EXHIBIT 4.1
REGISTRATION RIGHTS AGREEMENT
EXHIBIT A
TO SECURITIES PURCHASE AGREEMENT
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "AGREEMENT") is entered into as
of January 23, 2002, by and among GADZOOX NETWORKS, INC., a corporation
organized under the laws of the State of Delaware (the "COMPANY"), and each of
the undersigned (the "INITIAL INVESTORS").
WHEREAS:
A. The Company and the Initial Investors have entered into a Securities
Purchase Agreement dated the date hereof (the "SECURITIES PURCHASE AGREEMENT");
capitalized terms used herein and not otherwise defined herein shall have the
respective meanings set forth in the Securities Purchase Agreement. In
connection with the Securities Purchase Agreement, the Company has agreed, upon
the terms and subject to the conditions contained therein, to issue and sell to
the Initial Investors shares of the Company's common stock, $0.005 par value per
share (the "COMMON STOCK"). The shares of Common Stock issued on the Closing
Date under the Securities Purchase Agreement are referred to herein as the
"SHARES."
B. To induce the Initial Investors to execute and deliver the Securities
Purchase Agreement, the Company has agreed to provide certain registration
rights under the Securities Act of 1933, as amended, and the rules and
regulations thereunder, or any similar successor statute (collectively, the
"SECURITIES ACT"), and applicable state securities laws.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Company and the
Initial Investors, intending to be legally bound, hereby agree as follows:
1. DEFINITIONS.
As used in this Agreement, the following terms shall have the following
meanings:
(i)"INVESTORS" means the Initial Investors and any transferees
or assignees who agree to become bound by the provisions of this Agreement in
accordance with Section 9 hereof, provided that neither such person nor any
affiliate of such person is registered as a broker or dealer under Section 15(a)
of the Securities Exchange Act of 1934, as amended (the "EXCHANGE ACT"), or a
member of the National Association of Securities Dealers, Inc. ("NASD").
(ii) "REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a Registration Statement or
Statements in compliance with the Securities Act and pursuant to Rule 415 under
the Securities Act or any successor rule providing for
offering securities on a continuous basis ("RULE 415"), and the declaration or
ordering of effectiveness of such Registration Statement by the United States
Securities and Exchange Commission (the "SEC").
(iii) "REGISTRABLE SECURITIES" means (i) the Shares and (ii) any
shares of capital stock issued or issuable, from time to time (with any
adjustments), as a distribution on or in exchange for or otherwise with respect
to any of the foregoing.
(iv) "REGISTRATION STATEMENT" means one or more registration
statements of the Company under the Securities Act registering all of the
Registrable Securities, including the Initial Registration Statement, any
Uncovered Shares Amendments and Uncovered Shares Registration Statements (each,
as defined below).
2. REGISTRATION.
a. Mandatory Registration. Within 45 days following the Closing Date
(the "FILING DEADLINE"), the Company shall file with the United States
Securities and Exchange Commission ("SEC") a Registration Statement on Form S-3
(or, if Form S-3 is not then available, on such form of Registration Statement
as is then available) to effect a registration of all of the Registrable
Securities, covering the resale of at least 7,825,000 shares of Common Stock,
which Registration Statement, to the extent allowable under the Securities Act
and the rules promulgated thereunder shall state that such Registration
Statement also covers such indeterminate number of additional shares of Common
Stock as may become issuable to prevent dilution resulting from stock splits,
stock dividends or similar transactions (the "INITIAL REGISTRATION STATEMENT").
The Registrable Securities included in the Initial Registration Statement shall
be registered on behalf of the Investors as set forth in Section 11(k) hereof.
The Initial Registration Statement (and each amendment or supplement thereto,
and each request for acceleration of effectiveness thereof) shall be provided to
(and subject to the review by) the Initial Investors and their counsel at least
five (5) business days prior to its filing or other submission. If for any
reason (including, but not limited to, a determination by the staff of the SEC
that all or any portion of the Shares or any other Registrable Securities cannot
be included in the Initial Registration Statement (an "SEC DETERMINATION")) the
Initial Registration Statement declared effective by the SEC does not include
all of the Registrable Securities (any such shares that are not included being
the "UNCOVERED SHARES"), the Company shall prepare and file with the SEC, as
soon as practicable, but in any event within 30 days after becoming aware of the
existence of any Uncovered Shares (such date referred to herein as the
"UNCOVERED SHARE FILING DEADLINE"), either (a) an amendment (the "UNCOVERED
SHARES AMENDMENT") to the Initial Registration Statement effecting a
registration of the Uncovered Shares or (b) a registration statement which
registers the Uncovered Shares (the "UNCOVERED SHARES REGISTRATION STATEMENT").
The Uncovered Shares Amendment or the Uncovered Shares Registration Statement
(and each amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided to the Initial Investors and their
counsel for review and comment at least three (3) business days prior to its
filing or other submission. The Company shall use its best efforts to cause each
of the Initial Registration Statement and the Uncovered Shares Amendment or the
Uncovered Shares Registration Statement to become effective as soon as
practicable after the filing thereof.
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b. Underwritten Offering. The Investors may offer and sell the
Registrable Securities pursuant to a Registration Statement filed in accordance
with Section 2(a) in an underwritten offering. In any such underwritten
offering, the Investors who hold a majority in interest of the Registrable
Securities subject to such underwritten offering, shall have the right to select
one legal counsel to represent the Investors and an investment banker or bankers
and manager or managers to administer the offering, which investment banker or
bankers or manager or managers shall be reasonably satisfactory to the Company.
In the event that any Investors elect not to participate in such underwritten
offering, the Registration Statement covering all of the Registrable Securities
shall contain appropriate plans of distribution reasonably satisfactory to the
Investors participating in such underwritten offering and the Investors electing
not to participate in such underwritten offering (including, without limitation,
appropriate plans of distribution governing the ability of nonparticipating
Investors to sell from time to time and at any time during the effectiveness of
such Registration Statement). In the event the Investors elect to offer and sell
the Registrable Securities pursuant to a Registration Statement filed in
accordance with Section 2(a) in an underwritten offering, the provisions of
Section 2(c) shall be inapplicable to such Registration Statement.
c. Payments by the Company. The Company shall promptly prepare and
file with the SEC a Registration Statement with respect to the Registrable
Securities required to be registered pursuant to Section 2(a) (but in no event
later than the Filing Deadline) and use its best efforts to cause such
Registration Statement to become effective as soon as possible after such filing
(but in no event later than the ninetieth (90th) day after the Closing Date (the
"REGISTRATION DEADLINE"), and as to any Uncovered Shares Amendment or Uncovered
Shares Registration Statement, in no event later than the ninetieth (90th) day
after the Uncovered Share Filing Deadline (the "UNCOVERED SHARE REGISTRATION
DEADLINE")). If (i) the Registration Statement(s) covering the Registrable
Securities required to be filed by the Company pursuant to Section 2(a) hereof
is not filed with the SEC by the Filing Deadline or the Uncovered Share Filing
Deadline, as applicable, or, declared effective by the SEC on or before the
Registration Deadline or the Uncovered Share Registration Deadline, as
applicable, or if, after a Registration Statement has been declared effective by
the SEC, sales of all the Registrable Securities (including any Registrable
Securities required to be registered pursuant to Section 3(b) hereof) required
to be included therein (except, in the case of the Initial Registration
Statement, for Uncovered Shares which are the subject of an SEC Determination)
cannot be made pursuant to the Registration Statement (by reason of a stop
order, the Company's failure to update a Registration Statement, any reason
resulting in Uncovered Shares or any other reason outside the control of the
Investors) or (ii) the Common Stock is not listed or included for quotation on
The Nasdaq National Market or Small Cap Market (the "NASDAQ MARKETS"), the New
York Stock Exchange (the "NYSE") or the American Stock Exchange (the "AMEX") at
any time after the Registration Deadline, then the Company will make payments to
the Investors in such amounts and at such times as shall be determined pursuant
to this Section 2(c) as damages to the Investors by reason of any such delay in
or reduction of their ability to sell the Registrable Securities.
On the first day of each thirty (30) day period after the Filing
Deadline, the Uncovered Filing Deadline, the Registration Deadline or the
Uncovered Share Registration Deadline, as applicable, the Company will pay each
Investor a penalty until such time that the Registration Statement is filed with
the SEC or declared effective by the SEC, as applicable. The amount of each
payment shall
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equal the product of (A) one-half of one percent (0.5%) for the first thirty
(30) day period and one percent (1.0%) for each thirty (30) day period
thereafter, multiplied by (B) the Investment Amount (as defined in the
Securities Purchase Agreement) paid by such Investor (or if such Investor is not
an Initial Investor, the Investment Amount paid by such Investor's transferor or
assignor of such Shares) for the Shares purchased by such Investor (or such
Investor's transferor or assignor) pursuant to the Securities Purchase Agreement
(the "AGGREGATE PURCHASE PRICE"). In the event that such Registration Statement
is not declared effective by the SEC within 270 days after the Registration
Deadline, either the Investors or the Company shall have the right at any time
prior to the effectiveness of the Registration Statement to require redemption
of any or all of the Shares at a price equal to 110% of the Aggregate Purchase
Price. Such amounts shall be paid in cash. If the Company is unable to pay all
amounts due and payable with respect to the penalties, the Company will pay the
Investors such amounts pro rata based upon the total amounts payable to each
Investor as a percentage of the total amounts payable to all Investors.
d. Eligibility for Form S-3. Subject to the disclosure set forth in
the Company Disclosure Schedules, the Company represents and warrants that it is
currently eligible to register the resale of Registrable Securities on a
registration statement on Form S-3 under the Securities Act, and that it knows
of no facts or circumstances (including without limitation any required
approvals or waivers or any circumstances that may delay or prevent the
obtaining of accountant's consents) that would prohibit or delay the preparation
and filing of a registration statement on Form S-3 with respect to the
Registrable Securities within the time periods required herein. The Company
shall file all reports required to be filed by the Company with the SEC in a
timely manner so as to maintain or, if applicable, regain its eligibility for
the use of Form S-3.
3. OBLIGATIONS OF THE COMPANY.
In connection with the registration of the Registrable Securities, the
Company shall have the following obligations:
a. The Company shall prepare and file with the SEC, on or before the
Filing Deadline or the Uncovered Share Filing Deadline, as applicable, the
applicable Registration Statement required by Section 2(a) and shall use its
best efforts to cause such Registration Statement to become effective as soon as
practicable after such filing (but in no event later than the Registration
Deadline or the Uncovered Share Registration Deadline, as applicable). The
Company shall keep such Registration Statement effective pursuant to Rule 415 at
all times until the date on which all of the outstanding Registrable Securities
may (in the reasonable opinion of counsel experienced in securities matters
representing at least a majority of the Initial Investors and, if none, to
counsel to the Company) be immediately sold to the public without registration
or restriction pursuant to Rule 144(k) under the Securities Act (the
"REGISTRATION PERIOD"). In the event that the sale of Registrable Securities by
one or more Investors is determined by the SEC to constitute a primary offering,
upon the written request from time to time of any such Investor, the Company
shall as promptly as practicable: cause a Registration Statement to be amended
and/or one or more additional Registration Statements (which may be requested on
a sequential basis) to be filed (as specified by the applicable Investors) and
to be declared effective; and take all other actions reasonably requested by
such Investors to effectuate the offering of Registrable Securities. If the
Initial Registration Statement is not filed on Form S-3, the Company shall, as
soon as it is eligible to
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do so, file a post-effective amendment on Form S-3 to the Initial Registration
Statement to the extent permitted by the SEC or, if not so permitted, file a
post-effective amendment on an appropriate form or a new Registration Statement
on Form S-3 to permit sales of the Registrable Securities under the Securities
Act; and the Company shall use its best efforts to cause such post-effective
amendment or Registration Statement to become effective as soon as possible.
Each Registration Statement (including any amendments or supplements thereto and
prospectuses contained therein and all documents incorporated by reference
therein) filed pursuant to this Agreement (i) shall comply in all material
respects with the requirements of the Securities Act and the rules and
regulations of the SEC promulgated thereunder and (ii) shall not contain any
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, in light of the
circumstances in which they were made, not misleading. The financial statements
of the Company included in the Registration Statement or incorporated by
reference therein will comply as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC applicable with respect thereto. Such financial statements shall be
prepared in accordance with U.S. generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim statements, to the extent they may not include
footnotes or may be condensed or summary statements) and shall fairly present in
all material respects the consolidated financial position of the Company and its
consolidated subsidiaries as of the dates thereof and the consolidated results
of their operations and cash flows for the periods then ended (subject, in the
case of unaudited statements, to immaterial or recurring year-end adjustments).
b. The Company shall prepare and file with the SEC such amendments
(including post-effective amendments) and supplements to the Registration
Statement and the prospectus used in connection with the Registration Statement
as may be necessary to keep the Registration Statement effective at all times
during the Registration Period, and, during such period, comply with the
provisions of the Securities Act with respect to the disposition of all
Registrable Securities of the Company covered by the Registration Statement
until such time as all of such Registrable Securities have been disposed of in
accordance with the intended methods of disposition by the seller or sellers
thereof as set forth in the Registration Statement. Notwithstanding the
foregoing, the Company's obligations hereunder to file a Registration Statement
and to keep a registration statement continuously in effect under the Securities
Act shall be suspended without penalty as provided in Section 2(c) of this
Agreement if the fulfillment of such obligations would require the Company to
make a disclosure that would, in the reasonable judgment of the Company's Board
of Directors, have a Material Adverse Effect (as such term is defined in the
Securities Purchase Agreement) on the Company or a material adverse effect on
the future prospects of the Company or its stockholders; provided, that the
Registration Statement shall be suspended for a total of no more than forty-five
(45) days during any twelve (12) month period.
c. The Company shall furnish to each Investor whose Registrable
Securities are included in the Registration Statement and legal counsel, if any,
representing Investors holding at least a majority of the Registrable Securities
(i) promptly after the same is prepared and publicly distributed, filed with the
SEC, or received by the Company, one copy of the Registration Statement and any
amendment thereto, each prospectus and each amendment or supplement thereto (ii)
on the date of effectiveness of the Registration Statement or any amendment
thereto, a notice stating that the Registration Statement or amendment has been
declared effective, and (iii) such number of
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copies of a prospectus and all amendments and supplements thereto and such other
documents as such Investor may reasonably request in order to facilitate the
disposition of the Registrable Securities owned by such Investor. In responding
to comments from the staff of the SEC, the Company shall cooperate with any
Investor that notifies the Company that it desires to be consulted with respect
to such process. To the extent that issues raised by the staff of the SEC have
an impact primarily on any such Investor rather than the Company, the Company
shall give reasonable deference to such Investor's requests with respect to the
process and substance of responses with respect to such issues. In the event
that the Company is unable to meet the Filing Deadline, the Uncovered Share
Filing Deadline, the Registration Deadline or the Uncovered Share Registration
Deadline due to delays caused by requests of any Investor to be consulted or due
to changes to the Registration Statement or prospectus requested by any Investor
or its representative, the Company shall have no obligation to pay any penalties
set forth in Section 2(c).
d. The Company shall use its best efforts to (i) register and
qualify the Registrable Securities covered by the Registration Statement under
such other securities or "blue sky" laws of such jurisdictions in the United
States as each Investor who holds Registrable Securities being offered
reasonably requests, (ii) prepare and file in those jurisdictions such
amendments (including post-effective amendments) and supplements to such
registrations and qualifications as may be necessary to maintain the
effectiveness thereof during the Registration Period, (iii) take such other
actions as may be necessary to maintain such registrations and qualifications in
effect at all times during the Registration Period, and (iv) take all other
actions reasonably necessary or advisable to qualify the Registrable Securities
for sale in such jurisdictions; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (a) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(d), (b) subject itself to general taxation in any such
jurisdiction, (c) file a general consent to service of process in any such
jurisdiction, (d) provide any undertakings that cause the Company undue expense
or burden, or (e) make any change in its articles of incorporation or bylaws,
which in each case the Board of Directors of the Company determines to be
contrary to the best interests of the Company and its stockholders.
e. In the event the Investors who hold a majority in interest of the
Registrable Securities being offered in an offering select underwriters for the
offering, the Company shall enter into and perform its obligations under an
underwriting agreement, in usual and customary form, including, without
limitation, customary indemnification and contribution obligations, with the
underwriters of such offering.
f. As promptly as practicable after becoming aware of such event,
the Company shall notify each Investor by telephone, facsimile or e-mail of the
happening of any event, of which the Company has knowledge, as a result of which
the prospectus included in the Registration Statement, as then in effect,
includes an untrue statement of a material fact or omission to state a material
fact required to be stated therein or necessary to make the statements therein
not misleading, and use its best efforts promptly to prepare a supplement or
amendment to the Registration Statement to correct such untrue statement or
omission and deliver such number of copies of such supplement or amendment to
each Investor as such Investor may reasonably request.
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g. The Company shall use its best efforts to prevent the issuance of
any stop order or other suspension of effectiveness of a Registration Statement,
and, if such an order is issued, to obtain the withdrawal of such order at the
earliest practicable date (including in each case by amending or supplementing
such Registration Statement) and to notify each Investor who holds Registrable
Securities being sold (or, in the event of an underwritten offering, the
managing underwriters) of the issuance of such order and the resolution thereof
(and if such Registration Statement is supplemented or amended, deliver such
number of copies of such supplement or amendment to each Investor as such
Investor may reasonably request).
h. The Company shall permit a single firm of counsel designated by
the Initial Investors to review the Registration Statement and all amendments
and supplements thereto a reasonable period of time prior to their filing with
the SEC.
i. At the request of the Initial Investors whose Registrable
Securities are included in a Registration Statement, the Company shall furnish,
on the date of effectiveness of the Registration Statement (i) an opinion, dated
as of such date, from counsel representing the Company addressed to the
Investors to the effect that the Registration Statement and related prospectus
comply as to form in all material respects with the requirements of the
Securities Act and the applicable rules and regulations thereunder (except that
no opinion need be expressed with respect to the financial statements, including
the notes and schedules thereto, or any other financial, statistical or
accounting information, or information relating to the Investors or any
underwriters or the method of distribution of the Registrable Securities by the
Investors and any underwriters included therein), and (ii) a letter (the "COLD
COMFORT LETTER"), dated as of such date, from the Company's independent
certified public accountants (the "AUDITORS") in form and substance as is
customarily given by independent certified public accountants to underwriters in
an underwritten public offering, addressed to the Initial Investors and the
underwriters, if any, provided, however, that such Investors requesting the Cold
Comfort Letter shall, as a condition precedent to receiving the Cold Comfort
Letter, furnish the Auditors with such information as the Auditors may
reasonably request in order to render the Cold Comfort Letter.
j. The Company shall make available for inspection by (i) any
Investor who holds at least 20% of the Shares initially purchased by that
Investor and whose Registrable Securities are included in a Registration
Statement, (ii) any underwriter participating in any disposition pursuant to a
Registration Statement, (iii) one firm of attorneys and one firm of accountants
or other agents retained by the Investors, and (iv) one firm of attorneys
retained by all such underwriters (collectively, the "INSPECTORS") all pertinent
financial and other records, and pertinent corporate documents and properties of
the Company (collectively, the "RECORDS"), as shall be reasonably deemed
necessary by each Inspector to enable each Inspector to exercise its due
diligence responsibility, and cause the Company's officers, directors and
employees to supply all information which any Inspector may reasonably request
for purposes of such due diligence.
k. The Company and each Investor shall hold in confidence and not
make any disclosure of information concerning an Investor and the Company,
respectively, provided to the Company or an Investor unless (i) disclosure of
such information is necessary to comply with federal or state securities laws,
(ii) the disclosure of such information is necessary to avoid or correct a
misstatement or omission in any Registration Statement, (iii) the release of
such information is
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ordered pursuant to a subpoena or other order from a court or governmental body
of competent jurisdiction, (iv) such information has been made generally
available to the public other than by disclosure in violation of this or any
other agreement, or (v) such Investor consents to the form and content of any
such disclosure. The Company agrees that it shall, upon learning that disclosure
of such information concerning an Investor is sought in or by a court or
governmental body of competent jurisdiction or through other means, give prompt
notice to such Investor prior to making such disclosure, and allow the Investor,
at its expense, to undertake appropriate action to prevent disclosure of, or to
obtain a protective order for, such information.
l. The Company shall use commercially reasonable best efforts to
promptly either (i) secure the designation and quotation, of all the Registrable
Securities covered by the Registration Statement on The Nasdaq National Market
or the Nasdaq SmallCap Market, or (ii) cause all the Registrable Securities
covered by the Registration Statement to be listed on the NYSE or the AMEX or
another national securities exchange and on each additional national securities
exchange on which securities of the same class or series issued by the Company
are then listed, if any, if the listing of such Registrable Securities is then
permitted under the rules of such exchange.
m. The Company shall provide a transfer agent and registrar, which
may be a single entity, for the Registrable Securities not later than the
effective date of the Registration Statement.
n. The Company shall cooperate with the Investors who hold
Registrable Securities being offered and the managing underwriter or
underwriters, if any, to facilitate the timely preparation and delivery of
certificates (not bearing any restrictive legends) representing Registrable
Securities to be offered pursuant to the Registration Statement and enable such
certificates to be in such denominations or amounts, as the case may be, as the
managing underwriter or underwriters, if any, or the Investors may reasonably
request and registered in such names as the managing underwriter or
underwriters, if any, or the Investors may request, and, if required by the
transfer agent for the Registrable Securities, within three (3) business days
after a Registration Statement which includes Registrable Securities is ordered
effective by the SEC, the Company shall deliver, and shall cause legal counsel
selected by the Company to deliver, to the transfer agent for the Registrable
Securities (with copies to the Investors whose Registrable Securities are
included in such Registration Statement) an opinion of such counsel in a form
customary for such transactions.
o. At the request of an Initial Investor or Investors who holds a
majority-in-interest of the Registrable Securities, the Company shall prepare
and file with the SEC such amendments (including post-effective amendments) and
supplements to a Registration Statement and the prospectus used in connection
with the Registration Statement as may be reasonably necessary in order to
change the plan of distribution set forth in such Registration Statement.
p. The Company shall comply with applicable federal and state
securities laws and regulations related to a Registration Statement and offering
and sale of securities.
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q. The Company shall take all such other actions as any Investor or
the underwriters, if any, reasonably request in order to expedite or facilitate
the disposition of such Registrable Securities.
4. OBLIGATIONS OF THE INVESTORS.
In connection with the registration of the Registrable Securities, the
Investors shall have the following obligations:
a. It shall be a condition precedent to the obligations of the
Company to complete the registration pursuant to this Agreement with respect to
the Registrable Securities of a particular Investor that such Investor shall
furnish to the Company such information regarding itself, the Registrable
Securities held by it and the intended method of disposition of the Registrable
Securities held by it as shall be reasonably required to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least five (5)
business days prior to the first anticipated filing date of the Initial
Registration Statement and at least three (3) business days prior to the
anticipated filing date of any Uncovered Shares Registration Statement or other
registration statement, the Company shall notify each Investor to be included in
such registration statement of any information the Company requires from each
such Investor.
b. Each Investor, by such Investor's acceptance of the Registrable
Securities, agrees to cooperate with the Company as reasonably requested by the
Company in connection with the preparation and filing of the Registration
Statement hereunder, unless such Investor has notified the Company in writing of
such Investor's election to exclude all of such Investor's Registrable
Securities from the Registration Statement.
c. In the event Investors holding a majority in interest of the
Registrable Securities being offered determine to engage the services of an
underwriter, each Investor agrees to enter into and perform such Investor's
obligations under an underwriting agreement, in usual and customary form,
including, without limitation, customary indemnification and contribution
obligations, with the underwriter(s) of such offering and the Company and take
such other actions as are reasonably required in order to expedite or facilitate
the disposition of the Registrable Securities, unless such Investor has notified
the Company in writing of such Investor's election not to participate in such
underwritten distribution.
d. No Investor may participate in any underwritten distribution
hereunder unless such Investor (i) agrees to sell such Investor's Registrable
Securities on the basis provided in any underwriting arrangements in usual and
customary form entered into by the Company, (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements, and (iii) agrees to pay its pro rata share of all underwriting
discounts and commissions and any expenses in excess of those payable by the
Company pursuant to Section 5 below. Notwithstanding anything in this Section
4(d) to the contrary, this Section 4(d) is not intended to limit an Investor's
rights under Section 2(a) or 3(b) hereof.
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e. Each Investor will enter into customary lock-up agreements (not
to exceed ninety (90) days (or such shorter period of time as may be required of
the directors and executive officers)) with the underwriters of a public
offering of the capital stock of the Company if so requested by such
underwriters; provided, however, that such lock-up shall not apply to shares
registered on Form S-3.
5. EXPENSES OF REGISTRATION.
All reasonable expenses incurred by the Company or the Investors in
connection with registrations, filings or qualifications pursuant to Sections 2
and 3 above (excluding brokers' fees, underwriting discounts and commissions,
and similar selling expenses), including, without limitation, all registration,
listing and qualifications fees, printers and accounting fees and the fees and
disbursements of counsel for the Company, up to a maximum of $25,000 incurred by
the Investors, shall be borne by the Company. In addition, the Company shall pay
all of the Investors' costs and expenses (including reasonable legal fees)
incurred in connection with the enforcement of the rights of the Investors
hereunder.
6. INDEMNIFICATION.
In the event any Registrable Securities are included in a Registration
Statement under this Agreement:
a. To the extent permitted by law, the Company will indemnify, hold
harmless and defend (i) each Investor who holds such Registrable Securities, and
(ii) the directors, officers, partners, members, employees and agents of such
Investor and each person who controls any Investor within the meaning of Section
15 of the Securities Act or Section 20 of the Exchange Act, if any (each, an
"INDEMNIFIED PERSON"), against any joint or several losses, claims, damages,
liabilities, settlements or expenses (collectively, together with actions,
proceedings or inquiries by any regulatory or self-regulatory organization,
whether commenced or threatened, in respect thereof, "CLAIMS") to which any of
them may become subject insofar as such Claims arise out of or are based upon:
(i) any untrue statement or alleged untrue statement of a material fact in a
Registration Statement or the omission or alleged omission to state therein a
material fact required to be stated or necessary to make the statements therein
not misleading, (ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus if used prior to the
effective date of such Registration Statement, or contained in the final
prospectus (as amended or supplemented, if the Company files any amendment
thereof or supplement thereto with the SEC) or the omission or alleged omission
to state therein any material fact necessary to make the statements made
therein, in light of the circumstances under which the statements therein were
made, 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 thereunder relating to the offer or sale of the Registrable
Securities (the matters in the foregoing clauses (i) through (iii) being,
collectively, "VIOLATIONS"). Subject to the restrictions set forth in Section
6(c) with respect to the number of legal counsel, the Company shall reimburse
the Investors and each other Indemnified Person, promptly as such expenses are
incurred and are due and payable, for any reasonable legal fees or other
reasonable expenses incurred by them in connection with investigating or
defending any such Claim. Notwithstanding anything to the contrary contained
herein, the indemnification agreement contained
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in this Section 6(a): (i) shall not apply to a Claim arising out of or based
upon a Violation which occurs in reliance upon and in conformity with
information furnished in writing to the Company by such Indemnified Person
expressly for use in the Registration Statement or any such amendment thereof or
supplement thereto; (ii) shall not apply to amounts paid in settlement of any
Claim if such settlement is effected without the prior written consent of the
Company, which consent shall not be unreasonably withheld; and (iii) with
respect to any prospectus, shall not inure to the benefit of any Indemnified
Person if the untrue statement or omission of material fact contained in such
prospectus was corrected on a timely basis in the prospectus, as then amended or
supplemented, if such corrected prospectus was timely made available by the
Company pursuant to Section 3(c) hereof, and the Indemnified Person was promptly
advised in writing not to use the incorrect prospectus prior to the use giving
rise to a Violation and such Indemnified Person, notwithstanding such advice,
used it. Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Indemnified Person and shall survive
the transfer of the Registrable Securities by the Investors pursuant to Section
9.
b. In connection with any Registration Statement in which an
Investor is participating, each such Investor agrees severally and not jointly
to indemnify, hold harmless and defend, to the same extent and in the same
manner set forth in Section 6(a), the Company, each of its directors, each of
its officers who signs the Registration Statement, its employees, agents and
each person, if any, who controls the Company within the meaning of Section 15
of the Securities Act or Section 20 of the Exchange Act, and any other
stockholder selling securities pursuant to the Registration Statement or any of
its directors or officers or any person who controls such stockholder or
underwriter within the meaning of the Securities Act or the Exchange Act
(collectively and together with an Indemnified Person, an "INDEMNIFIED PARTY"),
against any Claim to which any of them may become subject, under the Securities
Act, the Exchange Act or otherwise, insofar as such Claim arises out of or is
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 to the Company by such Investor expressly for use in
connection with such Registration Statement; and subject to Section 6(c) such
Investor will reimburse any legal or other expenses (promptly as such expenses
are incurred and are due and payable) reasonably incurred by them in connection
with investigating or defending any such Claim; provided, however, that the
indemnity agreement contained in this Section 6(b) shall not apply to amounts
paid in settlement of any Claim if such settlement is effected without the prior
written consent of such Investor, which consent shall not be unreasonably
withheld; provided, further, however, that the Investor shall be liable under
this Agreement (including this Section 6(b) and Section 7) for only that amount
as does not exceed the net proceeds actually received by such Investor as a
result of the sale of Registrable Securities pursuant to such Registration
Statement. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such Indemnified Party and shall
survive the transfer of the Registrable Securities by the Investors pursuant to
Section 9. Notwithstanding anything to the contrary contained herein, the
indemnification agreement contained in this Section 6(b) with respect to any
preliminary prospectus shall not inure to the benefit of any Indemnified Party
if the untrue statement or omission of material fact by the Investor contained
in the preliminary prospectus was corrected on a timely basis in the prospectus,
as then amended or supplemented, and the Indemnified Party failed to utilize
such corrected prospectus.
-11-
c. Promptly after receipt by an Indemnified Person or Indemnified
Party under this Section 6 of notice of the commencement of any action
(including any governmental action), such Indemnified Person or Indemnified
Party shall, if a Claim in respect thereof is made against any indemnifying
party under this Section 6, deliver to the indemnifying party a written notice
of the commencement thereof, and the indemnifying party shall have the right to
assume control of the defense thereof with counsel mutually satisfactory to the
indemnifying party and the Indemnified Person or the Indemnified Party, as the
case may be; provided, however, that such indemnifying party shall not be
entitled to assume such defense and an Indemnified Person or Indemnified Party
shall have the right to retain its own counsel with the reasonable fees and
expenses to be paid by the indemnifying party, if, in the reasonable opinion of
counsel retained by the indemnifying party, the representation by such counsel
of the Indemnified Person or Indemnified Party and the indemnifying party would
be inappropriate due to actual or potential conflicts of interest between such
Indemnified Person or Indemnified Party and any other party represented by such
counsel in such proceeding or the actual or potential defendants in, or targets
of, any such action include both the Indemnified Person or the Indemnified Party
and the indemnifying party and any such Indemnified Person or Indemnified Party
reasonably determines that there may be legal defenses available to such
Indemnified Person or Indemnified Party which are in conflict with those
available to such indemnifying party. The indemnifying party shall pay for only
one separate legal counsel for the Indemnified Persons or the Indemnified
Parties, as applicable, and such legal counsel shall be selected by Investors
holding a majority-in-interest of the Registrable Securities included in the
Registration Statement to which the Claim relates (with the approval of the
Initial Investors if any of them holds Registrable Securities included in such
Registration Statement), if the Investors are entitled to indemnification
hereunder, or by the Company, if the Company is entitled to indemnification
hereunder, as applicable. The failure to deliver written notice to the
indemnifying party within a reasonable time of the commencement of any such
action shall not relieve such indemnifying party of any liability to the
Indemnified Person or Indemnified Party under this Section 6, except to the
extent that the indemnifying party is actually prejudiced in its ability to
defend such action. The indemnification required by this Section 6 shall be made
by periodic payments of the amount thereof during the course of the
investigation or defense, as such expense, loss, damage or liability is incurred
and is due and payable.
7. CONTRIBUTION.
To the extent any indemnification by an indemnifying party is prohibited
or limited by law, the indemnifying party agrees to make the maximum
contribution with respect to any amounts for which it would otherwise be liable
under Section 6 to the fullest extent permitted by law; provided, however, that
(a) no contribution shall be made under circumstances where the maker would not
have been liable for indemnification under the fault standards set forth in
Section 6, (b) no person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation, and (c) contribution (together with any indemnification or
other obligations under this Agreement) by any seller of Registrable Securities
shall be limited in amount to the net amount of proceeds received by such seller
from the sale of such Registrable Securities.
-12-
8. REPORTS UNDER THE EXCHANGE ACT.
With a view to making available to the Investors the benefits of Rule
144 promulgated under the Securities Act or any other similar rule or regulation
of the SEC that may at any time permit the Investors to sell securities of the
Company to the public without registration ("RULE 144"), the Company agrees to:
a. file with the SEC in a timely manner and make and keep available
all reports and other documents required of the Company under the Securities Act
and the Exchange Act so long as the Company remains subject to such requirements
(it being understood that nothing herein shall limit the Company's obligations
under Section 5(c) of the Securities Purchase Agreement) and the filing and
availability of such reports and other documents as is required for the
applicable provisions of Rule 144; and
b. furnish to each Investor so long as such Investor owns
Registrable Securities, promptly upon request, (i) a written statement by the
Company that it has complied with the reporting requirements of Rule 144, the
Securities Act and the Exchange Act, (ii) a copy of the most recent annual or
quarterly report of the Company and such other reports and documents so filed by
the Company, and (iii) such other information as may be reasonably requested to
permit the Investors to sell such securities pursuant to Rule 144 without
registration.
9. ASSIGNMENT OF REGISTRATION RIGHTS.
The rights of the Investors hereunder, including the right to have the
Company register Registrable Securities pursuant to this Agreement, shall be
assignable by each Investor to any permitted transferee of the Registrable
Securities (a) in the case of an assignment of all Registrable Securities held
by such Investor without the consent of the Company and (b) in the case of an
assignment of less than all Registrable Securities held by such Investor with
the consent of the Company (which consent shall not be unreasonably withheld),
if: (i) the Investor agrees in writing with the transferee or assignee to assign
such rights, and a copy of such agreement is furnished to the Company after such
assignment, (ii) the Company is furnished with written notice of (x) the name
and address of such transferee or assignee and (y) the securities with respect
to which such registration rights are being transferred or assigned, (iii)
following such transfer or assignment, the further disposition of such
securities by the transferee or assignee is restricted under the Securities Act
and applicable state securities laws, (iv) the transferee or assignee agrees in
writing with the Company to be bound by all of the provisions contained herein
and applicable provisions of the Securities Purchase Agreement relating to the
transfer of any Securities, and (v) such transfer shall have been made in
accordance with the applicable requirements of the Securities Purchase
Agreement. In addition, and notwithstanding anything to the contrary contained
in this Agreement or the Securities Purchase Agreement, the Shares may be
pledged, and all rights of the Investors under this Agreement or any other
agreement or document related to the transaction contemplated hereby may be
assigned, without further consent of the Company, to a bona fide pledgee in
connection with an Investor's margin or brokerage accounts.
-13-
10. AMENDMENT OF REGISTRATION RIGHTS.
Provisions of this Agreement may be amended and the observance thereof
may be waived (either generally or in a particular instance and either
retroactively or prospectively), by the Company and Investors (excluding
Investors who are affiliates of the Company) who hold a majority in interest of
the Registrable Securities (excluding Registrable Securities held by affiliates
of the Company) or, in the case of a waiver, with the written consent of the
party charged with the enforcement of any such provision. Any amendment or
waiver effected in accordance with this Section 10 shall be binding upon each
Investor and the Company.
11. MISCELLANEOUS.
a. A person or entity is deemed to be a holder of Registrable
Securities whenever such person or entity owns of record such Registrable
Securities. If the Company receives conflicting instructions, notices or
elections from two or more persons or entities with respect to the same
Registrable Securities, the Company shall act upon the basis of instructions,
notice or election received from the registered owner of such Registrable
Securities.
b. Any notices required or permitted to be given under the terms of
this Agreement shall be sent by certified or registered mail (return receipt
requested) or delivered personally or by courier or by confirmed telecopy, and
shall be effective five (5) days after being placed in the mail, if mailed, or
upon receipt or refusal of receipt, if delivered personally or by courier
confirmed telecopy or e-mail, in each case addressed to a party. The addresses
for such communications shall be:
If to the Company:
Gadzoox Networks, Inc.
0000 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxx Xxxxxxx, President and
Chief Executive Officer
with a copy to:
Xxxxxx Xxxxxxx Xxxxxxxx and Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, XX 00000-0000
Telephone No.: (000) 000-0000
Facsimile No.: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
-14-
If to an Investor, at such address as such Investor shall have provided
in writing to the Company or such other address as such Investor furnishes by
notice given in accordance with this Section 11(b).
Each party hereto may from time to time change its address or facsimile
number for notices under this Section 11(b) by giving at least ten (10) days'
prior written notice of such changed address or facsimile number, in the case of
the Investors to the Company, and in the case of the Company to all of the
Investors.
c. Failure of any party to exercise any right or remedy under this
Agreement or otherwise, or delay by a party in exercising such right or remedy,
shall not operate as a waiver thereof.
d. This Agreement shall be governed by and construed in accordance
with the laws of the State of California applicable to contracts made and to be
performed in the State of California. The Company irrevocably consents to the
jurisdiction of the United States federal courts and state courts located in the
State of California in any suit or proceeding based on or arising under this
Agreement and irrevocably agrees that all claims in respect of such suit or
proceeding may be determined in such courts. The Company irrevocably waives the
defense of an inconvenient forum to the maintenance of such suit or proceeding.
The Company further agrees that service of process upon the Company mailed by
first class mail to the address set forth in Section 11(b) shall be deemed in
every respect effective service of process upon the Company in any such suit or
proceeding. Nothing herein shall affect an Investor's right to serve process in
any other manner permitted by law. The Company agrees that a final
non-appealable judgment in any such suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on such judgment or in any other
lawful manner.
e. This Agreement and the Securities Purchase Agreement (including
all schedules and exhibits thereto) constitute the entire agreement among the
parties hereto with respect to the subject matter hereof and thereof. There are
no restrictions, promises, warranties or undertakings, other than those set
forth or referred to herein and therein. This Agreement and the Securities
Purchase Agreement supersede all prior agreements and understandings among the
parties hereto and thereto with respect to the subject matter hereof and
thereof.
f. Subject to the requirements of Section 9 hereof, this Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties hereto.
g. The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.
h. This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original but all of which shall constitute one and
the same agreement. This Agreement, once executed by a party, may be delivered
to the other party hereto by facsimile transmission of a copy of this Agreement
bearing the signature of the party so delivering this Agreement.
-15-
i. 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.
j. All consents, approvals and other determinations to be made by
the Investors pursuant to this Agreement shall be made by the Investors holding
at least a majority of the Registrable Securities then held by all Investors.
k. The initial number of Registrable Securities included on any
Registration Statement and each increase to the number of Registrable Securities
included thereon shall be registered on behalf of each Investor pro rata based
on the number of Registrable Securities held by each Investor at the time of
such establishment or increase, as the case may be. In the event an Investor
shall sell or otherwise transfer any of such holder's Registrable Securities,
each transferee shall be deemed to have registered on its behalf a pro rata
portion of the number of Registrable Securities included on a Registration
Statement for such transferor. Any shares of Common Stock included on a
Registration Statement on behalf of any person or entity which does not hold any
Registrable Securities shall be deemed registered on behalf of the remaining
Investors, pro rata based on the number of shares of Registrable Securities then
held by such Investors. For the avoidance of doubt, no provision of this
subsection shall operate to reduce the number of Registrable Securities
registered on behalf of any Investor pursuant to the first sentence of this
subsection.
l. For purposes of this Agreement, the term "business day" means any
day other than a Saturday or Sunday or a day on which banking institutions in
the State of New York are authorized or obligated by law, regulation or
executive order to close.
m. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company, the
holders of Registrable Securities and permitted assigns of Registrable
Securities any legal or equitable right, remedy or claim under this Agreement,
but this Agreement shall be for the sole and exclusive benefit of the Company,
the holder and the permitted assigns of this Agreement.
n. Aggregation of Registrable Securities. All of the Registrable
Securities held or acquired by affiliated entities or persons shall be
aggregated together for the purpose of determining the availability of rights
under this Agreement.
o. Termination. Notwithstanding anything to the contrary herein, the
Company's obligations shall terminate as of the date which is five (5) years
from the date hereof.
*****
-16-
IN WITNESS WHEREOF, the parties have caused this Registration Rights Agreement
to be duly executed as of the date first above written.
GADZOOX NETWORKS, INC.
By: /s/ Xxxxxxx Xxxxxxx
------------------------------
Name: Xxxxxxx Xxxxxxx
----------------------------
Title: President
---------------------------
INITIAL INVESTORS:
XXXXX XXXX PARTNERS, L.P.
By: Xxxxx Hill Capital, LLC
General Partner
By: /s/ Xxxxx Xxxxxxx
------------------------------
Name: Xxxxx Xxxxxxx
----------------------------
Title: Manager
---------------------------
XXXX XXXXXXX TTEE
XXXXXXX FAMILY CHARITABLE REMAINDER UNITRUST
DATED 10/31/00
By: /s/ Xxxx Xxxxxxx
------------------------------
Name: Xxxx Xxxxxxx
----------------------------
Title: Trustee
---------------------------
XXXX AND XXXX XXXXXXX
REVOCABLE FAMILY TRUST
DATED 10/27/99
By: /s/ Xxxx Xxxxxxx
------------------------------
Name: Xxxx Xxxxxxx
----------------------------
Title: Trustee
---------------------------
