EXHIBIT 2
November ___, 2003
TPG ZHONE, L.L.C.
Re: Letter Agreement re. Nomination of Certain Directors
Ladies and Gentlemen:
Zhone Technologies, Inc. ("Zhone") has entered into an Agreement and
Plan of Merger, dated as of July 27, 2003 (the "Merger Agreement"), by and among
Zhone, Tellium, Inc. (the "Company") and Zebra Acquisition Corp. ("Merger Sub"),
providing for, among other things, the merger of Merger Sub with and into Zhone
(the "Merger"), with Zhone surviving as a wholly-owned subsidiary of Tellium.
Immediately following the Merger, the name of the Company will be changed to
"Zhone Technologies, Inc."
The Company and TPG ZHONE, L.L.C. ("TPG") desire to enter into this
letter agreement to provide for the nomination of certain persons as directors
of the Company immediately upon the closing of the Merger.
1. Nomination of Certain Directors. At any annual or special meeting
called, or in any other action taken (including in connection with the changes
in the size and composition of the Board of Directors as contemplated by the
Merger Agreement) for the purpose of electing directors to the Company's Board
of Directors, the Company agrees to nominate as directors of the Company two
nominees designated by TPG who shall initially be ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇▇▇ and who shall be placed in separate classes if the Company has a
classified Board of Directors.
2. Maximum Nominees. At each annual or special meeting called for the
purpose of electing directors to the Company's Board of Directors, the Company
shall not nominate more persons than there are vacancies, unless and to the
extent required by law.
3. Board Size. The Company shall not increase the number of directors
on the Board beyond nine without the prior written consent of TPG.
4. Vacancies. In the event of any vacancy of the directorships
designated by TPG, the Company agrees to nominate such persons as shall be
designated by TPG to fill said vacancies.
5. Nominating Committee. The Company agrees to direct its Board of
Directors to appoint at least one representative of TPG to the Company's
Nominating and Corporate Governance Committee, provided that such representative
meets the independence and other requirements under applicable law, rules or
regulations
6. Termination. The provisions of this letter agreement shall terminate
upon the earliest to occur of any one of the following:
(a) The liquidation or dissolution of the Company;
(b) The execution by the Company of a general assignment for
the benefit of creditors, the appointment of a receiver or trustee to take
possession of the property and assets of the Company or the filing by the
Company for bankruptcy protection under Chapter 11 of the United States
Bankruptcy Code;
(c) The occurrence of any of the following events (other than
the Merger), provided that the "beneficial owners" (as such term is defined in
the Securities Exchange Act of 1934, as amended, and the rules promulgated
thereunder) of the stock of the Company immediately prior thereto shall
immediately thereafter own less than fifty percent (50%) of the voting power of
the surviving natural person, partnership (whether limited or general), limited
liability company, trust, estate, association, corporation, custodian, nominee
or any other individual or entity in its own or any representative entity
("Person") or an entity that holds eighty percent (80%) or more of the
beneficial equity interest in such surviving Person: (i) the merger or
consolidation of the Company with or into another Person, (ii) the issuance by
the Company of voting securities to another Person, (iii) the sale, transfer or
other disposition (but not including a transfer or disposition by pledge or
mortgage to a bona fide lender) of all or substantially all of the assets of the
Company or (iv) other transaction;
(d) At such time that TPG holds less than fifty percent (50%)
of the shares of capital stock issued or issuable to it in connection with the
Merger (the "Merger Shares") (provided that, for these purposes, any securities
transferred by TPG to, and held by, an affiliated partnership or other
affiliated entity or an affiliate or associate of TPG or other entity shall be
deemed to be held by TPG), then TPG shall lose the right to designate one
nominee; and
(e) At such time that TPG holds less than twenty five percent
(25%) of the Merger Shares (provided that, for these purposes, any shares
transferred by TPG to, and held by, an affiliated partnership or other
affiliated entity or an affiliate or associate of TPG or other entity shall be
deemed to be held by TPG), then (i) TPG shall lose the right to designate any
remaining nominees and (ii) the Company's obligations set forth in this letter
agreement shall terminate.
6. General.
6.1 Waivers and Amendments. No provision of this letter agreement
shall be waived, modified or amended without the prior written consent of the
Company and TPG.
6.2 Successors and Assigns. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto.
6.3 Entire Agreement. This Agreement constitutes the full and
entire understanding and agreement between the parties with regard to the
subjects hereof, and this Agreement shall supersede and cancel all prior
agreements between the parties hereto with regard to the subject matter hereof.
If this letter agreement accurately describes our agreement, please
indicate your acceptance and acknowledgement in the space provided below. Thank
you for your continued support and cooperation.
Sincerely,
ZHONE TECHNOLOGIES, INC.
(FORMERLY TELLIUM, INC.
IMMEDIATELY PRIOR TO THE
CLOSING OF THE MERGER
REFERENCED HEREIN)
By:
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Title:
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ACKNOWLEDGED AND AGREED
TPG ZHONE, L.L.C.
By:
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Title:
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