EXHIBIT 4.14
AMENDED AND RESTATED WARRANT
REGISTRATION RIGHTS AGREEMENT
Dated as of March 30, 2000
Between
PATHNET TELECOMMUNICATIONS, INC.,
and
SPECTRUM EQUITY INVESTORS, L.P.,
NEW ENTERPRISE ASSOCIATES VI, LIMITED PARTNERSHIP,
ONSET ENTERPRISE ASSOCIATES II, L.P.,
FBR TECHNOLOGY VENTURE PARTNERS, L.P.,
TORONTO DOMINION CAPITAL (USA) INC.,
GROTECH PARTNERS IV, L.P. and
RICHARD A. JALKUT
TABLE OF CONTENTS
PAGE
Section 1. Definitions.....................................................................................1
Section 2. Registration Rights.............................................................................6
2.1 (a) Demand Registration......................................................................6
(b) Effective Registration...................................................................7
(c) Selection of Underwriter.................................................................7
(d) Expenses.................................................................................8
2.2 (a) Piggy-Back Registration..................................................................8
(b) Priority in Piggy-Back Registration......................................................9
2.3 Limitations, Conditions and Qualifications to Obligations Under
Registration Covenants..........................................................................9
2.4 Restrictions on Sale by the Company and Others.................................................10
2.5 Rule 144 and Rule 144A.........................................................................11
2.6 Underwritten Registration......................................................................11
Section 3. Transfers......................................................................................12
3.1 Generally......................................................................................12
3.2 Tag-Along Rights...............................................................................12
3.3 Drag-Along Rights..............................................................................14
Section 4. Registration Procedures........................................................................14
Section 5. Indemnification and Contribution...............................................................20
Section 6. Miscellaneous..................................................................................23
(a) Remedies.......................................................................................23
(b) No Inconsistent Agreements.....................................................................24
(c) No Piggy-Back on Demand Registrations..........................................................24
(d) Amendments and Waivers.........................................................................24
(e) Notices........................................................................................24
(f) Successors and Assigns.........................................................................24
(g) Counterparts...................................................................................25
(h) GOVERNING LAW..................................................................................25
(i) Severability...................................................................................25
(j) Headings.......................................................................................25
(k) Entire Agreement...............................................................................25
(l) Securities Held by the Company or Its Affiliates...............................................25
AMENDED AND RESTATED WARRANT
REGISTRATION RIGHTS AGREEMENT
This AMENDED AND RESTATED WARRANT REGISTRATION RIGHTS
AGREEMENT (this "AGREEMENT") is made and entered into as of March 30, 2000,
between PATHNET TELECOMMUNICATIONS, INC. (the "COMPANY"), a Delaware
corporation, and SPECTRUM EQUITY INVESTORS, L.P., NEW ENTERPRISE ASSOCIATES VI,
LIMITED PARTNERSHIP, ONSET ENTERPRISE ASSOCIATES II, L.P., FBR TECHNOLOGY
VENTURE PARTNERS, L.P., TORONTO DOMINION CAPITAL (USA) INC., GROTECH PARTNERS
IV, L.P., and RICHARD A. JALKUT (the "PERMITTED HOLDERS").
The predecessor to this Agreement was originally executed
pursuant to the Purchase Agreement dated as of April 8, 1998, among Pathnet, Inc
("PATHNET") and the Initial Purchasers, with respect to the issue and sale by
Pathnet and the purchase by the Initial Purchasers, severally, of the respective
number of Pathnet's Units, each Unit consisting of $1,000 principal amount of
the Company's 12.25% Senior Notes due 2008 (the "Notes") and one warrant (each,
a "PATHNET WARRANT"), each initially entitling the holder thereof to purchase
1.1 shares of common stock, par value $0.01 per share, of Pathnet, set forth
opposite such Initial Purchaser's name on Schedule I to the Purchase Agreement.
This Agreement, which amends and restates the original agreement, reflects the
substitution of the Company as a party to this Agreement in lieu of Pathnet and
the conversion of each Pathnet Warrant into a warrant (each, a "WARRANT") which,
as of the date hereof, entitles the holder thereof to purchase 3.19 shares of
common stock, par value $0.01 per share, of the Company ("COMMON STOCK").
In consideration of the foregoing, the parties hereto agree as
follows:
Section 1. DEFINITIONS. As used in this Agreement, the
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following defined terms shall have the following meanings:
"ADVICE" shall have the meaning ascribed to such term in
Section 4 hereof.
"AFFILIATE" shall have the meaning ascribed to such term in
the Indenture.
"AGREEMENT" shall have the meaning ascribed to such term in
the preamble hereto.
"BUSINESS DAY" shall mean a day that is not a Legal Holiday.
"CAPITAL STOCK" shall mean, with respect to any Person, any
and all shares, interests, partnership interests, participations, rights in or
other equivalents (however designated and whether voting or non-voting) of, such
Person's capital stock, and any rights (other than debt securities convertible
into capital stock), warrants or options exchangeable for or convertible into
such capital stock whether outstanding on the Issue Date or thereafter issued.
"CHANGE OF CONTROL" shall have the meaning ascribed to such
term in the Indenture.
"COMPANY" shall have the meaning ascribed to such term in the
preamble of this Agreement and shall also include the Company's permitted
successors and assigns.
"COMMON STOCK" shall have the meaning ascribed to such term in
the preamble of this Agreement and any other class or series of common equity
equivalent shares of the Company into which such Common Stock may be
reclassified and sold to the public in an Initial Public Equity Offering.
"CONVERTIBLE PREFERRED STOCK" shall mean the Series Preferred
Stock (as defined in the Indenture) of the Company and any other series of
preferred stock convertible or exchangeable into Common Stock, whether
outstanding on the date hereof or thereafter issued.
"CURRENT MARKET VALUE" shall have the meaning ascribed to such
term in the Warrant Agreement.
"DEMAND REGISTRATION" shall have the meaning ascribed to such
term in Section 2.1(a) hereof.
"DRAG-ALONG RIGHT" shall have the meaning ascribed to such
term in Section 3.3 hereof.
"DTC" shall have the meaning ascribed to such term in Section
4(i) hereof.
"EFFECTIVENESS PERIOD" shall have the meaning ascribed to such
term in Section 2.1(a) hereof.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended from time to time.
"FAIR MARKET VALUE" shall mean the value of any securities as
determined (without any discount for lack of liquidity, the amount of such
securities proposed to be sold or the fact that such securities held by any
Holder of such security may represent a minority interest in a private company)
by a nationally or regionally recognized independent financial expert selected
by the Company for the determination of such value.
"HOLDER" shall mean each holder of any Warrants, Warrant
Shares or Registrable Securities, and each of their successors, assigns and
direct and indirect transferees who become registered owners of such Warrants,
Warrant Shares or Registrable Securities for so long as such Person continues to
hold such Warrants, Warrant Shares or Registrable Securities.
"INCLUDED SECURITIES" shall have the meaning ascribed to such
term in Section 2.1(a) hereof.
"INDENTURE" shall mean the Indenture, dated as of April 8,
2000 between Pathnet and The Bank of New York, Trustee, pursuant to which the
Notes were issued, as amended as of March 30, 2000, and as further amended or
supplemented from time to time in accordance with the terms thereof.
"INDEPENDENT FINANCIAL EXPERT " shall have the meaning
ascribed to such term in the Indenture.
"INITIAL PUBLIC EQUITY OFFERING" shall mean a primary public
offering (whether or not underwritten, but excluding any offering pursuant to
Form S-8 under the Securities Act or any other publicly registered offering
pursuant to the Securities Act pertaining to an issuance of Common Stock or
securities exercisable therefor under any benefit plan, employee compensation
plan, or employee or director stock purchase plan) of Common Stock pursuant to
an effective registration statement under the Securities Act.
"INITIAL PURCHASERS" shall mean Merrill Lynch & Co., Merrill
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Lynch, Pierce, Fenner & Smith Incorporated, Bear, Stearns & Co. Inc., TD
Securities (USA) Inc., and Salomon Brothers Inc.
"INSPECTORS" shall have the meaning ascribed to such term in
Section 4(m) hereof.
"ISSUE DATE" shall mean the date hereof.
"LEGAL HOLIDAY" shall mean a Saturday, a Sunday or a day on
which (i) banking institutions in The City of New York are required or
authorized by law or other government action to be closed and (ii) the principal
U.S. securities exchange or market, if any, on which any Common Stock is listed
or admitted to trading and the principal U.S. securities exchange or market, if
any, on which the Warrants are listed or admitted to trading are closed for
business.
"NOTES" shall have the meaning ascribed to such term in the
preamble hereof.
"PARTICIPATING HOLDER" shall have the meaning ascribed to such
term in Section 3.2(c).
"PERMITTED HOLDER" shall have the meaning ascribed to such
term in the preamble hereof.
"PATHNET" shall have the meaning ascribed to such term in the
preamble hereof.
"PATHNET WARRANT" shall have meaning ascribed to such term in
the preamble hereof "PERSON" shall mean any individual, corporation, limited
liability company, partnership, joint venture, association, joint-stock company,
trust, business trust, unincorporated organization or government or any agency
or political subdivision thereof, including any entity that is a predecessor of
any such entity.
"PIGGY-BACK REGISTRATION" shall have the meaning ascribed to
such term in Section 2.2(a) hereof.
"PROPOSED PURCHASER" shall have the meaning ascribed to such
term in Section 3.2(a) hereof.
"PROSPECTUS" shall mean the prospectus included in any
Registration Statement (including, without limitation, any prospectus subject to
completion and a prospectus that includes any information previously omitted
from a prospectus filed as part of an effective registration statement in
reliance upon Rule 430A promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by such
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.
"REGISTRABLE SECURITIES" shall mean any of (i) the Common
Stock issued and issuable upon exercise of the Warrants and (ii) any other
securities issued or issuable with respect to the Warrants or Warrant Shares by
way of stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization or
otherwise. As to any particular Registrable Securities, such securities shall
cease to be Registrable Securities when (a) a Registration Statement with
respect to the offering of such securities by the holder thereof shall have been
declared effective under the Securities Act and such securities shall have been
disposed of by such holder pursuant to such Registration Statement, (b) such
securities have been sold to the public pursuant to, or are eligible (or would
have been eligible if the holder of Warrants had elected cashless exercise of
the Warrant or Warrants) for sale to the public without volume or manner of sale
restrictions under, Rule 144(k) (or any similar provision then in force, but not
Rule 144A) promulgated under the Securities Act, (c) such securities shall have
been otherwise transferred and new certificates for such securities not bearing
a legend restricting further transfer shall have been delivered by the Company
or its transfer agent and subsequent disposition of such securities shall not
require registration or qualification under the Securities Act or any similar
state law then in force or (d) such securities shall have ceased to be
outstanding.
"REGISTRATION EXPENSES" shall mean all expenses incident to
the Company's performance of or compliance with this Agreement, including,
without limitation, all SEC and stock exchange or National Association of
Securities Dealers, Inc. registration and filing fees and expenses, fees and
expenses of compliance with securities or blue sky laws (including, without
limitation, reasonable fees and disbursements of counsel for the underwriters
and the Holders in connection with blue sky qualifications of the Registrable
Securities, such counsel fees not to exceed $5,000 per registration), rating
agency fees, printing expenses, messenger, telephone and delivery expenses, fees
and disbursements of counsel for the Company and all independent certified
public accountants and fees and disbursements of underwriters customarily paid
by issuers or sellers of securities (but not including underwriting discounts or
commissions, fees of counsel to the Holders or transfer taxes, if any,
attributable to the sale of Subject Equity by Holders of such Subject Equity).
"REGISTRATION STATEMENT" shall mean any appropriate
registration statement of the Company filed with the SEC pursuant to the
Securities Act which covers any of the Subject Equity pursuant to the provisions
of this Agreement and all amendments and supplements to any such Registration
Statement, including post-effective amendments, in each case including the
Prospectus contained therein, all exhibits thereto and all materials
incorporated by reference therein.
"RULE 144" shall mean Rule 144 promulgated under the
Securities Act, as such Rule may be amended from time to time, or any similar
rule (other than Rule 144A) or regulation hereafter adopted by the SEC providing
for offers and sales of securities made in compliance therewith resulting in
offers and sales by subsequent holders that are not affiliates of an issuer of
such securities being free of the registration and prospectus delivery
requirements of the Securities Act.
"RULE 144A" shall mean Rule 144A promulgated under the
Securities Act, as such Rule may be amended from time to time, or any similar
rule (other than Rule 144) or regulation hereafter adopted by the SEC.
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended from time to time.
"SELLING HOLDER" shall mean a Holder who is selling Subject
Equity or Registrable Securities in accordance with the provisions of Section
2.1 or 2.2, respectively.
"SUBJECT EQUITY" shall have the meaning ascribed to such term
in Section 2.1(a) hereof. "SUSPENSION PERIOD" shall have the
meaning ascribed to such term in Section 2.3(a).
"TAG-ALONG NOTICE" shall have the meaning ascribed to such
term in Section 3.2(c) hereof.
"TAG-ALONG RIGHT" shall have the meaning ascribed to such term
in Section 3.2(a) hereof.
"TRANSFER" shall have the meaning ascribed to such term in
Section 3.2(a) hereof.
"TRANSFER NOTICE" shall have the meaning ascribed to such term
in Section 3.2(c) hereof.
"TRIGGERING DATE" shall mean the date of the consummation of a
bona fide underwritten public offering of Common Stock, as a result of which at
least 20% of the outstanding shares of Common Stock are listed on a U.S.
national securities exchange or the Nasdaq National Market.
"WARRANT AGENT" shall mean The Bank of New York and any
successor warrant agent for the Warrants pursuant to the Warrant Agreement.
"WARRANT AGREEMENT" shall mean the Supplemental Warrant
Agreement dated as of the date hereof, between the Company and the Warrant
Agent, as amended or supplemented from time to time in accordance with the terms
thereof.
"WARRANT SHARES" shall mean shares of Common Stock issued or
issuable upon exercise of the Warrants at an exercise price of $0.01 per share
or any other securities issued or issuable with respect to the Warrants by way
of stock dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise.
"WARRANTS" shall have the meaning ascribed to such term in the
preamble hereof.
Section 2. REGISTRATION RIGHTS.
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2.1 (a) DEMAND REGISTRATION. After the occurrence of an
Exercise Event (as such term is defined in the Warrant Agreement) and the
completion of an Initial Public Equity Offering, the holders of a number of
Warrants, Warrant Shares and Registrable Securities (collectively, the "SUBJECT
EQUITY") equivalent to at least a majority of the Warrant Shares subject to the
Warrants originally issued on the Issue Date, from time to time, may make a
written request to the Company to effect one registration (the "DEMAND
REGISTRATION") under the Securities Act of the Subject Equity. Any such request
will specify the number of shares of Subject Equity proposed to be sold and will
also specify the intended method of disposition thereof. Within 10 days after
the receipt of such written request for a Demand Registration, the Company shall
notify the Holders of all Subject Equity that a Demand Registration has been
requested. Within 45 days after receipt by any Holder of Subject Equity of such
notice from the Company, such Holder may request in writing that such Holder's
Subject Equity be included in such Registration Statement and the Company shall
include in such Registration Statement the Subject Equity of such Holder
requested to be so included (the "INCLUDED SECURITIES"). Each such request by
such other Holders shall specify the number of Included Securities proposed to
be sold and the intended method of disposition thereof. Furthermore, the Company
shall prepare, file with the SEC and use its best efforts to cause to become
effective under the Securities Act within 150 days of such demand a Registration
Statement in respect of all of the Subject Equity which the Holders request and
keep such Registration Statement continuously effective until the earlier to
occur of (i) the date that is 180 days after such effectiveness (the
"EFFECTIVENESS PERIOD"), (ii) such period of time as all of the Subject Equity
included in such Registration Statement shall have been sold thereunder and
(iii) the Subject Equity included in such registration becomes fully saleable
under paragraph (k) of Rule 144.
If a Demand Registration occurs during the "lock up" or "black
out" period (not to exceed 180 days) imposed on the Company pursuant to or in
connection with any underwriting or purchase agreement relating to an
underwritten Rule 144A or registered public offering of Common Stock or
securities convertible into or exchangeable or exercisable for Common Stock, the
Company shall not be required to so notify Holders of Subject Equity and file
such Registration Statement with respect to the Subject Equity which the Holders
request prior to the end of such "lock up" or "black out" period, in which event
the Company will use its best efforts to cause such Registration Statement to
become effective no later than the later of (i) 150 days after such demand or
(ii) 30 days after the end of such "lock up" or "black out" period. In the event
of any "lock up" or "black out" period or any underwriting or other purchase
agreement, the Company shall so notify the holders of Registrable Securities.
Notwithstanding the foregoing, in lieu of filing and causing
to become effective the Demand Registration, the Company may satisfy its
obligation with respect thereto by making and consummating (or having its
designee make and consummate) an offer to purchase all Subject Equity at a price
at least equal to Current Market Value (as defined in the Warrant Agreement, but
without the inclusion of clause (i)(a) thereof), less any applicable Exercise
Price.
(b) EFFECTIVE REGISTRATION. A Registration Statement shall not
be deemed to have been effected as a Demand Registration unless it shall have
been declared effective by the SEC, and the Company has complied in all material
respects with its obligations under this Agreement with respect thereto, no
later than the later of (i) 150 days after the request for a Demand Registration
or (ii) 30 days after the end of any "lock up" or "black out" period described
in Section 2.1(a) hereof; PROVIDED, HOWEVER, that if, after such Registration
Statement has become effective, the offering of Subject Equity pursuant to such
Registration Statement is or becomes the subject of any stop order, injunction
or other order or requirement of the SEC or any similar governmental, judicial
or administrative order or requirement that prevents, restrains or otherwise
limits the sale of Subject Equity pursuant to such Registration Statement, and
such Registration Statement has not become effective within a reasonable time
period thereafter, such Registration Statement shall be deemed not to have been
effected. If (i) the registration requested pursuant to this Section 2.1 shall
be deemed not to have been effected or (ii) the Demand Registration does not
remain effective under the Securities Act until at least the earlier of (A) the
end of the Effectiveness Period or (B) the consummation of the distribution by
the Holders of all of the Subject Equity covered thereby, then such Demand
Registration shall not count towards determining if the Company has satisfied
its obligation to effect a Demand Registration pursuant to this Section 2.1. The
Holders of Subject Equity shall be permitted to withdraw all or any part of the
Registrable Securities from the Demand Registration. Notwithstanding any such
withdrawal by a Holder of Subject Equity, if the Company has complied with all
of its obligations hereunder and has effected a Demand Registration within 150
days after the request for such Demand Registration, such withdrawal shall not
require the Company to effect an additional Demand Registration.
(c) SELECTION OF UNDERWRITER. If the Holders so elect, the
offering of such Subject Equity pursuant to such Demand Registration shall be in
the form of an underwritten offering. The Holders making such Demand
Registration shall select one or more nationally recognized firms of investment
bankers, who shall be reasonably acceptable to the Company, to act as the
managing underwriter or underwriters in connection with such offering and shall
select any additional investment bankers and managers to be used in connection
with the offering.
(d) EXPENSES. The Company will pay all Registration Expenses
in connection with the registrations requested pursuant to Section 2.1(a)
hereof. Each Holder of Subject Equity shall pay all underwriting discounts and
commissions and transfer taxes, if any, relating to the sale or disposition of
such Holder's Subject Equity pursuant to a Registration Statement requested
pursuant to this Section 2.1.
2.2 (a) PIGGY-BACK REGISTRATION. If at any time the Company
proposes to file a Registration Statement under the Securities Act with respect
to an offering by the Company for its own account or for the account of any of
its securityholders of any class of its common equity securities (other than (i)
a registration statement on Form S-4 or S-8 (or any substitute form that may be
adopted by the SEC) or any other publicly registered offering pursuant to the
Securities Act pertaining to the issuance of shares of Capital Stock or
securities exercisable therefor under any benefit plan, employee compensation
plan, or employee or director stock purchase plan, (ii) a registration statement
filed in connection with an offer of securities solely to the Company's existing
securityholders or (iii) a Demand Registration), then the Company shall give
written notice of such proposed filing to the Holders of Registrable Securities
as soon as practicable (but in no event fewer than 15 days before the
anticipated filing date or 10 days if the Company is subject to filing reports
under the Exchange Act and able to use Form S-3 under the Securities Act), and
such notice shall offer such Holders the opportunity to register such number of
shares of Registrable Securities as each such Holder may request in writing
within 12 days (or eight days if the Company is subject to filing reports under
the Exchange Act and able to use Form S-3 under the Securities Act) after
receipt of such written notice from the Company (which request shall specify the
Registrable Securities intended to be disposed of by such Selling Holder and the
intended method of distribution thereof) (a "PIGGY-BACK REGISTRATION"). In such
case where the intended method of distribution thereof is on a delayed or
continuous basis pursuant to Rule 415 under the Securities Act, or any similar
rule that may be adopted by the SEC, the Company shall use its best efforts to
keep such Piggy-Back Registration continuously effective under the Securities
Act in the qualifying jurisdictions until at least the earlier of (A) 60 days
after the effective date thereof or (B) the consummation of the distribution by
the Holders of all of the Registrable Securities covered thereby. The Company
shall use its reasonable efforts to cause the managing underwriter or
underwriters, if any, of such proposed offering to permit the Registrable
Securities requested to be included in a Piggy-Back Registration to be included
on the same terms and conditions as any similar securities of the Company or any
other securityholder included therein and to permit the sale or other
disposition of such Registrable Securities in accordance with the intended
method of distribution thereof. Any Selling Holder shall have the right to
withdraw its request for inclusion of its Registrable Securities in any
Registration Statement pursuant to this Section 2.2 by giving written notice to
the Company of its request to withdraw. The Company may withdraw a Piggy-Back
Registration at any time prior to the time it becomes effective or the Company
may elect to delay the registration; PROVIDED, HOWEVER, that the Company shall
give prompt written notice thereof to participating Selling Holders.
The Company will pay all Registration Expenses in connection
with each registration of Registrable Securities requested pursuant to this
Section 2.2, and each Holder of Registrable Securities shall pay all
underwriting discounts and commissions and transfer taxes, if any, relating to
the sale or disposition of such Holder's Registrable Securities pursuant to a
Registration Statement effected pursuant to this Section 2.2.
No registration effected under this Section 2.2, and no
failure to effect a registration under this Section 2.2, shall relieve the
Company of its obligation to effect a registration upon the request of Holders
of Registrable Securities pursuant to Section 2.1 hereof, and no failure to
effect a registration under this Section 2.2 and to complete the sale of
securities registered thereunder in connection therewith shall relieve the
Company of any other obligation under this Agreement.
(b) PRIORITY IN PIGGY-BACK REGISTRATION. In a registration
pursuant to Section 2.2 hereof involving an underwritten offering, if the
managing underwriter or underwriters of such underwritten offering shall have
informed the Company and the Selling Holders requesting inclusion in such
offering, in writing, that in such underwriter's or underwriters' reasonable
opinion the total number or type of Registrable Securities which the Company,
the Selling Holders and any other persons desiring to participate in such
registration intend to include in such offering is such as to materially and
adversely affect the success of such offering, including the price at which such
securities can be sold, then the Company shall be required to include in such
registration only the amount of securities which it is so advised should be
included in such registration. In such event, securities shall be registered in
such offering in the following order of priority: (i) first, the securities
which the Company proposes to register (a) in the Initial Public Equity Offering
or (b) pursuant to an exercise of "demand" registration rights pursuant to a
contractual commitment of the Company and (ii) second, provided that no
securities sought to be included by the Company or any such Person under the
immediately preceding clause (i) have been excluded from such registration,
securities which have been requested to be included in such registration by the
Company (other than those covered by clause (i)) and by the Holders of
Registrable Securities pursuant to this Agreement, and the securities of other
Persons entitled to exercise "piggy-back" registration rights pursuant to
contractual commitments of the Company (pro rata based on the amount of
securities sought to be registered by the Company and such Persons).
If, as a result of the provisions of this Section 2.2(b), any
Selling Holder shall not be entitled to include all Registrable Securities in a
Piggy-Back Registration that such Selling Holder has requested to be included,
such Selling Holder may elect to withdraw his request to include Registrable
Securities in such registration.
2.3 LIMITATIONS, CONDITIONS AND QUALIFICATIONS TO OBLIGATIONS
UNDER REGISTRATION COVENANTS. The obligations of the Company set forth in
Sections 2.1 and 2.2 hereof are subject to each of the following limitations,
conditions and qualifications:
(a) The Company may postpone the filing of, or suspend the
effectiveness of, any Registration Statement or amendment thereto,
suspend the use of any Prospectus and shall not be required to amend or
supplement the Registration Statement, any related Prospectus or any
document incorporated therein by reference (other than an effective
Registration Statement being used for an underwritten offering) in the
event that, and for a period (a "SUSPENSION PERIOD") not to exceed an
aggregate of 60 days. A Suspension period used in respect of Sections
2.1 and 2.2 may be effected only if (i) an event or circumstance occurs
and is continuing as a result of which the Registration Statement, any
related Prospectus or any document incorporated therein by reference as
then amended or supplemented or proposed to be filed would, in the
Company's good faith judgement, contain an untrue statement of a
material fact or omit to state a material fact necessary in order to
make the statements therein, in the light of the circumstances under
which they were made, not misleading, and (ii) (A) the Company
determines in its good faith judgement that the disclosure of such an
event at such time would have a material adverse effect on the
business, operations or prospects of the Company or (B) the disclosure
otherwise relates to a material business transaction which has not yet
been publicly disclosed; PROVIDED that the Effectiveness Period shall
be extended by the number of days in any Suspension Period; PROVIDED
FURTHER that the Company shall not be entitled to the postponement or
suspension more than once in any 12-month period; PROVIDED FURTHER that
the Company may suspend the effectiveness for a period not in excess of
five Business Days to allow for the updating of the financial
statements included in a Registration Statement to the extent required
by law, not to exceed 45 days in the aggregate in any 12-month period.
If the Company shall so postpone the filing of a Registration Statement
it shall, as promptly as possible, deliver a certificate signed by the
chief executive officer of the Company to the Selling Holders as to
such determination, and the Selling Holders shall (1) have the right,
in the case of a postponement of the filing or effectiveness of a
Registration Statement, upon the affirmative vote of the Holders of not
less than a majority of the Subject Equity to be included in such
Registration Statement, to withdraw the request for registration by
giving written notice to the Company within 10 days after receipt of
such notice or (2) in the case of a suspension of the right to make
sales, receive an extension of the registration period equal to the
number of days of the suspension. Any Demand Registration as to which
the withdrawal election referred to in the preceding sentence has been
effected shall not be counted for purposes of the Demand Registration
the Company is required to effect pursuant to Section 2.1 hereof.
(b) The Company's obligations under this Agreement shall be
subject to the obligations of the Selling Holders, which the Selling
Holders acknowledge, to furnish all information and materials and to
take any and all actions as may be required under applicable federal
and state securities laws and regulations to permit the Company to
comply with such laws and regulations and all applicable requirements
of the SEC and to obtain any acceleration of the effective date of such
Registration Statement.
2.4 RESTRICTIONS ON SALE BY THE COMPANY AND OTHERS. The
Company covenants and agrees that (i) it shall not, and that it shall not cause
or permit any of its subsidiaries to, effect any public sale or public
distribution of any securities of the same class as any of the Warrants or
Registrable Securities or any securities convertible into or exchangeable or
exercisable for such securities (or any option or other right for such
securities) during the 30-day period prior to, and during the 180-day period
beginning on, the commencement of any underwritten offering of Warrants or
Registrable Securities pursuant to a Demand Registration which has been
requested pursuant to this Agreement, or a Piggy-Back Registration which has
been scheduled, prior to the Company or any of its subsidiaries publicly
announcing its intention to effect any such public sale or public distribution;
(ii) the Company will not, and the Company will not cause or permit any
subsidiary of the Company to, after the date hereof, enter into any agreement or
contract that conflicts with or limits or prohibits the full and timely exercise
by the Holders of Warrants or Registrable Securities of the rights herein to
request a Demand Registration or to join in any Piggy-Back Registration subject
to the other terms and provisions hereof; and (iii) upon request of the Holders
of not less than a majority of the Warrants or Registrable Securities to be
included in such Registration Statement or any underwriter, it shall use its
reasonable best efforts to secure the written agreement of each of its officers
and directors to not effect any public sale or public distribution of any
securities of the same class as the Warrants or Registrable Securities (or any
securities convertible into or exchangeable or exercisable for such securities)
or any option or other right for such securities during the period described in
clause (i) of this Section 2.4.
2.5 RULE 144 AND RULE 144A. While any Warrants or Registrable
Securities remain outstanding, the Company covenants that it shall file the
reports required to be filed by it under the Exchange Act and the rules,
regulations and policies adopted by the SEC thereunder in a timely manner and in
accordance with the requirements of the Exchange Act. If at any time the Company
is not required to file such reports, it will distribute to each Holder or
beneficial owner of Warrants that are "restricted securities" within the meaning
of Rule 144 and are not saleable in full under paragraph (k) of Rule 144 or
Registrable Securities such information as is necessary to permit sales pursuant
to Rule 144A under the Securities Act. The Company further covenants that it
will take such further action as any Holder of Warrants or Registrable
Securities may reasonably request, all to the extent required from time to time
to enable such Holder to sell Warrants or Registrable Securities without
registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144(k) and Rule 144A under the Securities Act, as such
Rules may be amended from time to time, or (b) any similar rule or regulation
hereafter adopted by the SEC. Upon the request of any Holder of Warrants or
Registrable Securities, the Company will in a timely manner deliver to such
Holder a written statement as to whether it has complied with such information
requirements.
2.6 UNDERWRITTEN REGISTRATIONS. No Holder of Registrable
Securities may participate in any underwritten registration pursuant to a
Registration Statement filed under this Agreement unless such Holder (a) agrees
to (i) sell such Holder's Registrable Securities on the basis provided in and in
compliance with any underwriting arrangements approved by the Holders of not
less than a majority of the Registrable Securities to be sold thereunder and
(ii) comply with Rules 101, 102 and 104 of Regulation M under the Exchange Act
and (b) completes and executes all questionnaires, powers of attorney,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements.
Each Holder of Warrants and Registrable Securities whose
Warrants and Registrable Securities are covered by a Registration Statement
filed pursuant to Sections 2.1 and 2.2 and are to be sold thereunder agrees, if
and to the extent reasonably requested by the managing underwriter or
underwriters with respect to an underwritten public offering (including any
underwritten public offering with respect to which registration rights are not
available to holders of the Warrants), not to effect any public sale or
distribution of Warrants and Registrable Securities or of securities of the
Company of the same class as any securities included in such Registration
Statement, including a sale pursuant to Rule 144 (except as part of such
underwritten offering), during the 30-day period prior to, and during the
180-day period beginning on, the closing date of each underwritten offering made
pursuant to such Registration Statement, to the extent timely notified in
writing by the Company or such managing underwriter or underwriters.
The provisions of the foregoing paragraph shall not apply to
any Holders of Warrants and Registrable Securities if such Holder is prevented
by applicable statute or regulation from entering into any such agreement;
provided, however, that any such Holder shall undertake, in its request to
participate in any such underwritten offering, not to effect any public sale or
distribution of any Warrants and Registrable Securities commencing on the date
of sale of such Warrants and Registrable Securities unless it has provided 45
days' prior written notice of such sale or distribution to the managing
underwriter or underwriters.
Section 3. TRANSFERS.
---------
3.1 GENERALLY. All Subject Equity at any time and from time to
time outstanding shall be held subject to the conditions and restrictions set
forth in this Section 3. All shares of Capital Stock now or hereafter held by
the Permitted Holders shall be held subject to the conditions and restrictions
set forth in this Section 3. Each Holder of Subject Equity and the Permitted
Holders by executing this Agreement or by accepting a certificate representing
Capital Stock or other indicia of ownership therefor from the Company agree with
the Company and with each other stockholder to such conditions and restrictions.
3.2 TAG-ALONG RIGHTS. (a) Prior to the Triggering Date, each
of the Holders of Subject Equity shall have the right (the "TAG-ALONG RIGHT") to
require the Proposed Purchaser (as defined below) to purchase from each of them
all Subject Equity owned by such Holder in the event of any proposed direct or
indirect sale or other disposition (collectively, a "TRANSFER") of Common Stock
or Convertible Preferred Stock (whether now or hereafter issued) to any Person
or Persons (such other Person or Persons being hereinafter referred to as the
"PROPOSED PURCHASER") by any Permitted Holder or Permitted Holders or any of
their Affiliates in any transaction or a series of related transactions
resulting in a Change of Control; provided that no such Tag-Along Right shall
exist as a result of sales pursuant to one or more underwritten offerings
registered under the Securities Act which result in a Change of Control.
(b) Any Subject Equity purchased from the Participating
Holders pursuant to this Section 3.2 shall be paid for in the same type of
consideration and at the same price per share of Common Stock and upon the same
terms and conditions of such proposed Transfer of Common Stock by any Permitted
Holder or any of its Affiliates; provided that the price per Warrant to be paid
by the Proposed Purchaser shall be less the aggregate Exercise Price of such
Warrant. If the Subject Equity to be purchased from the Permitted Holders or the
Participating Holders includes securities or property other than Common Stock,
the price to be paid for such securities or property shall be the same price per
share or other denomination paid by the Proposed Purchaser for like securities
purchased from any Permitted Holder or any of its Affiliates or, if like
securities are not purchased from any Permitted Holder or any of its Affiliates,
the Fair Market Value of such securities determined by an independent financial
expert selected by the Company.
(c) Each Permitted Holder shall notify, or cause to be
notified, each Holder of Subject Equity in writing (a "TRANSFER NOTICE") of each
such proposed Transfer at least 30 days prior to the date thereof. Such notice
shall set forth: (a) the name and address of the Proposed Purchaser and the
number of shares of Common Stock and other securities, if any, proposed to be
transferred, (b) the proposed amount of consideration and terms and conditions
of payment offered by such Proposed Purchaser (if the proposed consideration is
not cash, the Transfer Notice shall describe the terms of the proposed
consideration) and (c) that either the Proposed Purchaser has been informed of
the "TAG-ALONG RIGHT" and has agreed to purchase Subject Equity in accordance
with the terms hereof or that the Permitted Holder or any of its Affiliates
shall make such purchase. The Tag-Along Right may be exercised by any Holder of
Subject Equity (a "PARTICIPATING HOLDER") by delivery of a written notice to the
Company and the Permitted Holder that gave the Transfer Notice ("TAG-ALONG
NOTICE"), within 10 days following such Holder's receipt of the Transfer Notice,
indicating its election to exercise the Tag-Along Right. The Tag-Along Notice
shall state the amount of Subject Equity that such Holder proposes to include in
such Transfer to the Proposed Purchaser. Failure by any Holder to provide a
Tag-Along Notice within the 10-day notice period shall be deemed to constitute
an election by such Holder not to exercise its Tag-Along Right. The closing with
respect to any sale to a Proposed Purchaser pursuant to this Section shall be
held at the time and place specified in the Transfer Notice but in any event
within 60 days of the date such Transfer Notice is given; provided that if
through the exercise of reasonable efforts the Company is unable to cause such
transaction to close within 60 days, such period may be extended for such
reasonable period of time as may be necessary to close such transaction.
Consummation of the sale of Common Stock or Convertible Preferred Stock by any
Permitted Holder or any of its Affiliates to a Proposed Purchaser shall be
conditioned upon consummation of the sale by each participating Holder to such
Proposed Purchaser (or the Permitted Holder) of the Subject Equity entitled to
be transferred as described above, if any.
(d) [RESERVED]
(e) If the Proposed Purchaser does not purchase the Subject
Equity entitled to be transferred as described in this Section 3.2 on the same
terms and conditions as purchased from the Permitted Holders or any of their
Affiliates, then the Permitted Holders or their Affiliates shall purchase such
Subject Equity if the Transfer occurs. If any Subject Equity shall be sold by a
Holder pursuant to this Section 3.2 upon the occurrence of a Change of Control
triggered by the sale of Common Stock by a Permitted Holder, then the other
Permitted Holders shall have the right to purchase up to 50% of such Subject
Equity.
(f) If at the end of 60 days following the date on which a
Transfer Notice was given, or as otherwise extended pursuant to the provisions
of Section 3.2(a), the sale of Common Stock by the Permitted Holders or their
Affiliates and the sale of the Subject Equity entitled to be transferred as
provided above have not been completed in accordance with the terms of the
Proposed Purchaser's offer, all certificates representing such Subject Equity
shall be returned to the Participating Holders, and all the restrictions on
Transfer contained in this Agreement with respect to Common Stock owned by the
Permitted Holders and their Affiliates shall remain in effect.
3.3 DRAG-ALONG RIGHTS. If at any time prior to the Triggering
Date, one or more Permitted Holders or any of their respective Affiliates
determines to sell all of the Capital Stock of the Company owned by them to a
Person other than a Permitted Holder or its Affiliate in a transaction resulting
in a Change of Control, the transferring Permitted Holder or Permitted Holders
(whether directly or through an Affiliate) shall have the right (the "DRAG-ALONG
RIGHT") to require the Holders of Subject Equity to sell such Subject Equity to
such transferee; PROVIDED THAT (i) the consideration to be received by the
Holders of Subject Equity shall be the same type of consideration received by
the Permitted Holders and their Affiliates and, in any event, shall be cash or
freely transferable marketable securities, and (ii) after giving effect to such
transaction, the Permitted Holder or Permitted Holders making the transfers and
their Affiliates shall not own, directly or indirectly, any Capital Stock or
rights to purchase Capital Stock of the Company (excluding successors for
purposes of this section 3.3). Any Warrants or Registrable Securities, or both,
purchased from the Holders thereof pursuant to this Section 3.3 shall be paid
for at the same price per share of Common Stock and upon the same terms and
conditions as such proposed transfer of Common Stock by the Permitted Holders
and their Affiliates. The price per Warrant to be paid by the Proposed Purchaser
shall be less the aggregate Exercise Price of such Warrant per share. If the
Subject Equity to be purchased includes securities other than Common Stock, the
price to be paid for such securities shall be the same price per share or other
denomination paid by the proposed purchaser for like securities purchased from
the Permitted Holders and their Affiliates or, if like securities are not
purchased from the Permitted Holders and their Affiliates, the Fair Market Value
of such securities determined by an independent financial expert selected by the
Company.
Section 4. REGISTRATION PROCEDURES. In connection with the
obligations of the Company with respect to any Registration Statement pursuant
to Sections 2.1 and 2.2 hereof, the Company shall, except as otherwise provided:
(a) A reasonable period of time prior to the initial filing of
a Registration Statement or Prospectus and a reasonable period of time
prior to the filing of any amendment or supplement thereto (including
any document that would be incorporated or deemed to be incorporated
therein by reference), furnish to the Holders and the managing
underwriters, if any, copies of all such documents proposed to be
filed, which documents (other than those incorporated or deemed to be
incorporated by reference) shall be subject to the review of such
Holders, and such underwriters, if any, and cause the officers and
directors of the Company, counsel to the Company and independent
certified public accountants to the Company to respond to such
reasonable inquiries as shall be necessary, in the opinion of counsel
to such underwriters, to conduct a reasonable investigation within the
meaning of the Securities Act; PROVIDED THAT the foregoing inspection
and information gathering shall be coordinated on behalf of the Holders
by a nationally recognized underwriting firm to be designated by the
Company. The Company shall not file any such Registration Statement or
related Prospectus or any amendments or supplements thereto which the
Holders of a majority of the Registrable Securities included in such
Registration Statement shall reasonably object to a timely basis.
(b) Subject to Section 2.3, prepare and file with the SEC such
amendments, including post-effective amendments, to each Registration
Statement as may be necessary to keep such Registration Statement
continuously effective for the applicable time period required
hereunder; cause the related Prospectus to be supplemented by any
required Prospectus supplement, and as so supplemented to be filed
pursuant to Rule 424 (or any similar provisions then in force)
promulgated under the Securities Act; and comply with the provisions of
the Securities Act and the Exchange Act with respect to the disposition
of all securities covered by such Registration Statement during such
period in accordance with the intended methods of disposition by the
sellers thereof set forth in such Registration Statement as so amended
or in such Prospectus as so supplemented.
(c) Notify the Holders of Registrable Securities to be sold
and the managing underwriters, if any, promptly, and (if requested by
any such person) confirm such notice in writing, (i)(A) when a
Prospectus or any Prospectus supplement or post-effective amendment is
proposed to be filed, and (B) with respect to a Registration Statement
or any post-effective amendment, when the same has become effective,
(ii) of any request by the SEC or any other Federal or state
governmental authority for amendments or supplements to a Registration
Statement or related Prospectus or for additional information, (iii) of
the issuance by the SEC, any state securities commission, any other
governmental agency or any court of any stop order suspending the
effectiveness of such Registration Statement or of any order or
injunction suspending or enjoining the use of a Prospectus or the
effectiveness of a Registration Statement or the initiation of any
proceedings for that purpose, (iv) of the receipt by the Company of any
notification with respect to the suspension of the qualification or
exemption from qualification of any of the Registrable Securities for
sale in any jurisdiction, or the initiation or threatening of any
proceeding for such purpose, and (v) of the happening of any event, the
existence of any information becoming known that makes any statement
made in a Registration Statement or related Prospectus or any document
incorporated or deemed to be incorporated therein by reference untrue
in any material respect or omit to state any material fact required to
be stated therein or necessary to make the statements therein, not
misleading, and that in the case of the Prospectus, it will not contain
any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(d) Use its reasonable efforts to avoid the issuance of or, if
issued, obtain the withdrawal of any order enjoining or suspending the
effectiveness of the Registration Statement or the use of a Prospectus
or the lifting of any suspension of the qualification (or exemption
from qualification) of any of the Registrable Securities covered
thereby for sale in any jurisdiction described in Section 4(h) at the
earliest practicable moment.
(e) If requested by the managing underwriters, if any, or if
none, by the Holders of a majority of the Registrable Securities being
sold pursuant to such Registration Statement, (i) promptly incorporate
in a Prospectus supplement or post-effective amendment such information
as the managing underwriters, if any, or if none, such Holders
reasonably believe, upon advice of counsel, which need not be in
writing should be included therein, and (ii) subject to Section 2.3,
make all required filings of such Prospectus supplement or such
post-effective amendment under the Securities Act as soon as
practicable after the Company has received notification of the matters
to be incorporated in such Prospectus supplement or post-effective
amendment; PROVIDED, HOWEVER, that the Company shall not be required to
take any action pursuant to this Section 4(e) that would, in the
opinion of counsel for the Company, violate applicable law.
(f) Upon written request to the Company, furnish to each
Holder of Registrable Securities to be sold pursuant to a Registration
Statement and each managing underwriter, if any, without charge, at
least one conformed copy of the Registration Statement and each
amendment thereto, including financial statements and schedules, all
documents incorporated or deemed to be incorporated therein by
reference, and all exhibits to the extent reasonably requested
(including those previously furnished or incorporated by reference) as
soon as practicable after the filing of such documents with the SEC.
(g) Deliver to each Holder of Registrable Securities to be
sold pursuant to a Registration Statement and each managing
underwriter, if any, without charge, as many copies of each Prospectus
(including each form of Prospectus) and each amendment or supplement
thereto as such. Persons may reasonably request; and the Company hereby
consents to use of such Prospectus and each amendment or supplement
thereto and each document supplemental thereto by each of the selling
Holders of Registrable Securities and the underwriters or agents, if
any, in connection with the offering and sale of the Registrable
Securities covered by such Prospectus and any amendment or supplement
thereto.
(h) Prior to any offering of Registrable Securities, use its
reasonable efforts to register or qualify or cooperate with the Holders
of Registrable Securities to be sold, the managing underwriter or
underwriters, if any, and their respective counsel in connection with
the registration or qualification (or exemption from such registration
or qualification) of such Registrable Securities for offer and sale
under the securities or Blue Sky laws of such jurisdictions as any such
Holder or underwriter reasonably requests in writing; keep each such
registration or qualification (or exemption therefrom) effective during
the period such Registration Statement is required to be kept effective
hereunder and do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the
Registrable Securities covered by the applicable Registration
Statement; PROVIDED, HOWEVER, that the Company shall not be required to
(i) qualify generally to do business in any jurisdiction where it is
not then so qualified or (ii) take any action that would subject it to
general service of process in any such jurisdiction where it is not
then so subject or to taxation in any jurisdiction where it is not so
subject.
(i) In connection with any sale or transfer of Registrable
Securities that will result in such securities no longer being
Registrable Securities, cooperate with the Holders of Registrable
Securities and the managing underwriters, if any, to facilitate the
timely preparation and delivery of certificates representing
Registrable Securities to be sold, which certificates shall not bear
any restrictive legends whatsoever and shall be in a form eligible for
deposit with The Depository Trust Company ("DTC"); and to enable such
Registrable Securities to be in such denominations and registered in
such names as the managing underwriter or underwriters, if any, or such
Holders may reasonably request at least two business days prior to any
sale of Registrable Securities.
(j) Subject to Section 2.3, upon the occurrence of any event
contemplated by Section 4(c)(v) above, as promptly as practicable
prepare a supplement or amendment, including if appropriate a
post-effective amendment to each Registration Statement or a supplement
to the related Prospectus or any document incorporated or deemed to be
incorporated therein by reference, and file any other required document
so that, as thereafter delivered, such Prospectus will not contain an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(k) Prior to the effective date of a Registration Statement,
(i) provide the registrar for the Registrable Securities with
certificates for such securities in a form eligible for deposit with
DTC and (ii) provide a CUSIP number for such securities.
(l) Enter into such agreement (including an underwriting
agreement in such form, scope and substance as is customary in
underwritten offerings) and take all such other reasonable actions in
connection therewith (including those reasonably requested by the
managing underwriters, if any, or the Holders of a majority of the
Registrable Securities being sold) in order to expedite or facilitate
the disposition of such Registrable Securities, and, whether or not an
underwriting agreement is entered into and whether or not the
registration is an underwritten registration, (i) make such
representations and warranties to the Holders of such Registrable
Securities and the underwriter or underwriters, if any, with respect to
the business of the Company and the subsidiaries of the Company
(including with respect to businesses or assets acquired or to be
acquired by any of them), and the Registration Statement, Prospectus
and documents, if any, incorporated or deemed to be incorporated by
reference therein, in each case, in form, substance and scope a are
customarily made by issuers to underwriters in underwritten offerings,
and confirm the same if any when requested; (ii) obtain opinions of
counsel to the Company and updates thereof (which counsel and opinions
(in form, scope and substance) shall be reasonably satisfactory to the
managing underwriters, if any, addressed to each selling Holder of
Registrable Securities and each of the underwriters, if any), covering
the matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by such
underwriters; (iii) use their reasonable efforts to obtain customary
"cold comfort" letters and updates thereof from the independent
certified public accountants of the Company (and, if necessary, any
other independent certified public accountants of any subsidiary of the
Company or of any business acquired by the Company for which financial
statements and financial data are, or are required to be, included in
the Registration Statement), addressed (where reasonably possible) to
each Selling Holder of Registrable Securities and each of the
underwriters, if any, such letters to be in customary form and covering
matters of the type customarily covered in "cold comfort" letters in
connection with underwritten offerings; (iv) if an underwriting
agreement is entered into, the same shall contain customary
indemnification provisions and procedures no less favorable to the
Selling Holder and the underwriters, if any, than those set forth in
Section 5 hereof (or such other provisions and procedures acceptable to
Holders of a majority of Registrable Securities covered by such
Registration Statement and the managing underwriter, if any); and (v)
deliver such documents and certificates as may be reasonably requested
by the Holders of a majority of the Registrable Securities being sold
and the managing underwriters or underwriters to evidence the continued
validity of the representations and warranties made pursuant to clause
(i) above and evidence compliance with any customary conditions
contained in the underwriting agreement or other agreements entered
into by the Company. The above shall be done at each closing under such
underwriting agreement or other agreements, or as and to the extent
required thereunder.
(m) Make available for inspection by a representative of the
selling Holders of Registrable Securities, any underwriter
participating in any such disposition of Registrable Securities, if
any, and any attorney, consultant or accountant retained by such
representative of the selling Holders of Registrable Securities or
underwriter (collectively, the "INSPECTORS"), at the offices where
normally kept, during the reasonable business hours, all financial and
other records, pertinent corporate documents and properties of the
Company and the subsidiaries of the Company (including with respect to
businesses and assets acquired or to be acquired to the extent that
such information is available to the Company), and cause the officers,
directors, agents and employees of the Company and its subsidiaries of
the Company (including with respect to businesses and assets acquired
or to be acquired to the extent that such information is available to
the Company) to supply all information in each case reasonably
requested by any such Inspector in connection with such Registration
Statement; provided, however, that such persons shall first agree in
writing with the Company that any information that is reasonably and in
good faith designated by the Company in writing as confidential at the
time of delivery of such information shall be kept confidential by such
Persons, unless (i) disclosure of such information is required by court
or administrative order or is necessary to respond to inquiries of
regulatory authorities, (ii) disclosure of such information is required
by law (including any disclosure requirements pursuant to U.S.
securities laws in connection with the filing of the Registration
Statement or the use of any Prospectus), (iii) such information becomes
generally available to the public other than as a result of a
disclosure or failure to safeguard such information by such person or
(iv) such information becomes available to such person from a source
other than the Company and its subsidiaries and such source is not
bound by a confidentiality agreement; AND PROVIDED FURTHER that the
foregoing investigation shall be coordinated on behalf of the selling
Holders of Registrable Securities by a nationally recognized
underwriting firm to be designated by the Company.
(n) Comply with all applicable rules, regulations and policies
of the SEC and make generally available to its securityholders earnings
statements satisfying the provisions of Section 11(a) of the Securities
Act and Rule 158 thereunder no later than 60 days after the end of any
12-month period (or 135 days after the end of any 12-month period if
such period is a fiscal year) (i) commencing at the end of any fiscal
quarter in which Registrable Securities are sold to an underwriter or
to underwriters in a firm commitment or reasonable efforts underwritten
offering and (ii) if not sold to an underwriter or to underwriters in
such an offering, commencing on the first day of the first fiscal
quarter of the Company after the effective date of the relevant
Registration Statement, which statements shall cover such period,
consistent with the requirements of Rule 158 under the Securities Act.
(o) Use its reasonable efforts to cause all Registrable
Securities relating to such Registration Statement to be listed on each
securities exchange, if any, on which similar securities issued by the
Company are then listed.
(p) Cooperate with each seller of Registrable Securities to
facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold and not bearing any
restrictive legends and registered in such names as the Selling Holders
may reasonably request at least two business days prior to the closing
of any sale of Registrable Securities.
(q) Cooperate with each seller of Registrable Securities
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Registrable Securities and its
respective counsel in connection with any filings required to be made
with the National Association of Securities Dealers, Inc.
The Company may require a Holder of Registrable Securities to
be included in a Registration Statement to furnish to the Company such
information regarding (i) the intended method of distribution of such
Registrable Securities (ii) such Holder and (iii) the Registrable Securities
held by such Holder as is required by law to be disclosed in such Registrable
Statement and the Company may exclude from such Registration Statement the
Registrable Securities of any Holder who fails to furnish such information
within a reasonable time after receiving such request.
If any such Registration Statement refers to any Holder by
name or otherwise as the Holder of any securities of the Company, then such
Holder shall have the right to require (i) the insertion therein of language, in
form and substance reasonably satisfactory to such Holder, to the effect that
the holding by such Holder of such securities is not to be construed as a
recommendation by such Holder of the investment quality of the Company's
securities covered thereby and that such holding does not imply that such Holder
will assist in meeting any future financial requirements of the Company, or (ii)
in the event that such reference to such Holder by name or otherwise is not
required by the Securities Act, the deletion of the reference to such Holder in
such amendment or supplement to the Registration Statement filed or prepared
subsequent to the time that such reference ceases to be required.
Each Holder of Registrable Securities agrees by acquisition of
such Subject Equity that, upon receipt of any notice from the Company of the
happening of any event of the kind described in Section 4(c)(ii), 4(c)(iv) or
4(c)(v) hereof, such Holder will forthwith discontinue disposition of such
Subject Equity covered by the Registration Statement or Prospectus until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 4(j) hereof, or until it is advised in writing (the
"ADVICE") by the Company that the use of the applicable Prospectus may be
resumed, and in either case has received copies of any additional or
supplemental filings that are incorporated or deemed to be incorporated by
reference in such Prospectus. If the Company shall give any such notice, the
Effectiveness Period shall be extended by the number of days during such periods
from and including the date of the giving of such notice to and including the
date when each seller of Subject Equity covered by such Registration Statement
shall have received (x) the copies of the supplemented or amended Prospectus
contemplated by Section 4(j) hereof or (y) the Advice, and, in either case, has
received copies of any additional or supplemental filings that are incorporated
or deemed to be incorporated by reference in such Prospectus.
Holders of the Subject Equity shall be obligated to keep
confidential the existence of a Suspension Period or any confidential
information communicated by the Company to the Holder with respect thereto.
Section 5. INDEMNIFICATION AND CONTRIBUTION. (a) The Company
shall indemnify and hold harmless, each Selling Holder (in its capacity as
Selling Holder), each underwriter, if any, who participates in an offering of
Registrable Securities, their respective affiliates, and their respective
directors, officers, employees, agents and each Person, if any, who controls any
of such parties within the meaning of Section 15 of the 1933 Act or Section 20
of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or
alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment thereto) pursuant to which
Registrable Securities were registered under the 1933 Act, including
all documents incorporated therein by reference, or the omission or
alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein not misleading or
arising out of any untrue statement or alleged untrue statement of a
material fact contained in any Prospectus (or any amendment or
supplement thereto) or the omission or alleged omission therefrom of a
material fact necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount
paid in settlement of any litigation, or any investigation or
proceeding by any governmental agency or body, commenced or threatened,
or of any claim whatsoever, in each case, based upon any such untrue
statement or omission, or any such alleged untrue statement or
omission; provided that (subject to Section 5(d) below) any such
settlement is effected with the written consent of the Company; and
(iii) against any and all expenses whatsoever, as incurred
(including fees and disbursements of counsel chosen by any indemnified
party), reasonably incurred in investigating, preparing or defending
against any litigation, or investigation or proceeding by any court or
governmental agency or body, commenced or threatened, or any claim
whatsoever based upon any such untrue statement or omission, or any
such alleged untrue statement or omission, to the extent that any such
expense is not paid under subparagraph (i) or (ii) of this Section
5(a);
PROVIDED, HOWEVER, that this indemnity agreement does not apply to any loss,
liability, claim, damage or expense to the extent (i) arising out of an untrue
statement or omission or alleged untrue statement or omission (A) made in or
omitted from a preliminary Prospectus or Registration Statement and corrected or
included in a subsequent Prospectus or Registration Statement or any amendment
or supplement thereto made in reliance upon and in conformity with written
information furnished to the Company by the Selling Holders of Registrable
Securities, any Holder, or any underwriter expressly for use in the Registration
Statement (or any amendment thereto) or the Prospectus (or any amendment or
supplement thereto) or (B) resulting from the use of the Prospectus during a
period when the use of the Prospectus has been suspended or is otherwise
unavailable for sales thereunder in accordance with Sections 2.1(b), 2.1(c),
2.2(a), 2.3(a), 2.4, 2.6 or 4(c) hereof, PROVIDED, in each case, that Holders
received prior notice of such suspension or other unavailability. The foregoing
indemnity with respect to any untrue statement contained in or any omission from
a Prospectus shall not inure to the benefit of any Selling Holder (in its
capacity as Selling Holder), or any person who controls such party within the
meaning of Section 15 of the 1933 Act or Section 20 of the 1934 Act from whom
the person asserting any such loss, liability, claim, damage or expense
purchased any of the Registrable Securities that are the subject thereof, was
not sent or given a copy of such Prospectus (as amended or supplemented) by such
Selling Holder (in its capacity as Selling Holder) to the extent such Selling
Holder (in its capacity as Selling Holder) was required by law to deliver such
Prospectus as amended or supplemented, at or prior to the written confirmation
of the sale of such Registrable Securities and the untrue statement contained in
or the omission from such Prospectus was corrected in such amended or
supplemented Prospectus, unless such failure resulted from noncompliance by the
Company with its obligations hereunder to furnish such Selling Holder (in its
capacity as Selling Holder), with copies of such Prospectus as amended or
supplemented.
(b) In the case of any registration of Registrable Securities,
each Selling Holder agrees, severally and not jointly, to indemnify and hold
harmless the Company, each Initial Purchaser, each underwriter, if any, who
participates in an offering of Registrable Securities and the other Selling
Holders and each of their respective directors and officers (including each
officer of the Company who signed the Registration Statement) and each Person,
if any, who controls the Company, any Initial Purchaser, any underwriter or any
other Selling Holder within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act, against any and all loss, liability, claim, damage and
expense whatsoever described in the indemnity contained in Section 5(a) hereof,
as incurred, but only with respect to untrue statements or omissions, or alleged
untrue statements or omissions, made in the Registration Statement (or any
amendment thereto) or the Prospectus (or any amendment or supplement thereto) in
reliance upon and in conformity with written information furnished to the
Company by such Holder expressly for use in the Registration Statement (or any
amendment thereto), or the Prospectus (or any amendment or supplement thereto);
PROVIDED, HOWEVER, that no such Holder shall be liable for any claims hereunder
in excess of the amount of net proceeds received by such Holder from the sale of
Registrable Securities pursuant to such Registration Statement.
(c) In case any action shall be commenced involving any Person
in respect of which indemnity may be sought pursuant to either paragraph (a) or
(b) above, such Person (the "indemnified party") shall give notice as promptly
as reasonably practicable to each Person against whom such indemnity may be
sought (the "indemnifying party"), but failure to so notify an indemnifying
party shall not relieve such indemnifying party from any liability hereunder to
the extent it is not materially prejudiced as a result thereof and in any event
shall not relieve it from any liability which it may have otherwise than on
account of this indemnity agreement. In the case of parties indemnified pursuant
to Section 5(a) above, counsel for such indemnified parties shall be chosen by
such indemnified parties, and, in the case of parties indemnified pursuant to
Section 5(b) above, counsel to such indemnified parties shall be selected by the
Company. An indemnifying party may participate at its own expense in the defense
of such action; PROVIDED, HOWEVER, that counsel to the indemnifying party shall
not (except with the consent of the indemnified party) also be counsel to the
indemnified party. In no event shall the indemnifying party or parties be liable
for the fees and expenses of more than one counsel (in addition to any local
counsel) separate from their own counsel for all indemnified parties in
connection with any one action or separate but similar or related actions in the
same jurisdiction arising out of the same general allegations or circumstances.
No indemnifying party shall, without the prior written consent of the
indemnified parties, settle or compromise or consent to the entry of any
judgment with respect to any litigation, or any investigation or proceeding by
any governmental agency or body, commenced or threatened, or any claim
whatsoever in respect of which indemnification or contribution could be sought
under this Section 5 (whether or not the indemnified parties are actual or
potential parties thereof), unless such settlement, compromise or consent (i)
includes an unconditional release of each indemnified party from all liability
arising out of such litigation, investigation, proceeding or claim and (ii) does
not include a statement as to or an admission of fault, culpability or a failure
to act by or on behalf of any indemnified party.
(d) If at any time an indemnified party shall have requested
an indemnifying party to reimburse the indemnified party for fees and expenses
of counsel, such indemnifying party agrees that it shall be liable for any
settlement of the nature contemplated by Section 5(a)(ii) hereof effected
without its written consent if (i) such settlement is entered into more than 45
days after receipt by such indemnifying party of the aforesaid request, (ii)
such indemnifying party shall have received notice of the terms of such
settlement at least 30 days prior to such settlement being entered into and
(iii) such indemnifying party shall not have reimbursed such indemnified party
in accordance with such request prior to the date of such settlement.
Notwithstanding the immediately preceding sentence, if at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, an indemnifying party shall
not be liable for any settlement of the nature contemplated by Section 5(a)(ii)
effected without its consent if such indemnifying party (i) reimburses such
indemnified party in accordance with such request to the extent it considers
such request to be reasonable and (ii) provides written notice to the
indemnified party substantiating the unpaid balance as unreasonable, in each
case prior to the date of such settlement.
(e) If the indemnification provided for in any of the
indemnity provisions set forth in this Section 5 is for any reason unavailable
to or insufficient to hold harmless an indemnified party in respect of any
losses, liabilities, claims, damages or expenses referred to therein, then each
indemnifying party shall contribute to the aggregate amount of such losses,
liabilities, claims, damages and expenses incurred by such indemnified party, as
incurred, (i) in such proportion as is appropriate to reflect the relative
benefits received by such indemnifying party or parties on the one hand, and
such indemnified party or parties on the other and from the offering of the
Registrable Securities included in such offering; or (ii) if the allocation
provided by clause (i) is not permitted by applicable law, in such proportion as
is appropriate to reflect not only the relative benefits referred to in clause
(i) above but also the relative fault of such indemnifying party or parties on
the one hand, and such indemnified party or parties on the other hand, in
connection with the statements or omissions which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations. The relative fault of such indemnifying party or
parties on the one hand, and such indemnified party or parties on the other hand
shall be determined by reference to, among other things, whether any such untrue
or alleged untrue statement of a material fact or omission or alleged omission
to state a material fact relates to information supplied by such indemnifying
party or parties and such indemnified party or parties and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission. The Company and the Holders of the Registrable
Securities agree that it would not be just and equitable if contribution
pursuant to this Section 5 were determined by PRO RATA allocation (even if the
Selling Holders of Registrable Securities were treated as one entity, and the
Holders were treated as one entity, for such purpose) or by another method of
allocation which does not take account of the equitable considerations referred
to above in Section 5. The aggregate amount of losses, liabilities, claims,
damages and expenses incurred by an indemnified party and referred to above in
this Section 5 shall be deemed to include any legal or other expenses reasonably
incurred by such indemnified party in investigating, preparing or defending
against any litigation, or any investigation or proceeding by a governmental
agency or body, commenced or threatened, or any claim whatsoever based upon any
such untrue or alleged untrue statement or omission or alleged omission. No
Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the 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 a Holder within the meaning of this Section 15
of the 1933 Act or Section 20 of the 1934 Act shall have the same rights to
contribution as such Holder, and each director of the Company, each officer of
the Company who signed the Registration Statement, and each Person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act shall have the same rights to contribution as the Company.
Section 6. MISCELLANEOUS.
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(a) REMEDIES. In the event of a breach by the Company of any
of its obligations under this Agreement, each Holder and Permitted Holders, in
addition to being entitled to exercise all rights provided herein, or granted by
law, including recovery of damages, will be entitled to specific performance of
its rights under this Agreement. The Company agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it
of any of the provisions of this Agreement and hereby further agrees that in the
event of any action for specific performance in respect of such breach, it shall
waive the defense that a remedy at large would be adequate.
(b) NO INCONSISTENT AGREEMENTS. The Company and the Permitted
Holders will not enter into any agreement which is inconsistent with the rights
granted to the Holders of Warrants and Registrable Securities in this Agreement
or otherwise conflicts with the provisions hereof. The rights granted to the
Holders hereunder do not in any way conflict with and are not inconsistent with
the rights granted to the holders of the Company's other issued and outstanding
securities, if any, under any such agreements.
(c) NO PIGGY-BACK ON DEMAND REGISTRATIONS. The Company shall
not grant to any of its securityholders (other than the Holders in such
capacity) the right to include any of their securities in any Registration
Statement filed pursuant to a Demand Registration.
(d) AMENDMENTS AND WAIVERS. The provisions of this Agreement,
including the provisions of this sentence, may not be amended, modified or
supplemented, and waivers or consents to departures from the provisions hereof
may not be given, otherwise than with the prior written consent of the Holders
and Permitted Holders of not less than a majority of the then outstanding
Warrants and each class and series of Registrable Securities and with respect to
Sections affecting the rights or obligations of the Permitted Holders hereunder,
the Permitted Holders who hold not less than a majority of shares of the capital
stock held by the Permitted Holders; PROVIDED, HOWEVER, that, for the purposes
of this Agreement, Warrants and Registrable Securities that are owned, directly
or indirectly, by the Company or any of their Affiliates are not deemed to be
outstanding. Notwithstanding the foregoing, a waiver or consent to depart from
the provisions hereof with respect to a matter that relates exclusively to the
rights of one or more Holders and Permitted Holders and that does not directly
or indirectly affect the rights of other Holders and other Permitted Holders may
be given by a majority of the Holders and Permitted Holders so affected;
PROVIDED, HOWEVER, that the provisions of this sentence may not be amended,
modified or supplemented except in accordance with the provisions of the
immediately preceding sentence. Notwithstanding the foregoing, no amendment,
modification, supplement, waiver or consent with respect to Section 5 shall be
made or given otherwise than the prior written consent of each Person affected
thereby.
(e) NOTICES. All notices and other communications provided for
or permitted hereunder shall be made in writing by hand delivery, registered
first-class mail, telecopier, or any courier guaranteeing overnight delivery (i)
if to a Holder or a Permitted Holder, at the most current address of such Holder
or such Permitted Holder as set forth in the register for the Warrants or the
Registrable Securities or the securities owned by the Permitted Holders, and
(ii) if to the Company, as provided in the Warrant Agreement.
All such notices and communications shall be deemed to have
been duly given: at the time delivered by hand, if personally delivered; five
Business Days after being deposited in the mail, postage prepaid, if mailed;
when answered back, if telexed; when receipt is acknowledged, if telecopied; and
on the next Business Day, if timely delivered to an air courier guaranteeing
overnight delivery.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the successors and permitted assigns of each of
the parties and shall inure to the benefit of each Holder. If any transferee of
any Holder shall acquire Registrable Securities, in any manner, whether by
operation of law or otherwise, such Warrants, Warrants Shares or securities
shall be held subject to all of the terms of this Agreement, and by taking and
holding such securities such Person shall be conclusively deemed to have agreed
to be bound by and to perform all of the terms and provisions of this Agreement
and such Person shall be entitled to receive the benefits hereof. The Company
may not assign any of its rights or obligations hereunder without the prior
written consent of each Holder of Registrable Securities and each indemnified
party under Section 5(a). Notwithstanding the foregoing, no successor or
assignee of the Company shall have any rights granted under the Agreement until
such person shall acknowledge its rights and obligations hereunder by a signed
written statement of such person's acceptance of such rights and obligations.
(g) COUNTERPARTS. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same Agreement.
(h) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
-------------
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(i) SEVERABILITY. If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to be
invalid, illegal, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired or invalidated, and the parties
hereto shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by such
term, provision, covenant or restriction. It is hereby stipulated and declared
to be the intention of the parties that they would have executed the remaining
terms, provisions, covenants and restrictions without including any of such that
may be hereafter declared invalid, illegal, void or unenforceable.
(j) HEADINGS. The headings in this Agreement are for
convenience of reference only and shall not limit or otherwise affect the
meaning hereof. All references made in this Agreement to "Section" and
"paragraph" refer to such Section or paragraph of this Agreement, unless
expressly stated otherwise.
(k) ENTIRE AGREEMENT. This Agreement, together with the
Warrant Agreement, is intended by the parties as a final expression of their
agreement, and is intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein and therein. This Agreement and the Warrant Agreement
supersede all prior agreements and understandings between the parties with
respect to such subject matter.
(l) SECURITIES HELD BY THE COMPANY OR ITS AFFILIATES. Whenever
the consent or approval of Holders of a specified percentage of Registrable
Securities or Warrants is required hereunder, Registrable Securities or Warrants
held by the Company or by any of its affiliates (as such term is defined in Rule
405 under the Securities Act) shall not be counted (in either the numerator or
the denominator) in determining whether such consent or approval was given by
the Holders of such required percentage.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first written above.
PATHNET TELECOMMUNICATIONS, INC.
By: /s/ W. R. Smedberg V
------------------------------------
Name:
Title:
SPECTRUM EQUITY INVESTORS, L.P.,
In its Capacity as a Permitted Holder
By:/s/ Chris J Maroni
------------------------------------
Name: K. J. Maroni
Title: illegible
NEW ENTERPRISE ASSOCIATES VI,Limited
Partnership,
In its Capacity as a Permitted Holder
By: /s/ illegible
------------------------------------
Name:
Title:
ONSET ENTERPRISE ASSOCIATES II, L.P.,
In its Capacity as a Permitted Holder
By:
By: /s/ R Kuhling
------------------------------------
Name: Robert F. Kuhling
Title: General Partner
The General Partner of
ONSET Enterprise Associates II
L.P.
FBR TECHNOLOGY VENTURE PARTNERS,L.P.,
In its Capacity as a Permitted Holder
By: /s/ illegible
------------------------------------
Name: Gene Riechers
Managing Director
FBR Technology Venture
Partners, L.P.
TORONTO DOMINION CAPITAL (USA) INC.,
In its Capacity as a Permitted Holder
By:/s/ Martha L. Gariepy
------------------------------------
Name: Martha L. Gariepy
Secretary/Treasurur
GROTECH PARTNERS IV, L.P.,
In its Capacity as a Permitted Holder
By:/s/ Patrick J. Kerins
------------------------------------
Name: Patrick J. Kerins
Title: Managing Director
/s/ Richard Jalkut
------------------------------------
Richard A. Jalkut