Exhibit 10.21
EXECUTION COPY
NOTES REGISTRATION RIGHTS AGREEMENT
Dated as of April 8, 1998
among
PATHNET, INC.
and
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED,
BEAR, STEARNS & CO., INC.
TD SECURITIES (USA) INC. and
SALOMON BROTHERS INC
as Initial Purchasers
NOTES REGISTRATION RIGHTS AGREEMENT
THIS NOTES REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made
and entered into as of April 8, 1998, by and among PATHNET, INC., a Delaware
corporation (the "Company"), and MERRILL LYNCH & CO., Merrill Lynch, Pierce,
Fenner & Smith Incorporated ("Merrill Lynch"), BEAR, STEARNS & CO. INC., TD
SECURITIES (USA) INC. and SALOMON BROTHERS INC (collectively, the "Initial
Purchasers").
This Agreement is made pursuant to the Purchase Agreement dated
April 1, 1998, among the Company and the Initial Purchasers (the "Purchase
Agreement"), which provides for the sale by the Company to the Initial
Purchasers of 350,000 Units (the "Units"), each Unit consisting of $1,000
principal amount of the Company's 12.25% Senior Notes due 2008 (the "Notes") and
one warrant (a "Warrant"), each initially entitling the holder thereof to
purchase 1.1 shares of common stock, par value $0.01 per share (the "Common
Stock"). Capitalized terms used but not specifically defined herein shall have
the same meanings herein as in the Purchase Agreement. In order to induce the
Initial Purchasers to enter into the Purchase Agreement and in satisfaction of a
condition to the Initial Purchasers' obligations thereunder, the Company agrees
to provide to the Initial Purchasers and their respective direct and indirect
transferees and assigns, for the benefit of the holders of the Notes, the
registration rights set forth in this Agreement. The execution and delivery of
this Agreement is a condition to the closing under the Purchase Agreement.
In consideration of the foregoing, the parties hereto agree as
follows:
1. Definitions. As used in this Agreement, the following capitalized
defined terms shall have the following meanings:
"1933 Act" shall mean the Securities Act of 1933, as amended from
time to time, and the rules and regulations of the SEC promulgated
thereunder.
"1934 Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time, and the rules and regulations of the SEC
promulgated thereunder.
"Broker-Dealer" shall mean any broker or dealer registered under the
Exchange Act.
"Depositary" shall mean The Depository Trust Company, or any other
depositary appointed by the Company; provided, however, that any such
depositary must have an address in the Borough of Manhattan, in the City
of New York.
"Exchange Notes" shall mean the 12.25% Senior Notes due 2008 of the
Company issued under the Indenture, containing terms identical to the
respective
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Notes (except that (i) interest on the Exchange Notes shall accrue from
the last date on which interest was paid on the Notes or, if no such
interest has been paid, from April 8, 1998, (ii) the transfer restrictions
thereon shall be eliminated and (iii) certain provisions relating to
payment of Liquidated Damages shall be eliminated) to be offered to
Holders of Notes in exchange for Notes pursuant to the Exchange Offer.
"Exchange Offer" shall mean the exchange offer by the Company of
Exchange Notes for Registrable Notes pursuant to Section 2(a) hereof.
"Exchange Offer Registration" shall mean a registration under the
1933 Act effected pursuant to Section 2(a) hereof.
"Exchange Offer Registration Statement" shall mean an exchange offer
registration statement on Form S-4 (or, if applicable, on another
appropriate form) under the 1933 Act, and all amendments and supplements
to such registration statement, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.
"Holders" shall mean the Initial Purchasers, for so long as they own
any Registrable Notes, and each of their respective successors, assigns
and direct and indirect transferees who become registered owners of
Registrable Notes under the Indenture for so long as they own Registrable
Notes.
"Indenture" shall mean the Indenture relating to the Notes and the
Exchange Notes dated as of April 8, 1998, between the Company and The Bank
of New York, trustee (the "Trustee"), and as the same may be amended from
time to time in accordance with the terms thereof.
"Initial Purchasers" shall have the meaning set forth in the
preamble of this Agreement.
"Liquidated Damages" shall have the meaning set forth in Section
2(e) hereof.
"Majority Holders" shall mean the Holders of a majority of the
aggregate principal amount of Registrable Notes outstanding; provided that
whenever the consent or approval of Holders of a specified percentage of
Registrable Notes is required hereunder, Registrable Notes held by the
Company or any of its affiliates (as such term is defined in Rule 405
under the 1933 Act) shall be disregarded in determining whether such
consent or approval was given by the Holders of such required percentage
or amount.
"NASD" shall mean the National Association of Securities Dealers,
Inc.
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"Original Issue Date" shall mean the date of original issuance of
the Notes.
"Participating Broker-Dealer" shall have the meaning set forth in
Section 3(f).
"Person" shall mean an individual, partnership, limited liability
company, corporation, trust or unincorporated organization, or a
government or agency or political subdivision thereof.
"Prospectus" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, and any such prospectus
as amended or supplemented by any prospectus supplement, including a
prospectus supplement with respect to the terms of the offering of any
portion of the Registrable Notes covered by a Shelf Registration
Statement, and by all other amendments and supplements to a prospectus,
including post-effective amendments, and in each case including all
material incorporated by reference therein.
"Purchase Agreement" shall have the meaning set forth in the
preamble of this Agreement.
"Registrable Notes" shall mean the Notes; provided, however, that
the Notes shall cease to be Registrable Notes when (i) a Registration
Statement with respect to such Notes shall have been declared effective
under the 1933 Act and such Notes shall have been disposed of (including
by a Broker-Dealer) pursuant to such Registration Statement, (ii) such
Notes shall have been sold to the public pursuant to Rule 144 (or any
similar provision then in force, but not Rule 144A) under the 1933 Act,
(iii) such Notes shall have ceased to be outstanding or (iv) such Notes
have been exchanged for Exchange Notes upon consummation of the Exchange
Offer.
"Registration Default" shall have the meaning set forth in Section
2(e) of this Agreement.
"Registration Expenses" shall mean any and all expenses incident to
performance of or compliance by the Company with this Agreement, including
without limitation: (i) all SEC, stock exchange or NASD registration and
filing fees, (ii) all fees and expenses incurred in connection with
compliance with state or other securities or blue sky laws and compliance
with the rules of the NASD (including reasonable fees and disbursements of
United States and local counsel for any underwriters and Holders in
connection with state or other securities or blue sky qualification of any
of the Exchange Notes or Registrable Notes), such counsel fees not to
exceed $5,000 per registration, (iii) all expenses of any Persons in
preparing, printing and distributing any Registration Statement, any
Prospectus, any amendments or supplements thereto, any underwriting
agreements, securities sales agreements,
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certificates representing the Exchange Notes and other documents relating
to the performance of and compliance with this Agreement, (iv) all rating
agency fees, (v) all fees and expenses incurred in connection with the
listing, if any, of any of the Registrable Notes on any securities
exchange or exchanges, (vi) all fees and disbursements relating to the
qualification of the Indenture under applicable securities laws, (vii) the
reasonable fees and disbursements of counsel for the Company and of the
independent public accountants of the Company, including the expenses of
any special audits or "cold comfort" letters required by or incident to
such performance and compliance, (viii) the fees and expenses of a
"qualified independent underwriter" as defined by Conduct Rule 2720 of the
NASD, if required by the NASD rules, in connection with the offering of
the Registrable Notes, and (ix) the reasonable fees and expenses of the
Trustee, including its counsel, and any escrow agent or custodian.
Notwithstanding the foregoing, the holders of the Registrable Notes being
registered shall (i) pay all agency or brokerage fees and commissions and
underwriting discounts and commissions attributable to the sale of such
Registrable Notes, (ii) the fees and disbursements of any counsel or other
advisors or experts retained by such holders (severally or jointly), other
than, in the case of a Shelf Registration Statement under Section 2(b)
hereof, the reasonable fees and disbursements of one counsel (in addition
to any local counsel) for the Holders or the Initial Purchasers (which
counsel shall be selected by a majority of the Holders and may be counsel
for the Initial Purchasers) up to $5,000, (iii) transfer taxes on resale
of any of the Securities by such holders and (iv) any advertising expenses
customarily required to be paid by issuers or sellers of securities.
"Registration Statement" shall mean any registration statement of
the Company relating to any offering of the Exchange Notes or Registrable
Notes pursuant to the provisions of this Agreement, and all amendments and
supplements to any such Registration Statement, including post-effective
amendments, in each case including the Prospectus contained therein, all
exhibits thereto and all material incorporated by reference therein.
"SEC" shall mean the Securities and Exchange Commission.
"Shelf Registration" shall mean a registration effected pursuant to
Section 2(b) hereof.
"Shelf Registration Statement" shall mean a "shelf" registration
statement of the Company pursuant to the provisions of Section 2(b) of
this Agreement which covers all of the Registrable Notes on an appropriate
form under Rule 415 under the 1933 Act, or
any similar rule that may be adopted by the SEC, and all amendments and
supplements to such registration statement, including post-effective
amendments,
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in each case including the Prospectus contained therein, all exhibits
thereto and all material incorporated by reference therein.
"Trustee" shall mean the Trustee under the Indenture.
2. Registration Under the 1933 Act. (a) Exchange Offer Registration.
To the extent not prohibited by any applicable law or applicable interpretation
of the staff of the SEC, the Company shall (A) file or cause to be filed an
Exchange Offer Registration Statement within 60 days after the Original Issue
Date with the SEC covering the offer by the Company to the Holders to exchange
Exchange Notes for all of their Registrable Notes, (B) use its best efforts to
cause such Exchange Offer Registration Statement to be declared effective under
the 1933 Act within 150 days after the Original Issue Date (C) use their best
efforts to consummate the Exchange Offer within 180 days after the Original
Issue Date. Upon the effectiveness of the Exchange Offer Registration Statement,
the Company shall promptly commence the Exchange Offer, it being the objective
of such Exchange Offer to enable each Holder (other than Participating
Broker-Dealers (as defined in Section 3(f)) eligible and electing to exchange
Registrable Notes for Exchange Notes (assuming that such Holder is not an
affiliate of the Company within the meaning of Rule 405 under the 1933 Act,
acquires the Exchange Notes in the ordinary course of such Holder's business and
has no arrangements or understandings with any person to participate in the
Exchange Offer for the purpose of distributing the Exchange Notes) to trade such
Exchange Notes from and after their receipt without any limitations or
restrictions under the 1933 Act and without material restrictions under the
securities laws of a substantial proportion of the several states of the United
States.
In connection with the Exchange Offer, the Company shall:
(i) mail to each Holder a copy of the Prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
(ii) keep the Exchange Offer open for not less than 20 business days
(or longer if required by applicable federal and state securities laws)
after the date notice thereof is mailed to the Holders;
(iii) use the services of the Depositary for the Exchange Offer with
respect to Notes evidenced by global certificates;
(iv) permit Holders to withdraw tendered Registrable Notes at any
time prior to the close of business, New York City time, on the last
business day on which the
Exchange Offer shall remain open, by sending to the institution specified
in the notice, a telegram, telex, facsimile transmission or letter setting
forth the name of
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such Holder, the principal amount of Registrable Notes delivered for
exchange, and a statement that such Holder is withdrawing its election to
have such Notes exchanged;
(v) otherwise comply with all applicable federal and state
securities laws relating to the Exchange Offer.
As soon as practicable after the close of the Exchange Offer, the
Company shall:
(i) accept for exchange Registrable Notes duly tendered and not
validly withdrawn pursuant to the Exchange Offer in accordance with the
terms of the Exchange Offer Registration Statement and the letter of
transmittal which is an exhibit thereto;
(ii) deliver, or cause to be delivered, to the Trustee for
cancellation all Registrable Notes so accepted for exchange by the
Company; and
(iii) cause the Trustee promptly to authenticate and deliver
Exchange Notes to each Holder of Registrable Notes equal in principal
amount at maturity to the principal amount at maturity of the Registrable
Notes of such Holder so accepted for exchange.
Interest on each Exchange Note exchanged for a Note will accrue from
the last date on which interest was paid on the Notes surrendered in exchange
therefor or, if no interest has been paid on the Notes, from April 8, 1998. The
Exchange Offer shall not be subject to any conditions, other than (i) that the
Exchange Offer, or the making of any exchange by a Holder, does not violate
applicable law or any applicable interpretation of the staff of the SEC and (ii)
the tendering of Registrable Notes in accordance with the Exchange Offer. Each
Holder of Registrable Notes (other than Participating Broker-Dealers) who wishes
to exchange such Registrable Notes for Exchange Notes in the Exchange Offer (a)
shall have represented that (i) it is not an affiliate (as defined in Rule 405
under the 1933 Act) of the Company, (ii) any Exchange Notes to be received by it
were acquired in the ordinary course of its business, (iii) at the time of the
commencement of the Exchange Offer, it has no arrangement with any person to
participate in the distribution (within the meaning of the 1933 Act) of the
Exchange Notes and (b) shall have made such other representations as may be
reasonably necessary under applicable SEC rules, regulations or interpretations
to render the use of Form S-4 or another appropriate form under the 1933 Act
available. To the extent permitted by law, the Company shall inform the Initial
Purchasers of the names and addresses of the Holders to whom the Exchange Offer
is made, and the Initial Purchasers shall have the right to contact
such Holders and otherwise facilitate the tender of Registrable Notes in the
Exchange Offer. Upon consumation of the Exchange Offer in accordance with this
Section 2, the provisions of this Agreement will continue to apply solely with
respect to
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Registrable Notes referred to in Section 2(b)(iii) and (iv), and the Company
shall have no further obligation to register any other Registrable Notes
pursuant to this Agreement.
(b) Shelf Registration. (i) If, because of any change in law or
applicable interpretations thereof by the staff of the SEC, the Company is not
permitted to effect the Exchange Offer as contemplated by Section 2(a) hereof,
(ii) if for any other reason the Exchange Offer is not declared effective by the
SEC within 150 days or the Exchange Offer is not consummated within 180 days
following the Original Issue Date, (iii) if any Holder (other than an Initial
Purchaser) is not eligible to participate in the Exchange Offer or elects to
participate in the Exchange Offer but does not receive fully tradeable Exchange
Notes pursuant to the Exchange Offer or (iv) upon the request of any of the
Initial Purchasers following the consummation of the Exchange Offer (provided
that such Initial Purchaser shall hold Registrable Notes that it acquired
directly from the Company and that such Initial Purchaser is not permitted, in
the opinion of counsel to such Initial Purchaser, pursuant to applicable law or
applicable interpretation of the staff of the SEC, to participate in the
Exchange Offer), the Company shall, at its cost:
(A) as promptly as practicable, file with the SEC a Shelf
Registration Statement relating to the offer and sale of the Registrable
Notes by the Holders from time to time in accordance with the methods of
distribution elected by the Majority Holders of such Registrable Notes and
set forth in such Shelf Registration Statement; provided however, that no
Holder (other than an Initial Purchaser) shall be entitled to have the
Registrable Notes held by it covered by such Shelf Registration Statement
unless such Holder agrees to be bound by all of the provisions of this
Agreement applicable to such Holder,
(B) use its best efforts to cause such Shelf Registration Statement
to be declared effective under the Securities Act within 150 days after
the Original Issue Date (or within 30 days of the request of any Initial
Purchaser); provided that, with respect to Exchange Notes received by a
Broker-Dealer in exchange for any securities that were acquired by such
Broker-Dealer as a result of market making or other trading activities,
the Company may, if permitted by current interpretations by the
Commission's staff, file a post-effective amendment to the Exchange Offer
Registration Statement containing the information required by Regulation
S-K Items 507 and/or 508, as applicable, in satisfaction of its
obligations under this paragraph (A) solely with respect to broker-dealers
who acquired their Securities as a result of market making or other
trading activities, and any such Exchange Offer Registration Statement, as
so amended, shall be referred to herein as, and governed by the provisions
herein applicable to, a Shelf Registration Statement. In the event that
the Company is required to file a Shelf Registration Statement upon the
request of any Holder (other than an Initial Purchaser) not eligible to
participate in the Exchange Offer pursuant to clause (iii) above or upon
the request of any Initial Purchaser
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pursuant to clause (iv) above, the Company shall file and use its best
efforts to have declared effective by the SEC both an Exchange Offer
Registration Statement pursuant to Section 2(a) with respect to all
Registrable Notes and a Shelf Registration Statement (which may be a
combined Registration Statement with the Exchange Offer Registration
Statement) with respect to offers and sales of Registrable Notes held by
such Holder or such Initial Purchaser, as applicable, after completion of
the Exchange Offer;
(C) use its best efforts to keep the Shelf Registration Statement
continuously effective, supplemented and amended as required, in order to
permit the Prospectus forming part thereof to be usable by Holders for a
period of two years after its effective date or such shorter period which
will terminate when all of the Registrable Notes covered by the Shelf
Registration Statement have been sold pursuant thereto or otherwise cease
to be Registrable Securities; and
(D) notwithstanding any other provisions hereof, use its best
efforts to ensure that (i) any Shelf Registration Statement and any
amendment thereto and any Prospectus forming a part thereof and any
supplement thereto complies in all material respects with the 1933 Act and
the rules and regulations thereunder, (ii) any Shelf Registration
Statement and any amendment thereto does not, when it becomes effective,
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading, and (iii) any Prospectus forming part of any Shelf
Registration Statement, and any supplement to such Prospectus (as amended
or supplemented from time to time), does not include an untrue statement
of a material fact or omit to state a material fact necessary in order to
make the statements therein, in light of the circumstances under which
they were made, not misleading.
The Company further agrees, if necessary, to supplement or amend the
Shelf Registration Statement if reasonably requested by the Majority Holders
with respect to information relating to the Holders and otherwise as required by
Section 3(b) below, to use all reasonable efforts to cause any such amendment to
become effective and such Shelf Registration to become usable as soon as
practicable thereafter and to furnish to the Holders of Registrable Notes copies
of any such supplement or amendment promptly after its being used or filed with
the SEC.
(c) Expenses. The Company shall pay all Registration Expenses in
connection with the registration pursuant to Section 2(a) and 2(b), including,
in the case of any Shelf Registration Statement, reimbursement of the Holders or
the Initial Purchasers in an amount up to $5,000 for the reasonable fees and
disbursements of one counsel (in addition to any local counsel) designated in
writing by the Majority Holders to act as counsel for the Holders of the
Registrable Notes in connection therewith. Each Holder shall pay all
9
expenses of its counsel other than as set forth in the preceding sentence,
underwriting discounts and commissions and transfer taxes, if any, relating to
the sale or disposition of such Holder's Registrable Notes pursuant to the Shelf
Registration Statement.
(d) Effective Registration Statement. (i) The Company will be deemed
not to have used its best efforts to cause a Registration Statement to become,
or to remain, effective during the requisite periods set forth herein if the
Company voluntarily takes any action that could reasonably be expected to result
in any such Registration Statement not being declared effective or in the
Holders of Registrable Notes covered thereby not being able to exchange or offer
and sell such Registrable Notes during that period unless (A) such action is
required by applicable law or (B) such action is taken by the Company in good
faith and for valid business reasons (but not including avoidance of the
Company's obligations hereunder), including a material corporate transaction, so
long as the Company promptly complies with the requirements of Section 3(k)
hereof, if applicable.
(ii) An Exchange Offer Registration Statement pursuant to Section
2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof
will not be deemed to have become effective unless it has been declared
effective by the SEC; provided, however, that if, after it has been declared
effective, the offering of Registrable Notes pursuant to a Registration
Statement is interfered with by any stop order, injunction or other order or
requirement of the SEC or any other governmental agency or court, such
Registration Statement will be deemed not to have been effective during the
period of such interference, until the offering of Registrable Notes pursuant to
such Registration Statement may legally resume.
(iii) During any 365-day period, the Company may suspend the
availability of a Shelf Registration Statement and the use of the related
Prospectus, as provided in Section 3(e)(vi) and the last paragraph of Section 3
hereof, for up to two periods of up to 45 consecutive days (except for the
consecutive 45-day period immediately prior to maturity of the Notes), but no
more than an aggregate 60 days during any 365-day period, if any event shall
occur as a result of which it shall be necessary, in the good faith
determination of the board of directors of the Company, to amend the Shelf
Registration Statement or amend or supplement any prospectus or prospectus
supplement thereunder in order that each such document not include any untrue
statement of fact or omit to state a material fact necessary to make the
statements therein not misleading in light of the circumstances under which they
were made.
(e) Accrual and Payment of Liquidated Damages. In the event that (i)
the Exchange Offer Registration Statement is not filed with the SEC on or prior
to the 60th calendar day following the Original Issue Date, (ii) the Exchange
Offer Registration Statement is not declared effective on or prior to the 150th
calendar day following the Original Issue Date, (iii) the Exchange Offer is not
consummated or, if required, a Shelf
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Registration Statement with respect to the Notes is not declared effective on or
prior to the 180th calendar day following the Original Issue Date or (iv) the
Exchange Offer Registration Statement or the Shelf Registration Statement is
declared effective but thereafter ceases to be effective or usable except in
accordance with Section 2(d)(iii) hereof (each event referred to in clauses (i)
through (iv) above, a "Registration Default"), then the Company shall pay
additional interest ("Liquidated Damages") on the Registrable Notes (in addition
to the interest otherwise due on the Registrable Notes) in cash in arrears on
each semiannual interest payment date (as set forth in the Indenture) of each
year in an amount equal to one-half of one percent (0.5%) per annum of the
principal amount of the Notes with respect to the first 90-day period following
such Registration Default. The amount of such additional interest will increase
by an additional one-half of one percent (0.5%) to a maximum of one and one-half
percent (1.5%) per annum for each subsequent 90-day period until such
Registration Default has been cured. Upon (w) the filing of the Exchange Offer
Registration Statement after the 60-day period described in clause (i) above,
(x) the effectiveness of the Exchange Offer Registration Statement after the
150-day period described in clause (ii) above, (y) the consummation of the
Exchange Offer or the effectiveness of a Shelf Registration Statement, as the
case may be, after the 180-day period described in clause (iii) above, or (z)
the cure of any Registration Default described in clause (iv) above, such
additional interest shall cease to accrue on the Notes from the date of such
filing, effectiveness, consummation or cure, as the case may be, if the Company
is otherwise in compliance with this paragraph; provided, however, that if,
after any such Liquidated Damages cease to accrue, a different event specified
in clause (i), (ii), (iii) or (iv) above occurs, such Liquidated Damages shall
begin to accrue again pursuant to the foregoing provisions.
(f) Specific Enforcement. Without limiting the remedies available to
the Initial Purchasers and the Holders, the Company acknowledges that any
failure by it to comply with its obligations under Sections 2(a) and 2(b) hereof
may result in material irreparable injury to the Initial Purchasers or the
Holders for which there is no adequate remedy at law, that it will not be
possible to measure damages for such injuries precisely and that, in the event
of any such failure, the Initial Purchasers or any Holder may obtain such relief
as may be required to specifically enforce the Company's obligations under
Sections 2(a) and 2(b).
3. Registration Procedures. In connection with the obligations of
the Company with respect to the Registration Statements pursuant to Sections
2(a) and 2(b) hereof, the Company shall:
(a) prepare and file with the SEC a Registration Statement, within
the time periods specified in Section 2, on the appropriate form under the
1933 Act, which form (i) shall be selected by the Company, (ii) shall, in
the case of a Shelf Registration, be available for the sale of the
Registrable Notes by the selling Holders
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thereof and (iii) shall comply as to form in all material respects with
the requirements of the applicable form and include or incorporate by
reference all financial statements required by the SEC to be filed
therewith, and use their best efforts to cause such Registration Statement
to become effective and remain effective in accordance with Section 2
hereof;
(b) subject to Section 2(d)(iii) prepare and file with the SEC such
amendments and post-effective amendments to each Registration Statement as
may be necessary under applicable law to keep such Registration Statement
effective for the applicable period; cause each Prospectus to be
supplemented by any required prospectus supplement, and as so supplemented
to be filed pursuant to Rule 424 under the 1933 Act; and comply with the
provisions of the 1933 Act with respect to the disposition of all
securities covered by each Registration Statement during the applicable
period in accordance with the intended method or methods of distribution
by the selling Holders thereof;
(c) in the case of a Shelf Registration, (i) notify each Holder of
Registrable Notes, at least ten days prior to filing, that a Shelf
Registration Statement with respect to the Registrable Notes is being
filed and advising such Holders that the distribution of Registrable Notes
will be made in accordance with the method elected by the Majority
Holders; and (ii) furnish to each Holder of Registrable Notes, to counsel
for the Initial Purchasers, to counsel for the Holders and to each
underwriter of an underwritten offering of Registrable Notes, if any,
without charge, as many copies of each Prospectus, including each
preliminary Prospectus, and any amendment or supplement thereto and such
other documents as such Holder or underwriter may reasonably request,
including financial statements and schedules and, if the Holder so
requests, all exhibits reasonably requested (including those incorporated
by reference) in order to facilitate the public sale or other disposition
of the Registrable Notes; and (iii) subject to the last paragraph of this
Section 3, hereby consent to the use of the Prospectus, including each
preliminary Prospectus, or any amendment or supplement thereto by each of
the selling Holders of Registrable Notes in connection with the offering
and sale of the Registrable Notes covered by the Prospectus or any
amendment or supplement thereto;
(d) use its reasonable best efforts to register or qualify the
Registrable Notes under all applicable state securities or "blue sky" laws
of such jurisdictions as any Holder of Registrable Notes covered by a
Registration Statement and each underwriter of an underwritten offering of
Registrable Notes shall reasonably request by the time the Registration
Statement is declared effective by the SEC, to cooperate with the Holders
in connection with any filings required to be made with the NASD and do
any and all other acts and things which may be reasonably necessary or
advisable to enable such Holder to consummate the disposition in each such
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jurisdiction of such Registrable Notes owned by such Holder; provided,
however, that the Company shall not be required to (i) qualify as a
foreign corporation or as a dealer in securities in any jurisdiction where
it would not otherwise be required to qualify but for this Section 3(d) or
(ii) take any action which would subject it to general service of process
or taxation in any such jurisdiction if it is not then so subject;
(e) in the case of a Shelf Registration, notify each Holder of
Registrable Notes and counsel for such Holders promptly and, if requested
by such Holder or counsel, confirm such advice in writing promptly (i)
when a Registration Statement has become effective and when any
post-effective amendments and supplements thereto become effective, (ii)
of any request by the SEC or any state securities authority for
post-effective amendments and supplements to a Registration Statement and
Prospectus or for additional information after the Registration Statement
has become effective, (iii) of the issuance by the SEC or any state
securities authority of any stop order suspending the effectiveness of a
Registration Statement or the initiation of any proceedings for that
purpose, (iv) if, during the period a Registration Statement is effective,
the representations and warranties of the Company contained in any
underwriting agreement, securities sales agreement or other similar
agreement, if any, relating to such offering cease to be true and correct
in all material respects, (v) of the receipt by the Company of any
notification with respect to the suspension of the qualification of the
Registrable Notes for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose, (vi) of the happening of
any event or the discovery of any facts during the period a Shelf
Registration Statement is effective (including as contemplated in Section
2(d)(iii) hereof) which makes any statement made in such Registration
Statement or the related Prospectus untrue in any material respect or
which requires the making of any changes in such Registration Statement or
Prospectus in order to make the statements therein not misleading and
(vii) of any determination by the Company that a post-effective amendment
to a Registration Statement would be appropriate;
(f) (A) in the case of the Exchange Offer, (i) include in the
Exchange Offer Registration Statement a "Plan of Distribution" section
covering the use of the Prospectus included in the Exchange Offer
Registration Statement by Broker-Dealers who hold Registrable Notes and
who have exchanged their Registrable Notes for Exchange Notes for the
resale of such Exchange Notes, (ii) furnish to each Broker- Dealer who
desires to participate in the Exchange Offer, without charge, as many
copies of each Prospectus included in the Exchange Offer Registration
Statement, including any preliminary prospectus, and any amendment or
supplement thereto, as such Broker-Dealer may reasonably request, (iii)
include in the Exchange Offer Registration Statement a statement that any
Broker-Dealer who holds Registrable Notes acquired for its own account as
a result of market-making activities or other
13
trading activities (a "Participating Broker-Dealer"), and who receives
Exchange Notes for Registrable Notes pursuant to the Exchange Offer, may
be a statutory underwriter and must deliver a prospectus meeting the
requirements of the 1933 Act in connection with any resale of such
Exchange Notes, (iv) subject to the last paragraph of Section 3, hereby
consent to the use of the Prospectus forming part of the Exchange Offer
Registration Statement or any amendment or supplement thereto, by any
Broker-Dealer in connection with the sale or transfer of the Exchange
Notes covered by the Prospectus or any amendment or supplement thereto,
and (v) include in the transmittal letter or similar documentation to be
executed by an exchange offeree in order to participate in the Exchange
Offer the following provision:
"If the undersigned is not a broker-dealer, the undersigned
represents that it is not engaged in, and does not intend to engage
in, a distribution of Exchange Notes. If the undersigned is a
broker-dealer that will receive Exchange Notes for its own account
in exchange for Registrable Notes, it represents that the
Registrable Notes to be exchanged for Exchange Notes were acquired
by it as a result of market-making activities or other trading
activities and acknowledges that it will deliver a prospectus
meeting the requirements of the 1933 Act in connection with any
resale of such Exchange Notes pursuant to the Exchange Offer;
however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter"
within the meaning of the 1933 Act;"
(B) to the extent any Participating Broker-Dealer participates in
the Exchange Offer, the Company shall use its best efforts to cause to be
delivered at the request of an entity representing the Participating
Broker-Dealers (which entity shall be one of the Initial Purchasers,
unless it elects not to act as such representative) one "cold comfort"
letter with respect to the Prospectus in the form existing on the last
date for which exchanges are accepted pursuant to the Exchange Offer and
with respect to each subsequent amendment or supplement, if any, effected
during the period specified in clause (C) below; and
(C) to the extent any Participating Broker-Dealer participates in
the Exchange Offer, the Company shall use its best efforts to maintain the
effectiveness of the Exchange Offer Registration Statement for a period
extending to the sooner of the 180th day from the date on which the
Exchange Offer is declared effective or the date on which all
participating Broker-Dealers and the Initial Purchasers have sold all
Exchange Notes held by them; and
(D) the Company shall not be required to amend or supplement the
Prospectus contained in the Exchange Offer Registration Statement as would
otherwise be contemplated by Section 3(b) hereof, or take any other action
as a result
14
of this Section 3(f), for a period extending beyond the sooner of either
the 180th day after the last date for which exchanges are accepted
pursuant to the Exchange Offer, or the date on which all Participating
Broker-Dealers and the Initial Purchasers have sold all Exchange Notes
held by them (as such period may be extended by the Company) and
Participating Broker-Dealers shall not be authorized by the Company to,
and shall not, deliver such Prospectus after such period in connection
with resales contemplated by this Section 3.
(g) (A) in the case of an Exchange Offer, furnish counsel for the
Initial Purchasers and (B) in the case of a Shelf Registration, furnish
counsel for the Holders of Registrable Notes copies of any request by the
SEC or any state securities authority for amendments or supplements to a
Registration Statement and Prospectus or for additional information;
(h) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of a Registration Statement as soon as
practicable and provide immediate notice to each Holder of the withdrawal
of any such order;
(i) in the case of a Shelf Registration, furnish to each Holder of
Registrable Notes, without charge, at least one conformed copy of each
Registration Statement and any post-effective amendment thereto (without
documents incorporated therein by reference or exhibits thereto, unless
reasonably requested);
(j) in the case of a Shelf Registration, cooperate with the selling
Holders of Registrable Notes to facilitate the timely preparation and
delivery of certificates representing Registrable Notes to be sold and not
bearing any restrictive legends; and cause such Registrable Notes to be in
such denominations (consistent with the provisions of the Indenture) in a
form eligible for deposit with the Depositary and registered in such names
as the selling Holders or the underwriters, if any, may reasonably request
in writing at least one business day prior to the closing of any sale of
Registrable Notes;
(k) in the case of a Shelf Registration, upon the occurrence of any
event or the discovery of any facts, each as contemplated by Section
3(e)(vi) hereof, subject to section 2(d)(iii) use their best efforts to
prepare a supplement or post-effective amendment to a 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 purchasers of the Registrable Notes, such Prospectus will
not contain at the time of such delivery any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading. The Company agrees to notify each Holder to suspend
use of the Prospectus as promptly as practicable after
15
the occurrence of such an event, and each Holder hereby agrees to suspend
use of the Prospectus until the Company has amended or supplemented the
Prospectus to correct such misstatement or omission. At such time as such
public disclosure is otherwise made or the Company determines that such
disclosure is not necessary, in each case to correct any misstatement of a
material fact or to include any omitted material fact, the Company agrees
promptly to notify each Holder of such determination and to furnish each
Holder such numbers of copies of the Prospectus, as amended or
supplemented, as such Holder may reasonably request;
(l) obtain CUSIP numbers for all Exchange Notes, or Registrable
Notes, as the case may be, not later than the effective date of a
Registration Statement, and provide the Trustee with printed certificates
for the Exchange Notes in a form eligible for deposit with the Depositary;
(m) (i) cause the Indenture to be qualified under the Trust
Indenture Act of 1939, as amended (the "TIA"), in connection with the
registration of the Exchange Notes, or Registrable Notes, as the case may
be, (ii) cooperate with the Trustee and the Holders to effect such changes
to the Indenture as may be required for the Indenture to be so qualified
in accordance with the terms of the TIA and (iii) execute, and use its
best efforts to cause the Trustee to execute, all documents as may be
required to effect such changes, and all other forms and documents
required to be filed with the SEC to enable the Indenture to be so
qualified in a timely manner;
(n) in the case of a Shelf Registration, enter into agreements
(including underwriting agreements) and take all other customary and
appropriate actions (including those reasonably requested by the holders
of a majority in principal amount of the Registrable Notes being sold) in
order to expedite or facilitate the disposition of such Registrable Notes
and in such connection, whether or not an underwriting agreement is
entered into and whether or not the registration is an underwritten
registration:
(i) make such representations and warranties to the Holders of
such Registrable Notes and the underwriters, if any, in form,
substance and scope as are customarily made by issuers to
underwriters in similar underwritten offerings as may be reasonably
requested by them;
(ii) obtain opinions of counsel to the Company and updates
thereof (which counsel and opinions (in form, scope and substance)
shall be reasonably satisfactory to the managing underwriters, if
any, and the Holders of a majority in principal amount of the
Registrable Notes being sold) addressed to each selling Holder and
the underwriters, if any, covering the matters customarily covered
in opinions requested in sales of securities or
16
underwritten offerings and such other matters as may be reasonably
requested by such Holders and underwriters;
(iii) obtain "cold comfort" letters and updates thereof from
the Company's independent certified public accountants addressed to
the underwriters, if any, and will use best efforts to have such
letters addressed to the selling Holders of Registrable Notes, such
letters to be in customary form and covering matters of the type
customarily covered in "cold comfort" letters to underwriters in
connection with similar underwritten offerings;
(iv) enter into a securities sales agreement with the Holders
and an agent of the Holders providing for, among other things, the
appointment of such agent for the selling Holders for the purpose of
soliciting purchases of Registrable Notes, which agreement shall be
in form, substance and scope customary for similar offerings;
(v) if an underwriting agreement is entered into in the case
of an underwritten offering, cause the same to set forth
indemnification provisions and procedures substantially equivalent
to the indemnification provisions and procedures set forth in
Section 5 hereof with respect to the underwriters and all other
parties to be indemnified pursuant to Section 5 hereof; and
(vi) deliver such documents and certificates as may be
reasonably requested and as are customarily delivered in similar
offerings.
The above shall be done at (i) the effectiveness of such Registration
Statement (and, if appropriate, each post-effective amendment thereto) and
(ii) each closing under any underwriting or similar agreement as and to
the extent required thereunder. In the case of any underwritten offering,
the Company shall provide written notice to the Holders of all Registrable
Notes of such underwritten offering at least 30 days prior to the filing
of a prospectus supplement for such underwritten offering. Such notice
shall (x) offer each such Holder the right to participate in such
underwritten offering, (y) specify a date, which shall be no earlier than
10 days following the date of such notice, by which such Holder must
inform the Company of its intent to participate in such underwritten
offering and (z) include the instructions such Holder must follow in order
to participate in such underwritten offering;
(o) in the case of a Shelf Registration, make available for
inspection by representatives of the Holders of the Registrable Notes and
any underwriters participating in any disposition pursuant to a Shelf
Registration Statement and any U.S. counsel or accountant retained by such
Holders or underwriters, all financial and other records, pertinent
corporate documents and properties of the Company
17
reasonably requested by any such Persons, and cause the respective
officers, directors, employees, and any other agents of the Company to
supply all information reasonably requested by any such representative,
underwriter, special counsel or accountant in connection with a
Registration Statement;
(p) (i) in the case of an Exchange Offer, a reasonable time prior to
the filing of any Exchange Offer Registration Statement, any Prospectus
forming a part thereof, any amendment to an Exchange Offer Registration
Statement or amendment or supplement to a Prospectus, provide copies of
such document to the Initial Purchasers, and make such changes in any such
document prior to the filing thereof as the Initial Purchasers or their
counsel may reasonably request; (ii) in the case of a Shelf Registration,
a reasonable time prior to filing any Shelf Registration Statement, any
Prospectus forming a part thereof, any amendment to such Shelf
Registration Statement or amendment or supplement to such Prospectus,
provide copies of such document to the Holders of Registrable Notes, to
the Initial Purchasers, to counsel on behalf of the Holders and to the
underwriter or underwriters of an underwritten offering of Registrable
Notes, if any, and make such changes in any such document prior to the
filing thereof as counsel to the Initial Purchasers or any underwriter may
reasonably request; and (iii) cause the representatives of the Company to
be available for discussion of such document as shall be reasonably
requested by the Holders of Registrable Notes, the Initial Purchasers on
behalf of such Holders or any underwriter, and shall not at any time make
any filing of any such document of which such Holders, the Initial
Purchasers on behalf of such Holders, their counsel or any underwriter
shall not have previously been advised and furnished a copy or to which
such Holders, the Initial Purchasers on behalf of such Holders, their
counsel or any underwriter shall reasonably object within a reasonable
time period;
(q) in the case of a Shelf Registration, use its reasonable efforts
to cause all Registrable Notes to be listed on any securities exchange on
which similar debt securities issued by the Company are then listed if
requested by the Majority Holders or by the underwriter or underwriters of
an underwritten offering of Registrable Notes, if any;
(r) otherwise use its reasonable efforts to comply with all
applicable rules and regulations of the SEC and make available to their
security holders, as soon as reasonably practicable (but not until the end
of the first full fiscal quarter following effectiveness), an earnings
statement covering at least 12 months which shall satisfy the provisions
of Section 11(a) of the 1933 Act and Rule 158 thereunder; and
(s) cooperate and assist in any filings required to be made with the
NASD and in the performance of any due diligence investigation by any
underwriter and its counsel.
18
In the case of a Shelf Registration Statement, the Company may (as a
condition to such Holder's participation in the Shelf Registration) require each
Holder of Registrable Notes to furnish to the Company such information regarding
such Holder and the proposed distribution by such Holder of such Registrable
Notes as the Company may from time to time reasonably request.
In the case of a Shelf Registration Statement, each Holder agrees
that, upon receipt of any notice from the Company of the happening of any event
or the discovery of any facts, each of the kind described in Section
3(e)(ii)-(vii) hereof, such Holder will forthwith discontinue disposition of
Registrable Notes pursuant to a Registration Statement until such Holder's
receipt of the copies of the supplemented or amended Prospectus contemplated by
Section 3(k) hereof, or until such Holder is advised in writing by the Company
that the use of the Prospectus may be resumed, and has received copies of any
additional or supplemental filings that are incorporated by reference in the
Prospectus. If so directed by the Company, such Holder will deliver to the
Company (at the Company's expense) all copies in its possession, other than
permanent file copies then in such Holder's possession, of the Prospectus
covering such Registrable Notes current at the time of receipt of such notice.
Each Holder agrees to keep confidential the cause of any such notice of
suspension or other information provided to them by the Company with respect
thereto or any other event which would materially adversely affect the Company.
If the Company shall give any such notice to suspend the disposition of
Registrable Notes pursuant to a Shelf Registration Statement as a result of the
happening of any event or the discovery of any facts, each of the kind described
in Section 3(e)(vi) hereof, the Company shall be deemed to have used its best
efforts to keep the Shelf Registration Statement effective during such period of
suspension; provided that (i) such period of suspension shall not exceed the
time periods provided in Section 2(d)(iii) hereof and (ii) the Company shall use
its best efforts to file and have declared effective (if an amendment) as soon
as practicable an amendment or supplement to the Shelf Registration Statement
and shall extend the period during which the Registration Statement shall be
maintained effective pursuant to this Agreement by the number of days during the
period from and including the date of the giving of such notice to and including
the date when the Holders shall have received copies of the supplemented or
amended Prospectus necessary to resume such dispositions.
4. Underwritten Registrations. If any of the Registrable Notes
covered by any Shelf Registration are to be sold in an underwritten offering,
the investment banker or investment bankers and manager or managers that will
manage the offering will be selected among nationally recognized investment
bankers and managers by the Company, subject to the approval (not to be
unreasonably withheld) of the Majority Holders of such Registrable Notes
included in such offering.
No Holder of Registrable Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Registrable Notes
19
on the basis provided in any underwriting arrangements approved by the Persons
entitled hereunder to approve such arrangements and (b) completes and executes
all questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents required under the terms of such underwriting arrangements.
5. Indemnification and Contribution. (a) The Company agrees to
indemnify and hold harmless each Initial Purchaser, each Holder, including
Participating Broker-Dealers, each underwriter who participates in an offering
of Registrable Notes, their respective affiliates, and their respective
directors, officers, employees, agents and each Person, if any, who controls any
of such parties within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in any Registration
Statement (or any amendment thereto) pursuant to which Exchange Notes or
Registrable Notes were registered under the 1933 Act, including all
documents incorporated therein by reference, or the omission or alleged
omission therefrom of a material fact required to be stated therein or
necessary to make the statements therein not misleading or arising out of
any untrue statement or alleged untrue statement of a material fact
contained in any Prospectus (or any amendment or supplement thereto) or
the omission or alleged omission therefrom of a material fact necessary in
order to make the statements therein, in the light of the circumstances
under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever, in each case, based upon any such untrue statement or
omission, or any such alleged untrue statement or omission; provided that
(subject to Section 5(d) below) any such settlement is effected with the
written consent of the Company; and
(iii) against any and all expenses whatsoever, as incurred
(including the reasonable fees and disbursements of one counsel chosen by
any indemnified party), reasonably incurred in investigating, preparing or
defending against any litigation, or any investigation or proceeding by
any court or governmental agency or body, commenced or threatened, or any
claim whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under subparagraph (i) or (ii) of this Section 5(a);
20
provided, however, that this indemnity agreement does not apply to any loss,
liability, claim, damage or expense to the extent (i) arising out of an untrue
statement or omission or alleged untrue statement or omission (A) made in or
omitted from a preliminary Prospectus or Registration Statement and corrected or
included in a subsequent Prospectus or Registration Statement or any amendment
or supplement thereto made in reliance upon and in conformity with written
information furnished to the Company by the Initial Purchasers, any Holder,
including Participating Broker-Dealers, or any underwriter expressly for use in
the Registration Statement (or any amendment thereto) or the Prospectus (or any
amendment or supplement thereto) or (B) resulting from the use of the Prospectus
during a period when the use of the Prospectus has been suspended in accordance
with Section 2(d)(iii) Section 3(e)(vi) and the last paragraph of Section 3
hereof, provided, in each case, that Holders received prior notice of such
suspension. The foregoing indemnity with respect to any untrue statement
contained in or any omission from a Prospectus shall not inure to the benefit of
any Initial Purchaser, Holder (in its capacity as a Holder), or any person who
controls such party within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act from whom the person asserting any such loss, liability,
claim, damage or expense purchased any of the Registrable Notes that are the
subject thereof, was not sent or given a copy of such Prospectus (as amended or
supplemented) by such Initial Purchaser or such Holder (in its capacity as
Holder) to the extent such Initial Purchaser or such Holder (in its capacity as
Holder) was required by law to deliver such Prospectus as amended or
supplemented, at or prior to the written confirmation of the sale of such
Registrable Notes and the untrue statement contained in or the omission from
such Prospectus was corrected in such amended or supplemented Prospectus, unless
such failure resulted from noncompliance by the Company with its obligations
hereunder to furnish such Initial Purchase or such Holder (in its capacity as
Holder), as the case may be, with copies of such Prospectus as amended or
supplemented.
(b) In the case of a Shelf Registration, each Holder agrees,
severally and not jointly, to indemnify and hold harmless the Company, each
Initial Purchaser, each underwriter who participates in an offering of
Registrable Notes and the other selling Holders and each of their respective
directors and officers (including each officer of the Company who signed the
Registration Statement) and each Person, if any, who controls the Company, any
Initial Purchaser, any underwriter or any other selling Holder within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act, against any
and all loss, liability, claim, damage and expense whatsoever described in the
indemnity contained in Section 5(a) hereof, as incurred, but only with respect
to untrue statements or omissions, or alleged untrue statements or omissions,
made in the Registration Statement (or any amendment thereto) or the Prospectus
(or any amendment or supplement thereto) in reliance upon and in conformity with
written information furnished to the Company by such Holder expressly for use in
the Registration Statement (or any amendment thereto), or the Prospectus (or any
amendment or supplement thereto); provided, however, that no such Holder shall
be liable
21
for any claims hereunder in excess of the amount of net proceeds received by
such Holder from the sale of Registrable Notes pursuant to such Shelf
Registration Statement.
(c) In case any action shall be commenced involving any Person in
respect of which indemnity may be sought pursuant to either paragraph (a) or (b)
above, such Person (the "indemnified party") shall give notice as promptly as
reasonably practicable to each Person against whom such indemnity may be sought
(the "indemnifying party"), but failure to so notify an indemnifying party shall
not relieve such indemnifying party from any liability hereunder to the extent
it is not materially prejudiced as a result thereof and in any event shall not
relieve it from any liability which it may have otherwise than on account of
this indemnity agreement. In the case of parties indemnified pursuant to Section
5(a) above, counsel for such indemnified parties shall be chosen by such
indemnified parties, and, in the case of parties indemnified pursuant to Section
5(b) above, counsel to such indemnified parties shall be selected by the
Company. An indemnifying party may participate at its own expense in the defense
of such action; provided, however, that counsel to the indemnifying party shall
not (except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying party or parties be liable
for the fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
No indemnifying party shall, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 5 (whether or not the indemnified parties are actual or
potential parties thereof), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
(d) If at any time an indemnified party shall have requested an
indemnifying party to reimburse the indemnified party for fees and expenses of
counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 5(a)(ii) hereof effected
without its written consent if (i) such settlement is entered into more than 45
days after receipt by such indemnifying party of the aforesaid request, (ii)
such indemnifying party shall have received notice of the terms of such
settlement at least 30 days prior to such settlement being entered into and
(iii) such indemnifying party shall not have reimbursed such indemnified party
in accordance with such request prior to the date of such settlement.
Notwithstanding the immediately preceding sentence, if at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, an indemnifying party shall
not be liable for any
22
settlement of the nature contemplated by Section 5(a)(ii) effected without its
consent if such indemnifying party (i) reimburses such indemnified party in
accordance with such request to the extent it considers such request to be
reasonable and (ii) provides written notice to the indemnified party
substantiating the unpaid balance as unreasonable, in each case prior to the
date of such settlement.
(e) If the indemnification provided for in any of the indemnity
provisions set forth in this Section 5 is for any reason unavailable to or
insufficient to hold harmless an indemnified party in respect of any losses,
liabilities, claims, damages or expenses referred to therein, then each
indemnifying party shall contribute to the aggregate amount of such losses,
liabilities, claims, damages and expenses incurred by such indemnified party, as
incurred, (i) in such proportion as is appropriate to reflect the relative
benefits received by such indemnifying party or parties on the one hand, and
such indemnified party or parties on the other and from the offering of the
Registrable Notes included in such offering; or (ii) if the allocation provided
by clause (i) is not permitted by applicable law, in such proportion as is
appropriate to reflect not only the relative benefits referred to in clause (i)
above but also the relative fault of such indemnifying party or parties on the
one hand, and such indemnified party or parties on the other hand, in connection
with the statements or omissions which resulted in such losses, liabilities,
claims, damages or expenses, as well as any other relevant equitable
considerations. The relative fault of such indemnifying party or parties on the
one hand, and such indemnified party or parties on the other hand shall be
determined by reference to, among other things, whether any such untrue or
alleged untrue statement of a material fact or omission or alleged omission to
state a material fact relates to information supplied by such indemnifying party
or parties or such indemnified party or parties and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company, the Initial Purchasers and the Holders
of the Registrable Notes agree that it would not be just and equitable if
contribution pursuant to this Section 5 were determined by pro rata allocation
(even if the Initial Purchasers were treated as one entity, and the Holders were
treated as one entity, for such purpose) or by another method of allocation
which does not take account of the equitable considerations referred to above in
Section 5. The aggregate amount of losses, liabilities, claims, damages and
expenses incurred by an indemnified party and referred to above in this Section
5 shall be deemed to include any legal or other expenses reasonably incurred by
such indemnified party in investigating, preparing or defending against any
litigation, or any investigation or proceeding by an governmental agency or
body, commenced or threatened, or any claim whatsoever based upon any such
untrue or alleged untrue statement or omission or alleged omission. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the 1993 Act) shall be entitled to contribution from any Person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 5,
each Person, if any, who controls an Initial Purchaser or Holder within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act shall have
the same rights to contribution as such Initial Purchaser or Holder, and each
director of the Company, each officer of the Company who
23
signed the Registration Statement, and each Person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act shall have the same rights to contribution as the Company. The parties
hereto agree that any underwriting discount or commission or reimbursement of
fees paid to any Initial Purchaser pursuant to the Purchase Agreement shall not
be deemed to be a benefit received by any Initial Purchaser in connection with
the offering of the Registrable Notes in such offering.
6. Miscellaneous. (a) Rule 144 and Rule 144A. For so long as the
Company is subject to the reporting requirements of Section 13 or 15 of the 1934
Act, the Company covenants that it will file the reports required to be filed by
it under Section 13(a) or 15(d) of the 1934 Act and the rules and regulations
adopted by the SEC thereunder, that if it ceases to be so required to file such
reports, it will upon the request of any Holder of Registrable Notes that are
restricted securities within the meaning of Rule 144 and are not saleable in
full under paragraph (k) of Rule 144 (i) make publicly available such
information as is necessary to permit sales pursuant to Rule 144 under the 1933
Act, (ii) deliver such information to a prospective purchaser as is necessary to
permit sales pursuant to Rule 144A under the 1933 Act and it will take such
further action as any Holder of Registrable Notes may reasonably request, and
(iii) take such further action that is reasonable in the circumstances, in each
case, to the extent required from time to time to enable such Holder to sell its
Registrable Notes without registration under the 1933 Act within the limitation
of the exemptions provided by (x) Rule 144 under the 1933 Act, as such Rule may
be amended from time to time, (y) Rule 144A under the 1933 Act, as such Rule may
be amended from time to time, or (z) any similar rules or regulations hereafter
adopted by the SEC. Upon the written request of any Holder of Registrable Notes,
the Company will deliver to such Holder a written statement as to whether it has
complied with such requirements.
(b) No Inconsistent Agreements. The Company has not entered into nor
will it on or after the date of this Agreement enter into any agreement which is
inconsistent with the rights granted to the Holders of Registrable Notes in this
Agreement or otherwise conflicts with the provisions hereof. The rights granted
to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Company's other
issued and outstanding securities under any such agreements.
(c) Amendments and Waivers. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given unless the Company has obtained the written consent of Holders
of at least a majority in aggregate principal amount at maturity of the
outstanding Registrable Notes affected by such amendment, modification,
supplement, waiver or departure; provided, however, that no amendment,
modification, supplement or waiver or consent to any departure from the
provisions of Section 5 hereof shall be effective as against any Holder of
Registrable Notes unless consented to in writing by such Holder.
24
(d) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, registered
first-class mail, telecopier, or any courier guaranteeing overnight delivery (i)
if to a Holder (other than an Initial Purchaser), at the most current address
set forth on the records of the Registrar under the Indenture, (ii) if to an
Initial Purchaser, at the most current address given by such Initial Purchaser
to the Company by means of a notice given in accordance with the provisions of
this Section 6(d), which address initially is the address set forth in the
Purchase Agreement; and (iii) if to the Company, initially at the address set
forth in the Purchase Agreement and thereafter at such other address, notice of
which is given in accordance with the provisions of this Section 6(d).
All such notices and communications shall be deemed to have been
duly given: at the time delivered by hand, if personally delivered; five
business days after being deposited in the mail, postage prepaid, if mailed;
when receipt is acknowledged, if telecopied; and on the next business day if
timely delivered to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands, or other communications shall
be concurrently delivered by the Person giving the same to the Trustee, at the
address specified in the Indenture.
(e) Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the successors, assigns and transferees of each
of the parties, including, without limitation and without the need for an
express assignment, subsequent Holders; provided that nothing herein shall be
deemed to permit any assignment, transfer or other disposition of Registrable
Notes in violation of the terms hereof or of the Purchase Agreement or the
Indenture. If any transferee of any Holder shall acquire Registrable Notes, in
any manner, whether by operation of law or otherwise, such Registrable Notes
shall be held subject to all of the terms of this Agreement, and by taking and
holding such Registrable Notes, such Person shall be conclusively deemed to have
agreed to be bound by and to perform all of the terms and provisions of this
Agreement, including the restrictions on resale set forth in this Agreement and,
if applicable, the Purchase Agreement, and such Person shall be entitled to
receive the benefits hereof.
(f) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company on the one
hand, and the Initial Purchasers, on the other hand, and shall have the right to
enforce such agreements directly to the extent it deems such enforcement
necessary or advisable to protect its rights or the rights of Holders hereunder.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so
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executed shall be deemed to be an original and all of which taken together shall
constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(j) Severability. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
IN WITNESS WHEREOF, the parties have executed this Agreement as of
the date first written above.
PATHNET, INC.
By /s/ David Schaeffer
_____________________________________
Name: David Schaeffer
Title: Chairman
Confirmed and accepted as of
the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
BEAR, STEARNS & CO., INC.
TD SECURITIES
SALOMON BROTHERS INC
By: MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By: /s/ Lisa Craig
______________________________________
Authorized Signatory