EXHIBIT 4.8
WARRANT
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THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS AND MAY NOT BE OFFERED OR SOLD, UNLESS THEY HAVE BEEN REGISTERED UNDER SUCH
ACT AND APPLICABLE STATE SECURITIES LAWS OR UNLESS AN EXEMPTION FROM
REGISTRATION IS AVAILABLE.
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CONVERGENT COMMUNICATIONS, INC.
Warrant for the Purchase of Common Stock
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Warrant No. 1
FOR VALUE RECEIVED, Convergent Communications, Inc. (the "Company"), a
corporation organized under the laws of Colorado, hereby certifies that Xxxxxxx,
Xxxxx & Co. or each of its registered assigns (any such Person, a "Holder") is
entitled, subject to the provisions of this Warrant, to purchase from the
Company, at any time or from time to time during the Exercise Period (as
hereinafter defined), subject to the terms and conditions set forth below, up to
750,000 Warrant Shares (as hereinafter defined), at a price per share equal to
the Exercise Price (as hereinafter defined). The number of Warrant Shares to be
received upon the exercise of this Warrant is subject to adjustment from time to
time as hereinafter set forth.
Section 1. Definitions Unless otherwise defined herein, the following
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terms, as used herein, have the following respective meanings:
"Additional Shares" means any shares of Common Stock other than (i)
Common Stock issued upon the exercise of any Warrant, (ii) Common Stock issued
pursuant to any security convertible into, or exchangeable or exercisable for,
shares of Common Stock outstanding as of the date hereof, (iii) Common Stock
issued upon the conversion, exchange or exercise of any convertible security as
to which the issuance thereof has previously been the subject of any required
adjustment pursuant to this Warrant, and (iv) Common Stock issued upon the
conversion, exchange or exercise of convertible, exchangeable or exercisable
securities of the Company outstanding on the date hereof (to the extent in
accordance with the terms of such securities as in effect on such date).
"Affiliate" of any specified Person means any other Person which,
directly or indirectly, controls, is controlled by or is under direct or
indirect common control with, such specified Person. For the purposes of this
definition, "control" when used with respect to any Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "affiliated," "controlling" and "controlled" have meanings
correlative to the foregoing. For purposes of this definition the following
persons shall, in any event, be deemed Affiliates of the Company: (i) any person
owning or controlling more than 5% of the Common Stock (or Convertible
Securities convertible or exchangeable into 5% of such Common Stock) of the
Company, (ii) any member of the Board of Directors of the Company and any
officer of the Company.
"Appraiser" has the meaning set forth in Section 7(d)(iii).
"Business Day" means any day that is not a Saturday or Sunday or a day
on which banks are required or permitted to be closed in the State of New York.
"Change of Control" has the meaning set forth in Section 1.01 of the
Indenture. The definition of such term, together with the definition of all
capitalized terms used herein that are also defined in the Indenture, are
incorporated herein by reference.
"Commencement Date" means the earliest of (i) 180/th/ day after the
effective date of an Initial Public Offering, (ii) the date an effective demand
for registration of Common Stock or convertible securities of the Company is
made by any person and (iii) March 17, 2001.
"Commission" means the United States Securities and Exchange
Commission or any other federal agency administering the Securities Act and
other federal securities laws.
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"Common Stock" means the authorized common stock, no par value, of the
Company, and any stock into which such common stock may thereafter be converted
or changed.
"Company" has the meaning set forth in the introductory paragraph
hereof.
"Convertible Securities" means rights to subscribe for, or any rights
or options to purchase, shares of Common Stock, or any stock or other securities
convertible into or exchangeable for shares of Common Stock other than (i) any
such rights, stock or securities established or issued pursuant to the Sandler
Documents and (ii) any other such rights, stock or securities outstanding on the
date hereof.
"Credit Agreement" means that certain Credit Agreement of even date
herewith by and among the Company, Convergent Communication Services, Inc.,
Convergent Capital Corporation, the lenders party thereto and Xxxxxxx Xxxxx
Credit Partners L.P., as Administrative Agent, as such agreement may be amended,
modified or supplemented from time to time in accordance with the terms thereof.
"Current Market Price" means, for shares of Common Stock, the current
market price of such Common Stock as determined in accordance with subsection
7(d).
"Exchange Act" means the United States Securities Exchange Act of
1934, as amended, or any similar federal statute, and the rules and regulations
of the Commission thereunder, all as shall be in effect from time to time.
"Exercise Event" means the date of the occurrence of the earliest of
(a) the consummation of an Initial Public Offering or (b) October 2, 1999.
"Exercise Period" means the period from and including the date of an
Exercise Event to and including 5:00 p.m. (New York City time) on the Expiration
Date.
"Exercise Price" means, with respect to any Warrant Share, an amount
equal to $7.50.
"Expiration Date" means the earlier of (y) the third anniversary of an
Initial Public Offering and (z) the fourth anniversary of the date hereof.
"Fully Diluted Common Stock" means, at any time, the then outstanding
Common Stock plus (without duplication) all shares of Common Stock issuable,
whether at such time or solely upon the passage of time or the occurrence of
future events (but
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excluding shares that are issuable in the future contingent upon unknown future
events), upon the exercise, conversion or exchange of all then-outstanding
rights, warrants, options, convertible securities or exchangeable securities or
indebtedness, or other rights exercisable for or convertible or exchangeable
into, directly or indirectly, Common Stock, and securities convertible or
exchangeable into Common Stock, whether at the time of issuance or solely upon
the passage of time or the occurrence of some future event (but excluding shares
that are issuable in the future contingent upon unknown future events).
"Holder" has the meaning set forth in the introductory paragraph
hereof.
"Indenture" means the Indenture, dated as of April 2, 1998 between the
Company and Norwest Bank Colorado, N.A., as in effect on the date hereof.
"Initial Public 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.
"Majority Holders" means the Holders of Warrants exercisable for in
excess of fifty percent (50%) of the aggregate number of shares of Common Stock
then purchasable upon exercise of all Warrants (subject to any contractual
agreement entered into between Xxxxxxx, Sachs & Co. and any subsequent Holder
with respect to the retention by Xxxxxxx, Xxxxx & Co. of rights of Majority
Holders).
"Permitted Holders" has the meaning ascribed to such term in the
Indenture.
"Person" means any individual, corporation, limited liability company,
partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof.
"Registration Statement" shall mean any appropriate registration
statement of the Company filed with the Commission pursuant to the Securities
Act which covers any of the Warrant Shares pursuant to the provisions of this
Warrant and all amendments and supplements to any such Registration Statement,
including post-effective amendments, in each case including the Prospectus
contained therein, all exhibits thereto and all material incorporated by
reference therein.
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"Reorganization Transaction" has the meaning set forth in Section 9
hereof.
"Sandler Documents" means (i) the Securities Purchase Agreement dated
March 17, 1999 between the Company and entities named in Exhibit A thereto, (ii)
the Warrant Agreement dated March 17, 1999 between the Company and each of the
entities named in Exhibit A thereto, and (iii) the Investors Rights Agreement
dated March 17, 1999 between the Company and each of the entities named in
Exhibit A thereof, in each case as in effect on the date hereof.
"Securities Act" means the United States Securities Act of 1933, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as shall be in effect from time to time.
"Selling Holder" means a Holder who is selling Warrant Shares in
accordance with the provisions of Section 14 hereof.
"Warrant Shares" means the shares of the Common Stock of the Company
deliverable upon exercise of this Warrant, as adjusted from time to time.
"Warrants" has the meaning set forth in Section 5 hereof.
Section 2. Exercise of Warrant. (a) This Warrant may be exercised in
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whole or in part, at any time or from time to time, during the Exercise Period.
(b) In the event of an adjustment as described in Section 7 hereof,
the number of Warrant Shares for which this Warrant may be exercised shall be
revised accordingly.
(c) This Warrant shall be exercised by presentation and surrender
hereof to the Company at its principal office at the address set forth on the
signature page hereof (or at such other address as the Company may hereafter
notify the Holder in writing), together with the Purchase Form annexed hereto
duly executed and accompa xxxx by proper payment of that portion of the Exercise
Price represented by the number of Warrant Shares being purchased as specified
in such form. Such payment may be made, at the option of the Holder, (a) by
cash, certified or bank cashier's check or wire transfer in an amount equal to
the product of (i) the Exercise Price times (ii) the number of Warrant Shares as
to which this Warrant is being exercised, (b) by receiving from the Company the
number of Warrant Shares equal to (i) the number of Warrant Shares as to which
this Warrant is being exercised minus (ii) the number of Warrant Shares having a
value, based on the Current Market Price on the trading day immediately prior to
the
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date of such exercise, equal to the product of (x) the Exercise Price times
(y) the number of Warrant Shares as to which this Warrant is being exercised, or
(c) any combination of (a) and (b). If this Warrant should be exercised in part
only, the Company shall, upon surrender of this Warrant, execute and deliver a
new Warrant evidencing the rights of the Holder to purchase the balance of the
Warrant Shares purchasable hereunder. Upon receipt by the Company of this
Warrant and a duly executed Purchase Form, together with the applicable portion
of the Exercise Price, at the principal office of the Company, in proper form
for exercise, the Holder shall be deemed to be the holder of record of the
Warrant Shares, notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such Warrant Shares shall
not then be actually delivered to the Holder. The Company shall pay any and all
documentary stamp or similar issue taxes payable in respect of the issue of the
Warrant Shares.
Section 3. Due Authorization; Reservation of Shares. (a) The Company
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represents and warrants that this Warrant has been duly authorized, executed and
delivered by the Company and is a valid and binding agreement of the Company,
enforceable against the Company in accordance with its terms, and entitles the
Holder hereof or its assignees to purchase Warrant Shares on the terms and
conditions set forth herein and upon payment to the Company of the Exercise
Price then in effect applicable to such shares. The Company hereby agrees that
at all times there shall be reserved for issuance and delivery by the Company,
upon exercise of this Warrant, all shares of Common Stock from time to time
issuable or deliverable upon exercise of this Warrant. All such shares shall be
duly authorized (and, if newly-issued, when issued upon such exercise), shall be
validly issued, fully paid and nonassessable, free and clear of all liens,
security interests, charges and other encumbrances or restrictions on sale and
free and clear of all preemptive rights.
(b) The Company represents and warrants that the execution and
delivery by it of this Warrant and the performance by it of its obligations
hereunder (i) do not require any action by or in respect of, or filing with, any
United States or foreign governmental body, agency or official and (ii) do not
contravene or constitute a default under or violation of (A) any provision of
applicable law or regulation, (B) the certificate of incorporation or bylaws of
the Company, or (C) any material agreement, judgment, injunction, order, decree
or other instrument binding upon the Company.
Section 4. Fractional Shares. No fractional shares or scrip
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representing fractional shares shall be issued upon the exercise of this
Warrant. With respect to any fraction of a share called for upon any exercise
hereof, the Company shall pay to the Holder an amount in cash equal to such
fraction multiplied by the Exercise Price per Warrant Share.
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Section 5. Exchange, Transfer, Assignment or Loss of Warrant. This
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Warrant is exchangeable, without expense, at the option of the Holder, upon
presentation and surrender hereof to the Company for other Warrants of different
denominations, entitling the Holder to purchase in the aggregate the same number
of Warrant Shares. Subject to Section 11 hereof, the Holder of this Warrant
shall be entitled to assign its interest in this Warrant in whole or in part to
any Person or Persons. Upon surrender of this Warrant to the Company, with the
Assignment Form annexed hereto duly executed and funds sufficient to pay any
transfer tax, the Company shall, without charge, execute and deliver a new
Warrant or Warrants in the name of the transferee specified in such instrument
of assignment and, if the Holder's entire interest is not being assigned, in the
name of the Holder, and this Warrant shall promptly be cancelled. In the event
of any assignment in part, the Exercise Price shall be apportioned between the
Warrant to be issued to the Holder with respect to that portion not transferred
and the Warrant to be issued to the transferee based on their respective
interests. This Warrant may be divided or combined with other Warrants that
carry the same rights upon presentation hereof at the principal office of the
Company, together with a written notice specifying the names and denominations
in which new Warrants are to be issued and signed by the Holder hereof. The
terms "Warrant" or "Warrants" as used herein includes any Warrant or Warrants
into which this Warrant may be divided or for which it may be exchanged. Upon
receipt by the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant (provided that an affidavit of
the Holder as to a loss, theft or destruction of this Warrant shall be deemed to
be evidence reasonably satisfactory to the Company of such loss, theft or
destruction), and upon surrender and cancellation of this Warrant, if mutilated,
the Company shall execute and deliver a new Warrant of like tenor and date.
Section 6. Rights of the Holder. The Holder shall not, by virtue
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hereof, be entitled to any rights of a stockholder in the Company, either at law
or equity, and the rights of the Holder are limited to those expressed in this
Warrant.
Section 7. Anti-dilution Provisions and Other Adjustments; Purchase
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Right. The number of Warrant Shares which may be purchased upon the exercise
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hereof shall be subject to change or adjustment as follows:
(a) Stock Dividends, Splits, Combinations, Reclassifications, etc. If
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the Company at any time (i) shall declare a dividend or make a distribution on
its Common Stock payable in shares of its capital stock (whether shares of
Common Stock or of capital stock of any other class), (ii) shall subdivide
shares of its Common Stock into a greater number of shares, (iii) shall combine
or have combined its outstanding Common Stock into a smaller number of shares or
(iv) shall issue by reclassification of its Common Stock (including any such
reclassification in connection with a consolidation
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or merger in which the Company is the continuing corporation) other securities
of the Company, the Holder shall be entitled to purchase the aggregate number
and kind of shares of capital stock and other securities which, if this Warrant
had been exercised immediately prior to such event, such Holder would have owned
upon such exercise and been entitled to receive by virtue of such dividend,
distribution, subdivision, combination or reclassification. Such adjustment
shall be made successively whenever any event listed above shall occur.
(b) Additional Issuances. If the Company at any time shall issue (y)
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at any time prior to the consummation of an Initial Public Offering any
Additional Shares and (z) at any time on or after the date of consummation, any
Additional Shares to an Affiliate, in either case at a price less than the
Current Market Price per share of Common Stock, or any Convertible Securities
(excluding any such issuance for which the number of Warrant Shares purchasable
hereunder shall have been adjusted pursuant to subsection (a) of this Section 7)
which are exercisable or convertible for Additional Shares at an exercise or
conversion price less than the Current Market Price per share of Common Stock,
the number of Warrant Shares purchasable hereunder after such issuance shall be
determined by multiplying the number of Warrant Shares purchasable hereunder
immediately prior to such issuance by a fraction, (i) the denominator of which
shall be the number of shares of Fully Diluted Common Stock immediately prior to
such issuance plus the number of shares that the aggregate consideration for the
total number of such Additional Shares (including the issue price of any such
Convertible Securities) would purchase at the Current Market Price per share of
Common Stock, and (ii) the numerator of which shall be the number of shares of
Fully Diluted Common Stock immediately after such issuance. Shares of Common
Stock owned by or held for the account of the Company or any subsidiary of the
Company on the date of any such issuance shall not be deemed outstanding for the
purpose of any such computation. Such adjustment shall become effective
immediately after such issuance. Such adjustment shall be made successively
whenever any such event shall occur.
If the Company at any time shall issue two or more securities as a
unit and one or more of such securities shall be Additional Shares or
Convertible Securities subject to this subsection (b), the consideration
allocated to each such security shall be determined by an independent nationally
recognized investment banking firm experienced in valuing securities.
(c) Distribution of Evidences of Indebtedness or Assets. If the
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Company at any time shall fix a record date for the making of a distribution to
all holders of its Common Stock (including any such distribution to be made in
connection with a consolidation or merger in which the Company is to be the
continuing corporation) of evidences of its indebtedness or assets (excluding
dividends paid in or distributions of
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capital stock of the Company for which the number of Warrant Shares purchasable
hereunder shall have been adjusted pursuant to subsection (a) of this Section 7
or regular cash dividends or distributions payable out of earnings or surplus
and made in the ordinary course of business), the number of Warrant Shares
purchasable hereunder after such record date shall be determined by multiplying
the number of Warrant Shares purchasable hereunder immediately prior to such
record date by a fraction, (i) the denominator of which shall be (x) the Current
Market Price per share of Common Stock on such record date less (y) the fair
market value (as determined by an independent nationally recognized investment
banking firm experienced in valuing evidences of indebtedness or assets of a
similar type and described in a statement mailed by certified mail to the
Holder) of the portion of the assets or evidences of indebtedness to be so
distributed to a holder of one share of Common Stock, and (ii) the numerator of
which shall be such Current Market Price per share of Common Stock. Such
adjustment shall become effective immediately after such record date. Such
adjustment shall be made whenever such a record date is fixed; and in the event
that such distribution is not so made, the number of Warrant Shares purchasable
hereunder shall again be adjusted to be the number that was in effect
immediately prior to such record date.
(d) Determination of Market Price. For the purpose of any
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computation under Section 4 or subsection (b) or (c) of this Section 7, the
Current Market Price per share of Common Stock on any date shall be the average
of the current market value, determined as set forth below, of Common Stock for
the 20 Business Days prior to such date.
(i) If the Common Stock is listed on a national securities
exchange or admitted to unlisted trading privileges on such an exchange,
the current market value for any Business Day shall be the last reported
sale price of the Common Stock on such exchange on such Business Day or if
no such sale is made on such Business Day, the mean of the closing bid and
asked prices for such Business Day on such exchange; or
(ii) If the Common Stock is not so listed or admitted to unlisted
trading privileges, the current market value for any Business Day shall be
the mean of the last bid and asked prices reported on such Business Day (A)
by the National Association of Securities Dealers, Inc. Automatic Quotation
System or (B) if reports are unavailable under clause (A) above, by the
National Quotation Bureau Incorporated; or
(iii) If the Common Stock is not so listed or admitted to unlisted
trading privileges and bid and asked prices are not so reported, the
current market value shall be such value as agreed upon by the Company and
the Majority
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Holders or, if the Company and the Majority Holders cannot otherwise agree,
the current market value shall be determined by an independent nationally
recognized investment banking firm experienced in valuing businesses (an
"Appraiser") selected by the Board of Directors of the Company and
reasonably acceptable to Majority Holders.
(e) Stock Other Than Common Stock. In the event that at any time, as
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a result of an adjustment made pursuant to subsection (a) of this Section 7, the
Holder shall become entitled to receive any shares of the capital stock of the
Company other than Common Stock, thereafter the number of such other shares so
receivable upon exercise of this Warrant shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Common Stock contained in this Section 7, and the
provisions of this Warrant with respect to the Common Stock shall apply on like
terms to any such other shares.
(f) Common Stock Defined. Whenever reference is made in this Section
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7 to the issuance of shares of Common Stock, the term "Common Stock" shall
include any equity securities of any class of the Company hereinafter authorized
which shall not be limited to a fixed or determinable amount in respect of the
right of the holders thereof to participate in dividends or distributions of
assets upon the voluntary or involuntary liquidation, dissolution or winding-up
of the Company; provided, however, that, subject to the provisions of Section 9
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hereof, shares issuable upon exercise hereof shall include only Warrant Shares
as of the date hereof or shares of any class or classes resulting from any
reclassification or reclassifications thereof or as a result of any corporate
reorganization as provided for in Section 9 hereof.
Section 8. Notice of Certain Actions. In the event that at any time:
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(a) the Company shall authorize the issuance of Convertible
Securities to all holders of its Common Stock; or
(b) the Company shall authorize the distribution of evidences of its
indebtedness or assets to all holders of its Common Stock (other than dividends
paid in or distributions of capital stock of the Company for which the number of
Warrant Shares purchasable hereunder shall have been adjusted pursuant to
subsection (a) of Section 7 or regular cash dividends or distributions payable
out of earnings or surplus and made in the ordinary course of business); or
(c) the Company shall authorize (i) any capital reorganization or
reclassification of the Common Stock (other than a subdivision or combination of
the outstanding Common Stock and other than a change in par value of the Common
Stock),
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(ii) any consolidation or merger to which the Company is a party and for
which approval of any stockholders of the Company is required (other than a
consolidation or merger in which the Company is the continuing corporation and
that does not result in any reclassification or change of the Common Stock
outstanding), or (iii) the conveyance or transfer of the properties and assets
of the Company substantially as an entirety; or
(d) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company; or
(e) the Company shall take any other action that would require any
adjustment greater than 1% of the number of Warrant Shares purchasable hereunder
pursuant to Section 7; or
(f) the Company shall receive an effective notice from any person
other than a Holder with respect to the exercise of a demand registration rights
applicable to equity securities of the Company.
then the Company shall or shall cause to be mailed by certified mail to the
Holder, (y) except in the case of clauses (e) and (f) above at least 20 days
prior to the applicable record or effective date hereinafter specified and (z)
in the case of clauses (e) and (f) above promptly after the effectiveness or
occurrence of any such event, a notice describing such issuance, distribution,
reorganization, reclassification, consolidation, merger, conveyance, transfer,
dissolution, liquidation, winding-up or other action and stating (x) the date as
of which the holders of Common Stock of record entitled to receive any such
Convertible Securities or distributions are to be determined or (y) the date on
which any such reorganization, reclassification, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding-up is expected to
become effective and the date as of which it is expected that holders of Common
Stock of record shall be entitled to exchange their shares of Common Stock for
securities or other property, if any, deliverable upon such reorganization,
reclassification, consolidation, merger, convey ance, transfer, dissolution,
liquidation or winding-up.
Section 9. Officers' Certificate. Whenever the number of Warrant
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Shares purchasable hereunder shall be adjusted as required by the provisions of
Section 7, the Company shall forthwith file in the custody of its Secretary or
an Assistant Secretary at its principal office an officer's certificate showing
the adjusted number of Warrant Shares purchasable hereunder determined as herein
provided, setting forth in reasonable detail the facts requiring such adjustment
and the manner of computing such adjustment. Each such officer's certificate
shall be signed by the Chairman, President or Chief Financial Officer of the
Company and by the Secretary or any Assistant Secretary of the Company. Each
such officer's certificate shall be made available at all reasonable times for
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inspection by the Holder or any holder of a Warrant executed and delivered
pursuant to Section 5 hereof and the Company shall, forthwith after each such
adjustment, mail a copy, by certified mail, of such certificate to the Holder or
any such holder.
Section 10. Reclassification, Reorganization, Consolidation or Merger.
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In case of any Reorganization Transaction (as hereinafter defined), the Company
shall, as a condition precedent to such transaction, cause effective provisions
to be made so that the Holder shall have the right thereafter, by exercising
this Warrant, to purchase the kind and amount of shares of stock and other
securities and property receivable upon such Reorganization Transaction by a
holder of the number of shares of Common Stock that might have been received
upon exercise of this Warrant immediately prior to such Reorganization
Transaction. Any such provision shall include provision for adjustments in
respect of such shares of stock and other securities and property that shall be
as nearly equivalent as may be practicable to the adjustments provided for in
this Warrant. The foregoing provisions of this Section 10 shall similarly apply
to successive Reorganization Transactions. For purposes of this Section 10,
"Reorganization Transaction" shall mean (excluding any transaction covered by
Section 7) any reclassification, capital reorganization or other change of
outstanding shares of Common Stock of the Company (other than a subdivision or
combination of the outstanding Common Stock and other than a change in the par
value of the Common Stock) or any consolidation or merger of the Company with or
into another corporation (other than a merger with a subsidiary in which merger
the Company is the continuing corporation and that does not result in any
reclassification, capital reorganization or other change of outstanding shares
of Common Stock of the class issuable upon exercise of this Warrant) or any
sale, lease, transfer or conveyance to another corporation of all or
substantially all of the assets of the Company.
Section 11. Transfer Restrictions. The Holder by its acceptance
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hereof, represents and warrants that it is acquiring this Warrant and any
Warrant Shares for its own account and not with an intent to sell or distribute
this Warrant or any Warrant Shares except in compliance with applicable United
States federal and state securities laws in a manner which would not result in
the issuance of this Warrant or any Warrant Shares being treated as a public
offering. Neither this Warrant nor any of the Warrant Shares, nor any interest
in either, may be sold, assigned, pledged, hypothecated, encumbered or in any
other manner transferred or disposed of, in whole or in part, except in
compliance with applicable United States federal and state securities laws.
Section 12. Listing on Securities Exchanges. The Company shall use all
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reasonable efforts to list on each national securities exchange on which any
Common Stock may at any time be listed, subject to official notice of issuance
upon the exercise of this Warrant, and shall use its reasonable best efforts to
maintain such listing, so long
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as any other shares of its Common Stock shall be so listed, all shares of Common
Stock from time to time issuable upon the exercise of this Warrant; and the
Company shall use its reasonable best efforts to so list on each national
securities exchange, and shall use all reasonable efforts to maintain such
listing of, any other shares of capital stock of the Company issuable upon the
exercise of this Warrant if and so long as any shares of capital stock of the
same class shall be listed on such national securities exchange by the Company.
Any such listing shall be at the Company's expense.
Section 13. Availability of Information. (a) the Company shall comply
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with the reporting requirements of Sections 13 and 15(d) of the Exchange Act to
the extent it is required to do so under the Exchange Act. The Company shall
also provide each Holder of any Warrants and each holder of any Warrant Shares
promptly upon their becoming available, copies of (i) all financial statements,
reports, notices and proxy statements sent or made available generally by the
Company to its securityholders or creditors acting in such capacity or by any
subsidiary of the Company to its securityholders or creditors other than the
Company or another subsidiary of the Company, (ii) all regular and periodic
reports and all registration statements (other than on Form S-8 or a similar
form) and prospectuses, if any, filed by the Company or any of its subsidiaries
with any securities exchange or with the Commission or any governmental or
private regulatory authority, and (iii) all press releases and other statements
made available generally by the Company or any of its subsidiaries to the public
concerning material developments in the business of the Company or any of its
subsidiaries. The provisions of this Section 13 shall survive termination of
this Warrant, whether upon exercise of this Warrant in full or otherwise.
(b) If at any time the Company is not subject to the requirements of
Section 13 or 15(d) of the Exchange Act, the Company will promptly furnish at
its expense, upon request, for the benefit of Holders from time to time of
Warrants and holders from time to time of Warrant Shares, to Holders of
Warrants, holders of Warrant Shares and prospective purchasers of Warrants and
Warrant Shares information satisfying the requirements of subsection (d)(4)(i)
of Rule 144A under the Securities Act.
Section 14. Registration Rights.
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(a) Demand Registration. (i) At any time on or after the
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Commencement Date, but prior to the Expiration Date, the Holders of a number of
Warrants or the holders of Warrant Shares equivalent to at least a majority of
the total of (1) all Warrant Shares then subject to purchase upon exercise of
the Warrants pursuant to Section 2(a) hereof, and (2) all Warrant Shares then
outstanding have the right hereunder to make a written request to the Company to
effect one registration (a
13
"Demand Registration") under the Securities Act of the Warrant Shares. Within 20
days after the receipt of such written request for a Demand Registration, the
Company shall notify the Holders of all Warrants and the holders of all Warrant
Shares that a Demand Registration has been requested. In addition, the Company
shall (1) prepare, file with the Commission and use its best efforts to cause to
become effective under the Securities Act within 150 days of such demand a
Registration Statement with respect to such Warrant Shares, and to prepare and
file with the Commission such amendments and supplements to such Registration
Statement and the prospectus used in connection therewith as may be necessary to
keep such Registration Statement effective and to comply with the provisions of
the Securities Act with respect to the sale or other disposition of all
securities covered by such Registration Statement and (2) keep such Registration
Statement continuously effective until the earlier to occur of (A) the date that
is 60 days after such effectiveness (the "Effectiveness Period") and (B) such
period of time as all of the Warrant Shares included in such Registration
Statement shall have been sold thereunder. Any such request will specify the
number of Warrant Shares proposed to be sold and will also specify the intended
method of disposition thereof. Within 30 days after receipt by any Holder of
Warrants or holder of Warrant Shares of such notice from the Company, such
Holder or holder may request in writing that such Holder's or holder's Warrant
Shares be included in such Registration Statement and the Company shall include
in such Registration Statement the Warrant Shares of any such Holder or holder
requested to be so included, provided that, with respect to any Holder of
Warrants, such Warrants are duly and timely exercised with respect to the
Warrant Shares requested to be registered (the "Included Shares"). Each such
request by such other Holders or holders shall specify the number of Included
Shares proposed to be sold and the intended method of disposition thereof.
(ii) If such a requested registration occurs during the "lock up" or
"black out" period (not to exceed 180 days) imposed on the Company pursuant to
or in connection with any underwriting or purchase agreement relating to an
underwritten Rule 144A or registered public offering of Common Stock or
securities convertible into or exchangeable or exercisable for Common Stock, the
Company shall not be required to so notify holders of Warrants and Warrant
Shares and file such Demand Registration Statement prior to the end of such
"lock up" or "black out" period, in which event the Company will use its best
efforts to cause such Demand Registration Statement to become effective no later
than the later of (1) 150 days after such demand or (2) 30 days after the end of
such "lock up" or "black out" period. In the event of any "lock up" or "black
out" period or any underwriting or other purchase agreement, the Company shall
so notify the holders of Warrants and Warrant Shares.
(iii) A Registration Statement shall not be deemed to have been
effected as a Demand Registration Statement unless it shall have been declared
effective by the
14
Commission, no later than the later of (1) 150 days after the request for a
Demand Registration or (2) 30 days after the end of any "lock up" or "black out"
period described in the preceding paragraph, and the Company has complied in all
material respects with all of its obligations under this Warrant with respect
thereto; provided, however, that if, after such Registration Statement has
become effective, the offering of Warrant Shares pursuant to such Registration
Statement is or becomes the subject of any stop order, injunction or other order
or requirement of the Commission or any other governmental, judicial or
administrative order or requirement that prevents, restrains or otherwise limits
the sale of the Warrant Shares pursuant to such Registration Statement for any
reason not attributable to any Selling Holder participating in such
registration, and such Registration Statement has not become effective within a
reasonable time period thereafter, such Registration Statement shall be deemed
not to have been effected. If (1) a registration requested pursuant to this
Section 14(a) is deemed not to have been effected or (2) a Demand Registration
does not remain effective under the Securities Act until at least the earlier of
(A) an aggregate of 60 days (subject to Section 14(c) hereof) after the
effective date thereof or (B) the consummation of the distribution by the
Selling Holders of all of the Warrant Shares covered thereby, then such Demand
Registration shall not count towards determining if the Company has satisfied
its obligation to effect one Demand Registration pursuant to this Section 14(a).
For purposes of calculating the 60-day period referred to in the preceding
sentence, any period of time during which such Registration Statement was not in
effect shall be excluded. The holders of Warrant Shares shall be permitted to
withdraw all or any part of such Warrant Shares from a Demand Registration.
Notwithstanding any such withdrawal by a holder of Warrant Shares, if the
Company has complied with all of its obligations hereunder and has effected a
Demand Registration within 150 days after the request for a Demand Registration,
such withdrawal shall not require the Company to effect any additional Demand
Registrations.
(iv) Each Holder of Warrants and Warrant Shares whose Warrant Shares
are covered by a Registration Statement filed pursuant to this Section 14(a) and
are to be sold thereunder agrees, if and to the extent reasonably requested by
the managing underwriter or underwriters in an underwritten public offering of
such Warrant Shares, not to effect any public sale or distribution of Warrant
Shares or of securities of the Company of the same class as any securities
included in such Registration Statement, including a sale pursuant to Rule 144
(except as part of such underwritten offering), during the 30-day period prior
to, and during the 180-day period beginning on, the closing date of each
underwritten offering made pursuant to such Registration Statement, to the
extent timely notified in writing by the Company or such managing underwriter or
underwriters.
15
The foregoing provisions of Section 14(a)(iv) shall not apply to any
Holders of Warrant Shares if such Holder is prevented by applicable statute or
regulation from entering into any such agreement; provided, however, that any
such Holder shall undertake, in its request to participate in any such
underwritten offering, not to effect any public sale or distribution of any
Warrant Shares commencing on the date of sale of such Warrant Shares unless it
has provided 45 days' prior written notice of such sale or distribution by the
managing underwriter or underwriters.
(v) If a majority of the holders of the Warrant Shares to be
registered so elect, the offering of such Warrant Shares pursuant to such Demand
Registration shall be in the form of an underwritten offering. The holders
making such Demand Registration shall select one or more nationally recognized
firms of investment bankers, who shall be reasonably acceptable to the Company,
to act as the managing underwriter or underwriters in connection with such
offering and shall select any additional investment bankers and managers to be
used in connection with the offering.
(vi) The Company will pay all Registration Expenses (as hereinafter
defined) in connection with the registration requested pursuant to Section 14(a)
hereof. Each holder of Warrant Shares being registered shall pay all
underwriting discounts and commissions and transfer taxes, if any, relating to
the sale or disposition of such holder's Warrant Shares pursuant to a
Registration Statement requested pursuant to this Section 14(a).
(b) Piggy-Back Registration. (i) If at any time the Company
-----------------------
proposes to file a Registration Statement under the Securities Act with respect
to an offering by the Company for its own account or for the account of any of
its securityholders of Common Stock (other than (1) a Registration Statement on
Form S-4 or S-8 (or any substitute form that may be adopted by the SEC) or any
other publicly registered offering pursuant to the Securities Act pertaining to
the issuance of shares of capital stock or securities exercisable therefor under
any benefit plan, employee compensation plan, or employee or director stock
purchase plan, (2) a Registration Statement filed in connection with an offer of
securities solely to the Company's existing securityholders or (3) a Demand
Registration or (4) if the registration is a "demand" registration made by (i)
the holders of warrants issued to the purchasers of Notes or (ii) the holders of
securities issued pursuant to and governed by the Sandler Documents, then the
Holders of Warrants and the holders of Warrant Shares shall not be entitled to
participate in such registration unless agreed to in writing by those holders
referenced in the foregoing clauses (i) and (ii)), then the Company shall give
written notice of such proposed filing to the holders of Warrant Shares as soon
as practicable (but in no event fewer than 15 days before the anticipated filing
date or 10 days if the Company is subject to filing reports under the Exchange
Act and able to use Form S-3 under the Securities
16
Act), and such notice shall offer such holders the opportunity to register such
number of Warrant Shares as each such holder may request in writing within 12
days (or eight days if the Company is subject to filing reports under the
Exchange Act and able to use Form S-3 under the Securities Act) after receipt of
such written notice from the Company (which request shall specify the Warrant
Shares intended to be disposed of by such Selling Holder and the intended method
of distribution thereof) (a "Piggy-Back Registration"). The Company shall use
its best efforts to keep such Piggy-Back Registration continuously effective
under the Securities Act in the qualifying jurisdic tions until at least the
earlier of (A) 60 days after the effective date thereof or (B) the consummation
of the distribution by the Selling Holders of all of the Warrant Shares covered
thereby. The Company shall use its best efforts to cause the managing
underwriter or underwriters, if any, of such proposed offering to permit the
Warrant Shares requested to be included in a Piggy-Back Registration to be
included on the same terms and conditions as any similar securities of the
Company or any other securityholder included therein and to permit the sale or
other disposition of such Warrant Shares in accordance with the intended method
of distribution thereof. Any Selling Holder shall have the right to withdraw its
request for inclusion of its Warrant Shares in any Registration Statement
pursuant to this Section 14(b) by giving written notice to the Company of its
request to withdraw. The Company may withdraw a Piggy-Back Registration at any
time prior to the time it becomes effective or the Company may elect to delay
the registration; provided, however, that the Company shall give prompt written
notice thereof to participating Selling Holders. The Company will pay all
Registration Expenses in connection with each registration of Warrant Shares
requested pursuant to this Section 14(b), and each holder of Warrant Shares
shall pay all underwriting discounts and commissions and transfer taxes, if any,
relating to the sale or disposition of such Selling Holder's Warrant Shares
pursuant to a Registration Statement effected pursuant to this Section 14(b).
No registration effected under this Section 14(b), and no failure to
effect a registration under this Section 14(b), shall relieve the Company of its
obligation to effect a registration upon the request of Holders of Warrants and
holders of Warrant Shares pursuant to Section 14(a) hereof, and no failure to
effect a registration under this Section 14(b) and to complete the sale of
securities registered thereunder in connection therewith shall relieve the
Company of any other obligation under this Warrant.
(ii) In a registration pursuant to Section 14(b) hereof involving an
underwritten offering, if the managing underwriter or underwriters of such
underwritten offering have informed, in writing, the Company and the Selling
Holders requesting inclusion in such offering that in such underwriter's or
underwriters' reasonable opinion the total number of securities which the
Company, the Selling Holders and any other Persons desiring to participate in
such registration intend to include in such offering is
17
such as to materially and adversely affect the success of such offering,
including the price at which such securities can be sold, then the Company will
be required to include in such registration only the amount of securities which
it is so advised should be included in such registration. In such event: (x) in
cases only involving the registration for sale of securities for the Company's
own account (which may include securities included pursuant to the exercise of
piggy-back rights herein and in other contractual commit ments of the Company),
securities shall be registered in such offering in the following order of
priority: (i) first, the securities which the Company proposes to register and
(ii) second, provided that no securities sought to be included by the Company
have been excluded from such registration, on a pro rata basis, (a) the Warrant
Shares which have been requested to be included in such registration by the
holders of Warrant Shares pursuant to this Warrant (such Warrant Shares for the
account of such holders to be allocated among the holders pro rata based on the
amount of Warrant Shares sought to be registered by the holder), together with
(b) the securities of other Persons entitled to exercise "piggy-back"
registration rights pursuant to contractual commitments of the Company (pro rata
based on the amount of securities sought to be registered by such Persons); and
(y) in cases not involving the registration for sale of securities for the
Company's own account only, securities shall be registered in such offering in
the following order of priority: (i) first, securities to be sold for the
account of the Company and the securities of any Person whose exercise of a
"demand" registration right pursuant to a contractual commitment of the Company
is the basis for the registration (provided that if such Person is a Holder of
Warrants or holder of Warrant Shares, as among holders of Warrant Shares there
shall be no priority and Warrant Shares sought to be included by holders of
Warrant Shares shall be included pro rata based on the amount of securities
sought to be registered by such Persons) and (ii) second, provided that no
securities of the Company or such Person referred to in the immediately
preceding clause (i) have been excluded from such registration, on a pro rata
basis, (a) the securities requested to be included in such registration by the
holders of Warrant Shares pursuant to this Section 14(b) (such securities for
the account of such holders to be allocated among such holders pro rata based on
the total amount of securities sought to be registered by the holders), together
with (b) the securities of other Persons entitled to exercise "piggy-back"
registration rights pursuant to contractual commitments (pro rata based on the
amount of securities sought to be registered by such Persons).
If, as a result of the provisions of this Section 14(b), any Selling
Holder shall not be entitled to include all Warrant Shares in a Piggy-Back
Registration that such Selling Holder has requested be included, such Selling
Holder may elect to withdraw his request to include Warrant Shares in such
registration.
18
(iii) Each Holder of Warrants and Warrant Shares whose Warrant Shares
are covered by a Registration Statement filed pursuant to this Section 14(b) and
are to be sold thereunder agrees, if and to the extent reasonably requested by
the managing underwriter or underwriters in an underwritten public offering of
such Warrant Shares, not to effect any public sale or distribution of Warrant
Shares or of securities of the Company of the same class as any securities
included in such Registration Statement, including a sale pursuant to Rule 144
(except as part of such underwritten offering), during the 30-day period prior
to, and during the 180-day period beginning on, the closing date of each
underwritten offering made pursuant to such Registration Statement, to the
extent timely notified in writing by the Company or such managing underwriter or
underwriters.
The foregoing provisions of Section 14(b) shall not apply to any
Holders of Warrants and Warrant Shares if such Holder is prevented by applicable
statute or regulation from entering into any such agreement; provided, however,
that any such holder shall undertake, in its request to participate in any such
underwritten offering, not to effect any public sale or distribution of any
Warrant Shares commencing on the date of sale of such Warrant Shares unless it
has provided 45 days' prior written notice of such sale or distribution to the
managing underwriter or underwriters.
(iv) Notwithstanding the foregoing provisions of this Section 14(b):
(A) the Holders may not require a Piggyback Registration in
connection with an Initial Public Offering unless such offering
consists or includes a secondary offering of securities by any
Person other than holders of Existing Registration Rights (as
defined in the Sandler Documents) who are not Insiders (as
defined in the Sandler Documents);
(B) the Holders may not require a Piggyback Registration on the
first registered offering of Common Stock by the Company which is
made after the Initial Public Offering pursuant to a Registration
Statement that becomes effective within six months after the
Initial Public Offering unless such offering consists or includes
a secondary offering of securities by any Person other than (A)
holders of Existing Registration Rights who are not Insiders or
(B) Insiders, provided that each participating Insider registers
fewer than 10% of the shares of Common Stock he then beneficially
owns; and
19
(c) Limitations, Conditions and Qualifications to Obligations
---------------------------------------------------------
Under Registration Covenants. The obligations of the Company set forth in
----------------------------
Sections 14(a), 14(b) and 14(f) hereof are subject to each of the following
limitations, conditions and qualifications:
(i) Subject to the next sentence of this paragraph, the Company shall
be entitled to postpone, for a reasonable period of time, the filing of, or
suspend the effectiveness of, any Registration Statement or amendment
thereto, or suspend the use of any prospectus and shall not be required to
amend or supplement the Registration Statement, any related prospectus or
any document incorporated therein by reference (other than an effective
Registration Statement being used for an underwritten offering); provided
that the duration of such postponement or suspension (a "Suspension
Period") may not exceed an aggregate of 90 days after the event or
circumstance giving rise to such Suspension Period and the duration of such
Suspension Period shall be excluded from the calculation of the 60-day
period described in Section 14(b) hereof. Such Suspension Period may be
effected only if (1) an event or circumstance occurs and is continuing as a
result of which the Registration Statement, any related prospectus or any
document incorporated therein by reference as then amended or supplemented
or proposed to be filed would, in the Company's good faith judgment,
contain an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading, and (2) (A) the
Company determines in its good faith judgment that the disclosure of such
an event at such time would have a material adverse effect on the business,
operations or prospects of the Company or (B) the disclosure otherwise
relates to a material business transaction which has not yet been publicly
disclosed; provided, that the Effectiveness Period shall be extended by the
number of days in any Suspension Period; provided further that the Company
may suspend the effectiveness for a period not in excess of five Business
Days to allow for the updating of the financial statements included in a
Registration Statement to the extent required by law, not to exceed 45 days
in aggregate in any 12-month period. If the Company shall so postpone the
filing of a Registration Statement it shall, as promptly as possible,
deliver a certificate signed by the chief executive officer of the Company
to the Selling Holders as to such determination, and the Selling Holders
shall (1) have the right, in the case of a postponement of the filing or
effectiveness of a Registration Statement, upon the affirmative vote of the
holders of not less than a majority of the Warrant Shares to be included in
such Registration Statement, to withdraw the request for registration by
giving written notice to the Company within 10 days after receipt of such
notice or (2) in the case of a suspension of the right to make sales,
receive an extension of the
20
registration period equal to the number of days of the suspension. Any
Demand Registration as to which the withdrawal election referred to in the
preceding sentence has been effected shall not be counted for purposes of
the Demand Registration the Company is required to effect pursuant to
Section 14(a) hereof.
(ii) The Company's obligations shall be subject to the obligations of
the Selling Holders, which the Selling Holders acknowledge, to furnish all
information and materials and to take any and all actions as may be
required under applicable federal and state securities laws and regulations
to permit the Company to comply with all applicable requirements of the
Commission, if applicable, and to obtain any acceleration of the effective
date of such Registration Statement.
(d) Restrictions on Sale by the Company and Others. The Company
----------------------------------------------
covenants and agrees that (i) it shall not, and that it shall not cause or
permit any of its subsidiaries to, effect any public sale or distribution of any
securities of the same class as any of the Warrant Shares or any securities
convertible into or exchange able or exercisable for such securities (or any
option or other right for such securities) during the 90-day period beginning on
the commencement of any underwritten offering of Warrant Shares pursuant to a
Demand Registration which has been requested pursuant to this Warrant, prior to
the Company or any of its subsidiaries publicly announcing its intention to
effect any such public sale or distribution; (ii) except as permitted herein,
the Company will not, and the Company will not cause or permit any subsidiary of
the Company to, after the date hereof, enter into any agreement or contract that
conflicts with or limits or prohibits the full and timely exercise by the
Holders of Warrants or holders of Warrant Shares of the rights herein to request
a Demand Registration or to join in any Piggy-Back Registration subject to the
other terms and provisions hereof; and (iii) upon request of the holders of not
less than a majority of the Warrant Shares to be included in such Registration
Statement or any underwriter, it shall use its reasonable best efforts to secure
the written agreement of each of its officers and directors to not effect any
public sale or distribution of any securities of the same class as the Warrant
Shares (or any securities convertible into or exchangeable or exercisable for an
such shares), or any option or right for such shares during the period described
in clause (i) of this Section 14(d).
(e) Rule 144 and Rule 144A. The Company covenants that it will
----------------------
file the reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the Commission thereunder
in a timely manner and, if at any time the Company is not required to file such
reports, it will, upon the request of any Holder or beneficial owner of Warrants
or holder of Warrant Shares, make available such information necessary to permit
sales pursuant to Rule 144A under the
21
Securities Act. The Company further covenants that it will take such further
action as any Holder of Warrants or holder of Warrant Shares may reasonably
request, all to the extent required from time to time to enable such holder to
sell Warrant Shares without registration under the Securities Act within the
limitation of the exemptions provided by (a) Rule 144(k) and Rule 144A under the
Securities Act, as such Rules may be amended from time to time, or (b) any
similar rule or regulation hereafter adopted by the Commission. Upon the request
of any Holder of Warrants or holder of Warrant Shares, the Company will in a
timely manner deliver to such holder a written statement as to whether it has
complied with such information requirements.
(f) Underwritten Registrations. If any of the Warrant Shares
--------------------------
covered by any Demand Registration Statement are to be sold in an underwritten
public offering, the investment banker or investment bankers and manager or
managers that will administer the offering will be selected by the holders of
not less than a majority of the Warrant Shares to be sold thereunder and will be
reasonably acceptable to the Company.
No holder of Warrant Shares may participate in any underwritten
registration pursuant to a Registration Statement filed under this Warrant
unless such holder (a) agrees to (i) sell such holder's Warrant Shares on the
basis provided in and in compliance with any underwriting arrangements approved
by the holders of not less than a majority of the Warrant Shares to be sold
thereunder and (ii) comply with Rules 101, 102 and 104 of Regulation M under the
Exchange Act and (b) completes and executes all questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents reasonably
required under the terms of such underwriting arrangements.
If the Company has complied with all of its obligations under this
Warrant with respect to a Demand Registration or a Piggy-Back Registration
relating to an underwritten public offering of Warrant Shares, all holders of
Warrants or holders of Warrant Shares upon request of the lead managing
underwriter with respect to such offering, will be required not to sell or
otherwise distribute any Warrant Shares owned by them for a period not to exceed
180 days after the consummation of such offering.
(g) Registration Procedures. If the Company is required by the
-----------------------
provisions of this Section 14 to use its best efforts to effect the registration
of any of its securities under the Securities Act, the Company will (in addition
to taking any other actions required by law or this Warrant), as expeditiously
as possible:
(i) furnish to such Selling Holders such number of copies of a
summary prospectus or other prospectus, including a preliminary prospectus,
in conformity with the requirements of the Securities Act, and such other
docu ments, as such Selling Holders may reasonably request;
22
(ii) use its best efforts to register or qualify the securities
covered by such Registration Statement under such other securities or blue
sky laws of such jurisdictions within the United States and Puerto Rico as
each holder of such securities shall request (provided, however, that the
Company shall not be obligated to qualify as a foreign corporation to do
business under the laws of any jurisdiction in which it is not then
qualified or to file any general consent to service or process), and do
such other reasonable acts and things as may be required of it to enable
such Selling Holder to consummate the disposition in such jurisdiction of
the securities covered by such Registration Statement;
(iii) furnish, at the request of any Holder of Warrants or holder
of Warrant Shares requesting registration of Warrant Shares pursuant to
Section 14, on the date that such Warrant Shares are delivered to the
underwriters for sale pursuant to such registration or, if such Warrant
Shares are not being sold through underwriters, on the date that the
Registration Statement with respect to such Warrant Shares becomes
effective, (A) an opinion, dated such date, of the independent counsel
representing the Company for the purposes of such registration, addressed
to the underwriters, if any, and if such Warrant Shares are not being sold
through underwriters, then to the holders making such request, in customary
form and covering matters of the type customarily covered in such legal
opinions; and (B) a comfort letter dated such date, from the independent
certified public accountants of the Company, addressed to the underwriters,
if any, and if such Warrant Shares are not being sold through underwriters,
then to the holders making such request and, if such accountants refuse to
deliver such letter to such holders, then to the Company in a customary
form and covering matters of the type customarily covered by such comfort
letters as the underwrit ers or such holders shall reasonably request.
Such opinion of counsel shall additionally cover such other legal matters
with respect to the registration in respect of which such opinion is being
given as such holders holding a majority of the Warrant Shares being so
registered may reasonably request. Such letter from the independent
certified public accountants shall additionally cover such other financial
matters (including information as to the period ending not more than three
(3) Business Days prior to the date of such letter) with respect to the
registration in respect of which such letter is being given as the holders
holding a majority of the Warrant Shares being so registered may reasonably
request;
(iv) enter into customary agreements (including an underwriting
agreement in customary form) and take such other actions as are reasonably
required in order to expedite or facilitate the disposition of such
securities; and
23
(v) cause the appropriate officers of the Company to meet with
prospective investors and to otherwise participate in "road shows" and to
take such other actions as are usual and customary in connection with an
underwritten offering of equity securities; and
(vi) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission.
It shall be a condition precedent to the obligation of the Company to
take any action pursuant to this Section 14 in respect of the securities which
are to be registered at the request of any Holder of Warrants or holder of
Warrant Shares that such Holder or holder shall furnish to the Company such
information regarding the securities held by such Holder or holder and the
intended method of disposition thereof as the Company shall reasonably request
and as shall be required in connection with the action taken by the Company.
(h) Expenses. Except as provided in Section 14(a), all expenses
--------
incurred in complying with this Section 14, including, without limitation, all
registration and filing fees (including all expenses incident to filing with the
National Association of Securities Dealers, Inc.), printing expenses, fees and
disbursements of counsel for the Company, the reasonable fees and expenses of a
single firm of legal counsel for the Selling Holders (up to $75,000 in
connection with a Demand Registration; $25,000 in connection with a Piggy-Back
Registration) and expenses of any special audits incident to or required by any
such registration and expenses of complying with the securities or blue sky laws
of any jurisdiction (collectively, "Registration Expenses"), shall be paid by
the Company, except that the Company shall not be liable for any fees, discounts
or commissions to any underwriter or any fees or disbursements of counsel for
any underwriter.
(i) Indemnification and Contribution. (i) In the event of any
--------------------------------
registration of any of the Warrant Shares under the Securities Act pursuant to
this Section 14, the Company shall indemnify and hold harmless the holder of
such Warrant Shares, such holder's directors and officers, and each other Person
(including each underwriter) who participated in the offering of such Warrant
Shares and each other Person, if any, who controls such holder or such
participating Person within the meaning of the Securities Act, against any
losses, claims, damages or liabilities, joint or several, to which such holder
or any such director or officer or participating Person or controlling Person
may become subject under the Securities Act or any other statute or at common
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon (A) any untrue statement or
alleged untrue statement of any material fact contained, on the effective date
thereof, in any Registration Statement
24
under which such securities were registered under the Securities Act, any
preliminary prospectus or final prospectus contained therein, or any amendment
or supplement thereto, or (B) any omission or alleged omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, and shall reimburse such holder or such
director, officer or participating Person or controlling Person for any legal or
any other expenses reasonably incurred by such holder or such director, officer
or participating Person or controlling Person in connection with investigating
or defending any such loss, claim, damage, liability or action; provided,
however, that the Company shall not be liable in any such case to the extent
that any such loss, claim, damage, liability or action arises out of or is based
upon any alleged untrue statement or alleged omission made in such Registration
Statement, preliminary prospectus, prospectus or amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by such holder specifically for use therein or (in the case of any
registration pursuant to Section 14(a)) so furnished for such purposes by any
underwriter. Such indemnity shall remain in full force and effect regardless of
any investigation made by or on behalf of such holder or such director, officer
or participating Person or controlling Person, and shall survive the transfer of
such securities by such holder.
(ii) In the event of any registration of any of the Warrant Shares
under the Securities Act pursuant to this Section 14, each holder of any Warrant
Shares, by acceptance thereof, agrees to indemnify and hold harmless the
Company, its directors and officers, and each other Person (including each
underwriter) who participated in the offering of such Warrant Shares and each
other Person, if any, who controls the Company or such participating Person
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which the Company or any such director or
officer or participating Person or controlling Person may become subject under
the Securities Act or any other statute or at common law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon (A) any untrue statement or alleged untrue statement of any
material fact contained, on the effective date thereof, in any Registration
Statement under which such securities were registered under the Securities Act,
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereto, or (B) any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, but only to the extent that such untrue
statement or alleged untrue statement or omission or alleged omission was made
in reliance upon and in conformity with written information furnished to the
Company by or on behalf of such holder of Warrant Shares specifically for use
therein, and shall reimburse the Company or such director, officer or
participating Person or controlling Person for any legal or any other expenses
reasonably incurred by the Company or such director, officer or participating
Person or controlling Person in connection with
25
investigating or defending any such loss, claim, damage, liability or action.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of the Company or such director, officer or
participating Person or controlling Person, and shall survive the transfer of
such securities by such holder.
(iii) If the indemnification provided for in this Section 14(i) from
the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such losses, claims, damages, liabilities or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified parties in connection with the actions which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying party
and indemnified parties shall be determined by reference to, among other things,
whether any action in question, including any untrue or alleged untrue statement
of a material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
such indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include any legal or other
fees or expenses reasonably incurred by such party in connection with any
investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 14(i)(iii) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not guilty of such fraudulent misrepresentation.
Section 15. Transfer Generally. All Warrants and Warrant Shares at any
------------------
time and from time to time outstanding shall be held subject to the conditions
and restrictions set forth in Sections 16 and 17 below. Each Holder of Warrants
by executing this Warrant and by accepting a certificate representing Warrant
Shares or other indicia of ownership therefor from the Company agrees with the
Company and with each other securityholder to such conditions and restrictions.
Section 16. Tag-Along Rights. (a) Prior to an Initial Public Offering,
----------------
each of the holders of Warrants or Warrant Shares shall have the right (the
"Tag-Along
26
Right") to require the Proposed Purchaser (as defined below) to purchase
from each of them all Warrants and Warrant Shares owned by such holder in the
event of any proposed direct or indirect sale or other disposition
(collectively, a "Transfer") of Common Stock or Convertible Securities (whether
now or hereafter issued) to any Person or Persons (such other Person or Persons
being hereinafter referred to as the "Proposed Purchaser") by any Permitted
Holders or any of their Affiliates in any transaction or a series of related
transactions resulting in a Change of Control.
(b) Any Warrants or Warrant Shares purchased from the Participating
Holders (as defined below) pursuant to this Section 16 shall be paid for in the
same type of consideration and at the same price per share of Common Stock and
upon the same terms and conditions of such proposed Transfer of Common Stock by
any Permitted Holder or any of its Affiliates (net, in the case of any Warrants,
of an amount equal to the product of (y) the number of Warrant Shares covered by
such Warrants and (z) the Exercise Price with respect to such Warrant Shares).
(c) Each Permitted Holder shall notify, or cause to be notified, each
holder of Warrants or Warrant Shares in writing (a "Transfer Notice") of each
such proposed Transfer at least 30 days prior to the date thereof. Such notice
shall set forth: (a) the name and address of the Proposed Purchaser and the
number of shares of Common Stock and other securities, if any, proposed to be
transferred, (b) the proposed amount of consideration and terms and conditions
of payment offered by such Proposed Purchaser (if the proposed consideration is
not cash, the Transfer Notice shall describe the terms of the proposed
consideration) and (c) that either the Proposed Purchaser has been informed of
the "Tag-Along Right" and has agreed to purchase Warrants and Warrant Shares in
accordance with the terms hereof or that the Permitted Holder or any of its
Affiliates will make such purchase. The Tag-Along Right may be exercised by any
holder of Warrants or Warrant Shares by delivery of a written notice to the
Company (the "Tag-Along Notice"), within 10 days of such holder's receipt of the
Transfer Notice, indicating its election to exercise the Tag-Along Right (a
"Participating Holder"). The Tag-Along Notice shall state the amount of
Warrants or Warrant Shares that such holder proposes to include in such Transfer
to the Proposed Purchaser. Failure by any holder to provide a Tag-Along Notice
within the 10-day notice period shall be deemed to constitute an election by
such holder not to exercise its Tag-Along Right. The closing with respect to
any sale to a Proposed Purchaser pursuant to this Section 16 shall be held at
the time and place specified in the Transfer Notice but in any event within 60
days of the date such Transfer Notice is given; provided that if through the
exercise of reasonable efforts the Company is unable to cause such transaction
to close within 60 days, such period may be extended for such reasonable period
of time as may be necessary to close such transaction. Consummation of the sale
of Common Stock or Convertible Securities by any Permitted Holder or any of its
Affiliates to a Proposed Purchaser shall be
27
conditioned upon consummation of the sale by each Participating Holder to such
Proposed Purchaser (or the Permitted Holder) of the Warrants or Warrant Shares
entitled to be transferred as described above, if any.
(d) If the Proposed Purchaser does not purchase the Warrants or
Warrant Shares entitled to be transferred as described in this Section 16 on the
same terms and conditions as purchased from the Permitted Holders or any of
their Affiliates, then the Permitted Holders or their Affiliates shall purchase
such Warrants or Warrant Shares if the Transfer occurs.
(e) If at the end of 60 days following the date on which a Transfer
Notice was given, or as otherwise extended pursuant to the provisions of this
Section 16, the sale of Common Stock or Convertible Securities by the Permitted
Holders or their Affiliates and the sale of the Warrants or Warrant Shares
entitled to be transferred as provided above have not been completed in
accordance with the terms of the Proposed Purchaser's offer, all certificates
representing such Warrants or Warrant Shares shall be returned to the
Participating Holders, and all the restrictions on Transfer contained in this
Agreement with respect to Common Stock or Convertible Securities owned by the
Permitted Holders and their Affiliates shall remain in effect.
Section 17. Drag-Along Rights. If at any time prior to an Initial
-----------------
Public Offering, any Permitted Holders or any of their respective Affiliates
determines to sell all of the capital stock of the Company owned by them to a
Person other than a Permitted Holder or its Affiliate in a transaction resulting
in a Change of Control, the transferring Permitted Holder (whether directly or
through an Affiliate) shall have the right (the "Drag-Along Right") to require
the holders of Warrants and Warrant Shares to sell such Warrants and Warrant
Shares to such transferee; provided that (i) the consideration to be received by
the holders of Warrant Shares shall be the same type of consideration received
by the Permitted Holders and their Affiliates and, in any event, shall be cash
or freely transferable marketable securities, and (ii) after giving effect to
such transaction, the Permitted Holders making the transfers and its Affiliates
shall not own, directly or indirectly, any capital stock or rights to purchase
capital stock of the Company. Any Warrants or Warrant Shares purchased from the
holders thereof pursuant to this Section 17 shall be paid for at the same price
per share of Common Stock and upon the same terms and conditions as such
proposed transfer of Common Stock by the Permitted Holders and their Affiliates
(net, in the case of any Warrants, of an amount equal to the product of (y) the
number of Warrant Shares covered by such Warrants and (z) the Exercise Price
with respect to such Warrant Shares).
Section 18. Certain Representations and Warranties. The Company hereby
--------------------------------------
represents and warrants to the Holder as follows:
28
(a) Corporate Existence. The Company is a corporation duly organized,
-------------------
validly existing and in good standing under the laws of the State of Colorado
and has full power and authority to carry on its business.
(b) Power and Authority. The Company has full corporate power to
-------------------
execute, deliver and issue this Warrant and to carry out its obligations
hereunder and no other corporate acts or proceedings on the part of the Company
are necessary to authorize this Warrant or the Warrant Shares.
Section 19. Certain Covenants.
-----------------
(a) No Impairment. The Company shall not by any action, including,
-------------
without limitation, amending its certificate of incorporation, effecting any
reorganization, transfer or assets, consolidation, merger, dissolution, issue or
sale of securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate to protect the
rights of the Holder against impairment.
(b) Acknowledgment. Upon the request of the Holder, the Company
--------------
shall, at any time during the period this Warrant is outstanding, acknowledge in
writing, in a form satisfactory to the Holder, the continued validity of this
Warrant and the Company's obligations hereunder.
Section 20. Governing Law. This Warrant and the rights and obligations
-------------
of the parties hereunder shall be construed in accordance with and governed by
the laws of the State of New York without regard to principles of conflicts of
laws.
Section 21. Notice. Except as otherwise specified herein, any notice
------
pursuant to this Warrant by the Company or the Holder shall be in writing and
shall be mailed by certified mail, return receipt requested, (a) to the Company
at its principal office at the address set forth on the signature page hereof,
or (b) to the Holder at Xxxxxxx, Xxxxx & Co., 00 Xxxxx Xxxxxx, 0/xx/ Xxxxx, Xxx
Xxxx, Xxx Xxxx, 00000, Attention: Xxxx Xxxxxxxx. Either party may from time to
time change the address to which notices to it are to be delivered or mailed
under this Warrant by notice in writing to the other party.
Section 22. Limitation of Liability. No provision hereof, in the
-----------------------
absence of affirmative action by the Holder to purchase shares of Common Stock,
and no
29
enumeration herein of the rights or privileges of the Holder, shall give rise to
any liability of the Holder for the purchase price of any Common Stock or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
Section 23. Remedies. Each Holder of Warrants and each holder of
--------
Warrant Shares, in addition to being entitled to exercise all rights granted by
law, including recovery of damages, will be entitled to specific performance of
their rights under this Warrant. The Company agrees that monetary damages would
not be adequate compensation for any loss incurred by reason of a breach by it
of the provisions of this Warrant and hereby agrees to waive the defense in any
action for specific performance that a remedy at law would be adequate.
Section 24. No-Piggy-Back on Demand Registrations. The Company shall
-------------------------------------
not grant to any of its securityholders (other than the Holders in such capacity
and persons who hold such rights pursuant to agreements in effect on the date
hereof) the right to include any of their securities in any Registration
Statement filed pursuant to a Demand Registration.
Section 25. Successors and Assigns. This Warrant and the rights
----------------------
evidenced hereby shall inure to the benefit of an be binding upon the successors
of the Company and the successors and assigns of the Holder. The provisions of
this Warrant are intended to be for the benefit of all Holders from time to time
of this Warrant and, with respect to Section 14, holders of Warrant Shares, and
shall be enforceable by any such Holder or holder of Warrant Shares.
Section 26. Headings. The Section headings herein have been inserted
--------
for convenience only and shall have no substantive effect.
30
IN WITNESS WHEREOF, the Company has duly caused this Warrant to be
executed by and attested by its duly authorized officers and to be dated as of
June 3, 1999.
CONVERGENT COMMUNICATIONS, INC.
By /s/ XXXXXX X. XXXXXXX By /s/ XXXX X. XXXXX
--------------------- ----------------------
Attest: Xxxxxx X. Xxxxxxx Name: Xxxx X. Xxxxx
Title: Assistant Secretary Title: CEO
31
PURCHASE FORM
_____________
Dated ____________, ____
The undersigned hereby irrevocably elects to exercise the within
Warrant to the extent of purchasing ______ shares of Common Stock and hereby
makes payment of ________ in payment of the exercise price thereof.
INSTRUCTIONS FOR REGISTRATION OF STOCK
______________________________________
Name____________________________________________________________
(please typewrite or print in block letters)
Address__________________________________________________________
Signature___________________________________________________
____________________
32
ASSIGNMENT FORM
__________ ____
FOR VALUE RECEIVED, _____________________ hereby sells, assigns and
transfers unto
Name____________________________________________________________
(please typewrite or print in block letters)
Address__________________________________________________________
its right to purchase _____________ shares of Common Stock represented by this
Warrant and does hereby irrevocably constitute and appoint ___________ Attorney,
to transfer the same on the books of the Company, with full power of
substitution in the premises.
Date________________, _____
Signature____________________
33
