Exhibit 99.2
STOCK PURCHASE AGREEMENT
dated as of
May 28, 2001
between
RCN CORPORATION
and
RED BASIN, LLC, as Buyer
relating to the purchase and sale
of
Common Stock and Warrants
of
RCN CORPORATION
TABLE OF CONTENTS
PAGE
ARTICLE 1 DEFINITIONS
Section 1.01 Definitions........................................2
ARTICLE 2 PURCHASE AND SALE
Section 2.01 Purchase and Sale..................................7
Section 2.02 Closing............................................7
Section 2.03 Certificates for Shares............................8
Section 2.04 Use of Proceeds....................................9
ARTICLE 3 REPRESENTATIONS AND WARRANTIES
OF THE CORPORATION
Section 3.01 Corporate Existence and Power......................9
Section 3.02 Corporate Authorization............................9
Section 3.03 Actions or Filings.................................9
Section 3.04 Non-contravention.................................10
Section 3.05 Capitalization....................................10
Section 3.06 Authorization of Common Shares and Warrant
Shares............................................11
Section 3.07 Finders Fees......................................11
Section 3.08 SEC Reports.......................................12
Section 3.09 [Intentionally Omitted]...........................12
Section 3.10 Financial Statements..............................12
Section 3.11 Absence of Certain Changes........................12
Section 3.12 Litigation........................................12
Section 3.13 Offering of Common Shares.........................13
Section 3.14 Governmental Authorizations.......................13
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF BUYER
Section 4.01 Existence and Power...............................14
Section 4.02 Authorization.....................................14
Section 4.03 Actions or Filings................................14
Section 4.04 Non-contravention.................................14
Section 4.05 Purchase for Investment...........................15
Section 4.06 Current Ownership.................................15
Section 4.07 Voting Arrangements...............................15
Section 4.08 Litigation........................................15
Section 4.09 Finders' Fees.....................................15
Section 4.10 HSR...............................................16
ARTICLE 5 COVENANTS OF THE CORPORATION
Section 5.01 Access to Information.............................16
Section 5.02 Restrictions Pending the Closing..................16
Section 5.03 Other Transfers of Common Shares or
Warrant Shares....................................17
Section 5.04 Pro Rata Participation............................17
Section 5.05 [Intentionally Omitted]...........................18
Section 5.06 Cross Ownership...................................18
Section 5.07 HMTF Waiver; NSTAR Waiver.........................19
ARTICLE 6 COVENANTS OF BUYER
Section 6.01 Confidentiality...................................20
Section 6.02 Sale or Transfer of Common Shares or Warrant
Shares............................................21
Section 6.03 Acquisition of Voting Securities..................22
Section 6.04 Standstill........................................22
ARTICLE 7 COVENANTS OF BUYER AND THE CORPORATION
Section 7.01 Required Regulatory Approvals; Reasonable
Best Efforts; Further Assurances..................27
Section 7.02 Certain Filings...................................27
Section 7.03 Public Announcements..............................28
Section 7.04 Registration Rights Agreement; Warrants...........29
Section 7.05 NASD Filing.......................................29
ARTICLE 8 CONDITIONS TO CLOSING
Section 8.01 Condition to Obligations of Buyer and the
Corporation.......................................29
Section 8.02 Conditions to Obligation of Buyer.................30
Section 8.03 Conditions to Obligation of the Corporation.......31
ARTICLE 9 TERMINATION
Section 9.01 Grounds for Termination...........................31
Section 9.02 Effect of Termination.............................32
ARTICLE 10 SURVIVAL; INDEMNIFICATION
Section 10.01 Survival of Representation and Warranties.........32
Section 10.02 Indemnification...................................32
Section 10.03 Procedures........................................33
Section 10.04 Inspection; No Other Representations..............33
Section 10.05 Exclusivity.......................................34
ARTICLE 11 MISCELLANEOUS
Section 11.01 Notices...........................................34
Section 11.02 Amendments and Waivers............................36
Section 11.03 Expenses..........................................36
Section 11.04 Assignment........................................36
Section 11.05 Governing Law.....................................36
Section 11.06 Jurisdiction......................................37
Section 11.07 Counterparts; Third-Party Beneficiaries...........37
Section 11.08 Entire Agreement..................................37
Section 11.09 Captions..........................................37
Section 11.10 Severability......................................37
Section 11.11 Specific Performance..............................38
Section 11.12 No Recourse.......................................38
EXHIBIT A Current Ownership and Ownership Interests in Buyer
EXHIBIT B Registration Rights
EXHIBIT C Form of Warrant
STOCK PURCHASE AGREEMENT
AGREEMENT dated as of May 28, 2001, between RCN Corporation, a
Delaware corporation (the "Corporation"), and Red Basin, LLC, a Nebraska
limited liability company (the "Buyer").
WHEREAS, the Corporation desires to sell to Buyer (i) 7,661,074
shares of Common Stock (as defined herein) and (ii) 3,830,537 warrants to
purchase shares of Common Stock at an exercise price of $12.928 per share
in the form attached hereto as Exhibit C (the "Warrants") and Buyer desires
to purchase such shares of Common Stock and Warrants from the Corporation,
upon the terms and subject to the conditions hereinafter set forth;
WHEREAS, as soon as reasonably practicable following the execution
of this Agreement, the Corporation shall either (i) commence a tender offer
or (ii) enter into an agreement, pursuant to which, in each case, on the
terms and subject to the conditions contained therein and which shall have
been approved by the Board of Directors of the Corporation (or a committee
thereof or duly authorized officer designated thereby), it will purchase
(the "Note Purchase") for cash $50 million in aggregate of its issued and
outstanding (i) 10% Senior Notes, due 2007, (ii) 111/8% Senior Discount
Notes, due 2007, (iii) 9.8% Senior Discount Notes, due February 15, 2008,
(iv) 11% Senior Discount Notes, due July 1, 2008 and (v) 10.125% Senior
Notes, due January 2010 (collectively, the "Notes");
WHEREAS, it is a condition precedent to the sale of Common Shares
(as defined herein) and the Warrants pursuant to this Agreement that the
Note Purchase is consummated; and
WHEREAS, it is a condition precedent to the Note Purchase that
Buyer purchase the Common Shares and the Warrants pursuant to this
Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and undertakings contained herein,
and for other good and valuable consideration, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
DEFINITIONS
Section 1.01 Definitions. (a) The following terms, as used herein,
have the following meanings:
"Affiliate" means, with respect to any specified Person, any other
Person which, directly or indirectly, controls, is controlled by or is
under direct or indirect common control with, such specified Person. For
the purposes of this definition, "control" when used with respect to any
Person means the power to direct the management and policies of such
Person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "affiliated,"
"controlling," and "controlled" have meanings correlative to the foregoing.
Solely for purposes of this Agreement, with respect to Buyer, the term
"Affiliate" shall include each Buyer Member and their respective
Affiliates, but shall exclude the Level 3 Holders and Double Eight Land
Corp.; provided, however, that solely for purposes of calculating the Total
Voting Power of Buyer, the Buyer Members and their respective Affiliates,
shares of Common Stock owned (either directly or indirectly) by Double
Eight Land Corp. shall be included in such calculation.
"beneficial owner" has the meaning set forth in Rule 13d-3 under
the Exchange Act, and derivative terms such as "beneficially own" shall be
given corresponding meanings.
"Board of Directors" means the Board of Directors of the
Corporation.
"Change of Control" means the occurrence of any of the following
events: (a) any Person or Group is or becomes the beneficial owner (as
defined herein, except that a Person shall be deemed to have "beneficial
ownership" of all securities that such Person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 50% of the total Voting
Securities of the Corporation; or (b) the Corporation consolidates with, or
merges with or into, another Person or sells, assigns, conveys, transfers,
leases or otherwise disposes of all or substantially all of its assets to
any Person, or any Person consolidates with, or merges with or into the
Corporation, in any such event pursuant to a transaction in which the
outstanding Voting Securities of the Corporation are converted into or
exchanged for cash, securities or other property, other than any such
transaction where (i) the outstanding Voting Securities of the Corporation
are converted into or exchanged for Voting Securities of the surviving or
transferee corporation or its parent corporation and/or cash, securities or
other property in an amount which could be paid by the Corporation under
the terms of the Corporation's credit and financing agreements and (ii)
immediately after such transaction no Person or Group is the beneficial
owner (as defined herein, except that a Person shall be deemed to have
"beneficial ownership" of all securities that such Person has the right to
acquire, whether such right is exercisable immediately or only after the
passage of time), directly or indirectly, of more than 50% of the total
Voting Securities of the surviving or transferee corporation, as
applicable; or (c) during any consecutive two-year period, individuals who
at the beginning of such period constituted the Board of Directors
(together with any new directors whose election by the Board of Directors
or whose nomination for election by the stockholders of the Corporation was
approved by a vote of a majority of the directors then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors then in office.
"Closing Date" means the date of the Closing.
"Commission" means the Securities and Exchange Commission.
"Common Equity" means shares of Common Stock, shares of Class B
Stock and Convertible Securities.
"Common Shares" means the shares of Common Stock to be issued on
the Closing Date.
"Common Stock" means the common stock, par value $1.00 per share,
of the Corporation.
"Controlled Affiliate" means, with respect to any Person, any
corporation or other entity of which 75% or more of the securities or other
ownership interests having ordinary voting power to elect directors to the
Board of Directors (or other governing body) of such corporation or other
entity are directly or indirectly owned by such Person.
"Convertible Securities" means any securities convertible into or
exchangeable or exercisable for Common Stock or Class B Stock.
"Convertible Voting Securities" means securities convertible into
or exchangeable or exercisable for Voting Securities.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Group" means a group within the meaning of Section l3(d)(3) of the
Exchange Act
"Level 3 Holders" means ▇▇▇▇▇ ▇▇▇▇▇▇ Sons', Inc., Level 3
Communications, Inc. and Level 3 Delaware Holdings, Inc. and any of their
respective Controlled Affiliates.
"Lien" means any mortgage, lien, pledge, charge, security interest
or encumbrance of any kind.
"Material Adverse Effect" means (i) with respect to the
Corporation, a material adverse effect on the condition (financial or
otherwise), business, assets or results of operations of the Corporation
and its Subsidiaries, taken as whole, excluding any such effect resulting
from or arising in connection with (A) this Agreement, the transactions
contemplated hereby or the announcement thereof, (B) changes or conditions
generally affecting the industries in which the Corporation and its
Subsidiaries operate or (C) changes in general economic, regulatory or
political conditions, or (ii) with respect to Buyer, a material adverse
effect on the condition (financial or otherwise), business, assets or
results of operations of Buyer and its Subsidiaries, taken as a whole,
excluding any such effect resulting from or arising in connection with (A)
this Agreement, the transactions contemplated hereby or the announcement
thereof, (B) changes or conditions generally affecting the industries in
which Buyer and its Subsidiaries operate or (C) changes in general
economic, regulatory or political conditions.
"Person" means an individual, corporation, partnership, limited
liability company, association, trust and any other entity or organization,
including a government or political subdivision or an agency or
instrumentality thereof
"Qualified Director" means any individual who at the time of any
such determination is a member of the Board of Directors and has
continuously been a member of the Board of Directors since the date on
which the Corporation consummated its initial public offering.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations promulgated thereunder.
"Subsidiary" means, with respect to any Person, any corporation or
other entity (and any predecessor thereof) of which the securities or other
ownership interests having ordinary voting power to elect a majority of the
Board of Directors or other persons performing similar functions are
directly or indirectly owned by such Person.
"Takeover Proposal" means any solicited or unsolicited tender or
exchange offer (or a proposal therefor) or proposal for a merger,
consolidation, sale of assets or other business combination or transaction
(including a sale or issuance of equity securities or a proxy contest)
that, in any such case, could reasonably be expected to result in a Change
of Control.
"Total Voting Power" means the aggregate number of votes which may
be cast by holders of Voting Securities in respect of Voting Securities.
"Voting Percentage" means, with respect to any Person, the
percentage of the Total Voting Power beneficially owned by such Person.
"Voting Securities" means securities of the Corporation ordinarily
having the power to vote for the election of directors of the Corporation;
provided that when the term "Voting Securities" is used with respect to any
other Person it means the capital stock or other equity interests of any
class or kind ordinarily having the power to vote for the election of
directors or other members of the governing body of such Person.
(b) Each of the following terms is defined in the Section set
forth opposite such term:
Term Section
Advance Pro Rata Notice 5.04
Affiliated Permitted Transferee 6.02
Authorizations 3.14
Bank Consent 3.04
Buyer Member 4.06
Buyer Proposal 6.04
Class B Stock 3.05
Closing 2.02
Damages 10.02
Demand Transferee 11.04
Determination Period 6.04
Exchange Agreement 3.05
Fully Financed 6.04
Gross Up Adjustment 10.02
HMTF Waiver 5.07
HSR Act 3.03
Indemnified Party 10.03
Indemnifying Party 10.03
Issuance 5.04
Listing Notification 7.05
NASD 7.05
Negotiated Proposal 6.04
Negotiation Notice 6.04
Note Purchase Recitals
Notes Recitals
Offer 6.04
Per Share Purchase Price 2.01
Permitted Actions 6.04
Permitted Transferee 6.02
Pro Rata Notice 5.04
Pro Rata Offerees 5.04
Pro Rata Securities 5.04
Proxy Statement 3.09
Regulatory Authorities 3.03
Representatives 6.01
Rights 5.04
SEC Reports 3.05
Section 6.04(e) Event 6.04
Series A Certificate 5.07
Series A Preferred Stock 3.05
Series B Preferred Stock 3.05
Standstill Period 6.04
Vulcan 3.05
Vulcan Purchase Agreement 3.05
Vulcan Waiver 3.15
Warrants Recitals
Warrant Shares 3.06
(c) The following definitional provisions shall apply to this
Agreement:
(i) The words "hereof," "herein," and "hereunder" and
words of similar import, when used in this Agreement, shall refer
to this Agreement as a whole and not to any particular provision
of this Agreement.
(ii) the terms defined in the singular shall have a
comparable meaning when used in the plural, and vice versa.
(iii) The terms "Dollars" and "$" shall mean United
States Dollars.
(iv) References herein to a specific Section, Subsection
or Schedule shall refer, respectively, to Sections, Subsections or
Schedules of this Agreement, unless the express context otherwise
requires.
(v) Wherever the word "include," "includes," or
"including" is used in this Agreement, it shall be deemed to be
followed by the words "without limitation."
ARTICLE 2
PURCHASE AND SALE
Section 2.01 Purchase and Sale. Upon the terms and subject to the
conditions of this Agreement, the Corporation agrees to sell to Buyer, and
Buyer agrees to purchase from the Corporation, 7,661,074 shares of Common
Stock and 3,830,537 Warrants at the Closing. The per share purchase price
for the Common Shares (including the Warrants) is $6.5265 in cash (the "Per
Share Purchase Price") and the aggregate purchase price is $50,000,000. The
purchase price shall be paid as provided in Section 2.02.
Section 2.02 Closing. The closing (the "Closing") of the purchase
and sale of the Common Shares and the Warrants hereunder shall take place
at the offices of Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, as soon as possible, and in no event
later than five business days after satisfaction or waiver of the
conditions set forth in Article 8 (other than those conditions that by
their nature are to be satisfied at the Closing and will in fact be
satisfied at the Closing), or at such other time or place as Buyer and the
Corporation may agree. At the Closing:
(a) Buyer shall deliver to the Corporation the Per Share Purchase
Price multiplied by the aggregate number of Common Shares (which amount
equals $50,000,000) in immediately available funds by wire transfer to an
account of the Corporation with a bank designated by the Corporation, by
notice to Buyer received not later than two business days prior to the
Closing Date.
(b) The Corporation shall deliver to Buyer a certificate for the
Common Shares being purchased by Buyer hereunder and shall deliver to Buyer
the Warrants.
Section 2.03 Certificates for Shares. (a) Each certificate for
Common Shares or Warrant Shares issued to Buyer shall (in addition to any
other legend required to be borne on such Common Share or Warrant Share)
bear the following legend:
"The securities represented hereby have not been registered under
the Securities Act of 1933, as amended, and may not be offered,
sold, transferred or otherwise disposed of except in compliance
with such Act and other applicable laws."
(b) Each certificate for Common Shares or Warrant Shares (in
addition to any other legend previously borne by such Common Share or
Warrant Share) beneficially owned by Buyer will bear the following legend:
"The securities represented hereby are subject to certain
restrictions under the terms of the Stock Purchase Agreement dated
as of May 28, 2001, as amended from time to time, between RCN
Corporation and Red Basin, LLC and may not be offered, sold,
transferred or otherwise disposed of except in accordance with the
terms of that Agreement."
(c) The Corporation agrees that, at the request of Buyer or any
Permitted Transferee, it will remove from the certificates representing any
Common Shares or Warrant Shares the legend contemplated by subsection (a)
regarding the restriction under the Securities Act in the event that
outside counsel for Buyer or such Permitted Transferee determines that the
transfer of such Common Shares or Warrant Shares is no longer restricted by
the Securities Act and outside counsel for the Corporation concurs in such
determination (such concurrence not to be unreasonably withheld). The
Corporation agrees that, at the request of Buyer, it will remove from the
certificates representing Common Shares or Warrant Shares the legend
contemplated by subsection (b) regarding the restrictions under this
Agreement at the time after which such restrictions are no longer
applicable. If Buyer transfers any Common Shares or Warrant Shares in
accordance with Section 6.02, the Corporation will issue to such transferee
a certificate representing such transferred Common Shares or Warrant Shares
without the legend contemplated by subsection (b) regarding the
restrictions under this Agreement.
Section 2.04 Use of Proceeds. The proceeds from the sale of the
Common Shares hereunder shall be used by the Corporation solely to purchase
the Notes pursuant to the Note Purchase and to pay the costs and expenses
incurred in connection with the transactions contemplated hereby and the
Note Purchase.
ARTICLE 3
REPRESENTATIONS AND WARRANTIES
OF THE CORPORATION
The Corporation represents and warrants to Buyer as of the date
hereof and as of the Closing that:
Section 3.01 Corporate Existence and Power. The Corporation is a
corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware, and has all corporate powers required to
carry on its business as now conducted.
Section 3.02 Corporate Authorization. (a) The execution, delivery
and performance of this Agreement by the Corporation is within the
Corporation's corporate powers and, except for any required approval of the
Corporation's stockholders, has been duly authorized by all necessary
corporate action on the part of the Corporation.
(b) This Agreement constitutes a legal and binding agreement of
the Corporation, enforceable against the Corporation in accordance with its
terms, except (i) as such enforcement is limited by bankruptcy, insolvency
and other similar laws affecting the enforcement of creditors' rights
generally and (ii) for limitations imposed by general principles of equity.
Section 3.03 Actions or Filings. Except as set forth on Schedule
3.03 hereto, the execution, delivery and performance of this Agreement by
the Corporation requires no action by or in respect of, or filing with, any
governmental or non-governmental body, agency, official or authority other
than (i) compliance with any applicable requirements of the Exchange Act,
(ii) with respect to the Corporation's obligations under Section 7.04,
compliance with any applicable requirements of the Securities Act, (iii)
compliance with the applicable requirements of the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), (iv)
filings with, notifications to and consents from the Federal Communications
Commission, franchising authorities, state public utility commissions and
other similar governmental entities (collectively, "Regulatory
Authorities"), and (v) other filings, notifications and consents that are
immaterial to the consummation of the transactions contemplated hereby.
Section 3.04 Non-contravention. Except as set forth on Schedule
3.04 hereto, assuming compliance with the matters referred to in Section
3.03 and set forth on Schedule 3.03 hereto, the execution, delivery and
performance of this Agreement by the Corporation do not and will not (i)
violate the certificate of incorporation or bylaws of the Corporation, (ii)
violate any applicable law, rule, regulation, judgment, injunction, order
or decree binding upon the Corporation, other than violations that would be
immaterial to the Corporation or Buyer, or (iii) except for the consent of
Chase Manhattan Bank and the other parties to the Corporation's credit
agreement set forth on Schedule 3.04 hereto (the "Bank Consent") and except
as to matters which would be immaterial to the Corporation or Buyer,
constitute a default under, or give rise to any right of termination,
cancellation or acceleration of any right or obligation of the Corporation
or to a loss of any benefit to which the Corporation is entitled under any
provision of any agreement or other instrument binding upon the Corporation
or (iv) result in the creation or imposition of any Lien on any asset of
the Corporation except where such Lien would not have a Material Adverse
Effect on the Corporation.
Section 3.05 Capitalization. (a) As of the date hereof, the
authorized capital stock of the Corporation consists of: 300,000,000 shares
of Common Stock; 400,000,000 shares of Class B common stock ("Class B
Stock"), par value $1.00 per share; and 25,000,000 shares of preferred
stock, par value $1.00 per share. As of March 31, 2001, there were issued
and outstanding the following shares of such stock: 87,725,546 shares of
Common Stock, no shares of Class B Stock, 263,054 shares of Series A 7%
Senior Convertible Preferred Stock ("Series A Preferred Stock"), 1,650,000
shares of Series B 7% Senior Convertible Preferred Stock ("Series B
Preferred Stock") and options to purchase 1,045,611 shares of Common Stock
(using the treasury method of computation and assuming an exercise price of
$6.03 per share).
(b) All outstanding shares of Common Stock and all outstanding
shares of Series A Preferred Stock and Series B Preferred Stock are duly
authorized, validly issued and fully paid and nonassessable. Except as
provided in the Stock Purchase Agreement, dated October 1, 1999, between
the Corporation and Vulcan Ventures Incorporated ("Vulcan," and such
agreement, the "Vulcan Purchase Agreement") and the Exchange Agreement,
dated as of June 17, 1997, by and between C-TEC Corporation and BECOCOM,
Inc. (the "Exchange Agreement"), there are no preemptive or other similar
rights available to the existing holders of the capital stock of the
Corporation. As of the date hereof and other than (i) as set forth in the
financial statements contained in the forms, reports and documents filed
with the Commission (the "SEC Reports") and (ii) in connection with the
transactions contemplated by this Agreement, there are no outstanding
options, warrants, rights, puts, calls, commitments, or other contracts,
arrangements, or understandings issued by or binding upon the Corporation
requiring, and there are no outstanding debt or equity securities of the
Corporation which upon the conversion, exchange or exercise thereof would
require, the issuance, sale or transfer by the Corporation of any new or
additional equity interests in the Corporation (or any other securities of
the Corporation or any of its Subsidiaries which, whether after notice,
lapse of time or payment of monies, are or would be convertible into or
exercisable or exchangeable for equity interests in the Corporation).
Except as set forth in the SEC Reports and as contemplated by this
Agreement, there are no voting trusts or other agreements or understandings
to which the Corporation or any of its Subsidiaries is a party with respect
to the voting of capital stock of the Corporation.
Section 3.06 Authorization of Common Shares and Warrant Shares.
The issuance, sale and delivery of the Common Shares, the Warrants and the
shares of Common Stock issuable upon conversion of the Warrants (the
"Warrant Shares") has been duly authorized by all requisite corporate
action of the Corporation, and the Common Shares and the Warrant Shares
when issued and delivered in accordance with the terms of this Agreement
and the Warrants, respectively, will be validly issued and outstanding,
fully paid and nonassessable, free and clear of any Liens and not subject
to preemptive or other similar rights of the stockholders of the
Corporation.
Section 3.07 Finders Fees. Except for ▇▇▇▇▇▇▇ ▇▇▇▇▇ & Co., Inc.,
whose fees and expenses will be paid by the Corporation, there is no
investment banker, broker, finder or other intermediary which has been
retained by or is authorized to act on behalf of the Corporation who might
be entitled to any fee or commission in connection with the transactions
contemplated by this Agreement.
Section 3.08 SEC Reports. The Corporation has filed all required
SEC Reports when due in accordance with the Exchange Act and delivered or
made available to Buyer copies thereof. As of their respective dates (or,
in the case of any amended SEC Report, as of the date of the amendment),
the SEC Reports complied in all material respects with all applicable
requirements of the Exchange Act or the Securities Act, as the case may be.
As of their respective dates (or, in the case of any amended SEC Report, as
of the date of the amendment), none of the SEC Reports contained any untrue
statement of a material fact or omitted to state a material fact required
to be stated or incorporated by reference therein or necessary in order to
make the statements therein, in light of the circumstances under which they
were made, not misleading.
Section 3.09 [Intentionally Omitted]
Section 3.10 Financial Statements. The consolidated financial
statements of the Corporation contained in the SEC Reports (or, in the case
of any amended SEC Report, in the SEC Report as so amended) comply as to
form in all material respects with the published rules and regulations of
the Commission with respect thereto, were prepared in accordance with GAAP
applied on a consistent basis during the periods involved (except as may be
indicated in the notes thereto) and fairly present, in conformity with GAAP
(except as may be indicated in the notes thereto), the consolidated
financial position of the Corporation and its consolidated Subsidiaries as
of the dates thereof and their consolidated results of operations and
changes in financial position for the periods then ended (subject to normal
year-end adjustments in the case of any unaudited interim financial
statements, which adjustments will not be material either individually or
in the aggregate).
Section 3.11 Absence of Certain Changes. Since December 31, 2000,
there has not been any event, occurrence or development of a state of
circumstances or facts that has had or would reasonably be expected to have
a Material Adverse Effect on the Corporation or an adverse effect on the
ability of the Corporation to perform its obligations under this Agreement.
Section 3.12 Litigation. Except as disclosed in the SEC Reports,
there is no action, suit, investigation or proceeding pending against, or
to the knowledge of the Corporation threatened against or affecting, the
Corporation or any Subsidiary before any court or arbitrator or any
governmental body, agency or official which (i) in any manner challenges or
seeks to prevent, enjoin, alter or materially delay the transactions
contemplated by this Agreement or (ii) if resolved adversely to the
Corporation or a Subsidiary would reasonably be likely to have,
individually or in the aggregate, a Material Adverse Effect on the
Corporation.
Section 3.13 Offering of Common Shares. Neither the Corporation
nor any Person acting on its behalf has taken or will take any action
(including, without limitation, any offering of any securities of the
Corporation under circumstances which would require, under the Securities
Act, the integration of such offering with the offering and sale of the
Common Shares) which might subject the offering, issuance or sale of the
Common Shares, the Warrant Shares or the Warrants to the registration
requirements of Section 5 of the Securities Act.
Section 3.14 Governmental Authorizations. The Corporation has all
necessary franchises, approvals, authorizations, permits, licenses,
registrations, qualifications and similar rights obtained from any federal,
state or local regulatory authority ("Authorizations") to conduct and
operate the businesses of the Corporation, except any such Authorizations
which the failure to have would not, either individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect on the
Corporation. The Authorizations are currently in full force and effect, are
not in default, and are valid under all applicable rules and regulations
according to their terms, except as would not, either individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect on
the Corporation. The Corporation is in compliance with the terms and
conditions of the Authorizations, including requirements for notifications,
filing, reporting, posting and maintenance of logs and records, except
where any failure to so comply would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect on the
Corporation.
Section 3.15 Vulcan Waiver. The Corporation has obtained from
Vulcan Ventures Incorporated a waiver (the "Vulcan Waiver") of (i) all its
rights to acquire any of the Common Shares, Warrants or Warrant Shares and
(ii) the application of Section 8(g) of the Certificate of Designations,
Preferences and Rights of Series B 7% Senior Convertible Preferred Stock of
the Corporation with respect to the issuance of Common Shares, Warrants and
Warrants Shares.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to the Corporation as of the date
hereof and as of the Closing that:
Section 4.01 Existence and Power. Buyer is a limited liability
company duly organized, validly existing and in good standing under the
laws of its jurisdiction of organization.
Section 4.02 Authorization. The execution, delivery and
performance of this Agreement by Buyer are within Buyer's powers and have
been duly authorized by all necessary action on the part of Buyer. This
Agreement constitutes a legal, valid and binding agreement of Buyer,
enforceable against Buyer in accordance with its terms, except (a) as such
enforcement is limited by bankruptcy, insolvency and other similar laws
affecting the enforcement of creditors' rights generally and (b) for
limitations imposed by general principles of equity.
Section 4.03 Actions or Filings. The execution, delivery and
performance of this Agreement by Buyer requires no action by or in respect
of, or filing with, any governmental or non-governmental body, agency or
official or any other Person other than (i) compliance with any applicable
requirements of the Exchange Act, (ii) compliance with the applicable
requirements of the HSR Act, (iii) filings with, notifications to and
consents from Regulatory Authorities and (iv) other filings or
notifications that are immaterial to the consummation of the transactions
contemplated hereby.
Section 4.04 Non-contravention. Assuming compliance with the
matters referred to in Section 4.03, the execution, delivery and
performance of this Agreement by Buyer does not and will not (i) except in
the case where Buyer is an individual, violate the certificate of
incorporation, bylaws or other organizational documents of Buyer, (ii)
violate any applicable law, rule, regulation, judgment, injunction, order
or decree, except for any such violations which would not have a material
adverse effect on the ability of Buyer to consummate the transactions
contemplated hereby or (iii) constitute a default under any agreement or
other instrument binding upon Buyer except as to matters which would not be
material to Buyer.
Section 4.05 Purchase for Investment. Buyer is an "accredited
investor" as defined in Rule 501 under the Securities Act. Buyer is
purchasing the Common Shares for investment for its own account and not
with a view to, or for sale in connection with, any distribution thereof in
violation of the Securities Act. Buyer (either alone or together with its
advisors) has sufficient knowledge and experience in financial and business
matters so as to be capable of evaluating the merits and risks of its
investment in the Common Shares and is capable of bearing the economic
risks of such investment
Section 4.06 Current Ownership. Buyer, and each owner of equity
interests in Buyer, as set forth on Exhibit A hereto (each, a "Buyer
Member"), is the record and beneficial owner of the number of shares, if
any, of Common Stock and the percentage ownership interest in Buyer set
forth opposite such Buyer Member's name on Exhibit A hereto. Except for the
shares of Common Stock referenced on Exhibit A (including shares owned by
the family corporation referenced thereon), neither Buyer, nor any Buyer
Member, nor any of their respective Affiliates, beneficially owns shares of
equity (or securities convertible into equity) of the Corporation.
Section 4.07 Voting Arrangements. Buyer has not:
(i) formed, joined or in any way participated in a Group with
respect to any Common Equity; or
(ii) granted any "proxies" (as defined under the Exchange
Act) with respect to any Common Equity to any Person or deposited
any Common Equity in a voting trust or entered into any other
arrangement or agreement with respect to the voting thereof.
Section 4.08 Litigation. There is no action, suit, investigation
or proceeding pending against, or to the knowledge of Buyer threatened
against or affecting, Buyer before any court or arbitrator or any
governmental body, agency or official which has a reasonable likelihood of
success and in any manner challenges or seeks to prevent, enjoin, alter or
materially delay the transactions contemplated by this Agreement.
Section 4.09 Finders' Fees. There is no investment banker, broker,
finder or other intermediary which has been retained by or is authorized to
act on behalf of Buyer who might be entitled to any fee or commission from
the Corporation or any of its Affiliates upon consummation of the
transactions contemplated by this Agreement (other than in connection with
the Note Purchase).
Section 4.10 HSR. No filing under the HSR Act and rules thereunder
is required in connection with the transactions contemplated hereby (other
than any such filing that may be required prior to the exercise of the
Warrants).
ARTICLE 5
COVENANTS OF THE CORPORATION
The Corporation agrees that:
Section 5.01 Access to Information. From the date hereof until the
Closing Date, the Corporation will (i) furnish to Buyer and its authorized
representatives such financial and operating data and other information
relating to the Corporation and its Subsidiaries as such Persons may
reasonably request and (ii) instruct its counsel, independent accountants
and financial advisors to cooperate with Buyer and its authorized
representatives in its investigation of the Corporation. Any investigation
pursuant to this Section shall be conducted in such manner as not to
interfere unreasonably with the conduct of the business of the Corporation.
Section 5.02 Restrictions Pending the Closing. After the date
hereof and prior to the Closing Date, except as expressly provided for in
this Agreement or as consented to in writing by Buyer and subject to any
additional consents required to be obtained from holders of Series A
Preferred Stock and Series B Preferred Stock, the Corporation will not:
(i) amend its Certificate of Incorporation or By-laws or
similar organizational documents;
(ii) split, combine or reclassify any shares of the
Corporation's capital stock;
(iii) declare or pay any dividend or distribution
(whether in cash, stock or property) in respect of its Common
Stock;
(iv) take any action, or knowingly omit to take any
action, that would, or that would reasonably be expected to,
result in (A) any of the representations and warranties of the
Corporation set forth in Article 3 becoming untrue or (B) any of
the conditions to the obligations of Buyer set forth in Section
8.01 or 8.02 not being satisfied; or
(v) enter into any agreement or commitment to do any of
the foregoing.
Section 5.03 Other Transfers of Common Shares or Warrant Shares.
The Corporation shall take all actions reasonably necessary to enable
holders of the Common Shares or Warrant Shares to sell such stock without
registration under the Securities Act pursuant to Rule 144 under the
Securities Act or any successor rule or regulation, subject in each case to
the provisions of this Agreement and, specifically, the filing on a timely
basis of all reports required to be filed under the Exchange Act.
Section 5.04 Pro Rata Participation. (a) For so long as Buyer and
Affiliated Permitted Transferees (as defined herein) own in the aggregate
at least 50% of the shares of Common Stock of the Corporation being
purchased by Buyer pursuant to this Agreement, if the Corporation shall
issue (such issuance, including any Common Equity issued to Buyer pursuant
to this Section 5.04, an "Issuance") any Common Equity (other than an
issuance of Common Equity (i) pursuant to the Corporation's existing or
future stock option plans or pursuant to any other existing or future
director or employee compensation plan approved by the Board of Directors,
(ii) as consideration for the acquisition of a business or of assets, (iii)
to the Corporation's joint venture partners in exchange for interests in
the relevant joint venture, (iv) upon conversion, exercise or exchange of
Convertible Securities, (v) pursuant to any shareholders' rights plan, (vi)
as dividends on any class of preferred stock of the Corporation) or (vii)
upon exercise of the Warrants), Buyer and Affiliated Permitted Transferees
(the "Pro Rata Offerees") shall have the right to purchase for cash an
amount of such Common Equity ("Pro Rata Securities") on the same terms and
at the same price as the issue price of such Common Equity (such price to
be agreed by the Corporation and Buyer if such Common Equity is to be
issued for consideration other than cash, and if the parties cannot agree
on such price, the price shall be determined as provided in paragraph (c)
of this Section 5.04) so that, after the Issuance, the Pro-Rata Offerees
would own the same proportional interest of the Common Equity of the
Corporation in the aggregate (assuming conversion, exercise or exchange of
all Convertible Securities) as their remaining Common Shares represent of
the Common Equity of the Corporation immediately prior to the Issuance
(assuming conversion, exercise or exchange of all Convertible Securities).
The Corporation shall deliver written notice (a "Pro Rata Notice") to each
Pro Rata Offeree with respect to any Issuance subject to the provisions of
this Section 5.04 either, at the Corporation's option, (i) not less than 5
days before the anticipated date of such Issuance (an "Advance Pro Rata
Notice"), or (ii) promptly after consummation of such Issuance. Each Pro
Rata Offeree's right to purchase Pro Rata Securities with respect to any
Issuance shall terminate 5 business days after delivery of the Pro Rata
Notice unless such Pro-Rata Offeree elects to exercise its right to
purchase Pro Rata Securities within such 5 business days. Such election
will constitute a binding offer to purchase and may not be revoked by such
Pro Rata Offeree; provided, however, that such Pro Rata Offeree's
obligation to acquire the Pro Rata Securities will be subject to terms and
conditions at least as favorable as those applicable to the Issuance giving
rise to the Pro Rata Offeree's rights under this Section 5.04 and to
receipt of any necessary governmental approvals (and the parties agree to
expeditiously seek and cooperate with respect to obtaining such approvals).
Notwithstanding anything in this Section 5.04 to the contrary, if a Pro
Rata Offeree exercises its right to purchase any Pro Rata Securities
pursuant to an Advance Pro Rata Notice, but the Corporation does not
consummate the issuance of Common Equity referred to in such notice (or
reduces the size of such issuance), the Pro Rata Offerees will not have the
right to purchase such Pro Rata Securities (or, in the event of a reduction
in the size of the Issuance, have its right to purchase reduced pro rata).
(b) If Buyer and the Corporation fail to agree on the price at
which Buyer may purchase securities under paragraph (a) of this Section
5.04 within 30 days following receipt by Buyer of a Pro Rata Notice, then
the items in dispute shall be referred to a nationally recognized
investment banking firm selected jointly by Buyer and the Corporation. The
determination of such investment banking firm shall be rendered within 30
days of such referral. The Corporation and Buyer shall share equally in
payment of all fees and expenses of such investment banking firm. All
determinations made pursuant to this paragraph (b) shall be final and
binding on Buyer and the Corporation.
Section 5.05 [Intentionally Omitted]
Section 5.06 Cross Ownership. For so long as Buyer or any
Affiliated Permitted Transferees or any of their respective Affiliates hold
equity securities representing at least 5% of the total equity of the
Corporation, the Corporation and its Affiliates will use their reasonable
best efforts not to take any action which would cause or result in any
violation by the Corporation and its Affiliates or by Buyer or any Buyer
Members or any of their respective Affiliates of applicable provisions of
the cross-ownership provisions of the Communications Act of 1934, as
amended, or any comparable provisions of other applicable federal, state or
local statutes or regulations, such that Buyer, or any Affiliated Permitted
Transferee or any of their respective Affiliates would, as a result of
Buyer's or any Affiliated Permitted Transferee's or any of their respective
Affiliates' ownership, operation or management (whether directly or by
attribution) of local telephone systems owned, operated, managed (whether
directly or by attribution) or subject to a definitive purchase agreement
to be acquired by Buyer, any of the Level 3 Holders, any Affiliated
Permitted Transferees or any of their respective Affiliates as of the date
of this Agreement and its interest in the Corporation, be compelled to (i)
divest or restructure any interest in any such local telephone system; (ii)
divest or restructure its interest in the Corporation; or (iii) incur any
penalty or other sanction as a result of such action. Buyer and the
Corporation will, and will cause their respective Affiliates to, cooperate
with each other to seek to obtain any consents or waivers necessary to
avoid violations of the type referred to in the previous sentence, provided
that none of Buyer, any of the Level 3 Holders, any Affiliated Permitted
Transferees or any of their respective Affiliates shall be required to
agree to any divestiture or restructuring of any of its assets or business
in order to secure any such consent or waiver. Should such required
consents and waivers not be secured, the Corporation and its Affiliates
will use their reasonable best efforts to refrain from such actions and
will use their reasonable best efforts to take such actions as may be
necessary from time to time in order to remedy any situation that could
otherwise give rise to any such results as a result of such circumstances.
Section 5.07 HMTF Waiver; NSTAR Waiver. The Corporation will use
its reasonable best efforts to obtain from (i) HMTF Live Wire Investors,
LLC (the "HMTF Waiver") prior to the Closing Date a waiver of the
application of Section 8(g) of the Certificate of Designations, Preferences
and Rights of Series A 7% Senior Convertible Preferred Stock of the
Corporation (the "Series A Certificate") with respect to the issuance of
Common Shares, Warrants and Warrant Shares and (ii) NSTAR Communications,
Inc., prior to the Closing Date a waiver of all its rights to acquire any
of the Common Shares, Warrants or Warrant Shares pursuant to the Exchange
Agreement or otherwise.
ARTICLE 6
COVENANTS OF BUYER
Buyer agrees that:
Section 6.01 Confidentiality. (a) Buyer will hold, and will use
its best efforts to cause its officers, directors, members, employees,
accountants, counsel, consultants, advisors, financing sources, financial
institutions, and agents (its "Representatives") to hold, in confidence,
unless compelled to disclose by judicial or administrative process or by
other requirements of law or national stock exchange, all confidential
documents and information concerning the Corporation or any of its
Affiliates furnished to Buyer, except to the extent that such information
can be shown to have been (i) previously known on a non-confidential basis
by Buyer or such Representatives, (ii) in the public domain through no
fault of Buyer or its Representatives (acting in their capacity as such or
with respect to information received in their capacity as such) or (iii)
later acquired by Buyer or such Representatives from sources other than the
Corporation or any of its Affiliates not known by Buyer or such
Representatives, as applicable, to be bound by any confidentiality
obligation; provided that Buyer may disclose such information to any of its
Representatives in connection with the transactions contemplated by this
Agreement so long as such Persons are informed by Buyer of the confidential
nature of such information and are directed by Buyer to treat such
information confidentially. Buyer shall be responsible for any failure to
treat such information confidentially by such Persons. The obligation of
Buyer to hold and to cause its Representatives to hold any such information
in confidence shall be satisfied if they exercise the same care with
respect to such information as they would take to preserve the
confidentiality of their own similar information. Buyer agrees that it
shall not and it shall cause its Representatives not to use any
confidential documents or information for any purpose other than monitoring
and evaluating its investment in the Corporation and in connection with the
transactions contemplated by this Agreement. If this Agreement is
terminated, Buyer will, and will use its reasonable best efforts to cause
its Representatives to, destroy or deliver to the Corporation, upon
request, all documents and other materials, and all copies thereof,
obtained by Buyer or on its behalf from the Corporation, or any of its
Representatives, in connection with this Agreement that are subject to such
confidence.
(b) In the event Buyer or anyone to whom Buyer transmits
confidential information is requested or required (by oral questions,
interrogatories, requests for information or documents, subpoenas, civil
investigative demand or similar process) to disclose any such information,
Buyer will provide the Corporation with prompt notice so that the
Corporation may seek a protective order or other appropriate remedy and/or
waive Buyer's compliance with the provisions of this Section. In the event
that such protective order or other remedy is not obtained sufficiently
promptly so as not to adversely affect Buyer or those of its officers,
directors, employees, accountants, counsel, consultants, advisors and
agents as to whom the information has been requested or required, or the
Corporation waives Buyer's compliance with the provisions of this
Agreement, Buyer will furnish only that portion of such information that
Buyer is advised by counsel is legally required and will, at the
Corporation's expense and direction, exercise its reasonable efforts to
obtain reliable assurance that confidential treatment will be accorded such
information.
Section 6.02 Sale or Transfer of Common Shares or Warrant Shares.
During the Standstill Period, Buyer will not, and will not permit its
Affiliates to, directly or indirectly, sell, pledge, encumber or otherwise
transfer, or agree to sell, pledge, encumber or otherwise transfer, any
Common Shares, Warrants or Warrant Shares without the prior written consent
of the Board of Directors, specifically expressed in a resolution adopted
by a majority of the directors of the Corporation who are not designees or
representatives of Buyer (or designees or representatives of any other
Person who is acting in concert with Buyer with respect to a requested
action); provided, that upon expiration of the 180-day period following the
Closing Date, Buyer and its Affiliates may sell, pledge, encumber or
otherwise transfer Common Shares, Warrants or Warrant Shares (a) in any
transaction in compliance with Rule 144 under the Securities Act; provided,
that any such sale shall be subject to the volume and manner of sale
limitations set forth in such rule whether or not legally required unless
Buyer and its Affiliates shall use commercially reasonable efforts not to
sell securities to a Person that would not be a Permitted Transferee (and
in the case of an arranged sale Buyer will not transfer securities to a
Person that would not be a Permitted Transferee without the prior written
consent of the Board of Directors, specifically expressed in a resolution
adopted by a majority of the directors of the Corporation who are not
designees or representatives of Buyer (or designees or representatives of
any other Person who is acting in concert with Buyer with respect to a
requested action)), (b) pursuant to the registration rights contemplated by
Exhibit B hereto or in a bona fide firm commitment, underwritten public
offering registered under the Securities Act in which Buyer, its Affiliates
and the underwriters use commercially reasonable efforts to prevent the
sale of such stock to any Person that would, after giving effect to such
sale, not be a Permitted Transferee, (c) to a commercial bank or other
financial institution in connection with a bona fide financing transaction
by Buyer or its Affiliates, provided that such bank or other financial
institution agrees to comply with the transfer restrictions set forth in
this Agreement with respect to such stock, and (d) to Permitted
Transferees. "Permitted Transferee" is (i) a Person who after giving effect
to such sale, pledge, encumbrance or transfer, would, together with its
Affiliates and with any members of a Group in which such Person or any of
its Affiliates is a member, beneficially own securities representing less
than 5% of the Total Voting Power and less than 15% of the aggregate number
of outstanding shares of Common Stock and Class B Stock (assuming, in each
case, the conversion, exercise or exchange of all Convertible Securities
beneficially owned by such Person, its Affiliates and such Group members)
or (ii) provided that such Person enters into an agreement in form and
substance reasonably acceptable to the Corporation pursuant to which such
Person agrees to be bound by the terms of this Agreement, (A) (x) any Buyer
Member or (y) W. ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
(collectively, the "Family Members"), (B) the lineal descendants, heirs,
executors, administrators, testamentary trustees, legatees or beneficiaries
of any Buyer Member or the Family Members, (C) any public foundation,
private foundation, or public charity established by any of the foregoing
and (D) any trust, the beneficiaries of which, or corporation or
partnership, the stockholders, members or general or limited partners of
which, include only a Buyer Member, his or her spouse, members of his or
her immediate family or his or her lineal descendants or any of the
foregoing. Such Persons contemplated in clause (ii) of this definition of
Permitted Transferee are referred to herein as "Affiliated Permitted
Transferees."
Section 6.03 Acquisition of Voting Securities. Buyer agrees that
during the Standstill Period, and notwithstanding anything in this
Agreement to the contrary, without the prior written consent of the Board
of Directors specifically expressed in a resolution adopted by a majority
of the directors of the Corporation who are not designees or
representatives of Buyer (or designees or representatives of any other
Person who is acting in concert with Buyer with respect to a requested
action), Buyer will not, and will not permit its Affiliates to, purchase or
otherwise acquire, directly or indirectly, or agree or offer to purchase or
otherwise acquire any Voting Securities of the Corporation if, as a result
thereof, Buyer and its Affiliates, in the aggregate, would beneficially own
Voting Securities representing more than 15% of the Total Voting Power.
Section 6.04 Standstill. (a) Buyer agrees that from the date
hereof until the earlier of (i) the date of a Change of Control, (ii) the
seventh anniversary of the Closing Date, (iii) the date upon which the
Level 3 Holders sell to one Person, in one transaction or a series of
related transactions, Voting Securities or Convertible Voting Securities
representing 5% or more of the Total Voting Power (assuming the conversion,
exercise or exchange of all Convertible Voting Securities held by such
Person and the members of any Group of which such Person is a member) if
following such sale such Person, or any Group of which such Person is a
member, would beneficially own Voting Securities representing 15% or more
of the Total Voting Power (assuming the conversion, exercise or exchange of
all Convertible Voting Securities held by such Person and the members of
any Group of which such Person is a member) and (iv) the occurrence of a
Section 6.04(e) Event (the "Standstill Period"), without the prior written
consent of the Board of Directors, specifically expressed in a resolution
adopted by a majority of the directors of the Corporation who are not
designees of Buyer (or designees or representatives of any other Person who
is acting in concert with Buyer with respect to a requested action), Buyer
will not and will not permit its Affiliates to:
(i) purchase or otherwise acquire, directly or
indirectly, or agree or offer to purchase or otherwise acquire
(except, in any case, (A) pursuant to the terms of this Agreement,
(B) by way of a stock dividend, stock split, reclassification,
recapitalization or other similar event by the Corporation, (C)
pursuant to the exercise of the Warrants or (D) with prior written
consent of the Board of Directors, specifically expressed in a
resolution adopted by a majority of the directors of the
Corporation who are not designees or representatives of Buyer (or
designees or representatives of any other Person who is acting in
concert with Buyer with respect to a requested action), any Voting
Securities or Convertible Voting Securities if such purchase or
acquisition would result in Buyer, the Buyer Members and any Group
of which any of Buyer or any Buyer Member is a member, owning,
directly or indirectly, 15% or more in the aggregate of the Total
Voting Power (assuming the conversion, exercise or exchange of all
Convertible Voting Securities held by Buyer, the Buyer Members and
the members of any Group of which any of Buyer or any Buyer Member
is a member); provided that if the Corporation shall issue any
Voting Securities or Convertible Voting Securities in respect of
which the Pro-Rata Offerees did not have the right to purchase
their pro rata share under Section 5.04, the Pro-Rata Offerees
shall be permitted to purchase in the open market or pursuant to
one or more private transactions, the number of shares of such
class of Voting Securities or Convertible Voting Securities as
they would have been entitled to purchase if they had been
entitled to purchase their pro rata share of such issuance under
Section 5.04;
(ii) "solicit,"or become a "participant," directly or
indirectly, in any "solicitation" of proxies (as such terms are
defined under the Exchange Act) from any holder of Voting
Securities or Convertible Voting Securities in connection with any
vote or other action on any matter or agree or announce its
intention to vote with any Person undertaking a "solicitation"
with respect to the voting of any Voting Security;
(iii) seek, propose (in a manner that is intended to
require, or would reasonably be expected to require, public
disclosure) or publicly make any statement inconsistent with the
position of the Board of Directors with respect to, or otherwise
participate in, any merger, consolidation, business combination,
tender or exchange offer, sale or purchase of assets, sale or
purchase of securities (except as and to the extent specifically
permitted by this Section 6.04), dissolution, liquidation,
restructuring, recapitalization or similar transactions of or
involving the Corporation or any of its Subsidiaries;
(iv) form, join or in any way participate in a Group
with respect to any Voting Securities or Convertible Voting Securities;
(v) grant any "proxies" (as defined under the Exchange
Act) with respect to any Voting Securities to any Person (except
as recommended by the Board of Directors of the Corporation) or
deposit any Voting Securities or Convertible Voting Securities in
a voting trust or enter into any other arrangement or agreement
with respect to the voting thereof;
(vi) otherwise act, alone or in concert with others, to
control or seek to control or influence or seek to influence the
management, Board of Directors or policies of the Corporation;
(vii) seek, alone or in concert with others,
representation on the Board of Directors (except with respect to
any Buyer Member in his capacity as a member of the Board of
Directors), or seek the removal of any member of the Board of
Directors;
(viii) make any publicly disclosed proposal or enter into
any discussion regarding any of the foregoing;
(ix) make any proposal, statement or inquiry, or disclose
any intention, plan or arrangement (whether written or oral)
inconsistent with the foregoing, or make or disclose any request
to amend, waive or terminate any provision of this Section 6.04 or
Section 6.02 or 6.03; or
(x) have any discussions or communications, or enter into
any arrangements, understandings or agreements (whether written or
oral) with, or advise, finance, assist or encourage, any other
Person in connection with any of the foregoing.
(b) (1) Nothing contained in this Section 6.04 shall be deemed in
any way to prohibit or limit (i) the activities of ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇. (or
designees or representatives of any other Person who is acting in concert
with ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇. with respect to a requested action) acting in his
capacity as a director of the Corporation or as a director of Level 3
Communications, Inc. or any Subsidiary thereof, (ii) Level 3
Communications, Inc. or any Subsidiary thereof or (iii) any transactions in
the ordinary course of business between the Corporation and its
Subsidiaries, on the one hand, and Buyer, the Affiliated Permitted
Transferees, the Level 3 Holders or any of their respective Affiliates, on
the other hand.
(2) Notwithstanding anything contained in Section 6.04(a)
of this Agreement to the contrary, the provisions of clauses (vi) through
(x) of Section 6.04(a) of this Agreement shall not be applicable to any
Qualified Director.
(c) The following shall apply during the Standstill Period:
Notwithstanding the provisions of Section 6.04(a), if the Corporation
receives an indication of interest for a Takeover Proposal that it intends
to consider, it will promptly notify Buyer of such fact. If thereafter or
otherwise the Corporation shall propose to enter into negotiations with any
Person regarding a possible Takeover Proposal (a "Negotiated Proposal"),
then prior to entering into such negotiations, the Corporation shall notify
Buyer that it proposes to enter into negotiations in respect of a
Negotiated Proposal (a "Negotiation Notice") and shall give Buyer a period
of not less than four Business Days (the "Determination Period") to
determine whether Buyer wishes to enter into negotiations with the
Corporation regarding a possible Takeover Proposal (a "Buyer Proposal").
The Negotiation Notice shall provide only the following information: (i) if
the Person making the Negotiated Proposal is proposing a transaction
involving the use by such Person of cash consideration, (A) whether it will
be Fully Financed (as defined below) at the time the Board may approve the
Negotiated Proposal or (B) if it will not be Fully Financed, the identity
of such Person and (ii) if the Person making the Negotiated Proposal is
proposing a transaction involving the use by such Person of non-cash
consideration, the identity of such Person and the form of consideration
proposed to be used. If after the delivery of the Negotiation Notice, the
Person making the Negotiated Proposal and the Corporation determine to
change the form of consideration or the Fully Financed status changes, the
Corporation will provide Buyer with another Negotiation Notice (which will
commence a new Determination Period). The cash consideration to be
delivered under a Negotiated Proposal will be "Fully Financed" for purposes
hereof if either (i) the Person making the Negotiated Proposal has
committed financing for such Negotiated Proposal or (ii) such Person is a
publicly traded entity with an equity market capitalization of at least
200% of the equity market capitalization of the Corporation.
(i) If within the Determination Period, Buyer or a Buyer
Member notifies the Corporation that it wishes to negotiate
regarding a Buyer Proposal, it shall be permitted to negotiate
with the Corporation regarding a Buyer Proposal and Buyer or such
Buyer Member (or designees or representatives of any other Person
who is acting in concert with Buyer or such Buyer Member with
respect to a requested action), shall recuse himself from
consideration of the Negotiated Proposal and a Buyer Proposal. If
the Board of Directors does not approve the Negotiated Proposal or
a Buyer Proposal, Buyer's and the Buyer Member' rights to
negotiate regarding a Buyer Proposal shall terminate. If the Board
of Directors determines to approve the Negotiated Proposal, Buyer
and each Buyer Member shall thereafter be permitted to (A) make a
Buyer Proposal by way of a tender or exchange offer or otherwise
and (B) take other actions in opposition to the Negotiated
Proposal, and in support of a Buyer Proposal, that would otherwise
be prohibited by Section 6.04(a) (other than clause (i) thereof,
except pursuant to Buyer's or a Buyer Members's tender or exchange
offer) (the actions referred to under clause (A) and (B) of this
sentence, the "Permitted Actions"). If the Negotiated Proposal is
rejected by the shareholders of the Corporation, Buyer's and the
Buyer Members' rights to take Permitted Actions shall thereupon
terminate; provided that if at such time Buyer or a Buyer Member
has proposed a Buyer Proposal to the Corporation's shareholders
and such Buyer Proposal is still pending, Buyer's and such Buyer
Member's rights to take Permitted Actions shall continue until the
earlier of (l) the date upon which the Buyer Proposal is rejected
by the Corporation's shareholders and (2) 60 days after the date
upon which the Negotiated Proposal was rejected. Upon the
termination of Buyer's or a Buyer Member's rights to take
Permitted Actions hereunder, Buyer and such Buyer Member shall
take any action necessary to promptly terminate all proxies,
agreements, Groups and other arrangements entered into that would
have been prohibited under Section 6.04(a) but for the effect of
this Section 6.04(c).
(ii) If within the Determination Period, Buyer or a Buyer
Member does not notify the Corporation that it intends to
negotiate with the Corporation regarding a Buyer Proposal, Buyer
and the Buyer Members shall not be permitted to negotiate with the
Corporation regarding, or otherwise make, a Buyer Proposal and
shall not be released from the restrictions contained in Section
6.04(a) at any time either before or after approval of the
Negotiated Proposal by the Board of Directors with respect to such
Negotiated Proposal.
(d) If, during the Standstill Period, the Board of Directors shall
approve a process pursuant to which Takeover Proposals are to be solicited
from one or more Persons, then the provisions of Section 6.04(c) shall
apply in respect of such process except that (i) the Determination Period
shall end no earlier than the day prior to the last date by which such
Persons are required to submit Takeover Proposals (or in the event that the
Corporation determines to enter into a bona fide negotiation with one
or more participants in such process prior to such date, the date upon
which such negotiations shall begin) and (ii) the term "Negotiated
Proposal" shall mean the Takeover Proposal(s) of one or more of the
participants in such process.
(e) If any Person shall commence and not withdraw a bona fide
unsolicited tender or exchange offer that if successful would result in a
Change of Control (an "Offer"), the Standstill Period shall terminate
unless (i) within 10 business days of the announcement of such Offer, the
Corporation shall have publicly recommended that the Offer not be accepted
and (ii) the Level 3 Holders shall be subject to an agreement not to tender
or otherwise sell Voting Securities beneficially owned by the Level 3
Holders to the Person making the Offer except to the extent the Voting
Securities beneficially owned by the Level 3 Holders that are not subject
to such an agreement shall be less than 5% of the Total Voting Power. The
termination of the Standstill Period pursuant to this Section 6.04(e) is
referred to herein as a "Section 6.04(e) Event."
ARTICLE 7
COVENANTS OF BUYER AND THE CORPORATION
Section 7.01 Required Regulatory Approvals; Reasonable Best
Efforts; Further Assurances. Buyer and the Corporation acknowledge that
certain regulatory or governmental approvals may be required to lawfully
consummate the transactions contemplated by this Agreement. Subject to the
terms and conditions of this Agreement, each of Buyer and the Corporation
will, and will cause their Affiliates to, use their reasonable best efforts
to take, or cause to be taken, all actions and to do, or cause to be done,
all things necessary or desirable under applicable laws and regulations to
consummate the transactions contemplated by this Agreement. The Corporation
and Buyer agree to execute and deliver such other documents, certificates,
agreements and other writings and to take such other actions as may be
necessary or desirable in order to consummate or implement expeditiously
the transactions contemplated by this Agreement.
Section 7.02 Certain Filings. (a) The Corporation and Buyer will,
and will cause their Affiliates to, cooperate with one another (i) in
determining whether any action by or in respect of or filing with, any
governmental body, agency, official or authority is required, or any
actions, consents, approvals or waivers are required to be obtained from
parties to any material contracts, in connection with the consummation of
the transactions contemplated by this Agreement and (ii) in taking such
actions or making any such filings, furnishing information required in
connection therewith and seeking timely to obtain any such actions,
consents, approvals or waivers. Without limiting the generality of the
foregoing, the Corporation and Buyer, to the extent required to do so in
connection with the exercise of the Warrants, shall prepare and file the
notifications required under the HSR Act in connection with the
transactions contemplated by this Agreement. The Corporation and Buyer
shall respond as promptly as practicable to (i) any inquiries or requests
received from the Federal Trade Commission or the Department of Justice for
additional information or documentation and (ii) any inquiries or requests
received from any state attorney general or other governmental body in
connection with antitrust or related matters. The Corporation and Buyer
shall (A) give the other parties prompt notice of the commencement of any
action, suit, litigation, arbitration, preceding or investigation by or
before any governmental body with respect to the transactions contemplated
by this Agreement, (B) keep the other parties informed as to the status of
any such action, suit, litigation, arbitration, preceding or investigation,
and (C) promptly inform the other parties of any communication to or from
the Federal Trade Commission, the Department of Justice or any other
governmental body regarding the transactions contemplated by this
Agreement.
(b) The Corporation and Buyer will, and will cause their
Affiliates to, take such actions, make such payments or commitments, and
agree to such amendments to any of their respective franchises, licenses,
contracts or other agreements or authorizations, as shall be required in
order to obtain a consent, approval or waiver from any other Person in
connection with the transactions contemplated hereby, except if such
actions, payments, commitments or amendments, considered individually or in
the aggregate, would reasonably be expected to have a Material Adverse
Effect on the Corporation or Buyer, as the case may be. If the Corporation
or Buyer believes that such actions, payments, commitments or amendments
would have such a Material Adverse Effect, the Corporation and Buyer shall
cooperate in good faith to seek a resolution to the circumstances which
give rise to the requirement for such action, payment, commitment or
amendment or to determine an otherwise appropriate resolution.
Section 7.03 Public Announcements. Prior to the Closing, the
parties agree to consult with each other before issuing any press release
or making any public statement with respect to this Agreement or the
transactions contemplated hereby and, except as may be required by
applicable law or any listing agreement with any national securities
exchange or quotation system, will not issue any such press release or make
any such public statement prior to such consultation. Following the
Closing, the parties agree to consult with each other before issuing any
press release or making any public filing that describes any terms of this
Agreement.
Section 7.04 Registration Rights Agreement; Warrants. The terms
set forth in Exhibit C and Exhibit D hereto are hereby incorporated by
reference.
Section 7.05 NASD Filing. (a) Promptly after the execution of this
Agreement, the Corporation will file with the Nasdaq Stock Market, Inc.
(the "Nasdaq") the appropriate notification form for the listing of
additional shares in a form reasonably acceptable to Buyer (the "Listing
Notification") pursuant to Rule 4310(c)(17) of the National Association of
Securities Dealers, Inc. (the "NASD") in respect of the Common Shares and
Warrant Shares.
ARTICLE 8
CONDITIONS TO CLOSING
Section 8.01 Condition to Obligations of Buyer and the
Corporation. The obligations of Buyer and the Corporation to consummate the
Closing are subject to the satisfaction of the following conditions:
(a) at least 15 calendar days shall have elapsed since the filing
of the Listing Notification and Nasdaq shall not have raised any material
issue with respect thereto which has not been resolved to the reasonable
satisfaction of both Buyer and the Corporation;
(b) (i) all filings with, notifications to and consents from
Regulatory Authorities or set forth on Schedules 3.03 and 3.04 hereto
required for the consummation of the Closing, with such exceptions as would
not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect on the Corporation or Buyer and (ii) the Bank
Consent, shall in each case have been made or obtained, as applicable, in
form and substance reasonably satisfactory to the Corporation and Buyer;
(c) no provision of any applicable law or regulation (with such
exceptions as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect on the Corporation or Buyer) and
no judgment, injunction, order or decree shall prohibit the consummation of
the Closing;
(d) the Note Purchase shall have been consummated;
(e) either (i) the HMTF Waiver shall have been obtained or (ii) no
anti- dilution adjustment shall be required as a result of the transactions
contemplated by this Agreement pursuant to the Series A Certificate; and
(f) the Vulcan Waiver shall be in full force and effect.
Section 8.02 Conditions to Obligation of Buyer. The obligation of
Buyer to consummate the Closing is subject to the satisfaction of the
following further conditions:
(a) The Corporation shall have performed in all material respects
all of its obligations hereunder required to be performed by it on or prior
to the Closing;
(b) The representations and warranties of the Corporation
contained in this Agreement shall in each case, if specifically qualified
by materiality, be true and correct and, if not so qualified, be true and
correct in all material respects at and as of the Closing (except that, for
the purposes of this Section 8.02(b), the representation and warranty in
Section 3.12(i) shall only apply with respect to any action, suit,
investigation or proceeding instituted by a governmental agency or
authority), as if made at and as of such date (except to the extent such
representations and warranties expressly relate to an earlier date, in
which case such representations and warranties shall be true and correct,
or true and correct in all material respects, as the case may be, on and as
of such earlier date);
(c) The Corporation shall have delivered to Buyer (i) a copy of
the resolutions adopted by the Board of Directors, certified by the
Secretary of the Corporation, authorizing this Agreement and the
transactions contemplated hereby and (ii) a certificate dated the Closing
Date, signed by an officer of the Corporation, certifying as to the
fulfillment of the conditions set forth in Sections 8.02(a) and (b);
(d) The Corporation shall have delivered to Buyer an opinion
reasonably acceptable to Buyer from the General Counsel of the Corporation,
with respect to the due incorporation, due authorization and capitalization
of the Corporation; and
(e) The Corporation shall have delivered to Buyer an opinion
reasonably acceptable to Buyer from Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇
LLP, special counsel to the Corporation, with respect to the valid and
binding nature and enforceability of this Agreement.
Section 8.03 Conditions to Obligation of the Corporation. The
obligation of the Corporation to consummate the Closing is subject to the
satisfaction of the following further conditions:
(a) Buyer shall have performed in all material respects all of its
obligations hereunder required to be performed by it at or prior to the
Closing Date;
(b) The representations and warranties of Buyer contained in this
Agreement shall in each case, if specifically qualified by materiality, be
true and correct and, if not so qualified, be true and correct in all
material respects at and as of the Closing, as if made at and as of such
date (except to the extent such representations and warranties expressly
relate to an earlier date, in which case such representations and
warranties shall be true and correct, or true and correct in all material
respects, as the case may be, on and as of such earlier date); and
(c) The Corporation shall have received a certificate from Buyer,
dated the Closing Date, signed by an appropriate officer of Buyer
certifying as to the fulfillment of the conditions set forth in Sections
8.03(a) and 8.03(b).
ARTICLE 9
TERMINATION
Section 9.01 Grounds for Termination. This Agreement may be
terminated at any time prior to the Closing:
(a) by mutual written agreement of the Corporation and Buyer;
(b) by either the Corporation or Buyer if the Closing shall not
have been consummated on or before July 15, 2001, unless extended by mutual
agreement or unless the failure to consummate the Closing is attributable
to a failure on the part of the party seeking to terminate this Agreement
to perform any obligation required to be performed by such party at or
prior to the Closing Date; or
(c) by either the Corporation or Buyer if consummation of the
transactions contemplated hereby would violate any nonappealable final
order, decree or judgment of any court or governmental body having
competent jurisdiction.
Any party desiring to terminate this Agreement pursuant to Section 9.01(b)
or 9.01(c) shall promptly give notice of such termination to the other
parties.
Section 9.02 Effect of Termination. If this Agreement is
terminated as permitted by Section 9.01, such termination shall be without
liability of any party (or any stockholder, director, officer, employee,
agent, consultant or representative of such party) to the other parties to
this Agreement; provided that if such termination shall result from the
willful (a) failure of any party to fulfill a condition to the performance
of the obligations of the other parties, (b) failure to perform a covenant
of this Agreement or (c) breach by any parties hereto of any representation
or warranty or agreement contained herein, such party shall be fully liable
for any and all losses incurred or suffered by the other parties as a
result of such failure or breach. The provisions of Sections 6.01, 9.02,
11.01, 11.03, 11.05, 11.06, 11.07, 11.08, 11.09, 11.10, and 11.12 shall
survive any termination hereof pursuant to Section 9.01.
ARTICLE 10
SURVIVAL; INDEMNIFICATION
Section 10.01 Survival of Representation and Warranties. All
representations and warranties contained in this Agreement and all claims
with respect thereto shall terminate upon the expiration of 18 months after
the Closing Date, except that the representations and warranties contained
in Sections 3.01, 3.02, 3.03, 3.06, 4.01, 4.02, and 4.03 shall survive
indefinitely. Notwithstanding the preceding sentence, any representation or
warranty in respect of which indemnity may be sought under this Agreement
shall survive the time at which it would otherwise terminate pursuant to
the preceding sentence, if notice of the inaccuracy or breach thereof
giving rise to such right of indemnity shall have been given in reasonable
detail to the party against whom such indemnity may be sought prior to such
time.
Section 10.02 Indemnification. (a) In the event that the Closing
shall occur, the Corporation shall indemnify Buyer against and agrees to
hold Buyer harmless from any and all damage, loss, liability and expense
(including, without limitation, reasonable expenses of investigation and
reasonable attorneys' fees and expenses in connection with any action, suit
or proceeding) ("Damages") incurred or suffered by Buyer arising out of any
misrepresentation or breach of warranty, covenant or agreement made or to
be performed by the Corporation pursuant to this Agreement; provided that
(i) the Corporation shall not be liable to Buyer under this Section
10.02(a) unless the aggregate amount of Buyer's Damages with respect to all
matters referred to in this Section 10.02(a) exceeds $1 million, in which
event Buyer shall be entitled to make a claim against the Corporation for
the full amount of such Damages, and (ii) the Corporation's maximum
liability under this Section 10.02(a) with respect to Buyer shall not
exceed $50 million. In the event that such indemnity is payable by the
Corporation, the Corporation will advance or reimburse each Buyer to which
such indemnity is payable (in lieu of the amount set forth in the preceding
sentence) an amount equal to the product of (x) such Damages and (y) the
Gross Up Adjustment. "Gross Up Adjustment" means, with respect to Buyer, a
fraction, the numerator of which is one and the denominator of which is the
difference between (A) one, and (B) Buyer's percentage ownership of the
outstanding Common Stock and Class B Stock (assuming the conversion,
exercise or exchange of all Convertible Securities and expressed as a
decimal) at the time of payment of such Damages.
(b) In the event that the Closing shall occur, Buyer shall
indemnify the Corporation against and agrees to hold the Corporation
harmless from any and all Damages incurred or suffered by the Corporation
arising out of any misrepresentation or breach of warranty, covenant or
agreement made or to be performed by Buyer pursuant to this Agreement;
provided that (i) Buyer shall not be liable under this Section 10.02(b)
unless the aggregate amount of Damages attributable to Buyer with respect
to all matters referred to in this Section 10.02(b) exceeds $1 million, in
which event the Corporation shall be entitled to make a claim against Buyer
for the full amount of such Damages, and (ii) Buyer's maximum liability
under this Section shall not exceed $50 million.
Section 10.03 Procedures. Any party seeking indemnification under
Section 10.02 (the "Indemnified Party") agrees to give prompt notice to the
party against whom indemnity is sought (the "Indemnifying Party") of the
assertion of any claim, or the commencement of any suit, action or
proceeding in respect of which indemnity may be sought under such Section.
The Indemnifying Party may at its election participate in and control the
defense of any such suit, action or proceeding at its own expense. The
Indemnifying Party shall not be liable under Section 10.02 for any
settlement effected without its consent of any claim, litigation or
proceeding in respect of which indemnity may be sought hereunder.
Section 10.04 Inspection; No Other Representations. Buyer is an
informed and sophisticated purchaser, and has undertaken such investigation
and has been provided with and has evaluated such documents and information
as it has deemed necessary to enable it to make an informed and intelligent
decision with respect to the execution, delivery and performance of this
Agreement. Buyer will undertake prior to the Closing such further
investigation and request such additional documents and information as it
deems necessary. Buyer agrees to accept the Common Shares it is purchasing
based upon its own inspection, examination and determination with respect
thereto as to all matters, and without reliance upon any express or implied
representations or warranties of any nature made by or on behalf of or
imputed to the Corporation, except as expressly set forth in this
Agreement. Without limiting the generality of the foregoing, Buyer
acknowledges that the Corporation makes no representation or warranty with
respect to (i) any projections, estimates or budgets delivered to or made
available to Buyer of future revenues, future results of operations (or any
component thereof), future cash flows or future financial condition (or any
component thereof) of the Corporation and the Subsidiaries or the future
business and operations of the Corporation and its Subsidiaries or (ii) any
other information or documents made available to Buyer or its counsel,
accountants or advisors with respect to the Corporation or its Subsidiaries
or their respective businesses or operations, except as expressly set forth
in this Agreement.
Section 10.05 Exclusivity. Except for Buyer's rights to
indemnification set forth in Section 10.02 of this Agreement and except in
the case of fraud, effective as of the Closing Buyer waives any rights and
claims Buyer may have against the Corporation, whether in law or in equity,
relating to the transactions contemplated hereby. The rights and claims
waived by Buyer include, without limitation, claims for breach of contract,
breach of representation or warranty, negligent misrepresentation and all
other claims for breach of duty. After the Closing, Section 10.02 will
provide the exclusive remedy for any misrepresentation, breach of warranty,
covenant or other agreement or other claim arising out of this Agreement or
the transactions contemplated hereby, except in the case of fraud.
ARTICLE 11
MISCELLANEOUS
Section 11.01 Notices. All notices, requests and other
communications to any party hereunder shall be in writing and shall be
deemed duly given, effective (i) three Business Days later, if sent by
registered or certified mail, return receipt requested, postage prepaid,
(ii) when sent if sent by telecopier or fax, provided that the telecopy or
fax is promptly confirmed by telephone confirmation thereof (iii) when
served, if delivered personally to the intended recipient, and (iv) one
Business Day later, if sent by overnight delivery via a national courier
service, and in each case, addressed,
if to BUYER, to:
Red Basin, LLC
▇/▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇/▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
Fraser Stryker
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇/▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and to:
▇▇▇▇▇▇▇ ▇▇▇▇ and ▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇/▇▇▇▇ ▇▇▇▇▇▇▇▇
Fax: (▇▇▇)▇▇▇-▇▇▇▇
if to the Corporation, to:
RCN Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇ Slate ▇▇▇▇▇▇▇ & ▇▇▇▇, LLP
▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
Any party may change the address to which notices or other communications
hereunder are to be delivered by giving the other party notice in the
manner herein set forth.
Section 11.02 Amendments and Waivers. Any provision of this
Agreement may be amended or waived if, but only if, such amendment or
waiver is in writing and is signed, in the case of an amendment, by each
party to this Agreement, or in the case of a waiver, by the party against
whom the waiver is to be effective. No failure or delay by any party in
exercising any right, power or privilege hereunder shall operate as a
waiver thereof nor shall any single or partial exercise thereof preclude
any other or further exercise thereof or the exercise of any other right,
power or privilege. The rights and remedies herein provided shall be
cumulative.
Section 11.03 Expenses. All costs and expenses incurred in
connection with this Agreement shall be paid by the party incurring such
cost or expense.
Section 11.04 Assignment. The rights and obligations of the
parties hereunder cannot be assigned or delegated except that (i) Buyer may
assign all of its rights and obligations under this Agreement to a single
Controlled Affiliate (provided that (A) any such Controlled Affiliate
continues to be a Controlled Affiliate of Buyer and (B) Buyer shall be
responsible for any breach by such Controlled Affiliate), (ii) Buyer may
assign all or a portion of its rights and obligations under this Agreement
to any Buyer Member, provided that such Buyer Member enters into an
agreement in form and substance reasonably acceptable to the Corporation
pursuant to which such Buyer Member agrees to be bound by the terms of this
Agreement, (iii) Buyer may assign its rights and obligations under this
Agreement to any one or more Affiliated Permitted Transferees (if the
related transfer is not a sale made under Rule 144 under the Exchange Act)
and (iv) Buyer may assign its rights and obligations under Section 7.04 and
Exhibit B of this Agreement solely with respect to one Demand Registration
(as defined in Exhibit B) to a Permitted Transferee that concurrently
therewith acquires in the aggregate from Buyer or its Affiliated Permitted
Transferees at least 20% of the shares of Common Stock being purchased by
Buyer pursuant to this Agreement and agrees in writing to be bound by the
terms of this Agreement (the "Demand Transferee").
Section 11.05 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT
GIVING EFFECT TO THE CHOICE OF LAW PRINCIPLES THEREOF OTHER THAN SECTION
5-1401 OF THE NEW YORK GENERAL CORPORATION LAW) AS TO ALL MATTERS,
INCLUDING, BUT NOT LIMITED TO, MATTERS OF VALIDITY, CONSTRUCTION, EFFECT,
PERFORMANCE AND REMEDIES.
Section 11.06 Jurisdiction. Except as otherwise expressly provided
in this Agreement, the parties hereto agree that any suit, action or
proceeding seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the transactions
contemplated hereby may only be brought in the United States District Court
for the Southern District of New York or any New York State court sitting
in New York City, and each of the parties hereby consents to the exclusive
jurisdiction of such courts (and of the appropriate appellate courts
therefrom) in any such suit, action or proceeding and irrevocably waives,
to the fullest extent permitted by law, any objection which it may now or
hereafter have to the laying of the venue of any such suit, action or
proceeding in any such court or that any such suit, action or proceeding
which is brought in any such court has been brought in an inconvenient
forum. Process in any such suit, action or proceeding may be served on any
party anywhere in the world, whether within or without the jurisdiction of
any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 11.01 shall be
deemed effective service of process on such party.
Section 11.07 Counterparts; Third-Party Beneficiaries. This
Agreement may be signed in any number of counterparts, each of which shall
be an original, with the same effect as if the signatures thereto and
hereto were upon the same instrument. This Agreement shall become effective
when each party hereto shall have received a counterpart hereof signed by
the other party hereto. No provision of this Agreement is intended to
confer upon any Person other than the parties hereto any rights or remedies
hereunder, except for rights provided to Permitted Transferees under
Section 7.04.
Section 11.08 Entire Agreement. This Agreement (including the
Exhibits hereto) constitutes the entire agreement between the parties with
respect to the subject matter of this Agreement and supersede all prior
agreements and understandings, both oral and written, between the parties
with respect to the subject matter of this Agreement.
Section 11.09 Captions. The captions herein are included for
convenience of reference only and shall be ignored in the construction or
interpretation hereof.
Section 11.10 Severability. The provisions of this Agreement shall
be deemed severable and the invalidity or unenforceability of any provision
shall not affect the validity or enforceability of the other provisions
hereof. If any provision of this Agreement, or the application thereof to
any Person or any circumstance, is invalid or unenforceable, (a) a suitable
and equitable provision shall be substituted therefor in order to carry
out, so far as may be valid and enforceable, the intent and purpose of such
invalid or unenforceable provision and (b) the remainder of this Agreement
and the application of such provision to other Persons or circumstances
shall not be affected by such invalidity or unenforceability, nor shall
such invalidity or unenforceability affect the validity or enforceability
of such provision, or the application thereof, in any other jurisdiction.
Section 11.11 Specific Performance. The parties hereto agree that
the remedy at law for any breach of this Agreement will be inadequate and
that any party by whom this Agreement is enforceable shall be entitled to
specific performance in addition to any other appropriate relief or remedy.
Such party may, in its sole discretion, apply to any court of competent
jurisdiction for specific performance or injunctive or such other relief as
such court may deem just and proper in other to enforce this Agreement or
prevent any violation hereof and, to the extent permitted by applicable
law, each party waives any objection to the imposition of such relief
Section 11.12 No Recourse. Notwithstanding any of the terms or
provisions of this Agreement, (i) the Corporation agrees that neither it
nor any Person acting on its behalf may assert any claims or cause of
action against any officer, director, partner, member or stockholder of
Buyer or any of its Affiliates in connection with or arising out of this
Agreement or the transactions contemplated hereby and (ii) each Buyer
agrees that neither it nor any Person acting on its behalf may assert any
claims or cause of action against any officer, director, partner, member or
stockholder of the Corporation or any of its Affiliates in connection with
or arising out of this Agreement or the transactions contemplated hereby.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be duly executed by their respective authorized officers as of the day
and year first above written.
RCN CORPORATION
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Chief Financial Officer
RED BASIN, LLC
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇.
--------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇.
Title: Manager, Red Basin, LLC
EXHIBIT B
REGISTRATION RIGHTS
This constitutes Exhibit B to the Stock Purchase Agreement (as it
may be amended from time to time, the "Stock Purchase Agreement") dated as
of May 28, 2001 between RCN Corporation, a Delaware corporation (the
"Corporation"), and Red Basin, LLC, a Nebraska limited liability company
(the "Buyer").
ARTICLE 1
DEFINITIONS
Section 1.01 Definitions. Terms defined in the Stock Purchase
Agreement are used herein as therein defined. In addition, the following
terms, as used herein, have the following meanings:
"Commission" means the Securities and Exchange Commission.
"Holder" means a person who owns Registrable Securities and is
either (a) Buyer, (b) an Affiliated Permitted Transferee or (c) the Demand
Transferee.
"Piggyback Registration" means a Piggyback Registration as defined
in Section 2.02.
"Registrable Securities" means (i) shares of Common Stock issued
pursuant to the Stock Purchase Agreement, (ii) shares issued upon exercise
of the Warrants (as defined in the Stock Purchase Agreement), (iii) shares
of Common Stock acquired under Section 5.04 of the Stock Purchase Agreement
and (iv) any additional shares of Common Stock issued in respect of the
shares referred to in (i), (ii) and (iii) in connection with a stock split,
stock dividend or similar event with respect to the Common Stock. As to any
particular Registrable Securities, such Registrable Securities shall cease
to be Registrable Securities as soon as they (i) have been sold or
otherwise disposed of pursuant to a registration statement that was filed
with the Commission and declared effective under the Securities Act, (ii)
are eligible for sale pursuant to Rule 144 without being subject to
applicable volume limitations thereunder, (iii) have been otherwise sold,
transferred or disposed of by a Holder to any Person that is not a Holder,
or (iv) have ceased to be outstanding.
"Rule 144" means Rule 144 (or any successor rule of similar
effect) promulgated under the Securities Act.
"Selling Holder" means any Holder who is selling Registrable
Securities pursuant to a public offering registered hereunder.
"Underwriter" means a securities dealer who purchases any
Registrable Securities as principal and not as part of such dealer's
market-making activities.
Section 1.02 Internal References. Unless the context indicates
otherwise, references to Articles, Sections and paragraphs shall refer to
the corresponding articles, sections and paragraphs in this Exhibit B, and
references to the parties shall mean the parties to the Stock Purchase
Agreement.
ARTICLE 2
REGISTRATION RIGHTS
Section 2.01 Demand Registration. (a) Buyer, on its own behalf and
on behalf of the other Holders, may make up to three written requests for
registration under the Securities Act of all or any part of the Registrable
Securities held by the Holders (each, a "Demand Registration"); provided
that (i) Buyer may not request a Demand Registration before the first
anniversary of the Closing Date, (ii) no Demand Registration may be
requested within 180 days after the preceding request for a Demand
Registration, and (iii) each Demand Registration must be (x) in respect of
Registrable Securities with a fair market value of at least $25,000,000 or
(y) in respect of all remaining Registrable Securities and have a fair
market value of at least $5,000,000. Such request will specify the
aggregate number of shares of Registrable Securities proposed to be sold
and will also specify the intended method of disposition thereof. A
registration will not count as a Demand Registration until it has become
effective. Should a Demand Registration not become effective due to the
failure of a Holder to perform its obligations under this Exhibit B or the
inability of the requesting Holders to reach agreement with the
Underwriters for the proposed sale on price or other customary terms for
such transaction, or in the event the requesting Holders withdraw or do not
pursue the request for the Demand Registration (in each of the foregoing
cases, provided that at such time the Corporation is in compliance in all
material respects with its obligations under this Exhibit B), then such
Demand Registration shall be deemed to have been effected (provided that if
the Demand Registration does not become effective because of a material
adverse change in the condition (financial or otherwise), business, assets
or results of operations of the Corporation and its Subsidiaries taken as a
whole that occurs subsequent to the date of the written request made by the
requesting Holders, then the Demand Registration shall not be deemed to
have been effected).
(b) In the event that the requesting Holders withdraw or do not
pursue a request for a Demand Registration and, pursuant to Section 2.01(a)
hereof, such Demand Registration is deemed to have been effected, the
Holders may reacquire such Demand Registration (such that the withdrawal or
failure to pursue a request will not count as a Demand Registration
hereunder) if the Holders reimburse the Corporation for any and all
Registration Expenses incurred by the Corporation in connection with such
request for a Demand Registration; provided that the right to reacquire a
Demand Registration may be exercised a maximum of two times.
(c) If the Selling Holders so elect, the offering of such
Registrable Securities pursuant to such Demand Registration shall be in the
form of an underwritten offering. A majority in interest of the Selling
Holders shall have the right to select the managing Underwriters and any
additional investment bankers and managers to be used in connection with
such offering, subject to the Corporation's approval, which approval shall
not be unreasonably withheld.
(d) The Selling Holders will inform the Corporation of the time
and manner of any disposition of Registrable Securities, and agree to
reasonably cooperate with the Corporation in effecting the disposition of
the Registrable Securities in a manner that does not unreasonably disrupt
the public trading market for the Common Stock.
(e) The Corporation will have the right to preempt any Demand
Registration with a primary registration by delivering written notice
(within five business days after the Corporation has received a request for
such Demand Registration) of such intention to Buyer indicating that the
Corporation has identified a specific business need and use for the
proceeds of the sale of such securities and the Corporation shall use
commercially reasonable efforts to effect a primary registration within 60
days of such notice. In the ensuing primary registration, the Holders will
have such piggyback registration rights as are set forth in Section 2.02
hereof. Upon the Corporation's preemption of a requested Demand
Registration, such requested registration will not count as a Demand
Registration; provided that a Demand Registration will not be deemed
preempted if the Holders are permitted to sell all requested securities in
connection with the ensuing primary offering by exercising their piggyback
registration rights as set forth in Section 2.02. The Corporation may
exercise the right to preempt only twice in any 360-day period; provided,
that during any 360-day period there shall be a period of at least 120
consecutive days during which the Selling Holders may effect a Demand
Registration.
(f) Subject to Section 2.03, the Corporation will be entitled to
include in a Demand Registration shares of Common Stock for its own account
or for the account of other Persons.
Section 2.02 Piggyback Registration. If the Corporation proposes
to file a registration statement under the Securities Act with respect to
an offering of Common Stock for its own account or for the account of
another Person (other than a registration statement on Form S-4 or S-8 or
pursuant to Rule 415 (or any substitute form or rule, respectively, that
may be adopted by the Commission)), the Corporation shall give written
notice of such proposed filing to the Holders at the address set forth in
the share register of the Corporation as soon as reasonably practicable
(but in no event less than 10 days before the anticipated filing date), and
such notice shall offer each Holder the opportunity to register on the same
terms and conditions such number of shares of Registrable Securities as
such Holder may request (a "Piggyback Registration"). Each Holder will have
five business days after receipt of any such notice to notify the
Corporation as to whether it wishes to participate in a Piggyback
Registration; provided that should a Holder fail to provide timely notice
to the Corporation, such Holder will forfeit any rights to participate in
the Piggyback Registration with respect to such proposed offering. In the
event that the registration statement is filed on behalf of a Person other
than the Corporation, the Corporation will use its best efforts to have the
shares of Registrable Securities that the Holders wish to sell included in
the registration statement. If the Corporation shall determine in its sole
discretion not to register or to delay the proposed offering, the
Corporation may, at its election, provide written notice of such
determination to the Holders and (i) in the case of a determination not to
effect the proposed offering, shall thereupon be relieved of the obligation
to register such Registrable Securities in connection therewith, and (ii)
in the case of a determination to delay a proposed offering, shall
thereupon be permitted to delay registering such Registrable Securities for
the same period as the delay in respect of the proposed offering. As
between the Corporation and the Selling Holders, the Corporation shall be
entitled to select the Underwriters in connection with any Piggyback
Registration.
Section 2.03 Reduction of Offering. Notwithstanding anything
contained herein, if the managing Underwriter of an offering described in
Section 2.01 or 2.02 states in writing that the size of the offering that
Holders, the Corporation and any other Persons intend to make is such that
the inclusion of the Registrable Securities would be likely to materially
and adversely affect the price, timing or distribution of the offering,
then the amount of Registrable Securities to be offered for the account of
Holders shall be reduced to the extent necessary to reduce the total amount
of securities to be included in such offering to the amount recommended by
such managing Underwriter; provided that in the case of a Piggyback
Registration, if securities are being offered for the account of Persons
other than the Corporation, then the proportion by which the amount of
Registrable Securities intended to be offered for the account of Holders is
reduced shall not exceed the proportion by which the amount of securities
intended to be offered for the account of such other Persons (other than
any Person exercising a demand registration right) is reduced; provided
further that in the case of a Demand Registration, the amount of
Registrable Securities to be offered for the account of the Holders making
the Demand Registration shall be reduced only after the amount of
securities to be offered for the account of the Corporation and any other
Persons has been reduced to zero. In the event of a reduction pursuant to
this Section 2.03 of Registrable Securities to be offered for the account
of Holders, such reduction shall be pro rata among such Holders based on
the number of Registrable Securities each Holder had proposed to sell.
Section 2.04 Preservation of Rights. The Corporation will not
grant any registration rights to third parties which contravene the rights
granted hereunder.
ARTICLE 3
! REGISTRATION PROCEDURES
Section 3.01 Filings; Information. In connection with a Demand
Registration pursuant to Section 2.01 hereof, the Corporation will use its
reasonable best efforts to effect the registration of such Registrable
Securities as promptly as is reasonably practicable, and in connection with
any such request:
(a) The Corporation will expeditiously prepare and file with the
Commission a registration statement on any form for which the Corporation
then qualifies and which counsel for the Corporation shall deem appropriate
and available for the sale of the Registrable Securities to be registered
thereunder in accordance with the intended method of distribution thereof
and use its reasonable best efforts to cause such filed registration
statement to become and remain effective for such period, not to exceed 60
days, as may be reasonably necessary to effect the sale of such securities;
provided that if the Corporation shall furnish to Buyer a certificate
signed by the Corporation's Chairman, President or any Vice-President
stating that in his or her good faith judgment it would be detrimental or
otherwise disadvantageous to the Corporation or its shareholders for such a
registration statement to be filed as expeditiously as possible (because
the sale of Registrable Securities covered by such Registration Statement
or the disclosure of information in any related prospectus or prospectus
supplement would materially interfere with any acquisition, financing or
other material event or transaction which is then intended or the public
disclosure of which at the time would be materially prejudicial to the
Corporation), the Corporation may postpone the filing or effectiveness of a
registration statement for a period of not more than 120 days; provided,
that during any 360-day period there shall be a period of at least 120
consecutive days during which the Corporation will make a registration
statement available under this Exhibit B; and provided further, that if (i)
the effective date of any registration statement filed pursuant to a Demand
Registration would otherwise be at least 45 calendar days, but fewer than
90 calendar days, after the end of the Corporation's fiscal year, and (ii)
the Securities Act requires the Corporation to include audited financials
as of the end of such fiscal year, the Corporation may delay the
effectiveness of such registration statement for such period as is
reasonably necessary to include therein its audited financial statements
for such fiscal year.
(b) The Corporation will, if requested, prior to filing such
registration statement or any amendment or supplement thereto, furnish to
the Selling Holders, and each applicable managing Underwriter, if any,
copies thereof, and thereafter furnish to the Selling Holders and each such
Underwriter, if any, such number of copies of such registration statement,
amendment and supplement thereto (in each case including all exhibits
thereto and documents incorporated by reference therein) and the prospectus
included in such registration statement (including each preliminary
prospectus) as the Selling Holders or each such Underwriter may reasonably
request in order to facilitate the sale of the Registrable Securities by
the Selling Holders.
(c) After the filing of the registration statement, the
Corporation will promptly notify the Selling Holders of any stop order
issued or, to the Corporation's knowledge, threatened to be issued by the
Commission and take all reasonable actions required to prevent the entry of
such stop order or to remove it if entered.
(d) The Corporation will use its reasonable best efforts to
qualify the Registrable Securities for offer and sale under such other
securities or blue sky laws of such jurisdictions in the United States as
the Selling Holders reasonably request; provided that the Corporation will
not be required to (i) qualify generally to do business in any jurisdiction
where it would not otherwise be required to qualify but for this paragraph
3.01(d), (ii) subject itself to taxation in any such jurisdiction or (iii)
consent to general service of process in any such jurisdiction.
(e) The Corporation will as promptly as is practicable notify the
Selling Holders, at any time when a prospectus relating to the sale of the
Registrable Securities is required by law to be delivered in connection
with sales by an Underwriter or dealer, of the occurrence of any event
requiring the preparation of a supplement or amendment to such prospectus
so that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus will not contain an untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading and promptly make
available to the Selling Holders, and to the Underwriters, any such
supplement or amendment. Upon receipt of any notice from the Corporation of
the occurrence of any event of the kind described in the preceding
sentence, the Selling Holders will forthwith discontinue the offer and sale
of Registrable Securities pursuant to the registration statement covering
such Registrable Securities until receipt by the Selling Holders and the
Underwriters of the copies of such supplemented or amended prospectus and,
if so directed by the Corporation, the Selling Holders will deliver to the
Corporation all copies, other than permanent file copies then in the
possession of Selling Holders, of the most recent prospectus covering such
Registrable Securities at the time of receipt of such notice. In the event
the Corporation shall give such notice, the Corporation shall extend the
period during which such registration statement shall be maintained
effective as provided in Section 3.01(a) hereof by the number of days
during the period from and including the date of the giving of such notice
to the date when the Corporation shall make available to the Selling
Holders such supplemented or amended prospectus.
(f) The Corporation will enter into customary agreements
(including an underwriting agreement in customary form) and take such other
actions as are reasonably required in order to expedite or facilitate the
sale of such Registrable Securities.
(g) At the request of any Underwriter in connection with an
underwritten offering the Corporation will furnish (i) an opinion of
counsel, addressed to the Underwriters, covering such customary matters as
the managing Underwriter may reasonably request and (ii) a comfort letter
or comfort letters from the Corporation's independent public accountants
covering such customary matters as the managing Underwriter may reasonably
request.
(h) The Corporation will make generally available to its security
holders, as soon as reasonably practicable, an earnings statement covering
a period of 12 months, beginning within three months after the effective
date of the registration statement, which earnings statement shall satisfy
the provisions of Section 11(a) of the Securities Act and the rules and
regulations of the Commission thereunder.
(i) The Corporation will use commercially reasonable efforts to
cause all such Registrable Securities to be listed on each securities
exchange or quoted on each inter-dealer quotation system on which the
Common Stock is then listed or quoted.
Section 3.02 Selling Holder Information. The Corporation may
require Selling Holders promptly to furnish in writing to the Corporation
such information regarding such Selling Holders, the plan of distribution
of the Registrable Securities and other information as the Corporation may
from time to time reasonably request or as may be legally required in
connection with any Demand Registration or Piggyback Registration.
Section 3.03 Registration Expenses. In connection with any Demand
Registration, the Corporation shall pay the following expenses incurred in
connection with such registration (the "Registration Expenses"): (i)
registration and filing fees with the Commission and the National
Association of Securities Dealers, Inc., (ii) fees and expenses of
compliance with securities or blue sky laws (including reasonable fees and
disbursements of counsel in connection with blue sky qualifications of the
Registrable Securities), (iii) printing expenses, (iv) fees and expenses
incurred in connection with the listing or quotation of the Registrable
Securities, (v) fees and expenses of counsel to the Corporation and the
reasonable fees and expenses of independent certified public accountants
for the Corporation (including fees and expenses associated with special
audits or the delivery of comfort letters) and (vi) the reasonable fees and
expenses of any additional experts retained by the Corporation in
connection with such registration. In connection with any Piggyback
Registration, the Corporation shall pay the Registration Expenses set forth
in clauses (ii) through (vi) of the preceding sentence. The Selling Holders
shall pay (i) any underwriting fees, discounts or commissions attributable
to the sale of Registrable Securities, (ii) fees and expenses of counsel
for the Selling Holders and (iii) any out-of-pocket expenses of the Selling
Holders. In connection with any Piggyback Registration, the Selling Holders
shall pay, in addition to items (i) through (iii) of the preceding
sentence, registration and filing fees with the Commission and the National
Association of Securities Dealers Inc., in proportion to the ratio that the
number of shares of Registrable Securities being registered for the account
of the Selling Holders bears to the aggregate number of shares of Common
Stock being included in the applicable registration statement.
ARTICLE 4
INDEMNIFICATION AND CONTRIBUTION
Section 4.01 Indemnification by the Corporation. The Corporation
agrees to indemnify and hold harmless each Selling Holder and its
Affiliates and their respective officers, directors, partners,
stockholders, members, employees, agents and representatives and each
Person (if any) which controls a Selling Holder within the meaning of
either Section 15 of the Securities Act or Section 20 of the Exchange Act,
from and against any and all losses, claims, damages, liabilities, costs
and expenses (including reasonable attorneys' fees) caused by, arising out
of or resulting from or related to any untrue statement or alleged untrue
statement of a material fact contained in any registration statement or
prospectus relating to the Registrable Securities (as amended or
supplemented if the Corporation shall have furnished any amendments or
supplements thereto) or any preliminary prospectus, or caused by any
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein not
misleading, except insofar as such losses, claims, damages or liabilities
are caused by or contained in or based upon any information furnished in
writing to the Corporation by or on behalf of such Selling Holder or any
Underwriter expressly for use therein or by the Selling Holder's or
Underwriter's failure to deliver a copy of the registration statement or
prospectus or any amendments or supplements thereto after the Corporation
has furnished the Selling Holder or the Underwriter with copies of the
same. The Corporation also agrees to indemnify any Underwriters of the
Registrable Securities, their officers and directors and each Person who
controls such Underwriters on substantially the same basis as that of the
indemnification of the Selling Holders provided in this Section 4.01.
Section 4.02 Indemnification by Selling Holders. Each Selling
Holder agrees to indemnify and hold harmless the Corporation, its officers
and directors, and each Person, if any, which controls the Corporation
within the meaning of either Section 15 of the Securities Act or Section 20
of the Exchange Act to the same extent as the foregoing indemnity from the
Corporation to each Selling Holder, but only with reference to information
furnished in writing by or on behalf of such Selling Holder expressly for
use in any registration statement or prospectus relating to the Registrable
Securities, or any amendment or supplement thereto, or any preliminary
prospectus. Each Selling Holder also agrees to indemnify and hold harmless
any Underwriters of the Registrable Securities, their officers and
directors and each Person who controls such Underwriters on substantially
the same basis as that of the indemnification of the Corporation provided
in this Section 4.02.
Section 4.03 Conduct of Indemnification Proceedings. In case any
proceeding (including any governmental investigation) shall be instituted
involving any Person in respect of which indemnity may be sought pursuant
to Section 4.01 or Section 4.02, such Person (the "Indemnified Party")
shall promptly notify the Person against whom such indemnity may be sought
(the "Indemnifying Party") in writing and the Indemnifying Party, upon the
request of the Indemnified Party, shall retain counsel reasonably
satisfactory to such Indemnified Party to represent such Indemnified Party
and any others the Indemnifying Party may designate in such proceeding and
shall pay the fees and disbursements of such counsel related to such
proceeding. In any such proceeding, any Indemnified Party shall have the
right to retain its own counsel, but the fees and expenses of such counsel
shall be at the expense of such Indemnified Party unless (i) the
Indemnifying Party and the Indemnified Party shall have mutually agreed to
the retention of such counsel or (ii) the named parties to any such
proceeding (including any impleaded parties) include both the Indemnified
Party and the Indemnifying Party and, in the written opinion of counsel for
the Indemnified Party, representation of both parties by the same counsel
would be inappropriate due to actual or potential differing interests
between them. It is understood that the Indemnifying Party shall not, in
connection with any proceeding or related proceedings in the same
jurisdiction, be liable for the fees and expenses of more than one separate
firm of attorneys (in addition to any local counsel) at any time for all
such Indemnified Parties, and that all such fees and expenses shall be
reimbursed as they are incurred. In the case of any such separate firm for
the Indemnified Parties, such firm shall be designated in writing by the
Indemnified Parties. The Indemnifying Party shall not be liable for any
settlement of any proceeding effected without its written consent, but if
settled with such consent (not to be unreasonably withheld), or if there be
a final judgment for the plaintiff, the Indemnifying Party shall indemnify
and hold harmless such Indemnified Parties from and against any loss or
liability (to the extent stated above) by reason of such settlement or
judgment.
Section 4.04 Contribution. If the indemnification provided for in
this Article 4 is unavailable to an Indemnified Party in respect of any
losses, claims, damages or liabilities in respect of which indemnity is to
be provided hereunder, then each such Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall to the fullest extent permitted
by law contribute to the amount paid or payable by such Indemnified Party
as a result of such losses, claims, damages or liabilities in such
proportion as is appropriate to reflect the relative fault of such party in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative fault of the Corporation, a Selling Holder and
the Underwriters shall be determined by 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 such party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission.
The Corporation and each Selling Holder agrees that it would not
be just and equitable if contribution pursuant to this Section 4.04 were
determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation that does
not take account of the equitable considerations referred to in the
immediately preceding paragraph. The amount paid or payable by an
Indemnified Party as a result of the losses, claims, damages or liabilities
referred to in the immediately preceding paragraph shall be deemed to
include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Article 4, no Underwriter shall be required to
contribute any amount in excess of the amount by which the total price at
which the securities underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission, and each Selling
Holder shall not be required to contribute any amount in excess of the
amount by which the net proceeds of the offering (before deducting
expenses) received by such Selling Holder exceeds the amount of any damages
which such Selling Holder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Securities Act) shall be entitled to contribution from
any Person who was not guilty of such fraudulent misrepresentation.
ARTICLE 5
MISCELLANEOUS
Section 5.01 Participation in Underwritten Registrations. No
Person may participate in any underwritten registered offering contemplated
hereunder unless such Person (a) agrees to sell its securities on the basis
provided in any underwriting arrangements approved by the Persons entitled
hereunder to approve such arrangements, (b) completes and executes all
questionnaires, powers of attorney, custody arrangements, indemnities,
underwriting agreements and other documents reasonably required under the
terms of such underwriting arrangements and this Exhibit B and (c)
furnishes in writing to the Corporation such information regarding such
Person, the plan of distribution of the Registrable Securities and other
information as the Corporation may from time to time request or as may be
legally required in connection with such registration.
Section 5.02 Rule 144. The Corporation covenants that it will file
any reports required to be filed by it under the Securities Act and the
Exchange Act and that it will take such further action as the Holders may
reasonably request to the extent required from time to time to enable the
Holders to sell Registrable Securities without registration under the
Securities Act within the limitation of the exemptions provided by Rule 144
under the Securities Act, as such Rule may be amended from time to time, or
any similar rule or regulation hereafter adopted by the Commission. Upon
the request of Selling Holders, the Corporation will deliver to the Selling
Holders a written statement as to whether it has complied with such
reporting requirements.
Section 5.03 Holdback Agreements. Each Holder agrees, in the event
of an underwritten offering for the Corporation (whether for the account of
the Corporation or otherwise) not to offer, sell, contract to sell or
otherwise dispose of any Registrable Securities or other Common Stock, or
any securities convertible into or exchangeable or exercisable for any of
the foregoing, including any sale pursuant to Rule 144 under the Securities
Act (except as part of such underwritten offering), during the 14 days
prior to, and during the 180-day period (or such lesser period as the lead
or managing Underwriter may agree) beginning on, the effective date of the
registration statement for such underwritten offering (or, in the case of
an offering pursuant to an effective shelf registration statement pursuant
to Rule 415, the pricing date for such underwritten offering).
Section 5.04 Termination. The registration rights granted under
this Agreement will terminate on the fifteenth anniversary of the Closing
Date.
Section 5.05 Holder Determinations. In the event any determination
is to be made by the Holders or the Selling Holders as a group, such
determination shall be made by Holders or Selling Holders holding a
majority in interest of the Registrable Securities or the Registrable
Securities being sold, respectively.
Exhibit C
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WARRANT
to Purchase Common Stock of
RCN Corporation
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Warrant No. [ ]
Original Issue Date: [ ]
NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF THE
SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES "ACT"), OR ANY STATE
SECURITIES LAW. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES
NOT TO OFFER, SELL OR OTHERWISE TRANSFER SUCH SECURITY, OTHER THAN (A) TO
THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, OR (C) PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, SUBJECT TO THE COMPANY'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR
TRANSFER PURSUANT TO CLAUSE (C) TO REQUIRE THE DELIVERY OF AN OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION REASONABLY SATISFACTORY TO
IT. IN ADDITION, THE WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE
SECURITIES ISSUABLE UPON EXERCISE HEREOF ARE SUBJECT TO TRANSFER AND OTHER
RESTRICTIONS CONTAINED IN THE STOCK PURCHASE AGREEMENT DATED AS OF MAY 28,
2001 BETWEEN THE COMPANY AND RED BASIN, LLC. IN CONNECTION WITH ANY
TRANSFER, THE HOLDER WILL DELIVER TO THE COMPANY SUCH CERTIFICATES AND
OTHER INFORMATION AS THE COMPANY MAY REASONABLY REQUIRE TO CONFIRM THAT THE
TRANSFER COMPLIES WITH THE FOREGOING RESTRICTIONS.
Warrant No. [ ]
WARRANT
RCN CORPORATION
THIS IS TO CERTIFY THAT RED BASIN, LLC is entitled, at
any time from and after the Exercisability Date (such term, and certain
other capitalized terms used herein being hereinafter defined) and prior to
the Expiration Date, to purchase from RCN CORPORATION, a Delaware
corporation (the "Company"), 3,830,537 shares of Common Stock (subject to
adjustment as provided in Section 4 hereof), at the Exercise Price (subject
to adjustment as provided in Section 4 hereof), all on the terms and
conditions and pursuant to the provisions hereinafter set forth.
1. DEFINITIONS
As used in this Warrant, the following terms have the
respective meanings set forth below:
"Beneficially Owned" or "Beneficial Owner" shall have the
interpretation set forth in Rule 13d-3 under the Securities Exchange Act of
1934, as amended.
"Business Day" shall mean any day that is not a Saturday
or Sunday or a day on which banks are required or permitted to be closed in
the State of New York.
"Commission" shall mean the Securities and Exchange
Commission or any other federal agency then administering the Securities
Act and other federal securities laws.
"Common Stock" shall mean (except where the context
otherwise indicates) the Common Stock of the Company, par value $0.01 per
share, as constituted on the Original Issue Date, and any capital stock
into which such Common Stock may thereafter be changed, and shall also
include shares of common stock of any successor or acquiring corporation
(as defined in Section 4.3 hereof received by or distributed to the holders
of Common Stock of the Company in the circumstances contemplated by Section
4.3 hereof.
"Designated Office" shall have the meaning set forth in
Section 10 hereof.
"Exercisability Date" shall mean the later of (i) [Insert
180-Day anniversary of Closing under stock Purchase Agreement], (ii) such
time after the expiration of the applicable waiting period in respect of
any filing required to be made prior to the exercise of all or any portion
of this Warrant under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended, and (iii) such time after all notices, approvals,
consents or waivers, if any, that may be required by Regulatory Authorities
(as defined in the Stock Purchase Agreement) shall have been made or
obtained, as applicable.
"Exercise Date" shall have the meaning set forth in
Section 2.1(a) hereof.
"Exercise Notice" shall have the meaning set forth in
Section 2.1(a) hereof.
"Exercise Period" shall mean the period during which this
Warrant is exercisable pursuant to Section 2.1 hereof.
"Exercise Price" shall mean, in respect of a share of
Common Stock at any date herein specified, $12.928 per share, as adjusted
from time to time pursuant to Section 4 hereof.
"Expiration Date" shall mean [Insert date 54 months after
issuance], 2005.
"Holder" shall mean the Person in whose name the Warrant
set forth herein is registered from time to time on the books of the
Company maintained for such purpose.
"Opinion of Counsel" means a written opinion of counsel
(who may be an employee of a Holder) experienced in Securities Act matters
chosen by the holder of this Warrant or Warrant Stock issued upon the
exercise hereof and reasonably acceptable to the Company.
"Original Issue Date" shall mean the date on which the
Original Warrants were issued, as set forth on the cover page of this
Warrant.
"Original Warrants" shall mean the Warrants originally
issued by the Company on the Original Issue Date to RED BASIN, LLC.
"Person" shall mean any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, incorporated
organization, association, corporation, institution, public benefit
corporation, entity or government (whether federal, state, county, city,
municipal or otherwise, including, without limitation, any instrumentality,
division, agency, body or department thereof).
"Restricted Common Stock" shall mean shares of Common
Stock which are, or which upon their issuance on the exercise of this
Warrant would be, evidenced by a certificate bearing the restrictive legend
set forth in Section 8.2(a) hereof.
"Securities Act" shall mean 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.
"Stock Purchase Agreement" shall mean the Stock Purchase
Agreement by and between the Company and Red Basin, LLC, dated as of May
28, 2001, as it may be amended and restated from time to time in accordance
with its terms.
"Subsidiary" means any corporation or association more
than 50% (by number of votes) of the voting stock of which is at the time
owned by the Company or by one or more Subsidiaries or by the Company and
one or more Subsidiaries, or any other business entity in which the Company
or one or more Subsidiaries or the Company and one or more Subsidiaries own
more than a 50% interest either in the profits or capital of such business
entity.
"Transfer" shall mean any disposition of any Warrant or
Warrant Stock or of any interest in either thereof, which would constitute
a "sale" thereof within the meaning of the Securities Act.
"Warrant Price" shall mean an amount equal to (i) the
number of shares of Common Stock being purchased upon exercise of this
Warrant pursuant to Section 2.1 hereof, multiplied by (ii) the Exercise
Price as of the date of such exercise.
"Warrants" shall mean the Original Warrants and all
warrants issued upon transfer, division or combination of, or in
substitution for, such Original Warrants or any other such Warrant. All
Warrants shall at all times be identical as to terms and conditions and
date, except as to the number of shares of Common Stock for which they may
be exercised.
"Warrant Stock" generally shall mean the shares of Common
Stock issued, issuable or both (as the context may require) upon the
exercise of Warrants until such time as such shares of Common Stock have
either been (i) Transferred in a public offering pursuant to a registration
statement filed under the Securities Act or (ii) Transferred in a
transaction exempt from the registration and prospectus delivery
requirements of the Securities Act under Rule 144 thereunder with all
transfer restrictions and restrictive legends with respect to such Common
Stock being removed in connection with such transaction.
2. EXERCISE OF WARRANT
2.1 Manner of Exercise.
(a) From and after the Exercisability Date and until 5:00
P.M., New York City time, on the Expiration Date, the Holder may from time
to time exercise this Warrant, on any Business Day, for all or any part of
the number of shares of Common Stock purchasable hereunder (subject to
adjustment pursuant to Section 4 hereof). In order to exercise this
Warrant, in whole or in part, the Holder shall (i) deliver to the Company
at the Designated Office (as defined herein) a written notice of the
Holder's election to exercise this Warrant (an "Exercise Notice"), which
Exercise Notice shall be irrevocable and specify the number of shares of
Common Stock to be purchased, together with this Warrant and (ii) pay to
the Company the Warrant Price (the date on which both such delivery and
payment shall have first taken place being hereinafter sometimes referred
to as the "Exercise Date") by delivery of a certified or official bank
check in the amount of such Warrant Price. Such Exercise Notice shall be in
the form of the subscription form attached as Annex A to this Warrant, duly
executed by the Holder or its duly authorized agent or attorney. In the
event that a certificate is surrendered for exercise of less than all the
Warrants represented by such certificate at any time prior to the
Expiration Date, a new certificate representing the remaining Warrants
shall be issued.
(b) Upon receipt of such Exercise Notice, Warrant and
payment of the Warrant Price, the Company shall, as promptly as
practicable, and in any event within five (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 full shares of Common Stock issuable upon such exercise, together with
cash in lieu of any fraction of a share, as hereafter provided. The stock
certificate or certificates so delivered shall be, to the extent possible,
in such denomination or denominations as the exercising Holder shall
reasonably request in the Exercise Notice and shall be registered in the
name of the Holder or such other name as shall be designated in the
Exercise Notice. This Warrant shall be deemed to have been exercised and
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 such shares for all purposes,
as of the Exercise Date; provided, however, that a Holder shall not be
entitled to revoke, rescind or modify its Exercise Notice after such notice
is delivered to the Company.
(c) If this Warrant shall have been exercised in part,
the Company shall, at the time of delivery of the certificate or
certificates representing the shares of Common Stock being issued, deliver
to the Holder a new Warrant evidencing the rights of the Holder to purchase
the unpurchased shares of Common Stock called for by this Warrant. Such new
Warrant shall in all other respects be identical with this Warrant.
2.2 No Liens. All shares of Common Stock issuable upon
the exercise of this Warrant pursuant to the terms hereof shall be validly
issued, fully paid and nonassessable, issued without violation of any
preemptive rights and free and clear of all liens (other than any created
by actions of the Holder).
2.3 Fractional Shares. The Company shall not be required
to issue a fractional share of Common Stock upon exercise of any Warrant
and, in lieu thereof, the Company shall pay a cash adjustment in respect of
fractional share in an amount equal to the same fraction of the market
value of one share of Common Stock on the Exercise Date, with such market
value being equal to the average of the closing sales prices per share of
Common Stock for the twenty consecutive trading days preceding such date.
2.4 Continued Validity and Application. A holder of
shares of Warrant Stock issued upon the exercise of this Warrant, in whole
or in part, including any transferee of such shares (other than a
transferee in whose hands such shares no longer constitute Warrant Stock as
defined herein), shall continue, with respect to such shares, to be
entitled to all rights and to be subject to all obligations that are
applicable to such holder by the terms of this Warrant.
3. TRANSFER, DIVISION AND COMBINATION
3.1 Transfer. Subject to compliance with Section 8
hereof, each transfer of this Warrant and all rights hereunder, in whole or
in part, shall be registered on the books of the Company to be maintained
for such purpose, upon surrender of this Warrant at the Designated Office,
together with a written assignment of this Warrant in the form attached as
Annex B to this Warrant, duly executed by the Holder or its duly authorized
agent or attorney. Upon such surrender and delivery, the Company shall,
subject to Section 8 hereof, execute and deliver a new Warrant or Warrants
in the name of the assignee or assignees and in the denominations specified
in such instrument of assignment, and shall issue to the assignor a new
Warrant evidencing the portion of this Warrant not so assigned and this
Warrant shall promptly be cancelled. A Warrant, if properly assigned in
compliance with Section 8 hereof, may be exercised by the new Holder for
the purchase of shares of Common Stock without having a new Warrant issued.
3.2 Division and Combination. Subject to compliance with
the applicable provisions of this Warrant, this Warrant may be divided or
combined with other Warrants upon presentation hereof at the Designated
Office, together with a written notice specifying the names and
denominations in which new Warrants are to be issued, signed by the Holder
or its agent or attorney. Subject to compliance with the applicable
provisions of this Warrant as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new
Warrant or Warrants in exchange for the Warrant or Warrants to be divided
or combined in accordance with such notice.
3.3 Expenses. The Company shall prepare, issue and
deliver at its own expense any new Warrant or Warrants required to be
issued under this Section 3.
3.4 Maintenance of Books. The Company agrees to maintain,
at the Designated Office, books for the registration and transfer of the
Warrants.
4. ANTIDILUTION PROVISIONS
The number of shares of Common Stock for which this
Warrant is exercisable and the Exercise Price shall be subject to
adjustment from time to time as set forth in this Section 4.
4.1 Stock Dividends, Subdivisions and Combinations. If at
any time the Company shall:
(a) take a record of the holders of its Common Stock for
the purpose of entitling them to receive a dividend payable in, or
other distribution of, additional shares of Common Stock,
(b) subdivide, split 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 the Exercise Price shall be adjusted to equal the product of the
Exercise Price in effect immediately prior to such event multiplied by a
fraction the numerator of which is equal to the number of shares of Common
Stock outstanding immediately prior to the adjustment and the denominator
of which is equal to the number of shares of Common Stock outstanding
immediately after such adjustment.
4.2 Adjustment of Number of Shares Purchasable. Upon any
adjustment of the Exercise Price as provided in Sections 4.1 and 4.3
hereof, as applicable, the Holder hereof shall thereafter be entitled to
purchase upon the exercise of this Warrant, at the Exercise Price resulting
from such adjustment, the number of shares of Common Stock (calculated to
the nearest 1/100th of a share) obtained by multiplying the Exercise Price
in effect immediately prior to such adjustment by the number of shares of
Common Stock issuable on the exercise hereof immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting
from such adjustment.
4.3 Reorganization, Reclassification, Merger,
Consolidation or Disposition of Assets. In case the Company shall
reorganize its capital, reclassify its capital stock, consolidate or merge
with or into another corporation (where the Company is not the surviving
corporation or where there is any change whatsoever in, or distribution
with respect to, the outstanding Common Stock of the Company), or sell,
transfer or otherwise dispose of all or substantially all of its property,
assets or business to another corporation and, pursuant to the terms of
such reorganization, reclassification, merger, consolidation or disposition
of assets, (a) shares of common stock of the successor or acquiring
corporation or of the Company (if it is the surviving corporation) or (b)
any cash, shares of stock or other securities or property of any nature
whatsoever (including warrants or other subscription or purchase rights) in
addition to or in lieu of common stock of the successor or acquiring
corporation ("Other Property") are to be received by or distributed to the
holders of Common Stock of the Company who are holders immediately prior to
such transaction, then the Holder of this Warrant shall have the right
thereafter to receive, upon exercise of this Warrant, the number of shares
of common stock of the successor or acquiring corporation or of the
Company, if it is the surviving corporation, and Other Property receivable
upon or as a result of such reorganization, reclassification, merger,
consolidation or disposition of assets by a holder of the number of shares
of Common Stock for which this Warrant is exercisable immediately prior to
such event. In such event, the aggregate Exercise Price otherwise payable
for the shares of Common Stock issuable upon exercise of this Warrant shall
be allocated among the shares of common stock and Other Property receivable
as a result of such reorganization, reclassification, merger, consolidation
or disposition of assets in proportion to the respective fair market values
of such shares of common stock and Other Property as determined in good
faith by the Board of Directors of the Company. In case of any such
reorganization, reclassification, merger, consolidation or disposition of
assets, the successor or acquiring corporation (if other than the Company)
shall expressly assume the due and punctual observance and performance of
each and every covenant and condition of this Warrant to be performed and
observed by the Company and all the obligations and liabilities hereunder,
subject to such modifications as may be reasonably deemed appropriate (as
determined by resolution of the Board of Directors of the Company) in order
to provide for adjustments of any shares of the common stock of such
successor or acquiring corporation for which this Warrant thus becomes
exercisable, which modifications shall be as equivalent as practicable to
the adjustments provided for in this Section 4. For purposes of this
Section 4.3, "common stock of the successor or acquiring corporation" shall
include stock of such corporation of any class that is not preferred as to
dividends or assets over any other class of stock of such corporation and
that is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities that are convertible into
or exchangeable for any such stock, either immediately or upon the arrival
of a specified date or the happening of a specified event and any warrants
or other rights to subscribe for or purchase any such stock. The foregoing
provisions of this Section 4.3 shall similarly apply to successive
reorganizations, reclassification, mergers, consolidations or disposition
of assets.
4.4 Determination of Consideration. For purposes of
Section 4.3 hereof, as applicable, the consideration received and/or
receivable by the Company in connection with the issuance, sale, grant or
exercise of additional shares of Common Stock, irrespective of the
accounting treatment of such consideration, shall be valued as follows:
(a) Cash Payment. In the case of cash, the net amount
received by the Company after deduction of any underwriting
commissions or concessions paid or allowed by the Company.
(b) Securities or Other Property. In the case of
securities or other property, the fair market value thereof as of
the date immediately preceding such issuance, sale, grant or
exercise as determined in good faith by the Board of Directors of
the Company.
4.5 Other Provisions Applicable to Adjustments Under this
Section 4. The following provisions shall be applicable to the adjustments
provided for pursuant to this Section 4:
(a) When Adjustments to Be Made. The adjustments required
by this Section 4 shall be made whenever and as often as any
specified event requiring such an adjustment shall occur. For the
purpose of any such adjustment, any specified event shall be
deemed to have occurred at the close of business on the date of
its occurrence.
(b) Record Date. In case the Company shall take a record
of the holders of the Common Stock for the purpose of entitling
them to receive a dividend or other distribution payable in Common
Stock, then all references in this Section 4 to the date of the
issuance or sale of such shares of Common Stock shall be deemed to
be references to such record date.
(c) Fractional Interests. In computing adjustments under
this Section 4, fractional interests in Common Stock shall be
taken into account to the nearest 1/100th of a share.
(d) When Adjustment Not Required. If the Company shall
take a record of the holders of its Common Stock for the purpose
of entitling them to receive a dividend or distribution to which
the provisions of Section 4.1 hereof would apply, but shall,
thereafter and before the distribution to stockholders thereof,
legally abandon its plan to pay or deliver such dividend or
distribution, 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.
(e) Certain Limitations. Notwithstanding anything herein
to the contrary, no adjustment hereunder, including under Sections
4.1 and 4.3 hereof, as applicable, shall be made, to the extent it
would cause the Exercise Price to be less than the par value of
the Common Stock, if any.
(f) Tax Adjustments. The Company may make such reductions
in the Exercise Price or increase in the number of Common Stock to
be received by any Holder upon the exercise or exchange of this
Warrant, in addition to those adjustments required by this Section
4, as it in its sole discretion shall determine to be advisable in
order that any consolidation or subdivision of the Common Stock or
any stock dividend made by the Company to the holders of its
Common Stock shall not be taxable to such holders.
(g) Certain Business Combinations. The Company will not
merge or consolidate with or into, or sell, transfer or lease all
or substantially all of its property to, any other entity unless
the successor or purchasing entity, as the case may be (if not the
Company), shall expressly agree to provide to each Holder the
securities, cash or property required by Section 4.3 hereof upon
the exercise or exchange of this Warrant.
(h) Notice of Adjustments. Whenever the number of shares
of Common Stock for which this Warrant is exercisable or the
Exercise Price shall be adjusted pursuant to this Section 4, the
Company shall forthwith prepare a certificate to be executed by
the chief financial officer of the Company setting forth, in
reasonable detail, the event requiring the adjustment and the
method by which such adjustment was calculated, specifying the
number of shares of Common Stock for which this Warrant is
exercisable and (if such adjustment was made pursuant to Section
4.3 hereof) describing the number and kind of any other shares of
stock or Other Property for which this Warrant is exercisable, and
any related change in the Exercise Price, after giving effect to
such adjustment or change. The Company shall promptly cause a
signed copy of such certificate to be delivered to each Holder in
accordance with Section 14.3 hereof. The Company shall keep at its
principal office or at the Designated Office, if different, copies
of all such certificates and cause the same to be available for
inspection at said office during normal business hours by any
Holder or any prospective transferee of a Warrant designated by a
Holder thereof.
(i) Independent Application. Except as otherwise provided
herein, all subsections of this Section 4 are intended to operate
independently of one another (but without duplication). If any
single transaction would require adjustment of the Exercise Price
pursuant to more than one subsection of this Section 4, only one
adjustment shall be made and such adjustment shall be the amount
of adjustment which has the highest absolute value.
5. NO IMPAIRMENT
The Company shall not by any action, including, without
limitation, amending its charter documents or through any reorganization,
reclassification, transfer of assets, consolidation, merger, dissolution,
issue or sale of securities or any other similar voluntary action, avoid or
seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of
all such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of the Holder against impairment. Without
limiting the generality of the foregoing, the Company shall take all such
action as may be necessary or appropriate in order that the Company may
validly and legally issue fully paid and nonassessable shares of Common
Stock upon the exercise of this Warrant, free and clear of all liens, and
shall use its best efforts to obtain all such authorizations, exemptions or
consents from any public regulatory body having jurisdiction over it as may
be necessary to enable the Company to perform its obligations under this
Warrant.
6. RESERVATION AND AUTHORIZATION OF COMMON STOCK;
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL
AUTHORITY
From and after the Original Issue Date, the Company shall
at all times reserve and keep available for issuance upon the exercise of
the 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. All shares of Common Stock issuable pursuant to the
terms hereof, when issued upon exercise of this Warrant with payment
therefor in accordance with the terms hereof, shall be duly and validly
issued and fully paid and nonassessable, not subject to preemptive rights
and shall be free and clear of all liens. Before taking any action that
would result in an adjustment in the number of shares of Common Stock for
which this Warrant is exercisable or in the Exercise Price, the Company
shall obtain all such authorizations or exemptions thereof, or consents
thereto, as may be necessary from any public regulatory body or bodies
having jurisdiction over such action.
7. NOTICE OF CORPORATE ACTIONS; TAKING OF RECORD; TRANSFER
BOOKS
7.1 Notices of Corporate Actions. In the event of: (a)
any taking by the Company of a record of the holders of any class of
securities for the purpose of determining the holders thereof who are
entitled to receive any dividend or distribution, (b) any capital
reorganization of the Company, any reclassification or recapitalization of
the capital stock of the Company or any consolidation or merger involving
the Company and any other Person or any transfer or other disposition of
all or substantially all the assets of the Company to another Person or (c)
any action taken by the Company which would require an adjustment pursuant
to Section 4 hereof, the Company shall mail to each Holder of a Warrant in
accordance with the provisions of Section 11.2 hereof a notice specifying
(i) the date or expected date on which any such record is to be taken for
the purpose of such dividend or distribution, and the amount and character
of such dividend or distribution and (ii) the date or expected date on
which any such reorganization, reclassification, recapitalization,
consolidation, merger, transfer or disposition is to take place, the time,
if any such time is to be fixed, as of which the holders of record of
Common Stock shall be entitled to exchange their shares of Common Stock for
the securities or Other Property deliverable upon such reorganization,
reclassification, recapitalization, consolidation, merger, transfer or
disposition and a description in reasonable detail of the transaction. Such
notice shall be mailed to the extent practicable under the circumstances as
determined in the reasonable judgment of an officer of the Company at least
fifteen (15) days prior to the date therein specified, and shall describe
the material terms of the matter in question. In the event that the Company
at any time sends any other notice to the holders of its Common Stock, it
shall concurrently send a copy of such notice to each Holder of a Warrant.
7.2 Taking of Record. In the case of all dividends or
other distributions by the Company to the holders of its Common Stock with
respect to which any provision of any Section hereof refers to the taking
of a record of such holders, the Company will in each such case take such a
record and will take such record as of the close of business on a Business
Day.
7.3 Closing of Transfer Books. The Company shall not at
any time, except upon dissolution, liquidation or winding up of the
Company, close its stock transfer books or Warrant transfer books so as to
result in preventing or delaying the exercise or transfer of any Warrant.
7.4 No Rights as Stockholders. Except as provided herein,
Holders shall have no rights as holders of Common Stock of the Company
solely as a result of being the Beneficial Owner of a Warrant. Holders
shall have no right to vote, consent or otherwise participate with respect
to matters submitted to a vote of the stockholders of the Company.
8. TRANSFER
The Holder, by acceptance of this Warrant, agrees to be
bound by the provisions of this Section 8.
8.1 Restrictions on Transfer. Neither this Warrant nor
any shares of Restricted Common Stock issued upon the exercise hereof shall
be Transferred other than pursuant to an effective registration statement
under the Securities Act or an exemption from the registration provisions
thereof. The Holder of this Warrant by its acceptance hereof agrees not to
offer, sell or otherwise transfer this Warrant other than (a) to the
Company, (b) pursuant to a registration statement that has been declared
effective under the Securities Act or (c) pursuant to any other available
exemption from the registration requirements of the Securities Act, subject
to the Company's right prior to any such offer, sale or transfer pursuant
to clause (c) to require the delivery of an Opinion of Counsel,
certification and/or other information reasonably satisfactory to it. In
addition, this Warrant and the Warrant Stock issuable upon conversion
hereof are subject to transfer and other restrictions contained in the
Stock Purchase Agreement. In connection with any Transfer, the Holder will
deliver to the Company such certificates and other information as the
Company may reasonably require to confirm that the transfer complies with
the foregoing restrictions. Holders of the Warrants or the Restricted
Common Stock, as the case may be, shall not be entitled to Transfer such
Warrants or such Restricted Common Stock except in accordance with this
Section 8.1.
8.2 Restrictive Legends.
(a) Except as otherwise provided in this Section 8, each
certificate for Warrant Stock initially issued upon the exercise of this
Warrant, and each certificate for Warrant Stock issued to any subsequent
transferee of any such certificate, shall be stamped or otherwise imprinted
with two legends in substantially the following forms:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), OR ANY STATE SECURITIES LAW. THE HOLDER OF THIS
SECURITY BY ITS ACCEPTANCE HEREOF AGREES NOT TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY OTHER THAN (A) TO THE COMPANY,
(B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT OR (C) PURSUANT TO AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, SUBJECT TO THE COMPANY'S RIGHT PRIOR TO ANY SUCH OFFER, SALE
OR TRANSFER PURSUANT TO CLAUSE (C) TO REQUIRE THE DELIVERY OF AN
OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION
REASONABLY SATISFACTORY TO IT. IN ADDITION, THE SHARES REPRESENTED
BY THIS CERTIFICATE ARE SUBJECT TO TRANSFER AND OTHER RESTRICTIONS
CONTAINED IN THE STOCK PURCHASE AGREEMENT, DATED AS OF MAY 28,
2001, BY AND BETWEEN THE COMPANY AND RED BASIN, LLC. IN CONNECTION
WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE COMPANY SUCH
CERTIFICATES AND OTHER INFORMATION AS THE COMPANY MAY REASONABLY
REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS."
"THE SHARES REPRESENTED BY THIS CERTIFICATE ARE ENTITLED TO THE
BENEFITS OF AND ARE SUBJECT TO CERTAIN OBLIGATIONS SET FORTH IN
THE WARRANT PURSUANT TO THE EXERCISE OF WHICH SUCH SHARES WERE
ISSUED. A COPY OF SUCH WARRANT IS AVAILABLE AT THE EXECUTIVE
OFFICES OF THE COMPANY."
(b) Except as otherwise provided in this Section 8, each
Warrant shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"NEITHER THE WARRANTS REPRESENTED BY THIS CERTIFICATE NOR ANY OF
THE SECURITIES ISSUABLE UPON EXERCISE THEREOF HAVE BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE SECURITIES
"ACT"), OR ANY STATE SECURITIES LAW. THE HOLDER OF THIS SECURITY
BY ITS ACCEPTANCE HEREOF AGREES NOT TO OFFER, SELL OR
OTHERWISE TRANSFER SUCH SECURITY, OTHER THAN (A) TO THE COMPANY,
(B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, OR (C) PURSUANT TO AN
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT, SUBJECT TO THE COMPANY'S RIGHT PRIOR TO ANY SUCH
OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (C) TO REQUIRE THE
DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION REASONABLY SATISFACTORY TO IT. IN ADDITION, THE
WARRANTS REPRESENTED BY THIS CERTIFICATE AND THE SECURITIES
ISSUABLE UPON EXERCISE HEREOF ARE SUBJECT TO TRANSFER AND OTHER
RESTRICTIONS CONTAINED IN THE STOCK PURCHASE AGREEMENT DATED AS OF
MAY 28, 2001 BETWEEN THE COMPANY AND RED BASIN, LLC. IN CONNECTION
WITH ANY TRANSFER, THE HOLDER WILL DELIVER TO THE COMPANY SUCH
CERTIFICATES AND OTHER INFORMATION AS THE COMPANY MAY REASONABLY
REQUIRE TO CONFIRM THAT THE TRANSFER COMPLIES WITH THE FOREGOING
RESTRICTIONS."
8.3 Termination of Securities Law Restrictions.
Notwithstanding the foregoing provisions of Section 8, the restrictions
imposed by Section 8.1 hereof upon the transferability of the Warrants and
the Restricted Common Stock and the legend requirements of Section 8.2
hereof shall terminate as to any particular Warrant or shares of Restricted
Common Stock when the Company shall have received from the holder thereof
an Opinion of Counsel to the effect that such legend is not required in
order to ensure compliance with the Securities Act. Whenever the
restrictions imposed by Sections 8.1 and 8.2 shall terminate as to this
Warrant, as hereinabove provided, the Holder hereof shall be entitled to
receive from the Company, at the expense of the Company, a new Warrant
bearing the following legend in place of the restrictive legend set forth
hereon:
"THE RESTRICTIONS ON TRANSFERABILITY OF THE WITHIN
WARRANT CONTAINED IN SECTIONS 8.1 AND 8.2 HEREOF
TERMINATED ON ______________, 20__, AND ARE OF NO FURTHER
FORCE AND EFFECT."
All Warrants issued upon registration of transfer, division or combination
of, or in substitution for, any Warrant or Warrants entitled to bear such
legend shall have a similar legend endorsed thereon. Wherever the
restrictions imposed by this Section 8.3 shall terminate as to any share of
Restricted Common Stock, as hereinabove provided, the holder thereof shall
be entitled to receive from the Company, at the Company's expense, a new
certificate representing such Common Stock not bearing the restrictive
legend set forth in Section 8.2(a) hereof.
8.4 Nominees for Beneficial Owners. In the event that any
Warrant Stock is held by a nominee for the Beneficial Owner thereof, the
Beneficial Owner thereof may, at its election, be treated as the holder of
such Warrant Stock for purposes of any request or other action by any
holder or holders of Warrant Stock pursuant to this Warrant or any
determination of any number or percentage of shares of Warrant Stock held
by any holder or holders of Warrant Stock contemplated by this Agreement.
If the Beneficial Owner of any Warrant Stock so elects, the Company may
require assurances reasonably satisfactory to it of such owner's Beneficial
Ownership of such Warrant Stock; provided, however, that in no event shall
there be "double-counting" of Warrants or Warrant Stock.
8.5 Payment of Taxes. The Company shall not be required
to issue or deliver Warrant Stock or a new Warrant unless or until the
Person or Persons requesting the issuance thereof shall have paid to the
Company the amount of any applicable transfer or stamp taxes or shall have
established to the reasonable satisfaction of the Company that such taxes
have been paid or are not due and owing.
9. LOSS OR MUTILATION
Upon receipt by the Company from any Holder of evidence
reasonably satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of this Warrant and an indemnity reasonably
satisfactory to it and, in case of mutilation, upon surrender and
cancellation hereof, the Company will execute and deliver in lieu hereof a
new Warrant of like tenor to such Holder; provided, however, in the case of
mutilation, no indemnity shall be required if this Warrant in identifiable
form is surrendered to the Company for cancellation.
10. OFFICE OF THE COMPANY
As long as any of the Warrants remain outstanding, the
Company shall maintain an office or agency, which may be the principal
executive offices of the Company (the "Designated Office"), where the
Warrants may be presented for exercise, registration of transfer, division
or combination as provided in this Warrant. Such Designated Office shall
initially be the office of the Company at ▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇,
▇▇ ▇▇▇▇▇. The Company may from time to time change the Designated Office to
another office of the Company or its agent within the United States by
notice given to all registered holders of Warrants at least ten (10)
Business Days prior to the effective date of such change.
11. REGISTRATION RIGHTS
Red Basin, LLC and Affiliated Permitted Transferees (as
defined in the Stock Purchase Agreement) shall be entitled to the benefit
of the registration rights set forth as Exhibit C to the Stock Purchase
Agreement in respect of the Warrants and the Warrant Stock.
11.1 Nonwaiver. No course of dealing or any delay or
failure to exercise any right hereunder on the part of the Company or the
Holder shall operate as a waiver of such right or otherwise prejudice the
rights, powers or remedies of such Person.
11.2 Notice Generally. Any notice, demand, request,
consent, approval, declaration, delivery or communication hereunder to be
made pursuant to the provisions of this Warrant shall be sufficiently given
or made if in writing and either delivered in person with receipt
acknowledged or sent by registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
(a) if to any Holder of this Warrant or holder of Warrant
Stock issued upon the exercise hereof, at its last known address
appearing on the books of the Company maintained for such purpose;
(b) if to the Company, at its Designated Office;
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in
writing by the party entitled to receive such notice. Every notice, demand,
request, consent, approval, declaration, delivery or other communication
hereunder shall be deemed to have been duly given or served on the date on
which personally delivered, with receipt acknowledged, or three (3)
Business Days after the same shall have been deposited in the United States
mail, or one (1) Business Day after the same shall have been delivered to
Federal Express or another overnight courier service.
11.3 Limitation of Liability. No provision hereof, in the
absence of affirmative action by the Holder to purchase shares of Common
Stock, and no enumeration herein of the rights or privileges of the Holder
hereof, shall give rise to any liability of such Holder to pay the Exercise
Price for any Warrant Stock other than pursuant to an exercise of this
Warrant or any liability as a stockholder of the Company, whether such
liability is asserted by the Company or by creditors of the Company.
11.4 Remedies. Each holder of Warrants and/or Warrant
Stock, in addition to being entitled to exercise its rights granted by law,
including recovery of damages, shall be entitled to specific performance of
its rights provided under this Warrant. The Company 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 Warrant and hereby agrees, in
an action for specific performance, to waive the defense that a remedy at
law would be adequate.
11.5 Successors and Assigns. Subject to the provisions of
Sections 3.1, 8.1 and 8.2, this Warrant and the rights evidenced hereby
shall inure to the benefit of and be binding upon the successors of the
Company and the permitted successors and assigns of the Holder hereof. The
provisions of this Warrant are intended to be for the benefit of all
Holders from time to time of this Warrant and, to the extent applicable,
all holders of shares of Warrant Stock issued upon the exercise hereof
(including permitted transferees), and shall be enforceable by any such
holder.
11.6 Amendment. This Warrant and all other Warrants may
be modified or amended or the provisions hereof waived with the written
consent of the Company and holders of Warrants exercisable for the purchase
of more than fifty percent (50%) of the aggregate number of shares of
Warrant Stock then purchasable upon exercise of all then outstanding
Warrants, provided that no such Warrant may be modified or amended to
reduce the number of shares of Common Stock for which such Warrant is
exercisable or to increase the price at which such shares may be purchased
upon exercise of such Warrant (before giving effect to any adjustment as
provided therein) without the written consent of the holder thereof.
11.7 Severability. Wherever possible, each provision of
this Warrant shall be interpreted in such manner as to be effective and
valid under applicable law, but if any provision of this Warrant shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of
this Warrant.
11.8 Headings. The headings used in this Warrant are for
the convenience of reference only and shall not, for any purpose, be deemed
a part of this Warrant.
11.9 GOVERNING LAW; JURISDICTION. IN ALL RESPECTS,
INCLUDING ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE, THIS
WARRANT AND THE OBLIGATIONS ARISING HEREUNDER SHALL BE GOVERNED BY, AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK APPLICABLE TO CONTRACTS MADE AND PERFORMED IN SUCH STATE, EXCEPT WITH
RESPECT TO THE VALIDITY OF THIS WARRANT, THE ISSUANCE OF WARRANT STOCK UPON
EXERCISE HEREOF AND THE RIGHTS AND DUTIES OF THE COMPANY WITH RESPECT TO
REGISTRATION OF TRANSFER, WHICH SHALL BE GOVERNED BY THE LAWS OF THE STATE
OF DELAWARE. THE COMPANY HEREBY CONSENTS AND AGREES THAT THE STATE OR
FEDERAL COURTS LOCATED IN NEW YORK CITY SHALL HAVE, EXCEPT AS SET FORTH
BELOW, EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES
BETWEEN THE COMPANY AND THE HOLDER OF THIS WARRANT PERTAINING TO THIS
WARRANT OR TO ANY MATTER ARISING OUT OF OR RELATING TO THIS AGREEMENT,
PROVIDED, THAT IT IS ACKNOWLEDGED THAT ANY APPEALS FROM THOSE COURTS MAY
HAVE TO BE HEARD BY A COURT LOCATED OUTSIDE OF NEW YORK CITY.
(The balance of this page is intentionally left
blank.)
IN WITNESS WHEREOF, the Company has caused this Warrant
to be duly executed by a duly authorized officer with effect from the date
first set forth above.
RCN CORPORATION
By:_________________________
Name:
Title:
ANNEX A
SUBSCRIPTION FORM
[To be executed only upon an exercise of Warrant]
The undersigned registered owner of this Warrant
irrevocably exercises this Warrant for the purchase of ______ shares of
Common Stock and herewith makes payment therefor, all at the price and on
the terms and conditions specified in this Warrant and requests that
certificates for the shares of Common Stock hereby purchased (and any
securities or other property issuable upon such exercise) be issued in the
name of and delivered to _________________ whose address is
________________________ and, if such shares of Common Stock shall not
include all of the shares of Common Stock issuable as provided in this
Warrant, that a new Warrant of like tenor and date for the balance of the
shares of Common Stock issuable hereunder be delivered to the undersigned.
-------------------------------
(Name of Registered Owner)
-------------------------------
(Signature of Registered Owner)
-------------------------------
(Street Address)
-------------------------------
(City) (State) (Zip Code)
NOTICE: The signature on this subscription must correspond with
the name as written upon the face of the within Warrant
in every particular, without alteration or enlargement or
any change whatsoever.
ANNEX B
ASSIGNMENT FORM
FOR VALUE RECEIVED the undersigned registered owner of
this Warrant hereby sells, assigns and transfers unto the Assignee named
below all of the rights of the undersigned under this Warrant, with respect
to the number of shares of Common Stock set forth below:
Name and Address of Assignee Number of Shares of Common Stock
---------------------------- --------------------------------
and does hereby irrevocably constitute and appoint ________ _____________
attorney-in- fact to register such transfer onto the books of the Company
maintained for the purpose, with full power of substitution in the
premises.
Dated:___________________ Print Name:___________________
Signature:_____________________
Witness:______________________
NOTICE: The signature on this assignment must correspond with the
name as written upon the face of the within Warrant in
every particular, without alteration or enlargement or
any change whatsoever.