Exhibit 10.5
XXXXX 0 COMMUNICATIONS, INC.
and
XXXXXXX X. XXXXXXXX
______________________
Warrant Agreement
Dated as of March 11, 2002
______________________
WARRANT AGREEMENT (the "Agreement"), dated as of March 11, 2002, between
Level 3 Communications, Inc., a Delaware corporation (the "Company"), and
Xxxxxxx X. Xxxxxxxx (the "Purchaser").
The Company proposes to issue Common Stock Purchase Warrants, as
hereinafter described (the "Warrants"), to purchase up to an aggregate 1,514,840
shares of its Common Stock, par value $.01 per share (the "Common Stock") (the
shares of Common Stock issuable on exercise of the Warrants being referred to
herein as the "Warrant Shares"). The Warrants will be issued in a single series.
In consideration of the foregoing and for the purpose of defining the terms
and provisions of the Warrants and the respective rights and obligations
thereunder of the Company and the registered owners of the Warrants (the
"Holders"), the Company and the Purchaser hereby agree as follows:
SECTION 1. Issuance of Warrants. Concurrently with the execution and
delivery of this Agreement, the Company is issuing and delivering to the
Purchaser Warrants to purchase 1,514,840 Warrant Shares.
SECTION 2. Transferability and Form of Warrant.
2.1 Registration. The Warrants shall be numbered and shall be registered on
the books of the Company as they are issued. The Company shall be entitled to
treat the Holder of any Warrant as the owner in fact thereof for all purposes
and shall not be bound to recognize any equitable or other claim or interest in
such Warrant on the part of any other person, and shall not be liable for any
registration of transfer of any Warrants which are registered or to be
registered in the name of a fiduciary or the nominee of a fiduciary unless made
with the actual knowledge that a fiduciary or nominee is committing a breach of
trust in requesting such registration of transfer, or with such actual knowledge
of such facts that its participation therein amounts to intentional conversion.
The Warrants shall initially be registered in the name of the Purchaser.
2.2 Form of Warrant. The text of the Warrant and of the Purchase Form shall
be substantially in the form set forth in Exhibit A attached hereto. The price
per Warrant Share and the number of Warrant Shares issuable upon exercise of
each Warrant are subject to adjustment upon the occurrence of certain events,
all as hereinafter provided. The Warrants shall be executed on behalf of the
Company by its Chairman of the Board, Chief Executive Officer, President or one
of its Executive or Group Vice Presidents, under its corporate seal reproduced
thereon attested by its Secretary or Assistant Secretary. The signature of any
such officers on the Warrants may be manual or facsimile.
Warrants bearing the signatures of individuals who were at any time the
proper officers of the Company shall bind the Company, notwithstanding that such
individuals or any one of them shall have ceased to hold such offices prior to
the delivery of such Warrants.
SECTION 3. Term of Warrants; Exercise of Warrants.
3.1 Term of Warrants. Subject to the terms of this Agreement, the Holder
shall have the right, which may be exercised at any time and from time to time,
to purchase from the Company the number of fully paid and nonassessable Warrant
Shares which the Holder may at the time be entitled to purchase upon exercise of
such Warrant.
3.2 Vesting. The Warrants shall be vested as of the date of this Agreement.
Each Warrant shall expire at 5:00 p.m., New York City time, on June 30, 2009
(the "Expiration Date").
3.3 Exercise of Warrants. Subject to the provisions of Section 3.4 hereof,
a Warrant that is exercisable under this Agreement may be exercised upon
surrender to the Company at its principal office of the certificate or
certificates evidencing the Warrant or Warrants to be exercised, together with
the Purchase Form on the reverse thereof duly filled in and signed, which
signature (if not the Purchaser) shall be guaranteed by a bank or trust company
or a broker or dealer which is a member of the National Association of
Securities Dealers, Inc., and upon payment to the Company of the Warrant Price
as defined in and determined in accordance with the provisions of Section 7
hereof for the number of Warrant Shares in respect of which such Warrants are
then exercised (the "Exercise Amount"). Payment of the Exercise Amount shall be
made (i) by payment to the Company in cash, by certified or official bank check,
or by wire transfer of the Exercise Amount, (ii) by surrender to the Company for
cancellation of securities (which may include Warrant Shares received in respect
of such Warrants being exercised) of the Company having a Market Price (as
hereinafter defined) on the date of exercise equal to the Exercise Amount; or
(iii) by a combination of the methods described in clauses (i) and (ii) above,
in each case at the option of the Holder. For purposes hereof, the term "Market
Price" shall mean (1) the average of the daily closing price of a share of
Common Stock or other securities of the Company, as the case may be, for the 15
consecutive trading days preceding the date the Warrant is presented for
exercise on the principal national securities exchange on which the Common
Stock, or securities are listed or admitted to trading or, (2) if not listed or
admitted to trading on any national securities exchange, the average of the
reported bid and asked prices during such 15 trading day period in the
over-the-counter market as furnished by the National Quotation Bureau, Inc., or,
if such firm is not then engaged in the business of reporting such prices, as
furnished by any member of the National Association of Securities Dealers, Inc.
selected by the Company or, (3) if the Common Stock or securities are not
publicly traded, the Market Price for such day shall be the fair market value
thereof determined jointly by the Company and the Holder; provided, however,
that if pursuant to this subclause (3) such parties are unable to reach
agreement within a reasonable period of time, the Market Price shall be
determined in good faith by the independent investment banking firm selected
jointly by the Company and the Holder or, if that selection cannot be made
within 15 days, by an independent investment banking firm selected by the
American Arbitration Association in accordance with its rules.
Subject to Section 3.4 and Section 4 hereof, upon the surrender of a
Warrant that is exercisable under this Agreement and payment of the Warrant
Price as aforesaid, the Company shall cause to be issued and delivered with all
reasonable dispatch (but in not event later than (i) 5 business days after
payment is received if payment is made in immediately available funds or by the
surrender of securities and (ii) 10 business days after payment is received if
payment is not made in immediately available funds or by the surrender of
securities) to or upon the written order of the Holder and in such name or names
as the Holder may designate, a certificate or certificates for the number of
full Warrant Shares so purchased upon the exercise of such Warrants, together
with cash, as provided in Section 8 hereof, in respect of any fractional Warrant
Shares otherwise issuable upon such surrender. If permitted by applicable law,
to the extent that the Warrant Price consideration consists solely of securities
(which may include Warrant Shares received in respect of such Warrants being
exercised) of the Company, the Warrant Shares so acquired (together with the
related certificate or certificates) shall be deemed to have been acquired as of
the date hereof. The rights of purchase represented by the Warrants shall be
exercisable, at the election of the Holders thereof, either in full or from time
to time in part and, in the event that a certificate evidencing Warrants is
exercised in respect of less than all of the Warrant Shares purchasable on
exercise at any time prior to the date of expiration of the Warrants, the
Company shall, at the time of delivery of the certificate or certificates
representing Warrant Shares, deliver to the Holder a new Warrant evidencing the
rights to purchase the remaining Warrant Shares, which new Warrant shall in all
other respects be identical to this Warrant.
3.4 Cash in Lieu of Shares Upon Exercise of Warrants. Prior to the exercise
of any Warrants, the Holder shall give notice to the Company that such Holder
intends to exercise all or a portion of the Warrants. Following such notice, the
Company shall have the right, exercisable at its sole election, by giving notice
to the Holder of such election within 10 business days of such notice, to pay to
the Holder, in lieu of the issuance of the Warrant Shares which otherwise would
be issued upon such exercise, and payment of the Warrant Price relating thereto,
an amount equal to the product of (x) 99.8% of the difference between the
Warrant Price and the current market price of the Common Stock on the date prior
to the date on which the notice of exercise is given (determined as provided in
Section 7.2(f)) (the "Spread") and (y) the number of shares which would have
been issued upon exercise of the Warrants had the Company not made the election
set forth herein. In the event the Company notifies the Holder that it does not
intend to exercise its right to pay the Spread (or fails to notify the Holder of
its intent within such 10 business day period), the Holder will have 60 days to
obtain the funds necessary to acquire the shares of Common Stock pursuant to the
Warrants and/or exercise the registration rights provided in Exhibit B. If the
Holder fails to obtain the funds necessary to acquire the Common Stock within
such 60 days, the requirement to provide the notices contemplated by this
Section 3.4 shall once again be applicable. If the Holder exercises the Holder's
registration rights, the Holder need not pay for the Warrant Shares until such
registration shall become effective and the issuance of shares of Common Stock
pursuant thereto shall have been consummated. The Company shall take all actions
necessary to cause the certificates representing the Warrant Shares to be issued
upon exercise of such Warrants to be issued to the Holder promptly following the
payment of the Warrant Price by the Holder.
3.5 Split Up, Combination and Exchange of Warrant Certificates. At or prior
to the Expiration Date, this Warrant, with or without other Warrants, may be
split up, combined or
exchanged for an other Warrant or Warrants, entitling the Holder to
purchase a like number of Warrant Shares as such surrendered Warrant or Warrants
then entitled such Holder to purchase. Any Holder desiring to split up, combine
or exchange this Warrant shall make such request in writing delivered to the
Company, and shall surrender the Warrant or Warrants to be split up, combined or
exchanged to the Company. Thereupon the Company shall within a reasonable period
of time sign and deliver to such Holder a Warrant or Warrants, as the case may
be, as so requested containing such legends as are required by this Agreement
and applicable law.
3.6 Registration Rights. The Purchaser and the Holders shall have
registration rights as set forth in Exhibit B hereto with respect to the Warrant
Shares.
SECTION 4. Payment of Taxes. The Company will pay all documentary stamp
taxes, if any, attributable to the initial issuance of Warrant Shares upon the
exercise of Warrants; provided, however, that the Company shall not be required
to pay any tax or taxes which may be payable in respect of any transfer involved
in the issue or delivery of any Warrant or certificates for Warrant Shares in a
name other than that of the Holder of such Warrants.
SECTION 5. Mutilated or Missing Warrants. In case any of the certificates
evidencing the Warrants shall be mutilated, lost, stolen or destroyed, the
Company will issue and deliver in exchange and substitution for and upon
cancellation of the mutilated Warrant certificate, or in lieu of and
substitution for the Warrant certificate lost, stolen or destroyed, a new
Warrant certificate of like tenor and representing an equivalent right or
interest, but only upon receipt of evidence reasonably satisfactory to the
Company of such loss, theft or destruction of such Warrant and an indemnity or
bond, if requested, also reasonably satisfactory to it. An applicant for such a
substitute Warrant certificate shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company may prescribe.
SECTION 6. Reservation of Warrant Shares; Purchase and Cancellation of
Warrants.
6.1 Reservation of Warrant Shares. There have been reserved, and the
Company shall at all times keep reserved, out of its authorized Common Stock, a
number of shares of Common Stock sufficient to provide for the exercise of the
rights of purchase represented by the outstanding Warrants. The transfer agent
for the Common Stock and every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise of any of the rights of
purchase aforesaid will be irrevocably authorized and directed at all times to
reserve such number of authorized shares as shall be required for such purpose.
The Company will keep a copy of this Agreement on file with the transfer agent
for the Common Stock and with every subsequent transfer agent for any shares of
the Company's capital stock issuable upon the exercise of the rights of purchase
represented by the Warrants. The Company may requisition from time to time from
such transfer agent the stock certificates required to honor outstanding
Warrants upon exercise thereof in accordance with the terms of this Agreement.
The Company will supply such transfer agent with duly executed stock
certificates for such purposes and will provide or otherwise make available any
cash which may be payable as provided in Section 8 hereof. The Company will
furnish such transfer agent a copy of all notices of adjustments and
certificates related thereto. All Warrants surrendered in the exercise of the
rights thereby evidenced shall be canceled.
6.2 Purchase of Warrants by the Company. In addition to its rights
contained in this Agreement, the Company may, except as limited by applicable
law, other agreements or herein, with the consent of the Holder, purchase or
otherwise acquire Warrants at such times, in such manner and for such
consideration as the Company and such Holder may deem appropriate.
6.3 Cancellation of Warrants. In the event the Company shall purchase or
otherwise acquire Warrants, the certificates evidencing the same shall thereupon
be canceled and retired. The Company shall cancel any Warrant certificate
surrendered for exchange, substitution, transfer or exercise in whole or in
part.
SECTION 7. Warrant Price.
7.1 Unadjusted Warrant Price. The initial price at which Warrant Shares
shall be purchasable upon exercise of Warrants shall be $8.00 per share, subject
to adjustment pursuant to Sections 7.2 through 7.5 hereof (the "Warrant Price").
7.2 Adjustments. The number and kind of securities purchasable upon the
exercise of each Warrant and the Warrant Price shall be subject to adjustment as
follows:
(a) Stock dividends, splits, etc. In case the Company shall at any
time or from time to time after the date of this Agreement (i) declare or
pay a dividend on any of its shares of Common Stock or make a distribution
to all holders of shares of Common Stock in shares of Common Stock (or a
series thereof), (ii) subdivide its outstanding shares of Common Stock into
a greater number of shares, (iii) combine its outstanding shares of Common
Stock into a smaller number of shares of Common Stock or (iv) issue by
reclassification of its shares of Common Stock other securities of the
Company (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing company),
the number of shares purchasable upon exercise of each Warrant immediately
prior thereto shall be adjusted so that the Holder shall be entitled to
receive solely the kind and number of shares or other securities of the
Company that it would have owned or have been entitled to receive after the
happening of any of the events described above had such Warrant been
exercised immediately prior to the happening of such event or any record
date with respect thereto. An adjustment made pursuant to this paragraph
(a) shall become effective immediately after the effective date of such
event, retroactive to the record date, if any, for such event.
(b) Distribution of rights or warrants. In case the Company shall fix
a record date for the issuance of rights or warrants to all holders of
Common Stock (other than pursuant to the Rights Agreement, dated as of May
29, 1998, between the Company and Norwest Bank Minnesota, N.A., (now known
as Xxxxx Fargo Bank Minnesota, N.A.) as rights agent, or any successor
agreement), entitling them to subscribe for or purchase shares of Common
Stock at a price per share (or having a conversion price per share) that is
lower on the date of issuance thereof than the then current market price
per share of Common Stock (as defined in paragraph (f) below), the number
of shares thereafter purchasable upon the exercise of each Warrant (at the
price determined in accordance with paragraph (j) hereof) shall be
determined by multiplying the number of shares theretofore purchasable upon
exercise of each Warrant by a fraction, of which the
numerator shall be the number of shares of Common Stock outstanding on the
date of issuance of such rights or warrants plus the number of additional
shares of Common Stock offered for subscription or purchase (or into which
the convertible securities so offered are initially convertible), and of
which the denominator shall be the number of shares of Common Stock
outstanding on the date of issuance of such rights or warrants plus the
number of shares that the aggregate offering price of the total number of
shares of Common Stock so offered (or the aggregate initial conversion
price of the convertible securities so offered) would purchase at the then
current market price per share of Common Stock. Such adjustment shall
become effective immediately after the date such rights or warrants are
issued, retroactive to the record date for the determination of
stockholders entitled to receive such rights or warrants.
(c) Distributions of assets. In the event the Company shall fix a
record date for the distribution to all holders of its shares of Common
Stock (i) evidences of its indebtedness, (ii) securities (other than Common
Stock or rights or warrants of the type described in Section 7.2(a) or (b))
or (iii) assets (including extraordinary cash dividends, but excluding
regular distributions, including cash dividends, paid in the ordinary
course), then in each case the Warrant Price shall be adjusted to a price
determined by multiplying the Warrant Price in effect immediately prior to
such distribution by a fraction, of which the numerator shall be the then
current market price per share of Common Stock (as defined in paragraph (f)
below) on the date of such distribution, less the then fair value (as
determined in good faith by the Board of Directors of the Company, whose
determination shall be conclusive and set forth in a certified resolution
of the Board of Directors) of the portion of the assets or the securities
or the evidences of indebtedness so distributed applicable to one share of
Common Stock, and of which the denominator shall be the then current market
price per share of Common Stock. Such adjustment shall be made whenever any
such distribution is made, and shall become effective on the date of
distribution, retroactive to the record date for the determination of
stockholders entitled to receive such distribution.
(d) Issuance of Common Stock. In case the Company shall issue shares
of Common Stock (excluding shares issued (i) in any of the transactions
described in paragraph (a) hereof, (ii) upon conversion or exchange of
securities convertible into or exchangeable for Common Stock, including the
Warrants, (iii) to the Company's employees under bona fide employee benefit
plans adopted by the Company, (iv) upon exercise of rights or warrants
issued to the holders of Common Stock, but only if at the time of such
issuance the current market price of the Common Stock is greater than or
equal to the Warrant Price, (v) issued to acquire, or in connection with
the acquisition of, all or any portion of a business as a going concern,
whether such acquisition shall be effected by purchase of assets, exchange
of securities, merger, consolidation or otherwise, (vi) upon exercise of
rights or warrants issued in a firm commitment public offering, with an
initial exercise price at least equal to the current market price at the
date of issuance or (vii) in a firm commitment public offering), for a
consideration per share of Common Stock less than the current market price
per share of Common Stock (as defined in paragraph (f) hereof) on the date
the Company fixes the offering price of such additional shares, the Warrant
Price shall be adjusted immediately prior thereto by multiplying the
Warrant Price in effect immediately prior to such issuance by a fraction,
of which the numerator shall be the total number of shares of Common Stock
outstanding immediately prior to the issuance of such additional shares
plus the number of shares of Common Stock which the aggregate consideration
received (determined as provided in paragraph (g) hereof) for the issuance
of such additional shares would purchase at the then current market price
per share of Common Stock, and of which the denominator shall be the number
of shares of Common Stock outstanding immediately after the issuance of
such additional shares. Such adjustment shall be made successively whenever
such an issuance is made.
(e) Issuance of convertible securities. In case the Company shall
issue any securities convertible into or exchangeable for Common Stock
(excluding securities issued in transactions described in paragraphs
(a)(iv), (b) and (c) hereof) for a consideration per share of Common Stock
initially deliverable upon conversion or exchange of such securities
(determined as provided in paragraph (g) hereof) less than the current
market price per share of Common Stock (as defined in paragraph (f) hereof)
in effect immediately prior to the issuance of such securities, the Warrant
Price shall be adjusted immediately thereafter so that it shall equal the
price determined by multiplying the Warrant Price in effect immediately
prior thereto by a fraction, of which the numerator shall be the number of
shares of Common Stock outstanding immediately prior to the issuance of
such securities plus the number of shares of Common Stock which the
aggregate consideration received (determined as provided in paragraph (g)
hereof) for such securities would purchase at the current market price per
share of Common Stock, and of which the denominator shall be the number of
shares of Common Stock outstanding immediately prior to such issuance plus
the maximum number of shares of Common Stock deliverable upon conversion of
or in exchange for such securities at the initial conversion or exchange
price or rate. Such adjustment shall be made successively whenever such an
issuance is made.
Upon the termination of the right to convert or exchange such
securities, the Warrant Price shall be readjusted to such Warrant Price as
would have been obtained had the adjustments made upon the issuance of such
convertible or exchangeable securities been made upon the basis of the
delivery of only the number of shares of Common Stock actually delivered
upon conversion or exchange of such securities and upon the basis of the
consideration actually received by the Company (determined as provided in
paragraph (g) hereof) for such securities. Such a readjustment shall not
affect the number of shares issued upon the exercise of any Warrants prior
to the date the readjustment is made.
(f) Definition of market price. For the purpose of any computation
under paragraphs (b), (c), (d) and (e) of this Section 7.2 and for the
purpose of Section 3.4 hereof, the current market price per share of Common
Stock at any date shall be deemed to be the average of the daily closing
price per share for the 10 consecutive trading days commencing 20 trading
days before such date. The closing price for each day shall be the last
sale price or, in case no such sale takes place on such day, the average of
the highest reported bid and lowest reported asked prices as furnished by
the National Association of Securities Dealers Inc. through Nasdaq or a
similar organization if Nasdaq is no longer reporting such information. If
on any such trading day shares of Common
Stock are not quoted by any such organization, the fair value of such
shares on such day, as determined in good faith by the Board of Directors
of the Company, shall be used.
(g) Valuation of consideration. For purposes of any computation
respecting consideration received pursuant to paragraphs (d) and (e)
hereof, the following shall apply:
(i) in the case of the issuance of shares of Common Stock for
cash, the consideration shall be the amount of such cash, provided
that in no case shall any deductions be made for any commissions,
discounts or other expenses incurred by the Company for any
underwriting of the issue or otherwise in connection therewith;
(ii) in the case of the issuance of shares of Common Stock for a
consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined in good faith by the Board of Directors of the Company
(irrespective of the accounting treatment thereof), whose
determination shall be conclusive and described in a certified
resolution; and
(iii) in the case of the issuance of securities convertible into
or exchangeable for shares of Common Stock, the aggregate
consideration received therefor shall be deemed to be the
consideration received by the Company for the issuance of such
securities plus the additional minimum consideration, if any, to be
received by the Company upon the conversion or exchange thereof (the
consideration in each case to be determined in the same manner as
provided in clauses (i) and (ii) of this paragraph (g)).
(h) Definition of shares of Common Stock. For the purposes of this
Section 7.2, the term "shares of Common Stock" shall mean (i) the class of
stock designated as the Common Stock of the Company at the date of this
Agreement or (ii) any other class of stock resulting from changes or
reclassifications of such shares consisting solely of changes in par value,
or from par value to no par value, or from no par value to par value. In
the event that at any time, as a result of an adjustment made pursuant to
paragraph (a) above, the Holders shall become entitled to purchase any
shares of the Company other than shares of Common Stock, thereafter the
number of such other shares so purchasable upon exercise of each Warrant
and the Warrant Price of such shares shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable
to the provisions with respect to the Warrant Shares contained in Sections
7.2 through 7.3, inclusive as they would have been applied to the Warrant
Shares.
(i) Minimum adjustment. No adjustment in the number of shares
purchasable hereunder shall be required unless such adjustment would
require an increase or decrease of at least one half (1/2) of one percent
(1%) in the number of shares purchasable upon the exercise of each Warrant;
provided, however, that any adjustments which by reason of this paragraph
(i) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment or upon any exercise of a Warrant.
(j) Warrant Price adjustment. Whenever the number of shares
purchasable upon the exercise of each warrant is adjusted, as herein
provided, the Warrant Price per share payable upon exercise of each Warrant
shall be adjusted to the nearest cent by multiplying such Warrant Price
immediately prior to such adjustment by a fraction, of which the numerator
shall be the number of shares purchasable upon the exercise of each Warrant
immediately prior to such adjustment, and of which the denominator shall be
the number of shares so purchasable immediately thereafter.
(k) Notice of adjustment. Whenever the number of shares purchasable
upon the exercise of each Warrant or the Warrant Price of such shares is
adjusted, as herein provided, the Company shall promptly mail to each
Holder, by first-class mail, postage prepaid, notice of such adjustment or
adjustments.
(l) Company may reduce Warrant Price or increase number of shares
purchasable. The Company may at its option, at any time during the term of
the Warrants, reduce the then current Warrant Price, or increase the number
of shares of Common Stock purchasable upon exercise of each Warrant, to any
amount deemed appropriate by the Board of Directors of the Company.
(m) Consolidation, Merger, etc. In case the Company after the date
hereof (a) shall consolidate with or merge into any other corporation,
association, partnership, organization, business, individual, government or
political subdivision thereof or a governmental agency ("Person") and shall
not be the continuing or surviving corporation of such consolidation or
merger, or (b) shall permit any other Person to consolidate with or merge
into the Company and the Company shall be the continuing or surviving
Person but, in connection with such consolidation or merger, shares of
Common Stock or other securities shall be changed into or exchanged for
stock or other securities of any other Person or cash or any other
property, or (c) shall transfer all or substantially all of its properties
or assets to any other Person, or (d) shall effect a capital reorganization
or reclassification of the Common Stock or other securities (other than a
capital reorganization or reclassification resulting in the issue of shares
of Common Stock for which adjustment in the Warrant Price is otherwise
provided in Section 7.2) (each a "Merger Event"), then, and in the case of
each such Merger Event, proper provision shall be made so that, upon the
basis and the terms and conditions as well as in the manner provided in
this Agreement, the Holder, upon the exercise of a Warrant at any time
after the consummation of such Merger Event, shall be entitled to receive
(at the aggregate Warrant Price adjusted to reflect the modification of the
number of Warrant Shares pursuant to this Section 7.2(m) in effect at the
time of such consummation for all shares of Common Stock or other
securities issuable upon such exercise immediately prior to such
consummation), in lieu of the shares of Common Stock or other securities
issuable upon such exercise prior to such consummation, the highest amount
of securities, cash or other property to which such Holder would have been
entitled as a stockholder upon such consummation if such Holder had
exercised the rights represented by this Warrant immediately prior thereto
(or, if applicable, immediately prior to the record date established in
connection with any such Merger Event), subject to adjustments (subsequent
to such consummation) as nearly equivalent as possible to the adjustments
provided for in Sections 7.2 through 7.5.
In addition, for the period commencing on the date of this Agreement and
terminating on the date that is the second anniversary of this Agreement,
if the Company shall engage in any Merger Event wherein all of the
outstanding Common Stock of the Company is acquired for consideration
consisting of any property or asset other than the common stock of the
acquiring company (the "Merger Consideration") (a "Special Merger Event"),
the Company shall pay immediately prior to any record date for such Special
Merger Event by issuing to the Holder shares of unregistered Common Stock
an amount equal to the underlying value of any Warrants then held by the
Holder absent the consummation of the Special Merger Event, calculated as
of the record date of the Special Merger Event using a Black-Scholes
derived option pricing model for a sixty (60) day historical period
immediately preceding, and ending on, the record date for such Special
Merger Event. In the event that a payment in the form of shares of
unrestricted Common Stock is required by this Section 7.2(m) is required,
it shall be a condition to the closing of any Special Merger Event that
such shares of Common Stock so issued by the Company will be entitled to
receive the consideration in the Special Merger Event. To the extent that
the Merger Consideration consists of the common stock of the acquiring
company and any other form of consideration, the payment required by this
paragraph shall be pro rated in the same proportion as the common stock
component of the Merger Consideration is to the other form of consideration
component of the Merger Consideration.
7.3 No Adjustment in Certain Cases. Except as set forth in Section 7.2
hereof, no adjustment in respect of any dividends shall be made during the term
of a Warrant or upon the exercise of a Warrant.
7.4 Other Dilutive Events. If any event occurs as to which, in the good
faith opinion of the Board of Directors of the Company, the provisions of this
Section 7.2 are not strictly applicable or if strictly applicable would not
fairly protect the rights of the Holder in accordance with the essential intent
and principles of such provisions, then the Board of Directors shall make an
adjustment in the application of such provisions, in accordance with such
essential intent and principles, so as to protect such rights as aforesaid, but
in no event shall any adjustment have the effect of increasing the Warrant
Shares as otherwise determined pursuant to any of the provisions of this Section
7.2.
7.5 No Impairment. The Company will not, by amendment of its certificate of
incorporation or through reorganization, consolidation, merger, dissolution,
sale of assets or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but will at all
times in good faith assist in the carrying out of all such terms and in the
taking of all such action as may be necessary or appropriate in order to protect
the rights of the Holder against dilution or other impairment. Without limiting
the generality of the foregoing, the Company will not increase the par value of
any shares of stock receivable upon the exercise of this Warrant above the
amount payable therefor upon such exercise, and at all times will take all such
action as may be necessary or appropriate in order that the Company may validly
and legally issue fully paid and nonassessable stock upon the exercise of this
Warrant.
7.6 Statement on Warrants. Irrespective of any adjustments in the Warrant
Price or the number or kind of shares purchasable upon the exercise of the
Warrants, Warrants
theretofore or thereafter issued may continue to express the same price and
number and kind of shares as are stated in the Warrants initially issuable
pursuant to this Agreement, but shall be modified and replaced upon the request
of the Holders thereof.
SECTION 8. Fractional Interests. The Company shall not be required to issue
fractional Warrant Shares on the exercise of Warrants. If more than one Warrant
shall be presented for exercise in full at the same time by the same Holder, the
number of full Warrant Shares which shall be issuable upon the exercise thereof
shall be computed on the basis of the aggregate number of Warrant Shares
purchasable on exercise of the Warrants so presented. If any fraction of a
Warrant Share would, except for the provisions of this Section 8, be issuable on
the exercise of any Warrant (or specified portion thereof), the Company shall
pay an amount in cash equal to the closing price for one share of the Common
Stock, as defined in paragraph (f) of Section 7.2, on the trading day
immediately preceding the date the Warrant is presented for exercise, multiplied
by such fraction.
SECTION 9. Rights and Notices.
9.1 No Rights as Stockholders; Notices to Holders. Nothing contained in
this Agreement or in any of the Warrants shall be construed as conferring upon
the Holders or their transferees, the right to vote or to receive dividends or
to consent or to receive notice as stockholders in respect of any meeting of
stockholders for the election of directors of the Company or any other matter,
or any rights whatsoever as stockholders of the Company. If, however, at any
time prior to the expiration of the Warrants and prior to their exercise, any of
the following events shall occur:
(a) the Company shall declare any dividend payable in any securities
upon its shares of Common Stock or make any distribution (other than a
regular cash dividend, as such dividend may be increased from time to time)
to the holders of its shares of Common Stock; or
(b) the Company shall offer to the holders of its shares of Common
Stock any cash, additional shares of Common Stock or other securities of
the Company or any right to subscribe for or purchase any thereof; or
(c) a dissolution, liquidation or winding up of the Company (other
than in connection with a consolidation, merger, sale, transfer or lease of
all or substantially all of its property, assets and business as an
entirety) shall be proposed,
then in any one or more of said events the Company shall give notice in writing
of such event as provided in Section 10 hereof, such giving of notice to be
completed at least 30 days prior to the date fixed as a record date or the date
of closing the transfer books for the determination of the stockholders entitled
to such dividend, distribution, or subscription rights or for the determination
of stockholders entitled to vote on such proposed dissolution, liquidation or
winding up or the date of expiration of such offer. Such notice shall specify
such record date or the date of closing the transfer books or the date of
expiration, as the case may be. Failure to mail or receive such notice or any
defect therein or in the publication or mailing thereof shall not
affect the validity of any action in connection with such dividend,
distribution, liquidation or winding up, or such offer.
9.2 Reports to Holders. If at any time while any Warrants are outstanding
the Company is no longer subject to the reporting requirements of Section 12 or
15 of the Securities Exchange Act of 1934, the Company will cause annual and
quarterly reports to be sent to the Holders that shall contain such financial
statements and other information concerning the business and affairs of the
Company as would be required to permit Holders to sell securities of the Company
pursuant to Rule 144 of the Securities Act of 1933, as amended (the "Securities
Act"), including information required to be included in annual and quarterly
reports filed with the Securities and Exchange Commission pursuant to Section 13
or 15(d) of the Securities Exchange Act of 1934 by an issuer registered
therewith pursuant to Section 12 of said Act.
SECTION 10. Notices. Any notice pursuant to this Agreement by any Holder to
the Company, shall be in writing and shall be delivered in person or by
facsimile transmission, or mailed first class, postage prepaid to the Company,
at its principal office, Attention: General Counsel. Any notice pursuant to this
Agreement by the Company to the Holders, shall be in writing and shall be mailed
first class, postage prepaid, or otherwise delivered, to such Holders at their
respective addresses on the books of the Company. Each party hereto may from
time to time change the address to which notices to it are to be delivered or
mailed hereunder by notice to the other party.
SECTION 11. Successors. Except as expressly provided herein to the
contrary, all the covenants and provisions of this Agreement by or for the
benefit of the Company and the Purchaser shall bind and inure to the benefit of
their respective successors and permitted assigns hereunder.
SECTION 12. Merger or Consolidation of the Company. The Company will not
merge or consolidate with or into, or sell, transfer or lease all or
substantially all of its property to, any other corporation unless the successor
or purchasing corporation, as the case may be (if not the Company), shall
expressly assume, by supplemental agreement, the due and punctual performance
and observance of each and every covenant and condition of this Agreement to be
performed and observed by the Company.
SECTION 13. Private Placement.
The Purchaser hereby represents that:
(a) The Purchaser understands that the offering and sale of the
Warrants is intended to be exempt from registration under the Securities
Act pursuant to Section 4(2) of the Securities Act.
(b) To the extent that the Purchaser has employed any investment
banker, broker or finder or incurred any liability for any brokerage fees,
commissions or finder's fees in connection with the transactions
contemplated by this Agreement, the Purchaser shall be responsible for the
payment of any such fees or commissions.
(c) The Purchaser understands that the Warrants have not been, and
will not be, registered under any securities laws, state or federal; that
the Warrants must be held indefinitely unless they are subsequently
registered under applicable securities laws or an exemption from such
registration is available; that the Company is under no obligation to
register the Warrants or in complying with any exemption from registration.
In addition, the Purchaser understands that the Warrant Shares have not
been, and may not be, registered under any securities laws, state or
federal; that the Warrant Shares must be held indefinitely unless they are
subsequently registered under applicable securities laws or an exemption
from such registration is available; that except as provided in this
Agreement, the Company is under no obligation to register the Warrant
Shares or to assist in complying with any exemption from registration.
(d) The Purchaser agrees that it will not transfer, by way of gift or
otherwise, or sell the Warrants or any part thereof or the Warrant Shares,
unless such Warrants or Warrant Shares, as applicable, have been registered
under the Securities Act or it first obtains, at its own expense, an
opinion of counsel reasonably satisfactory to the Company that the transfer
of such Warrants or Warrant Shares may be effected without registration
under the Securities Act, provided that no opinion shall be necessary to
effect a transfer to affiliates of the Purchaser, to the extent the
Purchaser or such person confirms the representations set forth in this
Section 13.
(e) The Purchaser is not acquiring the Warrants as a result of (i) any
advertisement, article, notice or other communication published in any
newspaper, magazine, or similar media or broadcast over television or radio
or (ii) any seminar meeting whose attendees had been invited as a result
of, subsequent to, or pursuant to any of the foregoing.
(f) The Purchaser understands that there will be no public market for
the Warrants.
(g) The Purchaser (i) has carefully evaluated the risks of investing
in the Company, (ii) has no need for liquidity in this investment, and
(iii) should it decide to exercise the Warrants, will be able to bear the
substantial economic risks of an investment in the Warrant Shares.
(h) The Purchaser has sufficient knowledge and experience in
financial, tax and business matters to enable him to utilize the
information made available to him in connection with the purchase of the
Warrants, to evaluate the merits and risks of the prospective investment
and to make an informed investment decision with respect thereto.
(i) The Purchaser acknowledges that the Company is relying upon the
representations and warranties contained herein in determining to make the
sale of the Warrants, and the Purchaser consents to such reliance.
(j) The Purchaser has received and carefully reviewed financial
information pertaining to the Company, has had a reasonable opportunity to
ask questions of and
receive answers from the Company and its directors, officers and employees
concerning the Warrants and the business and affairs of the Company, and,
all such questions have been answered to the full satisfaction of the
Purchaser. No oral representations have been made or oral information
furnished in connection with the sale of Warrants which were in any way
relied upon by the Purchaser.
(k) Company Excluded Information. The Purchaser acknowledges and
agrees that the Company may possess material information not generally
known by the public or by the Purchaser regarding the Company, its
business, its condition (financial or otherwise) and its prospects
(collectively, the "Company Excluded Information"), and the Purchaser
agrees that the Company shall have no liability to the Purchaser to the
extent the Purchaser incurs or otherwise suffers any liability, loss,
expense, cost or damage arising out of or relating to the non-disclosure of
the Company Excluded Information.
SECTION 14. Legends. Certificates evidencing the Warrants issued pursuant
to this Agreement and any Warrant Shares shall bear the following legend:
"The securities evidenced hereby have not been registered under the
Securities Act of 1933, as amended (the "Act"), or any state securities
law, and may not be transferred except pursuant to an effective
registration under the Act and such state securities laws or in a
transaction which, in the opinion of counsel reasonably satisfactory to the
Company, qualifies as an exempt transaction under the Act and applicable
state securities laws and the rules and regulations promulgated thereunder.
In addition, such securities are subject to the terms of that certain
Warrant Agreement, dated as of March 11, 2002, by and between the Company
and Xxxxxxx X. Xxxxxxxx, including certain restrictions on transfer. A copy
of such Agreement has been filed with the Secretary of the Company and is
available upon request."
SECTION 15. Applicable Law. This Agreement and each Warrant issued
hereunder shall be governed by and constructed in accordance with the laws of
the State of Delaware, without giving effect to principles of conflict of laws
thereof.
SECTION 16. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any person or corporation other than the Company and the
Holders any legal or equitable right, remedy or claim under this Agreement; but
this Agreement shall be for the sole and exclusive benefit of the Company and
the Holders.
SECTION 17. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
SECTION 18. Captions. The captions of the Sections and subsections of this
Agreement have been inserted for convenience only and shall have no substantive
effect.
SECTION 19. Miscellaneous.
(a) If any term or provision of this Agreement is held by a court of
competent jurisdiction or other authority to be invalid, void, unenforceable or
against its regulatory policy, the remainder of the terms, provisions, covenants
and restrictions of this Agreement shall remain in full force and effect and
shall in no way be affected, impaired or invalidated.
(b) Except as otherwise provided herein, each party hereto shall pay its
own expenses incurred with this Agreement.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the day and year first above written.
XXXXX 0 COMMUNICATIONS, INC.
By: /S/ Xxxx X. Xxxxxxxx
Name: Xxxx X. Xxxxxxxx
Title: Vice President
XXXXXXX X. XXXXXXXX
/S/ Xxxxxxx X. Xxxxxxxx
EXHIBIT A
THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY STATE SECURITIES LAW, AND MAY NOT BE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION UNDER THE ACT AND SUCH
STATE SECURITIES LAWS OR IN A TRANSACTION WHICH, IN THE OPINION OF COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY, QUALIFIES AS AN EXEMPT TRANSACTION UNDER
THE ACT AND APPLICABLE STATE SECURITIES LAWS AND THE RULES AND REGULATIONS
PROMULGATED THEREUNDER.
IN ADDITION, SUCH SECURITIES ARE SUBJECT TO THE TERMS OF THAT CERTAIN WARRANT
AGREEMENT, DATED AS OF MARCH 11, 2002, BY AND BETWEEN THE COMPANY AND XXXXXXX X.
XXXXXXXX, INCLUDING CERTAIN RESTRICTIONS ON TRANSFER. A COPY OF SUCH AGREEMENT
HAS BEEN FILED WITH THE SECRETARY OF THE COMPANY AND IS AVAILABLE UPON REQUEST.
VOID AFTER 5:00 P.M., New York City time, June 30, 2009
Warrants to Purchase
[Number of Warrant Shares]
Shares of Common Stock
LEVEL 3 COMMUNICATIONS, INC.
COMMON STOCK PURCHASE WARRANTS
This certifies that, for value received, _________ or registered assigns
(the "Holder"), is entitled to purchase from Level 3 Communications, Inc., a
Delaware corporation, (the "Company"), at any time after 9:00 a.m., New York
City time, on December 31, 2001 and prior to 5:00 p.m., New York City time, on
June 30, 2009, at the purchase price of $8.00 per share (the "Warrant Price"),
the number of shares of its Common Stock, par value $.01 per share (the "Common
Stock"), shown above. The number of shares purchasable upon exercise of the
Common Stock Purchase Warrants (the "Warrants") and the Warrant Price are
subject to adjustment from time to time as set forth in the Warrant Agreement
referred to below. Outstanding Warrants not exercised prior to 5 p.m., New York
City time, on June 30, 2009 shall thereafter be void.
Warrants may be exercised in whole or in part by presentation of this
Warrant Certificate with the Purchase Form on the reverse side hereof duly
executed, which signature (if not the Purchaser) shall be guaranteed by a bank
or trust company or a broker or dealer which is a member of the National
Association of Securities Dealers, Inc., and simultaneous payment of the Warrant
Price at the principal office of the Company. Payment of such price shall be
made in cash or by certified or official bank check or as otherwise provided in
the Warrant Agreement
referred to below. As provided in the Warrant Agreement referred to below, the
Warrant Price and the number of kind of shares which may be purchased upon the
exercise of the Warrants evidenced by this Warrant Certificate are, upon the
happening of certain events, subject to modification and adjustment.
This Warrant Certificate is issued under and in accordance with a Warrant
Agreement dated as of March 11, 2002 between the Company and Xxxxxxx X. Xxxxxxxx
and is subject to the terms and provisions contained in the Warrant Agreement,
to all of which the Holder of this Warrant Certificate by acceptance hereof
consents. A copy of the Warrant Agreement may be obtained by the Holder hereof
upon written request to the Company.
Upon any partial exercise of the Warrants evidenced by this Warrant
Certificate, there shall be issued to the Holder hereof a new Warrant
Certificate in respect of the shares of Common Stock as to which the Warrants
evidenced by this Warrant Certificate shall not have been exercised. This
Warrant Certificate may be exchanged at the office of the Company by surrender
of this Warrant Certificate properly endorsed either separately or in
combination with one or more other Warrant Certificates for one or more new
Warrant Certificates evidencing the right of the Holder thereof to purchase the
aggregate number of shares as were purchasable on exercise of the Warrants
evidenced by the Warrant Certificate or Certificates exchanged. No fractional
shares will be issued upon the exercise of any Warrant, but the Company will pay
the cash value thereof determined as provided in the Warrant Agreement. This
Warrant Certificate is transferable at the office of the Company in the manner
and subject to the limitations set forth in the Warrant Agreement.
The Holder hereof may be treated by the Company and all other persons
dealing with this Warrant Certificate as the absolute owner hereof for any
purpose and as the person entitled to exercise the rights represented hereby, or
to the transfer hereof on the books of the company, any notice to the contrary
notwithstanding, and until such transfer on such books, the Company may treat
the Holder hereof as the owner for all purposes.
Neither the Warrants nor this Warrant Certificate entitles any Holder to
any of the rights of a stockholder of the Company.
DATED:
XXXXX 0 COMMUNICATIONS, INC.
By:
Attest:
PURCHASE FORM
(To be executed upon exercise of Warrant)
To LEVEL 3 COMMUNICATIONS, INC.:
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant Certificate for, and to purchase thereunder,
_______ shares of Common Stock, as provided for therein, and tenders herewith
payment of the purchase price in full in the form of cash or a certified or
official bank check in the amount of $_____ or securities in the amount of
$_________ pursuant to the non-cash exercise provisions set forth in the Warrant
Agreement dated as of December 31, 2001 between the Company and Kiewit
Construction Company.
Please issue a certificate or certificates for such shares of Common Stock
in the name of, and pay any cash for any fractional share to:
PLEASE INSERT SOCIAL SECURITY OR NAME
OTHER IDENTIFYING NUMBEROF PURCHASER (Please Print Name & Address)
Address
Signature
NOTE: The above signature should
correspond exactly with the name
on the face of this Warrant
Certificate or with the name of
the assignee appearing in the
assignment form below.
And, if said number of shares shall not be all the shares purchasable under the
within Warrant Certificate, a new Warrant Certificate is to be issued in the
name of said undersigned for the balance remaining of the share purchasable
thereunder less any fraction of a share paid in cash.
ASSIGNMENT
(To be executed only upon assignment of Warrant Certificate)
For value received, _________ hereby sells, assigns and transfers unto
_________ the within Warrant Certificate, together with all right, title and
interest therein, and does hereby irrevocably constitute and appoint _________
attorney, to transfer said Warrant Certificate on the books of the within-named
Company, with full power of substitution in the premises.
Dated:
NOTE: The above signature should correspond
exactly with the name on the face of this
Warrant Certificate.
PLEASE INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER
OF ASSIGNEE
Exhibit B
REGISTRATION RIGHTS
(a) At any time after December 31, 2003, and subject to the restrictions
contained in this Agreement, upon a written request to register under the
Securities Act of 1933, as amended, by the Purchaser, or by the Holders of (i)
Warrants representing the right to purchase Warrant Shares and/or (ii) Warrant
Shares, which in the aggregate comprise 50% or more of the Common Stock issuable
upon exercise of the Warrants (the "Majority Holders"), the Company shall
promptly prepare and file no later than 45 days following any such request at
its sole expense, a registration statement with the Securities and Exchange
Commission (the "Commission") to register the resale of the Warrant Shares to be
received by any Holder, and any other shares of Common Stock held by the
Purchaser (the "Registrable Securities"). However, in no event will the Company
be required to file more than one such registration statement and the Company
shall not be required to file a registration statement relating to the
registration of the Warrants. The Company shall notify all other Holders of
Registrable Securities of such registration, and shall allow such Holders a
reasonable opportunity to participate in such registration. Subject to
subsection (c) hereof, the Holders acknowledge that the Company may include in
such registration statement shares of Common Stock to be sold for the account of
other holders of Common Stock or the Company.
(b) The obligations of the Company to use its best efforts to cause the
Registrable Securities to be registered under the Securities Act are subject to
the following limitations:
(i) The Company shall be entitled to postpone for up to 120 days in
any twelve-month period the filing of any registration statement otherwise
required to be prepared and filed by it pursuant to subsection (a) if, at
the time it receives a request for such registration, the Company
determines, in its reasonable judgment, that such registration and sale
would materially interfere with any financing, acquisition, corporate
reorganization or other material transaction involving the Company or any
of its subsidiaries and promptly gives the Holders written notice of such
determination. If the Company shall so postpone the filing of a
registration statement, the requesting party or parties shall have the
right to withdraw the request for registration by giving written notice to
the Company within 30 calendar days after receipt of the notice of
postponement (and, in the event of such withdrawal, such request shall not
be counted for purposes of determining the number of requests for
registration to which the Holders are entitled pursuant to subsection (a)).
(ii) A registration statement with respect to a registration requested
pursuant to subsection (a) that has not become effective within 120 days
following any such request shall not be counted for the purpose of
determining the number of requests for registration to which the Holders
are entitled pursuant to subsection (a) unless agreed to by the Purchaser
and by the Majority Holders or more of the Registrable Securities
outstanding. Notwithstanding the foregoing, in the event that such failure
to become effective is the result of action or inaction on the part of the
Purchaser or the Majority Holders, such registration statement shall
be counted for purposes of determining the number of requests for
registration under subsection (a).
(iii) The Company shall pay the costs of one such registration
statement filed pursuant to subsection (a), including without limitation
all registration and filing fees, fees and expenses of compliance with
securities or Blue Sky laws (including counsel's fees and expenses in
connection therewith), printing expenses, messenger and delivery expenses,
internal expenses of the Company (including all salary and expenses of its
officers and employees performing legal or accounting services), listing
fees and expenses, and fees and expenses of the Company's counsel,
independent accountants and other persons retained or employed by the
Company in connection with such registration statement (provided that the
selling Holders shall pay all underwriters discounts, commissions and fees,
the fees and expenses of counsel to the Holders and all other costs and
expenses incurred by such Holders).
(c) Priority in Requested Registrations. If a requested registration
involves an underwritten offering, and the managing underwriter shall advise the
Company in writing (with a copy to each holder of Registrable Securities
requesting registration) that, in its opinion, the number of securities
requested to be included in such registration (including securities of the
Company which are not Registrable Securities) exceeds the number which can be
sold in such offering within a price range acceptable to the holders of a
majority of the Registrable Securities requested to be included in such
registration, the Company will include in such registration, to the extent of
the number which the Company is so advised can be sold in such offering, (i)
first, Registrable Securities requested to be included in such registration by
the holder or holders of Registrable Securities, pro rata among the holders
thereof such holders requesting such registration on the basis of the number of
such securities requested to be included by such holders and (ii) second,
securities the Company proposes to sell and other securities of the Company
included in such registration by the holders thereof.
(d) Upon any such registration statement becoming effective, the Company
shall use its best efforts to keep such registration statement current for a
period of six (6) months or such lesser period as the parties may agree (but in
no event beyond the completion of the distribution or distributions being made
pursuant thereto). The Company shall make such filings, and will use its best
efforts to cause such filings to become effective, so that the securities being
registered shall be registered or qualified for sale under the securities or
Blue Sky laws of such jurisdictions as shall be reasonably appropriate for the
distribution of the securities covered by the registration statement; provided,
however, that the Company shall not be required to register as a broker or
dealer in any jurisdiction where it is not presently so registered or to qualify
as a foreign corporation to do business under the laws of any jurisdiction in
which it is not then qualified or to file any general consent to service of
process. The Company will furnish to the selling Holders such numbers of copies
of a prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act and such other related documents as the
selling Holders may reasonably request in order to effect the sale of the
securities to be offered and sold by the selling Holders, but only while the
Company is required to cause the registration statement to remain current.
(e) To effect any such registration, and if requested by the Majority
Holders, the Company and the selling Holders shall enter into with an investment
banking firm, selected by the Majority Holders and reasonably satisfactory to
the Company, an underwriting agreement containing customary representations and
warranties and provisions relating to indemnification and contribution
(including appropriate indemnification and contribution between the selling
Holders as selling stockholders and the Company and other customary provisions).
(f) Except as may otherwise be provided in any underwriting agreement
entered into by the Company and the Holders, in the event of any registered
offering of shares of Common Stock pursuant to this Agreement in which any of
the Holder's shares of Common Stock are sold, and as the sole and exclusive
remedy of the Holders:
(i) The Company will indemnify and hold harmless, to the fullest
extent permitted by law, the Holders and each person, if any, who controls
each Holder within the meaning of the Securities Act, from and against any
and all losses, damages, claims, liabilities, joint or several, costs and
expenses (including any amounts paid in any settlement effected with the
Company's consent) to which the Holders or any such controlling person may
become subject under the Securities Act, state securities or blue sky laws,
common law or otherwise, insofar as such losses, damages, claims,
liabilities (or actions or proceedings in respect thereof), costs or
expenses arise out of or are based upon (x) any untrue statement or alleged
untrue statement of any material fact contained in the registration
statement or included prospectus, as amended or supplemented, or (y) the
omission or alleged omission to state therein a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances in which they are made, not misleading, and the Company
will reimburse the Holders and each such controlling person of the Holders
promptly upon demand for any reasonable legal or any other expenses
incurred by them in connection with investigating, preparing to defend or
defending against or appearing as a third-party witness in connection with
such loss, claim, damage, liability, action or proceeding; provided,
however, that the Company will not be liable to any Holder in any such case
to the extent that any such loss, damage, liability, cost or expense arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission so made in conformity with information
furnished by such Holder or such controlling persons in writing
specifically for use in the preparation thereof. Such indemnity shall
remain in full force and effect regardless of any investigation made by or
on behalf of any Holder or any controlling person of the Investor, and
shall survive the transfer of such securities by the Investor.
(ii) Each Holder will indemnify and hold harmless, to the fullest
extent permitted by law, the Company and each person, if any, who controls
the Company from and against any and all losses, damages, claims,
liabilities, joint or several, costs or expenses (including any amounts
paid in any settlement with such Holder's consent) to which the Company or
any such controlling person may become subject under the Securities Act,
state securities or blue sky laws, common law or otherwise, insofar as such
losses, damages, claims, liabilities (or
actions or proceedings in respect thereof), costs or expenses arise out of
or are based upon any untrue or alleged untrue statement of any material
fact contained in the registration statement or included prospectus, as
amended or supplemented, or arise out of or are based upon the omission or
the alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged
untrue statement or omission or alleged omission was so made in strict
conformity with written information furnished by such Holder specifically
for use in the preparation thereof and such Holder will reimburse the
Company and each such controlling person of the Company promptly upon
demand for any reasonable legal or any other expenses incurred by them in
connection with investigating, preparing to defend or defending against or
appearing as a third-party witness in connection with such loss, claim,
damage, liability, action or proceeding. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf
of the Company or any controlling person of the Company, and shall survive
the transfer of such securities by the Holder. Each Holder, by allowing its
shares of Common Stock or Warrant Shares to be included in the registration
statement, agrees to the terms of this Exhibit B.
(iii) Promptly after receipt by an indemnified party pursuant to the
provisions of subsection (f)(i) or (ii) of this Exhibit B of notice of the
commencement of any action involving the subject matter of the foregoing
indemnity provisions, such indemnified party will, if a claim thereof is to
be made against the indemnifying party pursuant to the provisions of said
subsection (f)(i) or (ii), promptly notify the indemnifying party of the
commencement thereof; but the omission to notify the indemnifying party
will not relieve it from any liability which it may have to any indemnified
party otherwise hereunder, except to the extent of actual prejudice. In
case such action is brought against any indemnified party and it notifies
the indemnifying party of the commencement thereof, the indemnifying party
shall have the right to participate in, and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party; provided, however, if the defendants in any action
include both the indemnified party and the indemnifying party and there is
a conflict of interest which would prevent counsel for the indemnifying
party from also representing the indemnified party, the indemnified party
or parties shall have the right to select one separate counsel to
participate in the defense of such action on behalf of such indemnified
party or parties. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party pursuant to
the provisions of said subsection (f)(i) or (ii) for any legal or other
expense subsequently incurred by such indemnified party in connection with
the defense thereof other than reasonable costs of investigation, unless
(x) the indemnified party shall have employed counsel in accordance with
the proviso of the preceding sentence, (y) the indemnifying party shall not
have employed counsel
reasonably satisfactory to the indemnified party to represent the
indemnified party within a reasonable time after the notice of the
commencement of the action, or (z) the indemnifying party agrees in writing
to bear such expenses. No indemnifying party will consent to entry of any
judgment or enter into any settlement which does not include as an
unconditional term thereof the giving by the claimant or plaintiff to such
indemnified party of a release from all liability in respect to such claim
or litigation.
(iv) If recovery is not available under the foregoing indemnification
provisions, for any reason other than as specified therein, the parties
entitled to indemnification by the terms thereof shall be entitled to
contribution to liabilities and expenses, except to the extent that
contribution is not permitted under Section 11(f) of the Securities Act. In
determining the amount of contribution to which the respective parties are
entitled, there shall be considered the parties' relative knowledge and
access to information concerning the matter with respect to which the claim
was asserted, the opportunity to correct and prevent any statement or
omission, and any other equitable considerations appropriate under the
circumstances.
(g) If, at any time after December 31, 2003, the Company shall determine to
register any of its equity securities either for its own account or for the
account of a security holder or holders exercising their respective demand
registration rights, other than a registration relating solely to employee
benefit plans, a registration on Form S-4 or any successor or substitute form or
a registration relating solely to a Commission Rule 145 transaction, or a
registration on any registration form which does not permit secondary sales or
does not include substantially the same information as would be required to be
included in a registration statement covering the sale of Registrable
Securities, the Company will (i) promptly give to each of the Holders a written
notice thereof (which shall include a list of the jurisdictions in which the
Company intends to attempt to qualify such securities under the applicable blue
sky or other state securities laws); and (ii) include in such registration (and
any related qualification under blue sky laws or other compliance), and in any
underwriting involved therein, all the Warrant Shares specified in a written
request or requests, made by the Holders within twenty (20) days after receipt
of the written notice from the Company described in clause (i) above, except as
set forth in paragraph (h) below. Such written request may specify all or a part
of the Holders' Warrant Shares.
(h) If the registration of which the Company gives notice is for a
registered public offering involving an underwriting, the Company shall so
advise each of the Holders as a part of the written notice given pursuant to
paragraph (g). In such event, the right of each of the Holders to registration
pursuant to paragraph (g) shall be conditioned upon such Holders' participation
in such underwriting and the inclusion of such Holders' Warrant Shares in the
underwriting to the extent provided herein. The Holders whose shares are to be
included in such registration shall (together with the Company and the other
stockholders distributing their securities through such underwriting (the "Other
Stockholders")) enter into an underwriting agreement in customary form with the
representative of the underwriter or underwriters selected for underwriting by
the Company. Notwithstanding any other provision of paragraph (g) and this
paragraph (h), if the representative determines that marketing factors require a
limitation on
the number of shares to be underwritten, the representative may (subject to the
allocation priority set forth below) limit the number of Warrant Shares to be
included in the registration and underwriting. The Company shall so advise all
holders of securities requesting registration, and the number of shares of
securities that are entitled to be included in the registration and underwriting
shall be allocated in the following manner: The securities to be sold by the
Company and securities held by persons who by contractual right initiated the
demand for such registration ("Demanding Holders") shall not be subject to
reduction. The securities of the Company held by Holders, and Other Stockholders
of the Company (other than securities held by Demanding Holders) shall be
reduced, on a pro rata basis (based on the number of shares proposed to be sold
by such Holders and other stockholders), by such minimum number of shares as is
necessary to comply with such limitation. If any of the Holders or Demanding
Holders or any officer, director or Other Stockholder disapproves of the terms
of any such underwriting, such holder may elect to withdraw therefrom by written
notice to the Company and the underwriter. Any Warrant Shares or other
securities excluded or withdrawn from such underwriting shall be withdrawn from
such registration.
