EXHIBIT 10-1
EXECUTION COPY
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WARRANT AGREEMENT
Between
METROMEDIA FIBER NETWORK, INC.
and
THE HOLDERS PARTY HERETO
Dated as of October 1, 2001
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS AND ACCOUNTING MATTERS.....................................................................1
SECTION 1.01. Definitions...............................................................................1
SECTION 1.02. Terms Generally...........................................................................7
SECTION 1.03. Accounting Terms and Determinations.......................................................7
ARTICLE II PURCHASE AND SALE OF WARRANTS.........................................................................7
SECTION 2.01. Authorization and Issuance of Warrant Stock and Warrant...................................7
SECTION 2.02. Issuance of Warrants......................................................................7
SECTION 2.03. Purchase for Initial Holders' Account.....................................................8
SECTION 2.04. Securities Act Compliance.................................................................8
SECTION 2.05. Listing...................................................................................9
ARTICLE III REPRESENTATIONS AND WARRANTIES.......................................................................9
SECTION 3.01. Existence; Qualification..................................................................9
SECTION 3.02. No Breach.................................................................................9
SECTION 3.03. Corporate Action..........................................................................9
SECTION 3.04. Approvals................................................................................10
SECTION 3.05. Investment Company Act...................................................................10
SECTION 3.06. Public Utility Holding Company Act.......................................................10
SECTION 3.07. Capitalization...........................................................................10
SECTION 3.08. Private Offering.........................................................................11
SECTION 3.09. Litigation...............................................................................11
SECTION 3.10. Brokers..................................................................................11
SECTION 3.11. SEC Documents; Financial Statements......................................................11
ARTICLE IV RESTRICTIONS ON TRANSFERABILITY......................................................................12
SECTION 4.01. Transfers Generally......................................................................12
SECTION 4.02. Transfers of Restricted Securities Pursuant to Registration Statement and
Exemptions...............................................................................12
SECTION 4.03. Restrictive Legends......................................................................12
SECTION 4.04. Termination of Restrictions..............................................................13
SECTION 4.05. Dispositions of Warrants and Warrant Stock...............................................13
SECTION 4.06. Provisions Applicable to Regulated Holders...............................................14
ARTICLE V ADJUSTMENTS OF STOCK UNITS............................................................................15
SECTION 5.01. Purchases and Redemptions................................................................15
SECTION 5.02. Subdivisions and Combinations............................................................16
SECTION 5.03. Issuance of Common Stock.................................................................16
(i)
Page
SECTION 5.04. Issuance of Other Securities, Rights or Obligations......................................17
SECTION 5.05. Superseding Adjustment...................................................................18
SECTION 5.06. Other Provisions Applicable to Adjustments...............................................19
SECTION 5.07. Merger, Consolidation or Disposition of Assets...........................................19
SECTION 5.08. Other Action Affecting Common Stock......................................................20
SECTION 5.09. No Adjustment Necessary..................................................................20
SECTION 5.10. Notice of Adjustments....................................................................20
SECTION 5.11. Notice of Certain Corporate Action.......................................................20
ARTICLE VI REGISTRATION RIGHTS..................................................................................21
SECTION 6.01. (a) Filing of Shelf Registration.........................................................21
SECTION 6.02. Hold-Back Agreements; Cutbacks...........................................................22
SECTION 6.03. Registration Procedures..................................................................23
SECTION 6.04. Registration Expenses....................................................................27
SECTION 6.05. Restriction on Other Registrations.......................................................28
SECTION 6.06. Indemnification..........................................................................28
SECTION 6.07. Rule 144.................................................................................30
SECTION 6.08. Remedies.................................................................................31
ARTICLE VII TAG-ALONG SALE......................................................................................31
SECTION 7.01. Tag-Along Obligations....................................................................31
SECTION 7.02. Procedures...............................................................................32
ARTICLE XIII HOLDERS' RIGHTS....................................................................................33
SECTION 8.01. Delivery Expenses........................................................................33
SECTION 8.02. Taxes....................................................................................33
SECTION 8.03. Replacement of Instruments...............................................................33
SECTION 8.04. Indemnification..........................................................................33
SECTION 8.05. Inspection Rights........................................................................34
ARTICLE IX OTHER COVENANTS OF ISSUER............................................................................34
SECTION 9.01. Financial Statements, Etc................................................................34
SECTION 9.02. Transactions with Affiliates.............................................................34
SECTION 9.03. Restrictions on Performance..............................................................34
SECTION 9.04. Modification of Other Equity Documents...................................................35
SECTION 9.05. Reservation and Authorization of Common Stock............................................35
SECTION 9.06. Notice of Expiration Date................................................................36
SECTION 9.07. Occurrence of Initial Exercise Date......................................................36
SECTION 9.08. Limitations on Registration of Other Securities..........................................36
ARTICLE X MISCELLANEOUS.........................................................................................36
SECTION 10.01. Home Office Payment.....................................................................36
SECTION 10.02. Waiver..................................................................................36
SECTION 10.03. Notices.................................................................................37
SECTION 10.04. Expenses, Etc...........................................................................37
(ii)
Page
SECTION 10.05. Amendments, Etc.........................................................................37
SECTION 10.06. Successors and Assigns..................................................................37
SECTION 10.07. Survival................................................................................37
SECTION 10.08. Specific Performance....................................................................38
SECTION 10.09. Captions................................................................................38
SECTION 10.10. Counterparts............................................................................38
SECTION 10.11. Governing Law...........................................................................38
SECTION 10.12. Severability............................................................................38
SECTION 10.13. Entire Agreement........................................................................39
ANNEX 1 - FORM OF WARRANT
ANNEX 2 - FORM OF ASSIGNMENT
ANNEX 3 - ALLOCATION OF WARRANTS
ANNEX 4 - FORM OF JOINDER AGREEMENT
(iii)
WARRANT AGREEMENT
WARRANT AGREEMENT dated as of October 1, 2001 between METROMEDIA FIBER
NETWORK, INC., a company duly organized and validly existing under the laws of
the State of Delaware (the "ISSUER"), and each Person named under the caption
"INITIAL HOLDERS" on the signature pages hereof (and each assignee thereof)
(each an "INITIAL HOLDER" and, collectively, the "INITIAL HOLDERS").
WHEREAS, the Issuer, certain of its subsidiaries and the Initial Holders
(or their respective affiliates) are parties to a Note and Guarantee Agreement,
dated as of September 6, 2001 (as originally executed, the "NOTE AND GUARANTEE
AGREEMENT"; references to the Note and Guarantee Agreement herein shall apply
whether or not the Note and Guarantee Agreement is then in force and without
regard to amendments thereto unless such amendments thereto have been consented
to by the requisite Initial Holders as provided herein), providing, subject to
the terms and conditions thereof, for the purchase of notes of the Issuer by the
Initial Holders (or such affiliates) in an original aggregate principal amount
of $150,000,000.
WHEREAS, as a condition to the closing of the transactions contemplated by
the Note and Guarantee Agreement and the purchase of notes of the Issuer by the
Initial Holders thereunder and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Issuer has agreed
to issue one or more Warrants (as hereinafter defined) to each Initial Holder
providing for the purchase of shares of Stock Units (as hereinafter defined) of
the Issuer, in the manner hereinafter provided.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
SECTION 1.01. DEFINITIONS. As used in this Agreement, the following terms
shall have the following meanings:
"AFFILIATE" means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
"APPLICABLE DISPOSITION" means any sale, transfer or other disposition by
the Principal Shareholder of Common Stock, to the extent that such sale,
transfer or other disposition, together with all other sales, transfers and
other dispositions by the Principal Shareholder and its Affiliates in the
aggregate represents in excess of 20% of the aggregate amount of Common Stock
beneficially owned by the Principal Shareholder and its Affiliates on the
Closing Date.
"BOARD" means the Board of Directors of the Issuer.
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"BUSINESS DAY" means any day that is not a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law to
remain close.
"CLOSING DATE" means the date of the original issuance of the Warrants
hereunder.
"COMMISSION" means the Securities and Exchange Commission or any other
similar or successor agency of the Federal government administering the
Securities Act and/or the Exchange Act.
"COMMON STOCK" means the Issuer's Class A Common Stock, par value $.01 per
share, as constituted on the Closing Date and any stock into which such Common
Stock may thereafter be converted or changed, and also shall include any other
stock of the Issuer of any other class (other than the Issuer's Class B Common
Stock, par value $.01 per share), which is not preferred as to dividends or
assets over any other class of any other stock of the Issuer. References herein
and in the Warrants to the Common Stock outstanding "on a fully diluted basis"
at any time means the number of shares of Common Stock then issued and
outstanding, assuming full conversion, exercise and exchange of all Convertible
Securities and Options that are (or may become) exchangeable for, or exercisable
or convertible into, Common Stock, including the Warrants. All references to
Common Stock herein shall be subject to appropriate adjustment by reason of any
stock dividend, split, reverse split, combination, recapitalization or any
similar corporate transaction.
"CONTROL" means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
"CONTROLLING" and "CONTROLLED" shall have meanings correlative thereto.
"CONVERTIBLE SECURITIES" means evidences of indebtedness, interests or
other securities or rights which are exchangeable for or exercisable or
convertible into shares of Common Stock either immediately or upon the arrival
of a specified date or the occurrence of a specified event.
"CURRENT MARKET VALUE" means, on any date, (i) the average of the daily
market prices for each day during the 5 consecutive trading days ending on the
last trading day prior to such date or (ii) if the applicable securities are not
publicly traded or are not registered under the Exchange Act, the fair value of
such securities. The market price for each such Business Day shall be the last
sale price on such day as reported in the Consolidated Last Sale Reporting
System or as quoted in the National Association of Securities Dealers Automated
Quotation System, or if such last sale price is not available, the average of
the closing bid and asked prices as reported in either such system, or in any
other case the higher bid price quoted for such day as reported by The Wall
Street Journal and the National Quotation Bureau pink sheets.
"CURRENT WARRANT PRICE" means, as at any date, the amount per share of
Common Stock equal to the quotient resulting from dividing the Exercise Price
per Stock Unit in effect on
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such date by the number of shares (including any fractional share) of Common
Stock comprising a Stock Unit on such date.
"EQUITY SECURITIES" means Securities, Convertible Securities, Options and
Rights to Purchase Securities.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or
any similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"EXERCISE PRICE" has the meaning specified in the form of Warrant attached
as Annex 1.
"EXPIRATION DATE" has the meaning specified in form of the Warrant attached
as Annex 1.
"GAAP" means generally accepted accounting principles, consistently applied
throughout the specified period.
"GOVERNMENTAL AUTHORITY" means the government of the United States of
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory, monetary or administrative powers or functions of or
pertaining to government.
"HOLDER" means any Person (including, without limitation, each Initial
Holder) who acquires Warrants or Warrant Stock pursuant to the provisions of
this Agreement, including any transferees of Warrants or Warrant Stock;
PROVIDED, HOWEVER, that a holder of Warrants or Warrant Stock purchased pursuant
to an effective registration statement or pursuant to Rule 144 shall not be
deemed a Holder.
"INDEMNIFIED PARTIES" has the meaning specified in Section 6.06(a).
"INDEMNIFIED PARTY" has the meaning specified in Section 6.06(c).
"INITIAL EXERCISE DATE" shall mean the date upon which the stockholders of
the Issuer duly and validly approve, by means of written consent or otherwise,
and in accordance with Rule 14(c)(2)(b) promulgated under the Exchange Act, the
issuances of common stock (or securities convertible into or exercisable for
common stock) of the Issuer pursuant to the terms of the Basic Documents and the
Verizon Debt Agreement (as such terms are defined in the Note and Guarantee
Agreement).
"INITIAL HOLDER" has the meaning specified in the preamble of this
Agreement.
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"ISSUER" has the meaning specified in the preamble of this Agreement.
"JOINDER AGREEMENT" has the meaning specified in Section 7.01(c) of this
Agreement.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For purposes of this Agreement, a Person shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such asset.
"LIQUIDATED DAMAGES" has the meaning specified in Section 6.01(b).
"NASD" means the National Association of Securities Dealers.
"NOTE AND GUARANTEE AGREEMENT" has the meaning specified in the recital of
this Agreement.
"OPTION" means any warrant, option or other right to subscribe for or
purchase shares of Common Stock.
"OPTION PLANS" means any stock option plan, stock grant plan, stock
purchase, stock option or employment arrangement approved from time to time by
the Board.
"OTHER EQUITY DOCUMENTS" means the Option Plans, the certificate of
incorporation of the Issuer, the by-laws of the Issuer and any other instrument
or document of organization or governance of the Issuer.
"PERSON" means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.
"PRINCIPAL SHAREHOLDER" means Metromedia Company.
"PRINCIPAL SHAREHOLDER BENEFICIAL OWNER" means John W. Kluge and/or Stuart
Subotnick, as applicable.
"PROSPECTUS" means any Registration Statement, 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
by all other amendments and supplements to the prospectus, including
post-effective amendments and all material incorporated by reference in such
prospectus.
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"REGISTRABLE SECURITIES" means the Warrants and the Warrant Stock; PROVIDED
that a security ceases to be a Registrable Security when it is no longer a
Transfer Restricted Security.
"REGISTRATION DEFAULT" has the meaning specified in Section 6.01(b).
"REGISTRATION EXPENSES" has the meaning specified in Section 6.04.
"REGISTRATION STATEMENT" means any registration statement of the Issuer
which covers any of the Registrable Securities pursuant to the provisions of
this Agreement, including the Prospectus, amendments and supplements to such
Registration Statement, including post-effective amendments, all exhibits and
all material incorporated by reference in such Registration Statement.
"REQUIRED EFFECTIVE DATE" has the meaning specified in Section 6.01(a).
"REQUIRED FILING DATE" has the meaning specified in Section 6.01(a).
"REQUIRED HOLDERS" means the Holders of a majority of the Warrant Stock
issued or issuable upon exercise of the Warrants. For purposes of giving
notices, waivers and consents hereunder, Holders of Warrants shall be deemed
holders of the Warrant Stock issued on exercise thereof.
"RESTRICTED CERTIFICATE" means a certificate for Warrant Stock or Warrants
bearing or required to bear the restrictive legend set forth in Section 4.03.
"RESTRICTED SECURITIES" means Restricted Warrant Stock and Restricted
Warrants.
"RESTRICTED WARRANT STOCK" means Warrant Stock evidenced by a Restricted
Certificate.
"RESTRICTED WARRANTS" means Warrants evidenced by a Restricted Certificate.
"RIGHTS TO PURCHASE SECURITIES" means options and rights issued by the
Issuer (whether presently exercisable or not) to purchase Securities or
Convertible Securities.
"RULE 144" means Rule 144 promulgated by the Commission under the
Securities Act (or any successor or similar rule then in force).
"RULE 144A" means Rule 144A promulgated by the Commission under the
Securities Act (or any successor or similar rule then in force).
"SECURITIES" means the Common Stock and any other equity securities of the
Issuer of any kind or class.
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"SECURITIES ACT" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"SHAREHOLDER" means any Person who directly or indirectly owns any shares
of Common Stock (including Warrant Stock).
"SHELF REGISTRATION" has the meaning ascribed to it in Section 6.01(a).
"STOCK UNIT" means one share of Common Stock, as such Common Stock is
constituted on the date hereof, and thereafter means such number of shares
(including any fractional shares) of Common Stock and other securities, cash or
other property as shall result from the adjustments specified in Article V.
"SUBSIDIARY" of a Person means (a) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(b) any company, partnership, association, joint venture or similar business
organization more than 50% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled. Unless otherwise
expressly provided, all references herein to a "Subsidiary" means a direct or
indirect Subsidiary of the Issuer.
"TAG-ALONG RIGHTS" means the right of a Holder to participate in a
Tag-Along Sale pursuant to, and in accordance with, Article VII.
"TAG-ALONG SALE" has the meaning specified in Section 7.01(a).
"TAG-ALONG SELLER" has the meaning specified in Section 7.01(a).
"TRANSFER RESTRICTED SECURITY" means the Registrable Securities beginning
upon original issuance thereof, until the later of (i) such time as all
Registrable Securities are eligible for sale under Rule 144(k) under the
Securities Act so that all transfer restrictions and restrictive legends with
respect to such shares may be removed upon the consummation of such sale and
(ii) the third anniversary of the Initial Exercise Date.
"UNDERWRITTEN REGISTRATION" or "UNDERWRITTEN OFFERING" means a registration
in which securities of the Issuer are sold to an underwriter for reoffering to
the public.
"WARRANT" and "WARRANTS" means the Warrants issued by the Issuer pursuant
to this Agreement on the date hereof, evidencing rights to purchase up to an
aggregate of 203,468,436 Stock Units (which Warrants represent as of the Closing
Date 12% of the outstanding shares of Common Stock on a fully diluted basis),
and all Warrants issued upon transfer, division or combination of, or in
substitution for, any thereof.
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"WARRANT STOCK" means all shares of Common Stock issuable from time to time
upon exercise of the Warrant.
SECTION 1.02. TERMS GENERALLY. The definitions of terms herein shall apply
equally to the singular and plural forms of the terms defined. Whenever the
context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits, Annexes and Schedules shall be construed to refer to
Articles and Sections of, and Exhibits, Annexes and Schedules to, this Agreement
or the Warrant, as the case may be, and (e) the words "asset" and "property"
shall be construed to have the same meaning and effect and to refer to any and
all tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.
SECTION 1.03. ACCOUNTING TERMS AND DETERMINATIONS. Except as otherwise may
be expressly provided herein, all accounting terms used herein shall be
interpreted, and all financial statements and certificates and reports as to
financial matters required to be delivered to the Holder hereunder shall be
prepared, in accordance with GAAP. All calculations made for the purposes of
determining compliance with the terms of this Agreement shall (except as
otherwise may be expressly provided herein) be made by application of GAAP.
ARTICLE II
PURCHASE AND SALE OF WARRANTS
SECTION 2.01. AUTHORIZATION AND ISSUANCE OF WARRANT STOCK AND WARRANT. The
Issuer has authorized: (a) the issuance of Warrants evidenced by warrant
certificates in the form of Annex 1; and (b) the issuance of such number of
shares of Common Stock as shall be necessary to permit the Issuer to comply with
its obligations to issue shares of Common Stock pursuant to the Warrants.
SECTION 2.02. ISSUANCE OF WARRANTS. On the date hereof, in consideration of
the purchase of notes of the Issuer by the Initial Holders pursuant to the Note
and Guarantee Agreement,
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(a) the Issuer shall issue to each Initial Holder a Warrant evidencing
the right to purchase such number of Stock Units as is set forth on the
first page of such Warrant, which number has been calculated in accordance
with Annex 3 hereto;
(b) the Issuer shall deliver to each Initial Holder a single
certificate for the Warrants issued pursuant to the clause (a) above,
registered in the name of such Initial Holder, except that, if any Initial
Holder shall notify the Issuer in writing prior to such issuance that it
desires certificates for such Warrants to be issued in other denominations
or registered in the name or names of any Affiliate, nominee or nominees of
such Initial Holder for its or their benefit, then the certificates for
such Warrants shall be issued to such Initial Holder in the denominations
and registered in the name or names specified in such notice; and
(c) the Issuer shall deliver to the Initial Holders a legal opinion
from counsel to the Issuer in form and substance satisfactory to the
Initial Holders.
SECTION 2.03. PURCHASE FOR INITIAL HOLDERS' ACCOUNT. Each Initial Holder
represents and warrants to the Issuer as follows:
(a) Such Initial Holder is acquiring the Warrants and the Warrant
Stock for investment for its own account, without a view to the
distribution thereof, all without prejudice, however, to the right of such
Initial Holder at any time, in accordance with this Agreement, lawfully to
sell or otherwise to dispose of all or any part of the Warrants or the
Warrant Stock held by it.
(b) Such Initial Holder is an "accredited investor" within the meaning
of Regulation D promulgated under the Securities Act.
(c) All documents, records or books pertaining to this investment have
been made available for inspection by such Initial Holder, its attorneys
and/or its accountants. Such Initial Holder understands that such Initial
Holder and/or its representatives have had the opportunity to ask questions
of, and receive answers from, the Issuer or one or more persons acting on
the Issuer's behalf concerning the offering of the Warrants and the Warrant
Stock and the business of the Issuer and all such questions have been
answered to such Initial Holder's full satisfaction.
SECTION 2.04. SECURITIES ACT COMPLIANCE. Such Initial Holder understands
that the Issuer has not registered the Warrants or the Warrant Stock under the
Securities Act or applicable state securities laws, and such Initial Holder
agrees that neither the Warrants nor the Warrant Stock shall be sold or
transferred or offered for sale or transfer without registration or
qualification under the Securities Act or applicable state securities laws or
the availability of an exemption therefrom, all as more fully provided in
Article IV, and such Initial Holder understands that the Warrants and the
Warrant Stock will bear a legend to such effect and the Issuer will make a
notation on its transfer books to such effect.
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SECTION 2.05. LISTING. Prior to the issuance of Warrant Stock upon the
exercise of a Warrant, the Company shall secure the listing of such shares of
Warrant Stock upon each of the national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance upon the exercise of such Warrant) and
shall maintain, so long as any other shares of Common Stock shall be so listed,
such listing of all shares of Warrant Stock from time to time issuable upon the
exercise of a Warrant; and the Company shall so list on each national securities
exchange or automated quotation system, and shall maintain such listing of, any
other shares of capital stock of the Company issuable upon the exercise of a
Warrant if and so long as shares of the same class shall be so listed on such
national securities exchange or automated system.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Issuer represents and warrants as follows:
SECTION 3.01. EXISTENCE; QUALIFICATION. The Issuer is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization. The Issuer is duly qualified, licensed or admitted to do business
and is in good standing as a foreign corporation in every jurisdiction where the
failure to be so qualified would have a material adverse effect on the business,
financial condition, operations, assets, prospects, liabilities or
capitalization of the Issuer and has all requisite corporate power and authority
to transact its business as now conducted in all such jurisdictions.
SECTION 3.02. NO BREACH. The execution, delivery and performance of this
Agreement and the Warrants by the Issuer and the consummation by it of the
transactions contemplated hereby and thereby will not (a) violate the
certificate of incorporation or by-laws or any other instrument or document of
organization or governance of the Issuer, (b) violate, or result in a breach of
or default under, any other material instrument or agreement to which the Issuer
is a party or is bound, (c) violate any judgment, order, injunction, decree or
award against or binding upon the Issuer, (d) result in the creation of any
material Lien upon any of the properties or assets of the Issuer, or (e) violate
any law, rule or regulation relating to the Issuer.
SECTION 3.03. CORPORATE ACTION. The Issuer has all necessary corporate
power and authority to execute, deliver and perform its obligations under this
Agreement and the Warrants; the execution, delivery and performance by the
Issuer of this Agreement and the Warrants have been duly authorized by all
necessary action (including all Shareholder action) on the part of the Issuer;
this Agreement and the Warrants being issued on the date hereof have been (and
the Warrants issued after the date hereof will be) duly executed and delivered
by the Issuer and constitute (or in the case of the Warrants issued after the
date hereof, will constitute) the legal, valid and binding obligations of the
Issuer, enforceable against the Issuer in accordance with their respective
terms, except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors rights
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generally and by general equitable principles (regardless of whether such
enforceability is considered in a proceeding in equity or law); the Warrant
Stock covered by the Warrants has been duly and validly authorized and reserved
for issuance and shall, when paid for, issued and delivered in accordance with
the Warrants, be duly and validly issued, fully paid and nonassessable and free
and clear of any Liens; and none of the Warrant Stock issued pursuant to the
terms hereof will be in violation of any preemptive rights of any Shareholder.
SECTION 3.04. APPROVALS. Except in connection with the registration of the
Warrant Stock pursuant to Article VI, no authorizations, approvals or consents
of, and no filings or registrations with, any Governmental Authority or any
other Person are necessary for the execution, delivery or performance by the
Issuer of this Agreement or the Warrants or for the validity or enforceability
thereof. Any such action required to be taken as a condition to the execution
and delivery of this Agreement, or the execution, issuance and delivery of the
Warrants, has been duly taken by all such Governmental Authorities or other
Persons, as the case may be.
SECTION 3.05. INVESTMENT COMPANY ACT. The Issuer is not an "investment
company", or a company "controlled by" an "investment company", within the
meaning of the Investment Company Act of 1940, as amended.
SECTION 3.06. PUBLIC UTILITY HOLDING COMPANY ACT. The Issuer is not a
"holding company", or an "affiliate" of a "holding company" or a "subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
SECTION 3.07. CAPITALIZATION.
(a) The authorized capital stock of the Issuer consists of 2,404,031,240
shares of Class A Common Stock, par value $.01 per share, and 522,254,782 shares
of Class B Common Stock, par value $.01 per share, and 20,000,000 shares of
Preferred Stock, par value $.01 per share, of which 548,640,152 shares of Class
A Common Stock have been issued and 67,538,544 shares of the Class B Common
Stock have been issued. Except for the Warrants or as otherwise disclosed in
this Agreement, the Issuer shall not have outstanding any Convertible Securities
or Options exercisable or convertible into or exchangeable for any interests or
other equity rights of the Issuer, nor shall it have outstanding any agreements
providing for the issuance (contingent or otherwise) of, or any calls,
commitments or claims of any character relating to, any interests or equity
rights of the Issuer or Convertible Securities exercisable or convertible into
or exchangeable for any interests or equity rights of the Issuer, other than (i)
the Warrants, (ii) the Option Plans, (iii) as set forth in the Issuer's Annual
Report on Form 10-K for the year ended December 31, 2000, and (iv) the 8.5%
senior convertible notes to be issued on the Closing Date.
(b) Other than this Agreement or as otherwise disclosed in Schedule
3.07(b), there is not in effect on the date hereof any agreement by the Issuer
pursuant to which any holders of debt or equity securities of the Issuer have a
right to cause the Issuer to register such
11
securities under the Securities Act. None of the agreements listed on Schedule
3.07(b) contain any provision that conflict or are inconsistent with the rights
granted under Article VI hereof. Other than this Agreement, there is not in
effect on the date hereof any agreement to which the Issuer or (to its
knowledge) any of its Shareholders is a party relating to the voting, transfer
or sale of such securities.
(c) There is not in effect on the date hereof any agreement by the Issuer
or any of its Shareholders that (i) restricts the transferability of the
Warrants and/or the Warrant Stock (whether or not in connection with a transfer
of the notes under the Note and Guarantee Agreement), except as provided in
Article IV, (ii) restricts the transferability of the right of the Holder in
this Agreement to any transferee of all or a portion of the Holder's Warrants
and/or Warrant Stock, or (iii) requires any consent or other approval of any
Person to the exercise of the Warrant by the Holder or the issuance of Warrant
Stock upon such exercise.
SECTION 3.08. PRIVATE OFFERING.
(a) Assuming the truth and accuracy of the Initial Holders' representations
and warranties contained in Sections 2.03 and 2.04, the issuance and sale of the
Warrants to the Holders hereunder are exempt from the registration and
prospectus delivery requirements of the Securities Act.
SECTION 3.09. LITIGATION.
(a) There is no action, suit, proceeding or investigation pending or, to
the knowledge of the Issuer, threatened against the Issuer or any of its
Subsidiaries before any Governmental Authority seeking to enjoin the
transactions contemplated by this Agreement or the Warrants.
(b) There are no legal or arbitral proceedings or any proceedings by or
before any Governmental Authority, now pending or (to the knowledge of the
Issuer) threatened against the Issuer or any of its Subsidiaries which could
reasonably be expected to have a material adverse effect on the business,
financial condition, operations, assets, prospects, liabilities or
capitalization of the Issuer and its Subsidiaries taken as a whole.
SECTION 3.10. BROKERS. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried out by the Issuer directly
with the Initial Holders without the intervention of any Person on behalf of the
Issuer in such manner as to give rise to any valid claim by any Person against
the Initial Holders or any other Holder for a finder's fee, brokerage commission
or similar payment.
SECTION 3.11. SEC DOCUMENTS; FINANCIAL STATEMENTS. The Issuer has filed in
a timely manner all documents that the Issuer was required to file with the
Commission under Sections 13, 14(a) and 15(d) of the Exchange Act, since its
initial public offering. As of their respective filing dates, all documents
filed by the Issuer with the Commission ("SEC
12
DOCUMENTS") complied in all material respects with the requirements of the
Exchange Act or the Securities Act, as applicable. None of the SEC Documents as
of their respective dates contained any untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which they
were made, not misleading. The financial statements of the Issuer included in
the SEC Documents (the "FINANCIAL STATEMENTS") comply as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the Commission with respect thereto. The Financial Statements
have been prepared in accordance with GAAP and fairly present the consolidated
financial position of the Issuer and its Subsidiaries at the dates thereof and
the consolidated results of their operations and consolidated cash flows for the
periods then ended (subject, in the case of unaudited statements, to the lack of
full footnote disclosure and to normal, recurring adjustments).
ARTICLE IV
RESTRICTIONS ON TRANSFERABILITY
SECTION 4.01. TRANSFERS GENERALLY. The Restricted Securities shall be
transferable only upon the conditions specified in this Article IV and in
Article VI, which conditions are intended to insure compliance with the
provisions of the Securities Act and applicable state securities laws in respect
of the transfer of any Restricted Securities.
SECTION 4.02. TRANSFERS OF RESTRICTED SECURITIES PURSUANT TO REGISTRATION
STATEMENT AND EXEMPTIONS. The Restricted Securities may be offered or sold by
the Holder thereof pursuant to an effective registration statement under the
Securities Act and applicable state securities laws or a valid exemption
therefrom (including, without limitation, to the extent applicable, Rule 144 or
Rule 144A).
SECTION 4.03. RESTRICTIVE LEGENDS. Unless and until otherwise permitted by
this Article IV, each certificate for the Warrants issued under this Agreement,
each certificate for any Warrants issued to any subsequent transferees of any
such certificate, each certificate for any Warrant Stock issued upon exercise of
any Warrant and each certificate for any Warrant Stock issued to any subsequent
transferee of any such certificate, shall be stamped or otherwise imprinted with
a legend in substantially the following form:
"THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO THE RESTRICTIONS SPECIFIED IN THAT CERTAIN WARRANT
AGREEMENT DATED AS OF OCTOBER 1, 2001 (THE "WARRANT AGREEMENT"),
BETWEEN METROMEDIA FIBER NETWORK, INC., A DELAWARE CORPORATION (THE
"ISSUER"), AND THE HOLDERS PARTY THERETO FROM TIME TO TIME AS MODIFIED
AND SUPPLEMENTED AND IN EFFECT FROM TIME TO TIME, AND NO TRANSFER OF
13
THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR
EFFECTIVE UNTIL SUCH RESTRICTIONS HAVE LAPSED OR BEEN FULFILLED,
RELEASED OR WAIVED. A COPY OF THE FORM OF THE WARRANT AGREEMENT IS ON
FILE AND MAY BE INSPECTED AT THE PRINCIPAL EXECUTIVE OFFICE OF THE
ISSUER. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS
CERTIFICATE, AGREES TO BE BOUND BY THE PROVISIONS OF THE WARRANT
AGREEMENT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE
STATE SECURITIES LAWS, AND ACCORDINGLY, SUCH SECURITIES MAY NOT BE
TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH
THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND
STATE SECURITIES LAWS OR APPLICABLE EXEMPTIONS THEREFROM."
SECTION 4.04. TERMINATION OF RESTRICTIONS. All of the restrictions imposed
by this Article IV upon the transferability of the Restricted Securities shall
cease and terminate as to any particular Restricted Security when such
Restricted Security shall have been effectively registered under the Securities
Act and applicable state securities laws and sold by the Holder thereof in
accordance with such registration or sold under and pursuant to Rule 144 or is
eligible to be sold under and pursuant to paragraph (k) of Rule 144. Whenever
the restrictions imposed by this Article IV shall terminate as to any Restricted
Security as hereinabove provided, the Holder thereof shall, upon written
request, be entitled to receive from the Issuer, without expense, a new
certificate evidencing such Restricted Security not bearing the restrictive
legend otherwise required to be borne by a certificate evidencing such
Restricted Security, PROVIDED, that the Holder thereof shall have furnished the
Issuer with such certificates and opinions as it shall have reasonably
requested.
SECTION 4.05. DISPOSITIONS OF WARRANTS AND WARRANT STOCK.
(a) Notwithstanding anything in this Agreement or the Warrants to the
contrary, but subject to compliance with the Securities Act, applicable state
securities laws and the requirement as to placement of a legend on certificates
for Restricted Securities specified in Section 4.03, any Holder shall have the
right to transfer any or all of its Restricted Securities to any Person. The
Person to which Restricted Securities are transferred pursuant to the
immediately preceding sentence shall be deemed to be a Holder of such Restricted
Securities and
14
bound by the provisions of this Agreement applicable to the Holders so long as
such Person continues to own any of the Restricted Securities so transferred to
it.
(b) In connection with any transfer of any Warrant, the Holder shall
surrender such Warrant to the Issuer, together with a written assignment of such
Warrant duly executed by the Holder hereof or such Holder's agent or attorney.
Such written assignment shall be in the form of the Assignment attached as Annex
2. Upon such surrender and receipt by the Issuer of a written agreement, in form
reasonably satisfactory to the Issuer, of the assignee agreeing to be bound by
this Agreement to the same extent as such Holder was so bound), the Issuer shall
execute and deliver a new Warrant or Warrants in the name of the assignee and in
the denominations specified in such instrument of assignment, and the original
Warrant shall promptly be canceled.
(c) Any Warrant may be exchanged for other Warrants of the same series upon
presentation to the Issuer, together with a written notice specifying the
denominations in which new Warrants are to be issued, signed by the Holder
thereof. The Issuer shall execute and deliver a new Warrant or Warrants to such
Holder in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice. The Issuer shall pay all expenses, taxes (other
than income taxes or capital gains of the Holder transferring such Warrant but
including transfer taxes) and other charges payable in connection with the
preparation, issuance, delivery, transfer or exchange of the Warrants.
(d) The Issuer shall maintain books for the registration and transfer of
the Warrants, and shall allow each Holder of Warrants to inspect such books at
such reasonable times as such Holder shall request.
SECTION 4.06. PROVISIONS APPLICABLE TO REGULATED HOLDERS.
(a) Notwithstanding anything in this Agreement or the Warrants to the
contrary, no Holder which is subject to the provisions of Regulation Y of the
Board of Governors of the Federal Reserve System (or any successor regulation
thereto) ("REGULATION Y") or which is affiliated with any entity subject to the
provisions of Regulation Y (if such Affiliate holds securities of the Issuer
(any such Holder being referred to herein as a "REGULATED HOLDER")) and no
transferee of such Regulated Holder may exercise the Warrants for a number of
shares of Warrant Stock which would permit such Regulated Holder, together with
its Affiliates and transferees, to own or control a number of shares of Warrant
Stock greater than that permitted by applicable law including Regulation Y (and,
for purposes of this restriction, a reasoned opinion of counsel to such Holder
and reasonably acceptable to the Issuer based on facts and circumstances deemed
appropriate by such counsel to the effect that such Holder does not have the
power to exercise a controlling influence or otherwise control the Issuer, shall
be conclusive).
(b) The Issuer shall not, without 15 days' prior notice to each Holder,
directly or indirectly, purchase, redeem, retire or otherwise acquire any shares
of Common Stock if, as a result of such purchase, redemption, retirement or
other acquisition and after giving effect to the
15
exercise of all outstanding Warrants, such Holder, together with its Affiliates,
shall own or control, or shall be deemed to own or control, in the aggregate a
greater number of securities of any kind issued by the Issuer than are permitted
under Regulation Y.
(c) In the event of any underwritten public offering of Restricted
Securities in which a Regulated Holder is participating, the Issuer shall
provide reasonable assistance to the underwriter in ensuring that any Warrant or
Warrant Stock sold by such Holder are widely disseminated.
(d) In the event that a Holder determines that there is a Regulatory
Problem (as defined below), the Issuer agrees to use commercially reasonable
efforts to take all such actions as are within its control and reasonably
required by such Holder in order (i) to effectuate and facilitate any transfer
by any Holder of any Warrant or Warrant Stock then held by such Holder to any
Person designated by such Holder and (ii) to permit such Holder (or any of its
Affiliates) to exchange all or a portion of any voting security then held by it
on a share-for-share basis for shares of a non-voting security of the Issuer,
which non-voting security shall convey equivalent economic benefits to such
Warrants or Warrant Stock and include equivalent anti-dilution protection and
otherwise identical in all respects to the voting security exchanged for it,
except that it shall be non-voting and shall be convertible into a voting
security on such terms as are required by such Holder in light of regulatory
considerations then prevailing. Such actions may include, but shall not
necessarily be limited to entering into such additional agreements, adopting
such amendments to the certificate of incorporation and bylaws of the Issuer
subject to required Shareholder approvals and taking such additional actions as
are reasonably requested by any Holder in order to effectuate the intent of the
foregoing. For purposes of this Agreement, a "REGULATORY PROBLEM" means any set
of facts or circumstances wherein it has been asserted by any Governmental
Authority (or any Holder believes that there is a substantial risk of such
assertion) that any Holder is not entitled to hold, or exercise any significant
right with respect to, any Warrant or Warrant Stock held by it. Any exchange
referred to in clause (ii) above shall occur as soon as practicable but in any
event within 60 days after written notice by such Holder to the Issuer (or such
earlier date if required to comply with applicable law so long as such Holder
has provided reasonable prior notice of such date to the Issuer).
ARTICLE V
ADJUSTMENTS OF STOCK UNITS
SECTION 5.01. PURCHASES AND REDEMPTIONS. If at any time the Issuer shall
propose to purchase or redeem any shares of its Common Stock for cash, evidence
of indebtedness or other property of any nature whatsoever, the Issuer shall
deliver to each Holder of Warrants which are by their terms then exercisable
(whether or not such Holder exercises such Warrants) or shares of Warrant Stock
a notice of such proposed purchase or redemption, and each such Holder shall, at
its option, have the right to require the Issuer to at the same time purchase or
redeem Warrants which are by their terms then exercisable (whether or not such
Holder exercises such Warrants) and shares of Warrant Stock owned by such
holder, pro-rata
16
based on the number of shares of such other Common Stock to be so purchased or
redeemed, on the same terms and conditions as the proposed purchase or
redemption of such other Common Stock and for the same consideration per Warrant
or share of Warrant Stock, as the case may be, as is paid to the Holders of such
other Common Stock for each share of Common Stock so redeemed or purchased,
minus, in the case of Warrants, the exercise price of the Warrants to be so
purchased or redeemed.
SECTION 5.02. SUBDIVISIONS AND COMBINATIONS. If at any time the Issuer
shall:
(a) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend or other distribution of Common
Stock;
(b) subdivide or reclassify its outstanding shares of Common Stock
into a larger number of shares of Common Stock; or
(c) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock;
then immediately after the occurrence of any such event the number of shares of
Warrant Stock comprising a Stock Unit shall be adjusted so as to equal the
number of shares of Warrant Stock which such holder would have been entitled to
receive if such Holder had exercised the Warrant immediately prior to the
occurrence of such event.
SECTION 5.03. ISSUANCE OF COMMON STOCK. In case at any time the Issuer
(i)(A) shall take a record of the holders of its Common Stock for the purpose of
entitling them to subscribe for or purchase shares of any class or series of
Common Stock or (B) shall otherwise sell or issue any such securities and (ii)
the consideration per share of Common Stock to be paid upon such issuance or
subscription is less than the Current Market Value per share of Common Stock on
such record date, then the number of shares of Warrant Stock comprising a Stock
Unit shall be adjusted to be that number determined by multiplying the number of
shares of Warrant Stock comprising a Stock Unit immediately prior to such record
date by a fraction (not to be less than one) (A) the numerator of which shall be
equal to the product of (x) the number of shares of Common Stock outstanding
after giving effect to such issuance, distribution, subscription or purchase and
(y) the Current Market Value per share of Common Stock determined immediately
before such record date and (B) the denominator of which shall be equal to the
sum of (x) the product of (1) the number of shares of Common Stock outstanding
immediately before such record date and (2) the Current Market Value per share
of Common Stock determined immediately before such record date and (y) the
aggregate consideration to be received by the Issuer for the total number of
shares of Common Stock to be issued, distributed, subscribed for or purchased.
Aggregate consideration for purposes of the preceding clause (y) shall be
determined as follows: In case any shares of Common Stock shall be issued or
sold for cash, the consideration received therefor shall be deemed to be the
amount payable to the Issuer therefor, after deduction therefrom of any expenses
incurred or any underwriting commissions or concessions or discounts or, in the
case of a private placement thereof, finders' fees or
17
commissions paid or allowed by the Issuer in connection therewith. In case any
shares of Common Stock shall be issued or sold for a consideration other than
cash payable to the Issuer, the consideration received therefor shall be deemed
to be the Current Market Value of such consideration, after deduction therefrom
of any expenses incurred or any underwriting commissions or concessions or
discounts paid or allowed by the Issuer in connection therewith. In case any
shares of Common Stock shall be issued in connection with any merger of another
corporation into the Issuer, the amount of consideration therefor shall be
deemed to be the Current Market Value of such portion of the assets of such
merged corporation as the Board shall determine to be attributable to such
shares of Common Stock.
SECTION 5.04. ISSUANCE OF OTHER SECURITIES, RIGHTS OR OBLIGATIONS. In case
at any time the Issuer (i)(A) shall take a record of the holders of its Common
Stock for the purpose of entitling them to subscribe for or purchase options to
purchase or rights to subscribe for Common Stock or securities directly or
indirectly convertible into or exchangeable for Common Stock (or options or
rights with respect to such securities) or (B) shall otherwise issue or sell any
such options, rights or securities and (ii) the consideration per share for
which Common Stock is deliverable upon exercise of such options or rights or
conversion or exchange of such securities (determined by dividing (x) the total
amount received or receivable by the Issuer in consideration of the issuance of
or subscription for such options, rights or securities, plus the minimum
aggregate amount of premiums (if any) payable to the Issuer upon such exercise,
conversion or exchange, by (y) the total maximum number of shares of Common
Stock necessary to effect the exercise, conversion or exchange of all such
options, rights or securities) shall be less than the Current Market Value per
share of Common Stock on such record date or sale or issuance date, as the case
may be, then the number of shares of Warrant Stock comprising a Stock Unit shall
be adjusted to be that number determined by multiplying the number of shares of
Warrant Stock comprising a Stock Unit immediately prior to such date by a
fraction (not to be less than one) (i) the numerator of which shall be equal to
the product of (A) the total maximum number of shares of Common Stock
outstanding after giving effect to the assumed exercise or conversion of all
such options, rights or securities and (B) the Current Market Value per share of
Common Stock determined immediately before such date and (ii) the denominator of
which shall be equal to the sum of (A) the product of (1) the number of shares
of Common Stock outstanding immediately before such date and (2) the Current
Market Value per share of the Common Stock determined immediately before such
date and (B) the aggregate consideration per share (determined as set forth in
subsection (ii)(x) and (y) above) for which Common Stock is deliverable upon
exercise conversion or exchange of such options, rights or securities. Aggregate
consideration for purposes of the preceding clause (B) shall be determined as
follows: In case any options, rights or convertible or exchangeable securities
(or options or rights with respect thereto) shall be issued or sold, or
exercisable, convertible or exchangeable for cash, the consideration received
therefor shall be deemed to be the amount payable to the Issuer (determined as
set forth in subsection (ii)(x) and (y) above) therefor, after deduction
therefrom of any expenses incurred or any underwriting commissions or
concessions or discounts or, in the case of a private placement thereof,
finders' fees or commissions paid or allowed by the Issuer in connection
therewith. In case any such options, rights or securities shall be issued or
sold, or exercisable, convertible or exchangeable for a consideration other than
cash payable to the Issuer, the consideration received therefor (determined as
set forth in subsection (ii)(x) and (y) above) shall be deemed to be the Current
Market Value of such consideration, after deduction therefrom of any expenses
incurred or any underwriting commissions or concessions or discounts or, in the
case of a private placement thereof, finders' fees or commissions paid or
allowed by the Issuer in connection therewith. In case any such options, rights
or securities shall be issued or sold, or
18
exercisable, convertible or exchangeable in connection with any merger of
another corporation into the Issuer, the amount of consideration therefor shall
be deemed to be the Current Market Value of such portion of the assets of such
merged corporation as the Board shall determine to be attributable to such
options, rights or securities.
SECTION 5.05. SUPERSEDING ADJUSTMENT. If at any time after any adjustment
in the number of shares of Warrant Stock comprising a Stock Unit shall have been
made on the basis of the issuance of any options or rights, or convertible or
exchangeable securities (or options or rights with respect to such securities)
pursuant to Section 5.04:
(a) the options or rights shall expire prior to exercise or the right
to convert or exchange any such securities shall terminate; or
(b) the consideration per share for which shares of Common Stock are
issuable pursuant to the terms of such options or rights or convertible or
exchangeable securities shall be increased or decreased, other than under
or by reason of provisions designed to protect against dilution,
such previous adjustment shall be rescinded and annulled,
thereupon a recomputation shall be made of the effect of such options or rights
or convertible or exchangeable securities with respect to shares of Common Stock
on the basis of:
(A) treating the number of shares of Common Stock, if any, theretofore
actually issued or issuable pursuant to the previous exercise,
conversion or exchange of such options, rights or securities as having
been issued on the date or dates of such exercise, conversion or
exchange and for the consideration actually received and receivable
therefore, and
(B) treating any such options, rights or securities which then remain
outstanding as having been granted or issued immediately after the
time of such increase or decrease for the consideration per share for
which shares of Common Stock are issuable upon exercise, conversion or
exchange of such options, rights or securities.
To the extent called for by the foregoing provisions of this Section 5.05 on the
basis aforesaid, a new adjustment in the number of shares of Warrant Stock
comprising a Stock Unit shall be made
19
in accordance with Section 5.04, determined using the Current Market Value used
at the time of the original determination, which new adjustment shall supersede
the previous adjustment so rescinded and annulled. If the exercise, conversion
or exchange price provided for in any such option, right or security shall
decrease at any time under or by reason of provisions designed to protect
against dilution, then in the case of the delivery of shares of Common Stock
upon the exercise, conversion or exchange of any such option, right or security,
the Stock Unit purchasable upon the exercise of a Warrant shall forthwith be
adjusted in the manner which would have been obtained had the adjustment made
upon issuance of such option, right or security been made upon the basis of the
issuance of (and the aggregate consideration received for) the shares of Common
Stock delivered as aforesaid.
SECTION 5.06. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS. The following
provisions shall be applicable to the making of adjustments of the number of
shares of Warrant Stock comprising a Stock Unit:
(a) The sale or other disposition of any issued shares of Common Stock
owned or held by or for the account of the Issuer (other than to the
Holders hereunder) shall be deemed to be an issuance thereof for purposes
of this Article V.
(b) In computing adjustments under this Article V, fractional
interests in Common Stock shall be taken into account to the nearest
one-thousandth of a share.
(c) If the Issuer shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend or
distribution or subscription or purchase rights and shall, thereafter and
before the distribution thereof, legally abandon its plan to pay or deliver
such dividend, distribution, subscription or purchase rights, then
thereafter no adjustment shall be required by reason of the taking of such
record and any such adjustment previously made in respect thereof shall be
rescinded and annulled.
SECTION 5.07. MERGER, CONSOLIDATION OR DISPOSITION OF ASSETS. If the Issuer
shall merge or consolidate with another Person, or shall sell, transfer or
otherwise dispose of all or substantially all of its assets to another Person
and pursuant to the terms of such merger, consolidation or disposition of
assets, cash, shares of common stock or other securities of the successor or
acquiring Person, or property of any nature is to be received by or distributed
to the holders of Common Stock of the Issuer, then each Holder of Warrants which
are by their terms then exercisable shall, at such Holder's election, have the
right to receive (whether or not such Holder exercises such Warrants) the amount
of cash or other consideration it would have been entitled to receive if such
Holder had exercised such Warrants immediately prior to the occurrence of such
merger, consolidation or disposition of assets, net of the exercise price of
such Warrants, and shall thereupon be deemed to have exercised such Warrants. In
case of any such merger, consolidation or disposition of assets in which the
foregoing election is not made, the successor or acquiring Person (and any
affiliate thereof issuing securities) shall expressly assume the due and
punctual observance and performance of each and every covenant and condition to
be performed and observed by, and all of the obligations and liabilities of, the
Issuer
20
hereunder and under the Warrants, subject to such modifications as may be deemed
appropriate (as determined by resolution of the Board) in order to provide for
adjustments of Stock Units which shall be as nearly equivalent as practicable to
the adjustments provided for in this Article V. The foregoing provisions shall
similarly apply to successive mergers, consolidations and dispositions of
assets.
SECTION 5.08. OTHER ACTION AFFECTING COMMON STOCK. If at any time or from
time to time the Issuer shall take any action affecting its Common Stock, other
than an action described in any of the foregoing subsections of this Article V
or an action taken in the ordinary course of the Issuer's business and
consistent with past practice, then, unless in the reasonable opinion of the
Board such action will not have a material adverse effect upon the rights of the
Holders of the Warrants, the number of shares of Warrant Stock comprising a
Stock Unit shall be adjusted in such manner and at such time as the Board shall
in good faith determine to be equitable in the circumstances.
SECTION 5.09. NO ADJUSTMENT NECESSARY. Anything to the contrary herein
notwithstanding, no adjustment to the number of shares of Warrant Stock
comprising a Stock Unit shall be made as a result of, or in connection with, the
issuance of any Option or any Common Stock issuable or issued upon the exercise
thereof (so long as the exercise price for such Option represents the Current
Market Value of the Equity Securities issued at the time such Option was
awarded).
SECTION 5.10. NOTICE OF ADJUSTMENTS. Whenever the number of shares of
Warrant Stock comprising a Stock Unit shall be adjusted pursuant to this
Agreement, the Issuer shall forthwith obtain a certificate signed by the
Issuer's chief financial officer (or, if the Holders of a majority in interest
of the Warrants so request after delivery of a certificate from the chief
financial officer, signed by a firm of independent accountants of recognized
national standing selected by the Issuer), setting forth, in reasonable detail,
the event requiring the adjustment and the method by which such adjustment was
calculated and specifying the number of shares of Warrant Stock comprising a
Stock Unit, after giving effect to such adjustment. The Issuer shall promptly
cause a signed copy of such certificate to be delivered to each holder of
Warrants. The Issuer shall keep at its office copies of all such certificates
and cause the same to be available for inspection at said office during normal
business hours by any Holder of Warrants or any prospective purchaser of
Warrants designated by the registered Holder of such Warrants.
SECTION 5.11. NOTICE OF CERTAIN CORPORATE ACTION. If the Issuer shall
propose (i) to pay any dividend to the holders of its Common Stock or to make
any other distribution to the holders of its Common Stock; (ii) to offer to the
holders of its Common Stock rights to subscribe for or to purchase any
additional shares of Common Stock (or options or rights with respect thereto);
(iii) to effect any reclassification of its Common Stock; (iv) to otherwise
issue any Equity Securities; (v) to effect any capital reorganization; (vi) to
effect any consolidation, merger or sale, transfer or other disposition of all
or substantially all of its assets; or (vii) to effect the liquidation,
dissolution or winding up of the Issuer, then, in each such case, the Issuer
shall give to each Holder of Warrants a notice of such proposed action, which
shall specify the
21
date on which a record is to be taken for the purposes of such dividend,
distribution or rights offer, or the date on which such reclassification,
issuance, reorganization, consolidation, merger, sale, transfer, disposition,
liquidation, dissolution or winding up is to take place and the date of
participation therein by the holders of Common Stock, if any such date is to be
fixed, and shall also set forth such facts with respect thereto as shall be
reasonably necessary to indicate the effect of such action on the Common Stock,
and the number of shares of Warrant Stock which will comprise a Stock Unit after
giving effect to any adjustment which will be required as a result of such
action. Such notice shall be so given in the case of any action covered by
clause (i) or (ii) above at least 20 days prior to the record date for
determining holders of the Common Stock for purposes of such action, and in the
case of any other such action, at least 20 days prior to the date of the taking
of such proposed action or the date of participation therein by the holders of
Common Stock, whichever shall be the earlier.
ARTICLE VI
REGISTRATION RIGHTS
SECTION 6.01. (a) FILING OF SHELF REGISTRATION. The Issuer shall use its
reasonable best efforts to file a "shelf" registration statement on any
appropriate form pursuant to Rule 415 (or similar rule that may be adopted by
the Commission) under the Securities Act (a "SHELF REGISTRATION") as promptly as
practicable and in no event later than the date that is 5 days following the
date hereof (the "REQUIRED FILING DATE") to permit resales of all of the
Registrable Securities. The Issuer agrees to use its reasonable best efforts to
cause such Shelf Registration to become effective as promptly as possible after
the filing thereof, but in no event later than 90 days after the Required Filing
Date (the "REQUIRED EFFECTIVE DATE"), and thereafter to keep it continuously
effective for the period that will terminate upon the earlier of the date on
which (1) all the Registrable Securities covered by the Shelf Registration have
been sold pursuant to such Shelf Registration or have been sold to the public
pursuant to Rule 144 and (2) no Registrable Securities remain outstanding.
(b) LIQUIDATED DAMAGES. If (i) the Registration Statement has not been
declared effective by the Commission on or prior to the Required Effective Date
or (ii) the Registration Statement is filed and declared effective but shall
thereafter cease to be effective at any time within the time period required for
effectiveness in subsection (a) above without being succeeded immediately by a
post-effective amendment to the Registration Statement that cures such failure
and that is itself immediately declared effective (each such event referred to
in clauses (i) and (ii), a "REGISTRATION DEFAULT"), the Issuer shall pay
liquidated damages ("LIQUIDATED DAMAGES") to each holder of Registrable
Securities in an amount equal to $0.01 per share of Warrant Stock held by such
holder for each week or portion thereof during which any Registration Default
continues (other than with respect to any period during which such holder is
required to discontinue the disposition of Registrable Securities pursuant to
the last paragraph of Section 6.03 hereof). The amount of such Liquidated
Damages shall increase on each 90-day anniversary of the day the first
Registration Default occurred by an additional $0.01 per share of Warrant Stock
for each week or portion thereof during which any Registration Default continues
22
until all Registration Defaults have been cured, up to a maximum amount of
Liquidated Damages of $0.05 per week or portion thereof per share of Warrant
Stock. All accrued Liquidated Damages shall be paid by wire transfer of
immediately available funds or by federal funds check on the last day of each
four week period to an account previously designated in writing to the Issuer by
each holder of Registrable Securities. Following the cure of all Registration
Defaults relating to any particular Registrable Security, the accrual of
Liquidated Damages with respect to such Registrable Security will cease. Except
as provided in Section 6.06 hereof, no holder of Registrable Securities shall be
entitled to any damages for a Registration Default beyond the Liquidated Damages
provided for herein.
All obligations of the Issuer set forth in the preceding paragraph that are
outstanding with respect to any Registrable Security at the time such security
ceases to be a Registrable Security shall survive until such time as all such
obligations have been paid in full.
SECTION 6.02. HOLD-BACK AGREEMENTS; CUTBACKS.
(a) RESTRICTIONS ON PUBLIC SALE BY HOLDER OF REGISTRABLE SECURITIES. Each
holder of Registrable Securities whose Registrable Securities are covered by a
Registration Statement filed pursuant to Section 6.01 hereof agrees, if
requested by the managing underwriters in an underwritten offering, not to
effect any public sale or distribution of securities of the Issuer of the same
class as the securities included in such Registration Statement, including a
sale pursuant to Rule 144 under the Securities Act (except as part of such
underwritten registration), during the 15-day period prior to, and during the
90-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 Issuer or the managing underwriters; PROVIDED, HOWEVER, that each
holder of Registrable Securities shall be subject to the hold-back restrictions
of this Section 6.02(a) only once during any twelve-month period.
The foregoing provisions shall not apply to any holder of Registrable
Securities if such holder is prevented by applicable statute or regulation from
entering into any such agreement; PROVIDED, HOWEVER, that any such holder shall
undertake, in its request to participate in any such underwritten offering, not
to effect any public sale or distribution of any Registrable Securities held by
such holder and covered by a Registration Statement commencing on the date of
sale of the Registrable Securities unless it has provided 45 days prior written
notice of such sale or distribution to the underwriter or underwriters.
(b) RESTRICTIONS ON SALE OF SECURITIES BY THE ISSUER AND OTHERS. The Issuer
agrees (1) not to effect any public or private offer, sale or distribution of
any of its equity securities or any class or series of its capital stock having
a preference in liquidation or with respect to dividends, including a sale
pursuant to Regulation D under the Securities Act (other than any such sale or
distribution of such securities in connection with any merger or consolidation
by the Issuer or any subsidiary of the Issuer or the acquisition by the Issuer
or a subsidiary of the Issuer of the capital stock or substantially all the
assets of any other Person or in connection with any employee stock option or
other benefit plan), during the 10-day period prior
23
to, and during the 90-day period beginning with, the effectiveness of a
Registration Statement filed under Section 6.01 hereof to the extent timely
notified in writing by a holder of Registrable Securities or the managing
underwriters in an underwritten offering (except as part of such if permitted,
or pursuant to registrations on Forms S-4 or S-8 or any successor form to such
registration Forms) and (2) during the aforementioned period to use reasonable
best efforts to cause each holder of each of its privately placed equity
securities or any class or series of its capital stock having a preference in
liquidation or with respect to dividends purchased from the Issuer at any time
on or after the date of this Agreement to agree not to effect any public sale or
distribution of any such securities during such period, including a sale
pursuant to Rule 144 under the Securities Act (except as part of such
registration, if permitted).
(c) CUTBACKS IN UNDERWRITTEN REGISTRATIONS. In connection with any
registration hereunder in which more than one securityholder has a right to
request registration of its Common Stock, in the event that such registration
involves an underwritten offering and the managing underwriter or underwriters
participating in such offering advise the securityholders participating in such
offering that the total number of shares of Common Stock to be included in such
offering exceeds the amount that can be sold in (or during the time of) such
offering without delaying or jeopardizing the success of such offering
(including the price per share of Common Stock), then the Issuer shall include
in any such total number of Registrable Securities and all other shares of
Common Stock which have registration rights with respect to such registration to
be offered for the account of all securityholders shall be reduced to a number
deemed satisfactory by such managing underwriter or underwriters, provided that
the shares of Common Stock to be excluded shall be determined in the following
sequence: (i) first, there shall be excluded shares of Common Stock held by
securityholders of the Issuer other than the holders of Registrable Securities
requesting and legally entitled to include such shares of Common Stock in such
registration, on a PRO RATA basis (based upon the number of shares of Common
Stock requested (or proposed) to be registered by each such holder and (ii)
second, Registable Securities, on a PRO RATA basis (based upon the number of
Registrable Securities requested to be included in such registration).
SECTION 6.03. REGISTRATION PROCEDURES. In connection with the Issuer's
Shelf Registration obligations pursuant to Section 6.01 hereof, the Issuer will
use its best efforts to effect such registration to permit the sale of such
Registrable Securities in accordance with the intended method or methods of
distribution thereof (which methods may include, at the request of the Required
Holders, an underwritten offering), and pursuant thereto the Issuer will, as
expeditiously as possible:
(a) prepare and file with the Commission, within the time period
provided in Section 6.01 hereof, a Registration Statement or Registration
Statements relating to the Shelf Registration on any appropriate form under
the Securities Act, which form shall be available for the sale of the
Registrable Securities in accordance with the intended method or methods of
distribution thereof and shall include (i) all financial statements
(including, if applicable, financial statements of any Person which shall
have guaranteed any indebtedness of the Issuer)
24
required by the Commission to be filed therewith and (ii) if the sale is by
means of an underwritten offering, any other information that the managing
underwriter reasonably believes to be of material importance to the success
of such offering, cooperate and assist in any filings required to be made
with the NASD, and use its best efforts to cause such Registration
Statement to become effective within such time period; PROVIDED that as far
in advance as practical before filing a Registration Statement or any
amendments or supplements thereto, the Issuer will furnish to the holders
of the Registrable Securities covered by such Registration Statement and
the underwriters, if any, copies of all such documents proposed to be
filed, which documents will be subject to the review by such holders and
underwriters, and the Issuer will not file any Registration Statement or
any amendments or supplements thereto to which the holders of a majority of
the Registrable Securities or such managing underwriters, if any, shall
reasonably object within 14 days;
(b) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be necessary
to keep the Registration Statement effective until all Registrable
Securities covered by such Registration Statement have been sold; cause the
Prospectus to be supplemented by any required Prospectus supplement, and as
so supplemented to be filed pursuant to Rule 424 under the Securities Act;
and comply with the provisions of the Securities Act with respect to the
disposition of all Registrable Securities covered by such Registration
Statement during the applicable period in accordance with the intended
method or methods of distribution by the sellers thereof set forth in such
Registration Statement or supplement to the Prospectus;
(c) notify the selling holders of Registrable Securities and the
managing underwriters, if any, promptly, and (if requested by any such
Person) confirm such advice in writing, (1) when the Prospectus or any
Prospectus supplement or post-effective amendment has been filed, and, with
respect to the Registration Statement or any post-effective amendment, when
the same has become effective, (2) of any request by the Commission for
amendments or supplements to the Registration Statement or the Prospectus
or for additional information, (3) of the issuance by the Commission of any
stop order of which the Issuer or its counsel is aware suspending the
effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose, (4) if at any time the representations and
warranties of the Issuer contemplated by paragraph (n) below cease to be
true and correct in any material respect, (5) of the receipt by the Issuer
of any notification with respect to the suspension of the qualification of
the Registrable Securities for sale in any jurisdiction or the initiation
or threatening of any proceeding for such purpose and (6) of the Issuer's
becoming aware that the Prospectus (including any document incorporated
therein by reference), as then in effect, includes an untrue statement of
material fact or omits to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light
of the circumstances then existing;
(d) make every reasonable effort to obtain the withdrawal of any order
suspending the effectiveness of the Registration Statement at the earliest
possible moment;
25
(e) if reasonably requested by the managing underwriter or
underwriters or a holder of Registrable Securities being sold in connection
with an underwritten offering, promptly incorporate in a Prospectus
supplement or post-effective amendment such information as the managing
underwriter or underwriters or the holders of a majority of the Registrable
Securities being sold agree should be included therein relating to the plan
of distribution with respect to such Registrable Securities, including,
without limitation, information with respect to the amount of Registrable
Securities being sold to such managing underwriter or underwriters, the
purchase price being paid therefor by such underwriters and any other terms
of the underwritten (or best efforts underwritten) offering of the
Registrable Securities to be sold in such offering; and make all required
filings of such Prospectus supplement or post-effective amendment as
promptly as practicable upon being notified of the matters to be
incorporated in such Prospectus supplement or post-effective amendment;
(f) furnish to each selling holder of Registrable Securities and each
managing underwriter, if any, without charge, if requested, at least one
signed copy of the Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (including those
incorporated by reference);
(g) deliver to each selling holder of Registrable Securities and the
underwriters, if any, without charge, if requested, as many copies of the
Prospectus (including each preliminary Prospectus) and any amendment or
supplement thereto as such Persons may reasonably request; the Issuer
consents to the use (subject to the limitations set forth in the last
paragraph of this Section 6.03) of the Prospectus or any amendment or
supplement thereto by each of the selling holders of Registrable Securities
and the underwriters, if any, in connection with the offering and sale of
the Registrable Securities covered by the Prospectus or any amendment or
supplement thereto;
(h) prior to any public offering of Registrable Securities, use its
best efforts to register or qualify or cooperate with the selling holders
of Registrable Securities, the underwriters, if any, and their respective
counsel in connection with the registration or qualification of such
Registrable Securities for offer and sale under the securities or blue sky
laws of such jurisdictions as any such seller or underwriter reasonably
requests in writing and do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of such
Registrable Securities; provided that the Issuer will not be required to
qualify generally to do business in any jurisdiction where it is not then
so qualified or to take any action which would subject it to general
service of process or taxation in any such jurisdiction where it is not
then so subject;
(i) cooperate with the selling holders of Registrable Securities and
the managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing such Registrable Securities to be
sold and not bearing any restrictive legends; and enable such Registrable
Securities to be in such denominations and registered in such names as
26
such managing underwriters may request at least two business days prior to
any sale of such Registrable Securities to the underwriters;
(j) use its best efforts to cause the Registrable Securities covered
by the applicable Registration Statement to be registered with or approved
by such other governmental agencies or authorities as may be necessary to
enable the seller or sellers thereof or the underwriters, if any, to
consummate the disposition of such Registrable Securities;
(k) upon the occurrence of any event contemplated by paragraph (c)(6)
above, immediately prepare a supplement or post-effective amendment to the
related Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document so
that, as thereafter delivered to the holders of the Registrable Securities,
the Prospectus will not contain an untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein
not misleading in light of the circumstances then existing;
(l) use best efforts to cause all Registrable Securities covered by a
Registration Statement to be listed on each securities exchange on which
securities of the same class issued by the Issuer are then listed;
(m) not later than the effective date of the Shelf Registration,
provide a CUSIP number for all Registrable Securities and provide the
transfer agent with printed certificates for the Registrable Securities
which are in a form eligible for deposit with The Depository Trust Company;
(n) enter into such agreements (including an underwriting agreement)
and take all such other appropriate and reasonable actions in connection
therewith in order to expedite or facilitate the disposition of such
Registrable Securities and in such connection, whether or not an
underwriting agreement is entered into and whether or not the registration
is an underwritten registration (1) make such representations and
warranties to the holders of such Registrable Securities and the
underwriters, if any, in form, substance and scope as are customarily made
by issuers to underwriters in primary underwritten offerings and covering
matters; (2) obtain opinions of counsel to the Issuer (which counsel and
opinions (in form, scope and substance) shall be reasonably satisfactory to
the managing underwriters, if any, and the holders of a majority of the
Registrable Securities) addressed to each selling holder and 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 holders and underwriters; (3) obtain "cold
comfort" letters and updates thereof from the Issuer's independent
certified public accountants addressed to such holders and underwriters, if
any, such letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters by underwriters in connection
with primary underwritten offerings; (4) if an underwriting agreement is
entered into, if permitted by the managing underwriter the same shall set
forth in full the indemnification provisions and procedures of Section 6.06
hereof with respect to all parties to be indemnified pursuant to said
Section; provided that the
27
indemnification provisions and procedures set forth in such underwriting
agreement shall be no less favorable to the selling holders of Registrable
Securities and the underwriters than the indemnification provisions and
procedures of Section 6.06 hereof; and (5) the Issuer shall deliver such
documents and certificates as may be requested by the holders of a majority
of the Registrable Securities being sold and the managing underwriters, if
any, to evidence compliance with paragraph (k) above and with any customary
conditions contained in the underwriting agreement or other agreement
entered into by the Issuer. The above shall be done at each closing under
such underwriting or similar agreement or as and to the extent required
thereunder;
(o) make available for inspection by any holder of Registrable
Securities or any underwriter participating in any disposition of
Registrable Securities pursuant to a Shelf Registration, and any attorney
or accountant retained by such holders or underwriters, if any, all
financial and other records, pertinent corporate documents and properties
of the Issuer as may be reasonably necessary to enable them to exercise
their due diligence responsibilities, and provide reasonable access to
appropriate officers of the Issuer in connection with such due diligence
responsibilities;
(p) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission; and
(q) make appropriate officers of the Issuer available to such holders
and underwriters for meetings with prospective purchasers of the
Registrable Securities and prepare and present to potential investors
customary "road show" material in a manner consistent with other new
issuances of other securities similar to the Registrable Securities.
The Issuer may require each seller of Registrable Securities as to which
any registration is being effected to furnish to the Issuer such information
regarding the distribution of such securities as the Issuer may from time to
time reasonably request in writing.
Each holder of Registrable Securities agrees by acceptance of such
Registrable Securities that, upon receipt of any notice from the Issuer of the
happening of any event of the kind described in Section 6.03(c)(3), (5) or (6)
hereof, such holder will forthwith discontinue disposition of Registrable
Securities until such holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 6.03(k) hereof, or until it is
advised in writing by the Issuer that the use of such Prospectus may be resumed,
and has received copies of any additional or supplemental filings which are
incorporated by reference in such Prospectus, and, if so directed by the Issuer
such holder will deliver to the Issuer (at the Issuer's expense) all copies,
other than permanent file copies then in such holder's possession, of such
Prospectus covering such Registrable Securities current at the time of receipt
of such notice.
SECTION 6.04. REGISTRATION EXPENSES. All expenses incident to the Issuer's
performance of or compliance with this Agreement, including without limitation
all (i) registration and filing fees, fees and expenses associated with filings
required to be made with the NASD (including, if applicable, the fees and
expenses of any "qualified independent
28
underwriter" and its counsel as may be required by the rules and regulations of
the NASD), (ii) fees and expenses of compliance with securities or blue sky laws
(including fees and disbursements of counsel for the underwriters or selling
holders in connection with blue sky qualifications of the Registrable Securities
and determination of their eligibility for investment under the laws of such
jurisdictions as the managing underwriters or holders of a majority of the
Registrable Securities being sold may reasonably designate), (iii) printing
expenses (including expenses of printing certificates for the Registrable
Securities in a form eligible for deposit with The Depository Trust Company and
of printing prospectuses), (iv) fees and disbursements of counsel for the Issuer
and customary out of pocket expenses and fees paid by issuers to the extent
provided for in an underwriting agreement (excluding discounts, commissions or
fees of underwriters, selling brokers, dealer managers or similar securities
industry professionals relating to the distribution of the Registrable
Securities, transfer taxes or legal expenses of any Person other than the Issuer
and the selling holders), (v) the cost of securities acts liability insurance if
the Issuer so desires and (vi) fees and expenses of other Persons retained by
the Issuer (all such expenses being herein called "REGISTRATION EXPENSES") will
be borne by the Issuer regardless of whether the Registration Statement becomes
effective. Each holder of Registrable Securities will pay any fees or
disbursements of counsel to such holder and all underwriting discounts and
commissions and transfer taxes, if any, and other fees, costs and expenses of
such holder (other than Registration Expenses) relating to the sale or
disposition of such holder's Registrable Securities. The Issuer, in any event,
will pay the Issuer's own internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
accounting duties), the expense of any annual audit, the fees and expenses
incurred in connection with the listing of the securities to be registered on
each securities exchange on which similar securities issued by the Issuer are
then listed, rating agency fees and the fees and expenses of any Person,
including special experts, retained by the Issuer.
SECTION 6.05. RESTRICTION ON OTHER REGISTRATIONS. The Issuer agrees that,
until the occurrence of the date on which the Registration Statement referred to
in Section 6.01 hereof is declared effective by the Commission, it shall not
effect a registration of any of its equity securities, other than with respect
to up to 25,000,000 shares of Common Stock.
SECTION 6.06. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE ISSUER. The Issuer agrees to indemnify and hold
harmless, to the full extent permitted by law, each holder of Registrable
Securities, their officers, directors and employees and each Person who controls
such holder (within the meaning of the Securities Act) (the "INDEMNIFIED
PARTIES") against all losses, claims, damages, liabilities and expenses incurred
by such party in connection with any actual or threatened action arising out of
or based upon any untrue or alleged untrue statement of a material fact
contained in any Registration Statement, Prospectus or preliminary Prospectus or
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein (in the case of a
Prospectus or a preliminary Prospectus, in light of the circumstances then
existing) not misleading, and the Issuer agrees to reimburse such Indemnified
Parties for any legal or other expenses reasonably incurred by them in
connection with
29
investigating or defending any such loss or action or proceeding in respect
thereof, except insofar as the same arise out of or are based upon any such
untrue statement or omission made in reliance on and in conformity with any
information furnished in writing to the Issuer by such holder or its counsel
expressly for use therein. The Issuer shall also indemnify underwriters, their
officers and directors and each Person who controls such Persons (within the
meaning of the Securities Act) to the same extent as provided above with respect
to the indemnification of the Indemnified Parties, if requested.
(b) INDEMNIFICATION BY HOLDER OF REGISTRABLE SECURITIES. In connection with
the Shelf Registration, each holder of Registrable Securities will furnish to
the Issuer in writing such information and affidavits as the Issuer reasonably
requests for use in connection with any Registration Statement or Prospectus and
agrees to indemnify and hold harmless, to the full extent permitted by law, the
Issuer, its directors and officers and each Person who controls the Issuer
(within the meaning of the Securities Act) against any losses, claims, damages,
liabilities and expenses resulting from any untrue statement of a material fact
contained in any Registration Statement or Prospectus or any omission of a
material fact required to be stated in the Registration Statement or Prospectus
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, to the extent, but only to the extent,
that such untrue statement or omission relates to such holder and is made in
reliance on and in conformity with any information or affidavit furnished in
writing by such holder to the Issuer specifically for inclusion in such
Registration Statement or Prospectus. In no event shall the liability of any
selling holder of Registrable Securities hereunder be greater in amount than the
dollar amount of the proceeds received by such holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation. The
Issuer shall be entitled to receive indemnities from underwriters, selling
brokers, dealer managers and similar securities industry professionals
participating in the distribution of such Registrable Securities to the same
extent above with respect to information or affidavit furnished writing by such
Persons as provided specifically for any Prospectus or Registration Statement.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any Person entitled to
indemnification hereunder will (i) give prompt notice to the Issuer or holder of
Registrable Securities, as the case may be (in either case, as applicable, an
"INDEMNIFYING PARTY"), of any claim with respect to which it seeks
indemnification and (ii) permit such Indemnifying Party to assume the defense of
such claim with counsel reasonably satisfactory to such Person; PROVIDED,
HOWEVER, that any Person entitled to indemnification hereunder shall have the
right to employ separate counsel and to participate in the defense of such
claim, but the fees and expenses of such counsel shall be at the expense of such
Person unless (a) the Indemnifying Party has agreed to pay such fees or
expenses, (b) the Indemnifying Party has failed to assume the defense of such
claim or (c) in the reasonable judgment of any such Person, based upon written
advice of its counsel, it would be inappropriate under applicable ethical
standards for counsel to the Indemnifying Party to represent such Person in the
defense of such claim (in which case, if the Person notifies the Indemnifying
Party in writing that such Person elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right
30
to assume the defense of such claim on behalf of such Person). If such defense
is not assumed by the Indemnifying Party, the Indemnifying Party will not be
subject to any liability for any settlement made without its consent (but such
consent will not be unreasonably withheld). No Indemnifying Party will consent
to entry of any judgment or enter into any settlement without the consent of the
Indemnified Party which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation. Any Indemnifying Party who
is not entitled to, or elects not to, assume the defense of a claim will not be
obligated to pay the fees and expenses of more than one counsel for all Persons
entitled to indemnification by such Indemnifying Party with respect to such
claim in any one jurisdiction, unless in the reasonable judgment of such Person
a conflict of interest may exist between such Person and any other Person
entitled to indemnification hereunder with respect to such claim, in which event
the Indemnifying Party shall be obligated to pay the fees and expenses of such
additional counsel or counsels, but only of one such additional counsel for each
group of similarly situated Persons in any one jurisdiction.
(d) CONTRIBUTION. If for any reason the indemnification provided for in the
preceding paragraphs (a) and (b) is unavailable to a Person entitled to
indemnification or is insufficient to hold it harmless as contemplated by the
preceding paragraphs (a) and (b), then the Indemnifying Party shall contribute
to the amount paid or payable by such Person as a result of such loss, claim,
damage or liability in such proportion as is appropriate to reflect the relative
fault of such Person and the Indemnifying Party, as well as any other relevant
equitable considerations, PROVIDED that no holder of Registrable Securities
shall be required to contribute an amount greater than the dollar amount of the
proceeds received by such holder of Registrable Securities with respect to the
sale of any securities. The relative fault 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 the Indemnifying Party or the Indemnified Party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The parties hereto agree
that it would not be just and equitable if contributions pursuant to this
paragraph were to be determined by pro rata allocation or by any other method of
allocation which does not take into account the equitable considerations
referred to in the first sentence of this paragraph. 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.
SECTION 6.07. RULE 144. The Issuer covenants that it will file the reports
required to be filed by it under the Securities Act and the Exchange Act and the
rules and regulations adopted by the Commission thereunder (or, if it is not
required to file such reports, it will, upon the request of any holder of
Registrable Securities, make publicly available other information so long as
necessary to permit sales pursuant to Rule 144 under the Securities Act), and it
will take such further action as any holder of Registrable Securities may
reasonably request, all to the extent required from time to time to enable such
holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions
31
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended
from time to time, or (b) any similar rule or regulation hereafter adopted by
the Commission. Upon the request of any holder of Registrable Securities, the
Issuer will deliver to such holder a written statement as to whether it has
complied with such information and filing requirements.
SECTION 6.08 REMEDIES. Each holder of Registrable Securities, in addition
to being entitled to exercise all rights provided herein or granted by law,
including recovery of damages, in connection with the breach by the Issuer of
its obligations to register the Registrable Securities will be entitled to
specific performance of its rights under this Agreement. The Issuer agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Agreement and agrees to waive
the defense in any action for specific performance that a remedy at law would be
adequate.
ARTICLE VII
TAG-ALONG SALE
SECTION 7.01. TAG-ALONG OBLIGATIONS.
(a) If at any time the Principal Shareholder or any Affiliate (other than
the Company) of the Principal Shareholder that has such Affiliate status solely
by virtue of his, her or its status as an Affiliate of the Issuer ("TAG-ALONG
SELLER") shall, in one or in a series of transactions, enter into an agreement
to effect, or effect or propose to effect, an Applicable Disposition to any
transferee (a "TAG-ALONG SALE"), each Initial Holder shall have the right, but
not the obligation, to participate in such Tag-Along Sale by selling up to the
number of shares (on an aggregate basis) of Warrant Stock subject to Warrants
and shares of Warrant Stock equal to the product of (i) the total number of
shares (on an aggregate basis) of Common Stock proposed to be sold in the
proposed Tag-Along Sale multiplied by (ii) a fraction, the numerator of which is
equal to the number of shares (on an aggregate basis) of Warrant Stock subject
to Warrants and shares of Warrant Stock owned by such Initial Holder immediately
prior to the Tag-Along Sale, and the denominator of which is equal to (A) the
number of shares of Common Stock owned by the Tag-Along Seller immediately prior
to the Tag-Along Sale plus (B) the number of shares (on an aggregate basis) of
Warrant Stock subject to Warrants and shares of Warrant Stock owned by such
holder together with the number of shares of Common Stock owned by any holder
thereof who has similar "tag-along" rights and elects to exercise such rights in
connection with the Tag-Along Sale, in each case immediately prior to the
Tag-Along Sale. Any such sales by such Initial Holder shall be on the same terms
and conditions as the proposed Tag-Along Sale by the Tag-Along Seller, except
such Initial Holder shall not be required to make any representations or
warranties except as to (x) its title to the Warrants or shares of Warrant Stock
to be sold by it, (y) such Initial Holder's power and authority to effect such
transfer and (z) such matters pertaining to compliance with securities law as
the transferee may reasonably require.
32
(b) Notwithstanding the foregoing, the provisions of Section 7.01(a) shall
not apply to any transfer, sale or disposition of shares of Common Stock by the
Principal Shareholder (i) to any of its Affiliates, PROVIDED that, any further
sale, disposition or transfer by such Affiliate transferee shall be subject to
the provisions of this Section 7.01(a), (ii) in an ordinary brokerage
transaction pursuant to Rule 144 or (iii) to a Principal Shareholder Beneficial
Owner's spouse or the members of the Principal Shareholder Beneficial Owner's
immediate family or to a custodian, trustee, executor, or other fiduciary for
the account of the Principal Shareholder Beneficial Owner's spouses or members
of the Principal Shareholder Beneficial Owner's immediate family, or to a trust
for the Principal Shareholder Beneficial Owner's own self, PROVIDED, that each
such transferee or assignee, prior to the completion of the sale, transfer, or
assignment shall have executed documents assuming the obligations of the
Principal Shareholder Beneficial Owner with respect to the transferred
securities.
(c) On the date hereof, the Issuer shall deliver to the Initial Holders a
joinder agreement substantially in the form attached hereto as Annex 4 (a
"JOINDER AGREEMENT"), executed by the Issuer, the Principal Shareholder and the
Principal Shareholder Beneficial Owners, pursuant to which such parties will
agree to be bound by the provisions of this Article VII. As a condition to the
validity of any sale, disposition or other transfer of any Common Stock by any
of the Persons who have executed and delivered a Joinder Agreement pursuant to
this Section 7.01 to any other Person, the transferee thereof shall execute and
deliver to the Issuer and each Holder a Joinder Agreement.
(d) References in this Section 7.01 to Initial Holders shall include each
Initial Holder's respective Affiliates to the extent that such Affiliates then
hold Warrants or Warrant Stock.
SECTION 7.02. PROCEDURES. If a Tag-Along Seller is participating in a
Tag-Along Sale, at least 15 days before the proposed date thereof, the Issuer
shall provide each Holder of Warrants or Warrant Stock with written notice of
such Tag-Along Sale setting forth in reasonable detail the consideration per
share to be paid by the transferee, the number of shares to be sold and the
other terms and conditions of the Tag-Along Sale. Each Holder of Warrants or
Warrant Stock wishing to participate in the Tag-Along Sale shall provide written
notice to such Tag-Along Seller and to the Issuer within 15 days of the date the
notice specified in the preceding sentence is received by such Holder. Such
notice shall set forth the number (on an aggregate basis) of then exercisable
Warrants and shares of Warrant Stock, if any, such holder elects to include in
the Tag-Along Sale. If a Holder, or Holders, of Warrants or Warrant Stock has
elected to participate in a Tag-Along Sale, the Tag-Along Seller shall reduce,
to the extent necessary, the number of shares of Common Stock that it is
entitled to sell in the Tag-Along Sale to permit the Holder, or Holders, of
Warrants or Warrant Stock to participate in the Tag-Along Sale and the Holder,
or Holders, of Warrant or Warrant Stock so electing shall sell such number of
shares identified in its notice to the Tag-Along Seller. If such notice is not
received from a Holder within the 15-day period specified above, the Tag-Along
Seller shall have the right to sell or otherwise transfer the shares of Common
Stock to the proposed transferee without any participation by such Holder, but
only (i) on the terms and conditions stated in the notice, and (ii)
33
if the sale or transfer of such shares of Common Stock is consummated not later
than 60 days after the end of such 5-day period specified above.
ARTICLE XIII
HOLDERS' RIGHTS
SECTION 8.01. DELIVERY EXPENSES. If any Holder surrenders any certificate
for Warrants or Warrant Stock to the Issuer or a transfer agent of the Issuer
for exchange for instruments of other denominations or registered in another
name or names, the Issuer shall cause such new instruments to be issued and
shall pay the cost of delivering to or from the office of such Holder from or to
the Issuer or its transfer agent, duly insured, the surrendered instrument and
any new instruments issued in substitution or replacement for the surrendered
instrument.
SECTION 8.02. TAXES. The Issuer shall pay all taxes (other than Federal,
state or local income taxes) which may be payable in connection with the
execution and delivery of this Agreement or the issuance of the Warrants and
Warrant Stock hereunder or in connection with any modification of this Agreement
or the Warrants and shall hold each Holder harmless without limitation as to
time against any and all liabilities with respect to all such taxes. The
obligations of the Issuer under this Section 8.02 shall survive any redemption,
repurchase or acquisition of Warrants or Warrant Stock by the Issuer, any
termination of this Agreement, and any cancellation or termination of the
Warrants.
SECTION 8.03. REPLACEMENT OF INSTRUMENTS. Upon receipt by the Issuer of
evidence reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any certificate or instrument evidencing any
Warrants or Warrant Stock, and
(a) in the case of loss, theft or destruction, of indemnity reasonably
satisfactory to it (PROVIDED that if the Common Stock is not at the time
publicly traded and the owner of the same is any Holder or an institutional
lender or investor, its own agreement of indemnity shall be deemed to be
satisfactory), or
(b) in the case of mutilation, upon surrender or cancellation thereof,
the Issuer, at its expense, shall execute, register and deliver, in lieu
thereof, a new certificate or instrument for (or covering the purchase of)
an equal number of Warrants or Warrant Stock.
SECTION 8.04. INDEMNIFICATION. The Issuer shall indemnify and hold harmless
each of the Holders and each of their respective directors, officers, employees,
shareholders,
34
Affiliates and agents (each, an "INDEMNIFIED PERSON") on demand from and against
any and all losses, claims, damages, liabilities (or actions or other
proceedings commenced or threatened in respect thereof) and expenses that arise
out of, result from, or in any way relate to, this Agreement or the Warrants, or
in connection with the other transactions contemplated hereby, and to reimburse
each indemnified person, upon its demand, for any legal or other expenses
incurred in connection with investigating, defending or participating in the
defense of any such loss, claim, damage, liability, action or other proceeding
(whether or not such indemnified person is a party to any action or proceeding
out of which any such expenses arise), other than any of the foregoing claimed
by any indemnified person to the extent incurred by reason of the gross
negligence or willful misconduct of such indemnified person. No indemnified
person shall be responsible or liable to either the Issuer or any other Person
for any damages which may be alleged as a result of or relating to this
Agreement or the Warrants (other than in connection with a breach of this
Agreement), or in connection with the other transactions contemplated hereby and
thereby. Any claim for indemnity in connection with or relating to a
registration of securities pursuant to Article VI shall be governed by Section
6.06, without regard to the provisions of this Section 8.04.
SECTION 8.05. INSPECTION RIGHTS. The Issuer shall afford, and shall cause
its Subsidiaries to afford, any Holder or its authorized agents, access, at
reasonable times, upon reasonable prior notice and subject to customary
confidentiality obligations, (a) to inspect the books and records of the Issuer
and its Subsidiaries, (b) to discuss with management of the Issuer and its
Subsidiaries the business and affairs of the Issuer and its Subsidiaries and (c)
to inspect the properties of the Issuer and its Subsidiaries.
ARTICLE IX
OTHER COVENANTS OF ISSUER
The Issuer agrees with each Holder that, so long as any of the Warrants
and/or Warrant Stock shall be outstanding:
SECTION 9.01. FINANCIAL STATEMENTS, ETC. The Issuer agrees that it will
file the reports required to be filed by it under the Securities Act and the
Exchange Act so long as the Issuer is registered under the Exchange Act. Upon
the request of any Holders, the Issuer will deliver to such Holder a written
statement as to whether it has complied with such requirements.
SECTION 9.02. TRANSACTIONS WITH AFFILIATES. The Issuer and its Subsidiaries
shall not, directly or indirectly, enter into any transaction or series of
related transactions with or for the benefit of any of their respective
Affiliates except on terms that are no less favorable to the Issuer or the
relevant Subsidiary than any transactions permitted by Section 6.10 of the Note
and Guarantee Agreement.
SECTION 9.03. RESTRICTIONS ON PERFORMANCE. The Issuer shall not at any time
enter into an agreement or other instrument limiting in any manner its ability
to perform its
35
obligations under this Agreement or the Warrants, or making such performance or
the issuance of Warrant Stock upon the exercise of any Warrant a default under
any such agreement or instrument.
SECTION 9.04. MODIFICATION OF OTHER EQUITY DOCUMENTS. The Issuer shall not
amend or consent to any modification, supplement or waiver of any provision of
any Other Equity Documents in any manner which would have a material adverse
effect on the holders of Warrants or Warrant Stock, in each case without the
prior written consent of the Required Holders. Without limiting the generality
of the foregoing, the Issuer shall not amend, or consent to any modification,
supplement or waiver of any provision of any Other Equity Documents in a way
which would (i) restrict the transferability of the Warrants or the Warrant
Stock, (ii) restrict the transferability of the rights of any Holder in this
Agreement to any transferee of all or a portion of such Holder's Warrants and/or
Warrant Stock or (iii) require any consent or other approval of any Person to
the exercise of the Warrants by any Holder or the issuance of Warrant Stock upon
such exercise.
SECTION 9.05. RESERVATION AND AUTHORIZATION OF COMMON STOCK. The Issuer
shall at all times reserve and keep available for issue upon the exercise or
conversion of Warrants such number of its authorized but unissued shares of
Common Stock as will be sufficient to permit the exercise in full of all
outstanding Warrants. The Issuer shall not amend its certificate of
incorporation in any respect relating to the Common Stock other than (i) to
increase or decrease the number of shares of authorized capital stock (subject
to the provisions of the preceding sentence) or (ii) to decrease the par value
of any shares of Common Stock. All shares of Common Stock which shall be so
issuable, when issued upon exercise of any Warrant and payment of the applicable
Exercise Price therefor in accordance with the terms of this Warrant, shall be
duly and validly issued, fully paid and nonassessable and free and clear of any
Liens.
Before taking any action which would result in an adjustment in the number
of shares of Common Stock comprising a Stock Unit or which would cause an
adjustment reducing the Current Warrant Price per share of Common Stock below
the then par value, if any, of the shares of Common Stock issuable upon exercise
of the Warrants, the Issuer shall take any corporate action which is necessary
in order that the Issuer may validly and legally issue fully paid and
nonassessable shares of Common Stock free and clear of any Liens upon the
exercise of all the Warrants immediately after the taking of such action.
Before taking any action which would result in an adjustment in the number
of shares of Common Stock comprising a Stock Unit or in the Current Warrant
Price per share of Common Stock, the Issuer shall obtain all such authorizations
or exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
The Issuer will list on each national securities exchange on which any
Common Stock may at any time be listed, subject to official notice of issuance
upon exercise of the
36
Warrants, and will maintain such listing of, all shares of Common Stock from
time to time issuable upon the exercise of the Warrants.
SECTION 9.06. NOTICE OF EXPIRATION DATE. The Issuer shall give to each
Holder notice of the Expiration Date. Such notice may be given by the Issuer not
less than 30 days but not more than 60 days prior to the Expiration Date;
PROVIDED, HOWEVER, that if the Issuer fails to give timely notice, the
Expiration Date will be extended to the date which is 30 days after the day on
which such notice is given.
SECTION 9.07. OCCURRENCE OF INITIAL EXERCISE DATE. The Issuer agrees to use
its reasonable best efforts to cause the Initial Exercise Date to occur as
promptly as practicable, and in no event later than the 90th day following the
Closing Date.
SECTION 9.08. LIMITATIONS ON REGISTRATION OF OTHER SECURITIES. From and
after the date of this Agreement, the Issuer shall not, without the prior
written consent of a majority in interest of the Initial Holders, enter into any
agreement with any holder or prospective holder of any Securities of the Issuer
giving such holder or prospective holder any registration rights the terms of
which are as or more favorable taken as a whole than the registration rights
granted to the Initial Holders hereunder unless the Issuer shall also give such
rights to the Initial Holders hereunder.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. HOME OFFICE PAYMENT. Notwithstanding anything to the
contrary in this Agreement or the Warrants, so long as any Holder or any nominee
designated by it shall be a Holder, the Issuer shall punctually pay all amounts
which become due and payable with respect to any Warrant or Warrant Stock to
such Holder at the address registered on the books of the Issuer maintained for
such purpose, or at such other place and in such manner as such Holder may
designate by notice to the Issuer, without presentation or surrender of such
Warrant or the making of any notation thereon. Each Holder agrees that prior to
the sale, transfer or other disposition of a part of any Warrant, it will make
notation thereon of the number of shares of Warrant Stock covered by the part of
the Warrant sold, transferred or disposed, or surrender the same in exchange for
a Warrant covering the number of shares of Warrant Stock remaining on the
Warrant so surrendered. The Issuer agrees that the provisions of this Section
10.01 shall inure to the benefit of any other Holder registered on the books of
the Issuer.
SECTION 10.02. WAIVER. No failure on the part of any Holder to exercise and
no delay in exercising, and no course of dealing with respect to, any right,
power or privilege under this Agreement or the Warrants shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, power or
privilege under this Agreement or the Warrant preclude
37
any other or further exercise thereof or the exercise of any other right, power
or privilege. The remedies provided herein are cumulative and not exclusive of
any remedies provided by law.
SECTION 10.03. NOTICES. (a) All notices, requests and other communications
provided for herein and the Warrants (including any waivers or consents under
this Agreement and the Warrants) shall be given or made in writing, (a) to any
party hereto, delivered to the intended recipient at the "Address for Notices"
specified below its name on the signature pages hereof; or, as to any party, at
such other address as shall be designated by such party in a written notice to
each other party, or (b) any other Person who is the registered Holder of any
Warrants or Warrant Stock, to the address for such Holder as it appears in the
stock or warrant ledger of the Issuer.
(b) All such notices, requests and other communications shall be: (i)
personally delivered, sent by courier guaranteeing overnight delivery or sent by
registered or certified mail, return receipt requested, postage prepaid, in each
case given or addressed as aforesaid; and (ii) effective upon receipt.
SECTION 10.04. EXPENSES, ETC. The Issuer agrees to pay or reimburse the
Holders for: (a) all reasonable out-of-pocket costs and expenses of the Holders
(including the reasonable fees and expenses of Milbank, Tweed, Hadley & McCloy
LLP, special New York counsel to Citicorp USA, Inc.), in connection with (i) the
negotiation, preparation, execution and delivery of this Agreement and the
issuance of Warrants hereunder and (ii) any amendment, modification or waiver of
(or consents in respect of) any of the terms of this Agreement and/or the
Warrants; and (b) all costs and expenses of the Holders (including reasonable
legal fees and expenses) in connection with (i) any default by the Issuer
hereunder or under the Warrants or any enforcement proceedings resulting
therefrom and (ii) the enforcement of this Section 10.04.
SECTION 10.05. AMENDMENTS, ETC. Except as otherwise expressly provided in
this Agreement, any provision of this Agreement may be amended or modified only
by an instrument in writing signed by the Issuer and the Required Holders;
PROVIDED that (a) the consent of the holders of any class of Warrant Stock or
Warrants shall not be required with respect to any amendment or waiver which
does not affect the rights or benefits of such class under this Agreement, and
(b) no such amendment or waiver shall, without the written consent of all
Holders of such Warrant Stock and Warrants at the time outstanding, amend this
Section 10.05.
SECTION 10.06. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
SECTION 10.07. SURVIVAL. All representations and warranties made by the
Issuer herein or in any certificate or other instrument delivered by it or on
its behalf under this Agreement shall be considered to have been relied upon by
the Holders and shall survive the issuance of the Warrants or the Warrant Stock
regardless of any investigation made by or on
38
behalf of the Holders. All statements in any such certificate or other
instrument so delivered shall constitute representations and warranties by the
Issuer hereunder. All representations and warranties made by the Holders herein
shall be considered to have been relied upon by the Issuer and shall survive the
issuance to the Holders of the Warrants or the Warrant Stock regardless of any
investigation made by the Issuer or on its behalf.
SECTION 10.08. SPECIFIC PERFORMANCE. Damages in the event of breach of this
Agreement by a Holder or the Issuer would be difficult, if not impossible, to
ascertain, and it is therefore agreed that each Holder and the Issuer, in
addition to and without limiting any other remedy or right it may have, will
have the right to an injunction or other equitable relief in any court of
competent jurisdiction, enjoining any such breach, and enforcing specifically
the terms and provisions hereof, and each Holder and the Issuer hereby waives
any and all defenses it may have on the ground of lack of jurisdiction or
competence of the court to grant such an injunction or other equitable relief.
The existence of this right will not preclude the Holders or the Issuer from
pursuing any other rights and remedies at law or in equity which the Holders or
the Issuer may have.
SECTION 10.09. CAPTIONS. The captions and section headings appearing herein
are included solely for convenience of reference and are not intended to affect
the interpretation of any provision of this Agreement.
SECTION 10.10. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart signature page or counterpart.
SECTION 10.11. GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the law of the State of New York without giving
effect to the conflicts of law principles thereof, except to the extent that New
York conflicts of laws principles would apply the Delaware General Corporation
Law to matters relating to corporations organized thereunder.
SECTION 10.12. SEVERABILITY. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
39
SECTION 10.13. ENTIRE AGREEMENT. This Agreement supersedes all prior
discussions and agreements between the parties with respect to the subject
matter hereof and, together with the Warrants, contains the sole and entire
agreement between the parties hereto with respect to the subject matter hereof.
40
IN WITNESS WHEREOF, the parties hereto have duly executed this Warrant
Agreement as of the date first above written.
METROMEDIA FIBER NETWORK, INC.
By /s/ Nick Tanzi
--------------------------------
Name: Nick Tanzi
Title: President & CEO
41
INITIAL HOLDERS
CITICORP USA, INC.
By: /s/ Caesar W. Wyszomirski
--------------------------------
Name: Caesar W. Wyszomirski
Title: Vice President
42
MERRILL LYNCH GLOBAL ALLOCATION
FUND, INC.
By: /s/ Lisa Ann O'Donnell
--------------------------------
Lisa Ann O'Donnell
Director, Merrill Lynch
Investment Managers
Authorized Signatory
MERRILL LYNCH EQUITY/CONVERTIBLE
SERIES GLOBAL ALLOCATION PORTFOLIO
By: /s/ Lisa Ann O'Donnell
--------------------------------
Lisa Ann O'Donnell
Director, Merrill Lynch
Investment Managers
Authorized Signatory
MERRILL LYNCH VARIABLE SERIES
FUNDS, INC.
(MERRILL LYNCH GLOBAL
ALLOCATION FOCUS FUND)
By: /s/ Merrill Lynch
--------------------------------
________________, Merrill
Lynch Investment Managers
Authorized Signatory
MERRILL LYNCH SERIES FUND, INC.
(GLOBAL ALLOCATION STRATEGY
PORTFOLIO)
By: /s/ Lisa Ann O'Donnell
--------------------------------
Lisa Ann O'Donnell
Director, Merrill Lynch
Investment Managers
Authorized Signatory
43
JOHN W. KLUGE, CHASE MANHATTAN BANK
AND STUART SUBOTNICK, TRUSTEES
UNDER A TRUST AGREEMENT BETWEEN
JOHN W. KLUGE, AS GRANTOR AND JOHN
W. KLUGE AND MANUFACTURERS HANOVER
TRUST COMPANY, AS TRUSTEES, DATED
MAY 30, 1984, AS AMENDED AND
RESTATED
By: /s/ Stuart Subotnick
--------------------------------
Name: Stuart Subotnick
Title: Trustee
Annex 1 to Warrant Agreement
[Form of Warrant]
WARRANT
THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT
TO THE RESTRICTIONS SPECIFIED IN THAT CERTAIN WARRANT AGREEMENT DATED AS OF
OCTOBER 1, 2001 (THE "WARRANT AGREEMENT"), BETWEEN METROMEDIA FIBER
NETWORK, INC., A DELAWARE CORPORATION (THE "ISSUER"), AND THE HOLDERS PARTY
THERETO FROM TIME TO TIME AS MODIFIED AND SUPPLEMENTED AND IN EFFECT FROM
TIME TO TIME, AND NO TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE SHALL BE VALID OR EFFECTIVE UNTIL SUCH RESTRICTIONS HAVE LAPSED
OR BEEN FULFILLED, RELEASED OR WAIVED. A COPY OF THE FORM OF THE WARRANT
AGREEMENT IS ON FILE AND MAY BE INSPECTED AT THE PRINCIPAL EXECUTIVE OFFICE
OF THE ISSUER. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS
CERTIFICATE, AGREES TO BE BOUND BY THE PROVISIONS OF THE WARRANT AGREEMENT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS, AND ACCORDINGLY, SUCH SECURITIES MAY NOT BE TRANSFERRED,
SOLD OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE REGISTRATION OR
QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR
APPLICABLE EXEMPTIONS THEREFROM.
No. of Stock Units Covered Hereby: [__] Warrant No. [_]
WARRANT
to Purchase Common Stock of
METROMEDIA FIBER NETWORK, INC.
THIS IS TO CERTIFY THAT ___________, or its registered assigns (the
"HOLDER"), is entitled to purchase in whole or in part from time to time from
METROMEDIA FIBER NETWORK, INC., a Delaware corporation (the "ISSUER"), at any
time on and after the Initial Exercise Date, but not later than 5:00 p.m., New
York time, on the fifth anniversary of the
-2-
Initial Exercise Date (as it may be extended pursuant to Section 9.06 of the
Warrant Agreement, the "EXPIRATION DATE"), ____ Stock Units at a purchase price
of $___ per Stock Unit (the "EXERCISE PRICE") [THE EXERCISE PRICE SHALL EQUAL A
25% PREMIUM OVER THE AVERAGE TRADING PRICE DURING THE TEN CONSECUTIVE TRADING
DAYS PRIOR TO THE CLOSING], subject to the terms and conditions hereinbelow
provided. All capitalized terms unless otherwise defined herein shall have the
meanings set forth in the Warrant Agreement.
On and after the Initial Exercise Date and until 5:00 p.m., New York time,
on the Expiration Date, the Holder may exercise this Warrant, on one or more
occasions, on any Business Day, in whole or in part, by delivering to the
Issuer,
(a) a written notice of the Holder's election to exercise this
Warrant, which notice shall specify the number of Stock Units to be
purchased (the "EXERCISE NOTICE");
(b) payment of the aggregate Exercise Price for the number of Stock
Units as to which this Warrant is being exercised (payable as set forth
below); and
(c) this Warrant.
The Exercise Price shall be payable (a) in cash or by certified or official
bank check payable to the order of the Issuer or by wire transfer of immediately
available funds to the account of the Issuer, (b) by delivery to the Issuer of
any Notes issued pursuant to the Note and Guarantee Agreement, with such
securities being credited against the Exercise Price in an amount equal to the
aggregate principal amount of the Notes (plus unpaid and accrued interest) so
delivered, or (c) by delivery of this Warrant Certificate to the Issuer for
cancellation in accordance with the following formula: in exchange for each
share of Common Stock issuable on exercise of each Warrant represented by this
Warrant Certificate that is being exercised, the Holder shall receive such
number of shares of Common Stock as is equal to the product of (i) the number of
shares of Common Stock issuable upon exercise of the Warrants being exercised at
such time multiplied by (ii) a fraction, the numerator or which is the Current
Market Value per share of Common Stock at such time minus the Exercise Price per
share of Common Stock at such time, and the denominator of which is the Current
Market Value per share of Common Stock at such time. Such Exercise Notice may be
substantially in the form of Exhibit A hereto. Upon receipt thereof, the Issuer
shall, as promptly as practicable and in any event within 5 Business Days
thereafter, execute or cause to be executed and deliver or cause to be delivered
to the Holder a certificate or certificates representing the aggregate number of
Warrant Stock and other securities issuable upon such exercise and any other
property to which the Holder is entitled.
The certificate or certificates for Warrant Stock so delivered shall be in
such denominations as may be specified in the Exercise Notice and shall be
registered in the name of the Holder or such other name or names as shall be
designated in such Exercise Notice. Such certificate or certificates shall be
deemed to have been issued and the Holder or any other Person so designated to
be named therein shall be deemed to have become a holder of record of Warrant
Stock, including, to the extent permitted by law, the right to vote Warrant
Stock or to consent or to receive notice as a Shareholder, as of the date on
which the last of the Exercise Notice,
-3-
payment of the Exercise Price and this Warrant is received by the Issuer as
aforesaid, and all taxes required to be paid by the Holder, if any, pursuant to
the Warrant Agreement, prior to the issuance of Stock Units have been paid. If
this Warrant shall have been exercised only in part, the Issuer shall, at the
time of delivery of the certificate or certificates representing Warrant Stock
and other securities, execute and deliver to the Holder a new Warrant evidencing
the rights of the Holder to purchase the unpurchased Stock Units called for by
this Warrant, which new Warrant shall in all other respects be identical with
this Warrant, or, at the request of the Holder, appropriate notation may be made
on this Warrant and the same returned to the Holder.
The Issuer shall not be required to issue a fractional amount of Warrant
Stock upon exercise of this Warrant. As to any fraction of a Warrant Stock which
the Holder would otherwise be entitled to purchase upon such exercise, the
Issuer shall pay a cash adjustment in respect of such final fraction in an
amount equal to the same fraction of the Current Market Value per share of
Warrant Stock on the date of exercise.
THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS
OF THE STATE OF NEW YORK.
-4-
IN WITNESS WHEREOF, the Issuer has duly executed this Warrant.
Dated: [_________], 200[_]
METROMEDIA FIBER NETWORK, INC.
By
-------------------------------
Name:
Title:
Attest:
--------------------------------
Secretary
Exhibit A to Warrant
FORM OF EXERCISE
(To be executed by the registered holder hereof)
The undersigned registered owner of this Warrant irrevocably exercises this
Warrant for the purchase of [___] Stock Units of METROMEDIA FIBER NETWORK, INC.,
a Delaware corporation and herewith makes payment therefore [in cash, as
provided in clause (a) of the third paragraph of this Warrant] [by delivery of
any Notes, as provided in clause (b) of the third paragraph of this Warrant] [by
delivery the Warrant Certificate(s) for cancellation in accordance with the
formula provided in clause (c) of the third paragraph of this Warrant], all at
the price and on the terms and conditions specified in this Warrant, and
requests that certificates for the shares of Common Stock be issued in
accordance with the instructions given below, and, if such Stock Units shall not
include all of the Stock Units to which the Holder is entitled under this
Warrant, that a new Warrant of like tenor and date for the unpurchased balance
of the Stock Units issuable hereunder be delivered to the undersigned.
Dated: _____________, 200_
--------------------------------
(Signature of Registered Holder)
Instructions for issuance and
registration of Common Stock:
--------------------------------
Name of Registered Holder
(please print)
Social Security or Other Identifying
Number: _________________________
Please deliver certificate to
the following address:
------------------------------------
Street
-------------------------------------
City, State and Zip Code
Annex 2 to Warrant Agreement
FORM OF ASSIGNMENT
(To be executed by the registered holder hereof)
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the assignee named below all the rights of the
undersigned under this Warrant with respect to the number of shares of Warrant
Stock covered thereby set forth hereinbelow unto:
Number of Stock Units and
Name of Assignee Address Class of Common Stock
--------------------------------------------------------------------------
Dated: ____________, 200_
--------------------------------
Signature of Registered Holder
--------------------------------
Name of Registered Holder
(Please Print)
Witness:
----------------------
Annex 3 to Warrant Agreement
Each Initial Holder shall receive Warrants to purchase that number of Stock
Units as is determined in accordance with the calculation set forth below
opposite such Initial Holder's name:
INITIAL HOLDER NUMBER OF STOCK UNITS
-------------- ---------------------
Citicorp USA, Inc. .12 x FDN x 62.5/150
Merrill Lynch Global Allocation Fund, Inc. .12 x FDN x 52/150
Merrill Lynch Equity/Convertible
Series Global Allocation Portfolio .12 x FDN x 5.75/150
Merrill Lynch Variable Series Funds, Inc.
(Merrill Lynch Global Allocation Focus Fund) .12 x FDN x 3.5/150
Merrill Lynch Series Fund, Inc.
(Global Allocation Strategy Portfolio) .12 x FDN x 1.25/150
John W. Kluge, Chase Manhattan Bank
and Stuart Subotnick, Trustees Under a Trust
Agreement Between John W. Kluge, as Grantor
and John W. Kluge and Manufacturers Hanover
Trust Company, as Trustees, Dated May 30, 1984,
as Amended and Restated .12 x FDN x 25.0/150
"FDN" or "FULLY-DILUTED NUMBER" means the number of shares of Common Stock
outstanding on the date of issuance of the Warrants, assuming full conversion,
exercise and exchange of all in-the-money Convertible Securities outstanding
prior to the date hereof, all Convertible Securities and all of the Warrants, to
be issued on the date of issuance of the Warrants, and all in-the-money Options
that are (or may become) exchangeable for, or exercisable or convertible into,
Common Stock, including the Warrants. Terms not defined in this Annex 3 shall
have the meanings ascribed to them in the Warrant Agreement. "In-the-money"
Convertible Securities and Options are Convertible Securities and Options having
a conversion price or an exercise price equal or less than the Current Market
Value of the Common Stock on the Closing Date.
Annex 4 to
Warrant Agreement
[Form of Joinder Agreement]
JOINDER AGREEMENT, dated as of October 1, 2001 between METROMEDIA FIBER
NETWORK, INC, a Delaware Corporation (the "ISSUER"), and the other parties
signatories hereto (this "JOINDER AGREEMENT").
A. Reference is made to that certain Warrant Agreement dated as of
October 1, 2001 (as modified and supplemented and in effect from time
to time, the "WARRANT AGREEMENT"), between the Issuer and the Initial
Holders. Each capitalized term used but not defined herein shall have
the meaning assigned to such term in the Warrant Agreement; and
B. Section 7.01 of the Agreement requires that the Issuer shall deliver
to the Initial Holders this Joinder Agreement executed by the Issuer,
the Principal Shareholder and the Principal Shareholder Beneficial
Owners.
In consideration of the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
undersigned hereby agrees that:
1. The undersigned: (a) is delivering this Joinder Agreement pursuant to
Section 7.01(c) of the Warrant Agreement and (b) acknowledges receipt of a copy
of the Warrant Agreement.
2. The undersigned hereby agrees to be bound by the provisions of Article
VII of the Warrant Agreement.
IN WITNESS WHEREOF, the undersigned has signed this Joinder Agreement as of
the date first above written.
METROMEDIA COMPANY
By:
-------------------------------
Name:
Title:
JOHN W. KLUGE
By:
-------------------------------
Name:
Title:
STUART SUBOTNICK
By:
-------------------------------
Name:
Title:
Acknowledged and Agreed to as
of the date first above written:
METROMEDIA FIBER NETWORK, INC.
By:
---------------------------
Name:
Title: