STOCK PURCHASE AGREEMENT
dated as of
March 18, 1999
between
RCN CORPORATION
and
HMTF LIVE WIRE INVESTORS, LLC
relating to the purchase and sale
of
Series A 7% Senior Convertible Preferred Stock
of
RCN CORPORATION
TABLE OF CONTENTS
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PAGE
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ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions....................................................1
ARTICLE 2
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale..............................................4
SECTION 2.02. Closing........................................................4
SECTION 2.03. Certificates for Restricted Securities.........................4
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
SECTION 3.01. Corporate Existence and Power..................................5
SECTION 3.02. Corporate Authorization........................................5
SECTION 3.03. Authorization..................................................5
SECTION 3.04. Noncontravention...............................................5
SECTION 3.05. Capitalization.................................................6
SECTION 3.06. Authorization of Preferred Shares..............................6
SECTION 3.07. Finders' Fees..................................................7
SECTION 3.08. SEC Reports....................................................7
SECTION 3.09. Financial Statements...........................................7
SECTION 3.10. Absence of Certain Changes.....................................7
SECTION 3.11. Litigation.....................................................8
SECTION 3.12. Offering of Preferred Shares...................................8
SECTION 3.13. Accuracy and Completeness of Information Provided..............8
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
SECTION 4.01. Existence and Power............................................9
SECTION 4.02. Authorization..................................................9
SECTION 4.03. Authorization..................................................9
SECTION 4.04. Noncontravention...............................................9
SECTION 4.05. Purchase for Investment........................................9
SECTION 4.06. Litigation....................................................10
SECTION 4.07. Finders' Fees.................................................10
PAGE
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ARTICLE 5
COVENANTS OF THE CORPORATION
SECTION 5.01. Access to Information.........................................10
SECTION 5.02. Certificate of Designations...................................10
SECTION 5.03. Restrictions Pending the Closing..............................10
SECTION 5.04. Buyer Director................................................11
SECTION 5.05. Reservation of Rights.........................................12
SECTION 5.06. Other Transfers of Restricted Securities......................12
SECTION 5.07. Venture Capital Operating Company Requirements................12
ARTICLE 6
COVENANTS OF BUYER
SECTION 6.01. Confidentiality...............................................12
SECTION 6.02. Sale or Transfer of Restricted Securities.....................14
ARTICLE 7
COVENANTS OF BUYER AND THE CORPORATION
SECTION 7.01. Reasonable Best Efforts; Further Assurances...................14
SECTION 7.02. Certain Filings...............................................14
SECTION 7.03. Public Announcements..........................................14
SECTION 7.04. Registration Rights Agreement.................................15
ARTICLE 8
CONDITIONS TO CLOSING
SECTION 8.01. Conditions to Obligations of Buyer and the Corporation........15
SECTION 8.02. Conditions to Obligation of Buyer.............................15
SECTION 8.03. Conditions to Obligation of the Corporation...................16
ARTICLE 9
TERMINATION
SECTION 9.01. Grounds for Termination.......................................17
SECTION 9.02. Effect of Termination.........................................17
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ARTICLE 10
SURVIVAL; INDEMNIFICATION
SECTION 10.01. Survival of Representation and Warranties....................17
SECTION 10.02. Indemnification..............................................18
SECTION 10.03. Procedures...................................................18
SECTION 10.04. Inspections; No Other Representations .......................19
SECTION 10.05. Exclusivity..................................................19
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. Notices......................................................19
SECTION 11.02. Amendments and Waivers.......................................21
SECTION 11.03. Expenses.....................................................21
SECTION 11.04. Assignment...................................................21
SECTION 11.05. Governing Law................................................21
SECTION 11.06. Jurisdiction.................................................21
SECTION 11.07. Counterparts; Third Party Beneficiaries......................22
SECTION 11.08. Entire Agreement.............................................22
SECTION 11.09. Captions.....................................................22
SECTION 11.10. Severability.................................................22
SECTION 11.11. Specific Performance.........................................23
SECTION 11.12. No Recourse..................................................23
Exhibit A Certificate of Designations, Preferences and Rights
of Series A 7% Senior Convertible Preferred Stock
Exhibit B Registration Rights
iv
STOCK PURCHASE AGREEMENT
AGREEMENT dated as of March 18, 1999 between RCN Corporation, a
Delaware corporation (the "Corporation"), and HMTF Live Wire Investors, LLC, a
Delaware limited liability company ("Buyer").
WHEREAS, the Corporation desires to sell the Preferred Shares (as
defined herein) to Buyer, and Buyer desires to purchase the Preferred Shares
from the Corporation, upon the terms and subject to the conditions hereinafter
set forth;
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and undertakings contained herein, and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. (a) The following terms, as used herein,
have the following meanings:
"Affiliate" means, with respect to any specified person, any other
person which, directly or indirectly, controls, is controlled by or is under
direct or indirect common control with, such specified person. For the purposes
of this definition, "control" when used with respect to any person means the
power to direct the management and policies of such person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise, and the terms "affiliated," "controlling," and "controlled" have
meanings correlative to the foregoing.
"Board of Directors" means the Board of Directors of the Corporation.
"Closing Date" means the date of the Closing.
"Commission" means the Securities and Exchange Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.
"HMTF" means Hicks, Muse, Xxxx & Xxxxx Incorporated, a Texas
corporation.
"HMTF Group" means HMTF and its Affiliates and its and their respective
officers, directors, partners, members, stockholders and employees (and members
of their respective families and trusts for the primary benefit of such family
members).
"Lien" means any mortgage, lien, pledge, charge, security interest or
encumbrance of any kind.
"Material Adverse Effect" means a material adverse effect on the
condition (financial or otherwise), business, assets or results of operations of
the Corporation and its Subsidiaries, taken as whole.
"Person" means an individual, corporation, partnership, limited
liability company, association, trust or other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
"Preferred Shares" means 250,000 shares of Preferred Stock issued on
the Closing Date.
"Preferred Stock" means the Series A 7% Senior Convertible Preferred
Stock of the Corporation.
"Restricted Securities" means (i) the Preferred Stock issued hereunder,
and (ii) any securities issued directly or indirectly with respect to the
securities referred to in clause (i) above upon conversion of the Preferred
Stock, including in connection with a stock split or combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise
pursuant to the terms of the Preferred Stock. As to any particular Restricted
Securities, such securities shall cease to be Restricted Securities when they
have (a) been effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them, (b) become eligible
for sale pursuant to Rule 144 (without any volume limitations) or (c) been
otherwise transferred and new certificates for them not bearing the Securities
Act legend set forth in Section 2.03(b) have been delivered by the Corporation.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Subsidiary" means any corporation or other entity (and any predecessor
thereof) of which the securities or other ownership interests having ordinary
2
voting power to elect a majority of the Board of Directors or other persons
performing similar functions are directly or indirectly owned by the
Corporation.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
Buyer Director 5.04
Closing 2.02
Permitted Transferee 6.02
Purchase Price 2.01
SEC Reports 3.05
Certificate of Designations 3.06
(c) The following definitional provisions shall apply to this Agreement:
(i) The words "hereof", "herein", and "hereunder" and words of
similar import, when used in this Agreement, shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement.
(ii) The terms defined in the singular shall have a comparable
meaning when used in the plural, and vice versa.
(iii) The terms "Dollars" and "$" shall mean United States
Dollars.
(iv) References herein to a specific Section, Subsection or
Schedule shall refer, respectively, to Sections, Subsections or
Schedules of this Agreement, unless the express context otherwise
requires.
(v) Wherever the word "include," "includes," or "including" is
used in this Agreement, it shall be deemed to be followed by the words
"without limitation."
3
ARTICLE 2
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale. Upon the terms and subject to the
conditions of this Agreement, the Corporation agrees to sell to Buyer, and Buyer
agrees to purchase from the Corporation, the Preferred Shares at the Closing.
The purchase price (the "Purchase Price") for the Preferred Shares is
$250,000,000 in cash. The Purchase Price shall be paid as provided in Section
2.02.
SECTION 2.02. Closing. The closing (the "Closing") of the purchase and
sale of the Preferred Shares hereunder shall take place at the offices of Xxxxx
Xxxx & Xxxxxxxx, 000 Xxxxxxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx, as soon as possible,
but no earlier than April 1, 1999 and in no event later than five business days
after satisfaction of the conditions set forth in Article 8.01, or at such other
time or place as Buyer and the Corporation may agree. At the Closing:
(a) following delivery of the certificate described in Section 8.02(d)
and the filing of the Certificate of Designations in accordance with Section
8.02(c), Buyer shall deliver to the Corporation the Purchase Price (less the
amount of a 2% transaction fee payable to Xxxxx, Muse & Co. Partners, L.P.,
("HM&C")) in immediately available funds by wire transfer to an account of the
Corporation with a bank designated by the Corporation, by notice to Buyer, not
later than two business days prior to the Closing Date.
(b) following delivery of the certificate described in Section 8.03(c),
the Corporation shall deliver to Buyer certificates for the Preferred Shares.
SECTION 2.03. Certificates for Restricted Securities. (a) Each
certificate for Restricted Securities shall bear the following legend for so
long as such securities constitute Restricted Securities:
"The securities represented hereby have not been registered under
the Securities Act of 1933, as amended, and may not be offered,
sold, transferred or otherwise disposed of except in compliance
with such laws."
(b) The Corporation agrees that, at the request of Buyer or any
Permitted Transferee, it will remove the legend contemplated by this Section
from the certificates representing any Restricted Securities in the event that
outside counsel for Buyer or such Permitted Transferee determines that the
transfer of such Preferred Shares is no longer restricted by the Securities Act
and outside counsel for the Corporation reasonably concurs in such
determination.
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF THE CORPORATION
The Corporation represents and warrants to Buyer as of the date hereof
and as of the Closing that:
SECTION 3.01. Corporate Existence and Power. The Corporation is a
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware, and has all corporate powers required to carry on
its business as now conducted.
SECTION 3.02. Corporate Authorization. The execution, delivery and
performance of this Agreement by the Corporation is within the Corporation's
corporate powers and has been duly authorized by all necessary corporate action
on the part of the Corporation. This Agreement constitutes a legal and binding
agreement of the Corporation, enforceable against the Corporation in accordance
with its terms, except (a) as such enforcement is limited by bankruptcy,
insolvency and other similar laws affecting the enforcement of creditors' rights
generally and (b) for limitations imposed by general principles of equity.
SECTION 3.03. Authorization. Except as set forth in Schedule 3.03
hereto, the execution, delivery and performance of this Agreement by the
Corporation requires no action by or in respect of, or filing with, any
governmental or non-governmental body, agency, official or authority other than
(i) compliance with any applicable requirements of the Exchange Act; (ii) with
respect to the Corporation's obligations under Section 7.04, compliance with any
applicable requirements of the Securities Act; (iii) the filing of the
Certificate of Designations in accordance with the laws of Delaware and (iv)
other filings or notifications that are immaterial to the consummation of the
transactions contemplated hereby.
SECTION 3.04. Noncontravention. The execution, delivery and performance
of this Agreement by the Corporation do not and will not (i) violate the
certificate of incorporation or bylaws of the Corporation, (ii) assuming
compliance with the matters referred to in Section 3.03, violate any applicable
law, rule, regulation, judgment, injunction, order or decree binding upon the
Corporation, other than violations that would be immaterial to the Corporation
or Buyer, or (iii) except as to matters which would be immaterial to the
Corporation or Buyer, constitute a default under, or give rise to any right of
termination, cancellation or acceleration of any right or obligation of the
Corporation or to a loss of any benefit to which the Corporation is entitled
under any provision of any
5
agreement or other instrument binding upon the Corporation or (iv) result in the
creation or imposition of any Lien on any asset of the Corporation except where
such Lien would not have a Material Adverse Effect.
SECTION 3.05. Capitalization. (a) As of the date hereof, the authorized
capital stock of the Corporation consists of: 200,000,000 shares of common
stock, par value $1.00 per share ("Common Stock"); 400,000,000 shares of Class B
common stock, par value $1.00 per share; and 25,000,000 shares of preferred
stock, par value $1.00 per share. As of December 31, 1998, there were 64,920,493
shares of Common Stock issued and outstanding, no shares of Class B common stock
outstanding and no shares of preferred stock outstanding.
(b) All outstanding shares of Common Stock are duly authorized, validly
issued and fully paid and nonassessable. There are no preemptive or other
similar rights available to the existing holders of the capital stock of the
Corporation. As of the date hereof and other than (i) as set forth in the
financial statements contained in the forms, reports and documents filed with
the Commission (the "SEC Reports") (ii) as set forth on Schedule 3.05 (b)
hereto, and (iii) in connection with the transactions contemplated by this
Agreement, there are no outstanding options, warrants, rights, puts, calls,
commitments, or other contracts, arrangements, or understandings issued by or
binding upon the Corporation requiring, and there are no outstanding debt or
equity securities of the Corporation which upon the conversion, exchange or
exercise thereof would require, the issuance, sale or transfer by the
Corporation of any new or additional equity interests in the Corporation (or any
other securities of the Corporation or any of its Subsidiaries which, whether
after notice, lapse of time or payment of monies, are or would be convertible
into or exercisable or exchangeable for equity interests in the Corporation).
Except as set forth in the SEC Reports, there are no voting trusts or other
agreements or understandings to which the Corporation or any of its Subsidiaries
is a party with respect to the voting of capital stock of the Corporation.
SECTION 3.06. Authorization of Preferred Shares. The issuance, sale and
delivery of the Preferred Shares has been duly authorized by all requisite
corporate action of the Corporation and the Preferred Shares issued to Buyer in
accordance with the terms of the Certificate of Designations, Preferences and
Rights of Series A 7% Senior Convertible Preferred Stock (the "Certificate of
Designations") set forth on Exhibit A hereto, when issued and delivered in
accordance with the terms of this Agreement will be validly issued and
outstanding, fully paid and nonassessable free and clear of any Liens and not
subject to preemptive or other similar rights of the stockholders of the
Corporation.
6
SECTION 3.07. Finders' Fees. Except for Chase Securities, Inc., whose
fees will be paid by the Corporation, there is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to act
on behalf of the Corporation who might be entitled to any fee or commission in
connection with the transactions contemplated by this Agreement.
SECTION 3.08. SEC Reports. The Corporation has filed all required SEC
Reports when due in accordance with the Exchange Act and delivered or made
available to Buyer copies thereof. As of their respective dates, the SEC Reports
complied in all material respects with all applicable requirements of the
Exchange Act or the Securities Act, as the case may be. As of their respective
dates, none of the SEC Reports contained any untrue statement of a material fact
or omitted to state a material fact required to be stated or incorporated by
reference therein or necessary in order to make the statements therein, in light
of the circumstances under which they were made, not misleading.
SECTION 3.09. Financial Statements. The consolidated financial
statements of the Corporation contained in the SEC Reports complied as to form
in all material respects with the published rules and regulations of the
Commission with respect thereto, were prepared in accordance with GAAP applied
on a consistent basis during the periods involved (except as may be indicated in
the notes thereto) and fairly present, in conformity with GAAP (except as may be
indicated in the notes thereto), the consolidated financial position of the
Corporation and its consolidated subsidiaries as of the dates thereof and their
consolidated results of operations and changes in financial position for the
periods then ended (subject to (i) normal year-end adjustments in the case of
any unaudited interim financial statements which will not be material, either
individually or in the aggregate, and (ii) further adjustments that may be
required by the Commission with respect to allocation of the purchase price of
certain assets to in-process research and development as reflected in the
Corporation's pending Registration Statement No. 333-71525). The Corporation has
delivered to Buyer a copy of its consolidated financial statements for the year
ended December 31, 1998, together with footnotes in draft form; such financial
statements were prepared in accordance with GAAP applied on a consistent basis
during the period involved (except as may be indicated in the notes thereto) and
fairly present, in conformity with GAAP (except as may be indicated in the notes
thereto), the consolidated financial position of the Corporation and its
consolidated subsidiaries as of the date thereof and their consolidated results
of operations and changes in financial position for the period then ended
(subject to the adjustments referred to in the preceding sentence.)
SECTION 3.10. Absence of Certain Changes. Since December 31, 1998,
there has not been any event, occurrence or development of a state of
7
circumstances or facts that has had or could reasonably be expected to have a
Material Adverse Effect or an adverse effect on the ability of the Corporation
to perform its obligations under this Agreement.
SECTION 3.11. Litigation. Except as set forth in Schedule 3.11, and
except as disclosed in the SEC Reports and the Company's pending Registration
Statement No. 333-71525, there is no action, suit, investigation or proceeding
pending against, or to the knowledge of the Corporation threatened against or
affecting, the Corporation or any Subsidiary before any court or arbitrator or
any governmental body, agency or official which (i) in any manner challenges or
seeks to prevent, enjoin, alter or materially delay the transactions
contemplated by this Agreement or (ii) if resolved adversely to the Corporation
or a Subsidiary would reasonably be likely to have, individually or in the
aggregate, a Material Adverse Effect.
SECTION 3.12. Offering of Preferred Shares. Neither the Corporation nor
any Person acting on its behalf has taken or will take any action (including,
without limitation, any offering of any securities of the Corporation under
circumstances which would require, under the Securities Act, the integration of
such offering with the offering and sale of the Preferred Shares) which might
subject the offering, issuance or sale of the Preferred Shares to the
registration requirements of Section 5 of the Securities Act.
SECTION 3.13. Accuracy and Completeness of Information Provided. To the
Corporation's knowledge, none of the documents or written information delivered
by the Corporation to Buyer in connection with the transactions contemplated by
this Agreement contains any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained
therein not misleading (for purposes of the preceding sentence, any preliminary
document or written information shall be disregarded if a final version of such
document or written information was delivered by Buyer to the Corporation prior
to the date hereof). There is no fact or information relating to the Corporation
or its subsidiaries that is known to the Corporation that could reasonably be
expected to be material to the Corporation and its subsidiaries taken as a whole
and that has not been disclosed to Buyer.
8
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Corporation as of the date hereof
and as of the Closing that:
SECTION 4.01. Existence and Power. Buyer is a limited liability company
duly formed, validly existing and in good standing under the laws of its
jurisdiction of formation.
SECTION 4.02. Authorization. The execution, delivery and performance of
this Agreement by Buyer are within the Buyer's limited liability company powers
and have been duly authorized by all necessary limited liability company action
on the part of Buyer. This Agreement constitutes a legal, valid and binding
agreement of Buyer, enforceable against Buyer in accordance with its terms,
except (a) as such enforcement is limited by bankruptcy, insolvency and other
similar laws affecting the enforcement of creditors' rights generally and (b)
for limitations imposed by general principles of equity.
SECTION 4.03. Authorization. The execution, delivery and performance of
this Agreement by Buyer requires no action by or in respect of, or filing with,
any governmental or non-governmental body, agency or official or any other
Person other than (i) compliance with any applicable requirements of the
Exchange Act and (ii) other filings or notifications that are immaterial to the
consummation of the transactions contemplated hereby.
SECTION 4.04. Noncontravention. The execution, delivery and performance
of this Agreement by Buyer does not and will not (i) violate the certificate of
formation or limited liability company agreement of Buyer, or, (ii) assuming
compliance with the matters referred to in Section 4.03, violate any applicable
law, rule, regulation, judgment, injunction, order or decree, except for any
such violations which would not have a material adverse effect on the ability of
Buyer to consummate the transactions contemplated hereby.
SECTION 4.05. Purchase for Investment. Buyer is purchasing the Preferred
Shares for investment for its own account and not with a view to, or for sale in
connection with, any distribution thereof. Buyer (either alone or together with
its advisors) has sufficient knowledge and experience in financial and business
matters so as to be capable of evaluating the merits and risks of its investment
in the Preferred Shares and is capable of bearing the economic risks of such
investment.
9
SECTION 4.06. Litigation. There is no action, suit, investigation or
proceeding pending against, or to the knowledge of Buyer threatened against or
affecting, Buyer before any court or arbitrator or any governmental body, agency
or official which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated by this Agreement.
SECTION 4.07. Finders' Fees. Except for HM&C, whose transaction fee
shall be paid by the Corporation in accordance with Section 2.02, there is no
investment banker, broker, finder or other intermediary which has been retained
by or is authorized to act on behalf of Buyer who might be entitled to any fee
or commission from the Corporation or any of its Affiliates upon consummation of
the transactions contemplated by this Agreement.
ARTICLE 5
COVENANTS OF THE CORPORATION
The Corporation agrees that:
SECTION 5.01. Access to Information. From the date hereof until the
Closing Date, the Corporation will (i) furnish to Buyer and its authorized
representatives such financial and operating data and other information relating
to the Corporation and its Subsidiaries as such Persons may reasonably request
and (ii) instruct its counsel, independent accountants and financial advisors to
cooperate with Buyer and its authorized representatives in its investigation of
the Corporation. Any investigation pursuant to this Section shall be conducted
in such manner as not to interfere unreasonably with the conduct of the business
of the Corporation. In addition, during any time that Buyer has the right to
designate a Buyer Director pursuant to Section 5.04, the Corporation will
provide Buyer with copies of all financial information, reports and
presentations delivered to the lenders under the Corporation's principal credit
facilities, subject to the confidentiality agreement set forth in Section 6.01.
SECTION 5.02. Certificate of Designations. Prior to the Closing, the
Corporation shall cause to be filed the Certificate of Designations set forth as
Exhibit A hereto as required pursuant to the law of Delaware.
SECTION 5.03. Restrictions Pending the Closing. After the date hereof
and prior to the Closing Date, except as expressly provided for in this
Agreement or as consented to in writing by Buyer, the Corporation will not:
10
(i) amend its Certificate of Incorporation or By-laws or similar
organizational documents;
(ii) split, combine or reclassify any shares of the Corporation's
capital stock;
(iii) declare or pay any dividend or distribution (whether in
cash, stock or property) in respect of its capital stock;
(iv) take any action, or knowingly omit to take any action, that
would, or that would reasonably be expected to, result in (A) any of the
representations and warranties of the Corporation set forth in Article 3
becoming untrue or (B) any of the conditions to the obligations of Buyer
set forth in Section 8.02 not being satisfied; or
(v) enter into any agreement or commitment to do any of the foregoing.
SECTION 5.04. Buyer Director. Buyer shall be entitled to designate for
election to the Board of Directors one person (the "Buyer Director"), for so
long as Buyer owns either (i) 50% or more of the Preferred Shares issued and
outstanding on the Closing Date (the "Issued Preferred Shares"), (ii) an amount
of Common Stock issued upon conversion of 50% or more of the Issued Preferred
Shares or (iii) any combination of Issued Preferred Shares and Common Stock
issued upon conversion of Issued Preferred Shares which, taken together,
represent an amount of Common Stock issuable upon conversion of 50% or more of
the Issued Preferred Shares; provided, however, that the right to designate the
Buyer Director under this Section shall be suspended at any time that the
holders of Preferred Stock have the right to designate a person for election to
the Board of Directors under the terms of the Preferred Stock set forth in the
Certificate of Designations. In the event Buyer elects to have the Board of
Directors appoint a Buyer Director, it shall so notify the Corporation in
writing and the Corporation shall (a) increase the size of the Board of
Directors by one and fill the vacancy created thereby by electing the Buyer
Director and (b) in connection with the meeting of shareholders of the
Corporation next following such election, nominate such Buyer Director for
election as director by the shareholders and use its best efforts to cause the
Buyer Director to be so elected. If a vacancy shall exist in the office of a
Buyer Director, Buyer shall be entitled to designate a successor and the Board
of Directors shall elect such successor and, in connection with the meeting of
shareholders of the corporation next following such election, nominate such
successor for election as director by the shareholders and use its best efforts
to cause the successor to be such elected.
11
SECTION 5.05. Reservation of Rights. For so long as any of the Preferred
Stock is outstanding, the Corporation shall keep reserved for issuance a
sufficient number of shares of Common Stock to satisfy its conversion
obligations under the Certificate of Designations.
SECTION 5.06. Other Transfers of Restricted Securities. The Corporation
shall take all actions reasonably necessary to enable holders of the Restricted
Securities to sell such securities without registration under the Securities Act
pursuant to Rule 144 under the Securities Act or any successor rule or
regulation, subject in each case to the provisions of this Agreement and,
specifically, the filing on a timely basis of all reports required to be filed
under the Exchange Act.
SECTION 5.07. Venture Capital Operating Company Requirements. The
Corporation agrees that for so long as Buyer has the right to designate a Buyer
Director pursuant to Section 5.04 of this Agreement, Hicks, Muse, Xxxx & Xxxxx
Equity Fund IV, L.P. and Hicks, Muse, Xxxx & Xxxxx Private Equity Fund IV, L.P.
(the "Funds") (which upon the Closing will collectively own substantially all of
the membership interests of Buyer) shall have the right: (a) to receive the same
information that is provided to members of the Corporation's board of directors;
(b) upon reasonable request and at reasonable times during normal business
hours, to receive income statements, balance sheets, budgets, business plans and
other financial information and to inspect the books and records of the
Corporation; and (c) upon reasonable request and at reasonable times during
normal business hours, to meet and consult with management with respect to the
business of the Corporation. The foregoing rights are intended to satisfy the
requirement of management rights for purposes of qualifying the Funds' indirect
ownership interests in the Corporation as venture capital investments for
purposes of the Department of Labor's "plan assets" regulations, and in the
event such rights are not satisfactory for such purpose, the Corporation and the
Funds shall reasonably cooperate in good faith to agree upon mutually
satisfactory management rights which satisfy such regulations. The Funds hereby
agree to treat all information received by them pursuant to this Section 5.07 in
accordance with the provisions of Section 6.01.
ARTICLE 6
COVENANTS OF BUYER
Buyer agrees that:
SECTION 6.01. Confidentiality. (a) Buyer will hold, and will use its
best efforts to cause its officers, directors, members, employees, accountants,
counsel,
12
consultants, advisors, financing sources, financial institutions, and agents
(the "Representatives") to hold, in confidence, unless compelled to disclose by
judicial or administrative process or by other requirements of law or national
stock exchange, all confidential documents and information concerning the
Corporation or any of its Affiliates furnished to Buyer, except to the extent
that such information can be shown to have been (i) previously known on a
nonconfidential basis by Buyer, (ii) in the public domain through no fault of
Buyer or (iii) later acquired by Buyer from sources other than the Corporation
or any of its Affiliates not known by Buyer to be bound by any confidentiality
obligation; provided that Buyer may disclose such information to any of the
Representatives in connection with the transactions contemplated by this
Agreement so long as such Persons are informed by Buyer of the confidential
nature of such information and are directed by Buyer to treat such information
confidentially. Buyer shall be responsible for any failure to treat such
information confidentially by such Persons. The obligation of Buyer to hold and
to cause the Representatives to hold any such information in confidence shall be
satisfied if they exercise the same care with respect to such information as
they would take to preserve the confidentiality of their own similar
information. Buyer agrees that it shall not and it shall cause the
Representatives not to use any confidential documents or information for any
purpose other than monitoring and evaluating its investment in the Corporation
and in connection with the transactions contemplated by this Agreement. If this
Agreement is terminated, Buyer will, and will use its reasonable best efforts to
cause its respective officers, directors, employees, accountants, counsel,
consultants, advisors and agents to, destroy or deliver to the Corporation, upon
request, all documents and other materials, and all copies thereof, obtained by
Buyer or on its behalf from the Corporation, or any of the Representatives, in
connection with this Agreement that are subject to such confidence.
(b) In the event Buyer or anyone to whom Buyer transmits confidential
information is requested or required (by oral questions, interrogatories,
requests for information or documents, subpoenas, civil investigative demand or
similar process) to disclose any such information, Buyer will provide the
Corporation with prompt notice so that the Corporation may seek a protective
order or other appropriate remedy and/or waive Buyer's compliance with the
provisions of this Section. In the event that such protective order or other
remedy is not obtained sufficiently promptly so as not to adversely affect Buyer
or those of its officers, directors, employees, accountants, counsel,
consultants, advisors and agents as to whom the information has been requested
or required, or the Corporation waives Buyer's compliance with the provisions of
this Agreement, Buyer will furnish only that portion of such information that
Buyer is advised by counsel is legally required and, at the Corporation's
expense, will exercise its commercially
13
reasonable efforts to obtain reliable assurance that confidential treatment will
be accorded such information.
SECTION 6.02. Sale or Transfer of Restricted Securities. Buyer will not
sell, pledge, encumber or otherwise transfer, or agree to sell, pledge, encumber
or otherwise transfer, directly or indirectly, any Restricted Securities;
provided, that Buyer may sell, pledge, encumber or otherwise transfer Preferred
Stock and Common Stock (a) (i) in any transaction in compliance with Rule 144
under the Securities Act or any successor rule or regulation, (ii) in a public
offering, registered under the Securities Act or (iii) in a private transaction
exempt from the registration requirements of the Securities Act and (b) to
Permitted Transferees. A "Permitted Transferee" means a Person that (A) has
agreed in writing to be bound by the terms of Sections 2.03, 6.02, 7.04 and
Exhibit B of this Agreement and (B) is a member of the HMTF Group and any person
investing, directly or indirectly, in or in parallel with HMTF or any Affiliate
of HMTF in connection with the consummation of the transactions contemplated
hereby.
ARTICLE 7
COVENANTS OF BUYER AND THE CORPORATION
SECTION 7.01. Reasonable Best Efforts; Further Assurances. Subject to
the terms and conditions of this Agreement, Buyer and the Corporation will use
their reasonable best efforts to take, or cause to be taken, all actions and to
do, or cause to be done, all things necessary or desirable under applicable laws
and regulations to consummate the transactions contemplated by this Agreement.
The Corporation and Buyer agree to execute and deliver such other documents,
certificates, agreements and other writings and to take such other actions as
may be necessary or desirable in order to consummate or implement expeditiously
the transactions contemplated by this Agreement.
SECTION 7.02. Certain Filings. The Corporation and Buyer shall cooperate
with one another (i) in determining whether any action by or in respect of, or
filing with, any governmental body, agency, official or authority is required,
or any actions, consents, approvals or waivers are required to be obtained from
parties to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement and (ii) in taking such actions or
making any such filings, furnishing information required in connection therewith
and seeking timely to obtain any such actions, consents, approvals or waivers.
SECTION 7.03. Public Announcements. Prior to the Closing, the parties
agree to consult with each other before issuing any press release or making any
14
public statement with respect to this Agreement or the transactions contemplated
hereby and, except as may be required by applicable law or any listing agreement
with any national securities exchange, will not issue any such press release or
make any such public statement prior to such consultation. Following the
Closing, the parties agree to consult with each other before issuing any press
release or making any public filing that describes any terms of this Agreement.
SECTION 7.04. Registration Rights Agreement. The terms set forth in
Exhibit B hereto are hereby incorporated by reference.
ARTICLE 8
CONDITIONS TO CLOSING
SECTION 8.01. Conditions to Obligations of Buyer and the Corporation.
The obligations of Buyer and the Corporation to consummate the Closing are
subject to the satisfaction of the condition that no provision of any applicable
law or regulation and no judgment, injunction, order or decree shall prohibit
the consummation of the Closing.
SECTION 8.02. Conditions to Obligation of Buyer. The obligation of
Buyer to consummate the Closing is subject to the satisfaction of the following
further conditions:
(a) The Corporation shall have performed in all material respects all of
its obligations hereunder required to be performed by it on or prior to the
Closing.
(b) The representations and warranties of the Corporation contained in
this Agreement shall in each case, if specifically qualified by materiality, be
true and correct and, if not so qualified, be true and correct in all material
respects at and as of the Closing, as if made at and as of such date (except to
the extent such representations and warranties expressly relate to an earlier
date, in which case such representations and warranties shall be true and
correct on and as of such earlier date).
(c) The Certificate of Designations shall have been filed in accordance
with the laws of Delaware.
(d) The Corporation shall have delivered to Buyer (i) a copy of the
resolutions adopted by the Board of Directors, certified by the Secretary of the
Corporation, authorizing this Agreement and (ii) a certificate dated the Closing
15
Date, signed by an officer of the Corporation, certifying as to the fulfillment
of the conditions set forth in Sections 8.02(a) and (b).
(e) The Corporation shall have delivered to Buyer an opinion reasonably
acceptable to Buyer from the General Counsel of the Corporation, with respect to
the due incorporation, due authorization, non-contravention, capitalization of
the Corporation and the validity of the Preferred Shares.
(f) The Corporation shall have delivered to Buyer an opinion reasonably
acceptable to Buyer from Xxxxx Xxxx & Xxxxxxxx, special counsel to the
Corporation, with respect to the valid, binding and enforceable nature of this
Agreement.
(g) There shall not have occurred (i) any event, circumstance,
condition, fact, effect, or other matter which has had or could reasonably be
expected to have a material adverse effect (x) on the business, assets,
financial condition, prospects, or results of operations of the Corporation and
its subsidiaries taken as a whole or (y) on the ability of the Corporation and
such subsidiaries to perform on a timely basis any material obligation under
this Agreement or to consummate the transactions contemplated hereby; or (ii)
any material disruption of or material adverse change in financial, banking or
capital market conditions.
SECTION 8.03. Conditions to Obligation of the Corporation. The
obligation of the Corporation to consummate the Closing is subject to the
satisfaction of the following further conditions:
(a) Buyer shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the Closing
Date.
(b) The representations and warranties of Buyer contained in this
Agreement shall be true in all material respects at and as of the Closing Date,
as if made at and as of such date.
(c) The Corporation shall have received a certificate signed by an
appropriate officer of Buyer to the foregoing effect.
(d) Buyer shall have delivered to the Corporation an opinion reasonably
acceptable to Buyer from Weil, Gotshal & Xxxxxx LLP, special counsel to Buyer,
with respect to the valid, binding and enforceable nature of this Agreement.
16
ARTICLE 9
TERMINATION
SECTION 9.01. Grounds for Termination. This Agreement may be
terminated at any time prior to the Closing:
(a) by mutual written agreement of the Corporation and Buyer;
(b) by either the Corporation or Buyer if the Closing shall not have
been consummated on or before April 30, 1999; or
(c) by either the Corporation or Buyer if consummation of the
transactions contemplated hereby would violate any nonappealable final order,
decree or judgment of any court or governmental body having competent
jurisdiction.
The party desiring to terminate this Agreement pursuant to clauses 9.01(b) or
9.01(c) shall promptly give notice of such termination to the other party.
SECTION 9.02. Effect of Termination. If this Agreement is terminated as
permitted by Section 9.01, such termination shall be without liability of either
party (or any stockholder, director, officer, partner, employee, agent,
consultant or representative of such party) to the other party to this
Agreement; provided that if such termination shall result from the willful (a)
failure of either party to fulfill a condition to the performance of the
obligations of the other party, (b) failure to perform a covenant of this
Agreement or (c) breach by either party hereto of any representation or warranty
or agreement contained herein, such party shall be fully liable for any and all
losses incurred or suffered by the other party as a result of such failure or
breach. The provisions of Sections 6.01, 11.01, 11.03, 11.05, 11.06, 11.07,
11.08, 11.09, 11.10, and 11.12 shall survive any termination hereof pursuant to
Section 9.01.
ARTICLE 10
SURVIVAL; INDEMNIFICATION
SECTION 10.01. Survival of Representation and Warranties. All
representations and warranties contained in this Agreement and all claims with
respect thereto shall terminate upon the expiration of 18 months after the
Closing Date, except that the representations and warranties contained in
Sections 3.01, 3.02, 3.03, 3.06, 4.01, 4.02, and 4.03 shall survive
indefinitely. Notwithstanding
17
the preceding sentence, any covenant, agreement, representation or warranty in
respect of which indemnity may be sought under this Agreement shall survive the
time at which it would otherwise terminate pursuant to the preceding sentence,
if notice of the inaccuracy or breach thereof giving rise to such right of
indemnity shall have been given to the party against whom such indemnity may be
sought prior to such time.
SECTION 10.02. Indemnification. (a) The Corporation hereby indemnifies
Buyer against and agrees to hold Buyer harmless from any and all damage, loss,
liability and expense (including, without limitation, reasonable expenses of
investigation and reasonable attorneys' fees and expenses in connection with any
action, suit or proceeding) ("Damages") incurred or suffered by Buyer arising
out of any misrepresentation or breach of warranty, covenant or agreement made
or to be performed by the Corporation pursuant to this Agreement; provided that
(i) the Corporation shall not be liable under this Section 10.02(a) unless the
aggregate amount of Damages with respect to all matters referred to in this
Section 10.02(a) exceeds $5,000,000, in which event the Buyer shall be entitled
to make a claim against the Corporation for the full amount of such Damages and
(ii) the Corporation's maximum liability under this Section 10.02(a) shall not
exceed $200,000,000.
(b) Buyer hereby indemnifies the Corporation against and agrees to hold
the Corporation harmless from any and all Damages incurred or suffered by the
Corporation arising out of any misrepresentation or breach of warranty, covenant
or agreement made or to be performed by Buyer pursuant to this Agreement;
provided that (i) Buyer shall not be liable under this Section 10.02(b) unless
the aggregate amount of Damages with respect to all matters referred to in this
Section 10.02(b) exceeds $5,000,000, in which event the Corporation shall be
entitled to make a claim against the Buyer for the full amount of such Damages
and (ii) Buyer's maximum liability under this Section 10.02(b) shall not exceed
$200,000,000.
SECTION 10.03. Procedures. The party seeking indemnification under
Section 10.02 (the "Indemnified Party") agrees to give prompt notice to the
party against whom indemnity is sought (the "Indemnifying Party") of the
assertion of any claim, or the commencement of any suit, action or proceeding in
respect of which indemnity may be sought under such Section. The Indemnifying
Party may at the request of the Indemnified Party participate in and control the
defense of any such suit, action or proceeding at its own expense. The
Indemnifying Party shall not be liable under Section 10.02 for any settlement
effected without its consent of any claim, litigation or proceeding in respect
of which indemnity may be sought hereunder.
18
SECTION 10.04. Inspections; No Other Representations . Buyer is an
informed and sophisticated purchaser, and has undertaken such investigation and
has been provided with and has evaluated such documents and information as it
has deemed necessary to enable it to make an informed and intelligent decision
with respect to the execution, delivery and performance of this Agreement. Buyer
will undertake prior to the Closing such further investigation and request such
additional documents and information as it deems necessary. Buyer agrees to
accept the Preferred Shares based upon its own inspection, examination and
determination with respect thereto as to all matters, and without reliance upon
any express or implied representations or warranties of any nature made by or on
behalf of or imputed to the Corporation, except as expressly set forth in this
Agreement. Without limiting the generality of the foregoing, Buyer acknowledges
that the Corporation makes no representation or warranty with respect to (i) any
projections, estimates or budgets delivered to or made available to Buyer of
future revenues, future results of operations (or any component thereof), future
cash flows or future financial condition (or any component thereof) of the
Corporation and the Subsidiaries or the future business and operations of the
Corporation and the Subsidiaries or (ii) any other information or documents made
available to Buyer or its counsel, accountants or advisors with respect to the
Company or the Subsidiaries or their respective businesses or operations, except
as expressly set forth in this Agreement.
SECTION 10.05. Exclusivity. Except as specifically set forth in this
Agreement and except in the case of fraud, effective as of the Closing Buyer
waives any rights and claims Buyer may have against the Corporation, whether in
law or in equity, relating to the Corporation or the Preferred Shares or the
transactions contemplated hereby. The rights and claims waived by Buyer include,
without limitation, claims for breach of contract, breach of representation or
warranty, negligent misrepresentation and all other claims for breach of duty.
After the Closing, Section 10.02 will provide the exclusive remedy for any
misrepresentation, breach of warranty, covenant or other agreement or other
claim arising out of this Agreement or the transactions contemplated hereby,
except in the case of fraud.
ARTICLE 11
MISCELLANEOUS
SECTION 11.01. Notices. All notices, requests and other communications
to any party hereunder shall be in writing and shall be deemed duly given,
effective (i) three Business Days later, if sent by registered or certified
mail, return receipt requested, postage prepaid, (ii) when sent if sent by
telecopier or fax,
19
provided that the telecopy or fax is promptly confirmed by telephone
confirmation thereof, (iii) when served, if delivered personally to the intended
recipient, and (iv) one Business Day later, if sent by overnight delivery via a
national courier service, and in each case, addressed,
if to Buyer, to:
HMTF Live Wire Investors, LLC
c/o Hicks, Muse, Xxxx & Xxxxx Incorporated
1325 Avenue of the Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxx
Fax: (000) 000-0000
with a copy to:
Hicks, Muse, Xxxx & Xxxxx Incorporated
000 Xxxxxxxx Xxxxx
Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attention: Xxxxxxxx X. Xxxxxx, Xx., Esq.
Fax: (000) 000-0000
with a copy to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Simeon Gold, Esq.
Fax: (000) 000-0000
if to the Corporation, to:
RCN Corporation
000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000-0000
Attention: Xxxx X. Xxxxx, Esq.
Fax: (000) 000-0000
20
with a copy to:
Xxxxx Xxxx & Xxxxxxxx
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Fax: (000) 000-0000
Any party may change the address to which notices or other communications
hereunder are to be delivered by giving the other party notice in the manner
herein set forth.
SECTION 11.02. Amendments and Waivers. Any provision of this Agreement
may be amended or waived if, but only if, such amendment or waiver is in writing
and is signed, in the case of an amendment, by each party to this Agreement, or
in the case of a waiver, by the party against whom the waiver is to be
effective. No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative.
SECTION 11.03. Expenses. All costs and expenses incurred in connection
with this Agreement shall be paid by the party incurring such cost or expense.
SECTION 11.04. Assignment. The rights and obligations of the parties
hereunder cannot be assigned or delegated except (i) that Buyer may assign any
or all of its rights and obligations under this Agreement to any one or more of
its Affiliates and (ii) that Buyer may assign its rights and obligations under
Sections 2.03, 6.02, 7.04 and Exhibit B of this Agreement to any one or more
Permitted Transferees.
SECTION 11.05. Governing Law. This Agreement shall be governed by
and construed in accordance with the law of the State of New York, without
regard to the conflicts of law rules of such state.
SECTION 11.06. Jurisdiction. Except as otherwise expressly provided in
this Agreement, the parties hereto agree that any suit, action or proceeding
seeking to enforce any provision of, or based on any matter arising out of or in
connection with, this Agreement or the transactions contemplated hereby may only
be brought in the United States District Court for the Southern District of New
York or any other New York State court sitting in New York City, and each of the
parties hereby consents to the jurisdiction of such courts (and of the
21
appropriate appellate courts therefrom) in any such suit, action or proceeding
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may now or hereafter have to the laying of the venue of any such suit,
action or proceeding in any such court or that any such suit, action or
proceeding which is brought in any such court has been brought in an
inconvenient forum. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 11.01 shall be deemed
effective service of process on such party.
SECTION 11.07. Counterparts; Third Party Beneficiaries. This Agreement
may be signed in any number of counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the same
instrument. This Agreement shall become effective when each party hereto shall
have received a counterpart hereof signed by the other party hereto. No
provision of this Agreement is intended to confer upon any Person other than the
parties hereto any rights or remedies hereunder, except for rights provided to
Permitted Transferees under Section 7.04.
SECTION 11.08. Entire Agreement. This Agreement (including the Exhibits
hereto) and the Certificate of Designations constitute the entire agreement
between the parties with respect to the subject matter of this Agreement and
supersede all prior agreements and understandings, both oral and written,
between the parties with respect to the subject matter of this Agreement (except
for the letter agreement dated March 9, 1999 with respect to confidential
treatment of information provided by the Corporation, which remains in effect).
SECTION 11.09. Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
SECTION 11.10. Severability. The provisions of this Agreement shall be
deemed severable and the invalidity or unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof. If any
provision of this Agreement, or the application thereof to any person or entity
or any circumstance, is invalid or unenforceable, (a) a suitable and equitable
provision shall be substituted therefor in order to carry out, so far as may be
valid and enforceable, the intent and purpose of such invalid or unenforceable
provision and (b) the remainder of this Agreement and the application of such
provision to other persons, entities or circumstances shall not be affected by
such invalidity or unenforceability, nor shall such invalidity or
unenforceability affect the validity or
22
enforceability of such provision, or the application thereof, in any other
jurisdiction.
SECTION 11.11. Specific Performance. The parties hereto agree that the
remedy at law for any breach of this Agreement will be inadequate and that any
party by whom this Agreement is enforceable shall be entitled to specific
performance in addition to any other appropriate relief or remedy. Such party
may, in its sole discretion, apply to a court of competition jurisdiction for
specific performance or injunctive or such other relief as such court may deem
just and proper in order to enforce this Agreement or prevent any violation
hereof and, to the extent permitted by applicable law, each party waives any
objection to the imposition of such relief.
SECTION 11.12. No Recourse. Notwithstanding any of the terms or
provisions of this Agreement, (i) the Corporation agrees that neither it nor any
person acting on its behalf may assert any claims or cause of action against any
officer, director, partner, member or stockholder of the Buyer or any of its
Affiliates in connection with or arising out of this Agreement or the
transactions contemplated hereby and (ii) the Buyer agrees that neither it nor
any person acting on its behalf may assert any claims or cause of action against
any officer, director, partner, member or stockholder of the Corporation or any
of its Affiliates in connection with or arising out of this Agreement or the
transactions contemplated hereby.
23
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
RCN CORPORATION
By:
----------------------------------
Name:
Title:
HMTF LIVE WIRE INVESTORS, LLC
By:
----------------------------------
Name:
Title:
EXHIBIT B
REGISTRATION RIGHTS
This constitutes Exhibit B to the Stock Purchase Agreement (as it may
be amended from time to time, the "Stock Purchase Agreement") dated as of March
18, 1999 between RCN Corporation, a Delaware corporation (the "Corporation") and
HMTF Live Wire Investments, LLC, a Delaware limited liability company ("Buyer").
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. Terms defined in the Stock Purchase
Agreement are used herein as therein defined. In addition, the following terms,
as used herein, have the following meanings:
"Commission" means the Securities and Exchange Commission.
"Demand Registration Statement" means the Demand Registration Statement
as defined in Section 2.01.
"Holder" means a person who owns Registrable Securities and is either
(a) the Buyer or (b) a direct or an indirect transferee of the Buyer who has
agreed in writing to be bound by the terms of Sections 2.03(b), 6.02 and 7.04 of
the Stock Purchase Agreement and this Exhibit B.
"Piggyback Registration" means a Piggyback Registration as defined in
Section 2.02.
"Registrable Common Stock" means the shares of Common Stock issued upon
conversion of the Preferred Stock, including any additional shares of Common
Stock issued the respect thereof in connection with a stock split, stock
dividend or similar event with respect to the Common Stock.
"Registrable Securities" means (a) the Preferred Stock and (b) the
Registrable Common Stock. As to any particular Registrable Securities, such
Registrable Securities shall cease to be Registrable Securities as soon as they
(i)
have been sold or otherwise disposed of pursuant to a registration statement
that was filed with the Commission and declared effective under the Securities
Act, (ii) are eligible for sale pursuant to Rule 144 without being subject to
applicable volume limitations thereunder, (iii) have been otherwise sold,
transferred or disposed of by a Holder to any Person that is not a Holder, or
(iv) have ceased to be outstanding.
"Rule 144" means Rule 144 (or any successor rule of similar effect)
promulgated under the Securities Act.
"Selling Holder" means any Holder who is selling Registrable Securities
pursuant to a public offering registered hereunder.
"Underwriter" means a securities dealer who purchases any Registrable
Securities as principal and not as part of such dealer's market-making
activities.
SECTION 1.02. Internal References. Unless the context indicates
otherwise, references to Articles, Sections and paragraphs shall refer to the
corresponding articles, sections and paragraphs in this Exhibit B, and
references to the parties shall mean the parties to the Stock Purchase
Agreement.
ARTICLE 2
REGISTRATION RIGHTS
SECTION 2.01. Demand Registration. (a) The Buyer, on its own behalf and
on behalf of the other Holders, may make up to four written requests for
registration under the Securities Act of all or any part of the Registrable
Securities held by the Holders (each, a "Demand Registration"); provided that
(i) no Demand Registration may be requested within 180 days after the preceding
request for a Demand Registration, and (ii) each Demand Registration must be (x)
in respect of Registrable Securities with a fair market value of at least
$50,000,000 or (y) in respect of all remaining Registrable Securities and have a
fair market value of at least $5,000,000. Such request will specify the
aggregate number of shares of Registrable Securities proposed to be sold and
will also specify the intended method of disposition thereof. A registration
will not count as a Demand Registration until it has become effective. Should a
Demand Registration not become effective due to the failure of a Holder to
perform its obligations under this Exhibit B or the inability of the requesting
Holders to reach agreement with the underwriters for the proposed sale (the
"Underwriters") on price or other customary terms for such transaction, or in
the event the requesting
2
Holders withdraw or do not pursue the request for the Demand Registration (in
each of the foregoing cases, provided that at such time the Corporation is in
compliance in all material respects with its obligations under this Exhibit B),
then such Demand Registration shall be deemed to have been effected (provided
that if the Demand Registration does not become effective because of a material
adverse change in the condition (financial or otherwise), business, assets or
results of operations of the Corporation and its subsidiaries taken as a whole
that occurs subsequent to the date of the written request made by the requesting
Holders, then the Demand Registration shall not be deemed to have been
effected).
(b) In the event that Buyer withdraws or does not pursue a request for
a Demand Registration and, pursuant to Section 2.01(a) hereof, such Demand
Registration is deemed to have been effected, the Holders may reacquire such
Demand Registration (such that the withdrawal or failure to pursue a request
will not count as a Demand Registration hereunder) if the Selling Holders
reimburse the Corporation for any and all Registration Expenses incurred by the
Corporation in connection with such request for a Demand Registration; provided
that the right to reacquire a Demand Registration may be exercised a maximum of
two times.
(c) If the Selling Holders so elect, the offering of such Registrable
Securities pursuant to such Demand Registration shall be in the form of an
underwritten offering. A majority in interest of the Selling Holders shall have
the right to select the managing Underwriters and any additional investment
bankers and managers to be used in connection with any offering under this
Section 2.01, subject to the Corporation's approval, which approval shall not be
unreasonably withheld.
(d) The Selling Holders will inform the Corporation of the time and
manner of any disposition of Registrable Common Stock, and agree to reasonably
cooperate with the Corporation in effecting the disposition of the Registrable
Common Stock in a manner that does not unreasonably disrupt the public trading
market for the Common Stock.
(e) The Corporation will have the right to preempt any Demand
Registration with a primary registration by delivering written notice (within
five business days after the Corporation has received a request for such Demand
Registration) of such intention to the Buyer indicating that the Corporation has
identified a specific business need and use for the proceeds of the sale of such
securities and the Corporation shall use commercially reasonable efforts to
effect a primary registration within 60 days of such notice. In the ensuing
primary registration, the Holders will have such piggyback registration rights
as are set forth in Section 2.02 hereof. Upon the Corporation's preemption of a
requested Demand Registration, such requested registration will not count as the
Holders'
3
Demand Registration; provided that a Demand Registration will not be deemed
preempted if the Holders are permitted to sell all requested securities in
connection with the ensuing primary offering by exercising their piggyback
registration rights as set forth in Section 2.02. The Corporation may exercise
the right to preempt only twice in any 360-day period; provided, that during any
360 day period there shall be a period of at least 120 consecutive days during
which the Selling Holders may effect a Demand Regulation.
SECTION 2.02. Piggyback Registration. If the Corporation proposes to
file a registration statement under the Securities Act with respect to an
offering of Common Stock for its own account or for the account of another
Person (other than a registration statement on Form S-4 or S-8 or pursuant to
Rule 415 (or any substitute form or rule, respectively, that may be adopted by
the Commission)), the Corporation shall give written notice of such proposed
filing to the Holders at the address set forth in the share register of the
Corporation as soon as reasonably practicable (but in no event less than 10 days
before the anticipated filing date), undertaking to provide each Holder the
opportunity to register on the same terms and conditions such number of shares
of Registrable Common Stock as such Holder may request (a "Piggyback
Registration"). Each Holder will have five business days after receipt of any
such notice to notify the Corporation as to whether any it wishes to participate
in a Piggyback Registration; provided that should a Holder fail to provide
timely notice to the Corporation, such Holder will forfeit any rights to
participate in the Piggyback Registration with respect to such proposed
offering. In the event that the registration statement is filed on behalf of a
Person other than the Corporation, the Corporation will use its best efforts to
have the shares of Registrable Common Stock that the Holders wish to sell
included in the registration statement. If the Corporation shall determine in
its sole discretion not to register or to delay the proposed offering, the
Corporation may, at its election, provide written notice of such determination
to the Holders and (i) in the case of a determination not to effect the proposed
offering, shall thereupon be relieved of the obligation to register such
Registrable Common Stock in connection therewith, and (ii) in the case of a
determination to delay a proposed offering, shall thereupon be permitted to
delay registering such Registrable Common Stock for the same period as the delay
in respect of the proposed offering. As between the Corporation and the Selling
Holders, the Corporation shall be entitled to select the Underwriters in
connection with any Piggyback Registration.
SECTION 2.03. Reduction of Offering. Notwithstanding anything contained
herein, if the managing Underwriter of an offering described in Section 2.01 or
2.02 states in writing that the size of the offering that Holders, the
Corporation and any other Persons intend to make is such that the inclusion of
the Registrable Securities would be likely to materially and adversely affect
the price, timing or
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distribution of the offering, then the amount of Registrable Securities to be
offered for the account of Holders shall be reduced to the extent necessary to
reduce the total amount of securities to be included in such offering to the
amount recommended by such managing Underwriter; provided that in the case of a
Piggyback Registration, if securities are being offered for the account of
Persons other than the Corporation, then the proportion by which the amount of
Registrable Securities intended to be offered for the account of Holders is
reduced shall not exceed the proportion by which the amount of securities
intended to be offered for the account of such other Persons (other than any
Person exercising a demand registration right) is reduced; provided further that
in the case of a Demand Registration, the amount of Registrable Securities to be
offered for the account of the Holders making the Demand Registration shall be
reduced only after the amount of securities to be offered for the account of the
Corporation and any other Persons has been reduced to zero.
SECTION 2.04. Preservation of Rights. The Corporation will not grant
any registration rights to third parties which contravene the rights granted
hereunder.
ARTICLE 3
REGISTRATION PROCEDURES
SECTION 3.01. Filings; Information. In connection with the registration
of Registrable Securities pursuant to Section 2.01 and Section 2.02 hereof, the
Corporation will use its reasonable best efforts to effect the registration of
such Registrable Securities as promptly as is reasonably practicable, and in
connection with any such request:
(a) The Corporation will expeditiously prepare and file with the
Commission a registration statement on any form for which the
Corporation then qualifies and which counsel for the Corporation shall
deem appropriate and available for the sale of the Registrable
Securities to be registered thereunder in accordance with the intended
method of distribution thereof, and use its reasonable best efforts to
cause such filed registration statement to become and remain effective
for such period, not to exceed 60 days, as may be reasonably necessary
to effect the sale of such securities; provided that if the Corporation
shall furnish to the Buyer a certificate signed by the Corporation's
Chairman, President or any Vice-President stating that in his or her
good faith judgment it would be detrimental or otherwise
disadvantageous to the Corporation or its shareholders for such a
registration statement to be filed as expeditiously
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as possible (because the sale of Registrable Securities covered by such
Registration Statement or the disclosure of information in any related
prospectus or prospectus supplement would materially interfere with any
acquisition, financing or other material event or transaction which is
then intended or the public disclosure of which at the time would be
materially prejudicial to the Corporation), the Corporation may
postpone the filing or effectiveness of a registration statement for a
period of not more than 120 days; provided, that during any 360 day
period there shall be a period of at least 120 consecutive days during
which the Corporation will make a registration statement available
under this Exhibit B; and provided further, that if (i) the effective
date of any registration statement filed pursuant to a Demand
Registration would otherwise be at least 45 calendar days, but fewer
than 90 calendar days, after the end of the Corporation's fiscal year,
and (ii) the Securities Act requires the Corporation to include audited
financials as of the end of such fiscal year, the Corporation may delay
the effectiveness of such registration statement for such period as is
reasonably necessary to include therein its audited financial
statements for such fiscal year.
(b) The Corporation will, if requested, prior to filing such
registration statement or any amendment or supplement thereto, furnish
to the Selling Holders, and each applicable managing Underwriter, if
any, copies thereof, and thereafter furnish to the Selling Holders and
each such Underwriter, if any, such number of copies of such
registration statement, amendment and supplement thereto (in each case
including all exhibits thereto and documents incorporated by reference
therein) and the prospectus included in such registration statement
(including each preliminary prospectus) as the Selling Holders or each
such Underwriter may reasonably request in order to facilitate the sale
of the Registrable Securities by the Selling Holders.
(c) After the filing of the registration statement, the
Corporation will promptly notify the Selling Holders of any stop order
issued or, to the Corporation's knowledge, threatened to be issued by
the Commission and take all reasonable actions required to prevent the
entry of such stop order or to remove it if entered.
(d) The Corporation will use its reasonable best efforts to
qualify the Registrable Securities for offer and sale under such other
securities or blue sky laws of such jurisdictions in the United States
as the Selling Holders reasonably request; provided that the
Corporation will not be required to (i) qualify generally to do
business in any jurisdiction where it would not otherwise be required
to qualify but for this paragraph 3.01(d),
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(ii) subject itself to taxation in any such jurisdiction or (iii)
consent to general service of process in any such jurisdiction.
(e) The Corporation will as promptly as is practicable notify the
Selling Holders, at any time when a prospectus relating to the sale of
the Registrable Securities is required by law to be delivered in
connection with sales by an Underwriter or dealer, of the occurrence of
any event requiring the preparation of a supplement or amendment to
such prospectus so that, as thereafter delivered to the purchasers of
such Registrable Securities, such prospectus will not contain an 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 the light of the circumstances under which they were made,
not misleading and promptly make available to the Selling Holders, and
to the Underwriters any such supplement or amendment. Upon receipt of
any notice of the occurrence of any event of the kind described in the
preceding sentence, Selling Holders will forthwith discontinue the
offer and sale of Registrable Securities pursuant to the registration
statement covering such Registrable Securities until receipt by the
Selling Holders and the Underwriters of the copies of such supplemented
or amended prospectus and, if so directed by the Corporation, the
Selling Holders will deliver to the Corporation all copies, other than
permanent file copies then in the possession of Selling Holders, of the
most recent prospectus covering such Registrable Securities at the time
of receipt of such notice. In the event the Corporation shall give such
notice, the Corporation shall extend the period during which such
registration statement shall be maintained effective as provided in
Section 3.01(a) hereof by the number of days during the period from and
including the date of the giving of such notice to the date when the
Corporation shall make available to the Selling Holders such
supplemented or amended prospectus.
(f) The Corporation will enter into customary agreements
(including an underwriting agreement in customary form) and take such
other actions as are required in order to expedite or facilitate the
sale of such Registrable Securities.
(g) At the request of any Underwriter in connection with an
underwritten offering the Corporation will furnish (i) an opinion of
counsel, addressed to the Underwriters, covering such customary matters
as the managing Underwriter may reasonably request and (ii) a comfort
letter or comfort letters from the Corporation's independent public
accountants covering such customary matters as the managing Underwriter
may reasonably request.
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(h) The Corporation will make generally available to its security
holders, as soon as reasonably practicable, an earnings statement
covering a period of 12 months, beginning within three months after the
effective date of the registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act and
the rules and regulations of the Commission thereunder.
(i) The Corporation will use its commercially reasonable efforts
to cause all such Registrable Common Stock and, in the event of a
public offering of Series A Preferred Stock, the Series A Preferred
Stock (subject to applicable listing requirements) to be listed on each
securities exchange or quoted on each inter-dealer quotation system on
which the Common Stock is then listed or quoted.
The Corporation may require Selling Holders promptly to furnish in
writing to the Corporation such information regarding such Selling Holders, the
plan of distribution of the Registrable Securities and other information as the
Corporation may from time to time reasonably request or as may be legally
required in connection with such registration.
SECTION 3.02. Registration Expenses. In connection with any Demand
Registration, the Corporation shall pay the following expenses incurred in
connection with such registration (the "Registration Expenses"): (i)
registration and filing fees with the Commission and the National Association of
Securities Dealers, Inc., (ii) fees and expenses of compliance with securities
or blue sky laws (including reasonable fees and disbursements of counsel in
connection with blue sky qualifications of the Registrable Securities), (iii)
printing expenses, (iv) fees and expenses incurred in connection with the
listing or quotation of the Registrable Securities, (v) fees and expenses of
counsel to the Corporation and the reasonable fees and expenses of independent
certified public accountants for the Corporation (including fees and expenses
associated with the special audits or the delivery of comfort letters) and (vi)
the reasonable fees and expenses of any additional experts retained by the
Corporation in connection with such registration. In connection with any
Piggyback Registration, the Corporation shall pay the Registration Expenses set
forth in clauses (ii) through (vi) of the preceding sentence. The Selling
Holders shall pay (i) any underwriting fees, discounts or commissions
attributable to the sale of Registrable Securities, (ii) fees and expenses of
counsel for the Selling Holders and (iii) any out-of-pocket expenses of the
Selling Holders. In connection with any Piggyback Registration, the Selling
Holders shall pay, in addition to items (i) through (iii) of the preceding
sentence, registration and filing fees with the Commission and National
Association of Securities Dealers Inc., in proportion to the ratio that the
number of
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shares of Registrable Common Stock being registered for the account of the
Selling Holders bears to the aggregate number of shares of Common Stock being
included in the applicable registration statement.
ARTICLE 4
INDEMNIFICATION AND CONTRIBUTION
SECTION 4.01. Indemnification by the Corporation. The Corporation
agrees to indemnify and hold harmless each Selling Holder and its Affiliates and
their respective officers, directors, partners, stockholders, members,
employees, agents and representatives and each Person (if any) which controls a
Selling Holder within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act, from and against any and all losses, claims,
damages, liabilities, costs and expenses (including reasonable attorneys' fees)
caused by, arising out of resulting from or related to any untrue statement or
alleged untrue statement of a material fact contained in any registration
statement or prospectus relating to the Registrable Securities (as amended or
supplemented if the Corporation shall have furnished any amendments or
supplements thereto) or any preliminary prospectus, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages or liabilities are caused by or contained in or
based upon any information furnished in writing to the Corporation by or on
behalf of such Selling Holder or any Underwriter expressly for use therein or by
the Selling Holder or Underwriter's failure to deliver a copy of the
registration statement or prospectus or any amendments or supplements thereto
after the Corporation has furnished the Buyer or Underwriter with copies of the
same. The Corporation also agrees to indemnify any Underwriters of the
Registrable Securities, their officers and directors and each person who
controls such Underwriters on substantially the same basis as that of the
indemnification of the Selling Holders provided in this Section 4.01.
SECTION 4.02. Indemnification by the Buyer. Each Selling Holder agrees
to indemnify and hold harmless the Corporation, its officers and directors, and
each Person, if any, which controls the Corporation within the meaning of either
Section 15 of the Securities Act or Section 20 of the Exchange Act to the same
extent as the foregoing indemnity from the Corporation to each Selling Holder,
but only with reference to information furnished in writing by or on behalf of
such Selling Holder expressly for use in any registration statement or
prospectus relating to the Registrable Securities, or any amendment or
supplement thereto, or
9
any preliminary prospectus. Each Selling Holder also agrees to indemnify and
hold harmless any Underwriters of the Registrable Securities, their officers and
directors and each person who controls such Underwriters on substantially the
same basis as that of the indemnification of the Corporation provided in this
Section 4.02.
SECTION 4.03. Conduct of Indemnification Proceedings. In case any
proceeding (including any governmental investigation) shall be instituted
involving any Person in respect of which indemnity may be sought pursuant to
Section 4.01 or Section 4.02, such Person (the "Indemnified Party") shall
promptly notify the Person against whom such indemnity may be sought (the
"Indemnifying Party") in writing and the Indemnifying Party, upon the request of
the Indemnified Party, shall retain counsel reasonably satisfactory to such
Indemnified Party to represent such Indemnified Party and any others the
Indemnifying Party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any Indemnified Party shall have the right to retain its own
counsel, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party unless (i) the Indemnifying Party and the Indemnified
Party shall have mutually agreed to the retention of such counsel or (ii) the
named parties to any such proceeding (including any impleaded parties) include
both the Indemnified Party and the Indemnifying Party and, in the written
opinion of counsel for the Indemnified Party, representation of both parties by
the same counsel would be inappropriate due to actual or potential differing
interests between them. It is understood that the Indemnifying Party shall not,
in connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate firm
of attorneys (in addition to any local counsel) at any time for all such
Indemnified Parties, and that all such fees and expenses shall be reimbursed as
they are incurred. In the case of any such separate firm for the Indemnified
Parties, such firm shall be designated in writing by the Indemnified Parties.
The Indemnifying Party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent (not to
be unreasonably withheld), or if there be a final judgment for the plaintiff,
the Indemnifying Party shall indemnify and hold harmless such Indemnified
Parties from and against any loss or liability (to the extent stated above) by
reason of such settlement or judgment.
SECTION 4.04. Contribution. If the indemnification provided for in this
Article 4 is unavailable to an Indemnified Party in respect of any losses,
claims, damages or liabilities in respect of which indemnity is to be provided
hereunder, then each such Indemnifying Party, in lieu of indemnifying such
Indemnified Party, shall to the fullest extent permitted by law contribute to
the amount paid or payable by such Indemnified Party as a result of such losses,
claims, damages or
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liabilities in such proportion as is appropriate to reflect the relative fault
of such party in connection with the statements or omissions that resulted in
such losses, claims, damages or liabilities, as well as any other relevant
equitable considerations. The relative fault of the Corporation, a Selling
Holder and the Underwriters shall be determined by reference to, among other
things, whether the untrue or alleged untrue statement of a material fact or the
omission or alleged omission to state a material fact relates to information
supplied by such party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The Corporation and each Selling Holder agrees that it would not be
just and equitable if contribution pursuant to this Section 4.04 were determined
by pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or payable by an Indemnified Party as a result of the losses,
claims, damages or liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such Indemnified Party
in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this Article 4, no Underwriter shall be
required to contribute any amount in excess of the amount by which the total
price at which the securities underwritten by it and distributed to the public
were offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and each Selling
Holder shall not be required to contribute any amount in excess of the amount by
which the net proceeds of the offering (before deducting expenses) received by
such Selling Holder exceeds the amount of any damages which such Selling Holder
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.
ARTICLE 5
MISCELLANEOUS
SECTION 5.01. Participation in Underwritten Registrations. No Person
may participate in any underwritten registered offering contemplated hereunder
unless such Person (a) agrees to sell its securities on the basis provided in
any
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underwriting arrangements approved by the Persons entitled hereunder to approve
such arrangements, (b) completes and executes all questionnaires, powers of
attorney, custody arrangements, indemnities, underwriting agreements and other
documents reasonably required under the terms of such underwriting arrangements
and this Exhibit B and (c) furnishes in writing to the Corporation such
information regarding such Person, the plan of distribution of the Registrable
Securities and other information as the Corporation may from time to time
request or as may be legally required in connection with such registration.
SECTION 5.02. Rule 144. The Corporation covenants that it will file any
reports required to be filed by it under the Securities Act and the Exchange Act
and that it will take such further action as the Holders may reasonably request
to the extent required from time to time to enable the Holders to sell
Registrable Securities without registration under the Securities Act within the
limitation of the exemptions provided by Rule 144 under the Securities Act, as
such Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission. Upon the request of the Buyer, the
Corporation will deliver to the Buyer a written statement as to whether it has
complied with such reporting requirements.
SECTION 5.03. Holdback Agreements. Each Holder agrees, in the event of
an underwritten offering for the Corporation (whether for the account of the
Corporation or otherwise) not to offer, sell, contract to sell or otherwise
dispose of any Registrable Securities, or any securities convertible into or
exchangeable or exercisable for such securities, including any sale pursuant to
Rule 144 under the Securities Act (except as part of such underwritten
offering), during the 14 days prior to, and during the 180-day period (or such
lesser period as the lead or managing underwriters may require) beginning on,
the effective date of the registration statement for such underwritten offering
(or, in the case of an offering pursuant to an effective shelf registration
statement pursuant to Rule 415, the pricing date for such underwritten
offering).
SECTION 5.04. Termination. The registration rights granted under this
Agreement will terminate on March 31, 2014; provided, however, that if the
shares of Preferred Stock outstanding on such date shall not have been redeemed
in full in accordance with Section 6(b) of the Certificate of Designations, this
Agreement shall remain in full force and effect with respect to such shares (and
the shares of Common Stock issuable upon the conversion of such shares) until
such time as such shares have been so redeemed in full.
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