EXHIBIT 4.1
ZHONE TECHNOLOGIES, INC.
RESTATED RIGHTS AGREEMENT
THIS RIGHTS AGREEMENT is entered into as of February 12, 2003, by and
among Zhone Technologies, Inc., a Delaware corporation (the "Company"), the
undersigned holders of Series AA Preferred Stock (the "Series AA Preferred
Stockholders") and Series B Preferred Stock (the "Series B Preferred
Stockholders") of the Company (collectively, the "Preferred Stockholders"), and
Xxxx Xxxxxx, Xxxxxxxx Xxxxxx and Xxxxxx Xxxx (each a "Founder" and collectively,
the "Founders").
RECITALS:
A. In connection with bridge loan transaction (the "Bridge Loan"),
certain of the Preferred Stockholders and the Company have entered into or
concurrently herewith are entering into a Secured Note and Warrant Purchase
Agreement (the "Purchase Agreement"), pursuant to which the participants in the
Bridge Loan shall purchase notes convertible into Series B Preferred Stock of
the Company and warrants exercisable into Series B Preferred Stock of the
Company pursuant to the terms and conditions set forth in the Purchase Agreement
and related documents.
B. In connection with the Stock Purchase and Sale Agreement, dated
as of February __, 2003, by and among the Company, NEC eLuminant Technologies,
Inc.("Target") and the parties thereto (the "Stock Purchase Agreement"), the
Company will issue up to 9,000,000 shares of Series B Preferred Stock of the
Company in exchange for all of the outstanding shares of Target.
C. The obligations of the Company and the Target under the Stock
Purchase Agreement are conditioned, among other things, upon the execution and
delivery of this Agreement by the Company, the Founders and each of the
Preferred Stockholders, and the shareholders of Target shall become parties to
this Rights Agreement upon their execution of a signature page as contemplated
in the Stock Purchase Agreement.
AGREEMENT:
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants contained herein, the parties agree as follows:
1. Registration Rights.
1.1 Definitions. As used in this Agreement, the following
terms shall have the following respective meanings:
(a) The terms "register," "registered" and
"registration" refer to a registration effected by preparing and filing a
registration statement in compliance with the
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Securities Act of 1933, as amended (the "Securities Act"), and the declaration
or ordering of the effectiveness of such registration statement.
(b) The term "Registrable Securities" means (i) any and
all shares of Common Stock of the Company issued or issuable upon conversion of
the shares of Series AA or Series B Preferred Stock, including warrants and
options exercisable therefore or convertible securities convertible thereunto
(which shares of Series AA and Series B Preferred Stock are referred to herein
collectively as the "Preferred Shares"), (ii) except for Sections 1.1(d), 1.2,
1.4, 1.9, 2 and 5.1, the Founder Shares (as defined in subsection (e) below),
(iii) stock issued in lieu of the securities referred to in (i) and (ii) above
in any reorganization or (iv) stock issued in respect of the stock referred to
in (i), (ii) and (iii) above and this clause (iv) as a result of a stock split,
stock dividend, recapitalization or the like (collectively, a "Recapitalization
Event").
(c) The terms "Holder" or "Holders" mean(s) any person
or persons to whom Registrable Securities were originally issued or qualifying
transferees under subsection 1.10 hereof who hold Registrable Securities.
(d) The term "Initiating Holders" means any Holder or
Holders of twenty percent (20%) or greater of the Registrable Securities then
held by the Holders.
(e) The term "Founder Shares" shall mean the shares of
Common Stock that the Founders beneficially own on the date hereof (including
any shares of Common Stock issued to the Founders in connection with the
Restructuring), but excluding any such Common Stock that has been (i) registered
under the Securities Act pursuant to an effective registration statement filed
thereunder and disposed of in accordance with the registration statement
covering them or (ii) publicly sold pursuant to Rule 144 under the Securities
Act.
(f) The term "SEC" means the Securities and Exchange
Commission.
(g) The term "Registration Expenses" shall mean all
expenses incurred by the Company in complying with any single registration
effected pursuant to subsections 1.2, 1.3 and 1.4 hereof, including, without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, reasonable fees
and expenses of one special counsel for all selling stockholders up to One
Hundred Fifty Thousand Dollars ($150,000), 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).
(h) The term "Qualified IPO" means an underwritten
public offering of the Common Stock of the Company resulting in gross proceeds
to the Company of not less than $50 million (prior to expenses and underwriting
commissions) and at an offering price per share of at least $4.00 per share of
Common Stock, as adjusted for any Recapitalization Event.
(i) The term "Material Adverse Change" shall mean any
change, effect or circumstance that, individually or when taken together with
all other such changes, effects or circumstances, has or is reasonably likely to
have, any material adverse effect on the assets, liabilities, operations,
business, competitive position, prospects, results of operations or condition
(financial or otherwise) of the Company; provided, however that none of the
following
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shall be deemed to constitute a Material Adverse Change: any change, effect or
circumstance that results from conditions affecting the U.S. economy or the
world economy.
(j) The term "Person" means any natural person,
partnership (whether limited or general), limited liability company, trust,
estate, association, corporation, custodian, nominee or any other individual or
entity in its own or any representative entity.
1.2 Demand Registration.
(a) Request for Registration. In case the Company shall
receive from Initiating Holders a written request that the Company effect any
registration, qualification or compliance with respect to Registrable Securities
with an anticipated aggregate offering price before deduction of standard
underwriting discounts and commissions, in excess of Five Million Dollars
($5,000,000), the Company will:
(i) promptly give written notice of the proposed
registration, qualification or compliance to all other Holders; and
(ii) as soon as practicable, use its best efforts
to effect all such registrations, qualifications and compliances (including,
without limitation, the execution of an undertaking to file post-effective
amendments, appropriate qualifications under the applicable blue sky or other
state securities laws and appropriate compliance with exemptive regulations
issued under the Securities Act and any other governmental requirements or
regulations) as may be so requested and as would permit or facilitate the sale
and distribution of all or such portion of such Initiating Holder's or
Initiating Holders' Registrable Securities as are specified in such request,
together with all or such portion of the Registrable Securities of any Holder or
Holders joining in such request as are specified in a written request given
within thirty (30) days after receipt of such written notice from the Company;
provided, that the Company shall not be obligated to take any action to effect
such registration, qualification or compliance pursuant to this subsection 1.2:
(A) at any time prior to six (6) months
following the effective date of the registration statement under the Securities
Act for the Company's initial registered underwritten public offering (the
"IPO") of its securities to the general public (other than a registration
statement relating either solely to a sale of securities to employees of the
Company pursuant to a stock option, stock purchase or similar plan or a SEC Rule
145 transaction);
(B) in any particular jurisdiction in
which the Company would be required to execute a general qualification or
compliance unless the Company is already subject to service in such jurisdiction
and except as required by the Securities Act; or
(C) after the Company has effected two
(2) such registrations pursuant to this subsection 1.2(a) and such registrations
have been declared or ordered effective.
Subject to the foregoing clauses (A) through (C), the Company shall file
a registration statement covering the Registrable Securities so requested to be
registered as soon as practical,
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but in any event within ninety (90) days after receipt of the request or
requests of the Initiating Holders; provided, however, that if the Company shall
furnish to such Initiating Holders a certificate signed by the President of the
Company stating that in the good faith judgment of the Board of Directors it
would be detrimental to the Company and its stockholders for such registration
statement to be filed at the date filing would be required and it is therefore
essential to defer the filing of such registration statement, the Company shall
have an additional period of not more than sixty (60) days after the expiration
of the initial ninety (90) day period within which to file such registration
statement; provided, that the Company may not use this right more than once in
any twelve (12) month period. The Company shall use its best efforts to cause
such registration statement to remain effective for at least one hundred twenty
(120) days, or until the distribution described in the registration statement
has been completed, whichever occurs first. In the event the Company does not
perform its obligations set forth in the preceding sentence, then such
registration shall not be deemed effected for the purposes of the limitations
set forth in Section 1.2(a)(ii)(C).
(b) Underwriting. If the Initiating Holders intend to
distribute the Registrable Securities covered by their request by means of an
underwriting, they shall so advise the Company as part of their request made
pursuant to subsection 1.2 and the Company shall include such information in the
written notice referred to in subsection 1.2(a)(i). In such event, the
underwriter shall be selected by a majority in interest of the Initiating
Holders and shall be reasonably acceptable to the Company. The right of any
Holder to registration pursuant to subsection 1.2 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. The Company shall (together with all Holders proposing to
distribute their securities through such underwriting) enter into an
underwriting agreement in customary form with the underwriter or underwriters.
Notwithstanding any other provision of this subsection 1.2, if the underwriter
advises the Initiating Holders in writing that marketing factors require a
limitation of the number of shares to be underwritten, the Initiating Holders
shall so advise all Holders participating in the registration, and the number of
shares of Registrable Securities that may be included in the registration and
underwriting shall be allocated among all such Holders thereof in proportion, as
nearly as practicable, to the respective amounts of Registrable Securities held
by such Holders. If any Holder disapproves of the terms of the underwriting,
such Holder may elect to withdraw therefrom by written notice to the Company,
the underwriter and the Initiating Holders. Any Registrable Securities which are
excluded from the underwriting by reason of the underwriter's marketing
limitation or withdrawn from such underwriting shall be withdrawn from such
registration.
(c) Company Shares. If the managing underwriter has not
limited the number of Registrable Securities to be underwritten, the Company may
include securities for its own account or for the account of others in such
registration if the managing underwriter so agrees and if the number of
Registrable Securities which would otherwise have been included in such
registration and underwriting will not thereby be limited.
1.3 Company Registration.
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(a) Registration. If at any time or from time to time,
the Company shall determine to register any of its securities, for its own
account or the account of any of its stockholders (other than a registration (A)
on Form S-1 or S-8 or successor forms relating solely to employee stock option
or purchase plans, (B) on Form S-4 relating solely to an SEC Rule 145
transaction or (C) a registration on any other form or successor forms the use
of which is not appropriate for the sale of Registrable Securities), the Company
will:
(i) promptly give to each Holder written notice
thereof; and
(ii) include in such registration (and
compliance), and in any underwriting involved therein, all the Registrable
Securities specified in a written request or requests, made within twenty (20)
days after receipt of such written notice from the Company by any Holder or
Holders, except as set forth in subsection 1.3(b) below.
(b) Underwriting. If the registration of which the
Company gives notice is for a registered public offering involving an
underwriting, the Company shall so advise the Holders as a part of the written
notice given pursuant to subsection 1.3(a)(i). In such event the right of any
Holder to registration pursuant to subsection 1.3 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and the other stockholders distributing their
securities through such underwriting) enter into an underwriting agreement in
customary form with the underwriter or underwriters selected for such
underwriting by the Company. Notwithstanding any other provision of this
subsection 1.3, if the underwriter determines that marketing factors require a
limitation of the number of shares to be underwritten, the underwriter may limit
the number of Registrable Securities to be included in the registration and
underwriting; provided, however in no event shall the amount of Registrable
Securities of the Holders included in the offering be reduced below thirty
percent (30%) of the total amount of securities included in such offering,
unless such offering is the initial public offering of the Company's securities
in which case the Holders may be excluded entirely if the underwriters make the
determination described above or the Holders holding a majority of the
Registrable Securities consent in writing to such a reduction. In the event of a
cutback by the managing underwriter of the number of Registrable Securities to
be included in the registration and underwriting, the Company shall advise all
Holders of Registrable Securities which would otherwise be registered and
underwritten pursuant hereto, and the number of shares of Registrable Securities
that may be included in the registration and underwriting shall be allocated
first among all of such Holders, excluding the Holders of Founder Shares, in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities held by such Holders as of the date of the notice pursuant to
subsection 1.3(a)(i). If, after such Holders participate to the full extent they
desire in such registration and underwriting, the managing underwriter
determines that additional shares of Registrable Securities may be included, the
number of such shares shall be allocated among all of the Holders of Founder
Shares in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities held by such Holders of Founder Shares. If any Holder
disapproves of the terms of the underwriting, he or she may elect to withdraw
therefrom by written notice to the Company and the underwriter. Any Registrable
Securities excluded or withdrawn from such underwriting shall be withdrawn from
such registration.
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1.4 Form S-3. In addition to the rights and obligations set
forth in subsections 1.2 and 1.3 above, if Initiating Holders request that the
Company file a registration statement on Form S-3 (or any successor to Form S-3)
for a public offering of Registrable Securities, and the Company is then a
registrant entitled to use Form S-3 to register shares for such an offering, the
Company will: (i) promptly give written notice of the proposed registration,
qualification or compliance to all other Holders; and (ii) as soon as
practicable, use its best efforts to effect all such registrations,
qualifications and compliances (including, without limitation, the execution of
an undertaking to file post-effective amendments, appropriate qualifications
under the applicable blue sky or other state securities laws and appropriate
compliance with exemptive regulations issued under the Securities Act and any
other governmental requirements or regulations) as may be so requested and as
would permit or facilitate the sale and distribution of all or such portion of
such Initiating Holder's or Initiating Holders' Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request as are specified in
a written request given within thirty (30) days after receipt of such written
notice from the Company. The Company shall use its best efforts to cause such
registration statement to remain effective for at least one hundred twenty (120)
days, or until the distribution described in the registration statement has been
completed, whichever occurs first; provided, however the Company shall not be
required to effect a registration pursuant to this subsection 1.4:
(a) in any particular jurisdiction in which the Company
would be required to execute a general consent to service of process in
effecting such registration, qualification or compliance, unless the Company is
already subject to service in such jurisdiction and except as may be required by
the Securities Act;
(b) if the Company, within ten (10) days of the receipt
of the request of the Initiating Holders, gives notice of its bona fide
intention to effect the filing of a registration statement with the SEC within
forty-five (45) days of receipt of such request (other than with respect to a
registration statement relating to a Rule 145 transaction, an offering solely to
employees or any other registration which is not appropriate for the
registration of Registrable Securities);
(c) during a period of ninety (90) days following the
effective date of any registration statement filed under the Securities Act
(other than with respect to a registration statement relating to a Rule 145
transaction, an offering solely to employees or any other registration which is
not appropriate for the registration of Registrable Securities);
(d) if the Company has effected two (2) registrations
pursuant to this subsection 1.4 within the previous twelve (12) months,
provided, however, in the event the Company does not exercise best efforts to
cause a registration statement to remain effective for at least one hundred
twenty (120) days, or until the distribution is completed, whichever occurs
first, then such registration shall not be deemed effected for the purposes of
the limitations of this Section 1.4(d); or
(e) if the Company shall furnish to such Initiating
Holders a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors of the Company, it would be
detrimental to the Company and its stockholders for such
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registration statement to be filed on or before the date filing would be
required and it is therefore essential to defer the filing of such registration
statement, in which case the Company shall have the right to defer such filing
for a period of not more than ninety (90) days after the furnishing of such a
certificate of deferral, provided that the Company may not defer such filing
pursuant to this subsection 1.4 more than once in any twelve (12) month period.
In the event such Initiating Holders propose to offer the shares of
Registrable Securities pursuant to this subsection 1.4 by means of an
underwriting, the proposed underwriter(s) shall 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 registration pursuant to
subsection 1.4 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. The Company
shall (together with all Holders proposing to distribute their securities
through such underwriting) enter into an underwriting agreement in customary
form with the underwriter or underwriters. Notwithstanding any other provision
of this subsection 1.4, if the underwriter advises the Initiating Holders in
writing that marketing factors require a limitation of the number of shares to
be underwritten, the Initiating Holders shall so advise all Holders
participating in the registration, and the number of shares of Registrable
Securities that may be included in the registration and underwriting shall be
allocated among all such Holders thereof in proportion, as nearly as
practicable, to the respective amounts of Registrable Securities held by such
Holders. If any Holder disapproves of the terms of the underwriting, such Holder
may elect to withdraw therefrom by written notice to the Company, the
underwriter and the Initiating Holders. Any Registrable Securities which are
excluded from the underwriting by reason of the underwriter's marketing
limitation or withdrawn from such underwriting shall be withdrawn from such
registration.
1.5 Expenses of Registration. All Registration Expenses
incurred in connection with any registration, qualification or compliance
pursuant to this Section 1 shall be borne by the Company except as follows:
(a) The Company shall not be required to pay for
Registration Expenses of any registration proceeding begun pursuant to
subsection 1.2, the request for which has been subsequently withdrawn by the
Initiating Holders, in which latter such case, such expenses shall be borne pro
rata by the Holders requesting such withdrawal. Notwithstanding the foregoing,
the Company shall be required to pay for Registration Expenses of any
registration proceeding begun pursuant to subsection 1.2 if the request for such
registration proceeding has been withdrawn (i) by the Initiating Holders at the
Company's request, (ii) due to the occurrence of a Material Adverse Change or
(iii) when the Initiating Holders agree to forfeit one (1) other registration
for which the Company would be obligated to pay expenses.
(b) The Company shall not be required to pay fees or
disbursements of legal counsel other than the fees and disbursements of one
special counsel selected by a majority of the participating Holders.
(c) The Company shall not be required to pay
Registration Expenses for more than two (2) registrations pursuant to subsection
1.2.
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(d) The Company shall not be required to pay
Registration Expenses for more than six (6) registrations pursuant to subsection
1.4.
(e) The Company shall not be required to pay
underwriters' fees, discounts or commissions relating to Registrable Securities.
1.6 Registration Procedures. In the case of each registration,
qualification or compliance effected by the Company pursuant to this Rights
Agreement, the Company will keep each Holder participating therein advised in
writing as to the initiation of each registration, qualification and compliance
and as to the completion thereof. Except as otherwise provided in subsection
1.5, at its expense the Company will:
(a) Prepare and file with the SEC a registration
statement with respect to such Registrable Securities (drafts of which shall be
provided to the Holders for the sole purpose of confirming the accuracy of the
information therein relating to each such Holder) and use its best efforts to
cause such registration statement to become effective, and, upon the request of
the Holders of a majority of the Registrable Securities registered thereunder,
keep such registration statement effective for up to one hundred twenty (120)
days.
(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 (drafts of which shall be
provided to the Holders for the sole purpose of confirming the accuracy of the
information therein relating to each such Holder).
(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.
(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 jurisdictions.
(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. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) Notify each Holder of Registrable Securities
covered by such registration statement at any time when a prospectus relating
thereto is required to be delivered under the Securities Act or 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.
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1.7 Indemnification.
(a) The Company will indemnify each Holder of
Registrable Securities and each of its officers, directors, members and
partners, and each Person controlling any such Person, with respect to which
such registration, qualification or compliance has been effected pursuant to
this Rights Agreement, and each underwriter, broker or dealer, if any, and each
Person who controls any underwriter, broker or dealer of the Registrable
Securities held by or issuable to such Holder, against all claims, losses,
expenses, damages and liabilities (or actions in respect thereto) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any prospectus, offering circular or other document (including
any related registration statement, notification or the like) incident to any
such registration, qualification or compliance, or based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statement therein not misleading, or any violation or
alleged violation by the Company of the Securities Act, the Securities Exchange
Act of 1934, as amended, ("Exchange Act") or any state securities law applicable
to the Company or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any such state law and relating to action or inaction
required of the Company in connection with any such registration, qualification
of compliance, and will reimburse each such Holder, each of its officers,
directors, members and partners, and each Person controlling any such Person,
each such underwriter, broker or dealer and each Person who controls any such
underwriter, broker or dealer, within a reasonable amount of time after incurred
for any reasonable legal and any other expenses incurred in connection with
investigating, defending or settling any such claim, loss, damage, liability or
action; provided, however, that the indemnity agreement contained in this
subsection 1.7(a) shall not apply to amounts paid in settlement of any such
claim, loss, damage, liability, or action if such settlement is effected without
the consent of the Company (which consent shall not be unreasonably withheld);
and provided, further that the Company will not be liable in any such case to
the extent that any such claim, loss, damage or liability arises out of or is
based solely on any untrue statement or omission based upon written information
furnished to the Company by an instrument duly executed by such Holder or
underwriter, broker or dealer specifically for use therein.
(b) Each Holder will, if Registrable Securities held by
or issuable to such Holder are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify the
Company, each of its directors and officers, each underwriter, broker or dealer,
if any, of the Company's securities covered by such a registration statement,
each person who controls the Company within the meaning of the Securities Act,
and each other such Holder, each of its officers, directors, members and
partners and each Person controlling such Person, against all claims, losses,
expenses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any such registration statement, prospectus, offering
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circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company, such Holders,
such directors, officers, partners, members, Persons or underwriters, brokers or
dealers for any reasonable legal or any other expenses incurred in connection
with investigating, defending or settling any such claim, loss, damage,
liability or action, in each case to the extent, but only to the extent, that
such untrue statement (or alleged untrue statement) or omission (or alleged
omission) is made in such registration statement, prospectus, offering circular
or other document in reliance solely upon and in conformity with written
information furnished to the Company by the Holder in an instrument duly
executed by such Holder specifically for use therein; provided, however that the
indemnity agreement contained in this subsection 1.7(b) shall not apply to
amounts paid in settlement of any such claim, loss, damage, liability or action
if such settlement is effected without the consent of the Holder, (which consent
shall not be unreasonably withheld); and provided, further that the total amount
for which any Holder shall be liable under this subsection 1.7(b) shall not in
any event exceed the aggregate net proceeds received by such Holder from the
sale of Registrable Securities held by such Holder in such registration.
(c) Each party entitled to indemnification under this
subsection 1.7 (the "Indemnified Party") shall give notice to the party required
to provide indemnification (the "Indemnifying Party") promptly after such
Indemnified Party has actual knowledge of any claim as to which indemnity may be
sought, and shall permit the Indemnifying Party to assume the defense of any
such claim or any litigation resulting therefrom; provided, that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation,
shall be approved by the Indemnified Party (whose approval shall not be
unreasonably withheld), and the Indemnified Party may participate in such
defense at such party's expense; and provided, further that the failure of any
Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations hereunder, unless such failure resulted in
prejudice to the Indemnifying Party; and provided, further 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 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. No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect to such
claim or litigation.
(d) If the indemnification provided for in this Section
1.7 is held by a court of competent jurisdiction to be unavailable to an
Indemnified Party with respect to any losses, claims, damages or liabilities
referred to herein, the Indemnifying Party, in lieu of indemnifying such
Indemnified Party thereunder, shall to the extent permitted by applicable law
contribute to the amount paid or payable by such Indemnified Party as a result
of such loss, claim, damage or liability 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 violation(s) that resulted
in such loss, claim, damage or liability, as well as any other relevant
equitable considerations. The relative fault of the Indemnifying Party and of
the Indemnified Party shall be determined by a court of law 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; provided, that in no event shall any contribution by
a Holder hereunder exceed the net proceeds received from the offering by such
Holder.
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(e) The obligations of the Company and Holders under
this Section 1.7 shall survive completion of any offering of Registrable
Securities in a registration statement and the termination of this Agreement. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
except with the consent of each Indemnified Party, consent to entry of any
judgment or enter into any settlement which does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such Indemnified Party
of a release from all liability in respect to such claim or litigation.
1.8 Information by Holder. Any Holder or Holders of
Registrable Securities included in any registration shall promptly furnish to
the Company such information regarding such Holder or Holders and the
distribution proposed by such Holder or Holders as the Company may request in
writing and as shall be required in connection with any registration,
qualification or compliance referred to herein.
1.9 Rule 144 Reporting. With a view to making available to
Holders the benefits of certain rules and regulations of the SEC which may
permit the sale of the Registrable Securities to the public without
registration, the Company agrees at all times to:
(a) make and keep public information available, as
those terms are understood and defined in SEC Rule 144, beginning after the
effective date of the first registration filed by the Company for an offering of
its securities to the general public;
(b) file with the SEC in a timely manner all reports
and other documents required of the Company under the Securities Act and the
Exchange Act (at any time after it has become subject to such reporting
requirements); and
(c) so long as a Holder owns any Registrable
Securities, to furnish to such Holder forthwith upon request a written statement
by the Company as to its compliance with the reporting requirements of said Rule
144 (at any time beginning after the effective date of the first registration
statement filed by the Company for an offering of its securities to the general
public), and of the Securities Act and the Exchange Act (at any time after it
has become subject to such reporting requirements), a copy of the most recent
annual or quarterly report of the Company, and such other reports and documents
so filed by the Company as the Holder may reasonably request in complying with
any rule or regulation of the SEC allowing the Holder to sell any such
securities without registration.
1.10 Transfer of Registration Rights. Holders' rights to cause
the Company to register their securities and keep information available, granted
to them by the Company under Section 1, may be assigned by any Holder upon the
(i) sale or transfer by such Holder to a transferee of any portion of the
Registrable Securities held by such Holder in excess of 250,000 Preferred Shares
(as adjusted for any Recapitalization Event), (ii) transfer of Registrable
Securities to an affiliated partnership or other entity or to an affiliate or an
associate of such Holder or (iii) transfer of any portion of the Registrable
Securities held by such Holder to any other Holder; provided, that the Company
is given written notice by such Holder at the time of or within a reasonable
time after said transfer, stating the name and address of said transferee and
identifying the securities with respect to which such registration rights are
being assigned, and
11
further provided that said transferee shall agree to become subject to the
obligations of the transferring party hereunder.
1.11 Limitations on Subsequent Registration Rights. From and
after the date hereof, the Company shall not, without the prior written consent
of the Holders of not less than a majority of the Registrable Securities held by
all of the Holders then outstanding, enter into any agreement with any holder or
prospective holder of any securities of the Company which would allow such
holder or prospective holder to demand any registration or include such
securities in any registration filed under subsections 1.2, 1.3 or 1.4 hereof if
such inclusion would adversely affect the rights of any Holder under such
subsections.
1.12 "Market Stand-Off" Agreement. Each Holder hereby agrees
that, during the period of duration (not to exceed one hundred eighty (180)
days) specified by the Company and an underwriter of Common Stock or other
securities of the Company following the effective date of a registration
statement of the Company filed under the Securities Act, it shall not, to the
extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase, pledge or otherwise transfer or dispose of
(other than to donees who agree to be similarly bound) any securities of the
Company held by it at any time during such period except common stock included
in such registration; provided, however, that:
(a) such agreement shall be applicable only to the
first such registration statement of the Company which covers common stock (or
other securities) to be sold on its behalf to the public in an underwritten
offering; and
(b) such agreement shall not be required unless all
executive officers, directors and holders of 1% or more of the outstanding
capital stock of the Company enter into similar agreements.
In order to enforce the foregoing covenant, the Company may impose
stop-transfer instructions with respect to the Registrable Securities of each
Holder (and the shares of securities of every other person subject to the
foregoing restriction) until the end of such period.
1.13 Termination of Registration Rights. No Holder shall be
entitled to exercise any right provided for in this Section 1 after seven (7)
years following the consummation of the sale of securities pursuant to a
registration statement filed by the Company under the Securities Act, in
connection with the initial firm commitment underwritten offering of its
securities to the general public; provided, however, that a Holder's rights
provided for in this Section 1 shall terminate earlier when such Holder may sell
all its shares in a three (3) month period under Rule 144 of the Securities Act
(without reference to Rule 144(k)).
2. Affirmative Covenants of the Company. The Company hereby
covenants and agrees as follows:
2.1 Financial Information. The Company will furnish to each
Holder of at least of 500,000 Preferred Shares (as adjusted for any
Recapitalization Event):
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(i) as soon as practicable after the end of each
fiscal year, and in any event within ninety (90) days thereafter, consolidated
balance sheets of the Company and its subsidiaries, if any, as at the end of
such fiscal year, and consolidated statements of operations and consolidated
statements of changes in financial position (or equivalent cash flow statements
if required by the Financial Accounting Standards Board) of the Company and its
subsidiaries, if any, for such fiscal year, prepared in accordance with
generally accepted accounting principles, all in reasonable detail and certified
by independent public accountants of recognized national standing selected by
the Company, and
(ii) as soon as practicable after the end of each
month (if requested) and each quarter (except the last month and last quarter of
the fiscal year), and in any event within thirty (30) and forty-five (45) days,
respectively, thereafter, consolidated balance sheets of the Company and its
subsidiaries, if any, as of the end of such month or quarter; and consolidated
statements of income (or equivalent cash flow statements if required by the
Financial Accounting Standards Board), for such month or quarter and for the
current fiscal year to date, prepared in accordance with generally accepted
accounting principles (except for required footnotes), subject to changes
resulting from year-end audit adjustments by the principal financial officer or
chief executive officer of the Company, all in reasonable detail and signed, and
(iii) as soon as practicable, but in no event
later than thirty (30) days prior to the commencement of such fiscal year, an
annual plan for each fiscal year which shall include monthly capital and
operating expense budgets, cash flow statements, projected balance sheets and
profit and loss projections for each such month and for the end of the year and
other longer term forecasts, itemized in such detail as the Board of Directors
may reasonably determine and certified by the Chief Financial Officer of the
Company.
2.2 Inspection. The Company shall permit each Holder of
Registrable Securities representing two and one-half percent (2.5%) or more of
the fully diluted Common Stock of the Company, or such Holder's representatives,
at such Holder's expense, to visit and inspect the Company's properties, to
examine its books of account and records and to discuss the Company's affairs,
finances and accounts with its officers, all at such reasonable times as may be
requested by the Holder; provided, however, that the Company shall not be
obligated pursuant to this Section 2.2 to provide access to any information
which it reasonably considers to be a trade secret or similar confidential
information.
2.3 Board Observation Rights. From and after the date hereof
and at all times throughout the term of this Agreement, the California Public
Employees' Retirement System and Madison Dearborn Capital Partners, III shall
each be entitled to designate one person to be an observer at all meetings of
the Company's Board of Directors or any committee thereof (collectively, the
"Board Observers"). Each Board Observer shall be entitled to attend all meetings
of the Board of Directors or any committee thereof and shall receive (at the
same time as such materials are sent to the members of the Board of Directors or
any committee thereof) (a) notice of all such meetings, (b) copies of all
written consents and (c) copies of all written materials.
13
2.4 Termination of Information Covenants and Confidentiality
of Information. The covenants of the Company set forth in subsections 2.1, 2.2
and 2.3 shall terminate and be of no further force or effect (i) upon the
consummation by the Company of a Qualified IPO, or (ii) when the Company first
becomes subject to the periodic reporting requirements of Section 12(g) or 15(d)
of the Exchange Act, whichever event shall first occur. Each Holder granted
rights under Sections 2.1, 2.2 or 2.3 (a "Qualified Holder") agrees that it will
keep confidential and will not disclose or divulge any confidential, proprietary
or secret information which such Qualified Holder may obtain from the Company,
and which the Company has prominently marked "confidential," "proprietary" or
"secret" or has otherwise identified as being such, pursuant to financial
statements, reports and other materials submitted by the Company as required
hereunder, unless (w) the disclosure of such information is required by law, (x)
such information is or becomes known to the Qualified Holder from a source other
than the Company without violation of any rights of the Company, or (y) is or
becomes publicly known, or (z) unless the Company gives its written consent to
the Qualified Holder's release of such information, except that no such written
consent shall be required (and the Qualified Holder shall be free to release
such information to such recipient) if such information is to be provided to a
Qualified Holder's counsel, accountant or consultant (and the provision of such
information is directly necessary in order for such recipient to provide
services to Qualified Holder), or to an officer, director or partner of a
Qualified Holder, provided that the Qualified Holder shall inform the recipient
of the confidential nature of such information, and such recipient agrees in
writing in advance of disclosure to treat the information as confidential.
2.5 Acquisition Approval. The consent of at least six (6) of
the nine (9) members of the Company's Board of Directors shall be required to
approve any acquisition with a transaction value greater than Fifty Million
Dollars ($50,000,000) or any series of acquisitions with a cumulative value
greater than One Hundred Million Dollars ($100,000,000) in a twelve (12) month
period. The consent of a majority of the members of the Company's Board of
Directors shall be required for all other acquisitions.
2.6 Right of First Refusal on New Issuances.
(a) If, at any time prior to the termination of this
right of first refusal pursuant to Section 2.6(f), the Company should desire to
issue in a transaction not registered under the Securities Act in reliance upon
a claimed exemption thereunder, any Equity Securities (as hereinafter defined),
it shall give each Holder of at least 500,000 Preferred Shares (as adjusted for
any Recapitalization Event) (each, a "Qualified First Refusal Holder") the first
right to purchase such Qualified First Refusal Holder's pro rata share (or any
part thereof) of all of such privately offered Equity Securities on the same
terms as the Company is willing to sell such Equity Securities to any other
person. Each Qualified First Refusal Holder's pro rata share of the Equity
Securities shall be equal to that percentage of the outstanding Common Stock of
the Company held by such Qualified First Refusal Holder on the date hereof. For
purposes of this Section 2.6, the outstanding Common Stock of the Company shall
include (i) outstanding shares of Common Stock and (ii) shares of Common Stock
issued or issuable upon conversion of any then outstanding Preferred Stock of
the Company.
(b) Prior to any sale or issuance by the Company of any
Equity Securities, the Company shall notify each Qualified First Refusal Holder
in writing of its
14
intention to sell and issue such securities, setting forth the terms under which
it proposes to make such sale. Within thirty (30) days after receipt of such
notice, each Qualified First Refusal Holder shall notify the Company whether
such Qualified First Refusal Holder desires to exercise the option to purchase
such Qualified First Refusal Holder's pro rata share (or any part thereof) of
the Equity Securities so offered. If a Qualified First Refusal Holder elects to
purchase such Qualified First Refusal Holder's pro rata share, then such
Qualified First Refusal Holder shall have a right of over-allotment such that if
any other Qualified First Refusal Holder fails to purchase such Qualified First
Refusal Holder's pro rata share of the Equity Securities the Company shall
provide notice to each Qualified First Refusal Holder of such right and any such
Qualified First Refusal Holder(s) who have elected to purchase their pro rata
shares will have ten (10) days to give notice of its intent to purchase, on a
pro rata basis, that portion of the Equity Securities which such other Qualified
First Refusal Holder elected not to purchase.
(c) After termination of the forty (40) day period
specified in Section 2.6(b) above, the Company may, during a period of sixty
(60) days following the end of such forty (40) day period, sell and issue such
Equity Securities as to which the Qualified First Refusal Holders do not
indicate a desire to purchase to another person as well as those additional
shares of Equity Securities it originally intended to issue to other persons,
upon the same terms and conditions as those set forth in the notice to the
Qualified First Refusal Holders. In the event the Company has not sold the
Equity Securities, or has not entered into an agreement to sell the Equity
Securities, within said sixty (60) day period, the Company shall not thereafter
issue or sell any Equity Securities without first offering such securities to
the Qualified First Refusal Holders in the manner provided above.
(d) If a Qualified First Refusal Holder gives the
Company notice that such Qualified First Refusal Holder desires to purchase any
of the Equity Securities offered by the Company, payment for the Equity
Securities shall be by check, or wire transfer, against delivery of the Equity
Securities at the executive offices of the Company within fifteen (15) business
days after giving the Company such notice, or, if later, the closing date for
the sale of such Equity Securities. The Company shall take all such action as
may be required by any regulatory authority in connection with the exercise by a
Qualified First Refusal Holder of the right to purchase Equity Securities as set
forth in this Section 2.6.
(e) The right of first refusal contained in this
Section 2.6 shall not apply to the issuance by the Company of Equity Securities
(i) issued or granted to officers, directors, employees or consultants of the
Company and its subsidiaries pursuant to any stock plans approved by the
Company's Board of Directors not in excess of 6,297,197 shares in the aggregate,
(ii) issued pursuant to transactions described in Article IV Section 2(e)(1) of
the Company's Amended and Restated Certificate of Incorporation, as amended from
time to time, (iii) issued upon conversion of the Company's Preferred Stock,
(iv) issued (A) to the Company's vendors or service providers, (B) in
conjunction with an equipment lease financing, debt financing, licensing or
acquisition transaction that is approved by the Company's Board of Directors or
(C) to companies or entities with whom the Company has business relationships,
in any such case not to exceed in the aggregate twenty-five percent (25%) of the
then current maximum number of shares reserved for issuance under the Company's
option plan(s), (v) issued pursuant to the Exchange Agreement, (vi) up to
17,000,000 shares of Series B Preferred Stock issued in conjunction with the
acquisition of Vpacket Communications, Inc. and any subsequent
15
follow-on rights offering of Series B Preferred Stock or (vii) issued in
connection with the conversion of Equity Securities not subject to this right of
first refusal.
(f) The right of first refusal contained in this
Section 2.6 shall terminate upon the closing of a Qualified IPO.
(g) The term "Equity Securities" shall mean (i) Common
Stock and rights, options or warrants to purchase Common Stock, (ii) any
security other than Common Stock having voting rights in the election of the
Board of Directors, not contingent upon a failure to pay dividends, (iii) any
security convertible into or exchangeable for any of the foregoing and (iv) any
agreement or commitment to issue any of the foregoing.
(h) A Qualified First Refusal Holder's right to
purchase any Equity Securities pursuant to this Section 2.6 may be assigned by a
Qualified First Refusal Holder to an affiliate of a Qualified First Refusal
Holder. For the purposes of this Section 2.6, an "affiliate" shall mean any
person or entity that directly or indirectly through one or more intermediaries
controls or is controlled by or is under common control with a Qualified First
Refusal Holder.
2.7 Vesting of Stock Options. Unless otherwise agreed to by
the Board of Directors of the Company, all options granted to employees after
the date hereof shall vest according to the following schedule: (i) if the
employee has 12 months of continuous service at the time of grant, the
employee's option shall vest at a rate of 1/48th per month over a 4-year period,
and (ii) otherwise, the employee's option shall vest (x) with respect to 25%, on
the 12 month anniversary of the date of grant, and (y) with respect to the
remaining 75%, 1/48th per month thereafter.
3. Right of First Refusal - Preferred Stockholders. Before any
equity securities of the Company registered in the name of a Preferred Stock
Holder may be sold or transferred (including transfer by operation of law) other
than to members or their partners, stockholders, subsidiaries, affiliates,
affiliated partnerships or other affiliated entities, family members, family
trusts or the estates of the members of the Preferred Stock Holder or in
connection with the liquidation of a Preferred Stock Holder (provided that such
permitted transferees shall agree, as a condition of the transfer, to be bound
by the provisions of this Section 3), such shares shall first be offered to the
other Preferred Stockholders in the following manner:
3.1 Notice. The Preferred Stock Holder intending to sell
securities of the Company ("Preferred Selling Party") shall first deliver a
written notice ("Notice") to the other Preferred Stockholders stating (i) the
Preferred Selling Party desires to sell or transfer such equity securities, (ii)
the number of equity securities proposed to be sold or transferred and (iii) the
price and other terms of the proposed sale or transfer.
3.2 Preferred Stockholders Right. Within ten (10) business
days after receipt of the Notice, each Preferred Stock Holder may elect to
purchase its pro rata share or any part thereof of such equity securities, on
the same terms and conditions specified in the Notice, by delivering to the
Preferred Selling Party written notice of such election. Each Preferred Stock
Holder's pro rata share of these equity securities shall be a fraction
calculated by dividing (i) the number of shares of Common Stock issued and
issuable upon exercise, conversion or exchange
16
of all outstanding Preferred Stock held by such Preferred Stock Holder as of the
date of delivery of the Notice by (ii) the total number of shares of Common
Stock issued and issuable upon exercise, conversion or exchange of all
outstanding equity securities held by the Preferred Stockholders (other than the
Preferred Selling Party) as of that date.
3.3 Over-allotment. If, within ten (10) business days after
receipt of the Notice, a Preferred Stock Holder does not notify the Preferred
Selling Party that it desires to purchase its pro-rata share (or any part
thereof) of the equity securities, those Preferred Stockholders who have elected
to purchase equity securities during the ten (10) business day period (the
"Over-allotment Purchasers") may elect to purchase those equity securities not
so purchased. The Preferred Selling Party shall provide written notice to the
Over-allotment Purchasers not later than thirty (30) days after receipt of the
Notice of the number of shares of equity securities of the Preferred Selling
Party available for purchase pursuant to this over-allotment right. Each of
these Over-allotment Purchasers shall have until forty (40) days after receipt
of the Notice to notify the Preferred Selling Party in writing that it elects to
purchase at least its pro rata share or any part thereof of the equity
securities so offered. Each Over-allotment Purchaser's pro rata share of the
equity securities shall be a fraction calculated by dividing (i) the number of
shares of Common Stock issued and issuable upon exercise, conversion or exchange
of all outstanding equity securities of the Company held by the Over-allotment
Purchaser as of the date of the Notice by (ii) the total number of shares of
Common Stock issued and issuable upon exercise, conversion or exchange of all
outstanding equity securities of the Company held by all Over-allotment
Purchasers as of the date of the Notice.
3.4 Preferred Stock Holder Purchases. In the event the
Preferred Stockholders elect to acquire any of the equity securities offered
pursuant to Section 3, the Preferred Stockholders and the Preferred Selling
Party shall complete the sale and purchase of such equity securities within
sixty (60) days after the Preferred Selling Party provides the Notice.
3.5 Selling Party Right. If all of the equity securities to
which the Notice refers are not elected to be purchased by the Preferred
Stockholders, the Preferred Selling Party may sell all such shares not to be so
purchased at the price and on the terms specified in the Notice, provided that
(i) such sale or transfer is consummated within one hundred fifty (150) days of
the date of the Notice, and (ii) that prior to the transfer, the transferee of
such equity securities agrees in writing (in a form satisfactory to the
Preferred Stockholders) that such transferee shall receive and hold such
securities subject to the provisions of this Section 3.
3.6 Termination. The rights and obligations of the Preferred
Stockholders under this Section 3 shall terminate upon (and not apply to the
transfer of shares upon) the closing of the Company's initial public offering
pursuant to an effective registration statement on Form S-1 (or a successor
form) under the Securities Act covering the offer and sale of Common Stock for
the account of the Company to the public (the "IPO").
3.7 Transfer. The right of first refusal granted hereunder to
the Preferred Stockholders may be assigned to a transferee or assignee
reasonably acceptable to the Company.
17
4. Voting Agreement.
4.1 Election of Certain Directors. At any annual or special
meeting called, or in any other action taken, for the purpose of electing
directors to the Company's Board of Directors, the Preferred Stockholders agree
to vote all of the shares of the Company's capital stock now or hereafter owned
by them (the "Stockholders' Shares"), whether beneficially or otherwise, so as
to elect each of the following persons as a director of the Company:
(a) two (2) nominees designated by TPG Zhone L.L.C.,
who shall initially be Xxx Xxxxxxx and Xxxx Xxxxxx;
(b) two (2) nominees designated by KKR-ZT L.L.C., who
shall initially be Xxxxx Xxxxxx and Xxxxxxxxx Xxxxx, Xx.;
(c) one (1) nominee designated by New Enterprise
Associates VII, Limited Partnership, who shall initially be Xxxx Xxxxxxxx;
(d) one (1) nominee designated by a majority of Series
B Preferred Stockholders; who shall initially be Xxx Xxxxxxx;
(e) one (1) nominee designated by holders of a majority
of the Company's Common Stock and holders of a majority of the Company's
Preferred Stock.
4.2 Vacancies. In the event of any vacancy of the
directorships referenced in Section 4.1 that is to be filled by the Preferred
Stockholders, the Preferred Stockholders agree to vote the Stockholders' Shares
to fill such vacancy with a nominee designated in the same manner as the person
who held the directorship so vacated.
4.3 Removal. At any annual or special meeting called where a
vote is taken, or in any other action taken where a consent is sought, for the
removal of any director, the Preferred Stockholders agree not to vote any of the
Stockholders' Shares for the removal of any director unless (a) the Preferred
Stockholders having the right to nominate such director vote or have voted for
such removal or (b) such removal is for cause.
4.4 Other Matters. The provisions of this Section 4 shall not
extend to voting upon questions and matters, other than the matters referenced
herein, upon which the Preferred Stockholders have a right to vote under the
Company's Certificate of Incorporation or Bylaws, each as amended to date, or
under the laws of the State of Delaware.
4.5 Legend on Certificates. Each certificate representing
shares held by the Preferred Stockholders, and any assignees or transferees
thereof, shall bear the following legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
VOTING AGREEMENT AMONG THE COMPANY, THE STOCKHOLDER AND CERTAIN
OTHER PERSONS, WHICH HAS BEEN DEPOSITED WITH THE COMPANY AT ITS
PRINCIPAL OFFICE. COPIES OF SUCH AGREEMENT MAY BE OBTAINED
18
UPON WRITTEN REQUEST FROM THE SECRETARY OF THE COMPANY.
A counterpart of this Agreement shall be deposited with the Company at
its principal office and shall be subject to the same rights of examination by a
stockholder of the Company (or a proposed bona fide assignee or transferee
thereof), in person or by agent or attorney, as are the books and records of the
Company.
4.6 No Liability for Election of Recommended Director. None of
the parties hereto and no officer, director, stockholder, partner, employee or
agent of any party makes any representation or warranty as to the fitness or
competence of the nominee of any party hereunder to serve on the Board of
Directors by virtue of such party's execution of this Agreement or by the act of
such party in voting for such nominee pursuant to this Agreement.
4.7 Manner of Voting. The voting of shares pursuant to this
Agreement may be effected in person, by proxy, by written consent or in any
other manner permitted by applicable law or the Company's Bylaws.
4.8 Grant of Proxy. Should the provisions of this Section 4 be
construed to constitute the granting of proxies, such proxies shall be deemed
coupled with an interest and are irrevocable for the term of this Agreement.
4.9 Termination. The provisions of this Section 4 shall
terminate upon the earliest to occur of any one of the following:
(a) The liquidation or dissolution of the Company;
(b) The execution by the Company of a general
assignment for the benefit of creditors, the appointment of a receiver or
trustee to take possession of the property and assets of the Company or the
filing by the Company for bankruptcy protection under Chapter 11 of the United
States Bankruptcy Code;
(c) The closing of the IPO; and
(d) The occurrence of any of the following events,
provided that the "beneficial owners" (as such terms is defined by the Exchange
Act) of the stock of the Company immediately prior thereto shall immediately
thereafter own less than fifty percent (50%) of the voting power of the
surviving Person or an entity that holds eighty percent (80%) or more of the
beneficial equity interest in such surviving Person: (i) the merger or
consolidation of the Company with or into another Person, (ii) the issuance by
the Company of voting securities to another Person, (iii) the sale, transfer or
other disposition (but not including a transfer or disposition by pledge or
mortgage to a bona fide lender) of all or substantially all of the assets of the
Company or (iv) other transaction.
4.10 Bylaw Amendments; Voting. The parties hereto agree to vote
their shares of Preferred Stock and Common Stock (a) to implement the provisions
of this Agreement and the Exchange Agreement and (b) to make any amendments to
the Company's Bylaws which may be necessary to implement any of the provisions
of this Agreement and the Exchange Agreement.
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5. General.
5.1 Waivers and Amendments. With the written consent of the
record or beneficial holders of at least sixty six and two-thirds percent
(66K%) of the Registrable Securities, the obligations of the Company and
the rights of the parties under this Agreement may be waived (either generally
or in a particular instance, either retroactively or prospectively, and either
for a specified period of time or indefinitely), and with the same consent the
Company, when authorized by resolution of its Board of Directors, may enter into
a supplementary agreement for the purpose of adding any provisions to or
changing in any manner or eliminating any of the provisions of this Agreement;
provided, however that notwithstanding the foregoing, Sections 2.1, 2.2 and 2.3
of this Agreement cannot be amended without the written consent of the
California Public Employees' Retirement System; provided further, however that
no modification, amendment or waiver of this Agreement shall adversely affect
any Preferred Stock Holder in a way different than any other Preferred Stock
Holder without the first Preferred Stock Holder's written consent; provided,
further, however that no such modification, amendment or waiver shall reduce the
aforesaid percentage of Registrable Securities without the consent of all of the
Holders of the Registrable Securities. Upon the effectuation of each such
waiver, consent, agreement of amendment or modification, the Company shall
promptly give written notice thereof to the record holders of the Registrable
Securities who have not previously consented thereto in writing.
5.2 Governing Law. This Agreement shall be governed in all
respects by the laws of the State of Delaware as such laws are applied to
agreements between Delaware residents entered into and to be performed entirely
within Delaware.
5.3 Successors and Assigns. Except as otherwise expressly
provided herein, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors, assigns, heirs, executors and administrators of
the parties hereto.
5.4 Entire Agreement. Except as set forth below, this
Agreement and the other documents delivered pursuant hereto constitute the full
and entire understanding and agreement between the parties with regard to the
subjects hereof and thereof, and this Agreement shall supersede and cancel all
prior agreements between the parties hereto with regard to the subject matter
hereof.
5.5 Notices, etc. All notices, requests, consents and other
communications under this Agreement shall be in writing and shall be delivered
by hand or fax or sent by a nationally recognized overnight courier service with
written verification of receipt:
If to the Company:
Zhone Technologies, Inc.
0000 Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attention: President
(fax no. 000-000-0000)
with a copy to:
20
Xxxx Xxxx Xxxx & Freidenrich LLP
000 Xxxxxxxx Xxxxxx
Xxxx Xxxx, Xxxxxxxxxx 00000-0000
Attention: Xxxxx X. Xxxxx, Esq.
(fax no. 000-000-0000)
If to a Preferred Stock Holder: At its address set forth on
Exhibit to the Exchange Agreement, or at such other address or
addresses as may have been furnished to the Company in writing by
such Preferred Stock Holder.
Notices provided in accordance with this Section 5.5 shall be deemed delivered
upon actual receipt.
5.6 Severability. In case any provision of this Agreement
shall be invalid, illegal, or unenforceable, the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby.
5.7 Titles and Subtitles. The titles of the sections and
subsections of this Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
5.8 Counterparts. This Agreement may be executed in any number
of counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
5.9 Attorney's Fees. In the event that any dispute among the
Company, any or all Founders and any or all Preferred Stockholders should result
in arbitration, the arbitrator may award to one or more of the Prevailing
Persons such reasonable attorney fees, costs and expenses, as determined by the
arbitrator. Any judgment or order enforcing such arbitration may, in the
discretion of the court entering such judgment or order, contain a specific
provision providing for the recovery of attorney fees and costs incurred in
enforcing such judgment or order and an award of prejudgment interest from the
date of the breach at the maximum rate of interest allowed by law. For the
purposes of this Section 5.9, "attorney fees" shall include, without limitation,
attorney fees incurred in arbitration, post-arbitration order or judgment
motions, contempt proceedings, garnishment, levy, and debtor and third party
examinations, discovery and bankruptcy litigation. For purposes of this Section
5.9, "Prevailing Person" shall mean any person who is determined by the
arbitrator in the proceeding to have prevailed or who prevails by dismissal,
default or otherwise.
5.10 Binding Arbitration. The Company, each Founder and each
Preferred Stock Holder agree that any controversy or claim arising out of or
relating to this Agreement, or the breach thereof, shall be settled by binding
arbitration, and judgment upon the final award may be entered in any court
having jurisdiction. The arbitration shall be in Palo Alto, California and in
accordance with the Comprehensive Arbitration Rules and Procedures ("Rules") of
the Judicial Arbitration and Mediation Services/Endispute in San Francisco,
California. Except as otherwise provided in Section 5.9 ("Attorney's Fees") of
this Agreement, all fees and expenses of the arbitration shall be borne by the
parties equally.
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A single arbitrator shall be selected according to the Rules within thirty (30)
days of submission of the dispute to the arbitrator. The arbitrator shall
conduct the arbitration in accordance with the California Evidence Code. The
parties shall allow and participate in discovery in accordance with the
California Rules of Civil Procedure for a period of sixty (60) days after the
filing of an answer or other responsive pleading. All issues regarding
compliance with discovery requests shall be decided by the arbitrator. Any party
may seek the arbitrator's permission to take any additional deposition which is
necessary to preserve the testimony of a witness who either is, or may become,
outside the subpoena power of the arbitrator or otherwise unavailable to testify
in the arbitration.
The arbitrator shall have the power to enter any award that could be entered by
a Judge of the Superior Court of the State of California sitting without a jury,
and only such power, except that the arbitrator shall not have the power to
award punitive damages, treble damages or any other damages that do not
represent actual damages, even if permitted under the laws of the State of
California or any other applicable law.
The parties hereby agree to the Optional Appeal Procedure provided for in the
Rules. The final arbitration award may be enforced in any court having
jurisdiction over the parties and the subject matter of the arbitration.
Notwithstanding the foregoing, the Company, each Founder and each Preferred
Stock Holder irrevocably submit to the non-exclusive jurisdiction of the
Superior Court of the State of California, Santa Xxxxx County, and the United
States District Court for the Northern District of California, Branch nearest to
Palo Alto, California, in any action to enforce an arbitration award.
The Company, each Founder and each Preferred Stock Holder further agree that
personal jurisdiction over it may be effected by service of process by
registered or certified mail addressed as provided in Section 5.5 of this
Agreement, and that when so made shall be as if served upon it personally within
the State of California.
[Signatures to Follow]
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IN WITNESS WHEREOF, the parties hereby have executed this Agreement on
the date first above written.
COMPANY:
Zhone Technologies, Inc.
By:__________________________________
Xxxx Xxxxxx,
Chief Executive Officer
23
COUNTERPART SIGNATURE PAGE
ZHONE TECHNOLOGIES, INC.
RESTATED RIGHTS AGREEMENT
KKR-ZT L.L.C.
By:________________________________
Authorized Signature
________________________________
Name Printed
________________________________
Title
TPG ZHONE L.L.C.
By: TPG Partners II, L.P.
By: TPG Genpar II, L.P.
By: TPG Advisors II, Inc.
By:_________________________________
Xxxxxxx X. Xxxxxxxxx
Vice President
24
COUNTERPART SIGNATURE PAGE
ZHONE TECHNOLOGIES, INC.
RESTATED RIGHTS AGREEMENT
TPG BACCHUS II, L.L.C.
By: TPG Partners II, L.P.
By: TPG Genpar II, L.P.
By: TPG Advisors II, Inc.
By:_________________________________
Xxxxxxx X. Xxxxxxxxx
Vice President
25
COUNTERPART SIGNATURE PAGE
ZHONE TECHNOLOGIES, INC.
RESTATED RIGHTS AGREEMENT
NEW ENTERPRISE ASSOCIATES VIII, L.P.
By: NEA Partners VIII, L.P.
Its General Partner
By:_____________________________________
Name: _____________________________
Title: ____________________________
NEW ENTERPRISE ASSOCIATES 8A, L.P.
By: NEA Partners VIII, L.P.
Its General Partner
By:_____________________________________
Name: _____________________________
Title: ____________________________
NEW ENTERPRISE ASSOCIATES 9, L.P.
By: NEA Partners 9, L.P.
Its General Partner
By:_____________________________________
Name: _____________________________
Title: ____________________________
26
COUNTERPART SIGNATURE PAGE
ZHONE TECHNOLOGIES, INC.
RESTATED RIGHTS AGREEMENT
XXXX XXXXXX, AS TRUSTEE OF THE
XXXXXXX XXXXXX TRUST
By:_____________________________________
Authorized Signature
_____________________________________
Name Printed
_____________________________________
Title
XXXXXXXX XXXXXX, AS TRUSTEE OF
THE XXXXXX LIVING TRUST
By:_____________________________________
Authorized Signature
_____________________________________
Name Printed
_____________________________________
Title
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