EXECUTION COPY
SONUS CORP.
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AMENDED AND RESTATED
WARRANT AGREEMENT
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WARRANTS TO PURCHASE 2,000,000 COMMON SHARES
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THIS AMENDED AND RESTATED WARRANT AGREEMENT (this "Agreement") dated as
of October 1, 1999 is made and entered into by and between Sonus Corp., a
corporation continued and existing under the laws of Yukon Territory, Canada
(the "Company"), and Warburg, Xxxxxx Ventures, L.P., a Delaware limited
partnership (the "Warrantholder").
Subject to the terms and conditions hereof, pursuant to a Securities
Purchase Agreement dated as of October 1, 1999, by and between the Company and
the Warrantholder (the "Securities Purchase Agreement"), the Company agrees to
(a) amend and restate, as hereinafter described, the terms of the warrants
described in and issued pursuant to that certain Warrant Agreement dated as of
December 24, 1997, by and between the Company and the Warrantholder, as
represented by Warrant Certificate No. W-1 of the Company dated December 24,
1997 (the "Old Warrant Certificate"); (b) cancel the Old Warrant Certificate;
and (c) issue to the Warrantholder, Amended and Restated Warrant Certificate No.
W-1 of the Company, the form of which is attached hereto as Exhibit 1,
representing warrants (the "Warrants") to purchase up to an aggregate of
2,000,000 common shares without par value of the Company (the "Common Shares"),
at the Warrant Price (as hereinafter defined), subject to adjustment pursuant to
Section 6 hereof. As used herein (i) the term "Shares" shall mean, unless the
context otherwise requires, collectively the Common Shares issuable upon
exercise of the Warrants together with any other securities or other property
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issuable upon such exercise as provided in Section 6 of this Agreement; (ii) the
term "Warrants" shall include any and all warrants outstanding pursuant to this
Agreement, including those evidenced by a certificate or certificates issued
upon division, exchange or substitution pursuant to this Agreement; (iii) the
term "Warrant Price" shall mean the price per Share at which Shares shall at any
time be purchasable upon exercise of the Warrants, such price to equal U.S.
$6.75, subject to adjustment pursuant to Section 6 hereof, provided that if the
Series A Amendment Filing Date has not occurred on or prior to March 31, 2000,
then from and after March 31, 2000, such price shall equal U.S. $4.00, subject
to adjustment pursuant to Section 6 hereof; and (iv) the term "Series A
Amendment Filing Date" shall mean the date upon which the amendment and
restatement of the terms of the Series A Convertible Shares, in the form
attached to the Securities Purchase Agreement as Exhibit B, shall have occurred,
as preceded by the passing of resolutions by a majority of not less than
two-thirds of the votes cast by the holders of the Common Shares, the Series A
Convertible Shares and Series B Convertible Shares of the Company, each voting
separately as a class, as evidenced by (1) a duly executed report of an
inspector of election, (2) a copy of the articles of amendment amending the
terms of the Series A Convertible Shares, certified by the registrar of
Corporations of the Yukon Territory and (3) an opinion of counsel to the
Company, addressed to the Investor, in the form attached hereto as Exhibit 4,
and such other documentation as the Investor may reasonably request; provided
that no Series A Amendment Filing Date shall occur after March 31, 2000. Terms
which are capitalized but not defined herein shall have the same meanings as in
the Securities Purchase Agreement. Any amounts herein referencing share prices
or numbers of shares shall be subject to appropriate adjustments in the event of
any stock splits, consolidations or the like.
For the purpose of defining the terms and provisions of the Warrants
and the respective rights and obligations thereunder, the Company and the
Warrantholder, for value received, hereby agree as follows:
Section 1. Restrictions on Transfer and Form of Warrants.
1.1. Registration. Certificates evidencing the Warrants shall be
numbered and shall be registered on the books of the Company when issued, in
accordance with Yukon Territory corporate practice.
1.2. Restriction on Transfer of the Warrants. The Warrants shall not be
transferable and may not be sold, assigned,
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hypothecated or otherwise transferred by the Warrantholder without the express
written consent of the Company, such consent not to be unreasonably withheld.
Any transferee permitted under this Section 1.2 shall acquire title to such
transferred Warrants and to all rights represented thereby.
1.3. Form of Warrants. The form of certificate evidencing the Warrants
shall be substantially as set forth in Exhibit 1 hereto. Certificates evidencing
the Warrants shall be executed on behalf of the Company by its President or by
any Vice President, shall be attested to by its Secretary or any Assistant
Secretary, and shall be dated as of the date of execution thereof.
1.4. Legends on Warrants and Common Shares. The Warrants, and the
Shares issuable upon the exercise thereof, have not been registered under the
Securities Act of 1933, as amended (the "Securities Act"). Each certificate for
the Warrants shall bear the following legend:
"THE WARRANTS REPRESENTED BY THIS CERTIFICATE, AND THE COMMON
SHARES ISSUABLE UPON EXERCISE OF SUCH WARRANTS, HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933 OR
THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
PROVINCE OF CANADA. SUCH WARRANTS MAY NOT BE SOLD, OFFERED FOR
SALE, ASSIGNED, EXCHANGED, PLEDGED OR HYPOTHECATED OR
OTHERWISE TRANSFERRED, IN ANY MANNER, AND SUCH COMMON SHARES
MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED OR HYPOTHECATED OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION
OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY, THAT AN
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. THE WARRANTS
REPRESENTED BY THIS CERTIFICATE MAY NOT BE TRADED IN CANADA
EXCEPT AS PERMITTED BY RELEVANT CANADIAN SECURITIES LAWS."
Each certificate for the Shares shall bear the following legend:
"THE COMMON SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933
OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR
ANY PROVINCE OF CANADA AND MAY NOT BE SOLD, ASSIGNED,
EXCHANGED OR
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OTHERWISE TRANSFERRED, IN THE ABSENCE OF SUCH REGISTRATION OR
AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY,
THAT AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE THIS
CERTIFICATE MAY NOT CONSTITUTE 'GOOD DELIVERY' IN SATISFACTION
OF A TRADE MADE ON A STOCK EXCHANGE IN CANADA. THIS
CERTIFICATE IS NOT TRANSFERABLE IN CANADA UNTIL MARCH 30, 2000
EXCEPT PURSUANT TO AN EXEMPTION FROM THE PROSPECTUS
REQUIREMENTS CONTAINED IN THE APPLICABLE SECURITIES
LEGISLATION."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public distribution pursuant to a registration statement under the
Securities Act of the Common Shares represented thereby) shall also bear a like
legend unless, in the opinion of counsel reasonably satisfactory to the Company,
the securities represented thereby need no longer be subject to such
restrictions.
Section 2. Term of Warrants; Exercise of Warrants.
(a) Subject to the terms of this Agreement, the Warrantholder
shall have the right, at any time and from time to time during the period
commencing at 9:00 a.m., Pacific Time, on October 1, 1999, (the "Commencement
Date") and ending at 5:00 p.m., Pacific Time, on October 1, 2004 (the
"Termination Date") to purchase from the Company up to the number of fully paid
and nonassessable Shares which the Warrantholder may at the time be entitled to
purchase pursuant to this Agreement, upon surrender to the Company at its
principal office of the certificates evidencing the Warrants to be exercised,
with the purchase form, in the form attached hereto as Exhibit 2, duly completed
and signed, and upon payment to the Company of an amount (the "Exercise
Payment") equal to the Warrant Price multiplied by the number of Shares being
purchased pursuant to such exercise, payable in cash, by certified or official
bank check, or by wire transfer.
(b) At any time subsequent to the first anniversary of the
Commencement Date, in lieu of exercising the Warrants as provided in Section
2(a) above, and subject to all applicable law and all applicable regulatory
approvals, limitations and restrictions, the Warrantholder may elect to receive,
without any cash payment, a number of Shares equal to the value (as determined
below) of any or all of the Warrants held of record by
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the Warrantholder, upon surrender to the Company at its principal office of the
certificates evidencing such Warrants, with the attached cashless exercise form
attached hereto as Exhibit 3 duly completed and signed, in which event the
Company shall issue to the Warrantholder a number of Shares computed using the
following formula:
X = Y(A-B)
A
where
X = the number of Common Shares to be issued pursuant to this
Section 2(b).
Y = the number of Common Shares issuable upon exercise of the
surrendered Warrants.
A = the average of the Market Prices of the Common Shares for
the sixty (60) calendar days immediately preceding the
date upon which the certificates evidencing the
surrendered Warrants are received by the Company at its
principal office.
B = the Warrant Price on such date.
For all purposes of this Agreement the term "Market Price" as of any
specified date shall mean: (i) if the Common Shares are listed or admitted for
trading on one or more United States national securities exchanges, the daily
closing price for the Common Shares on the principal exchange in the United
States on which the Common Shares are listed; (ii) if the Common Shares are not
listed or admitted for trading on any United States national securities
exchange, the daily closing price for the Common Shares on the Nasdaq National
or Nasdaq Small-Cap Market ("Nasdaq"); (iii) if the Common Shares are not listed
or admitted for trading on a United States national securities exchange or on
Nasdaq, the daily closing price of the Common Shares on the principal stock
exchange in Canada on which the Common Shares are listed (expressed in United
States dollars based upon the noon buying rate in New York City for cable
transfers in Canadian dollars as certified for customs purposes by the Federal
Reserve Bank of New York); (iv) if the Common Shares are not listed or admitted
to trading on any United States national or Canadian national securities
exchange or on Nasdaq, the average of the reported bid and asked prices on the
trading day preceding such date in the over-the-counter market as furnished by
the National
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Quotation Bureau, Inc., or, if such firm is not then engaged in the business of
reporting such prices, as furnished by any member of the National Association of
Securities Dealers, Inc. selected by the Company; or (y) if the Common Shares
are not publicly traded, the Market Price for such day shall be the fair market
value thereof determined jointly by the Company and the Warrantholder; provided,
however, that if such parties are unable to reach agreement within a reasonable
period of time, the Market Price shall be determined in good faith by an
independent investment banking firm selected jointly by the Company and the
Warrantholder or, if that selection cannot be made within an additional 15 days,
by an independent investment banking firm selected by the American Arbitration
Association in accordance with its rules.
(c) The Company may, at any time, elect to force the exercise
of the Warrants by the Warrantholder subject to the terms of this Agreement
provided that the Company shall have satisfied all of the following conditions
prior to the date of such election by the Company:
(i) the Common Shares are listed on the New York Stock
Exchange, the American Stock Exchange or the Nasdaq National Market;
(ii) the Common Shares are traded on the New York Stock
Exchange, the American Stock Exchange or the Nasdaq National Market at
a Market Price greater than U.S. $8.00 per share for the 10 consecutive
trading days immediately preceding the date of such election; and
(iii) The Company's net income (excluding profit or loss
on disposal of a significant part of the Company's assets or separate
segment thereof, gains on restructuring payables, gains or losses on
the extinguishment of debt, expropriations of property, gains or losses
that are the direct result of a major casualty, or one-time losses
resulting from prohibitions under a newly-enacted law or regulation)
for the three consecutive fiscal quarters ended immediately prior to
the date of such election, as reported in or derived from its quarterly
or annual reports filed with the Securities and Exchange Commission,
before income taxes, dividends on the Company's Series A Convertible
Preferred Shares and Series B Convertible Preferred Shares
(collectively, the "Convertible Shares") and amortization of goodwill
and covenants not to compete for such quarterly periods, shall have
averaged at least U.S. $0.35 per fully diluted Common Share per fiscal
quarter, provided, however,
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that in making such calculation, the Common Shares issuable upon
exercise of the Warrants shall be excluded but Common Shares issuable
upon the conversion of the Convertible Shares shall not.
The foregoing conditions (i), (ii) and (iii) shall hereinafter be collectively
referred to as the "Triggering Conditions." All references to per share amounts
or prices with respect to the Triggering Conditions shall be appropriately
adjusted for any stock splits, consolidations or the like.
The Company shall give the Warrantholder written notice that the
Triggering Conditions have been satisfied and that the Company intends to force
the exercise of the Warrants. In this event, the Termination Date shall be the
date ten (10) business days after such notice shall be effectively delivered to
the Warrantholder as provided in Section 10 of this Agreement.
In the event of a forced exercise of Warrants pursuant to this Section
2(c), in lieu of exercising the Warrants as provided in Section 2(a) above, and
subject to all applicable law and all applicable regulatory approvals,
limitations and restrictions, the Warrantholder may elect to receive, without
any cash payment, a number of Shares equal to the value (as determined below) of
any or all of the Warrants held of record by the Warrantholder, upon surrender
to the Company at its principal office of the certificates evidencing such
Warrants, with the attached cashless exercise form thereof duly completed and
signed, in which event the Company shall issue to the holder a number of Shares
computed using the formula set forth in Section 2(b) except the term "A" in such
formula, the Market Price of the Common Shares, shall be calculated based on the
ten (10) trading days immediately preceding the date on which the certificates
evidencing the surrendered Warrants are received by the Company at its principal
offices.
(d) Upon the surrender of Warrant certificates and payment of the
Exercise Payment (in cash, except in the event of a cashless exercise), the
Company, at its expense, shall issue and cause to be delivered with all
reasonable dispatch, and in any event within ten (10) days thereafter, to the
Warrantholder a certificate or certificates for the number of full Shares so
acquired upon the exercise of the Warrant, together with cash in respect of any
fractional Shares otherwise issuable upon such surrender, determined in
accordance with Section 7 hereof. Such certificate or certificates shall be
deemed to have been issued, and the Warrantholder shall be deemed to have become
a holder of record of such Shares, as of the date of surrender of the
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Warrants being exercised and (in the case of exercise pursuant to Section 2(a))
payment of the Exercise Payment notwithstanding that the certificate or
certificates representing such securities shall not actually have been delivered
or that the stock transfer books of the Company shall then be closed. The
Warrants shall be exercisable at the election of the Warrantholder either in
full or from time to time in part and, in the event that a certificate
evidencing Warrants is exercised in respect of fewer than all of the Shares
specified therein at any time prior to the Termination Date, a new certificate
evidencing the remaining portion of the Warrants shall be issued by the Company.
Section 3. Payment of Taxes. The Company will pay all transfer and
stamp taxes and fees, if any, attributable to the initial issuance of the
Warrants or the issuance of Shares upon exercise of the Warrants.
Section 4. Mutilated or Missing Warrants. In case the certificate or
certificates evidencing any Warrants shall be mutilated, lost, stolen or
destroyed, the Company shall, at the request of the affected Warrantholder,
issue and deliver in exchange and substitution for and upon cancellation of the
mutilated certificate or certificates, or in lieu of and substitution for the
certificate or certificates lost, stolen or destroyed, a new Warrant certificate
or certificates of like tenor and representing an equivalent right or interest,
but only upon receipt of evidence reasonably satisfactory to the Company of the
loss, theft, destruction or mutilation of such Warrant and, if requested, at the
cost and expense of the Warrantholder (in the case of loss, theft or
destruction), an unsecured bond of indemnity in form and amount reasonably
satisfactory to the Company. Such substitute Warrant certificate shall also
comply with such other reasonable regulations as the Company may prescribe.
Section 5. Reservation of Common Shares. There has been reserved, and
the Company shall at all times keep reserved and available so long as any
Warrants remain outstanding, out of its authorized share capital, such number of
Shares as shall be subject to purchase under all outstanding Warrants. Every
transfer agent for the Common Shares and other securities of the Company
issuable upon the exercise of Warrants will be irrevocably authorized and
directed at all times to reserve such number of authorized Common Shares and
other securities as shall be requisite for such purposes. The Company will keep
a copy of this Agreement on file with every transfer agent for the Common
Shares. The Company will supply every such transfer agent with duly executed
stock and other certificates, as appropriate, for
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such purpose and will provide or otherwise make available any cash which may be
payable as provided in Section 7 hereof.
Section 6. Adjustment of Number and Kind of Securities. The number and
kind of securities purchasable upon the exercise of the Warrants and the Warrant
Price shall be subject to adjustment from time to time upon the happening of
certain events, as follows:
6.1. Anti-Dilution Provisions And Other Adjustments. In order to
prevent dilution of the rights granted hereunder, the Warrant Price shall be
subject to adjustment from time to time in accordance with this Section 6. Upon
each adjustment of the Warrant Price pursuant to this Section 6, the
Warrantholder shall thereafter be entitled to acquire upon exercise, at the
Warrant Price resulting from such adjustment, the number of Shares obtainable by
multiplying the Warrant Price in effect immediately prior to such adjustment by
the number of Shares acquirable immediately prior to such adjustment and
dividing the product thereof by the Warrant Price resulting from such
adjustment.
(a) Adjustment for Issue or Sale of Common Shares at Less than
Specified Prices. Except as provided in Sections 6.3 or 6.5 below, if and
whenever on or after the date hereof the Company shall issue or sell, or shall
in accordance with subparagraphs 6.1(a)(1) to (8), inclusive, be deemed to have
issued or sold (such issuance or sale, whether actual or deemed, a "Triggering
Transaction") any Common Shares for a consideration per share less than
(I) (if the Common Shares are not traded on the New York Stock
Exchange, the American Stock Exchange or the Nasdaq National Market)
U.S. $6.75 then forthwith upon such issue or sale the Warrant Price
shall, subject to subparagraphs (1) to (8) of this Section 6.1(a), be
reduced to the Warrant Price (calculated to the nearest tenth of a
cent) determined by dividing: (i) an amount equal to the sum of (x) the
product derived by multiplying the Number of Common Shares Deemed
Outstanding immediately prior to such Triggering Transaction by the
Warrant Price then in effect, plus (y) the consideration, if any,
received by the Company upon consummation of such Triggering
Transaction, by (ii) an amount equal to the sum of (x) the Number of
Common Shares Deemed Outstanding immediately prior to such Triggering
Transaction plus (y) the number of shares of Common Stock issued (or
deemed to be issued in accordance with subparagraphs 6.1(a)(1) to (8))
in connection with the Triggering Transaction; or
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(II) (if the Common Shares are traded on the New York Stock
Exchange, the American Stock Exchange or the Nasdaq National Market)
the average Market Price for the ten trading days immediately preceding
such issuance or sale, then forthwith upon such Triggering Transaction,
the Warrant Price shall, subject to subparagraphs (1) to (8) of this
Section 6.1(a), be reduced to the Warrant Price (calculated to the
nearest tenth of a cent) determined by multiplying the Warrant Price in
effect immediately prior to the time of such Triggering Transaction by
a fraction, the numerator of which shall be the sum of (x) the Number
of Common Shares Deemed Outstanding immediately prior to such
Triggering Transaction and (y) the number of Common Shares which the
aggregate consideration received by the Company upon such Triggering
Transaction would purchase at the average Market Price for the ten
trading days immediately preceding such Triggering Transaction, and the
denominator of which shall be the Number of Common Shares Deemed
Outstanding immediately after such Triggering Transaction.
For purposes of this Section 6, the term "Number of Common Shares
Deemed Outstanding" at any given time shall mean the sum of (i) the number of
Common Shares outstanding at such time, and (ii) the number of Common Shares
deemed to be outstanding under subparagraphs 6.1(a)(1) to (8), inclusive, at
such time.
For purposes of determining the adjusted Warrant Price under this
Section 6.1(a), the following subsections (1) to (8), inclusive, shall be
applicable:
(1) In case the Company at any time shall in any manner grant
(whether directly or by assumption in an amalgamation or otherwise) any
rights to subscribe for or to purchase, or any options for the purchase
of, Common Shares or any stock or other securities convertible into or
exchangeable for Common Shares (such rights or options being herein
called "Options" and such convertible or exchangeable stock or
securities being herein called "Convertible Securities"), whether or
not such Options or the right to convert or exchange any such
Convertible Securities are immediately exercisable, and the price per
share for which the Common Shares are issuable upon exercise,
conversion or exchange (determined by dividing (x) the total amount, if
any, received or receivable by the Company as consideration for the
granting of such Options, plus the minimum aggregate amount of
additional consideration payable to the Company upon the exercise of
all such Options, plus, in the case of such Options which relate to
Convertible Securities, the
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minimum aggregate amount of additional consideration, if any, payable
upon the issue or sale of such Convertible Securities and upon the
conversion or exchange thereof, by (y) the total maximum number of
Common Shares issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities) shall be less
than the average Market Price in effect for the ten trading days
immediately prior to the time of the granting of such Option (if the
Common Shares are traded on The New York Stock Exchange, The American
Stock Exchange or The National Nasdaq Market) or U.S. $6.75 (if the
Common Shares are not traded on The New York Stock Exchange, The
American Stock Exchange, or the Nasdaq National Market) then the total
maximum amount of Common Shares issuable upon the exercise of such
Options, or, in the case of Options for Convertible Securities, upon
the conversion or exchange of such Convertible Securities, shall (as of
the date of granting of such Options) be deemed to be outstanding and
to have been issued and sold by the Company for such price per share.
No adjustment of the Warrant Price shall be made upon the actual issue
of such Common Shares or such Convertible Securities upon the exercise
of such Options, except as otherwise provided in subparagraph (3)
below.
(2) In case the Company at any time shall in any manner issue
(whether directly or by assumption in an amalgamation or otherwise) 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 Shares are issuable upon such conversion or
exchange (determined by dividing (x) the total amount received or
receivable by the Company as consideration for the issue or sale of
such Convertible Securities, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the
conversion or exchange thereof, by (y) the total maximum number of
Common Shares issuable upon the conversion or exchange of all such
Convertible Securities) shall be less than the average Market Price in
effect for the ten trading days immediately prior to the time of such
issue or sale (if the Common Shares are traded on The New York Stock
Exchange, The American Stock Exchange, or The Nasdaq National Market)
or U.S. $6.75 (if the Common Shares are not traded on The New York
Stock Exchange, The American Stock Exchange, or The Nasdaq National
Market), then the total maximum number of Common Shares issuable upon
conversion or exchange of all such Convertible Securities shall (as of
the date of the
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issue or sale of such Convertible Securities) be deemed to be
outstanding and to have been issued and sold by the Company for such
price per share. No adjustment of the Warrant Price shall be made upon
the actual issue of such Common Shares upon exercise of the rights to
exchange or convert under such Convertible Securities, except as
otherwise provided in subparagraph (3) below.
(3) If the purchase price provided for in any Options referred to
in subparagraph (1), the additional consideration, if any, payable upon
the conversion or exchange of any Convertible Securities referred to in
subparagraphs (1) or (2), or the rate at which any Convertible
Securities referred to in subparagraph (1) or (2) are convertible into
or exchangeable for Common Shares shall change at any time (other than
under or by reason of provisions designed to protect against dilution
of the type set forth in Section 6.1 (a) or (b)), the Warrant Price in
effect at the time of such change shall forthwith be readjusted to the
Warrant Price which would have been in effect at such time had such
Options or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or conversion rate, as
the case may be, at the time initially granted, issued or sold. If the
purchase price provided for in any Option referred to in subparagraph
(1) or the rate at which any Convertible Securities referred to in
subparagraphs (1) or (2) are convertible into or exchangeable for
Common Shares, shall be reduced at any time under or by reason of
provisions with respect thereto designed to protect against dilution,
then in case of the delivery of Common Shares upon the exercise of any
such Option or upon conversion or exchange of any such Convertible
Security, the Warrant Price then in effect hereunder shall forthwith be
adjusted to such respective amount as would have been obtained had such
Option or Convertible Security never been issued as to such Common
Shares and had adjustments been made upon the issuance of the Common
Shares delivered as aforesaid, but only if as a result of such
adjustment the Warrant Price then in effect hereunder is hereby
reduced.
(4) On the expiration of any Option or the termination of any
right to convert or exchange any Convertible Securities, the Warrant
Price then in effect hereunder shall forthwith be increased to the
Warrant Price which would have been in effect at the time of such
expiration or termination had such Option or Convertible Securities, to
the extent
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outstanding immediately prior to such expiration or termination, never
been issued.
(5) In case any Options shall be issued in connection with the
issue or sale of other securities of the Company, together comprising
one integral transaction in which no specific consideration is
allocated to such Options by the parties thereto, such Options shall be
deemed to have been issued without consideration.
(6) In case any Common Shares, Options or Convertible Securities
shall be issued or sold or deemed to have been issued or sold for cash,
the consideration received therefor shall be deemed to be the amount
received by the Company therefor. In case any Common Shares, Options or
Convertible Securities shall be issued or sold for a consideration
other than cash, the amount of the consideration other than cash
received by the Company shall be the fair value of such consideration
as determined in good faith by the Board of Directors of the Company.
In case any Common Shares, Options or Convertible Securities shall be
issued in connection with any amalgamation in which the Company is an
amalgamating corporation, the amount of consideration therefor shall be
deemed to be the fair value of such portion of the net assets and
business of the other corporation which is a party to the amalgamation
as shall be attributed by the Board of Directors of the Company in good
faith to such Common Shares, Options or Convertible Securities, as the
case may be.
(7) In case the Company shall declare a dividend or make any other
distribution upon the stock of the Company payable in Options or
Convertible Securities, then in such case any Options or Convertible
Securities, as the case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without
consideration.
(8) For purposes of this Section 6.1(a), in case the Company shall
take a record of the holders of its Common Shares for the purpose of
entitling them (x) to receive a dividend or other distribution payable
in Common Shares, Options or in Convertible Securities, or (y) to
subscribe for or purchase Common Shares, Options or Convertible
Securities, then such record date shall be deemed to be the date of the
issue or sale of the Common Shares deemed to have been issued or sold
upon the declaration of such dividend or the making of such other
distribution or the
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date of the granting of such right or subscription or purchase, as the
case may be.
(b) In case the Company shall (i) pay a dividend in Common Shares
or make a distribution in Common Shares or (ii) subdivide its outstanding Common
Shares, the Warrant Price in effect immediately prior to such subdivision or
dividend shall be proportionately reduced by the same ratio as the dividend or
subdivision. In case the Company shall at any time combine its outstanding
Common Shares, the Warrant Price in effect immediately prior to such combination
shall be proportionately increased by the same ratio as the combination. Any
adjustment made pursuant to this subsection 6.1 (b) shall become effective
immediately on the effective date of such event retroactive to the record date,
if any, for such event.
(c) Whenever the number of Common Shares purchasable upon the
exercise of Warrants is adjusted as herein provided, the Company shall cause to
be promptly delivered to the Warrantholder notice of such adjustment and a
certificate of the chief financial officer of the Company setting forth the
number of Common Shares purchasable upon the exercise of the Warrants after such
adjustment, the Warrant Price that will be effective after such adjustment, a
brief statement of the facts requiring such adjustment and the computation by
which such adjustment was made. If such notice relates to an adjustment
resulting from an event referred to in Section 8, such notice shall be included
as part of the notice required to be delivered and published under the
provisions of Section 8 hereof.
6.2. No Adjustment for Dividends. Except as provided in this Section 6,
no adjustment to the Warrants or any provision or condition thereof in respect
of any dividends or distributions out of earnings shall be made during the term
of the Warrants or upon the exercise of Warrants.
6.3. Dividends Not Paid Out of Earnings or Earned Surplus. In the event
the Company shall declare a dividend upon the Common Shares (other than a
dividend payable in Common Shares) payable otherwise than out of earnings or
earned surplus, determined in accordance with generally accepted accounting
principles, including the making of appropriate deductions for minority
interests, if any, in subsidiaries (herein referred to as "Liquidating
Dividends"), then, as soon as possible after the exercise of this Warrant, the
Company shall pay to the person exercising such Warrant an amount equal to the
aggregate value at the time of such exercise of all Liquidating Dividends
(including but not limited to the Common Shares which would have been issued
-14-
at the time of such earlier exercise and all other securities which would have
been issued with respect to such Common Shares by reason of stock splits, stock
dividends, amalgamations or reorganizations, or for any other reason). For the
purposes of this subsection 6.3, a dividend other than in cash shall be
considered payable out of earnings or earned surplus only to the extent that
such earnings or earned surplus are charged an amount equal to the fair value of
such dividend as determined in good faith by the Board of Directors of the
Company.
6.4. Reclassification, Amalgamation, etc. If any capital reorganization
or reclassification of the share capital of the Company, or amalgamation of the
Company with another corporation, or the sale of all or substantially all of its
assets to another corporation shall be effected in such a way that holders of
Common Shares shall be entitled to receive stock, securities, cash or other
property with respect to or in exchange for Common Shares, then, as a condition
of such reorganization, reclassification, amalgamation or sale, lawful and
adequate provision shall be made whereby the Warrantholder shall have the right
to acquire and receive upon exercise of this Warrant such shares of stock,
securities, cash or other property issuable or payable (as part of the
reorganization, reclassification, amalgamation or sale) with respect to or in
exchange for such number of outstanding Shares as would have been received upon
exercise of this Warrant at the Warrant Price then in effect. The Company will
not effect any such amalgamation or sale, unless prior to the consummation
thereof the amalgamated corporation or the corporation purchasing such assets
shall assume by written instrument mailed or delivered to the Warrantholder the
obligation to deliver to such holder such shares of stock, securities or assets
as, in accordance with the foregoing provisions, such holder may be entitled to
purchase. If a purchase, tender or exchange offer is made to and accepted by the
holders of more than 50% of the outstanding Common Shares of the Company, the
Company shall not effect any amalgamation or sale with the person having made
such offer or with any Affiliate of such person, unless prior to the
consummation of such amalgamation or sale the Warrantholder shall have been
given a reasonable opportunity to then elect to receive upon the exercise of
this Warrant either the stock, securities or assets then issuable with respect
to the Common Shares of the Company or the stock, securities or assets, or the
equivalent, issued to previous holders of the Common Shares in accordance with
such offer. For purposes hereof the term "Affiliate" with respect to any given
person shall mean any person controlling, controlled by or under common control
with the given person. In the event of a
-15-
merger described in Section 368(a)(2)(E) of the Internal Revenue Code of 1986
(or any successor provision), in which the Company is the surviving corporation,
the right to purchase Shares upon exercise of the Warrants shall terminate on
the date of such merger and thereupon the Warrants shall become null and void,
but only if the controlling corporation (after such event) shall agree to
substitute for the Warrants its warrants entitling the Warrantholder to purchase
the kind and amount of shares and other securities and property which it would
have been entitled to receive had the Warrants been exercised immediately prior
to such merger. Any such agreements referred to in this subsection 6.3 shall
provide for adjustments, which shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 6, and shall contain
substantially the same terms, conditions and provisions as are contained herein
immediately prior to such event. The provisions of this subsection 6.4 shall
similarly apply to successive amalgamations, sales or conveyances.
6.5. No Adjustment for Exercise of Certain Options, Warrants, Etc. The
provisions of this Section 6 shall not apply to any Common Shares issued,
issuable or deemed outstanding under subparagraphs 6.1(a)(1) to (8) inclusive:
(i) to any person pursuant to any stock option, stock purchase or similar plan
or arrangement for the benefit of employees, consultants or directors of the
Company or its subsidiaries in effect on the date hereof or hereafter adopted by
the Board of Directors of the Company, or (ii) pursuant to options, warrants and
conversion rights in existence on the date hereof, including the Convertible
Shares.
6.6. Grant Issue or Sale of Options, Convertible Securities, or Rights.
If at any time or from time to time on or after the date of this Agreement, the
Company shall grant, issue or sell any Options, Convertible Securities or rights
to purchase property (the "Purchase Rights") pro rata to the record holders of
any class of share capital of the Company and such grants, issuances or sales do
not result in an adjustment of the Warrant Price under Section 6.1(a) hereof,
then the Warrantholder shall be entitled to acquire (within thirty (30) days
after the later to occur of the initial exercise date of such Purchase Rights or
receipt by the Warrantholder of the notice concerning Purchase Rights to which
the Warrantholder shall be entitled under Section 8) and upon the terms
applicable to such Purchase Rights either:
(a) the aggregate Purchase Rights which the Warrantholder could
have acquired if it had held the number of Shares acquirable upon
exercise of this Warrant
-16-
immediately before the grant issuance or sale of such Purchase Rights;
provided that if any Purchase Rights were distributed to the
Warrantholder of Common Shares without the payment of additional
consideration by such holders, corresponding Purchase Rights shall be
distributed to the Warrantholder as soon as possible after exercise of
this Warrant and it shall not be necessary for the Warrantholder
specifically to request delivery of such rights; or
(b) in the event that any such Purchase Rights shall have expired
or shall expire prior to the end of said thirty (30) day period, the
number of Shares or the amount of property which the Warrantholder
could have acquired upon such exercise at the time or times at which
the Company granted, issued or sold such expired Purchase Rights.
6.7. Nominal Value of Common Shares. Before taking any action which
would cause an adjustment effectively reducing the portion of the Warrant Price
allocable to each Share below the then nominal value per Share issuable upon
exercise of the Warrants, the Company will take any corporate action which may,
in the opinion of its counsel, be necessary in order that the Company may
validly and legally issue fully paid and nonassessable Shares upon exercise of
the Warrants.
6.8. Independent Public Accountants. The Company may retain a firm of
independent public accountants of recognized national standing in the United
States (which may be any such firm regularly employed by the Company) to make
any computation required under this Section.
6.9. Statement on Warrant Certificates. Irrespective of any adjustments
in the number of securities issuable upon exercise of Warrants, Warrant
certificates theretofore or thereafter issued may continue to express the same
number of securities as are stated in the similar Warrant certificates initially
issuable pursuant to this Agreement. However, the Company may, at any time in
its reasonable discretion, make any change in the form of Warrant certificate
that it may deem appropriate and that does not affect the substance thereof; and
any Warrant certificate hereafter issued, whether upon registration of transfer
of, or in exchange or substitution for, an outstanding Warrant certificate, may
be in the form so changed.
6.10. Adjustment by Board of Directors. If any event occurs as to
which, in the opinion of the Board of Directors of the Company, the provisions
of this Section 6 are not strictly
-17-
applicable or if strictly applicable would not fairly protect the rights of the
Warrantholder in accordance with the essential intent and principles of such
provisions, then the Board of Directors shall make an adjustment in the
application of such provisions, in accordance with such essential intent and
principles, so as to protect such rights as aforesaid, but in no event shall any
adjustment have the effect of increasing the Warrant Price as otherwise
determined pursuant to any of the provisions of this Section 6 except in the
case of a combination of shares of a type contemplated in Section 6.1(a) and
then in no event to an amount larger than the Warrant Price as adjusted pursuant
to Section 6.1(a).
Section 7. Fractional Interests. The Company shall not issue fractional
Common Shares upon any exercise of any Warrants. If any fraction of a Common
Share would, except for the provisions of this Section 7, be issuable on the
exercise of any Warrants, the Company shall pay an amount in cash equal to the
Market Price (as defined in Section 2(b) hereof, except if the Common Shares are
not publicly traded, as determined in good faith by the Board of Directors of
the Company) multiplied by such fraction, provided, however, that no amount
shall be paid by the Company of less than U.S. $5.00.
Section 8. No Rights as Shareholder, Notices to Warrantholder. Nothing
contained in this Agreement or in the Warrants shall be construed as conferring
upon the Warrantholder any rights as a shareholder of the Company, including
(without limitation) the right to vote, receive dividends, consent or receive
notices as a shareholder in respect of any meeting of shareholders for the
election of directors of the Company or any other matter, except as provided
herein. If, however, at any time prior to the expiration of the Warrants and
prior to their exercise in full, any one or more of the following events shall
occur:
(a) any action which would require an adjustment pursuant to
Section 6.1 or 6.3; or
(b) the Company shall declare any cash dividend upon its Common
Shares; or
(c) the Company shall declare any dividend upon its Common Shares
payable in stock or make any special dividend or other distribution to
the holders of its Common Shares; or
-18-
(d) the Company shall offer Purchase Rights to the holders of its
Common Shares; or
(e) there shall be any capital reorganization or reclassification
of the share capital of the Company, including any subdivision or
combination of its outstanding Common Shares, or amalgamation of the
Company with, or sale of all or substantially all of its assets to,
another corporation; or
(f) there shall be a dissolution, liquidation or winding up of the
Company (other than in connection with an amalgamation or sale of its
property, assets and business as an entirety or substantially as an
entirety);
then the Company shall give notice in writing of such event to the
Warrantholder, as provided in Section 10 hereof, at least 20 days prior to (i)
the date fixed as a record date or the date of closing the transfer books for
the determination of the shareholders entitled to any relevant dividend,
distribution, Purchase Rights or other rights or for the determination of
shareholders entitled to vote on such proposed reorganization, reclassification,
amalgamation, sale, dissolution, liquidation or winding up and (ii) the date
when any such reorganization, reclassification, amalgamation, sale, dissolution,
liquidation or winding up shall take place. Such notice in accordance with the
foregoing clause (i) shall also specify, in the case of any such dividend,
distribution or Purchase Rights, the date on which the holders of Common Shares
shall be entitled thereto, and such notice in accordance with the foregoing
clause (ii) shall also specify the date on which the holders of Common Shares
shall be entitled to exchange their Common Shares for securities or other
property deliverable upon such reorganization, reclassification, amalgamation,
sale, dissolution, liquidation or winding up, as the case may be.
Section 9. No Dilution or Impairment. The Company will not, by
amendment of its charter or through reorganization, amalgamation, dissolution,
sale of assets or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the Warrantholder against dilution or other impairment. Without
limiting the generality of the foregoing, the Company will not increase the par
value of any shares receivable upon the exercise of this Warrant above the
amount payable therefor upon such exercise, and at all times will
-19-
take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and non-assessable shares upon
the exercise of this Warrant.
Section 10. Notices. Any notice hereunder shall be in writing and shall
be effective when delivered in person or by facsimile transmission, or seven
business days after being mailed by certified or registered mail, postage
prepaid, return receipt requested, to the appropriate party at the following
addresses:
If to the Warrantholder:
Warburg Pincus Ventures, L.P.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Facsimile: 000-000-0000
Attention: Xx. Xxxx Xxxxxxxx
with a copy to:
Xxxxxxx Xxxx & Xxxxxxxxx
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Facsimile: 000-000-0000
Attention: Xxxxxx X. Xxxxxxx, Esq.
If to the Company:
Sonus Corp.
000 XX Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxx 00000
Facsimile: 000-000-0000
Attention: Xx. Xxxxxxx X. Xxxxxx
with copy to:
Sonus Corp.
000 XX Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxx 00000
Facsimile: 000-000-0000
Attention: Xxxxx Xxxxxxxx, Esq.
or, in each case, to such other address as the parties may hereinafter designate
by like notice.
Section 11. Successors. All the covenants and provisions of this
Agreement for the benefit of the Warrantholder or the Company shall bind and
inure to the benefit of their successors
-20-
and, in the case of the Warrantholder, permitted assigns. This Agreement shall
not be assignable by the Company.
Section 12. Amalgamation of the Company. The Company shall not
amalgamate with any other corporation or sell all or substantially all of its
property to another corporation, unless the provisions of Section 6.4 are
complied with.
Section 13. Remedies. The Company stipulates that the remedies at law
of the Warrantholder in the event of any default by the Company in the
performance of or compliance with any of the terms of this Warrant are not and
will not be adequate, and that the same may be specifically enforced.
Section 14. Subdivisions of Rights. The Warrants (as well as any new
warrants issued pursuant to the provisions of this Section) are exchangeable,
upon the surrender hereof by the Warrantholder at the principal office of the
Company for any number of new warrants of like tenor and date representing in
the aggregate the right to subscribe for and purchase the number of Shares which
may be subscribed for and purchased hereunder.
Section 15. Applicable Law, Submission to Jurisdiction. This Agreement
shall be deemed to be a contract made under the laws of the State of New York
and for all purposes shall be construed in accordance with the internal laws of
said State (without reference to its rules as to conflicts of laws). The Company
hereby agrees to the non-exclusive jurisdiction of the courts of the State of
New York or the federal courts sitting in the City of New York in connection
with any action arising out of this Agreement.
Section 16. Benefits of this Agreement. Except as provided in Section
1.2 and Section 11, nothing in this Agreement shall be construed to give to any
person or corporation other than the Company and the Warrantholder any legal or
equitable right, remedy or claim under this Agreement. Except as provided in
Section 1.2 and Section 11, this Agreement shall be for the sole and exclusive
benefit of the Company and the Warrantholder.
-21-
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed, all as of the date and year first above written.
SONUS CORP.
By: /s/ Xxxxxxx X. Xxxxxx
Name: Xxxxxxx X. Xxxxxx
Title: Chairman and Chief Executive Officer
WARBURG, XXXXXX VENTURES, L.P.
By: Warburg, Xxxxxx & Co.,
General Partner
By: Authorized Signature
Name:
Title:
-22-
EXHIBIT 1
[FORM OF WARRANT CERTIFICATE]
"THE WARRANTS REPRESENTED BY THIS CERTIFICATE, AND THE COMMON SHARES
ISSUABLE UPON EXERCISE OF SUCH WARRANTS, HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY
STATE OF THE UNITED STATES OR ANY PROVINCE OF CANADA. SUCH WARRANTS MAY
NOT BE SOLD, OFFERED FOR SALE, ASSIGNED, EXCHANGED, PLEDGED OR
HYPOTHECATED OR OTHERWISE TRANSFERRED, IN ANY MANNER, AND SUCH COMMON
SHARES MAY NOT BE OFFERED FOR SALE, SOLD, PLEDGED OR HYPOTHECATED OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN OPINION OF
COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY, THAT AN EXEMPTION FROM
SUCH REGISTRATION IS AVAILABLE." THE WARRANTS REPRESENTED BY THIS
CERTIFICATE MAY NOT BE TRADED IN CANADA EXCEPT AS PERMITTED BY RELEVANT
CANADIAN SECURITIES LAWS.
AMENDED AND RESTATED
WARRANT CERTIFICATE NO. W-1
SONUS CORP.
(ORGANIZED UNDER THE LAWS
OF YUKON TERRITORY)
October 1, 1999
WARRANTS TO PURCHASE COMMON SHARES
This certifies that, for value received, Warburg, Xxxxxx Ventures, L.P.
(the "Warrantholder") is the registered owner of 2,000,000 warrants (the
"Warrants") each to purchase from Sonus Corp. (the "Company"), at any time prior
to 5:00 p.m., Pacific Time, on October 1, 2004, one common share of the Company,
without par value (a "Common Share") at a purchase price per Common Share (the
"Warrant Price"), equal to U.S. $6.75, provided that if the Series A Amendment
Filing Date has not occurred on or prior to March 31, 2000, then from and after
March 31, 2000, the Warrant Price shall equal U.S. $4.00. The Warrants are
subject
-1-
to, and the Warrantholder, by acceptance of this certificate, consents to, all
the terms and provisions of, the Amended and Restated Warrant Agreement dated as
of October 1, 1999, between the Warrantholder and the Company (the "Warrant
Agreement"). Any capitalized terms used herein and not defined herein shall have
the meanings assigned to such terms in the Warrant Agreement.
The Warrants evidenced hereby may be exercised in whole or in part by
presentation of this Warrant Certificate with the Purchase Form herein duly
executed (with a signature guarantee as provided therein), and simultaneous
payment of the Warrant Price for each Warrant exercised, at the principal office
of the Company. Payment of such price shall be made at the option of the
Warrantholder in cash by certified or official bank check or by wire transfer.
Subject to the terms and conditions set forth in Section 2 of the Warrant
Agreement, the Warrantholder may also receive Common Shares without any cash
payment by presentation of this Warrant Certificate with the Cashless Exercise
Form herein duly executed (with a signature guarantee as provided therein) at
the principal office of the Company.
Upon any partial exercise of the Warrants evidenced hereby, there shall
be signed and issued to the Warrantholder a new Warrant Certificate in respect
of the Common Shares as to which the Warrants evidenced hereby shall not have
been exercised. These Warrants may be exchanged at the office of the Company by
surrender of this Warrant Certificate properly endorsed for one or more new
Warrants of the same aggregate number of Common Shares as here evidenced by the
Warrant or Warrants exchanged. No fractional Common Shares will be issued upon
the exercise of rights to purchase hereunder, but the Company shall pay the cash
value of any fraction otherwise issuable upon the exercise of one or more
Warrants, as provided in the Warrant Agreement.
The Warrants evidenced hereby are transferable only in accordance with
the terms and conditions set forth in Section 1.2 of the Warrant Agreement.
This Warrant Certificate does not entitle the Warrantholder to any of
the rights of a shareholder of the Company.
-2-
SONUS CORP.
By: /s/ Xxxxxxx X. Xxxxxx
Title: Chairman and Chief Executive Officer
ATTEST:
/s/ Xxxxx X. Xxxxxxxx
Title: Secretary
Dated: October 1, 1999
EXHIBIT 2
PURCHASE FORM
Sonus Corp.
000 XX Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxx 00000
Pursuant to Section 2(a) of the Warrant Agreement, as amended, the
undersigned hereby irrevocably elects to exercise the right of purchase
represented by this Warrant Certificate for, and to purchase thereunder, ------
common shares of the Company (the "Common Shares"), and requests that
certificates for such Common Shares be issued in the name of:
Warburg, Xxxxxx Ventures, L.P.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Taxpayer Identification Number: -------------------
If this Warrant Certificate is hereby being exercised with respect to fewer than
all the Common Shares specified herein, please issue a new Warrant Certificate
for the unexercised balance of the Warrants, registered in the name of the
undersigned Warrantholder as below indicated and delivered to the address stated
below.
Dated:-----------------------
Name of Warrantholder:
Warburg, Xxxxxx Ventures, L.P.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
By: Warburg, Xxxxxx & Co.
General Partner
By:---------------------
Name:
Title:
EXHIBIT 3
CASHLESS EXERCISE FORM
Sonus Corp.
000 XX Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxx, Xxxxxx 00000
Pursuant to Section 2(b) of the Warrant Agreement, the undersigned
hereby irrevocably elects to exercise the right represented by this Warrant
Certificate for, and to receive thereunder, without any cash payment, --------
common shares of the Company (the "Common Shares") as provided for therein, and
requests that certificates for such Common Shares be issued in the name of:
Warburg, Xxxxxx Ventures, L.P.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
Taxpayer Identification Number: ------------------
If this Warrant Certificate is hereby being exercised with respect to fewer than
all the Common Shares specified herein, please issue a new Warrant Certificate
for the unexercised balance of the Warrants, registered in the name of the
undersigned Warrantholder as below indicated and delivered to the address stated
below.
Dated:-----------------------
Name of Warrantholder:
Warburg, Xxxxxx Ventures, L.P.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000-0000
By: Warburg, Xxxxxx & Co.
General Partner
By:---------------------
Print Name:
Title:
EXHIBIT 4
FORM OF OPINION OF XXXXX & COMPANY
