EXHIBIT 4.12
WARRANT AGREEMENT
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WARRANT AGREEMENT, dated April 18, 2000, between Convergent
Communications, Inc., a Colorado corporation (the "Corporation"), and each of
the entities named on Exhibit A hereto (each, a "Purchaser" and collectively,
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the "Purchasers").
The Corporation and the Purchasers have entered into a certain Securities
Purchase Agreement, dated as of April 4, 2000, pursuant to which each Purchaser
is purchasing from the Corporation certain warrants issued by the Corporation in
two series, the Series A Warrants and the Series B Warrants, that are
convertible into or exercisable for shares of the Corporation's common stock.
The Corporation and the Purchasers intend for this document to set forth the
terms of such warrants.
In consideration of the premises and the covenants and agreement herein
contained, in order to induce the Purchasers to enter into such Securities
Purchase Agreement and consummate the transactions contemplated thereby and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto, intending to be legally bound, hereby
agree as follows.
ARTICLE I
DEFINITIONS
Section 1.1 As used in this Agreement, the following terms have the
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meanings indicated:
"Additional Shares of Common Stock" means any shares of Common Stock issued
or deemed to be issued by the Corporation after the Closing Time (other than
shares issued upon conversion of any Series B Share or exercise of any Warrant).
"Affiliate" has the meaning set forth in Rule 12b-2 of the regulations
promulgated under the Exchange Act. The term "affiliated" (whether or not
capitalized) shall have a correlative meaning. For purposes hereof, neither the
Corporation nor any Subsidiary shall be deemed to be an Affiliate of any
Purchaser and no Purchaser nor any Affiliate of any Purchaser shall be deemed to
be an Affiliate of the Corporation.
"Agreement" means this Warrant Agreement, as amended from time to time in
accordance with the terms hereof.
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"Beneficial Owner" means a beneficial owner within the meaning of Rules
13d-3 and 13d-5 under the Exchange Act, as interpreted by the Commission,
provided that a Person shall be deemed to have beneficial ownership of all
securities that such Person has a right to acquire without regard to the 60 day
limitation in subdivision (d)(i) of such Rule 13d-3. The terms (whether or not
capitalized) "beneficially own" and "owned beneficially" shall have correlative
meanings.
"Board" means the Board of Directors of the Corporation.
"Business Day" means any day other than a Saturday, a Sunday or a day on
which banking institutions in either New York, New York, or the city and state
in which the principal executive offices of the Corporation within the United
States are located are authorized or obligated by law or executive order to
close.
"capital stock" when used with respect to any corporation means (unless the
context otherwise indicates) any and all shares of capital stock (however
designated) of such corporation, including each class and series of common stock
and preferred stock of such corporation, any class or series, any and all stock
appreciation rights and any and all equivalents of any of the foregoing, and
including any security or interest convertible into or warrant, option or other
right (absolute or contingent) to subscribe for, purchase or otherwise acquire
any of the foregoing, in each case whether or not evidenced by any certificate,
instrument or other document and whether voting or nonvoting.
"Change of Control" has the meaning set forth in Section 101 of the
Indenture. The definition of such term, together with the definitions of all
capitalized terms used therein that are also defined in the Indenture, are
hereby incorporated herein by reference.
"Closing Date" means the date of the closing of the consummation of the
issuance of Series B Shares to the Purchasers pursuant to the Purchase
Agreement.
"Closing Time" means 10:00 A.M., New York City time, on the Closing Date.
"Commission" means the Securities and Exchange Commission or any successor
federal agency administering the Securities Act.
"Common Stock" means the Common Stock, no par value, of the Corporation as
constituted on the Closing Date, and any capital stock into which such Common
Stock may thereafter be changed, and (except where the context otherwise
requires) shall also include (i) capital stock of the
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Corporation of each and every other class or series (regardless of how
denominated) which is also not preferred as to dividends or assets on
liquidation over any other class or series of stock of the Corporation and which
is not subject to redemption and (ii) shares of common stock of any successor or
acquiring corporation (as defined in Section 3.13) received by or distributed to
the holders of Common Stock of the Corporation in the circumstances contemplated
by Section 3.13.
"Convertible Securities" means evidences of indebtedness, shares of stock
or other securities or obligations (except the Series B Preferred Stock and the
Warrants) that are convertible into or exchangeable, with or without payment of
additional consideration in cash or property, for any Common Stock, either
immediately or upon the occurrence of a specified date or a specified event or
the satisfaction or happening of any other condition or contingency.
"Corporation Parties" means the Corporation and its Subsidiaries.
"Current Market Price" means, in respect of any share of Common Stock as of
any date, the average of the reported last sales prices for the ten consecutive
Trading Days commencing twenty Trading Days before the date in question. The
reported last sales price for each Trading Day shall be the reported last sales
price, regular way, as reported on the National Market tier of The Nasdaq Stock
Market (or, if the Common Stock shall be traded principally through the
facilities of a national securities exchange other than The Nasdaq Stock Market,
such national securities exchange). As used herein, the term "Trading Day"
means a day on which The Nasdaq Stock Market (or such other national securities
exchange) is open for business, provided that if no sales of the Common Stock
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take place on such day on the relevant exchange or stock market determined under
the immediately preceding sentence, such day shall not be a Trading Day. In
case any event that would require an adjustment to the Warrant Price pursuant to
Article III occurs with an "ex" date or an effective date occurring during the
foregoing ten Trading Day period, the last sales prices used in determining the
Current Market Price shall be appropriately adjusted to take such event into
account.
"Election to Convert" is defined in Section 2.3.
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"Election to Exercise" is defined in Section 2.2.
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"Employee Option" means any option to purchase Common Stock for cash which
is granted by or with the approval of the Board to any director, officer,
employee or consultant of the Corporation or any subsidiary of the Corporation
pursuant to (i) the Corporation's stock option plans disclosed in a schedule to
the Purchase Agreement and as in effect on the Closing Date or (ii) any other
option plan adopted by the Corporation after the Closing Date with the prior
approval of the Majority Holders or the Series B Directors (collectively, the
"Stock Option Plans").
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"Entity" means any corporation, limited liability company, general or
limited partnership, joint venture, association, joint stock company, trust,
other unincorporated business or organization or other Person which is not
either a natural person or a governmental authority or agency.
An "equity interest" in or of any Entity includes any capital stock or
other equity security issued by such Entity, any partnership (general or
limited) or joint venture interest in such Entity, any other equity, ownership,
participating or beneficial interest in such Entity, any stock appreciation or
other equity appreciation right with respect to such Entity, and any equivalent
of any of the foregoing, regardless of how denominated and whether voting or
non-voting, and any security or interest convertible into or warrant, option or
other right (absolute or contingent) to subscribe for, purchase or otherwise
acquire, any of the foregoing, in each case whether or not evidenced by any
certificate, instrument or other document and whether voting or nonvoting.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Existing Rights" means all Rights (including stock options issued pursuant
to the Corporation's Stock Option Plans) and Convertible Securities, not
including any Series B Shares or Warrants, which were outstanding, or which the
Corporation had agreed to issue, at the Closing Time and disclosed on a schedule
to the Purchase Agreement.
"Fair Market Value" means, in respect of any security, asset or other
property, the price at which a willing seller would sell and a willing buyer
would buy such security, asset or other property having full knowledge of the
facts, in an arm's-length transaction without time constraints, and without
being under any compulsion to buy or sell. The Fair Market Value of a share of
Common Stock as of any time shall be equal to the Current Market Price in effect
at the time of determination. The Fair Market Value of the Corporation shall be
determined on a going concern basis, and on the basis that the management and
other key employees of the Corporation and its subsidiaries will continue to be
employed indefinitely and without treating as liabilities the amount, if any,
payable or which may be payable by the Corporation pursuant to the
indemnification provisions of the Purchase Agreement.
"HSR Act" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder.
"Indenture" means the Indenture, dated as of April 2, 1998, between the
Corporation and Norwest Bank Colorado, N.A., a national banking association, as
Trustee, as in effect at the Closing Time, regardless of any subsequent
amendment, modification, termination or expiration thereof.
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"Investor Rights Agreement" means the Investor Rights Agreement, dated as
of the Closing Date, among the Corporation and the Purchasers, as it may be
further amended from time to time in accordance with its terms.
"Majority Holders" means, as of any time, the holders of a majority of the
Warrants then outstanding.
"Outstanding Common Shares" means, as of any time, all issued and
outstanding shares of Common Stock as of such time, except shares then owned or
held by or for the account of the Corporation or any subsidiary thereof.
Outstanding Common Shares shall not include any shares issuable upon exercise,
conversion or exchange of any Rights or Convertible Securities or issuable in
payment of any dividend or other distribution which has been declared but not
actually paid, nor any other shares which have not actually been issued.
"Permitted Holders" has the meaning set forth in Section 101 of the
Indenture. The definition of such term, together with the definitions of all
capitalized terms used therein that are also defined in the Indenture are hereby
incorporated herein by reference.
"Person" means any individual, corporation, limited liability company,
general or limited partnership, joint venture, association, joint stock company,
trust, unincorporated business or organization, government or agency or
political subdivision thereof, or other entity, whether acting in an individual,
fiduciary or other capacity.
"Purchase Agreement" means the Securities Purchase Agreement, dated as of
April 4, 2000, between the Corporation and the Purchasers, as the same may be
amended from time to time in accordance with its terms and with the prior
written consent of the Majority Holders.
"Purchaser" means each of TPG, Sandler Capital and their respective
Affiliates and permitted assignees under the Purchase Agreement.
"Redeemable Stock" has the meaning set forth in Section 3.2(b).
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"Reference Price" means, as of any time, the higher of (x) one-half of the
Warrant Price then in effect or (y) the Current Market Price per share of the
Common Stock determined as of such time.
"Reorganization Event" has the meaning assigned to it in the Series B
Articles of Amendment.
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"Rights" means (i) any Convertible Securities and (ii) any options,
warrants or other rights (except Convertible Securities, the Series B Preferred
Stock and the Warrants), however denominated, to subscribe for, purchase or
otherwise acquire any Common Stock or Convertible Securities, with or without
payment of additional consideration in cash or property, either immediately or
upon the occurrence of a specified date or a specified event or the satisfaction
or happening of any other condition or contingency.
"Sale of the Company" means any of the following:
(i) any Change of Control; or
(ii) the Corporation consolidates with, or merges with or into,
another Person, directly or indirectly sells, assigns, conveys, transfers,
leases or otherwise disposes of all or substantially all of its assets to any
Person, or any Person consolidates with, or merges with or into, the Corporation
or any Subsidiary of the Corporation, in any such event pursuant to a
transaction in which the outstanding Common Stock of the Corporation is
converted into or exchanged for cash, securities, equity interests or other
property and immediately after such transaction the Persons who were the
Beneficial Owners of the outstanding Common Stock of the Corporation immediately
prior to such transaction are not the beneficial owners, directly or indirectly,
of more than 50% of the combined voting power represented by all then
outstanding common stock of the surviving or transferee Person; or
(iii) the Corporation or any of its Subsidiaries purchase, lease or
otherwise acquire assets of any Person or Persons, in one or a series of related
transactions, for consideration consisting in whole or in part of Common Stock,
Convertible Securities or Rights and the number of shares of Common Stock issued
by the Corporation (including all shares issuable or purchasable upon exercise
of all such Convertible Securities and Rights) in such transaction is equal to
50% or more of the number of fully diluted shares of Common Stock outstanding
immediately prior to such transaction (or the first of such series of
transactions); or
(iv) any Reorganization Event.
"Sandler Capital" means Sandler Capital Partners IV, L.P. and its
Affiliates.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations of the Commission thereunder.
"Series B Articles of Amendment" means the Articles of Amendment to the
Amended and Restated Articles of Incorporation of the Corporation setting forth
the resolution of the Board
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creating and authorizing the issuance of the Series B Preferred Stock and filed
with the Colorado Secretary of State pursuant to the Colorado Business
Corporation Act or any successor provisions of the Corporation's Articles of
Incorporation, as the same may have been amended prior to or concurrently with
the Closing Time and thereafter may be amended.
"Series B Director" has the meaning assigned to it in the Series B Articles
of Amendment.
"Series B Preferred Stock" means the Series B Senior Cumulative Convertible
Preferred Stock, no par value, of the Corporation as constituted on the Closing
Date, and any capital stock into which such Preferred Stock may thereafter be
changed (otherwise than upon conversion thereof).
"Series B Share" means any issued and outstanding share of Series B
Preferred Stock. In no event shall shares of Series B Preferred Stock owned or
held by or for the account of the Corporation or any subsidiary thereof be
deemed to be issued and outstanding for any purpose.
"TPG" means TPG Partners III, L.P. and its Affiliates.
"Warrant Certificate" means a certificate, substantially in the form
attached hereto, evidencing one or more Warrants.
"Warrant Price" means, as of any time and with respect to any Warrant, the
price payable upon exercise of such Warrant, in whole or in part, for one share
of Common Stock, which price shall be: (i) for the Series A Warrants, the
initial price of Twenty Dollars ($20) per share of Common Stock; and (ii) for
the Series B Warrants, the initial price of Twenty-Five Dollars ($25) per share
of Common Stock, in each case as such initial prices shall have from time to
time been cumulatively adjusted pursuant to Article III through such time.
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"Warrant Securities" means, with respect to any Warrant at any time, each
class and series of Warrant Stock, each class, series and issue of any other
securities, and any Rights with respect to any of such Warrant Stock or other
securities, any shares, number or other amount of which at such time are
deliverable to a holder of any Warrant upon exercise of such Warrant.
"Warrant Stock" means, with respect to any Warrant at any time, the Common
Stock, each other class or series of capital stock and any Rights or Convertible
Securities with respect to any of the foregoing any shares, number or other
amount of which at such time is deliverable to a holder of any Warrant upon
exercise of such Warrant.
"Warrants" means collectively, the Series A Warrants and the Series B
Warrants.
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"Warrantholder" means the holder of any Warrant or Warrants.
Section 1.2 Terms Generally; Certain Rules of Construction. This Agreement
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is to be interpreted in accordance with the following rules of construction:
(i) Number and Gender. All definitions of terms apply equally to both
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the singular and plural forms of the terms defined. Whenever the text
may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms.
(ii) "Including," "Herein," Etc. The words "include," "includes" and
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"including" are deemed to be followed by the phrase "without
limitation". The words "herein", "hereof", and "hereunder" and words
of similar import refer to this Agreement (including all Exhibits and
Schedules) in its entirety and are not limited to any part hereof
unless the context shall otherwise require. The word "or" is not
exclusive and means "and/or."
(iii) Subdivisions and Attachments. All references in this Agreement to
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Articles, Sections, subsections, Exhibits and Schedules are,
respectively, references to Articles, Sections and subsections of,
and Exhibits and Schedules attached to, this Agreement, unless
otherwise specified.
(iv) References to Documents and Laws. Except as expressly provided
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herein, all references to (x) any other agreement or instrument or
(y) any law, statute, rule, regulation, permit, license or similar
item are to it as amended and supplemented from time to time (and, in
the case of a law, statute, rule or regulation, to any corresponding
provisions of successor laws, statutes, rules or regulations).
(v) References to Days. Any reference in this Agreement to a "day" or
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number of "days" (without the explicit qualification "Business") is a
reference to a calendar day or number of calendar days. If any action
or notice is to be taken or given on or by a particular calendar day,
and such calendar day is not a Business Day, then such action or
notice may be taken or given on the next Business Day.
(vi) Examples. If, in any provision of this Agreement, any example is
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given (through the use of the words "such as," "for example," "e.g."
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or otherwise) of the meaning, intent or operation of any provision,
such example is intended to be illustrative only and not exclusive or
limiting.
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(vii) Participation in Drafting. The parties and their respective legal
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counsel have participated in the drafting of this Agreement, and this
Agreement will be construed simply and according to its fair meaning
and not strictly for or against any party.
(viii) Headings. The table of contents and section headings contained in
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this Agreement are inserted for convenience only and shall not affect
in any way the meaning or interpretation of this Agreement.
(ix) "Exercise". When used with reference to any Series B Share, Warrant,
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Convertible Security or Right, the term "exercise" shall mean the
exercise of the right to exchange or convert such Series B Share,
Warrant, Convertible Security or Right for or into, subscribe for,
purchase or otherwise acquire shares of Common Stock or other
underlying securities represented by such Series B Share, Warrant,
Convertible Security or Right, including an exercise, conversion or
exchange of a Warrant pursuant to Section 2.2, 2.3 or 2.4. Variants
of such word (including "exercised" and "exercisable") shall have
correlative meanings.
(x) "Issue" and "Property". Whenever used with respect to any Additional
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Share of Common Stock or any other share of Common Stock, the word
"issue" includes any issuance, sale or other method of transfer or
delivery of such share, whether such share is newly issued or is a
treasury share and variants of such word (including "issued",
"issuance" or "issuable") used with respect to any Additional Share
of Common Stock or any other share of Common Stock shall have
correlative meanings; therefore, any provision of this Agreement
which is stated to be applicable if the Corporation issues or shall
issue any share is applicable both to a newly issued share and to a
treasury share sold or otherwise transferred or delivered. The word
"property" shall include assets or property of any kind, real,
personal, tangible or intangible.
ARTICLE II
EXERCISE OF WARRANTS
Section 2.1 Exercise of Warrants. Any Warrant or Warrants may be
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exercised, in whole or in part, as provided in this Article II at any time and
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from time to time during the period of five consecutive years beginning on the
Closing Date.
Section 2.2 Mechanics of Exercise. Subject to Section 2.3 and Section
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2.4, any Warrant or Warrants may be exercised by any Warrantholder, at any time
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and from time to time and in whole
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or in part, upon delivery to the Corporation at its principal executive offices
within the United States or at another office or agency designated by the
Corporation pursuant to Section 4.3, of the Warrant Certificate(s) evidencing
the Warrant(s) to be exercised, together with the form of election to purchase
(the "Election to Purchase") substantially in the form annexed to this Agreement
duly completed and signed by such Warrantholder or by such Warrantholder's duly
appointed legal representative or attorney-in-fact, and payment in full to the
Corporation of the aggregate Warrant Price with respect to each Warrant
exercised. Payment of the aggregate Warrant Price for the Warrant(s) exercised
shall be made in cash, by bank wire transfer or by check payable to the order of
the Corporation. Unless such Warrantholder is a Purchaser, if such payment is
made by check, such check shall be certified or an official bank check. Subject
to Section 2.7, any Warrant (or portion thereof) exercised shall be deemed to
have been exercised immediately prior to the close of business on the day of
delivery of the last to be delivered of such items.
Section 2.3 Conversion In Lieu of Exercise. Any Warrantholder, in its
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sole discretion may elect, in lieu of the exercise of any Warrant held by such
Warrantholder or any portion thereof in accordance with Section 2.2, to convert
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such Warrant or portion thereof into
(i) the nearest whole number of shares of Common Stock equal to the
quotient obtained by dividing "A" by "B" where
"A" is the product of (x) the number of shares of Common Stock then
issuable if such Warrant (or portion thereof) were exercised on the
date of conversion and (y) the excess, if any, of (1) the Current
Market Price per share of Common Stock as of the date of conversion
over (2) the Warrant Price in effect on the date of conversion, and
"B" is the Current Market Price per share of Common Stock as of the
date of conversion, and
(ii) the kind and amount of cash, other securities and other property, if
any, to which such Warrantholder would be entitled upon an exercise of
such Warrant or portion thereof.
The conversion right provided for in this Section 2.3 may be exercised in whole
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or in part and at any time and from time to time while any Warrant or any
portion of any Warrant is outstanding. The conversion right may be exercised by
any Warrantholder in whole or in part upon delivery to the Corporation at its
principal executive offices within the United States or at another office or
agency designated by the Corporation pursuant to Section 4.3 of the Warrant
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Certificate(s) evidencing the Warrant(s) to be converted, together with a form
of election to convert (the "Election to Convert")
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substantially in the form attached to this Agreement duly completed and signed
by such Warrantholder or by such Warrantholder's duly appointed legal
representative or attorney-in-fact. Any Warrant (or portion thereof) converted
shall be deemed to have been converted immediately prior to the close of
business on the day of surrender of such Warrant for conversion in accordance
with the foregoing.
Section 2.4 Exchange of Warrants In a Recapitalization. The Corporation,
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with the prior written consent of the holders of a majority of the Warrants then
outstanding, may elect to effect a partial recapitalization of the Corporation
pursuant to which all or a portion of the Warrants then outstanding are
exchanged, on a per Warrant basis, into the number of shares of Common Stock and
the kind and amount of cash, other securities and other property, if any, into
which a Warrant could be converted pursuant to Section 2.3 as of the date of
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such recapitalization. Any such exchange of less than all outstanding Warrants
will be made on a pro rata basis, and shall be effective (subject to Section
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2.7) on such date as may be determined by the Corporation with the consent of
the Majority Holders.
Section 2.5 Delivery of Warrant Securities. As promptly as practicable
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after exercise, conversion or exchange of any Warrant (or portion thereof) as
provided in Section 2.2, 2.3 or 2.4, and in any event within five Business Days
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thereafter, the Corporation shall issue and deliver to the holder, or to his
nominee(s) or, subject to compliance with the Securities Act, transferee(s), a
certificate or certificates for the number of whole shares of Common Stock to
which such holder shall be entitled, registered in such name or names as such
Warrantholder may designate in writing. Subject to Section 2.7, each such
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certificate shall be dated as of the effective date of exercise as determined
pursuant to Section 2.2, Section 2.3 or Section 2.4, as applicable, and such
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Warrantholder shall be deemed to have become a holder of record of such Common
Stock for all purposes as of such date. Simultaneously with the delivery of
such certificate(s) for such Common Stock, the Corporation also shall deliver to
such holder all cash, other securities and other property, if any, to which he
is entitled by virtue of the Warrants exercised. If fewer than all of the
Warrants evidenced by any Warrant Certificate delivered to the Corporation for
exercise, conversion or exchange are exercised, converted or exchanged, the
Corporation shall also deliver to the Warrantholder, at the time of delivery of
the certificate(s) representing such Common Stock, a new Warrant Certificate,
dated as of the Closing Date, evidencing the number of Warrants remaining
unexercised and otherwise identical to the Warrant Certificate so delivered, or
if requested in writing by the holder, in lieu of issuing such new Warrant
Certificate, the Corporation shall make an appropriate notation on such Warrant
Certificate so delivered for exercise indicating the number of Warrants
evidenced thereby which remain unexercised and shall return such Warrant
Certificate to the holder.
Section 2.6 Expenses and Taxes. The Corporation shall pay all expenses
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in connection with, and all taxes and other governmental charges that may be
imposed with respect to, the issue
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or delivery of the Warrant Securities and other property which any holder is
entitled to receive upon exercise of any Warrant or Warrants pursuant to Section
2.2, Section 2.3 or Section 2.4. The Corporation shall not be required, however,
to pay any stamp, stock transfer or other similar tax or other governmental
charge required to be paid solely by virtue of any transfer involved in the
issue of Warrant Securities in any name other than that of the holder of the
Warrant(s) exercised at the order of such Holder, and if any such transfer is
involved, the Corporation shall not be required to issue or deliver the Warrant
Securities as to which such tax or charge is applicable until such tax or other
charge shall have been paid or it has been established to the Corporation's
reasonable satisfaction that no such tax or other charge is due.
Section 2.7 Exercise Associated With Public Offerings or Requiring
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Governmental Action. Any Warrantholder may, by a letter or other written notice
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to the Corporation accompanying such Warrantholder's Notice of Election to
Exercise or Election to Convert state that the exercise or conversion by such
Warrantholder of any Warrant or portion thereof (i) is in connection with an
offering of securities registered or to be registered pursuant to the Securities
Act and is conditioned upon, and subject to withdrawal or revocation (in whole
or in part) at the election of such Warrantholder at any time prior to, the
closing of the sale of such securities pursuant to such offering or (ii) is
subject to one or more filings with, reviews or approvals by or other
requirements of any governmental authority or agency and is conditioned upon,
and is subject to withdrawal or revocation (in whole or in part) at the election
of such Warrantholder at any time prior to, the completion of such filings or
reviews, the receipt of such approvals or the satisfaction of such other
requirements. In such event, if such exercise or conversion is not so withdrawn
or revoked, the delivery to or upon the order of the exercising or converting
Warrantholder of the certificate(s) or instrument(s) representing or evidencing
the Warrant Shares deliverable by reason of such exercise or conversion shall be
at such time or times as such Warrantholder shall specify in a written notice to
the Corporation. During any period following delivery of the Election to
Exercise or the Election to Convert until such time or times (or such withdrawal
or revocation) such Warrant or portion thereof shall continue to be outstanding
for all purposes, including for purposes of adjustments pursuant to Article III.
The Majority Holders shall have similar rights in the event of any exchange
pursuant to Section 2.4.
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Section 2.8 Fractional Shares of Common Stock. If the number of shares of
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Common Stock issuable on the exercise of any Warrant is not a whole number, the
Corporation shall not be required to issue any fraction of a share of Common
Stock and such number of shares issuable shall be rounded up to the next highest
whole number. If more than one Warrant shall be surrendered for conversion at
one time by the same holder, the number of full shares which shall be issuable
upon conversion thereof shall be computed on the basis of the aggregate number
of Warrants so surrendered for conversion. Notwithstanding the provisions of
this Section 2.8, in computing adjustments to the Exercise Price pursuant to
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Article III, fractional shares of Common Stock shall
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be taken into account and any outstanding Warrant may at any time represent the
right to receive upon conversion less than one share of Common Stock or some
other number of shares of Common Stock which is not a whole number.
Section 2.9 Covenant to Reserve Shares for Issuance on Exercise. The
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Corporation shall at all times reserve and keep available out of the authorized
but unissued shares of Common Stock, solely for the purpose of issue upon
exercise of the Warrants, the full number of shares of Common Stock issuable if
all outstanding Warrants were to be converted in full. All shares of Common
Stock which shall be issuable upon exercise of any Warrant (or portion thereof)
shall be newly issued, duly authorized, validly issued, fully paid and
nonassessable and without any personal liability attaching to the ownership
thereof, and the issuance thereof shall not give rise or otherwise be subject to
preemptive or similar purchase rights on the part of any Person or Persons, and
the Corporation shall take any corporate and other actions that may, in the
opinion of its counsel, be necessary in order that the Corporation may comply
with the foregoing. The Corporation hereby irrevocably authorizes and directs
its current and future transfer agents, if any, for the Common Stock and for any
shares of the Corporation's capital stock of any other class or series issuable
upon the conversion of the exercise of the Warrants at all times to reserve such
number of authorized shares as shall be requisite for such purpose. The
Corporation shall supply such transfer agents with duly executed stock
certificates for such purposes.
Section 2.10 Compliance with Governmental Requirements; Listing of Shares.
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(a) General. If issuance of any Warrant Securities issuable upon
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exercise of any Warrant(s) require, under any applicable federal, state, local
or foreign law, rule or regulation or any applicable requirement of any national
securities exchange or inter-dealer quotation system, any registration,
qualification, listing or approval before such shares may be issued upon
conversion, the Corporation shall in good faith, as promptly as practicable and
at its expense, diligently endeavor to cause such shares to be duly registered,
qualified, approved or listed, as the case may be and Section 2.7 shall apply.
-----------
(b) Listing. Without limiting the generality of Section 2.10(a),
-------
if any shares of Common Stock or other capital stock or securities required to
be reserved for issuance upon exercise of any Warrant(s) require registration or
qualification with any governmental authority under any federal or state law
before such shares may be so issued, the Corporation will in good faith and as
expeditiously as possible and at its expense endeavor to cause such shares to be
duly registered. During all periods during which shares of Common Stock or any
other capital stock or securities of the same class, series or issue as are
issuable upon exercise of any Warrant are listed, qualified or otherwise
eligible for trading or quotation on any national securities exchange or The
Nasdaq Stock Market or any similar quotation system, the Corporation shall cause
all shares of Common Stock,
13
and all such other capital stock and securities, issuable upon conversion of
such Warrant to be listed, qualified or eligible for trading or quotation
thereon upon issuance thereof.
(c) HSR Act, Etc. Without limiting the generality of Section 2.10(a),
------------ ---------------
if any holder's intended exercise of any Warrant (alone or with other proposed
acquisitions of Common Stock or other securities of the Corporation) would or
might be subject to the HSR Act, the Corporation shall promptly comply with any
applicable requirements under the HSR Act relating to filing and furnishing of
information to the Federal Trade Commission and the Antitrust Division of the
Department of Justice and shall cooperate, and cause all Persons which are part
of the same "person" (as defined for purposes of the HSR Act) as the Corporation
to cooperate and assist in such filing and compliance. If any holder is advised
by its legal counsel that its intended exercise of Warrant(s) would or might be
subject to any other law, rule or regulation which requires any filing with or
review or approval by any governmental authority or agency, the Corporation
shall promptly comply with any requirements of such law, rule or regulation
applicable to it and shall cooperate with such holder in such holder's efforts
to comply with the requirements of such law, rule or regulation applicable to it
on a timely basis.
(d) Expenses. Each of the Corporation and such holder shall bear and
--------
pay any costs or expenses that it incurs in complying with this Section 2.10,
------------
except that each shall pay one half of any filing fee payable to the FTC or the
Department of Justice pursuant to Section 2.10(c) and the HSR Act.
---------------
ARTICLE III
ADJUSTMENT OF WARRANT PRICE AND
WARRANT SECURITIES PURCHASABLE
------------------------------
Section 3.1 Adjustment Generally. Initially as of the Closing Time,
--------------------
each Warrant issued on the Issue Date shall represent the right to purchase one
share of Common Stock for an initial Warrant Price of: (i) Twenty Dollars ($20)
per share for Series A Warrants; and (ii) Twenty-Five Dollars ($25) per share
for Series B Warrants. The Warrant Price payable and the type and number and
amount of securities and other property deliverable upon exercise of a Series A
Warrant or a Series B Warrant shall be subject to adjustment from time to time
as set forth in this Article III. Such adjustments shall be cumulative and
-----------
shall be made successively on each and every occasion that any event requiring
any such adjustment shall occur. The form of Warrant Certificate need not be
changed because of any adjustment made pursuant to this Article III, and Warrant
-----------
Certificates outstanding at the time of such adjustment or issued after such
adjustment may state the same Warrant Price and the same number of shares of
Common Stock as are stated in the Warrant Certificates prior to such adjustment.
14
Section 3.2 Stock Dividends, Subdivisions, Combinations and
-----------------------------------------------
Recapitalizations. If the Corporation shall at any time (i) declare or pay a
-----------------
dividend or declare, pay or make any other distribution on the Common Stock in
shares of Common Stock, (ii) subdivide the outstanding shares of Common Stock
into a greater number of shares or (iii) combine the outstanding shares of
Common Stock into a smaller number of shares, then in each and every such event,
the number of shares of Common Stock purchasable upon exercise of each Warrant
shall be adjusted so that the holder of any Warrant thereafter surrendered for
exercise shall be entitled to receive the aggregate number of shares of Common
Stock or other capital stock of the Corporation which such holder would have
owned and would have been entitled to receive by virtue of the happening of any
of the events described above had such Warrant been exercised (x) in the case of
a dividend or distribution, immediately prior to the record date for the
determination of the stockholders entitled to receive such dividend or
distribution (or, if no such record date is fixed, immediately prior to any
other time as of which the holders of Common Stock entitled to participate in
such distribution was determined) or (y) in the case of a subdivision,
combination or reclassification, on the effective date of such subdivision,
combination or reclassification. Upon such adjustment, the Warrant Price shall
be adjusted to be the Warrant Price in effect immediately prior to the
effectiveness of such adjustment multiplied by the quotient obtained by dividing
the number of shares of Common Stock for which a Warrant was exercisable
immediately prior to effectiveness by the number of shares of Common Stock for
which a Warrant shall be exercisable immediately after such effectiveness. An
adjustment made pursuant to this Section 3.2 shall become effective immediately
-----------
after such record date (or other applicable date referred to in subclause (A)(x)
of the immediately preceding sentence) in the case of a dividend or
distribution, subject to Section 3.9(d) and 3.9(e), and shall become effective
-------------- ------
immediately after the effective date in the case of a subdivision, combination
or reclassification.
Section 3.3 Certain Other Distributions.
---------------------------
(a) Other Distributions. Subject to Section 3.3(b) and Section
------------------- -------------- -------
3.3(c), if the Corporation shall at any time declare or make any distribution,
by dividend or otherwise, to all holders of outstanding shares of Common Stock
of any cash or other assets or property of any nature whatsoever, any debt
securities or other evidences of its indebtedness, any capital stock, any other
securities of any nature whatsoever or any warrants, options or other Rights to
subscribe for, purchase or otherwise acquire any assets, property, capital
stock, debt or other securities or evidences of indebtedness (excluding
dividends or distributions referred to in Section 3.2, Rights referred to in
-----------
Section 3.5 and Convertible Securities referred to in Section 3.6), or shall
----------- ------------
take a record of such holders for the purpose of entitling them to receive such
a distribution, then (i) the number of shares of Common Stock for which each
Warrant is exercisable shall be adjusted to equal the product of the number of
shares of Common Stock for which such Warrant is exercisable immediately prior
to the applicable Adjustment Date determined pursuant to Section 3.3(d),
--------------
15
multiplied by a fraction, the numerator of which shall be the Current Market
Price per share of the Outstanding Common Shares immediately before such
Adjustment Date and the denominator of which shall be the excess of (x) such
Current Market Price per share of the Outstanding Common Shares as of the
Adjustment Date over (y) the amount allocable to one share of the Outstanding
Common Shares as of such Adjustment Date of any such cash so distributable and
of the Fair Market Value (as determined as of such date in good faith by the
Board) of any and all such evidences of indebtedness, shares of capital stock,
debt securities, other securities, property, assets or Rights so distributable
and (ii) the Warrant Price shall be adjusted to equal (A) the Warrant Price in
effect immediately prior to such adjustment multiplied by the quotient obtained
by dividing the number of shares of Common Stock for which a single Warrant is
exercisable immediately prior to the adjustment by (B) the number of shares of
Common Stock for which a single Warrant is exercisable immediately after such
adjustment.
(b) When Adjustment Is Not To Be Made. No adjustment pursuant to the
---------------------------------
provisions of Section 3.3(a) shall be made if such adjustment would result in
--------------
the number of shares of Common Stock for which each Warrant is exercisable being
lower, or a Warrant Price that is higher, than was the case immediately prior to
such adjustment. In addition, at the election of the Majority Holders made
within 30 days of receipt of the notice with respect to such adjustment issued
pursuant to Section 3.10, in lieu of the adjustment pursuant to Section 3.3(a),
------------ --------------
but subject to Section 3.3(c), the type and number and amount of securities and
--------------
other property deliverable upon exercise of any Warrant determined as of
immediately prior to the effective date for such adjustment specified in Section
-------
3.3(c) shall be adjusted so that the holder of any such Warrant thereafter
------
surrendered for conversion shall be entitled to receive the kind and number or
amount of shares of Common Stock (or other capital stock of the Corporation),
other Warrant Securities and other property which such holder would have
received (after giving effect to all adjustments required by this Article III)
had such Warrant been exercised immediately prior to
(i) the record date for the determination of the stockholders entitled
to receive such distribution, or
(ii) if no such record date is fixed, as of any other time as of which
the holders of Common Stock entitled to participate in such distribution
was determined,
plus the kind and amount of cash, other assets or property, debt securities,
other evidences of indebtedness, other securities or Rights which such holder
would have been entitled to receive by virtue of being the record holder, as of
such record date or other time, of such kind and number or amount of shares of
Common Stock or other Conversion Securities. For such purpose, it shall be
assumed that such holder of Common Stock or other Conversion Securities failed
to exercise rights of election, if any, as to the kind or amount of shares or
stock, other securities or property receivable
16
in such distribution, provided that if the kind or amount of shares of stock,
other securities or property receivable in such distribution is not the same for
each non-electing share, then the kind and amount of shares of stock, other
securities or property receivable upon consummation of such transaction for each
non-electing share shall be deemed to be the kind and amount so receivable per
share by a plurality of the non-electing shares. If after an adjustment a holder
of a Warrant upon exercise may receive shares of two or more classes of capital
stock of the Company, the Board shall determine, in good faith, the allocation
of the adjusted Warrant Price between the classes of capital stock. After such
allocation, the exercise privilege and the exercise price of each class of
capital stock shall thereafter be subject to adjustment on terms comparable to
those applicable to Common Stock in this Article.
(c) Special Rule for Distributions of Redeemable Stock. If by virtue
--------------------------------------------------
of the applicability of Sections 3.2(b) and 3.3(b) in any one or more events,
---------------------------
the Warrant Securities issuable upon conversion of any Warrant consist of or
include any shares of any class or series of capital stock that provides by its
terms a right in favor of the Corporation to call, redeem, exchange or otherwise
acquire all of the outstanding shares or units of such class or series (such
class or series of capital stock being herein referred to as "Redeemable Stock")
and if the Corporation redeems all or any part of the outstanding shares of such
Redeemable Stock prior to the date on which such Warrant is exercised, then upon
exercise of such Warrant the holder thereof shall be entitled to receive, in
lieu of such shares of Redeemable Stock or, in the event of such a partial
redemption, a pro rata portion of such shares, the kind and amount of cash or
--- ----
other assets, securities or other property or consideration paid by the
Corporation with respect to its redemption of an equal number of shares of such
Redeemable Stock. If the consideration so paid upon the Corporation's
redemption of any such Redeemable Stock consists of or includes any other class
or series of Redeemable Stock which is also redeemed before exercise of any
Warrant, then the provisions of the first sentence of this Section 3.3(c) (and
--------------
of this sentence) shall apply to successively to the shares of such other class
or series of Redeemable Stock.
(d) Adjustment Date. The "Adjustment Date" for any distribution in
---------------
respect of which an adjustment is required by this Section 3.3 shall be either
-----------
(i) the date of taking of a record of holders of Common Stock for the purpose
of entitling them to receive such distribution or, if no record is taken, at the
date as of which the holders of Common Stock entitled to participate in such
distribution were determined or (ii) the date of such distribution, whichever
date yields the largest increase in the number of shares of Common Stock
issuable upon exercise of a Warrant in applying the formula contained in the
first sentence of Section 3.3(a).
--------------
(e) Adjustment Effective Date. An adjustment made pursuant to this
-------------------------
Section 3.3 shall become effective, subject to Section 3.8(d), immediately after
----------- --------------
such record date or, if no such record date is fixed, immediately after the time
as of which holders of Common Stock entitled to
17
participate in such distribution were determined or, if no such time is fixed,
as of the date of such distribution.
Section 3.4 Issuance of Additional Shares of Common Stock.
---------------------------------------------
(a) Adjustment Formula. Subject to Section 3.4(b), if at any time
the Corporation shall issue, or pursuant to Section 3.5, Section 3.6, or Section
3.7 be deemed to issue, any Additional Shares of Common Stock in exchange for
consideration in an amount, determined in accordance with Section 3.8(a) and
Section 3.8(e), per Additional Share of Common Stock less than the Reference
Price as of the applicable time of determination specified in the last sentence
of this Section 3.4(a), 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 such Warrant was
exercisable immediately prior to such time of determination by a fraction (x)
the numerator of which shall be the number of Outstanding Common Shares
immediately before such issuance or deemed issuance plus the number of
Additional Shares of Common Stock so issued or deemed to be issued and (y) the
denominator of which shall be the number of Outstanding Common Shares
immediately before such issuance or deemed issuance plus the number of shares
which the aggregate amount of consideration, if any, received by the Corporation
upon such issuance or deemed issuance of all such Additional Shares of Common
Stock would purchase at the Reference Price determined as of such time and (ii)
the Warrant Price shall be adjusted to equal the Warrant Price immediately prior
to such adjustment multiplied by the quotient obtained by dividing the number of
shares of Common Stock for which such Warrant was exercisable immediately prior
to the adjustment under clause (i) by the number of shares of Common Stock for
which such Warrant is exercisable immediately after the adjustment under clause
(i). The applicable time of determination shall be:
(i) if the event requiring the adjustment is the taking of a record date
for any dividend or distribution referred to in Section 3.5 or
Section 3.6, as of either the close of business on such record date
or the date such dividend or distribution is paid, whichever produces
the highest Reference Price, or
(ii) in the case of any other issuance or deemed issuance, immediately
prior to the time of such issuance or deemed issuance.
(b) When Adjustment is Not Required. The provisions of
-------------------------------
Section 3.4(a) shall not apply to any issuance of Additional Shares of Common
Stock for which an adjustment is made under Section 3.2 or Section 3.3. Subject
to Section 3.7, no adjustment of the Warrants or the Warrant Price shall be made
under this Section 3.4 upon the issuance of any Additional Shares of Common
Stock which are or are deemed to be issued pursuant to (i) the exercise of any
Existing Rights in
18
accordance with the terms thereof in effect on the Closing Date or (ii) the
exercise of any other Rights or the exercise of any conversion or exchange
rights in any other Convertible Securities if, in the case of any such Rights or
Convertible Securities referred to in this clause (ii) any such adjustment shall
previously have been made, or no such adjustment shall have been required to be
made, upon the issuance of such Rights or upon the issuance of such Convertible
Securities (or upon the issuance of any Rights therefor) pursuant to Section 3.5
or Section 3.6.
(c) Effective Date. Each adjustment pursuant to this Section 3.4
--------------
by reason of any issuance or deemed issuance of any Additional Shares of Common
Stock shall be effective as of the date of such issuance or deemed issuance.
Section 3.5 Issuance of Rights.
------------------
(a) Adjustment. If at any time the Corporation shall take a record
----------
of the holders of its Common Stock for the purpose of entitling them to receive
a dividend or other distribution of, or shall in any manner (whether directly or
indirectly by assumption in a consolidation or in a merger in which the
Corporation is the surviving corporation or otherwise) issue to any Person or
Persons, any Rights to subscribe for, purchase or otherwise acquire any
Additional Shares of Common Stock or any Convertible Securities, in any case
whether or not such Rights or the right to exchange or convert such Convertible
Securities are immediately exercisable, and the consideration per share for
which Common Stock is issuable upon the exercise of such Rights or upon
conversion or exchange of such Convertible Securities determined pursuant to
Section 3.8(a) and Section 3.8(e) shall be less than the Reference Price
determined as of the applicable time of determination specified in the last
sentence of this Section 3.5(a), then the maximum number of shares of Common
Stock issuable upon the exercise of such Rights or, in the case of Rights for
Convertible Securities, upon the conversion or exchange of such Convertible
Securities determined as of such applicable time shall be deemed to be
Additional Shares of Common Stock issued as of such applicable time for such
consideration per share and the number of shares of Common Stock for which each
Warrant is exercisable and the Warrant Price shall be adjusted as provided in
Section 3.4(a). The applicable time of determination shall be
(i) if the event requiring the adjustment is the taking of a
record date for any dividend or distribution of Rights
referred to in this Section 3.5(a), as of either the close of
business on such record date or the date such dividend or
distribution is paid, whichever produces the highest Reference
Price, or
(ii) in the case of any other issuance of Rights, immediately prior
to the time of such issuance.
19
(b) No Further Adjustment on Exercise. Subject to Section 3.7, no
--------------------------------- -----------
further adjustments of the Warrants or the Warrant Price shall be made upon the
actual issuance of such Common Stock or of such Convertible Securities upon
exercise of such Rights or upon the actual issuance of such Common Stock upon
such conversion or exchange of such Convertible Securities for which an
adjustment pursuant to this Section 3.5 previously had been made or was not
-----------
required to be made. Subject to Section 3.7, no adjustment under this Section
----------- -------
3.5 shall be required by reason of the grant of Employee Options that have an
---
exercise price per share of Common Stock, at least equal to the Current Market
Price at the time of grant.
Section 3.6 Issuance of Convertible Securities.
----------------------------------
(a) Adjustment. If at any time the Corporation shall take a record of
----------
the holders of its Common Stock for the purpose of entitling them to receive a
dividend or other distribution of, or shall in any manner (whether directly or
indirectly by assumption in a consolidation or in a merger in which the
Corporation is the surviving corporation or otherwise) issue, to any Person or
Persons, 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 determined
pursuant to Section 3.8(a) and Section 3.8(e) shall be less than the Reference
-------------- --------------
Price determined as of the applicable time of determination specified in the
last sentence of this Section 3.6(a), then the maximum number of shares of
--------------
Common Stock issuable upon the conversion or exchange of such Convertible
Securities determined as of such applicable time shall be deemed to be
Additional Shares of Common Stock issued as of such applicable time for such
consideration per share and the number of shares of Common Stock for which each
Warrant is exercisable and the Warrant Price shall be adjusted as provided in
Section 3.4. If the terms of any Convertible Securities provide for any
-----------
issuance of additional Convertible Securities (whether in payment of dividends
or interest or otherwise), then each occasion on which any such additional
Convertible Securities are issued shall be deemed a new issuance of Convertible
Securities for which an adjustment pursuant to this Section 3.6 shall be made.
-----------
The applicable time of determination shall be:
(i) if the event requiring the adjustment is the taking of a record date
for any dividend or distribution of Rights referred to in this Section
-------
3.6(a), as of either the close of business on such record date or the date
------
such dividend or distribution is paid, whichever produces the highest
Reference Price, or
(ii) in the case of any other issuance of Rights, immediately prior to the
time of such issuance.
20
(b) No Further Adjustment Upon Conversion. Subject to Section 3.7,
------------------------------------- -----------
no further adjustment of the Warrants or the Warrant Price shall be made under
this Section 3.6 upon the issuance of any Convertible Securities which are
-----------
issued pursuant to the exercise of any Rights therefor if any such adjustment
shall previously have been made upon the issuance of such Rights pursuant to
Section 3.5. Subject to Section 3.7, no further adjustments of the Warrants or
----------- -----------
the Warrant Price shall be made upon the actual issuance of such Common Stock
upon conversion or exchange of Convertible Securities for which an adjustment
pursuant to this Section 3.6 previously had been made or was not required.
-----------
Section 3.7 Superseding Adjustment.
----------------------
(a) Readjustment if Adjustment Previously Made. If, at any time
after any adjustment of the number of shares of Common Stock for which each
Warrant is exercisable and the Warrant Price shall have been made pursuant to
Section 3.5 or Section 3.6:
(i) the consideration paid or payable to the Corporation,
or the number of shares of Common Stock issuable, upon the exercise, conversion
or exchange of the Rights or Convertible Securities in respect of which such
adjustment was made is increased, in the case of such consideration, or
decreased in the case of such number of shares, by virtue of provisions
contained therein for an automatic increase or decrease (as the case may be)
upon the occurrence of a specified date or event, any amendment or modification
of or departure from the terms thereof previously in effect or otherwise (other
than under or by reason of an event resulting in a change pursuant to the
provisions set forth in the documents governing such Rights or Convertible
Securities designed to protect against dilution, which event also results in an
adjustment pursuant to this Article III), the adjustments to the Warrant Price
and the number of shares of Common Stock issuable upon exercise of each Warrant
computed upon the original issuance thereof (or upon the taking of a record date
with respect thereto), and any subsequent adjustments based thereon, shall, upon
any such increase or decrease becoming effective, be readjusted to the Warrant
Price and number of shares issuable upon exercise of a single Warrant which
would then be in effect had such adjustment originally been made on the basis
that such increased or decreased consideration payable or such increased or
decreased number of shares of Common Stock issued or issuable was the
consideration payable or the number of shares issued or issuable in respect of
such outstanding Rights or Convertible Securities which are actually outstanding
on the effective time of such increase or decrease (but no such readjustment
shall be made with respect to any Rights or Convertible Securities which for any
reason no longer are outstanding as of such time); or
(ii) any Rights or any rights of conversion or exchange
under Convertible Securities in respect of which such adjustment was made shall
expire without having been fully exercised, the Warrant Price computed upon the
original grant, issuance or sale thereof or upon the
21
taking of a record date with respect thereto (as the case may be), and any
subsequent adjustments based thereon, shall, upon such expiration, be recomputed
as if:
(A) in the case of such Rights or Convertible
Securities, the only Additional Shares of Common Stock issued were the shares of
Common Stock, if any, actually issued upon the exercise of such Rights or the
conversion or exchange of such Convertible Securities and the consideration
received for such Additional Shares of Common Stock was, in the case of Rights,
the consideration actually received by the Corporation for the grant, issuance
or sale of all such Rights, whether or not exercised, plus the consideration
actually received by the Corporation upon such exercise, or, in the case of
Convertible Securities, the consideration actually received by the Corporation
for the issuance or sale of all such Convertible Securities which were actually
converted or exchanged, plus the additional consideration, if any, actually
received by the Corporation upon such conversion or exchange; and
(B) in the case of any such Rights exercisable for
Convertible Securities, only the Convertible Securities, if any, actually issued
upon the exercise thereof were issued at the time of issuance or sale of such
Rights, and the consideration received by the Corporation for the Additional
Shares of Common Stock deemed to have been then issued was the consideration
actually received by the Corporation for the grant, issuance or sale of all such
Rights, whether or not exercised, plus the additional consideration, if any,
actually received by the Corporation upon the issuance or sale of the
Convertible Securities with respect to which such Rights were actually
exercised.
(b) When Readjustment is Not to be Made. No readjustment pursuant to
-----------------------------------
this Section 3.7 shall have the effect of (i) decreasing the number of shares of
-----------
Common Stock or the amounts of other Warrant Securities, cash or other property
for which any Warrant is exercisable below the number of such shares and the
amounts of such other Warrant Securities, cash and property for which such
Warrant would have been exercisable if the original adjustment had not been
made, but all subsequent adjustments, if any, required by this Article III had
-----------
been made or (ii) requiring any surrender, return or redelivery of any shares of
Common Stock, other Conversion Securities, cash or other property delivered upon
any exercise of any Warrant prior to the time such readjustment is made,
requiring that the exercising holder or any subsequent holder of any such shares
of Common Stock, Warrant Securities or other property make any payment to the
Corporation or otherwise affecting such shares of Common Stock, other Warrant
Securities or other property or the rights or obligations of the exercising
Holder or any such subsequent holder with respect thereto. From and after any
adjustment or adjustments provided for in this Section 3.7, the Warrants and the
-----------
Warrant Price shall continue to be subject to further adjustment as provided in
this Article III.
-----------
22
(c) Adjustment When No Adjustment Was Previously Made. If, at any
-------------------------------------------------
time after any grant, sale or other issuance of any Rights or Convertible
Securities for which an adjustment of the Conversion Rate shall not have been
required to be made pursuant to the provisions of Section 3.5 or Section 3.6 (as
----------- -----------
the case may be), the consideration paid or payable to the Corporation upon the
exercise of such Rights or Convertible Securities is decreased, or the number of
shares of Common Stock issued or issuable upon the exercise of such Rights or
Convertible Securities is increased, in either case by virtue of provisions
contained therein for an automatic decrease or increase (as the case may be)
upon the occurrence of a specified date or event, any amendment or modification
of or departure from the terms thereof previously in effect or otherwise (other
than under or by reason of an event resulting in a change pursuant to the
provisions set forth in the documents governing such Rights or Convertible
Securities designed to protect against dilution, which event also results in an
adjustment pursuant to this Article III), then such event shall, for purposes of
-----------
Section 3.5 (in the case of such Rights) or Section 3.6 (in the case of such
----------- -----------
Convertible Securities) be deemed to be a new issuance, as of the date of the
effectiveness of such decrease or increase (as the case may be) of Rights or
Convertible Securities having terms reflecting such changes.
(d) Adjustment for Events Affecting Existing Rights . If the number
-----------------------------------------------
of shares of Common Stock issued or issuable upon exercise of any Existing Right
is increased as a direct or indirect result of any amendment or modification of
or departure from the terms thereof previously in effect (other than as a result
of the issuance of the Series B Shares, the conversion of the Series B Shares,
the issuance of the Warrants or the exercise of the Warrants), then such
increased number of shares of Common Stock issued or issuable upon exercise
thereof shall be deemed to be Additional Shares of Common Stock issued as of the
effective date of such increase for the additional consideration, if any,
payable to acquire such increased number of shares upon exercise of such
Existing Right, and the number of shares of Common Stock for which each Warrant
is exercisable and the Warrant Price shall be adjusted as provided in Section
-------
3.4. If the consideration payable for shares of Common Stock issued or issuable
---
upon exercise of any Existing Right is decreased as a direct or indirect result
of any amendment or modification of or departure from the terms thereof
previously in effect, then such event shall be deemed to be the issuance, as of
the effective date of such decrease, of a number of Additional Shares of Common
Stock equal to the excess of (i) the maximum number of shares of Common Stock
issuable upon exercise of such Existing Right over (ii) the number of shares of
Common Stock determined by dividing the total consideration, if any, that would
be payable to the Corporation upon the exercise in full of such Existing Right
after giving effect to such decrease by the amount of consideration per share of
Common Stock issuable upon exercise of such Existing Right that would have been
payable to the Corporation absent such decrease. The provisions of this Section
-------
3.7(d) are in addition to (and not exclusive of) any other rights or remedies of
------
Warrantholders in the event that any such amendment, modification or departure
occurs without any required approval of Warrantholders.
23
Section 3.8 Other Provisions Applicable to Adjustments. The following
------------------------------------------
provisions shall be applicable to the making of adjustments provided for in this
Article III:
-----------
(a) Computation of Consideration.
----------------------------
Subject to Section 3.8(e):
--------------
(i) To the extent that any Additional Shares of Common
Stock, any Convertible Securities or any Rights to subscribe for or purchase any
Additional Shares of Common Stock or any Convertible Securities shall be issued
or deemed to be for cash consideration, the consideration received or deemed to
be received by the Corporation therefor shall be the net amount of the cash
received or deemed to be received by the Corporation therefor (in any such case
subtracting any amounts received in respect of accrued interest, accrued
dividends or other similar amounts which the Corporation may be obligated to pay
to the holders thereof in the future and any compensation, discounts or expenses
paid or incurred by the Corporation in connection with the issuance thereof).
(ii) To the extent that such issuance or deemed 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 Market Value of such consideration at the time of such issuance or deemed
issuance as determined in good faith by the Board.
(iii) In case any Additional Shares of Common Stock, any
Convertible Securities or any Rights to subscribe for, purchase or otherwise
acquire Additional Shares of Common Stock or Convertible Securities shall be
issued or deemed to be issued in connection with any merger, consolidation,
share exchange or similar transaction, the amount of consideration therefor
shall be deemed to be the Fair Market Value, as determined in good faith by the
Board, of such portion of the assets and business of the nonsurviving
corporation as the Board in good faith shall determine to be attributable to
such Additional Shares of Common Stock, Convertible Securities, or Rights, as
the case may be.
(iv) In case any Additional Shares of Common Stock, any
Convertible Securities or any Rights to subscribe for, purchase or otherwise
acquire Additional Shares of Common Stock or Convertible Securities are issued
or deemed to be issued in combination with each other or with any other
securities or property in connection with any transaction in which the
Corporation receives cash, securities, property or other consideration, or any
combination of the foregoing, then the amount of consideration therefor shall be
deemed to be such portion of the cash, securities, property and other
consideration received by the Corporation as the Board in good faith shall
determine to be attributable to such Additional Shares of Common Stock,
Convertible Securities
24
or Rights, as the case may be, with any noncash consideration being valued at
its Fair Market Value as determined by the Board in good faith. The
consideration for any Additional Shares of Common Stock issuable or deemed to be
issuable pursuant to any Rights to subscribe for, purchase or otherwise acquire
the same shall be the consideration received or deemed to be received by the
Corporation for issuing such Rights plus the minimum additional consideration,
if any, paid or payable to the Corporation upon the exercise or deemed exercise
of such Rights.
(v) The consideration for any Additional Shares of Common
Stock issued or issuable pursuant to the terms of any Convertible Securities
covered by any Rights to subscribe for, purchase or otherwise acquire such
Convertible Securities shall be the consideration received or deemed to be
received by the Corporation for issuing such Rights, plus the minimum additional
consideration, if any, paid or payable to the Corporation in respect of the
subscription for, purchase or other acquisition of such Convertible Securities,
plus the minimum additional consideration, if any, paid or payable to the
Corporation upon the exercise or deemed exercise of the right of conversion or
exchange in such Convertible Securities.
(vi) The consideration for any Additional Shares of Common
Stock issuable or deemed to be issuable pursuant to the terms of any Convertible
Securities, other than any covered by any Rights to subscribe for, purchase or
acquire the same, shall be the consideration received or deemed to be received
by the Corporation for issuing such Convertible Securities plus the minimum
additional consideration, if any, paid or payable to the Corporation upon the
exercise of the right of conversion or exchange in such Convertible Securities.
(vii) For all purposes of this Article III, all Rights or
Convertible Securities issued or deemed to be issued to directors, officers,
employees or consultants of the Corporation or any Subsidiary shall be deemed to
be issued for no consideration except to the extent the Corporation receives in
exchange for the issuance thereof consideration other than services rendered or
to be rendered.
(b) When Adjustments to Be Made. The adjustments required by this
---------------------------
Article III 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 would otherwise be required
may be postponed (except in the case of a subdivision or combination of shares
of the Common Stock) up to, but not beyond the date of conversion if such
adjustment either by itself or with other adjustments not previously made adds
or subtracts 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 Article III and not previously
-----------
made by
25
virtue of this Section 3.8(b), would result in a minimum adjustment or
--------------
on the date of conversion. 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 under this
--------------------
Article III, fractional interests in Common Stock shall be taken into account to
-----------
the nearest 1/100th of a share.
(d) Delivery of Due Bills. If, after the taking of any record of
---------------------
the holders of any class or series of capital stock of the Corporation for the
purpose of entitling them to receive a dividend or distribution for or in
connection with any other event in respect of which an adjustment pursuant to
this Article III is required, but prior to the occurrence of the event for which
-----------
such record is taken, any Warrant is exercised, the Corporation shall deliver to
the exercising Warrantholder a due xxxx or other appropriate instrument
evidencing such holder's right to receive the additional shares of Common Stock,
other securities, cash and other property receivable upon conversion by reason
of an adjustment pursuant to this Article III that would have been required by
-----------
reason of such dividend, distribution or other event if the Warrant had
continued to be outstanding immediately after the occurrence of the event
requiring such adjustment.
(e) Certain Determinations. Any determination of the Current Market
----------------------
Price of any share of Common Stock or the Fair Market Value of any other
security, asset, property or consideration which may be required to be made by
the Board pursuant to or in connection with the application of any provision of
this Agreement may be disputed in good faith by the Majority Holders and any
such dispute shall be resolved by an independent investment banking firm of
recognized national standing mutually selected by the Majority Holders and the
Corporation (and whose fees and expenses shall be paid by the Corporation),
whose decision with respect to such dispute shall be final and conclusive and
binding on the Corporation and all holders of Series B Shares. Any determination
by the Board pursuant to Section 3.9(b) or Section 3.13 may be disputed in good
-------------- ------------
faith by the Majority Holders, and any such dispute shall be resolved in
accordance with Section 3.12.
------------
(f) Other Action Affecting Common Stock. In case at any time or
-----------------------------------
from time to time the Corporation shall take any action in respect of its Common
Stock which is not one described in any other provision of Article III as
-----------
requiring an adjustment, then, unless such action will not have an adverse
effect upon the rights and intended benefits of the holders of Warrants, the
number of shares of Common Stock and the kind and amount of other securities and
property for which each Warrant is exercisable shall be increased in such manner
as may be equitable in the circumstances.
26
Section 3.9 Multiple Classes of Common Stock.
--------------------------------
(a) Election Right. If, at any time while any Warrants are
--------------
outstanding, the Corporation's authorized capital stock shall include two or
more classes or series of Common Stock, then each Warrantholder shall have the
right, upon each exercise of any of such holder's Warrant(s), to elect to
receive such number of shares of each such class or series as such holder
desires, provided that the total number of shares of all classes and series
selected by such holder shall not exceed the aggregate number of shares of
Common Stock issuable upon exercise of such Warrants(s).
(b) Adjustment Rights Apply. If, as a result of any adjustment
-----------------------
made pursuant to Article III, by virtue of the existence of Section 3.9(a), as a
----------- --------------
result of any event referred to in Section 3.13, or otherwise, the holder of a
------------
Warrant would, upon exercise thereof, become the holder of more than one class
or series of capital stock of the Corporation, then (i) the Warrant Price shall
be allocated among such classes or series in such manner as the Board shall
determine in good faith and (ii) number, amount and type of shares of Common
Stock and other securities and property for which any Warrant may be exercised
and the Warrant Price shall be subject to adjustment in respect of each such
class and series of capital stock in a manner and on terms as nearly as
equivalent as practicable to the provisions set forth in this Article III, which
-----------
manner and terms shall be determined by the Board promptly after each such
adjustment, each such action by the Corporation and each other event which has
or might have such result. Promptly after the Board makes any such
determination, the Corporation shall deliver to each Warrantholder a written
notice which shall describe in reasonable detail the manner and terms so
determined.
Section 3.10 Notices to Warrant Holders.
--------------------------
(a) Notice of Adjustments. Whenever the Warrant Price or the
---------------------
number of shares of Common Stock or the kind or amount of other securities or
property for which any Warrant is exercisable shall be adjusted pursuant to
Article III, the Corporation at its expense shall forthwith prepare a
-----------
certificate to be executed by the chief financial officer of the Corporation
setting forth, in reasonable detail, the event requiring the adjustment, the
nature and amount of such adjustment, the method by which such adjustment was
calculated (including a description of the basis on which the Board made any
determination required by any provision of Article III), the date as of which
-----------
such adjustment was or will be effective as provided herein, the number of
shares of Common Stock and the kinds and amounts, other securities, cash and
other property for which and the Warrant Price at which each Warrant was
exercisable immediately prior to such event and for and at which such Warrant is
exercisable immediately after such adjustment and all other relevant
information. The Corporation shall promptly cause to be delivered to each
Warrantholder a signed copy of such certificate. The Corporation shall, upon
the written request at any time of any Warrantholder, furnish or cause to be
furnished to such Warrantholder a like certificate setting forth (i) the Warrant
27
Price at the time in effect and showing how such Warrant Price was calculated,
and (ii) the number of shares of each class or series of Warrant Stock and the
kind and amount, if any, of other Warrant Securities, cash and other property
which at the time would be received upon the exercise of a Warrant at the time
and showing how the same were calculated.
(b) Notice of Corporate Action. If at any time
--------------------------
(i) the Corporation shall take a record of the holders of
any class, series or issue of its capital stock or other securities for the
purpose of entitling them to receive a dividend or other distribution, or any
right to subscribe for, purchase or otherwise acquire any evidences of its
indebtedness, any shares of capital stock of any class or series, any cash or
any other securities or property, or to receive any other right, interest or
benefit, or
(ii) there shall be any capital reorganization of the
Corporation, any reclassification or recapitalization of the capital stock of
the Corporation or any Sale of the Company or any other event referred to in
Section 3.2 or 3.13 shall occur or be proposed, or
(iii) there shall be any tender offer or exchange offer for
Warrant Securities of any class, series or issue, or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation,
then the Corporation shall (x) give to each Warrantholder at least 20 days'
prior written notice of the date on which a record date shall be fixed 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, (y) promptly
after learning of any such tender or exchange offer, deliver to each
Warrantholder notice thereof, a copy of all written offering material which the
Corporation possesses or reasonably can obtain or if no such materials exist or
are possessed or can reasonably be obtained by the Corporation, a written
summary of all material terms and conditions of and other material facts
relating thereto known to the Corporation and (z) give each Warrantholder at
least 20 days' prior written notice of the scheduled, planned or anticipated
date when any such reorganization, reclassification, Sale of the Company,
merger, consolidation, sale, transfer, dissolution, liquidation, winding up or
other event shall take place. Such notice in accordance with clause (x) of the
immediately preceding sentence also shall specify (i) the date on which any such
record is to be taken for the purpose of the event covered by the notice or any
related event, and (ii) the date on which such event or related event is to take
place and, if applicable, the time, if any such time is to be fixed, as of which
the holders of Common Stock shall
28
be entitled to exchange their shares of Common Stock for securities, cash or
other property deliverable as a result of such event.
(c) Notices To Stockholders. In addition to the foregoing, each
-----------------------
Warrantholder shall be given the same notices of corporate action or proposed
corporate action as any holder of Common Stock.
Section 3.11 No Impairment. The Corporation shall not by or through
-------------
amending its certificate of incorporation, any reorganization, transfer of
assets, consolidation, merger, share exchange, 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 any Warrant or Warrant Certificate, but
will at all times in good faith carry out and assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights and intended benefits of the Warrantholders
against impairment. Without limiting the generality of the foregoing, the
Corporation (i) will not directly or indirectly increase the par value of any
shares of Common Stock or other capital stock receivable upon the exercise of
any Warrant above the amount payable therefor upon such exercise immediately
prior to such increase in par value, (ii) will not take any action that results
in any adjustment to the Warrant Price if after such adjustment the total number
of shares of Common Stock or shares of any other class or series of Warrant
Stock issuable upon the exercise of all of the outstanding Warrants would exceed
the total number of shares of Common Stock or such other Warrant Stock,
respectively, then authorized by the Corporation's Certificate of Incorporation
and available and reserved for the purpose of issuance upon such exercise, and
(iii) will take all such action as may be necessary or appropriate in order that
the Corporation may validly and legally issue shares of each class and series of
Warrant Stock and other Warrant Securities upon the exercise of any Warrant
which in each case are fully paid, non-assessable and without personal liability
attaching to the ownership thereof and not subject to preemptive and similar
purchase rights. Upon the request of any Warrantholder, at any time, the
Corporation will acknowledge in writing, in form satisfactory to such
Warrantholder, the continuing validity of each Warrant and Warrant Certificate
then held by such Warrantholder and the obligations of the Corporation with
respect thereto and thereunder.
Section 3.12 Resolution of Certain Disputes.
------------------------------
(a) Consultation. If there shall arise any dispute between the
------------
Corporation and the Majority Holders concerning the interpretation, application
or operation of the adjustment provisions of Article III (other than any such
-----------
dispute referred to in the first sentence of Section 3.8(e), which shall be
--------------
resolved as stated therein), the Corporation and the Majority Holders will
promptly attempt to settle such dispute through consultation and negotiation in
good faith and in a spirit of mutual cooperation. If agreement is reached
concerning the resolution of such dispute,
29
then such agreement shall be final, conclusive and binding on the Corporation
and all Warrantholders.
(b) Arbitration. If, on or before the thirtieth day after
-----------
written notice of such dispute is given by the Corporation to the Warrantholders
or the Majority Holders to the Corporation, such dispute has not been resolved
by the agreement of the Corporation and the Majority Holders, such dispute shall
be settled by an expedited arbitration proceeding conducted in accordance with
the then current Commercial Arbitration rules of the American Arbitration
Association in New York, New York by a single arbitrator who satisfies the
requirements of Section 3.12(e) and who is mutually acceptable to the
---------------
Corporation and the Majority Holders or, in the event such Persons fail to agree
upon such arbitrator within ten Business Days after such written notice of
dispute is given, an arbitrator who satisfies such requirements appointed by the
American Arbitration Association upon application of either the Corporation or
the Majority Holders. Neither the Corporation nor the Majority Holders shall
unreasonably withhold its approval of the selection of an arbitrator satisfying
the requirements of Section 3.12(e).
---------------
(c) Certain Provisions Applicable to Arbitration. The
--------------------------------------------
Corporation and the Majority Holders shall provide such arbitrator with such
information as may be reasonably requested in connection with the arbitration of
such dispute and shall otherwise cooperate with each other and such arbitrator
in good faith and with the goal of resolving such dispute as promptly as
reasonably practicable. The arbitrator shall not have authority to award
damages, but shall have only the authority to determine disputes regarding the
matters set forth in the first sentence of Section 3.12(a). Subject to the
---------------
immediately preceding sentence and to Section 3.12(f), the arbitrator's decision
---------------
based on written conclusions of law and fact with respect to the dispute
referred to such arbitration shall be final and binding and may be entered in
any court with jurisdiction, and the Corporation and the Warrantholders shall
abide by such decision and award. Each party shall bear its own costs and
expenses, including attorney's fees, incurred in connection with any arbitration
proceeding, except that the Corporation and the Warrantholders (as a group) each
shall pay one-half of all fees, costs and disbursements of the arbitrator and of
or charged by the American Arbitration Association.
(d) Other Remedies. The provisions of this Section 3.12 shall
-------------- ------------
not in any way limit or otherwise affect (i) the right of any Warrantholder to
seek, with regard to the matter in dispute, specific performance or other
injunctive relief in any court of competent jurisdiction or (ii) the rights or
remedies of any Warrantholder with respect to any claim, controversy or dispute
not submitted to and decided by or within the authority of an arbitrator
pursuant to this Section 3.12.
------------
(e) Arbitrators. Each arbitrator appointed pursuant to Section
----------- -------
3.12(a) shall be an attorney who practices law in New York City, who has
-------
substantial experience in sophisticated
30
corporate and securities transactions generally and in negotiating and drafting
"antidilution" provisions of warrants and convertible securities in particular
and who has not, and who is not a member or employee of any firm which has,
rendered legal services to any of the parties to the dispute or any of their
respective Affiliates within the preceding two years and who has no interest
(other than the receipt of customary fees for his services as an arbitrator) in
the matter in dispute.
(f) Other Rights Unaffected. Nothing contained in this Section
----------------------- -------
3.12 or any other provision hereof is intended to or shall preclude any holder
----
of any Warrant or Warrant Stock from exercising or pursuing or otherwise
limiting or affecting the rights or remedies which such holder may have pursuant
to the Purchase Agreement, at law, in equity or otherwise by reason of any
matter which is the subject of or basis for any dispute referred to in Section
-------
3.12(a) (or any other matter), and the dispute resolution mechanisms provided
-------
for in this Section 3.12 are intended solely as a means of resolving bona fide
------------ ---- ----
disputes concerning the interpretation, application or operation of the
adjustment provisions of Article III (other than any such dispute referred to in
-----------
the first sentence of Section 3.8(e), which shall be resolved as stated
--------------
therein) or bona fide disputes which the last sentence of Section 3.8(e)
---- ----
provides will be resolved pursuant to this Section 3.12, and not for the purpose
--------------
of determining the rights of holders of Warrants or Warrant Stocks or the
liabilities or obligations of the Corporation, for the purpose of resolving or
settling any claim by any such holder of any breach or inaccuracy of any
representation or warranty of, or any breach or failure to perform any covenant,
agreement or obligation, of the Corporation contained herein or in the Purchase
Agreement or any other Transaction Agreement (as defined in the Purchase
Agreement) or any other purpose. Without limiting the generality of the
immediately preceding sentence, no decision of any arbitrator appointed pursuant
to this Section 3.12 shall have or be given any res judicata or similar effect
------------ --------
in any action, suit or proceeding in which any claim by any holder of any
Warrant or Warrant Stock of any breach or inaccuracy of any representation or
warranty of, or any breach or failure to perform any covenant, agreement or
obligation, of the Corporation contained herein or in the Purchase Agreement or
any other agreement or instrument is to be adjudicated.
Section 3.13 Reclassification, Consolidation, Merger or Sale, Conveyance
-----------------------------------------------------------
or Lease or Assets.
------------------
(a) Adjustments. If any of the following shall occur while any
-----------
Warrants are outstanding:
(i) any consolidation, merger, binding share exchange or
reorganization to which the Corporation is party (other than
a consolidation, merger, share exchange or reorganization in
which the Corporation is the continuing corporation and which
does not result in any reclassification of or change in the
outstanding shares of Warrant Securities issuable upon
exercise of the Warrants); or
31
(ii) any sale, conveyance, transfer or lease to another Entity of
the properties and assets of the Corporation as an entirety
or substantially as an entirety,
then the Corporation or the successor or acquiring Entity, as the case may be,
shall thereupon make appropriate provision, reasonably satisfactory to the
Majority Holders, so that the holders of the Warrants then outstanding shall
have the right at any time thereafter, upon exercise of the Warrants, to
purchase the kind and amount of shares of common stock of such successor or
acquiring Entity, other capital stock or equity interests, other securities and
property receivable or purchasable (as the case may be) upon such
reclassification, change, consolidation, merger, sale, conveyance, transfer or
lease as would be received by a holder of the number of shares of Common Stock,
the number of shares of each other class or series of Warrant Stock and the kind
and amount of all other Warrant Securities issuable upon exercise of such
Warrant immediately prior to such consolidation, merger, sale, conveyance,
transfer or lease (after giving effect to all adjustments required by this
Article III. If the holders of the Common Stock or any other shares of Warrant
-----------
Stock of any class or series have rights of election as to the kind or amount of
capital stock or other equity interests, other securities or other property
receivable upon consummation of any such transaction, then the same right of
election shall be given to the holders of the Warrants. For purposes of this
Section 3.13, "common stock of the successor or acquiring Entity" shall include
--------------
capital stock (or other equity interests if such Entity is not a corporation) of
such Entity of any class which is not preferred as to dividends or assets on
liquidation over any other class or series of stock of such corporation (or
other equity interests of a non-corporate Entity) and which is not subject to
redemption and shall also include any evidences of indebtedness, shares of
capital stock, equity interests or other securities which are convertible into
or exchangeable for any such capital stock (or other equity interests), either
immediately or upon the arrival of a specified date or the happening of a
specified event and any warrants or other rights to subscribe for or purchase
any such capital stock (or other equity interests).
(b) Express Assumption by Successor or Acquiring Corporation.
--------------------------------------------------------
In case of any such merger, consolidation, share exchange, reorganization, or
disposition of assets, the successor or acquiring Entity shall expressly assume
the due and punctual observance and performance of each and every covenant and
condition of this resolution to be performed and observed by the Corporation and
all the obligations and liabilities thereunder or otherwise with respect
thereto, subject to such modifications as may be deemed appropriate (as
determined by resolution of the Board) in order to provide for adjustments of
shares of the capital stock, other securities or other property for which
Warrants may be exercised which shall be as nearly equivalent as practicable to
the adjustments provided for in Article III. Promptly after the Board makes any
-----------
such determination, the Corporation shall deliver to each Warrantholder a
written notice which shall describe in reasonable detail the manner and terms so
determined.
32
(c) Provisions Apply Successively. The foregoing provisions of
-----------------------------
this Section 3.13 shall similarly apply to successive reorganizations, mergers,
------------
consolidations or disposition of assets.
Section 3.14 Taking of Record; Stock and Warrant Transfer Books. In the
--------------------------------------------------
case of all dividends or other distributions by the Corporation to the holders
of its Common Stock with respect to which any provision of Article III refers to
-----------
the taking of a record of such holders, in each such case the Corporation will
not declare, pay or make any such dividend or distribution unless it shall take
such a record and the Corporation take each such record as of the close of
business on a Business Day. The Corporation will not at any time, except upon
dissolution, liquidation or winding up of the Corporation, close its stock
transfer books or Warrant transfer books so as to result in preventing or
delaying the exercise or transfer of any Warrant.
ARTICLE IV
OTHER PROVISIONS RELATING TO RIGHTS
OF HOLDERS OF WARRANTS
----------------------
Section 4.1 No Rights or Obligations as Warrant Securityholder Conferred
------------------------------------------------------------
by Warrants or Warrant Certificates. Except as otherwise provided herein, no
-----------------------------------
Warrant Certificate or Warrant evidenced thereby shall, prior to exercise
thereof, entitle the holder thereof to any of the rights of a holder of Warrant
Securities, including the right to vote at or to receive notice of any meeting
of stockholders of the Corporation or any consent action or other proceeding of
the Corporation. Neither the ownership of any Warrants or Warrant Certificate
nor any provision of any Warrant Certificate shall give rise to any liability of
the holder thereof for the purchase price of any Warrant Security or as a holder
of any Warrant Security, whether such liability is asserted by or on behalf of
the Corporation, creditors of the Corporation or any other Person.
Section 4.2 Holder of Warrant Certificate May Enforce Rights.
------------------------------------------------
Notwithstanding any of the provisions of any Warrant Certificate, any holder of
a Warrant or a Warrant Certificate, without the consent of the holder of any
Warrant Securities or the holder of any other Warrant or Warrant Certificate
may, on his own behalf and for his own benefit, enforce, and may institute and
maintain any suit, action or proceeding against the Corporation suitable to
enforce, or otherwise in respect of, his rights under his Warrant Certificate(s)
or otherwise with respect to his Warrant(s).
Section 4.3 Office of the Corporation. As long as any of the Warrants
-------------------------
remain outstanding, the Corporation shall maintain one or more offices or
agencies where the Warrants may be presented for exercise and Warrants and
Warrant Securities may be presented for registration of
33
transfer, division or combination. Warrants and Warrant Securities may, in any
event, be presented for such purposes at the principal executive offices of the
Corporation in the United States.
Section 4.4 Uniform Terms. The substantive terms, conditions and other
-------------
provisions of all Warrants and Warrant Certificates shall at all times be
uniform and identical within each class (except, in the case of Warrant
Certificates, as to the number of Warrants evidenced thereby). The Corporation
shall not issue any Warrants except pursuant to the Purchase Agreement. All
Warrants outstanding from time to time shall be deemed to have been issued on
the Issue Date, and all Warrant Certificates, whenever issued, shall be deemed
to have been issued, and shall be dated, as of the Issue Date.
ARTICLE V
TRANSFER, EXCHANGE AND REPLACEMENT OF WARRANTS
----------------------------------------------
Section 5.1 Exchange and Transfer. Transfer of Warrants shall be
---------------------
registered on the books of the Corporation to be maintained for such purpose,
upon surrender of the Warrant Certificate representing the Warrant or Warrants
to be transferred at any office or agency designated by the Corporation pursuant
to Section 4.3, together with a written Assignment Form substantially in the
-----------
form annexed to this Agreement duly executed by the holder thereof or his duly
appointed legal representative or attorney-in-fact. Upon such surrender, the
Corporation shall, at its expense, execute and deliver a new Warrant Certificate
or Warrant Certificates in the name of the assignee or assignees and in the
denomination or denominations specified in such instrument of assignment, and
shall issue to the assignor a new Warrant Certificate evidencing the Warrants
not so assigned. Warrants, if properly assigned in compliance herewith, may be
exercised by a new holder thereof without having a new Warrant Certificate
issued. At the option of any Warrantholder (i) a Warrant Certificate may be
exchanged for other Warrant Certificates representing, in the aggregate, the
same number of Warrants as the Warrant Certificate exchanged or (ii) two or more
Warrant Certificates may be exchanged for a single Warrant Certificate
representing, or some other number of Warrant Certificates representing in the
aggregate, the same number of Warrants as the Warrant Certificates exchanged, in
each case upon surrender of the Warrant Certificate(s) to be exchanged at the
office of the Corporation referred to in Section 2.1 or another office or agency
designated by the Corporation pursuant to Section 4.3. Whenever any Warrant
-----------
Certificate is so surrendered for exchange, the Corporation shall, at its
expense, execute and deliver the Warrant Certificate(s) which the Warrantholder
making the exchange is entitled to receive. Upon receipt by the Corporation of
any mutilated Warrant Certificate, or of evidence reasonably satisfactory to it
of the loss, theft or destruction of any Warrant Certificate and, in the case of
loss, theft or destruction, of indemnity reasonably satisfactory to it, the
Corporation will make and deliver a new Warrant Certificate of identical tenor
and representing the same number of Warrants as such mutilated, lost, stolen or
34
destroyed Warrant Certificate. Any Warrant Certificate issued in exchange for
any Warrant Certificate, in replacement of any mutilated, lost, stolen or
destroyed Warrant Certificate or upon transfer of any Warrant shall be dated the
Issue Date and shall represent an additional contractual obligation of the
Corporation, whether or not the mutilated, lost, stolen or destroyed Warrant
Certificate shall be at any time enforceable by anyone, and shall be entitled to
rights and benefits equally and proportionately with any and all other Warrant
Certificates duly executed and delivered hereunder.
Section 5.2 Supplying Information. The Corporation shall cooperate with
---------------------
each Warrantholder and each holder of Warrant Securities in supplying such
information as may be reasonably necessary for such Warrantholder or holder to
complete and file any information reporting forms presently or hereafter
required by the Commission as a condition to the availability of an exemption
from registration under the Securities Act for the sale or other transfer of any
Warrant or Warrant Securities. Without limiting the generality of the
immediately preceding sentence, Warrantholders and prospective purchasers of
Warrants designated by such holders will have the right to obtain from the
Corporation upon request by such holders or prospective purchasers, during any
period in which the Corporation is not subject to Section 13 or 15(d) of the
Exchange Act, the information required by paragraph (d)(4)(i) of Rule 144A in
connection with any transfer or proposed transfer of Warrants.
Section 5.3 Expenses. No service or other charge shall be made for any
--------
exchange, substitution, replacement or registration of transfer of Warrants or
Warrant Certificates and the Corporation shall bear its own costs and expenses
in connection therewith, but the Corporation may require payment of a sum
sufficient to cover any stamp, stock transfer or other similar tax or
governmental charge that is required to be paid by the Corporation solely by
virtue of any transfer. All Warrant Certificates issued upon any exchange,
substitution, replacement or registration of transfer of Warrant Certificates
shall be the valid obligations of the Corporation, evidencing the same
obligations, and entitled to the same benefits under this Agreement, as the
Warrant Certificate surrendered for such exchange, substitution, replacement or
registration of transfer.
ARTICLE VI
MISCELLANEOUS
-------------
Section 6.1 Reacquired Warrants. All Warrants received by the
-------------------
Corporation upon exercise or redeemed, retired, purchased or otherwise lawfully
acquired by the Corporation or any of its Subsidiaries shall be retired and
canceled and shall not be deemed outstanding for any purpose or reissued.
35
Section 6.2 Amendment. The terms, conditions and other provisions of
---------
the Warrants and Warrant Certificates which, as indicated hereinabove, are
intended to be uniform may be amended only with the written consent of the
Corporation and the Majority Holders. Any such amendment which is so consented
to shall be conclusive and binding on all present and future holders of Warrant
Certificates whether or not they have consented to such modification or
amendment or waiver and whether or not notation of such modification or
amendment is made upon such Warrant Certificates. Any instrument given by or on
behalf of any holder of a Warrant Certificate in connection with any consent to
any modification or amendment will be conclusive and binding on all subsequent
holders of such Warrant Certificate.
Section 6.3 Determinations Generally. Unless otherwise expressly
------------------------
provided herein, all decisions and determinations required or permitted to be
made hereunder by any Purchaser (including any decision as to whether to give
any consent or approval) shall be made by such Person in its sole discretion.
Section 6.4 Binding Effect; Successors and Assigns; Entire Agreement.
--------------------------------------------------------
Except as expressly provided in this Agreement, nothing in this Agreement,
express or implied, is intended or shall be construed to confer upon or give any
creditor, stockholder or Affiliate of the Corporation or any other Person except
the parties and the Persons who from time to time are holders of Warrants any
remedy or claim under or by reason of this Agreement or any term, covenant or
condition hereof, all of which shall be for the sole and exclusive benefit of
the parties. This Agreement and all of the provisions hereof shall be binding
upon and inure to the benefit of the parties and the Persons who from time to
time are holders of Warrants and their respective successors and permitted
assigns. Except as otherwise specifically permitted or contemplated by this
Agreement, neither this Agreement nor any of the rights, interests or
obligations of the Corporation hereunder shall be assigned or delegated without
the prior written consent of the Majority Holders. This Agreement constitutes
the entire agreement of the parties with respect to the subject matter herein
and supersede all prior agreements and undertakings, both written and oral,
among the parties, or any of them, with respect to the specific subject matter
hereof.
Section 6.5 No Implied Waivers. No action taken pursuant to this
------------------
Agreement, including, without limitation, any investigation by or on behalf of
any party or beneficiary, shall be deemed to constitute a waiver by the party or
beneficiary taking such action of compliance with any agreements, covenants,
obligations or commitments contained herein or made pursuant hereto. The waiver
by any party of a breach or benefit of any provision of this Agreement shall not
operate or be construed as a waiver of any preceding or succeeding breach and no
failure by any party or beneficiary to exercise any right, privilege or remedy
hereunder shall be deemed a waiver of such party's or beneficiary's rights,
privileges or remedies hereunder or shall be deemed a waiver of such party's or
beneficiary's rights to exercise the same at any subsequent time.
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Section 6.6 Further Assurances. Each party shall cooperate and take
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such actions as may be reasonably requested by another party in order to carry
out the provisions and purposes of this Agreement and the transactions
contemplated hereby.
Section 6.7 Counterparts. This Agreement may be executed in
------------
counterparts, each of which shall be deemed to be an original and all of which
together shall be deemed to constitute one and the same agreement. In addition
to any other lawful means of execution or delivery, this Agreement may be
executed by facsimile signatures and may be delivered by the exchange of
counterparts of signature pages by means of telecopier transmission.
Section 6.8 Notices. All notices, requests, demands, claims, and other
-------
communications hereunder shall be in writing. Any notice, request, demand,
claim, or other communication hereunder shall be deemed duly given if (and then
two Business Days after) it is sent by registered or certified mail, return
receipt requested, postage prepaid, and addressed to the intended recipient as
set forth below:
If to the Corporation: Convergent Communications, Inc.
000 Xxxxxxxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, Xxxxxxxx 00000
Attn: General Counsel
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
with a copy to: Xxxxxxx X. Xxxxx, Esq.
Xxxxxx, Xxxx & Xxxxxxxx LLP
0000 Xxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
If to any Warrantholder, to such Warrantholder at its address or supplied
by such Warrantholder form time to time in writing to the Corporation, with
copies to:
Xxxx X. Xxxx, Esq.
Cleary, Gottlieb, Xxxxx & Xxxxxxxx
Xxx Xxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
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Any party may send any notice, request, demand, claim, or other communication
hereunder to the intended recipient at the address set forth above using any
other means (including personal delivery, expedited courier, messenger service,
telecopy, telex, facsimile transmission ordinary mail, or electronic mail), but
no such notice, request, demand, claim, or other communication shall be deemed
to have been duly given unless and until it actually is received by the intended
recipient. Any party may change the address to which notices, requests,
demands, claims, and other communications hereunder are to be delivered by
giving the other parties notice in the manner herein set forth.
Section 6.9 Governing Law. This Agreement shall be governed by and
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construed in accordance with the laws of the State of New York without giving
effect to any choice or conflict of law provision or rule (whether of the State
of New York or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of New York.
Section 6.10 Severability. If any provision of this Agreement or the
------------
application thereof to any person or circumstance is held by a court of
competent jurisdiction to be invalid, void or unenforceable, the remaining
provisions hereof, or the application of such provision to Persons or
circumstances other than those as to which it has been held invalid, void or
unenforceable, shall remain in full force and effect and shall in no way be
affected, impaired or invalidated thereby, provided, that if any provision
--------
hereof or thereof or the application of any such provisions shall be so held to
be invalid, void or unenforceable by a court of competent jurisdiction, then
such court may substitute therefor a suitable and equitable provision in order
to carry out, so far as may be valid and enforceable, the intent and purpose of
the invalid, void or unenforceable provision and, if such court shall fail or
decline to do so, the parties shall negotiate in good faith a suitable and
equitable substitute provision. To the extent that any such provision shall be
judicially unenforceable in any one or more states, such provision shall not be
affected with respect to any other state, each provision with respect to each
state being construed as several and independent.
Section 6.11 Specific Performance. Without intending to limit the
--------------------
remedies available to any of the parties, each of the parties acknowledges and
agrees that a violation, breach or threatened by the other of any term of this
Agreement will cause such party irreparable injury for which an adequate remedy
at law is not available. The parties agree that each party shall have the right
of specific performance and, accordingly, shall be entitled to an injunction,
restraining order or other form of equitable relief, in addition to any and all
other rights and remedies at law, from any court of competent jurisdiction
restraining any other party from committing any breach or threatened breach of,
or otherwise specifically to enforce, any provision of this Agreement and all
such rights will be cumulative. The parties further agree that any defense in
any action for specific performance that a remedy at law would be adequate is
waived.
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(Signatures continued on the next page)
39
IN WITNESS WHEREOF, the parties have executed this Warrant Agreement as of
the date first written above.
CONVERGENT COMMUNICATIONS, INC.
By: /s/ Xxxxxx X. Xxxx
_________________________________________
Xxxxxx X. Xxxx, Chief Executive Officer
TPG CONVERGENT I, LLC
By: /s/ Xxxxxxx X. Xxxxxxxxx
_________________________________________
Name: Xxxxxxx X. Xxxxxxxxx
Title: Vice President
SANDLER CAPITAL PARTNERS V, L.P.
By: Sandler Investment Partners, L.P.,
General Partner
By: Sandler Capital Management,
General Partner
By: MJDM Corp., a General
Partner
By: /s/ Xxxxxx X. Xxxxxxxxx
_________________________________________
Xxxxxx X. Xxxxxxxxx
President
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SANDLER CAPITAL PARTNERS IV, L.P.
By: Sandler Investment Partners, L.P.,
General Partner
By: Sandler Capital Management,
General Partner
By: MJDM Corp., a General
Partner
By: /s/ Xxxxxx X. Xxxxxxxxx
_______________________
Xxxxxx X. Xxxxxxxxx
President
SANDLER CAPITAL PARTNERS IV FTE, L.P.
By: Sandler Investment Partners, L.P.,
General Partner
By: Sandler Capital Management,
General Partner
By: MJDM Corp., a General
Partner
By: /s/ Xxxxxx X. Xxxxxxxxx
_______________________
Xxxxxx X. Xxxxxxxxx
President
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