplated hereby;
provided, however, that the Company shall be entitled, without the
prior approval of any Purchaser, to make any press release or other public
disclosure with respect to such transactions as is required by applicable law
and regulations (although each Purchaser shall be consulted by the Company in
connection with any such press release or other public disclosure prior to its
release and shall be provided with a copy thereof), but only to the extent
required by such law or regulation.

    8.11  Further
Assurances. Each party shall do and perform, or cause to be done
and performed, all such further acts and things, and shall execute and deliver
all such other agreements, certificates, instruments and documents, as the other
party may reasonably request in order to carry out the intent and accomplish the
purposes of this Agreement and the consummation of the transactions contemplated
hereby.

    8.12  No Strict
Construction. The language used in this Agreement will be deemed
to be the language chosen by the parties to express their mutual intent, and no
rules of strict construction will be applied against any party.

17

 

    8.13  Equitable
Relief. The Company recognizes that in the event that it fails to
perform, observe, or discharge any or all of its obligations under this
Agreement, any remedy at law may prove to be inadequate relief to the
Purchasers. The Company therefore agrees that the Purchasers shall be entitled
to seek temporary and permanent injunctive relief in any such case without the
necessity of proving actual damages.

    8.14  Other
Engagements and Activities. The investments in the Company being made by
The Goldman Sachs Group, Inc. and Goldman Sachs Direct Investment Fund 2000, L.P.
(collectively, “Goldman Sachs” and, together with
any affiliates thereof, a “GS Entity” or the
“GS Entities”) pursuant to this Agreement and the
Registration Rights Agreement, and any subsequent investments in the Company by
any GS Entity after the date hereof, is being made notwithstanding any
engagement, prior to or subsequent to the date hereof, by the Company, of any GS
Entity as financial advisor, agent or underwriter to the Company.
Notwithstanding anything in this Agreement or the Registration Rights Agreement
to the contrary, no GS Entity will be restricted in any way from engaging in any
brokerage, investment advisory, financial advisory, anti-raid advisory,
financing, asset management, trading, market making, arbitrage and other similar
activities conducted in the ordinary course of its business.

    8.15  No
Promotion. Except as otherwise required by law, the Company agrees that
it will not, without the prior written consent of each GS Entity in each
instance, (i) use in advertising, publicity, or other similar promotional
activity the name of Goldman Sachs, or any affiliate of Goldman Sachs, or any
partner or employee of Goldman Sachs, nor any trade name, trademark, trade
device, service mark, symbol or any abbreviation, contraction or simulation
thereof owned by Goldman Sachs or its affiliates, or (ii) represent, directly or
indirectly, that any product or any service provided by the Company has been
approved or endorsed by Goldman Sachs; provided, however, that
Goldman Sachs acknowledges and agrees that the Company may issue a press release
upon the closing of the sale of the Series B Preferred Stock stating the total
amount invested in the company and a list of the purchasers. Prior to issuing
any subsequent press releases containing or mentioning the name of Goldman
Sachs, the Company shall deliver a copy of such press release in draft form to
Goldman Sachs and shall provide Goldman Sachs with a reasonable amount of time
to review and comment on such draft press release.

    8.16  Transfers
to Affiliates. Any GS Entity’s investment may be transferred at any
time to another GS Entity without a written opinion; provided,
however, that (a) the transferee is an “accredited investor” as
defined in Regulation D promulgated under the Securities Act of 1933, as
amended, and agrees in writing to be bound by the terms of this Agreement and
the Registration Rights Agreement and (b) the transfer is in compliance with all
applicable federal and state securities laws. Any GS Entity may hold its
investment in nominee form.

 

18

The foregoing agreement is hereby executed as of the date first above written.

	
Vixel Corporation

 

	
	
By: /s/ Kurtis L.
Adams                                                                                     

	
Name:  Kurtis L.
Adams

	
Title:  
Chief Financial Officer

 

SIGNATURE
PAGE TO SECURITIES PURCHASE AGREEMENT

 

	
The Goldman Sachs Group, Inc.

 

	
By: /s/ Joe DiSabato                                                                                             

	
Name:  Joe
DiSabato

	
Title: 
Attorney-in-Fact

 

	
	
Goldman Sachs Direct Investment
Fund 2000, L.P.

 

	
By: /s/ Joe DiSabato                                                                                            

	
Name:  Joe
DiSabato

	
Title:   
Attorney-in-Fact

	

 

SIGNATURE
PAGE TO SECURITIES PURCHASE AGREEMENT

 

	
Howard Hughes Medical Institute

	
	
By: Wellington Management Company, LLP,

	
as investment advisor

 

	
	
	
By:  /s/ Julie
Jenkins                                                                                

	
Name: Julie A. Jenkins

	
Title:     Vice President and Counsel

 

	
	
	
	
New York State Nurses Association Pension Plan

	
	
By: Wellington Management Company, LLP,

	
as investment advisor

 

	
	
	
By: /s/ Julie
Jenkins                                                                               

	
Name: Julie A. Jenkins

	
Title:     Vice President and Counsel

 

	
	
	
	
Ohio Carpenters’ Pension Fund

	
	
By: Wellington Management Company, LLP,

	
as investment advisor

 

	
	
	
By: /s/ Julie
Jenkins                                                                               

	
Name: Julie A. Jenkins

	
Title:     Vice President and Counsel     

	
	

 

SIGNATURE PAGE TO
SECURITIES PURCHASE AGREEMENT

 

	

	
Laborers’ District Council and Contractors’ of Ohio Pension Fund

	
	
By: Wellington Management Company, LLP,

	
as investment advisor

 

	
	
	
By: /s/ Julie
Jenkins                                                                               

	
Name: Julie A. Jenkins

	
Title:     Vice President and Counsel     

 

	
	
Australian Retirement Fund

	
	
By: Wellington Management Company, LLP,

	
as investment advisor

 

	
	
	
By: /s/ Julie
Jenkins                                                                               

	
Name: Julie A. Jenkins

	
Title:     Vice President and Counsel 

 

	
	
	
	
ESSS Global Small Companies

	
	
By: Wellington Management Company, LLP,

	
as investment advisor

 

	
	
	
By: /s/ Julie
Jenkins                                                                               

	
Name: Julie A. Jenkins

	
Title:     Vice President and Counsel

 

 

 

SIGNATURE PAGE TO
SECURITIES PURCHASE AGREEMENT

 

Exhibit A

SCHEDULE OF PURCHASERS

	
Purchaser

	
Purchase

Price

	
Preferred

Shares

	
Warrants

	
The Goldman Sachs Group, Inc.

85 Broad Street

New York, NY 10004

Tel: (212) 902-1000

Fax: (212) 357-5505

Attn: Tara Harrison

	
$3,006,700

	
1,431,762

	
429,528

	
Goldman Sachs Direct Investment
Fund 2000, L.P.

c/o The Goldman Sachs Group, Inc.

85 Broad Street

New York, NY 10004

Tel: (212) 902-1000

Fax: (212) 357-5505

Attn: Tara Harrison

with a copy to:

Brown Raysman Millstein Felder & Steiner LLP

900 Third Avenue

New York, NY 10022

Tel: (212) 895-2110

Fax: (212) 895-2900

Attn:  Stuart Bressman, Esq.

	
$3,006,700

	
1,431,762

	
429,528

 

	
Purchaser

	
Purchase

Price

	
Preferred

Shares

	
Warrants

	
Howard Hughes Medical Institute

Wellington Management Company, LLP

75 State Street

Boston, MA  02109

Tel:  (617) 790-7535

Fax: (617) 204-7535 

Attn: Gina Di Mento

 

	
$707,700

	
337,000

	
101,100

	
New York State Nurses Association Pension Plan

Wellington Management Company, LLP

75 State Street

Boston, MA  02109

Tel:  (617) 790-7535

Fax: (617) 204-7535

Attn: Gina Di Mento

 

	
$420,000

	
200,000

	
60,000

                           

	
Ohio Carpenters’ Pension Fund

Wellington Management Company, LLP

75 State Street

Boston, MA  02109

Tel:  (617) 790-7535

Fax: (617) 204-7535

Attn: Gina Di Mento

 

	
$346,500

	
165,000

	
49,500

	
Laborers’ District Council and Contractors’ of Ohio Pension Fund

Wellington Management Company, LLP

75 State Street

Boston, MA  02109

Tel:  (617) 790-7535

Fax: (617) 204-7535

Attn: Gina Di Mento

	
$241,500

	
115,000

	
34,500

 

	
Purchaser

	
Purchase

Price

	
Preferred

Shares

	
Warrants

	
Australian Retirement Fund

Wellington Management Company, LLP

75 State Street

Boston, MA  02109

Tel:  (617) 790-7535

Fax: (617) 204-7535

Attn: Gina Di Mento

	
$119,700

	
57,000

	
17,100

	
 

ESSS Global Small Companies

Wellington Management Company, LLP

75 State Street

Boston, MA  02109

Tel:  (617) 790-7535

Fax: (617) 204-7535

Attn: Gina Di Mento

 

	
 

 

$151,200

	
 

 

72,000

	
 

 

21,600

	
TOTAL

	
$8,000,000

	
3,809,524

	
1,142,856

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