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Exhibit 10.54
WARRANT AND STOCKHOLDER'S AGREEMENT
THIS WARRANT AND STOCKHOLDER'S AGREEMENT (the "Agreement"), dated this
13th day of October, 2000, is made and entered into by and between Verilink
Corporation, a Delaware corporation ("Verilink") and Beacon Telco, L.P., a
Delaware limited partnership ("Beacon").
WHEREAS, Verilink and Beacon have entered into a Cooperative Research
Agreement dated the date hereof (the "Research Agreement") for the
implementation of a research and development project for optical networking
products for the telecommunications access market; and
WHEREAS, Verilink and the Trustees of Boston University, a
Massachusetts non-profit corporation (the "University"), have entered into a
Premises License and Services Agreement dated the date hereof (the "Premises
Agreement"), providing for Verilink to participate in the Photonics Center
Incubator and Accelerator Program of the University and, as a part thereof, to
obtain a license from the University to use certain University premises and to
obtain certain engineering support services of the University's Photonics Center
in furtherance of such project; and
WHEREAS, in consideration of the execution and delivery of the Research
Agreement and the Premises Agreement, Verilink has proposed to grant Beacon a
warrant to purchase up to Two Million Two Hundred Forty-Nine Thousand Nine
Hundred (2,249,900) shares (subject to adjustment, as provided herein) of common
stock of Verilink on the terms and conditions set forth herein; and
WHEREAS, the parties desire to provide for the terms of such warrant
and certain other rights and obligations related to the warrant and the common
stock issuable upon the exercise thereof;
NOW, THEREFORE, in consideration thereof and for other good and
valuable consideration, the receipt and sufficiency of which hereby are
acknowledged, the parties hereto, subject to the terms and conditions set forth
below, hereby agree as follows:
ARTICLE I - DEFINITIONS
1.1 Definitions. Capitalized terms used herein and not defined herein will have
the meaning set forth in the Research Agreement. In addition to the terms
defined elsewhere herein, the following terms have the following meanings when
used herein with initial capital letters:
(a) "Affiliate" of any Person means any other Person, that, directly or
indirectly through one or more intermediaries, controls or is
controlled by, or is under common control with, such Person; and,
for the purposes of this definition only, "control" (including the
terms "controlling", "controlled by" and "under common control
with") means the possession, direct or
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cause the direction of the management, policies or activities of a
Person whether through the ownership of securities, by contract or
agency or otherwise.
(b) "Assumption Agreement" means an agreement in writing in
substantially the form of Exhibit B hereto pursuant to which the
party thereto agrees to be bound by the terms and provisions of
this Agreement.
(c) "Average Trading Price" at any date means the average of the Market
Prices for the Common Stock for the five (5) consecutive trading
days immediately prior to such date.
(d) "Beacon" means and includes Beacon as well as any Permitted
Transferees, as applicable.
(e) A Person will be deemed the "Beneficial owner" of, and will be
deemed to "Beneficially own", and will be deemed to have
"Beneficial ownership" of:
(i) any securities that such Person or any of such Person's
Affiliates is deemed to "beneficially own" within the
meaning of Rule 13d-3 under the Exchange Act, as in effect
on the date of this Agreement; and
(ii) any securities (the "underlying securities") that such
Person or any of such Person's Affiliates has the right to
acquire (whether such right is exercisable immediately or
only after the passage of time) pursuant to any agreement,
arrangement or understanding (written or oral), or upon
the exercise of conversion rights, exchange rights,
rights, warrants or options, or otherwise (it being
understood that such Person will also be deemed to be the
Beneficial owner of the securities convertible into or
exchangeable for the underlying securities).
(f) "Board" means the Board of Directors of Verilink.
(g) "Board Approval" means the approval of a majority of the members of
the Board who neither (i) are a Beacon Designee nor (ii) are an
Affiliate of Beacon.
(h) "Change in Control" means the occurrence of any of the following
events: (i) the merger or consolidation of Verilink with or into
another entity, unless the holders of Verilink's Voting Securities
immediately prior to such transaction continue to hold at least a
majority of outstanding voting power of the surviving entity
following such transaction, (ii) any Person or Group (other than
Beacon, its Permitted Transferees, their Affiliates, or any
Subsidiary of Verilink or any employee benefit plan sponsored by
Verilink) becomes the Beneficial Owner of 50% or more of the
outstanding Voting Securities, or (iii) the sale of all or
substantially all of the assets of Verilink.
(i) "Common Stock" means the common stock, $.01 par value per share, of
Verilink as constituted on the date hereof, together with any other
equity securities that may be issued by Verilink in substitution
therefor.
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(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
(k) "Exercise Price" means $4.75 per share.
(l) "Expiration Date" means the third (3rd) anniversary of the date
hereof.
(m) "Group" shall have the meaning as set forth in Rule 13d-5 under the
Exchange Act.
(n) "Market Price" at any date means the closing price of the Common
Stock on the Nasdaq Stock Market or the principal national
securities exchange on which the Common Stock is admitted to
trading or listed, or if not then listed on a national securities
exchange or the Nasdaq Stock Market, the closing sale price as
reported on the Over the Counter Bulletin Board or Electronic "Pink
Sheets", as applicable, or if the closing sale price is not then
reported, the average of the closing bid and ask prices so
reported, or if not then publicly traded or quoted, the fair market
price of the Common Stock as determined by the Board.
(o) "Permitted Acquisition" means (i) any acquisition by Beacon of
Warrant Stock pursuant to or contemplated by this Agreement, (ii)
any other acquisition of Voting Securities after Beacon has
received prior Board Approval of such acquisition, and (iii) any
Common Stock received by Beacon upon payment of a Bonus Amount or
Bonus Note (as such terms are used in the Research Agreement).
(p) "Permitted Transferees" means any Person to whom the Warrant or
Common Stock is Transferred in a Transfer in accordance with
Section 2.1 or Section 3.2(a)(i) of this Agreement or a Transfer
otherwise not in violation of this Agreement, which includes any
Person to whom a Permitted Transferee of Beacon (or a Permitted
Transferee of a Permitted Transferee) so further Transfers Common
Stock, and who is required to, and does, become bound by the terms
of this Agreement.
(q) "Person" means an individual, a corporation, a partnership, a
limited partnership, a limited liability company, an association, a
trust or other entity or organization, including without limitation
a government or political subdivision or an agency or
instrumentality thereof.
(r) "Public Offering" means the sale of shares of any class of Voting
Securities to the public pursuant to an effective registration
statement (other than a registration statement on Form S-4 or S-8
or any similar or successor form) filed under the Securities Act.
(s) "Registrable Stock" shall mean those shares of Common Stock issued
to Beacon either upon exercise of the Warrant (including shares
issuable as a result of the adjustments provided for herein) or in
payment of a Bonus Amount or a Bonus Note under Article IV of the
Research Agreement.
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(t) "SEC" means the Securities and Exchange Commission.
(u) "Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
(v) "Standstill Period" means the period commencing on the date of this
Agreement and ending on the tenth (10th) anniversary thereof.
(w) "Transfer" means a transfer, sale, assignment, pledge,
hypothecation or disposition.
(x) "Warrant Stock" means up to Two Million Two Hundred Forty-Nine
Thousand Nine Hundred (2,249,900) shares of Common Stock
deliverable upon such exercise of the Warrant granted pursuant to
Article II hereof and as adjusted from time to time.
(y) "Verilink" means and includes Verilink as well as (i) any successor
corporation resulting from the merger or consolidation of such
corporation with another corporation, or (ii) any corporation to
which such corporation has transferred its property or assets as an
entirety or substantially as an entirety.
(z) "Voting Securities" means the Common Stock and any other securities
of Verilink entitled to vote generally in the election of directors
of Verilink, and all other securities convertible into,
exchangeable for or exercisable for any such securities (whether
immediately or otherwise).
ARTICLE II - GRANT OF WARRANT
2.1 Grant of Warrant. Verilink hereby agrees that Beacon is entitled, subject to
the provisions of this Agreement, to purchase from Verilink, commencing on the
dates as set forth in Article II herein and expiring at 5:00 P.M. New York City
time on the Expiration Date, the Warrant Stock at a price equal to the Exercise
Price (the "Warrant"). The number of shares of Warrant Stock to be received upon
the exercise of this Warrant may be adjusted from time to time as hereinafter
set forth. This Warrant is non-transferable and non-assignable, except that this
Warrant may be assigned or transferred (a) to any Affiliates of Beacon, or (b)
pursuant to a merger or sale of all or substantially all the assets or stock of
Beacon; provided that in either such event, the Transferee executes an
Assumption Agreement.
2.2 Exercise Events. Subject to the provisions set forth in this Agreement, this
Warrant may be exercised to purchase the number of shares of Warrant Stock upon
the occurrence of such events (each, an "Exercise Event" and collectively, the
"Exercise Events") set forth in subsections (a) through (e) below:
(a) MILESTONE 1 -- SIGNING. Seven Hundred Forty-Nine Thousand Nine
Hundred (749,900) shares of Warrant Stock at any time following the
execution of this Agreement;
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(b) MILESTONE 2 -- PHASE O. An additional Two Hundred Fifty Thousand
(250,000) shares of Warrant Stock following the earliest of: (i)
twelve (12) months after the completion of Milestone 2 -- Phase 0
as set forth in the PACE(TM) Phase Description and Deliverable
Milestone Document relating to developing the specifications of the
Developed Product(s) and the milestones for the work attached as
Appendix A-1 to Research Agreement, as such may be supplemented or
amended from time to time by mutual agreement of the parties (the
"PACE Document"); (ii) a change in control of Verilink, or (iii)
sixty (60) months after the date hereof;
(c) MILESTONE 3 -- PHASE 1. An additional Five Hundred Thousand
(500,000) shares of Warrant Stock upon the earliest of (i) twelve
(12) months after the completion of Milestone 3 - Phase 1 as set
forth in the PACE Document; (ii) a Change in Control of Verilink,
or (iii) sixty (60) months after the date hereof;
(d) MILESTONE 4 -- PHASE 2 ALPHA. An additional Two Hundred Fifty
Thousand (250,000) shares of Warrant Stock, upon the earlier of (i)
twelve (12) months after the completion of Milestone 4 - Phase 2
Alpha as set forth in the PACE Document, with such twelve (12)
month period reduced by two (2) weeks for each full week that such
phase is duly completed prior to the date such phase is scheduled
to be completed as mutually determined by the parties as
contemplated by the PACE Document, (ii) a Change in Control
occurring after the completion of Phase 2 Alpha as set forth in the
PACE Document or (iii) sixty (60) months after the date hereof;
(e) MILESTONE 5 -- PHASE 2 BETA. An additional Five Hundred Thousand
(500,000) shares of Warrant Stock upon the earlier of (i) twelve
(12) months after the completion of Milestone 4 - Phase 2 Beta as
set forth in the PACE Document, with such twelve (12) month period
reduced by (x) two (2) weeks for each full week that the Milestone
4 is duly completed prior to the date such phase is scheduled to be
completed as mutually determined by the parties as contemplated by
the PACE Document and (y) by one week for each full week that
Milestone 5 is duly completed prior to the date such phase is
scheduled to be completed as set as mutually determined by the
parties as contemplated by the PACE Document, (iii) a Change in
Control occurring after the completion of Phase 2 Beta as set forth
in the PACE Document or (iii) sixty (60) months after the date
hereof; and
(f) ACCELERATION. Notwithstanding sub-sections (a) through (e) above,
the Warrant will become exercisable for one-half the number of
shares of Warrant Stock for which the Warrant would not yet then be
exercisable but for this sub-section whenever (i) twelve months
(12) after the date hereof, if the Average Trading Price for the
Common Stock as of such date is greater than $11.88; or (ii) upon
the completion of an underwritten Public Offering of capital stock
either (x) providing gross proceeds to Verilink of $20 million or
more or (y) at a price per share to the public of at least two
hundred percent (200%) of the Exercise Price.
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2.3 Exercise of Warrant.
(a) Beacon may exercise this Warrant by presentation and surrender of
the Warrant Exercise Form, in the form attached hereto as Exhibit A
(the "Warrant Exercise Form"), to Verilink at its principal office,
or to its stock transfer agent, if any, duly executed and
accompanied by payment of the Exercise Price for the number of
shares of Warrant Stock specified in such form. The Exercise Price
may be paid either, at Beacon's option, (i) in cash or by certified
or official bank check, payable to the order of Verilink, or by
wire transfer of immediately available funds to an account
designated by Verilink, or (ii) if a Bonus Amount (as defined in
the Research Agreement) has been paid by the issuance of a Note
pursuant to Article IV of the Research Agreement (the "Bonus
Note"), by the delivery and cancellation of the Bonus Note, with
the aggregate principal amount of the Bonus Note credited against
the exercise price for the number of shares specified in such form.
(b) In connection with any requested exercise of this Warrant, and in
lieu of the payment of the Exercise Price as described in paragraph
(a) of this Section 2.3, at the request of Beacon, Verilink shall
convert this Warrant, in whole or in part and at any time or times,
into Warrant Stock (the "Conversion Right"), as follows: Upon
exercise of the Conversion Right, Verilink shall deliver to Beacon
(without payment by Beacon of any Exercise Price) that number of
shares of Warrant Stock equal to the quotient obtained by dividing
(i) the difference of (A) the aggregate Market Price for all
Warrant Stock issuable upon exercise of the Warrants being
converted, less (B) the aggregate Exercise Price for all such
Warrant Stock, by (ii) the Market Price of one share of Warrant
Stock.
(c) Upon receipt by Verilink of the Warrant Exercise Form and the
Exercise Price (the "Exercise Time"), at its office, or by the
stock transfer agent of Verilink at its office, Beacon shall be
deemed to be the holder of record of the shares of Warrant Stock
issuable upon such exercise, notwithstanding that the stock
transfer books of Verilink shall then be closed or that
certificates representing such shares of Warrant Stock shall not
then be actually delivered to Beacon.
(d) Verilink will deliver to Beacon certificates for Warrant Stock
purchased upon exercise of this Warrant within ten (10) business
days after the Exercise Time.
(e) The issuance of certificates for Warrant Stock upon exercise of
this Warrant will be made without charge to Beacon for any issuance
tax in respect thereof or other cost incurred by Verilink in
connection with such exercise and the related issuance of Warrant
Stock. Beacon or its transferee shall pay any transfer tax payable
in respect of a transfer of the Warrant Stock to a third party.
2.4 Reservation of Shares. Verilink shall at all times authorize and reserve for
issuance and delivery all shares of Warrant Stock issuable upon exercise of this
Warrant. All such shares shall be duly authorized and, when issued upon exercise
in compliance with the terms of this Agreement, shall be validly issued, fully
paid and non-assessable. No fractional shares or scrip
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representing fractional shares shall be issued upon the exercise of this
Warrant, but Verilink shall pay Beacon an amount equal to the applicable
Exercise Price multiplied by such fraction in lieu of each fraction of a share
otherwise called for upon any exercise of this Warrant. If at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of this Warrant, Verilink will use its best efforts to
take such corporate action as may, be reasonably necessary to increase its
authorized but unissued shares of Common Stock to such number of shares as shall
be sufficient for such purpose. Verilink shall use its best efforts to take all
such actions as may be reasonably necessary to assure that all such shares of
Common Stock may be so issued without violation of any applicable law or
governmental regulation or any requirements of any securities exchange or
inter-dealer quotation system upon which shares of Common Stock may be listed or
traded (except for official notice of issuance which shall be immediately
transmitted by Verilink upon issuance).
2.5 Adjustments.
(a) Capital Adjustments. If Verilink at any time or from time to time
after the date hereof effects a subdivision of the outstanding
Common Stock (by stock split, stock dividend, recapitalization or
otherwise) or a combination the outstanding shares of Common Stock
into a smaller number of shares (by reverse stock split,
recapitalization or otherwise), (i) the Exercise Price in effect
immediately before the subdivision or combination shall be
automatically adjusted by multiplying the Exercise Price by a
fraction (the "Capital Adjustment Factor"), (A) the numerator of
which is the total number of shares of Common Stock issued and
outstanding immediately prior to the time of such subdivision or
combination, and (B) the denominator of which is the total number
of shares of Common Stock issued and outstanding immediately after
such subdivision or combination, and (ii) the number of shares of
Warrant Stock issuable upon exercise of this Warrant shall be
automatically adjusted by dividing such number of shares by the
Capital Adjustment Factor.
(b) Reorganizations, Mergers, Consolidations or Sales of Assets. If at
any time or from time to time after the date hereof, there is a
capital reorganization of the Common Stock (other than a
recapitalization, subdivision, combination, reclassification,
exchange or substitution of shares provided for elsewhere in
Article II), as a part of such capital reorganization, provision
shall be made so that Beacon shall thereafter be entitled to
receive upon exercise of this Warrant the number of shares of stock
or other securities or property of Verilink to which a holder of
the number of shares of Warrant Stock deliverable upon exercise of
this Warrant would have been entitled in connection with such
capital reorganization, subject to adjustment in respect of such
stock or securities by the terms thereof. In any such case,
appropriate adjustment shall be made in the application of the
provisions of this Article II with respect to the rights of Beacon
after the capital reorganization to the end that the provisions of
this Article II (including adjustment of the Exercise Price and the
number of shares of Warrant Stock issuable upon exercise of this
Warrant then in effect) shall be applicable after that event and be
as nearly equivalent as practicable.
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(c) Notice to Beacon of Adjustment. Whenever the number of shares of
Warrant Stock issuable upon exercise of this Warrant is adjusted as
herein provided, Verilink shall cause to be mailed to Beacon in
accordance with the provisions of this Section 2.5(c), a notice (i)
stating that an event giving rise to an adjustment hereunder has
occurred, (ii) setting forth the adjusted number of shares of
Warrant Stock and (iii) showing in reasonable detail the
computations and the facts upon which such adjustments are based.
2.6 Beacon Representations and Warranties. Beacon hereby represents and warrants
to, and agrees with, Verilink, as of the date of this Agreement and each date
that the warrant is exercised, as follows:
(a) Beacon is a limited partnership duly organized, validly existing
and in good standing under the laws of the State of Delaware.
Beacon has all necessary power and authority under all applicable
provisions of law to execute and deliver this Agreement and to
carry out its provisions. All partnership action on the part of
Beacon necessary for the authorization, execution and delivery of
this Agreement, the performance of the obligations of Beacon under
this Agreement has been taken. This Agreement has been duly
executed and delivered by Beacon and constitutes legal, valid and
binding obligations of Beacon enforceable in accordance with its
terms.
(b) The execution, delivery and performance of this Agreement and the
performance by Beacon of its obligations hereunder do not and will
not conflict with or violate any provision of the certificate of
limited partnership, limited partnership agreement or bylaws of
Beacon or any law, statute, rule or regulation or any agreement,
contract or instrument or any order, judgment or decree to which
Beacon is subject or by which any of its assets are bound.
(c) Beacon understands that neither the Warrant nor the Warrant Stock
has been registered under any state securities act or the
Securities Act. Beacon also understands that the Warrant and the
Warrant Stock are being offered and sold pursuant to an exemption
from registration contained in applicable state securities acts and
the Securities Act based in part upon Beacon's representations
contained in this Warrant.
(d) Beacon has substantial experience in evaluating and investing in
private placement transactions of securities in companies similar
to Verilink so that Beacon is capable of evaluating the merits and
risks of its investment in Verilink and has the capacity to protect
its own interests. Beacon must bear the economic risk of this
investment indefinitely unless the Warrant or the Warrant Stock is
registered pursuant to the Securities Act, or an exemption from
registration is available. Beacon also understands that there is no
assurance that any exemption from registration under the Securities
Act will be available and that, even if available, such exemption
may not allow Beacon to transfer all or any portion of the Warrant
or the Warrant Stock under the circumstances, in the amounts or at
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the times Beacon might propose. Beacon can bear the economic risk
of losing its entire investment in Verilink.
(e) Beacon is acquiring the Warrant and the Warrant Stock for its own
account for investment only, and not with a view towards their
resale or distribution in violation of applicable securities laws.
(f) Beacon represents that, by reason of its management's business or
financial experience, Beacon has the capacity to protect its own
interests in connection with the transactions contemplated in this
Agreement. Further, Beacon is aware of no publication of any
advertisement in connection with the transactions contemplated by
this Agreement.
(g) Beacon represents that it is an accredited investor within the
meaning of Regulation D under the Securities Act.
(h) Beacon has had an opportunity to discuss Verilink's business,
management and financial affairs with directors, officers and
management of Verilink. Beacon has also had the opportunity to ask
questions of, and receive answers from, Verilink and its management
regarding the terms and conditions of this investment. Beacon has
had an adequate opportunity to inspect and copy all material
documents relating to Verilink which it has requested.
2.7 Verilink Representations and Warranties. Verilink hereby represents and
warrants to, and agrees with, Beacon as follows:
(a) Organization. Verilink is a corporation duly organized, validly
existing and in good standing under the laws of the State of
Delaware. Verilink has all requisite corporate power and authority
to execute and deliver this Agreement, and to issue the shares of
Warrant Stock upon exercise of the Warrant.
(b) Capitalization. The authorized capital stock of Verilink as of
October 2, 2000, consists of (i) 40,000,000 shares of Common Stock,
14,717,791 shares of which are issued and outstanding and 3,662,523
shares held in treasury and (ii) 1,000,000 shares of preferred
stock, par value $.01 per share, none of which are outstanding.
Other than 2,192,343 options available for grant and outstanding
options to purchase 4,002,406 shares of Common Stock under
Verilink's option plans, 806,116 of which were vested as of
September 30, 2000 and 180,995 shares of Common Stock reserved for
issuance under Verilink's Employee Stock Purchase Plan, there are
no outstanding options, warrants or other securities convertible
into or exercisable for common stock, other than the Warrant
granted hereby.
(c) Authorization; Binding Obligations. All corporate action on the
part of Verilink necessary for the authorization, execution and
delivery of this Agreement, the performance of the obligations of
Verilink under this Agreement and for the authorization, sale,
issuance and delivery of the Warrant Stock issuable upon exercise
of the Warrant has been taken. When issued in compliance with the
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provisions of this Agreement, the Warrant Stock will be duly
authorized, validly issued, fully paid and nonassessable. This
Agreement has been duly executed and delivered by Verilink and
constitutes legal, valid and binding obligations of Verilink
enforceable in accordance with its terms.
(d) No Violations. The execution, delivery and performance of this
Agreement and the performance by Verilink of its obligations
hereunder do not and will not conflict with or violate any
provision of the certificate of incorporation or bylaws of Verilink
or any law, statute, rule or regulation or any agreement, contract
or instrument or any order, judgment or decree to which Verilink is
subject or by which any of its assets are bound.
(e) No Other Representations or Warranties. The representations and
warranties made by Verilink in this Agreement supersede any prior
statements, representations and warranties of any person with
respect to Verilink or the transactions contemplated hereby. The
representations and warranties of Verilink in this Agreement are
the only representations and warranties by Verilink upon which
Beacon may rely in connection with transactions contemplated by
this Agreement.
2.8 Notices of Record Date, Etc. In case:
(a) Verilink shall establish a record date for the holders of its
Common Stock for the purpose of entitling them to receive any
dividend or other distribution, or any right to subscribe for,
purchase or otherwise acquire any shares of stock of any class or
any other securities or to receive any other right; of any capital
reorganization of Verilink, any reclassification of the capital
stock of Verilink, any consolidation or merger of Verilink with or
into another corporation, any share exchange for shares of capital
stock of another corporation or any conveyance of all or
substantially all of the assets of Verilink to another corporation;
(b) of any voluntary or involuntary dissolution, liquidation or winding
up of Verilink; or
(c) Verilink shall enter into a letter of intent or agreement with
respect to a transaction by which all of the outstanding shares of
Common Stock of Verilink are to be acquired by a third party;
then Verilink shall mail or cause to be mailed to each holder of the Warrant at
the time outstanding a notice specifying, as the case may be, (i) the date on
which a record is to be taken for the purpose of such dividend, distribution or
rights, and stating the amount and character of such dividend, distribution or
rights, (ii) the date on which such reorganization, reclassification,
consolidation, merger, conveyance, dissolution, liquidation or winding up is to
take place, and the time, if any is to be fixed, as to which the holders of
record of Common Stock shall be entitled to exchange their shares for securities
or other property deliverable upon the completion of such transaction, or (iii)
the closing of the acquisition by a third party of all of the outstanding
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shares of Common Stock. Such notice shall be mailed as soon as practicable after
the occurrence or likelihood of such event is publicly disclosed.
2.9 Automatic Exercise. Notwithstanding any provision of this Agreement to the
contrary, immediately prior to the termination of this Warrant, it shall be
automatically exercised as follows. If a Bonus Note is outstanding immediately
prior to the termination of the Warrant, the outstanding Bonus Note shall be
automatically cancelled (whether or not physically delivered) and the aggregate
principal amount hereof, together with accrued interest thereon, shall be
applied against the remaining aggregate exercise price for the remaining Warrant
Stock. To the extent the Warrant is not fully exercised after applying the
principal amount hereof, together with accrued interest thereon, of any
outstanding Bonus Note to purchase Warrant Stock, the Warrant shall be
automatically exercised to purchase the balance of the Warrant Stock pursuant to
the provisions of Section 2.3(b) of this Agreement, unless the holder gives five
(5) business days' notice to Verilink that this Warrant shall not be exercised
pursuant to the provisions of this Section 2.9.
2.10 Registered Owner. Except as otherwise expressly provided herein, Verilink
may deem and treat the registered owner of the Warrant and the Warrant Stock as
the absolute owner hereof (notwithstanding any notation of ownership or other
writing thereon made by anyone) for all purposes and shall not be affected by
any notice (other than a duly executed Assumption Agreement) to the contrary.
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ARTICLE III - STOCKHOLDER'S AGREEMENT
3.1 Standstill.
(a) Additional Ownership. Except in connection with a Permitted
Acquisition, during the Standstill Period, Beacon will not purchase
or otherwise acquire Beneficial ownership of any Voting Security.
(b) Other Restrictions. Without prior Board Approval, except as
otherwise permitted hereunder, during the Standstill Period, Beacon
will not, nor will it encourage any other person to do, any of the
following:
(i) solicit proxies from other stockholders of Verilink in
opposition to, or prior to the issuance of, a
recommendation of the Board for any matter to be
considered at any meeting of holders of securities of
Verilink;
(ii) form, join or participate in or encourage the formation of
a Group with respect to any securities of Verilink other
than a group consisting solely of Affiliates of Beacon;
(iii) deposit any securities of Verilink into a voting trust or
subject any such securities to any arrangement or
agreement with respect to the voting thereof, other than
any such trust, arrangement or agreement (A) the only
parties to, or beneficiaries of, which are Affiliates of
Beacon; and (B) the terms of which do not require or
expressly permit any party thereto to act in a manner
inconsistent with this Agreement; or
(iv) tender any securities in any tender offer involving
Verilink unless such tender offer has received Board
Approval.
3.2 Transfer of Common Stock.
(a) Transferability. Beacon agrees that it will not Transfer any Common
Stock Beneficially owned by it, except in strict compliance with
the terms of this Section 3.2.
(i) Affiliates. Notwithstanding any other provision of this
Agreement other than Section 3.3 relating to securities
law compliance, Beacon may Transfer all or any part of the
Common Stock owned by it at any time, without compliance
with Section 3.2(b), to any Affiliate of Beacon; provided
that, prior to such Transfer, (A) notice of such Transfer
is given to Verilink and (B) the Affiliate to whom such
Common Stock is to be Transferred enters into an
Assumption Agreement.
(ii) Transfer After First Anniversary. From and after the first
(1st) anniversary of the date of this Agreement, Beacon
may Transfer all or any part of the
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Warrant Stock Beneficially owned by it, without compliance
with Section 3.2(b), provided that such transaction (A) is
pursuant to an available exemption from the registration
requirements under applicable securities laws and (B) does
not involve the Transfer of Common Stock representing five
percent (5%) or more of the outstanding Voting Securities
to any one Person or Group.
(iii) 5% Transfer After First Anniversary. Subject to compliance
with the requirements of Section 3.2(b) hereof, from and
after the first (1st) anniversary of the date of this
Agreement, Beacon may Transfer Common Stock representing
five percent (5%) or more of the outstanding Common Stock
to any one Person or Group, following compliance with
Section 3.2(b); provided, that with respect to any such
Transfer, such Transfer shall -------- ---- be conditioned
on the Permitted Transferee agreeing (A) to be bound by
the provisions of this Agreement and (B) not to acquire
more than two percent (2%) of the outstanding Voting
Securities during any twelve (12) month period except in
compliance with this Agreement. Notwithstanding any other
provision of this Agreement to the contrary, open market
sales of Common Stock shall not be deemed for any purpose
a Transfer to one Person or Group unless transferor has
actual knowledge that such Transfer would result in a
Person or Group becoming the Beneficial owner or five
percent (5%) or more of the outstanding Common Stock.
(iv) Void Transfer. In the event of any purported Transfer by
Beacon of Common Stock not made in compliance with this
Section 3.2, such purported Transfer will be void and of
no effect and Verilink will not give effect to such
Transfer. Verilink shall be entitled to treat the prior
owner as the holder of any such securities not Transferred
in accordance with this Agreement.
(v) Legend. Each certificate representing Common Stock issued
to Beacon will bear a legend on the face thereof
substantially to the following effect (with such additions
thereto or changes therein as Verilink may be advised by
counsel are required by law (the "Legend")):
"THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO A STOCKHOLDERS AGREEMENT BETWEEN VERILINK
CORPORATION AND BEACON TELCO, L.P. A COPY OF WHICH IS ON
FILE WITH THE SECRETARY OF VERILINK CORPORATION. NO
TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
DISPOSITION OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE MAY BE MADE EXCEPT IN ACCORDANCE WITH THE
PROVISIONS OF SUCH STOCKHOLDERS AGREEMENT."
"THE SHARES OF STOCK REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
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1933 AND MAY NOT BE TRANSFERRED OR OTHERWISE DISPOSED OF
UNLESS THEY HAVE BEEN REGISTERED UNDER THAT ACT OR ANY
OTHER APPLICABLE LAW OR AN EXEMPTION FROM REGISTRATION IS
AVAILABLE."
The Legend will be removed by Verilink by the delivery of
substitute certificates without such Legend in the event
of (A) a Transfer permitted by Section 3.2(a) to any
Person who is not required to enter into an Assumption
Agreement as a condition to such Transfer or (B) the
termination of this Article III pursuant to the terms of
this Agreement, provided, however, that the second
paragraph of such Legend will only be removed if at such
time a legal opinion from counsel to the Transferee shall
have been obtained to the effect that such Legend is no
longer required for purposes of applicable securities
laws. In connection with the foregoing, Verilink agrees
that, if Verilink is required to file reports under the
Exchange Act, for so long as and to the extent necessary
to permit Beacon to sell any Common Stock pursuant to Rule
144, Verilink will use its best efforts to file, on a
timely basis, all reports required to be filed with the
SEC by it pursuant to Section 13 of the Exchange Act,
furnish to Beacon upon request a written statement as to
whether Verilink has complied with such reporting
requirements during the twelve (12) months preceding any
proposed sale under Rule 144 and otherwise use its best
efforts to permit such sales pursuant to Rule 144.
(b) Right of First Offer for Five Percent (5%) Sales.
(i) Prior to Beacon effecting a Transfer described in Section
3.2(a)(iii) (a "Third-Party Sale"), Beacon will deliver to
Verilink a written Notice (an "Offer Notice") specifying
the amount of consideration (the "Offer Price") and the
other material terms pertaining to such Third Party Sale
for which Beacon proposes to sell the Common Stock to be
offered in such Third-Party Sale (the "Offered Stock")
and, to the extent known or contemplated, the proposed
purchaser of the Offered Stock.
(ii) If Verilink delivers to Beacon a written notice (an
"Acceptance Notice") within five (5) calendar days of
receipt of the Offer Notice (such five (5) calendar day
period being referred to herein as the "ROFO Acceptance
Period") stating that Verilink or its designee (the "ROFO
Purchaser") is willing to purchase all of the Offered
Stock for the Offer Price and on the other terms set forth
in the Offer Notice, Beacon will sell all of the Offered
Stock to the ROFO Purchaser, and Verilink will purchase
such Offered Stock from Beacon, on the proposed terms and
subject to the conditions set forth below.
(iii) The consummation of any purchase of the Offered Stock by
the ROFO Purchaser pursuant to this Section 3.2(b) (the
"ROFO Closing") will occur no more than fifteen (15)
calendar days following the delivery of the
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Acceptance Notice (such fifteen (15) calendar day period
being referred to herein as the "ROFO Closing Period") at
10:00 a.m. (Eastern Time) at Verilink's offices or at such
other time of day and place as may be mutually agreed upon
by Beacon and the ROFO Purchaser. At the ROFO Closing, (x)
the ROFO Purchaser will deliver to Beacon by wire transfer
to an account designated by Beacon an amount in
immediately available funds equal to the Offer Price, (y)
Beacon will deliver one or more certificates evidencing
the Offered Stock, together with such other duly executed
instruments or documents (executed by Beacon) as may be
reasonably requested by the ROFO Purchaser to acquire the
Offered Stock free and clear of any and all claims, liens,
pledges, charges, encumbrances, security interests,
options, trusts, commitments and other restrictions of any
kind whatsoever (collectively, "Encumbrances"), except for
Encumbrances created by this Agreement, or federal or
state securities laws ("Permitted Encumbrances"), and (z)
in connection with the foregoing, Beacon will represent
and warrant to Verilink that, upon the ROFO Closing,
Beacon will convey and Verilink will acquire the entire
record and Beneficial ownership of, and good and valid
title to, the Offered Stock, free and clear of any and all
Encumbrances, except for Permitted Encumbrances.
(iv) If no Acceptance Notice relating to the proposed
Third-Party Sale is delivered to Beacon prior to the
expiration of the ROFO Acceptance Period, or an Acceptance
Notice is so delivered to Beacon but the ROFO Closing
fails to occur prior to the expiration of the ROFO Closing
Period (unless the ROFO Purchaser was ready, willing and
able prior to the expiration of the ROFO Closing Period to
consummate the transactions to be consummated by the ROFO
Purchaser at the ROFO Closing), Beacon may, during the
three hundred sixty (360) calendar day period immediately
following the expiration of the ROFO Acceptance Period (in
the event that no Acceptance Notice was timely delivered
to Beacon) or the three hundred sixty (360) calendar day
period immediately following the expiration of the ROFO
Closing Period (in the event that an Acceptance Notice was
timely delivered to Beacon but the ROFO Closing failed
timely to occur other than as a result of a failure by
Beacon to perform its obligations under Section
3.2(b)(iii) hereof) at a gross price at least equal to the
Offer Price and on such other terms no more favorable to
the Transferee than those set forth in the Offer Notice,
consummate the Third-Party Sale in accordance with Section
3.2(a)(iii). After the applicable three hundred sixty
(360) day period, any Transfer pursuant to Section
3.2(a)(iii) shall not be made unless Beacon again complies
with the provisions of this Section 3.2(b).
(v) For purposes of this Section 3.2(b), the value of any
consideration other than cash that is payable or
receivable in the Third Party Sale will be as determined
by the Board in good faith or, if Beacon gives Verilink
written
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notice of its disagreement with such valuation within ten
(10) business days after receipt of written notice of such
value, such value will be determined in accordance with
the appraisal procedures set forth on Exhibit C. The
various time periods described above relating to any
actions regarding the exercise of a right of first offer
will be extended for the duration of any period in which
the value of any non-cash consideration is subject to
dispute pursuant to Section 3.2(b).
(c) Transfer Prohibited prior to First Anniversary. Beacon shall not
effect any Transfer (other than to an Affiliate pursuant to Section
3.2(a)(i) above or Section 5.4 below, or as contemplated by a
Piggyback Registration, under Section 4.1) of any amount of Warrant
Stock prior to the first (1st) anniversary of the date of this
Agreement, and any such purported Transfer shall be void as
provided in Section 3.2(a)(iv) above.
3.3 Securities Law Restrictions. In order to comply with applicable securities
laws, Beacon further agrees not to make any transfer of all or any portion of
the Common Stock unless and until:
(a) there is then in effect a registration statement under the
Securities Act covering such proposed Transfer and such Transfer is
made in accordance with such registration statement; or
(b) Beacon shall have furnished Verilink, at the expense of Beacon or
its transferee, with an opinion of counsel, reasonably satisfactory
to Verilink (it being agreed that an opinion of Xxxxxxx Xxxx LLP
shall be reasonably satisfactory), that such disposition shall not
require registration of such securities under the Securities Act.
(c) Notwithstanding the provisions of paragraphs (1) and (2) above, no
such registration statement or opinion of counsel shall be
required: (i) for any transfer of any of the Common Stock in
compliance with Rule 144 or Rule 144A promulgated under the
Securities Act, or (ii) for any transfer of the Common Stock by
Beacon or a Permitted Transferee, if such holder is a partnership
or a corporation to (A) a partner of such partnership, shareholder
of such corporation or controlled subsidiary of such partnership or
corporation, (B) a retired partner of such partnership who retires
after the date hereof, (C) the estate of any such partner or
shareholder, or (iii) for the transfer by gift, will or intestate
succession by the holder to his or her spouse or lineal descendants
or ancestors or any trust for any of the foregoing, provided that
in each of the foregoing cases the subsequent Permitted Transferee
agrees in writing to be subject to the terms of this Section 3.3.
3.4 Board Representative.
(a) Promptly after the date hereof, Verilink shall take all necessary
action to appoint or elect to the Board one person designated by
Beacon and reasonably acceptable to Verilink (the "Beacon
Designee"). For so long as Beacon Beneficially owns at
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least ten percent (10%) of the outstanding Voting Securities,
Verilink, at each meeting of stockholders of Verilink at which
directors are elected or pursuant to which such action is to be
taken by written consent, will nominate such Beacon Designee for
election as a director of Verilink. Ninety (90) calendar days prior
to any such meeting or action by written consent, Beacon will
provide Verilink with the information required pursuant to
Regulation 14A under the Exchange Act with respect to such Beacon
Designee. Verilink will solicit proxies from its stockholders for
such nominees, vote all proxies in favor of such nominees, except
for such proxies that specifically indicate to the contrary, and
otherwise use its best efforts to cause such nominees to be elected
to the Board as herein contemplated.
(b) The Beacon Designee will serve until his or her successor is
elected and qualified or until his or her earlier resignation,
retirement, disqualification, removal from office, or death.
(c) If the Beacon Designee ceases to be a director of Verilink for any
reason, Verilink will promptly upon the request of Beacon cause a
person designated by Beacon to replace such director if Beacon is
then so entitled.
(d) Beacon agrees to cause the Beacon Designee to promptly resign in
the event Beacon's Beneficial ownership of the outstanding Voting
Securities falls below ten percent (10%).
(e) Verilink shall reimburse reasonable expenses of the Beacon Designee
incurred in connection with the performance of his or her duties as
a director of Verilink in accordance with Verilink's policies
regarding director reimbursement and on the same basis as all other
non-employee directors of Verilink.
(f) Beacon and its Permitted Transferees shall vote all Common Stock
owned by any of them for the election of directors nominated by the
Nominating Committee of the Board and in accordance with the
recommendations of the Board on all other matters at each
stockholder meeting, or shall execute written consents for such
purpose at the request of Verilink.
ARTICLE IV - REGISTRATION RIGHTS
4.1 Incidental Registration. If Verilink proposes to register any Common Stock
under the Securities Act for sale by Verilink in an underwritten Public
Offering, it will each such time give written notice to Beacon of its intention
so to do. Upon the written request of Beacon given within ten (10) days after
receipt of any such notice (stating the number of shares of Registrable Stock to
be disposed of by Beacon) and notwithstanding Section 3.2, Verilink will use its
best efforts to cause all such shares of Registrable Stock intended to be
disposed of to be registered under the Securities Act so as to permit the
disposition by Beacon in the proposed underwritten Public Offering (a "Piggyback
Registration"), subject, however, to the limitations set forth in Section 4.2.
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4.2 Limitations on Incidental Registration. Beacon may not participate in any
underwritten registration hereunder unless Beacon (i) agrees to sell its
Registrable Stock on the basis provided in any underwriting arrangements
approved by Verilink, (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 portion of all underwriting discounts and commissions and any
fees and expenses of its counsel. Notwithstanding any provision of Section 4.1,
if the managing underwriter determines that marketing or other factors require a
limitation of the number of shares of Registrable Stock to be included in the
underwritten offering, the managing underwriter may exclude or otherwise limit
the number of shares of Registrable Stock to be included in the registration and
underwriting to the extent that it also excludes from registration of shares to
be offered by officers and directors of Verilink as well on a pro rata basis
based on the number of shares requested to be included in such registration.
Shares to be offered by Verilink shall have priority in registration. Verilink
shall so advise Beacon, and no Registrable Stock excluded from the underwriting
by reason of the managing underwriter's determination shall be included in such
registration.
4.3 S-3 Registration.
(a) Verilink agrees to use its best efforts, upon written request of
Beacon at any time after the first anniversary of the date hereof,
to file and cause to be declared effective a valid "shelf"
registration on Form S-3 (a "Demand Registration") providing for
the registration and sale on a continuous or delayed basis all of
the Registrable Stock, pursuant to Rule 415 under the Securities
Act and/or any similar rule that may be adopted by the Commission.
Verilink will use its best efforts to keep the Demand Registration
current and effective until the earliest to occur of (i) the
seventh anniversary of the date hereof, (ii) the date all of the
Registrable Stock then held by Beacon and its Permitted Transferees
is eligible for sale under Rule 144 within a single three-month
period, and the date on which all the Registrable Stock registered
thereunder has been sold.
(b) In connection with any underwritten Public Offering pursuant to a
Demand Registration, the managing underwriter shall be an
investment banking firm reasonably acceptable to Verilink.
(c) Notwithstanding the foregoing, Verilink may delay filing a
registration statement relating to a Demand Registration and may
withhold its efforts to cause such registration statement to become
effective for not more than sixty (60) days and for not more than
ninety (90) days in the aggregate during any twelve (12) month
period, if Verilink determines in good faith that such registration
might (i) interfere with or affect the negotiation or completion of
any transaction that is being contemplated by Verilink (whether or
not a final decision has been made to undertake such transaction)
at the time the right to delay is exercised, or (ii) involve
initial or continuing disclosure obligations that might not be in
the best interests of Verilink's stockholders.
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4.4 Cooperation by Beacon. Beacon will furnish to Verilink such information as
Verilink may reasonably require from Beacon in connection with the registration
statement (and the prospectus included therein) and shall not effect sales of
the shares included in the registration after receipt of telegraphic or written
notice from Verilink to suspend sales to permit Verilink to correct or update a
registration statement or prospectus.
4.5 Expenses of Registration. All expenses incurred in effecting any
registration pursuant to this Agreement, including, without limitation, all
registration and filing fees, printing expenses, expenses of compliance with
blue sky laws, fees and disbursements of counsel for Verilink and expenses of
any audits incidental to or required by any such registration shall be borne by
Verilink, except that all additional expenses, fees and disbursements of any
counsel retained by Beacon, and all underwriting discounts, fees and commissions
shall be borne by Beacon, according to the quantity of its Registrable Stock so
registered.
4.6 Indemnification.
(a) To the extent permitted by law, Verilink will indemnify Beacon,
each agent, officer and director of Beacon, each person, if any,
who controls Beacon within the meaning of Section 15 of the
Securities Act, each underwriter and selling broker of the
securities so registered (collectively, "Indemnitees") against all
claims, losses, 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
prospectus, offering circular or other document incident to any
registration, qualification or compliance (or in any related
registration statement, notification or the like) 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 in the light of the circumstances in which they were
made, or any violation by Verilink of any rule or regulation
promulgated under the Securities Act applicable to Verilink and
relating to an action or inaction required of Verilink in
connection with any such registration, qualification or compliance,
and will reimburse each such Indemnitee for any legal and any other
expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action;
provided, however, that Verilink will not be liable in any such
case to the extent that any such claim, loss, damage, liability or
action is caused by any untrue statement or omission so made in
conformity with written information furnished to Verilink by such
Indemnitees and except that the foregoing indemnity agreement is
subject to the condition that, insofar as it relates to any such
untrue statement (or alleged untrue statement) or omission (or
alleged omission) made in the preliminary prospectus but eliminated
or remedied in the amended prospectus on file with the SEC at the
time the registration statement becomes effective or in the amended
prospectus filed with the SEC pursuant to Rule 424(b) (the "Final
Prospectus"), such indemnity agreement shall not inure to the
benefit of any underwriter, or any Indemnitee if there is no
underwriter, if a copy of the Final Prospectus was not furnished to
the person or entity asserting the loss, liability, claim or damage
at or prior to the time such furnishing is required by the
Securities Act; provided, further, that this indemnity shall not be
deemed to relieve any underwriter of any of its due diligence
obligations;
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provided, further, that the indemnity agreement contained in this
Section 4.6(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 Verilink, which consent shall not
be unreasonably withheld.
(b) To the extent permitted by law, Beacon and each underwriter of the
securities so registered will indemnify Verilink and its officers
and directors and each person, if any, who controls Verilink within
the meaning of Section 15 of the Securities Act and their
respective successors against all claims, losses, 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 prospectus, offering circular or other
document incident to any registration, qualification or compliance
(or in any related registration statement, notification or the
like) 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 in the light of the
circumstances in which they were made and will reimburse Verilink
and each other person indemnified pursuant to this subsection (b)
for any legal and any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss,
damage, liability or action, provided, however, that this
subsection (b) shall apply only if (and only to the extent that)
such statement or omission was made in reliance upon and in
conformity with written information furnished to Verilink by Beacon
or underwriter and except that the foregoing indemnity agreement is
subject to the condition that, insofar as it relates to any such
untrue statement (or alleged untrue statement) or omission (or
alleged omission) made in the preliminary prospectus but eliminated
or remedied in the amended prospectus on file with the SEC at the
time the registration statement becomes effective or in the Final
Prospectus, such indemnity agreement shall not inure to the benefit
of (i) Verilink and (ii) any underwriter if a copy of the Final
Prospectus was not furnished to the person or entity asserting the
loss, liability, claim or damage at or prior to the time such
furnishing is required by the Securities Act; provided, further,
that the indemnity agreement contained in this Section 4.6(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 Beacon or underwriter, as the case may be, which
consent shall not be unreasonably withheld; and provided, further,
that the obligations of Beacon shall be limited to an amount equal
to the proceeds to Beacon of Registrable Stock sold as contemplated
herein, unless such claim, loss, damage, liability or action
resulted from Beacon's fraudulent misconduct.
(c) Each party entitled to indemnification hereunder (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
indemnification may be sought, and shall permit the Indemnifying
Party (at its expense) to assume the defense of any 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 satisfactory to the
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Indemnified Party, and the Indemnified Party may participate in
such defense at such party's expense, and provided, further, that
the omission by any Indemnified Party to give notice as provided
herein shall not relieve the Indemnifying Party of its obligations
under this Section 4.6 except to the extent that the omission
results in a failure of actual notice to the Indemnifying Party and
such Indemnifying Party is damaged solely as a result of the
failure to give notice. 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 that either (i) 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 or (ii) contains any finding of
a violation of law by an Indemnified Party.
(d) The reimbursement required by this Section 4.6 shall be made by
periodic payments during the course of the investigation or
defense, as and when bills are received or expenses are incurred.
(e) If the indemnification provided for in this Section 4.6 is
unavailable to an Indemnified Party in respect of any losses,
claims, damages or liabilities referred to therein, then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party,
shall contribute to the amount paid or payable by such Indemnified
Party as a result of such losses, claims, damages or liabilities in
such proportion as is appropriate to reflect the relative fault of
Verilink on the one hand, and of Beacon and any other sellers
participating in the registration statement on the other hand, in
connection with the statements or omissions that resulted in such
losses, claims, damages or liabilities, as well as any other
relevant equitable considerations. The relative benefits received
by Verilink on the one hand, and Beacon and any other sellers
participating in the registration statement on the other hand,
shall be deemed to be in the same proportion as the total net
proceeds from the offering (before deducting expenses) to Verilink
bear to the total net proceeds from the offering (before deducting
expenses) to Beacon and any other sellers participating in the
registration statement. The relative fault of Verilink on the one
hand, and of Beacon and any other sellers participating in the
registration statement on the other hand, shall be determined by
reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied
by Verilink or by Beacon or other sellers participating in the
registration statement and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such
statement or omission.
(f) Verilink and Beacon agree that it would not be just and equitable
if contribution pursuant to this Section 4.6 were determined by pro
rata allocation or by any other method of allocation that does not
take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an
Indemnified Party as a result of the losses, claims, damages and
liabilities referred to in the immediately preceding paragraph
shall be deemed to include,
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subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such Indemnified Party in
connection with investigating or defending any such action or
claim. 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.
(g) The obligations under this Section 4.6 shall survive the completion
of any offering of Registrable Stock in a registration statement
under this Agreement or otherwise.
4.7 "Stand-Off" Agreement. In consideration for Verilink performing its
obligations under this Agreement, Beacon agrees for a period of time (not to
exceed one hundred eighty (180) days) from the effective date of any
registration of securities of Verilink (upon request of Verilink or of the
underwriters managing any underwritten offering of Verilink's securities) not to
sell, make any short sale of, loan, grant any option for the purchase of, or
otherwise dispose of any Warrants or Registrable Stock or other securities
exercisable or exchangeable for, or convertible into, Common Stock, other than
shares of Registrable Stock included in the registration, without the prior
written consent of Verilink and such underwriters, provided that all executive
officers and directors of Verilink shall enter into similar agreements.
ARTICLE V - MISCELLANEOUS PROVISIONS
5.1 Applicable Law. The Agreement shall for all purposes be governed by and
construed in accordance with the internal laws of the State of Delaware, without
regard to conflicts of laws principles.
5.2 Entire Agreement. This Agreement, the Research Agreement, the Premises
Agreement and the existing Confidentiality Agreement and the other agreements,
certificates and documents delivered in connection with this Agreement contain
the entire agreement between Verilink and Beacon with respect to the
transactions described herein, and supersede all prior agreements or statements,
written or oral, with respect thereto.
5.3 Termination. The provisions of this Agreement specified below will
terminate, and be of no further force or effect (other than with respect to
prior breaches), as follows:
(a) Article II will terminate upon the earlier of (A) the exercise in
full of the Warrant; or (B) seven (7) years from the date hereof;
(b) Section 3.1 will terminate upon the expiration of the Standstill
Period;
(c) Section 3.2 will terminate upon the earlier of (A) Beacon ceasing
to be the Beneficial owner of five percent (5%) or more of the
outstanding voting securities or (B) five (5) years from the date
hereof;
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(d) Section 3.4 will terminate upon the earlier of (A) Beacon ceasing
to be the Beneficial owner of ten percent (10%) or more of the
outstanding Voting Securities; or (B) five (5) years from the date
hereof;
(e) Article IV will terminate on the earlier of (A) the tenth (10th)
anniversary of the date of this Agreement or (B) at such time when
Beacon would be permitted to sell all of the Warrant Stock held by
Beacon within a single three (3) month period pursuant to Rule
144(k); and
(f) Any portion or all of this Agreement will terminate and be of no
further force and effect upon a written agreement of the parties to
that effect.
5.4 Transfer and Assignment.
The provisions of this Agreement will be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns,
provided, however, that neither of the parties may assign, delegate or otherwise
transfer any of their rights or obligations under this Agreement except as
follows:
(a) with the written consent of the other party hereto,
(b) to any Affiliate of Beacon or pursuant to a merger or sale of
substantially all the assets or stock of Beacon, provided that the
Permitted Transferee executes an Assumption Agreement.
(c) Beacon's rights under Section 3.4 and Article IV of this Agreement
may only be assigned, transferred, pledged or hypothecated in any
way (whether by operation of law or otherwise) to an Affiliate in
connection with a Transfer of the Warrant or the Warrant Stock in
accordance with Section 2.1 or Section 3.2(a)(i).
(d) Except as otherwise expressly set forth in this Agreement,
including without limitation Section 3.2(a) and Section 5.4, this
Agreement, the Warrant, the Warrant Stock or any rights hereunder
may not be assigned, transferred, pledged or hypothecated in any
way (whether by operation of law or otherwise). The Warrant and the
Warrant Stock shall not be subject to execution, attachment or
similar process. Any attempted assignment, transfer, pledge,
hypothecation or other disposition of the Warrant and/or the
Warrant Stock contrary to the provisions of this Agreement shall be
null and void and without legal effect.
Except upon assignment or transfer expressly permitted by any this Agreement,
this Agreement nor any provision hereof is intended to confer upon any Person
other than the parties hereto any rights or remedies hereunder.
5.5 Notices. All notices required hereunder must be in writing and shall be
deemed given when telefaxed, delivered personally or by overnight delivery
service or within three days after mailing when mailed by certified or
registered mail, return receipt requested, if to Verilink, at:
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Verilink Corporation
000 Xxxxxxxx Xxxx.
Xxxxxxxxxx, XX 00000,
Attention: Xxxxxx X. Xxxxxx, Vice President and Chief
Financial Officer
Fax: (000) 000-0000
with a courtesy copy to:
Powell, Goldstein, Xxxxxx & Xxxxxx LLP
000 Xxxxxxxxx Xxxxxx, X.X, 00xx Xxxxx,
Xxxxxxx, Xxxxxxx 00000
Attention: Xxxxx Xxxxxxxx
Fax: 000-000-0000
and if to Beacon, at:
Beacon Telco, L.P.
0 Xx. Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, XX 00000
Attention: Xxxx Xxxxxx, President
Fax: (000) 000-0000
with a courtesy copy to:
Xxxxxxx Xxxx LLP
000 Xxxxxxx Xxxxxx
Xxxxxx, XX 00000,
Attention: Xxxx Xxxxxxxxx
Fax: 000-000-0000
or at such other address of which Verilink or Beacon has been advised by notice
hereunder.
5.6 Rights as a Stockholder. Unless otherwise expressly provided herein, Beacon
shall have no rights as a stockholder with respect to any Warrant Stock until
the date of issuance of such shares. No provision hereof, in the absence of
affirmative action by Beacon to purchase Warrant Stock, and no enumeration
herein of the rights or privileges of Beacon shall give rise to any liability of
such holder for the Exercise Price of Warrant Stock acquirable by exercise
hereof or as a stockholder of Verilink.
5.7 Specific Performance. The parties agree that any breach by any of them of
any provision of this Agreement would irreparably injure Verilink or Beacon, as
the case may be, and that money damages would be an inadequate remedy therefor.
Accordingly, the parties agree that the other party will be entitled to one or
more injunctions enjoining any such breach and requiring specific performance of
this Agreement and consent to the entry thereof, in addition to any other remedy
to which such other party are entitled at law or in equity.
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5.8 Amendment; Waivers.
(a) Any provision of this Agreement may be amended or waived if, and
only if, such amendment or waiver is in writing and signed, in the
case of an amendment, by Verilink and Beacon (who shall have the
authority to bind all Permitted Transferees), or in the case of a
waiver, by the party against whom the waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder will operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided will be
cumulative and not exclusive of any rights or remedies provided by
law.
5.9 Counterparts; Effectiveness. This Agreement may be signed in any number of
counterparts, each of which will be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument. This Agreement will
become effective when each party hereto shall have received a counterpart hereof
signed by the other party hereto.
5.10 Calculation of Beneficial Ownership. Any provision in this Agreement that
refers to a percentage of Voting Securities shall be calculated based on the
aggregate number of issued and outstanding shares of Common Stock at the time of
such calculation (including any shares of Common Stock that would then be
issuable upon the exercise of the Warrant and the conversion of any outstanding
convertible security), but shall not include any shares of Common Stock issuable
upon any other options, warrants or other securities that are exercisable for
Common Stock.
5.11 Severability. In the event that any one or more of the provisions contained
herein, or the application thereof in any circumstances, is held invalid,
illegal or unenforceable in any respect for any reason, the validity, legality
and enforceability of any such provision in every other respect and of the
remaining provisions contained herein shall not be in any way impaired thereby,
it being intended that all of the rights and privileges of the parties hereto
shall be enforceable to the fullest extent permitted by law.
5.13 No Strict Construction. The parties hereto have participated jointly in the
negotiation and drafting of this Agreement. In the event an ambiguity or
question of intent or interpretation arises, this Agreement shall be construed
as if drafted jointly by the parties hereto, and no presumption or burden of
proof shall arise favoring or disfavoring any party by virtue of the authorship
of any of the provisions of this Agreement.
[Signature page follows]
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IN WITNESS WHEREOF, Verilink and Beacon have caused this Agreement to
be signed as of the day and year first above written.
VERILINK CORPORATION
By: /s/ Xxxxxx X. Xxxxxxxx
----------------------------------------
Name: Xxxxxx X. Xxxxxxxx
-------------------------------------
Title: President and Chief Executive Officer
-------------------------------------
BEACON TELCO, L.P.
By: /s/ Xxxx Xxxxxx
----------------------------------------
Name: Xxxx Xxxxxx
-------------------------------------
Title: President
-------------------------------------
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EXHIBIT A
WARRANT EXERCISE FORM
To: VERILINK CORPORATION
1. The undersigned hereby irrevocably elects to purchase
__________________ shares of Common Stock ("Stock") of VERILINK CORPORATION (the
"Company") pursuant to the terms of the Warrant and Stockholder's Agreement
dated as of ________ __, 2000 by and between the Company and Beacon Telco, L.P.,
(the "Agreement"), and tenders herewith payment of the purchase price for the
Stock.
2. The undersigned understands that the issuance of the Stock to the
undersigned has not been registered under the Securities Act of 1933, as amended
(the "Act") or any state securities laws and can only be resold or transferred
pursuant to an effective registration statement under the Act or an applicable
exemption from such registration, and in accordance with the restrictions on
transfer set forth in the Agreement.
3. The undersigned is an "accredited investor" as defined in Rule 502
of Regulation D under the Act and confirms that each of its representations and
warranties set forth in Section 2.6 of the Agreement are true and correct as of
the date hereof.
4. The undersigned understands the instruments evidencing the Stock may
bear a restrictive legend as set forth in the Agreement.
Date: [BEACON TELCO, L.P.]
------------------------
By:
----------------------------------------
Name:
Title:
--------------------------------------------------------------------------------
CASHLESS EXERCISE PROVISION
(To be executed upon exercise of Warrant pursuant to Section 2.3(b) of
the Agreement)
The undersigned hereby irrevocably elects to surrender
____________________ shares purchasable under the attached Warrant for such
shares of Common Stock issuable in exchange therefor pursuant to the Conversion
Right provision of Section 2.3(b) of the Agreement.
Date: [BEACON TELCO, L.P.]
------------------------
By:
----------------------------------------
Name:
Title:
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EXHIBIT B
ASSUMPTION AGREEMENT
The undersigned hereby agrees, effective as of the date
hereof, to become a party to, and be bound by the provisions of, that certain
Warrant and Stockholder's Agreement (the "Agreement") dated as of ________ ___,
2000 by and between Verilink Corporation and Beacon Telco, L.P. and for all
purposes of the Agreement, the undersigned shall be included within the term
"Permitted Transferee" (as defined in the Agreement). The address and facsimile
number to which notices may be sent to the undersigned is as follows:
----------------------------
----------------------------
----------------------------
Facsimile No.
--------------
[Name]
By:
----------------------------------------
Name:
Title:
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EXHIBIT C
APPRAISAL PROCEDURES
If the ROFO Purchaser gives the Offering Stockholder written notice of
its disagreement as to the valuation of any non-cash consideration payable or
receivable in a Third Party Sale in accordance with Section 3.2(b) (the
"Agreement Deadline"), then appraisals hereunder shall be undertaken by two (2)
Appraisers (as defined below), one selected by the ROFO Purchaser and one
selected by the Offering Stockholder, which appointment shall be made within
fifteen (15) calendar days after the Agreement Deadline. Such Appraisers shall
have thirty (30) calendar days following the appointment of the last Appraiser
to be appointed to agree upon the value of the consideration other than cash
proposed to be received in the Third Party Sale pursuant to Section 3.2(b) of
this Agreement (the "Consideration Value"). In the event that such Appraisers
cannot so agree within such period of time, (x) if such Appraisers' valuations
do not vary by more than twenty (20%) percent, then the Consideration Value
shall be the average of the two valuations and (y) if such Appraisers'
valuations differ by more than twenty (20%) percent, such Appraisers shall
mutually agree on a third Appraiser who shall calculate the Consideration Value
independently. In the event that the two original Appraisers cannot agree upon a
third Appraiser within thirty (30) calendar days following the end of the thirty
(30) day period referred to above, then the third Appraiser shall be determined
by lottery from a group of two (2) Appraisers, one of whom will be designated by
the ROFO Purchaser and one of whom will be designated by the Offering
Stockholder. The third Appraiser shall make its determination as to
Consideration Value within thirty (30) calendar days of its appointment. The
third Appraiser's valuation will be the Consideration Value for all purposes
hereof and will not be subject to appeal or challenge by either the ROFO
Purchaser or the Offering Stockholder.
For purposes of this Exhibit C, "Appraiser" means a nationally
recognized investment banking firm that (a) does not have a direct or indirect
material financial interest in the ROFO Purchaser or the Offering Stockholder,
(b) has not received in excess of $50,000 in fees or other compensation from the
ROFO Purchaser, the Offering Stockholder or any of their respective subsidiaries
or affiliates in the preceding three hundred sixty (360) days, and (c) is
otherwise qualified to render an appraisal of the Consideration Value.
