Exhibit 1
ZHONE TECHNOLOGIES, INC.
SECOND RESTATED RIGHTS AGREEMENT
THIS SECOND RESTATED RIGHTS AGREEMENT is entered into as of [Closing
Date of Merger], 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. The Company has entered into an Agreement and Plan of Merger, dated
as of July 27, 2003 (the "Merger Agreement"), by and among the Company, Tellium,
Inc. ("Tellium") and Zebra Acquisition Corp. ("Merger Sub"), providing for,
among other things, the merger of Merger Sub with and into the Company (the
"Merger"), with the Company surviving as a wholly owned subsidiary of Tellium.
B. Upon the consummation of the Merger, which is expected to occur on
the date of this Agreement (the "Merger Closing Date"), each share of Common
Stock and Preferred Stock of the Company will be converted into the right to
receive a certain number of shares of Common Stock of Tellium according to a
formula set forth in the Merger Agreement.
C. Immediately following the Merger, the name of Tellium will be
changed to Zhone Technologies, Inc. (hereinafter the "Company" shall refer to
Zhone Technologies, Inc. after the Merger (formerly Tellium, Inc.)).
D. Following the consummation of the Merger and the name change as
described above, Zhone will be a publicly-traded company with shares listed on
the Nasdaq National Market and subject to the public reporting obligations set
forth in the Securities Exchange Act of 1934. As a result, the parties to this
Agreement agree that the Merger shall be considered to be a "Qualified IPO", as
that term was defined in the Restated Rights Agreement, dated as of February 12,
2003, by and among the Company and the other parties thereto.
E. The parties desire to amend and restate this Rights Agreement, as
provided herein, to clarify the rights and obligations of the parties with
respect to the Company following the Merger.
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 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 in connection with the
Merger to the former holders of Preferred Stock of Zhone, including warrants and
options exercisable therefor or convertible securities convertible thereunto,
(ii) except for Sections 1.1(d), 1.2, 1.4, 1.9 and 2.1, 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"), but excluding any such Common Stock
that has been (i) registered under the Securities Act pursuant to an effective
registration statement for resale of securities filed thereunder and disposed of
in accordance with the registration statement covering them, (ii) subject to
Section 1.10, disposed of pursuant to an exemption to the registration
requirements under the Securities Act or (iii) publicly sold pursuant to Rule
144 or Rule 145 under the Securities Act.
(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 any and all shares of
Common Stock of the Company issued to the Founders in connection with the
Merger, but excluding any such Common Stock that has been (i) registered under
the Securities Act pursuant to an effective registration statement for resale of
securities filed thereunder and disposed of in accordance with the registration
statement covering them, (ii) subject to Section 1.10, disposed of pursuant to
an exemption to the registration requirements under the Securities Act or (iii)
publicly sold pursuant to Rule 144 or Rule 145 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 "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 and its subsidiaries taken as a whole; provided,
however that none of the following 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.
(i) 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
Merger Closing Date;
(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, 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.
(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 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.
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) at any time prior to six (6) months following the Merger
Closing Date;
(b) 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;
(c) 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);
(d) 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);
(e) 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
(f) 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 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.
(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 of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
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 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.
(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;
(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;
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, and of
the Securities Act and the Exchange Act, 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 x exchange
ratio, rounded to nearest multiple of 50,000] shares of Common Stock (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 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 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 Merger Closing Date; 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. General.
2.1 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 no modification, amendment or waiver of this Agreement shall
adversely affect any Preferred Stockholder in a way different than any other
Preferred Stockholder without the first Preferred Stockholder'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.
2.2 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.
2.3 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. Upon the closing of the Merger, all of the rights and
obligations of the Company under this Agreement shall become rights and
obligations of Tellium, which shall be renamed "Zhone Technologies, Inc."
immediately following the closing of the Merger.
2.4 Entire Agreement. Notwithstanding the provisions of section 4
of that certain Affiliate Agreement, dated on or about the closing date of the
Merger, between Tellium, Inc. and certain of the parties to this Agreement, this
Agreement constitutes the full and entire understanding and agreement between
the parties with regard to the subjects hereof, and this Agreement shall
supersede and cancel all prior agreements between the parties hereto with regard
to the subject matter hereof.
2.5 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:
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 Stockholder:
At such address or addresses as may have been furnished to the
Company in writing by such Preferred Stockholder.
Notices provided in accordance with this Section 2.5 shall be deemed delivered
upon actual receipt.
2.6 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.
2.7 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.
2.8 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.
2.9 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 2.9, "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
2.9, "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.
2.10 Binding Arbitration. The Company, each Founder and each
Preferred Stockholder 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 2.9 ("Attorney's Fees") of
this Agreement, all fees and expenses of the arbitration shall be borne by the
parties equally.
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
Stockholder 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 Stockholder further agree that
personal jurisdiction over it may be effected by service of process by
registered or certified mail addressed as provided in Section 2.5 of this
Agreement, and that when so made shall be as if served upon it personally within
the State of California.
[Signatures to Follow]
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
ACKNOWLEDGED AND AGREED
Tellium, Inc.
By:
------------------------
COUNTERPART SIGNATURE PAGE
ZHONE TECHNOLOGIES, INC.
SECOND RESTATED RIGHTS AGREEMENT
FOUNDERS
--------
Please print your name and sign
to the right.
Name (Please Print):
----------------------------------
Signature:
----------------------
COUNTERPART SIGNATURE PAGE
ZHONE TECHNOLOGIES, INC.
RESTATED RIGHTS AGREEMENT
PREFERRED STOCKHOLDER
---------------------
If entity:
Please print the legal name of the Name of Organization:
organization and have an authorized
person sign to the right.
By:
--------------------------
Name (Please Print)
Title:
------------------------
If individual:
Please print your name and sign
to the right. Name (Please Print):
------------------------------
Signature: -------------------
