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EXHIBIT 4.4
WARRANT AGREEMENT
Dated as of May 27, 1999
by and between
STATE COMMUNICATIONS, INC.
and
NORTEL NETWORKS INC.
WARRANT AGREEMENT (this "Agreement") is made and entered into as of May
27, 1999 by and between STATE COMMUNICATIONS, INC., a South Carolina corporation
(the "Company"), NORTEL NETWORKS INC., a Delaware corporation ("Nortel
Networks") and the Holders of the Warrants from time to time.
WHEREAS, in consideration for, among other things, the execution of the
Credit Agreement (as defined below) and the purchase of the Series 1999A Note
(as defined below), the Company agrees to issue Common Stock warrants as
hereinafter described (the "Warrants") to purchase shares Common Stock (as
defined below), in such number and at such price determined in accordance with
this Agreement. Each Warrant entitles the holder thereof to purchase one share
of Common Stock.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, and for the purpose of defining the respective
rights and obligations of the Company and Nortel Networks, the parties hereto
agree as follows:
Section 1. Certain Definitions. Capitalized defined terms used in this
Agreement and not otherwise defined herein shall have the meanings given to
those terms in the Credit Agreement. As used in this Agreement, the following
terms shall have the following respective meanings:
"Commission" means the Securities and Exchange Commission.
"Common Equity Securities" means Common Stock and securities
convertible into, or exercisable or exchangeable for, Common Stock or rights or
options to acquire Common Stock or such other securities, excluding the
Warrants.
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"Common Stock" means the common stock, par value $.001 per share, of
the Company, and any other capital stock of the Company into which such common
stock may be converted or reclassified or that may be issued in respect of, in
exchange for, or in substitution for, such common stock by reason of any stock
splits, stock dividends, distributions, mergers, consolidations or other like
events.
"Credit Agreement" means the Credit Agreement dated as of May 27, 1999,
by and between State Communications Telecom, Inc. (the "Borrower"), the lenders
named therein and Nortel Networks Inc., as agent, as the same may be amended,
renewed, extended, restated, replaced, substituted, supplemented or otherwise
modified from time to time.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor statute, and the rules and regulations promulgated thereunder.
"Exercise Price" means the purchase price per share of Common Stock to
be paid upon the exercise of each Warrant in accordance with the terms hereof,
which price shall initially be $2.00 per share, subject to adjustment from time
to time pursuant to Section 12 hereof.
"Expiration Date" means May 27, 2006, as the same may be extended
pursuant to Section 6 hereof.
"Holder" or "Warrant Holder" means a Person who is the owner as shown
on the Warrant register maintained by the Company.
"Issue Date" means the date of the initial issuance of the Warrants,
which shall be the Closing Date under the Credit Agreement.
"Registrable Securities" means any of (i) the Warrant Shares, (ii) any
shares of Common Stock issued upon the conversion of the Series 1999A Note, and
(iii) any other securities issued or issuable with respect to any Warrant Shares
or any conversion shares referred to in clause (ii) above, by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization or otherwise,
unless, in each case, such Warrant Shares and securities, if any, have been
offered and sold to the Holders pursuant to an effective Registration Statement
under the Securities Act declared effective prior to the date of exercisability
of the Warrants or the date such Warrant Shares and securities, if any, may be
sold to the public pursuant to Rule 144 without any restriction on the amount of
securities which may be sold by such Holders or the satisfaction of any
condition. As to any particular Registrable Securities held by a Holder, such
securities shall cease to be Registrable Securities when (i) a Registration
Statement with respect to the exercise or offering of such securities by the
Holder thereof shall have been declared effective under the Securities Act and
such securities shall have been exercised and/or disposed of by such Holder
pursuant to such Registration Statement, (ii) such securities may at the time of
determination be sold to the public pursuant to Rule 144 without any restriction
on the amount of securities which may be sold by such Holder (or any similar
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provision then in force, but not Rule 144A) without the lapse of any further
time or the satisfaction of any condition, (iii) such securities shall have been
otherwise transferred by such Holder and new certificates for such securities
not bearing a legend restricting further transfer shall have been delivered by
the Company or its transfer agent and subsequent disposition of such securities
shall not require registration or qualification under the Securities Act or any
similar state law then in force or (iv) such securities shall have ceased to be
outstanding.
"Registration Rights Agreement" means the registration rights
agreement, dated as of the date hereof by and between the Company and Nortel
Networks relating to the Warrants and the Warrant Shares.
"Rule 144" shall mean Rule 144 promulgated under the Securities Act, as
such Rule may be amended from time to time, or any similar rule (other than Rule
144A) or regulation hereafter adopted by the Commission providing for offers and
sales of securities made in compliance therewith resulting in offers and sales
by subsequent holders that are not affiliates of an issuer of such securities
being free of the registration and prospectus delivery requirements of the
Securities Act.
"Rule 144A" shall mean Rule 144A promulgated under the Securities Act,
as such Rule may be amended from time to time, or any similar rule (other than
Rule 144) or regulation hereafter adopted by the Commission.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute and the rules and regulations promulgated thereunder.
"Series 1999A Note" means the Series 1999A Note in the original
principal amount of $4,000,000 dated as of May 27, 1999, issued by the Company
to Nortel Networks Inc.
"Warrant Holder" or "Holder" means a Person who is the owner as shown
on the Warrant register maintained by the Company.
"Warrant Shares" means the shares of Common Stock issued or issuable
upon the exercise of the Warrants.
Section 2. Issuance of Warrants; Warrant Certificates.
(a) The Warrants will be issued in the form of definitive certificates,
substantially in the form of Exhibit A (the "Warrant Certificates"). Each
Warrant 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.
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(b) The Warrants shall be initially issued on the Issue Date in the
aggregate amount of 652,089 shares of Common Stock, subject to adjustment as
herein provided, and shall be issued under two Warrant Certificates in the
amount of 508,089 and 144,000 shares of Common Stock. .
Section 3. Execution of Warrant Certificates. Warrant Certificates
shall be signed on behalf of the Company by the Company's President or a Vice
President and by its Secretary or an Assistant Secretary under its corporate
seal. Each such signature upon the Warrant Certificates may be in the form of a
facsimile signature of the present or any future President, Vice President,
Secretary or Assistant Secretary and may be imprinted or otherwise reproduced on
the Warrant Certificates and for that purpose the Company may adopt and use the
facsimile signature of any person who shall have been President, Vice President,
Secretary or Assistant Secretary, notwithstanding the fact that at the time the
Warrant Certificates shall be countersigned and delivered or disposed of, such
person shall have ceased to hold such office. 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.
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
Certificates so signed shall have been disposed of by the Company, such Warrant
Certificates nevertheless may be countersigned and delivered or disposed of as
though such person had not ceased to be such officer of the Company; and any
Warrant Certificate may be signed on behalf of the Company by any person who, at
the actual date of the execution of such Warrant Certificate, shall be a proper
officer of the Company to sign such Warrant Certificate, although at the date of
the execution of this Warrant Agreement any such person was not such officer.
Section 4. Registration. The Company shall number and register the
Warrant Certificates in a register as they are issued by the Company.
The Company may deem and treat the person in whose name any Warrant is
registered as the absolute owner(s) thereof, for all purposes, and the Company
shall not be affected by any notice to the contrary.
Section 5. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Warrants and Registrable Securities. When
Warrants or Registrable Securities are presented to the Company with a request
to register their transfer; or to exchange such Warrants for an equal number of
Warrants of other authorized denominations, the Company shall register the
transfer or make the exchange as requested if the following requirements are
met:
(i) the Warrants presented or surrendered for registration of
transfer or exchange shall be duly endorsed or accompanied by a written
instruction of transfer in
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form satisfactory to the Company, duly executed by the Holder thereof
or by his attorney-in-fact, duly authorized in writing; and
(ii) in the case of Registrable Securities, such request shall
be accompanied by the following additional information and documents
(all of which may be submitted by facsimile), as applicable:
(A) if such Registrable Security is being delivered
to the Company 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 B
hereto);
(B) if such Registrable Security is being transferred
(1) to a "qualified institutional buyer" (as defined in Rule
144A) in accordance with Rule 144A or (2) pursuant to an
exemption from registration in accordance with Rule 144 (and
based on an opinion of counsel if the Company so requests) or
(3) pursuant to an effective registration statement under the
Securities Act, a certification to that effect (in
substantially the form of Exhibit B hereto);
(C) if such Registrable Security is being transferred
pursuant to an exemption from registration in accordance with
Rule 904 under the Securities Act (and based on an opinion of
counsel if the Company so requests), a certification to that
effect (in substantially the form of Exhibit B hereto); or
(D) if such Registrable Security is being transferred
in reliance on another exemption from the registration
requirements of the Securities Act (and based on an opinion of
counsel if the Company so requests), a certification to that
effect (in substantially the form of Exhibit B hereto).
(b) Legends.
(i) Except for any Registrable Security sold or transferred as
discussed in clause (ii) below, each Warrant Certificate (and all
Warrants issued in exchange therefor or substitution thereof) and each
certificate representing the Warrant Shares shall bear a legend in
substantially the following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY
ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER XXXXXXX 0 XX XXX
XXXXXX XXXXXX SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND THE SECURITY EVIDENCED HEREBY AND THE SECURITIES DELIVERED
UPON EXERCISE THEREOF MAY NOT BE EXERCISED, OFFERED, SOLD OR OTHERWISE
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION
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THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY AND THE
SECURITIES DELIVERED UPON THE EXERCISE THEREOF IS HEREBY NOTIFIED THAT
THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF
SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A. THE HOLDER OF
THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE ISSUER THAT
(A) SUCH SECURITY AND THE SECURITIES DELIVERED UPON EXERCISE HEREOF MAY
BE EXERCISED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO
A PERSON WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT)
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES
ACT, (c) OUTSIDE THE UNITED STATES TO A PERSON THAT IS NOT A U.S.
PERSON (AS DEFINED IN RULE 902 UNDER THE SECURITIES ACT) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES
ACT, OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (IN THE CASE OF (b), (c) or (d),
UPON AN OPINION OF COUNSEL AND WRITTEN CERTIFICATION IF THE ISSUER,
REGISTRAR OR TRANSFER AGENT FOR THE SECURITIES SO REQUESTS), (2) TO THE
ISSUER OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN
EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B)
THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY AND THE SECURITIES
DELIVERED UPON EXERCISE HEREOF OF THE RESALE RESTRICTIONS SET FORTH IN
(A) ABOVE."
(ii) Upon any sale or transfer of a Registrable Security
pursuant to an effective registration statement under the Securities
Act, pursuant to Rule 144(A) or pursuant to an opinion of counsel
reasonably satisfactory to the Company that no legend is required, the
Holder thereof shall be permitted to exchange such Registrable Security
for a Warrant that does not bear the legend set forth in clause (i)
above and rescind any restriction on the transfer of such Registrable
Security.
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(c) Obligations With Respect to Transfers and Exchanges of Warrants.
(i) To permit registrations of transfers and exchanges, the
Company shall execute in accordance with the provisions of Section 4
and this Section 5, Warrants as required pursuant to the provisions of
this Section 5. Notwithstanding anything to the contrary contained
herein, the Company shall refuse to register any transfer of the
Warrants not made in accordance with Regulation S, pursuant to
registration under the Securities Act or pursuant to an available
exemption from the registration requirements of the Securities Act;
provided, however, that if a foreign law prevents the Company from
refusing to register securities transfers, the Company shall implement
other reasonable measures designed to prevent transfers of the Warrants
not made in accordance with Regulation S, pursuant to registration
under the Securities Act or pursuant to an available exemption from the
registration requirements of the Securities Act.
(ii) All Warrants issued upon any registration of transfer or
exchange of Warrants shall be the valid obligations of the Company,
entitled to the same benefits under this Warrant Agreement, as the
Warrants surrendered upon such registration of transfer or exchange.
(iii) Prior to due presentment for registration of transfer of
any Warrant, the Company may deem and treat the person in whose name
any Warrant is registered as the absolute owner of such Warrant and the
Company shall not be affected by notice to the contrary.
(iv) No service charge shall be made to a Holder for any
registration of transfer or exchange.
Section 6. Terms of Warrants; Exercise of Warrants. Subject to the
terms of this Agreement, each Warrant Holder shall have the right, which may be
exercised at any time and from time to time, in whole or in part, commencing on
the date hereof and ending at 5:00 p.m., New York City time, on the Expiration
Date, to receive from the Company the number of fully paid and nonassessable
Warrant Shares which the Holder may at the time be entitled to receive on
exercise of such Warrants and payment of the Exercise Price then in effect for
such Warrant Shares; provided, however, that no Warrant Holder shall be entitled
to exercise such Holder's Warrants at any time, unless, at the time of exercise,
(i) a registration statement under the Securities Act relating to the Warrant
Shares has been filed with, and declared effective by, the Commission, and no
stop order suspending the effectiveness of such registration statement has been
issued by the Commission or (ii) the issuance of the Warrant Shares is permitted
pursuant to an exemption from the registration requirements of the Securities
Act. Subject to the provisions of the following paragraph of this Section 6,
each Warrant not exercised prior to 5:00 p.m., New York City time, on the
Expiration Date shall become void and all rights thereunder and all rights in
respect thereof under this Agreement shall cease as of such time. No adjustments
as to dividends will be made upon exercise of the Warrants.
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The Company shall give notice not less than 90, and not more than 120,
days prior to the Expiration Date to the Holders of all then outstanding
Warrants to the effect that the Warrants will terminate and become void as of
5:00 p.m., New York City time, on the Expiration Date. If the Company fails to
give such notice, the Warrants will not expire until 90 days after the Company
gives such notice, provided, however, in no event will Holders be entitled to
any damages or other remedy for the Company's failure to give such notice other
than any such extension.
A Warrant may be exercised upon surrender to the Company of the
certificate or certificates evidencing the Warrant to be exercised with the form
of election to purchase on the reverse thereof properly completed and signed,
which signature shall be guaranteed by a bank or trust company having an office
or correspondent in the United States or a broker or dealer which is a member of
a registered securities exchange or the National Association of Securities
Dealers, Inc., and upon payment to the Company of the Exercise Price as adjusted
as herein provided, for each of the Warrant Shares in respect of which such
Warrants are then exercised. Payment of the aggregate Exercise Price shall be
made in cash or by certified or official bank check, payable to the order of the
Company. In the alternative, each Holder may exercise its right to receive
Warrant Shares (i) on a net basis, such that without the exchange of any funds,
the Holder receives that number of Warrant Shares otherwise issuable upon
exercise of its Warrants less that number of Warrant Shares having a fair market
value equal to the aggregate Exercise Price that would otherwise have been paid
by the Holder for the Warrant Shares being issued, (ii) by any Holder to whom
the Company is indebted, by tendering indebtedness having an aggregate principal
amount, plus accrued but unpaid interest, if any, thereon, to the date of
exercise equal to the aggregate Exercise Price that would otherwise have been
paid by the Holder for the Warrant Shares being issued, or (iii) by a
combination of the procedures in clauses (i) and (ii). For purposes of the
foregoing sentence, "fair market value" of the Warrant Shares shall be as
determined by the Board of Directors of the Company in good faith and evidenced
by a resolution thereof. The Company shall notify the Holders in writing of any
such determination of fair market value.
Subject to the provisions of Section 7 hereof, upon surrender of
Warrants and payment of the Exercise Price as provided above, the Company shall
promptly transfer to the Holder of such Warrant a certificate or certificates
for the appropriate number of Warrant Shares or other securities or property
(including any money) to which the Holder is entitled, registered or otherwise
placed in, or payable to the order of, such name or names as may be directed in
writing by the Holder, and shall deliver such certificate or certificates
representing the Warrant Shares and any other securities or property (including
any money) to the Person or Persons entitled to receive the same, together with
an amount in cash in lieu of any fraction of a share as provided in Section 13.
Any such certificate or certificates representing the Warrant Shares shall be
deemed to have been issued and any Person so designated to be named therein
shall be deemed to have become a Holder of record of such Warrant Shares as of
the later of the date of the surrender of such Warrants and payment of the
Exercise Price.
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The Warrants shall be exercisable commencing on the Issue Date, at the
election of the Holders thereof, either in full or from time to time in part
and, in the event that a certificate evidencing Warrants is exercised in respect
of fewer than all of the Warrant Shares issuable on such exercise at any time
prior to the date of expiration of the Warrants, a new certificate evidencing
the remaining Warrant or Warrants will be issued and delivered pursuant to the
provisions of this Section and of Section 3 hereof.
All Warrant Certificates surrendered upon exercise of Warrants shall be
cancelled. Such cancelled Warrant Certificates shall then be disposed of in
accordance with customary procedures.
Section 7. Payment of Taxes. The Company will pay all documentary stamp
taxes, if any, attributable to the issuance of the Warrant Certificates or the
initial issuance of Warrant Shares upon the exercise of Warrants; provided,
however, that the Company shall not be required to pay any tax or taxes which
may be payable in respect of any transfer involved in the issue of any
certificates for Warrant Shares in a name other than that of the Holder of a
Warrant Certificate surrendered upon the exercise of a Warrant.
Section 8. Mutilated or Missing Warrant Certificates. In case any of
the Warrant Certificates shall be mutilated, lost, stolen or destroyed, the
Company may in its discretion issue in exchange and substitution for and upon
cancellation of the mutilated Warrant Certificate, or in lieu of and
substitution for the Warrant Certificate lost, stolen or destroyed, a new
Warrant Certificate of like tenor and representing an equivalent number of
Warrants, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction of such Warrant Certificate and, if
requested, indemnity reasonably satisfactory to them. Applicants for such
substitute Warrant Certificates shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company may prescribe.
Section 9. Reservation of Warrant Shares. The Company will at all times
reserve and keep available, free from any preemptive rights, out of the
aggregate of its authorized but unissued Common Stock or its authorized and
issued Common Stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the
maximum number of shares of Common Stock which may then be deliverable upon the
exercise of all outstanding Warrants.
The transfer agent for the Common Stock (the "Transfer Agent") and
every subsequent transfer agent for any shares of the Company's capital stock
issuable upon the exercise of any of the rights of purchase aforesaid will be
irrevocably authorized and directed at all times to reserve such number of
authorized shares as shall be required for such purpose. The Company will keep a
copy of this Agreement on file with the Transfer Agent and with every subsequent
transfer agent for any shares of the Company's capital stock issuable upon the
exercise of the rights of purchase represented by the Warrants. The Company will
supply such Transfer Agent with duly executed certificates for such purposes and
will provide or otherwise make available any cash which may be payable as
provided in Section 13. The Company will furnish such Transfer Agent a copy of
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all notices of adjustments and certificates related thereto, transmitted to each
Holder of the Warrants pursuant to Section 14 hereof.
Before taking any action which would cause an adjustment pursuant to
Section 11 hereof that would reduce the Exercise Price below the then par value
(if any) of the Warrant Shares, the Company will take any corporate action which
may, in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable Warrant Shares at the
Exercise Price as so adjusted.
The Company covenants that all Warrant Shares which may be issued upon
exercise of Warrants in accordance with the terms of this Agreement (including
the payment of the Exercise Price) will, upon issue, be duly and validly issued,
fully paid, nonassessable, and free of preemptive rights and Liens.
Section 10. 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 (including, without limitation,
the Nasdaq National or SmallCap Markets) within the United States of America, if
any, on which other shares of Common Stock are then listed. Upon the listing of
such Warrant Shares, the Company shall notify the Holders in writing. The
Company will obtain and keep all required permits and records in connection with
such listing.
Section 11. Adjustment of Exercise Price and Number of Warrant Shares
Issuable. The number and kind of shares purchasable upon the exercise of
Warrants and the Exercise Price shall be subject to adjustment from time to time
(as set forth in the notices required by Section 14 hereof) as follows:
(a) Stock Splits, Combinations, etc. In case the Company shall
hereafter (A) pay a dividend or make a distribution on its Common Stock in
shares of its capital stock (whether shares of Common Stock or of capital stock
of any other class), (B) subdivide its outstanding shares of Common Stock, (C)
combine its outstanding shares of Common Stock into a smaller number of shares,
or (D) issue by reclassification of its shares of Common Stock any shares of
capital stock of the Company, the Exercise Price in effect and the number of
Warrant Shares issuable upon exercise of each Warrant immediately prior to such
action shall be adjusted so that the Holder of any Warrant thereafter exercised
shall be entitled to receive the number of shares of capital stock of the
Company which such Holder would have owned immediately following such action had
such Warrant been exercised immediately prior thereto. Any adjustment made
pursuant to this paragraph shall become effective immediately after the record
date in the case of a dividend and shall become effective immediately after the
effective date in the case of a subdivision, combination or reclassification.
If, as a result of an adjustment made pursuant to this paragraph, the Holder of
any Warrant thereafter exercised shall become entitled to receive shares of two
or more classes of capital stock of the Company, the Board of Directors of the
Company (whose
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determination shall be conclusive and evidenced by a Board resolution) shall
determine the allocation of the adjusted Exercise Price between or among shares
of such classes of capital stock.
(b) Reclassification, Combinations, Mergers, etc. In case of any
reclassification or change of outstanding shares of Common Stock issuable upon
exercise of the Warrants (other than as set forth in paragraph (a) above and
other than a change in par value, or from par value to no par value, or from no
par value to par value or as a result of a subdivision or combination), or in
case of any consolidation or merger of the Company with or into another
corporation (other than a merger in which the Company is the continuing
corporation and which does not result in any reclassification or change of the
then outstanding shares of Common Stock or other capital stock issuable upon
exercise of the Warrants) or in case of any sale or conveyance to another
corporation of all or substantially all of the assets of the Company, then, as a
condition of such reclassification, change, consolidation, merger, sale or
conveyance, the Company or such a successor or purchasing corporation, as the
case may be, shall forthwith make lawful and adequate provision whereby the
Holder of each Warrant then outstanding shall have the right thereafter to
receive on exercise of such Warrant the kind and amount of shares of stock and
other securities and property receivable upon such reclassification, change,
consolidation, merger, sale or conveyance by a Holder of the number of shares of
Common Stock issuable upon exercise of such Warrant immediately prior to such
reclassification, change, consolidation, merger, sale or conveyance and enter
into a supplemental warrant agreement so providing. Such provisions shall
include provision for adjustments which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 11. If the issuer of
securities deliverable upon exercise of Warrants under the supplemental warrant
agreement is an affiliate of the formed, surviving or transferee corporation,
that issuer shall join in the supplemental warrant agreement. The above
provisions of this paragraph (b) shall similarly apply to successive
reclassifications and changes of shares of Common Stock and to successive
consolidations, mergers, sales or conveyances.
(c) Issuance of Additional Shares of Common Stock. In the event the
Company shall, at any time or from time to time after the date hereof, issue,
sell, distribute or otherwise grant in any manner (including by assumption) any
additional shares of Common Stock without consideration or for a price per share
less than the current market price per share of Common Stock on the date of the
issuance, sale, distribution or granting of such additional shares, then,
effective upon such issuance or sale, (I) the Exercise Price shall be reduced to
the price (calculated to the nearest 1/1,000 of one cent) determined by
multiplying the Exercise Price in effect immediately prior to such issuance or
sale by a fraction, the numerator of which shall be the sum of (i) the number of
shares of Common Stock outstanding (exclusive of any treasury shares)
immediately prior to such issuance or sale multiplied by the current market
price per share of Common Stock on the date of such issuance or sale plus (ii)
the consideration, if any, received by the Company in respect of such issuance
or sale, and the denominator of which shall be the product of (A) the total
number of shares of Common Stock outstanding (exclusive of any treasury shares)
immediately after such issuance or sale multiplied by (B) the current market
price per share of Common Stock on the record date for such issuance or sale and
(II) the number of shares of Common Stock purchasable upon the exercise of each
Warrant shall be increased to a number
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determined by multiplying the number of shares of Common Stock so purchasable
immediately prior to the record date for such issuance or sale by a fraction,
the numerator of which shall be the Exercise Price in effect immediately prior
to the adjustment required by clause (I) of this sentence and the denominator of
which shall be the Exercise Price in effect immediately after such adjustment.
The Holder hereof acknowledges and agrees that the Designations, Rights and
Preferences of the Series A Convertible Preferred Stock of the Company provides
the owners of the Series A Convertible Preferred Stock with rights to adjustment
similar to those provided the Holder in this clause (c) and agrees that in the
event all owners of Series A Convertible Preferred Stock waive such rights to
adjustment in connection with an issuance or sale of Common Stock of the
Company, that the Holder will waive its rights to adjustment under this clause
(c). In addition, Holder's rights under this clause (c) shall terminate upon
written notice from the Company that the similar rights of the Series A
Convertible Preferred Stock have terminated (for whatever reason) on any date
prior to the conversion of the Series A Convertible Preferred Stock.
(d) Issuance of Options or Convertible Securities. In the event the
Company shall, at any time or from time to time after the date hereof, issue,
sell, distribute or otherwise grant in any manner (including by assumption) any
rights to subscribe for or to purchase, or any warrants or options for the
purchase of, Common Stock or any stock or securities convertible into or
exchangeable for Common Stock (any such rights, warrants or options being herein
called "Options" and any such convertible or exchangeable stock or securities
being herein called "Convertible Securities") or any Convertible Securities
(other than upon exercise of any Option), whether or not such Options or the
rights to convert or exchange such Convertible Securities are immediately
exercisable, and if the price per share at which Common Stock is issuable upon
the exercise of such Options or upon the conversion or exchange of such
Convertible Securities (determined by dividing (i) the aggregate amount, if any,
received or receivable by the Company as consideration for the issuance, sale,
distribution or granting of such Options or any such Convertible Security, plus
the minimum aggregate amount of additional consideration, if any, payable to the
Company upon the exercise of all such Options or upon conversion or exchange of
all such Convertible Securities, plus, in the case of Options to acquire
Convertible Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the conversion or exchange of all such
Convertible Securities, by (ii) the total maximum number of shares of Common
Stock issuable upon the exercise of all such Options or upon the conversion or
exchange of all such Convertible Securities or upon the conversion or exchange
of all Convertible Securities issuable upon the exercise of all such Options)
shall be less than the current market price per share of Common Stock on the
date for the issuance, sale, distribution or granting of such Options or
Convertible Securities (any such event being herein called a "Distribution"),
then, effective upon such Distribution, (I) the Exercise Price shall be reduced
to the price (calculated to the nearest 1/1,000 of one cent) determined by
multiplying the Exercise Price in effect immediately prior to such Distribution
by a fraction, the numerator of which shall be the sum of (i) the number of
shares of Common Stock outstanding (exclusive of any treasury shares)
immediately prior to such Distribution multiplied by the current market price
per share of Common Stock on the date of such Distribution plus (ii) the
consideration, if any, received by the Company in respect of such Distribution,
and the denominator of which shall be the product of (A) the total number of
shares
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of Common Stock outstanding (exclusive of any treasury shares) immediately after
such Distribution multiplied by (B) the current market price per share of Common
Stock on the record date for such Distribution and (II) the number of shares of
Common Stock purchasable upon the exercise of each Warrant shall be increased to
a number determined by multiplying the number of shares of Common Stock so
purchasable immediately prior to the record date for such Distribution by a
fraction, the numerator of which shall be the Exercise Price in effect
immediately prior to the adjustment required by clause (I) of this sentence and
the denominator of which shall be the Exercise Price in effect immediately after
such adjustment. For purposes of the foregoing, the total maximum number of
shares of Common Stock issuable upon exercise of all such Options or upon
conversion or exchange of all such Convertible Securities or upon the conversion
or exchange of the total maximum amount of the Convertible Securities issuable
upon the exercise of all such Options shall be deemed to have been issued as of
the date of such Distribution and thereafter shall be deemed to be outstanding
and the Company shall be deemed to have received as consideration therefor such
price per share, determined as provided above. Except as provided in paragraphs
(j) and (k) below, no additional adjustment of the Exercise Price shall be made
upon the actual exercise of such Options or upon conversion or exchange of the
Convertible Securities or upon the conversion or exchange of the Convertible
Securities issuable upon the exercise of such Options. Notwithstanding the
foregoing, no adjustment shall be made pursuant to this paragraph if Holders
(concurrently with all holders of Common Stock) receive, as if the Warrants had
been exercised, the securities issued, sold, distributed or otherwise granted to
such holders of Common Stock on the same terms as holders of Common Stock and in
connection therewith there is no diminution of the economic value of the
Warrants and the Holders of the Warrants do not incur, or become obligated for,
additional cost or expense.
(e) Dividends and Distributions. In the event the Company shall, at any
time or from time to time after the date hereof, distribute to all the holders
of Common Stock any dividend or other distribution of cash, evidences of its
indebtedness, other securities or other properties or assets (in each case other
than (i) dividends payable in Common Stock, Options or Convertible Securities
and (ii) any cash dividend that, when added to all other cash dividends paid
with respect to Common Stock in the one year prior to the declaration date of
such dividend (excluding any such other dividend included in a previous
adjustment of the Exercise Price pursuant to this paragraph (e) and excluding
any cash dividends or other cash distributions from current or retained
earnings), does not exceed 5% of the current market price per share of Common
Stock on such declaration date), or any options, warrants or other rights to
subscribe for or purchase any of the foregoing, then (A) the Exercise Price
shall be decreased to a price determined by multiplying the Exercise Price then
in effect by a fraction, the numerator of which shall be the current market
price per share of Common Stock on the record date for such distribution less
the sum of (X) the cash portion, if any, of such distribution per share of
Common Stock outstanding (exclusive of any treasury shares) on the record date
for such distribution plus (Y) the then fair market value (as determined in good
faith by the Board of Directors of the Company) per share of Common Stock
outstanding (exclusive of any treasury shares) on the record date for such
distribution of that portion, if any, of such distribution consisting of
evidences of indebtedness, other securities, properties, assets, options,
warrants or subscription or purchase rights, and the denominator of
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which shall be such current market price per share of Common Stock and (B) the
number of shares of Common Stock purchasable upon the exercise of each Warrant
shall be increased to a number determined by multiplying the number of shares of
Common Stock so purchasable immediately prior to the record date for such
distribution by a fraction, the numerator of which shall be the Exercise Price
in effect immediately prior to the adjustment required by clause (A) of this
sentence and the denominator of which shall be the Exercise Price in effect
immediately after such adjustment. The adjustments required by this paragraph
(e) shall be made whenever any such distribution occurs retroactive to the
record date for the determination of stockholders entitled to receive such
distribution.
(f) Current Market Price. For the purpose of any computation of current
market price under this Section 11 and Section 13, the current market price per
share of Common Stock at any date shall be (x) for purposes of Section 13, the
closing price on the business day immediately prior to the exercise of the
applicable Warrant pursuant to Section 6 and (y) in all other cases, the average
of the daily closing prices for the shorter of (i) the 20 consecutive trading
days ending on the last full trading day on the exchange or market specified in
the second succeeding sentence prior to the Time of Determination (as defined
below) and (ii) the period commencing on the date next succeeding the first
public announcement of the issuance, sale, distribution or granting in question
through such last full trading day prior to the Time of Determination. The term
"Time of Determination" as used herein shall be the time and date of the earlier
to occur of (A) the date as of which the current market price is to be computed
and (B) the last full trading day on such exchange or market before the
commencement of "ex-dividend" trading in the Common Stock relating to the event
giving rise to the adjustment required by paragraph (a), (b), (c), (d) or (e)
above. The closing price for any day shall be the last reported sale price
regular way or, in case no such reported sale takes place on such day, the
average of the closing bid and asked prices regular way for such day, in each
case (1) on the principal national securities exchange on which the shares of
Common Stock are listed or to which such shares are admitted to trading or (2)
if the Common Stock is not listed or admitted to trading on a national
securities exchange, in the over-the-counter market as reported by Nasdaq
National or SmallCap Markets or any comparable system or (3) if the Common Stock
is not listed on Nasdaq National or SmallCap Markets or a comparable system, as
furnished by two members of the NASD selected from time to time in good faith by
the Board of Directors of the Company for that purpose. In the absence of all of
the foregoing, or if for any other reason the current market price per share
cannot be determined pursuant to the foregoing provisions of this paragraph (f),
the current market price per share shall be the fair market value thereof as
determined in good faith by the Board of Directors of the Company and evidenced
by a resolution of such Board, subject to the following dispute resolution right
of the Holders of the Warrants. In the event that Holders of a majority of the
Warrants dispute the determination of the Board of Directors, such Holders shall
notify the Company and the current market price shall be determined in a
reasonably prompt manner as follows:
(1) The Company and Holders of a majority of the Warrants shall each
appoint an independent, experienced appraiser who is a member of a
recognized professional association of business appraisers. The two
appraisers shall determine the value of shares
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of Common Stock at the relevant date, assuming a sale between a willing
buyer and a willing seller, both of whom have full knowledge of the
financial and other affairs of the Company, and neither of whom is
under any compulsion to sell or to buy.
(2) If the higher of the two appraisals is not more than 20% more than
the lower of the appraisals, the current market price per share shall
be the average of the two appraisals. If the higher of the two
appraisals is 20% or more than the lower of the two appraisals, then a
third appraiser shall be appointed by the two appraisers, and if they
cannot agree on a third appraiser, the American Arbitration Association
shall appoint the third appraiser. The third appraiser, regardless of
who appoints him or her, shall have the same qualifications as the
first two appraisers.
(3) The current market price per share after the appointment of the
third appraiser shall be the average of the two appraisals that are
closest in value to each other.
(4) The fees and expenses of the appraisers shall be paid one-half by
the Company and one-half by the Holders.
(g) Certain Distributions. If the Company shall pay a dividend or make
any other distribution payable in Options or Convertible Securities, then, for
purposes of paragraph (d) above, such Options or Convertible Securities shall be
deemed to have been issued or sold without consideration.
(h) Consideration Received. If any shares of Common Stock, Options or
Convertible Securities shall be issued, sold or distributed for a consideration
other than cash, the amount of the consideration other than cash received by the
Company in respect thereof shall be deemed to be the then fair market value of
such consideration (as determined in good faith by the Board of Directors of the
Company and evidenced by a Board resolution). If any Options shall be issued in
connection with the issuance and sale of other securities of the Company,
together comprising one integral transaction in which no specific consideration
is allocated to such Options by the parties thereto, such Options shall be
deemed to have been issued without consideration; provided, however, that if
such Options have an exercise price equal to or greater than the current market
price of the Common Stock on the date of issuance of such Options, then such
Options shall be deemed to have been issued for consideration equal to such
exercise price.
(i) Deferral of Certain Adjustments. No adjustment to the Exercise
Price (including the related adjustment to the number of shares of Common Stock
purchasable upon the exercise of each Warrant) shall be required hereunder
unless such adjustment, together with other adjustments carried forward as
provided below, would result in an increase or decrease of at least one percent
of the Exercise Price; provided that any adjustments which by reason of this
paragraph (i) are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. No adjustment need be made for a
change in the par value of the Common Stock.
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All calculations under this Section shall be made to the nearest 1/1,000 of one
cent or to the nearest 1/1000 of a share, as the case may be.
(j) Changes in Options and Convertible Securities. If the exercise
price provided for in any Options referred to in paragraph (d) above, the
additional consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in paragraph (d) or (e) above, or the rate at
which any Convertible Securities referred to in paragraph (d) or (e) above are
convertible into or exchangeable for Common Stock shall change at any time
(other than under or by reason of provisions designed to protect against
dilution upon an event which results in a related adjustment pursuant to this
Section 11), the Exercise Price then in effect and the number of shares of
Common Stock purchasable upon the exercise of each Warrant shall forthwith be
readjusted (effective only with respect to any exercise of any Warrant after
such readjustment) to the Exercise Price and number of shares of Common Stock so
purchasable that would then be in effect had the adjustment made upon the
issuance, sale, distribution or granting of such Options or Convertible
Securities been made based upon such changed purchase price, additional
consideration or conversion rate, as the case may be, but only with respect to
such Options and Convertible Securities as then remain outstanding.
(k) Expiration of Options and Convertible Securities. If, at any time
after any adjustment to the number of shares of Common Stock purchasable upon
the exercise of each Warrant shall have been made pursuant to paragraph (d), (e)
or (j) above or this paragraph (k), any Options or Convertible Securities shall
have expired unexercised, the number of such shares so purchasable shall, upon
such expiration, be readjusted and shall thereafter be such as they would have
been had they been originally adjusted (or had the original adjustment not been
required, as the case may be) as if (i) the only shares of Common Stock deemed
to have been issued in connection with such Options or Convertible Securities
were the shares of Common Stock, if any, actually issued or sold upon the
exercise of such Options or Convertible Securities and (ii) such shares of
Common Stock, if any, were issued or sold for the consideration actually
received by the Company upon such exercise plus the aggregate consideration, if
any, actually received by the Company for the issuance, sale, distribution or
granting of all such Options or Convertible Securities, whether or not
exercised; provided that no such readjustment shall have the effect of
decreasing the number of such shares so purchasable by an amount (calculated by
adjusting such decrease to account for all other adjustments made pursuant to
this Section 11 following the date of the original adjustment referred to above)
in excess of the amount of the adjustment initially made in respect of the
issuance, sale, distribution or granting of such Options or Convertible
Securities.
(l) Other Adjustments. In the event that at any time, as a result of an
adjustment made pursuant to this Section 11, the Holders shall become entitled
to receive any securities of the Company other than shares of Common Stock,
thereafter the number of such other securities so receivable upon exercise of
the Warrants and the Exercise Price applicable to such exercise shall be subject
to adjustment from time to time in a manner and on terms as nearly equivalent as
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practicable to the provisions with respect to the shares of Common Stock
contained in this Section 11.
Section 12. Statement on Warrants. Irrespective of any adjustment in
the number or kind of shares issuable upon the exercise of the Warrants or the
Exercise Price, Warrants theretofore or thereafter issued may continue to
express the same number and kind of shares as are stated in the Warrants
initially issuable pursuant to this Agreement.
Section 13. Fractional Interest. The Company shall not be required to
issue fractional shares of Common Stock on the exercise of Warrants. If more
than one Warrant shall be presented for exercise in full at the same time by the
same Holder, the number of full shares of Common Stock which shall be issuable
upon such exercise shall be computed on the basis of the aggregate number of
shares of Common Stock acquirable on exercise of the Warrants so presented. If
any fraction of a share of Common Stock would, except for the provisions of this
Section, be issuable on the exercise of any Warrant (or specified portion
thereof), the Company shall direct the Transfer Agent to pay an amount in cash
calculated by it equal to (i) the then current market price per share multiplied
by such fraction computed to the nearest whole cent, less (ii) an amount equal
to the Exercise Price multiplied by such fraction computed to the nearest whole
cent. The Holders, by their acceptance of the Warrant Certificates, expressly
waive any and all rights to receive any fraction of a share of Common Stock or a
stock certificate representing a fraction of a share of Common Stock.
Section 14. Notices to Warrant Holders. Upon any adjustment of the
Exercise Price pursuant to Section 11, the Company shall promptly thereafter
cause to be given to each of the registered Holders by first-class mail, postage
prepaid, a certificate executed by the Chief Financial Officer of the Company
setting forth the Exercise Price after such adjustment and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculations are based and setting forth the number of Warrant Shares (or
portion thereof) issuable after such adjustment in the Exercise Price, upon
exercise of a Warrant and payment of the adjusted Exercise Price, which
certificate shall be conclusive evidence, absent manifest error, of the
correctness of the matters set forth therein.
In case:
(a) the Company shall authorize the issuance to all holders of
shares of Common Stock of rights, options or warrants to subscribe for
or purchase shares of Common Stock or of any other subscription rights
or warrants; or
(b) the Company shall authorize the distribution to all
holders of shares of Common Stock of evidences of its indebtedness or
assets (other than cash dividends or cash distributions payable out of
consolidated earnings or earned surplus or dividends payable in shares
of Common Stock or distributions referred to in Section 11 hereof); or
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(c) of any consolidation or merger to which the Company is a
party for which approval of any shareholders of the Company is required
and following which the shareholders of the Company before such
consolidation or merger no longer hold at least 50% of the outstanding
capital stock of the Company following the merger or consolidation, or
of the conveyance or transfer of all or substantially all of the
properties and assets of the Company, or of any reclassification or
change of Common Stock issuable upon exercise of the Warrants (other
than a change in par value, or from par value to no par value, or from
no par value to par value, or as a result of a subdivision or
combination), or a tender offer or exchange offer for shares of Common
Stock, or other transaction that would result in a change in control;
or
(d) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company; or
(e) the Company proposes to take any other action that would
require an adjustment of the Exercise Price or the number of Warrant
Shares pursuant to Section 11; then the Company shall cause to be given
to each of the registered Holders of the Warrants at such Holder's
address appearing on the Warrant register, at least 20 days (or 10 days
in any case specified in clauses (a) or (b) above) prior to the
applicable record date hereinafter specified, or promptly in the case
of events for which there is no record date, by first-class mail,
postage prepaid, a written notice stating (i) the date as of which the
holders of record of shares of Common Stock to be entitled to receive
any such rights, options, warrants or distribution are to be
determined, or (ii) the initial expiration date set forth in any tender
offer or exchange offer for shares of Common Stock, or (iii) the date
on which any such consolidation, merger, conveyance, transfer,
dissolution, liquidation or winding up or change of control is expected
to become effective or consummated, and the date as of which it is
expected that holders of record of shares of Common Stock shall be
entitled to exchange such shares for securities or other property, if
any, deliverable upon such reclassification, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up or change
of control. The failure to give the notice required by this Section 14
or any defect therein shall not affect the legality or validity of any
distribution, right, option, warrant, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up, or change
of control or the vote upon any action. Nothing contained in this
Agreement or in any of the Warrant Certificates shall be construed as
conferring upon the Holders thereof the right to vote or to consent or
to receive notice as shareholders in respect of the meetings of
shareholders or the election of Directors of the Company or any other
matter, or any rights whatsoever as shareholders of the Company.
Section 15. Registration. The Company acknowledge that Holders of
Warrants shall have the registration rights set forth in the Registration Rights
Agreement.
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Section 16. Reports. For each fiscal quarter and each fiscal year of
the Company, the Company will transmit by mail to all Warrant Holders, as their
names and addresses appear in the register, without cost to such Warrant
Holders, unaudited quarterly and audited annual financial statements of the
Company prepared in accordance with GAAP. Beginning with the initial public
offering of the Company and thereafter, whether or not the Company is subject to
Section 13(a) or 15(d) of the Exchange Act, or any successor provision thereto,
the Company shall prepare the annual and quarterly reports and other
information, and documents ("SEC Reports") as the Commission shall prescribe
pursuant to such Section 13(a) or 15(d) and which the Company is or would be (if
they were so subject) required to file with the Commission pursuant to such
Section 13(a) or 15(d) or any successor provision thereto (on or prior to the
respective dates (the "Required Filing Dates") by which the Company is or would
(if they were so subject) be required so to file such SEC Reports) and shall,
within 15 days of the Required Filing Date transmit by mail to all Warrant
Holders, as their names and addresses appear in the register, without cost to
such Warrant Holders, copies of such annual and quarterly reports.
Section 17. Rule 144A. The Company hereby agrees with each Holder, for
so long as any Registrable Securities remain outstanding and the Company is not
subject to Section 13(a) or 15(d) of the Exchange Act, to make available, upon
request of any Holder of Registrable Securities, to any Holder or beneficial
owner of Registrable Securities in connection with any sale thereof and any
prospective purchaser of such Registrable Securities designated by such Holder
or beneficial owner, the information required by Rule 144A(d)(4) under the
Securities Act in order to permit resales of such Registrable Securities
pursuant to Rule 144A.
Section 18. Notices to Company. Any notice or demand authorized by this
Agreement to be given or made by the Holder of any Warrants to or on the Company
shall be sufficiently given or made when and if deposited in the mail,
first-class or registered, postage prepaid, addressed (until another address is
filed in writing by the Company), as follows:
State Communications, Inc.
000 X. Xxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxx Xxxxxxxx 00000
Attention: Xxxxx X. Xxxxxx
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Any notice pursuant to this Agreement to be given by the Company to the
Holders shall be sufficiently given when and if deposited in the mail,
first-class or registered, postage prepaid, addressed (until another address is
filed in writing with the Company) to the addresses of the Holders provided to
the Company from time to time.
Section 19. Supplements and Amendments. The Company and Nortel Networks
may from time to time supplement or amend this Agreement without the approval of
any Holders of Warrants in order to cure any ambiguity or to correct or
supplement any provision contained
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herein which may be defective or inconsistent with any other provision herein,
or to make any other provisions in regard to matters or questions arising
hereunder which the Company and Nortel Networks may deem necessary or desirable
and which shall not in any way adversely affect the interests of the Holders of
Warrants. Any amendment or supplement to this Agreement that has a material
adverse effect on the interests of Holders shall require the written consent of
Holders representing a majority of the then outstanding Warrants (excluding
Warrants held by the Company or any of its Affiliates); provided, however, that
the consent of each Holder of a Warrant affected shall be required for any
amendment pursuant to which the Exercise Price would be increased or the number
of Warrant Shares purchasable upon exercise of Warrants would be decreased
(other than pursuant to adjustments provided for in Section 11 hereof). Nortel
Networks shall be entitled to receive and shall be fully protected in relying
upon an officer's certificate and opinion of counsel as conclusive evidence that
any such amendment or supplement is authorized or permitted hereunder, that it
does or does not, as the case may be, require the written consent of Holders to
be effective hereunder, that it is not inconsistent herewith, and that it will
be valid and binding upon the Company in accordance with its terms.
Section 20. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company shall bind and inure to the
benefit of its respective successors and assigns hereunder.
Section 21. Termination. This Agreement (other than any party's
obligations with respect to Warrants previously exercised and with respect to
indemnification) shall terminate at 5:00 p.m., New York City time on the
Expiration Date.
Section 22. Governing Law. THIS AGREEMENT AND EACH WARRANT CERTIFICATE
ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE
STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED IN ACCORDANCE WITH THE
INTERNAL LAWS OF SAID STATE, WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS
PRINCIPLES THEREOF.
Section 23. Benefits of This Agreement.
(a) The Holders are the third-party beneficiaries of this Agreement.
Nothing in this Agreement shall be construed to give to any Person other than
the Company, Nortel Networks and the Holders of the Warrants any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, Nortel Networks and the
Holders of the Warrants from time to time.
(b) Prior to the exercise of the Warrants, no Holder of a Warrants, as
such, shall be entitled to any rights of a stockholder of a Company, including,
without limitation, the right to receive dividends or subscription rights, the
right to vote, to consent, to exercise any preemptive right, to receive any
notice of or to participate in meetings of stockholders for the election of
directors of the Company or any other matter or to receive any notice of any
proceedings of the
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Company, except as may be specifically and expressly provided for herein. The
Holders of the Warrants are not entitled to share in the assets of the Company
in the event of the liquidation, dissolution or winding up of the Company's
affairs.
(c) All rights of action in respect of this Agreement are vested in the
Holders of the Warrants, and any Holder of any Warrant, without the consent of
the Holder of any other Warrant, may, on such Holder's own behalf and for such
Holder's own benefit, enforce, and may institute and maintain any suit, action
or proceeding against the Company suitable to enforce, or otherwise in respect
of, such Holder's rights hereunder, including the right to exercise, exchange or
surrender for purchase such Holder's Warrants in the manner provided in this
Agreement.
Section 24. Representations and Warranties.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of South Carolina, has the
corporate power and authority to conduct its business as currently conducted and
as intended to be conducted, has the corporate power and authority to execute
and deliver this Agreement and the Warrant Certificates, to issue the Warrants
and to perform its obligations under this Agreement and the Warrant
Certificates, has the corporate power and authority and legal right to own and
lease its properties and is duly qualified and in good standing as a foreign
corporation in each jurisdiction in which it owns or leases real property or in
which the conduct of its business requires such qualification, except where
failure to be so qualified could not be reasonably expected to have a material
adverse effect on the business, properties, financial condition or results of
operations of the Company and its subsidiaries taken as a whole.
(b) The execution, delivery and performance by the Company of this
Agreement and the Warrant Certificates, the issuance of the Warrants and the
issuance of the Warrant Shares upon exercise of the Warrants have been duly
authorized by all necessary corporate action and do not and will not violate, or
result in a breach of, or constitute a default under, or require any consent
under, or result in the creation of any lien, charge of encumbrance upon any of
the assets of the Company pursuant to, any law, statute, ordinance, rule,
regulation, order or decree of any court, governmental body or regulatory
authority or administrative agency having jurisdiction over the Company or its
subsidiaries or the Company's Articles of Incorporation or any contract,
mortgage, loan agreement, note, lease or other instrument binding upon the
Company or its subsidiaries or by which any of their respective properties are
bound.
(c) This Agreement and the Warrant Certificates executed and delivered
on the date hereof have been duly executed and delivered by the Company. This
Agreement, the Warrant Certificates and the Warrants constitute legal, valid,
binding and enforceable obligations of the Company. The Warrant Shares, when
issued upon exercise of the Warrants in accordance with the terms hereof, will
be duly authorized, validly issued, fully paid, nonassessable and free of any
lien or encumbrance not created by the Holder thereof. The Warrants and the
Warrant Shares are not subject to any preemptive right or right of first
refusal.
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(d) The authorized capital stock of Company consists solely of (x)
50,000,000 shares of Common Stock, of which 10,870,295 shares are currently
issued and outstanding, and (y) 10,000,000 shares of preferred stock (the
"Preferred Stock"), of which 4,791,668 shares of Series A Convertible Preferred
Stock, par value of $.01 per share, are currently issued and outstanding (the
Common Stock and the Preferred Stock being, collectively, the "Capital Stock").
Except for the Warrants, and except as set forth on Schedule 1 attached hereto,
there are outstanding on the date hereof no options, warrants or other
securities exercisable or exchangeable for or convertible into shares of Capital
Stock of the Company or any other rights to acquire Capital Stock of the
Company.
(e) The representations and warranties as to the financial statements
of the Company set forth in Section 7.2 of the Credit Agreement are true and
correct.
Section 25. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, as of the day and year first above written.
STATE COMMUNICATIONS, INC.
By:
-------------------------------------
Name: Xxxxx X. Xxxxxx
Title: Executive Vice President and Chief
Financial Officer
NORTEL NETWORKS INC.
By:
-------------------------------------
Name: Xxxxxxx X. XxXxxxxx
Title: Director, Customer Finance
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Exhibit A
FORM OF WARRANT CERTIFICATE
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED IN A
TRANSACTION EXEMPT FROM REGISTRATION UNDER XXXXXXX 0 XX XXX XXXXXX XXXXXX
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY
EVIDENCED HEREBY AND THE SECURITIES DELIVERED UPON EXERCISE THEREOF MAY NOT BE
EXERCISED, OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM. EACH PURCHASER OF THE
SECURITY EVIDENCED HEREBY AND THE SECURITIES DELIVERED UPON THE EXERCISE THEREOF
IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE
PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE 144A. THE HOLDER
OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE ISSUER THAT (A)
SUCH SECURITY AND THE SECURITIES DELIVERED UPON EXERCISE HEREOF MAY BE
EXERCISED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO
THE SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A PERSON THAT IS NOT A U.S.
PERSON (AS DEFINED IN RULE 902 UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT, OR (d) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT (IN THE CASE OF (b), (c) or (d), UPON AN OPINION OF COUNSEL AND
WRITTEN CERTIFICATION IF THE ISSUER, REGISTRAR OR TRANSFER AGENT FOR THE
SECURITIES SO REQUESTS), (2) TO THE ISSUER OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY AND THE SECURITIES
DELIVERED UPON EXERCISE HEREOF OF THE RESALE RESTRICTIONS SET FORTH IN (A)
ABOVE.
_________ Shares of Common Stock Warrant Certificate No. __
WARRANT CERTIFICATE
For the Purchase of Common Stock of
STATE COMMUNICATIONS, INC.
1. Certificate. THIS IS TO CERTIFY THAT _________________, or its
registered assigns ("Holder"), is entitled to exercise this Warrant Certificate
to purchase from State Communications, Inc., a South Carolina corporation (the
"Company"), ____________________ (________) shares of common stock, par value
$0.001 per share, of the Company (the "Common Stock"), all on the terms and
conditions and pursuant to the provisions hereinafter set forth. This Warrant
Certificate is executed pursuant to the terms
24
of that certain Warrant Agreement of even date herewith (the "Agreement")
between the Company and the Holder. Any capitalized terms not defined herein
will have the meanings set forth in the Agreement.
2. Exercise Price. The exercise price per share of Common Stock shall
be $2.00 (the "Exercise Price"). Such Exercise Price and the number of shares of
Common Stock into which this Warrant Certificate is exercisable are subject to
adjustment from time to time as provided in the Agreement.
3. Exercise. This Warrant Certificate may be exercised at any time or
from time to time on or after the date hereof; provided, however, that this
Warrant Certificate shall be void and all rights represented hereby shall cease
unless exercised in full before May 27, 2006, as such date may be extended
pursuant to Section 6 of the Agreement (the "Expiration Date").
In order to exercise this Warrant Certificate, in whole or in part, the
Holder hereof shall deliver to the Company at its principal office, or at such
other office as shall be designated by the Company pursuant to the Agreement:
(a) written notice of Holder's election to exercise this Warrant
Certificate, which notice shall specify the number of shares of Common Stock to
be purchased pursuant to such exercise;
(b) payment of the Exercise Price in cash or by certified check or on a
"net basis" as set forth in Section 6 of the Agreement; and
(c) this Warrant Certificate, properly indorsed.
Upon receipt thereof, the Company shall promptly execute or cause to be executed
and deliver to such Holder a certificate or certificates representing the
aggregate number of full shares of Common Stock issuable upon such exercise. The
stock certificate or certificates so delivered shall be registered in the name
of such Holder, or such other name as shall be designated in said notice. If the
exercise is for less than all of the shares of Common Stock issuable as provided
in the Warrant Certificate, the Company will issue a new Warrant Certificate of
like tenor and date for the balance of such shares issuable hereunder to the
Holder.
4. Transfer. This Warrant Certificate and all options and rights
hereunder are transferable, as to all or any part of the number of shares of
Common Stock purchasable upon its exercise, in accordance with the Agreement.
5. Registration Rights. If this Warrant Certificate represents a right
to purchase greater than _____ shares of Common Stock pursuant to the Agreement,
the Common Stock into which this Warrant Certificate is exercisable is subject
to registration rights as provided in the Registration Rights Agreement.
6. Successors and Assigns. This Warrant Certificate and the rights
evidenced hereby shall inure to the benefit of and be binding upon the
successors and assigns of the Holder hereof and, shall be enforceable by any
such Holder.
25
7. Headings. Headings of the paragraphs in this Warrant Certificate are
for convenience and reference only and shall not, for any purpose, be deemed a
part of this Warrant Certificate.
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be duly executed and issued.
DATED as of ___________, ____.
STATE COMMUNICATIONS, INC.
By: ______________________________
Name: ______________________________
Title: ______________________________
ATTEST:
By: ______________________________
Name: ______________________________
Title: ______________________________
CORPORATE SEAL:
26
Exhibit B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR
REGISTRATION OF TRANSFER OF WARRANTS
Re: _______ Warrants to Purchase Common Stock (the "Warrants") of State
Communications, Inc.
This Certificate relates to ________ Warrants held in _____ book-entry
or _____ definitive form by _______________ (the "Transferor"). The Transferor:
[ ] has requested the Company by written order to exchange or register
the transfer of a Warrant or Warrant(s).
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 that the transfer
of each such Warrant does not require registration under the Securities Act of
1933, as amended (the "Securities Act"), because:
[ ] Each such Warrant is being acquired for the Transferor's own
account without transfer.
[ ] Each such Warrant is being transferred (i) to a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act), in
reliance on Rule 144A or (ii) pursuant to an exemption from registration in
accordance with Rule 904 under the Securities Act (and, in the case of clause
(ii), based on an opinion of counsel and written certification if the Company so
requests).
[ ] Each such Warrant is being transferred (i) in accordance with Rule
144 under the Securities Act (and based on an opinion of counsel if the Company
so requests) or (ii) pursuant to an effective registration statement under the
Securities Act.
[ ] Each such Warrant is being transferred in reliance on and in
compliance with another exemption from the registration requirements of the
Securities Act (and based on an opinion of counsel if the Company so requests).
[INSERT NAME OF TRANSFEROR]
By: ______________________________
Name: ______________________________
Title: ______________________________
Date:
27
Schedule 1
OUTSTANDING OPTIONS, WARRANTS, CONVERTIBLE SECURITIES OR RIGHTS TO
ACQUIRE CAPITAL STOCK
[To be provided by State Communications]
