Exhibit 4.20
REGISTRATION RIGHTS AGREEMENT
Dated as of March 3, 2000
by and among
RHYTHMS NETCONNECTIONS INC.
and
XXXXXXX LYNCH, PIERCE, XXXXXX & XXXXX
INCORPORATED
and
XXXXXXX XXXXX BARNEY INC.
as Initial Purchasers
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and entered
into as of March 3, 2000 by and among RHYTHMS NETCONNECTIONS INC., a Delaware
corporation (the "Company"), and XXXXXXX LYNCH, PIERCE, XXXXXX & XXXXX
INCORPORATED (the "Representative") and XXXXXXX XXXXX BARNEY INC. (together with
the Representative, the "Initial Purchasers").
This Agreement is made pursuant to the Purchase Agreement dated as of
February 28, 2000 by and among the Company and the Initial Purchasers (the
"Purchase Agreement"), that provides for, among other things, the sale by the
Company to the Initial Purchasers of up to 3,000,000 shares of 6 3/4% Cumulative
Convertible Preferred Stock, $.001 par value per share (liquidation preference
$100 per share) (the "Preferred Stock"). The Preferred Stock will be convertible
into shares of Common Stock, par value $.001 per share, of the Company (the
"Common Stock") as set forth in the Offering Memorandum dated February 28, 2000,
subject to adjustment in accordance with the Certificate of Designations,
Preferences and Relative, Participating, Optional and Other Special Rights of
Preferred Stock and Qualifications, Limitations and Restrictions (the
"Certificate of Designations"). The Preferred Stock and the Common Stock
issuable upon conversion of the Preferred Stock are collectively herein referred
to as the "Securities" and each of them as held singularly is herein referred to
as a "Security". In order to induce the Initial Purchasers to enter into the
Purchase Agreement, the Company has agreed to provide to the Initial Purchasers
and their direct and indirect transferees and the holders of the Securities from
time to time (each of the foregoing a "Holder" and together the "Holders"), the
registration rights set forth in this Agreement. The execution and delivery of
this Agreement is a condition to the closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as follows:
1. Shelf Registration. So long as any Transfer Restricted Security (as
defined in Section 5(e) hereof) exists, the Company shall take the following
actions:
(a) The Company shall, at its cost, prepare and, on or before 90 days after
the date of this Agreement (the "Closing Date"), file with the Securities and
Exchange Commission (the "Commission") and thereafter shall use its reasonable
best efforts to cause to be declared effective on or prior to 180 days after the
Closing Date, a registration statement on the appropriate form (the "Shelf
Registration Statement") covering the offer and sale of the Transfer Restricted
Securities (as defined in Section 5(e) hereof) by the Holders thereof from time
to time in accordance with the methods of distribution set forth in the Shelf
Registration Statement and Rule 415 under the Securities Act of 1933, as amended
(the "Securities Act") (hereinafter, the "Shelf Registration").
(b) The Company shall use its reasonable best efforts to keep the Shelf
Registration Statement continuously effective, in order to permit the prospectus
included therein to be lawfully delivered by the Holders of the relevant
Securities, until the earlier
of such time as all the Securities covered by the Shelf Registration Statement
(i) have been sold pursuant thereto or (ii) two years following the effective
date of the Shelf Registration Statement (in any such case, such period being
called the "Shelf Registration Period"). The Company shall be deemed not to have
used its reasonable best efforts to keep the Shelf Registration Statement
effective during the requisite 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 during that period, unless (i) such action is required
by applicable law or (ii) upon the occurrence of any event contemplated by
paragraph 2(b)(v) below, such action is taken by the Company in good faith and
for valid business reasons and the Company thereafter promptly complies with the
requirements of paragraph 2(h) below if the Company has determined in good faith
that there are no material legal or commercial impediments in so doing.
(c) Notwithstanding any other provisions of this Agreement to the contrary,
the Company shall cause (other than information required to be supplied by the
selling Holders pursuant to this Agreement) (i) the Shelf Registration Statement
and the related prospectus and any amendment or supplement thereto to comply in
all material respects with the applicable requirements of the Securities Act and
the rules and regulations of the Commission thereunder, (ii) the Shelf
Registration Statement and any amendment thereto not to contain, when it becomes
effective, 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 and (iii) any prospectus forming a part of the Shelf Registration
Statement, and any amendment or supplement to such prospectus, not to contain,
as of the date of such prospectus or amendment or supplement, 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 light of
the circumstances under which they were made, not misleading.
(d) The Company shall, from time to time, cause a shelf registration
statement to be filed to cover additional shares of Common Stock issued in
payment of dividends, if any, as permitted in accordance with the terms of the
Preferred Stock.
2. Registration Procedures. In connection with the Shelf Registration
contemplated by Section 1 hereof the following provisions shall apply so long as
any Transfer Restricted Security exists:
(a) The Company shall (i) furnish, without charge, to the Initial
Purchasers, prior to the filing thereof with the Commission, a copy of the Shelf
Registration Statement and each amendment thereof and each amendment or
supplement, if any, to the prospectus included therein and, in the event that
the Initial Purchasers (with respect to any portion of an unsold allotment from
the original offering) are participating in the Shelf Registration Statement,
shall use its commercially reasonable best efforts to reflect in each such
document, when so filed with the Commission, such comments as such Initial
Purchasers reasonably may propose, (ii) include in each such document the names
of the Holders who propose to sell Transfer Restricted Securities pursuant to
the Shelf Registration Statement as selling security holders and (iii) file
pursuant to Rule 424(b)
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under the Securities Act an amendment to the Shelf Registration Statement or
amend the prospectus to cover new Holders of Securities upon written notice by
such new Holders to the effect.
(b) The Company shall give written notice to the Initial Purchasers and the
Holders (which notice pursuant to clauses (ii) through (v) hereof shall be
accompanied by an instruction, if applicable, to suspend the use of the
prospectus until the requisite changes have been made):
(i) when the Shelf Registration Statement or any amendment thereto has
been filed with the Commission and when the Shelf Registration Statement or
any post-effective amendment thereto has become effective;
(ii) of any request by the Commission for amendments or supplements to
the Shelf Registration Statement or the prospectus included therein or for
additional information;
(iii) of the issuance by the Commission of any stop order suspending the
effectiveness of the Shelf Registration Statement or the initiation of any
proceedings for that purpose;
(iv) of the receipt by the Company or its legal counsel of any
notification with respect to the suspension of the qualification of the
Securities for sale in any jurisdiction or the initiation or threatening of
any proceeding for such purpose; and
(v) of the happening of any event that requires the Company to make
changes in the Shelf Registration Statement or the prospectus in order that
the Shelf Registration Statement or the prospectus do not contain an untrue
statement of a material fact and 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 light of the circumstances under which
they were made) not misleading, which written notice need not provide any
detail as to the nature of such event.
(c) The Company shall use its reasonable best efforts to obtain the
withdrawal as soon as practicable, of any order suspending the effectiveness of
the Shelf Registration Statement.
(d) The Company shall furnish to each Holder of Transfer Restricted
Securities included within the coverage of the Shelf Registration, if the Holder
so requests in writing, without charge, one copy of the Shelf Registration
Statement and any post-effective amendment thereto, including financial
statements and schedules, and, if the Holder so requests in writing, all
exhibits thereto (other than those, if any, incorporated by reference).
(e) The Company shall, during the Shelf Registration Period, deliver to
each Holder of Transfer Restricted Securities included within the coverage of
the Shelf
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Registration Statement, without charge, as many copies of the prospectus
(including each preliminary prospectus) included in the Shelf Registration
Statement and any amendment or supplement thereto as such person may reasonably
request. The Company consents, subject to the provisions of this Agreement, to
the use of the then current prospectus or any amendment thereto, together with
any supplement thereto, by each of the selling Holders in connection with the
offering and sale of the Transfer Restricted Securities covered by the
prospectus, or any amendment or supplement thereto, included in the Shelf
Registration Statement.
(f) Prior to any public offering of the Securities pursuant to the Shelf
Registration Statement, the Company shall register or qualify or cooperate with
the Holders of the Transfer Restricted Securities included therein and their
respective counsel in connection with the registration or qualification of such
Securities for offer and sale under the securities or "blue sky" laws of such
states of the United States as any such Holder reasonably requests in writing
and do any and all other acts or things necessary or advisable to enable the
offer and sale in such jurisdictions of the Securities covered by the Shelf
Registration Statement; provided, however, that the Company shall not be
required to qualify generally to do business in any jurisdiction where it is not
then otherwise required to be so qualified or take any action which would
subject it to general service of process or to taxation in any jurisdiction
where it is not then so subject.
(g) The Company shall cooperate with the Holders of the Transfer Restricted
Securities to facilitate the timely preparation and delivery of certificates
representing the Securities to be sold pursuant to the Shelf Registration
Statement free of any restrictive legends and in such denominations and
registered in such names as the Holders may reasonably request in writing at
least two Business Days prior to the closing of any sale of Registrable
Securities. For purposes of this Section 2(g), "Business Day" means any day,
other than a Saturday or Sunday, on which banks in New York are open for
business.
(h) Upon the occurrence of any event contemplated by paragraphs (ii)
through (v) of Section 2(b) above during the period for which the Company is
required to maintain an effective Shelf Registration Statement, the Company
shall use its commercially reasonable best efforts to prepare and file as
promptly as practicable a post-effective amendment to the Shelf Registration
Statement or an amendment or supplement to the related prospectus and any other
required document so that, as thereafter delivered to Holders or purchasers of
Securities, the prospectus will not contain 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 light of the circumstances under
which they were made, not misleading. If the Company notifies the Initial
Purchasers or the Holders, in accordance with paragraphs (ii) through (v) of
Section 2(b) above, to suspend the use of the prospectus until the requisite
changes to the prospectus have been made, then the Initial Purchasers and the
Holders shall suspend use of such prospectus.
(i) The Company will comply with all rules and regulations of the
Commission to the extent and so long as they are applicable to the Shelf
Registration and
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will make generally available to its security holders (or otherwise provide in
accordance with Section 11(a) of the Securities Act) an earnings statement
satisfying the provisions of Section 11(a) of the Securities Act, 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 Shelf Registration Statement,
which statement shall cover such 12-month period.
(j) The Company may require each Holder of Securities to be sold pursuant
to the Shelf Registration Statement to furnish to the Company such information
regarding the Holder and the distribution of the Securities by such Holder as
the Company may from time to time reasonably require for inclusion in the Shelf
Registration Statement, and the Company may exclude from such registration the
Securities of any Holder that fails to furnish such information.
(k) The Company shall (i) make reasonably available for inspection by the
Holders of the Transfer Restricted Securities and any attorney, accountant or
other agent retained by the Holders of the Securities all relevant financial and
other records, pertinent corporate documents and properties of the Company and
(ii) cause the Company's officers, directors, employees, accountants and
auditors to supply all relevant information reasonably requested by the Holders
of the Securities or any such attorney, accountant or agent in connection with
the Shelf Registration Statement, in each case, as shall be reasonably necessary
to enable such persons to conduct a reasonable investigation within the meaning
of Section 11 of the Securities Act; provided, however, that the foregoing
inspection and information gathering shall be coordinated on behalf of the
Holders of the Transfer Restricted Securities by one counsel (the "Designated
Counsel") designated by the Holders of a majority of the Transfer Restricted
Securities covered by the Shelf Registration Statement (provided that Holders of
Common Stock issued upon the conversion of the Preferred Stock shall be deemed
to be Holders of the aggregate number of Preferred Stock from which such Common
Stock was converted).
(l) The Company will use its reasonable best efforts to cause the Common
Stock relating to such Shelf Registration Statement to be listed on the Nasdaq
National Market or such other national securities exchange or inter-dealer
automated quotation system as the Common Stock shall be listed upon.
(m) The Company shall use its reasonable best efforts to take all other
steps necessary to effect the registration of the Transfer Restricted Securities
covered by the Shelf Registration Statement contemplated hereby.
3. Registration Expenses. The Company shall bear all fees and expenses
incurred in connection with the performance of its obligations under Sections 1
through 2 hereof, whether or not the Shelf Registration Statement is filed or
becomes effective; provided, however, that the Company shall not be required to
pay for the fees and expenses of more than one counsel to the Holders (who shall
be designated by the Holders of a majority of the Transfer Restricted Securities
covered by the Shelf Registration Statement, provided that Holders of Common
Stock issued upon the
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conversion of the Preferred Stock shall be deemed to be Holders of the aggregate
number of Preferred Stock from which such Common Stock was converted).
4. Indemnification and Contribution. (a) The Company shall indemnify and
hold harmless each Initial Purchaser, each Holder, each broker-dealer (a
"Participating Broker-Dealer") that holds Transfer Restricted Securities
acquired for its own account as a result of market-making activities or other
trading activities and that will be the beneficial owner (as defined in Rule
13d-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act")) of Securities, each underwriter who participates in an offering of
Transfer Restricted Securities, their respective affiliates, and each person, if
any, who controls any of such parties within the meaning of Section 15 of the
Securities Act or Section 20 of the Exchange Act, as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, joint or several, as incurred, arising out of any untrue
statement or alleged untrue statement of a material fact contained in the
Shelf Registration Statement (or any amendment or supplement thereto),
covering the Securities, including all documents incorporated therein by
reference, or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein
not misleading or arising out of any untrue statement or alleged untrue
statement of a material fact contained in any prospectus (or any amendment
or supplement thereto) or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, joint or several, as incurred, to the extent of the aggregate
amount paid in settlement of any litigation, or any investigation or
proceeding by any court or governmental agency or body, commenced or
threatened, or of any claim whatsoever based upon any such untrue statement
or omission, or any such alleged untrue statement or omission; provided that
(subject to Sections 4(c) and 4(d) below) any such settlement is effected
with the prior written consent of the Company; and
(iii) against any and all expenses whatsoever, as incurred (including
reasonable fees and disbursements of one counsel (in addition to any local
counsel) chosen by the Representative, such Holder, such Participating
Broker-Dealer or any underwriter (except to the extent otherwise expressly
provided in Section 4(c) hereof)), reasonably incurred in investigating,
preparing or defending against any litigation, or any investigation or
proceeding by any court or governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue statement or
omission, or any such alleged untrue statement or omission, to the extent
that any such expense is not paid under subparagraph (i) or (ii) of this
Section 4(a);
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provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent (i) arising out of an untrue
statement or omission or alleged untrue statement or omission (A) made in or
omitted from a preliminary prospectus or registration statement and corrected or
included in a subsequent prospectus or registration statement or any amendment
or supplement thereto made in reliance upon and in conformity with written
information furnished to the Company by or on behalf of such Initial Purchaser,
such Holder, such Participating Broker-Dealer or any underwriter with respect to
such Initial Purchaser, Holder, Participating Broker-Dealer or underwriter, as
the case may be, expressly for use in the Shelf Registration Statement (or any
amendment or supplement thereto) or any prospectus (or any amendment or
supplement thereto) or (B) resulting from the use of a prospectus during a
period when the use thereof has been suspended in accordance with Section
2(b)(v) and Section 5(c), provided, in each case, that such Initial Purchaser,
Holders, Participating Broker- Dealers or any underwriter with respect thereto
received prior notice of such suspension.
(b) Each Holder agrees, severally and not jointly, to indemnify and hold
harmless the Company, each Initial Purchaser, each underwriter who participates
in an offering of Transfer Restricted Securities and the other selling Holders
and each of their respective directors and each person, if any, who controls any
of the Company, any Initial Purchaser, any underwriter or any other selling
Holder within the meaning of Section 15 of the Act or Section 20 of the Exchange
Act, against any and all loss, liability, claim, damage and expense whatsoever
described in the indemnity contained in Section 4(a) hereof, as incurred, but
only with respect to untrue statements or omissions, or alleged untrue
statements or omissions, made in the Shelf Registration Statement (or any
amendment or supplement thereto) or any prospectus (or any amendment or
supplement thereto) in reliance upon and in conformity with written information
furnished to the Company by or on behalf of such selling Holder with respect to
such Holder expressly for use in the Shelf Registration Statement (or any
supplement thereto), or any such prospectus (or any amendment thereto);
provided, however, that no such Holder shall be liable for any claims hereunder
in excess of the amount of net proceeds received by such Holder from the sale of
Transfer Restricted Securities pursuant to the Shelf Registration Statement.
(c) Each indemnified party shall give notice as promptly as reasonably
practicable to each indemnifying party of any action commenced against it in
respect of which indemnity may be sought hereunder, but failure to so notify an
indemnifying party shall not relieve such indemnifying party from any liability
hereunder to the extent it is not materially prejudiced as a result thereof and
in any event shall not relieve it from any liability that it may have otherwise
than on account of this indemnity agreement. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party.
Notwithstanding the foregoing, if it so elects within a reasonable time after
receipt of such notice, an indemnifying party, jointly with any other
indemnifying parties receiving such notice, may assume the defense of such
action with counsel chosen by it and approved by the indemnified parties
defendant in such action (which approval shall not
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be unreasonably withheld), unless such indemnified parties reasonably object to
such assumption on the ground that there may be legal defenses available to them
which are different from or in addition to those available to such indemnifying
party. If an indemnifying party assumes the defense of such action, the
indemnifying parties shall not be liable for any fees and expenses of counsel
for the indemnified parties incurred thereafter in connection with such action.
In no event shall the indemnifying parties be liable for fees and expenses of
more than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions arising out of the same general
allegations or circumstances. No indemnifying party shall, without the prior
written consent of the indemnified parties, settle or compromise or consent to
the entry of any judgment with respect to any litigation, or any investigation
or proceeding by any governmental agency or body, commenced or threatened, or
any claim whatsoever in respect of which indemnification or contribution could
be sought under this Section 4 (whether or not the indemnified parties are
actual or potential parties thereto), unless such settlement, compromise or
consent (i) includes a full and unconditional release of each indemnified party
from all liability arising out of such litigation, investigation, proceeding or
claim and the offer and sale of any Securities and (ii) does not include a
statement as to or an admission of fault, culpability or a failure to act by or
on behalf of any indemnified party.
(d) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for reasonable fees and
expenses of counsel pursuant to Section 4(a)(iii) above, then such indemnifying
party agrees that it shall be liable for any settlement of the nature
contemplated by Section 4(a)(ii) effected without its written consent if (i)
such settlement is entered into more than 60 days after receipt by such
indemnifying party of the aforesaid request, (ii) such indemnifying party shall
have received notice of the terms of such settlement at least 30 days prior to
such settlement being entered into and (iii) such indemnifying party shall not
have reimbursed such indemnified party in accordance with such request prior to
the date of such settlement.
(e) In order to provide for just and equitable contribution in circumstances
under which any of the indemnity provisions set forth in this Section 4 is for
any reason held to be unavailable to the indemnified parties although applicable
in accordance with its terms, the Company, the Initial Purchasers and the
Holders, as applicable, shall contribute to the aggregate losses, liabilities,
claims, damages and expenses of the nature contemplated by such indemnity
agreement incurred by the Company, the Initial Purchasers and the Holders;
provided, however, that no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person that was not guilty of such fraudulent
misrepresentation. As between the Company and the Initial Purchasers and the
Holders, such parties shall contribute to such aggregate losses, liabilities,
claims, damages and expenses of the nature contemplated by such indemnity
agreement in such proportion as shall be appropriate to reflect the relative
fault of the Company on the one hand and of the Holder of Transfer Restricted
Securities, the Participating Broker-Dealer or Initial Purchaser, as the case
may be, on the other hand in connection with the statements or omissions which
resulted in such losses, liabilities, claims, damages or expenses, as well as
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any other relevant equitable considerations.
The relative fault of the Company on the one hand and the Holder of
Transfer Restricted Securities, the Participating Broker-Dealer or the Initial
Purchasers, as the case may be, on the other hand shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company, or by the Holder of Transfer
Restricted Securities, the Participating Broker-Dealer or the Initial
Purchasers, as the case may be, and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement or
omission.
The Company and the Holders of the Transfer Restricted Securities and the
Initial Purchasers agree that it would not be just and equitable if contribution
pursuant to this Section 4 were determined by pro rata allocation or by any
other method of allocation which does not take account of the equitable
considerations referred to above in this Section 4.
For purposes of this Section 4, each affiliate of any person, if any, who
controls a Holder of Transfer Restricted Securities, an Initial Purchaser or a
Participating Broker-Dealer within the meaning of Section 15 of the Securities
Act or Section 20 of the Exchange Act shall have the same rights to contribution
as such other person, and each director of the Company, each affiliate of the
Company, each executive officer of the Company who signed the Shelf Registration
Statement, and each person, if any, who controls the Company within the meaning
of Section 15 of the Securities Act or Section 20 of the Exchange Act shall have
the same rights to contribution as the Company.
(f) The agreements contained in this Section 4 shall survive the sale of
the Securities pursuant to the Shelf Registration Statement and shall remain in
full force and effect, regardless of any termination or cancellation of this
Agreement or any investigation made by or on behalf of any indemnified party.
5. Additional Dividends Under Certain Circumstances. (a) Additional
dividends (the "Additional Dividends") shall accrue with respect to the shares
of Preferred Stock which are Transfer Restricted Securities upon the occurrence
of any of the following events (each such event in clauses (i), (ii) and (iii)
below being herein called a "Registration Default"):
(i) if by 90 days after the Closing Date, the Shelf Registration
Statement has not been filed with the Commission;
(ii) if by 180 days after the Closing Date, the Shelf Registration
Statement has not been declared effective by the Commission; or
(iii) if after the Shelf Registration Statement is declared effective
(A) the Shelf Registration Statement thereafter ceases to be effective; or
(B) the Shelf Registration Statement or the related prospectus ceases to be
usable (in each case except as permitted in paragraph (c) below) in
connection with resales of Transfer
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Restricted Securities in accordance with and during the periods specified
herein because either (1) any event occurs as a result of which the related
prospectus forming part of such Shelf Registration Statement would include
any untrue statement of a material fact or omit to state any material fact
necessary to make the statements therein in the light of the circumstances
under which they were made not misleading, or (2) it shall be necessary to
amend such Shelf Registration Statement or supplement the related
prospectus, to comply with the Securities Act or the Exchange Act or the
respective rules thereunder.
(b) Additional Dividends shall accrue with respect to the shares of
Preferred Stock which are Transferred Restricted Securities from and including
the date on which any such Registration Default shall occur until all such
Registration Defaults have been cured according to the following:
(i) with respect to the first 90-day period following the occurrence
of such Registration Default, at a rate of 0.50% per year per share of
Preferred Stock; and
(ii) with respect to any period beyond 90 days following the occurrence
of such Registration Default, at a rate of an additional 0.25% per year per
share of Preferred Stock; provided, that the maximum Additional Dividend
rate shall not exceed 1.00% per year.
The amount of Additional Dividends for each share of Preferred Stock shall
be determined by multiplying the applicable Additional Dividends, specified
above, by a fraction, the numerator of which is the number of days such
Additional Dividends rate was applicable during such period (determined on the
basis of a 360-day year comprised of twelve 30-day months), and the denominator
of which is 360; and
(iii) if after the cure of all Registration Defaults then in effect,
there is a subsequent Registration Default, the rate of Additional Dividends
will initially be 0.25%, regardless of the rate of Additional Dividends in
effect at the time of the cure of the Registration Defaults.
(c) A Registration Default referred to in Section 5(a)(iii) shall be deemed
not to have occurred and be continuing in relation to the Shelf Registration
Statement or the related prospectus if (i) such Registration Default has
occurred solely as a result of one of the following, each of which is referred
to herein as a "Permitted Interruption": (x) the filing of a post-effective
amendment to the Shelf Registration Statement to incorporate annual audited
financial information with respect to the Company where such post-effective
amendment is not yet effective and needs to be declared effective to permit
Holders to use the related prospectus or (y) material business developments with
respect to the Company that would need to be described in the Shelf Registration
Statement or the related prospectus to make such Shelf Registration Statement or
related prospectus accurate and complete and (ii) in the case of clause (y), the
Company proceeds promptly and in good faith to amend or supplement the Shelf
Registration Statement and related
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prospectus to describe such events if the Company has determined in good faith
that there are no material legal or commercial impediments in so doing;
provided, however, that a Permitted Interruption shall expire and will not
prevent a Registration Default from occurring or continuing to the extent it
exceeds 90 days for a single period. Multiple Permitted Interruptions shall not
exceed 90 days in the aggregate in any consecutive 365- day period. Additional
Dividends shall accrue in accordance with the subsection (b) from the date that
such Permitted Interruption expires until such Registration Default is cured.
(d) Additional Dividends shall cease to accumulate and the dividend rate on
the Preferred Stock shall revert to the dividend rate originally borne on the
Preferred Stock upon the cure of all Registration Defaults.
(e) Any amounts of Additional Dividends due pursuant to this Section 5 will
be payable in cash and on such terms and conditions as provided in the
Certificate of Designations with respect to the Preferred Stock. Notwithstanding
anything to the contrary contained in this Section 5, the Company will not be
required to pay Additional Dividends with respect to more than one Registration
Default during any single period.
(f) "Transfer Restricted Securities" means each Security until the earlier
of (i) the date on which such Security has been effectively registered under the
Securities Act and disposed of in accordance with the Shelf Registration
Statement or (ii) the date on which is two years from the effective date of
the Shelf Registration Statement.
6. Miscellaneous.
(a) Rule 144 and Rule 144A. So long as any Transfer Restricted Security
exists, the Company shall use its reasonable best efforts to file the reports
required to be filed by it under the Securities Act and the Exchange Act in a
timely manner and, if at any time the Company is not required to file such
reports, it will, upon the request of any Holder of Transfer Restricted
Securities, make publicly available other information so long as necessary to
permit sales of its securities pursuant to Rules 144 and 144A. The Company
covenants that, if in the event the Company is no longer subject to Sections 13
or 15(d) of the Exchange Act, it will take such further action as any Holder of
Transfer Restricted Securities may reasonably request, all to the extent
required from time to time to enable such Holder to sell Transfer Restricted
Securities without registration under the Securities Act within the limitation
of the exemptions provided by Rules 144 and 144A (including the requirements of
Rule 144A(d)(4)). The Company will provide a copy of this Agreement to
prospective purchasers of Securities identified to the Company by the Initial
Purchasers upon request.
Notwithstanding the foregoing, nothing in this Section 6 shall be deemed to
require the Company to register any of its securities pursuant to the Exchange
Act.
(b) No Inconsistent Agreements. The rights granted to the Holders hereunder
do not, and will not for the term of this Agreement in any way conflict with and
are not, and will not during the term of this Agreement be inconsistent with the
rights granted to
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the holders of the Company's other issued and outstanding securities under any
other agreements entered into by the Company.
(c) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to departures from
the provisions hereof may not be given, otherwise than with the prior written
consent of the Company and the Holders of a majority of the Transfer Restricted
Securities (provided that Holders of Common Stock issued upon conversion of
Preferred Stock shall be deemed to be Holders of the aggregate number of
Preferred Stock from which such Common Stock was converted) affected by such
amendment, modification, supplement, waiver or consents.
(d) Notices. All notices and other communications provided for or permitted
hereunder shall be made in writing by hand-delivery, registered first-class
mail, telex, telecopier, or any courier guaranteeing overnight delivery (i) if
to a Holder, at the most current address given by such Holder to the Company by
means of a notice given in accordance with the provisions of this Section 6(d),
which address initially is, with respect to the Initial Purchasers, the address
set forth in the Purchase Agreement; and (ii) if to the Company, initially at
the Company's address set forth in the Purchase Agreement and thereafter at such
other address, notice of which is given in accordance with the provisions of
this Section 6(d).
All such notices and communications shall be deemed to have been duly given:
at the time delivered by hand, if personally delivered; five business days after
being deposited in the mail, postage prepaid, if mailed; when answered back, if
telexed; when receipt is acknowledged, if telecopied; and on the next business
day, if timely delivered to an air courier guaranteeing overnight delivery.
(e) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors, assigns and transferees of the Initial
Purchasers, including, without limitation and without the need for an express
assignment, subsequent Holders; provided, however, that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Transfer
Restricted Securities in violation of the terms of the Purchase Agreement. If
any transferee of any Holder shall acquire Transfer Restricted Securities, in
any manner, whether by operation of law or otherwise, such Transfer Restricted
Securities shall be held subject to all of the terms of this Agreement, and by
taking and holding such Transfer Restricted Securities, such person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement and such person shall be entitled to
receive the benefits hereof.
(f) Third Party Beneficiary. Each of the Initial Purchasers and each Holder
shall be a third party beneficiary of the agreements made hereunder between the
Company, on the one hand, and the Initial Purchasers, on the other hand, and
shall have the right to enforce such agreements directly to the extent it deems
such enforcement necessary or advisable to protect its rights or the rights of
Holders hereunder.
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(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY
PROVISIONS RELATING TO CONFLICTS OF LAWS. Specified times of day refer to New
York City time.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Securities Held by the Company or Any of Its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Transfer Restricted
Securities is required hereunder, Securities held by the Company or any of its
affiliates (as such term is defined in Rule 405 under the Securities Act) shall
not be counted in determining whether such consent or approval was given by the
Holders of such required percentage.
[Signature Page Follows]
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IN WITNESS WHEREOF, the parties have executed this Registration Rights
Agreement as of the date first written above.
RHYTHMS NETCONNECTIONS INC.
By:
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Name:
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
XXXXXXX LYNCH, PIERCE, XXXXXX & XXXXX
INCORPORATED
XXXXXXX XXXXX BARNEY INC.
By: Xxxxxxx Lynch, Pierce, Xxxxxx & Xxxxx
Incorporated
By:
--------------------------------
Authorized Signatory
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