Exhibit 4.9
WARRANT PURCHASE AGREEMENT
This Warrant Purchase Agreement (this "Agreement") is made as of
April 6, 1999, by and between Rhythms NetConnections, Inc., a Delaware
corporation (the "Company"), and MCI WorldCom Venture Fund, Inc. ("MCI
WorldCom").
RECITAL
MCI WorldCom desires to purchase from the Company, and the Company
desires to sell and issue to MCI WorldCom, a Warrant in substantially the same
form as EXHIBIT A attached hereto and subject to the terms and conditions set
forth herein (the "Warrant"), such Warrant to initially purchase up to 136,996
shares of the Company's Common Stock (the "Common Stock").
NOW, THEREFORE, in consideration of the mutual covenants and agreements
set forth herein and for good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties hereby agree as follows:
1. PURCHASE AND SALE OF THE WARRANT.
1.1 PURCHASE AND SALE OF THE WARRANT. Subject to the terms and
conditions of this Agreement, MCI WorldCom agrees to purchase at the Closing and
the Company agrees to sell and issue to MCI WorldCom at the Closing a Warrant to
purchase shares of Common Stock as set forth by the terms of this Agreement and
the Warrant in substantially the same form as attached hereto as EXHIBIT A at a
purchase price equal to $0.001 times the number of shares that are subject to
the Warrant (the "Purchase Price").
1.2 CLOSING.
(a) The purchase and sale of the Warrant shall occur at the
offices of Xxxxxxx, Xxxxxxx & Xxxxxxxx LLP, 000 Xxxx X Xxxxxx, Xxxxx 0000,
Xxx Xxxxx, Xxxxxxxxxx, at 10:00 a.m. on April 6, 1999, or at such other time
and place as the Company and MCI WorldCom shall mutually agree in writing
(the "Closing").
(b) At the Closing, the Company shall deliver to MCI WorldCom the
Warrant that MCI WorldCom is purchasing against payment by check or wire
transfer of the respective Purchase Price.
2. REPRESENTATIONS AND WARRANTIES OF MCI WORLDCOM. MCI WorldCom hereby
represents and warrants to and for the benefit of the Company, with knowledge
that the Company is relying thereon in entering into this Agreement and issuing
the Warrant to MCI WorldCom, as follows:
2.1 PURCHASE ENTIRELY FOR OWN ACCOUNT. By MCI WorldCom's execution of
this Agreement, MCI WorldCom hereby confirms that the Warrant and the Common
Stock issuable upon exercise of the Warrant (collectively, and also including
any further underlying securities, the "Securities") shall be acquired for
investment for MCI WorldCom's own account,
not as a nominee or agent, and not with a view to the resale or distribution of
any part thereof, and that MCI WorldCom has no present intention of selling,
granting any participation in, or otherwise distributing the same. By executing
this Agreement, MCI WorldCom further represents that MCI WorldCom does not have
any contract, undertaking, agreement or arrangement with any person to sell,
transfer or grant participation to such person or to any third person, with
respect to any of the Securities. MCI WorldCom represents that it has full power
and authority to enter into this Agreement.
2.2 INVESTMENT EXPERIENCE. MCI WorldCom is an investor in securities
of companies in the development stage and acknowledges that it is able to fend
for itself, can bear the economic risk of its investment and has such knowledge
and experience in financial or business matters that it is capable of evaluating
the merits and risks of the investment in the Securities.
2.3 ACCREDITED INVESTOR. MCI WorldCom is an "accredited investor"
within the meaning of SEC Rule 501 of Regulation D, as now in effect.
2.4 RESTRICTED SECURITIES. MCI WorldCom understands that the
Securities it is and shall be purchasing are characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from the Company in a transaction not involving a public offering and
that under such laws and applicable regulations such securities may be resold
without registration under the Securities Act of 1933, as amended (the "Act"),
only in certain limited circumstances. In this connection, MCI WorldCom
represents that it is familiar with Rule 144 promulgated under the Act, as now
in effect, and understands the resale limitations imposed thereby and by the
Act.
2.5 LEGENDS. MCI WorldCom understands that the certificates evidencing
the Securities may bear one or all of the following legends:
(a) The securities evidenced by this certificate have not been
registered under the Securities Act of 1933, as amended (the "Act") or the
securities laws of any state of the United States. The securities evidenced by
this certificate may not be offered, sold or transferred for value directly or
indirectly, in the absence of such registration under the Act and qualification
under applicable state laws, or pursuant to an exemption from registration under
the Act and qualification under applicable state laws, the availability of which
is to be established to the reasonable satisfaction of the Company.
(b) Any legend required by the laws of the State of California,
including any legend required by the California Department of Corporations and
Sections 417 and 418 of the California Corporations Code.
(c) A legend giving notice of Section 4.
3. RESTRICTIONS ON DISPOSITION. Without in any way limiting the
representations set forth in Section 2 above, MCI WorldCom further agrees not to
make any disposition of all or any portion of the Securities unless and until
the transferee has agreed in writing for the benefit of the Company to be bound
by this Section 3, and in addition thereto, one of the following conditions is
satisfied:
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3.1 SECURITIES REGISTERED. There is then in effect a registration
statement under the Act covering such proposed disposition and such disposition
is made in accordance with such registration statement.
3.2 REGISTRATION NOT REQUIRED. MCI WorldCom shall have (i) notified
the Company of the proposed disposition and shall have furnished the Company
with a detailed statement of the circumstances surrounding the proposed
disposition, and (ii) if reasonably requested by the Company, furnished the
Company with an opinion of counsel, reasonably satisfactory to the Company, that
such disposition will not require registration of such securities under the Act.
It is agreed that the Company will not require opinions of counsel for
transactions made pursuant to Rule 144 except in unusual circumstances.
3.3 OTHER PERMITTED TRANSFERS. The disposition is by MCI WorldCom
which is a partnership to a partner of such partnership or a retired partner of
such partnership who retires after the date hereof, or to the estate of any such
partner or retired partner or the transfer by gift, will or intestate succession
of any partner to his spouse or to the siblings, lineal descendants including
adopted children or ancestors of such partner or his spouse, if, prior to such
transfer, the transferee agrees in writing to be subject to the terms hereof to
the same extent as if he were the original party hereunder. Notwithstanding any
of the foregoing, transferability of the Warrant is further restricted by its
terms. No transferee shall be required as a condition to any transfer of
securities by MCI WorldCom, to agree to be bound by this Section 3.3 if the
transferee is acquiring such securities pursuant to a registration statement
under the Act or in a transaction made pursuant to Rule 144.
4. MARKET STAND-OFF AGREEMENT. During the period of duration (not to exceed
180 days) specified by the Company and an underwriter of Common Stock or other
securities of the Company, following the effective date of a registration
statement of the Company filed under the Act, MCI WorldCom shall not, to the
extent requested by the Company and such underwriter, directly or indirectly
sell, offer to sell, contract to sell (including, without limitation, any short
sale), grant any option to purchase or otherwise transfer or dispose of (other
than to transferees or donees who agree to be similarly bound) any securities of
the Company held by it at any time during such period except Common Stock
included in such registration; provided, however, that this Section 4 shall be
applicable only to the first such registration statement of the Company pursuant
to which Common Stock (or other securities) of the Company are to be sold on its
behalf to the public in an underwritten offering, and (b) all officers and
directors of the Company enter into similar agreements. In order to enforce the
foregoing covenant, the Company may impose stop-transfer instructions with
respect to the securities of MCI WorldCom (and the shares or securities of every
other person subject to the foregoing restriction) until the end of such period.
5. GENERAL PROVISIONS.
5.1 CONSTRUCTION. This Agreement shall be governed, construed and
enforced in accordance with the internal laws of the State of Delaware, without
giving effect to its conflicts of laws principles.
5.2 ENTIRE AGREEMENT. This Agreement, together with the agreements and
documents referred to herein, constitute the entire agreement among the parties
hereto with
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respect to the subject matter hereof and supersede all prior and contemporaneous
negotiations, agreements and understandings.
5.3 NOTICES. All payments, notices, requests, demands and other
communications hereunder shall be in writing and shall be deemed to have been
duly given at the earlier of (i) the time of actual delivery or (ii) on the
third business day following the date deposited with the United States Postal
Service, postage prepaid, certified with return receipt requested, to the
parties hereto at the addresses set forth on the signature pages hereto or at
such other address as shall be given in writing by a party to the other parties
hereto.
5.4 SUCCESSORS AND ASSIGNS. This Agreement, and the rights and
obligations of each of the parties hereunder, may not be assigned by MCI
WorldCom without the prior written consent of the Company. Subject to the
foregoing sentence, this Agreement shall inure to the benefit of, and shall be
binding upon, the parties hereto and their respective successors and assigns.
5.5 SEVERABILITY. If any term, covenant or condition of this Agreement
is held to be invalid, void or otherwise unenforceable by any court of competent
jurisdiction, the remainder of this Agreement shall not be affected thereby and
each term, covenant and condition of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
5.6 MODIFICATION. Any term of this Agreement may be amended and the
observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the
written consent of the Company and MCI WorldCom.
5.7 ATTORNEYS' FEES. If any action at law or in equity is necessary to
enforce or interpret the terms of this Agreement, the prevailing party shall be
entitled to an award of its reasonable attorneys' fees, costs and disbursements
in addition to any other relief to which such party may be entitled.
5.8 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement to be
effective as of the date first written above.
COMPANY: RHYTHMS NETCONNECTIONS, INC., a
Delaware corporation
By: /s/ Xxxxxxxxx Xxxxx
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Xxxxxxxxx Xxxxx, President and
Chief Executive Officer
Address: 0000 Xxxxx Xxxxxx Xxxxxxx
Xxxxxxxxx, XX 00000-0000
MCI WORLDCOM: MCI WORLDCOM VENTURE FUND, INC.
By: /s/ Xxxxx Xxxxx
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Its: President
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Address: 0000 Xxxxxxxxxxxx Xxxxxx, X.X.
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Xxxxxxxxxx, X.X. 00000
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[SIGNATURE PAGE TO WARRANT PURCHASE AGREEMENT]
EXHIBIT A
FORM OF WARRANT
THE TRANSFER OF THIS WARRANT IS SUBJECT TO
RESTRICTIONS CONTAINED HEREIN. THIS WARRANT
HAS BEEN ISSUED IN RELIANCE UPON THE
REPRESENTATION OF THE HOLDER THAT IT HAS BEEN
ACQUIRED FOR INVESTMENT PURPOSES AND NOT WITH
A VIEW TOWARD THE RESALE OR OTHER DISTRIBUTION
THEREOF. NEITHER THIS WARRANT NOR THE SHARES
ISSUABLE UPON THE EXERCISE OF THIS WARRANT
HAVE BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933 OR ANY STATE SECURITIES LAWS.
RHYTHMS NETCONNECTIONS INC.
Common Stock Purchase Warrant
To Subscribe for and Purchase April __, 1999
136,996 Shares of Common Stock of
Rhythms NetConnections Inc.
THIS CERTIFIES that, for the per share purchase price equal to the
price per share paid for shares of Common Stock ("Common Stock") of Rhythms
NetConnections Inc., a Delaware corporation (the "Company") in the Company's
initial public offering of such securities (such price as from time to time to
be adjusted as provided herein is called the "Warrant Price"), MCI WorldCom
Venture Fund, Inc. or its registered assigns (the "Holder") is entitled to
subscribe for and purchase from the Company, up to 136,996 shares (subject to
adjustment as provided herein) of fully paid and non-assessable Common Stock,
subject to the provisions and upon the terms and conditions hereinafter set
forth at the Warrant Price, at or prior to 5:00 p.m. Pacific time on April __,
2004 (the "Exercise Period).
This Warrant and any Warrant subsequently issued upon exchange or
transfer hereof are hereinafter collectively called the "Warrant."
Section 1. EXERCISE OF WARRANT. The rights represented by this Warrant
may be exercised by the Holder, in whole or in part (but not as to fractional
shares) at any time or from time to time during the Exercise Period by the
completion of the purchase form attached hereto and by the surrender of this
Warrant (properly endorsed) at the office of the Company as it may designate by
notice in writing to the Holder hereof at the address of the Holder appearing on
the books of the Company, and by payment to the Company of the Warrant Price in
cash or by certified or official bank check, for each share being purchased. (In
addition, see Section 2 below for net issuance provisions.) In the event of any
exercise of the rights represented by this
Warrant, a certificate or certificates for the shares of Common Stock so
purchased, registered in the name of the Holder, or its nominee or other party
designated in the purchase form by the Holder hereof, shall be delivered to the
Holder within thirty (30) business days after the date on which the rights
represented by this Warrant shall have been so exercised; and, unless this
Warrant has expired or has been exercised in full, a new Warrant representing
the number of shares (except a remaining fractional share), if any, with respect
to which this Warrant shall not then have been exercised shall also be issued to
the Holder within such time. The person in whose name any certificate for shares
of Common Stock is issued upon exercise of this Warrant shall for all purposes
be deemed to have become the holder of record of such shares on the date on
which this Warrant was surrendered and payment of the Warrant Price is made,
except that, if the date of such surrender and payment is a date on which the
stock transfer books of the Company are closed, such person shall be deemed to
have become the holder of such shares at the close of business on the next
succeeding date on which the stock transfer books are open. No fractional shares
shall be issued upon exercise of this Warrant and no payment or adjustment shall
be made upon any exercise on account of any cash dividends on the Common Stock
issued upon such exercise. If any fractional interest in a share of Common Stock
would, except for the provision of this Section 1, be delivered upon such
exercise, the Company, in lieu of delivery of a fractional share thereof, shall
pay to the Holder an amount in cash equal to the current market price of such
fractional share as determined in good faith by the Board of Directors of the
Company.
Section 2. NET ISSUANCE.
(a) RIGHT TO CONVERT. In addition to and without limiting the
rights of the Holder under the terms of this Warrant, if the fair market value
of a share of Common Stock is greater than the Warrant Price, in lieu of
exercising this Warrant for cash the Holder shall have the right to convert this
Warrant or any portion thereof (the "Conversion Right") into shares of Common
Stock equal to the value of this Warrant or the portion thereof being canceled
as provided in this Section 2 at any time or from time to time during the
Exercise Period. Upon exercise of the Conversion Right with respect to a
particular number of shares subject to the Warrant (the "Converted Warrant
Shares"), the Company shall deliver to the Holder (without payment by the Holder
of any exercise price or any cash or other consideration) that number of shares
of fully paid and nonassessable Common Stock computed using the following
formula:
X = Y (A - B)
---------
A
Where X = the number of shares of Common Stock to be
delivered to the holder
Y = the number of Converted Warrant Shares
A = the fair market value of one share
of the Company's Common Stock on the
Conversion Date (as defined below)
B = the per share exercise price of
the Warrant (as adjusted to the
Conversion Date)
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The Conversion Right may only be exercised with respect to a whole number of
shares subject to the Warrant. No fractional shares shall be issuable upon
exercise of the Conversion Right, and if the number of shares to be issued
determined in accordance with the foregoing formula is other than a whole
number, the Company shall pay to the Holder an amount in cash equal to the fair
market value of the resulting fractional share on the Conversion Date (as
defined below). Shares issued pursuant to the Conversion Right shall be treated
as if they were issued upon the exercise of the Warrant.
(b) METHOD OF EXERCISE. The Conversion Right may be exercised
by the Holder by the surrender of the Warrant at the principal office of the
Company together with a written statement specifying that the Holder thereby
intends to exercise the Conversion Right and indicating the total number of
shares under the Warrant that the Holder is exercising through the Conversion
Right. Such conversion shall be effective upon receipt by the Company of the
Warrant together with the aforesaid written statement, or on such later date as
is specified therein (the "Conversion Date"). Certificates for the shares
issuable upon exercise of the Conversion Right and, if applicable, a new warrant
evidencing the balance of the shares remaining subject to the Warrant, shall be
issued as of the Conversion Date and shall be delivered to the Holder promptly
following the Conversion Date.
(c) DETERMINATION OF FAIR MARKET VALUE. For purposes of this
Section 2, fair market value of a share of Common Stock on the Conversion Date
shall mean:
(i) If traded on a stock exchange, the fair market
value of the Common Stock shall be deemed to be the average of the closing
selling prices of the Common Stock on the stock exchange determined by the Board
to be the primary market for the Common Stock over the ten (10) trading day
period (or such shorter period immediately following the closing of an initial
public offering) ending on the date prior to the Conversion Date, as such prices
are officially quoted in the composite tape of transactions on such exchange;
(ii) If traded over-the-counter, the fair market
value of the Common Stock shall be deemed to be the average of the closing bid
prices (or, if such information is available, the closing selling prices) of the
Common Stock over the ten (10) trading day period (or such shorter period
immediately following the closing of an initial public offering) ending on the
date prior to the Conversion Date, as such prices are reported by the National
Association of Securities Dealers through its NASDAQ system, any successor
system or any exchange on which it is listed, whichever is applicable; or
(iii) If there is no public market for the Common
Stock, then the fair market value shall be determined by mutual agreement of the
holder of the Warrant and the Company, and if the holder and the Company are
unable to so agree, by an investment banker of national reputation selected by
the Company and reasonably acceptable to the holder of the Warrant.
Section 3. STOCK SPLITS, CONSOLIDATION, MERGER AND SALE. In the event that
before the issuance of the shares of Common Stock into which this Warrant may be
exercised the outstanding shares of Common Stock shall be split, combined or
consolidated, by dividend, reclassification or otherwise, into a greater or
lesser number of shares of Common Stock or any other class or classes of stock,
as appropriate, the Warrant Price in effect immediately prior to
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such combination or consolidation and the number of shares purchasable under
this Warrant shall, concurrently with the effectiveness of such combination or
consolidation, be proportionately adjusted. If there shall be effected any
consolidation or merger of the Company with another corporation, or a sale of
all or substantially all of the Company's assets to another corporation, and if
the holders of Common Stock shall be entitled pursuant to the terms of any such
transaction to receive stock, securities or assets with respect to or in
exchange for Common Stock, then, as a condition of such consolidation, merger or
sale, lawful and adequate provisions shall be made whereby the Holder of this
Warrant shall thereafter have the right to receive, upon the basis and upon the
terms and conditions specified herein and in lieu of the shares of Common Stock
immediately theretofore receivable upon the exercise of such Warrant, such
shares of stock, securities or assets as may be issuable or payable with respect
to or in exchange for a number of outstanding shares of such Common Stock equal
to the number of shares of such Common Stock immediately theretofore so
receivable had such consolidation, merger or sale not taken place, and in any
such case appropriate provisions shall be made with respect to the rights and
interests of the Holder to the end that the provisions hereof shall thereafter
be applicable, as nearly as may be, in relation to any shares of stock,
securities or assets thereafter deliverable upon the exercise of this Warrant.
(a) STOCK TO BE RESERVED. The Company will at all times
reserve and keep available out of its authorized Common Stock, solely for the
purpose of issue upon the exercise of this Warrant as herein provided, such
number of shares of Common Stock as shall then be issuable upon the exercise of
this Warrant.
(b) ISSUE TAX. The issuance of certificates for shares of
Common Stock upon exercise of this Warrant shall be made without charge to the
Holders of this Warrant for any issuance tax in respect thereof provided that
the Company shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any certificate in a
name other than that of the Holder of this Warrant.
(c) CLOSING OF BOOKS. The Company will at no time close its
transfer books against the transfer of the shares of Common Stock issued or
issuable upon the exercise of this Warrant in any manner which interferes with
the timely exercise of this Warrant.
Section 4. NOTICES OF RECORD DATES. In the event of:
(a) any taking by the Company of a record of the holders of
any class of securities for the purpose of determining the holders thereof who
are entitled to receive any dividend or other distribution (other than cash
dividends out of earned surplus), or any right to subscribe for, purchase or
otherwise acquire any shares of stock of any class or any other securities or
property, or to receive any other right, or
(b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
transfer of all or substantially all the assets of the Company to or
consolidation or merger of the Company with or into any other corporation, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
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then and in each such event the Company will give notice to the Holder of this
Warrant specifying (i) the date on which any such record is to be taken for the
purpose of such dividend, distribution or right and stating the amount and
character of such dividend, distribution or right, and (ii) the date on which
any such reorganization, reclassification, recapitalization, transfer,
consolidation, merger, dissolution, liquidation or winding-up is to take place,
and the time, if any is to be fixed, as of which the holders of record of Common
Stock will be entitled to exchange their shares of Common Stock for securities
or other property deliverable upon such reorganization, reclassification,
recapitalization, transfer, consolidation, merger, dissolution, liquidation or
winding-up. Such notice shall be given at least ten (10) days and not more than
ninety (90) days prior to the date therein specified, and such notice shall
state that the action in question or the record date is subject to the
effectiveness of a registration statement under the Securities Act of 1933, as
amended (the "Securities Act") or to a favorable vote of shareholders, if either
is required.
Section 5. NO SHAREHOLDER RIGHTS OR LIABILITIES. This Warrant shall not
entitle the Holder hereof to any voting rights or other rights as a shareholder
of the Company. No provision hereof, in the absence of affirmative action by the
Holder hereof to purchase shares of Common Stock, and no mere enumeration hereon
of the rights or privileges of the Holder hereof, shall give rise to any
liability of such Holder for the Warrant Price or as a shareholder of the
Company, whether such liability is asserted by the Company or by creditors of
the Company.
Section 6. REPRESENTATIONS OF HOLDER. The Holder hereby represents and
acknowledges to the Company that:
(a) this Warrant, the Common Stock issuable upon exercise of
this Warrant and any securities issued with respect to any of them by way of a
stock dividend or stock split or in connection with a recapitalization, merger,
consolidation or other reorganization will be "restricted securities" as such
term is used in the rules and regulations under the Securities Act and that such
securities have not been and may not be registered under the Securities Act or
any state securities law, and that such securities must be held indefinitely
unless registration is effected or transfer can be made pursuant to appropriate
exemptions;
(b) the Holder has read, and fully understands, the terms of
this Warrant set forth on its face and the attachments hereto, including the
restrictions on transfer contained herein;
(c) the Holder is purchasing for investment for its own
account and not with a view to or for sale in connection with any distribution
of this Warrant or the Common Stock of the Company issuable upon exercise of
this Warrant and it has no intention of selling such securities in a public
distribution in violation of the federal securities laws or any applicable state
securities laws; provided that nothing contained herein will prevent Holder from
transferring such securities in compliance with the terms of this Warrant and
the applicable federal and state securities laws;
(d) the Holder is an "accredited investor" within the
meaning of paragraph (a) of Rule 501 of Regulation D promulgated by the
Securities; and
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(e) the Company may affix the following legend (in addition to
any other legend(s), if any, required by applicable state corporate and/or
securities laws) to certificates for shares of Common Stock (or other
securities) issued upon exercise of this Warrant ("Warrant Shares"):
"These securities have not been registered under the
Securities Act of 1933, as amended. They may not be sold,
offered for sale, pledged or hypothecated in the absence of a
registration statement in effect with respect to the
securities under such Act or an opinion of counsel
satisfactory to the Company that such registration is not
required or unless sold pursuant to Rule 144 of such Act."
Section 7. LIMITATIONS ON DISPOSITION.
(a) The Holder of this Warrant, by acceptance hereof, agrees
to comply in all respects with the provisions of this Section 7. Without in any
way limiting the representations set forth above, the Holder of this Warrant
agrees not to make any disposition of this Warrant or any Warrant Shares, unless
and until the transferee has agreed in writing for the benefit of the Company to
be bound by this Section 7 and the other provisions of this Warrant as if such
transferee were the original Holder hereof, provided and to the extent such
provisions are then applicable, and:
(i) There is then in effect a Registration
Statement under the Securities Act covering such proposed disposition and such
disposition is made in accordance with such Registration Statement; or
(ii) (A) the Holder shall have notified the Company
of the proposed disposition and shall have furnished the Company with a detailed
statement of the circumstances surrounding the proposed disposition, and the
Company has given its prior written consent, and (B) if reasonably requested by
the Company, the Holder shall have furnished the Company with an opinion of
counsel, reasonably satisfactory to the Company, that such disposition will not
require registration of the Warrant and/or the Warrant Shares under the Act. It
is agreed that the Company will not require opinions of counsel for transactions
made pursuant to Rule 144 except in unusual circumstances.
(b) Notwithstanding the provisions of paragraph (a) above, (i)
no such Registration Statement, prior consent or opinion of counsel shall be
necessary for a transfer (A) by a Holder which is a partnership to a partner of
such partnership or a retired partner of such partnership who retires after the
date hereof, or to the estate of any such partner or retired partner or to the
transfer by gift, will or intestate succession of any partner to his spouse or
to the siblings, lineal descendants or ancestors of such partner or his spouse,
or (B) to an "affiliate" of the Holder as that term is defined in Rule 405
promulgated by the Securities and Exchange Commission under the Securities Act,
if the transferee agrees in writing to be subject to the terms hereof to the
same extent as if he were an original Holder hereunder, and (ii) no transferee
shall be required, as a condition to any transfer of the Warrant or the Warrant
Shares by the Holder, to agree to be bound by this Section 7, if the transferee
is acquiring the Warrant and/or Warrant Shares pursuant to a Registration
Statement under the Securities Act or in a transaction made pursuant to Rule
144. Each new certificate evidencing the Warrant and/or Warrant Shares so
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transferred shall bear the appropriate restrictive legends set forth in Section
6(f) above, except that such certificate shall not bear such restrictive legend
if, in the opinion of counsel for the Company, such legend is not required in
order to establish or assist in compliance with any provisions of the Securities
Act or any applicable state securities laws.
Section 8. LOST, STOLEN, MUTILATED OR DESTROYED WARRANT. If this Warrant is
lost, stolen, mutilated or destroyed, the Company may, on such terms as to
indemnity or otherwise as it may in its discretion reasonably impose (which
shall, in the case of a mutilated Warrant, include the surrender thereof), issue
a new Warrant of like denomination and tenor as the Warrant so lost, stolen,
mutilated or destroyed. Any such new Warrant shall constitute an original
contractual obligation of the Company, whether or not the allegedly lost,
stolen, mutilated or destroyed Warrant shall be at any time enforceable by
anyone.
Section 9. PRESENTMENT. Prior to due presentment of this Warrant together
with a completed assignment form attached hereto for registration of transfer,
the Company may deem and treat the Holder as the absolute owner of the Warrant,
notwithstanding any notation of ownership or other writing thereon, for the
purpose of any exercise thereof and for all other purposes, and the Company
shall not be affected by any notice to the contrary.
Section 10. NOTICE. Notice or demand pursuant to this Warrant shall be
sufficiently given or made, if sent by first-class mail, postage prepaid,
addressed, if to the Holder of this Warrant, to the Holder at its last known
address as it shall appear in the records of the Company, and if to the Company,
at 0000 Xxxxx Xxxxxx Xxxxxxx, Xxxxxxxxx, Xxxxxxxx 00000, Attention: Secretary.
The Company may alter the address to which communications are to be sent by
giving notice of such change of address in conformity with the provisions of
this Section 10 for the giving of notice.
Section 11. GOVERNING LAW. The validity, interpretation and performance of
this Warrant shall be governed by the laws of the State of Delaware without
regard to principles of conflicts of laws.
Section 12. SUCCESSORS, ASSIGNS. Subject to the restrictions on transfer by
Holder set forth in Section 7 hereof, all the terms and provisions of the
Warrant shall be binding upon and inure to the benefit of and be enforceable by
the respective successors and assigns of the parties hereto.
Section 13. AMENDMENT. This Warrant may be modified, amended or terminated
by a writing signed by the Company and the Holder.
Section 14. SEVERABILITY. Should any part but not the whole of this Warrant
for any reason be declared invalid, such decision shall not affect the validity
of any remaining portion, which remaining portion shall remain in force and
effect as if this Warrant had been executed with the invalid portion thereof
eliminated, and it is hereby declared the intention of the parties hereto that
they would have executed the remaining portion of this Warrant without including
therein any such part which may, for any reason, be hereafter declared invalid.
Section 15. "MARKET STAND-OFF" AGREEMENT. Holder hereby agrees that, during
the period of duration (such period not to exceed 180 days) specified by the
Company and an underwriter of Common Stock or other securities of the Company,
following the effective date of
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a registration statement of the Company filed under the Securities Act of 1933,
as amended, it shall not, to the extent requested by the Company and such
underwriter, directly or indirectly sell, offer to sell, contract to sell
(including, without limitation, any short sale), grant any option to purchase or
otherwise transfer or dispose of (other than to donees who agree to be similarly
bound) any securities of the Company held by it at any time during such period
except Common Stock included in such registration; PROVIDED, HOWEVER, that:
(i) such agreement shall be applicable only to the first two
such registration statements of the Company which cover common stock (or other
securities) to be sold on its behalf to the public in an underwritten offering;
and
(ii) all officers and directors of the Company and all other
persons with registration rights enter into similar agreements.
In order to enforce the foregoing covenant, the Company may impose stop-transfer
instructions with respect to the Common Stock of the Holder (and the shares or
securities of every other person subject to the foregoing restriction) until the
end of such period.
Section 16. NO IMPAIRMENT. The Company will not, by any voluntary action,
avoid or seek to avoid the observance or performance of any of the terms to be
observed or performed hereunder by the Company, but will at all times in good
faith assist in the carrying out of all the provisions of this Warrant and in
the taking of all such action as may be necessary or appropriate in order to
protect the rights of the Holder of this Warrant against impairment.
Section 17. NO RIGHT TO REDEEM. Except as explicitly provided herein, this
Warrant may not be called by the Company.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be duly
executed and delivered on and as of the day and year first above written by one
of its officers thereunto duly authorized.
RHYTHMS NETCONNECTIONS INC.,
a Delaware corporation
Dated: April __, 1999
--------------------------------------
Xxxxxxxxx Xxxxx, President and
Chief Executive Officer
The undersigned Holder agrees and accepts this Warrant and acknowledges
that it has read and confirms each of the representations contained in Section
6.
MCI WORLDCOM VENTURE FUND, INC.
By:
-----------------------------------
Its:
----------------------------------
Address:
-------------------------------------
-------------------------------------
PURCHASE FORM
(To be executed by the Warrant Holder if he desires to exercise the Warrant in
whole or in part)
To: RHYTHMS NETCONNECTIONS INC.
The undersigned, whose Social Security or other identifying
number is _______________, hereby irrevocably elects the right of purchase
represented by the within Warrant for, and to purchase thereunder,
___________________________ shares of Common Stock provided for therein and
tenders payment herewith to the order of
RHYTHMS NETCONNECTIONS INC.
in the amount of
$
------------
The undersigned requests that certificates for such shares be issued as follows:
Name:
---------------------------------------------------------------------------
Address:
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Deliver to:
---------------------------------------------------------------------
Address:
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and, if said number of shares shall not be all the shares purchasable hereunder,
that a new Warrant for the balance remaining of the shares purchasable under the
within Warrant be registered in the name of, and delivered to, the undersigned
at the address stated below:
Address:
------------------------------------------------------
------------------------------------------------------
Dated: ____________, 199__ Signature:
----------------------------------
(Signature must conform in all
respects to the name of the
Warrant Holder as specified on
the face of the Warrant, without
alteration, enlargement or any
change whatsoever)
ASSIGNMENT
(To be executed by the Warrant Holder if he desires to effect a transfer of the
Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and
transfers unto ________________________________, whose Social Security or other
identification number is ________________________ [residing/located] at
____________________________ ____________________ the attached Warrant, and
appoints _____________________________ residing at
__________________________________________________________________ the
undersigned's attorney-in-fact to transfer said Warrant on the books of the
Company, with full power of substitution in the premises.
Dated: ______________, 199__.
In the presence of:
--------------------------------- ---------------------------------
(Signature must conform in all
respects to the name of the
Warrant Holder as specified on
the face of the Warrant, without
alteration, enlargement or any
change whatsoever).
Exhibit A-1
