EXHIBIT 10.4
AGREEMENT
This Agreement ("Agreement") is made as of April 30, 1997, by and among:
METROMEDIA COMPANY, a Delaware general partnership with offices
at Xxx Xxxxxxxxxxx Xxxxx, Xxxx Xxxxxxxxxx, Xxx Xxxxxx 00000
("Metromedia");
XXXXXX XXXXXXXXX, residing at 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000 ("Subotnick");
XXXXXX XXXXXX, residing at 00 Xxxxxx Xxxx Xxxx, Xxxxxxxx, Xxx
Xxxxxx 00000 ("Xxxxxx");
XXXXXX XXXXXX, residing at 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx
Xxxx 00000 ("Xxxxxx");
XXXXXXX X. XXXXXXXX, residing at 00 Xxx Xxxxxx Xxxx, Xxx
Xxxxxxxx, Xxx Xxxx 00000 ("Xxxxxxxx"); and
NATIONAL FIBER NETWORK, INC., a Delaware corporation with offices
at 00 Xxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 ("NFN").
W I T N E S S E T H:
WHEREAS, Metromedia, Subotnick, Xxxxxx and Xxxxxx (each a "Buyer" and
collectively "Buyers") desire to purchase, and NFN desires to sell to the
Buyers, the Buyers' Shares (as such term is hereinafter defined), for the
consideration and on the terms set forth in this Agreement; and
WHEREAS, Metromedia, NFN and Xxxxxxxx desire to enter into certain
agreements and arrangements in connection with the purchase of the Buyers'
Shares;
NOW, THEREFORE, in consideration of the promises and mutual covenants and
agreements herein set forth and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged and confirmed, the
parties hereto agree as follows:
1. DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"AMENDED AND RESTATED NOTE" -- the amended and restated promissory note
issued by NFN to Metromedia dated March 6, 1997.
"APPLICABLE CONTRACT" -- any Contract (a) under which a Company has or may
acquire any rights, (b) under which a Company has or may become subject to any
obligation or liability, (c) by which a Company or any of the assets owned or
used by it is or may become bound, including, but not limited to, any such
Contract referred to in (a), (b) or (c) above which is related to or affects the
System.
"1996 BALANCE SHEET" -- as defined in Section 3.4.
"BREACH" -- a "Breach" of a representation, warranty, covenant, obligation,
or other provision of this Agreement or any instrument delivered pursuant to
this Agreement will be deemed to have occurred if there is or has been (a) any
material inaccuracy in or breach of, or any failure to perform or comply with,
such representation, warranty, covenant, obligation, or other provision, or (b)
any true and valid claim (by any Person) or other occurrence or circumstance
that is or was inconsistent with such representation, warranty, covenant,
obligation, or other provision, and the term "Breach" means any such inaccuracy,
breach, failure, claim, occurrence, or circumstance.
"BUYERS" -- Metromedia, Subotnick, Xxxxxx and Xxxxxx.
"BUYERS' SHARES" -- an aggregate of 8,403.325 shares of Series B Preferred
Stock, it being understood that if such shares were converted in full
immediately following the Closing, the holders thereof would receive upon such
conversion that number of shares of Common Stock as shall equal 24.528% of the
sum of the number of shares of Common Stock then issued and outstanding (after
giving effect to such conversion) plus the number of shares of Common Stock then
issuable pursuant to warrants and options then outstanding (such sum being
hereinafter referred to as the "Fully-Diluted Common Stock"). If, for any
reason, the sum of the number of shares of Common Stock issued and outstanding
plus the number of shares of Common Stock issuable pursuant to warrants and
options, in each case outstanding immediately prior to the Closing, exceeds
25,856,808, the number of Buyers' Shares shall be adjusted such that the number
of shares of Common Stock that the holders of the Buyers' Shares would receive
upon conversion in full of all Buyers' Shares shall equal 24.528% of the Fully-
Diluted Common Stock.
"CLOSING" -- as defined in Section 2.2.
"CLOSING DATE" -- the date and time as of which the Closing actually takes
place.
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"COMMON STOCK" -- the common stock, $.01 par value per share, of NFN as the
same is constituted from time to time.
"COMPANY" and "COMPANIES" -- respectively, NFN or its Subsidiaries,
individually, and NFN and its Subsidiaries, collectively.
"CONSENT" -- any approval, consent, ratification, waiver, or other
authorization (including, but not limited to, any Governmental Authorization).
"CONTEMPLATED TRANSACTIONS" -- all of the transactions contemplated by
and/or in connection with this Agreement, including:
(a) the authorization, issuance, sale and delivery of the Buyers' Shares
by NFN to Buyers;
(b) the performance by Buyers and NFN of their respective covenants and
obligations under this Agreement;
(c) Buyers' acquisition and ownership of the Buyers' Shares;
(d) The understandings, agreements and arrangements with respect to
governance, voting, registration rights and other matters set forth in this
Agreement.
"CONTRACT" -- any agreement, contract, obligation, promise, or undertaking
(whether written or oral and whether express or implied) that is legally binding
at the time of execution thereof (if applicable, or at any time thereafter).
"DAMAGES" -- as defined in Section 6.2 and 6.3.
"DISCLOSURE LETTER" -- stall mean the letter which shall be delivered by
NFN to the Buyers on the date of execution of this Agreement as modified by the
letter, if any, delivered by NFN to Buyers on the Closing Date, providing the
information and disclosure as provided in Article "3" hereof.
"DOITT" -- the New York City Department of Information, Technology and
Telecommunication.
"ENCUMBRANCE" -- any charge, claim, community property interest, condition,
equitable interest, lien, option, pledge, security interest, right of first
refusal, or restriction of any kind, including any restriction on use, voting,
transfer (other than restrictions imposed by applicable federal or state
securities laws), receipt of income, or exercise of any other attribute of
ownership.
"ENVIRONMENT" -- soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
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wetlands), groundwaters, drinking water supply, stream sediments, ambient air
(including indoor air), plant and animal life, and any other environmental
medium or natural resource.
"ENVIRONMENTAL, HEALTH, AND SAFETY LIABILITIES" -- any cost, damages,
expense, liability, obligation, or other responsibility arising from or under
Environmental Law or Occupational Safety and Health Law and consisting of or
relating to:
(a) any environmental, health, or safety matters or conditions (including,
but not limited to, on-site or off-site contamination, occupational safety and
health, and regulation of chemical substances or products);
(b) fines, penalties, judgments, awards, settlements, legal or
administrative proceedings, damages, losses, claims, demands and response,
investigative, remedial, or inspection costs and expenses arising under
Environmental Law or Occupational Safety and Health Law:
(c) financial responsibility under Environmental Law or Occupational
Safety and Health Law for cleanup costs or corrective action, including any
investigation, cleanup, removal, containment, or other remediation or response
actions ("Cleanup") required by applicable Environmental Law or Occupational
Safety and Health Law (whether or not such Cleanup has been required or
requested by any Governmental Body or any other Person) and for any natural
resource damages; or
(d) any other compliance, corrective, investigative, or remedial measures
required under Environmental Law or Occupational Safety and Heath Law. The
terms "removal," "remedial," and "response action," include the types of
activities covered by the United States Comprehensive Environmental Response,
Compensation, and Liability Act, 42 U.S.C. 9601 et seq., as amended ("CERCLA").
"ENVIRONMENTAL LAW" -- any Legal Requirement that requires or relates to:
(a) advising and/or notifying appropriate authorities, employees, and the
public of any intended or actual releases of pollutants or hazardous substances
or materials, violations of discharge limits, or other prohibitions and of the
commencements of activities, such as resource extraction or construction, that
could impact on the Environment;
(b) preventing or reducing the release of pollutants or hazardous
substances or materials into the Environment;
(c) reducing the quantities, preventing the release, or minimizing the
hazardous characteristics of wastes that are generated;
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(d) assuring that products are designed, formulated, packaged, and used so
that they do not present risks to health or the Environment when used or
disposed of;
(e) protecting resources, species, or ecological amenities;
(f) reducing to acceptable levels the risks inherent in the transportation
of hazardous substances, pollutants, oil, or other potentially harmful
substances;
(g) cleaning up pollutants that have been released, preventing the threat
of release, or paying the costs of such clean up or prevention; or
(h) making responsible parties pay private parties, or groups of them, for
damages done to their health or the Environment, or permitting self-appointed
representatives of the public interest to recover for injuries done to public
assets.
"ERISA" -- the Employee Retirement Income Security Act of 1974, as amended,
or any successor law, and any regulations and rules issued thereunder.
"EXECUTIVE EMPLOYMENT AGREEMENTS" -- the agreement between NFN and
Xxxxxxxx, employing Xxxxxxxx as chief executive officer and chairman of the
board of directors of NFN, and the agreement between NFN and Xxxxxx Xxxxxxxxxxx
("Xxxxxxxxxxx"), employing Xxxxxxxxxxx as chief operating officer and president
of NFN to be effective as of the Closing Date (as defined herein), which
agreements are substantially in the form annexed to the disclosure letter.
"FACILITIES" -- any real property, leaseholds, easements, right of ways,
licenses or other interests currently or formerly owned or operated by the
Companies and any and all improvements, buildings, plants, structures, supplies
or equipment (including, but not limited to, fiber optic cable,
telecommunications equipment, motor vehicles, tank cars, and rolling stock)
currently or formerly owned or operated by the Companies, including property,
leaseholds, easements, right of ways, licenses or other interests and buildings,
plants, structures or equipment used in or related to the System.
"FCRC" -- the Franchise and Concession Review Committee of the City of New
York.
"FRANCHISE AGREEMENT" -- that certain Franchise Agreement between the City
of New York and NFN dated December 20, 1993 and all amendments thereto.
"GAAP" -- United States generally accepted accounting principles.
"GOVERNMENTAL AUTHORIZATION" -- any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement,
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including, but not limited to, the Franchise Agreement and the Xxxx-Xxxxx-Xxxxxx
Antitrust Improvements Act of 1976, as amended.
"GOVERNMENTAL BODY" -- any:
(a) nation, state, county, city, town, village, district, or other
jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other government;
(c) governmental or quasi-governmental authority of any nature (including
any governmental agency, branch, department, official, or entity and any court
or other tribunal);
(d) multi-national organization or body; or
(e) body exercising, or entitled to exercise, any administrative,
executive, judicial, legislative, police, regulatory, or taxing authority or
power of any nature.
"HAZARDOUS ACTIVITY" -- the distribution, generation, handling, importing,
management, manufacturing, processing, production, refinement, Release, storage,
transfer, transportation, treatment, or use (including any withdrawal or other
use of groundwater) of Hazardous Materials in, on, under, about, or from the
Facilities or any part thereof into the Environment, and any other act,
business, operation, or thing that increases the danger, or risk of danger, or
poses an unreasonable risk of harm to persons or property on or off the
Facilities, or that may affect the value of any of the Facilities or any
Company.
"HAZARDOUS MATERIALS" -- any waste materials, chemicals or other substances
that are listed, defined, designated, or classified as, or otherwise determined
to be, hazardous, radioactive, or toxic or a pollutant or a contaminant under or
pursuant to any Environmental Law or that could result in the imposition of
liabilities under any Environmental Law, including, but not limited to, any
admixture or solution thereof, and specifically including petroleum (including
crude oil or any fraction thereof) and all derivatives thereof or synthetic
substitutes therefor and asbestos or asbestos-containing materials.
"INTELLECTUAL PROPERTY ASSETS" -- as defined in Section 3.19.
"IRC" -- the Internal Revenue Code of 1986, as amended, or any successor
law, and any rules or regulations thereunder.
"IRS" -- the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
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"KNOWLEDGE" -- an individual will be deemed to have "Knowledge" of a
particular fact or other matter if (i) such individual is actually aware of such
fact or other matter; or (ii) if such individual upon the exercise of due
inquiry would be expected to be aware of such fact or matter.
A Person (other than an individual) will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving, or who has at
any time served, as a director, officer, executive, manager, executor, or
trustee of such Person (or in any similar capacity) has, or at any time had,
Knowledge of such fact or matter. Notwithstanding the foregoing, the parties
agree that the Knowledge of Xxxxxxxxxxx shall not be imputed to any of the
parties hereto.
"LEGAL REQUIREMENT" -- any federal, state, local, municipal, foreign,
international, multinational, Order, constitution, law, ordinance, principle of
common law, regulation, statute, or treaty.
"NFN" -- as defined in the first paragraph of this Agreement.
"OCCUPATIONAL SAFETY AND HEALTH LAW" -- any Legal Requirement which are
designed to or in any way otherwise provide for a safe and healthy working
conditions and (ii) the reduction or amelioration of occupational safety and
health hazards, and any program, whether governmental or private (including, but
not limited to, those promulgated or sponsored by industry associations and
insurance companies), designed to or in any other way provide for safe and
healthy working conditions.
"ORDER" -- any award, decision, injunction, writ, judgment, order,
stipulation, ruling, subpoena, or verdict entered, issued, made, or rendered by
any court, administrative agency, or other Governmental Body or by any
arbitrator.
"ORDINARY COURSE OF BUSINESS" -- an action taken by a Person will be deemed
to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such Person and
is taken in the ordinary course of the normal day-to-day operations of such
Person;
(b) such action is not required to be authorized by the board of directors
of such Person (or by any Person or group of Persons exercising similar
authority) and is not required to be specifically authorized by the parent
company (if any) of such Person; and
(c) such action is similar in nature and magnitude to actions customarily
taken, without any authorization by the board of directors (or by any Person or
group of Persons exercising similar authority), in the ordinary course of the
normal day-to-day operations of other Persons that are in the same line of
business as such Person.
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"ORGANIZATIONAL DOCUMENTS" -- (a) the articles or certificate of
incorporation (or similar organizational documents) and the bylaws (or similar
document) of a corporation; (b) the partnership agreement and any statement of
partnership of a general partnership; (c) the limited partnership agreement and
the certificate of limited partnership of a limited partnership; (d) the
operating agreement and certificate of formation of a limited liability company;
(e) any charter or similar document adopted or filed in connection with the
creation, formation, or organization of a Person; and (f) any amendment to any
of the foregoing.
"PERSON" -- any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company, joint
venture, estate, trust, association, organization, labor union, or other entity
or Governmental Body.
"PREFERRED STOCK" -- the preferred stock of NFN, par value $.01 per share.
"PROCEEDING" -- any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, or otherwise
involving, any Governmental Body or arbitrator.
"RELATED PERSON" -- with respect to a particular individual:
(a) each other member of such individual's Family;
(b) any Person that is directly or indirectly controlled by such
individual or one or more members of such individual's Family;
(c) any Person in which such individual or members of such individual's
Family hold (individually or in the aggregate) a Material Interest; and
(d) any Person with respect to which such individual or one or more
members of such individual's Family serves as a director, officer, partner,
member, executor, or trustee (or in a similar capacity).
With respect to a specified Person other than an individual:
(a) any Person that directly or indirectly controls, is directly or
indirectly controlled by, or is directly or indirectly under common control with
such specified Person;
(b) any Person that holds a Material Interest in such specified Person;
(c) each Person that serves as a director, officer, partner, member,
executor, or trustee of such specified Person (or in a similar capacity);
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(d) any Person in which such specified Person holds a Material Interest;
(e) any Person with respect to which such specified Person serves as a
partner, manager or a trustee (or in a similar capacity); and
(f) any Related Person of any individual described in clause (b) or (c).
For purposes of this definition, (a) the "Family" of an individual includes (i)
the individual, (ii) the individual's spouse, and (iii) any other natural person
who resides with such individual, other than a natural person employed by or
rendering services for consideration to such individual or his/her family and
(b) "Material Interest" means direct or indirect beneficial ownership (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of
voting securities or other voting interests representing at least 5% of the
outstanding voting power of a Person or equity securities or other equity
interests representing at least 5 % of the outstanding equity securities or
equity interests in a Person.
"RELEASE" -- any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment, whether
intentional or unintentional.
"REPRESENTATIVE" -- with respect to a particular Person, any director,
officer, manager, employee, agent, consultant, advisor, or other representative
of such Person, including, but not limited to, legal counsel, accountants, and
financial advisors.
"SECURITIES ACT" -- the Securities Act of 1933, as amended, or any
successor law, and any regulations and rules thereunder.
"SERIES A PREFERRED STOCK" -- the 150,000 shares of Series A Convertible
Preferred Stock of NFN, par value $0.01 per share.
"SERIES B PREFERRED STOCK" -- the 8,403.325 shares of Series B Convertible
Preferred Stock of NFN, par value $0.01 per share.
"STERLING NOTE" -- The promissory note made by NFN to Sterling Capital LLC
under date of September 24, 1996, in the principal amount of $550,000.
"SUBSIDIARY" -- with respect to any Person (the "Owner"), any corporation
or other Person of which securities or other interests having the power to elect
(either directly or indirectly) a majority of that corporation's or other
Person's board of directors or similar governing body, or otherwise having the
power to direct (either directly or indirectly) the business and policies of
that corporation or other Person (other than securities or other interests
having such power only upon the happening of a contingency that has not
occurred) are held by the Owner or one or more of its Subsidiaries. When used
without reference to a particular Person, "Subsidiary" means a Subsidiary of
NFN.
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"SYSTEM" -- the telecommunications system which has been and will be
constructed, installed, operated and/or maintained by the Company, including any
and all real property and interests in real property, all tangible and
intangible personal property, buildings, improvements, offices, furniture,
customer lists, cables, wires, optical fibers, amplifiers and all other
electronic devices, equipment, supplies, plans, drawings, tools and facilities
used in connection therewith and all rights, contracts, agreements and
understandings with regard to any matter related thereto.
"TAX" -- any tax however denominated, including any interest, penalties or
other additions to tax that may be payable in respect thereof, imposed by any
Governmental Body, including, without limitation, all income or profit taxes,
payroll and employee withholding taxes, unemployment insurance, social security
taxes, sales and use taxes, ad valorem taxes, excise taxes, franchise taxes,
gross receipts taxes, business license taxes, occupation taxes, real and
personal property taxes, stamp taxes, environmental taxes, transfer taxes,
workers' compensation, Pension Benefit Guaranty Corporation premiums and any
other governmental charges, and other obligations of the same or of a similar
nature to any of the foregoing, required to be paid, withheld or collected.
"TAX RETURN" -- any return (including any information return), report,
statement, schedule, notice, form, or other document or information filed with
or submitted to, or required to be filed with or submitted to, any Governmental
Body in connection with the determination, assessment, collection, or payment of
any Tax or in connection with the administration, implementation, or enforcement
of or compliance with any Legal Requirement relating to any Tax.
"THREAT OF RELEASE" -- a likelihood of a Release that may require action in
order to prevent or mitigate damage to the Environment that may result from such
Release.
"US ONE" -- US One Communications of New York, Inc.
"US ONE LEASE" -- the Agreement for the Provision of a Fiber Optic
transmission Network dated April 16, 1996 between NFN and US One Communications
of New York, Inc.
"US ONE LOAN AGREEMENT" -- the agreement entitled "Amended and Restated
Master Agreement" between NFN and US One Communications Corp. dated as of April
16, 1996.
2. SALE AND TRANSFER OF SERIES B PREFERRED STOCK; CLOSING
2.1 PURCHASE PRICE
The aggregate purchase price for all of the Buyers' Shares is $32,500,000
("Aggregate Purchase Price") at a per share price of $3,867.516727 per share
(the "Per
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Share Price"). Each Buyer shall pay a proportionate share of the Aggregate
Purchase Price based upon the product of the number of Buyers' Shares purchased
by each such Buyer multiplied by the Per Share Price. The Buyers shall advise
NFN prior to the Closing Date of the number of Buyers' Shares which shall be
purchased by each Buyer at the Closing.
2.2 CLOSING
The closing with respect to the purchase and sale of the Buyers' Shares
("Closing") shall take place at the offices of Skadden, Arps, Slate, Xxxxxxx &
Xxxx LLP, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 at 8:30 a.m. on April 30,
1997.
2.3 CLOSING OBLIGATIONS
(a) At the Closing, NFN will deliver to the Buyer:
(i) a certificate registered in the name of each Buyer for the
number of Buyers' Shares as shall be designated by joint notice from the Buyers
to NFN.
(ii) The opinion of counsel to NFN dated as of the Closing Date
substantially in the form annexed hereto as schedule 2.3(a);
(iii) An amendment to the US One Lease and the US One Loan Agreement
which in substance will provide (a) upon the funding of an equity investment in
NFN for a minimum of $32,500,000, US One shall prepay to NFN additional lease
payments, and reimburse NFN for construction costs, aggregating $3,530,000,
which payments shall be made and satisfied by the simultaneous delivery and
exchange of the following: (x) US One shall deliver to NFN that certain
promissory note (the "Note") from NFN to US One in the principal amount of
$4,900,000 marked "Canceled," and shall deliver and release all security
instruments pledged or filed with respect thereto, and (y) NFN shall pay to US
One $1,370,000 in cash, and (b) a modification of the scope of the buildout of
the NFN Network to eliminate the requirement to build 000 Xxxxx Xxxxx (as
defined in the US One Loan Agreement) into Westchester, Nassau and Suffolk
counties and a modification of the lease payments corresponding thereto;
(iv) evidence of the approval of the FCRC under the terms of the
Franchise Agreement granting permission for the Buyers' ownership of an
aggregate of 24.528% of the Common Stock of NFN without conditions materially
adverse to the Buyers;
(v) evidence of the redemption of 150,000 shares of Series A
Preferred Stock;
(vi) documentary evidence of the payment of the Sterling Note and
the delivery and release of all security instruments pledged or filed with
respect thereto; and
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(vii) an estoppel certificate executed by each officer and director
of NFN in form and substance reasonably acceptable to Buyers.
(b) At the Closing each of the Buyers will deliver to NFN the purchase
price for their respective Buyers' Shares which purchase price shall equal the
product of the number of shares purchased by each such Buyer multiplied by the
Per Share Price.
(i) Metromedia (x) shall pay to NFN by wire transfer to one or
more accounts specified by NFN, the purchase price for its Buyers' Shares less
the outstanding principal balance and accrued interest due under the Amended and
Restated Note; (y) shall deliver to NFN the Amended and Restated Note with
an acknowledgment that such note has been satisfied; and (z) shall deliver to
NFN the collateral which was pledged by NFN as security for the performance of
the Amended and Restated Note;
(ii) Subotnick shall pay to NFN the purchase price for his Buyers'
Shares by wire transfer to the account designated by NFN;
(iii) Xxxxxx shall pay to NFN the purchase price for his Buyers'
Shares by wire transfer to the account designated by NFN;
(iv) Xxxxxx shall pay to NFN the purchase price for her Buyers'
Shares by wire transfer to the account designated by NFN.
3. REPRESENTATIONS AND WARRANTIES OF NFN
NFN represents and warrants to Buyers as follows:
3.1 ORGANIZATION AND GOOD STANDING
NFN is a corporation duly organized, validly existing, and in good standing
under the laws of its jurisdiction of incorporation, with full corporate power
and authority to conduct its business as it is now being conducted, to own or
use the properties and assets that it purports to own or use, and to perform all
its obligations under Applicable Contracts. NFN and each of its subsidiaries is
duly qualified to do business as a foreign corporation and is in good standing
under the laws of each state or other jurisdiction in which either the ownership
or use of the properties owned or used by it, or the nature of the activities
conducted by it, requires such qualification. NFN does not own, directly or
indirectly, any interest in or control, directly or indirectly, any other
corporation, company, business trust, partnership, limited partnership, limited
liability company, joint venture, or other entity or association other than (i)
National Fiber Network of New Jersey Inc., a New Jersey corporation of which NFN
owns 100% of the issued and outstanding capital stock; and (ii) Local Fiber,
L.L.C., a New York limited liability company of which NFN owns a 10% equity
interest.
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3.2 AUTHORITY; NO CONFLICT
Neither the execution and delivery by NFN of this Agreement nor the
consummation or performance by NFN of any of the Contemplated Transactions will,
directly or indirectly (with or without notice or lapse of time) contravene,
conflict with, or result in a violation of (A) any provision of the
Organizational Documents of any Company, (B) any resolution adopted by the board
of directors or the stockholders of any Company, (C) any Order, (D) any Legal
Requirement or (D) any Applicable Contract.
3.3 CAPITALIZATION
The authorized equity securities of NFN consist of (i) 60,000,000 shares of
Common Stock, par value $.01 per share; and (ii) 2,000,000 shares of Preferred
Stock, par value $.01 per share. Immediately following the Closing, 18,865,758
shares of Common Stock and 8,403.325 shares of Series B Preferred Stock will be
issued and outstanding. Upon their purchase as contemplated hereunder, the
Buyers' Shares will be duly authorized, validly issued, fully paid and
non-assessable. Other than any Encumbrance arising out of any act of any Buyer,
at the time of issuance and sale by NFN, all of Buyers' Shares will be free and
clear of all Encumbrances. All of the outstanding equity securities and other
securities of each Subsidiary are owned of record and beneficially by NFN, free
and clear of all Encumbrances except as set forth in Part 3.3 of the Disclosure
Letter. All of the outstanding equity securities of each Company have been duly
authorized and validly issued and are fully paid and nonassessable. Except as
set forth in Part 3.3 of the Disclosure Letter (as defined herein), immediately
following the Closing there will be no outstanding options, warrants,
convertible securities (with the exception of Buyers' Shares), other rights to
purchase, or rights to convert any obligation or other instrument into Common
Stock or other Contracts relating to the issuance, sale, or transfer of any
equity securities or other securities of any Company. None of the outstanding
equity securities or other securities of any Company was issued in violation of
or will breach (or with the lapse of time, cause to be breached) the Securities
Act, any Contract, any Organizational Document, or any other Legal Requirement.
Except as disclosed in Part 3.3 of the Disclosure Letter, no Company owns, or
has any Contract to acquire, any equity securities or other securities of any
Person or any direct or indirect equity or ownership interest in any other
business.
3.4 FINANCIAL STATEMENTS
NFN has delivered to Buyers the audited consolidated balance sheet of the
Companies as of September 30, 1996 and the related consolidated statements of
income, changes in stockholders' equity, and cash flow for the nine month period
then ended and a draft of the consolidated balance sheet of the Companies as of
December 31, 1996 and the related drafts of consolidated statements of income,
changes in stockholders' equity and cash flow for the twelve month period then
ended (collectively, the "1996 Balance Sheet"). Such financial statements and
notes fairly present the financial condition and the results of operations,
changes in stockholders' equity, and cash flow of the
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Companies as at the date of and for the period referred to in such financial
statements, all in accordance with GAAP; the financial statement referred to in
this Section 3.4 reflects the consistent application of such accounting
principles throughout the periods involved. No financial statements of any
Person other than the Companies are required by GAAP to be included in the
consolidated financial statements of NFN.
3.5 BOOKS AND RECORDS
The books of account, minute books, stock record books, and other records
of the Companies are complete and correct and have been maintained in accordance
with sound business practices, including the maintenance of an adequate system
of internal controls. The minute books of NFN contain accurate and complete
records of all meetings held of, and corporate action taken by, the
stockholders, the Boards of Directors, and committees of the Boards of Directors
of the Companies, and no meeting of any such stockholders, Board of Directors,
or committees has been held for which minutes have not been prepared and are not
contained in such minute books and which books and records are in the possession
of NFN.
3.6 CONDITION AND SUFFICIENCY OF ASSETS
The System and all other plants, improvements, structures, supplies, tools,
drawings, plans and equipment of each Company are structurally sound, are in
good operating condition and repair, and are adequate for the uses to which they
are being put, and for which they are intended, and no part of the System or
such other plants, improvements, structures, supplies, tools, drawings, plans
and equipment is in need of maintenance or repairs except for ordinary, routine
maintenance and repairs that are not material in nature or cost. The System and
all other plants, improvements, structures, supplies, tools, drawings, plans and
equipment of each Company are sufficient for the continued conduct of the
Companies' businesses after the Closing in substantially the same manner as
conducted prior to the Closing.
3.7 ACCOUNTS RECEIVABLE AND ACCOUNTS PAYABLE
All accounts receivable and accounts payable of each Company that are
reflected on the 1996 Balance Sheet or are reflected in the Companies' books and
records as of the Closing Date ( the "Accounts Receivable" and the "Accounts
Payable", respectively) represent or will with only the passage of time
represent valid obligations arising from, respectively, sales and purchases
actually made or services actually performed or received in the Ordinary Course
of Business. Unless paid prior to the Closing Date, the Accounts Receivable are
or will be as of the Closing Date current and collectible net of the respective
reserves shown on the 1996 Balance Sheet or on the Companies' books and records
as of the Closing Date.
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3.8 NO UNDISCLOSED LIABILITIES
Except as set forth in Part 3.8 of the Disclosure Letter, no Company has
any liabilities or obligations of any nature (whether absolute, accrued,
contingent, or otherwise) except for liabilities or obligations reflected or
reserved against in the 1996 Balance Sheet and current liabilities incurred in
the Ordinary Course of Business since the date thereof.
3.9 TAXES
(a) Except as set forth in Part 3.9 of the Disclosure Letter, NFN has
filed or caused to be filed all Tax Returns that are or were required to be
filed by or with respect to any of them, either separately or as a member of a
group of corporations, pursuant to applicable Legal Requirements.
(b) None of the United States federal and state Tax Returns of any Company
subject to such Taxes has been audited or threatened to be audited by the IRS or
any relevant state or local tax authorities (and none of the companies has
reason to believe that any such audit may be requested) or are closed by the
applicable statute of limitations for all taxable years through 1996.
3.10 COMPLIANCE WITH LEGAL REQUIREMENTS;
GOVERNMENTAL AUTHORIZATIONS
(a) Except as set forth in Part 3.10 of the Disclosure Letter:
(i) NFN has been in full compliance with each Legal Requirement
that is or was applicable to it or to the conduct or operation of its business
or the ownership or use of any of its assets, including, but not limited to, the
System;
(ii) no event has occurred or circumstance exists that (with or
without notice or lapse of time) (A) may constitute or result in a violation by
any Company of. or a failure on the part of any Company to comply with, any
Legal Requirement, or (B) may give rise to any obligation on the part of any
Company to undertake, or to bear all or any portion of the cost, expense or
liability of or for, any remedial action of any nature, including, but not
limited to, any action with respect to the System; and
(iii) No Company has received any notice or other communication
(whether oral or written) from any Governmental Body or any other Person
regarding (A) any actual, alleged, possible, or potential violation of, or
failure to comply with, any Legal Requirement, or (B) any actual, alleged,
possible, or potential obligation on the part of any Company to undertake, or to
bear all or any portion of the cost, expense or responsibility of, any remedial
action of any nature, including, without limitation, any action with respect to
the System.
15
3.11 LEGAL PROCEEDINGS; ORDERS
(a) Except as set forth in Part 3.11 of the Disclosure Letter, there is no
pending and/or threatened Proceeding:
(i) that has been commenced by or against any Company or that
otherwise relates to or may affect the business or prospects of, or any of the
assets, including the System, owned or used by, any Company or to which any
Company has any rights whatsoever; or
(ii) that challenges, or that may have the effect of preventing,
delaying, making illegal, or otherwise interfering with, any of the Contemplated
Transactions. To the Knowledge of NFN, (1) no such Proceeding has been
threatened, and (2) no event has occurred or circumstance exists that may give
rise to or serve as a basis for the commencement of any such Proceeding.
3.12 ABSENCE OF CERTAIN CHANGES AND EVENTS
Except as set forth in Part 3.12 of the Disclosure Letter, since the date
of the 1996 Balance Sheet, the Companies have conducted their businesses only
in the Ordinary Course of Business and there has not been any:
(a) change in any Company's authorized or issued capital stock; grant of
any stock option or right to purchase shares of capital stock of any Company;
issuance of any security convertible into such capital stock; grant of any
registration rights; purchase, redemption, retirement, or other acquisition by
any Company of any shares of any such capital stock; or declaration or payment
of any dividend or other distribution or payment in respect of shares of capital
stock;
(b) amendment or modification to the Organizational Documents of any
Company;
(c) payment or increase by any Company of any bonuses, salaries, or other
compensation to any stockholder, director, officer, or (except in the Ordinary
Course of Business) employee or entry into any employment, severance, or similar
Contract with any director, officer, or employee;
(d) adoption of, or increase in the payments to or benefits under, any
profit sharing, bonus, deferred compensation, savings, insurance, pension,
retirement, or other employee benefit plan for or with any employees of any
Company;
(e) damage to or destruction or loss of any asset or property of any
Company, whether or not covered by insurance, materially and adversely affecting
the properties, assets, business, financial condition, or prospects of any
Company;
16
(f) damage to or destruction or loss of all or any portion of the System,
whether or not covered by insurance,
(g) termination of, or receipt of notice of termination of, or receipt of
notice of default under and/or any breach of renegotiation or receipt of notice
of renegotiation of any of the terms of the Franchise Agreement or any
threatened action (whether oral or written) with respect to any potential
termination, default, breach or renegotiation of any of the terms of the
Franchise Agreement, and NFN has no reason to believe that any such action is
likely and/or imminent;
(h) sale (other than sales of inventory in the Ordinary Course of
Business), lease, or other disposition of any asset (including, but not limited
to, any portion of the System and/or any Contract) or property of any Company or
mortgage, pledge, or imposition of any lien or other encumbrance on any asset or
property of any Company, including the System;
(i) material change in the accounting methods used by any Company; or
(j) agreement, whether oral or written, by any Company to do any of the
foregoing.
3.13 CONTRACTS; NO DEFAULTS
(a) NFN has delivered or made available to Buyers true and complete
copies, of:
(i) each Applicable Contract that involves performance of services
or delivery of goods or materials by one or more Companies of an amount or value
in excess of $50,000;
(ii) each Applicable Contract that involves performance of services
or delivery of goods or materials to one or more Companies of an amount or value
in excess of $50,000;
(iii) each Applicable Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures or receipts of one or
more Companies in excess of $50,000;
(iv) each joint venture, partnership, and other Applicable Contract
(however named) involving a sharing of revenues, profits, losses, costs, or
liabilities by any Company with any other Person;
(v) each Applicable Contract containing covenants that in any way
purport to restrict the business activity of any Company or any Affiliate of a
Company or limit the freedom of any Company or any Affiliate of any Company to
engage in any
17
line of business, to compete with any Person, to issue securities or to
transfer, sell or otherwise dispose of any equity securities or any material
assets;
(vi) each written warranty, guaranty, and or other similar
undertaking with respect to contractual performance extended by any Company
other than in the Ordinary Course of Business; and
(vii) each amendment, supplement, and modification (whether oral or
written) in respect of any of the foregoing.
(b) Except as set forth in Part 3.14(b) of the Disclosure Letter, no
officer or director, no agent, employee, consultant, or contractor of any
Company is bound by any Contract that purports to limit the ability of such
officer, director, agent, employee, consultant, or contractor to (A) engage in
or continue any conduct, activity, or practice relating to the business of any
Company, or (B) assign to any Company or to any other Person any rights to any
invention, improvement, or discovery;
(c) There are no renegotiations of, attempts to renegotiate, or
outstanding rights to renegotiate any material amounts paid by or payable to any
Company under current or completed Contracts (including, but not limited to, the
Franchise Agreement) with any Person and to the Knowledge of NFN, no such Person
has made written demand for such renegotiation; and
(d) The Contracts relating to the sale, design, manufacture, or provision
of products or services (including the design, construction, maintenance and
operation of the System) by the Companies have been entered into in the Ordinary
Course of Business and have been entered into without the commission of any act
alone or in concert with any other Person, or any consideration having been paid
or promised, that is or would be in violation of any Legal Requirement.
3.14 INSURANCE
(a) Part 3.14 of the Disclosure Letter is a certificate of insurance which
lists and describes all policies of insurance to which any Company is a party or
under which any Company, or any director of any Company, is or has been covered
at any time within the 12 months preceding the date of this Agreement.
3.15 ENVIRONMENTAL MATTERS
Except as set forth in part 3.15 of the Disclosure Letter:
(a) Each Company is, and at all times has been, in full compliance with,
and has not been and is not in violation of or liable under, any Environmental
Law. No Company has any basis to expect, nor has any of them or any other
Person for whose conduct they are or may be held to be responsible received, any
actual or threatened
18
Order, notice, or other communication (written or oral) from (i) any
Governmental Body or private citizen acting in the public interest, or (ii) the
current or prior owner or operator of any Facilities, or the System, of any
actual or potential violation or failure to comply with any Environmental Law,
or of any actual or threatened obligation to undertake or bear the cost of any
Environmental, Health, and Safety Liabilities with respect to any of the
Facilities or any other properties or assets.(whether real, personal, or mixed)
in which any Company has had an interest, including, but not limited to, the
System, or with respect to any property or Facility at or to which Hazardous
Materials were generated, manufactured, refined, transferred, imported, used, or
processed by any Company, or any other Person for whose conduct they are or may
be held responsible, or from which Hazardous Materials have been transported,
treated, stored, handled, transferred, disposed, recycled, or received.
(b) There are no pending or, to the Knowledge of NFN, threatened claims,
Encumbrances, or other restrictions of any nature, resulting from any
Environmental, Health, and Safety Liabilities or arising under or pursuant to
any Environmental Law, with respect to or affecting any of the Facilities or any
other properties and assets (whether real, personal, or mixed) in which any
Company has or had an interest, including the System.
(c) No Company has Knowledge or any basis to expect, nor has any of them
or any other Person for whose conduct they are or may be held responsible,
received, any citation, directive, inquiry, notice, Order, summons, warning, or
other communication (written or oral) that relates to Hazardous Activity,
Hazardous Materials, or any alleged, actual, or potential violation or failure
to comply with any Environmental Law, or of any alleged, actual, or potential
obligation to undertake or bear the cost of any Environmental, Health, and
Safety Liabilities with respect to any of the Facilities or any other properties
or assets (whether real, personal, or mixed) in which any Company had an
interest, including the System, or with respect to any property or facility to
which Hazardous Materials generated, manufactured, refined, transferred,
imported, used, or processed by any Company, or any other Person for whose
conduct they are or may be held responsible, have been transported, treated,
stored, handled, transferred, disposed, recycled, or received.
(d) There has been no Release or, to the Knowledge of any of the
Companies, threatened Release, of any Hazardous Materials at or from the
Facilities or at any other locations where any Hazardous Materials are
generated, manufactured, refined, transferred, produced, imported, used, or
processed from or by the Facilities, or from or by any other properties and
assets (whether real, personal, or mixed) in which any Company has or had an
interest, including the System, or to the Knowledge of NFN any adjoining
property, whether by any Company, or any other Person.
19
3.16 EMPLOYEES
(a) Part 3.16 of the Disclosure Letter sets forth information regarding
each executive or managerial employee of NFN, including such employee's name;
job title and current compensation;
(b) No employee or director of any Company is a party to, or is otherwise
bound by, any agreement or arrangement, including any confidentiality,
noncompetition, or proprietary rights agreement, between such employee or
director and any other Person ("Proprietary Rights Agreement") that in any way
adversely affects or will affect (i) the performance of his duties as an
employee or director of the Companies, or (ii) the ability of any Company to
conduct its business, including any Proprietary Rights Agreement with the
Companies by any such employee or director. To NFN's Knowledge, no director,
officer, or other key employee of any Company intends to terminate his
employment with such Company.
3.17 LABOR RELATIONS; COMPLIANCE
The Company is not a party to any collective bargaining or other labor
Contract. There has not been, there is not presently pending or existing, and
to any Company's Knowledge there is not threatened, (a) any strike, slowdown,
picketing, work stoppage, or employee grievance process, (b) any material
Proceeding against or affecting any Company relating to the alleged violation of
any Legal Requirement pertaining to labor relations or employment matters,
including any charge or complaint filed by an employee or union with the
National Labor Relations Board, the Equal Employment Opportunity Commission, or
any comparable Governmental Body, organizational activity, or other labor or
employment dispute against or affecting any of the Companies, their premises
and/or any of the Facilities, or (c) any application for certification of a
collective bargaining agent. To NFN's Knowledge, no event has occurred or
circumstance exists that could provide the basis for any work stoppage or other
labor dispute. There is no lockout of any employees by any Company, and no such
action is contemplated by any Company. Each Company has complied in all
respects with all Legal Requirements relating to employment, equal employment
opportunity, nondiscrimination, immigration, wages, hours, benefits, collective
bargaining, the payment of social security and similar taxes, occupational
safety and health, and plant closing. No Company is liable for the payment of
any material compensation, damages, taxes, fines, penalties, or other amounts,
however designated, for failure to comply with any of the foregoing Legal
Requirements.
3.18 INTELLECTUAL PROPERTY
(a) As used in this Agreement, the term "Intellectual Property Assets"
includes:
20
(i) NFN's name, all fictional business names, trading names,
registered and unregistered trademarks, service marks, and applications
(collectively, "Marks");
(ii) all patents, patent applications, and inventions and
discoveries that may be patentable (collectively, "Patents");
(iii) all copyrights in both published works and unpublished works
(collectively, "Copyrights");
(iv) all rights in mask works (collectively, "Rights in Mask
Works"); and
(v) all know-how, trade secrets, confidential information,
customer lists, software, technical information, data, process technology,
plans, drawings, and blue prints (collectively, "Trade Secrets") owned, used, or
licensed by any Company as licensee or licensor.
(b) There are no Contracts relating to the Intellectual Property Assets to
which NFN is a party or by which NFN is bound. There are no outstanding and, to
NFN's Knowledge, no threatened disputes or disagreements with respect to any
such agreement.
(c) There are no Contracts and/or claims relating to any patent, and to
NFN's Knowledge, the construction, maintenance and operation of the System does
not infringe upon any Person's Patent or any other proprietary right of any
Person.
(d) TRADEMARKS
(i) To NFN's Knowledge, there is no potentially interfering
trademark or trademark application of any third party.
(e) TRADE SECRETS
(i) With respect to each Trade Secret, the documentation relating
to such Trade Secret is current, accurate, and sufficient in detail and content
to identify and explain it and to allow its full and proper use without reliance
on the knowledge or memory of any individual.
(ii) The Companies have taken all reasonable precautions to protect
the secrecy, confidentiality, and value of their Trade Secrets.
(iii) One or more of the Companies has good title and an absolute
(but not necessarily exclusive) right to use the Trade Secrets. The Trade
Secrets are not part of the public knowledge or literature, and, to NFN's
Knowledge, have not been used, divulged, or appropriated either for the benefit
of any Person (other than one or more
21
of the Companies) or to the detriment of the Companies. No Trade Secret is
subject to any adverse claim or has been challenged or threatened in any way.
3.19 CERTAIN PAYMENTS
No Company or director, officer, agent, or employee of any Company, any
other Person associated with or acting for or on behalf of any Company, has
directly or indirectly (a) made any contribution, gift, bribe, rebate, payoff,
influence payment kickback, or other payment to any Person, private or public,
regardless of form, whether in money, property, or services (i) to obtain
favorable treatment in securing business, (ii) to pay for favorable treatment
for business secured, (iii) to obtain special concessions or for special
concessions already obtained, for or in respect of any Company or any Affiliate
of a Company, or (iv) in violation of any Legal Requirement, or (b) established
or maintained any or asset that has not been recorded in the books and records
of the Companies.
3.20 DISCLOSURE
(a) No representation or warranty of NFN in this Agreement or statement or
disclosure in the Disclosure Letter contains any misrepresentation of any
material fact or omits to state a material fact necessary to make the statements
herein or therein, in light of the circumstances in which they were made, not
misleading.
3.21 BROKERS OR FINDERS
NFN has incurred no obligation or liability, contingent or otherwise, for
brokerage or finders' fees or agents' commissions or other similar payment in
connection with this Agreement and will indemnify and hold the Buyer harmless
from any such payment alleged to be payable by Buyer as the result of the action
of NFN or its officers or agents.
3.22 AFFILIATE TRANSACTIONS
All material transactions between NFN and a Related Person of NFN (other
than a wholly owned Subsidiary of NFN) ("Affiliate Transactions") between
January 1, 1995 and December 31, 1996 are disclosed in (i) the audited
consolidated financial statements of NFN as of and for the year ended December
31, 1995, (ii) the audited consolidated financial statements of NFN as of and
for the nine months ended September 30, 1996, (iii) the draft consolidated
financial statements of NFN as of and for the twelve months ended December 31,
1996, or (iv) the Disclosure Letter. Since December 31, 1996, NFN has not
consummated any Affiliate Transactions other than on an arm's-length basis,
except as set forth in the Disclosure Letter.
22
4. REPRESENTATIONS AND WARRANTIES OF BUYERS
Buyers represent and warrant to NFN as follows:
4.1 ORGANIZATION AND GOOD STANDING OF METROMEDIA
Metromedia is a general partnership duly organized, and validly existing,
under the laws of the State of Delaware.
4.2 AUTHORITY; NO CONFLICT
(a) This Agreement constitutes the legal, valid, and binding obligation of
Each Buyer, enforceable against each Buyer in accordance with its respective
terms. Each Buyer has the authority to execute and deliver this Agreement to
perform their obligations under this Agreement.
(b) Neither the execution and delivery of this Agreement Buyer nor the
consummation or performance of any of the Contemplated Transactions by any Buyer
in accordance with the terms of this Agreement will give any Person the right to
prevent, delay, or otherwise interfere with any of the Contemplated Transactions
pursuant to:
(i) any provision of Metromedia's Organizational Documents;
(ii) any material Legal Requirement or Order to which any Buyer is
subject; or
(iii) any material Contract to which any Buyer is a party or by
which any Buyer is bound.
No Buyer is, and will not be, required to obtain any Consent from any
Person in connection with the execution and delivery of this Agreement or the
consummation or performance of any of the Contemplated Transactions pursuant to
any Legal Requirement or Order to which any Buyer is subject or any Contract to
which any Buyer is a party or by which any Buyer is bound.
4.3 INVESTMENT INTENT, ETC.
(a) "Buyers Shares", for the purposes of this Section 4.3, shall include
8,403.325 shares of Series B Preferred Stock and the shares of Common Stock
issuable upon conversion thereof. Each Buyer is acquiring their respective
Buyers' Shares for their own account and not with a view to their distribution
within the meaning of Section 2(l1) of the Securities Act. Each Buyer hereby
acknowledges and agrees that Buyers' Shares will not be registered under the
Securities Act or any state securities or "blue sky" laws and may not be sold,
transferred or otherwise disposed of except in compliance with the provisions of
the Securities Act and the rules and regulations promulgated thereunder
23
and such state securities or "blue sky" laws. Buyer is an "accredited investor"
as such term is defined in Rule 501 of Regulation D promulgated under the
Securities Act.
(b) Each Buyer understands that the Company has no obligation to register
the Buyers' Shares under the Securities Act or any state securities laws except
as set forth in Article 8 hereof. Each Buyer acknowledges that the Buyers'
Shares must be held indefinitely unless a registration occurs as provided in
Article 8 hereof or an exemption from such registration is available for a
transfer of the Buyers' Shares. Each Buyer understands that no public market
now exists for any of the securities issued by the Company and that the Company
has made no assurances with respect to any secondary market for the Buyers'
Shares. Each Buyer has had an opportunity to discuss the business, management
and financial affairs of the Company and the terms and conditions of an
investment in the Buyers' Shares with, and has had access to, the management of
the Company. Each Buyer understands and acknowledges that the Company will be
relying upon Buyers' representations and warranties set forth herein in offering
and selling the Buyers' Shares. Each Buyer represents that the offering of the
Buyers' Shares was made only through direct, personal communication between each
Buyer and a representative of the Company and not through public solicitation or
advertising. No Buyer has retained or consulted any "Purchaser Representative"
as such term is defined in Rule 501 of Regulation D promulgated under the
Securities Act. Each Buyer has such knowledge, experience and skill in
evaluating and investing in issues of both equity and debt securities, including
securities of new and speculative companies, based on actual based on actual
participation in financial, investment and business matters such that he, she or
it is capable of evaluating the merits and risks of an investment in the Buyers'
Shares, and has such knowledge, experience and skill in financial and business
matters that he, she or it is capable of evaluating the merits and risks of the
prospective investment in the Company and the suitability of the Buyers' Shares
as an investment for itself, himself or herself. No Buyer has received, or is
relying on, any representations or warranties from the Company or any other
person, other than the information in writing as provided herein. Each Buyer is
able to bear the economic risk of an investment in the Buyers' Shares and has
adequate income independent of any income produced from an investment in the
Buyers' Shares and has sufficient net worth to sustain a loss of all of its, his
or her investment in the Buyers' Shares without economic hardship if such a
loss should occur.
24
4.4 RESTRICTIONS ON TRANSFERS; CERTAIN PERMITTED TRANSFERS.
(a) Each Buyer agrees that it will not sell, transfer, assign, pledge,
hypothecate or otherwise dispose of (each, a "transfer") any of the Buyers'
Shares, except:
(i) a transfer made in compliance with the federal and all
applicable state securities laws to a trust, the beneficiaries of which, or to a
corporation, partnership or limited liability company, the stockholders, limited
or general partners or equity owners of which, include only the Buyer and its
"affiliates" (within the meaning of the Securities Act); PROVIDED that no
transfer pursuant to subsection (a)(i) of this Section 4.4 shall be given effect
on the books of the Company unless and until the transferee shall agree in
writing, in form and substance satisfactory to the Company, to become, and
becomes, bound by the representations and warranties and restrictions on
transfer applicable to the Buyer contained in this Agreement. Each person to
whom the Buyers' Shares may be transferred pursuant to this Section 4.4(a)(i) is
hereinafter sometimes referred to as a "Permitted Transferee".
(ii) a transfer to a person other than a Permitted Transferee may
be made with the prior written consent of the Company, which consent shall not
be unreasonably withheld, PROVIDED that (A) such transfer is exempt from the
registration requirements of the Securities Act and any applicable state
securities laws, (B) if the Company so requests, the Company receives from the
transferor an unqualified opinion of counsel that such transfer may be effected
without registration under the Securities Act and any applicable state
securities laws, and (C) the transferee shall agree in writing, in form and
substance satisfactory to the Company, to become, and becomes, bound by the
representations and warranties and restrictions on transfer applicable to the
Buyer contained in this Agreement.
(iii) a transfer to the Company.
(b) Each certificate evidencing the Buyers' Shares issued to Buyer or to a
subsequent transferee shall include a legend in substantially the following form
(in addition to any other statements or legends required by law):
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OR UNDER STATE SECURITIES
LAWS. THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
IS SUBJECT TO THE CONDITIONS SPECIFIED IN AN AGREEMENT DATED APRIL 30,
1997. A COPY OF SUCH CONDITIONS WILL BE FURNISHED BY THE CORPORATION
TO THE HOLDER HEREOF UPON
25
WRITTEN REQUEST AND WITHOUT CHARGE. THESE SECURITIES MAY NOT BE
RESOLD OR TRANSFERRED UNLESS SUCH CONDITIONS COMBINED WITH AND UNLESS
REGISTERED OR EXEMPT FROM REGISTRATION UNDER THE SECURITIES ACT OF
1933 AND APPLICABLE STATE SECURITIES LAWS.
(c) Any purported transfer in violation of this Section 4.4 shall be null
and void and of no force or effect.
(d) Anything to the contrary contained in this Section 4.4
notwithstanding, no transfer to or from any Buyer or any Permitted Transferee or
a person other than a Permitted Transferee shall be made or recorded on the
transfer records of the Company, if as a result thereof, the Company would be
required to register the Buyer Shares under the Securities Act or any applicable
state securities or "blue sky' laws.
(e) The restrictions on transfer contained in this Section 4.4 shall not
apply to any transfer pursuant to an effective registration statement, or Rule
144, under the Securities Act and in compliance with all applicable state
securities laws.
4.5 CERTAIN PROCEEDINGS
There is no pending Proceeding that has been commenced against any Buyer
and that challenges, or may have the effect of preventing, delaying, making
illegal, or otherwise interfering with, any of the Contemplated Transactions.
To each Buyer's Knowledge, no such Proceeding has been threatened.
4.6 BROKERS OR FINDERS
No Buyer has incurred any obligation or liability, contingent or otherwise,
for brokerage or finders' fees or agents' commissions or other similar payment
in connection with this Agreement and each Buyer will indemnify and hold NFN
harmless from any such payment alleged to be due by or through a Buyer as a
result of the action of any such Buyer.
5. CERTAIN UNDERSTANDINGS, AGREEMENTS AND
ARRANGEMENTS BETWEEN BUYERS AND XXXXXXXX
(a) Without the prior written consent of Xxxxxxxx, XXX shall not, and
Buyers shall not permit NFN to:
(i) directly or indirectly declare or pay any dividends or make
any distributions in cash, property or securities upon any of its equity
securities;
26
(ii) directly or indirectly redeem, cancel, purchase or otherwise
acquire any equity security of NFN or securities convertible into or
exchangeable for any equity security of NFN (other than any redemption,
cancellation, purchase or acquisition of shares of Series B Preferred Stock
that may otherwise be deemed to have occurred upon conversion of the Series
B Preferred Stock in accordance with its terms);
(iii) voluntarily liquidate or dissolve;
(iv) make any payment (in cash or property) to, or enter into any
transaction with, any stockholder of NFN or any Related Person of NFN that
is not on an arms'-length basis unless such action is approved by a
majority of the directors of NFN that are disinterested with respect to
such transaction;
(v) file a petition under the Federal Bankruptcy Code or any other
insolvency law, or admit in writing its bankruptcy, insolvency or general
inability to pay its debts;
(vi) alter, amend or repeal any provision of its By-laws;
(vii) merge or consolidate with any person or entity, acquire a
controlling interest in any other business (whether by stock purchase,
asset purchase or otherwise), or make a disposition of its assets or an
acquisition involving consideration representing 25% or more of NFN's
consolidated stockholders' equity (as set forth in a consolidated balance
sheet of NFN prepared in accordance with GAAP as of the end of the most
recently completed calendar month prior to such disposition or
acquisition), or sell or lease assets constituting all or substantially all
of the assets of NFN;
(viii) issue any shares of its capital stock or any options, warrants
or rights to acquire such shares or securities convertible into or
exchangeable for such shares (other than shares of Common Stock issuable
upon conversion of the Series B Preferred Stock in accordance with its
terms or upon conversion, exchange or exercise of any other securities of
NFN convertible into or exchangeable or exercisable for shares of Common
Stock, in each case in accordance with their respective terms); and
(ix) appoint, employ, engage, change or terminate any legal,
accounting or financial advisors (including, but not limited to, any
underwriter or placement agent with respect to a primary or secondary
offering of securities of NFN) to NFN.
(b) Buyers and NFN shall take all action within their respective power,
including but not limited to, the voting of capital stock of NFN, required to
cause Xxxxxxxx to be elected chairman of the board of directors of NFN and to
ensure that Xxxxxxxx and two of his designees are members of the board of
directors of NFN.
27
(c) Buyers understand, acknowledge and agree that, so long as Xxxxxxxx is
employed by NFN, Xxxxxxxx has and shall retain, to employ in his sole
discretion, day-to-day operating control of NFN.
(d) The Company hereby grants to Xxxxxxxx and his assigns the registration
rights set forth in Exhibit A hereto.
(e) NFN and Xxxxxxxx shall take all action within their respective power
required to cause the disposition of NFN's 10% equity interest in Local Fiber,
L.L.C. within 90 days after the Closing Date.
6. INDEMNIFICATION; REMEDIES
6.1 SURVIVAL; RIGHT TO INDEMNIFICATION NOT AFFECTED BY
KNOWLEDGE
All representations, warranties, covenants, and obligations in this
Agreement, will survive the Closing. The right to indemnification, payment of
Damages or other remedy based on such representations, warranties, covenants,
and obligations will not be affected by any investigation conducted with respect
to, or any Knowledge acquired (or capable of being acquired) at any time,
whether before or after the execution and delivery of this Agreement or the
Closing Date, with respect to the accuracy or inaccuracy of or compliance with,
any such representation, warranty, covenant, or obligation. The waiver of any
condition based on the accuracy of any representation or warranty, or on the
performance of or compliance with any covenant or obligation, will not affect
the right to indemnification, payment of Damages, or other remedy based on such
representation, warranty, covenant, and obligation.
6.2 INDEMNIFICATION AND PAYMENT OF DAMAGES BY NFN
NFN will indemnify and hold harmless each Buyer, and their respective
Representatives, members, controlling Persons, and affiliates (collectively, the
"Indemnified Persons") for, and will pay to the Indemnified Persons the amount
of, any loss, liability, claim, damage (excluding incidental and consequential
damages), or expense (including costs of investigation and defense and
reasonable attorneys' fees), whether or not involving a third-party claim
(collectively, "Damages"), arising, directly or indirectly, from or in
connection with:
(a) any material Breach of any representation or warranty made by NFN in
this Agreement or in any document delivered by NFN pursuant to this Agreement
including, without limitation, the Disclosure Letter;
(b) and any material Breach by NFN of any covenant or obligation of NFN in
this Agreement.
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The remedies provided in this Section 6.2 will not be exclusive of or limit
any other remedies that may be available to Buyer or the other Indemnified
Persons, including any right of rescission granted under the Securities Act or
any action under Section 10(b) of the Securities Exchange Act of 1934, as
amended, and Rule l0b-5 promulgated thereunder.
6.3 INDEMNIFICATION AND PAYMENT OF DAMAGES BY BUYER
Each Buyer will indemnify and hold harmless NFN and, its Representatives,
controlling persons and affiliates and will pay to NFN the amount of any Damages
arising, directly or indirectly, from or in connection with (a) any material
Breach of any representation or warranty made by such Buyer in this Agreement;
and (b) any material Breach by Buyer of any covenant or obligation of Buyer in
this Agreement.
6.4 PROCEDURE FOR INDEMNIFICATION-THIRD PARTY CLAIMS
(a) Promptly after receipt by an indemnified party under Section 6.2 or
6.3 ("Indemnified Party") of notice of the commencement of any Proceeding
against it, such Indemnified Party will, if a claim is to be made against an
Indemnifying Party under such Section ("Indemnifying Party"), give notice to the
Indemnifying Party of the commencement of such claim, but the failure to notify
the Indemnifying Party will not relieve the Indemnifying Party of any liability
that it may have to any Indemnified Party, except to the extent that the
Indemnifying Party demonstrates that the defense of such action is materially
prejudiced by the Indemnifying Party's failure to give such notice.
(b) If any Proceeding referred to in Section 6.4(a) is brought against an
Indemnified Party and it gives notice to the Indemnifying Party of the
commencement of such Proceeding, the Indemnifying Party will, unless the claim
only relates to Taxes, be entitled to participate in such Proceeding and, to the
extent that it wishes (unless (i) the Indemnifying Party is also a party to such
Proceeding and the Indemnified Party determines in good faith that joint
representation would be inappropriate, or (ii) the Indemnifying Party fails to
provide reasonable assurance to the Indemnified Party of its financial capacity
to defend such Proceeding and provide indemnification with respect to such
Proceeding), to assume the defense of such Proceeding with counsel reasonably
satisfactory to the Indemnified Party and, after notice from the Indemnifying
Party to the Indemnified Party of its election to assume the defense of such
Proceeding, the Indemnifying Party will not, as long as it diligently conducts
such defense, be liable to the Indemnified Party under this Section 6 for any
fees of other counsel or any other expenses with respect to the defense of such
Proceeding, in each case subsequently incurred by the Indemnified Party in
connection with the defense of such Proceeding, other than reasonable legal fees
incurred by the Indemnified Party due to the Indemnifying Party's reasonable
belief that the Indemnifying Party was not in fact appropriately or diligently
pursuing such defense. If the Indemnifying Party assumes the defense of a
Proceeding, (i) no compromise or settlement of such claims may be effected by
the Indemnifying Party without the Indemnified Party's consent unless (A) there
is no finding or admission of any violation of Legal Requirements or any
violation of the rights of any Person and no effect on any other claims that may
be made against the
29
Indemnified Party, and (B) the sole relief provided is monetary damages that are
paid in full by the Indemnifying Party; and (ii) the Indemnified Party will have
no liability with respect to any compromise or settlement of such claims
effected without its consent. If notice is given to an Indemnifying Party of
the commencement of any Proceeding and the Indemnifying Party does not, within
ten days after the Indemnified Party's notice is given, give notice to the
Indemnified Party of its election to assume the defense of such Proceeding, the
Indemnifying Party will be bound by and will be liable for any and all costs
and/or liabilities in connection with any determination made in such Proceeding
or any action, defense, compromise or settlement effected by the Indemnified
Party.
(c) Notwithstanding the foregoing, if an Indemnified Party determines in
good faith that there is a reasonable probability that a Proceeding may
adversely affect it or its affiliates other than as a result of monetary damages
for which it would be entitled to indemnification under this Agreement, the
Indemnified Party may, by notice to the Indemnifying Party, assume the exclusive
right to defend, compromise, or settle such Proceeding, but the Indemnifying
Party will not be bound by any determination of a Proceeding so defended or any
compromise or settlement effected without its consent.
(d) NFN hereby consents to the non-exclusive jurisdiction of any court in
which a Proceeding is brought against any Indemnified Person for purposes of any
claim that an Indemnified Person may have under this Agreement with respect to
such Proceeding or the matters alleged therein, and agrees that process may be
served on NFN with respect to such a claim anywhere in the world.
6.5 PROCEDURE FOR INDEMNIFICATION -- OTHER CLAIMS
A claim for indemnification for any matter not involving a third-party
claim may be asserted by notice to the party from whom indemnification is
sought.
7. DESIGNATION OF DIRECTORS
From and after the time that the voting rights set forth in Section 6(b) of
the Certificate of Designation relating to the Series B Preferred Stock shall
expire, at each annual meeting of stockholders of the Corporation or at any
other meeting of stockholders called for the purpose of electing members of the
Board of Directors of the Corporation, Metromedia shall have the right to
designate the Applicable Number (as defined below), as of the date of such
meeting, of members of the Board of Directors of NFN; provided, that if at any
time following an election of directors the Applicable Number shall decrease due
to a decrease in the number of shares of capital stock of NFN then owned by
Metromedia, then the term of office of that number of directors previously
elected by Metromedia in excess of the number of directors that Metromedia would
have been entitled to elect had the decreased Applicable Number been in effect
on the date of such previous election, shall IPSO FACTO expire and the specific
individuals whose terms so expire shall be designated by Metromedia or, failing
such designation by Metromedia, by the Chairman of the Board of Directors of
NFN. As used herein, the term "Applicable Number" means, as of any date,
30
(i) 25% of the number of members of the Board of Directors of NFN if as of such
date Metromedia owns beneficially and of record shares of capital stock of NFN
representing not less than 10% of the issued and outstanding voting stock of
NFN, (ii) one member of the Board of Directors if as of such date Metromedia
owns beneficially and of record shares of shares of capital stock of NFN
representing less than 10% but not less than 5% of the issued and outstanding
voting stock of NFN and (iii) no members of the Board of Directors if as of such
date Metromedia owns beneficially and of record shares of capital stock of NFN
representing less than 5% of the issued and outstanding voting stock of NFN.
8. REGISTRATION RIGHTS
8.1 DEFINITIONS
As used in this Article 8, the following terms have the following
respective meanings:
"COMMISSION" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or
any successor federal statute, and the rules and regulations of the Commission
thereunder, all as of the same shall be in effect at the time. References to a
particular section of the Securities Exchange Act of 1934, as amended, shall
include a reference to the comparable section, if any, of any such successor
federal statute.
"HOLDERS" means the Buyers or their Permitted Assigns who are holders of
Registrable Securities.
"MAJORITY HOLDERS" means the Holders of a majority of the Registrable
Securities.
"PERMITTED ASSIGNS" means (i) any "affiliate" (as such term is defined in
Rule 144 under the Securities Act) of any Holder to whom such Holder sells,
transfers, assigns or otherwise disposes of Registrable Securities, (ii) any
other Person to whom any Holder sells, transfers, assigns or otherwise disposes
of Registrable Securities representing at least 75% of such Holder's aggregate
equity interest in NFN, as constituted immediately following the Closing, and
(iii) with respect to any individual, any member of such individual's Family (as
defined in the definition of "Related Person" of Section 1).
The terms "register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"REGISTRATION" means either a "Demand Registration" or a "Piggyback
Registration", as such terms are defined in this Article 8.
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"REGISTRABLE SECURITIES" means (i) the shares of Common Stock issuable upon
conversion of the Series B Preferred Stock, (ii) any shares of Common Stock
owned by Holders and (iii) any Related Registrable Securities. As to any
particular Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (a) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such registration
statement or (b) they shall have been sold pursuant to Rule 144 (or any
successor provision) under the Securities Act, or (c) they shall have been
otherwise transferred, new certificates evidencing them not bearing a legend
restricting further transfer shall have been delivered by NFN and subsequent
public distribution of them shall not, in the opinion of counsel to such Holders
(or in the opinion of counsel to the Company, which opinion is reasonably
satisfactory to such holders), require registration of them under the Securities
Act, or (d) they shall have ceased to be outstanding. All references to
percentages of Registrable Securities shall be calculated based upon the number
of shares of Common Stock represented by the Registrable Securities outstanding
at the time such calculation is made.
"REGISTRATION EXPENSES" means all expenses incident to NFN's performance of
or compliance with Article 8 hereof, including, without limitation, all
registration, filing and NASD fees, all fees and expenses of complying with
securities or blue sky laws, all word processing, duplicating and printing
expenses, messenger and delivery expenses, the fees and disbursements of counsel
for NFN and of its independent public accountants, including the expenses of
"cold comfort" letters required by or incident to such performance and
compliance, any fees and disbursements of underwriters customarily paid by
issuers or sellers of securities (excluding any underwriting discounts or
commissions with respect to the Registrable Securities) and the reasonable fees
and expenses of counsel to the Majority Holders.
"RELATED REGISTRABLE SECURITIES" means any equity securities of NFN issued
or issuable with respect to any of the securities identified in clauses (i)
through (iii) in the definition of Registrable Securities by way of a dividend
or stock split or in connection with a combination of shares, recapitalization,
merger, consolidation or other reorganization of otherwise.
"SECURITIES ACT" means the Securities Act of 1933, or any successor federal
statute, and the rules and regulations of the Commission thereunder, all as
shall be in effect at the time. Reference to a particular section of the
Securities Act of 1933, as amended, shall include a reference to the comparable
section if any, of any such successor federal statute.
32
8.2 DEMAND REGISTRATION.
8.2.1 DEMAND BY MAJORITY HOLDERS. At any time, or from time to time, the
Majority Holders may demand that NFN effect the registration under the
Securities Act of all or part of Holders' Registrable Securities ("Demand
Notice"). Thereupon, NFN shall file a registration statement within thirty (30)
days after the date of the Demand Notice and NFN shall use its best efforts to
effect within (30) days after the date of such filing, the registration under
the Securities Act, including by means of a shelf registration pursuant to Rule
415 under the Securities Act ("Shelf Registration") if so requested in the
Demand Notice (but only if NFN is then eligible to use a Shelf Registration), of
the Holders' Registrable Securities which NFN has been so requested to register
by the Majority Holders to the extent requisite to permit the disposition of the
Registrable Securities so to be registered. All registrations requested
pursuant to this Section 8.2.1 are referred to herein as "Demand Registrations."
Unless the Majority Holders consent to such inclusion, in no event shall any
Demand Registration include securities other than (i) Registrable Securities,
(ii) securities owned by the Persons referred to in Section 5(d) hereof or (iii)
Common Stock of Persons who hold or have rights to receive Common Stock pursuant
to agreements with NFN which are in effect on the date of this Agreement and all
of which are listed and described in Section 8.2.1 of the Disclosure Letter,
which agreements provide for registration rights on the part of such Persons by
reason of the exercise by Holders of the registration rights pursuant to this
Section 8.2.1 (the "Other Eligible Holders"). Notwithstanding anything in this
Section 8.2.1 to the contrary: (i) in no event will NFN be required to effect
more than three (3) Demand Registrations in the aggregate, and never more than
two (2) Demand Registrations within any six (6) month period; (ii) the Majority
Holders may not issue a Demand Notice if NFN had a registration statement
declared effective on behalf of the Holders pursuant to a Demand Registration
within the prior six (6) months; (iii) NFN will not be obligated to effect a
Demand Registration within six (6) months after the effectiveness of a
registration by NFN offering its Common Stock (other than a registration on Form
S-8 with respect to an employee benefit plan of NFN), unless NFN has completed
the sale of not less than 80% of the offering pursuant to such registration; and
(iv) NFN shall not be required to effect a Demand Registration for Common Stock
included in such registrations valued at less than $5,000,000, based upon the
then current market price, or fair market value estimated by NFN's
underwriter(s).
8.2.2 REGISTRATION STATEMENT FORM. At the request of the, Majority
Holders in the Demand Notice, all Demand Registrations of all or part of their
Registrable Securities shall be by means of a Shelf Registration (if NFN is then
eligible to use a Shelf Registration), or on Form S-1 or any similar long-form
registration, or on Forms S-2 or S-3 or other comparable short form
registrations, if permitted by applicable law. After an initial public
offering, NFN shall use its best efforts to qualify for use of short-form
registrations. If NFN files a Shelf Registration, it shall use its best efforts
to keep the Shelf Registration continuously effective until such time as all of
the Registrable Securities shall cease to be Registrable Securities.
33
8.2.3 EFFECTIVE REGISTRATION STATEMENT. A Demand Registration shall not
be deemed to have been effected until such time as a registration statement with
respect thereto has become effective and remained effective in compliance with
the provisions of the Securities Act with respect to the disposition of all
Registrable Securities covered by such registration statement and all of such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof set forth in such
registration statement, except as otherwise provided in this Section 8.2 with
respect to a Shelf Registration.
8.3 PIGGYBACK REGISTRATIONS. Each time NFN proposes to file a
registration statement to register any of its equity securities under the
Securities Act (except for registration on Form S-4 or S-8 or any successor or
similar forms), whether or not for sale for its own account, it will each such
time give prompt written notice to all Holders of its intention to do so and of
such Holders' rights under this Section 8.3. Upon the written request of the
Majority Holders (which request shall specify the amount of Registrable
Securities intended to be disposed of by each Holder) at the earliest possible
date and in any event within 30 days after the receipt of any such notice, NFN
will use its best efforts to effect the registration under the Securities Act of
all Registrable Securities which NFN has been so requested to register by the
Holders. No registration filed or effected under this Section 8.3 ("Piggyback
Registration") shall relieve NFN of its obligation to effect any Demand
Registration. In the case of any Piggyback Registration to be filed or effected
pursuant to this Section 8.3 in connection with a Demand Registration initiated
by Xxxxxxxx or Xxxxxxxxxxx (or their respective Permitted Assigns) pursuant to
Exhibit A attached to this Agreement or Xxxxxxxxxxx'x Executive Employment
Agreement, respectively, the amount of Registrable Securities to be included in
such Piggyback Registration shall not, without the prior written consent of the
Person initiating such registration, exceed 10 % of the Holders' total equity
interest in NFN as of the filing date of such Piggyback Registration.
Notwithstanding anything in this Section 8.3 to the contrary, if a Piggyback
Registration is an underwritten primary registration on behalf of the Company,
and the Company's underwriter or underwriters advise the Company in writing that
the number of shares of Common Stock to be included in such registration by the
Company and the Holders exceeds the number of shares of Common Stock which in
the estimation of such underwriter or underwriters can reasonably be expected to
be sold in such offering, then the Company shall include in such registration
(i) first, the Common Stock which the Company proposes to sell, and (ii) second,
if additional shares of Common Stock can be included in such registration in the
estimation of the Company's underwriter or underwriters, then the shares of
Common Stock which were requested by the Holders (and the Other Eligible
Holders, if any), on a pro rata basis with respect to each such Holder (and
Other Eligible Holder) based upon its respective ownership percentage of shares
of Common Stock to be included in such registration by all of the shares of
Common Stock to be included in such registration by all Holders (and Other
Eligible Holders).
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8.4 REGISTRATION UNDER SECURITIES ACT, ETC.
8.4.1 REGISTRATION EXPENSES. NFN shall pay all Registration Expenses in
connection with any Registration, whether or not it becomes effective, and
whether all, none or some of the Registrable Securities are sold pursuant to the
Registration.
8.4.2 REGISTRATION PROCEDURES. In connection with any registration
statement filed pursuant to this Article 8 NFN will:
(i) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be required by such form or by the instructions
applicable to such form or by the Securities Act or as reasonably requested by
the Majority Holders or as may be necessary to keep such registration statement
effective and to comply with the provisions of the Securities Act with respect
to the disposition of all Registrable Securities covered by such registration
statement until such time as all of such Registrable Securities have been
disposed of;
(ii) furnish to each seller of Registrable Securities covered by
such registration statement, such number of conformed copies of such
registration statement and of each such amendment and supplement thereto (in
each case including all exhibits) and such number of copies of the prospectus
contained in such registration statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, and such other documents, as such seller may reasonably
request;
(iii) use its best efforts (x) to register or qualify all
Registrable Securities and other securities covered by such registration
statement under such other securities or blue sky laws of such States of the
United States of America where an exemption is not available and as the sellers
of Registrable Securities covered by such registration statement shall
reasonably request, (y) to keep such registration or qualification in effect for
so long as such registration statement remains in effect, and (z) to take any
other action which may be reasonably necessary or advisable to enable such
sellers to consummate the disposition in such jurisdictions of the securities to
be sold by such sellers; provided that nothing herein shall require NFN to
submit to general service of process in any such jurisdiction;
(iv) use its best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or approved by such
other federal or state governmental agencies or authorities as may be necessary
in the opinion of counsel to NFN and counsel to the seller or sellers of
Registrable Securities to enable the seller or sellers thereof to dispose of
such Registrable Securities;
(v) use its best efforts to furnish at the effective date of such
registration statement and the date of the closing of the sale of the
Registrable Securities (whether or not such sale is underwritten), to each
seller of Registrable Securities, and each such seller's
35
underwriters, if any, a signed counterpart of (x) an opinion of counsel for NFN,
dated the effective date of such registration statement (or such date of sale,
as applicable) and (y) a "comfort" letter signed by the independent public
accountants who have certified the financial statements included or incorporated
by reference in such registration statement, covering substantially the same
matters with respect to such registration statement (and the prospectus included
therein) and, in the case of the accountants' comfort letter, with respect to
events subsequent to the date of such financial statements, as are customarily
covered in opinions of issuer's counsel and in accountants' comfort letters
delivered to the underwriters in underwritten public offerings of securities
and, in the case of the accountants' comfort letter, such other financial
matters, and, in the case of the legal opinion, such other legal matters, as the
sellers of the Registrable Securities covered by such registration statement, or
the underwriters, may reasonably request;
(vi) notify each Holder at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, upon discovery
that, or upon the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein not misleading, in the light of the circumstances under which
they were made, and at the request of any such Holder promptly prepare and
furnish to such Holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as amended or
supplemented, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made;
(vii) otherwise use its best efforts to comply with all applicable
miles and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earning statement covering the
period of at least twelve months, but not more than eighteen months, beginning
with the first full calendar month after the effective date of such registration
statement, which earning statement shall satisfy the provisions of Section 11(a)
of the Securities Act and Rule 158 promulgated thereunder, and promptly furnish
to each holder of Registrable Securities a copy of any amendment or supplement
to such registration statement or prospectus; and
(viii) use its best efforts to have approved for listing, on the date
such Registration becomes effective, subject to official notice of issuance, the
Common Stock being registered pursuant to the Registration on a national
securities exchange on which shares of Common Stock are already listed, or if
not listed, then on a national securities exchange unless the Common Stock is
then quoted on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ").
8.4.3 REQUESTS FOR INFORMATION. NFN may (i) require each Holder of
Registrable Securities as to which any Registration is being effected to furnish
NFN such information regarding such Holder and the intended method of
distribution of such securities as NFN may from time to time reasonably request
in writing and (ii) require each seller of
36
Registrable Securities to agree to comply with the Securities Act and the
Exchange Act in connection with the registration and distribution of the
Registrable Securities.
8.4.4 DISCONTINUATION OF DISPOSITION. Each Holder agrees by
acquisition of such Registrable Securities that, upon receipt of any notice from
NFN of the happening of any event of the kind described in subdivision (vi) of
Section 8.4.2, such Holder will forthwith discontinue such Holder's disposition
of Registrable Securities pursuant to the Registration until such Holder's
receipt of the copies of the supplemented or amended prospectus contemplated by
subdivision (vi) of Section 8.4.2 and, if so directed by NFN, will deliver to
NFN (at NFN's expense) all copies, other than permanent file copies, then in
such Holder's possession of the prospectus relating to such Registrable
Securities current at the time of receipt of such notice.
8.4.5 UNDERWRITTEN OFFERINGS. If the Majority Holders so elect for a
Demand Registration, the offering shall be an underwritten offering with an
underwriter or underwriters selected by the Majority Holders. If the offering
is other than pursuant to a Demand Registration, NFN and the Majority Holders
will mutually agree as to the selection of an underwriter or underwriters. If
requested by the underwriter(s) for any underwritten offering by Holders of
Registrable Securities pursuant to a Registration, NFN will enter into an
underwriting agreement with such underwriter(s) for such offering, such
agreement to be reasonably satisfactory in substance and form to Holders and the
underwriter(s) and to contain such representations and warranties by NFN and
such other terms as are generally prevailing in agreements of that type,
including, without limitation, indemnities. The Holders of the Registrable
Securities proposed to be sold by such underwriter(s) will reasonably cooperate
with NFN in the negotiation of the underwriting agreement and will enter into
custody agreements and execute powers of attorney as reasonably required by such
underwriter or underwriters. Such Holders of Registrable Securities to be sold
by such underwriters may be parties to such underwriting agreement and may, at
their option, require that any or all of the representations and warranties by,
and the other agreements on the part of, NFN to and for the benefit of such
Holders and that any or all of the conditions precedent to the obligations of
such precedent to the obligations of such Holders. Any such Holder shall not be
required to make any representations or warranties to or agreements with NFN
other than representations, warranties or agreements regarding such Holder's
intended method of distribution or any other representations required by
applicable law.
8.4.6 PREPARATION; REASONABLE INVESTIGATION. In connection with the
preparation and filing of a Registration, NFN (i) shall give the Majority
Holders, the underwriter(s), and counsel designated by the Majority Holders the
reasonable opportunity to participate in the preparation of such registration
statement, each prospectus included therein or filed with the Commission, and
each amendment thereof or supplement thereto, (ii) shall give each of them such
reasonable access to its books and records and such opportunities to discuss the
business of NFN with its officers and the independent public accountants who
have certified its financial statements as shall be necessary, in the opinion of
the Majority Holders and such underwriters or such counsel or accountants, to
conduct
37
a reasonable investigation within the meaning of the Securities Act and (iii)
shall promptly notify the Majority Holders and its counsel of any stop order
issued or threatened by the Commission and take all reasonable actions required
to prevent the entry of such stop order or to remove it if entered.
8.4.7 HOLDBACK; PRIORITY ON REGISTRATIONS. Notwithstanding any
provision to the contrary contained in Article 8 hereof, if a Registration is an
underwritten offering, and the underwriter or underwriter(s) advise NFN in
writing that the number of Registrable Shares requested (and permitted hereby)
to be included in such Registration by the Holders exceeds the number of shares
of Common Stock which in the reasonable and good faith determination of the
underwriter(s) can reasonably be expected to be sold in such offering, then NFN
will include in such Registration the Registrable Shares which the Holders
propose to sell pursuant to such Registration on a pro rata basis, with respect
to each such Holder (and each of the Other Eligible Holders, if any), based upon
its respective percentage ownership of the aggregate number of shares of Common
Stock to be included in such Registration by all shareholders of NFN
participating in such Registration.
8.4.8 LOCK-UP. In the event that NFN delivers to the Holders a written
Notice (the "Lock-up Notice") stating that such notice is being delivered
pursuant to this Section 8.4.8 and that NFN intends to do a primary or secondary
offering of its equity securities (the "Offering"), then the Holders shall not
sell any Registrable Securities in a public offering until the earlier of (i)
the expiration of such period as may be requested by the underwriters; (ii) 180
days after the effective date of the applicable registration statement; and
(iii) the date upon which the Offering is terminated without having been
consummated. In no event may NFN deliver a Lock-up Notice if it has previously
delivered a Lock-up Notice within the preceding one year period.
8.5 INDEMNIFICATION.
8.5.1 INDEMNIFICATION BY NFN. NFN will, and hereby does, indemnify and
hold harmless, each Holder and each other Person who participates as an
underwriter in the offering or sale of such securities and each other Person, if
any, who controls such Holder or any such underwriter within the meaning of the
Securities Act, and their respective directors, officers, partners, employees
and affiliates against any losses, claims, damages or liabilities, joint or
several, to which such Holder or underwriter or any such director, officer,
partner, employee, affiliate or controlling person may become subject under the
Securities Act or otherwise, including, without limitation, the fees and
expenses of legal counsel, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in a registration statement, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission or alleged
omission to state therein 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, and NFN will reimburse such seller or
underwriter and each such director, officer, partner, employee,
38
affiliate and controlling Person for any legal or any other expenses reasonably
incurred by them in connection with investigating or defending any such loss,
claim, damage, liability, action or proceeding; provided, that NFN shall not be
liable in any such case to the extent that any such loss, claim, damage,
liability (or action or proceeding in respect thereof) or expense arises out of
or is based upon any untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, any such preliminary
prospectus, final prospectus, summary prospectus, amendment or supplement in
reliance upon and in conformity with written information furnished to NFN for
use therein by or on behalf of such Holder or underwriter, as the case may be.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Holder or any such director, officer,
employee, affiliate, partner or controlling Person and shall survive the
transfer of such securities by such Holder.
8.5.2 INDEMNIFICATION BY THE HOLDERS. As a condition to including any
Registrable Securities in a Registration, NFN shall have received an undertaking
satisfactory to it from the Holder to indemnify and hold harmless (in the same
manner and to the same extent as set forth in Section 8.5.1) NFN, and each
director of NFN, each officer of NFN and each other Person who controls NFN
within the meaning of the Securities Act, with respect to any statement or
alleged statement in or omission or alleged omission from a prospectus or
summary prospectus contained therein, or any amendment or supplement thereto, if
such statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to NFN for
use therein; PROVIDED, HOWEVER, that the liability of such indemnifying party
under this Section 8.5.2 shall be limited to the amount of proceeds received by
such indemnifying party in the offering giving rise to such liability. Such
indemnity shall remain in full force and effect, regardless of any investigation
made by or on behalf of NFN or any such director, officer or controlling person
and shall survive the transfer of such securities by such seller.
8.5.3 NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified
party or notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subparagraphs of this Section 8.5, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action; PROVIDED, HOWEVER, that the failure of any indemnified party to
give notice as provided herein shall not relieve the indemnifying party of its
obligations under the preceding subparagraphs of this Section 8.5, except to the
extent that the indemnifying party is materially prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party
the indemnified party shall be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified to
the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party for any legal or other expenses subsequently incurred by a
letter in connection with the defense thereof other than reasonable costs of
investigation; provided however, that if the indemnified party reasonably
believes it is advisable for it to be represented by separate counsel because
there exists or may exist a conflict of interest
39
between its interests and those of the indemnifying party with respect to such
claim, or there exist defenses available to such indemnified party which may not
be available to the indemnifying party, or if the indemnifying party shall fail
to assume responsibility for such defense, the indemnified party may retain
counsel satisfactory to it and the indemnifying party shall pay all fees and
expenses of such counsel. No indemnifying party shall be liable for any
settlement of any action or proceeding effected without its written consent,
which consent shall not be unreasonably withheld or delayed. No indemnifying
party shall, without the consent of the indemnified party, consent to entry of
any judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim or
litigation or which requires action other than the payment of money by the
indemnifying party.
8.5.4 CONTRIBUTION. If the indemnification provided for in this Section
8.5 shall for any reason be held by a court to be unavailable to an indemnified
party under Sections 8.5.1 or 8.5.2 hereof in respect of any loss, claim, damage
or liability, or any action or proceeding in respect thereof, then, in lieu of
the amount paid or payable under Sections 8.5.1 or 8.5.2 hereof, the indemnified
party and the indemnifying party under Sections 8.5.1 or 8.5.2 hereof shall
contribute to the aggregate losses, claims, damages and liabilities (including
legal or other expenses reasonably incurred in connection with investigating the
same), (i) in such proportion as is appropriate to reflect the relative fault of
NFN and the Holders covered by the Registration which resulted in such loss,
claim, damage or liability, or action in respect thereof, with respect to the
statements or omissions which resulted in such loss, claim, damage or liability,
or action or proceeding in respect thereof, as well as any other relevant
equitable considerations or (ii) if the allocation provided by clause (i) above
is not permitted by applicable law, in such proportion as shall be appropriate
to reflect the relative benefits received by NFN and such Holders from the
offering of the securities covered by such registration statement. 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. Each Holder's obligations to
contribute as provided in this Section 8.5.4 are several in proportion to the
relative value of their respective Registrable Securities covered by such
registration statement and not joint. In addition, no Person shall be obligated
to contribute hereunder any amounts in payment for any settlement of any action
or claim effected without such Person's consent, which consent shall not be
unreasonably withheld or delayed.
8.5.5 OTHER INDEMNIFICATION. Indemnification and contribution similar to
that specified in the preceding subsections of this Section 8.5 (with
appropriate modifications) shall be given by NFN and each seller of Registrable
Securities with respect to any required registration or other qualification of
securities under any federal or state law or regulation of any governmental
authority other than the Securities Act.
8.5.6 INDEMNIFICATION PAYMENTS. The indemnification and contribution
required by this Section 8.5 shall be made by periodic payments of the amount
thereof
40
during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
8.6 RULE 144 AND RULE 144A. NFN shall take all actions reasonably
necessary (including, without limiting the generality of the foregoing, filing
on a timely basis all reports required to be filed by the Exchange Act) to
enable Holders to sell Registrable Securities without registration under the
Securities Act pursuant to (a) Rule 144 under the Securities Act, as such Rule
may be amended from time to time, (b) Rule 144A under the Securities Act, as
such Rule may be amended from time to time, or (c) any similar rules or
regulations hereafter adopted by the Commission. Upon the request of any
Holder, NFN will deliver to such Holder a written statement as to whether it has
complied with such requirements.
8.7 NOMINEES FOR BENEFICIAL OWNERS. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election in writing delivered to NFN, be
treated as the Holder for purposes of any request or other action by any Holder
or Holders pursuant to this Agreement or any determination of any number of
percentage of shares of Registrable Securities so elects, may require assurances
reasonably satisfactory to it of such owner's beneficial ownership of such
Registrable Securities.
9. GENERAL PROVISIONS
9.1 EXPENSES
Except as otherwise expressly provided in this Agreement, each party to
this Agreement will bear its respective expenses incurred in connection with the
preparation, execution, and performance of this Agreement and the Contemplated
Transactions, including all fees and expenses of agents, representatives and
accountants.
9.2 PUBLIC ANNOUNCEMENTS
Any public announcement or similar publicity with respect to this Agreement
or the Contemplated Transactions will be issued, if at all, at such time and in
such manner as both parties mutually agree.
9.3 CONFIDENTIALITY
Prior to the Closing Date, Buyers and NFN will maintain in confidence, and
will cause the directors, officers, members, employees, agents, and advisors of
Buyer and the Companies to maintain in confidence, any written, oral, or other
information obtained in confidence from another party or a Company in connection
with this Agreement or the Contemplated Transactions, unless (a) such
information is already known to such party or to others not bound by a duty of
confidentiality or such information becomes publicly available through no fault
of such party, (b) the use of such information is necessary or
41
appropriate in making any filing or obtaining any consent or approval required
for the consummation of the Contemplated Transactions, or (c) the furnishing or
use of such information is required by or necessary or appropriate in connection
with legal proceedings.
If the Contemplated Transactions are not consummated, each party will
return or destroy as much of such written information as the other party may
reasonably request.
9.4 NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
members set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
NFN: National Fiber Network, Inc.
00 Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxxxx
Facsimile No.: (000) 000-0000
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxx, Esq. and Xxxxxxx X. Xxxxxxxxx, Esq.
Facsimile No.: (000) 000-0000
Metromedia: Metromedia Company
Xxx Xxxxxxxxxxx Xxxxx
Xxxx Xxxxxxxxxx, XX 00000
Attn: General Counsel
Facsimile No. (000) 000-0000
Subotnick: Xxxxxx Xxxxxxxxx
c/o Metromedia Company
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No. (000) 000-0000
42
Xxxxxx: Xxxxxx Xxxxxx
00 Xxxxxx Xxxx Xxxx
Xxxxxxxx, Xxx Xxxxxx 00000
Facsimile No. (000) 000-0000
Xxxxxx: Xxxxxx Xxxxxx
c/o Metromedia Company
000 Xxxx 00xx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No. (000) 000-0000
Xxxxxxxx: Xxxxxxx Xxxxxxxx
00 Xxxxxxxxx Xxxx
Xxx Xxxxxxxx, Xxx Xxxx 00000
Facsimile No. (000) 000-0000
with a copy to:
Xxxxxxxxx, Xxxxxxx & Chemis, P.C.
000 Xxxx Xxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No. (000) 000-0000
9.5 JURISDICTION; SERVICE OF PROCESS
Any action or proceeding seeking to enforce any provision of, or based on
any right arising out of, this Agreement may be brought against any of the
parties in the courts of the State of New York, County of New York, or, if it
has or can acquire jurisdiction, in the United States District Court for the
Southern District of New York, and each of the parties consents to the
jurisdiction of such courts (and of the appropriate appellate courts) in any
such action or proceeding and waives any objection to venue laid therein.
Process in any action or proceeding referred to in the preceding sentence may be
served on any party anywhere in the world.
9.6 FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
9.7 WAIVER
The rights and remedies of the parties to this Agreement are cumulative and
not alternative. Neither the failure nor any delay by any party in exercising
any right, power,
43
or privilege under this Agreement or the documents referred to in this Agreement
will operate as a waiver of such right, power, or privilege, and no single or
partial exercise of any such right, power, or privilege will preclude any other
or further exercise of such right, power, or privilege or the exercise of any
other right, power, or privilege. To the maximum extent permitted by applicable
law, (a) no claim or right arising out of this Agreement or the documents
referred to in this Agreement can be discharged by one party, in whole or in
part, by a waiver or renunciation of the claim or right unless in writing signed
by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c) no
notice to or demand on one party will be deemed to be a waiver of any obligation
of such party or of the right of the party giving such notice or demand to take
further action without notice or demand as provided in this Agreement or the
documents referred to in this Agreement.
9.8 ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the parties with
respect to its subject matter and constitutes (along with the documents referred
to in this Agreement) a complete and exclusive statement of the terms of the
agreement between the parties with respect to its subject matter. This
Agreement may not be amended except by a written agreement executed by the party
to be charged with the amendment.
9.9 ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this Agreement without the
prior consent of the other parties. Subject to the preceding sentence, this
Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties. Nothing
expressed or referred to in this Agreement will be construed to give any Person
other than the parties to this Agreement any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the parties to this Agreement and their successors
and assigns.
9.10 SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid
or unenforceable only in part or degree will remain in full force and effect to
the extent not held invalid or unenforceable.
9.11 SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement. All words used in this Agreement will be construed to be of such
gender or number as the circumstances require.
44
Unless otherwise expressly provided, the word "including' shall mean "including,
without limitation" and does not limit the preceding words or terms.
9.12 GOVERNING LAW
THIS AGREEMENT WILL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
9.13 COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of which
will be deemed to be an original copy of this Agreement and all of which, when
taken together. will be deemed to constitute one and the same agreement.
45
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above by their respective representatives thereunto
duly authorized.
METROMEDIA COMPANY NATIONAL FIBER NETWORK, INC.
By: _________________________ By: ___________________________
Xxxxxx Xxxxxxxxx Xxxxxxx Xxxxxxxx
Executive Vice President Chief Executive Officer
_____________________________ ___________________________
Xxxxxx Xxxxxxxxx Xxxxxx Xxxxxx
_____________________________ ___________________________
Xxxxxx Xxxxxx Xxxxxxx X. Xxxxxxxx
46
IN WITNESS WHEREOF, the parties have executed and delivered this Agreement
as of the date first written above by their respective representatives thereunto
duly authorized.
METROMEDIA COMPANY NATIONAL FIBER NETWORK, INC.
By: _________________________ By: ___________________________
Xxxxxx Xxxxxxxxx Xxxxxxx Xxxxxxxx
Executive Vice President Chief Executive Officer
_____________________________ ___________________________
Xxxxxx Xxxxxxxxx Xxxxxx Xxxxxx
_____________________________ ___________________________
Xxxxxx Xxxxxx Xxxxxxx X. Xxxxxxxx
47
EXHIBIT A
REGISTRATION RIGHTS OF XXXXXXXX
1. DEFINITIONS. As used in this Exhibit A, the following terms shall
have the following respective meanings:
"COMMISSION" means the Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or
any successor federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. References to a
particular section of the Securities Exchange Act of 1934, as amended, shall
include a reference to the comparable section, if any, of any such successor
federal statute.
"HOLDERS" means Xxxxxxxx or his Permitted Assigns who are holders of
Registrable Securities.
"MAJORITY HOLDERS" means the Holders of a majority of the Registrable
Securities.
"PERMITTED ASSIGNS" means (i) any "affiliate" (as such term is defined in
Rule 144 under the Securities Act) of any Holder to whom such Holder sells,
transfers, assigns or otherwise disposes of Registrable Securities, (ii) any
other Person to whom any Holder sells, transfers, assigns or otherwise disposes
of Registrable Securities representing at least 75% of such Holder's aggregate
equity interest in NFN, as constituted immediately following the Closing, and
(iii) with respect to any individual, any member of such individual's Family (as
defined in the definition of "Related Person" in Section 1 of the Agreement to
which this Exhibit A is attached).
The terms "register", "registered" and "registration" shall refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
"REGISTRATION" means either a "Demand Registration" or a "Piggyback
Registration", as such terms are defined in this Exhibit A.
"REGISTRABLE SECURITIES" means (i) any shares of Common Stock owned by
Holders and (ii) any Related Registrable Securities. As to any particular
Registrable Securities, once issued such securities shall cease to be
Registrable Securities when (a) a registration statement with respect to the
sale of such securities shall have become effective under the Securities Act and
such securities shall have been disposed of in accordance with such registration
statement or (b) they shall have been sold pursuant to Rule 144 (or any
A-1
successor provision) under the Securities Act, or (c) they shall have been
otherwise transferred, new certificates evidencing them not bearing a legend
restricting further transfer shall have been delivered by NFN and subsequent
public distribution of them shall not, in the opinion of counsel to such Holders
(or in the opinion of counsel to the Company, which opinion is reasonably
satisfactory to such holders), require registration of them under the Securities
Act, or (d) they shall have ceased to be outstanding. All references to
percentages of Registrable Securities shall be calculated based upon the number
of shares of Common Stock represented by the Registrable Securities outstanding
at the time such calculation is made.
"REGISTRATION EXPENSES" means all expenses incident to NFN's performance of
or with this Exhibit A, including, without limitation, all registration, filing
and NASD fees, all fees and expenses of complying with securities or blue sky
laws, all word processing, duplicating and printing expenses, messenger and
delivery expenses, the fees and disbursements of counsel for NFN and of its
independent public accountants, including the expenses of "cold comfort" letters
required by or incident to such performance and compliance, any fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities (excluding any underwriting discounts or commissions with respect to
the Registrable Securities) and the reasonable fees and expenses of counsel to
the designated Holders.
"RELATED REGISTRABLE SECURITIES" means any equity securities of NFN issued
or issuable with respect to any of the securities identified in clauses (i) or
(ii) in the definition of Registrable Securities by way of a dividend or stock
split or in connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization of otherwise.
"SECURITIES ACT" means the Securities Act of 1933, or any successor federal
statute, and the rules and regulations of the Commission thereunder, all as
shall be in effect at the time. Reference to a particular section of the
Securities Act of 1933, as amended, shall include a reference to the comparable
section if any, of any such successor federal statute.
All other initially capitalized terms used but not otherwise defined in
this Exhibit A shall have the respective meanings ascribed to such terms in the
Agreement to which this Exhibit A is attached.
2. DEMAND REGISTRATION.
2.1 DEMAND BY MAJORITY HOLDERS. At any time, or from time to time,
the Majority Holders may demand that NFN effect the registration under the
Securities Act of all or part of Holders' Registrable Securities ("Demand
Notice"). Thereupon, NFN shall file a registration statement within (30) days
after the date of the Demand Notice and NFN shall use its best efforts to effect
within (30) days after the date of such filing, the registration under the
Securities Act, including by means of a shelf registration pursuant to Rule 415
under the Securities Act ("Shelf Registration") if so requested in the Demand
A-2
Notice (but only if NFN is then eligible to use a Shelf Registration), of the
Holders' Registrable Securities which NFN has been so requested to register by
the Majority Holders to the extent requisite to permit the disposition of the
Registrable Securities so to be registered. All registrations requested
pursuant to this Section 2.1 are referred to herein as "Demand Registrations."
Unless the Majority Holders consent to such inclusion, in no event shall any
Demand Registration include securities other than (i) Registrable Securities,
(ii) securities owned by the Persons entitled to registration rights pursuant to
Section 8 of the Agreement to which this Exhibit A is attached and (iii) Common
Stock of Persons who hold or have rights to receive Common Stock pursuant to any
agreements with NFN which are in effect on the date of this Agreement and all of
which are listed and described in Section 2.1 of the Disclosure Letter, which
agreements provide for registration rights on the part of such Persons by reason
of the exercise by Holders of the registration rights pursuant to this Section
2.1 (the "Other Eligible Holders"). Notwithstanding anything in this Section
2.1 to the contrary: (i) in no event will NFN be required to effect more than
three (3) Demand Registrations in the aggregate, and never more than two (2)
Demand Registrations within any six (6) month period; (ii) the Majority Holders
may not issue a Demand Notice if NFN had a registration statement declared
effective on behalf of the Holders pursuant to a Demand Registration within the
prior six (6) months; (iii) NFN will not be obligated to effect a Demand
Registration within six (6) months after the effectiveness of a registration by
NFN offering its Common Stock (other than a registration on Form S-8 with
respect to an employee benefit plan of NFN), unless NFN has completed the sale
of not less than 80% of the offering pursuant to such registration; and (iv) NFN
shall not be required to effect a Demand Registration for Common Stock included
in such registrations valued at less than $5,000,000, based upon the then
current market price, or fair market value estimated by NFN's underwriter(s).
2.2 REGISTRATION STATEMENT FORM. At the request of the Majority
Holders in the Demand Notice, all Demand Registrations of all or part of their
Registrable Securities shall be by means of a Shelf Registration (if NFN is then
eligible to use a Shelf Registration), or on Form S-1 or any similar long-form
registration, or on Forms S-2 or S-3 or other comparable short form
registrations, if permitted by applicable law. After an initial public
offering, NFN's shall use its best efforts to qualify for use of short-form
registrations. If NFN files a Shelf Registration, it shall use its best efforts
to keep the Shelf Registration continuously effective until such time as all of
the Registrable Securities shall cease to be Registrable Securities.
2.3 EFFECTIVE REGISTRATION STATEMENT. A Demand Registration shall not
be deemed to have been effected until such time as a registration statement with
respect thereto has become effective and remained effective in compliance with
the provisions of the Securities Act with respect to the disposition of all
Registrable Securities covered by such registration statement and all of such
Registrable Securities have been disposed of in accordance with the intended
methods of disposition by the seller or sellers thereof set forth in such
registration statement, except as otherwise provided in this Section 2 with
respect to a Shelf Registration.
A-3
3. PIGGYBACK REGISTRATIONS. Each time NFN proposes to file a
registration statement to register any of its equity securities under the
Securities Act (except for registration on Form S-4 or S-8 or any successor or
similar forms), whether or not for sale for its own account, it will each such
time give prompt written notice to all Holders of its intention to do so and of
such Holders' rights under this Section 3. Upon the written request of the
Majority Holders (which request shall specify the amount of Registrable
Securities intended to be disposed of by each Holder) at the earliest possible
date and in any event within 30 days after the receipt of any such notice, NFN
will use its best efforts to effect the registration under the Securities Act of
all Registrable Securities which NFN has been so requested to register by the
Holders. No registration filed or effected under this Section 3 ("Piggyback
Registration") shall relieve NFN of its obligation to effect any Demand
Registration. In the case of any Piggyback Registration to be filed or effected
pursuant to this Section 3 in connection with a Demand Registration initiated by
the Buyers (or their Permitted Assigns) pursuant to Section 8.3 of the Agreement
to which this Exhibit A is attached, the amount of Registrable Securities to be
included in such Piggyback Registration shall not, without the prior written
consent of the Person initiating such registration, exceed 10% of the Holders'
total equity interest in NFN as of the filing date of such Piggyback
Registration. Notwithstanding anything in this Section 3 to the contrary, if a
Piggyback Registration is an underwritten primary registration on behalf of the
Company, and the Company's underwriter or underwriters advise the Company in
writing that the number of shares of Common Stock to be included in such
registration by the Company and the Holders exceeds the number of shares of
Common Stock which in the estimation of such underwriter or underwriters can
reasonably be expected to be sold in such offering, then the Company shall
include in such registration (i) first, the Common Stock which the Company
proposes to sell, and (ii) second, if additional shares of Common Stock can be
included in such registration in the estimation of the Company's underwriter or
underwriters, then the shares of Common Stock which were requested by the
Holders (and the Other Eligible Holders, if any), on a pro rata basis with
respect to each such Holder (and Other Eligible Holder) based upon its
respective ownership percentage of shares of Common Stock to be included in such
registration by all of the shares of Common Stock to be included in such
registration by all Holders (and Other Eligible Holders).
4. REGISTRATION UNDER SECURITIES ACT, ETC.
4.1 REGISTRATION EXPENSES. NFN shall pay all Registration Expenses in
connection with any Registration, whether or not it becomes effective, and
whether all, none or some of the Registrable Securities are sold pursuant to the
Registration.
4.2 REGISTRATION PROCEDURES. In connection with any registration
statement filed pursuant to this Exhibit A NFN will:
(i) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be required by such form or by the instructions
applicable to such form or by the Securities Act or as reasonably requested by
the Majority Holders or as may be necessary
A-4
to keep such registration statement effective and to comply with the provisions
of the Securities Act with respect to the disposition of all Registrable
Securities covered by such registration statement until such time as all of such
Registrable Securities have been disposed of;
(ii) furnish to each seller of Registrable Securities covered by
such registration statement, such number of conformed copies of such
registration statement and of each such amendment and supplement thereto (in
each case including all exhibits) and such number of copies of the prospectus
contained in such registration statement (including each preliminary prospectus
and any summary prospectus) and any other prospectus filed under Rule 424 under
the Securities Act, and such other documents, as such seller may reasonably
request;
(iii) use its best efforts (x) to register or qualify all
Registrable Securities and other securities covered by such registration
statement under such other securities or blue sky laws of such States of the
United States of America where an exemption is not available and as the sellers
of Registrable Securities covered by such registration statement shall
reasonably request, (y) to keep such registration or qualification in effect for
so long as such registration statement remains in effect, and (z) to take any
other action which may be reasonably necessary or advisable to enable such
sellers to consummate the disposition in such jurisdictions of the securities to
be sold by such sellers; provided that nothing herein shall require NFN to
submit to general service of process in any such jurisdiction;
(iv) use its best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or approved by such
other federal or state governmental agencies or authorities as may be necessary
in the opinion of counsel to NFN and counsel to the seller or sellers of
Registrable Securities to enable the seller or sellers thereof to dispose of
such Registrable Securities;
(v) use its best efforts to furnish at the effective date of such
registration statement and the date of the closing of the sale of the
Registrable Securities (whether or not such sale is underwritten), to each
seller of Registrable Securities and each such seller's underwriters, if any, a
signed counterpart of (x) an opinion of counsel for NFN, dated the effective
date of such registration statement (or such date of sale, as applicable) and
(y) a "comfort" letter signed by the independent public accountants who have
certified the financial statements included or incorporated by reference in such
registration statement, covering substantially the same matters with respect to
such registration statement (and the prospectus included therein) and, in the
case of the accountants' comfort letter, with respect to events subsequent to
the date of such financial statements, as are customarily covered in opinions of
issuer's counsel and in accountants' comfort letters delivered to the
underwriters in underwritten public offerings of securities and, in the case of
the accountants' comfort letter, such other financial matters, and, in the case
of the legal opinion, such other legal matters, as the sellers of the
Registrable Securities covered by such registration statement, or the
underwriters, may reasonably request;
A-5
(vi) notify each Holder at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, upon discovery
that, or upon the happening of any event as a result of which the prospectus
included in such registration statement, as then in effect, includes an untrue
statement of a material fact or omits to state any material fact required to be
stated therein not misleading, in the light of the circumstances under which
they were made, and at the request of any such Holder promptly prepare and
furnish to such Holder a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as amended or
supplemented, such prospectus shall not include an untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of the
circumstances under which they were made;
(vii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its security
holders, as soon as reasonably practicable, an earning statement covering the
period of at least twelve months, but not more than eighteen months, beginning
with the first full calendar month after the effective date of such registration
statement, which earning statement shall satisfy the provisions of Section 11(a)
of the Securities Act and Rule 158 promulgated thereunder, and promptly furnish
to each holder of Registrable Securities a copy of any amendment or supplement
to such registration statement or prospectus; and
(viii) use its best efforts to have approved for listing, on the date
such Registration becomes effective, subject to official notice of issuance, the
Common Stock being registered pursuant to the Registration on a national
securities exchange on which shares of Common Stock are already listed, or if
not listed, then on a national securities exchange unless the Common Stock is
then quoted on the National Association of Securities Dealers Automated
Quotation System ("NASDAQ").
4.3 REQUESTS FOR INFORMATION. NFN may (i) require each Holder of
Registrable Securities as to which any Registration is being effected to furnish
NFN such information regarding such Holder and the intended method of
distribution of such securities as NFN may from time to time reasonably request
in writing and (ii) require each seller of Registrable Securities to agree to
comply with the Securities Act and the Exchange Act in connection with the
registration and distribution of the Registrable Securities.
4.4 DISCONTINUATION OF DISPOSITION. Each Holder agrees by acquisition of
such Registrable Securities that, upon receipt of any notice from NFN of the
happening of any event of the kind described in subdivision (vi) of Section 4.2,
such Holder will forthwith discontinue such Holder's disposition of Registrable
Securities pursuant to the Registration until such Holder's receipt of the
copies of the supplemented or amended prospectus contemplated by subdivision
(vi) of Section 4.2 and, if so directed by NFN, will deliver to NFN (at NFN's
expense) all copies, other than permanent file copies, then in such Holder's
possession of the prospectus relating to such Registrable Securities current at
the time of receipt of such notice.
A-6
4.5 UNDERWRITTEN OFFERINGS. If the Majority Holders so elect for a Demand
Registration, the offering shall be an underwritten offering with an underwriter
or underwriters selected by the Majority Holders. If the offering is other than
pursuant to a Demand Registration, NFN and the Majority Holders will mutually
agree as to the selection of an underwriter or underwriters. If requested by
the underwriter(s) for any underwritten offering by Holders of Registrable
Securities pursuant to a Registration, NFN will enter into an underwriting
agreement with such underwriter(s) for such offering, such agreement to be
reasonably satisfactory in substance and form to Holders and the underwriter(s)
and to contain such representations and warranties by NFN and such other terms
as are generally prevailing in agreements of that type, including, without
limitation, indemnities. The Holders of the Registrable Securities proposed to
be sold by such underwriter(s) will reasonably cooperate with NFN in the
negotiation of the underwriting agreement and will enter into custody agreements
and execute powers of attorney as reasonably required by such underwriter or
underwriters. Such Holders of Registrable Securities to be sold by such
underwriters may be parties to such underwriting agreement and may, at their
option, require that any or all of the representations and warranties by, and
the other agreements on the part of, NFN to and for the benefit of such Holders
and that any or all of the conditions precedent to the obligations of such
precedent to the obligations of such Holders. Any such Holder is not be
required to make any representations or warranties to or agreements with NFN
other than representations, warranties or agreements regarding such Holder's
intended method of distribution or any other representations required by
applicable law.
4.6 PREPARATION; REASONABLE INVESTIGATION. In connection with the
preparation and filing of a Registration, NFN (i) shall give the Majority
Holders, the underwriter(s), and counsel designated by the Majority Holders the
reasonable opportunity to participate in the preparation of such registration
statement, each prospectus included therein or filed with the Commission, and
each amendment thereof or supplement thereto, (ii) shall give each of them such
reasonable access to its books and records and such opportunities to discuss the
business of NFN with its officers and the independent public accountants who
have certified its financial statements as shall be necessary, in the opinion of
the Majority Holders and such underwriters or such counsel or accountants, to
conduct a reasonable investigation within the meaning of the Securities Act and
(iii) shall promptly notify the Majority Holders and its counsel of any stop
order issued or threatened by the Commission and take all reasonable actions
required to prevent the entry of such stop order or to remove it if entered.
4.7 HOLDBACK; PRIORITY ON REGISTRATIONS. Notwithstanding any provision to
the contrary contained in this Exhibit A, if a Registration is an underwritten
offering, and the underwriter or underwriter(s) advise NFN in writing that the
number of Registrable Shares requested (and permitted hereby) to be included in
such Registration by the Holders exceeds the number of shares of Common Stock
which in the reasonable and good faith determination of the underwriter(s) can
reasonably be expected to be sold in such offering, then NFN will include in
such Registration the Registrable Shares which the Holders propose to sell
pursuant to such Registration on a pro rata basis, with respect to
A-7
each such Holder (and each of the Other Eligible Holders, if any), based upon
its respective percentage ownership of the aggregate number of shares of Common
Stock to be included in such Registration by all shareholders of NFN
participating in such Registration.
4.8 LOCK-UP. In the event that NFN delivers to the Holders a written
Notice (the "Lock-up Notice") stating that such notice is being delivered
pursuant to this Section 4.8 and that NFN intends to do a primary or secondary
offering of its equity securities (the "Offering"), then the Holders shall not
sell any Registrable Securities in a public offering until the earlier of (i)
the expiration of such period as may be requested by the underwriters; (ii) 180
days after the effective date of the applicable registration statement; and
(iii) the date upon which the Offering is terminated without having been
consummated. In no event may NFN deliver a Lock-up Notice if it has previously
delivered a Lock-up Notice within the preceding one year period.
5. INDEMNIFICATION.
5.1 INDEMNIFICATION BY NFN. NFN will, and hereby does, indemnify and hold
harmless, each Holder and each other Person who participates as an underwriter
in the offering or sale of such securities and each other Person, if any, who
controls such Holder or any such underwriter within the meaning of the
Securities Act, and their respective directors, officers, partners, employees
and affiliates against any losses, claims, damages or liabilities, joint or
several, to which such Holder or underwriter or any such director, officer,
partner, employee, affiliate or controlling person may become subject under the
Securities Act or otherwise, including, without limitation, the fees and
expenses of legal counsel, insofar as such losses, claims, damages or
liabilities (or actions or proceedings, whether commenced or threatened, in
respect thereof) arise out of or are based upon any untrue statement or alleged
untrue statement of any material fact contained in a registration statement, any
preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, or any omission or alleged
omission to state therein 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, and NFN will reimburse such seller or
underwriter and each such director, officer, partner, employee, affiliate and
controlling Person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim, damage,
liability, action or proceeding; provided, that NFN shall not be liable in any
such case to the extent that any such loss, claim, damage, liability (or action
or proceeding in respect thereof) or expense arises out of or is based upon any
untrue statement or alleged untrue statement or omission or alleged omission
made in such registration statement, any such preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement in reliance upon and in
conformity with written information held to NFN for use therein by or on behalf
of such Holder or underwriter, as the case may be. Such indemnity shall remain
in full force and effect regardless of any investigation made by or on behalf of
such Holder or any such director, officer, employee, affiliate, partner or
controlling Person and shall survive the transfer of such securities by such
Holder.
A-8
5.2 INDEMNIFICATION BY THE HOLDERS. As a condition to including any
Registrable Securities in a Registration, NFN shall have received an undertaking
satisfactory to it from the Holder to indemnify and hold harmless (in the same
manner and to the same extent as set forth in Section 5.1) NFN, and each
director of NFN, each officer of NFN and each other Person who controls NFN
within the meaning of the Securities Act, with respect to any statement or
alleged statement in or omission or alleged omission from a prospectus or
summary prospectus contained therein, or any amendment or supplement thereto, if
such statement or alleged statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to NFN for
use therein; PROVIDED, HOWEVER, that the liability of such indemnifying party
under this Section 5.2. shall be limited to the amount of proceeds received by
such indemnifying party in the offering giving rise to such liability. Such
indemnity shall remain in full force and effect, regardless of any investigation
made by or on behalf of NFN or any such director, officer or controlling person
and shall survive the transfer of such securities by such seller.
5.3 NOTICES OF CLAIMS, ETC. Promptly after receipt by an indemnified
party or notice of the commencement of any action or proceeding involving a
claim referred to in the preceding subparagraphs of this Section 5, such
indemnified party will, if a claim in respect thereof is to be made against an
indemnifying party, give written notice to the latter of the commencement of
such action; PROVIDED, HOWEVER, that the failure of any indemnified party to
give notice as provided herein stall not relieve the indemnifying party of its
obligations under the preceding subparagraphs of this Section 5, except to the
extent that the indemnifying party is materially prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party
the indemnified party shall be entitled to participate in and to assume the
defense thereof, jointly with any other indemnifying party similarly notified to
the extent that it may wish, with counsel reasonably satisfactory to such
indemnified party, and after notice from the indemnifying party to such
indemnified party for any legal or other expenses subsequently incurred by a
letter in connection with the defense thereof other than reasonable costs of
investigation; provided however, that if the indemnified party reasonably
believes it is advisable for it to be represented by separate counsel because
there exists or may exist a conflict of interest between its interests and those
of the indemnifying party with respect to such claim, or there exist defenses
available to such indemnified party which may not be available to the
indemnifying party, or if the indemnifying party shall fail to assume
responsibility for such defense, the indemnified party may retain counsel
satisfactory to it and the indemnifying party shall pay all fees and expenses of
such counsel. No indemnifying party shall be liable for any settlement of any
action or proceeding effected without its written consent, which consent shall
not be unreasonably withheld or delayed. No indemnifying party shall, without
the consent of the indemnified party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability in respect to such claim or litigation or which requires action
other than the payment of money by the Indemnification party.
A-9
5.4 CONTRIBUTION. If the indemnification provided for in this Section 5
shall for any reason be held by a court to be unavailable to an indemnified
party under Sections 5.1 or 5.2 hereof in respect of any loss, claim, damage or
liability, or any action or proceeding in respect thereof, then, in lieu of the
amount paid or payable under Sections 5.1 or 5.2 hereof, the indemnified party
and the indemnifying party under Sections 5.1 or 5.2 hereof shall contribute to
the aggregate losses, claims, damages and liabilities (including legal or other
expenses reasonably incurred in connection with investigating the same), (i) in
such proportion as is appropriate to reflect the relative fault of NFN and the
Holders covered by the Registration which resulted in such loss, claim, damage
or liability, or action in respect thereof, with respect to the statements or
omissions which resulted in such loss, claim, damage or liability, or action or
proceeding in respect thereof, as well as any other relevant equitable
considerations or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as shall be appropriate to
reflect the relative benefits received by NFN and such Holders from the offering
of the securities covered by such registration statement. 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. Each Holder's obligations to
contribute as provided in this Section 5.4 are several in proportion to the
relative value of their respective Registrable Securities covered by such
registration statement and not joint. In addition, no Person shall be obligated
to contribute hereunder any amounts in payment for any settlement of any action
or claim effected without such Person's consent, which consent shall not be
unreasonably withheld or delayed.
5.5 OTHER INDEMNIFICATION. Indemnification and contribution similar to
that specified in the preceding subsections of this Section 5 (with appropriate
modifications) shall be given by NFN and each seller of Registrable Securities
with respect to any required registration or other qualification of securities
under any federal or state law or regulation of any governmental authority other
than the Securities Act.
5.6 INDEMNIFICATION PAYMENTS. The indemnification and contribution
required by this Section 5 shall be made by periodic payments of the amount
thereof during the course of the investigation or defense, as and when bills are
received or expense, loss, damage or liability is incurred.
6. RULE 144 AND RULE 144A. NFN shall take all actions reasonably
necessary (including, without limiting the generality of the foregoing, filing
on a timely basis all reports required to be filed by the Exchange Act) to
enable Holders to sell Registrable Securities without registration under the
Securities Act pursuant to (a) Rule 144 under the Securities Act, as such Rule
may be amended from time to time, (b) Rule 144A under the Securities Act, as
such Rule may be amended from time to time, or (c) any similar rules or
regulations hereafter adopted by the Commission. Upon the request of any
Holder, NFN will deliver to such Holder a written statement as to whether it has
complied with such requirements.
A-10
7. NOMINEES FOR BENEFICIAL OWNERS. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election in writing delivered to NFN, be
treated as the Holder for purposes of any request or other action by any Holder
or Holders pursuant to this Agreement or any determination of any number of
percentage of shares of Registrable Securities so elects, may require assurances
reasonably satisfactory to it of such owner's beneficial ownership of such
Registrable Securities.
A-11
Schedule 2.3(a)
April 30, 1997
Metromedia Company
Xxxxxx Xxxxxxxxx
Xxxxxx Xxxxxx
Xxxxxx Xxxxxx
c/o Metromedia Company
Xxx Xxxxxxxxxxx Xxxxx
Xxxx Xxxxxxxxxx, Xxx Xxxxxx 00000
Ladies and Gentlemen:
We are counsel to National Fiber Network, Inc. (a Delaware corporation)
(referred to herein as the "Company") in connection with the sale to you of an
aggregate of 8,403.325 shares the "Shares") of the Company's Series B
Convertible Preferred Stock, $.01 par value, pursuant to the terms of an
agreement dated as of the date hereof (the "Agreement"). All capitalized terms
used, but not defined in this letter shall have the meanings set forth in the
Agreement.
We are of the opinion that:
1. The Company is a duly organized and validly existing corporation
in good standing under the laws of the state of Delaware, with perpetual
corporate existence, is duly licensed or qualified to do business and in good
standing in each state in which the conduct of its business requires such
licensing or qualification, and has the corporate power and authority and
governmental licenses to own its properties and to transact the business in
which it is engaged or presently proposes to engage, and having a principal
place of business at 000 X. 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000.
2. The authorized capital stock of the Company consists of
62,000,000 shares of which 60,000,000 shares are designated as common stock, par
value $.01 per share ("Common Stock") and 2,000,000 shares are designated as
preferred stock par value, $.01 per share ("Preferred Stock").
3. All of the outstanding shares of capital stock of National Fiber
Network, of New Jersey, Inc., a New Jersey corporation (the "Subsidiary"), are
owned of record and, to our knowledge, beneficially by the Borrower, free and
clear, to our knowledge, of all liens, claims, limitations on voting rights,
options, security interests and
Metromedia Company
April 30, 1997
Page 2
other encumbrances and are duly authorized, validly issued fully paid and
nonassessable, and have not been issued in violation of any preemptive rights.
4. The Company has the corporate power to execute, deliver and carry
out the terms and provisions of the Agreement and has duly taken or caused to be
taken all necessary corporate action to authorize the execution, delivery and
performance of the Agreement.
5. The Agreement has been duly and validly executed and delivered by
the Company and constitutes valid and binding obligations of the Company as
applicable, enforceable in accordance with their respective terms, subject to
bankruptcy, reorganization and other similar laws affecting the enforcement of
creditors' rights generally, and except that the remedy of specific enforcement
may not be available in all cases.
6. To our knowledge, after due inquiry there is no suit, action or
proceeding pending or threatened against or affecting the Company in any court,
or by any administrative agency or governmental authority which brings into
question the validity of any of the transactions contemplated by the Agreement.
7. The execution and delivery of the Agreement, the consummation of
the transactions contemplated thereby (subject to the conditions provided
therein) and compliance by the Company with any of the provisions thereof will
not conflict with, constitute a default under or violate (i) any of the terms,
conditions or provisions of the certificate of incorporation or by-laws of the
Company, (ii) any of the terms, conditions or provisions of any document,
agreement or other instrument to which either the Company is a party or by which
it is bound of which we are aware, (iii) any New York, Delaware corporate or
federal law or regulation (other than federal and state securities or blue sky
laws, as to which we express no opinion), or (iv) any judgment, writ,
injunctions, decree, order or ruling of any court or governmental authority
binding on the Company of which we are aware. Notwithstanding the foregoing, we
express no opinion concerning Section 6B of the Company's Certificate of
Designation dated April 29, 1997 as the same relates to the Franchise Agreement.
April 30, 1997
Metromedia Company
Xx. Xxxxxx Xxxxxx
Mr. Xxxxxx Xxxxxxxxx
Xx. Xxxxxx Xxxxxx
c/o Metromedia Company
Xxx Xxxxxxxxxxx Xxxxx
Xxxx Xxxxxxxxxx, Xxx Xxxxxx 00000
Ladies and Gentlemen:
We have acted as special counsel to National Fiber Network, Inc., a
Delaware corporation (the "Company"), in connection with the issuance and sale
by the Company to Metromedia Company, Xxxxxx Xxxxxxxxx, Xxxxxx Xxxxxx and Xxxxxx
Xxxxxx (collectively, the "Buyers") of an aggregate of 8,403.325 shares (the
"Shares") of the Company's Series B Convertible Preferred Stock, par value $0.01
per share (the "Series B Preferred Stock"), pursuant to an Agreement dated as of
April 30, 1997 among the Company, the Buyers and Xxxxxxx X. Xxxxxxxx (the
"Agreement").
This opinion is being furnished pursuant to Section 2.3(a)(ii) of the
Agreement. Capitalized terms used and not otherwise defined herein shall have
the meanings ascribed to them in the Agreement.
In connection with this opinion, we have examined originals or copies,
certified or otherwise identified to our satisfaction, of (i) an executed copy
of the Agreement; (ii) the Amended and Restated Certificate of Incorporation of
the Company, as currently in effect (including the Certificate of Amendment
thereof filed with the Secretary of State of the State of Delaware (the
"Secretary of State") on April 28, 1997); (iii) the Certificate of Designation
relating to the Series B Preferred Stock (the "Certificate of Designation")
filed with the Secretary of State on April 29, 1997; (iv) the Bylaws of the
Company, as currently in effect; (v) the certificates representing the Shares;
(vi) the Officers' Certificate dated the date hereof, a copy of which is
attached hereto (the "Officers' Certificate"); and (vii) certain resolutions of
the Board of Directors of the Company relating to, among other things, the
issuance and sale of the Shares and related matters. We have also examined
originals or copies, certified or otherwise identified to our satisfaction, of
such records of the Company and such agreements, certificates of public
officials, certificates of officers or other representatives of the Company and
others and such other documents, certificates and records as we have deemed
necessary or appropriate as a basis for the opinions set forth herein.
In our examination, we have assumed the legal capacity of all natural
persons, the genuineness of all signatures, the authenticity of all documents
submitted to us as
Metromedia Company
Xx. Xxxxxx Xxxxxx
Mr. Xxxxxx Xxxxxxxxx
Xx. Xxxxxx Xxxxxx
April 30, 1997
Page 2
originals, the conformity to original documents of all documents submitted to us
as certified, conformed or photostatic copies and the authenticity of the
originals of such latter documents. In making our examination of documents
executed by parties other than the Company, we have assumed that such parties
had the power, corporate or other, to enter into and perform all obligations
thereunder and have also assumed the due authorization by all requisite action,
corporate or other, and the execution and delivery by such parties of such
documents and that such documents constitute valid and binding obligations of
such parties. As to any facts material to the opinions expressed herein which
we did not independently establish or verify, we have relied, without
independent investigation, upon certificates (including the Officers'
Certificate), statements and representations of officers and other
representatives of the Company and others.
Metromedia Company
Xx. Xxxxxx Xxxxxx
Mr. Xxxxxx Xxxxxxxxx
Xx. Xxxxxx Xxxxxx
April 30, 1997
Page 3
Members of our firm are admitted to the bar in the State of New York,
and we express no opinion as to the laws of any jurisdiction other than the
General Corporation Law of the State of Delaware.
Based upon and subject to the foregoing, we are of the opinion that:
1. When delivered to and paid for by the Buyers in accordance with
the terms of the Agreement, the Shares will be validly issued, fully paid and
non-assessable.
2. The Shares will be convertible into shares of the Company's
Common Stock in accordance with the terms of the Certificate of Designation.
The shares of Common Stock initially issuable upon conversion of the Shares (the
"Conversion Shares") have been duly authorized and reserved for issuance by the
Company upon such conversion and, if and when issued upon such conversion in
accordance with the Certificate of Designation, such Conversion Shares will be
validly issued, fully paid and non-assessable.
This opinion is being furnished to you solely for your benefit in
connection with the closing under the Agreement occurring today and is not to be
used, circulated, quoted or otherwise referred to for any other purpose or
relied upon by any other person for any purpose without our express prior
written consent.
Very truly yours,
FORM OF
MODIFICATION AGREEMENT
Agreement (the "Modification Agreement"), dated September __, 1997 by
and among METROMEDIA COMPANY, a Delaware general partnership with offices at Xxx
Xxxxxxxxxxx Xxxxx, Xxxx Xxxxxxxxxx, Xxx Xxxxxx 00000 ("Metromedia"); XXXXXX
XXXXXXXXX, residing at 000 Xxxx 00xx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000
("Subotnick"); XXXXXX X. XXXXXX, residing at 00 Xxxxxx Xxxx Xxxx, Xxxxxxxx, Xxx
Xxxxxx 00000 ("Xxxxxx"); XXXXXX XXXXXX, residing at 000 Xxxx 00xx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000 ("Xxxxxx"); XXXXXXX X. XXXXXXXX, residing at 00 Xxx Xxxxxx
Xxxx, Xxx Xxxxxxxx, Xxx Xxxx 00000 ("Xxxxxxxx"); and METROMEDIA FIBER NETWORK,
INC. (f/k/a NATIONAL FIBER NETWORK, INC. ("NFN")), a Delaware corporation with
offices at 000 Xxxx 00xx Xxxxxx, Xxxxx 0000, Xxx Xxxx, Xxx Xxxx 00000 ("MFN").
WHEREAS, Metromedia, Subotnick, Wadler, Xxxxxx (each a "Buyer" and
collectively "Buyers"), Xxxxxxxx and MFN entered into an Agreement made as of
April 30, 1997 (the "Existing Agreement") pursuant to which the Buyers
purchased, and MFN sold to the Buyers, the Buyers' Shares (as such term is
defined in the Existing Agreement) for the consideration and other terms set
forth in the Existing Agreement and Metromedia, MFN and Xxxxxxxx entered into
certain agreements and arrangements in connection with the purchase of the
Buyers' Shares;
WHEREAS, MFN has filed a Registration Statement on Form S-1 (the
"Registration Statement") with the Securities and Exchange Commission to
register shares of the Company's Class A Common Stock, par value $0.01 per share
(the "Class A Common Stock") under the Securities Act of 1933, as amended (the
"Offering");
WHEREAS, it is contemplated that simultaneously with the acceleration
of the effectiveness of the Registration Statement by the United States
Securities and Exchange Commission (the "SEC") the Company intends to adopt and
file with the Delaware Secretary of State an Amended and Restated Certificate of
Incorporation, substantially in the form of Exhibit A hereto (the "Restated
Certificate of Incorporation") that will provide for the Company's existing
Common Stock, par value $.01 per share (the "Common Stock") to be reclassified
into Class A Common Stock and the existing Series B Convertible Preferred Stock,
par value $.01 per share that will also be reclassified into Class B Common, par
value $.01 per share (the "Class B Common Stock") (together the
"Reclassifications");
WHEREAS, it is contemplated that immediately following the
Reclassifications, the Company will declare a reverse stock split whereby each
share of outstanding Class A Common Stock and Class B Common Stock will be
converted into a currently unknown number of shares of Class A Common Stock and
Class B Common Stock, respectively (the "Reverse Stock Split"); and
2
WHEREAS, the Buyers, Xxxxxxxx and MFN wish to set forth their
agreement to approve the Restated Certificate of Incorporation and the Reverse
Stock Split in order to facilitate the Offering and to modify certain provisions
of the Existing Agreement as set forth in this Modification Agreement (the
Existing Agreement, as modified by this Modification Agreement is hereinafter
referred to as the "Agreement");
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the Buyers, Xxxxxxxx and MFN hereby agree as follows:
Article I
MODIFICATION OF THE EXISTING AGREEMENT
3. MODIFICATIONS AND AMENDMENTS. Notwithstanding anything to the
contrary contained in the Existing Agreement, as of the date of the declaration
by the SEC of the effectiveness of the Registration Statement (the "Effective
Date") the Existing Agreement is hereby modified and amended as set forth below.
All terms used in this Modification Agreement shall have the same definitions as
set forth in the Existing Agreement unless otherwise indicated herein.
3.1 AMENDMENTS TO PARAGRAPH 4.4 OF THE EXISTING AGREEMENT.
Paragraph 4.4 of the Existing Agreement is hereby replaced in its entirety with
the following:
4.4 INTENTIONALLY OMITTED.
3.2 AMENDMENTS OF PARAGRAPH 5 OF THE EXISTING AGREEMENT.
Paragraph 5 of the Existing Agreement is hereby amended as follows:
1. Paragraph 5(a) is hereby replaced in its entirety with the
following:
5(a). INTENTIONALLY OMITTED.
2. Paragraph 5(b) is hereby replaced in its entirety with the
following:
5(b). INTENTIONALLY OMITTED.
3. Paragraph 5(c) is hereby replaced in its entirety with the
following:
5(c). INTENTIONALLY OMITTED.
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3.3 AMENDMENT OF PARAGRAPH 7 OF THE EXISTING AGREEMENT.
Paragraph 7 of the Existing Agreement is deleted in its entirety.
3.4 AMENDMENT OF PARAGRAPH 8 OF THE EXISTING AGREEMENT.
Paragraph 8.1 is amended by replacing the definition of "MAJORITY HOLDERS" with
the following: "MAJORITY HOLDERS means the majority of holders of the
Registrable Securities."
Article II
AGREEMENT REGARDING VOTING OF SHARES
2.1 AGREEMENT TO VOTE SHARES. The Buyers and Xxxxxxxx covenant
and agree that, to the extent applicable, they shall take all action within
their respective power, including but not limited to, voting favorably as a
director and voting favorably any and all shares held by them, whether
beneficially or by record ownership, of Series B Preferred Stock, Common Stock
and Class A Common Stock to effect the following:
1. the Restated Certificate of Incorporation including the
Reclassifications;
2. the Reverse Stock Split;
2.2 CONSENTS OF STOCKHOLDERS. To the extent permissible by
Section 228(a) of the Delaware General Corporate Law (the "DGCL") and any other
section of the DGCL, the Buyers and Xxxxxxxx shall comply with the requirements
of paragraph 2.1 herein by preparing, signing and delivering to MFN one or more
written consents of stockholder(s) to action taken without a meeting voting in
favor of the items in paragraph 2.1 herein.
2.3 FURTHER ASSURANCES. The Buyers and Xxxxxxxx agree (a) to
furnish upon request to each other such further information, (b) to execute and
deliver to each other documents, and (c) to do such other acts and things, all
as the other party may reasonably request, for the purpose of carrying out the
intent of this Article II and the documents referred to in this Article II.
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Article III
GENERAL PROVISIONS
3.1 HEADINGS. The various headings of this Modification
Agreement are inserted for convenience only and shall not affect the meaning or
interpretation of this Modification Agreement or any provisions hereof.
3.2 EXECUTION IN COUNTERPARTS, ETC. This Modification Agreement
may be executed by the parties hereto in several counterparts, each of which
shall be deemed to be an original and all of which shall constitute together but
one and the same agreement.
3.3 LIMITATION. Except as amended or modified by this
Modification Agreement, all of the terms, covenants and conditions contained in
the Existing Agreement shall remain unamended and shall continue to be, and
shall remain, in full force and effect in accordance with their respective
terms.
3.4 SUCCESSORS AND ASSIGNS. This Modification Agreement shall
be binding upon and inure to the benefit of the parties hereto and their
respective heirs, representatives, successors and assigns.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the date first above written.
METROMEDIA COMPANY METROMEDIA FIBER NETWORK,
INC.
By: ________________________ By: ____________________________
Xxxxxx Xxxxxxxxx Xxxxxxx X. Xxxxxxxx
Executive Vice President Chief Executive Officer
____________________________ _______________________________
Xxxxxx Xxxxxxxxx Xxxxxx X. Xxxxxx
____________________________ ________________________________
Xxxxxx Xxxxxx Xxxxxxx X. Xxxxxxxx
