AMENDED AND RESTATED VOTING AGREEMENT
THIS AMENDED AND RESTATED VOTING AGREEMENT (this "Agreement") is made as
of the 12th day of March, 1998, by and among Rhythms NetConnections Inc., a
Delaware corporation (the "Company") and the parties listed on the Schedule of
Investors attached hereto as SCHEDULE A.
RECITALS
A. In connection with the Company's sale and issuance of its Series A
Preferred Stock (the "Series A Shares"), the Company and the Investors listed
under the heading "Series A Investors" on the Schedule of Investors attached
hereto as SCHEDULE A (the "Series A Investors") entered into that certain Voting
Agreement dated June 3, 1997 (the "Prior Agreement") which provided that each of
the following Series A Investors be given the right to designate one (1) nominee
to serve as one of the directors: The Sprout Group funds (collectively,
"Sprout"); Enterprise Partners funds (collectively, "Enterprise"), Xxxxxxx
Xxxxxxx Xxxxxxxx & Xxxxx funds (collectively, "KPCB") and Brentwood Associates
funds (collectively, "Brentwood") (collectively, the "Series A Directors" as
defined in Recital D below); and which provided further that the Company be
given the right to designate its Chief Executive Officer as a nominee to serve
as one of the directors (the "Common/Series A Director" as defined in Recital D
below);
B. The Investors listed under the heading "Series B Investors" on the
Schedule of Investors attached hereto as SCHEDULE A (the "Series B Investors")
desire to purchase from the Company shares of the Company's Series B Preferred
Stock (the "Series B Shares"), and the Company desires to sell such Series B
Shares to the Series B Investors;
C. As a condition of its agreement to purchase the Series B Shares from
the Company, Enron Communications Group, Inc. ("Enron") has requested that it be
given the right to designate a nominee to serve as one of the directors (the
"Series B Director" as defined in Recital D below);
D. The terms Series A Directors, Series B Director and Common/Series A
Director shall have the meanings ascribed to them in the Company's Restated
Certificate of Incorporation
E. The Series A Investors, the Series B Investors (collectively, the
"Preferred Investors") and the Company acknowledge that they are entering into
this Voting Agreement to amend and restate in its entirety the Prior Agreement
and as an inducement to and in consideration of the purchase of the Series B
Shares by the Series B Investors pursuant to that certain Series B Preferred
Stock Purchase Agreement dated as of the date hereof (the "Purchase Agreement").
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. SERIES A DIRECTORS. During the term of this Agreement, each of the
Series A Investors agrees to vote all of its Series A Shares now or hereafter
owned by it as follows:
a. For so long as Sprout holds at least 1,000,000 Preferred Shares,
(i) to elect the nominee of Sprout (the "Sprout Nominee") as one of the Series A
Directors and (ii) if requested by Sprout, to remove the incumbent Sprout
Nominee and elect a new Sprout Nominee as one of the Series A Directors or to
fill a vacancy created by death of such Sprout Nominee or otherwise.
b. For so long as Enterprise holds at least 1,000,000 Preferred
Shares, (i) to elect the nominee of Enterprise (the "Enterprise Nominee") as one
of the Series A Directors and (ii) if requested by Enterprise, to remove the
incumbent Enterprise Nominee and elect a new Enterprise Nominee as one of the
Series A Directors or to fill a vacancy created by death of such Enterprise
Nominee or otherwise.
c. For so long as KPCB holds at least 1,000,000 Preferred Shares,
(i) to elect the nominee of KPCB (the "KPCB Nominee") as one of the Series A
Directors and (ii) if requested by KPCB, to remove the incumbent KPCB Nominee
and elect a new KPCB Nominee as one of the Series A Directors or to fill a
vacancy created by death of such KPCB Nominee or otherwise.
d. For so long as Brentwood holds at least 1,000,000 Preferred
Shares, (i) to elect the nominee of Brentwood (the "Brentwood Nominee") as one
of the Series A Directors and (ii) if requested by Brentwood, to remove the
incumbent Brentwood Nominee and elect a new Brentwood Nominee as one of the
Series A Directors or to fill a vacancy created by death of such Brentwood
Nominee or otherwise.
e. Each Series A Investor shall designate its respective Nominee in
writing to the Company prior to each election of directors of the Company. The
Company shall promptly notify each of the Series A Investors of the choice of
such Nominee. Any vacancy occurring because of the death, resignation, removal
or disqualification of a Nominee shall be filled according to this Section 1.
2. COMMON/SERIES A DIRECTOR.
a. During the term of this Agreement, each of the Preferred
Investors agrees to vote all of its Series A Shares and/or shares of the
Company's Common Stock (the "Common Shares"), as applicable, now or hereafter
owned by it to elect the Company's Chief Executive Officer as the Common/Series
A Director.
b. In the event of the resignation, removal or disqualification of
the Chief Executive Officer of the Company, the Preferred Investors shall vote
to remove such Chief Executive Officer from the Board, and the remaining members
of the Board (the "Remaining Board Members") shall be entitled to nominate a
replacement director for the Chief Executive Officer (the "CEO Replacement
Nominee"), until such time as a new Chief Executive Officer is elected.
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c. If the Company employs a Chief Executive Officer prior to the
time it sends notices to its stockholders of an annual meeting, the Remaining
Board Members shall, prior to the election of directors of the Company,
designate the newly employed Chief Executive Officer as the CEO Replacement
Nominee and the Company shall promptly notify, in writing, each of the Preferred
Investors of the Remaining Board Members' choice of such nominee. If
applicable, each of the Preferred Investors agrees to vote all of its Series A
Shares and/or Common Shares, as applicable, now or hereafter owned by it to
elect to the Board such CEO Replacement Nominee; provided, however, that in all
events, whenever the Company hires a new Chief Executive Officer of the Company,
such Chief Executive Officer shall, at the next regular or special meeting (or
by written consent) held for the purpose of electing or nominating directors, be
elected to the Board as provided in Section 2(a) above to replace the CEO
Replacement Nominee.
3. SERIES B DIRECTOR. During the term of this Agreement, each of the
Series B Investors agrees to vote all of its Series B Shares now or hereafter
owned by it as follows:
a. For so long as Enron holds at least 750,000 Series B Shares,
(i) to elect the nominee of Enron (the "Enron Nominee") as the Series B Director
and (ii) if requested by Enron, to remove the incumbent Enron Nominee and elect
a new Enron Nominee as the Series B Director or to fill a vacancy created by
death of such Enron Nominee or otherwise.
b. Enron shall designate its Enron Nominee in writing to the Company
prior to each election of directors of the Company. The Company shall promptly
notify each of the Series B Investors of the choice of such Enron Nominee. Any
vacancy occurring because of the death, resignation, removal or disqualification
of the Enron Nominee shall be filled according to this Section 3.
4. ADDITIONAL SERIES B DIRECTORS. In the event that the size of the
Company's board of directors (the "Board") is increased (the "Board Increase"),
then each of the Preferred Investors agrees to vote all of its Preferred Shares
and Common Shares now or hereafter owned by it to amend the Restated Certificate
of Incorporation and this Agreement such that the number of directors to be
elected by Series B Shares and the number of Enron Nominees shall be increased
so that (i) the proportion of the total number of directors elected by Series B
Shares and the number of Enron Nominees to the total size of the Board is
approximately equal (rounding to the nearest whole number of directors) to (ii)
the proportion of shares of Common Stock issued or issuable upon conversion of
the Series B Shares owned by Enron to the total outstanding capital stock of the
Company as of the time of the applicable Board Increase. At such time as the
number of Enron Nominees is increased as described above (the "Additional Enron
Nominee"), each of the Series B Investors agrees to vote all of its Series B
Shares now or hereafter owned by it to elect the Enron Nominees to the Board
consistent with the provisions of Section 3 above.
5. SUCCESSORS IN INTEREST.
a. The provisions of this Agreement shall be binding upon the
successors in interest to any of the Preferred Shares. The Company shall not
permit the transfer of any
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of the Preferred Shares on its books or issue new certificates representing any
shares of such securities unless and until the person(s) to whom such shares are
to be transferred shall have executed a written agreement, substantially in the
form of this Agreement, pursuant to which such person becomes a party to this
Agreement, and agrees to be bound by all the provisions hereof as if such person
was a party hereunder.
b. Each certificate representing any of the Preferred Shares shall
bear a legend reading as follows:
"The shares evidenced hereby are subject to the terms
of a Voting Agreement (a copy of which may be obtained
without charge from the issuer), and by accepting any
interest in such shares the person accepting such interest
shall be deemed to agree to and shall become bound by all
the provisions of such Voting Agreement."
6. TERMINATION. This Agreement shall terminate upon (i) the date the
Company consummates an underwritten public offering of its Common Stock under
the Securities Act of 1933, as amended (ii) the closing of a consolidation or
merger of the Company with or into any other corporation or corporations and in
which the Company is not the surviving entity (but excluding a merger or
consolidation of the Company with the parent of the Company or one of the
Company's majority owned subsidiaries or an entity in which more than fifty
percent (50%) of the voting control is controlled by the persons or entities
controlling more than fifty percent (50%) of the voting control of the Company,
whether or not the Company is the surviving entity ("Excluded Merger")), or
(iii) a sale, conveyance or disposition of all or substantially all of the
assets of the Company (other than to the parent of the Company or one of the
Company's majority owned subsidiaries an entity in which more than fifty percent
(50%) of the voting control is controlled by the persons or entities controlling
more than fifty percent (50%) of the voting control of the Company).
7. AMENDMENTS AND WAIVERS. The observance of any term hereof by any
party hereunder may be waived (either generally or in a particular instance and
either retroactively or prospectively) by the party so affected upon written
consent. Any term in Sections 1 through 4 hereof may be amended only with the
written consent of (a) the Company and (b) with respect to Section 1 hereof, the
Series A Investors, or their assigns, holding not less than 55% of the Series A
Shares then outstanding, (c) with respect to Section 2 hereof, the Preferred
Investors, or their assigns, holding not less than 55% of the Preferred Shares
then outstanding, and (d) with respect to Sections 3 and 4, the Series B
Investors, or their assigns, holding not less than a majority of the Series B
Shares then outstanding. Any term in Sections 5 through 15 hereof may be
amended only with the written consent of (a) the Company, (b) the Series A
Investors, or their assigns, holding not less than 55% of the Series A Shares
then outstanding and (c) the Series B Investors, or their assigns, holding not
less than a majority of the Series B Shares then outstanding. Any amendment so
effected shall be binding upon the Company and all Preferred Investors or Series
B Investors, as applicable,
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subject to the terms of this Agreement, whether or not such party, assignee, or
other stockholder entered into or approved such amendment.
8. STOCK SPLITS, STOCK DIVIDENDS, ETC. In the event of any stock split,
stock dividend, recapitalization, reorganization, or the like, any securities
issued with respect to the Preferred Shares shall become subject to this
Agreement and shall be endorsed with the legend set forth in Section 5(b)
hereof.
9. ENFORCEABILITY/SEVERABILITY. The parties hereto agree that each
provision of this Agreement shall be interpreted in such a manner as to be
effective and valid under applicable law. If any provision of this Agreement
shall nevertheless be held to be prohibited by or invalid under applicable law,
(a) such provision shall be effective only to the extent of such prohibition or
invalidity, without invalidating the remainder of such provision or the
remaining provisions of this Agreement, and (b) the parties shall, to the extent
permissible by applicable law, amend this Agreement, or enter into a voting
trust agreement under which the Preferred Shares shall be transferred to the
voting trust created thereby, so as to make effective and enforceable the intent
of this Agreement.
10. GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of Delaware.
11. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
12. SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided in
this Agreement, the provisions hereof shall inure to the benefit of, and be
binding upon, the successors and assigns of the parties hereto.
13. NOTICES. All notices, requests and other communications to the
Company or any of the Investors hereunder shall be in writing, shall refer
specifically to this Agreement and shall be personally delivered or sent by
facsimile transmission, overnight delivery with a nationally recognized
overnight delivery service or by registered or certified mail, return receipt
requested, postage prepaid, in each case to the respective address specified on
the signature page hereof with respect to the Company and in the Schedule of
Investors attached as SCHEDULE A hereto with respect to the Preferred Investors
(or such other address as may be specified in writing to the other parties
hereto). Any notice or communication given in conformity with this Section 13
shall be deemed to be effective when received by the addressee, if delivered by
hand or facsimile transmission, one (1) business day after deposit with a
nationally recognized overnight delivery service and three (3) days after
mailing by first class U.S. Mail.
14. EQUITABLE REMEDIES. The Company and the Preferred Investors
acknowledge and agree that the legal remedies available to the Company and the
Preferred Investors in the event any party violates the covenants and agreements
made in this Agreement would be inadequate and that the Company and each of the
Preferred Investors shall be entitled, without
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posting any bond or other security, to temporary, preliminary, and permanent
injunctive relief, specific performance and other equitable remedies in the
event of such a violation, in addition to any other remedies which the Company
or any of the Preferred Investors may have at law or in equity.
15. FURTHER ASSURANCES. Each of the parties hereto shall execute and
deliver all additional documents and instruments and shall do any and all acts
and things reasonably requested in connection with the performance of the
obligations undertaken in this Agreement and/or otherwise to effectuate in good
faith the intent of the parties.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year hereinabove first written.
THE COMPANY:
RHYTHMS NETCONNECTIONS INC.
By: /s/ Xxxxxxxxx X. Xxxxx
----------------------------------------------
Xxxxxxxxx X. Xxxxx,
President and Chief Executive Officer
THE PREFERRED INVESTORS:
SPROUT CAPITAL VII, L.P.
By: DLJ Capital Corporation
Managing General Partner
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------------------
Xxxxx Xxxxxxx, Attorney-in-Fact
THE SPROUT CEO FUND, L.P.
By: DLJ Capital Corporation
Its General Partner
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------------------
Xxxxx Xxxxxxx, Attorney-in-Fact
DLJ CAPITAL CORPORATION
By: /s/ Xxxxx X. Xxxxxxx
----------------------------------------------
Xxxxx Xxxxxxx, Attorney-in-Fact
[COUNTERPART SIGNATURE PAGE TO VOTING AGREEMENT]
DLJ FIRST ESC L.L.C.
By: DLJ LBO Plans Management Corporation
Its: Manager
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------------------
Xxxxx Xxxxxxx, Attorney-in-Fact
ENTERPRISE PARTNERS III, L.P.
By: /s/ X. X. Xxxxxxxx
----------------------------------------------
Its: General Partner
---------------------------------------------
ENTERPRISE PARTNERS III
ASSOCIATES, L.P.
By: /s/ X. X. Xxxxxxxx
----------------------------------------------
Its: General Partner
---------------------------------------------
XXXXXXX XXXXXXX XXXXXXXX & XXXXX VIII
By: /s/ Xxxxx X. Xxxxxxx
----------------------------------------------
Its: General Partner
---------------------------------------------
[COUNTERPART SIGNATURE PAGE TO VOTING AGREEMENT]
KPCB VIII FOUNDERS FUND
By: /s/ Xxxxx X. Xxxxxxx
----------------------------------------------
Its: General Partner
---------------------------------------------
KPCB VIII INFORMATION SCIENCES ZAIBATSU FUND II
By: /s/ Xxxxx X. Xxxxxxx
----------------------------------------------
Its: General Partner
---------------------------------------------
BRENTWOOD ASSOCIATES VII, L.P.
By: /s/ Xxxx Xxxxxxx
----------------------------------------------
Its: General Partner
---------------------------------------------
BRENTWOOD AFFILIATE FUND, L.P.
By: /s/ Xxxx Xxxxxxx
----------------------------------------------
Its: General Partner
---------------------------------------------
ENRON COMMUNICATIONS GROUP, INC.
By: /s/ X. X. Xxxxxxxx
----------------------------------------------
Its:
---------------------------------------------
[COUNTERPART SIGNATURE PAGE TO VOTING AGREEMENT]
SCHEDULE A
SCHEDULE OF PREFERRED INVESTORS
Name and Address of Series A Investors Name and Address of Series B Investors
-------------------------------------- --------------------------------------
The Sprout Group The Sprout Group
0000 Xxxx Xxxx Xxxx 0000 Xxxx Xxxx Xxxx
Xxxxxxxx 0, Xxxxx 000 Building 4, Suite 270
Menlo Park, CA 94025 Xxxxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxxx Attn: Xxxxx Xxxxxxx
Fax: (000) 000-0000 Fax: (000) 000-0000
Enterprise Partners Enterprise Partners
0000 Xxxxxxx Xxxxxx, Xxxxx 000 0000 Xxxxxxx Xxxxxx, Xxxxx 000
Xx Xxxxx, XX 00000 Xx Xxxxx, XX 00000
Attn: Xxxxxxx Xxxxxxxx Attn: Xxxxxxx Xxxxxxxx
Fax: (000) 000-0000 Fax: (000) 000-0000
Xxxxxxx Xxxxxxx Xxxxxxxx & Xxxxx Xxxxxxx Xxxxxxx Xxxxxxxx & Xxxxx
0000 Xxxx Xxxx Xxxx 0000 Xxxx Xxxx Xxxx
Xxxxx Xxxx, XX 00000 Xxxxx Xxxx, XX 00000
Attn: Xxxxx Xxxxxxx Attn: Xxxxx Xxxxxxx
Fax: (000) 000-0000 Fax: (000) 000-0000
Brentwood Associates Brentwood Associates
0000 Xxxx Xxxx Xxxx 0000 Xxxx Xxxx Xxxx
Xxxxxxxx 0, Xxxxx 000 Building 1, Suite 260
Menlo Park, CA 94025 Xxxxx Xxxx, XX 00000
Attn: Xxxx Xxxxxxx Attn: Xxxx Xxxxxxx
Fax: (000) 000-0000 Fax: (000) 000-0000
Enron Communications Group, Inc.
000 Xxxxxxxxx Xxxxxxxx Xxxxxx,
Xxxxx 000
Xxxxxxxx, XX 00000
