EXHIBIT 4.30
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CLASS D PREFERRED STOCK CONVERSION AGREEMENT
BY AND BETWEEN
WAM!NET INC.
AND
MCI WORLDCOM, INC.
______________________________
Dated as of March 4, 1999
______________________________
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PREFERRED STOCK CONVERSION AGREEMENT
Preferred Stock Conversion Agreement, dated as of March 4, 1999 (this
"Agreement"), by and between WAM!NET INC., a Minnesota corporation (the
"Company"), and MCI WORLDCOM,INC., a Georgia corporation ("Buyer").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, on January 13, 1999, the Company issued to Buyer that certain
13.25% Subordinated Unsecured Convertible Note due August 28, 2005, in an
aggregate principal amount of up to $25 million (the "Note");
WHEREAS, upon an Equity Offering (as defined in the Note), the aggregate
principal amount outstanding under the Note and any interest accrued thereon
shall be converted into the same class of shares sold in the Equity Offering and
at a Conversion Price (as defined in the Note) equal to the offering price per
share in the Equity Offering;
WHEREAS, the Company and Silicon Graphics, Inc., a Delaware corporation
("SGI"), have entered into that certain Preferred Stock Purchase Agreement,
dated as of March 3, 1999, providing for the sale to SGI of two series of the
Company's preferred stock (the "SGI Investment"), consisting of (i) 5,710,425
shares of the Company's Class B Convertible Preferred Stock, par value $0.01 per
share, and (ii) 878,527 shares of the Company's Class C Convertible Preferred
Stock, par value $0.01 per share;
WHEREAS, the Company has designated an additional series of its preferred
stock, consisting of 2,196,317 shares, par value $0.01 per share, designated as
its "Class D Convertible Preferred Stock" (the "Class D Preferred Shares");
WHEREAS, the Class D Preferred Shares are convertible into shares (the
"Conversion Shares") of the Company's common stock, par value $0.01 per share
(the "Common Stock") in accordance with the terms of the Class D Certificate of
Designation (as defined herein); and
WHEREAS, the terms, limitations and relative rights and preferences of the
Class D Preferred Shares are set forth in the "Statement of Rights and
Preferences of Class D Convertible Preferred Shares" (the "Class D Certificate
of Designation"), a copy of which is attached hereto as Exhibit I.
NOW THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereby agree as follows:
I. CONVERSION OF THE NOTE INTO CLASS D PREFERRED STOCK
1.01 Automatic Conversion. The Company and Buyer acknowledge and agree
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that the SGI Investment constitutes an Equity Offering for the purposes of the
Note and that, as of the date hereof and immediately prior to the consummation
of the SGI Investment, the Note and any accrued interest thereon shall
automatically convert into the Class D Preferred Shares.
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1.02 Duration, Rights and Preferences of the Class D Preferred Stock. The
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Class D Preferred Shares shall have and enjoy the rights and preferences as are
set forth in the Class D Certificate of Designation.
II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.01 The Company hereby represents, warrants and covenants to Buyer that,
as of the date hereof:
(a) Corporate Organization and Power; Qualification. The Company (i) is
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duly organized, validly existing and in good standing as a corporation under the
laws of the state of Minnesota, (ii) has all corporate power and authority to
own its properties and to carry on its businesses as now being conducted and
(iii) is duly qualified and in good standing as a foreign corporation, and is
authorized to do business, in all jurisdictions in which the character of its
properties or the nature of its businesses requires such qualification or
authorization, except for qualifications and authorizations the lack of which,
individually or in the aggregate, would not reasonably be expected to result in
a material adverse effect on the business, financial condition, results of
operations, assets or liabilities of the Company and its subsidiaries taken as a
whole (a "Material Adverse Effect").
(b) Subsidiaries. Set forth on Schedule 2.01(b) hereto is a complete list
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of all of the subsidiaries of the Company. Except as set forth on Schedule
2.01(b) hereto, the Company does
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not own, directly or indirectly, any capital stock or other equity securities of
any corporation, nor does the Company have any direct or indirect ownership
interest, including interests in partnerships and joint ventures, in any other
entity or business. Each of the subsidiaries has been duly incorporated, is
validly existing and in good standing under the laws of its respective
jurisdiction of incorporation and is duly qualified and in good standing as a
foreign corporation, and is authorized to do business, in all jurisdictions in
which the character of its properties or the nature of its businesses requires
such qualification or authorization, except for qualifications and
authorizations the lack of which, individually or in the aggregate, would not
reasonably be expected to result in a Material Adverse Effect. Each of the
subsidiaries has the requisite power and authority to own and hold its
properties and to carry on its business as now being conducted. Except as
disclosed in the registration statements, reports and proxy statements filed by
the Company with the Securities and Exchange Commission (the "SEC Reports"),
disclosed in the Financial Statements (as defined herein) or set forth on
Schedule 2.01(b) hereto: (i) all of the outstanding shares (other than
director's qualifying shares, if any) of capital stock of each of the
subsidiaries are owned beneficially and of record by the Company, one of its
subsidiaries or any combination thereof, in each case free and clear of any
liens, charges, restrictions, claims or encumbrances created or suffered by the
Company or any of its subsidiaries, other than restrictions on transfer imposed
by the
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Securities Act of 1933, as amended (the "Securities Act"), or any other
provision of applicable law; and (ii) there are no outstanding subscriptions,
warrants, options, convertible securities or other rights (contingent or other)
pursuant to which any of the subsidiaries is or may become obligated to issue
any shares of its capital stock to any person other than the Company or a
subsidiary.
(c) Power and Authority; Authorization; Enforceability. The Company has
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all requisite corporate power and authority necessary to execute and deliver
this Agreement and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of the Company and no other corporate
proceedings on the part of the Company are necessary to authorize this Agreement
and to consummate the transactions contemplated hereby and thereby. This
Agreement has been duly executed and delivered by the Company and constitutes
the valid and binding obligation of the Company, enforceable against it in
accordance with its terms, except as enforceability against the Company may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws now or hereafter in effect relating to the rights of creditors
generally and other general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law) and except as any
rights to indemnity and contribution
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contemplated by Section 6.02 may be limited by applicable federal and state
securities laws and public policy considerations.
(d) No Violations; Consents and Approvals. The execution and delivery by
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the Company of this Agreement, the performance by the Company of its obligations
hereunder and the consummation by the Company of the transactions contemplated
hereby will not (i) violate, conflict with, result in a breach of, constitute a
default under, or result in or require the creation of any lien upon any assets
of the Company under its Articles of Incorporation, as amended (the "Charter"),
By-laws or any material contract to which the Company is a party or by which the
Company or any of its properties may be bound or (ii) require any consent or
approval other than such consents and approvals to be obtained before the
Closing and those that have been obtained which are final and not subject to
review on appeal or to collateral attack and are in full force and effect,
except for such violations, conflicts, breaches, defaults or liens which, or
consents or approvals which, if not obtained, would not reasonably be expected
to, individually or in the aggregate, result in a Material Adverse Effect.
(e) Litigation; Compliance with Laws. Except as disclosed in the SEC
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Reports, disclosed in the Financial Statements or set forth on Schedule 2.01(e),
there are no (i) actions, suits, claims, proceedings or investigations
instituted and pending or, to the knowledge of the Company, threatened, against
or affecting the Company or any of its subsidiaries, at law or in equity, or
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before or by any federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign, (ii)
arbitration proceedings relating to the Company instituted and pending under
collective bargaining agreements or otherwise or (iii) governmental inquiries
instituted and pending or, to the knowledge of the Company, threatened, against
or affecting the Company, any of which would reasonably be expected to result in
a Material Adverse Effect. Except for any defaults which would not reasonably
be expected to result in a Material Adverse Effect, neither the Company nor any
of its subsidiaries is in default with respect to any order, writ, injunction or
decree known to or served upon the Company of any court or of any federal,
state, municipal or other governmental department, commission, board, bureau,
agency or instrumentality, domestic or foreign. Except where the failure to do
so would not reasonably be expected to result in a Material Adverse Effect,
neither the Company nor any of its subsidiaries has failed to comply with any
laws, rules, regulations and orders applicable to its respective business,
operations, properties, assets, products and services, the Company and each of
its subsidiaries has all necessary permits, licenses and other authorizations
required to conduct its business as presently conducted and the Company and each
of its subsidiaries has operated its respective business pursuant to and in
compliance with the terms of all such permits, licenses and other
authorizations.
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(f) Taxes. The Company has filed (or obtained extensions of the time by
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which it is required to file) all United States federal, state and local income
tax returns and all other material tax returns required to be filed by it, and
has paid all taxes shown due on the returns so filed as well as the other taxes,
assessments and governmental charges which have become due, except such taxes,
if any, as are being contested in good faith and as to which adequate reserves
have been provided. The Company will continue to make all such filings in a
timely manner and pay all such taxes, assessments and other governmental charges
required of it.
(g) Capitalization. (i) As of the date hereof, the authorized capital
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stock of the Company consists of 500,000,000 shares, the designations and
classes of which are set forth on Schedule 2.01(g) hereto. The Company does not
hold any of its shares in treasury.
(ii) As of the date hereof, 9,291,027 shares of Common Stock and 100,000
shares of the Company's Class A Preferred Stock, par value $10.00 per share (the
"Class A Preferred Stock"), are issued and outstanding and have been validly
issued and are fully paid and nonassessable and are not subject to preemptive
rights.
(iii) Except as contemplated by this Agreement, disclosed in the SEC
Reports, disclosed in the Financial Statements or set forth on Schedule 2.01(g)
hereto, as of the date hereof there are
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no outstanding subscriptions, options, warrants or other rights of any kind to
acquire any additional shares of capital stock of the Company or other
instruments or securities convertible into or exchangeable for, or which
otherwise confer on the holder thereof any right to acquire, any such additional
shares of capital stock, nor is the Company committed to issue any such option,
warrant, right or security. Except as provided for in the Charter, disclosed in
the SEC Reports or set forth on Schedule 2.01(g) hereto, the Company has no
obligation (contingent or other) to purchase, redeem or otherwise acquire any of
its equity securities or any interest therein or to pay any dividend or make any
other distribution in respect thereof. All of the outstanding securities of the
Company were issued in compliance with the registration requirements under
applicable federal and state securities laws (or pursuant to applicable
exemptions therefrom).
(iv) Except as contemplated by this Agreement, disclosed in the SEC Reports
or disclosed in the Financial Statements, as of the date hereof, there are no
agreements relating to voting, purchase or sale of capital stock between the
Company and any of its stockholders or affiliates, and to the best of the
Company's knowledge, there are no such agreements among any of its stockholders.
(v) The Class D Preferred Shares are duly authorized, validly issued,
fully paid and nonassessable, and have the rights, preferences and privileges
specified in the Class D
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Certificate of Designation. The Conversion Shares are duly authorized and have
been reserved for issuance and, when issued upon conversion in accordance with
the terms of the Class D Certificate of Designation will be validly issued,
fully paid and nonassessable, and will be free and clear of all liens,
encumbrances and restrictions (other than those contemplated hereby, created or
suffered by Buyer (or the current holder thereof) and restrictions on transfer
imposed by the Securities Act or any other applicable federal or state
securities laws, and the rules and regulations promulgated thereunder). Neither
the issuance, sale or delivery of the Class D Preferred Shares nor the
contemplated issuance or delivery of the Conversion Shares is subject to any
currently existing preemptive right of stockholders of the Company, any right of
first refusal or other right in favor of any person, in each case except for
rights that have been waived.
(h) Financial Statements. The Company has delivered to Buyer copies of its
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financial statements (including balance sheets, income statements, changes in
stockholders equity, statements of cash flow and any related notes) for the year
ended December 31, 1998 (the "Financial Statements") and will deliver to Buyer
(as soon as practicable but in no event later than March 31, 1999) audited
copies of the Financial Statements. The Financial Statements (i) fairly
present, in all material respects, the financial condition, assets and
liabilities of the Company as of the date thereof and the results of its
operations
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and changes in its cash flows for the periods covered thereby, (ii) were
prepared in accordance with generally accepted accounting principles applied on
a consistent basis during the periods involved, except as may be noted therein,
and (iii) were prepared from the books and records of the Company, which books
and records are complete and correct and fairly reflect all material
transactions of the Company's business.
(i) Absence of Certain Changes. Except as contemplated by this Agreement,
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disclosed in the SEC Reports or set forth on Schedule 2.01(i) hereto, since
December 31, 1998, (i) there has been no change in the assets, liabilities or
financial condition of the Company and its subsidiaries (on a consolidated
basis) from that reflected in the balance sheet of the Company and its
subsidiaries as of December 31, 1998, except for changes (A) in the ordinary
course of business or (B) which in the aggregate have not resulted in and would
not reasonably be expected to result in a Material Adverse Effect and (ii) there
has not been any event or change that would reasonably be expected to result in
a Material Adverse Effect, individually or in the aggregate, whether or not
insured against (excluding general economic or industry changes).
(j) No Brokers. No broker, finder or investment banker is entitled to any
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brokerage, finder's or other fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
the Company.
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(k) Proprietary Information of Third Parties. Except for such claims that
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would not reasonably be expected to result in a Material Adverse Effect, to the
knowledge of the Company, no third party has claimed or has reason to claim that
the Company or any of its subsidiaries has (a) violated or may be violating any
of the terms or conditions of any non-competition or non-disclosure agreement
with such third party, (b) disclosed or may be disclosing or utilized or may be
utilizing any trade secret or proprietary information or documentation of such
third party or (c) interfered or may be interfering in the employment
relationship between such third party and any of its present or former
employees. Neither the Company nor any of its subsidiaries has utilized and
does not propose to utilize any trade secret or any information or documentation
proprietary to any other person in violation of existing arrangements with such
person, and to the knowledge of the Company, neither the Company nor any of its
subsidiaries has violated any confidential relationship which any such person
may have had with any third party, in connection with the development,
manufacture or sale of any product or the development or sale of any service of
the Company.
(l) Patents, Trademarks, Etc. Set forth on Schedule 2.01(l) hereto is a
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list of all domestic and foreign trademarks, trademark applications, patents,
registered copyrights (except copyrighted software licensed to the Company in
its ordinary course of business) and patent applications owned by, registered in
the name of or licensed to or from the Company and its
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subsidiaries as of the date hereof. Except where the failure to do so would not
reasonably be expected to result in a Material Adverse Effect, the Company and
its subsidiaries own or possess, or can acquire on reasonable terms, adequate
patents, patent rights, licenses, inventions, copyrights, know-how (including
trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service marks and
trade names (including those necessary for the use and protection of the names
and/or marks "WAM!NET", "WAM!BASE" and "WAM!PROOF") or other intellectual
property (collectively, "Intellectual Property") necessary to carry on its
business as presently conducted. Except as set forth on Schedule 2.01(l) hereto,
neither the Company nor any subsidiary has received any notice of any
infringement of or conflict with asserted rights of others with respect to any
Intellectual Property or of any facts or circumstances which would render any
Intellectual Property invalid or inadequate to protect the interest of the
Company or any of its subsidiaries, and which infringement or conflict (if the
subject of any unfavorable decision, ruling or finding) or invalidity or
inadequacy, individually or in the aggregate, would reasonably be expected to
result in a Material Adverse Effect.
(m) The Year 2000. Except where the failure to do so would not reasonably
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be expected to result in a Material Adverse Effect, the Company has used (or is
in the process of using) reasonable procedures to verify that any of its
software licensed or otherwise provided to its customers and any software used
in
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its business will recognize and process date fields after the turn of the
century, and perform date-dependent calculations and operations (including
sorting, comparing and reporting) after the turn of the century correctly, and
has used (or is in the process of using) reasonable efforts to ensure that any
such software will not produce invalid and incorrect results as a result of the
change of century (all without human intervention, other than original data
entry of valid dates), provided that such software receives correct and properly
formatted date inputs from all software and hardware that exchanges data with or
provides data to the software.
(n) Title to Properties. Except as disclosed in the SEC Reports, the
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Company and its subsidiaries have good and valid title to all real and personal
property which they own and which are reflected on the Financial Statements
(except for assets and properties sold, consumed or otherwise disposed of by
them in the ordinary course of business since December 31, 1998), and such
assets and properties are owned free and clear of all mortgages, pledges, liens,
security interests, claims, restrictions or encumbrances of any kind, except (i)
those securing indebtedness reflected on the Financial Statements or
indebtedness incurred in the ordinary course of business and consistent with
past practice after the date thereof, (ii) mechanics', materialmens' and other
liens which have arisen in the ordinary course of business or (iii) mortgages,
pledges, liens, security interests, claims, restrictions or encumbrances which,
individually or in the
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aggregate, would not be reasonably likely to impair, in any material respect,
the continued use of such asset or property.
(o) Agreements. Except as set forth in Schedule 2.01(o) hereto or
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disclosed in the Financial Statements, all material agreements, contracts or
instruments required to be filed as exhibits to the SEC Reports have been so
filed. Neither the Company nor any of its subsidiaries is in breach or default
of any agreement, contract, instrument or other commitment, except for such
breaches and defaults which would not reasonably be expected to result in a
Material Adverse Effect. To the knowledge of Company, no other party to any of
such agreements, contracts, instruments or other commitments is, as of the date
of this Agreement, in breach or default (and no event has occurred which with
notice or the lapse of time or both would constitute a default or violation)
thereunder, except for such breaches and defaults which would not reasonably be
expected to result in a Material Adverse Effect. The Company is in full
compliance with all of the terms and provisions of its Charter and By-laws,
except where the failure to so comply would not reasonably be expected to result
in a Material Adverse Effect.
(p) Transactions With Affiliates. Except as disclosed in the SEC Reports
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or disclosed in the Financial Statements, neither the Company nor any subsidiary
is a party to any transaction of the type required to be disclosed pursuant to
Item 404 of Regulation S-K under the Securities Act.
(q) Disclosure. Neither this Agreement (including the Schedules hereto)
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nor the SEC Reports (as of the date filed with
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the Securities and Exchange Commission) contains an untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances under
which they were made, not misleading. None of the statements, documents,
certificates or other items prepared by the Company and supplied to Buyer or its
counsel in connection with the transactions contemplated hereby (other than
those relating to (i) projected financial information, (ii) plans and objectives
regarding the Company's future operations, (iii) future economic performance and
(iv) assumptions underlying any of the matters described in (i) through (iii),
each as to which no representation or warranty is given) contains an untrue
statement of a material fact or omits to state a material fact necessary in
order to make the statements contained therein, in light of the circumstances
under which they were made, not misleading.
III. REPRESENTATIONS AND WARRANTIES OF BUYER
3.01 Buyer hereby represents, warrants and covenants to the Company that:
(a) Corporate Organization and Power; Qualification. Buyer (i) is duly
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organized, validly existing and in good standing as a corporation under the laws
of the state of Georgia and (ii) has all corporate power and authority to own
its properties and to carry on its businesses as now being conducted.
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(b) Power and Authority; Authorization; Enforceability. Buyer has all
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requisite corporate power and authority necessary to execute and deliver this
Agreement and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by all
necessary corporate action on the part of Buyer and no other corporate
proceedings on the part of Buyer are necessary to authorize this Agreement and
to consummate the transactions contemplated hereby and thereby. This Agreement
has been duly executed and delivered by Buyer and constitutes the valid and
binding obligation of Buyer, enforceable against it in accordance with its
terms, except as enforceability against Buyer may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to the rights of creditors generally and other
general principles of equity (regardless of whether enforcement is considered in
a proceeding in equity or at law) and except as any rights to indemnity and
contribution contemplated by Section 6.02 may be limited by applicable federal
and state securities laws and public policy considerations.
(c) No Violations; Consents and Approvals. The execution and delivery by
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Buyer of this Agreement, the performance by Buyer of its obligations hereunder
and the consummation by Buyer of the transactions contemplated hereby will not
(i) violate, conflict with, result in a breach of, constitute a default under,
or result in or require the creation of any lien upon any assets of
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Buyer under its certificate of incorporation, by-laws (or other comparable
charter documents) or any material contract to which Buyer is a party or by
which Buyer or any of its properties may be bound or (ii) require any consent or
approval other than such consents and approvals to be made and obtained before
the Closing and those that have been obtained which are final and not subject to
review on appeal or to collateral attack and are in full force and effect,
except for such violations, conflicts, breaches, defaults or liens which, or
consents or approvals which, if not obtained would not reasonably be expected
to, individually or in the aggregate, result in a material adverse effect on the
business, financial condition, results of operations, assets or liabilities of
Buyer.
(d) Due Diligence. Buyer has sufficient knowledge and experience in
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investing in companies similar to the Company in terms of the Company's stage of
development and is capable of evaluating the merits and risks of its investment
in the Company contemplated by the automatic conversion provisions of the Note
and is able to bear the economic risk of such investment for an indefinite
period of time. Buyer has been given access to full and complete information
regarding the Company and has utilized such access to its satisfaction for the
purpose of obtaining information Buyer desires or deems relevant to its
investment decision. Buyer has had the opportunity to ask questions of and
receive answers from representatives of the Company concerning the terms and
conditions of this Agreement, to discuss the Company's business, management and
financial affairs with the
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Company's management and to obtain any additional information Buyer desires or
deems relevant. Buyer has obtained, to the extent it has deemed necessary,
professional advice with respect to the risks inherent in the investment in the
Class D Preferred Shares and the Company, including, without limitation, the
matters relating to the Company's business and financial condition set forth in
the SEC Reports.
(e) Investment Intent. Buyer has acquired the Class D Preferred Shares for
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its own account for investment and not with a view towards the resale, transfer
or distribution thereof, nor with any present intention of distributing the
Class D Preferred Shares in violation of the Securities Act or any other
applicable federal or state securities laws, and the rules and regulations
promulgated thereunder. Buyer understands that no public market currently
exists for the Class D Preferred Shares or the Common Stock, and that no such
public market may ever exist. Buyer further understands and agrees that the
Class D Preferred Shares have not been (and the Conversion Shares, upon
issuance, will not be) registered under the Securities Act by reason of their
issuance in a transaction exempt from the registration requirements of the
Securities Act, that the Class D Preferred Shares and the Conversion Shares will
bear a legend (and the Company will make a notation on its transfer books) to
such effect and the Class D Preferred Shares (and, upon issuance, the Conversion
Shares) must be held indefinitely unless subsequently disposed of pursuant to an
effective registration statement under the Securities Act or in a transaction
exempt from, or not
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subject to, the registration requirements thereof. Buyer agrees that if it sells
any Conversion Shares pursuant to Rule 144A under the Securities Act, it will
take all necessary steps in order to perfect the exemption from registration
provided thereby, including, without limitation, obtaining on behalf of the
Company information to enable the Company to establish a reasonable belief that
the purchaser is a "qualified institutional buyer" (within the meaning of Rule
144A) and advising such purchaser that Rule 144A is being relied upon with
respect to such resale. Buyer was not organized for the specific purpose of
acquiring the Class D Preferred Shares and is an "accredited investor" within
the meaning of Rule 501(a) of the Securities Act.
(f) No Brokers. No broker, finder or investment banker is entitled to any
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brokerage, finder's or other fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on behalf of
Buyer.
IV. [INTENTIONALLY OMITTED]
V. [INTENTIONALLY OMITTED]
VI. OTHER AGREEMENTS
6.01 [INTENTIONALLY OMITTED]
6.02 Registration Rights.
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(a) Piggy-back Registration. If, commencing one (1) year after the date
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hereof, the Company proposes to claim an exemption
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under Section 3(b) of the Securities Act for a public offering of any of its
securities or to register under the Securities Act (except pursuant to a
registration statement on Form S-4 or S-8 (or any substitute form adopted by the
Commission) or any other form that does not permit the inclusion of shares by
its security holders) its Common Stock, it will give written notice to Buyer of
its intention to do so and, upon the written request of Buyer given within
twenty (20) days after receipt of any such notice (which request shall specify
the number of Conversion Shares intended to be sold or disposed of by Buyer and
the nature of any proposed sale or other disposition thereof), the Company will
use its best efforts to cause all Conversion Shares that Buyer shall have
requested the registration of to be included in such notification or the
registration statement proposed to be filed by the Company; provided, however,
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that nothing herein shall prevent the Company from, at any time, abandoning or
delaying any such registration initiated by it. If any such registration shall
be underwritten in whole or in part, the Company may require that the Conversion
Shares requested for inclusion pursuant to this Section 6.02 be included in the
underwriting on the same terms and conditions as the securities otherwise being
sold through the underwriters. If in the good faith judgment of the managing
underwriter, as expressed in writing delivered to Buyer, the inclusion of all of
the Conversion Shares of Common Stock originally covered by a request for
registration would reduce the number of Common Stock to be offered by the
Company or interfere with the successful marketing of the Common Stock
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offered by the Company, the number of Conversion Shares otherwise to be included
pursuant to this Section 6.02 in the underwritten public offering may be
reduced; provided, however, that any such required reduction shall be pro rata
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among all persons (other than the Company and any other persons demanding
registration pursuant to existing rights who are entitled to be protected
against any such reduction) who are participating in such offering. Conversion
Shares which are thus excluded from the underwritten public offering shall be
withheld from the market for a period, not to exceed 90 days, which the managing
underwriter reasonably determines is necessary in order to effect the
underwritten public offering. All expenses of such offering, except the fees of
special counsel to Buyer and brokers' commissions or underwriting discounts
payable by Buyer, shall be borne by the Company.
(b) Demand Registration. In addition, on one occasion only, commencing
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upon the later of one (1) year after the date hereof and the date that is six
months after an IPO, upon request by Buyer to register the Conversion Shares,
the Company will promptly use its reasonable best efforts to register such
shares under the Securities Act; provided that (i) such request must be made
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within five (5) years from the date hereof and (ii) the Company may delay the
filing of any registration statement requested pursuant to this Section 6.02(b)
to a date not more than ninety (90) days following the date of such request if
in the opinion of the Company's principal investment banker at the time of such
request such a delay is necessary in order not to
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adversely affect the Company's financing efforts then underway or if in the
opinion of the Company such a delay is necessary or advisable to avoid
disclosure of material nonpublic information. The costs and expenses directly
related to any registration requested pursuant to this Section 6.02(b),
including, but not limited to, legal fees of the Company's counsel, audit fees,
printing expenses, filing fees of the Commission and the National Association of
Securities Dealers, Inc. and fees and expenses relating to qualifications under
state securities or blue sky laws incurred by the Company shall be borne
entirely by the Company; provided, however, that the persons for whose account
-------- -------
the securities covered by such registration are sold shall bear the expenses of
brokers' commissions or underwriting discounts applicable to their shares and
fees of their legal counsel. If Buyer is the only person whose shares are
included in the registration pursuant to this Section 6.02(b), Buyer shall bear
the expense of inclusion of any audited financial statements contained in the
registration statement which are not dated as of the Company's fiscal year-end
or are not otherwise prepared by the Company for its own business purposes. The
Company shall keep effective and maintain any registration statement specified
in this Section 6.02(b) for such period as may be necessary for Buyer to dispose
of the Conversion Shares so registered, and from time to time shall amend or
supplement, at Buyer's expense, the prospectus used in connection therewith to
the extent necessary in order to comply with applicable law; provided that the
-------- ----
Company shall not be obligated to maintain any registration statement for
23
a period of more than nine (9) months. If, at the time any written request for
registration is received by the Company pursuant to this Section 6.02(b), the
Company had previously determined to proceed with the preparation and filing of
a registration statement under the Securities Act in connection with the
proposed offer and sale of Common Stock, such written request shall be deemed to
have been given pursuant to Section 6.02(a) rather than this Section 6.02(b),
and the rights of Buyer shall be governed by Section 6.02(a) hereof.
(c) Registration Procedures. If and whenever the Company is required by
-----------------------
the provisions of Sections 6.02(a) or 6.02(b) hereof to effect the registration
of Conversion Shares under the Securities Act, the Company will:
(i) prepare and file with the Commission a registration statement with
respect to such securities, and use its reasonable best efforts to cause such
registration statement to become and remain effective for such period as may be
reasonably necessary to effect the sale of such securities, not to exceed nine
(9) months;
(ii) prepare and file with the Commission such amendments to such
registration statement and supplements to the prospectus contained therein as
may be necessary to keep such registration statement effective for such period
as may be reasonably necessary to effect the sale of such securities, not to
exceed nine (9) months;
(iii) furnish to the security holders participating in such registration
and to the underwriters of the securities being
24
registered, such reasonable number of copies of the registration statement,
preliminary prospectus, final prospectus and such other documents as such
participating security holders and underwriters may reasonably request in order
to facilitate the public offering of such securities;
(iv) use its reasonable best efforts to register or qualify the
securities covered by such registration statement under such state securities or
blue sky laws of such jurisdictions as such participating security holders and
underwriters may reasonably request in writing within 30 days following the
original filing of such registration statement, except that the Company shall
not for any purpose be required to execute a general consent to service of
process or to qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified;
(v) notify the participating security holders, promptly after it shall
receive notice thereof, of the time when such registration statement has become
effective or a supplement to any prospectus forming a part of such registration
statement has been filed;
(vi) notify such participating security holders promptly of any request
by the Commission for the amending or supplementing of such registration
statement or prospectus or for additional information;
(vii) prepare and file with the Commission, promptly upon the request of
any such participating security holders, any amendments or supplements to such
registration statement or
25
prospectus which, in the opinion of counsel for such holders (and concurred with
by counsel for the Company), is required under the Securities Act or the rules
and regulations promulgated thereunder in connection with the distribution of
such Conversion Shares by such holder;
(viii) prepare and promptly file with the Commission and promptly notify
such participating security holders of the filing of such amendment or
supplement to such registration statement or prospectus as may be necessary to
correct any statements or omissions if, at the time when a prospectus relating
to such securities is required to be delivered under the Securities Act, any
event shall have occurred as the result of which any such prospectus or any
other prospectus as then in effect would include an untrue statement of a
material fact or omit to state any material fact necessary to make the
statements therein, in the light of the circumstances in which they were made,
not misleading;
(ix) advise such participating security holders, promptly after it shall
receive notice of the issuance of any stop order by the Commission suspending
the effectiveness of such registration statement or the initiation or
threatening of any proceeding for that purpose, and promptly use its reasonable
best efforts to prevent the issuance of any stop order or to obtain its
withdrawal if such stop order should be issued; and
(x) furnish on the effective date of the registration statement and, if
such registration includes an underwritten public offering, at the closing
provided for in the underwriting
26
agreement: (A) opinions, dated such respective dates, of counsel representing
the Company for the purposes of such registration, addressed to the
underwriters, covering such matters as such persons may reasonably request in
customary form as would be given to underwriters in connection with underwritten
offerings and (B) letters, dated such respective dates, from the independent
certified public accountants of the Company addressed to the underwriters, in
customary form and concerning matters of the type customarily covered in
"comfort" letters in connection with underwritten offerings, and such other
matters as permitted by the Statement on Accounting Standards No. 72.
(d) Indemnification. In connection with such registration, the Company
---------------
shall indemnify Buyer, its officers, directors, employees and agents, and any
person who controls Buyer within the meaning of Section 15 of the Securities
Act, against all losses, claims, damages and liabilities caused by any untrue
statement of a material fact contained in any registration statement or
prospectus, (and as amended or supplemented, if the Company shall have furnished
any amendments or supplements thereto) or any preliminary prospectus, or caused
by any omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, except insofar as
such losses, claims, damages or liabilities are caused by any untrue statement
or omission contained in information furnished in writing to the Company by
Buyer expressly for use therein, and Buyer agrees that it will indemnify and
hold harmless the Company and each of its officers who signs such
27
registration statement and each of its directors and each person, if any, who
controls the Company within the meaning of Section 15 of the Securities Act with
respect to losses, claims, damages or liabilities which are caused by any untrue
statement or omission contained in information furnished in writing to the
Company by Buyer expressly for use therein.
(e) Contribution. In addition, in connection with any such registration,
------------
the Company and Buyer agree that if the indemnification to be provided for
pursuant to Section 6.02(d) is unavailable to an indemnified party as provided
herein in respect of any losses, claims, damages, liabilities or expenses
referred to therein, then the Company or Buyer (as the case may be), in lieu of
indemnifying such indemnified party, shall contribute to the amount paid or
payable by such indemnified party as a result of such losses, claims, damages,
liabilities or expenses in such proportion as is appropriate to reflect the
relative fault of the Company, on the one hand, and Buyer, on the other hand, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or expenses, as well as any other relevant
equitable considerations. The relative fault of the Company on the one hand,
and of Buyer, on the other hand, shall be determined by reference to, among
other things, whether the untrue or alleged untrue statements of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or by Buyer, and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The amount paid
28
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include, without limitation,
any legal or other fees or expenses reasonably incurred by such party in
connection with investigating or defending any action or claim. The Company and
Buyer agree that it would not be just and equitable if contribution pursuant to
this Section 6.02(e) were determined by a pro rata allocation or by any other
method of allocation that does not take account of the equitable considerations
referred to in this Section 6.02(e). Notwithstanding the provisions of this
Section 6.02(e), Buyer shall not be required to contribute any amount in excess
of the amount by which the total price which Buyer's securities were sold to the
public. The parties agree that in connection with any such registration, no
person guilty of fraudulent misrepresentations (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.
(f) Termination. The registration rights provided in this Section 6.02
-----------
shall terminate on the earliest to occur of: (i) the date that is five (5) years
from the date hereof and (ii) the date on which all of the Conversion Shares
then held by Buyer could be sold pursuant to Rule 144(k) under the Securities
Act (or any comparable or successor provision).
6.03 Confidentiality. (a) Without the consent of the other party,
---------------
neither Buyer nor the Company shall make any public comment, statement or
communication with respect to, or otherwise
29
disclose or permit the disclosure of the terms of this Agreement and the
transactions contemplated hereby, and each party shall cause its authorized
officers, directors, partners, employees, counsel, accountants, agents and other
representatives (collectively, "Representatives") to strictly comply with the
foregoing.
(b) Each of the parties hereby covenants and agrees to use due care to
prevent the disclosure of the information and other material furnished under or
in connection with this Agreement to persons other than its Representatives who
have a need to know such information or to have access to such material in
connection with Buyer's investment in the Company and who have agreed to keep
such information and material confidential. For purposes of this Section
6.03(b), "due care" means at least the same level of care that a person would
use to protect the confidentiality of its own sensitive or proprietary
information, and this obligation shall survive termination of this Agreement.
(c) Notwithstanding Sections 6.03(a) and (b), either party may disclose or
deliver any information or other material disclosed to or received by it (i)
should such party be advised by its counsel that such disclosure or delivery is
required by law, regulation, legal process or administrative order, if the
disclosing party has first provided the other party with prompt notice of the
request to disclose or deliver such information or other material a reasonable
period of time in advance of making such disclosure or delivery so as to enable
such other party to
30
seek a protective order or other appropriate remedy or (ii) in connection with a
public or private financing effected by the Company, to the extent required in
any Registration Statement, prospectus or other offering document, or to the
extent necessary to make any statements contained in any of the foregoing not
misleading.
6.04 Information Rights. From and after the date hereof until the earlier
------------------
to occur of (i) the issuance of shares of Common Stock to the public in an
underwritten offering pursuant to a registration statement filed under the
Securities Act covering the offer and sale of Common Stock (an "IPO") and (ii)
the date on which Buyer no longer owns any Class D Preferred Shares, within 45
days following the end of each of its first three fiscal quarters and within 90
days following the end of its fourth fiscal quarter, the Company shall furnish
Buyer with a copy of its financial statements, (including balance sheets, income
statements, changes in stockholders equity and statements of cash flow) for each
of such quarters and fiscal year, respectively. In addition, during such
period, the Company will furnish Buyer with such additional financial and
business information, including monthly or other periodic financial statements
as the Company may prepare from time to time, upon the reasonable request of
Buyer.
6.05 Subscription Right. (a) From and after the date hereof until the
------------------
earlier of (i) an IPO and (ii) the date on which Buyer no longer owns any Class
D Preferred Shares, if the Company
31
proposes to issue equity securities of any kind (the term "equity securities"
shall include for the purposes of this Section 6.05, any equity securities and
all warrants, options or other rights to acquire equity securities, and debt
securities convertible into or exchangeable for equity securities) of the
Company (other than the issuance of securities (i) upon conversion of or
exercise securities of the Company outstanding as of the date hereof, (ii) in an
IPO, (iii) pursuant to the acquisition of another entity by the Company by
merger, purchase of substantially all of the assets or other form of
reorganization, (iv) pursuant to an employee stock option plan, stock bonus
plan, stock purchase plan or other management equity program, (v) to vendors,
customers and consultants of the Company for purposes primarily other than the
raising of capital or (vi) in connection with a public or private debt financing
effected by the Company (other than with an affiliate of the Company) or upon
the conversion or exercise of any securities so issued), then the Company shall:
(A) give written notice to Buyer setting forth in reasonable detail: (1) the
designation and all of the terms and provisions of the securities proposed to be
issued (the "Proposed Securities"), including, where applicable, the voting
powers, preferences and relative participating, optional or other special rights
and the qualifications, limitations or restrictions thereof; (2) the price and
other terms of the proposed sale of Proposed Securities; (3) the amount of
Proposed Securities proposed to be issued; and (4) such other information as
Buyer may reasonably request in order to evaluate the proposed
32
issuance; and (B) offer to issue to Buyer a portion of the Proposed Securities
equal to a percentage determined by dividing (1) the number of Conversion Shares
by (2) the total number of shares of Common Stock then outstanding (including
for purposes of this calculation, conversion and exercise in full of all
securities then outstanding that are then convertible into or exchangeable for
Common Stock).
(b) Buyer must exercise its purchase right hereunder within fifteen (15)
days after receipt of such notice from the Company. To the extent that the
Company offers two or more securities in units, Buyer must purchase such units
as a whole and will not be given the opportunity to purchase only one of the
securities making up such unit. Upon the expiration of such fifteen-day period,
the Company will be free to sell Proposed Securities that Buyer has not elected
to purchase during the ninety (90) days following such expiration on terms and
conditions no more favorable to the purchasers thereof than those offered to
Buyer. Any Proposed Securities offered or sold by the Company after such 90-day
period must be reoffered to Buyer pursuant to this Section 6.05.
(c) The election by Buyer not to exercise its subscription rights under
this Section 6.05 in any one instance shall not affect its right (other than in
respect of a reduction in its percentage holdings) as to any subsequent proposed
issuance of equity securities by the Company. Any sale of equity securities by
the Company without first giving Buyer the rights described in this Section 6.05
shall be void and of no force and effect.
33
6.06 By-laws. The Company shall at all times cause its By-laws to provide
-------
that the number of directors fixed in accordance therewith shall in no event
conflict with any of the terms or provisions of the Preferred Shares as set
forth in the Charter. The Company shall at all times maintain provisions in its
By-laws or Charter indemnifying all directors to the maximum extent permitted
under the Minnesota Business Corporation Act.
VII. MISCELLANEOUS
7.01 Amendments, Waivers and Consents. No provision in this Agreement may
--------------------------------
be altered or amended, and compliance with any covenant or provision set forth
herein may not be omitted or waived, except by an instrument in writing duly
executed by Buyer and the Company. Any waiver or consent may be given subject to
satisfaction of conditions stated therein and any waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given.
7.02 Notices. All notices required or permitted by this Agreement shall be
-------
in writing, and shall be hand delivered, sent by facsimile or nationally
recognized overnight delivery service, addressed as follows:
(a) If to Buyer:
MCI WORLDCOM, Inc.
515 E. Amite.
Jackson, MS 39201
Attention: Susan Mayer
Senior Vice President
Telephone: (202) 887-2202
Facsimile: (202) 887-3226
34
with a copy to:
MCI WORLDCOM, Inc.
515 E. Amite.
Jackson, MS 39201
Attention: Michael Salsbury
General Counsel
Telephone: (601) 360-8977
Facsimile: (601) 360-8282
(b) If to the Company:
WAM!NET INC.
6100 West 110th Street
Minneapolis, MN 55438
Attention: Edward J. Driscoll, III, President
Telephone: 612-886-5100
Facsimile: 612-887-2165
with a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019-6099
Attention: Daniel D. Rubino
Telephone: 212-728-8000
Facsimile: 212-728-8111
or to such other person or address as a party shall specify by notice in writing
to the other party. All such notices and other communications shall be
effective when received.
7.03 Binding Effect; Assignment. This Agreement shall be binding upon and
--------------------------
inure to the benefit of the Company and Buyer. No assignment of rights or
delegation of duties arising under this Agreement may be made by any party
hereto without the prior written consent of the other party.
7.04 Third-Party Beneficiaries. This Agreement is for the sole benefit of
-------------------------
the parties hereto and their permitted assigns and nothing herein expressed or
implied shall give or be
35
construed to give to any person, other than the parties hereto and such
permitted assigns, any legal or equitable rights hereunder.
7.05 Entire Agreement. This Agreement (including all Schedules and Exhibit
----------------
hereto) constitutes the entire agreement between the parties hereto with respect
to the subject matter contained herein and supersedes all other prior
understandings or agreements, both written and oral, between the parties with
respect to the matters contained herein.
7.06 Severability. The provisions of this Agreement are severable and, in
------------
the event that any court of competent jurisdiction shall determine that any one
or more of the provisions or part of a provision contained in this Agreement
shall, for any reason, be held to be invalid, illegal or unenforceable in any
respect, such invalidity, illegality or unenforceability shall not affect any
other provision or part of a provision of this Agreement; but this Agreement
shall be reformed and construed as if such invalid or illegal or unenforceable
provision, or part of a provision, had never been contained herein, and such
provisions or part reformed so that it would be valid, legal and enforceable to
the maximum extent possible.
7.07 Governing Law. This Agreement shall be governed by, and construed in
-------------
accordance with, the law of the State of Minnesota without regard to its
principles of conflicts of laws.
36
7.08 Headings. Article, Section and sub-Section headings in this Agreement
--------
are included herein for convenience of reference only and shall not constitute a
part of this Agreement for any other purpose.
7.09 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which shall be deemed an original and 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 by original or
facsimile signature.
7.10 Expenses. Each party shall pay the fees and expenses of its
--------
respective counsel, accountants and other experts (including any broker, finder,
advisor or intermediary), and shall pay all other expenses incurred by it in
connection with the negotiation, preparation and execution of this Agreement and
the consummation of the transactions contemplated hereby.
37
IN WITNESS WHEREOF, the parties hereto have signed this Agreement as of the
day and year first above written.
WAM!NET INC.
/s/ Allen L. Witters
_________________________________
By: Allen L. Witters
Its: Chief Technology Officer
MCI WORLDCOM, INC.
/s/ Susan Mayer
_________________________________
By: Susan Mayer
Its: Senior Vice President
38