NOTES REGISTRATION RIGHTS AGREEMENT
Dated as of May 5, 1998
among
Rhythms NetConnections, Inc.,
Issuer
and
▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co.,
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇
Incorporated, and
▇▇▇▇▇▇▇▇▇, Lufkin & ▇▇▇▇▇▇▇▇
Securities Corporation,
Initial Purchasers
TABLE OF CONTENTS
PAGE
1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1933 Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1934 Act. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Depositary. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Exchange Notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Exchange Offer. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Exchange Offer Registration . . . . . . . . . . . . . . . . . . . . . . 2
Exchange Offer Registration Statement . . . . . . . . . . . . . . . . . 2
Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Indenture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Initial Purchasers. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Majority Holders. . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Original Issue Date . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Person. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Prospectus. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Purchase Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Registration Expenses . . . . . . . . . . . . . . . . . . . . . . . . . 2
Registration Statement. . . . . . . . . . . . . . . . . . . . . . . . . 3
SEC . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Shelf Registration. . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Shelf Registration Statement. . . . . . . . . . . . . . . . . . . . . . 3
Transfer Restricted Notes . . . . . . . . . . . . . . . . . . . . . . . 3
Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2. REGISTRATION UNDER THE 1933 ACT . . . . . . . . . . . . . . . . . . . . 4
(a) EXCHANGE OFFER REGISTRATION . . . . . . . . . . . . . . . . . . . 4
(b) SHELF REGISTRATION. . . . . . . . . . . . . . . . . . . . . . . . 5
(c) EXPENSES. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
(d) EFFECTIVE REGISTRATION STATEMENT. . . . . . . . . . . . . . . . . 8
(e) ACCRUAL AND PAYMENT OF ADDITIONAL INTEREST. . . . . . . . . . . . 9
(f) SPECIFIC ENFORCEMENT. . . . . . . . . . . . . . . . . . . . . . . 9
3. REGISTRATION PROCEDURES. . . . . . . . . . . . . . . . . . . . . . . . 9
4. UNDERWRITTEN REGISTRATIONS . . . . . . . . . . . . . . . . . . . . . . 16
5. INDEMNIFICATION AND CONTRIBUTION . . . . . . . . . . . . . . . . . . . 16
6. MISCELLANEOUS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(a) RULE 144 AND RULE 144A. . . . . . . . . . . . . . . . . . . . . . 19
(b) NO INCONSISTENT AGREEMENTS. . . . . . . . . . . . . . . . . . . . 19
(c) AMENDMENTS AND WAIVERS. . . . . . . . . . . . . . . . . . . . . . 19
(d) NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
(e) SUCCESSORS AND ASSIGNS. . . . . . . . . . . . . . . . . . . . . . 20
(f) THIRD PARTY BENEFICIARY . . . . . . . . . . . . . . . . . . . . . 20
(g) COUNTERPARTS. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(h) HEADINGS. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(i) GOVERNING LAW . . . . . . . . . . . . . . . . . . . . . . . . . . 20
(j) SEVERABILITY. . . . . . . . . . . . . . . . . . . . . . . . . . . 20
NOTES REGISTRATION RIGHTS AGREEMENT
THIS NOTES REGISTRATION RIGHTS AGREEMENT (the "Agreement") is made and
entered into as of May 5, 1998, by and among RHYTHMS NETCONNECTIONS, INC., a
Delaware corporation (the "Company"), and ▇▇▇▇▇▇▇ ▇▇▇▇▇ & CO., ▇▇▇▇▇▇▇ LYNCH,
PIERCE, ▇▇▇▇▇▇ & ▇▇▇▇▇ INCORPORATED ("▇▇▇▇▇▇▇ ▇▇▇▇▇") and ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇ SECURITIES CORPORATION (together with ▇▇▇▇▇▇▇ ▇▇▇▇▇, the "Initial
Purchasers").
This Agreement is made pursuant to the Purchase Agreement dated April 28,
1998 among the Company and the Initial Purchasers (the "Purchase Agreement"),
with respect to the issue and sale by the Company and the purchase by the
Initial Purchasers of the respective number of the Company's Units (the
"Units"), each Unit consisting of $1,000 principal amount at maturity of the
Company's 131/2% Senior Discount Notes due 2008 (the "Notes") and four warrants
(the "Warrants"), each initially entitling the holder thereof to purchase 1.7
shares of common stock, par value $0.001 per share (the "Common Stock"), of the
Company. In order to induce the Initial Purchasers to enter into the Purchase
Agreement, the Company has agreed to provide to the Initial Purchasers and to
other holders of 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.
"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 131/2% Senior Discount Notes due 2008, Series B
of the Company, issued under the Indenture containing terms identical to the
respective Notes (except that (i) interest on the Exchange Notes shall accrue
from the last date on which interest was paid on the Notes, (ii) the transfer
restrictions thereon shall be eliminated and (iii) certain provisions relating
to payment of additional interest 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 Transfer Restricted 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), 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
Transfer Restricted Notes, and each of their respective successors, assigns and
direct and indirect transferees who become registered owners of Transfer
Restricted Notes under the Indenture.
"INDENTURE" shall mean the Indenture relating to the Notes dated as of May
5, 1998, between the Company and State Street Bank and Trust Company of
California, N.A., as 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.
"MAJORITY HOLDERS" shall mean the Holders of a majority of the aggregate
principal amount at maturity of Transfer Restricted Notes outstanding; PROVIDED
that whenever the consent or approval of Holders of a specified percentage of
Transfer Restricted Notes is required hereunder, Transfer Restricted Notes held
by the Company or any of its affiliates (as such term is defined in Rule 405
under the ▇▇▇▇ ▇▇▇) shall be disregarded in determining whether such consent or
approval was given by the Holders of such required percentage or amount.
"ORIGINAL ISSUE DATE" shall mean the date of original issuance of the
Notes.
"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
Transfer Restricted 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.
"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 National Association of
Securities Dealers, Inc. ("NASD") registration and filing fees, (ii) all fees
and expenses incurred in connection with compliance with state or other
securities or
2
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 Transfer Restricted Notes), (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, 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 disbursements relating to the qualification of the Indenture under
applicable securities laws, (vi) 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, (vii) 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 Transfer Restricted Notes, and (viii) the reasonable fees and expenses of
the Trustee, including its counsel, and any escrow agent or custodian.
Notwithstanding the foregoing, "Registration Expenses" shall exclude, and the
Holders of the Transfer Restricted Notes being registered shall pay, any amounts
required by Section 2(c) to be paid by the Holders.
"REGISTRATION STATEMENT" shall mean any registration statement of the
Company which covers any of the Exchange Notes or Transfer Restricted 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 Transfer Restricted 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, in each case including the Prospectus contained
therein, all exhibits thereto and all material incorporated by reference
therein.
"TRANSFER RESTRICTED NOTES" shall mean the Notes; PROVIDED, HOWEVER, that
any Note shall cease to be a Transfer Restricted Note when (i) such Note has
been exchanged by a person other than a broker-dealer for an Exchange Note in
the Exchange Offer, (ii) following the exchange by a broker-dealer in the
Exchange Offer of a Note for an Exchange Note, such Exchange Note is sold to a
purchaser who receives from such broker-dealer on or prior to the date of such
sale a copy of the prospectus contained in the Exchange Offer Registration
Statement, (iii) such Note has been effectively registered under the 1933 Act
and disposed of in accordance with the Shelf Registration Statement, (iv) such
Note is distributed to the public pursuant to Rule 144(k) under the 1933 Act (or
any similar provision then in force, but not Rule ▇▇▇▇ ▇▇▇▇▇ ▇▇▇ ▇▇▇▇ ▇▇▇), (▇)
such Note shall have been otherwise transferred by the Holder thereof and a new
Note not bearing a legend restricting further transfer shall have been delivered
by the Company and subsequent disposition of
3
such Note shall not require registration or qualification under the 1933 Act or
any similar state law then in force or (vi) such Note ceases to be outstanding.
"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) cause to be filed an Exchange Offer Registration Statement with the
SEC within 90 days after the Original Issue Date covering the offer by the
Company to the Holders of Exchange Notes for all of their Transfer Restricted
Notes, (B) use its best efforts to cause such Exchange Offer Registration
Statement to be declared effective under the 1933 Act as promptly as possible
but in any event within 150 days after the Original Issue Date and (C) use its
best efforts to consummate the Exchange Offer within 30 days after the date on
which such Exchange Offer Registration Statement is declared effective under the
1933 Act. 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
Transfer Restricted 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
after the date notice thereof is mailed to the Holders (or longer if
required by applicable law);
(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 Transfer Restricted 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 such Holder, the principal
amount of Transfer Restricted Notes delivered for exchange, and a statement
that such Holder is withdrawing its election to have such Notes exchanged;
and
(v) otherwise comply with all applicable laws relating to the
Exchange Offer.
4
As soon as practicable after the close of the Exchange Offer, the Company
shall:
(i) accept for exchange Transfer Restricted 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 Transfer Restricted Notes so accepted for exchange by the
Company; and
(iii) cause the Trustee promptly to authenticate and deliver Exchange
Notes to each Holder of Transfer Restricted Notes equal in principal amount
at maturity to the principal amount at maturity of the Transfer Restricted
Notes of such Holder so accepted for exchange.
Original issue discount will accrete, if on or prior to May 15, 2003, and
interest will accrue, if after May 15,2003, on each Exchange Note exchanged for
a Note, in either case from the last date on which original issue discount
accreted or interest was paid, as the case may be, on the Notes surrendered in
exchange therefor. If no interest has been paid on the Notes, such interest will
be payable from May 15, 2003. 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 proper tendering of Transfer
Restricted Notes in accordance with the Exchange Offer. Each Holder of Transfer
Restricted Notes (other than Participating Broker-Dealers) who wishes to
exchange such Transfer Restricted Notes for Exchange Notes in the Exchange Offer
shall have represented that (i) it is not an affiliate (as defined in Rule 405
under the ▇▇▇▇ ▇▇▇) of the Company, or, if it is such an affiliate, it will
comply with the registration and prospectus delivery requirements of the 1933
Act to the extent applicable, (ii) any Exchange Notes to be received by it will
be 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 ▇▇▇▇ ▇▇▇) of the
Exchange Notes and (iv) it 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 and ascertainable by the Company, 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
Transfer Restricted Notes in the Exchange Offer.
(b) SHELF REGISTRATION. If (i) 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) for any
other reason the Exchange Offer is not consummated within 180 days following the
Original Issue Date, (iii) any Holder notifies the Company prior to one year
after the Original Issue Date that (x) due to a change in law or policy it is
not entitled to participate in the Exchange Offer, (y) due to a change in law or
policy it may not resell the Exchange Notes acquired by it in the Exchange Offer
to the public without delivering a prospectus, and the prospectus contained in
the Exchange Offer Registration Statement is not appropriate or available for
such resales by such Holder, and such prospectus is not promptly amended or
modified in order to be suitable for use in connection with such resales for
such Holder
5
and all similarly situated Holders or (z) it is a broker-dealer and owns Notes
acquired directly from the Company or an affiliate of the Company or (iv) a
majority of the Holders may not resell the Exchange Notes acquired by them in
the Exchange Offer to the public without restriction under the Securities Act
and without restriction under applicable blue sky or state securities laws, then
the Company shall, at its cost:
(A) use its best efforts to, prior to the later of (I) the date
that is 90 days after the Original Issue Date and (II) the date that is 30
days after the filing obligation arises, file with the SEC a Shelf
Registration Statement relating to the offer and sale of the Transfer
Restricted Notes by the Holders from time to time in accordance with the
methods of distribution elected by the Majority Holders of such Transfer
Restricted Notes and set forth in such Shelf Registration Statement, and
use their best efforts to cause such Shelf Registration Statement to be
declared effective under the Securities Act as promptly as possible, but in
any event within 60 days after the filing obligation arises; PROVIDED that,
if the filing obligation arises pursuant to clause (ii) above, then the
Company shall file the Shelf Registration Statement on or prior to 210 days
after the Original Issue Date; and PROVIDED FURTHER 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 Notes 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. If the Company is required to file a Shelf Registration
Statement pursuant to clause (iii) above or pursuant to clause (iv) above,
then 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 Transfer Restricted 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 Transfer Restricted Notes held by such Holder or such Initial Purchaser
entitled to the rights under Section 2(b)(iii), as applicable, after
completion of the Exchange Offer;
(B) use its best efforts to keep the Shelf Registration Statement
continuously effective 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
Transfer Restricted Notes covered by the Shelf Registration Statement
either have been sold pursuant to the Shelf Registration Statement or have
ceased to be Transfer Restricted Notes; and
(C) notwithstanding any other provisions hereof, 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
6
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 Transfer Restricted
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) and, in the
case of any Shelf Registration Statement, will reimburse the Holders entitled to
the rights under Section 2(b) for the reasonable fees and disbursements of one
counsel designated in writing by the Majority Holders to act as counsel for the
Holders of the Transfer Restricted Notes in connection therewith. Each Holder
shall pay all expenses of its counsel other than as set forth in the preceding
sentence, underwriting discounts and commissions (and any other fees or costs of
the underwriter) and transfer taxes, if any, relating to the sale or disposition
of such Holder's Transfer Restricted 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 Transfer
Restricted Notes covered thereby not being able to exchange or offer and
sell such Transfer Restricted 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 Transfer Restricted 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 Transfer Restricted Notes pursuant to such Registration
Statement may legally resume.
7
(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 a period of up to 60 consecutive days (except for the
consecutive 60-day period immediately prior to maturity of the Notes), 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 ADDITIONAL INTEREST. In the event that (i) the
Exchange Offer Registration Statement is not filed with the SEC on or prior to
the 90th 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 on or prior to the 30th calendar day after the date on which the
Exchange Offer Registration Statement is declared effective, (iv) if required, a
Shelf Registration Statement with respect to the Notes is not declared effective
on or prior to the 60th calendar day following the date on which the obligation
to file such registration statement arises or (v) 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 (v)
above, a "Registration Default"), the Notes shall, with respect to each
Registration Default, accrue interest, as liquidated damages ("Additional
Interest"), at a rate of one-half of one percent per annum of the Accreted Value
(as defined in the Indenture) of the Notes commencing upon the occurrence of
such Registration Default, which rate will increase by one-half of one percent
at the end of each 90-day period in which such Registration Default is not
cured, PROVIDED that the maximum aggregate Additional Interest that accrues on
the Accreted Value of the Restricted Notes as a result of all Registration
Defaults will in no event exceed one and one-half percent (1.5%) per annum.
Additional Interest shall be computed based on the actual number of days elapsed
in each 90-day period in which Additional Interest accrues on the Notes.
The Company shall notify the Trustee within three Business Days after the
occurrence of each Registration Default. Additional Interest payable with
respect to any Note shall be due and payable on each May 15 and November 15
(each an "Additional Interest Payment Date") if Additional Interest has accrued
on such Note during the semi-annual period immediately preceding such Additional
Interest Payment Date, to the Person in whose name such Note (or one or more
Predecessor Notes) is registered at the close of business on the May 1 or
November 1, whether or not a Business Day, next preceding such Additional
Interest Payment Date. Each obligation to pay Additional Interest shall be
deemed to accrue from and including the day following the occurrence of the
applicable Registration Default.
Upon (v) the filing of the Exchange Offer Registration Statement after the
90-day period described in clause (i) above, (w) the effectiveness of the
Exchange Offer Registration Statement after the 150-day period described in
clause (ii) above, (x) the consummation of the Exchange Offer after the 30-day
period described in clause (iii) above, (y) the effectiveness of a Shelf
Registration Statement after the 60-day period described in clause (iv) above,
or (z) the cure of any Registration
8
Default described in clause (v) 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 Additional Interest ceases
to accrue, a different event specified in clause (i), (ii), (iii), (iv) or (v)
above occurs, such Additional Interest 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 (i) 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, (ii) that it will not be
possible to measure damages for such injuries precisely and (iii) 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 period 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 Transfer Restricted Notes
by the selling Holders thereof entitled to the rights under Section 2(b) 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 its best efforts
to cause such Registration Statement to become effective and remain effective in
accordance with Section 2 hereof;
(b) 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
Transfer Restricted Notes, at least ten days prior to filing, that a Shelf
Registration Statement with respect to the Transfer Restricted Notes is being
filed and advising such Holders that the distribution of Transfer Restricted
Notes will be made in accordance with the method elected by the Majority
Holders; and (ii) furnish to each Holder of Transfer Restricted Notes, to
counsel for the Initial Purchasers, to counsel for the Holders and to each
underwriter of an underwritten offering of Transfer Restricted 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
9
exhibits (including those incorporated by reference) in order to facilitate the
public sale or other disposition of the Transfer Restricted Notes; and (iii)
subject to Section 2(d)(iii) and 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 Transfer
Restricted Notes in connection with the offering and sale of the Transfer
Restricted Notes covered by the Prospectus or any amendment or supplement
thereto;
(d) use its reasonable best efforts to register or qualify the Transfer
Restricted Notes under all applicable state securities or "blue sky" laws of
such jurisdictions as any Holder of Transfer Restricted Notes covered by a
Registration Statement and each underwriter of an underwritten offering of
Transfer Restricted 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 reasonably advisable
to enable such Holder to consummate the disposition in each such jurisdiction of
such Transfer Restricted 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 Transfer
Restricted Notes entitled to the rights under Section 2(b) 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 Transfer Restricted 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 have exchanged their Transfer Restricted Notes for
Exchange Notes for the resale of such Exchange Notes, (ii) furnish to each
broker-dealer who desires to participate in the Exchange
10
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 within 180 days following the date of effectiveness
of the Exchange Offer Registration Statement, (iii) include in the Exchange
Offer Registration Statement a statement that any broker-dealer who holds
Transfer Restricted Notes acquired for its own account as a result of
market-making activities or other trading activities (a "Participating
Broker-Dealer"), and who receives Exchange Notes for Transfer Restricted
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
Transfer Restricted Notes, it represents that the Transfer Restricted
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) only one, if any, "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;
(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 of
180 days following the closing of the Exchange Offer; 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 of this Section 3(f), for a period exceeding 180 days after the
last date for which exchanges are accepted pursuant to the Exchange Offer
(as such period may be extended by the Company) and Participating
11
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 Transfer Restricted 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 entitled
to the rights under Section 2(b), 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
requested);
(j) in the case of a Shelf Registration, cooperate with the selling
Holders entitled to the rights under Section 2(b) to facilitate the timely
preparation and delivery of any certificates representing Transfer Restricted
Notes to be sold and not bearing any restrictive legends; and cause such
Transfer Restricted 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 Transfer Restricted 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,
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 Transfer Restricted 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 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 Transfer Restricted
Notes, as the case may be, not later than the effective date of a Registration
Statement, and provide the Trustee with any necessary printed certificates for
the Exchange Notes in a form eligible for deposit with the Depositary;
12
(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 Transfer Restricted 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 at maturity of the Transfer Restricted Notes being sold under Section
2(b)) in order to expedite or facilitate the disposition of such Transfer
Restricted 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
Transfer Restricted 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 at maturity of the Transfer
Restricted 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 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 to the selling Holders of Transfer Restricted
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 Transfer Restricted 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
13
(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 Transfer Restricted Notes not then
exchanged for Exchange 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 entitled to rights under Section 2(b) 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 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; PROVIDED that any such records, documents, properties
and such information that is designated in writing by the Company, in good
faith, as confidential at the time of delivery of such records, documents,
properties or information shall be kept confidential by any such representative,
underwriter, special counsel or accountant and shall be used only in connection
with such Registration Statement, unless disclosure thereof is made in
connection with a court proceeding or required by law, or such information has
become available (not in violation of this agreement) to the public generally or
through a third party without an accompanying obligation of confidentiality, and
the Company shall be entitled to request that such representative, underwriter,
special counsel or accountant sign a confidentiality agreement to the foregoing
effect;
(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 entitled to
rights under Section 2(b), to the Initial Purchasers, to counsel on behalf of
such Holders and to the underwriter or underwriters of an underwritten offering
of Transfer Restricted 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 Transfer Restricted 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,
14
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) otherwise use its best 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
(r) 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.
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 Transfer Restricted Notes to furnish to the Company such information
regarding such Holder and the proposed distribution by such Holder of such
Transfer Restricted Notes as the Company may from time to time reasonably
request in writing.
In the case of (1) a Shelf Registration Statement or (2) Participating
Broker-Dealers utilizing the Prospectus contained in the Exchange Offer
Registration Statement as provided in Section 3(f) hereof, that are seeking to
sell Exchange Notes and are required to deliver Prospectuses, 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
Transfer Restricted 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 it is advised in writing by the
Company that the use of the applicable Prospectus may be resumed, and, if so
directed by the Company, such Holder will deliver to the Company (at their
expense) all copies in its possession, other than permanent file copies then in
such Holder's possession, of the Prospectus covering such Transfer Restricted
Notes or Exchange Notes, as the case may be, 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
Transfer Restricted Notes or Exchange Notes, as the case may be, pursuant to a
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 reasonable 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.
15
4. UNDERWRITTEN REGISTRATIONS.
If any of the Transfer Restricted 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
by the Majority Holders of such Transfer Restricted Notes included in such
offering, PROVIDED such banker or manager is acceptable to the Company, acting
reasonably.
No Holder of Transfer Restricted Notes may participate in any underwritten
registration hereunder unless such Holder (a) agrees to sell such Holder's
Transfer Restricted Notes 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 Transfer Restricted 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 Transfer
Restricted 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
16
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 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.
(b) In the case of an Exchange Offer Registration or 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 Transfer Restricted Notes and the other selling Holders and each of
their respective directors and officers (including each of 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
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 Transfer
Restricted Notes pursuant to such Registration Statement.
(c) In case any action shall be commenced involving any Person in respect
of which 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. 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
17
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.
(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, in such
proportion as is appropriate to reflect 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 Transfer Restricted 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 ▇▇▇▇ ▇▇▇) 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
18
to contribution as such Initial Purchaser or 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.
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(d) 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, and that if it ceases to be so required to file such reports, it
will upon the request of any Holder of Transfer Restricted Notes (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 Transfer Restricted
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 Transfer Restricted 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 Transfer Restricted 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 that is
inconsistent with the rights granted to the Holders of Transfer Restricted Notes
in this Agreement or that 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 agreements or instruments relating
to such securities. Except as set forth in this Agreement, no Person has any
rights to include any securities of the Company in any Registration Statement
required to be filed pursuant to this Agreement.
(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 Transfer
Restricted 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 Transfer Restricted Notes unless consented
to in writing by such Holder.
(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
19
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 Transfer Restricted
Notes in violation of the terms hereof or of the Purchase Agreement or the
Indenture. If any transferee of any Holder shall acquire Transfer Restricted
Notes, in any manner, whether by operation of law or otherwise, such Transfer
Restricted Notes shall be held subject to all of the terms of this Agreement,
and by taking and holding such Transfer Restricted 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 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.
[signature page follows]
20
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first written above.
RHYTHMS NETCONNECTIONS, INC.
By:/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
--------------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Chief Financial Officer
Confirmed and accepted as of
the date first above written:
▇▇▇▇▇▇▇ ▇▇▇▇▇ & CO.,
▇▇▇▇▇▇▇ LYNCH, PIERCE, ▇▇▇▇▇▇ & ▇▇▇▇▇
INCORPORATED
▇▇▇▇▇▇▇▇▇, LUFKIN & ▇▇▇▇▇▇▇▇
SECURITIES CORPORATION
By: ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇
INCORPORATED
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
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Authorized Signatory