FORM OF
SERIES C WARRANT
CHI ENERGY, INC.
and
as Warrant Agent
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Warrants to Purchase up to 526,316 Shares of Common Stock
------------------
WARRANT AGREEMENT
Dated as of _______ __, 1997
TABLE OF CONTENTS
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Page
1. DEFINITIONS..................................................... 1
2. APPOINTMENT OF WARRANT AGENT.................................... 7
2.1. Appointment........................................ 7
3. REGISTRATION, FORM AND EXECUTION OF WARRANTS.................... 7
3.1. Registration....................................... 7
3.2. Form of Warrant.................................... 7
3.3. Countersignature of Warrants............................... 7
4. EXERCISE OF WARRANTS............................................ 8
4.1. Manner of Exercise................................. 8
4.2. Payment of Taxes................................... 9
4.3. Fractional Shares.................................. 9
5. TRANSFER, DIVISION AND COMBINATION.............................. 9
5.1. Transfer........................................... 9
5.2. Division and Combination........................... 10
5.3. Maintenance of Books............................... 10
6. ADJUSTMENTS..................................................... 10
6.1. Stock Dividends, Subdivisions and Combinations;
Extraordinary Distributions........................ 10
6.2. Certain Issuances of Additional Shares of Common
Stock.............................................. 11
6.3. Certain Issuances of Warrants or Other Rights...... 11
6.4. Certain Issuances of Convertible Securities........ 12
6.5. Superseding Adjustment............................. 13
6.6. Other Provisions Applicable to Adjustments under
this Section....................................... 14
6.7. Reorganization, Reclassification, Merger,
Consolidation or Sale of Substantially all
Assets of the Company.............................. 16
6.8. Certain Limitations................................ 18
7. NOTICES TO WARRANT HOLDERS...................................... 18
7.1. Notice of Adjustments.............................. 18
7.2. Notice of Corporate Action......................... 19
8. NO IMPAIRMENT................................................... 20
9. RESERVATION AND AUTHORIZATION OF COMMON STOCK;
REGISTRATION WITH OR APPROVAL OF ANY GOVERNMENTAL
AUTHORITY....................................................... 20
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10. STOCK AND WARRANT TRANSFER BOOKS................................ 21
11. LOSS OR MUTILATION.............................................. 21
12. OFFICE OF COMPANY............................................... 21
13. WARRANT AGENT................................................... 21
13.1. Merger or Consolidation or Change of Name of
Warrant Agent...................................... 21
13.2. Certain Terms and Conditions Concerning the
Warrant Agent...................................... 22
13.3. Change of Warrant Agent............................ 25
13.4. Disposition of Proceeds on Exercise of Warrants,
Inspection of Warrant Agreement.................... 25
14. MISCELLANEOUS................................................... 26
14.1. Stockholders' Agreement............................ 26
14.2. Notice Generally................................... 26
14.3. Successors and Assigns............................. 27
14.4. Amendment.......................................... 27
14.5. Third-Party Beneficiaries.......................... 27
14.6. Severability....................................... 27
14.7. Headings........................................... 27
14.8. Governing Law...................................... 27
14.9. Counterparts....................................... 28
EXHIBITS
Exhibit A - Form of Warrant Certificate
Exhibit B - Warrant Agent Fees
Exhibit C - Form of Stockholders' Agreement
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THIS WARRANT AGREEMENT (this "Warrant Agreement"), dated as of , 1997, is
made by and between CHI Energy, Inc. a Delaware corporation formerly known as
Consolidated Hydro, Inc. (the "Company"), and , a corporation, as warrant agent
(the "Warrant Agent").
W I T N E S S E T H:
WHEREAS, the Company proposes to issue to holders of the Company's
pre-existing Preferred Stock, warrants, as hereinafter described (the
"Warrants"), to purchase up to 526,316 shares of Common Stock pursuant to
Article IV of the Plan, as confirmed pursuant to the order of the United States
Bankruptcy Court, District of Delaware, [(_______________________________ No.
[_____________] (___))], in connection with the reorganization of the Company
under chapter 11, title 11 of the United States Code; and
WHEREAS, the Company has requested the Warrant Agent to act on behalf of
the Company, and the Warrant Agent is willing so to act, in connection with the
issuance, division, transfer, exchange and exercise of Warrants;
NOW, THEREFORE, in consideration of the foregoing and for the purpose of
defining the terms and provisions of the Warrants and the respective rights and
obligations thereunder and hereunder of the Company, the Warrant Agent, and the
Holders, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged and affirmed, the Company and the
Warrant Agent hereby agree as follows:
1. DEFINITIONS.
As used in this Warrant Agreement, the following capitalized terms have the
respective meanings set forth below:
"Additional Shares of Common Stock" shall mean all shares of Common Stock
issued by the Company after the Effective Date, other than Warrant Stock.
"Business Day" shall mean any day that is not a Saturday or Sunday or a day
on which banks are required or permitted to be closed in the State of New York.
"Class A Common Stock" shall mean (except where the context otherwise
indicates) the new Class A Common Stock, $.01 par value per share, of the
Company as constituted on the Effective Date, and any capital stock into which
such Class A Common Stock may thereafter be changed, and shall also include
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(1) capital stock of the Company of any other class (regardless of how
denominated) issued to the holders of shares of Class A Common Stock upon any
reclassification thereof which is also not preferred as to dividends or assets
over any other class of stock of the Company and which is not subject to
redemption and (2) shares of common stock of any successor or acquiring
corporation received by or distributed to the holders of Class A Common Stock of
the Company in the circumstances contemplated by Section 6.7.
"Class B Common Stock" shall mean (except where the context otherwise
indicates) the new Class B Common Stock, $.01 par value per share, of the
Company as constituted on the Effective Date, and any capital stock into which
such Class B Common Stock may thereafter be changed, and shall also include (1)
capital stock of the Company of any other class (regardless of how denominated)
issued to the holders of shares of Class B Common Stock upon any
reclassification thereof which is also not preferred as to dividends or assets
over any other class of stock of the Company and which is not subject to
redemption and (2) shares of common stock of any successor or acquiring
corporation received by or distributed to the holders of Class B Common Stock of
the Company in the circumstances contemplated by Section 6.7.
"Common Stock" shall mean, collectively (except where the context otherwise
indicates), the Class A Common Stock and the Class B Common Stock.
"Company" shall have the meaning assigned to such term in the first
paragraph of this Warrant Agreement.
"Convertible Securities" shall mean evidences of indebtedness, shares of
capital stock or other securities which are convertible into or exchangeable,
with or without payment of additional consideration in cash or property, for
Additional Shares of Common Stock, either immediately or upon the occurrence of
a specified date or a specified event.
"Current Warrant Price" shall mean, in respect of a share of Common Stock
at any date herein specified, the price at which a share of Common Stock may be
purchased pursuant to this Warrant Agreement on such date. The initial Current
Warrant Price is as specified in the second paragraph of the Form of Warrant
Certificate as set forth in Exhibit A hereto.
"Daily Market Price" shall mean, in respect of any share of Common Stock on
any Trading Day, (1) the last reported sale price on such day on the principal
national securities exchange (including for this purpose The Nasdaq Stock
Market) on which such Common Stock is then listed or admitted to unlisted
trading privileges or (2) if no sale takes place on such day on
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any national securities exchange, the average of the last reported closing bid
and ask prices on such day as officially quoted on any such exchange. If the
Common Stock is not then listed or admitted to unlisted trading privileges on
any national securities exchange, the Daily Market Price shall be the average of
the last reported closing bid and ask prices on such day in the over-the-counter
market, as furnished by the National Association of Securities Dealers, Inc.
("NASD") Automated Quotation System or the National Quotation Bureau, Inc.;
provided, that if neither such corporation at the time is engaged in the
business of reporting such prices, the Daily Market Price shall be as furnished
by any similar firm then engaged in such business, or if there is no such firm,
as furnished by any member of the NASD selected mutually by the Majority Holders
and the Company or, if they cannot agree upon such selection, as selected by two
such members of the NASD, one of which shall be selected by the Majority Holders
and one of which shall be selected by the Company. If the Common Stock is not
reported in the over-the-counter market and no member of the NASD selected
pursuant to the preceding sentence will furnish the Daily Market Price, then the
Daily Market Price shall be the fair market value per share of Common Stock as
of such date, determined in good faith by the Board of Directors.
"Effective Date" shall have the meaning set forth in the Plan.
"Expiration Date" shall mean __________ ___, 2005.
"Extraordinary Distribution" shall mean any dividend or distribution in
respect of the Common Stock that:
(a) is made after the Effective Date but prior to the Initial Measurement
Date;
(b) is made during the First Measurement Period, to the extent that the
aggregate amount of cash or other property included in such dividend or
distribution, when aggregated with all other dividends and distributions made
after the Initial Measurement Date but prior to the date on which such dividend
or distribution is paid or distributed, exceeds 25% of the Company's cumulative
consolidated net income (before extraordinary items determined in accordance
with GAAP) for the period beginning on the first day of the First Measurement
Period through and including the date such dividend is paid or distributed; or
(c) is made after the last day of the First Measurement Period, to the
extent that the aggregate amount of cash or other property included in such
dividend or distribution, when aggregated with all other dividends and
distributions paid or
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distributed after the Initial Measurement Date but prior to the date on which
such dividend or distribution is paid or distributed, exceeds the sum of (i) the
First Measurement Amount and (ii) 50% of the Company's cumulative consolidated
net income (before extraordinary items determined in accordance with GAAP) for
the period beginning on the first day next following the last day of the First
Measurement Period through and including the date such dividend or distribution
is paid or distributed; provided, however, that in determining the aggregate
amount of dividends and distributions paid or distributed after the Initial
Measurement Date for purposes of clause (c) above, the amount of such dividends
or distributions made during the First Measurement Period is equal to the lesser
of (x) the amounts actually paid or distributed and (y) the First Measurement
Amount; and provided, further, however, that up to $15 million in cash paid by
the Company pursuant to the Plan on and after the Effective Date to holders of
the 12% Senior Discount Notes due 2003 that were outstanding prior to the
Effective Date shall not constitute an "Extraordinary Distribution" for purposes
of this Agreement.
"First Measurement Amount" shall mean, with respect to the First
Measurement Period, an amount equal to 25% of the Company's cumulative
consolidated net income for such period (before extraordinary items determined
in accordance with GAAP).
"First Measurement Period" shall mean the period commencing on the Initial
Measurement Date and ending on the last day of the 11th fiscal quarter of the
Company next following such date.
"Fully Diluted Outstanding" shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be determined,
all shares of Common Stock Outstanding at such date and all shares of Common
Stock issuable in respect of any Warrants and any other options or warrants to
purchase, or securities convertible into or exchangeable for, shares of Common
Stock outstanding on such date including, without limitation, all Permitted
Issuances.
"GAAP" shall mean generally accepted accounting principles in the United
States of America as from time to time in effect.
"Holder" shall mean the Person in whose name a Warrant is registered in the
warrant register of the Company maintained by or on behalf of the Company for
such purpose.
"Initial Measurement Date" shall mean the first day of the first full
fiscal quarter of the Company next following the Effective Date.
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"Majority Holders" shall mean the Holders of Warrants exercisable for in
excess of 50% of the aggregate number of shares of Common Stock then purchasable
upon exercise of all Warrants.
"NASD" shall mean the National Association of Securities Dealers, Inc., or
any successor corporation thereto.
"Other Property" shall have the meaning set forth in Section 6.7.
"Outstanding" shall mean, when used with reference to Common Stock, at any
date as of which the number of shares thereof is to be determined, all issued
shares of Common Stock, except shares then owned or held by or for the account
of the Company or any subsidiary thereof, and shall include all shares issuable
in respect of outstanding scrip or any certificates representing fractional
interests in shares of Common Stock.
"Permitted Issuances" shall mean the issuance and grant of stock options
pursuant to the Company's 1997 Stock Option Plan and the issuance of shares of
Common Stock upon the exercise of (i) such options, (ii) the Warrants and (iii)
the Series B Warrants issued by the Company on the Effective Date.
"Person" shall mean any individual, sole proprietorship, partnership, joint
venture, trust, incorporated organization, association, corporation, limited
liability company, limited liability partnership, institution, public benefit
corporation, entity or government (whether federal, state, county, city,
municipal or otherwise, including, without limitation, any instrumentality,
division, agency, body or department thereof).
"Plan" shall mean the Company's Plan of Reorganization Under Chapter 11 of
the United States Bankruptcy Code, as it may be amended or modified.
"Preferred Stock" shall mean the Company's Series F Preferred Stock, Series
H Preferred Stock and Series G Preferred Stock.
"Pricing Period" shall have the meaning set forth in Section 13.1.
"Repurchase Price" shall have the meaning set forth in Section 13.1.
"Stockholders' Agreement" shall mean that certain Stockholders' Agreement
dated as of ____________ __, 1997, by and
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among the Company and each of the stockholders of the Company, a copy of which
is annexed hereto as Exhibit C.
"Trading Day" shall mean any day on which the principal stock exchange on
which the Common Stock is listed or admitted to trading is open or, if the
Common Stock is not then listed or admitted to trading on any stock exchange,
any day on which the National Association of Securities Dealers Automated
Quotation System or the National Quotation Bureau Inc. reports prices in respect
of securities or, if neither such corporation is then engaged in such business,
any day on which the member of the NASD selected as specified in the proviso set
forth in the definition of "Daily Market Price" furnishes prices for securities.
"Warrant Agent" shall have the meaning assigned to such term in the first
paragraph of this Warrant Agreement and shall include any successor Warrant
Agent hereunder.
"Warrant Agent's Principal Office" shall mean the principal office of the
Warrant Agent in New York City, New York (or such other office of the Warrant
Agent or any successor thereto hereunder acceptable to the Company as set forth
in a written notice provided to the Company and the Holders).
"Warrant Agreement" shall have the meaning assigned to such term in the
first paragraph of this Warrant Agreement.
"Warrant Price" shall mean an amount equal to (1) the number of shares of
Common Stock being purchased upon exercise of a Warrant pursuant to Section 4.1,
multiplied by (2) the Current Warrant Price as of the date of such exercise.
"Warrant Stock" shall mean the shares of Common Stock purchased by the
Holders of the Warrants upon the exercise thereof.
"Warrants" shall have the meaning assigned to such term in the recitals to
this Warrant Agreement, and shall include all warrants issued upon transfer,
division or combination of, or in substitution for, any thereof. All Warrants
shall at all times be identical as to terms and conditions and date, except as
to the number of shares of Common Stock and the class of Common Stock for which
they may be exercised.
2. APPOINTMENT OF WARRANT AGENT.
2.1. Appointment. The Company hereby appoints the Warrant Agent to act as
agent for the Company in accordance with the instructions set forth in this
Warrant Agreement, and the Warrant Agent hereby accepts such appointment.
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3. REGISTRATION, FORM AND EXECUTION OF WARRANTS.
3.1. Registration. All Warrants shall be numbered and shall be registered
in a warrant register maintained at the Warrant Agent's Principal Office by the
Warrant Agent as they are issued. The Company and the Warrant Agent shall be
entitled to treat a Holder as the owner in fact for all purposes whatsoever of
each Warrant registered in such Holder's name.
3.2. Form of Warrant. The text of each Warrant and of the Election to
Purchase Form and Assignment Form shall be substantially as set forth in Exhibit
A attached hereto. Each Warrant shall be executed on behalf of the Company by
its President or one of its Vice Presidents, under its corporate seal reproduced
thereon or facsimile thereof attested by its Secretary or an Assistant
Secretary. The signature of any of such officers on the Warrants may be manual
or facsimile.
Warrants bearing the manual or facsimile signatures of individuals who were
at any time the proper officers of the Company shall bind the Company,
notwithstanding that such individuals or any one of them shall have ceased to
hold such offices prior to the delivery of such Warrants or did not hold such
offices on the date of this Warrant Agreement.
Warrants shall be dated as of the date of countersignature thereof by the
Warrant Agent either upon initial issuance or upon division, exchange,
substitution or transfer.
3.3. Countersignature of Warrants. Each Warrant shall be manually
countersigned by the Warrant Agent (or any successor to the Warrant Agent then
acting as warrant agent under this Warrant Agreement) and shall not be valid for
any purpose unless so countersigned. Warrants may be countersigned, however, by
the Warrant Agent (or by its successor as warrant agent hereunder) and may be
delivered by the Warrant Agent, notwithstanding that the persons whose manual
signatures appear thereon as proper officers of the Company shall have ceased to
be such officers at the time of such countersignature, issuance or delivery. The
Warrant Agent shall, upon written instructions of the President, a Vice
President, the Secretary, or an Assistant Secretary of the Company, countersign,
issue and deliver Warrants entitling the Holders thereof to purchase not more
than 810,811 shares of Common Stock (subject to adjustment as set forth herein)
and shall countersign and deliver Warrants as otherwise provided in this Warrant
Agreement.
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4. EXERCISE OF WARRANTS
4.1. Manner of Exercise. From and after the date hereof until 5:00 p.m.,
New York City time, on the Expiration Date, a Holder may exercise any of the
Warrants, on any Business Day, for all or any part of the number of shares of
Common Stock purchasable thereunder.
In order to exercise a Warrant, in whole or in part, a Holder shall deliver
to the Company at the Warrant Agent's Principal Office, (1) a written notice of
such Holder's election to exercise such Warrant, which notice shall include the
number of shares and class of Common Stock to be purchased, (2) payment in
immediately available funds or certified cashiers or official bank check or
checks in each case in United States dollars of the Warrant Price for the
account of the Company and (3) such Warrant. Such notice shall be substantially
in the form of the Election to Purchase Form set forth on the reverse side of
the form of Warrant Certificate attached as Exhibit A hereto, duly executed by
such Holder or its agent or attorney. Upon receipt thereof, the Warrant Agent
shall, as promptly as practicable, and in any event within five Business Days
thereafter, deliver or cause to be delivered to such Holder an executed
certificate or certificates representing the aggregate number of full shares of
Common Stock issuable upon such exercise. The stock certificate or certificates
so delivered shall be, to the extent possible, in such denomination or
denominations as such Holder shall request in the notice and shall be registered
in the name of such Holder or such other name as shall be designated in such
notice. A Warrant shall be deemed to have been exercised and such certificate or
certificates shall be deemed to have been issued, and such Holder or any other
Person so designated to be named therein shall be deemed to have become a holder
of record of such shares for all purposes, as of the date such notice, together
with the immediately available funds or certified cashiers or official bank
check or checks in United States dollars and such Warrant, is received by the
Warrant Agent as described above and all taxes required to be paid by such
Holder, if any, pursuant to Section 4.2 prior to the issuance of such shares
have been paid. If any Warrant shall have been exercised in part, the Warrant
Agent shall, at the time of delivery of the certificate or certificates
representing Warrant Stock, deliver to the Holder a new Warrant evidencing the
rights of such Holder to purchase the unpurchased shares of Common Stock called
for by such Warrant, which new Warrant shall in all other respects be identical
with the Warrant exercised in part, or, at the request of such Holder,
appropriate notation may be made on such exercised Warrant and the same returned
to such Holder. Notwithstanding any provision herein to the contrary, the
Warrant Agent shall not be required to register shares in the name of any Person
who acquired a
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Warrant (or part thereof) or any Warrant Stock otherwise than in accordance with
such Warrant and this Warrant Agreement.
Payment of the Warrant Price shall be made at the option of the Holder in
immediately available funds or by certified or official bank check or any
combination thereof, duly executed by such Holder or by such Holder's attorney
duly authorized in writing.
4.2. Payment of Taxes. All shares of Common Stock issuable upon the
exercise of any Warrant pursuant to the terms hereof shall be validly issued,
fully paid and nonassessable and without any preemptive rights. The Holder shall
pay all expenses in connection with, and all taxes and other governmental
charges that may be imposed with respect to, the issuance or delivery thereof.
4.3. Fractional Shares. The Company shall not be required to issue a
fractional share of Common Stock upon exercise of any Warrant. Whenever any
distribution of Warrants exercisable into fractional shares of Common Stock
would otherwise be called for, the actual distribution thereof will reflect a
rounding up or down to the nearest share of Common Stock, provided, that
whenever any distribution of a Warrant that is exercisable into exactly one-half
of a share of Common Stock would otherwise be called for, the actual
distribution will reflect a rounding down to the nearest share of Common Stock.
5. TRANSFER, DIVISION AND COMBINATION.
5.1. Transfer. Transfer of any Warrant and all rights hereunder, in whole
or in part, shall be registered in the warrant register of the Company to be
maintained for such purpose at the Warrant Agent's Principal Office, upon
surrender of such Warrant at the Warrant Agent's Principal Office, together with
a written assignment of such Warrant substantially in the form set forth on the
reverse side of the form of Warrant Certificate attached as Exhibit A hereto
duly executed by the Holder or its agent or attorney and payment of all funds
sufficient to pay any taxes payable upon the making of such transfer. Upon such
surrender and, if required, such payment, and subject to Section 9, the Company
shall execute and the Warrant Agent shall countersign and deliver a new Warrant
or Warrants in the name of the assignee or assignees and in the denomination
specified in such instrument of assignment, and shall issue to the assignor a
new Warrant evidencing the portion of such Warrant not so assigned, and the
surrendered Warrant shall promptly be cancelled. A Warrant, if properly
assigned, may be exercised by a new Holder for the purchase of shares of Common
Stock without having a new Warrant issued.
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5.2. Division and Combination. Any Warrant may be divided or combined with
other Warrants upon presentation thereof at the Warrant Agent's Principal
Office, together with a written notice specifying the names and denominations in
which new Warrants are to be issued, signed by the Holder or its agent or
attorney. Subject to compliance with Section 5.1, as to any transfer which may
be involved in such division or combination, the Company shall execute and the
Warrant Agent shall countersign and deliver a new Warrant or Warrants in
exchange for the Warrant or Warrants to be divided or combined in accordance
with such notice.
5.3. Maintenance of Books. The Warrant Agent agrees to maintain, at the
Warrant Agent's Principal Office, the warrant register for the registration of
warrants and the registration of transfer of the Warrants.
6. ADJUSTMENTS.
The number of shares of Common Stock for which a Warrant is exercisable,
and the price at which such shares may be purchased upon exercise of a Warrant,
shall be subject to adjustment from time to time as set forth in this Section 6.
6.1. Stock Dividends, Subdivisions and Combinations; Extraordinary
Distributions. (a) If at any time the Company shall:
(i) take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, Additional Shares of Common Stock,
(ii) subdivide its outstanding shares of Common Stock into a
larger number of shares of Common Stock, or
(iii) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock,
then (i) the number of shares of Common Stock for which a Warrant is exercisable
immediately after the occurrence of any such event shall be adjusted to equal
the number of shares of Common Stock that a record holder of the same number of
shares of Common Stock for which a Warrant is exercisable immediately prior to
the occurrence of such event would own or be entitled to receive after the
happening of such event, and (ii) the Current Warrant Price shall be adjusted to
equal (A) the Current Warrant Price multiplied by the number of shares of Common
Stock for which a Warrant is exercisable immediately prior to the adjustment
divided by (B) the number of shares for which a Warrant is exercisable
immediately after such adjustment.
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(b) If the Company shall pay or distribute an Extraordinary
Distribution in cash or other property, the Current Warrant Price shall be
adjusted downward in an amount equal to the per share (computed on the basis of
the number of shares then Outstanding) dollar amount of the Extraordinary
Distribution.
6.2. Certain Issuances of Additional Shares of Common Stock. (a) If at any
time the Company shall (except as hereinafter provided) issue or sell any
Additional Shares of Common Stock, other than Permitted Issuances, for
consideration in an amount per Additional Share of Common Stock less than the
Daily Market Price, then (i) the number of shares of Common Stock for which each
Warrant is exercisable shall be adjusted to equal the product obtained by
multiplying the number of shares of Common Stock for which each Warrant is
exercisable immediately prior to such issuance or sale by a fraction (A) the
numerator of which shall be the number of shares of Common Stock Outstanding
immediately after such issuance or sale, and (B) the denominator of which shall
be the number of shares of Common Stock Outstanding immediately prior to such
issuance or sale plus the number of shares which the aggregate offering price of
the total number of such Additional Shares of Common Stock would purchase at the
then Daily Market Price; and (ii) the Current Warrant Price as to the number of
shares for which each Warrant is exercisable prior to such adjustment shall be
adjusted by multiplying such Current Warrant Price by a fraction (X) the
numerator of which shall be the number of shares for which each Warrant is
exercisable immediately prior to such issuance or sale; and (Y) the denominator
of which shall be the number of shares of Common Stock purchasable immediately
after such issuance or sale.
6.3. Certain Issuances of Warrants or Other Rights. If at any time the
Company shall take a record of the holders of its Common Stock for the purpose
of entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving or
resulting corporation) issue or sell, any warrants or other rights to subscribe
for or purchase any Additional Shares of Common Stock or any Convertible
Securities, whether or not the rights to exchange or convert thereunder are
immediately exercisable, and the price per share for which Common Stock is
issuable upon the exercise of such warrants or other rights or upon conversion
or exchange of such Convertible Securities shall be less than the Daily Market
Price in effect immediately prior to the time of such issuance or sale, then the
number of shares for which each Warrant is exercisable and the Current Warrant
Price shall be adjusted as provided in Section 6.2 on the basis that the maximum
number of Additional Shares of Common Stock issuable pursuant to all such
warrants or other rights or
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necessary to effect the conversion or exchange of all such Convertible
Securities shall be deemed to have been issued and outstanding and the Company
shall be deemed to have received all of the consideration payable therefor, if
any, as of the date of the issuance of such warrants, other rights or
Convertible Securities. No further adjustments of the Current Warrant Price or
the number of shares for which each Warrant is exercisable shall be made upon
the actual issuance of such Common Stock or of such Convertible Securities upon
exercise of such warrants or other rights or upon the actual issuance of such
Common Stock upon such conversion or exchange of such Convertible Securities.
6.4. Certain Issuances of Convertible Securities. If at any time the
Company shall take a record of the holders of its Common Stock for the purpose
of entitling them to receive a distribution of, or shall in any manner (whether
directly or by assumption in a merger in which the Company is the surviving or
resulting corporation) issue or sell, any Convertible Securities, whether or not
the rights to exchange or convert thereunder are immediately exercisable, and
the price per share for which Common Stock is issuable upon such conversion or
exchange shall be less than the Daily Market Price in effect immediately prior
to the time of such issuance or sale, then the number of shares of Common Stock
for which each Warrant is exercisable and the Current Warrant Price shall be
adjusted as provided in Section 6.2 on the basis that the maximum number of
Additional Shares of Common Stock necessary to effect the conversion or exchange
of all such Convertible Securities shall be deemed to have been issued and
outstanding and the Company shall have received all of the consideration payable
therefor, if any, as of the date of issuance of such Convertible Securities. No
adjustment of the number of shares of Common Stock for which each Warrant is
exercisable and the Current Warrant Price shall be made under this Section 6.4
upon the issuance of any Convertible Securities which are issued pursuant to the
exercise of any warrants or other subscription or purchase rights therefor, if
any such adjustment previously shall have been made upon the issuance of such
warrants or other rights pursuant to Section 6.3. No further adjustments of the
number of shares of Common Stock for which each Warrant is exercisable and the
Current Warrant Price shall be made upon the actual issuance of such Common
Stock upon conversion or exchange of such Convertible Securities and, if any
issuance or sale of such Convertible Securities is made upon exercise of any
warrant or other right to subscribe for or to purchase any such Convertible
Securities for which adjustments of the number of shares of Common Stock for
which each Warrant is exercisable and the Current Warrant Price have been or are
to be made pursuant to other provisions of this Article 6, no further
adjustments of the number of shares of Common Stock for which
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each Warrant is exercisable and the Current Warrant Price shall be made by
reason of such issuance or sale.
6.5. Superseding Adjustment. If, at any time after any adjustment of the
number of shares of Common Stock for which a Warrant is exercisable and the
Current Warrant Price shall have been made pursuant to Section 6.3 or Section
6.4 as the result of any issuance of warrants, rights or Convertible Securities:
(a) such warrants or rights, or the right of conversion or exchange in
such other Convertible Securities, shall expire, and all or a portion of such
warrants or rights, or the right of conversion or exchange with respect to all
or a portion of such other Convertible Securities, as the case may be, shall not
have been exercised, or
(b) the consideration per share for which shares of Common Stock are
issuable pursuant to such warrants or rights, or the terms of such other
Convertible Securities, shall be increased solely by virtue of provisions
therein contained for an automatic increase in such consideration per share upon
the occurrence of a specified date or event,
then for each outstanding Warrant such previous adjustment shall be rescinded
and annulled and the Additional Shares of Common Stock which were deemed to have
been issued by virtue of the computation made in connection with the adjustment
so rescinded and annulled no longer shall be deemed to have been issued by
virtue of such computation. Thereupon, a recomputation shall be made of the
effect of such rights or options or other Convertible Securities on the basis
of:
(c) treating the number of Additional Shares of Common Stock
or other property, if any, theretofore actually issued or issuable pursuant to
the previous exercise of any such warrants or rights or any such right of
conversion or exchange, as having been issued on the date or dates of any such
exercise and for the consideration actually received and receivable therefor,
and
(d) treating any such warrants or rights or any such other Convertible
Securities which then remain outstanding as having been granted or issued
immediately after the time of such increase of the consideration per share for
which shares of Common Stock or other property are issuable under such warrants
or rights or other Convertible Securities; whereupon a new adjustment of the
number of shares of Common Stock for which this Warrant is exercisable and the
Current Warrant Price shall be made, which new adjustment shall supersede the
previous adjustment so rescinded and annulled.
13
6.6. Other Provisions Applicable to Adjustments under this Section. The
following provisions shall be applicable to the making of adjustments of the
number of shares of Common Stock for which a Warrant is exercisable and the
Current Warrant Price provided for in this Article 6:
(a) Computation of Consideration. To the extent that any Additional
Shares of Common Stock or any Convertible Securities or any warrants or other
rights to subscribe for or purchase any Additional Shares of Common Stock or any
Convertible Securities shall be issued for cash consideration, the consideration
received by the Company therefor shall be the amount of the cash received by the
Company therefor, or, if such Additional Shares of Common Stock or Convertible
Securities are offered by the Company for subscription, the subscription price,
or, if such Additional Shares of Common Stock or Convertible Securities are sold
to underwriters or dealers for public offering without a subscription offering,
the initial public offering price (in any such case subtracting any amounts paid
or receivable for accrued interest or accrued dividends and without taking into
account any compensation, discounts or expenses paid or incurred by the Company
for and in the underwriting of, or otherwise in connection with, the issuance
thereof). To the extent that such issuance shall be for a consideration other
than cash, then, except as herein otherwise expressly provided, the amount of
such consideration shall be deemed to be the fair value of such consideration at
the time of such issuance as determined in good faith by the Board of Directors
of the Company. In case any Additional Shares of Common Stock or any Convertible
Securities or any warrants or other rights to subscribe for or purchase such
Additional Shares of Common Stock or Convertible Securities shall be issued in
connection with any merger in which the Company issues any securities, the
amount of consideration therefor shall be deemed to be the fair value, as
determined in good faith by the Board of Directors of the Company, of such
portion of the assets and business of the nonsurviving corporation as such Board
in good faith shall determine to be attributable to such Additional Shares of
Common Stock, Convertible Securities, warrants or other rights, as the case may
be. The consideration for any Additional Shares of Common Stock issuable
pursuant to any warrants or other rights to subscribe for or purchase the same
shall be the consideration received by the Company for issuing such warrants or
other rights plus the additional consideration payable to the Company upon
exercise of such warrants or other rights. The consideration for any Additional
Shares of Common Stock issuable pursuant to the terms of any Convertible
Securities shall be the consideration received by the Company for issuing
warrants or other rights to subscribe for or purchase such Convertible
Securities, plus the additional consideration, if any, payable to the Company
upon the exercise
14
of the right of conversion or exchange in such Convertible Securities. In case
of the issuance at any time of any Additional Shares of Common Stock or
Convertible Securities in payment or satisfaction of any dividends upon any
class of stock other than Common Stock, the Company shall be deemed to have
received for such Additional Shares of Common Stock or Convertible Securities a
consideration equal to the amount of such dividend so paid or satisfied.
(b) When Adjustments to Be Made. The adjustments required by this
Article 6 shall be made whenever and as often as any specified event requiring
an adjustment shall occur, except that any adjustment of the number of shares of
Common Stock for which a Warrant is exercisable that otherwise would be required
may be postponed (except in the case of a subdivision or combination of shares
of Common Stock, as provided for in Section 6.1) up to, but not later than the
date of exercise if such adjustment either by itself or with other adjustments
not previously made would result in an increase or decrease, as the case may be,
of less than 1% of the shares of Common Stock for which a Warrant is exercisable
immediately prior to the making of such adjustment. Any adjustment representing
a change of less than such minimum amount (except as aforesaid) which is
postponed shall be carried forward and made as soon as such adjustment, together
with other adjustments required by this Section 6 and not previously made, would
result in a minimum adjustment or on the date of exercise. 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.
(c) Fractional Interests. In computing adjustments pursuant to this
Article 6, fractional interests in Common Stock shall be taken into account to
the nearest 1/10th of a share.
(d) When Adjustment Not Required. If the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them to receive
a dividend or distribution or subscription or purchase rights and shall,
thereafter and before the distribution to stockholders thereof, legally abandon
its plan to pay or deliver such dividend, distribution, subscription or purchase
rights, then no adjustment shall be required by reason of the taking of such
record and any such adjustment previously made in respect thereof shall be
rescinded and annulled.
6.7. Reorganization, Reclassification, Merger, Consolidation or Sale of
Substantially all Assets of the Company. (a) If the Company shall reorganize its
capital, reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or resulting
15
entity or where there is a change in or distribution with respect to the Common
Stock of the Company) (each such event hereinafter referred to as a
"Transaction"), and pursuant to the terms of any such Transaction, the
consideration to be paid or distributed to or otherwise received by the holders
of Common Stock consists of shares of common stock of the surviving corporation
or resulting entity and/or any cash, shares of stock (not constituting common
stock) or other securities or property of any nature whatsoever (including
warrants or other subscription or purchase rights) (such non-common stock
property hereinafter referred to as "Other Property"), then each Holder shall
have the right thereafter to receive, upon exercise of a Warrant, the number of
shares of common stock of the surviving corporation or resulting entity and such
amount of Other Property receivable pursuant to such Transaction by a holder of
the number of shares of Warrant Stock for which a Warrant is exercisable
immediately prior to the effective time of such Transaction.
In the case of any Transaction of the type described in the immediately
preceding paragraph of this Section 6.7(a), it shall be a condition precedent to
consummation of the Transaction that the surviving corporation or resulting
entity expressly assume the due and punctual observance and performance of each
and every covenant and condition of this Warrant Agreement and the Warrants to
be performed and observed by the Company and all the obligations and liabilities
hereunder, subject to such modifications as may be deemed appropriate (as
determined by resolution of the Board of Directors of the Company) in order to
provide for adjustments of shares of the Warrant Stock for which a Warrant is
exercisable which shall be as nearly equivalent as practicable to the
adjustments provided for in this Section 6.7. For purposes of this Section 6.7,
"common stock of the surviving corporation or resulting entity" shall include
stock of such corporation of any class which does not have a preference as to
dividends or assets over any other class of stock of such corporation and which
is not subject to redemption and shall also include any evidences of
indebtedness, shares of stock or other securities which are convertible into or
exercisable or exchangeable for any such stock, either immediately, after the
lapse of any prescribed time period or the occurrence of a specified event, and
any warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions of this Section 6.7 shall similarly apply to successive
Transactions.
(b) Notwithstanding anything to the contrary in paragraph (a) above,
if (i) pursuant to the terms of any Transaction, at least 70% of the aggregate
value of the consideration to be paid or distributed to or otherwise received by
the holders of Common Stock consists of Other Property and the aggregate fair
value per share of the common stock and Other
16
Property to be paid or distributed to or otherwise received by the holders of
Common Stock is less than the Current Warrant Price or (ii) all or substantially
all of the assets of the Company are to be sold in a single transaction (or
series of related transactions)(such transaction or transactions hereinafter
referred to as a "Sale of Assets"), at least 70% in value of the consideration
to be received by the Company pursuant thereto consists of Other Property and
the aggregate fair value of the common stock and Other Property to be received
by the Company (computed on a per share after corporate-level tax basis as if
the same were then distributed to the stockholders of the Company) is less than
the Current Warrant Price, then, in either such case:
(1) the Board of Directors of the Company shall, in good faith and in
accordance with established market practices, determine the fair value per
Warrant of the Warrants (the "Board Warrant Value") and deliver written notice
of the Board Warrant Value to each Holder of Warrants. If within 20 days after
receipt of such notice the Majority Holders do not object to the Board Warrant
Value by delivering written notice thereof to the Company, then the Board
Warrant Value as determined by the Board of Directors shall be final and binding
and shall constitute the "Warrant Value" for all purposes of this Agreement. If
the Majority Holders shall object to the Board Warrant Value, they shall within
20 days after receipt of notice of the Board Warrant Value deliver written
notice of such objection to the Company, which notice shall require that the
Company promptly employ two independent appraisal or financial consulting firms
of recognized standing (the "Appraisers"), each of which shall appraise the fair
value of the Warrants. The Appraisers shall, within 20 days after the Company's
receipt of the Majority Holders' notice of objection to the Warrant Value, send
to each Holder of Warrants its appraisal of the fair value of the Warrants, and
the average of each Appraiser's determination of the fair value of the Warrants
shall be the "Warrant Value" for all purposes of this Agreement;
(2) upon consummation of a transaction of a type referred to in clause
(i) or (ii) above, each then vested and exercisable Warrant having an exercise
price greater than the aggregate fair value per share of the common stock and
Other Property to be paid or distributed to or otherwise received by the holders
of the Common Stock (in the case of a clause (i) transaction) or by the Company
(in the case of a clause (ii) transaction) shall be cancelled, terminated and of
no further force or effect and each Holder shall receive in respect of each such
Warrant an amount in cash equal to the Warrant Value;
17
(3) upon consummation of a transaction of a type referred to in clause
(i) or (ii) above, each then vested and exercisable Warrant having an exercise
price less than the aggregate fair value per share of the common stock and Other
Property to be paid or distributed to or otherwise received by the holders of
the Common Stock (in the case of a clause (i) transaction) or by the Company (in
the case of a clause (ii) transaction) shall be deemed to have been exercised in
full and, upon payment of the Current Warrant Price in respect thereof, the
Holder of a Warrant shall be entitled to receive (x) the amount of common stock
and Other Property such Holder would have become entitled to receive pursuant to
the transactions as a holder of the number of shares of Common Stock for which
the Warrant was exercisable as of such date and (y) an amount in cash equal to
the difference, if any, between the Warrant Value and the amount by which the
fair value of the common stock and Other Property received pursuant to clause
(x) above exceeds the Current Warrant Price; and
(4) the Company and the Holders of Warrants shall each bear 50% of the
total costs and expenses, if any, attributable to the Appraisers, and the share
of such costs and expenses attributable on a per share basis to each Holder
shall be deducted from the cash payable to such Holder pursuant to either of
paragraph (2) or (3) above.
6.8. Certain Limitations. Notwithstanding anything herein to the contrary,
the Company agrees not to enter into any transaction which, by reason of any
adjustment hereunder, would cause the Current Warrant Price to be less than the
par value per share of Common Stock.
7. NOTICES TO WARRANT HOLDERS.
7.1. Notice of Adjustments. Whenever the number of shares of Common Stock
for which a Warrant is exercisable, or whenever the price at which a share of
such Common Stock may be purchased upon exercise of the Warrants, shall be
adjusted pursuant to Section 6, the Company shall forthwith prepare a
certificate to be executed by the chief financial officer of the Company setting
forth, in reasonable detail, the event requiring the adjustment and the method
by which such adjustment was calculated, specifying the number of shares of
Common Stock for which a Warrant is exercisable and describing the number and
kind of any other shares of stock or Other Property for which a Warrant is
18
exercisable, and any change in the purchase price or prices thereof, after
giving effect to such adjustment or change. The Company shall promptly cause a
signed copy of such certificate to be delivered to each Holder in accordance
with Section 14.2. The Company shall keep at its office or agency designated by
the Company pursuant to Section 12 copies of all such certificates and cause the
same to be available for inspection at said office during normal business hours
by any Holder or any prospective purchaser of a Warrant designated by a Holder
thereof.
7.2. Notice of Corporate Action. If at any time:
(a) the Company shall take a record of the holders of its Common Stock
for the purpose of entitling them to receive a dividend (other than a cash
dividend payable out of earnings or earned surplus legally available for the
payment of dividends under the laws of the jurisdiction of incorporation of the
Company) or other distribution of Additional Shares of Common Stock, or
(b) there shall be any capital reorganization of the Company, any
reclassification or recapitalization of the capital stock of the Company or any
consolidation or merger of the Company with, or any sale, transfer or other
disposition of all or substantially all the property, assets or business of the
Company to, another corporation, or
(c) there shall be a voluntary or involuntary dissolution, liquidation
or winding up of the Company;
then, in any one or more of such cases, the Company shall give to each Holder
(i) prompt written notice of the record date for such dividend, distribution or
right or for determining rights to vote in respect of any such reorganization,
reclassification, merger, consolidation, sale, transfer, disposition,
dissolution, liquidation or winding up, and (ii) in the case of any such
reorganization, reclassification, merger, consolidation, sale, transfer,
disposition, dissolution, liquidation or winding up, prior written notice of the
date when the same shall take place. Such notice in accordance with the
foregoing clause also shall specify (i) the date on which any such record is
taken for the purpose of such dividend, distribution or right, the date on which
the holders of Common Stock shall be entitled to any such dividend, distribution
or right, and the amount and character thereof, and (ii) the date and time on
which any such reorganization, reclassification, merger, consolidation, sale,
transfer, disposition, dissolution, liquidation or winding up takes place. Each
such written notice shall be sufficiently given if addressed to such Holder at
the last address of such
19
Holder appearing on the books of the Company and delivered in accordance with
Section 14.2.
To enable each Holder of an "In-the-Money Company Warrant" to
participate in a "Tag-along-Sale", the Company hereby further agrees to deliver
to each Holder of an "In-the-Money Company Warrant" a true and complete copy of
(i) the "Original Transfer Notice" not later than the 25th day next preceding
the "Original Transfer Date" and (ii) the "New Transfer Notice" not later than
the 25th day next preceding the "New Transfer Date (all of the foregoing
capitalized terms used and not expressly defined in this Agreement having, the
respective meanings assigned to them in the Stockholder's Agreement).
8. NO IMPAIRMENT.
The Company shall not by any action, including, without limitation,
amending its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant Agreement or any Warrant.
Without limiting the generality of the foregoing, the Company will (1) not
increase the par value of any shares of Common Stock receivable upon the
exercise of a Warrant above the amount payable therefor upon such exercise
immediately prior to such increase in par value and (2) take all such action as
may be necessary or appropriate in order that the Company may validly and
legally issue fully paid and nonassessable shares of Common Stock upon the
exercise of any Warrant.
9. RESERVATION AND AUTHORIZATION OF COMMON STOCK; REGISTRATION WITH OR APPROVAL
OF ANY GOVERNMENTAL AUTHORITY.
From and after the Effective Date, the Company shall at all times reserve
and keep available for issue upon the exercise of Warrants such number of its
authorized but unissued shares of Common Stock as will be sufficient to permit
the exercise in full of all outstanding Warrants. All shares of Common Stock
which shall be so issuable, when issued upon exercise of any Warrant and payment
therefor in accordance with the terms of this Warrant Agreement and such
Warrant, shall be duly and validly issued and fully paid and nonassessable, and
not subject to preemptive rights.
Before taking any action which would cause an adjustment reducing the
Current Warrant Price below the then par value, if any, of the shares of Common
Stock issuable upon exercise of the Warrants, the Company shall take any
corporate action which may be necessary in order that the Company may
20
validly and legally issue fully paid and nonassessable shares of such Common
Stock at such adjusted Current Warrant Price.
10. STOCK AND WARRANT TRANSFER BOOKS.
The Company will not at any time, except upon dissolution, liquidation or
winding up of the Company, close its stock transfer books or Warrant transfer
books so as to result in preventing or delaying the exercise or transfer of any
Warrant.
11. LOSS OR MUTILATION.
Upon receipt by the Company and the Warrant Agent from any Holder of
evidence reasonably satisfactory to them of the ownership of and the loss,
theft, destruction or mutilation of such Holder's Warrant and indemnity
reasonably satisfactory to them, and in case of mutilation upon surrender and
cancellation thereof, the Company will execute and the Warrant Agent will
countersign and deliver in lieu hereof a new Warrant of like tenor to such
Holder; provided, in the case of mutilation, no indemnity shall be required if
such Warrant in identifiable form is surrendered to the Company or the Warrant
Agent for cancellation.
12. OFFICE OF COMPANY.
As long as any of the Warrants remain outstanding, the Company shall
maintain an office or agency (which may be the principal executive offices of
the Company) where the Warrants may be presented for exercise, registration of
transfer, division or combination as provided in this Warrant Agreement. The
Company shall initially maintain such an agency at the Warrant Agent's Principal
Offices.
13. WARRANT AGENT.
13.1. Merger or Consolidation or Change of Name of Warrant Agent. Any
corporation into which the Warrant Agent may be merged or with which it may be
consolidated, or any corporation resulting from any merger or consolidation to
which the Warrant Agent shall be a party, or any corporation succeeding to the
corporate trust business of the Warrant Agent, shall be the successor to the
Warrant Agent hereunder without the execution or filing of any paper or any
further act on the part of any of the parties hereto; provided that such
corporation must be eligible for appointment as a successor Warrant Agent under
the provisions of Section 13.3 hereof. If at the time such successor to the
Warrant Agent shall succeed to the agency created by this Warrant Agreement any
of the Warrants shall have been countersigned but not delivered, any such
successor to the Warrant Agent may adopt
21
the countersignature of the predecessor Warrant Agent and deliver such Warrants
so countersigned; and if at that time any of the Warrants shall not have been
countersigned, any successor to the Warrant Agent may countersign such Warrants
either in the name of the predecessor Warrant Agent or in the name of the
successor Warrant Agent; and in all such cases Warrants shall have the full
force provided in the Warrants and in this Warrant Agreement. If at any time the
name of the Warrant Agent shall be changed and at such time any of the Warrants
shall have been countersigned but not delivered, the Warrant Agent may adopt the
countersignatures under its prior name and deliver such Warrants so
countersigned; and if at that time any of the Warrants shall not have been
countersigned as provided in Section 3.3, the Warrant Agent may countersign such
Warrants either in its prior name or in its changed name; and in all such cases
such Warrants shall have the full force provided in the Warrants and in this
Warrant Agreement.
13.2. Certain Terms and Conditions Concerning the Warrant Agent. The
Warrant Agent undertakes the duties and obligations imposed by this Warrant
Agreement upon the following terms and conditions, by all of which the Company
and the Holders, by their acceptance of Warrants, shall be bound:
(a) Correctness of Statements. The statements contained herein and in
the Warrants shall be taken as statements of the Company and the Warrant Agent
assumes no responsibility for the correctness of any of the same except such as
describe the Warrant Agent or action taken by it. The Warrant Agent assumes no
responsibility with respect to the distribution of the Warrants except as herein
otherwise provided.
(b) Breach of Covenants. The Warrant Agent shall not be responsible
for any failure of the Company to comply with any of the covenants contained in
this Warrant Agreement or in the Warrants to be complied with specifically by
the Company.
(c) Performance of Duties. The Warrant Agent may execute and exercise
any of the rights or powers hereby vested in it or perform any duty hereunder
either itself or by or through its attorneys or agents (which shall not include
its employees) and shall not be responsible for the misconduct or negligence of
any agent appointed with due care.
(d) Reliance on Counsel. The Warrant Agent may consult at any time
with legal counsel satisfactory to it (who may be counsel for the Company) and
the Warrant Agent shall incur no liability or responsibility to the Company or
to any Holder in respect of any action taken, suffered or omitted by it
hereunder in good faith and in accordance with the opinion or the advice of
22
such counsel provided that such counsel shall have been selected with due care.
(e) Proof of Actions Taken. Whenever in the performance of its duties
under this Warrant Agreement the 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
conclusively to be proved and established by a certificate signed by the
President, a Vice President, the Secretary or an Assistant Secretary of the
Company and delivered to the Warrant Agent; and such certificate shall be full
authorization to the Warrant Agent for any action taken or suffered in good
faith by it under the provisions of this Warrant Agreement in reliance upon such
certificate.
(f) Compensation. The Company agrees to pay the Warrant Agent
reasonable compensation as set forth in the fee schedule attached hereto as
Exhibit B for all services rendered by the Warrant Agent in the performance of
its duties under this Warrant Agreement, to reimburse the Warrant Agent for all
expenses, taxes and governmental charges and other charges of any kind and
nature incurred by the Warrant Agent in the performance of its duties under this
Warrant Agreement, and to indemnify the Warrant Agent and save it harmless
against any and all liabilities, including judgments, costs and counsel fees,
for anything done or omitted by the Warrant Agent in the performance of its
duties under this Warrant Agreement except as a result of the Warrant Agent's
negligence or bad faith.
(g) Legal Proceedings. The Warrant Agent shall be under no obligation
to institute any action, suit or legal proceeding or to take any other action
likely to involve expense unless the Company or one or more Holders shall
furnish the Warrant Agent with reasonable security and indemnity for any costs
and expenses that may be incurred, but this provision shall not affect the power
of the Warrant Agent to take such action as the Warrant Agent may consider
proper, whether with or without any such security or indemnity. All rights of
action under this Warrant Agreement or under any of the Warrants may be enforced
by the Warrant Agent without the possession of any of the Warrants or the
production thereof at any trial or other proceeding relative thereto, and any
such action, suit or proceeding instituted by the Warrant Agent shall be brought
in its name as Warrant Agent, and any recovery of judgment shall be for the
ratable benefit of the Holders, as their respective rights or interests may
appear.
23
(h) Other Transactions in Securities of the Company. The Warrant Agent
and any stockholder, director, officer or employee of the Warrant Agent may buy,
sell or deal in any of the Warrants or other securities of the Company or become
pecuniarily interested in any transaction in which the Company may be
interested, or contract with or lend money to the Company or otherwise act as
fully and freely as though it were not Warrant Agent under this Warrant
Agreement. Nothing herein shall preclude the Warrant Agent from acting in any
other capacity for the Company or for any other legal entity.
(i) Liability of Warrant Agent. The Warrant Agent shall act hereunder
solely as agent, and its duties shall be determined solely by the provisions
hereof. The Warrant Agent shall not be liable for anything that it may do or
refrain from doing in connection with this Warrant Agreement except for its own
negligence or bad faith.
(j) Reliance on Documents. The Warrant Agent will not incur any
liability or responsibility to the Company or to any Holder for any action taken
in reliance on any notice, resolution, waiver, consent, order, certificate, or
other paper, document or instrument reasonably believed by it to be genuine and
to have been signed, sent or presented by the proper party or parties.
(k) Validity of Agreements. The Warrant Agent shall not be under any
responsibility in respect of the validity of this Warrant Agreement or the
execution and delivery hereof (except the due execution and delivery hereof by
the Warrant Agent) or in respect of the validity or execution of any Warrant
(except its countersignature and delivery thereof); nor shall the Warrant Agent
by any act hereunder be deemed to make any representation or warranty as to the
authorization or reservation of any Warrant Stock (or other stock) to be issued
pursuant to this Warrant Agreement or any Warrant, or as to whether any Warrant
Stock (or other stock) will, when issued, be validly issued, fully paid and
nonassessable, or as to the Warrant Price or the number or amount of Warrant
Stock or other securities or other property issued upon exercise of any Warrant.
(l) Instructions from Company. The Warrant Agent is hereby authorized
and directed to accept instructions with respect to the performance of its
duties hereunder from the President, a Vice President, the Secretary or any
Assistant Secretary of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and shall not be liable for any
action taken or suffered to be taken by it in good faith in accordance with
instructions of any such officer or officers.
24
13.3. Change of Warrant Agent. The Warrant Agent may resign and be
discharged from its duties under this Warrant Agreement by giving to the Company
30 days' advance notice in writing. The Warrant Agent may be removed by like
notice to the Warrant Agent from the Company. If the Warrant Agent shall resign
or be removed or shall otherwise become incapable of acting, the Company shall
appoint a successor to the Warrant Agent. If the Company shall fail to make such
appointment within a period of 30 days after such removal or after it has been
notified in writing of such resignation or incapacity by the resigning or
incapacitated Warrant Agent, then any Holder may apply to a court of competent
jurisdiction for the appointment of a successor to the Warrant Agent. Pending
the appointment of the successor warrant agent, the Company shall perform the
duties of the Warrant Agent. Any successor warrant agent, whether appointed by
the Company or a court of competent jurisdiction, 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 as
warrant agent a combined capital and surplus of at least $500,000,000. After
appointment, the successor warrant agent shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named as
Warrant Agent without further act or deed; but the former Warrant Agent shall
deliver and transfer to the successor warrant agent any property at the time
held by it hereunder, and execute and deliver any further assurance, conveyance,
act or deed necessary for the purpose. Failure to file any notice provided for
in this Section 13.3, however, or any defect therein, shall not affect the
legality or validity of the resignation or removal of the Warrant Agent or the
appointment of the successor warrant agent, as the case may be. In the event of
such resignation or removal, the successor warrant agent shall mail, first
class, to each Holder, written notice of such removal or resignation and the
name and address of such successor warrant agent.
13.4. Disposition of Proceeds on Exercise of Warrants, Inspection of
Warrant Agreement. The Warrant Agent shall account promptly to the Company with
respect to Warrants exercised and concurrently pay to the Company all
immediately available funds received by the Warrant Agent for the purchase of
the Warrant Stock through the exercise of such Warrants. The Warrant Agent
shall, upon request of the Company from time to time, deliver to the Company
such complete reports of registered ownership of the Warrants and such complete
records of transactions with respect to the Warrants and the shares of Common
Stock as the Company may request. The Warrant Agent shall also make available to
the Company for inspection by the Company's agents or employees, from time to
time as the Company may request, such original books of accounts and records
maintained by the Warrant Agent in
25
connection with the issuance and exercise of Warrants hereunder, such
inspections to occur at the Warrant Agent's Principal Office. The Warrant Agent
shall keep copies of this Warrant Agreement and any notices given or received
hereunder available for inspection by the Company or the Holders at the Warrant
Agent's Principal Office. The Company shall supply the Warrant Agent from time
to time with such numbers of copies of this Warrant Agreement as the Warrant
Agent may request.
14. MISCELLANEOUS.
14.1. Stockholders' Agreement. The acceptance and exercise of any Warrant
issued pursuant to this Warrant Agreement shall constitute the agreement of the
Holder thereof to become a party to and to be bound by the Stockholders'
Agreement (a copy of which is attached hereto as Exhibit C) upon the acquisition
of Common Stock by such Holder upon the exercise of such Warrant.
14.2. Notice Generally. Any notice, demand, request, consent, approval,
declaration, delivery or other communication hereunder to be made pursuant to
the provisions of this Warrant Agreement shall be sufficiently given or made if
in writing and either delivered in person with receipt acknowledged or sent by
registered or certified mail, return receipt requested, postage prepaid or by
telecopy and confirmed by telecopy answerback, addressed as follows:
(a) If to any Holder or holder of Warrant Stock, at its last known
address appearing on the warrant register of the Company maintained for
such purpose.
(b) If to Company at
CHI Energy, Inc.
000 Xxxxxxxxxx Xxxxxxxxx
Xxxxxxxx, Xxxxxxxxxxx 00000
Attention: Xxxxxx X. Xxxxx, President and General
Counsel
Telecopy Number:
(c) If to Warrant Agent at
[To come]
Attention:
Telecopy Number:
or at such other address as may be substituted by notice given as herein
provided. The giving of any notice required hereunder may be waived in writing
by the party entitled to receive such notice. Every notice, demand, request,
consent, approval,
26
declaration, delivery or other communication hereunder shall be deemed to have
been duly given or served on the date on which personally delivered, with
receipt acknowledged, telecopied and confirmed by telecopy answerback or three
Business Days after the same shall have been deposited in the United States mail
whichever is earlier. Failure or delay in delivering copies of any notice,
demand, request, approval, declaration, delivery or other communication to the
Person designated above to receive a copy shall in no way adversely affect the
effectiveness of such notice, demand, request, approval, declaration, delivery
or other communication.
14.3. Successors and Assigns. All covenants and provisions of this Warrant
Agreement by or for the benefit of the Company or the Warrant Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
14.4. Amendment. This Warrant Agreement and the Warrants may only be
modified or amended or the provisions hereof and thereof waived with the written
consent of the Company, the Warrant Agent and the Majority Holders, provided
that no Warrant may be modified or amended to reduce the number of shares of
Common Stock for which such Warrant is exercisable or to increase the price at
which such shares may be purchased upon exercise of such Warrant (before giving
effect to any adjustment as provided herein and therein) without the prior
written consent of the Holder thereof.
14.5. Third-Party Beneficiaries. All covenants and provisions of this
Warrant Agreement shall inure to the benefit of each Holder from time to time of
Warrants.
14.6. Severability. Wherever possible, each provision of this Warrant
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Warrant Agreement shall be
prohibited by or invalid under applicable law, such provision shall be
ineffective to the extent of such prohibition or invalidity, without
invalidating the remainder of such provision or the remaining provisions of this
Warrant Agreement.
14.7. Headings. The headings used in this Warrant Agreement are for the
convenience of reference only and shall not, for any purpose, be deemed a part
of this Warrant Agreement.
14.8. Governing Law. This Warrant Agreement and the Warrants shall be
governed by the laws of the State of Delaware, without regard to the provisions
thereof relating to conflict of laws.
27
14.9. Counterparts. This Warrant Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
IN WITNESS WHEREOF, each of the Company and the Warrant Agent has caused
this Warrant Agreement to be duly executed by its duly authorized officers as of
the date first above written.
CHI ENERGY, INC.
By:______________________________________
Name:____________________________________
Title:___________________________________
__________________________, as
Warrant Agent
By:______________________________________
Name:____________________________________
Title:___________________________________
28
EXHIBIT A
---------
[FORM OF FACE OF WARRANT CERTIFICATE]
CHI ENERGY, INC.
Warrant to purchase [Class A Common Stock/Class B
Common Stock], par value $0.01 per share, of
CHI Energy, Inc.
-------------------------------------------------------------------------------
Warrant Certificate No.: Number of Warrants:
CUSIP No. ___________
-------------------------------------------------------------------------------
See Reverse for Certain Definitions
Exercisable from and after the date hereof until 5:00 p.m., New York City
time on , 2005.
This Warrant Certificate certifies that ____________________, or registered
assigns, is the registered holder of the number of Warrants set forth above
expiring at 5:00 p.m., New York City time, on , 2005 (the "Warrants") to
purchase [Class A Common Stock/Class B Common Stock], par value $0.01 per share
(collectively, the "Common Stock"), of CHI Energy, Inc., a Delaware corporation
(the "Company"). The Common Stock issuable upon exercise of Warrants is
hereinafter referred to as the "Warrant Stock." Subject to the immediately
succeeding paragraph, each Warrant entitles the holder upon exercise to purchase
from the Company at any time after the date hereof until 5:00 p.m., New York
City time, on _______ ___, 2005, one share of Common Stock, subject to
adjustment as set forth herein and in the Warrant Agreement dated as of , 1997
(the "Warrant Agreement") by and between the Company and , a corporation, as
warrant agent (the "Warrant Agent"), in whole or in part, at the initial
purchase price of $[_____] per share, on and subject to the terms and conditions
set forth herein and in the Warrant Agreement. Such purchase shall be payable in
lawful money of the United States of America by certified or official bank check
or any combination thereof to the order of the Warrant Agent for the account of
the Company at the principal office of the Warrant Agent, but only subject to
the conditions set forth herein and in the Warrant Agreement. The number of
shares of Common Stock for which each Warrant is exercisable, and the price at
which such shares may be purchased upon exercise of each Warrant, are subject to
adjustment upon the occurrence of certain events as set forth in the Warrant
Agreement. Whenever the number of shares of Common Stock for which a Warrant is
exercisable, or
29
the price at which a share of such Common Stock may be purchased upon exercise
of the Warrants, is adjusted pursuant to the Warrant Agreement, the Company
shall cause to be given to each of the registered holders of the Warrants at
such holders' addresses appearing on the Warrant register written notice of such
adjustment by first class mail postage pre-paid.
No Warrant may be exercised after 5:00 p.m., New York City time, on _______
___, 2005, and to the extent not exercised by such time such Warrants shall
become void.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse side hereof and such further provisions
shall for all purposes have the same effect as though fully set forth at this
place.
This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent.
THIS WARRANT CERTIFICATE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF
DELAWARE, WITHOUT REGARD TO THE PROVISIONS THEREOF RELATING TO CONFLICT OF LAWS.
30
IN WITNESS WHEREOF, the Company has caused this Warrant Certificate to
be signed by its President and has caused its corporate seal to be affixed
hereunto or imprinted hereon.
Dated:
(Seal)
Attest: CHI ENERGY, INC.
_________________________ By:___________________________________
Name:____________________ Name:_________________________________
Title: Secretary Title: President
COUNTERSIGNED:
_________________________, as Warrant Agent
By:___________________________________
Name:_________________________________
Title: President
[Authorized Signature]
31
[FORM OF REVERSE OF WARRANT CERTIFICATE]
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of up to Warrants expiring at 5:00 p.m., New York City time, on
, 2005 or, if such date is not a business day, the next succeeding business day,
entitling the holder, on exercise, to purchase shares of [Class A Common
Stock/Class B Common Stock], par value $0.01 per share, of the Company, and are
issued or to be issued pursuant to the Warrant Agreement, which 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 Warrant Agent,
the Company and the Holders (the words "Holders" or "Holder" meaning the
registered holders or registered holder of the Warrants). A copy of the Warrant
Agreement may be obtained by the Holder hereof upon written request to the
Company. The acceptance and exercise of any Warrant evidenced by this Warrant
Certificate shall constitute the agreement of the Holder hereof to become a
party to and to be bound by the Stockholders' Agreement upon the acquisition of
Common Stock by such Holder upon the exercise of such Warrant. A copy of the
Stockholders' Agreement may be obtained by the Holder hereof upon written
request to the Company.
Warrants may be exercised at any time from and after the date hereof until
5:00 p.m., New York City time, on , 2005 or, if such date is not a business day,
the next succeeding business day. The Holder of Warrants evidenced by this
Warrant Certificate may exercise them by surrendering this Warrant Certificate,
with the form of election to purchase set forth hereon properly completed and
executed, together with payment of the purchase price by certified or official
bank check or any combination thereof to the order of the Warrant Agent for the
account of the Company and the other required documentation. In the event that
upon any exercise of Warrants evidenced hereby the number of Warrants exercised
shall be less than the total number of Warrants evidenced hereby, there shall be
issued to the Holder hereof or his assignee a new Warrant Certificate evidencing
the number of Warrants not exercised.
The Warrant Agreement provides that the number of shares of Common Stock
for which each Warrant is exercisable, and the price at which such shares may be
purchased upon exercise of each Warrant, are subject to adjustment upon the
occurrence of certain events as set forth in the Warrant Agreement. The Company
shall not be required to issue any fractional share, of Common Stock upon the
exercise of any Warrant, but the Company shall round up
32
or down to the nearest share of Common Stock as provided in the
Warrant Agreement.
Warrant Certificates, when surrendered at the office of the Warrant Agent
by the registered Holder thereof in person or by legal representative or
attorney duly authorized in writing, may be exchanged, in the manner and subject
to the limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Warrant Agent a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement
without charge except for any tax imposed in connection therewith.
33
[ELECTION TO PURCHASE FORM]
[To be executed only upon exercise of Warrant]
The undersigned registered owner of this Warrant irrevocably exercises this
Warrant for the purchase of ______ Shares of [Class A Common Stock/Class B
Common Stock of] CHI Energy, INC. and herewith makes payment therefor, all at
the price and on the terms and conditions specified in this Warrant and the
Warrant Agreement and requests that certificates for the shares of Common Stock
hereby purchased (and any securities or other property issuable upon such
exercise) be issued in the name of and delivered to _____________ whose address
is _________________ and, if such shares of Common Stock shall not include all
of the shares of Common Stock issuable as provided in this Warrant, that a new
Warrant of like tenor and date for the balance of the shares of Common Stock
issuable hereunder be delivered to the undersigned. By executing this Election
to Purchase, the undersigned agrees to become a party to and to be bound by that
certain Stockholders' Agreement, dated as of ____________ __, 1997, by and among
the Company and each of the stockholders of the Company (the "Stockholders'
Agreement"), as a Stockholder (as defined in the Stockholders' Agreement) and to
the same extent as all other Stockholders' now a party to and bound thereby.
-------------------------------
(Name of Registered Owner)
-------------------------------
(Signature of Registered Owner)
-------------------------------
(Street Address)
-------------------------------
(City) (State) Zip Code)
NOTICE: The signature on this election to purchase must correspond with
the name as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
34
[FORM OF ASSIGNMENT]
FOR VALUE RECEIVED the undersigned registered owner of this Warrant hereby
sells, assigns and transfers unto the Assignee named below all of the rights of
the undersigned under this Warrant, with respect to the number of shares of
Common Stock set forth below:
Name and Address of Assignee No. of Shares of
---------------------------- ----------------
Common Stock
------------
and does hereby irrevocably constitute and appoint _______________________
attorney-in-fact to register such transfer on the books of CHI Energy, Inc.
maintained for the purpose, with full power of substitution in the premises.
Dated:____________________ Print Name:_________________________________
Signature:__________________________________
Witness:____________________________________
NOTICE: The signature on this assignment must correspond with the name
as written upon the face of the within Warrant in every
particular, without alteration or enlargement or any change
whatsoever.
35
EXHIBIT B
_________________________________,
as Warrant Agent
Schedule of Fees
----------------
36
