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WARRANT AGREEMENT
Dated as of March 31, 2001
BY AND BETWEEN
XXXXXXXXXXXXX.XXX, INC.
(AS ISSUER OF WARRANTS)
AND
MCG FINANCE CORPORATION
(AS PURCHASER OF WARRANTS)
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Warrants to Purchase 659,775 Shares of
Voting Common Stock of Company
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TABLE OF CONTENTS
Page
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ARTICLE 1 . GRANT OF WARRANTS.............................................1
1.1. GRANT OF WARRANTS...................................................1
1.2. WARRANT ENTITLEMENT.................................................2
1.3. WARRANTS AS ADDITIONAL COMPENSATION.................................2
ARTICLE 2 . PURCHASER'S REPRESENTATIONS AND AGREEMENTS....................2
ARTICLE 3 . COMPANY'S REPRESENTATIONS AND WARRANTIES......................2
3.1. LEGAL EXISTENCE AND POWER...........................................2
3.2. AUTHORIZATION; NON-CONTRAVENTION....................................3
3.3. EXECUTION, DELIVERY AND BINDING EFFECT..............................3
3.4. BROKER AND FINDER FEES..............................................3
3.5. OFFER AND SALE OF SECURITIES........................................3
3.6. CAPITALIZATION; WARRANT SHARES AS A PERCENT OF CAPITAL STOCK........3
3.7. RESERVATION AND ISSUANCE OF WARRANT SHARES..........................4
3.8. DISCLOSURES.........................................................4
3.9. ACKNOWLEDGMENT REGARDING PURCHASER'S PURCHASE OF THE WARRANTS.......4
ARTICLE 4 . THE WARRANTS AND WARRANT SHARES...............................5
4.1. WARRANT CERTIFICATES................................................5
4.2. EXERCISE OF WARRANTS................................................5
4.3. TRANSFERS OF WARRANTS AND WARRANT SHARES............................6
4.4. REGISTRATION AND RELATED RIGHTS.....................................7
4.5. RIGHTS UPON EQUITY DISPOSITIONS, EQUITY REDEMPTIONS AND
NON-SURVIVING TRANSACTIONS.........................................12
4.6. REPURCHASE OFFERS..................................................13
4.7. CUMULATIVE RIGHTS..................................................14
4.8. EXERCISE OF RIGHTS CONDITIONED UPON CLOSING OF TRANSACTION
INVOLVED...........................................................14
4.9. PAYMENT OF TAXES AND EXPENSES......................................14
4.10. RESERVATION AND ISSUANCE OF WARRANT SHARES........................15
4.11. CORRECTIVE ADJUSTMENTS............................................15
4.12. LISTING OF SHARES.................................................15
4.13. LISTS OF HOLDERS..................................................15
4.14. STATEMENT OF WARRANT INTEREST.....................................15
4.15. RIGHT OF INSPECTION...............................................16
4.16. ATTENDANCE AND PARTICIPATION RIGHTS...............................16
4.17. COMPLIANCE WITH APPROVAL REQUIREMENTS.............................16
ARTICLE 5 . ANTI-DILUTION PROVISIONS.....................................16
5.1. ADJUSTMENTS TO WARRANT SHARES PURCHASABLE AND EXERCISE PRICE.......16
5.2. NOTICE OF ADJUSTMENT...............................................19
5.3. PRESERVATION OF PURCHASE RIGHTS UPON CERTAIN TRANSACTIONS..........19
ARTICLE 6 . COMPANY'S COVENANTS..........................................19
6.1. INFORMATION........................................................19
6.2. BOOKS AND RECORDS..................................................21
6.3. NO AMENDMENTS TO ORGANIC DOCUMENTS.................................21
6.4. EXISTENCE AND GOOD STANDING........................................21
6.5. TRANSACTIONS WITH RELATED PARTIES..................................21
6.6. CONDUCT OF BUSINESS................................................21
ARTICLE 7 . DEFINITIONS..................................................21
7.1. DEFINITIONS........................................................21
7.2. GENERAL CONSTRUCTION AND INTERPRETATION............................27
ARTICLE 8 . MISCELLANEOUS................................................28
8.1. COMPLIANCE WITH FCC AND STATE PUC REQUIREMENTS.....................28
8.2. COMPLIANCE WITH PURCHASER'S REGULATORY REQUIREMENTS................28
8.3. BINDING EFFECT AND GOVERNING LAW...................................28
8.4. SURVIVAL...........................................................29
8.5. NO WAIVER; DELAY...................................................29
8.6. MODIFICATION.......................................................29
8.7. NOTICES............................................................29
8.8. PRIOR AGREEMENTS SUPERSEDED........................................30
8.9. SEVERABILITY.......................................................30
8.10. COUNTERPARTS......................................................30
8.11. LIMITATION OF LIABILITY...........................................30
8.12. FORUM SELECTION; CONSENT TO JURISDICTION..........................31
8.13. WAIVER OF JURY TRIAL..............................................31
EXHIBIT A -- ARTICLES OF INCORPORATION.....................................33
EXHIBIT B -- AUTHORIZING RESOLUTIONS.......................................34
EXHIBIT C -- FORM OF WARRANT CERTIFICATE...................................35
EXHIBIT D -- RESTRICTIVE LEGENDS...........................................36
WARRANT AGREEMENT
THIS WARRANT AGREEMENT (as defined in Article 7 along with all the
other defined terms, this "Agreement") is made and effective as of March
31, 2001 by and between XXXXXXXXXXXXX.XXX, INC. (as more fully defined in
Article 7, "Company"), and MCG FINANCE CORPORATION (as more fully defined
in Article 7, "Purchaser", "Lender" and/or a "Holder").
R E C I T A L S
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WHEREAS, Company (together with certain of its Affiliates) and
Lender entered into a Credit Facility Agreement dated as of March 16, 2000
(the "Original Credit Agreement") and various related Loan Documents (as
defined in the Original Credit Agreement) pursuant to which Lender agreed
to provide Borrowers (as defined therein) with credit facilities initially
aggregating up to $15.0 million; and
WHEREAS, Borrowers applied to Lender (a) to amend the credit
facility in order to add an additional Subsidiary as a Borrower thereunder;
and (b) to increase the term loan arrangement to $17 million (such
additional $2 million (or any portion thereof) (collectively, the
"Discretionary Advances") to be advanced in the sole and absolute
discretion of Lender) and to otherwise restructure various aspects of the
credit facilities thereunder; and
WHEREAS, to induce Lender to enter into the Amendment Number One
to XxxxxxxXxxxxx.xxx, Inc. Loan Documents (together with the Original
Credit Agreement, and as such Original Credit Agreement may be further
amended and modified from time to time hereafter, the "Credit Agreement")
and as additional consideration for the accommodations and credit to be
provided thereunder, the outstanding balance of the Discretionary Advances
was to become due and payable on March 31, 2001 unless, prior to March 31,
2001, Company issued and granted to Purchaser warrants exercisable into
shares of its common stock sufficient to represent 5.0% of its issued and
outstanding common stock as of March 31, 2001, on a fully diluted basis for
a nominal exercise price; and
NOW, THEREFORE, for good and valuable consideration (receipt and
sufficiency of which are hereby acknowledged), and intending to be legally
bound hereby, Company and Purchaser hereby agree as follows:
ARTICLE 1. GRANT OF WARRANTS
1.1. GRANT OF WARRANTS. Company hereby grants to Purchaser
warrants, each a "Warrant"; collectively, the "Warrants") to purchase up to
an aggregate of 659,775 shares of Common Stock (as such number may be
adjusted from time to time as provided herein). Each Warrant is exercisable
immediately.
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1.2. WARRANT ENTITLEMENT. Each Warrant entitles the registered
Holder of such Warrant to purchase (during the Exercise Period) one fully
paid, nonassessable Warrant Share at a price of $0.01 per share (as such
amount may be adjusted from time to time as provided herein, the "Exercise
Price").
1.3. WARRANTS AS ADDITIONAL COMPENSATION. The Warrants (and the
grant thereof hereunder) are additional compensation for the cost, expense
and risk incurred by Lender (and/or its Affiliates) associated with the
underwriting and establishment of the loan credit facilities provided for
in the Credit Agreement, but neither the grant nor the exercise of any
Warrants in any way affects or relieves Company, Borrowers (or any
Affiliate thereof) of any of its obligations to fully and timely perform
and to fully and timely repay the entire indebtedness due under the Credit
Agreement and related Loan Documents.
ARTICLE 2. PURCHASER'S REPRESENTATIONS AND AGREEMENTS
Purchaser represents and warrants that it is acquiring the
Warrants (a) solely for the purpose of investment and not with a view to
any distribution of the Warrants or any Warrant Shares within the meaning
of the Securities Act, and (b) with no present intention of selling or
otherwise transferring the Warrants, the Warrant Certificates or the
Warrant Shares except as provided herein. Purchaser further represents and
warrants as follows: (1) it has such knowledge and experience in financial
and business matters as to be capable of evaluating the merits and risks of
its prospective investment in the Warrants, and (2) it has the ability to
bear the economic risks of its prospective investment, and (3) it is able
(without materially impairing its financial condition) to hold the Warrants
and Warrant Shares for an indefinite period of time and to suffer a
complete loss on its investment in such Warrants and Warrant Shares.
Purchaser agrees that it will not offer, sell or otherwise transfer any
Warrants, Warrant Certificates or Warrant Shares except in compliance with
this Agreement and the Securities Act (and the regulations of the
Commission thereunder), as well as in compliance with any applicable laws,
regulations and orders of and/or administered by any State PUC (to the
extent failure to so comply could reasonably be expected to have or cause a
material adverse effect on the operations of Company) or the FCC. Purchaser
further represents and warrants that it is an "accredited investor" within
the meaning of Rule 501 under Regulation D of the Securities Act, has
received a copy of Company's Information Statement dated within 10 calendar
days of the date of this Agreement disclosing certain risks regarding
investment in the Company's securities as well as other information
pertaining to the Company's business.
ARTICLE 3. COMPANY'S REPRESENTATIONS AND WARRANTIES
Company represents and warrants that:
3.1. LEGAL EXISTENCE AND POWER. Company (a) is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware, and (b) has all requisite corporate power to execute,
deliver and perform this Agreement, and (c) has all requisite corporate
power to issue and deliver the Warrants, to execute, deliver and perform
the Warrant Certificates (evidencing the Warrants), and to issue and
deliver the Warrant Shares (if and when any Warrants
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are exercised and upon payment of the purchase price therefor). The
Articles of Incorporation of Company (as amended from time to time prior to
the effective date hereof) are attached as Exhibit A.
3.2. AUTHORIZATION; NON-CONTRAVENTION. Company has duly authorized
each of the following by all requisite actions thereof: (a) the execution,
delivery and performance of this Agreement, and (b) the issuance and
delivery of the Warrants, and (c) the execution, delivery and performance
of the Warrant Certificates, and (d) the issuance and delivery of the
Warrant Shares upon any exercise of the Warrants and payment of the
purchase price therefor. None of the actions or activities by Company the
authorization of which is described in the first sentence of this Section
(when performed by Company) will violate, breach or cause a default under
(or will require any consent that has not been obtained under) any
applicable law or regulation (including the laws, regulations and orders of
and/or administered by the FCC or any State PUC), the Organic Documents of
Company, any voting or other equity-related agreements, any other material
agreements or instruments, any order, injunction or decree of any court or
governmental authority, or any permit, authorization or license that (with
respect to each of the foregoing items, as applicable) Company is a party
to, Company is bound by or Company operates pursuant to. The resolutions of
Company's Board of Directors authorizing the actions described in the first
sentence of this Section are attached as Exhibit B and are in full force
and effect as of the effective date hereof.
3.3. EXECUTION, DELIVERY AND BINDING EFFECT. This Agreement and
the Warrant Certificates have been duly executed and delivered by Company.
This Agreement, the Warrant Certificates and the Warrants constitute valid
and binding obligations of Company enforceable against Company in
accordance with their terms except as (a) the enforceability hereof or
thereof may be limited by applicable bankruptcy, insolvency or similar laws
affecting creditors' rights generally and (b) the availability of equitable
remedies may be limited by equitable principles of general applicability.
3.4. BROKER AND FINDER FEES. Company has not dealt with any
broker, finder, investment bank or other advisor in connection with the
issuance and sale of the Warrants or Warrant Shares, and no broker, finder,
investment banking or advisory fee or commission has been or will be
payable by Company with respect to the issuance and sale of the Warrants or
the Warrant Shares.
3.5. OFFER AND SALE OF SECURITIES. Assuming the truth of the
representations and warranties of the Purchaser set forth in Article 2 as
of the date hereof and as of the date of exercise of the Warrants and
acquisition of the Warrant Shares, then the offer, sale and issuance of the
Warrants complied with or are exempt from, and the issuance of the Warrant
Shares pursuant to the terms hereof and thereof will comply with or will be
exempt from, the requirements of federal and applicable state securities or
"Blue Sky" laws.
3.6. CAPITALIZATION; WARRANT SHARES AS A PERCENT OF CAPITAL STOCK.
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a. Schedule 3.6 accurately and completely describes all
of the authorized, issued and outstanding shares of Capital Stock of
Company as of the date hereof. All of such outstanding shares of Capital
Stock have been validly issued and are fully paid and nonassessable.
b. There are no outstanding warrants, options,
convertible securities or other rights, agreements or arrangements under
which Company is or may be obligated (contingently or
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otherwise) to issue any Capital Stock or to purchase, redeem, retire or
otherwise acquire any Capital Stock, except (1) pursuant to this Agreement,
and (2) warrants issued to the Company's underwriters for its initial
public offering exercisable for 290,000 shares of Common Stock at an
exercise price of $16.50 per share (the "Underwriters' Warrants"), and
warrants issued to certain financial advisors exercisable for 245,000
shares of Common Stock at exercise prices of $5.63 (200,000 warrants),
$7.00 (30,000 warrants) and $9.00 (15,000 warrants) per share (the
"Advisors' Warrants"), and options issued to directors, officers, employees
and agents of Company exercisable for 1,178,622 shares of Common Stock at
exercise prices ranging from $.20 to $15.00 per share, and (3) other
warrants issued or to be issued to Lender pursuant to the Credit Agreement,
and (4) as otherwise set forth in Schedule 3.6 to the Credit Agreement. No
Person has any right of first refusal, preemptive right, anti-dilution
protection, put right, registration right, or similar right with respect to
any Capital Stock of Company, except (i) Holders pursuant to this
Agreement, and (ii) the holders of the Underwriters' Warrants which
warrants contain customary demand and piggyback registration rights, and
(iii) the holders of a portion of the Advisors' Warrants exercisable for
215,000 shares which warrants are entitled to registration rights and
anti-dilution protection and (iv) holders of other warrants issued pursuant
to the Credit Agreement. To the knowledge of Company (after diligent
inquiry), no holder of any Capital Stock is a party to any equityholder or
voting agreement with respect to any such Capital Stock.
c. The Warrant Shares (if issued as of the effective date
hereof) would constitute approximately 5.0% of the issued and outstanding
shares of Capital Stock and voting rights on a fully diluted basis assuming
9,966,572 shares are outstanding as of the date hereof, warrants and
options exercisable for up to an aggregate of 3,228,928 are outstanding as
of the date hereof excluding 690,328 shares and 1,054,037 warrants to be
issued to Lender as of the date hereof.
3.7. RESERVATION AND ISSUANCE OF WARRANT SHARES. Company has
reserved among its currently authorized but unissued shares of Common Stock
the full number of Warrant Shares deliverable upon exercise of all of the
Warrants. The Warrant Shares (when and if issued upon exercise of the
Warrants in accordance with the terms hereof) (a) will be duly authorized,
validly issued, fully paid and nonassessable, and (b) will be free from all
taxes (other than income taxes that may be imposed upon the Holder
thereof), liens (other than liens that may be created by the Holder thereof
as and to the extent permitted under this Agreement), preemptive rights,
rights of first refusal or similar rights of other equityholders of
Company.
3.8. DISCLOSURES. All information relating to or concerning
Company (and its direct and indirect Subsidiaries, if any) set forth in
this Agreement or otherwise provided to Purchaser in connection with the
transactions contemplated by this Agreement is true, correct and complete
in all material respects, and Company has not omitted to state any material
fact necessary in order to make the statements made herein or therein (in
light of the circumstances under which there were made) not misleading.
3.9. ACKNOWLEDGMENT REGARDING PURCHASER'S PURCHASE OF THE
WARRANTS. Company acknowledges and agrees that (a) Purchaser is acting
solely in the capacity of an arm's length purchaser with respect to this
Agreement and the transactions contemplated hereby, and (b) Company has
been advised by legal counsel in connection herewith, and (c) Purchaser is
not acting as a financial advisor or fiduciary of Company (or in any
similar capacity) with respect to this Agreement or the transactions
contemplated hereby, and (d) any advice given by Purchaser or any of
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its representatives or agents in connection with this Agreement and the
transactions contemplated hereby is merely incidental to Purchaser's
purchase of the Warrants.
ARTICLE 4 . THE WARRANTS AND WARRANT SHARES
4.1. WARRANT CERTIFICATES.
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a. Form of Certificate; Registration Among Company's
Records. The Warrants shall be evidenced by one or more Warrant
Certificates, each of which will be substantially in the form of Exhibit C
with the applicable legend specified on Exhibit D (but such certificates
shall incorporate such changes therein as may be required from time to time
to reflect any adjustments made pursuant to Article 5, and the legend
thereon shall be modified or removed from time to time to reflect the
applicable requirements of the Securities Act). Each Warrant Certificate
shall be uniquely numbered, shall identify the record Holder thereof, and
shall be registered on the books and records of Company in substantially
the same manner as other equity interests of Company.
b. Exchange and Transfer of Certificates. A Warrant
Certificate (and the Warrants evidenced thereby) may be exchanged or
(subject to compliance with the applicable requirements hereof) may be
transferred from time to time at the option of the Holder thereof. Upon
surrender of any such Warrant Certificate to Company, then Company shall
issue and deliver to (or in accordance with the written instructions of)
such Holder one or more new Warrant Certificates evidencing in the
aggregate the same number of Warrants.
c. Missing and Mutilated Certificates. If any Warrant
Certificate is lost, stolen, mutilated or destroyed, then Company (upon
request of the registered Holder thereof) shall issue and deliver to (or in
accordance with the written instructions of) such Holder one or more
replacement Warrant Certificates evidencing in the aggregate the same
number of Warrants. Company's obligation under this Clause is conditioned
upon its receipt of reasonably satisfactory evidence of such loss, theft,
mutilation or destruction.
d. Authorization of Certificate Signer. Any Warrant
Certificate may be signed on behalf of Company (and delivered to the Holder
entitled thereto) by any person who, on the actual date of execution of
such Warrant Certificate, is a proper officer of Company to sign such
Warrant Certificate even though (1) on the date of execution of this
Agreement such person was not such an officer, and/or (2) on the date of
delivery of such Warrant Certificate such person has ceased to serve as
such officer of Company.
4.2. EXERCISE OF WARRANTS.
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a. Exercise Period. The Warrants are exercisable at any
time and from time to time after the effective date hereof and prior to
11:59 p.m. (Eastern Time) on March 31, 2011 (as such period may be extended
from time to time by mutual agreement of the Holders and Company, "Exercise
Period"), at which time any unexercised Warrants shall expire.
b. Method of Exercise; Cashless Exercise. A Holder of any
Warrant Certificate may exercise any such Warrants from time to time during
the Exercise Period to purchase Warrant
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Shares upon (1) the surrender of such Warrant Certificate evidencing such
Warrants, and (2) the payment of the applicable Exercise Price in cash, by
certified or cashier's check payable to the order of Company or by wire
transfer to Company. As an alternative to paying such Exercise Price (or
any portion thereof) in cash, a Holder may instead elect to effect a
cashless exercise pursuant to which such Holder will receive in exchange
for such tendered Warrants an amount of Warrant Shares determined by
multiplying (a) the number of Warrant Shares into which such Holder would
otherwise be entitled as a result of such exercise by (b) a fraction (i)
the numerator of which is the difference between the then Current Market
Price per Warrant Share and the Exercise Price then in effect and (ii) the
denominator of which is the then Current Market Price per Warrant Share.
Such surrender and payment must occur at an office of Company or at such
other address as Company may specify in writing to the then registered
Holder of such Warrant Certificate.
c. Issuance of Warrant Shares Upon Exercise. Upon
surrender of any Warrant Certificate and payment of the applicable Exercise
Price (as described above in this Section), then Company shall issue, sell
and deliver to or upon the instructions of the Holder of such Warrant
Certificate and/or its designee one or more certificates evidencing in the
aggregate the number of Warrant Shares represented by such Warrant
Certificate that are then being purchased (each of which Warrant Shares
shall be validly issued, fully paid and nonassessable). Any persons 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 exercise of such Warrants.
If less than all of the Warrants evidenced by a Warrant Certificate are
exercised at any time prior to the last day of the Exercise Period, then
Company shall issue to such Holder (or its designee) one or more new
Warrant Certificates evidencing the remaining number of Warrants evidenced
by such Warrant Certificate that are not then exercised by Holder.
d. Rights of a Holder of Warrant Shares Upon Exercise.
Upon any exercise of Warrants by a Holder entitled thereto in accordance
with and as provided under this Agreement, the Holder of such issued
Warrant Shares shall be entitled to all of the rights and benefits of a
holder of Common Stock under the Organic Documents of Company as well as
the rights and benefits of a Holder of Warrant Shares under this Agreement
(notwithstanding any provision of such Organic Documents to the contrary).
To the extent that the rights and benefits of a holder of Capital Stock
under the Organic Documents are inconsistent with or less favorable than
the rights and benefits of a Holder of Warrant Shares under this Agreement,
then the terms and provisions of this Agreement shall control and govern
with respect to the rights and benefits of such Holder.
4.3. TRANSFERS OF WARRANTS AND WARRANT SHARES.
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a. General Transferability. Except as otherwise expressly
provided herein, upon compliance with any applicable requirements under the
Securities Act and the laws, regulations and orders of and/or administered
by each State PUC (to the extent failure to so comply could reasonably be
expected to have or cause a material adverse effect on the operations of
Company) or the FCC, then the Warrants, the corresponding Warrant
Certificates and the Warrant Shares may be transferred by a Holder from
time to time in whole or in part upon complying with the applicable
restrictions under this Section (but without the necessity of otherwise
obtaining any consent of Company).
b. Treatment of Holder Prior to Notice of Transfer. Prior
to receiving notice of any such transfer (either from such Holder or from
such transferee), Company shall be otherwise
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entitled to treat such known Holder as the Holder of record hereunder for
purposes of giving and receiving notices and for purposes of exercising
rights hereunder.
c. Rights of a Subsequent Holder. Unless otherwise
limited or restricted pursuant to the document of transfer, then a
subsequent Holder of Warrants, Warrant Certificates or Warrant Shares
hereunder shall be entitled to all of the rights and benefits of the
transferring Holder under this Agreement and under the Organic Documents.
4.4. REGISTRATION AND RELATED RIGHTS.
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a. Incidental Registration in a Public Offering. Each
Holder of Warrant Shares and each Holder of Warrants shall have the right
to require Company to include all or (at such Holder's election) any
portion of such Warrants and the Warrant Shares purchasable upon exercise
of any such Warrants in any Public Offering of Company's securities, other
than in connection with a merger or pursuant to a Form X-0, Xxxx X-0 or
other comparable or successor registration statement.
Company shall give written notice to each Holder of Warrants and
each Holder of Warrant Shares (at each such Holder's last known address as
it appears on Company's books and records) at least 30 days prior to the
initial filing of a registration statement pertaining to any Public
Offering. In addition, Company shall also notify such Holders promptly
after the occurrence of any of the following events: (i) the initial filing
of a registration statement with the Commission pertaining to any Public
Offering, or (ii) any amendment, supplement or modification to any
registration statement for a Public Offering by Company (other than
amendments, supplements and modifications that occur automatically through
incorporation by reference as a result of subsequently prepared publicly
available materials), or (iii) any withdrawal of any registration statement
for a Public Offering by Company. Once any such registration statement is
declared effective by the Commission, then Company may not amend or modify
it without providing each Holder of Warrants and each Holder of Warrant
Shares with written notice thereof at least 2 Business Days prior to filing
any such amendment or modification with the Commission.
In connection with any such Public Offering, Company shall enter
into an underwriting agreement with one or more underwriters that shall
provide, among other things, that the underwriters shall offer to purchase
at the closing of such Public Offering all of the Warrant Shares and all of
the Warrants (or such lesser portion thereof as any Holder may request) at
the price paid by the underwriters for the Capital Stock (or if a security
convertible into or exchangeable for, or rights to purchase, Capital Stock,
then the conversion, exchange or purchase price for the Capital Stock
provided for by such security less the conversion, exchange or exercise
premium on the date of such offering) sold by Company and/or any selling
shareholders (less, with respect to Warrants, the applicable Exercise Price
then in effect). Notwithstanding the foregoing, if the underwriters shall
advise Company in writing that, in their experience and professional
opinion arrived at in good faith based upon existing market conditions,
inclusion of such number of Warrant Shares (together with the shares of
Capital Stock requested for registration by any other selling
equityholders) will adversely affect the price or distribution of the
securities to be offered in such Public Offering solely for the account of
Company, then (1) Company shall promptly furnish each such Holder with a
copy of such written advice by the underwriters, and (2) such Holders shall
then have the right to include only such number of Warrant Shares and
Warrants that such advice by the underwriters indicates may be distributed
without adversely affecting the distribution of the securities solely for
Company's
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account. As among Holders of Warrant Shares and/or Warrants, such
availability for inclusion in the registration for such Public Offering
shall be allocated pro rata based upon the total number of Warrant Shares
owned or purchasable by such Holder. As between such Holders and any other
holders of Capital Stock requesting to be included in such Public Offering,
priority for inclusion in the registration for such Public Offering shall
be allocated pro rata among the Holders of Warrant Shares and Warrants and
the other holders of securities entitled to incidental or piggyback
registration rights.
In connection with any Public Offering, provided that all other
holders of equity interests of Company are subject to identical (or more
restrictive) restrictions with respect to their equity interests, then each
Holder of Warrants and each Holder of Warrant Shares shall agree to refrain
from selling or otherwise transferring (other than to a Holder-Affiliated
Transferee) any Warrant Shares not included in such Public Offering for a
period of time (not to exceed 180 calendar days after the effective date of
the registration statement for such Public Offering) as may be appropriate
under the circumstances and reasonably requested by Company and the
underwriters for such offering.
b. Demand Registration. In addition to any other
registration rights to which any Holder is entitled, at any time and from
time to time after the date hereof, Company (upon each request of Holders
of at least 50% of the Warrant Shares and Warrants) shall prepare, shall
file with the Commission and shall use its best efforts to cause to become
effective as promptly as reasonably possible a registration statement (on
Form S-3 or any successor form, if available) covering such number of
Warrant Shares owned or then purchasable as is requested by such Holders.
Notwithstanding the foregoing, Company shall not be required to so prepare
and file upon the demand of such Holders either (a) more than two (2) such
registration statements that are declared effective by the Commission and
maintained in effect by Company for at least 90 consecutive calendar days
and are not on a Form S-3 (or any successor form), or (b) any such
registration statement within the first 180 calendar days after the closing
of a Public Offering in which 50% or more of the Warrant Shares and
Warrants were included, or (c) any registration statement if the
anticipated gross proceeds of the Public Offering is less than the lesser
of $1,000,000 or the proceeds realized by registering all Warrants and
Warrant Shares then held by Holders.
In connection with any such demand registration, Company shall use
its best efforts to engage (or, at Holders' request, shall use its best
efforts to assist Holders in engaging) one or more underwriters to purchase
on a best-efforts or a firm-offer basis the Warrant Shares owned or then
purchasable at the price at which such Warrant Shares are to be resold
under such registration statement less the underwriters' discount (less,
with respect to Warrants, the applicable Exercise Price then in effect).
The registration statement shall also provide that sales of the Warrant
Shares may be made by dealers, on an exchange if listed, directly to
purchasers or in any other manner. No such registration statement filed
pursuant to this demand registration provision (without the consent of
Holders of at least 50% of the total Warrant Shares and Warrants) may
relate to any securities other than the Warrant Shares (other than the
underwriters' warrants and the advisors' warrants existing as of the date
hereof), and no other securities (other than the underwriters' warrants and
the advisors' warrants existing as of the date hereof) may be sold
incidentally to any such underwritten public offering of Warrant Shares so
registered.
- 8 -
In connection with any such demand registration, Company shall
keep effective and maintain the registration, qualification, approval or
listing covering the Warrant Shares for a period of at least 90 consecutive
calendar days (or in the event such registration is on Form S-3 or any
successor form, on a continuous basis). Company from time to time shall
amend or supplement the prospectus and registration statement used in
connection with any such registration to the extent necessary to comply
with applicable law (including to reflect additional information relating
to the plan of distribution), and shall immediately advise each Holder if
any such prospectus or registration statement does not so comply and/or if
any stop order or similar order is issued or threatened or any request for
amendment or supplement is received from any regulatory agency. Company
shall make every reasonable effort to prevent the issuance of any stop
order and, if any stop order is issued, to obtain the lifting thereof at
the earliest possible moment. Company shall comply with all other
applicable laws in connection with any offering of Warrant Shares and will
promptly make available an earnings statement in accordance with Section
11(a) of the Securities Act and the regulations promulgated thereunder.
c. Holders Entitled to Equivalent Rights. Except for the
underwriters' warrants and the advisors' warrants existing as of the date
hereof, if Company has otherwise granted or hereafter grants to any Person
any other or additional registration rights with respect to any securities
of Company (or similar registration rights with any more favorable or less
restrictive terms), then Company will promptly notify each Holder of
Warrants and each Holder of Warrant Shares, and such registration rights
(or the more favorable or less restrictive terms thereof) will be deemed
automatically to be incorporated into this Agreement (without the necessity
of any other action by the parties hereto) as additional registration
rights that each Holder is entitled to exercise.
d. Sales Through Underwriters and Dealers. Company shall
effect the registration or qualification of the Warrant Shares, and the
notification to or approval of any governmental authority under any federal
or state law, and the listing with any securities exchange on which the
Common Stock is listed, in each instance as may be reasonably necessary to
permit the sale of Warrant Shares through underwriters, and, in the case of
a demand registration hereunder, also through dealers, on an exchange,
directly to purchasers or in any other manner.
e. Certain Additional Agreements in Connection with
Registrations. In connection with any Public Offering, Company (1) shall
enter into, execute and deliver all agreements and other instruments and
documents (including opinions of counsel, comfort letters and underwriting
agreements) that are customary and appropriate with such public offerings,
and (2) shall cooperate with any underwriters to facilitate sales of the
Warrant Shares to the same extent as if such Warrant Shares were being
offered directly by Company, and (3) shall furnish each Holder such numbers
of copies of registration statements and prospectuses (and amendments and
supplements thereto) as such Holder may reasonably request, and (4) shall
take all such other actions as are necessary or advisable to facilitate the
registration and sale of such Warrant Shares. In connection with any Public
Offering as to which any Holder is requesting registration of Warrant
Shares, each such Holder (i) shall provide Company with such information
regarding itself, himself or herself as may be reasonably required by
Company, and (ii) shall reasonably cooperate with Company in the
preparation of the registration statement, and (iii) shall enter into,
execute and deliver all agreements and other instruments and documents that
are customary and appropriate for selling equityholders to execute in
connection with a secondary public offering.
- 9 -
f. Indemnification by Company. In connection with any
offering of Warrant Shares pursuant to the provisions of this Section,
Company hereby indemnifies and holds harmless each Holder of Warrants and
each Holder of Warrant Shares (and the directors, officers and controlling
Persons of each such Holder), each other Person (if any) who acts on behalf
of or at the request of any such Holder, each underwriter, and each other
Person who participates in the offering of Warrant Shares (collectively,
for purposes of this Clause, the "Indemnified Parties") against any losses,
claims, damages or liabilities, joint or several, to which such Indemnified
Party may become subject under the Securities Act or any other statute or
at common law, insofar as such losses, claims, damages or liabilities (or
actions in respect thereof) arise out of or are based upon either of the
following:
(i) any untrue statement or alleged untrue
statement of any material fact contained (on the
effective date thereof) in any registration statement (or
any amendment thereto) under which such Warrant Shares
were registered under the Securities Act, or the omission
or alleged omission therefrom of a material fact required
to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they
were made, not misleading, or
(ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary
prospectus or prospectus (or any amendment or supplement
thereto) or the omission or alleged omission therefrom of
a material fact necessary to make the statements therein,
in light of the circumstances under which they were made,
not misleading, or
(iii) any violation by Company of any federal or
state law, rule or regulation applicable to Company in
connection with any registration statement or prospectus
(or any amendment or supplement thereto).
Company shall also reimburse each such Indemnified Party for any legal or
any other expenses reasonably incurred in connection with investigating or
defending any such loss, claim, damage, liability or action.
Notwithstanding the foregoing, Company shall not be liable to an
Indemnified Party in any such case to the extent that any such loss, claim,
damage or liability arises out of or is based upon any untrue or alleged
untrue statement or omission or alleged omission made in such registration
statement, preliminary prospectus, prospectus, or amendment or supplement
in reliance upon and in conformity with written information furnished to
Company through an instrument duly executed by such Indemnified Party
specifically stating that it is expressly for use therein. Such indemnity
shall remain in full force and effect and shall survive the transfer of
such Warrants or Warrant Shares by any such Holder.
g. Indemnification by Holders. Each Holder whose Warrant
Shares are sold under any registration statement pursuant to this Section
(by inclusion of such Warrant Shares thereunder) shall indemnify and hold
harmless Company (the officers, directors and controlling Persons thereof),
each other Holder of Warrants and each other Holder of Warrant Shares (and
the directors, officers and controlling Persons of each such Holder), each
other Person (if any) who acts on behalf of or at the request of Company or
such other Holder, each underwriter, and each other Person who participates
in the offering of Warrant Shares (collectively, for purposes of this
Clause, the "Indemnified Parties") against any losses, claims, damages or
liabilities, joint or several, to which
- 10 -
such Indemnified Party may become subject under the Securities Act or any
other statute or at common law, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon
either of the following:
(i) any untrue statement or alleged untrue
statement of any material fact contained (on the
effective date thereof) in any registration statement (or
any amendment thereto) under which such Warrant Shares
were registered under the Securities Act at the request
of such Holder, or the omission or alleged omission
therefrom of a material fact required to be stated
therein or necessary to make the statements therein, in
light of the circumstances under which they were made,
not misleading, or
(ii) any untrue statement or alleged untrue
statement of a material fact contained in any preliminary
prospectus or prospectus (or any amendment or supplement
thereto) or the omission or alleged omission therefrom of
a material fact necessary to make the statements therein,
in the light of the circumstances under which they were
made, not misleading;
but only to the extent (with respect to either of the foregoing Clauses)
that such untrue statement or alleged untrue statement or omission or
alleged omission was made in such registration statement, preliminary
prospectus, prospectus, amendment or supplement in reliance upon and in
conformity with written information furnished to Company through an
instrument duly executed by such Holder specifically stating that it is
expressly for use therein. Each such Holder shall also reimburse each such
Indemnified Party for any legal or any other expenses reasonably incurred
in connection with investigating or defending any such loss, claim, damage,
liability or action. Notwithstanding the foregoing, no such Holder shall be
liable to any Indemnified Party in any such instance to the extent (a) such
loss, claim, damage or liability relates to any untrue statement or
omission, or any alleged untrue statement or omission, made in a
preliminary prospectus but eliminated or remedied in a final prospectus,
and (b) a copy of the final prospectus was not delivered to the Person
asserting the claim at or prior to the time required by the Securities Act
in an instance for which delivery thereof would have constituted a defense
to the claim asserted by such Person and the failure to so deliver such
prospectus was not the result of the negligence of such Holder.
h. Certain Notices and Other Rights Relating to
Indemnification. A party from whom indemnity may be sought pursuant to the
provisions of this Section shall not be liable for such indemnity with
respect to any claim as to which indemnity is sought unless the party
seeking such indemnity shall have notified such indemnifying party in
writing of the nature of such claim promptly after such indemnified party
becomes aware of the assertion thereof. Notwithstanding the foregoing, the
failure to so notify such indemnifying party shall not relieve such party
from any liability which it may have to such indemnified party otherwise
than on account of the provisions of this Section or if the failure to give
such notice promptly shall not have been prejudicial to such indemnifying
party. No indemnifying party shall be liable for any compromise or
settlement of any such action effected without its consent. No indemnifying
party (in the defense of any such claim or suit), without the consent of
each indemnified party, shall consent to any compromise or settlement that
does not include as an unconditional term thereof the giving by the
claimant to such indemnified party of a complete release from all liability
in respect of such claim or suit.
- 11 -
i. Contribution. In order to provide for just and
equitable contribution in circumstances in which the indemnification
provided for in this Section for any reason is held to be unenforceable
although applicable in accordance with its terms, Company and the Holders,
as amongst themselves, shall contribute to the losses, claims, damages,
liabilities and expenses described herein in such proportions so that the
portion thereof for which any Holder shall be responsible shall be limited
to the portion determined by a court or the parties to any settlement to be
directly attributable to an untrue statement of a material fact or an
omission to state a material fact in a registration statement, preliminary
prospectus, prospectus or amendment or supplement thereto in specific
reliance upon and in conformity with written information furnished to
Company through an instrument duly executed by such Holder specifically
stating that it is expressly for use therein, and Company shall be
responsible for the balance. Notwithstanding the foregoing, the liability
of each Holder shall be limited to the net proceeds received by such Holder
from the sale of the Warrant Shares sold by it thereunder. Company and the
Holders agree that it would not be just and equitable if their respective
obligations to contribute were to be determined by pro rata allocation, by
reference to the proceeds realized by them or in any manner which does not
take into account the equitable considerations set forth in this Clause.
4.5. RIGHTS UPON EQUITY DISPOSITIONS, EQUITY REDEMPTIONS AND
-------------------------------------------------------
NON-SURVIVING TRANSACTIONS.
--------------------------
a. Offer to Purchase. In connection with any Equity
Disposition, any Equity Redemption or any Non-Surviving Transaction,
Company or the acquiror in any such transaction shall also offer to
purchase on the terms set forth below all of the Warrant Shares and all of
the Warrants. If an Equity Disposition or an Equity Redemption is of less
than all of the Capital Stock then outstanding, then the number of Warrants
and Warrant Shares subject to purchase under this Section shall be reduced
proportionately (to the nearest whole number), and such reduced number will
be allocated pro rata among all Holders desiring to tender Warrant Shares
or Warrants in connection with such transaction.
b. Notice of Proposed Transaction. Company shall give
written notice to each Holder of Warrants and each Holder of Warrant Shares
(at each such Holder's last known address as it appears on Company's books
and records) promptly after an agreement in principle is reached with
respect to any Equity Disposition, any Equity Redemption or any
Non-Surviving Transaction (but, in any event, at least 30 calendar days
prior to the closing of any such transaction).
c. Purchase Price. If a Holder accepts the offer under
this Section, then (as a condition to consummation of such Equity
Disposition, Equity Redemption or Non-Surviving Transaction) either Company
or such acquiror shall purchase (either before or concurrently with the
consummation of such transaction) all Warrants and Warrant Shares tendered
by a Holder thereof at an aggregate price equal to the product of (1) the
aggregate consideration received by all sellers and transferors in
connection with such transaction or series of related transactions
(including the consideration to be received by the holders of Warrants and
Warrant Shares pursuant to this provision) and (2) a fraction the numerator
of which is the number of Warrants and Warrant Shares tendered for purchase
in connection with such transaction or series of related transactions and
the denominator of which is the sum of the number of shares of Common Stock
outstanding immediately prior to such transaction or series of related
transactions plus the number of Warrants
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then outstanding (which product shall be net of the applicable Exercise
Price then in effect with respect to Warrants tendered but not with respect
to Warrant Shares tendered).
d. Payment of Purchase Price. Company (either before or
concurrently with the consummation of such transactions) shall distribute
to the respective Holders of Warrants and Warrant Shares (or to such other
Person as such Holder may direct Company in writing) the applicable
purchase price for each tendered Warrant Share and Warrant. Such payment,
except as otherwise provided in this Clause, shall be in immediately
available funds (i.e., in cash, by certified or cashier's check, or by wire
transfer) or by any other means acceptable to such Holder. In addition,
Company shall also deliver to each such Holder (as and to the extent
applicable) a return or re-issuance of Warrants and Warrant Shares not
purchased in connection with any such transaction. To the extent that any
consideration for such transaction is payable by such acquiror in cash, in
publicly traded and readily marketable securities (with reasonable
liquidity and no restrictions on transfer) or evidence of indebtedness from
an obligor who (in the commercially reasonable opinion of Holders) is
highly creditworthy, then the purchase price payable to Holders may be in
the same form of consideration; otherwise, the purchase price (or the
remaining balance thereof) payable to Holders shall be in immediately
available funds. Notwithstanding the foregoing, in connection with any such
Equity Disposition, Equity Redemption or Non-Surviving Transaction, each
Holder may elect (at its option) to receive the purchase price payable
under this Section pro rata in kind in the same form of consideration as is
to be received by Company or such selling equityholder.
e. Intentionally Blank.
-------------------
4.6. REPURCHASE OFFERS.
-----------------
a. Offer to Repurchase. Within 30 calendar days following
the occurrence of any Repurchase Condition, Company and each Borrower
(jointly and severally) shall make a written offer (each, a "Repurchase
Offer") to repurchase at the Repurchase Price up to all of the Warrant
Shares and Warrants owned by each Holder. Each such Repurchase Offer (among
other things) shall indicate the date of occurrence of the relevant
Repurchase Condition and shall provide a calculation of the Current Market
Price per Warrant Share (together with a copy of documentation supporting
such calculation). Each such Repurchase Offer shall be delivered by Company
to each such Holder entitled thereto by first-class mail to the last known
address of such Holder on the books and records of Company.
b. "Repurchase Condition". A "Repurchase Condition" will
be deemed to occur (1) at any time after January 1, 2005 upon a written
request from Holders of at least 50% of the outstanding Warrants and
Warrant Shares, and (2) upon any full repayment of the indebtedness under
the Loan Documents, and (3) upon the occurrence of any Event of Default
under and as defined in the Credit Agreement, and (4) upon the execution of
any definitive agreement by Company or holders of Capital Stock to engage
in an Equity Disposition or a Non-Surviving Transaction (or any amendment
thereto), and (5) upon any attempt by any Holder to exercise the Warrants
in accordance with the terms hereof at a time when Company is legally,
regulatorily or otherwise not authorized or permitted to issue the
corresponding Warrant Shares, provided, however, that Company shall be
permitted a reasonable period of time (not to exceed 30 calendar days) to
prepare any state blue sky filings, information statements, Nasdaq listing
applications or other necessary securities documents to procure the
necessary private placement exemptions from registration and Nasdaq
approvals in
- 13 -
connection with any such exercise without a "Repurchase Condition" being
deemed to have occurred.
c. "Repurchase Price". The "Repurchase Price" for each
Warrant and Warrant Share in connection with any such Repurchase Offer will
be the Current Market Price per Warrant Share, less with respect to
Warrants (but not Warrant Shares) the applicable Exercise Price then in
effect.
d. Acceptance of Repurchase Offer. At any time within 30
calendar days after a Holder receives a Repurchase Offer (together with a
final written valuation report), each such Holder may accept such
Repurchase Offer by agreeing to tender for repurchase by Company all or any
portion of such Holder's Warrant Shares and Warrants.
e. Payment of Purchase Price. Within 30 calendar days of
receiving any such agreement to tender Warrant Shares or Warrants, Company
and each Borrower (jointly and severally) shall distribute to each such
Holder (or to such other Person as such Holder may direct Company in
writing) the applicable Repurchase Price for each such tendered Warrant
Share and Warrant in cash, by certified or cashier's check, by wire
transfer or by any other means acceptable to such Holder (concurrently with
which distribution, such Holder shall deliver to Company the Warrant
Certificates and/or Warrant Shares). In addition, Company shall also
deliver to each such Holder (as and to the extent applicable) a return or
re-issuance of Warrants and Warrant Shares not tendered for repurchase.
Notwithstanding the foregoing, with respect to the Repurchase Condition
occurring concurrently with any full repayment of the indebtedness under
the Loan Documents under Clause "b(2)" above, unless the Holders otherwise
consent, Company and each Borrower (jointly and severally) shall establish
a cash escrow of the Repurchase Price with a "well capitalized" depository
institution concurrently with any such full repayment of the indebtedness
under the Loan Documents (but such cash escrow shall be returned to Company
if the Holders elect not to accept such Repurchase Offer within the time
period set forth in Section 4.6.d).
4.7. CUMULATIVE RIGHTS. The rights of Holders upon the occurrence
of events set forth in this Article 4 are cumulative. If more than one such
event occurs simultaneously (or the time period for exercising any such
rights overlaps), then each Holder can elect which rights (if any) to
exercise and any prior inclusion or surrender of Warrants or Warrant Shares
with respect to a transaction that has not yet closed may be rescinded by
such Holder during such overlapping period in order to exercise rights
arising under any concurrently occurring event.
4.8. EXERCISE OF RIGHTS CONDITIONED UPON CLOSING OF TRANSACTION
INVOLVED. The rights of Holders to have Warrants or Warrant Shares included
and sold in any Public Offering or purchased in any Equity Disposition or
Non-Surviving Transaction pursuant to this Article 4 are conditioned upon
the consummation of the proposed transaction. Neither Company nor any
equityholder involved in any such proposed transaction shall have any
obligation to Holders to consummate any such proposed transaction once an
agreement in principle or decision to proceed with respect thereto is
reached, except as expressly provided in this Article 4.
4.9. PAYMENT OF TAXES AND EXPENSES. Company will pay all expenses
(including reasonable costs and expenses of Holders and one legal counsel
thereto, but excluding underwriter's and/or broker's discounts and
commissions), taxes (other than income taxes) and other reasonable
- 14 -
fees and charges attributable to the issuance, registration, qualification,
notification, approval, listing, transfer pursuant to Section 4.5, and/or
repurchase of the Warrants, the Warrant Certificates and the Warrant
Shares.
4.10. RESERVATION AND ISSUANCE OF WARRANT SHARES. Company at all
times shall reserve (and keep free from preemptive rights or similar rights
of equityholders of Company) among its authorized but unissued shares of
Capital Stock the full number of Warrant Shares deliverable upon exercise
of all of the Warrants. Company covenants that all Warrant Shares (when and
if issued upon exercise of the Warrants in accordance with the terms hereof
including receipt of the Exercise Price) will be duly authorized, validly
issued, fully paid and nonassessable (and will be free from all taxes,
liens, charges and security interests with respect to the issuance
thereof). Before taking any action that could cause an adjustment pursuant
to Article 5, Company will take any corporate action that (in the opinion
of its counsel) may be necessary or appropriate in order that Company may
validly and legally issue fully paid and nonassessable Warrant Shares at
the applicable Exercise Price as so adjusted.
4.11. CORRECTIVE ADJUSTMENTS. Company hereby acknowledges that
Purchaser has relied upon, among other things, the representation and
warranty set forth in Section 3.6 regarding the outstanding Capital Stock
of Company and the rights to acquire Capital Stock of Company as of the
date of this Agreement. If it is later determined that the representation
and warranty set forth in Section 3.6 is untrue or inaccurate such that the
outstanding Capital Stock or rights to acquire Capital Stock are greater
that the amount disclosed therein, then Company shall notify each Holder in
writing within 10 Business Days of discovering such inaccuracy and shall
promptly prepare, execute and deliver to the Holders such additional
documents and certificates as are necessary to equitably adjust the
Exercise Price and/or Warrants and Warrant Shares deliverable upon exercise
of all Warrants for the benefit of Holders. Such adjustment shall include
the issuance of additional Warrants and/or the reduction in Exercise Price
of the Warrants, as approved in writing by Holders of a majority of the
Warrants.
4.12. LISTING OF SHARES. If Company lists any shares of Common
Stock on any national securities exchange, inter-dealer quotation system or
other market, then Company (at its expense) will use its best efforts to
cause the Warrant Shares to be approved for listing, subject to notice of
issuance, and will provide prompt notice to each such exchange, system or
other market of the issuance thereof from time to time.
4.13. LISTS OF HOLDERS. Company (from time to time upon the
request of any Holder) will provide such Holder with a list of the
registered Holders and their respective addresses.
4.14. STATEMENT OF WARRANT INTEREST. Company (from time to time
upon the request of any Holder) will provide such Holder with a statement
of such Holder's interest in Company containing the following information
(as applicable): (a) the number of Warrants then owned of record by such
Holder, and (b) the number of Warrant Shares purchasable upon the exercise
of each Warrant then owned of record by such Holder, and (c) the Exercise
Price of each Warrant then owned of record by such Holder, and (d) the
number of Warrant Shares then owned of record by such Holder, and (e) a
chart describing (in reasonable detail) the then current capitalization of
Company.
- 15 -
4.15. RIGHT OF INSPECTION. At any time and from time to time
during normal business hours (and upon reasonable prior written notice)
Company will permit an agent or representative of any Holder (at such
Holder's cost and expense) (i) to visit, and (ii) to examine and make
copies of and abstracts from the books and records of Company and its
Subsidiaries, and (iii) to discuss the affairs, finances, and accounts of
Company and its Subsidiaries with any of their respective officers,
directors and independent accountants, subject in all cases to the
confidentiality requirements of Section 6.1(d).
4.16. ATTENDANCE AND PARTICIPATION RIGHTS. So long as the Warrants
and Warrant Shares of Holders (together will all other Capital Stock owned
by any Holder) collectively represent 1% or more of the Common Stock (on a
fully diluted basis), then a representative of Holders shall be entitled
(if at any time hereafter Holders so elect) to attend each of the meetings
of Company's Board of Directors (including, each committee thereof).
Notwithstanding the foregoing, at the request of Company, representatives
of Holders may be required temporarily to leave any such meeting of the
Board of Directors if such action is necessary to preserve Company's
attorney-client privilege with respect to such meetings or the information
disseminated therein. In addition, at all times while any Holder owns
Warrant Shares (together with all other shares of Capital Stock owned by
such Holder) representing 5% or more of the issued and outstanding Common
Stock, such Holder (at its option) shall be entitled to designate a pro
rata percent of the positions on the Board of Directors (and each committee
thereof) of Company (rounded upwards to the next whole number). The Company
will cause any directors designated by a Holder to be included among the
nominees who are recommended for election as directors by management of the
Company, at each meeting of the Company's stockholders at which directors
of the Company are proposed to be elected.
4.17. COMPLIANCE WITH APPROVAL REQUIREMENTS. If any Warrants or
Warrant Shares require registration or approval of the FCC, any State PUC
or any other governmental authority (or the taking of any other action
under the laws of the United States of America or any political subdivision
thereof) before such securities may be validly issued, then Company will
use best efforts to secure and maintain such registration or approval or
will take such other action as and when necessary.
ARTICLE 5 . ANTI-DILUTION PROVISIONS
5.1. ADJUSTMENTS TO WARRANT SHARES PURCHASABLE AND EXERCISE PRICE.
------------------------------------------------------------
a. Equity Dividends, Restructurings and
Reclassifications. If Company at any time (1) declares or pays a dividend
on its outstanding Capital Stock in shares of Common Stock or other
securities of Company, or (2) subdivides its outstanding shares of Common
Stock, or (3) combines its outstanding shares of Common Stock into a
smaller number of shares, or (4) issues by reclassification of the Common
Stock other securities of Company (including any such reclassification in
connection with a merger, consolidation or other business combination in
which Company is the surviving entity), then the number and kind of Warrant
Shares purchasable upon exercise of each Warrant and the applicable
Exercise Price therefor shall be adjusted so that each Holder of a Warrant
upon exercise of such Warrant shall be entitled to receive (for the same
aggregate Exercise Price) the aggregate number and kind of Warrant Shares
or other securities of
- 16 -
Company that such Holder would have owned or would have been entitled to
receive after the occurrence of any such event had such Warrant been
exercised immediately prior to the occurrence of such event (or, if
earlier, any record date with respect thereto). Any adjustment required by
this Clause (a) shall become effective on the date of such event
retroactive to the record date with respect thereto (if any), and (b) shall
be made successively whenever any such event occurs.
b. Issuances Below Target Market Price. If Company issues
or sells any shares of Capital Stock (or rights, options, warrants or
convertible or exchangeable securities containing a right to subscribe for
or purchase shares of Common Stock) other than the Excludible Shares for no
consideration or at a price per share less than the Target Market Price per
share of Common Stock in effect immediately prior to such sale or issuance,
then the number of Warrant Shares owned and Warrant Shares thereafter
purchasable upon the exercise of each Warrant shall be automatically
increased to account for the economic effects of such transaction (and the
applicable Exercise Price for such Warrants shall be proportionately
decreased) using a standard weighted average formula approach to compute
such adjustment. If Company (i) issues or sells shares for consideration
that includes any property other than cash or (ii) issues or sells shares
together with other securities as a part of a unit at a price per unit,
then the "price per share" and the amount of consideration received by
Company for purposes of this Clause (unless Company and Holders otherwise
mutually agree) will be determined by an Independent Appraiser. In
addition, if Company and Holders are unable to agree on the amount or form
of any such adjustment, then Company will retain an Independent Appraiser
acceptable to Holders (which acceptance may not be unreasonably withheld)
that will determine the amount and form of such adjustment. Any adjustment
required by this Clause (1) shall become effective on the date of issuance
retroactive to the record date for determining equityholders entitled to
receive such issuance, and (2) shall be made successively whenever any such
event occurs.
c. Dividend and Distribution Dilution. If any dividend,
distribution or payment (whether as cash or other assets of Company) is
made after the date hereof with respect to any Capital Stock or other
equity securities of Company, other than dividends appropriately covered
under Clause "a" above, then Company (concurrently with the payment
thereof) shall make a corresponding proportionate distribution or payment
to each Holder of Warrants and/or Warrant Shares equal to such Holder's
percentage ownership of Company's outstanding Capital Stock (but, for such
purposes, treating all Warrants as though they had then been exercised).
Notwithstanding the foregoing, Company shall not be obligated to make any
such distribution or payment to a Holder (and no Holder shall be entitled
to receive such distribution or payment) to the extent that such Holder
otherwise receives actual payment of the corresponding dividend or
distribution as a holder of Warrant Shares in such class of equity
security.
d. Catchall Anti-Dilution Protection. If Company
otherwise issues any securities or instruments or engages in any
transaction an effect of which is to dilute the economic value or voting
rights of any Holder's Warrants or Warrant Shares (including the issuance
of any securities or instruments with enhanced voting rights, preemptive
rights, dividend preferences or liquidation preferences) in a manner
contrary to the intent of this Section 5.1, then Company will implement an
equitable adjustment to such Holder's interest in Company (in a manner
reasonably acceptable to such Holder) in order to account for the effects
of such transaction. Any adjustment required by this Clause shall be made
successively whenever any such event occurs. If Company and Holders are
unable to agree on the amount or form of any such equitable adjustment,
then Company will retain
- 17 -
an Independent Appraiser acceptable to Holders (which acceptance may not be
unreasonably withheld) that will determine the amount and form of such
equitable adjustment.
e. Preemptive Rights. If Company issues or sells any
shares of Capital Stock (or rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for or purchase
shares of Capital Stock), other than (i) in a Public Offering, or (ii) in
connection with acquisitions of Internet service providers or other
telecommunications companies, or (iii) in connection with the Excludible
Shares, then each Holder of Warrants and/or Warrant Shares shall be
entitled at any time during the term of this Warrant Agreement to acquire
(at the price paid by such acquiror of Capital Stock and on terms and
conditions otherwise at least as favorable as was offered to such acquiror)
an amount of additional shares of Capital Stock that would entitle such
Holder to have the same aggregate percentage of Capital Stock (on a fully
diluted basis) as such Holder had or was entitled to have immediately prior
to such transaction.
f. Rights Applicable to Shares Other than Common Stock.
If at any time (as a result of an adjustment made pursuant to this Section
5.1) a Holder becomes entitled to receive any shares of Company other than
shares of Common Stock, then thereafter the number of such other shares so
receivable upon exercise of any Warrant shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable
to the provisions with respect to the Warrant Shares contained in this
Section 5.1, and the provisions of Article 4 with respect to the Warrant
Shares shall apply on like terms to such other shares.
g. Holders Entitled to Equivalent Rights. Except for the
underwriters' warrants and the advisors' warrants existing as of the date
hereof, if Company has otherwise granted or hereafter grants to any Person
any other or additional anti-dilution protection or preemptive rights with
respect to any securities of Company (or similar protections or rights with
any more favorable or less restrictive terms), then Company will promptly
notify each Holder of Warrants and each Holder of Warrant Shares, and such
protections and rights (or the more favorable or less restrictive terms
thereof) will be deemed automatically to be incorporated into this
Agreement (without the necessity of any other action by the parties hereto)
as additional protections and rights that each Holder is entitled to
exercise.
h. Expiration of Rights Previously Subject to Adjustment.
Upon the expiration of any rights, options or warrants that resulted in
adjustments pursuant to this Section 5.1 that were not exercised, then the
Exercise Price and the number of Warrant Shares purchasable shall be
readjusted and thereafter shall be such as it would have been had it been
originally adjusted (or had the original adjustment not been required, as
applicable) as if (A) the only shares of Common Stock purchasable upon
exercise of such rights, options or warrants were the shares of Common
Stock (if any) actually issued or sold upon the exercise of such rights,
options or warrants and (B) such shares of Common Stock so issued or sold
(if any) were issuable for the consideration actually received by Company
for the issuance, sale or grant of all such rights, options or warrants
whether or not exercised; provided that no such readjustment may have the
effect of increasing the Exercise Price or decreasing the number of Warrant
Shares purchasable upon the exercise of a Warrant by an amount in excess of
the amount of the adjustment initially made in respect to the issuance,
sale or grant of such rights, options or warrants.
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5.2. NOTICE OF ADJUSTMENT. Upon any adjustment required under this
Article 5, Company (at its expense) shall mail (within 10 Business Days
after such adjustment) by first-class mail, postage prepaid, to each Holder
of Warrants and each Holder of Warrant Shares a notice of such adjustment.
Such notice shall include the following (each in reasonable detail): (i)
the number of Warrant Shares purchasable upon the exercise of each Warrant
and the Exercise Price of such Warrant after such adjustment, and (ii) a
brief statement of the facts requiring such adjustment, and (iii) the
computation by which such adjustment was made.
5.3. PRESERVATION OF PURCHASE RIGHTS UPON CERTAIN TRANSACTIONS. In
connection with any merger, consolidation, reorganization or combination of
Company with or into another Person (whether or not Company is the
surviving entity), or any sale, transfer or lease to another Person of all
or substantially all the property of Company, then Company (or such
successor or purchasing Person) shall execute an agreement in favor of each
Holder of Warrants giving such Holder the right thereafter upon payment of
the applicable Exercise Price in effect immediately prior to such action to
purchase upon exercise of each Warrant the kind and amount of securities,
cash and property that such Holder would have owned or would have been
entitled to receive after the happening of such merger, consolidation,
combination, sale, transfer or lease had such Warrant been exercised
immediately prior to such action. Such agreement shall provide for
adjustments that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Article 5. The provisions of this Section
shall similarly apply to successive mergers, consolidations, combinations,
sales, transfers or leases.
ARTICLE 6 . COMPANY'S COVENANTS
6.1. INFORMATION
a. Information Provided by Company to Other Persons.
Whether or not Company is subject to the reporting requirements of Sections
13 or 15(d) of the Exchange Act, Company will provide each Holder with a
copy of all information (including financial information) and other
communications that are sent by or on behalf of Company (i) to any class of
Company's equityholders, or (ii) to the members of Company's Board of
Directors (if and to the extent subsequently requested by Holders), or
(iii) to the Commission, subject to the confidentiality requirements set
forth in Section 6.1.d. Company shall provide such information and
communications to Holders concurrently with providing it to such third
parties.
b. Specific Additional Information. Company will
also provide each Holder written notice of (and describing in reasonable
detail) the occurrence of any of the following events:
1. Company offers or issues to any Person any
shares of Capital Stock or securities convertible into or
exchangeable for Capital Stock or any right to subscribe for or
purchase any thereof (other than in connection with the issuance
of Excludible Shares or the issuance of options exercisable for
Excludible Shares); or
2. A dissolution, liquidation or winding
up of Company; or
3. An agreement in principle is reached
and/or a letter of intent is executed with respect to any Equity
Disposition or Non-Surviving Transaction; or
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4. Company declares or makes (directly or
indirectly) any payment, dividend or distribution (in cash or
otherwise) with respect to, or incurs any liability for the
purchase, acquisition, redemption or retirement of, any Capital
Stock or as a dividend, return of capital or other payment or
distribution of any kind to any equityholder.
Each such notice shall be mailed by Company to each Holder (at such
Holder's last known address on the books and records of Company) at least
20 Business Days prior to the applicable record date of such transaction.
c. Additional Requested Information. In addition to the
information and disclosures otherwise required under this Agreement,
Company will also provide to each Holder any information reasonably
requested from time to time by such Holder relating to the operations,
business plans and/or ownership of Company, subject to the confidentiality
requirements set forth in Section 6.1.d.
d. Disclosure of Information by Holders. Each Holder will
employ reasonable procedures to treat as confidential all written,
non-public information delivered to such Holder pursuant to this Agreement
concerning the performance, operations, assets, structure and business
plans of Company that is conspicuously designated by Company as
confidential information. While other or different confidentiality
procedures may be employed by each Holder, the actual procedures employed
by such Holder for this purpose will be conclusively deemed to be
reasonable if they are at least as protective of such information as the
procedures generally employed by such Holder to safeguard the
confidentiality of such Holder's own information that such Holder generally
considers to be confidential. Notwithstanding the foregoing, each Holder
may disclose any information concerning Company in such Holder's possession
from time to time (a) to permitted participants, transferees, assignees,
pledgees and investors (including prospective participants, transferees,
assignees, pledgees and investors), but subject to a reasonable
confidentiality agreement regarding any non-public confidential information
thereby disclosed, and (b) in response to credit inquiries consistent with
general banking practices, and (c) to any federal or state regulator of
such Holder, and (d) to such Holder's Affiliates, employees, legal counsel,
appraisers, accountants, and agents, and (e) to any Person pursuant to
compulsory judicial process, and (f) to any judicial or arbitration forum
in connection with enforcing this Agreement or defending any action based
upon this Agreement or the relationship between such Holder and Company,
and (g) to any other Person with respect to the public or non-confidential
portions of any such information. Moreover, each Holder (without any
compensation, remuneration or notice to Company) may also include
operational, performance and structural information and data relating to
Company in compilations, reports and data bases assembled by such Holder
(or its Affiliates) and used to conduct, support, assist in and validate
portfolio, industry and credit research and analysis for itself and/or
other Persons; provided, however, that such Holder may not thereby disclose
to other Persons any information relating to Company in a manner that is
attributable to Company unless (1) such disclosure is permitted under the
standards outlined above in this Section or (2) Company otherwise
separately consents thereto (which consent may not be unreasonably
withheld). Notwithstanding the foregoing, each Holder agrees to comply with
applicable federal securities laws and regulations regarding dissemination,
use and/or disclosure of non-public information
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6.2. BOOKS AND RECORDS. Company and each of its Subsidiaries
shall keep and maintain satisfactory and adequate books and records of
account in accordance with generally accepted accounting principles.
6.3. NO AMENDMENTS TO ORGANIC DOCUMENTS. Without the prior written
consent of Holders representing a majority of Warrant Shares and Warrants
(which consent may not be unreasonably withheld), Company shall not permit
any amendments to or reincorporation of its Organic Documents that could
reasonably be expected to have or cause an adverse effect on the rights and
interest of Holders. Without limiting the generality of the foregoing,
without the prior written consent of Holders representing a majority of
Warrant Shares and Warrants (which consent may not be unreasonably
withheld), Company shall not establish any class of Capital Stock or issue
any shares of Capital Stock that have rights, dividends or preferences
senior to or more advantageous than the rights, dividends and preferences
of the Warrant Shares.
6.4. EXISTENCE AND GOOD STANDING. Company and each of its
Subsidiaries shall preserve and maintain its existence in good standing as
a organization under the laws of its jurisdiction of organization.
6.5. TRANSACTIONS WITH RELATED PARTIES. Without the prior written
consent of Holders representing a majority of Warrant Shares and Warrants
(which consent may not be unreasonably withheld), Company will not (and
will not permit any Subsidiary to) engage in any transaction (including
employment and compensation arrangements) with any Affiliate or other
related party other than for value received and under reasonable and
customary terms and conditions that are consistent with Company's
historical practices and at least as favorable to Company as would be
achieved in an arm's length transaction.
6.6. CONDUCT OF BUSINESS. Without the prior written consent of
Holders representing a majority of Warrant Shares and Warrants (which
consent may not be unreasonably withheld), Company (a) will continue to
engage in (and only in) businesses of the same general type as now
conducted by it, and (b) will comply, and will cause each Subsidiary to
comply, in all material respects with all applicable material laws,
regulations, and orders.
ARTICLE 7 . DEFINITIONS
7.1. DEFINITIONS. As used herein, the following terms have
the following respective meanings:
7.1.1. "Advisors' Warrants" has the meaning given to
such term in Section 3.6.
7.1.2. "Affiliate" of any Person means any other Person
that directly or indirectly controls, is controlled by or is under direct
or indirect common control with such Person. A Person shall be deemed to
"control" another Person if such first Person directly or indirectly
possesses the power to direct (or to cause the direction of or to
materially influence) the management and policies of the second Person,
whether through the ownership of voting securities, by contract or
otherwise. Without limiting the generality of the foregoing, each of the
following Persons will be deemed to be an Affiliate of a Person: (a) each
Person who owns or controls 5% or more of any class or series of any equity
interest of such Person, and (b) each member, manager, partner, director
and/or senior
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executive officer of such Person or any Affiliate thereof, and (c) any
family member or other relative of such Person or any Affiliate thereof,
and (d) any trust of which any Person or Affiliate thereof is either a
trustee or beneficiary. Notwithstanding the foregoing, No Holder shall be
deemed to be an Affiliate of Company or any Affiliate thereof.
7.1.3. "Agreement" means this Warrant Agreement, as
amended, modified and supplemented from time to time.
7.1.4. "Appraised Valuation" means, as of any relevant
date, the fair market value of a Warrant Share, a share of Common Stock or
other security or equity interest (as applicable) as determined by an
Independent Appraiser. Such Independent Appraiser will be selected by
Holders of a majority of the Warrants and Warrant Shares and approved by
Company (which approval may not be unreasonably withheld, delayed or
conditioned). Such Independent Appraiser shall use one or more valuation
methods that the Independent Appraiser (in its best professional judgment)
determines to be most appropriate under the circumstances; provided, that
such valuation methods shall not give effect to (1) any discount for any
lack of liquidity of the Warrants, Warrant Shares and/or such other
security, or (2) the minority status of any holder of Warrants, Warrant
Shares or other security, or (3) the fact that Company may have no class of
equity securities registered under the Securities Act. Such Independent
Appraiser, as promptly as is reasonably possible, will prepare and deliver
to Company and to each Holder of a Warrant or Warrant Share a written
valuation report indicating (a) the methods of valuation considered or
used, and (b) the value of a Warrant Share or other security, and (c) the
nature and scope of the examination or investigation upon which the
determination of value was made. Unless the valuation report is revised by
the Independent Appraiser within 5 Business Days after delivery thereof or
unless Company and Holders otherwise mutually agree, then the valuation
report shall be deemed final at the end of such 5-Business-Day period.
Company shall pay the fees and expenses associated with the Independent
Appraiser.
7.1.5. "Business Day" means any day except a Saturday,
Sunday or other day on which commercial banks in Arlington, Virginia are
authorized by law to close.
7.1.6. "Capital Stock" means the Common Stock, and all
other classes of common stock (whether voting or non-voting), and all other
forms of capital stock or securities of Company (preferred or otherwise).
7.1.7. "Commission" means the Securities and Exchange
Commission or any entity or agency that succeeds to any or all of its
functions under the Securities Act or the Exchange Act.
7.1.8. "Common Stock" means the voting common stock of
Company (which has a par value of $0.01 per share).
7.1.9. "Company" means XXXXXXXXXXXXX.XXX, INC., a
Delaware corporation, and its successors and permitted assigns.
7.1.10. "Credit Agreement" means the Credit Facility
Agreement dated as of March 16, 2000 by and among Company (and certain of
its Affiliates) and Lender (and certain other lenders), as the same may be
amended, modified or otherwise supplemented from time to time
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(including any renewals, refinancings or extensions thereof or increases in
the credit extended thereunder).
7.1.11. "Current Market Price" means, with respect to any
share of Common Stock or any other security of Company at the date herein
specified, the following:
(i) if Company does not then have such
securities registered under the Exchange Act, then the Current Market Price
per share of such security will be the greater of the applicable Exercise
Price per Warrant Share then in effect or the Appraised Valuation per share
of such security, or alternatively
(ii) if Company does then have such securities
registered under the Exchange Act, then the Current Market Price per share
of such security will be the greater of the Appraised Valuation per share
of such security or the average of the daily market prices of such security
for 20 consecutive Business Days during the period commencing 30 Business
Days before such date (or, if Company has had a class of such securities
registered under the Exchange Act for less than 30 consecutive Business
Days before such date, then the average of the daily market prices for all
of the Business Days before such date for which daily market prices are
available). The market price for each such Business Day shall be as
follows: (A) for a security listed or admitted to trading on any securities
exchange, then the closing price (regular way) on such day (or if no sale
takes place on such day, then the average of the closing bid and asked
prices on such day), and (B) for a security not then listed or admitted to
trading on any securities exchange, then the last reported sale price on
such day (or if no sale takes place on such day, then the average of the
closing bid and asked prices on such day, as reported by a reputable
quotation source designated by Company), and (C) for a security not then
listed or admitted to trading on any securities exchange and as to which no
such reported sale price or bid and asked prices are available, then the
average of the reported high bid and low asked prices on such day, as
reported by a reputable quotation service, or a newspaper of general
circulation in Manhattan Borough (New York, NY) customarily published on
each business day, designated by Company (or if there is no bid and asked
prices on such day, then the average of the high bid and low asked prices,
as so reported, on the most recent day (not more than 30 calendar days
prior to the date in question) for which prices have been so reported), and
(D) if there are no bid and asked prices reported during the 30 calendar
days prior to the date in question, then the Current Market Price per share
of the security shall be determined as if Company did not have a class of
such securities registered under the Exchange Act.
7.1.12. "Equity Disposition" means the sale, issuance,
transfer or other Equity Disposition of Capital Stock (or securities
convertible into, or exchangeable for, Capital Stock or rights to acquire
Capital Stock or such securities) to one or more Persons through any
transaction or series of related transactions (other than as a result of a
Public Offering or other than as a result of a series of acquisitions of
unrelated internet service providers or telecommunications companies) if,
after such sale, issuance, transfer or Equity Disposition, (a) more than
50% of the Capital Stock or voting power of Company is sold, issued or
transferred or (b) the Initial Shareholders sell, issue or transfer more
than 50% of the Capital Stock and voting rights owned by such Initial
Shareholders as of the date hereof. For purposes of this definition, any
transfer of Capital Stock (or securities convertible into, or exchangeable
for, Capital Stock or rights to acquire Capital Stock or such
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securities) by a shareholder to any member of his or her immediately family
or to any trust created by such shareholder for estate planning purposes
shall not constitute an "Equity Disposition".
7.1.13. "Equity Redemption" means any purchase,
repurchase, acquisition, redemption or retirement of any issued and
outstanding shares of Capital Stock (or any rights, options or convertible
securities therefor) from any holder by Company or any Affiliate thereof,
except for repurchases to fund employee stock purchase/401(k) or similar
plans which plans in the aggregate do not exceed 5% of the outstanding
Capital Stock.
7.1.14. "Event of Dilution" means any of the events
described in Section 5.1 as to which anti-dilution rights are granted
pursuant to Article 5.
7.1.15. "Exchange Act" means the Securities and Exchange
Act of 1934, as amended, or any similar Federal statute, as implemented by
the Commission or any court of competent jurisdiction.
7.1.16. "Excludible Shares" means (1) the shares issued
upon exercise of the Underwriters' or Advisors' Warrants, and (2) shares
issued to the Lender from time to time, and (3) the pool of options
convertible into shares of Common Stock that Company may issue from time to
time as incentive compensation for its employees and directors, provided
that (a) such options are granted at a price that is equal to or greater
than the Current Market Price on the date of such grant, and (b) such
issuances are reasonable in amount and otherwise in accordance with normal
and customary business practices within Company's industry and (c) the
aggregate amount of such shares issued at no times exceeds 15.0% of the
issued and outstanding equity of Company from time to time (on a fully
diluted basis). Such issuances may be pursuant to option plans either (i)
that have been established as of the effective date hereof or (ii) that are
established after the effective date hereof with notice to Holders.
7.1.17. "Exercise Period" has the meaning set forth in
Section 4.2.
7.1.18. "Exercise Price" has the meaning set forth in
Section 1.2.
7.1.19. "FCC" means the Federal Communications Commission
or any other entity or agency that succeeds to its responsibilities and powers.
7.1.20. "Holder" means, individually and collectively,
each owner and/or holder of any interest in any Warrant (and corresponding
Warrant Certificate) and/or any Warrant Share, and (with respect to each)
any successor, assignee, transferee, trustee, estate, heir, executor,
administrator, or personal representative thereof. For avoidance of doubt,
as of the effective date of this Agreement, the term "Holder" shall include
both MCG Finance Corporation and MCG Credit Corporation on a pro rata basis
in accordance with their respective interests under the Credit Agreement.
At any time when there is more than one Holder as defined hereunder, the
Holders as a group shall designate one such Holder to act as administrative
agent for the Holders as a group, and as of the effective date of this
Agreement, MCG Finance Corporation shall act as such administrative agent.
- 24 -
7.1.21. "Holder-Affiliated Transferee" means any
Affiliate of a Holder, and/or any current or former director, officer,
employee, business unit or division, or successor-in-interest of such
Holder, and/or (with respect to Purchaser) any pledgee of Purchaser's
interest under the Credit Agreement.
7.1.22. "Independent Appraiser" means a Person who (a) is
with a nationally recognized investment banking or appraisal firm, and (b)
is qualified in the valuation of businesses, transactions and securities of
the general type being analyzed, and (c) does not have a material direct or
material indirect financial interest in Company or any Holder.
7.1.23. "Initial Shareholders" means, Xxxx Xxxxx, Xxxxx
Xxxxx and Xxxxx Xxxxxx, who collectively beneficially own 3,089,242 shares
of Common Stock of Company as of the effective date of this Agreement.
7.1.24. "Lender" means, individually and collectively,
MCG FINANCE CORPORATION, a Delaware corporation, and its successors,
assigns, pledgees and transferees, and MCG Credit Corporation, a Delaware
corporation, and its successors, assigns, pledgees and transferees. At any
time when there is more than one Lender as defined hereunder, the Lenders
as a group shall designate one such Lender to act as administrative agent
for the Lenders as a group, and as of the effective date of this Agreement,
MCG Finance Corporation shall act as such administrative agent.
7.1.25. "Non-Surviving Transaction" means either (a) any
merger, consolidation or other business combination by Company with one or
more Persons in which the other Person effectively is the survivor or (b)
any sale, transfer, lease or license of all or any material portion of the
assets (or the economic benefits thereof) of Company to one or more other
Persons through any transaction or series of related transactions.
7.1.26. "Organic Document" means, relative to any entity,
its certificate and articles of incorporation, organization or formation,
its by-laws or operating agreements, and all equityholder agreements,
voting agreements and similar arrangements applicable to any of its
authorized shares of capital stock, its partnership interests or its equity
interests, and any other arrangements relating to the control or management
of any such entity (whether existing as a corporation, a partnership, an
LLC or otherwise).
7.1.27. "Person" means an individual, an association, a
partnership, a corporation, a trust or an unincorporated organization or any
other entity or organization.
7.1.28. "Public Offering" means any issuance or other
sale of any Capital Stock (or securities convertible into, or exchangeable
for, Capital Stock or rights to acquire Capital Stock or such securities)
of Company pursuant to a registration statement filed with the Commission
under the Securities Act.
7.1.29. "Purchaser" means Lender, and its successors,
assigns, pledgees and transferees with respect to the Warrants,
corresponding Warrant Certificates and/or Warrant Shares.
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7.1.30. "Registration Rights" means the rights of the
Holders of the Warrant Certificates to have the Warrant Shares registered
for sale under an effective registration statement under the Securities
Act.
7.1.31. "Repurchase Condition" has the meaning set forth
in Section 4.6.
7.1.32. "Repurchase Offer" has the meaning set forth in
Section 4.6.
7.1.33. "Repurchase Price" has the meaning set forth in
Section 4.6.
7.1.34. "Securities Act" means the Securities Act of
1933, as amended, or any similar Federal statute, as implemented by the
Commission or any court of competent jurisdiction.
7.1.35. "State Communications Acts" means the laws of any
state in which Company does business that govern the provision of
communications services offered or performed by Company within such state
and are applicable to Company, as amended from time to time, and as
implemented by the rules, regulations, and orders of the applicable State
PUC or any court of competent jurisdiction.
7.1.36. "State PUC" means the public utility commission
or other regulatory agency of any state in which Company does business that
is vested with jurisdiction over Company and over State Communications Acts
or the provision of communication services within such state.
7.1.37. "Subsidiary" of any Person means (a) any other
Person as to which the first Person directly or indirectly owns or controls
50% or more of the equity, voting rights or enterprise value thereof or (b)
any other Person the accounts of which would be consolidated with those of
the first Person in its consolidated or combined financial statements
according to generally accepted accounting principles.
7.1.38. "Surviving Public Combination" means any merger,
consolidation or other business combination by Company with one or more
Persons in which Company is the survivor (or a purchase of assets by
Company from one or more other Persons) if Company is thereafter required
to file reports with respect to any of its Capital Stock with the
Commission pursuant to the Exchange Act.
7.1.39. "Target Market Price" means, at the time of any
determination, (i) a price per share of Capital Stock (or with respect to
options, warrants or convertible securities, such price inclusive of any
exercise or conversion payments) of $3.50 per share for the first $15.0
million in equity issued by Company after the Closing Date and (ii) a price
per share of Capital Stock (or with respect to options, warrants or
convertible securities, such price inclusive of any exercise or conversion
payments) of $5.00 per share for all additional equity issuances, as each
such price may be adjusted from time to time in connection with any
subdivisions, combinations or reclassifications of any Capital Stock.
7.1.40. "Underwriters' Warrants" has the meaning given to
such term in Section 3.6.
7.1.41. "Warrant Certificate" means a certificate
(substantially in the form of Exhibit C) evidencing one or more Warrants.
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7.1.42. "Warrant" means the irrevocable and unconditional
right (subject to the terms hereof) to acquire a fully paid and
nonassessable Warrant Share at a purchase price per share equal to an
applicable Exercise Price (and any other right or warrant issued upon any
exchange or transfer of any such Warrant or any adjustment relating
thereto).
7.1.43. "Warrant Share" means a share of Common Stock
issuable upon exercise of a Warrant (until such share is registered by
Company and sold by the Holder thereof to a third party in a public
transaction). For purposes of Section 4.4 and Section 4.5 only, the term
"Warrant Share" shall include all shares of Common Stock issued or issuable
to any Holder in connection with any Loan Document.
7.2. GENERAL CONSTRUCTION AND INTERPRETATION.
---------------------------------------
7.2.1. Plural; Gender. Unless otherwise expressly stated
or the context clearly indicates a different intention, then (as may be
appropriate in the particular context) (a) a singular number or noun used
herein includes the plural, and a plural number or noun includes the
singular, and (b) the use of the masculine, feminine or neuter gender
pronouns herein includes each and all genders.
7.2.2. Section, Schedule and Exhibit References. Unless
otherwise expressly stated or the context clearly indicates a different
intention, then all references to sections, paragraphs, clauses, schedules
and exhibits herein are to be interpreted as references to sections,
paragraphs, clauses, schedules and exhibits of and to this Agreement. In
addition, the words "herein", "hereof", "hereunder", "hereto" and other
words of similar import herein refer to this Agreement as a whole, and not
to any particular section, paragraph or clause in this Agreement.
7.2.3. Titles and Headings. Unless otherwise expressly
stated or the context clearly indicates a different intention, then the
various titles and headings herein are inserted for convenience only and do
not affect the meaning or interpretation of any provision hereof.
7.2.4. "Including" and "Among Other" References. Unless
otherwise expressly stated or the context clearly indicates a different
intention, then all references herein to phrases containing or lists
preceded by the words "include", "includes", "including", "among other",
"among other things" or other words or phrases of similar import are to be
interpreted to mean such "without limitation" (whether or not such
additional phrase is actually added). In other words, such words and
phrases connote an illustrative example or list rather than an exclusive
example or list.
7.2.5. Time of Day References. Unless otherwise expressly
stated or the context clearly indicates a different intention, then all time
of day references in and restrictions imposed hereunder are to be calculated
using Eastern Time.
7.2.6. Successors and Assigns. Unless otherwise expressly
stated or the context clearly indicates a different intention, then all
references to any Person (including any Official Body) herein are to be
interpreted as including (as applicable) such Person's successors, assigns,
estate, heirs, executors, administrators and personal representatives.
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7.2.7. Modifications to Documents. Unless otherwise
expressly stated or the context clearly indicates a different intention,
then all references herein to any other agreement or instrument are to be
interpreted as including all extensions, renewals, amendments, supplements,
substitutions, replacements and waivers thereto and thereof from time to
time.
7.2.8. References to Laws and Regulations. Unless
otherwise expressly stated or the context clearly indicates a different
intention, then all references to any law, regulation, rule, order or
policy herein are to be interpreted as references to such law, regulation,
rule or policy (a) as implemented and interpreted from time to time by
Official Bodies with appropriate jurisdiction therefor, and (b) as amended,
modified, supplemented, replaced and repealed from time to time.
7.2.9. Financial and Accounting Terms. Unless otherwise
expressly stated or the context clearly indicates a different intention,
then financial and accounting terms used in the foregoing definitions or
elsewhere herein shall be defined and determined in accordance with
Generally Accepted Accounting Principles (GAAP).
ARTICLE 8 . MISCELLANEOUS
8.1. COMPLIANCE WITH FCC AND STATE PUC REQUIREMENTS. Company and
Purchaser each hereby acknowledge its intent that this Agreement, the
Warrants, the Warrant Certificates and the Warrant Shares (as well as the
exercise of rights hereunder) each comply with all of the laws, regulations
and orders of and/or administered by the FCC or any State PUC relating to
Purchaser's ownership, exercise and/or other realization of rights in
connection herewith. If at any time the terms and conditions of any such
ownership, exercise or other ability to realize upon rights violates, is in
conflict with or requires any consent under any such legal requirements,
then Company and Purchaser (or any subsequent Holder) will cooperate and
negotiate in good faith to amend the underlying documents (or the relevant
rights therein) and/or to file and prosecute (or to cause others to file
and prosecute) applications for any such consent in order to enable Company
and Purchaser (or such subsequent Holder) to be in compliance in all
material respects with such legal requirements.
8.2. COMPLIANCE WITH PURCHASER'S REGULATORY REQUIREMENTS. Company
and Purchaser each hereby acknowledge its intent that this Agreement, the
Warrants, the Warrant Certificates and the Warrant Shares (as well as the
exercise of rights hereunder) each comply with all of the statutory and
regulatory requirements applicable to Purchaser (or any subsequent Holder)
relating to its ownership, exercise and/or other realization of rights in
connection herewith. If at any time the terms and conditions of any such
ownership, exercise or other ability to realize upon rights violates or is
in conflict with any such regulatory requirements applicable to Purchaser
(or such subsequent Holder), then Company and Purchaser (or such subsequent
Holder) will cooperate and negotiate in good faith to amend the underlying
documents (or the relevant rights therein) in order to enable Purchaser (or
such subsequent Holder) to be in compliance in all material respects with
such statutory and regulatory requirements.
8.3. BINDING EFFECT AND GOVERNING LAW. This Agreement (and the
Warrants, the Warrant Certificates and other documents in connection
herewith) are binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns (to the extent authorized).
This Agreement (and the Warrants, the Warrant Certificates and other
documents in connection
- 28 -
herewith) are governed as to their validity, interpretation, construction
and effect by the laws of the Commonwealth of Virginia (without giving
effect to the conflicts of law rules of Virginia) or, to the extent that
the particular issue in controversy involves Company's legal power or
authorization in connection herewith, matters of internal governance, or
matters of corporate law, then resolution of such issue shall be governed
by the corporate laws of the State of Delaware.
8.4. SURVIVAL. All agreements, representations, warranties and
covenants of Company contained herein or in any documentation required
hereunder will survive the execution and delivery of this Agreement and
will continue in full force and effect so long as this Agreement otherwise
remains effective.
8.5. NO WAIVER; DELAY. To be effective, any waiver by Purchaser
must be expressed in a writing executed by Purchaser. If Purchaser waives
any power, right or remedy arising hereunder or under any applicable law,
then such waiver will not be deemed to be a waiver upon the later
occurrence or recurrence of any events giving rise to the earlier waiver.
No failure or delay by Purchaser to insist upon the strict performance of
any term, condition, covenant or agreement hereunder, or to exercise any
right, power or remedy hereunder, will constitute a waiver of compliance
with any such term, condition, covenant or agreement, or preclude Purchaser
from exercising any such right, power, or remedy at any later time or
times. The remedies provided herein are cumulative and not exclusive of
each other and the remedies provided by law.
8.6. MODIFICATION. Except as otherwise expressly provided in this
Agreement, no modification or amendment hereof will be effective unless
made in a writing signed by appropriate officers of the parties hereto.
8.7. NOTICES. Unless otherwise provided in this Agreement, any
notice, request, consent, waiver or other communication required or
permitted under or in connection with this Agreement will be deemed
satisfactorily given if it is in writing and is delivered either personally
to the addressee thereof, or by prepaid registered or certified U.S. mail
(return receipt requested), or by a nationally recognized commercial
courier service with next-day delivery charges prepaid, or by telegraph, or
by facsimile (voice confirmed), or by any other reasonable means of
personal delivery to the party entitled thereto at its respective address
set forth below:
If to Company [Party Entitled to Notice]
or its Affiliates: c/o XxxxxxxXxxxxx.xxx, Inc.
----------------- 0000 Xxxxx 00
X.X. Xxx 0000
Xxxx, Xxx Xxxxxx 00000
Attention: Xxxx X. Xxxxx, President
Facsimile: (000) 000-0000
With a copy to the following listed
counsel or such other counsel as may be
designated by Company from time to time
(and which notice shall not constitute
notice to Company and failure to give
such notice shall not affect the
effectiveness of notice to Company):
Xxxxx & Xxxxxxx, Ltd.
- 29 -
000 Xxxxx Xxxx Xxxxxxxx
Xxxxxxxxxx, XX 00000
Attention: Xxxxxxx X. Xxxxxxx, Esquire
Facsimile: (000) 000-0000
If to Purchaser: MCG Finance Corporation
--------------- 0000 Xxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: Investment Administration
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Any party to this Agreement may change its address or facsimile number for
notice purposes by giving notice thereof to the other in accordance with
this Section, provided that such change shall not be effective until 2
calendar days after notice of such change. All such notices and other
communications will be deemed given and effective (a) if by mail, then upon
actual receipt or 5 calendar days after mailing as provided above
(whichever is earlier), or (b) if by facsimile, then upon successful
transmittal to such party's designated number, or (c) if by telegraph, then
upon actual receipt or 2 Business Days after delivery to the telegraph
company (whichever is earlier), or (d) if by nationally recognized
commercial courier service, then upon actual receipt or 2 Business Days
after delivery to the courier service (whichever is earlier), or (e) if
otherwise delivered, then upon actual receipt.
8.8. PRIOR AGREEMENTS SUPERSEDED. This Agreement completely and
fully supersedes all oral agreements and all other and prior written
agreements by and between Company and Purchaser concerning the terms and
conditions of this Agreement.
8.9. SEVERABILITY. If fulfillment of any provision of or any
transaction related to this Agreement or the Credit Agreement, the time
performance of such provision or transaction is due shall involve
transcending the limit of validity prescribed by law, then ipso facto, the
obligation to be fulfilled shall be reduced to the limit of such validity.
If any clause or provision of this Agreement operates or would
prospectively operate to invalidate this Agreement in whole or in part,
then such clause or provision only shall be void, as though not contained
herein, and the remainder of this Agreement shall remain operative and in
full force and effect.
8.10. COUNTERPARTS. This Agreement may be executed in any number
of counterparts with the same effect as if all the signatures on such
counterparts appeared on one document. Each such counterpart will be deemed
to be an original but all counterparts together will constitute one and the
same instrument.
8.11. LIMITATION OF LIABILITY. Notwithstanding any other provision
of this Agreement (unless expressly provided otherwise), neither Company
nor any Holder (nor any director, officer, employee, representative, legal
counsel or agent of Company or any Holder) shall have any liability to any
other Person that is a party to or beneficiary of this Agreement (or to any
equityholder of Company) with respect to (and each Person that is a party
to this Agreement hereby waives, releases and agrees not to xxx upon any
claim for) any special, indirect, consequential, punitive or
non-foreseeable damages suffered by such Person in connection with or in
any way related to the
- 30 -
transactions contemplated or the relationship established by this
Agreement, or any act, omission or event occurring in connection herewith.
8.12. FORUM SELECTION; CONSENT TO JURISDICTION. ANY LITIGATION IN
CONNECTION WITH OR IN ANY WAY RELATED TO THIS AGREEMENT, OR ANY COURSE OF
CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), ACTIONS
OR INACTIONS OF ANY HOLDER OR COMPANY WILL BE BROUGHT AND MAINTAINED
EXCLUSIVELY IN THE COURTS OF THE COMMONWEALTH OF VIRGINIA OR IN THE UNITED
STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF VIRGINIA; PROVIDED,
HOWEVER, THAT ANY SUIT SEEKING ENFORCEMENT AGAINST COMPANY MAY ALSO BE
BROUGHT (AT SUCH HOLDER'S OPTION) IN THE COURTS OF ANY OTHER JURISDICTION
WHERE ANY PROPERTY OF COMPANY MAY BE FOUND OR WHERE ANY HOLDER MAY
OTHERWISE OBTAIN PERSONAL JURISDICTION OVER COMPANY. COMPANY HEREBY
EXPRESSLY AND IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE
COMMONWEALTH OF VIRGINIA AND OF THE UNITED STATES DISTRICT COURT FOR THE
EASTERN DISTRICT OF VIRGINIA FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET
FORTH ABOVE AND IRREVOCABLY AGREES TO BE BOUND BY ANY FINAL AND
NON-APPEALABLE JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH
LITIGATION. COMPANY FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS
BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE
WITHIN OR OUTSIDE THE COMMONWEALTH OF VIRGINIA. COMPANY HEREBY EXPRESSLY
AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT PERMITTED BY LAW, ANY
OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE LAYING OF VENUE OF
ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO ABOVE AND ANY
CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT FORUM.
TO THE EXTENT THAT COMPANY HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM
JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH
SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF
EXECUTION OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, THEN
COMPANY HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS
OBLIGATIONS UNDER THIS AGREEMENT.
8.13. WAIVER OF JURY TRIAL. EACH HOLDER AND COMPANY EACH HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION (WHETHER AS CLAIM,
COUNTER-CLAIM, AFFIRMATIVE DEFENSE OR OTHERWISE) IN CONNECTION WITH OR IN
ANY WAY RELATED TO THIS AGREEMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN), ACTIONS OR INACTIONS OF
ANY HOLDER OR COMPANY.
[BALANCE OF PAGE INTENTIONALLY BLANK]
- 31 -
IN WITNESS WHEREOF, the parties have caused this Warrant Agreement
to be duly executed, as an instrument under seal (whether or not any such
seals are physically attached hereto) as of the date and year first above
written.
ATTEST: XXXXXXXXXXXXX.XXX, INC. (Company)
By: /s/ Xxxxxx X. Xxxxxxxx By: /s/ Xxxx X. Xxxxx
-------------------------- ---------------------------------
Name: Xxxxxx X. Xxxxxxxx Name: Xxxx X. Xxxxx
Title: Vice President Title: President
[CORPORATE SEAL] Address: 0000 Xxxxx 00
X.X. Xxx 0000
Xxxx, Xxx Xxxxxx 00000
Facsimile: 732) 280-6409
WITNESS: MCG FINANCE CORPORATION
(Purchaser)
/s/ Xxxx Xxxxxx By: /s/ Xxxxxx X. Xxxxxx
------------------------------- -------------------------------
Xxxxxx X. Xxxxxx, President
and COO
Address: 0000 Xxxxxx Xxxxxxxxx
Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Facsimile: (000) 000-0000
EXHIBIT A -- ARTICLES OF INCORPORATION
EXHIBIT B -- AUTHORIZING RESOLUTIONS
EXHIBIT C -- FORM OF WARRANT CERTIFICATE
EXHIBIT D -- RESTRICTIVE LEGENDS
FORM OF RESTRICTIVE LEGENDS FOR WARRANT CERTIFICATES
-----------------------
"The Warrants evidenced by this certificate have not been registered under
the Securities Act of 1933 or the securities laws of any state. Such
Warrants may not be sold, transferred, pledged or hypothecated in the
absence of an effective registration statement for such Warrants under the
Securities Act of 1933 and applicable state securities laws or an opinion
of counsel satisfactory to XXXXXXXXXXXXX.XXX, INC. prior to the proposed
transaction that such registration is not required."
FORM OF RESTRICTIVE LEGEND FOR WARRANT SHARES
-----------------------
"The shares evidenced by this certificate have been issued upon the
exercise of warrants issued pursuant to a Warrant Agreement dated as of
March 16, 2000 (the "Warrant Agreement") and have not been registered under
the Securities Act of 1933 or the securities laws of any state. Such shares
may not be sold, transferred, pledged or hypothecated in the absence of an
effective registration statement for such shares under the Securities Act
of 1933 and applicable state securities laws or an opinion of counsel
satisfactory to XXXXXXXXXXXXX.XXX, INC. prior to the proposed transaction
that such registration is not required."
