EXECUTION COPY
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PREFERENCE WARRANT AGREEMENT
Dated as of January 27, 1999
By and Between
@ENTERTAINMENT, INC.
and
BANKERS TRUST COMPANY,
Preference Warrant Agent
--------------------
5.5 million Warrants to Purchase an Aggregate of 5.5
million Shares of Common Stock
(Par Value $0.01 Per Share)
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TABLE OF CONTENTS
ARTICLE I
ISSUANCE, FORM, EXECUTION, DELIVERY AND
REGISTRATION OF PREFERENCE WARRANT CERTIFICATES ....................2
SECTION 1.01. Issuance of Preference Warrants.........................2
SECTION 1.02. Form of Preference Warrant Certificate[s]...............2
SECTION 1.03. Execution of Preference Warrant Certificates............3
SECTION 1.04. Authentication and Delivery.............................3
SECTION 1.05. Registration............................................4
SECTION 1.06. Registration of Transfers or Exchanges..................5
SECTION 1.07. Lost, Stolen, Destroyed, Defaced or Mutilated
Preference Warrant Certificates......................10
SECTION 1.08. Offices for Exercise, etc..............................11
ARTICLE II
DURATION, EXERCISE OF PREFERENCE WARRANTS; EXERCISE PRICE
AND REPURCHASE OF PREFERENCE WARRANTS...................12
SECTION 2.01. Duration of Preference Warrants........................12
SECTION 2.02. Exercise, Exercise Price, Settlement and Delivery......12
SECTION 2.03. Cancellation of Preference Warrant Certificates........16
ARTICLE III
OTHER PROVISIONS RELATING TO
RIGHTS OF HOLDERS OF PREFERENCE WARRANTS..............................16
SECTION 3.01. Enforcement of Rights..................................16
ARTICLE IV
CERTAIN COVENANTS OF THE COMPANY......................................17
SECTION 4.01. Payment of Taxes.......................................17
SECTION 4.02. Rule 144A..............................................17
SECTION 4.03. Securities Act and Applicable State Securities Laws....17
SECTION 4.05. Notice of Proposal to Issue or Sell....................18
SECTION 4.06. Sale or Issuance After Notice..........................19
SECTION 4.07. Redemption of Certain New Securities...................19
SECTION 4.08. Termination............................................19
SECTION 4.09. Assignment.............................................20
SECTION 4.10. Definitions............................................20
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ARTICLE V
ADJUSTMENTS...........................................................21
SECTION 5.01. Adjustment of Preference Exercise Rate; Notices........21
SECTION 5.02. Fractional Preference Warrant Shares...................30
SECTION 5.03. Exceptions to Antidilution Provisions..................30
ARTICLE VI
CONCERNING THE PREFERENCE WARRANT AGENT ..............................31
SECTION 6.01. Preference Warrant Agent...............................31
SECTION 6.02. Conditions of Preference Warrant Agent's Obligations...31
SECTION 6.03. Resignation and Appointment of Successor...............36
ARTICLE VII
MISCELLANEOUS.........................................................37
SECTION 7.01. Amendment..............................................37
SECTION 7.02. Notices and Demands to the Company and Preference
Warrant Agent.........................................38
SECTION 7.03. Addresses for Notices to Parties and for Transmission
of Documents..........................................39
SECTION 7.04. Notices to Holders.....................................39
SECTION 7.05. Applicable Law.........................................39
SECTION 7.06. Persons Having Rights Under Agreement..................40
SECTION 7.07. Headings...............................................40
SECTION 7.08. Counterparts...........................................40
SECTION 7.09. Inspection of Agreement................................40
SECTION 7.10. Availability of Equitable Remedies.....................40
SECTION 7.11. Obtaining of Governmental Approvals....................40
EXHIBIT A - Form of Preference Warrant Certificate.......................A-1
EXHIBIT B - Form of Legend for Global Preference Warrant.................B-1
EXHIBIT C - Certificate to Be Delivered upon Exchange or Registration
of Transfer of Warrants.....................................C-1
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INDEX OF DEFINED TERMS
Defined Term Page
Agreement....................................................................1
Business Day.....................................................12, X-0, X-00
Xxxxxxx Xxxxx...............................................................00
Cashless Exercise...........................................................13
Cashless Exercise Ratio.....................................................13
Common Stock.................................................................2
Definitive Warrants..........................................................2
Election to Exercise........................................................13
Exercise Date...............................................................14
Exercise Price..............................................................13
Exercise Rate...............................................................13
Expiration Date.............................................................12
Global Shares...............................................................15
Global Warrants..............................................................2
Independent Financial Expert................................................29
Initial Purchasers...........................................................1
Notes........................................................................1
Officers' Certificate........................................................8
Private Placement Legend.....................................................9
Purchase Agreement...........................................................1
Related Parties.............................................................32
Requisite Warrant Holders...................................................38
Resale Restriction Termination Date..........................................5
Surviving Person............................................................25
Time of Determination............................................29, X-0, X-00
Xxxxxxx......................................................................0
Warrant Agent................................................................1
Warrant Agent Office........................................................12
Warrant Exercise Office.....................................................11
Warrant Register.............................................................5
Warrant Registration Rights Agreement........................................1
Warrant Shares...............................................................2
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PREFERENCE WARRANT AGREEMENT
PREFERENCE WARRANT AGREEMENT ("Agreement"), dated as of January 27,
1999 by and between @ENTERTAINMENT, INC. (the "Company"), a Delaware
corporation, and Bankers Trust Company, as preference warrant agent (with any
successor Preference Warrant Agent, the "Preference Warrant Agent").
WHEREAS, the Company has entered into a purchase agreement (the
"MGPE Purchase Agreement") dated January 22, 1999 with Xxxxxx Xxxxxxxx Private
Equity Limited on behalf of Xxxxxx Xxxxxxxx Development Capital Syndication
Limited ("MGPE"), in which the Company has agreed to sell to MGPE 45,000 shares
of the Company's Series A 12% cumulative preference shares (the "Series A
Preference Shares"), and (ii) 45,000 warrants (the "Series A Preference
Warrants"), each initially entitling the holder thereof to purchase 110 shares
of Common Stock (as defined herein) of the Company; and
WHEREAS, the Company has entered into a purchase agreement (the
"Chase Purchase Agreement") dated January 22, 1999 with Xx. Xxxxxx Xxxxx
("Xxxxxx Xxxxx"), Ms. Xxxxxx Xxxxx ("Xxxxxx Xxxxx") and Xx. Xxxxx Xxxxx ("Xxxxx
Xxxxx", and together with Xxxxxx Xxxxx and Xxxxxx Xxxxx, the "Initial Chase
Purchasers" and together with the Xxxxxxx Trust, the "Chase Purchasers"), in
which the Company has agreed to sell to the Chase Purchasers an aggregate of
5,000 shares of the Company's Series B 12% cumulative preference shares (the
"Series B Preference Shares"), and (ii) 5,000 warrants (the "Series B Preference
Warrants"), each initially entitling the holder thereof to purchase 110 shares
of Common Stock (as defined herein) of the Company; the Chase Purchasers and
MGPE are herein after collectively referred to as the "Purchasers"; the Series A
Preference Shares and the Series B Preference Shares are hereinafter referred to
collectively as the "Preference Shares"; the Series A Preference Warrants and
the Series B Preference Warrants are hereinafter referred to as the "Preference
Warrants" and the certificates evidencing the Preference Warrants are
hereinafter referred to collectively as the "Preference Warrant Certificates";
and
WHEREAS, the holders of the Preference Warrants are entitled to the
benefits of a Preference Warrant Registration Rights Agreement dated as of
January 27, 1999 between the Company and the Purchasers (the "Preference Warrant
Registration Rights Agreement"); and
WHEREAS, the Company desires the Preference Warrant Agent as
preference warrant agent to assist the Company in connection with the issuance,
exchange, cancellation, replacement and exercise of the Preference Warrants, and
in this Agreement wishes to set forth, among other things, the terms and
conditions on which the Preference Warrants may be issued, exchanged, canceled,
replaced and exercised;
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NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
ISSUANCE, FORM, EXECUTION, DELIVERY AND
REGISTRATION OF PREFERENCE WARRANT CERTIFICATES
SECTION 1.01. Issuance of Preference Warrants. Preference Warrants
shall be originally issued in connection with the sale of the Preference Shares
to the Purchasers.
Each Preference Warrant Certificate shall evidence the number of
Preference Warrants specified therein. Each Preference Warrant evidenced by a
Preference Warrant Certificate shall, when it becomes exercisable as provided
herein and therein, initially represent the right, subject to the provisions
contained herein and therein, to purchase from the Company (and the Company
shall issue and sell to the holder of such Preference Warrant) 110 fully paid
and non-assessable Preference Warrant Shares at an exercise price of $10.00 per
share. The number of shares of the Company's common stock, par value $0.01 per
share (the "Common Stock") issuable upon exercise of a Preference Warrant is
subject to adjustment as provided herein and in the Preference Warrants. The
shares of Common Stock issuable upon exercise of a Preference Warrant are
hereinafter referred to as the "Preference Warrant Shares" and, unless the
context otherwise requires, such term shall also include any other securities
issuable and deliverable upon exercise of a Preference Warrant as provided in
Article V, subject to adjustment as provided herein and in the Preference
Warrant Certificates.
SECTION 1.02. Form of Preference Warrant Certificate[s]. The
Preference Warrant Certificate[s] will initially be issued either in global form
(the "Global Preference Warrants") or in registered form as Certificated
Preference Warrant Certificates (the "Certificated Preference Warrants"), in
either case substantially in the form of Exhibit A attached hereto. Any Global
Preference Warrants to be delivered pursuant to this Agreement shall bear the
legend set forth in Exhibit B attached hereto. The Global Preference Warrants
shall represent such of the outstanding Preference Warrants as shall be
specified therein, and each Global Preference Warrant shall provide that it
shall represent the aggregate amount of outstanding Preference Warrants from
time to time endorsed thereon and that the aggregate amount of outstanding
Preference Warrants represented thereby may from time to time be reduced or
increased, as appropriate. Any endorsement of a Global Preference Warrant to
reflect the amount of any increase or decrease in the amount of outstanding
Preference Warrants represented thereby shall be made by the Preference Warrant
Agent and the Depositary (as defined below) in accordance with instructions
given by the holder thereof. The Depository Trust Company shall act as the
"Depositary" with respect to the Global Preference Warrants until a successor
shall be appointed by the Company and the Preference Warrant Agent. Upon written
request, a holder of Preference Warrants may receive from the
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Preference Warrant Agent or the Depositary Certificated Preference Warrants as
set forth in Section 1.07 hereof.
SECTION 1.03. Execution of Preference Warrant Certificates. The
Preference Warrant Certificates shall be executed on behalf of the Company by
the chairman of its board of directors, its president, its chief executive
officer, its chief financial officer or any vice president and by its treasurer,
assistant treasurer, secretary or assistant secretary. Such signatures may be
the manual or facsimile signatures of the present or any future such officers.
The seal of the Company may be in the form of a facsimile thereof and may be
impressed, affixed, imprinted or otherwise reproduced on the Preference Warrant
Shares. Typographical and other minor errors or defects in any such reproduction
of any such signature shall not affect the validity or enforceability of any
Preference Warrant Certificate that has been duly countersigned and delivered by
the Preference Warrant Agent.
In case any officer of the Company who shall have signed any of the
Preference Warrant Certificates shall cease to be such officer before the
Preference Warrant Certificate so signed shall be authenticated and delivered by
the Preference Warrant Agent or disposed of by the Company, such Preference
Warrant Certificate nevertheless may be authenticated and delivered or disposed
of as though the person who signed such Preference Warrant Certificate had not
ceased to be such officer of the Company. Any Preference Warrant Certificate may
be signed on behalf of the Company by such persons as, at the actual date of the
execution of such Preference Warrant Certificate, shall be the proper officers
of the Company, although at the date of the execution and delivery of this
Agreement any such person was not such an officer.
SECTION 1.04. Authentication and Delivery. Subject to the
immediately following paragraph, Preference Warrant Certificates shall be
authenticated by manual signature and dated the date of authentication by the
Preference Warrant Agent and shall not be valid for any purpose unless so
authenticated and dated. The Preference Warrant Certificates shall be numbered
and shall be registered in the Preference Warrant Register (as defined in
Section 1.06 hereof).
Upon the receipt by the Preference Warrant Agent of a written order
of the Company, which order shall be signed by the chairman of its board of
directors, its president, its chief executive officer, its chief financial
officer or any vice president and by its treasurer, assistant treasurer,
secretary or assistant secretary, and shall specify the amount of Preference
Warrants to be authenticated, whether the Preference Warrants are to be Global
Preference Warrants or Certificated Preference Warrants, the date of such
Preference Warrants and such other information as the Preference Warrant Agent
may reasonably request, without any further action by the Company, the
Preference Warrant Agent is authorized, upon receipt from the Company at any
time and from time to time of the Preference Warrant Certificates, duly executed
as provided in Section 1.03 hereof, to authenticate the Preference Warrant
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Certificates and upon the holder's request deliver them. Such authentication
shall be by a duly authorized signatory of the Preference Warrant Agent
(although it shall not be necessary for the same signatory to sign all
Preference Warrant Certificates).
In case any authorized signatory of the Preference Warrant Agent who
shall have authenticated any of the Preference Warrant Certificates shall cease
to be such authorized signatory before the Preference Warrant Certificate shall
be disposed of by the Company or the Preference Warrant Agent, such Preference
Warrant Certificate nevertheless may be delivered or disposed of as though the
person who authenticated such Preference Warrant Certificate had not ceased to
be such authorized signatory of the Preference Warrant Agent; and any Preference
Warrant Certificate may be authenticated on behalf of the Preference Warrant
Agent by such persons as, at the actual time of authentication of such
Preference Warrant Certificates, shall be the duly authorized signatories of the
Preference Warrant Agent, although at the time of the execution and delivery of
this Agreement any such person is not such an authorized signatory.
The Preference Warrant Agent's authentication on all Preference
Warrant Certificates shall be in substantially the form set forth in Exhibit A
hereto.
SECTION 1.05. Registration. The Company will keep, at the office or
agency maintained by the Company for such purpose, a register or registers in
which, subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of, and registration of transfer and exchange
of, Preference Warrants as provided in this Article. Each person designated by
the Company from time to time as a person authorized to register the transfer
and exchange of the Preference Warrants is hereinafter called, individually and
collectively, the "Preference Registrar." The Company hereby initially appoints
the Preference Warrant Agent as Preference Registrar. Upon written notice to the
Preference Warrant Agent and any acting Preference Registrar, the Company may
appoint a successor Preference Registrar for such purposes.
In connection with the separate units offering being conducted
simultaneously, the Company is issuing a number of Warrants. The Company agrees
to keep separate registers for the Warrants and the Preference Warrants. The
Company may utilize the same entity as Registrar for the Warrants and for the
Preference Warrants. The Preference Warrant Agent is also the warrant agent for
the Warrants being issued by the Company in the Units Offering. The functions
and obligations of the Registrar and of the Preference Registrar are virtually
identical. Likewise, the functions and obligations of the Preference Warrant
Agent and of the Warrant Agent are virtually identical. In each case, this
Agreement relates only to the relationship between the Company and the
Preference Warrants Agent and Preference Registrar. The relationship between the
Company and the Warrant Agent and Registrar of the Units is covered by a
separate warrant agreement which is dated as of the date hereof.
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The Company will at all times designate one person (which may be the
Company and which need not be a Preference Registrar) to act as repository of a
master list of names and addresses of the holders of Preference Warrants (the
"Preference Warrant Register"). The Preference Warrant Agent will act as such
repository unless and until some other person is, by written notice from the
Company to the Preference Warrant Agent and the Preference Registrar, designated
by the Company to act as such. The Company shall cause each Preference Registrar
to furnish to such repository, on a current basis, such information as to all
registrations of transfer and exchanges effected by such Preference Registrar,
as may be necessary to enable such repository to maintain the Preference Warrant
Register on as current a basis as is practicable.
SECTION 1.06. Registration of Transfers or Exchanges.
(a) Transfer or Exchange of Certificated Preference Warrants. When
Certificated Preference Warrants are presented to the Preference Warrant Agent
with a request from the holder:
(i) to register the transfer of the Certificated Preference Warrants; or
(ii) to exchange such Certificated Preference Warrants for an equal
number of Certificated Preference Warrants of other authorized
denominations,
the Preference Warrant Agent shall register the transfer or make the exchange as
requested if the requirements under this Preference Warrant Agreement as set
forth in this Section 1.06 for such transactions are met; provided, however,
that the Certificated Preference Warrants presented or surrendered by a holder
for registration of transfer or exchange:
(x) shall be duly endorsed or accompanied by a written instruction of
transfer or exchange in form satisfactory to the Company and the
Preference Warrant Agent, duly executed by such holder or by his
attorney, duly authorized in writing; and
(y) in the case of Preference Warrants the offer and sale of which have
not been registered under the Securities Act of 1933 (the
"Securities Act") and are presented for transfer or exchange prior
to (X) the date which is two years (or such shorter period as may be
prescribed by Rule 144(k) (or any successor provision thereto))
after the later of the date of original issuance of the Preference
Warrants and the last date on which the Company or any affiliate of
the Company was the owner of such Preference Warrants, or any
predecessor thereto, and (Y) such later date, if any, as may be
required by any subsequent change in applicable law (the "Resale
Restriction Termination Date"), such
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Preference Warrants shall be accompanied by the following additional
information and documents, as applicable:
(A) if such Preference Warrants are being delivered to the
Preference Warrant Agent by a holder for registration in the
name of such holder, without transfer, a certification from
such holder to that effect (in substantially the form of
Exhibit C hereto); or
(B) if such Preference Warrants are being transferred to a
qualified institutional buyer as such term is defined in Rule
144A under the Securities Act (a "QIB") in accordance with
Rule 144A under the Securities Act, a certification from the
transferor to that effect (in substantially the form of
Exhibit C hereto); or
(C) if such Preference Warrants are being transferred in reliance
on Rule 144 under the Securities Act, delivery by the
transferor of (i) a certification from the transferor to that
effect (in substantially the form of Exhibit C hereto), and
(ii) an opinion of counsel reasonably satisfactory to the
Company to the effect that such transfer is in compliance with
the Securities Act; or
(D) if such Preference Warrants are being transferred in reliance
on another exemption from the registration requirements of the
Securities Act, a certification from the transferor to that
effect (in substantially the form of Exhibit C hereto) and an
opinion of counsel reasonably satisfactory to the Company to
the effect that such transfer is in compliance with the
Securities Act; provided that the Company may, based upon the
views of its own counsel, instruct the Preference Warrant
Agent not to register such transfer in any case where the
proposed transferee is not a QIB.
(b) Restrictions on Transfer of a Certificated Preference Warrant
for a Beneficial Interest in a Global Preference Warrant. A Certificated
Preference Warrant may not be transferred by a holder for a beneficial interest
in a Global Preference Warrant except upon satisfaction of the requirements set
forth below. Upon receipt by the Preference Warrant Agent of a Certificated
Preference Warrant, duly endorsed or accompanied by appropriate instruments of
transfer, in form satisfactory to the Preference Warrant Agent, together with:
(A) certification from such holder (in substantially the form of
Exhibit C hereto) that such Certificated Preference Warrant is
being transferred to a QIB in accordance with Rule 144A under
the Securities Act; and
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(B) written instructions directing the Preference Warrant Agent to
make, or to direct the Depositary to make, an endorsement on
the Global Preference Warrant to reflect an increase in the
aggregate amount of the Preference Warrants represented by the
Global Preference Warrant,
then the Preference Warrant Agent shall cancel such Certificated Preference
Warrant and cause, or direct the Depositary to cause, in accordance with the
standing instructions and procedures existing between the Depositary and the
Preference Warrant Agent, the number of Preference Warrant Shares represented by
the Global Preference Warrant to be increased accordingly. If no Global
Preference Warrant is then outstanding, the Company shall issue, and the
Preference Warrant Agent shall upon written instructions from the Company
authenticate, a new Global Preference Warrant in the appropriate amount.
(c) Transfer or Exchange of Global Preference Warrants. The transfer
or exchange of Global Preference Warrants or beneficial interests therein shall
be effected through the Depositary, in accordance with this Section 1.06, the
Private Placement Legend (as defined below), this Agreement (including those
restrictions on transfer set forth herein) and the procedures of the Depositary
therefor.
(d) Transfer or Exchange of a Beneficial Interest in a Global
Preference Warrant for a Certificated Preference Warrant.
(i) Any person having a beneficial interest in a Global Preference
Warrant may transfer or exchange such beneficial interest for a
Certificated Preference Warrant upon receipt by the Preference
Warrant Agent of written instructions (or such other form of
instructions as is customary for the Depositary) from the Depositary
or its nominee on behalf of any person having a beneficial interest
in a Global Preference Warrant, including a written order containing
registration instructions and, in the case of any such transfer or
exchange prior to the Resale Restriction Termination Date, the
following additional information and documents:
(A) if such beneficial interest is being transferred to the person
designated by the Depositary as being the beneficial owner, a
certification from such person to that effect (in
substantially the form of Exhibit C hereto); or
(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act, a
certification from the transferor to that effect (in
substantially the form of Exhibit C hereto); or
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(C) if such beneficial interest is being transferred in reliance
on Rule 144 under the Securities Act, delivery by the
transferor of (i) a certification to that effect (in
substantially the form of Exhibit C hereto) and (ii) an
opinion of counsel reasonably satisfactory to the Company to
the effect that such transfer is in compliance with the
Securities Act; or
(D) if such beneficial interest is being transferred in reliance
on another exemption from the registration requirements of the
Securities Act, a certification from the transferor to that
effect (in substantially the form of Exhibit C hereto) and an
opinion of counsel reasonably satisfactory to the Company to
the effect that such transfer is in compliance with the
Securities Act; provided that the Company may instruct the
Preference Warrant Agent not to register such transfer in any
case where the proposed transferee is not a QIB;
then, upon receipt of such written instructions and additional
information and documents, the Preference Warrant Agent will cause,
in accordance with the standing instructions and procedures existing
between the Depositary and the Preference Warrant Agent, the
aggregate amount of the Global Preference Warrant to be reduced and,
following such reduction, the Company will execute and, upon receipt
of an authentication order in the form of an officers' certificate
(a certificate signed by the chairman or a co-chairman of the board,
the president, the chief executive officer, the chief financial
officer, any executive vice president or any senior vice president
of the Company signing alone, or by any vice president signing
together with the secretary, any assistant secretary, the treasurer,
or any assistant treasurer of the Company) (an "Officers'
Certificate"), the Preference Warrant Agent will authenticate and
deliver to the transferee a Certificated Preference Warrant.
(ii) Certificated Preference Warrants issued in exchange for a beneficial
interest in a Global Preference Warrant pursuant to this Section
1.06(d) shall be registered in such names and in such authorized
denominations as the Depositary, pursuant to instructions from its
direct or indirect participants or otherwise, shall instruct the
Preference Warrant Agent in writing. The Preference Warrant Agent
shall deliver such Certificated Preference Warrants to the persons
in whose names such Preference Warrants are so registered and adjust
the Global Preference Warrant pursuant to paragraph (h) of this
Section 1.06.
(e) Restrictions on Transfer or Exchange of Global Preference
Warrants. Notwithstanding any other provisions of this Agreement (other than the
provisions set forth in subsection (f) of this Section 1.06), a Global
Preference Warrant may not be transferred or
9
exchanged as a whole except by the Depositary to a nominee of the Depositary; by
a nominee of the Depositary to the Depositary or another nominee of the
Depositary; or by the Depositary or any such nominee to a successor Depositary
or a nominee of such successor Depositary.
(f) Authentication of Certificated Preference Warrants in Absence of
Depositary. If at any time:
(i) the Depositary for the Global Preference Warrants notifies the
Company that the Depositary is unwilling or unable to continue as
Depositary for the Global Preference Warrant and a successor
Depositary for the Global Preference Warrant is not appointed by the
Company within 90 days after delivery of such notice; or
(ii) the Company, at its sole discretion, notifies the Preference Warrant
Agent in writing that it elects to cause the issuance of
Certificated Preference Warrants for all Global Preference Warrants
under this Agreement,
then the Company will execute, and the Preference Warrant Agent will, upon
receipt of an Officers' Certificate requesting the authentication and delivery
of Certificated Preference Warrants, authenticate and deliver Certificated
Preference Warrants, in an aggregate number equal to the aggregate number of
Preference Warrants represented by the Global Preference Warrant, in exchange
for such Global Preference Warrant.
(g) Private Placement Legend. Upon the transfer or exchange of
Preference Warrant Certificates not bearing the legend set forth in the first
paragraph of Exhibit A attached hereto (the "Private Placement Legend"), the
Preference Warrant Agent shall deliver Preference Warrant Certificates that do
not bear the Private Placement Legend. Upon the transfer, exchange or
replacement of Preference Warrant Certificates bearing the Private Placement
Legend, the Preference Warrant Agent shall deliver Preference Warrant
Certificates that bear the Private Placement Legend unless, and the Preference
Warrant Agent is hereby authorized to deliver Preference Warrant Certificates
without the Private Placement Legend if, (i) there is delivered to the
Preference Warrant Agent an opinion of counsel reasonably satisfactory to the
Company to the effect that neither such legend nor the related restrictions on
transfer are required in order to maintain compliance with the provisions of the
Securities Act or (ii) there is delivered to the Preference Warrant Agent an
Officers' Certificate stating that the Preference Warrants to be transferred or
exchanged represented by such Preference Warrant Certificates are being
transferred or exchanged pursuant to an effective registration statement under
the Securities Act.
(h) Cancellation or Adjustment of a Global Preference Warrant. At
such time as all beneficial interests in a Global Preference Warrant have either
been exchanged for
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Certificated Preference Warrants, redeemed, repurchased or canceled, such Global
Preference Warrant shall be returned to the Company or, upon written order to
the Preference Warrant Agent in the form of an Officers' Certificate from the
Company, retained and canceled by the Preference Warrant Agent. At any time
prior to such cancellation, if any beneficial interest in a Global Preference
Warrant is exchanged for Certificated Preference Warrants, redeemed, repurchased
or canceled, the number of Preference Warrants represented by such Global
Preference Warrant shall be reduced and an endorsement shall be made on such
Global Preference Warrant by the Preference Warrant Agent to reflect such
reduction.
(i) Obligations with Respect to Transfers or Exchanges of
Certificated Preference Warrants.
(i) To permit registrations of transfers or exchanges completed in
accordance with the provisions hereof, the Company shall execute, at
the Preference Warrant Agent's request, and the Preference Warrant
Agent shall authenticate, Certificated Preference Warrants and
Global Preference Warrants.
(ii) All Certificated Preference Warrants and Global Preference Warrants
issued upon any registration of transfer or exchange of Certificated
Preference Warrants or Global Preference Warrants, as the case may
be, completed in accordance with the provisions hereof, shall be the
valid obligations of the Company, entitled to the same benefits
under this Preference Warrant Agreement as the Certificated
Preference Warrants or Global Preference Warrants surrendered upon
the registration of transfer or exchange.
(iii) Prior to due presentment for registration of transfer of any
Preference Warrant, the Preference Warrant Agent and the Company may
deem and treat the person in whose name any Preference Warrant is
registered as the absolute owner of such Preference Warrant, and
neither the Preference Warrant Agent nor the Company shall be
affected by notice to the contrary.
SECTION 1.07. Lost, Stolen, Destroyed, Defaced or Mutilated
Preference Warrant Certificates. Upon receipt by the Company and the Preference
Warrant Agent (or any agent of the Company or the Preference Warrant Agent, if
requested by the Company) of evidence satisfactory to them of the loss, theft,
destruction, defacement, or mutilation of any Preference Warrant Certificate and
of indemnity satisfactory to them and, in the case of mutilation or defacement,
upon surrender thereof to the Preference Warrant Agent for cancellation, then,
in the absence of notice to the Company or the Preference Warrant Agent that
such Preference Warrant Certificate has been acquired by a bona fide purchaser
or holder in due course, the Company shall execute, and an authorized signatory
of the Preference Warrant Agent shall manually authenticate and deliver, in
exchange for or in lieu of the lost,
11
stolen, destroyed, defaced or mutilated Preference Warrant Certificate, a new
Preference Warrant Certificate representing a like number of Preference
Warrants, bearing a number or other distinguishing symbol not contemporaneously
outstanding. Prior to the issuance of any new Preference Warrant Certificate
under this Section in a name other than the prior registered holder of the lost,
stolen, destroyed, defaced or mutilated Preference Warrant Certificate, the
Company may require the payment from the holder of such Preference Warrant
Certificate of a sum sufficient to cover any tax, stamp tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Preference Warrant Agent and
the Preference Registrar or any agent thereof) in connection therewith. Every
substitute Preference Warrant Certificate executed and delivered pursuant to
this Section 1.07 in lieu of any lost, stolen or destroyed Preference Warrant
Certificate shall constitute an additional contractual obligation of the
Company, whether or not the lost, stolen or destroyed Preference Warrant
Certificate shall be at any time enforceable by anyone, and shall be entitled to
the benefits of (but shall be subject to all the limitations of rights set forth
in) this Agreement equally and proportionately with any and all other Preference
Warrant Certificates duly executed and delivered hereunder. The provisions of
this Section 1.07 are exclusive with respect to the replacement of lost, stolen,
destroyed, defaced or mutilated Preference Warrant Certificates and shall
preclude (to the extent lawful) any and all other rights or remedies
notwithstanding any law or statute existing or hereafter enacted to the contrary
with respect to the replacement of lost, stolen, destroyed, defaced or mutilated
Preference Warrant Certificates.
The Preference Warrant Agent is hereby authorized to authenticate in
accordance with the provisions of this Agreement and deliver the new Preference
Warrant Certificates required pursuant to the provisions of this Section 1.07.
SECTION 1.08. Offices for Exercise, etc. So long as any of the
Preference Warrants remain outstanding, the Company will designate and maintain
in the Borough of Manhattan, The City of New York: (a) an office or agency where
the Preference Warrant Certificates may be presented for exercise (each a
"Preference Warrant Exercise Office"), (b) an office or agency where the
Preference Warrant Certificates may be presented for registration of transfer
and for exchange, and (c) an office or agency where notices and demands to or
upon the Company in respect of the Preference Warrants or of this Agreement may
be served. The Company may from time to time change or rescind such designation,
as it may deem desirable or expedient; provided, however, that an office or
agency shall at all times be maintained in the Borough of Manhattan, The City of
New York, as provided in the first sentence of this Section. In addition to such
office or offices or agency or agencies, the Company may from time to time
designate and maintain one or more additional offices or agencies within or
outside The City of New York, where Preference Warrant Certificates may be
presented for exercise or for registration of transfer or for exchange, and the
Company may from time to time change or rescind such designation, as it may deem
desirable or expedient.
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The Company will give to the Preference Warrant Agent written notice of the
location of any such office or agency and of any change of location thereof. The
Company hereby designates the Preference Warrant Agent at its principal
corporate trust office identified in Section 7.03 in the Borough of Manhattan,
The City of New York (the "Preference Warrant Agent Office"), as the initial
agency maintained for each such purpose. In case the Company shall fail to
maintain any such office or agency or shall fail to give such notice of the
location or of any change in the location thereof, presentations and demands may
be made and notice may be served at the Preference Warrant Agent Office and the
Company appoints the Preference Warrant Agent as its agent to receive all such
presentations, surrenders, notices and demands.
ARTICLE II
DURATION, EXERCISE OF PREFERENCE WARRANTS; EXERCISE PRICE
AND REPURCHASE OF PREFERENCE WARRANTS
SECTION 2.01. Duration of Preference Warrants. Subject to the terms
and conditions established herein, the Preference Warrants shall expire at 5:00
p.m., New York City time, on February 1, 2010. The applicable date of expiration
of a particular Preference Warrant is referred to herein as the "Preference
Expiration Date" of such Preference Warrant. Each Preference Warrant may be
exercised as set forth in Section 2.02. The Company will give notice of
expiration to then registered holders of Preference Warrants not less than 90
nor more than 120 days prior to the Preference Expiration Date. Failure to give
such notice however, will not prevent the Preference Warrants from expiring and
becoming void on the Preference Expiration Date.
Any Preference Warrant not exercised before 5:00 p.m., New York City
time, on the Preference Expiration Date shall become void, and all rights of the
holder under the Preference Warrant Certificate evidencing such Preference
Warrant and under this Agreement shall cease.
"Business Day" shall mean any day on which (i) banks in The City of
New York, (ii) the principal U.S. securities exchange or market, if any, on
which any Common Stock is listed or admitted to trading and (iii) the principal
U.S. securities exchange or market, if any, on which the Preference Warrants are
listed or admitted to trading, are open for business.
SECTION 2.02. Exercise, Exercise Price, Settlement and Delivery. (a)
Subject to the provisions of this Agreement, each Preference Warrant shall
entitle the registered holder thereof to purchase from the Company on any
Business Day during the period beginning on the Preference Exercise Date and
ending at 5:00 p.m., New York City
13
time, on the Preference Expiration Date 110 fully paid, registered and
non-assessable Preference Warrant Shares (and any other securities purchasable
or deliverable upon exercise of such Preference Warrant as provided in Article
V), subject to adjustment in accordance with Article V hereof, at the purchase
price of $10.00 for each share purchased (the "Preference Exercise Price"). The
number and amount of Preference Warrant Shares issuable upon exercise of a
Preference Warrant (the "Preference Exercise Rate") at the Preference Exercise
Price shall be subject to adjustment from time to time as set forth in Article V
hereof.
"Preference Exercise Date" means any date after the Issue Date on
which the Preference Warrants are exercised and Preference Warrant Shares issued
in connection with such exercise.
(b) Preference Warrants may be exercised on or after the date they
are exercisable hereunder by (i) surrendering at any Preference Warrant Exercise
Office the Preference Warrant Certificate evidencing such Preference Warrants
with the form of election to purchase Preference Warrant Shares set forth on the
reverse side of the Preference Warrant Certificate (the "Election to Exercise")
duly completed and signed by the registered holder or holders thereof or by the
duly appointed legal representative thereof or by a duly authorized attorney,
and in the case of a transfer, such signature shall be guaranteed by an eligible
guarantor institution, and (ii) paying in full the Preference Exercise Price for
each such Preference Warrant exercised. Each Preference Warrant may be exercised
only in whole. The Preference Warrants may be exercised in whole or in part
prior to the Preference Expiration Date.
(c) Simultaneously with the exercise of each Preference Warrant,
payment in full of the aggregate Preference Exercise Price may be made, at the
option of the holder, (i) in cash or by certified or official bank check, (ii)
by a Cashless Exercise (as defined below) or (iii) by any combination of (i) and
(ii), to the office or agency where the Preference Warrant Certificate is being
surrendered. For purposes of this Agreement, a "Cashless Exercise" shall mean an
exercise of a Preference Warrant in accordance with the immediately following
two sentences. To effect a Cashless Exercise, the holder may exercise a
Preference Warrant or Preference Warrants without payment of the Preference
Exercise Price in cash by surrendering such Preference Warrant or Preference
Warrants (represented by one or more Preference Warrant Certificates) and, in
exchange therefor, receiving such number of shares of Common Stock equal to the
product of (1) that number of shares of Common Stock for which such Preference
Warrant or Preference Warrants are exercisable and which would be issuable in
the event of an exercise with payment in cash of the Preference Exercise Price
and (2) the Cashless Exercise Ratio (as defined below). The "Cashless Exercise
Ratio" shall equal a fraction, the numerator of which is the excess of the
Current Market Value (calculated as set forth in this Agreement) per share of
Common Stock on the date of exercise over the Preference Exercise Price per
share of Common Stock as of the date of exercise and the denominator of which is
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the Current Market Value per share of Common Stock on the date of exercise. Upon
surrender of a Preference Warrant Certificate representing more than one
Preference Warrant in connection with a holder's option to elect a Cashless
Exercise, such holder must specify the number of Preference Warrants for which
such Preference Warrant Certificate is to be exercised (without giving effect to
such Cashless Exercise). All provisions of this Agreement shall be applicable
with respect to a Cashless Exercise of a Preference Warrant Certificate for less
than the full number of Preference Warrants represented thereby. No payment or
adjustment shall be made on account of any distributions of dividends on the
Common Stock issuable upon exercise of a Preference Warrant. If the Company has
not effected the registration under the Securities Act of the offer and sale of
the Preference Warrant Shares by the Company to the holders of the Preference
Warrants on or prior to the Effective Preference Exercise Date (as defined
below), the Company may elect to require that the holders of the Warrants effect
the exercise thereof solely pursuant to the Cashless Exercise option and may
also amend the Preference Warrants to eliminate the requirement for payment of
the Preference Exercise Price with respect to such Cashless Exercise option. The
Preference Warrant Agent shall have no obligation under this section to
calculate the Cashless Exercise Ratio.
(d) Upon surrender of a Preference Warrant Certificate and payment
and collection of the Preference Exercise Price at any Preference Warrant
Exercise Office (other than any Preference Warrant Exercise Office that also is
an office of the Preference Warrant Agent), such Preference Warrant Certificate
and payment shall be promptly delivered to the Preference Warrant Agent. The
"Effective Preference Exercise Date" for a Preference Warrant shall be the date
when all of the items referred to in the first sentence of paragraphs (b) and
(c) of this Section 2.02 are received by the Preference Warrant Agent at or
prior to 11:00 a.m., New York City time, on a Business Day and the exercise of
the Preference Warrants will be effective as of such Effective Preference
Exercise Date. If any items referred to in the first sentence of paragraphs (b)
and (c) are received after 11:00 a.m., New York City time, on a Business Day,
the exercise of the Preference Warrants to which such item relates will be
effective on the next succeeding Business Day. Notwithstanding the foregoing, in
the case of an exercise of Preference Warrants on the Preference Expiration
Date, if all of the items referred to in the first sentence of paragraphs (b)
and (c) are received by the Preference Warrant Agent at or prior to 5:00 p.m.,
New York City time, on the Preference Expiration Date, the exercise of the
Preference Warrants to which such items relate will be effective on the
Preference Expiration Date.
(e) Upon the exercise of a Preference Warrant in accordance with the
terms hereof, the receipt of a Preference Warrant Certificate and payment of the
Preference Exercise Price (or election of the Cashless Exercise option), the
Preference Warrant Agent shall: (i) except to the extent exercise of the
Preference Warrant has been effected through a Cashless Exercise, cause an
amount equal to the aggregate Preference Exercise Price to be paid to the
Company by crediting such amount in immediately available funds to the account
designated
15
by the Company in writing to the Preference Warrant Agent for that purpose; (ii)
advise the Company immediately by telephone of the amount so deposited to the
Company's account and promptly confirm such telephonic advice in writing; and
(iii) as soon as practicable, advise the Company in writing of the number of
Preference Warrants exercised in accordance with the terms and conditions of
this Agreement and the Preference Warrant Certificates, the instructions of each
exercising holder of the Preference Warrant Certificates with respect to
delivery of the Preference Warrant Shares to which such holder is entitled upon
such exercise, and such other information as the Company shall reasonably
request.
(f) Subject to Section 5.02 hereof, as soon as practicable after the
exercise of any Preference Warrant or Preference Warrants in accordance with the
terms hereof, the Company shall issue or cause to be issued to or upon the
written order of the registered holder of the Preference Warrant Certificate
evidencing such exercised Preference Warrant or Preference Warrants, a
certificate or certificates evidencing the Preference Warrant Shares to which
such holder is entitled, in fully registered form, registered in such name or
names as may be directed by such holder pursuant to the Election to Exercise, as
set forth on the reverse of the Preference Warrant Certificate. Such certificate
or certificates evidencing the Preference Warrant Shares shall be deemed to have
been issued and any persons who are designated to be named therein shall be
deemed to have become the holders of record of such Preference Warrant Shares as
of the close of business on the Effective Exercise Date; the Preference Warrant
Shares may initially be issued in Global form (the "Global Preference Shares").
Such Global Preference Shares shall represent such of the outstanding Preference
Warrant Shares as shall be specified therein and each Global Preference Share
shall provide that it represents the aggregate amount of outstanding Preference
Warrant Shares from time to time endorsed thereon and that the aggregate amount
of outstanding Preference Warrant Shares represented thereby may from time to
time be reduced or increased, as appropriate. Any endorsement of a Global
Preference Share to reflect any increase or decrease in the amount of
outstanding Preference Warrant Shares represented thereby shall be made by the
registrar for the Preference Warrant Shares and the Depositary (referred to
below) in accordance with instructions given by the holder thereof. The
Depository Trust Company shall (if possible) act as the Depositary with respect
to the Global Preference Shares until a successor shall be appointed by the
Company and the registrar for the Preference Warrant Shares. After exercise of
any Preference Warrant or Preference Warrant Shares, the Company shall also
issue or cause to be issued to or upon the written order of the registered
holder of such Preference Warrant Certificate, a new Preference Warrant
Certificate, countersigned by the Preference Warrant Agent pursuant to written
instruction, evidencing the number of Preference Warrants, if any, remaining
unexercised unless such Preference Warrants shall have expired.
(g) The Holders of the Preference Warrants have agreed with the
Company that while they may exercise their Preference Warrants at any time, in
whole or in part, prior to the Preference Expiration Date, such Holders of the
Preference Warrants will not be
16
allowed to sell or otherwise dispose of any Preference Warrant Shares prior to
one year from the date hereof.
SECTION 2.03. Cancellation of Preference Warrant Certificates. In
the event the Company shall purchase or otherwise acquire Preference Warrants,
the Preference Warrant Certificates evidencing such Preference Warrants may
thereupon be delivered to the Preference Warrant Agent, and if so delivered,
shall at the Company's written instruction be canceled by it and retired. The
Preference Warrant Agent shall cancel all Preference Warrant Certificates
properly surrendered for exchange, substitution, transfer or exercise. Upon the
Company's written request, the Preference Warrant Agent shall deliver such
canceled Preference Warrant Certificates to the Company.
ARTICLE III
OTHER PROVISIONS RELATING TO
RIGHTS OF HOLDERS OF PREFERENCE WARRANTS
SECTION 3.01. Enforcement of Rights. (a) Notwithstanding any of the
provisions of this Agreement, any holder of any Preference Warrant Certificate,
without the consent of the Preference Warrant Agent, the holder of any
Preference Warrant Shares or the holder of any other Preference Warrant
Certificate, may, in and for his own behalf enforce, and may institute and
maintain any suit, action or proceeding against the Company suitable to enforce,
his right to exercise the Preference Warrant or Preference Warrants evidenced by
his Preference Warrant Certificate in the manner provided in such Preference
Warrant Certificate and in this Agreement.
(b) Neither the Preference Warrants nor any Preference Warrant
Certificate shall entitle the holders thereof to any of the rights of
shareholders of the Company, including, without limitation, the right to vote or
to receive any dividends or other payments or to consent or to exercise any
preemptive rights (except as provided in Section 4.04 hereof) or to receive
notice as stockholders in respect of the meetings of stockholders or for the
election of directors of the Company or any other matter, or any rights
whatsoever as stockholders of the Company.
SECTION 3.02. Obtaining Stock Exchange Listings. The Company will
use its best efforts from time to time to list the Preference Warrant Shares,
immediately upon their issuance upon the exercise of Preference Warrants, on the
Nasdaq National Market.
17
ARTICLE IV
CERTAIN COVENANTS OF THE COMPANY
SECTION 4.01. Payment of Taxes. The Company will pay all documentary
stamp taxes attributable to the initial issuance of Preference Warrants and of
the Preference Warrant Shares upon the exercise of Preference Warrants;
provided, however, that the Company shall not be required to pay any tax or
other governmental charge which may be payable in respect of any transfer or
exchange of any Preference Warrant Certificates or any certificates for
Preference Warrant Shares in a name other than the registered holder of a
Preference Warrant Certificate surrendered upon the exercise of a Preference
Warrant. In any such case, no transfer or exchange shall be made unless or until
the person or persons requesting issuance thereof shall have paid to the Company
the amount of such tax or other governmental charge or shall have established to
the satisfaction of the Company that such tax or other governmental charge has
been paid or an exemption is available therefrom.
SECTION 4.02. Rule 144A. The Company covenants that it will file the
reports required to be filed by it under the Securities Act and the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and the rules, regulations
and policies adopted by the Securities and Exchange Commission thereunder in a
timely manner in accordance with the requirements of the Securities Act and the
Exchange Act and, if at any time prior to the Preference Expiration Date the
Company is not required to file such reports, it will mail to each owner or
beneficial owner of Preference Warrants upon request such information as is
referred to in Rule 144A(d)(4) under the Securities Act.
SECTION 4.03. Securities Act and Applicable State Securities Laws.
The Company will also agree to comply with all applicable laws, including the
Securities Act and any applicable state securities laws, in connection with the
offer and sale of Common Stock (and other securities and property deliverable)
upon exercise of the Preference Warrants.
SECTION 4.04. Grant of Right of First Refusal
(a) The Company hereby grants to each Purchaser the right of first
refusal to purchase, at the same per share price and on the same terms and
conditions, such Purchaser's pro rata share of New Securities as the
Company may, from time to time, sell or issue after the date of this
Agreement; provided however, that this right of first refusal shall not
provide the Purchasers with additional rights to acquire securities if the
provisions of Section 5.01 (c) or (d) of this Agreement are applicable.
(b) For purposes of this Agreement, each Purchaser's "pro rata
share" is the ratio of the number of Shares of Common Stock that such
Purchaser has the right to
18
acquire pursuant to the Preference Warrants held by it immediately prior
to the issuance of New Securities, to the total number of shares of Common
Stock outstanding immediately prior to the issuance of New Securities,
assuming full conversion of all outstanding Shares convertible into or
exchangeable for Common Stock and exercise of all outstanding rights,
options and warrants for Common Stock. Any shares of Common Stock acquired
by any Purchaser (including pursuant to the Preference Warrants) and any
other rights to acquire shares of Common Stock acquired by any Purchaser
(other than the Preference Warrants) shall not be included in the "pro
rata share" that such Purchaser may be entitled to purchase.
(c) This right of first refusal shall be subject to the remaining
provisions of this Agreement.
(d) Notwithstanding anything in this Agreement to the contrary, no
adjustment in the number of shares of Common Stock issuable or issued upon
exercise, exchange or conversion of any outstanding securities convertible
into or exchangeable for Common Stock and exercise for Common Stock of any
outstanding right, option or warrant held by such Person (or which such
Person is entitled to hold pursuant to a right of conversion or exchange
on any security) by reason of original provisions of or relating to such
security which provide for an automatic adjustment upon the occurrence of
specified events shall be deemed an issuance or sale or a proposed
issuance or sale of New Securities, nor shall such adjustment give rise to
any rights of first refusal under this Agreement.
SECTION 4.05. Notice of Proposal to Issue or Sell
(a) In the event the Company proposes to issue or sell New
Securities, it shall give each Purchaser written notice of the proposal (a
"Section 4.05 Notice"), describing the proposed New Securities, and the
terms (including the cash to be paid for, plus the fair market value of
any other consideration to be given for, the New Securities) upon which
the Company proposes to sell or issue the New Securities and the proposed
buyers, if known.
(b) Each Purchaser shall have 30 days after any Section 4.05 Notice
is given to agree to purchase such New Securities upon the terms specified
in the Section 4.05 Notice, and in the event that any Purchaser wishes to
do so it shall give written notice to the Company, stating therein the
quantity of New Securities to be purchased, which in any event may not
exceed such Purchaser's pro rata share thereof. In the event that any
Purchaser fails to give such notice, it shall be deemed to have waived its
right of first refusal under this Agreement.
19
(c) In the event that any Purchaser exercises its right pursuant to
Section 4.05(b) such Purchaser shall purchase the quantity of New
Securities specified in such Purchaser's notice to the Company on the
terms specified in the Section 4.05 Notice (except that if such terms
include the giving of consideration other than cash, such Purchaser shall
pay the fair market value of such other consideration in lieu thereof) on
a date (other than a date on which banks in The City of New York City are
closed) not more than 210 days after the date of the Section 4.05 Notice.
The Company shall give such Purchaser notice of the purchase date not less
than ten days in advance of the purchase date.
SECTION 4.06. Sale or Issuance After Notice
(a) From the first day after the first day on which the Purchasers
have (i) exercised their right of first refusal as provided for in Section
4.05(b), (ii) waived their right of first refusal in writing, or (iii)
been deemed to have waived their right of first refusal pursuant to the
last sentence of Section 4.05(b), the Company shall have 180 days to sell
or issue, or enter into an agreement (pursuant to which the sale of New
Securities covered thereby shall be closed, if at all, not later than 180
days from the date of such agreement) to sell or issue, all those New
Securities covered by the applicable Section 4.05 Notice, at a price and
upon terms no more favorable to the purchasers thereof than specified in
such Section 4.05 Notice.
(b) If the Company does not sell such New Securities within the time
periods specified in Section 4.06(a), the Company shall not be permitted
to issue or sell such New Securities, unless it first offers such
securities to each Purchaser again pursuant to the terms of this
Agreement.
SECTION 4.07. Redemption of Certain New Securities
Any options, warrants, or other rights to purchase Common Stock that
any Purchaser purchases pursuant to this Agreement (collectively, "Option
Rights") shall be subject to redemption by the Company if the Company does not
complete a sale or issuance pursuant to Section 4.05(a) of the New Securities
the proposed sale or issuance of which caused the Company to give the Section
4.05 Notice that led to such Purchaser's purchase of such Option Rights.
SECTION 4.08. Termination
Upon the disposition by any Purchaser of all of its Preference
Warrants, such Purchaser shall have no further rights under this Agreement.
20
SECTION 4.09. Assignment. The rights granted by the Company under
Section 4.04 can be assigned by a Purchaser only to a transferee or assignee of
some of all of the Preference Warrant Shares or Preference Warrants (as adjusted
for stock splits and the like) that is owned and controlled by such Purchaser.
SECTION 4.10. Definitions. For purposed of this Article IV, the
following terms shall have the following definitions:
"Common Stock" means the commons stock of the Company, par value
$0.01 per share.
"New Securities" means any Common Stock, whether now authorized or
not, and any rights, options or warrants to purchase any such Common Stock, and
securities of any type whatsoever that are, or may become, convertible into
Common Stock; provided that the term "New Securities" does not include:
(i) securities issued in connection with an acquisition by the
Company of another business entity or business segment of such an entity,
whether by merger, purchase of substantially all the stock or assets, or
by other reorganization;
(ii) securities issued to employees, consultants, officers or
directors of the Company either
(x) pursuant to any stock option, stock purchase, stock bonus
or similar plan that is or has been approved by the Board of
Directors of the Company on or before the date of this Agreement, or
(y) pursuant to any stock option, stock purchase, stock bonus
or similar plan that is approved by the Compensation Committee of
the Board of Directors of the Company, provided that such securities
have an exercise price of no less than the Common Stock fair market
value on the date of the grant;
(iii) securities issued in connection with any stock split, stock
dividend, recapitalization or other reorganization of the Company;
(iv) securities issued upon the exchange, exercise or conversion of
any security that was the subject of a right of first refusal pursuant to
this Agreement;
(v) treasury shares;
21
(vi) any right, option or warrant to acquire any security
convertible solely into the securities excluded from the definition of New
Securities pursuant to subsections (i) through (v) above;
(vii) any Common Stock, or any rights, options, warrants, or Shares
convertible into or exchangeable for Common Stock, which the Company was,
on or before the date of this Agreement, required to issue;
(viii) any Common Stock, or any rights, options, warrants or Shares
convertible into or exchangeable for Common Stock which the Company shall
issue on January 27, 1999 in connection with its offering of certain
senior discount notes due 2009; and
(ix) any Common Stock, or any rights, options, warrants or Shares
convertible into or exchangeable for Common Stock, issued or sold to any
Person by the operation of any rights described in this Article IV or
pursuant to any other anti-dilution arrangement with any other Person
(including but not limited to any such rights granted to the Purchaser).
"Person" means any individual, partnership, company, corporation or
other legal entity, as the context requires.
"Shares" means shares of any class or series of the capital stock of
the Company.
ARTICLE V
ADJUSTMENTS
SECTION 5.01. Adjustment of Preference Exercise Rate; Notices. The
Preference Exercise Rate is subject to adjustment from time to time as provided
in this Section 5.01.
(a) Adjustment for Changes in Common Stock. In the event that at any
time on or after the Issue Date or from time to time the Company shall (i) pay a
dividend or make a distribution on its Common Stock payable in shares of its
Common Stock or other equity interests of the Company, (ii) subdivide any of its
outstanding shares of Common Stock into a larger number of shares of Common
Stock, (iii) combine any of its outstanding shares of Common Stock into a
smaller number of shares of Common Stock or (iv) increase or decrease the number
of shares of Common Stock outstanding by reclassification of its Common Stock,
then the number of shares of Common Stock issuable upon exercise of each
Preference
22
Warrant immediately after the happening of such event shall be adjusted to a
number determined by multiplying the number of shares of Common Stock that such
holder would have owned or have been entitled to receive upon exercise had such
Warrants been exercised immediately prior to the happening of the events
described above (or, in the case of a dividend or distribution of Common Stock
or other shares of Capital Stock, immediately prior to the record date therefor)
by a fraction, the numerator of which shall be the total number of shares of
Common Stock outstanding immediately after the happening of the events described
above and the denominator of which shall be the total number of shares of Common
Stock outstanding immediately prior to the happening of the events described
above; and subject to Section 5.01(n), the Preference Exercise Price for each
Preference Warrant shall be adjusted to a number determined by dividing the
Preference Exercise Price immediately prior to such event by the aforementioned
fraction. An adjustment made pursuant to this Section 5.01(a) shall become
effective immediately after the effective date of such event, retroactive to the
record date therefor in the case of a dividend or distribution in shares of
Common Stock or other shares of the Company's capital stock.
(b) Adjustment for Cash Dividends and Other Distributions. In the
event that at any time or from time to time the Company shall distribute to all
holders of Common Stock (i) any dividend or other distribution of cash,
evidences of its indebtedness, shares of its capital stock or any other assets,
properties or debt securities or (ii) any options, warrants or other rights to
subscribe for or purchase any of the foregoing (other than, in each case, (x)
any distributions described in Sections 5.01(a), 5.01(c) or 5.01(d) that result
in an adjustment; and (z) any cash dividends or other cash distributions from
current or retained earnings), then the number of shares of Common Stock
issuable upon the exercise of each Preference Warrant shall be increased to a
number determined by multiplying the number of shares of Common Stock issuable
upon the exercise of such Preference Warrant immediately prior to the record
date for any such dividend or distribution by a fraction, the numerator of which
shall be the Current Market Value per share of Common Stock on the record date
for such dividend or distribution and the denominator of which shall be such
Current Market Value per share of Common Stock on the record date for such
dividend or distribution less the sum of (x) the amount of cash, if any,
distributed per share of Common Stock and (y) the fair value (as determined in
good faith by the Board, whose determination shall be evidenced by a board
resolution filed with the Preference Warrant Agent, a copy of which will be sent
to Holders upon request) of the portion, if any, of the distribution applicable
to one share of Common Stock consisting of evidences of indebtedness, shares of
stock, securities, other assets or property, warrants, options or subscription
or purchase rights; and, subject to Sections 5.01(n) and 5.03, the Preference
Exercise Price shall be adjusted to a number determined by dividing the
Preference Exercise Price immediately prior to such record date by the
aforementioned fraction. Such adjustments shall be made whenever any
distribution is made and shall become effective as of the date of distribution,
retroactive to the record date for any such distribution; provided, however,
that the Company is not required to make an adjustment pursuant to this
23
Section 5.01(b) if at the time of such distribution the Company makes the same
distribution to Holders of Preference Warrants as it makes to holders of Common
Stock pro rata based on the number of shares of Common Stock for which such
Preference Warrants are exercisable (whether or not currently exercisable). No
adjustment shall be made pursuant to this Section 5.01(b) which shall have the
effect of decreasing the number of shares of Common Stock issuable upon exercise
of each Preference Warrant or increasing the Preference Exercise Price.
(c) Adjustment for Rights Issued to All Holders of Common Stock. In
the event that at any time or from time to time the Company shall issue to all
holders of Common Stock without any charge, rights, options or warrants
entitling the holders thereof to subscribe for additional shares of Common
Stock, or securities convertible into or exchangeable or exercisable for
additional shares of Common Stock, entitling such holders to subscribe for or
purchase shares of Common Stock at a price per share that is lower at the record
date for such issuance than the then Current Market Value per share of Common
Stock (other than issuances referred to in Sections 5.01(a), 5.01(b) or
5.01(d)that result in an adjustment), then the number of shares of Common Stock
issuable upon the exercise of each Preference Warrant shall be increased to a
number determined by multiplying the number of shares of Common Stock
theretofore issuable upon exercise of each Preference Warrant by a fraction, the
numerator of which shall be the number of shares of Common Stock outstanding on
the date of issuance of such rights, options, warrants or securities plus the
number of additional shares of Common Stock offered for subscription or purchase
or into or for which such securities that are issued are convertible,
exchangeable or exercisable, and the denominator of which shall be the number of
shares of Common Stock outstanding on the date of issuance of such rights,
options, warrants or securities plus the total number of shares of Common Stock
which the aggregate consideration expected to be received by the Company
(assuming the exercise or conversion of all such rights, options, warrants or
securities) would purchase at the then Current Market Value per share of Common
Stock. Subject to Sections 5.01(n) and 5.03, in the event of any such
adjustment, the Preference Exercise Price shall be adjusted to a number
determined by dividing the Preference Exercise Price immediately prior to such
date of issuance by the aforementioned fraction. Such adjustment shall be made
immediately after such rights, options or warrants are issued and shall become
effective, retroactive to the record date for the determination of stockholders
entitled to receive such rights, options, warrants or securities. No adjustment
shall be made pursuant to this Section 5.01(c) which shall have the effect of
decreasing the number of shares of Common Stock purchasable upon exercise of
each Preference Warrant or of increasing the Preference Exercise Price.
(d) Adjustment for Other Issuances of Common Stock or Rights. In the
event that at any time or from time to time the Company shall issue (i) shares
of Common Stock (subject to the provisions below), (ii) rights, options or
warrants entitling the holder thereof to subscribe for shares of Common Stock
(provided, however, that no adjustment shall be made upon the exercise of such
rights, options or warrants), or (iii) securities convertible
24
into or exchangeable or exercisable for Common Stock (provided, however, that no
adjustment shall be made upon the conversion, exchange or exercise of such
securities (other than issuances specified in (i), (ii) or (iii) which are made
as the result of anti-dilution adjustments in such securities)), at a price per
share at the record date of such issuance that is less than the then Current
Market Value per share of Common Stock (other than issuances referred to in
Sections 5.01(a), 5.01(b) or 5.01(d)that result in an adjustment), then the
number of shares of Common Stock issuable upon the exercise of each Preference
Warrant shall be increased to a number determined by multiplying the number of
shares of Common Stock theretofore issuable upon exercise of each Preference
Warrant by a fraction, the numerator of which shall be the number of shares of
Common Stock outstanding immediately after such sale or issuance plus the number
of additional shares of Common Stock offered for subscription or purchase or
into or for which such securities that are issued are convertible, exchangeable
or exercisable, and the denominator of which shall be the number of shares of
Common Stock outstanding immediately prior to such sale or issuance plus the
total number of shares of Common Stock which the aggregate consideration
expected to be received by the Company (assuming the exercise or conversion of
all such rights, options, warrants or securities, if any) would purchase at the
then Current Market Value per share of Common Stock, and subject to Sections
5.01(n) and 5.03 the Preference Exercise Price shall be adjusted to a number
determined by dividing the Preference Exercise Price immediately prior to such
date of issuance by the aforementioned fraction. Such adjustments shall be made
whenever such rights, options or warrants or convertible securities are issued.
No adjustment shall be made pursuant to this Section 5.01(d) which shall have
the effect of decreasing the number of shares of Common Stock issuable upon
exercise of each warrant or of increasing the Preference Exercise Price. For
purposes of this Section 5.01(d) only, any issuance of Common Stock, or rights,
options or warrants to subscribe for, or other securities convertible into or
exercisable or exchangeable for, Common Stock, which issuance (or agreement to
issue) (A) is in exchange for or otherwise in connection with the acquisition of
the property (excluding any such exchange exclusively for cash) of any Person
and (B) is at a price per share equal to the Current Market Value at the time of
signing a definitive agreement, shall be deemed to have been made at a price per
share equal to the Current Market Value per share at the record date with
respect to such issuance (the time of closing or consummation of such exchange
or acquisition) if such definitive agreement is entered into within 90 days of
the date of such agreement in principle.
(e) Notice of Adjustment. Whenever the Preference Exercise Price or
the number of shares of Common Stock and other property, if any, issuable upon
exercise of the Preference Warrants is adjusted, as herein provided, the Company
shall deliver to the Preference Warrant Agent and to the holder of the
Preference Warrants a certificate of a firm of independent accountants selected
by the Board (who may be the regular accountants employed by the Company)
setting forth, in reasonable detail, the event requiring the adjustment and the
method by which such adjustment was calculated (including a description of
25
the basis on which (i) the Board determined the fair value of any evidences of
indebtedness, other securities or property or warrants, options or other
subscription or purchase rights and (ii) the Current Market Value of the Common
Stock was determined, if either of such determinations were required), and
specifying the Preference Exercise Price and the number of shares of Common
Stock issuable upon exercise of Preference Warrants after giving effect to such
adjustment. The Company shall, by Company Order, promptly cause the Preference
Warrant Agent to mail a copy of such certificate to each Holder in accordance
with Section 5.01(l). The Preference Warrant Agent shall be entitled to rely on
such certificate and shall be under no duty or responsibility with respect to
any such certificate, except to exhibit the same from time to time, to any
Holder desiring an inspection thereof during reasonable business hours. The
Preference Warrant Agent shall not at any time be under any duty or
responsibility to any Holder to determine whether any facts exist which may
require any adjustment of the Preference Exercise Price or the number of shares
of Common Stock or other stock issuable on exercise of the Preference Warrants,
or with respect to the nature or extent of any such adjustment when made, or
with respect to the method employed in making such adjustment or the validity or
value of any shares of Common Stock, evidences of indebtedness, warrants,
options, or other securities or property.
(f) Reorganization of Company; Special Distributions. (i) If the
Company, in a single transaction or through a series of related transactions,
consolidates with or merges with or into any other person or sells, assigns,
transfers, leases, conveys or otherwise disposes of all or substantially all of
its properties and assets to another person or group of affiliated persons or is
a party to a merger or binding share exchange which reclassifies or changes its
outstanding Common Stock (a "Fundamental Transaction"), as a condition to
consummating any such transaction the person formed by or surviving any such
consolidation or merger if other than the Company or the person to whom such
transfer has been made (the "Surviving Person") shall enter into a supplemental
preference warrant agreement. The supplemental preference warrant agreement
shall provide (a) that the holder of a Preference Warrant then outstanding may
exercise it for the kind and amount of securities, cash or other assets which
such holder would have received immediately after the Fundamental Transaction if
such holder had exercised the Preference Warrant immediately before the
effective date of the transaction (whether or not the Preference Warrants were
then exercisable and without giving effect to the Cashless Exercise option); it
being understood that the Preference Warrants will remain exercisable only in
accordance with their terms so that conditions to exercise will remain
applicable, such as payment of Preference Exercise Price, assuming (to the
extent applicable) that such holder (i) was not a constituent person or an
affiliate of a constituent person to such transactions, (ii) made no election
with respect to the form of consideration payable in such transaction, and (iii)
was treated alike with the plurality of non-electing holders, and (b) that the
Surviving Person shall succeed to and be substituted to every right and
obligation of the Company in respect of this Agreement and the Preference
Warrants. The supplemental warrant agreement shall provide for adjustments which
shall be as nearly equivalent as may be
26
practicable to the adjustments provided for in this Article V. The Surviving
Person shall mail to holders of Preference Warrants at the addresses appearing
on the Preference Warrant Register a notice briefly describing the supplemental
warrant agreement. If the issuer of securities deliverable upon exercise of
Preference Warrants is an affiliate of the Surviving Person, that issuer shall
join in the supplemental warrant agreement.
(ii) Notwithstanding the foregoing, (a) if the Company enters into a
Fundamental Transaction with another Person (other than a subsidiary of the
Company) and consideration is payable to holders of shares of Common Stock (or
other securities) issuable or, deliverable upon exercise of the Preference
Warrants in connection with such Fundamental Transaction which consists solely
of cash or (b) if there is a dissolution, liquidation or winding up of the
Company, then the holders of Preference Warrants shall be entitled to receive
distributions on the date of such event on an equal basis with holders of such
shares (or other securities issuable upon exercise of the Preference Warrants)
as if the Preference Warrants had been exercised immediately prior to such
event, less the aggregate Preference Exercise Price therefor. Upon receipt of
such payment, if any, the rights of a holder of such Preference Warrant shall
terminate and cease and such holder's Preference Warrants shall expire.
(iii) If this paragraph (f) applies, it shall supersede the
application of paragraph (a) of this Section 5.01.
(g) Company Determination Final. Any determination that the Company
or the board of directors of the Company must make pursuant to this Article V
shall be conclusive.
(h) Preference Warrant Agent's Adjustment Disclaimer. The Preference
Warrant Agent shall have no duty to determine when an adjustment under this
Article V should be made, how it should be made or what it should be. The
Preference Warrant Agent shall have no duty to determine whether a supplemental
warrant agreement under paragraph (f) need be entered into or whether any
provisions of any supplemental warrant agreement are correct. The Preference
Warrant Agent shall not be accountable for and makes no representation as to the
validity or value of any securities or assets issued upon exercise of Preference
Warrants. The Preference Warrant Agent shall not be responsible for the
Company's failure to comply with this Article V.
(i) Underlying Preference Warrant Shares. The Company shall at all
times reserve and keep available, free from preemptive rights (except as
otherwise authorized in this Agreement), out of its authorized but unissued
Common Stock or Common Stock held in the treasury of the Company, for the
purpose of effecting the exercise of Preference Warrants, the full number of
Preference Warrant Shares then deliverable upon the exercise of all Preference
27
Warrants then outstanding and payment of the exercise price, and the shares so
deliverable shall be fully paid and nonassessable and free from all liens and
security interests.
(j) Specificity of Adjustment. Regardless of any adjustment in the
number or kind of shares purchasable upon the exercise of the Preference
Warrants, Preference Warrant Certificates theretofore or thereafter issued may
continue to express the same number and kind of Preference Warrant Shares per
Preference Warrant as are stated on the Preference Warrant Certificates
initially issuable pursuant to this Agreement.
(k) Notice of Voluntary Adjustment. In the event that the Company
shall propose to (a) pay any dividend payable in securities of any class to the
holders of its Common Stock or to make any other non-cash dividend or
distribution to the holders of its Common Stock, (b) offer the holders of its
Common Stock rights to subscribe for or to purchase any securities convertible
into shares of Common Stock or shares of stock of any class or any other
securities, rights or options, (c) issue any (i) shares of Common Stock, (ii)
rights, options or warrants entitling the holders thereof to subscribe for
shares of Common Stock, or (iii) securities convertible into or exchangeable or
exercisable for Common Stock (in the case of (i), (ii) and (iii), only if such
issuance or adjustment would result in an adjustment hereunder), (d) effect any
capital reorganization, reclassification, consolidation or merger, (e) effect
the voluntary or involuntary dissolution, liquidation or winding-up of the
Company or (f) make a tender offer or exchange offer with respect to the Common
Stock, the Company shall within five (5) days send the Holder and the Preference
Warrant Agent a notice of such proposed action or offer. Such notice shall be
mailed by the Company to the Holders at their addresses as they appear in the
Preference Certificate Register, which shall specify the record date for the
purposes of such dividend, distribution or rights, or the date such issuance or
event is to take place and the date of participation therein by the holders of
Common Stock, if any such date is to be fixed, and shall briefly indicate the
effect of such action on the Common Stock and on the number and kind of any
other shares of stock and on other property, if any, and the number of shares of
Common Stock and other securities, if any, issuable upon exercise of each
Preference Warrant and the Preference Exercise Price after giving effect to any
adjustment pursuant to Article 5 which will be required as a result of such
action. Such notice shall be given by the Company as promptly as possible and
(x) in the case of any action covered by clause (a) or (b) above, at least 10
days prior to the record date for determining holders of the Common Stock for
purposes of such action or (y) in the case of any other such action, at least 20
days prior to the date of the taking of such proposed action or the date of
participation therein by the holders of Common Stock, whichever shall be the
earlier.
(l) Multiple Adjustments. After an adjustment to the Exercise Rate
for outstanding Preference Warrants under this Article V, any subsequent event
requiring an adjustment under this Article V shall cause an adjustment to the
Exercise Rate for outstanding Preference Warrants as so adjusted.
28
(m) Definitions.
"Capital Stock" means, with respect to any Person, any and all
shares, interests, partnership interests, participations, rights in or other
equivalents (however designated and whether voting or non-voting) of, such
person's capital stock, and any rights (other than debt securities convertible
into capital stock), warrants or options exchangeable for or convertible into
such capital stock whether outstanding on the Issue Date (as defined below) or
issued after the Issue Date.
"Current Market Value" per share of Common Stock of the Company or
any other security at any date shall mean (i) if the security is not registered
under the Exchange Act, (a) the value of the security, determined in good faith
by the board of directors of the Company and certified in a board resolution,
based on the most recently completed arm's-length transaction between the
Company and a person other than an affiliate of the Company and the closing of
which occurs on such date or shall have occurred within the six-month period
preceding such date, or (b) if no such transaction shall have occurred on such
date or within such six-month period, the fair market value of the security as
determined by a nationally or regionally recognized Independent Financial Expert
(as defined herein) (provided that in the case of the calculation of Current
Market Value for determining the cash value of fractional shares, any such
determination within six months that is, in the good faith judgment of the
Board, a reasonable determination of value, may be utilized) or (ii)(a) if the
security is registered under the Exchange Act, the average of the daily closing
sales prices of the securities for the 20 consecutive trading days immediately
preceding such date, or (b) if the security has been registered under the
Exchange Act for less than 20 consecutive trading days before such date, then
the average of the daily closing sales prices for all of the trading days before
such date for which closing sales prices are available, in the case of each of
(ii)(a) and (ii)(b), as certified by the president, the chief executive officer,
any vice president or the chief financial officer of the Company in a writing
delivered to the Preference Warrant Agent. The closing sales price for each such
trading day shall be: (A) in the case of a security listed or admitted to
trading on any U.S. national securities exchange or quotation system, the
closing sales price, regular way, on such day, or if no sale takes place on such
day, the average of the closing bid and asked prices on such day, (B) in the
case of a security not then listed or admitted to trading on any U.S. national
securities exchange or quotation system, the last reported sale price on such
day, or if no sale takes place on such day, the average of the closing bid and
asked prices on such day, as reported by a reputable quotation source designated
by the Company, (C) in the case of a security not then listed or admitted to
trading on any U.S. national securities exchange or quotation system and as to
which no such reported sale price or bid and asked prices are available, the
average of the reported high bid and low asked prices on such day, as reported
by a reputable quotation service, or a newspaper of general circulation in the
Borough of Manhattan, The City and State of New York customarily published on
each Business Day, designated by the Company, or, if there shall be no bid and
29
asked prices on such day, the average of the high bid and low asked prices, as
so reported, on the most recent day (not more than 30 days prior to the date in
question) for which prices have been so reported and (D) if there are not bid
and asked prices reported during the 30 days prior to the date in question, the
Current Market Value shall be determined as if the securities were not
registered under the Exchange Act.
"Independent Financial Expert" means a U.S. investment banking firm
of national standing in the United States (i) which does not, and whose
directors, officers and employees or affiliates do not have a direct or indirect
material financial interest for its proprietary account in the Company or any of
its affiliates and (ii) which, in the judgment of the board of directors of the
Company, is otherwise independent with respect to the Company and its affiliates
and qualified to perform the task for which it is to be engaged.
"Issue Date" means January 27, 1999.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof or any other entity, including any predecessor of any such entity.
(n) When De Minimis Adjustment May Be Deferred. The adjustments
required by the preceding Sections of this Article V shall be made whenever and
as often as any specified event requiring an adjustment shall occur, except that
no adjustment of the Preference Exercise Price or the number of shares of Common
Stock issuable upon exercise of Preference Warrants that would otherwise be
required shall be made unless and until such adjustment either by itself or with
other adjustments not previously made increases or decreases by at least 1% the
Preference Exercise Price or the number of shares of Common Stock issuable upon
exercise of Preference Warrants immediately prior to the making of such
adjustment. Any adjustment representing a change of less than such minimum
amount shall be carried forward and made as soon as such adjustment, together
with other adjustments required by this Article V and not previously made, would
result in a minimum adjustment. For the purpose of any adjustment, any specified
event shall be deemed to have occurred at the close of business on the date of
its occurrence. In computing adjustments under this Article V, fractional
interests in Common Stock shall be taken into account to the nearest
one-thousandth of a share.
(o) Adjustment of Exercise Price. In addition, notwithstanding any
other provisions of this Article V, the Company may reduce the Preference
Exercise Price (to an amount not less than the par value of the Common Stock)
for a period of time not less then 20 business days as deemed appropriate and
determined in good faith by the Board.
30
SECTION 5.02. Fractional Preference Warrant Shares. The Company
shall not be required to issue fractional Preference Warrant Shares upon
exercise of the Preference Warrants or distribute Preference Warrant
Certificates that evidence fractional shares of Common Stock. In addition, in no
event shall any holder of Preference Warrants be required to make any payment of
a fractional cent. In lieu of fractional Preference Warrant Shares, there shall
be paid to the registered holders of Preference Warrant Certificates at the time
Preference Warrants evidenced thereby are exercised as herein provided an amount
in cash equal to the same fraction of the Current Market Value per Warrant Share
on the Business Day preceding the date the Preference Warrant Certificates
evidencing such Preference Warrants are surrendered for exercise. Such payments
shall be made by check or by transfer to an account maintained by such
registered holder with a bank in The City of New York. If any holder surrenders
for exercise more than one Preference Warrant Certificate, the number of
Preference Warrant Shares deliverable to such holder may, at the option of the
Company, be computed on the basis of the aggregate amount of all the Preference
Warrants exercised by such holder.
SECTION 5.03. Exceptions to Antidilution Provisions. Without
limiting any other exception contained in this Agreement, including in
particular, without limiting any preemptive rights identified in Section 4.04 of
this Agreement, and in addition thereto, no adjustment need be made for:
(i) grants or exercises of rights granted to employees of the
Company or any of its subsidiaries of shares of Common Stock issued or
granted to such employees under any stock incentive plan or otherwise,
whether or not upon the exercise, exchange or conversion of any such
rights, issued in good faith and, except for Section 5.01(c) and (d), at
fair market value (as determined in good faith by the Board of Directors
of the Company);
(ii) grants or exercises of rights granted to employees of the
Company or any of its subsidiaries of shares of Common Stock issued or
granted to such employees under any employee stock purchase plan or
otherwise, whether or not upon the exercise, exchange or conversion of any
such rights, issued in good faith (as determined in good faith by the
Board of Directors of the Company);
(iii) options, warrants or other agreements or rights to purchase
capital stock of the Company entered into prior to the date of the
issuance of the Preference Warrants and any issuance of shares of Common
Stock in connection therewith;
(iv) rights to purchase shares of Common Stock pursuant to a Company
plan for reinvestment of dividends or interest;
31
(v) a change in the par value of shares of Common Stock (including a
change from par value to no par value or vice versa); and
(vi) bona fide public offerings or private placements pursuant to
Section 4(2) of the Securities Act, Rule 144A, Regulation D or Regulation
S thereunder of any security trading on any national securities exchange
or in the over the counter market, or of a security directly or indirectly
convertible or exchangeable for any such security, involving at least one
investment bank of national reputation.
ARTICLE VI
CONCERNING THE PREFERENCE WARRANT AGENT
SECTION 6.01. Preference Warrant Agent. The Company hereby appoints
Bankers Trust Company as Preference Warrant Agent of the Company in respect of
the Preference Warrants and the Preference Warrant Certificates upon the terms
and subject to the conditions set forth herein and in the Preference Warrant
Certificates; and Bankers Trust Company hereby accepts such appointment. The
Preference Warrant Agent shall have the powers and authority specifically
granted to and conferred upon it in the Preference Warrant Certificates and
hereby and such further powers and authority to act on behalf of the Company as
the Company may hereafter grant to or confer upon it and it shall accept in
writing. All of the terms and provisions with respect to such powers and
authority contained in the Preference Warrant Certificates are subject to and
governed by the terms and provisions hereof. The Preference Warrant Agent may
act through agents and shall not be responsible for the misconduct or negligence
of any such agent appointed with due care.
SECTION 6.02. Conditions of Preference Warrant Agent's Obligations.
The Preference Warrant Agent accepts its obligations herein set forth upon the
terms and conditions hereof and in the Preference Warrant Certificates,
including the following, to all of which the Company agrees and to all of which
the rights hereunder of the holders from time to time of the Preference Warrant
Certificates shall be subject:
(a) The Preference Warrant Agent shall be entitled to compensation
to be agreed upon with the Company in writing for all services rendered by
it and the Company agrees promptly to pay such compensation and to
reimburse the Preference Warrant Agent for its reasonable out-of-pocket
expenses (including reasonable fees and expenses of counsel) incurred
without gross negligence or willful misconduct on its part in connection
with the services rendered by it hereunder. The Company also agrees to
indemnify the Preference Warrant Agent and any predecessor Preference
Warrant Agent, their directors, officers, affiliates, agents and employees
for, and to hold them
32
and their directors, officers, affiliates, agents and employees harmless
against, any loss, liability or expense of any nature whatsoever
(including, without limitation, reasonable fees and expenses of counsel)
incurred without gross negligence or willful misconduct on the part of the
Preference Warrant Agent, arising out of or in connection with its acting
as such Preference Warrant Agent hereunder and its exercise of its rights
and performance of its obligations hereunder. The obligations of the
Company under this Section 6.02 shall survive the exercise and the
expiration of the Preference Warrant Certificates and the resignation and
removal of the Preference Warrant Agent.
(b) In acting under this Agreement and in connection with the
Preference Warrant Certificates, the Preference 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 of the owners or holders
of the Preference Warrant Certificates.
(c) The Preference Warrant Agent may consult with counsel of its
selection and any advice or written opinion 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
such advice or opinion.
(d) The Preference Warrant Agent shall be fully protected and shall
incur no liability for or in respect of any action taken or omitted to be
taken or thing suffered by it in reliance upon any Preference Warrant
Certificate, notice, direction, consent, certificate, affidavit, opinion
of counsel, instruction, 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) The Preference Warrant Agent, and its officers, directors,
affiliates and employees ("Related Parties"), may become the owners of, or
acquire any interest in, Preference Warrant Certificates, shares or other
obligations of the Company with the same rights that it or they would have
if it were not the Preference Warrant Agent hereunder and, to the extent
permitted by applicable law including, but not limited to, the Trust
Indenture Act of 1939, it or they may engage or be interested in any
financial or other transaction with the Company and may act on, or as
depositary, trustee or agent for, any committee or body of holders of
shares or other obligations of the Company as freely as if it were not the
Preference Warrant Agent hereunder. Nothing in this Agreement shall be
deemed to prevent the Preference Warrant Agent or such Related Parties
from acting in any other capacity for the Company.
(f) The Preference Warrant Agent shall not be under any liability
for interest on, and shall not be required to invest, any monies at any
time received by it
33
pursuant to any of the provisions of this Agreement or of the Preference
Warrant Certificates.
(g) The Preference Warrant Agent shall not be under any
responsibility in respect of the validity of this Agreement (or any term
or provision hereof) or the execution and delivery hereof (except the due
execution and delivery hereof by the Preference Warrant Agent) or in
respect of the validity or execution of any Preference Warrant Certificate
(except its authentication thereof).
(h) The recitals and other statements contained herein and in the
Preference Warrant Certificates (except as to the Preference Warrant
Agent's authentication thereon) shall be taken as the statements of the
Company and the Preference Warrant Agent assumes no responsibility for the
correctness of the same. The Preference Warrant Agent does not make any
representation as to the validity or sufficiency of this Agreement or the
Preference Warrant Certificates, except for its due execution and delivery
of this Agreement; provided, however, that the Preference Warrant Agent
shall not be relieved of its duty to authenticate the Preference Warrant
Certificates as authorized by this Agreement. The Preference Warrant Agent
shall not be accountable for the use or application by the Company of the
proceeds of the exercise of any Preference Warrant.
(i) Before the Preference Warrant Agent acts or refrains from acting
with respect to any matter contemplated by this Preference Warrant
Agreement, it may require and may conclusively rely on:
(1) an Officers' Certificate (as defined in the Indenture)
stating on behalf of the Company that, in the opinion of the
signers, all conditions precedent, if any, provided for in this
Preference Warrant Agreement relating to the proposed action have
been complied with; and
(2) an opinion of counsel for the Company stating that, in the
opinion of such counsel, all such conditions precedent have been
complied with, provided that such matter is one customarily opined
upon by counsel.
Each Officers' Certificate or, if requested, an opinion of counsel
with respect to compliance with a condition or covenant provided for in
this Preference Warrant Agreement shall include:
(1) a statement that the person making such certificate or
opinion has read such covenant or condition;
34
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of such person, he or she
has made such examination or investigation as is necessary to enable
him or her to express an informed opinion as to whether or not such
covenant or condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
(j) The Preference Warrant Agent shall be obligated to perform such
duties as are specifically set forth herein and in the Preference Warrant
Certificates, and no implied duties or obligations shall be read into this
Agreement or the Preference Warrant Certificates against the Preference
Warrant Agent. The Preference Warrant Agent shall not be accountable or
under any duty or responsibility for the use by the Company of any of the
Preference Warrant Certificates duly authenticated by the Preference
Warrant Agent and delivered by it to the Company pursuant to this
Agreement. The Preference Warrant Agent shall have no duty or
responsibility in case of any default by the Company in the performance of
its covenants or agreements contained in the Warrant Certificates or in
the case of the receipt of any written demand from a holder of a
Preference Warrant Certificate 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 7.02 hereof, to make any
demand upon the Company.
(k) Unless otherwise specifically provided herein, any order,
certificate, notice, request, direction or other communication from the
Company made or given under any provision of this Agreement shall be
sufficient if signed by the chairman or a co-chairman of the board, the
chief executive officer, the president, the chief financial officer, any
executive vice president or any senior vice president of the Company
signing alone, or by any vice president signing together with the
secretary, any assistant secretary, the treasurer, or any assistant
treasurer of the Company.
(l) The Preference Warrant Agent shall have no responsibility in
respect of any adjustment pursuant to Article V hereof.
(m) The Company agrees that it will perform, execute, acknowledge
and deliver, or cause to be performed, executed, acknowledged and
delivered, all such further and other acts, instruments and assurances as
may reasonably be required by the
35
Preference Warrant Agent for the carrying out or performing by the
Preference Warrant Agent of the provisions of this Agreement.
(n) The Preference Warrant Agent is hereby authorized and directed
to accept written instructions with respect to the performance of its
duties hereunder from any one of the chairman or a co-chairman of the
board, the president, the chief executive officer, the chief financial
officer, any executive vice president or any senior vice president alone,
or any vice president together with the secretary, assistant secretary,
the treasurer or any assistant treasurer, of the Company or any other
officer or official of the Company reasonably believed to be authorized to
give such instructions and to apply to such officers or officials for
advice or instructions in connection with its duties, and it shall not be
liable for any action taken or suffered to be taken by it in good faith in
accordance with instructions with respect to any matter arising in
connection with the Preference Warrant Agent's duties and obligations
arising under this Agreement. Such application by the Preference Warrant
Agent for written instructions from the Company may, at the option of the
Preference Warrant Agent, set forth in writing any action proposed to be
taken or omitted by the Preference Warrant Agent with respect to its
duties or obligations under this Agreement and the date on or after which
such action shall be taken and the Preference Warrant Agent shall not be
liable for any action taken or omitted in accordance with a proposal
included in any such application on or after the date specified therein
(which date shall be not less than 10 Business Days after the Company
receives such application unless the Company consents to a shorter
period); provided that (i) such application includes a statement to the
effect that it is being made pursuant to this paragraph (n) and that
unless objected to prior to such date specified in the application, the
Preference Warrant Agent will not be liable for any such action or
omission to the extent set forth in such paragraph (n) and (ii) prior to
taking or omitting any such action, the Preference Warrant Agent has not
received written instructions objecting to such proposed action or
omission.
(o) Whenever in the performance of its duties under this Agreement
the Preference Warrant Agent shall deem it necessary or desirable that any
fact or matter be proved or established by the Company prior to taking or
suffering any action hereunder, such fact or matter (unless other evidence
in respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by a certificate signed on behalf of
the Company by any one of the chairman of the board of directors, the
president, the chief executive officer, the treasurer, the controller, any
vice president or the secretary or assistant secretary of the Company or
any other officer or official of the Company reasonably believed to be
authorized to give such instructions and delivered to the Preference
Warrant Agent; and such certificate shall be full authorization to the
Preference Warrant Agent for any action taken or suffered in
36
good faith by it under the provisions of this Agreement in reliance upon
such certificate.
(p) The Preference Warrant Agent shall not be required to risk or
expend its own funds in the performance of its obligations and duties
hereunder.
SECTION 6.03. Resignation and Appointment of Successor. (a) The
Company agrees, for the benefit of the holders from time to time of the
Preference Warrant Certificates, that there shall at all times be a Preference
Warrant Agent hereunder.
(b) The Preference Warrant Agent may at any time resign as
Preference Warrant Agent by giving written notice to the Company of such
intention on its part, specifying the date on which its desired resignation
shall become effective; provided, however, that such date shall be at least 60
days after the date on which such notice is given unless the Company agrees to
accept less notice. Upon receiving such notice of resignation, the Company shall
promptly appoint a successor Preference Warrant Agent, qualified as provided in
Section 6.03(d) hereof, by written instrument in duplicate signed on behalf of
the Company, one copy of which shall be delivered to the resigning Preference
Warrant Agent and one copy to the successor Preference Warrant Agent. As
provided in Section 6.03(d) hereof, such resignation shall become effective upon
the earlier of (x) the acceptance of the appointment by the successor Preference
Warrant Agent or (y) 60 days after receipt by the Company of notice of such
resignation. The Company may, at any time and for any reason, and shall, upon
any event set forth in the next succeeding sentence, remove the Preference
Warrant Agent and appoint a successor Preference Warrant Agent by written
instrument in duplicate, specifying such removal and the date on which it is
intended to become effective, signed on behalf of the Company, one copy of which
shall be delivered to the Preference Warrant Agent being removed and one copy to
the successor Preference Warrant Agent. The Preference Warrant Agent shall be
removed as aforesaid if it shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or a receiver of the Preference Warrant Agent
or of its property shall be appointed, or any public officer shall take charge
or control of it or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation. Any removal of the Preference
Warrant Agent and any appointment of a successor Preference Warrant Agent shall
become effective upon acceptance of appointment by the successor Preference
Warrant Agent as provided in Section 6.03(d). As soon as practicable after
appointment of the successor Preference Warrant Agent, the Company shall cause
written notice of the change in the Preference Warrant Agent to be given to each
of the registered holders of the Warrants in the manner provided for in Section
7.04 hereof.
(c) Upon resignation or removal of the Preference Warrant Agent, if
the Company shall fail to appoint a successor Preference Warrant Agent within a
period of 60 days after receipt of such notice of resignation or removal, then
the holder of any Warrant
37
Certificate or the retiring Preference Warrant Agent may apply to a court of
competent jurisdiction for the appointment of a successor to the Preference
Warrant Agent. Pending appointment of a successor to the Preference Warrant
Agent, either by the Company or by such a court, the duties of the Preference
Warrant Agent shall be carried out by the Company.
(d) Any successor Preference Warrant Agent, whether appointed by the
Company or by a court, shall be a bank or trust company in good standing,
incorporated under the laws of the United States of America or any State thereof
and having, at the time of its appointment, a combined capital surplus of at
least $50 million. Such successor Preference Warrant Agent shall execute and
deliver to its predecessor and to the Company an instrument accepting such
appointment hereunder and all the provisions of this Agreement, and thereupon
such successor Preference Warrant Agent, without any further act, deed or
conveyance, shall become vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as Preference Warrant Agent hereunder, and such predecessor shall
thereupon become obligated to (i) transfer and deliver, and such successor
Preference Warrant Agent shall be entitled to receive, all securities, records
or other property on deposit with or held by such predecessor as Preference
Warrant Agent hereunder and (ii) upon payment of the amounts then due it
pursuant to Section 6.02(a) hereof, pay over, and such successor Preference
Warrant Agent shall be entitled to receive, all monies deposited with or held by
any predecessor Preference Warrant Agent hereunder.
(e) Any corporation or bank into which the Preference Warrant Agent
hereunder may be merged or converted, or any corporation or bank with which the
Preference Warrant Agent may be consolidated, or any corporation or bank
resulting from any merger, conversion or consolidation to which the Preference
Warrant Agent shall be a party, or any corporation or bank to which the
Preference Warrant Agent shall sell or otherwise transfer all or substantially
all of its corporate trust business, shall be the successor to the Preference
Warrant Agent under this Agreement (provided that such corporation or bank shall
be qualified as aforesaid) without the execution or filing of any document or
any further act on the part of any of the parties hereto.
(f) No Preference Warrant Agent under this Preference Warrant
Agreement shall be personally liable for any action or omission of any successor
Preference Warrant Agent.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. Amendment. This Agreement and the terms of the
Preference Warrants may be amended by the Company, the Purchasers and the
Preference Warrant Agent,
38
without the consent of any other holder of any Preference Warrant Certificate,
for the purpose of curing any ambiguity, or of curing, correcting or
supplementing any defective or inconsistent provision contained herein or
therein, or to effect any assumptions of the Company's obligations hereunder and
thereunder by a successor corporation under certain circumstances or in any
other manner which the Company may deem necessary or desirable and which shall
not adversely affect the interests of the holders of the Preference Warrant
Certificates.
The Company and the Preference Warrant Agent may amend, modify or
supplement this Agreement and the terms of the Preference Warrants, and waivers
to departures from the terms hereof and thereof may be given, with the consent
of the Requisite Preference Warrant Holders (as defined below) for the purpose
of adding any provision to or changing in any manner or eliminating any of the
provisions of this Agreement or modifying in any manner the rights of the
holders of the outstanding Preference Warrants. "Requisite Preference Warrant
Holders" means (i) in the case of any amendment, modification, supplement or
waiver affecting only Preference Warrant Holders as such holders of a majority
in number of the outstanding Preference Warrants, voting separately as a class,
or (ii) in the case of any amendment, modification, supplement or waiver
affecting Preference Warrant Shares, a majority in number of Preference Warrant
Shares represented by the Preference Warrants that would be issuable assuming
exercise thereof at the time such amendment, modification, supplement or waiver
is voted upon. Notwithstanding any other provision of this Agreement, the
Preference Warrant Agent's consent must be obtained regarding any supplement or
amendment which alters the Preference Warrant Agent's rights or duties (it being
expressly understood that the foregoing shall not be in derogation of the right
of the Company to remove the Preference Warrant Agent in accordance with Section
6.03 hereof). For purposes of any amendment, modification or waiver hereunder,
Preference Warrants held by the Company or any of its Affiliates (other than the
Purchasers) shall be disregarded.
Any modification or amendment made in accordance with this Agreement
will be conclusive and binding on all present and future holders of Warrant
Certificates whether or not they have consented to such modification or
amendment or waiver and whether or not notation of such modification or
amendment is made upon such Warrant Certificates. Any instrument given by or on
behalf of any holder of a Warrant Certificate in connection with any consent to
any modification or amendment will be conclusive and binding on all subsequent
holders of such Warrant Certificate.
SECTION 7.02. Notices and Demands to the Company and Preference
Warrant Agent. If the Preference Warrant Agent shall receive any notice or
demand addressed to the Company by the holder of a Preference Warrant
Certificate pursuant to the provisions hereof or of the Preference Warrant
Certificates, the Preference Warrant Agent shall promptly forward such notice or
demand to the Company.
39
SECTION 7.03. Addresses for Notices to Parties and for Transmission
of Documents. All notices hereunder to the parties hereto shall be deemed to
have been given when sent by certified or registered mail, postage prepaid, or
by facsimile transmission, confirmed by first class mail, postage prepaid,
addressed to any party hereto as follows:
To the Company:
@Entertainment, Inc.
Xxx Xxxxxxxxxx Xxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000-0000
Facsimile: 00 1 860 549 1674
Attention: Xxxxxx X. Xxxxxx, III
with copies to:
Xxxxx & XxXxxxxx
000 Xxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000-0000
Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxx, Esq.
To the Preference Warrant Agent:
Bankers Trust Company
Corporate Trust Xxxxxx
Xxxx Xxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: (000) 000-0000
Attention: Corporate Trust Manager
or at any other address of which either of the foregoing shall have notified the
other in writing.
SECTION 7.04. Notices to Holders. Notices to holders of Preference
Warrants shall be mailed to such holders at the addresses of such holders as
they appear in the Preference Warrant Register. Any such notice shall be
sufficiently given if sent by first-class mail, postage prepaid to the address
of such holder.
SECTION 7.05. Applicable Law. THIS AGREEMENT AND EACH PREFERENCE
WARRANT CERTIFICATE ISSUED HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
40
SECTION 7.06. Persons Having Rights Under Agreement. Nothing in this
Agreement expressed 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 Preference Warrant
Agent and the holders of the Preference Warrant Certificates and, with respect
to Sections 4.03 and 4.04, the holders of Preference Warrant Shares issued
pursuant to Preference Warrants, 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 (except for Section 4.03 which shall be for
the benefit of all holders of Preference Warrant Shares issued pursuant to
Preference Warrants), conditions, stipulations, promises and agreements in this
Agreement contained shall be for the sole and exclusive benefit of the Company
and the Preference Warrant Agent and their successors and of the holders of the
Preference Warrant Certificates.
SECTION 7.07. Headings. The descriptive headings of the several
Articles and Sections of this Agreement are inserted for convenience only and
shall not control or affect the meaning or construction of any of the provisions
hereof.
SECTION 7.08. Counterparts. This Agreement may be executed in any
number of counterparts, each of which so executed shall be deemed to be an
original; but such counterparts shall together constitute but one and the same
instrument.
SECTION 7.09. Inspection of Agreement. A copy of this Agreement
shall be available during regular business hours at the principal corporate
trust office of the Preference Warrant Agent, for inspection by the holder of
any Preference Warrant Certificate. The Preference Warrant Agent may require
such holder to submit his Preference Warrant Certificate for inspection by it.
SECTION 7.10. Availability of Equitable Remedies. Since a breach of
the provisions of this Agreement could not adequately be compensated by money
damages, holders of Preference Warrants shall be entitled, in addition to any
other right or remedy available to them, to an injunction restraining such
breach or a threatened breach and to specific performance of any such provision
of this Agreement, and in either case no bond or other security shall be
required in connection therewith, and the parties hereby consent to such
injunction and to the ordering of specific performance.
SECTION 7.11. Obtaining of Governmental Approvals. The Company will
from time to time take all action required to be taken by it which may be
necessary to obtain and keep effective any and all permits, consents and
approvals of governmental agencies and authorities and securities acts filings
under U.S. federal and state laws, and the rules and regulations of all stock
exchanges on which the Preference Warrant Shares may become listed
41
which may be or become requisite in connection with the issuance, sale, transfer
and delivery of the Preference Warrant Shares issued upon exercise of the
Preference Warrants.
[Signature Page Follows]
42
IN WITNESS WHEREOF, this Agreement has been duly executed by the
parties hereto as of the day and year first above written.
@ENTERTAINMENT, INC.
By: /S/ XXXXXX X. XXXXXX, III
-------------------------------
Title: CHIEF EXECUTIVE OFFICER
By: /S/ XXXXXX XXXXXX XXXXX
-------------------------------
Title: CHIEF FINANCIAL OFFICER
BANKERS TRUST COMPANY,
Preference Warrant Agent
By: /S/ XXXXXXX XXXXXXXX
-------------------------------
Title: ASSISTANT VICE PRESIDENT
43
Xxxxxx Xxxxx
By:
-----------------------------------
Name:
Xxxxxx Xxxxx
By:
-----------------------------------
Name:
Xxxxx Xxxxx
By:
-----------------------------------
Name:
The Xxxxxxx Trust
By: Rothschild Trust Guernsey Limited
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
EXHIBIT A
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES
LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT IT
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR ACCREDITED INVESTORS (AS DEFINED IN REGULATION D UNDER THE
SECURITIES ACT), (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO
YEARS (OR SHORTER PERIOD AS MAY BE PRESCRIBED BY RULE 144(K) (OR ANY SUCCESSOR
PROVISION THEREOF) UNDER THE SECURITIES ACT) AFTER THE LATER OF THE ORIGINAL
ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON
WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY
OR ANY PREDECESSOR OF THIS SECURITY AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE
REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER,
SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ITS
SUBSIDIARY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS
A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A OR (D) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE
TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THESE SECURITIES
WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE
BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND
SUBMIT THIS CERTIFICATE TO THE PREFERENCE WARRANT AGENT. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE.
A-1
CUSIP No. 045920 15 4
No. 1 45,000 Preference Warrants
PREFERENCE WARRANT CERTIFICATE
@ENTERTAINMENT, INC.
This Preference Warrant Certificate certifies that Cede & Co., or
its registered assigns, is the registered holder of 45,000 Preference Warrants
(the "Preference Warrants") to purchase an aggregate of 4,950,000 shares of
Common Stock, par value $0.01 per share, issuable upon exercise of the
Preference Warrants (the "Preference Warrant Shares") of @ENTERTAINMENT, INC., a
Delaware corporation (the "Company," which term includes its successors and
assigns). Each Preference Warrant entitles the holder to purchase from the
Company at any time from 9:00 a.m. New York City time on or after the Exercise
Date until 5:00 p.m., New York City time, on February 1, 2010 (the "Preference
Expiration Date"), 110 fully paid, registered and non-assessable Preference
Warrant Shares, subject to adjustment as provided in Article V of the Preference
Warrant Agreement, at a preference exercise price of $10.00 for each share
purchased (the "Preference Exercise Price"); upon surrender of this Preference
Warrant Certificate and payment of the Preference Exercise Price (i) in cash or
by certified or official bank check, (ii) by a Cashless Exercise or (iii) by any
combination of (i) and (ii), at any office or agency maintained for that purpose
by the Company (the "Preference Warrant Exercise Office"), subject to the
conditions set forth herein and in the Preference Warrant Agreement. For
purposes of this Warrant, a "Cashless Exercise" shall mean an exercise of a
Preference Warrant in accordance with the immediately following two sentences.
To effect a Cashless Exercise, the holder may exercise a Preference Warrant or
Preference Warrants without payment of the Preference Exercise Price in cash by
surrendering such Preference Warrant or Preference Warrants (represented by one
or more Preference Warrant Certificates) and in exchange therefor, receiving
such number of shares of Common Stock equal to the product of (1) that number of
shares of Common Stock for which such Preference Warrant or Preference Warrants
are exercisable and which would be issuable in the event of an exercise with
payment of the Preference Exercise Price and (2) the Cashless Exercise Ratio.
The "Cashless Exercise Ratio" shall equal a fraction, the numerator of which is
the excess of the Current Market Value (calculated as set forth in this
Preference Warrant) per share of Common Stock on the date of exercise over the
Preference Exercise Price per share of Common Stock as of the date of exercise
and the denominator of which is the Current Market Value per share of Common
Stock on the date of exercise. Upon surrender of a Preference Warrant
Certificate representing more than one Preference Warrant in connection with the
holder's option to elect a Cashless Exercise, the holder must specify the number
of Preference Warrants for which such Preference Warrant Certificate is to be
exercised (without giving effect to the Cashless Exercise). All provisions of
the Preference Warrant Agreement shall be
A-2
applicable with respect to a Cashless Exercise of a Preference Warrant
Certificate for less than the full number of Preference Warrants represented
thereby. Capitalized terms used herein without being defined herein shall have
the definitions ascribed to such terms in the Preference Warrant Agreement.
"Current Market Value" per share of Common Stock of the Company or
any other security at any date shall mean (i) if the security is not registered
under the Exchange Act, (a) the value of the security, determined in good faith
by the board of directors of the Company and certified in a board resolution,
based on the most recently completed arm's-length transaction between the
Company and a person other than an affiliate of the Company and the closing of
which occurs on such date or shall have occurred within the six-month period
preceding such date, or (b) if no such transaction shall have occurred on such
date or within such six-month period, the fair market value of the security as
determined by a nationally or regionally recognized Independent Financial Expert
(as defined herein) (provided that in the case of the calculation of Current
Market Value for determining the cash value of fractional shares, any such
determination within six months that is, in the good faith judgment of the
Board, a reasonable determination of value, may be utilized) or (ii)(a) if the
security is registered under the Exchange Act, the average of the daily closing
sales prices of the securities for the 20 consecutive trading days immediately
preceding such date, or (b) if the security has been registered under the
Exchange Act for less than 20 consecutive trading days before such date, then
the average of the daily closing sales prices for all of the trading days before
such date for which closing sales prices are available, in the case of each of
(ii)(a) and (ii)(b), as certified by the president, the chief executive officer,
any vice president or the chief financial officer of the Company in a writing
delivered to the Preference Warrant Agent. The closing sales price for each such
trading day shall be: (A) in the case of a security listed or admitted to
trading on any U.S. national securities exchange or quotation system, the
closing sales price, regular way, on such day, or if no sale takes place on such
day, the average of the closing bid and asked prices on such day, (B) in the
case of a security not then listed or admitted to trading on any U.S. national
securities exchange or quotation system, the last reported sale price on such
day, or if no sale takes place on such day, the average of the closing bid and
asked prices on such day, as reported by a reputable quotation source designated
by the Company, (C) in the case of a security not then listed or admitted to
trading on any U.S. national securities exchange or quotation system and as to
which no such reported sale price or bid and asked prices are available, the
average of the reported high bid and low asked prices on such day, as reported
by a reputable quotation service, or a newspaper of general circulation in the
Borough of Manhattan, The City and State of New York customarily published on
each Business Day, designated by the Company, or, if there shall be no bid and
asked prices on such day, the average of the high bid and low asked prices, as
so reported, on the most recent day (not more than 30 days prior to the date in
question) for which prices have been so reported and (D) if there are not bid
and asked prices reported during the 30 days prior to the date in question, the
Current Market Value shall be determined as if the securities were not
registered under the Exchange Act.
A-3
"Independent Financial Expert" means a U.S. investment banking firm
of national standing in the United States, (i) which does not, and whose
directors, officers and employees or affiliates do not have a direct or indirect
material financial interest for its proprietary account in the Company or any of
its affiliates and (ii) which, in the judgment of the board of directors of the
Company, is otherwise independent with respect to the Company and its affiliates
and qualified to perform the task for which it is to be engaged.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof or any other entity, including any predecessor of any such entity.
The Company has initially designated the principal corporate trust
office of the Preference Warrant Agent in the Borough of Manhattan, The City of
New York, as the initial Preference Warrant Agent Office. The number of shares
of Common Stock issuable upon exercise of the Preference Warrants ("Exercise
Rate") is subject to adjustment upon the occurrence of certain events set forth
in the Preference Warrant Agreement.
Any Warrants not exercised on or prior to 5:00 p.m., New York City
time, on February 1, 2010 shall thereafter be void.
If the Company in a single transaction or through a series of
related transactions, consolidates with or merges with or into any other person
or sells, assigns, transfers, leases, conveys or otherwise disposes of all or
substantially all of its properties and assets to another person or group of
affiliated persons or is a party to a merger or binding share exchange which
reclassifies or changes its outstanding Common Stock (a "Fundamental
Transaction"), as a condition to consummating any such transaction the person
formed by or surviving any such consolidation or merger if other than the
Company or the person to whom such transfer has been made (the "Surviving
Person") shall enter into a supplemental preference warrant agreement. The
supplemental preference warrant agreement shall provide (a) that the holder of a
Preference Warrant then outstanding may exercise it for the kind and amount of
securities, cash or other assets which such holder would have received
immediately after the Fundamental Transaction if such holder had exercised the
Preference Warrant immediately before the effective date of the transaction
(regardless of whether the Preference Warrants were then exercisable and without
giving effect to the Cashless Exercise option), assuming (to the extent
applicable) that such holder (i) made no election with respect to the form of
consideration payable in such transaction and (ii) was treated alike with the
plurality of non-electing holders, and (b) that the Surviving Person shall
succeed to and be substituted for every right and obligation of the Company in
respect of the Preference Warrant Agreement and the Preference Warrants. The
Surviving Person shall mail to holders of Preference Warrants at the addresses
appearing on the Warrant Register a notice briefly describing the supplemental
warrant agreement. If the issuer of securities deliverable upon exercise of
Preference Warrants
A-4
is an affiliate of the Surviving Person, that company shall join in the
supplemental warrant agreement.
Notwithstanding the foregoing, (i) if the Company enters into a
Fundamental Transaction and the consideration payable to holders of the Common
Stock (or other securities) issuable or deliverable upon exercise of the
Preference Warrants in connection with such Fundamental Transaction consists
solely of cash or (ii) there is a dissolution, liquidation or winding up of the
issuer, then the holders of Preference Warrants shall be entitled to receive
distributions on the date of such event on an equal basis with holders of Common
Stock (or other securities issuable or delivered upon exercise of the Preference
Warrants) as if the Preference Warrants had been exercised immediately prior to
such event, less the Exercise Price therefor. Upon receipt of such payment, if
any, the rights of a holder of a Preference Warrant shall terminate and cease
and such holder's Preference Warrants shall expire.
Reference is hereby made to the further provisions on the reverse
hereof which provisions shall for all purposes have the same effect as though
fully set forth at this place.
This Preference Warrant Certificate shall not be valid unless
authenticated by the Preference Warrant Agent, as such term is used in the
Preference Warrant Agreement.
The Holders of Preference Warrants have agreed with the Company that
while they may exercise their Preference Warrants at any time, in whole or in
part, prior to the Preference Expiration Date, such Holder of Preference
Warrants will not be allowed to sell or otherwise dispose of the Preference
Warrant Shares prior to one year from the date hereof.
THIS PREFERENCE WARRANT CERTIFICATE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
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WITNESS the facsimile seal of the Company and facsimile signatures
of its duly authorized officers.
Dated: January 27, 1999
@ENTERTAINMENT, INC.
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
Certificate of Authentication:
This is one of the Preference Warrants
referred to in the within
mentioned Preference Warrant Agreement:
BANKERS TRUST COMPANY,
Preference Warrant Agent
By:
-----------------------------------
Authorized Signatory
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@ENTERTAINMENT, INC.
The Preference Warrants evidenced by this Preference Warrant
Certificate are part of a duly authorized issue of Preference Warrants expiring
at 5:00 p.m., New York City time, on February 1, 2010 (the "Preference
Expiration Date"). Each Preference Warrant initially represents the right to
purchase at any time on or after the Preference Exercise Date (as defined in the
Preference Warrant Agreement) and on or prior to the Preference Expiration Date
110 Preference Warrant Shares, subject to adjustment as set forth in the
Preference Warrant Agreement. The Preference Warrants are issued pursuant to a
Preference Warrant Agreement dated as of January 27, 1999 (the "Preference
Warrant Agreement"), duly executed and delivered by the Company to Bankers Trust
Company, as Preference Warrant Agent (the "Preference Warrant Agent"), which
Preference Warrant Agreement is hereby incorporated by reference in and made a
part of this instrument and is hereby referred to for a description of the
rights, limitation of rights, obligations, duties and immunities thereunder of
the Preference Warrant Agent, the Company and the holders (the words "holders"
or "holder" meaning the registered holders or registered holder) of the
Preference Warrants.
Preference Warrants may be exercised by (i) surrendering at any
Preference Warrant Exercise Office this Preference Warrant Certificate with the
form of Election to Exercise set forth hereon duly completed and executed and
(ii) to the extent such exercise is not being effected through a Cashless
Exercise by paying in full, in cash or by certificated or official bank check,
the Warrant Preference Exercise Price for each such Preference Warrant exercised
and any other amounts required to be paid pursuant to the Preference Warrant
Agreement.
If all of the items referred to in the last sentence of the
preceding paragraph are received by the Preference Warrant Agent at or prior to
11:00 a.m., New York City time, on a Business Day, the exercise of the
Preference Warrant to which such items relate will be effective on such Business
Day. If any items referred to in the last sentence of the preceding paragraph
are received after 11:00 a.m., New York City time, on a Business Day, the
exercise of the Preference Warrants to which such item relates will be deemed to
be effective on the next succeeding Business Day. Notwithstanding the foregoing,
in the case of an exercise of Preference Warrants on February 1, 2010, if all of
the items referred to in the last sentence of the preceding paragraph are
received by the Preference Warrant Agent at or prior to 5:00 p.m., New York City
time, on such Preference Expiration Date, the exercise of the Preference
Warrants to which such items relate will be effective on the Preference
Expiration Date.
As soon as practicable after the exercise of any Preference Warrant
or Preference Warrants, the Company shall issue or cause to be issued to or upon
the written order of the registered holder of this Preference Warrant
Certificate, a certificate or certificates evidencing such Preference Warrant
Share or Preference Warrant Shares to which such holder is entitled, in fully
registered form, registered in such name or names as may be directed by
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such holder pursuant to the Election to Exercise, as set forth on the reverse of
this Preference Warrant Certificate. Such certificate or certificates evidencing
the Preference Warrant Share or Preference Warrant Shares shall be deemed to
have been issued and any persons who are designated to be named therein shall be
deemed to have become the holder of record of such Preference Warrant Share or
Preference Warrant Shares as of the close of business on the date upon which the
exercise of this Preference Warrant was deemed to be effective as provided in
the preceding paragraph.
The Company shall not be required to issue fractional Preference
Warrant Shares upon exercise of the Preference Warrants or distribute Preference
Warrant Certificates that evidence fractional Preference Warrant Shares. In lieu
of fractional Preference Warrant Shares, there shall be paid to the registered
Holder of this Preference Warrant Certificate at the time such Preference
Warrant Certificate is exercised an amount in cash equal to the same fraction of
the Current Market Value per share of Common Stock on the Business Day preceding
the date this Preference Warrant Certificate is surrendered for exercise.
Preference Warrant Certificates, when surrendered at any office or
agency maintained by the Company for that purpose by the registered holder
thereof in person or by legal representative or attorney duly authorized in
writing, may be exchanged for a new Preference Warrant Certificate or new
Preference Warrant Certificates evidencing in the aggregate a like number of
Preference Warrants, in the manner and subject to the limitations provided in
the Preference Warrant Agreement, without charge except for any tax or other
governmental charge imposed in connection therewith.
Upon due presentment for registration of transfer of this Preference
Warrant Certificate at any office or agency maintained by the Company for that
purpose, a new Preference Warrant Certificate evidencing in the aggregate a like
number of Preference Warrants shall be issued to the transferee in exchange for
this Preference Warrant Certificate, subject to the limitations provided in the
Preference Warrant Agreement, without charge except for any tax or other
governmental charge imposed in connection therewith.
The Company and the Preference Warrant Agent may deem and treat the
registered holder hereof as the absolute owner of this Preference Warrant
Certificate (notwithstanding any notation of ownership or other writing hereon
made by anyone) for the purpose of any exercise hereof and for all other
purposes, and neither the Company nor the Preference Warrant Agent shall be
affected by any notice to the contrary.
The term "Business Day" shall mean any day on which (i) banks in The
City of New York, (ii) the principal U.S. securities exchange or market, if any,
on which any Common Stock is listed or admitted to trading and (iii) the
principal U.S. securities exchange or market, if any, on which the Preference
Warrants are listed or admitted to trading, are open for business.
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THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES
LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT. THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT IT
IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) OR ACCREDITED INVESTORS (AS DEFINED IN REGULATION D UNDER THE
SECURITIES ACT), (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO
YEARS (OR SHORTER PERIOD AS MAY BE PRESCRIBED BY RULE 144(K) (OR ANY SUCCESSOR
PROVISION THEREOF) UNDER THE SECURITIES ACT) AFTER THE LATER OF THE ORIGINAL
ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON
WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY
OR ANY PREDECESSOR OF THIS SECURITY AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE
REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER,
SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE ISSUER OR ITS
SUBSIDIARY, (B) PURSUANT TO A REGISTRATION STATEMENT WHICH HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE
ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS
A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A UNDER THE SECURITIES
ACT THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED
INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN
RELIANCE ON RULE 144A OR (D) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE
TO EACH PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO
THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THESE SECURITIES
WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE
BOX SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND
SUBMIT THIS CERTIFICATE TO THE PREFERENCE WARRANT AGENT. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION
DATE.
A-9
CUSIP No.
No. Preference Warrants
FORM OF
PREFERENCE WARRANT CERTIFICATE
@ENTERTAINMENT, INC.
This Preference Warrant Certificate certifies that Cede & Co., or
its registered assigns, is the registered holder of _______ Preference Warrants
(the "Preference Warrants") to purchase an aggregate of _________ shares of
Common Stock, par value $0.01 per share, issuable upon exercise of the
Preference Warrants (the "Preference Warrant Shares") of @ENTERTAINMENT, INC., a
Delaware corporation (the "Company," which term includes its successors and
assigns). Each Preference Warrant initially entitles the holder to purchase from
the Company at any time from 9:00 a.m. New York City time on or after the
Exercise Date until 5:00 p.m., New York City time, on February 1, 2010 (the
"Preference Expiration Date"), 110 fully paid, registered and non-assessable
Preference Warrant Shares, subject to adjustment as provided in Article V of the
Preference Warrant Agreement, at an exercise price of $10.00 for each share
purchased (the "Preference Exercise Price"); upon surrender of this Preference
Warrant Certificate and payment of the Preference Exercise Price (i) in cash or
by certified or official bank check, (ii) by a Cashless Exercise or (iii) by any
combination of (i) and (ii), at any office or agency maintained for that purpose
by the Company (the "Preference Warrant Exercise Office"), subject to the
conditions set forth herein and in the Preference Warrant Agreement. For
purposes of this Warrant, a "Cashless Exercise" shall mean an exercise of a
Preference Warrant in accordance with the immediately following two sentences.
To effect a Cashless Exercise, the holder may exercise a Preference Warrant or
Preference Warrants without payment of the Preference Exercise Price in cash by
surrendering such Preference Warrant or Preference Warrants (represented by one
or more Preference Warrant Certificates) and in exchange therefor, receiving
such number of shares of Common Stock equal to the product of (1) that number of
shares of Common Stock for which such Preference Warrant or Preference Warrants
are exercisable and which would be issuable in the event of an exercise with
payment of the Preference Exercise Price and (2) the Cashless Exercise Ratio.
The "Cashless Exercise Ratio" shall equal a fraction, the numerator of which is
the excess of the Current Market Value (calculated as set forth in this
Preference Warrant) per share of Common Stock on the date of exercise over the
Preference Exercise Price per share of Common Stock as of the date of exercise
and the denominator of which is the Current Market Value per share of Common
Stock on the date of exercise. Upon surrender of a Preference Warrant
Certificate representing more than one Preference Warrant in connection with the
holder's option to elect a Cashless Exercise, the holder must specify the number
of Preference
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Warrants for which such Preference Warrant Certificate is to be exercised
(without giving effect to the Cashless Exercise). All provisions of the
Preference Warrant Agreement shall be applicable with respect to a Cashless
Exercise of a Preference Warrant Certificate for less than the full number of
Preference Warrants represented thereby. Capitalized terms used herein without
being defined herein shall have the definitions ascribed to such terms in the
Preference Warrant Agreement.
"Current Market Value" per share of Common Stock of the Company or
any other security at any date shall mean (i) if the security is not registered
under the Exchange Act, (a) the value of the security, determined in good faith
by the board of directors of the Company and certified in a board resolution,
based on the most recently completed arm's-length transaction between the
Company and a person other than an affiliate of the Company and the closing of
which occurs on such date or shall have occurred within the six-month period
preceding such date, or (b) if no such transaction shall have occurred on such
date or within such six-month period, the fair market value of the security as
determined by a nationally or regionally recognized Independent Financial Expert
(as defined herein) (provided that in the case of the calculation of Current
Market Value for determining the cash value of fractional shares, any such
determination within six months that is, in the good faith judgment of the
Board, a reasonable determination of value, may be utilized) or (ii)(a) if the
security is registered under the Exchange Act, the average of the daily closing
sales prices of the securities for the 20 consecutive trading days immediately
preceding such date, or (b) if the security has been registered under the
Exchange Act for less than 20 consecutive trading days before such date, then
the average of the daily closing sales prices for all of the trading days before
such date for which closing sales prices are available, in the case of each of
(ii)(a) and (ii)(b), as certified by the president, the chief executive officer,
any vice president or the chief financial officer of the Company in a writing
delivered to the Preference Warrant Agent. The closing sales price for each such
trading day shall be: (A) in the case of a security listed or admitted to
trading on any U.S. national securities exchange or quotation system, the
closing sales price, regular way, on such day, or if no sale takes place on such
day, the average of the closing bid and asked prices on such day, (B) in the
case of a security not then listed or admitted to trading on any U.S. national
securities exchange or quotation system, the last reported sale price on such
day, or if no sale takes place on such day, the average of the closing bid and
asked prices on such day, as reported by a reputable quotation source designated
by the Company, (C) in the case of a security not then listed or admitted to
trading on any U.S. national securities exchange or quotation system and as to
which no such reported sale price or bid and asked prices are available, the
average of the reported high bid and low asked prices on such day, as reported
by a reputable quotation service, or a newspaper of general circulation in the
Borough of Manhattan, The City and State of New York customarily published on
each Business Day, designated by the Company, or, if there shall be no bid and
asked prices on such day, the average of the high bid and low asked prices, as
so reported, on the most recent day (not more than 30 days prior to the date in
question) for which prices have been so reported and (D) if there are not bid
and asked prices reported during the 30 days prior
A-11
to the date in question, the Current Market Value shall be determined as if the
securities were not registered under the Exchange Act.
"Independent Financial Expert" means a U.S. investment banking firm
of national standing in the United States, (i) which does not, and whose
directors, officers and employees or affiliates do not have a direct or indirect
material financial interest for its proprietary account in the Company or any of
its affiliates and (ii) which, in the judgment of the board of directors of the
Company, is otherwise independent with respect to the Company and its affiliates
and qualified to perform the task for which it is to be engaged.
"Person" means any individual, corporation, limited liability
company, partnership, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political subdivision
thereof or any other entity, including any predecessor of any such entity.
The Company has initially designated the principal corporate trust
office of the Preference Warrant Agent in the Borough of Manhattan, The City of
New York, as the initial Preference Warrant Agent Office. The number of shares
of Common Stock issuable upon exercise of the Preference Warrants ("Exercise
Rate") is subject to adjustment upon the occurrence of certain events set forth
in the Preference Warrant Agreement.
Any Warrants not exercised on or prior to 5:00 p.m., New York City
time, on February 1, 2010 shall thereafter be void.
If the Company in a single transaction or through a series of
related transactions, consolidates with or merges with or into any other person
or sells, assigns, transfers, leases, conveys or otherwise disposes of all or
substantially all of its properties and assets to another person or group of
affiliated persons or is a party to a merger or binding share exchange which
reclassifies or changes its outstanding Common Stock (a "Fundamental
Transaction"), as a condition to consummating any such transaction the person
formed by or surviving any such consolidation or merger if other than the
Company or the person to whom such transfer has been made (the "Surviving
Person") shall enter into a supplemental preference warrant agreement. The
supplemental preference warrant agreement shall provide (a) that the holder of a
Preference Warrant then outstanding may exercise it for the kind and amount of
securities, cash or other assets which such holder would have received
immediately after the Fundamental Transaction if such holder had exercised the
Preference Warrant immediately before the effective date of the transaction
(regardless of whether the Preference Warrants were then exercisable and without
giving effect to the Cashless Exercise option), assuming (to the extent
applicable) that such holder (i) made no election with respect to the form of
consideration payable in such transaction and (ii) was treated alike with the
plurality of non-electing holders, and (b) that the Surviving Person shall
succeed to and be substituted for every right and obligation of the Company in
respect of the Preference Warrant Agreement and the Preference Warrants. The
Surviving Person shall mail to holders of Preference Warrants
A-12
at the addresses appearing on the Warrant Register a notice briefly describing
the supplemental warrant agreement. If the issuer of securities deliverable upon
exercise of Preference Warrants is an affiliate of the Surviving Person, that
company shall join in the supplemental warrant agreement.
Notwithstanding the foregoing, (i) if the Company enters into a
Fundamental Transaction and the consideration payable to holders of the Common
Stock (or other securities) issuable or deliverable upon exercise of the
Preference Warrants in connection with such Fundamental Transaction consists
solely of cash or (ii) there is a dissolution, liquidation or winding up of the
issuer, then the holders of Preference Warrants shall be entitled to receive
distributions on the date of such event on an equal basis with holders of Common
Stock (or other securities issuable or delivered upon exercise of the Preference
Warrants) as if the Preference Warrants had been exercised immediately prior to
such event, less the Exercise Price therefor. Upon receipt of such payment, if
any, the rights of a holder of a Preference Warrant shall terminate and cease
and such holder's Preference Warrants shall expire.
Reference is hereby made to the further provisions on the reverse
hereof which provisions shall for all purposes have the same effect as though
fully set forth at this place.
This Preference Warrant Certificate shall not be valid unless
authenticated by the Preference Warrant Agent, as such term is used in the
Preference Warrant Agreement.
The Holders of Preference Warrants have agreed with the Company that
while they may exercise their Preference Warrants at any time, in whole or in
part, prior to the Preference Expiration Date, such Holders of Preference
Warrants will not be allowed to sell or otherwise dispose of the Preference
Warrant Shares prior to one year from the date hereof.
THIS PREFERENCE WARRANT CERTIFICATE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
A-13
WITNESS the facsimile seal of the Company and facsimile signatures
of its duly authorized officers.
Dated: January 27, 1999
@ENTERTAINMENT, INC.
By:
-----------------------------------
Name:
Title:
By:
-----------------------------------
Name:
Title:
Certificate of Authentication:
This is one of the Preference Warrants
referred to in the within
mentioned Preference Warrant Agreement:
BANKERS TRUST COMPANY,
Preference Warrant Agent
By:
-----------------------------------
Authorized Signatory
A-14
@ENTERTAINMENT, INC.
The Preference Warrants evidenced by this Preference Warrant
Certificate are part of a duly authorized issue of Preference Warrants expiring
at 5:00 p.m., New York City time, on February 1, 2010 (the "Preference
Expiration Date"). Each Preference Warrant initially represents the right to
purchase at any time on or after the Preference Exercise Date (as defined in the
Preference Warrant Agreement) and on or prior to the Preference Expiration Date
110 Preference Warrant Shares, subject to adjustment as set forth in the
Preference Warrant Agreement. The Preference Warrants are issued pursuant to a
Preference Warrant Agreement dated as of January 27, 1999 (the "Preference
Warrant Agreement"), duly executed and delivered by the Company to Bankers Trust
Company, as Preference Warrant Agent (the "Preference Warrant Agent"), which
Preference Warrant Agreement is hereby incorporated by reference in and made a
part of this instrument and is hereby referred to for a description of the
rights, limitation of rights, obligations, duties and immunities thereunder of
the Preference Warrant Agent, the Company and the holders (the words "holders"
or "holder" meaning the registered holders or registered holder) of the
Preference Warrants.
Preference Warrants may be exercised by (i) surrendering at any
Preference Warrant Exercise Office this Preference Warrant Certificate with the
form of Election to Exercise set forth hereon duly completed and executed and
(ii) to the extent such exercise is not being effected through a Cashless
Exercise by paying in full, in cash or by certificated or official bank check,
the Warrant Preference Exercise Price for each such Preference Warrant exercised
and any other amounts required to be paid pursuant to the Preference Warrant
Agreement.
If all of the items referred to in the last sentence of the
preceding paragraph are received by the Preference Warrant Agent at or prior to
11:00 a.m., New York City time, on a Business Day, the exercise of the
Preference Warrant to which such items relate will be effective on such Business
Day. If any items referred to in the last sentence of the preceding paragraph
are received after 11:00 a.m., New York City time, on a Business Day, the
exercise of the Preference Warrants to which such item relates will be deemed to
be effective on the next succeeding Business Day. Notwithstanding the foregoing,
in the case of an exercise of Preference Warrants on February 1, 2010, if all of
the items referred to in the last sentence of the preceding paragraph are
received by the Preference Warrant Agent at or prior to 5:00 p.m., New York City
time, on such Preference Expiration Date, the exercise of the Preference
Warrants to which such items relate will be effective on the Preference
Expiration Date.
As soon as practicable after the exercise of any Preference Warrant
or Preference Warrants, the Company shall issue or cause to be issued to or upon
the written order of the registered holder of this Preference Warrant
Certificate, a certificate or certificates evidencing such Preference Warrant
Share or Preference Warrant Shares to which such holder is entitled, in fully
registered form, registered in such name or names as may be directed by
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such holder pursuant to the Election to Exercise, as set forth on the reverse of
this Preference Warrant Certificate. Such certificate or certificates evidencing
the Preference Warrant Share or Preference Warrant Shares shall be deemed to
have been issued and any persons who are designated to be named therein shall be
deemed to have become the holder of record of such Preference Warrant Share or
Preference Warrant Shares as of the close of business on the date upon which the
exercise of this Preference Warrant was deemed to be effective as provided in
the preceding paragraph.
The Company shall not be required to issue fractional Preference
Warrant Shares upon exercise of the Preference Warrants or distribute Preference
Warrant Certificates that evidence fractional Preference Warrant Shares. In lieu
of fractional Preference Warrant Shares, there shall be paid to the registered
Holder of this Preference Warrant Certificate at the time such Preference
Warrant Certificate is exercised an amount in cash equal to the same fraction of
the Current Market Value per share of Common Stock on the Business Day preceding
the date this Preference Warrant Certificate is surrendered for exercise.
Preference Warrant Certificates, when surrendered at any office or
agency maintained by the Company for that purpose by the registered holder
thereof in person or by legal representative or attorney duly authorized in
writing, may be exchanged for a new Preference Warrant Certificate or new
Preference Warrant Certificates evidencing in the aggregate a like number of
Preference Warrants, in the manner and subject to the limitations provided in
the Preference Warrant Agreement, without charge except for any tax or other
governmental charge imposed in connection therewith.
Upon due presentment for registration of transfer of this Preference
Warrant Certificate at any office or agency maintained by the Company for that
purpose, a new Preference Warrant Certificate evidencing in the aggregate a like
number of Preference Warrants shall be issued to the transferee in exchange for
this Preference Warrant Certificate, subject to the limitations provided in the
Preference Warrant Agreement, without charge except for any tax or other
governmental charge imposed in connection therewith.
The Company and the Preference Warrant Agent may deem and treat the
registered holder hereof as the absolute owner of this Preference Warrant
Certificate (notwithstanding any notation of ownership or other writing hereon
made by anyone) for the purpose of any exercise hereof and for all other
purposes, and neither the Company nor the Preference Warrant Agent shall be
affected by any notice to the contrary.
The term "Business Day" shall mean any day on which (i) banks in The
City of New York, (ii) the principal U.S. securities exchange or market, if any,
on which any Common Stock is listed or admitted to trading and (iii) the
principal U.S. securities exchange or market, if any, on which the Preference
Warrants are listed or admitted to trading, are open for business.
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[FORM OF ELECTION TO EXERCISE]
(To be executed upon exercise of Preference Warrants on the Effective Preference
Exercise Date)
The undersigned hereby irrevocably elects to exercise [ ] of
the Preference Warrants represented by this Preference Warrant Certificate and
purchase the whole number of Preference Warrant Shares issuable upon the
exercise of such Preference Warrants and herewith tenders payment for such
Preference Warrant Shares as follows:
$ ________ in cash or by certified or official bank check; or by
surrender of Preference Warrants pursuant to a Cashless Exercise (as defined in
the Preference Warrant Agreement) for [ ] shares of Common Stock at the current
Cashless Exercise Ratio.
The undersigned requests that a certificate representing such
Preference Warrant Shares be registered in the name of __________ whose address
is ____________________ and that such shares be delivered to _____________ whose
address is ____________. Any cash payments to be paid in lieu of a fractional
share of Common Stock should be delivered to ____________________ whose address
is ____________________ and the check representing payment thereof should be
delivered to ______________ whose address is _______________.
Dated ___________, ____
Name of holder of
Preference Warrant
Certificate:_________________________________________________
(Please Print)
Tax Identification or
Social Security Number:____________________________________________
Address: _________________________________________________________
_________________________________________________________
Signature:_________________________________________________________
Note: The above signature must correspond with the name
as written upon the face of this Preference
Warrant Certificate in every particular, without
alteration or enlargement or any change whatever
and if the certificate representing the Preference
Warrant Shares or any
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Preference Warrant Certificate representing
Preference Warrants not exercised is to be
registered in a name other than that in which this
Preference Warrant Certificate is registered, or
if any cash payment to be paid in lieu of a
fractional share is to be made to a person other
than the registered holder of this Preference
Warrant Certificate, the signature of the holder
hereof must be guaranteed as provided in the
Preference Warrant Agreement.
Dated ______________, ____
Signature:________________________________________
Note: The above signature must correspond
with the name as written upon the
face of this Preference Warrant
Certificate in every particular,
without alteration or enlargement
or any change whatever.
Signature Guaranteed:_____________________________
[FORM OF ASSIGNMENT]
For value received __________________________ hereby sells, assigns
and transfers unto _____________________________ the within Preference Warrant
Certificate, together with all right, title and interest therein, and does
hereby irrevocably constitute and appoint __________________ attorney, to
transfer said Preference Warrant Certificate on the books of the within-named
Company, with full power of substitution in the premises.
Dated ________________, ____
Signature:________________________________________
Note: The above signature must correspond
with the name as written upon the
face of this Preference Warrant
Certificate in every particular,
without alteration or enlargement
or any change whatever.
Signature Guaranteed:_____________________________
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SCHEDULE OF EXCHANGES OF CERTIFICATED PREFERENCE WARRANTS
The following exchanges of a part of this Global Preference Warrant for
Certificated Preference Warrants have been made:
Number of
Amount of Amount of Preference
decrease in increase in Warrants of this
Number of Number of Global
Preference Preference Preference Signature of
Warrants of this Warrants of this Warrant authorized
Global Global following officer of
Date of Preference Preference such decrease Preference
Exchange Warrant Warrant (or increase) Warrant Agent
--------------------------------------------------------------------------------
A-19
EXHIBIT B
FORM OF LEGEND FOR GLOBAL PREFERENCE WARRANT
Any Global Preference Warrant authenticated and delivered hereunder
shall bear a legend in substantially the following form:
THIS SECURITY IS A GLOBAL PREFERENCE WARRANT WITHIN THE MEANING OF
THE PREFERENCE WARRANT AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED
IN THE NAME OF A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS
NOT EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON OTHER
THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE PREFERENCE WARRANT AGREEMENT, AND NO TRANSFER OF THIS
SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE
DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE DEPOSITORY) MAY BE
REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE PREFERENCE
WARRANT AGREEMENT.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE
ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE, OR PAYMENT,
AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR
OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
B-1
EXHIBIT C
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF WARRANTS
Re: Preference Warrants to Purchase Common Stock (the "Preference Warrants")
of @ENTERTAINMENT, INC.
This Certificate relates to ____ Preference Warrants held in* ___
book-entry or* _______ Certificated Preference form by ______ (the
"Transferor").
The Transferor:*
|_| has requested the Preference Warrant Agent by written order to deliver
in exchange for its beneficial interest in the Global Preference Warrant held by
the Depositary a Preference Warrant or Preference Warrants in definitive,
registered form of authorized denominations and an aggregate number equal to its
beneficial interest in such Global Preference Warrant (or the portion thereof
indicated above); or
|_| has requested the Preference Warrant Agent by written order to
exchange or register the transfer of a Preference Warrant or Preference
Warrants.
In connection with such request and in respect of each such
Preference Warrant, the Transferor does hereby certify that the Transferor is
familiar with the Preference Warrant Agreement relating to the above captioned
Preference Warrants and the restrictions on transfers thereof as provided in
Section 1.07 of such Preference Warrant Agreement, and that the transfer of this
Preference Warrant does not require registration under the Securities Act of
1933, as amended (the "Act") because*:
|_| Such Preference Warrant is being acquired for the Transferor's own
account, without transfer (in satisfaction of Section 1.07 (a)(y)(A) or Section
1.07 (d)(i)(A) of the Preference Warrant Agreement).
|_| Such Preference Warrant is being transferred to a qualified
institutional buyer (as defined in Rule 144A under the Act), in reliance on Rule
144A.
-----------------------------
* Check applicable box.
C-1
|_| Such Preference Warrant is being transferred in accordance with Rule
144 under the Act.
|_| Such Preference Warrant is being transferred in reliance on and in
compliance with an exemption from the registration requirements of the Act.
------------------------------------
[INSERT NAME OF TRANSFEROR]
By:
---------------------------------
Date:_____________________
C-2
