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Exhibit 4.2    
    

EXECUTION
COPY 

BRINKER INTERNATIONAL, INC. 

5.75%
Notes due 2014 

REGISTRATION
RIGHTS AGREEMENT 

May 14,
2004 

Citigroup
Global Markets Inc.

J.P. Morgan Securities Inc.

As Representatives of the Initial Purchasers

c/o Citigroup Global Markets Inc.

388 Greenwich Street

New York, New York 10013 

Ladies
and Gentlemen: 

        Brinker
International, Inc., a corporation organized under the laws of the State of Delaware (the "Company"), proposes to issue and sell to certain purchasers (the "Initial
Purchasers"), for whom you (the "Representatives") are acting as representatives, its 5.75% Notes due 2014 (the "Securities"), upon the terms set forth in the Purchase Agreement between the Company
and the Representatives dated
May 11, 2004 (the "Purchase Agreement") relating to the initial placement of the Securities (the "Initial Placement"). To induce the Initial Purchasers to enter into the Purchase Agreement and
to satisfy a condition to your obligations thereunder, the Company agrees with you for your benefit and the benefit of the holders from time to time of the Securities (including the Initial
Purchasers) (each a "Holder" and, collectively, the "Holders"), as follows: 

        1.    Definitions.    Capitalized terms used herein without definition shall have their respective meanings set forth
in the Purchase Agreement. As used in this Agreement, the following capitalized defined terms shall have the following meanings: 

        "Act"
shall mean the Securities Act of 1933, as amended, and the rules and regulations of the Commission promulgated thereunder. 

        "Affiliate"
shall have the meaning specified in Rule 405 under the Act and the terms "controlling" and "controlled" shall have meanings correlative thereto. 

        "Broker-Dealer"
shall mean any broker or dealer registered as such under the Exchange Act. 

        "Business
Day" shall mean any day other than a Saturday, a Sunday or a legal holiday or a day on which banking institutions or trust companies are authorized or obligated by law to close
in New York City. 

        "Closing
Date" shall mean the date of the first issuance of the Securities. 

        "Commission"
shall mean the Securities and Exchange Commission. 

        "Deferral
Period" shall have the meaning indicated in Section 4(k)(ii) hereof. 

        "Exchange
Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission promulgated thereunder. 

        "Exchange
Offer Registration Period" shall mean the one-year period following the consummation of the Registered Exchange Offer, exclusive of any period during which any stop
order shall be in effect suspending the effectiveness of the Exchange Offer Registration Statement. 

 

        "Exchange
Offer Registration Statement" shall mean a registration statement of the Company on an appropriate form under the Act with respect to the Registered Exchange Offer, all
amendments and supplements to such registration statement, including post-effective amendments thereto, in each case including the Prospectus contained therein, all exhibits thereto and
all material incorporated by reference therein. 

        "Exchanging
Dealer" shall mean any Holder (which may include any Initial Purchaser) that is a Broker-Dealer and elects to exchange for New Securities any Securities that it acquired for
its own account as a result of market-making activities or other trading activities (but not directly from the Company or any Affiliate of the Company) for New Securities. 

        "Final
Memorandum" shall mean the offering memorandum, dated May 11, 2004, relating to the Securities, including any and all exhibits thereto and any information incorporated by
reference therein as of such date. 

        "Holder"
shall have the meaning set forth in the preamble hereto. 

        "Indenture"
shall mean the Indenture relating to the Securities, dated as of May 14, 2004, between the Company and Citibank, N.A., as trustee, as the same may be amended from time
to time in accordance with the terms thereof. 

        "Initial
Placement" shall have the meaning set forth in the preamble hereto. 

        "Initial
Purchaser" shall have the meaning set forth in the preamble hereto. 

        "Losses"
shall have the meaning set forth in Section 6(d) hereof. 

        "Majority
Holders" shall mean, on any date, Holders of a majority of the aggregate principal amount of Securities registered under a Registration Statement. 

        "Managing
Underwriters" shall mean the investment banker or investment bankers and manager or managers that administer an underwritten offering, if any, under a Registration Statement. 

        "NASD
Rules" shall mean the Conduct Rules and the By-Laws of the National Association of Securities Dealers, Inc. 

        "New
Securities" shall mean debt securities of the Company identical in all material respects to the Securities (except that the transfer restrictions shall be modified or eliminated, as
appropriate) to be issued under the New Securities Indenture. 

        "New
Securities Indenture" shall mean an indenture between the Company and the New Securities Trustee, identical in all material respects to the Indenture (except that the transfer
restrictions shall be modified or eliminated, as appropriate), which may be the Indenture if in the terms thereof appropriate provision is made for the New Securities. 

        "New
Securities Trustee" shall mean a bank or trust company reasonably satisfactory to the Initial Purchasers, as trustee with respect to the New Securities under the New Securities
Indenture. 

        "Prospectus"
shall mean the prospectus included in any Registration Statement (including, without limitation, a prospectus that discloses information previously omitted from a prospectus
filed as part of an effective registration statement in reliance upon Rule 430A under the Act), as amended or supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Securities or the New Securities covered by such Registration Statement, and all amendments and supplements thereto, including any and all exhibits thereto and any
information incorporated by reference therein. 

2

 

        "Purchase
Agreement" shall have the meaning set forth in the preamble hereto. 

        "Registered
Exchange Offer" shall mean the proposed offer of the Company to issue and deliver to the Holders of the Securities that are not prohibited by any law or policy of the
Commission from participating in such offer, in exchange for the Securities, a like aggregate principal amount of the New Securities. 

        "Registrable
Securities" shall mean (i) Securities other than those that have been (A) registered under a Registration Statement and disposed of in accordance therewith or
(B) distributed to the public pursuant to Rule 144 under the Act or any successor rule or regulation thereto that may be adopted by the Commission and (ii) any New Securities
resale of which by the Holder thereof requires compliance with the prospectus delivery requirements of the Act. 

        "Registration
Default Damages" shall have the meaning set forth in Section 8 hereof. 

        "Registration
Statement" shall mean any Exchange Offer Registration Statement or Shelf Registration Statement that covers any of the Securities or the New Securities pursuant to the
provisions of this Agreement, any amendments and supplements to such registration statement, including post-effective amendments (in each case including the Prospectus contained therein),
all exhibits thereto and all material incorporated by reference therein. 

        "Securities"
shall have the meaning set forth in the preamble hereto. 

        "Shelf
Registration" shall mean a registration effected pursuant to Section 3 hereof. 

        "Shelf
Registration Period" has the meaning set forth in Section 3(b) hereof. 

        "Shelf
Registration Statement" shall mean a "shelf" registration statement of the Company pursuant to the provisions of Section 3 hereof which covers some or all of the Securities
or New Securities, as applicable, on an appropriate form under Rule 415 under the Act, or any similar rule that may be adopted by the Commission, amendments and supplements to such registration
statement, including post effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and all material incorporated by reference therein. 

        "Trustee"
shall mean the trustee with respect to the Securities under the Indenture. 

        "Trust
Indenture Act" shall mean the Trust Indenture Act of 1939, as amended, and the rules and regulations of the Commission promulgated thereunder. 

        "underwriter"
shall mean any underwriter of Securities in connection with an offering thereof under a Shelf Registration Statement. 

        2.    Registered Exchange Offer.    (a)    The Company shall prepare and, not later than 90 days
following the Closing Date, shall file with the Commission the Exchange Offer Registration Statement with respect to the Registered Exchange Offer. The Company shall use its reasonable efforts to
cause the Exchange Offer Registration Statement to become effective under the Act within 195 days of the Closing Date. 

        (b)   Upon
the effectiveness of the Exchange Offer Registration Statement, the Company shall promptly commence the Registered Exchange Offer, it being the objective of such
Registered Exchange Offer to enable each Holder electing to exchange Securities for New Securities (assuming that such Holder is not an Affiliate of the Company, acquires the New Securities in the
ordinary course of such Holder's business, has no arrangements with any person to participate in the distribution of the New Securities and is not prohibited by any law or policy of the Commission
from participating in the Registered Exchange Offer) to trade such New Securities 

3

 

from
and after their receipt without any limitations or restrictions under the Act and without material restrictions under the securities laws of a substantial proportion of the several states of the
United States. 

        (c)   In
connection with the Registered Exchange Offer, the Company shall: 

        (i)    mail
to each Holder a copy of the Prospectus forming part of the Exchange Offer Registration Statement, together with an appropriate letter of transmittal and related
documents; 

        (ii)   keep
the Registered Exchange Offer open for not less than 20 Business Days and not more than 30 Business Days after the date notice thereof is mailed to the Holders
(or, in each case, longer if required by applicable law); 

        (iii)  use
its reasonable efforts to keep the Exchange Offer Registration Statement continuously effective under the Act, supplemented and amended as required under the Act,
to ensure that it is available for sales of New Securities by Exchanging Dealers during the Exchange Offer Registration Period; 

        (iv)  utilize
the services of a depositary for the Registered Exchange Offer with an address in the Borough of Manhattan in New York City, which may be the Trustee, the New
Securities Trustee or an Affiliate of either of them; 

        (v)   permit
Holders to withdraw tendered Securities at any time prior to the close of business, New York time, on the last Business Day on which the Registered Exchange Offer
is open; 

        (vi)  prior
to effectiveness of the Exchange Offer Registration Statement, provide a supplemental letter to the Commission (A) stating that the Company is conducting
the Registered Exchange Offer in reliance on the position of the Commission in Exxon Capital Holdings Corporation (pub. avail. May 13, 1988) and  Morgan Stanley and Co.,
 Inc. (pub. avail. June 5, 1991); and (B) including a representation that the Company has not entered into
any arrangement or understanding with any person to distribute the New Securities to be received in the Registered Exchange Offer and that, to the best of the Company's information and belief, each
Holder participating in the Registered Exchange Offer is acquiring the New Securities in the ordinary course of business and has no arrangement or understanding with any person to participate in the
distribution of the New Securities; and 

        (vii) comply
in all respects with all applicable laws. 

        (d)   As
soon as practicable after the close of the Registered Exchange Offer, the Company shall: 

        (i)    accept
for exchange all Securities tendered and not validly withdrawn pursuant to the Registered Exchange Offer; 

        (ii)   deliver,
or cause to be delivered, to the Trustee for cancellation in accordance with Section 4(s) all Securities so accepted for exchange; and 

        (iii)  cause
the New Securities Trustee promptly to authenticate and deliver to each Holder of Securities a principal amount of New Securities equal to the principal amount
of the Securities of such Holder so accepted for exchange. 

        (e)   Each
Holder hereby acknowledges and agrees that any Broker-Dealer and any such Holder using the Registered Exchange Offer to participate in a distribution of the New
Securities (x) could not under Commission policy as in effect on the date of this Agreement rely on the position of the Commission in Exxon Capital Holdings
Corporation (pub. avail. May 13, 1988) and 

4

 

 Morgan Stanley and Co., Inc. (pub. avail. June 5, 1991), as interpreted in the Commission's letter to Shearman & Sterling dated July 2, 1993 and
similar no-action letters; and (y) must comply with the registration and prospectus delivery requirements of the Act in connection with any secondary resale transaction, which must
be covered by an effective registration statement containing the selling security holder information required by Item 507 or 508, as applicable, of Regulation S-K under the Act if
the resales are of New Securities obtained by such Holder in exchange for Securities acquired by such Holder directly from the Company or one of its Affiliates. Accordingly, each Holder participating
in the Registered Exchange Offer shall be required to represent to the Company that, at the time of the consummation of the Registered Exchange Offer: 

        (i)    any
New Securities received by such Holder will be acquired in the ordinary course of business; 

        (ii)   such
Holder will have no arrangement or understanding with any person to participate in the distribution of the Securities or the New Securities within the meaning of
the Act; and 

        (iii)  such
Holder is not an Affiliate of the Company. 

        (f)    If
any Initial Purchaser determines that it is not eligible to participate in the Registered Exchange Offer with respect to the exchange of Securities constituting any
portion of an unsold allotment, at the request of such Initial Purchaser, the Company shall issue and deliver to such Initial Purchaser or the person purchasing New Securities registered under a Shelf
Registration Statement as contemplated by Section 3 hereof from such Initial Purchaser, in exchange for such Securities, a like principal amount of New Securities. The Company shall use its
reasonable efforts to cause the CUSIP Service Bureau to issue the same CUSIP number for such New Securities as for New Securities issued pursuant to the Registered Exchange Offer. 

        3.    Shelf Registration.    (a)    If (i) due to any change in law or applicable interpretations
thereof by the Commission's staff, the Company determines upon advice of its outside counsel that it is not permitted to effect the Registered Exchange Offer as contemplated by Section 2
hereof; or (ii) for any other reason the Registered Exchange Offer is not consummated within 225 days of the date hereof; (iii) any Initial Purchaser so requests with respect to
Securities that are not eligible to be exchanged for New Securities in the Registered Exchange Offer and that are held by it following consummation of the Registered Exchange Offer; (iv) any
Holder (other than an Initial Purchaser) is not eligible to participate in the Registered Exchange Offer; or (v) in the case of any Initial Purchaser that participates in the Registered
Exchange Offer or acquires New Securities pursuant to Section 2(f) hereof, such
Initial Purchaser does not receive freely tradeable New Securities in exchange for Securities constituting any portion of an unsold allotment (it being understood that (x) the requirement that
an Initial Purchaser deliver a Prospectus containing the information required by Item 507 or 508 of Regulation S-K under the Act in connection with sales of New Securities acquired
in exchange for such Securities shall not result in such New Securities being not "freely tradeable"; and (y) the requirement that an Exchanging Dealer deliver a Prospectus in connection with
sales of New Securities acquired in the Registered Exchange Offer in exchange for Securities acquired as a result of market-making activities or other trading activities shall not result in such New
Securities being not "freely tradeable"), the Company shall effect a Shelf Registration Statement in accordance with subsection (b) below. 

        (b)   (i) The
Company shall as promptly as practicable file with the Commission and shall use its reasonable efforts to cause to be declared effective under the Act a
Shelf Registration Statement relating to the offer and sale of the Securities or the New Securities, as applicable, by the Holders thereof from time to time in accordance with the methods of
distribution elected by such Holders and set forth in such Shelf Registration Statement; provided, however, that no Holder (other than an Initial Purchaser) shall be entitled to have the Securities
held by it covered 

5

 

by
such Shelf Registration Statement unless such Holder agrees in writing to be bound by all of the provisions of this Agreement applicable to such Holder; and provided further, that with respect to
New Securities received by an Initial Purchaser in exchange for Securities constituting any portion of an unsold allotment, the Company may, if permitted by current interpretations by the Commission's
staff, file a post-effective amendment to the Exchange Offer Registration Statement containing the information required by Item 507 or 508 of Regulation S-K, as
applicable, in satisfaction of its obligations under this subsection with respect thereto, and any such Exchange Offer Registration Statement, as so amended, shall be referred to herein as, and
governed by the provisions herein applicable to, a Shelf Registration Statement. 

        (ii)   The
Company shall use its reasonable efforts to keep the Shelf Registration Statement continuously effective, supplemented and amended as required by the Act, in order
to permit the Prospectus forming part thereof to be usable by Holders for a period (the "Shelf Registration Period") from the date the Shelf Registration Statement is declared effective by the
Commission until (A) the second anniversary thereof or (B) the date upon which all the Securities or New Securities, as applicable, covered by the Shelf Registration Statement have been
sold pursuant to the Shelf Registration Statement. The Company shall be deemed not to have used its reasonable efforts to keep the Shelf Registration Statement effective during the Shelf Registration
Period if it voluntarily takes any action that would result in Holders of Securities covered thereby not being able to offer and sell such Securities at any time during the Shelf Registration Period,
unless such action is (x) required by applicable law or otherwise undertaken by the Company in good faith and for valid business reasons (not including avoidance of the Company's obligations
hereunder), including the acquisition or divestiture of assets, and (y) permitted pursuant to Section 4(k)(ii) hereof. 

        (iii)  The
Company shall cause the Shelf Registration Statement and the related Prospectus and any amendment or supplement thereto, as of the effective date of the Shelf
Registration Statement or such
amendment or supplement, (A) to comply in all material respects with the applicable requirements of the Act; and (B) not to contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary in order to make the statements therein (in the case of the Prospectus, in the light of the circumstances under which they were made)
not misleading. 

        4.    Additional Registration Procedures.    In connection with any Shelf Registration Statement and, to the extent
applicable, any Exchange Offer Registration Statement, the following provisions shall apply. 

        (a)   The
Company shall: 

        (i)    furnish
to each of the Representatives and to counsel for the Holders, not less than five Business Days prior to the filing thereof with the Commission, a copy of any
Exchange Offer Registration Statement and any Shelf Registration Statement, and each amendment thereof and each amendment or supplement, if any, to the Prospectus included therein (including all
documents incorporated by reference therein after the initial filing) and shall use its reasonable efforts to reflect in each such document, when so filed with the Commission, such comments as the
Representatives reasonably propose; 

        (ii)   include
the information set forth in Annex A hereto on the facing page of the Exchange Offer Registration Statement, in Annex B hereto in the forepart of the Exchange
Offer Registration Statement in a section setting forth details of the Exchange Offer, in Annex C hereto in the underwriting or plan of distribution section of the Prospectus contained in the Exchange
Offer Registration Statement, and in Annex D hereto in the letter of transmittal delivered pursuant to the Registered Exchange Offer; 

6

 

        (iii)  if
requested by an Initial Purchaser, include the information required by Item 507 or 508 of Regulation S-K, as applicable, in the Prospectus
contained in the Exchange Offer Registration Statement; and 

        (iv)  in
the case of a Shelf Registration Statement, include the names of the Holders that propose to sell Securities pursuant to the Shelf Registration Statement as selling
security holders. 

        (b)   The
Company shall ensure that: 

        (i)    any
Registration Statement and any amendment thereto and any Prospectus forming part thereof and any amendment or supplement thereto complies in all material respects
with the Act; and 

        (ii)   any
Registration Statement and any amendment thereto does not, when it becomes effective, contain 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. 

        (c)   The
Company shall advise the Representatives, the Holders of Securities covered by any Shelf Registration Statement and any Exchanging Dealer under any Exchange Offer
Registration Statement that has provided in writing to the Company a telephone or facsimile number and address for notices, and, if requested by any Representative or any such Holder or Exchanging
Dealer, shall confirm such advice in writing (which notice pursuant to clauses (ii)-(v) hereof shall be accompanied by an instruction to suspend the use of the Prospectus until the Company
shall have remedied the basis for such suspension): 

        (i)    when
a Registration Statement and any amendment thereto has been filed with the Commission and when the Registration Statement or any post effective amendment thereto
has become effective; 

        (ii)   of
any request by the Commission for any amendment or supplement to the Registration Statement or the Prospectus or for additional information; 

        (iii)  of
the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the institution or threatening of any proceeding for
that purpose; 

        (iv)  of
the receipt by the Company of any notification with respect to the suspension of the qualification of the securities included therein for sale in any jurisdiction or
the institution or threatening of any proceeding for such purpose; and 

        (v)   of
the happening of any event that requires any change in the Registration Statement or the Prospectus so that, as of such date, they (A) do not contain any
untrue statement of a material fact and (B) do not omit to state a material fact required to be stated therein or necessary to make the statements therein (in the case of the Prospectus, in the
light of the circumstances under which they were made) not misleading. 

        (d)   The
Company shall use its reasonable efforts to prevent the issuance of any order suspending the effectiveness of any Registration Statement or the qualification of the
securities therein for sale in any jurisdiction and, if issued, to obtain as soon as possible the withdrawal thereof. 

        (e)   The
Company shall furnish to each Holder of Securities covered by any Shelf Registration Statement, without charge, at least one copy of such Shelf Registration
Statement and any post-effective amendment thereto, including all material incorporated therein by reference, and, if the Holder so requests in writing, all exhibits thereto (including
exhibits incorporated by reference therein). 

7

 

        (f)    The
Company shall, during the Shelf Registration Period, deliver to each Holder of Securities covered by any Shelf Registration Statement, without charge, as many copies
of the Prospectus (including the Preliminary Prospectus) included in such Shelf Registration Statement and any amendment or supplement thereto as such Holder may reasonably request. The Company
consents to the use of the Prospectus or any amendment or supplement thereto by each of the selling Holders of Securities in connection with the offering and sale of the Securities covered by the
Prospectus, or any amendment or supplement thereto, included in the Shelf Registration Statement. 

        (g)   The
Company shall furnish to each Exchanging Dealer which so requests, without charge, at least one copy of the Exchange Offer Registration Statement and any
post-effective amendment thereto, including all material incorporated by reference therein, and, if the Exchanging Dealer so requests in writing, all exhibits thereto (including exhibits
incorporated by reference therein). 

        (h)   The
Company shall promptly deliver to each Initial Purchaser, each Exchanging Dealer and each other person required to deliver a Prospectus during the Exchange Offer
Registration Period, without charge, as many copies of the Prospectus included in such Exchange Offer Registration Statement and any amendment or supplement thereto as any such person may reasonably
request. The Company consents to the use of the Prospectus or any amendment or supplement thereto by any Initial Purchaser, any Exchanging Dealer and any such other person that may be required to
deliver a Prospectus following the Registered Exchange Offer in connection with the offering and sale of the New Securities covered by the Prospectus, or any amendment or supplement thereto, included
in the Exchange Offer Registration Statement. 

        (i)    Prior
to the Registered Exchange Offer or any other offering of Securities pursuant to any Registration Statement, the Company shall arrange, if necessary, for the
qualification of the Securities or the New Securities for sale under the laws of such jurisdictions as any Holder shall reasonably request and shall maintain such qualification in effect so long as
required; provided that in no event shall the Company be obligated to qualify to do business in any jurisdiction where it is not then so qualified or to take any action that would subject it to
service of process in suits, other than those arising out of the Initial Placement, the Registered Exchange Offer or any offering pursuant to a Shelf Registration Statement, in any such jurisdiction
where it is not then so subject. 

        (j)    The
Company shall cooperate with the Holders of Securities to facilitate the timely preparation and delivery of certificates representing New Securities or Securities to
be issued or sold pursuant to any Registration Statement free of any restrictive legends and in such denominations and registered in such names as Holders may request. 

        (k)   (i)
Upon the occurrence of any event contemplated by subsections (c)(ii) through (v) above, the Company shall promptly (or within the time period provided
for by clause (ii) hereof, if applicable) prepare a post-effective amendment to the applicable Registration Statement or an amendment or supplement to the related Prospectus or file
any other required document so that, as thereafter delivered to Initial Purchasers of the securities included therein, the Prospectus will not include an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. In such circumstances,
the period of effectiveness of the Exchange Offer Registration Statement provided for in Section 2 shall be extended by the number of days from and including the date of the giving of a notice
of suspension pursuant to Section 4(c) to and including the date when the Initial Purchasers, the Holders of the Securities and any known Exchanging Dealer shall have received such amended or
supplemented Prospectus pursuant to this Section. 

        (ii)   Upon
the occurrence or existence of any pending corporate development or any other material event that, in the reasonable judgment of the Company, makes it appropriate 

8

 

to
suspend the availability of a Shelf Registration Statement and the related Prospectus, the Company shall give notice (without notice of the nature or details of such events) to the Holders that the
availability of the Shelf Registration is suspended and, upon actual receipt of any such notice, each Holder agrees not to sell any Registrable Securities pursuant to the Shelf Registration until such
Holder's receipt of copies of the supplemented or amended Prospectus provided for in Section 4(k)(i) hereof, or until it is advised in writing by the Company that the Prospectus may be
used, and has received copies of any additional or supplemental filings that are incorporated or deemed incorporated by reference in such Prospectus. The period during which the availability of the
Shelf Registration and any Prospectus is suspended (the "Deferral Period") shall not exceed 45 days in any three-month period or 90 days in any twelve-month period. 

        (l)    Not
later than the effective date of any Registration Statement, the Company shall provide a CUSIP number for the Securities or the New Securities, as the case may be,
registered under such Registration Statement and provide the Trustee with printed certificates for such Securities or New Securities, in a form eligible for deposit with The Depository Trust Company. 

        (m)  The
Company shall comply with all applicable rules and regulations of the Commission and shall make generally available to its security holders an earnings statement
satisfying the provisions of Section 11(a) of the Act as soon as practicable after the effective date of the applicable Registration Statement and in any event no later than 45 days
after the end of a 12-month period (or
90 days, if such period is a fiscal year) beginning with the first month of the Company's first fiscal quarter commencing after the effective date of the applicable Registration Statement. 

        (n)   The
Company shall cause the New Securities Indenture to be qualified under the Trust Indenture Act in a timely manner. 

        (o)   The
Company may require each Holder of Securities to be sold pursuant to any Shelf Registration Statement to furnish to the Company such information regarding the Holder
and the distribution of such securities as the Company may from time to time reasonably require for inclusion in such Registration Statement. The Company may exclude from such Shelf Registration
Statement the Securities of any Holder that unreasonably fails to furnish such information within a reasonable time after receiving such request. 

        (p)   In
the case of any Shelf Registration Statement, the Company shall enter into customary agreements (including, if requested, an underwriting agreement in customary form)
and take all other appropriate actions in order to expedite or facilitate the registration or the disposition of the Securities, and in connection therewith, if an underwriting agreement is entered
into, cause the same to contain indemnification provisions and procedures no less favorable than those set forth in Section 6 hereof. 

        (q)   In
the case of any Shelf Registration Statement, the Company shall: 

        (i)    make
reasonably available for inspection by the Holders of Securities to be registered thereunder, any underwriter participating in any disposition pursuant to such
Registration Statement, and any attorney, accountant or other agent retained by the Holders or any such underwriter all relevant financial and other records and pertinent corporate documents of the
Company and its subsidiaries; 

9

  

        (ii)   cause
the Company's officers, directors, employees, accountants and auditors to supply all relevant information reasonably requested by the Holders or any such
underwriter, attorney, accountant or agent in connection with any such Registration Statement as is customary for similar due diligence examinations; 

        (iii)  make
such representations and warranties to the Holders of Securities registered thereunder and the underwriters, if any, in form, substance and scope as are
customarily made by issuers to underwriters in primary underwritten offerings and covering matters including, but not limited to, those set forth in the Purchase Agreement; 

        (iv)  obtain
opinions of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the
Managing Underwriters, if any) addressed to each selling Holder and the underwriters, if any, covering such matters as are customarily covered in opinions requested in underwritten offerings and such
other matters as may be reasonably requested by such Holders and underwriters; 

        (v)   obtain
"comfort" letters and updates thereof from the independent certified public accountants of the Company (and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Registration
Statement), addressed to each selling Holder of Securities registered thereunder and the underwriters, if any, in customary form and covering matters of the type customarily covered in "comfort"
letters in connection with primary underwritten offerings; and 

        (vi)  deliver
such documents and certificates as may be reasonably requested by the Majority Holders or the Managing Underwriters, if any, including those to evidence
compliance with Section 4(k) and with any customary conditions contained in the underwriting agreement or other agreement entered into by the Company. 

The
actions set forth in clauses (iii), (iv), (v) and (vi) of this paragraph (q) shall be performed at (A) the effectiveness of such Registration Statement and each
post-effective amendment thereto; and (B) each closing under any underwriting or similar agreement as and to the extent required thereunder. 

        (r)   In
the case of any Exchange Offer Registration Statement, the Company shall, if requested by an Initial Purchaser, or by a Broker-Dealer that holds Securities that were
acquired as a result of market-making or other trading activities: 

        (i)    make
reasonably available for inspection by the requesting party, and any attorney, accountant or other agent retained by the requesting party, all relevant financial
and other records, pertinent corporate documents and properties of the Company and its subsidiaries; 

        (ii)   cause
the Company's officers, directors, employees, accountants and auditors to supply all relevant information reasonably requested by the requesting party or any such
attorney, accountant or agent in connection with any such Registration Statement as is customary for similar due diligence examinations; 

        (iii)  make
such representations and warranties to the requesting party, in form, substance and scope as are customarily made by issuers to underwriters in primary
underwritten offerings and covering matters including, but not limited to, those set forth in the Purchase Agreement; 

        (iv)  obtain
opinions of counsel to the Company and updates thereof (which counsel and opinions (in form, scope and substance) shall be reasonably satisfactory to the
requesting party and its counsel, addressed to the requesting party, covering such matters as are customarily 

10

 

covered
in opinions requested in underwritten offerings and such other matters as may be reasonably requested by the requesting party or its counsel; 

        (v)   obtain
"comfort" letters and updates thereof from the independent certified public accountants of the Company (and, if necessary, any other independent certified public
accountants of any subsidiary of the Company or of any business acquired by the Company for which financial statements and financial data are, or are required to be, included in the Registration
Statement), addressed to the requesting party, in customary form and covering matters of the type customarily covered in "comfort" letters in connection with primary underwritten offerings, or if
requested by the requesting party or its counsel in lieu of a "comfort" letter, an agreed-upon procedures letter under Statement on Auditing Standards No. 35, covering matters
requested by the requesting party or its counsel; and 

        (vi)  deliver
such documents and certificates as may be reasonably requested by the requesting party or its counsel, including those to evidence compliance with
Section 4(k) and with conditions customarily contained in underwriting agreements. 

The
foregoing actions set forth in clauses (iii), (iv), (v), and (vi) of this Section shall be performed at the close of the Registered Exchange Offer and the effective date of any
post-effective amendment to the Exchange Offer Registration Statement. 

        (s)   If
a Registered Exchange Offer is to be consummated, upon delivery of the Securities by Holders to the Company (or to such other person as directed by the Company) in
exchange for the New Securities, the Company shall mark, or caused to be marked, on the Securities so exchanged that such Securities are being cancelled in exchange for the New Securities. In no event
shall the Securities be marked as paid or otherwise satisfied. 

        (t)    The
Company shall use its reasonable efforts if the Securities have been rated prior to the initial sale of such Securities, to confirm such ratings will apply to the
Securities or the New Securities, as the case may be, covered by a Registration Statement. 

        (u)   In
the event that any Broker-Dealer shall underwrite any Securities or participate as a member of an underwriting syndicate or selling group or "assist in the
distribution" (within the meaning of the NASD Rules) thereof, whether as a Holder of such Securities or as an underwriter, a placement or sales agent or a broker or dealer in respect thereof, or
otherwise, the Company shall assist such Broker-Dealer in complying with the NASD Rules. 

        (v)   The
Company shall use its reasonable efforts to take all other steps necessary to effect the registration of the Securities or the New Securities, as the case may be,
covered by a Registration Statement. 

        5.    Registration Expenses.    The Company shall bear all expenses incurred in connection with the performance of its
obligations under Sections 2, 3 and 4 hereof and, in the event of any Shelf Registration Statement, will reimburse the Holders for the reasonable fees and disbursements of one firm or counsel (which
shall initially be Cravath, Swaine & Moore LLP, but which may be another nationally recognized law firm experienced in securities matters designated by the Majority Holders) to act as counsel
for the Holders in connection therewith, and, in the case of any Exchange Offer Registration Statement, will reimburse the Initial Purchasers for the reasonable fees and disbursements of counsel
acting in connection therewith. 

        6.    Indemnification and Contribution.    (a) The Company agrees to indemnify and hold harmless each Holder of
Securities or New Securities, as the case may be, covered by any Registration Statement, each Initial Purchaser and, with respect to any Prospectus delivery as contemplated in Section 4(h)
hereof, each Exchanging Dealer, the directors, officers, employees, Affiliates and agents of each such Holder, Initial Purchaser or Exchanging Dealer and each person 

11

 

who
controls any such Holder, Initial Purchaser or Exchanging Dealer within the meaning of either the Act or the Exchange Act against any and all losses, claims, damages or liabilities, joint or
several, to which they or any of them may become subject under the Act, the Exchange Act or other federal or state statutory law or regulation, at common law or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon any untrue statement or alleged untrue statement of a material fact contained in the Registration
Statement as originally filed or in any amendment thereof, or in any preliminary Prospectus or the Prospectus, or in any amendment thereof or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein (in the case of any preliminary Prospectus or the Prospectus, in
the light of the circumstances under which they were made) not misleading, and agrees to reimburse each such indemnified party, as incurred, for any legal or other expenses reasonably incurred by it
in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the Company will not be liable in any such case to the extent that any such
loss, claim, damage or liability arises out of or is based upon any such untrue statement or alleged untrue statement or omission or alleged omission made therein in reliance upon and in conformity
with written information furnished to the Company by or on behalf of the party claiming indemnification specifically for inclusion therein. This indemnity agreement shall be in addition to any
liability that the Company may otherwise have. 

        The
Company also agrees to indemnify as provided in this Section 6(a) or contribute as provided in Section 6(d) hereof to Losses of each underwriter, if any, of Securities
or New Securities, as the case may be, registered under a Shelf Registration Statement, their directors, officers, employees, Affiliates or agents and each person who controls such underwriter on
substantially the same basis as that of the indemnification of the Initial Purchasers and the selling Holders provided in this Section 6(a) and shall, if requested by any Holder, enter into an
underwriting agreement reflecting such agreement, as provided in Section 4(p) hereof. 

        (b)   Each
Holder of securities covered by a Registration Statement (including each Initial Purchaser that is a Holder, in such capacity) severally and not jointly agrees to
indemnify and hold harmless the Company, each of its directors, each of its officers who signs such Registration Statement and each person who controls the Company within the meaning of either the Act
or the Exchange Act, to the same extent as the foregoing indemnity from the Company to each such Holder, but only with reference to written information relating to such Holder furnished to the Company
by or on behalf of such Holder specifically for inclusion in the documents referred to in the foregoing indemnity. This indemnity agreement will be in addition to any liability that any such Holder
may otherwise have. 

        (c)   Promptly
after receipt by an indemnified party under this Section 6 or notice of the commencement of any action, such indemnified party will, if a claim in
respect thereof is to be made against the indemnifying party under this Section, notify the indemnifying party in writing of the commencement thereof; but the failure so to notify the indemnifying
party (i) will not relieve it from liability under paragraph (a) or (b) above unless and to the extent it did not otherwise learn of such action and such failure results in the
forfeiture by the indemnifying party of substantial rights and defenses; and (ii) will not, in any event, relieve the indemnifying party from any obligations to any indemnified party other than
the indemnification obligation provided in paragraph (a) or (b) above. The indemnifying party shall be entitled to appoint counsel (including local counsel) of the indemnifying party's
choice at the indemnifying party's expense to represent the indemnified party in any action for which indemnification is sought (in which case the indemnifying party shall not thereafter be
responsible for the fees and expenses of any separate counsel, other than local counsel if not appointed by the indemnifying party, retained by the indemnified party or parties except as set forth
below); provided, however, that such counsel shall 

12

 

be
satisfactory to the indemnified party. Notwithstanding the indemnifying party's election to appoint counsel (including local counsel) to represent the indemnified party in an action, the
indemnified party shall have the right to employ separate counsel (including local counsel), and the indemnifying party shall bear the reasonable fees, costs and expenses of such separate counsel if
(i) the use of counsel chosen by the indemnifying party to represent the indemnified party would present such counsel with a conflict of interest; (ii) the actual or potential defendants
in, or targets of, any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded that there may be legal defenses available to
it and/or other indemnified parties that are different from or additional to those available to the indemnifying party; (iii) the indemnifying party shall not have employed counsel satisfactory
to the indemnified party to represent the indemnified party within a reasonable time after notice of the institution of such action; or (iv) the indemnifying party shall authorize the
indemnified party to employ separate counsel at the expense of the indemnifying party. An indemnifying party will not, without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought
hereunder (whether or not the indemnified parties are actual or potential parties to such claim or action) unless such settlement, compromise or consent includes an unconditional release of each
indemnified party from all liability arising out of such claim, action, suit or proceeding. 

        (d)   In
the event that the indemnity provided in paragraph (a) or (b) of this Section is unavailable to or insufficient to hold harmless an indemnified party
for any reason, then each applicable indemnifying party shall have a joint and several obligation to contribute to the aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating or defending any loss, claim, liability, damage or action) (collectively "Losses") to which such indemnified party may be subject in such
proportion as is appropriate to reflect the relative benefits received by such indemnifying party, on the one hand, and such indemnified party, on the other hand, from the Initial Placement and the
Registration Statement which resulted in such Losses; provided, however, that in no case shall any
Initial Purchaser be responsible, in the aggregate, for any amount in excess of the purchase discount or commission applicable to such Security, or in the case of a New Security, applicable to the
Security that was exchangeable into such New Security, as set forth in the Final Memorandum, nor shall any underwriter be responsible for any amount in excess of the underwriting discount or
commission applicable to the securities purchased by such underwriter under the Registration Statement which resulted in such Losses. If the allocation provided by the immediately preceding sentence
is unavailable for any reason, the indemnifying party and the indemnified party shall contribute in such proportion as is appropriate to reflect not only such relative benefits but also the relative
fault of such indemnifying party, on the one hand, and such indemnified party, on the other hand, in connection with the statements or omissions which resulted in such Losses as well as any other
relevant equitable considerations. Benefits received by the Company shall be deemed to be equal to the total net proceeds from the Initial Placement (before deducting expenses) as set forth in the
Final Memorandum. Benefits received by the Initial Purchasers shall be deemed to be equal to the total purchase discounts and commissions as set forth on the cover page of the Final Memorandum, and
benefits received by any other Holders shall be deemed to be equal to the value of receiving Securities or New Securities, as applicable, registered under the Act. Benefits received by any underwriter
shall be deemed to be equal to the total underwriting discounts and commissions, as set forth on the cover page of the Prospectus forming a part of the Registration Statement which resulted in such
Losses. Relative fault shall be determined by reference to, among other things, whether any untrue or any alleged untrue statement of a material fact or omission or alleged omission to state a
material fact relates to information provided by the indemnifying party, on the one hand, or by the indemnified party, on the other hand, the intent of the parties and 

13

 

their
relative knowledge, access to information and opportunity to correct or prevent such untrue statement or omission. The parties agree that it would not be just and equitable if contribution were
determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or any other method of allocation which does not take account of the equitable considerations
referred to above. Notwithstanding the provisions of this paragraph (d), no person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. For purposes of this Section, each person who controls a Holder within the meaning of either the Act
or the Exchange Act and each director, officer, employee and agent of such Holder shall have the same rights to contribution as such Holder, and each person who controls the Company within the meaning
of either the Act or the Exchange Act, each officer of the Company who shall have signed the Registration Statement and each director of the Company shall have the same rights to contribution as the
Company, subject in each case to the applicable terms and conditions of this paragraph (d). 

        (e)   The
provisions of this Section will remain in full force and effect, regardless of any investigation made by or on behalf of any Holder or the Company or any of the
indemnified persons referred to in this Section 6, and will survive the sale by a Holder of securities covered by a Registration Statement. 

        7.    Underwritten Registrations.    (a) If any of the Securities or New Securities, as the case may be,
covered by any Shelf Registration Statement are to be sold in an underwritten offering, the Managing Underwriters shall be selected by the Majority Holders. 

        (b)   No
person may participate in any underwritten offering pursuant to any Shelf Registration Statement, unless such person (i) agrees to sell such person's
Securities or New Securities, as the case may be, on the basis reasonably provided in any underwriting arrangements approved by the persons entitled hereunder to approve such arrangements; and
(ii) completes and executes all questionnaires, powers of attorney, indemnities, underwriting agreements and other documents reasonably required under the terms of such underwriting
arrangements. 

        8.    Registration Defaults.    If any of the following events shall occur, then the Company shall pay liquidated
damages (the "Registration Default Damages") to the Holders of Securities in respect of the Securities as follows: 

        (a)   if
any Registration Statement required by this Agreement is not filed with the Commission on or prior to the 90th day following the date of original issuance of the
Securities, then Registration Default Damages shall accrue on the Registrable Securities at a rate of 0.25% per annum for the first 90 days from and including such specified date and 0.50% per
annum thereafter; 

        (b)   if
any Registration Statement required by this Agreement is not declared effective by the Commission on or prior to the 195th day following the date of original issuance
of the Securities, then commencing on the day after such specified date, Registration Default Damages shall accrue on the Registrable Securities at a rate of 0.25% per annum for the first
90 days from and including such specified date and 0.50% per annum thereafter; 

        (c)   if
neither the Registered Exchange Offer has been consummated nor the Shelf Registration Statement has been declared effective on or prior to the 225th day following the
date of original issuance of the Securities, Registration Default Damages shall accrue on the Registrable Securities at a rate of 0.25% per annum for the first 90 days from and including such
specified date and 0.50% per annum thereafter; or 

        (d)   if
any Registration Statement required by this Agreement has been declared effective but ceases to be effective at any time at which it is required to be effective under
this 

14

 

Agreement,
then commencing on the day the Registration Statement ceases to be effective, Registration Default Damages shall accrue on the Registrable Securities at a rate of 0.25% per annum for the
first 90 days from and including such date on which the Registration Statement ceases to be effective and 0.50% per annum thereafter; 

provided, however, that (1) upon the filing of the Registration Statement (in the case of
paragraph (a) above), (2) upon the effectiveness of the Registration Statement (in the case of paragraph (b) above), (3) upon the consummation of the Registered Exchange
Offer or the effectiveness of the Shelf Registration Statement (in the case of paragraph (c) above), or (4) upon the effectiveness of the Registration Statement which had ceased to
remain effective (in the case of paragraph (d) above), Registration Default Damages shall cease to accrue. At no time will the aggregate of any such Registration Default Damages accrue at a
rate greater than 0.50% per annum. 

        9.    No Inconsistent Agreements.    The Company has not entered into, and agrees not to enter into, any agreement
with respect to its securities that is inconsistent with the rights granted to the Holders herein or that otherwise conflicts with the provisions hereof. 

        10.    Amendments and Waivers.    The provisions of this Agreement may not be amended, qualified, modified or
supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of the Holders of a majority of the aggregate
principal amount of the Registrable Securities outstanding; provided that, with respect to any matter that directly or indirectly affects the rights of
any Initial Purchaser hereunder, the Company shall obtain the written consent of each such Initial Purchaser against which such amendment, qualification, supplement, waiver or consent is to be
effective; provided further that no amendment, qualification, supplement, waiver or consent with respect to Section 8 hereof shall be effective
as against any Holder of Registered Securities unless consented to in writing by such Holder; and provided, further, that the provisions of this Article 10 may not be amended, qualified,
modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given, unless the Company has obtained the written consent of the Initial Purchasers and each
Holder. Notwithstanding the foregoing (except the foregoing provisos), a waiver or consent to departure from the provisions hereof with respect to a matter that relates exclusively to the rights of
Holders whose Securities or New Securities, as the case may be, are being sold pursuant to a Registration Statement and that does not directly or indirectly affect the rights of other Holders may be
given by the Majority Holders, determined on the basis of Securities or New Securities, as the case may be, being sold rather than registered under such Registration Statement. 

        11.    Notices.    All notices and other communications provided for or permitted hereunder shall be made in writing
by hand-delivery, first-class mail, telex, telecopier or air courier guaranteeing overnight delivery: 

        (a)   if
to a Holder, at the most current address given by such holder to the Company in accordance with the provisions of this Section 11, which address initially is,
with respect to each Holder, the address of such Holder maintained by the Registrar under the Indenture; 

        (b)   if
to the Representatives, initially at the address or addresses set forth in the Purchase Agreement; and 

        (c)   if
to the Company, initially at its address set forth in the Purchase Agreement. 

        All
such notices and communications shall be deemed to have been duly given when received. 

        The
Initial Purchasers or the Company by notice to the other parties may designate additional or different addresses for subsequent notices or communications. 

15

 

        12.    Remedies.    Each Holder, in addition to being entitled to exercise all rights provided to it herein, in the
Indenture or in the Purchase Agreement or granted by law, including recovery of liquidated or other damages, will be entitled to specific performance of its rights under this Agreement. The Company
agrees that monetary damages would not be adequate compensation for any loss incurred by reason of a breach by it of the provisions of this Agreement and hereby agrees to waive in any action for
specific performance the defense that a remedy at law would be adequate. 

        13.    Successors.    This Agreement shall inure to the benefit of and be binding upon the parties hereto, their
respective successors and assigns, including, without the need for an express assignment or any consent by the Company thereto, subsequent Holders of Securities and the New Securities, and the
indemnified persons referred to in Section 6 hereof. The Company hereby agrees to extend the benefits of this Agreement to any Holder of Securities and the New Securities, and any such Holder
may specifically enforce the provisions of this Agreement as if an original party hereto. 

        14.    Counterparts.    This Agreement may be signed in one or more counterparts, each of which shall constitute an
original and all of which together shall constitute one and the same agreement. 

        15.    Headings.    The section headings used herein are for convenience only and shall not affect the construction
hereof. 

        16.    Applicable Law.    This Agreement shall be governed by and construed in accordance with the laws of the State
of New York applicable to contracts made and to be performed in the State of New York. The parties hereto each hereby waive any right to trial by jury in any action, proceeding or counterclaim arising
out of or relating to this Agreement. 

        17.    Severability.    In the event that any one or more of the provisions contained herein, or the application
thereof in any circumstances, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the
remaining provisions hereof shall not be in any way impaired or affected thereby, it being intended that all of the rights and privileges of the parties shall be enforceable to the fullest extent
permitted by law. 

        18.    Securities Held by the Company, etc.    Whenever the consent or approval of Holders of a specified percentage
of principal amount of Securities or New Securities is required hereunder, Securities or New Securities, as applicable, held by the Company or its Affiliates (other than subsequent Holders of
Securities or New Securities if such subsequent Holders are deemed to be Affiliates solely by reason of their holdings of such Securities or New Securities) shall not be counted in determining whether
such consent or approval was given by the Holders of such required percentage. 

16

 

        If
the foregoing is in accordance with your understanding of our agreement, please sign and return to us the enclosed duplicate hereof, whereupon this letter and your acceptance shall
represent a binding agreement between the Company and the several Initial Purchasers. 

	 	 	Very truly yours,
	

 	
 	

Brinker International, Inc.
	

 	
 	

By:	

/s/  DOUGLAS H. BROOKS      
 Name: Douglas H. Brooks

Title: President and Chief Executive Officer
	 	 	 	 

	The foregoing Agreement is hereby confirmed and accepted as of the date first above written.	 	 
	

Citigroup Global Markets Inc.

J.P. Morgan Securities Inc.	
 	

 
	

By:	
 	

Citigroup Global Markets Inc.	
 	

 
	

By	
 	

/s/  MICHAEL A. ECK      
 Name: Michael A. Eck

Title: Managing Director	
 	

 
	

By:	
 	

J.P. Morgan Securities Inc.	
 	

 
	

By	
 	

/s/  MARIA SRAMEK      
 Name: Maria Sramek

Title: Vice President	
 	

 
	

For themselves and the other several Initial Purchasers named in Schedule I to the Purchase Agreement.	
 	

 

17

   ANNEX A  

        Each broker-dealer that receives new securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such new securities. The Letter of Transmittal states that by so acknowledging and by delivering a prospectus, a broker-dealer will not be deemed to admit that it is an
"underwriter" within the meaning of the Act. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of new securities
received in exchange for securities where such securities were acquired by such broker-dealer as a result of market-making activities or other trading activities. The company has agreed that, starting
on the expiration date and ending on the close of business one year after the expiration date, it will make this prospectus available to any broker-dealer for use in connection with any such resale.
See "Plan of Distribution". 

A-1

   ANNEX B  

        Each broker-dealer that receives new securities for its own account in exchange for securities, where such securities were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge that it will deliver a prospectus in connection with any resale of such new securities. See "Plan of Distribution". 

B-1

   ANNEX C  

 PLAN OF DISTRIBUTION  

        Each broker-dealer that receives new securities for its own account pursuant to the Exchange Offer must acknowledge that it will deliver a prospectus in
connection with any resale of such new securities. This prospectus, as it may be amended or supplemented from time to time, may be used by a broker-dealer in connection with resales of new securities
received in exchange for securities where such securities were acquired as a result of market-making activities or other trading activities. The company has agreed that, starting on the expiration
date and ending on the close of business one year after the expiration date, it will make this prospectus, as amended or supplemented, available to any broker-dealer for use in connection with any
such resale. In addition, until [            ], 200[    ] all dealers effecting transactions in the new securities may be required to
deliver a prospectus. 

        The
company will not receive any proceeds from any sale of new securities by brokers-dealers. New securities received by broker-dealers for their own account pursuant to the Exchange
Offer may be sold from time to time in one or more transactions in the over-the-counter market, in negotiated transactions, through the writing of options on the new securities
or a combination of such methods of resale, at market prices prevailing at the time of resale, at prices related to such prevailing market prices or negotiated prices. Any such resale may be made
directly to purchasers or to or through brokers or dealers who may receive compensation in the form of commissions or concessions from any such broker-dealer and/or the purchasers of any such new
securities. Any broker-dealer that resells new securities that were received by it for its own account pursuant to the Exchange Offer and any broker or dealer that participates in a distribution of
such new securities may be deemed to be an "underwriter" within the meaning of the Act and any profit of any such resale of new securities and any commissions or concessions received by any such
persons may be deemed to be underwriting compensation under the Act. The Letter of Transmittal states that by acknowledging that it will deliver and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the Act. 

        For
a period of one year after the expiration date, the company will promptly send additional copies of this prospectus and any amendment or supplement to this prospectus to any
broker-dealer that requests such documents in the Letter of Transmittal. The company has agreed to pay all expenses incident to the Exchange Offer (including the expenses of one counsel for the holder
of the securities) other than commissions or concessions of any brokers or dealers and will indemnify the holders of the securities (including any broker-dealers) against certain liabilities,
including liabilities under the Act. 

        [If
applicable, add information required by Regulation S-K Items 507 and/or 508.] 

C-1

   ANNEX D  

Rider A  

        PLEASE FILL IN YOUR NAME AND ADDRESS BELOW IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS
OR SUPPLEMENTS THERETO. 

	Name:	 	          

	Address:	 	          
          

Rider B  

        If the undersigned is not a Broker-Dealer, the undersigned represents that it acquired the New Securities in the ordinary course of its business, it is not
engaged in, and does not intend to engage in, a distribution of New Securities and it has no arrangements or understandings with any person to participate in a distribution of the New Securities. If
the undersigned is a Broker-Dealer that will receive New Securities for its own account in exchange for Securities, it represents that the Securities to be exchanged for New Securities were acquired
by it as a result of market-making activities or other trading activities and acknowledges that it will deliver a prospectus in connection with any resale of such New Securities; however, by so
acknowledging and by delivering a prospectus, the undersigned will not be deemed to admit that it is an "underwriter" within the meaning of the Act. 

D-1

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Exhibit 4.2QuickLinks
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Exhibit 4.2    
    

 
  IKANOS COMMUNICATIONS
  FOURTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT    
    

        THIS FOURTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT (this"Agreement") is made as of the 5th day of
March 2004, by and among Ikanos Communications (f/k/a Velocity Communication) (the "Company"), a California corporation, the investors in the
Series A Preferred Stock listed in Exhibit A attached hereto (the "Series A
Investors"), the investors in the Series B Preferred Stock listed in Exhibit B attached hereto (the
"Series B Investors"), the investors in the Series C Preferred Stock listed in  Exhibit C attached hereto (the "Series C Investors"), the investors in the Series D
Preferred Stock listed in Exhibit D attached hereto (the "Series D Investors"), the
investors in the Series E Preferred Stock listed in Exhibit E attached hereto (the "Series E
Investors"), and Behrooz Rezvani (the "Founder"). 

RECITALS  

        WHEREAS, the Company, the Series A Investors, the Series B Investors, the Series C Investors, the Series D Investors and the Founder
are parties to that certain Third Amended and Restated Investor Rights Agreement dated as of January 30, 2003 (the "2003 Rights Agreement"),
pursuant to which the Series A Investors, the Series B Investors, the Series C Investors, the Series D Investors and the Founder were granted certain rights regarding
registration of the Company's securities under the Securities Act of 1933, as amended ("Registration Rights"), and other rights; 

        WHEREAS,
the Series E Investors, in connection with their proposal to purchase certain shares of the Company's Series E Preferred Stock pursuant to the Series E
Preferred Stock Purchase Agreement (the "Series E Agreement") dated of even date herewith by and among the Company and the Series E
Investors, desire to obtain the rights provided for herein; 

        WHEREAS,
the Company, the Series A Investors, the Series B Investors, the Series C Investors, the Series D Investors and the Founder, to induce the
Series E Investors to purchase the Series E Preferred Stock, desire to terminate the 2003 Rights Agreement and further desire that this Agreement supercede and replace the 2003 Rights
Agreement in its entirety; and 

        WHEREAS,
the 2003 Rights Agreement may be amended or modified upon written consent of the Company and those Series A Investors, Series B Investors, the Series C
Investors and the Series D Investors who hold at least two-thirds (2/3) of the Registrable Securities (as such term is defined in the 2003 Rights Agreement),
excluding any shares held by the Founder; 

        NOW,
THEREFORE, in consideration of the foregoing, the mutual promises set forth herein and other good and valuable consideration, the receipt of which is hereby acknowledged, the
parties hereto agree, subject to the closing of the purchase of Series E Preferred Stock pursuant to the Series E Agreement, as follows: 

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

        "Commission" shall mean the Securities and Exchange Commission or any other federal agency at the time administering the Securities Act. 

        "Common Stock" shall mean the common stock of the Company. 

        "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. 

        "Holder" shall mean any holder, or a transferee or an assignee under Section 14 hereof, of Registrable
Securities which, for purposes hereof, includes Registrable Securities issuable upon conversion of any Shares (as defined below). 

        "Initiating Holders" shall mean any Holders who in the aggregate are Holders of thirty percent (30%) or more of the outstanding
Registrable Securities. 

        "Investors" shall mean the Series A Investors, the Series B Investors, the Series C Investors, the Series D
Investors and the Series E Investors, collectively. 

        The
terms "register," "registered," and
"registration" shall 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. 

        "Lighthouse" shall mean Lighthouse Capital Partners III, L.P. 

        "Registrable Securities," subject to Section 6 hereof, shall mean shares of Common Stock (i) issued or issuable pursuant to
the conversion of the Shares (as defined below), (ii) issued in respect of securities issued pursuant to the conversion of the Shares upon any stock split, stock dividend, recapitalization,
substitution, or similar event, (iii) held by TeleSoft Partners IA, L.P., TeleSoft Strategic Side Fund I, L.L.C., and Anthelion Capital II, L.P. as of February 14, 2000 (as adjusted for
any stock splits, stock dividends, recapitalizations, substitutions, or similar events), (iv) held by the Founder, but only to the extent provided by Section 6(c) hereof and
(v) held by Lighthouse, including, without limitation, shares of Common Stock issued or issuable upon conversion of any Shares or other convertible securities held by Lighthouse or issued or
issuable upon the exercise of any warrant or warrants held by Lighthouse. 

        "Registration Expenses" shall mean all expenses (excluding underwriting discounts and selling commissions) incurred in connection with a
registration under Sections 5, 6, and 8 hereof, including, without limitation, all registration and filing fees, printing expenses, 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, and the reasonable fees and expenses of one counsel for the selling Investors (but excluding the
compensation of regular employees of the Company, which shall be paid in any event by the Company). 

        "Restricted Securities" shall mean the securities of the Company required to bear or bearing the legend set forth in Section 3
hereof. 

        "Rule 144" and "Rule 144(k)" shall mean Rule 144 and
Rule 144(k), respectively, promulgated under the Securities Act as in effect at the time in question and any successor to Rule 144 or Rule 144(k) and any similar exemption adopted
in the future. 

        "Securities Act" shall mean the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. 

        "Selling Expenses" shall mean all underwriting discounts and selling commissions applicable to the sale of Registrable Securities. 

        "Shares" shall mean outstanding shares of the Company's Series A Preferred Stock, outstanding shares of the Company's
Series B Preferred Stock, including, without limitation, those shares of Series B Preferred Stock issued or issuable to Lighthouse upon exercise of any warrant or warrants held by
Lighthouse, outstanding shares of the Company's Series C Preferred Stock, outstanding shares of the Company's Series D Preferred Stock and outstanding shares of the Company's
Series E Preferred Stock. 

        2.     Restrictions on Transferability. The Restricted Securities held by the Investors shall not be transferred except upon the
conditions specified in this Agreement, which conditions are intended to insure compliance with the provisions of the Securities Act or, in the case of Section 14 hereof, to assist in an
orderly distribution. Each Investor will cause any proposed transferee of Restricted Securities held by that Investor to agree to take and hold those securities subject to the provisions and upon the
conditions specified in this Agreement. 

        3.     Restrictive Legend. Each certificate representing (i) the Shares, and (ii) shares of the Company's Common
Stock issued upon conversion of the Shares, and (iii) any other securities issued in 

respect
of the Shares, or the Common Stock issued upon conversion of the Shares, upon any stock split, stock dividend, recapitalization, merger, consolidation or similar event, shall (unless otherwise
permitted or unless the securities evidenced by such certificate shall have been registered under the Securities Act) be stamped or otherwise imprinted with a legend substantially in the following
form (in addition to any legend required under applicable state securities laws): 

THE
SHARES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, (THE "ACT") OR ANY STATE SECURITIES LAWS. SUCH
SHARES MAY NOT BE SOLD OR OFFERED FOR SALE IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY AND ITS COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED UNDER THE
ACT. COPIES OF THE AGREEMENT COVERING THE PURCHASE OF THESE SHARES AND RESTRICTING THEIR TRANSFER MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF THE CORPORATION AT THE PRINCIPAL EXECUTIVE OFFICE OF THE CORPORATION. 

THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A LOCK-UP PERIOD OF UP TO 180 DAYS FOLLOWING THE EFFECTIVE DATE OF A REGISTRATION STATEMENT OF THE COMPANY FILED UNDER THE ACT, AS
SET FORTH IN AN AGREEMENT BETWEEN THE COMPANY AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE COMPANY. SUCH LOCK-UP PERIOD IS
BINDING ON TRANSFEREES OF THESE SHARES. 

        Upon
request of a holder of such a certificate, the Company shall remove the foregoing legend from the certificate or issue to such holder a new certificate therefor free of any transfer
legend, if, with such request, the Company shall have received either the opinion referred to in Section 4(i) or the "no-action" letter referred to in
Section 4(ii) to the effect that any transfer by such holder of the securities evidenced by such certificate will not violate the Securities Act and applicable state securities laws,
unless any such transfer legend may be removed pursuant to Rule 144(k), in which case no such opinion or "no-action" letter shall be required, and provided that the Company shall
not be obligated to remove any such legends prior to the date of the initial public offering of the Company's Common Stock under the Securities Act. 

        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. Prior to any proposed transfer of any Restricted Securities (other than under circumstances described in Sections 5, 6
and 8 hereof), the holder thereof shall give written notice to the Company of such holder's intention to effect such transfer. Each such notice shall describe the manner and circumstances of the
proposed transfer in sufficient detail, and shall be accompanied (except in transactions in compliance with Rule 144 promulgated under the Securities Act or for a transfer to a holder's spouse,
ancestors, descendants, affiliated companies, partners, members or a trust for any of their benefit, or in transactions involving the distribution without consideration of Restricted Securities by a
holder to any of its partners or retired partners, or members or retired members of a limited liability company (or a member of a member) or to the estate of any of its partners or retired partners)
by either (i) a written opinion of legal counsel to the holder who shall be reasonably satisfactory to the Company, addressed to the Company and reasonably satisfactory in form and substance to
the Company's counsel, 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 distribution 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 such holder to the
Company. Each certificate evidencing the Restricted Securities transferred as above provided shall bear the restrictive legend set forth in Section 3 above, except that such certificate shall 

not
bear such restrictive legend after the date of the Company's initial public offering under the Securities Act if the opinion of counsel or "no-action" letter referred to above
expressly indicates that such legend is not required in order to establish compliance with the Securities Act or if such legend is no longer required pursuant to Rule 144(k). 

        5.     Requested Registration. 

        (a)   Request for Registration. If, at any time after the earlier of (i) March 5, 2007 (but not within six
(6) months of the effective date of the Company's initial public offering under the Securities Act) and (ii) six months after the date of the Company's initial public offering under the
Securities Act, the Company shall receive from Initiating Holders a written request that the Company effect any
registration covering the sale of a number of Registrable Securities equal to at least the lesser of (i) 10% of the Registrable Securities or (ii) the number of Registrable Securities
that would have an aggregate offering price, net of underwriting discounts and commissions, of at least $5,000,000, the Company will: 

        (i)    within
ten (10) business days give written notice of the proposed registration to all other Holders; and 

        (ii)   use
its reasonable best efforts to effect such registration (including, without limitation, the execution of an undertaking to file post effective amendments,
appropriate qualification under applicable blue sky or other state securities laws and appropriate compliance with applicable regulations issued under the Securities Act) 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 as are specified in a written request delivered to the Company within fifteen (15) days after receipt of the Company's written notice
to such Holders of the Initiating Holders' registration request; provided that the Company shall not be obligated to effect, or to take any action to
effect, any such registration pursuant to this Section 5: 

        (A)  In
any particular jurisdiction in which the Company would be required to execute a general consent to service of process in effecting such registration, qualification or
compliance, unless the Company is already subject to service in such jurisdiction and except as may be required by the Securities Act; 

        (B)  After
the Company has effected two (2) such registrations pursuant to this Section 5(a) and such registrations have been declared or ordered effective and
the sales of such Registrable Securities have closed; 

        (C)  During
the period starting with the date sixty (60) days prior to the Company's good faith estimate of the date of filing of, and ending on a date one hundred
eighty (180) days after the effective date of, a Company-initiated registration; provided that the Company is actively employing in good faith
commercially reasonable efforts to cause such registration statement to become effective; or 

        (D)  If
the Initiating Holders propose to dispose of shares of Registrable Securities which may be immediately registered on Form S-3 pursuant to a request
made under Section 8 hereof, unless the Underwriter (as defined below) requires the registration to be on Form S-1. 

        Subject
to the foregoing clauses (A), (B), (C) and (D), the Company shall file a registration statement covering the Registrable Securities so requested to be registered as
soon as practicable, but in any event within sixty (60) days after receipt of the request or requests of the Initiating Holders; provided,  however,
that if the Company shall furnish to such Holders a certificate signed by the President of the Company stating that in the good faith judgment
of the Board of Directors of the Company, it would be seriously detrimental to the Company and its shareholders for such registration statement to be filed on or before the time filing would be
required and it is therefore essential to 

defer
the filing of such registration statement, the Company shall have the right to defer such filing (but not more than once during any twelve month period) for a period of not more than ninety
(90) days after receipt of the request of the Initiating Holders;; and provided further that the Company shall not register any securities for the account of itself or any other shareholder
during such ninety (90) day period (other than a registration relating solely to the sale of securities of participants in a Company stock plan, a registration relating to a corporate
reorganization or transaction under Rule 145 of the Act, a registration on any form that does not include substantially the same information as would be required to be included in a
registration statement covering the sale of the Registrable Securities, a registration solely of debt securities, or a registration in which the only Common Stock being registered is Common Stock
issuable upon conversion of debt securities that are also being registered). 

        The
registration statement filed pursuant to the request of the Initiating Holders, may, subject to the provisions of Section 5(b) below, include other securities of the Company
which are held by officers or directors of the Company or which are held by persons who, by virtue of agreements with the Company, are entitled to include their securities in any such registration,
but the Company and such officers or directors of the Company or other such persons with registration rights shall have no right to include any of its securities in any such registration except as
provided in Section 5(b) below. 

        (b)   Underwriting. If the Initiating Holders intend to distribute the Registrable Securities covered by their request by means
of an underwriting, they shall so advise the Company as a part of their request made pursuant to Section 5, and the Company shall include such information in the written notice referred to in
Section 5(a)(i) above. The right of any Holder to registration pursuant to Section 5 shall be conditioned upon such Holder's participation in such underwriting and the inclusion
of such Holder's Registrable Securities in the underwriting (unless otherwise mutually agreed by a majority in interest of the Initiating Holders and such Holder with respect to such participation and
inclusion) to the extent provided herein. A Holder may elect to include in such underwriting all or a part of the Registrable Securities he holds. 

        If
officers or directors of the Company shall request inclusion of securities of the Company other than Registrable Securities in any registration pursuant to this Section 5, or
if holders of securities of the Company who are entitled by contract with the Company to have securities included in such a registration (such officers, directors, and other shareholders being
collectively referred to as the "Other Shareholders") request such inclusion, the Initiating Holders shall, on behalf of all Holders, offer to include
the securities of such Other Shareholders in the underwriting and may condition such offer on their acceptance of the further applicable provisions of this Agreement. The Company shall (together with
all Holders and Other Shareholders proposing to distribute their securities through such underwriting) enter into an underwriting agreement in customary form with the representative of the underwriter
or underwriters (the "Underwriter") selected for such underwriting by the Initiating Holders holding at least fifty-one percent (51%) of the
Registrable Securities proposed to be registered by all Initiating Holders and reasonably acceptable to the Company. Notwithstanding any other provision of this Section 5, if the Underwriter in
its sole discretion advises the Company in writing that marketing factors require a limitation on the number of shares to be underwritten, the Company shall (subject to the allocation priority set
forth below) limit the number of Registrable Securities to be included in the registration and underwriting. In such event, the Company shall so advise all holders of securities requesting
registration, and the number of shares of securities that are entitled to be included in the registration and underwriting shall be allocated in the following priority: first, among all Holders of
Registrable Securities (and pro rata among such holders on the basis of all Registrable Securities then held by such holders); and second, among all Other Shareholders in proportion, as nearly as
practicable, to the respective amounts of securities which they had requested to be included in such registration at the time of filing the registration statement. If any Holder or Other Shareholder
disapproves of the terms of any such underwriting, such holder may elect to withdraw therefrom by written notice to the Company and the Underwriter. Any Registrable Securities or other securities
excluded or withdrawn from such underwriting shall be withdrawn from such registration. If the Underwriter has not limited the number of Registrable Securities or other securities to be underwritten, 

the
Company may include its securities for its own account in such registration if the underwriter so agrees and if the number of Registrable Securities and other securities which would otherwise have
been included in such registration and underwriting will not thereby be limited. 

        6.     Company Registration. 

        (a)   If
the Company shall determine to register any of its securities for its own account, other than (1) a registration relating solely to employee benefit plans;
(2) a registration relating to a corporate reorganization or other transaction under Commission Rule 145; (3) a registration on any registration form which does not permit
secondary sales or does not include substantially the same information as would be required to be included in a registration statement covering the sale of Registrable Securities; or (4) a
registration on Form S-3, the Company will: 

        (i)    within
ten (10) business days of such determination, give to each Holder written notice thereof (which, to the extent then known, shall include a list of the
jurisdictions in which the Company intends to attempt to qualify such securities under the applicable blue sky or other state securities laws); and 

        (ii)   include
in such registration (and any related qualification under blue sky laws or other compliance), and in any underwriting involved therein, all of the Registrable
Securities specified in a written request or requests made by any Holder within twenty (20) days after receipt of the written notice from the Company described in clause (i) above,
except as set forth in Section 6(b) below. Such written request may specify all or a part of a Holder's Registrable Securities. 

        (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 6(a)(i). In such event the right of any Holder to registration pursuant to
Section 6 shall be conditioned upon such Holder's participation in such underwriting and the inclusion of such Holder's Registrable Securities in the underwriting to the extent provided herein.
All Holders proposing to distribute their securities through such underwriting shall (together with the Company and the Other Shareholders distributing their securities through such underwriting)
enter into an underwriting agreement in customary form with the Underwriter selected for underwriting by the Company. Notwithstanding any other provision of this Section 6, if the Underwriter
in its sole discretion advises the Company in writing that marketing factors require a limitation on the number of shares to be underwritten, then (a) if such registration is the first
registered offering of the Company's securities to the public, the Company may (subject to the allocation priority set forth below) exclude from such registration and underwriting some or all of the
Registrable Securities which would otherwise be underwritten pursuant hereto, and (b) if such registration is other than the first registered offering of the sale of the Company's securities to
the public, the Company may (subject to the allocation priority set forth below) limit the number of Registrable Securities to be included in such registration and underwriting to not less than
twenty-five percent (25%) of the total number of shares of stock of the Company to be included therein. The Company shall so advise all holders of securities requesting registration, and
the number of shares of securities that are entitled to be included in the registration and underwriting by persons other than the Company shall be allocated in the following priority: first, to
Holders of Registrable Securities (other than Founder) (and pro rata among such Holders on the basis of all Registrable Securities then held by such Holders); second, to Founder; and third, among all
Other Shareholders in proportion, as nearly as practicable, to the respective amounts of securities which they had requested to be included in such registration at the time of filing the registration
statement. If any Holder or Other Shareholder disapproves of the terms of any such underwriting, he may elect to withdraw therefrom by written notice to the Company and the Underwriter. Any
Registrable Securities or other securities excluded or withdrawn from such underwriting shall be withdrawn from such registration. 

        (c)   Piggyback Registration Rights. The Founder shall be entitled to include (subject to any underwriter cutbacks as provided
in this Agreement) shares of Common Stock in any registration by the Company under Section 6(a). 

        7.     Expenses of Registration. All Registration Expenses incurred in connection with any registration, qualification or
compliance pursuant to this Agreement shall be borne by the Company, and all Selling Expenses shall be borne by the holders of the securities so registered pro rata on the basis of the number of their
shares so registered; provided, however, that the Company shall not be required to pay any Registration
Expenses if, as a result of the withdrawal of a request for registration by Initiating Holders, the registration statement does not become effective, unless such withdrawal is caused by a material
adverse change in the business or operations of the Company after such request for registration, or unless the Initiating Holders agree to have such registration considered a registration pursuant to
Section 5(a)(ii)(B). If the Company is not required to pay any Registration Expenses, then the Holders and Other Shareholders requesting registration shall bear such Registration Expenses pro
rata on the basis of the number of their shares so included in the registration request, and such registration shall not be considered a registration for purposes of Section 5(a)(ii)(B). 

        8.     Registration on Form S-3. The Company shall use its reasonable best efforts to qualify for registration
on Form S-3, and to that end, the Company shall comply with the reporting requirements of the Exchange Act within six (6) months following the effective date of the first
registration of any securities of the Company for a registered public offering. After the Company has qualified for the use of Form S-3, each Holder of Registrable Securities shall
have the right to request registrations on Form S-3 (such requests shall be in writing and shall state the number of shares of Registrable Securities to be disposed of and the
intended method of disposition of such shares by each such holder), subject only to the following limitations: 

        (a)   The
Company shall not be obligated to cause a registration on Form S-3 if, within ten (10) days of receipt of the holder of Registrable
Securities, the Company gives notice of its bona fide intention to effect the filing of a registration statement with the Commission within ninety (90) days of receipt of such request (other
than a registration effected solely to qualify an employee benefit plan or to effect a corporate reorganization or other transaction under Commission Rule 145) and the Holders have registration
rights with respect thereto under Section 6. 

        (b)   The
Company shall not be obligated to cause a registration on Form S-3 if the Company has within the twelve (12) month period preceding the
date of such request, already effected two (2) registrations on Form S-3 pursuant to this Section 8. 

        (c)   The
Company shall not be obligated to cause a registration on Form S-3 during the period starting with the date sixty (60) days prior to the
Company's good faith estimate of the date of filing of, and ending on a date one hundred eighty (180) days after the effective date of, a Company registration;  provided that the Company is actively
employing in good faith commercially reasonable efforts to cause such registration statement to become effective. 

        (d)   The
Company shall not be required to effect a registration pursuant to this Section 8 in any particular jurisdiction in which the Company would be required to
execute a general consent to service of process in effecting such registration, qualification or compliance, unless the Company is already subject to service in such jurisdiction and except as may be
required by the Securities Act. 

        (e)   The
Company shall not be required to effect a registration pursuant to this Section 8 unless the Holder or Holders requesting registration propose to dispose of
shares of Registrable Securities having an aggregate disposition price (before deduction of underwriting discounts and expenses of sale) of more than $2,500,000. 

        (f)    The
Company shall not be required to effect a registration pursuant to this Section 8 if the Company shall furnish to such Holders a certificate signed by the
President of the Company stating that in the good faith judgment of the Board of Directors of the Company, it would be 

seriously
detrimental to the Company and its shareholders for such registration statement to be filed on or before the time filing would be required and it is therefore essential to defer the filing
of such registration statement. The Company shall have the right to defer such filing (but not more than once during any twelve month period) for a period of not more than ninety (90) days
after receipt of the request of the Initiating Holders;; and provided further that the Company shall not register any securities for the account of itself or any other shareholder during such ninety
(90) day period (other than a registration relating solely to the sale of securities of participants in a Company stock plan, a registration relating to a corporate reorganization or
transaction under Rule 145 of the Act, a registration on any form that does not include substantially the same information as would be required to be included in a registration statement
covering the sale of the Registrable Securities, a registration solely of debt securities, or a registration in which the only Common Stock being registered is Common Stock issuable upon conversion of
debt securities that are also being registered). 

        (g)   The
Company shall not be required to maintain and keep any such registration on Form S-3 effective for a period exceeding one hundred twenty
(120) days from the effective date thereof. The Company shall give notice to all Holders of the receipt of a request for registration pursuant to this Section 8 and shall provide a
reasonable opportunity for all such other holders to participate in the registration. Subject to the foregoing, the Company will use its best efforts to effect promptly the registration of all shares
of Registrable Securities on Form S-3 to the extent requested by the Holder or Holders thereof for purposes of disposition. If the Holders of Registrable Securities requesting
registration under this Section 8 intend to distribute the Registrable Securities covered by their request by means of an underwriting, the provisions of Sections 5(b) shall apply to such
registration. 

        9.     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 (including via electronic mail) as to the initiation of such registration and as to the completion thereof. At its expense, the Company will: 

        (a)   Keep
such registration effective for a period of one hundred twenty (120) days or until the Holder or Holders have completed the distribution described in the
registration statement relating thereto, whichever first occurs; 

        (b)   Prepare
and file with the SEC 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; 

        (c)   Furnish
to the Holders such numbers of copies of a prospectus, including a preliminary prospectus, in conformity with the requirements of the Securities Act, and such
other documents as they may reasonably request in order to facilitate the disposition of Registrable Securities owned by them; 

        (d)   Use
its best 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 of such offering. Each Holder participating in such underwriting shall also enter into and perform its obligations under such an agreement. 

        (f)    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 or 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 in the
light of the circumstances then existing. 

        (g)   Cause
all such Registrable Securities registered pursuant hereunder to be listed on each securities exchange or trading system on which similar securities issued by the
Company are then listed. 

        (h)   Provide
a transfer agent and registrar for all Registrable Securities registered pursuant hereunder and a CUSIP number for all such Registrable Securities, in each case
not later than the effective date of such registration; and 

        (i)    Use
its best efforts to furnish, at the request of any Holder requesting registration of Registrable Securities pursuant to this Agreement, on the date that such
Registrable Securities are delivered to the underwriters for sale in connection with a registration pursuant to this Agreement, if such securities are being sold through underwriters, or, if such
securities are not being sold through underwriters, on the date that the registration statement with respect to such securities becomes effective, (i) an opinion, dated 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,
if any, and to the Holders requesting registration of Registrable Securities and (ii) a letter dated 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, if any, and to the Holders requesting
registration of Registrable Securities. 

        10.   Termination of Registration Rights The right of any Holder to request registration or inclusion in any registration
pursuant to Section 5, 6 or 8 shall terminate on the closing of the first registered public offering of Common Stock of the Company, if all shares of Registrable Securities held or entitled to
be held upon conversion by such Holder may immediately be sold under Rule 144 during any ninety (90)-day period, or the earlier of (i) such date after the closing of the
first registered public offering of Common Stock of the Company as all shares of Registrable Securities held or entitled to be held upon conversion by such Holder may immediately be sold under
Rule 144 during any ninety (90)-day period, and (ii) five (5) years after the effectiveness of a registration statement under the Securities Act of 1933, as amended,
as to the Company's Common Stock in an underwritten public offering; provided that the aggregate gross proceeds thereof (prior to deducting underwriter commissions and expenses) are not less that
$25,000,000; and provided further that the price per share in such offering is at least $5.00. 

        11.   Indemnification. In the event any Registrable Securities are included in a registration statement under this
Section 11: 

        (a)   To
the extent permitted by law, the Company will indemnify and hold harmless each Holder, the partners or officers, directors and shareholders of each Holder, legal
counsel and accountants for each Holder, any underwriter (as defined in the Securities Act) for such Holder and each person, if any, who controls such Holder or underwriter within the meaning of the
Securities Act or the Exchange Act, against any losses, claims, damages or liabilities (joint or several) to which they may become subject under the Securities Act, the Exchange Act, any regulations
promulgated thereunder, or any state securities laws, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon any of the following
statements, omissions or violations (collectively a "Violation"): (i) any untrue statement or alleged untrue statement of a material fact contained therein or any amendments or supplements
thereto, (ii) the omission or alleged omission to state therein a material fact required to be stated therein, or necessary to make the statements therein no misleading, or (iii) any
violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities laws or any rule or regulation promulgated under the Securities Act, the Exchange Act or any
state securities laws; and the Company will reimburse each such Holder, the partners or 

officers,
directors, and shareholders of such Holder, the legal counsel and accountants for such Holder, and such underwriter(s) or controlling person(s) of such Holder for any legal or any other
expenses reasonably incurred by them in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement contained in this
subsection 11(a) 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 Company (which consent
shall not be unreasonably withheld), nor shall the Company be liable in any such case for any such loss, claim, damage, liability or action to the extent that it arises out of or is based upon a
Violation that occurs in reliance upon and in conformity with written information furnished expressly for use in connection with such registration by any such Holder, underwriter or controlling
person; provided further, however, that the foregoing indemnity agreement with respect to any preliminary prospectus shall not inure to the benefit of any Holder or underwriter, or any person
controlling such Holder or underwriter, from whom the person asserting any such losses, claims, damages or liabilities purchased shares in the offering, if a copy of the prospectus (as then amended or
supplemented if the Company shall have furnished any amendments or supplements thereto) was not sent or given by or on behalf of such Holder or underwriter to such person, if required by law so to
have been delivered by or on behalf of such Holder, at or prior to the written confirmation of the sale of the shares to such person, and if the prospectus (as so amended or supplemented) would have
cured the defect giving rise to such loss, claims, damage or liability. 

        (b)   To
the extent permitted by law, each selling Holder will indemnify and hold harmless the Company, each of its directors, each of its officers who has signed the
registration statement, each person, if any, who controls the Company within the meaning of the Securities Act, legal counsel and accountants for the Company, any underwriter, any other Holder, the
partners or officers, directors, and shareholders of each such other Holder, and legal counsel and accountants for such other Holders selling securities in such registration statement and any
controlling person of any such underwriter or other Holder, against any losses, claims, damages or liabilities (joint or several) to which any of the foregoing persons may become subject, under the
Securities Act, the Exchange Act, any regulations promulgated thereunder, or any state securities laws, insofar as such losses, claims, damages or liabilities (or actions in respect thereto) arise out
of or are based upon any Violation, in each case to the extent (and only to the extent) that such Violation occurs in reliance upon and in conformity with written information furnished by such Holder
expressly for use in connection with such registration; and each such Holder will reimburse any person intended to be indemnified pursuant to this subsection 11(b), for any legal or
other expenses reasonably incurred by such person in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that the indemnity agreement
contained in this subsection 11(b) shall not apply to amounts paid in settlement of any such loss, claim, damage, liability or action if such settlement of any loss, claim, damage, liability or action
if such settlement is effected without the consent of the Holder (which consent shall not be unreasonably withheld), provided that in no event shall any indemnity under this subsection 11(b) exceed
the net proceeds from the offering received by such Holder. 

        (c)   Promptly
after receipt by an indemnified party under this Section 11 of notice of the commencement of any action (including any governmental action), such
indemnified party will, if a claim in respect thereof is to be made against any indemnifying party under this Section 11, deliver to the indemnifying party a written notice of the commencement
thereof and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume
the defense thereof with counsel mutually satisfactory to the parties; provided, however, that an indemnified party (together with all other indemnified parties that may be represented without
conflict by one counsel) shall have the right to retain one separate counsel, with the fees and expenses to be paid by the indemnifying party, if representation of such indemnified party by the
counsel retained by the indemnifying party would be inappropriate due to actual or potential differing interests between such indemnified party and any other party represented by such counsel in such
proceeding. The failure to deliver written notice to the indemnifying party within a reasonable time of the 

commencement
of any such action, if materially prejudicial to its ability to defend such action, shall relieve such indemnifying party of any liability to the indemnified party under this
Section 11, but the omission so to deliver written notice to the indemnifying party will not relieve it of liability that it may have to any indemnified party otherwise than under this
Section 11. 

        (d)   If
the indemnification provided for in this Section 11 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 herein, then the indemnifying party, in lieu of indemnifying such indemnified party hereunder, shall 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 statements or omissions that resulted in such loss, liability, claim, damage or expense, as well as any other relevant equitable
considerations; provided, however, that no contribution by any Holder, when combined with any amounts paid by such Holder pursuant to Section 11(b), shall exceed the net proceeds from the
offering received by such Holder. The relative fault of the indemnifying party and of the indemnified party shall be determined 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. 

        (e)   Notwithstanding
the foregoing, to the extent that the provisions on indemnification and contribution contained in the underwriting agreement entered into in connection
with the 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 11 shall survive the completion of any offering of Registrable Securities in a registration
statement. 

        12.   Information by Holder. Each Holder of Registrable Securities shall furnish to the Company such information regarding such
Holder as the Company may reasonably request in writing and as shall be reasonably required in connection with any registration, qualification or compliance referred to in this Agreement. 

        13.   Rule 144 Reporting. With a view to making available the benefits of certain rules and regulations of the
Commission which may permit the sale of the Restricted Securities to the public without registration, the Company agrees to use diligent efforts to: 

        (a)   Make
and keep public information available as those terms are understood and defined in Rule 144 under the Securities Act, at all times from and after ninety
(90) days following the effective date of the first registration under the Securities Act 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 Securities Act and the Exchange Act at any time after it
has become subject to such reporting requirements; 

        (c)   So
long as an Investor owns any Restricted Securities, furnish to the Investor forthwith upon request, a written statement by the Company as to its compliance with the
reporting requirements of Rule 144 (at any time from and after ninety (90) days following the effective date of the first registration statement filed by the Company for an offering of
its securities to the general public), and of the Securities Act and the Exchange Act (at any time after it has become subject to such reporting requirements), a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so filed as an Investor may reasonably request in availing itself of any rule or regulation of the Commission allowing an Investor
to sell any such securities without registration. 

        14.   Transfer or Assignment of Registration Rights. The rights to cause the Company to register Investors securities granted
to Investors by the Company under Sections 5, 6, and 8 hereof may be transferred or assigned by any Investor to a transferee or assignee of any of the Restricted Securities,  provided that (i) the
Company is given written notice by such Investor at the time of said transfer or assignment, stating the name and address
of said transferee or assignee and identifying the securities with respect to which such registration rights are being transferred or assigned, (ii) such transferee or assignee is either
(a) an affiliate or partner or retired partner or a member or retired member of a limited liability company (or a member of a member) of such Investor or (b) acquires at least 100,000
shares of such Investor's Restricted Securities, and (iii) the transferee or assignee of such rights assumes the obligations of an Investor under this Agreement. For the purposes of this
paragraph "affiliate" shall mean any entity which, directly or indirectly, is under common ownership or control with, or is owned or controlled by, or owns or controls, such Investor. 

        15.   "Market Stand-off" Agreement. Each Holder agrees, if requested by the Company and an underwriter of Common
Stock (or other securities) of the Company, not to sell or otherwise transfer or dispose of any Common Stock (or other securities) of the Company held by Investor during a period of time determined by
the Company and its underwriters not to exceed (180) days following the effective date of the Company's initial registration statement, provided
that all officers and directors of the Company who then hold Common Stock (or other securities) of the Company and all holders of more than one percent (1%) of the outstanding capital stock of the
Company enter into similar agreements. Such agreement shall be in writing in a form satisfactory to the Company and such underwriter. The Company may impose stop-transfer instructions with
respect to the Shares (or securities) subject to the foregoing restriction until the end of said period. 

        16.   No Additional Registration Rights. From and after the date of this Agreement, the Company shall not, without the prior
written consent of the Holders of at least 2/3 of the Registrable Securities then issuable and then outstanding, enter into any agreement with any holder or prospective holder of any
securities of the Company which would allow such holder or prospective holder: (a) to include such securities in any registration filed under Section 5, 6 or 8 hereof, unless under the
terms of such agreement, such holder or prospective holder may include such securities in any such registration only to the extent that the inclusion of his securities will not reduce the amount of
the Registrable Securities of the Holders which is included, or (b) to make a demand registration. 

        17.   Investor Rights of First Refusal for Company Stock Sales. 

        (a)   Grant of Rights. The Company hereby grants to each Holder who owns at least 1,000,000 Shares (as adjusted for any stock
splits, stock dividends, recapitalizations or the like), or at least such number of shares of Common Stock issued upon conversion of 1,000,000 Shares (as adjusted for any stock splits, stock
dividends, recapitalizations or the like) (the "Significant Holders"), the right of first refusal to purchase all or any part of such Investor's Pro
Rata Share (as hereinafter defined) of New Securities (as defined in Section 17(b) below) which the Company may, from time to time, propose to sell and issue. Such Investors may purchase New
Securities on the same terms and at the same price at which the Company proposes to sell New Securities. The Pro Rata Share of each Investor, for purposes of this right of first refusal, shall be the
ratio of the total number of shares of Common Stock held by such Investor, including any shares of Common Stock into which shares of Preferred Stock held by such Investor are convertible, to the total
number of shares of Common Stock outstanding immediately prior to the issuance of New Securities (including any shares of Common Stock into which outstanding shares of Preferred Stock are convertible
and including any shares of Common Stock issuable on the exercise of all exercisable outstanding securities). Each Significant Holder shall have a right of over-allotment such that if any
Significant Holder fails to exercise its right hereunder to purchase its pro rata share of New Securities, the other Significant Holders may purchase the non-purchasing Significant
Holder's portion on a pro rata basis within ten (10) days from the date such non-purchasing Significant Holder fails to exercise its right hereunder to purchase its pro rata share
of New Securities. 

        (b)   New Securities. "New Securities" shall mean any capital stock of the
Company, whether or not now authorized, and any rights, options or warrants to purchase any capital stock of the Company, and all securities of any type that are or may become convertible into capital
stock of the Company; provided, however, that "New Securities" does not include: 

        (i)    securities
offered to the public in an underwritten offering pursuant to a registration statement filed under the Securities Act; 

        (ii)   Common
Stock issued pursuant to a stock split, subdivision, or other transaction described in Section 3.3(c) of the Restated Articles (as defined herein). 

        (iii)  shares
of Common Stock (or options, warrants, or other convertible securities therefor) issued or issuable to employees, officers, or directors of, or consultants to,
the Company, for the primary purpose of soliciting or retaining their services, pursuant to incentive agreements, stock option plans, stock bonuses or awards, or incentive contracts approved by the
Board together with such additional number of Shares as may be approved by: (1) at least two-thirds (2/3) of the members of the Board (not including any vacancies
which may then exist); or (2) the holders of at least two-thirds (2/3) of the voting power of the Preferred Stock voting together as a single class; 

        (iv)  Common
Stock or Preferred Stock (or options, warrants, or other convertible securities therefor) issued in connection with the acquisition of another corporation by
merger, or the purchase of all or substantially all of such other corporation's assets, or other reorganization, provided that such transactions are approved by either (1) at least
two-thirds (2/3) of the members of the Board (not including any vacancies which may then exist); or (2) the holders of at least two-thirds
(2/3) of the voting power of the Preferred Stock voting together as a single class; 

        (v)   Common
Stock issued or issuable upon conversion of the Preferred Stock and other securities convertible into Preferred Stock or Common Stock; 

        (vi)  Common
Stock or Preferred Stock (or options, warrants, or other convertible securities therefor) issued to strategic partners, financial institutions or lessors
primarily in connection with commercial credit arrangements, equipment financings, or other commercial transactions approved by a majority of the members of the Board (not including any vacancies
which may then exist; provided such issuances are for other than primarily equity financing purposes); and 

        (vii) Shares
of Series E Preferred issued and sold for a consideration per share equal to at least the then current Series E Original Issue Price (as such term
is defined in the Company's Third Amended and Restated Articles of Incorporation (the "Restated Articles") of the Series E Preferred (or issuable
upon exercise of options, warrants, or other convertible securities therefor that are currently outstanding); provided,  however, that such Shares of
Series E Preferred are issued and sold within one hundred twenty (120) days of the date of this Agreement. 

        (c)   Notice. In the event the Company proposes to undertake an issuance of New Securities, it shall give each Significant
Holder written notice (the "Notice") of its intention, describing the type of New Securities, number of shares, the price, the terms upon which the
Company proposes to issue New Securities, and a statement as to the number of days from receipt of such Notice within which the Investors must respond to such Notice. Each Significant Holder shall
have fifteen (15) days from the date the Notice is received to elect to purchase, at the closing of the sale of New Securities described in the Company's Notice, any or all of its Pro Rata
Share of the New Securities for the 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. The
Company shall promptly inform each Significant Holder that elects to purchase all the New Securities available to it (a "Fully-Exercising Significant Holder") of any other Significant Holder's failure
to do likewise, in which case, each Fully-Exercising Significant Holder may elect to purchase its Pro Rata Share of 

that
portion of the New Securities for which Significant Holders were entitled to subscribe, but which were not subscribed for by the Significant Holders. 

        (d)   Sale after Notice. In the event the Significant Holders fail to exercise in full the right of first refusal within said
fifteen (15) day period, the Company shall have one hundred and twenty (120) days thereafter to sell or enter into an agreement to sell the New Securities respecting which the
Significant Holders' rights of first refusal were not exercised, at a price and upon general terms no more favorable than specified in the Notice. In the event the Company has not sold the New
Securities within said one hundred and twenty (120) day period, the Company shall not thereafter issue or sell any New Securities without first offering such securities to the Significant
Holders in the manner provided above. 

        (e)   No Additional Rights of First Refusal. The Company shall not grant any rights of first offer or of first refusal to
acquire any of its "New Securities" except for the rights set forth in this Agreement. 

        (f)    Termination of Right of First Refusal. The Significant Holders' right of first refusal as set forth in this
Section 17 shall terminate upon the occurrence of the earliest of the following events: 

        (i)    The
effectiveness of a registration statement under the Securities Act of 1933, as amended, as to the Company's Common Stock in an underwritten public offering; provided
that the aggregate gross proceeds thereof (prior to deducting underwriter commissions and expenses) are not less that $25,000,000; and provided further that the price per share in such offering is at
least $5.00. 

        (ii)   A
liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary, as defined in the Restated Articles. 

        18.   Covenants and Information Rights. The Company and the Investors hereby covenant and agree as follows: 

        (a)   Financial Information. The Company shall furnish the following reports to each Investor and/or its assignee or transferee
for so long as such Investor, assignee, or transferee is the record holder of at least 100,000 shares of the Registrable Securities (as adjusted for stock splits, stock dividends, combinations,
recapitalizations or the like): 

        (i)    As
soon as practicable after the end of each fiscal quarter (except the fourth quarter), and in any event within 45 days thereafter, an income statement and
statement of changes in financial condition for such fiscal quarter and a balance sheet as of the end of such fiscal quarter. 

        (ii)   As
soon as practicable after the end of each fiscal year, and in any event within 90 days thereafter (unless extended by the Board up to a maximum of
180 days), an income statement for such fiscal year, a balance sheet of the Company as of the end of such fiscal year, and a statement of changes in
financial condition for such fiscal year, all certified by independent public accountants of recognized national standing selected by the Company. 

        All
financial statements provided for in Sections 18(a)(i) and (ii) above shall be prepared in accordance with generally accepted accounting principles applied on a
consistent basis (except that such unaudited financial statements may be prepared without footnotes and will be subject to normal year-end audit adjustments). 

        (b)   Additional Financial Information. In addition to the financial statements referenced in Sections 18(a)(i) and
(ii) above, the Company shall furnish the following reports to each Investor and/or its assignee or transferee for so long as such Investor, assignee, or transferee is the record holder of at
least 1,000,000 shares of the Registrable Securities (as adjusted for any stock splits, stock dividends, recapitalizations or the like): 

        (i)    As
soon as practicable after the end of each fiscal month, and in any event within 30 days thereafter, an unaudited income statement and statement of changes in
financial 

condition
for such fiscal month and an unaudited balance sheet as of the end of such fiscal month, upon request of a Significant Shareholder. 

        (ii)   Sixty
days prior to the beginning of each fiscal year of the Company, a copy of the annual operating plan and budget as approved by the Company's Board of Directors. 

        (c)   Customary Inspection Rights; Confidentiality. The Company shall permit each Significant Shareholder, at such Significant
Shareholder's expense, to visit and inspect the Company's properties, to examine its books of account and records and to discuss the Company's affairs, finances and accounts with its officers, all at
such reasonable times as may be requested by such Significant Shareholder. Each Investor agrees that any information obtained by such Investor pursuant to this Section which may be proprietary to the
Company or otherwise confidential will not be disclosed without the prior written consent of the Company. Each Investor further acknowledges and understands that any information so obtained which may
be considered "inside" non-public information will not be utilized by such Investor in connection with purchases and/or sales of the Company's securities except in compliance with
applicable state and federal antifraud statutes. 

        (d)   Termination of Financial Information Rights. The Company's obligation to deliver the financial statements under Sections
18(a) and 18(b) shall terminate and shall be of no further force or effect at the earlier of (i) the effectiveness of a registration statement under the Securities Act of 1933, as amended, as
to the Company's Common Stock in an underwritten public offering; provided that the
aggregate gross proceeds thereof (prior to deducting underwriter commissions and expenses) are not less that $25,000,000; and provided further that the price per share in such offering is at least
$5.00; (ii) a liquidation, dissolution, or winding up of the Company, whether voluntary or involuntary as defined in the Restated Articles. 

        19.   Certain Covenants

        (a)   Qualified Small Business Stock. The Company shall submit to its shareholders (including the Investors) and to the
Internal Revenue Service any reports that may be required under Section 1202(d)(1)(C) of the Code and the Regulations promulgated thereunder. In addition, within ten (10) days after any
Investor's written request therefor, the Company shall deliver to such Investor a written statement indicating whether, to the knowledge of the Company, such Investor's interest in the Company
constitutes "qualified small business stock" as defined in Section 1202(c) of the Code. For clarity, the Company shall deliver such written statement in good faith, but shall have no liability
for the failure of such interest to qualify as Qualified Small Business Stock. 

        (b)   Vesting of Stock Options. The Company agrees that future issuances of its Common Stock or securities exercisable or
convertible into Common Stock, to employees will vest at the rate of twenty-five percent (25%) following one year after the earlier of the date of such issuance or commencement of
employment and 1/36 per month thereafter, although (i) a majority of the Board of Directors (including a majority of the directors elected by the holders of Preferred Stock) or
(ii) the Compensation Committee may elect to modify this vesting schedule in certain cases. With respect to any unvested stock or securities exercisable or convertible into Common Stock in
connection with such future issuances, the Company shall have a right to repurchase any such unvested shares at cost upon the termination of each such employee's employment and a right of first
refusal to purchase any shares of vested stock proposed to be transferred by an employee. 

        20.   Governing Law. This Agreement and the legal relations between the parties arising hereunder shall be governed by and
interpreted in accordance with the laws of the State of California without giving effect to the principles of conflicts of laws thereof. The parties hereto agree to submit to the jurisdiction of the
federal and state courts of the State of California with respect to the breach or interpretation of this Agreement or the enforcement of any and all rights, duties, liabilities, obligations, powers,
and other relations between the parties arising under this Agreement. 

        21.   Proprietary Information and Inventions Agreements. The Company shall require all employees and consultants with access to
confidential information to execute and deliver a Proprietary Information and Inventions Agreement in substantially the form approved by the Company's Board of Directors. 

        22.   Entire Agreement. This Agreement constitutes the full and entire understanding and agreement between the parties
regarding the matters set forth herein and supersede all prior and contemporaneous agreements and understandings with respect to such matters whether oral or written. 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. 

        23.   Prior Agreement Superseded. The 2003 Rights Agreement is hereby terminated and superseded in its entirety and the rights
of any parties to the 2003 Rights Agreement to participate in the offer and sale of any of the shares of Series E Preferred Stock under the Series E Agreement are hereby waived. 

        24.   Notices, Etc. All notices and other communications required or permitted hereunder shall be in writing and shall be
effective upon (1) delivery by messenger to the party to whom the notice was sent, or (2) three business days after deposit in the United States mail (sent by registered or certified
mail) postage prepaid, addressed: 

        (a)   if
to a Series A Investor, at the address set forth on Exhibit A attached hereto, or if to a
Series B Investor, at the address set forth on Exhibit B attached hereto, if to a Series C investor, at the address set forth on  Exhibit C, or if to a Series D investor, at the address set forth on Exhibit D, or
if to a Series E investor, at the address set forth on Exhibit E, or at such other address as a Series A, Series B Investor,
Series C Investor, Series D Investor or Series E Investor shall have furnished to the other parties hereto in writing; 

        (b)   if
to the Company, at the address of its principal offices set forth on the signature page of this Agreement, or at such other address as the Company shall have
furnished to the other parties hereto in writing, with a copy to Arthur F. Schneiderman, Wilson Sonsini Goodrich & Rosati, 650 Page Mill Road, Palo Alto, CA 94304-1050; or 

        (c)   if
to the Founder, at the address set forth on the signature page of this Agreement, or at such other address as the Founder shall have furnished to the other parties
hereto in writing. 

        25.   Aggregation of Stock. All Shares held or acquired by affiliated entities or persons, or partners of an Investor, and all
Registrable Securities issued or issuable upon conversion thereof shall be aggregated together for the purpose of determining the availability of any rights under this Agreement. 

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

        27.   Amendments. Any provision of this Agreement may be amended, waived or modified upon the written consent of the Company
and those Series A Investors, Series B Investors, Series C Investors, Series D Investors and Series E Investors (or their assignees to whom the Series A
Investors, the Series B Investors, the Series C Investors, the Series D Investors and the Series E Investors have expressly assigned their rights in compliance with
Section 14 hereof) who then hold at least two-thirds (2/3) of the Registrable Securities (excluding any shares held by the Founder), provided any such amendment,
waiver or modification applies by its terms and to the extent applicable in the same manner to the Founder, the Series A Investors, the Series B Investors, the Series C Investors,
the Series D Investors, Series E Investors and each such assignee and; provided further, that the Series E Investors purchasing
shares in a closing after the Initial Closing (as that term is defined in the Series E Agreement) may become parties to this Agreement and be deemed a "Series E Investor" hereunder
without any amendment of this Agreement pursuant to this paragraph or any consent or approval of any other Investor by executing and delivering an additional counterpart signature page to this
Agreement. Each Investor acknowledges that the Founder, and any single Series A Investor, Series B Investor, Series C Investor, Series D Investor or Series E
Investor or such assignee hereunder may 

waive
any of such Holder's rights hereunder without obtaining the consent of other Founders, Series A Investors, Series B Investors, Series C Investors, Series D Investors,
Series E Investors or assignees. 

[The Remainder of this Page Intentionally Left Blank]

        IN
WITNESS WHEREOF, the parties have executed this Fourth Amended and Restated Investor Rights Agreement as of March 5, 2004. 

	 	 	COMPANY	 	 
	

 	
 	

Ikanos Communications	
 	

 
	

 	
 	

By:	

/s/  RAJESH VASHIST      
 Rajesh Vashist

President and Chief Executive Officer	
 	

 
	 	 	 	 	 	 

       

       

       

SIGNATURE PAGE FOR IKANOS COMMUNICATIONS

FOURTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT—FOURTH CLOSING  

QuickLinks

Exhibit 4.2

IKANOS COMMUNICATIONS FOURTH AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT

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