Exhibit 10.23
EXECUTION COPY
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WARRANT
REGISTRATION RIGHTS AGREEMENT
Dated as of April 8, 0000
Xxxxxxx
XXXXXXX, INC.,
SPECTRUM EQUITY INVESTORS, L.P.,
NEW ENTERPRISE ASSOCIATES VI, LIMITED PARTNERSHIP,
ONSET ENTERPRISE ASSOCIATES II, L.P.,
FBR TECHNOLOGY VENTURE PARTNERS, L.P.,
TORONTO DOMINION CAPITAL (USA) INC.,
GROTECH PARTNERS IV, L.P.,
XXXXXXX X. XXXXXX,
XXXXX XXXXXXXXX
and
XXXXXXX XXXXX & CO.,
XXXXXXX LYNCH, PIERCE, XXXXXX & XXXXX
INCORPORATED,
BEAR, XXXXXXX & CO. INC.,
TD SECURITIES (USA) INC.,
SALOMON BROTHERS INC
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TABLE OF CONTENTS
Page
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Section 1. Definitions......................................................1
Section 2. Registration Rights..............................................7
2.1 (a)Demand Registration...........................................7
(b)Effective Registration........................................8
(c)Selection of Underwriter......................................8
(d)Expenses......................................................9
2.2 (a)Piggy-Back Registration.......................................9
(b)Priority in Piggy-Back Registration..........................10
2.3 Limitations, Conditions and Qualifications to
Obligations Under Registration Covenants........................11
2.4 Restrictions on Sale by the Company and Others..................12
2.5 Rule 144 and Rule 144A..........................................13
2.6 Underwritten Registrations......................................13
Section 3. Transfers.......................................................14
3.1 Generally.......................................................14
3.2 Tag-Along Rights................................................14
3.3 Drag-Along Rights...............................................16
Section 4. Registration Procedures.........................................16
Section 5. Indemnification and Contribution................................23
Section 6. Miscellaneous...................................................27
(a) Remedies........................................................27
(b) No Inconsistent Agreements......................................27
(c) No Piggy-Back on Demand Registrations...........................28
(d) Amendments and Waivers..........................................28
(e) Notices.........................................................28
(f) Successors and Assigns..........................................28
(g) Counterparts....................................................29
(h) GOVERNING LAW...................................................29
(j) Severability....................................................29
(k) Headings........................................................29
(l) Entire Agreement................................................29
(m) Securities Held by the Company or Its Affiliates................29
WARRANT REGISTRATION RIGHTS AGREEMENT
This WARRANT REGISTRATION RIGHTS AGREEMENT (this "Agreement") is
made and entered into as of April 8, 1998, between PATHNET, INC. (the
"Company"), a Delaware corporation, SPECTRUM EQUITY INVESTORS, L.P., NEW
ENTERPRISE ASSOCIATES VI, LIMITED PARTNERSHIP, ONSET ENTERPRISE ASSOCIATES II,
L.P., FBR TECHNOLOGY VENTURE PARTNERS, L.P., TORONTO DOMINION CAPITAL (USA)
INC., GROTECH PARTNERS IV, L.P., XXXXXXX X. XXXXXX and XXXXX XXXXXXXXX (the
"Permitted Holders") and XXXXXXX XXXXX & CO., XXXXXXX LYNCH, PIERCE, XXXXXX &
XXXXX INCORPORATED ("Xxxxxxx Xxxxx"), BEAR, XXXXXXX & CO. INC., TD SECURITIES
(USA) INC. and SALOMON BROTHERS INC (together with Xxxxxxx Xxxxx, the "Initial
Purchasers").
This Agreement is made pursuant to the Purchase Agreement dated as
of April 8, 1998, among the Company and the Initial Purchasers (the "Purchase
Agreement"), with respect to the issue and sale by the Company and the purchase
by the Initial Purchasers, severally, of the respective number of the Company's
Units (the "Units"), each Unit consisting of $1,000 principal amount of the
Company's 12.25% Senior Notes due 2008 (the "Notes") and one warrant (each, a
"Warrant"), each initially entitling the holder thereof to purchase 1.1 shares
of common stock, par value $0.01 per share (the "Common Stock"), of the Company,
set forth opposite such Initial Purchaser's name on Schedule I to the Purchase
Agreement. In order to induce the Initial Purchasers to enter into the Purchase
Agreement, the Company has agreed to provide to the Holders (as defined herein)
the registration rights for the Registrable Securities (as defined herein) set
forth in this Agreement and the Permitted Holders have agreed to provide the
Holders, among other things, the tag-along rights for the Warrants and the
Registrable Securities set forth herein. The execution of this Agreement is a
condition to the obligations of the Initial Purchasers under the Purchase
Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
Section 1. Definitions. As used in this Agreement, the following
defined terms shall have the following meanings:
"Advice" shall have the meaning ascribed to such term in Section 4
hereof.
"Affiliate" shall have the meaning ascribed to such term in the
Indenture.
"Agreement" shall have the meaning ascribed to such term in the
preamble hereto.
"Business Day" shall mean a day that is not a Legal Holiday.
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"Capital Stock" shall mean, with respect to any Person, any and all
shares, interests, partnership interests, participations, rights in or
other equivalents (however designated and whether voting or non-voting)
of, such Person's capital stock, and any rights (other than debt
securities convertible into capital stock), warrants or options
exchangeable for or convertible into such capital stock whether
outstanding on the Issue Date or thereafter issued.
"Change of Control" shall have the meaning ascribed to such term in
the Indenture.
"Company" shall have the meaning ascribed to such term in the
preamble of this Agreement and shall also include the Company's permitted
successors and assigns.
"Common Stock" shall have the meaning ascribed to such term in the
preamble of this Agreement and any other class or series of common equity
equivalent shares of the Company into which such Common Stock may be
reclassified and sold to the public in an Initial Public Equity Offering.
"Convertible Preferred Stock" shall mean the Series Preferred Stock
(as defined in the Indenture) of the Company and any other series of
preferred stock convertible or exchangeable into Common Stock, whether
outstanding on the date hereof or thereafter issued.
"Current Market Value" shall have the meaning ascribed to such term
in the Warrant Agreement.
"Demand Registration" shall have the meaning ascribed to such term
in Section 2.1(a) hereof.
"Drag-Along Right" shall have the meaning ascribed to such term in
Section 3.3 hereof.
"DTC" shall have the meaning ascribed to such term in Section 4(i)
hereof.
"Effectiveness Period" shall have the meaning ascribed to such term
in Section 2.1(a) hereof.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
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"Fair Market Value" shall mean the value of any securities as
determined (without any discount for lack of liquidity, the amount of such
securities proposed to be sold or the fact that such securities held by
any Holder of such security may represent a minority interest in a private
company) by a nationally or regionally recognized independent financial
expert selected by the Company for the determination of such value.
"Holder" shall mean each holder (including the Initial Purchasers)
of any Warrants, Warrant Shares or Registrable Securities, and each of
their successors, assigns and direct and indirect transferees who become
registered owners of such Warrants, Warrant Shares or Registrable
Securities for so long as such Person continues to hold such Warrants,
Warrant Shares or Registrable Securities.
"Included Securities" shall have the meaning ascribed to such term
in Section 2.1(a) hereof.
"Indemnified Person" shall have the meaning ascribed to such term in
Section 5(a).
"Indenture" shall mean the Indenture, dated as of the date hereof,
between the Company and The Bank of New York, Trustee, pursuant to which
the Notes are issued.
"Independent financial expert " shall have the meaning ascribed to
such term in the Indenture.
"Initial Public Equity Offering" shall mean a primary public
offering (whether or not underwritten, but excluding any offering pursuant
to Form S-8 under the Securities Act or any other publicly registered
offering pursuant to the Securities Act pertaining to an issuance of
Common Stock or securities exercisable therefor under any benefit plan,
employee compensation plan, or employee or director stock purchase plan)
of Common Stock pursuant to an effective registration statement under the
Securities Act.
"Initial Purchasers" shall have the meaning ascribed to such term in
the preamble hereof.
"Inspectors" shall have the meaning ascribed to such term in Section
4(m) hereof.
"Legal Holiday" shall mean a Saturday, a Sunday or a day on which
(i) banking institutions in The City of New York are required or
authorized by law or
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other government action to be closed and (ii) the principal U.S.
securities exchange or market, if any, on which any Common Stock is listed
or admitted to trading and the principal U.S. securities exchange or
market, if any, on which the Warrants are listed or admitted to trading
are closed for business.
"Xxxxxxx Xxxxx" shall have the meaning ascribed to such term in the
preamble hereof.
"Notes" shall have the meaning ascribed to such term in the preamble
hereof.
"Participating Holder" shall have the meaning ascribed to such term
in Section 3.2(c).
"Permitted Holder" shall have the meaning ascribed to such term in
the preamble hereof.
"Person" shall mean any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company,
trust, business trust, unincorporated organization or government or any
agency or political subdivision thereof, including any entity that is a
predecessor of any such entity.
"Piggy-Back Registration" shall have the meaning ascribed to such
term in Section 2.2(a) hereof.
"Proposed Purchaser" shall have the meaning ascribed to such term in
Section 3.2(a) hereof.
"Prospectus" shall mean the prospectus included in any Registration
Statement (including, without limitation, any prospectus subject to
completion and a prospectus that includes any information previously
omitted from a prospectus filed as part of an effective registration
statement in reliance upon Rule 430A promulgated under the Securities
Act), as amended or supplemented by any prospectus supplement, with
respect to the terms of the offering of any portion of the Registrable
Securities covered by such Registration Statement, and all other
amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
"Purchase Agreement" shall have the meaning ascribed to such term in
the preamble hereof.
"Registrable Securities" shall mean any of (i) the Common Stock
issued and issuable upon exercise of the Warrants and (ii) any other
securities issued or issuable
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with respect to the Warrants or Warrant Shares by way of stock dividend or
stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or
otherwise. As to any particular Registrable Securities, such securities
shall cease to be Registrable Securities when (a) a registration statement
with respect to the offering of such securities by the holder thereof
shall have been declared effective under the Securities Act and such
securities shall have been disposed of by such holder pursuant to such
registration statement, (b) such securities have been sold to the public
pursuant to, or are eligible (or would have been eligible if the holder of
Warrants had elected cashless exercise of the Warrant or Warrants) for
sale to the public without volume or manner of sale restrictions under,
Rule 144(k) (or any similar provision then in force, but not Rule 144A)
promulgated under the Securities Act, (c) such securities shall have been
otherwise transferred and new certificates for such securities not bearing
a legend restricting further transfer shall have been delivered by the
Company or its transfer agent and subsequent disposition of such
securities shall not require registration or qualification under the
Securities Act or any similar state law then in force or (d) such
securities shall have ceased to be outstanding.
"Registration Expenses" shall mean all expenses incident to the
Company's performance of or compliance with this Agreement, including,
without limitation, all SEC and stock exchange or National Association of
Securities Dealers, Inc. registration and filing fees and expenses, fees
and expenses of compliance with securities or blue sky laws (including,
without limitation, reasonable fees and disbursements of counsel for the
underwriters and the Holders in connection with blue sky qualifications of
the Registrable Securities, such counsel fees not to exceed $5,000 per
registration), rating agency fees, printing expenses, messenger, telephone
and delivery expenses, fees and disbursements of counsel for the Company
and all independent certified public accountants and fees and
disbursements of underwriters customarily paid by issuers or sellers of
securities (but not including underwriting discounts or commissions, fees
of counsel to the Holders or transfer taxes, if any, attributable to the
sale of Subject Equity by Holders of such Subject Equity).
"Registration Statement" shall mean any appropriate registration
statement of the Company filed with the SEC pursuant to the Securities Act
which covers any of the Subject Equity pursuant to the provisions of this
Agreement and all amendments and supplements to any such Registration
Statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all materials
incorporated by reference therein.
"Rule 144" shall mean Rule 144 promulgated under the Securities Act,
as such Rule may be amended from time to time, or any similar rule (other
than Rule 144A) or regulation hereafter adopted by the SEC providing for
offers and sales of securities
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made in compliance therewith resulting in offers and sales by subsequent
holders that are not affiliates of an issuer of such securities being free
of the registration and prospectus delivery requirements of the Securities
Act.
"Rule 144A" shall mean Rule 144A promulgated under the Securities
Act, as such Rule may be amended from time to time, or any similar rule
(other than Rule 144) or regulation hereafter adopted by the SEC.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as amended
from time to time.
"Selling Holder" shall mean a Holder who is selling Subject Equity
or Registrable Securities in accordance with the provisions of Section 2.1
or 2.2, respectively.
"Subject Equity" shall have the meaning ascribed to such term in
Section 2.1(a) hereof.
"Suspension Period" shall have the meaning ascribed to such term in
Section 2.3(a).
"Tag-Along Notice" shall have the meaning ascribed to such term in
Section 3.2(c) hereof.
"Tag-Along Right" shall have the meaning ascribed to such term in
Section 3.2(a) hereof.
"Transfer" shall have the meaning ascribed to such term in Section
3.2(a) hereof.
"Transfer Notice" shall have the meaning ascribed to such term in
Section 3.2(c) hereof.
"Triggering Date" shall mean the date of the consummation of a bona
fide underwritten public offering of Common Stock, as a result of which at
least 20% of the outstanding shares of Common Stock are listed on a U.S.
national securities exchange or the Nasdaq National Market.
"Units" shall have the meaning ascribed to such term in the preamble
of this Agreement.
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"Warrant Agent" shall mean The Bank of New York and any successor
warrant agent for the Warrants pursuant to the Warrant Agreement.
"Warrant Agreement" shall mean the Warrant Agreement dated as of the
date hereof, between the Company and the Warrant Agent, as amended or
supplemented from time to time in accordance with the terms thereof.
"Warrant Shares" shall mean shares of Common Stock issued or
issuable upon exercise of the Warrants at an exercise price of $0.01 per
share or any other securities issued or issuable with respect to the
Warrants by way of stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise.
"Warrants" shall have the meaning ascribed to such term in the
preamble hereof.
Section 2. Registration Rights.
2.1 (a) Demand Registration. After the occurrence of an Exercise
Event (as such term is defined in the Warrant Agreement) and the completion of
an Initial Public Equity Offering, the holders of a number of Warrants, Warrant
Shares and Registrable Securities (collectively, the "Subject Equity")
equivalent to at least a majority of the Warrant Shares subject to the Warrants
originally issued on the Issue Date, from time to time, may make a written
request to the Company to effect one registration (the "Demand Registration")
under the Securities Act of the Subject Equity. Any such request will specify
the number of shares of Subject Equity proposed to be sold and will also specify
the intended method of disposition thereof. Within 10 days after the receipt of
such written request for a Demand Registration, the Company shall notify the
Holders of all Subject Equity that a Demand Registration has been requested.
Within 45 days after receipt by any Holder of Subject Equity of such notice from
the Company, such Holder may request in writing that such Holder's Subject
Equity be included in such Registration Statement and the Company shall include
in such Registration Statement the Subject Equity of such Holder requested to be
so included (the "Included Securities"). Each such request by such other Holders
shall specify the number of Included Securities proposed to be sold and the
intended method of disposition thereof. Furthermore, the Company shall prepare,
file with the SEC and use its best efforts to cause to become effective under
the Securities Act within 150 days of such demand a Registration Statement in
respect of all of the Subject Equity which the Holders request and keep such
registration statement continuously effective until the earlier to occur of (i)
the date that is 180 days after such effectiveness (the "Effectiveness Period"),
(ii) such period of time as all of the Subject Equity included in such
registration statement shall have been sold thereunder and (iii) the Subject
Equity included in such registration becomes fully saleable under paragraph (K)
of Rule 144.
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If a Demand Registration occurs during the "lock up" or "black out"
period (not to exceed 180 days) imposed on the Company pursuant to or in
connection with any underwriting or purchase agreement relating to an
underwritten Rule 144A or registered public offering of Common Stock or
securities convertible into or exchangeable or exercisable for Common Stock, the
Company shall not be required to so notify Holders of Subject Equity and file
such Registration Statement with respect to the Subject Equity which the Holders
request prior to the end of such "lock up" or "black out" period, in which event
the Company will use its best efforts to cause such registration statement to
become effective no later than the later of (i) 150 days after such demand or
(ii) 30 days after the end of such "lock up" or "black out" period. In the event
of any "lock up" or "black out" period or any underwriting or other purchase
agreement, the Company shall so notify the holders of Registrable Securities.
Notwithstanding the foregoing, in lieu of filing and causing to
become effective the Demand Registration, the Company may satisfy its obligation
with respect thereto by making and consummating (or having its designee make and
consummate) an offer to purchase all Subject Equity at a price at least equal to
Current Market Value (as defined in the Warrant Agreement, but without the
inclusion of clause (i)(a) thereof), less any applicable Exercise Price.
(b) Effective Registration. A Registration Statement shall not be
deemed to have been effected as a Demand Registration unless it shall have been
declared effective by the SEC, and the Company has complied in all material
respects with its obligations under this Agreement with respect thereto, no
later than the later of (i) 150 days after the request for a Demand Registration
or (ii) 30 days after the end of any "lock up" or "black out" period described
in Section 2.1(a) hereof; provided, however, that if, after such Registration
Statement has become effective, the offering of Subject Equity pursuant to such
Registration Statement is or becomes the subject of any stop order, injunction
or other order or requirement of the SEC or any similar governmental, judicial
or administrative order or requirement that prevents, restrains or otherwise
limits the sale of Subject Equity pursuant to such Registration Statement, and
such Registration Statement has not become effective within a reasonable time
period thereafter, such Registration Statement shall be deemed not to have been
effected. If (i) the registration requested pursuant to this Section 2.1 shall
be deemed not to have been effected or (ii) the Demand Registration does not
remain effective under the Securities Act until at least the earlier of (A) the
end of the Effectiveness Period or (B) the consummation of the distribution by
the Holders of all of the Subject Equity covered thereby, then such Demand
Registration shall not count towards determining if the Company has satisfied
its obligation to effect a Demand Registration pursuant to this Section 2.1. The
Holders of Subject Equity shall be permitted to withdraw all or any part of the
Registrable Securities from the Demand Registration. Notwithstanding any such
withdrawal by a Holder of Subject Equity, if the Company has complied with all
of its obligations hereunder and has effected a Demand Registration within 150
days after the request for such Demand
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Registration, such withdrawal shall not require the Company to effect an
additional Demand Registration.
(c) Selection of Underwriter. If the Holders so elect, the offering
of such Subject Equity pursuant to such Demand Registration shall be in the form
of an underwritten offering. The Holders making such Demand Registration shall
select one or more nationally recognized firms of investment bankers, who shall
be reasonably acceptable to the Company, to act as the managing underwriter or
underwriters in connection with such offering and shall select any additional
investment bankers and managers to be used in connection with the offering.
(d) Expenses. The Company will pay all Registration Expenses in
connection with the registrations requested pursuant to Section 2.1(a) hereof.
Each Holder of Subject Equity shall pay all underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition of
such Holder's Subject Equity pursuant to a Registration Statement requested
pursuant to this Section 2.1.
2.2 (a) Piggy-Back Registration. If at any time the Company proposes
to file a Registration Statement under the Securities Act with respect to an
offering by the Company for its own account or for the account of any of its
securityholders of any class of its common equity securities (other than (i) a
registration statement on Form S-4 or S-8 (or any substitute form that may be
adopted by the SEC) or any other publicly registered offering pursuant to the
Securities Act pertaining to the issuance of shares of Capital Stock or
securities exercisable therefor under any benefit plan, employee compensation
plan, or employee or director stock purchase plan, (ii) a registration statement
filed in connection with an offer of securities solely to the Company's existing
securityholders or (iii) a Demand Registration), then the Company shall give
written notice of such proposed filing to the Holders of Registrable Securities
as soon as practicable (but in no event fewer than 15 days before the
anticipated filing date or 10 days if the Company is subject to filing reports
under the Exchange Act and able to use Form S-3 under the Securities Act), and
such notice shall offer such Holders the opportunity to register such number of
shares of Registrable Securities as each such Holder may request in writing
within 12 days (or eight days if the Company is subject to filing reports under
the Exchange Act and able to use Form S-3 under the Securities Act) after
receipt of such written notice from the Company (which request shall specify the
Registrable Securities intended to be disposed of by such Selling Holder and the
intended method of distribution thereof) (a "Piggy-Back Registration"). In such
case where the intended method of distribution thereof is on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act, or any similar
rule that may be adopted by the SEC, the Company shall use its best efforts to
keep such Piggy-Back Registration continuously effective under the Securities
Act in the qualifying jurisdictions until at least the earlier of (A) 60 days
after the effective date thereof or (B) the consummation of the distribution by
the Holders of all of the Registrable Securities covered thereby. The Company
shall use its
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reasonable efforts to cause the managing underwriter or underwriters, if any, of
such proposed offering to permit the Registrable Securities requested to be
included in a Piggy-Back Registration to be included on the same terms and
conditions as any similar securities of the Company or any other securityholder
included therein and to permit the sale or other disposition of such Registrable
Securities in accordance with the intended method of distribution thereof. Any
Selling Holder shall have the right to withdraw its request for inclusion of its
Registrable Securities in any Registration Statement pursuant to this Section
2.2 by giving written notice to the Company of its request to withdraw. The
Company may withdraw a Piggy-Back Registration at any time prior to the time it
becomes effective or the Company may elect to delay the registration; provided,
however, that the Company shall give prompt written notice thereof to
participating Selling Holders.
The Company will pay all Registration Expenses in connection with
each registration of Registrable Securities requested pursuant to this Section
2.2, and each Holder of Registrable Securities shall pay all underwriting
discounts and commissions and transfer taxes, if any, relating to the sale or
disposition of such Holder's Registrable Securities pursuant to a Registration
Statement effected pursuant to this Section 2.2.
No registration effected under this Section 2.2, and no failure to
effect a registration under this Section 2.2, shall relieve the Company of its
obligation to effect a registration upon the request of Holders of Registrable
Securities pursuant to Section 2.1 hereof, and no failure to effect a
registration under this Section 2.2 and to complete the sale of securities
registered thereunder in connection therewith shall relieve the Company of any
other obligation under this Agreement.
(b) Priority in Piggy-Back Registration. In a registration pursuant
to Section 2.2 hereof involving an underwritten offering, if the managing
underwriter or underwriters of such underwritten offering shall have informed
the Company and the Selling Holders requesting inclusion in such offering, in
writing, that in such underwriter's or underwriters' reasonable opinion the
total number or type of Registrable Securities which the Company, the Selling
Holders and any other persons desiring to participate in such registration
intend to include in such offering is such as to materially and adversely affect
the success of such offering, including the price at which such securities can
be sold, then the Company shall be required to include in such registration only
the amount of securities which it is so advised should be included in such
registration. In such event, securities shall be registered in such offering in
the following order of priority: (i) first, the securities which the Company
proposes to register (a) in the Initial Public Equity Offering or (b) pursuant
to an exercise of "demand" registration rights pursuant to a contractual
commitment of the Company and (ii) second, provided that no securities sought to
be included by the Company or any such Person under the immediately preceding
clause (i) have been excluded from such registration, securities which have been
requested to be included in such registration by the Company (other than those
covered by clause (i)) and by the Holders of Registrable
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Securities pursuant to this Agreement, and the securities of other Persons
entitled to exercise "piggy-back" registration rights pursuant to contractual
commitments of the Company (pro rata based on the amount of securities sought to
be registered by the Company and such Persons).
If, as a result of the provisions of this Section 2.2(b), any
Selling Holder shall not be entitled to include all Registrable Securities in a
Piggy-Back Registration that such Selling Holder has requested to be included,
such Selling Holder may elect to withdraw his request to include Registrable
Securities in such registration.
2.3 Limitations, Conditions and Qualifications to Obligations Under
Registration Covenants. The obligations of the Company set forth in Sections 2.1
and 2.2 hereof are subject to each of the following limitations, conditions and
qualifications:
(a) The Company may postpone the filing of, or suspend the
effectiveness of, any registration statement or amendment thereto, suspend
the use of any Prospectus and shall not be required to amend or supplement
the Registration Statement, any related Prospectus or any document
incorporated therein by reference (other than an effective registration
statement being used for an underwritten offering) in the event that, and
for a period (a "Suspension Period") not to exceed an aggregate of 60
days. A Suspension Period used in respect of Sections 2.1 and 2.2 may be
effected only if (i) an event or circumstance occurs and is continuing as
a result of which the registration statement, any related prospectus or
any document incorporated therein by reference as then amended or
supplemented or proposed to be filed would, in the Company's good faith
judgement, contain an untrue statement of a material fact or omit to state
a material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading, and
(ii) (A) the Company determines in its good faith judgement that the
disclosure of such an event at such time would have a material adverse
effect on the business, operations or prospects of the Company or (B) the
disclosure otherwise relates to a material business transaction which has
not yet been publicly disclosed; provided that the Effectiveness Period
shall be extended by the number of days in any Suspension Period; provided
further that the Company shall not be entitled to the postponement or
suspension more than once in any 12-month period; provided further that
the Company may suspend the effectiveness for a period not in excess of
five Business Days to allow for the updating of the financial statements
included in a Registration Statement to the extent required by law, not to
exceed 45 days in the aggregate in any 12-month period. If the Company
shall so postpone the filing of a Registration Statement it shall, as
promptly as possible, deliver a certificate signed by the chief executive
officer of the Company to the Selling Holders as to such determination,
and the Selling Holders shall (1) have the right, in the case of a
postponement of the filing or effectiveness of a Registration Statement,
upon the affirmative vote of the Holders
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of not less than a majority of the Subject Equity to be included in such
Registration Statement, to withdraw the request for registration by giving
written notice to the Company within 10 days after receipt of such notice
or (2) in the case of a suspension of the right to make sales, receive an
extension of the registration period equal to the number of days of the
suspension. Any Demand Registration as to which the withdrawal election
referred to in the preceding sentence has been effected shall not be
counted for purposes of the Demand Registration the Company is required to
effect pursuant to Section 2.1 hereof.
(b) The Company's obligations under this Agreement shall be subject
to the obligations of the Selling Holders, which the Selling Holders
acknowledge, to furnish all information and materials and to take any and
all actions as may be required under applicable federal and state
securities laws and regulations to permit the Company to comply with such
laws and regulations and all applicable requirements of the SEC and to
obtain any acceleration of the effective date of such Registration
Statement.
2.4 Restrictions on Sale by the Company and Others. The Company
covenants and agrees that (i) it shall not, and that it shall not cause or
permit any of its subsidiaries to, effect any public sale or public distribution
of any securities of the same class as any of the Warrants or Registrable
Securities or any securities convertible into or exchangeable or exercisable for
such securities (or any option or other right for such securities) during the
30-day period prior to, and during the 180-day period beginning on, the
commencement of any underwritten offering of Warrants or Registrable Securities
pursuant to a Demand Registration which has been requested pursuant to this
Agreement, or a Piggy-Back Registration which has been scheduled, prior to the
Company or any of its subsidiaries publically announcing its intention to effect
any such public sale or public distribution; (ii) the Company will not, and the
Company will not cause or permit any subsidiary of the Company to, after the
date hereof, enter into any agreement or contract that conflicts with or limits
or prohibits the full and timely exercise by the Holders of Warrants or
Registrable Securities of the rights herein to request a Demand Registration or
to join in any Piggy-Back Registration subject to the other terms and provisions
hereof; and (iii) upon request of the Holders of not less than a majority of the
Warrants or Registrable Securities to be included in such Registration Statement
or any underwriter, it shall use its reasonable best efforts to secure the
written agreement of each of its officers and directors to not effect any public
sale or public distribution of any securities of the same class as the Warrants
or Registrable Securities (or any securities convertible into or exchangeable or
exercisable for an such securities) or any option or other right for such
securities during the period described in clause (i) of this Section 2.4.
2.5 Rule 144 and Rule 144A. While any Warrants or Registrable
Securities remain outstanding, the Company covenants that it shall file the
reports required to be filed by it under the Exchange Act and the rules,
regulations and policies adopted by the SEC
13
thereunder in a timely manner and in accordance with the requirements of the
Exchange Act. If at any time the Company is not required to file such reports,
it will distribute to each Holder or beneficial owner of Warrants that are
"restricted securities" within the meaning of Rule 144 and are not saleable in
full under paragraph (k) of Rule 144 or Registrable Securities such information
as is necessary to permit sales pursuant to Rule 144A under the Securities Act.
The Company further covenants that it will take such further action as any
Holder of Warrants or Registrable Securities may reasonably request, all to the
extent required from time to time to enable such Holder to sell Warrants or
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144(k) and Rule 144A under the
Securities Act, as such Rules may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the SEC. Upon the request of any
Holder of Warrants or Registrable Securities, the Company will in a timely
manner deliver to such Holder a written statement as to whether it has complied
with such information requirements.
2.6 Underwritten Registrations. No Holder of Registrable Securities
may participate in any underwritten registration pursuant to a Registration
Statement filed under this Agreement unless such Holder (a) agrees to (i) sell
such Holder's Registrable Securities on the basis provided in and in compliance
with any underwriting arrangements approved by the Holders of not less than a
majority of the Registrable Securities to be sold thereunder and (ii) comply
with Rules 101, 102 and 104 of Regulation M under the Exchange Act and (b)
completes and executes all questionnaires, powers of attorney, indemnities,
underwriting agreements and other documents reasonably required under the terms
of such underwriting arrangements.
Each Holder of Warrants and Registrable Securities whose Warrants
and Registrable Securities are covered by a Registration Statement filed
pursuant to Sections 2.1 and 2.2 and are to be sold thereunder agrees, if and to
the extent reasonably requested by the managing underwriter or underwriters with
respect to an underwritten public offering (including any underwritten public
offering with respect to which registration rights are not available to holders
of the Warrants), not to effect any public sale or distribution of Warrants and
Registrable Securities or of securities of the Company of the same class as any
securities included in such Registration Statement, including a sale pursuant to
Rule 144 (except as part of such underwritten offering), during the 30-day
period prior to, and during the 180-day period beginning on, the closing date of
each underwritten offering made pursuant to such Registration Statement, to the
extent timely notified in writing by the Company or such managing underwriter or
underwriters.
The provisions of the foregoing paragraph shall not apply to any
Holders of Warrants and Registrable Securities if such Holder is prevented by
applicable statute or regulation from entering into any such agreement;
provided, however, that any such Holder shall undertake, in its request to
participate in any such underwritten offering, not to effect
14
any public sale or distribution of any Warrants and Registrable Securities
commencing on the date of sale of such Warrants and Registrable Securities
unless it has provided 45 days' prior written notice of such sale or
distribution to the managing underwriter or underwriters.
Section 3. Transfers.
3.1 Generally. All Subject Equity at any time and from time to time
outstanding shall be held subject to the conditions and restrictions set forth
in this Section 3. All shares of Capital Stock now or hereafter held by the
Permitted Holders shall be held subject to the conditions and restrictions set
forth in this Section 3. Each Holder of Subject Equity and the Permitted Holders
by executing this Agreement or by accepting a certificate representing Capital
Stock or other indicia of ownership therefor from the Company agree with the
Company and with each other stockholder to such conditions and restrictions.
3.2 Tag-Along Rights. (a) Prior to the Triggering Date, each of the
Holders of Subject Equity shall have the right (the "Tag-Along Right") to
require the Proposed Purchaser (as defined below) to purchase from each of them
all Subject Equity owned by such Holder in the event of any proposed direct or
indirect sale or other disposition (collectively, a "Transfer") of Common Stock
or Convertible Preferred Stock (whether now or hereafter issued) to any Person
or Persons (such other Person or Persons being hereinafter referred to as the
"Proposed Purchaser") by any Permitted Holder or Permitted Holders or any of
their Affiliates in any transaction or a series of related transactions
resulting in a Change of Control; provided that no such Tag-Along Right shall
exist as a result of sales pursuant to one or more underwritten offerings
registered under the Securities Act which result in a Change of Control.
(b) Any Subject Equity purchased from the Participating Holders
pursuant to this Section 3.2 shall be paid for in the same type of consideration
and at the same price per share of Common Stock and upon the same terms and
conditions of such proposed Transfer of Common Stock by any Permitted Holder or
any of its Affiliates; provided that the price per Warrant to be paid by the
Proposed Purchaser shall be less the aggregate Exercise Price of such Warrant.
If the Subject Equity to be purchased from the Permitted Holders or the
Participating Holders includes securities or property other than Common Stock,
the price to be paid for such securities or property shall be the same price per
share or other denomination paid by the Proposed Purchaser for like securities
purchased from any Permitted Holder or any of its Affiliates or, if like
securities are not purchased from any Permitted Holder or any of its Affiliates,
the Fair Market Value of such securities determined by an independent financial
expert selected by the Company.
(c) Each Permitted Holder shall notify, or cause to be notified,
each Holder of Subject Equity in writing (a "Transfer Notice") of each such
proposed Transfer at least 30 days prior to the date thereof. Such notice shall
set forth: (a) the name and address
15
of the Proposed Purchaser and the number of shares of Common Stock and other
securities, if any, proposed to be transferred, (b) the proposed amount of
consideration and terms and conditions of payment offered by such Proposed
Purchaser (if the proposed consideration is not cash, the Transfer Notice shall
describe the terms of the proposed consideration) and (c) that either the
Proposed Purchaser has been informed of the "Tag-Along Right" and has agreed to
purchase Subject Equity in accordance with the terms hereof or that the
Permitted Holder or any of its Affiliates shall make such purchase. The
Tag-Along Right may be exercised by any Holder of Subject Equity (a
"Participating Holder") by delivery of a written notice to the Company and the
Permitted Holder that gave the Transfer Notice ("Tag-Along Notice"), within 10
days following such Holder's receipt of the Transfer Notice, indicating its
election to exercise the Tag-Along Right. The Tag-Along Notice shall state the
amount of Subject Equity that such Holder proposes to include in such Transfer
to the Proposed Purchaser. Failure by any Holder to provide a Tag-Along Notice
within the 10-day notice period shall be deemed to constitute an election by
such Holder not to exercise its Tag-Along Right. The closing with respect to any
sale to a Proposed Purchaser pursuant to this Section shall be held at the time
and place specified in the Transfer Notice but in any event within 60 days of
the date such Transfer Notice is given; provided that if through the exercise of
reasonable efforts the Company is unable to cause such transaction to close
within 60 days, such period may be extended for such reasonable period of time
as may be necessary to close such transaction. Consummation of the sale of
Common Stock or Convertible Preferred Stock by any Permitted Holder or any of
its Affiliates to a Proposed Purchaser shall be conditioned upon consummation of
the sale by each participating Holder to such Proposed Purchaser (or the
Permitted Holder) of the Subject Equity entitled to be transferred as described
above, if any.
(d) [reserved]
(e) If the Proposed Purchaser does not purchase the Subject Equity
entitled to be transferred as described in this Section 3.2 on the same terms
and conditions as purchased from the Permitted Holders or any of their
Affiliates, then the Permitted Holders or their Affiliates shall purchase such
Subject Equity if the Transfer occurs. If any Subject Equity shall be sold by a
Holder pursuant to this Section 3.2 upon the occurrence of a Change of Control
triggered by the sale of Common Stock by a Permitted Holder, then the other
Permitted Holders shall have the right to purchase up to 50% of such Subject
Equity.
(f) If at the end of 60 days following the date on which a Transfer
Notice was given, or as otherwise extended pursuant to the provisions of Section
3.2(a), the sale of Common Stock by the Permitted Holders or their Affiliates
and the sale of the Subject Equity entitled to be transferred as provided above
have not been completed in accordance with the terms of the Proposed Purchaser's
offer, all certificates representing such Subject Equity shall be returned to
the Participating Holders, and all the restrictions on Transfer contained
16
in this Agreement with respect to Common Stock owned by the Permitted Holders
and their Affiliates shall remain in effect.
3.3 Drag-Along Rights. If at any time prior to the Triggering Date,
one or more Permitted Holders or any of their respective Affiliates determines
to sell all of the Capital Stock of the Company owned by them to a Person other
than a Permitted Holder or its Affiliate in a transaction resulting in a Change
of Control, the transferring Permitted Holder or Permitted Holders (whether
directly or through an Affiliate) shall have the right (the "Drag- Along Right")
to require the Holders of Subject Equity to sell such Subject Equity to such
transferee; provided that (i) the consideration to be received by the Holders of
Subject Equity shall be the same type of consideration received by the Permitted
Holders and their Affiliates and, in any event, shall be cash or freely
transferable marketable securities, and (ii) after giving effect to such
transaction, the Permitted Holder or Permitted Holders making the transfers and
their Affiliates shall not own, directly or indirectly, any Capital Stock or
rights to purchase Capital Stock of the Company (excluding successors for
purposes of this section 3.3). Any Warrants or Registrable Securities, or both,
purchased from the Holders thereof pursuant to this Section 3.3 shall be paid
for at the same price per share of Common Stock and upon the same terms and
conditions as such proposed transfer of Common Stock by the Permitted Holders
and their Affiliates. The price per Warrant to be paid by the Proposed Purchaser
shall be less the aggregate Exercise Price of such Warrant per share. If the
Subject Equity to be purchased includes securities other than Common Stock, the
price to be paid for such securities shall be the same price per share or other
denomination paid by the proposed purchaser for like securities purchased from
the Permitted Holders and their Affiliates or, if like securities are not
purchased from the Permitted Holders and their Affiliates, the Fair Market Value
of such securities determined by an independent financial expert selected by the
Company.
Section 4. Registration Procedures. In connection with the
obligations of the Company with respect to any Registration Statement pursuant
to Sections 2.1 and 2.2 hereof, the Company shall, except as otherwise provided:
(a) A reasonable period of time prior to the initial filing of a
Registration Statement or Prospectus and a reasonable period of time prior
to the filing of any amendment or supplement thereto (including any
document that would be incorporated or deemed to be incorporated therein
by reference), furnish to the Holders and the managing underwriters, if
any, copies of all such documents proposed to be filed, which documents
(other than those incorporated or deemed to be incorporated by reference)
shall be subject to the review of such Holders, and such underwriters, if
any, and cause the officers and directors of the Company, counsel to the
Company and independent certified public accountants to the Company to
respond to such reasonable inquiries as shall be necessary, in the opinion
of counsel to such underwriters, to conduct a reasonable investigation
within the meaning of the
17
Securities Act; provided that the foregoing inspection and information
gathering shall be coordinated on behalf of the Holders by Xxxxxxx Xxxxx.
The Company shall not file any such Registration Statement or related
Prospectus or any amendments or supplements thereto which the Holders of a
majority of the Registrable Securities included in such Registration
Statement shall reasonably object to a timely basis.
(b) Subject to Section 2.3, prepare and file with the SEC such
amendments, including post-effective amendments, to each Registration
Statement as may be necessary to keep such Registration Statement
continuously effective for the applicable time period required hereunder;
cause the related Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 (or
any similar provisions then in force) promulgated under the Securities
Act; and comply with the provisions of the Securities Act and the Exchange
Act with respect to the disposition of all securities covered by such
Registration Statement during such period in accordance with the intended
methods of disposition by the sellers thereof set forth in such
Registration Statement as so amended or in such Prospectus as so
supplemented.
(c) Notify the Holders of Registrable Securities to be sold and the
managing underwriters, if any, promptly, and (if requested by any such
person) confirm such notice in writing, (i)(A) when a Prospectus or any
Prospectus supplement or post-effective amendment is proposed to be filed,
and (B) with respect to a Registration Statement or any post-effective
amendment, when the same has become effective, (ii) of any request by the
SEC or any other Federal or state governmental authority for amendments or
supplements to a Registration Statement or related Prospectus or for
additional information, (iii) of the issuance by the SEC, any state
securities commission, any other governmental agency or any court of any
stop order suspending the effectiveness of such Registration Statement or
of any order or injunction suspending or enjoining the use of a Prospectus
or the effectiveness of a Registration Statement or the initiation of any
proceedings for that purpose, (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Securities for sale
in any jurisdiction, or the initiation or threatening of any proceeding
for such purpose, and (v) of the happening of any event, the existence of
any information becoming known that makes any statement made in a
Registration Statement or related Prospectus or any document incorporated
or deemed to be incorporated therein by reference untrue in any material
respect or omit to state any material fact required to be stated therein
or necessary to make the statements therein, not misleading, and that in
the case of the Prospectus, it will not contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
18
(d) Use its reasonable efforts to avoid the issuance of or, if
issued, obtain the withdrawal of any order enjoining or suspending the
effectiveness of the Registration Statement or the use of a Prospectus or
the lifting of any suspension of the qualification (or exemption from
qualification) of any of the Registrable Securities covered thereby for
sale in any jurisdiction described in Section 4(h) at the earliest
practicable moment.
(e) If requested by the managing underwriters, if any, or if none,
by the Holders of a majority of the Registrable Securities being sold
pursuant to such Registration Statement, (i) promptly incorporate in a
Prospectus supplement or post-effective amendment such information as the
managing underwriters, if any, or if none, such Holders reasonably
believe, upon advice of counsel, which need not be in writing should be
included therein, and (ii) subject to Section 2.3, make all required
filings of such Prospectus supplement or such post-effective amendment
under the Securities Act as soon as practicable after the Company has
received notification of the matters to be incorporated in such prospectus
supplement or post-effective amendment; provided, however, that the
Company shall not be required to take any action pursuant to this Section
4(e) that would, in the opinion of counsel for the Company, violate
applicable law.
(f) Upon written request to the Company, furnish to each Holder of
Registrable Securities to be sold pursuant to a Registration Statement and
each managing underwriter, if any, without charge, at least one conformed
copy of the Registration Statement and each amendment thereto, including
financial statements and schedules, all documents incorporated or deemed
to be incorporated therein by reference, and all exhibits to the extent
reasonably requested (including those previously furnished or incorporated
by reference) as soon as practicable after the filing of such documents
with the SEC.
(g) Deliver to each Holder of Registrable Securities to be sold
pursuant to a Registration Statement and each managing underwriter, if
any, without charge, as many copies of each Prospectus (including each
form of prospectus) and each amendment or supplement thereto as such
Persons may reasonably request; and the Company hereby consents to use of
such Prospectus and each amendment or supplement thereto and each
document supplemental thereto by each of the selling Holders of
Registrable Securities and the underwriters or agents, if any, in
connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto.
(h) Prior to any offering of Registrable Securities, use its
reasonable efforts to register or qualify or cooperate with the Holders of
Registrable Securities to be sold, the managing underwriter or
underwriters, if any, and their respective counsel
19
in connection with the registration or qualification (or exemption from
such registration or qualification) of such Registrable Securities for
offer and sale under the securities or Blue Sky laws of such jurisdictions
as any such Holder or underwriter reasonably requests in writing; keep
each such registration or qualification (or exemption therefrom) effective
during the period such Registration Statement is required to be kept
effective hereunder and do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by the applicable Registration Statement;
provided, however, that the Company shall not be required to (i) qualify
generally to do business in any jurisdiction where it is not then so
qualified or (ii) take any action that would subject it to general service
of process in any such jurisdiction where it is not then so subject or to
taxation in any jurisdiction where it is not so subject.
(i) In connection with any sale or transfer of Registrable
Securities that will result in such securities no longer being Registrable
Securities, cooperate with the Holders of Registrable Securities and the
managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing Registrable Securities to be sold,
which certificates shall not bear any restrictive legends whatsoever and
shall be in a form eligible for deposit with The Depository Trust Company
("DTC"); and to enable such Registrable Securities to be in such
denominations and registered in such names as the managing underwriter or
underwriters, if any, or such Holders may reasonably request at least two
business days prior to any sale of Registrable Securities.
(j) Subject to Section 2.3, upon the occurrence of any event
contemplated by Section 4(c)(v) above, as promptly as practicable prepare
a supplement or amendment, including if appropriate a post-effective
amendment to each Registration Statement or a supplement to the related
Prospectus or any document incorporated or deemed to be incorporated
therein by reference, and file any other required document so that, as
thereafter delivered, such Prospectus will not contain an untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
(k) Prior to the effective date of a Registration Statement, (i)
provide the registrar for the Registrable Securities with certificates for
such securities in a form eligible for deposit with DTC and (ii) provide a
CUSIP number for such securities.
(l) Enter into such agreement (including an underwriting agreement
in such form, scope and substance as is customary in underwritten
offerings) and take all such other reasonable actions in connection
therewith (including those reasonably requested by the managing
underwriters, if any, or the Holders of a majority of the Registrable
20
Securities being sold) in order to expedite or facilitate the disposition
of such Registrable Securities, and, whether or not an underwriting
agreement is entered into and whether or not the registration is an
underwritten registration, (i) make such representations and warranties to
the Holders of such Registrable Securities and the underwriter or
underwriters, if any, with respect to the business of the Company and the
subsidiaries of the Company (including with respect to businesses or
assets acquired or to be acquired by any of them), and the Registration
Statement, Prospectus and documents, if any, incorporated or deemed to be
incorporated by reference therein, in each case, in form, substance and
scope as are customarily made by issuers to underwriters in underwritten
offerings, and confirm the same if any when requested; (ii) obtain
opinions of counsel to the Company and updates thereof (which counsel and
opinions (in form, scope and substance) shall be reasonably satisfactory
to the managing underwriters, if any, addressed to each selling Holder of
Registrable Securities and each of the underwriters, if any), covering the
matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by such
underwriters; (iii) use their reasonable efforts to obtain customary "cold
comfort" letters and updates thereof from the independent certified public
accountants of the Company (and, if necessary, any other independent
certified public accountants of any subsidiary of the Company or of any
business acquired by the Company for which financial statements and
financial data are, or are required to be, included in the Registration
Statement), addressed (where reasonably possible) to each Selling Holder
of Registrable Securities and each of the underwriters, if any, such
letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters in connection with
underwritten offerings; (iv) if an underwriting agreement is entered into,
the same shall contain customary indemnification provisions and procedures
no less favorable to the Selling Holder and the underwriters, if any, than
those set forth in Section 5 hereof (or such other provisions and
procedures acceptable to Holders of a majority of Registrable Securities
covered by such Registration Statement and the managing underwriter, if
any); and (v) deliver such documents and certificates as may be reasonably
requested by the Holders of a majority of the Registrable Securities being
sold and the managing underwriters or underwriters to evidence the
continued validity of the representations and warranties made pursuant to
clause (i) above and evidence compliance with any customary conditions
contained in the underwriting agreement or other agreements entered into
by the Company. The above shall be done at each closing under such
underwriting agreement or other agreements, or as and to the extent
required thereunder.
(m) Make available for inspection by a representative of the selling
Holders of Registrable Securities, any underwriter participating in any
such disposition of Registrable Securities, if any, and any attorney,
consultant or accountant retained by such representative of the selling
Holders of Registrable Securities or underwriter
21
(collectively, the "Inspectors"), at the offices where normally kept,
during the reasonable business hours, all financial and other records,
pertinent corporate documents and properties of the Company and the
subsidiaries of the Company (including with respect to businesses and
assets acquired or to be acquired to the extent that such information is
available to the Company), and cause the officers, directors, agents and
employees of the Company and its subsidiaries of the Company (including
with respect to businesses and assets acquired or to be acquired to the
extent that such information is available to the Company) to supply all
information in each case reasonably requested by any such Inspector in
connection with such Registration Statement; provided, however, that such
persons shall first agree in writing with the Company that any information
that is reasonably and in good faith designated by the Company in writing
as confidential at the time of delivery of such information shall be kept
confidential by such Persons, unless (i) disclosure of such information is
required by court or administrative order or is necessary to respond to
inquiries of regulatory authorities, (ii) disclosure of such information
is required by law (including any disclosure requirements pursuant to U.S.
securities laws in connection with the filing of the Registration
Statement or the use of any Prospectus), (iii) such information becomes
generally available to the public other than as a result of a disclosure
or failure to safeguard such information by such person or (iv) such
information becomes available to such person from a source other than the
Company and its subsidiaries and such source is not bound by a
confidentiality agreement; and provided further that the foregoing
investigation shall be coordinated on behalf of the selling Holders of
Registrable Securities by Xxxxxxx Xxxxx.
(n) Comply with all applicable rules, regulations and policies of
the SEC and make generally available to its securityholders earnings
statements satisfying the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder no later than 60 days after the end of any
12-month period (or 135 days after the end of any 12-month period if such
period is a fiscal year) (i) commencing at the end of any fiscal quarter
in which Registrable Securities are sold to an underwriter or to
underwriters in a firm commitment or reasonable efforts underwritten
offering and (ii) if not sold to an underwriter or to underwriters in such
an offering, commencing on the first day of the first fiscal quarter of
the Company after the effective date of the relevant Registration
Statement, which statements shall cover such period, consistent with the
requirements of Rule 158 under the Securities Act.
(o) Use its reasonable efforts to cause all Registrable Securities
relating to such Registration Statement to be listed on each securities
exchange, if any, on which similar securities issued by the Company are
then listed.
(p) Cooperate with each seller of Registrable Securities to
facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be
22
sold and not bearing any restrictive legends and registered in such names
as the Selling Holders may reasonably request at least two business days
prior to the closing of any sale of Registrable Securities.
(q) Cooperate with each seller of Registrable Securities covered by
any Registration Statement and each underwriter, if any, participating in
the disposition of such Registrable Securities and its respective counsel
in connection with any filings required to be made with the National
Association of Securities Dealers, Inc.
The Company may require a Holder of Registrable Securities to be
included in a Registration Statement to furnish to the Company such information
regarding (i) the intended method of distribution of such Registrable Securities
(ii) such Holder and (iii) the Registrable Securities held by such Holder as is
required by law to be disclosed in such Registrable Statement and the Company
may exclude from such Registration Statement the Registrable Securities of any
Holder who fails to furnish such information within a reasonable time after
receiving such request.
If any such Registration Statement refers to any Holder by name or
otherwise as the Holder of any securities of the Company, then such Holder shall
have the right to require (i) the insertion therein of language, in form and
substance reasonably satisfactory to such Holder, to the effect that the holding
by such Holder of such securities is not to be construed as a recommendation by
such Holder of the investment quality of the Company's securities covered
thereby and that such holding does not imply that such Holder will assist in
meeting any future financial requirements of the Company, or (ii) in the event
that such reference to such Holder by name or otherwise is not required by the
Securities Act, the deletion of the reference to such Holder in such amendment
or supplement to the Registration Statement filed or prepared subsequent to the
time that such reference ceases to be required.
Each Holder of Registrable Securities agrees by acquisition of such
Subject Equity that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 4(c)(ii), 4(c)(iv) or
4(c)(v) hereof, such Holder will forthwith discontinue disposition of such
Subject Equity covered by the Registration Statement or Prospectus until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 4(j) hereof, or until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus may be
resumed, and in either case has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus. If the Company shall give any such notice, the
Effectiveness Period shall be extended by the number of days during such periods
from and including the date of the giving of such notice to and including the
date when each seller of Subject Equity covered by such Registration Statement
shall have received (x) the copies of the supplemented or amended Prospectus
contemplated by Section 4(j) hereof or (y) the Advice, and, in either case, has
received copies of any additional or
23
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus.
Holders of the Subject Equity shall be obligated to keep
confidential the existence of a Suspension Period or any confidential
information communicated by the Company to the Holder with respect thereto.
Section 5. Indemnification and Contribution. (a) The Company shall
indemnify and hold harmless each Initial Purchaser, each Selling Holder (in its
capacity as Selling Holder), each underwriter, if any, who participates in an
offering of Registrable Securities, their respective affiliates, and their
respective directors, officers, employees, agents and each Person, if any, who
controls any of such parties within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in any Registration
Statement (or any amendment thereto) pursuant to which Registrable
Securities were registered under the 1933 Act, including all documents
incorporated therein by reference, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact contained in any
Prospectus (or any amendment or supplement thereto) or the omission or
alleged omission therefrom of a material fact necessary in order to make
the statements therein, in the light of the circumstances under which they
were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever, in each case, based upon any such untrue statement or
omission, or any such alleged untrue statement or omission; provided that
(subject to Section 5(d) below) any such settlement is effected with the
written consent of the Company; and
(iii) against any and all expenses whatsoever, as incurred
(including fees and disbursements of counsel chosen by any indemnified
party), reasonably incurred in investigating, preparing or defending
against any litigation, or investigation or proceeding by any court or
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission, to the extent that any such expense
is not paid under subparagraph (i) or (ii) of this Section 5(a);
24
provided, however, that this indemnity agreement does not apply to any loss,
liability, claim, damage or expense to the extent (i) arising out of an untrue
statement or omission or alleged untrue statement or omission (A) made in or
omitted from a preliminary Prospectus or Registration Statement and corrected or
included in a subsequent Prospectus or Registration Statement or any amendment
or supplement thereto made in reliance upon and in conformity with written
information furnished to the Company by the Selling Holders of Registrable
Securities, any Holder, or any underwriter expressly for use in the Registration
Statement (or any amendment thereto) or the Prospectus (or any amendment or
supplement thereto) or (B) resulting from the use of the Prospectus during a
period when the use of the Prospectus has been suspended or is otherwise
unavailable for sales thereunder in accordance with Sections 2.1(b), 2.1(c),
2.2(a), 2.3(a), 2.4, 2.6 or 4(c) hereof, provided, in each case, that Holders
received prior notice of such suspension or other unavailability. The foregoing
indemnity with respect to any untrue statement contained in or any omission from
a Prospectus shall not inure to the benefit of any Initial Purchaser, Selling
Holder (in its capacity as Selling Holder), or any person who controls such
party within the meaning of Section 15 of the 1933 Act or Section 20 of the 1934
Act from whom the person asserting any such loss, liability, claim, damage or
expense purchased any of the Registrable Securities that are the subject
thereof, was not sent or given a copy of such Prospectus (as amended or
supplemented) by such Initial Purchaser or such Selling Holder (in its capacity
as Selling Holder) to the extent such Initial Purchaser or such Selling Holder
(in its capacity as Selling Holder) was required by law to deliver such
Prospectus as amended or supplemented, at or prior to the written confirmation
of the sale of such Registrable Securities and the untrue statement contained in
or the omission from such Prospectus was corrected in such amended or
supplemented Prospectus, unless such failure resulted from noncompliance by the
Company with its obligations hereunder to furnish such Initial Purchaser or such
Selling Holder (in its capacity as Selling Holder), as the case may be, with
copies of such Prospectus as amended or supplemented.
(b) In the case of any registration of Registrable Securities, each
Selling Holder agrees, severally and not jointly, to indemnify and hold harmless
the Company, each Initial Purchaser, each underwriter, if any, who participates
in an offering of Registrable Securities and the other Selling Holders and each
of their respective directors and officers (including each officer of the
Company who signed the Registration Statement) and each Person, if any, who
controls the Company, any Initial Purchaser, any underwriter or any other
Selling Holder within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act, against any and all loss, liability, claim, damage and expense
whatsoever described in the indemnity contained in Section 5(a) hereof, as
incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto) or the Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Company by such Holder expressly for use in the Registration Statement (or any
amendment thereto), or the Prospectus (or any amendment or supplement thereto);
provided,
25
however, that no such Holder shall be liable for any claims hereunder in excess
of the amount of net proceeds received by such Holder from the sale of
Registrable Securities pursuant to such Registration Statement.
(c) In case any action shall be commenced involving any Person in
respect of which indemnity may be sought pursuant to either paragraph (a) or (b)
above, such Person (the "indemnified party") shall give notice as promptly as
reasonably practicable to each Person against whom such indemnity may be sought
(the "indemnifying party"), but failure to so notify an indemnifying party shall
not relieve such indemnifying party from any liability hereunder to the extent
it is not materially prejudiced as a result thereof and in any event shall not
relieve it from any liability which it may have otherwise than on account of
this indemnity agreement. In the case of parties indemnified pursuant to Section
5(a) above, counsel for such indemnified parties shall be chosen by such
indemnified parties, and, in the case of parties indemnified pursuant to Section
5(b) above, counsel to such indemnified parties shall be selected by the
Company. An indemnifying party may participate at its own expense in the defense
of such action; provided, however, that counsel to the indemnifying party shall
not (except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying party or parties be liable
for the fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
No indemnifying party shall, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 5 (whether or not the indemnified parties are actual or
potential parties thereof), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
(d) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 5(a)(ii) hereof effected
without its written consent if (i) such settlement is entered into more than 45
days after receipt by such indemnifying party of the aforesaid request, (ii)
such indemnifying party shall have received notice of the terms of such
settlement at least 30 days prior to such settlement being entered into and
(iii) such indemnifying party shall not have reimbursed such indemnified party
in accordance with such request prior to the date of such settlement.
Notwithstanding the immediately preceding sentence, if at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified
26
party for fees and expenses of counsel, an indemnifying party shall not be
liable for any settlement of the nature contemplated by Section 5(a)(ii)
effected without its consent if such indemnifying party (i) reimburses such
indemnified party in accordance with such request to the extent it considers
such request to be reasonable and (ii) provides written notice to the
indemnified party substantiating the unpaid balance as unreasonable, in each
case prior to the date of such settlement.
(e) If the indemnification provided for in any of the indemnity
provisions set forth in this Section 5 is for any reason unavailable to or
insufficient to hold harmless an indemnified party in respect of any losses,
liabilities, claims, damages or expenses referred to therein, then each
indemnifying party shall contribute to the aggregate amount of such losses,
liabilities, claims, damages and expenses incurred by such indemnified party, as
incurred, (i) in such proportion as is appropriate to reflect the relative
benefits received by such indemnifying party or parties on the one hand, and
such indemnified party or parties on the other and from the offering of the
Registrable Securities included in such offering; or (ii) if the allocation
provided by clause (i) is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of such indemnifying party or parties on
the one hand, and such indemnified party or parties on the other hand, in
connection with the statements or omissions which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations. The relative fault of such indemnifying party or
parties on the one hand, and such indemnified party or parties on the other hand
shall be determined by reference to, among other things, whether any such untrue
or alleged untrue statement of a material fact or omission or alleged omission
to state a material fact relates to information supplied by such indemnifying
party or parties and such indemnified party or parties and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company, the Initial Purchasers and the Holders
of the Registrable Securities agree that it would not be just and equitable if
contribution pursuant to this Section 5 were determined by pro rata allocation
(even if the Selling Holders of Registrable Securities were treated as one
entity, and the Holders were treated as one entity, for such purpose) or by
another method of allocation which does not take account of the equitable
considerations referred to above in Section 5. The aggregate amount of losses,
liabilities, claims, damages and expenses incurred by an indemnified party and
referred to above in this Section 5 shall be deemed to include any legal or
other expenses reasonably incurred by such indemnified party in investigating,
preparing or defending against any litigation, or any investigation or
proceeding by a governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue or alleged untrue statement or
omission or alleged omission. No Person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the 0000 Xxx) shall be entitled to
contribution from any Person who was not guilty of such fraudulent
misrepresentation. For purposes of this Section 5, each Person, if any, who
controls an Initial Purchaser or Holder within the meaning of this Section 15 of
the 1933 Act or Section 20 of the 1934 Act shall
27
have the same rights to contribution as such Initial Purchaser or Holder, and
each director of the Company, each officer of the Company who signed the
Registration Statement, and each Person, if any, who controls the Company within
the meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall
have the same rights to contribution as the Company. The parties hereto agree
that any underwriting discount or commission or reimbursement of fees paid to
any Initial Purchaser pursuant to the Purchase Agreement shall not be deemed to
be a benefit received by any Initial Purchaser in connection with the offering
of the Registrable Securities in such offering.
Section 6. Miscellaneous.
(a) Remedies. In the event of a breach by the Company of any of its
obligations under this Agreement, each Holder and Permitted Holders, in addition
to being entitled to exercise all rights provided herein, in the Purchase
Agreement or granted by law, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of any of the provisions of this Agreement and hereby
further agrees that in the event of any action for specific performance in
respect of such breach, it shall waive the defense that a remedy at large would
be adequate.
(b) No Inconsistent Agreements. The Company and the Permitted
Holders will not enter into any agreement which is inconsistent with the rights
granted to the Holders of Warrants and Registrable Securities in this Agreement
or otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's other issued and outstanding
securities, if any, under any such agreements.
(c) No Piggy-Back on Demand Registrations. The Company shall not
grant to any of its securityholders (other than the Holders in such capacity)
the right to include any of their securities in any Registration Statement filed
pursuant to a Demand Registration.
(d) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, otherwise than with the prior written consent of the Holders
and Permitted Holders of not less than a majority of the then outstanding
Warrants and each class and series of Registrable Securities and with respect to
Sections affecting the rights or obligations of the Permitted Holders hereunder,
the Permitted Holders who hold not less than a majority of shares of the capital
stock held by the Permitted Holders; provided, however, that, for the purposes
of this Agreement, Warrants and Registrable Securities that are owned, directly
or indirectly, by the
28
Company or any of their Affiliates are not deemed to be outstanding.
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of one or
more Holders and Permitted Holders and that does not directly or indirectly
affect the rights of other Holders and other Permitted Holders may be given by a
majority of the Holders and Permitted Holders so affected; provided, however,
that the provisions of this sentence may not be amended, modified or
supplemented except in accordance with the provisions of the immediately
preceding sentence. Notwithstanding the foregoing, no amendment, modification,
supplement, waiver or consent with respect to Section 5 shall be made or given
otherwise than the prior written consent of each Person affected thereby.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand delivery, registered
first-class mail, telecopier, or any courier guaranteeing overnight delivery (i)
if to a Holder or a Permitted Holder, at the most current address of such Holder
or such Permitted Holder as set forth in the register for the Warrants or the
Registrable Securities or the securities owned by the Permitted Holders, (ii) if
to the Initial Purchasers, as provided in the Purchase Agreement and (iii) if to
the Company, as provided in the Purchase Agreement.
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
on the next Business Day, if timely delivered to an air courier guaranteeing
overnight delivery.
(f) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. If any transferee of
any Holder shall acquire Registrable Securities, in any manner, whether by
operation of law or otherwise, such Warrants, Warrants Shares or securities
shall be held subject to all of the terms of this Agreement, and by taking and
holding such securities such Person shall be conclusively deemed to have agreed
to be bound by and to perform all of the terms and provisions of this Agreement
and such Person shall be entitled to receive the benefits hereof. The Company
may not assign any of its rights or obligations hereunder without the prior
written consent of each Holder of Registrable Securities and each indemnified
party under Section 5(a). Notwithstanding the foregoing, no successor or
assignee of the Company shall have any rights granted under the Agreement until
such person shall acknowledge its rights and obligations hereunder by a signed
written statement of such person's acceptance of such rights and obligations.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so
29
executed shall be deemed to be an original and all of which taken together shall
constitute one and the same Agreement.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(j) Severability. If any term, provision, covenant or restriction of
this Agreement is held by a court of competent jurisdiction to be invalid,
illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(k) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof. All
references made in this Agreement to "Section" and "paragraph" refer to such
Section or paragraph of this Agreement, unless expressly stated otherwise.
(l) Entire Agreement. This Agreement, together with the Purchase
Agreement and the Warrant Agreement, is intended by the parties as a final
expression of their agreement, and is intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein and therein. This Agreement, the Purchase
Agreement and the Warrant Agreement supersede all prior agreements and
understandings between the parties with respect to such subject matter.
(m) Securities Held by the Company or Its Affiliates. Whenever the
consent or approval of Holders of a specified percentage of Registrable
Securities or Warrants is required hereunder, Registrable Securities or Warrants
held by the Company or by any of its affiliates (as such term is defined in Rule
405 under the Securities Act) shall not be counted (in either the numerator or
the denominator) in determining whether such consent or approval was given by
the Holders of such required percentage.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
PATHNET, INC.
By: /s/ Xxxxx Xxxxxxxxx
______________________________________
Name: Xxxxx Xxxxxxxxx
Title: Chairman
SPECTRUM EQUITY INVESTORS, L.P.,
In its Capacity as a Permitted Holder
By: /s/ Xxxxx X. Xxxxxx
______________________________________
Name: Xxxxx X. Xxxxxx
Title: General Partner
NEW ENTERPRISE ASSOCIATES VI, Limited
Partnership,
In its Capacity as a Permitted Holder
By: /s/ Xxxxx X. Xxxxxx
______________________________________
Name: Xxxxx X. Xxxxxx
Title:
ONSET ENTERPRISE ASSOCIATES II, L.P.,
In its Capacity as a Permitted Holder
By: OEA II Management, L.P.
By: /s/ Xxxxxx X. Xxxxxx
______________________________________
Name: Xxxxxx X. Xxxxxx
Title: General Partner
FBR TECHNOLOGY VENTURE PARTNERS,
L.P.,
In its Capacity as a Permitted Holder
By: /s/ Xxxx Xxxxxxxx
______________________________________
Name: Xxxx Xxxxxxxx
TORONTO DOMINION CAPITAL (USA) INC.,
In its Capacity as a Permitted Holder
By: /s/ Xxxxxx X. Xxxxxxx
______________________________________
Name: Xxxxxx X. Xxxxxxx
GROTECH PARTNERS IV, L.P.,
In its Capacity as a Permitted Holder
By: /s/ Xxxxxxx X. Xxxxxx
______________________________________
Name: Xxxxxxx X. Xxxxxx
Title: Managing Director
/s/ Xxxxxxx X. Xxxxxx
__________________________________
Xxxxxxx X. Xxxxxx
/s/ Xxxxx Xxxxxxxxx
_____________________________________
Xxxxx Xxxxxxxxx
Confirmed and accepted as of
the date first above written:
XXXXXXX XXXXX & CO.
XXXXXXX LYNCH, PIERCE, XXXXXX & XXXXX
INCORPORATED
BEAR, XXXXXXX & CO. INC.
TD SECURITIES (USA) INC.
SALOMON BROTHERS INC
By: XXXXXXX XXXXX & CO.
XXXXXXX LYNCH, PIERCE, XXXXXX & XXXXX
INCORPORATED
By: /s/ Xxxx Xxxxx
________________________________
Name: Xxxx Xxxxx
Title: Authorized Signatory
