1
EXHIBIT 4.5
GADZOOX NETWORKS, INC.
--------------------------------------------------
FIRST AMENDED AND RESTATED
SERIES F, G AND H PREFERRED
STOCKHOLDERS' AGREEMENT
OCTOBER 12, 1998
---------------------------------------------------
2
TABLE OF CONTENTS
PAGE
----
1. Definitions..............................................................................1
2. Agreements Concerning Voting of the Shares...............................................3
3. Right of First Refusal...................................................................3
4. Right of First Offer.....................................................................6
5. Right to Maintain........................................................................8
6. Limitation on Ownership of Stocks........................................................9
7. Restriction Upon Transfer of Shares......................................................9
8. Company Right of First Refusal..........................................................10
9. Restriction Upon Sale of Shares.........................................................11
10. Confidential Information................................................................12
11. Right to Repurchase Shares..............................................................12
12. Equity Method Accounting................................................................13
13. 3Com Nomination to Board of Directors...................................................13
14. Miscellaneous...........................................................................14
-i-
3
GADZOOX NETWORKS, INC.
FIRST AMENDED AND RESTATED
SERIES F, G AND H PREFERRED STOCKHOLDERS' AGREEMENT
This First Amended and Restated Series F, G and H Preferred
Stockholders' Agreement is made as of October 12, 1998, (the "Agreement") by and
among (i) Gadzoox Networks, Inc., a Delaware corporation having its principal
executive offices at 0000 Xxx Xxx Xxx, Xxx Xxxx, Xxxxxxxxxx 00000 (the
"Company"); (ii) Seagate Technology, Inc., a Delaware corporation ("Seagate") a
holder of shares of the Company's Series F Preferred Stock and Series G
Preferred Stock pursuant to that certain Series F Preferred Stock Purchase
Agreement dated May 21, 1997 (the "Series F Agreement"), Series G Preferred
Stock Purchase Agreement dated June 16, 1998 (the "Series G Agreement") and
issuable upon conversion of certain convertible promissory notes (the "Notes")
pursuant to the Note Purchase Agreement dated September 18, 1998 (the "Note
Purchase Agreement"); and (iii) 3Com Corporation, a Delaware corporation
("3Com") a purchaser of shares of the Company's Series H Preferred Stock
pursuant to the Series H Preferred Stock Purchase Agreement of even date
herewith (the "Series H Agreement"). Seagate and 3Com are collectively referred
to herein as the "Investors." The number of shares of the Company's Series F, G
and H Preferred Stock are listed on Exhibit A opposite the name of each
Investor. This Agreement amends in its entirety and supersedes in all respects
the Series F, G and H Stockholders' Agreement dated September 18, 1998 (the
"Prior Agreement").
WHEREAS, the Company and Seagate have granted each other certain rights
in connection with the purchase and sale of Series F and Series G Preferred
Stock pursuant to Superseded Provisions; and
WHEREAS, the Company and the Investors wish to restate the Prior
Agreement and to apply such rights to include the holders of Series H Preferred
Stock.
NOW THEREFORE, in consideration of the mutual promises and covenants
hereinafter set forth, the parties agree as follows:
1. DEFINITIONS. As used in this Agreement, the following terms
shall have the following respective meanings:
"Certificate" shall mean the Company's Amended and Restated
Certificate of Incorporation.
"Change of Control" shall mean any merger, consolidation or sale
of all or substantially all of the assets or stock of the Company which results
in the holders of the Company's Voting Stock prior thereto owning less than
fifty percent (50%) of the Voting Stock of the Company or such surviving entity
outstanding immediately after such merger, consolidation or sale.
"Closing Date" shall mean the date of this Agreement.
4
"Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.
"Conversion Stock" shall mean the Common Stock issued or
issuable pursuant to conversion of the Series A Preferred, Series B Preferred,
Series C Preferred, Series D Preferred, Series E Preferred, Series F Preferred,
Series G Preferred and Series H Preferred.
"Initial Public Offering" shall mean the closing of the initial
public offering of securities of the Company to the general public which is
effected pursuant to a registration statement filed with, and declared effective
by the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended.
"New Securities" shall have the meaning set forth in Section
3(b) hereof.
"Preferred Stock" shall mean the Company's Preferred Stock.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar federal statute and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Series A Preferred" shall mean the Series A Preferred Stock.
"Series B Preferred" shall mean the Series B Preferred Stock.
"Series C Preferred" shall mean the Series C Preferred Stock.
"Series D Preferred" shall mean the Series D Preferred Stock.
"Series E Preferred" shall mean the Series E Preferred Stock.
"Series F Preferred" shall mean the Series F Preferred Stock
issued pursuant to the Series F Agreement.
"Series G Preferred" shall mean the Series G Preferred Stock
issued pursuant to the Series G Agreement and issuable upon conversion of the
Notes.
"Series H Preferred" shall mean the Series H Preferred Stock
issued pursuant to the Series H Agreement.
"Significant Event" means (i) any amendment to the Certificate
or Bylaws, (ii) recapitalization or (iii) liquidation of the Company.
"Specified Number of Shares" shall have the meaning set forth in
Section 3(a) hereof.
2
5
"Voting Agreement" shall mean that certain Second Amended and
Restated Voting Agreement dated of even date herewith by and among the Company
and holders of the Company's Preferred Stock, as such agreement may be amended
from time to time.
"Voting Stock" shall mean the Company's Common Stock and
Preferred Stock and other securities issued by the Company having the ordinary
power to vote in the election of directors of the Company (other than securities
having such power only upon the happening of a contingency).
2. AGREEMENTS CONCERNING VOTING OF THE SHARES.
(a) Following the termination of the Voting Agreement, each
Investor agrees to vote all shares of Voting Stock owned by such Investor in
favor of any merger, sale of all or substantially all of the assets or similar
disposition of the Company that is approved by the (i) Board of Directors of the
Company (the "Board") and (ii) the holders of a majority of the then outstanding
shares of the Company's Voting Stock.
(b) Additionally, each Investor agrees that if it acquires a
number of shares which at the time of said share acquisition, represents fifteen
percent (15%) or more of the then outstanding shares of the Company's Voting
Stock, following such date and for so long as it owns at least fifteen percent
(15%) of the outstanding Voting Stock, it will take such actions as may be
required so that all shares of Voting Stock or other voting securities of the
Company owned by such Investor (i) are voted for management's nominees to the
Board of Directors of the Company, consistent with the provisions of Article
Fourth, Section 6(b) of the Certificate, or similar provision as amended from
time to time, and (ii) unless the Company otherwise consents in writing, are
voted with management on all other matters to be voted on by holders of Voting
Stock in not less than the same proportion as the votes cast by the other
non-Investor holders of Voting Stock with respect to such matters; provided,
however, that Voting Stock owned by an Investor may be voted as the Investor
determines in its sole discretion on any Significant Event presented to the
holders of Voting Stock for a vote.
(c) Each Investor, as the holder of shares of Voting Stock,
shall be present, in person or by proxy, at all meetings of stockholders of the
Company so that all shares beneficially owned by such Investor may be counted
for the purposes of determining the presence of a quorum at such meetings.
(d) This Section 2 shall terminate upon the Initial Public
Offering.
3. RIGHT OF FIRST REFUSAL. The Company hereby grants to each
Investor, the right of first refusal to purchase up to the Specified Number of
Shares (as defined in this Section 3) of New Securities (as defined in this
Section 3) which the Company may, from time to time, propose to issue and sell.
Any amount in excess of the Specified Number of Shares may be sold by the
Company without regard to the right of first refusal set forth in this Section
3.
(a) The "Specified Number of Shares" shall mean (i) with
respect to Seagate, a number of shares of the Company's Voting Stock (as defined
in Section 1 above) which results in Seagate owning, following such purchase,
not more than 19.9% of the Company's outstanding Voting
3
6
Stock, including shares issued and issuable upon the Notes (except to the extent
said 19.9% is increased pursuant to the penultimate sentence of subsection (e)
of this Section 3 below) and (ii) with respect to 3Com, a number of shares of
the Company's Voting Stock (as defined in Section 1 above) which results in 3Com
owning, following such purchase, not more than 4.9% of the Company's outstanding
Voting Stock (except to the extent said 4.9% is increased pursuant to the
penultimate sentence of subsection (e) of this Section 3 below).
(b) Except as set forth below, "New Securities" shall mean
any shares of capital stock of the Company, including Common Stock and Preferred
Stock, whether now authorized or not, and rights, options or warrants to
purchase shares of Common Stock or Preferred Stock, and securities of any type
whatsoever that are, or may become, convertible into shares of the Company's
Common Stock or Preferred Stock. Notwithstanding the foregoing, "New Securities"
DOES NOT include (i) securities offered to the public generally pursuant to a
firm commitment underwriting registration statement under the Securities Act,
(ii) securities issued in connection with the acquisition of another corporation
by the Company by merger, purchase of substantially all of the assets or other
reorganization whereby the stockholders of the Company prior to such merger,
purchase or reorganization retain following such merger, purchase or
reorganization not less than a majority of the voting power of the Company or
the surviving or successor corporation in such merger, purchase or
reorganization, (iii) subject to the provisions of Sections 3(c) and 3(e) hereof
and solely with respect to the rights granted to Seagate under this Section 3,
securities issued pursuant to a joint venture arrangement or other strategic
financing arrangement whereby the stockholders of the Company prior to such
issuance of securities retain not less than a majority of the voting power of
the Company subsequent to such issuance provided that the partner in such
arrangement is not an independent disk drive manufacturer whose primary business
is the sale of disk drives, (iv) subject to the provisions of Sections 3(d) and
3(e) hereof and solely with respect to the rights granted to 3Com under this
Section 3, securities issued pursuant to a joint venture arrangement or other
strategic financing arrangement whereby the stockholders of the Company prior to
such issuance retain not less than a majority of the voting power of the Company
subsequent to such issuance and the partner in such arrangement is not (A) Cisco
Systems, Inc., (B) Bay Networks, Inc., Nortel Business or (C) Intel Corporation
or any majority-owned subsidiary or successor thereto (provided, however, that
notwithstanding this subsection (iv), securities issued to (A) Cisco Systems,
Inc., (B) Bay Networks, Inc., Nortel Business or (C) Intel Corporation or any
majority-owned subsidiary or successor thereto pursuant to a joint venture
arrangement or other strategic financing arrangement shall NOT be deemed "New
Securities" on and after the earlier to occur of (A) the Initial Public Offering
and (B) the first anniversary of the date of this Agreement), (v) shares of
Common Stock or options to purchase Common Stock issued to employees, officers
and directors of, and consultants to, the Company, pursuant to any arrangement
approved by the Board of Directors of the Company, (vi) securities issued
pursuant to any rights or agreements, including without limitation convertible
securities, options and warrants, provided that the rights of first refusal
established by this Section 3 apply with respect to the initial sale or grant by
the Company of such rights or agreements, (vii) securities issued to financial
institutions or equipment lessors of the Company pursuant to any arrangement
approved by the Board of Directors, or (viii) securities issued in connection
with any stock split, stock dividend or recapitalization by the Company.
4
7
(c) If Seagate owns at least seven percent (7%) of the
outstanding Voting Stock as of the date of the applicable issuance and prior to
such issuance (the "Calculation Date"), securities issued pursuant to subsection
(iii) of Section 3(b) shall only be excluded from the definition of New
Securities with respect to Seagate, to the extent that all securities sold in
reliance on such subsection after the Closing Date aggregate a percentage of the
Company's Voting Stock (calculated as of the Calculation Date of each issuance
under such subsection), which is equal to or less than the percentage of the
Company's Voting Stock owned by Seagate as of such Calculation Date (the
"Seagate Percentage Interest").
(d) If 3Com owns at least one and three-quarters percent
(1.75%) of the outstanding Voting Stock as of the Calculation Date, securities
issued pursuant to subsection (iv) of Section 3(b) shall only be excluded from
the definition of New Securities, with respect to 3Com, to the extent that all
securities sold in reliance on such subsection after the Closing Date aggregate
a percentage of the Company's Voting Stock (calculated as of the Calculation
Date of each issuance under such subsection), which is equal to or less than the
percentage of the Company's Voting Stock owned by 3Com as of such Calculation
Date (the "3Com Percentage Interest").
(e) Notwithstanding the provisions of Sections 3(c) and
3(d), the Company may sell securities to strategic partners pursuant to
subsection (iii) and (iv) of this Section 3(b) in excess of the Seagate
Percentage Interest, with respect to Seagate, and in excess of the 3Com
Percentage Interest, with respect to 3Com, if it also provides Seagate and 3Com
respectively with the opportunity to purchase additional shares of the Company's
Voting Stock (at the same price and on substantially the same terms as sold to
such strategic partners, or if there are multiple sales to strategic partners,
in the sale which triggered the operation of this sentence) up to a number of
shares of Voting Stock which results in Seagate or 3Com, as the case may be,
owning, after said issuances, the greater of (i) a percentage of the Company's
outstanding Voting Stock equal to the percentage owned by the strategic partner
(other than Seagate) which holds the largest percentage of Voting Stock, or (ii)
(X) with respect to Seagate, up to 19.9% of the Company's outstanding Voting
Stock and (Y) with respect to 3Com, up to 4.9% of the Company's outstanding
Voting Stock. Such sale to Investors shall be on the terms and in accordance
with the procedures set forth in Sections 3(f) and (g) hereof.
(f) In the event the Company proposes to undertake an
issuance of New Securities, it shall give each Investor written notice of its
intention (the "Sale Notice"), describing the type of New Securities, and the
price and terms upon which the Company proposes to issue the same. Each Investor
shall have the right to purchase all or any part of such New Securities (not to
exceed the Specified Number of Shares) for the price and upon the terms
specified in the notice, by giving written notice to the Company within fifteen
(15) days from the date of receipt of the Sale Notice and stating therein the
quantity of New Securities to be purchased (not to exceed the Specified Number
of Shares). If an Investor elects to purchase the New Securities, the sale
thereof shall close as promptly as reasonably possible, provided that if such
sale is subject to compliance with the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements
Act of 1976, as amended (the "HSR Act"), the parties shall cooperate and make
all filings and get all clearances required thereunder as promptly as reasonably
possible. If (a) within one hundred fifty (150) days of the date of filing of
the necessary documents under the HSR Act, (i) the waiting period under the HSR
Act shall not have expired, or (ii) a second request has been issued and the
Justice
5
8
Department or the Federal Trade Commission (as applicable) shall not have
terminated the waiting period thereafter, or (b) an order, decree, ruling or
other action is issued or taken by a governmental entity which has the effect of
permanently restraining, enjoining or otherwise prohibiting the purchase of the
New Securities or only permits said purchase if certain actions are taken by
either the Company or the Investor, and which order, decree, ruling or action is
final and non-appealable, then in any such case, the Investor's right of first
refusal shall terminate with respect to such New Securities and the Company may
sell such New Securities to a third party. If the Company so requests, each
Investor shall assist the Company in obtaining financing during the pendency of
the foregoing described proceedings under the HSR Act to the extent that
Investor is legally permitted to do so.
(g) In the event an Investor fails to exercise the right of
first refusal within said fifteen (15) day period or an Investor's right of
first refusal terminates as provided in Section 3(f), the Company shall have one
hundred twenty (120) days thereafter to sell or enter into an agreement
(pursuant to which the sale of New Securities covered thereby shall be closed,
if at all, within one hundred twenty (120) days from the date of said agreement)
to sell the New Securities not elected to be purchased by the Investors at a
price and upon terms no more favorable to the purchaser of such securities than
specified in the Company's Sale Notice. In the event the Company has not sold
the New Securities or has not entered into an agreement to sell the New
Securities within said one hundred twenty (120) day period (or sold and issued
New Securities in accordance with the foregoing within one hundred twenty (120)
days from the date of said agreement), the Company shall not thereafter issue or
sell any New Securities without first offering such securities to the Investors
in the manner provided above.
(h) The rights of first refusal granted to Seagate and 3Com
under this Section 3 shall terminate (A) with respect to Seagate, upon the first
to occur of (i) the acquisition by Seagate of at least 19.9% of the then
outstanding Voting Stock of the Company (or, if applicable, upon the closing of
the purchase by Seagate of a percentage greater than 19.9% pursuant to Section
3(e) hereof) and (ii) the Initial Public Offering and (B) with respect to 3Com,
upon the first to occur of (i) the acquisition by 3Com of at least 4.9% of the
then outstanding Voting Stock of the Company (or, if applicable, upon the
closing of the purchase by 3Com of a percentage greater than 4.9% pursuant to
Section 3(e) hereof) and (ii) the Initial Public Offering.
(i) The rights of first refusal granted hereunder are not
assignable or transferable by an Investor except to a wholly owned subsidiary of
such Investor which has executed an agreement to be bound by the same terms as
such Investor.
4. RIGHT OF FIRST OFFER. If the Company decides to commence
discussions with, or receives a written proposal from, any party with respect to
any transaction which would result in a Change of Control of the Company (as
defined in Section 1 above) and the Board reasonably believes such Change of
Control transaction would be in the best interests of the Company and its
stockholders, the Company shall promptly provide each Investor with notice
describing the price and general terms of such proposal and a copy of such
written proposal (the "Right of First Offer Notice"). Thereafter, each Investor
shall have a right to make an offer to acquire the Company (a "Right of First
Offer") subject to and upon the following terms:
6
9
(a) 3Com shall have five (5) business days after receipt of
the Right of First Offer Notice to provide the Company with a written counter
offer to acquire the Company which shall set forth the principal, proposed terms
of such acquisition (the "3Com Counter-Offer"). Further, 3Com shall have the
opportunity to present the terms and conditions of the 3Com Counter-Offer to the
Company's Board of Directors.
(b) After the earlier of (i) 3Com has presented the
Company's Board of Directors with the 3Com Counter-Offer (or 3Com has delivered
the 3Com Counter-Offer to the Company if 3Com chooses not to present the 3Com
Counter-Offer to the Company's Board) and (ii) the 3Com Offer Period has
expired, the Company shall deliver the 3Com Counter-Offer to Seagate, and
Seagate shall have five (5) business days after receipt of both the Right of
First Offer Notice and the 3Com Counter-Offer (if any) (or if no such 3Com
Counter-Offer is received, five (5) days after receipt of the Right of First
Offer Notice and a notice from the Company that no 3Com Counter-Offer was
received within the five business day period) to provide the Company with a
written counter offer to acquire the Company which shall set forth the
principal, proposed terms of such acquisition (the "Seagate Counter-Offer").
(c) In comparing and assessing the terms of the third party
offer to Investors' counter offers, the Board shall consider all factors they
deem reasonable and in the best interest of the Company's stockholders.
(d) In the event any Investor fails to deliver its
respective counter-offer within the applicable time periods set forth above or
the Board determines in its reasonable business judgment that the counter-offers
are less favorable to the Company and its stockholders than the transaction
described in the Right of First Offer Notice or any other counter-offer, the
Company shall have one hundred twenty (120) days thereafter to enter into an
agreement (the "Definitive Agreement") pursuant to which the Change of Control
transaction covered thereby shall be closed, if at all, within one hundred fifty
(150) days from the date of the Definitive Agreement. Such Definitive Agreement
may be on terms different from those set forth in the Right of First Offer
Notice or contained in any other counter-offer. In the event the Company has not
entered into a Definitive Agreement within the one hundred twenty (120) day
period or does not close the Definitive Agreement within an additional one
hundred fifty (150) days from the date of the Definitive Agreement, the Company
shall not thereafter complete any Change of Control transaction without again
providing each Investor with a Right of First Offer as described herein.
(e) Notwithstanding anything to the contrary in this
Agreement or elsewhere, the Company may commence discussions, negotiate, and/or
consummate (in accordance with the terms and conditions of this Section 4) a
Change of Control of the Company with any party including, but not limited to,
(i) Cisco Systems, Inc., (ii) Bay Networks, Inc., Nortel Business and (iii)
Intel Corporation.
(f) The rights set forth in this Section 4 shall expire upon
the closing of the Initial Public Offering.
(g) The rights set forth in this Section 4 shall not be
assigned or transferred, except that such rights are assignable, in whole, by an
Investor to any wholly-owned subsidiary of such Investor which has executed an
agreement to be bound by the same terms as such Investor.
7
10
5. RIGHT TO MAINTAIN. In the event the Company issues and sells
shares of its Voting Stock either in a transaction described in Section
3(b)(iii), 3(b)(iv) above or in the Initial Public Offering, the Investors shall
have the right to maintain their respective percentage interest in the Company
by purchasing a number of shares of such Voting Stock (determined as described
below) at the same price and on substantially the same terms as were sold (or as
are being sold) by the Company in such transaction. If the issuance to which the
right applies is the Initial Public Offering, the price per share to each
Investor shall be net of underwriting discounts and commissions. The number of
shares which each Investor may so purchase is the number equal (a) to Investor's
percentage ownership of the outstanding shares of Voting Stock of the Company
owned immediately prior to such transaction multiplied by the total number of
shares of Voting Stock issued in such transaction less (b) the number of shares
purchased by such Investor in connection with such transaction pursuant to
Section 3 hereof. Each Investor shall pay the legal fees and other expenses
incurred by the Company in connection with the exercise by such Investor of its
rights in this Section 5.
(a) With respect to Seagate, in lieu of purchasing shares of
Voting Stock pursuant to its right to maintain in this Section 5, Seagate shall
first convert its Notes into shares of Series G Preferred Stock in order to
maintain its percentage interest in the Company; and only at such time and to
the extent that all shares issued upon conversion of all Notes is less than the
number of shares Seagate is entitled to purchase pursuant to this Section 5,
shall Seagate be entitled to purchase shares of the Company's Voting Stock
pursuant to this Section 5.
(b) Prior to the date which is fifteen (15) days after the
Company issues and sells shares in such a transaction, the Company shall provide
written notice to each Investor which shall state the number of additional
securities, if any, that such Investor is entitled to purchase and the purchase
price thereof.
(c) Each Investor shall have ten (10) days from the date of
receipt of such notice to exercise its option. Each Investor shall exercise its
option by delivering to the Company written notice of exercise of such right
accompanied by its check for the full purchase price of the Voting Stock which
it wishes to purchase. Each Investor may purchase all or any portion of the
number of shares of Voting Stock which it is entitled to purchase through this
Section 5. To the extent that an Investor does not exercise its option within
said ten (10) day period, the option shall expire; provided that if such
purchase is subject to the HSR Act, the provision of Section 3(f) concerning
filings under such HSR Act and termination of purchase rights shall apply to
said purchase.
(d) The provisions of this Section 5 shall expire upon the
first to occur of (i) April 30, 2003, or (ii) thirty (30) days after the closing
of the Initial Public Offering.
(e) The rights granted under this Section 5 shall not be
assigned or transferred by an Investor except to a wholly owned subsidiary of
such Investor which has executed an agreement to be bound by the same terms as
such Investor.
8
11
6. LIMITATION ON OWNERSHIP OF STOCKS. Without the consent of the
Company's Board of Directors, for a period which shall expire upon the earlier
of (i) three (3) years after the Company's Initial Public Offering, (ii) Xxxxx
00, 0000, (xxx) such time as a tender offer is made for not less than 50% of the
outstanding shares as evidenced by a filing with the Securities and Exchange
Commission of Schedule 14D-1 and the actual dissemination of tender offer
materials to stockholders, or (iv) such time as another entity or group acquires
not less than 25% ownership of the total combined voting power of all
outstanding shares, no Investor nor any partnership, syndicate or group of which
an Investor is a member or any entity affiliated with an Investor or with which
an Investor is acting in concert will:
(a) except as permitted by Section 3(e) hereof, acquire
beneficial ownership of any Company shares if after such acquisition (X) with
respect to Seagate, would beneficially own more than 19.9% of the outstanding
Voting Stock of the Company and (Y) with respect to 3Com, would beneficially own
more than 4.9% of the outstanding Voting Stock of the Company;
(b) form, join or in any way participate in a group (a "13D
Group") acting together for the purpose of acquiring, holding or disposing of
Company shares which would be required to file a statement on Schedule 13D if
such 13D Group beneficially owns more than 5% of the outstanding Company shares
(other than a 13D Group composed of Investor and its affiliates);
(c) submit any resolution to the Company's stockholders or
become a participant in a proxy solicitation in opposition to the recommendation
of a majority of the Company's directors; or
(d) enter into any voting arrangement with respect to any
Company shares other than the as set forth herein and the Voting Agreement.
7. RESTRICTION UPON TRANSFER OF SHARES. With respect to Seagate,
for so long as Seagate owns at least seven percent (7%) of the Company's
outstanding Voting Stock and with respect to 3Com, for so long as 3Com owns at
least one and three-quarters percent (1.75%) of the Company's outstanding Voting
Stock, such respective Investor agrees that it will not nor will it permit any
of its affiliates to sell or transfer any of the shares of the Company acquired
hereunder or otherwise except (i) to an existing stockholder of the Company as
of the date first set forth above, or a person or entity who owns Voting Stock
of the Company immediately prior to the closing of the Company's Initial Public
Offering; (ii) to the Company or to any person approved by the Company; (iii)
pursuant to a bona fide public offering registered under the Securities Act;
(iv) pursuant to Rule 144 under the Securities Act; (v) pursuant to a bona fide
pledge of such shares to an institutional lender to secure a loan, guarantee or
other financial support, provided that such lender agrees to hold such stock
subject to all provisions of this Agreement and any sale or disposition by such
lender of such pledged stock shall be subject to the limitations of this
Section; (vi) in the event of a merger or consolidation in which the Company is
acquired by another corporation, or pursuant to a plan of liquidation of the
Company; (vii) to a wholly-owned subsidiary of such Investor which has executed
an agreement to be bound by the same terms as such Investor; (viii) sales into
any tender or exchange offer (A) which is made by or on behalf of the Company;
(B) which is made by another person or group and is not opposed by the Board of
Directors of the Company; or (C) subject to the Company's right of first refusal
set forth in Section 8 below, which is made by another person or group and which
would result in such person or group owning more than fifty
9
12
percent (50%) of the total outstanding voting power of the Company; or (ix) any
public distribution (including any Rule 144 sale), provided that, in cases other
than public distributions underwritten by an underwriter selected by the
Company, no single Investor (other than an underwriter) is known to be acquiring
more than five percent (5%) of the outstanding Company shares in such
distribution. In addition to the foregoing restrictions, each Investor agrees
that it will not nor will it permit any of its affiliates to sell or transfer
any of the shares of the Company to a person or entity which as of the date of
such transfer, is engaged in or has publicly announced its intention to enter
into the business of developing, manufacturing, marketing or selling storage
area networks. For purposes of this Section 7, an acquisition or merger of an
Investor by or into another entity, in which such entity following the
acquisition or merger owns at least a majority of the outstanding capital stock
of such Investor, shall not be deemed a transfer or sale of the Voting Stock of
the Company held by such Investor.
8. COMPANY RIGHT OF FIRST REFUSAL. With respect to Seagate, for so
long as Seagate owns at least seven percent (7%) of the Company's outstanding
Voting Stock and with respect to 3Com, for so long as 3Com owns at least one and
three-quarters percent (1.75%) of the Company's outstanding Voting Stock and
upon execution of this Agreement, such respective Investor shall not sell,
assign, pledge, or in any manner transfer any of the shares or securities or
other rights convertible into shares of the Company acquired under the Series F
Agreement, the Series G Agreement, the Note Purchase Agreement or the Series H
Agreement or otherwise or any right or interest therein, whether voluntarily of
by operation of law, or by gift or otherwise, except by a transfer which meets
the requirements hereinafter set forth:
(a) If an Investor desires to sell or otherwise transfer any
of its shares or Notes of the Company, then such Investor shall first give
written notice thereof to the Company. The notice shall name the proposed
transferee and state the number of shares of the Company or principal amount of
the Notes to be transferred, the proposed consideration, and all other terms and
conditions of the proposed transfer.
(b) For thirty (30) days following receipt of such notice,
the Company shall have the option to purchase or cause an assignee of the rights
hereunder to purchase, any or all of the shares or Notes specified in the notice
at the price and upon the terms set forth in such notice; provided that if the
purchase by the Company of less than all of the shares or Notes specified in the
notice would cause such Investor to be unable to sell all of the shares or Notes
at the price set forth in the notice, the Company's option shall only be
exercisable if it purchases all of the shares or Notes specified in the notice.
In the event of a gift, property settlement or other transfer in which the
proposed transferee is not paying the full price for the shares or Notes, and
that is not otherwise exempted from the provisions of this Section 8, the price
shall be deemed to be the fair market value of the stock or Notes at such time
as determined in good faith by the Company's Board of Directors. In the event
that such Investor does not agree with such price of the stock or Notes as
determined by the Company's Board of Directors, the parties shall engage an
independent appraiser to determine the fair market value of the stock. In the
event that the Company elects to purchase any or all of the shares or Notes, it
shall give written notice to such Investor of its election and settlement for
said shares or Notes shall be made as provided below in Section 8(c).
10
13
(c) In the event the Company and/or its assignee(s) elect to
acquire any of the shares or Notes of an Investor as specified in such
Investor's notice pursuant to 8(b) hereof, the Secretary of the Company shall so
notify such Investor and settlement thereof shall be made in cash within thirty
(30) days after the Secretary of the Company receives such Investor's notice;
provided that if the terms of payment set forth in such Investor's notice were
other than cash against delivery, the Company and/or its assignee(s) shall pay
for said shares or Notes on the same terms and conditions set forth in
Investor's notice.
(d) In the event the Company and/or its assignee(s) do not
elect to acquire any of the shares or Notes specified in such Investor's notice,
such Investor may within the ninety (90) day period following the expiration of
the option rights granted to the Company and/or its assignee(s) herein or such
later time as reasonably agreed to by such Investor and the Company, transfer
the shares or Notes specified in such Investor's notice which were not acquired
by the Company and/or its assignee(s) as specified in such Investor's notice.
All shares or Notes so sold by such Investor shall no longer be subject to the
provisions of this Section 8.
(e) Anything to the contrary contained herein
notwithstanding, the following transactions shall be exempt from the provisions
hereof:
(i) transactions permitted under Section 7(i), (ii),
(iii), (iv), (v), (vii)(A) and (vii)(B); or
(ii) an Investor's transfer of any and all of its
shares or Notes pursuant to and in accordance with the terms of any merger,
consolidation, reclassification of shares or capital reorganization of such
Investor, or pursuant to a sale of all or substantially all of the stock or
assets of such Investor.
(f) Any sale or transfer, or purported sale or transfer, of
securities of the Company shall be null and void unless the terms, conditions,
and provisions hereof are strictly observed and followed.
(g) The certificates representing shares of stock and Notes
of the Company owned by an Investor shall bear on their face the following
legend so long as the foregoing right of first refusal remains in effect:
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT
TO A RIGHT OF FIRST REFUSAL OPTION IN FAVOR OF THE
COMPANY AND/OR ITS ASSIGNEE(S), AS PROVIDED IN AN
AGREEMENT BETWEEN THE COMPANY AND THE HOLDER OF THIS
CERTIFICATE, WHICH IS AVAILABLE FOR REVIEW AT THE
COMPANY."
9. RESTRICTION UPON SALE OF SHARES. Until the earlier to occur of
(i) the first anniversary of the date of this Agreement and (ii) the Initial
Public Offering, and subject to the continuing rights of the Company to effect a
Change of Control of the Company to any entity as set forth in Section 4(e)
11
14
hereof, the Company shall not sell any Voting Stock of the Company to (i) Cisco
Systems, Inc., (ii) Bay Networks, Inc., Nortel Business, or (iii) Intel
Corporation.
10. CONFIDENTIAL INFORMATION.
(a) The Company will from time to time pursuant to this
Agreement disclose to an Investor and such Investor's designee to the Board, if
any, certain business information, technical information, proprietary
information or such other information which the Company deems to be
confidential. No Investor shall disclose such information to third parties until
the earliest of (i) the date upon which such information becomes public
knowledge through no fault of such Investor, (ii) the date upon which the
Company discloses such information to a third party on an unrestricted basis, or
(iii) the fifth anniversary of the date of disclosure to such Investor.
(b) If so requested by the Board of Directors of the
Company, the designee of Investor, if any, shall excuse himself from all
deliberations or discussions of the Board of Directors of the Company concerning
(a) competitors of such Investor or (b) relationships between the Company and
Investor or the Company and such competitor or (c) with respect to any
discussions relating to the merger or sale of all or substantially all of the
assets or stock of the Company either to such Investor or in a transaction in
which such Investor has a Right of First Offer. Upon notice to such Investor's
designee, if any, the Company may refrain from sending or providing to such
Investor, or such Investor may refuse to receive, any information otherwise
disseminated to the directors of the Company concerning any matters set forth in
this Section 10. The Company does not currently compensate its outside
directors. The Company shall provide all rights and benefits of indemnity to
such designee, if any, as are provided such directors.
11. RIGHT TO REPURCHASE SHARES.
(a) Except to the extent such Voting Stock is purchased in
accordance with the second to last sentence of Section 3(e), if at any time
after the date first set forth above and before the expiration of the provisions
of Section 6 hereof an Investor acquires Voting Stock, any securities
convertibles or exchangeable for Voting Stock, or any other right to acquire
Voting Stock, (except, in any case, by way of stock dividends or other
distributions or offerings made available to holders of any Voting Stock
generally and except, with respect to Seagate, the acquisition of the Notes or
the conversion thereof in accordance with their terms) such that the Voting
Stock owned by such Investor represent (X) with respect to Seagate, in excess of
19.9% of the outstanding Voting Stock of the Company and (Y) with respect to
3Com, in excess of 4.9% of the outstanding Voting Stock of the Company, the
Company shall have the right to purchase, in accordance with the provisions of
this Section 11, from such Investor shares of Voting Stock so as to reduce such
Investor's aggregate voting power (X) with respect to Seagate, to no more than
19.9% of the outstanding Voting Stock of the Company and (Y) with respect to
3Com, to no more than 4.9% of the outstanding Voting Stock of the Company.
12
15
(b) The Company may repurchase any such Voting Securities in
the following manner:
(i) The Company shall give notice (the "Repurchase
Notice") to such Investor in writing of such intention specifying the amount of
Voting Stock proposed to be repurchased and the other material terms upon which
such disposition is proposed to be made, including the proposed closing date.
(ii) Upon receipt of the Repurchase Notice, such
Investor shall promptly, but in no event in more than five (5) business days,
deliver notice to the Company of the average per share cash price paid by such
Investor for the number of shares of Voting Stock being purchased by the Company
from such Investor, such price calculated on a last purchased, first sold basis
(the "Purchase Price").
(iii) The Company shall have the right, exercisable by
written notice by the Company to such Investor within ten business days after
receipt of such notice from such Investor, to purchase all or part of the Voting
Securities specified in such Repurchase Notice for cash per share equal to the
Purchase Price.
(iv) If the Company exercises its rights of
repurchase hereunder, the closing of the purchase of the Voting Stock with
respect to which such right has been exercised shall take place within thirty
(30) calendar days after the Company gives notice of such exercise, which period
of time shall be extended in order to comply with applicable securities laws and
regulations. Upon exercise of its rights of repurchase, the Company and such
Investor shall be legally obligated to consummate the purchase contemplated
thereby and shall use their best efforts to secure any approvals required in
connection therewith.
12. EQUITY METHOD ACCOUNTING. If an Investor desires at some date to
account for its investment in the Company pursuant to the equity method, the
Company shall furnish to such Investor all information that is required by
generally accepted accounting principles to enable such Investor so to account,
to the extent reasonably available to the Company. To the extent reasonably
requested by an Investor, the Company shall provide information, to the extent
reasonably available, regarding the Company and will otherwise cooperate with
such Investor so as to enable such Investor to prepare financial statements in
accordance with accounting principles generally accepted in the United States
and to comply with its reporting requirements under applicable United States
securities laws and regulations.
13. 3COM NOMINATION TO BOARD OF DIRECTORS.
(a) Contingent upon and effective as of the closing of the
sale of Series H Preferred Stock to 3Com pursuant to the Series H Agreement (the
"Series H Financing") and in accordance with Article 2a of the Company's Bylaws,
the Board of Directors of the Company (the "Board of Directors") will be
increased from seven (7) members to eight (8) members until such number is
changed by a subsequent resolution duly adopted by the Board of Directors.
13
16
(b) Contingent upon and effective as of the closing of the
Series H Financing and in accordance with Article 2b of the Company's Bylaws,
the Board of Directors will elect and fill the newly created directorship on the
Company's Board of Directors with a person (the "3Com Designee") designated by
3Com, provided that such 3Com Designee is and at all times during his tenure on
the Company's Board of Directors shall remain at the level of at least a Vice
President of 3Com, and such 3Com Designee shall hold such directorship until the
first to occur of (i) the next annual meeting of shareholders for the election
of directors and (ii) the date at which such 3Com Designee ceases to serve as at
least a Vice President of 3Com.
(c) At the next annual meeting of the shareholders of the
Company for the election of directors, if 3Com has entered into an agreement
with the Company to develop jointly future products with the Company in which
3Com has agreed to pay the Company substantial nonrecurring engineering costs
(the "3Com Commitment"), then the Board of Directors will include the 3Com
Designee in the management's nominees for the Board of Directors and submit such
management nominee at the next annual meeting of shareholders for the election
of directors; provided, however, that at the time of any annual meeting of the
shareholders for the election of directors, if 3Com has not achieved the 3Com
Commitment, the Board of Directors shall have no obligation to nominate the 3Com
Designee, provided that if the Board of Directors nonetheless includes the 3Com
Designee in the management's nominees for the Board of Directors, the Board of
Directors reserves the right at any subsequent annual meeting of the
shareholders not to include the 3Com Designee in the management's nominees for
the Board of Directors.
(d) The rights and obligations of the Company under this
Section 13 shall cease upon the earlier to occur of (i) the Initial Public
Offering, (ii) a Change of Control of the Company, and (iii) at such time as
3Com ceases to hold at least 350,000 shares of Series H Preferred Stock or
Common Stock issued upon conversion of such shares of Series H Preferred Stock.
14. MISCELLANEOUS
(a) Governing Law. This Agreement shall be governed in all
respects by the internal laws of the State of California.
(b) Successors and Assigns. Except as otherwise provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
(c) Entire Agreement; Amendment. This Agreement constitutes
the full and entire understanding and agreement between the parties with regard
to the subjects hereof and thereof, and no party shall be liable or bound to any
other party in any manner by any warranties, representations or covenants except
as specifically set forth herein or therein. Except as expressly provided
herein, neither this Agreement nor any term hereof may be amended, waived,
discharged or terminated other than by a written instrument signed by the party
against whom enforcement of any such amendment, waiver, discharge or termination
is sought; provided, however, that holders of a majority of the outstanding
shares of Series F Preferred, Series G Preferred (including for such purpose the
number of shares of
14
17
Series G Preferred issuable on conversion of the Notes, which shall be deemed to
be outstanding) and Series H Preferred voting together as a class may, with the
Company's prior written consent, waive, modify, amend or terminate on behalf of
all Investors, this Agreement or any terms or provisions hereof.
(d) Prior Agreement; Waiver and Termination.
(i) This Agreement supersedes and replaces the Prior
Agreement and such Prior Agreement shall be of no further force or effect upon
execution of this Agreement by the Company and the Investors.
(ii) Seagate hereby waives any and all rights,
including, without limitation, rights of first refusal and rights to maintain,
if any, with respect to the issuance and sale of the Series H Preferred and
notice of such sale and issuance which it may have under the Prior Agreement.
(e) Notices, etc. All notices and other communications
required or permitted hereunder shall be in writing and shall be mailed by
registered or certified mail, postage prepaid, or otherwise delivered by hand or
by messenger, addressed (a) if to any other Investor, at such address as such
Investor shall have furnished the Company in writing, or (b) if to the Company,
one copy should be sent to its address set forth above and addressed to the
attention of the Corporate Secretary, or at such other address as the Company
shall have furnished to the Investors.
Each such notice or other communication shall for all purposes
of this Agreement be treated as effective or having been given (a) when
delivered if delivered personally or by messenger, or, (b) if sent by mail, at
the earlier of its receipt or seventy-two (72) hours after the same has been
deposited in a regularly maintained receptacle for the deposit of the United
States mail, addressed and mailed as aforesaid.
(f) Counterparts. This Agreement may be executed in any
number of counterparts, each of which may be executed by less than all parties
to this Agreement, each of which shall be enforceable against the parties
actually executing such counterparts, and all of which together shall constitute
one instrument.
(g) Severability. In the event that any provision of this
Agreement becomes or is declared by a court of competent jurisdiction to be
illegal, unenforceable or void, this Agreement shall continue in full force and
effect without said provision.
(h) Titles and Subtitles. The titles and subtitles used in
this Agreement are used for convenience only and are not considered in
construing or interpreting this Agreement.
(i) Binding Effect and Transfers. Except as specifically set
forth in this Agreement, this Agreement is for the benefit of, and shall be
binding upon, the parties hereto and their respective heirs, personal
representatives, successors and assigns (each a "Transferee"). Any transfer of
Voting Stock shall be subject to the voting requirements and restrictions of
this Agreement without any further act or deed by such transferee or by any
other party. Any such Transferee receiving Voting Stock shall
15
18
be deemed an Investor for purposes of this Agreement with respect to the voting
of such shares of Voting Stock. Any Transferee shall hold such Voting Stock
subject to the terms hereof and shall comply in all respects with this
Agreement.
16
19
The foregoing First Amended and Restated Series F, G and H Stockholders'
Agreement is hereby executed as of the date first above written.
"COMPANY"
GADZOOX NETWORKS, INC.
a Delaware corporation
By: ______________________________________
(Signature)
Name: ______________________________________
(Printed Name)
Title: ______________________________________
"INVESTORS"
SERIES F AND G STOCKHOLDER AND
NOTEHOLDER:
SEAGATE TECHNOLOGY, INC.
a Delaware corporation
By: ______________________________________
(Signature)
Name: ______________________________________
(Printed Name)
Title: ______________________________________
SERIES H STOCKHOLDER:
3COM CORPORATION
a Delaware corporation
By: ______________________________________
(Signature)
Name: ______________________________________
(Printed Name)
Title: ______________________________________
17
20
EXHIBIT A
GADZOOX NETWORKS, INC.
SERIES F, SERIES G AND SERIES H PREFERRED STOCKHOLDERS
No. of No. of Series G Preferred No. of
Shares Shares Stock issuable upon Shares
Series F Series G conversion of Notes Series H
--------- --------- -------------------- --------
Seagate Technology.... 2,092,234 895,263 1,725,504*
3Com Corporation...... 784,314
* Number of shares to be issued upon conversion of the 13,200,103.29
Convertible Subordinated Promissory Note issued October 12, 1998 at 5.75% per
annum simple interest. The exact number will vary based upon the time and rate
of conversion.
