SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------------------
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Rhythms NetConnections Inc.
(Name of Issuer)
Common Stock, par value $0.001 per share
(Title of Class of Securities)
762430 10 6
(CUSIP Number)
Thomas O. Hicks
c/o Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court
Suite 1600
Dallas, Texas 75201
(214) 740-7300
(Name, Address and Telephone Number of Person Authorized to Receive Notices and
Communications)
Copies to:
Eric S. Shube
Vinson & Elkins, L.L.P.
1325 Avenue of the Americas
New York, New York 10019
(917) 206-8005
March 16, 2000
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G to
report the acquisition that is the subject of this Schedule 13D, and is filing
this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the
following box. [ ]
(Continued on following pages)
<PAGE>
CUSIP No. 762430 10 6
- --------------------------------------------------------------------------------
1 Name of Reporting Person
I.R.S. Identification No. of above person (entities only)
Mr. Thomas O. Hicks
- --------------------------------------------------------------------------------
2 Check the appropriate box if a member of a group* (a) [ ]
(b) [x]
- --------------------------------------------------------------------------------
3 SEC use only
- --------------------------------------------------------------------------------
4 Source of Funds
N/A
- --------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
United States
- --------------------------------------------------------------------------------
7 Sole Voting Power 0
Number of -----------------------------------------------------------------
Shares 8 Shared Voting Power* 12,291,666
Beneficially
Owned by -----------------------------------------------------------------
Each 9 Sole Dispositive Power 0
Reporting -----------------------------------------------------------------
Person With 10 Shared Dispositive Power* 12,291,666
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by each Reporting Person**
12,291,666
- --------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11) 13.57%
- --------------------------------------------------------------------------------
14 Type of Reporting Person IN
- --------------------------------------------------------------------------------
* The Reporting Person expressly disclaims (a) the existence of any group
and (b) beneficial ownership with respect to any shares other than the
shares owned of record by such reporting person.
** Assuming (1) conversion of all 8 1/4% Series E Convertible Preferred Stock
beneficially owned by such reporting person, but without giving effect to the
conversion into Common Stock of any capital stock held by other holders and (2)
exercise of all three-year Common Stock warrants, five-year Common Stock
warrants and seven-year Common Stock warrants beneficially owned by such
reporting person, but without giving effect to the exercise of any warrants held
by other holders.
PAGE 2
<PAGE>
CUSIP No. 762430 10 6
- --------------------------------------------------------------------------------
1 Name of Reporting Person
I.R.S. Identification No. of above person (entities only)
HM4 Rhythms Qualified Fund, LLC
- --------------------------------------------------------------------------------
2 Check the appropriate box if a member of a group* (a) [ ]
(b) [x]
- --------------------------------------------------------------------------------
3 SEC use only
- --------------------------------------------------------------------------------
4 Source of Funds
OO
- --------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
7 Sole Voting Power 0
Number of -----------------------------------------------------------------
Shares 8 Shared Voting Power* 5,592,377
Beneficially
Owned by -----------------------------------------------------------------
Each 9 Sole Dispositive Power 0
Reporting -----------------------------------------------------------------
Person With 10 Shared Dispositive Power* 5,592,377
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by each Reporting Person**
5,592,377
- --------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)** 6.67%
- --------------------------------------------------------------------------------
14 Type of Reporting Person OO
- --------------------------------------------------------------------------------
* The Reporting Person expressly disclaims (a) the existence of any group
and (b) beneficial ownership with respect to any shares other than the
shares owned of record by such reporting person.
** Assuming (1) conversion of all 8 1/4% Series E Convertible Preferred Stock
beneficially owned by such reporting person, but without giving effect to the
conversion into Common Stock of any capital stock held by other holders and (2)
exercise of all three-year Common Stock warrants, five-year Common Stock
warrants and seven-year Common Stock warrants beneficially owned by such
reporting person, but without giving effect to the exercise of any warrants held
by other holders.
PAGE 3
<PAGE>
CUSIP No. 762430 10 6
- --------------------------------------------------------------------------------
1 Name of Reporting Person
I.R.S. Identification No. of above person (entities only)
HMTF Equity Fund IV (1999), L.P.
- --------------------------------------------------------------------------------
2 Check the appropriate box if a member of a group* (a) [ ]
(b) [x]
- --------------------------------------------------------------------------------
3 SEC use only
- --------------------------------------------------------------------------------
4 Source of Funds
OO
- --------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Texas
- --------------------------------------------------------------------------------
7 Sole Voting Power 0
Number of -----------------------------------------------------------------
Shares 8 Shared Voting Power* 5,592,377
Beneficially
Owned by -----------------------------------------------------------------
Each 9 Sole Dispositive Power 0
Reporting -----------------------------------------------------------------
Person With 10 Shared Dispositive Power* 5,592,377
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by each Reporting Person**
5,592,377
- --------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)** 6.67%
- --------------------------------------------------------------------------------
14 Type of Reporting Person PN
- --------------------------------------------------------------------------------
* The Reporting Person expressly disclaims (a) the existence of any group
and (b) beneficial ownership with respect to any shares other than the
shares owned of record by such reporting person.
** Assuming (1) conversion of all 8 1/4% Series E Convertible Preferred Stock
beneficially owned by such reporting person, but without giving effect to the
conversion into Common Stock of any capital stock held by other holders and (2)
exercise of all three-year Common Stock warrants, five-year Common Stock
warrants and seven-year Common Stock warrants beneficially owned by such
reporting person, but without giving effect to the exercise of any warrants held
by other holders.
PAGE 4
<PAGE>
CUSIP No. 762430 10 6
- --------------------------------------------------------------------------------
1 Name of Reporting Person
I.R.S. Identification No. of above person (entities only)
HM4 Rhythms Private Fund, LLC
- --------------------------------------------------------------------------------
2 Check the appropriate box if a member of a group* (a) [ ]
(b) [x]
- --------------------------------------------------------------------------------
3 SEC use only
- --------------------------------------------------------------------------------
4 Source of Funds
OO
- --------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
7 Sole Voting Power 0
Number of -----------------------------------------------------------------
Shares 8 Shared Voting Power* 39,622
Beneficially
Owned by -----------------------------------------------------------------
Each 9 Sole Dispositive Power 0
Reporting -----------------------------------------------------------------
Person With 10 Shared Dispositive Power* 39,622
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by each Reporting Person**
39,622
- --------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)** 0.05%
- --------------------------------------------------------------------------------
14 Type of Reporting Person OO
- --------------------------------------------------------------------------------
* The Reporting Person expressly disclaims (a) the existence of any group
and (b) beneficial ownership with respect to any shares other than the
shares owned of record by such reporting person.
** Assuming (1) conversion of all 8 1/4% Series E Convertible Preferred Stock
beneficially owned by such reporting person, but without giving effect to the
conversion into Common Stock of any capital stock held by other holders and (2)
exercise of all three-year Common Stock warrants, five-year Common Stock
warrants and seven-year Common Stock warrants beneficially owned by such
reporting person, but without giving effect to the exercise of any warrants held
by other holders.
PAGE 5
<PAGE>
CUSIP No. 762430 10 6
- --------------------------------------------------------------------------------
1 Name of Reporting Person
I.R.S. Identification No. of above person (entities only)
HMTF Private Equity Fund IV (1999), L.P.
- --------------------------------------------------------------------------------
2 Check the appropriate box if a member of a group* (a) [ ]
(b) [x]
- --------------------------------------------------------------------------------
3 SEC use only
- --------------------------------------------------------------------------------
4 Source of Funds
OO
- --------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Texas
- --------------------------------------------------------------------------------
7 Sole Voting Power 0
Number of -----------------------------------------------------------------
Shares 8 Shared Voting Power* 39,622
Beneficially
Owned by -----------------------------------------------------------------
Each 9 Sole Dispositive Power 0
Reporting -----------------------------------------------------------------
Person With 10 Shared Dispositive Power* 39,622
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by each Reporting Person**
39,622
- --------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)** 0.05%
- --------------------------------------------------------------------------------
14 Type of Reporting Person PN
- --------------------------------------------------------------------------------
* The Reporting Person expressly disclaims (a) the existence of any group
and (b) beneficial ownership with respect to any shares other than the
shares owned of record by such reporting person.
** Assuming (1) conversion of all 8 1/4% Series E Convertible Preferred Stock
beneficially owned by such reporting person, but without giving effect to the
conversion into Common Stock of any capital stock held by other holders and (2)
exercise of all three-year Common Stock warrants, five-year Common Stock
warrants and seven-year Common Stock warrants beneficially owned by such
reporting person, but without giving effect to the exercise of any warrants held
by other holders.
PAGE 6
<PAGE>
CUSIP No. 762430 10 6
- --------------------------------------------------------------------------------
1 Name of Reporting Person
I.R.S. Identification No. of above person (entities only)
HM4/GP (1999) Partners, L.P.
- --------------------------------------------------------------------------------
2 Check the appropriate box if a member of a group* (a) [ ]
(b) [x]
- --------------------------------------------------------------------------------
3 SEC use only
- --------------------------------------------------------------------------------
4 Source of Funds
OO
- --------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Texas
- --------------------------------------------------------------------------------
7 Sole Voting Power 0
Number of -----------------------------------------------------------------
Shares 8 Shared Voting Power* 5,632,000
Beneficially
Owned by -----------------------------------------------------------------
Each 9 Sole Dispositive Power 0
Reporting -----------------------------------------------------------------
Person With 10 Shared Dispositive Power* 5,632,000
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by each Reporting Person**
5,632,000
- --------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)** 6.71%
- --------------------------------------------------------------------------------
14 Type of Reporting Person PN
- --------------------------------------------------------------------------------
* The Reporting Person expressly disclaims (a) the existence of any group
and (b) beneficial ownership with respect to any shares other than the
shares owned of record by such reporting person.
** Assuming (1) conversion of all 8 1/4% Series E Convertible Preferred Stock
beneficially owned by such reporting person, but without giving effect to the
conversion into Common Stock of any capital stock held by other holders and (2)
exercise of all three-year Common Stock warrants, five-year Common Stock
warrants and seven-year Common Stock warrants beneficially owned by such
reporting person, but without giving effect to the exercise of any warrants held
by other holders.
PAGE 7
<PAGE>
CUSIP No. 762430 10 6
- --------------------------------------------------------------------------------
1 Name of Reporting Person
I.R.S. Identification No. of above person (entities only)
HM-4EQ Rhythms Coinvestors, LLC
- --------------------------------------------------------------------------------
2 Check the appropriate box if a member of a group* (a) [ ]
(b) [x]
- --------------------------------------------------------------------------------
3 SEC use only
- --------------------------------------------------------------------------------
4 Source of Funds
OO
- --------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
7 Sole Voting Power 0
Number of -----------------------------------------------------------------
Shares 8 Shared Voting Power* 82,165
Beneficially
Owned by -----------------------------------------------------------------
Each 9 Sole Dispositive Power 0
Reporting -----------------------------------------------------------------
Person With 10 Shared Dispositive Power* 82,165
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by each Reporting Person**
82,165
- --------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)** 0.10%
- --------------------------------------------------------------------------------
14 Type of Reporting Person OO
- --------------------------------------------------------------------------------
* The Reporting Person expressly disclaims (a) the existence of any group
and (b) beneficial ownership with respect to any shares other than the
shares owned of record by such reporting person.
** Assuming (1) conversion of all 8 1/4% Series E Convertible Preferred Stock
beneficially owned by such reporting person, but without giving effect to the
conversion into Common Stock of any capital stock held by other holders and (2)
exercise of all three-year Common Stock warrants, five-year Common Stock
warrants and seven-year Common Stock warrants beneficially owned by such
reporting person, but without giving effect to the exercise of any warrants held
by other holders.
PAGE 8
<PAGE>
CUSIP No. 762430 10 6
- --------------------------------------------------------------------------------
1 Name of Reporting Person
I.R.S. Identification No. of above person (entities only)
HM-4EQ (1999) Coinvestors, L.P.
- --------------------------------------------------------------------------------
2 Check the appropriate box if a member of a group* (a) [ ]
(b) [x]
- --------------------------------------------------------------------------------
3 SEC use only
- --------------------------------------------------------------------------------
4 Source of Funds
OO
- --------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Texas
- --------------------------------------------------------------------------------
7 Sole Voting Power 0
Number of -----------------------------------------------------------------
Shares 8 Shared Voting Power* 82,165
Beneficially
Owned by -----------------------------------------------------------------
Each 9 Sole Dispositive Power 0
Reporting -----------------------------------------------------------------
Person With 10 Shared Dispositive Power* 82,165
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by each Reporting Person**
82,165
- --------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)** 0.10%
- --------------------------------------------------------------------------------
14 Type of Reporting Person PN
- --------------------------------------------------------------------------------
* The Reporting Person expressly disclaims (a) the existence of any group
and (b) beneficial ownership with respect to any shares other than the
shares owned of record by such reporting person.
** Assuming (1) conversion of all 8 1/4% Series E Convertible Preferred Stock
beneficially owned by such reporting person, but without giving effect to the
conversion into Common Stock of any capital stock held by other holders and (2)
exercise of all three-year Common Stock warrants, five-year Common Stock
warrants and seven-year Common Stock warrants beneficially owned by such
reporting person, but without giving effect to the exercise of any warrants held
by other holders.
PAGE 9
<PAGE>
CUSIP No. 762430 10 6
- --------------------------------------------------------------------------------
1 Name of Reporting Person
I.R.S. Identification No. of above person (entities only)
HM 4-SBS Rhythms Coinvestors, LLC
- --------------------------------------------------------------------------------
2 Check the appropriate box if a member of a group* (a) [ ]
(b) [x]
- --------------------------------------------------------------------------------
3 SEC use only
- --------------------------------------------------------------------------------
4 Source of Funds
OO
- --------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
7 Sole Voting Power 0
Number of -----------------------------------------------------------------
Shares 8 Shared Voting Power* 133,927
Beneficially
Owned by -----------------------------------------------------------------
Each 9 Sole Dispositive Power 0
Reporting -----------------------------------------------------------------
Person With 10 Shared Dispositive Power* 133,927
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by each Reporting Person**
133,927
- --------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)** 0.17%
- --------------------------------------------------------------------------------
14 Type of Reporting Person OO
- --------------------------------------------------------------------------------
* The Reporting Person expressly disclaims (a) the existence of any group
and (b) beneficial ownership with respect to any shares other than the
shares owned of record by such reporting person.
** Assuming (1) conversion of all 8 1/4% Series E Convertible Preferred Stock
beneficially owned by such reporting person, but without giving effect to the
conversion into Common Stock of any capital stock held by other holders and (2)
exercise of all three-year Common Stock warrants, five-year Common Stock
warrants and seven-year Common Stock warrants beneficially owned by such
reporting person, but without giving effect to the exercise of any warrants held
by other holders.
PAGE 10
<PAGE>
CUSIP No. 762430 10 6
- --------------------------------------------------------------------------------
1 Name of Reporting Person
I.R.S. Identification No. of above person (entities only)
HM 4-SBS (1999) Coinvestors, L.P.
- --------------------------------------------------------------------------------
2 Check the appropriate box if a member of a group* (a) [ ]
(b) [x]
- --------------------------------------------------------------------------------
3 SEC use only
- --------------------------------------------------------------------------------
4 Source of Funds
OO
- --------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Texas
- --------------------------------------------------------------------------------
7 Sole Voting Power 0
Number of -----------------------------------------------------------------
Shares 8 Shared Voting Power* 133,927
Beneficially
Owned by -----------------------------------------------------------------
Each 9 Sole Dispositive Power 0
Reporting -----------------------------------------------------------------
Person With 10 Shared Dispositive Power* 133,927
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by each Reporting Person**
133,927
- --------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)** 0.17%
- --------------------------------------------------------------------------------
14 Type of Reporting Person PN
- --------------------------------------------------------------------------------
* The Reporting Person expressly disclaims (a) the existence of any group
and (b) beneficial ownership with respect to any shares other than the
shares owned of record by such reporting person.
** Assuming (1) conversion of all 8 1/4% Series E Convertible Preferred Stock
beneficially owned by such reporting person, but without giving effect to the
conversion into Common Stock of any capital stock held by other holders and (2)
exercise of all three-year Common Stock warrants, five-year Common Stock
warrants and seven-year Common Stock warrants beneficially owned by such
reporting person, but without giving effect to the exercise of any warrants held
by other holders.
PAGE 11
<PAGE>
CUSIP No. 762430 10 6
- --------------------------------------------------------------------------------
1 Name of Reporting Person
I.R.S. Identification No. of above person (entities only)
Hicks, Muse GP (1999) Partners IV, L.P.
- --------------------------------------------------------------------------------
2 Check the appropriate box if a member of a group* (a) [ ]
(b) [x]
- --------------------------------------------------------------------------------
3 SEC use only
- --------------------------------------------------------------------------------
4 Source of Funds
OO
- --------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Texas
- --------------------------------------------------------------------------------
7 Sole Voting Power 0
Number of -----------------------------------------------------------------
Shares 8 Shared Voting Power* 5,848,092
Beneficially
Owned by -----------------------------------------------------------------
Each 9 Sole Dispositive Power 0
Reporting -----------------------------------------------------------------
Person With 10 Shared Dispositive Power* 5,848,092
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by each Reporting Person**
5,848,092
- --------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)** 6.95%
- --------------------------------------------------------------------------------
14 Type of Reporting Person PN
- --------------------------------------------------------------------------------
* The Reporting Person expressly disclaims (a) the existence of any group
and (b) beneficial ownership with respect to any shares other than the
shares owned of record by such reporting person.
** Assuming (1) conversion of all 8 1/4% Series E Convertible Preferred Stock
beneficially owned by such reporting person, but without giving effect to the
conversion into Common Stock of any capital stock held by other holders and (2)
exercise of all three-year Common Stock warrants, five-year Common Stock
warrants and seven-year Common Stock warrants beneficially owned by such
reporting person, but without giving effect to the exercise of any warrants held
by other holders.
PAGE 12
<PAGE>
CUSIP No. 762430 10 6
- --------------------------------------------------------------------------------
1 Name of Reporting Person
I.R.S. Identification No. of above person (entities only)
Hicks, Muse (1999) Fund IV, LLC
- --------------------------------------------------------------------------------
2 Check the appropriate box if a member of a group* (a) [ ]
(b) [x]
- --------------------------------------------------------------------------------
3 SEC use only
- --------------------------------------------------------------------------------
4 Source of Funds
OO
- --------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Texas
- --------------------------------------------------------------------------------
7 Sole Voting Power 0
Number of -----------------------------------------------------------------
Shares 8 Shared Voting Power* 5,848,092
Beneficially
Owned by -----------------------------------------------------------------
Each 9 Sole Dispositive Power 0
Reporting -----------------------------------------------------------------
Person With 10 Shared Dispositive Power* 5,848,092
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by each Reporting Person**
5,848,092
- --------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)** 6.95%
- --------------------------------------------------------------------------------
14 Type of Reporting Person OO
- --------------------------------------------------------------------------------
* The Reporting Person expressly disclaims (a) the existence of any group
and (b) beneficial ownership with respect to any shares other than the
shares owned of record by such reporting person.
** Assuming (1) conversion of all 8 1/4% Series E Convertible Preferred Stock
beneficially owned by such reporting person, but without giving effect to the
conversion into Common Stock of any capital stock held by other holders and (2)
exercise of all three-year Common Stock warrants, five-year Common Stock
warrants and seven-year Common Stock warrants beneficially owned by such
reporting person, but without giving effect to the exercise of any warrants held
by other holders.
PAGE 13
<PAGE>
CUSIP No. 762430 10 6
- --------------------------------------------------------------------------------
1 Name of Reporting Person
I.R.S. Identification No. of above person (entities only)
HM PG-IV Rhythms, LLC
- --------------------------------------------------------------------------------
2 Check the appropriate box if a member of a group* (a) [ ]
(b) [x]
- --------------------------------------------------------------------------------
3 SEC use only
- --------------------------------------------------------------------------------
4 Source of Funds
OO
- --------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
7 Sole Voting Power 0
Number of -----------------------------------------------------------------
Shares 8 Shared Voting Power* 297,741
Beneficially
Owned by -----------------------------------------------------------------
Each 9 Sole Dispositive Power 0
Reporting -----------------------------------------------------------------
Person With 10 Shared Dispositive Power* 297,741
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by each Reporting Person**
297,741
- --------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)** 0.38%
- --------------------------------------------------------------------------------
14 Type of Reporting Person OO
- --------------------------------------------------------------------------------
* The Reporting Person expressly disclaims (a) the existence of any group
and (b) beneficial ownership with respect to any shares other than the
shares owned of record by such reporting person.
** Assuming (1) conversion of all 8 1/4% Series E Convertible Preferred Stock
beneficially owned by such reporting person, but without giving effect to the
conversion into Common Stock of any capital stock held by other holders and (2)
exercise of all three-year Common Stock warrants, five-year Common Stock
warrants and seven-year Common Stock warrants beneficially owned by such
reporting person, but without giving effect to the exercise of any warrants held
by other holders.
PAGE 14
<PAGE>
CUSIP No. 762430 10 6
- --------------------------------------------------------------------------------
1 Name of Reporting Person
I.R.S. Identification No. of above person (entities only)
Hicks, Muse PG-IV (1999), C.V.
- --------------------------------------------------------------------------------
2 Check the appropriate box if a member of a group* (a) [ ]
(b) [x]
- --------------------------------------------------------------------------------
3 SEC use only
- --------------------------------------------------------------------------------
4 Source of Funds
OO
- --------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Netherlands
- --------------------------------------------------------------------------------
7 Sole Voting Power 0
Number of -----------------------------------------------------------------
Shares 8 Shared Voting Power* 297,741
Beneficially
Owned by -----------------------------------------------------------------
Each 9 Sole Dispositive Power 0
Reporting -----------------------------------------------------------------
Person With 10 Shared Dispositive Power* 297,741
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by each Reporting Person**
297,741
- --------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)** 0.38%
- --------------------------------------------------------------------------------
14 Type of Reporting Person PN
- --------------------------------------------------------------------------------
* The Reporting Person expressly disclaims (a) the existence of any group
and (b) beneficial ownership with respect to any shares other than the
shares owned of record by such reporting person.
** Assuming (1) conversion of all 8 1/4% Series E Convertible Preferred Stock
beneficially owned by such reporting person, but without giving effect to the
conversion into Common Stock of any capital stock held by other holders and (2)
exercise of all three-year Common Stock warrants, five-year Common Stock
warrants and seven-year Common Stock warrants beneficially owned by such
reporting person, but without giving effect to the exercise of any warrants held
by other holders.
PAGE 15
<PAGE>
CUSIP No. 762430 10 6
- --------------------------------------------------------------------------------
1 Name of Reporting Person
I.R.S. Identification No. of above person (entities only)
HM Equity Fund IV/GP Partners (1999), C.V.
- --------------------------------------------------------------------------------
2 Check the appropriate box if a member of a group* (a) [ ]
(b) [x]
- --------------------------------------------------------------------------------
3 SEC use only
- --------------------------------------------------------------------------------
4 Source of Funds
OO
- --------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Netherlands
- --------------------------------------------------------------------------------
7 Sole Voting Power 0
Number of -----------------------------------------------------------------
Shares 8 Shared Voting Power* 297,741
Beneficially
Owned by -----------------------------------------------------------------
Each 9 Sole Dispositive Power 0
Reporting -----------------------------------------------------------------
Person With 10 Shared Dispositive Power* 297,741
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by each Reporting Person**
297,741
- --------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)** 0.38%
- --------------------------------------------------------------------------------
14 Type of Reporting Person PN
- --------------------------------------------------------------------------------
* The Reporting Person expressly disclaims (a) the existence of any group
and (b) beneficial ownership with respect to any shares other than the
shares owned of record by such reporting person.
** Assuming (1) conversion of all 8 1/4% Series E Convertible Preferred Stock
beneficially owned by such reporting person, but without giving effect to the
conversion into Common Stock of any capital stock held by other holders and (2)
exercise of all three-year Common Stock warrants, five-year Common Stock
warrants and seven-year Common Stock warrants beneficially owned by such
reporting person, but without giving effect to the exercise of any warrants held
by other holders.
PAGE 16
<PAGE>
CUSIP No. 762430 10 6
- --------------------------------------------------------------------------------
1 Name of Reporting Person
I.R.S. Identification No. of above person (entities only)
HM GP Partners IV Cayman, L.P.
- --------------------------------------------------------------------------------
2 Check the appropriate box if a member of a group* (a) [ ]
(b) [x]
- --------------------------------------------------------------------------------
3 SEC use only
- --------------------------------------------------------------------------------
4 Source of Funds
OO
- --------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Cayman Islands
- --------------------------------------------------------------------------------
7 Sole Voting Power 0
Number of -----------------------------------------------------------------
Shares 8 Shared Voting Power* 297,741
Beneficially
Owned by -----------------------------------------------------------------
Each 9 Sole Dispositive Power 0
Reporting -----------------------------------------------------------------
Person With 10 Shared Dispositive Power 297,741
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by each Reporting Person**
297,741
- --------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)** 0.38%
- --------------------------------------------------------------------------------
14 Type of Reporting Person PN
- --------------------------------------------------------------------------------
* The Reporting Person expressly disclaims (a) the existence of any group
and (b) beneficial ownership with respect to any shares other than the
shares owned of record by such reporting person.
** Assuming (1) conversion of all 8 1/4% Series E Convertible Preferred Stock
beneficially owned by such reporting person, but without giving effect to the
conversion into Common Stock of any capital stock held by other holders and (2)
exercise of all three-year Common Stock warrants, five-year Common Stock
warrants and seven-year Common Stock warrants beneficially owned by such
reporting person, but without giving effect to the exercise of any warrants held
by other holders.
PAGE 17
<PAGE>
CUSIP No. 762430 10 6
- --------------------------------------------------------------------------------
1 Name of Reporting Person
I.R.S. Identification No. of above person (entities only)
HM Fund IV Cayman LLC
- --------------------------------------------------------------------------------
2 Check the appropriate box if a member of a group* (a) [ ]
(b) [x]
- --------------------------------------------------------------------------------
3 SEC use only
- --------------------------------------------------------------------------------
4 Source of Funds
OO
- --------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Cayman Islands
- --------------------------------------------------------------------------------
7 Sole Voting Power 0
Number of -----------------------------------------------------------------
Shares 8 Shared Voting Power* 297,741
Beneficially
Owned by -----------------------------------------------------------------
Each 9 Sole Dispositive Power 0
Reporting -----------------------------------------------------------------
Person With 10 Shared Dispositive Power* 297,741
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by each Reporting Person**
297,741
- --------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)** 0.38%
- --------------------------------------------------------------------------------
14 Type of Reporting Person OO
- --------------------------------------------------------------------------------
* The Reporting Person expressly disclaims (a) the existence of any group
and (b) beneficial ownership with respect to any shares other than the
shares owned of record by such reporting person.
** Assuming (1) conversion of all 8 1/4% Series E Convertible Preferred Stock
beneficially owned by such reporting person, but without giving effect to the
conversion into Common Stock of any capital stock held by other holders and (2)
exercise of all three-year Common Stock warrants, five-year Common Stock
warrants and seven-year Common Stock warrants beneficially owned by such
reporting person, but without giving effect to the exercise of any warrants held
by other holders.
PAGE 18
<PAGE>
CUSIP No. 762430 10 6
- --------------------------------------------------------------------------------
1 Name of Reporting Person
I.R.S. Identification No. of above person (entities only)
HMTF Bridge RHY, LLC
- --------------------------------------------------------------------------------
2 Check the appropriate box if a member of a group* (a) [ ]
(b) [x]
- --------------------------------------------------------------------------------
3 SEC use only
- --------------------------------------------------------------------------------
4 Source of Funds
OO
- --------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
7 Sole Voting Power 0
Number of -----------------------------------------------------------------
Shares 8 Shared Voting Power* 6,145,833
Beneficially
Owned by -----------------------------------------------------------------
Each 9 Sole Dispositive Power 0
Reporting -----------------------------------------------------------------
Person With 10 Shared Dispositive Power* 6,145,833
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by each Reporting Person**
6,145,833
- --------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)** 7.28%
- --------------------------------------------------------------------------------
14 Type of Reporting Person OO
- --------------------------------------------------------------------------------
* The Reporting Person expressly disclaims (a) the existence of any group
and (b) beneficial ownership with respect to any shares other than the
shares owned of record by such reporting person.
** Assuming (1) conversion of all 8 1/4% Series E Convertible Preferred Stock
beneficially owned by such reporting person, but without giving effect to the
conversion into Common Stock of any capital stock held by other holders and (2)
exercise of all three-year Common Stock warrants, five-year Common Stock
warrants and seven-year Common Stock warrants beneficially owned by such
reporting person, but without giving effect to the exercise of any warrants held
by other holders.
PAGE 19
<PAGE>
CUSIP No. 762430 10 6
- --------------------------------------------------------------------------------
1 Name of Reporting Person
I.R.S. Identification No. of above person (entities only)
HMTF Bridge Partners, L.P.
- --------------------------------------------------------------------------------
2 Check the appropriate box if a member of a group* (a) [ ]
(b) [x]
- --------------------------------------------------------------------------------
3 SEC use only
- --------------------------------------------------------------------------------
4 Source of Funds
OO
- --------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Delaware
- --------------------------------------------------------------------------------
7 Sole Voting Power 0
Number of -----------------------------------------------------------------
Shares 8 Shared Voting Power* 6,145,833
Beneficially
Owned by -----------------------------------------------------------------
Each 9 Sole Dispositive Power 0
Reporting -----------------------------------------------------------------
Person With 10 Shared Dispositive Power* 6,145,833
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by each Reporting Person**
6,145,833
- --------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)** 7.28%
- --------------------------------------------------------------------------------
14 Type of Reporting Person PN
- --------------------------------------------------------------------------------
* The Reporting Person expressly disclaims (a) the existence of any group
and (b) beneficial ownership with respect to any shares other than the
shares owned of record by such reporting person.
** Assuming (1) conversion of all 8 1/4% Series E Convertible Preferred Stock
beneficially owned by such reporting person, but without giving effect to the
conversion into Common Stock of any capital stock held by other holders and (2)
exercise of all three-year Common Stock warrants, five-year Common Stock
warrants and seven-year Common Stock warrants beneficially owned by such
reporting person, but without giving effect to the exercise of any warrants held
by other holders.
PAGE 20
<PAGE>
CUSIP No. 762430 10 6
- --------------------------------------------------------------------------------
1 Name of Reporting Person
I.R.S. Identification No. of above person (entities only)
HTMF Bridge Partners, LLC
- --------------------------------------------------------------------------------
2 Check the appropriate box if a member of a group* (a) [ ]
(b) [x]
- --------------------------------------------------------------------------------
3 SEC use only
- --------------------------------------------------------------------------------
4 Source of Funds
OO
- --------------------------------------------------------------------------------
5 Check if Disclosure of Legal Proceedings is Required Pursuant to
Items 2(d) or 2(e) [ ]
- --------------------------------------------------------------------------------
6 Citizenship or Place of Organization
Texas
- --------------------------------------------------------------------------------
7 Sole Voting Power 0
Number of -----------------------------------------------------------------
Shares 8 Shared Voting Power* 6,145,833
Beneficially
Owned by -----------------------------------------------------------------
Each 9 Sole Dispositive Power 0
Reporting -----------------------------------------------------------------
Person With 10 Shared Dispositive Power* 6,145,833
- --------------------------------------------------------------------------------
11 Aggregate Amount Beneficially Owned by each Reporting Person**
6,145,833
- --------------------------------------------------------------------------------
12 Check if the Aggregate Amount in Row (11) Excludes Certain
Shares* [ ]
- --------------------------------------------------------------------------------
13 Percent of Class Represented by Amount in Row (11)** 7.28%
- --------------------------------------------------------------------------------
14 Type of Reporting Person OO
- --------------------------------------------------------------------------------
* The Reporting Person expressly disclaims (a) the existence of any group
and (b) beneficial ownership with respect to any shares other than the
shares owned of record by such reporting person.
** Assuming (1) conversion of all 8 1/4% Series E Convertible Preferred Stock
beneficially owned by such reporting person, but without giving effect to the
conversion into Common Stock of any capital stock held by other holders and (2)
exercise of all three-year Common Stock warrants, five-year Common Stock
warrants and seven-year Common Stock warrants beneficially owned by such
reporting person, but without giving effect to the exercise of any warrants held
by other holders.
PAGE 21
<PAGE>
Item 1. Security and Issuer.
The class of equity securities to which this Schedule 13D (this
"Statement") relates is the Common Stock, par value $0.001 per share (the
"Common Stock"), of Rhythms NetConnections Inc., a Delaware corporation (the
"Issuer"). The address of the Issuer's principal executive offices is 6933
South Revere Parkway, Englewood, Colorado 80112-3931.
Item 2. Identity and Background.
(a) Name of Person(s) Filing this Statement (the "Reporting Persons"):
Mr. Thomas O. Hicks
HM4 Rhythms Qualified Fund, LLC, a Delaware limited liability company
("Qualified LLC")
HMTF Equity Fund IV (1999), L.P., a Texas limited partnership ("Equity
L.P.")
HM4 Rhythms Private Fund, LLC, a Delaware limited liability company
("Private LLC")
HMTF Private Equity Fund IV (1999), L.P., a Texas limited partnership
("Private L.P.")
HM4/GP (1999) Partners, L.P., a Texas limited partnership ("HM4/GP
Partners")
HM 4-EQ Rhythms Coinvestors, LLC, a Delaware limited liability company
("4-EQ LLC")
HM 4-EQ (1999) Coinvestors, L.P., a Texas limited partnership ("4-EQ L.P.")
HM 4-SBS Rhythms Coinvestors, LLC, a Delaware limited liability company
("4-SBS LLC")
HM 4-SBS (1999) Coinvestors, L.P., a Texas limited partnership ("4-SBS
L.P.")
Hicks, Muse GP (1999) Partners IV, L.P., a Texas limited partnership
("Hicks GP Partners")
Hicks, Muse (1999) Fund IV, LLC, a Texas limited liability company ("Fund
IV LLC")
HM PG-IV Rhythms, LLC, a Delaware limited liability company ("PG-IV LLC")
Hicks, Muse PG-IV (1999), C.V., a limited partnership organized under the
laws of the Netherlands ("PG-IV C.V.")
HM Equity Fund IV/GP Partners (1999), C.V., a limited partnership organized
under the laws of the Netherlands ("HM Equity C.V.")
HM GP Partners IV Cayman, L.P., a Cayman Islands exempted limited
partnership ("GP Cayman L.P.")
HM Fund IV Cayman LLC, an exempted Cayman Islands limited liability company
("Fund IV Cayman LLC")
HMTF Bridge RHY, LLC, a Delaware limited liability company ("Bridge LLC")
HMTF Bridge Partners, L.P., a Delaware limited partnership
("Bridge Partners L.P.")
HMTF Bridge Partners, LLC, a Texas limited liability company ("Bridge
Partners LLC")
(b) - (c)
Mr. Thomas O. Hicks
Mr. Thomas O. Hicks is chief executive officer of Hicks, Muse, Tate & Furst
Incorporated ("Hicks, Muse"), a private investment firm primarily engaged in
leveraged acquisitions, recapitalizations and other investment activities. Mr.
Hicks is also the sole member and sole manager of Fund IV LLC, which is the sole
general partner of Hicks GP Partners, which is the sole general partner of
HM4/GP Partners, which is the sole general partner of each of Equity L.P. and
Private L.P. Equity L.P. is the sole member of Qualified LLC, and Private L.P.
is the sole member of Private LLC. Hicks GP Partners is also the sole general
partner of each of 4-SBS L.P. and 4-EQ L.P. 4-SBS L.P. is the sole member of
4-SBS LLC, and 4-EQ L.P. is the sole member of 4-EQ LLC. Mr. Hicks is also the
sole member of Fund IV Cayman LLC, which is the sole general partner of GP
Cayman L.P., which is the sole general partner of HM Equity C.V., which is the
sole general partner of PG-IV C.V. PG-IV C.V. is the sole member of PG-IV LLC.
Mr. Hicks is also the sole member of Bridge Partners LLC, which is the sole
general partner of Bridge Partners L.P., which is the sole member of Bridge LLC.
The business address of Mr. Hicks is 200 Crescent Court, Suite 1600, Dallas,
Texas 75201-6950.
Qualified LLC
Qualified LLC is a Delaware limited liability company formed to invest
in the 8 1/4% Series E Convertible Preferred Stock of the Issuer (the "Preferred
Stock"), the three year warrants (the "A-1 Warrants"), the five year warrants
(the "A-2 Warrants") and the seven year warrants (the "A-3 Warrants") to
purchase Common Stock (the A-1 Warrants, A-2 Warrants and A-3 Warrants are
collectively referred to as the "Warrants"). The business address of Qualified
LLC, which also serves as its principal office, is 200 Crescent Court, Suite
1600, Dallas, Texas 75201-6950. Pursuant to Instruction C to Schedule 13D of
the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
information with respect to Equity L.P., the sole member of Qualified LLC, is
PAGE 22
<PAGE>
set forth below.
Equity L.P.
Equity L.P. is a Texas limited partnership, the principal business of which
is to invest directly or indirectly in various companies. The business address
of Equity L.P., which also serves as its principal office, is 200 Crescent
Court, Suite 1600, Dallas, Texas 75201-6950. Pursuant to Instruction C to
Schedule 13D of the Exchange Act, information with respect to HM4/GP Partners,
the sole general partner of Equity L.P., is set forth below.
Private LLC
Private LLC is a Delaware limited liability company formed to invest in the
Preferred Stock and Warrants. The business address of Private LLC, which also
serves as its principal office, is 200 Crescent Court, Suite 1600, Dallas, Texas
75201-6950. Pursuant to Instruction C to Schedule 13D of the Exchange Act,
information with respect to Private L.P., the sole member of Private LLC, is set
forth below.
Private L.P.
Private L.P. is a Texas limited partnership, the principal business of
which is to invest directly or indirectly in various companies. The business
address of Private L.P., which also serves as its principal office, is 200
Crescent Court, Suite 1600, Dallas, Texas 75201-6950. Pursuant to Instruction C
to Schedule 13D of the Exchange Act, information with respect to HM4/GP
Partners, the sole general partner of Private L.P., is set forth below.
HM4/GP Partners
HM4/GP Partners is a Texas limited partnership, the principal business of
which is serving as the sole general partner of various limited partnerships
whose principal business is to serve as partners in various investment
partnerships. The principal business address of HM4/GP Partners, which also
serves as its principal office, is 200 Crescent Court, Suite 1600, Dallas, Texas
75201-6950. Pursuant to Instruction C to Schedule 13D of the Exchange Act,
information with respect to Hicks GP Partners, the sole general partner of
HM4/GP Partners, is set forth below.
4-EQ LLC
4-EQ LLC is a Delaware limited liability company formed to invest in the
Preferred Stock and Warrants. The business address of 4-EQ LLC, which also
serves as its principal office, is 200 Crescent Court, Suite 1600, Dallas, Texas
75201-6950. Pursuant to Instruction C to Schedule 13D of the Exchange Act,
information with respect to 4-EQ L.P., the sole member of 4-EQ LLC, is set forth
below.
4-EQ L.P.
4-EQ L.P. is a Texas limited partnership, the principal business of which
is to invest directly or indirectly in various companies. The business address
of 4-EQ L.P., which also serves as its principal office, is 200 Crescent Court,
Suite 1600, Dallas, Texas 75201-6950. Pursuant to Instruction C to Schedule 13D
of the Exchange Act, information with respect to Hicks GP Partners, the sole
general partner of 4-EQ L.P., is set forth below.
4-SBS LLC
4-SBS LLC is a Delaware limited liability company formed to invest in the
Preferred Stock and Warrants. The business address of 4-SBS LLC, which also
serves as its principal office, is 200 Crescent Court, Suite 1600, Dallas, Texas
75201-6950. Pursuant to Instruction C to Schedule 13D of the Exchange Act,
information with respect to 4-SBS L.P., the sole member of 4-SBS LLC, is set
forth below.
4-SBS L.P.
4-SBS L.P. is a Texas limited partnership, the principal business of which
is to invest directly or indirectly in various companies. The business address
of 4-SBS L.P., which also serves as its principal office, is 200 Crescent Court,
Suite 1600, Dallas, Texas 75201-6950. Pursuant to Instruction C to Schedule 13D
of the Exchange Act, information with respect to Hicks GP Partners, the sole
general partner of 4-SBS L.P., is set forth below.
Hicks GP Partners
Hicks GP Partners is a Texas limited partnership, the principal business of
which is serving as the sole general partner of various limited partnerships
whose principal business is to serve as partners in various investment
partnerships. The principal business address of Hicks GP Partners, which also
serves as its principal office, is 200 Crescent Court, Suite 1600, Dallas, Texas
75201-6950. Pursuant to Instruction C to Schedule 13D of the Exchange Act,
PAGE 23
<PAGE>
information with respect to Fund IV LLC, the sole general partner of Hicks GP
Partners, is set forth below.
Fund IV LLC
Fund IV LLC is a Texas limited liability company, the principal business of
which is serving as the sole general partner in various limited partnerships
whose principal business is to serve as partners in various investment
partnerships. The business address of Fund IV LLC, which also serves as its
principal office, is 200 Crescent Court, Suite 1600, Dallas, Texas 75201-6950.
Pursuant to Instruction C to Schedule 13D of the Exchange Act, information with
respect to Mr. Thomas O. Hicks, the sole member of Fund IV LLC, is set forth
above.
PG-IV LLC
PG-IV LLC is a Delaware limited liability company formed to invest in the
Preferred Stock and Warrants. The business address of PG-IV LLC, which also
serves as its principal office, is 200 Crescent Court, Suite 1600, Dallas, Texas
75201-6950. Pursuant to Instruction C to Schedule 13D of the Exchange Act,
information with respect to PG-IV C.V., the sole member of PG-IV LLC, is set
forth below.
PG-IV C.V.
PG-IV C.V. is a limited partnership organized under the laws of the
Netherlands, the principal business of which is to invest directly or indirectly
in various companies. The business address of PG-IV C.V., which also serves as
its principal office, is 200 Crescent Court, Suite 1600, Dallas, Texas
75201-6950. Pursuant to Instruction C to Schedule 13D of the Exchange Act,
information with respect to HM Equity C.V., the sole general partner of PG-IV
C.V., is set forth below.
HM Equity C.V.
HM Equity C.V. is a limited partnership organized under the laws of the
Netherlands, the principal business of which is serving as the sole general
partner of various limited partnerships whose principal business is to serve as
partners in various investment partnerships. The principal business address of
HM Equity C.V., which also serves as its principal office, is 200 Crescent
Court, Suite 1600, Dallas, Texas 75201-6950. Pursuant to Instruction C to
Schedule 13D of the Exchange Act, information with respect to GP Cayman L.P.,
the sole general partner of HM Equity C.V., is set forth below.
GP Cayman L.P.
GP Cayman L.P. is a Cayman Islands exempted limited partnership, the
principal business of which is serving as the sole general partner of various
limited partnerships whose principal business is to serve as partners in various
investment partnerships. The business address of GP Cayman L.P., which also
serves as its principal office, is 200 Crescent Court, Suite 1600, Dallas, Texas
75201-6950. Pursuant to Instruction C to Schedule 13D of the Exchange Act,
information with respect to Fund IV Cayman LLC, the sole general partner of GP
Cayman L.P., is set forth below.
Fund IV Cayman LLC
Fund IV Cayman LLC is an exempted Cayman Islands limited liability company,
the principal business of which is serving as the sole general partner in
various limited partnerships whose principal business is to serve as partners in
various investment partnerships. The business address of Fund IV Cayman LLC,
which also serves as its principal office, is 200 Crescent Court, Suite 1600,
Dallas, Texas 75201-6950. Pursuant to Instruction C to Schedule 13D of the
Exchange Act, information with respect to Mr. Thomas O. Hicks, the sole member
of Fund IV Cayman LLC, is set forth above.
Bridge LLC
Bridge LLC is a Delaware limited liability company formed to invest in the
Preferred Stock and Warrants. The business address of Bridge LLC, which also
serves as its principal office, is 200 Crescent Court, Suite 1600, Dallas, Texas
75201-6950. Pursuant to Instruction C to Schedule 13D of the Exchange Act,
information with respect to Bridge Partners L.P., the sole member of Bridge LLC,
is set forth below.
Bridge Partners L.P.
Bridge Partners L.P. is a Delaware limited partnership, the principal
business of which to invest directly or indirectly in various companies. The
business address of Bridge Partners L.P., which also serves as its principal
office, is 200 Crescent Court, Suite 1600, Dallas, Texas 75201-6950. Pursuant
to Instruction C to Schedule 13D of the Exchange Act, information with respect
to Bridge Partners LLC, the general partner of Bridge Partners L.P., is set
forth below.
PAGE 24
<PAGE>
Bridge Partners LLC
Bridge Partners LLC is Texas limited liability company, the principal
business of which is serving as the sole general partner of various limited
partnerships whose principal business is to serve as partners in various
investment partnerships. The principal business address of Bridge Partners LLC,
which also serves as its principal office, is 200 Crescent Court, Suite 1600,
Dallas, Texas 75201-6950. Pursuant to Instruction C to Schedule 13D of the
Exchange Act, information with respect to Mr. Thomas O. Hicks, the sole member
of Bridge Partners LLC, is set forth above.
(d) None of the entities or persons identified in this Item 2 has,
during the last five years, been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors).
(e) None of the entities or persons identified in this Item 2 has,
during the last five years, been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such proceeding
was or is subject to a judgment, decree or final order enjoining future
violations of, or prohibiting or mandating activities subject to, federal or
state securities laws or finding any violations with respect to such laws.
(f) Mr. Hicks is a United States citizen.
Item 3. Source and Amount of Funds or Other Consideration.
As more fully described in Item 6 below, on March 16, 2000, Bridge LLC,
Qualified LLC, Private LLC, PG-IV LLC, 4-SBS LLC and 4-EQ LLC each purchased
from the Issuer the number of shares of Preferred Stock and the number of
Warrants set forth opposite their respective names below at the purchase price
set forth opposite their respective names below.
<TABLE>
<CAPTION>
Number of Number of Number of Number of
---------------- ---------------------- ---------------------- ----------------------
Name of Entity Shares Purchased A-1 Warrants Purchased A-2 Warrants Purchased A-3 Warrants Purchased Purchase Price
- --------------- ---------------- ---------------------- ---------------------- ---------------------- ---------------
<S> <C> <C> <C> <C> <C>
Bridge LLC. . . 125,000 937,500 937,500 937,500 $ 125,000,000
---------------- ---------------------- ---------------------- ---------------------- ---------------
Qualified LLC . 113,743 853,077 853,077 853,077 113,743,000
---------------- ---------------------- ---------------------- ---------------------- ---------------
Private LLC . . 806 6,043 6,043 6,043 806,000
---------------- ---------------------- ---------------------- ---------------------- ---------------
PG-IV LLC . . . 6,056 45,416 45,416 45,416 6,056,000
---------------- ---------------------- ---------------------- ---------------------- ---------------
4-SBS LLC . . . 2,724 20,429 20,429 20,429 2,724,000
---------------- ---------------------- ---------------------- ---------------------- ---------------
4-EQ LLC. . . . 1,671 12,535 12,535 12,535 1,671,000
- --------------- ---------------- ---------------------- ---------------------- ---------------------- ---------------
</TABLE>
Qualified LLC obtained funds for the purchase price of its shares of
Preferred Stock and its Warrants from capital contributions provided by Equity
L.P.; Equity L.P. obtained such funds from capital contributions provided by its
limited partners and HM4/GP Partners; HM4/GP Partners obtained such funds from
capital contributions provided by its limited partners and Hicks GP Partners;
and Hicks GP Partners obtained such funds from capital contributions provided by
its limited partners and Fund IV LLC. Fund IV LLC obtained such funds from
capital contributions provided by Mr. Thomas O. Hicks, who obtained such funds
from personal funds.
Private LLC obtained funds for the purchase price of its shares of
Preferred Stock and its Warrants from capital contributions provided by Private
L.P.; Private L.P. obtained such funds from capital contributions provided by
its limited partners and HM4/GP Partners; HM4/GP Partners obtained such funds
from capital contributions provided by its limited partners and Hicks GP
Partners; and Hicks GP Partners obtained such funds from capital contributions
provided by its limited partners and Fund IV LLC. Fund IV LLC obtained such
PAGE 25
<PAGE>
funds from capital contributions provided by Mr. Thomas O. Hicks, who obtained
such funds from personal funds.
4-EQ LLC obtained funds for the purchase price of its shares of Preferred
Stock and its Warrants from capital contributions provided by 4-EQ L.P.; 4-EQ
L.P. obtained such funds from capital contributions provided by its limited
partners and Hicks GP Partners, and Hicks GP Partners obtained such funds from
capital contributions provided by its limited partners and Fund IV LLC. Fund IV
LLC obtained such funds from capital contributions provided by Mr. Thomas O.
Hicks, who obtained such funds from personal funds.
4-SBS LLC obtained funds for the purchase price of its shares of Preferred
Stock and its Warrants from capital contributions provided by 4-SBS L.P.;
4-SBS L.P. obtained such funds from capital contributions provided by its
limited partners and Hicks GP Partners, and Hicks GP Partners obtained such
funds from capital contributions provided by its limited partners and Fund IV
LLC. Fund IV LLC obtained such funds from capital contributions provided by Mr.
Thomas O. Hicks, who obtained such funds from personal funds.
PG-IV LLC obtained funds for the purchase price of its shares of Preferred
Stock and its Warrants from capital contributions provided by PG-IV C.V.; PG-IV
C.V. obtained such funds from capital contributions provided by its limited
partners and HM Equity C.V.; HM Equity C.V. obtained such funds from capital
contributions provided by its limited partners and G.P. Cayman L.P.; and G.P.
Cayman L.P. obtained such funds from capital contributions provided by its
limited partners and Fund IV Cayman LLC. Fund IV Cayman LLC obtained such funds
from capital contributions provided by Mr. Thomas O. Hicks, who obtained such
funds from personal funds.
Bridge LLC obtained funds for the purchase price of its shares of Preferred
Stock and its Warrants from capital contributions provided by Bridge Partners
L.P.; Bridge Partners L.P. obtained $ 3,779,757.50 of such funds from capital
contributions provided by its general partner, Bridge Partners LLC, and its
limited partners, and it obtained the remainder of the funds, $124,288,319.93,
from borrowing under a credit agreement dated December 28, 1999, among HMTF
Partners, L.P. and HM/Europe Coinvestors, C.V., as Initial Borrowers, and any
Future Borrowers from time to time parties thereto, the Lenders from time to
time parties thereto, the Issuing Bank, The Chase Manhattan Bank, as
Administrative Agent, and Bank of America, N.A., as Syndication Agent ("Credit
Agreement"). Such funds include amounts allocated to fees and expenses.
Bridge Partners L.P. intends to repay the Credit Agreement either with funds
drawn under a new credit facility or with funds contributed by affiliates of
Hicks, Muse. The terms of the line of credit facility are set forth in the
Credit Agreement, a copy of which is filed as Exhibit 10.7 hereto, and is
incorporated by reference. Bridge Partners LLC obtained the funds it
contributed to Bridge Partners L.P. from capital contributions provided by Mr.
Thomas O. Hicks, who obtained such funds from personal funds.
Item 4. Purpose of the Transaction.
The Reporting Persons consummated the transactions described herein in
order to acquire an interest in the Issuer for investment purposes. The
Reporting Persons intend to review continuously their position in the Issuer.
Depending upon future evaluations of the business prospects of the Issuer and
upon other developments, including, but not limited to, general economic and
business conditions and stock market conditions, the Reporting Persons may
retain or from time to time increase their holdings or dispose of all or a
portion of their holdings, subject to any applicable legal and contractual
restrictions on their ability to do so.
In addition, the matters set forth in Item 6 below are incorporated in this
Item 4 by reference as if fully set forth herein.
Except as set forth in this Item 4 (including the matters described in Item
6 below which are incorporated in this Item 4 by reference), the Reporting
Persons have no present plans or proposals that relate to or that would result
in any of the actions specified in clauses (a) through (j) of Item 4 of Schedule
13D under the Exchange Act.
Item 5. Interest in Securities of the Issuer.
(a) (1) Qualified LLC is the record and beneficial owner of 113,743
shares of Preferred Stock, 853,077 A-1 Warrants, 853,077 A-2 Warrants and
853,077 A-3 Warrants. Assuming conversion of all such shares of Preferred Stock
and exercise of all such Warrants, Qualified LLC is the beneficial owner of
5,592,377 shares of Common Stock, which, based on calculations made in
accordance with Rule 13d-3 of the Exchange Act and, as at December 31, 1999,
there being 78,296,488 shares of Common Stock outstanding, represents
approximately 6.67% of the outstanding shares of Common Stock.
(2) Assuming conversion of all 113,743 shares of Preferred Stock and
exercise of all 2,559,231 Warrants owned of record by Qualified LLC, Equity
L.P., in its capacity as sole member of Qualified LLC, may, pursuant to Rule
13d-3 of the Exchange Act, be deemed to be the beneficial owner of 5,592,377
PAGE 26
<PAGE>
shares of Common Stock, which, based on calculations made in accordance with
Rule 13d-3 of the Exchange Act and, as at December 31, 1999, there being
78,296,488 shares of Common Stock outstanding, represents approximately 6.67% of
the outstanding shares of Common Stock.
(3) Private LLC is the record and beneficial owner of 806 shares of
Preferred Stock, 6,043 A-1 Warrants, 6,043 A-2 Warrants and 6,043 A-3 Warrants.
Assuming conversion of all such shares of Preferred Stock and assuming exercise
of all such Warrants, Private LLC is the beneficial owner of 39,622 shares of
Common Stock, which, based on calculations made in accordance with Rule 13d-3 of
the Exchange Act and, as at December 31, 1999, there being 78,296,488 shares of
Common Stock outstanding, represents approximately 0.05% of the outstanding
shares of Common Stock.
(4) Assuming conversion of all 806 shares of Preferred Stock and
exercise of all 18,129 Warrants owned of record by Private LLC, Private L.P., in
its capacity as sole member of Private LLC, may, pursuant to Rule 13d-3 of the
Exchange Act, be deemed to be the beneficial owner of 39,622 shares of Common
Stock, which, based on calculations made in accordance with Rule 13d-3 of the
Exchange Act and, as at December 31, 1999, there being 78,296,488 shares of
Common Stock outstanding, represents approximately 0.05% of the outstanding
shares of Common Stock.
(5) Assuming conversion of all 114,549 shares of Preferred Stock and
exercise of all 2,577,360 Warrants owned of record by Qualified LLC and Private
LLC, HM4/GP Partners, in its capacity as the sole general partner of each of
Equity L.P. and Private L.P., may, pursuant to Rule 13d-3 of the Exchange Act,
be deemed to be the beneficial owner of 5,632,000 shares of Common Stock, which,
based on calculations made in accordance with Rule 13d-3 of the Exchange Act
and, as at December 31, 1999, there being 78,296,488 shares of Common Stock
outstanding, represents approximately 6.71% of the outstanding shares of Common
Stock.
(6) 4-EQ LLC is the record and beneficial owner of 1,671 shares of
Preferred Stock, 12,535 A-1 Warrants, 12,535 A-2 Warrants and 12,535 A-3
Warrants. Assuming conversion of all such shares of Preferred Stock and
assuming exercise of all such Warrants, 4-EQ LLC is the beneficial owner of
82,165 shares of Common Stock, which, based on calculations made in accordance
with Rule 13d-3 of the Exchange Act and, as at December 31, 1999, there being
78,296,488 shares of Common Stock outstanding, represents approximately 0.10% of
the outstanding shares of Common Stock.
(7) Assuming conversion of all 1,671 shares of Preferred Stock and
exercise of all 37,605 Warrants owned of record by 4-EQ LLC, 4-EQ L.P., in its
capacity as sole member of 4-EQ LLC, may, pursuant to Rule 13d-3 of the Exchange
Act, be deemed to be the beneficial owner of 82,165 shares of Common Stock,
which, based on calculations made in accordance with Rule 13d-3 of the Exchange
Act and, as at December 31, 1999, there being 78,296,488 shares of Common Stock
outstanding, represents approximately 0.10% of the outstanding shares of Common
Stock.
(8) 4-SBS LLC is the record and beneficial owner of 2,724 shares of
Preferred Stock, 20,429 A-1 Warrants, 20,429 A-2 Warrants and 20,429 A-3
Warrants. Assuming conversion of all such shares of Preferred Stock and
exercise of all such Warrants, 4-SBS LLC is the beneficial owner of 133,927
shares of Common Stock, which, based on calculations made in accordance with
Rule 13d-3 of the Exchange Act and, as at December 31, 1999, there being
78,296,488 shares of Common Stock outstanding, represents approximately 0.17% of
the outstanding shares of Common Stock.
(9) Assuming conversion of all 2,724 shares of Preferred Stock and
exercise of all 61,287 Warrants owned of record by 4-SBS LLC, 4-SBS L.P., in its
capacity as sole member of 4-SBS LLC, may, pursuant to Rule 13d-3 of the
Exchange Act, be deemed to be the beneficial owner of 133,927 shares of Common
Stock, which, based on calculations made in accordance with Rule 13d-3 of the
Exchange Act and, as at December 31, 1999, there being 78,296,488 shares of
Common Stock outstanding, represents approximately 0.17% of the outstanding
shares of Common Stock.
(10) Assuming conversion of all 118,944 shares of Preferred Stock and
exercise of all 2,676,252 Warrants owned of record by Qualified LLC, Private
LLC, 4-EQ LLC and 4-SBS LLC, Hicks GP Partners, in its capacity as sole general
partner of each of HM4/GP Partners, 4-EQ L.P. and 4-SBS L.P., may, pursuant to
Rule 13d-3 of the Exchange Act, be deemed to be the beneficial owner of
5,848,092 shares of Common Stock, which, based on calculations made in
accordance with Rule 13d-3 of the Exchange Act and, as at December 31, 1999,
there being 78,296,488 shares of Common Stock outstanding, represents
approximately 6.95% of the outstanding shares of Common Stock.
(11) Assuming conversion of all 118,944 shares of Preferred Stock and
exercise of all 2,676,252 Warrants owned of record by Qualified LLC, Private
LLC, 4-EQ LLC and 4-SBS LLC, Fund IV LLC, in its capacity as the sole general
partner of Hicks GP Partners, may, pursuant to Rule 13d-3 of the Exchange Act,
be deemed to be the beneficial owner of 5,848,092 shares of Common Stock, which,
PAGE 27
<PAGE>
based on calculations made in accordance with Rule 13d-3 of the Exchange Act
and, as at December 31, 1999, there being 78,296,488 shares of Common Stock
outstanding, represents approximately 6.95% of the outstanding shares of Common
Stock.
(12) PG-IV LLC is the record and beneficial owner of 6,056 shares of
Preferred Stock, 45,416 A-1 Warrants, 45,416 A-2 Warrants and 45,416 A-3
Warrants. Assuming conversion of all such shares of Preferred Stock and
exercise of all such Warrants, PG-IV LLC is the beneficial owner of 297,741
shares of Common Stock, which, based on calculations made in accordance with
Rule 13d-3 of the Exchange Act and, as at December 31, 1999, there being
78,296,488 shares of Common Stock outstanding, represents approximately 0.38% of
the outstanding shares of Common Stock.
(13) Assuming conversion of all 6,056 shares of Preferred Stock and
exercise of all 136,248 Warrants owned of record by PG-IV LLC, PG-IV C.V., in
its capacity as sole member of PG-IV LLC, may, pursuant to Rule 13d-3 of the
Exchange Act, be deemed to be the beneficial owner of 297,741 shares of Common
Stock, which, based on calculations made in accordance with Rule 13d-3 of the
Exchange Act and, as at December 31, 1999, there being 78,296,488 shares of
Common Stock outstanding, represents approximately 0.38% of the outstanding
shares of Common Stock.
(14) Assuming conversion of all 6,056 shares of Preferred Stock and
exercise of all 136,248 Warrants owned of record by PG-IV LLC, HM Equity C.V.,
in its capacity as sole general partner of PG-IV C.V., may, pursuant to Rule
13d-3 of the Exchange Act, be deemed to be the beneficial owner of 297,741
shares of Common Stock, which, based on calculations made in accordance with
Rule 13d-3 of the Exchange Act and, as at December 31, 1999, there being
78,296,488 shares of Common Stock outstanding, represents approximately 0.38% of
the outstanding shares of Common Stock.
(15) Assuming conversion of all 6,056 shares of Preferred Stock and
exercise of all 136,248 Warrants owned of record by PG-IV LLC, GP Cayman L.P.,
in its capacity as sole general partner of HM Equity C.V., may, pursuant to Rule
13d-3 of the Exchange Act, be deemed to be the beneficial owner of 297,741
shares of Common Stock, which, based on calculations made in accordance with
Rule 13d-3 of the Exchange Act and, as at December 31, 1999, there being
78,296,488 shares of Common Stock outstanding, represents approximately 0.38% of
the outstanding shares of Common Stock.
(16) Assuming conversion of all 6,056 shares of Preferred Stock and
exercise of all 136,248 Warrants owned of record by PG-IV LLC, Fund IV Cayman
LLC, in its capacity as the sole general partner of GP Cayman L.P. may, pursuant
to Rule 13d-3 of the Exchange Act, be deemed to be the beneficial owner of
297,741 shares of Common Stock, which, based on calculations made in accordance
with Rule 13d-3 of the Exchange Act and, as at December 31, 1999, there being
78,296,488 shares of Common Stock outstanding, represents approximately 0.38% of
the outstanding shares of Common Stock.
(17) Bridge LLC is the record and beneficial owner of 125,000 shares of
Preferred Stock, 937,500 A-1 Warrants, 937,500 A-2 Warrants and 937,500 A-3
Warrants. Assuming conversion of all such shares and exercise of all such
Warrants, Bridge LLC is the beneficial owner of 6,145,833 shares of Common
Stock, which, based on calculations made in accordance with Rule 13d-3 of the
Exchange Act and, as at December 31, 1999, there being 78,296,488 shares of
Common Stock outstanding, represents approximately 7.28% of the outstanding
shares of Common Stock.
(18) Assuming conversion of all 125,000 shares of Preferred Stock and
exercise of all 2,812,500 Warrants owned of record by Bridge LLC, Bridge
Partners L.P., in its capacity as sole member of Bridge LLC, may, pursuant to
Rule 13d-3 of the Exchange Act, be deemed to be the beneficial owner of
6,145,833 shares of Common Stock, which, based on calculations made in
accordance with Rule 13d-3 of the Exchange Act and, as at December 31, 1999,
there being 78,296,488 shares of Common Stock outstanding, represents
approximately 7.28% of the outstanding shares of Common Stock.
(19) Assuming conversion of all 125,000 shares of Preferred Stock and
exercise of all 2,812,500 Warrants owned of record by Bridge LLC, Bridge
Partners LLC, in its capacity as general partner of Bridge Partners L.P., may,
pursuant to Rule 13d-3 of the Exchange Act, be deemed to be the beneficial owner
of 6,145,833 shares of Common Stock, which, based on calculations made in
accordance with Rule 13d-3 of the Exchange Act and, as at December 31, 1999,
there being 78,296,488 shares of Common Stock outstanding, represents
approximately 7.28% of the outstanding shares of Common Stock.
(20) Assuming conversion of all 250,000 shares of Preferred Stock and
exercise of all 5,625,000 Warrants owned of record by Qualified LLC, Private
LLC, 4-EQ LLC, 4-SBS LLC, PG-IV LLC and Bridge LLC, Mr. Thomas O. Hicks, in his
capacity as sole member of Fund IV LLC, Fund IV Cayman LLC and Bridge Partners
LLC, may, pursuant to Rule 13d-3 of the Exchange Act, be deemed to be the
beneficial owner of 12,291,666 shares of Common Stock, which, based on
calculations made in accordance with Rule 13d-3 of the Exchange Act and, as at
PAGE 28
<PAGE>
December 31, 1999, there being 78,296,488 shares of Common Stock outstanding,
represents approximately 13.57% of the outstanding shares of Common Stock.
The Reporting Persons expressly disclaim (a) the existence of any group and
(b) beneficial ownership with respect to any shares other than the shares owned
of record by such Reporting Person.
(b) The information set forth in Items 7 through 11 of the cover pages
hereto is incorporated herein by reference.
(c) Except as set forth herein, none of the persons named in response
to paragraph (a) has effected any transactions in shares of Common Stock during
the past 60 days.
(d) The right to receive dividends on, and proceeds from the sale of,
the shares of Common Stock which may be beneficially owned by the persons
described in (a) and (b) above is governed by the limited liability company
agreements and limited partnership agreements of each such entity, and such
dividends or proceeds may be distributed with respect to numerous member
interests and general and limited partnership interests.
Item 6. Contracts, Arrangements, Understandings or Relationships with Respect
to Securities of the Issuer.
The matters set forth in Item 2 are incorporated in this Item 6 by
reference as if fully set forth herein.
Securities Purchase Agreement
Pursuant to the Preferred Stock and Warrant Purchase Agreement (the
"Securities Purchase Agreement"), dated as of February 6, 2000 between the
Issuer and Bridge LLC, the Issuer agreed to sell to Bridge LLC, and Bridge LLC
agreed to purchase from the Issuer, 250,000 shares of Preferred Stock, 1,875,000
A-1 Warrants, 1,875,000 A-2 Warrants and 1,875,000 A-3 Warrants for a purchase
price of $250,000,000. In addition, the Issuer agreed to form a subsidiary for
the purpose of entering business relationships in Latin America and to grant to
Bridge LLC and the Assignees (as defined below) a 25% equity ownership interest
in that subsidiary.
Prior to the issuance of the shares of Preferred Stock at the Closing (as
defined below), pursuant to an Assignment of Rights Under Preferred Stock and
Warrant Purchase Agreement dated February 16, 2000 (the "Assignment Agreement"),
Bridge LLC assigned 50% of its rights, titles, interests and obligations in, to
and under the Securities Purchase Agreement to Qualified LLC, Private LLC, 4-EQ
LLC, 4-SBS LLC and PG-IV LLC (the "Assignees").
On March 16, 2000 at the closing held pursuant to the Purchase Agreement
(the "Closing"), the Issuer sold to each of the persons listed below (the "HMTF
Holders") the number of shares of Preferred Stock and the number of Warrants set
forth opposite each person's name below in exchange for the purchase price set
forth opposite such person's name below.
<TABLE>
<CAPTION>
Number of Number of Number of Number of
---------------- ---------------------- ---------------------- ----------------------
Name of Entity Shares Purchased A-1 Warrants Purchased A-2 Warrants Purchased A-3 Warrants Purchased Purchase Price
- --------------- ---------------- ---------------------- ---------------------- ---------------------- ---------------
<S> <C> <C> <C> <C> <C>
Bridge LLC. . . 125,000 937,500 937,500 937,500 $ 125,000,000
---------------- ---------------------- ---------------------- ---------------------- ---------------
Qualified LLC . 113,743 853,077 853,077 853,077 113,743,000
---------------- ---------------------- ---------------------- ---------------------- ---------------
Private LLC . . 806 6,043 6,043 6,043 806,000
---------------- ---------------------- ---------------------- ---------------------- ---------------
PG-IV LLC . . . 6,056 45,416 45,416 45,416 6,056,000
---------------- ---------------------- ---------------------- ---------------------- ---------------
4-SBS LLC . . . 2,724 20,429 20,429 20,429 2,724,000
---------------- ---------------------- ---------------------- ---------------------- ---------------
4-EQ LLC. . . . 1,671 12,535 12,535 12,535 1,671,000
- --------------- ---------------- ---------------------- ---------------------- ---------------------- ---------------
</TABLE>
PAGE 29
<PAGE>
The foregoing description of the Securities Purchase Agreement is not, and
does not purport to be, complete and is qualified in its entirety by reference
to the Securities Purchase Agreement, a copy of which is filed herewith as
Exhibit 10.1 and is incorporated herein by reference.
Registration Rights
At Closing, the Issuer and the holders of Preferred Stock entered into a
Registration Rights Agreement (the "Registration Rights Agreement"), pursuant to
which the Issuer has agreed to effect four "demand" registrations at the request
of the holders of a majority of the Registrable Securities held by the HMTF
Holders and any direct or indirect transferee of any Registrable Securities held
by the HMTF Holders, provided that each such demand registration must be in
respect of Registrable Securities (as defined below) with a fair market value of
at least $50,000,000 and provided that certain other restrictions are met. In
addition, the Purchasers have certain piggyback registration rights in
connection with registrations of the Issuer's securities under the Securities
Act of 1933 (the "Securities Act") as well as rights to request a shelf
registration of portions of the Registrable Securities.
"Registrable Securities" means (a) the Preferred Stock purchased pursuant
to the Securities Purchase Agreement, plus any additional shares of Preferred
Stock issued in respect thereof in connection with any stock split, stock
dividend or similar event with respect to the Preferred Stock, (b) the Common
Stock issued upon conversion of such Preferred Stock or upon exercise of the
Warrants, plus any additional shares of Common Stock issued in respect thereof
in connection with any stock split, stock dividend or similar event with respect
to the Common Stock and (c) any securities that the Issuer or any successor
entity into which such Common Stock or such Preferred Stock may be converted or
changed.
The foregoing description of the Registration Rights Agreement is not, and
does not purport to be, complete and is qualified in its entirety by reference
to the Registration Rights Agreement, a copy of which is filed herewith as
Exhibit 10.2 and is incorporated herein by reference.
Certificate of Designation
As contemplated by the Securities Purchase Agreement, the Board of Directors of
the Issuer approved and adopted the Certificate of Designation of the Powers,
Preferences and Relative, Participating, Optional and Other Special Rights of
8 1/4% Series E Convertible Preferred Stock and Qualifications, Limitations and
Restrictions Thereof (the "Certificate of Designation") to create the series of
Preferred Stock. Under the Certificate of Designation, the shares of Preferred
Stock will, with respect to dividend rights and rights on liquidation,
winding-up and dissolution, rank (i) senior to all shares of Common Stock and to
each other class of capital stock or preferred stock of the Issuer, the terms of
which do not expressly provide that it ranks senior to or on a parity with the
shares of the Preferred Stock as to dividend rights and rights on liquidation,
winding-up and dissolution of the Issuer; (ii) on a parity with additional
shares of Preferred Stock issued by the Issuer and each other class of capital
stock or series of preferred stock of the Issuer issued by Issuer, the terms of
which expressly provide that such class or series will rank on a parity with the
shares of the Preferred Stock as to dividend rights and rights on liquidation,
winding-up and dissolution, if the Issuer, in issuing the shares, complies with
applicable provisions in the Certificate of Designation; and (iii) junior to
each class of capital stock or series of preferred stock of the Issuer issued by
the Issuer, the terms of which expressly provide that such class or series will
rank senior to the shares of Preferred Stock as to dividend rights and rights
upon liquidation, winding-up and dissolution, if the Issuer, in issuing the
shares, complies with applicable provisions in the Certificate of Designation.
The holders of the shares of Preferred Stock will be entitled to receive
with respect to each share of Preferred Stock, out of funds legally available
for the payment of dividends, dividends at a rate per annum of 8 1/4% of the
then-effective Liquidation Preference (as defined below). Such dividends shall
be cumulative from the date of issuance of the Preferred Stock and shall be
payable quarterly in arrears. On each Dividend Payment Date, commencing the
March 31, 2000 Dividend Payment Date, to and including the March 31, 2005
Dividend Payment Date, accrued dividends on a share of Preferred Stock for the
preceding Dividend Period shall be added cumulatively to and thereafter remain a
part of the Liquidation Preference of such share. Thereafter, accrued dividends
shall be payable quarterly on each Dividend Payment Date, commencing on June 30,
2005, to the holders of record of Preferred Stock as of the close of business on
the applicable Dividend Record Date. Accrued Dividends that are not paid in
full in cash on any Dividend Payment Date (whether or not declared and whether
or not there are sufficient funds legally available for the payment thereof)
shall be added cumulatively to the Liquidation Preference on the applicable
Dividend Payment Date and thereafter remain a part thereof.
The holders of shares of Preferred Stock will have the right, generally, at
any time, to convert any or all their shares of Preferred Stock into a number of
PAGE 30
<PAGE>
fully paid and nonassessable shares of Common Stock equal to the then effective
Liquidation Preference thereof plus accrued and unpaid dividends to the date of
conversion divided by the Conversion Price in effect at the time of conversion.
The initial Conversion Price is $37.50 per share.
The shares of Preferred Stock may be redeemed at any time commencing on or
after March 31, 2005 (or earlier, if, under the Certificate of Designation,
certain conditions relating to a Change of Control (as defined in the
Certificate of Designation) shall have occurred), in whole or from time to time
in part, at the election of the Issuer, at a redemption price payable in cash
equal to 100% (or, under certain conditions described below relating to a Change
of Control, 101%) of the then effective Liquidation Preference plus accrued and
unpaid dividends from the last dividend payment date to the date fixed for
redemption. Shares of Preferred Stock (if not earlier redeemed or converted)
shall be mandatorily redeemed by the Issuer on March 31, 2015, at a redemption
price per share in cash equal to the then effective Liquidation Preference, plus
accrued and unpaid dividends thereon from the last Dividend Payment Date to the
date of mandatory redemption.
Upon occurrence of a "Change of Control" (as defined in the Certificate of
Designation), the holders of Preferred Stock shall be entitled to receive, if
the change of control occurs prior to March 31, 2005, the Special Dividend (as
defined in the Certificate of Designation) and shall have the right to either
(a) continue to hold their shares of Preferred Stock (or the shares of preferred
stock issued in respect thereof pursuant to consolidation, merger, conveyance or
transfer as provided in the Certificate of Designation (the "Hold Option")), (b)
convert their shares of Preferred Stock (including shares received as a Special
Dividend) or (c) elect to have their shares of Preferred Stock remarketed as
described below (the "Remarketing Option").
If the Remarketing Option is selected with respect to a share of Preferred
Stock, such holder shall be deemed to have elected to waive such holder's right
to convert such share for a specified period of time and the Issuer shall
thereafter have the option either to (a) have such share redeemed in accordance
with the provisions of optional redemption contained in the Certificate of
Designation, or (b) remarket such share for the account of such holder and, if
the net proceeds to such holder of such remarketing are less than an amount
equal to 101% of the Liquidation Preference (after giving effect to the Special
Dividend (if applicable)) of such share plus accrued and unpaid dividends
thereon from the last dividend payment date to the date payment is received by
such holder in respect of such share, the Issuer shall issue to and sell for the
account of such holder a sufficient number of shares of Common Stock to make up
for such shortfall. If the Issuer does not, within 180 days after the date of
the Issuer's giving written notice of its election of (a) or (b) above, settle
the claim with the holder pursuant to (a) or (b) above, then the holder shall
have the option, for a period of 10 business days, of electing the Hold Option
or electing to convert such holder's share of Preferred Stock.
The holders of the shares of Preferred Stock will be entitled to vote on
all matters that the holders of the Issuer's Common Stock are entitled to vote
upon. In exercising these voting rights, each share of Preferred Stock shall be
entitled to vote on an as-converted basis with the holders of the Issuer's
Common Stock. The approval of the holders of at least a majority of the
then-outstanding shares of Preferred Stock, voting as one class, will be
required for the Issuer to take certain actions. In addition, for so long as
members of the HMTF Group own any combination of the shares of Preferred Stock
issued to the HMTF Holders as of the Closing Date and shares of Common Stock
issued upon conversion of such Preferred Stock, which, taken together, would
represent (if all such shares of Preferred Stock were converted) an amount of
Common Stock issuable upon conversion of 40% or more of such Preferred Stock,
the holders of the HMTF Shares, voting as a class, may elect one director to
serve on the board of directors of the Issuer. Pursuant to this right, the HMTF
Holders expect to elect Michael Levitt for election to the board of directors of
the Issuer. The Stock Purchase Agreement contains a parallel provision for the
election of a director that is inoperative for so long as the above described
provision is in effect.
"Liquidation Preference" means an amount equal to $1,000 per share of
Preferred Stock, subject to change in accordance with the provisions of the
Certificate of Designation.
The foregoing description is not, and does not purport to be, complete and
is qualified in its entirety by reference to the Certificate of Designation, a
copy of which is filed as Exhibit 10.3 and is incorporated by reference.
Common Stock Warrant Certificate
As contemplated by the Securities Purchase Agreement, the Board of
Directors of the Issuer approved and adopted the Common Stock Warrant
Certificates for the A-1 Warrants (the "A-1 Warrant Certificates"), the A-2
Warrants (the "A-2 Warrant Certificates") and the A-3 Warrants (the "A-3 Warrant
Certificates"). The A-1 Warrants entitle the HMTF Holders or their permitted
assigns to purchase from the Issuer fully paid and nonassessable shares of
Common Stock at an exercise price of $45.00 per share, as adjusted from time to
PAGE 31
<PAGE>
time pursuant to the terms of the A-1 Warrant Certificate. The A-1 Warrants are
void after March 16, 2003. The A-2 Warrants entitle the HMTF Holders or their
permitted assigns to purchase from the Issuer fully paid and nonassessable
shares of Common Stock at an exercise price of $50.00 per share, as adjusted
from time to time pursuant to the terms of the A-2 Warrant Certificate. The A-2
Warrants are void after March 16, 2005. The A-3 Warrants entitle the HMTF
Holders or their permitted assigns to purchase from the Issuer fully paid and
nonassessable shares of Common Stock at an exercise price of $55.00 per share,
as adjusted from time to time pursuant to the terms of the A-3 Warrant
Certificate. The A-3 Warrants are void after March 16, 2007.
The foregoing description of the A-1 Warrant Certificate, A-2 Warrant
Certificate and A-3 Warrant Certificate is not, and does not purport to be,
complete and is qualified in its entirety by reference to the Form of Common
Stock Warrant A-1, Form of Common Stock Warrant A-2 and Form of Common Stock
Warrant A-3, copies of which are filed herewith as Exhibit 10.4, Exhibit 10.5
and Exhibit 10.6, respectively, and are incorporated herein by reference.
Item 7. Material to be Filed as Exhibits.
Exhibit 10.1: Preferred Stock and Warrant Purchase Agreement, dated as of
February 6, 2000, between the Issuer and Bridge LLC.
Exhibit 10.2: Registration Rights Agreement, dated as of March 16, 2000,
between the Issuer and Bridge LLC, Qualified LLC, Private
LLC,PG-IV LLC, 4-SBS LLC and 4-EQ LLC.
Exhibit 10.3: Certificate of Designation of the Powers, Preferences and
Relative, Participating, Optional and Other Special Rights of
the 8 1/4% Series E Convertible Preferred Stock and
Qualifications, Limitations and Restrictions Thereof.
Exhibit 10.4: Form of Common Stock Warrant No. A-1, dated as of March 16,
2000.
Exhibit 10.5: Form of Common Stock Warrant No. A-2 dated as of March 16,
2000.
Exhibit 10.6: Form of Common Stock Warrant No. A-3 dated as of March 16,
2000.
Exhibit 10.7: Credit Agreement, dated December 28, 1999, by and among HMTF
Bridge Partners, L.P., and HM/Europe Coinvestors, C.V. as
Initial Borrowers, the Lenders named therein, the Issuing
Bank, The Chase Manhattan Bank, as Administrative Agent,
and Bank of America, N.A., as Syndication Agent.
Exhibit 99.1: Joint Filing Agreement among the parties regarding filing of
Schedule 13D.
PAGE 32
<PAGE>
After reasonable inquiry and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
March 27, 2000 *
----------------------
Name: Thomas O. Hicks
*By: /s/ David W. Knickel
--------------------------
Name: David W. Knickel
Attorney-in-Fact
S1
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
March 27, 2000 HM4 RHYTHMS QUALIFIED FUND, LLC
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
S2
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
March 27, 2000 HMTF EQUITY FUND IV (1999), L.P.
By: HM4/GP (1999) Partners, L.P., its General
Partner
By: Hicks, Muse GP (1999) Partners IV, L.P.,
its General Partner
By: Hicks, Muse (1999) Fund IV, LLC, its
General Partner
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
S3
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
March 27, 2000 HM4 RHYTHMS PRIVATE FUND, LLC
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
S4
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
March 27, 2000 HMTF PRIVATE EQUITY FUND IV (1999), L.P.
By: HM4/GP (1999) Partners, L.P., its General
Partner
By: Hicks, Muse GP (1999) Partners IV, L.P.,
its General Partner
By: Hicks, Muse (1999) Fund IV, LLC, its
General Partner
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
S5
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
March 27, 2000 HM4/GP (1999) PARTNERS, L.P.
By: Hicks, Muse GP (1999) Partners IV, L.P.,
its General Partner
By: Hicks, Muse (1999) Fund IV, LLC, its
General Partner
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
S6
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
March 27, 2000 HM 4-EQ RHYTHMS COINVESTORS, LLC
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
S7
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
March 27, 2000 HM 4-EQ (1999) COINVESTORS, L.P.
By: Hicks, Muse GP (1999) Partners IV, L.P.,
its General Partner
By: Hicks, Muse (1999) Fund IV, LLC, its
General Partner
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
S8
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
March 27, 2000 HM 4-SBS RHYTHMS COINVESTORS, LLC
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
S9
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
March 27, 2000 HM 4-SBS (1999) COINVESTORS, L.P.
By: Hicks, Muse GP (1999) Partners IV, L.P.,
its General Partner
By: Hicks, Muse (1999) Fund IV, LLC, its
General Partner
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
S10
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
March 27, 2000 HICKS, MUSE GP (1999) PARTNERS IV, L.P.
By: Hicks, Muse (1999) Fund IV, LLC, its
General Partner
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
S11
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
March 27, 2000 HICKS, MUSE (1999) FUND IV, LLC
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
S12
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
March 27, 2000 HM PG-IV RHYTHMS, LLC
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
S13
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
March 27, 2000 HICKS, MUSE PG-IV (1999), C.V.
By: HM Equity Fund IV/GP Partners (1999),
C.V., its General Partner
By: HM GP Partners IV Cayman, L.P., its
General Partner
By: HM Fund IV Cayman LLC, its General Partner
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
S14
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
March 27, 2000 HM EQUITY FUND IV/GP PARTNERS (1999), C.V.
By: HM GP Partners IV Cayman, L.P., its
General Partner
By: HM Fund IV Cayman LLC, its General Partner
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
S15
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
March 27, 2000 HM GP PARTNERS IV CAYMAN, L.P.
By: HM Fund IV Cayman LLC, its General Partner
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
S16
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
March 27, 2000 HM FUND IV CAYMAN LLC
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
S17
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
March 27, 2000 HMTF BRIDGE RHY, LLC
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
S18
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
March 27, 2000 HMTF BRIDGE PARTNERS, L.P.
By: HMTF Bridge Partners, LLC, its General
Partner
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
S19
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, the
undersigned certifies that the information set forth in this statement is true,
complete and correct.
March 27, 2000 HMTF BRIDGE PARTNERS, LLC
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
S20
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT INDEX
<S> <C>
Exhibit 10.1: Preferred Stock and Warrant Purchase Agreement, dated as of February 6, 2000, between the Issuer
and Bridge LLC.*
Exhibit 10.2: Registration Rights Agreement, dated as of March 16, 2000, between the Issuer and Bridge LLC,
Qualified LLC, Private LLC, PG-IV LLC, 4-SBS LLC and 4-EQ LLC.*
Exhibit 10.3: Certificate of Designation of the Powers, Preferences and Relative, Participating, Optional and Other
Special Rights of the 8 1/4% Series E Convertible Preferred Stock and Qualifications,
Limitations and Restrictions Thereof.*
Exhibit 10.4: Form of Common Stock Warrant No. A-1, dated as of March 16, 2000.*
Exhibit 10.5: Form of Common Stock Warrant No. A-2 dated as of March 16, 2000.*
Exhibit 10.6: Form of Common Stock Warrant No. A-3 dated as of March 16, 2000.*
Exhibit 10.7: Credit Agreement, dated December 28, 1999, by and among HMTF Bridge Partners, L.P., and
HM/Europe Coinvestors, C.V. as Initial Borrowers, the Lenders named therein, the Issuing
Bank, The Chase Manhattan Bank, as Administrative Agent, and Bank of America, N.A., as
Syndication Agent.*
Exhibit 99.1: Joint Filing Agreement among the parties regarding filing of Schedule 13D.*
</TABLE>
__________________
* Filed herewith
E-1
<PAGE>
EXHIBIT 10.1
================================================================================
PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
BY AND AMONG
RHYTHMS NETCONNECTIONS INC.
AND
THE PURCHASERS LISTED ON SCHEDULE I HERETO
-----------------------
Dated as of
February 6, 2000
-----------------------
================================================================================
<PAGE>
This STOCK PURCHASE AGREEMENT is dated as of February 6, 2000 (this
"Agreement"), by and among Rhythms NetConnections Inc., a Delaware corporation
(the "Company"), and each of the purchasers listed on Schedule I hereto
(individually, a "Purchaser" and collectively, the "Purchasers").
WHEREAS, the Company proposes, subject to the terms and conditions set
forth herein, to issue and sell to the Purchasers 250,000 Shares of its 8.25%
Series E Convertible Preferred Stock, liquidation preference $1,000 per share,
par value $0.001 per share (the "Series E Preferred Stock");
WHEREAS, the Company proposes, subject to the terms and conditions set
forth herein, to issue and sell to the Purchasers warrants (each a "Warrant" and
together, the "Warrants") to purchase 5,625,000 shares of the Company's Common
Stock (the "Warrant Shares"), par value $0.001 per share, such Warrants to be
allocated and priced as follows: Warrants to purchase 1,875,000 Warrant Shares
at $45.00 per share with a term of three (3) years from the Closing Date
(defined below), Warrants to purchase 1,875,000 Warrant Shares at $50.00 per
share with a term of five (5) years from the Closing Date and Warrants to
purchase 1,875,000 Warrant Shares at $55.00 per share with a term of seven (7)
years from the Closing Date (each price an "Exercise Price" and together, the
"Exercise Prices"), in substantially the form as attached Exhibit A;
WHEREAS, the Company proposes to form a subsidiary for the purpose of
entering into business relationships in Latin America and desires to grant the
HMTF Purchasers (as defined below) an equity ownership interest equal to
twenty-five percent (25%) of the Capital Stock of such Subsidiary (the "Latin
America Subsidiary"),
WHEREAS, subject to the terms and conditions set forth herein, the
Purchasers desire to purchase such Series E Preferred Stock and Warrants from
the Company;
NOW, THEREFORE, the parties hereto, intending to be legally bound, hereby
agree as follows.
ARTICLE I
DEFINITIONS
(a) As used in this Agreement, the following terms shall have the
following meanings:
"Affiliate" means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For the purposes of this definition and the
definition of "HMTF Purchaser", "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 "controlling" and "controlled" have meanings
correlative to the foregoing.
"Applicable Law" means (a) any United States federal, state, local or
foreign law, statute, rule, regulation, order, writ, injunction, judgment,
decree or permit of any Governmental Authority and (b) any rule or listing
requirement of any applicable national stock exchange or listing requirement of
any national stock exchange or Commission recognized trading market on which
securities issued by the Company or any of the Subsidiaries are listed or
quoted.
"Business Day" means any day other than a Saturday, a Sunday, the day after
Thanksgiving or a day when banks in The City of New York are authorized by
Applicable Law to be closed.
"Capital Stock" means (i) with respect to any Person that is a corporation,
any and all shares, interests, participations, rights or other equivalents
(however designated) of corporate stock and (ii) with respect to any other
Person, any and all partnership or other equity interests of such Person.
"Certificate of Designation" means the Certificate of Designation of the
Powers, Preferences and Relative, Participating, Optional and Other Special
Rights and Qualifications, Limitations and Restrictions thereof relating to the
Series E Preferred Stock, in the form attached hereto as Exhibit B.
"Commission" means the United States Securities and Exchange Commission.
"Commission Filings" means all reports, registration statements and other
filings filed by the Company with the Commission (and all notes, exhibits and
schedules thereto and documents incorporated by reference therein).
"Common Stock" means the common stock, par value $0.001 per share, of the
Company.
"Contract" means any contract, lease, loan agreement, mortgage, security
agreement, trust indenture, note, bond, or other agreement (whether written or
oral) or instrument.
PAGE 2
<PAGE>
"Conversion Shares" means the shares of Common Stock issuable upon the
conversion of the Series E Preferred Stock in accordance with the terms of the
Certificate of Designation.
"Equity Documents" means this Agreement, the Registration Rights Agreement,
the Certificate of Designation, the Warrants, the Rights Agreement Amendment and
the Management Rights Agreement.
"Exchange Act" means the Securities Exchange Act of 1934, and the rules and
regulations of the Commission promulgated thereunder.
"GAAP" means United States generally accepted accounting principles,
consistently applied.
"Governmental Authority" means (i) any foreign, Federal, state or local
court or governmental or regulatory agency or authority, (ii) any arbitration
board, tribunal or mediator and (iii) any national stock exchange or Commission
recognized trading market on which securities issued by the Company or any of
the Subsidiaries are listed or quoted.
"HMTF" means Hicks, Muse, Tate & Furst Incorporated, a Texas corporation.
"HMTF Funds" means the funds affiliated with the HMTF Purchaser identified
by the HMTF Purchaser on or prior to the Closing Date.
"HMTF Group" means HMTF and its Affiliates and their respective officers,
directors, partners, members, stockholders and employees (and members of their
respective families and trusts for the primary benefit of such family members),
and HMTF Purchaser and its Affiliates.
"HMTF Purchaser" means any one or more of the following: HMTF Bridge RHY,
LLC and one or more members of the HMTF Group designated by HMTF Bridge RHY, LLC
on or prior to the Closing Date.
"HMTF Shares" means the HMTF Issued Series E Preferred Shares held by
members of the HMTF Group plus the shares of Common Stock issued to and held by
members of the HMTF Group upon conversion of the HMTF Issued Series E Preferred
Shares.
"HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and applicable rules and regulations.
"Lien" means any mortgage, pledge, lien, security interest, claim,
restriction, charge or encumbrance of any kind.
"Material Adverse Effect" means a material adverse effect on the condition
(financial or otherwise), business, assets or results of operations of the
Company and the Subsidiaries, taken as a whole.
"Permitted Transferee" means, with respect to any Purchaser, or any
Permitted Transferee of any Purchaser, (i) any Purchaser Affiliate of such
Purchaser that is not a holder of common stock of the Company on the date hereof
or an affiliate of such holder; and (ii) any person that is a member of the HMTF
Group and any person investing, directly or indirectly, in or in parallel with
any member of the HMTF Group; provided, however, that each Permitted Transferee
must agree in writing pursuant to a Permitted Transferee Agreement, in
accordance with the provisions of Section 6.5, to be bound by the terms, and
subject to the conditions, of this Agreement to the same extent, and in the same
manner, as the transferring Purchaser prior to the transfer of any Securities to
such Permitted Transferee; and provided, further, that the transfer of
Securities from such Purchaser to such Permitted Transferee is in compliance
with all applicable securities laws.
"Person" means any individual, partnership, corporation, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization, government or agency or political subdivision thereof, or other
entity.
"Purchaser Affiliate" means (a) any direct or indirect holder of any equity
interests or securities in any Purchaser (whether limited or general partners,
members, stockholders or otherwise), (b) any Affiliate of any Purchaser or (c)
any director, officer, employee, representative or agent of (i) such Purchaser,
(ii) any Affiliate of such Purchaser or (iii) any holder of equity interests or
securities referred to in clause (a) above.
"Registration Rights Agreement" means the Registration Rights Agreement, to
be dated as of the Closing Date, to be entered into by and among the Company and
the Purchasers, in the form attached hereto as Exhibit C.
"Rights Agreement Amendment" means an amendment dated as of February 6,
2000 to the Company's Rights Agreement dated as of April 2, 1999 between the
Company and American Securities Transfer and Trust, Inc., in substantially the
form attached as Exhibit D.
PAGE 3
<PAGE>
"Securities" means the Shares and the Warrants.
"Securities Act" means the Securities Act of 1933, and the rules and
regulations of the Commission promulgated thereunder.
"Series E Preferred Stock" has the meaning set forth in the first recital
to this Agreement. The Series E Preferred Stock has the designation, powers,
preferences and rights, and qualifications, limitations and restrictions thereof
set forth in the Certificate of Designation.
"Shares" means the shares of Series E Preferred Stock to be issued and sold
by the Company to the Purchasers pursuant to Section 2.1 hereof.
"Subsidiary" means, with respect to any Person (i) a corporation a majority
of whose capital stock with voting power, under ordinary circumstances, to elect
directors is at the time, directly or indirectly, owned by such Person, by a
subsidiary of such Person, or by such Person and one or more subsidiaries of
such Person, (ii) a partnership in which such Person or a subsidiary of such
Person is, at the date of determination, a general partner of such partnership
and has the power to direct the policies and management of such partnership or
(iii) any other Person (other than a corporation) in which such Person, a
subsidiary of such Person or such Person and one or more subsidiaries of such
Person, directly or indirectly, at the date of determination thereof, has (A) at
least a majority ownership interest or (B) the power to elect or direct the
election of the directors or other governing body of such Person.
"Subsidiary" means a subsidiary of the Company.
"Term" shall mean the 15-year period ending on the fifteenth anniversary of
the Issuance, after which the Shares, if not earlier redeemed or converted,
shall be mandatorily redeemed by the Company.
"Transactions" means the transactions contemplated by this Agreement and
the other Equity Documents.
(b) As used in this Agreement, the following terms shall have the
meanings given thereto in the Sections set forth opposite such terms:
Term Section
Agreement Preamble
Closing 2.2
Closing Date 2.2
Company Preamble
DGCL 3.2(b)
HMTF Director 5.2
HMTF Issued Series E Preferred Shares 5.2
Indemnified Party 8.1(c)
Indemnified Person 8.1(b)
Indemnifying Party 8.1(c)
Information 3.7
Issuance 2.1
Losses 8.1(b)
Management Rights Agreement 2.2(c)
Notices 8.2
Permitted Transferee Agreement 6.5
Projections 3.7
Purchaser; Purchasers Preamble
Purchase Price 2.1
Securities Transfer 6.5
Supplying Purchasers 8.18
ARTICLE II
SALE AND PURCHASE
SECTION 2.1.Agreement to Sell and to Purchase; Purchase Price
On the Closing Date, and upon the terms and subject to the conditions set
forth in this Agreement, the Company shall issue and sell to each Purchaser, and
each Purchaser, severally and not jointly, shall purchase and accept from the
Company such number of Shares and Warrants as is set forth opposite such
Purchaser's name on Schedule 1 hereto (the "Issuance"), for a purchase price of
one thousand dollars ($1,000) per Share (the "Purchase Price").
SECTION 2.2.Closing The closing of the Issuance to each Purchaser (the
"Closing") shall take place on a date to be specified by the Company and such
Purchaser, which shall be no later than the later of (A) the 2nd Business Day
after the date as of which all of the conditions set forth in Article VII hereof
shall have been satisfied as to the purchase by the HMTF Purchaser (or, to the
extent permitted, waived by the party or parties entitled to the benefit
thereof) and (B) 15 Business Days after the date hereof or at such other time
and date as the parties hereto shall agree in writing (such date and time, the
"Closing Date"), at the offices of Brobeck, Phleger & Harrison LLP, located at
550 West C Street, San Diego, California 92101 or at such other place as the
PAGE 4
<PAGE>
parties hereto shall agree in writing. At such time as a Purchaser and the
Company shall have satisfied all the conditions set forth in Article VII, if the
Company elects, such Purchaser and the Company shall close separately on such
date.
At the Closing with respect to each Purchaser:
(a) Such Purchaser shall deliver:
(i) against delivery of a certificate or certificates
representing the Shares and the Warrants being purchased by such Purchaser
pursuant to Section 2.1, an amount equal to the aggregate Purchase Price of such
Securities via wire transfer of immediately available funds to such bank
account as the Company shall designate not later than two Business Days
prior to the Closing Date;
(ii) a copy of the Registration Rights Agreement executed by
such Purchaser.
At the Closing, with respect to each Purchaser:
(b) The Company shall deliver to such Purchaser:
(i) against payment of the Purchase Price therefor, a
certificate or certificates representing the Shares and Warrants being
purchased by such Purchaser pursuant to Section 2.1, which shall be in
definitive form and registered in the name of such Purchaser or its nominee
or designee and in a single certificate or in such other denominations as
such Purchaser shall request not later than two Business Days prior to
the Closing Date;
(ii) an opinion of counsel to the Company, dated the Closing
Date, covering such matters as are customarily covered by such opinions, in
form and substance reasonably acceptable to the Purchasers;
(iii) an officer's certificate of the Company as
contemplated by Section 7.2(f);
(iv) a certificate of the secretary of the Company
covering such matters as are customarily covered by such certificates and as to
the book value per share of the Common Stock, in form and substance reasonably
acceptable to the Purchasers;
(v) a long-form good standing certificate of the Company
issued by the Secretary of State of the State of Delaware; and
(vi) a copy of the Registration Rights Agreement
executed by the Company.
(vii) A copy of the Rights Agreement Amendment.
(c) The Company shall deliver to the HMTF Funds a letter in the
form of Exhibit E executed by the Company (the "Management Rights Agreement").
(d) The Company shall deliver to Purchasers (or their designees) a
transaction fee equal to 3.25% of the Purchase Price of the Shares purchased by
Purchasers, in immediately available funds by wire transfer to an account
designated by Purchasers at least two Business Days prior to the Closing Date.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each Purchaser on the date
hereof and on and as of the Closing Date as follows:
SECTION 3.1.Organization and Standing. Each of the Company and the
material domestic Subsidiaries is duly incorporated, validly existing and in
good standing under the laws of its state of incorporation and has all requisite
corporate power and authority to own its properties and assets and to carry on
its business as it is now being conducted and as proposed to be conducted. Each
of the Company and the material domestic Subsidiaries is duly qualified to
transact business as a foreign corporation and is in good standing in each
jurisdiction in which the character of the properties owned or leased by
it or the nature of its business makes such qualification necessary, except
for any such failures to so qualify or be in good standing that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
All of the outstanding shares of Capital Stock of each such material
Subsidiary have been validly issued and are fully paid and non-assessable and,
except as provided on Schedule 3.1 hereof, are owned directly or indirectly by
the Company, free and clear of all pledges, claims, Liens, charges,
encumbrances, and security interest of any kind or nature whatsoever. The
PAGE 5
<PAGE>
Company does not own any equity interest in any corporation, partnership,
limited liability company, joint venture, or other entity except as provided on
Schedule 3.1(b) hereof.
The Company has delivered to Purchaser true and complete copies of the
Company's Certificate of Incorporation, as amended to date, and By-laws, as in
effect on the date hereof.
SECTION 3.2.Capital Stock. (a) As of the date of this Agreement, the
authorized Capital Stock of the Company consists solely of (i) 250,000,000
shares of Common Stock, par value $0.001 per share, of which 78,296,488 shares
are issued and outstanding as of December 31, 1999 (and no shares of Common
Stock have been issued since December 31, 1999 except those issued in respect to
the exercise of stock options), and (ii) 5,000,000 shares of preferred stock,
par value $0.001 per share, of which no shares are issued or outstanding. Each
share of Capital Stock of the Company that will be issued and outstanding
immediately following the Closing, including without limitation the Shares, will
be duly authorized and validly issued and fully paid and nonassessable, and the
issuance thereof will not have been subject to any preemptive rights or made in
violation of any Applicable Law.
(b) Except as set forth on Schedule 3.2, as of the date of this
Agreement, there are (i) no outstanding options, warrants, agreements,
conversion rights, exchange rights, preemptive rights or other rights (whether
contingent or not) to subscribe for, purchase or acquire any issued or unissued
shares of Capital Stock of the Company or any Subsidiary, (ii) no authorized or
outstanding stock appreciation, phantom stock, profit participation, or similar
rights with respect to the Company or any Subsidiary, (iii) no rights,
contracts, commitments or arrangements (contingent or otherwise) obligating the
Company or any Subsidiary to either (A) redeem, purchase or otherwise acquire,
or offer to purchase, redeem, or otherwise acquire, any outstanding shares of,
or any outstanding warrants or rights of any kind to acquire any shares of, or
any outstanding securities that are convertible into or exchangeable for any
shares of, Capital Stock of the Company, or (B) pay any dividend or make any
distribution in respect of any shares of, or any outstanding securities that are
convertible or exchangeable for any shares of, Capital Stock of the Company,
(iv) no agreements or arrangements under which the Company or any Subsidiary is
obligated to register the sale of any of its securities under the Securities Act
(except as provided hereunder) and except as set forth in Schedule 3.2(a) and
(v) no restrictions upon, or Contracts or understandings of the Company or any
Subsidiary, or, to the knowledge of the Company, Contracts or understandings of
any other Person, with respect to, the voting or transfer of any shares of
Capital Stock of the Company or any Subsidiary. Except as set forth on Schedule
3.2(a), there are no securities or instruments containing antidilution or
similar provisions that will be triggered by the consummation of the
transactions contemplated hereby in accordance with the terms of this Agreement,
the Certificate of Designation or the Warrants. Except as set forth on Schedule
3.2(a), no party has any right of first refusal, right of first offer, right of
co-sale or other similar right regarding the Company's securities. Except as
set forth on Schedule 3.2(a), there are no provisions of the Certificate of
Incorporation, as amended, or the By-laws of the Company, no agreements to which
the Company is a party and no agreements by which the Company or any Subsidiary
are bound, that would (a) require the vote of the holders of more than a
majority of the shares of the Company's issued and outstanding Common Stock,
voting together as a single class, to take or prevent any corporate action,
other than those matters requiring a class vote under General Corporation Law of
the State of Delaware (the "DGCL"), or (b) entitle any party to nominate or
elect any director of the Company or require any of the Company's stockholders
to vote for any such nominee or other person as a director of the Company.
(c) The Conversion Shares and Warrant Shares have been duly
authorized and adequately reserved in contemplation of the conversion of the
Series E Preferred Stock and the exercise of the Warrants, respectively, and,
when issued and delivered in accordance with the terms of the Certificate of
Designation or the Warrants, as the case may be, will have been validly issued
and will be fully paid and nonassessable, and the issuance thereof will not have
been subject to any preemptive rights or made in violation of any Applicable
Law.
(d) The holders of the Series E Preferred Stock will, upon
issuance thereof, have the rights set forth in the Certificate of Designation
(subject to the limitations and qualifications set forth therein and under the
DGCL.
SECTION 3.3.Authorization; Enforceability. The Company has the power and
authority to execute, deliver and perform its obligations under each of the
Equity Documents, and has taken all action necessary to authorize the execution,
delivery and performance by it of each of such Equity Documents and to
consummate the Transaction. No other corporate or stockholder proceeding on the
part of the Company is necessary for such authorization, execution, delivery and
consummation. The Company has duly executed and delivered this Agreement and, at
the Closing, the Company will have duly executed and delivered each of the other
PAGE 6
<PAGE>
Equity Documents to be executed and delivered at or prior to Closing. This
Agreement constitutes, and each of the other Equity Documents, when executed and
delivered by the Company, will constitute, a legal, valid and binding obligation
of the Company.
SECTION 3.4.No Violation; Consents. (a) The execution, delivery and
performance by the Company of each of the Equity Documents and the consummation
by the Company of the Transactions do not and will not contravene any
Applicable Law, except for any such contravention that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. The execution, delivery and performance by the Company of
each of the Equity Documents and the consummation of the Issuance (i) will not
(A) violate, result in a breach of or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under any Contract to which the Company is a party
or by which the Company is bound or to which any of its assets is subject, or
(B) result in the creation or imposition of any Lien upon any of the assets of
the Company, except for any such violations, breaches, defaults or Liens that
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect and (ii) will not conflict with or violate any
provision of the certificate of incorporation or bylaws or other governing
documents of the Company.
(b) Except as set forth on Schedule 3.4(b) and except for (i) the
filings by the Company, if any, required by the HSR Act, (ii) applicable
filings, if any, required by applicable federal and state securities laws and
(iii) filing of the Certificate of Designation with the Secretary of State of
the State of Delaware, in each case, which shall be made (or are not required to
be made) on or prior to the Closing Date, no consent, authorization or order of,
or filing or registration with, any Governmental Authority or other Person is
required to be obtained or made by the Company for the execution and delivery of
the Equity Documents or the consummation by the Company of the Transactions
except where the failure to obtain such consents, authorizations or orders, or
make such filings or registrations, would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect or a material adverse
effect on the ability of the Company to consummate the transactions contemplated
hereby.
SECTION 3.5.Commission Filings; Financial Statements.(a) The Company
has filed all reports, registration statements and other filings, together with
any amendments or supplements required to be made with respect thereto, that
it has been required to file with the Commission under the Securities Act and
the Exchange Act. As of the respective dates of their filing with the
Commission, the Commission Filings complied in all material respects with
the applicable provisions of the Securities Act and the Exchange Act and did not
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in the light of the circumstances under which they were
made, not misleading.
(b) Each of the historical consolidated financial statements of
the Company (including any related notes or schedules) included in the
Commission Filings was prepared in accordance with GAAP (except as may be
disclosed therein), and complied in all material respects with the rules and
regulations of the Commission. Such financial statements fairly present the
consolidated financial position of the Company and the Subsidiaries as of the
dates thereof and the consolidated results of operations, cash flows and changes
in stockholders' equity for the periods then ended (subject, in the case of the
unaudited interim financial statements, to normal, recurring year-end audit
adjustments). Except as set forth on Schedule 3.5(b) or as reflected in the
Commission Filings filed prior to the date hereof, the Company does not have any
liabilities or obligations of any nature (whether accrued, absolute, contingent,
unasserted or otherwise) that individually or in the aggregate would be expected
to have a Material Adverse Effect.
SECTION 3.6.Private Offering. Based, in part, on the Purchasers'
representations in Section 4.2, the offer and sale of the Securities is exempt
from the registration and prospectus delivery requirements of the Securities
Act. Neither the Company, nor anyone acting on behalf of it, has offered or sold
or will offer or sell any securities, or has taken or will take any other action
(including, without limitation, any offering of any securities of the Company
under circumstances that would require, under the Securities Act, the
integration of such offering with the offering and sale of the Securities, which
would subject the Issuance to the registration provisions of the Securities
Act).
SECTION 3.7.Provided Information. To the knowledge of the Company,
all written information (excluding information of a general economic nature and
financial projections) concerning the Company and the Transactions (the
"Information") that has been prepared by or on behalf of the Company or any of
the Company's authorized representatives and that has been provided to the
Purchasers or any of their authorized representatives in connection with the
Issuance, when taken as a whole, was, at the time made available, correct in all
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material respects and did not, at the time made available, contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements contained therein not misleading in light of the
circumstances under which such statements are made. All financial projections
concerning the Company and the Transactions (the "Projections") that have been
prepared by or on behalf of the Company or any of the Company's authorized
representatives and that have been delivered to the Purchasers or any of their
authorized representatives in connection with the Transactions have been
reasonably prepared on a basis reflecting the best currently available estimates
and judgments of the Company's management as to the future financial performance
of the Company and the individual business segments thereof.
SECTION 3.8.Material Adverse Change Except as disclosed in the
Commission Filings filed as of the date hereof or as set forth on Schedule 3.8,
since September 30, 1999, there has not been any event, occurrence or
development of a state of circumstances or facts that has had, or could have
reasonably been expected to have, (i) a Material Adverse Effect or (ii) a
material adverse effect on the ability of the Company to perform its obligations
under this Agreement.
SECTION 3.9.Litigation. Except as disclosed in Commission Filings
filed as of the date hereof or as set forth on Schedule 3.9, there are not any
(a) outstanding judgments against or affecting the Company or any of the
Subsidiaries, (b) proceedings pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of the Subsidiaries or (c)
investigations by any Governmental Authority that are, to the knowledge of the
Company, pending or threatened against or affecting the Company or any of the
Subsidiaries that (i) in any manner challenge or seek to prevent, enjoin, alter
or materially delay the Transactions or (ii) if resolved adversely to the
Company or any Subsidiary, would have, individually or in the aggregate, a
Material Adverse Effect.
SECTION 3.10.Permits and Licenses. The Company and the Subsidiaries
have obtained all governmental permits, licenses, franchises and authorizations
required for the Company and the Subsidiaries to conduct their respective
businesses as currently conducted, except for those of which the failure to
obtain would not have a Material Adverse Effect.
SECTION 3.11.Intellectual Property, etc. Schedule 3.11 sets forth a
true and complete list of all patents, patent applications, trademarks, trade
names, service marks and registered copyrights and make work rights and
applications therefor, if any, owned by or licensed to the Company that are
material to the Company. All patents, patent applications, trademarks, mask
works, service marks and copyrights of the Company have been duly applied for or
registered and filed with or issued by each appropriate governmental entity in
the jurisdictions indicated on Schedule 3.11, all necessary affidavits of
continuing use have been filed and all necessary maintenance fees have been paid
to continue all such rights in effect. The Company owns or is licensed or
otherwise has the right to use, without payment to any other person except for
fees set forth in Schedule 3.11, all intellectual property used in or necessary
for the Company's business, as presently conducted and as proposed to be
conducted, except with respect to "shrink-wrap" software. The Company's
ownership and/or use of intellectual property in its business, as presently
conducted and as proposed to be conducted does not conflict with, or result in
any violation of, or default (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or result in any loss of a material benefit under or the creation
of any Lien in or upon any of the properties or assets of the Company under, any
contract between the Company and any person or any other intellectual property
rights of any other person, except for any such conflict, violation, default,
right of termination, cancellation, acceleration, loss of material benefit or
creation of any Lien which would not have a Material Adverse Effect.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser severally as to itself only, and not jointly, hereby
represents and warrants to the Company as of the date hereof and as of the
Closing Date as follows:
SECTION 4.1. Organization; Authorization; Enforceability. Such Purchaser
is duly organized, validly existing and in good standing under the laws of the
jurisdiction of its organization and has all requisite power and authority to
own its properties and assets and to carry on its business as it is now being
conducted and as currently proposed to be conducted. Such Purchaser has the
power to execute, deliver and perform its obligations under each of the Equity
Documents to which it is a party and has taken all action necessary to authorize
the execution, delivery and performance by it of such Equity Documents and to
consummate the transactions contemplated hereby and thereby. No other
proceedings on the part of such Purchaser are necessary for such authorization,
execution, delivery and consummation. Such Purchaser has duly executed and
delivered this Agreement and, at the Closing, such Purchaser will have duly
executed and delivered each of the other Equity Documents to be executed and
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delivered at or prior to Closing. This Agreement constitutes, and each of the
other Equity Documents to which such Purchaser is a party, when executed and
delivered by such Purchaser, will constitute, a legal, valid and binding
obligation of such Purchaser.
SECTION 4.2. Private Placement. (a) Such Purchaser understands that (i)
the offering and sale of the Securities, the Conversion Shares and the Warrant
Shares in the Issuance by the Company is intended to be exempt from registration
under the Securities Act pursuant to Section 4(2) thereof and (ii) there is no
existing public or other market for the Securities.
(b) Such Purchaser (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
Securities, the Conversion Shares and the Warrant Shares, and is capable of
bearing the economic risks of such investment.
(c) Such Purchaser is acquiring the Securities, the Conversion
Shares and the Warrant Shares to be acquired hereunder for its own account (or
for accounts over which it exercises investment authority or as otherwise
provided herein), for investment and not with a view to the public resale or
distribution thereof, in violation of any securities law.
(d) Such Purchaser understands that the Securities, the Conversion
Shares and the Warrant Shares will be issued in a transaction exempt from the
registration or qualification requirements of the Securities Act and applicable
state securities laws, and that such securities must be held indefinitely unless
a subsequent disposition thereof is registered or qualified under the Securities
Act and such laws or is exempt from such registration or qualification.
(e) Such Purchaser (A) has been furnished with or has had full
access to all of the information that it considers necessary or appropriate to
make an informed investment decision with respect to the Securities, the
Conversion Shares and the Warrant Shares and that it has requested from the
Company, (B) has had an opportunity to discuss with management of the Company
the intended business and financial affairs of the Company and to obtain
information (to the extent the Company possessed such information or could
acquire it without unreasonable effort or expense) necessary to verify any
information furnished to it or to which it had access and (C) can bear the
economic risk of (x) an investment in the Securities, the Conversion Shares and
the Warrant Shares indefinitely and (y) a total loss in respect of such
investment, has such knowledge and experience in business and financial matters
so as to enable it to understand and evaluate the risks of and form an
investment decision with respect to its investment in the Securities, the
Conversion Shares and the Warrant Shares and to protect its own interest in
connection.
(f) The foregoing representations with respect to the Conversion
Shares and the Warrant Shares are made only if and to the extent the offering of
the Shares and the Warrants constitutes an offering of the Conversion Shares and
the Warrant Shares.
SECTION 4.3.No Violation; Consents. (a) The execution, delivery and
performance by such Purchaser of each of the Equity Documents to which it is a
party and the consummation of the Transactions do not and will not contravene
any Applicable Law, except for such contraventions as would not, individually or
in the aggregate, reasonably be expected to have a material adverse effect on
the ability of such Purchaser to timely perform its obligations under this
Agreement. The execution, delivery and performance by such Purchaser of each of
the Equity Documents to which it is a party and the consummation of the
Transactions contemplated therein (i) will not (A) violate, result in a breach
of or constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation or acceleration) under
any Contract to which such Purchaser is party or by which such Purchaser is
bound or to which any of its assets is subject, or (B) result in the creation or
imposition of any Lien upon any of the assets of such Purchaser, except for any
such violations, breaches, defaults or Liens that would not, individually or in
the aggregate, reasonably be expected to have a material adverse effect on the
ability of such Purchaser to timely perform its obligations under this
Agreement, and (ii) will not conflict with or violate any provision of the
certificate of incorporation or bylaws or other governing documents of such
Purchaser.
(b) Except for (i) the filings by the Purchaser, if any,
required by the HSR Act, and (ii) applicable filings, if any, with the
Commission pursuant to the Exchange Act, in each case, which shall be made (or
are not required to be made) on or prior to the Closing Date, no consent,
authorization or order of, or filing or registration with, any Governmental
Authority or other Person is required to be obtained or made by such Purchaser
for the execution, delivery and performance of any of the Equity Documents to
which it is a party or the consummation of any of the transactions contemplated
therein, except where the failure to obtain such consents, authorizations or
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orders, or make such filings or registrations, would not, individually or in the
aggregate, reasonably be expected to have a material adverse effect on the
ability of such Purchaser to timely perform its obligations under this
Agreement.
SECTION 4.4.No Litigation. There are not any (a) outstanding judgments
against or affecting the Purchaser or any of its subsidiaries, (b) proceedings
pending or, to the knowledge of the Purchaser, threatened against or affecting
the Purchaser or any of its subsidiaries or (c) investigations by any
Governmental Authority that are, to the knowledge of the Purchaser, pending or
threatened against or affecting the Purchaser or any of its subsidiaries that,
in any case, individually or in the aggregate, would reasonably be expected to
have a material adverse effect on the ability of such Purchaser to timely
perform its obligations under this Agreement.
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.1.Operation of Business. From the date hereof until the Closing
Date, the Company shall, and shall cause each of the Subsidiaries to:
(i) operate its business in all material respects in the ordinary
course and in compliance with Applicable Laws;
(ii) not adopt any amendment to its charter or bylaws or comparable
organizational documents;
(iii) not split, combine or reclassify any shares of the Company's
Capital Stock;
(iv) not declare or pay any dividend or distribution (whether in cash,
stock or property) in respect of its Capital Stock or increase the number of
shares subject to the Company's stock incentive and option plan;
(v) not 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 Company set forth in Article III becoming
untrue or (B) any of the conditions to the obligations of Purchaser set forth in
Section 7.2 not being satisfied or (C) the triggering of any of the
anti-dilution adjustments contained in the Certificate of Designation for the
Series E Preferred Stock (had such Certificate been in effect); or
(vi) enter into any agreement or commitment to do any of the foregoing.
SECTION 5.2. HMTF Director For so long as members of the HMTF Group
own any combination of the shares of Series E Preferred Shares issued to members
of the HMTF Group on the Closing Date (the "HMTF Issued Series E Preferred
Shares") and Common Stock issued upon conversion of HMTF Issued Series E
Preferred Shares that, taken together, would represent, if all HMTF Issued
Series E Preferred Shares were converted, an amount of Common Stock issuable
upon conversion of 40% or more of the HMTF Issued Series E Preferred Shares, the
holders of a majority of the then outstanding HMTF Shares shall have a right to
designate one member of the Company's Board of Directors (the "HMTF Director");
provided, however, that the right to designate the HMTF Director under this
Section 5.2 shall be suspended at any time that members of the HMTF Group own at
least 100 shares of Series E Preferred Stock and have the right to elect a
person to the Board of Directors under the terms of the Series E Preferred Stock
set forth in the Certificate of Designation. In the event the holders of a
majority of the then outstanding HMTF Shares are entitled under this Section 5.2
to designate the HMTF Director for election to the Company's Board of Directors
and elect to have the Board of Directors appoint the HMTF Director, they shall
so notify the Company in writing and the Company shall (a) increase the size of
the Board of Directors by one and fill the vacancy created thereby by electing
the HMTF Director and (b) in connection with the meeting of stockholders of the
Company next following such election, nominate such HMTF Director for election
as director by the stockholders and use its commercially reasonable efforts to
cause the HMTF Director to be so elected. If the holders of a majority of the
then outstanding HMTF Shares are entitled under this Section 5.2 to designate
the HMTF Director for election to the Company's Board of Directors and a vacancy
shall exist in the office of a HMTF Director, the holders of a majority of the
then outstanding HMTF Shares shall be entitled to designate a successor and the
Board of Directors shall elect such successor and, in connection with the
meeting of stockholders of the Company next following such election, nominate
such successor for election as director by the stockholders and use its
commercially reasonable efforts to cause the successor to be elected.
SECTION 5.3. Access to Books and Records. (a) The Company shall afford
to each of the Purchasers and the Purchasers' accountants, counsel and
representatives full access during normal business hours throughout the period
prior to the Closing Date (or the earlier termination of this Agreement pursuant
to Section 8.4) to all its properties, books, Contracts, commitments and records
(including, but not limited to, tax returns) and, during such period, shall,
upon request, furnish promptly to each of the Purchasers (i) a copy of each
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report, schedule and other document filed or received by any of them pursuant to
the requirements of Federal or state securities laws and (ii) all other
information concerning its business, properties and personnel as the Purchasers
may reasonably request, provided that no investigation or receipt of information
pursuant to this Section 5.3 shall affect any representation or warranty of the
Company or the conditions to the obligations of the Purchasers.
(b) The Company shall supplement the Information and the Projections
from time to time until the Closing Date if there is a material change in the
Information and the Projections previously provided, but no such supplement
shall be given effect for purposes of determining whether the Company has
breached any representations or warranties for purposes of Section 7.2 and
Section 8.1.
SECTION 5.4. Agreement to Take Necessary and Desirable Actions. The
Company shall (a) subject to the satisfaction of the conditions set forth in
Section 7.1, execute and deliver the Equity Documents and such other documents,
certificates, agreements and other writings, and (b) take such other actions, in
each case, as may be necessary or reasonably requested by any of the Purchasers
in order to consummate or implement the Issuance in accordance with the terms of
this Agreement.
SECTION 5.5. Compliance with Conditions; Commercially Reasonable Efforts.
The Company shall use all commercially reasonable efforts to cause all
conditions precedent to the obligations of the Company and the Purchasers to be
satisfied. Upon the terms and subject to the conditions of this Agreement, the
Company will use all commercially reasonable efforts to take, or cause to be
taken, all action, and to do, or cause to be done, all things necessary, proper
or advisable consistent with Applicable Law to consummate and make effective in
the most expeditious manner practicable the Issuance in accordance with the
terms of this Agreement.
SECTION 5.6.HSR Act Notification. To the extent required by the HSR Act,
the Company shall, to the extent it has not already done so, (a) use all
commercially reasonable efforts to file or cause to be filed, as promptly as
practicable after the execution and delivery of this Agreement, with the United
States Federal Trade Commission and the Antitrust Division of the United States
Department of Justice, all reports and other documents required to be filed by
it under the HSR Act concerning the transactions contemplated hereby and (b) use
all commercially reasonable efforts to promptly comply with or cause to be
complied with any requests by the United States Federal Trade Commission or the
Antitrust Division of the United States Department of Justice for additional
information concerning such transactions, in each case so that the waiting
period applicable to this Agreement and the transactions contemplated hereby
under the HSR Act shall expire as soon as practicable after the execution and
delivery of this Agreement. The Company agrees to request, and to cooperate with
the Purchasers in requesting, early termination of any applicable waiting period
under the HSR Act.
SECTION 5.7.Consents and Approvals. The Company (a) shall use all
commercially reasonable efforts to obtain all necessary consents, waivers,
authorizations and approvals of all Governmental Authorities and of all other
Persons required in connection with the execution, delivery and performance of
the Equity Documents or the consummation of the Issuance and (b) shall
diligently assist and cooperate with the Purchasers in preparing and filing all
documents required to be submitted by the Purchasers to any Governmental
Authority in connection with the Issuance (which assistance and cooperation
shall include, without limitation, timely furnishing, upon written requests, to
the Purchasers all information concerning the Company and the Subsidiaries that
counsel to the Purchasers reasonably determines is required to be included in
such documents or would be helpful in obtaining any such required consent,
waiver, authorization or approval).
SECTION 5.8.Reservation of Shares. The Company shall:
(i) cause to be authorized and reserve and keep available at all times
during which any of the Shares and Warrants remain outstanding, free from
preemptive rights, out of its treasury stock or authorized but unissued shares
of Capital Stock, or both, solely for the purpose of effecting the conversion or
exercise of the Shares or Warrants pursuant to the terms of the Certificate of
Designation, sufficient shares of Common Stock to provide for the issuance of
the maximum number of shares issuable upon conversion or exercise of outstanding
Shares and Warrants;
(ii) issue and cause the transfer agent to deliver such shares of
Common Stock as required upon conversion or exercise of the Shares and Warrants;
and
(iii) if any shares of Common Stock reserved for the purpose of
issuance upon conversion of the Shares and Warrants require registration with or
approval of any Governmental Authority under any Applicable Law before such
shares may be validly issued or delivered, secure such registration or approval,
as the case may be, and maintain such registration or approval in effect so long
as so required.
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SECTION 5.9.Use of Proceeds. The Company shall use the proceeds from the
Issuance for payment of expenses incurred in connection with the Transactions
and for general corporate purposes.
SECTION 5.10.Filing of Certificate of Designation. Prior to the Issuance,
the Company shall file the Certificate of Designation with the Secretary of
State of the State of Delaware pursuant to Section 151(g) of the DGCL.
SECTION 5.11.Listing of Shares. The Company shall use all commercially
reasonable efforts to cause the shares of Common Stock issuable upon conversion
of the Shares to be listed or otherwise eligible for trading on the NASDAQ
National Market System or other national securities exchange.
SECTION 5.12.Periodic Information. For so long as the Securities are
outstanding the Company shall file all reports required to be filed by the
Company under Section 13 or 15(d) of the Exchange Act and shall provide the
holders of the Securities and prospective purchasers of such shares with the
information specified in Rule 144A(d) under the Securities Act.
SECTION 5.13.Legends. So long as applicable, each certificate representing
any portion of the Securities, shall contain, be stamped or otherwise imprinted
with a legend in the following form (in addition to any legend required under
applicable state securities laws):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR THE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES. SUCH SHARES MAY NOT BE OFFERED, SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF
SUCH REGISTRATION OTHER THAN PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS.
After the above requirement for a legend is no longer applicable because the
Securities are freely transferable under the Securities Act, the Company shall
remove such legend upon request from a holder of such Securities, if outside
counsel for such holder reasonably determines that the transfer of such
Securities is no longer restricted by the Securities Act and outside counsel for
the Company reasonably concurs in such determination.
SECTION 5.14. Payment; Paying Agent; Certain Information. The Company
shall
(i) make any required payments on the Securities;
(ii) maintain (a) an office or agency where the Securities may be
presented for payment (the "Paying Agent"), (b) an office or agency where the
Securities may be presented for conversion (the "Conversion Agent"), and (c) a
Registrar, which shall be an office or an agency where the Securities may be
presented for transfer; and
(iii) provide certain information to the Purchasers, including such
information and notices as may be necessary for the Purchasers to exercise their
rights under this Agreement and in connection with conversion or exercise of the
Securities.
SECTION 5.15. Latin American Subsidiary. The Company agrees to form the
Latin American Subsidiary and to issue to the HMTF Purchasers an aggregate
equity interest in (and proportional representation on the board of) the Latin
American Subsidiary equal to twenty-five percent (25%) of the issued and
outstanding Capital Stock of the Latin American Subsidiary as soon as
practicable after its formation. The HMTF Purchasers' interest will not be
reduced or diluted by the first twenty-five million dollars ($25,000,000)
invested by the Company. The organizational and constitutive documents for the
Latin American Subsidiary and the joint venture will be subject to the HMTF
Purchasers' prior approval, such consent not to be unreasonably withheld or
delayed, and shall contain with respect to the HMTF Purchasers such terms as are
customary for private equity investments in private companies (including,
without limitation, appropriate liquidity and minority protection provisions).
SECTION 5.16.Latin American Venture. Attached hereto as Exhibit F is a
term sheet describing the indicative terms of a proposed joint venture
arrangement to exploit DSL opportunities in Latin America. The Company will use
commercially reasonable efforts to cause the Latin American Subsidiary to effect
the joint venture, but nothing in this Section 5.16 shall compel the Company to
go forward with the joint venture if in its commercial judgment it would be
imprudent or inadvisable to do so. The Company will not create any other
entity, or enter into any other venture or partnership to exploit DSL
opportunities in Latin America without granting the HMTF Purchasers an interest
identical to that held in the Latin American Subsidiary. The HMTF Purchasers
shall be entitled to representation on any board subcommittee or other
board-level task force assigned to supervise the Company's Latin American
venture, if formed, in proportion to their equity interest in the Latin American
Subsidiary.
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ARTICLE VI
COVENANTS OF THE PURCHASERS
SECTION 6.1.Agreement to Take Necessary and Desirable Actions. Each
Purchaser shall (a) subject to the satisfaction of the conditions set forth in
Section 7.2, execute and deliver each of the Equity Documents to which it is a
party and such other documents, certificates, agreements and other writings and
(b) take such other actions as may be reasonably necessary, desirable or
requested by the Company in order to consummate or implement the Transactions
in accordance with the terms of this Agreement.
SECTION 6.2.Compliance with Conditions; Commercially Reasonable Efforts.
Each Purchaser will use all commercially reasonable efforts to cause all of the
obligations imposed upon it in this Agreement to be duly complied with, and to
cause all conditions precedent to the obligations of the Company and the
Purchasers to be satisfied. Upon the terms and subject to the conditions of this
Agreement, each Purchaser will use all commercially reasonable efforts to take,
or cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable consistent with applicable law to consummate and
make effective in the most expeditious manner practicable the Transactions in
accordance with the terms of this Agreement.
SECTION 6.3.HSR Act Notification. To the extent required by the HSR Act,
each Purchaser shall, if it has not already done so, (a) use all commercially
reasonable efforts to file or cause to be filed, as promptly as practicable
after the execution and delivery of this Agreement, with the United States
Federal Trade Commission and the Antitrust Division of the United States
Department of Justice, all reports and other documents required to be filed by
it under the HSR Act concerning the transactions contemplated hereby and (b) use
all commercially reasonable efforts to promptly comply with or cause to be
complied with any requests by the United States Federal Trade Commission or the
Antitrust Division of the United States Department of Justice for additional
information concerning such transactions in each case so that the waiting period
applicable to this Agreement and the transactions contemplated hereby under the
HSR Act shall expire as soon as practicable after the execution and delivery of
this Agreement. Purchaser agrees to request, and to cooperate with the Company
in requesting, early termination of any applicable waiting period under the HSR
Act.
SECTION 6.4.Consents and Approvals. Each Purchaser (a) shall use all
commercially reasonable efforts to obtain all necessary consents, waivers,
authorizations and approvals of all Governmental Authorities other than as
expressly set forth in Section 6.3 regarding the HSR Act, and of all other
Persons required in connection with the execution, delivery and performance of
this Agreement or the consummation of the Transactions and (b) shall diligently
assist and cooperate with the Company in preparing and filing all documents
required to be submitted by the Company to any Governmental Authority in
connection with such Transactions (which assistance and cooperation shall
include, without limitation, timely furnishing to the Company all information
concerning such Purchaser that counsel to the Company reasonably determines is
required to be included in such documents or would be helpful in obtaining any
such required consent, waiver, authorization or approval).
SECTION 6.5.Restrictions on Transfer. No Purchaser shall sell, assign,
transfer, pledge, hypothecate, deposit in a voting trust or otherwise dispose of
any portion of the Securities (any such disposition, a "Securities Transfer"),
other than (a) to a Permitted Transferee of such Purchaser that has agreed in
writing (each, a "Permitted Transferee Agreement") to be bound by the terms and
provisions of this Section 6.5 to the same extent that the transferring
Purchaser would be bound if it beneficially owned the Securities transferred to
such Permitted Transferee or (b)(i) in any transaction in compliance with Rule
144 under the Securities Act or any successor rule or regulation, (ii) in a
transaction exempt from the registration requirements of the Securities Act or
(iii) pursuant to a registration statement. Each Purchaser shall promptly notify
the Company of any Securities Transfer to a Permitted Transferee of such
Purchaser, which notification shall include a Permitted Transferee Agreement
executed by each Permitted Transferee of such Purchaser to whom any Securities
have been transferred.
ARTICLE VII
CONDITIONS PRECEDENT TO CLOSING
SECTION 7.1.Conditions to the Company's Obligations. The obligations of
the Company with respect to a Purchaser hereunder required to be performed on
the Closing Date shall be subject to the satisfaction or waiver, at or prior to
the Closing, of the following conditions:
(a) The representations and warranties of such Purchaser contained
in this Agreement shall have been true and correct when made and, in addition,
shall be repeated and true and correct in all material respects on and as of the
Closing Date with the same force and effect as though made on and as of the
Closing Date.
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(b) Such Purchaser shall have performed in all material respects
all obligations and agreements, and complied in all material respects with all
covenants contained in this Agreement to be performed and complied with by such
Purchaser at or prior to the Closing Date.
(c) Any applicable waiting period under the HSR Act with respect
to the purchase by such Purchaser shall have expired or been terminated.
(d) The Company shall have obtained all necessary consents,
waivers, authorizations and approvals of all Governmental Authorities and of all
other Persons required in connection with the execution, delivery and
performance of the Equity Documents or the consummation of the Issuance.
(e) Such Purchaser shall have entered into the Registration Rights
Agreement.
SECTION 7.2.Conditions to Each Purchaser's Obligations. The obligations of
a Purchaser hereunder required to be performed on the Closing Date shall be
subject to the satisfaction or waiver, at or prior to the Closing, of the
following conditions:
(a) The representations and warranties of the Company contained in
this Agreement (i) shall have been true and correct when made and (ii) shall be
(A) in the case of representations and warranties that are qualified as to
materiality or Material Adverse Effect, true and correct and (B) in all other
cases, true and correct in all material respects, in the case of clauses (A) and
(B), as of the Closing Date with the same force and effect as though made on and
as of the Closing Date.
(b) The Company shall have performed in all material respects all
of its obligations, agreements and covenants contained in this Agreement to be
performed and complied with at or prior to the Closing Date.
(c) The Company shall have entered into the Registration Rights
Agreement.
(d) The Company shall have filed the Certificate of Designation
with the Secretary of State of the State of Delaware.
(e) Any applicable waiting period under the HSR Act with respect
to the purchase by such Purchaser shall have expired or been terminated.
(f) The Company shall have delivered to such Purchaser a
certificate executed by it or on its behalf by a duly authorized representative,
dated the Closing Date, to the effect that each of the conditions specified in
paragraph (a) through (e) of this Section 7.2 has been satisfied.
(g) No provision of any Applicable Law, injunction, order or
decree of any Governmental Entity shall be in effect which has the effect of
making the Transactions illegal or shall otherwise restrain or prohibit the
consummation of the Transactions.
(h) Such Purchaser shall have received an opinion of counsel to
the Company, dated the Closing Date, and addressed to such Purchaser, in form
and substance reasonably acceptable to the Purchaser.
(i) Such Purchaser shall have received certificates representing
the Securities purchased by such Purchaser concurrently with the Company's
receipt of the Purchase Price for such Securities.
(j) The Purchaser shall have executed and caused its rights agent
to execute the Rights Agreement Amendment.
(k) The Company shall have delivered to the HMTF Purchasers a
Management Rights Agreement executed by the Company and addressed to the HMTF
Funds.
(l) There shall not have occurred (i) any event, circumstance,
condition, fact, effect or other matter which has had or could reasonably be
expected to have a material adverse effect (x) on the business, assets,
financial condition, prospects, or results of operations of the Company and the
Subsidiaries taken as a whole or (y) on the ability of the Company and the
Subsidiaries to perform on a timely basis any material obligation under this
Agreement or to consummate the Issuance contemplated hereby; or (ii) any
material disruption of or material adverse change in financial, banking or
capital market conditions that would reasonably be expected to materially impair
the Company's ability to obtain financing on reasonable terms.
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ARTICLE VIII
MISCELLANEOUS
SECTION 8.1.Indemnification. (a) All representations,
warranties, covenants and agreements contained in this Agreement shall survive
the Closing for 18 months (except (i) covenants and agreements that are required
to be performed after the Closing Date and (ii) the last sentence of Section
3.2(a), which shall survive indefinitely). Notwithstanding the foregoing, with
respect to claims asserted pursuant to this Section 8.1 before the expiration of
the applicable representation, warranty, covenant or agreement, such claims
shall survive until the date they are finally adjudicated or otherwise resolved.
(b) The Company agrees to indemnify and hold harmless each Purchaser
and each Purchaser Affiliate (each an "Indemnified Person"), from and against
(and to reimburse each indemnified person as the same are incurred) any and all
losses (including, but not limited to, impairment of the value of the Shares and
Warrants as of the date such loss first becomes known, but excluding
consequential damages), claims, damages, liabilities, costs and expenses
(collectively, "Losses") to which any indemnified person may become subject or
which any indemnified person may incur based upon, arising out of, or in
connection with (i) a breach of any representation, warranty or covenant of this
Agreement by the Company or (ii) any claim, litigation, investigation or
proceeding brought by or on behalf of any Person other than the Company relating
to the Issuance, and to reimburse each indemnified person upon demand for any
reasonable legal or other reasonable out of pocket expenses incurred in
connection with investigating or defending any of the foregoing, provided the
maximum amount indemnifiable to each Purchaser (and its successors or assigns)
under clause (i) shall not exceed the purchase price of the Shares and Warrants
purchased by such Purchaser.
(c) If a Person entitled to indemnity hereunder (an "Indemnified
Party") asserts that the Company (the "Indemnifying Party") has become obligated
to the Indemnified Party pursuant to Section 8.1(b), or if any suit, action,
investigation, claim or proceeding is begun, made or instituted as a result of
which the Indemnifying Party may become obligated to the Indemnified Party
hereunder, the Indemnified Party shall notify the Indemnifying Party promptly
and shall cooperate with the Indemnifying Party, at the Indemnifying Party's
expense, to the extent reasonably necessary for the resolution of such claim or
in the defense of such suit, action or proceedings, including making available
any information, documents and things in the possession of the Indemnified
Party. Notwithstanding the foregoing notice requirement, the right to
indemnification hereunder shall not be affected by any failure to give, or delay
in giving, notice unless, and only to the extent that, the rights and remedies
of the Indemnifying Party shall have been materially prejudiced as a result of
such failure or delay.
(d) In fulfilling its obligations under this Section 8.1, after the
Indemnifying Party has provided each Indemnified Party with a written notice of
its acceptance of liability under this Section 8.1, as between such Indemnified
Party and the Indemnifying Party, the Indemnifying Party shall have the right to
investigate, defend, settle or otherwise handle, with the aforesaid cooperation,
any claim, suit, action or proceeding brought by a third party in such manner as
the Indemnifying Party may in its sole discretion reasonably deem appropriate;
provided, that (i) counsel retained by the Indemnifying Party is reasonably
satisfactory to the Indemnified Party and (ii) the Indemnifying Party will not
consent to any settlement or entry of judgment imposing any obligations on any
other party hereto other than financial obligations for which such party will be
indemnified hereunder, unless such party has consented in writing to such
settlement or judgment (which consent may be given or withheld in its sole
discretion) and (iii) the Indemnifying Party will not consent to any settlement
or entry of judgment unless, in connection therewith, the Indemnifying Party
obtains a full and unconditional release of the Indemnified Party from all
liability with respect to such suit, action, investigation claim or proceeding.
Notwithstanding the Indemnifying Party's election to assume the defense or
investigation of such claim, action or proceeding, the Indemnified Party shall
have the right to employ separate counsel and to participate in the defense or
investigation of such claim, action or proceeding, which participation shall be
at the expense of the Indemnifying Party, if (i) on the advice of counsel to the
Indemnified Party use of counsel of the Indemnifying Party's choice could
reasonably be expected to give rise to a material conflict of interest, (ii) the
Indemnifying Party shall not have employed counsel reasonably satisfactory to
the Indemnified Party to represent the Indemnified Party within a reasonable
time after notice of the assertion of any such claim or institution of any such
action or proceeding, (iii) if the Indemnifying Party shall authorize the
Indemnified Party to employ separate counsel at the Indemnifying Party's expense
or (iv) such action shall seek relief other than monetary damages against the
Indemnified Party.
(e) The Company and the Purchasers agree that any payment of Losses
made hereunder will be treated by the parties on their tax returns as an
adjustment to the Purchase Price. If, notwithstanding such treatment by the
parties, a final determination (which shall include the form 870-AD or successor
form) with respect to the Indemnified Party or any of its affiliates causes any
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such payment not to be treated as an adjustment to Purchase Price, then the
Indemnifying Party shall indemnify the Indemnified Party for any taxes payable
by the Indemnified Party or any subsidiary by reason of the receipt of such
payment (including any payments under this Section 8.1(e)), determined at an
assumed marginal tax rate equal to the highest marginal tax rate then in effect
for corporate taxpayers in the relevant jurisdiction.
SECTION 8.2.Notices. All notices, demands, requests, consents, approvals
or other communications (collectively, "Notices") required or permitted to be
given hereunder or which are given with respect to this Agreement shall be in
writing and shall be personally served, delivered by reputable air courier
service with charges prepaid, or transmitted by hand delivery, telegram, telex
or facsimile, addressed as set forth below, or to such other address as such
party shall have specified most recently by written notice. Notice shall be
deemed given on the date of service or transmission if personally served or
transmitted by telegram, telex or facsimile. Notice otherwise sent as provided
herein shall be deemed given on the next business day following delivery of such
notice to a reputable air courier service.
To the Company:
Rhythms NetConnections Inc.
6933 South Revere Parkway
Englewood, CO 80112-3931
Attn: Catherine Hapka
Telephone: (303) 476-4200
Fax: (303) 476-5700
with a copy to:
Brobeck, Phleger & Harrison LLP
550 West C Street, Suite 1300
San Diego, CA 9210
Attn: Martin C. Nichols
Telephone: (619) 699-0254
Fax: (619) 234-3848
To the Purchasers:
To the appropriate member of the HMTF Group
c/o Hicks, Muse, Tate & Furst Incorporated
1325 Avenue of the Americas
25th Floor
New York, NY 10019
Attn: Michael J. Levitt
Telephone: (212) 424-1400
Fax: (212) 424-1450
with a copy to:
Hicks, Muse, Tate & Furst Incorporated
200 Crescent Court, Suite 1600
Dallas, Texas 75201
Attn: Lawrence D. Stuart
Telephone: (214) 740-7300
Fax: (214) 720-7888
with a copy to:
Vinson & Elkins L.L.P.
1325 Avenue of the Americas (17th Floor)
New York, NY 10019
Attention: Eric S. Shube
Telephone: (917) 206-8005
Fax: (917) 206-8100
SECTION 8.3.Governing Law. This Agreement shall be governed by,
interpreted under, and construed in accordance with the laws of the State of New
York, regardless of the laws that might otherwise govern under applicable
principles of conflicts of law thereof.
SECTION 8.4.Termination. (a) This Agreement may be terminated as
between the Company and any Purchaser (i) at any time prior to the Closing Date
by mutual written agreement of the Company and such Purchaser, (ii) if the
Closing shall not have occurred on or prior toMarch 31, 2000 either the Company
or such Purchaser, at any time after March 31, 2000, provided that the right to
terminate this Agreement under this Section 8.4(a)(ii) shall not be available to
any party whose failure to fulfill any obligation under this Agreement was the
cause of or resulted in the failure of the Closing to occur on or before such
date, (iii) if any Governmental Authority shall have issued a nonappealable
final order, decree or ruling or taken any other action having the effect of
permanently restraining, enjoining or otherwise prohibiting the transactions
contemplated by this Agreement, by either the Company or such Purchaser, (iv) if
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either the Company or such Purchaser shall have breached any of its material
obligations under this Agreement, by the non-breaching party, or (v) if an event
described in Section 7.2(l) shall have occurred, by such Purchaser. Any party
desiring to terminate this Agreement pursuant to clauses 8.4(a)(ii), (iii), (iv)
or (v) shall promptly give notice of such termination to the other party.
(b) If this Agreement is terminated as between the Company and a
Purchaser, as permitted by Section 8.4(a), such termination shall be without
liability of any party (or any stockholder, director, officer, partner,
employee, agent, consultant or representative of such party) to any other party
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 party, (b) failure to perform a covenant of this
Agreement or (c) breach by any party hereto of any representation or warranty
contained herein, such failing or breaching party shall be fully liable for any
and all losses (excluding consequential damages) incurred or suffered by the
other party as a result of such failure or breach. The provisions of Sections
8.2, 8.3, this Section 8.4, Sections 8.5, 8.8, 8.10, 8.11, 8.12, 8.13, 8.14,
8.16, 8.17, 8.18 and 8.20 shall survive any termination hereof pursuant to
Section 8.4(a).
SECTION 8.5.Entire Agreement. As between the Company and each Purchaser
this Agreement and the other Equity Documents (including all agreements entered
into pursuant hereto and thereto and all certificates and instruments delivered
pursuant hereto and thereto) constitute the entire agreement of the parties with
respect to the subject matter hereof and supersede all prior and contemporaneous
agreements, representations, understandings, negotiations and discussions
between the parties, whether oral or written, with respect to the subject matter
hereof.
SECTION 8.6.Modifications and Amendments. No amendment, modification or
termination of this Agreement as between the Company and a Purchaser shall be
binding unless executed in writing by the Company and such Purchaser intending
to be bound thereby.
SECTION 8.7.Waivers and Extensions. Any party to this Agreement may waive
any condition, right, breach or default that such party has the right to waive,
provided that such waiver will not be effective against the waiving party unless
it is in writing, is signed by such party, and specifically refers to this
Agreement. Waivers may be made in advance or after the right waived has arisen
or the breach or default waived has occurred. Any waiver may be conditional. No
waiver of any breach of any agreement or provision herein contained shall be
deemed a waiver of any preceding or succeeding breach thereof nor of any other
agreement or provision herein contained. No waiver or extension of time for
performance of any obligations or acts shall be deemed a waiver or extension of
the time for performance of any other obligations or acts.
SECTION 8.8.Titles and Headings. Titles and headings of sections of this
Agreement are for convenience only and shall not affect the construction of any
provision of this Agreement.
SECTION 8.9.Exhibits and Schedules. Each of the exhibits and schedules
referred to herein and attached hereto is an integral part of this Agreement and
is incorporated herein by reference.
SECTION 8.10.Expenses. All costs and expenses incurred in connection with
this Agreement shall be paid by the party incurring such cost or expense;
provided, however, that (a) the Company shall pay the filing fee payable in
respect to any HSR Act filing, and (b) if this Agreement is terminated with
respect to any Purchaser for any reason other than a breach by such Purchaser
and other than the failure of the condition set forth in Section 7.2(l)(ii) to
be satisfied, then (without limiting any party's right to recover damages
pursuant to Section 8.4(b)) the Company shall reimburse such Purchaser for such
Purchaser's reasonable out-of-pocket costs and expenses incurred in connection
with this Agreement.
SECTION 8.11.Press Releases and Public Announcements. All public
announcements or disclosures relating to the Issuance or this Agreement shall be
made only if mutually agreed upon by the Company and the Purchasers, except to
the extent such disclosure is, in the opinion of counsel, required by law or by
regulation of any applicable national stock exchange or Commission recognized
trading market; provided that (a) any such required disclosure shall only be
made, to the extent consistent with law and regulation of any applicable
national stock exchange or Commission recognized trading market, after
consultation with each Purchaser and (b) no such announcement or disclosure
(except as required by law or by regulation of any applicable national stock
exchange or Commission recognized trading market) shall identify any Purchaser
without such Purchaser's prior consent.
SECTION 8.12.Assignment; No Third Party Beneficiaries. This Agreement and
the rights, duties and obligations hereunder may not be assigned or delegated by
the Company without the prior written consent of the Purchasers, and may not
assigned or delegated by any Purchaser without the Company's prior written
consent except that each Purchaser may assign any or all of its rights and
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obligations under this Agreement to any one or more of its Affiliates. Any
assignment or delegation of rights, duties or obligations hereunder made by the
Company without the prior written consent of the Purchasers, shall be void and
of no effect. This Agreement and the provisions hereof shall be binding upon and
shall inure to the benefit of each of the parties and their respective
successors and permitted assigns. This Agreement is not intended to confer any
rights or benefits on any Persons other than the parties hereto, except as
expressly set forth in Section 5.2, Section 8.1, this Section 8.12 or Section
8.20.
SECTION 8.13.Severability. This Agreement shall be deemed severable, and
the invalidity or unenforceability of any term or provision hereof shall not
affect the validity or enforceability of this Agreement or of any other term or
provision hereof. Furthermore, in lieu of any such invalid or unenforceable term
or provision, the parties hereto intend that there shall be added as a part of
this Agreement a provision as similar in terms to such invalid or unenforceable
provision as may be possible and be valid and enforceable.
SECTION 8.14.Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which taken together shall
constitute one and the same instrument.
SECTION 8.15.Further Assurances. As between the Company and a Purchaser,
each party hereto, upon the request of any other party hereto, shall do all such
further acts and execute, acknowledge and deliver all such further instruments
and documents as may be necessary or desirable to carry out the transactions
contemplated by this Agreement, including, in the case of the Company, such
acts, instruments and documents as may be necessary or desirable to convey and
transfer to each Purchaser the Shares and Warrants to be purchased by it
hereunder.
SECTION 8.16.Remedies Cumulative. The remedies provided herein shall be
cumulative and shall not preclude the assertion by any party hereto of any other
rights or the seeking of any remedies against the other party hereto.
SECTION 8.17.Several Liability of the Purchasers. Nothing in this
Agreement (including, without limitation, Article VI) shall be construed to
impose on any Purchaser any liability for any action or failure to act of any
other Purchaser, including any breach of this Agreement by any such other
Purchaser.
SECTION 8.18.No Duty to Other Purchasers. Each Purchaser confirms with
each other Purchaser that such Purchaser has conducted its own due diligence in
connection with its investment in the Securities and the other Purchasers may
therefore have information different from, or additional to, the information
possessed by such Purchaser. In addition, although certain of such other
Purchasers (the "Supplying Purchasers") may have shared information received by
them (including information contained in third party reports prepared for such
other Purchasers) with such Purchaser, no representation or warranty is being
made with respect to such information by any Supplying Purchaser or any such
third party. Nothing in this Section 8.18 is meant to limit any duty, obligation
or liability the Company may have to any Purchaser under this Agreement or
otherwise.
SECTION 8.19.Specific Performance. The parties hereto agree that the
remedy at law for any breach of this Agreement may be inadequate, and that as
between the Company and a Purchaser 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 a
court of competent jurisdiction for specific performance or injunctive or such
other relief as such court may deem just and proper in order to enforce this
Agreement as between the Company and a Purchaser, or prevent any violation
hereof, and, to the extent permitted by applicable as between the Company and a
Purchaser law, each party waives any objection to the imposition of such relief.
SECTION 8.20.No Purchaser Affiliate Liability. No Purchaser Affiliate
shall have any liability or obligation of any nature whatsoever in connection
with or under this Agreement or the transactions contemplated hereby, and the
Company hereby waives and releases all claims of any such liability and
obligation, it being understood that no such Person or entity (other than
Purchaser) shall be liable for or in respect of this Agreement with the
transactions contemplated hereby.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
RHYTHMS NETCONNECTIONS INC.
By: /s/ Catherine Hapka
Name: Catherine Hapka
Title: Chief Executive Officer
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HMTF BRIDGE RHY, LLC
By: /s/ David Knickel
Name: David W. Knickel
Title: Vice President
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EXHIBIT 10.2
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (the "Agreement"), is made as of the
March 16, 2000, by and among Rhythms NetConnections Inc., a Delaware corporation
(the "Company"), and the entities listed on Schedule I to this Agreement.
WHEREAS, the Company and HMTF Bridge RHY, LLC entered into a Preferred
Stock and Warrant Purchase Agreement dated as of February 6, 2000 (the "Stock
Purchase Agreement");
WHEREAS, pursuant to an Assignment and Assumption, the Holders (as defined
below) have become parties to the Stock Purchase Agreement;
WHEREAS, it is a condition precedent to the closing of the transactions
contemplated in the Stock Purchase Agreement that the parties hereto execute and
deliver this Agreement;
NOW THEREFORE, in consideration of the premises, mutual promises and
covenants contained in this Agreement and intending to be legally bound, the
parties hereto hereby agree as follows:
ARTICLE I
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.
"Demand Registration" means a registration under the Securities Act
requested in accordance with Section 2.01.
"Holders" means the entities set forth on Schedule I (including any
affiliates thereof) and any direct or indirect transferee of any Registrable
Securities held by such entities.
"Investor Rights Agreement" means the Amended and Restated Investors'
Rights Agreement dated as of April 6, 1999 among the Company and certain
investors parties thereto.
"Investor Rights Agreement 30% Right" means the rights to participate in a
Company registration pursuant to Section 1.8 of the Investor Rights Agreement,
pursuant to which the amount of securities of the selling holders under such
agreement to be included in a piggyback registration shall not, except in
certain circumstances, be reduced below thirty percent (30%) of the total amount
of securities included in such offering.
"Piggyback Registration" has the meaning set forth in Section 2.02.
"Registrable Common Stock" means the shares of Common Stock issued upon
conversion of the Registrable Series E Preferred Stock or upon exercise of the
Warrants, plus any additional shares of Common Stock issued in respect thereof
in connection with any stock split, stock dividend or similar event with respect
to the Common Stock.
"Registrable Series E Preferred Stock" means the Series E Preferred Stock
purchased pursuant to the Stock Purchase Agreement, plus any additional shares
of Series E Preferred Stock issued in respect thereof in connection with any
stock split, stock dividend or similar event with respect to the Series E
Preferred Stock.
"Registrable Securities" means (a) the Registrable Series E Preferred
Stock, (b) the Registrable Common Stock and (c) any securities of the Company or
any successor entity into which Registrable Common Stock or Registrable Series E
Preferred Stock may hereafter be converted or changed. As to any particular
Registrable Securities, such securities shall cease to be Registrable Securities
when (i) a registration statement with respect to the sale of such securities
shall have become effective under the Securities Act and such securities shall
have been disposed of under such registration statement, (ii) such securities
shall have been transferred pursuant to Rule 144, (iii) such securities shall
have been otherwise transferred or disposed of, and new certificates therefor
not bearing a legend restricting further transfer shall have been delivered by
the Company, and subsequent transfer or disposition of them shall not require
their registration or qualification under the Securities Act or any similar
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state law then in force or (iv) such securities shall have ceased to be
outstanding.
"Requesting Holders" means the Holders requesting a Demand Registration,
and shall include parties deemed "Requesting Holders" pursuant to Section
2.01(a)(iii).
"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.
"Senior Piggyback Registration Rights" means those piggyback registration
rights pursuant to (i) the Warrant Registration Rights Agreement dated as of May
5, 1998 among the Company and parties thereto, (ii) the Warrant to Purchase
Shares of Common Stock granted to Sun Financial Group dated as of May 19, 1998,
(iii) the Warrant to Purchase Shares of Common Stock granted to GATX dated as of
March 31, 1999 and (iv) the Stock Subscription Warrant granted to Cisco Systems
Capital Corporation dated as of April 5, 1999.
"Shelf Registration" has the meaning set forth in Section 2.03(b).
"Underwriter" means a securities dealer who purchases any Registrable
Securities as principal and not as part of such dealer's market-making
activities.
SECTION 1.01.Internal References. Unless the context indicates otherwise,
references to Articles, Sections and paragraphs shall refer to the corresponding
articles, sections and paragraphs in this Agreement, and references to the
parties shall mean the parties to the Stock Purchase Agreement.
ARTICLE II
Registration Rights
SECTION 2.01.Demand Registration.(a) (i) Holders of a majority of
the Registrable Securities held by the Holders may make up to four (4) written
requests for a Demand Registration under this Section 2.01 of all or any part of
the Registrable Securities held by such Holders; provided, that (A) each such
Demand Registration by the Holders must be in respect of Registrable Securities
with a fair market value of at least $50,000,000, (B) the Holders shall not be
entitled to a Demand Registration if, during the 120 days preceding such
request, the Holders had requested a Demand Registration and (C) unless and
until the consent described in Section 5.10 is obtained, the Holders shall not
be entitled to a Demand Registration which results in such registration
statement being declared effective within 120 days after the effective date of
any registration effected pursuant to Section 1.2 of the Investors Rights
Agreement.
(ii) Any request for a Demand Registration will specify the
aggregate number of shares of Registrable Securities proposed to be sold by the
Requesting Holders 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 Agreement 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 Company is in compliance in all material respects with its obligations under
this Agreement), then, subject to Section 2.01(b), such Demand Registration
shall be deemed to have been effected (provided that (i) if, the Demand
Registration does not become effective because a material adverse change has
occurred, or is reasonably likely to occur, in the condition (financial or
otherwise), business, assets or results of operations of the Company and its
subsidiaries taken as a whole subsequent to the date of the written request made
by the Requesting Holders, (ii) if the Company withdraws the Demand Registration
for any reason or (iii) if, after the Demand Registration has become effective,
an offering of Registrable Securities pursuant to a registration is interfered
with by any stop order, injunction, or other order or requirement of the
Commission or other governmental agency or court then the Demand Registration
shall not be deemed to have been effected and will not count as a Demand
Registration).
(iii) Upon receipt of any request for a Demand Registration by holders
of a majority of the Registrable Securities, the Company shall promptly (but in
any event within ten (10) days) give written notice of such proposed Demand
Registration to all other Holders, and all such Holders shall have the right,
exercisable by written notice to the Company within twenty (20) days of their
receipt of the Company's notice, to elect to include in such Demand Registration
such portion of their Registrable Securities as they may request. All such
Holders requesting to have their Registrable Securities included in a Demand
Registration in accordance with the preceding sentence shall be deemed to be
"Requesting Holders" for purposes of this Section 2.01.
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(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
Selling Holders reimburse the Company for any and all Registration Expenses
incurred by the Company in connection with such request for a Demand
Registration.
(c) If the Requesting Holders so elect, the offering of such Registrable
Securities pursuant to such Demand Registration shall be in the form of a "firm
commitment" underwritten offering. A majority in interest of the Requesting
Holders shall have the right to select the managing Underwriters and any
additional investment bankers and managers to be used in connection with any
offering under this Section 2.01, subject to the Company's approval, which
approval shall not be unreasonably withheld.
(d) The Requesting Holders will inform the Company of the time and
manner of any disposition of Registrable Common Stock, and agree to reasonably
cooperate with the Company in effecting the disposition of the Registrable
Common Stock in a manner that does not unreasonably disrupt the public trading
market for the Common Stock; provided, however, that the Holders' only right to
a shelf registration statement shall be pursuant to Section 2.03.
(e) Subject to the Investor Rights Agreement 30% Right, no securities
to be sold for the account of any Person (including the Company) other than a
Requesting Holder shall be included in a Demand Registration unless the managing
Underwriter or Underwriters shall advise the Company and the Requesting Holders
in writing that the inclusion of such securities will not materially and
adversely affect the price of the offering (a "Material Adverse Effect").
Furthermore, in the event the managing Underwriter or Underwriters shall advise
the Company or the Requesting Holders that even after exclusion of all
securities of other Persons (including the Company) pursuant to the immediately
preceding sentence, the amount of Registrable Securities proposed to be included
in such Demand Registration by Requesting Holders is sufficiently large to cause
a Material Adverse Effect, the Registrable Securities of the Requesting Holders
to be included in such Demand Registration shall equal the number of shares
which the Company and the Requesting Holders are so advised can be sold in such
offering without a Material Adverse Effect and such shares shall be allocated
pro rata among the Requesting Holders on the basis of the number of Registrable
Securities requested to be included in such registration by each such Requesting
Holder; provided, however, that if any Registrable Securities requested to be
registered pursuant to a Demand Registration under Section 2.01 are excluded
from registration hereunder, then the Holder(s) having shares excluded
("Excluded Holders") shall have the right to withdraw all, or any part, of their
shares from such registration.
SECTION 2.02. Piggyback Registration (a) If the Company 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, except as
provided for in Section 2.03, pursuant to Rule 415 (or any substitute form or
rule, respectively, that may be adopted by the Commission)), the Company shall
give written notice of such proposed filing to the Holders at the address set
forth in the share register of the Company as soon as reasonably practicable
(but in no event less than 15 days before the anticipated filing date),
undertaking to provide each Holder the opportunity to register on the same terms
and conditions such number of shares of Registrable Common Stock as such Holder
may request (a "Piggyback Registration"). Each Holder will have seven business
days after receipt of any such notice to notify the Company as to whether it
wishes to participate in a Piggyback Registration (which notice shall not be
deemed to be a request for a Demand Registration); provided that should a Holder
fail to provide timely notice to the Company, 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 Company, the Company will use its best efforts
to have the shares of Registrable Common Stock that the Holders wish to sell
included in the registration statement. If the Company or the Person for whose
account such offering is being made shall determine in its sole discretion not
to register or to delay the proposed offering, the Company 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 Common Stock 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 Common Stock for the same period as the delay in respect of the
proposed offering. As between the Company and the Selling Holders, the Company
shall be entitled to select the Underwriters in connection with any Piggyback
Registration.
(b) If the Registrable Securities requested to be included in the
Piggyback Registration by any Holder differ from the type of securities proposed
to be registered by the Company and the managing Underwriter advises the Company
that due to such differences the inclusion of such Registrable Securities would
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cause a Material Adverse Effect, then (i) the number of such Holders'
Registrable Securities to be included in the Piggyback Registration shall be
reduced to an amount which, in the opinion of the managing Underwriter, would
eliminate such Material Adverse Effect or (ii) if no such reduction would, in
the opinion of the managing Underwriter, eliminate such Material Adverse Effect,
then the Company shall have the right to exclude all such Registrable Securities
from such Piggyback Registration, provided, that no other securities of such
type are included and offered for the account of any other Person in such
Piggyback Registration. Any partial reduction in number of Registrable
Securities of any Holder to be included in the Piggyback Registration pursuant
to clause (i) of the immediately preceding sentence shall be effected pro rata
based on the ratio which such Holder's requested shares bears to the total
number of shares requested to be included in such Piggyback Registration by all
Persons other than the Company who have the contractual right to request that
their shares be included in such registration statement and who have requested
that their shares be included, subject to the Senior Piggyback Registration
Rights and (if applicable) the Investor Rights Agreement 30% Right. If the
Registrable Securities requested to be included in the registration statement
are of the same type as the securities being registered by the Company and the
managing Underwriter advises the Company that the inclusion of such Registrable
Securities would cause a Material Adverse Effect, the Company will be obligated
to include in such registration statement, as to each Holder only a portion of
the shares such Holder has requested be registered equal to the ratio which
such Holder's requested shares bears to the total number of shares requested to
be included in such registration statement by all Persons (other than the Person
or Persons initiating such registration request) who have the contractual right
to request that their shares be included in such registration statement and who
have requested their shares be included, subject to the Senior Piggyback
Registration Rights and the (if applicable) Investor Rights Agreement 30% Right.
If the Company initiated the registration, then the Company may include all of
its securities in such registration statement before any such Holder's requested
shares are included. If another security holder initiated the registration,
then the Company may not include any of its securities in such registration
statement unless all Registrable Securities requested to be included in the
registration statement by all Holders are included in such registration
statement. If as a result of the provisions of this Section 2.02(b) any Holder
shall not be entitled to include all Registrable Securities in a registration
that such Holder has requested to be so included, such Holder may withdraw such
Holder's request to include Registrable Securities in such registration
statement prior to its effectiveness.
SECTION 2.03. Shelf Registration (a) Holders of a majority of the
Registrable Securities may, at any time after the first anniversary of the
Closing Date (the "First Anniversary"), make a written request that the Company
effect a shelf registration of a portion of the Registrable Securities held by
such Holders (the "Shelf Registration") pursuant to Rule 415; provided, that a
Holder will be entitled to include in the Shelf Registration no more than 25% of
the Registrable Securities held by such Holder immediately after the Closing
Date (giving effect to accretion of dividends as of such anniversary on such
holder's Registrable Series E Preferred Stock and exercise, as of or prior to
such anniversary, of such holder's Warrants). Upon receipt of a request for the
Shelf Registration, the Company shall promptly (but in any event within 10 days)
give written notice of the proposed Shelf Registration to all other Holders, and
each such other Holder shall have the right to include in the Shelf Registration
up to 25% of the Registrable Securities held by such Holder immediately after
the Closing Date (giving effect to accretion of dividends as of such anniversary
on such holder's Registrable Series E Preferred Stock and exercise, as of or
prior to such anniversary, of such holder's Warrants).
(b) From and after the third anniversary of the Closing Date, Holders
of a majority of the Registrable Securities may make a written request that the
Company amend the Shelf Registration to include in the Shelf Registration no
more than 50% of the Registrable Securities held by such Holders immediately
after the Closing Date (giving effect to accretion of dividends as of such
anniversary on such holder's Registrable Series E Preferred Stock and exercise,
as of or prior to such anniversary, of such holder's Warrants). Upon receipt of
such request, the Company shall promptly (but in any event within 10 days) give
written notice of the proposed amendment to all other Holders, and each such
other Holder shall have the right to include in the amended Shelf Registration
up to 50% of the Registrable Securities held by such Holder immediately after
the Closing Date (giving effect to accretion of dividends as of such anniversary
on such holder's Registrable Series E Preferred Stock and exercise, as of or
prior to such anniversary, of such holder's Warrants). From and after the
fourth anniversary of the Closing Date, Holders of a majority of the Registrable
Securities may make a written request that the Company amend the Shelf
Registration to include in the Shelf Registration no more than 75% of the
Registrable Securities held by such Holder immediately after the Closing Date
(giving effect to accretion of dividends as of such anniversary on such holder's
Registrable Series E Preferred Stock and exercise, as of or prior to such
anniversary, of such holder's Warrants). Upon receipt of such request, the
Company shall promptly (but in any event within 10 days) give written notice of
the proposed amendment to all other Holders, and each such other Holder shall
have the right to include in the amended Shelf Registration up to 75% of the
Registrable Securities held by such Holders immediately after the Closing Date
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(giving effect to accretion of dividends as of such anniversary on such Holder's
Registrable Series E Preferred Stock and exercise, as of or prior to such
anniversary, of such Holder's Warrants). From and after the fifth anniversary
of the Closing Date, Holders of a majority of the Registrable Securities may
make a written request that the Company amend the Shelf Registration to include
in the Shelf Registration up to 100% of the Registrable Securities held by such
Holders immediately after the Closing Date (giving effect to accretion of
dividends as of such anniversary on such holder's Registrable Series E Preferred
Stock and exercise, as of or prior to such anniversary, of such holder's
Warrants). Upon receipt of such request, the Company shall promptly (but in any
event within 10 days) give written notice of the proposed amendment to all other
Holders, and each such other Holder shall have the right to include in the
amended Shelf Registration up to 100% of the Registrable Securities held by such
Holder immediately after the Closing Date (giving effect to accretion of
dividends as of such anniversary on such holder's Registrable Series E Preferred
Stock and exercise, as of or prior to such anniversary, of such holder's
Warrants). If a Nonconsent Event (as defined in Section 5.10) shall have
occurred, references in this paragraph to the "third anniversary of the Closing
Date" shall mean the second anniversary of the Closing Date, references to the
"fourth anniversary of the Closing Date" shall mean the third anniversary of the
Closing Date and references to the "fifth anniversary of the Closing Date" shall
mean the fourth anniversary of the Closing Date.
(c) If the Company's ability to amend the registration statement for the
Shelf Registration to increase the number of Registrable Securities included
therein (or to file a new shelf registration statement in respect thereof) in
accordance with Section 2.03 (b) is subject to any contractual limitations that
could delay the Company's ability to file or cause to become effective such
registration statement, then, if requested by Holders of a majority of the
Registrable Securities, the Company shall, in lieu of following the procedure
set forth in Section 2.03(b), file a single registration statement for the Shelf
Registration (and cause such registration statement to become and remain
effective for the period set forth in Section 3.01) that would permit the
offering of such portion of the Registrable Securities (up to 100%) as may be
requested by the Holders of a majority of the Registrable Securities (it being
understood and agreed that the Holders of the Registrable Securities would not
have the right to offer and sell from such Shelf Registration Registrable
Securities other than in accordance with the schedule and amounts set forth in
Section 2.03(b) and that the Company would have the right to take whatever
measures necessary to ensure that such schedule was followed, including, without
limitation the issuance of stop orders).
ARTICLE III
Registration Procedures
SECTION 3.01.Filings; Information. In connection with the registration of
Registrable Securities pursuant to Section 2.01, Section 2.02 and Section 2.03
hereof, the Company 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 Company will expeditiously prepare and file with the Commission a
registration statement on any form for which the Company then qualifies and
which counsel for the Company 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 (i) with
respect to any Demand Registration or Piggyback Registration, for such period,
not to exceed 60 days, as may be reasonably necessary to effect the sale of such
securities, (ii) with respect to the Shelf Registration, until the earlier of
the sale of all Registrable Securities thereunder and the eighth anniversary of
the Closing Date (it being understood that if at any time all the Registrable
Securities then permitted to be sold under such Shelf Registration pursuant to
Section 2.03 have been sold but the Holders have the right to request the
addition of additional Registrable Securities to the Shelf Registration in the
future pursuant to Section 2.03, the Company may (at its option) either cause
the registration statement to remain effective (notwithstanding the fact that
all securities then registrable on such shelf registration statement shall have
been sold) and to file post-effective amendments when required to permit the
sale of the additional Registrable Securities or prepare and file, and cause to
become and remain effective, a new shelf registration statement to effect the
registration of the additional Registrable Securities when required pursuant to
Section 2.03); provided that if the Company shall furnish to the Selling Holder
a certificate signed by the Company's Chairman, President or any Vice-President
stating that the Company's Board of Directors has determined in good faith that
it would be detrimental or otherwise disadvantageous to the Company 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 Company,
the Company 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
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the Company shall use its reasonable best efforts to permit a period of at least
120 consecutive days during which the Company will make a registration statement
available under this Agreement; 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 Company's fiscal year, and (ii) the Securities Act requires the
Company to include audited financials as of the end of such fiscal year, the
Company 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. If the Company exercises its right to postpone
the filing or effectiveness of a registration statement, the applicable
Requesting Holders shall be entitled to withdraw their request for such Demand
Registration and it shall not count as a Demand Registration.
(b) Anything in this Agreement to the contrary notwithstanding, it is
understood and agreed that the Company shall not be required to keep any shelf
registration effective or useable for offers and sales of the Registrable
Securities, file a post effective amendment to a shelf registration statement or
prospectus supplement or to supplement or amend any registration statement, if
the Company is then involved in discussions concerning, or otherwise engaged in,
any material financing or investment, acquisition or divestiture transaction or
other material business purpose if the Company determines in good faith that the
making of such a filing, supplement or amendment at such time would interfere
with such transaction or purpose. The Company shall promptly give the Holders
of Registrable Securities written notice of such postponement containing a
general statement of the reasons for such postponement and an approximation of
the anticipated delay. Upon receipt by a Holder of Registrable Securities of
notice of an event of the kind described in this Section 3.01(b), such Holder
shall forthwith discontinue such Holder's disposition of Registrable Securities
until such Holder's receipt of notice from the Company that such disposition may
continue and of any supplemented or amended prospectus indicated in such notice.
The Company shall use its reasonable best efforts to permit sales of Registrable
Securities on such shelf registration statement for at least 120 days during any
360-day period. In the event the Company shall give notice of an event of the
kind described in this Section 3.01 (b), the Company shall extend the period
during which the applicable 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
Company shall give notice to the Selling Holders that such dispositions of such
Registrable Securities may continue and shall have made available to the Selling
Holders any such supplemented or amended prospectus.
(c) The Company 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.
(d) After the filing of the registration statement, the Company will
promptly notify the Selling Holders of any stop order issued or, to the
Company'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.
(e) The Company will use its commercially reasonable 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; keep each such registration or qualification (or exemption
therefrom) effective during the period in which such registration statement is
required to be kept effective; and do any and all other acts and things which
may be reasonably necessary or advisable to enable each Selling Holder to
consummate the disposition of the Registrable Securities owned by such Selling
Holder in such jurisdictions; provided that the Company 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(e), (ii) subject
itself to taxation in any such jurisdiction or (iii) consent to general service
of process in any such jurisdiction.
(f) The Company 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 of the occurrence of any
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event of the kind described in the preceding sentence, 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 Company, the Selling Holders will
deliver to the Company 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
Company shall give such notice, the Company 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 Company shall make
available to the Selling Holders such supplemented or amended prospectus.
(g) The Company will enter into customary agreements (including an
underwriting agreement in customary form) and take such other actions as are
required in order to expedite or facilitate the sale of such Registrable
Securities.
(h) At the request of any Underwriter in connection with an underwritten
offering the Company 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
Company's independent public accountants covering such customary matters as the
managing Underwriter may reasonably request.
(i) If requested by the managing Underwriter or any Selling Holder, the
Company shall promptly incorporate in a prospectus supplement or post effective
amendment such information as the managing Underwriter or any Selling Holder
reasonably requests to be included therein, including without limitation, with
respect to the Registrable Securities being sold by such Selling Holder, the
purchase price being paid therefor by the Underwriters and with respect to any
other terms of the underwritten offering of the Registrable Securities to be
sold in such offering, and promptly make all required filings of such prospectus
supplement or post effective amendment.
(j) The Company shall promptly make available for inspection by any Selling
Holder or Underwriter participating in any disposition pursuant to any
registration statement, and any attorney, accountant or other agent or
representative retained by any such Selling Holder or Underwriter (collectively,
the "Inspectors"), all financial and other records, pertinent corporate
documents and properties of the Company (collectively, the "Records"), as shall
be reasonably necessary to enable them to exercise their due diligence
responsibility, and cause the Company's officers, directors and employees to
supply all information requested by any such Inspector in connection with such
registration statement; provided, however, that unless the disclosure of such
Records is necessary to avoid or correct a misstatement or omission in the
registration statement or the release of such Records is ordered pursuant to a
subpoena or other order from a court of competent jurisdiction, the Company
shall not be required to provide any information under this subparagraph (j) if
(A) the Company believes, after consultation with counsel for the Company, that
to do so would cause the Company to forfeit an attorney-client privilege that
was applicable to such information or (B) if either (1) the Company has
requested and been granted from the Commission confidential treatment of such
information contained in any filing with the Commission or documents provided
supplementally or otherwise or (2) the Company reasonably determines in good
faith that such Records are confidential and so notifies the Inspectors in
writing unless prior to furnishing any such information with respect to (A) or
(B) such Holder of Registrable Securities requesting such information agrees to
enter into a confidentiality agreement in customary form and subject to
customary exceptions; provided further, however, that each Holder of Registrable
Securities agrees that it will, upon learning that disclosure of such Records is
sought in a court of competent jurisdiction, give notice to the Company and
allow the Company, at its expense, to undertake appropriate action and to
prevent disclosure of the Records deemed confidential.
(k) The Company shall cause the Registrable Securities included in any
registration statement to be (A) listed on each securities exchange, if any, on
which similar securities issued by the Company are then listed, or (B)
authorized to be quoted and/or listed (to the extent applicable) on the Nasdaq
National Market if the Registrable Securities so qualify.
(l) The Company shall provide a CUSIP number for the Registrable Securities
included in any registration statement not later than the effective date of such
registration statement.
(m) The Company shall cooperate with each Selling Holder and each
Underwriter participating in the disposition of such Registrable Securities and
their respective counsel in connection with any filings required to be made with
the National Association of Securities Dealers, Inc.
(n) The Company shall during the period when the prospectus is required to
be delivered under the Securities Act, promptly file all documents required to
be filed with the Commission pursuant to Sections 13(a), 13(c), 14 or 15(d) of
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the Exchange Act.
(o) The Company 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.
The Company may require Selling Holders promptly to furnish in writing to
the Company such information regarding such Selling Holders, the plan of
distribution of the Registrable Securities and other information as the Company
may from time to time reasonably request or as may be legally required in
connection with such registration.
SECTION 3.02.Registration Expenses. In connection with any Registration
effected hereunder, the Company 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 Company and the reasonable fees and expenses of independent
certified public accountants for the Company (including fees and expenses
associated with the special audits or the delivery of comfort letters), (vi) the
reasonable fees and expenses of any additional experts retained by the Company
in connection with such registration, (vii) all roadshow costs and expenses not
paid by the Underwriters and (viii) the reasonable fees and expenses of one
counsel for the Selling Holders.
ARTICLE IV
Indemnification and Contribution
SECTION 4.01.Indemnification by the Company. The Company 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, resulting from or related to any untrue statement or alleged
untrue statement of a material fact contained or incorporated by reference in
any registration statement or prospectus relating to the Registrable Securities
(as amended or supplemented if the Company 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 based
upon any information furnished in writing to the Company by or on behalf of such
Selling Holder expressly for use therein or by the Selling Holder's failure to
deliver a copy of the registration statement or prospectus or any amendments or
supplements thereto after the Company has furnished the Selling Holder with
copies of the same; provided, however, that the Company shall have no obligation
to indemnify under this sentence to the extent any such losses, claims, damages
or liabilities have been finally and non-appealably determined by a court to
have resulted from such Selling Holder's willful misconduct or gross negligence.
The Company 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, except insofar as such
losses, claims, damages or liabilities are caused by or based upon any
information furnished in writing to the Company by or on behalf of such
Underwriter expressly for use therein or by the Underwriter's failure to deliver
a copy of the registration statement or prospectus or any amendments or
supplements thereto after the Company has furnished the Underwriter with copies
of the same; provided, however, that the Company shall have no obligation to
indemnify under this sentence to the extent any such losses, claims, damages or
liabilities have been finally and non-appealably determined by a court to have
resulted from any such Underwriter's willful misconduct or gross negligence.
SECTION 4.02.Indemnification by Selling Holders. Each Selling Holder
agrees to indemnify and hold harmless the Company, its officers and directors,
and each Person, if any, which controls the Company 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 Company 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 Company provided in this
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Section 4.02, 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 such Selling Holder's
liability under this Section 4.02 shall be limited to an amount equal to the net
proceeds (after deducting the underwriting discount and expenses) received by
such Selling Holder from the sale of such Registrable Securities by such Selling
Holder. The obligation of each Selling Holder shall be several and not joint.
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 IV 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 Company, 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 Company 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 IV, 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.
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ARTICLE V
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 Agreement and (c) furnishes in writing to the Company such
information regarding such Person, the plan of distribution of the Registrable
Securities and other information as the Company may from time to time request or
as may be legally required in connection with such registration; provided,
however, that no such Person shall be required to make any representations or
warranties in connection with any such registration other than representations
and warranties as to (i) such Person's ownership of his or its Registrable
Securities to be sold or transferred free and clear of all liens, claims and
encumbrances, (ii) such Person's power and authority to effect such transfer and
(iii) such matters pertaining to compliance with securities laws as may be
reasonably requested; provided further, however, that the obligation of such
Person to indemnify pursuant to any such underwriting agreements shall be
several, not joint and several, among such Persons selling Registrable
Securities, and the liability of each such Person will be in proportion to, and
provided further that such liability will be limited to, the net amount received
by such Person from the sale of such Person's Registrable Securities pursuant to
such registration.
SECTION 5.02.Rule 144. The Company 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 any Holder, the Company will
deliver to such Holder 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 by the Company (whether for the account of the Company or
otherwise) not to offer, sell, contract to sell or otherwise dispose of any
Registrable Securities, or any securities convertible into or exchangeable or
exercisable for such securities, 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 120-day period (or such lesser period as the lead
or managing underwriters may require) 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 March 31, 2015, or such earlier time as there shall
no longer be any Registrable Securities; provided, however, that if all shares
of Series E Preferred Stock outstanding on such date shall not have been
redeemed in full in accordance with Section 10 of the Certificate of
Designations, this Agreement shall remain in full force and effect with respect
to the Registrable Securities until such time as the shares of Series E
Preferred Stock have been so redeemed in full.
SECTION 5.05.Amendments, Waivers, Etc. This Agreement may not be amended,
waived or otherwise modified or terminated except by an instrument in writing
signed by the Company and the Holders of at least 50% of the Registrable
Securities then held by all the Holders, if the amendment is to be effective
against the Holders.
SECTION 5.06.Counterparts. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement. Each
party need not sign the same counterpart.
SECTION 5.07.Entire Agreement. This Agreement constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof.
SECTION 5.08.Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York regardless of
the laws that might otherwise govern under applicable principles of conflicts of
law thereof.
SECTION 5.09.Assignment of Registration Rights. Each Holder of the
Registrable Securities may assign all or any part of its rights under this
Agreement to any person to whom such Holder sells, transfers or assigns such
Registrable Securities. In the event that the Holder shall assign its rights
pursuant to this Agreement in connection with the transfer of less than all its
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Registrable Securities, the Holder shall also retain his rights with respect to
its remaining Registrable Securities.
SECTION 5.10. Consent. The Company will use its best efforts to obtain
the consent of "Holders of 60% or more of the outstanding Registrable
Securities" (as such terms are defined in the Investors Rights Agreement ) (i)
acknowledging that the Holders of the Registrable Securities are new preferred
stock investors in the Company within the meaning of Section 3.3 of the
Investors Rights Agreement and (ii) consenting (if necessary in light of (i)) to
the waiver of Section 1.14(b) of the Investors Rights Agreement with respect to
registrations effected pursuant to this Agreement. If the Company does not
obtain the requisite consent referred to in the preceding sentence prior to the
first anniversary of the Closing Date (a "Nonconsent Event"), the shelf
registration rights set forth in Section 2.03 shall be adjusted as provided
therein.
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IN WITNESS WHEREOF, the Company and each Holder has caused this Agreement
to be signed on its behalf by its officer thereunto duly authorized as of the
date first written above.
RHYTHMS NETCONNECTIONS INC.
By:/s/ Catherine Hapka
Name:Catherine Hapka
Title: Chief Executive Officer
HMTF BRIDGE RHY, LLC
HM4 RHYTHMS QUALIFIED FUND, LLC
HM4 RHYTHMS PRIVATE FUND, LLC
HM PG-IV RHYTHMS, LLC
HM 4-SBS RHYTHMS COINVESTORS, LLC
HM 4-EQ RHYTHMS COINVESTORS, LLC
By:/s/ David W. Knickel
Name: David W. Knickel
Title: Vice President
[SIGNATURE PAGE FOR RHYTHMS NETCONNECTIONS INC.
REGISTRATION RIGHTS AGREEMENT]
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SCHEDULE I
Number Purchase Price
Purchasers of Shares of the Shares
HMTF Bridge RHY, LLC 125,000 $125,000,000
HM4 Rhythms Qualified Fund, LLC 113,743 113,743,000
HM4 Rhythms Private Fund, LLC 806 806,000
HM PG-IV Rhythms, LLC 6,056 6,056,000
HM 4-SBS Rhythms Coinvestors, LLC 2,724 2,724,000
HM 4-EQ Rhythms Coinvestors, LLC 1,671 1,671,000
PAGE 13
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EXHIBIT 10.3
RHYTHMS NETCONNECTIONS INC.
CERTIFICATE OF DESIGNATION OF THE POWERS,
PREFERENCES AND RELATIVE, PARTICIPATING, OPTIONAL
AND OTHER SPECIAL RIGHTS OF 8.25% SERIES E
CONVERTIBLE PREFERRED STOCK AND
QUALIFICATIONS, LIMITATIONS
AND RESTRICTIONS THEREOF
8.25% Series E Convertible
Preferred Stock due 2015
Rhythms NetConnections Inc., a company organized and existing under the
General Corporation Law of the State of Delaware (the "Company"), certifies that
pursuant to the authority contained in its Certificate of Incorporation (the
"Certificate of Incorporation") and its By-laws (the "By-laws"), and in
accordance with Section 151 of the General Corporation Law of the State of
Delaware, the board of directors of the Company (the "Board of Directors") at a
meeting duly called and held on February __, 2000 duly approved and adopted the
following resolution, which resolution remains in full force and effect on the
date hereof:
RESOLVED, that pursuant to the authority vested in the Board of Directors
by the Certificate of Incorporation and By-laws, the Board of Directors does
hereby create, authorize and provide for the issue of a series of Preferred
Stock having the following designation, voting powers, preferences and relative,
participating, optional and other special rights:
Certain capitalized terms used herein are defined in Section 16.
1. Number and Designation. The Company shall have a series of
Preferred Stock, which shall be designated as its 8.25% Series E Convertible
Preferred Stock due 2015 (the "Series E Preferred Stock"), par value $0.001 per
share. The number of shares constituting the Series E Preferred Stock shall be
250,000. Unless otherwise specified, references herein to any "Section" refer
to the Section number specified in this Certificate of Designation.
2. Issuance. The Company may issue up to 250,000 shares of Series E
Preferred Stock in accordance with the Purchase Agreement.
3. Registered Form; Liquidation Preference; Registrar. Certificates
for shares of Series E Preferred Stock shall be issuable only in registered form
and only with an initial liquidation preference of $1,000 per share plus accrued
and unpaid dividends. The Company shall serve as initial Registrar and Transfer
Agent (the "Registrar") for the Series E Preferred Stock.
4. Registration; Transfer. Shares of the Series E Preferred Stock have
not been registered under the Securities Act of 1933, as amended (the
"Securities Act") and may not be resold, pledged or otherwise transferred prior
to the date when they may be resold pursuant to Rule 144 under the Securities
Act other than (i) to the Company, (ii) pursuant to an exemption from
registration under the Securities Act or (iii) pursuant to an effective
registration statement under the Securities Act, in each case in accordance with
any applicable securities laws of any state of the United States. Until such
time as it is no longer required pursuant to the Securities Act, certificates
evidencing the Series E Preferred Stock shall contain a legend (the "Restricted
Shares Legend") evidencing the foregoing restrictions in substantially the form
set forth on the form of Series E Preferred Stock attached hereto as Exhibit A.
5. Paying Agent and Conversion Agent
(a) The Company shall maintain (i) an office or agency where shares of
Series E Preferred Stock may be presented for payment (the "Paying Agent"), (ii)
an office or agency where shares of Series E Preferred Stock may be presented
for conversion (the "Conversion Agent"), and (iii) a Registrar, which shall be
an office or an agency where shares of Series E Preferred Stock may be presented
for transfer. The Company may appoint the Registrar, the Paying Agent and the
Conversion Agent and may appoint one or more additional paying agents and one or
more additional conversion agents in such other locations as it shall determine.
The term "Paying Agent" includes any additional paying agent, and the term
"Conversion Agent" includes any additional conversion agent. The Company may
change any Paying Agent or Conversion Agent without prior notice to any holder.
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The Company shall notify the Registrar of the name and address of any Paying
Agent or Conversion Agent appointed by the Company. If the Company fails to
appoint or maintain another entity as Paying Agent or Conversion Agent, the
Registrar shall act as such. Notwithstanding the foregoing, the Company or any
of its Affiliates may act as Paying Agent, Registrar, coregistrar or Conversion
Agent.
(b) Neither the Company nor the Registrar shall be required (A) to
issue, countersign or register the transfer of or exchange any share of Series E
Preferred Stock during a period beginning at the opening of business 15 days
before any Redemption Date (as defined under Section 10(d)) and ending at the
close of business on such Redemption Date or (B) to register the transfer of or
exchange any share of Series E Preferred Stock so selected for redemption.
(c) If shares of Series E Preferred Stock are issued upon the transfer,
exchange or replacement of shares of Series E Preferred Stock bearing the
Restricted Shares Legend, or if a request is made to remove such Restricted
Shares Legend on shares of Series E Preferred Stock, the shares of Series E
Preferred Stock so issued shall bear the Restricted Shares Legend, or the
Restricted Shares Legend shall not be removed, as the case may be, unless the
holders of such shares shall request such Legend be removed, and outside counsel
for such holders reasonably determines that the transfer of such shares is no
longer restricted by the Securities Act and outside counsel for the Company
reasonably concurs in such determination.
(d) Each holder of a share of Series E Preferred Stock agrees to
indemnify the Company and the Registrar against any liability that may result
from the transfer, exchange or assignment by such holder of such holder's share
of Series E Preferred Stock in violation of any provision of this Certificate of
Designation and/or applicable Federal or state securities law; provided,
however, that such indemnity shall not apply to acts of willful misconduct or
gross negligence on the part of the Company or the Registrar, as the case may
be.
(e) Payments due on the shares of Series E Preferred Stock shall be
payable at the office or agency of the Paying Agent maintained for such purpose
in The City of New York and at any other office or agency maintained by the
Paying Agent for such purpose. If any such payment is in cash, it shall be
payable by United States dollar check drawn on, or wire transfer (provided that
appropriate wire instructions have been received by the Paying Agent at least 15
days prior to the applicable date of payment) to a United States dollar account
maintained by the holder with, a bank located in New York City; provided that at
the option of the Company payment of dividends in cash may be made by check
mailed to the address of the person entitled thereto as such address shall
appear in the Series E Preferred Share Register.
6. Dividend Rights.
(a) The holders of Series E Preferred Stock shall be entitled to
participating cumulative dividends, in preference to dividends on any Junior
Shares, which shall accrue as provided herein. Dividends on each share of Series
E Preferred Stock will accrue on a daily basis at the rate of 8.25% per annum of
the then effective Liquidation Preference of such share from and including the
Closing Date to the first to occur of (i) the date on which such share is
redeemed in accordance with Section 10, (ii) the date on which such share is
converted in accordance with Section 12 or (iii) the date the Company is
liquidated, dissolved or wound up in accordance with Section 9(c). Dividends
shall accrue as provided herein whether or not such dividends have been
declared, whether or not there are any unrestricted funds of the Company legally
available for the payment of dividends and whether or not such dividends are
then payable in cash as provided in Section 11. The Company will take all
actions required or permitted under the DGCL to permit the payment or accrual of
dividends on the Series E Preferred Stock. On each Dividend Payment Date,
commencing March 31, 2000, to and including the March 31, 2005 Dividend Payment
Date, accrued dividends on a share of the Series E Preferred Stock for the
preceding Dividend Period shall be added cumulatively to and thereafter remain a
part of the Liquidation Preference of such share. Thereafter, accrued dividends
shall be payable quarterly on each Dividend Payment Date, commencing on June 30,
2005, to the holders of record of the Series E Preferred Stock as of the close
of business on the applicable Dividend Record Date. Accrued dividends that are
not paid in full in cash on any such Dividend Payment Date (whether or not
declared and whether or not there are sufficient funds legally available for the
payment thereof) shall be added cumulatively to the Liquidation Preference on
the applicable Dividend Payment Date and thereafter remain a part thereof.
Accrued dividends added to the Liquidation Preference of a share of Series E
Preferred Stock in accordance with the foregoing provisions of this Section 6(a)
are sometimes referred to in this Certificate as "Accumulated Dividends". For
purposes of determining the amount of dividends "accrued" (i) as of the first
Dividend Payment Date and as of any date that is not a Dividend Payment Date,
such amount shall be calculated on the basis of the rate per annum specified
above in this paragraph for the actual number of days elapsed from and including
the Closing Date (in case of the first Dividend Payment Date and any date prior
to the first Dividend Payment Date) or the last preceding Dividend Payment Date
(in case of any other date) to the date as of which such determination is to be
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made, based on a 360-day year, and (ii) as of any Dividend Payment Date after
the first Dividend Payment Date, such amount shall be calculated on the basis of
such rate per annum based on a 360-day year of twelve 30-day months.
(b) If a Change of Control occurs prior to March 31, 2005 (the time and
date such Change of Control occurs being the "Change of Control Date"), an
amount equal to the Special Dividend shall be added to the Liquidation
Preference of each share of the Series E Preferred Stock as of the Change of
Control Date and thereafter remain a part thereof.
In addition to all dividends provided for above, whenever the Company shall
declare or pay any dividend in cash on any Common Stock, the holders of Series E
Preferred Stock shall be entitled to receive such dividend on an as converted
basis. Dividends payable pursuant to this Section 6(c) shall not reduce any
dividends otherwise payable pursuant to Section 6(a) or 6(b).
7. Payment of Dividend; Mechanics of Payment; Dividend Rights
Preserved.
(a) Subject to Sections 6 and 11, dividends on any share of
Series E Preferred Stock that are payable, and are punctually paid or duly
provided for, on any Dividend Payment Date shall be paid in cash to the person
in whose name such share of Series E Preferred Stock (or one or more predecessor
shares of Series E Preferred Stock) is registered at the close of business on
the next preceding March 15, June 15, September 15 and December 15 (each, a
"Dividend Record Date").
(b) Unless full cumulative dividends on all outstanding shares of
Series E Preferred Stock for all past Dividend Periods shall have been declared
and paid or declared and a sufficient sum for the payment thereof set apart (for
purposes of this Section 7, dividends on shares of Series E Preferred Stock that
are added to the Liquidation Preference of such shares through and including the
March 31, 2005 Dividend Payment Date shall be deemed declared and paid), then:
(i) no dividend (other than (A) with respect to Junior Shares, a
dividend payable solely in any Junior Shares, (B) with respect to Parity Shares,
a dividend payable solely in Junior Shares or Parity Shares or (C) with respect
to Parity Shares a partial dividend paid pro rata on such Parity Shares and the
shares of Series E Preferred Stock) shall be declared or paid upon, or any sum
set apart for the payment of dividends upon, any Junior Shares or Parity Shares,
respectively;
(ii) no other distribution shall be declared or made upon, or any
sum set apart for the payment of any distribution upon, any Junior Shares or
Parity Shares;
(iii) no Junior Shares or Parity Shares or any warrants, rights,
calls or options (other than any cashless exercises of options or buybacks of
options or restricted stock from present or former employees, directors or
consultants) exercisable for or convertible into any Parity Share or Junior
Share shall be purchased, redeemed or otherwise acquired (other than in exchange
for other Junior Shares or Parity Shares, respectively) by the Company or any of
its subsidiaries; and
(iv) no monies shall be paid into or set apart or made available
for a sinking or other like fund for the purchase, redemption or other
acquisition of any Junior Shares or Parity Shares or any warrants, rights, calls
or options exercisable for or convertible into any Parity Shares or Junior
Shares by the Company or any of its subsidiaries (other than any cashless
exercises of options or option buybacks).
Except as provided in Sections 6, 12 or 13, holders of Series
Preferred Stock will not be entitled to any dividends, whether payable in cash,
property or stock, in excess of the full cumulative dividends as herein
described.
(c) The Company will notify the Registrar and make a public
announcement no later than the close of business on the tenth Business Day prior
to the Record Date for each dividend as to whether it will pay such dividend.
(d) Subject to the foregoing provisions of this Section 7, each share
of Series E Preferred Stock delivered under this Certificate of Designation upon
registration of transfer of or in exchange for or in lieu of any other share of
Series E Preferred Stock shall carry the rights to dividends accumulated and
unpaid, and to accrue, that were carried by such other shares of Series E
Preferred Stock.
(e) The holder of record of a share of Series E Preferred Stock at the
close of business on a Dividend Record Date with respect to the payment of
dividends on the shares of Series E Preferred Stock will be entitled to receive
such dividends with respect to such share of Series E Preferred Stock on the
corresponding Dividend Payment Date, notwithstanding the conversion of such
share after such Dividend Record Date and prior to such Dividend Payment Date.
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8. Voting Rights.
(a) The holders of record of shares of Series E Preferred Stock shall
not be entitled to any voting rights except as hereinafter provided in this
Section 8 or as otherwise provided by law.
(b) The holders of record of shares of Series E Preferred Stock shall
be entitled to vote on all matters that the holders of the Company's Common
Stock are entitled to vote upon.
(c) In addition to the voting rights set forth above, the approval of
the holders of at least a majority of the then Outstanding shares of Series E
Preferred Stock voting or consenting, as the case may be, as one class, will be
required for the Company to:
(i) amend the Certificate of Incorporation, this Certificate of
Designation or the By-Laws so as to (A) affect adversely the rights, preferences
(including, without limitation, liquidation preferences, conversion price,
dividend rate and Optional Redemption provisions), privileges or voting rights
of holders of the shares of Series E Preferred Stock, or (B) increase or
decrease the number of authorized shares of Series E Preferred Stock;
(ii) in a single transaction or series of related transactions,
consolidate or merge with or into, or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its assets to, any person or
adopt a plan of liquidation or dissolution, except as expressly provided in
Section 14;
(iii) enter into, or permit any of its subsidiaries to enter into, any
agreement that would impose material restrictions on the Company's ability to
honor the exercise of any rights of the holders of the Series E Preferred Stock;
(iv) issue any shares of Series E Preferred Stock other than pursuant
to the terms of the Purchase Agreement as in effect on the Closing Date; or
(v) issue any class or series of equity of the Company that would
be deemed to be Parity Shares or Senior Shares with respect to rights relating
(a) to payments of dividends or (b) distribution of assets upon liquidation,
dissolution or winding-up.
(d) For so long as the members of the HMTF Group in the aggregate own
any combination of the shares of Series E Preferred Stock issued to members of
the HMTF Group on the Closing Date under the Purchase Agreement (the "HMTF
Issued Series E Preferred Shares") and shares of Common Stock issued upon
conversion of HMTF Issued Series E Preferred Shares that, taken together, would
represent (if all HMTF Issued Series E Preferred Shares were converted) an
amount of Common Stock issuable upon conversion of 40% or more of the HMTF
Issued Series E Preferred Shares, the HMTF Holders, voting as a single class,
shall be entitled to elect one director to serve on the Board of Directors at
any annual meeting of stockholders or special meeting held in place thereof, or
at a special meeting of the HMTF Holders called as hereinafter provided. At any
time after voting power to elect such director shall have become vested and be
continuing in the HMTF Holders pursuant to this paragraph, or if a vacancy shall
exist in the office of a director elected by the HMTF Holders at a time when the
HMTF Holders are entitled to elect a director pursuant to this paragraph, a
proper officer of the Company may, and upon the written request of the holders
of record of at least twenty-five percent (25%) of the HMTF Issued Series E
Preferred Shares then outstanding held by the HMTF Holders addressed to the
Secretary of the Company shall, call a special meeting of the HMTF Holders for
the sole purpose of electing the director that such holders are entitled to
elect. If such meeting shall not be called by a proper officer of the Company
within twenty (20) days after personal service of said written request upon the
Secretary of the Company, or within twenty (20) days after mailing the same
within the United States by certified mail, addressed to the Secretary of the
Company at its principal executive offices, then the holders of at least
twenty-five percent (25%) of the HMTF Issued Series E Preferred Shares then
outstanding held by the HMTF Holders may designate in writing one of their
number to call such meeting at the expense of the Company, and such meeting may
be called by the person so designated upon the notice required for the annual
meeting of stockholders of the Company and shall be held at the place for
holding the annual meetings of stockholders. As used herein, (i) "HMTF Group"
means Hicks, Muse, Tate & Furst Incorporated, a Texas corporation, and its
Affiliates and their respective officers, directors, partners, members,
stockholders and employees (and members of their respective families and trusts
for the primary benefit of such family members) and HM4 Rhythms Qualified Fund,
LLC; HM4 Rhythms Private Fund, LLC; HM PG-IV Rhythms, LLC; HM 4-SBS Rhythms
Coinvestors, LLC; HM 4-EQ Rhythms Coinvestors LLC; and HMTF Bridge RHY, LLC and
their respective Affiliates and (ii) "HMTF Holders" means members of the HMTF
Group that are holders of all or a portion of the HMTF Issued Series E Preferred
Shares or the Common Stock into which such HMTF Issued Series E Preferred Shares
are converted. The action permitted or required to be taken by the HMTF Holders
pursuant to this Section 8(d) may be taken (1) at any annual or special meeting
of stockholders or at a special meeting of the HMTF Holders, or (2) without a
meeting, without prior notice, and without a vote if a consent or consents in
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writing, setting forth the action so taken, shall be signed by the HMTF Holders
having not less than the minimum number of votes that would be necessary to
authorize or take such action at a meeting at which all shares held by the HMTF
Holders entitled to vote thereon were present and voted and shall be delivered
to the Company by delivery to its address listed in Section 8.2 of the Purchase
Agreement.
(e) In exercising the voting rights set forth in Section 8(b), each
share of Series E Preferred Stock shall be entitled to vote on an as-converted
basis with the holders of the Company's Common Stock. Except as set forth in
Section 8(d), exercising the other voting rights set forth in this Section 8,
each share of Series E Preferred Stock entitled to vote shall have one vote per
share, except that when any other series of preferred stock shall have the right
to vote with the Series E Preferred Stock as a single class on any matter, then
the Series E Preferred Stock and such other series of preferred stock shall have
with respect to such matters one vote per $1,000 of the aggregate liquidation
preference of all shares of Series E Preferred Stock and all shares of such
other series of preferred stock. Except as otherwise required by applicable law
or as set forth herein, the shares of Series E Preferred Stock shall not have
any relative, participating, optional or other special voting rights and powers
and the consent of the holders thereof shall not be required for the taking of
any corporate action.
9. Ranking
(a) The shares of Series E Preferred Stock will, with respect to
dividend rights and rights on liquidation, winding-up and dissolution, rank (i)
senior to all shares of Common Stock (whether issued in one or more classes) and
to each other class of capital stock or series of Preferred Stock of the Company
(including without limitation the Series 1 Junior Participating Preferred
Stock), the terms of which do not expressly provide that it ranks senior to or
on a parity with the shares of Series E Preferred Stock as to dividend rights
and rights on liquidation, winding-up and dissolution of the Company
(collectively referred to, together with all shares of Common Stock (whether
issued in one or more classes) of the Company, as "Junior Shares"); (ii) on a
parity with (A) the 6 % Series F Cumulative Convertible Preferred Stock and (B)
each other class of capital stock or series of Preferred Stock of the Company
issued by the Company in compliance with Section 8, the terms of which expressly
provide that such class or series will rank on a parity with the shares of
Series E Preferred Stock as to dividend rights and rights on liquidation,
winding-up and dissolution of the Company (collectively referred to as "Parity
Shares"); and (iii) junior to each class of capital stock or series of Preferred
Stock of the Company, the terms of which expressly provide that such class or
series will rank senior to the shares of Series E Preferred Stock as to dividend
rights and rights upon liquidation, winding-up and dissolution of the Company
(collectively referred to as "Senior Shares").
(b) No dividend whatsoever shall be declared or paid upon, or any sum
set apart for the payment of dividends upon, any outstanding shares of Series E
Preferred Stock with respect to any dividend period unless all dividends for all
preceding dividend periods have been declared and paid, or declared and a
sufficient sum set apart for the payment of such dividends, or declared and
added to the Liquidation Value as described herein, upon all outstanding Senior
Shares.
(c) In the event of any liquidation, dissolution or winding-up of the
Company, whether voluntary or involuntary, the holders of the shares of Series E
Preferred Stock then Outstanding shall be entitled to receive, prior and in
preference to any distribution of any of the assets of the Company to the
holders of shares of Common Stock or Junior Shares by reason of their ownership
thereof, an amount equal to the greater of (i) the then effective Liquidation
Preference, plus an amount equal to all dividends accrued and unpaid thereon
from the last Dividend Payment Date to the date fixed for liquidation,
dissolution or winding-up or (ii) the amount such holders would receive if such
holders converted their shares of Series E Preferred Stock into Common Stock
immediately prior to such liquidation, dissolution or winding up. If upon the
occurrence of such event the assets of the Company shall be insufficient to
permit the payment to such holders of the full preferential amount and all
liquidating payments on all Parity Securities, the entire assets of the Company
legally available for distribution shall be distributed among the holders of the
shares of Series E Preferred Stock and the holders of all Parity Shares ratably
in accordance with the respective amounts that would be payable on such shares
of Series E Preferred Stock and any such Parity Securities if all amounts
payable thereon were paid in full. After payment of the full preferential
amount (and, if applicable, an amount equal to a pro rata dividend to the
holders of Outstanding shares of Series E Preferred Stock), such holders shall
not be entitled to any additional distribution of assets of the Company.
10. Redemption
(a) The shares of Series E Preferred Stock may be redeemed by the
Company at any time commencing on or after March 31, 2005 (or earlier, in
accordance with the provisions of Section 13(d) if a Change of Control Date
shall have occurred, but only as to shares of Series E Preferred Stock with
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respect to which the Remarketing Option has been elected), in whole or from time
to time in part, at the election of the Company (an "Optional Redemption"), at a
redemption price (the "Redemption Price") payable in cash equal to 100% (or 101%
if a Change of Control shall have occurred prior to March 31, 2005) of the then
effective Liquidation Preference (after giving effect to the Special Dividend,
if applicable), plus accrued and unpaid dividends thereon from the last Dividend
Payment Date to the date of redemption (the "Optional Redemption Date").
(b) Shares of Series E Preferred Stock (if not earlier redeemed or
converted) shall be mandatorily redeemed by the Company on March 31, 2015 (the
"Mandatory Redemption Date"); provided, however, that if such date is not a
Business Day, then the Mandatory Redemption Date shall be the next Business
Day), at a Redemption Price per share in cash equal to the then effective
Liquidation Preference (after giving effect to the Special Dividend, if
applicable), plus accrued and unpaid dividends thereon from the last Dividend
Payment Date to the Mandatory Redemption Date.
(c) In the event of a redemption of fewer than all the shares of Series
E Preferred Stock, the shares of Series E Preferred Stock will be chosen for
redemption by the Registrar from the Outstanding shares of Series E Preferred
Stock not previously called for redemption, pro rata or by lot or by such other
method as the Registrar shall deem fair and appropriate; provided, that the
Company may redeem (an "Odd-lot Redemption") all shares held by holders of fewer
than 100 shares of Series E Preferred Stock (or by holders that would hold fewer
than 100 shares of Series E Preferred Stock following such redemption) prior to
its redemption of other shares of Series E Preferred Stock; provided, further,
that the Company may not redeem a portion of any share without redeeming the
entire share. If fewer than all the shares of Series E Preferred Stock
represented by any share certificate are so to be redeemed, (i) the Company
shall issue a new certificate for the shares not redeemed and (ii) if any shares
represented thereby are converted before termination of the conversion right
with respect to such shares, such converted shares shall be deemed (so far as
may be) to be the shares represented by such share certificate that was selected
for redemption. Shares of Series E Preferred Stock that have been converted
during a selection of shares of Series E Preferred Stock to be redeemed shall be
treated by the Registrar as outstanding for the purpose of such selection but
not for the purpose of the payment of the Redemption Price.
(d) In the event the Company elects to effect an Optional Redemption,
the Company shall (i) make a public announcement of the redemption and (ii) give
a redemption notice (the "Redemption Notice") to the holders not fewer than 30
days nor more than 60 days before the redemption date (the "Redemption Date").
Whenever a Redemption Notice is required to be delivered to the holders, such
notice shall provide the information set forth below and be given by first class
mail, postage prepaid to each holder of shares of Series E Preferred Stock to be
redeemed, at such holder's address appearing in the Series E Preferred Share
Register. All Redemption Notices shall identify the shares of Series E
Preferred Stock to be redeemed (including CUSIP number) and shall state:
(i) the Redemption Date;
(ii) the applicable Redemption Price;
(iii) if fewer than all the outstanding shares of Series E Preferred
Stock are to be redeemed, the identification (and, in the case of partial
redemption, the certificate number, the total number of shares represented
thereby and the number of such shares being redeemed on the Redemption Date) of
the particular shares of Series E Preferred Stock to be redeemed;
(iv) that on the Redemption Date the Redemption Price, together with
all accrued and unpaid dividends from the last Dividend Payment Date to the
Redemption Date, will become due and payable upon each such share of Series E
Preferred Stock to be redeemed and that dividends thereon will cease to accrue
on and after said date;
(v) the conversion price, the date on which the right to convert shares
of Series E Preferred Stock to be redeemed will terminate and the place or
places where such shares of Series E Preferred Stock may be surrendered for
conversion; and
(vi) the place or places where such shares of Series E Preferred Stock
are to be surrendered for payment of the Redemption Price and the other amounts
which are then payable.
The Redemption Notice shall be given by the Company or, at the Company's
request, by the Registrar in the name and at the expense of the Company;
provided that if the Company so requests, it shall provide the Registrar
adequate time, as reasonably determined by the Registrar, to deliver such
notices in a timely fashion.
(e) Prior to any Redemption Date, the Company shall deposit with the
Registrar or with a Paying Agent (or, if the Company is acting as its own Paying
Agent, segregate and hold in trust) an amount of consideration sufficient to pay
the Redemption Price of all the shares of Series E Preferred Stock that are to
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be redeemed on that date plus all accrued and unpaid dividends thereon from the
last Dividend Payment Date to the Redemption Date. If any share of Series E
Preferred Stock called for redemption is converted, any consideration deposited
with the Registrar or with any Paying Agent or so segregated and held in trust
for the redemption of such share of Series E Preferred Stock shall be paid or
delivered to the Company upon Company Order or, if then held by the Company,
shall be discharged from such trust.
(f) Notice of redemption having been given as aforesaid, the shares of
Series E Preferred Stock so to be redeemed shall, on the Redemption Date, become
due and payable at the Redemption Price therein specified plus all accrued and
unpaid dividends thereon from the last Dividend Payment Date to the Redemption
Date, and from and after such date (unless the Company shall default in the
payment of the Redemption Price and accrued but unpaid dividends) dividends on
such shares of Series E Preferred Stock shall cease to accrue and such shares
shall cease to be convertible into shares of Common Stock. Upon surrender of
any such shares of Series E Preferred Stock for redemption in accordance with
said notice, such shares of Series E Preferred Stock shall be redeemed by the
Company at the applicable Redemption Price, together with all accrued and unpaid
dividends thereon from the last Dividend Payment Date to the Redemption Date.
If any share of Series E Preferred Stock called for redemption shall not be so
paid upon surrender thereof for redemption, the Redemption Price thereof, and
all accrued and unpaid dividends thereon from the last Dividend Payment Date to
the Redemption Date, shall, until paid, bear interest from the Redemption Date
at the dividend rate payable on the shares of Series E Preferred Stock and such
shares shall remain convertible.
(g) Any certificate that represents more than one share of Series E
Preferred Stock and is to be redeemed only in part shall be surrendered at any
office or agency of the Company designated for that purpose (with, if the
Company or the Registrar so requires, due endorsement by, or a written
instrument of transfer in form satisfactory to the Company and the Registrar
duly executed by, the holder thereof or his attorney duly authorized in
writing), and the Company shall execute, and the Registrar shall countersign and
deliver to the holder of such share of Series E Preferred Stock without service
charge, a new Series E Preferred Stock certificate or certificates, representing
any number of shares of Series E Preferred Stock as requested by such holder, in
aggregate amount equal to and in exchange for the number of shares not redeemed
and represented by the Series E Preferred Stock certificate so surrendered.
(h) If a share of Series E Preferred Stock is redeemed subsequent to a
Dividend Record Date with respect to any Dividend Payment Date and on or prior
to such Dividend Payment Date, then the accrued dividends payable on such
Dividend Payment Date will be paid to the person in whose name such share of
Series E Preferred Stock is registered at the close of business on such Dividend
Record Date.
11. Method of Payments
The Company may make any dividend payments in cash with respect to any
Dividend Period beginning after March 31, 2005; provided that no payment shall
be made in cash that would violate the provisions of the Indenture dated as of
May 5, 1998 between the Company and State Street Bank and Trust Company of
California, N.A. or the Indenture dated April 23, 1999 between the same parties,
if and to the extent those Indentures are in effect. Any dividends not paid in
cash on a current basis on the applicable Dividend Payment Date with respect to
all periods after March 31, 2005, and all dividends with respect to periods
prior to March 31, 2005, shall not be paid in cash but rather shall constitute
Accumulated Dividends as dividends. No payment may be made in respect of
Accumulated Dividends as dividends. Rather, Accumulated Dividends shall be
added to the Liquidation Preference. Dividends may not be paid by delivery of
shares of Series E Preferred Stock.
12. Conversion
(a) Subject to and upon compliance with the provisions of this
Certificate of Designation, at the option of the holder thereof, any share of
Series E Preferred Stock may be converted at any time into a number of fully
paid and nonassessable shares of Common Stock (calculated as to each conversion
to the nearest 1/100 of a share) equal to (i) the then effective Liquidation
Preference thereof plus accrued and unpaid dividends to the date of conversion
divided by (ii) the Conversion Price in effect at the time of conversion. Such
conversion right shall expire at the close of business on the Business Day next
preceding the Mandatory Redemption Date. In case a share of Series E Preferred
Stock is called for redemption, such conversion right in respect of the share so
called shall expire at the close of business on the Business Day next preceding
the Redemption Date, unless the Company defaults in making the payment due upon
redemption.
The Conversion Price shall be initially $37.50 per share of Common Stock.
The Conversion Price shall be adjusted in certain instances as provided in
Section 12(d) and Section 12(e).
(b) In order to exercise the conversion privilege, the holder of any
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share of Series E Preferred Stock to be converted shall surrender the
certificate for such share, duly endorsed or assigned to the Company or in
blank, at any office or agency of the Company maintained for that purpose,
accompanied by written notice to the Company at such office or agency that the
holder elects to convert such share or, if fewer than all the shares of Series E
Preferred Stock represented by a single share certificate are to be converted,
the number of shares represented thereby to be converted.
Shares of Series E Preferred Stock shall be deemed to have been converted
immediately prior to the close of business on the day of surrender of such
shares for conversion in accordance with the foregoing provisions, and at such
time the rights of the holders of such shares as holders shall cease, and the
person or persons entitled to receive the shares of Common Stock issuable upon
conversion shall be treated for all purposes as the record holder or holders of
such shares of Common Stock at such time. As promptly as practicable on or
after the conversion date, the Company shall issue and shall deliver at such
office or agency a certificate or certificates for the number of full shares of
Common Stock issuable upon conversion, together with payment in lieu of any
fraction of a share, as provided in Section 12(c).
In the case of any conversion of fewer than all the shares of Series E
Preferred Stock evidenced by a certificate, upon such conversion the Company
shall execute and the Registrar shall countersign and deliver to the holder
thereof, at the expense of the Company, a new certificate or certificates
representing the number of unconverted shares of Series E Preferred Stock.
(c) No fractional shares of Common Stock shall be issued upon the
conversion of a share of Series E Preferred Stock. If more than one share of
Series E Preferred Stock shall be surrendered for conversion at one time by the
same holder, the number of full shares of Common Stock which shall be issuable
upon conversion thereof shall be computed on the basis of the aggregate number
of shares of Series E Preferred Stock so surrendered. Instead of any fractional
shares of Common Stock which would otherwise be issuable upon conversion of any
share of Series E Preferred Stock, the Company shall pay a cash adjustment in
respect of such fraction in an amount equal to the same fraction of the Closing
Price (as defined in Section 12(d)(vi) per Common Share at the close of business
on the Business Day prior to the day of conversion.
(d) The Conversion Price shall be adjusted from time to time by the
Company as follows:
(i) If the Company shall hereafter pay a dividend or make a
distribution to all holders of the outstanding shares of Common Stock in shares
of Common Stock, the Conversion Price in effect at the opening of business on
the date following the date fixed for the determination of shareholders entitled
to receive such dividend or other distribution shall be reduced by multiplying
such Conversion Price by a fraction of which the numerator shall be the number
of shares of Common Stock outstanding at the close of business on the Common
Stock Record Date (as defined in Section 12(d)(vi)) fixed for such determination
and the denominator shall be the sum of such number of shares and the total
number of shares constituting such dividend or other distribution, such
reduction to become effective immediately after the opening of business on the
day following the Common Stock Record Date. If any dividend or distribution of
the type described in this Section 12(d)(i) is declared but not so paid or made,
the Conversion Price shall again be adjusted to the Conversion Price which would
then be in effect if such dividend or distribution had not been declared.
(ii) (a) In case the Company shall issue or sell any Common Stock in a
financing conducted as an underwritten public offering or a private placement
(in each case for cash and other than transactions with strategic investors) for
a consideration per share that is 90% or less than the Current Market Price on
the date of such issuance, or shall issue securities convertible into Common
Stock having a conversion price per share that is 90% or less than the Current
Market Price at the date of issuance of such convertible security, the
Conversion Price to be in effect after such issuance or sale shall be determined
by multiplying the Conversion Price in effect immediately prior to such issuance
or sale by a fraction, (1) the numerator of which shall be the sum of (x) the
number of shares of Common Stock outstanding immediately prior to such issuance
or sale and (y) the number of shares of Common Stock which the aggregate
consideration receivable by the Company for the total number of additional
shares of Common Stock so issued or sold (or issuable on conversion) would
purchase at the Current Market Price in effect immediately prior to such
issuance or sale and (2) the denominator of which shall be the sum of the number
of shares of Common Stock outstanding immediately prior to such issuance or sale
and the number of additional shares of Common Stock to be issued or sold (or, in
the case of convertible securities, issued on conversion). Notwithstanding the
foregoing, the Conversion Price shall not be adjusted as a result of the
circumstances described in this Section 12(d)(ii)(a) if the HMTF Holders shall
be offered the opportunity to purchase their pro rata portion (based on the
percentage of the outstanding shares of Common Stock represented by the Series E
Preferred Stock then held by the HMTF Holders on an as-converted basis) of such
offering. The preemptive right set forth in the preceding sentence shall be
deemed waived as to an HMTF Holder if such HMTF Holder does not respond in a
timely fashion to notice of the pricing of an offering to which the preemptive
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right would otherwise apply.
(b) If the Company shall offer or issue rights or warrants to all
holders of its outstanding shares of Common Stock entitling them to subscribe
for or purchase shares of Common Stock at a price per share less than the
Current Market Price (as defined in Section 12(d)(vi)) on the Common Stock
Record Date fixed for the determination of shareholders entitled to receive such
rights or warrants, the Conversion Price shall be adjusted so that the same
shall equal the price determined by multiplying the Conversion Price in effect
at the opening of business on the date after such Common Stock Record Date by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding at the close of business on the Common Stock Record Date plus the
number of shares of Common Stock which the aggregate offering price of the total
number of shares of Common Stock subject to such rights or warrants would
purchase at such Current Market Price and of which the denominator shall be the
number of shares of Common Stock outstanding at the close of business on the
Common Stock Record Date plus the total number of additional shares of Common
Stock subject to such rights or warrants for subscription or purchase. Such
adjustment shall become effective immediately after the opening of business on
the day following the Common Stock Record Date fixed for determination of
shareholders entitled to purchase or receive such rights or warrants. To the
extent that shares of Common Stock are not delivered pursuant to such rights or
warrants, upon the expiration or termination of such rights or warrants the
Conversion Price shall again be adjusted to be the Conversion Price which would
then be in effect had the adjustments made upon the issuance of such rights or
warrants been made on the basis of delivery of only the number of shares of
Common Stock actually delivered. If such rights or warrants are not so issued,
the Conversion Price shall again be adjusted to be the Conversion Price which
would then be in effect if such date fixed for the determination of shareholders
entitled to receive such rights or warrants had not been fixed. In determining
whether any rights or warrants entitle the holders to subscribe for or purchase
shares of Common Stock at less than such Current Market Price, and in
determining the aggregate offering price of such shares of Common Stock, there
shall be taken into account (x) any consideration received for such rights or
warrants, with the value of such consideration and the amount of such exercise
or subscription price, if other than cash, to be determined by the Board of
Directors and (y) the amount of any exercise price or subscription price
required to be paid upon exercise of such warrants or rights.
(iii) If the outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Conversion Price in effect
at the opening of business on the day following the day upon which such
subdivision becomes effective shall be proportionately reduced, and, conversely,
if the outstanding shares of Common Stock shall be combined into a smaller
number of shares of Common Stock, the Conversion Price in effect at the opening
of business on the day following the day upon which such combination becomes
effective shall be proportionately increased, such reduction or increase, as the
case may be, to become effective immediately after the opening of business on
the day following the day upon which such subdivision or combination becomes
effective.
(iv) If the Company shall, by dividend or otherwise, distribute to all
holders of its shares of Common Stock any class of capital stock of the Company
(other than any dividends or distributions to which Section 12(d)(i) applies) or
evidences of its indebtedness, cash or other assets (including securities, but
excluding any rights or warrants of a type referred to in Section 12(d)(ii)(b)
and dividends and distributions paid exclusively in cash and excluding any
capital stock, evidences of indebtedness, cash or assets distributed upon a
merger or consolidation to which Section 12(e) applies) (the foregoing
hereinafter in this Section 12(d)(iv) called the "Distributed Securities"),
then, in each such case, the Conversion Price shall be reduced so that the same
shall be equal to the price determined by multiplying the Conversion Price in
effect immediately prior to the close of business on the Common Stock Record
Date (as defined in Section 12(d)(vi) with respect to such distribution by a
fraction of which the numerator shall be the Current Market Price (determined as
provided in Section 12(d)(vi) on such date less the fair market value (as
determined by the Board of Directors, whose good faith determination shall be
conclusive and described in a resolution of the Board of Directors) on such date
of the portion of the Distributed Securities so distributed applicable to one
share of Common Stock and the denominator shall be such Current Market Price,
such reduction to become effective immediately prior to the opening of business
on the day following the Common Stock Record Date; provided, however, that, in
the event the then fair market value (as so determined) of the portion of the
Distributed Securities so distributed applicable to one share of Common Stock is
equal to or greater than the Current Market Price on the Common Stock Record
Date, in lieu of the foregoing adjustment, adequate provision shall be made so
that each holder of shares of Series E Preferred Stock shall have the right to
receive upon conversion of a share of Series E Preferred Stock (or any portion
thereof) the amount of Distributed Securities such holder would have received
had such holder converted such share of Series E Preferred Stock (or portion
thereof) immediately prior to such Common Stock Record Date. If such dividend
or distribution is not so paid or made, the Conversion Price shall again be
adjusted to be the Conversion Price which would then be in effect if such
dividend or distribution had not been declared. If the Board of Directors
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determines the fair market value of any distribution for purposes of this
Section 12(d)(iv) by reference to the actual or when issued trading market for
any securities constituting all or part of such distribution, it must in doing
so consider the prices in such market over the same period used in computing the
Current Market Price pursuant to Section 12(d)(vi) to the extent possible.
Rights or warrants distributed by the Company to all holders of shares of
Common Stock entitling the holders thereof to subscribe for or purchase shares
of the Company's capital stock (either initially or under certain
circumstances), which rights or warrants, until the occurrence of a specified
event or events ("Dilution Trigger Event"): (A) are deemed to be transferred
with such shares of Common Stock; (B) are not exercisable; and (C) are also
issued in respect of future issuances of shares of Common Stock, shall be deemed
not to have been distributed for purposes of this Section 12(d)(iv) (and no
adjustment to the Conversion Price under this Section 12(d)(iv) shall be
required) until the occurrence of the earliest Dilution Trigger Event, whereupon
such rights and warrants shall be deemed to have been distributed and an
appropriate adjustment to the Conversion Price under this Section 12(d)(iv)
shall be made. If any such rights or warrants, including any such existing
rights or warrants distributed prior to the first issuance of shares of Series E
Preferred Stock, are subject to subsequent events, upon the occurrence of each
of which such rights or warrants shall become exercisable to purchase different
securities, evidences of indebtedness or other assets, then the occurrence of
each such event shall be deemed to be such date of issuance and record date with
respect to new rights or warrants (and a termination or expiration of the
existing rights or warrants, without exercise by the holder thereof). In
addition, in the event of any distribution (or deemed distribution) of rights or
warrants, or any Dilution Trigger Event with respect thereto, that was counted
for purposes of calculating a distribution amount for which an adjustment to the
Conversion Price under this Section 12(d) was made, (1) in the case of any such
rights or warrants which shall all have been redeemed or repurchased without
exercise by any holders thereof, the Conversion Price shall be readjusted upon
such final redemption or repurchase to give effect to such distribution or
Dilution Trigger Event, as the case may be, as though it were a cash
distribution, equal to the per share redemption or repurchase price received by
a holder or holders of shares of Common Stock with respect to such rights or
warrants (assuming such holder had retained such rights or warrants), made to
all holders of shares of Common Stock as of the date of such redemption or
repurchase, and (2) in the case of such rights or warrants which shall have
expired or been terminated without exercise by any holders thereof, the
Conversion Price shall be readjusted as if such rights and warrants had not been
issued.
Notwithstanding any other provision of this Section 12(d)(iv) to the
contrary, rights, warrants, evidences of indebtedness, other securities, cash or
other assets (including, without limitation, any rights distributed pursuant to
any shareholder rights plan) shall be deemed not to have been distributed for
purposes of this Section 12(d)(iv) if the Company makes proper provision so that
each holder of shares of Series E Preferred Stock who converts a share of Series
E Preferred Stock (or any portion thereof) after the date fixed for
determination of shareholders entitled to receive such distribution shall be
entitled to receive upon such conversion, in addition to the shares of Common
Stock issuable upon such conversion, the amount and kind of such distributions
that such holder would have been entitled to receive if such holder had,
immediately prior to such determination date, converted such share of Series E
Preferred Stock into a share of Common Stock.
For purposes of this Section 12(d)(iv) and Sections 12(d)(i) and (ii), any
dividend or distribution to which this Section 12(d)(iv) is applicable that also
includes shares of Common Stock, or rights or warrants to subscribe for or
purchase shares of Common Stock to which Section 12(d)(ii) applies (or both),
shall be deemed instead to be (A) a dividend or distribution of the evidences of
indebtedness, assets, shares of capital stock, rights or warrants other than
such shares of Common Stock or rights or warrants to which Section 12(d)(ii)
applies (and any Conversion Price reduction required by this Section 12(d)(iv)
with respect to such dividend or distribution shall then be made) immediately
followed by (B) a dividend or distribution of such shares of Common Stock or
such rights or warrants (and any further Conversion Price reduction required by
Sections 12(d)(i) or 12(d)(ii) with respect to such dividend or distribution
shall then be made), except that (1) the Common Stock Record Date of such
dividend or distribution shall be substituted as "the date fixed for the
determination of stockholders entitled to receive such dividend or other
distribution", "the Common Stock Record Date fixed for such determination" and
"the Common Stock Record Date" within the meaning of Section 12(d)(i) and as
"the date fixed for the determination of shareholders entitled to receive such
rights or warrants", "the Common Stock Record Date fixed for the determination
of the share holders entitled to receive such rights or warrants" and "such
Common Stock Record Date" for purposes of Section 12(d)(ii), and (2) any shares
of Common Stock included in such dividend or distribution shall not be deemed
"outstanding at the close of business on the date fixed for such determination"
for the purposes of Section 12(d)(i).
(v) If a tender offer made by the Company or any of its subsidiaries
for all or any portion of the Common Stock expires and such tender offer (as
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amended upon the expiration thereof) requires the payment to shareholders (based
on the acceptance (up to any maximum specified in the terms of the tender offer)
of Purchased Shares) of an aggregate consideration having a fair market value
(as determined by the Board of Directors, whose good faith determination shall
be conclusive and described in a resolution of the Board of Directors) that,
combined together with the aggregate of the cash plus the fair market value (as
determined by the Board of Directors, whose good faith determination shall be
conclusive and described in a resolution of the Board of Directors) as of the
expiration of such tender offer, of consideration payable in respect of any
other tender offers by the Company or any of its subsidiaries for all or any
portion of the shares of Common Stock expiring within the 12 months preceding
the expiration of such tender offer and in respect of which no adjustment
pursuant to this Section 12(d)(v) has been made, exceeds 5% of the net income of
the Company reported for the 12 month period ending with the fiscal quarter next
preceding such payment (the "12 Month Net Income") (determined as of the last
time (the "Expiration Time") tenders could have been made pursuant to such
tender offer (as it may be amended) then, and in each such case, immediately
prior to the opening of business on the day after the date of the Expiration
Time, the Conversion Price shall be adjusted so that the same shall equal the
price determined by multiplying the Conversion Price in effect immediately prior
to the close of business on the date of the Expiration Time by a fraction of
which the numerator shall be the number of shares of Common Stock outstanding
(including any tendered shares) at the Expiration Time multiplied by the Current
Market Price of a share of Common Stock on the trading day next succeeding the
Expiration Time and the denominator shall be the sum of (x) the fair market
value (determined as aforesaid) of the aggregate consideration payable to
shareholders based on the acceptance (up to any maximum specified in the terms
of the tender offer) of all shares validly tendered and not withdrawn as of the
Expiration Time (the shares deemed so accepted, up to any such maximum, being
referred to as the "Purchased Shares") and (y) the product of the number of
shares of Common Stock outstanding (less any Purchased Shares) at the Expiration
Time and the Current Market Price of the shares of Common Stock on the trading
day next succeeding the Expiration Time, such reduction (if any) to become
effective immediately prior to the opening of business on the day following the
Expiration Time. If the Company is obligated to purchase shares pursuant to any
such tender offer, but the Company is permanently prevented by applicable law
from effecting any such purchases or all such purchases are rescinded, the
Conversion Price shall again be adjusted to be the Conversion Price which would
then be in effect if such tender offer had not been made. If the application of
this Section 12(d)(v) to any tender offer would result in an increase in the
Conversion Price, no adjustment shall be made for such tender offer under this
Section 12(d)(v).
(vi) For purposes of this Section 12(d), the following terms shall have
the meaning indicated:
"closing price" with respect to any securities on any day means the closing
sale price as of 4:00 p.m. Eastern Time on such day or any earlier final closing
on such day or, if no such sale takes place on such day, the average of the
reported high and low bid prices on such day, in each case on the Nasdaq
National Market, or the New York Stock Exchange, as applicable, or, if such
security is not listed or admitted to trading on such national market or
exchange, on the national stock exchange or Commission recognized trading market
in the United States on which such security is quoted or listed or admitted to
trading, or, if not quoted or listed or admitted to trading on any national
stock exchange or Commission recognized trading market in the United States, the
average of the high and low bid prices of such security on the over-the-counter
market on the day in question as reported by the National Quotation Bureau
Incorporated or a similar generally accepted reporting service in the United
States, or, if not so available, in such manner as furnished by any New York
Stock Exchange member firm selected from time to time by the Board of Directors
for that purpose, or a price determined in good faith by the Board of Directors,
whose determination shall be conclusive and described in a resolution of the
Board of Directors.
"Common Stock Record Date" means, with respect to any dividend,
distribution or other transaction or event in which the holders of Common Stock
have the right to receive any cash, securities or other property or in which the
Common Stock (or other applicable security) is exchanged for or converted into
any combination of cash, securities or other property, the date fixed for
determination of shareholders entitled to receive such cash, securities or other
property (whether such date is fixed by the Board of Directors or by statute,
contract or otherwise).
"Current Market Price" means the average of the daily closing prices per
share of Common Stock for the 10 consecutive trading days immediately prior to
the date in question; provided, however, that (A) if the "ex" date (as
hereinafter defined) for any event (other than the issuance or distribution
requiring such computation) that requires an adjustment to the Conversion Price
pursuant to Section 12(d)(i), (ii), (iii), (iv) or (v) occurs during such 10
consecutive trading days, the closing price for each trading day prior to the
"ex" date for such other event shall be adjusted by multiplying such closing
price by the same fraction by which the Conversion Price is so required to be
adjusted as a result of such other event, (B) if the "ex" date for any event
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(other than the issuance or distribution requiring such computation) that
requires an adjustment to the Conversion Price pursuant to Section 12(d)(i),
(ii), (iii), (iv) or (v) occurs on or after the "ex" date for the issuance or
distribution requiring such computation and prior to the day in question, the
closing price for each trading day on and after the "ex" date for such other
event shall be adjusted by multiplying such closing price by the reciprocal of
the fraction by which the Conversion Price is so required to be adjusted as a
result of such other event and (C) if the "ex" date for the issuance or
distribution requiring such computation is prior to the day in question, after
taking into account any adjustment required pursuant to clause (A) or (B) of
this proviso, the closing price for each trading day on or after such "ex" date
shall be adjusted by adding thereto the amount of any cash and the fair market
value (as determined by the Board of Directors in a manner consistent with any
good faith determination of such value for purposes of Section 12(d)(iv), whose
good faith determination shall be conclusive and described in a resolution of
the Board of Directors) of the evidences of indebtedness, shares of capital
stock or assets being distributed applicable to one share of Common Stock as of
the close of business on the day before such "ex" date. For purposes of any
computation under Section 12(d)(v), the Current Market Price on any date shall
be deemed to be the average of the daily closing prices per share of Common
Stock for such day and the next two succeeding trading days; provided, however,
that, if the "ex" date for any event (other than the tender offer requiring such
computation) that requires an adjustment to the Conversion Price pursuant to
Section 12(d)(i), (ii), (iii), (iv) or (v) occurs on or after the Expiration
Time for the tender or exchange offer requiring such computation and prior to
the day in question, the closing price for each trading day on and after the
"ex" date for such other event shall be adjusted by multiplying such closing
price by the reciprocal of the fraction by which the Conversion Price is so
required to be adjusted as a result of such other event. For purposes of this
paragraph, the term "ex" date (1) when used with respect to any issuance or
distribution, means the first date on which the shares of Common Stock trade
regular way on the relevant exchange or in the relevant market from which the
closing price was obtained without the right to receive such issuance or
distribution, (2) when used with respect to any subdivision or combination of
shares of Common Stock, means the first date on which the shares of Common Stock
trade regular way on such exchange or in such market after the time at which
such subdivision or combination becomes effective and (3) when used with respect
to any tender or exchange offer means the first date on which the shares of
Common Stock trade regular way on such exchange or in such market after the
Expiration Time of such offer. Notwithstanding the foregoing, whenever
successive adjustments to the Conversion Price are called for pursuant to this
Section 12(d), such adjustments shall be made to the Current Market Price as may
be necessary or appropriate to effectuate the intent of this Section 12(d) and
to avoid unjust or inequitable results, as determined in good faith by the Board
of Directors.
"Fair Market Value" means the amount which a willing buyer would pay a
willing seller in an arm's-length transaction.
(vii) No adjustment in the Conversion Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in such
price; provided, however, that any adjustments which by reason of this Section
12(d)(vii) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section 12
shall be made by the Company and shall be made to the nearest cent. No
adjustment need be made for a change in the par value or no par value of the
Common Stock.
(viii) Whenever the Conversion Price is adjusted as herein provided,
the Company shall promptly file with the Registrar an Officers' Certificate
setting forth the Conversion Price after such adjustment and setting forth a
brief statement of the facts requiring such adjustment. Promptly after delivery
of such certificate, the Company shall prepare a notice of such adjustment of
the Conversion Price setting forth the adjusted Conversion Price and the date on
which each adjustment becomes effective and shall mail such notice of such
adjustment of the Conversion Price to each holder of shares of Series E
Preferred Stock at such holder's last address appearing on the register of
holders maintained for that purpose within 20 days of the effective date of such
adjustment. Failure to deliver such notice shall not affect the legality or
validity of any such adjustment.
(ix) In any case in which this Section 12(d) provides that an
adjustment shall become effective immediately after a Common Stock Record Date
for an event, the Company may defer until the occurrence of such event issuing
to the holder of any share of Series E Preferred Stock converted after such
Common Stock Record Date and before the occurrence of such event the additional
shares of Common Stock issuable upon such conversion by reason of the adjustment
required by such event over and above the shares of Common Stock issuable upon
such conversion before giving effect to such adjustment.
(x) For purposes of this Section 12(d), the number of shares of Common
Stock at any time outstanding shall not include shares held in the treasury of
the Company. The Company shall not pay any dividend or make any distribution on
shares of Common Stock held in the treasury of the Company.
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(e) Subject to Section 13, in case of any consolidation of the Company
with, or merger of the Company into, any other corporation, or in case of any
merger of another corporation into the Company (other than a merger that does
not result in any reclassification, conversion, exchange or cancellation of
outstanding shares of Common Stock of the Company), or in case of any sale,
conveyance or transfer of all or substantially all the assets of the Company,
the holder of each share of Series E Preferred Stock shall have the right
thereafter, during the period such share of Series E Preferred Stock shall be
convertible as specified in Section 12(a), to convert such share of Series E
Preferred Stock into the kind and amount of securities, cash and other property
receivable upon such consolidation, merger, conveyance or transfer by a holder
of the number of shares of Common Stock of the Company into which such share of
Series E Preferred Stock might have been converted immediately prior to such
consolidation, merger, conveyance or transfer, assuming such holder of shares of
Common Stock of the Company failed to exercise his rights of election, if any,
as to the kind or amount of securities, cash and other property receivable upon
such consolidation, merger, conveyance or transfer (provided that, if the kind
or amount of securities, cash and other property receivable upon such
consolidation, merger, conveyance or transfer is not the same for each share of
Common Stock of the Company in respect of which such rights of election shall
not have been exercised ("nonelecting share"), then for the purpose of this
Section 12 the kind and amount of securities, cash and other property receivable
upon such consolidation, merger, conveyance or transfer by each nonelecting
share shall be deemed to be the kind and amount so receivable per share by a
plurality of the nonelecting shares). Such securities shall provide for
adjustments which, for events subsequent to the effective date of the triggering
event, shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Section 12. The above provisions of this Section 12 shall
similarly apply to successive consolidations, mergers, conveyances or transfers.
(f) In case:
(i) the Company shall declare a dividend (or any other distribution) on
its Common Stock payable otherwise than in cash out of its earned surplus; or
(ii) the Company shall authorize the granting to all holders of its
shares of Common Stock of rights or warrants to subscribe for or purchase any
shares of capital stock of any class or of any other rights; or
(iii) of any reclassification of the Common Stock (other than a
subdivision or combination of the Company's outstanding shares of Common Stock),
or of any consolidation or merger to which the Company is a party and for which
approval of any shareholders of the Company is required, or the sale, conveyance
or transfer of all or substantially all the assets of the Company; or
(iv) of the voluntary or involuntary dissolution, liquidation or
winding-up of the Company;
then the Company shall cause to be filed with the Registrar and at each
office or agency maintained for the purpose of conversion of shares of Series
Preferred Stock, and shall cause to be mailed to all holders at their last
addresses as they shall appear in the shares of Series E Preferred Stock
Register, at least 20 Business Days (or 10 Business Days in any case specified
in clause (i) or (ii) above) prior to the applicable date hereinafter specified,
a notice stating (x) the date on which a record is to be taken for the purpose
of such dividend, distribution, rights or warrants, or, if a record is not to be
taken, the date as of which the holders of shares of Common Stock of record to
be entitled to such dividend, distribution, rights or warrants are to be
determined or (y) the date on which such reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding-up is expected to
become effective, and the date as of which it is expected that holders of shares
of Common Stock of record shall be entitled to exchange their shares of Common
Stock for securities, cash or other property deliverable upon such
reclassification, consolidation, merger, sale, transfer, dissolution,
liquidation or winding-up. Failure to give the notice required by this Section
12(f) or any defect therein shall not affect the legality or validity of any
dividend, distribution, right, warrant, reclassification, consolidation, merger,
sale, transfer, dissolution, liquidation or winding-up, or the vote upon any
such action.
(g) The Company shall at all times reserve and keep available, free
from preemptive rights, out of its authorized but unissued shares of Common
Stock, for the purpose of effecting the conversion of shares of Series E
Preferred Stock, the full number of shares of Common Stock then issuable upon
the conversion of all outstanding shares of Series E Preferred Stock.
(h) The Company will pay any and all taxes that may be payable in
respect of the issue or delivery of shares of Common Stock on conversion of
shares of Series E Preferred Stock pursuant hereto. The Company shall not,
however, be required to pay any tax which may be payable in respect of any
transfer involved in the issue and delivery of shares of Common Stock in a name
other than that of the holder of the share of Series E Preferred Stock or shares
of Series E Preferred Stock to be converted, and no such issue or delivery shall
be made unless and until the Person requesting such issue has paid to the
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Company the amount of any such tax, or has established to the satisfaction of
the Company that such tax has been paid or is not payable.
13. Change of Control
(a) If a Change of Control shall have occurred, the Company shall cause
to be filed with the Registrar and at each office or agency maintained for the
purpose of conversion of shares of Series E Preferred Stock, and shall cause to
be mailed to all holders at their last addresses as they shall appear in the
Series E Preferred Stock Register, in any case within 10 days after the Change
of Control Date, a notice stating (1) the Change of Control Date, (2) the fact
that if the Change of Control Date is prior to March 31, 2005, the holders shall
receive the Special Dividend as a result of such Change of Control, (3) the fact
that holders shall have the right to either (a) continue to hold their shares of
Series E Preferred Stock (or the shares of preferred stock issued in respect
thereof pursuant to Section 14) (the "Hold Option"), (b) convert such shares in
accordance with Section 12 or (c) elect the Remarketing Option (as defined
below), (4) the relevant circumstances and facts regarding such Change of
Control and (5) the instructions that such holder must follow in order to
exercise the rights identified above. The holders of Series E Preferred Stock
shall receive the Special Dividend as of the Change of Control Date if the
Change of Control Date occurs prior to March 31, 2005, whether they elect the
Hold Option or the Remarketing Option or whether they elect to convert their
shares in accordance with Section 12.
(b) Within 30 days after delivery by the Company of the notice
described in Section 13(a), each holder of shares of Series E Preferred Stock
(or the shares of preferred stock issued in respect thereof pursuant to Section
14) who wishes to exercise the Hold Option or the Remarketing Option must submit
written notice (a "COC Response Notice") to the Company setting forth the option
such holder wishes to elect (and if no option is selected within such 30 day
period such holder shall be deemed to have selected the Hold Option).
(c) If the Hold Option is selected with respect to a share of Series E
Preferred Stock, or if no notice from a holder is received by the date referred
to in the preceding paragraph, such holder shall be deemed to have elected to
waive such holder's right to elect the Remarketing Option with respect to such
Change of Control (but not the continuing right to convert pursuant to Section
12) and such share of Series E Preferred Stock (or the shares of preferred stock
issued in respect thereof pursuant to Section 14) shall remain outstanding in
accordance with its current terms after giving effect to the Special Dividend
(if applicable).
(d) If the Remarketing Option is selected with respect to a share of
Series E Preferred Stock, such holder shall be deemed to have elected to waive
such holder's right to elect the Hold Option or to convert such holder's shares
pursuant to Section 12 during the Remarketing Period and the Company shall
thereafter have the option (the "Remarketing Option") to either (a) have such
share redeemed in accordance with the optional redemption procedures set forth
in Section 10 or (b) remarket such share for the account of such holder and, if
the net proceeds to such holder of such remarketing are less than an amount in
cash equal to 101% of the Liquidation Preference of such share (after giving
effect to the Special Dividend if applicable) plus accrued and unpaid dividends
thereon from the last Dividend Payment Date to the date payment in full is
received by such holder in respect of such share (the "Remarketing Price"), the
Company shall issue to and sell for the account of such holder a sufficient
number of shares of Common Stock to make up such shortfall; i.e., such that the
holder receives a net amount in cash in respect of such share of Series E
Preferred Stock as to which the Remarketing Option has been selected which, when
taken together with the net proceeds received by such holder in such
remarketing, is equal to the Remarketing Price. Written notice of the election
by the Company to either redeem or remarket such share shall be provided to such
holder within 10 days after receipt of a COC Response Notice specifying the
Remarketing Option.
(e) In order to accomplish the remarketing, the Company shall take all
actions that may be necessary, including without limitation, preparing and
filing a registration statement under the Securities Act of 1933, and shall pay
all expenses (including without limitation, underwriting discounts) associated
with the remarketing and issuance and shall provide customary indemnification
for the benefit of the holder against securities law liabilities in connection
therewith. Without limiting the generality of the foregoing, the Company shall
use its best efforts to remarket the shares with respect to which the
Remarketing Option has been elected as expeditiously as reasonably practicable.
If the Remarketing Option has been selected and the Company has not elected to
redeem such share, payment of the full Remarketing Price in respect of the
remarketed share shall be made at a single settlement against surrender of the
share. Such settlement shall take place as soon as reasonably practicable. If
such settlement does not take place within 180 days after the date of the
Company's written notice pursuant to paragraph (d) above (the "Remarketing
Period"), the Company shall give written notice to the Holders that have elected
the Remarketing Option that such 180 day period has elapsed and each such Holder
shall have the option, for a period of 10 Business Days following the giving of
such notice, of terminating the remarketing process with respect to such
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Holder's shares and electing to convert such Holder's shares pursuant to Section
12 or the Hold Option. If such Holder does not so elect, the Company will
continue to effect the remarketing.
(f) The Company shall have the right to institute reasonable procedures
in order to implement this Section 13 and, to the extent reasonably practicable,
will make proper provision prior to the Change of Control Date to ensure that
the holders of shares of Series E Preferred Stock will be entitled to receive
the benefits intended to be afforded by this Section 13. Nothing in this
Section 13 shall affect the rights of the holders of Series E Preferred Stock
set forth in Section 14 hereof.
14. Consolidation, Merger, Conveyance or Transfer
. Without the vote or consent of the holders of a majority of the then
Outstanding shares of Series E Preferred Stock, the Company may not consolidate
or merge with or into, or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its assets to, any person unless (i) if
the Company is the surviving or continuing person, the Series E Preferred Stock
shall remain outstanding without any amendment that would adversely affect the
preferences, rights or powers of the Series E Preferred Stock, (ii) if the
Company is not the surviving or continuing person, (a) the entity formed by such
consolidation or merger or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made (in any such case, the
"resulting entity") is a corporation organized and existing under the laws of
Bermuda, the United States or any State thereof or the District of Columbia; and
(b) the shares of Series E Preferred Stock are converted into or exchanged for
and become shares of such resulting entity, having in respect of such resulting
entity the same (or more favorable) powers, preferences and relative,
participating, optional or other special rights that the shares of Series E
Preferred Stock had immediately prior to such transaction; and (iii) the Company
shall have delivered to the Registrar an Officers' Certificate and an opinion of
counsel, reasonably satisfactory in form and content, each stating that such
consolidation, merger, conveyance or transfer complies with this Section 14 and
that all conditions precedent herein provided for relating to such transaction
have been complied with.
15. SEC Reports; Reports by Company
. So long as any shares of Series E Preferred Stock are outstanding, the
Company shall file with the SEC and, within 15 days after it files them with the
SEC, with the Registrar and, if requested, furnish to each holder of shares of
Series E Preferred Stock all annual and quarterly reports and the information,
documents, and other reports that the Company is required to file with the SEC
pursuant to Section 13(a) or 15(d) of the Exchange Act ("SEC Reports"). In the
event the Company is not required or shall cease to be required to file SEC
Reports, pursuant to the Exchange Act, the Company will nevertheless file such
reports with the SEC (unless the SEC will not accept such a filing). Whether or
not required by the Exchange Act to file SEC Reports with the SEC, so long as
any shares of Series E Preferred Stock are Outstanding, the Company will furnish
or cause to be furnished copies of the SEC Reports to the holders of shares of
Series E Preferred Stock at the time the Company is required to make such
information available to the Registrar and to prospective investors who request
it in writing.
16.Definitions. For purposes of this Certificate of Designation, the
following terms shall have the meaning set forth below:
"Accumulated Dividends" has the meaning set forth in Section 6.
"Affiliate" means, with respect to any Person, any other Person directly or
indirectly controlling, controlled by, or under direct or indirect common
control with, such 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 "controlling" and
"controlled" have meanings correlative to the foregoing.
"Board of Directors" has the meaning set forth in the Recitals.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in The City of New York are
authorized or obligated by law or executive order to be closed.
"By-laws" has the meaning set forth in the Recitals.
"COC Response Notice" has the meaning set forth in Section 13(b).
"Capital Stock" means, with respect to any person, any and all shares,
interests, participations, rights in, or other equivalents (however designated
and whether voting and/or non-voting) of such person's capital stock, whether
outstanding on the Closing Date or issued after the Closing Date, and any and
all rights (other than any evidence of indebtedness), warrants or options
exchangeable for or convertible into such capital stock.
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"Certificate of Incorporation" has the meaning set forth in the recitals.
"Change of Control" means the occurrence of any of the following events:
(a) any "person" or "group" (as such terms are used in Sections 13(d) and 14(d)
of the Exchange Act) is or becomes the "beneficial owner" (as defined in Rule
13d-3 and 13d-5 under the Exchange Act, 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 Capital
Stock of the Company or (b) the Company 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 Company, in any such event
pursuant to a transaction in which the holders of the outstanding Voting Capital
Stock of the Company immediately prior to such transaction hold less than 50% of
the outstanding Voting Capital Stock of the surviving or transferee company or
its parent company immediately after such transaction or immediately after such
transaction any "person" or "group" (as such terms are used in Sections 13(d)
and 14(d) of the Exchange Act), is the "beneficial owner" (as defined in Rules
13d-3 and 13d-5 under the Exchange Act, 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 Capital
Stock of the surviving or transferee company or its parent company 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 Company 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 or (d) any transaction subject to Rule 13e-3 under the
Exchange Act if following such Rule 13e-3 transaction a person or group (as such
terms are used in Section 13(d) and 14(d) of the Exchange Act) owns more than
50% of the total Voting Capital Stock of the Company.
"Change of Control Date" has the meaning set forth in Section 6(b).
"Closing Date" means any Closing Date under the Purchase Agreement.
"Closing Price" has the meaning set forth in Section 12(d)(vi).
"Common Stock Record Date" has the meaning set forth in Section 12(d)(vi).
"Common Stock" means the common stock of the Company, par value $.001 per
share and capital stock of any other class or series into which the common stock
may hereafter be changed.
"Company" has the meaning set forth in the Recitals and includes any
successor to the Company hereunder.
"Company Order" means a written request or order signed in the name of the
Company by its Chairman of the Board, its President or a Vice President and by
its Treasurer, an Assistant Treasurer, its Secretary or an Assistant Secretary.
"Conversion Agent" has the meaning set forth in Section 5(a).
"Conversion Price" means the price at which shares of Common Stock shall be
delivered upon conversion.
"Current Market Value" of the Common Stock means the average of the high
and low sale prices of the shares of Common Stock as reported on the Nasdaq
National Market or any national stock exchange or Commission recognized trading
market in the United States upon which the shares of Common Stock are then
listed or admitted to trading, for the trading day in question.
"Current Market Price" has the meaning set forth in Section 12(d)(vi).
"Dilution Trigger Event" has the meaning set forth in Section 12(d)(iv).
"Distributed Securities" has the meaning set forth in Section 12(d)(iv).
"Dividend Payment Date" shall mean the last day of March, June, September
and December of each year, commencing March 31, 2000, or the next succeeding
Business Day if any such day is not a Business Day.
"Dividend Period" shall mean the period from and including the Closing Date
to but excluding the first Dividend Payment Date and thereafter each quarterly
period from and including a Dividend Payment Date to but excluding the next
Dividend Payment Date.
"Dividend Record Date" has the meaning set forth in Section 7(a).
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"Expiration Time" has the meaning set forth in Section 12(d)(v).
"Fair Market Value" has the meaning set forth in Section 12(d)(vi).
"Junior Shares" has the meaning set forth in Section 9(a).
"Liquidation Preference" means an amount initially equal to $1,000 per
share of Series E Preferred Stock, subject to increase in accordance with
Section 6, Section 7 and Section 11 hereof, including, without limitation, by
the addition of Accumulated Dividends and, if applicable, the Special Dividend.
"Mandatory Redemption Date" has the meaning set forth in Section 10(b);
provided, however, that if such date shall not be a Business Day, then such date
shall be the next Business Day.
"Nonelecting Share" has the meaning set forth in Section 12(e).
"Odd-lot Redemption" has the meaning set forth in Section 10(c).
"Officers' Certificate" means a certificate of the Company signed in the
name of the Company by its Chairman of the Board, its President or a Vice
President and by its Treasurer, an Assistant Treasurer, its Secretary or an
Assistant Secretary.
"Optional Redemption" has the meaning set forth in Section 10(a).
"Optional Redemption Date" has the meaning set forth in Section 10(a).
"Outstanding" means when used with respect to shares of Series E Preferred
Stock, as of the date of determination, all shares of Series E Preferred Stock
theretofore authenticated and delivered under this Certificate of Designation,
except (a) shares of Series E Preferred Stock theretofore converted into shares
of Common Stock in accordance with Section 12 and shares of Series E Preferred
Stock theretofore canceled by the Registrar or delivered to the Registrar for
cancellation; (b) shares of Series E Preferred Stock for whose payment or
redemption money in the necessary amount has been theretofore deposited with the
Registrar or any Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its own Paying
Agent) for the holders of such shares of Series E Preferred Stock; provided
that, if such shares of Series E Preferred Stock are to be redeemed, notice of
such redemption has been duly given pursuant to this Certificate of Designation
or provision therefor satisfactory to the Registrar has been made; and (c)
shares of Series E Preferred Stock (x) that are mutilated, destroyed, lost or
stolen which the Company has decided to pay or (y) in exchange for or in lieu of
which other shares of Series E Preferred Stock have been authenticated and
delivered pursuant to this Certificate of Designation; provided, however, that,
in determining whether the holders of the shares of Series E Preferred Stock
have given any request, demand, authorization, direction, notice, consent or
waiver or taken any other action hereunder, shares of Series E Preferred Stock
owned by the Company or any other obligor upon the shares of Series E Preferred
Stock or any Affiliate of the Company or of such other obligor shall be
disregarded and deemed not to be Outstanding, except that, in determining
whether the Registrar shall be protected in relying upon any such request,
demand, authorization, direction, notice, consent, waiver or other action, only
shares of Series E Preferred Stock which the Registrar has actual knowledge of
being so owned shall be so disregarded. Shares of Series E Preferred Stock so
owned which have been pledged in good faith may be regarded as Outstanding if
the pledgee establishes to the satisfaction of the Registrar the pledgee's right
so to act with respect to such shares of Series E Preferred Stock and that the
pledgee is not the Company or any other obligor upon the shares of Series E
Preferred Stock or any Affiliate of the Company or of such other obligor.
"Parity Shares" has the meaning set forth in Section 9(a).
"Paying Agent" has the meaning set forth in Section 5(a).
"Person" means an individual, partnership, corporation, limited liability
company, business trust, joint stock company, trust, unincorporated association,
joint venture, governmental authority or other entity of whatever nature.
"Preferred Stock" means, with respect to any person, any and all shares,
interests, participations or other equivalents (however designated, whether
voting or non-voting) of such person's preferred or preference stock, whether
now outstanding or issued after the date hereof, including all Series End
classes of such preferred or preference stock.
"Purchase Agreement" means the Preferred Stock and Warrant Purchase
Agreement dated as of February 6, 2000, among the Company and the Purchasers
named therein, as it may be amended from time to time.
"Purchased Shares" has the meaning set forth in Section 12(d)(v).
"Redemption Date" has the meaning set forth in Section 10(d).
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"Redemption Notice" has the meaning set forth in Section 10(d).
"Redemption Price" has the meaning set forth in Section 10(a).
"Registrar" has the meaning set forth in Section 3.
"Registration Rights Agreement" means the Registration Rights Agreement
dated as of March 16, 2000, among the Company and the Purchasers.
"Remarketing Option" has the meaning set forth in Section 13(d).
"Restricted Shares Legend" has the meaning set forth in Section 4(a).
"Resulting Entity" has the meaning set forth in Section 14.
"SEC" means the Securities and Exchange Commission, as from time to time
constituted, created under the Securities Exchange Act of 1934, or, if at any
time after the adoption of this Certificate of Designation such commission is
not existing and performing the duties now assigned to it, then the body
performing such duties at such time.
"SEC Reports" has the meaning set forth in Section 15.
"Securities Act" has the meaning set forth in Section 4(a).
"Senior Shares" has the meaning set forth in Section 9(a).
"Series E Preferred Stock" has the meaning set forth in Section 1.
"Special Dividend" means, with respect to each share of Series E Preferred
Stock, the difference between (i) $1,504.26 (as such number shall be
appropriately adjusted for stock splits, stock dividends or similar events
affecting the Series E Preferred Stock) and (ii) the amount of the actual
Liquidation Preference of such share immediately prior to the Change of Control
Date.
"Voting Capital Stock" means with respect to any Person, securities of any
class or classes of Capital Stock in such Person ordinarily entitling the
holders thereof (whether at all times or at the times that such class of Capital
Stock has voting power by reason of the happening of any contingency) to vote in
the election of members of the board of directors or comparable governing body
of such Person.
IN WITNESS WHEREOF, the Company has caused this Certificate of Designation
to be duly executed by Catherine Hapka, Chairman and Chief Executive Officer of
the Company, this 16th day of March, 2000.
RHYTHMS NETCONNECTIONS INC.,
By:
/s/ Catherine Hapka
Name: Catherine Hapka
Title: Chief Executive Officer
EXHIBIT A
FACE OF SECURITY
Restricted Legend "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE OR OTHER
JURISDICTION, AND, UNLESS SO REGISTERED, THEY MAY NOT BE SOLD, OFFERED FOR SALE,
TRANSFERRED, ASSIGNED, PLEDGED OR HYPOTHECATED EXCEPT PURSUANT TO AN EXEMPTION
FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
ACT AND APPLICABLE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION."
Number of Shares
Number: ____ ____ Shares
CUSIP NO.: { }
8.25% SERIES E CONVERTIBLE PREFERRED STOCK
DUE 2015
OF
RHYTHMS NETCONNECTIONS INC.
PAGE 18
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RHYTHMS NETCONNECTIONS INC., a company organized under the laws of Delaware
(the "Company"), hereby certifies that {HOLDER} (the "Holder") is the registered
owner of fully paid and non-assessable preference securities of the Company
designated the 8.25% Series E Convertible Preferred Stock due 2015, par value
U.S.$0.001 and initial liquidation preference U.S.$1,000 per share (the
"Preferred Stock"). The shares of Preferred Stock are transferable on the books
and records of the Registrar, in person or by a duly authorized attorney, upon
surrender of this certificate duly endorsed and in proper form for transfer.
The designation, rights, privileges, restrictions, preferences and other terms
and provisions of the Preferred Stock represented hereby are issued and shall in
all respects be subject to the provisions of the Certificate of Designation of
the Company dated March __, 2000, as the same may be amended from time to time
in accordance with its terms (the "Preferred Stock Certificate of Designation").
Capitalized terms used herein but not defined shall have the meaning given them
in the Preferred Stock Certificate of Designation. The Company will provide a
copy of the Preferred Stock Certificate of Designation to a Holder without
charge upon written request to the Company at its principal place of business.
Reference is hereby made to select provisions of the Preferred Stock set
forth on the reverse hereof, and to the Preferred Stock Certificate of
Designation, which select provisions and the Preferred Stock Certificate of
Designation shall for all purposes have the same effect as if set forth at this
place.
Upon receipt of this certificate, the Holder is bound by the Preferred
Stock Certificate of Designation and is entitled to the benefits thereunder.
Unless the Transfer Agent's valid counter-signature appears hereon, the
shares of Preferred Stock evidenced hereby shall not be entitled to any benefit
under the Preferred Stock Certificate of Designation or be valid or obligatory
for any purpose.
IN WITNESS WHEREOF, the Company has executed this certificate as of the
date set forth below.
RHYTHMS NETCONNECTIONS INC.,
By:
--------------------------------
Name:
Title:
{Seal}
By:
---------------------------------
Name:
Title:
Dated:
COUNTERSIGNED AND REGISTERED
{ }
as Transfer Agent,
By:
-------------------------------
Authorized Signatory
Dated:
REVERSE OF SECURITY
RHYTHM NETCONNECTIONS INC.
8.25% Series E Convertible Preferred Stock
due 2015
Dividends on each share of Preferred Stock shall be payable at a rate per
annum set forth on the face hereof or as provided in the Preferred Stock
Certificate of Designation. Subject to the limitations set forth in Section 11
of the Preferred Stock Certificate of Designation, dividends may be paid, at the
option of the Company, in cash or as otherwise set forth in the Preferred Stock
Certificate of Designation.
The shares of Preferred Stock shall be redeemable as provided in the
Preferred Stock Certificate of Designation. The shares of Preferred Stock shall
be convertible into the Company's Common Stock in the manner and according to
the terms set forth in the Preferred Stock Certification of Designation.
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<PAGE>
The Company shall furnish to any Holder upon request and without charge, a
copy of the voting rights preferences, limitations and special rights of the
shares of each class or Series E authorized to be issued by the Company so far
as they have been fixed and determined and the authority of the Board of
Directors to fix and determine the designations, voting rights, preferences,
limitations and special rights of the class and series of shares of the Company.
ASSIGNMENT
FOR VALUE RECEIVED, the undersigned assigns and transfers the shares of
Preferred Stock evidenced hereby to:
(Insert assignee's social security or tax identification number)
(Insert address and zip code of assignee)
and irrevocably appoints:
agent to transfer the shares of Preferred Stock evidenced hereby on the books of
the Transfer Agent and Registrar. The agent may substitute another to act for
him or her.
Date:--------------------------------Signature:---------------------------------
(Sign exactly as your name appears on the other side of this Convertible
Preferred Stock Certificate)
Signature Guarantee:*
---------------------------------
* Signature must be guaranteed by an "eligible guarantor institution"
(i.e., a bank, stockbroker, savings and loan association or credit union)
meeting the requirements of the Registrar, which requirements include membership
or participation in the Securities Transfer Agents Medallion Program ("STAMP")
or such other "signature guarantee program" as may be determined by the
Registrar in addition to, or in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934.
NOTICE OF CONVERSION
(To be Executed by the Registered Holder
in order to Convert the Preferred Stock)
The undersigned hereby irrevocably elects to convert (the "Conversion")
- --------- shares of 8.25% Series E Convertible Preferred Stock due 2015 (the
"Preferred Stock"), represented by stock certificate No(s). -------------- (the
"Preferred Stock Certificates") into shares of common stock, par value U.S.
$.001 per share ("Common Stock"), of Rhythms NetConnections Inc. (the "Company")
according to the conditions of the Certificate of Designation establishing the
terms of the Preferred Stock (the "Preferred Stock Certificate of Designation"),
as of the date written below. If shares are to be issued in the name of a
person other than the undersigned, the undersigned will pay all transfer taxes
payable with respect thereto and is delivering herewith such certificates. No
fee will be charged to the holder for any conversion, except for transfer taxes,
if any. A copy of each Preferred Stock Certificate is attached hereto (or
evidence of loss, theft or destruction thereof).*
The undersigned represents and warrants that all offers and sales by the
undersigned of the shares of Common Stock issuable to the undersigned upon
conversion of the Preferred Stock shall be made pursuant to registration of the
Common Stock under the Securities Act of 1933 (the "Act"), or pursuant to an
exemption from registration under the Act.
Capitalized terms used but not defined herein shall have the meanings ascribed
thereto in or pursuant to the Preferred Stock Certificate of Designation.
Date of Conversion:
Applicable Conversion Price:
Number of shares of Preferred Stock to be Converted:
Number of shares of Common Stock to be Issued:
Signature:
---------------------------
Name:
---------------------------
Address:
---------------------------
Fax No.:
---------------------------
PAGE 20
<PAGE>
* The Company is not required to issue shares of Common Stock until the
original Preferred Stock Certificate(s) (or evidence of loss, theft or
destruction thereof) to be converted are received by the Company or its Transfer
Agent. The Company shall issue and deliver shares of Common Stock to an
overnight courier not later than three business days following receipt of the
original Preferred Stock Certificate(s) to be converted.
** Address where shares of Common Stock and any other payments or
certificates shall be sent by the Company.
PAGE 21
<PAGE>
EXHIBIT 10.4
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR THE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES. SUCH SECURITIES MAY NOT BE OFFERED,
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE
OF SUCH REGISTRATION OTHER THAN PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS.
[Form of]
COMMON STOCK WARRANT
Void after March 16, 2003
Warrant No. A-1-[ ]
This certifies that, for value received, [ ] or its permitted
assigns is entitled, subject to the terms and conditions set forth herein
(including the exercise conditions of Section 2), to purchase from Rhythms
NetConnections Inc (the "Company"), a Delaware corporation, up to [
] fully paid and nonassessable
shares (the "Shares") of Common Stock (as defined herein) at the exercise price
of $45.00 per share (the "Exercise Price"). The Exercise Price and number of
Shares is subject to adjustment as provided in this Warrant. The term "Warrant"
as used herein shall include this Warrant and any warrants delivered in
substitution or exchange therefor as provided herein.
1. Definitions. As used in this Warrant, the following terms, unless
the context otherwise requires, have the following meanings:
(a) "Affiliate" means with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such 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
"controlling" and "controlled" have meanings correlative to the foregoing.
(b) "Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday that is not a day on which banking institutions in the City of New
York are authorized or obligated by law or executive order to be closed.
(c) "Capital Stock" or "capital stock" means, with respect to any
Person, any and all shares, interests, participations, rights in, or other
equivalents (however designated and whether voting and/or non-voting) of such
Person's capital stock, whether outstanding on the date of the Warrant or issued
after the date of the Warrant, and any and all rights (other than any evidence
of indebtedness) or warrants exercisable or exchangeable for or convertible into
such capital stock.
(d) "Common Stock" means shares of the Company's common stock, par
value $0.001 per share and capital stock of any other class or series into which
the Common Stock may hereafter by changed.
(e) "Company" means Rhythms NetConnections Inc. and any Person
that shall succeed to or assume the obligations of the Company under this
Warrant.
(f) "HMTF Group" means Hicks, Muse, Tate & Furst Incorporated, a
Texas corporation, and its Affiliates and their respective officers, directors,
partners, members, stockholders and employees (and members of their respective
families and trusts for the primary benefit of such family members) and HM4
Rhythms Qualified Fund, LLC; HM4 Rhythms Private Fund, LLC; HM PG-IV Rhythms,
LLC; HM 4-SBS Rhythms Coinvestors, LLC, HM 4-EQ Rhythms Coinvestors, LLC and
HMTF Bridge RHY, LLC and their respective Affiliates.
(g) "HMTF Holders" means members of the HMTF Group that are
holders of all or a portion of this Warrant and the shares of the Common Stock
issuable upon exercise of this Warrant.
(h) "Person" means any individual, partnership, corporation,
limited liability company, joint venture, association, joint-stock company,
trust, unincorporated organization, government or agency or political
subdivision thereof, or other entity.
(i) "Public Offering" shall mean a public offering by the Company
of its Common Stock registered under the Securities Act of 1933, as amended.
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<PAGE>
(j) "Warrantholder", "holder of Warrant", "holder", or similar
terms refers to the holder of this Warrant.
2. Exercise Provisions.
(a) Exercisability. The holder of this Warrant may exercise it in
whole or in part to the extent then exercisable by surrender of this Warrant,
with the form of subscription at the end of this Warrant duly executed by the
holder, to the Company at its principal office (or to the office of the Warrant
Agent as contemplated in Section 6(b), if applicable), accompanied by payment,
in lawful money of the United States, of the amount obtained by multiplying the
Exercise Price (as adjusted from time to time pursuant to the terms of this
Warrant) by the number of shares of Common Stock designated in such completed
subscription form. This Warrant shall be deemed to have been exercised
immediately prior to the close of business on the day of surrender of such
Warrant, and the person or persons entitled to receive shares of Common Stock
issuable upon exercise of this Warrant shall be treated for all purposes as the
record holder or holders of such shares of Common Stock at such time.
(b) Payment of Exercise Price Payment shall be made by check payable
to the Company.
(c) Restrictions on Exercise. This Warrant is exercisable at any time
and from time to time from the date hereof, provided this Warrant has not
terminated pursuant to Section 10.
3. Delivery of Stock Certificates. As soon as possible after full or
partial exercise of this Warrant in accordance with the terms hereof and in any
event within ten (10) days after such exercise, the Company, at its expense,
will cause to be issued in the name of and delivered to the holder of this
Warrant, a certificate or certificates for the number of fully paid and
nonassessable shares of Common Stock to which that holder shall be entitled upon
such exercise. In the event that this Warrant is exercised in part, the Company
at its expense will also execute and deliver a new Warrant of like tenor
exercisable for the number of Shares for which this Warrant may then be
exercised. No fractional shares or scrip representing fractional shares will be
issued upon exercise of this Warrant. If upon any exercise of this Warrant a
fraction of a share would otherwise be issuable, the Company will pay the cash
value of that fractional share, calculated on the basis of the fair market value
as of the date of exercise.
4. Adjustment Provisions
The Exercise Price shall be adjusted from time to time by the Company as
follows:
(a) If the Company shall hereafter pay a dividend or make a
distribution to all holders of the outstanding shares of Common Stock in shares
of Common Stock, the Exercise Price in effect at the opening of business on the
date following the date fixed for the determination of shareholders entitled to
receive such dividend or other distribution shall be reduced by multiplying such
Exercise Price by a fraction the numerator of which shall be the number of
shares of Common Stock outstanding at the close of business on the Common Stock
Record Date (as defined in Section 4(f)(ii)) fixed for such determination and
the denominator of which shall be the sum of such number of shares and the total
number of shares constituting such dividend or other distribution, such
reduction to become effective immediately after the opening of business on the
day following the Common Stock Record Date. If any dividend or distribution of
the type described in this Section 4(a) is declared but not so paid or made, the
Exercise Price shall again be adjusted to the Exercise Price which would then be
in effect if such dividend or distribution had not been declared.
(b) (i) In case the Company shall issue or sell any Common Stock in
a financing conducted as an underwritten public offering or a private placement
(in each case for cash and other than transactions with strategic investors) for
a consideration per share that is 90% or less than the Current Market Price on
the date of such issuance, or shall issue securities convertible into Common
Stock having an Exercise Price per share that is 90% or less than the Current
Market Price at the date of issuance of such convertible security, the Exercise
Price to be in effect after such issuance or sale shall be determined by
multiplying the Exercise Price in effect immediately prior to such issuance or
sale by a fraction, (1) the numerator of which shall be the sum of (x) the
number of shares of Common Stock outstanding immediately prior to such issuance
or sale and (y) the number of shares of Common Stock which the aggregate
consideration receivable by the Company for the total number of additional
shares of Common Stock so issued or sold (or issuable on conversion) would
purchase at the Current Market Price in effect immediately prior to such
issuance or sale and (2) the denominator of which shall be the sum of the number
of shares of Common Stock outstanding immediately prior to such issuance or sale
and the number of additional shares of Common Stock to be issued or sold (or, in
the case of convertible securities, issued on conversion). Notwithstanding the
foregoing, the Exercise Price shall not be adjusted as a result of the
circumstances described in this Section 4(b)(i) if the HMTF Holders shall be
offered the opportunity to purchase their pro rata portion (based on the
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<PAGE>
percentage of the outstanding shares of Common Stock represented by the Warrants
then held by such HMTF Holders on an as-exercised basis) of such offering. The
preemptive right set forth in the preceding sentence shall be deemed waived as
to an HMTF Holder if such HMTF Holder does not respond in a timely fashion to
notice of the pricing of the offering to which the preemptive right would
otherwise apply.
(ii) If the Company shall offer or issue rights or warrants to all
holders of its outstanding shares of Common Stock entitling them to subscribe
for or purchase shares of Common Stock at a price per share less than the
Current Market Price (as defined in Section 4(f) (iii)) on the Common Stock
Record Date fixed for the determination of shareholders entitled to receive such
rights or warrants, the Exercise Price shall be adjusted so that the same shall
equal the price determined by multiplying the Exercise Price in effect at the
opening of business on the date after such Common Stock Record Date by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding at the close of business on the Common Stock Record Date plus the
number of shares of Common Stock which the aggregate offering price of the total
number of shares of Common Stock subject to such rights or warrants would
purchase at such Current Market Price and of which the denominator shall be the
number of shares of Common Stock outstanding at the close of business on the
Common Stock Record Date plus the total number of additional shares of Common
Stock subject to such rights or warrants for subscription or purchase. Such
adjustment shall become effective immediately after the opening of business on
the day following the Common Stock Record Date fixed for determination of
shareholders entitled to purchase or receive such rights or warrants. To the
extent that shares of Common Stock are not delivered pursuant to such rights or
warrants, upon the expiration or termination of such rights or warrants the
Exercise Price shall again be adjusted to be the Exercise Price which would then
be in effect had the adjustments made upon the issuance of such rights or
warrants been made on the basis of delivery of only the number of shares of
Common Stock actually delivered. If such rights or warrants are not so issued,
the Exercise Price shall again be adjusted to be the Exercise Price which would
then be in effect if such date fixed for the determination of shareholders
entitled to receive such rights or warrants had not been fixed. In determining
whether any rights or warrants entitle the holders to subscribe for or purchase
shares of Common Stock at less than such Current Market Price, and in
determining the aggregate offering price of such shares of Common Stock, there
shall be taken into account (x) any consideration received for such rights or
warrants, with the value of such consideration and the amount of such exercise
or subscription price, if other than cash, to be determined by the Board of
Directors and (y) the amount of any exercise price or subscription price
required to be paid upon exercise of such warrants or rights.
(c) If the outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Exercise Price in effect at
the opening of business on the day following the day upon which such subdivision
becomes effective shall be proportionately reduced, and, conversely, if the
outstanding shares of Common Stock shall be combined into a smaller number of
shares of Common Stock, the Exercise Price in effect at the opening of business
on the day following the day upon which such combination becomes effective shall
be proportionately increased, such reduction or increase, as the case may be, to
become effective immediately after the opening of business on the day following
the day upon which such subdivision or combination becomes effective.
(d) (i) If the Company shall, by dividend or otherwise, distribute to
all holders of its shares of Common Stock any class of capital stock of the
Company (other than any dividends or distributions to which Section 4(a)
applies) or evidences of its indebtedness, cash or other assets (including
securities, but excluding any rights or warrants of a type referred to in
Section 4(b)(ii) and dividends and distributions paid exclusively in cash and
excluding any capital stock, evidences of indebtedness, cash or assets
distributed upon a merger or consolidation to which Section 4(k) applies) (the
foregoing hereinafter in this Section 4(d) called the "Distributed Securities"),
then, in each such case, the Exercise Price shall be reduced so that the same
shall be equal to the price determined by multiplying the Exercise Price in
effect immediately prior to the close of business on the Common Stock Record
Date with respect to such distribution by a fraction of which the numerator
shall be the Current Market Price (determined as provided in Section 4(f)(iii))
on such date less the fair market value (as determined by the Board of
Directors, whose good faith determination shall be conclusive and described in a
resolution of the Board of Directors) on such date of the portion of the
Distributed Securities so distributed applicable to one share of Common Stock
and the denominator shall be such Current Market Price, such reduction to become
effective immediately prior to the opening of business on the day following the
Common Stock Record Date; provided, however, that, in the event the then fair
market value (as so determined) of the portion of the Distributed Securities so
distributed applicable to one share of Common Stock is equal to or greater than
the Current Market Price on the Common Stock Record Date, in lieu of the
foregoing adjustment, adequate provision shall be made so that each
Warrantholder shall have the right to receive upon exercise of such Warrant (or
any portion thereof) the amount of Distributed Securities such holder would have
received had such holder exercised such Warrant (or portion thereof) immediately
prior to such Common Stock Record Date. If such dividend or distribution is not
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<PAGE>
so paid or made, the Exercise Price shall again be adjusted to be the Exercise
Price which would then be in effect if such dividend or distribution had not
been declared. If the Board of Directors determines the fair market value of any
distribution for purposes of this Section 4(d) by reference to the actual or
when issued trading market for any securities constituting all or part of such
distribution, it must in doing so consider the prices in such market over the
same period used in computing the Current Market Price pursuant to Section
4(f)(iii) to the extent possible.
(ii) Options, rights or warrants distributed by the Company to all
holders of shares of Common Stock entitling the holders thereof to subscribe for
or purchase shares of the Company's capital stock (either initially or under
certain circumstances), which options, rights or warrants, until the occurrence
of a specified event or events ("Dilution Trigger Event"): (A) are deemed to be
transferred with such shares of Common Stock; (B) are not exercisable; and (C)
are also issued in respect of future issuances of shares of Common Stock, shall
be deemed not to have been distributed for purposes of this Section 4(d)(ii)
(and no adjustment to the Exercise Price under this Section 4(d)(ii) shall be
required) until the occurrence of the earliest Dilution Trigger Event, whereupon
such options, rights and warrants shall be deemed to have been distributed and
an appropriate adjustment to the Exercise Price under this Section 4(d)(ii)
shall be made. If any such options, rights or warrants, including any such
existing options, rights or warrants distributed prior to the first issuance of
the Warrants, are subject to subsequent events, upon the occurrence of each of
which such options, rights or warrants shall become exercisable to purchase
different securities, evidences of indebtedness or other assets, then the
occurrence of each such event shall be deemed to be such date of issuance and
record date with respect to new options, rights or warrants (and a termination
or expiration of the existing options, rights or warrants, without exercise by
the holder thereof). In addition, in the event of any distribution (or deemed
distribution) of options, rights or warrants, or any Dilution Trigger Event with
respect thereto, that was counted for purposes of calculating a distribution
amount for which an adjustment to the Exercise Price under this Section 4 was
made, (1) in the case of any such options, rights or warrants which shall all
have been redeemed or repurchased without exercise by any holders thereof, the
Exercise Price shall be readjusted upon such final redemption or repurchase to
give effect to such distribution or Dilution Trigger Event, as the case may be,
as though it were a cash distribution, equal to the per share redemption or
repurchase price received by a holder or holders of shares of Common Stock with
respect to such options, rights or warrants (assuming such holder had retained
such options, rights or warrants), made to all holders of shares of Common Stock
as of the date of such redemption or repurchase, and (2) in the case of such
options, rights or warrants which shall have expired or been terminated without
exercise by any holders thereof, the Exercise Price shall be readjusted as if
such options, rights and warrants had not been issued.
(iii) Notwithstanding any other provision of this Section 4(d) to
the contrary, options, rights, warrants, evidences of indebtedness, other
securities, cash or other assets (including, without limitation, any rights
distributed pursuant to any shareholder rights plan) shall be deemed not to have
been distributed for purposes of this Section 4(d) if the Company makes proper
provision so that each Warrantholder who exercises such Warrants (or any portion
thereof) after the date fixed for determination of shareholders entitled to
receive such distribution shall be entitled to receive upon such exercise, in
addition to the shares of Common Stock issuable upon such exercise, the amount
and kind of such distributions that such holder would have been entitled to
receive if such holder had, immediately prior to such determination date,
exercised such Warrants.
(iv) For purposes of this Section 4(d) and Sections 4(a) and 4(b),
any dividend or distribution to which this Section 4(d) is applicable that also
includes shares of Common Stock, or options, rights or warrants to subscribe for
or purchase shares of Common Stock to which 4(b) applies (or both), shall be
deemed instead to be (A) a dividend or distribution of the evidences of
indebtedness, assets, shares of capital stock, rights or warrants other than
such shares of Common Stock or options, rights or warrants to which Section 4(b)
applies (and any Exercise Price reduction required by this Section 4(d)(iv) with
respect to such dividend or distribution shall then be made) immediately
followed by (B) a dividend or distribution of such shares of Common Stock or
such options, rights or warrants (and any further Exercise Price reduction
required by Sections 4(a) or 4(b) with respect to such dividend or distribution
shall then be made), except that (1) the Common Stock Record Date of such
dividend or distribution shall be substituted as "the date fixed for the
determination of stockholders entitled to receive such dividend or other
distribution", "the Common Stock Record Date fixed for such determination" and
"the Common Stock Record Date" within the meaning of Section 4(a) and as "the
date fixed for the determination of shareholders entitled to receive such rights
or warrants", "the Common Stock Record Date fixed for the determination of the
stockholders entitled to receive such rights or warrants" and "such Common Stock
Record Date" for purposes of Section 4(b), and (2) any shares of Common Stock
included in such dividend or distribution shall not be deemed "outstanding at
the close of business on the date fixed for such determination" for the purposes
of Section 4(a).
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(e) If a tender offer made by the Company or any of its
subsidiaries for all or any portion of the Common Stock expires and such tender
offer (as amended upon the expiration thereof) requires the payment to
shareholders (based on the acceptance (up to any maximum specified in the terms
of the tender offer) of Purchased Shares) of an aggregate consideration having a
fair market value (as determined by the Board of Directors, whose good faith
determination shall be conclusive and described in a resolution of the Board of
Directors) that, combined together with the aggregate of the cash plus the fair
market value (as determined by the Board of Directors, whose good faith
determination shall be conclusive and described in a resolution of the Board of
Directors) as of the expiration of such tender offer, of consideration payable
in respect of any other tender offers by the Company or any of its subsidiaries
for all or any portion of the shares of Common Stock expiring within the 12
months preceding the expiration of such tender offer and in respect of which no
adjustment pursuant to this Section 4(e) has been made, exceeds 5% of the income
of the Company reported for the 12 month period ending with the fiscal quarter
next preceding such payment (the "12 Month Net Income") (determined as of the
last time (the "Expiration Time") tenders could have been made pursuant to such
tender offer (as it may be amended)), then, and in each such case, immediately
prior to the opening of business on the day after the date of the Expiration
Time, the Exercise Price shall be adjusted so that the same shall equal the
price determined by multiplying the Exercise Price in effect immediately prior
to the close of business on the date of the Expiration Time by a fraction of
which the numerator shall be the number of shares of Common Stock outstanding
(including any tendered shares) at the Expiration Time multiplied by the Current
Market Price of a share of Common Stock on the trading day next succeeding the
Expiration Time and the denominator shall be the sum of (x) the fair market
value (determined as aforesaid) of the aggregate consideration payable to
shareholders based on the acceptance (up to any maximum specified in the terms
of the tender offer) of all shares validly tendered and not withdrawn as of the
Expiration Time (the shares deemed so accepted, up to any such maximum, being
referred to as the "Purchased Shares") and (y) the product of the number of
shares of Common Stock outstanding (less any Purchased Shares) at the Expiration
Time and the Current Market Price of the shares of Common Stock on the trading
day next succeeding the Expiration Time, such reduction (if any) to become
effective immediately prior to the opening of business on the day following the
Expiration Time. If the Company is obligated to purchase shares pursuant to any
such tender offer, but the Company is permanently prevented by applicable law
from effecting any such purchases or all such purchases are rescinded, the
Exercise Price shall again be adjusted to be the Exercise Price which would then
be in effect if such tender offer had not been made. If the application of this
Section 4(e) to any tender offer would result in an increase in the Exercise
Price, no adjustment shall be made for such tender offer under this Section
4(e).
(f) For purposes of this Section 4, the following terms shall have
the meaning indicated:
(i) "closing price" with respect to any securities on any day
means the closing sale price as of 4:00 p.m. Eastern Time on such day or any
earlier final closing on such day or, if no such sale takes place on such day,
the average of the reported high and low bid prices on such day, in each case on
the Nasdaq National Market, or the New York Stock Exchange, as applicable, or,
if such security is not listed or admitted to trading on such national market or
exchange, on the national stock exchange or Commission recognized trading market
in the United States on which such security is quoted or listed or admitted to
trading, or, if not quoted or listed or admitted to trading on any national
stock exchange or Commission recognized trading market in the United States, the
average of the high and low bid prices of such security on the over-the-counter
market on the day in question as reported by the National Quotation Bureau
Incorporated or a similar generally accepted reporting service in the United
States, or, if not so available, in such manner as furnished by any New York
Stock Exchange member firm selected from time to time by the Board of Directors
for that purpose, or a price determined in good faith by the Board of Directors,
whose determination shall be conclusive and described in a resolution of the
Board of Directors.
(ii) "Common Stock Record Date" means, with respect to any
dividend, distribution or other transaction or event in which the holders of
Common Stock have the right to receive any cash, securities or other property or
in which the Common Stock (or other applicable security) is exchanged for or
converted into any combination of cash, securities or other property, the date
fixed for determination of shareholders entitled to receive such cash,
securities or other property (whether such date is fixed by the Board of
Directors or by statute, contract or otherwise).
(iii) "Current Market Price" means the average of the daily
closing prices per share of Common Stock for the 10 consecutive trading days
immediately prior to the date in question; provided, however, that (A) if the
"ex" date (as hereinafter defined) for any event (other than the issuance or
distribution requiring such computation) that requires an adjustment to the
Exercise Price pursuant to Section 4(a), 4(b), 4(c), 4(d) or 4(e) occurs during
such 10 consecutive trading days, the closing price for each trading day prior
to the "ex" date for such other event shall be adjusted by multiplying such
closing price by the same fraction by which the Exercise Price is so required to
be adjusted as a result of such other event, (B) if the "ex" date for any event
(other than the issuance or distribution requiring such computation) that
requires an adjustment to the Exercise Price pursuant to Section 4(a), 4(b),
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4(c), 4(d) or 4(e) occurs on or after the "ex" date for the issuance or
distribution requiring such computation and prior to the day in question, the
closing price for each trading day on and after the "ex" date for such other
event shall be adjusted by multiplying such closing price by the reciprocal of
the fraction by which the Exercise Price is so required to be adjusted as a
result of such other event and (C) if the "ex" date for the issuance or
distribution requiring such computation is prior to the day in question, after
taking into account any adjustment required pursuant to clause (A) or (B) of
this proviso, the closing price for each trading day on or after such "ex" date
shall be adjusted by adding thereto the amount of any cash and the fair market
value (as determined by the Board of Directors in a manner consistent with any
good faith determination of such value for purposes of Section 4(d), whose good
faith determination shall be conclusive and described in a resolution of the
Board of Directors) of the evidences of indebtedness, shares of capital stock or
assets being distributed applicable to one share of Common Stock as of the close
of business on the day before such "ex" date. For purposes of any computation
under Section 4(e), the Current Market Price on any date shall be deemed to be
the average of the daily closing prices per share of Common Stock for such day
and the next two succeeding trading days; provided, however, that, if the "ex"
date for any event (other than the tender offer requiring such computation) that
requires an adjustment to the Exercise Price pursuant to Section 4(a), 4(b),
4(c), 4(d) or 4(e), occurs on or after the Expiration Time for the tender or
exchange offer requiring such computation and prior to the day in question, the
closing price for each trading day on and after the "ex" date for such other
event shall be adjusted by multiplying such closing price by the reciprocal of
the fraction by which the Exercise Price is so required to be adjusted as a
result of such other event. For purposes of this paragraph, the term "ex" date
(1) when used with respect to any issuance or distribution, means the first date
on which the shares of Common Stock trade regular way on the relevant exchange
or in the relevant market from which the closing price was obtained without the
right to receive such issuance or distribution, (2) when used with respect to
any subdivision or combination of shares of Common Stock, means the first date
on which the shares of Common Stock trade regular way on such exchange or in
such market after the time at which such subdivision or combination becomes
effective and (3) when used with respect to any tender or exchange offer means
the first date on which the shares of Common Stock trade regular way on such
exchange or in such market after the Expiration Time of such offer.
Notwithstanding the foregoing, whenever successive adjustments to the Exercise
Price are called for pursuant to this Section 4, such adjustments shall be made
to the Current Market Price as may be necessary or appropriate to effectuate the
intent of this Section 4 and to avoid unjust or inequitable results, as
determined in good faith by the Board of Directors.
(iv) "Fair Market Value" means the amount which a willing
buyer would pay a willing seller in an arm's-length transaction.
(g) No adjustment in the Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in such
price; provided, however, that any adjustments which by reason of this Section
4(g) are not required to be made shall be carried forward and taken into account
in any subsequent adjustment. All calculations under this Section 4 shall be
made by the Company and shall be made to the nearest cent. No adjustment need be
made for a change in the par value or no par value of the Common Stock.
(h) Whenever the Exercise Price is adjusted as herein provided,
the Company shall promptly file with the Registrar an Officers' Certificate
setting forth the Exercise Price after such adjustment and the number of shares
of Common Stock for which this Warrant will be exercisable after such adjustment
pursuant to Section 4(e) and setting forth a brief statement of the facts
requiring such adjustment. Promptly after delivery of such certificate, the
Company shall prepare a notice of such adjustment of the Exercise Price setting
forth the adjusted Exercise Price and the date on which each adjustment becomes
effective and shall mail such notice of such adjustment of the Exercise Price to
each Warrantholder at such holder's last address appearing on the register of
holders maintained for that purpose within 20 days of the effective date of such
adjustment. Failure to deliver such notice shall not affect the legality or
validity of any such adjustment.
(i) In any case in which this Section 4 provides that an
adjustment shall become effective immediately after a Common Stock Record Date
for an event, the Company may defer until the occurrence of such event issuing
to the holder of any Warrant exercised after such Common Stock Record Date and
before the occurrence of such event the additional shares of Common Stock
issuable upon such exercise by reason of the adjustment required by such event
over and above the shares of Common Stock issuable upon such exercise before
giving effect to such adjustment.
(j) For purposes of this Section 4, the number of shares of Common
Stock at any time outstanding shall not include shares held in the treasury of
the Company. The Company shall not pay any dividend or make any distribution on
shares of Common Stock held in the treasury of the Company.
(k) In case of any consolidation of the Company with, or merger of
the Company into, any other Person, or in case of any merger of another Person
into the Company (other than a merger that does not result in any
reclassification, conversion, exchange or cancelation of outstanding shares of
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Common Stock of the Company), or in case of any sale, conveyance or transfer of
all or substantially all the assets of the Company, the Warrantholders shall
have the right thereafter, during the period such Warrant shall be exercisable
as specified in Section 2(a), to convert such Warrants into the kind and amount
of securities, cash and other property receivable upon such consolidation,
merger, conveyance or transfer by a holder of the number of shares of Common
Stock of the Company for which the Warrants might have been exercised
immediately prior to such consolidation, merger, conveyance or transfer,
assuming such holder of shares of Common Stock of the Company failed to exercise
his rights of election, if any, as to the kind or amount of securities, cash and
other property receivable upon such consolidation, merger, conveyance or
transfer (provided that, if the kind or amount of securities, cash and other
property receivable upon such consolidation, merger, conveyance or transfer is
not the same for each share of Common Stock of the Company in respect of which
such rights of election shall not have been exercised ("nonelecting share"),
then for the purpose of this Section 4(k) the kind and amount of securities,
cash and other property receivable upon such consolidation, merger, conveyance
or transfer by each nonelecting share shall be deemed to be the kind and amount
so receivable per share by a plurality of the nonelecting shares). Such
securities shall provide for adjustments which, for events subsequent to the
effective date of the triggering event, shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 4(k). The above
provisions of this Section 4(k) shall similarly apply to successive
consolidations, mergers, conveyances or transfers.
(l) Upon each adjustment of the Exercise Price as a result of the
operation of this Section 4, this Warrant shall thereafter evidence the right to
purchase, at the adjusted Exercise Price, that number of shares of Common Stock
obtained by multiplying the number of shares covered by this Warrant immediately
prior to this adjustment by the Exercise Price in effect immediately prior to
such adjustment and dividing the product so obtained by the Exercise Price in
effect immediately after such adjustment of the Exercise Price.
5. Notice of Certain Events. If at any time prior to the termination
or full exercise of this Warrant:
(a) the Company shall declare any dividend payable in stock upon
its Common Stock, make any distribution to the holders of its Common Stock or
offer for subscription pro rata to holders of Common Stock any additional shares
of stock of any class or other rights;
(b) there shall be any reclassification of the Common Stock of the
Company;
(c) there shall be any consolidation or merger of the Company with
or into, or sale of all or substantially all of its assets to, another
corporation;
(d) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(e) there shall be a Public Offering;
then, in any one or more of such cases, the Company shall give the holder at
least 10 days' prior written notice of the date on which the books of the
Company shall close or a record shall be taken for such dividend, distribution
or subscription rights or for determining rights to vote in respect to any such
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up or of the date of a filing of a registration statement under the
Securities Act for a Public Offering. Such notice in accordance with the
foregoing clause shall also specify, in the case of any such dividend,
distribution or subscription rights, the date on which the holders shall be
entitled thereto, and such notice in accordance with the foregoing clause shall
also specify the date on which the holders shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be. Each such written notice shall be given by
first-class mail, postage prepared, addressed to the holder at the address of
the holder as shown on the books of the Company.
6. Transfer of Warrants.
(a) Warrant Register. The Company shall maintain a register (the
"Warrant Register") containing the names, addresses and facsimile numbers of the
holder(s). Any holder of this Warrant or any portion thereof may change its
address as shown on the Warrant Register by written notice to the Company
requesting such a change. Until this Warrant is transferred on the Warrant
Register, the Company may treat the holder as shown on the Warrant Register as
the absolute owner of this Warrant for all purposes, notwithstanding any notice
to the contrary.
(b) Warrant Agent. The Company may, by written notice to the holder,
appoint an agent for the purpose of maintaining the Warrant Register referred to
in Section 6(a) above, issuing any other securities then issuable upon the
exercise of this Warrant, exchanging this Warrant, replacing this Warrant or any
or all of the foregoing. Thereafter, any such registration, issuance or
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replacement, as the case may be, shall be made at the office of such agent.
(c) Transferability and Negotiability of Warrant. Title to this
Warrant may be transferred by endorsement (by the holder executing the
Assignment Form attached hereto) and delivery in the same manner as negotiable
instruments transferable by endorsement and delivery.
(d) Exchange of Warrant Upon a Transfer. On surrender of this Warrant
for exchange, properly endorsed on the Assignment Form and subject to the
provisions of this Warrant with respect to compliance with the Securities Act,
the Company at its expense shall issue to or on the order of the holder a new
warrant or warrants of like tenor, in the name of the holder or as the holders
(on payment by the holder of any applicable transfer taxes) may direct,
exercisable for the number of Shares issuable upon the exercise hereof.
7. Registration Rights. If the holder of this Warrant is a party to,
or an assignee of rights under, that certain Registration Rights Agreement,
dated March 16, 2000 (the "Registration Rights Agreement"), such holder shall be
entitled to include any shares of Common Stock or other securities received upon
exercise of the Warrant with such holder's Registrable Securities (as such term
is defined in the Registration Rights Agreement), on the terms and conditions as
set forth in the Registration Rights Agreement.
8. Amendment and Waivers. No amendment, modification or termination of
this Warrant shall be binding unless executed in writing by the Company and the
Warrantholder intending to be bound thereby.
9. Waivers and Extensions. Any provision of this Warrant may be
amended, waived or modified only if such amendment, waiver or modification is in
writing, is signed by the party intending to be bound, and specifically refers
to this Warrant. Waivers may be made in advance or after the right waived has
arisen or the breach or default waived has occurred. Any waiver may be
conditional. No waiver of any breach of any agreement or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach thereof
nor of any other agreement or provision herein contained. No waiver or
extension of time for performance of any obligations or acts shall be deemed a
waiver or extension of the time for performance of any other obligations or
acts.
10. Termination. The right to exercise this Warrant shall expire and
shall be void at 5:00 p.m. New York City time on March 16, 2003.
11. Reservation of Stock. The Company covenants that it will at all
times reserve and keep available, solely for issuance upon exercise of this
Warrant, all shares of Common Stock or other securities from time to time
issuable upon exercise of this Warrant and, subject to any existing contractual
limitations, from time to time, will take all steps necessary to amend its
Certificate of Incorporation to provide sufficient reserves of shares of Common
Stock or other securities issuable upon exercise of this Warrant. The Company
further covenants that all shares that may be issued upon the exercise of rights
represented by this Warrant and payment of the Exercise Price, as set forth
herein, will be fully paid and non-assessable and free from all taxes, liens and
charges in respect of the issue thereof. The Company also agrees that its
issuance of this Warrant shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for shares of Common Stock upon exercise of this Warrant.
12. Replacement. On receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction, or mutilation of this Warrant and, in
the case of loss, theft, or destruction, on delivery of any indemnity agreement
or bond reasonably satisfactory in form and amount to the Company or, in the
case of mutilation, on surrender and cancellation of this Warrant, the Company
at its expense will execute and deliver, in lieu of this Warrant, a new Warrant
of like tenor.
13. No Rights as Stockholder. Except as provided in Section 2 or 4, no
holder of this Warrant, as such, shall be entitled to vote or receive dividends
or be considered a stockholder of the Company for any purpose, nor shall
anything in this Warrant be construed to confer on any holder of this Warrant as
such, any rights of a stockholder of the Company or any right to vote, give or
withhold consent to any corporate action, to receive notice of meeting of
stockholders, to receive dividends or subscription rights or otherwise.
14. Miscellaneous Provisions.
(a) Governing Law. This Warrant shall be governed by, interpreted
under, and construed in accordance with the laws of the State of New York,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.
(b) Notices. All notices, demands, requests, consents, approvals or
other communications (collectively, "Notices") required or permitted to be given
hereunder or which are given with respect to this Warrant shall be in writing
and shall be personally served, delivered by reputable air courier service with
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charges prepaid, or transmitted by hand delivery, telegram, telex or facsimile,
to such address as such party shall have specified most recently by written
notice. Notice shall be deemed given on the date of service or transmission if
personally served or transmitted by telegram, telex or facsimile. Notice
otherwise sent as provided herein shall be deemed given on the next business day
following delivery of such notice to a reputable air courier service.
(c) Binding Effect. The provisions of this Warrant shall be binding
upon the Company and its successors and assigns.
(d) Remedies. In the event of a breach of this Warrant, the holder
shall be entitled to injunctive relief and specific performance of its rights
under this Warrant, in addition to all of its rights granted by law, including,
without limitation, recovery of damages. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach of this Warrant by the Company and hereby waives any defense in any
action for injunctive relief or specific performance that a remedy at law would
be adequate.
(e) Headings. Titles and headings of sections of this Warrant are for
convenience only and shall not affect the construction of any provision of this
Warrant.
Dated: March 16, 2000
RHYTHMS NETCONNECTIONS, INC.
By:/s/ Catherine Hapka
Name: Catherine Hapka
Title: Chief Executive Officer
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SUBSCRIPTION FORM
(To be signed only upon exercise of Warrant)
To: .
Attention: Secretary
(1) The undersigned, the holder of the attached Warrant, hereby
irrevocably elects to [exercise the purchase right represented by that Warrant
for, and to purchase under that Warrant, ___________ shares of Common Stock of
and herewith tenders any necessary payment of the purchase price in such number
of shares in full.] [to exercise [all][a portion] of the purchase right
represented by that Warrant by canceling the Warrant with respect to ___________
shares of Common Stock of . in exchange for a number of shares of Common Stock
equal to the value [as determined pursuant to the Warrant] as the [portion of
the] Warrant [being canceled].
(2) In exercising the Warrant, the undersigned hereby confirms and
acknowledges that the shares of Common Stock or other securities to be issued
upon exercise thereof are being acquired solely for the account of the
undersigned and not as a nominee for any other party, and that the undersigned
will not sell, offer for sale, pledge, hypothecate or otherwise dispose of any
shares of Common Stock, except under circumstances that will not result in a
violation of the Securities Act of 1933, as amended, or any applicable state
securities laws.
(3) Please issue a certificate(s) representing said shares of Common
Stock in the name of the undersigned or in the name of the transferee specified
below.
(4) Please issue a new Warrant for the unexercised portion in the name
of the undersigned or in the name of the permitted transferee specified below.
(5) Please deliver any certificate(s) or Warrant to the following
address.
Name: ___________________________
Address: ___________________________
Attention: ___________________________
Dated:
By:___________________________
Name
Footnote:
1. Insert here the number of shares called for on the face of the Warrant
(or, in the case of partial exercise, the portion as to which the Warrant is
being exercised), without making any adjustment for additional shares of Common
Stock or any other securities or property which, under the adjustment provisions
of the Warrant, may be deliverable upon exercise.
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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:
No. of Shares of
Name and Address of Assignee Common Stock
and does hereby irrevocably constitute and appoint _______________________
attorney-in-fact to register such transfer onto the books of , Inc. maintained
for the purpose, with full power of substitution in the premises.
Date:_______________________ 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.
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EXHIBIT 10.5
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR THE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES. SUCH SECURITIES MAY NOT BE OFFERED,
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE
OF SUCH REGISTRATION OTHER THAN PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS.
[Form of]
COMMON STOCK WARRANT
Void after March 16, 2005
Warrant No. A-2-[ ]
This certifies that, for value received, [ ] or its permitted
assigns is entitled, subject to the terms and conditions set forth herein
(including the exercise conditions of Section 2), to purchase from Rhythms
NetConnections Inc (the "Company"), a Delaware corporation, up to [
] fully paid and nonassessable shares
(the "Shares") of Common Stock (as defined herein) at the exercise price of
$50.00 per share (the "Exercise Price"). The Exercise Price and number of
Shares is subject to adjustment as provided in this Warrant. The term "Warrant"
as used herein shall include this Warrant and any warrants delivered in
substitution or exchange therefor as provided herein.
1. Definitions. As used in this Warrant, the following terms,
unless the context otherwise requires, have the following meanings:
(a) "Affiliate" means with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such 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
"controlling" and "controlled" have meanings correlative to the foregoing.
(b) "Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday that is not a day on which banking institutions in the City of New
York are authorized or obligated by law or executive order to be closed.
(c) "Capital Stock" or "capital stock" means, with respect to any
Person, any and all shares, interests, participations, rights in, or other
equivalents (however designated and whether voting and/or non-voting) of such
Person's capital stock, whether outstanding on the date of the Warrant or issued
after the date of the Warrant, and any and all rights (other than any evidence
of indebtedness) or warrants exercisable or exchangeable for or convertible into
such capital stock.
(d) "Common Stock" means shares of the Company's common stock, par
value $0.001 per share and capital stock of any other class or series into which
the Common Stock may hereafter by changed.
(e) "Company" means Rhythms NetConnections Inc. and any Person
that shall succeed to or assume the obligations of the Company under this
Warrant.
(f) "HMTF Group" means Hicks, Muse, Tate & Furst Incorporated, a
Texas corporation, and its Affiliates and their respective officers, directors,
partners, members, stockholders and employees (and members of their respective
families and trusts for the primary benefit of such family members) and HM4
Rhythms Qualified Fund, LLC; HM4 Rhythms Private Fund, LLC; HM PG-IV Rhythms,
LLC; HM 4-SBS Rhythms Coinvestors, LLC, HM 4-EQ Rhythms Coinvestors LLC and HMTF
Bridge RHY, LLC and their respective Affiliates.
(g) "HMTF Holders" means members of the HMTF Group that are
holders of all or a portion of this Warrant and the shares of the Common Stock
issuable upon exercise of this Warrant.
(h) "Person" means any individual, partnership, corporation,
limited liability company, joint venture, association, joint-stock company,
trust, unincorporated organization, government or agency or political
subdivision thereof, or other entity.
(i) "Public Offering" shall mean a public offering by the Company
of its Common Stock registered under the Securities Act of 1933, as amended.
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(j) "Warrantholder", "holder of Warrant", "holder", or similar
terms refers to the holder of this Warrant.
2. Exercise Provisions.
(a) Exercisability. The holder of this Warrant may exercise it in
whole or in part to the extent then exercisable by surrender of this Warrant,
with the form of subscription at the end of this Warrant duly executed by the
holder, to the Company at its principal office (or to the office of the Warrant
Agent as contemplated in Section 6(b), if applicable), accompanied by payment,
in lawful money of the United States, of the amount obtained by multiplying the
Exercise Price (as adjusted from time to time pursuant to the terms of this
Warrant) by the number of shares of Common Stock designated in such completed
subscription form. This Warrant shall be deemed to have been exercised
immediately prior to the close of business on the day of surrender of such
Warrant, and the person or persons entitled to receive shares of Common Stock
issuable upon exercise of this Warrant shall be treated for all purposes as the
record holder or holders of such shares of Common Stock at such time.
(b) Payment of Exercise Price. Payment shall be made by check
payable to the Company.
(c) Net Issue Exercise. Notwithstanding any provisions herein to
the contrary, if the fair market value (as defined below) of one share of Common
Stock is greater than the Exercise Price (on the date of exercise of this
Warrant), in lieu of exercising this Warrant in exchange for cash, the holder
may elect to exercise all or a portion of this Warrant by canceling all or a
portion of this Warrant and receiving in exchange therefor shares of Common
Stock (as determined below) equal to the value of this Warrant, or the portion
thereof being canceled, by surrender of this Warrant at the principal office of
the Company (or the office of the Warrant Agent contemplated by Section 6(b), if
applicable) together with a duly executed form of subscription, in which event
the Company shall issue to the holder a number of shares of Common Stock
computed using the following formula:
X=Y(A-B)
---------
A
Where
X = the number of shares of Common Stock to be issued to the
holder
Y = the number of shares of Common Stock purchasable under
the Warrant or, if only a portion of the Warrant is
being exercised, under the portion of the Warrant being
exercised (on the date of exercise)
A = the fair market value of one share of the Common Stock (on
the date of exercise)
B = the Exercise Price (as adjusted on the date of exercise)
For purposes of the above calculation, "fair market value" of one share of
Common Stock shall be determined by the Company's Board of Directors in good
faith; provided, however, where a public market exists for the Common Stock at
the time of such exercise, the "fair market value", per share shall be equal to
the average for the five trading days prior to the date of such exercise of the
average of the closing bid and asked prices of the Common Stock quoted in the
Over-The-Counter Market Summary or the last reported sale price of the Common
Stock quoted on the Nasdaq National Market System or the principal exchange on
which the Common Stock is then listed, whichever is applicable, as published in
The Wall Street Journal.
(d) Restrictions on Exercise. This Warrant is exercisable at any
time and from time to time from the date hereof, provided this Warrant has not
terminated pursuant to Section 10.
3. Delivery of Stock Certificates. As soon as possible after full or
partial exercise of this Warrant in accordance with the terms hereof and in any
event within ten (10) days after such exercise, the Company, at its expense,
will cause to be issued in the name of and delivered to the holder of this
Warrant, a certificate or certificates for the number of fully paid and
nonassessable shares of Common Stock to which that holder shall be entitled upon
such exercise. In the event that this Warrant is exercised in part, the Company
at its expense will also execute and deliver a new Warrant of like tenor
exercisable for the number of Shares for which this Warrant may then be
exercised. No fractional shares or scrip representing fractional shares will be
issued upon exercise of this Warrant. If upon any exercise of this Warrant a
fraction of a share would otherwise be issuable, the Company will pay the cash
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value of that fractional share, calculated on the basis of the fair market value
as of the date of exercise.
4. Adjustment Provisions
The Exercise Price shall be adjusted from time to time by the Company
as follows:
(a) If the Company shall hereafter pay a dividend or make a
distribution to all holders of the outstanding shares of Common Stock in shares
of Common Stock, the Exercise Price in effect at the opening of business on the
date following the date fixed for the determination of shareholders entitled to
receive such dividend or other distribution shall be reduced by multiplying such
Exercise Price by a fraction the numerator of which shall be the number of
shares of Common Stock outstanding at the close of business on the Common Stock
Record Date (as defined in Section 4(f)(ii)) fixed for such determination and
the denominator of which shall be the sum of such number of shares and the total
number of shares constituting such dividend or other distribution, such
reduction to become effective immediately after the opening of business on the
day following the Common Stock Record Date. If any dividend or distribution of
the type described in this Section 4(a) is declared but not so paid or made, the
Exercise Price shall again be adjusted to the Exercise Price which would then be
in effect if such dividend or distribution had not been declared.
(b) (i) In case the Company shall issue or sell any Common
Stock in a financing conducted as an underwritten public offering or a private
placement (in each case for cash and other than transactions with strategic
investors) for a consideration per share that is 90% or less than the Current
Market Price on the date of such issuance, or shall issue securities convertible
into Common Stock having an Exercise Price per share that is 90% or less than
the Current Market Price at the date of issuance of such convertible security,
the Exercise Price to be in effect after such issuance or sale shall be
determined by multiplying the Exercise Price in effect immediately prior to such
issuance or sale by a fraction, (1) the numerator of which shall be the sum of
(x) the number of shares of Common Stock outstanding immediately prior to such
issuance or sale and (y) the number of shares of Common Stock which the
aggregate consideration receivable by the Company for the total number of
additional shares of Common Stock so issued or sold (or issuable on conversion)
would purchase at the Current Market Price in effect immediately prior to such
issuance or sale and (2) the denominator of which shall be the sum of the number
of shares of Common Stock outstanding immediately prior to such issuance or sale
and the number of additional shares of Common Stock to be issued or sold (or, in
the case of convertible securities, issued on conversion). Notwithstanding the
foregoing, the Exercise Price shall not be adjusted as a result of the
circumstances described in this Section 4(b)(i) if the HMTF Holders shall be
offered the opportunity to purchase their pro rata portion (based on the
percentage of the outstanding shares of Common Stock represented by the Warrants
then held by such HMTF Holders on an as-exercised basis) of such offering. The
preemptive right set forth in the preceding sentence shall be deemed waived as
to an HMTF Holder if such HMTF Holder does not respond in a timely fashion to
notice of the pricing of the offering to which the preemptive right would
otherwise apply.
(ii) If the Company shall offer or issue rights or warrants
to all holders of its outstanding shares of Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per share less than
the Current Market Price (as defined in Section 4(f) (iii)) on the Common Stock
Record Date fixed for the determination of shareholders entitled to receive such
rights or warrants, the Exercise Price shall be adjusted so that the same shall
equal the price determined by multiplying the Exercise Price in effect at the
opening of business on the date after such Common Stock Record Date by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding at the close of business on the Common Stock Record Date plus the
number of shares of Common Stock which the aggregate offering price of the total
number of shares of Common Stock subject to such rights or warrants would
purchase at such Current Market Price and of which the denominator shall be the
number of shares of Common Stock outstanding at the close of business on the
Common Stock Record Date plus the total number of additional shares of Common
Stock subject to such rights or warrants for subscription or purchase. Such
adjustment shall become effective immediately after the opening of business on
the day following the Common Stock Record Date fixed for determination of
shareholders entitled to purchase or receive such rights or warrants. To the
extent that shares of Common Stock are not delivered pursuant to such rights or
warrants, upon the expiration or termination of such rights or warrants the
Exercise Price shall again be adjusted to be the Exercise Price which would then
be in effect had the adjustments made upon the issuance of such rights or
warrants been made on the basis of delivery of only the number of shares of
Common Stock actually delivered. If such rights or warrants are not so issued,
the Exercise Price shall again be adjusted to be the Exercise Price which would
then be in effect if such date fixed for the determination of shareholders
entitled to receive such rights or warrants had not been fixed. In determining
whether any rights or warrants entitle the holders to subscribe for or purchase
shares of Common Stock at less than such Current Market Price, and in
determining the aggregate offering price of such shares of Common Stock, there
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shall be taken into account (x) any consideration received for such rights or
warrants, with the value of such consideration and the amount of such exercise
or subscription price, if other than cash, to be determined by the Board of
Directors and (y) the amount of any exercise price or subscription price
required to be paid upon exercise of such warrants or rights.
(c) If the outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Exercise Price in effect at
the opening of business on the day following the day upon which such subdivision
becomes effective shall be proportionately reduced, and, conversely, if the
outstanding shares of Common Stock shall be combined into a smaller number of
shares of Common Stock, the Exercise Price in effect at the opening of business
on the day following the day upon which such combination becomes effective shall
be proportionately increased, such reduction or increase, as the case may be, to
become effective immediately after the opening of business on the day following
the day upon which such subdivision or combination becomes effective.
(d) (i) If the Company shall, by dividend or otherwise, distribute
to all holders of its shares of Common Stock any class of capital stock of the
Company (other than any dividends or distributions to which Section 4(a)
applies) or evidences of its indebtedness, cash or other assets (including
securities, but excluding any rights or warrants of a type referred to in
Section 4(b)(ii) and dividends and distributions paid exclusively in cash and
excluding any capital stock, evidences of indebtedness, cash or assets
distributed upon a merger or consolidation to which Section 4(k) applies) (the
foregoing hereinafter in this Section 4(d) called the "Distributed Securities"),
then, in each such case, the Exercise Price shall be reduced so that the same
shall be equal to the price determined by multiplying the Exercise Price in
effect immediately prior to the close of business on the Common Stock Record
Date with respect to such distribution by a fraction of which the numerator
shall be the Current Market Price (determined as provided in Section 4(f)(iii))
on such date less the fair market value (as determined by the Board of
Directors, whose good faith determination shall be conclusive and described in a
resolution of the Board of Directors) on such date of the portion of the
Distributed Securities so distributed applicable to one share of Common Stock
and the denominator shall be such Current Market Price, such reduction to become
effective immediately prior to the opening of business on the day following the
Common Stock Record Date; provided, however, that, in the event the then fair
market value (as so determined) of the portion of the Distributed Securities so
distributed applicable to one share of Common Stock is equal to or greater than
the Current Market Price on the Common Stock Record Date, in lieu of the
foregoing adjustment, adequate provision shall be made so that each
Warrantholder shall have the right to receive upon exercise of such Warrant (or
any portion thereof) the amount of Distributed Securities such holder would have
received had such holder exercised such Warrant (or portion thereof) immediately
prior to such Common Stock Record Date. If such dividend or distribution is not
so paid or made, the Exercise Price shall again be adjusted to be the Exercise
Price which would then be in effect if such dividend or distribution had not
been declared. If the Board of Directors determines the fair market value of any
distribution for purposes of this Section 4(d) by reference to the actual or
when issued trading market for any securities constituting all or part of such
distribution, it must in doing so consider the prices in such market over the
same period used in computing the Current Market Price pursuant to Section
4(f)(iii) to the extent possible.
(ii) Options, rights or warrants distributed by the Company
to all holders of shares of Common Stock entitling the holders thereof to
subscribe for or purchase shares of the Company's capital stock (either
initially or under certain circumstances), which options, rights or warrants,
until the occurrence of a specified event or events ("Dilution Trigger Event"):
(A) are deemed to be transferred with such shares of Common Stock; (B) are not
exercisable; and (C) are also issued in respect of future issuances of shares of
Common Stock, shall be deemed not to have been distributed for purposes of this
Section 4(d)(ii) (and no adjustment to the Exercise Price under this Section
4(d)(ii) shall be required) until the occurrence of the earliest Dilution
Trigger Event, whereupon such options, rights and warrants shall be deemed to
have been distributed and an appropriate adjustment to the Exercise Price under
this Section 4(d)(ii) shall be made. If any such options, rights or warrants,
including any such existing options, rights or warrants distributed prior to the
first issuance of the Warrants, are subject to subsequent events, upon the
occurrence of each of which such options, rights or warrants shall become
exercisable to purchase different securities, evidences of indebtedness or other
assets, then the occurrence of each such event shall be deemed to be such date
of issuance and record date with respect to new options, rights or warrants (and
a termination or expiration of the existing options, rights or warrants, without
exercise by the holder thereof). In addition, in the event of any distribution
(or deemed distribution) of options, rights or warrants, or any Dilution Trigger
Event with respect thereto, that was counted for purposes of calculating a
distribution amount for which an adjustment to the Exercise Price under this
Section 4 was made, (1) in the case of any such options, rights or warrants
which shall all have been redeemed or repurchased without exercise by any
holders thereof, the Exercise Price shall be readjusted upon such final
redemption or repurchase to give effect to such distribution or Dilution Trigger
Event, as the case may be, as though it were a cash distribution, equal to the
PAGE 4
<PAGE>
per share redemption or repurchase price received by a holder or holders of
shares of Common Stock with respect to such options, rights or warrants
(assuming such holder had retained such options, rights or warrants), made to
all holders of shares of Common Stock as of the date of such redemption or
repurchase, and (2) in the case of such options, rights or warrants which shall
have expired or been terminated without exercise by any holders thereof, the
Exercise Price shall be readjusted as if such options, rights and warrants had
not been issued.
(iii) Notwithstanding any other provision of this Section
4(d) to the contrary, options, rights, warrants, evidences of indebtedness,
other securities, cash or other assets (including, without limitation, any
rights distributed pursuant to any shareholder rights plan) shall be deemed not
to have been distributed for purposes of this Section 4(d) if the Company makes
proper provision so that each Warrantholder who exercises such Warrants (or any
portion thereof) after the date fixed for determination of shareholders entitled
to receive such distribution shall be entitled to receive upon such exercise, in
addition to the shares of Common Stock issuable upon such exercise, the amount
and kind of such distributions that such holder would have been entitled to
receive if such holder had, immediately prior to such determination date,
exercised such Warrants.
(iv) For purposes of this Section 4(d) and Sections 4(a) and
4(b), any dividend or distribution to which this Section 4(d) is applicable that
also includes shares of Common Stock, or options, rights or warrants to
subscribe for or purchase shares of Common Stock to which 4(b) applies (or
both), shall be deemed instead to be (A) a dividend or distribution of the
evidences of indebtedness, assets, shares of capital stock, rights or warrants
other than such shares of Common Stock or options, rights or warrants to which
Section 4(b) applies (and any Exercise Price reduction required by this Section
4(d)(iv) with respect to such dividend or distribution shall then be made)
immediately followed by (B) a dividend or distribution of such shares of Common
Stock or such options, rights or warrants (and any further Exercise Price
reduction required by Sections 4(a) or 4(b) with respect to such dividend or
distribution shall then be made), except that (1) the Common Stock Record Date
of such dividend or distribution shall be substituted as "the date fixed for the
determination of stockholders entitled to receive such dividend or other
distribution", "the Common Stock Record Date fixed for such determination" and
"the Common Stock Record Date" within the meaning of Section 4(a) and as "the
date fixed for the determination of shareholders entitled to receive such rights
or warrants", "the Common Stock Record Date fixed for the determination of the
stockholders entitled to receive such rights or warrants" and "such Common Stock
Record Date" for purposes of Section 4(b), and (2) any shares of Common Stock
included in such dividend or distribution shall not be deemed "outstanding at
the close of business on the date fixed for such determination" for the purposes
of Section 4(a).
(e) If a tender offer made by the Company or any of its
subsidiaries for all or any portion of the Common Stock expires and such tender
offer (as amended upon the expiration thereof) requires the payment to
shareholders (based on the acceptance (up to any maximum specified in the terms
of the tender offer) of Purchased Shares) of an aggregate consideration having a
fair market value (as determined by the Board of Directors, whose good faith
determination shall be conclusive and described in a resolution of the Board of
Directors) that, combined together with the aggregate of the cash plus the fair
market value (as determined by the Board of Directors, whose good faith
determination shall be conclusive and described in a resolution of the Board of
Directors) as of the expiration of such tender offer, of consideration payable
in respect of any other tender offers by the Company or any of its subsidiaries
for all or any portion of the shares of Common Stock expiring within the 12
months preceding the expiration of such tender offer and in respect of which no
adjustment pursuant to this Section 4(e) has been made, exceeds 5% of the income
of the Company reported for the 12 month period ending with the fiscal quarter
next preceding such payment (the "12 Month Net Income") (determined as of the
last time (the "Expiration Time") tenders could have been made pursuant to such
tender offer (as it may be amended)), then, and in each such case, immediately
prior to the opening of business on the day after the date of the Expiration
Time, the Exercise Price shall be adjusted so that the same shall equal the
price determined by multiplying the Exercise Price in effect immediately prior
to the close of business on the date of the Expiration Time by a fraction of
which the numerator shall be the number of shares of Common Stock outstanding
(including any tendered shares) at the Expiration Time multiplied by the Current
Market Price of a share of Common Stock on the trading day next succeeding the
Expiration Time and the denominator shall be the sum of (x) the fair market
value (determined as aforesaid) of the aggregate consideration payable to
shareholders based on the acceptance (up to any maximum specified in the terms
of the tender offer) of all shares validly tendered and not withdrawn as of the
Expiration Time (the shares deemed so accepted, up to any such maximum, being
referred to as the "Purchased Shares") and (y) the product of the number of
shares of Common Stock outstanding (less any Purchased Shares) at the Expiration
Time and the Current Market Price of a share of Common Stock on the trading day
next succeeding the Expiration Time, such reduction (if any) to become effective
immediately prior to the opening of business on the day following the Expiration
Time. If the Company is obligated to purchase shares pursuant to any such tender
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offer, but the Company is permanently prevented by applicable law from effecting
any such purchases or all such purchases are rescinded, the Exercise Price shall
again be adjusted to be the Exercise Price which would then be in effect if such
tender offer had not been made. If the application of this Section 4(e) to any
tender offer would result in an increase in the Exercise Price, no adjustment
shall be made for such tender offer under this Section 4(e).
(f) For purposes of this Section 4, the following terms shall have
the meaning indicated:
(i) "closing price" with respect to any securities on any day
means the closing sale price as of 4:00 p.m. Eastern Time on such day or any
earlier final closing on such day or, if no such sale takes place on such day,
the average of the reported high and low bid prices on such day, in each case on
the Nasdaq National Market, or the New York Stock Exchange, as applicable, or,
if such security is not listed or admitted to trading on such national market or
exchange, on the national stock exchange or Commission recognized trading market
in the United States on which such security is quoted or listed or admitted to
trading, or, if not quoted or listed or admitted to trading on any national
stock exchange or Commission recognized trading market in the United States, the
average of the high and low bid prices of such security on the over-the-counter
market on the day in question as reported by the National Quotation Bureau
Incorporated or a similar generally accepted reporting service in the United
States, or, if not so available, in such manner as furnished by any New York
Stock Exchange member firm selected from time to time by the Board of Directors
for that purpose, or a price determined in good faith by the Board of Directors,
whose determination shall be conclusive and described in a resolution of the
Board of Directors.
(ii) "Common Stock Record Date" means, with respect to any
dividend, distribution or other transaction or event in which the holders of
Common Stock have the right to receive any cash, securities or other property or
in which the Common Stock (or other applicable security) is exchanged for or
converted into any combination of cash, securities or other property, the date
fixed for determination of shareholders entitled to receive such cash,
securities or other property (whether such date is fixed by the Board of
Directors or by statute, contract or otherwise).
(iii) "Current Market Price" means the average of the daily
closing prices per share of Common Stock for the 10 consecutive trading days
immediately prior to the date in question; provided, however, that (A) if the
"ex" date (as hereinafter defined) for any event (other than the issuance or
distribution requiring such computation) that requires an adjustment to the
Exercise Price pursuant to Section 4(a), 4(b), 4(c), 4(d) or 4(e) occurs during
such 10 consecutive trading days, the closing price for each trading day prior
to the "ex" date for such other event shall be adjusted by multiplying such
closing price by the same fraction by which the Exercise Price is so required to
be adjusted as a result of such other event, (B) if the "ex" date for any event
(other than the issuance or distribution requiring such computation) that
requires an adjustment to the Exercise Price pursuant to Section 4(a), 4(b),
4(c), 4(d) or 4(e) occurs on or after the "ex" date for the issuance or
distribution requiring such computation and prior to the day in question, the
closing price for each trading day on and after the "ex" date for such other
event shall be adjusted by multiplying such closing price by the reciprocal of
the fraction by which the Exercise Price is so required to be adjusted as a
result of such other event and (C) if the "ex" date for the issuance or
distribution requiring such computation is prior to the day in question, after
taking into account any adjustment required pursuant to clause (A) or (B) of
this proviso, the closing price for each trading day on or after such "ex" date
shall be adjusted by adding thereto the amount of any cash and the fair market
value (as determined by the Board of Directors in a manner consistent with any
good faith determination of such value for purposes of Section 4(d), whose good
faith determination shall be conclusive and described in a resolution of the
Board of Directors) of the evidences of indebtedness, shares of capital stock or
assets being distributed applicable to one share of Common Stock as of the close
of business on the day before such "ex" date. For purposes of any computation
under Section 4(e), the Current Market Price on any date shall be deemed to be
the average of the daily closing prices per share of Common Stock for such day
and the next two succeeding trading days; provided, however, that, if the "ex"
date for any event (other than the tender offer requiring such computation) that
requires an adjustment to the Exercise Price pursuant to Section 4(a), 4(b),
4(c), 4(d) or 4(e), occurs on or after the Expiration Time for the tender or
exchange offer requiring such computation and prior to the day in question, the
closing price for each trading day on and after the "ex" date for such other
event shall be adjusted by multiplying such closing price by the reciprocal of
the fraction by which the Exercise Price is so required to be adjusted as a
result of such other event. For purposes of this paragraph, the term "ex" date
(1) when used with respect to any issuance or distribution, means the first date
on which the shares of Common Stock trade regular way on the relevant exchange
or in the relevant market from which the closing price was obtained without the
right to receive such issuance or distribution, (2) when used with respect to
any subdivision or combination of shares of Common Stock, means the first date
on which the shares of Common Stock trade regular way on such exchange or in
such market after the time at which such subdivision or combination becomes
effective and (3) when used with respect to any tender or exchange offer means
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the first date on which the shares of Common Stock trade regular way on such
exchange or in such market after the Expiration Time of such offer.
Notwithstanding the foregoing, whenever successive adjustments to the Exercise
Price are called for pursuant to this Section 4, such adjustments shall be made
to the Current Market Price as may be necessary or appropriate to effectuate the
intent of this Section 4 and to avoid unjust or inequitable results, as
determined in good faith by the Board of Directors.
(iv) "Fair Market Value" means the amount which a willing
buyer would pay a willing seller in an arm's-length transaction.
(g) No adjustment in the Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in such
price; provided, however, that any adjustments which by reason of this Section
4(g) are not required to be made shall be carried forward and taken into account
in any subsequent adjustment. All calculations under this Section 4 shall be
made by the Company and shall be made to the nearest cent. No adjustment need be
made for a change in the par value or no par value of the Common Stock.
(h) Whenever the Exercise Price is adjusted as herein provided,
the Company shall promptly file with the Registrar an Officers' Certificate
setting forth the Exercise Price after such adjustment and the number of shares
of Common Stock for which this Warrant will be exercisable after such adjustment
pursuant to Section 4(e) and setting forth a brief statement of the facts
requiring such adjustment. Promptly after delivery of such certificate, the
Company shall prepare a notice of such adjustment of the Exercise Price setting
forth the adjusted Exercise Price and the date on which each adjustment becomes
effective and shall mail such notice of such adjustment of the Exercise Price to
each Warrantholder at such holder's last address appearing on the register of
holders maintained for that purpose within 20 days of the effective date of such
adjustment. Failure to deliver such notice shall not affect the legality or
validity of any such adjustment.
(i) In any case in which this Section 4 provides that an
adjustment shall become effective immediately after a Common Stock Record Date
for an event, the Company may defer until the occurrence of such event issuing
to the holder of any Warrant exercised after such Common Stock Record Date and
before the occurrence of such event the additional shares of Common Stock
issuable upon such exercise by reason of the adjustment required by such event
over and above the shares of Common Stock issuable upon such exercise before
giving effect to such adjustment.
(j) For purposes of this Section 4, the number of shares of Common
Stock at any time outstanding shall not include shares held in the treasury of
the Company. The Company shall not pay any dividend or make any distribution on
shares of Common Stock held in the treasury of the Company.
(k) In case of any consolidation of the Company with, or merger of
the Company into, any other Person, or in case of any merger of another Person
into the Company (other than a merger that does not result in any
reclassification, conversion, exchange or cancelation of outstanding shares of
Common Stock of the Company), or in case of any sale, conveyance or transfer of
all or substantially all the assets of the Company, the Warrantholders shall
have the right thereafter, during the period such Warrant shall be exercisable
as specified in Section 2(a), to convert such Warrants into the kind and amount
of securities, cash and other property receivable upon such consolidation,
merger, conveyance or transfer by a holder of the number of shares of Common
Stock of the Company for which the Warrants might have been exercised
immediately prior to such consolidation, merger, conveyance or transfer,
assuming such holder of shares of Common Stock of the Company failed to exercise
his rights of election, if any, as to the kind or amount of securities, cash and
other property receivable upon such consolidation, merger, conveyance or
transfer (provided that, if the kind or amount of securities, cash and other
property receivable upon such consolidation, merger, conveyance or transfer is
not the same for each share of Common Stock of the Company in respect of which
such rights of election shall not have been exercised ("nonelecting share"),
then for the purpose of this Section 4(k) the kind and amount of securities,
cash and other property receivable upon such consolidation, merger, conveyance
or transfer by each nonelecting share shall be deemed to be the kind and amount
so receivable per share by a plurality of the nonelecting shares). Such
securities shall provide for adjustments which, for events subsequent to the
effective date of the triggering event, shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 4(k). The above
provisions of this Section 4(k) shall similarly apply to successive
consolidations, mergers, conveyances or transfers.
(l) Upon each adjustment of the Exercise Price as a result of the
operation of this Section 4, this Warrant shall thereafter evidence the right to
purchase, at the adjusted Exercise Price, that number of shares of Common Stock
obtained by multiplying the number of shares covered by this Warrant immediately
prior to this adjustment by the Exercise Price in effect immediately prior to
such adjustment and dividing the product so obtained by the Exercise Price in
effect immediately after such adjustment of the Exercise Price.
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5. Notice of Certain Events. If at any time prior to the termination or
full exercise of this Warrant:
(a) the Company shall declare any dividend payable in stock upon
its Common Stock, make any distribution to the holders of its Common Stock or
offer for subscription pro rata to holders of Common Stock any additional shares
of stock of any class or other rights;
(b) there shall be any reclassification of the Common Stock of the
Company;
(c) there shall be any consolidation or merger of the Company with
or into, or sale of all or substantially all of its assets to, another
corporation;
(d) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(e) there shall be a Public Offering;
then, in any one or more of such cases, the Company shall give the holder at
least 10 days' prior written notice of the date on which the books of the
Company shall close or a record shall be taken for such dividend, distribution
or subscription rights or for determining rights to vote in respect to any such
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up or of the date of a filing of a registration statement under the
Securities Act for a Public Offering. Such notice in accordance with the
foregoing clause shall also specify, in the case of any such dividend,
distribution or subscription rights, the date on which the holders shall be
entitled thereto, and such notice in accordance with the foregoing clause shall
also specify the date on which the holders shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be. Each such written notice shall be given by
first-class mail, postage prepared, addressed to the holder at the address of
the holder as shown on the books of the Company.
6. Transfer of Warrants.
(a) Warrant Register. The Company shall maintain a register (the
"Warrant Register") containing the names, addresses and facsimile numbers of the
holder(s). Any holder of this Warrant or any portion thereof may change its
address as shown on the Warrant Register by written notice to the Company
requesting such a change. Until this Warrant is transferred on the Warrant
Register, the Company may treat the holder as shown on the Warrant Register as
the absolute owner of this Warrant for all purposes, notwithstanding any notice
to the contrary.
(b) Warrant Agent. The Company may, by written notice to the
holder, appoint an agent for the purpose of maintaining the Warrant Register
referred to in Section 6(a) above, issuing any other securities then issuable
upon the exercise of this Warrant, exchanging this Warrant, replacing this
Warrant or any or all of the foregoing. Thereafter, any such registration,
issuance or replacement, as the case may be, shall be made at the office of such
agent.
(c) Transferability and Negotiability of Warrant. Title to this
Warrant may be transferred by endorsement (by the holder executing the
Assignment Form attached hereto) and delivery in the same manner as negotiable
instruments transferable by endorsement and delivery.
(d) Exchange of Warrant Upon a Transfer. On surrender of this
Warrant for exchange, properly endorsed on the Assignment Form and subject to
the provisions of this Warrant with respect to compliance with the Securities
Act, the Company at its expense shall issue to or on the order of the holder a
new warrant or warrants of like tenor, in the name of the holder or as the
holders (on payment by the holder of any applicable transfer taxes) may direct,
exercisable for the number of Shares issuable upon the exercise hereof.
7. Registration Rights. If the holder of this Warrant is a party to,
or an assignee of rights under, that certain Registration Rights Agreement,
dated March 16, 2000 (the "Registration Rights Agreement"), such holder shall be
entitled to include any shares of Common Stock or other securities received upon
exercise of the Warrant with such holder's Registrable Securities (as such term
is defined in the Registration Rights Agreement), on the terms and conditions as
set forth in the Registration Rights Agreement.
8. Amendment and Waivers. No amendment, modification or termination of
this Warrant shall be binding unless executed in writing by the Company and the
Warrantholder intending to be bound thereby.
9. Waivers and Extensions. Any provision of this Warrant may be
amended, waived or modified only if such amendment, waiver or modification is in
writing, is signed by the party intending to be bound, and specifically refers
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to this Warrant. Waivers may be made in advance or after the right waived has
arisen or the breach or default waived has occurred. Any waiver may be
conditional. No waiver of any breach of any agreement or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach thereof
nor of any other agreement or provision herein contained. No waiver or
extension of time for performance of any obligations or acts shall be deemed a
waiver or extension of the time for performance of any other obligations or
acts.
10. Termination. The right to exercise this Warrant shall expire and
shall be void at 5:00 p.m. New York City time on March 16, 2005.
11. Reservation of Stock. The Company covenants that it will at all
times reserve and keep available, solely for issuance upon exercise of this
Warrant, all shares of Common Stock or other securities from time to time
issuable upon exercise of this Warrant and, subject to any existing contractual
limitations, from time to time, will take all steps necessary to amend its
Certificate of Incorporation to provide sufficient reserves of shares of Common
Stock or other securities issuable upon exercise of this Warrant. The Company
further covenants that all shares that may be issued upon the exercise of rights
represented by this Warrant and payment of the Exercise Price, as set forth
herein, will be fully paid and non-assessable and free from all taxes, liens and
charges in respect of the issue thereof. The Company also agrees that its
issuance of this Warrant shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for shares of Common Stock upon exercise of this Warrant.
12. Replacement. On receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction, or mutilation of this Warrant and, in
the case of loss, theft, or destruction, on delivery of any indemnity agreement
or bond reasonably satisfactory in form and amount to the Company or, in the
case of mutilation, on surrender and cancellation of this Warrant, the Company
at its expense will execute and deliver, in lieu of this Warrant, a new Warrant
of like tenor.
13. No Rights as Stockholder. Except as provided in Section 2 or 4, no
holder of this Warrant, as such, shall be entitled to vote or receive dividends
or be considered a stockholder of the Company for any purpose, nor shall
anything in this Warrant be construed to confer on any holder of this Warrant as
such, any rights of a stockholder of the Company or any right to vote, give or
withhold consent to any corporate action, to receive notice of meeting of
stockholders, to receive dividends or subscription rights or otherwise.
14. Miscellaneous Provisions.
(a) Governing Law. This Warrant shall be governed by, interpreted
under, and construed in accordance with the laws of the State of New York,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.
(b) Notices. All notices, demands, requests, consents, approvals
or other communications (collectively, "Notices") required or permitted to be
given hereunder or which are given with respect to this Warrant shall be in
writing and shall be personally served, delivered by reputable air courier
service with charges prepaid, or transmitted by hand delivery, telegram, telex
or facsimile, to such address as such party shall have specified most recently
by written notice. Notice shall be deemed given on the date of service or
transmission if personally served or transmitted by telegram, telex or
facsimile. Notice otherwise sent as provided herein shall be deemed given on
the next business day following delivery of such notice to a reputable air
courier service.
(c) Binding Effect. The provisions of this Warrant shall be
binding upon the Company and its successors and assigns.
(d) Remedies. In the event of a breach of this Warrant, the
holder shall be entitled to injunctive relief and specific performance of its
rights under this Warrant, in addition to all of its rights granted by law,
including, without limitation, recovery of damages. The Company agrees that
monetary damages would not be adequate compensation for any loss incurred by
reason of a breach of this Warrant by the Company and hereby waives any defense
in any action for injunctive relief or specific performance that a remedy at law
would be adequate.
(e) Headings. Titles and headings of sections of this Warrant are
for convenience only and shall not affect the construction of any provision of
this Warrant.
PAGE 9
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Dated: March 16, 2000
RHYTHMS NETCONNECTIONS, INC.
By: /s/ Catherine Hapka
Name: Catherine Hapka
Title:Chief Executive Officer
SUBSCRIPTION FORM
(To be signed only upon exercise of Warrant)
To: .
Attention: Secretary
(1) The undersigned, the holder of the attached Warrant, hereby
irrevocably elects to [exercise the purchase right represented by that Warrant
for, and to purchase under that Warrant, ___________ shares of Common Stock of
and herewith tenders any necessary payment of the purchase price in such number
of shares in full.] [to exercise [all][a portion] of the purchase right
represented by that Warrant by canceling the Warrant with respect to ___________
shares of Common Stock of . in exchange for a number of shares of Common Stock
equal to the value [as determined pursuant to the Warrant] as the [portion of
the] Warrant [being canceled].
(2) In exercising the Warrant, the undersigned hereby confirms and
acknowledges that the shares of Common Stock or other securities to be issued
upon exercise thereof are being acquired solely for the account of the
undersigned and not as a nominee for any other party, and that the undersigned
will not sell, offer for sale, pledge, hypothecate or otherwise dispose of any
shares of Common Stock, except under circumstances that will not result in a
violation of the Securities Act of 1933, as amended, or any applicable state
securities laws.
(3) Please issue a certificate(s) representing said shares of Common
Stock in the name of the undersigned or in the name of the transferee specified
below.
(4) Please issue a new Warrant for the unexercised portion in the name
of the undersigned or in the name of the permitted transferee specified below.
(5) Please deliver any certificate(s) or Warrant to the following
address.
Insert here the number of shares called for on the face of the Warrant (or, in
the case of partial exercise, the portion as to which the Warrant is being
exercised), without making any adjustment for additional shares of Common Stock
or any other securities or property which, under the adjustment provisions of
the Warrant, may be deliverable upon exercise.
SUBSCRIPTION FORM
(To be signed only upon exercise of Warrant)
To: .
Attention: Secretary
(1) The undersigned, the holder of the attached Warrant, hereby
irrevocably elects to [exercise the purchase right represented by that Warrant
for, and to purchase under that Warrant, ___________ shares of Common Stock of
and herewith tenders any necessary payment of the purchase price in such number
of shares in full.] [to exercise [all][a portion] of the purchase right
represented by that Warrant by canceling the Warrant with respect to ___________
shares of Common Stock of . in exchange for a number of shares of Common Stock
equal to the value [as determined pursuant to the Warrant] as the [portion of
the] Warrant [being canceled].
(2) In exercising the Warrant, the undersigned hereby confirms and
acknowledges that the shares of Common Stock or other securities to be issued
upon exercise thereof are being acquired solely for the account of the
undersigned and not as a nominee for any other party, and that the undersigned
will not sell, offer for sale, pledge, hypothecate or otherwise dispose of any
shares of Common Stock, except under circumstances that will not result in a
violation of the Securities Act of 1933, as amended, or any applicable state
securities laws.
(3) Please issue a certificate(s) representing said shares of Common
Stock in the name of the undersigned or in the name of the transferee specified
below.
(4) Please issue a new Warrant for the unexercised portion in the name
of the undersigned or in the name of the permitted transferee specified below.
(5) Please deliver any certificate(s) or Warrant to the following
address.
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Insert here the number of shares called for on the face of the Warrant (or, in
the case of partial exercise, the portion as to which the Warrant is being
exercised), without making any adjustment for additional shares of Common Stock
or any other securities or property which, under the adjustment provisions of
the Warrant, may be deliverable upon exercise.
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 No. of Shares of
Common Stock
and does hereby irrevocably constitute and appoint -----------------------
attorney-in-fact to register such transfer onto the books of , Inc. maintained
for the purpose, with full power of substitution in the premises.
Date: 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.
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EXHIBIT 10.6
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR THE SECURITIES
LAWS OF ANY STATE OF THE UNITED STATES. SUCH SECURITIES MAY NOT BE OFFERED,
SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF IN THE ABSENCE
OF SUCH REGISTRATION OTHER THAN PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION
REQUIREMENTS.
[Form of]
COMMON STOCK WARRANT
Void after March 16, 2007
Warrant No. A-3-[ ]
This certifies that, for value received, [ ] or its permitted
assigns is entitled, subject to the terms and conditions set forth herein
(including the exercise conditions of Section 2), to purchase from Rhythms
NetConnections Inc (the "Company"), a Delaware corporation, up to [
] fully paid and nonassessable shares (the
"Shares") of Common Stock (as defined herein) at the exercise price of $55.00
per share (the "Exercise Price"). The Exercise Price and number of Shares is
subject to adjustment as provided in this Warrant. The term "Warrant" as used
herein shall include this Warrant and any warrants delivered in substitution or
exchange therefor as provided herein.
1. Definitions. As used in this Warrant, the following terms, unless
the context otherwise requires, have the following meanings:
(a) "Affiliate" means with respect to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such 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
"controlling" and "controlled" have meanings correlative to the foregoing.
(b) "Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday that is not a day on which banking institutions in the City of New
York are authorized or obligated by law or executive order to be closed.
(c) "Capital Stock" or "capital stock" means, with respect to any
Person, any and all shares, interests, participations, rights in, or other
equivalents (however designated and whether voting and/or non-voting) of such
Person's capital stock, whether outstanding on the date of the Warrant or issued
after the date of the Warrant, and any and all rights (other than any evidence
of indebtedness) or warrants exercisable or exchangeable for or convertible into
such capital stock.
(d) "Common Stock" means shares of the Company's common stock, par
value $0.001 per share and capital stock of any other class or series into which
the Common Stock may hereafter by changed.
(e) "Company" means Rhythms NetConnections Inc. and any Person
that shall succeed to or assume the obligations of the Company under this
Warrant.
(f) "HMTF Group" means Hicks, Muse, Tate & Furst Incorporated, a
Texas corporation, and its Affiliates and their respective officers, directors,
partners, members, stockholders and employees (and members of their respective
families and trusts for the primary benefit of such family members) and HM4
Rhythms Qualified Fund, LLC; HM4 Rhythms Private Fund, LLC; HM PG-IV Rhythms,
LLC; HM 4-SBS Rhythms Coinvestors, LLC, HM 4-EQ Rhythms Coinvestors, LLC and
HMTF Bridge RHY, LLC and their respective Affiliates.
(g) "HMTF Holders" means members of the HMTF Group that are
holders of all or a portion of this Warrant and the shares of the Common Stock
issuable upon exercise of this Warrant.
(h) "Person" means any individual, partnership, corporation,
limited liability company, joint venture, association, joint-stock company,
trust, unincorporated organization, government or agency or political
subdivision thereof, or other entity.
(i) "Public Offering" shall mean a public offering by the Company
of its Common Stock registered under the Securities Act of 1933, as amended.
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(j) "Warrantholder", "holder of Warrant", "holder", or similar
terms refers to the holder of this Warrant.
2. Exercise Provisions.
(a) Exercisability. The holder of this Warrant may exercise it in
whole or in part to the extent then exercisable by surrender of this Warrant,
with the form of subscription at the end of this Warrant duly executed by the
holder, to the Company at its principal office (or to the office of the Warrant
Agent as contemplated in Section 6(b), if applicable), accompanied by payment,
in lawful money of the United States, of the amount obtained by multiplying the
Exercise Price (as adjusted from time to time pursuant to the terms of this
Warrant) by the number of shares of Common Stock designated in such completed
subscription form. This Warrant shall be deemed to have been exercised
immediately prior to the close of business on the day of surrender of such
Warrant, and the person or persons entitled to receive shares of Common Stock
issuable upon exercise of this Warrant shall be treated for all purposes as the
record holder or holders of such shares of Common Stock at such time.
(b) Payment of Exercise Price. Payment shall be made by check
payable to the Company.
(c) Net Issue Exercise. Notwithstanding any provisions herein to
the contrary, if the fair market value (as defined below) of one share of Common
Stock is greater than the Exercise Price (on the date of exercise of this
Warrant), in lieu of exercising this Warrant in exchange for cash, the holder
may elect to exercise all or a portion of this Warrant by canceling all or a
portion of this Warrant and receiving in exchange therefor shares of Common
Stock (as determined below) equal to the value of this Warrant, or the portion
thereof being canceled, by surrender of this Warrant at the principal office of
the Company (or the office of the Warrant Agent contemplated by Section 6(b), if
applicable) together with a duly executed form of subscription, in which event
the Company shall issue to the holder a number of shares of Common Stock
computed using the following formula:
X=Y(A-B)
A
Where X = the number of shares of Common Stock to be
issued to the holder
Y = the number of shares of Common Stock
purchasable under the Warrant or, if only a
portion of the Warrant is being exercised,
under the portion of the Warrant being
exercised (on the date of exercise)
A = the fair market value of one share of the
Common Stock (on the date of exercise)
B = the Exercise Price (as adjusted on the
date of exercise)
For purposes of the above calculation, "fair market value" of one share of
Common Stock shall be determined by the Company's Board of Directors in good
faith; provided, however, where a public market exists for the Common Stock at
the time of such exercise, the "fair market value", per share shall be equal to
the average for the five trading days prior to the date of such exercise of the
average of the closing bid and asked prices of the Common Stock quoted in the
Over-The-Counter Market Summary or the last reported sale price of the Common
Stock quoted on the Nasdaq National Market System or the principal exchange on
which the Common Stock is then listed, whichever is applicable, as published in
The Wall Street Journal.
(d) Restrictions on Exercise. This Warrant is exercisable at any
time and from time to time from the date hereof, provided this Warrant has not
terminated pursuant to Section 10.
3. Delivery of Stock Certificates. As soon as possible after full or
partial exercise of this Warrant in accordance with the terms hereof and in any
event within ten (10) days after such exercise, the Company, at its expense,
will cause to be issued in the name of and delivered to the holder of this
Warrant, a certificate or certificates for the number of fully paid and
nonassessable shares of Common Stock to which that holder shall be entitled upon
such exercise. In the event that this Warrant is exercised in part, the Company
at its expense will also execute and deliver a new Warrant of like tenor
exercisable for the number of Shares for which this Warrant may then be
exercised. No fractional shares or scrip representing fractional shares will be
issued upon exercise of this Warrant. If upon any exercise of this Warrant a
fraction of a share would otherwise be issuable, the Company will pay the cash
value of that fractional share, calculated on the basis of the fair market value
as of the date of exercise.
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4. Adjustment Provisions
The Exercise Price shall be adjusted from time to time by the Company as
follows:
(a) If the Company shall hereafter pay a dividend or make a
distribution to all holders of the outstanding shares of Common Stock in shares
of Common Stock, the Exercise Price in effect at the opening of business on the
date following the date fixed for the determination of shareholders entitled to
receive such dividend or other distribution shall be reduced by multiplying such
Exercise Price by a fraction the numerator of which shall be the number of
shares of Common Stock outstanding at the close of business on the Common Stock
Record Date (as defined in Section 4(f)(ii)) fixed for such determination and
the denominator of which shall be the sum of such number of shares and the total
number of shares constituting such dividend or other distribution, such
reduction to become effective immediately after the opening of business on the
day following the Common Stock Record Date. If any dividend or distribution of
the type described in this Section 4(a) is declared but not so paid or made, the
Exercise Price shall again be adjusted to the Exercise Price which would then be
in effect if such dividend or distribution had not been declared.
(b) (i) In case the Company shall issue or sell any Common
Stock in a financing conducted as an underwritten public offering or a private
placement (in each case for cash and other than transactions with strategic
investors) for a consideration per share that is 90% or less than the Current
Market Price on the date of such issuance, or shall issue securities convertible
into Common Stock having an Exercise Price per share that is 90% or less than
the Current Market Price at the date of issuance of such convertible security,
the Exercise Price to be in effect after such issuance or sale shall be
determined by multiplying the Exercise Price in effect immediately prior to such
issuance or sale by a fraction, (1) the numerator of which shall be the sum of
(x) the number of shares of Common Stock outstanding immediately prior to such
issuance or sale and (y) the number of shares of Common Stock which the
aggregate consideration receivable by the Company for the total number of
additional shares of Common Stock so issued or sold (or issuable on conversion)
would purchase at the Current Market Price in effect immediately prior to such
issuance or sale and (2) the denominator of which shall be the sum of the number
of shares of Common Stock outstanding immediately prior to such issuance or sale
and the number of additional shares of Common Stock to be issued or sold (or, in
the case of convertible securities, issued on conversion). Notwithstanding the
foregoing, the Exercise Price shall not be adjusted as a result of the
circumstances described in this Section 4(b)(i) if the HMTF Holders shall be
offered the opportunity to purchase their pro rata portion (based on the
percentage of the outstanding shares of Common Stock represented by the Warrants
then held by such HMTF Holders on an as-exercised basis) of such offering. The
preemptive right set forth in the preceding sentence shall be deemed waived as
to an HMTF Holder if such HMTF Holder does not respond in a timely fashion to
notice of the pricing of the offering to which the preemptive right would
otherwise apply.
(ii) If the Company shall offer or issue rights or warrants
to all holders of its outstanding shares of Common Stock entitling them to
subscribe for or purchase shares of Common Stock at a price per share less than
the Current Market Price (as defined in Section 4(f) (iii)) on the Common Stock
Record Date fixed for the determination of shareholders entitled to receive such
rights or warrants, the Exercise Price shall be adjusted so that the same shall
equal the price determined by multiplying the Exercise Price in effect at the
opening of business on the date after such Common Stock Record Date by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding at the close of business on the Common Stock Record Date plus the
number of shares of Common Stock which the aggregate offering price of the total
number of shares of Common Stock subject to such rights or warrants would
purchase at such Current Market Price and of which the denominator shall be the
number of shares of Common Stock outstanding at the close of business on the
Common Stock Record Date plus the total number of additional shares of Common
Stock subject to such rights or warrants for subscription or purchase. Such
adjustment shall become effective immediately after the opening of business on
the day following the Common Stock Record Date fixed for determination of
shareholders entitled to purchase or receive such rights or warrants. To the
extent that shares of Common Stock are not delivered pursuant to such rights or
warrants, upon the expiration or termination of such rights or warrants the
Exercise Price shall again be adjusted to be the Exercise Price which would then
be in effect had the adjustments made upon the issuance of such rights or
warrants been made on the basis of delivery of only the number of shares of
Common Stock actually delivered. If such rights or warrants are not so issued,
the Exercise Price shall again be adjusted to be the Exercise Price which would
then be in effect if such date fixed for the determination of shareholders
entitled to receive such rights or warrants had not been fixed. In determining
whether any rights or warrants entitle the holders to subscribe for or purchase
shares of Common Stock at less than such Current Market Price, and in
determining the aggregate offering price of such shares of Common Stock, there
shall be taken into account (x) any consideration received for such rights or
warrants, with the value of such consideration and the amount of such exercise
PAGE 3
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or subscription price, if other than cash, to be determined by the Board of
Directors and (y) the amount of any exercise price or subscription price
required to be paid upon exercise of such warrants or rights.
(c) If the outstanding shares of Common Stock shall be subdivided
into a greater number of shares of Common Stock, the Exercise Price in effect at
the opening of business on the day following the day upon which such subdivision
becomes effective shall be proportionately reduced, and, conversely, if the
outstanding shares of Common Stock shall be combined into a smaller number of
shares of Common Stock, the Exercise Price in effect at the opening of business
on the day following the day upon which such combination becomes effective shall
be proportionately increased, such reduction or increase, as the case may be, to
become effective immediately after the opening of business on the day following
the day upon which such subdivision or combination becomes effective.
(d) (i) If the Company shall, by dividend or otherwise, distribute
to all holders of its shares of Common Stock any class of capital stock of the
Company (other than any dividends or distributions to which Section 4(a)
applies) or evidences of its indebtedness, cash or other assets (including
securities, but excluding any rights or warrants of a type referred to in
Section 4(b)(ii) and dividends and distributions paid exclusively in cash and
excluding any capital stock, evidences of indebtedness, cash or assets
distributed upon a merger or consolidation to which Section 4(k) applies) (the
foregoing hereinafter in this Section 4(d) called the "Distributed Securities"),
then, in each such case, the Exercise Price shall be reduced so that the same
shall be equal to the price determined by multiplying the Exercise Price in
effect immediately prior to the close of business on the Common Stock Record
Date with respect to such distribution by a fraction of which the numerator
shall be the Current Market Price (determined as provided in Section 4(f)(iii))
on such date less the fair market value (as determined by the Board of
Directors, whose good faith determination shall be conclusive and described in a
resolution of the Board of Directors) on such date of the portion of the
Distributed Securities so distributed applicable to one share of Common Stock
and the denominator shall be such Current Market Price, such reduction to become
effective immediately prior to the opening of business on the day following the
Common Stock Record Date; provided, however, that, in the event the then fair
market value (as so determined) of the portion of the Distributed Securities so
distributed applicable to one share of Common Stock is equal to or greater than
the Current Market Price on the Common Stock Record Date, in lieu of the
foregoing adjustment, adequate provision shall be made so that each
Warrantholder shall have the right to receive upon exercise of such Warrant (or
any portion thereof) the amount of Distributed Securities such holder would have
received had such holder exercised such Warrant (or portion thereof) immediately
prior to such Common Stock Record Date. If such dividend or distribution is not
so paid or made, the Exercise Price shall again be adjusted to be the Exercise
Price which would then be in effect if such dividend or distribution had not
been declared. If the Board of Directors determines the fair market value of any
distribution for purposes of this Section 4(d) by reference to the actual or
when issued trading market for any securities constituting all or part of such
distribution, it must in doing so consider the prices in such market over the
same period used in computing the Current Market Price pursuant to Section
4(f)(iii) to the extent possible.
(ii) Options, rights or warrants distributed by the Company to all
holders of shares of Common Stock entitling the holders thereof to subscribe for
or purchase shares of the Company's capital stock (either initially or under
certain circumstances), which options, rights or warrants, until the occurrence
of a specified event or events ("Dilution Trigger Event"): (A) are deemed to be
transferred with such shares of Common Stock; (B) are not exercisable; and (C)
are also issued in respect of future issuances of shares of Common Stock, shall
be deemed not to have been distributed for purposes of this Section 4(d)(ii)
(and no adjustment to the Exercise Price under this Section 4(d)(ii) shall be
required) until the occurrence of the earliest Dilution Trigger Event, whereupon
such options, rights and warrants shall be deemed to have been distributed and
an appropriate adjustment to the Exercise Price under this Section 4(d)(ii)
shall be made. If any such options, rights or warrants, including any such
existing options, rights or warrants distributed prior to the first issuance of
the Warrants, are subject to subsequent events, upon the occurrence of each of
which such options, rights or warrants shall become exercisable to purchase
different securities, evidences of indebtedness or other assets, then the
occurrence of each such event shall be deemed to be such date of issuance and
record date with respect to new options, rights or warrants (and a termination
or expiration of the existing options, rights or warrants, without exercise by
the holder thereof). In addition, in the event of any distribution (or deemed
distribution) of options, rights or warrants, or any Dilution Trigger Event with
respect thereto, that was counted for purposes of calculating a distribution
amount for which an adjustment to the Exercise Price under this Section 4 was
made, (1) in the case of any such options, rights or warrants which shall all
have been redeemed or repurchased without exercise by any holders thereof, the
Exercise Price shall be readjusted upon such final redemption or repurchase to
give effect to such distribution or Dilution Trigger Event, as the case may be,
as though it were a cash distribution, equal to the per share redemption or
repurchase price received by a holder or holders of shares of Common Stock with
respect to such options, rights or warrants (assuming such holder had retained
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such options, rights or warrants), made to all holders of shares of Common Stock
as of the date of such redemption or repurchase, and (2) in the case of such
options, rights or warrants which shall have expired or been terminated without
exercise by any holders thereof, the Exercise Price shall be readjusted as if
such options, rights and warrants had not been issued.
(iii) Notwithstanding any other provision of this Section 4(d) to
the contrary, options, rights, warrants, evidences of indebtedness, other
securities, cash or other assets (including, without limitation, any rights
distributed pursuant to any shareholder rights plan) shall be deemed not to have
been distributed for purposes of this Section 4(d) if the Company makes proper
provision so that each Warrantholder who exercises such Warrants (or any portion
thereof) after the date fixed for determination of shareholders entitled to
receive such distribution shall be entitled to receive upon such exercise, in
addition to the shares of Common Stock issuable upon such exercise, the amount
and kind of such distributions that such holder would have been entitled to
receive if such holder had, immediately prior to such determination date,
exercised such Warrants.
(iv) For purposes of this Section 4(d) and Sections 4(a) and 4(b),any
dividend or distribution to which this Section 4(d) is applicable that also
includes shares of Common Stock, or options, rights or warrants to subscribe for
or purchase shares of Common Stock to which 4(b) applies (or both), shall be
deemed instead to be (A) a dividend or distribution of the evidences of
indebtedness, assets, shares of capital stock, rights or warrants other than
such shares of Common Stock or options, rights or warrants to which Section 4(b)
applies (and any Exercise Price reduction required by this Section 4(d)(iv) with
respect to such dividend or distribution shall then be made) immediately
followed by (B) a dividend or distribution of such shares of Common Stock or
such options, rights or warrants (and any further Exercise Price reduction
required by Sections 4(a) or 4(b) with respect to such dividend or distribution
shall then be made), except that (1) the Common Stock Record Date of such
dividend or distribution shall be substituted as "the date fixed for the
determination of stockholders entitled to receive such dividend or other
distribution", "the Common Stock Record Date fixed for such determination" and
"the Common Stock Record Date" within the meaning of Section 4(a) and as "the
date fixed for the determination of shareholders entitled to receive such rights
or warrants", "the Common Stock Record Date fixed for the determination of the
stockholders entitled to receive such rights or warrants" and "such Common Stock
Record Date" for purposes of Section 4(b), and (2) any shares of Common Stock
included in such dividend or distribution shall not be deemed "outstanding at
the close of business on the date fixed for such determination" for the purposes
of Section 4(a).
(e) If a tender offer made by the Company or any of its
subsidiaries for all or any portion of the Common Stock expires and such tender
offer (as amended upon the expiration thereof) requires the payment to
shareholders (based on the acceptance (up to any maximum specified in the terms
of the tender offer) of Purchased Shares) of an aggregate consideration having a
fair market value (as determined by the Board of Directors, whose good faith
determination shall be conclusive and described in a resolution of the Board of
Directors) that, combined together with the aggregate of the cash plus the fair
market value (as determined by the Board of Directors, whose good faith
determination shall be conclusive and described in a resolution of the Board of
Directors) as of the expiration of such tender offer, of consideration payable
in respect of any other tender offers by the Company or any of its subsidiaries
for all or any portion of the shares of Common Stock expiring within the 12
months preceding the expiration of such tender offer and in respect of which no
adjustment pursuant to this Section 4(e) has been made, exceeds 5% of the income
of the Company reported for the 12 month period ending with the fiscal quarter
next preceding such payment (the "12 Month Net Income") (determined as of the
last time (the "Expiration Time") tenders could have been made pursuant to such
tender offer (as it may be amended)), then, and in each such case, immediately
prior to the opening of business on the day after the date of the Expiration
Time, the Exercise Price shall be adjusted so that the same shall equal the
price determined by multiplying the Exercise Price in effect immediately prior
to the close of business on the date of the Expiration Time by a fraction of
which the numerator shall be the number of shares of Common Stock outstanding
(including any tendered shares) at the Expiration Time multiplied by the Current
Market Price of a share of Common Stock on the trading day next succeeding the
Expiration Time and the denominator shall be the sum of (x) the fair market
value (determined as aforesaid) of the aggregate consideration payable to
shareholders based on the acceptance (up to any maximum specified in the terms
of the tender offer) of all shares validly tendered and not withdrawn as of the
Expiration Time (the shares deemed so accepted, up to any such maximum, being
referred to as the "Purchased Shares") and (y) the product of the number of
shares of Common Stock outstanding (less any Purchased Shares) at the Expiration
Time and the Current Market Price of the shares of Common Stock on the trading
day next succeeding the Expiration Time, such reduction (if any) to become
effective immediately prior to the opening of business on the day following the
Expiration Time. If the Company is obligated to purchase shares pursuant to any
such tender offer, but the Company is permanently prevented by applicable law
from effecting any such purchases or all such purchases are rescinded, the
Exercise Price shall again be adjusted to be the Exercise Price which would then
PAGE 5
<PAGE>
be in effect if such tender offer had not been made. If the application of this
Section 4(e) to any tender offer would result in an increase in the Exercise
Price, no adjustment shall be made for such tender offer under this Section
4(e).
(f) For purposes of this Section 4, the following terms shall
have the meaning indicated:
(i) "closing price" with respect to any securities on any day means the
closing sale price as of 4:00 p.m. Eastern Time on such day or any earlier final
closing on such day or, if no such sale takes place on such day, the average of
the reported high and low bid prices on such day, in each case on the Nasdaq
National Market, or the New York Stock Exchange, as applicable, or, if such
security is not listed or admitted to trading on such national market or
exchange, on the national stock exchange or Commission recognized trading market
in the United States on which such security is quoted or listed or admitted to
trading, or, if not quoted or listed or admitted to trading on any national
stock exchange or Commission recognized trading market in the United States, the
average of the high and low bid prices of such security on the over-the-counter
market on the day in question as reported by the National Quotation Bureau
Incorporated or a similar generally accepted reporting service in the United
States, or, if not so available, in such manner as furnished by any New York
Stock Exchange member firm selected from time to time by the Board of Directors
for that purpose, or a price determined in good faith by the Board of Directors,
whose determination shall be conclusive and described in a resolution of the
Board of Directors.
(ii) "Common Stock Record Date" means, with respect to any dividend,
distribution or other transaction or event in which the holders of Common Stock
have the right to receive any cash, securities or other property or in which the
Common Stock (or other applicable security) is exchanged for or converted into
any combination of cash, securities or other property, the date fixed for
determination of shareholders entitled to receive such cash, securities or other
property (whether such date is fixed by the Board of Directors or by statute,
contract or otherwise).
(iii) "Current Market Price" means the average of the daily closing
prices per share of Common Stock for the 10 consecutive trading days immediately
prior to the date in question; provided, however, that (A) if the "ex" date (as
hereinafter defined) for any event (other than the issuance or distribution
requiring such computation) that requires an adjustment to the Exercise Price
pursuant to Section 4(a), 4(b), 4(c), 4(d) or 4(e) occurs during such 10
consecutive trading days, the closing price for each trading day prior to the
"ex" date for such other event shall be adjusted by multiplying such closing
price by the same fraction by which the Exercise Price is so required to be
adjusted as a result of such other event, (B) if the "ex" date for any event
(other than the issuance or distribution requiring such computation) that
requires an adjustment to the Exercise Price pursuant to Section 4(a), 4(b),
4(c), 4(d) or 4(e) occurs on or after the "ex" date for the issuance or
distribution requiring such computation and prior to the day in question, the
closing price for each trading day on and after the "ex" date for such other
event shall be adjusted by multiplying such closing price by the reciprocal of
the fraction by which the Exercise Price is so required to be adjusted as a
result of such other event and (C) if the "ex" date for the issuance or
distribution requiring such computation is prior to the day in question, after
taking into account any adjustment required pursuant to clause (A) or (B) of
this proviso, the closing price for each trading day on or after such "ex" date
shall be adjusted by adding thereto the amount of any cash and the fair market
value (as determined by the Board of Directors in a manner consistent with any
good faith determination of such value for purposes of Section 4(d), whose good
faith determination shall be conclusive and described in a resolution of the
Board of Directors) of the evidences of indebtedness, shares of capital stock or
assets being distributed applicable to one share of Common Stock as of the close
of business on the day before such "ex" date. For purposes of any computation
under Section 4(e), the Current Market Price on any date shall be deemed to be
the average of the daily closing prices per share of Common Stock for such day
and the next two succeeding trading days; provided, however, that, if the "ex"
date for any event (other than the tender offer requiring such computation) that
requires an adjustment to the Exercise Price pursuant to Section 4(a), 4(b),
4(c), 4(d) or 4(e), occurs on or after the Expiration Time for the tender or
exchange offer requiring such computation and prior to the day in question, the
closing price for each trading day on and after the "ex" date for such other
event shall be adjusted by multiplying such closing price by the reciprocal of
the fraction by which the Exercise Price is so required to be adjusted as a
result of such other event. For purposes of this paragraph, the term "ex" date
(1) when used with respect to any issuance or distribution, means the first date
on which the shares of Common Stock trade regular way on the relevant exchange
or in the relevant market from which the closing price was obtained without the
right to receive such issuance or distribution, (2) when used with respect to
any subdivision or combination of shares of Common Stock, means the first date
on which the shares of Common Stock trade regular way on such exchange or in
such market after the time at which such subdivision or combination becomes
effective and (3) when used with respect to any tender or exchange offer means
the first date on which the shares of Common Stock trade regular way on such
PAGE 6
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exchange or in such market after the Expiration Time of such offer.
Notwithstanding the foregoing, whenever successive adjustments to the Exercise
Price are called for pursuant to this Section 4, such adjustments shall be made
to the Current Market Price as may be necessary or appropriate to effectuate the
intent of this Section 4 and to avoid unjust or inequitable results, as
determined in good faith by the Board of Directors.
(iv) "Fair Market Value" means the amount which a willing buyer would
pay a willing seller in an arm's-length transaction.
(g) No adjustment in the Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in such
price; provided, however, that any adjustments which by reason of this Section
4(g) are not required to be made shall be carried forward and taken into account
in any subsequent adjustment. All calculations under this Section 4 shall be
made by the Company and shall be made to the nearest cent. No adjustment need be
made for a change in the par value or no par value of the Common Stock.
(h) Whenever the Exercise Price is adjusted as herein provided,
the Company shall promptly file with the Registrar an Officers' Certificate
setting forth the Exercise Price after such adjustment and the number of shares
of Common Stock for which this Warrant will be exercisable after such adjustment
pursuant to Section 4(e) and setting forth a brief statement of the facts
requiring such adjustment. Promptly after delivery of such certificate, the
Company shall prepare a notice of such adjustment of the Exercise Price setting
forth the adjusted Exercise Price and the date on which each adjustment becomes
effective and shall mail such notice of such adjustment of the Exercise Price to
each Warrantholder at such holder's last address appearing on the register of
holders maintained for that purpose within 20 days of the effective date of such
adjustment. Failure to deliver such notice shall not affect the legality or
validity of any such adjustment.
(i) In any case in which this Section 4 provides that an
adjustment shall become effective immediately after a Common Stock Record Date
for an event, the Company may defer until the occurrence of such event issuing
to the holder of any Warrant exercised after such Common Stock Record Date and
before the occurrence of such event the additional shares of Common Stock
issuable upon such exercise by reason of the adjustment required by such event
over and above the shares of Common Stock issuable upon such exercise before
giving effect to such adjustment.
(j) For purposes of this Section 4, the number of shares of Common
Stock at any time outstanding shall not include shares held in the treasury of
the Company. The Company shall not pay any dividend or make any distribution on
shares of Common Stock held in the treasury of the Company.
(k) In case of any consolidation of the Company with, or merger of
the Company into, any other Person, or in case of any merger of another Person
into the Company (other than a merger that does not result in any
reclassification, conversion, exchange or cancelation of outstanding shares of
Common Stock of the Company), or in case of any sale, conveyance or transfer of
all or substantially all the assets of the Company, the Warrantholders shall
have the right thereafter, during the period such Warrant shall be exercisable
as specified in Section 2(a), to convert such Warrants into the kind and amount
of securities, cash and other property receivable upon such consolidation,
merger, conveyance or transfer by a holder of the number of shares of Common
Stock of the Company for which the Warrants might have been exercised
immediately prior to such consolidation, merger, conveyance or transfer,
assuming such holder of shares of Common Stock of the Company failed to exercise
his rights of election, if any, as to the kind or amount of securities, cash and
other property receivable upon such consolidation, merger, conveyance or
transfer (provided that, if the kind or amount of securities, cash and other
property receivable upon such consolidation, merger, conveyance or transfer is
not the same for each share of Common Stock of the Company in respect of which
such rights of election shall not have been exercised ("nonelecting share"),
then for the purpose of this Section 4(k) the kind and amount of securities,
cash and other property receivable upon such consolidation, merger, conveyance
or transfer by each nonelecting share shall be deemed to be the kind and amount
so receivable per share by a plurality of the nonelecting shares). Such
securities shall provide for adjustments which, for events subsequent to the
effective date of the triggering event, shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 4(k). The above
provisions of this Section 4(k) shall similarly apply to successive
consolidations, mergers, conveyances or transfers.
(l) Upon each adjustment of the Exercise Price as a result of the
operation of this Section 4, this Warrant shall thereafter evidence the right to
purchase, at the adjusted Exercise Price, that number of shares of Common Stock
obtained by multiplying the number of shares covered by this Warrant immediately
prior to this adjustment by the Exercise Price in effect immediately prior to
such adjustment and dividing the product so obtained by the Exercise Price in
effect immediately after such adjustment of the Exercise Price.
5. Notice of Certain Events. If at any time prior to the termination
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<PAGE>
or full exercise of this Warrant:
(a) the Company shall declare any dividend payable in stock upon
its Common Stock, make any distribution to the holders of its Common Stock or
offer for subscription pro rata to holders of Common Stock any additional shares
of stock of any class or other rights;
(b) there shall be any reclassification of the Common Stock
of the Company;
(c) there shall be any consolidation or merger of the Company
with or into, or sale of all or substantially all of its assets to, another
corporation;
(d) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Company; or
(e) there shall be a Public Offering;
then, in any one or more of such cases, the Company shall give the holder at
least 10 days' prior written notice of the date on which the books of the
Company shall close or a record shall be taken for such dividend, distribution
or subscription rights or for determining rights to vote in respect to any such
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up or of the date of a filing of a registration statement under the
Securities Act for a Public Offering. Such notice in accordance with the
foregoing clause shall also specify, in the case of any such dividend,
distribution or subscription rights, the date on which the holders shall be
entitled thereto, and such notice in accordance with the foregoing clause shall
also specify the date on which the holders shall be entitled to exchange their
Common Stock for securities or other property deliverable upon such
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up, as the case may be. Each such written notice shall be given by
first-class mail, postage prepared, addressed to the holder at the address of
the holder as shown on the books of the Company.
6. Transfer of Warrants.
(a) Warrant Register. The Company shall maintain a register (the
"Warrant Register") containing the names, addresses and facsimile numbers of the
holder(s). Any holder of this Warrant or any portion thereof may change its
address as shown on the Warrant Register by written notice to the Company
requesting such a change. Until this Warrant is transferred on the Warrant
Register, the Company may treat the holder as shown on the Warrant Register as
the absolute owner of this Warrant for all purposes, notwithstanding any notice
to the contrary.
(b) Warrant Agent. The Company may, by written notice to the
holder, appoint an agent for the purpose of maintaining the Warrant Register
referred to in Section 6(a) above, issuing any other securities then issuable
upon the exercise of this Warrant, exchanging this Warrant, replacing this
Warrant or any or all of the foregoing. Thereafter, any such registration,
issuance or replacement, as the case may be, shall be made at the office of such
agent.
(c) Transferability and Negotiability of Warrant. Title to this
Warrant may be transferred by endorsement (by the holder executing the
Assignment Form attached hereto) and delivery in the same manner as negotiable
instruments transferable by endorsement and delivery.
(d) Exchange of Warrant Upon a Transfer. On surrender of this
Warrant for exchange, properly endorsed on the Assignment Form and subject to
the provisions of this Warrant with respect to compliance with the Securities
Act, the Company at its expense shall issue to or on the order of the holder a
new warrant or warrants of like tenor, in the name of the holder or as the
holders (on payment by the holder of any applicable transfer taxes) may direct,
exercisable for the number of Shares issuable upon the exercise hereof.
7. Registration Rights. If the holder of this Warrant is a party to,
or an assignee of rights under, that certain Registration Rights Agreement,
dated March 16, 2000 (the "Registration Rights Agreement"), such holder shall be
entitled to include any shares of Common Stock or other securities received upon
exercise of the Warrant with such holder's Registrable Securities (as such term
is defined in the Registration Rights Agreement), on the terms and conditions as
set forth in the Registration Rights Agreement.
8. Amendment and Waivers. No amendment, modification or termination of
this Warrant shall be binding unless executed in writing by the Company and the
Warrantholder intending to be bound thereby.
9. Waivers and Extensions. Any provision of this Warrant may be
amended, waived or modified only if such amendment, waiver or modification is in
writing, is signed by the party intending to be bound, and specifically refers
to this Warrant. Waivers may be made in advance or after the right waived has
PAGE 8
<PAGE>
arisen or the breach or default waived has occurred. Any waiver may be
conditional. No waiver of any breach of any agreement or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach thereof
nor of any other agreement or provision herein contained. No waiver or
extension of time for performance of any obligations or acts shall be deemed a
waiver or extension of the time for performance of any other obligations or
acts.
10. Termination. The right to exercise this Warrant shall expire and
shall be void at 5:00 p.m. New York City time on March 16, 2007.
11. Reservation of Stock. The Company covenants that it will at all
times reserve and keep available, solely for issuance upon exercise of this
Warrant, all shares of Common Stock or other securities from time to time
issuable upon exercise of this Warrant and, subject to any existing contractual
limitations, from time to time, will take all steps necessary to amend its
Certificate of Incorporation to provide sufficient reserves of shares of Common
Stock or other securities issuable upon exercise of this Warrant. The Company
further covenants that all shares that may be issued upon the exercise of rights
represented by this Warrant and payment of the Exercise Price, as set forth
herein, will be fully paid and non-assessable and free from all taxes, liens and
charges in respect of the issue thereof. The Company also agrees that its
issuance of this Warrant shall constitute full authority to its officers who are
charged with the duty of executing stock certificates to execute and issue the
necessary certificates for shares of Common Stock upon exercise of this Warrant.
12. Replacement. On receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction, or mutilation of this Warrant and, in
the case of loss, theft, or destruction, on delivery of any indemnity agreement
or bond reasonably satisfactory in form and amount to the Company or, in the
case of mutilation, on surrender and cancellation of this Warrant, the Company
at its expense will execute and deliver, in lieu of this Warrant, a new Warrant
of like tenor.
13. No Rights as Stockholder. Except as provided in Section 2 or 4, no
holder of this Warrant, as such, shall be entitled to vote or receive dividends
or be considered a stockholder of the Company for any purpose, nor shall
anything in this Warrant be construed to confer on any holder of this Warrant as
such, any rights of a stockholder of the Company or any right to vote, give or
withhold consent to any corporate action, to receive notice of meeting of
stockholders, to receive dividends or subscription rights or otherwise.
14. Miscellaneous Provisions.
(a) Governing Law. This Warrant shall be governed by, interpreted
under, and construed in accordance with the laws of the State of New York,
regardless of the laws that might otherwise govern under applicable principles
of conflicts of laws thereof.
(b) Notices. All notices, demands, requests, consents, approvals or
other communications (collectively, "Notices") required or permitted to be given
hereunder or which are given with respect to this Warrant shall be in writing
and shall be personally served, delivered by reputable air courier service with
charges prepaid, or transmitted by hand delivery, telegram, telex or facsimile,
to such address as such party shall have specified most recently by written
notice. Notice shall be deemed given on the date of service or transmission if
personally served or transmitted by telegram, telex or facsimile. Notice
otherwise sent as provided herein shall be deemed given on the next business day
following delivery of such notice to a reputable air courier service.
(c) Binding Effect. The provisions of this Warrant shall be binding
upon the Company and its successors and assigns.
(d) Remedies. In the event of a breach of this Warrant, the holder
shall be entitled to injunctive relief and specific performance of its rights
under this Warrant, in addition to all of its rights granted by law, including,
without limitation, recovery of damages. The Company agrees that monetary
damages would not be adequate compensation for any loss incurred by reason of a
breach of this Warrant by the Company and hereby waives any defense in any
action for injunctive relief or specific performance that a remedy at law would
be adequate.
(e) Headings. Titles and headings of sections of this Warrant are for
convenience only and shall not affect the construction of any provision of this
Warrant.
Dated: March 16, 2000
RHYTHMS NETCONNECTIONS, INC.
By:/s/ Catherine Hapka
Name: Catherine Hapka
Title: Chief Executive Officer
PAGE 9
<PAGE>
SUBSCRIPTION FORM
(To be signed only upon exercise of Warrant)
To: .
Attention: Secretary
(1) The undersigned, the holder of the attached Warrant, hereby
irrevocably elects to [exercise the purchase right represented by that Warrant
for, and to purchase under that Warrant, ___________ shares of Common
Stock of and herewith tenders any necessary payment of the purchase price in
such number of shares in full.] [to exercise [all][a portion] of the purchase
right represented by that Warrant by canceling the Warrant with respect to
___________ shares of Common Stock of . in exchange for a number of shares of
Common Stock equal to the value [as determined pursuant to the Warrant]
as the [portion of the] Warrant [being canceled].
(2) In exercising the Warrant, the undersigned hereby confirms and
acknowledges that the shares of Common Stock or other securities to be issued
upon exercise thereof are being acquired solely for the account of the
undersigned and not as a nominee for any other party, and that the undersigned
will not sell, offer for sale, pledge, hypothecate or otherwise dispose of any
shares of Common Stock, except under circumstances that will not result in a
violation of the Securities Act of 1933, as amended, or any applicable state
securities laws.
(3) Please issue a certificate(s) representing said shares of Common
Stock in the name of the undersigned or in the name of the transferee specified
below.
(4) Please issue a new Warrant for the unexercised portion in the name
of the undersigned or in the name of the permitted transferee specified below.
(5) Please deliver any certificate(s) or Warrant to the following
address.
Name: ___________________________
Address: ___________________________
Attention: ___________________________
Dated:
By:___________________________
Name
Footnote:
1 Insert here the number of shares called for on the face of the Warrant (or, in
the case of partial exercise, the portion as to which the Warrant is being
exercised), without making any adjustment for additional shares of Common Stock
or any other securities or property which, under the adjustment provisions of
the Warrant, may be deliverable upon exercise.
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<PAGE>
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:
No. of Shares of
Name and Address of Assignee Common Stock
and does hereby irrevocably constitute and appoint _______________________
attorney-in-fact to register such transfer onto the books of , Inc. maintained
for the purpose, with full power of substitution in the premises.
Date:_______________________ 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.
PAGE 11
<PAGE>
EXHIBIT 10.7
CREDIT AGREEMENT
dated as of
December 28, 1999
among
HMTF Bridge Partners, L.P.
and
HM/Europe Coinvestors, C.V.,
as Initial Borrowers,
and any Future Borrowers from time to time parties hereto,
The Lenders and the Issuing Bank Parties Hereto,
and
The Chase Manhattan Bank,
as Administrative Agent,
Chase Securities Inc.,
as Co-Lead Arranger and Co-Book Manager,
Bank of America, N.A.,
as Syndication Agent,
and
Banc of America Securities LLC,
as Co-Lead Arranger and Co-Book Manager
U.S. $1,780,000,000 TERM LOAN FACILITY
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1 Definitions 1
SECTION 1.1 Defined Terms 1
SECTION 1.2 Terms Generally 12
SECTION 1.3 Accounting Terms; GAAP 13
ARTICLE 2 Term Loans 13
SECTION 2.1 Term Loans 13
SECTION 2.2 Procedure for Term Loan Borrowing 13
SECTION 2.3 Letters of Credit 14
SECTION 2.4 Repayment of Loans; Evidence of Debt; etc 17
SECTION 2.5 Termination and Reduction of Commitments 18
SECTION 2.6 Prepayments 18
SECTION 2.7 Conversion and Continuation Options 20
SECTION 2.8 Minimum Amounts and Maximum Number of Tranches 20
SECTION 2.9 Interest 20
SECTION 2.10 Fees 21
SECTION 2.11 Inability to Deter2mine Interest Rate 22
SECTION 2.12 Pro Rata Treatment and Payments 22
SECTION 2.13 Requirements of Law 23
SECTION 2.14 Taxes 24
SECTION 2.15 Indemnity 26
SECTION 2.16 Change of Lending Office 27
SECTION 2.17 Replacement of Lenders 27
SECTION 2.18 Nature of Obligations 28
SECTION 2.19 Increase of Commitments 28
ARTICLE 3 Representations and Warranties 29
SECTION 3.1 Organization; Powers 29
SECTION 3.2 Authorization; Enforceability 30
SECTION 3.3 Governmental Approvals; No Conflicts 30
SECTION 3.4 Compliance with Laws and Agreements 30
SECTION 3.5 Investment and Holding Company Status 30
SECTION 3.6 Material Adverse Effect 30
SECTION 3.7 No Material Litigation 30
SECTION 3.8 Disclosure 30
SECTION 3.9 Investments 31
ARTICLE 4 Conditions Precedent 31
SECTION 4.1 Conditions to Initial Funding 31
SECTION 4.2 Additional Conditions for Each Credit Event 32
ARTICLE 5 Covenants 34
SECTION 5.1 Notices of Material Events 34
SECTION 5.2 Existence; Conduct of Business 34
SECTION 5.3 Payment of Obligations 34
SECTION 5.4 Compliance with Laws 34
SECTION 5.5 Use of Proceeds 34
SECTION 5.6 Additional Collateral 35
SECTION 5.7 Financial Reporting 35
SECTION 5.8 Additional Guarantors 36
SECTION 5.9 Management and Advisory Agreements 36
SECTION 5.10 Covenant to Pay 36
SECTION 5.11 Margin Securities 36
ARTICLE 6 Negative Covenants 36
SECTION 6.1 Indebtedness 36
SECTION 6.2 Liens 37
SECTION 6.3 Fundamental Changes 37
SECTION 6.4 Restricted Payments 37
SECTION 6.5 Sale of Assets 37
ARTICLE 7 Events of Default 38
ARTICLE 8 The Administrative Agent 41
SECTION 8.1 Generally 41
SECTION 8.2 Joint and Several Creditorship 43
ARTICLE 9 Miscellaneous 43
SECTION 9.1 Notices 43
SECTION 9.2 Waivers; Amendments 43
SECTION 9.3 Expenses; Indemnity; Damage Waiver 44
SECTION 9.4 Successors and Assigns 45
SECTION 9.5 Survival 47
SECTION 9.6 Counterparts; Integration; Effectiveness 48
SECTION 9.7 Severability 48
SECTION 9.8 Right of Setoff 48
SECTION 9.9 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF PROCESS
48
SECTION 9.10 WAIVER OF JURY TRIAL 49
SECTION 9.11 Headings 49
SECTION 9.12 Confidentiality 49
SECTION 9.13 Syndication 50
SECTION 9.14 Certainty of Funds 50
<PAGE>
INDEX OF EXHIBITS
Exhibit A Assignment and Acceptance
Exhibit B Legal Opinion of Weil, Gotshal & Manges LLP
Exhibit C Legal Opinion of Nauta Dutilh
Exhibit D Legal Opinion of Walkers
Exhibit E Closing Certificate
Exhibit F Affiliate Guarantee
Exhibit G Investment Guarantee
Exhibit H Note
Exhibit I Pledge Agreement
Exhibit J Letter Agreement
Exhibit K Joinder Agreement
Exhibit L Principal Agreement
INDEX OF SCHEDULES
Schedule 2.1 Lender's Commitments
<PAGE>
CREDIT AGREEMENT, dated as of December 28, 1999, among HMTF Bridge
Partners, L.P., a Delaware limited partnership, and HM/Europe Coinvestors, C.V.,
a limited partnership organized under the laws of the Kingdom of the Netherlands
(collectively, the "Initial Borrowers"), any Future Borrowers from time to time
parties hereto, the Lenders from time to time parties hereto, the Issuing Bank
referred to below, The Chase Manhattan Bank, as Administrative Agent, and Bank
of America, N.A., as Syndication Agent.
The parties hereto agree as follows:
ARTICLE 1
Definitions
SECTION 1.1 Defined Terms. As used in this Agreement, the
following terms have the meanings specified below:
"ABR Loans" means Term Loans the rate of interest applicable to which is
based upon the Alternate Base Rate.
"Additional Lenders" has the meaning set forth in Section 9.13.
"Administrative Agent" means The Chase Manhattan Bank, in its capacity as
administrative agent for the Lenders hereunder.
"Affiliate" means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.
"Affiliate Guarantees" means the collective reference to each guarantee
agreement executed and delivered by an Affiliate Guarantor, substantially in the
form of Exhibit F, as the same may be amended, supplemented or otherwise
modified from time to time.
"Affiliate Guarantors" means the collective reference to (a) each
Affiliate of Hicks Muse or Olympus that holds carried interests in any New
Portfolio Company (except to the extent that a carried interest is attributable
to an investment by a Specified Fund in such New Portfolio Company) and (b) HM &
Co. and each other Affiliate of Hicks Muse or Olympus that receives fee income
(whether in the form of management fees, transaction fees, investment banking
fees, advisory fees or otherwise) from or in respect of any New Fund, any New
Portfolio Company or any Investment Party (except to the extent that such fee
income is attributable to an investment by a Specified Fund in such New
Portfolio Company, with any allocation of such fee income attributable to a
Specified Fund and a New Fund being made in a manner equitable to the Lenders
hereunder), in each case whether now existing or subsequently formed.
"Agreement" means this Credit Agreement, as amended, supplemented or
otherwise modified from time to time.
"Alternate Base Rate" means, for any day, a rate per annum equal to the
greatest of (a) the Prime Rate in effect on such day, (b) the Base CD Rate in
effect on such day plus 1% and (c) the Federal Funds Effective Rate in effect on
such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change
in the Prime Rate, the Base CD Rate or the Federal Funds Effective Rate shall be
effective from and including the effective date of such change in the Prime
Rate, the Base CD Rate or the Federal Funds Effective Rate, respectively.
"Applicable Margin" means, for any day and for each Type of Term Loan,
based on the then Available Qualified Subscription Amount, the rate per annum
set forth below:
Available Qualified
Level Subscription Amount ABR Loans Eurodollar Loans
Level I $0 - $625,000,000 1.50% 2.50%
Level II $625,000,001 - $1,250,000,000 1.00% 2.00%
Level III $1,250,000,001 - $1,875,000,000 .50% 1.50%
Level IV Greater than $1,875,000,001 0% 1.00%
provided that for the first 45 days following the Closing Date the Applicable
Margin shall be determined by reference to Level I of the above grid and
provided further that Level I of the above grid shall apply at all times while
an Event of Default shall have occurred and be continuing.
"Assessment Rate" means, for any day, the annual assessment rate in effect
on such day that is payable by a member of the Bank Insurance Fund classified as
"well-capitalized" and within supervisory subgroup "B" (or a comparable
successor risk classification) within the meaning of 12 C.F.R. Part 327 (or any
successor provision) to the Federal Deposit Insurance Corporation for insurance
by such Corporation of time deposits made in dollars at the offices of such
member in the United States; provided that if, as a result of any change in any
law, rule or regulation, it is no longer possible to determine the Assessment
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Rate as aforesaid, then the Assessment Rate shall be such annual rate as shall
be determined in good faith by the Administrative Agent to be representative of
the cost of such insurance to the Lenders.
"Assignee" has the meaning set forth in Section 9.4(b).
"Assignment and Acceptance" means an assignment and acceptance entered into
by a Lender and an assignee (with the consent of any party whose consent is
required by Section 9.4), and accepted by the Administrative Agent, in the form
of Exhibit A or any other form approved by the Administrative Agent.
"Available Commitment" means, as to any Lender at any time, an amount equal
to the excess, if any, of (a) such Lender's Commitment over (b) such Lender's
Credit Exposure.
"Available Excess Investment Commitment Amount" means, as to any Lender at
any time, an amount equal to the excess, if any, of (a) such Lender's Investment
Commitment Amount over (b) such Lender's Credit Exposure.
"Available Qualified Subscription Amount" means the Qualified Subscription
Amount less the aggregate Qualified Subscription Amounts utilized to make any
and all investments by the New Fund.
"Base CD Rate" means the sum of (a) the Three-Month Secondary CD Rate
multiplied by the Statutory Reserve Rate plus (b) the Assessment Rate.
"Board" means the Board of Governors of the Federal Reserve System of the
United States.
"Borrowers" means the Initial Borrowers and any Future Borrower.
"Business Day" means any day that is not a Saturday, Sunday or other day on
which commercial banks in New York City or Dallas, Texas are authorized or
required by law to remain closed; provided that, when used in connection with a
Eurodollar Loan, the term Business Day shall also exclude any day on which banks
are not open for dealings in dollar deposits in the London interbank market.
"Capital Lease Obligations" of any Person means the obligations of such
Person to pay rent or other amounts under any lease of (or other arrangement
conveying the right to use) real or personal property, or a combination thereof,
which obligations are required to be classified and accounted for as capital
leases on a balance sheet of such Person under GAAP, and the amount of such
obligations shall be the capitalized amount thereof determined in accordance
with GAAP.
"Capital Stock" means any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation, any
and all equivalent ownership interests in a Person (other than a corporation),
including any limited liability company interests in a limited liability
company, any limited or general partnership interests in a partnership, and any
and all warrants, rights or options to purchase any of the foregoing.
"Change in Control" means any of the following events: (a) Hicks Muse,
Olympus, or any of their respective principals or Affiliates cease to own of
record and beneficially a majority of the economic interests in any Borrower and
the power, directly or indirectly, to vote or direct the voting of Capital Stock
having a majority of the power to direct the management and policies of any
Borrower, (b) Hicks Muse, Olympus, or their respective principals or Affiliates
cease to Control each Guarantor, (c) Hicks Muse, its principals or Affiliates
cease to own of record and beneficially a majority of the economic interests in
Olympus and the power, directly or indirectly, to vote or direct the voting of
Capital Stock having a majority of the power to direct the management and
policies of Olympus, or (d) Hicks Muse, its principals or Affiliates cease to
Control Olympus.
"Chase" means The Chase Manhattan Bank.
"Closing Date" means December 28, 1999.
"Co-Investor" means a Direct Co-Investor or an Indirect Co-Investor, as the
case may be.
"Co-Investment" means a Direct Co-Investment or an Indirect Co-Investment,
as the case may be.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Commitment" means, as to any Lender, the commitment of such Lender to make
Term Loans and to participate in Letters of Credit hereunder, in an amount so
that such Lender's Credit Exposure does not exceed such Lender's commitment
hereunder, as such commitment may be (a) reduced from time to time pursuant to
Section 2.5 or 6.1(e), (b) reduced or increased from time to time as the result
of an Assignment and Acceptance or (c) increased pursuant to Section 2.19. The
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initial amount of each Lender's Commitment is set forth on Schedule 2.1, or in
the Assignment and Acceptance pursuant to which such Lender shall have assumed
its Commitment, as applicable.
"Control" means the possession of the power, directly or indirectly, to
vote more than 50% of the Capital Stock having ordinary voting power for the
election of directors (or persons performing similar functions) of a Person.
"Controlling" and "Controlled" have meanings correlative thereto.
"Credit Exposure" means, with respect to any Lender at any time, the sum of
the outstanding principal amount of such Lender's Term Loans and its LC Exposure
at such time.
"Default" means any event or condition which constitutes an Event of
Default or which upon notice, lapse of time or both would, unless cured or
waived, become an Event of Default.
"Direct Co-Investment" means an investment in any Borrower in connection
with such Borrower's Investment in a New Portfolio Company in an amount not less
than 2.98% of such Borrower's total Investment in such New Portfolio Company.
"Direct Co-Investor" means the principals of Hicks Muse or Olympus, their
families and employees of Hicks Muse and Olympus who make a Direct Co-Investment
in any Borrower with respect to such Borrower's investment in a New Portfolio
Company.
"Directly Owned Investment Party" means any Person in which any Borrower
and, if the Co-Investment is made as an Indirect Co-Investment, any Indirect
Co-Investor, directly makes an Investment, and which Person directly or
indirectly makes the same Investment in the New Portfolio Company.
"Document Party" has the meaning set forth in Section 9.12.
"dollars" or "$" refers to lawful money of the United States.
"EquityCo" means HM/Europe Equity Investors, C.V., a limited partnership
organized under the laws of the Kingdom of the Netherlands.
"Eurodollar Base Rate" means with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, the rate per annum equal to the rate at
which Chase is offered dollar deposits at or about 10:00 A.M., New York, New
York time, two Business Days prior to the beginning of such Interest Period in
the interbank eurodollar market where the eurodollar and foreign currency and
exchange operations in respect of its Eurodollar Loans are then being conducted
for delivery on the first day of such Interest Period for the number of days
comprised therein and in an amount comparable to the amount of its Eurodollar
Loan to be outstanding during such Interest Period.
"Eurodollar Loans" means Term Loans the rate of interest applicable to
which is based upon the Eurodollar Rate.
"Eurodollar Rate" with respect to each day during each Interest Period
pertaining to a Eurodollar Loan, a rate per annum determined for such day
(rounded upward to the nearest 1/100th of 1%) equal to (a) the Eurodollar Base
Rate for such Interest Period multiplied by (b) the Statutory Reserve Rate.
"Eurodollar Tranche" the collective reference to Eurodollar Loans the then
current Interest Periods with respect to all of which begin on the same date and
end on the same later date (whether or not such Eurodollar Loans shall
originally have been made on the same day).
"Event of Default" has the meaning assigned to such term in Article 7.
"Federal Funds Effective Rate" means, for any day, the weighted average
(rounded upwards, if necessary, to the next 1/100 of 1%) of the rates on
overnight Federal funds transactions with members of the Federal Reserve System
arranged by Federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary, to the next 1/100 of 1%) of the quotations for such day for such
transactions received by the Administrative Agent from three Federal funds
brokers of recognized standing selected by it.
"Fees" means the fees payable pursuant to Section 2.10.
"Funding Fee" has the meaning assigned to such term in Section 2.10(a).
"Future Borrower" means any Person that becomes a borrower hereunder
pursuant to any Joinder Agreement.
"GAAP" means generally accepted accounting principles in the United States
from time to time.
"Governmental Authority" means the government of the United States, any
other nation or any political subdivision thereof, whether state or local, and
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any agency, authority, instrumentality, regulatory body, court, central bank or
other entity exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government.
"Guarantee" of or by any Person (the "guarantor") means any obligation,
contingent or otherwise, of the guarantor guaranteeing or having the economic
effect of guaranteeing any Indebtedness or other obligation of any other Person
(the "primary obligor") in any manner, whether directly or indirectly, and
including any obligation of the guarantor, direct or indirect, (a) to purchase
or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation or to purchase (or to advance or supply funds
for the purchase of) any security for the payment thereof, (b) to purchase or
lease property, securities or services for the purpose of assuring the owner of
such Indebtedness or other obligation of the payment thereof, (c) to maintain
working capital, equity capital or any other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor to pay such
Indebtedness or other obligation or (d) as an account party in respect of any
letter of credit or letter of guaranty issued to support such Indebtedness or
obligation; provided that the term Guarantee shall not include endorsements for
collection or deposit in the ordinary course of business.
"Guarantor" shall mean any Affiliate Guarantor or Investment Guarantor.
"Hicks Muse" means HMTF Operating, L.P., a Texas limited partnership
(formerly known as Hicks, Muse, Tate & Furst Incorporated).
"HM & Co." means Hicks, Muse & Co. Partners, L.P., a Texas limited
partnership.
"Increase Effective Date" has the meaning set forth in Section 2.19.
"Increase Response Date" has the meaning set forth in Section 2.19.
"Increase Request" has the meaning set forth in Section 2.19.
"Indebtedness" of any Person means, without duplication, (a) all
obligations of such Person for borrowed money, (b) all obligations of such
Person evidenced by bonds, debentures, notes or similar instruments, (c) all
obligations of such Person under conditional sale or other title retention
agreements relating to property acquired by such Person, (d) all obligations of
such Person in respect of the deferred purchase price of property or services
(excluding current accounts payable incurred in the ordinary course of
business), (e) all Indebtedness of others secured by (or for which the holder of
such Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien on property owned or acquired by such Person, whether or not the
Indebtedness secured thereby has been assumed, (f) all Guarantees by such Person
of Indebtedness of others, (g) all Capital Lease Obligations of such Person, (h)
all obligations, contingent or otherwise, of such Person as an account party in
respect of letters of credit and letters of guaranty and (i) all obligations,
contingent or otherwise, of such Person in respect of bankers' acceptances. The
Indebtedness of any Person shall include the Indebtedness of any other entity
(including any partnership in which such Person is a general partner) to the
extent such Person is liable therefor as a result of such Person's ownership
interest in or other relationship with such entity, except to the extent the
terms of such Indebtedness provide that such Person is not liable therefor.
"Indirect Co-Investment" means an investment with any Borrower in
connection with such Borrower's Investment in a New Portfolio Company in an
amount not less than 2.98% of such total Investment in such New Portfolio
Company.
"Indirect Co-Investor" means (a) EquityCo or (b) any other Person formed
for the purpose of making an Indirect Co-Investment with any Borrower in a New
Portfolio Company, in any case, which is owned by the principals of Hicks Muse
or Olympus, or the families and employees of Hicks Muse or Olympus.
"Initial Borrowers" means HMTF Bridge Partners, L.P., a Delaware limited
partnership, and HM/Europe Coinvestors, C.V., a limited partnership organized
under the laws of the Kingdom of the Netherlands.
"Interest Payment Date" means (a) as to any ABR Loan, the date which is the
three month anniversary of the Closing Date and each date which is the three
month anniversary of the prior Interest Payment Date to occur while such ABR
Loan is outstanding, (b) as to any Eurodollar Loan having an Interest Period of
three months or less, the last day of such Interest Period, (c) as to any
Eurodollar Loan having an Interest Period longer than three months, each day
which is three months, or a whole multiple thereof, after the first day of such
Interest Period and the last day of such Interest Period and (d) as to any Term
Loan, the date of any repayment or prepayment made in respect thereof.
"Interest Period" means, as to any Eurodollar Loan, (a) initially, the
period commencing on the borrowing or conversion date, as the case may be, with
respect to such Eurodollar Loan and ending one, two, three, six, or to the
extent available to all Lenders, nine or twelve months thereafter, as selected
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by any Borrower in its notice of borrowing or notice of conversion, as the case
may be, given with respect thereto and (b) thereafter, each period commencing on
the last day of the next preceding Interest Period applicable to such Eurodollar
Loan and ending one, two, three, six, or to the extent available to all Lenders,
nine or twelve months thereafter, as selected by any Borrower by irrevocable
notice to the Administrative Agent not less than three Business Days prior to
the last day of the then current Interest Period with respect thereto; provided
that (i) if any Interest Period would end on a day other than a Business Day,
such Interest Period shall be extended to the next succeeding Business Day
unless such next succeeding Business Day would fall in the next calendar month,
in which case such Interest Period shall end on the next preceding Business Day,
(ii) any Interest Period that commences on the last Business Day of a calendar
month (or on a day for which there is no numerically corresponding day in the
last calendar month of such Interest Period) shall end on the last Business Day
of the last calendar month of such Interest Period and (iii) no Borrower may
select an Interest Period that would extend beyond the Maturity Date.
"Investment" means the collective reference to any direct or indirect
investment in a New Portfolio Company by a Borrower. Investments shall not
include debt securities or borrowings of an Investment Party that, in the
judgment of the Borrower, would customarily be issued or borrowed in a bridge
financing to an offering or private placement in anticipation of or to a
registered public offering or in a private placement under Rule 144A of the
Securities Act of 1933, as amended.
"Investment Commitment Amount" means the amount on the date giving rise to
this calculation, as calculated by the Borrowers and the Administrative Agent,
rounded upward to the nearest $500,000.00, that represents (i) the Term Loans,
(ii) the LC Exposure and (iii) all interest and fees previously accrued or which
will be payable pursuant to Sections 2.9, 2.10(a) and 2.10(c) through the
Maturity Date assuming no pre-payments pursuant to Section 2.6 prior to the
Maturity Date (using for future periods not covered by existing Interest
Periods, the Eurodollar Rate available on the date of any determination for a
three (3) month Interest Period and using the current Applicable Margin). The
Investment Commitment Amount of any Lender at any time shall be its Loan
Percentage of the total Investment Commitment Amount.
"Investment Guarantee" means the collective reference to each Investment
Guarantee Agreement executed and delivered by an Investment Guarantor,
substantially in the form of Exhibit G, as the same may be amended, supplemented
or otherwise modified from time to time.
"Investment Guarantor" shall mean any Indirect Co-Investor.
"Investment Party" means any Person in which any Borrower directly or
indirectly makes an Investment, which Person directly or indirectly makes the
same Investment in a New Portfolio Company.
"Investment Term Loan" has the meaning set forth in Section 2.10(a) hereof.
"Investor" means any Person which has executed a Subscription Agreement
(that has become effective pursuant to its terms) and the signature page to the
limited partnership agreement of New Fund and has thereby become obligated to
make capital contributions to New Fund in exchange for limited partnership
interests therein, subject only to such customary conditions as are reasonably
acceptable to the Administrative Agent.
"Issuing Bank" means The Chase Manhattan Bank, in its capacity as the
issuer of Letters of Credit hereunder, and its successors in such capacity as
provided in Section 2.3(i).
"Joinder Agreement" means an agreement substantially in the form of Exhibit
K, as the same may be amended, supplemented or otherwise modified from time to
time.
"LC Disbursement" means a payment made by the Issuing Bank pursuant to a
Letter of Credit.
"LC Exposure" means, at any time, the sum of (a) the aggregate undrawn
amount of any outstanding Letter of Credit at such time plus (b) the aggregate
amount of all LC Disbursements that have not yet been reimbursed by or on behalf
of any Borrower at such time. The LC Exposure of any Lender at any time shall
be its Loan Percentage of the total LC Exposure at such time.
"Lenders" means the Persons listed on Schedule 2.1 and any other Person
that shall have become a party hereto pursuant to an Assignment and Acceptance,
other than any such Person that ceases to be a party hereto pursuant to an
Assignment and Acceptance.
"Letter Agreement" means the Letter Agreement dated as of the date hereof
between Hicks Muse, Olympus and the Administrative Agent on behalf of the
Lenders, substantially in the form of Exhibit J, as the same may be amended,
supplemented or otherwise modified from time to time.
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"Letter of Credit" means a letter of credit issued pursuant to Section 2.3,
a bank guaranty or similar instrument treated as a letter of credit for bank
regulatory purposes, in a form reasonably acceptable to the Administrative Agent
and the Issuing Bank, to support the Borrowers' agreement to make an Investment.
"Lien" means, with respect to any asset, (a) any mortgage, deed of trust,
lien, pledge, hypothecation, encumbrance, charge or security interest in, on or
of such asset, (b) the interest of a vendor or a lessor under any conditional
sale agreement, capital lease or title retention agreement (or any financing
lease having substantially the same economic effect as any of the foregoing)
relating to such asset and (c) in the case of securities, any purchase option,
call or similar right of a third party with respect to such securities.
"Loan Documents" means the collective reference to this Agreement, the
Affiliate Guarantees, the Investment Guarantees, the Pledge Agreement, the
Letter Agreement, the Principal Agreement, the Joinder Agreements and the Notes.
"Loan Parties" means the collective reference to the Initial Borrowers, any
Future Borrowers, the Guarantors, Hicks Muse, Olympus and any other Person party
to a Loan Document.
"Loan Percentage" means, with respect to any Lender, the percentage of the
total Commitments represented by such Lender's Commitment, and, if the
Commitments have terminated, the aggregate outstanding principal amount of the
Term Loans represented by such Lender's Term Loans.
"Material Adverse Effect" means a material adverse effect on (a) the
ability of any Loan Party to perform any of its obligations under any Loan
Document or (b) the rights of or benefits available to the Lenders under any
Loan Document.
"Maturity Date" means the date which is 364 days after the Closing Date.
"New Fund" or "New Funds" means (a) any investment fund or funds formed
after the date hereof and sponsored, advised or managed by Hicks Muse, Olympus
or any of their respective Affiliates and (b) any other Person which may acquire
an Investment in an Investment Party or a New Portfolio Company or any part
thereof.
"New Portfolio Company" means a Person, having as some or all of its
shareholders, partners or members, as the case may be, directly or indirectly,
any of the Borrowers, and, if applicable, one or more Indirect Co-Investors.
"Non-Consenting Lender" has the meaning specified in Section 2.17.
"Non-Excluded Taxes" has the meaning set forth in Section 2.14(a).
"Non-Funding Lender" has the meaning set forth in Section 2.12(c).
"Non-U.S. Lender" has the meaning set forth in Section 2.14(b).
"Note" has the meaning set forth in Section 2.4(e).
"Obligations" means the collective reference to the unpaid principal of and
interest on the Term Loans, the LC Disbursements and all other obligations and
liabilities of the Borrowers to the Administrative Agent and the Lenders
(including, without limitation, interest accruing at the then applicable rate
provided in this Agreement after the maturity of the Term Loans and Letters of
Credit, LC Disbursements and interest accruing at the then applicable rate
provided in this Agreement after the filing of any petition in bankruptcy, or
the commencement of any insolvency, reorganization or like proceeding, relating
to any of the Borrowers whether or not a claim for post-filing or post-petition
interest is allowed in such proceeding), whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred, which
may arise under, out of, or in connection with, this Agreement or any other
document made, delivered or given in connection therewith, in each case whether
on account of principal, interest, reimbursement obligations, fees, indemnities,
costs, expenses or otherwise (including, without limitation, all fees and
disbursements of counsel to the Administrative Agent or to the Lenders that are
required to be paid by the Borrowers pursuant to the terms of this Agreement).
"Olympus" means Olympus Real Estate Corporation, a Delaware corporation.
"Participant" has the meaning set forth in Section 9.4(e).
"Person" means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity of whatever nature.
"Pledge Agreement" means the Pledge Agreement executed and delivered by the
Pledgors, substantially in the form of Exhibit I, as the same may be amended,
supplemented or otherwise modified from time to time.
"Pledged Interests" shall have the meaning set forth in the Pledge
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Agreement.
"Pledgors" shall mean (i) on the Closing Date, the Initial Borrowers and
EquityCo, and (ii) thereafter, any Future Borrower and any Indirect Co-Investor.
"Principal Agreement" means the Principal Agreement executed and delivered
by each principal of Hicks Muse and Olympus, substantially in the form of
Exhibit L, as the same may be amended, supplemented or otherwise modified from
time to time.
"Prime Rate" means the rate of interest per annum publicly announced from
time to time by Chase as its prime rate in effect at its principal office in New
York, New York; each change in the Prime Rate shall be effective from and
including the date such change is publicly announced as being effective. The
Prime Rate is a reference rate and does not necessarily represent the lowest or
best rate actually charged to a customer.
"Qualified Investors" means those Investors reasonably acceptable to the
Administrative Agent. Any Investor shall be subject to exclusion for: (i)
default under or breach of (A) its respective Subscription Agreement or (B) the
limited partnership agreement of New Fund; (ii) bankruptcy or other insolvency
event or proceeding with respect to such Investor; (iii) appointment of a
receiver with respect to such Investor; (iv) repudiation by such Investor of its
obligation to make capital contributions to New Fund pursuant to its
Subscription Agreement and the limited partnership agreement of New Fund; and
(v) any material adverse change which affects the ability of such Investor to
fulfill its obligations under the limited partnership agreement of New Fund or
its Subscription Agreement.
"Qualified Subscription Amount" means the aggregate dollar amount of all
subscriptions to New Fund by all Qualified Investors as to which the Borrowers
have delivered to the Administrative Agent a fully executed copy of one or more
Subscription Agreements (including all supporting documentation including, but
not limited to, the executed signature page to the limited partnership agreement
of New Fund).
"Register" has the meaning set forth in Section 9.4(c).
"Related Parties" means, with respect to any specified Person, such
Person's Affiliates and the respective directors, officers, employees, agents,
partners and advisors of such Person and such Person's Affiliates.
"Requested Amount" has the meaning set forth in Section 2.19.
"Required Lenders" at any time, Lenders holding more than 50% of (a) the
Commitments or (b) if the Commitments have been terminated, the sum of (i)
aggregate unpaid principal amount of the Term Loans and (ii) outstanding LC
Exposure.
"Requirement of Law" as to any Person, the Certificate of Incorporation and
By-Laws or other organizational or governing documents of such Person, and any
law, treaty, rule or regulation or determination of an arbitrator or a court or
other Governmental Authority, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its property is
subject.
"Responsible Officer" means the Chief Executive Officer, the President, any
Vice President, the Chief Financial Officer, the Treasurer, any Assistant
Treasurer, the Secretary or any Assistant Secretary or any officer having
responsibilities similar to any of the foregoing.
"Restricted Payment" means any dividend or other distribution (whether in
cash, securities or other property) with respect to any shares of any class of
Capital Stock of any Person, or any payment (whether in cash, securities or
other property), including any sinking fund or similar deposit, on account of
the purchase, redemption, retirement, acquisition, cancellation or termination
of any such shares of Capital Stock of such Person or any option, warrant or
other right to acquire any such shares of Capital Stock of such Person.
"Specified Fund" means Hicks, Muse, Tate & Furst Equity Fund II, L.P.,
Hicks, Muse, Tate & Furst Equity Fund III, L.P., Hicks, Muse, Tate & Furst
Equity Fund IV, L.P., Hicks, Muse, Tate & Furst Private Equity Fund IV, L.P.,
Hicks, Muse, Tate & Furst Europe Fund, L.P., Hicks, Muse, Tate & Furst Europe
Private Fund, L.P., Hicks, Muse, Tate & Furst Latin America Fund, L.P. and
Hicks, Muse, Tate & Furst Latin America Private Fund, L.P.
"Statutory Reserve Rate" means a fraction (expressed as a decimal), the
numerator of which is the number one and the denominator of which is the number
one minus the aggregate of the maximum reserve percentages (including any
marginal, special, emergency or supplemental reserves) expressed as a decimal
established by the Board to which the Administrative Agent is subject (a) with
respect to the Base CD Rate, for new negotiable nonpersonal time deposits in
dollars of over $100,000 with maturities approximately equal to three months and
(b) with respect to the Eurodollar Rate, for eurocurrency funding (currently
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referred to as "Eurocurrency Liabilities" in Regulation D of the Board). Such
reserve percentages shall include those imposed pursuant to such Regulation D.
Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be
subject to such reserve requirements without benefit of or credit for proration,
exemptions or offsets that may be available from time to time to any Lender
under such Regulation D or any comparable regulation. The Statutory Reserve
Rate shall be adjusted automatically on and as of the effective date of any
change in any reserve percentage.
"Subscription Agreement" shall mean the Subscription Agreement in the form
customarily used by Hicks Muse or Olympus (and then by any New Fund) pursuant to
which a Person agrees to acquire limited partnership interests in New Fund in
accordance with the terms thereof, which such Subscription Agreement obligates
such Person to sign the limited partnership agreement of New Fund.
"Term Loans" has the meaning set forth in Section 2.1.
"Three-Month Secondary CD Rate" means, for any day, the secondary market
rate for three-month certificates of deposit reported as being in effect on such
day (or, if such day is not a Business Day, the next preceding Business Day) by
the Board through the public information telephone line of the Federal Reserve
Bank of New York (which rate will, under the current practices of the Board, be
published in Federal Reserve Statistical Release H.15(519) during the week
following such day) or, if such rate is not so reported on such day or such next
preceding Business Day, the average of the secondary market quotations for
three-month certificates of deposit of major money center banks in New York City
received at approximately 12:00 noon, New York City time, on such day (or, if
such day is not a Business Day, on the next preceding Business Day) by the
Administrative Agent from three negotiable certificate of deposit dealers of
recognized standing selected by it.
"Ticking Fee" has the meaning set forth in Section 2.10(b).
"Transactions" means the execution, delivery and performance by the Loan
Parties of the Loan Documents, the borrowing of Term Loans, the issuance of
Letters of Credit and the use of the proceeds thereof, the grant of the Liens
under the Loan Documents and the making of each Investment.
"Type" as to any Term Loans, its nature as an ABR Loan or a Eurodollar
Loan.
"United States" means the United States of America.
SECTION 1.2 Terms Generally. The definitions of terms herein
shall apply equally to the singular and plural forms of the terms defined.
Whenever the context may require, any pronoun shall include the corresponding
masculine, feminine and neuter forms. The words "include", "includes" and
"including" shall be deemed to be followed by the phrase "without limitation".
The word "will" shall be construed to have the same meaning and effect as the
word "shall". Unless the context requires otherwise (a) any definition of or
reference to any agreement, instrument or other document herein shall be
construed as referring to such agreement, instrument or other document as from
time to time amended, supplemented or otherwise modified (subject to any
restrictions on such amendments, supplements or modifications set forth herein),
(b) any reference herein to any Person shall be construed to include such
Person's successors and assigns, (c) the words "herein", "hereof" and
"hereunder", and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, (d) all
references herein to Articles, Sections, Exhibits and Schedules shall be
construed to refer to Articles and Sections of, and Exhibits and Schedules to,
this Agreement and (e) the words "asset" and "property" shall be construed to
have the same meaning and effect and to refer to any and all tangible and
intangible assets and properties, including cash, securities, accounts and
contract rights.
SECTION 1.3 Accounting Terms; GAAP. Except as otherwise expressly
provided herein, all terms of an accounting or financial nature shall be
construed in accordance with GAAP, as in effect from time to time.
ARTICLE 2
Term Loans
SECTION 2.1 Term Loans. Subject to the terms and conditions
hereof, each Lender severally agrees to make one or more term loans (each, a
"Term Loan") to the Borrowers on the Closing Date and on any Business Day
thereafter prior to the Maturity Date in an aggregate principal amount not to
exceed such Lender's Available Commitment. The initial amount of each Lender's
Commitment is set forth on Schedule 2.1, or in the Assignment and Acceptance
pursuant to which such Lender shall have assumed its Commitment, as applicable.
The Term Loans may from time to time be (a) Eurodollar Loans or (b) ABR Loans,
as determined by the applicable Borrower and notified to the Administrative
Agent in accordance with Sections 2.2 and 2.7. Each Term Loan shall be made as
part of a borrowing consisting of Term Loans made by the Lenders ratably in
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accordance with their respective Commitments. Amounts repaid or prepaid on
account of the Term Loans may not be reborrowed. The Term Loans shall be made
only if the total Investment Commitment Amounts shall not exceed the total
Commitments.
SECTION 2.2 Procedure for Term Loan Borrowing. Any Borrower shall
give the Administrative Agent irrevocable notice (including telephonic notice
confirmed in writing) (which notice must be received by the Administrative Agent
(a) in the case of Eurodollar Loans, not later than 11:00 a.m., New York, New
York time, three Business Days prior to the date of the anticipated borrowing
and (b) in the case of ABR Loans, not later than 12:00 noon, New York, New York
time, one Business Day prior to the date of the anticipated borrowing)
requesting that the Lenders make the Term Loans on such borrowing date and
specifying the amount to be borrowed; provided that a notice of an ABR Loan to
finance the reimbursement of an LC Disbursement as required by Section 2.3(e)
shall be deemed given one Business Day prior to the date of such drawing. The
Term Loans made on the Closing Date shall initially be ABR Loans. Upon receipt
of such notice, the Administrative Agent shall promptly notify each Lender
thereof. Not later than 11:00 a.m., New York, New York time, on the relevant
borrowing date, each Lender shall make available to the Administrative Agent at
its office specified in Section 9.1 an amount in immediately available funds
equal to the Term Loan to be made by such Lender. The Administrative Agent
shall credit the account of the applicable Borrower on the books of such office
of the Administrative Agent with the aggregate of the amounts made available to
the Administrative Agent by the Lenders in immediately available funds; provided
that ABR Loans made to fund the reimbursement of an LC Disbursement as provided
in Section 2.3(e) shall be remitted by the Administrative Agent to the Issuing
Bank.
SECTION 2.3 Letters of Credit. (a) General. Subject to the terms
and conditions set forth herein, any Borrower may request the issuance of a
Letter of Credit, for the account of such Borrower on the Closing Date and on
any Business Day thereafter not later than 5 Business Days prior to the Maturity
Date. In the event of any inconsistency between the terms and conditions of
this Agreement and the terms and conditions of any form of letter of credit
application or other agreement submitted by such Borrower to, or entered into by
such Borrower with, the Issuing Bank relating to such Letter of Credit, the
terms and conditions of this Agreement shall control.
(b) Notice of Issuance; Certain Conditions. To request the issuance of
a Letter of Credit, a Borrower shall deliver to the Issuing Bank and the
Administrative Agent (at least three Business Days in advance of the requested
date of issuance, unless otherwise agreed to with the Issuing Bank), a notice
requesting the issuance of such Letter of Credit, the date of issuance, the
amount of such Letter of Credit, the name and address of the beneficiary thereof
and such other information as shall be necessary to prepare such Letter of
Credit, accompanied by a duly completed and executed letter of credit
application in the Issuing Bank's standard form for such Letter of Credit. A
Letter of Credit, shall be issued only if (and upon issuance, the Borrowers
shall be deemed to represent and warrant that), after giving effect to such
issuance, (i) the LC Exposure shall not exceed $250,000,000, (ii) no Letter of
Credit shall have a face amount in excess of $100,000,000, and (iii) the total
Investment Commitment Amounts shall not exceed the total Commitments.
(c) Expiration Date. Each Letter of Credit shall expire not later than
five Business Days prior to the Maturity Date.
(d) Participations. By the issuance of a Letter of Credit and without
any further action on the part of the Issuing Bank or the Lenders, the Issuing
Bank hereby grants to each Lender, and each Lender hereby acquires from the
Issuing Bank, a participation in such Letter of Credit equal to such Lender's
Loan Percentage of the aggregate amount available to be drawn under such Letter
of Credit. In consideration and in furtherance of the foregoing, each Lender
hereby absolutely and unconditionally agrees to pay to the Administrative Agent,
for the account of the Issuing Bank, such Lender's Loan Percentage of each LC
Disbursement made by the Issuing Bank and not reimbursed by the Borrowers on the
date due as provided in Section 2.3(e), or of any reimbursement payment required
to be refunded to the Borrowers for any reason. Each Lender acknowledges and
agrees that its obligation to acquire participations pursuant to this paragraph
in respect of each Letter of Credit is absolute and unconditional and shall not
be affected by any circumstance whatsoever, including the occurrence and
continuance of a Default or reduction or termination of the Commitments, and
that each such payment shall be made without any offset, abatement, withholding
or reduction whatsoever.
(e) Reimbursement. If the Issuing Bank shall make any LC Disbursement
in respect of a Letter of Credit, the Borrowers shall reimburse such LC
Disbursement by paying to the Administrative Agent an amount equal to such LC
Disbursement not later than (a) 12:00 noon, New York, New York time, on the date
that such LC Disbursement is made, if the applicable Borrower shall have
received notice of such LC Disbursement prior to 10:00 a.m., New York, New York
time, one Business Day prior to such date or (b) if such notice has not been
received by the applicable Borrower prior to such time on such date, then not
later than 12:00 noon, New York, New York time, two Business Days immediately
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following the day that the Borrowers receive such notice; provided that, if an
Event of Default set forth in Article 7(g) shall not have occurred and be
continuing, the Borrowers shall be deemed to have requested in accordance with
Section 2.2 that such payment be financed with an ABR Loan in an equivalent
amount and, to the extent so financed, the Borrowers' obligation to make such
payment shall be discharged and replaced by the resulting ABR Loan. If the
Borrowers fail to make such payment when due, the Administrative Agent shall
notify each Lender of the applicable LC Disbursement, the payment then due from
the Borrowers in respect thereof and such Lender's Loan Percentage thereof.
Promptly following receipt of such notice, each Lender shall pay to
Administrative Agent its Loan Percentage of the payment then due from the
Borrowers, in the same manner as provided in Section 2.2 with respect to Term
Loans made by such Lender (and Section 2.2 shall apply, mutatis mutandis, to the
payment obligations of the Lenders), and the Administrative Agent shall promptly
pay to the Issuing Bank the amounts so received by it from the Lenders.
Promptly following receipt by the Administrative Agent of any payment from the
Borrowers pursuant to this Section 2.3(e), the Administrative Agent shall
distribute such payment to the Issuing Bank or, to the extent that Lenders have
made payments pursuant to this Section 2.3(e) to reimburse the Issuing Bank,
then to such Lenders and the Issuing Bank as their interest may appear. Any
payment made by a Lender pursuant to this Section 2.3(e) to reimburse the
Issuing Bank for any LC Disbursement (other than the funding of ABR Loans as
contemplated above) shall not constitute a Term Loan and shall not relieve the
Borrowers of their obligation to reimburse such LC Disbursement.
(f) Obligations Absolute. The Borrowers' obligation to reimburse LC
Disbursements as provided in Section 2.3(e) shall be absolute, unconditional and
irrevocable, and shall be performed strictly in accordance with the terms of
this Agreement under any and all circumstances whatsoever and irrespective of:
(i) any lack of validity or enforceability of a Letter of Credit
or this Agreement, or any term or provision therein;
(ii) any amendment or waiver of or any consent to departure from
all or any of the provisions of a Letter of Credit or this Agreement;
(iii) the existence of any claim, setoff, defense or other right
that any Borrower, or any other Person may at any time have against the
beneficiary under a Letter of Credit, the Issuing Bank, the Administrative Agent
or any Lender or any other Person, whether in connection with this Agreement or
any other related or unrelated agreement or transaction;
(iv) any draft or other document presented under a Letter of
Credit proving to be forged, fraudulent or invalid in any respect or any
statement therein being untrue or inaccurate in any respect; and
(v) any other act or omission to act or delay of any kind of the
Issuing Bank, the Lenders, the Administrative Agent or any other Person or any
other event or circumstance whatsoever, whether or not similar to any of the
foregoing, that might but for the provisions of this Section, constitute a legal
or equitable discharge of any Borrower's obligations hereunder.
Neither the Administrative Agent, the Lenders nor the Issuing Bank, nor any of
their Related Parties, shall have any liability or responsibility by reason of
or in connection with the issuance or transfer of a Letter of Credit or any
payment or failure to make any payment thereunder, including any of the
circumstances specified in clauses (i) through (v) above, as well as any error,
omission, interruption, loss or delay in transmission or delivery of any draft,
notice or other communication under or relating to a Letter of Credit (including
any document required to make a drawing thereunder), any error in interpretation
of technical terms or any consequence arising from causes beyond the control of
the Issuing Bank; provided that the foregoing shall not be construed to excuse
the Issuing Bank from liability to the Borrowers to the extent of any direct
damages (as opposed to consequential damages, claims in respect of which are
hereby waived by each of the Borrowers to the extent permitted by applicable
law) suffered by any Borrower that are caused by the Issuing Bank's failure to
exercise the agreed standard of care (as set forth below) in determining whether
drafts and other documents presented under a Letter of Credit comply with the
terms thereof. The parties hereto expressly agree that the Issuing Bank shall
have exercised the agreed standard of care in the absence of gross negligence or
willful misconduct on the part of the Issuing Bank. Without limiting the
generality of the foregoing, it is understood that the Issuing Bank may accept
documents that appear on their face to be in substantial compliance with the
terms of a Letter of Credit, without responsibility for further investigation,
and may make payment upon presentation of documents that appear on their face to
be in substantial compliance with the terms of such Letter of Credit; provided
that the Issuing Bank shall have the right, in its reasonable discretion, to
decline to accept such documents and to make such payment if such documents are
not in strict compliance with the terms of such Letter of Credit.
(g) Disbursement Procedures. The Issuing Bank shall, promptly
following its receipt thereof, examine all documents purporting to represent a
demand for payment under each Letter of Credit. The Issuing Bank shall promptly
notify the Administrative Agent and the applicable Borrower by telephone
(confirmed by telecopy) of such demand for payment and whether the Issuing Bank
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has made or will make an LC Disbursement thereunder; provided that any failure
to give or delay in giving such notice shall not relieve the Borrowers of their
obligation to reimburse the Issuing Bank and the Lenders with respect to any
such LC Disbursement.
(h) Interim Interest. If the Issuing Bank shall make any LC
Disbursement, then, unless the Borrowers shall reimburse such LC Disbursement in
full on the date such LC Disbursement is made, the unpaid amount thereof shall
bear interest, for each day from and including the date such LC Disbursement is
made to but excluding the date that the Borrowers reimburses such LC
Disbursement, at the rate per annum then applicable to ABR Loans; provided,
that, if the Borrowers fail to reimburse such LC Disbursement when due pursuant
to Section 2.3(e), then Section 2.9(c) shall apply. Interest accrued pursuant
to this paragraph shall be for the account of the Issuing Bank, except that
interest accrued on and after the date of payment by any Lender pursuant to
Section 2.3(e) to reimburse the Issuing Bank shall be for the account of such
Lender to the extent of such payment.
(i) Replacement of the Issuing Bank. The Issuing Bank may be replaced
at any time by written agreement among the Borrowers, the Administrative Agent,
and the successor Issuing Bank. The Administrative Agent shall notify the
Lenders of any such replacement of the Issuing Bank. At the time any such
replacement shall become effective, the applicable Borrower shall pay all unpaid
fees accrued for the account of the replaced Issuing Bank pursuant to Section
2.10. From and after the effective date of any such replacement, (i) the
successor Issuing Bank shall have all the rights and obligations of the Issuing
Bank under this Agreement with respect to any Letter of Credit to be issued
thereafter and (ii) references herein to the term "Issuing Bank" shall be deemed
to refer to such successor or to any previous Issuing Bank, or to such successor
and all previous Issuing Banks, as the context shall require. After the
replacement of an Issuing Bank hereunder, the replaced Issuing Bank shall remain
a party hereto and shall continue to have all the rights and obligations of an
Issuing Bank under this Agreement with respect to any Letter of Credit issued by
it prior to such replacement.
SECTION 2.4 Repayment of Loans; Evidence of Debt; etc. (a) The
Borrowers hereby unconditionally promise to pay to the Administrative Agent for
the account of each Lender the then unpaid principal amount of the Term Loans of
such Lender on the Maturity Date (or such earlier date on which the Term Loans
shall become due and payable pursuant to Article 7).
(b) Each Lender shall maintain in accordance with its usual practice an
account or accounts evidencing indebtedness of each Borrower to such Lender
resulting from the Term Loans of such Lender from time to time, including the
amounts of principal and interest payable and paid to such Lender from time to
time under this Agreement.
(c) The Administrative Agent shall maintain the Register pursuant to
Section 9.4(c), and a subaccount therein for each Lender, in which shall be
recorded (i) the amount of each Term Loan made hereunder, including each Term
Loan evidenced by a Note, the applicable Borrower and Type thereof and each
Interest Period applicable thereto, (ii) the amount of any principal or interest
due and payable or to become due and payable from the respective Borrowers to
each Lender hereunder and (iii) both the amount of any sum received by the
Administrative Agent hereunder from the various Borrowers and each Lender's
share thereof.
(d) The entries made in the Register and the accounts of each Lender
maintained pursuant to Section 2.4(b) shall, to the extent permitted by
applicable law, be prima facie evidence of the existence and amounts of the
obligations of the Borrowers therein recorded, absent manifest error; provided,
however, that the failure of any Lender or the Administrative Agent to maintain
the Register or any such account, or any error therein, shall not in any manner
affect the obligation of the Borrowers to repay (with applicable interest) the
Term Loans made to the Borrowers by such Lender in accordance with the terms of
this Agreement.
(e) Each Borrower hereby agrees that, upon the request to the
Administrative Agent by any Lender, such Borrower will execute and deliver to
such Lender a promissory note of such Borrower evidencing the Term Loans of such
Lender, substantially in the form of Exhibit H, with appropriate insertions as
to date and principal amount (a "Note").
SECTION 2.5 Termination and Reduction of Commitments. (a) Unless
previously terminated by the Borrowers in accordance with this Agreement, the
Commitments shall terminate on the Maturity Date.
(b) The Borrowers may at any time terminate, or from time to time
reduce, the Commitments; provided that (i) each reduction of the Commitments
shall be in an amount that is an integral multiple of $1,000,000 and not less
than $1,000,000 and (ii) the Borrowers shall not terminate or reduce the
Commitments if, after giving effect to any concurrent prepayment of the Term
Loans in accordance with Section 2.6, the sum of the Credit Exposures would
exceed the total Commitments.
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(c) The Borrowers shall notify the Administrative Agent of any election
to terminate or reduce the Commitments under Section 2.5(b) at least three
Business Days prior to the effective date of such termination or reduction,
specifying such election and the effective date thereof. Promptly following
receipt of any notice, the Administrative Agent shall advise the Lenders of the
contents thereof. Each notice delivered by a Borrower pursuant to this Section
2.5(c) shall be irrevocable; provided that a notice of termination of the
Commitments delivered by a Borrower may state that such notice is conditioned
upon the effectiveness of other credit facilities, in which case such notice may
be revoked by such Borrower (by notice to the Administrative Agent on or prior
to the specified effective date) if such condition is not satisfied. Any
termination or reduction of the Commitments shall be permanent. Each reduction
of the Commitments shall be made ratably among the Lenders in accordance with
their respective Commitments.
SECTION 2.6 Prepayments. (a) The Borrowers may at any time and
from time to time prepay the Term Loans, in whole or in part, without premium or
penalty, upon irrevocable notice (including telephonic notice confirmed in
writing) delivered to the Administrative Agent at least three Business Days
prior thereto in the case of Eurodollar Loans and at least one Business Day
prior thereto in the case of ABR Loans, which notice shall specify the date and
amount of prepayment and whether the prepayment is of Eurodollar Loans, ABR
Loans or a combination thereof, and, if of a combination thereof, the amount
allocable to each; provided that, if a Eurodollar Loan is prepaid on any day
other than the last day of the Interest Period applicable thereto, the Borrowers
shall also pay any amounts owing pursuant to Section 2.15. Upon receipt of any
such notice, the Administrative Agent shall promptly notify each Lender thereof.
If any such notice is given, the amount specified in such notice, together with
accrued interest thereon, shall be due and payable on the date specified
therein; provided that, if a notice of prepayment is given in connection with a
conditional notice of termination of the Commitments as contemplated by Section
2.5, then such notice of prepayment may be revoked if such notice is revoked in
accordance with Section 2.5.
(b) If any Capital Stock shall be issued by, or any capital
contribution shall be made to, any Borrower, any Indirect Co-Investor or any
Investment Party (other than with respect to an Investment in a New Portfolio
Company and other than with respect to any Co-Investment) or if any Borrower,
any Indirect Co-Investor or any Investment Party (other than a New Portfolio
Company and other than ratably with respect to any Co-Investment) receives any
Restricted Payment, 100% of the net cash proceeds thereof received by such
Borrower or Indirect Co-Investor shall be applied toward the prepayment in full
of the Term Loans, second, to repay all LC Disbursements and third, to cash
collateralize any outstanding Letter of Credit on terms reasonably satisfactory
to the Administrative Agent. All prepayments made by a Borrower or an Indirect
Co-Investor in accordance with this Section 2.6(b) shall result in a pro rata
reduction of the Commitments.
(c) Upon any sale, assignment, conveyance, transfer or other
disposition (in whole or in part) of any outstanding interest in a Borrower or
in an Indirect Co-Investor (other than any sale, assignment, conveyance,
transfer or other disposition by a Co-Investor to any other Co-Investor) or any
outstanding interest of a Borrower or any Indirect Co-Investor in any Investment
Party or a New Portfolio Company, 100% of the net cash proceeds (taking into
account any necessary escrows) thereof received by such Borrower or such
Indirect Co-Investor (less the ratable interest of any Co-Investors) shall be
applied on the date thereof first toward the prepayment in full of the Term
Loans, together with accrued interest thereon, second, to repay all LC
Disbursements and third, to cash collateralize any outstanding Letter of Credit
on terms reasonably satisfactory to the Administrative Agent; provided, however,
if Borrower or any Investment Party shall sell, transfer or otherwise dispose of
"margin stock" as such term is defined in Regulation U of the Board, the net
proceeds from such sale shall be held by the Borrower or such Investment Party,
as the case may be, in cash or marketable direct obligations issued by, or
unconditionally guaranteed by, the United States Government maturing on or
within one year from the date of such sale until the Maturity Date; provided,
further, that in the event that an interest in a Borrower or an Indirect
Co-Investor, or the interest of a Borrower or Indirect Co-Investor in any
Investment Party or New Portfolio Company which shall not constitute "margin
stock" shall be sold for more than the cost of the Investments held by such
Borrower, Indirect Co-Investor, Investment Party or New Portfolio Company
(including, without limitation, any interest and fees relating thereto), the
amount of net cash proceeds in excess of such cost shall be held in a cash
collateral account in the name and under the sole dominion and control of the
Administrative Agent as security for the Obligations. All prepayments made by a
Borrower in accordance with this Section 2.6(c) shall result in a pro rata
reduction of the Commitments.
(d) The application of any prepayment pursuant to paragraphs (b) or (c)
of this Section 2.6 shall be made first to ABR Loans and second to Eurodollar
Loans. Amounts prepaid on account of the Term Loans may not be reborrowed.
(e) Notwithstanding anything to the contrary contained herein, in the
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event that a Borrower would incur costs pursuant to Section 2.15 as a result of
any payment due as a result of any prepayment to be made pursuant to this
Section 2.6, such Borrower, at its option, may deposit the amount of such
payment with the Administrative Agent, for the benefit of the Lenders who would
have received such payment, in a cash collateral account until the end of the
applicable Interest Period at which time such payment shall be made. Each
Borrower hereby grants to the Administrative Agent, for the benefit of such
Lenders, a security interest in all amounts in which such Borrower has any
right, title or interest which are from time to time on deposit in such cash
collateral account and expressly waives all rights (which rights the Borrowers
hereby acknowledge and agree are vested exclusively in the Administrative Agent)
to exercise dominion or control over any such amounts.
SECTION 2.7 Conversion and Continuation Options. (a) Any Borrower
may elect from time to time to convert its Eurodollar Loans to ABR Loans by
giving the Administrative Agent at least one Business Day's prior irrevocable
notice of such election, provided that if such conversion of Eurodollar Loans is
made other than on the last day of an Interest Period with respect thereto, then
such Borrower shall pay the Lenders any amounts due pursuant to Section 2.15.
Any Borrower may elect from time to time to convert its ABR Loans to Eurodollar
Loans by giving the Administrative Agent at least three Business Days' prior
irrevocable notice of such election (which notice shall specify the length of
the initial Interest Period therefor), provided that no ABR Loan may be
converted into a Eurodollar Loan when (i) any Event of Default has occurred and
is continuing and (ii) the Administrative Agent or the Required Lenders have
determined in its or their reasonable discretion not to permit such conversions.
Upon receipt of any such notice the Administrative Agent shall promptly notify
each Lender thereof.
(b) Any Eurodollar Loan may be continued as such upon the expiration of
the then current Interest Period with respect thereto by the giving of
irrevocable notice by the applicable Borrower to the Administrative Agent, in
accordance with the applicable provisions of the term "Interest Period" set
forth in Section 1.1, of the length of the next Interest Period to be applicable
to such Loans, provided that no Eurodollar Loan may be continued as such when
any Event of Default has occurred and is continuing and the Administrative Agent
has or the Required Lenders have determined in its or their reasonable
discretion not to permit such continuations, and provided, further, that if any
Borrower shall fail to give any required notice as described above in this
paragraph or if such continuation is not permitted pursuant to the preceding
proviso such Loans shall be automatically converted to ABR Loans on the last day
of such then expiring Interest Period. Upon receipt of any such notice the
Administrative Agent shall promptly notify each Lender thereof.
SECTION 2.8 Minimum Amounts and Maximum Number of Tranches.
Notwithstanding anything to the contrary in this Agreement, all borrowings,
conversions, continuations and optional prepayments of Eurodollar Loans
hereunder and all selections of Interest Periods hereunder shall be in minimum
amounts of $5,000,000 and incremental amounts of $500,000 in excess thereof and
shall be made pursuant to such elections so that, after giving effect thereto no
more than ten Eurodollar Tranches shall be outstanding at any one time.
SECTION 2.9 Interest. (a) Each Eurodollar Loan shall bear
interest for each day during each Interest Period with respect thereto at a rate
per annum equal to the Eurodollar Rate determined for such day plus the
Applicable Margin.
(b) Each ABR Loan shall bear interest at a rate per annum equal to the
Alternate Base Rate plus the Applicable Margin.
(c) If all or a portion of (i) any principal of any Term Loan, (ii) any
interest payable thereon or (iii) any Fees or any other amount payable hereunder
(including LC Disbursements) shall not be paid when due (whether at the stated
maturity, by acceleration or otherwise), the principal of the Term Loans and any
such overdue interest, Fees or other amount shall bear interest at a rate per
annum which is (x) in the case of principal, the rate that would otherwise be
applicable thereto pursuant to the foregoing provisions of this Section 2.9 plus
2% or (y) in the case of any such overdue interest, Fees or other amount, the
rate in effect at such time pursuant to paragraph (b) of this Section 2.9 plus
2%, in each case from the date of such non-payment until such overdue principal,
interest, Fees or other amount is paid in full (before as well as after receipt
of a judgment).
(d) Interest shall be payable in arrears on each Interest Payment Date
and the Maturity Date, provided that interest accruing pursuant to paragraph (c)
of this Section 2.9 shall be payable from time to time on demand.
(e) Whenever it is calculated on the basis of the Prime Rate, interest
shall be calculated on the basis of a 365- (or 366-, as the case may be) day
year for the actual days elapsed; and, otherwise, interest shall be calculated
on the basis of a 360-day year for the actual days elapsed. The Administrative
Agent shall as soon as practicable notify the applicable Borrower and the
Lenders of each determination of a Eurodollar Rate. Any change in the interest
rate on a Term Loan resulting from a change in the Alternate Base Rate shall
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become effective as of the opening of business on the day on which such change
becomes effective. The Administrative Agent shall as soon as practicable notify
the applicable Borrower and the Lenders of the effective date and the amount of
each such change in interest rate.
(f) Each determination of an interest rate by the Administrative Agent
pursuant to any provision of this Agreement shall be conclusive and binding on
the Borrowers and the Lenders in the absence of manifest error. The
Administrative Agent shall, at the request of any Borrower, deliver to such
Borrower a statement showing the quotations used by the Administrative Agent in
determining any interest rate in respect of its Eurodollar Loan.
SECTION 2.10 Fees. (a) The Borrowers agree to pay to the
Administrative Agent, for the account of each Lender, a funding fee (the
"Funding Fee") equal to (i) 1.0% of each Term Loan made to fund an Investment
(and not for the payment of interest and fees) (each borrowing of such a Term
Loan, an "Investment Term Loan"), payable on the date of the funding of each
such Investment Term Loan, plus (ii) 0.5% of the outstanding amount of each
Investment Term Loan on the seven month anniversary of the funding of such
Investment Term Loan, plus (iii) 0.5% of the outstanding amount of each
Investment Term Loan on the nine month anniversary of the funding of such
Investment Term Loan and (iv) 1.0% of the outstanding amount of each Investment
Term Loan on the eleven month anniversary of the funding of such Investment Term
Loan. Each Funding Fee in respect of an Investment Term Loan shall be payable
on the borrowing date of such Investment Term Loan and on the seven, nine and
eleven month anniversaries of the borrowing date of such Investment Term Loan.
(b) The Borrowers agree to pay to the Administrative Agent, for the
account of each Lender, a ticking fee (the "Ticking Fee") in the amount of 0.5%
per annum on the average daily amount of the Available Excess Investment
Commitment Amount, which shall be paid by the Borrowers to the Administrative
Agent on June 30, 2000 and the Maturity Date (or if this Agreement is terminated
prior to the Maturity Date, the date this Agreement is terminated),
respectively.
(c) Each Borrower shall pay to the Administrative Agent, for the
account of the Issuing Bank and the Lenders, a letter of credit commission with
respect to each Letter of Credit issued for its account, in an amount equal to
the Applicable Margin with respect to Eurodollar Loans on the average daily face
amount of such Letter of Credit, payable quarterly in arrears on each Interest
Payment Date and on the Maturity Date. A portion of such letter of credit
commission equal to 0.125% of the average daily face amount of the Letters of
Credit shall be payable to the Issuing Bank for its own account, and the
remaining portion of such letter of credit commission shall be payable to the
Issuing Bank and the Lenders to be shared ratably among them in accordance with
their respective Loan Percentages.
(d) For purposes of calculating the fees payable by the Borrowers under
this Section 2.10, all prepayments or repayments of the Term Loans shall be
treated as being paid in the order such Term Loans were made from and after the
Closing Date irrespective of the Borrower thereof.
SECTION 2.11 Inability to Determine Interest Rate. If prior to the
first day of any Interest Period (or during any Interest Period):
(a) the Administrative Agent shall have determined (which
determination, in the absence of manifest error, shall be conclusive and binding
upon the Borrowers) that, by reason of circumstances affecting the relevant
market, adequate and reasonable means do not exist for ascertaining the
Eurodollar Rate for such Interest Period, or
(b) the Administrative Agent shall have received notice from the
Required Lenders that the Eurodollar Rate determined or to be determined for
such Interest Period will not adequately and fairly reflect the cost to such
Lenders (as conclusively certified by such Lenders) of making or maintaining
their Term Loans during such Interest Period, the Administrative Agent shall
give telecopy or telephonic notice thereof to each Borrower and the Lenders as
soon as practicable thereafter. If such notice is given (i) any Eurodollar
Loans requested to be made on the first day of such Interest Period shall be
made as ABR Loans, (ii) any Term Loans that were to have been converted on the
first day of such Interest Period to Eurodollar Loans shall be continued as ABR
Loans and (iii) any outstanding Eurodollar Loans shall be converted to ABR Loans
on the last day of the Interest Period applicable thereto. Until such notice
has been withdrawn by the Administrative Agent (which the Administrative Agent
agrees to do when the circumstances that prompted the delivery of such notice no
longer exist), no further Eurodollar Loans shall be made or continued as such,
nor shall any Borrower have the right to convert ABR Loans to Eurodollar Loans.
SECTION 2.12 Pro Rata Treatment and Payments. (a) Each payment
(including each prepayment) by a Borrower on account of principal of and
interest on, and fees with respect to, the Term Loans and the Letters of Credit
shall be made pro rata according to the respective outstanding principal amounts
of the Term Loans then held by the Lenders or Issuing Bank, as the case may be.
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(b) All payments (including prepayments) to be made by a Borrower
hereunder, whether on account of principal, interest or otherwise, shall be made
without setoff or counterclaim and shall be made prior to 12:00 Noon, New York,
New York time, on the due date thereof to the Administrative Agent, for the
account of the Lenders, at the Administrative Agent's office specified in
Section 9.1, in dollars and in immediately available funds. The Administrative
Agent shall distribute such payments to the Lenders promptly upon receipt in
like funds as received. If any payment hereunder becomes due and payable on a
day other than a Business Day, such payment shall be extended to the next
succeeding Business Day (except, in the case of Eurodollar Loans, as otherwise
provided in clause (i) of the definition of "Interest Period"). In the case of
any extension of any payment of principal pursuant to the preceding sentence,
interest thereon shall be payable at the then applicable rate during such
extension.
(c) Notwithstanding that a Lender (a "Non-Funding Lender") has (x)
failed to make a Term Loan required to be made by it hereunder, and the
Administrative Agent has determined that such Lender is not likely to make such
Term Loan or (y) given notice to any Borrower or the Administrative Agent that
it will not make, or that it has disaffirmed or repudiated any obligation to
make, any Term Loans, in each case, by reason of the provisions of the Financial
Institutions Reform, Recovery and Enforcement Act of 1989 or otherwise, any
payment made on account of the principal of the Term Loans outstanding shall be
made pro rata according to the respective outstanding principal amounts of such
Term Loans; and any payment made on account of interest on the Term Loans shall
be made pro rata according to the respective amounts of accrued and unpaid
interest and/or fees due and payable on such Term Loans with respect to which
such payment is being made. The Borrowers agree to give the Administrative
Agent such assistance in making any determination pursuant to this paragraph as
the Administrative Agent may reasonably request. Any such determination by the
Administrative Agent shall be conclusive and binding on the Lenders.
SECTION 2.13 Requirements of Law. (a) If the adoption of or any
change in any Requirement of Law or in the interpretation or application thereof
or compliance by any Lender or the Issuing Bank with any request or directive
(whether or not having the force of law) from any central bank or other
Governmental Authority made subsequent to the date hereof:
(i) shall subject any Lender or the Issuing Bank to any tax of any
kind whatsoever with respect to this Agreement, any Letter of Credit or any
Eurodollar Loan made by it, or change the basis of taxation of payments to such
Lender or Issuing Bank in respect thereof (except Non-Excluded Taxes covered by
Section 2.14, the establishment of a tax based on the net income of such Lender
or Issuing Bank and changes in the rate of tax on the net income of such Lender
or Issuing Bank);
(ii) shall impose, modify or hold applicable any reserve, special
deposit, compulsory loan or similar requirement against assets held by, deposits
or other liabilities in or for the account of, advances, loans or other
extensions of credit by, or any other acquisition of funds by, any office of
such Lender which is not otherwise included in the determination of the
Eurodollar Rate hereunder or on any Issuing Lender with respect to any Letter of
Credit; or
(iii) shall impose on such Lender or Issuing Bank any other
condition;
and the result of any of the foregoing is to increase the cost to such Lender or
Issuing Bank, by an amount which such Lender or Issuing Bank deems to be
material, of making, converting into, continuing or maintaining Eurodollar Loans
or to increase the cost to such Lender or Issuing Bank of participating in,
issuing or maintaining Letters of Credit, or to reduce any amount receivable
hereunder in respect thereof, then, in any such case, the applicable Borrower
shall promptly pay such Lender or the Issuing Bank, as the case may be, upon its
demand, any additional amounts necessary to compensate such Lender or Issuing
Bank for such increased cost or reduced amount receivable. If a Borrower
notifies the Administrative Agent within five Business Days after any Lender
notifies such Borrower of any increased cost pursuant to the foregoing
provisions of this Section 2.13(a), such Borrower may covert all Eurodollar
Loans of such Lender then outstanding into ABR Loans in accordance with Section
2.7 and shall, additionally, reimburse such Lender for any cost in accordance
with Section 2.15.
(b) If any Lender or the Issuing Bank shall have determined that the
adoption of or any change in any Requirement of Law regarding capital adequacy
or in the interpretation or application thereof or compliance by such Lender or
Issuing Bank or any corporation controlling such Lender or Issuing Bank with any
request or directive regarding capital adequacy (whether or not having the force
of law) from any Governmental Authority made subsequent to the date hereof shall
have the effect of reducing the rate of return on such Lender's, such Issuing
Bank's or such corporation's capital as a consequence of its obligations
hereunder to a level below that which such Lender, such Issuing Bank or such
corporation could have achieved but for such adoption, change or compliance
(taking into consideration such Lender's or such corporation's policies with
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respect to capital adequacy) by an amount deemed by such Lender or Issuing Bank
to be material, then from time to time, after submission by such Lender or
Issuing Bank to the Borrowers through the Administrative Agent of a written
request therefor, the Borrowers shall pay to such Lender or Issuing Bank such
additional amount or amounts as will compensate such Lender or Issuing Bank for
such reduction.
(c) A certificate as to any additional amounts payable pursuant to this
Section 2.13 showing in reasonable detail the calculation thereof and certifying
that it is generally charging such costs to other similarly situated borrowers
under similar credit facilities submitted by any Lender or Issuing Bank to the
Borrowers through the Administrative Agent shall be conclusive in the absence of
manifest error, provided that the determination of such amounts shall be made in
good faith in a manner generally consistent with such Lender's or Issuing Bank's
standard practices. The obligations of the Borrowers pursuant to this Section
2.13 shall survive the termination of this Agreement and the payment of the Term
Loans and all other amounts payable hereunder for a period of nine months
thereafter. If any Lender becomes entitled to claim any additional amounts
pursuant to this Section 2.13, it shall promptly (and in any event no later than
90 days after such Lender becomes entitled to make such claim) notify the
Borrowers through the Administrative Agent of the event by reason of which it
has become so entitled.
SECTION 2.14 Taxes. (a) All payments made by the Borrowers under this
Agreement, except as provided in this Section 2.14, shall be made free and clear
of, and without deduction or withholding for or on account of, any present or
future income, stamp or other taxes, levies, imposts, duties, charges, fees,
deductions or withholdings, now or hereafter imposed, levied, collected,
withheld or assessed by any Governmental Authority, excluding net income taxes
and franchise taxes (imposed in lieu of net income taxes) imposed on the
Administrative Agent or any Lender as a result of a present or former connection
between the Administrative Agent or such Lender and the jurisdiction of the
Governmental Authority imposing such tax or any political subdivision or taxing
authority thereof or therein (other than any such connection arising solely from
the Administrative Agent or such Lender having executed, delivered or performed
its obligations or received a payment under, or enforced, this Agreement or any
other Loan Document). If any such non-excluded taxes, levies, imposts, duties,
charges, fees, deductions or withholdings ("Non-Excluded Taxes") are required to
be withheld from any amounts payable to the Administrative Agent or any Lender
hereunder, the amounts so payable to the Administrative Agent or such Lender
shall be increased to the extent necessary to yield to the Administrative Agent
or such Lender (after payment of all Non-Excluded Taxes) interest or any such
other amounts payable hereunder at the rates or in the amounts specified in this
Agreement, provided, however, that the Borrowers shall not be required to
increase any such amounts payable to any Lender with respect to any Non-Excluded
Taxes (i) that are attributable to such Lender's failure to comply with the
requirements of this Section, (ii) that are United States withholding taxes
imposed on amounts payable to such Lender at the time the Lender becomes a party
to this Agreement, or (iii) that are United States withholding taxes imposed as
a result of an event occurring after the date the Lender becomes a Lender other
than a change in law (including any income tax treaty) or regulation or the
introduction of any law or regulation or a change in interpretation or
administration of any law. Whenever any Non-Excluded Taxes are payable by a
Borrower, as promptly as possible thereafter such Borrower paying such
Non-Excluded Taxes shall send to the Administrative Agent for its own account or
for the account of such Lender, as the case may be, a certified copy of an
original official receipt received by such Borrower showing payment thereof. If
the Borrowers fail to pay any Non-Excluded Taxes when due to the appropriate
taxing authority or fails to remit to the Administrative Agent the required
receipts or other required documentary evidence, the Borrowers shall indemnify
the Administrative Agent and the Lenders for any incremental taxes, interest or
penalties that may become payable by the Administrative Agent or any Lender as a
result of any such failure. The agreements in this Section 2.14 shall survive
the termination of this Agreement and the payment of the Loans and all other
amounts payable hereunder for a period of nine months thereafter.
(b) Each Lender (or Transferee) that is not a person described in
Section 7701(a)(30) of the Code (a "Non-U.S. Lender") shall deliver to the
Borrowers and the Administrative Agent (or, in the case of a Participant, to the
Lender from which the related participation shall have been purchased) two
copies of either U.S. Internal Revenue Service Form W-8BEN or Form W-8ECI, or,
in the case of a Non-U.S. Lender claiming exemption from U.S. federal
withholding tax under Section 871(h) or 881(c) of the Code with respect to
payments of "portfolio interest", a Form W-8BEN, or any subsequent versions
thereof or successors thereto and an annual certificate representing, under
penalty of perjury, that such Non-U.S. Lender is not a "bank" for purposes of
Section 881(c) of the Code, is not a 10-percent shareholder (within the meaning
of Section 871(h)(3)(B) of the Code) of any Borrower and is not a controlled
foreign corporation related to the Borrowers (within the meaning of Section
864(d)(4) of the Code), properly completed and duly executed by such Non-U.S.
Lender claiming complete exemption from, or a reduced rate of, U.S. federal
withholding tax on all payments by the Borrowers under this Agreement and the
other Loan Documents. Such forms shall be delivered by each Non-U.S. Lender on
or before the date it becomes a party to this Agreement (or, in the case of any
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Participant, on or before the date such Participant purchases the related
participation). In addition, each Non-U.S. Lender shall deliver such forms on
or before the expiration or obsolescence and promptly upon the invalidity of any
form previously delivered by such Non-U.S. Lender and after the occurrence of
any event requiring a change in the most recently provided form and, if
necessary, obtain any extensions of time reasonably requested by any Borrower or
the Administrative Agent for filing and completing such forms. Each Non-U.S.
Lender agrees, to the extent legally entitled to do so, upon reasonable request
by any Borrower, to provide to such Borrower (for the benefit of the Borrowers
and the Administrative Agent) such other forms as may be reasonably required in
order to establish the legal entitlement of such Lender to an exemption from
withholding with respect to payments of interest under this Agreement or the
other Loan Documents, provided that in determining the reasonableness of such a
request, such Lender shall be entitled to consider the cost of complying with
such request (to the extent unreimbursed by the Borrowers) that would be imposed
on such Lender. Each Non-U.S. Lender shall promptly notify the Borrowers at any
time it determines that it is no longer in a position to provide any previously
delivered certificate to any Borrower (or any other form of certification
adopted by the U.S. taxing authorities for such purpose). Notwithstanding any
other provision of this Section 2.14(b), a Non-U.S. Lender shall not be required
to deliver any form pursuant to this Section 2.14(b) that such Non-U.S. Lender
is not legally able to deliver.
(c) If the Administrative Agent or any Lender receives a refund in
respect of Non-Excluded Taxes paid by any Borrower, which in the good faith
judgment of such Lender is allocable to such payment, it shall promptly pay such
refund, together with any other amounts paid by the Borrowers in connection with
such refunded Non-Excluded Taxes, to the Borrowers, net of all out-of-pocket
expenses of such Lender incurred in obtaining such refund, provided, however,
that each Borrower agrees to promptly return such refund to the Administrative
Agent or the applicable Lender, as the case may be, if it receives notice from
the Administrative Agent or applicable Lender that such Administrative Agent or
Lender is required to repay such refund.
SECTION 2.15 Indemnity. Each Borrower agrees to indemnify each Lender
and to hold each Lender harmless from any loss (excluding loss of profit) or
expense which such Lender may sustain or incur as a consequence of (a) default
by any Borrower in making a borrowing of, conversion into or continuation of
Eurodollar Loans after such Borrower has given a notice requesting the same in
accordance with the provisions of this Agreement, (b) default by any Borrower in
making any prepayment after such Borrower has given a notice thereof in
accordance with the provisions of this Agreement or (c) the making of a
prepayment of Eurodollar Loans on a day which is not the last day of an Interest
Period with respect thereto. Such indemnification may include an amount equal
to the excess, if any, of (i) the amount of interest which would have accrued on
the amount so prepaid, or not so borrowed, converted or continued, for the
period from the date of such prepayment or of such failure to borrow, convert or
continue to the last day of such Interest Period (or, in the case of a failure
to borrow, convert or continue, the Interest Period that would have commenced on
the date of such failure) in each case at the applicable rate of interest for
such Loans provided for herein (excluding, however, any margin included therein,
if any) over (ii) the amount of interest (as reasonably determined by such
Lender) which would have accrued to such Lender on such amount by placing such
amount on deposit for a comparable period with leading banks in the interbank
eurodollar market. A certificate as to any amounts payable pursuant to this
Section 2.15, showing in reasonable detail the calculation thereof, submitted to
the Borrowers by any Lender shall be conclusive in the absence of manifest
error. This covenant shall survive the termination of this Agreement and the
payment of the Loans and all other amounts payable hereunder for a period of
nine months thereafter.
SECTION 2.16 Change of Lending Office. Each Lender agrees that if it
makes any demand for payment under Section 2.14(a), or if any adoption or change
of the type described in Section 2.13 shall occur with respect to it, it will
use reasonable efforts (consistent with its internal policy and legal and
regulatory restrictions and so long as such efforts would not be disadvantageous
to it, as determined in its reasonable discretion) to designate a different
lending office if the making of such a designation would reduce or obviate the
need for the Borrowers to make payments under Section 2.14(a), or would
eliminate or reduce the effect of any adoption or change described in Section
2.13.
SECTION 2.17 Replacement of Lenders. If, at any time (a) the Borrowers
become obligated to pay additional amounts described in Sections 2.13 or 2.14 as
a result of any conditions described in such Sections, (b) any Lender becomes
insolvent and its assets become subject to a receiver, liquidator, trustee,
custodian or other Person having similar powers, (c) any Lender becomes a
"Nonconsenting Lender" (as defined below in this Section 2.17) or (d) any Lender
becomes a Non-Funding Lender, then the Borrowers may, on ten Business Days'
prior written notice to the Administrative Agent and such Lender, replace such
Lender by causing such Lender to (and such Lender shall) assign pursuant to
Section 9.4(b) all of its rights and obligations under this Agreement to a
Lender or other entity selected by the Borrowers and reasonably acceptable to
the Administrative Agent for a purchase price equal to the outstanding principal
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amount of such Lender's Loans and all accrued interest and fees and other
amounts payable hereunder; provided that (i) the Borrowers shall have no right
to replace the Administrative Agent, (ii) neither the Administrative Agent nor
any Lender shall have any obligation to the Borrower to find a replacement
Lender or other such entity, (iii) in the event of replacement of a
Nonconsenting Lender or a Lender to which the Borrowers become obligated to pay
additional amounts pursuant to clause (a) of this Section, in order for the
Borrowers to be entitled to replace such a Lender, such replacement must take
place no later than 180 days after (A) the date the Nonconsenting Lender shall
have notified the Borrowers and the Administrative Agent of its failure to agree
to any requested consent, waiver or amendment or (B) the Lender shall have
demanded payment of additional amounts under one of the Sections described in
clause (a) of this Section, as the case may be and (iv) in no event shall the
Lender hereby replaced be required to pay or surrender to such replacement
Lender or other entity any of the fees received by such Lender hereby replaced
pursuant to this Agreement. In the case of a replacement of a Lender to which
the Borrower becomes obligated to pay additional amounts pursuant to clause (a)
of this Section, the Borrower shall pay such additional amounts to such Lender
prior to such Lender being replaced and the payment of such additional amounts
shall be a condition to the replacement of such Lender. In the event that (x)
the Borrower or the Administrative Agent has requested the Lenders to consent to
a departure or waiver of any provisions of the Loan Documents or to agree to any
amendment thereto, (y) the consent, waiver or amendment in question requires the
consent of all Lenders and (z) the Required Lenders have agreed to such consent,
waiver or amendment, then any such Lender who does not agree to such consent,
waiver or amendment shall be deemed a "Nonconsenting Lender". The Borrower's
right to replace a Non-Funding Lender pursuant to this Section 2.17 is, and
shall be, in addition to, and not in lieu of, all other rights and remedies
available to the Borrower against such Non-Funding Lender under this Agreement,
at law, in equity, or by statute.
SECTION 2.18 Nature of Obligations. (a) The Borrowers shall be jointly
and severally liable for the payment and performance of all obligations and
covenants required by this Agreement to be performed by any of them, and each
Borrower shall be bound by any notices (including, without limitation, notices
of borrowings and notices of conversion or continuation), consents or other
actions furnished or taken by any other Borrower hereunder. At the request of
the Administrative Agent or the Required Lenders, each Borrower shall confirm in
writing any action taken or proposed to be taken by such Borrower hereunder,
provided that the failure of any Borrower to furnish such confirmation shall not
affect such Borrower's obligations under the preceding sentence or any other
provision of this Agreement. Each Borrower hereby agrees that it shall be
jointly and severally liable for all Obligations and that such liability shall
be absolute and unconditional irrespective of:
(i) any lack of validity or enforceability of any provision of
this Agreement, any other Loan Document or any other agreement or instrument
relating to this Agreement or any other Loan Document, or avoidance or
subordination of any of the Obligations;
(ii) any change in the time, manner or place of payment of, or in
any other term of, or any increase in the amount of, all or any of the
Obligations, or any other amendment or waiver of any term of, or any consent to
departure from any requirement of, the Agreement or any of the other Loan
Documents;
(iii) any exchange, release or non-perfection of any Lien on any
collateral for, or any release or amendment or waiver of any term of any consent
to departure from any requirement of any other guaranty of, all or any of the
Obligations;
(iv) the absence of any attempt to collect any of the Obligations,
from any Borrower or from any Loan Party or any other guarantor or any other
action to enforce the same or the election of any remedy by the Lender;
(v) any waiver, consent, extensions, forbearance or granting
of any indulgence by the Lenders with respect to any provision of this Agreement
or any Loan Document; or
(vi) any other circumstance which might otherwise constitute
a legal or equitable discharge or defense of a borrower or a guarantor.
(b) Notwithstanding anything to the contrary contained herein, in the
event of a sale of all or substantially all of the Capital Stock or assets of or
by any Borrower (directly or indirectly) to a New Fund and the application of
the proceeds thereof in accordance with this Agreement and the other Loan
Documents, such Borrower shall be released of its obligations under this
Agreement and the other Loan Documents.
SECTION 2.19 Increase of Commitments. (a) The Borrower shall have the
right with the consent of the Administrative Agent and the Syndication Agent, to
request in writing, from time to time (but not more than twice), that the
aggregate amount of the Commitments then in effect be increased effective upon a
specific date (the "Increase Effective Date") set forth in such request (the
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"Increase Request") upon the same terms and conditions as set forth herein,
provided that no such increase shall be permitted if, after giving effect
thereto the total aggregate Commitments would exceed $2,500,000,000. Any such
increase shall be in incremental aggregate amounts of not less than the lesser
of (i) $10,000,000 or (ii) $2,500,000,000 minus the amount of the total
aggregate Commitments then in effect (the "Requested Amount") and shall increase
permanently the amount of the total aggregate Commitments then in effect
(subject to the Borrower's right to terminate or reduce the amount of the
Commitments pursuant to Section 2.5).
(b) If on the date (the "Increase Response Date") specified in any
Increase Request any Lenders or any new lenders selected by the Borrower with
the consent of the Administrative Agent and the Syndication Agent (such consent
not to be unreasonably withheld) elect in their sole discretion, to increase
their Commitments (each an "Increasing Lender") by an aggregate amount equal to
the Requested Amount, then, subject to the provisions of this Section 2.19, on
the Increase Effective Date therefor, the Commitments of such Increasing
Lenders, and correspondingly, the total aggregate Commitments, shall be
increased accordingly.
(c) Each increase in the Commitment of an Increasing Lender (including
any new lender) shall be evidenced by a written instrument executed by such
Increasing Lender, the Borrower and the Administrative Agent, and shall take
effect on the related Increase Effective Date.
(d) Upon the request to the Administrative Agent by any Increasing
Lender, the Borrower shall deliver to each such Increasing Lender, in exchange
for the Note held by such Increasing Lender, a new Note, in the principal amount
of such Increasing Lender's Commitment after giving effect to the adjustments
made pursuant to this Section 2.19.
(e) If any Lender or group of Lenders shall have elected to increase
their Commitments as provided in this Section 2.19, then as of the related
Increase Effective Date (i) the Commitments of each Increasing Lender shall take
effect and (ii) the Commitments of the Lenders which are not Increasing Lenders
shall remain constant.
ARTICLE 3
Representations and Warranties
Each Borrower represents and warrants to the Lenders, on the Closing Date and on
the date of each borrowing by such Borrower hereunder, that:
SECTION 3.1 Organization; Powers. Such Borrower is duly formed,
validly existing and in good standing under the laws of the jurisdiction of its
organization or formation, has all requisite power and authority to carry on its
business as now conducted and, except where the failure to do so, individually
or in the aggregate, could not reasonably be expected to result in a Material
Adverse Effect, is qualified to do business in, and is in good standing in,
every jurisdiction where such qualification is required.
SECTION 3.2 Authorization; Enforceability. The Transactions are
within the Borrower's powers and have been duly authorized by all necessary
corporate, partnership, limited liability company or other actions. The Loan
Documents have been duly executed and delivered on behalf of each Loan Party
thereto and constitute a legal, valid and binding obligation of each such Loan
Party, enforceable in accordance with their terms, subject to applicable
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally and subject to general principles of equity,
regardless of whether considered in a proceeding in equity or at law.
SECTION 3.3 Governmental Approvals; No Conflicts. The
Transactions (a) do not require any material consent or approval of,
registration or filing with, or any other action by, any Governmental Authority,
except such as have been obtained or made and are in full force and effect, (b)
will not violate any applicable law or regulation or the organizational or
formation documents of any Loan Party or any order of any Governmental
Authority, (c) will not violate or result in a default under any indenture,
material agreement or other material instrument binding upon any Loan Party or
its assets, or give rise to a right thereunder to require any payment to be made
by any Loan Party, and (d) will not result in the creation or imposition of any
Lien on any asset of any Loan Party, other than pursuant to the Loan Documents.
SECTION 3.4 Compliance with Laws and Agreements. Each Loan Party
is in compliance with all laws, regulations and orders of any Governmental
Authority applicable to it or its property and all agreements and other
instruments binding upon it or its property, except where the failure to do so,
individually or in the aggregate, could not reasonably be expected to result in
a Material Adverse Effect. No Default or Event of Default has occurred and is
continuing.
SECTION 3.5 Investment and Holding Company Status. No Borrower is
(a) an "investment company" as defined in, or subject to regulation under, the
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Investment Company Act of 1940 or (b) a "holding company" as defined in, or
subject to regulation under, the Public Utility Holding Company Act of 1935.
SECTION 3.6 Material Adverse Effect. There has been no
development or event which has had or could reasonably be expected to have a
Material Adverse Effect.
SECTION 3.7 No Material Litigation. No litigation, investigation
or proceeding of or before any arbitrator or Governmental Authority is pending
or, to the knowledge of such Borrower, threatened by or against any Loan Party
or any Investment Party or against any of their respective properties or
revenues (a) with respect to any of the Loan Documents or any of the
transactions contemplated hereby, or (b) which, if adversely determined, could
reasonably be expected to have a Material Adverse Effect.
SECTION 3.8 Disclosure. No information, financial statement,
report, certificate or other document prepared or furnished by or on behalf of
any Loan Party to the Administrative Agent or any Lender in connection with this
Agreement or any other Loan Document (but excluding all projections and pro
forma financial statements which shall have been prepared in good faith and
based upon reasonable assumptions) contains any untrue statement of a material
fact or omits to state any material fact necessary to make the statements herein
or therein not misleading.
SECTION 3.9 Investments. On and after the date of the making of
each Investment, each applicable Investment Party and New Portfolio Company in
which such Investment is made will be duly organized or formed, validly existing
and in good standing under the laws of the jurisdiction of its organization or
formation, will have all requisite power and authority to carry out its business
as then conducted and proposed to be conducted and, except where the failure to
do so, individually or in the aggregate, could not reasonably be expected to
result in a Material Adverse Effect, will be qualified to do business in, and in
good standing in every jurisdiction where such qualification is required. The
making of each Investment (i) will be within the power of the applicable
Borrower, and each Investment Party and will be duly authorized by all necessary
appropriate action on the part of each such Borrower and Investment Party, (ii)
will not require any consent or approval of, registration or filing with, or any
other action by, any Governmental Authority, except such as will have been
obtained or made and be in full force and effect, (iii) will not violate any
applicable law or regulation, in any material respect, or any organizational
document of any applicable Borrower, Investment Party or New Portfolio Company
or any order of any Governmental Authority, (iv) will not violate or result in a
default under any material indenture, agreement or other instrument binding upon
the applicable Borrower, Investment Party or New Portfolio Company or its
assets, or give rise to a right thereunder to require any payment to be made by
the applicable Borrower, Investment Party or New Portfolio Company (other than
payments made simultaneously with such Investment), (v) will not result in the
creation or imposition of any Lien on any asset of the applicable Borrower,
Investment Party or New Portfolio Company except Liens under the Pledge
Agreement and Liens on the acquired assets to secure Indebtedness owed to third
party lenders incurred in connection with the making of an Investment in the
assets acquired thereby, and (vi) will be consistent with investments made by,
or permitted under, any Specified Fund (other than with respect to geographic
region).
ARTICLE 4
Conditions Precedent
SECTION 4.1 Conditions to Initial Funding. The obligations of the
Lenders to make the Term Loans and of the Issuing Bank to issue any Letter of
Credit hereunder shall not become effective until the date on which each of the
following conditions is satisfied (or waived in accordance with Section 9.2):
(a) Loan Documents. The Administrative Agent (or its counsel) shall
have received (i) this Agreement, duly executed and delivered by each Initial
Borrower, (ii) an Affiliate Guarantee, duly executed and delivered by each
Affiliate Guarantor in existence on the Closing Date, (iii) an Investment
Guarantee duly executed and delivered by each Investment Guarantor in existence
on the Closing Date; (iv) the Pledge Agreement, duly executed and delivered by
each Initial Borrower and EquityCo, together with all documents required to be
delivered thereunder, all certificates representing the Pledged Interests listed
on Schedule I thereto and stock powers endorsed in blank, (v) the Letter
Agreement, duly executed and delivered by each party thereto, and (vi) the
Principal Agreement, duly executed and delivered by each party thereto.
(b) Closing Certificate. The Administrative Agent shall have received,
with a counterpart for each Lender, a certificate of each Loan Party, dated the
Closing Date, substantially in the form of Exhibit E, with appropriate
insertions and attachments.
(c) Legal Opinion. The Administrative Agent shall have received the
executed legal opinion of (i) Weil, Gotshal & Manges LLP, counsel to the Loan
Parties, substantially in the form of Exhibit B, (ii) Nauta Dutilh, counsel to
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HM/Europe Coinvestors, C.V. and EquityCo, substantially in the form of Exhibit
C, and (iii) Walkers, counsel to TOH/Europe Cayman Ltd, substantially in the
form of Exhibit D.
(d) Approvals. All governmental and third party approvals necessary
or, in the discretion of the Administrative Agent, advisable in connection with
the Transactions shall have been obtained and be in full force and effect, and
all applicable waiting periods shall have expired without any action being taken
or threatened by any competent authority which would restrain, prevent or
otherwise impose adverse conditions on any Initial Borrower's ability to perform
its obligations under the Loan Documents.
(e) Fees. The Administrative Agent shall have received all fees and
other amounts due and payable on or prior to the date hereof.
(f) Filings. Any documents (including, without limitation, financing
statements) required to be filed, registered or recorded in order to create, for
the benefit of the Administrative Agent and the Lenders, a perfected, first
priority security interest shall have been properly prepared for filing,
registration or recording in each office in each jurisdiction in which such
filings, registrations and recordations are required to perfect such first
priority security interests created by the Pledge Agreement, and the
Administrative Agent shall be satisfied that such recordings and filings will be
completed promptly after the date hereof.
SECTION 4.2 Additional Conditions for Each Credit Event. The
obligation of each Lender to make Term Loans on the occasion of any borrowing
(other than a Loan made pursuant to Section 2.3(e) and Term Loans made for the
payment of interest and Fees), and of the Issuing Bank to issue any Letter of
Credit, is subject to the satisfaction of the following conditions:
(a) Joinder Agreement. In the event the Term Loans are to be drawn by
a Future Borrower not a party to this Agreement, the Administrative Agent shall
have received from such Future Borrower a Joinder Agreement signed by the
appropriate Future Borrower together with such other documentation required
thereunder.
(b) Guarantee. The Administrative Agent shall have received, if
applicable, an Investment Guarantee or an Affiliate Guarantee signed by the
appropriate Investment Guarantor or Affiliate Guarantor.
(c) Pledge Agreement. The Administrative Agent shall have received (i)
from the Borrower a Pledge Supplement (as defined in the Pledge Agreement) to
the Pledge Agreement signed by the Borrower and the Indirect Co-Investor, if
applicable, or (ii) in the case of any Future Borrower not a party to a Pledge
Agreement, a Pledge Agreement signed by such Future Borrower and the Indirect
Co-Investor, if applicable.
(d) Representations and Warranties. The representations and warranties
of the Loan Parties set forth in this Agreement and the Loan Documents shall be
true and correct in all material respects on and as of the date of such
borrowing or the date of issuance of such Letter of Credit, as applicable,
except to the extent they relate to an earlier date, in which case they shall be
true and correct in all material respects as of such earlier date.
(e) No Default. At the time of and immediately after giving effect to
such borrowing or the issuance of such Letter of Credit, as applicable, no
Default or Event of Default shall have occurred and be continuing.
(f) Certificate. With respect to each Term Loan the proceeds of which
will be used to fund an Investment, the Administrative Agent (which shall
forward the same to the Lenders and Issuing Bank) shall have received a
certificate of the applicable Borrower setting forth in reasonable detail, and
to such Borrower's knowledge, information with respect to the following items:
(i) a description of such Investment; (ii) the total cost of such Investment;
(iii) the amount, maturity, source and collateral security for all debt, equity
and other financing for such Investment and the acquisition by or of the
applicable New Portfolio Company of such Investment; and (iv) the name, form of
organization and jurisdiction of organization of such Borrower and, if
applicable, the appropriate Indirect Co-Investor, the applicable New Portfolio
Company and any Investment Party and the respective direct ownership interests
of such Borrower, the Indirect Co-Investor, each Investment Party and the New
Portfolio Company and their respective subsidiaries. In addition, the
Administrative Agent (which shall forward the same to the Lenders) shall receive
from the Borrower: (i) a copy of all purchase documents relating to the
acquisition of the applicable New Portfolio Company and (ii) such other
information reasonably requested by the Lenders regarding the applicable New
Portfolio Company, the Indirect Co-Investor, and the Investment Parties (in each
case, if any).
(g) Co-Investment. The amount of the borrowing shall not equal more
than 97.02% of the Investment in a Directly Owned Investment Party or New
Portfolio Company, as the case may be, and in each case the Co-Investors shall
have made the Co-Investment in an amount not less than 2.98% of such Investment.
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(h) Legal Opinion. The Administrative Agent shall have received an
executed legal opinion from the Loan Parties' outside counsel and local counsel,
as to all matters reasonably requested by Administrative Agent including,
without limitation, (a) Regulation U and (b) perfection of the Administrative
Agent's security interest in the Investment pledged by the Pledgors of Pledged
Interests.
(i) Investment. Each Investment shall be reasonably expected by the
Loan Parties to be suitable for purchase by New Fund (the determination of which
will include a determination that the Investment is consistent with past
investments by any Specified Fund). Each borrowing and the issuance of any
Letter of Credit shall be deemed to constitute a representation and warranty by
each Borrower on the date thereof as to the matters specified in paragraphs (c)
and (d) of this Section.
ARTICLE 5
Covenants
Until the principal of and interest on each Term Loan and all other amounts
payable hereunder shall have been paid in full and the Commitments are
terminated and any Letter of Credit shall have expired or terminated and all LC
Disbursements shall have been reimbursed, each Borrower hereby covenants and
agrees with the Lenders that (with references to "the Borrower" being deemed to
be references to "such Borrower"):
SECTION 5.1 Notices of Material Events. The Borrower will furnish
to the Administrative Agent and each Lender prompt written notice of the
following:
(a) the occurrence of any Default or Event of Default;
(b) the filing or commencement of any action, suit or proceeding by or
before any arbitrator or Governmental Authority against or affecting any Loan
Party or any Affiliate thereof that, if adversely determined, could reasonably
be expected to result in a Material Adverse Effect; and
(c) any other development that results in, or could reasonably be
expected to result in, a Material Adverse Effect.
Each notice delivered under this Section shall be accompanied by a statement of
the Borrower setting forth the details of the event or development requiring
such notice and any action taken or proposed to be taken with respect thereto.
SECTION 5.2 Existence; Conduct of Business. The Borrower will do
or cause to be done all things necessary to preserve, renew and keep in full
force and effect (a) its legal existence and (b) the rights, licenses, permits,
privileges and franchises material to the conduct of its business other than
those in the case of clause (b) above, the failure of which to maintain, could
reasonably be expected to have a Material Adverse Effect.
SECTION 5.3 Payment of Obligations. The Borrower will pay its
material obligations, including material tax liabilities, before the same shall
become delinquent or in default, except where (a) the validity or amount thereof
is being contested in good faith by appropriate proceedings, (b) the Borrower
has set aside on its books adequate reserves with respect thereto in accordance
with GAAP and (c) the failure to make payment pending such contest could not
reasonably be expected to result in a Material Adverse Effect.
SECTION 5.4 Compliance with Laws. The Borrower will comply with
all laws, rules, regulations and orders of any Governmental Authority applicable
to it or its property, except where the failure to do so, individually or in the
aggregate, could not reasonably be expected to result in a Material Adverse
Effect.
SECTION 5.5 Use of Proceeds. The proceeds of the Term Loans will
be used only to finance the Investments in New Portfolio Companies and the
payment of interest, fees and expenses due hereunder and Letters of Credit shall
be used only in connection with the consummation of the proposed Investments;
provided that (i) Term Loans may not be borrowed and Letters of Credit may not
be issued for the purpose of making any Investment if the aggregate Investment
Commitment Amount (after giving effect to such Term Loan or Letter of Credit, as
the case may be), would exceed the aggregate Commitments, (ii) no part of the
proceeds of any Term Loan and no Letter of Credit will be used, whether directly
or indirectly, for any purpose that entails a violation of any of the
Regulations of the Board, including Regulations U and X and (iii) the amount of
Term Loans borrowed and the aggregate face amount of Letters of Credit issued
shall not exceed (x) $500,000,000 in the aggregate, in the case of any
Investment in real estate, and (y) $175,000,000 individually or $375,000,000 in
the aggregate, in the case of Investments in New Portfolio Companies domiciled
in Mexico, Central America or South America.
SECTION 5.6 Additional Collateral. (a) With respect to any
investment by a Borrower and an Indirect Co-Investor, if any, in a Directly
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Owned Investment Party or a New Portfolio Company, as the case may be, the
applicable Borrower and Indirect Co-Investor, if any, shall execute and deliver
to the Administrative Agent, for the benefit of the Lenders, such Pledge
Agreements or Pledge Supplements to the Pledge Agreement or such other documents
as the Administrative Agent shall deem necessary or advisable to grant to the
Administrative Agent, for the benefit of the Lenders, a Lien on the Capital
Stock issued by the Directly Owned Investment Party or, to the extent there is
no Directly Owned Investment Party, the Capital Stock of the New Portfolio
Company, or in the case of an Investment in Indebtedness, a Lien on such
Indebtedness.
(b) In all cases, the appropriate Pledgor shall, as soon as practicable
but in any event not more than five Business Days after any borrowing, (i)
deliver to the Administrative Agent the stock certificates, notes or other
evidence of ownership representing the Investment in such New Portfolio Company
or such Directly Owned Investment Party, as applicable, together with undated
stock or transfer powers, executed, endorsed and delivered in blank, for any
stock certificates or notes representing such Investment, by a Responsible
Officer of such Pledgor, and (ii) take all actions necessary or advisable to
cause such Lien to be duly perfected in accordance with all applicable
Requirements of Law, including, without limitation, the filing of financing
statements in such jurisdictions as may be required by the Pledge Agreement or
by law or as may be requested by the Administrative Agent and (iii) if
reasonably requested by the Administrative Agent, deliver to the Administrative
Agent legal opinions, including legal opinions of local counsel, relating to the
matters described in this Section 5.6, which opinions shall be in form and
substance, and from counsel, reasonably satisfactory to the Administrative
Agent.
SECTION 5.7 Financial Reporting. Each Borrower will provide to
the Administrative Agent, for distribution to the Lenders, (a) each of the
financial statements and related certificates and other business and financial
information regularly distributed to the lenders pursuant to any credit
agreement for a New Portfolio Company as well as such additional information as
the Lenders may reasonably request hereunder, and (b) within 45 days after the
expiration of the applicable quarter, quarterly unconsolidated financial
statements for each Borrower for the periods ending as of such quarter,
commencing with the quarter ended December 31, 1999.
SECTION 5.8 Additional Guarantors. Within ten Business Days after
the formation of any Affiliate Guarantor or Investment Guarantor on the date any
entity becomes an Affiliate Guarantor or Investment Guarantor within the
definition of Affiliate Guarantor set forth in Section 1.1 hereof, the Borrower
shall cause each such Affiliate Guarantor or Investment Guarantor, as
applicable, to execute and deliver to the Administrative Agent, as appropriate,
an Affiliate Guarantee substantially in the form of Exhibit F attached hereto or
an Investment Guarantee substantially in the form of Exhibit G attached hereto.
SECTION 5.9 Management and Advisory Agreements. Upon the request
of the Administrative Agent, the Borrower shall provide to the Administrative
Agent a copy of each management and advisory agreement in respect of the New
Fund or an Investment in a New Portfolio Company, if any.
SECTION 5.10 Covenant to Pay. Each Borrower covenants in favor of the
Administrative Agent, with the agreement of the Lenders and the Issuing Bank, to
pay the Obligations to the Administrative Agent as joint and several creditor
thereof when and to the extent due from such Borrower under the terms of and
subject always to any express limits set out in this Agreement, to such bank
account as the Administrative Agent may direct, except that each Borrower may
also, subject to the terms of this Agreement until otherwise notified in writing
by the Administrative Agent, pay the Obligations directly to the Administrative
Agent for itself or to the relevant Lender or Issuing Bank, as the case may be,
and each such payment will constitute a pro rata discharge of the covenant to
pay in favor of the Administrative Agent set forth herein.
SECTION 5.11 Margin Securities. All Investments in "margin stock", as
such term is defined in Regulation U of the Board, shall be made through one or
more Investment Parties.
ARTICLE 6
Negative Covenants
Until the principal of and interest on each Term Loan and all other amounts
payable hereunder shall have been paid in full and the Commitments are
terminated and any Letter of Credit shall have expired or terminated and all LC
disbursements shall have been reimbursed, each Borrower hereby covenants and
agrees with the Lenders that (with references to "the Borrower" being deemed to
be references to "such Borrower"):
SECTION 6.1 Indebtedness. The Borrower will not, and will not
permit any Indirect Co-Investor (if applicable) or Investment Party to, create,
incur, assume or permit to exist any Indebtedness, except (a) Indebtedness
created hereunder and under the other Loan Documents, (b) nonconsensual
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obligations imposed by operation of law, (c) indemnification obligations arising
under the Borrower's constituent documents, (d) administrative expenses and
taxes, and (e) Indebtedness arising out of any Guarantee or similar agreement
entered into by any Borrower, Indirect Co-Investor or Investment Party in
support of the obligation of a New Portfolio Company or its Subsidiaries;
provided, however, (i) the remaining Commitment after giving effect to such
Guarantee, shall be sufficient to make payments of interest and fees previously
accrued or which will be payable hereunder through the Maturity Date (using for
future periods not covered by existing Interest Periods, the Eurodollar Rate
available on the date of any determination for a three (3) month Interest Period
and using the then current Applicable Margin, (ii) the Commitments shall be
deemed to be utilized in an amount equal to the full amount of such Indebtedness
during the time such Indebtedness remains outstanding, (iii) such Guarantees
shall not exceed $250 million in the aggregate at any one time outstanding, and
(iv) promptly after entering into a permitted Guarantee, give the Administrative
Agent written notice thereof.
SECTION 6.2 Liens. The Borrower will not, and will not permit any
Indirect Co-Investor (if applicable) or any Investment Party to, create, incur,
assume or permit to exist any Lien (other than Liens created pursuant to the
Pledge Agreement) on any property or asset now owned or hereafter acquired by
it, or assign or sell any income or revenues (including accounts receivable) or
rights in respect of any thereof other than (a) Liens for taxes not yet due or
which are being contested in good faith by appropriate proceedings, provided
that adequate reserves with respect thereto are maintained on the books of the
Borrower in accordance with GAAP, (b) Liens in favor of banking institutions
arising as a matter of law and encumbering the deposits (including the right of
setoff) held by such banking institutions in the ordinary course of business and
which are within the general parameters customary in the banking industry, and
(c) attachment and judgment Liens not constituting an Event of Default;
provided, however, that this Section 6.2 shall not apply to any "margin stock"
as such term is defined in Regulation U of the Board, if such margin stock
represents more than 25% of the value of the assets of the Borrower as such
value is required to be computed by Regulation U of the Board.
SECTION 6.3 Fundamental Changes. (a) The Borrower will not, and
will not permit any Indirect Co-Investor (if applicable) or any Investment Party
to, merge into or consolidate with any other Person, or permit any other Person
to merge into or consolidate with it, or liquidate or dissolve; provided that
any Borrower, Indirect Co-Investor or Investment Party may (i) merge into or
consolidate with any other Borrower, Indirect Co-Investor or Investment Party,
or (ii) liquidate or dissolve if, in connection thereunder, all of its assets
are transferred to another Borrower, Indirect Co-Investor or Investment Party,
or if such transfer is done in accordance with Section 6.5.
(b) The Borrower will not engage in any business other than a business
consistent with its current operations and activities on the date of execution
of this Agreement.
SECTION 6.4 Restricted Payments. The Borrower will not, and will
not permit any Investment Party to, make any Restricted Payments (except that
the Investment Parties may make Restricted Payments to the Borrower (and the
Indirect Co-Investor, if any) to repay Term Loans and other amounts due
hereunder and the Borrower may make Restricted Payments to a Co-Investor in
respect of any Co-Investment amount in connection with a sale of assets
permitted under Sections 2.6(b) or 6.5 or with the proceeds funded by a
Co-Investor in connection with transfer among the Co-Investors).
SECTION 6.5 Sale of Assets. The Borrower shall not and will not
permit any Indirect Co-Investor or Investment Party to sell, transfer or
otherwise dispose of any of its respective property other than for cash
(yielding net proceeds) representing at least such Person's cost of such
property (including, without limitation, any interest and fees relating
thereto), the net proceeds (less the ratable interest of any Co-Investors and
any necessary escrows) of which (to the extent attributable to the Investment)
are distributed to the Borrowers to repay the Term Loans; provided, however, the
Borrower or any Investment Party may sell, transfer or otherwise dispose of
"margin stock" as such term is defined in Regulation U of the Board so long as
the net proceeds from such sale shall be held by the Borrower or such Investment
Party, as the case may be, in cash or marketable direct obligations issued by,
or unconditionally guaranteed by, the United States Government maturing on or
within one year from the date of such sale until the Maturity Date; provided
further, that in the event that any such property which shall not constitute
"margin stock" is sold for more than the cost thereof (including, without
limitation, any interest and fees relating thereto), the amount of net cash
proceed in excess of such cost shall be held in a cash collateral account in the
name and under the sole dominion and control of the Administrative Agent as
security for the Obligations.
ARTICLE 7
Events of Default
If any of the following events ("Events of Default") shall occur:
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(a) any Borrower shall fail to pay any principal of any Term Loan or LC
Disbursement when and as the same shall become due and payable, whether at the
due date thereof or at a date fixed for prepayment thereof or otherwise;
(b) any Borrower shall fail to pay any interest on any Term Loan or LC
Disbursement or to pay any Fee or any other amount (other than an amount
referred to in clause (a) of this Article) payable under or in connection with
this Agreement, when and as the same shall become due and payable, and such
failure shall continue unremedied for a period of five days;
(c) any representation or warranty made or deemed made by or on behalf
of any Loan Party in or in connection with any Loan Document or any amendment or
modification thereof, or in any report, certificate, financial statement or
other document furnished pursuant to or in connection with any Loan Document or
any amendment or modification thereof, shall prove to have been incorrect in any
material respect when made or deemed made;
(d) any Borrower shall fail to observe or perform any covenant,
condition or agreement contained in Section 5.2(a) or Article 6 or any Guarantor
shall fail to observe or perform any covenant, condition or agreement contained
in Section 10(a)(i) or (d) of its Affiliate Guarantee or Investment Guarantee,
as applicable;
(e) any Loan Party shall fail to observe or perform any covenant,
condition or agreement contained in any Loan Document (other than those
specified in clause (a), (b), (c), (d) or (g) of this Article), and such failure
shall continue unremedied for a period of 30 days;
(f) any Loan Party, Investment Party, or any New Portfolio Company
shall (i) default in making any payment of any principal of or interest on any
Indebtedness (including any Guarantee, but excluding the Term Loans, LC
Disbursements and Guarantees pursuant to the Affiliate Guarantees and Investment
Guarantees) beyond the period of grace, if any, provided in the instrument or
agreement under which such Indebtedness was created; or (ii) default in the
observance or performance of any other agreement or condition relating to any
such Indebtedness or contained in any instrument or agreement evidencing,
securing or relating thereto, or any other event shall occur or condition exist,
the effect of which default or other event or condition is to cause, or to
permit the holder or beneficiary of such Indebtedness (or a trustee or agent on
behalf of such holder or beneficiary) to cause, with the giving of notice if
required, such Indebtedness to become due prior to its stated maturity or (in
the case of any such Indebtedness constituting a Guarantee) to become payable;
provided that a default, event or condition described in clause (i) or (ii) of
this paragraph (f) shall not at any time constitute an Event of Default under
this Agreement unless, at such time, one or more defaults, events or conditions
(without duplication as to the same item of Indebtedness) of the type described
in clauses (i) and (ii) of this paragraph (f) shall have occurred and be
continuing with respect to Indebtedness the outstanding principal amount of
which exceeds in the aggregate $500,000 in the case of any Borrower or
$10,000,000 in the case of any New Portfolio Company, Investment Party or any
other Loan Party; or
(g) (i) any Loan Party, Investment Party, or any New Portfolio Company
shall commence any case, proceeding or other action (A) under any existing or
future law of any jurisdiction, domestic or foreign, relating to bankruptcy,
insolvency, reorganization or relief of debtors, seeking to have an order for
relief entered with respect to it, or seeking to adjudicate it a bankrupt or
insolvent, or seeking reorganization, winding-up, liquidation, dissolution,
composition or other relief with respect to it or its debts, or (B) seeking
appointment of a receiver, trustee, custodian, conservator or other similar
official for it or for all or any substantial part of its assets, or any Loan
Party, Investment Party or any New Portfolio Company shall make a general
assignment for the benefit of its creditors; or (ii) there shall be commenced
against any Loan Party, Investment Party or any New Portfolio Company, any case,
proceeding or other action of a nature referred to in clause (i) above which (A)
results in the entry of an order for relief or any such adjudication or
appointment or (B) remains undismissed, undischarged or unbonded for a period of
60 days; or (iii) there shall be commenced against any Loan Party, Investment
Party or any New Portfolio Company any case, proceeding or other action seeking
issuance of a warrant of attachment, execution, distraint or similar process
against all or any substantial part of its assets which results in the entry of
an order for any such relief which shall not have been vacated, discharged, or
stayed or bonded pending appeal within 60 days from the entry thereof; or (iv)
any Loan Party shall take any action in furtherance of, or indicating its
consent to, approval of, or acquiescence in, any of the acts set forth in clause
(i), (ii), or (iii) above; or (v) any Loan Party, Investment Party or any New
Portfolio Company shall generally not, or shall be unable to, or shall admit in
writing its inability to, pay its debts as they become due; or
(h) one or more judgments or decrees shall be entered against any Loan
Party, Investment Party or New Portfolio Company involving in the aggregate a
liability (not paid or fully covered by insurance as to which the relevant
insurance company has not denied coverage) of $500,000 or more in the case of
any Borrower and $10,000,000 or more in the case of any New Portfolio Company,
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Investment Party or any other Loan Party, and all such judgments or decrees
shall not have been vacated, discharged, stayed or bonded pending appeal within
60 days from the entry thereof; or
(i) any Loan Document shall, at any time, cease to be in full force and
effect (unless released by the Administrative Agent at the direction of the
Required Lenders or as otherwise permitted under this Agreement or the other
Loan Documents) or shall be declared null and void, or the validity or
enforceability thereof shall be contested by any Loan Party; or
(j) any Person constituting a "Guarantor" shall not be a party to an
Affiliate Guarantee or an Investment Guarantee, as applicable, within ten
Business Days after such Person has been organized or formed;
(k) a Change in Control shall occur; or
(l) any Investment Party shall fail to distribute any payment made to
it on account of any Investment (net of reasonable expenses and reasonably
required escrows).
then, and in every such event (other than an event with respect to any Borrower
described in clause (g) of this Article), and at any time thereafter during the
continuance of such event, the Administrative Agent may, and at the request of
the Required Lenders shall, by notice to the Borrowers, declare the Term Loans
and LC Disbursements then outstanding to be due and payable in whole (or in
part, in which case any principal not so declared to be due and payable may
thereafter be declared to be due and payable) and the Commitments to be
terminated, and thereupon the principal of the Term Loans and LC Disbursements
so declared to be due and payable, together with accrued interest thereon and
all other obligations of the Borrowers accrued hereunder, shall become due and
payable immediately, without presentment, demand, protest or other notice of any
kind, all of which are hereby waived by each Borrower; and in case of any event
with respect to any Borrower described in clause (g) of this Article, the
principal of the Term Loans and LC Disbursements then outstanding, together with
accrued interest thereon and all other obligations of the Borrowers accrued
hereunder, shall automatically become due and payable and the Commitments shall
be automatically terminated, without presentment, demand, protest or other
notice of any kind, all of which are hereby waived by each Borrower; and at any
time thereafter during the continuance of such event, the Administrative Agent
may exercise all of its rights and remedies under the Pledge Agreement in
accordance with all applicable laws.
With respect to all Letters of Credit with respect to which presentment for
honor shall not have occurred at the time of an acceleration pursuant to the
preceding paragraph, the Borrowers shall at such time deposit in a cash
collateral account opened by the Administrative Agent an amount equal to the
aggregate then undrawn and unexpired amount of such Letters of Credit. Each
Borrower hereby grants to the Administrative Agent, for the benefit of the
Issuing Bank, a security interest in such cash collateral to secure all
obligations of such Borrower in respect of such Letters of Credit under this
Agreement and the other Loan Documents. The Borrowers shall execute and deliver
to the Administrative Agent, for the account of the Issuing Bank, such further
documents and instruments as the Administrative Agent may request to evidence
the creation and perfection of such security interest in such cash collateral
account. Amounts held in such cash collateral account shall be applied by the
Administrative Agent to the payment of drafts drawn under such Letters of
Credit, and the unused portion thereof after all such Letters of Credit shall
have expired or been fully drawn upon, if any, shall be applied to repay other
obligations of the Borrowers hereunder and under any Notes. After all such
Letters of Credit shall have expired or been fully drawn upon, all obligations
under the Letters of Credit shall have been satisfied and all other obligations
of the Borrowers hereunder and under any Notes shall have been paid in full, the
balance, if any, in such cash collateral account shall be returned to Borrowers.
ARTICLE 8
The Administrative Agent
SECTION 8.1 Generally.
Each of the Lenders hereby irrevocably appoints the Administrative Agent as
its agent and authorizes the Administrative Agent to take such actions on its
behalf and to exercise such powers as are delegated to the Administrative Agent
by the terms hereof, together with such actions and powers as are reasonably
incidental thereto.
The bank serving as the Administrative Agent hereunder shall have the same
rights and powers in its capacity as a Lender as any other Lender and may
exercise the same as though it were not the Administrative Agent, and such bank
and its Affiliates may accept deposits from, lend money to and generally engage
in any kind of business with any Loan Party or any Affiliate thereof as if it
were not the Administrative Agent hereunder.
The Administrative Agent shall not have any duties or obligations except
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those expressly set forth herein. Without limiting the generality of the
foregoing, (a) the Administrative Agent shall not be subject to any fiduciary or
other implied duties, regardless of whether a Default has occurred and is
continuing, (b) the Administrative Agent shall not have any duty to take any
discretionary action or exercise any discretionary powers, except discretionary
rights and powers expressly contemplated hereby that the Administrative Agent is
required to exercise in writing by the Required Lenders, and (c) except as
expressly set forth herein, the Administrative Agent shall not have any duty to
disclose, and shall not be liable for the failure to disclose, any information
relating to any Loan Party or any of its Affiliates that is communicated to or
obtained by the bank serving as Administrative Agent or any of its Affiliates in
any capacity. The Administrative Agent shall not be liable for any action taken
or not taken by it with the consent or at the request of the Required Lenders or
in the absence of its own gross negligence or willful misconduct. The
Administrative Agent shall be deemed not to have knowledge of any Default unless
and until written notice thereof is given to the Administrative Agent by the
Borrower or a Lender, and the Administrative Agent shall not be responsible for
or have any duty to ascertain or inquire into (i) any statement, warranty or
representation made in or in connection with this Agreement, (ii) the contents
of any certificate, report or other document delivered hereunder or in
connection herewith, (iii) the performance or observance of any of the
covenants, agreements or other terms or conditions set forth herein, (iv) the
validity, enforceability, effectiveness or genuineness of this Agreement or any
other agreement, instrument or document, or (v) the satisfaction of any
condition set forth in Article 4 or elsewhere herein, other than to confirm
receipt of items expressly required to be delivered to the Administrative Agent.
The Administrative Agent shall be entitled to rely upon, and shall not
incur any liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing believed by it to be genuine
and to have been signed or sent by the proper Person. The Administrative Agent
also may rely upon any statement made to it orally or by telephone and believed
by it to be made by the proper Person, and shall not incur any liability for
relying thereon. The Administrative Agent may consult with legal counsel (who
may be counsel for any Borrower), independent accountants and other experts
selected by it, and shall not be liable for any action taken or not taken by it
in accordance with the advice of any such counsel, accountants or experts.
The Administrative Agent may perform any and all its duties and exercise
its rights and powers by or through any one or more sub-agents appointed by the
Administrative Agent. The Administrative Agent and any such sub-agent may
perform any and all its duties and exercise its rights and powers through their
respective Related Parties. The exculpatory provisions of the preceding
paragraphs shall apply to any such sub-agent and to the Related Parties of the
Administrative Agent and any such sub-agent, and shall apply to their respective
activities in connection with the syndication of the credit facilities provided
for herein as well as activities as Administrative Agent.
Subject to the appointment and acceptance of a successor Administrative
Agent as provided in this paragraph, the Administrative Agent may resign at any
time by notifying the Lenders and the Borrowers. Upon any such resignation, the
Required Lenders shall have the right, in consultation with the Borrowers, to
appoint a successor, which successor shall be approved by the Borrowers (which
approval shall not be unreasonably withheld or delayed). If no successor shall
have been so appointed by the Required Lenders and shall have accepted such
appointment within 30 days after the retiring Administrative Agent gives notice
of its resignation, then the retiring Administrative Agent may, on behalf of the
Lenders, appoint a successor Administrative Agent which shall be a bank
reasonably acceptable to the Borrowers. Upon the acceptance of its appointment
as Administrative Agent hereunder by a successor, such successor shall succeed
to and become vested with all the rights, powers, privileges and duties of the
retiring Administrative Agent, and the retiring Administrative Agent shall be
discharged from its duties and obligations hereunder. Any fees payable by the
Borrowers to a successor Administrative Agent shall be the same as those payable
to its predecessor unless otherwise agreed between the Borrowers and such
successor. After the Administrative Agent's resignation hereunder, the
provisions of this Article and Section 9.3 shall continue in effect for its
benefit in respect of any actions taken or omitted to be taken by it while it
was acting as Administrative Agent.
Each Lender acknowledges that it has, independently and without reliance
upon the Administrative Agent or any other Lender and based on such documents
and information as it has deemed appropriate, made its own credit analysis and
decision to enter into this Agreement. Each Lender also acknowledges that it
will, independently and without reliance upon the Administrative Agent or any
other Lender and based on such documents and information as it shall from time
to time deem appropriate, continue to make its own decisions in taking or not
taking action under or based upon this Agreement, any related agreement or any
document furnished hereunder or thereunder.
SECTION 8.2 Joint and Several Creditorship. The Administrative
Agent shall be the joint and several creditor together with each Lender and the
Issuing Bank of each and every Obligation of any Borrower towards such Bank
under this Agreement or any Loan Document so that accordingly the Administrative
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Agent in its individual capacity will have its own independent right to demand
performance by the relevant Borrower of those Obligations, and such Obligations
will be discharged by and to the extent of any discharge thereof either to the
Administrative Agent in its capacity referred to above or to the Administrative
Agent for itself or to the relevant Bank, as the case may be. In case of a
resignation of the Administrative Agent pursuant to Section 8.1, the rights of
the Administrative Agent hereunder shall be assigned by the retiring
Administrative Agent to the successor Administrative Agent by an assignment not
constituting a novation of debt.
ARTICLE 9
Miscellaneous
SECTION 9.1 Notices. Except in the case of notices and other
communications expressly permitted to be given by telephone, all notices and
other communications provided for herein shall be in writing (including by
facsimile transmission) and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made (a) in the case of delivery by hand,
when delivered, (b) in the case of delivery by mail, three days after being
deposited in the mails, postage prepaid, or (c) in the case of delivery by
facsimile transmission, when sent and receipt has been confirmed, addressed as
follows:
(a) if to any Borrower, to it c/o Hicks, Muse Tate & Furst
Incorporated, 200 Crescent Court, Suite 1600, Dallas, Texas 75201, Attention:
Lawrence D. Stuart, Jr., (Telecopy No. 214-740-7313), with a copy to each other
Borrower);
(b) if to the Administrative Agent, to The Chase Manhattan Bank, Loan
and Agency Services, One Chase Manhattan Plaza, New York, New York 10081,
Attention: Janet Belden (Telecopy No. 212-552-5658), with a copy to The Chase
Manhattan Bank, 270 Park Avenue, New York, New York 10017, Attention: Neil
Boylan (Telecopy No. 212-972-0009); and
(c) if to any Lender, to it at its address (or telecopy number) set
forth in an administrative questionnaire delivered to the Administrative Agent
and as otherwise notified in writing to the Borrowers.
Any party hereto may change its address or telecopy number for notices and other
communications hereunder by notice to the other parties hereto. All notices and
other communications given to any party hereto in accordance with the provisions
of this Agreement shall be deemed to have been given on the date of receipt.
SECTION 9.2 Waivers; Amendments. (a) No failure or delay by the
Administrative Agent or any Lender in exercising any right or power hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right or power, or any abandonment or discontinuance of steps to
enforce such a right or power, preclude any other or further exercise thereof or
the exercise of any other right or power. The rights and remedies of the
Administrative Agent and the Lenders hereunder are cumulative and are not
exclusive of any rights or remedies that they would otherwise have. No waiver
of any provision of this Agreement or consent to any departure by any Borrower
therefrom shall in any event be effective unless the same shall be permitted by
paragraph (b) of this Section, and then such waiver or consent shall be
effective only in the specific instance and for the purpose for which given.
Without limiting the generality of the foregoing, the making of a Term Loan
shall not be construed as a waiver of any Default, regardless of whether the
Administrative Agent or any Lender may have had notice or knowledge of such
Default at the time.
(b) Neither any Loan Document nor any provision thereof may be waived,
amended or modified except pursuant to an agreement or agreements in writing
entered into by the Required Lenders and each affected Loan Party; provided that
no such agreement shall (i) increase the Commitment of any Lender without the
written consent of such Lender, (ii) reduce the amount of, or extend any
scheduled date for payment of, any principal or interest in respect of the Term
Loans, any LC Disbursements or any Letter of Credit fees, without the written
consent of each Lender directly affected thereby, (iii) change any of the
provisions of this Section or the definition of "Required Lenders" without the
written consent of each Lender, (iv) release any Loan Party from its obligations
under the Loan Documents without the written consent of each Lender (except upon
payment in full in cash of the Obligations or, with respect to a given Borrower
or Indirect Co-Investor, upon a sale of the Directly Owned Investment Party or
New Portfolio Company in a transaction permitted hereunder and repayment in full
of such Borrower's Term Loans) or (v) release all or substantially all of the
collateral (except as expressly provided in the Loan Documents) under the
Affiliate Guarantees or Investment Guarantees and the Pledge Agreement (provided
that a partial release of collateral thereunder shall require the consent of the
Required Lenders); provided, further, that no such agreement shall amend, modify
or otherwise affect the rights or duties of the Administrative Agent hereunder
without the prior written consent of the Administrative Agent.
SECTION 9.3 Expenses; Indemnity; Damage Waiver. (a) The Borrowers
shall pay or cause to be paid (i) all reasonable out-of-pocket expenses incurred
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by the Administrative Agent, including the reasonable fees, charges and
disbursements of counsel for the Administrative Agent, in connection with the
administration of this Agreement or any amendments, modifications or waivers of
the provisions hereof and (ii) all reasonable out-of-pocket expenses incurred by
the Administrative Agent or any Lender, including the reasonable fees, charges
and disbursements of any counsel for the Administrative Agent or any Lender, in
connection with the enforcement or protection of its rights in connection with
the Loan Documents, including in connection with any workout, restructuring or
negotiations in respect thereof, the reasonable fees and disbursements of
counsel to the Administrative Agent and after the occurrence and during the
continuance of an Event of Default a single counsel to the Lenders collectively.
(b) Each Borrower shall indemnify the Administrative Agent and each
Lender, and each Related Party of any of the foregoing Persons (each such Person
being called an "Indemnitee") against, and hold each Indemnitee harmless from,
any and all losses, claims, damages, liabilities and related expenses (other
than non-Non-Excluded Taxes), including the reasonable fees, charges and
disbursements of any counsel for any Indemnitee, incurred by or asserted against
any Indemnitee arising out of, in connection with, or as a result of (i) the
execution or delivery of the Loan Documents or any agreement or instrument
contemplated thereby, the performance by the parties thereto of their respective
obligations under the Loan Documents or the consummation of the Transactions or
any other transactions contemplated by the Loan Documents, (ii) any Term Loan or
the use of the proceeds therefrom, or (iii) any actual or prospective claim,
litigation, investigation or proceeding relating to any of the foregoing,
whether based on contract, tort or any other theory and regardless of whether
any Indemnitee is a party thereto; provided that such indemnity shall not, as to
any Indemnitee, be available to the extent that such losses, claims, damages,
liabilities or related expenses are determined by a court of competent
jurisdiction by final and nonappealable judgment to have resulted from the gross
negligence or willful misconduct of such Indemnitee or, in the case of any
indemnified liabilities arising out of this Agreement or the other Loan
Documents, from the material breach by any such Indemnitee of this Agreement or
the other Loan Documents, as the case may be; provided that, for purpose of
clarity, no provision of this paragraph (b) shall be deemed to negate Section
9.3(a)(ii) to the extent that it provides that after the occurrence and during
the continuance of an Event of Default, the Lenders shall be reimbursed for a
single counsel.
(c) To the extent that the Borrowers fail to pay any amount required to
be paid by it to the Administrative Agent, each Lender severally agrees to pay
to the Administrative Agent such Lender's Loan Percentage (determined as of the
time that the applicable unreimbursed expense or indemnity payment is sought) of
such unpaid amount; provided that the unreimbursed expense or indemnified loss,
claim, damage, liability or related expense, as the case may be, was incurred by
or asserted against the Administrative Agent in its capacity as such.
(d) To the extent permitted by applicable law, the Borrowers shall not
assert, and each Borrower hereby waives, any claim against any Indemnitee, on
any theory of liability, for special, indirect, consequential or punitive
damages (as opposed to direct or actual damages) arising out of, in connection
with, or as a result of, this Agreement or any agreement or instrument
contemplated hereby, the Transactions, any Term Loan or the use of the proceeds
thereof.
(e) The agreements in this Section 9.3 shall survive repayment of the
Loans and all other amounts payable hereunder.
SECTION 9.4 Successors and Assigns. (a) The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns permitted hereby, except that no
Borrower may assign or otherwise transfer any of its rights or obligations
hereunder without the prior written consent of each Lender (and any attempted
assignment or transfer by such Borrower without such consent shall be null and
void). Nothing in this Agreement, expressed or implied, shall be construed to
confer upon any Person (other than the parties hereto, their respective
successors and assigns permitted hereby and, to the extent expressly
contemplated hereby, the Related Parties of each of the Administrative Agent and
the Lenders) any legal or equitable right, remedy or claim under or by reason of
this Agreement.
(b) Any Lender may assign to one or more assignees a portion of its
rights and obligations under this Agreement (an "Assignee"); provided that (i)
each of the Lenders party to this Agreement on the Closing Date may not assign
more than 49% of its Commitments, Term Loans and LC Exposure without the consent
of the Borrowers, (ii) except in the case of an assignment to a Lender or an
Affiliate of a Lender, each of the Borrowers (such consent not to be
unreasonably withheld) and the Administrative Agent (the consent of the
Administrative Agent may be withheld in its sole discretion) must give their
prior written consent to such assignment, (iii) except in the case of an
assignment to a Lender or an Affiliate of a Lender or an assignment of the
entire remaining amount of the assigning Lender's Commitment, Term Loans and LC
Exposure, the amount of the Term Loans of the assigning Lender subject to each
such assignment (determined as of the date the Assignment and Acceptance with
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respect to such assignment is delivered to the Administrative Agent) shall not
be less than $5,000,000 unless each of the Borrowers and the Administrative
Agent otherwise consent, (iv) the parties to each assignment shall execute and
deliver to the Administrative Agent an Assignment and Acceptance, together with
a processing and recordation fee of $4,000 (provided, however, if the Borrowers
request the replacement of any Lender pursuant to Section 2.17 hereof, the
Borrowers shall pay such processing and recordation fee, which shall be funded
with the proceeds of the Term Loans), and (v) the assignee, if it shall not be a
Lender, shall deliver to the Administrative Agent an administrative
questionnaire; provided further that any consent of the Borrowers otherwise
required under this paragraph shall not be required if an Event of Default under
clause (g) of Article 7 has occurred and is continuing. Upon acceptance and
recording pursuant to paragraph (d) of this Section, from and after the
effective date specified in each Assignment and Acceptance, the assignee
thereunder shall be a party hereto and, to the extent of the interest assigned
by such Assignment and Acceptance, have the rights and obligations of a Lender
under this Agreement, and the assigning Lender thereunder shall, to the extent
of the interest assigned by such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all of the assigning Lender's rights and obligations under
this Agreement, such Lender shall cease to be a party hereto but shall continue
to be entitled to the benefits of Sections 2.13, 2.14, 2.15 and 9.3). Any
assignment or transfer by a Lender of rights or obligations under this Agreement
that does not comply with this paragraph shall be treated for purposes of this
Agreement as a sale by such Lender of a participation in such rights and
obligations in accordance with paragraph (e) of this Section. Notwithstanding
anything to the contrary provided herein, in the event of any proposed
assignment by a Lender pursuant to this Section 9.4(b), such assignment shall be
offered to the Lenders pro rata based on their respective Loan Percentages.
(c) The Administrative Agent, acting for this purpose as an agent of
the Borrowers, shall maintain at one of its offices in New York, New York a copy
of each Assignment and Acceptance delivered to it and a register for the
recordation of the names and addresses of the Lenders, and the Commitment of,
and principal amount of the Term Loans whether or not evidenced by a Note owing
to, each Lender pursuant to the terms hereof from time to time (the "Register").
The entries in the Register shall be conclusive, and the Borrowers, the
Administrative Agent and the Lenders may treat each Person whose name is
recorded in the Register pursuant to the terms hereof as a Lender hereunder for
all purposes of this Agreement, notwithstanding notice to the contrary. Any
assignment of any Loan whether or not evidenced by a Note shall be effective
only upon appropriate entries with respect thereto being made in the Register
(and each Note shall expressly so provide). Any assignment or transfer of all
or part of a Loan evidenced by a Note shall be registered on the Register only
upon surrender for registration of assignment or transfer of the Note evidencing
such Loan, accompanied by a duly executed Assignment and Acceptance, and
thereupon one or more new Notes in the same aggregate principal amount shall be
issued to the designated Assignee and the old Notes shall be returned by the
Administrative Agent to appropriate Borrower marked "cancelled".
(d) Upon its receipt of a duly completed Assignment and Acceptance
executed by an assigning Lender and an assignee, the assignee's completed
administrative questionnaire (unless the assignee shall already be a Lender
hereunder), the processing and recordation fee referred to in paragraph (b) of
this Section and any written consent to such assignment required by paragraph
(b) of this Section, the Administrative Agent shall accept such Assignment and
Acceptance and record the information contained therein in the Register. No
assignment shall be effective for purposes of this Agreement unless it has been
recorded in the Register as provided in this paragraph.
(e) Any Lender may, without the consent of the Borrowers but with the
consent of the Administrative Agent (the consent of the Administrative Agent may
be withheld in its sole discretion) sell participations to one or more banks or
other entities (a "Participant") in all or a portion of such Lender's rights and
obligations under this Agreement (including all or a portion of its Commitment
and the Term Loans owing to it); provided that (i) such Lender's obligations
under this Agreement shall remain unchanged, (ii) such Lender shall remain
solely responsible to the other parties hereto for the performance of such
obligations and (iii) the Borrowers, the Administrative Agent and the Lenders
shall continue to deal solely and directly with such Lender in connection with
such Lender's rights and obligations under this Agreement. Any agreement or
instrument pursuant to which a Lender sells such a participation shall provide
that such Lender shall retain the sole right to enforce this Agreement and to
approve any amendment, modification or waiver of any provision of this
Agreement; provided that such agreement or instrument may provide that such
Lender will not, without the consent of the Participant, agree to any amendment,
modification or waiver described in the first proviso to Section 9.2(b) that
affects such Participant. Subject to paragraph (f) of this Section, the
Borrowers agree that each Participant shall be entitled to the benefits of
Sections 2.13, 2.14 and 2.15 to the same extent as if it were a Lender and had
acquired its interest by assignment pursuant to paragraph (b) of this Section;
provided that, in the case of Section 2.14, such Participant shall have complied
with the requirements of said Section and provided, further, that no Participant
shall be entitled to receive any greater amount pursuant to any such Section
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than the transferor Lender would have been entitled to receive in respect of the
amount of the participation transferred by such transferor Lender to such
Participant had no such transfer occurred. Notwithstanding anything to the
contrary provided herein, in the event of any proposed participation by a Lender
pursuant to this Section 9.4(e), such participation shall be offered to the
Lenders pro rata based on their respective Loan Percentages.
(f) Any Lender may at any time pledge or assign a security interest in
all or any portion of its rights under this Agreement to secure obligations of
such Lender, including any such pledge or assignment to a Federal Reserve Bank,
and this Section shall not apply to any such pledge or assignment to a Federal
Reserve Bank; provided that no such pledge or assignment of a security interest
shall release a Lender from any of its obligations hereunder or substitute any
such assignee for such Lender as a party hereto.
SECTION 9.5 Survival. All covenants, agreements, representations
and warranties made by the Borrowers herein and in the certificates or other
instruments delivered in connection with or pursuant to this Agreement shall be
considered to have been relied upon by the other parties hereto and shall
survive the execution and delivery of this Agreement and the making of any Term
Loans, regardless of any investigation made by any such other party or on its
behalf.
SECTION 9.6 Counterparts; Integration; Effectiveness. This
Agreement may be executed in counterparts and by facsimile (and by different
parties hereto on different counterparts), each of which shall constitute an
original, but all of which when taken together shall constitute a single
contract. This Agreement and any separate agreements with respect to Fees
constitute the entire contract among the parties relating to the subject matter
hereof and supersede any and all previous agreements and understandings, oral or
written, relating to the subject matter hereof.
SECTION 9.7 Severability. Any provision of this Agreement held to
be invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision in
a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.
SECTION 9.8 Right of Setoff. If an Event of Default shall have
occurred and be continuing, each Lender is hereby authorized at any time and
from time to time, to the fullest extent permitted by law, to set off and apply
any and all deposits (general or special, time or demand, provisional or final)
at any time held and other indebtedness at any time owing by such Lender to or
for the credit or the account of any Borrower against any of and all the
obligations of the Borrowers now or hereafter existing under this Agreement held
by such Lender, irrespective of whether or not such Lender shall have made any
demand under this Agreement and although such obligations may be unmatured. The
rights of each Lender under this Section are in addition to other rights and
remedies (including other rights of setoff) which such Lender may have.
SECTION 9.9 GOVERNING LAW; JURISDICTION; CONSENT TO SERVICE OF
PROCESS. (a) THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED
BY THE LAW OF THE STATE OF NEW YORK.
(b) Each Borrower hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of the Supreme Court
of the State of New York sitting in New York County and of the United States
District Court of the Southern District of New York, and any appellate court
from any thereof, in any action or proceeding arising out of or relating to this
Agreement, or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in such New
York State or, to the extent permitted by law, in such Federal court. Each of
the parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Agreement
shall affect any right that the Administrative Agent or any Lender may otherwise
have to bring any action or proceeding relating to this Agreement against any
Borrower or any of its properties in the courts of any jurisdiction.
(c) The Borrowers hereby irrevocably and unconditionally waive, to the
fullest extent they may legally and effectively do so, any objection which they
may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement in any court referred to
in paragraph (b) of this Section. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
(d) Each party to this Agreement irrevocably consents to service of
process in the manner provided for notices in Section 9.1. Nothing in this
Agreement will affect the right of any party to this Agreement to serve process
in any other manner permitted by law.
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SECTION 9.10 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY WAIVES, TO
THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A TRIAL
BY JURY IN ANY LEGAL PROCEEDING DIRECTLY OR INDIRECTLY ARISING OUT OF OR
RELATING TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY (WHETHER
BASED ON CONTRACT, TORT OR ANY OTHER THEORY). EACH PARTY HERETO (A) CERTIFIES
THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY OTHER PARTY HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF
LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT
AND THE OTHER PARTIES HERETO HAVE BEEN INDUCED TO ENTER INTO THIS AGREEMENT BY,
AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.
SECTION 9.11 Headings. Article and Section headings and the Table of
Contents used herein are for convenience of reference only, are not part of this
Agreement and shall not affect the construction of, or be taken into
consideration in interpreting, this Agreement.
SECTION 9.12 Confidentiality. Each Lender agrees to keep information
obtained by it pursuant hereto and the other Loan Documents identified as
confidential in writing at the time of delivery confidential in accordance with
such Lender's customary practices and agrees that it will only use such
information in connection with the transactions contemplated by this Agreement
and not disclose any of such information other than (a) to such Lender's
employees, representatives, directors, attorneys, auditors, agents or affiliates
who are advised of the confidential nature of such information, (b) to the
extent such information presently is or hereafter becomes available to such
Lender on a non-confidential basis from any source or such information that is
in the public domain at the time of disclosure, (c) to the extent disclosure is
required by law (including applicable securities laws), regulation, subpoena or
judicial order or process (provided that notice of such requirement or order
shall be promptly furnished to the Borrowers unless such notice is legally
prohibited) or requested or required by bank, securities or investment company
regulations or auditors or any administrative body or commission to whose
jurisdiction such Lender may be subject, (d) to actual or prospective Assignees
or Participants who agree to be bound by the provisions of this Section 9.12,
(e) to the extent required in connection with any litigation between any Loan
Party and any Lender with respect to the Term Loans or this Agreement and the
other Loan Documents or (f) with the Borrowers' prior written consent. The
agreements in this Section 9.12 shall survive repayment of the Term Loans and
all other amounts payable hereunder. Each of the parties hereto (each, a
"Document Party") agrees to keep confidential this Agreement and the other Loan
Documents and the transactions contemplated hereby and thereby; provided that
nothing herein shall prevent any Document Party from disclosing such information
(a) to any other Document Party or any Affiliate of any Document Party, or any
officer, director, employee, agent, or advisor of any Document Party or
Affiliate of any Document Party, (b) to any other Person if reasonably
incidental to the administration of the credit facility provided herein, (c) as
required by any law, rule, or regulation, (d) upon the order of any court or
administrative agency, (e) upon the request or demand of any regulatory agency
or authority, (f) to any New Portfolio Company (or prospective New Portfolio
Company) or any officer, director, employee, agent, or advisor of any Document
Party or Affiliate of such New Portfolio Company in connection with a proposed
Investment by any Borrower in such New Portfolio Company, (g) in connection with
any litigation to which such Document Party or any of its Affiliates may be a
party, or (h) to the extent necessary in connection with the exercise of any
remedy under this Agreement or any other Loan Document.
SECTION 9.13 Syndication. The Borrowers agree that the Administrative
Agent has the right to syndicate the Commitments and the Term Loans at any time
or from time to time to a group of financial institutions (the "Additional
Lenders") identified by the Administrative Agent in consultation with the
Borrowers, if the Administrative Agent and its affiliates determine to syndicate
the Commitments and the Term Loans. The Borrowers agree to actively assist the
Administrative Agent and its affiliates in completing a syndication satisfactory
to the Administrative Agent and the Borrowers, including (a) using commercially
reasonable efforts to ensure that the syndication efforts benefit materially
from the Borrower's lending and equity relationships, (b) direct contact between
the Borrowers and any Additional Lenders, (c) furnishing, or, as the
Administrative Agent may request, assisting in the preparation of, information,
projections and marketing materials to be used in connection with the
syndication and (d) the hosting, with the Administrative Agent and its
affiliates, of one or more meetings of any Additional Lenders. The
Administrative Agent and its affiliates would manage all aspects of the
syndication, in consultation with the Borrowers, including decisions as to the
selection of institutions to be approached and when they will be approached,
when their commitments will be accepted, which institutions will participate,
the allocations of the commitments among any Additional Lenders and the amount
and distribution of fees among any Additional Lenders. The Borrowers
acknowledge that the information the Borrowers may be asked to furnish to the
Administrative Agent and its affiliates and to any Additional Lenders may
include sensitive competitive information, and the Administrative Agent and its
affiliates agree to take appropriate and customary confidentiality precautions
with respect thereto. Notwithstanding anything to the contrary contained
herein, in the event of a syndication (i) no Lender shall be permitted to
syndicate more than 49% of the Commitments, Term Loans and LC Disbursements held
PAGE 32
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by it on the Closing Date without the prior written consent of the Borrowers and
(ii) any syndication shall be offered to the Lenders pro rata (to the extent
desired by any Lenders) based on their respective Loan Percentages.
SECTION 9.14 Certainty of Funds. At the request of any Borrower, the
Administrative Agent on behalf of the Lenders shall provide such documentation
as may be reasonably agreed between such Borrower and the Administrative Agent
to evidence the availability of the unused Commitment to make Investments by any
Borrower or a proposed Future Borrower.
[The remainder of this page is intentionally left blank.]
PAGE 33
<PAGE>
Signature Page To
Credit Agreement
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.
Initial Borrowers:
HM/Europe Coinvestors, C.V.
By: TOH/Europe Cayman Ltd.,
its General Partner
By: /s/ Michael D. Salim
Name: Michael D. Salim
Title: Principal
HMTF Bridge Partners, L.P.
By: HMTF Bridge Partners, LLC
its General Partner
By: /s/Michael D. Salim
Name: Michael D. Salim
Title: Principal
PAGE 34
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Signature Page To
Credit Agreement
THE CHASE MANHATTAN BANK
as Administrative Agent,
Issuing Bank, and a Lender
By:/s/ Deborah Davey
Name: Deborah Davey
Title: Vice President
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<PAGE>
BANK OF AMERICA, N.A.
as Syndication Agent and
a Lender
By:/s/ Curtis D. Leuker
Name: Curtis D. Leuker
Title: Vice President
PAGE 36
<PAGE>
Signature Page To
Credit Agreement
BANKERS TRUST COMPANY
as a Lender
By:/s/ William Archer
Name: William Archer
Title: Managing Director
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<PAGE>
Signature Page To
Credit Agreement
CREDIT SUISSE FIRST BOSTON
as a Lender
By:/s/ Robert Hetu and
Chris T. Horgan
Name: Robert Hetu and
Chris T. Morgan
Title: Vice President/
Vice President
PAGE 38
<PAGE>
Signature Page To
Credit Agreement
MORGAN STANLEY SENIOR FUNDING, INC.
as a Lender
By:/s/ Cameron Fleming
Name: Cameron Fleming
Title: Vice President
PAGE 39
<PAGE>
Signature Page To
Credit Agreement
MERRILL LYNCH CAPITAL
CORPORATION as a Lender
By:/s/ Christopher Birosak
Name: Christopher Birosak
Title: Vice President
PAGE 40
<PAGE>
Signature Page To
Credit Agreement
MFBL FUNDING, INC.
as a Lender
By:/s/ Michael Hart
Name: Michael Hart
Title: Principal
PAGE 41
<PAGE>
SCHEDULE 2.1
Lenders' Commitments
Lender Commitment
The Chase Manhattan Bank $400,000,000
Bank of America, N.A. $400,000,000
Bankers Trust Company $200,000,000
Credit Suisse First Boston $200,000,000
Morgan Stanley Senior Funding, Inc. $200,000,000
Merrill Lynch Capital Corporation $180,000,000
MFBL Funding, Inc. $200,000,000
Total Commitments $1,780,000,000
PAGE 42
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<PAGE>
EXHIBIT 99.1
JOINT FILING STATEMENT
Each of the undersigned agrees that (i) the statement on Schedule 13D
relating to the Common Stock, par value $.001 per share, of Rhythms
NetConnections Inc. has been adopted and filed on behalf of each of them, (ii)
all future amendments to such statement on Schedule 13D will, unless written
notice to the contrary is delivered as described below, be jointly filed on
behalf of each of them, and (iii) the provisions of Rule 13d-1(k)(1) under the
Securities Exchange Act of 1934 apply to each of them. This agreement may be
terminated with respect to the obligations to jointly file future amendments to
such statement on Schedule 13D as to any of the undersigned upon such person
giving written notice thereof to each of the other persons signatory hereto, at
the principal office thereof.
March 27, 2000 *
----------------------
Name: Thomas O. Hicks
* By: /s/ David W. Knickel
--------------------------
Name: David W. Knickel
Attorney-in-Fact
HM4 RHYTHMS QUALIFIED FUND, LLC
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
HMTF EQUITY FUND IV (1999), L.P.
By: HM4/GP (1999) Partners, L.P., its General
Partner
By: Hicks, Muse GP (1999) Partners IV, L.P.,
its General Partner
By: Hicks, Muse (1999) Fund IV, LLC, its
General Partner
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
HM4 RHYTHMS PRIVATE FUND, LLC
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
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<PAGE>
HMTF PRIVATE EQUITY FUND IV (1999), L.P.
By: HM4/GP (1999) Partners, L.P., its General
Partner
By: Hicks, Muse GP (1999) Partners IV, L.P.,
its General Partner
By: Hicks, Muse (1999) Fund IV, LLC, its
General Partner
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
HM4/GP (1999) PARTNERS, L.P.
By: Hicks, Muse GP (1999) Partners IV, L.P.,
its General Partner
By: Hicks, Muse (1999) Fund IV, LLC, its
General Partner
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
HM 4-EQ RHYTHMS COINVESTORS, LLC
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
HM 4-EQ (1999) COINVESTORS, L.P.
By: Hicks, Muse GP (1999) Partners IV, L.P.,
its General Partner
By: Hicks, Muse (1999) Fund IV, LLC, its
General Partner
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
HM 4-SBS RHYTHMS COINVESTORS, LLC
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
HM 4-SBS (1999) COINVESTORS, L.P.
By: Hicks, Muse GP (1999) Partners IV, L.P.,
its General Partner
By: Hicks, Muse (1999) Fund IV, LLC, its
General Partner
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
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<PAGE>
HICKS, MUSE GP (1999) PARTNERS IV, L.P.
By: Hicks, Muse (1999) Fund IV, LLC, its
General Partner
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
HICKS, MUSE (1999) FUND IV, LLC
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
HM PG-IV RHYTHMS, LLC
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
HICKS, MUSE PG-IV (1999), C.V.
By: HM Equity Fund IV/GP Partners (1999),
C.V., its General Partner
By: HM GP Partners IV Cayman, L.P., its
General Partner
By: HM Fund IV Cayman LLC, its General Partner
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
HM EQUITY FUND IV/GP PARTNERS (1999), C.V.
By: HM GP Partners IV Cayman, L.P., its
General Partner
By: HM Fund IV Cayman LLC, its General Partner
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
HM GP PARTNERS IV CAYMAN, L.P.
By: HM Fund IV Cayman LLC, its General Partner
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
HM FUND IV CAYMAN LLC
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
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<PAGE>
HMTF BRIDGE RHY, LLC
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
HMTF BRIDGE PARTNERS, L.P.
By: HMTF Bridge Partners, LLC, its General
Partner
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
HMTF BRIDGE PARTNERS, LLC
By: /s/ David W. Knickel
---------------------------
Name: David W. Knickel
Title: Vice President
PAGE 4
