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WARRANT REGISTRATION RIGHTS AGREEMENT
Dated as of May 5, 1998
Between
RHYTHMS NETCONNECTIONS INC.
And
XXXXXXX XXXXX & CO.
XXXXXXX LYNCH, PIERCE, XXXXXX & XXXXX INCORPORATED
XXXXXXXXX, LUFKIN & XXXXXXXX SECURITIES CORPORATION
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TABLE OF CONTENTS
Page
Section 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . 1
Section 2. REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . 5
2.1 (a) PIGGY-BACK REGISTRATION . . . . . . . . . . . . . . . . . . . 5
(b) PRIORITY IN PIGGY-BACK REGISTRATION . . . . . . . . . . . . . . . . 6
(c) RESTRICTIONS ON SALE BY HOLDERS . . . . . . . . . . . . . . . . . . 7
2.2 (a) SHELF REGISTRATION. . . . . . . . . . . . . . . . . . . . . . 8
(b) EFFECTIVE REGISTRATION. . . . . . . . . . . . . . . . . . . . . . . 8
(c) RESTRICTIONS ON SALE BY HOLDERS . . . . . . . . . . . . . . . . . . 9
(d) SELECTION OF UNDERWRITER. . . . . . . . . . . . . . . . . . . . . . 9
(e) EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.3 LIMITATIONS, CONDITIONS AND QUALIFICATIONS TO OBLIGATIONS UNDER
REGISTRATION COVENANTS. . . . . . . . . . . . . . . . . . . . . . .10
2.4 RESTRICTIONS ON ACTIONS BY THE COMPANY AND OTHERS . . . . . . . . .10
2.5 RULE 144 AND RULE 144A. . . . . . . . . . . . . . . . . . . . . . .11
2.6 UNDERWRITTEN REGISTRATIONS. . . . . . . . . . . . . . . . . . . . .11
Section 3. REGISTRATION PROCEDURES . . . . . . . . . . . . . . . . . . .11
Section 4. INDEMNIFICATION AND CONTRIBUTION. . . . . . . . . . . . . . .17
Section 5. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . .20
(a) REMEDIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
(b) NO INCONSISTENT AGREEMENTS . . . . . . . . . . . . . . . . . . . .20
(c) NO PIGGY-BACK ON SHELF REGISTRATIONS . . . . . . . . . . . . . . .20
(d) AMENDMENTS AND WAIVERS . . . . . . . . . . . . . . . . . . . . . .20
(e) NOTICES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20
(f) SUCCESSORS AND ASSIGNS . . . . . . . . . . . . . . . . . . . . . .21
(g) COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . .21
(h) GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . . . .21
(i) SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . .21
(j) HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .21
(k) ENTIRE AGREEMENT . . . . . . . . . . . . . . . . . . . . . . . . .21
(l) SECURITIES HELD BY THE COMPANY OR ITS AFFILIATES . . . . . . . . .22
(i)
WARRANT REGISTRATION RIGHTS AGREEMENT
This WARRANT REGISTRATION RIGHTS AGREEMENT (the "AGREEMENT" is made and
entered into as of May 5, 1998, between RHYTHMS NETCONNECTIONS INC. (the
"COMPANY") a Delaware corporation, XXXXXXX XXXXX & CO., XXXXXXX LYNCH, PIERCE,
XXXXXX & XXXXX INCORPORATED ("XXXXXXX XXXXX") and XXXXXXXXX, XXXXXX & XXXXXXXX
SECURITIES CORPORATION (together with Xxxxxxx Xxxxx, the "INITIAL PURCHASERS").
This Agreement is made pursuant to the Purchase Agreement dated as of April
28, 1998, between the Company and the Initial Purchasers (the "PURCHASE
AGREEMENT"), with respect to the issue and sale by the Company and the purchase
by the Initial Purchasers, severally, of the respective number of the Company's
Units (the "UNITS"), each Unit consisting of $1,000 aggregate principal amount
at maturity of the Company's 13 1/2% Senior Discount Notes due 2008 (the
"NOTES") and four warrants (the "WARRANTS"), each initially entitling the holder
thereof to purchase 1.7 shares of common stock, par value $0.001 per share (the
"COMMON STOCK"), of the Company, set forth opposite such Initial Purchaser's
name on Schedule A to the Purchase Agreement. The execution 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 Section 3 hereof.
"AFFILIATE" shall mean (i) any other Person which, directly or indirectly,
controls, is controlled by or is under direct or indirect common control with,
the specified Person, (ii) any other Person that owns, directly or indirectly,
10% or more of the specified Person's Voting Stock or (iii) any executive
officer or director of the specified Person; PROVIDED that Xxxxxxxxx, Lufkin &
Xxxxxxxx, Inc. and its Affiliates shall not be deemed to be Affiliates of the
Company solely as a result of such entities holding the Units, the Notes, the
Warrants, the Company's Series A Preferred Stock or the Company's Series B
Preferred Stock (or any security which is convertible into or exchangeable for
any of the foregoing). For the purposes of this definition, "CONTROL" when used
with respect to any Person means the power to direct the management and policies
of such Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "AFFILIATED," "CONTROLLING"
and "CONTROLLED" have meanings correlative to the foregoing.
"AGREEMENT" shall have the meaning ascribed to such term in the preamble
hereto.
"BUSINESS DAY" shall mean each Monday, Tuesday, Wednesday, Thursday and
Friday which is not a day on which banking institutions in The City of New York,
New York are authorized or obligated by law, regulation or executive order to
close.
"CAPITAL STOCK" shall mean, with respect to any Person, any and all shares,
interests, partnership interests, participation, rights in or other equivalents
(however designated and whether voting or non-voting) of such person's capital
stock, and any rights (other than debt securities convertible into capital
stock), warrants or options exchangeable for or convertible into such capital
stock whether outstanding on the Issue Date or issued after the Issue Date.
"COMPANY" shall have the meaning ascribed to such term in the preamble of
this Agreement and shall also include the Company's permitted successors and
assigns.
"COMMON STOCK" shall have the meaning ascribed to such term in the preamble
of this Agreement.
"DTC" shall have the meaning ascribed to such term in Section 3(i) hereof.
"EFFECTIVENESS PERIOD" shall have the meaning ascribed to such term in
Section 2.2(a) hereof.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as amended
from time to time.
"HOLDER" shall mean each holder (including the Initial Purchasers) of any
Warrants, Warrant Shares or Registrable Securities, and each of their
successors, assigns and direct and indirect transferees who become registered
owners of such Warrants, Warrant Shares or Registrable Securities.
"INCLUDED SECURITIES" shall have the meaning ascribed to such tend in
Section 2.2(a) hereof.
"INDEMNIFIED PERSON" shall have the meaning ascribed to such term in
Section 4(a) hereof.
"INDENTURE" shall mean the Indenture, dated as of the date hereof, between
the Company and State Street Bank and Trust Company of California, N.A.,
Trustee, pursuant to which the Notes are issued.
"INITIAL PUBLIC EQUITY OFFERING" shall mean a primary public offering
(whether or not underwritten, but excluding any offering pursuant to Form S-8 or
F-8 under the Securities Act or any other publicly registered offering pursuant
to the Securities Act pertaining to an issuance of shares of Common Stock or
securities exercisable therefor under any benefit plan, employee compensation
plan, or employee or director stock purchase plan) of Capital Stock of the
Company pursuant to an effective registration statement under the Securities
Act.
"INITIAL PURCHASERS" shall have the meaning ascribed to such term in the
preamble hereof.
"INSPECTORS" shall have the meaning ascribed to such term in Section 3(m)
hereof.
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"XXXXXXX XXXXX" shall have the meaning ascribed to such term in the
preamble hereto.
"NOTES" shall have the meaning ascribed to such term in the preamble
hereto.
"PERSON" shall mean any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof or any other entity, including any predecessor of any such entity.
"PIGGY-BACK REGISTRATION" shall have the meaning ascribed to such term in
Section 2.1 (a) hereof.
"PROSPECTUS" shall mean 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.
"PURCHASE AGREEMENT" shall have the meaning ascribed to such term in the
preamble hereof.
"REGISTRABLE SECURITIES" shall mean any of (i) the Common Stock issued and
issuable upon exercise of the Warrants and (ii) any other securities issued or
issuable with respect to the Warrants or Warrant Shares by way of stock dividend
or stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization or otherwise. As to any
particular Registrable Securities, such securities shall cease to be Registrable
Securities when (a) 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, (b) such securities have been
sold to the public pursuant to, or are eligible for sale to the public without
volume or manner of sale restrictions under, Rule 144(k) (or any similar
provision then in force, but not Rule 144A) promulgated under the Securities
Act, (c) such securities shall have been otherwise transferred 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 (d) such securities shall have ceased to be outstanding.
"REGISTRATION EXPENSES" shall mean 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, reasonable fees and
disbursements of counsel for the underwriters in connection with blue sky
qualifications
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of the Registrable Securities in an amount not to exceed $10,000), printing
expenses, messenger, telephone and delivery expenses, fees and disbursements of
counsel for the Company and all independent certified public accountants, 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 underwriters and the
Holders as to blue sky matters).
"REGISTRATION STATEMENT" shall mean any appropriate registration statement
of the Company filed with the SEC pursuant to the Securities Act that covers any
of the Subject Equity 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.
"RULE 144" shall mean Rule 144 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the SEC providing for offers and sales
of securities made in compliance therewith resulting in offers and sales by
subsequent holders that are not affiliates of an issuer of such securities being
free of the registration and prospectus delivery requirements of the Securities
Act.
"RULE 144A" shall mean Rule 144A promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144) or regulation hereafter adopted by the SEC.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended from
time to time.
"SELLING HOLDER" shall mean a Holder who is selling Subject Equity in
accordance with the provisions of Section 2.2 or 2.1 hereof, respectively.
"SHELF REGISTRATION" shall have the meaning ascribed to such term in
Section 2.2(a) hereof.
"SUBJECT EQUITY" shall mean, collectively, Warrants, Warrant Shares and
Registrable Securities.
"SUSPENSION PERIOD" shall have the meaning ascribed to such term in Section
2.3(a) hereof.
"UNITS" shall have the meaning ascribed to such term in the preamble of
this Agreement.
"WARRANT AGENT" shall mean State Street Bank and Trust Company of
California, N.A. and any successor warrant agent for the Warrants pursuant to
the Warrant Agreement.
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"WARRANT AGREEMENT" shall mean the Warrant Agreement dated as of the date
hereof, between the Company and the Warrant Agent, as amended or supplemented
from time to time in accordance with the terms thereof.
"WARRANT SHARES" shall mean shares of Common Stock issuable upon exercise
of the Warrants at an exercise price of $0.01 per share.
"WARRANTS" shall have the meaning ascribed to such term in the preamble
hereto.
Section 2. REGISTRATION RIGHTS.
2.1 (a) PIGGY-BACK REGISTRATION. If at any time the Company proposes to
file a Registration Statement under the Securities Act with respect to (i) an
Initial Public Equity Offering of Common Stock (or any other securities issuable
upon exercise of the Warrants) if any securities held by any stockholder of the
Company are registered in such Registration Statement or (ii) any offering by
the Company for its own account or for the account of any of its security
holders of Common Stock (or any other securities issuable upon exercise of the
Warrants) (other than (w) a registration statement on Form S-4 or S-8 (or any
substitute form that may be adopted by the SEC) or any other publicly registered
offering pursuant to the Securities Act pertaining to the issuance of shares of
Capital Stock or securities exercisable therefor under any benefit plan,
employee compensation plan, or employee or director stock purchase plan, (x) a
registration statement filed in connection with an offer of securities solely to
the Company's existing security holders, (y) a Shelf Registration or (z)
registrations of debt securities) conducted subsequent to the Initial Public
Equity Offering, 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 within 12 days (or 8 days 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 commercially reasonable
efforts to keep such Piggy-Back Registration continuously effective under the
Securities Act in the qualifying jurisdictions until at least the earlier of (A)
60 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 use its best efforts to 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, subject to Section 2.1(b) hereof. 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
2.1 by giving written
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notice to the Company of its request to withdraw. The Company may withdraw a
Piggy-Back Registration at any timeprior 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
Company will pay all Registration Expenses in connection with each registration
of Registrable Securities requested pursuant to this Section 2.1, and 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
effected pursuant to this Section 2.1.
No registration effected under this Section 2.1, and no failure to effect a
registration under this Section 2.1, shall relieve the Company of its obligation
to effect a registration upon the request of Holders of Registrable Securities
pursuant to Section 2.2 hereof, and no failure to effect a registration under
this Section 2.1 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 pursuant to
this Section 2.1 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' reasonable 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 (which may include securities included 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)
SECOND, PROVIDED that no securities sought to be included by the Company 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, the securities of other Persons entitled to exercise
"piggy-back" registration rights pursuant to contractual commitments of the
Company existing on the date hereof and the securities, if any, that may be
issued pursuant to warrants to purchase up to 290,000 shares of Common Stock at
an exercise price no less than $4.45 per share issued to any Person from which
the Company obtains lease financing subsequent to the date hereof (such
securities to be allocated pro rata based on the amount of securities sought to
be registered by such Holders or other Persons) and (iii) THIRD, PROVIDED that
no securities sought to be included by the Company, the Holders or such Persons
referred to in clause (ii) above 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 not existing on the
date hereof (pro rata based on the amount of securities sought to be registered
by such Persons); and (y) in cases not involving the registration for sale of
securities for the Company's own account only, securities shall be registered in
such offering in the following order of priority: (i) FIRST, securities of any
Person whose exercise of a "demand" registration right
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pursuant to a contractual commitment of the Company is the basis for the
registration, (ii) SECOND, PROVIDED that no securities of such Person referred
to in the immediately preceding clause (i) have been excluded from such
registration, the securities requested to be included in such registration by
the Holders of Registrable Securities pursuant to this Agreement, the securities
of other Persons entitled to exercise "piggy-back" registration rights pursuant
to contractual commitments of the Company existing on the date hereof and the
securities, if any, that may be issued pursuant to warrants to purchase up to
290,000 shares of Common Stock at an exercise price no less than $4.45 per share
issued to any Person from which the Company obtains lease financing subsequent
to the date hereof (such securities to be allocated pro rata based on the amount
of securities sought to be registered by such Holders or other Persons) and
(iii) THIRD, PROVIDED that no securities of such Persons referred to in the
immediately preceding clauses (i) and (ii) or of the Holders have been excluded
from such registration, securities of other Persons entitled to exercise
"piggy-back" registration rights pursuant to contractual commitments of the
Company not existing on the date hereof (pro rata based on the amount of
securities sought to be registered by such Persons).
If, as a result of the provisions of this Section 2.1 (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.
(c) RESTRICTIONS ON SALE BY HOLDERS. Each Holder of Warrants and
Registrable Securities whose Warrants and 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 public offering, not to effect
any public sale or distribution of Warrants and 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 30-day period prior to, and 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. In order
to enforce the foregoing covenant, the Company shall have the right to impose
stop transfer instructions with respect to the Warrants and Registrable
Securities until the end of such period. The provisions of this Section 2.1 (c)
shall be binding upon any transferee of any Warrants or Registrable Securities.
The foregoing provisions of this Section 2.1 (c) shall not apply to any
Holders of Warrants and 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 Warrants and Registrable Securities commencing on the date
of sale of such Warrants and Registrable Securities unless it has provided 45
days' prior written notice of such sale or distribution to the managing
underwriter or underwriters.
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2.2 (a) SHELF REGISTRATION. If only the Company sells shares in an
Initial Public Equity Offering or if all of the Warrant Shares (or other
securities issuable upon exercise of the Warrants) are not sold in an Initial
Public Equity Offering or any subsequent public offering, the Company shall use
its best efforts to cause to be declared effective, no later than the later of
(i) 180 days after the closing date of the Initial Public Equity Offering
(PROVIDED that, if a "lock up" or "black out" period is imposed on the Company
pursuant to or in connection with any underwriting or purchase agreement
relating to an underwritten Rule 144A or registered public offering of Common
Stock or securities convertible into or exchangeable or exercisable for Common
Stock, then the Company shall not be required to file such registration
statement until the end of such "lock up" or "black out" period, in which case
the Company shall be required to use its best efforts to be declared effective
no later than 30 days after the end of the "lock up" or "black out" period, but
in no event later than 210 days after the closing date of the Initial Public
Equity Offering) or (ii) the first anniversary of the date hereof, a shelf
registration statement (the "SHELF REGISTRATION") with respect to the issuance
(if allowed by applicable rule or policy of the SEC) or sale of Warrant Shares
(or other securities issuable upon exercise of the Warrants). In furtherance of
the foregoing, the Company shall (i) notify the Holders of all Subject Equity
when a Shelf Registration is being prepared, (ii) prepare and file with the SEC
a Registration Statement with respect to such Subject Equity and (iii) keep such
Registration Statement continuously effective until the earlier to occur of (A)
the 120th day of effectiveness of such Registration Statement (the
"EFFECTIVENESS PERIOD") and (B) such period of time as all of the Warrants have
been exercised and the Subject Equity included in such registration statement
shall have been sold thereunder. Any such request will specify the number of
shares of Subject Equity proposed to be sold and will also specify the intended
method of disposition thereof. Within 30 days after receipt by any Holder of
Subject Equity of such notice from the Company, such Holder may request in
writing that such Holder's Subject Equity be included in such Registration
Statement and the Company shall include in such Registration Statement the
Subject Equity 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. In the event of any "lock up" or "black out" period
imposed on the Company as described in the preceding paragraph, the Company
shall so notify the Holders of Registrable Securities.
(b) EFFECTIVE REGISTRATION. A Registration Statement shall not be deemed
to have been effected as a Shelf Registration unless it shall have been declared
effective by the SEC as set forth in Section 2.2(a) hereof and the Company has
complied 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 Subject Equity
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, judicial or administrative order or requirement that prevents,
restrains or otherwise limits the sale of Subject Equity pursuant to such
Registration Statement for any reason, and such Registration Statement has not
become effective within a reasonable time period thereafter, such Registration
Statement shall be deemed not to have been effected. If (i) a registration
requested pursuant to this Section 2.2 is deemed not to have been effected or
(ii) a Shelf Registration does not remain effective under the Securities Act
until at least
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the earlier of (A) an aggregate of 120 days (subject to Section 2.3 hereof)
after the effective date thereof or (B) the consummation of the distribution by
the Holders of all of the Subject Equity covered thereby, then such Shelf
Registration shall not count towards determining if the Company has satisfied
its obligation to effect Shelf Registrations pursuant to this Section 2.2. For
purposes of calculating the 1 20-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 Subject Equity shall be permitted to
withdraw all or any part of the Registrable Securities from a Shelf
Registration. Notwithstanding any such withdrawal by a Holder of Subject
Equity, if the Company has complied with all of its obligations hereunder, such
withdrawal shall not require the Company to effect any additional Shelf
Registrations.
(c) RESTRICTIONS ON SALE BY HOLDERS. Each Holder of Warrants and
Registrable Securities whose Warrants and Registrable Securities are covered by
a Registration Statement filed pursuant to this Section 2.2 and are to be sold
thereunder agrees, if and to the extent reasonably requested by the managing
underwriter or underwriters in an underwritten public offering, not to effect
any public sale or distribution of Warrants and 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 30-day period prior to, and 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. In order
to enforce the foregoing covenant, the Company shall have the right to impose
stop transfer instructions with respect to the Warrants and Registrable
Securities until the end of such period. The provisions of this Section 2.2(c)
shall be binding upon any transferee of any Warrants or Registrable Securities.
The foregoing provisions of Section 2.2(c) shall not apply to any Holders
of Warrants and 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
Warrants and Registrable Securities commencing on the date of sale of such
Warrants and Registrable Securities unless it has provided 45 days' prior
written notice of such sale or distribution to the managing underwriter or
underwriters.
(d) SELECTION OF UNDERWRITER. If the Holders so elect, the offering of
such Subject Equity pursuant to such Shelf Registration shall be in the form of
an underwritten offering. The Holders making such Shelf Registration shall
select one or more nationally recognized firms of investment bankers, who shall
be reasonably acceptable to the Company, to act as the managing underwriter or
underwriters in connection with such offering and shall select any additional
investment bankers and managers to be used in connection with the offering.
(e) EXPENSES. The Company will pay all Registration Expenses in
connection with the registrations required pursuant to Section 2.2(a) hereof.
Each Holder of Subject Equity shall pay all underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition
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of such Holder's Subject Equity pursuant to a Registration Statement requested
pursuant to this Section 2.2.
2.3 LIMITATIONS, CONDITIONS AND QUALIFICATIONS TO OBLIGATIONS UNDER
REGISTRATION COVENANTS. The obligations of the Company set forth in Sections
2.1, 2.2 and 2.6 hereof are subject to each of the following limitations,
conditions and qualifications:
(a) Subject to the next sentence of this paragraph, the Company shall
be entitled to postpone, for a reasonable period of time, the filing of, or
suspend the effectiveness of, any registration statement or amendment
thereto, or suspend the use of any prospectus and shall not be required to
amend or supplement the registration statement, any related prospectus or any
document incorporated therein by reference (other than an effective
registration statement being used for an underwritten offering); PROVIDED
that the duration of such postponement or suspension (a "SUSPENSION PERIOD")
may not exceed an aggregate of 60 days after the event or circumstance giving
rise to such Suspension Period, and the duration of such Suspension Period
shall be excluded from the calculation of the 120-day period described in
Section 2.2(b) hereof; and PROVIDED, FURTHER, that the Company may not effect
such a postponement or suspension during the 60 days immediately prior to the
expiration of the Warrants. Such Suspension Period may be effected only if
the Company's Board of Directors determines in good faith that there is a
valid purpose for such Suspension Period and provides notice of such
determination to the Holders at their addresses appearing in the register of
Warrants maintained by the Warrant Agent; PROVIDED, that the Company shall
not be entitled to such postponement or suspension more than once in any
365-day 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 (1)
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
(2) 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.
(b) 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, if applicable,
and to obtain any acceleration of the effective date of such Registration
Statement.
2.4 RESTRICTIONS ON ACTIONS BY THE COMPANY AND OTHERS. The Company
covenants and agrees that it will not, and that it will not cause or permit any
of its subsidiaries 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 Warrants or Registrable Securities of the rights herein to
have a Shelf Registration or to join in any Piggy-Back Registration subject to
the other terms and provisions
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hereof. Notwithstanding the foregoing, the Company shall not be deemed to have
breached its obligations pursuant to this Section 2.4 solely as a result of its
granting to any Person (a) "piggyback" registration rights that are junior in
all respects to the rights granted under this Agreement or (b) "demand"
registration rights.
2.5 RULE 144 AND RULE 144A. The Company covenants that it will take such
action as any Holder of Warrants or Registrable Securities may reasonably
request, all to the extent required from time to time to enable such Holder to
sell Warrants or 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.
2.6 UNDERWRITTEN REGISTRATIONS. 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 Rules 101, 102 and 104 of 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.
Section 3. 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) A reasonable period of time prior to the initial filing of a
Registration Statement or Prospectus and a reasonable period of time prior to
the filing of any amendment or supplement thereto (including any document that
would be incorporated or deemed to be incorporated therein by reference),
furnish to the Holders and the managing underwriters, if any, upon written
request therefor, copies of all such documents proposed to be filed, which
documents (other than those incorporated or deemed to be incorporated by
reference) shall be subject to the review of such Holders, and such
underwriters, if any, and cause the officers and directors of the Company,
counsel to the Company and independent certified public accountants to the
Company to respond to such reasonable inquiries as shall be necessary, in the
opinion of counsel to such underwriters, to conduct a reasonable investigation
within the meaning of the Securities Act; PROVIDED that the foregoing inspection
and information gathering shall be coordinated on behalf of the Holders by
Xxxxxxx Xxxxx. The Company shall not file any such Registration Statement or
related Prospectus or any amendments or supplements thereto which the Holders of
a majority of the Registrable Securities included in such Registration Statement
shall reasonably object on a timely basis.
(b) Prepare and file with the SEC such amendments, including
post-effective amendments, to each Registration Statement as may be necessary to
keep such Registration Statement continuously effective for the applicable time
period required hereunder; cause the related
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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 and the Exchange Act with respect to the disposition of all
securities covered by such Registration Statement during such period in
accordance with the intended methods of disposition by the sellers thereof set
forth in such Registration Statement as so amended or in such Prospectus as so
supplemented.
(c) Notify the Holders of Registrable Securities to be sold and the
managing underwriters, if any, promptly, and (if requested by any such person)
confirm such notice in writing, (i)(A) when a Prospectus or any Prospectus
supplement or post-effective amendment is proposed to be filed, and (B) with
respect to a Registration Statement or any post-effective amendment, when the
same has become effective, (ii) of any request by the SEC or any other Federal
or state governmental authority for amendments or supplements to a Registration
Statement or related Prospectus or for additional information, (iii) of the
issuance by the SEC, any state securities commission, any other governmental
agency or any court of any stop order suspending the effectiveness of such
Registration Statement or of any order or injunction suspending or enjoining the
use of a Prospectus or the effectiveness of a Registration Statement or the
initiation of any proceedings for that purpose, (iv) of the receipt by the
Company of any notification with respect to the suspension of the qualification
or exemption from qualification of any of the Registrable 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, the existence of any information
becoming known that makes any statement made in a Registration Statement or
related Prospectus or any document incorporated or deemed to be incorporated
therein by reference untrue in any material respect 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 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.
(d) Use its best efforts to avoid the issuance of or, if issued, obtain
the withdrawal of any order enjoining or suspending the effectiveness of the
Registration Statement or the use of a Prospectus or the lifting of any
suspension of the qualification (or exemption from qualification) of any of the
Registrable Securities covered thereby for sale in any jurisdiction described in
Section 3(h) hereof at the earliest practicable moment.
(e) If requested by the managing underwriters, if any, or if none, by the
Holders of a majority of the Registrable Securities being sold pursuant to such
Registration Statement, (i) promptly incorporate in a Prospectus supplement or
post-effective amendment such information as the managing underwriters, if any,
or if none, such Holders reasonably believe should be included therein, and (ii)
make all required filings of such Prospectus supplement or such post-effective
amendment under the Securities Act as soon as practicable after the Company has
received notification of the matters to be incorporated in such prospectus
supplement or post-effective amendment; PROVIDED, HOWEVER, that the Company
shall not be required to take any action pursuant to this Section 3(e) that
would in the opinion of counsel for the Company, violate applicable law.
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(f) Upon written request to the Company, furnish to each Holder of
Registrable Securities to be sold pursuant to a Registration Statement and each
managing underwriter, if any, without charge, at least one conformed copy of the
Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits to the extent requested
(including those previously furnished or incorporated by reference) as soon as
practicable after the filing of such documents with the SEC.
(g) Deliver to each Holder of Registrable Securities to be sold pursuant
to a Registration Statement and each managing underwriter, if any, without
charge, as many copies of each Prospectus (including each form of prospectus)
and each amendment or supplement thereto as such Persons may reasonably request;
and the Company hereby consents to use of such Prospectus (except upon the
occurrence of any event contemplated by Section 3(c)(v) hereof) and each
amendment or supplement thereto and each document supplemental thereto by each
of the selling Holders of Registrable Securities and the 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, use its best efforts
to register or qualify or cooperate with the Holders of Registrable Securities
to be sold, the managing 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 as any such Holder or underwriter reasonably requests in writing;
keep each such registration or qualification (or exemption therefrom) effective
during the period such Registration Statement is required to be kept effective
hereunder and do any and all other acts or things necessary or advisable to
enable the disposition in such jurisdictions of the Registrable Securities
covered by the applicable Registration Statement; PROVIDED, HOWEVER, that the
Company shall not be required to (i) qualify generally to do business in any
jurisdiction where it is not then so qualified or (ii) take any action that
would subject it to general service of process in any such jurisdiction where it
is not then so subject or to taxation in any jurisdiction where it is not so
subject or to taxation in any jurisdiction where it is not so subject.
(i) In connection with any sale or transfer of Registrable Securities that
will result in such securities no longer being Registrable Securities, cooperate
with the Holders of Registrable Securities and the managing 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 to enable such
Registrable Securities to be in such denominations and registered in such names
as the managing underwriter or underwriters, if any, or such Holders may
reasonably request at least two business days prior to any sale of Registrable
Securities.
(j) Upon the occurrence of any event contemplated by Section 3(c)(v)
above, as promptly as practicable prepare a supplement or amendment, including
if appropriate a post-effective amendment to each Registration Statement or a
supplement to the related Prospectus or any
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document incorporated or deemed to be incorporated therein by reference, and
file any other required document so that, as thereafter delivered, 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. Upon notification by the Company of the occurrence of such
event, and until the preparation of a supplement or amendment by the Company,
the Holders shall not use such Prospectus in connection with the sale of any
Registrable Securities.
(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.
(l) Enter into such agreements (including an underwriting agreement in
such form, scope and substance as is customary in underwritten offerings) and
take all such other reasonable actions in connection therewith (including those
reasonably requested by the managing underwriters, if any, or the Holders of a
majority of the Registrable Securities being sold) in order to expedite or
facilitate the disposition of such Registrable Securities, and, if the
registration is an underwritten registration, (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 (including with respect to
businesses or assets acquired or to be acquired by any of them), 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 any when requested; (ii) obtain opinions of
counsel to the Company and updates thereof (which counsel and opinions (in form,
scope and substance) shall be reasonably satisfactory to the managing
underwriters, addressed to each of the underwriters), covering the matters
customarily covered in opinions requested in underwritten offerings and such
other matters as may be reasonably requested by such underwriters; (iii) use
their best efforts to obtain customary "cold comfort" letters and updates
thereof from the independent certified public accountants of the Company (and,
if necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company for which
financial statements and financial data are, or are required to be, included in
the Registration Statement), addressed (where reasonably possible) 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; (iv) the underwriting agreement entered into shall
contain customary indemnification provisions and procedures no less favorable to
the underwriters, if any, than those set forth in Section 4 hereof (or such
other provisions and procedures acceptable to the managing underwriter); and (v)
deliver such documents and certificates as may be reasonably requested by the
managing underwriter or underwriters to evidence the continued validity of the
representations and warranties made pursuant to clause (i) above and evidence
compliance with any customary conditions contained in the underwriting agreement
or other agreements entered into by the Company.
- 14 -
(m) Make available for inspection by a representative of any underwriter
participating in any such disposition of Registrable Securities. and any
attorney, consultant or accountant retained by such underwriter (collectively,
the "INSPECTORS"), at the offices where normally kept, during the reasonable
business hours, all financial and other records, pertinent corporate documents
and properties of the Company and the subsidiaries of the Company (including
with respect to businesses and assets acquired or to be acquired to the extent
that such information is available to the Company), and cause the officers,
directors, agents and employees of the Company and its subsidiaries of the
Company (including with respect to businesses and assets acquired or to be
acquired to the extent that such information is available to the Company) to
supply all information in each case reasonably requested by any such Inspector
in connection with such Registration Statement; PROVIDED, HOWEVER, that such
persons shall first agree in writing with the Company that any information that
is reasonably and in good faith designated by the Company in writing as
confidential at the time of delivery of such information shall be kept
confidential by such Persons, unless (i) disclosure of such information is
required by court or administrative order or is necessary to respond to
inquiries of regulatory authorities, (ii) disclosure of such information is
required by law (including any disclosure requirements pursuant to U.S.
securities laws in connection with the filing of the Registration Statement or
the use of any Prospectus), (iii) such information becomes generally available
to the public other than as a result of a disclosure or failure to safeguard
such information by such person or (iv) such information becomes available to
such person from a source other than the Company and its subsidiaries and such
source is not bound by a confidentiality agreement; PROVIDED, FURTHER that the
foregoing investigation shall be coordinated on behalf of the selling Holders of
Registrable Securities by Xxxxxxx Xxxxx.
(n) Comply with all applicable rules, regulations and policies of the SEC
and make generally available to its security holders earnings statements
satisfying the provisions of Section 1l(a) of the Securities Act and Rule 158
thereunder no later than 60 days after the end of any 12-month period (or 135
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 reasonable
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 said such period,
consistent with the requirements of Rule 158 under the Securities Act.
(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 each seller 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.
- 15 -
(q) Cooperate with each seller of Registrable Securities covered by any
Registration Statement and each underwriter, if any, participating in the
disposition of such Registrable Securities and its respective counsel in
connection with any filings required to be made with the National Association of
Securities Dealers, Inc.
The Company may require a Holder of Registrable Securities to be included
in a Registration Statement to furnish to the Company such information regarding
(i) the intended method of distribution of such Registrable Securities, (ii)
such Holder and (iii) the Registrable Securities held by such Holder as is
required by law to be disclosed in such Registration Statement, and the Company
may exclude from such Registration Statement the Registrable Securities of any
Holder who fails to furnish such information within a reasonable time after
receiving such request.
If any such Registration Statement refers to any Holder by name or
otherwise as the Holder of any securities of the Company, then such Holder shall
have the right to require (i) the insertion therein of language, in form and
substance reasonably satisfactory to such Holder, to the effect that the holding
by such Holder of such securities is not to be construed as a recommendation by
such Holder of the investment quality of the Company's securities covered
thereby and that such holding does not imply that such Holder will assist in
meeting any future financial requirements of the Company, or (ii) in the event
that such reference to such Holder by name or otherwise is not required by the
Securities Act, the deletion of the reference to such Holder in such amendment
or supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
Each Holder of Registrable Securities agrees by acquisition of such Subject
Equity that, upon receipt of any notice from the Company of the happening of any
event of the kind described in Section 3(c)(ii), 3(c)(iii), 3(c)(iv) or 3(c)(v)
hereof or of a Suspension Period pursuant to Section 2.3(a) hereof, such Holder
will forthwith discontinue disposition of such Subject Equity covered by the
Registration Statement or Prospectus until such Holder's receipt of the copies
of the supplemented or amended Prospectus contemplated by Section 3(j) hereof,
or until it is advised in writing (the "Advice") by the Company that the use of
the applicable Prospectus may be resumed, and in either case has received copies
of any additional or supplemental filings that are incorporated or deemed to be
incorporated by reference in such Prospectus. If the Company shall give any
such notice, the Effectiveness Period 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 Subject Equity covered by such
Registration Statement shall have received (x) the copies of the supplemented or
amended Prospectus contemplated by Section 3(j) hereof or (y) the Advice, and,
in either case, has received copies of any additional or supplemental filings
that are incorporated or deemed to be incorporated by reference in such
Prospectus.
Holders of the Subject Equity shall be obligated to keep confidential the
existence of a Suspension Period or any confidential information communicated by
the Company to the Holder with respect thereto.
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Section 4. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to
indemnify and hold harmless each Initial Purchaser, each Holder, each
underwriter, if any, who participates in an offering of Registrable Securities
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, as incurred, arising out of 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, 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, in the light of the circumstances under which they were
made, 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, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever, in each case, based upon any such untrue statement or omission,
or any such alleged untrue statement or omission; PROVIDED that (subject to
Section 4(d) below) any such settlement is effected with the written
consent of the Company; and
(iii) against any and all expenses whatsoever, as incurred (including
the reasonable fees and disbursements of one counsel chosen by Xxxxxxx
Xxxxx), 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);
PROVIDED, HOWEVER, that this indemnity agreement does not apply to any loss,
liability, claim, damage or expense to the extent 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, (B) made in reliance upon and in conformity with written
information furnished to the Company by the Selling Holders of Registrable
Securities, any Holder, any Initial Purchaser or any underwriter expressly for
use in the Registration Statement (or any amendment thereto) or the Prospectus
(or any amendment or supplement thereto) or (C) resulting from the use of the
Prospectus during a period when the use of the Prospectus has been suspended or
is otherwise unavailable for sales thereunder in accordance with Sections
2.1(c), 2.2(b), 2.2(c), 2.3, 2.4, 2.6 or
- 17 -
the penultimate paragraph of Section 3 hereof, PROVIDED, in each case, that
Holders received prior notice of such suspension or other unavailability.
(b) In the case of any registration of Registrable Securities, each Holder
agrees, severally and not jointly, to indemnify and hold harmless the Company,
each Initial Purchaser, each underwriter, if any, who participates in an
offering of Registrable Securities and the other Selling Holders and each of
their respective directors and officers (including each officer of the Company
who signed the Registration Statement) and each Person, if any, who controls the
Company, any Initial Purchaser, any underwriter or any other Selling Holder
within the meaning of Section 15 of the Securities Act or Section 20 of the
Exchange Act, against any and all loss, liability, claim, damage and expense
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 Registration Statement (or any amendment
thereto) or the Prospectus (or any amendment or supplement thereto) in reliance
upon and in conformity with written information furnished to the Company by such
Holder expressly for use in the Registration Statement (or any amendment
thereto), or the Prospectus (or any amendment or supplement 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
Registrable Securities pursuant to such Registration Statement.
(c) In case any action shall be commenced 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 give notice as promptly as
reasonably practicable to each Person against whom such indemnity may be sought
(the "INDEMNIFYING PARTY"), 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 which it may have otherwise than on account of
this indemnity agreement.
An indemnifying party may participate at its own expense in the defense of
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. In no event shall the indemnifying party or parties be
liable for the 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 in the
same jurisdiction 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 thereof), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim 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.
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(d) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 4(a)(ii) hereof effected
without its written consent if (i) such settlement is entered into more than 45
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) If the indemnification provided for in any of the indemnity provisions
set forth in this Section 4 is for any reason unavailable to or insufficient to
hold harmless an indemnified party in respect of any losses, liabilities,
claims, damages or expenses referred to therein, then each indemnifying party
shall contribute to the aggregate amount of such losses, liabilities, claims,
damages and expenses incurred by such indemnified party, as incurred, in such
proportion as is appropriate to reflect the relative fault of such indemnifying
party or parties on the one hand, and such indemnified party or parties on the
other hand, in connection with the statements or omissions which resulted in
such losses, liabilities, claims, damages or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying
party or parties on the one hand, and such indemnified party or parties on the
other hand shall be determined by reference to, among other things, whether any
such untrue or alleged untrue statement of a material fact or omission or
alleged omission to state a material fact relates to information supplied by
such indemnifying party or parties or such indemnified party or parties and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The Company, the Initial
Purchasers and the Holders of the Registrable Securities agree that it would not
be just and equitable if contribution pursuant to this Section 4 were determined
by pro rata allocation (even if the Selling Holders of Registrable Securities
were treated as one entity, and the Holders were treated as one entity, for such
purpose) or by another method of allocation which does not take account of the
equitable considerations referred to above in this Section 4. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 4 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by an governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any 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 0000 Xxx) shall
be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation. For purposes of this Section 4, each Person, if
any, who controls an Initial Purchaser or Holder within the meaning of this
Section 15 of the Securities Act or Section 20 of the Exchange Act shall have
the same rights to contribution as such Initial Purchaser or Holder, and each
director of the Company, each officer of the Company who signed the 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.
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Section 5. MISCELLANEOUS.
(a) 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.
(b) NO INCONSISTENT AGREEMENTS. The Company will not enter into any
agreement which is inconsistent with the rights granted to the Holders of
Warrants and 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.
(c) NO PIGGY-BACK ON SHELF REGISTRATIONS. The Company shall not grant to
any of its security holders (other than the Holders in such capacity) the right
to include any of their securities in any Registration Statement filed pursuant
to a Shelf Registration.
(d) AMENDMENTS AND WAIVERS. The provisions of this Agreement, including
the provisions of this sentence, 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 Holders of not less
than a majority of the then outstanding Warrants and each class and series of
Registrable Securities. Notwithstanding the foregoing, a waiver or consent to
depart from the provisions hereof with respect to a matter that relates
exclusively to the rights of one or more Holders and that does not directly or
indirectly affect the rights of other Holders may be given by a majority of the
Holders so affected; PROVIDED, HOWEVER, that the provisions of this sentence may
not be amended, modified or supplemented except in accordance with the
provisions of the immediately preceding sentence. Notwithstanding the
foregoing, no amendment, modification, supplement, waiver or consent with
respect to Section 4 hereof shall be made or given otherwise than the prior
written consent of each Person affected thereby.
(e) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, registered
first-class mail, telecopier, or any courier guaranteeing overnight delivery (i)
if to a Holder, at the most current address of such Holder as set forth in the
register for the Warrants or the Registrable Securities, which address initially
is, with respect to each Initial Purchaser, the address set forth with respect
to such Initial Purchaser 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 5(e), with a copy to Xxxxxxx
Xxxxxxx & Xxxxxxxx LLP, 000 Xxxx "X" Xxxxxx, Xxxxx 0000, Xxx Xxxxx, XX
00000-0000, Attention: Xxxx Xxxxxxxxx, and thereafter at such other address
notice of which is given in accordance with the provisions of this Section 5(e).
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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.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the successors and permitted assigns of each of the parties
and shall inure to the benefit of each Holder. If any transferee of any Holder
shall acquire Registrable Securities, in any manner, whether by operation of law
or otherwise, such Registrable Securities shall be held subject to all of the
terms of this Agreement, and by taking and holding such 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. The Company may not assign any of
its rights or obligations hereunder without the prior written consent of each
Holder of Registrable Securities. Notwithstanding the foregoing, no successor
or assignee of the Company shall have any rights granted under the Agreement
until such person shall acknowledge its rights and obligations hereunder by a
signed written statement of such person's acceptance of such rights and
obligations.
(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) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(i) 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.
(j ) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(k) 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
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Agreement and the Warrant Agreement supersede all prior agreements and
understandings between the parties with respect to such subject matter.
(l) 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 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.
[SIGNATURE PAGE FOLLOWS]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
RHYTHMS NETCONNECTIONS INC.
0000 Xxxxx Xxxxxx Xxxxxxx
Xxxxxxxxx, XX 00000-0000
By: /s/ Xxxxx X. Xxxxxxxx
-------------------------------------------
Name: Xxxxx X. Xxxxxxxx
Title: Chief Financial Officer
Confirmed and accepted as of
the date first above written:
XXXXXXX XXXXX & CO.
XXXXXXX LYNCH, PIERCE, XXXXXX & XXXXX INCORPORATED
XXXXXXXXX, LUFKIN & XXXXXXXX SECURITIES CORPORATION
By: XXXXXXX LYNCH, PIERCE, XXXXXX & XXXXX INCORPORATED
By: /s/ Xxxxx Xxxxxx
-----------------------------
Name: X. Xxxxxx
Title: Vice President
- 23 -
