EXHIBIT 10.17
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WARRANT AGREEMENT
Between
METROMEDIA FIBER NETWORK, INC.
and
NORTEL NETWORKS INC.
Dated as of September 28, 2001
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TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS AND ACCOUNTING MATTERS................................5
SECTION 1.01. Definitions.............................................5
SECTION 1.02. Terms Generally........................................11
SECTION 1.03. Accounting Terms and Determinations....................11
ARTICLE II PURCHASE AND SALE OF WARRANTS...................................11
SECTION 2.01. Authorization and Issuance of Warrant Stock and
Warrant.........................................................11
SECTION 2.02. Issuance of Warrants...................................11
SECTION 2.03. Purchase for Initial Holder's Account..................12
SECTION 2.04. Securities Act Compliance..............................12
SECTION 2.05. Listing................................................13
ARTICLE III REPRESENTATIONS AND WARRANTIES.................................13
SECTION 3.01. Existence; Qualification...............................13
SECTION 3.02. No Breach..............................................13
SECTION 3.03. Corporate Action.......................................13
SECTION 3.04. Approvals..............................................14
SECTION 3.05. Investment Company Act.................................14
SECTION 3.06. Public Utility Holding Company Act.....................14
SECTION 3.07. Capitalization.........................................14
SECTION 3.08. Private Offering.......................................15
SECTION 3.09. Litigation.............................................15
SECTION 3.10. Brokers................................................15
SECTION 3.11. SEC Documents; Financial Statements....................15
SECTION 3.12. Note Agreement.........................................16
ARTICLE IV RESTRICTIONS ON TRANSFERABILITY.................................16
SECTION 4.01. Transfers Generally....................................16
SECTION 4.02. Transfers of Restricted Securities Pursuant to
Registration Statement and Exemptions...........................16
SECTION 4.03. Restrictive Legends....................................16
SECTION 4.04. Termination of Restrictions............................17
SECTION 4.05. Dispositions of Warrants and Warrant Stock.............17
ARTICLE V ADJUSTMENTS OF STOCK UNITS.......................................18
SECTION 5.01. Purchases and Redemptions..............................18
SECTION 5.02. Subdivisions and Combinations..........................18
SECTION 5.03. Issuance of Common Stock...............................19
SECTION 5.04. Issuance of Other Securities, Rights or
Obligations.....................................................20
SECTION 5.05. Superseding Adjustment.................................21
SECTION 5.06. Other Provisions Applicable to Adjustments.............22
SECTION 5.07. Merger, Consolidation or Disposition of Assets.........22
SECTION 5.08. Other Action Affecting Common Stock....................22
SECTION 5.09. No Adjustment Necessary................................23
SECTION 5.10. Notice of Adjustments..................................23
SECTION 5.11. Notice of Certain Corporate Action.....................23
ARTICLE VI REGISTRATION RIGHTS.............................................24
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SECTION 6.01. (a) Filing of Shelf Registration......................24
SECTION 6.02. Hold-Back Agreements; Cutbacks.........................25
SECTION 6.03. Registration Procedures................................26
SECTION 6.04. Registration Expenses..................................30
SECTION 6.05. Restriction on Other Registrations.....................31
SECTION 6.06. Indemnification........................................31
SECTION 6.07. Rule 144...............................................33
SECTION 6.08 Remedies................................................33
ARTICLE VII TAG-ALONG SALE.................................................33
SECTION 7.01. Tag-Along Obligations..................................33
SECTION 7.02. Procedures.............................................34
ARTICLE XIII HOLDERS' RIGHTS...............................................35
SECTION 8.01. Delivery Expenses......................................35
SECTION 8.02. Taxes..................................................35
SECTION 8.03. Replacement of Instruments.............................35
SECTION 8.04. Indemnification........................................36
SECTION 8.05. Inspection Rights......................................36
ARTICLE IX OTHER COVENANTS OF ISSUER.......................................36
SECTION 9.01. Financial Statements, Etc..............................36
SECTION 9.02. Transactions with Affiliates...........................37
SECTION 9.03. Restrictions on Performance............................37
SECTION 9.04. Modification of Other Equity Documents.................37
SECTION 9.05. Reservation and Authorization of Common Stock..........37
SECTION 9.06. Notice of Expiration Date..............................38
SECTION 9.07. Occurrence of Initial Exercise Date....................38
SECTION 9.08. Limitations on Registration of Other Securities........37
ARTICLE X MISCELLANEOUS....................................................38
SECTION 10.01. Home Office Payment...................................38
SECTION 10.02. Waiver................................................39
SECTION 10.03. Notices...............................................39
SECTION 10.04. Expenses, Etc.........................................39
SECTION 10.05. Amendments, Etc.......................................39
SECTION 10.06. Successors and Assigns................................40
SECTION 10.07. Survival..............................................40
SECTION 10.08. Specific Performance..................................40
SECTION 10.09. Captions..............................................40
SECTION 10.10. Counterparts..........................................40
SECTION 10.11. Governing Law.........................................40
SECTION 10.12. Severability..........................................40
SECTION 10.13. Entire Agreement......................................41
ANNEX 1 - FORM OF WARRANT
ANNEX 2 - FORM OF ASSIGNMENT
ANNEX 3 - ALLOCATION OF WARRANTS
ANNEX 4 - FORM OF JOINDER AGREEMENT
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ANNEX 5 - FORM OF CONSENT
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WARRANT AGREEMENT dated as of September 28, 2001, between METROMEDIA
FIBER NETWORK, INC., a company duly organized and validly existing under the
laws of the State of Delaware (the "ISSUER"), and NORTEL NETWORKS INC., a
Delaware corporation (the "INITIAL HOLDER") (and each assignee thereof).
WHEREAS, Metromedia Fiber Network Services, Inc., a Delaware
corporation (the "METROMEDIA SERVICES"), a wholly-owned subsidiary of the
Issuer, Nortel Networks Inc. as administrative agent, and the Initial Holder are
parties to a Note Agreement, dated as of September 19, 2001 (as originally
executed, the "NOTE AGREEMENT"; references to the Note Agreement herein shall
apply whether or not the Note Agreement is then in force and without regard to
amendments thereto unless such amendments thereto have been consented to by the
Initial Holder as provided herein), providing, subject to the terms and
conditions thereof, for the purchase of notes of the Issuer by the Initial
Holder in an original aggregate principal amount of $231,036,842.00.
WHEREAS, as a condition to the closing of the transactions
contemplated by the Note Agreement and the purchase of notes of Metromedia
Services by the Initial Holder thereunder and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
Issuer has agreed to issue one or more Warrants (as hereinafter defined) to the
Initial Holder providing for the purchase of shares of Stock Units (as
hereinafter defined) of the Issuer, in the manner hereinafter provided.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
SECTION 1.01. DEFINITIONS. As used in this Agreement, the following
terms shall have the following meanings:
"AFFILIATE" means, with respect to a specified Person, another
Person that directly, or indirectly through one or more intermediaries, Controls
or is Controlled by or is under common Control with the Person specified.
"APPLICABLE DISPOSITION" means any sale, transfer or other
disposition by the Principal Shareholder of Common Stock, to the extent that
such sale, transfer or other disposition, together with all other sales,
transfers and other dispositions by the Principal Shareholder and its Affiliates
in the aggregate represents in excess of 20% of the aggregate amount of Common
Stock beneficially owned by the Principal Shareholder and its Affiliates on the
Closing Date.
"BOARD" means the Board of Directors of the Issuer.
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"BUSINESS DAY" means any day that is not a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by law
to remain close.
"CLOSING DATE" means the date of the original issuance of the
Warrants hereunder.
"COMMISSION" means the Securities and Exchange Commission or any
other similar or successor agency of the Federal government administering the
Securities Act and/or the Exchange Act.
"COMMON STOCK" means the Issuer's Class A Common Stock, par value
$.01 per share, as constituted on the Closing Date and any stock into which such
Common Stock may thereafter be converted or changed, and also shall include any
other stock of the Issuer of any other class (other than the Issuer's Class B
Common Stock, par value $.01 per share), which is not preferred as to dividends
or assets over any other class of any other stock of the Issuer. References
herein and in the Warrants to the Common Stock outstanding "on a fully diluted
basis" at any time means the number of shares of Common Stock then issued and
outstanding, assuming full conversion, exercise and exchange of all Convertible
Securities and Options that are (or may become) exchangeable for, or exercisable
or convertible into, Common Stock, including the Warrants. All references to
Common Stock herein shall be subject to appropriate adjustment by reason of any
stock dividend, split, reverse split, combination, recapitalization or any
similar corporate transaction.
"CONTROL" means the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of a Person,
whether through the ability to exercise voting power, by contract or otherwise.
"CONTROLLING" and "CONTROLLED" shall have meanings correlative thereto.
"CONVERTIBLE SECURITIES" means evidences of indebtedness, interests
or other securities or rights which are exchangeable for or exercisable or
convertible into shares of Common Stock either immediately or upon the arrival
of a specified date or the occurrence of a specified event.
"CURRENT MARKET VALUE" means, on any date, (i) the average of the
daily market prices for each day during the 5 consecutive trading days ending on
the last trading day prior to such date or (ii) if the applicable securities are
not publicly traded or are not registered under the Exchange Act, the fair value
of such securities. The market price for each such Business Day shall be the
last sale price on such day as reported in the Consolidated Last Sale Reporting
System or as quoted in the National Association of Securities Dealers Automated
Quotation System, or if such last sale price is not available, the average of
the closing bid and asked prices as reported in either such system, or in any
other case the higher bid price quoted for such day as reported by The Wall
Street Journal and the National Quotation Bureau pink sheets.
"CURRENT WARRANT PRICE" means, as at any date, the amount per share
of Common Stock equal to the quotient resulting from dividing the Exercise Price
per Stock Unit in effect on
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such date by the number of shares (including any fractional share) of Common
Stock comprising a Stock Unit on such date.
"EQUITY SECURITIES" means Securities, Convertible Securities,
Options and Rights to Purchase Securities.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, or any similar Federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"EXERCISE PRICE" has the meaning specified in the form of Warrant
attached as Annex 1.
"EXPIRATION DATE" has the meaning specified in form of the Warrant
attached as Annex 1.
"GAAP" means generally accepted accounting principles, consistently
applied throughout the specified period.
"GOVERNMENTAL AUTHORITY" means the government of the United States
of America, any other nation or any political subdivision thereof, whether state
or local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory, monetary or administrative powers or functions of or
pertaining to government.
"HOLDER" means any Person who is shown on the Warrant register
maintained by the Issuer as the owner of Warrants or Warrant Stock pursuant to
the provisions of this Agreement, including any transferees of Warrants or
Warrant Stock.
"HOLDINGS DEBT OR EQUITY" has the meaning specified in the Note
Agreement.
"INDEMNIFIED PARTIES" has the meaning specified in Section 6.06(a).
"INDEMNIFYING PARTY" has the meaning specified in Section 6.06(c).
"INITIAL EXERCISE DATE" shall mean the date described in Rule
14c-2(b) promulgated under the Exchange Act when the stockholders of the Issuer
duly and validly approve, by means of written consent or otherwise, the
issuances of common stock (or securities convertible into or exercisable for
common stock) of the Issuer pursuant to the terms of the Basic Documents (as
such term is defined in the Note Agreement).
"INITIAL HOLDER" has the meaning specified in the preamble of this
Agreement.
"ISSUER" has the meaning specified in the preamble of this
Agreement.
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"JOINDER AGREEMENT" has the meaning specified in Section 7.01(c) of
this Agreement.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For purposes of this Agreement, a Person shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such asset.
"LIQUIDATED DAMAGES" has the meaning specified in Section 6.01(b).
"METROMEDIA SERVICES" has the meaning specified in the recital of
this Agreement.
"NASD" means the National Association of Securities Dealers.
"NOTE AGREEMENT" has the meaning specified in the recital of this
Agreement.
"OPTION" means any warrant, option or other right to subscribe for
or purchase shares of Common Stock.
"OPTION PLANS" means any stock option plan, stock grant plan, stock
purchase, stock option or employment arrangement approved from time to time by
the Board.
"OTHER EQUITY DOCUMENTS" means the Option Plans, the certificate of
incorporation of the Issuer, the by-laws of the Issuer and any other instrument
or document of organization or governance of the Issuer.
"PERSON" means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
"PRINCIPAL SHAREHOLDER" means Metromedia Company.
"PRINCIPAL SHAREHOLDER BENEFICIAL OWNER" means ▇▇▇▇ ▇. ▇▇▇▇▇ and/or
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, as applicable.
"PROSPECTUS" means the portion of a Registration Statement
designated as the prospectus, as amended or supplemented by any prospectus
supplement with respect to the terms of the offering of any portion of the
Registrable Securities covered by such Registration Statement and by all other
amendments and supplements to the prospectus, including post-effective
amendments and all material incorporated by reference in such prospectus.
"REGISTRABLE SECURITIES" means the Warrants and the Warrant Stock;
PROVIDED that a security ceases to be a Registrable Security when it is no
longer a Transfer Restricted Security.
"REGISTRATION DEFAULT" has the meaning specified in Section 6.01(b).
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"REGISTRATION EXPENSES" has the meaning specified in Section 6.04.
"REGISTRATION STATEMENT" means any registration statement of the
Issuer which covers any of the Registrable Securities pursuant to the provisions
of this Agreement, including the Prospectus, amendments and supplements to such
Registration Statement, including post-effective amendments, all exhibits and
all material incorporated by reference in such Registration Statement.
"REQUIRED EFFECTIVE DATE" has the meaning specified in Section
6.01(a).
"REQUIRED FILING DATE" has the meaning specified in Section 6.01(a).
"REQUIRED HOLDERS" means the Holders of a majority of the Warrant
Stock issued or issuable upon exercise of the Warrants. For purposes of giving
notices, waivers and consents hereunder, Holders of Warrants shall be deemed
holders of the Warrant Stock issued on exercise thereof.
"RESTRICTED CERTIFICATE" means a certificate for Warrant Stock or
Warrants bearing or required to bear the restrictive legend set forth in Section
4.03.
"RESTRICTED SECURITIES" means Restricted Warrant Stock and
Restricted Warrants.
"RESTRICTED WARRANT STOCK" means Warrant Stock evidenced by a
Restricted Certificate.
"RESTRICTED WARRANTS" means Warrants evidenced by a Restricted
Certificate.
"RIGHTS TO PURCHASE SECURITIES" means options and rights issued by
the Issuer (whether presently exercisable or not) to purchase Securities or
Convertible Securities.
"RULE 144" means Rule 144 promulgated by the Commission under the
Securities Act (or any successor or similar rule then in force).
"RULE 144A" means Rule 144A promulgated by the Commission under the
Securities Act (or any successor or similar rule then in force).
"SECURITIES" means the Common Stock and any other securities of the
Issuer of any kind or class.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or
any similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
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"SHAREHOLDER" means any Person who directly or indirectly owns any
shares of Common Stock (including Warrant Stock).
"SHELF REGISTRATION" has the meaning ascribed to it in Section
6.01(a).
"STOCK UNIT" means one share of Common Stock, as such Common Stock
is constituted on the date hereof, and thereafter means such number of shares
(including any fractional shares) of Common Stock and other securities, cash or
other property as shall result from the adjustments specified in Article V.
"SUBSIDIARY" of a Person means (a) any corporation more than 50% of
the outstanding securities having ordinary voting power of which shall at the
time be owned or controlled, directly or indirectly, by such Person or by one or
more of its Subsidiaries or by such Person and one or more of its Subsidiaries,
or (b) any company, partnership, association, joint venture or similar business
organization more than 50% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled. Unless otherwise
expressly provided, all references herein to a "Subsidiary" means a direct or
indirect Subsidiary of the Issuer.
"TAG-ALONG RIGHTS" means the right of a Holder to participate in a
Tag-Along Sale pursuant to, and in accordance with, Article VII.
"TAG-ALONG SALE" has the meaning specified in Section 7.01(a).
"TAG-ALONG SELLER" has the meaning specified in Section 7.01(a).
"TRANSFER RESTRICTED SECURITY" means the Registrable Securities
beginning upon original issuance thereof, until the later of (i) such time as
all Registrable Securities are eligible for sale under Rule 144(k) under the
Securities Act so that all transfer restrictions and restrictive legends with
respect to such shares may be removed upon the consummation of such sale and
(ii) the third anniversary of the Initial Exercise Date.
"UNDERWRITTEN OFFERING" means an offering whereby Securities of the
Issuer are sold to an underwriter for reoffering and sale to subsequent
purchasers.
"WARRANT" and "WARRANTS" means the Warrants issued by the Issuer
pursuant to this Agreement on the date hereof, evidencing rights to purchase up
to an aggregate of 84,778,516 Stock Units (which Warrants represent as of the
Closing Date 5% of the outstanding shares of Common Stock on a fully diluted
basis), and all Warrants issued upon transfer, division or combination of, or in
substitution for, any thereof.
"WARRANT STOCK" means all shares of Common Stock issuable from time
to time upon exercise of the Warrant.
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SECTION 1.02. TERMS GENERALLY. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, (d) all references herein to Articles,
Sections, Exhibits, Annexes and Schedules shall be construed to refer to
Articles and Sections of, and Exhibits, Annexes and Schedules to, this Agreement
or the Warrant, as the case may be, and (e) the words "asset" and "property"
shall be construed to have the same meaning and effect and to refer to any and
all tangible and intangible assets and properties, including cash, securities,
accounts and contract rights.
SECTION 1.03. ACCOUNTING TERMS AND DETERMINATIONS. Except as
otherwise may be expressly provided herein, all accounting terms used herein
shall be interpreted, and all financial statements and certificates and reports
as to financial matters required to be delivered to the Holder hereunder shall
be prepared, in accordance with GAAP. All calculations made for the purposes of
determining compliance with the terms of this Agreement shall (except as
otherwise may be expressly provided herein) be made by application of GAAP.
ARTICLE II
PURCHASE AND SALE OF WARRANTS
SECTION 2.01. AUTHORIZATION AND ISSUANCE OF WARRANT STOCK AND
WARRANT. The Issuer has authorized: (a) the issuance of Warrants evidenced by
warrant certificates in the form of Annex 1; and (b) the issuance of such number
of shares of Common Stock as shall be necessary to permit the Issuer to comply
with its obligations to issue shares of Common Stock pursuant to the Warrants.
SECTION 2.02. ISSUANCE OF WARRANTS. On the date hereof, in
consideration of the purchase of notes of Metromedia Services by the Initial
Holder pursuant to the Note Agreement,
(a) the Issuer shall issue to the Initial Holder a Warrant
evidencing the right to purchase such number of Stock Units as is set
forth opposite the Initial Holder's name on the signature pages hereto,
which have been calculated in accordance with ANNEX 3 hereto;
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(b) the Issuer shall deliver to the Initial Holder a single
certificate for the Warrants issued pursuant to the clause (a) above,
registered in the name of the Initial Holder, except that, if the Initial
Holder shall notify the Issuer in writing prior to such issuance that it
desires certificates for such Warrants to be issued in other denominations
or registered in the name or names of any Affiliate, nominee or nominees
of the Initial Holder for its benefit, then the certificates for such
Warrants shall be issued to the Initial Holder in the denominations and
registered in the name or names specified in such notice;
(c) the Holders (as defined in the Consent attached hereto as Annex
5) shall execute and deliver to the Initial Holder a Consent substantially
in the form attached hereto as Annex 5; and
(d) the Issuer shall deliver to the Initial Holder a legal opinion
from counsel to the Issuer in form and substance satisfactory to the
Initial Holder.
SECTION 2.03. PURCHASE FOR INITIAL HOLDER'S ACCOUNT. The Initial
Holder represents and warrants to the Issuer as follows:
(a) The Initial Holder is acquiring the Warrants and the Warrant
Stock for investment for its own account, without a view to the distribution
thereof in violation of the Securities Act, all without prejudice, however, to
the right of the Initial Holder at any time, in accordance with this Agreement,
lawfully to sell or otherwise to dispose of all or any part of the Warrants or
the Warrant Stock held by it.
(b) The Initial Holder is an "accredited investor" within the
meaning of Regulation D promulgated under the Securities Act.
(c) All documents, records or books pertaining to this investment
have been made available for inspection by the Initial Holder, its attorneys
and/or its accountants. The Initial Holder understands that the Initial Holder
and/or its representatives have had the opportunity to ask questions of, and
receive answers from, the Issuer or one or more persons acting on the Issuer's
behalf concerning the offering of the Warrants and the Warrant Stock and the
business of the Issuer and all such questions have been answered to the Initial
Holder's full satisfaction.
SECTION 2.04. SECURITIES ACT COMPLIANCE. The Initial Holder
understands that the Issuer has not registered the Warrants or the Warrant Stock
under the Securities Act or applicable state securities laws, and the Initial
Holder agrees that neither the Warrants nor the Warrant Stock shall be sold or
transferred or offered for sale or transfer without registration or
qualification under the Securities Act or applicable state securities laws or
the availability of an exemption therefrom, all as more fully provided in
Article IV, and the Initial Holder understands that the Warrants and the Warrant
Stock will bear a legend to such effect and the Issuer will make a notation on
its transfer books to such effect.
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SECTION 2.05. LISTING. Prior to the issuance of Warrant Stock upon
the exercise of a Warrant, the Issuer shall secure the listing of such shares of
Warrant Stock upon each of the national securities exchange or automated
quotation system, if any, upon which shares of Common Stock are then listed
(subject to official notice of issuance upon the exercise of such Warrant) and
shall maintain, so long as any other shares of Common Stock shall be so listed,
such listing of all shares of Warrant Stock from time to time issuable upon the
exercise of a Warrant; and the Issuer shall so list on each national securities
exchange or automated quotation system, and shall maintain such listing of, any
other shares of capital stock of the Issuer issuable upon the exercise of a
Warrant if and so long as shares of the same class shall be so listed on such
national securities exchange or automated system.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
The Issuer represents and warrants as follows:
SECTION 3.01. EXISTENCE; QUALIFICATION. The Issuer is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its organization. The Issuer is duly qualified, licensed or
admitted to do business and is in good standing as a foreign corporation in
every jurisdiction where the failure to be so qualified would have a material
adverse effect on the business, financial condition, operations, assets,
prospects, liabilities or capitalization of the Issuer and has all requisite
corporate power and authority to transact its business as now conducted in all
such jurisdictions.
SECTION 3.02. NO BREACH. The execution, delivery and performance of
this Agreement and the Warrants by the Issuer and the consummation by it of the
transactions contemplated hereby and thereby will not (a) violate the
certificate of incorporation or by-laws or any other instrument or document of
organization or governance of the Issuer, (b) violate, or result in a breach of
or default under, any other material instrument or agreement to which the Issuer
is a party or is bound, (c) violate any judgment, order, injunction, decree or
award against or binding upon the Issuer, (d) result in the creation of any
material Lien upon any of the properties or assets of the Issuer, or (e) violate
any law, rule or regulation relating to the Issuer.
SECTION 3.03. CORPORATE ACTION. The Issuer has all necessary
corporate power and authority to execute, deliver and perform its obligations
under this Agreement and the Warrants; the execution, delivery and performance
by the Issuer of this Agreement and the Warrants have been duly authorized by
all necessary action (including all Shareholder action) on the part of the
Issuer; this Agreement and the Warrants being issued on the date hereof have
been (and the Warrants issued after the date hereof will be) duly executed and
delivered by the Issuer and constitute (or in the case of the Warrants issued
after the date hereof, will constitute) the legal, valid and binding obligations
of the Issuer, enforceable against the Issuer in accordance with their
respective terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors rights generally and by general equitable principles
(regardless of whether such enforceability is
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considered in a proceeding in equity or law); the Warrant Stock covered by the
Warrants has been duly and validly authorized and reserved for issuance and
shall, when paid for, issued and delivered in accordance with the Warrants, be
duly and validly issued, fully paid and nonassessable and free and clear of any
Liens; and none of the Warrant Stock issued pursuant to the terms hereof will be
in violation of any preemptive rights or right of first refusal of any
Shareholder.
SECTION 3.04. APPROVALS. Except in connection with the registration
of the Warrant Stock pursuant to Article VI, no authorizations, approvals or
consents of, and no filings or registrations with, any Governmental Authority or
any other Person, including the Nasdaq National Market or any national
securities exchange or other automated quotation system, are necessary for the
execution, delivery or performance by the Issuer of this Agreement, the Warrants
or the Warrant certificates or for the validity or enforceability thereof. Any
such action required to be taken as a condition to the execution and delivery of
this Agreement, or the execution, issuance and delivery of the Warrants, has
been duly taken by all such Governmental Authorities or other Persons, as the
case may be.
SECTION 3.05. INVESTMENT COMPANY ACT. The Issuer is not an
"investment company", or a company "controlled by" an "investment company",
within the meaning of the Investment Company Act of 1940, as amended.
SECTION 3.06. PUBLIC UTILITY HOLDING COMPANY ACT. The Issuer is not
a "holding company", or an "affiliate" of a "holding company" or a "subsidiary
company" of a "holding company", within the meaning of the Public Utility
Holding Company Act of 1935, as amended.
SECTION 3.07. CAPITALIZATION.
(a) The authorized capital stock of the Issuer consists of
2,404,031,240 shares of Class A Common Stock, par value $.01, of which
548,640,152 shares are issued and outstanding, 522,254,782 shares of the Class B
Common Stock, par value $.01, of which 67,538,544 shares are issued and
outstanding and 20,000,000 shares of preferred stock, par value $.01, of which
no shares are issued and outstanding. Except for the Warrants or as otherwise
disclosed in this Agreement, the Issuer shall not have outstanding any
Convertible Securities or Options exercisable or convertible into or
exchangeable for any interests or other equity rights of the Issuer, nor shall
it have outstanding any agreements providing for the issuance (contingent or
otherwise) of, or any calls, commitments or claims of any character relating to,
any interests or equity rights of the Issuer or Convertible Securities
exercisable or convertible into or exchangeable for any interests or equity
rights of the Issuer, other than (i) the Warrants, (ii) the Option Plans, (iii)
as set forth in the Issuer's Annual Report on Form 10-K for the year ended
December 31, 2000, and (iv) the Holdings Convertible Debt or Equity.
(b) Other than this Agreement or as otherwise disclosed in Schedule
3.07(b), there is not in effect on the date hereof any agreement by the Issuer
pursuant to which any holders of debt or equity securities of the Issuer have a
right to cause the Issuer to register such
14
securities under the Securities Act. None of the agreements listed on Schedule
3.07(b) contain any provision that conflict or are inconsistent with the rights
granted under Article VI hereof. Other than this Agreement, or as otherwise
disclosed in Schedule 3.07(b), there is not in effect on the date hereof any
agreement to which the Issuer or (to its knowledge) any of its Shareholders is a
party relating to the voting, transfer or sale of such securities.
(c) There is not in effect on the date hereof any agreement by the
Issuer or any of its Shareholders that (i) restricts the transferability of the
Warrants and/or the Warrant Stock (whether or not in connection with a transfer
of the notes under the Note Agreement), except as provided in Article IV, (ii)
restricts the transferability of the right of the Holder in this Agreement to
any transferee of all or a portion of the Holder's Warrants and/or Warrant
Stock, or (iii) requires any consent or other approval of any Person to the
exercise of the Warrant by the Holder or the issuance of Warrant Stock upon such
exercise.
SECTION 3.08. PRIVATE OFFERING. Assuming the truth and accuracy of
the Initial Holder's representations and warranties contained in Sections 2.03
and 2.04, the issuance and sale of the Warrants to the Initial Holder hereunder
are exempt from the registration and prospectus delivery requirements of the
Securities Act.
SECTION 3.09. LITIGATION.
(a) There is no action, suit, proceeding or investigation pending
or, to the knowledge of the Issuer, threatened against the Issuer or any of its
Subsidiaries before any Governmental Authority seeking to enjoin the
transactions contemplated by this Agreement or the Warrants.
(b) There are no legal or arbitral proceedings or any proceedings by
or before any Governmental Authority, now pending or (to the knowledge of the
Issuer) threatened against the Issuer or any of its Subsidiaries which could
reasonably be expected to have a material adverse effect on the business,
financial condition, operations, assets, prospects, liabilities or
capitalization of the Issuer and its Subsidiaries taken as a whole.
SECTION 3.10. BROKERS. All negotiations relative to this Agreement
and the transactions contemplated hereby have been carried out by the Issuer
directly with the Initial Holder without the intervention of any Person on
behalf of the Issuer in such manner as to give rise to any valid claim by any
Person against the Initial Holder or any other Holder for a finder's fee,
brokerage commission or similar payment.
SECTION 3.11. SEC DOCUMENTS; FINANCIAL STATEMENTS. The Issuer has
filed in a timely manner all documents that the Issuer was required to file with
the Commission under Sections 13, 14(a) and 15(d) of the Exchange Act, and with
the Nasdaq National Market since its initial public offering. As of their
respective filing dates, all documents filed by the Issuer with the Commission
("SEC DOCUMENTS") complied in all material respects with the requirements of the
Exchange Act or the Securities Act, as applicable, and all documents required to
be filed as exhibits to the SEC Documents have been so filed. None of the SEC
Documents as of their
15
respective dates contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Issuer included in the SEC
Documents (the "FINANCIAL STATEMENTS") were complete and correct in all material
respects as of their respective dates and comply as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the Commission with respect thereto. The Financial Statements
have been prepared in accordance with GAAP and fairly present the consolidated
financial position of the Issuer and its Subsidiaries at the dates thereof and
the consolidated results of their operations and consolidated cash flows for the
periods then ended (subject, in the case of unaudited statements, to the lack of
full footnote disclosure and to normal, recurring adjustments).
SECTION 3.12. NOTE AGREEMENT. The representations and warranties
with respect to the Issuer set forth in the Note Agreement are true and correct.
ARTICLE IV
RESTRICTIONS ON TRANSFERABILITY
SECTION 4.01. TRANSFERS GENERALLY. The Restricted Securities shall
be transferable only upon the conditions specified in this Article IV and in
Article VI, which conditions are intended to insure compliance with the
provisions of the Securities Act and applicable state securities laws in respect
of the transfer of any Restricted Securities.
SECTION 4.02. TRANSFERS OF RESTRICTED SECURITIES PURSUANT TO
REGISTRATION STATEMENT AND EXEMPTIONS. The Restricted Securities may be offered
or sold by the Holder thereof pursuant to an effective registration statement
under the Securities Act and applicable state securities laws or a valid
exemption therefrom (including, without limitation, to the extent applicable,
Rule 144 or Rule 144A).
SECTION 4.03. RESTRICTIVE LEGENDS. Unless and until otherwise
permitted by this Article IV, each certificate for the Warrants issued under
this Agreement, each certificate for any Warrants issued to any subsequent
transferees of any such certificate, each certificate for any Warrant Stock
issued upon exercise of any Warrant and each certificate for any Warrant Stock
issued to any subsequent transferee of any such certificate, shall be stamped or
otherwise imprinted with a legend in substantially the following form:
"THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS
SUBJECT TO THE RESTRICTIONS SPECIFIED IN THAT CERTAIN WARRANT
AGREEMENT DATED AS OF SEPTEMBER 28, 2001 (THE "WARRANT AGREEMENT"),
BETWEEN METROMEDIA FIBER NETWORK, INC., A DELAWARE CORPORATION (THE
"ISSUER"), AND THE HOLDERS PARTY THERETO FROM TIME TO TIME AS
MODIFIED AND SUPPLEMENTED AND
16
IN EFFECT FROM TIME TO TIME, AND NO TRANSFER OF THE SECURITIES
REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR EFFECTIVE UNTIL
SUCH RESTRICTIONS HAVE LAPSED OR BEEN FULFILLED, RELEASED OR WAIVED.
A COPY OF THE FORM OF THE WARRANT AGREEMENT IS ON FILE AND MAY BE
INSPECTED AT THE PRINCIPAL EXECUTIVE OFFICE OF THE ISSUER. THE
HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE,
AGREES TO BE BOUND BY THE PROVISIONS OF THE WARRANT AGREEMENT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, AND ACCORDINGLY, SUCH SECURITIES
MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF
APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE
EXEMPTIONS THEREFROM."
SECTION 4.04. TERMINATION OF RESTRICTIONS. All of the restrictions
imposed by this Article IV upon the transferability of the Restricted Securities
shall cease and terminate as to any particular Restricted Security when such
Restricted Security shall have been effectively registered under the Securities
Act and applicable state securities laws and sold by the Holder thereof in
accordance with such registration or sold under and pursuant to Rule 144 or is
eligible to be sold under and pursuant to paragraph (k) of Rule 144. Whenever
the restrictions imposed by this Article IV shall terminate as to any Restricted
Security as hereinabove provided, the Holder thereof shall, upon written
request, be entitled to receive from the Issuer, without expense, a new
certificate evidencing such Restricted Security not bearing the restrictive
legend otherwise required to be borne by a certificate evidencing such
Restricted Security, PROVIDED, that the Holder thereof shall have furnished the
Issuer with such certificates and opinions as it shall have reasonably
requested.
SECTION 4.05. DISPOSITIONS OF WARRANTS AND WARRANT STOCK.
(a) Notwithstanding anything in this Agreement or the Warrants to
the contrary, but subject to compliance with the Securities Act, applicable
state securities laws and the requirement as to placement of a legend on
certificates for Restricted Securities specified in SECTION 4.03, any Holder
shall have the right to transfer any or all of its Restricted Securities to any
Person. The Person to which Restricted Securities are transferred pursuant to
the immediately preceding sentence shall be deemed to be a Holder of such
Restricted Securities and
17
bound by the provisions of this Agreement applicable to the Holders so long as
such Person continues to own any of the Restricted Securities so transferred to
it.
(b) In connection with any transfer of any Warrant, the Holder shall
surrender such Warrant to the Issuer, together with a written assignment of such
Warrant duly executed by the Holder hereof or such Holder's agent or attorney.
Such written assignment shall be in the form of the Assignment attached as Annex
2. Upon such surrender and receipt by the Issuer of a written agreement, in form
reasonably satisfactory to the Issuer, of the assignee agreeing to be bound by
this Agreement (to the same extent as such Holder was so bound), the Issuer
shall execute and deliver a new Warrant or Warrants in the name of the assignee
and in the denominations specified in such instrument of assignment, and the
original Warrant shall promptly be canceled.
(c) Any Warrant may be exchanged for other Warrants of the same
series upon presentation to the Issuer, together with a written notice
specifying the denominations in which new Warrants are to be issued, signed by
the Holder thereof. The Issuer shall execute and deliver a new Warrant or
Warrants to such Holder in exchange for the Warrant or Warrants to be divided or
combined in accordance with such notice. The Issuer shall pay all expenses,
taxes (other than income taxes or capital gains of the Holder transferring such
Warrant but including transfer taxes) and other charges payable in connection
with the preparation, issuance, delivery, transfer or exchange of the Warrants.
(d) The Issuer shall maintain books for the registration and
transfer of the Warrants, and shall allow each Holder of Warrants to inspect
such books at such reasonable times as such Holder shall request.
ARTICLE V
ADJUSTMENTS OF STOCK UNITS
SECTION 5.01. Purchases and Redemptions. If at any time the Issuer
shall propose to purchase or redeem any shares of its Common Stock for cash,
evidence of indebtedness or other property of any nature whatsoever, the Issuer
shall deliver to each Holder of Warrants or shares of Warrant Stock a notice of
such proposed purchase or redemption, and each such Holder shall, at its option,
have the right to require the Issuer to at the same time purchase or redeem
Warrants and shares of Warrant Stock owned by such holder, pro-rata based on the
number of shares of such other Common Stock to be so purchased or redeemed, on
the same terms and conditions as the proposed purchase or redemption of such
other Common Stock and for the same consideration per Warrant or share of
Warrant Stock, as the case may be, as is paid to the Holders of such other
Common Stock for each share of Common Stock so redeemed or purchased, minus, in
the case of Warrants, the exercise price of the Warrants to be so purchased or
redeemed.
SECTION 5.02. SUBDIVISIONS AND COMBINATIONS. If at any time the
Issuer shall:
18
(a) take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend or other distribution of Common Stock;
(b) subdivide or reclassify its outstanding shares of Common Stock
into a larger number of shares of Common Stock; or
(c) combine its outstanding shares of Common Stock into a smaller
number of shares of Common Stock;
then immediately after the occurrence of any such event the number of shares of
Warrant Stock comprising a Stock Unit shall be adjusted so as to equal the
number of shares of Warrant Stock which such holder would have been entitled to
receive if such Holder had exercised the Warrant immediately prior to the
occurrence of such event.
SECTION 5.03. ISSUANCE OF COMMON STOCK. In case at any time the
Issuer (i)(A) shall take a record of the holders of its Common Stock for the
purpose of entitling them to subscribe for or purchase shares of any class or
series of Common Stock or (B) shall otherwise sell or issue any such securities
and (ii) the consideration per share of Common Stock to be paid upon such
issuance or subscription is less than the Current Market Value per share of
Common Stock on such record date, then the number of shares of Warrant Stock
comprising a Stock Unit shall be adjusted to be that number determined by
multiplying the number of shares of Warrant Stock comprising a Stock Unit
immediately prior to such record date by a fraction (not to be less than one)
(A) the numerator of which shall be equal to the product of (x) the number of
shares of Common Stock outstanding after giving effect to such issuance,
distribution, subscription or purchase and (y) the Current Market Value per
share of Common Stock determined immediately before such record date and (B) the
denominator of which shall be equal to the sum of (x) the product of (1) the
number of shares of Common Stock outstanding immediately before such record date
and (2) the Current Market Value per share of Common Stock determined
immediately before such record date and (y) the aggregate consideration to be
received by the Issuer for the total number of shares of Common Stock to be
issued, distributed, subscribed for or purchased. Aggregate consideration for
purposes of the preceding clause (y) shall be determined as follows: In case any
shares of Common Stock shall be issued or sold for cash, the consideration
received therefor shall be deemed to be the amount payable to the Issuer
therefor, after deduction therefrom of any expenses incurred or any underwriting
commissions or concessions or discounts or, in the case of a private placement
thereof, finders' fees or commissions paid or allowed by the Issuer in
connection therewith. In case any shares of Common Stock shall be issued or sold
for a consideration other than cash payable to the Issuer, the consideration
received therefor shall be deemed to be the Current Market Value of such
consideration, or if the Current Market Value of such consideration cannot be
determined, the consideration received therefor shall be deemed to be the fair
market value of such consideration as determined in good faith by the Board, in
either case determined after deduction therefrom of any expenses incurred or any
underwriting commissions or concessions or discounts paid or allowed by the
Issuer in connection therewith. In case any shares of Common Stock shall be
issued in connection with any merger of another corporation into the Issuer, the
amount of consideration therefor shall be deemed to be the Current Market Value
or fair market value, as
19
applicable, of such portion of the assets of such merged corporation as the
Board shall determine to be attributable to such shares of Common Stock.
SECTION 5.04. ISSUANCE OF OTHER SECURITIES, RIGHTS OR Obligations.
In case at any time the Issuer (i)(A) shall take a record of the holders of its
Common Stock for the purpose of entitling them to subscribe for or purchase
options to purchase or rights to subscribe for Common Stock or securities
directly or indirectly convertible into or exchangeable for Common Stock (or
options or rights with respect to such securities) or (B) shall otherwise issue
or sell any such options, rights or securities and (ii) the consideration per
share for which Common Stock is deliverable upon exercise of such options or
rights or conversion or exchange of such securities (determined by dividing (x)
the total amount received or receivable by the Issuer in consideration of the
issuance of or subscription for such options, rights or securities, plus the
minimum aggregate amount of premiums (if any) payable to the Issuer upon such
exercise, conversion or exchange, by (y) the total maximum number of shares of
Common Stock necessary to effect the exercise, conversion or exchange of all
such options, rights or securities) shall be less than the Current Market Value
per share of Common Stock on such record date or sale or issuance date, as the
case may be, then the number of shares of Warrant Stock comprising a Stock Unit
shall be adjusted to be that number determined by multiplying the number of
shares of Warrant Stock comprising a Stock Unit immediately prior to such date
by a fraction (not to be less than one) (i) the numerator of which shall be
equal to the product of (A) the total maximum number of shares of Common Stock
outstanding after giving effect to the assumed exercise or conversion of all
such options, rights or securities and (B) the Current Market Value per share of
Common Stock determined immediately before such date and (ii) the denominator of
which shall be equal to the sum of (A) the product of (1) the number of shares
of Common Stock outstanding immediately before such date and (2) the Current
Market Value per share of the Common Stock determined immediately before such
date and (B) the aggregate consideration per share (determined as set forth in
subsection (ii)(x) and (y) above) for which Common Stock is deliverable upon
exercise conversion or exchange of such options, rights or securities. Aggregate
consideration for purposes of the preceding clause (B) shall be determined as
follows: In case any options, rights or convertible or exchangeable securities
(or options or rights with respect thereto) shall be issued or sold, or
exercisable, convertible or exchangeable for cash, the consideration received
therefor shall be deemed to be the amount payable to the Issuer (determined as
set forth in subsection (ii)(x) and (y) above) therefor, or if the Current
Market Value of such consideration cannot be determined, the consideration
received therefor shall be deemed to be the fair market value of such
consideration as determined in good faith by the Board, in either case
determined after deduction therefrom of any expenses incurred or any
underwriting commissions or concessions or discounts or, in the case of a
private placement thereof, finders' fees or commissions paid or allowed by the
Issuer in connection therewith. In case any such options, rights or securities
shall
20
be issued or sold, or exercisable, convertible or exchangeable for a
consideration other than cash payable to the Issuer, the consideration received
therefor (determined as set forth in subsection (ii)(x) and (y) above) shall be
deemed to be the Current Market Value or fair market value, as applicable, of
such consideration, after deduction therefrom of any expenses incurred or any
underwriting commissions or concessions or discounts or, in the case of a
private placement thereof, finders' fees or commissions paid or allowed by the
Issuer in connection therewith. In case any such options, rights or securities
shall be issued or sold, or exercisable, convertible or exchangeable in
connection with any merger of another corporation into the Issuer, the amount of
consideration therefor shall be deemed to be the Current Market Value of such
portion of the assets of such merged corporation as the Board shall determine to
be attributable to such options, rights or securities.
SECTION 5.05. SUPERSEDING ADJUSTMENT. If at any time after any
adjustment in the number of shares of Warrant Stock comprising a Stock Unit
shall have been made on the basis of the issuance of any options or rights, or
convertible or exchangeable securities (or options or rights with respect to
such securities) pursuant to Section 5.04:
(a) the options or rights shall expire prior to exercise or the
right to convert or exchange any such securities shall terminate; or
(b) the consideration per share for which shares of Common Stock are
issuable pursuant to the terms of such options or rights or convertible or
exchangeable securities shall be increased or decreased, other than under or by
reason of provisions designed to protect against dilution, such previous
adjustment shall be rescinded and annulled, thereupon a recomputation shall be
made of the effect of such options or rights or convertible or exchangeable
securities with respect to shares of Common Stock on the basis of:
(i) treating the number of shares of Common Stock, if any,
theretofore actually issued or issuable pursuant to the
previous exercise, conversion or exchange of such
options, rights or securities as having been issued on
the date or dates of such exercise, conversion or
exchange and for the consideration actually received and
receivable therefore, and
(ii) treating any such options, rights or securities which
then remain outstanding as having been granted or issued
immediately after the time of such increase or decrease
for the consideration per share for which shares of
Common Stock are issuable upon exercise, conversion or
exchange of such options, rights or securities.
To the extent called for by the foregoing provisions of this Section 5.05 on the
basis aforesaid, a new adjustment in the number of shares of Warrant Stock
comprising a Stock Unit shall be made in accordance with Section 5.04,
determined using the Current Market Value or fair market value, as applicable,
used at the time of the original determination, which new adjustment shall
supersede the previous adjustment so rescinded and annulled. If the exercise,
conversion or exchange price provided for in any such option, right or security
shall decrease at any time under or by reason of provisions designed to protect
against dilution, then in the case of the delivery of shares of Common Stock
upon the exercise, conversion or exchange of any such option, right or security,
the Stock Unit purchasable upon the exercise of a Warrant shall forthwith be
adjusted on the basis of the aggregate consideration received for such exercise,
conversion or exchange.
21
SECTION 5.06. OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS. The
following provisions shall be applicable to the making of adjustments of the
number of shares of Warrant Stock comprising a Stock Unit:
(a) The sale or other disposition of any issued shares of Common
Stock owned or held by or for the account of the Issuer (other than to the
Holders hereunder) shall be deemed to be an issuance thereof for purposes of
this Article V.
(b) In computing adjustments under this Article V, fractional
interests in Common Stock shall be taken into account to the nearest
one-thousandth of a share.
(c) If the Issuer shall take a record of the holders of its Common
Stock for the purpose of entitling them to receive a dividend or distribution or
subscription or purchase rights and shall, thereafter and before the
distribution thereof, legally abandon its plan to pay or deliver such dividend,
distribution, subscription or purchase rights, then thereafter no adjustment
shall be required by reason of the taking of such record and any such adjustment
previously made in respect thereof shall be rescinded and annulled.
SECTION 5.07. MERGER, CONSOLIDATION OR DISPOSITION OF ASSETS. If the
Issuer shall merge or consolidate with another Person, or shall sell, transfer
or otherwise dispose of all or substantially all of its assets to another Person
and pursuant to the terms of such merger, consolidation or disposition of
assets, cash, shares of common stock or other securities of the successor or
acquiring Person, or property of any nature is to be received by or distributed
to the holders of Common Stock of the Issuer, then each Holder of Warrants
shall, at such Holder's election, have the right to receive (whether or not such
Holder exercises such Warrants) the amount of cash or other consideration it
would have been entitled to receive if such Holder had exercised such Warrants
immediately prior to the occurrence of such merger, consolidation or disposition
of assets, net of the exercise price of such Warrants, and shall thereupon be
deemed to have exercised such Warrants. In case of any such merger,
consolidation or disposition of assets in which the foregoing election is not
made, the successor or acquiring Person (and any affiliate thereof issuing
securities) shall expressly assume the due and punctual observance and
performance of each and every covenant and condition to be performed and
observed by, and all of the obligations and liabilities of, the Issuer hereunder
and under the Warrants, subject to such modifications as may be deemed
appropriate (as determined by resolution of the Board) in order to provide for
adjustments of the securities comprising a Stock Unit which shall be as nearly
equivalent as practicable to the adjustments provided for in this Article V. The
foregoing provisions shall similarly apply to successive mergers, consolidations
and dispositions of assets.
SECTION 5.08. OTHER ACTION AFFECTING COMMON STOCK. If at any time or
from time to time the Issuer shall take any action affecting its Common Stock,
other than an action described in any of the foregoing subsections of this
Article V or an action taken in the ordinary course of the Issuer's business and
consistent with past practice, then, unless in the reasonable opinion of the
Board such action will not have a material adverse effect upon the rights of the
Holders of the Warrants, the number of shares of Warrant Stock comprising a
Stock Unit shall be
22
adjusted in such manner and at such time as the Board shall in good faith
determine to be equitable in the circumstances.
SECTION 5.09. NO ADJUSTMENT NECESSARY. Anything to the contrary
herein notwithstanding, no adjustment to the number of shares of Warrant Stock
comprising a Stock Unit shall be made as a result of, or in connection with, the
issuance of any Option or any Common Stock issuable or issued upon the exercise
thereof so long as the exercise price for such Option represents the Current
Market Value of the Equity Securities issued at the time such Option was
awarded.
SECTION 5.10. NOTICE OF ADJUSTMENTS. Whenever the number of shares
of Warrant Stock comprising a Stock Unit shall be adjusted pursuant to this
Agreement, the Issuer shall forthwith obtain a certificate signed by the
Issuer's chief financial officer (or, if the Holders of a majority in interest
of the Warrants so request after delivery of a certificate from the chief
financial officer, signed by a firm of independent accountants of recognized
national standing selected by the Issuer), setting forth, in reasonable detail,
the event requiring the adjustment and the method by which such adjustment was
calculated and specifying the number of shares of Warrant Stock comprising a
Stock Unit, after giving effect to such adjustment. The Issuer shall promptly
cause a signed copy of such certificate to be delivered to each holder of
Warrants. The Issuer shall keep at its office copies of all such certificates
and cause the same to be available for inspection at said office during normal
business hours by any Holder of Warrants or any prospective purchaser of
Warrants designated by the registered Holder of such Warrants.
SECTION 5.11. NOTICE OF CERTAIN CORPORATE ACTION. If the Issuer
shall propose (i) to pay any dividend to the holders of its Common Stock or to
make any other distribution to the holders of its Common Stock; (ii) to offer to
the holders of its Common Stock rights to subscribe for or to purchase any
additional shares of Common Stock (or options or rights with respect thereto);
(iii) to effect any reclassification of its Common Stock; (iv) to otherwise
issue any Equity Securities; (v) to effect any capital reorganization; (vi) to
effect any consolidation, merger or sale, transfer or other disposition of all
or substantially all of its assets; or (vii) to effect the liquidation,
dissolution or winding up of the Issuer, then, in each such case, the Issuer
shall give to each Holder of Warrants a notice of such proposed action, which
shall specify the date on which a record is to be taken for the purposes of such
dividend, distribution or rights offer, or the date on which such
reclassification, issuance, reorganization, consolidation, merger, sale,
transfer, disposition, liquidation, dissolution or winding up is to take place
and the date of participation therein by the holders of Common Stock, if any
such date is to be fixed, and shall also set forth such facts with respect
thereto as shall be reasonably necessary to indicate the effect of such action
on the Common Stock, and the number of shares of Warrant Stock which will
comprise a Stock Unit after giving effect to any adjustment which will be
required as a result of such action. Such notice shall be so given in the case
of any action covered by clause (i) or (ii) above at least 20 days prior to the
record date for determining holders of the Common Stock for purposes of such
action, and in the case of any other such action, at least 20 days prior to the
date of the taking of such proposed action or the date of participation therein
by the holders of Common Stock, whichever shall be the earlier.
23
ARTICLE VI
REGISTRATION RIGHTS
SECTION 6.01. (a) FILING OF SHELF REGISTRATION. The Issuer shall use
its reasonable best efforts to file a "shelf" registration statement on any
appropriate form pursuant to Rule 415 (or similar rule that may be adopted by
the Commission) under the Securities Act (a "SHELF REGISTRATION") as promptly as
practicable and in no event later than the date that is 5 days following the
date hereof (the "REQUIRED FILING DATE") to permit resales of all of the
Registrable Securities. The Issuer agrees to use its reasonable best efforts to
cause such Shelf Registration to become effective as promptly as possible after
the filing thereof, but in no event later than 90 days after the Required Filing
Date (the "REQUIRED EFFECTIVE DATE"), and thereafter to keep it continuously
effective for the period that will terminate upon the earlier of the date on
which (1) all the Registrable Securities covered by the Shelf Registration have
been sold pursuant to such Shelf Registration or have been sold to the public
pursuant to Rule 144 or (2) no Registrable Securities remain outstanding.
(b) LIQUIDATED DAMAGES. If (i) the Registration Statement has not
been declared effective by the Commission on or prior to the Required Effective
Date or (ii) the Registration Statement is filed and declared effective but
shall thereafter cease to be effective at any time within the time period
required for effectiveness in subsection (a) above without being succeeded
immediately by a post-effective amendment to the Registration Statement that
cures such failure and that is itself immediately declared effective (each such
event referred to in clauses (i) and (ii), a "REGISTRATION DEFAULT"), the Issuer
shall pay liquidated damages ("LIQUIDATED DAMAGES") to each holder of
Registrable Securities in an amount equal to $0.01 per share of Warrant Stock
held by such holder for each week or portion thereof during which any
Registration Default continues (other than with respect to any period during
which such holder is required to discontinue the disposition of Registrable
Securities pursuant to the last paragraph of Section 6.03 hereof). The amount of
such Liquidated Damages shall increase on each 90-day anniversary of the day the
first Registration Default occurred by an additional $0.01 per share of Warrant
Stock for each week or portion thereof during which any Registration Default
continues until all Registration Defaults have been cured, up to a maximum
amount of Liquidated Damages of $0.05 per week or portion thereof per share of
Warrant Stock. All accrued Liquidated Damages shall be paid by wire transfer of
immediately available funds or by federal funds check on the last day of each
four week period to an account previously designated in writing to the Issuer by
each holder of Registrable Securities. Following the cure of all Registration
Defaults relating to any particular Registrable Security, the accrual of
Liquidated Damages with respect to such Registrable Security will cease. Except
as provided in Section 6.06 hereof, no holder of Registrable Securities shall be
entitled to any damages for a Registration Default beyond the Liquidated Damages
provided for herein.
All obligations of the Issuer set forth in the preceding paragraph
that are outstanding with respect to any Registrable Security at the time such
security ceases to be a Registrable Security shall survive until such time as
all such obligations have been paid in full.
24
SECTION 6.02. HOLD-BACK AGREEMENTS; CUTBACKS.
(a) RESTRICTIONS ON PUBLIC SALE BY HOLDER OF REGISTRABLE SECURITIES.
Each holder of Registrable Securities whose Registrable Securities are covered
by a Registration Statement filed pursuant to Section 6.01 hereof agrees, if
requested by the managing underwriters in an underwritten offering, not to
effect any public sale or distribution of securities of the Issuer of the same
class as the securities included in such Registration Statement, including a
sale pursuant to Rule 144 under the Securities Act (except as part of such
underwritten offering), during the 15-day period prior to, and during the 90-day
period beginning on, the closing date of each underwritten offering made
pursuant to such Registration Statement, to the extent timely notified in
writing by the Issuer or the managing underwriters; PROVIDED, HOWEVER, that all
directors and executive officers of the Issuer then holding Common Stock enter
into agreements containing similar restrictions, and that each holder of
Registrable Securities shall be subject to the hold-back restrictions of this
Section 6.02(a) only once during any twelve-month period.
The foregoing provisions shall not apply to any holder of
Registrable Securities if such holder is prevented by applicable statute or
regulation from entering into any such agreement; PROVIDED, HOWEVER, that any
such holder shall undertake, in its request to participate in any such
underwritten offering, not to effect any public sale or distribution of any
Registrable Securities held by such holder and covered by a Registration
Statement commencing on the date of sale of the Registrable Securities unless it
has provided 45 days prior written notice of such sale or distribution to the
underwriter or underwriters.
(b) RESTRICTIONS ON SALE OF SECURITIES BY THE ISSUER AND Others. The
Issuer agrees (1) not to effect any public or private offer, sale or
distribution of any of its equity securities or any class or series of its
capital stock having a preference in liquidation or with respect to dividends,
including a sale pursuant to Regulation D under the Securities Act (other than
any such sale or distribution of such securities in connection with any merger
or consolidation by the Issuer or any subsidiary of the Issuer or the
acquisition by the Issuer or a subsidiary of the Issuer of the capital stock or
substantially all the assets of any other Person or in connection with any
employee stock option or other benefit plan), during the 10-day period prior to,
and during the 90-day period beginning with, the effectiveness of a Registration
Statement filed under Section 6.01 hereof to the extent timely notified in
writing by a holder of Registrable Securities or the managing underwriters in an
underwritten offering (except as part of such if permitted, or pursuant to
registrations on Forms S-4 or S-8 or any successor form to such Registration
Statement forms) and (2) during the aforementioned period to use reasonable best
efforts to cause each holder of each of its privately placed equity securities
or any class or series of its capital stock having a preference in liquidation
or with respect to dividends purchased from the Issuer at any time on or after
the date of this Agreement to agree not to effect any public sale or
distribution of any such securities during such period, including a sale
pursuant to Rule 144 under the Securities Act (except as part of such
registration, if permitted).
(c) CUTBACKS IN UNDERWRITTEN REGISTRATIONS. In connection with any
registration hereunder in which more than one securityholder has a right to
request registration of its Common Stock, in the event that such registration
involves an underwritten offering and the
25
managing underwriter or underwriters participating in such offering advise the
securityholders participating in such offering that the total number of shares
of Common Stock to be included in such offering exceeds the amount that can be
sold in (or during the time of) such offering without delaying or jeopardizing
the success of such offering (including the price per share of Common Stock),
then the Issuer shall include in any such total number of Registrable Securities
and all other shares of Common Stock which have registration rights with respect
to such registration to be offered for the account of all securityholders shall
be reduced to a number deemed satisfactory by such managing underwriter or
underwriters, provided that the shares of Common Stock to be excluded shall be
determined in the following sequence: (i) first, there shall be excluded shares
of Common Stock held by securityholders of the Issuer other than the holders of
Registrable Securities requesting and legally entitled to include such shares of
Common Stock in such registration, on a PRO RATA basis (based upon the number of
shares of Common Stock requested (or proposed) to be registered by each such
holder and (ii) second, Registable Securities, on a PRO RATA basis (based upon
the number of Registrable Securities requested to be included in such
registration).
SECTION 6.03. REGISTRATION PROCEDURES. In connection with the
Issuer's Shelf Registration obligations pursuant to Section 6.01 hereof, the
Issuer will use its best efforts to effect such registration to permit the sale
of such Registrable Securities in accordance with the intended method or methods
of distribution thereof (which methods may include, at the request of the
Required Holders, an underwritten offering), and pursuant thereto the Issuer
will, as expeditiously as possible:
(a) prepare and file with the Commission, within the time period
provided in Section 6.01 hereof, a Registration Statement or Registration
Statements relating to the Registrable Securities on any appropriate form under
the Securities Act, which form shall be available for the sale of the
Registrable Securities in accordance with the intended method or methods of
distribution thereof and shall include (i) all financial statements (including,
if applicable, financial statements of any Person which shall have guaranteed
any indebtedness of the Issuer) required by the Commission to be filed therewith
and (ii) if the sale is by means of an underwritten offering, any other
information that the managing underwriter reasonably believes to be of material
importance to the success of such offering, cooperate and assist in any filings
required to be made with the NASD, and use its best efforts to cause such
Registration Statement to become effective within such time period; PROVIDED
that as far in advance as practical before filing a Registration Statement or
any amendments or supplements thereto, the Issuer will furnish to the holders of
the Registrable Securities covered by such Registration Statement and the
underwriters, if any, copies of all such documents proposed to be filed, which
documents will be subject to the review by such holders and underwriters, and
the Issuer will not file any Registration Statement or any amendments or
supplements thereto to which the holders of a majority of the Registrable
Securities or such managing underwriters, if any, shall reasonably object within
14 days;
(b) prepare and file with the Commission such amendments and
post-effective amendments to the Registration Statement as may be necessary to
keep the Registration Statement effective until all Registrable Securities
covered by such Registration Statement have
26
been sold; cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under the
Securities Act; and comply with the provisions of the Securities Act with
respect to the disposition of all Registrable Securities covered by such
Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the sellers thereof set forth in
such Registration Statement or supplement to the Prospectus;
(c) notify the selling holders of Registrable Securities and the
managing underwriters, if any, promptly, and (if requested by any such Person)
confirm such advice in writing, (1) when the Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to the
Registration Statement or any post-effective amendment, when the same has become
effective, (2) of any request by the Commission for amendments or supplements to
the Registration Statement or the Prospectus or for additional information, (3)
of the issuance by the Commission of any stop order of which the Issuer or its
counsel is aware suspending the effectiveness of the Registration Statement or
the initiation of any proceedings for that purpose, (4) if at any time the
representations and warranties of the Issuer contemplated by paragraph (n) below
cease to be true and correct in any material respect, (5) of the receipt by the
Issuer of any notification with respect to the suspension of the qualification
of the Registrable Securities for sale in any jurisdiction or the initiation or
threatening of any proceeding for such purpose and (6) of the Issuer's becoming
aware that the Prospectus (including any document incorporated therein by
reference), as then in effect, includes an untrue statement of material fact or
omits to state a material fact required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances then
existing;
(d) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of the Registration Statement at the earliest
possible moment;
(e) if reasonably requested by the managing underwriter or
underwriters or a holder of Registrable Securities being sold in connection with
an underwritten offering, promptly incorporate in a Prospectus supplement or
post-effective amendment such information as the managing underwriter or
underwriters or the holders of a majority of the Registrable Securities being
sold agree should be included therein relating to the plan of distribution with
respect to such Registrable Securities, including, without limitation,
information with respect to the amount of Registrable Securities being sold to
such managing underwriter or underwriters, the purchase price being paid
therefor by such underwriters and any other terms of the underwritten (or best
efforts underwritten) offering of the Registrable Securities to be sold in such
offering; and make all required filings of such Prospectus supplement or
post-effective amendment as promptly as practicable upon being notified of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment;
(f) furnish to each selling holder of Registrable Securities and
each managing underwriter, if any, without charge, if requested, at least one
signed copy of the Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, all documents
incorporated therein by reference and all exhibits (including those incorporated
by reference);
27
(g) deliver to each selling holder of Registrable Securities and the
underwriters, if any, without charge, if requested, as many copies of the
Prospectus (including each preliminary Prospectus) and any amendment or
supplement thereto as such Persons may reasonably request; the Issuer consents
to the use (subject to the limitations set forth in the last paragraph of this
Section 6.03) of the Prospectus or any amendment or supplement thereto by each
of the selling holders of Registrable Securities and the underwriters, if any,
in connection with the offering and sale of the Registrable Securities covered
by the Prospectus or any amendment or supplement thereto;
(h) prior to any public offering of Registrable Securities, use its
best efforts to register or qualify or cooperate with the selling holders of
Registrable Securities, the underwriters, if any, and their respective counsel
in connection with the registration or qualification of such Registrable
Securities for offer and sale under the securities or blue sky laws of such
jurisdictions as any such seller or underwriter reasonably requests in writing
and do any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of such Registrable Securities; provided that
the Issuer will not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action which would
subject it to general service of process or taxation in any such jurisdiction
where it is not then so subject;
(i) cooperate with the selling holders of Registrable Securities and
the managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing such Registrable Securities to be sold and
not bearing any restrictive legends; and enable such Registrable Securities to
be in such denominations and registered in such names as such managing
underwriters may request at least two business days prior to any sale of such
Registrable Securities to the underwriters;
(j) use its best efforts to cause the Registrable Securities covered
by the applicable Registration Statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary to enable
the seller or sellers thereof or the underwriters, if any, to consummate the
disposition of such Registrable Securities;
(k) upon the occurrence of any event contemplated by paragraph
(c)(6) above, immediately prepare a supplement or post-effective amendment to
the related Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the holders of the Registrable Securities, the
Prospectus will not contain an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not misleading
in light of the circumstances then existing;
(l) use best efforts to cause all Registrable Securities covered by
a Registration Statement to be listed on each securities exchange or automated
quotation system on which securities of the same class issued by the Issuer are
then listed;
28
(m) not later than the effective date of the Registration Statement,
provide a CUSIP number for all Registrable Securities and provide the transfer
agent with printed certificates for the Registrable Securities which are in a
form eligible for deposit with The Depository Trust Company;
(n) enter into such agreements (including an underwriting agreement)
and take all such other appropriate and reasonable actions in connection
therewith in order to expedite or facilitate the disposition of such Registrable
Securities and in such connection, whether or not an underwriting agreement is
entered into and whether or not the contemplated disposition of Registrable
Securities will be made pursuant to an underwritten offering (1) make such
representations and warranties to the holders of such Registrable Securities and
the underwriters, if any, in form, substance and scope as are customarily made
by issuers to underwriters in primary underwritten offerings and covering
matters; (2) obtain opinions of counsel to the Issuer (which counsel and
opinions (in form, scope and substance) shall be reasonably satisfactory to the
managing underwriters, if any, and the holders of a majority of the Registrable
Securities) addressed to each selling holder and the underwriters, if any,
covering the matters customarily covered in opinions requested in underwritten
offerings and such other matters as may be reasonably requested by such holders
and underwriters; (3) obtain "cold comfort" letters and updates thereof from the
Issuer's independent certified public accountants addressed to such holders and
underwriters, if any, such letters to be in customary form and covering matters
of the type customarily covered in "cold comfort" letters by underwriters in
connection with primary underwritten offerings; (4) if an underwriting agreement
is entered into, if permitted by the managing underwriter the same shall set
forth in full the indemnification provisions and procedures of Section 6.06
hereof with respect to all parties to be indemnified pursuant to said Section;
provided that the indemnification provisions and procedures set forth in such
underwriting agreement shall be no less favorable to the selling holders of
Registrable Securities and the underwriters than the indemnification provisions
and procedures of Section 6.06 hereof; and (5) the Issuer shall deliver such
documents and certificates as may be requested by the holders of a majority of
the Registrable Securities being sold and the managing underwriters, if any, to
evidence compliance with paragraph (k) above and with any customary conditions
contained in the underwriting agreement or other agreement entered into by the
Issuer. The above shall be done at each closing under such underwriting or
similar agreement or as and to the extent required thereunder;
(o) make available for inspection by any holder of Registrable
Securities or any underwriter participating in any disposition of Registrable
Securities pursuant to a Shelf Registration, and any attorney or accountant
retained by such holders or underwriters, if any, all financial and other
records, pertinent corporate documents and properties of the Issuer as may be
reasonably necessary to enable them to exercise their due diligence
responsibilities, and provide reasonable access to appropriate officers of the
Issuer in connection with such due diligence responsibilities;
(p) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission; and
29
(q) make appropriate officers of the Issuer available to such
holders and underwriters for meetings with prospective purchasers of the
Registrable Securities and prepare and present to potential investors customary
"road show" material in a manner consistent with other new issuances of other
securities similar to the Registrable Securities.
The Issuer may require each seller of Registrable Securities as to
which any registration is being effected to furnish to the Issuer such
information regarding the distribution of such securities as the Issuer may from
time to time reasonably request in writing.
Each holder of Registrable Securities agrees by acceptance of such
Registrable Securities that, upon receipt of any notice from the Issuer of the
happening of any event of the kind described in Section 6.03(c)(3), (5) or (6)
hereof, such holder will forthwith discontinue disposition of Registrable
Securities until such holder's receipt of the copies of the supplemented or
amended Prospectus contemplated by Section 6.03(k) hereof, or until it is
advised in writing by the Issuer that the use of such Prospectus may be resumed,
and has received copies of any additional or supplemental filings which are
incorporated by reference in such Prospectus, and, if so directed by the Issuer
such holder will deliver to the Issuer (at the Issuer's expense) all copies,
other than permanent file copies then in such holder's possession, of such
Prospectus covering such Registrable Securities current at the time of receipt
of such notice.
SECTION 6.04. REGISTRATION EXPENSES. All expenses incident to the
Issuer's performance of or compliance with this Agreement, including without
limitation all (i) registration and filing fees, fees and expenses associated
with filings required to be made with the NASD (including, if applicable, the
fees and expenses of any "qualified independent underwriter" and its counsel as
may be required by the rules and regulations of the NASD), (ii) fees and
expenses of compliance with securities or blue sky laws (including fees and
disbursements of counsel for the underwriters or selling holders in connection
with blue sky qualifications of the Registrable Securities and determination of
their eligibility for investment under the laws of such jurisdictions as the
managing underwriters or holders of a majority of the Registrable Securities
being sold may reasonably designate), (iii) printing expenses (including
expenses of printing certificates for the Registrable Securities in a form
eligible for deposit with The Depository Trust Company and of printing
prospectuses), (iv) fees and disbursements of counsel for the Issuer and
customary out of pocket expenses and fees paid by issuers to the extent provided
for in an underwriting agreement (excluding discounts, commissions or fees of
underwriters, selling brokers, dealer managers or similar securities industry
professionals relating to the distribution of the Registrable Securities,
transfer taxes or legal expenses of any Person other than the Issuer and the
selling holders), (v) the cost of securities acts liability insurance if the
Issuer so desires and (vi) fees and expenses of other Persons retained by the
Issuer (all such expenses being herein called "REGISTRATION EXPENSES") will be
borne by the Issuer regardless of whether the Registration Statement becomes
effective. Each holder of Registrable Securities will pay any fees or
disbursements of counsel to such holder and all underwriting discounts and
commissions and transfer taxes, if any, and other fees, costs and expenses of
such holder (other than Registration Expenses) relating to the sale or
disposition of such holder's Registrable Securities. The Issuer, in any event,
will pay the Issuer's own internal expenses (including, without limitation, all
salaries and expenses of its officers and employees performing legal or
30
accounting duties), the expense of any annual audit, the fees and expenses
incurred in connection with the listing of the securities to be registered on
each securities exchange on which similar securities issued by the Issuer are
then listed, rating agency fees and the fees and expenses of any Person,
including special experts, retained by the Issuer.
SECTION 6.05. RESTRICTION ON OTHER REGISTRATIONS. The Issuer agrees
that, until the occurrence of the date on which the Registration Statement
referred to in Section 6.01 hereof is declared effective by the SEC, it shall
not effect a registration of any of its equity securities, other than with
respect to up to 25,000,000 shares of Common Stock.
SECTION 6.06. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE ISSUER. The Issuer agrees to indemnify
and hold harmless, to the full extent permitted by law, each holder of
Registrable Securities, their officers, directors and employees and each Person
who controls such holder (within the meaning of the Securities Act) (the
"INDEMNIFIED PARTIES") against all losses, claims, damages, liabilities and
expenses incurred by such party in connection with any actual or threatened
action arising out of or based upon any untrue or alleged untrue statement of a
material fact contained in any Registration Statement, Prospectus or preliminary
Prospectus or any omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein (in
the case of a Prospectus or a preliminary Prospectus, in light of the
circumstances then existing) not misleading, and the Issuer agrees to reimburse
such Indemnified Parties for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss or action or
proceeding in respect thereof, except insofar as the same arise out of or are
based upon any such untrue statement or omission made in reliance on and in
conformity with any information furnished in writing to the Issuer by such
holder or its counsel expressly for use therein. The Issuer shall also indemnify
underwriters, their officers and directors and each Person who controls such
Persons (within the meaning of the Securities Act) to the same extent as
provided above with respect to the indemnification of the Indemnified Parties,
if requested.
(b) INDEMNIFICATION BY HOLDER OF REGISTRABLE SECURITIES. In
connection with any Registration Statement under SECTION 6.01, each holder of
Registrable Securities will furnish to the Issuer in writing such information
and affidavits as the Issuer reasonably requests for use in connection with any
Registration Statement or Prospectus and agrees to indemnify and hold harmless,
to the full extent permitted by law, the Issuer, its directors and officers and
each Person who controls the Issuer (within the meaning of the Securities Act)
against any losses, claims, damages, liabilities and expenses resulting from any
untrue statement of a material fact contained in any Registration Statement or
Prospectus or any omission of a material fact required to be stated in the
Registration Statement or Prospectus or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, to the extent, but only to the extent, that such untrue statement or
omission relates to such holder and is made in reliance on and in conformity
with any information or affidavit furnished in writing by such holder to the
Issuer specifically for inclusion in such Registration Statement or Prospectus.
In no event shall the liability of any selling holder of Registrable Securities
hereunder be greater in amount than
31
the dollar amount of the proceeds received by such holder upon the sale of the
Registrable Securities giving rise to such indemnification obligation. The
Issuer shall be entitled to receive indemnities from underwriters, selling
brokers, dealer managers and similar securities industry professionals
participating in the distribution of such Registrable Securities to the same
extent above with respect to information or affidavit furnished writing by such
Persons as provided specifically for any Prospectus or Registration Statement.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any Person entitled to
indemnification hereunder will (i) give prompt notice to the Issuer or holder of
Registrable Securities, as the case may be (in either case, as applicable, an
"INDEMNIFYING PARTY"), of any claim with respect to which it seeks
indemnification and (ii) permit such Indemnifying Party to assume the defense of
such claim with counsel reasonably satisfactory to such Person; PROVIDED,
HOWEVER, that any Person entitled to indemnification hereunder shall have the
right to employ separate counsel and to participate in the defense of such
claim, but the fees and expenses of such counsel shall be at the expense of such
Person unless (a) the Indemnifying Party has agreed to pay such fees or
expenses, (b) the Indemnifying Party has failed to assume the defense of such
claim or (c) in the reasonable judgment of any such Person, based upon written
advice of its counsel, it would be inappropriate under applicable ethical
standards for counsel to the Indemnifying Party to represent such Person in the
defense of such claim (in which case, if the Person notifies the Indemnifying
Party in writing that such Person elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense of such claim on behalf of such Person). If such
defense is not assumed by the Indemnifying Party, the Indemnifying Party will
not be subject to any liability for any settlement made without its consent (but
such consent will not be unreasonably withheld). No Indemnifying Party will
consent to entry of any judgment or enter into any settlement without the
consent of the Indemnified Party which does not include as an unconditional term
thereof the giving by the claimant or plaintiff to such Indemnified Party of a
release from all liability in respect to such claim or litigation. Any
Indemnifying Party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel for all Persons entitled to indemnification by such Indemnifying Party
with respect to such claim in any one jurisdiction, unless in the reasonable
judgment of such Person a conflict of interest may exist between such Person and
any other Person entitled to indemnification hereunder with respect to such
claim, in which event the Indemnifying Party shall be obligated to pay the fees
and expenses of such additional counsel or counsels, but only of one such
additional counsel for each group of similarly situated Persons in any one
jurisdiction.
(d) CONTRIBUTION. If for any reason the indemnification provided for
in the preceding paragraphs (a) and (b) is unavailable to a Person entitled to
indemnification or is insufficient to hold it harmless as contemplated by the
preceding paragraphs (a) and (b), then the Indemnifying Party shall contribute
to the amount paid or payable by such Person as a result of such loss, claim,
damage or liability in such proportion as is appropriate to reflect the relative
fault of such Person and the Indemnifying Party, as well as any other relevant
equitable considerations, PROVIDED that no holder of Registrable Securities
shall be required to contribute an amount greater than the dollar amount of the
proceeds received by such holder of Registrable Securities with respect to the
sale of any securities. The relative fault shall be determined by
32
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Indemnifying Party or the Indemnified
Party and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such untrue statement or omission. The parties
hereto agree that it would not be just and equitable if contributions pursuant
to this paragraph were to be determined by pro rata allocation or by any other
method of allocation which does not take into account the equitable
considerations referred to in the first sentence of this paragraph. No Person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.
SECTION 6.07. RULE 144. The Issuer covenants that it will file the
reports required to be filed by it under the Securities Act and the Exchange Act
and the rules and regulations adopted by the Commission thereunder (or, if it is
not required to file such reports, it will, upon the request of any holder of
Registrable Securities, make publicly available other information so long as
necessary to permit sales pursuant to Rule 144 under the Securities Act), and it
will take such further action as any holder of Registrable Securities may
reasonably request, all to the extent required from time to time to enable such
holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the Commission. Upon the request
of any holder of Registrable Securities, the Issuer will deliver to such holder
a written statement as to whether it has complied with such information and
filing requirements.
SECTION 6.08 REMEDIES. Each holder of Registrable Securities, in
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, in connection with the breach by the Issuer
of its obligations to register the Registrable Securities will be entitled to
specific performance of its rights under this Agreement. The Issuer agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach by it of the provisions of this Agreement and agrees to waive
the defense in any action for specific performance that a remedy at law would be
adequate.
ARTICLE VII
TAG-ALONG SALE
SECTION 7.01. TAG-ALONG OBLIGATIONS.
(a) If at any time the Principal Shareholder or any Affiliate (other
than the Company) of the Principal Shareholder that has such Affiliate status
solely by virtue of his, her or its status as an Affiliate of the Issuer
("TAG-ALONG SELLER") shall, in one or in a series of transactions, enter into an
agreement to effect, or effect or propose to effect, an Applicable Disposition
to any transferee (a "TAG-ALONG SALE"), the Initial Holder shall have the right,
but not the obligation, to participate in such Tag-Along Sale by selling up to
the number of shares (on an aggregate basis) of Warrant Stock subject to
Warrants and shares of Warrant Stock equal to the
33
product of (i) the total number of shares (on an aggregate basis) of Common
Stock proposed to be sold in the proposed Tag-Along Sale multiplied by (ii) a
fraction, the numerator of which is equal to the number of shares (on an
aggregate basis) of Warrant Stock subject to Warrants and shares of Warrant
Stock owned by the Initial Holder immediately prior to the Tag-Along Sale, and
the denominator of which is equal to (A) the number of shares of Common Stock
owned by the Tag-Along Seller immediately prior to the Tag-Along Sale plus (B)
the number of shares (on an aggregate basis) of Warrant Stock subject to
Warrants and shares of Warrant Stock owned by such holder together with the
number of shares of Common Stock owned by any holder thereof who has similar
"tag-along" rights and elects to exercise such rights in connection with the
Tag-Along Sale, in each case immediately prior to the Tag-Along Sale. Any such
sales by the Initial Holder shall be on the same terms and conditions as the
proposed Tag-Along Sale by the Tag-Along Seller, except the Initial Holder shall
not be required to make any representations or warranties except as to (x) its
title to the Warrants or shares of Warrant Stock to be sold by it, (y) the
Initial Holder's power and authority to effect such transfer and (z) such
matters pertaining to compliance with securities law as the transferee may
reasonably require.
(b) Notwithstanding the foregoing, the provisions of Section 7.01(a)
shall not apply to any transfer, sale or disposition of shares of Common Stock
by the Principal Shareholder (i) to any of its Affiliates, PROVIDED that, any
further sale, disposition or transfer by such Affiliate transferee shall be
subject to the provisions of this Section 7.01(a), (ii) in an ordinary brokerage
transaction pursuant to Rule 144 or (iii) to a Principal Shareholder Beneficial
Owner's spouse or the members of the Principal Shareholder Beneficial Owner's
immediate family or to a custodian, trustee, executor, or other fiduciary for
the account of the Principal Shareholder Beneficial Owner's spouses or members
of the Principal Shareholder Beneficial Owner's immediate family, or to a trust
for the Principal Shareholder Beneficial Owner's own self, PROVIDED, that each
such transferee or assignee, prior to the completion of the sale, transfer, or
assignment shall have executed documents assuming the obligations of the
Principal Shareholder Beneficial Owner with respect to the transferred
securities.
(c) On the date hereof, the Issuer shall deliver to the Initial
Holder a joinder agreement substantially in the form attached hereto as Annex 4
(a "JOINDER AGREEMENT"), executed by the Issuer, the Principal Shareholder and
the Principal Shareholder Beneficial Owners, pursuant to which such parties will
agree to be bound by the provisions of this Article VII. As a condition to the
validity of any sale, disposition or other transfer of any Common Stock by any
of the Persons who have executed and delivered a Joinder Agreement pursuant to
this Section 7.01 to any other Person, the transferee thereof shall execute and
deliver to the Issuer and each Holder a Joinder Agreement.
(d) References in this Section 7.01 to the Initial Holder shall
include the Initial Holder's respective Affiliates to the extent that such
Affiliates then hold Warrants or Warrant Stock.
SECTION 7.02. PROCEDURES. If a Tag-Along Seller is participating in
a Tag-Along Sale, at least 15 days before the proposed date thereof, the Issuer
shall provide each Holder of Warrants or Warrant Stock with written notice of
such Tag-Along Sale setting forth in
34
reasonable detail the consideration per share to be paid by the transferee, the
number of shares to be sold and the other terms and conditions of the Tag-Along
Sale. Each Holder of Warrants or Warrant Stock wishing to participate in the
Tag-Along Sale shall provide written notice to such Tag-Along Seller and to the
Issuer within 15 days of the date the notice specified in the preceding sentence
is received by such Holder. Such notice shall set forth the number (on an
aggregate basis) of then exercisable Warrants and shares of Warrant Stock, if
any, such holder elects to include in the Tag-Along Sale. If a Holder, or
Holders, of Warrants or Warrant Stock has elected to participate in a Tag-Along
Sale, the Tag-Along Seller shall reduce, to the extent necessary, the number of
shares of Common Stock that it is entitled to sell in the Tag-Along Sale to
permit the Holder, or Holders, of Warrants or Warrant Stock to participate in
the Tag-Along Sale and the Holder, or Holders, of Warrant or Warrant Stock so
electing shall sell such number of shares identified in its notice to the
Tag-Along Seller. If such notice is not received from a Holder within the 15-day
period specified above, the Tag-Along Seller shall have the right to sell or
otherwise transfer the shares of Common Stock to the proposed transferee without
any participation by such Holder, but only (i) on the terms and conditions
stated in the notice, and (ii) if the sale or transfer of such shares of Common
Stock is consummated not later than 60 days after the end of such 5-day period
specified above.
ARTICLE XIII
HOLDERS' RIGHTS
SECTION 8.01. DELIVERY EXPENSES. If any Holder surrenders any
certificate for Warrants or Warrant Stock to the Issuer or a transfer agent of
the Issuer for exchange for instruments of other denominations or registered in
another name or names, the Issuer shall cause such new instruments to be issued
and shall pay the cost of delivering to or from the office of such Holder from
or to the Issuer or its transfer agent, duly insured, the surrendered instrument
and any new instruments issued in substitution or replacement for the
surrendered instrument.
SECTION 8.02. TAXES. The Issuer shall pay all taxes (other than
Federal, state or local income taxes) which may be payable in connection with
the execution and delivery of this Agreement or the issuance of the Warrants and
Warrant Stock hereunder or in connection with any modification of this Agreement
or the Warrants and shall hold each Holder harmless without limitation as to
time against any and all liabilities with respect to all such taxes. The
obligations of the Issuer under this Section 8.02 shall survive any redemption,
repurchase or acquisition of Warrants or Warrant Stock by the Issuer, any
termination of this Agreement, and any cancellation or termination of the
Warrants.
SECTION 8.03. REPLACEMENT OF INSTRUMENTS. Upon receipt by the Issuer
of evidence reasonably satisfactory to it of the ownership of and the loss,
theft, destruction or mutilation of any certificate or instrument evidencing any
Warrants or Warrant Stock, and
(a) in the case of loss, theft or destruction, of indemnity
reasonably satisfactory to it (PROVIDED that if the Common Stock is not at
the time publicly traded and the owner of
35
the same is any Holder or an institutional lender or investor, its own
agreement of indemnity shall be deemed to be satisfactory), or
(b) in the case of mutilation, upon surrender or cancellation
thereof, the Issuer, at its expense, shall execute, register and deliver,
in lieu thereof, a new certificate or instrument for (or covering the
purchase of) an equal number of Warrants or Warrant Stock.
SECTION 8.04. INDEMNIFICATION. The Issuer shall indemnify and hold
harmless each of the Holders and each of their respective directors, officers,
employees, shareholders, Affiliates and agents (each, an "INDEMNIFIED PERSON")
on demand from and against any and all losses, claims, damages, liabilities (or
actions or other proceedings commenced or threatened in respect thereof) and
expenses that arise out of, result from, or in any way relate to, this Agreement
or the Warrants, or in connection with the other transactions contemplated
hereby, and to reimburse each indemnified person, upon its demand, for any legal
or other expenses incurred in connection with investigating, defending or
participating in the defense of any such loss, claim, damage, liability, action
or other proceeding (whether or not such indemnified person is a party to any
action or proceeding out of which any such expenses arise), other than any of
the foregoing claimed by any indemnified person to the extent incurred by reason
of the gross negligence or willful misconduct of such indemnified person. No
indemnified person shall be responsible or liable to either the Issuer or any
other Person for any damages which may be alleged as a result of or relating to
this Agreement or the Warrants (other than in connection with a breach of this
Agreement), or in connection with the other transactions contemplated hereby and
thereby. Any claim for indemnity in connection with or relating to a
registration of securities pursuant to Article VI shall be governed by Section
6.06, without regard to the provisions of this Section 8.04.
SECTION 8.05. INSPECTION RIGHTS. The Issuer shall afford, and shall
cause its Subsidiaries to afford, the Initial Holder or its authorized agents,
access, at reasonable times, upon reasonable prior notice and subject to
customary confidentiality obligations, (a) to inspect the books and records of
the Issuer and its Subsidiaries, (b) to discuss with management of the Issuer
and its Subsidiaries the business and affairs of the Issuer and its Subsidiaries
and (c) to inspect the properties of the Issuer and its Subsidiaries.
ARTICLE IX
OTHER COVENANTS OF ISSUER
The Issuer agrees with each Holder that, so long as any of the
Warrants and/or Warrant Stock shall be outstanding:
SECTION 9.01. FINANCIAL STATEMENTS, ETC. The Issuer agrees that it
will file all documents, reports and other items required to be filed by it
under the Securities Act and the Exchange Act so long as the Issuer is
registered under the Exchange Act. Upon the request of any Holders, the Issuer
will deliver to such Holder a written statement as to whether it has complied
with such requirements.
36
SECTION 9.02. TRANSACTIONS WITH AFFILIATES. The Issuer and its
Subsidiaries shall not, directly or indirectly, enter into any transaction or
series of related transactions with or for the benefit of any of their
respective Affiliates except on terms that are no less favorable to the Issuer
or the relevant Subsidiary other than any transactions permitted by Section 6.10
of the Note Agreement.
SECTION 9.03. RESTRICTIONS ON PERFORMANCE. The Issuer shall not at
any time enter into an agreement or other instrument limiting in any manner its
ability to perform its obligations under this Agreement or the Warrants, or
making such performance or the issuance of Warrant Stock upon the exercise of
any Warrant a default under any such agreement or instrument.
SECTION 9.04. MODIFICATION OF OTHER EQUITY DOCUMENTS. The Issuer
shall not amend or consent to any modification, supplement or waiver of any
provision of any Other Equity Documents in any manner which would have a
material adverse effect on the holders of Warrants or Warrant Stock, in each
case without the prior written consent of the Required Holders. Without limiting
the generality of the foregoing, the Issuer shall not amend, or consent to any
modification, supplement or waiver of any provision of any Other Equity
Documents in a way which would (i) restrict the transferability of the Warrants
or the Warrant Stock, (ii) restrict the transferability of the rights of any
Holder in this Agreement to any transferee of all or a portion of such Holder's
Warrants and/or Warrant Stock or (iii) require any consent or other approval of
any Person to the exercise of the Warrants by any Holder or the issuance of
Warrant Stock upon such exercise.
SECTION 9.05. RESERVATION AND AUTHORIZATION OF COMMON STOCK. The
Issuer shall at all times reserve and keep available for issue upon the exercise
or conversion of Warrants such number of its authorized but unissued shares of
Common Stock as will be sufficient to permit the exercise in full of all
outstanding Warrants. The Issuer shall not amend its certificate of
incorporation in any respect relating to the Common Stock other than (i) to
increase or decrease the number of shares of authorized capital stock (subject
to the provisions of the preceding sentence) or (ii) to decrease the par value
of any shares of Common Stock. All shares of Common Stock which shall be so
issuable, when issued upon exercise of any Warrant and payment of the applicable
Exercise Price therefor in accordance with the terms of this Warrant, shall be
duly and validly issued, fully paid and nonassessable and free and clear of any
Liens.
Before taking any action which would result in an adjustment in the
number of shares of Common Stock comprising a Stock Unit or which would cause an
adjustment reducing the Current Warrant Price per share of Common Stock below
the then par value, if any, of the shares of Common Stock issuable upon exercise
of the Warrants, the Issuer shall take any corporate action which is necessary
in order that the Issuer may validly and legally issue fully paid and
nonassessable shares of Common Stock free and clear of any Liens upon the
exercise of all the Warrants immediately after the taking of such action.
37
Before taking any action which would result in an adjustment in the
number of shares of Common Stock comprising a Stock Unit or in the Current
Warrant Price per share of Common Stock, the Issuer shall obtain all such
authorizations or exemptions thereof, or consents thereto, as may be necessary
from any public regulatory body or bodies having jurisdiction thereof.
The Issuer will list on each national securities exchange or the
Nasdaq National Market on which any Common Stock may at any time be listed,
subject to official notice of issuance upon exercise of the Warrants, and will
maintain such listing of, all shares of Common Stock from time to time issuable
upon the exercise of the Warrants.
SECTION 9.06. NOTICE OF EXPIRATION DATE. The Issuer shall give to
each Holder notice of the Expiration Date. Such notice may be given by the
Issuer not less than 30 days but not more than 60 days prior to the Expiration
Date; PROVIDED, HOWEVER, that if the Issuer fails to give timely notice, the
Expiration Date will be extended to the date which is 30 days after the day on
which such notice is given.
SECTION 9.07. OCCURRENCE OF INITIAL EXERCISE DATE. The Issuer agrees
to use its reasonable best efforts to cause the Initial Exercise Date to occur
as promptly as practicable, and in no event later than the 90th day following
the Closing Date.
SECTION 9.08. LIMITATIONS ON REGISTRATION OF OTHER SECURITIES. From
and after the date of this Agreement, the Issuer shall not, without the prior
written consent of a majority in interest of the Initial Holders, enter into any
agreement with any holder or prospective holder of any Securities of the Issuer
giving such holder or prospective holder any registration rights the terms of
which are as or more favorable taken as a whole than the registration rights
granted to the Initial Holders hereunder unless the Issuer shall also give such
rights to the Initial Holders hereunder.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. HOME OFFICE PAYMENT. Notwithstanding anything to the
contrary in this Agreement or the Warrants, so long as any Holder or any nominee
designated by it shall be a Holder, the Issuer shall punctually pay all amounts
which become due and payable with respect to any Warrant or Warrant Stock to
such Holder at the address registered on the books of the Issuer maintained for
such purpose, or at such other place and in such manner as such Holder may
designate by notice to the Issuer, without presentation or surrender of such
Warrant or the making of any notation thereon. Each Holder agrees that prior to
the sale, transfer or other disposition of a part of any Warrant, it will make
notation thereon of the number of shares of Warrant Stock covered by the part of
the Warrant sold, transferred or disposed, or surrender the same in exchange for
a Warrant covering the number of shares of Warrant Stock remaining on the
Warrant so surrendered. The Issuer agrees that the provisions of this Section
10.01 shall inure to the benefit of any other Holder registered on the books of
the Issuer.
38
SECTION 10.02. WAIVER. No failure on the part of any Holder to
exercise and no delay in exercising, and no course of dealing with respect to,
any right, power or privilege under this Agreement or the Warrants shall operate
as a waiver thereof, nor shall any single or partial exercise of any right,
power or privilege under this Agreement or the Warrant preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
The remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
SECTION 10.03. NOTICES. (a) All notices, requests and other
communications provided for herein and the Warrants (including any waivers or
consents under this Agreement and the Warrants) shall be given or made in
writing, (a) to any party hereto, delivered to the intended recipient at the
"Address for Notices" specified below its name on the signature pages hereof;
or, as to any party, at such other address as shall be designated by such party
in a written notice to each other party, or (b) any other Person who is the
registered Holder of any Warrants or Warrant Stock, to the address for such
Holder as it appears in the stock or warrant ledger of the Issuer.
(b) All such notices, requests and other communications shall be:
(i) personally delivered, sent by courier guaranteeing overnight delivery or
sent by registered or certified mail, return receipt requested, postage prepaid,
in each case given or addressed as aforesaid; and (ii) effective upon receipt.
SECTION 10.04. EXPENSES, ETC. The Issuer agrees to pay or reimburse
the Holders for: (a) all reasonable out-of-pocket costs and expenses of the
Holders (including the reasonable fees and expenses of Jenkens & ▇▇▇▇▇▇▇▇▇, a
Professional Corporation, counsel to Nortel Networks Inc.), in connection with
(i) the negotiation, preparation, execution and delivery of this Agreement and
the issuance of Warrants hereunder and (ii) any amendment, modification or
waiver of (or consents in respect of) any of the terms of this Agreement and/or
the Warrants; and (b) all costs and expenses of the Holders (including
reasonable legal fees and expenses) in connection with (i) any default by the
Issuer hereunder or under the Warrants or any enforcement proceedings resulting
therefrom and (ii) the enforcement of this Section 10.04.
SECTION 10.05. AMENDMENTS, ETC. Except as otherwise expressly
provided in this Agreement, any provision of this Agreement may be amended or
modified only by an instrument in writing signed by the Issuer and the Required
Holders; PROVIDED that (a) the consent of the holders of any class of Warrant
Stock or Warrants shall not be required with respect to any amendment or waiver
which does not affect the rights or benefits of such class under this Agreement,
and (b) no such amendment or waiver shall, without the written consent of all
Holders of such Warrant Stock and Warrants at the time outstanding, amend this
Section 10.05.
SECTION 10.06. SUCCESSORS AND ASSIGNS. This Agreement shall be
binding upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
39
SECTION 10.07. SURVIVAL. All representations and warranties made by
the Issuer herein or in any certificate or other instrument delivered by it or
on its behalf under this Agreement shall be considered to have been relied upon
by the Holders and shall survive the issuance of the Warrants or the Warrant
Stock regardless of any investigation made by or on behalf of the Holders. All
statements in any such certificate or other instrument so delivered shall
constitute representations and warranties by the Issuer hereunder. All
representations and warranties made by the Holders herein shall be considered to
have been relied upon by the Issuer and shall survive the issuance to the
Holders of the Warrants or the Warrant Stock regardless of any investigation
made by the Issuer or on its behalf.
SECTION 10.08. SPECIFIC PERFORMANCE. Damages in the event of breach
of this Agreement by a Holder or the Issuer would be difficult, if not
impossible, to ascertain, and it is therefore agreed that each Holder and the
Issuer, in addition to and without limiting any other remedy or right it may
have, will have the right to an injunction or other equitable relief in any
court of competent jurisdiction, enjoining any such breach, and enforcing
specifically the terms and provisions hereof, and each Holder and the Issuer
hereby waives any and all defenses it may have on the ground of lack of
jurisdiction or competence of the court to grant such an injunction or other
equitable relief. The existence of this right will not preclude the Holders or
the Issuer from pursuing any other rights and remedies at law or in equity which
the Holders or the Issuer may have.
SECTION 10.09. CAPTIONS. The captions and section headings appearing
herein are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.
SECTION 10.10. COUNTERPARTS. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart signature page or counterpart.
SECTION 10.11. GOVERNING LAW. This Agreement and each Warrant
Certificate issued hereunder shall be governed by, and construed in accordance
with, the laws of the State of New York without giving effect to the conflicts
of law principles thereof.
SECTION 10.12. SEVERABILITY. If any provision of this Agreement is
held to be illegal, invalid or unenforceable under any present or future law,
and if the rights or obligations of any party hereto under this Agreement will
not be materially and adversely affected thereby, (a) such provision will be
fully severable, (b) this Agreement will be construed and enforced as if such
illegal, invalid or unenforceable provision had never comprised a part hereof,
(c) the remaining provisions of this Agreement will remain in full force and
effect and will not be affected by the illegal, invalid or unenforceable
provision or by its severance herefrom and (d) in lieu of such illegal, invalid
or unenforceable provision, there will be added automatically as a part of this
Agreement a legal, valid and enforceable provision as similar in terms to such
illegal, invalid or unenforceable provision as may be possible.
40
SECTION 10.13. ENTIRE AGREEMENT. This Agreement supersedes all prior
discussions and agreements between the parties with respect to the subject
matter hereof and, together with the Warrants, contains the sole and entire
agreement between the parties hereto with respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Warrant Agreement as of the date first above written.
METROMEDIA FIBER NETWORK, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇ ▇▇▇▇▇
Title: President and CEO
NORTEL NETWORKS INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-----------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Director, Customer Finance
41
Annex 1 to Warrant Agreement
[Form of Warrant]
WARRANT
THE TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IS SUBJECT
TO THE RESTRICTIONS SPECIFIED IN THAT CERTAIN WARRANT AGREEMENT DATED AS
OF SEPTEMBER 28, 2001 (THE "WARRANT AGREEMENT"), BETWEEN METROMEDIA FIBER
NETWORK, INC., A DELAWARE CORPORATION (THE "ISSUER"), AND THE HOLDERS
PARTY THERETO FROM TIME TO TIME AS MODIFIED AND SUPPLEMENTED AND IN EFFECT
FROM TIME TO TIME, AND NO TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE SHALL BE VALID OR EFFECTIVE UNTIL SUCH RESTRICTIONS HAVE
LAPSED OR BEEN FULFILLED, RELEASED OR WAIVED. A COPY OF THE FORM OF THE
WARRANT AGREEMENT IS ON FILE AND MAY BE INSPECTED AT THE PRINCIPAL
EXECUTIVE OFFICE OF THE ISSUER. THE HOLDER OF THIS CERTIFICATE, BY
ACCEPTANCE OF THIS CERTIFICATE, AGREES TO BE BOUND BY THE PROVISIONS OF
THE WARRANT AGREEMENT.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE
SECURITIES LAWS, AND ACCORDINGLY, SUCH SECURITIES MAY NOT BE TRANSFERRED,
SOLD OR OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE REGISTRATION
OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES
LAWS OR APPLICABLE EXEMPTIONS THEREFROM.
No. of Stock Units Covered Hereby: 84,778,516 Warrant No. [_]
WARRANT
to Purchase Common Stock of
METROMEDIA FIBER NETWORK, INC.
THIS IS TO CERTIFY THAT NORTEL NETWORKS INC., or its registered
assigns (the "HOLDER"), is entitled to purchase in whole or in part from time to
time from METROMEDIA FIBER NETWORK, INC., a Delaware corporation (the "ISSUER"),
at any time on and after the Initial Exercise Date, but not later than 5:00
p.m., New York time, the tenth
42
anniversary of the Initial Exercise Date (as it may be extended pursuant to
Section 9.06 of the Warrant Agreement, the "EXPIRATION DATE"), 84,778,516 Stock
Units at a purchase price of $0.53875 per Stock Unit (the "EXERCISE PRICE") [THE
EXERCISE PRICE SHALL EQUAL A 25% PREMIUM OVER THE AVERAGE TRADING PRICE DURING
THE TEN CONSECUTIVE TRADING DAYS PRIOR TO THE CLOSING], subject to the terms and
conditions hereinbelow provided. All capitalized terms unless otherwise defined
herein shall have the meanings set forth in the Warrant Agreement.
On and after the Initial Exercise Date and until 5:00 p.m., New York time,
on the Expiration Date, the Holder may exercise this Warrant, on one or more
occasions, on any Business Day, in whole or in part, by delivering to the
Issuer,
(a) a written notice of the Holder's election to exercise this
Warrant, which notice shall specify the number of Stock Units to be
purchased (the "EXERCISE NOTICE");
(b) payment of the aggregate Exercise Price for the number of Stock
Units as to which this Warrant is being exercised (payable as set forth
below); and
(c) this Warrant.
The Exercise Price shall be payable (a) in cash or by certified or
official bank check payable to the order of the Issuer or by wire transfer of
immediately available funds to the account of the Issuer, (b) by delivery to the
Issuer of any Notes issued by Metromedia Services pursuant to the Note
Agreement, with such securities being credited against the Exercise Price in an
amount equal to the aggregate principal amount of the Notes (plus unpaid and
accrued interest) so delivered, or (c) by delivery of this Warrant Certificate
to the Issuer for cancellation in accordance with the following formula: in
exchange for each share of Common Stock issuable on exercise of each Warrant
represented by this Warrant Certificate that is being exercised, the Holder
shall receive such number of shares of Common Stock as is equal to the product
of (i) the number of shares of Common Stock issuable upon exercise of the
Warrants being exercised at such time multiplied by (ii) a fraction, the
numerator or which is the Current Market Value per share of Common Stock at such
time minus the Exercise Price per share of Common Stock at such time, and the
denominator of which is the Current Market Value per share of Common Stock at
such time. Such Exercise Notice may be substantially in the form of Exhibit A
hereto. Upon receipt thereof, the Issuer shall, as promptly as practicable and
in any event within 5 Business Days thereafter, execute or cause to be executed
and deliver or cause to be delivered to the Holder a certificate or certificates
representing the aggregate number of Warrant Stock and other securities issuable
upon such exercise and any other property to which the Holder is entitled.
The certificate or certificates for Warrant Stock so delivered shall
be in such denominations as may be specified in the Exercise Notice and shall be
registered in the name of the Holder or such other name or names as shall be
designated in such Exercise Notice. Such certificate or certificates shall be
deemed to have been issued and the Holder or any other Person so designated to
be named therein shall be deemed to have become a holder of record of Warrant
Stock, including, to the extent permitted by law, the right to vote Warrant
Stock or to consent or
43
to receive notice as a Shareholder, as of the date on which the last of the
Exercise Notice, payment of the Exercise Price and this Warrant is received by
the Issuer as aforesaid, and all taxes required to be paid by the Holder, if
any, pursuant to the Warrant Agreement, prior to the issuance of Stock Units
have been paid. If this Warrant shall have been exercised only in part, the
Issuer shall, at the time of delivery of the certificate or certificates
representing Warrant Stock and other securities, execute and deliver to the
Holder a new Warrant evidencing the rights of the Holder to purchase the
unpurchased Stock Units called for by this Warrant, which new Warrant shall in
all other respects be identical with this Warrant, or, at the request of the
Holder, appropriate notation may be made on this Warrant and the same returned
to the Holder.
The Issuer shall not be required to issue a fractional amount of
Warrant Stock upon exercise of this Warrant. As to any fraction of a Warrant
Stock which the Holder would otherwise be entitled to purchase upon such
exercise, the Issuer shall pay a cash adjustment in respect of such final
fraction in an amount equal to the same fraction of the Current Market Value per
share of Warrant Stock on the date of exercise.
THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK.
44
IN WITNESS WHEREOF, the Issuer has duly executed this Warrant.
Dated: September 28, 2001
METROMEDIA FIBER NETWORK, INC.
By ______________________________
Name:
Title:
Attest:
--------------------------------
Secretary
45
Exhibit A to Warrant
FORM OF EXERCISE
(To be executed by the registered holder hereof)
The undersigned registered owner of this Warrant irrevocably
exercises this Warrant for the purchase of [___] Stock Units of METROMEDIA FIBER
NETWORK, INC., a Delaware corporation and herewith makes payment therefore [in
cash, as provided in clause (a) of the third paragraph of this Warrant] [by
delivery of any Notes, as provided in clause (b) of the third paragraph of this
Warrant] [by delivery the Warrant Certificate(s) for cancellation in accordance
with the formula provided in clause (c) of the third paragraph of this Warrant],
all at the price and on the terms and conditions specified in this Warrant, and
requests that certificates for the shares of Common Stock be issued in
accordance with the instructions given below, and, if such Stock Units shall not
include all of the Stock Units to which the Holder is entitled under this
Warrant, that a new Warrant of like tenor and date for the unpurchased balance
of the Stock Units issuable hereunder be delivered to the undersigned.
Dated: _____________, 200_
--------------------------------
(Signature of Registered Holder)
Instructions for issuance and
registration of Common Stock:
--------------------------------
Name of Registered Holder
(please print)
Social Security or Other Identifying
Number: _________________________
Please deliver certificate to
the following address:
------------------------------------
▇▇▇▇▇▇
-------------------------------------
▇▇▇▇, ▇▇▇▇▇ and Zip Code
46
Annex 2 to Warrant Agreement
FORM OF ASSIGNMENT
(To be executed by the registered holder hereof)
FOR VALUE RECEIVED, the undersigned registered owner of this Warrant
hereby sells, assigns and transfers unto the assignee named below all the rights
of the undersigned under this Warrant with respect to the number of shares of
Warrant Stock covered thereby set forth hereinbelow unto:
Number of Stock Units and
Name of Assignee Address Class of Common Stock
----------------------------------------------------------------------------
Dated: ____________, 200_
--------------------------------
Signature of Registered Holder
--------------------------------
Name of Registered Holder
(Please Print)
Witness:
----------------------
47
Annex 3 to Warrant Agreement
The Initial Holder shall receive Warrants to purchase that number of Stock Units
as is determined in accordance with the calculation set forth below opposite the
Initial Holder's name:
INITIAL HOLDER NUMBER OF STOCK UNITS
-------------- ---------------------
Nortel Networks Inc. .05 x FDN
"FDN" or "FULLY-DILUTED NUMBER" means the number of shares of Common Stock
outstanding on the date of issuance of the Warrants, assuming full conversion,
exercise and exchange of all in-the-money Convertible Securities outstanding
prior to the date hereof, all Convertible Securities and all of the Warrants, to
be issued on the date of issuance of the Warrants, all Notes of Metromedia
Services issued and sold pursuant to the Note Agreement, the Holdings
Convertible Debt or Equity and all in-the-money Options that are (or may become)
exchangeable for, or exercisable or convertible into, Common Stock, including
the Warrants. Terms not defined in this Annex 3 shall have the meanings ascribed
to them in the Warrant Agreement. "In-the-money" Convertible Securities and
Options are Convertible Securities and Options having a conversion price or an
exercise price equal or less than the Current Market Value of the Common Stock
on the Closing Date.
48
Annex 4 to
Warrant Agreement
[Form of Joinder Agreement]
JOINDER AGREEMENT, dated as of September 28, 2001 between METROMEDIA FIBER
NETWORK, INC, a Delaware Corporation (the "ISSUER"), and the other parties
signatories hereto (this "JOINDER AGREEMENT").
A. Reference is made to that certain Warrant Agreement dated as of
September 28, 2001 (as modified and supplemented and in effect from
time to time, the "WARRANT AGREEMENT"), between the Issuer and the
Initial Holders. Each capitalized term used but not defined herein
shall have the meaning assigned to such term in the Warrant
Agreement; and
B. Section 7.01 of the Agreement requires that the Issuer shall deliver
to the Initial Holder this Joinder Agreement executed by the Issuer,
the Principal Shareholder and the Principal Shareholder Beneficial
Owners.
In consideration of the foregoing and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
undersigned hereby agrees that:
1. The undersigned: (a) is delivering this Joinder Agreement pursuant
to Section 7.01(c) of the Warrant Agreement and (b) acknowledges receipt of a
copy of the Warrant Agreement.
2. The undersigned hereby agrees to be bound by the provisions of
Article VII of the Warrant Agreement .
49
IN WITNESS WHEREOF, the undersigned has signed this Joinder Agreement as
of the date first above written.
METROMEDIA COMPANY
By:___________________________________
Name:
Title:
▇▇▇▇ ▇. ▇▇▇▇▇
By:___________________________________
Name:
Title:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
By:___________________________________
Name:
Title:
Acknowledged and Agreed to as
of the date first above written:
METROMEDIA FIBER NETWORK, INC.
By:____________________________
Name:
Title:
50
Annex 5 to
Warrant Agreement
CONSENT
CONSENT, dated as of September 28, 2001 (the "CONSENT"), under and related
to (i) that certain Warrant Agreement (the "CITICORP WARRANT Agreement"), dated
as of September 28, 2001 between Metromedia Fiber Network, Inc. (the "COMPANY")
and Citicorp USA, Inc., ▇▇▇▇▇▇▇ ▇▇▇▇▇ Global Allocation Fund, Inc., ▇▇▇▇▇▇▇
▇▇▇▇▇ Equity/Convertible Series Global Allocation Portfolio, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Variable Series Funds, Inc. (▇▇▇▇▇▇▇ ▇▇▇▇▇ Global Allocation Focus Fund),
▇▇▇▇▇▇▇ ▇▇▇▇▇ Series Fund., Inc. (Global Allocation Strategy Portfolio), and
▇▇▇▇ ▇. ▇▇▇▇▇, Chase Manhattan Bank and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Trustees Under a Trust
Agreement Between ▇▇▇▇ ▇. ▇▇▇▇▇, as Grantor and ▇▇▇▇ ▇. ▇▇▇▇▇ and Manufacturers
Hanover Trust Company, as Trustees, Dated May 30, 1984, as Amended and Restated
(collectively, the "HOLDERS"); and (ii) that certain Warrant Agreement (the
"NORTEL WARRANT AGREEMENT"), dated as of September 28, 2001, by and between
Metromedia Fiber Network, Inc. and Nortel Networks Inc. ("NORTEL NETWORKS").
WHEREAS, the Company, certain of its subsidiaries and the Holders are
parties to a Note and Guarantee Agreement, dated as of September 6, 2001 (as
originally executed, the "CITICORP NOTE AGREEMENT"), providing, subject to the
terms and conditions thereof, for the purchase of notes of the Company by the
Holders (or such affiliates) in an original aggregate principal amount of
$150,000,000.
WHEREAS, as a condition to the closing of the transactions contemplated by
the Citicorp Note Agreement and the purchase of notes of the Company by the
Holders thereunder, the Company has agreed to issue one or more Warrants (as
therein defined) to each Holder providing for the purchase of shares of Stock
Units (as therein defined) of the Company pursuant to the Citicorp Warrant
Agreement.
WHEREAS, Metromedia Fiber Network Services, Inc. ("METROMEDIA Services"),
a wholly-owned subsidiary of the Company, and Nortel Networks are parties to a
Note Agreement, dated as of September 19, 2001 (as originally executed, the
"NORTEL NOTE AGREEMENT"), providing, subject to the terms and conditions
thereof, for the purchase of notes of the Metromedia Services by Nortel Networks
(or such affiliates) in an original aggregate principal amount of
$231,036,842.00.
WHEREAS, as a condition to the closing of the transactions contemplated by
the Nortel Note Agreement and the purchase of notes of Metromedia Services by
Nortel Networks thereunder, the Company has agreed to issue one or more Warrants
(as therein defined) to Nortel Networks providing for the purchase of shares of
Stock Units (as therein defined) of the Company pursuant to the Nortel Warrant
Agreement.
WHEREAS, Article VI and Article VII of each of the Citicorp Warrant
Agreement and the Nortel Warrant Agreement provide for certain registration
rights and tag-along rights.
WHEREAS, the Nortel Warrant Agreement to be entered into as a condition
precedent to the execution of the Nortel Note Agreement would grant to Nortel
Networks certain registration rights and tag-along rights and may be ambiguous
as to priority with respect to the registration rights and tag-along rights
previously granted to the Holders pursuant to the Citicorp Warrant Agreement.
NOW, THEREFORE, by executing and delivering this Consent, for good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the Holders and Nortel Networks hereby agree as follows:
1. CONSENT AND ACKNOWLEDGMENT OF REGISTRATION RIGHTS AND TAG-ALONG RIGHTS.
(a) In connection with any exercise of registration rights or tag-along
rights under the Citicorp Warrant Agreement, including determinations of
priorities among securityholders of the Company and any determinations with
respect to any holdback, cutback or similar provision, any securities received
by Nortel Networks pursuant to the Nortel Warrant Agreement shall be included
with the Registrable Securities under the Citicorp Warrant Agreement as if
Nortel Networks was an Initial Holder under the Citicorp Warrant Agreement.
(b) In connection with any exercise of registration rights or tag-along
rights under the Nortel Warrant Agreement, including determinations of
priorities among securityholders of the Company and any determinations with
respect to any holdback, cutback or similar provision, any securities received
by the Holders pursuant to the Citicorp Warrant Agreement shall be included with
the Registrable Securities under the Nortel Warrant Agreement as if the Holders
were Initial Holders under the Nortel Warrant Agreement.
2. COUNTERPARTS. This Consent may be executed in one or more counterparts,
each of which shall be deemed an original, but all of which shall constitute one
and the same instrument.
3. BINDING EFFECT. This Consent shall be binding upon all of the Holders
by virtue of any other rights or power of such Holder to bind their stock in the
Company arising under the Existing Registration Rights Agreement or otherwise.
4. GOVERNING LAW. This Consent shall be governed by, and construed in
accordance with, the laws of the State of New York without giving effect to the
conflicts of law principles thereof.
[SIGNATURE PAGE FOLLOWS.]
IN WITNESS WHEREOF, the Holders have executed this Consent as of the date
first above written.
NORTEL NETWORKS INC.
By:
----------------------------
Name:
-----------------------
Title:
----------------------
HOLDERS
CITICORP USA, INC.
By:
----------------------------
Name:
-----------------------
Title:
----------------------
▇▇▇▇▇▇▇ ▇▇▇▇▇ GLOBAL ALLOCATION
FUND, INC.
By:_______________________________
▇▇▇▇ ▇▇▇ ▇'▇▇▇▇▇▇▇
Director, ▇▇▇▇▇▇▇ ▇▇▇▇▇ Investment
Managers
Authorized Signatory
▇▇▇▇▇▇▇ ▇▇▇▇▇
EQUITY/CONVERTIBLE
SERIES GLOBAL ALLOCATION
PORTFOLIO
By:_______________________________
▇▇▇▇ ▇▇▇ ▇'▇▇▇▇▇▇▇
Director, ▇▇▇▇▇▇▇ ▇▇▇▇▇ Investment
Managers
Authorized Signatory
▇▇▇▇▇▇▇ ▇▇▇▇▇ VARIABLE SERIES
FUNDS, INC.
(▇▇▇▇▇▇▇ ▇▇▇▇▇ GLOBAL
ALLOCATION
FOCUS FUND)
By:_______________________________
▇▇▇▇▇ ▇. ▇▇▇▇
First Vice President, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Investment Managers
Authorized Signatory
▇▇▇▇▇▇▇ ▇▇▇▇▇ SERIES FUND, INC.
(GLOBAL ALLOCATION STRATEGY
PORTFOLIO)
By:_______________________________
▇▇▇▇ ▇▇▇ ▇'▇▇▇▇▇▇▇
Director, ▇▇▇▇▇▇▇ ▇▇▇▇▇ Investment
Managers
Authorized Signatory
▇▇▇▇ ▇. ▇▇▇▇▇, CHASE MANHATTAN BANK AND
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, TRUSTEES UNDER A TRUST
AGREEMENT BETWEEN ▇▇▇▇ ▇. ▇▇▇▇▇, AS
GRANTOR AND ▇▇▇▇ ▇. ▇▇▇▇▇ AND
MANUFACTURERS HANOVER TRUST COMPANY, AS
TRUSTEES, DATED MAY 30, 1984, AS AMENDED
AND RESTATED
By:
----------------------------
Name:
-----------------------
Title:
----------------------