EXHIBIT 5
AMENDMENT OF INVESTOR RIGHTS AGREEMENT
THIS AMENDMENT OF INVESTOR RIGHTS AGREEMENT (this "Amendment"), dated as of
April 5, 2004, by and among Redback Networks, Inc., a Delaware corporation
(along with its successors and assigns, the "Company") and TCV IV, L.P., a
Delaware limited partnership and TCV IV Strategic Partners, L.P., a Delaware
limited partnership (collectively, the "Original Holders"). All capitalized
terms used herein, which are not defined herein, shall have the meaning assigned
to them in the Investor Rights Agreement, dated as of January 5, 2004, by and
among the Company and the Original Holders (the "Investor Rights Agreement").
RECITALS
WHEREAS, the Original Holders acquired from the Company, pursuant to a
Securities Purchase Agreement, dated as of January 5, 2004 (the "Purchase
Agreement"), shares of the Company's Series B Convertible Preferred Stock, par
value $0.0001 per share, and warrants to purchase 1,629,373 shares of the
Company's Common Stock, in the form attached to the Purchase Agreement (as
amended from time to time, the "Warrants");
WHEREAS, the Original Holders and the Company desire to amend the Investor
Rights Agreement as set forth below;
NOW THEREFORE, in consideration of the above recitals and the mutual
agreements set forth therein, the parties agree as follows:
1. Amendments. Upon the execution hereof, the Investor Rights Agreement is
amended as follows:
A. Definitions.
(i) Registrable Securities. The definition of "Registrable Securities"
is amended by deleting the period at the end of the definition and adding the
following after clause (B) at the end of the definition:
"or (C) Common Stock issued pursuant to the Primary Shelf
Registration."
(ii) Warrants. The definition of "Warrants" is amended by deleting the
period at the end of the definition and adding the following at the end of the
definition"
", as amended from time to time."
(iii) Sale Transaction. The following new definition shall be added to
Section 1.
"Sale Transaction" shall mean any (i) consolidation or merger of the
Company with or into any other corporation or other entity or person in which
the stockholders of the Company immediately prior to such consolidation or
merger own less than a majority of
the equity interest and voting power of the surviving entity (or of the
surviving entity's parent) immediately after such consolidation or merger,
excluding any consolidation or merger effected exclusively to change the
domicile of the Company, or (ii) tender offer, corporate reorganization, or
other acquisition transaction or series of related transactions, immediately
after which the stockholders of the Company immediately prior to such tender
offer, corporate reorganization, or other acquisition transaction or series of
related transactions own less than a majority of the equity interests and voting
power of the Company, or (iii) a direct or indirect sale, lease or other
disposition of all or substantially all of the assets of the Company.
B. Restrictions on Transfer of Warrants.
Section 2 of the Investor Rights Agreement is deleted in its entirety
and replaced with the following:
"SECTION 2 Restrictions.
(a) General. The Shares and Warrants shall not be sold, assigned,
transferred or pledged except upon the conditions specified in Section 4, which
conditions are intended to ensure compliance with the provisions of the
Securities Act.
(b) Warrants. Until the earliest to occur of:
(i) October 5, 2004;
(ii) the receipt by the Company of aggregate gross proceeds of
$10,000,000 or more in one or more financings consummated after April
5, 2004; and
(iii) the execution of an agreement by the Company for, or
consummation of, a Sale Transaction; without the written consent of
the Company, the Investors will not sell, assign, transfer or pledge
the Warrants, other than a transfer or assignment to a subsidiary,
affiliated partnership, affiliate or partner of limited liability
company member (including limited partners, retired partners, spouses
and ancestors, lineal descendants and siblings or such partners or
spouses who acquire the Warrants by gift, will or intestate
succession) of the Investors, provided that such transferee or
assignee agrees to be bound by the provisions of this Section 2(b).
Notwithstanding the foregoing, with respect to any agreement executed
by the Company for a Sale Transaction, if such agreement is terminated
prior to the occurrence of either subparagraph (i) or (ii) of the
prior sentence, then the restriction set forth in the previous
sentence shall be reinstated (until it would otherwise terminate in
accordance with the previous sentence) with respect to any Warrants
that have not been previously sold, assigned, transferred or pledged
by the Investors."
C. Mandatory Registrations.
Section 5 of the Investor Rights Agreement is deleted in its entirety
and replaced with the following:
"SECTION 5 Mandatory Registration.
(a) Resale Shelf Registration. The Company shall file a registration
statement covering the sale or distribution by the Holders, on a delayed or
continuous basis, including without limitation, by way of underwritten offering,
block sale or other distribution plan designated by the Holders of a majority of
the Registrable Securities from time to time, of all of the Registrable
Securities on Form S-3 (except if the Company is not then eligible to register
for resale the Registrable Securities on Form S-3, in which case such
registration shall be on another appropriate form in accordance herewith) (the
"Resale Shelf Registration") within 97 days after the date hereof and shall
cause the Resale Shelf Registration to be declared effective by the Commission
(and shall take such appropriate actions as are related thereto including,
without limitation, the execution of an undertaking to file post-effective
amendments, appropriate qualification, if necessary, under applicable blue sky
or other state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other governmental
requirements or regulations) as promptly as possible after the filing thereof,
but in any event prior to the date that is 165 days after the date hereof. Once
declared effective, the Company shall use its reasonable best efforts to cause
(x) the Resale Shelf Registration to be effective until the earlier of (i) five
(5) years from January 5, 2004 and (ii) such time as the Holders own shares of
Common Stock, or shares of Common Stock issuable upon exercise or conversion of
the Registrable Securities, which in the aggregate are less than 5% of the
Company's outstanding shares of Common Stock and the Holders may sell all of
their Registrable Securities without registration pursuant to Rule 144 under the
Securities Act in any and all three-month periods, and (y) subject to Section
9(j), the Resale Shelf Registration to be useable by the Holders during such
entire period. The Company shall not be obligated to take any action to effect
the Resale Shelf Registration in any particular jurisdiction in which the
Company would be required to qualify to do business, subject itself to general
taxation or execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is already
qualified to do business, subject to general taxation or subject to service, as
the case may be, in such jurisdiction, except as may be required by the
Securities Act.
(b) Primary Shelf Registration. The Company shall file a registration
statement covering the issuance by the Company, on a delayed or continuous
basis, of shares of Common Stock upon exercise of the Warrants which are not
Registrable Securities because they have been sold or transferred pursuant to
the Resale Shelf Registration (the "Warrant Shares") on Form S-3 (except if the
Company is not then eligible to register for the issuance of the Warrant Shares
on Form S-3, in which case such registration shall be on another appropriate
form in accordance herewith) (the "Primary Shelf Registration") within 97 days
after the date hereof and shall use it reasonable best efforts to cause the
Primary Shelf Registration to be declared effective by the Commission (and shall
take such appropriate actions as are related thereto including, without
limitation, the execution of an undertaking to file post-effective amendments,
appropriate
qualification, if necessary, under applicable blue sky or other state securities
laws and appropriate compliance with applicable regulations issued under the
Securities Act and any other governmental requirements or regulations) as
promptly as possible after the filing thereof, but in any event prior to the
date that is 165 days after the date hereof. The registration statement and the
prospectus for the Primary Shelf Registration may be combined with the
registration statement and prospectus for the Resale Shelf Registration. Once
declared effective, the Company shall use its reasonable best efforts, subject
to Section 9(j) to cause the Primary Shelf Registration to be effective until
and including the earlier of (i) expiration of the Warrants, currently January
2, 2011, and (ii) such time as all of the Warrants have been exercised for
Warrant Shares. The Company shall not be obligated to take any action to effect
the Primary Shelf Registration in any particular jurisdiction in which the
Company would be required to qualify to do business, subject itself to general
taxation or execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is already
qualified to do business, subject to general taxation or subject to service, as
the case may be, in such jurisdiction, except as may be required by the
Securities Act. The holders of Warrants which are not Registrable Securities
because they have been sold or transferred pursuant to the Resale Shelf
Registration, whether or not parties to this Agreement or assignees of rights
under this Agreement, shall be third party beneficiaries of this Section 5(b)."
D. Registration Procedures.
Section 9 of the Investor Rights Agreement is amended by changing
"Section 5" to "Section 5(a)" in the first sentence of that Section 9.
E. Third Parties.
Section 15 of the Investor Rights Agreement is amended by replacing
the phrase "Nothing in this Agreement" with the phrase "Except as provided in
Section 5(b), nothing in this Agreement".
F. Amendments and Waiver.
Section 20 of the Investor Rights Agreement is amended by adding the
following phrase to the end of the first sentence of that Section:
"; provided, however, that any amendment to Section 5(b) will also
require the written consent of the holders of Warrants representing a majority
of shares of Common Stock issuable upon exercise of the then outstanding
Warrants."
G. Effect of Amendments
The Investors hereby acknowledge that, although the Company has
received a communication from the CUSIP Bureau (which has been disclosed to the
Investors) indicating that the amendments to the Warrants would be sufficient to
allow the Warrants to bear the same CUSIP number as the Company's
publicly-traded warrants having an exercise price of $5.00 (the "Public $5.00
Warrants"), the Company makes no representation or warranty that the
amendments being effected to the Warrants and the Investor Rights Agreement,
including the addition of the Primary Shelf Registration to the Investor Rights
Agreement, will actually be sufficient to allow the Warrants to trade fungibly
with the Public $5.00 Warrants.
2. Amendment of Warrants. The Company and the Investors agree that (i) each of
the Warrants shall be amended to read in their entirety (other than with respect
to the name of the holder and the applicable numbers of warrant shares) as set
forth in Exhibit A hereto, and (ii) they will exchange the Warrants for such
amended warrants promptly after the execution hereof. Upon the execution of this
Amendment, all references to the Warrants in the Investor Rights Agreement and
elsewhere shall mean the amended Warrants.
3. Confirmation. The Investor Rights Agreement, as amended by this Amendment, is
in all respects confirmed and preserved. This Amendment and the Investor Rights
Agreement shall henceforth be read together as a single agreement.
4. Counterparts. This Amendment may be executed in any number of counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.
5. Headings. All section headings herein are inserted for convenience only and
shall not modify or affect the construction or interpretation of any provisions
of this Amendment.
6. Governing Law. This Amendment shall be governed by the laws of the State of
California, without giving effect to its principles on conflict of law.
IN WITNESS WHEREOF, the parties have executed this Amendment of Investor Rights
Agreement as of the date first above written.
COMPANY:
REDBACK NETWORKS, INC.
By:
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INVESTORS:
TCV IV, L.P.
By: Technology Crossover Management IV, L.L.C.
Its: General Partner
By:
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Name: Xxxxxx X. Xxxxxx
Title: Attorney in Fact
TCV IV STRATEGIC PARTNERS, L.P.
By: Technology Crossover Management IV, L.L.C.
Its: General Partner
By:
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Name: Xxxxxx X. Xxxxxx
Title: Attorney in Fact
