Exhibit 10.22
EXECUTION COPY
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WARRANT AGREEMENT
Dated as of April 8, 1998
By and Between
PATHNET, INC.
and
The Bank of New York,
Warrant Agent
--------------------
Warrants to Purchase Common Stock
Par Value $0.01 Per Share
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TABLE OF CONTENTS
Page
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ARTICLE I
ISSUANCE, FORM, EXECUTION, DELIVERY AND
REGISTRATION OF WARRANT CERTIFICATES
SECTION 1.01. Issuance of Warrants...................................... 2
SECTION 1.02. Form of Warrant Certificates.............................. 2
SECTION 1.03. Execution of Warrant Certificates......................... 3
SECTION 1.04. Authentication and Delivery............................... 3
SECTION 1.05. Temporary Warrant Certificates............................ 4
SECTION 1.06. Separation of Warrants and Notes.......................... 5
SECTION 1.07. Registration.............................................. 5
SECTION 1.08. Registration of Transfers or Exchanges................... 11
SECTION 1.09. Lost, Stolen, Destroyed, Defaced or Mutilated
Warrant Certificates..................................... 11
SECTION 1.10. Offices for Exercise, etc................................ 12
ARTICLE II
DURATION, EXERCISE OF WARRANTS; EXERCISE PRICE
AND REPURCHASE OF WARRANTS
SECTION 2.01. Duration of Warrants..................................... 12
SECTION 2.02. Exercise, Exercise Price, Settlement and Delivery........ 13
SECTION 2.03. Cancellation of Warrant Certificates..................... 16
SECTION 2.04. Notice of an Exercise Event.............................. 16
ARTICLE III
OTHER PROVISIONS RELATING TO
RIGHTS OF HOLDERS OF WARRANTS
SECTION 3.01. Enforcement of Rights.................................... 17
SECTION 3.02. Obtaining Stock Exchange Listings........................ 17
ARTICLE IV
CERTAIN COVENANTS OF THE COMPANY
SECTION 4.01. Payment of Taxes......................................... 17
SECTION 4.02. Rules 144 and 144A....................................... 18
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SECTION 4.03. Form of Initial Public Equity Offering................... 18
SECTION 4.04. Securities Act and Applicable State Securities Laws...... 18
SECTION 4.05. Resolution of Preemptive Rights, If Any.................. 18
ARTICLE V
ADJUSTMENTS
SECTION 5.01. Adjustment of Exercise Rate; Notices..................... 19
SECTION 5.02. Fractional Shares........................................ 26
SECTION 5.03. Certain Distributions.................................... 27
ARTICLE VI
CONCERNING THE WARRANT AGENT
SECTION 6.01. Warrant Agent............................................ 27
SECTION 6.02. Conditions of Warrant Agent's Obligations................ 27
SECTION 6.03. Resignation and Appointment of Successor................. 32
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Amendment................................................ 34
SECTION 7.02. Notices and Demands to the Company and Warrant Agent..... 34
SECTION 7.03. Addresses for Notices to Parties and for Transmission of
Documents................................................ 35
SECTION 7.04. Notices to Holders....................................... 35
SECTION 7.05. APPLICABLE LAW........................................... 35
SECTION 7.06. Persons Having Rights Under Agreement.................... 35
SECTION 7.07. Headings................................................. 35
SECTION 7.08. Counterparts............................................. 35
SECTION 7.09. Inspection of Agreement.................................. 35
SECTION 7.10. Availability of Equitable Remedies....................... 35
SECTION 7.11. Obtaining of Governmental Approvals...................... 36
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EXHIBIT A - Form of Warrant Certificate
EXHIBIT B - Form of Legend for Global Warrant
EXHIBIT C - Certificate To Be Delivered upon Exchange or Registration
of Transfer of Warrants
EXHIBIT D - Form of Certificate to be Delivered in Connection with Regulation S
Transfers
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INDEX OF DEFINED TERMS
Defined Term Page
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Affiliate................................................... 21
Agreement................................................... Preamble
Business Day................................................ 13
Capital Stock............................................... 24
Cashless Exercise........................................... 14
Cashless Exercise Ratio..................................... 14
Cedel Bank.................................................. 4
Common Stock................................................ 2
Company..................................................... Preamble
Convertible Preferred Stock................................. 24
Current Market Value........................................ 24
Definitive Warrants......................................... 2
Depositary.................................................. 2
Distribution................................................ 26
Distribution Rights......................................... 26
DTC......................................................... 4
Election to Exercise........................................ 14
Euroclear................................................... 4
Exercisability Date......................................... 13
Exercise Date............................................... 15
Exercise Event.............................................. 13
Exercise Price.............................................. 13
Exercise Rate............................................... 13
Expiration Date............................................. 12
Fundamental Transaction..................................... 22
Global Shares............................................... 16
Global Warrants............................................. 2
Indenture................................................... Recitals
Independent Financial Expert................................ 25
Initial Public Equity Offering.............................. 13
Initial Purchasers.......................................... Recitals
Legended Regulation S Global Warrant........................ 4
Xxxxxxx Xxxxx............................................... Recitals
Notes....................................................... Recitals
Notice Date................................................. 2.05(b)
Officers' Certificate....................................... 9
Person...................................................... 13
Private Placement Legend.................................... 10
Prospectus.................................................. 18
Purchase Agreement.......................................... Recitals
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Defined Term Page
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QIB......................................................... 6
Registrar................................................... 5
Regulation S................................................ 4
Related Parties............................................. 28
Requisite Warrant Holders................................... 33
Resale Restriction Termination Date......................... 6
Triggering Date............................................. 14
Securities Act.............................................. 5
Separability Date........................................... 4
Separation.................................................. 5
Shares......................................................
Subject Class............................................... 18
Surviving Person............................................ 22
Time of Determination....................................... 26
Trustee..................................................... Recitals
Units....................................................... Recitals
Warrant..................................................... Recitals
Warrant Agent............................................... Preamble
Warrant Agent Office........................................ 12
Warrant Certificates........................................ Recitals
Warrant Exercise Office..................................... 14
Warrant Register............................................ 5
Warrant Registration Rights Agreement....................... Recitals
Warrant Shares.............................................. Recitals
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WARRANT AGREEMENT
WARRANT AGREEMENT dated as of April 8, 1998 ("Agreement"), by and
between PATHNET, INC. (the "Company"), a Delaware corporation, and THE BANK OF
NEW YORK, warrant agent (with any successor warrant agent, the "Warrant Agent").
WHEREAS, the Company has entered into a purchase agreement (the
"Purchase Agreement") dated April 1, 1998, with Xxxxxxx Xxxxx & Co., Xxxxxxx
Lynch, Pierce, Xxxxxx & Xxxxx Incorporated ("Xxxxxxx Xxxxx"), Bear, Xxxxxxx &
Co. Inc., TD Securities (USA) Inc. and Salomon Brothers Inc (collectively, the
"Initial Purchasers"), in which the Company has agreed to sell to the Initial
Purchasers an aggregate of 350,000 units (the "Units"), each consisting of (i)
$1,000 principal amount of 12 1/4% Senior Notes due 2008 (the "Notes") of the
Company to be issued under an indenture dated as of April 8, 1998 (the
"Indenture"), between the Company and the Bank of New York, trustee (the
"Trustee") and (ii) one Warrant (a "Warrant"), initially entitling the holder
thereof to purchase 1.1 shares of Common Stock (as defined herein), (the
"Warrant Shares"), of the Company. The certificates evidencing the Warrants are
herein referred to collectively as the "Warrant Certificates"; and
WHEREAS, the Notes and the Warrants comprising the Units shall not
be separately transferable until the Separability Date (as defined herein); and
WHEREAS, the holders of the Warrants are entitled to the benefits of
a Warrant Registration Rights Agreement dated as of April 8, 1998 (the "Warrant
Registration Rights Agreement"), between the Company and the Initial Purchasers;
and
WHEREAS, the Company desires the Warrant Agent to assist the Company
in connection with the issuance, exchange, cancellation, replacement and
exercise of the Warrants, and in this Agreement wishes to set forth, among other
things, the terms and conditions on which the Warrants may be issued, exchanged,
cancelled, replaced and exercised;
NOW, THEREFORE, the parties hereto agree as follows:
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ARTICLE I
ISSUANCE, FORM, EXECUTION, DELIVERY AND
REGISTRATION OF WARRANT CERTIFICATES
SECTION 1.01. Issuance of Warrants. Warrants comprising part of the
Units shall be originally issued in connection with the issuance of the Units
and such Warrants shall not be separately transferable from the Notes until on
or after the Separability Date as provided in Section 1.06 hereof.
Each Warrant Certificate shall evidence the number of Warrants
specified therein. Each Warrant evidenced by a Warrant Certificate, when it
becomes exercisable as provided herein and therein, shall represent the right,
subject to the provisions contained herein and therein, to purchase from the
Company (and the Company shall issue and sell to the holder of such Warrant) 1.1
fully paid, registered and non-assessable Warrant Shares at an exercise price of
$0.01 per share. The number of Warrant Shares issuable upon exercise of a
Warrant is subject to adjustment as provided herein and in the Warrant. The
number of shares of the Company's common stock, par value $0.01 per share, and
any other class or series of common equity equivalent shares of the Company into
which such common stock may be reclassified and sold to the Public in an Initial
Public Equity Offering (the "Common Stock") issuable upon exercise of a Warrant
is subject to adjustment as provided herein and in the Warrant. Unless the
context otherwise requires, the term "Warrant Shares" shall also include any
other securities or property issuable and deliverable upon exercise of a Warrant
as provided in Article V, subject to adjustment as provided herein and in the
Warrant.
SECTION 1.02. Form of Warrant Certificates. The Warrant Certificates
will initially be issued either in global form (the "Global Warrants") or in
registered form as definitive Warrant Certificates (the "Definitive Warrants"),
in either case substantially in the form of Exhibit A attached hereto. Any
Global Warrants to be delivered pursuant to this Agreement shall bear the legend
set forth in Exhibit B attached hereto. Such Global Warrants shall represent
such of the outstanding Warrants as shall be specified therein and each shall
provide that it shall represent the aggregate amount of outstanding Warrants
from time to time endorsed thereon and that the aggregate amount of outstanding
Warrants represented thereby may from time to time be reduced or increased, as
appropriate. Any endorsement of a Global Warrant to reflect the amount of any
increase or decrease in the amount of outstanding Warrants represented thereby
shall be made by the Warrant Agent and the Depositary (as defined below) in
accordance with instructions given by the holder thereof. The Depository Trust
Company shall act as the depositary (with any successor depositary, the
"Depositary") with respect to the Global Warrants until a successor shall be
appointed by the Company and the Warrant Agent. Under the circumstances set
forth in Section 1.08 hereof, a holder of Warrants may receive from the Warrant
Agent or the Depository Definitive Warrants upon written request.
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SECTION 1.03. Execution of Warrant Certificates. The Warrant
Certificates shall be executed on behalf of the Company by the Chairman of its
Board of Directors, its Chief Executive Officer ("CEO"), its President, its
Chief Financial Officer or any executive vice president or vice president and
attested by its Secretary or any Assistant Secretary. Such signatures may be the
manual or facsimile signatures of the present or any future such officers. The
seal of the Company may be in the form of a facsimile thereof and may be
impressed, affixed, imprinted or otherwise reproduced on the Warrant
Certificates. Typographical and other minor errors or defects in any such
reproduction of any such signature shall not affect the validity or
enforceability of any Warrant Certificate that has been duly countersigned and
delivered by the Warrant Agent.
In case any officer of the Company who shall have signed any of the
Warrant Certificates shall cease to be such officer before the Warrant
Certificate so signed shall be authenticated and delivered by the Warrant Agent
or disposed of by the Company, such Warrant Certificate nevertheless may be
countersigned and delivered or disposed of as though the person who signed such
Warrant Certificate had not ceased to be such officer of the Company. Any
Warrant Certificate may be signed on behalf of the Company by such persons as,
at the actual date of the execution of such Warrant Certificate, shall be the
proper officers of the Company, although at the date of the execution and
delivery of this Agreement any such person was not such an officer.
SECTION 1.04. Authentication and Delivery. Subject to the
immediately following paragraph, Warrant Certificates shall be authenticated by
manual signature and dated the date of authentication by the Warrant Agent and
shall not be valid for any purpose unless so authenticated and dated. The
Warrant Certificates shall be numbered and shall be registered in the Warrant
Register (as defined in Section 1.07 hereof).
Upon the receipt by the Warrant Agent of a written order of the
Company, which order shall be signed by the Chairman of its Board of Directors,
its President, its CEO, its Chief Financial Officer or any executive vice
president or vice president and attested by its Secretary or any Assistant
Secretary, and shall specify the amount of Warrants to be authenticated, whether
the Warrants are to be Global Warrants or Definitive Warrants, the date of such
Warrants and such other information as the Warrant Agent may reasonably request,
without any further action by the Company, the Warrant Agent is authorized, upon
receipt from the Company at any time and from time to time of the Warrant
Certificates, duly executed as provided in Section 1.03 hereof, to authenticate
the Warrant Certificates and deliver them upon the Company's request. Such
authentication shall be by a duly authorized signatory of the Warrant Agent
(although it shall not be necessary for the same signatory to sign all Warrant
Certificates).
In case any authorized signatory of the Warrant Agent who shall have
authenticated any of the Warrant Certificates shall cease to be an authorized
signatory before
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the Warrant Certificate shall be disposed of by the Company or the Warrant
Agent, such Warrant Certificate nevertheless may be delivered or disposed of as
though the person who authenticated an Warrant Certificate had not ceased to be
an authorized signatory of the Warrant Agent. Any Warrant Certificate may be
authenticated on behalf of the Warrant Agent by such persons as, at the actual
time of authentication of such Warrant Certificates, shall be the duly
authorized signatories of the Warrant Agent, although at the time of the
execution and delivery of this Agreement any such person is not an authorized
signatory.
The Warrant Agent's authentication on all Warrant Certificates shall
be in substantially the form set forth in Exhibit A hereto.
SECTION 1.05. Temporary Warrant Certificates. Warrants sold in
offshore transactions in reliance on Regulation S ("Regulation S") under the
Securities Act of 1993, as amended (the Securities Act") will initially be
represented by one or more permanent legended global Warrants in definitive,
fully registered form (each a "Legended Regulation S Global Warrant"). The
Company may execute, and the Warrant Agent shall authenticate and deliver
Legended Regulation S Global Warrant Certificates, which are printed,
lithographed, typewritten or otherwise produced, substantially of the tenor of
the definitive Warrant Certificates in lieu of which they are issued and with
such appropriate insertions, omissions, substitutions and other variations as of
the officers executing such Warrant Certificates may determine, as evidenced by
their execution of such Warrant Certificates.
The Legended Regulation S Global Warrants will be exchangeable for
one or more unlegended permanent global Warrants on or after one year following
the Issue Date upon certification that the beneficial interests in such global
Warrants are owned by non-U.S. persons at any office or agency maintained by the
Company for that purpose pursuant to Section 1.10 hereof. Subject to the
provisions of Section 4.01 hereof, such exchange shall be without charge to the
holder. Upon surrender for cancellation of any one or more Legended Regulation S
Global Warrant Certificates, the Company shall execute, and the Warrant Agent
shall authenticate and deliver in exchange therefor, one or more unlegended
permanent global Warrant Certificates representing in the aggregate a like
number of Warrants. Until so exchanged, the holder of a Legended Regulation S
Global Warrant Certificate shall in all respects be entitled to the same
benefits under this Agreement as a holder of an unlegended permanent global
Warrant Certificate; provided that prior to one year after the Issue Date,
beneficial interests in the Legended Regulation S Global Warrant may be only
held through Euroclear or Cedel Bank. Cedel Bank and Euroclear will hold
interests in the Global Warrant on behalf of the participants through the
Depositary.
SECTION 1.06. Separation of Warrants and Notes. The Notes and the
Warrants will not be separately transferable until the Separability Date.
"Separability Date" shall mean the earliest to occur of: (i) October 5, 1998,
(ii) the date on which a registration statement under the Securities Act, with
respect to a registered exchange offer for the Notes
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or covering the sale by holders of the Notes is declared effective under the
Securities Act, (iii) the occurrence of an Exercise Event (as defined in Section
2.02 hereof), (iv) the occurrence of an Event of Default (as defined in the
Indenture), or (v) such date as may be determined by Xxxxxxx Xxxxx in its sole
discretion and specified to the Company, the Trustee and the Warrant Agent in
writing. The separation of the Warrants and the Notes is herein referred to as a
"Separation."
SECTION 1.07. Registration. The Company will keep, at the office or
agency maintained by the Company for such purpose, a register or registers in
which, subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of, and registration of transfer and exchange
of, Warrants as provided in this Article. Each person designated by the Company
from time to time as a person authorized to register the transfer and exchange
of the Warrants is hereinafter called, individually and collectively, the
"Registrar." The Company hereby initially appoints the Warrant Agent as
Registrar. Upon written notice to the Warrant Agent and any acting Registrar,
the Company may appoint a successor Registrar for such purposes.
The Company will at all times designate one person (who may be the
Company and who need not be a Registrar) to act as repository of a master list
of names and addresses of the holders of Warrants (the "Warrant Register"). The
Warrant Agent will act as such repository unless and until some other person is,
by written notice from the Company to the Warrant Agent and the Registrar,
designated by the Company to act as such. The Company shall cause each Registrar
to furnish to such repository, on a current basis, such information as to all
registrations of transfer and exchanges effected by such Registrar, as may be
necessary to enable such repository to maintain the Warrant Register on as
current a basis as is practicable.
SECTION 1.08. Registration of Transfers or Exchanges.
(a) Transfer or Exchange of Definitive Warrants. When Definitive
Warrants are presented to the Warrant Agent with a request from the holder:
(i) to register the transfer of the Definitive Warrants; or
(ii) to exchange such Definitive Warrants for an equal number of
Definitive Warrants of other authorized denominations,
the Warrant Agent shall register the transfer or make the exchange as requested
if the requirements for such transactions set forth in this Section 1.08 are
met; provided, however, that the Definitive Warrants presented or surrendered by
a holder for registration of transfer or exchange:
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(x) shall be duly endorsed or accompanied by a written instruction of
transfer or exchange in form satisfactory to the Company and the
Warrant Agent, duly executed by such holder or by his attorney, duly
authorized in writing; and
(y) in the case of Warrants the offer and sale of which have not been
registered under the Securities Act and are presented for transfer
or exchange prior to (1) the date which is two years (or such
shorter period as may be permitted by Rule 144(k) under the
Securities Act (or any successor provision thereto)) after the later
of the date of original issuance of the Warrants and the last date
on which the Company or any affiliate of the Company (or any
predecessor thereto) was the owner of such Warrants, or (2) such
later date, if any, as may be required by any applicable law (the
"Resale Restriction Termination Date"), such Warrants shall be
accompanied by the following additional information and documents,
as applicable:
(A) if such Warrants are being delivered to the Warrant Agent by a
holder for registration in the name of such holder, without
transfer, a certification from such holder to that effect (in
substantially the form of Exhibit C hereto); or
(B) if such Warrants are being transferred to a qualified
institutional buyer (as defined in Rule 144A under the
Securities Act), (a "QIB") in accordance with Rule 144A under
the Securities Act, a certification from the transferor to
that effect (in substantially the form of Exhibit C hereto);
(C) if such Warrants are being transferred in reliance on
Regulation S under the Securities Act, delivery by the
transferor of a certification to that effect (in substantially
the form of Exhibit C hereto), and a Certificate for
Regulation S Transfers in the form of Exhibit D hereto; or
(D) if such Warrants are being transferred in reliance on Rule 144
under the Securities Act, delivery by the transferor of (i) a
certification from the transferor to that effect (in
substantially the form of Exhibit C hereto), and (ii) an
opinion of counsel reasonably satisfactory to the Company to
the effect that such transfer is in compliance with the
Securities Act; or
(E) if such Warrants are being transferred in reliance on another
exemption from the registration requirements of the Securities
Act, a certification from the transferor to that effect (in
substantially the form of Exhibit C
7
hereto) and an opinion of counsel reasonably satisfactory to
the Company to the effect that such transfer is in compliance
with the Securities Act; provided that the Company may, based
upon the views of its own counsel, instruct the Warrant Agent
not to register such transfer in any case where the proposed
transferee is not a QIB or Non-U.S. Person.
(b) Restrictions on Transfer of a Definitive Warrant for a
Beneficial Interest in a Global Warrant. A Definitive Warrant may not be
transferred by a holder for a beneficial interest in a Global Warrant except
upon satisfaction of the requirements set forth below. Upon receipt by the
Warrant Agent of a Definitive Warrant, duly endorsed or accompanied by
appropriate instruments of transfer, in form satisfactory to the Warrant Agent,
together with:
(A) certification from such holder (in substantially the form of
Exhibit C hereto) that such Definitive Warrant is being
transferred to a QIB in accordance with Rule 144A under the
Securities Act; and
(B) written instructions directing the Warrant Agent to make, or
to direct the Depositary to make, an endorsement on the Global
Warrant to reflect an increase in the aggregate amount of the
Warrants represented by the Global Warrant,
then the Warrant Agent shall cancel such Definitive Warrant and cause, or direct
the Depositary to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Warrant Agent, the number of
Warrants represented by the Global Warrant to be increased accordingly. If no
Global Warrant is then outstanding, the Company shall issue, and the Warrant
Agent upon written instructions from the Company shall authenticate a new Global
Warrant in the appropriate amount.
(c) Transfer or Exchange of Global Warrants. The transfer or
exchange of Global Warrants or beneficial interests therein shall be effected
through the Depositary, in accordance with this Section 1.08, the Private
Placement Legend (as defined herein), this Agreement (including the restrictions
on transfer set forth herein) and the procedures of the Depositary therefor.
(d) Transfer or Exchange of a Beneficial Interest in a Global
Warrant for a Definitive Warrant.
(i) Any person having a beneficial interest in a Global Warrant may
transfer or exchange such beneficial interest for a Definitive
Warrant upon receipt by the Warrant Agent of written instructions or
such other form of instructions as is
8
customary for the Depositary from the Depositary or its nominee on
behalf of any person having a beneficial interest in a Global
Warrant, including a written order containing registration
instructions and, in the case of any such transfer or exchange prior
to the Resale Restriction Termination Date, the following additional
information and documents:
(A) if such beneficial interest is being transferred to the person
designated by the Depositary as being the beneficial owner, a
certification from such person to that effect (in
substantially the form of Exhibit C hereto); or
(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a
certification from the transferor to that effect (in
substantially the form of Exhibit C hereto); or
(C) if such beneficial interest is being transferred in reliance
on Regulation S under the Securities Act, delivery by the
transferor if (i) a certification to that effect (in
substantially in the form of Exhibit C hereto), and (ii) a
Certificate for Regulation S Transfers (in substantially the
form of Exhibit D hereto); or
(D) if such beneficial interest is being transferred in reliance
on Rule 144 under the Securities Act, delivery by the
transferor of (i) a certification to that effect (in
substantially the form of Exhibit C hereto) and (ii) an
opinion of counsel reasonably satisfactory to the Company to
the effect that such transfer is in compliance with the
Securities Act; or
(E) if such beneficial interest is being transferred in reliance
on another exemption from the registration requirements of the
Securities Act, a certification from the transferor to that
effect (in substantially the form of Exhibit C hereto) and an
opinion of counsel reasonably satisfactory to the Company to
the effect that such transfer is in compliance with the
Securities Act; provided that the Company may instruct the
Warrant Agent not to register such transfer in any case where
the proposed transferee is not a QIB or Non-U.S. Person,
then the Warrant Agent will cause, in accordance with the standing
instructions and procedures existing between the Depositary and the
Warrant Agent, the aggregate amount of the Global Warrant to be
reduced and, following such reduction, the Company will execute and,
upon receipt of an authentication
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order in the form of an officers' certificate (a certificate signed
by two officers of such company, one of whom must be the principal
executive officer, principal financial officer or principal
accounting officer) (an "Officers' Certificate"), the Warrant Agent
will authenticate and deliver to the transferee a Definitive
Warrant.
(ii) Definitive Warrants issued in exchange for a beneficial interest in
a Global Warrant pursuant to this Section 1.08(d) shall be
registered in such names and in such authorized denominations as the
Depositary, pursuant to instructions from its direct or indirect
participants or otherwise, shall instruct the Warrant Agent in
writing. The Warrant Agent shall deliver such Definitive Warrants to
the persons in whose names such Warrants are so registered and
adjust the Global Warrant pursuant to paragraph (h) of this Section
1.08.
(e) Restrictions on Transfer or Exchange of Global Warrants.
Notwithstanding any other provisions of this Agreement (other than the
provisions set forth in subsection (f) of this Section 1.08), a Global Warrant
may not be transferred or exchanged as a whole except by the Depositary to a
nominee of the Depositary or by a nominee of the Depositary to the Depositary or
another nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) Authentication of Definitive Warrants in Absence of Depositary.
If at any time:
(i) the Depositary for the Global Warrants notifies the Company that the
Depositary is unwilling or unable to continue as Depositary for the
Global Warrant and a successor Depositary for the Global Warrant is
not appointed by the Company within 90 days after delivery of such
notice; or
(ii) the Company, at its sole discretion, notifies the Warrant Agent in
writing that it elects to cause the issuance of Definitive Warrants
for all Global Warrants under this Agreement,
then the Company will execute, and the Warrant Agent will, upon receipt of an
Officers' Certificate requesting the authentication and delivery of Definitive
Warrants, authenticate and deliver Definitive Warrants, in an aggregate number
equal to the aggregate number of warrants represented by the Global Warrant, in
exchange for such Global Warrant.
(g) Private Placement Legend. Upon the transfer or exchange of
Warrant Certificates not bearing the legend set forth in the second paragraph of
Exhibit A attached hereto (the "Private Placement Legend"), the Warrant Agent
shall deliver Warrant Certificates that do not bear the Private Placement
Legend. Upon the transfer, exchange or
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replacement of Warrant Certificates bearing the Private Placement Legend, the
Warrant Agent shall deliver Warrant Certificates that bear the Private Placement
Legend unless, and the Warrant Agent is hereby authorized to deliver Warrant
Certificates without the Private Placement Legend if, (i) there is delivered to
the Warrant Agent an opinion of counsel reasonably satisfactory to the Company
and the Warrant Agent to the effect that neither such legend nor the related
restrictions on transfer are required in order to maintain compliance with the
provisions of the Securities Act or (ii) the Warrants to be transferred or
exchanged represented by such Warrant Certificates are being transferred or
exchanged pursuant to an effective registration statement under the Securities
Act.
(h) Cancellation or Adjustment of a Global Warrant. At such time as
all beneficial interests in a Global Warrant have either been exchanged for
Definitive Warrants, redeemed, repurchased or canceled, such Global Warrant
shall be returned to the Company or, upon written order to the Warrant Agent in
the form of an Officers' Certificate from the Company, retained and canceled by
the Warrant Agent. At any time prior to such cancellation, if any beneficial
interest in a Global Warrant is exchanged for Definitive Warrants, redeemed,
repurchased or canceled, the number of Warrants represented by such Global
Warrant shall be reduced and an endorsement shall be made on such Global Warrant
by the Warrant Agent to reflect such reduction.
(i) Obligations with Respect to Transfers or Exchanges of Definitive
Warrants.
(i) To permit registrations of transfers or exchanges, the Company shall
execute, and the Warrant Agent shall authenticate, Definitive
Warrants and Global Warrants.
(ii) All Definitive Warrants and Global Warrants issued upon any
registration, transfer or exchange of Definitive Warrants or Global
Warrants shall be the valid obligations of the Company, entitled to
the same benefits under this Warrant Agreement as the Definitive
Warrants or Global Warrants surrendered upon the registration of
transfer or exchange.
(iii) Prior to due presentment for registration of transfer of any
Warrant, the Warrant Agent and the Company may deem and treat the
person in whose name any Warrant is registered as the absolute owner
of such Warrant, and neither the Warrant Agent nor the Company shall
be affected by notice to the contrary.
SECTION 1.09. Lost, Stolen, Destroyed, Defaced or Mutilated Warrant
Certificates. Upon receipt by the Company and the Warrant Agent (or any agent of
the Company or the Warrant Agent, if requested by the Company) of evidence
satisfactory to
11
them of the loss, theft, destruction, defacement, or mutilation of any Warrant
Certificate and of indemnity satisfactory to them and, in the case of mutilation
or defacement, upon surrender of such Warrant Certificate to the Warrant Agent
for cancellation, then, in the absence of notice to the Company or the Warrant
Agent that such Warrant Certificate has been acquired by a bona fide purchaser
or holder in due course, the Company shall execute, and an authorized signatory
of the Warrant Agent shall manually authenticate and deliver, in exchange for or
in lieu of the lost, stolen, destroyed, defaced or mutilated Warrant
Certificate, a new Warrant Certificate representing a like number of Warrants,
bearing a number or other distinguishing symbol not contemporaneously
outstanding. Upon the issuance of any new Warrant Certificate under this Section
in a name other than the prior registered holder of the lost, stolen, destroyed,
defaced or mutilated Warrant Certificate, the Company may require the payment
from the holder of such Warrant Certificate of a sum sufficient to cover any
tax, stamp tax or other governmental charges that may be imposed in relation
thereto and any other expenses (including the fees and expenses of the Warrant
Agent and the Registrar) in connection therewith.
Every substitute Warrant Certificate executed and delivered pursuant
to this Section in lieu of any lost, stolen or destroyed Warrant Certificate
shall constitute an additional contractual obligation of the Company, whether or
not the lost, stolen or destroyed Warrant Certificate shall be at any time
enforceable by anyone, and shall be entitled to the benefits of (but shall be
subject to all the limitations of rights set forth in) this Agreement equally
and proportionately with any and all other Warrant Certificates duly executed
and delivered hereunder. The provisions of this Section 1.09 are exclusive with
respect to the replacement of lost, stolen, destroyed, defaced or mutilated
Warrant Certificates and shall preclude (to the extent lawful) any and all other
rights or remedies notwithstanding any law or statute existing or hereafter
enacted to the contrary with respect to the replacement of lost, stolen,
destroyed, defaced or mutilated Warrant Certificates.
The Warrant Agent is hereby authorized to authenticate in accordance
with the provisions of this Agreement, and deliver the new Warrant Certificates
required pursuant to the provisions of this Section.
SECTION 1.10. Offices for Exercise, etc. So long as any of the
Warrants remain outstanding, the Company will designate and maintain in the
Borough of Manhattan, The City of New York: (a) an office or agency where the
Warrant Certificates may be presented for exercise, (b) an office or agency
where the Warrant Certificates may be presented for registration of transfer and
for exchange (including the exchange of temporary Warrant Certificates for
definitive Warrant Certificates pursuant to Section 1.05 hereof), and
(c) an office or agency where notices and demands to or upon the Company in
respect of the Warrants or of this Agreement may be served. The Company may from
time to time change or rescind such designation, as it may deem desirable or
expedient; provided, however, that an office or agency shall at all times be
maintained in the Borough of Manhattan, The City
12
of New York, as provided in the first sentence of this Section. In addition to
such office or offices or agency or agencies, the Company may from time to time
designate and maintain one or more additional offices or agencies within or
outside The City of New York, where Warrant Certificates may be presented for
exercise or for registration of transfer or for exchange, and the Company may
from time to time change or rescind such designation, as it may deem desirable
or expedient. The Company will give to the Warrant Agent written notice of the
location of any such office or agency and of any change of location thereof. The
Company hereby designates the Warrant Agent at its principal corporate trust
office identified in Section 7.03 in the Borough of Manhattan, The City of New
York (the "Warrant Agent Office"), as the initial agency maintained for each
such purpose. In case the Company shall fail to maintain any such office or
agency or shall fail to give such notice of the location or of any change in the
location thereof, presentations and demands may be made and notice may be served
at the Warrant Agent Office and the Company appoints the Warrant Agent as its
agent to receive all such presentations, surrenders, notices and demands.
ARTICLE II
DURATION, EXERCISE OF WARRANTS; EXERCISE PRICE
AND REPURCHASE OF WARRANTS
SECTION 2.01. Duration of Warrants. Subject to the terms and
conditions established herein, the Warrants shall expire at 5:00 p.m., New York
City time, on April 15, 2008. The applicable date of expiration of a particular
Warrant is referred to herein as the "Expiration Date" of such Warrant. Each
Warrant may be exercised on any Business Day (as defined below) on or after the
Exercisability Date (as defined in Section 2.02) and on or prior to the close of
business on the Expiration Date.
Any Warrant not exercised before the close of business on the
Expiration Date shall become void, and all rights of the holder under the
Warrant Certificate evidencing such Warrant and under this Agreement shall
cease.
"Business Day" shall mean any day on which (i) banks in The City of
New York, (ii) the principal U.S. securities exchange or market, if any, on
which any Common Stock is listed or admitted to trading and (iii) the principal
U.S. securities exchange or market, if any, on which the Warrants are listed or
admitted to trading are open for business.
SECTION 2.02. Exercise, Exercise Price, Settlement and Delivery. (a)
Subject to the provisions of this Agreement, each holder of a Warrant shall have
the right to purchase from the Company on or after the Exercisability Date and
on or prior to the close of business on the Expiration Date the number of fully
paid, registered and non-assessable
13
Warrant Shares (and any other securities or property purchasable or deliverable
upon exercise of such Warrant as provided in Article V) which the holder may at
the time be entitled to receive on exercise of such Warrant, subject to
adjustment in accordance with Article V hereof, at the purchase price of $0.01
for each Warrant Share purchased (the "Exercise Price"). The number and amount
of Warrant Shares for which a particular Warrant may be exercised (the "Exercise
Rate") shall be subject to adjustment from time to time as set forth in Article
V hereof.
"Exercisability Date" means the first day on or after the
Separability Date on which there will have occurred an Exercise Event.
"Exercise Event" means the date of the occurrence of the earliest
of: (i) the time immediately prior to the occurrence of a Change of Control (as
defined in the Indenture), (ii) (a) the 180th day (or such earlier date as
determined by the Company in its sole discretion) following the closing of an
Initial Public Equity Offering (as defined herein) or (b) upon the closing of an
Initial Public Equity Offering but only in respect of Warrants, if any, required
to be exercised to permit the holders thereof to sell Warrant Shares pursuant to
their respective registration rights, (iii) the time when a class of equity
securities of the Company is listed on a national securities exchange or
authorized for quotation on the Nasdaq National Market or is otherwise subject
to registration under the Exchange Act, or (iv) April 8, 2000.
"Initial Public Equity Offering" means a primary public offering
(whether or not underwritten, but excluding any offering pursuant to Form S-8
under the Securities Act or any other publicly registered offering pursuant to
the Securities Act pertaining to an issuance of shares of Common Stock or
securities exercisable therefor under any benefit plan, employee compensation
plan, or employee or director stock purchase plan) of Common Stock pursuant to
an effective registration statement under the Securities Act.
"Person" means any individual, corporation, partnership, limited
liability company, partnership, joint venture, association, joint-stock company,
trust, business trust, unincorporated organization, government or any agency or
political subdivision thereof or any other entity, including any predecessor of
any such entity.
"Triggering Date" means the date of the consummation of a bona fide
underwritten public offering of Common Stock, as a result of which at least 20%
of the outstanding shares of Common Stock are listed on a United States national
securities exchange or the Nasdaq National Market.
(b) Warrants may be exercised on or after the date they are
exercisable hereunder by (i) surrendering at any office or agency maintained for
that purpose by the Company pursuant to Section 1.10 (each a "Warrant Exercise
Office") the Warrant
14
Certificate evidencing such Warrants with the form of election to purchase
Warrant Shares set forth on the reverse side of the Warrant Certificate (the
"Election to Exercise") duly completed and signed by the registered holder or
holders thereof or by the duly appointed legal representative thereof or by a
duly authorized attorney, and in the case of a transfer, such signature shall be
guaranteed by an eligible guarantor institution, and (ii) paying in full the
Exercise Price for each such Warrant exercised. Each Warrant may be exercised
only in whole.
(c) Simultaneously with the exercise of each Warrant, payment in
full of the aggregate Exercise Price may be made, at the option of the holder,
(i) in cash in United States dollars or by certified or official bank check,
(ii) by a Cashless Exercise (as defined below) or (iii) by any combination of
(i) and (ii), to the Warrant Exercise Office where the Warrant Certificate is
being surrendered. A "Cashless Exercise" shall mean an exercise of a Warrant in
accordance with the immediately following two sentences. To effect a Cashless
Exercise, the holder may exercise a Warrant or Warrants without payment of the
Exercise Price in cash by surrendering such Warrant or Warrants (represented by
one or more Warrant Certificates ) and, in exchange therefor, receiving such
number of shares of Common Stock equal to the product of (1) that number of
shares of Common Stock for which such Warrant are exercisable and which would be
issuable in the event of an exercise with payment in cash of the Exercise Price
and (2) the Cashless Exercise Ratio (as defined below). The "Cashless Exercise
Ratio" shall equal a fraction, the numerator of which is the excess of the
Current Market Value (calculated as set forth in this Agreement) per share of
Common Stock on the date of exercise over the Exercise Price per share of Common
Stock as of the date of exercise and the denominator of which is the Current
Market Value per share of Common Stock on the date of exercise. Upon surrender
of a Warrant Certificate representing more than one Warrant in connection with a
holder's option to elect a Cashless Exercise, such holder must specify the
number of Warrants for which such Warrant Certificate is to be exercised
(without giving effect to such Cashless Exercise). All provisions of this
Agreement shall be applicable with respect to a Cashless Exercise of a Warrant
Certificate for less than the full number of Warrants represented thereby. No
payment or adjustment shall be made on account of any distributions of dividends
on the Common Stock issued upon exercise of a Warrant.
If the Company has not effected the registration under the
Securities Act of the offer and sale of the Warrant Shares by the Company to the
holders of the Warrants on or prior to the Exercise Date (as defined herein),
the Company may elect to require that the holders of the Warrants effect the
exercise thereof solely pursuant to the Cashless Exercise option and may amend
the Warrants and this Agreement to eliminate the option to pay the Exercise
Price in cash. The Company shall calculate and transmit to the Warrant Agent,
and the Warrant Agent shall have no obligation under this section to calculate,
the Cashless Exercise Ratio.
15
(d) Upon surrender of a Warrant Certificate and payment and
collection of the Exercise Price at any Warrant Exercise Office (other than any
Warrant Exercise Office that also is an office of the Warrant Agent), such
Warrant Certificate and payment shall be promptly delivered to the Warrant
Agent. The "Exercise Date" shall be the date when all of the items referred to
in the first sentence of each of paragraphs (b) and (c) of this Section 2.02 are
received by the Warrant Agent at or prior to 11:00 a.m., New York City time, on
a Business Day and the exercise of the Warrants will be effective as of such
Exercise Date. If any items referred to in the first sentence of each of
paragraphs (b) and (c) are received after 11:00 a.m., New York City time, on a
Business Day, the exercise of the Warrants to which such item relates will be
effective on the next succeeding Business Day. Notwithstanding the foregoing, in
the case of an exercise of Warrants on the Expiration Date, if all of the items
referred to in the first sentence of each of paragraphs (b) and (c) are received
by the Warrant Agent at or prior to 5:00 p.m., New York City time, on the
Expiration Date, the exercise of the Warrants to which such items relate will be
effective on the Expiration Date.
(e) Upon the exercise of a Warrant in accordance with the terms
hereof, the receipt of a Warrant Certificate and payment of the Exercise Price
(or election of the Cashless Exercise option), the Warrant Agent shall: (i)
except to the extent exercise of the Warrant has been effected through Cashless
Exercise, cause an amount equal to the aggregate Exercise Price to be paid to
the Company by crediting the same to the account designated by the Company in
writing to the Warrant Agent for that purpose; (ii) advise the Company promptly
by telephone of the amount so deposited to the Company's account and promptly
confirm such telephonic advice in writing; and (iii) as soon as practicable,
advise the Company in writing of the number of Warrants exercised in accordance
with the terms and conditions of this Agreement and the Warrant Certificates,
the instructions of each exercising holder of the Warrant Certificates with
respect to delivery of the Warrant Shares to which such holder in entitled upon
such exercise, and such other information as the Company shall reasonably
request.
(f) Subject to Section 5.02 hereof, as soon as practicable after the
exercise of any Warrant or Warrants in accordance with the terms hereof, the
Company shall issue or cause to be issued to, or upon the written order of, the
registered holder of the Warrant Certificate evidencing such exercised Warrant
or Warrants, a certificate or certificates evidencing the Warrant Shares to
which such holder is entitled, in fully registered form, registered in such name
or names as may be directed by such holder pursuant to the Election to Exercise,
as set forth on the reverse of the Warrant Certificate. Such certificate or
certificates evidencing the Warrant Shares shall be deemed to have been issued
and any persons who are designated to be named therein shall be deemed to have
become the holder of record of such Warrant Shares as of the close of business
on the Exercise Date, the Warrant Shares may initially be issued in global form
(the "Global Shares"). Such Global Shares shall represent such of the
outstanding Warrant
16
Shares as shall be specified therein and each shall provide that it shall
represent the aggregate amount of outstanding Warrant Shares from time to time
endorsed thereon and that the aggregate amount of outstanding Warrant Shares
represented thereby may from time to time be reduced or increased, as
appropriate. Any endorsement of a Global Share to reflect the amount of any
increase or decrease in the amount of outstanding Shares represented thereby
shall be made by the registrar for the Warrant Shares and the Depositary in
accordance with instructions given by the holder thereof. The Depository Trust
Company (or its nominee) shall (if possible) act as the Depositary with respect
to the Global Shares until a successor shall be appointed by the Company and the
registrar for the Warrant Shares. After such exercise of any Warrant or Warrant
Shares, the Company shall also issue or cause to be issued to or upon the
written order of the registered holder of such Warrant Certificate, a new
Warrant Certificate, countersigned by the Warrant Agent pursuant to written
instruction, evidencing the number of Warrants, if any, remaining unexercised
unless such Warrants shall have expired.
SECTION 2.03. Cancellation of Warrant Certificates. In the event the
Company shall purchase or otherwise acquire Warrants, the Warrant Certificates
evidencing such Warrants may thereupon be delivered to the Warrant Agent, and if
so delivered, shall at the Company's written instruction be canceled by it and
retired. The Warrant Agent shall cancel all Warrant Certificates properly
surrendered for exchange, substitution, transfer or exercise. Upon the Company's
written request, the Warrant Agent shall deliver such canceled Warrant
Certificates to the Company.
SECTION 2.04. Notice of an Exercise Event. As soon as practicable
after the occurrence of an Exercise Event, the Company shall, send or cause to
be sent to each holder of Warrants with respect to which such Exercise Event has
occurred, to the extent that the Warrants are held of record by a depositary or
other agent (with a copy to the Warrant Agent), by first-class mail, at the
addresses appearing on the Warrant Register, a notice prepared by the Company
advising such holder of the Exercise Event which has occurred, which notice
shall describe the type of Exercise Event and the date of the occurrence
thereof, as applicable, and, in either case, the date of expiration of the right
to exercise the Warrants prominently set forth in the face of such notice.
ARTICLE III
OTHER PROVISIONS RELATING TO
RIGHTS OF HOLDERS OF WARRANTS
SECTION 3.01. Enforcement of Rights. (a) Notwithstanding any of the
provisions of this Agreement, any holder of any Warrant Certificate, without the
consent of the Warrant Agent, the holder of any Warrant Shares or the holder of
any other Warrant Certificate, may, in and for his own behalf, enforce, and may
institute and maintain any suit, action or proceeding against the Company
suitable to enforce, his right to exercise the
17
Warrant or Warrants evidenced by his Warrant Certificate in the manner provided
in such Warrant Certificate and in this Agreement.
(b) Neither the Warrants nor any Warrant Certificate shall entitle
the holders thereof to any of the rights of a holder of shares of Common Stock,
including, without limitation, the right to vote or to receive any dividends or
other payments or to consent or to receive notice as stockholders in respect of
the meetings of stockholders or for the election of directors of the Company or
any other matter, or any rights whatsoever as a holder of shares of Common
Stock, except as expressly provided herein (including Section 5.03 hereof).
SECTION 3.02. Obtaining Stock Exchange Listings. The Company will
from time to time take all action which may be necessary so that the Warrant
Shares, immediately upon their issuance upon the exercise of Warrants, will be
listed on the principal securities exchanges and markets within the United
States or Canada (including the Nasdaq National Market), if any, on which other
shares of Common Stock are then listed or quoted.
ARTICLE IV
CERTAIN COVENANTS OF THE COMPANY
SECTION 4.01. Payment of Taxes. The Company will pay all documentary
stamp taxes attributable to the initial issuance of Warrants and of the Warrant
Shares upon the exercise of Warrants; provided, however, that the Company shall
not be required to pay any tax or other governmental charge which may be payable
in respect of any transfer or exchange of any Warrant Certificates or any
certificates for Warrant Shares in a name other than the registered holder of a
Warrant Certificate surrendered upon the exercise of a Warrant. In any such
case, no transfer or exchange shall be made unless or until the person or
persons requesting issuance thereof shall have paid to the Company the amount of
such tax or other governmental charge or shall have established to the
satisfaction of the Company that such tax or other governmental charge has been
paid or an exemption is available therefrom.
SECTION 4.02. Rules 144 and 144A. While any Warrants remain
outstanding, the Company covenants that it shall file the reports required to be
filed by it under the Exchange Act, and the rules and regulations adopted by the
Securities and Exchange Commission thereunder, in a timely manner in accordance
with the requirements of the Exchange Act. If at any time the Company is not
required to file such reports, it will distribute to each holder or beneficial
owner of Warrants that are "restricted securities" within the meaning of Rule
144 and are not saleable in full under paragraph (k) of Rule 144,
18
such information as is necessary to permit sales pursuant to Rule 144A under the
Securities Act.
SECTION 4.03. Form of Initial Public Equity Offering. The Company
agrees that it shall not make an Initial Public Equity Offering of any class of
its Capital Stock (other than the class of Capital Stock into which the Warrants
are exercisable) without adopting such amendments to the terms of the Company's
Articles of Incorporation as may be necessary to provide that the Warrant Shares
are convertible into the class of Capital Stock subject to the Initial Public
Equity Offering (the "Subject Class") on a share-for-share or other equitable
basis; provided that the rights, conditions and privileges attaching to the
Subject Class as compared to the rights, conditions and privileges attaching to
the Common Stock into which such Warrants would be convertible on the date
hereof (if the Warrants were immediately exercisable) would not adversely affect
holders of the Warrant Shares; it being understood that the Capital Stock into
which the Warrants shall be convertible (a) shall represent the same economic
interests, but may not have the same voting rights, in the Company as the Common
Stock outstanding on the date hereof and (b) shall be identical to the class of
Capital Stock issued and sold by the Company in the Initial Public Equity
Offering, if any.
SECTION 4.04. Securities Act and Applicable State Securities Laws.
The Company shall to comply with all applicable laws, including the Securities
Act and any applicable state securities laws, in connection with the offer and
sale of Common Stock (and other securities and property deliverable ) upon
exercise of the Warrants.
SECTION 4.05. Resolution of Preemptive Rights, If Any. Neither the
Warrants or the Warrant Shares shall be subject to any preemptive or similar
rights.
ARTICLE V
ADJUSTMENTS
SECTION 5.01. Adjustment of Exercise Rate; Notices. The Exercise
Rate is subject to adjustment from time to time as provided in this Section.
(a) Adjustment for Change in Capital Stock. If, after the date
hereof, the Company:
(i) pays a dividend or makes a distribution on shares of Common
Stock in shares of Common Stock (other than any such dividend to the
extent covered by Section 5.03);
19
(ii) subdivides any of its outstanding shares of Common Stock into a
greater number of shares;
(iii) combines any of its outstanding shares of Common Stock into a
smaller number of shares;
(iv) pays a dividend or makes a distribution on shares of Common
Stock in shares of Capital Stock (as defined below) (other than Common
Stock or rights, warrants, or options for its Common Stock to the extent
such issuance or distribution is covered by Section 5.03); or
(v) issues by reclassification of any of its Common Stock or any
shares of any of its Capital Stock;
then the Company shall adjust the Exercise Rate in effect immediately prior to
such action for each Warrant then outstanding so that the holder of a Warrant
thereafter exercised may receive the number of shares of Capital Stock of the
Company which such holder would have owned immediately following such action if
such holder had exercised the Warrant immediately prior to such action or
immediately prior to the record date applicable thereto, if any (regardless of
whether the Warrants then outstanding are then exercisable and without giving
effect to the Cashless Exercise option). If there are no outstanding shares of
Common Stock that are of the same class as the Warrant Shares at the time of any
such action and such action has therefore been taken only in respect of Common
Stock, the adjustment shall relate to the Warrant Shares in their same form (and
not in the form of Common Shares) if it would not frustrate the intent and
purposes of this Section 5.01.
The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification. In
the event that such dividend or distribution is not so paid or made or such
subdivision, combination or reclassification is not effected, the Exercise Rate
shall again be adjusted to be the Exercise Rate which would then be in effect if
such record date or effective date had not been so fixed.
If after an adjustment a holder of a Warrant upon exercise of such
Warrant may receive shares of two or more classes of Capital Stock of the
Company, the Exercise Rate shall thereafter be subject to adjustment upon the
occurrence of an action taken with respect to any such class of Capital Stock as
is contemplated by this Article V with respect to the Common Stock, on terms
comparable to those applicable to Common Stock in this Article V.
Nothing in this Section 5.01(a) shall require any adjustment in the
Exercise Rate upon (i) the issuance, conversion, exchange or exercise of options
to acquire shares of Common
20
Stock by, or the issuance of restricted stock or other similar equity-based
payments to, officers, directors or employees of the Company; provided that the
exercise price of such options or the purchase price of such restricted stock,
as the case may be, at the time of issuance thereof, is at least equal to the
then Current Market Value of the Common Stock underlying such options or
restricted stock or (ii) the reclassification of the Company's Common Stock into
two or more series of common stock with different voting powers but otherwise
representing the same economic interests; provided that such series of common
stock will automatically convert into shares of Common Stock when the holder
sells, exchanges or otherwise transfers such shares to any person other than an
affiliate of the holder.
(b) Adjustment for Sale of Common Stock Below Current Market Value.
If, after the date hereof, the Company grants or sells to an Affiliate of the
Company (other than a wholly-owned subsidiary) any shares of Common Stock or of
securities convertible into or exchangeable or exercisable for any shares of
Common Stock at a price below the then Current Market Value (other than (1)
pursuant to the exercise of the Warrants, (2) upon the conversion, exchange or
exercise of any security convertible, exchangeable or exercisable for, shares of
Common Stock outstanding on the date hereof, (3) upon conversion, exchange or
exercise of convertible, exchangeable or exercisable security as to which, upon
the issuance thereof, has previously been the subject of any required adjustment
pursuant to this Section 5 or (4) upon the conversion, exchange or exercise of
convertible, exchangeable or exercisable securities of the Company outstanding
on the date hereof (to the extent permitted by the terms of such securities as
in effect on the date of this Agreement)) (calculated as set forth in Section
5.01(o) hereof), the Exercise Rate for each Warrant then outstanding shall be
adjusted in accordance with the formula:
E^1 = E (O + N)
-------------------------
(O + (N x P/M))
where:
E^1 = the adjusted Exercise Rate for each Warrant then outstanding;
E = the then current Exercise Rate for each Warrant then outstanding;
O = the number of shares of Common Stock outstanding immediately prior
to the sale of Common Stock or issuance of securities convertible,
exchangeable or exercisable for Common Stock;
N = the number of shares of Common Stock so sold or the maximum stated
number of shares of Common Stock issuable upon the conversion,
exchange or
21
exercise of any such convertible, exchangeable or exercisable
securities, as the case may be;
P = the proceeds per share of Common Stock received by the Company,
which (i) in the case of shares of Common Stock is the amount
received by the Company in consideration for the sale and issuance
of such shares; and (ii) in the case of securities convertible into
or exchangeable or exercisable for shares of Common Stock is the
amount received by the Company in consideration for the sale and
issuance of such convertible or exchangeable or exercisable
securities, plus the minimum aggregate amount of additional
consideration, other than the surrender of such convertible or
exchangeable securities, payable to the Company upon exercise,
conversion or exchange thereof; and
M = the Current Market Value as of the Time of Determination or at the
time of sale, as the case may be (calculated as set forth in Section
5.01(n) hereof.
The adjustment shall become effective immediately after the record
date for the determination of stockholders entitled to receive the rights,
warrants or options to which this paragraph (b) applies or upon consummation of
the sale of Common Stock, as the case may be. To the extent that shares of
Common Stock are not delivered after the expiration of such rights or warrants,
the Exercise Rate for each Warrant then outstanding shall be readjusted to the
Exercise Rate which would otherwise be in effect had the adjustment 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. In the event that
such rights or warrants are not so issued, the Exercise Rate for each Warrant
then outstanding shall again be adjusted to be the Exercise Rate which would
then be in effect if such date fixed for determination of stockholders entitled
to receive such rights or warrants had not been so fixed.
No adjustment shall be made under this paragraph (b) if the
application of the formula stated above in this paragraph (b) would result in a
value of E1 that is lower than the value of E.
No adjustment shall be made under this paragraph (b) for any
adjustment which is the subject of paragraph (c), (d) or (e) of this Section
5.01.
"Affiliate" means, with respect to any specified Person, (i) any
other Person directly or indirectly controlling or controlled by or under direct
or indirect common control with such specified Person or (ii) any other Person
that owns, directly or indirectly, 10% or more of such specified Person's Voting
Stock or any executive officer or director of any such specified Person or other
Person or, with respect to any natural Person, any other Person in such Person's
immediate family. For the purposes of this definition, "control," when used
22
with respect to any specified 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.
Notwithstanding the foregoing, no individual shall be deemed to be an Affiliate
of a Person solely by reason of (a) such Person being a party to an Incumbent
Agreement (as defined in the Indenture) or (b) such Person owning an interest in
a Restricted Subsidiary (as defined in the Indenture) pursuant to, or as a
result of, an Incumbent Agreement (as defined in the Indenture).
(c) Notice of Adjustment. Whenever the Exercise Rate is adjusted,
the Company shall promptly mail to holders of Warrants then outstanding at the
addresses appearing on the Warrant Register a notice of the adjustment. The
Company shall file with the Warrant Agent and any other Registrar such notice
and a certificate from the Company's independent public accountants briefly
stating the facts requiring the adjustment and the manner of computing it. The
certificate shall be conclusive evidence that the adjustment is correct. Neither
the Warrant Agent nor any such Registrar shall be under any duty or
responsibility with respect to any such certificate except to exhibit the same
during normal business hours to any holder desiring inspection thereof.
(d) Reorganization of Company; Special Distributions. (i) If the
Company, in a single transaction or through a series of related transactions,
consolidates with or merges with or into any other person or sells, assigns,
transfers, leases, conveys or otherwise disposes of all or substantially all of
its properties and assets to another person or group of affiliated persons or is
a party to a merger or binding share exchange which reclassifies or changes its
outstanding Common Stock (a "Fundamental Transaction"), as a condition to
consummating any such transaction the person formed by or surviving any such
consolidation or merger if other than the Company or the person to whom such
transfer has been made (the "Surviving Person") shall enter into a supplemental
warrant agreement. The supplemental warrant agreement shall provide (a) that the
holder of a Warrant then outstanding may exercise it for the kind and amount of
securities, cash or other assets which such holder would have received
immediately after the Fundamental Transaction if such holder had exercised the
Warrant immediately before the effective date of the transaction (whether or not
the Warrants were then exercisable and without giving effect to the Cashless
Exercise option) (it being understood that the Warrants will remain exercisable
only in accordance with their terms and that conditions to exercise, such as
payment of Exercise Price, will remain applicable), assuming (to the extent
applicable) that such holder (i) was not a constituent person or an affiliate of
a constituent person to such transaction, (ii) made no election with respect
thereto, and (iii) was treated alike with the plurality of non-electing holders,
and (b) that the Surviving Person shall succeed to and be substituted to every
right and obligation of the Company in respect of this Agreement and the
Warrants. The supplemental warrant agreement shall provide for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Article V. The
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Surviving Person shall mail to holders of Warrants at the addresses appearing on
the Warrant Register a notice briefly describing the supplemental warrant
agreement. If the issuer of securities deliverable upon exercise of Warrants is
an affiliate of the Surviving Person, that issuer shall join in the supplemental
warrant agreement.
(ii) Notwithstanding the foregoing, if the Company enters into a
Fundamental Transaction with another Person (other than a subsidiary of the
Company) and consideration is payable to holders of the shares of Capital Stock
(or other securities or property) issuable or deliverable upon exercise of the
Warrants in exchange for such shares of Capital Stock in connection with such
Fundamental Transaction which consists solely of cash, then the holders of
Warrants shall be entitled to receive distributions on the date of such event on
an equal basis with holders of such shares of Capital Stock (or other securities
issuable upon exercise of the Warrants) as if the Warrants had been exercised
immediately prior to such event, less the aggregate Exercise Price. Upon receipt
of such payment, if any, the rights of a holder of a Warrant shall terminate and
cease and such holder's Warrants shall expire.
(iii) If this paragraph (d) applies, it shall supersede the
application of paragraph (a) of this Section 5.01.
(e) Company Determination Final. Any determination that the Company
or the board of directors of the Company must make pursuant to this Article V is
conclusive.
(f) Warrant Agent's Adjustment Disclaimer. The Warrant Agent shall
have no duty to determine when an adjustment under this Article V should be
made, how it should be made or what it should be. The Warrant Agent shall have
no duty to determine whether a supplemental warrant agreement under paragraph
(d) need be entered into or whether any provisions of any supplemental warrant
agreement are correct. The Warrant Agent shall not be accountable for and makes
no representation as to the validity or value of any securities or assets issued
upon exercise of Warrants. The Warrant Agent shall not be responsible for the
Company's failure to comply with this Article V.
(g) Adjustment for Tax Purposes. In the event of a taxable
distribution to holders of shares of Common Stock which results in an adjustment
to the number of shares of Common Stock or other consideration for which a
Warrant may be exercised, the holders of the Warrants may, in certain
circumstances, be deemed to have received a distribution subject to United
States federal income tax as a dividend. The Company may make such increases in
the Exercise Rate, in addition to those otherwise required by this Section, as
it considers to be advisable in order that any event treated for federal income
tax purposes as a dividend of stock or stock rights shall not be taxable to the
recipients.
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(h) Underlying Shares. The Company shall at all times reserve and
keep available, free from preemptive rights, out of its authorized but unissued
Common Stock or Common Stock held in the treasury of the Company, for the
purpose of effecting the exercise of Warrants, the full number of Warrant Shares
then deliverable upon the exercise of all Warrants then outstanding and payment
of the exercise price, and the shares so deliverable shall be fully paid and
nonassessable and free from all liens and security interests.
(i) Specificity of Adjustment. Regardless of any adjustments in the
number or kind of shares purchasable upon the exercise of the Warrants, Warrant
Certificates theretofore or thereafter issued may continue to express the same
number and kind of Shares per Warrant as are stated on the Warrant Certificates
initially issuable pursuant to this Agreement.
(j) Voluntary Adjustment. The Company from time to time may increase
the Exercise Rate by any number and for any period of time (provided that such
period shall not be less than 20 Business Days). Whenever the Exercise Rate is
so increased, the Company shall mail to holders at the addresses appearing on
the Warrant Register and file with the Warrant Agent a notice of the increase.
The Company shall give the notice at least 15 days before the date the increased
Exercise Rate takes effect. The notice shall state the increased Exercise Rate
and the period it will be in effect. A voluntary increase in the Exercise Rate
does not change or adjust the Exercise Rate otherwise in effect as determined by
this Section 5.01.
(k) Multiple Adjustments. After an adjustment to the Exercise Rate
for outstanding Warrants under this Article V, any subsequent event requiring an
adjustment under this Article V shall cause an adjustment to the Exercise Rate
for outstanding Warrants as so adjusted.
(l) Definitions.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, partnership interests, participations, rights in or other
equivalents (however designated and whether voting or non-voting) of, such
Person's capital stock, and any rights (other than debt securities convertible
into Capital Stock), warrants or options exchangeable for or convertible into
such capital stock, whether outstanding on the date hereof or issued hereafter.
"Convertible Preferred Stock" means any securities convertible or
exercisable or exchangeable into Common Stock, whether outstanding on the date
hereof or hereafter issued.
"Current Market Value" per share of Common Stock or any other
security at any date means (i) if the security is not registered under the
Exchange Act, (a) the value of
25
the security, determined in good faith by the board of directors of the Company
and certified in a board resolution, based on the most recently completed
arm's-length transaction between the Company and a person other than an
Affiliate of the Company and the closing of which occurs on such date or shall
have occurred within the six-month period preceding such date, or (b) if no such
transaction shall have occurred on such date or within such six-month period or
if the board of directors of the Company otherwise elects, the Fair Market Value
of the security as determined by a nationally or regionally recognized
independent financial expert (provided that, in the case of the calculation of
Current Market Value for determining the cash value of fractional shares, any
such determination within six months that is, in the good faith judgment of the
board or directors of the Company, a reasonable determination of value, may be
utilized) or (ii) (a) if the security is registered under the Exchange Act, the
average of the daily closing sales prices of the securities for the 20
consecutive trading days immediately preceding such date, or (b) if the security
has been registered under the Exchange Act for less than 20 consecutive trading
days before such date, then the average daily closing sales prices for all of
the trading days before such date for which closing sales prices are available,
in the case of each of (ii) (a) and (ii) (b), as certified to the Warrant Agent
by the President or any vice president or the Chief Financial Officer of the
Company. The closing sales price for each such trading day shall be: (A) in the
case of a security listed or admitted to trading on any United States national
securities exchange or quotation system, the closing sales price, regular way,
on such day, or if no sale takes place on such day, the average of the closing
bid and asked prices on such day, (B) in the case of a security not then listed
or admitted to trading on any national securities exchange or quotation system,
the last reported sale price on such day, or if no sale takes place on such day,
the average of the closing bid and asked prices on such day, as reported by a
reputable quotation source designated by the Company, (C) in the case of a
security not then listed or admitted to trading on any national securities
exchange or quotation system and as to which no such reported sale price or bid
and asked prices are available, the average of the reported high bid and low
asked prices on such day, as reported by a reputable quotation service, or a
newspaper of general circulation in the Borough of Manhattan, The City and State
of New York, customarily published on each business day, designated by the
Company, or, if there shall be no bid and asked prices on such day, the average
of the high bid and low asked prices, as so reported, on the most recent day
(not more than 30 days prior to the date in question) for which prices have been
so reported and (D) if there are not bid and asked prices reported during the 30
days prior to the date in question, the Current Market Value shall be determined
as if the securities were not registered under the Exchange Act.
"Fair Market Value" means, with respect to any asset or property,
the sale value that would be obtained in an arm's length transaction between an
informed and willing seller under no compulsion to sell and an informed and
willing buyer under no compulsion to buy. Unless otherwise specified in this
Agreement, Fair Market Value shall be determined by the board of directors of
the Company acting in good faith and as of the date on which such determination
is made.
26
"Independent Financial Expert" means a nationally or regionally
recognized investment banking or public accounting firm in the United States or,
if the Company believes that an investment banking or public accounting firm is
generally not qualified to give such an opinion, a nationally recognized
appraisal firm, in any case (i) which does not, and whose directors, officers
and employees or Affiliates do not, have a direct or indirect material financial
interest for its proprietary account in the Company or any of its Affiliates and
(ii) which, in the judgment of the Board of Directors of the Company, is
otherwise independent with respect to the Company and its Affiliates and
qualified to perform the task for which it is to be engaged.
"Time of Determination" means, (i) in the case of any distribution
of securities or other property to existing stockholders to which paragraph (b)
applies, the time and date of the determination of stockholders entitled to
receive such securities or property or (ii) in the case of any other issuance
and sale to which paragraph (b) applies, the time and date of such issuance or
sale.
(m) When De Minimis Adjustment May be Deferred. No Adjustment in the
Exercise Rate need be made unless the adjustment would require an increase of at
least 1% in the Exercise Rate. Any adjustments that are not made shall be
carried forward and taken into account in any subsequent adjustments. All
calculations under this Section 5 shall be made to the nearest 1/1000th of a
share, as the case may be.
SECTION 5.02. Fractional Shares. The Company will not be required to
issue fractional Warrant Shares upon exercise of the Warrants or distribute
Warrant Share certificates that evidence fractional Warrant Shares. In the event
a holder is required by Section 2.02(c) to make a Cashless Exercise, the number
of Warrant Shares issuable shall be rounded up to the nearest whole number. In
addition, in no event shall any holder of Warrants be required to make any
payment of a fractional cent. In lieu of fractional Warrant Shares, there shall
be paid to the registered holders of Warrant Certificates at the time Warrants
evidenced thereby are exercised as herein provided an amount in cash equal to
the same fraction of the Current Market Value, as defined in paragraph (l) of
Section 5.01 of this Agreement per Warrant Share on the Business Day preceding
the date the Warrant Certificates evidencing such Warrants are surrendered for
exercise. Such payments will be made by check or by transfer to an account
maintained by such registered holder with a bank in The City of New York. If any
holder surrenders for exercise more than one Warrant Certificate, the number of
Warrant Shares deliverable to such holder may, at the option of the Company, be
computed on the basis of the aggregate amount of all the Warrants exercised by
such holder.
SECTION 5.03. Certain Distributions. If at any time after the
Exercisability Date, the Company grants, issues or sells options, convertible
securities, or rights to purchase Capital Stock, warrants or other securities
pro rata to the record holders of any
27
Common Stock ("Distribution Rights") or, without duplication, makes any dividend
or otherwise makes any distribution, including (subject to applicable law)
pursuant to any plan of liquidation (each, a "Distribution"), on the Common
Stock (whether in cash, property, evidences of indebtedness or otherwise), then
the Company shall grant, issue, sell or make to each registered holder of
Warrants then outstanding the aggregate Distribution Rights or Distribution, as
the case may be, which such holder would have acquired if such holder had held
the maximum number of shares of Common Stock acquirable upon complete exercise
of such holder's Warrants (regardless of whether the exercise of the Warrants is
then suspended and without giving effect to the Cashless Exercise option)
immediately before the record date for the grant, issuance or sale of such
Distribution Rights or Distribution, as the case may be, or, if there is no such
record date, the date as of which the record holders of Common Stock are to be
determined for the grant, issue or sale of such Distribution Rights or
Distribution, as the case may be.
ARTICLE VI
CONCERNING THE WARRANT AGENT
SECTION 6.01. Warrant Agent. The Company hereby appoints The Bank of
New York as Warrant Agent of the Company in respect of the Warrants and the
Warrant Certificates upon the terms and subject to the conditions set forth
herein and in the Warrant Certificates; and The Bank of New York hereby accepts
such appointment. The Warrant Agent shall have the powers and authority
specifically granted to and conferred upon it in the Warrant Certificates and
hereby and such further powers and authority to act on behalf of the Company as
the Company may hereafter grant to or confer upon it and it shall accept in
writing. All of the terms and provisions with respect to such powers and
authority contained in the Warrant Certificates are subject to and governed by
the terms and provisions hereof. The Warrant Agent may act through agents and
shall not be responsible for the misconduct or negligence of any such agent
appointed with due care.
SECTION 6.02. Conditions of Warrant Agent's Obligations. The Warrant
Agent accepts its obligations set forth herein upon the terms and conditions
hereof and in the Warrant Certificates, including the following, to all of which
the Company agrees and to all of which the rights hereunder of the holders from
time to time of the Warrant Certificates shall be subject:
(a) The Warrant Agent shall be entitled to compensation to be agreed
upon with the Company in writing for all services rendered by it and the
Company agrees promptly to pay such compensation and to reimburse the
Warrant Agent for its reasonable out-of-pocket expenses (including
reasonable fees and expenses of counsel) incurred without gross negligence
or willful misconduct on its part in connection with
28
the services rendered by it hereunder. The Company also agrees to
indemnify the Warrant Agent and any predecessor Warrant Agent, their
directors, officers, affiliates, agents and employees for, and to hold
them and their directors, officers, affiliates, agents and employees
harmless against, any loss, liability or expense of any nature whatsoever
(including, without limitation, reasonable fees and expenses of counsel)
incurred without gross negligence or willful misconduct on the part of the
Warrant Agent, arising out of or in connection with its acting as such
Warrant Agent hereunder and its exercise of its rights and performance of
its obligations hereunder. The obligations of the Company under this
Section 6.02 shall survive the exercise and the expiration of the Warrant
Certificates and the resignation and removal of the Warrant Agent.
(b) In acting under this Agreement and in connection with the
Warrant Certificates, the Warrant Agent is acting solely as agent of the
Company and does not assume any obligation or relationship of agency or
trust for or with any of the owners or holders of the Warrant
Certificates.
(c) The Warrant Agent may consult with counsel of its selection and
any advice or written opinion of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in accordance with such advice
or opinion.
(d) The Warrant Agent shall be fully protected and shall incur no
liability for or in respect of any action taken or omitted to be taken or
thing suffered by it in reliance upon any Warrant Certificate, notice,
direction, consent, certificate, affidavit, opinion of counsel,
instruction, statement or other paper or document reasonably believed by
it to be genuine and to have been presented or signed by the proper
parties.
(e) The Warrant Agent, and its officers, directors, affiliates and
employees ("Related Parties"), may become the owners of, or acquire any
interest in, Warrant Certificates, shares or other obligations of the
Company with the same rights that it or they would have if it were not the
Warrant Agent hereunder and, to the extent permitted by applicable law, it
or they may engage or be interested in any financial or other transaction
with the Company and may act on, or as depositary, trustee or agent for,
any committee or body of holders of shares or other obligations of the
Company as freely as if it were not the Warrant Agent hereunder. Nothing
in this Agreement shall be deemed to prevent the Warrant Agent or such
Related Parties from acting in any other capacity for the Company.
29
(f) The Warrant Agent shall not be under any liability for interest
on, and shall not be required to invest, any monies at any time received
by it pursuant to any of the provisions of this Agreement or of the
Warrant Certificates.
(g) The Warrant Agent shall not be under any responsibility in
respect of the validity of this Agreement (or any term or provision
hereof) or the execution and delivery hereof (except the due execution and
delivery hereof by the Warrant Agent) or in respect of the validity or
execution of any Warrant Certificate (except its authentication thereof).
(h) The recitals and other statements contained herein and in the
Warrant Certificates (except as to the Warrant Agent's authentication
thereon) shall be taken as the statements of the Company and the Warrant
Agent assumes no responsibility for the correctness of the same. The
Warrant Agent does not make any representation as to the validity or
sufficiency of this Agreement or the Warrant Certificates, except for its
due execution and delivery of this Agreement; provided, however, that the
Warrant Agent shall not be relieved of its duty to authenticate the
Warrant Certificates as authorized by this Agreement. The Warrant Agent
shall not be accountable for the use or application by the Company of the
proceeds of the exercise of any Warrant.
(i) Before the Warrant Agent acts or refrains from acting with
respect to any matter contemplated by this Warrant Agreement, it may
require:
(1) an Officers' Certificate (as defined in the Indenture)
stating on behalf of the Company that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Warrant Agreement relating to the proposed action have been complied
with; and
(2) if reasonably necessary in the sole judgment of the
Warrant Agent, an opinion of counsel for the Company stating that,
in the opinion of such counsel, all such conditions precedent have
been complied with provided that such matter is one customarily
opined on by counsel.
Each Officers' Certificate or, if requested, an opinion of counsel
with respect to compliance with a condition or covenant provided for in
this Warrant Agreement shall include:
(1) a statement that the person making such certificate or
opinion has read such covenant or condition;
30
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such person, he or she
has made such examination or investigation as is necessary to enable
him or her to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
(j) The Warrant Agent shall be obligated to perform such duties as
are specifically set forth herein and in the Warrant Certificates, and no
implied duties or obligations shall be read into this Agreement or the
Warrant Certificates against the Warrant Agent. The Warrant Agent shall
not be accountable or be under any duty or responsibility for the use by
the Company of any of the Warrant Certificates authenticated by the
Warrant Agent and delivered by it to the Company pursuant to this
Agreement. The Warrant Agent shall have no duty or responsibility in case
of any default by the Company in the performance of its covenants or
agreements contained in the Warrant Certificates or in the case of the
receipt of any written demand from a holder of a Warrant Certificate with
respect to such default, including, without limiting the generality of the
foregoing, any duty or responsibility to initiate or attempt to initiate
any proceedings at law or otherwise or, except as provided in Section 7.02
hereof, to make any demand upon the Company.
(k) Unless otherwise specifically provided herein, any order,
certificate, notice, request, direction or other communication from the
Company made or given under any provision of this Agreement shall be
sufficient if signed by its chairman of the board of directors, its
president, its treasurer, its controller or any vice president or its
secretary or any assistant secretary.
(l) The Warrant Agent shall have no responsibility in respect of any
adjustment pursuant to Article V hereof.
(m) The Company agrees that it will perform, execute, acknowledge
and deliver, or cause to be performed, executed, acknowledged and
delivered, all such further and other acts, instruments and assurances as
may reasonably be required by the Warrant Agent for the carrying out or
performing by the Warrant Agent of the provisions of this Agreement.
31
(n) The Warrant Agent is hereby authorized and directed to accept
written instructions with respect to the performance of its duties
hereunder from any one of the chairman of the board of directors, the
president, the treasurer, the controller, any vice president or the
secretary or assistant secretary of the Company or any other officer or
official of the Company reasonably believed to be authorized to give such
instructions and to apply to such officers or officials for advice or
instructions in connection with its duties, and it shall not be liable for
any action taken or suffered to be taken by it in good faith in accordance
with instructions with respect to any matter arising in connection with
the Warrant Agent's duties and obligations arising under this Agreement.
Such application by the Warrant Agent for written instructions from the
Company may, at the option of the Warrant Agent, set forth in writing any
action proposed to be taken or omitted by the Warrant Agent with respect
to its duties or obligations under this Agreement and the date on or after
which such action shall be taken and the Warrant Agent shall not be liable
for any action taken or omitted in accordance with a proposal included in
any such application on or after the date specified therein (which date
shall be not less than 10 Business Days after the Company receives such
application unless the Company consents to a shorter period), provided
that (i) such application includes a statement to the effect that it is
being made pursuant to this paragraph (n) and that unless objected to
prior to such date specified in the application, the Warrant Agent will
not be liable for any such action or omission to the extent set forth in
this paragraph (n) and (ii) prior to taking or omitting any such action,
the Warrant Agent has not received written instructions objecting to such
proposed action or omission.
(o) Whenever in the performance of its duties under this Agreement
the Warrant Agent shall deem it necessary or desirable that any fact or
matter be proved or established by the Company prior to taking or
suffering any action hereunder, such fact or matter (unless other evidence
in respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate signed on behalf of
the Company by any one of the chairman of the board of directors, CEO, the
president, the treasurer, the controller, any executive vice president,
any vice president or the secretary or any assistant secretary of the
Company or any other officer or official of the Company reasonably
believed to be authorized to give such instructions and delivered to the
Warrant Agent; and such certificate shall be full authorization to the
Warrant Agent for any action taken or suffered in good faith by it under
the provisions of this Agreement in reliance upon such certificate.
(p) The Warrant Agent shall not be required to risk or expend its
own funds in the performance of its obligations and duties hereunder.
32
SECTION 6.03. Resignation and Appointment of Successor. (a) The
Company agrees, for the benefit of the holders from time to time of the Warrant
Certificates, that there shall at all times be a Warrant Agent hereunder.
(b) The Warrant Agent may at any time resign as Warrant Agent by
giving written notice to the Company of such intention on its part, specifying
the date on which its desired resignation shall become effective; provided,
however, that such date shall be at least 60 days after the date on which such
notice is given unless the Company agrees to accept less notice. Upon receiving
such notice of resignation, the Company shall promptly appoint a successor
Warrant Agent, qualified as provided in Section 6.03(d) hereof, by written
instrument in duplicate signed on behalf of the Company, one copy of which shall
be delivered to the resigning Warrant Agent and one copy to the successor
Warrant Agent. As provided in Section 6.03(d) hereof, such resignation shall
become effective upon the earlier of (x) the acceptance of the appointment by
the successor Warrant Agent or (y) 60 days after receipt by the Company of
notice of such resignation. The Company may, at any time and for any reason, and
shall, upon any event set forth in the next succeeding sentence, remove the
Warrant Agent and appoint a successor Warrant Agent by written instrument in
duplicate, specifying such removal and the date on which it is intended to
become effective, signed on behalf of the Company, one copy of which shall be
delivered to the Warrant Agent being removed and one copy to the successor
Warrant Agent. The Warrant Agent shall be removed as aforesaid if it shall
become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a
receiver of the Warrant Agent or of its property shall be appointed, or any
public officer shall take charge or control of it or of its property or affairs
for the purpose of rehabilitation, conservation or liquidation. Any removal of
the Warrant Agent and any appointment of a successor Warrant Agent shall become
effective upon acceptance of appointment by the successor Warrant Agent as
provided in Section 6.03(d). As soon as practicable after appointment of the
successor Warrant Agent, the Company shall cause written notice of the change in
the Warrant Agent to be given to each of the registered holders of the Warrants
in the manner provided for in Section 7.04 hereof.
(c) Upon resignation or removal of the Warrant Agent, if the Company
shall fail to appoint a successor Warrant Agent within a period of 60 days after
receipt of such notice of resignation or removal, then the holder of any Warrant
Certificate or the retiring Warrant Agent may apply to a court of competent
jurisdiction for the appointment of a successor to the Warrant Agent. Pending
appointment of a successor to the Warrant Agent, either by the Company or by
such a court, the duties of the Warrant Agent shall be carried out by the
Company.
(d) Any successor Warrant Agent, whether appointed by the Company or
by a court, shall be a bank or trust company in good standing, incorporated
under the laws of the United States of America or any State thereof and having,
at the time of its appointment, a combined capital surplus of at least $50
million. Such successor Warrant
33
Agent shall execute and deliver to its predecessor and to the Company an
instrument accepting such appointment hereunder and all the provisions of this
Agreement, and thereupon such successor Warrant Agent, without any further act,
deed or conveyance, shall become vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as Warrant Agent hereunder, and such predecessor shall thereupon become
obligated to (i) transfer and deliver, and such successor Warrant Agent shall be
entitled to receive, all securities, records or other property on deposit with
or held by such predecessor as Warrant Agent hereunder and (ii) upon payment of
the amounts then due it pursuant to Section 6.02(a) hereof, pay over, and such
successor Warrant Agent shall be entitled to receive, all monies deposited with
or held by any predecessor Warrant Agent hereunder.
(e) Any corporation or bank into which the Warrant Agent hereunder
may be merged or converted, or any corporation or bank with which the Warrant
Agent may be consolidated, or any corporation or bank resulting from any merger,
conversion or consolidation to which the Warrant Agent shall be a party, or any
corporation or bank to which the Warrant Agent shall sell or otherwise transfer
all or substantially all of its corporate trust business, shall be the successor
to the Warrant Agent under this Agreement (provided that such corporation or
bank shall be qualified as aforesaid) without the execution or filing of any
document or any further act on the part of any of the parties hereto.
(f) No Warrant Agent under this Warrant Agreement shall be
personally liable for any action or omission of any successor Warrant Agent.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Amendment. This Agreement and the terms of the
Warrants may be amended by the Company and the Warrant Agent, without the
consent of the holder of any Warrant Certificate, for the purpose of curing any
ambiguity, or of curing, correcting or supplementing any defective or
inconsistent provision contained herein or therein, or to effect any assumptions
of the Company's obligations hereunder and thereunder by a successor corporation
under the circumstances described in Section 5.01(d) hereof or in any other
manner which the Company may deem necessary or desirable and which shall not
adversely affect the interests of the holders of the Warrant Certificates.
The Company and the Warrant Agent may amend, modify or supplement
this Agreement and the terms of the Warrants, and waivers to departures from the
terms hereof and thereof may be given, with the consent of the Requisite Warrant
Holders (as defined below) for the purpose of adding any provision to or
changing in any manner or eliminating
34
any of the provisions of this Agreement or modifying in any manner the rights of
the holders of the outstanding Warrants. "Requisite Warrant Holders" means (i)
in the case of any amendment, modification, supplement or waiver affecting only
Warrant Holders as such, holders of a majority in number of the outstanding
Warrants, voting separately as a class, or (ii) in the case of any amendment,
modification, supplement or waiver affecting Warrant Holders, a majority in
number of Warrant Shares represented by the Warrants that would be issuable
assuming exercise thereof at the time such amendment, modification, supplement
or waiver is voted upon. Notwithstanding any other provision of this Agreement,
the Warrant Agent's consent must be obtained regarding any supplement or
amendment which alters the Warrant Agent's rights or duties (it being expressly
understood that the foregoing shall not be in derogation of the right of the
Company to remove the Warrant Agent in accordance with Section 6.03 hereof). For
purposes of any amendment, modification or waiver hereunder, Warrants held by
the Company or any of its Affiliates shall be disregarded.
Any modification or amendment made in accordance with this Agreement
will be conclusive and binding on all present and future holders of Warrant
Certificates whether or not they have consented to such modification or
amendment or waiver and whether or not notation of such modification or
amendment is made upon such Warrant Certificates. Any instrument given by or on
behalf of any holder of a Warrant Certificate in connection with any consent to
any modification or amendment will be conclusive and binding on all subsequent
holders of such Warrant Certificate.
SECTION 7.02. Notices and Demands to the Company and Warrant Agent.
If the Warrant Agent shall receive any notice or demand addressed to the Company
by the holder of a Warrant Certificate pursuant to the provisions hereof or of
the Warrant Certificates, the Warrant Agent shall promptly forward such notice
or demand to the Company.
SECTION 7.03. Addresses for Notices to Parties and for Transmission
of Documents. All notices hereunder to the parties hereto shall be deemed to
have been given when sent by certified or registered mail, postage prepaid, or
by facsimile transmission, confirmed by first class mail, postage prepaid,
addressed to any party hereto as follows:
To the Company:
Pathnet, Inc.
0000 00xx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Facsimile: (000) 000-0000
Attention: General Counsel
35
with copies to:
Xxxx, Weiss, Rifkind, Xxxxxxx & Xxxxxxxx
1285 Avenue of the Americas
New York, N.Y. 10019-6064
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxxxx
To the Warrant Agent:
The Bank of New York
000 Xxxxxxx Xxxxxx
Xxxxx 00 Xxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile No.: (000) 000-0000
Attention: Corporate Trust Administration
or at any other address of which either of the foregoing shall have notified the
other in writing.
SECTION 7.04. Notices to Holders. Notices to holders of Warrants
shall be mailed to such holders at the addresses of such holders as they appear
in the Warrant Register. Any such notice shall be sufficiently given if sent by
first-class mail, postage prepaid.
SECTION 7.05. APPLICABLE LAW. THIS AGREEMENT AND EACH WARRANT
CERTIFICATE ISSUED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE LAWS OF THE STATE OF NEW YORK.
SECTION 7.06. Persons Having Rights Under Agreement. Nothing in this
Agreement expressed or implied and nothing that may be inferred from any of the
provisions hereof is intended, or shall be construed, to confer upon, or give
to, any person or corporation other than the Company, the Warrant Agent, the
holders of the Warrant Certificates and, with respect to Sections 4.03, 4.04 and
4.05, the holders of Warrant Shares issued pursuant to Warrants, any right,
remedy or claim under or by reason of this Agreement or of any covenant,
condition, stipulation, promise or agreement hereof; and all covenants (except
for Section 4.03 which shall be for the benefit of all holders of Warrant Shares
issued pursuant to Warrants), conditions, stipulations, promises and agreements
in this Agreement contained shall be for the sole and exclusive benefit of the
Company and the Warrant Agent and their successors and of the holders of the
Warrant Certificates.
36
SECTION 7.07. Headings. The descriptive headings of the several
Articles and Sections of this Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the provisions
hereof.
SECTION 7.08. Counterparts. This Agreement may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original; but such counterparts shall together constitute but one and the same
instrument.
SECTION 7.09. Inspection of Agreement. A copy of this Agreement
shall be available during regular business hours at the principal corporate
trust office of the Warrant Agent, for inspection by the holder of any Warrant
Certificate. The Warrant Agent may require such holder to submit his Warrant
Certificate for inspection by it.
SECTION 7.10. Availability of Equitable Remedies. Since a breach of
the provisions of this Agreement could not adequately be compensated by money
damages, holders of Warrants shall be entitled, in addition to any other right
or remedy available to them, to an injunction restraining such breach or a
threatened breach and to specific performance of any such provision of this
Agreement, and in either case no bond or other security shall be required in
connection therewith, and the parties hereby consent to such injunction and to
the ordering of specific performance.
SECTION 7.11. Obtaining of Governmental Approvals. The Company will
from time to time take all action required to be taken by it which may be
necessary to obtain and keep effective any and all permits, consents and
approvals of governmental agencies and authorities and securities acts filings
under United States Federal and state laws, if applicable, and the rules and
regulations of all stock exchanges on which the Warrants are listed which may be
or become requisite in connection with (i) the issuance, sale, transfer, and
delivery to the Company of the Warrant Certificates, (ii) the exercise of the
Warrants or (iii) the issuance, sale, transfer and delivery by the Company of
the Warrant Shares issued to the holders of the Warrants, each upon the exercise
of the Warrants by the holders of Warrants.
[Signature Page Follows]
37
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the day and year first above written.
PATHNET, INC.
By: /s/ Xxxxx Xxxxxxxxx
----------------------------
Name: Xxxxx Xxxxxxxxx
Title: Chairman of the Board
THE BANK OF NEW YORK,
Warrant Agent
By: /s/ Xxxx Xxxx X. Xxxxxxx
----------------------------
Name: Xxxx Xxxx X. Xxxxxxx
Title: Assitant Vice President
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
[FACE]
[THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE INITIALLY ISSUED AS PART OF AN
ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF $1,000 PRINCIPAL AMOUNT OF 12 1/4%
SENIOR NOTES DUE 2008 OF PATHNET, INC. (THE "NOTES") AND ONE WARRANTS, EACH
INITIALLY ENTITLING THE HOLDER THEREOF TO PURCHASE 1.1 SHARES OF COMMON STOCK,
PAR VALUE $0.01 PER SHARES OF PATHNET, INC. PRIOR TO THE CLOSE OF BUSINESS UPON
THE EARLIEST TO OCCUR OF (i) OCTOBER 5, 1998; (ii) THE DATE ON WHICH A
REGISTRATION STATEMENT WITH RESPECT TO AN EXCHANGE OFFER FOR THE NOTES OR
COVERING THE SALE BY HOLDERS OF THE NOTES IS DECLARED EFFECTIVE UNDER THE
SECURITIES ACT; (iii) THE OCCURRENCE OF AN EXERCISE EVENT (AS DEFINED HEREIN),
(iv) THE OCCURRENCE OF AN EVENT OF DEFAULT (AS DEFINED IN THE INDENTURE); OR (v)
SUCH EARLIER DATE AS DETERMINED BY XXXXXXX XXXXX (AS DEFINED IN THE WARRANT
AGREEMENT) IN ITS SOLE DISCRETION, THE WARRANTS EVIDENCED BY THIS CERTIFICATE
MAY NOT BE TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE TRANSFERRED OR
EXCHANGED ONLY TOGETHER WITH, THE NOTES.]*
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES
LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. HEDGING TRANSACTIONS INVOLVING THIS SECURITY MAY NOT BE CONDUCTED UNLESS
SUCH TRANSACTIONS ARE CONDUCTED IN COMPLIANCE WITH THE SECURITIES ACT. THE
HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT (A) IT IS A
"QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT) OR (B) IT IS NOT A U.S. PERSON AND IS ACQUIRING THIS SECURITY IN AN
"OFFSHORE TRANSACTION" PURSUANT TO REGULATION S UNDER THE SECURITIES ACT, (2)
AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR A SHORTER
PERIOD AS MAY BE PRESCRIBED BY
----------
* To be included on Warrant Certificates issued prior to the Separation
Date.
A-1
RULE 144(K) (OR ANY SUCCESSOR PROVISION THEREOF) UNDER THE SECURITIES ACT) AFTER
THE LATER OF THE ORIGINAL ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS
SECURITY) OR THE LAST DAY ON WHICH PATHNET, INC. OR ANY OF ITS AFFILIATES WAS
THE OWNER OF THIS SECURITY OR ANY PREDECESSOR OF THIS SECURITY AND (Y) SUCH
LATER DATE, IF ANY, AS MAY BE REQUIRED BY APPLICABLE LAW (THE "RESALE
RESTRICTION TERMINATION DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY
EXCEPT (A) TO PATHNET, INC. OR ANY OF ITS SUBSIDIARIES, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE
144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT THAT PURCHASES FOR ITS OWN ACCOUNT
OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN
THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS
AND SALES TO NON-U.S. PERSONS THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE
MEANING OF REGULATION S UNDER THE SECURITIES ACT, PURSUANT TO RULE 000 XX
XXXXXXXXXX X, XX (E) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE
TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY AND THE WARRANT AGENT SHALL
HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (E)
TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM. IN CONNECTION WITH ANY TRANSFER OF
THESE SECURITIES WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK
THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF
SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE WARRANT AGENT. THIS LEGEND WILL
BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED
STATES" AND "U.S. PERSON" HAVE THE RESPECTIVE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT.
A-2
CUSIP #[ ]
No. [ ] [ ] Warrants
WARRANT CERTIFICATE
PATHNET, INC.
This Warrant Certificate certifies that [ ], or registered
assigns, is the registered holder of [ ] Warrants (the "Warrants") to purchase
shares of Common Stock, par value $0.01 per share, issuable upon exercise of the
Warrants (the "Warrant Shares") of PATHNET, INC., a Delaware corporation (the
"Company," which term includes its successors and assigns). Each Warrant
entitles the holder to purchase from the Company at any time from 9:00 a.m. New
York City time on or after the Exercisability Date until 5:00 p.m., New York
City time, on April 15, 2008 (the "Expiration Date"), 1.1 fully paid, registered
and non-assessable Warrant Shares, subject to adjustment as provided in Article
V of the Warrant Agreement, at an exercise price of $0.01 for each share
purchased (the "Exercise Price"); upon surrender of this Warrant Certificate and
payment of the Exercise Price (i) in cash or by certified or official bank
check, (ii) by a Cashless Exercise or (iii) by any combination of (i) and (ii),
at any office or agency maintained for that purpose by the Company (the "Warrant
Exercise Office"), subject to the conditions set forth herein and in the Warrant
Agreement. For purposes of this Warrant, a "Cashless Exercise" shall mean an
exercise of a Warrant in accordance with the immediately following two
sentences. To effect a Cashless Exercise, the holder may exercise a Warrant or
Warrants without payment of the Exercise Price in cash by surrendering such
Warrant or Warrants (represented by one or more Warrant Certificates) and in
exchange therefor, receiving such number of shares of Common Stock equal to the
product of (1) that number of shares of Common Stock for which such Warrant or
Warrants are exercisable and which would be issuable in the event of an exercise
with payment of the Exercise Price and (2) the Cashless Exercise Ratio. The
"Cashless Exercise Ratio" shall equal a fraction, the numerator of which is the
excess of the Current Market Value (calculated as set forth in this Warrant) per
share of Common Stock on the date of exercise over the Exercise Price per share
of Common Stock as of the date of exercise and the denominator of which is the
Current Market Value per share of Common Stock on the date of exercise. Upon
surrender of a Warrant Certificate representing more than one Warrant in
connection with the holder's option to elect a Cashless Exercise, the holder
must specify the number of Warrants for which such Warrant Certificate is to be
exercised (without giving effect to the Cashless Exercise). All provisions of
the Warrant Agreement shall be applicable with respect to a Cashless Exercise of
a Warrant Certificate for less than the full number of Warrants represented
thereby. Capitalized terms used herein without being defined herein shall have
the definitions ascribed to such terms in the Warrant Agreement.
A-3
"Current Market Value" per share of Common Stock or any other
security at any date means (i) if the security is not registered under the
Exchange Act, (a) the value of the security, determined in good faith by the
board of directors of the Company and certified in a board resolution, based on
the most recently completed arm's-length transaction between the Company and a
person other than an Affiliate of the Company and the closing of which occurs on
such date or shall have occurred within the six-month period preceding such
date, or (b) if no such transaction shall have occurred on such date or within
such six-month period or if the board of directors of the Company otherwise
elects, the Fair Market Value of the security as determined by a nationally or
regionally recognized Independent Financial Expert (as defined herein) (provided
that, in the case of the calculation of Current Market Value for determining the
cash value of fractional shares, any such determination within six months that
is, in the good faith judgment of the board of directors of the Company, a
reasonable determination of value, may be utilized) or (ii) (a) if the security
is registered under the Exchange Act, the average of the daily closing sales
prices of the securities for the 20 consecutive trading days immediately
preceding such date, or (b) if the security has been registered under the
Exchange Act for less than 20 consecutive trading days before such date, then
the average daily closing sales prices for all of the trading days before such
date for which closing sales prices are available, in the case of each of (ii)
(a) and (ii) (b), as certified to the Warrant Agent by the President or any vice
president or the Chief Financial Officer of the Company. The closing sales price
for each such trading day shall be: (A) in the case of a security listed or
admitted to trading on any United States national securities exchange or
quotation system, the closing sales price, regular way, on such day, or if no
sale takes place on such day, the average of the closing bid and asked prices on
such day, (B) in the case of a security not then listed or admitted to trading
on any national securities exchange or quotation system, the last reported sale
price on such day, or if no sale takes place on such day, the average of the
closing bid and asked prices on such day, as reported by a reputable quotation
source designated by the Company, (C) in the case of a security not then listed
or admitted to trading on any national securities exchange or quotation system
and as to which no such reported sale price or bid and asked prices are
available, the average of the reported high bid and low asked prices on such
day, as reported by a reputable quotation service, or a newspaper of general
circulation in the Borough of Manhattan, The City and State of New York,
customarily published on each Business Day, designated by the Company, or, if
there shall be no bid and asked prices on such day, the average of the high bid
and low asked prices, as so reported, on the most recent day (not more than 30
days prior to the date in question) for which prices have been so reported and
(D) if there are not bid and asked prices reported during the 30 days prior to
the date in question, the Current Market Value shall be determined as if the
securities were not registered under the Exchange Act.
"Exercise Event" means, with respect to each Warrant, the date of
the occurrence of the earliest of: (i) the time immediately prior to a Change of
Control (as such term is defined in the Indenture); (ii)(a) the 180th day (or
such earlier date as determined by the Company in its sole discretion) following
the closing of an Initial Public Equity Offering (as defined herein) or (b) upon
the closing of an Initial Public Equity Offering, but only in
A-4
respect of Warrants, if any, required to be exercised to permit the holders
thereof to sell Warrant Shares pursuant to their respective registration rights,
(iii) a class of equity securities of the Company is listed on a national
securities exchange or authorized for quotation on the Nasdaq National Market or
is otherwise subject to registration under the Exchange Act, or (iv) April 8,
2000.
"Independent Financial Expert" means a nationally or regionally
recognized investment banking or public accounting firm in the United States or,
if the Company believes that an investment banking or public accounting firm is
generally not qualified to give such an opinion, a nationally recognized
appraisal firm, in any case (i) which does not, and whose directors, officers
and employees or Affiliates do not, have a direct or indirect material financial
interest for its proprietary account in the Company or any of its Affiliates and
(ii) which, in the judgment of the Board of Directors of the Company, is
otherwise independent with respect to the Company and its Affiliates and
qualified to perform the task for which it is to be engaged.
"Separability Date" shall mean the earliest to occur of: (i)
October, 1998, (ii) the date on which a registration statement under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to an
exchange offer for the Notes or covering the sale by holders of the Notes is
declared effective under the Securities Act, (iii) the occurrence of an Exercise
Event, (iv) the occurrence of an Event of Default (as defined in the Indenture)
or (v) such earlier date as determined by Xxxxxxx Xxxxx in its sole discretion
and specified to the Company and the Warrant Agent in writing.
The Company has initially designated the principal corporate trust
office of the Warrant Agent in the Borough of Manhattan, The City of New York,
as the initial Warrant Agent Office. The number of shares of Common Stock
issuable upon exercise of the Warrants ("Exercise Rate") is subject to
adjustment upon the occurrence of certain events set forth in the Warrant
Agreement.
Any Warrants not exercised on or prior to 5:00 p.m., New York City
time, on April 15, 2008 shall thereafter be void.
If the Company, in a single transaction or through a series of
related transactions, consolidates with or merges with or into, or sells all or
substantially all of its property and assets to, another Person (other than a
subsidiary of the Company) solely for cash, the holders of Warrants which are
then exercisable shall be entitled to receive distributions on the date of such
event on an equal basis with holders of shares of Capital Stock (or other
securities issuable upon exercise of the Warrants) as if the Warrants had been
exercised immediately prior to such event less the aggregate Exercise Price
therefor.
Reference is hereby made to the further provisions on the reverse
hereof which provisions shall for all purposes have the same effect as though
fully set forth at this place.
A-5
This Warrant Certificate shall not be valid unless authenticated by
the Warrant Agent, as such term is used in the Warrant Agreement.
THIS WARRANT CERTIFICATE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
WITNESS the facsimile seal of the Company and facsimile signatures
of its duly authorized officers.
PATHNET, INC.
By:
------------------------------
Name:
Title:
Attest:
By:
-------------------------------
Name:
Title:
Certificate of Authentication:
This is one of the Warrants
referred to in the within
mentioned Warrant Agreement:
Dated:
THE BANK OF NEW YORK,
Warrant Agent
By:
-------------------------------
Authorized Signatory
A-6
[FORM OF WARRANT CERTIFICATE]
[REVERSE]
PATHNET, INC.
The Warrants evidenced by this Warrant Certificate are part of a
duly authorized issue of Warrants expiring at 5:00 p.m., New York City time, on
April 15, 2008 (the "Expiration Date"), each of which represents the right to
purchase at any time on or after the Exercisability Date (as defined in the
Warrant Agreement) and on or prior to the Expiration Date 1.1 Shares, subject to
adjustment as set forth in the Warrant Agreement. The Warrants are issued
pursuant to a Warrant Agreement dated as of April 8, 1998 (the "Warrant
Agreement"), duly executed and delivered by the Company to The Bank of New York,
Warrant Agent (the "Warrant Agent"), which Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Warrant Agent, the Company and the
holders (the words "holders" or "holder" meaning the registered holders or
registered holder) of the Warrants.
Warrants may be exercised by (i) surrendering at any Warrant Agent
Office this Warrant Certificate with the form of Election to Exercise set forth
hereon duly completed and executed and (ii) to the extent such exercise is not
being effected through a Cashless Exercise by paying in full the Warrant
Exercise Price for each such Warrant exercised and any other amounts required to
be paid pursuant to the Warrant Agreement.
If all of the items referred to in the last sentence of the
preceding paragraph are received by the Warrant Agent at or prior to 11:00 a.m.,
New York City time, on a Business Day, the exercise of the Warrant to which such
items relate will be effective on such Business Day. If any items referred to in
the last sentence of the preceding paragraph are received after 11:00 a.m., New
York City time, on a Business Day, the exercise of the Warrants to which such
item relates will be deemed to be effective on the next succeeding Business Day.
Notwithstanding the foregoing, in the case of an exercise of Warrants on April
15, 2008, if all of the items referred to in the last sentence of the preceding
paragraph are received by the Warrant Agent at or prior to 5:00 p.m., New York
City time, on such Expiration Date, the exercise of the Warrants to which such
items relate will be effective on the Expiration Date.
As soon as practicable after the exercise of any Warrant or
Warrants, the Company shall issue or cause to be issued to or upon the written
order of the registered holder of this Warrant Certificate, a certificate or
certificates evidencing the Warrant Share or Warrant Shares to which such holder
is entitled, in fully registered form, registered in such name or names as may
be directed by such holder pursuant to the Election to Exercise, as set forth on
the face of this Warrant Certificate. Such certificate or certificates
evidencing
A-7
the Warrant Share or Warrant Shares shall be deemed to have been issued and any
persons who are designated to be named therein shall be deemed to have become
the holder of record of such Warrant Share or Warrant Shares as of the close of
business on the date upon which the exercise of this Warrant was deemed to be
effective as provided in the preceding paragraph.
The Company will not be required to issue fractional Shares upon
exercise of the Warrants or distribute Warrant Certificates that evidence
fractional Warrant Shares. In lieu of fractional Warrant Shares, there shall be
paid to the registered Holder of this Warrant Certificate at the time such
Warrant Certificate is exercised an amount in cash equal to the same fraction of
the Current Market Value per share of Common Stock on the Business Day preceding
the date this Warrant Certificate is surrendered for exercise.
Warrant Certificates, when surrendered at any office or agency
maintained by the Company for that purpose by the registered holder thereof in
person or by legal representative or attorney duly authorized in writing, may be
exchanged for a new Warrant Certificate or new Warrant Certificates evidencing
in the aggregate a like number of Warrants, in the manner and subject to the
limitations provided in the Warrant Agreement, without charge except for any tax
or other governmental charge imposed in connection therewith.
Upon due presentment for registration of transfer of this Warrant
Certificate at any office or agency maintained by the Company for that purpose,
a new Warrant Certificate evidencing in the aggregate a like number of Warrants
shall be issued to the transferee in exchange for this Warrant Certificate,
subject to the limitations provided in the Warrant Agreement, without charge
except for any tax or other governmental charge imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the registered
holder hereof as the absolute owner of this Warrant Certificate (notwithstanding
any notation of ownership or other writing hereon made by anyone) for the
purpose of any exercise hereof and for all other purposes, and neither the
Company nor the Warrant Agent shall be affected by any notice to the contrary.
The term "Business Day" shall mean any day on which (i) banks in The
City of New York, (ii) the principal U.S. securities exchange or market, if any,
on which the Common Stock is listed or admitted to trading and (iii) the
principal U.S. securities exchange or market, if any, on which the Warrants are
listed or admitted to trading are open for business.
The Warrants,Warrant Shares and Registrable Securities (as defined
in the Warrant Registration Rights Agreement) are entitled to the benefits of a
registration rights agreement relating to the Warrants and the Warrant Shares
(the "Warrant Registration Rights Agreement"), pursuant to which the holders
representing not less than 50% of Warrant
A-8
Shares and Registrable Securities have, at any time and from time to time on or
after (i) the time immediately prior to a Change of Control (as such term is
defined in the Indenture); (ii)(a) the180th day (or such earlier date as
determined by the Company in its sole discretion) following the consummation of
an Initial Public Equity Offering (as defined herein) or (b) upon the
consummation of an Initial Public Equity Offering, but only in respect of
Warrants, if any, required to be exercised to permit the holders thereof to sell
Warrant Shares pursuant to their respective registration rights, (iii) a class
of equity securities of the Company is listed on a national securities exchange
or authorized for quotation on the Nasdaq National Market or is otherwise
subject to registration under the Exchange Act, or (iv) April 8, 2000, the right
to require the Company to effect one demand registration of the Warrant Shares
and Registrable Securities. The Warrant Registration Rights Agreement also
provides the holders of Registrable Securities with the right, subject to the
conditions and limitations contained therein, to include the Registrable
Securities in certain registration statements filed by the Company for its
account or for the account of any of its securityholders.
A-9
[FORM OF ELECTION TO EXERCISE]
(To be executed upon exercise of Warrants on the Exercise Date)
The undersigned hereby irrevocably elects to exercise [ ] of the
Warrants represented by this Warrant Certificate and purchase the whole number
of Shares issuable upon the exercise of such Warrants and herewith tenders
payment for such Shares as follows:
$[ ] in cash or by certified or official bank check; or by
surrender of Warrants pursuant to a Cashless Exercise (as defined in the Warrant
Agreement) for [ ] shares of Stock at the current Cashless Exercise Ratio.
The undersigned requests that a certificate representing such Shares
be registered in the name of _______________ whose address is ________________
and that such shares be delivered to _____________________ whose address is
________________. Any cash payments to be paid in lieu of a fractional Share
should be delivered to _________ whose address is ________________ and the check
representing payment thereof should be delivered to _____________ whose address
is _____________________.
Dated ___________, ____
Name of holder of
Warrant Certificate:_______________________________________________
(Please Print)
Tax Identification or
Social Security Number:_____________________________________________
Address: __________________________________________________________
__________________________________________________________
Signature:_________________________________________________________
Note: The above signature must correspond with the name as
written upon the face of this Warrant Certificate in
every particular, without alteration or enlargement
or any change whatever and if the certificate
representing the Shares or any Warrant Certificate
representing Warrants not exercised is to be
registered in a name other than that in which this
Warrant Certificate is registered, or if any cash
payment to be paid in lieu of a fractional share is
to be made to a person other than the registered
holder of this Warrant Certificate, the signature of
the holder hereof
A-10
must be guaranteed as provided in the Warrant
Agreement.
Dated ______________, ____
Signature:___________________________________________________________
Note: The above signature must correspond with the name as
written upon the face of this Warrant Certificate in
every particular, without alteration or enlargement or
any change whatever.
Signature Guaranteed:________________________________________________
Signatures must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the
[Registrar], which requirements include membership or
participation in the Security Transfer Agent 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, as
amended.
[FORM OF ASSIGNMENT]
For value received __________________________ hereby sells, assigns
and transfers unto _____________________________ the within Warrant Certificate,
together with all right, title and interest therein, and does hereby irrevocably
constitute and appoint ___________ attorney, to transfer said Warrant
Certificate on the books of the within-named Company, with full power of
substitution in the premises.
Dated ________________, ____
Signature:___________________________________________________________
Note: The above signature must correspond with the name as
written upon the face of this Warrant Certificate in
every particular, without alteration or enlargement or
any change whatever.
Signature Guaranteed:________________________________________________
Signatures must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the
[Registrar], which requirements include membership or
participation in the Security Transfer Agent Medallion
Program ("STAMP") or such other "signature guarantee
program" as may be determined by the [Registrar] in
addition to,
A-11
or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as
amended.
A-12
SCHEDULE OF EXCHANGES OF CERTIFICATED WARRANTS**
The following exchanges of a part of this Global Warrant for certificated
Warrants have been made:
Number of
Amount of Amount of Warrants of this
decrease in increase in Global Warrant Signature of
Number of Number of following authorized
Date of Warrants of this Warrants of this such decrease officer of
Exchange Global Warrant Global Warrant (or increase) Warrant Agent
--------------------------------------------------------------------------------
--------
** This is to be included only if the Warrant is in global form.
A-13
EXHIBIT B
FORM OF LEGEND FOR GLOBAL WARRANT
Any Global Warrant authenticated and delivered hereunder shall bear
a legend in substantially the following form:
THIS SECURITY IS A GLOBAL WARRANT WITHIN THE MEANING OF THE WARRANT
AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT EXCHANGEABLE
FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER THAN THE
DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE WARRANT AGREEMENT, AND NO TRANSFER OF THIS SECURITY (OTHER THAN A
TRANSFER OF THIS SECURITY AS A WHOLE BY THE DEPOSITORY TO A NOMINEE OF THE
DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER
NOMINEE OF THE DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE WARRANT AGREEMENT.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
B-1
EXHIBIT C
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF WARRANTS
Re: Warrants to Purchase Common Stock (the "Warrants") of PATHNET, INC.
This Certificate relates to ____ Warrants held ino ___ book-entry
oro _______ certificated form by ______ (the "Transferor").
The Transferor:*
|_| has requested the Warrant Agent by written order to deliver in
exchange for its beneficial interest in the Global Warrant held by the
Depositary a Warrant or Warrants in definitive, registered form of authorized
denominations and an aggregate number equal to its beneficial interest in such
Global Warrant (or the portion thereof indicated above); or
|_| has requested the Warrant Agent by written order to exchange or
register the transfer of a Warrant or Warrants.
In connection with such request and in respect of each such Warrant,
the Transferor does hereby certify that the Transferor is familiar with the
Warrant Agreement relating to the above captioned Warrants and the restrictions
on transfers thereof as provided in Section 1.08 of such Warrant Agreement, and
that the transfer of this Warrant does not require registration under the
Securities Act of 1933, as amended (the "Act") because:
|_| Such Warrant is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 1.08 (a)(y)(A) or Section 1.08
(d)(i)(A) of the Warrant Agreement).
|_| Such Warrant is being transferred to a qualified institutional buyer
(as defined in Rule 144A under the Act), in reliance on Rule 144A.
C-1
|_| Such Warrant is being transferred in reliance on Regulation S under
the Act.
|_| Such Warrant is being transferred in accordance with Rule 144 under
the Act.
|_| Such Warrant is being transferred in reliance on and in compliance
with an exemption from the registration requirements of the Act.
------------------------------------
[INSERT NAME OF TRANSFEROR]
By:
--------------------------------
Date:_____________________
*Check applicable box.
Signature Guaranteed:_________________________
Signatures must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the
[Registrar], which requirements include membership or
participation in the Security Transfer Agent 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, as
amended.
C-2
EXHIBIT D
Form of Certificate to be
Delivered in Connection
with Regulation S Transfers
__________________________, ________
________________
________________
________________
Attention: __________________
Ladies and Gentlemen:
In connection with our proposed sale of Warrants of Pathnet, Inc
(the "Company"), we confirm that such sale has been effected pursuant to and in
accordance with Regulation S under the Securities Act of 1933, as amended (the
"Securities Act"), and, accordingly, we represent that:
(1) the offer of the Warrants was not made to a person in the United
States;
(2) either (a) at the time the buy offer was originated, the
transferee was outside the United States or we and any person acting on
our behalf reasonably believed that the transferee was outside the United
States, or (b) the transaction was executed in, on or through the
facilities of a designated off-shore securities market and neither we nor
any person acting on our behalf knows that the transaction has been
pre-arranged with a buyer in the United States;
(3) no directed selling efforts have been made in the United States
in contravention of the requirements of Rule 903(b) or Rule 904(b) of
Regulation S under the Securities Act, as applicable;
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act;
(5) if the circumstances set forth in Rule 904(c) under the
Securities Act are applicable, we have complied with the additional
conditions therein, including (if applicable) sending a confirmation or
other notice stating that the Warrants may be offered and sold during the
restricted period specified in Rule 903(c)(2) or (3), as
D-1
applicable, in accordance with the provisions of Regulation S; pursuant
to registration of the Warrants under the Securities Act; or pursuant to
an available exemption from the registration requirements under the Act.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Defined terms used herein without
definition have the respective meanings provided in Regulation S under the
Securities Act.
Very truly yours,
[Name of Transferor]
By:
-------------------------
[Authorized Signature]
Upon transfer the Warrants would be registered in the name of the
new beneficial owner as follows:
Name:
---------------------------------
Address:
------------------------------
Taxpayer ID Number:
--------------------
D-2
