exv4w2




Exhibit 4.2




EXECUTION COPY




AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT




     This Amended and Restated Investor Rights Agreement (this “Agreement”) is made as of
February 26, 2007, by and among ZONARE Medical Systems, Inc. a Delaware corporation (the
“Company”), and the investors listed on Schedule A hereto, which may be amended
from time to time (individually an “Investor” and collectively the “Investors”).
This Agreement hereby amends and restates the Amended and Restated Investor Rights Agreement dated
December 27, 2005 (the “Prior Agreement”).



RECITALS




     A. The Company and certain Investors are parties to the Series G Preferred Stock Purchase
Agreement of even date herewith (the “Purchase Agreement”), pursuant to which the Company
will sell, and certain Investors (the “Purchasers”) will buy, Series G Preferred Stock of
the Company (the “Series G Financing”).



     B. The obligations of the Company and the Investors in the Purchase Agreement are conditioned,
among other things, upon the execution and delivery of this Agreement by the Company and the
Investors.



AGREEMENT




     NOW, THEREFORE, in consideration of the mutual promises and covenants herein, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as follows:



     1. Definitions. As used in this Agreement, the following terms shall have the
following respective meanings:



          “Commission” means the Securities and Exchange Commission or any other federal agency
at the time administering the Securities Act.




          “Conversion Stock” means the Company’s Common Stock issued or issuable pursuant to
conversion of the Preferred Stock.




          “Exchange Act” means the Securities Exchange Act of 1934, as amended, or any similar
federal rule or statute and the rules and regulations of the Commission thereunder, all as the same
shall be in effect at the time.




          “Holder” means (i) any Investor holding Registrable Securities and (ii) any person
holding Registrable Securities to whom the rights under this Agreement have been transferred in
accordance with Section 4 hereof.




          “Initiating Holder” means, with respect to a request under Section 5.1, one or more
Holders that collectively hold at least sixty percent (60%) of the Registrable Securities then
outstanding, and with respect to a request under Section 5.3, one or more Holders that
collectively hold at least twenty percent (20%) of the Registrable Securities then outstanding.




 









 








          “Liquidation Event” has the meaning given to it in Article FOUR, Section 2 of the
Company’s Amended and Restated Certificate of Incorporation, as amended from time to time.




          “Major Investor” shall mean any Investor who holds at least 1,200,000 shares of
Preferred Stock or Conversion Stock (as adjusted for stock splits, stock dividends, recombinations,
reclassifications, and the like).




          “Preferred Stock” shall mean the Company’s Series A Preferred Stock, Series B
Preferred Stock, Series C Preferred Stock, Series D Preferred Stock, Series E Preferred Stock,
Series F Preferred Stock and Series G Preferred Stock.




          “Qualified Initial Public Offering” shall mean the Company’s initial public offering
pursuant to an effective registration statement under the Securities Act covering the offer and
sale of the Company’s Common Stock to the public pursuant to which the outstanding Preferred Stock
is converted into Common Stock in accordance with the Company’s Certificate of Incorporation.




          “Registrable Securities” means (i) the Conversion Stock; (ii) any other shares of
Common Stock and any shares of Common Stock issued or issuable upon the conversion or exercise of
any warrant, right or other security acquired by the Investors; and (iii) any Common Stock of the
Company issued (or issuable upon the conversion or exercise of any warrant, right or other security
which is issued) or issuable in respect of the stock referred to in (i) or(ii) upon any stock
split, stock dividend, recapitalization or similar event; provided, however, that securities shall
only be treated as Registrable Securities if and so long as (x) they have not been registered or
sold to or through a broker or dealer or underwriter in a public distribution or a public
securities transaction and (y) the registration rights with respect to such securities have not
terminated pursuant to Section 5.8.




          The terms “register,” “registered” and “registration” refer to a
registration effected by preparing and filing a registration statement in compliance with the
Securities Act, and the declaration or ordering of the effectiveness of such registration
statement.




          “Registration Expenses” shall mean all expenses, except as otherwise stated below,
incurred by the Company in complying with Sections 5.1, 5.2 and 5.3 hereof, including without
limitation all registration, qualification and filing fees, printing expenses, escrow fees, fees
and disbursements of counsel for the Company, blue sky fees and expenses and the expense of any
special audits incident to or required by any such registration (but excluding the compensation of
regular employees of the Company which shall be paid in any event by the Company). Registration
Expenses shall also include the reasonable fees and disbursements for one special counsel to the
selling stockholders (not to exceed $50,000).




          “Restricted Securities” shall mean the securities of the Company required to bear the
legends set forth in Section 3 hereof.




          “Rule 144” and “Rule 145” shall mean Rules 144 and 145, respectively,
promulgated under the Securities Act, or any similar federal rules thereunder, all as the same
shall be in effect at the time.




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          “Securities Act” shall mean the Securities Act of 1933, as amended, or any similar
federal rule or statute and the rules and regulations of the Commission thereunder, all as the same
shall be in effect at the time.




          “Selling Expenses” shall mean all underwriting discounts, selling commissions and
stock transfer taxes applicable to the securities registered by the Holders and all reasonable fees
and disbursements of counsel for any selling Holder.




          “Shares” shall mean the Company’s Preferred Stock held by the Investors listed on
Schedule A hereto and their permitted assigns.




     2. Restrictions on Transferability. The Preferred Stock, the Conversion Stock and any
other securities issued in respect of such stock upon any stock split, stock dividend,
recapitalization, merger, or similar event shall not be sold, assigned, transferred or pledged
except upon the conditions specified in this Agreement, which conditions are intended to ensure
compliance with the provisions of the Securities Act. Each Holder or transferee will cause any
proposed purchaser, assignee, transferee, or pledgee of any such shares held by the Holder or
transferee to agree to take and hold such securities subject to the restrictions and upon the
conditions specified in this Agreement.



     3. Restrictive Legend. Each certificate representing the Preferred Stock, the
Conversion Stock or any other securities issued in respect of such stock upon any stock split,
stock dividend, recapitalization, merger, or similar event shall (unless otherwise permitted by the
provisions of Section 4 below) be stamped or otherwise imprinted with legends in substantially the
following form (in addition to any legends required by agreement or by applicable state securities
laws):




THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “ACT”). SUCH SECURITIES MAY NOT BE TRANSFERRED UNLESS A
REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO SUCH TRANSFER OR IN THE
OPINION OF COUNSEL FOR THE COMPANY, SUCH TRANSFER MAY BE MADE PURSUANT TO RULE 144
OR REGISTRATION UNDER THE ACT IS OTHERWISE UNNECESSARY IN ORDER FOR SUCH TRANSFER TO
COMPLY WITH THE ACT; PROVIDED THAT THE FOREGOING REQUIREMENT OF AN OPINION OF
COUNSEL IN THE ABSENCE OF REGISTRATION UNDER THE ACT SHALL NOT BE REQUIRED IF THE
TRANSFER IS MADE IN ACCORDANCE WITH EXEMPTIONS SPECIFIED IN THAT CERTAIN INVESTOR
RIGHTS AGREEMENT BY AND AMONG THE COMPANY AND CERTAIN HOLDERS OF STOCK OF THE
COMPANY





THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE SUBJECT TO A LOCKUP PERIOD OF UP
TO 180 DAYS FOLLOWING THE EFFECTIVE DATE OF THE FIRST UNDERWRITTEN REGISTRATION
STATEMENT OF THE COMPANY FILED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AS SET
FORTH IN AN AGREEMENT BETWEEN



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THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A
COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH
OBLIGATION IS BINDING ON TRANSFEREES OF THESE SHARES.



          Each Holder consents to the Company making a notation on its records and giving stop transfer
instructions to any transfer agent of its capital stock in order to implement the restrictions on
transfer established in this Agreement.




     4. Notice of Proposed Transfers. The holder of each certificate representing
Restricted Securities by acceptance thereof agrees to comply in all respects with the provisions of
this Section 4. Without in any way limiting the immediately preceding sentence, no sale,
assignment, transfer or pledge of Restricted Securities shall be made by any holder thereof to any
person unless such person shall first agree in writing to be bound by the restrictions of this
Agreement. Prior to any proposed sale, assignment, transfer or pledge of any Restricted
Securities, unless there is in effect a registration statement under the Securities Act covering
the proposed transfer, the holder thereof shall give written notice to the Company of such holder’s
intention to effect such transfer, sale, assignment or pledge. Each such notice shall describe the
manner and circumstances of the proposed transfer, sale, assignment or pledge in reasonable detail,
and, if reasonably requested by the Company in its sole determination, the holder shall also
provide, at such holder’s expense, either (i) a written opinion of legal counsel who shall be, and
whose legal opinion shall be, reasonably satisfactory to the Company addressed to the Company to
the effect that the proposed transfer of the Restricted Securities may be effected without
registration under the Securities Act, or (ii) a “no action” letter from the Commission to the
effect that the transfer of such securities without registration will not result in a
recommendation by the staff of the Commission that action be taken with respect thereto, whereupon
the holder of such Restricted Securities shall be entitled to transfer such Restricted Securities
in accordance with the terms of the notice delivered by the holder to the Company; provided,
however, that the Company shall not request an opinion of counsel or “no action” letter with
respect to (i) a transfer not involving a change in beneficial ownership, (ii) a transaction
involving the distribution without consideration of Restricted Securities by the holder to any
affiliate as such term is defined in Rule 12b-2 under the Exchange Act (an “Affiliate
Transfer”), (iii) a transaction involving the transfer without consideration of Restricted
Securities by an individual holder during such holder’s lifetime by way of gift or on death by will
or intestacy, (iv) a transfer by Siemens Venture Capital GmbH or any of its affiliates (each a
“Siemens Entity”) to another Siemens Entity so long as such transfer of Restricted
Securities may be legally effected without registration under the Securities Act, (v) a transfer by
Merrill Lynch Ventures L.P. 2001 or any of its affiliates (each a “Merrill Lynch Entity”)
to another Merrill Lynch Entity so long as such transfer of Restricted Securities may be legally
effected without registration under the Securities Act, or (vi) a transfer by Kaiser Foundation
Hospitals or Permanente Federation LLC or any of their affiliates (each a “Kaiser Permanente
Entity”) to another Kaiser Permanente Entity so long as such transfer of Restricted Securities
may be legally
effected without registration under the Securities Act. Each certificate evidencing the
Restricted Securities transferred as above provided shall bear, except if such transfer is made
pursuant to Rule 144, the appropriate restrictive legend set forth in Section 3 above, except that
such certificate shall not bear such restrictive legend if in the opinion of counsel for such
holder and counsel for the Company such legend is not required in order to establish compliance
with any



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provision of the Securities Act. Notwithstanding the foregoing, each holder of Restricted
Securities agrees that it will not request that a transfer of the Restricted Securities be made or
that the legend set forth in Section 3 be removed from the certificate representing the Restricted
Securities, solely in reliance on Rule 144(k), if as a result thereof the Company would be rendered
subject to the reporting requirements of the Exchange Act.



Notwithstanding this Section 4, any other provision of this Agreement or any other provision of any
other agreement among some or all of the parties hereto, so long as such transfer of Restricted
Securities may be legally effected without registration under the Securities Act, 3i Technology
Partners II LP and any 3i Related Party may, from time to time, transfer all or any portion of the
shares of capital stock of the Company that it owns to 3i Group plc or any affiliate of 3i Group
plc or any entity or vehicle including a partnership in which 3i Group plc and/or its affiliates
has a majority economic interest and which is managed by 3i Group plc or any of its affiliates
(each a “3i Related Party”).




     5. Registration.



          5.1 Requested Registration.




               (a) Request for Registration. In case the Company shall receive from an Initiating
Holder a written request that the Company effect any registration with respect to shares of
Registrable Securities, the Company will:



                    (i) Within three business days of receipt thereof, give written notice of the proposed
registration to all other Holders, (the “Registration Request Notice”).



                    (ii) If the Company receives participation interest from Holders holding at least 60% of the
then outstanding Registrable Securities no more than 15 days after sending the Registration Request
Notice, the Company shall, subject to the limitations of this Section 5.1, effect, as expeditiously
as reasonably possible, the registration under the Securities Act of all Registrable Securities
that the participating Holders request to be registered.



                    (iii) If any Initiating Holder intends to distribute the Registrable Securities covered by the
request by means of an underwriting, such Holder shall so advise the Company as a part of its
request made pursuant to this Section 5.1 or any request pursuant to Section 5.3 and the Company
shall include such information in the written notice referred to in Section 5.1(a)(i) or
Section 5.3(a), as applicable. In such event, the Company will as soon as practicable use
commercially reasonable efforts to effect such registration as part of a firm commitment
underwritten public offering with underwriters reasonably acceptable to a majority in interest of
the participating Initiating Holders and the Company (including, without limitation, appropriate
qualification under applicable state securities laws and appropriate compliance with applicable
regulations issued under the Securities Act and any other governmental requirements
or regulations) as may be so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Registrable Securities as are specified in such
request, together with all or such portion of the Registrable Securities of any Holder or Holders
joining in such request by delivering a written notice to such effect to the Company within ten
(10) days after the date of such written notice from the Company.



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                         Notwithstanding the foregoing, the Company shall not be obligated to take any action to effect
or complete any such registration pursuant to this Section 5.1:



                         (A) Prior to the earlier of (i) six (6) months after the effective date of the Company’s first
registered public offering of its Common Stock or (ii) December 27, 2008;



                         (B) Following the filing of, and for one hundred eighty (180) days immediately following the
effective date of, a registration statement for securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to an employee benefit plan),
provided that the Company is actively employing in good faith commercially reasonable efforts to
cause such registration statement to become effective;



                         (C) After the Company has effected three (3) registrations of all of the Registrable
Securities requested to be registered pursuant to this Section 5.1(a) (and not subsequently
voluntarily withdrawn by the Holder thereof unless the withdrawal is based upon material adverse
information relating to the Company that is different from the information known or available (upon
request from the Company or otherwise) to the participating Initiating Holders at the time of their
request for registration) and such registrations have been declared or ordered effective;



                         (D) If an Initiating Holder is able to request a registration on Form S-3 pursuant to
Section 5.3 hereof;



                         (E) Within six (6) months after the Company has effected such a registration pursuant to this
Section 5.1(a), and such registration has been declared or ordered effective;



                         (F) If the Company shall furnish to the participating Initiating Holders a certificate signed
by the Chairman of the Board of Directors and an officer of the Company (i) giving notice of its
bona fide intention to effect the filing of a registration statement with the Commission within the
next thirty (30) days, or (ii) stating that in the good faith judgment of the Board of Directors it
would be seriously detrimental to the Company or its stockholders for a registration statement to
be filed in the near future. In such case, the Company’s obligation to use its commercially
reasonable efforts to register, qualify or comply under this Section 5.1(a) shall be deferred for a
period not to exceed ninety (90) days from the receipt of the request to file such registration by
such Initiating Holder or Holders; provided that the Company may not exercise this deferral right
more than once in any twelve (12) month period; provided, further that the Company may not exercise
this deferral right more than twice altogether; or



                         (G) If the aggregate price to the public of all Registrable Securities proposed to be sold in
such offering is less than $3,000,000.



                         Subject to the foregoing clauses (A) through (F), the Company shall file a registration
statement covering the Registrable Securities so requested to be



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registered as soon as practicable
after receipt of a request of the Initiating Holder, but in no event more than sixty (60) days from
its receipt of such request.




               (b) Underwriting. In the event of a registration pursuant to Section 5.1, the Company
shall advise the Holders as part of the notice given pursuant to Section 5.1(a)(i) that the right
of any Holder to registration pursuant to Section 5.1 shall be conditioned upon such Holder’s
participation in the underwriting arrangements required by this Section 5.1, and the inclusion of
such Holder’s Registrable Securities in the underwriting to the extent requested shall be limited
to the extent provided herein.



                    The Company shall, together with all Holders proposing to distribute their securities through
such underwriting, enter into an underwriting agreement in customary form with the lead managing
underwriter selected for such underwriting by the Company, but subject to the reasonable approval
of the holders of a majority in interest of the Registrable Securities participating in such
registration. Notwithstanding any other provision of this Section 5.1, if the managing underwriter
determines that marketing factors require a limitation of the number of shares to be underwritten,
then the Company shall so advise all Holders of Registrable Securities which would otherwise be
underwritten pursuant hereto, and the number of shares that may be included in the underwriting
shall be allocated to the Holders of such Registrable Securities on a pro rata basis based on the
number of Registrable Securities sought to be registered by all such Holders (including any
Initiating Holders); provided, however, that the number of shares of Registrable Securities to be
included in such underwriting and registration shall not be reduced unless all other securities of
the Company are first entirely excluded from the underwriting and registration. The Company shall
so advise all Holders requesting to be included in the registration and underwriting, and the
number of shares of Registrable Securities that may be included in the registration and
underwriting shall be allocated among all Holders requesting to be included in the registration and
underwriting in proportion, as nearly as practicable, to the respective amounts of Registrable
Securities sought to be registered by them. To facilitate the allocation of shares in accordance
with the above provisions, the Company or the underwriters may round the number of shares allocated
to any Holder to the nearest 100 shares. If any Holder of Registrable Securities disapproves of
the terms of the underwriting, such person may elect to withdraw therefrom by written notice to the
Company. For any Holder which is a partnership or corporation, the partners, retired partners and
shareholders of such Holder, or the estates and family members of any such partners and retired
partners and any trusts for the benefit of any of the foregoing persons, shall be deemed to be a
single “Holder,” and any pro rata reduction with respect to such “Holder” shall be based upon the
aggregate amount of shares carrying registration rights owned by all entities and individuals
included in such “Holder,” as defined in this sentence.



          5.2 Company Registration.




               (a) Notice of Registration. If at any time or from time to time the Company shall
determine to register any of its equity securities (including as a result of any demand
registration), either for its own account or the account of a Holder or other holders, other than
(i) a registration relating solely to employee benefit plans or (ii) a registration relating solely
to a Rule 145 transaction, the Company will:



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                    (i) promptly give to each Holder written notice thereof but not less than fifteen (15) days
prior to filing of such registration statement; and



                    (ii) include in such registration (and any related qualifications including compliance with
applicable state securities laws), and in any underwriting involved therein, all the Registrable
Securities specified in a written request or requests, made within twenty (20) days after the date
of such written notice from the Company, by any Holder. If a Holder decides not to include all of
its Registrable Securities in any registration statement thereafter filed by the Company, such
Holder shall nevertheless continue to have the right to include any Registrable Securities in any
subsequent registration statement or registration statements as may be filed by the Company with
respect to offerings of its securities, all upon the terms and conditions set forth herein.



               (b) Underwriting. If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so advise the Holders as a
part of the written notice given pursuant to Section 5.2(a)(i). In such event, the right of any
Holder to registration pursuant to Section 5.2 shall be conditioned upon such Holder’s
participation in such underwriting, and the inclusion of Registrable Securities in the underwriting
shall be limited to the extent provided herein.



                    All Holders proposing to distribute their securities through such underwriting shall (together
with the Company and the other Holders distributing their securities through such underwriting)
enter into an underwriting agreement in customary form with the managing underwriter selected for
such underwriting by the Company. Notwithstanding any other provision of this Section 5.2, if the
managing underwriter determines that marketing factors require a limitation of the number of shares
to be underwritten, the number of shares that may be included in the underwriting shall be
allocated, first, to the Holders of Registrable Securities requesting the Company to effectuate a
registration statement pursuant to Section 5.2 hereof on a pro rata basis based on the total number
of Registrable Securities sought to be registered by the Holders; second, to the Holders of
Registrable Securities who did not make a request on the Company to effectuate a registration
statement pursuant to Section 5.2 hereof but who possess registration rights pursuant to this
Agreement; and third, to any stockholder of the Company (other than a Holder). The managing
underwriter may limit in whole or in part the Registrable Securities to be included in such
registration (i) in the case of the Company’s initial public offering, to zero, and (ii) in the
case of any other offering pursuant to this Section 5.2, to an amount no less than thirty percent
(30%) of all shares to be included in such offering; provided, however, that the number of shares
of Registrable Securities to be included in such underwriting shall not be reduced without the
written consent of at least a majority of the Registrable Securities proposed to be sold in the
underwriting and all other stockholder securities are first
entirely excluded from the underwriting. The Company shall so advise all Holders requesting
to be included in the registration and underwriting, and the number of shares of Registrable
Securities that may be included in the registration and underwriting shall be allocated among all
the Holders requesting to be included in the registration and underwriting in proportion, as nearly
as practicable, to the respective amounts of Registrable Securities sought to be included by them.
To facilitate the allocation of shares in accordance with the above provisions, the Company or the
underwriters may round the number of shares allocated to any Holder to the nearest 100 shares. If
any Holder disapproves of the terms of any such underwriting, such person may elect



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to withdraw
therefrom by written notice to the Company. For any Holder which is a partnership or corporation,
the partners, retired partners and shareholders of such Holder, or the estates and family members
of any such partners and retired partners and any trusts for the benefit of any of the foregoing
persons, shall be deemed to be a single “Holder,” and any pro rata reduction with respect to such
“Holder” shall be based upon the aggregate amount of shares carrying registration rights owned by
all entities and individuals included in such “Holder,” as defined in this sentence.



               (c) Right to Terminate Registration. The Company shall have the right to terminate or
withdraw any registration initiated by it under this Section 5.2 prior to the effectiveness of such
registration whether or not any Holder has elected to include securities in such registration. The
Registration Expenses of such withdrawn registration shall be borne by the Company in accordance
with Section 5.4 hereof.



          5.3 Registration on Form S-3.




               (a) In case the Company shall receive from any Initiating Holder a written request that the
Company file a registration statement on Form S-3 (or any successor form to Form S-3), or any
similar short form registration statement, for a public offering of shares of the Registrable
Securities the aggregate price to the public of which would exceed $3,000,000, and the Company is a
registrant entitled to use Form S-3 to register the Registrable Securities for such an offering,
the Company will promptly give written notice of the proposed registration, and any related
qualification and compliance, to all Holders of Registrable Securities and as soon as practicable
use commercially reasonable efforts to effect such registration and all such qualifications and
compliances as may be so requested and as would permit or facilitate the sale and distribution of
all or such portion of such Holder’s or Holders’ Registrable Securities as are specified in such
request, together with all or such portions of the Registrable Securities of any other Holder or
Holders joining in such request as are specified in a written request given within fifteen (15)
days after receipt of such written notice from the Company. If such offer is to be an underwritten
offer, the underwriters must be reasonably acceptable to both the Initiating Holder(s) and the
Company. The Company shall inform the other Holders of the proposed registration and offer them
the opportunity to participate. In the event the registration is proposed to be part of a firm
commitment underwritten public offering, the substantive provisions of Section 5.1(b) shall be
applicable to each such registration initiated under this Section 5.3. Registrations effected
pursuant to this Section 5.3 shall not be counted as demands for registration or registrations
effected pursuant to Section 5.1 or 5.2, respectively.



               (b) Notwithstanding the foregoing, the Company shall not be obligated to take any action
pursuant to this Section 5.3:



                    (i) Following the filing of, and for 180 days immediately following the effective date of, any
registration statement pertaining to securities of the Company (other than a registration of
securities in a Rule 145 transaction or with respect to an employee benefit plan), provided that
the Company is actively employing in good faith commercially reasonable efforts to cause such
registration statement to become effective;



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                    (ii) (ii) If the Company shall have caused two registration statements to become effective
pursuant to this Section 5.3 in the immediately preceding twelve month period; or



                    (iii) If the Company shall furnish to the Initiating Holder(s) a certificate signed by the
Chairman of the Board of Directors and an officer of the Company (i) giving notice of its bona fide
intention to effect the filing of a registration statement with the Commission within the next
thirty (30) days, or (ii) stating that, in the good faith judgment of the Board of Directors, it
would be seriously detrimental to the Company or its stockholders for a registration statement to
be filed in the near future, then the Company’s obligation to use its commercially reasonable
efforts to file a registration statement shall be deferred for a period not to exceed ninety (90)
days from the receipt of the request to file such registration by such Initiating Holder or
Holders, provided that the Company may not exercise this deferral right more than once in any
twelve (12) month period.



          5.4 Expenses of Registration. All Registration Expenses incurred in connection with
(i) three (3) registrations pursuant to Section 5.1, (ii) all registrations pursuant to
Section 5.2, and (iii) all registrations pursuant to Section 5.3 shall be borne by the Company.
All Selling Expenses incurred in connection with any registrations hereunder shall be borne by the
holders of the securities so registered pro rata on the basis of the number of shares so
registered. Notwithstanding the foregoing, in the event that any Initiating Holders cause the
Company to begin a registration pursuant to Section 5.1, and the request for such registration is
subsequently withdrawn by the Initiating Holders or is otherwise not successfully completed due to
no fault of the Company, all Holders shall be deemed to have forfeited their right to one
registration under Section 5.1 unless (i) the participating Initiating Holders pay for, or
reimburse the Company for, the Registration Expenses incurred in connection with such withdrawn or
incomplete registration or (ii) such withdrawal is based upon material adverse information relating
to the Company that is different from the information known or available (upon request from the
Company or otherwise) to the participating Initiating Holders at the time of their request for
registration. Unless otherwise stated, all Selling Expenses relating to securities registered on
behalf of the Holders and all other registration expenses shall be borne by the Holders of such
securities pro rata on the basis of the number of shares so registered or proposed to be so
registered.




          5.5 Registration Procedures. In the case of each registration effected by the Company
pursuant to this Agreement, the Company will keep each Holder advised in writing as to the
initiation of such registration and as to the completion thereof. The Company will:




               (a) Prepare and file with the Commission a registration statement with respect to such
Registrable Securities and such amendments and supplements as may be necessary and use commercially
reasonable efforts to cause such registration statement to become and remain effective for at least
ninety (90) days or until the distribution described in the
registration statement has been completed, whichever first occurs; provided, however, that
such ninety (90)-day period shall be extended for a period of time equal to the period the Holder
refrains from selling any securities included in such registration at the request of an underwriter
of Common Stock (or other securities) of the Company;



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               (b) Prepare and file with the Commission such amendments and supplements to such registration
statement and the prospectus used in connection with such registration statement as may be
necessary to comply with the provisions of the Securities Act with respect to the disposition of
all securities covered by such registration statement for the period set forth in paragraph (a)
above;



               (c) Furnish to the Holders participating in such registration and to the underwriters of the
securities being registered such reasonable number of copies of the registration statement,
preliminary prospectus, final prospectus and such other documents as they may reasonably request in
order to facilitate the disposition of Registrable Securities owned by them or the public offering
of such securities;



               (d) Use its reasonable efforts to register and qualify the securities covered by such
registration statement under such other securities or Blue Sky laws of such jurisdictions as shall
be reasonably requested by the Holders; provided that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do business or to file a general
consent to service of process in any such states or jurisdictions;



               (e) In the event of any underwritten public offering, enter into and perform its obligations
under an underwriting agreement, in usual and customary form, with the managing underwriter(s) of
such offering. Each Holder participating in such underwriting shall also enter into and perform
its obligations under such an agreement;



               (f) Use its reasonable efforts to furnish, on the date that such Registrable Securities are
delivered to the underwriters for sale, if such securities are being sold through underwriters,
(i) an opinion, dated as of such date, of the counsel representing the Company for the purposes of
such registration, in form and substance as is customarily given to underwriters in an underwritten
public offering, addressed to the underwriters, and (ii) a letter dated as of such date, from the
independent certified public accountants of the Company, in form and substance as is customarily
given by independent certified public accountants to underwriters in an underwritten public
offering, addressed to the underwriters;



               (g) Notify each Holder of Registrable Securities covered by such registration statement at any
time when a prospectus relating thereto is required to be delivered under the Securities Act of the
happening of any event as a result of which the prospectus included in such registration statement,
as then in effect, includes an untrue statement of a material fact or omits to state a material
fact required to be stated therein or necessary to make the statements therein not misleading or
incomplete in the light of the circumstances then existing. The Company will use commercially
reasonable efforts to amend or supplement such prospectus as may be necessary so that, as
thereafter delivered to the purchasers of such shares, such prospectus shall not include an untrue
statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements therein not misleading
or incomplete in the light of the circumstances then existing;



               (h) Use its commercially reasonable efforts to cause all such Registrable Securities
registered pursuant hereunder to be listed on each securities exchange on which similar securities
issued by the Company are then listed; and



11









 





               (i) In the case of registrations pursuant to Sections 5.1 and 5.3, instruct its senior
management to use their commercially reasonable efforts to assist in the marketing of the shares to
be registered.



          5.6 Indemnification.




               (a) To the extent permitted by law, the Company will indemnify and hold harmless each Holder,
each of its officers, directors, members and partners, any underwriter (as defined in the
Securities Act) for such Holder and each person controlling such Holder or underwriter within the
meaning of Section 15 of the Securities Act, with respect to which registration has been effected
pursuant to this Agreement, against all expenses, claims, losses, damages or liabilities (joint or
several) (or actions in respect thereof), including any of the foregoing incurred in settlement of
any litigation, commenced or threatened, arising out of or based upon any of the following
statements, omissions or violations (collectively a “Violation”) by the Company: (i) any
untrue statement (or alleged untrue statement) of a material fact contained in any registration
statement, prospectus, offering circular or other document, or any amendment or supplement thereto,
incident to any such registration, (ii) 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, or (iii) any violation (or alleged violation) by the Company of the Securities Act, the
Exchange Act, state securities laws or any rule or regulation promulgated under such laws
applicable to the Company in connection with any such registration; and the Company will reimburse
each such Holder, each of its officers, directors, members and partners, any underwriter and each
person controlling such Holder for any legal and any other expenses reasonably incurred, as such
expenses are incurred, in connection with investigating, preparing or defending any such claim,
loss, damage, liability or action, provided that the Company will not be liable in any such case to
the extent that any such claim, loss, damage, liability or expense arises out of or is based upon a
Violation made in reliance upon and in conformity with written information furnished to the Company
by an instrument duly executed by such Holder or controlling person, and stated to be specifically
for use therein.



               (b) To the extent permitted by law, each Holder will, severally, and not jointly and
severally, if Registrable Securities held by such Holder are included in the securities as to which
such registration is being effected, indemnify the Company, each of its directors and officers,
each person who controls the Company within the meaning of Section 15 of the Securities Act, and
any other Holder selling securities under such registration statement, each of such Holder’s
officers directors, members and partners, and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, against all claims, losses, damages and liabilities
(or actions in respect thereof) arising out of or based upon any Violation, and will reimburse the
Company, such other Holders, and such directors, officers, persons, underwriters or control persons
for any legal or any other expenses reasonably incurred, as such
expenses are incurred, in connection with investigating or defending any such claim, loss,
damage, liability or action if it is judicially determined that there was such a Violation, but
only to the extent that such Violation occurs in reliance upon and strictly in conformity with
written information furnished to the Company by such Holder under an instrument duly executed by
such Holder and stated specifically for use in connection with such registration. Notwithstanding
the foregoing, the liability of each Holder under this Section 5.6(b) shall be limited in an amount
equal to the net proceeds from the offering received by such Holder, unless such liability arises



12









 




out of or is based on willful misconduct or fraud by such Holder. In addition, notwithstanding the
foregoing, the indemnity agreement contained in this Section 5.6(b) shall not apply to amounts paid
in settlement of any such loss, claim, damage, liability or action if such settlement is effected
without the consent of the Holder, which consent shall not be unreasonably withheld. Furthermore,
no Holder selling securities under a registration statement shall be liable in any case to the
extent that, prior to the filing of any such registration statement or prospectus or amendment
thereof or supplement thereto, such Holder selling securities has furnished in writing to the
Company information expressly for use in such registration statement or prospectus or any amendment
thereof or supplement thereto which corrected or made not misleading information previously
furnished to the Company.




               (c) Each party entitled to indemnification under this Section 5.6 (the “Indemnified
Party”) shall give written notice to the party required to provide indemnification (the
“Indemnifying Party”) promptly after such Indemnified Party has actual knowledge of any
claim as to which indemnity may be sought, and shall permit the Indemnifying Party to assume the
defense of any such claim or any litigation resulting therefrom, provided that counsel for the
Indemnifying Party, who shall conduct the defense of such claim or litigation, shall be approved by
the Indemnified Party (whose approval shall not unreasonably be withheld), and the Indemnified
Party may participate in such defense at such party’s expense, and provided further that the
failure of any Indemnified Party to give notice as provided herein shall not relieve the
Indemnifying Party of its obligations under this Agreement unless the failure to give such notice
is materially prejudicial to an Indemnifying Party’s ability to defend such action, and provided
further that the Indemnifying Party shall not assume the defense for matters as to which there is a
conflict of interest or there are separate and different defenses. No Indemnifying Party, in the
defense of any such claim or litigation, shall, except with the consent of each Indemnified Party
(whose consent shall not be unreasonably withheld), consent to entry of any judgment or enter into
any settlement which does not include as an unconditional term thereof the giving by the claimant
or plaintiff to such Indemnified Party of a release from all liability in respect to such claim or
litigation.



               (d) If the indemnification provided for in this Section 5.6 is held by a court of competent
jurisdiction to be unavailable to an Indemnified Party with respect to any loss, liability, claim,
damage or expense referred to therein, then the Indemnifying Party, in lieu of indemnifying such
Indemnified Party hereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such Indemnified Party as a result of such loss, liability, claim, damage
or expense in such proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection with the Violation(s)
that resulted in such loss, liability, claim, damage or expense as well as any other relevant
equitable considerations. The relative fault of the Indemnifying Party and of the Indemnified Party
shall be determined by a court of law by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the omission to
state a material fact relates to information supplied by the Indemnifying Party or by the
Indemnified Party and the parties’ relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission provided that in no event shall any
contribution by a Holder hereunder exceed the net proceeds from the offering received by such
Holder.



13









 





               (e) Notwithstanding the foregoing, to the extent that the provisions on indemnification and
contribution contained in the underwriting agreement entered into in connection with an
underwritten public offering are in conflict with the foregoing provisions, the provisions in the
underwriting agreement shall control.



               (f) The obligations of the Company and Holders under this Section 5.6 shall survive completion
of any offering of Registrable Securities in a registration statement and the termination of this
Agreement.



          5.7 Information by Holder. The Holder or Holders of Registrable Securities included
in any registration shall furnish to the Company such information regarding such Holder or Holders,
the Registrable Securities held by them and the distribution proposed by such Holder or Holders as
the Company may reasonably request in writing and as shall be reasonably required in connection
with any registration referred to in this Agreement.




          5.8 Termination of Registration Rights. The rights granted pursuant to Sections 5.1,
5.2 and 5.3 of this Agreement shall terminate as to any Holder upon the earlier of (i) the date
five years after the effective date of the Company’s initial public offering of its securities
pursuant to a registration statement filed under the Securities Act of 1933, as amended or (ii) the
closing of a Liquidation Event, or (iii) if the Company’s Common Stock is then trading on a
nationally recognized exchange or the Nasdaq National Market, the date such Holder is able to
immediately sell all shares of Registrable Securities held or entitled to be held upon conversion
by such Holder under Rule 144 during any ninety (90)-day period.




          5.9 Assignment of Registration Rights. The rights to cause the Company to register
Registrable Securities pursuant to this Section 5 may be assigned (a) by a Holder to a transferee
or assignee of Registrable Securities which is a subsidiary, parent, general partner, limited
partner, retired partner, member or retired member, stockholder or affiliate of a Holder, (b) by a
Holder to a transferee or assignee which is a Holder’s family member or trust for the benefit of an
individual Holder, (c) by any 3i Related Party to any other 3i Related Party, or (d) by a Holder to
a transferee or assignee which acquires at least one percent (1%) of the Company’s outstanding
shares (on a fully-diluted basis); provided, however, (i) the transferor shall, within ten (10)
days after such transfer, furnish to the Company written notice of the name and address of such
transferee or assignee and the securities with respect to which such registration rights are being
assigned, (ii) such transferee or assignee shall agree to be subject to all restrictions set forth
in this Agreement and (iii) the transferee or assignee is not a person deemed by the Board of
Directors, in its reasonable judgment, to be a competitor or potential competitor of the Company.




          5.10 Amendment of Registration Rights. Any provision of this Section 5 may be amended
and the observance thereof may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written consent of the
Company and the Holders of at least a majority of the Registrable Securities then outstanding. Any
amendment or waiver effected in accordance with this Section 5.10 shall be binding upon each Holder
and the Company. By acceptance of any benefits under this Section 5, Holders of Registrable
Securities hereby agree to be bound by the provisions hereunder. For purposes of




14









 







this Section
5.10, the consent of 3i Technology Partners II LP shall also serve as the consent of any of its
affiliated entities that are Holders hereunder.




          5.11 Limitation on Subsequent Registration Rights. Other than as provided in
Section 10.1, after the date of this Agreement, the Company shall not, without the prior written
consent of the Holders of at least a majority of the Registrable Securities then outstanding, enter
into any agreement with any holder or prospective holder of any securities of the Company that
would grant such holder registration rights senior or pari passu to those granted to the Holders
hereunder, except for pari passu piggyback registration rights approved by the Company’s Board of
Directors or approved by the Holders holding a majority of the Registrable Securities that are
granted for securities issuable upon the exercise of warrants issued in connection with debt
financing by banks or equipment lessors. For purposes of this Section 5.11, the consent of 3i
Technology Partners II, LP shall also serve as the consent of any of its affiliated entities that
are Holders hereunder.




          5.12 Rule 144 Reporting. With a view to making available to the Holders the benefits
of certain rules and regulations of the Commission which may permit the sale of the Registrable
Securities to the public without registration, the Company agrees to use its commercially
reasonable efforts to:




               (a) Make and keep public information available, as those terms are understood and defined in
Commission Rule 144 or any similar or analogous rule promulgated under the Securities Act, at all
times after the effective date of the first registration filed by the Company for an offering of
its securities to the general public;



               (b) File with the Commission, in a timely manner, all reports and other documents required of
the Company under the Exchange Act; and



               (c) So long as a Major Investor owns any Registrable Securities, to the extent permitted by
law and the Commission, furnish to such Major Investor forthwith upon request: a written statement
by the Company as to its compliance with the reporting requirements of said Rule 144 of the
Securities Act, and of the Exchange Act (at any time after it has become subject to such reporting
requirements); and such other reports and documents as a Holder may reasonably request in availing
itself of any rule or regulation of the Commission allowing it to sell any such securities without
registration.



     6. Financial Information Rights and Inspection Rights.



          6.1 The Company will provide the following documents to each Major Investor:




               (a) as soon as practicable, but in any event within ninety (90) days after the end of each
fiscal year of the Company commencing with the fiscal year ending
December 31, 2006 a consolidated balance sheet as of the end of such fiscal year, and
statements of operations and cash flow for such fiscal year. Such year-end financial reports shall
be in reasonable detail, prepared in accordance with generally accepted accounting principles
(“GAAP”), consistently applied, all in reasonable detail and audited and certified by
independent public accountants of recognized national standing selected by the Company;



15









 





               (b) as soon as practicable, but in any event within thirty (30) days of the end of each
quarter (except the last quarter of the fiscal year), an unaudited statement of operations and
consolidated balance sheet for and as of the end of such quarter, in reasonable detail and prepared
in accordance with GAAP, subject to year end audit adjustments and the absence of footnotes;



               (c) as soon as practicable, but in any event within thirty (30) days of the end of each month
(except the last month of the fiscal year), an unaudited statement of operations and consolidated
balance sheet for and as of the end of such month, in reasonable detail and prepared in accordance
with GAAP, subject to year end audit adjustments and the absence of footnotes;



               (d) as soon as practicable, but in any event within thirty (30) days of the end of each
quarter (except the last quarter of the fiscal year), an updated capitalization table of the
Company, certified by the Company’s chief financial officer; and



               (e) as soon as practicable, but in any event at least thirty (30) days prior to the end of
each fiscal year, a budget and business plan for the next fiscal year, prepared on a monthly basis,
including consolidated balance sheets, consolidated income statements, and consolidated statements
of cash flows for such months and, as soon as prepared, any other budgets or revised budgets
prepared by the Company.



          6.2 The Company will maintain true books and records of account in which full and correct
entries will be made of all its business transactions pursuant to a system of accounting
established and administered in accordance with generally accepted accounting principles
consistently applied, and will set aside on its books all such proper accruals and reserves as
shall be required under generally accepted accounting principles consistently applied.




          6.3 For purposes of determining the minimum holdings pursuant to this Section 6, any Investor
which is a partnership or limited liability company shall be deemed to hold any Preferred Stock
originally purchased by such Investor and subsequently distributed to constituent partners or
members of such Investor, but which has not been resold by such partners or members. If the
partnership or limited liability company is still in existence, the Company may satisfy any
obligation to distribute reports to individual partners of the partnership or members of a limited
liability company by delivering a single copy of each report to the partnership or limited
liability company as agent for the constituent partners or members.




          6.4 Each Major Investor shall, at such Major Investor’s expense, have the right to visit and
inspect the Company’s properties, to examine the Company’s books of account and other records, to
make copies or extracts therefrom and to discuss the Company’s affairs, finances and accounts with
its officers, management employees and independent accountants, all
at such reasonable times and as often as such Major Investor may reasonably request, and the
Company will provide all information reasonably requested by such Major Investors in the form and
manner requested not later than 72 hours following such request.




          6.5 Each Investor or transferee of rights under this Section 6 acknowledges and agrees that
any information obtained pursuant to this Section 6 which may be considered




16









 







nonpublic information
will be maintained in confidence by such Investor or transferee and will not be utilized by such
Investor or transferee in connection with purchases or sales of the Company’s securities except in
compliance with applicable state and federal securities laws.




          6.6 Notwithstanding the foregoing, the Company shall not be required to comply with any
provision of this Section 6 in respect of any Major Investor whom the Board of Directors of the
Company reasonably determines to be a competitor of the Company or an officer, employee, director
or holder of more than ten percent (10%) of the stock of a competitor.




          6.7 The covenants of the Company set forth in this Section 6 herein shall terminate and be of
no further force or effect upon the closing of (i) a Qualified Initial Public Offering; (ii) the
first date on which the Company is obligated to register any class of its securities under the
Securities Exchange Act of 1934; or (iii) a Liquidation Event.




     7. Lockup Agreement. Each Investor, Holder and transferee hereby agrees that, in
connection with the underwritten registration of the initial offering of any securities of the
Company under the Securities Act for the account of the Company, if so requested by the Company or
any representative of the underwriters (the “Managing Underwriter”), such Investor, Holder
or transferee shall not sell or otherwise transfer any securities of the Company (other than
securities acquired by such Investor, Holder or transferee in such offering) during the period
specified by the Company’s Board of Directors at the request of the Managing Underwriter (the
“Market Standoff Period”), with such period not to exceed one hundred eighty (180) days
following the effective date of a registration statement of the Company filed under the Securities
Act; provided however that such 180 day period may be extended to the extent necessary to permit
any managing underwriter to comply with NASD Rule 2711(f)(4)); and provided further that all
officers and directors of the Company and holders of at least one percent (1%) of the Company’s
voting securities enter into similar agreements. The foregoing provisions of this Section 7 shall
apply only to the Company’s initial offering of equity securities to be traded on the Nasdaq Stock
Market’s National Market, the New York Stock Exchange or another comparable U.S. exchange or
marketplace, and shall not apply to the sale of any shares to an underwriter pursuant to an
underwriting agreement. Notwithstanding the foregoing, a Holder may, during such period following
the effective date of a registration of the Company filed under the Securities Act, transfer Common
Stock (or other securities) of the Company to a subsidiary, parent, general partner, limited
partner, retired partner, member or retired member, or affiliate of such Holder, provided that such
transferee agrees to be bound to the remaining stand off period described in this Section 7. The
Company may impose stop-transfer instructions with respect to securities subject to the foregoing
restrictions until the end of such Market Standoff Period. The Company shall use commercially
reasonable efforts to place similar contractual lockup restrictions on all capital stock issued now
or hereafter to officers, directors, employees and consultants of the Company and holders of
registration rights with respect to capital stock of the Company. In the event that the Managing
Underwriter waives, terminates or modifies these
restrictions in whole or in part, then such waiver, termination or modification shall be
allocated among all Major Investors, pro rata based on the number of shares of Registrable
Securities then held by such Major Investors.



17









 





     8. Right of First Refusal.



          8.1 The Company hereby grants to each Major Investor the right of first refusal to purchase
its Pro Rata Share of New Securities (as defined in this Section 8) which the Company may, from
time to time, propose to sell and issue. A “Pro Rata Share,” for purposes of this right of
first refusal, equals the proportion that the total number of shares of Common Stock (including all
shares of Common Stock issuable upon exercise or conversion of all then outstanding securities
directly or indirectly exercisable for and/or convertible into Common Stock immediately prior to
the issuance of the New Securities) (as defined below) held by the Major Investor, immediately
prior to the issuance of such New Securities bears to the sum of the total number of shares of
Common Stock then outstanding plus the number of shares of Common Stock issuable upon exercise or
conversion of all then outstanding securities directly or indirectly exercisable for and/or
convertible into Common Stock immediately prior to the issuance of the New Securities. Each Major
Investor shall have a right of over-allotment such that if any Major Investor fails to exercise its
rights hereunder to purchase its full Pro Rata Share of New Securities, the other Major Investors
may purchase the unsubscribed portion on a pro rata basis within twenty (20) days from the date
such Major Investors receive notice from the Company that such non-purchasing Major Investor fails
to exercise fully its right hereunder to purchase its Pro Rata Share of New Securities.




          8.2 Except as set forth below, “New Securities” shall mean any shares of capital stock
of the Company, including Common Stock and any series of preferred stock, whether now authorized or
not, and rights, options or warrants to purchase said shares of Common Stock or preferred stock,
and securities of any type whatsoever that are, or may become, convertible into or exchangeable for
said shares of Common Stock or preferred stock. Notwithstanding the foregoing, “New Securities”
does not include stock issued or issuable: (i) upon conversion of shares
of Preferred Stock; (ii) to employees, consultants, or directors pursuant to stock option, stock
grant, stock purchase, or similar plans and arrangements approved by the Board of Directors
(including the approval of at least two of the three Preferred Directors (as defined in Article
Four, Section 5(b) of the Company’s Amended and Restated Certificate of Incorporation, as amended
from time to time) (the “Preferred Directors”), including the exercise of options
thereunder; (iii) to equipment lessors, banks, financial institutions or similar entities in a
transaction approved by the Board of Directors (including the approval of at least two of the three
Preferred Directors), the principal purpose of which is other than the raising of equity financing;
(iv) as a dividend or other distribution; (v) in a merger or acquisition that is approved by the
Board of Directors (including the approval of at least two of the three Preferred Directors),
(vi) upon exercise or conversion of securities with respect to which the holders of Preferred Stock
previously had an opportunity to exercise the right of first refusal pursuant to this Section 8 or
that were outstanding as of the date of the Initial Closing (as defined in the Purchase Agreement)
or (vii) if the Holders of at least 60% of the Registrable Securities then outstanding agree in
writing that such shares shall not constitute New Securities.




          8.3 In the event the Company proposes to undertake an issuance of New Securities, it shall
give each Major Investor written notice of its intention, describing the amount and type of New
Securities, and the price and terms upon which the Company proposes to issue the same. Each Major
Investor shall have twenty (20) days from the date of receipt of any such notice to agree to
purchase up to its respective Pro Rata Share of such New Securities for the




18









 







price and upon the
terms specified in the notice by giving written notice to the Company and stating therein the
quantity of New Securities to be purchased.




          8.4 In the event the Major Investors fail to exercise fully the right of first refusal within
said twenty (20) day period and after the expiration of the twenty (20) day period for the exercise
of the over-allotment provisions of Section 8.1, the Company shall have ninety (90) 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 sixty (60) days from the date of said agreement) to sell the New
Securities respecting which the Major Investors’ right of first refusal option set forth in this
Section 8 was not fully exercised, at a price and upon terms no more favorable to the purchasers
thereof than specified in the Company’s notice to Major Investors pursuant to Section 8.3. In the
event the Company has not sold within said ninety (90) day period or entered into an agreement to
sell the New Securities within said ninety (90) day period (or sold and issued New Securities in
accordance with the foregoing within sixty (60) days from the date of said agreement), the Company
shall not thereafter issue or sell any New Securities, without first again offering such securities
to the Major Investors in the manner provided in this Section 8.




          8.5 The provisions of this Section 8 will terminate and be of no further force or effect upon
a Qualified Initial Public Offering.




          8.6 Each Holder hereby waives its right of first refusal under the Prior Agreement, including
any notice rights pertaining thereto, to purchase the shares of Series G Preferred Stock being
issued and sold pursuant to the Purchase Agreement. Such waiver shall be effective upon the
execution of this Agreement by the Company and the holders of at least a majority of the
Registrable Securities then outstanding.




          8.7 Transfer of Rights of First Refusal. The rights of first refusal of each Major
Investor under this Section 8 may be transferred to the same parties, subject to the same
restrictions, as any transfer of registration rights pursuant to Section 5.9.




     9. Covenants.



          9.1 Employment, Confidential Information and Invention Assignment Agreement. The
Company will maintain a policy requiring each employee or consultant of the Company or any of its
subsidiaries or affiliates with access to confidential information to enter into an Employment,
Confidential Information and Invention Assignment Agreement substantially in a form approved by the
Board of Directors, which agreement shall provide for, among other things, non-solicit obligations
as set forth therein.




          9.2 Reservation of Common Stock. The Company will at all times reserve and keep
available, solely for issuance and delivery upon the conversion of the Preferred Stock, all Common
Stock issuable from time to time upon such conversion.




          9.3 Observer Rights. Siemens Venture Capital GmbH, Kaiser Permanente (for purpose of
this Section 9.3 defined as Permanente Federation LLC and Kaiser Foundation Hospitals), CB Health
Ventures, Merrill Lynch Ventures, L.P. 2001 (“Merrill”) or any of its affiliates and
Ascension Health and Montagu Newhall Global Partners, L.P. shall each have the




19









 







right to designate
one person to attend (in person or by telephone and at such person’s own expense) meetings (whether
such meetings are telephonic or in-person) of the Company’s Board of Directors as a non-voting
observer and to receive all information as and when distributed to members of the Board of
Directors, provided, however, that the Company reserves the right to exclude each such observer
from access to any material or meeting or portion thereof if the Company believes that such
exclusion is reasonably necessary to preserve the attorney-client privilege, to protect
confidential proprietary information or for other similar reasons. The foregoing rights are
referred to herein as “Observer Rights.” In the event that the director designated by
Draper Fisher Jurvetson ePlanet Ventures L.P. (Cayman Limited Partnership) or any of its affiliates
(“DFJ”) is not an employee of DFJ or no director is designated by DFJ, DFJ shall also have
Observer Rights. Each of the parties hereto agrees that, notwithstanding any agreement to the
contrary entered into before the date hereof, the Observer Rights set forth in this paragraph shall
be the only such rights that such parties will be entitled to, and that all such agreements are
hereby amended to the extent necessary to make the rights granted thereunder consistent with and
not in excess of the Observer Rights such party may have under this Agreement.




          9.4 D&O Insurance. The Company will maintain in full force and effect Directors and
Officers insurance with terms and conditions (including coverage limits) acceptable to the
Company’s Board of Directors. In the event that all or substantially all of the business or assets
of the Company or any of its subsidiaries is sold, whether by merger, consolidation, sale of assets
or securities or otherwise, in one transaction or a series of transactions, then the Company shall,
in each case, take action to ensure that the successors and assigns of the Company or such
subsidiary assume the obligations set forth in this Section 9.4. The provisions of this Section
9.4 shall apply to each of the successors and assigns of the Company and each subsidiary.




          9.5 Board Approval. So long as at least 20% of the Preferred Stock ever issued
remains outstanding, the Company will not take any of the following actions without the prior
approval of the Board of Directors, including at least two of the three Preferred Directors:




               (a) Make any loan or advance to, or own any stock or other securities of, any subsidiary or
other corporation, partnership, or other entity unless it is wholly owned by the Company;



               (b) Make any direct or indirect loan or advance to any person, including, any employee or
director, except advances and similar expenditures in the ordinary course of business or under the
terms of an employee stock option plan approved by the Board of Directors;



               (c) Guarantee any indebtedness, obligation or liability except for trade accounts of the
Company or any subsidiary arising from the ordinary course of business;



               (d) Make any investment other than investments in prime commercial paper, money market funds,
certificates of deposit in any United States bank having a net worth in excess of $100,000,000 or
obligations issued or guaranteed by the United States of America, in each case having a maturity
not in excess of two years;



20









 





               (e) Incur any indebtedness, obligation or liability in excess of $500,000 in the aggregate
that is not already included in a Board approved budget, other than trade credit incurred in the
ordinary course of business;



               (f) Enter into or be a party to any transaction with any director, officer, or employee of the
Company or any “associate” (as defined in Rule 12b-2 promulgated under the Securities Exchange Act
of 1934, as amended) of any such person except transactions resulting in payments to or by the
Company in an amount less than $60,000 per year, or transactions made in the ordinary course of
business and pursuant to reasonable requirements of the Company’s business and upon fair and
reasonable terms that are approved by a majority of the Board;



               (g) Hire, fire, or change the compensation of any of the executive officers, including
approving any option plans;



               (h) Change the principal business of the Company, enter into new lines of business, or exit
the current line of business of the Company;



               (i) Sell, transfer, license, pledge, or encumber technology or intellectual property of the
Company, other than licenses granted in the ordinary course of business;



               (j) Approve the Company’s annual operating plan and budget;



               (k) Make any capital expenditure in excess of $2,000,000 not included in the Company’s annual
operating plan and budget approved as set forth above;



               (l) Grant any stock option, unless approved by a duly authorized committee of the Board of
Directors; or



               (m) Establish or invest in any joint venture or strategic alliance.



          9.6 Board Meetings; Committees. The Company will hold a meeting of its Board of
Directors at least once every twelve weeks unless otherwise agreed to by the Company’s Board of
Directors, until the Board of Directors determines that is advisable to hold such meetings at some
other interval. Unless such directors shall decline to serve, any committee constituted by the
Board shall include at least one Investor Director.




          9.7 Directors’ Liability and Indemnification. The Company’s Certificate of
Incorporation and Bylaws shall provide (a) for elimination of the liability of directors to the
maximum extent permitted by law and (b) for indemnification of directors for acts on behalf of
the Company to the maximum extent permitted by law.




          9.8 Insurance. The Company shall obtain key person life insurance with proceeds
payable to the Company in such amounts and on such terms and conditions as is approved by the
Board.




21









 








          9.9 Compliance with Laws. The Company shall comply, and shall cause all of its
subsidiaries to comply, with all applicable laws, rules, regulations and orders, noncompliance with
which could materially adversely affect its business or condition, financial or otherwise.




          9.10 Publicity. Neither the Company nor any of its affiliates shall use the name of
any Investor or any of its affiliates in any press release, notice or other publication without the
prior written consent of such Investor. Furthermore, no party to this Agreement shall, or shall
allow any of its affiliates, to make any public announcements or other public communications in
respect of this Agreement or the other Investment Agreements (as such term is defined in the
Purchase Agreement) or the transactions contemplated hereby or thereby without the prior written
consent of the Company and the holders of a majority of the Registrable Securities, which majority
shall include 3i Technology Partners II LP. The Company and each of its officers covenants with
each of 3i Technology Partners II, LP, 3i Group Investments LP, 3i Pan European Technology 2004-06
LP, and 3i Group Technology 2004-06 LP (collectively, the “3i Purchasers”) that the Company
and its officers will not without the prior written consent of 3i Technology Partners II LP (a) use
the name of any 3i Related Party in any context whatsoever, except as required by law; or (b) hold
themselves out as being associated with any 3i Related Party in any manner whatsoever. Nothing in
this Section 9.10 shall prohibit the Company or its officers from stating that the 3i Purchasers
are shareholders in the Company. For purposes of this Section 9.10, “3i Related Party”
means 3i Group plc or any affiliate of 3i Group plc or any entity or vehicle including a
partnership in which 3i Group plc and/or its affiliate has a majority economic interest and which
is managed by 3i Group plc or any of its affiliates.




          9.11 Waiver of Conflicts. The Company acknowledges that the investment in the Company
being made by any Merrill Lynch Entity, and any subsequent investment in the Company by any Merrill
Lynch Entity after the date hereof, is being made notwithstanding any engagement, prior to or
subsequent to the date hereof, by the Company of any Merrill Lynch Entity as financial advisor,
agent or underwriter to the Company, and the Company waives any conflicts of interest that may
arise as a result thereof.




          9.12 Hold as Nominee. The Company acknowledges that any Investor may hold its
investment in the Company in nominee form so long as such an investor complies with state and
federal security laws.




          9.13 Disclosure. Subject to Section 9.10, any Investor may disclose its investment in
the Company and include the Company’s name and a brief non-confidential description of the
Company’s business in its securities offering, marketing, or partner disclosure or update
materials. Notwithstanding anything herein to the contrary, any party to this Agreement (and any
employee, representative, or other agent of any party to this Agreement)
may disclose to any and all persons, without limitation of any kind, the tax treatment and tax
structure of the transactions contemplated by this Agreement and all materials of any kind
(including opinions or other tax analyses) that are provided to it relating to such tax treatment
and tax structure; provided however, that such disclosure may only be made to the extent reasonably
necessary to comply with any applicable federal or state securities laws. For the purposes of the
foregoing sentence, (i) the “tax treatment” of a
transaction means the purported or claimed federal income tax treatment of the transaction,
and (ii) the “tax structure” of a




22









 







transaction means any fact that may be relevant to understanding the purported or claimed federal
income tax treatment of the transaction. Thus, for the avoidance of doubt, the parties acknowledge
and agree that the tax treatment and tax structure of any transaction does not include the name of
any party to a transaction or any sensitive business information (including, without limitation,
the name and other specific information about any party’s intellectual property or other
proprietary assets) unless such information may be related or relevant to the purported or claimed
federal income tax treatment of the transaction.



          9.14 Indemnification and Advancement.




               (a) The Company hereby agrees to hold harmless and indemnify the Investors, the Investors’
direct and indirect subsidiaries, affiliated entities and corporations, and each of their partners,
officers, directors, employees, stockholders, agents, and representatives (collectively, referred
to as the “Investor Indemnitees”) against any and all expenses (including attorneys’ fees),
damages, judgments, fines, amounts paid in settlements, or any other amounts that an Investor
Indemnitee incurs as a result of any claim or claims made against it in connection with any
threatened, pending or completed action, suit, arbitration, investigation or other proceeding
arising out of, or relating to the Investors’ actions in connection with the purchase by the
Investors of the Company’s Series C Preferred Stock, Series D Preferred Stock, Series E Preferred
Stock, Series F Preferred Stock or Series G Preferred Stock (a “Financing-Based Claim”);
provided, however, that no Investor Indemnitee shall be entitled to be held harmless or indemnified
by the Company for acts, conduct or omissions as to which there has been a final adjudication that
such Investor Indemnitee engaged in willful misconduct or fraud.



               (b) The Company shall reimburse, promptly following request therefor, all reasonable expenses
incurred by an Investor Indemnitee in connection with any threatened, pending or completed action,
suit, arbitration, investigation or other proceeding arising out of, or relating to, a
Financing-Based Claim, provided, however, that no Investor Indemnitee shall be entitled to
reimbursement in connection with acts, conduct or omissions as to which there has been a final
adjudication that such Investor Indemnitee engaged in willful misconduct or fraud.



               (c) The Company’s indemnity obligations set forth above are subject to the Investors providing
prompt written notice of a claim to the Company; provided that the failure to provide prompt notice
shall not relieve the Company of its indemnification obligations hereunder, except to the extent
that the Company is actually and materially prejudiced by its failure to give such prompt notice.
The Company shall control the defense of any such action and, at its discretion, may enter into a
stipulation of discontinuance or settlement thereof; provided that the Company may not discontinue
any action or settle any claim in a manner that does not unconditionally release the Investor
Indemnitees without the Investors’ prior written
approval. The Investor Indemnitees shall, at the Company’s expense and reasonable request,
cooperate with the Company in any such defense and shall make available to the Company at the
Company’s expense all those persons, documents (excluding attorney/client privileged or attorney
work product materials) reasonably required by the Company in the defense of any such action. The
Investor Indemnitees may, at their expense, assist in such defense.



23









 





          9.15 Directed Shares. In the event that the Company shall propose to consummate an
initial public offering, the Company will use its reasonable best efforts to cause the Managing
Underwriters of such initial public offering to designate at least 10% of the shares being issued
in such offering as “directed shares” and to further cause 50% of such directed shares to be
offered to the Major Investors, pro rata in proportion to the number of shares of Common Stock held
by each Major Investor relative to all Major Investors, calculated on an as-exercised and as
converted basis; provided, however, that this right shall only apply to any such initial public
offering the registration statement for which is declared effective not sooner than the first
anniversary of the last closing of the Series G Financing. All action taken pursuant to this
Section 9.15 shall be made in accordance with all federal and state securities laws and regulations
and all applicable rules and regulations promulgated by the National Association of Securities
Dealers, Inc. and other applicable self-regulating organizations. Prior to filing any registration
statement in connection with an initial public offering, the Company shall review its obligations
under this Section 9.15 and, if the Company shall conclude, based on the advice of counsel, that
any law, rule, regulation or interpretation of the Commission shall prohibit the Company from
complying with any provision of this Section 9.15, the Company shall use its reasonable best
efforts to take such lawful action as shall most closely preserve the rights of the Major Investors
under this Section 9.15.




          9.16 Qualified Small Business Stock. The Company covenants that so long as any of
Preferred Stock or the Common Stock into which such shares are converted, are held by an Investor
(in whose hands such shares of Common Stock are eligible to qualify as “qualified small business
stock” as defined in Section 1202(c) of the of the Internal Revenue Code of 1986, as amended (the
“Code”) (“Qualified Small Business Stock”), it will (i) comply with any applicable
filing or reporting requirements imposed by the Code on issuers of Qualified Small Business Stock
and (ii) execute and deliver to each Investor, from time to time, such forms, documents, schedules
and other instruments as may be reasonably requested thereby to cause the Preferred Stock, or the
Common Stock into which such shares are converted, to qualify as Qualified Small Business Stock and
in connection therewith, execute and deliver to the Investors, from time to time, such forms,
documents, schedules and other instruments as may be reasonably requested by an Investor to cause
such shares of capital stock to qualify as Qualified Small Business Stock. The Company further
agrees that it will use its reasonable best efforts to cause its capital stock to constitute
Qualified Small Business Stock , unless the Board determines that such qualification is
inconsistent with the best interests of the Company.




          9.17 Notice Regarding Data Protection. The Company covenants that it will deliver to
each of its officers and directors on the date hereof, and to each officer and director appointed
or elected after the date hereof, a notice, as set forth on Exhibit A hereto, regarding
Article Twelve of the Company’s Amended and Restated Certificate of Incorporation.




          9.18 Termination of Covenants. The covenants of the Company set forth in this Section
9 (other than Sections 9.7, 9.11 and 9.14) shall terminate and be of no further force and effect
upon the earlier to occur of (i) the closing of a Qualified IPO; or (ii) a Liquidation Event.




     10. Amendment.





24









 






          10.1 Additional parties may be added to this Agreement, and, except as otherwise provided in
Sections 5.10 and 5.11, any provision of this Agreement may be amended or the observance thereof
may be waived (either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Holders of at least 60% of the
Registrable Securities then outstanding; provided, however, that Section 9.3 may not be amended to
limit or terminate Merrill’s right to designate an observer or otherwise limit the rights of any
Merrill observer without Merrill’s consent. Notwithstanding the foregoing, this Agreement may not
be amended or terminated and the observance of any term hereof may not be waived with respect to
any Investor without the written consent of such Investor, unless such amendment, termination, or
waiver applies to all Investors in the same fashion (it being agreed that a waiver of the
provisions of Section 8 with respect to a particular transaction shall be deemed to apply to all
Investors in the same fashion if such waiver does so by its terms, notwithstanding the fact that
certain Investors may nonetheless, by agreement with the Company, purchase securities in such
transaction). Any amendment or waiver effected in accordance this Section 10.1 shall be binding
upon each Holder of Registrable Securities at the time outstanding, each future holder of any of
such securities, and the Company. Notwithstanding the foregoing, the parties hereto agree that
purchasers of shares of the Company’s Series G Preferred Stock under the Purchase Agreement or an
addendum thereto after the date of the Purchase Agreement shall be subsequently added as a party to
this Agreement as an Investor and shall be bound by and entitled to the terms, benefits and
conditions herein by the execution of this Agreement on a signature page to this Agreement. For
purposes of this Section 10.1, the consent of 3i Technology Partners II LP shall also serve as the
consent of any of its affiliated entities that are Holders hereunder.




          10.2 The Agreement hereby amends and restates the Prior Agreement and shall be effective upon
the execution of this Agreement by the holders of at least two-thirds of the Registrable Securities
outstanding immediately prior to the sale of the Series G Preferred Stock.




     11. Governing Law. This Agreement shall be governed in all respects by the internal
laws of the State of Delaware without regard to conflict of laws provisions.



     12. Entire Agreement. This Agreement constitutes the full and entire understanding
and Agreement among the parties regarding the matters set forth herein. 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.



     13. 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 facsimile transmission, by hand or by courier, addressed:



25









 





               (a) if to a Holder, at such Holder’s address as set forth the Company’s records, or at such
other address as such Holder shall have furnished to the Company in writing, with a copy to:




	 	 	 	Cooley Godward Kronish LLP

Five Palo Alto Square

3000 El Camino Real

Palo Alto, CA 94306-2155

Phone: (650) 843-5757

Fax: (650) 857-0663

Attn: John M. Geschke
	 
	 	(b)	 	if to the Company, to:
	 
	 	 	 	ZONARE Medical Systems, Inc.

1061 Terra Bella Avenue

Mountain View, CA 94043

Attn: Chief Executive Officer

Fax: (650) 230-2817




or at such other address as the Company shall have furnished to the Holders in writing, with a copy
to:





	 	 	 	Latham & Watkins

140 Scott Drive

Menlo Park, CA 94025

Attn: Patrick Pohlen

Fax: (650) 463-2600





     Each such notice or other communication shall for all purposes of this Agreement be treated as
effective or having been given when delivered if delivered personally or by courier, if sent by
facsimile, the first business day after the date of confirmation that the facsimile has been
successfully transmitted to the facsimile number for the party notified, or, if sent by mail, at
the earlier of its receipt or 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.



     14. Severability. In the event one or more of the provisions of this Agreement
should, for any reason, be held to be invalid, illegal or unenforceable in any respect, such
invalidity, illegality, or unenforceability shall not affect any other provisions of this
Agreement, and this Agreement shall be construed as if such invalid, illegal or unenforceable
provision had never been contained herein.



     15. Delays or Omissions. It is agreed that no delay or omission to exercise any
right, power, or remedy accruing to any Holder upon any breach, default or noncompliance of the
Company under this Agreement shall impair any such right, power, or remedy, nor shall it be
construed to be a waiver of any such breach, default or noncompliance, or an acquiescence therein,
or of any similar breach, default or noncompliance thereafter occurring. It is further agreed that
any waiver, permit, consent, or approval of any kind or character on any Holder’s



26









 







part with respect to any breach, default or noncompliance under the Agreement or any waiver on
such Holder’s part of any provisions or conditions of this Agreement must be in writing and shall
be effective only to the extent specifically set forth in such writing. All remedies, either under
this Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not alternative.



     16. Attorneys’ Fees. In the event that any suit or action is instituted to enforce
any provision in this Agreement, the prevailing party in such dispute shall be entitled to recover
from the losing party all fees, costs and expenses of enforcing any right of such prevailing party
under or with respect to this Agreement, including, without limitation, such reasonable fees and
expenses of attorneys and accountants, which shall include, without limitation, all fees, costs and
expenses of appeals.



     17. Titles and Subtitles. The titles of the sections and subsections of this
Agreement are for convenience of reference only and are not to be considered in construing this
Agreement.



     18. Counterparts. This Agreement may be executed in any number of counterparts, each
of which shall be an original and all of which together shall constitute one instrument.



     19. Facsimile. This Agreement may be executed via facsimile.



     20. Survival. The representations and warranties made herein shall survive any
investigation made by any Holder and the closing of the transactions contemplated hereby. All
statements as to factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions contemplated hereby
shall be deemed to be representations and warranties by the Company hereunder solely as of the date
of such certificate or instrument.



     21. Aggregation of Stock. All shares of capital stock held or acquired by affiliated
entities or persons shall be aggregated together for the purpose of determining the availability of
any rights under this Agreement. For the purposes of this determination, each of Kaiser Foundation
Hospitals and The Permanente Federation, LLC shall be deemed to be an affiliate of the other.



(Remainder of Page Intentionally Left Blank)




27









 





     IN WITNESS WHEREOF, the parties hereto have executed this Amended and Restated Investor Rights
Agreement as of the date first set forth above.



	 	 	 	 	 
	 	“COMPANY”



ZONARE MEDICAL SYSTEMS, INC.

 	 
	 	By:  	/s/ Donald Southard
 	 
	 	 	Donald Southard, Chief Executive Officer 	 
	 	 	 	 
	 



Signature Page to ZONARE Medical Systems, Inc.

Series G Amended & Restated Investor Rights Agreement




 









 








	 	 	 	 	 
	 	3i TECHNOLOGY PARTNERS II LP



By: 3i Technology Associates II LLC

its general partner



By: 3i Technology Corporation

its managing member

 	 
	 	By:  	/s/ Allan Ferguson
 	 
	 	 	Name:  	Allan Ferguson 	 
	 	 	Title:  	Senior Vice President 	 
	 
	 	3i GROUP INVESTMENTS LP

 	 
	 	By:  	/s/ Allan Ferguson
 	 
	 	 	Name:  	Allan Ferguson 	 
	 	 	Title:  	Attorney-in-fact 	 
	 
	 	3i PAN EUROPEAN TECHNOLOGY 

2004-06 LP

 	 
	 	By:  	/s/ Allan Ferguson
 	 
	 	 	Name:  	Allan Ferguson 	 
	 	 	Title:  	Attorney-in-fact 	 
	 
	 	3i GLOBAL TECHNOLOGY 2004-06 LP

 	 
	 	By:  	/s/ Allan Ferguson
 	 
	 	 	Name:  	Allan Ferguson 	 
	 	 	Title:  	Attorney-in-fact 	 
	 



Signature Page to ZONARE Medical Systems, Inc.

Series G Amended & Restated Investor Rights Agreement





 









 








	 	 	 	 	 
	 	 	ASCENSION HEALTH, as Nominee and

Fiscal Agent for Certain Wholly Owned

Subsidiaries
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Anthony J. Speranzo
	 

	 	 	 	 
	 

	 	Name:
	 	Anthony J. Speranzo
	 

	 	Title:
	 	Senior Vice President and
	 

	 	 	 	Chief Financial Officer






Signature Page to ZONARE Medical Systems, Inc.

Series G Amended & Restated Investor Rights Agreement





 









 








	 	 	 	 	 
	 	 	CB AH PARALLEL FUND II, L.P.
	 	 	By:  	 	CB Health Ventures II, LLC
	 

	 	 	 	Its General Partner
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Frederick R. Blume
	 

	 	 	 	 
	 

	 	Name:
	 	Frederick R. Blume
	 

	 	Title:
	 	Manager/Partner
	 
	 	 	 	 
	 	 	CB HEALTHCARE FUND II, L.P.
	 	 	By:  	 	CB Health Ventures II, LLC
	 

	 	 	 	Its General Partner
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Frederick R. Blume
	 

	 	 	 	 
	 

	 	Name:
	 	Frederick R. Blume
	 

	 	Title:
	 	Manager/Partner






Signature Page to ZONARE Medical Systems, Inc.

Series G Amended & Restated Investor Rights Agreement




 









 





	 	 	 	 	 
	 	 	DRAPER FISHER JURVETSON 
EPLANET VENTURES L.P.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ John Fisher
	 

	 	 	 	 
	 

	 	Name:
	 	John Fisher
	 

	 	Title:
	 	Managing Director
	 
	 	 	 	 
	 	 	DRAPER FISHER JURVETSON
EPLANET VENTURES GMBH
& CO. KG
	 
	 	 	 	 
	 

	 	By:
	 	/s/ John Fisher
	 

	 	 	 	 
	 

	 	Name:
	 	John Fisher
	 

	 	Title:
	 	Managing Director
	 
	 	 	 	 
	 	 	DRAPER FISHER JURVETSON

EPLANET PARTNERS FUND, LLC
	 
	 	 	 	 
	 

	 	By:
	 	/s/ John Fisher
	 

	 	 	 	 
	 

	 	Name:
	 	John Fisher
	 

	 	Title:
	 	Managing Member






Signature Page to ZONARE Medical Systems, Inc.

Series G Amended & Restated Investor Rights Agreement




 









 





	 	 	 	 	 
	 	 	EARLYBIRD VERWALTUNG GmbH, a
 German limited liability company (trustee to

all funds managed by Earlybird LLC, a
Delaware company)
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Rolf Mathies
	 

	 	 	 	 
	 

	 	Name:
	 	Rolf Mathies
	 

	 	Title:
	 	Managing Partner






Signature Page to ZONARE Medical Systems, Inc.

Series G Amended & Restated Investor Rights Agreement





 









 








	 	 	 	 	 
	 	FRAZIER AFFILIATES III, L.P. 

By FHM III, LLC, its general partner

 	 
	 	By:  	/s/ Nader Naini
 	 
	 	 	Nader Naini, Manager 	 
	 	 	 	 
	 	FRAZIER AFFILIATES IV, L.P.

By FHM IV, LP, its general partner

By FHM IV, LLC, its general partner

 	 
	 	By:  	/s/ Nader Naini
 	 
	 	 	Nader Naini, Manager 	 
	 	 	 	 
	 	FRAZIER HEALTHCARE III, L.P. 

By FHM III, LLC, its general partner

 	 
	 	By:  	/s/ Nader Naini
 	 
	 	 	Nader Naini, Manager 	 
	 	 	 	 
	 	FRAZIER HEALTHCARE IV, L.P.

By FHM IV, LP, its general partner

By FHM IV, LLC, its general partner

 	 
	 	By:  	/s/ Nader Naini
 	 
	 	 	Nader Naini, Manager 	 
	 	 	 	 



Signature Page to ZONARE Medical Systems, Inc.

Series G Amended & Restated Investor Rights Agreement





 









 








	 	 	 	 	 
	 	 	KAISER FOUNDATION HOSPITALS
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Thomas Meier
	 

	 	 	 	 
	 

	 	Name:
	 	Thomas Meier
	 

	 	Title:
	 	VP Treasury






Signature Page to ZONARE Medical Systems, Inc.

Series G Amended & Restated Investor Rights Agreement






 









 








	 	 	 	 	 
	 	 	THE PERMANENTE FEDERATION LLC
 – SERIES C
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Glen Hentges
	 

	 	 	 	 
	 

	 	Name:
	 	Glen Hentges
	 

	 	Title:
	 	CFO
	 
	 	 	 	 
	 	 	THE PERMANENTE FEDERATION LLC 
– SERIES D
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Glen Hentges
	 

	 	 	 	 
	 

	 	Name:
	 	Glen Hentges
	 

	 	Title:
	 	CFO
	 
	 	 	 	 
	 	 	THE PERMANENTE FEDERATION LLC
 – SERIES F
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Glen Hentges
	 

	 	 	 	 
	 

	 	Name:
	 	Glen Hentges
	 

	 	Title:
	 	CFO
	 
	 	 	 	 
	 	 	THE PERMANENTE FEDERATION LLC
– SERIES G
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Glen Hentges
	 

	 	 	 	 
	 

	 	Name:
	 	Glen Hentges
	 

	 	Title:
	 	CFO






Signature Page to ZONARE Medical Systems, Inc.

Series G Amended & Restated Investor Rights Agreement




 









 





	 	 	 	 	 
	 	MOSAIX VENTURES, LP



By: Mosaix Ventures Management, LLC

Its: General Partner

 	 
	 	By:  	/s/ Ranjan Lal
 	 
	 	 	Ranjan Lal, Managing Partner 	 
	 	 	 	 
	 



Signature Page to ZONARE Medical Systems, Inc.

Series G Amended & Restated Investor Rights Agreement





 









 








	 	 	 	 
	 

	 	/s/ David Amidei
	 

	 	 
	 

	 	DAVID AMIDEI






Signature Page to ZONARE Medical Systems, Inc.

Series G Amended & Restated Investor Rights Agreement




 









 








	 	 	 	 
	 

	 	/s/ Scott Barclay
	 

	 	 
	 

	 	SCOTT BARCLAY






Signature Page to ZONARE Medical Systems, Inc.

Series G Amended & Restated Investor Rights Agreement




 









 








	 	 	 	 
	 

	 	/s/ Ian Felix
	 

	 	 
	 

	 	IAN FELIX






Signature Page to ZONARE Medical Systems, Inc.

Series G Amended & Restated Investor Rights Agreement




 









 








	 	 	 	 
	 

	 	/s/ Harold C. Hohbach
	 

	 	 
	 

	 	HAROLD C. HOHBACH






Signature Page to ZONARE Medical Systems, Inc.

Series G Amended & Restated Investor Rights Agreement




 









 








	 	 	 	 	 
	 	 	KETAN D. KOTHARI AND SHEILA 
KOTHARI, TRUSTEES
OF THE KETAN
AND SHEILA KOTHARI FAMILY
 TRUST –
1998, U/I DTD DECEMBER 16, 1998
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Ketan D. Kothari
	 

	 	 	 	 
	 

	 	Name:
	 	Ketan D. Kothari
	 

	 	Title:
	 	Trustee






Signature Page to ZONARE Medical Systems, Inc.

Series G Amended & Restated Investor Rights Agreement




 









 








	 	 	 	 	 
	 	 	MANISH D. KOTHARI AND CARMEN
 SAURA, TRUSTEES
OF THE KOTHARI
 SAURA FAMILY TRUST – 1998, U/I

DTD DECEMBER 16, 1998
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Manish D. Kothari
	 

	 	 	 	 
	 

	 	Name:
	 	Manish D. Kothari
	 

	 	Title:
	 	Trustee






Signature Page to ZONARE Medical Systems, Inc.

Series G Amended & Restated Investor Rights Agreement




 









 








	 	 	 	 
	 

	 	/s/ Ruth Leibig
	 

	 	 
	 

	 	RUTH LEIBIG






Signature Page to ZONARE Medical Systems, Inc.

Series G Amended & Restated Investor Rights Agreement





 









 








	 	 	 	 
	 

	 	/s/ Zhi-Hong Liu
	 

	 	 
	 

	 	ZHI-HONG LIU






Signature Page to ZONARE Medical Systems, Inc.

Series G Amended & Restated Investor Rights Agreement




 









 





	 	 	 	 
	 

	 	/s/ Glen McLaughlin
	 

	 	 
	 

	 	GLEN MCLAUGHLIN






Signature Page to ZONARE Medical Systems, Inc.

Series G Amended & Restated Investor Rights Agreement




 









 





	 	 	 	 
	 

	 	/s/ Brian J. O’Rourke
	 

	 	 
	 

	 	BRIAN J. O’ROURKE
	 
	 	 
	 

	 	/s/ Helen E. O’Rourke
	 

	 	 
	 

	 	HELEN E. O’ROURKE






Signature Page to ZONARE Medical Systems, Inc.

Series G Amended & Restated Investor Rights Agreement





 









 








	 	 	 	 	 	 
	 	 	PENTECH FINANCIAL SERVICES, INC.
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Ben Millerbis
	 

	 	 	 	 
	 

	 	Name:
	 	Ben Millerbis
	 

	 	Title:
	 	CEO






Signature Page to ZONARE Medical Systems, Inc.

Series G Amended & Restated Investor Rights Agreement




 









 








	 	 	 	 
	 

	 	/s/ Stephen K. Prozorowski
	 

	 	 
	 

	 	STEPHEN K. PROZOROWSKI






Signature Page to ZONARE Medical Systems, Inc.

Series G Amended & Restated Investor Rights Agreement





 









 








	 	 	 	 
	 

	 	/s/ Rodolph Ruffy, M.D.
	 

	 	 
	 

	 	RODOLPHE RUFFY, M.D.






Signature Page to ZONARE Medical Systems, Inc.

Series G Amended & Restated Investor Rights Agreement




 









 





	 	 	 	 
	 

	 	/s/ Gayle A. Stephenson
	 

	 	 
	 

	 	GAYLE A. STEPHENSON






Signature Page to ZONARE Medical Systems, Inc.

Series G Amended & Restated Investor Rights Agreement




 









 








	 	 	 	 
	 

	 	/s/ Priscilla J. Ryland
	 

	 	 
	 

	 	PRISCILLA J. RYLAND






Signature Page to ZONARE Medical Systems, Inc.

Series G Amended & Restated Investor Rights Agreement




 









 





	 	 	 	 	 	 	 
	 	 	SIF INVESTMENT COMPANY LTD	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ E. Sequin
	 	/s/ M. Jenzer
	 	 	 	 	 
	 

	 	Name:
	 	E. Sequin
	 	M. Jenzer
	 

	 	Title:
	 	Director
	 	Director






Signature Page to ZONARE Medical Systems, Inc.

Series G Amended & Restated Investor Rights Agreement




 









 








	 	 	 	 
	 

	 	/s/ Donald Southard
	 

	 	 
	 

	 	DONALD SOUTHARD






Signature Page to ZONARE Medical Systems, Inc.

Series G Amended & Restated Investor Rights Agreement




 









 





	 	 	 	 
	 

	 	/s/ Robert Stanson
	 

	 	 
	 

	 	ROBERT STANSON






Signature Page to ZONARE Medical Systems, Inc.

Series G Amended & Restated Investor Rights Agreement




 









 





	 	 	 	 
	 

	 	/s/ Michael B. Thompson
	 

	 	 
	 

	 	MICHAEL B. THOMPSON






Signature Page to ZONARE Medical Systems, Inc.

Series G Amended & Restated Investor Rights Agreement





 









 








	 	 	 	 	 	 
	 

	 	WS INVESTMENT COMPANY 2007A
	 
	 	 	 	 
	 

	 	By:
	 	/s/ James A. Terranova
	 

	 	 	 	 
	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 
	 

	 	Title:	 	 
	 

	 	 	 	 





Signature Page to ZONARE Medical Systems, Inc.

Series G Amended & Restated Investor Rights Agreement





 









 








	 	 	 	 	 	 
	 	 	WTI VENTURES
	 
	 	 	 	 
	 

	 	By:
	 	/s/ S. Allan Johnson
	 

	 	 	 	 
	 

	 	Name:
	 	S. Allan Johnson
	 

	 	Title:
	 	General Partner






Signature Page to ZONARE Medical Systems, Inc.

Series G Amended & Restated Investor Rights Agreement




 









 





	 	 	 	 
	 

	 	/s/ Karl Zimmerman
	 

	 	 
	 

	 	KARL ZIMMERMAN






Signature Page to ZONARE Medical Systems, Inc.

Series G Amended & Restated Investor Rights Agreement





 









 








	 	 	 	 
	 

	 	/s/ Joseph E. Whitters
	 

	 	 
	 

	 	JOSEPH E. WHITTERS






Signature Page to ZONARE Medical Systems, Inc.

Series G Amended & Restated Investor Rights Agreement




 









 





	 	 	 	 
	 

	 	/s/ Jeffrey Otten
	 

	 	 
	 

	 	JEFFREY OTTEN






Signature Page to ZONARE Medical Systems, Inc.

Series G Amended & Restated Investor Rights Agreement




 









 





	 	 	 	 	 
	 	 	 
	 	/s/ Juan Enriquez
 	 
	 	JUAN ENRIQUEZ 	 



Signature Page to ZONARE Medical Systems, Inc.

Series G Amended & Restated Investor Rights Agreement





 









 





SCHEDULE A



Adam Ventures, L.P.



Allianz Life Insurance Company of North America



David Amidei



The Angels’ Forum 70, LLC



Ascension Health



ASQ, Inc.



Wenli Bai



Donald S. Baim, M.D.



Scott Barclay



William R. Brody



Cardiovascular Medicine, Cardiac Arrhythmias Profit Sharing Plan FBO R. Hardwin Mead



CB AH Parallel Fund



CB Healthcare Fund II, L.P.



Ching-Hua Chou



David Y. Dea and Linda A. Reynolds, Trustees The Dea Family Trust, Dated January 24, 2001



Sheila Desai



Draper Fisher Jurvetson ePlanet Partners Fund, LLC



Draper Fisher Jurvetson ePlanet Ventures GmbH & Co. KG



Draper Fisher Jurvetson ePlanet Ventures L.P.



Early Bird Verwaltung GmbH, a German limited liability company (trustee to all funds managed by
Earlybird LLC, a Delaware limited liability company)



Faison Bohlayer Charitable Trust



Ken Fowkes



Frazier Affiliates III, L.P.



Frazier Affiliates IV, L.P.




 









 




Frazier Healthcare III, L.P.



Frazier Healthcare IV, L.P.



Debra R. Goines



Goodman Company, LTD



Robert Halbach



Prentis C. Hale III, Trustee FBO Prentis C. Hale III U/W L.H. Hale, Dec’d



The Halo Fund II, LP



Hasan 1995 Living Trust, Dated 3/16/95



Hamilton Dale Hearn, Jr.



Harold C. Hohbach



Keith A. Holub



Ting-Lan Ji



Kaiser Foundation Hospitals



Osamu Katoh



Ketan D. Kothari and Sheila Kothari, trustees of the Ketan and Shelia Kothari Family Trust 1998,
U/I DTD December 16, 1998



Manish D. Kothari and Carmen Saura, Trustees of the Kothari Family Trust 1998, U/I DTD December 16,
1998



Henry A. Krause Jr.



Kevin T. Larkin



Ruth Leibig



Zhi-Hong Liu



Richard H. Love



Juan Miguel C. Mantecon



Merrill Lynch Ventures L.P.



Stanley J. Meresman and Sharon A. Meresman, Trustees of the MERESMAN FAMILY TRUST U/D/T dated
9/19/89, as amended




Sch. A-2




 









 







Montagu Newhall Global Partners, L.P.



Mosaix Ventures, LP



Glen McLaughlin



Glen Wallace McLaughlin



Helen E. O’ Rourke & Brian J. O’Rourke, J.T



Pentech Financial Services, Inc.



The Permanente Federation LLC – Series C



The Permanente Federation LLC – Series D



The Permanente Federation LLC – Series F



The Permanente Federation LLC – Series G



Scott & Joanne Polston



Prothro Family Limited Partnership, Ltd.



Stephen K. Prozorowski



Rodolphe Ruffy, M.D.



Keith Rubenstein



Priscilla J. Ryland



Safi Qureshey Family Trust



Samtan Company, LTD



The Lars and Debora Shaw 2001 Trust



Siemens Venture Capital GmbH



SIF Investment Company Ltd.



Donald Southard



Robert Stanson



Gayle A. Stephenson (Russi)



Texas Instruments Incorporated



Michael B. Thompson




Sch. A-3




 









 




Roger Winkle



Wasatch Funds, Inc., for Wasatch Ultra Growth Fund



Wasatch Funds, Inc., for Wasatch Small Cap Growth Fund



WS Investment Company 99A



WS Investment Company 2007A



WTI Ventures



Yock Family Revocable Trust Dated 7/21/93 as the Separate Property of Paul L. Yock



Syed Zaidi



Zilkha Venture Partners, L.P.



Karl H. Zimmerman



3i Technology Partners II LP



3i Group Investments LP



3i Pan European Technology 2004-06 LP



3i Global Technology 2004-06 LP



Jeffrey Otten



Joseph E. Whitters



Juan Enriquez




Sch. A-4




 









 








EXHIBIT A




     NOTICE REGARDING EUROPEAN DIRECTIVE ON DATA PROTECTION



     This Notice of Article Twelve of the Amended and Restated Certificate of Incorporation (the
“Charter”) of ZONARE Medical Systems, Inc. (the “Company”) is being delivered to
you pursuant to Section 9.17 of that certain Amended and Restated Investors’ Rights Agreement,
dated February 26, 2007, by and among the Company and the Investors listed on Schedule A thereto.



     3i Group, plc, a holding company of one or more of the Company’s Series F Preferred Stock
holders and Series G Preferred Stock holders (collectively, the “3i Entities”), is
incorporated in Europe and is subject to a European Directive on data protection (as enshrined by
UK Act of Parliament in The Data Protection Act of 1998) (the “Directive”). The primary
effect of the Directive is to prohibit the processing of personal data without notification and
consent. Because it is possible that the 3i Entities may be deemed to have processed personal data
within the meaning of the Directive in connection with their investments in portfolio companies,
the 3i Entities require each of their portfolio companies to insert certain standard language
regarding the Directive into such portfolio company’s certificate of incorporation. The language
regarding the Directive contained in the Charter is set forth below:




For the purposes of all applicable laws and regulations, each of the
stockholders, officers and directors of the Corporation authorize 3i
Technology Partners II LP, 3i Group Investments LP, 3i Plan European
Technology 2004-06 LP, 3i Global Technology 2004-06 LP, 3i Group plc and
affiliates of 3i Group plc (both within and outside the United States)
(“3i Group”) and each other stockholder who, together with its
affiliates, is subject to European Directive 95/46/EC) (“European
Stockholders”) to process (but only among the 3i Group or such
European Stockholder, as applicable, and its advisers and only within
the meaning of European Directive 95/46/EC) any data or information
concerning them which is obtained in the course of its and their due
diligence and other investment business. The data and information that
may be processed for such purposes shall include any information that
may have a bearing on the prudence or commercial merits of investing in,
or disposing of, any stock (or other investment or security) of the
Company. Nothing in this authority shall entitle any 3i Group entity or
an European Stockholder entity to make any disclosure of such data or
information to third parties.




Exh. A