EXHIBIT 10.24
WARRANT AGREEMENT OF
MAI SYSTEMS CORPORATION
1,000,000 SHARES
Dated as of January 13, 2003
COMMON STOCK PURCHASE WARRANTS
WARRANT AGREEMENT dated as of January 13, 2003, between MAI Systems
Corporation, a Delaware corporation (the "Company"), the Company as Warrant
Agent (in such capacity, "Warrant Agent"), and those persons signatory hereto
(collectively, the "Warrant Holder" or "Holder").
The Company proposes to issue Common Stock Purchase Warrants as
hereinafter described (collectively the "Warrants") to purchase an aggregate of
up to 1,000,000 shares of its Common Stock, $0.01 par value per share (the
shares of Common Stock issuable on exercise of the Warrants being referred to
herein as the "Warrant Shares"), in favor of the Warrant Holder. Capitalized
terms used herein, if not otherwise defined, are defined in Section 8 hereof.
The Company and the Warrant Holder hereby agree as follows:
Section 1. TRANSFERABILITY; NOTICE OF CORPORATE ACTIONS; FORM OF
THE WARRANTS.
1.1 REGISTRATION. The Warrants shall be numbered and
shall be registered on the books of the Company maintained at the principal
office of the Company in Irvine, California ("the Warrant Register"). The
Company shall be entitled to treat the Holder of the Warrants as the owner in
fact thereof for all purposes and shall not be bound to recognize any equitable
or other claim to or interest in such Warrants on the part of any other Person.
1.2 TRANSFERABILITY. The Warrants are only transferable
with Company's prior written consent, subject to applicable securities laws
restrictions, which consent shall not unreasonably be withheld or delayed. The
holder of any Warrants so transferred shall continue to be bound by this
Agreement. However, the minimum denomination of any Warrant hereunder shall be a
Warrant exchangeable for 10,000 Warrant Shares.
1.3 TRANSFER-GENERAL. Subject to the terms hereof, the
Warrants shall be transferable only on the books of the Company maintained at
its principal office upon delivery thereof duly endorsed by the Holder or by his
duly authorized attorney or representative, or accompanied by proper evidence of
succession, assignment or authority to transfer. In all cases of transfer by an
attorney, the original power of attorney, duly approved, or a copy thereof, duly
certified, shall be deposited and remain with the Company. In case of transfer
by executors, administrators, guardians or other legal representatives, duly
authenticated evidence of their authority shall be produced, and may be required
to be deposited and to remain with the Company in its discretion. Upon any
registration of transfer, the Company shall countersign and deliver new Warrants
to the Persons entitled thereto. The Company or the Warrant Agent may require
the payment of a sum sufficient to cover any tax or governmental charge that may
be imposed in connection with any such transfer.
1.4 NOTICES OF CORPORATE ACTIONS. In the event of: (a)
any taking by the Company of a record of the holders of the Common Stock for the
purpose of determining the holders thereof who are entitled to receive any
extraordinary dividend or distribution, (other than cash dividends representing
a dividend payment on an annualized basis of not more than 10% of the Company's
Market Capitalization at the time of such dividend) or any right to subscribe
for, purchase or otherwise acquire any shares of capital stock of any class or
any other securities, (b) any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
consolidation or merger involving the Company and any other
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Person or any transfer or other disposition of all or substantially all the
assets of the Company to another Person; (c) any voluntary or involuntary
dissolution, liquidation or winding-up of the Company, or (d) any amendment of
the Certificate of Incorporation of the Company, the Company shall mail to each
Warrant Holder in accordance with the provisions of Section 14 hereof a notice
specifying (i) the date or expected date on which any such record is to be taken
for the purpose of such dividend, distribution or right, and the amount and
character of such dividend, distribution or right and (ii) the date or expected
date on which any such reorganization, reclassification, recapitalization,
consolidation, merger, transfer, disposition, dissolution, liquidation or
winding-up is to take place, the time, if any such time is to be fixed, as of
which the holders of record of Common Stock shall be entitled to exchange their
shares of Common Stock for the securities or Other Property deliverable upon
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, disposition, dissolution, liquidation or winding-up and a description
in reasonable detail of the transaction. Such notice shall be mailed to the
extent practicable at least thirty (30), but not more than ninety (90) days
prior to the date therein specified. In the event that the Company at any time
sends any notice to the holders of its Common Stock, it shall concurrently send
a copy of such notice to each Warrant Holder.
1.5 FORM OF THE WARRANTS. The text of the Warrants and of
the form of election to purchase Warrant Shares (the "Purchase Form") shall be
substantially as set forth respectively in Exhibits A and B attached hereto. The
price per Warrant Share (the "Warrant Price") and the number of Warrant Shares
issuable upon exercise of each Warrant are subject to adjustment upon the
occurrence of certain events, all as hereinafter provided. The Warrants shall be
executed on behalf of the Company by its Chief Executive Officer and President
or its Chief Financial and Operating Officer , under its corporate seal
reproduced thereon, and attested by its Secretary or an Assistant Secretary.
The Warrants shall be dated as of the date of countersignature
thereof by the Company either upon initial issuance or upon transfer.
1.6 RESTRICTIVE LEGEND. Except as otherwise provided in
this Section 1.6, each Warrant and each certificate for Warrants or Warrant
Shares and each certificate for Warrant Shares issued to any subsequent
transferee of any such certificate, shall be stamped or otherwise imprinted with
a legend in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAW. NO TRANSFER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE SHALL BE VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS
MADE PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR
(B) THE HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE
DELIVERED TO THE COMPANY AN OPINION OF COUNSEL (WHO MAY BE AN EMPLOYEE
OF SUCH HOLDER) REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT
SUCH PROPOSED TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF
THE ACT OR (C) SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER
THE ACT AND
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SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE
SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED
TRANSFER.
1.7 TERMINATION OF SECURITIES LAWS RESTRICTIONS. The
legend requirements of Section 1.6 shall terminate as to any particular Warrant
or Warrant Shares when the Company shall have received from the Holder thereof
an opinion of counsel reasonably acceptable to the Company to the effect that
such legend is not required in order to ensure compliance with the Securities
Act. Whenever the restrictions imposed by this Agreement shall terminate as to
the Warrants, as hereinabove provided, the Holder hereof shall be entitled to
receive from the Company, at the expense of the Company, a new Warrant or
Warrant Shares bearing no legends.
Section 2. TERM OF THE WARRANTS; EXERCISE OF THE WARRANTS;
WARRANT PRICE, ETC.
2.1 TERM OF THE WARRANTS. Subject to the terms of this
Agreement, the Holder shall have the right, which may be exercised from time to
time, from and through the dates set forth in the Warrants, to purchase from the
Company the number of fully paid and nonassessable Warrant Shares which the
Holder may at the time be entitled to purchase on exercise of such Warrant. If
the last day for the exercise of the Warrants shall not be a Business Day, then
the Warrant may be exercised on the next succeeding Business Day.
2.2 VESTING OF THE WARRANTS. The Warrants shall
immediately vest and may be exercised on or after the date hereof in accordance
with the terms of this Agreement and the Warrant Certificate.
2.3 CALL PROVISIONS. [Omitted.]
2.4 EXERCISE OF THE WARRANTS. The Warrants may be
exercised upon surrender to the Company, at its principal office, of the
certificate evidencing the Warrant to be exercised, together with the Purchase
Form, in the form of Exhibit B hereto, on the reverse thereof duly filled in and
signed, and upon payment to the Company, of the Warrant Price (as defined in and
determined in accordance with the provisions of Sections 2 and 6 hereof), for
the number of Warrant Shares in respect of which such Warrant is then exercised.
Upon partial exercise, a Warrant Certificate for the unexercised portion shall
be delivered to the Holder. Payment of the aggregate Warrant Price shall be
payable in (i) cash, (ii) certified check payable to the order of the Company,
(iii) outstanding shares of Common Stock duly endorsed to the Company (which
shares of Common Stock shall be valued at their Fair Market Value as of the day
preceding the date of such exercise), (iv) by delivery to the Company and
cancellation of the Company's 11% Subordinated Notes, as amended, which shall be
valued for this purpose at the principal amount thereof so delivered plus the
accrued interest thereon on the date of delivery of the Subordinated Notes (v)
by delivery of Warrants owned by Warrant Holder having a Fair Market Value, as
of the day preceding the date of such exercise, in excess of the exercise price
of such Warrants, or (vi) any combination of the foregoing, or through (vii)
such other method of payment as may be provided in the applicable Warrant
Agreement.
Subject to Section 3 hereof, upon such surrender of the
Warrants and payment of the Warrant Price as aforesaid, the Company shall issue
and cause to be delivered with all
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reasonable dispatch to or upon the written order of the Holder and in such name
or names as the Holder may designate, a certificate or certificates for the
number of full Warrant Shares so purchased upon the exercise of such Warrant,
together with cash, as provided in Section 9 hereof, in respect of any
fractional Warrant Shares otherwise issuable upon such surrender. Such
certificate or certificates 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 date of the surrender of such Warrant
and payment of the Warrant Price, as aforesaid; provided, however, that if, at
the date of surrender of such Warrant and payment of such Warrant Price, the
transfer books for the Warrant Shares or other class of stock purchasable upon
the exercise of such Warrant shall be closed, the certificates for the Warrant
Shares in respect of which such Warrant are then exercised shall be issuable as
of the date on which such books shall next be opened (whether before or after
the Expiration Date or the Notice Period) and until such date the Company shall
be under no duty to deliver any certificate for such Warrant Shares; provided,
further, that the transfer books of record, unless otherwise required by law,
shall not be closed at any one time for a period longer than 20 calendar days.
2.5 WARRANT PRICE. The price per share at which Warrant
Shares shall be purchasable upon exercise of the Warrant (the "Warrant Price")
shall be $0.40, subject to adjustment pursuant to Section 6 hereof.
Section 3. PAYMENT OF TAXES AND INDEMNIFICATION.
3.1 PAYMENT OF TAXES. The Company will pay all
documentary stamp taxes, if any, attributable to the issuance of Warrants and
Warrant Shares upon the exercise of the Warrants.
3.2 INDEMNIFICATION. Warrant Holder hereby agrees to
indemnify and hold the Company harmless from any and all taxes on the Warrant
Holder that may result from the issuance of the Warrants or any subsequent
exercise of the Warrants and issuance of the Warrant Shares.
Section 4. MUTILATED OR MISSING WARRANTS. In case the Warrants
shall be mutilated, lost, stolen or destroyed, the Company shall issue and
deliver in exchange and substitution for and upon cancellation of the mutilated
Warrants, or in lieu of and substitution for the Warrants lost, stolen or
destroyed, a new certificate of like tenor and representing an equivalent right
or interest; but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction of such Warrant certificate and
indemnity or bond, if requested, also reasonably satisfactory to them. An
applicant for such substitute Warrant certificate shall also comply with such
other reasonable regulations and pay such other reasonable charges as the
Company may prescribe.
Section 5. RESERVATION OF WARRANT SHARES.
5.1 RESERVATION OF WARRANT SHARES. There have been
reserved, and the Company shall at all times keep reserved, out of its
authorized shares of Common Stock, a number of shares of Common Stock sufficient
to provide for the exercise of the rights of purchase represented by the
outstanding Warrants. The transfer agent for the Common Stock ("Transfer
Agent"), and every subsequent transfer agent for any shares of the Company's
capital
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stock issuable upon the exercise of any of the rights of purchase aforesaid will
be and are hereby irrevocably authorized and directed at all times until the
Expiration Date to reserve such number of authorized shares as shall be
requisite 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 covenants that all Warrant
Shares which may be issued upon exercise of Warrants will, upon issue, be fully
paid, nonassessable, free of preemptive rights and free from all taxes, liens,
charges and security interests with respect to the issue thereof. The Company
will supply such Transfer Agent and any subsequent transfer agent with duly
executed stock certificates for such purpose and will itself provide or
otherwise make available any cash which may be payable as provided in Section 9
of this Agreement. The Company will furnish to such Transfer Agent a copy of all
notices of adjustments, and certificates related thereto, transmitted to each
Holder. The Warrants surrendered in the exercise of the rights thereby evidenced
shall be canceled by the Company.
5.2 CANCELLATION OF THE WARRANTS. In the event the
Company shall purchase or otherwise acquire the Warrants, the same shall be
canceled and retired.
Section 6. ADJUSTMENT OF WARRANT PRICE AND NUMBER OF WARRANT
SHARES. The number and kind of securities purchasable upon the exercise of the
Warrants and the Warrant Price shall be subject to adjustment from time to time
upon the happening of certain events, as hereinafter defined.
6.1 Stock Dividends, Subdivisions and Combinations. If at
any time the Company shall:
(i) take a record of the holders of its Common
Stock for the purpose of entitling them to
receive a dividend payable in, or other
distribution of, additional shares of Common
Stock,
(ii) subdivide its shares of Common Stock
Outstanding into a larger number of shares
of such Common Stock, or
(iii) combine its shares of Common Stock
Outstanding into a smaller number of shares
of such Common Stock,
then the Exercise Price shall be adjusted to equal the product of the Exercise
Price in effect immediately prior to such event multiplied by a fraction the
numerator of which is equal to the number of shares of Common Stock Outstanding
immediately prior to the adjustment and the denominator of which is equal to the
number of shares of Common Stock Outstanding immediately after such adjustment.
6.2 RIGHTS OFFERINGS OF COMMON STOCK. (a) In case the
Company shall issue rights, options or warrants to all holders of its Common
Stock entitling them to subscribe for or purchase shares of Common Stock at a
price per share less than the Current Market Price per share (determined as
provided below) of the Common Stock on the date fixed for the determination of
stockholders entitled to receive such rights, options or warrants, the Exercise
Price in effect at the opening of business on the day following the date fixed
for such
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determination shall be decreased by multiplying such Exercise Price by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such determination
plus the number of shares of Common Stock which the aggregate of the offering
price of the total number of shares of Common Stock so offered for subscription
or purchase would purchase at such Current Market Price and the denominator
shall be the number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination plus the number of shares of
Common Stock so offered for subscription or purchase, such decrease to become
effective immediately after the opening of business on the day following the
date fixed for such determination. For the purposes of this provision, the
number of shares of Common Stock at any time outstanding shall not include
shares held in the treasury of the Company but shall include shares issuable in
respect of script certificates issued in lieu of fractions of shares of Common
Stock. The Company will not issue any rights, options or warrants in respect of
shares of Common Stock held in the treasury of the Company.
(b) The provisions of this Section 6.2 shall not apply to
any issuance of Common Stock for which an adjustment is provided for
under Section 6.1.
6.3 OTHER DISTRIBUTIONS. In case the Company shall, by
dividend or otherwise, distribute to all holders of its Common Stock evidences
of its indebtedness, shares of any class of capital stock, or other property
(including securities, but excluding (i) any rights, options or warrants
referred to in Section 6.2, (ii) any dividend or distribution paid exclusively
in cash, (iii) any dividend or distribution referred to in Section 6.1, and (iv)
any merger or consolidation or other transactions to which Section 6.5 or
Section 6.7 applies), the Exercise Price shall be reduced by multiplying the
Exercise Price in effect immediately prior to the close of business on the date
fixed for the determination of stockholders entitled to receive such
distribution by a fraction of which the numerator shall be the Current Market
Price per share of the Common Stock on the date fixed for such determination
(the "Reference Date") less the then fair market value (as determined by the
Board of Directors, whose determination shall be conclusive and described in a
Board Resolution filed with the Warrant Agent) on the Reference Date of the
portion assets, shares or evidences of indebtedness of the Company so
distributed applicable to one share of Common Stock and the denominator shall be
the Current Market Price per share of the Common Stock on the Reference Date,
such adjustment to become effective immediately prior to the opening of business
on the day following the Reference Date.
6.4 ADJUSTMENT OF NUMBER OF SHARES PURCHASABLE. Upon any
adjustment of the Exercise Price as provided in Section 6.1, 6.2 or 6.3 hereof,
the Warrant Holder shall thereafter be entitled to purchase upon the exercise of
the Warrants, at the Exercise Price resulting from such adjustment, the number
of shares of Common Stock (calculated to the nearest 1/100th of a share)
obtained by multiplying the Exercise Price in effect immediately prior to such
adjustment by the number of shares of Common Stock issuable on the exercise
hereof immediately prior to such adjustment and dividing the product thereof by
the Exercise Price resulting from such adjustment.
6.5 REORGANIZATION, RECLASSIFICATION, MERGER,
CONSOLIDATION OR DISPOSITION OF ASSETS. In case the Company shall reorganize its
capital, reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is any change whatsoever in, or distribution with respect to, the Outstanding
Common Stock of the Company), or sell, transfer or otherwise dispose of all or
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substantially all of its property, assets or business to another corporation
and, pursuant to the terms of such reorganization, reclassification, merger,
consolidation or disposition of assets, (i) shares of common stock of the
successor or acquiring corporation or of the Company (if it is the surviving
corporation) or (ii) any cash, shares of stock or other securities or property
of any nature whatsoever (including warrants or other subscription or purchase
rights) in addition to or in lieu of common stock of the successor or acquiring
corporation ("Other Property") are to be received by or distributed to the
holders of Common Stock of the Company who are holders immediately prior to such
transaction, then the Warrant Holder shall have the right thereafter to receive,
upon exercise of the Warrants, the number of shares of common stock of the
successor or acquiring corporation or of the Company, if it is the surviving
corporation, and Other Property receivable upon or as a result of such
reorganization, reclassification, merger, consolidation or disposition of assets
by a holder of the number of shares of Common Stock for which the Warrants are
exercisable immediately prior to such event. In such event, the aggregate
Exercise Price otherwise payable for the shares of Common Stock issuable upon
exercise of the Warrants shall be allocated among the shares of common stock and
Other Property receivable as a result of such reorganization, reclassification,
merger, consolidation or disposition of assets in proportion to the respective
fair market values of such shares of common stock and Other Property as
determined in good faith by the Board of Directors of the Company. In case of
any such reorganization, reclassification, merger, consolidation or disposition
of assets, the successor or acquiring corporation (if other than the Company)
shall expressly assume the due and punctual observance and performance of each
and every covenant and condition of this Agreement to be performed and observed
by the Company and all the obligations and liabilities hereunder, subject to
such modifications as may be reasonably deemed appropriate (as determined by
resolution of the Board of Directors of the Company) in order to provide for
adjustments of any shares of the common stock of such successor or acquiring
corporation for which the Warrants thus become exercisable, which modifications
shall be as equivalent as practicable to the adjustments provided for in this
Section 6. For purposes of this Section 6.5, "common stock of the successor or
acquiring corporation" shall include stock of such corporation of any class that
is not preferred as to dividends or assets over any other class of stock of such
corporation and that is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities that are
convertible into or exchangeable for any such stock, either immediately or upon
the arrival of a specified date or the happening of a specified event and any
warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions of this Section 6.5 shall similarly apply to successive
reorganizations, reclassification, mergers, consolidations or disposition of
assets.
6.6 DETERMINATION OF CONSIDERATION. For purposes of
Sections 6.1, 6.3 and 6.5 hereof, the consideration received and/or receivable
by the Company in connection with the issuance, sale, grant or exercise of
additional shares of Common Stock, Stock Purchase Rights or Convertible
Securities, irrespective of the accounting treatment of such consideration,
shall be valued as follows:
(1) Securities or Other Property. In the case of
securities or other property, the fair market value thereof as of the
date immediately preceding such issuance, sale, grant or exercise as
determined in good faith by the Board of Directors of the Company.
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(2) Dividends in Securities. In case the Company
shall declare a dividend or make any other distribution upon any stock
of the Company payable in either case in Common Stock or Convertible
Securities, such Common Stock or Convertible Securities, as the case
may be, issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.
(3) Merger, Consolidation or Sale of Assets. In
case any shares of Common Stock, Stock Purchase Rights or Convertible
Securities shall be issued in connection with any merger or
consolidation in which the Company is the surviving corporation, the
amount of consideration therefor shall be deemed to be the fair value
of such portion of the assets and business of the non-surviving
corporation attributable to such Common Stock, Stock Purchase Rights or
Convertible Securities, as is determined in good faith by the Company's
Board of Directors.
6.7 Corporate Distribution Event.
(a) PRICE ADJUSTMENT. In the event that the Company shall
subdivide (a "Corporate Distribution Event") into two or more corporate
entities which are owned (at least initially) by shareholders of the
Company or shall distribute to its shareholders, without consideration,
shares of one or more subsidiaries or affiliated corporations or former
divisions (the Company and each new entity a "Constituent Corporation
and collectively the "Constituent Corporations") then the Warrants
shall be divided into the right to purchase shares of common stock of
the Constituent Corporations based upon the number of shares of common
stock outstanding of each Constituent Corporation immediately after the
Corporate Distribution Event such that the Holders of the Warrants will
receive upon exercise of the Warrants in each of the Constituent
Corporations a proportionate share of such Constituent Corporations'
common stock equal to that share of the Company's Common Stock issuable
upon exercise of the Warrants prior to the Corporate Distribution
Event, such that the new warrant price per share for each warrant to
purchase shares in each of the Constituent Corporations reflects the
relative Market Capitalization values of the Constituent Corporations
after completion of the Corporate Distribution Event (rated by the
number of shares received by the holder of a share of Company Common
Stock) and such that the total consideration to be paid by the Holders
upon exercise of all of the Warrants in all of the Constituent
Corporations is equal to the total consideration which would have been
paid by the Holders prior to the Corporate Distribution Event if they
had exercised all the Warrants for the purchase of Company Common
Stock. Each Constituent Corporation shall become a party to a successor
warrant agreement similar hereto in form and substance reasonably
satisfactory to the Holders of the Warrants.
By way of example, if the Company had 7,500,000 shares of Common Stock
outstanding prior to the Corporate Distribution Event and the Company
distributed to each holder of its Common Stock two shares of common stock in a
newly formed Constituent Corporation ("Newco Common Stock") for each share of
Company Common Stock, and, during the twenty (20) trading days after the
completion of the Corporate Distribution Event, the shares of Newco Common Stock
traded at an average price of $6 per share and the shares of Company Common
Stock traded at an average price of $9 per share, then each Holder of Warrants
would be entitled to a reduction in his or her Exercise Price for the Warrants
which would continue to be
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exercisable for Company Common Stock to $3.43 per share and the Holders of
Warrants would receive in addition 1,500,000 warrants to purchase a like number
of shares of Newco Common Stock, each exercisable at $2.29 per share.
Adjustments made pursuant to this Section 6.7 shall be applied to successive
Corporate Distribution Events, the provisions of this Section 6 shall be
applicable to the warrants of all Constituent Corporations and the principles of
Sections 6.1 through 6.5 shall similarly apply to the Corporate Distribution
Event and the Constituent Corporations, if applicable.
(b) REGISTRATION RIGHTS. Any common stock of the
Constituent Corporations shall be subject to equivalent Registration
Rights as the Registration Rights applicable to the Company Common
Stock under the Registration Rights Agreement.
6.8 OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION. The following provisions shall be applicable to the adjustments
provided for pursuant to this Section 6:
(a) When Adjustments To Be Made. The adjustments required
by this Section 6 shall be made whenever and as often as any specified
event requiring such an adjustment shall occur. For the purpose of any
such adjustment, any specified event shall be deemed to have occurred
at the close of business on the date of its occurrence.
(b) Fractional Interests. In computing adjustments under
this Section 6, fractional interests in Common Stock shall be taken
into account to the nearest 1/100th of a share.
(c) When Adjustment Not Required. If the Company shall
take a record of the holders of its Common Stock for the purpose of
entitling them to receive a dividend or distribution to which the
provisions of Section 6 would apply, but shall, thereafter and before
the distribution to stockholders thereof, legally abandon its plan to
pay or deliver such dividend or distribution, then thereafter no
adjustment shall be required by reason of the taking of such record and
any such adjustment previously made in respect thereof shall be
rescinded and annulled.
(d) Maximum Exercise Price. Except as provided in Section
6.1 above, at no time shall the Exercise Price per share of Common
Stock exceed the amount set forth in this Agreement.
(e) Certain Limitations. Notwithstanding anything herein
to the contrary, the Company agrees not to enter into any transaction
that, by reason of any adjustment under Section 6.1, 6.2 or 6.3 above,
would cause the Exercise Price to be less than the par value of the
Common Stock, if any, unless the Company first reduces the par value of
the Common Stock to be less than the Exercise Price that would result
from such transaction.
(f) Notice of Adjustments. Whenever the number of shares
of Common Stock for which the Warrants are exercisable or the Exercise
Price shall be adjusted pursuant to this Section 6, the Company shall
forthwith prepare a certificate to be executed by the chief financial
officer of the Company setting forth, in reasonable detail,
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the event requiring the adjustment and the method by which such
adjustment was calculated, specifying the number of shares of Common
Stock for which the Warrants are exercisable and (if such adjustment
was made pursuant to Section 6.5) describing the number and kind of any
other shares of stock or Other Property for which the Warrants are
exercisable, and any related change in the Exercise Price, after giving
effect to such adjustment or change. The Company shall promptly cause a
signed copy of such certificate to be delivered to each Holder in
accordance with Section 14. The Company shall keep at its principal
office copies of all such certificates and cause the same to be
available for inspection at said office during normal business hours by
any Holder or any prospective transferee of any Warrants designated by
a Holder thereof.
(g) Independent Application. Except as otherwise provided
herein, all subsections of this Section 6 are intended to operate
independently of one another (but without duplication). If an event
occurs that requires the application of more than one subsection, all
applicable subsections shall be given independent effect without
duplication.
6.9 DISPUTES. In the event that there is any dispute as
to the computation of the price or the number of Warrant Shares required to be
issued upon exercise of Warrants or any other disputed calculation or adjustment
under Section 6 hereof, the Warrant Holders and the Company will retain an
independent and nationally recognized accounting firm to conduct at the expense
of the Company a special procedures engagement of the computations pursuant to
the terms hereof involved in such dispute, including the financial statements or
other information upon which such computations were based. The determination of
such nationally recognized accounting firm shall, in the absence of manifest
error, be binding upon the Warrant Holders and the Company. If there shall be a
dispute as to the selection of such nationally recognized accounting firm, such
firm shall be appointed by the American Institute of Certified Public
Accountants, if willing, otherwise the American Arbitration Association, upon
application by the Company or any holder or holders of at least 25% of the
outstanding Warrants with notice to the others.
Section 7. REGISTRATION RIGHTS.
(a) COMPANY REGISTRATION. The Company shall register the
Warrant Shares pursuant to the Registration Rights Agreement (attached
hereto as an exhibit to this Agreement) under the Securities Act, and
the Company shall, at such time, promptly give all holders of
Registrable Securities written notice of such registration.
(b) EXPENSES. The Company shall pay all Registration
Expenses incurred in connection with the registration of Registrable
Securities pursuant to the Registration Rights Agreement.
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Section 8. DEFINITIONS.
As used in this Warrant Agreement, the following terms shall
have the following respective meanings:
BUSINESS DAY shall mean any day that is not a Saturday or
Sunday or a day on which banks are required or permitted to be closed in the
State of California.
COMMISSION means the Securities and Exchange Commission.
COMMON STOCK means (except where the context indicates that it
means the Common Stock of another corporation such as a Constituent Corporation)
the Common Stock of the Company, par value $0.01 per share, as constituted on
its original date of issue by the Company, and any capital stock into which such
Common Stock may thereafter be changed, and shall also include (i) capital stock
of the Company of any other class (regardless of how denominated) issued to the
holders of shares of any Common Stock upon any reclassification thereof which is
also not preferred as to dividends or liquidation over any other class of stock
of the Company and which is not subject to redemption and (ii) shares of common
stock of any successor or acquiring corporation (as defined in Section 6.5
hereof) received by or distributed to the holders of Common Stock of the Company
in the circumstances contemplated by Section 6.5 hereof.
CONVERTIBLE SECURITIES shall mean evidences of indebtedness,
shares of stock or other securities that are convertible into or exchangeable
for, with or without payment of additional consideration in cash or property,
shares of Common Stock, either immediately or upon the occurrence of a specified
date or a specified event.
CURRENT MARKET PRICE shall mean as of any specified date the
average of the daily market prices of the Common Stock of the Company for the
shorter of (x) the twenty (20) consecutive Business Days immediately preceding
such date or (y) the period commencing on the Business Day next following the
first public announcement of any event giving rise to an adjustment of the
Exercise Price pursuant to Section 6 and ending on such specified date. The
"daily market price" for each such Business Day shall be: (i) if the Common
Stock is then listed on a national securities exchange or is listed on NASDAQ
and is designated as a National Market System security, the last sale price,
regular way, on such day on the principal stock exchange or market system on
which such Common Stock is then listed or admitted to trading, or, if no such
sale takes place on such day, the average of the closing bid and asked prices
for the Common Stock on such day as reported on such stock exchange or market
system or (ii) if the Common Stock is not then listed or admitted to trading on
any national securities exchange or designated as a National Market System
security on NASDAQ but is traded over-the-counter, the average of the closing
bid and asked prices for the Common Stock as reported on NASDAQ or the
Electronic Bulletin Board or in the National Daily Quotation Sheets, as
applicable.
EXCHANGE ACT means the Securities Exchange Act of 1934, as
amended, or any successor act, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect at the time.
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EXERCISE PRICE shall mean, in respect of a share of Common
Stock at any date herein specified, the initial Exercise Price set forth in this
Agreement as adjusted from time to time pursuant to Section 6 hereof.
EXPIRATION DATE means the later of February 1, 2010,
approximately the seventh anniversary of the date of this Agreement, and the
date the Company's 11% Subordinated Notes, as amended, have been repaid in full.
GAAP shall mean generally accepted accounting principles in
the United States of America as from time to time in effect.
MARKET CAPITALIZATION means a number which is the sum of the
number of shares of Outstanding Common Stock multiplied by the Current Market
Price of the corporation in question.
NOTICE PERIOD shall mean the period of fifteen (15) days
commencing upon the delivery to the Holders of written notice of the Company's
intention to call the Warrants pursuant to Section 2.3, provided that conditions
(i), (ii) and (iii) of Section 2.3 have been satisfied and that such conditions
(ii) and (iii) continue to have been satisfied for such 15 days.
OUTSTANDING shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be determined,
all issued shares of Common Stock, except shares then owned or held by or for
the account of the Company or any Subsidiary thereof, and shall include all
shares issuable in respect of outstanding scrip or any certificates representing
fractional interests in shares of Common Stock.
ORIGINAL ISSUE DATE shall mean the date on which the Warrants
were issued, as set forth on Exhibit B hereto.
PERSON shall mean any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, incorporated
organization, association, corporation, institution, public benefit corporation,
entity or government (whether federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division, agency,
body or department thereof).
REGISTRABLE SECURITIES shall have the meaning specified for
such term in the Registration Rights Agreement.
REGISTRATION EXPENSES shall have the meaning specified for
such term in the Registration Rights Agreement.
REGISTRATION RIGHTS means the right of a Holder to have its
Registrable Securities registered pursuant to Section 7 of this Agreement and
pursuant to the Registration Rights Agreement.
REGISTRATION RIGHTS AGREEMENT means the Agreement dated as of
January 13, 2003 between the Company and the Holders.
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STOCK PURCHASE RIGHTS shall mean any options, warrants or
other securities or rights to subscribe to or exercisable for the purchase of
shares of Common Stock or Convertible Securities, whether or not immediately
exercisable.
SECURITIES ACT means the Securities Act of 1933, as amended,
or any successor act thereto, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect at the time.
Section 9. FRACTIONAL INTERESTS. The Company shall not be
required to issue fractional Warrant Shares on the exercise of the Warrants. If
any fraction of a Warrant Share would, except for the provisions of this Section
8, be issuable on the exercise of the Warrants (or specified portion thereof),
the Company shall pay an amount in cash equal to the closing price for one share
of the Common Stock on the trading day immediately preceding the date the
Warrants are presented for exercise, multiplied by such fraction.
Section 10. NO RIGHTS AS STOCKHOLDER; NOTICES TO HOLDER. Nothing
contained in this Agreement or in the Warrants shall be construed as conferring
upon the Holder or his permitted transferees the right to vote or to receive
dividends or to consent to or receive notice as a stockholder in respect of any
meeting of stockholders for the election of directors of the Company or any
other matter, or any rights whatsoever as a stockholder of the Company.
Section 11. INSPECTION OF WARRANT AGREEMENT. The Company shall
keep copies of this Agreement and any notices given or received hereunder
available for inspection by the Holder during normal business hours at its
principal office.
Section 12. IDENTITY OF TRANSFER AND WARRANT AGENT. Forthwith
upon the appointment of any subsequent transfer agent for the Common Stock or
Warrant Agent, or any other shares of the Company's capital stock issuable upon
the exercise of the Warrants, the Company will notify the Holder of the name and
address of such subsequent transfer agent.
Section 13. FINANCIAL AND BUSINESS INFORMATION. Until the
Expiration Date, the Company shall deliver to each Warrant Holder promptly upon
their becoming available, copies of all public financial statements, reports and
filings, notices and proxy statements sent or made available by the Company to
the holders of any class of its securities generally.
Section 14. NOTICES. Any notice pursuant to this Agreement by any
Holder to the Company, shall be in writing and shall be mailed first class,
postage prepaid, or delivered to the Company at its office at 0000 Xxxxxxxx
Xxxx, Xxxxxx, Xxxxxxxxxx, 00000, Attention: General Counsel.
Each party hereto may from time to time change the address to
which notices to it are to be delivered or mailed hereunder by notice in writing
to the other party. Any notice mailed pursuant to this Agreement by the Company
or the Warrant Agent to the Holder shall be in writing and shall be mailed first
class, postage prepaid, or delivered to the Holder at his address on the books
of the Warrant Agent, and a copy thereof shall be delivered to Canyon Capital
Management c/o Canyon Partners Incorporated, 0000 Xxxxxxxx Xxxxxxxxx Xxxxx 000,
Xxxxxxx Xxxxx, XX 00000.
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Section 15. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT
GIVING EFFECT TO PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO AGREE TO
SUBMIT TO THE JURISDICTION OF THE COURTS OF THE STATE OF CALIFORNIA IN ANY
ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
Section 16. SUPPLEMENTS AND AMENDMENTS. The Company and the
Warrant Agent may from time to time supplement or amend this Agreement in order
to cure any ambiguity or to correct or supplement any provision contained 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 the Warrant Agent may deem necessary or desirable and
which shall not be inconsistent with the provisions of the Warrant and which
shall not adversely affect the interests of the Holder.
Section 17. SUCCESSORS. All the covenants and provisions of this
Agreement by or for the benefit of the Company, the Warrant Agent or the Holders
of the Warrants shall bind and inure to the benefit of their respective
successors and assigns hereunder.
Section 18. BENEFITS OF THIS AGREEMENT. Nothing in this Agreement
shall be construed to give to any Person other than the Company 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 and the Holders.
Section 19. CAPTIONS. The captions of the Sections of this
Agreement have been inserted for convenience only and shall have no substantive
effect.
Section 20. COUNTERPARTS. This Agreement may be executed in any
number of counterparts each of which so executed shall be deemed to be an
original; but such counterparts together shall constitute but one and the same
instrument.
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed as of the day, month and year first above written.
THE COMPANY:
MAI SYSTEMS CORPORATION, a Delaware
corporation
By: __________________________________________
Title: _______________________________________
15
THE WARRANT AGENT:
MAI SYSTEMS CORPORATION, a Delaware
corporation
By: __________________________________________
Title: _______________________________________
Canyon Value Realization Fund, L.P.,
a California limited partnership as to 450,000 Warrants
By: Canpartners Investments III, L.P.,
a California limited partnership,
its general partner
By: Canyon Capital Advisors LLC,
a Delaware limited liability company,
its general partner
By: Canpartners Incorporated,
a California corporation,
its general partner
By: ______________________________
Name:
Title:
The Canyon Value Realization Fund (Cayman), Ltd. as to 450,000 Warrants
By: MeesPierson (Cayman) Limited,
its Administrator
By: ______________________________
Name:
Title:
16
GRS Partners II as to 50,000 Warrants
By: Grosvenor Capital Management L.P.,
its Administrator
By: Grosvenor Capital Management, Inc.,
its general partner
By: ______________________________
Name:
Title:
CPI Securities L.P.,
a California limited partnership as to 50,000 Warrants
By: Canpartners Incorporated,
a California corporation,
its general partner
By: ______________________________
Name:
Title:
17
EXHIBIT A
Form of Warrant Certificate
No. ___ _______ Shares
COMMON STOCK PURCHASE WARRANT
Void After 5:00 P.M.
Pacific Time on [February 1, 2010]
THIS CERTIFIES THAT, for value received, _____________, the registered
holder of this Common Stock Purchase Warrant (the "Warrant") or permitted
assigns (the "Holder"), is entitled to purchase from MAI Systems Corporation, a
Delaware corporation (the "Company"), at any time until 5:00 p.m. Pacific Time
on the later of February 1, 2010 and the date the Company's 11% Subordinated
Notes, as amended, have been repaid in full (the "Expiration Date"), unless this
Warrant is earlier called by the Company pursuant to Section 2.3 of the Warrant
Agreement hereinafter mentioned, at the Warrant Price of $0.40 per share (the
"Warrant Price"), the number of shares of Common Stock of the Company (the
"Common Stock") which is equal to the number of Shares set forth above. The
number of shares purchasable upon exercise of this Warrant and the Warrant Price
per share shall be subject to adjustment from time to time as set forth in the
Warrant Agreement referred to below.
This Warrant is issued under and in accordance with a Warrant
Agreement, dated as of January 13, 2003, between the Company, the Warrant Agent
and the Warrant Holders and is subject to the terms and provisions contained in
the Warrant Agreement, to all of which the Holder of this Warrant by acceptance
hereof consents. A copy of the Warrant Agreement may be obtained for inspection
by the Holder hereof upon written request to the Company.
This Warrant may be exercised in whole or in part by presentation of
this Warrant with the Purchase Form on the reverse side hereof duly executed and
simultaneous payment of the Warrant Price (subject to adjustment) at the
principal office of the Company in Irvine, California. Payment of such price
shall be payable at the option of the Holder hereof in the manner described in
the Warrant Agreement. Terms relating to exercise of Warrant are set forth more
fully in the Warrant Agreement.
This Warrant may be exercised in whole or in part. Upon partial
exercise, a Warrant Certificate for the unexercised portion shall be delivered
to the Holder. No fractional shares will be issued upon the exercise of this
Warrant but the Company shall pay the cash value of any fraction upon the
exercise of the Warrant. This Warrant is transferable only in limited
circumstances as described in this Warrant Agreement at the office of the
Company in Irvine, California, in the manner and subject to the limitations set
forth in the Warrant Agreement.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE
SECURITIES LAW. NO
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TRANSFER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE
VALID OR EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE HOLDER OF THE
SECURITIES PROPOSED TO BE TRANSFERRED SHALL HAVE DELIVERED TO THE
COMPANY AN OPINION OF COUNSEL (WHO MAY BE AN EMPLOYEE OF SUCH HOLDER)
REASONABLY ACCEPTABLE TO THE COMPANY TO THE EFFECT THAT SUCH PROPOSED
TRANSFER IS EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C)
SUCH TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT AND
SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE COMPANY A CERTIFICATE
SETTING FORTH THE BASIS FOR APPLYING SUCH RULE TO THE PROPOSED
TRANSFER."
The Holder hereof may be treated by the Company and all other Persons
dealing with this Warrant as the absolute owner hereof for any purpose and as
the person entitled to exercise the rights represented hereby, or to the
transfer hereof on the books of the Company. Any notice to the contrary
notwithstanding, and until such transfer on which books, the Company may treat
the Holder hereof as the owner for all purposes.
This Warrant does not entitle any Holder hereof to any of the rights of
a stockholder of the Company.
MAI SYSTEMS CORPORATION
By:
Chief Executive Officer
Attest
Secretary
DATED: As of_________, 2003
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Exhibit B
Purchase Form
Mailing Address
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
_________________________________
The undersigned hereby irrevocably elects to exercise the right of
purchase represented by the within Warrant for, and to purchase thereunder,
_______________ shares of the stock provided for therein, and tenders herewith
payment of the Warrant Price in full in the form of cash or by cashier's check
in the amount of $______________], or as otherwise provided in the Warrant.
The undersigned requests that certificates for such shares be issued in
the name of:
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
(Please Print Name, Address and Social Security No.)
DATED: , ______
Name of Warrant Holder or Permitted Assignee:
________________________________________________________________________________
Address:
________________________________________________________________________________
________________________________________________________________________________
Signature:
Note: The above signature must correspond with the name as written upon the
face of this Warrant Certificate in every particular, without
alteration or enlargement or any change whatever, unless this Warrant
has been assigned.
Signature Guaranteed:
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