EXHIBIT 4.4
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WARRANT REGISTRATION RIGHTS AGREEMENT
Dated March 11, 1998
By and Among
COVAD COMMUNICATIONS GROUP, INC.
BEAR, XXXXXXX & CO. INC.
and
BT ALEX. XXXXX INCORPORATED
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WARRANT REGISTRATION RIGHTS AGREEMENT
THIS WARRANT REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT") is made
and entered into March 11, 1998, by and among COVAD COMMUNICATIONS GROUP, INC.,
a Delaware corporation (the "COMPANY"), and BEAR, XXXXXXX & CO. INC. and BT
ALEX. XXXXX INCORPORATED (each an "INITIAL PURCHASER" and collectively, the
"INITIAL PURCHASERS").
This Agreement is made pursuant to the Purchase Agreement dated as of
March 6, 1998 among the Company and the Initial Purchasers (the "PURCHASE
AGREEMENT"), relating to, among other things, the sale by the Company to the
Initial Purchasers of an aggregate of 260,000 Units, each Unit consisting of
$1,000 principal amount at maturity of 13 1/2% Senior Discount Notes due March
15, 2008 and one Warrant, each initially exercisable for 6.4792 shares of Common
Stock, par value $.001 per share, of the Company. In order to induce the
Initial Purchasers to enter into the Purchase Agreement, the Company has agreed
to provide to the Initial Purchasers and the Holders (as defined herein), among
other things, the registration rights for the Warrant Shares (as defined herein)
set forth in this Agreement. The execution and delivery of this Agreement is a
condition to the obligations of the Initial Purchasers under the Purchase
Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
Section 1. Definitions. As used in this Agreement, the following defined
terms shall have the following meanings:
"Advice" has the meaning ascribed to such term in the last paragraph
of Section 4 hereof.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition,
"CONTROL" (including, with correlative meanings, the terms "CONTROLLING,"
"CONTROLLED BY" and "UNDER COMMON CONTROL WITH"), as used with respect to
any Person, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or
otherwise; provided, however, that beneficial ownership of 10% or more of
the Voting Stock (as defined in the Indenture) of a Person shall be deemed
to be control.
"Business Day" means any day other than a Legal Holiday.
"Capital Stock" means, with respect to the Company, any and all
shares, interests, rights to purchase, warrants, options, participations,
or other equivalents of, or interests (however designated) in stock issued
by the Company.
"Common Stock" means the Common Stock, par value $.001 per share, of
the Company.
"Company" shall have the meaning ascribed to that term in the preamble
of this Agreement and shall also include the Company's permitted successors
and assigns.
"Demand Registration" has the meaning ascribed to such term in Section
2.1(a) hereof.
"DTC" has the meaning ascribed to such term in Section 4(i) hereof.
"Effectiveness Date" means, with respect to any Registration
Statement, the 60th day after the filing date thereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended
from time to time.
"Holder" means each of the Initial Purchasers, for so long as it owns
any Warrant Shares, and each of its successors, assigns and direct and
indirect transferees who become registered owners of such Warrant Shares.
"Included Securities" has the meaning ascribed to such term in Section
2.1(a) hereof.
"indemnified party" has the meaning ascribed to such term in Section
5(c) hereof.
"indemnifying party" has the meaning ascribed to such term in Section
5(c) hereof.
"Indenture" means the Indenture dated as of March 15, 1998, as amended
or supplemented from time to time, between the Company and The Bank of New
York as Trustee, pursuant to which the Notes are issued.
"Initial Purchasers" has the meaning ascribed to such term in the
preamble hereof.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are
authorized by law, regulation or executive order to remain closed. If a
payment date is a Legal Holiday at a place of payment, payment may be made
at that place on the next succeeding day that is not a Legal Holiday, and
no interest shall accrue on such payment for the intervening period.
"Notes" means the aggregate of $260,000,000 principal amount at
maturity of 13 1/2% Senior Discount Notes due March 15, 2008 of the Company
issued under the Indenture.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated
organization or government or agency or political subdivision thereof
(including any subdivision or ongoing business of any such entity or
substantially all of the assets of any such entity, subdivision or
business).
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"Piggy-Back Registration" has the meaning ascribed to such term in
Section 2.2(a) hereof.
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, any prospectus subject to
completion and a prospectus that includes any information previously
omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities Act),
as amended or supplemented by any prospectus supplement, and all other
amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
"Public Equity Offering" means an underwritten offering of Common
Stock pursuant to a registration statement that has been declared effective
by the SEC pursuant to the Securities Act (other than a registration
statement on Form S-8 or otherwise relating to equity securities issuable
under any employee benefit plan of the Company).
"Purchase Agreement" has the meaning ascribed to such term in the
preamble hereof.
"Registrable Securities" means any of (i) the Warrant Shares and (ii)
any other securities issued or issuable with respect to any Registrable
Securities by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise, unless, in each case, such Warrant Shares have
been offered and sold to the Holder pursuant to an effective Registration
Statement under the Securities Act declared effective prior to the
exercisability of the Warrants and such securities may be sold to the
public pursuant to Rule 144 without any restriction on the amount of
securities which may be sold by such Holder. As to any particular
Registrable Securities held by a Holder, such securities shall cease to be
Registrable Securities when (i) a Registration Statement with respect to
the offering of such securities by the Holder thereof shall have been
declared effective under the Securities Act and such securities shall have
been disposed of by such Holder pursuant to such Registration Statement,
(ii) such securities may at the time of determination be sold to the public
pursuant to Rule 144 without any restriction on the amount of securities
which may be sold by such Holder or Rule 144(k) (or any similar provision
then in force, but not Rule 144A) promulgated under the Securities Act
without the lapse of any further time or the satisfaction of any condition,
(iii) such securities shall have been otherwise transferred by such Holder
and new certificates for such securities not bearing a legend restricting
further transfer shall have been delivered by the Company or its transfer
agent and subsequent disposition of such securities shall not require
registration or qualification under the Securities Act or any similar state
law then in force or (iv) such securities shall have ceased to be
outstanding.
"Registration Expenses" means all expenses incident to the Company's
performance of or compliance with this Agreement, including, without
limitation, all SEC and stock exchange or National Association of
Securities Dealers, Inc. registration and filing fees and expenses, fees
and expenses of compliance with securities or blue sky laws (including,
without limitation,
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reasonable fees and disbursements of counsel for the underwriters in
connection with blue sky qualifications of the Registrable Securities),
printing expenses, messenger, telephone and delivery expenses, fees and
disbursements of counsel for the Company and all independent certified
public accountants, the fees and disbursements of underwriters customarily
paid by issuers or sellers of securities (but not including any
underwriting discounts or commissions or transfer taxes, if any,
attributable to the sale of Registrable Securities by Holders of such
Registrable Securities) and other reasonable out-of-pocket expenses of
Holders (it being understood that Registration Expenses shall not include,
as to the fees and expenses of counsel, the fees and expenses of more than
one counsel for the Holders).
"Registration Statement" means any appropriate registration statement
of the Company filed with the SEC pursuant to the Securities Act which
covers any of the Registrable Securities pursuant to the provisions of this
Agreement and all amendments and supplements to any 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.
"Requisite Securities" means a number of Registrable Securities equal
to not less than 25% of the Registrable Securities then outstanding held in
the aggregate by all Holders; provided, however, that with respect to any
action to be taken at the request of the Holders of the Registrable
Securities prior to such time as the Warrants have expired pursuant to the
terms thereof and of the Warrant Agreement, each Warrant outstanding shall
be deemed to represent that number of Registrable Securities for which such
Warrant would be then exercisable.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"SEC" means the Securities and Exchange Commission or any successor.
"Securities Act" means the Securities Act of 1933, as amended.
"Selling Holder" means a Holder who is selling Registrable Securities
in accordance with the provisions of Section 2.1 or 2.2.
"Stockholder Rights Agreement" means the Amended and Restated
Stockholder Rights Agreement dated as of March 11, 1998 by and among the
Company and the other Persons or entities party thereto, as amended or
supplemented from time to time.
"Warrant Agent" means The Bank of New York and any successor Warrant
Agent for the Warrants pursuant to the Warrant Agreement.
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"Warrant Agreement" means the Warrant Agreement dated March 11, 1998
between the Company and The Bank of New York, as Warrant Agent, as amended
or supplemented from time to time in accordance with the terms thereof.
"Warrants" means the warrants of the Company issued pursuant to the
Warrant Agreement.
"Warrant Share Prospectus" means the prospectus included in any
Warrant Share Registration Statement (including, without limitation, any
prospectus subject to completion and a prospectus that includes any
information previously omitted from a prospectus filed as part of an
effective registration statement in reliance upon Rule 430A promulgated
under the Securities Act), as amended or supplemented by any prospectus
supplement, and all other amendments and supplements to the Warrant Share
Prospectus, including post-effective amendments, and all material
incorporated by reference or deemed to be incorporated by reference in such
Warrant Share Prospectus.
"Warrant Share Registration Statement" has the meaning ascribed to
that term in Section 5(a) hereof.
"Warrant Shares" means the shares of Common Stock deliverable upon
exercise of the Warrants.
Section 2. Registration Rights.
2.1 (a) Demand Registration After Public Equity Offering.
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Commencing on the earlier of March 15, 2003 or 180 days after an initial Public
Equity Offering, Holders owning, individually or in the aggregate, not less than
the Requisite Securities may make a written request for one registration under
the Securities Act of their Registrable Securities (a "DEMAND REGISTRATION").
Within 120 days of the receipt of such written request for a Demand
Registration, the Company shall file with the SEC and use its best efforts to
cause to become effective under the Securities Act a Registration Statement with
respect to such Registrable Securities. Any such request will specify the
number of Registrable Securities proposed to be sold and will also specify the
intended method of disposition thereof. The Company shall give written notice
of such registration request to all other Holders of Registrable Securities
within 20 days after the receipt thereof. Within 30 days after the date of such
notice from the Company, any Holder may request in writing that such Holder's
Registrable Securities be included in such Registration Statement and the
Company shall include in such Registration Statement the Registrable Securities
of any such Holder requested to be so included (the "INCLUDED SECURITIES").
Each such request by such other Holders shall specify the number of Included
Securities proposed to be sold and the intended method of disposition thereof.
Subject to Sections 2.1(b) and 2.1(f) hereof, the Company shall be required to
register Registrable Securities pursuant to this Section 2.1(a) only once.
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Subject to Section 2.1(f) hereof, no other securities of the Company
except (i) Registrable Securities held by any Holder, (ii) equity securities to
be offered and sold for the account of the Company and (iii) any equity
securities of the Company held by the parties to the Stockholder Rights
Agreement or by any Person having "piggy-back" registration rights pursuant to
any contractual obligation of the Company shall be included in a Demand
Registration; provided, however, that no such securities for the account of the
Company or any other Person (other than the parties to the Stockholder Rights
Agreement) shall be so included unless, in connection with any underwritten
offering, the managing underwriter or underwriters confirm to the Holders of
Registrable Securities to be included in such Demand Registration that the
inclusion of such other securities will not be likely to affect the price at
which the Registrable Securities may be sold. The inclusion of any such
securities for the account of the Company or any other Person shall be on the
same terms as that of the Registrable Securities.
(b) Effective Registration. A Registration Statement will not
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be deemed to have been effected as a Demand Registration unless it has been
declared effective by the SEC and the Company has complied in a timely manner
and in all material respects with all of its obligations under this Agreement
with respect thereto; provided, however, that if, after such Registration
Statement has become effective, the offering of Registrable Securities pursuant
to such Registration Statement is or becomes the subject of any stop order,
injunction or other order or requirement of the SEC or any other governmental or
administrative agency or court that prevents, restrains or otherwise limits the
sale of Registrable Securities pursuant to such Registration Statement for any
reason not attributable to any Holder participating in such registration and
such Registration Statement has not become effective within a reasonable time
period thereafter (not to exceed 45 days), such Registration Statement will be
deemed not to have been effected. If (i) a registration requested pursuant to
this Section 2.1 is deemed not to have been effected or (ii) a Demand
Registration does not remain effective under the Securities Act until at least
the earlier of (A) an aggregate of 180 days after the effective date thereof or
(B) the consummation of the distribution by the Holders of all of the
Registrable Securities covered thereby, then such registration shall not count
towards determining if the Company has satisfied its obligation to effect one
Demand Registration pursuant to this Section 2.1. For purposes of calculating
the 180-day period referred to in the preceding sentence, any period of time
during which such Registration Statement was not in effect shall be excluded.
The Holders of Registrable Securities shall be permitted to withdraw all or any
part of the Registrable Securities from a Demand Registration at any time prior
to the effective date of such Demand Registration.
(c) Restrictions on Sale by Holders. Each Holder of Registrable
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Securities whose Registrable Securities are covered by a Registration Statement
filed pursuant to this Section 2.1 and are to be sold thereunder agrees, if and
to the extent reasonably requested by the managing underwriter or underwriters
in an underwritten offering, not to effect any public sale or distribution of
Registrable Securities or of securities of the Company of the same class as any
securities included in such Registration Statement, including a sale pursuant to
Rule 144 (except as part of such underwritten offering), during the 180 day
period beginning on the closing date of each underwritten offering made pursuant
to such Registration Statement, to the extent timely notified in writing by the
Company or such managing underwriter or underwriters.
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The foregoing provisions of Section 2.1(c) shall not apply to any
Holder of Registrable Securities if such Holder is prevented by applicable
statute or regulation from entering into any such agreement; provided, however,
that any such Holder shall undertake, in its request to participate in any such
underwritten offering, not to effect any public sale or distribution of any
Registrable Securities commencing on the date of sale of such Registrable
Securities unless it has provided 45 days' prior written notice of such sale or
distribution to the underwriter or underwriters.
(d) Underwritten Registrations. If any of the Registrable
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Securities covered by a Demand Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will manage the offering will be selected by the Company.
No Holder of Registrable Securities may participate in any
underwritten registration pursuant to a Registration Statement filed under this
Agreement unless such Holder (a) agrees to (i) sell such Holder's Registrable
Securities on the basis provided in and in compliance with any underwriting
arrangements approved by the Holders of not less than a majority of the
Registrable Securities to be sold thereunder and (ii) comply with Regulation M
under the Exchange Act and (b) completes and executes all questionnaires, powers
of attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements; provided, however,
that no Holder of Registrable Securities shall be required to enter into a
custody or escrow agreement or power of attorney with respect to Registrable
Securities to be sold in connection with such underwriting arrangements.
(e) Expenses. The Company will pay all Registration Expenses in
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connection with the registrations requested pursuant to Section 2.1(a) hereof.
Each Holder of Registrable Securities shall pay all underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition of
such Holder's Registrable Securities pursuant to a Registration Statement
requested pursuant to this Section 2.1.
(f) Priority in Demand Registration. In a registration pursuant
to Section 2.1 hereof involving an underwritten offering, if the managing
underwriter or underwriters of such underwritten offering have informed, in
writing, the Company and the Selling Holders who have requested such Demand
Registration or who have sought inclusion therein that in such underwriter's or
underwriters' opinion the total number of securities which the Selling Holders
and any other Person desiring to participate in such registration intend to
include in such offering is such as to affect adversely the success of such
offering, including the price at which such securities can be sold, then the
Company will be required to include in such registration only the amount of
securities which it is so advised should be included in such registration. In
such event, securities shall be registered in such registration in the following
order of priority: (i) first, the securities which have been requested to be
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included in such registration by the Holders of Registrable Securities pursuant
to this Agreement, (ii) second, provided that no securities sought to be
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included by the Holders of Registrable Securities have been excluded from such
registration, the securities of the other parties to the Stockholder Rights
Agreement, (iii) third, provided that no securities sought to be included by the
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Holders or the other parties to the Stockholder Rights Agreement have been
excluded from such registration, the securities of other Persons entitled to
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exercise "piggy-back" registration rights pursuant to contractual commitments of
the Company (pro rata based on the amount of securities sought to be registered
by such Persons) and (iv) fourth, provided that no securities of any other
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Person sought to be included therein have been excluded from such registration,
securities to be offered and sold for the account of the Company.
If any securities of a Holder have been excluded from a registration
statement pursuant to the provisions of the foregoing paragraph, then such
registration shall not count towards determining whether the Company has
satisfied its obligation to effect one Demand Registration pursuant to Section
2.1 hereof.
2.2 (a) Piggy-Back Registration. If at any time the Company
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proposes to file a Registration Statement under the Securities Act with respect
to an offering by the Company for its own account or for the account of any of
its security holders of Common Stock (other than (i) a Registration Statement on
Form S-4 or S-8 (or any substitute form that may be adopted by the SEC), (ii) a
Registration Statement filed in connection with an offering of securities solely
to the Company's existing security holders or any offer of debt securities or
convertible debt securities or (iii) a Demand Registration), then the Company
shall give written notice of such proposed filing to the Holders of Registrable
Securities as soon as practicable (but in no event fewer than 15 days before the
anticipated filing date or 10 days if the Company is subject to filing reports
under the Exchange Act and able to use Form S-3 under the Securities Act), and
such notice shall offer such Holders the opportunity to register such number of
shares of Registrable Securities as each such Holder may request in writing not
later than 15 days prior to the anticipated effective date of the Registration
Statement (or eight days of the notice of the proposed filing if the Company is
subject to filing reports under the Exchange Act and able to use Form S-3 under
the Securities Act) after receipt of such written notice from the Company (which
request shall specify the Registrable Securities intended to be disposed of by
such Selling Holder and the intended method of distribution thereof) (a "PIGGY-
BACK REGISTRATION"). The Company shall use its best efforts to keep such Piggy-
Back Registration continuously effective under the Securities Act until at least
the earlier of (A) 90 days after the effective date thereof or (B) the
consummation of the distribution by the Holders of all of the Registrable
Securities covered thereby. The Company shall cause the managing underwriter or
underwriters, if any, of such proposed offering to permit the Registrable
Securities requested to be included in a Piggy-Back Registration to be included
on the same terms and conditions as any similar securities of the Company or any
other security holder included therein and to permit the sale or other
disposition of such Registrable Securities in accordance with the intended
method of distribution thereof. Any Selling Holder shall have the right to
withdraw its request for inclusion of its Registrable Securities in any
Registration Statement pursuant to this Section 2.2 by giving written notice to
the Company of its request to withdraw. The Company may withdraw a Piggy-Back
Registration at any time prior to the time it becomes effective or the Company
may elect to delay the registration; provided, however, that the Company shall
give prompt written notice thereof to participating Selling Holders. The Piggy-
Back Registration right of holders of Warrants and Warrant Shares shall not
apply to any Public Equity Offering that is the initial Public Equity Offering
of the Company unless the securities of other Selling Holders are to be included
therein. The Company will pay all Registration Expenses in connection with each
registration of Registrable Securities requested pursuant to this Section 2.2,
and each Holder of Registrable Securities shall pay all underwriting discounts
and
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commissions and transfer taxes, if any, relating to the sale or disposition
of such Holder's Registrable Securities pursuant to a Registration Statement
effected pursuant to this Section 2.2.
No registration effected under this Section 2.2, and no failure to
effect a registration under this Section 2.2, shall relieve the Company of its
obligation to effect a registration upon the request of Holders of Registrable
Securities pursuant to Section 2.1 hereof, and no failure to effect a
registration under this Section 2.2 and to complete the sale of securities
registered thereunder in connection therewith shall relieve the Company of any
other obligation under this Agreement.
(b) Priority in Piggy-Back Registration. In a registration
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pursuant to Section 2.2 hereof involving an underwritten offering, if the
managing underwriter or underwriters of such underwritten offering have
informed, in writing, the Company and the Selling Holders requesting inclusion
in such offering that in such underwriter's or underwriters' opinion the total
number of securities which the Company, the Selling Holders and any other
Persons desiring to participate in such registration intend to include in such
offering is such as to materially and adversely affect the success of such
offering, including the price at which such securities can be sold, then the
Company will be required to include in such registration only the amount of
securities which it is so advised should be included in such registration. In
such event: (x) in cases only involving the registration for sale of securities
for the Company's own account (other than pursuant to the exercise of "piggy-
back" rights herein and in other contractual commitments of the Company),
securities shall be registered in such offering in the following order of
priority: (i) first, the securities which the Company proposes to register, (ii)
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second, provided that no securities sought to be included by the Company have
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been excluded from such registration, the securities which have been requested
to be included in such registration by the Holders of Registrable Securities
pursuant to this Agreement and by the other parties to the Stockholder Rights
Agreement pro rata between the Holders and the parties to the Stockholder Rights
Agreement based upon the aggregate amount of securities then held, and (iii)
third, provided that no securities sought to be included by the Company or the
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Holders or the parties to the Stockholder Rights Agreement have been excluded
from such registration, the securities of other Persons entitled to exercise
"piggy-back" registration rights pursuant to contractual commitments of the
Company (pro rata based on the amount of securities sought to be registered by
such Persons); (y) in cases not involving the registration for sale of
securities for the Company's own account only or not for the account of any
party to the Stockholder Rights Agreement, securities shall be registered in
such offering in the following order of priority: (i) first, the securities of
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any Person whose exercise of a "demand" registration right pursuant to a
contractual commitment of the Company is the basis for the registration
(provided that if such Person is a Holder of Registrable Securities, as among
Holders of Registrable Securities there shall be no priority and Registrable
Securities sought to be included by Holders of Registrable Securities shall be
included pro rata based on the amount of securities sought to be registered by
such Persons), (ii) second, provided that no securities of such Person referred
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to in the immediately preceding clause (i) have been excluded from such
registration, the securities which have been requested to be included in such
registration by the Holders of Registrable Securities pursuant to this Agreement
and by the parties to the Stockholder Rights Agreement pro rata between the
Holders and the parties to the Stockholder Rights Agreement based upon the
aggregate amount of securities held and (iii) third, provided that no securities
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of such Person referred to in the immediately preceding clause (i) or of the
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Holders or of the other parties to the Stockholder Rights Agreement have been
excluded from such registration, securities of other Persons entitled to
exercise "piggy-back" registration rights pursuant to contractual commitments
(pro rata based on the amount of securities sought to be registered by such
Persons) and (iv) fourth, provided that no securities of any other Person have
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been excluded from such registration, the securities which the Company proposes
to register; and (z) in cases involving the registration for sale of securities
for the account of any other party to the Stockholder Rights Agreement,
securities shall be registered in such offering in the following order of
priority: (i) first, the securities which have been requested to be included in
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such registration by the Holders of Registrable Securities pursuant to this
Agreement and by the other parties to the Stockholder Rights Agreement pro rata
between the Holders and the parties to the Stockholder Rights Agreement based
upon the aggregate amount of securities then held, (ii) second, provided that no
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securities of the Holders or of the parties to the Stockholder Rights Agreement
have been excluded from such registration, securities of other Persons entitled
to exercise "piggy-back" registration rights pursuant to contractual commitments
(pro rata based on the amount of securities sought to be registered by such
Persons) and (iii) third, provided that no securities of any other Person has
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been excluded from such registration, the securities which the Company proposes
to register.
If, as a result of the provisions of this Section 2.2(b), any Selling
Holder shall not be entitled to include all Registrable Securities in a Piggy-
Back Registration that such Selling Holder has requested to be included, such
Selling Holder may elect to withdraw his request to include Registrable
Securities in such registration.
2.3 Limitations, Conditions and Qualifications to Obligations Under
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Registration Covenants. The obligations of the Company set forth in Sections
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2.1 and 2.2 hereof are subject to each of the following limitations, conditions
and qualifications:
(i) Subject to the next sentence of this paragraph, the
Company shall be entitled to postpone, for a reasonable period of time, the
filing or effectiveness of, or suspend the rights of any Holders to make sales
pursuant to, any Registration Statement otherwise required to be prepared, filed
and made and kept effective by it hereunder; provided, however, that the
duration of such postponement or suspension may not exceed the earlier to occur
of (A) 15 days after the cessation of the circumstances described in the next
sentence of this paragraph on which such postponement or suspension is based or
(B) 90 days after the date of the determination of the Board of Directors
referred to in the next sentence, and the duration of such postponement or
suspension shall be excluded from the calculation of the 180-day period
described in Section 2.1(b) hereof. Such postponement or suspension may be
effected only if the Board of Directors of the Company determines reasonably and
in good faith that the filing or effectiveness of, or sales pursuant to, such
Registration Statement would materially impede, delay or interfere with any
financing, offer or sale of securities, acquisition, corporate reorganization or
other significant transaction involving the Company or any of its Affiliates or
require disclosure of material information which the Company has a bona fide
business purpose for preserving as confidential, which financing, offer or sale
of securities, acquisition, corporate reorganization or other significant
transaction had been initiated at the time of the filing of such Registration
Statement; provided, however, that the Company shall not be entitled to such
postponement or suspension more than
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twice in any twelve-month period. If the Company shall so postpone the filing of
a Registration Statement it shall, as promptly as possible, deliver a
certificate signed by the Chief Executive Officer of the Company to the Selling
Holders as to such determination, and the Selling Holders shall (y) have the
right, in the case of a postponement of the filing or effectiveness of a
Registration Statement, upon the affirmative vote of the Holders of not less
than a majority of the Registrable Securities to be included in such
Registration Statement, to withdraw the request for registration by giving
written notice to the Company within 10 days after receipt of such notice or (z)
in the case of a suspension of the right to make sales, receive an extension of
the registration period equal to the number of days of the suspension. Any
Demand Registration as to which the withdrawal election referred to in the
preceding sentence has been effected shall not be counted for purposes of the
single Demand Registration the Company may be required to effect pursuant to
Section 2.1 hereof.
(ii) The Company shall not be required by this Agreement
to effect a Demand Registration within 90 days immediately following the
effective date of any registration statement pertaining to a firmly underwritten
offering of equity securities of the Company for its own account; provided,
however, that this clause (ii) shall not apply if the underwriter of such
offering consents to the request for such Demand Registration pursuant to
Section 2.1(a).
(iii) The Company shall not be required by this Agreement
to effect a Demand Registration within 60 days immediately following the
effective date of any registration statement pertaining to a firmly underwritten
offering of equity securities of the Company for the account of any security
holder of the Company; provided, however, that this clause (ii) shall not apply
if the underwriter of such offering consents to the request for such Demand
Registration pursuant to Section 2.1(a).
(iv) The Company's obligations shall be subject to the
obligations of the Selling Holders, which the Selling Holders acknowledge, to
furnish all information and materials and to take any and all actions as may be
required under applicable federal and state securities laws and regulations to
permit the Company to comply with all applicable requirements of the SEC and to
obtain any acceleration of the effective date of such Registration Statement.
(v) The Company shall not be obligated to cause any
special audit to be undertaken in connection with any registration pursuant to
this Agreement unless such audit is required by the SEC or requested by the
underwriters with respect to such registration.
2.4 Restrictions on Sale by the Company and Others. The Company
----------------------------------------------
covenants and agrees that (i) it shall not, and that it shall not cause or
permit any of its subsidiaries to, effect any public sale or distribution of any
securities of the same class as any of the Registrable Securities or any
securities convertible into or exchangeable or exercisable for such securities
(or any option or other right for such securities) during the 30-day period
prior to, and during the 120-day period beginning on, the commencement of any
underwritten offering of Registrable Securities pursuant to a Demand
Registration which has been requested pursuant to this Agreement, or a Piggy-
Back Registration which has been scheduled, prior to the Company or any of its
subsidiaries publicly announcing its intention to
11
effect any such public sale or distribution; (ii) the Company will not, and the
Company will not cause or permit any subsidiary of the Company to, after the
date hereof, enter into any agreement or contract that conflicts with or limits
or prohibits the full and timely exercise by the Holders of Registrable
Securities of the rights herein to request a Demand Registration or to join in
any Piggy-Back Registration subject to the other terms and provisions hereof;
and (iii) that it shall use its reasonable best efforts to secure the written
agreement of each of its officers and directors to not effect any public sale or
distribution of any securities of the same class as the Registrable Securities
(or any securities convertible into or exchangeable or exercisable for any such
securities), or any option or right for such securities during the period
described in clause (i) of this Section 2.4.
2.5 Rule 144 and Rule 144A. The Company covenants that it will file
----------------------
the reports required to be filed by it under the Securities Act and the Exchange
Act and the rules and regulations adopted by the SEC thereunder 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 or beneficial owner of Registrable
Securities, make available such information necessary to permit sales pursuant
to Rule 144A under the Securities Act. The Company further covenants that it
will take such further action as any Holder of Registrable Securities may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (a) Rule 144(k) and Rule
144A under the Securities Act, as such Rules may be amended from time to time,
or (b) any similar rule or regulation hereafter adopted by the SEC (it being
expressly understood that the foregoing shall not create any obligation on the
part of the Company to file periodic reports or other reports under the Exchange
Act at any time that it is not then required to file such reports pursuant to
the Exchange Act). Upon the request of any Holder of Registrable Securities,
the Company will in a timely manner deliver to such Holder a written statement
as to whether it has complied with such information requirements.
Section 3. "Market Stand-Off" Agreement.
(a) If the Company has complied with all its obligations with
respect to a Demand Registration or a Piggy-Back Registration relating to an
underwritten public offering, all holders of Warrants and Warrant Shares, upon
request of the lead managing underwriter with respect to such underwritten
public offering, will be required to not sell or otherwise dispose of any
Warrants and Warrant Shares owned by them for a period not to exceed 180 days
from the consummation of such underwritten public offering: provided, however,
that except for the initial Public Equity Offering of the Company, such
requirement shall apply to Warrant Shares not sold in a Demand Registration or
Piggy-Back Registration due to a reduction pursuant to Section 2.2(b) hereof for
a period not to exceed 90 days from such date of consummation.
(b) In order to enforce the foregoing covenant, the Company
shall have the right to place restrictive legends on the certificates
representing the shares subject to this Section 3 and to impose stop transfer
instructions with respect to the Registrable Securities and such other shares of
stock of each Holder (and the shares or securities of every other Person subject
to the foregoing restriction)
12
until the end of such period. The provisions of this Section 3 shall be binding
upon any transferee of any Registrable Securities.
Section 4. Registration Procedures. In connection with the obligations
of the Company with respect to any Registration Statement pursuant to Sections
2.1, 2.2 and 2.6 hereof, the Company shall, except as otherwise provided:
(a) Prepare and file with the SEC as soon as practicable each
such Registration Statement (but in any event on or prior to the date of filing
thereof required under this Agreement) and cause such Registration Statement to
become effective and remain effective as provided herein; provided, however,
that before filing any such Registration Statement or any Prospectus (for
registrations pursuant to Sections 2.1 and 2.2 hereof) or any amendments or
supplements thereto (only for registrations pursuant to Section 2.1 hereof)
(including documents that would be incorporated or deemed to be incorporated
therein by reference, including such documents filed under the Exchange Act that
would be incorporated therein by reference), the Company shall, upon request,
afford promptly to the Holders of the Registrable Securities covered by such
Registration Statement, their counsel and the managing underwriter or
underwriters, if any, an opportunity to review copies of all such documents
proposed to be filed a reasonable time prior to the proposed filing thereof. The
Company shall not file any Registration Statement or Prospectus (for
registrations pursuant to Sections 2.1 and 2.2 hereof) or any amendments or
supplements thereto (only for registrations pursuant to Section 2.1 hereof) if
the Holders of a majority of the Registrable Securities covered by such
Registration Statement, their counsel, or the managing underwriter or
underwriters, if any, shall reasonably object in writing unless failure to file
any such amendment or supplement would involve a violation of the Securities Act
or other applicable law.
(b) Prepare and file with the SEC such amendments and post-
effective amendments to the Registration Statement as may be necessary to keep
such Registration Statement continuously effective for the time periods
prescribed hereby; cause the related Prospectus to be supplemented by any
required prospectus supplement, and as so supplemented to be filed pursuant to
Rule 424 (or any similar provisions then in force) promulgated under the
Securities Act; and comply with the provisions of the Securities Act, the
Exchange Act and the rules and regulations of the SEC promulgated thereunder
applicable to it with respect to the disposition of all securities covered by
such Registration Statement as so amended or in such prospectus as so
supplemented.
(c) Notify the Holders of Registrable Securities, their counsel
and the managing underwriter or underwriters, if any, promptly (but in any event
within two (2) Business Days), and confirm such notice in writing, (i) when a
Prospectus or any prospectus supplement or post-effective amendment has been
filed, and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective (including in such notice a
written statement that any Holder may, upon request, obtain, without charge, one
conformed copy of such Registration Statement or post-effective amendment
including financial statements and schedules and exhibits), (ii) of the issuance
by the SEC of any stop order suspending the effectiveness of such Registration
Statement or of any order preventing or suspending the use of any preliminary
prospectus or the initiation or
13
threatening of any proceedings for that purpose, (iii) if at any time when a
prospectus is required by the Securities Act to be delivered in connection with
sales of the Registrable Securities the representations and warranties of the
Company contained in any agreement (including any underwriting agreement)
contemplated by Section 4(l) below, to the knowledge of the Company, cease to be
true and correct in any material respect, (iv) of the receipt by the Company of
any notification with respect to (A) the suspension of the qualification or
exemption from qualification of the Registration Statement or any of the
Registrable Securities covered thereby for offer or sale in any jurisdiction, or
(B) the initiation of any proceeding for such purpose, (v) of the happening of
any event, the existence of any condition or information becoming known that
requires the making of any changes in such Registration Statement, Prospectus or
documents so that, in the case of such Registration Statement, it will conform
in all material respects with the requirements of the Securities Act and it will
not contain any 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 not misleading, and that in the case of the Prospectus, it will conform
in all material respects with the requirements of the Securities Act and it will
not contain any 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, and (vi) of the Company's reasonable determination that a post-
effective amendment to such Registration Statement would be appropriate.
(d) Use every reasonable effort to prevent the issuance of any
order suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of a Prospectus or suspending the qualification
(or exemption from qualification) of any of the Registrable Securities covered
thereby for sale in any jurisdiction, and, if any such order is issued, to
obtain the withdrawal of any such order as soon as practicable.
(e) If requested by the managing underwriter or underwriters, if
any, or the Holders of a majority of the Registrable Securities being sold in
connection with an underwriting offering (only for registrations pursuant to
Section 2.1 hereof), (i) promptly incorporate in a prospectus supplement or
post-effective amendment such information as the managing underwriter or
underwriters, if any, or such Holders reasonably request to be included therein
to comply with applicable law, (ii) make all required filings of such prospectus
supplement or such post-effective amendment as soon as practicable after the
Company has received notification of the matters to be incorporated in such
prospectus supplement or post-effective amendment, and (iii) supplement or make
amendments to such Registration Statement.
(f) Furnish to each Holder of Registrable Securities who so
requests and to counsel for the Holders of Registrable Securities and each
managing underwriter, if any, without charge, upon request, one conformed copy
of the Registration Statement and each post-effective amendment thereto,
including financial statements and schedules, and of all documents incorporated
or deemed to be incorporated therein by reference and all exhibits (including
exhibits incorporated by reference).
(g) Deliver to each Holder of Registrable Securities, their
counsel and each underwriter, if any, without charge, as many copies of each
Prospectus (including each form of
14
prospectus) and each amendment or supplement thereto as such Persons may
reasonably request; and, subject to the last paragraph of this Section 4, the
Company hereby consents to the use of such Prospectus and each amendment or
supplement thereto by each of the Holders of Registrable Securities and the
underwriter or underwriters or agents, if any, in connection with the offering
and sale of the Registrable Securities covered by such Prospectus and any
amendment or supplement thereto.
(h) Prior to any offering of Registrable Securities, to register
or qualify, and cooperate with the Holders of Registrable Securities, the
underwriter or underwriters, if any, and their respective counsel in connection
with the registration or qualification (or exemption from such registration or
qualification) of, such Registrable Securities for offer and sale under the
securities or blue sky laws of such jurisdictions within the United States as
the managing underwriter or underwriters reasonably request in writing, or, in
the event of a non-underwritten offering, as the Holders of a majority of the
Registrable Securities may request; provided, however, that where Registrable
Securities are offered other than through an underwritten offering, the Company
agrees to cause its counsel to perform blue sky investigations and file
registrations and qualifications required to be filed pursuant to this Section
4(h); keep each such registration or qualification (or exemption therefrom)
effective during the Effectiveness Period and do any and all other acts or
things necessary or advisable to enable the disposition in such jurisdictions of
the securities covered thereby; provided, however, that the Company will not be
required to (A) qualify generally to do business in any jurisdiction where it is
not then so qualified, (B) take any action that would subject it to general
service of process in any such jurisdiction where it is not then so subject or
(C) become subject to taxation in any jurisdiction where it is not then so
subject.
(i) Cooperate with the Holders of Registrable Securities and the
managing underwriter or underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable Securities to
be sold, which certificates shall not bear any restrictive legends whatsoever
and shall be in a form eligible for deposit with The Depository Trust Company
("DTC"); and enable such Registrable Securities to be in such denominations and
registered in such names as the managing underwriter or underwriters, if any, or
Holders may reasonably request at least two Business Days prior to any sale of
Registrable Securities in a firm commitment underwritten public offering.
(j) Upon the occurrence of any event contemplated by Section
4(c)(v) or 4(c)(vi) above, as promptly as practicable prepare a supplement or
post-effective amendment to the Registration Statement or a supplement to the
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and, subject to Section 4(a) hereof, file such with the
SEC so that, as thereafter delivered to the purchasers of Registrable Securities
being sold thereunder, such Prospectus will not 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, in light of the circumstances under
which they were made, not misleading.
(k) Prior to the effective date of a Registration Statement, (i)
provide the registrar for the Registrable Securities with certificates for such
securities in a form eligible for deposit with DTC and (ii) provide a CUSIP
number for such securities.
15
(l) Enter into an underwriting agreement in form, scope and
substance as is customary in underwritten offerings and take all such other
actions as are reasonably requested by the managing underwriter or underwriters
in order to expedite or facilitate the registration or disposition of such
Registrable Securities in any underwritten offering to be made of the
Registrable Securities in accordance with this Agreement, and in such
connection, (i) make such representations and warranties to the underwriter or
underwriters, with respect to the business of the Company and the subsidiaries
of the Company, and the Registration Statement, Prospectus and documents, if
any, incorporated or deemed to be incorporated by reference therein, in each
case, in form, substance and scope as are customarily made by issuers to
underwriters in underwritten offerings, and confirm the same if and when
requested; (ii) use reasonable efforts to obtain opinions of counsel to the
Company and updates thereof, addressed to the underwriter or underwriters
covering the matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by underwriters;
(iii) use reasonable efforts to obtain "cold comfort" letters and updates
thereof from the independent certified public accountants of the Company (and,
if applicable, the subsidiaries 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 of the underwriters, such letters to be in
customary form and covering matters of the type customarily covered in "cold
comfort" letters in connection with underwritten offerings and such other
matters as reasonably requested by the managing underwriter or underwriters and
as permitted by the Statement of Auditing Standards No.72; and (iv) if an
underwriting agreement is entered into, the same shall contain customary
indemnification provisions and procedures (or such other provisions and
procedures acceptable to Holders of a majority of Registrable Securities covered
by such Registration Statement and the managing underwriter or underwriters or
agents) with respect to all parties to be indemnified pursuant to such
agreement. The above shall be done at each closing under such underwriting
agreement, or as and to the extent required thereunder.
(m) Make available for inspection by a representative of the
Holders of Registrable Securities being sold, any underwriter participating in
any such disposition of Registrable Securities, if any, and any attorney or
accountant retained by such representative of the Holders or underwriter, at the
offices where normally kept, during reasonable business hours, all financial and
other records, pertinent corporate documents and properties of the Company and
the subsidiaries of the Company, and cause the officers, directors and employees
of the Company and the subsidiaries of the Company to supply all information in
each case reasonably requested by any such Person in connection with such
Registration Statement; provided, however, that all material non-public
information shall be kept confidential by such Person, except to the extent that
(i) the disclosure of such information is necessary or advisable to avoid or
correct a misstatement or omission in the Registration Statement or in any
Prospectus; provided, however, that prior notice is given to the Company, and
the Company's legal counsel and such Holder's legal counsel concur that
disclosure is required, (ii) the release of such information is ordered pursuant
to a subpoena or other order from a court of competent jurisdiction, (iii)
disclosure of such information is necessary in connection with any action,
claim, suit or proceeding, directly or indirectly, involving or potentially
involving such Person and arising out of, based upon, relating to or involving
this Agreement or any of the transactions contemplated hereby or arising
16
hereunder; provided, however, that prior notice shall be provided as soon as
practicable to the Company of the potential disclosure of any information by
such Person pursuant to clauses (ii) or (iii) of this sentence to permit the
Company to obtain a protective order (or waive the provisions of this paragraph
(m)) and that such Person shall take all actions as are reasonably necessary to
protect the confidentiality of such information (if practicable) to the extent
such action is otherwise not inconsistent with, an impairment of or in
derogation of the rights and interests of the Holder or any such Person, or (iv)
such information has been made generally available to the public.
(n) Comply with all applicable rules and regulations of the SEC
and make generally available to its security holders earnings statements
satisfying the provisions of Section 11(a) of the Securities Act and Rule 158
thereunder (or any similar rule promulgated under the Securities Act) no later
than forty-five (45) days after the end of any 12-month period (or ninety (90)
days after the end of any 12-month period if such period is a fiscal year) (i)
commencing at the end of any fiscal quarter in which Registrable Securities are
sold to an underwriter or to underwriters in a firm commitment or best efforts
underwritten offering and (ii) if not sold to an underwriter or to underwriters
in such an offering, commencing on the first day of the first fiscal quarter of
the Company after the effective date of the relevant Registration Statement,
which statements shall cover such 12-month periods.
(o) Use its best efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on each securities
exchange, if any, on which similar securities issued by the Company are then
listed.
(p) Cooperate with the Selling Holders of Registrable Securities
to facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold and not bearing any restrictive legends and
registered in such names as the selling Holders may reasonably request at least
two Business Days prior to the closing of any sale of Registrable Securities.
Each seller of Registrable Securities as to which any registration is
being effected agrees, as a condition to the registration obligations with
respect to such Holder provided herein, to furnish to the Company such
information regarding such seller and the distribution of such Registrable
Securities as the Company may, from time to time, reasonably request in writing
to comply with the Securities Act and other applicable law. The Company may
exclude from such registration the Registrable Securities of any seller for so
long as such seller fails to furnish such information within a reasonable time
after receiving such request. If the identity of a seller of Registrable
Securities is to be disclosed in the Registration Statement, such seller shall
be permitted to include all information regarding such seller as it shall
reasonably request.
Each Holder of Registrable Securities agrees by acquisition of such
Registrable Securities that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 4(c)(ii), 4(c)(iv),
4(c)(v), or 4(c)(vi) hereof, such Holder will forthwith discontinue disposition
of such Registrable Securities covered by the Registration Statement or
Prospectus until such Holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 4(j) hereof), or until it is advised
in writing (the "ADVICE") by the Company that the use of the applicable
prospectus
17
may be resumed, and has received copies of any amendments or supplements
thereto, and, if so directed by the Company, such Holder will, at the Company's
expense, deliver to the Company all copies, other than permanent file copies,
then in such Holder's actual possession of the Prospectus covering such
Registrable Securities current at the time of receipt of such notice; provided,
however, that nothing herein shall create any obligation on the part of any
Holder to undertake to retrieve or return any such Prospectus not within the
actual possession of such Holder. In the event the Company shall give any such
notice, the period of time for which a Registration Statement is required
hereunder to be effective shall be extended by the number of days during such
periods from and including the date of the giving of such notice to and
including the date when each seller of Registrable Securities covered by such
Registration Statement shall have received (x) the copies of the supplemented or
amended Prospectus contemplated by Section 4(j) hereof or (y) the Advice.
Section 5. Indemnification and Contribution.
(a) The Company agrees to indemnify and hold harmless each
Holder and each Person, if any, who controls such Holder within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act, or is
under common control with, or is controlled by, such Holder, from and against
all losses, claims, damages and liabilities (including, without limitation, and
subject to clause (c) of this Section 5 below, the reasonable legal fees and
other reasonable out-of-pocket expenses actually incurred by any Holder or any
such controlling or affiliated Person in connection with any suit, action or
proceeding or any claim asserted), caused by, arising out of or based upon any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment thereto) pursuant to which Registrable
Securities were registered under the Securities Act or in any registration
statement filed by the Company covering the issuance of Warrant Shares and
resales thereof (a "WARRANT SHARE REGISTRATION STATEMENT"), or caused by any
omission or alleged omission to state in any such Registration Statement or
Warrant Share Registration Statement a material fact required to be stated
therein or necessary to make the statements therein not misleading, or caused by
any untrue statement or alleged untrue statement of a material fact contained in
any preliminary prospectus, Prospectus or Warrant Share Prospectus (as amended
or supplemented if the Company shall have furnished any amendments or
supplements thereto), or caused by any omission or alleged omission to state in
any such preliminary prospectus, Prospectus or Warrant Share Prospectus a
material fact required to be stated in any such preliminary prospectus,
Prospectus or Warrant Share Prospectus or necessary to make the statements in
any such preliminary prospectus, Prospectus or Warrant Share Prospectus in light
of the circumstances under which they were made not misleading, except insofar
as such losses, claims, damages or liabilities are caused by any such untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with information relating to any Holder furnished to the
Company in writing by such Holder expressly for use in any such Registration
Statement, Warrant Share Registration Statement or Prospectus; provided,
however, that the Company shall not be required to indemnify any such Person if
such untrue statement or omission or alleged untrue statement or omission was
contained or made in any preliminary prospectus and corrected in the Prospectus
or such Warrant Share Prospectus, as the case may be, or any amendment or
supplement thereto and the Prospectus or such Warrant Share Prospectus, as the
case may be, does not contain any other untrue statement or omission or alleged
untrue statement or omission of a material fact that was
18
the subject matter of the related proceeding and any such loss, liability,
claim, damage or expense suffered or incurred by such indemnified Person
resulted from any action, claim or suit by any Person who purchased Registrable
Securities which are the subject thereof from such indemnified Person and it is
established in the related proceeding that such indemnified Person failed to
deliver or provide a copy of the Prospectus or Warrant Share Prospectus, as the
case may be (as amended or supplemented) to such Person with or prior to the
confirmation of the sale of such Registrable Securities sold to such Person if
required by applicable law, unless such failure to deliver or provide a copy of
the Prospectus or Warrant Share Prospectus, as the case may be (as amended or
supplemented) was a result of noncompliance by the Company with Section 4 hereof
or as a result of the failure of the Company to provide such Prospectus or
Warrant Share Prospectus, as the case may be.
(b) Each Holder agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign any
Registration Statement or Warrant Share Registration Statement, as the case may
be, and each Person, if any, who controls the Company within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act to the
same extent as the foregoing indemnity from the Company to such Holder, but only
with reference to information relating to such Holder furnished to the Company
in writing by such Holder expressly for use in any Registration Statement or
Warrant Share Registration Statement, as the case may be (or any amendment
thereto) or any Prospectus or Warrant Share Prospectus, as the case may be (or
any amendment or supplement thereto). The liability of any Holder under this
paragraph shall in no event exceed the proceeds received by such Holder from
sales of Registrable Securities giving rise to such obligations.
(c) In case any suit, action, proceeding (including any
governmental or regulatory investigation), claim or demand shall be instituted
involving any Person in respect of which indemnity may be sought pursuant to
either paragraph (a) or (b) above, such Person (the "INDEMNIFIED PARTY") shall
promptly notify the Person against which such indemnity may be sought (the
"INDEMNIFYING PARTY") in writing and the indemnifying party, upon request of the
indemnified party, shall retain counsel reasonably satisfactory to the
indemnified party to represent the indemnified party and any others the
indemnifying party may reasonably designate in such proceeding and shall pay the
reasonable fees and expenses actually incurred of such counsel relating to such
proceeding; provided, however, that the failure to so notify the indemnifying
party shall not relieve it of any obligation or liability which it may have
hereunder or otherwise. In any such proceeding, any indemnified party shall have
the right to retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such indemnified party unless (i) the indemnifying
party and the indemnified party shall have mutually agreed to the contrary, (ii)
the indemnifying party shall have failed to retain within a reasonable period of
time counsel reasonably satisfactory to such indemnified party or parties or
(iii) the named parties to any such proceeding (including any impleaded parties)
include both such indemnified party or parties and the indemnifying parties or
an Affiliate of the indemnifying parties or such indemnified parties and
representation of both parties by the same counsel would be inappropriate due to
actual or potential differing interests between the indemnifying party or
parties and the indemnified party or parties. It is understood that the
indemnifying parties shall not, in connection with any one such proceeding or
separate but substantially similar or related proceedings in the same
jurisdiction, arising out of the same
19
general allegations or circumstances, be liable for the reasonable fees and
expenses of more than one separate firm of attorneys (together with appropriate
local counsel) at any time for such indemnified party or parties and that all
such fees and expenses shall be reimbursed within reasonable time of the request
after the incurrence thereof. Any such separate firm for the Holders and such
control Persons of the Holders shall be designated in writing by Holders who
sold a majority in interest of Registrable Securities sold by all such Holders
and reasonably acceptable to the Company and any such separate firm for the
Company, its directors, its officers and such control Persons of the Company
shall be designated in writing by the Company and reasonably acceptable to the
Holders. The indemnifying party shall not be liable for any settlement of any
proceeding effected without its prior written consent (which consent shall not
be unreasonably withheld or delayed) but if settled with such consent or if
there be a final judgment for the plaintiff, the indemnifying party agrees to
indemnify and hold harmless the indemnified party from and against any loss or
liability by reason of such settlement or judgment. No indemnifying party shall,
without the prior written consent of the indemnified party (which consent shall
not be unreasonably withheld), effect any settlement or compliance of any
pending or threatened proceeding in respect of which any indemnified party is or
could have been a party, or indemnity could have been sought hereunder by such
indemnified party, unless such settlement or compliance includes an
unconditional written release of such indemnified party in form and substance
reasonably satisfactory to such indemnified party of such indemnified party from
all liability on claims that are the subject matter of such proceeding.
(d) To the extent the indemnification provided for in paragraph
(a) or (b) of this Section 5 is unavailable to, or insufficient to hold
harmless, an indemnified party in respect of any losses, claims, damages or
liabilities, then each indemnifying party under such paragraph, in lieu of
indemnifying such indemnified party thereunder and in order to provide for just
and equitable contribution, shall contribute to the amount paid or payable by
such indemnified party as a result of such losses, claims, damages or
liabilities in such proportion as is appropriate to reflect (i) the relative
benefits received by the Company on the one hand and the Holders on the other
hand from the offering of such Registrable Securities or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, not only such
relative benefits but also the relative fault of the Company on the one hand and
the Holders on the other hand in connection with the statements or omissions or
alleged statements or omissions that resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
equitable considerations. The relative benefits received by the Company on the
one hand and the Holders on the other shall be deemed to be in the same
proportion as the total proceeds from the offering (net of discounts and
commissions but before deducting expenses) of the Warrants sold pursuant to the
Purchase Agreement received by the Company bears to the total proceeds received
by such Holder from the sale of Registrable Securities, as the case may be. The
relative fault of the Company on the one hand and the Holders 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 Holders and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission, and any other
equitable considerations appropriate in the circumstances.
20
(e) The Company and each Holder agree that it would not be just
or equitable if contribution pursuant to this Section 5 were determined by pro
rata allocation or by any other method of allocation that does not take account
of the equitable considerations referred to in Section 5(d) above. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages and liabilities referred to in Section 5(d) above shall be deemed to
include, subject to the limitations set forth above, any reasonable legal or
other expenses actually incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 5, in no event shall a Holder be required to
contribute any amount in excess of the amount by which proceeds received by such
Holder from sales of Registrable Securities exceeds the amount of any damages
that such Holder has otherwise been required to pay or has paid by reason of
such untrue or alleged untrue statement or omission or alleged omission. 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
who was not guilty of such fraudulent misrepresentation. The remedies provided
for in this Section 5 are not exclusive and shall not limit any rights or
remedies which may otherwise be available to any indemnified party at law or in
equity.
(f) Any losses, claims, damages, liabilities or expenses for
which an indemnified party is entitled to indemnification or contribution under
this Section 5 shall be paid by the indemnifying party to the indemnified party
as such losses, claims, damages, liabilities or expenses are incurred. The
indemnity and contribution agreements contained in this Section 5 and the
representations and warranties of the Company set forth in this Agreement shall
remain operative and in full force and effect, regardless of (i) any
investigation made by or on behalf of any Initial Purchaser or any Person who
controls an Initial Purchaser, the Company, their respective directors or
officers or any Person controlling the Company and (ii) any termination of this
Agreement.
Section 6. Miscellaneous.
(a) No Inconsistent Agreements. The Company represents and
--------------------------
warrants to the Holders that it has not entered into nor will the Company on or
after the date of this Agreement enter into, or cause or permit any of its
subsidiaries to enter into, any agreement which is inconsistent with the rights
granted to the Holders of Registrable Securities in this Agreement or otherwise
conflicts with the provisions hereof. The rights granted to the Holders
hereunder do not in any way conflict with and are not inconsistent with the
rights granted to the holders of the Company's other issued and outstanding
securities, if any, under any such agreements.
(b) 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 unless the Company has
obtained the prior written consent of Holders of not less than a majority of the
outstanding Registrable Securities affected by such amendment, modification,
supplement, waiver or consent; provided, however, that Section 5 hereof and this
Section 6(b) may not be amended, modified or supplemented without the prior
written consent of each Holder (including any Person who was a Holder of
Registrable Securities disposed of pursuant to any Registration Statement or a
Warrant Share Registration Statement) affected by such amendment, modification
or supplement.
21
Notwithstanding the foregoing, a waiver or consent to departure from the
provisions hereof that relates exclusively to the rights of Holders of
Registrable Securities whose securities are being sold pursuant to a
Registration Statement and that does not directly or indirectly affect, impair,
limit or compromise the rights of other Holders of Registrable Securities may be
given by the Holders of not less than a majority of the Registrable Securities
proposed to be sold by such Holders pursuant to such Registration Statement.
(c) 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 of Holder as set forth
in the register for the Warrants or the Warrant Shares, 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 address set
forth below the Company's name on the signature pages hereto and thereafter at
such other address, notice of which is given in accordance with the provisions
of this Section 6(c), with a copy to Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, P.C., 000
Xxxx Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx 00000-0000, Attention: Xxxxx X. Xxxxxx,
Esq., and thereafter at such other address notice of which is given in
accordance with the provisions of this Section 6(c).
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.
(d) Successors and Assigns. This Agreement shall inure to the
----------------------
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders. If any transferee of any Holder shall
acquire Warrants and/or Registrable Securities, in any manner, whether by
operation of law or otherwise, such Warrants and/or Registrable Securities shall
be held subject to all of the terms of this Agreement, and by taking and holding
such Warrants and/or Registrable 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.
(e) 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.
(f) Headings. The headings in this Agreement are for
--------
convenience of reference only and shall not limit or otherwise affect the
meaning hereof.
(g) GOVERNING LAW; JURISDICTION. THIS AGREEMENT SHALL BE
---------------------------
GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK,
AS APPLIED TO CONTRACTS MADE AND PERFORMED WHOLLY
22
WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
(h) Severability. If any term, provision, covenant or
------------
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(i) Entire Agreement. This Agreement, together with the
----------------
Purchase Agreement and the Warrant Agreement, is intended by the parties as a
final expression of their agreement, and is intended to be a complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein and therein. This Agreement, the
Purchase Agreement and the Warrant Agreement supersede all prior agreements and
understandings between the parties with respect to such subject matter.
(j) Attorneys' Fees. As between the parties to this Agreement,
---------------
in any action or proceeding brought to enforce any provision of this Agreement,
or where any provision hereof is validly asserted as a defense, the successful
party shall be entitled to recover reasonable attorneys' fees in addition to its
costs and expenses and any other available remedy.
(k) Securities Held by the Company or Its Affiliates. Whenever
------------------------------------------------
the consent or approval of Holders of a specified percentage of Registrable
Securities or Warrants is required hereunder, Registrable Securities or Warrants
held by the Company or by any of its affiliates (as such term is defined in Rule
405 under the Securities Act) shall not be counted (in either the numerator or
the denominator) in determining whether such consent or approval was given by
the Holders of such required percentage.
(l) Remedies. In the event of a breach by the Company of any of
--------
its obligations under this Agreement, each Holder, in addition to being entitled
to exercise all rights provided herein, in the Purchase Agreement or granted by
law, including recovery of 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 any of the provisions of this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
COVAD COMMUNICATIONS GROUP, INC.
By: /s/ Xxxxxxx X. Xxxxx
--------------------------------------------
Name: Xxxxxxx X. Xxxxx
Title: Chief Financial Officer, Treasurer
also Vice President, Finance
Address for Notices:
0000 Xxxxxxx Xxxxxx
Xxxxx Xxxxx, Xxxxxxxxxx 00000
Telecopier: (000) 000-0000
Telephone: (000) 000-0000
BEAR, XXXXXXX & CO. INC.
By: /s/ Xxxxx X. Xxxx
--------------------------------------------
Name: Xxxxx X. Xxxx
Title: Senior Managing Director
Bear, Xxxxxxx & Co. Inc.
BT ALEX. XXXXX INCORPORATED
By: /s/ Xxxx Xxxxxx
--------------------------------------------
Name: Xxxx Xxxxxx
Title: Principal
24
