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WARRANT AGREEMENT
BETWEEN
SOVEREIGN BANCORP, INC.
AND
THE BANK OF NEW YORK,
AS WARRANT AGENT,
DATED AS OF FEBRUARY 26, 2004
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TABLE OF CONTENTS
PAGE
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ARTICLE I
DEFINITIONS
Section 1.01 Defined Terms.................................................................... 1
Section 1.02 Interpretive Provisions.......................................................... 9
ARTICLE II
ISSUANCE OF WARRANTS, NO SEPARATE TRANSFER OF WARRANTS AND
EXECUTION AND DELIVERY OF WARRANT CERTIFICATES
Section 2.01 Issuance of Warrants............................................................. 10
Section 2.02 No Separate Transfers of Warrants................................................ 10
Section 2.03 Form, Denomination and Execution of Warrant Certificates......................... 10
Section 2.04 Issuance and Delivery of Warrant Certificates.................................... 14
Section 2.05 Lost, Stolen, Destroyed or Mutilated Warrant Certificates........................ 14
Section 2.06 Payment of Certain Taxes......................................................... 15
Section 2.07 Holders of Warrants; Rights of Holders........................................... 15
Section 2.08 Tax Treatment of Warrants and Debentures......................................... 16
ARTICLE III
DURATION AND EXERCISE OF WARRANTS
Section 3.01 Duration of Warrants............................................................. 16
Section 3.02 Exercise of Warrants............................................................. 18
ARTICLE IV
ANTI-DILUTION PROVISIONS
Section 4.01 Warrant Adjustments.............................................................. 20
Section 4.02 Merger, Consolidation, Sale, Transfer or Conveyance.............................. 27
Section 4.03 Other Events..................................................................... 28
Section 4.04 Notice of Adjustment............................................................. 29
Section 4.05 Notice of Certain Transactions................................................... 29
Section 4.06 Adjustment to Warrant Certificate................................................ 30
ARTICLE V
EARLY EXPIRATION OF WARRANTS
Section 5.01 Early Expiration of Warrants..................................................... 30
ARTICLE VI
EXCHANGE AND TRANSFER OF WARRANTS
Section 6.01 Warrant Register; Exchange and Transfer of Warrants.............................. 31
Section 6.02 Section 6.02 Transfer Provisions................................................. 32
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TABLE OF CONTENTS
(Continued)
PAGE
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Section 6.03 Cancellation of Warrant Certificates............................................. 33
Section 6.04 CUSIP Numbers.................................................................... 33
ARTICLE VII
CONCERNING THE WARRANT AGENT
Section 7.01 Warrant Agent.................................................................... 34
Section 7.02 Conditions of Warrant Agent's Obligations........................................ 34
Section 7.03 Resignation and Removal; Appointment of Successor................................ 36
Section 7.04 Compliance With Applicable Laws.................................................. 37
Section 7.05 Office........................................................................... 37
ARTICLE VIII
COVENANTS
Section 8.01 Financial Statements and Reports of the Company.................................. 38
Section 8.02 Notices and Demands to the Company and Warrant Agent............................. 38
Section 8.03 Governmental Approvals........................................................... 38
Section 8.04 Satisfaction of Exercise Conditions.............................................. 38
Section 8.05 Reservation of Shares............................................................ 39
Section 8.06 Claims of Holders................................................................ 39
ARTICLE IX
MISCELLANEOUS
Section 9.01 Supplements and Amendments....................................................... 39
Section 9.02 Addresses for Notices............................................................ 40
Section 9.03 Governing Law.................................................................... 40
Section 9.04 Persons Having Rights Under Warrant Agreement.................................... 40
Section 9.05 Headings......................................................................... 40
Section 9.06 Counterparts..................................................................... 40
Section 9.07 Inspection of Agreement.......................................................... 41
Section 9.08 Separability Clause.............................................................. 41
Section 9.09 Successors and Assigns........................................................... 41
Section 9.10 Legal Holidays................................................................... 41
EXHIBIT A Form of Warrant Certificate.................................................................. A-1
ii
WARRANT AGREEMENT, between Sovereign Bancorp, Inc., a
Pennsylvania corporation (the "Company"), and The Bank of New York, a New York
banking corporation, as warrant agent (the "Warrant Agent") dated as of February
26, 2004 (this "Agreement").
RECITALS:
WHEREAS, the Company proposes to issue warrants (the
"Warrants") representing the right to purchase, under certain circumstances
described herein, Common Stock (as defined herein);
WHEREAS, the Company is simultaneously entering into a Third
Supplemental Indenture, dated as of the date hereof (the "Third Supplemental
Indenture" and, together with the Base Indenture, as hereinafter defined, the
"Indenture") with BNY Midwest Trust Company whereby the 4.375% Junior
Subordinated Deferrable Interest Debentures Due March 1, 2034 (the "Debentures")
will be issued;
WHEREAS, the Company, The Bank of New York (Delaware) as
Delaware trustee, The Bank of New York as property trustee and certain
individuals as administrative trustees are simultaneously entering into an
Amended and Restated Declaration of Trust of Sovereign Capital Trust IV (the
"Trust Agreement"), dated as of the date hereof, for the purpose of issuing and
selling certain securities representing undivided beneficial interests in the
assets of the Trust (the "Trust Securities");
WHEREAS, the Trust intends to invest the proceeds of the sale
of the Trust Securities in the purchase of the Debentures and the Warrants;
WHEREAS, the Company desires that the Warrant Agent act on
behalf of the Company in connection with the issuance of the Warrants as
provided herein and the Warrant Agent is willing to so act;
WHEREAS, the Company has duly authorized the execution and
delivery of this Agreement to provide for the issuance of Warrants to be
exercisable at such times and for such prices, and to have such other
provisions, as are hereinafter provided; and
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.01 Defined Terms. Whenever used in this Agreement,
the following words and phrases, unless the context otherwise requires, shall
have the meanings specified in this Article. Capitalized terms used herein but
not otherwise defined shall have the meanings given to them in the Trust
Agreement.
"Accelerated Expiration" means expiration of the Warrants
pursuant to Sections 5.01 and 5.02.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for the beneficial interests in the Global Certificate, the rules
and procedures of the Depositary that apply to such transfer or exchange.
"Base Indenture" means that certain Indenture between the
Company and Xxxxxx Trust and Savings Bank, predecessor in interest to BNY
Midwest Trust Company, dated as of September 1, 1999, providing for the issuance
from time to time of junior subordinated debt securities.
"Board of Directors" means the board of directors of the
Company or any duly authorized committee thereof.
"Board Resolution" means a resolution duly adopted by the
Board of Directors, a copy of which, certified by the Secretary or an Assistant
Secretary of the Company to be in full force and effect on the date of such
certification, shall have been delivered to the Warrant Agent.
"Business Day" means any day other than a Saturday or a Sunday
or a day on which banking institutions in the City of New York are authorized or
required by law or executive order to close.
"Calculation Agent" has the meaning given to it in Section
7.02(l).
"Cash Exercise" has the meaning given to it in Section
3.02(b).
"Cash Payment" means, with respect to any Warrant, the payment
by the Holder thereof of the Exercise Price of such Warrant in lawful money of
the United States of America, in cash or by certified or official bank check to
the Warrant Agent, or by wire transfer to the account indicated to such Holder
by the Warrant Agent, as designated by the Company by notice to the Warrant
Agent.
"Change of Control" has the meaning given to it in the Third
Supplemental Indenture.
"Change of Control Notice Date" has the meaning given to it in
Section 5.03.
"Change of Control Redemption" has the meaning given to it in
Section 5.03.
"Change of Control Redemption Date" has the meaning given to
it in Section 5.03.
"Change of Control Redemption Right" has the meaning given to
it in Section 5.03.
"Clearing Agency" means an organization registered as a
"Clearing Agency" pursuant to Section 17A of the Exchange Act that is acting as
a depositary for the Securities and in whose name, or in the name of a nominee
of that organization, shall be registered a Global Certificate and which shall
undertake to effect book entry transfers and pledges of the Securities.
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"Clearing Agency Participant" means a broker, dealer, bank,
other financial institution or other Person for whom from time to time the
Clearing Agency effects book entry transfers and pledges of securities deposited
with the Clearing Agency.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time, or any successor legislation.
"Common Stock" means the common stock, no par value per share,
of the Company.
"Company" has the meaning given to it in the Preamble.
"Company Order" has the meaning given to it in the Indenture.
"Contingent Debt Regulations" has the meaning set forth in
Section 2.08.
"Conversion Price" means, as of any date of determination, $50
divided by the applicable Exercise Amount in effect on such date.
"Conversion Value" has the meaning given to it in the Trust
Agreement.
"Date of Determination" means, with respect to the Exercise
Price of a Warrant in connection with an exercise of such Warrant, the end of
the day on the Exercise Date.
"Debentures" has the meaning given in the Preamble.
"Definitive Warrant Certificate" means a Warrant Certificate
in definitive, registered form.
"Discount" means the difference between the Exercise Price
contained in clause (b) of that definition as of the Issue Date and the Exercise
Price as of the Expiration Date.
"DTC" means The Depository Trust Company and its successors.
"Ex Date" means:
(i) with respect to any issuance or
distribution, the first date on which the Common Stock trades
regular way on the relevant exchange or in the relevant market
from which the Trading Price was obtained without the right to
receive such issuance or distribution;
(ii) with respect to any subdivision or
combination of shares of Common Stock, the first date on which
the Common Stock trades regular way on such exchange or in
such market after the time at which such subdivision or
combination becomes effective, and
(iii) with respect to any tender or exchange
offer, the first date on which the Common Stock trades regular
way on such exchange or in such market after the Tender
Expiration Time of such offer.
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"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Exercise Amount" means 1.6301 shares of Common Stock, which
is subject to adjustment as provided in Article IV.
"Exercise Conditions" means, with respect to any Warrant on
any date on which such Warrant is to be exercised by the Holder thereof, that:
(a) the Company shall have a registration statement in
effect under the Securities Act covering the issuance and sale of the
related Exercise Amount of Common Stock and, if applicable upon Cash
Exercise prior to March 5, 2007, the Short-Term Debentures upon
exercise of such Warrant, or the issuance and sale (and resale) of the
related Exercise Amount of Common Stock and, if applicable, the
Short-Term Debentures upon exercise of such Warrant is exempt from the
registration requirements of the Securities Act;
(b) such shares of Common Stock and, if applicable, the
Short-Term Debentures have been registered, qualified or are deemed to
be exempt under applicable state securities laws;
(c) to the extent required by applicable law, a then
current prospectus relating to the Common Stock and, if applicable, the
Short-Term Debentures shall be delivered to such exercising Holder; and
(d) if any Trust PIERS shall be outstanding at such time,
a Like Amount of Trust PIERS shall have been correspondingly delivered
to the Property Trustee for conversion into Common Stock.
"Exercise Price" means, with respect to a Warrant, an amount
initially equal to $31.78, which price will accrete on a daily basis, such that
on any given Date of Determination it will equal the Nominal Accreted Value of a
Debenture on such Date of Determination, to a maximum of $50, on the Expiration
Date.
"Expiration Date" means, with respect to any Warrant, 5:00
p.m., New York City time, on March 1, 2034.
"Fair Market Value" means the amount which a willing buyer
would pay a willing seller in an arm's length transaction, determined in good
faith by the Board of Directors, whose determination shall be conclusive and
given in a Board Resolution.
"Global Warrant Certificate" has the meaning given to it in
Section 2.03(a).
"Holder," when used with respect to a Warrant, means the
Person in whose name the Warrant evidenced by a Warrant Certificate is
registered in the Warrant Register which, so long as held in the form of a
Global Warrant Certificate, shall be the Depositary; provided, however, that in
determining whether the Holders of the requisite number of Warrants have voted
on any matter, then for the purpose of such determination only (and not for any
other purpose hereunder, including, without limitation, any notice hereunder),
if the Warrant remains
4
in the form of one or more Global Warrants and if the Clearing Agency which is
the holder of such Global Warrant has sent an omnibus proxy assigning voting
rights to the Clearing Agency Participants to whose accounts the Warrants are
credited on the record date, the term "Holder" shall mean such Clearing Agency
Participant acting at the direction of the beneficial owners of the Warrants.
"Indenture" has the meaning given in the Recitals.
"Investment Company Event" has the meaning given to it in the
Trust Agreement.
"Issue Date" means with respect to the issuance of the
Warrants, the applicable Delivery Date (as defined in the Underwriting
Agreement).
"Like Amount" means (i) with respect to the Trust PIERS upon
conversion of the Trust PIERS, one Trust PIERS having a liquidation amount at
maturity of $50 per Warrant and (ii) with respect to a distribution of
Debentures and Warrants upon the liquidation of the Trust or with respect to the
payment of the Exercise Price, one Debenture having a principal amount at stated
maturity of $50 per Warrant.
"Market Price" means the average of the daily Trading Prices
per share of Common Stock for the ten consecutive Trading Days immediately prior
to the date in question; provided, however, that if:
(i) the Ex Date for any event (other than the
issuance or distribution requiring such computation) that
requires an adjustment to the Exercise Amount pursuant to
Section 4.01 (a), (b), (c), (d), (e) or (f) occurs during such
ten consecutive Trading Days, the Trading Price for each
Trading Day prior to the Ex Date for such other event shall be
adjusted by multiplying such Trading Price by the same
fraction by which the Exercise Amount is so required to be
adjusted as a result of such other event;
(ii) the Ex Date for any event (other than the
issuance or distribution requiring such computation) that
requires an adjustment to the Exercise Amount pursuant to
Section 4.01 (a), (b), (c), (d), (e) or (f) occurs on or after
the Ex Date for the issuance or distribution requiring such
computation and prior to the day in question, the Trading
Price for each Trading Day on and after the Ex Date for such
other event shall be adjusted by multiplying such Trading
Price by the reciprocal of the fraction by which the Exercise
Amount is so required to be adjusted as a result of such other
event; and
(iii) the Ex Date for the issuance or distribution
requiring such computation is prior to the day in question,
after taking into account any adjustment required pursuant to
clause (i) or (ii) above, the Trading Price for each Trading
Day on or after such Ex Date shall be adjusted by adding
thereto the amount of any cash and the Fair Market Value of
the evidences of indebtedness, shares of capital stock or
assets being distributed applicable to one share of Common
Stock as of the close of business on the day before such Ex
Date.
5
For purposes of any computation under Section 4.01 (f), the
Market Price of the Common Stock on any date shall be deemed to be the average
of the daily Trading Prices per share of Common Stock for such day and the next
two succeeding Trading Days; provided, however, that if the Ex Date for any
event (other than the tender offer requiring such computation) that requires an
adjustment to the Exercise Amount pursuant to Section 4.01 (a), (b), (c), (d),
(e) or (f) occurs on or after the Tender Expiration Time for the tender or
exchange offer requiring such computation and prior to the day in question, the
Trading Price for each Trading Day on and after the Ex Date for such other event
shall be adjusted by multiplying such Trading Price by the reciprocal of the
fraction by which the Exercise Amount is so required to be adjusted as a result
of such other event.
"NASD" has the meaning given to it in section 6.01(c).
"Nominal Accreted Value" has the meaning given to it in the
Third Supplemental Indenture.
"Non-Electing Share" has the meaning given to it in Section
4.02(a).
"Participant" has the meaning given to it in Section 6.02(d).
"Property Trustee" has the meaning given to it in the Trust
Agreement.
"Purchased Shares" has the meaning given to it in Section
4.01(f).
"Record Date" means, with respect to any dividend,
distribution or other transaction or event in which the holders of Common Stock
have the right to receive any cash, securities or other property or in which the
Common Stock (or other applicable security) is exchanged for or converted into
any combination of cash, securities or other property, the date fixed for
determination of shareholders entitled to receive such cash, securities or other
property (whether such date is fixed by the Board of Directors or by statute,
contract or otherwise).
"Reference Period" has the meaning given to it in Section
4.01(d).
"Securities Act" means the Securities Act of 1933, as amended.
"Security Registrar" has the meaning given to it in Section
7.02(m).
"Short-Term Debentures" has the meaning given to it in Section
3.02(c).
"Special Event" means either an Investment Company Event or a
Tax Event.
"Spin-Off" has the meaning given to it in Section 4.01(d).
"Stock Price Event" means on any date prior to March 1, 2034,
the Trading Price of a share of the Common Stock exceeds and has exceeded for at
least 20 Trading Days within the immediately preceding 30 consecutive Trading
Days, 130% of the Conversion Price in effect as of the last Trading Day of the
preceding calendar quarter, giving effect to all adjustments to such Conversion
Price as of such date pursuant to Article IV.
6
"Tax Event" has the meaning given to it in the Trust
Agreement.
"Tender Expiration Time" has the meaning given to it in
Section 4.01(f).
"Third Supplemental Indenture" has the meaning given to it in
the Recitals.
"Trading Day" with respect to any security means a day during
which trading in securities generally occurs on the New York Stock Exchange or,
if the applicable security is not listed on the New York Stock Exchange, on the
principal other national or regional securities exchange on which it is then
listed or, if the applicable security is not listed on a national or regional
securities exchange, on the National Association of Securities Dealers Automated
Quotation System or, if the applicable security is not quoted on the National
Association of Securities Dealers Automated Quotation System, on the principal
other market on which the applicable security is then traded; provided that the
applicable security has traded at least once on the national securities
association or exchange or over-the-counter market that is the primary market
for the trading of such security; and provided, further, that extended hours and
days that are not full trading days shall not count as Trading Days, nor shall
any day on which the applicable security experiences any of the following count
as a Trading Day:
(x) any suspension of or limitation imposed on
trading of the applicable security on the principal
national or regional securities exchange or
association or over-the-counter market on or in which
the applicable security is listed or traded;
(y) any event (other than an event listed in clause
(z) below) that disrupts or impairs the ability of
market participants in general to (a) effect
transactions in or obtain market values for the
applicable security on any relevant national or
regional securities exchange or association or
over-the-counter market, or (b) effect transactions
in or obtain market values for, futures or options
contracts relating to such security on any relevant
national or regional securities exchange or
association or over-the-counter market; or
(z) any relevant national or regional securities
exchange or association or over-the-counter market on
which the applicable security trades closes on any
exchange business day prior to its scheduled closing
time unless such earlier closing time is announced by
the exchange at least one hour prior to the earlier
of (i) the actual closing time for the regular
trading session on such exchange and (ii) the
submission deadline for orders to be entered into the
exchange for execution on the next business day.
"Trading Price" of a security on any date (excluding any
after-hours trading as of such date) means:
(i) the closing sale price (or, if no closing
sale price is reported, the last reported sale price) of such
security (regular way) on the New York Stock Exchange on that
date;
7
(ii) if such security is not so listed on the New
York Stock Exchange, the closing sale price as reported on
that date in the composite transactions for the principal U.S.
securities exchange on which such security is listed;
(iii) if such security is not listed on the New
York Stock Exchange or any other U.S. national or regional
securities exchange on that date, the closing sale price as
reported on that date by the Nasdaq National Market;
(iv) if such security is not so listed on a U.S.
national or regional securities exchange or quoted on the
Nasdaq National Market on that date, the last price quoted by
the National Quotation Bureau for that security on the date
or, if the National Quotation Bureau is not quoting such
price, a similar quotation service selected by the Company;
(v) if such security is not so quoted, the
average mid-points of the last bid and ask prices for such
security on that date from each of three nationally recognized
independent investment banking firms selected by the Company
for this purpose;
(vi) if such bid and ask prices cannot reasonably
be obtained from at least three nationally recognized
independent investment banking firms, but such bid and ask
prices are obtained from two nationally recognized independent
investment banking firms, the average of the mid-points of
such bid and ask prices for such security on that date from
the two nationally recognized independent investment banking
firms;
(vii) if such bid and ask prices can reasonably be
obtained from only one nationally recognized independent
investment banking firm, the midpoint of such bid and ask
prices for such security on that date from this one nationally
recognized independent investment banking firm; or
(viii) if such bid and ask prices cannot reasonably
be obtained from at least one nationally recognized
independent investment banking firm, the average of the last
bid and ask prices for such security on that date from a
dealer engaged in the trading of such securities selected by
the Company for this purpose;
provided, however, that if the security whose Trading Price is to be determined
is a Trust PIERS, then (a) for the purposes of clauses (v) through (vii), the
bid and ask prices shall be sought for trades of at least $5,000,000 aggregate
liquidation amount at maturity of the Trust PIERS and (b) in place of the
calculation set forth in clause (viii), if bid and ask prices cannot reasonably
be obtained from at least one nationally recognized independent investment
banking firm, the Trading Price of the Trust PIERS shall be the product of (x)
the then-applicable Exercise Amount of the Trust PIERS multiplied by (y) the
Trading Price of the Company's Common Stock on that date.
"Treasury Regulations" means the income tax regulations,
including temporary and proposed regulations, promulgated under the Code by the
United States Treasury
8
Department, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Trigger Event" has the meaning given to it in Section
4.01(d).
"Trust" means Sovereign Capital Trust IV.
"Trust Agreement" has the meaning given in the Recitals.
"Trust PIERS" has the meaning given to it in the Trust
Agreement.
"Trust Securities" has the meaning given in the Recitals.
"Underwriters" means Xxxxxx Brothers Inc. and the other
underwriters named in the Underwriting Agreement.
"Underwriting Agreement" means the Underwriting Agreement
dated February 19, 2004 among the Company, the Trust and the Underwriters.
"Warrant" has the meaning given to it in the Recitals.
"Warrant Agent" has the meaning given to it in the Preamble.
"Warrant Certificate" means each registered certificate
(including, without limitation, the Global Warrant Certificate) issued by the
Company pursuant to this Agreement evidencing a Warrant, substantially in the
form of Exhibit A hereto.
"Warrant Register" has the meaning given to it in Section
6.01(a).
"Warrant Shares" means the shares of Common Stock issued upon
exercise of Warrants pursuant to this Agreement.
Section 1.02 Interpretive Provisions. With respect to all
terms in this Agreement, the singular includes the plural and the plural the
singular; words importing any gender include the other gender; references to
"writing" include printing, typing, lithography, and other means of reproducing
words in a visible form; references to agreements and other contractual
instruments include all subsequent amendments thereto or changes therein entered
into in accordance with their respective terms and not prohibited by this
Agreement; references to "Persons" include their permitted successors and
assigns; and the term "including" means "including without limitation." All
references herein to Articles, Sections, Subsections and Exhibits are references
to Articles, Sections, Subsections and Exhibits contained in or attached to this
Agreement unless otherwise specified, and each such Exhibit is part of the terms
hereof. Any reference herein to an agreement entered into in connection with the
issuance of securities contemplated therein as of the date hereof shall mean
such agreement as it may be amended, modified or supplemented in accordance with
its terms.
ARTICLE II
9
ISSUANCE OF WARRANTS, NO SEPARATE TRANSFER OF WARRANTS AND
EXECUTION AND DELIVERY OF WARRANT CERTIFICATES
Section 2.01 Issuance of Warrants. The Company hereby issues
14,432,990 Warrants (or up to 16,494,846 Warrants to the extent the Underwriters
exercise in full their right to purchase additional Trust PIERS, as set forth in
the Underwriting Agreement) described herein, each of which evidences the right
of the Holder thereof, under the terms and conditions provided for herein and in
the related Warrant Certificate, to purchase the Exercise Amount (subject to
adjustment as provided in Article IV) of fully paid and non-assessable shares of
Common Stock at the Exercise Price. At initial issuance, each Warrant shall be
issued together with a Debenture, pursuant to the Indenture and this Agreement.
Section 2.02 No Separate Transfers of Warrants.
Notwithstanding any other provision herein, a Warrant may not
be transferred without a simultaneous transfer of one Debenture issued under the
Indenture per each Warrant. Any transfer of a Warrant without a corresponding
Debenture or transfer of a Debenture without a corresponding Warrant shall be
deemed to be void ab initio and of no legal effect whatsoever. Any transferee of
a Warrant or Debenture not accompanied by the corresponding Debenture or Warrant
shall be deemed not to be a Holder of such Warrant or Debenture for any purpose,
such transferee shall be deemed to have no interest whatsoever in such Warrant
or Debenture and the transferor shall be treated as the owner of such Warrants
or Debentures purported to be transferred. Following any distribution of
Warrants and Debentures to Holders of the Trust Securities, each Holder agrees
by its acceptance of a Warrant not to transfer such Warrant separately from a
corresponding Debenture. This Warrant Agreement and the Third Supplemental
Indenture shall be construed in a manner consistent with this Section 2.02.
Section 2.03 Form, Denomination and Execution of Warrant
Certificates.
(a) The certificates evidencing the Warrants shall be
printed, lithographed or engraved on steel engraved borders or may be produced
in any other manner, all as determined by the officers of the Company executing
the Warrants evidenced by such certificates, consistent with the provisions of
this Agreement, as evidenced by their execution thereof. Upon the execution and
delivery of this Agreement, the Warrants will be issued in definitive, fully
registered and global form (the "Global Warrant Certificate"), substantially in
the form given to it in Exhibit A. The aggregate number of Warrants represented
by the Global Warrant Certificates may from time to time be increased or
decreased by adjustments made on the records of the Warrant Agent, as custodian
for the Depositary, as hereinafter provided.
Each Warrant Certificate, upon issuance, shall be dated the
date of its authentication and may have such letters, numbers or other
identifying marks and such legends or endorsements printed, lithographed,
engraved thereon or otherwise produced in any other manner, as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law, rule or regulation, or to conform to usage, as
the officer of the Company executing the same may approve (such officer's
execution thereof to be conclusive evidence of such approval). Each Warrant
Certificate shall evidence one or more Warrants. Upon the execution and delivery
of this Agreement, the Global Warrant Certificate shall
10
represent 14,432,990 outstanding Warrants (or up to 16,494,846 Warrants to the
extent the Underwriters exercise in full their option to purchase additional
Trust PIERS, as set forth in the Underwriting Agreement), as specified in the
"Schedule of Increases and Decreases in Global Warrant Certificate" attached
thereto or otherwise in accordance with the Applicable Procedures. Thereafter,
the Global Warrant Certificate shall represent such outstanding Warrants as
shall be specified in the "Schedule of Exchanges and Interests in Global Warrant
Certificate," attached to such certificate or otherwise in accordance with the
Applicable Procedures.
(b) The Warrant Certificates shall be signed in the name
and on behalf of the Company by its Chairman of the Board of Directors, its Vice
Chairman of the Board of Directors, its President, any Executive Vice President,
any Senior Vice President, any Vice President or its Treasurer, and by its
Secretary or an Assistant Secretary. Such signatures may be manual or facsimile
signatures of the present or any future holder of any such office and may be
imprinted or otherwise reproduced on the Warrant Certificates.
(c) No Warrant Certificate shall be valid for any
purpose, and no Warrant evidenced thereby shall be deemed issued or exercisable,
until such Warrant Certificate has been countersigned and authenticated by the
manual or facsimile signature of the Warrant Agent. Such signature by the
Warrant Agent upon any Warrant Certificate executed by the Company shall be
conclusive evidence that the Warrant Certificate so countersigned and
authenticated has been duly issued hereunder.
(d) In case any officer of the Company who shall have
signed any Warrant Certificate either manually or by facsimile signature shall
cease to be such officer before the Warrant Certificate so signed shall have
been countersigned, authenticated and delivered by the Warrant Agent, such
Warrant Certificate nevertheless may be countersigned, authenticated and
delivered as though the person who signed such Warrant Certificate had not
ceased to be such officer of the Company; and any Warrant Certificate may be
signed on behalf of the Company by such person as, at the actual date of the
execution of such Warrant Certificate, shall be a proper officer of the Company,
although at the date of the execution of this Agreement such person was not such
an officer.
(e) (i) Every Global Warrant executed on behalf of
the Holders and delivered hereunder shall bear a legend in
substantially the following form:
THIS CERTIFICATE IS A GLOBAL WARRANT CERTIFICATE WITHIN THE
MEANING OF THE WARRANT AGREEMENT HEREINAFTER REFERRED TO AND
IS REGISTERED IN THE NAME OF THE DEPOSITORY TRUST COMPANY, A
NEW YORK CORPORATION (THE "DEPOSITARY"), OR A NOMINEE OF THE
DEPOSITARY. THIS CERTIFICATE IS EXCHANGEABLE FOR CERTIFICATES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY
OR ITS NOMINEE ONLY IN THE LIMITED CIRCUMSTANCES DESCRIBED IN
THE WARRANT AGREEMENT AND NO TRANSFER OF THIS CERTIFICATE
(OTHER THAN A TRANSFER OF THIS CERTIFICATE AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF
THE DEPOSITARY TO THE DEPOSITARY OR
11
ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN
LIMITED CIRCUMSTANCES.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITARY FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED
IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND ANY
PAYMENT HEREON IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY
AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITARY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS MADE IN WHOLE, BUT NOT IN PART, TO NOMINEES OF THE
DEPOSITARY OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S
NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY
SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE
RESTRICTIONS GIVEN TO IT IN THE WARRANT AGREEMENT REFERRED TO
HEREIN.
(ii) Every Warrant Certificate executed on behalf
of the Holders and delivered hereunder shall bear a legend in
substantially the following form:
THE SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED WITHOUT A SIMULTANEOUS TRANSFER OF ONE 4.375%
JUNIOR SUBORDINATED DEFERRABLE INTEREST DEBENTURE DUE MARCH 1,
2034 (EACH, A "DEBENTURE") ISSUED UNDER THE THIRD SUPPLEMENTAL
INDENTURE, DATED AS OF FEBRUARY 26, 2004, BETWEEN THE COMPANY
AND BNY MIDWEST TRUST COMPANY, AS INDENTURE TRUSTEE, PER EACH
WARRANT TRANSFERRED. BY ITS ACCEPTANCE HEREOF THE HOLDER
HEREOF ACKNOWLEDGES AND AGREES THAT ANY TRANSFER OF A WARRANT
WITHOUT A TRANSFER OF A CORRESPONDING DEBENTURE SHALL BE
DEEMED TO BE VOID AND OF NO LEGAL EFFECT WHATSOEVER. ANY SUCH
TRANSFEREE SHALL BE DEEMED NOT TO BE A HOLDER OF SUCH WARRANTS
OR DEBENTURES FOR ANY PURPOSE, AND SUCH TRANSFEREE SHALL BE
DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH WARRANTS OR
DEBENTURES.
FOR PURPOSES OF SECTIONS 1273 AND 1275 OF THE INTERNAL REVENUE
CODE, THIS INSTRUMENT (AS DEFINED BELOW) IS A CONTINGENT
PAYMENT DEBT INSTRUMENT AND WILL ACCRUE
12
ORIGINAL ISSUE DISCOUNT AT THE COMPANY'S "COMPARABLE YIELD"
FOR UNITED STATES FEDERAL INCOME TAX PURPOSES. PURSUANT TO
SECTION 2.08 OF THE WARRANT AGREEMENT, THE COMPANY AGREES, AND
BY ACCEPTANCE OF A BENEFICIAL OWNERSHIP INTEREST IN THE
WARRANTS EACH BENEFICIAL HOLDER OF WARRANTS AGREES, FOR UNITED
STATES FEDERAL INCOME TAX PURPOSES, (I) TO TREAT EACH
DEBENTURE AND THE CORRESPONDING WARRANT IN WHICH SUCH HOLDER
HAS A BENEFICIAL INTEREST AS A SINGLE UNITARY INSTRUMENT, (II)
TO TREAT SUCH UNITARY INSTRUMENT AS INDEBTEDNESS OF THE
COMPANY, (III) TO TREAT SUCH INDEBTEDNESS AS SUBJECT TO
SECTION 1.1275-4(b) OF THE TREASURY REGULATIONS (THE
"CONTINGENT DEBT REGULATIONS"), (IV) TO BE BOUND BY THE
COMPANY'S DETERMINATION OF THE "COMPARABLE YIELD" AND
"PROJECTED PAYMENT SCHEDULE," WITHIN THE MEANING OF THE
CONTINGENT DEBT REGULATIONS, WITH RESPECT TO SUCH HOLDER'S
DEBENTURES AND CORRESPONDING WARRANTS, AND (V) TO USE SUCH
"COMPARABLE YIELD" AND "PROJECTED PAYMENT SCHEDULE" IN
DETERMINING ITS INTEREST ACCRUALS WITH RESPECT TO SUCH
HOLDER'S DEBENTURES AND CORRESPONDING WARRANTS AND IN
DETERMINING ADJUSTMENTS THERETO. FOR PURPOSES OF THE
FOREGOING, THE COMPANY'S DETERMINATION OF THE "COMPARABLE
YIELD" IS 7.410% PER ANNUM, COMPOUNDED QUARTERLY. THE
PROJECTED PAYMENT SCHEDULE, DETERMINED BY THE COMPANY, IS
ATTACHED TO AS EXHIBIT B TO THE INDENTURE FOR THE DEBENTURES.
A HOLDER OF WARRANTS MAY OBTAIN THE ISSUE DATE, YIELD TO
MATURITY, COMPARABLE YIELD AND A COPY OF THE PROJECTED PAYMENT
SCHEDULE FOR THE DEBENTURES AND WARRANTS BY TELEPHONING THE
COMPANY'S INVESTOR RELATIONS DEPARTMENT AT (000) 000-0000 OR
SUBMITTING A WRITTEN REQUEST FOR SUCH INFORMATION TO INVESTOR
RELATIONS DEPARTMENT, SOVEREIGN BANK, MAIL CODE 11-900-IR5,
X.X. XXX 00000, XXXXXXX, XX 00000, ATTN: XXXX X. XxXXXXXX.
(f) No Warrant Certificate shall be entitled to any
benefit under this Agreement or be valid or obligatory for any purpose unless
there appears on such Warrant Certificate a certificate of authentication
substantially in the form provided for herein executed by an authorized
signatory of the Warrant Agent by manual signature, and such certificate upon
any Warrant Certificate shall be conclusive evidence, and the only evidence,
that such Warrant Certificate has been duly authenticated and delivered
hereunder.
(g) If at any time the Depositary notifies the Company
that it is unwilling or unable to continue as Depositary or if at any time the
Depositary shall no longer be eligible to act as a depositary under applicable
law, the Company shall appoint a successor Depositary. If a successor Depositary
is not appointed by the Company within 90 days after the Company receives such
notice or becomes aware of such ineligibility, the Company's election of such
13
Depositary shall no longer be effective and the Company will execute, and the
Warrant Agent, upon receipt of a Company Order (as defined in the Trust
Agreement) for the countersigning and delivery of Definitive Warrant
Certificates, will authenticate and deliver, Warrants in definitive form in an
aggregate number equal to the number of the Global Warrant Certificate or
Certificates in exchange for such Global Warrant Certificate or Certificates.
The Company may at any time and in its sole discretion
determine that the Warrants in the form of one or more Global Warrant
Certificates shall no longer be represented by such Global Warrant Certificate
or Certificates. In such event the Company will execute, and the Warrant Agent,
upon receipt of a Company Order for the countersigning and delivery of
definitive Warrants, will countersign and deliver, Warrants in definitive form
and in an aggregate number equal to the number of the Global Warrant Certificate
or Certificates in exchange for such Global Warrant Certificate or Certificates.
Section 2.04 Issuance and Delivery of Warrant Certificates.
(a) Upon the execution and delivery of this Agreement, the Company shall deliver
one or more Global Warrant Certificates executed by the Company to the Warrant
Agent for countersignature and authentication. Thereupon, the Warrant Agent
shall countersign such Warrant Certificates and deliver the same to DTC or the
Warrant Agent, as custodian for DTC. Subsequent to the original issuance, the
Warrant Agent shall countersign and authenticate new Warrant Certificates only
if such Warrant Certificates are issued in exchange or substitution for one or
more previously countersigned and authenticated Warrant Certificates or in
connection with their transfer, as hereinafter provided.
(b) Temporary Warrant Certificates. Pending the
preparation of Definitive Warrants, the Company may execute, and upon the order
of the Company the Warrant Agent shall authenticate and deliver, temporary
Warrant Certificates that are printed, lithographed, typewritten, mimeographed
or otherwise produced, substantially of the tenor of the Definitive Warrants in
lieu of which they are issued and with such appropriate insertions, omissions,
substitutions and other variations as the officer executing such Warrant
Certificates may determine, as evidenced by such officer's execution of such
Warrant Certificates.
If temporary Warrant Certificates are issued, the Company will
cause Definitive Warrants to be prepared without unreasonable delay. After the
preparation of Definitive Warrants, the temporary Warrant Certificates shall be
exchangeable for Definitive Warrants upon surrender of the temporary Warrant
Certificates at the corporate trust office of the Warrant Agent, without charge
to the Holder thereof. Upon surrender for cancellation of any one or more
temporary Warrant Certificates, the Company shall execute and the Warrant Agent
shall countersign and authenticate and deliver in exchange therefor Definitive
Warrants representing the same aggregate number of Warrants. Until so exchanged,
the temporary Warrant Certificates shall in all respects be entitled to the same
benefits under this Agreement as Definitive Warrants.
Section 2.05 Lost, Stolen, Destroyed or Mutilated Warrant
Certificates. If any mutilated Warrant Certificate is surrendered to the Warrant
Agent, the Company shall execute and deliver to the Warrant Agent, and the
Warrant Agent shall authenticate, execute on behalf of the Holder, and deliver
in exchange therefor, a new Warrant Certificate, evidencing the same
14
number of Warrants and bearing a Warrant Certificate number not
contemporaneously outstanding.
If there shall be delivered to the Company and the Warrant
Agent (i) evidence to their satisfaction of the destruction, loss or theft of
any Warrant Certificate, and (ii) such security or indemnity as may be required
by them to hold each of them and any agent of any of them harmless, then, in the
absence of notice to the Company or the Warrant Agent that such Warrant
Certificate has been acquired by a bona fide purchaser, the Company shall
execute and deliver to the Warrant Agent, and the Warrant Agent shall
authenticate, execute on behalf of the Holder, and deliver to the Holder, in
lieu of any such destroyed, lost or stolen Warrant Certificate, a new Warrant
Certificate, evidencing the same number of Warrants and bearing a Warrant
Certificate number not contemporaneously outstanding.
Notwithstanding the foregoing, the Company shall not be
obligated to execute and deliver to the Warrant Agent, and the Warrant Agent
shall not be obligated to authenticate and deliver to the Holder, a Warrant
Certificate on or after the Business Day immediately preceding the Expiration
Date.
Upon the issuance of any new Warrant Certificate under this
Section, the Company and the Warrant Agent may require the payment by the Holder
of a sum sufficient to cover any tax or other governmental charge that may be
imposed in relation thereto and any other expenses (including the fees and
expenses of the Warrant Agent) connected therewith.
Every new Warrant Certificate issued pursuant to this Section
in lieu of any destroyed, lost or stolen Warrant Certificate shall constitute an
original additional contractual obligation of the Company and of the Holder in
respect of the Warrant evidenced thereby, whether or not the destroyed, lost or
stolen Warrant Certificate (and the Warrants evidenced thereby) shall be at any
time enforceable by the Holder, and shall be entitled to all the benefits and be
subject to all the obligations of this Agreement equally and proportionately
with any and all other Warrant Certificates delivered hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Warrant
Certificates.
Section 2.06 Payment of Certain Taxes. The Company shall pay
all stamp and other duties, if any, to which this Agreement or the original
issuance of the Warrants or Warrant Certificates may be subject under the laws
of the United States of America or any state or locality.
Section 2.07 Holders of Warrants; Rights of Holders. (a) At
any time that a Warrant is outstanding and has not expired, the Company shall,
or shall cause the Security Registrar to, make available to the Warrant Agent at
all times such information as to holders of Warrants as may be necessary to keep
the Warrant Register up to date.
(b) No Warrant or Warrant Certificate shall entitle the
Holder thereof to any of the rights, preferences and privileges of a holder of
Common Stock, including without limitation any dividend, voting, redemption,
conversion, exchange or liquidation rights.
15
(c) Any Holder may, without the consent of the Warrant
Agent, enforce, and may institute and maintain, any suit, action or proceeding
against the Company suitable to enforce, or otherwise in respect of, its right
to exercise its Warrants as provided in the related Warrant Certificates and
this Agreement.
Section 2.08 Tax Treatment of Warrants and Debentures.
The Company agrees, and by acceptance of a beneficial
ownership interest in the Warrants each beneficial holder of Warrants agrees,
for United States federal income tax purposes, (i) to treat each Warrant and the
corresponding Debenture in which such holder has a beneficial interest as a
single unitary instrument, (ii) to treat such unitary instrument as indebtedness
of the Company, (iii) to treat such indebtedness as subject to Section
1.1275-4(b) of the Treasury Regulations (the "Contingent Debt Regulations"),
(iv) to be bound by the Company's determination of the "comparable yield" and
"projected payment schedule," within the meaning of the Contingent Debt
Regulations, with respect to such holder's Debentures and corresponding
Warrants, and (v) to use such "comparable yield" and "projected payment
schedule" in determining its interest accruals with respect to such holder's
Debentures and corresponding Warrants and in determining adjustments thereto.
For purposes of the foregoing, the Company's determination of the "comparable
yield" is 7.410% per annum, compounded quarterly. The projected payment
schedule, determined by the Company, is attached to the Third Supplemental
Indenture as Exhibit B thereto. A Holder of Warrants may obtain the Issue Date,
yield to maturity, comparable yield and a copy of the projected payment schedule
for the Warrants and corresponding Debentures by telephoning the Company's
Investor Relations Department at (000) 000-0000 or submitting a written request
for such information to Investor Relations Department, Sovereign Bank, Mail Code
11-900-IR5, X.X. Xxx 00000, Xxxxxxx, XX 00000, Attn: Xxxx X. XxXxxxxx.
ARTICLE III
DURATION AND EXERCISE OF WARRANTS
Section 3.01 Duration of Warrants. (a) Each Warrant shall be
exercisable on any date prior to the Expiration Date by the Holder thereof at
the applicable Exercise Price for such date, provided that the Exercise
Conditions are met as of such date and provided, further, that one of the
conditions set forth in Section 3.01(b) shall have been met. Each Warrant that
is not exercised at or before 5:00 p.m., New York City time, on its Expiration
Date shall become void, and all rights of the Holder of such Warrant under the
related Warrant Certificate and under this Agreement shall cease.
(b) A Holder's right to exercise its Warrants will arise
only upon the occurrence of any of the following:
(i) Exercise Based on Common Stock Price. If, as of the
last day of any calendar quarter, the Trading Price of the Common Stock
on each of at least 20 Trading Days in a period of 30 consecutive
Trading Days ending on the last Trading Day of such quarter is more
than 130% of the Conversion Price in effect on the last Trading Day of
such calendar quarter, giving effect to all adjustments to such
Conversion Price pursuant
16
to Article IV hereof, then on and after the first day of the following
calendar quarter (and only during such following calendar quarter),
Holders may exercise their Warrants for Common Stock at any time at
their option until 5:00 p.m., New York, New York time, on the last day
of such calendar quarter or earlier Warrant expiration.
(ii) Exercise Based on Trust PIERS Trading Price. Holders
may also exercise their Warrants during the five-Business-Day period
following any 10-consecutive-Trading-Day period in which the average of
the Trading Prices for the Trust PIERS for such 10-Trading-Day period
is less than 105% of the average of the Conversion Values for the Trust
PIERS for each day during such period and the Conversion Value for each
day of that period was less than $49.00 (98% of the issue price of the
Trust PIERS).
(iii) Exercise Based on Credit Ratings. A Holder may
exercise its Warrants during any period in which (A) the rating
assigned to the Trust PIERS by Xxxxx'x Investor Services ("Xxxxx'x") is
below B1, (B) the rating assigned to the Trust PIERS by Standard &
Poor's Rating Group ("S&P") is below B-, or (C) the rating assigned to
the Trust PIERS by either Moody's or S&P is suspended or withdrawn.
(iv) Exercise Based on Notice of Redemption. A Holder may
exercise Warrants at any time a Trust PIERS has been called for
redemption at any time prior to 5:00 p.m., New York, New York time, on
the Business Day immediately preceding the date of redemption, even if
such Trust PIERS is not otherwise convertible at that time.
(v) Exercise Based on Occurrence of Certain Corporate
Transactions.
If:
(a) the Company shall distribute to all or
substantially all holders of its Common Stock rights or
warrants entitling such holders to subscribe for or purchase,
for a period expiring within 60 days of the date of any such
distribution, Common Stock at a price per share less than the
Trading Price of the Common Stock on the Trading Day
immediately preceding the date of the announcement of such
distribution;
(b) the Company elects to distribute to all or
substantially all holders of its Common Stock cash or other
assets, debt securities or rights or warrants to purchase its
securities, which distribution has a per share value (as
determined by the Company's Board of Directors) exceeding 5%
of the Trading Price of Common Stock on the Business Day
preceding the declaration date for the distribution; or
(c) a Change of Control (other than a Change of
Control that occurs due to a consolidation, merger or binding
share exchange described in the succeeding paragraph) would
have occurred but holders of Trust PIERS do not have the right
to require the Company to repurchase their Trust PIERS as a
result of the event otherwise constituting a Change of Control
because either (1) the trading price of Common Stock during
the period described in clause (x) of the definition of
"Change of Control" set forth in the Third Supplemental
Indenture
17
equals or exceeds the level specified in such definition or
(2) the consideration received in such Change of Control
consists of common stock that is freely tradable and the Trust
PIERS become convertible into such common stock (as described
in clause (y) of the definition of "Change of Control" set
forth in the Third Supplemental Indenture),
then the Company shall be required to notify the holders of the Trust
PIERS at least 20 days prior to the ex-dividend date for the
distribution or within 20 days of the occurrence of an event described
under (c) above, as the case may be. Once the Company has given such
notice, Holders may exercise their Warrants at any time until either
(a) the earlier of the close of business on the Business Day
immediately prior to the ex-dividend date and the date on which the
Company announces that the distribution will not take place, in the
case of a distribution or (b) 20 days after the date of the Change of
Control notice, in the case of an event described under (c) above. A
Holder will not have the right to exercise its Warrants as a result of
a distribution if the Holder has rights to participate, or will have
such rights, in the distribution without exercise. In addition, if the
Company is party to consolidation, merger or binding share exchange
pursuant to which the Common Stock will be converted into cash,
securities or other property, Holders may exercise their Warrants at
any time from and after the date which is 15 days prior to the
anticipated effective date of such transaction until 15 days after the
effective date of such transaction, provided, however, that if such
transaction also constitutes a Change of Control, then the Warrants
will automatically terminate upon the effective date of the Change of
Control.
Section 3.02 Exercise of Warrants. (a) Subject to Section
3.01, Section 5.01 and Article IV, the Holder of a Warrant shall have the right
at any time, prior to the Expiration Date, at such Holder's option, to exercise
such Warrant and purchase the Exercise Amount of Common Stock at the Exercise
Price. A Warrant may be exercised by giving notice to the Warrant Agent no later
than 5:00 p.m., New York City time, on the Business Day preceding the proposed
date of exercise of such Warrant, completing the form of election to purchase
set forth on the reverse side of such Warrant Certificate and otherwise
complying with Applicable Procedures, and delivering the same, together with the
related Warrant Certificate (in the case of Definitive Warrants), to the Warrant
Agent no later than 5:00 p.m., New York City time, on the date of such exercise,
together with a Like Amount of Debentures in full satisfaction of the Exercise
Price.
(b) At any time prior to March 5, 2007, a Holder at its
option may exercise its Warrants either by delivery of a Like Amount of
Debentures in satisfaction of the Exercise Price or by delivery of such
Debentures together with a Cash Payment in an amount equal to the aggregate
Nominal Accreted Value on the Conversion Date of such Debentures ("Cash
Exercise"), provided that the Exercise Conditions are met as of such date and
provided, further, that the conditions set forth in Section 3.01(b)(i) have been
satisfied. A Holder may not Cash Exercise if the exercise right arises solely
out of any other provision of Section 3.01(b).
(c) On the date of exercise of a Warrant, the Company
shall issue, and the Warrant Agent shall deliver, to or upon the order of the
Holder of such Warrant, the number of Warrant Shares equal to the Exercise
Amount of Common Stock to which such Holder is entitled registered in such name
or names as may be directed by such Holder. In the case of any Cash
18
Exercise pursuant to Section 3.02(b), the Company shall also deliver to the
exercising Holder a number of Debentures in definitive registered form with
modified terms and conditions (as so modified, the "Short-Term Debentures")
equal in number to the Like Amount of Debentures tendered upon Cash Exercise,
registered in such name or names as may be directed by such Holder. The
Short-Term Debentures will mature 94 days after the date of such Cash Exercise,
with a principal amount at maturity equal to the Nominal Accreted Value of a
Debenture on that date. The date on which the Warrant Certificate, Debentures
and, if applicable, Cash Amount are received by the Warrant Agent shall be
deemed to be the date on which the related Warrant is exercised and the related
Common Stock is issued and, if applicable, the Short-Term Debentures are
delivered. Notwithstanding anything to the contrary in this paragraph (b), (i)
no fractional shares of Common Stock shall be issued by the Company upon the
exercise of any Warrant, (ii) if more than one Warrant shall be exercised at the
same time by the same Holder, the number of Warrant Shares issuable in
connection with such exercise shall be computed on the basis of the aggregate
Exercise Amount of the Warrants so exercised and (iii) on the date a Holder
exercises such Holder's Warrant, the Company shall pay such Holder an amount in
cash equal to the Trading Price on the third Trading Day prior to the date of
such exercise (multiplied by the related fraction) of Common Stock for such
fractional shares, computed to the nearest whole cent.
(d) If fewer than all of the Warrants evidenced by a
Definitive Warrant Certificate are exercised, the Company shall execute, and an
authorized officer of the Warrant Agent shall countersign and deliver, a new
Definitive Warrant Certificate evidencing the number of Warrants remaining
unexercised.
(e) (i) The Warrant Agent shall deliver all
Debentures received by it in connection with any exercise of the
Warrants to the Company for cancellation.
(ii) The Warrant Agent shall deposit all funds
received by it in connection with a Cash Exercise into the account of
the Company maintained with the Warrant Agent for such purpose by
notice in writing to the Warrant Agent, and shall notify the Company by
telephone by 5:00 p.m., New York City time, of each day on which a Cash
Payment is so deposited of the amount of such deposit into the
Company's account. The Warrant Agent shall promptly confirm such notice
in writing to the Company.
(f) The Warrant Agent shall, from time to time, as
promptly as practicable, advise the Company of (i) the number of Warrants
exercised as provided herein, (ii) the instructions of each Holder with respect
to delivery of the Common Stock to which such Holder is entitled upon such
exercise and (iii) such other information as the Company shall reasonably
require. Such notice may be given by telephone to be promptly confirmed in
writing. In connection with any such exercise, to the extent the Company
furnishes the Warrant Agent with copies of a then-current prospectus relating to
the Warrant Shares, the Warrant Agent, upon such notice of exercise shall, at
the expense of the Company, deliver the same to the exercising holder, unless
previously furnished.
(g) The Company shall pay all documentary stamp taxes
attributable to the initial issuance of Warrants or to the issuance of Common
Stock or, if applicable, Short-Term
19
Debentures to the registered Holder of such Warrants upon exercise thereof;
provided, however, that such Holder, and not the Company, shall be required to
pay any stamp or other tax or other governmental charge that may be imposed in
connection with any transfer of the Warrants or involved in the issuance of the
Common Stock or, if applicable, Short-Term Debentures; and in the event that any
such transfer is involved, the Company shall not be required to issue any Common
Stock or, if applicable, Short-Term Debentures (and such Holder's purchase of
the Warrant Shares shall not be deemed to have been consummated) until such tax
or other charge shall have been paid or it has been established to the Company's
satisfaction that no such tax or other charge is due.
ARTICLE IV
ANTI-DILUTION PROVISIONS
Section 4.01 Warrant Adjustments. The Exercise Amount shall be
subject to adjustments, calculated by the Company, from time to time as follows:
(a) In case the Company shall hereafter pay a dividend or
make a distribution to all holders of the outstanding Common Stock in shares of
Common Stock, the Exercise Amount in effect at the opening of business on the
date following the date fixed for the determination of shareholders entitled to
receive such dividend or other distribution shall be increased by multiplying
such Exercise Amount by a fraction,
(i) the numerator of which shall be the sum of the number
of shares of Common Stock outstanding at the close of business on the
Record Date fixed for such determination and the total number of shares
constituting such dividend or other distribution, and
(ii) the denominator of which shall be the number of
shares of Common Stock outstanding at the close of business on the
Record Date fixed for such determination.
Such increase shall become effective immediately after the
opening of business on the day following the Record Date. If any dividend or
distribution of the type described in this paragraph (a) is declared but not so
paid or made, the Exercise Amount shall again be adjusted to the Exercise Amount
which would then be in effect if such dividend or distribution had not been
declared.
(b) In case the outstanding shares of Common Stock shall
be subdivided into a greater number of shares of Common Stock, the Exercise
Amount in effect at the opening of business on the day following the day upon
which such subdivision becomes effective shall be proportionately increased, and
conversely, in case outstanding shares of Common Stock shall be combined into a
smaller number of shares of Common Stock, the Exercise Amount in effect at the
opening of business on the day following the day upon which such combination
becomes effective shall be proportionately decreased, such reduction or
increase, as the case may be, to become effective immediately after the opening
of business on the day following the day upon which such subdivision or
combination becomes effective.
20
(c) In case the Company shall issue rights or warrants
(other than any rights or warrants referred to in paragraph (d) below) to all or
substantially all holders of its outstanding shares of Common Stock entitling
them to subscribe for or purchase shares of Common Stock (or securities
convertible into Common Stock) at a price per share (or having a conversion
price per share) less than the Market Price on the Record Date fixed for the
determination of shareholders entitled to receive such rights or warrants, the
Exercise Amount shall be adjusted so that the same shall equal the amount
determined by multiplying the Exercise Amount in effect at the opening of
business on the date after such Record Date by a fraction:
(i) the numerator of which shall be the number of shares
of Common Stock outstanding on the close of business on the Record Date
plus the total number of additional shares of Common Stock so offered
for subscription or purchase (or into which the convertible securities
so offered are convertible), and
(ii) the denominator of which shall be the number of
shares of Common Stock outstanding at the close of business on the
Record Date plus the number of shares which the aggregate offering
price of the total number of shares so offered for subscription or
purchase (or the aggregate conversion price of the convertible
securities so offered) would purchase at such Market Price.
Such adjustment shall become effective immediately after the
opening of business on the day following the Record Date fixed for determination
of shareholders entitled to receive such rights or warrants. To the extent that
shares of Common Stock (or securities convertible into Common Stock) are not
delivered pursuant to such rights or warrants, upon the expiration or
termination of such rights or warrants the Exercise Amount shall be readjusted
to the Exercise Amount which would then be in effect had the adjustments made
upon the issuance of such rights or warrants been made on the basis of the
delivery of only the number of shares of Common Stock (or securities convertible
into Common Stock) actually delivered. In the event that such rights or warrants
are not so issued, the Exercise Amount shall again be adjusted to be the
Exercise Amount which would then be in effect if such date fixed for the
determination of shareholders entitled to receive such rights or warrants had
not been fixed. In determining whether any rights or warrants entitle the
holders to subscribe for or purchase shares of Common Stock at less than such
Market Price, and in determining the aggregate offering price of such shares of
Common Stock, there shall be taken into account any consideration received for
such rights or warrants, the value of such consideration if other than cash, to
be determined by the Board of Directors.
(d) In case the Company shall, by dividend or otherwise,
distribute to all or substantially all holders of its Common Stock shares of any
class of capital stock of the Company (other than any dividends or distributions
to which paragraph (a) above applies) or evidence of its indebtedness, cash or
other assets, including securities (including the capital stock of its
subsidiaries), but excluding (i) any rights or warrants referred to in paragraph
(c) above, (ii) any stock, securities or other property or assets (including
cash) distributed in connection with a reclassification, change, merger,
consolidation, statutory share exchange, combination, sale or conveyance to
which Section 4.02 hereof applies and (iii) dividends and distributions paid
exclusively in cash, then, in each such case, subject to the second succeeding
paragraph of this paragraph (d), the Exercise Amount shall be increased so that
the same shall be equal to the
21
amount determined by multiplying the Exercise Amount in effect immediately prior
to the close of business on the Record Date with respect to such distribution by
a fraction:
(i) the numerator of which shall be the Conversion Price
on such date, and
(ii) the denominator of which shall be such Conversion
Price less the Fair Market Value on such date of the portion of the
capital stock, indebtedness, cash or other assets so distributed
applicable to one share of Common Stock (determined on the basis of the
number of shares of the Common Stock outstanding on the Record Date).
As used herein, "Conversion Price" as of any date of determination shall mean
$50 divided by the Exercise Amount then in effect.
Such increase shall become effective immediately prior to the
opening of business on the day following the Record Date. However, in the event
that (i) the then Fair Market Value of the portion of the capital stock,
indebtedness, cash or other assets so distributed applicable to one share of
Common Stock is equal to or greater than the Market Price on the Record Date or
(ii) such Market Price exceeds such Fair Market Value by less than $1.00, in
lieu of the foregoing adjustment, adequate provision shall be made so that each
Holder shall have the right to receive upon exercise of a Warrant the amount of
securities such Holder would have received had such Holder exercised such
Warrant immediately prior to such Record Date. In the event that such dividend
or distribution is not so paid or made, the Exercise Amount shall again be
adjusted to be the Exercise Amount which would then be in effect if such
dividend or distribution had not been declared.
If the Board of Directors determines the Fair Market Value of
any distribution for purposes of this paragraph (d) by reference to the actual
or when issued trading market for any securities comprising all or part of such
distribution, it must in doing so consider the prices in such market over the
same period (the "Reference Period") used in computing the Market Price as of
the same date of determination to the extent possible, unless the Board of
Directors in a Board Resolution determines in good faith that determining the
Fair Market Value during the Reference Period would not be in the best interest
of the Holders.
In the event any such distribution consists of shares of
capital stock of, or similar equity interests in, one or more of the Company's
subsidiaries (a "Spin-Off"), the Fair Market Value of the securities to be
distributed shall equal the average of Trading Prices of those securities for
the ten consecutive Trading Days commencing on and including the fifth day of
trading of those securities after the Ex-Date for such dividend or distribution,
and the then current Market Price shall be measured for the same period. In the
event, however, that an underwritten initial public offering of the securities
in the Spin-Off occurs simultaneously with the Spin-Off, Fair Market Value of
the securities distributed in the Spin-Off shall mean the initial public
offering price of such securities and the then current Market Price shall mean
the Trading Price for the Common Stock on the same Trading Day.
Rights or warrants distributed by the Company to all holders
of Common Stock entitling the holders thereof to subscribe for or purchase
shares of the Company's capital stock
22
(either initially or under certain circumstances), which rights or warrants,
until the occurrence of a specified event or events ("Trigger Event"):
(1) are deemed to be transferred with such
shares of Common Stock;
(2) are not exercisable; and
(3) are also issued in respect of future
issuances of Common Stock, shall be deemed not to have been
distributed for purposes of this paragraph (d) (and no
adjustment to the Exercise Amount under this paragraph (d)
will be required) until the occurrence of the earliest Trigger
Event. If such right or warrant is subject to subsequent
events, upon the occurrence of which such right or warrant
shall become exercisable to purchase different securities,
evidences of indebtedness or other assets or entitle the
holder to purchase a different number or amount of the
foregoing or to purchase any of the foregoing at a different
purchase price, then the occurrence of each such event shall
be deemed to be the date of issuance and Record Date with
respect to a new right or warrant (and a termination or
expiration of the existing right or warrant without exercise
by the holder thereof). In addition, in the event of any
distribution (or deemed distribution) of rights or warrants,
or any Trigger Event or other event (of the type described in
the preceding sentence) with respect thereto, that resulted in
an adjustment to the Exercise Amount under this paragraph (d):
(x) in the case of any such rights or
warrants which shall all have been redeemed or
repurchased without exercise by any holders thereof,
the Exercise Amount shall be readjusted upon such
final redemption or repurchase to give effect to such
distribution or Trigger Event, as the case may be, as
though it were a cash distribution, equal to the per
share redemption or repurchase price received by a
holder of Common Stock with respect to such rights or
warrant (assuming such holder had retained such
rights or warrants), made to all holders of Common
Stock as of the date of such redemption or
repurchase, and
(y) in the case of such rights or
warrants all of which shall have expired or been
terminated without exercise, the Exercise Amount
shall be readjusted as if such rights and warrants
had never been issued.
For purposes of this paragraph (d) and paragraphs (a), (b) and
(c), any dividend or distribution to which this paragraph (d) is applicable that
also includes shares of Common Stock, a subdivision or combination of Common
Stock to which paragraph (b) applies, or rights or warrants to subscribe for or
purchase shares of Common Stock to which paragraph (c) applies (or any
combination thereof), shall be deemed instead to be:
(I) a dividend or distribution of the evidences
of indebtedness, assets, shares of capital stock, rights or
warrants other than such shares of Common Stock, such
subdivision or combination or such rights or warrants to which
paragraphs (a), (b) and (c) above apply, respectively (and any
Exercise Amount
23
increase required by this paragraph (d) with respect to such
dividend or distribution shall then be made), immediately
followed by,
(II) a dividend or distribution of such shares of
Common Stock, such subdivision or combination or such rights
or warrants (and any further Exercise Amount increase required
by paragraphs (a), (b) and (c) with respect to such dividend
or distribution shall then be made), except:
(A) the Record Date of such dividend or
distribution shall be substituted as (x) "the date
fixed for the determination of shareholders entitled
to receive such dividend or other distribution,"
"Record Date fixed for such determinations" and
"Record Date" within the meaning of paragraph (a)
above, (y) "the day upon which such subdivision
becomes effective" and "the day upon which such
combination becomes effective" within the meaning of
paragraph (b) above, and (z) as "the date fixed for
the determination of shareholders entitled to receive
such rights or warrants," "the Record Date fixed for
the determination of the shareholders entitled to
receive such rights or warrants" and such "Record
Date" within the meaning of paragraph (c) above, and
(B) any shares of Common Stock included
in such dividend or distribution shall not be deemed
"outstanding at the close of business on the date
fixed for such determination" within the meaning of
paragraph (a) above and any reduction or increase in
the number of shares of Common Stock resulting from
such subdivision or combination shall be disregarded
in connection with such dividend or distribution.
(e) In case the Company shall, by dividend or otherwise,
distribute to all holders of its Common Stock cash (excluding any cash that is
distributed upon a reclassification, change, merger, consolidation, statutory
share exchange, combination, sale or conveyance to which Section 4.02 hereof
applies, as part of a distribution referred to in paragraph (d) hereof or as
part of the liquidation, dissolution or winding up of the Company) in an
aggregate amount that, combined together with the aggregate amount of any other
such distributions to all holders of Common Stock made exclusively in cash
within the same calendar quarter as such distribution, and in respect of which
no adjustment pursuant to this paragraph (e) has been made, exceeds ) $0.025 per
share of Common Stock (the "Dividend Threshold Amount"), subject to adjustment
pursuant to this Article IV, then and in each such case, immediately after the
close of business on such date, the Exercise Amount shall be increased so that
the same shall equal the amount determined by multiplying the Exercise Amount in
effect immediately prior to the close of business on such Record Date by a
fraction:
(i) the numerator of which shall be equal to the
Conversion Price on such Record Date, and
(ii) the denominator of which shall be equal to such
Conversion Price less an amount per share equal to (x) if the
distribution resulting in adjustment pursuant to this paragraph (e) is
a quarterly dividend, the excess of such combined amount over the
24
Dividend Threshold Amount, or (y) if such distribution is not a
quarterly dividend, the full amount of such combined amount.
However, in the event that the combined amount so distributed
applicable to one share of Common Stock is equal to or greater than the
Conversion Price on the Record Date, in lieu of the foregoing adjustment,
adequate provision shall be made so that each Holder shall have the right to
receive upon exercise of a Warrant the amount of cash such Holder would have
received had such Holder exercised such Warrant immediately prior to such Record
Date. In the event that such dividend or distribution is not so paid or made,
the Exercise Amount shall again be adjusted to be the Exercise Amount which
would then be in effect if such dividend or distribution had not been declared.
(f) In case a tender offer made by the Company or any of
its subsidiaries for all or any portion of the Common Stock shall expire and
such tender offer (as amended upon the expiration thereof) shall require the
payment to shareholders (based on the acceptance (up to any maximum specified in
the terms of the tender offer) of Purchased Shares (as defined below)) of an
aggregate consideration having a Fair Market Value in excess of the Market Price
of the Common Stock on the Trading Date next succeeding the last time (the
"Tender Expiration Time") tenders could have been made pursuant to such tender
offer (as it may be amended), then, immediately prior to the opening of business
on the day after the date of the Tender Expiration Time, the Exercise Amount
shall be adjusted so that the same shall equal the amount determined by
multiplying the Exercise Amount in effect immediately prior to close of business
on the date of the Tender Expiration Time by a fraction:
(A) the numerator of which shall be the sum of
(x) the Fair Market Value (determined as aforesaid) of the
aggregate consideration payable to shareholders based on the
acceptance (up to any maximum specified in the terms of the
tender offer) of all shares validly tendered and not withdrawn
as of the Tender Expiration Time (the shares deemed so
accepted, up to any such maximum, being referred to as the
"Purchased Shares") and (y) the product of the number of
shares of Common Stock outstanding (less any Purchased Shares)
on the Tender Expiration Time and the Market Price of the
Common Stock on the Trading Day next succeeding the Tender
Expiration Time, and
(B) the denominator shall be the number of
shares of Common Stock outstanding (including any Purchased
Shares) at the Tender Expiration Time multiplied by the Market
Price of the Common Stock on the Trading Day next succeeding
the Tender Expiration Time.
Such increase (if any) shall become effective immediately
prior to the opening of business on the day following the Tender Expiration
Time. In the event that the Company is obligated to purchase shares pursuant to
any such tender offer, but the Company is permanently prevented by applicable
law from effecting any such purchases or all such purchases are rescinded, the
Exercise Amount shall again be adjusted to be the Exercise Amount which would
then be in effect if such tender offer had not been made. If the application of
this paragraph (f) to any tender offer would result in a decrease in the
Exercise Amount, no adjustment shall be made for such tender offer under this
paragraph (f).
25
(g) Notwithstanding the foregoing, whenever adjustments
to the Exercise Amount are called for pursuant to this Section 4.01, such
adjustments shall be made to the Market Price as may be necessary or appropriate
to effectuate the intent of this Section 4.01 and to avoid unjust or inequitable
results as determined in good faith by the Board of Directors.
(h) The Company may make such increases in the Exercise
Amount as the Board of Directors considers to be advisable to avoid or diminish
any income tax to holders of Common Stock or rights to purchase Common Stock
resulting from any dividend or distribution of stock (or rights to acquire
stock) or from any event treated as such for income tax purposes.
(i) To the extent permitted by applicable law, the
Company from time to time may increase the Exercise Amount by any amount for any
period of time if the period is at least 20 days and the increase is irrevocable
during the period and the Board of Directors determines in good faith that such
reduction would be in the best interests of the Company, which determination
shall be conclusive and given to it in a Board Resolution. Whenever the Exercise
Price is reduced pursuant to the preceding sentence, the Company shall mail to
the Warrant Agent and each Holder at the address of such Holder as it appears in
the Warrant Register a notice of the reduction at least 15 days prior to the
date the increased Exercise Amount takes effect, and such notice shall state the
increased Exercise Amount and the period during which it will be in effect.
Failure to give such notice shall not affect the legality or validity of such
reduction.
(j) Notwithstanding anything to the contrary in this
Section 4.01, no adjustment in the Exercise Amount in connection with a
Redemption shall be required unless such adjustment would require an increase or
decrease of at least 1% in such amount; provided, however, that any adjustments
which by reason of this paragraph are not required to be made shall be carried
forward and taken into account in any subsequent adjustment, which shall be
made, regardless of whether the aggregate amount of such cumulative adjustments
exceeds 1%, within one year of the first adjustment so carried forward or, if
earlier, the date on which such carried-forward adjustments first equal or
exceed 1% of the Exercise Amount or such Trading Price in effect as of the date
of the first such adjustment carried forward . All calculations under this
Article IV shall be made by the Company and shall be made to the nearest cent or
to the nearest one hundredth of a share, as the case may be.
(k) No adjustment need be made for a change in the par
value, or from par value to no par value, of the Common Stock. No adjustment to
the Exercise Amount will be made in respect of a distribution described in
Sections 4.01(c), (d) or (e) if the Holder will otherwise participate in such
distribution without conversion.
(l) In the event of any distribution referred to in
Section 4.01(c) or (d), where, in the case of a distribution described in
Section 4.01(d), the Fair Market Value of such distribution per share of Common
Stock (as determined by the Board of Directors) exceeds 5% of the Market Price
of a share of Common Stock on the Business Day immediately preceding the
declaration date for such distribution, then, if such distribution would also
trigger a conversion right pursuant to Section 3.01(b)(v), the Company shall be
required to give notice to the Holders at least 20 days prior to the Ex-Date for
the distribution and, upon the giving of notice, the
26
Warrants may be exercised at any time until the close of business on the
Business Day prior to such Ex Date or until the Company announces that the
distribution will not take place.
(m) Under the existing rights plan of the Company, or any
amendment thereof or adoption of a new rights plan, while Warrants remain
outstanding, Holders shall receive, upon exercise of Warrants, in addition to
shares of Common Stock, the rights under the applicable rights plan unless,
prior to exercise, the rights have expired, terminated or been redeemed or
unless the rights have separated from the Common Stock, in which case the
Exercise Amount in effect shall be adjusted at the time of separation as if the
Company had distributed to all Holders of Common Stock the distributed assets,
subject to readjustment upon the subsequent expiration, termination or
redemption of the rights.
(n) In any case in which this Section provides that an
adjustment shall become effective immediately after a Record Date for an event,
the Company may defer until the occurrence of such event (i) issuing to any
Holder of a Warrant exercised after such Record Date and before the occurrence
of such event the additional shares of Warrant Shares issuable upon such
exercise by reason of the adjustment required by such event over and above the
Warrant Shares issuable upon such exercise before giving effect to such
adjustment and (ii) paying to such Holder any amount in cash in lieu of any
fraction pursuant to Section 3.02(b) hereof.
(o) For purposes of this Section, the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of shares of Common Stock. The Company
shall not pay any dividend or make any distribution on shares of Common Stock
held in the treasury of the Company.
Section 4.02 Merger, Consolidation, Sale, Transfer or
Conveyance. (a) If any of following events occur, namely:
(i) any reclassification or change of the outstanding
shares of Common Stock (other than a change in par value, or from par
value to no par value, or from no par value to par value, or as a
result of a subdivision or combination) as a result of which holders of
Common Stock shall be entitled to receive Capital Stock, securities or
other property or assets (including cash) with respect to or in
exchange for such Common Stock,
(ii) any merger, consolidation, statutory share exchange
or combination of the Company with another Person as a result of which
holders of Common Stock shall be entitled to receive stock, securities
or other property or assets (including cash) with respect to or in
exchange for such Common Stock, or
(iii) any sale or conveyance of the properties and assets
of the Company as, or substantially as, an entirety to any Person as a
result of which holders of Common Stock shall be entitled to receive
stock, securities or other property or assets (including cash) with
respect to or in exchange for such Common Stock,
then the Company or the successor or purchasing corporation, as the case may be,
shall execute with the Warrant Agent an amendment to this Agreement pursuant to
Section 9.01 providing that the Warrants shall, upon exercise, entitle the
Holder thereof to the kind and amount of shares of
27
stock and other securities or property or assets (including cash) which such
Holder would have been entitled to receive upon such reclassification, change,
merger, consolidation, statutory share exchange, combination, sale or conveyance
had such Warrants been exercised immediately prior to such reclassification,
change, merger, consolidation, statutory share exchange, combination, sale or
conveyance, assuming such holder of Common Stock did not exercise its rights of
election, if any, as to the kind or amount of securities, cash or other property
receivable upon such merger, consolidation, statutory share exchange, sale or
conveyance (provided that, if the kind or amount of securities, cash or other
property receivable upon such merger, consolidation, statutory share exchange,
sale or conveyance is not the same for each share of Common Stock in respect of
which such rights of election shall not have been exercised ("Non-Electing
Share"), then for the purposes of this Section, the kind and amount of
securities, cash or other property receivable upon such merger, consolidation,
statutory share exchange, sale or conveyance for each Non-Electing Share shall
be deemed to be the kind and amount so receivable per share by a plurality of
the Non-Electing Shares). Such amendment shall provide for adjustments which
shall be as nearly equivalent as may be practicable to the adjustments provided
for in this Article IV. If, in the case of any such reclassification, change,
merger, consolidation, statutory share exchange, combination, sale or
conveyance, the stock or other securities and assets receivable thereupon by a
holder of shares of Common Stock includes shares of stock or other securities
and assets of a corporation other than the successor or purchasing corporation,
as the case may be, in such reclassification, change, merger, consolidation,
statutory share exchange, combination, sale or conveyance, then such amendment
shall also be executed by such other corporation and shall contain such
additional provisions to protect the interests of the Holders as the Board of
Directors shall reasonably consider necessary by reason of the foregoing.
(b) If such reclassification, change, merger,
consolidation, statutory share exchange, combination, sale or conveyance also
constitutes a Change of Control, then the Warrants will automatically terminate
upon the effective date of the Change of Control and this Section 4.02 shall not
apply.
(c) The Company shall cause notice of the execution of
such amendment to be mailed to each Holder, at the address of such Holder as it
appears on the Warrant Register, within 20 days after execution thereof. Failure
to deliver such notice shall not affect the legality or validity of such
amendment.
(d) The above provisions of this Section shall similarly
apply to successive reclassifications, changes, mergers, consolidations,
statutory share exchanges, combinations, sales and conveyances.
(e) If this Section 4.02 applies to any event or
occurrence, Section 4.01 hereof shall not apply.
Section 4.03 Other Events. (a) If any event occurs as to which
the foregoing provisions of this Article IV are not strictly applicable or, if
strictly applicable, would not, in the good faith judgment of the Board of
Directors, fairly and adequately protect the rights of the Holders of the
Warrants in accordance with the essential intent and principles of such
provisions, then the Board of Directors shall make such adjustments in the
application of such provisions, in accordance with such essential intent and
principles, as shall be reasonably necessary, in their
28
good faith opinion, to protect such purchase rights as aforesaid, but in no
event shall any such adjustment have the effect of decreasing the Exercise
Amount of any Warrant.
(b) In addition, in the event that any event specified or
contemplated by Section 4.01 or 4.02 shall have occurred, the Company shall
adjust the Dividend Threshold Amount proportionately to any resulting adjustment
to the Conversion Price and shall make such further and related adjustments in
the application of such provisions in accordance with the essential intent and
principles of such provisions, as shall be reasonable necessary, in the good
faith opinion of the Board of Directors, to effect such intent and principles.
Section 4.04 Notice of Adjustment. Whenever the Exercise
Amount is adjusted as herein provided (other than in the case of an adjustment
pursuant to Section 4.01(i) for which the notice required by such paragraph has
been provided), the Company shall promptly file with the Warrant Agent an
Officers' Certificate setting forth such adjusted Exercise Amount and such
adjusted Trading Prices in such definition, as the case may be, and showing in
reasonable detail the facts upon which such adjustment is based. Promptly after
delivery of such Officers' Certificate, the Company shall prepare a notice
stating that the Exercise Amount has been adjusted and setting forth such
adjusted Exercise Amount on the date on which each adjustment becomes effective,
and (i) shall mail such notice to each Holder at the address of such Holder as
it appears in the Warrant Register within 20 days of the effective date of such
adjustment, (ii) issue a press release through Dow Xxxxx & Company Inc and
Bloomberg Business News, or any successor organization to either containing the
information in such notice and (iii) post such information on the Company's
website or such other public medium as may be in general use for communication
of corporate information at such time. Failure to so deliver, issue or post such
notice or the information therein shall not effect the legality or validity of
any such adjustment.
Section 4.05 Notice of Certain Transactions. In case, at any
time after the date hereof:
(a) the Company shall declare a dividend (or any other
distribution) on its Common Stock payable otherwise than in cash out of its
capital surplus or its consolidated retained earnings;
(b) the Company shall authorize the granting to the
holders of its Common Stock of rights or warrants to subscribe for or purchase
any shares of capital stock of any class (or of securities convertible into
shares of capital stock of any class) or of any other rights;
(c) there shall occur any reclassification of the Common
Stock of the Company (other than a subdivision or combination of its outstanding
Common Stock, a change in par value, a change from par value to no par value or
a change from no par value to par value), or any merger, consolidation,
statutory share exchange or combination to which the Company is a party and for
which approval of any shareholders of the Company is required, or the sale,
transfer or conveyance of all or substantially all of the assets of the Company;
or
(d) there shall occur the voluntary or involuntary
dissolution, liquidation or winding up of the Company,
29
then the Company shall cause to be filed at the corporate trust office of the
Warrant Agent, and shall cause notice to be provided to the Warrant Agent and
all Holders in accordance with Section 9.02 hereof, at least 20 days (or 10 days
in any case specified in paragraph (a) or (b) above) prior to the applicable
record or effective date hereinafter specified, a notice stating:
(i) the date on which a record is to be taken for the
purpose of such dividend, distribution, rights or warrants, or, if a
record is not to be taken, the date as of which the holders of Common
Stock of record to be entitled to such dividend, distribution, rights
or warrants are to be determined, or
(ii) the date on which such reclassification, merger,
consolidation, statutory share exchange, combination, sale, transfer,
conveyance, dissolution, liquidation or winding up is expected to
become effective, and the date as of which it is expected that holders
of Common Stock of record shall be entitled to exchange their shares of
Common Stock for securities, cash or other property deliverable upon
such reclassification, merger, consolidation, statutory share exchange,
combination, sale, transfer, conveyance, dissolution, liquidation or
winding up.
Neither the failure to give such notice nor any defect therein
shall affect the legality or validity of the proceedings or actions described in
clauses (a) through (d) of this Section.
Section 4.06 Adjustment to Warrant Certificate. The form of
Warrant Certificate need not be changed because of any adjustment made pursuant
to this Article IV, and Warrant Certificates issued after such adjustment may
state the same Exercise Amount as is stated in the Warrant Certificates
initially issued pursuant to this Agreement. The Company, however, may at any
time in its sole discretion make any change in the form of Warrant Certificate
that it may deem appropriate to give effect to such adjustments and that does
not affect the substance of the Warrant Certificate, and any Warrant Certificate
thereafter issued or authenticated, whether in exchange or substitution for an
outstanding Warrant Certificate or otherwise, may be in the form as so changed.
ARTICLE V
EARLY EXPIRATION OF WARRANTS
Section 5.01 Early Expiration of Warrants. The Warrants shall
expire unexercised immediately and be of no further effect upon the occurrence
of any of the following events:
(a) at any time on or after March 5, 2007 upon the
redemption of the Trust PIERS if a Stock Price Event shall have
occurred and the Company and the Trust shall have caused the redemption
of the Trust PIERS pursuant to Section 4(c) of Annex I to the Trust
Agreement;
(b) at any time upon the redemption of the Trust PIERS if
a Special Event shall have occurred and the Company and the Trust shall
have caused the redemption of the Trust PIERS pursuant to Section 6.02
of the Trust Agreement;
30
(c) upon a Change of Control; or
(d) in the event of the bankruptcy, dissolution,
liquidation or similar event of the Company.
ARTICLE VI
EXCHANGE AND TRANSFER OF WARRANTS
Section 6.01 Warrant Register; Exchange and Transfer of
Warrants.
(a) The Warrant Agent shall maintain, at its corporate
trust office, a register (the "Warrant Register") in which, upon the issuance of
the Warrants, and subject to such reasonable regulations as the Warrant Agent
may prescribe, it shall register Warrant Certificates and exchanges and
transfers thereof. The Warrant Register shall be in written form or in any other
form capable of being converted into written form within a reasonable time.
(b) The Warrant Certificates shall be issued in
registered form only and shall be transferable only upon surrender thereof for
registration of transfer. Subject to the provisions of this Agreement, when a
Warrant Certificate is presented to the Warrant Agent with a request to register
a transfer thereof, the Warrant Agent shall register such transfer as requested.
(c) Except as provided in the following sentence, upon
surrender at the corporate trust office of the Warrant Agent, Warrant
Certificates may be exchanged for one or more other Warrant Certificates
evidencing the same aggregate number of Warrants of the same title, or may be
transferred in whole or in part. A transfer shall be registered upon surrender
of a Warrant Certificate to the Warrant Agent at its corporate trust office for
transfer, properly endorsed or accompanied by appropriate instruments of
transfer and written instructions for transfer, all in form satisfactory to the
Company and the Warrant Agent, duly signed by the registered holder or holders
thereof or by the duly appointed legal representative thereof or by a duly
authorized attorney, such signature to be guaranteed by (a) a bank or trust
company, (b) a broker or dealer that is a member of the National Association of
Securities Dealers, Inc. (the "NASD") or (c) a member of a national securities
exchange. Upon any such registration of transfer, a new Warrant Certificate
shall be issued to the transferee. In connection with any such transfer, to the
extent the Company furnishes the Warrant Agent with copies of a then-current
prospectus relating to the Warrant Shares, the Warrant Agent shall, if so
instructed by the Company, deliver, at the expense of the Company, the same to
any transferee of Warrants. Whenever a Warrant Certificate is surrendered for
exchange or transfer, the Company shall execute, and the Warrant Agent shall
countersign and deliver to the person or persons entitled thereto, one or more
Warrant Certificates, as so requested. The Warrant Agent shall not be required
to effect any exchange or transfer which will result in the issuance of a
Warrant Certificate evidencing a fraction of a Warrant. All Warrant Certificates
issued upon any exchange or transfer of a Warrant Certificate shall be the valid
obligations of the Company, evidencing the same obligations, and entitled to the
same benefits under this Agreement, as the Warrant Certificate surrendered for
such exchange or transfer. No service charge shall be made for any exchange or
transfer of Warrants, but the Company may require payment of a sum
31
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any such exchange or transfer, in accordance with Section
3.02(g) hereof.
Notwithstanding the foregoing, the Company and the Trust shall
not be obligated to execute and deliver to the Agent, and the Warrant Agent
shall not be obligated to authenticate and deliver any Warrant Certificate in
exchange for any other Warrant Certificate presented or surrendered for
registration or transfer or for exchange on or after the Business Day
immediately preceding the Expiration Date. In lieu of delivery of a new Warrant
Certificate, upon satisfaction of the applicable conditions specified above in
this Section and receipt of appropriate registration or transfer instructions
from such Holder, the Warrant Agent shall deliver the consideration received on
such Expiration Date if such Warrant shall have been exercised, subject to the
applicable conditions and in accordance with the applicable provisions hereof.
(d) As noted in Section 2.02, the Global Warrant
Certificate shall represent such of the outstanding Warrants as shall be
specified in the "Schedule of Increases and Decreases of Global Warrant
Certificate" attached thereto or otherwise in accordance with the Applicable
Procedures. The Warrant Agent shall make such other necessary endorsements to
the Global Warrant Certificate, or follow other Applicable Procedures,
consistent with the terms of this agreement to reflect the appropriate number of
Warrants represented thereby.
Section 6.02 Section 6.02 Transfer Provisions.
(a) Upon any exchange or transfer of all or a portion of
any Global Warrant Certificate for a certificated Warrant, the Global Warrant
Certificate will be marked to reflect the reduction of its number by the
aggregate number of such certificated Warrants
(b) The Security Registrar shall retain for at least ten
years copies of all letters, notices and other written communications received
pursuant to this Section 6.02. The Company shall have the right to inspect and
make copies of all such letters, notices or other written communications at any
reasonable time upon the giving of reasonable written notice to the Security
Registrar.
(c) Notwithstanding any other provisions of this Section,
unless and until it is exchanged in whole or in part for new Global Warrant
Certificates or Definitive Warrant Certificates, the Global Warrant Certificate
may not be transferred except as a whole by DTC to a nominee of DTC or by a
nominee of DTC to DTC or another nominee of DTC or by DTC or any such nominee to
a successor depositary or a nominee of such successor depositary. Interests of
beneficial owners in the Global Warrant Certificate may be transferred in
accordance with the rules and procedures of DTC. Members of, or participants in,
DTC ("Participants") shall have no rights under this Agreement with respect to
the Global Warrant Certificate held on their behalf by DTC or the Warrant Agent
as its custodian, and DTC may be treated by the Company, the Warrant Agent and
any agent of the Company or the Warrant Agent as the absolute owner of such
Global Warrant Certificate for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Warrant Agent or any
agent of the Company or the Warrant Agent from giving effect to any written
certification, proxy or other authorization furnished by DTC, or impair, as
between DTC and its Participants, the operation of customary practices governing
the exercise of the rights of a Holder of any Warrants. The registered Holder
32
of the Global Warrant Certificate may grant proxies and otherwise authorize any
person, including Participants and persons that may hold interest through
Participants, to take any action which a Holder is entitled to take under this
Agreement or the Warrants. As provided in Section 2.02, the Warrants may not be
transferred separately from the corresponding Debentures.
If DTC notifies the Company that it is unwilling or unable to
continue as depositary for the Global Warrant Certificate, or if at any time DTC
shall no longer be eligible under the next sentence of this paragraph, the
Company shall appoint a successor depositary with respect to the Warrants. Each
depositary appointed pursuant to this Section shall, at the time of its
appointment and at all times while it serves as depositary, be a clearing agency
registered under the Exchange Act, and any other applicable statute or
regulation. The Company shall execute, and the Warrant Agent, upon receipt of
written instructions from the Company, shall countersign and deliver, Warrants
in definitive registered form in any authorized denominations, in an aggregate
amount equal to the amount of the Global Warrant Certificate or Certificates if
(i) DTC notifies the Company that it is unwilling or unable to continue as
depositary therefor or if at any time DTC shall no longer be eligible to serve
as depositary and a successor depositary for the Warrants is not appointed by
the Company within 60 days after the Company receives such notice or becomes
aware of such ineligibility, (ii) the Company, in its discretion, notifies the
Warrant Agent in writing that it is electing to cause the issuance of Definitive
Warrant Certificates or (iii) if there shall have occurred and be continuing a
default by the Company in respect of its obligations under this Agreement, the
Indenture or the Trust Agreement.
Section 6.03 Cancellation of Warrant Certificates. In the
event that the Company shall purchase, redeem or otherwise acquire any Warrants
after the issuance thereof pursuant to the terms of this Agreement, the Warrant
Certificate or Warrant Certificates evidencing such Warrants shall thereupon be
delivered to the Warrant Agent and be canceled by it. The Warrant Agent shall
also cancel any Warrant Certificate delivered to it for exercise, in whole or in
part, or for exchange or transfer. Warrant Certificates so canceled shall be
delivered by the Warrant Agent to the Company from time to time, or disposed of
in accordance with the instructions of the Company; provided, that the Warrant
Agent shall not be required to destroy the Warrant Certificates.
If the Company, the Trust or any Affiliate of the Company
shall acquire any Warrant Certificate, such acquisition shall not operate as a
cancellation of such Warrant Certificate unless and until such Certificate is
delivered to the Warrant Agent cancelled or for cancellation.
Section 6.04 CUSIP Numbers. The Company, in issuing the
Warrants, shall use CUSIP numbers (if then generally in use), and, if so, the
Warrant Agent shall use CUSIP numbers in notices of redemption as a convenience
to Holders; provided that any such notice may state that no representation is
made as to the correctness of such numbers either as printed on the Warrants or
as contained in any notice of a redemption and that reliance may be placed only
on the other identification numbers printed on the Securities, and any such
redemption shall not be affected by any defect in or omission of such numbers.
The Company will promptly notify the Warrant Agent of any change in the CUSIP
numbers.
33
ARTICLE VII
CONCERNING THE WARRANT AGENT
Section 7.01 Warrant Agent. The Company hereby appoints The
Bank of New York as Warrant Agent, upon the terms and subject to the conditions
set forth herein, and The Bank of New York hereby accepts such appointment. The
Warrant Agent shall have the powers and authority granted to and conferred upon
it in the Warrant Certificates and hereby, and such further powers and authority
acceptable to it to act on behalf of the Company as the Company may hereafter
grant to or confer upon it. All of the terms and provisions with respect to such
powers and authority contained in the Warrant Certificates are subject to and
governed by the terms and provisions hereof.
Section 7.02 Conditions of Warrant Agent's Obligations. The
Warrant Agent accepts its obligations set forth herein upon the terms and
conditions hereof, including the following, to all of which the Company agrees
and to all of which the rights hereunder of the Holders shall be subject:
(a) Compensation and Indemnification. The Company agrees
to promptly pay the Warrant Agent the compensation agreed to in writing from
time to time by the Company and the Warrant Agent, and to reimburse the Warrant
Agent for reasonable out-of-pocket expenses (including counsel fees and
expenses) incurred by the Warrant Agent in connection with the services rendered
hereunder by the Warrant Agent. The Company also agrees to indemnify the Warrant
Agent for, and to hold it harmless against, any loss, liability or expense
(including the reasonable costs and expenses of defending against any claim of
liability) incurred without negligence or bad faith on the part of the Warrant
Agent arising out of or in connection with its appointment, status or service as
Warrant Agent hereunder.
(b) Agent for the Company. In acting as Warrant Agent
under this Agreement and in connection with any Warrant Certificate, the Warrant
Agent is acting solely as agent of the Company and does not assume any
obligation or relationship of agency or trust for or with any Holder.
(c) Counsel. The Warrant Agent may consult with counsel
reasonably satisfactory to it, and the advice of such counsel shall be full and
complete authorization and protection in respect of any action taken, suffered
or omitted by it hereunder in good faith and in accordance with the advice of
such counsel; provided, however, that reasonable care shall have been exercised
in the selection and continued employment of such attorneys and agents.
(d) Documents. The Warrant Agent shall be protected and
shall incur no liability for or in respect of any action taken, suffered or
omitted by it in reliance upon any notice, direction, consent, certificate,
affidavit, statement or other paper or document reasonably believed by it to be
genuine and to have been presented or signed by the proper parties.
(e) Officer's Certificate. Whenever in the performance of
its duties hereunder the Warrant Agent shall reasonably deem it necessary that
any fact or matter be proved or established by the Company prior to taking,
suffering or omitting any action hereunder, the
34
Warrant Agent may (unless other evidence in respect thereof be herein
specifically prescribed), in the absence of bad faith on its part, conclusively
rely upon a certificate signed by the Chairman of the Board of Directors, the
Vice Chairman of the Board of Directors, the President, an Executive Vice
President, a Vice President, the Treasurer, an Assistant Treasurer, the
Secretary or an Assistant Secretary of the Company delivered by the Company to
the Warrant Agent.
(f) Actions Through Agents. The Warrant Agent may execute
and exercise any of the rights or powers hereby vested in it or perform any duty
hereunder either itself or by or through its attorneys or agents, and the
Warrant Agent shall not be answerable or accountable for any act, default,
neglect or misconduct of any such attorney or agent or for any loss to the
Company resulting from such neglect or misconduct; provided, however, that
reasonable care shall have been exercised in the selection and continued
employment of such attorneys and agents.
(g) Certain Transactions. The Warrant Agent, and any
officer, director or employee thereof, may become the owner of, or acquire any
interest in, any Warrant, with the same rights that he, she or it would have if
it were not the Warrant Agent, and, to the extent permitted by applicable law,
he, she or it may engage or be interested in any financial or other transaction
with the Company and may serve on, or as depository, trustee or agent for, any
committee or body of holders of Common Stock or other obligations of the Company
as if it were not the Warrant Agent.
(h) No Liability For Interest. The Warrant Agent shall
not be liable for interest on any monies at any time received by it pursuant to
any of the provisions of this Agreement or of the Warrant Certificates, except
as otherwise agreed with the Company.
(i) No Liability For Invalidity. The Warrant Agent shall
incur no liability with respect to the validity of this Agreement (except as to
the due execution hereof by the Warrant Agent) or any Warrant Certificate
(except as to the countersignature thereof by the Warrant Agent).
(j) No Responsibility For Company Representations. The
Warrant Agent shall not be responsible for any of the recitals or
representations contained herein (except as to such statements or recitals as
describe the Warrant Agent or action taken or to be taken by it) or in any
Warrant Certificate (except as to the Warrant Agent's countersignature on such
Warrant Certificate), all of which recitals and representations are made solely
by the Company.
(k) No Implied Obligations. The Warrant Agent shall be
obligated to perform only such duties as are specifically given to it herein,
and no other duties or obligations shall be implied. The Warrant Agent shall not
be under any obligation to take any action hereunder that may subject it to any
expense or liability, the payment of which within a reasonable time is not, in
its reasonable opinion, assured to it. The Warrant Agent shall not be
accountable or under any duty or responsibility for the use by the Company of
any Warrant Certificate countersigned and authenticated by the Warrant Agent and
delivered by it to the Company pursuant to this Agreement or for the application
by the Company of the proceeds of the issuance or exercise of Warrants. The
Warrant Agent shall have no duty or responsibility in case of any default by the
35
Company in the performance of its covenants or agreements contained herein or in
any Warrant Certificate or in case of the receipt of any written demand from a
Holder with respect to such default, including, without limiting the generality
of the foregoing, any duty or responsibility to initiate or attempt to initiate
any proceedings at law or otherwise or, except as provided in Section 8.02
hereof, to make any demand upon the Company.
(l) No Liability for Calculations by Calculation Agent.
The Warrant Agent shall be entitled to conclusively rely upon any determination
by any Calculation Agent.
(m) Security Registrar. The Bank of New York is hereby
appointed the security registrar (the "Security Registrar"), and The Bank of New
York hereby accepts such appointment, for the purpose of registering securities
and transfers of securities as provided for herein.
Section 7.03 Resignation and Removal; Appointment of
Successor.
(a) The Company agrees, for the benefit of the Holders of
the Warrants, that there shall at all times be a Warrant Agent hereunder until
all Warrants have expired.
(b) The Warrant Agent may at any time resign as such by
giving written notice to the Company, specifying the date on which its desired
resignation shall become effective; provided that such date shall not be less
than 30 days after the date on which such notice if given unless the Company
agrees to accept a shorter notice. The Warrant Agent hereunder may be removed at
any time by the filing with it of an instrument in writing signed by or on
behalf of the Company and specifying such removal and the date when it shall
become effective. Notwithstanding the provisions of this paragraph (b), such
resignation or removal shall take effect upon the appointment by the Company, as
hereinafter provided, of a successor Warrant Agent (which shall be a banking
institution organized and doing business under the laws of the United States of
America, any State thereof or the District of Columbia, authorized under the
laws of such jurisdiction to exercise corporate trust powers and having at the
time of its appointment as Warrant Agent a combined capital and surplus (as set
forth in its most recent published report of financial condition) of at least
$50,000,000) and the acceptance of such appointment by such successor Warrant
Agent. In the event a successor Warrant Agent has not been appointed and has not
accepted its duties within 30 days of the Warrant Agent's notice of resignation,
the Warrant Agent may apply to any court of competent jurisdiction for the
designation of a successor Warrant Agent. The obligations of the Company under
Section 7.02(a) shall continue to the extent set forth therein notwithstanding
the resignation or removal of the Warrant Agent.
(c) In case at any time the Warrant Agent shall resign,
or shall be removed, or shall become incapable of acting, or shall file a
petition seeking relief under Title 11 of the United States Code, as now
constituted or hereafter amended or under any other applicable federal or state
bankruptcy law or similar law, or make an assignment for the benefit of its
creditors or consent to the appointment of a receiver or custodian of all or any
substantial part of its property, or shall admit in writing its inability to pay
or meet its debts as they mature, or if a receiver or custodian of it or all or
any substantial part of its property shall be appointed, or if an order of any
court shall be entered for relief against it under the provisions of Title 11 of
the
00
Xxxxxx Xxxxxx Code, as now constituted or hereafter amended, or under any other
applicable federal or state bankruptcy or similar law, or if any public officer
shall have taken charge or control of the Warrant Agent or of its property or
affairs, for the purpose of rehabilitation, conservation or liquidation, a
successor Warrant Agent, qualified as aforesaid, shall be appointed by the
Company by an instrument in writing, filed with the successor Warrant Agent.
Upon the appointment as aforesaid of a successor Warrant Agent and acceptance by
the latter of such appointment, the Warrant Agent so superseded shall cease to
be Warrant Agent hereunder.
(d) Any successor Warrant Agent appointed hereunder shall
execute, acknowledge and deliver to its predecessor and to the Company an
instrument accepting such appointment hereunder, and thereupon such successor
Warrant Agent, without any further act, deed or conveyance, shall become vested
with all the authority, rights, powers, trusts, immunities, duties and
obligations of such predecessor with like effect as if originally named as
Warrant Agent hereunder, and such predecessor, upon payment of its charges and
disbursements then unpaid, shall thereupon become obligated to transfer, deliver
and pay over, and such successor Warrant Agent shall be entitled to receive all
moneys, securities and other property on deposit with or held by such
predecessor, as Warrant Agent hereunder.
(e) Any corporation into which the Warrant Agent
hereunder may be merged or converted or any corporation with which the Warrant
Agent may be consolidated, or any corporation resulting from any merger,
conversion or consolidation to which the Warrant Agent shall be a party, or any
corporation to which the Warrant Agent shall sell or otherwise transfer all or
substantially all of the assets and business of the Warrant Agent, provided that
such corporation shall be qualified as aforesaid, shall be the successor Warrant
Agent under this Agreement without the execution or filing of any paper or any
further act on the part of any of the parties hereto.
Section 7.04 Compliance With Applicable Laws. The Warrant
Agent agrees to comply with all laws applicable to it in respect of the services
rendered by it under this Agreement and in connection with the Warrants,
including (but not limited to) the provisions of United States federal income
tax laws regarding information reporting and backup withholding. The Warrant
Agent expressly assumes all liability for its failure to comply with any such
laws imposing obligations on it, including (but not limited to) any liability
for failure to comply with any applicable provisions of United States federal
income tax laws regarding information reporting and backup withholding.
Section 7.05 Office. The Company will maintain an office or
agency where Warrant Certificates may be presented for exchange, transfer or
exercise. The office initially designated for this purpose shall be the
Corporate Trust Office of the Warrant Agent at its address given to it in
Section 9.02.
ARTICLE VIII
COVENANTS
Section 8.01 Financial Statements and Reports of the Company.
The Company agrees so long as the Company is subject to Section 13 or 15 of the
Exchange Act, to provide to
37
each Holder, without cost to such Holder, copies of the annual and quarterly
reports and documents that the Company provides generally to shareholders of the
Company at the same time it provides the documents and reports to shareholders
that the Company files with the Commission.
Delivery of any such reports, information and documents to the
Warrant Agent shall be for informational purposes only and the Warrant Agent's
receipt of such shall not constitute constructive notice of any information
contained therein or determinable from information contained therein, including
the Company's compliance with any of its covenants hereunder (as to which the
Warrant Agent is entitled to rely exclusively on Officers' Certificates).
Notwithstanding anything to the contrary in this Section, the Company shall not
be required to deliver any such reports, information and documents which have
been electronically filed with the Securities and Exchange Commission.
Section 8.02 Notices and Demands to the Company and Warrant
Agent. If the Warrant Agent shall receive any notice or demand addressed to the
Company by any Holder pursuant to the provisions of the Warrant Certificates,
the Warrant Agent shall promptly forward such notice or demand to the Company.
Section 8.03 Governmental Approvals. The Company shall from
time to time use all reasonable efforts to obtain and keep effective any and all
permits, consents and approvals of governmental agencies and authorities and the
national securities exchange on which the Common Stock may be listed or
authorized for trading from time to time and will make all filings under the
federal and state securities laws (including without limitation the Securities
Act), as may be or become requisite in connection with the issuance, sale,
trading, transfer or delivery of the Warrants and Warrant Certificates, the
exercise of the Warrants and the issuance, sale and delivery of the Warrant
Shares.
Section 8.04 Satisfaction of Exercise Conditions.
(a) The Company shall at all times exercise its best
efforts to satisfy or cause to be satisfied the Exercise Conditions until the
earlier of (x) the Expiration Date and (y) the first date no Warrants remain
outstanding. In connection therewith, the Company shall exercise its best
efforts to (a) to the extent required by applicable law, prior to the exercise
of any Warrant (whether in connection with a Redemption or otherwise), furnish
the Warrant Agent with sufficient copies of a then-current prospectus relating
to the Common Stock or Short-Term Debentures, if applicable, deliverable upon
exercise of any outstanding Warrants (and the Warrant Agent, upon receipt
thereof, if any, shall deliver, at the expense of the Company, the same to
exercising Holders), and (b) otherwise cause to be satisfied the Exercise
Conditions.
(b) The Company agrees to use its reasonable best efforts
to file as soon as practicable and in any event no later than five Business Days
after the first Trading Day when the Market Price of the Common Stock shall be
equal to or greater than the Conversion Price, as such term is defined in the
Trust Agreement, as of such date and as adjusted pursuant to Article IV hereof,
to have declared effective and to thereafter maintain the effectiveness, until
the earlier of (i) March 5, 2007 or (ii) such time as no Warrants remain
outstanding, a shelf registration statement covering the issuance and sale of
the Common Stock and, to the extent required by
38
applicable law, the Short-Term Debentures upon Cash Exercise. The Company
further agrees to use the cash proceeds of any Cash Exercise for "current
transactions" within the meaning of Section 3(a)(3) under the Securities Act.
Section 8.05 Reservation of Shares. The Company shall at all
times keep reserved out of its authorized shares of Common Stock a number of
shares of Common Stock sufficient to provide for the exercise of all outstanding
Warrants. The registrar for the Common Stock shall at all times, until the
Warrants have expired, reserve such number of authorized shares as shall be
required for such purpose. All Warrant Shares shall, and the Company covenants
that they will, upon issuance, be fully paid, nonassessable, free of preemptive
rights and free from all taxes, liens, charges and security interests with
respect to the issue thereof.
Section 8.06 Claims of Holders. Each beneficial owner of
Warrants shall be deemed to agree, by its acceptance of any Warrant, not to
assert upon the occurrence of any of the events indicated in clauses (i), (ii)
or (iv) of Section 8.01(a) of the Trust Agreement, or any similar event, any
claim in respect of the Warrants and the Debentures as a whole before any court
having jurisdiction in the premises under the Federal bankruptcy laws, as now or
hereafter constituted, or any other applicable Federal or state bankruptcy,
insolvency or other similar law, in excess of the Nominal Accreted Value of a
Like Amount of Debentures on the date of commencement of any such proceedings
before such court.
ARTICLE IX
MISCELLANEOUS
Section 9.01 Supplements and Amendments.
(a) The Company and Warrant Agent may from time to time
supplement or amend this Agreement without the approval or consent of any Holder
in order to cure any ambiguity, to correct or supplement any provision contained
herein that may be defective or inconsistent with any other provisions herein,
or to make any other provision in regard to matters or questions arising
hereunder that the Company and the Warrant Agent may deem necessary or desirable
and that shall not adversely affect the interests of the Holders. Every Holder
of Warrants, whether issued before or after any such supplement or amendment,
shall be bound thereby. Promptly after the effectiveness of any supplement or
amendment that affects the interest of the Holders, the Company shall give
notice thereof, as provided in Section 9.02 hereof, to the Holders affected
thereby, setting forth in general terms the substance of such supplement or
amendment.
(b) The Company and the Warrant Agent may modify or amend
this Agreement and the Warrant Certificates with the consent of the Holders of
not fewer than a majority in number of the then-outstanding unexercised
Warrants, for any purpose; provided, however, that no such modification or
amendment that (i) changes the Exercise Amount of the Warrants other than in
accordance with Article IV, (iii) accelerates the Expiration Date of the
Warrants, (iv) changes the provisions relating to the exercise of Warrants, (iv)
changes the provisions requiring that the Warrants not be transferred separately
from the Debentures or (v) reduces the percentage of outstanding unexercised
Warrants the consent of the Holders of which
39
is required hereunder for modification or amendment of this Agreement or the
Warrants, may be made without the consent of each Holder.
Section 9.02 Addresses for Notices.
(a) Any communications from the Company to the Warrant
Agent with respect to this Agreement shall be addressed to The Bank of New York,
000 Xxxxxxx Xxxxxx, Xxxxx 21 West, New York, New York 10286, Attention:
Corporate Trust Administration;
(b) any communications from the Warrant Agent to the
Company with respect to this Agreement shall be addressed to Sovereign Bancorp,
Inc., 0000 Xxxxxxxxx Xxxxxxxxx, Xxxxxxxxxx, XX 00000, Attention: Chief Financial
Officer; with a copy to Xxxxxxx & Xxx, 000 Xxxxx 0xx Xxxxxx, Xxxxxxx, XX 00000,
Attention: Xxxxxx X. Xxxxxxx; or
(c) such other addresses as shall be specified in writing
by the Warrant Agent or by the Company, as the case may be.
Any notice or communication mailed to a Holder shall be mailed
to the Holder at the Holder's address as it appears on the Warrant Register and
shall be sufficiently given if so mailed within the time prescribed.
Failure to mail a notice or communication to a Holder or any
defect in it shall not affect its sufficiency with respect to other Holders. If
a notice or communication is mailed in the manner provided above, it is duly
given, whether or not the addressee receives it.
Section 9.03 Governing Law. This Warrant Agreement and the
Warrant Certificates shall be governed by, and construed in accordance with, the
laws of the State of New York. Without limiting the foregoing, the validity of
the issuance of the Warrant Shares shall be governed by the Business Corporation
Law of the State of Pennsylvania.
Section 9.04 Persons Having Rights Under Warrant Agreement.
Nothing in this Agreement or in the Warrants, express or implied, and nothing
that may be inferred from any of the provisions hereof is intended, or shall be
construed, to confer upon, or give to, any person or corporation other than the
Company, the Warrant Agent and the Holders any right, remedy or claim under or
by reason of this Agreement or of any covenant, condition, stipulation, promise
or agreement hereof; and all covenants, conditions, stipulations, promises and
agreements in this Agreement contained shall be for the sole and exclusive
benefit of the Company and the Warrant Agent and their respective successors and
of the Holders.
Section 9.05 Headings. The descriptive headings of the several
Articles and Sections and the Table of Contents of this Agreement are for
convenience only and shall not control or affect the meaning or construction of
any of the provisions hereof.
Section 9.06 Counterparts. This Warrant Agreement may be
executed by the parties hereto in any number of counterparts, each of which when
so executed and delivered shall be deemed to be an original; but all such
counterparts shall together constitute but one and the same instrument.
40
Section 9.07 Inspection of Agreement. A copy of this Agreement
shall be available at all reasonable times at the principal corporate trust
office of the Warrant Agent, for inspection by the Holders of Warrants.
Section 9.08 Separability Clause. In case any provision in
this Agreement or the Securities shall be invalid, illegal or unenforceable, the
validity, legality and enforceability of the remaining provisions shall not in
any way be affected or impaired thereby.
Section 9.09 Successors and Assigns. All covenants and
agreements in this Agreement by the Company shall bind its successors and
assigns, whether so expressed or not.
Section 9.10 Legal Holidays. In any case where any Change of
Control Date, Change of Control Notice Date or Redemption Date shall not be a
Business Day, then (notwithstanding any other provision of this Agreement or the
Certificates) payment of any amounts otherwise payable or the taking of other
action on such date shall not be made or taken on such date, but such payments
shall be made or action shall be taken on the next succeeding Business Day with
the same force and effect as if made or taken on such date.
41
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
SOVEREIGN BANCORP, INC.
By: ________________________________
Name:
Title:
THE BANK OF NEW YORK,
as Warrant Agent
By: ________________________________
Name:
Title:
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
[THIS CERTIFICATE IS A GLOBAL WARRANT CERTIFICATE WITHIN THE MEANING OF THE
WARRANT AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF THE
DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION (THE "DEPOSITARY"), OR A
NOMINEE OF THE DEPOSITARY. THIS CERTIFICATE IS EXCHANGEABLE FOR CERTIFICATES
REGISTERED IN THE NAME OF A PERSON OTHER THAN THE DEPOSITARY OR ITS NOMINEE ONLY
IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE WARRANT AGREEMENT AND NO TRANSFER
OF THIS CERTIFICATE (OTHER THAN A TRANSFER OF THIS CERTIFICATE AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO
THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY) MAY BE REGISTERED EXCEPT IN
LIMITED CIRCUMSTANCES.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITARY FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITARY), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF THE DEPOSITARY OR TO A SUCCESSOR THEREOF OR SUCH
SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE
LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS GIVEN TO IT IN THE
WARRANT AGREEMENT REFERRED TO HEREIN.]*
THE SECURITIES EVIDENCED BY THIS CERTIFICATE MAY NOT BE TRANSFERRED WITHOUT A
SIMULTANEOUS TRANSFER OF ONE 4.375% JUNIOR SUBORDINATED DEFERRABLE INTEREST
DEBENTURE DUE MARCH 1, 2034 (EACH, A "DEBENTURE") ISSUED UNDER THE THIRD
SUPPLEMENTAL INDENTURE, DATED AS OF FEBRUARY 26, 2004, BETWEEN THE COMPANY AND
BNY MIDWEST TRUST COMPANY, AS INDENTURE TRUSTEE, PER EACH WARRANT TRANSFERRED.
BY ITS ACCEPTANCE HEREOF THE HOLDER HEREOF ACKNOWLEDGES AND AGREES THAT ANY
TRANSFER OF A WARRANT WITHOUT A TRANSFER OF A CORRESPONDING DEBENTURE SHALL BE
DEEMED TO BE VOID AND OF NO
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* Insert for a Global Warrant Certificate
B-1
LEGAL EFFECT WHATSOEVER. ANY SUCH TRANSFEREE SHALL BE DEEMED NOT TO BE A HOLDER
OF SUCH WARRANTS OR DEBENTURES FOR ANY PURPOSE, AND SUCH TRANSFEREE SHALL BE
DEEMED TO HAVE NO INTEREST WHATSOEVER IN SUCH WARRANTS OR DEBENTURES.
FOR PURPOSES OF SECTIONS 1273 AND 1275 OF THE INTERNAL REVENUE CODE, THIS
INSTRUMENT (AS DEFINED BELOW) IS A CONTINGENT PAYMENT DEBT INSTRUMENT AND WILL
ACCRUE ORIGINAL ISSUE DISCOUNT AT THE COMPANY'S "COMPARABLE YIELD" FOR UNITED
STATES FEDERAL INCOME TAX PURPOSES. PURSUANT TO SECTION 2.08 OF THE WARRANT
AGREEMENT, THE COMPANY AGREES, AND BY ACCEPTANCE OF A BENEFICIAL OWNERSHIP
INTEREST IN THE WARRANTS EACH BENEFICIAL HOLDER OF WARRANTS AGREES, FOR UNITED
STATES FEDERAL INCOME TAX PURPOSES, (I) TO TREAT EACH DEBENTURE AND THE
CORRESPONDING WARRANT IN WHICH SUCH HOLDER HAS A BENEFICIAL INTEREST AS A SINGLE
UNITARY INSTRUMENT, (II) TO TREAT SUCH UNITARY INSTRUMENT AS INDEBTEDNESS OF THE
COMPANY, (III) TO TREAT SUCH INDEBTEDNESS AS SUBJECT TO SECTION 1.1275-4(b) OF
THE TREASURY REGULATIONS (THE "CONTINGENT DEBT REGULATIONS"), (IV) TO BE BOUND
BY THE COMPANY'S DETERMINATION OF THE "COMPARABLE YIELD" AND "PROJECTED PAYMENT
SCHEDULE," WITHIN THE MEANING OF THE CONTINGENT DEBT REGULATIONS, WITH RESPECT
TO SUCH HOLDER'S DEBENTURES AND CORRESPONDING WARRANTS, AND (V) TO USE SUCH
"COMPARABLE YIELD" AND "PROJECTED PAYMENT SCHEDULE" IN DETERMINING ITS INTEREST
ACCRUALS WITH RESPECT TO SUCH HOLDER'S DEBENTURES AND CORRESPONDING WARRANTS AND
IN DETERMINING ADJUSTMENTS THERETO. FOR PURPOSES OF THE FOREGOING, THE COMPANY'S
DETERMINATION OF THE "COMPARABLE YIELD" IS 7.410% PER ANNUM, COMPOUNDED
QUARTERLY. THE PROJECTED PAYMENT SCHEDULE, DETERMINED BY THE COMPANY, IS
ATTACHED AS EXHIBIT B TO THE INDENTURE FOR THE DEBENTURES. A HOLDER OF WARRANTS
MAY OBTAIN THE ISSUE DATE, YIELD TO MATURITY, COMPARABLE YIELD AND A COPY OF THE
PROJECTED PAYMENT SCHEDULE FOR THE DEBENTURES AND WARRANTS BY TELEPHONING THE
COMPANY'S INVESTOR RELATIONS DEPARTMENT AT (000) 000-0000 OR SUBMITTING A
WRITTEN REQUEST FOR SUCH INFORMATION TO INVESTOR RELATIONS DEPARTMENT, SOVEREIGN
BANK, MAIL CODE 11-900-IR5, X.X. XXX 00000, XXXXXXX, XX 00000, ATTN: XXXX X.
XxXXXXXX.
2
WARRANTS TO PURCHASE COMMON STOCK OF
SOVEREIGN BANCORP, INC.
No.: ______
Certificate for _____ Warrants CUSIP No. ___________
THIS CERTIFIES THAT __________, or its registered assigns, is the registered
holder of the number of Warrants given to it above (the "Warrants") [as
increased or decreased as provided for in Schedule A hereto]*. Each Warrant
entitles the holder thereof (the "Holder"), at its option and subject to the
provisions contained herein and in the Warrant Agreement referred to below, to
purchase from Sovereign Bancorp, Inc., a Pennsylvania corporation (the
"Company"), 1.6301 shares (subject to certain adjustments as provided in the
Warrant Agreement) of common stock of the Company (the "Common Stock") at the
Exercise Price. The Exercise Price as of any date of exercise shall be equal to
the Nominal Accreted Value as of such Exercise Date of one 4.375% Junior
Subordinated Deferrable Interest Debenture due March 1, 2034 (a "Debenture")
issued under the Third Supplemental Indenture, dated as of February 26, 2004,
between the Company and BNY Midwest Trust Company, as Indenture Trustee. This
Warrant Certificate shall terminate and become void, and the related Warrants
shall expire, as of 5:00 p.m., New York City time, on March 1, 2034 (the
"Expiration Date"), as such expiration date may be accelerated pursuant to
Section 5.01 of the Warrant Agreement, as described below, or upon the earlier
exercise hereof as to all the shares of Common Stock subject hereto. The number
of shares issuable upon exercise of the Warrants shall be subject to adjustment
from time to time as provided in the Warrant Agreement.
This Warrant Certificate is issued under and in accordance
with a Warrant Agreement dated as of February 26, 2004 (the "Warrant
Agreement"), between the Company and The Bank of New York, as warrant agent (the
"Warrant Agent," which term includes any successor Warrant Agent under the
Warrant Agreement), and is subject to the terms and provisions contained in the
Warrant Agreement, to all of which terms and provisions the Holder of this
Warrant Certificate consents by acceptance hereof. The Warrant Agreement is
hereby incorporated herein by reference and made a part hereof. Reference is
hereby made to the Warrant Agreement for a full statement of the respective
rights, limitations of rights, duties and obligations of the Company, the
Warrant Agent and the Holders of the Warrants. Capitalized terms used but not
defined herein shall have the meanings given to them in the Warrant Agreement. A
copy of the Warrant Agreement may be obtained for inspection by the Holder
hereof upon written request to the Warrant Agent at its address for notices
specified in the Warrant Agreement.
Subject to early expiration as described below, the Holder of
this Warrant Certificate shall have the right, prior to the Expiration Date, at
such Holder's option, to exercise the related Warrant and purchase the Exercise
Amount (subject to certain adjustments provided in the Warrant Agreement) of
Common Stock at the Exercise Price, provided that the Exercise
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* Insert for a Global Warrant Certificate
3
Conditions and one of the conditions set forth in Section 3.01(b) of the Warrant
Agreement are satisfied as of such date. If the Warrant evidenced by this
Warrant Certificate is not exercised at or before 5:00 p.m., New York City time,
on its Expiration Date, such Warrant shall become void, and all rights of the
Holder of this Warrant Certificate hereunder and under the Warrant Agreement
shall cease. The Warrant or Warrants evidenced by this Warrant Certificate may
be exercised by giving notice to the Warrant Agent no later than 5:00 p.m., New
York City time, on the Business Day preceding the proposed date of exercise of
such Warrants, and completing the form of election to purchase provided on the
reverse hereof and otherwise complying with the Applicable Procedures, and
delivering the same, together with this Warrant Certificate (if this Warrant
Certificate shall then be held in definitive form), to the Warrant Agent no
later than 5:00 p.m., New York City time, on the date of such exercise, together
with one Debenture per Warrant exercised.
At any time prior to March 5, 2007, a Holder at its option may
exercise its Warrants either by delivery of a Like Amount of Debentures in
satisfaction of the Exercise Price or by delivery of such Debentures together
with a Cash Payment in an amount equal to the aggregate Nominal Accreted Value
on the exercise date of such Debentures ("Cash Exercise"), provided that the
Exercise Conditions are met as of such date and provided, further, that the
conditions set forth in Section 3.01(b)(i) of the Warrant Agreement have been
satisfied. A Holder may not Cash Exercise if the exercise right arises solely
out of any other provision of Section 3.01(b).
On the date of exercise of the Warrant or Warrants evidenced
by this Warrant Certificate pursuant to the preceding paragraphs, the Company
shall issue, and the Warrant Agent shall deliver, to or upon the order of the
Holder hereof, the Exercise Amount of Common Stock to which such Holder is
entitled, registered in such name or names as may be directed by such Holder.
The date on which this Warrant Certificate and corresponding Debentures are
received by the Warrant Agent shall be deemed to be the date on which the
related Warrant is exercised and the related Common Stock is issued. In the case
of any Cash Exercise pursuant to the preceding paragraph, the Company shall also
deliver to the exercising Holder a number of modified Debentures, equal in
number to the Like Amount of Debentures tendered upon Cash Exercise, in
definitive registered form with modified terms, including a maturity date 94
days after the exercise date (such Debentures as modified, the "Short-Term
Debentures"), registered in such name or names as may be directed by such
Holder.
Notwithstanding anything to the contrary in this Warrant
Certificate or in the Warrant Agreement, (i) no fractional shares of Common
Stock shall be issued by the Company upon the exercise of any Warrant, (ii) if
more than one Warrant shall be exercised at the same time by the same Holder,
the number of shares of Warrant Shares issuable in connection with such exercise
shall be computed on the basis of the aggregate Exercise Amount of the Warrants
so exercised, and (iii) on the date a Holder exercises such Holder's Warrant,
the Company shall pay such Holder an amount in cash equal to the Trading Price
on the third Trading Day prior to the date of such exercise (multiplied by the
related fraction) of Common Stock for such fractional shares, computed to the
nearest whole cent.
If fewer than all of the Warrants evidenced by this Warrant
Certificate are exercised, the Company shall execute, and an authorized officer
of the Warrant Agent shall
4
countersign and deliver, a new Warrant Certificate evidencing the number of
Warrants remaining unexercised.
The "Exercise Conditions" require that, with respect to any
Warrant on any date on which such Warrant is or is proposed to be exercised by
the Holder thereof:
(a) the Company shall have a registration statement in
effect under the Securities Act covering the issuance
and sale of the related Exercise Amount of Common
Stock upon exercise of such Warrant or the issuance
and sale (and resale) of the related Exercise Amount
of Common Stock upon exercise of such Warrant is
exempt from the registration requirements of the
Securities Act;
(b) such shares of Common Stock have been registered,
qualified or are deemed to be exempt under applicable
state securities laws;
(c) to the extent required by applicable law, a then
current prospectus relating to the Common Stock shall
be delivered to such exercising Holder; and
(d) if any 4.375% Contingent Convertible Trust Preferred
Income Equity Redeemable Securities ("Trust PIERS")
issued by Sovereign Capital Trust IV shall be
outstanding at such time, a Like Amount of Trust
PIERS shall have been correspondingly delivered to
the Property Trustee for conversion into Common
Stock.
As provided in the Warrant Agreement, the number of shares of
Warrant Shares issuable upon the exercise of the Warrants is subject to an
anti-dilution adjustment upon the happening of certain events. The Warrant
Agreement also provides for certain adjustments and/or distributions in the
event of certain events relating to a merger or combination of the Company, and
similar events.
The Warrants shall expire unexercised immediately and be of no
further effect upon the occurrence of any of the following events:
(a) at any time on or after March 5, 2007 upon the
redemption of the Trust PIERS if a Stock Price Event
(as defined in the Warrant Agreement) shall have
occurred and the Company and the Trust shall have
caused the redemption of the Trust PIERS;
(b) at any time upon the redemption of the Trust PIERS if
a Special Event shall have occurred and the Company
and the Trust shall have caused the redemption of the
Trust PIERS;
(c) upon a Change of Control (as defined in the Warrant
Agreement); or
(d) in the event of the bankruptcy, dissolution,
liquidation or similar event of the Company.
5
Any Warrant that has expired, including pursuant to the
preceding paragraph, or been exercised will, upon such expiration or exercise,
cease to be outstanding.
A Warrant may not be transferred without a simultaneous
transfer of one Debenture issued under the Indenture per each Warrant.
The Company may require payment of a sum sufficient to pay all
taxes, assessments or other governmental charges in connection with the transfer
or exchange of the Warrant Certificates pursuant to the Warrant Agreement, but
not for any exchange or original issuance (not involving a transfer) with
respect to temporary Warrant Certificates, the exercise of the Warrants or the
issuance of the Common Stock.
This Warrant Certificate may be exchanged at the office of the
Warrant Agent by presenting this Warrant Certificate properly endorsed with a
request to exchange this Warrant Certificate for other Warrant Certificates
evidencing an equal number of Warrants, in accordance with the Warrant
Agreement.
All Warrant Shares, upon issuance, shall be duly and validly
issued and fully paid and non-assessable.
The holder in whose name this Warrant Certificate is
registered may be deemed and treated by the Company and the Warrant Agent as the
absolute owner of this Warrant Certificate for all purposes whatsoever and
neither the Company nor the Warrant Agent shall be affected by notice to the
contrary.
Neither this Warrant Certificate, nor the Warrant evidenced
hereby, entitles the Holder hereof to any of the rights of a shareholder of the
Company.
6
This Warrant Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned and authenticated by the
Warrant Agent.
SOVEREIGN BANCORP, INC.
By: ___________________________
Name:
Title:
DATED:
Authenticated and Countersigned:
THE BANK OF NEW YORK,
as Warrant Agent
By: ____________________________
Name:
Title:
7
[REVERSE OF WARRANT CERTIFICATE]
FORM OF ELECTION TO EXERCISE WARRANT TO PURCHASE COMMON STOCK
PRIOR TO XXXXX 0, 0000
(XX XX EXECUTED ONLY UPON EXERCISE OF WARRANTS)
SOVEREIGN BANCORP, INC.
Select as appropriate:
[ ] The undersigned hereby irrevocably elects to exercise ___ Warrants at
an Exercise Price of $______ per Warrant to acquire the Exercise Amount
(as determined pursuant to the Warrant Agreement) per Warrant of Common
Stock of Sovereign Bancorp, Inc. on the terms and conditions specified
within this Warrant Certificate and the Warrant Agreement therein
referred to, surrenders this Warrant Certificate, together with a Like
Amount of Debentures in satisfaction in full of the Exercise Price, and
all right, title and interest therein and directs that the shares of
Common Stock deliverable upon such exercise be registered or placed in
the name and at the address specified below and delivered thereto.
OR, upon Cash Exercise:
[ ] The undersigned hereby irrevocably elects to Cash Exercise ___
Warrants at an Exercise Price of $______ per Warrant to acquire the
Exercise Amount (as determined pursuant to the Warrant Agreement) per
Warrant of Common Stock of Sovereign Bancorp, Inc. on the terms and
conditions specified within this Warrant Certificate and the Warrant
Agreement therein referred to, surrenders this Warrant Certificate and
all right, title and interest therein, together with a Cash Amount
equal to the Exercise Price, delivers a Like Amount of Debentures in
exchange for Debentures in registered, definitive form with an
accelerated maturity date and other modified terms and conditions and
directs that the shares of Common Stock and Short-Term Debentures
deliverable upon such exercise be registered or placed in the name and
at the address specified below and delivered thereto.
8
FORM OF ELECTION TO EXERCISE WARRANT TO PURCHASE COMMON STOCK
ON OR AFTER XXXXX 0, 0000
(XX XX EXECUTED ONLY UPON EXERCISE OF WARRANTS)
SOVEREIGN BANCORP, INC.
The undersigned hereby irrevocably elects to exercise ___ Warrants at an
Exercise Price of $______ per Warrant to acquire the Exercise Amount (as
determined pursuant to the Warrant Agreement) per Warrant of Common Stock of
Sovereign Bancorp, Inc. on the terms and conditions specified within this
Warrant Certificate and the Warrant Agreement therein referred to, surrenders
this Warrant Certificate, together with a Like Amount of Debentures in
satisfaction in full of the Exercise Price, and all right, title and interest
therein and directs that the shares of Common Stock deliverable upon such
exercise be registered or placed in the name and at the address specified below
and delivered thereto.
9
The signature below must correspond with the name as written
upon the face of the within Warrant Certificate in every particular, without
alteration or enlargement or any change whatsoever, and must be guaranteed.
Dated: ____________, ____
_______________________________
(Signature of Holder)
_______________________________
(Xxxxxx Xxxxxxx)
_______________________________
(City) (State) (Zip Code)
Signature Guaranteed by:
_______________________________
(Signature must be guaranteed
by an eligible guarantor
institution (banks, stock
brokers, savings and loan
associations and credit unions)
with membership in an approved
guarantee medallion program
pursuant to Securities Exchange
Commission Rule 17Ad-5)
10
Identity of Person to whom Common Stock and, if applicable prior to March 5,
2007, Short-Term Debentures, shall be delivered:
Please insert social security or identifying number:
Name: __________________________________________________________________________
Street Address: ________________________________________________________________
City, State and Zip Code: ______________________________________________________
_______________________________________________________
Any unexercised Warrants represented by the Warrant Certificate to be issued to:
Please insert social security or identifying number:
Name: __________________________________________________________________________
Street Address: ________________________________________________________________
City, State and Zip Code: ______________________________________________________
______________________________________________________
11
[TO BE ATTACHED TO GLOBAL WARRANT CERTIFICATES]
SCHEDULE A
SCHEDULE OF INCREASES OR DECREASES IN GLOBAL WARRANT CERTIFICATE
This Global Certificate shall represent 14,432,990 Warrants
unless otherwise indicated below.
The following increases or decreases in this Global Warrant
Certificate have been made:
Number of Warrants
Amount of decrease Amount of increase in evidenced by the
in Number of Number of Warrants Global Warrant
Warrants evidenced evidenced by the Certificate Signature of
by the Global Global Warrant following such authorized officer
Date Warrant Certificate Certificate decrease or increase of Agent
---- ------------------- --------------------- -------------------- -------------------
12
