Exhibit 2
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED. IT MAY NOT BE OFFERED OR SOLD EXCEPT
PURSUANT TO (A) AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH
ACT OR (B) AN APPLICABLE EXEMPTION FROM REGISTRATION THEREUNDER
AND AN OPINION OF COUNSEL REASONABLE SATISFACTORY TO THE COMPANY
THAT REGISTRATION IS NOT REQUIRED.
THIS SECURITY, AND THE SHARES ISSUABLE UPON EXERCISE HEREOF, ARE
SUBJECT TO THE RIGHTS TO REPURCHASE CONTAINED HEREIN AND THE
RESTRICTIONS ON TRANSFER CONTAINED HEREIN AND IN THE
SHAREHOLDERS AGREEMENT DATED AS OF MAY 1, 1998 (A COPY OF WHICH
IS ON FILE WITH THE SECRETARY OF THE ISSUER HEREOF). NO
REGISTRATION OF TRANSFER OF SUCH SECURITY OR SHARES WILL BE MADE
ON THE BOOKS OF THE ISSUER AND NO SHARES SHALL BE ISSUED TO ANY
PERSON OTHER THAN THE REGISTERED HOLDER OF THIS SECURITY UNLESS
AND UNTIL ALL APPLICABLE RESTRICTIONS ON TRANSFER CONTAINED IN
SUCH SHAREHOLDERS AGREEMENT SHALL HAVE BEEN COMPLIED WITH.
STOCK PURCHASE WARRANT
Date of Issuance: May 1, 1998 Certificate No. 1
For value received, CHADMOORE WIRELESS GROUP, INC., a Colorado
corporation the "Company"), hereby grants to RECOVERY EQUITY INVESTORS II, L.P.,
a Delaware limited partnership, or its registered assigns (the "Registered
Holder"), the right to purchase from the Company, at any time or from time to
time during the Exercise Period, 4,000,000 Warrant Shares at the Exercise Price.
This Warrant is issued to REI on the Date of Issuance pursuant to the Investment
Agreement. The Exercise Price and number of Warrant Shares (and the amount and
kind of other securities) for which this Warrant is exercisable shall be subject
to adjustment and subject to rights to receive other securities, all as provided
herein. Certain capitalized terms used herein are defined in Section 5 hereof.
This Warrant is subject to the following provisions:
SECTION 1. Exercise of Warrant.
1A. Exercise Period. The purchase rights represented by this Warrant may
be exercised, in whole or in part, at any time and from time to time, commencing
on the Date of Issuance through 5:00 p.m., Nevada time, on May 1, 2001, or, if
such day is not a Business Day, on the next succeeding Business Day (the
"Exercise Period").
1B. Exercise Procedure.
(i) This Warrant shall be deemed to have been exercised when all
of the following items have been delivered to the Company (the "Exercise Time"):
(a) a completed Exercise Agreement, as described in
Section 1C below, executed by the Person exercising all or part of the
purchase rights represented by this Warrant (the "Purchaser");
(b) this Warrant;
(c) if the Purchaser is not the Registered Holder, an
Assignment or Assignments in the form set forth in Exhibit II hereto
evidencing the assignment of this Warrant to the Purchaser; and
(d) a check or wire transfer payable to the Company in an
amount equal to the Exercise Price multiplied by the number of Warrant
Shares being purchased upon such exercise (the "Aggregate Exercise
Price").
(ii) Certificates for Warrant Shares (rounded up to the nearest
whole share) purchased upon exercise of this Warrant shall be delivered by the
Company to the Purchaser within three Business Days after the date of the
Exercise Time.
(iii) Notwithstanding (ii) above, in lieu of delivery of
certificates for all or part of the Warrant Shares with respect to which this
Warrant is being exercised, the Purchaser, at its option, may elect to receive
and the Company shall then deliver to the Purchaser (a) such number of shares of
Preferred Stock of the Company as shall be designated by the Purchaser having an
aggregate stated value equal to the Aggregate Exercise Price of the Warrant
Shares with respect to which the Purchaser is making this election and which
Preferred Stock shall have terms identical in all respects with those of the
Preferred Purchased Stock, except that the stated value per share of such
Preferred Stock shall be equal to the Exercise Price in effect at the Exercise
Time ("New Preferred Shares") and (b) a warrant, on terms identical in all
respects with this Warrant, except that (w) the exercise period shall be for
five and one-half years after the date of the issuance thereof, (x) the terms
and provisions of Section 9 hereof shall not be applicable, (y) the number of
shares acquirable thereunder shall be equal to the number of Warrant Shares with
respect to which the Purchaser is making this election, and (z) the exercise
price thereunder shall be equal to the Exercise Price hereunder in effect at the
Exercise Time. The Purchaser may
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exercise its rights under this clause by delivering notice to the Company within
three Business Days of the Exercise Time.
(iv) Unless this Warrant has expired or all of the purchase
rights represented hereby have been exercised, the Company shall prepare a new
Warrant, substantially identical hereto, representing the rights formerly
represented by this Warrant which have not expired or been exercised and shall,
within three Business Days after the date of the Exercise Time, deliver such new
Warrant to the Person designated for delivery in the Exercise Agreement.
(v) The Warrant Shares and New Preferred Shares issuable upon the
exercise of this Warrant shall be deemed to have been issued to the Purchaser at
the Exercise Time, and the Purchaser shall be deemed for all purposes to have
become the Registered Holder of such Warrant Shares or New Preferred Shares at
the Exercise Time.
(vi) The issuance of certificates for Warrant Shares or New
Preferred Shares upon exercise of this Warrant shall be made without charge to
the Registered Holder or the Purchaser for any issuance tax in respect thereof
or other cost incurred by the Company in connection with such exercise and the
related issuance of Warrant Shares or New Preferred Shares; 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 issuance of any Warrants or
any certificates representing Warrant Shares or New Preferred Shares in a name
other than that of a Registered Holder, and the Company shall not be required to
issue or deliver such Warrant or certificate for Warrant Shares or New Preferred
Shares unless and until the Person requesting the issuance thereof shall have
paid to the Company the amount of such tax or shall have established to the
reasonable satisfaction of the Company that such tax has been paid.
(vii) The Company shall not close its books against the transfer
of this Warrant or of any Warrant Shares or New Preferred Shares issued or
issuable upon the exercise of this Warrant in any manner which interferes with
the timely exercise of this Warrant. The Company shall from time to time take
all such action as may be necessary to assure that the par value per share, if
any, of the unissued Warrant Shares and New Preferred Shares acquirable upon
exercise of this Warrant is at all times equal to or less than the Exercise
Price then in effect. In the event that the Company fails to comply with its
obligations set forth in the foregoing sentence, in addition to all other rights
which the Registered Holder or Purchaser may have at law or in equity, the
Purchaser may (but shall not be obligated to) purchase Warrant Shares or New
Preferred Shares hereunder at par value, and the Company shall be obligated to
reimburse the Purchaser for the aggregate amount of consideration paid in
connection with such exercise in excess of the Exercise Price then in effect.
(viii) The Company shall assist and cooperate with any reasonable
request by the Registered Holder or Purchaser in connection with any
governmental filings or approvals required to be obtained or made by any of them
prior to or in connection with any exercise of this Warrant (including, without
limitation, making any filings or obtaining any approvals required to be made or
obtained by the Company).
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(ix) Notwithstanding any other provision hereof, if an exercise
of any portion of this Warrant is to be made in connection with a public
offering or a sale of the Company (pursuant to a merger, sale of stock, sale of
assets or otherwise), then such exercise may at the election of the Registered
Holder be conditioned upon the consummation of such transaction, in which case
such exercise shall not be deemed to be effective until immediately prior to the
consummation of such transaction.
(x) The Company shall at all times reserve and keep available (x)
out of its authorized but unissued Warrant Shares and solely for the purpose of
issuance upon the exercise of this Warrant, the maximum number of Warrant Shares
issuable upon the exercise of this Warrant and (y) upon creation of the New
Preferred Shares, out of its authorized but unissued Preferred Stock, the
maximum number of New Preferred Shares issuable upon the exercise of this
Warrant. All Warrant Shares and New Preferred Shares which are so issuable
shall, when issued and upon the payment of the applicable Exercise Price, be
duly and validly issued, fully paid and nonassessable and free from all taxes,
liens and charges. The Company shall take all such actions as may be necessary
to ensure that all such Warrant Shares and New Preferred Shares may be so issued
without violation by the Company of any applicable law or governmental
regulation or any requirements of any domestic securities exchange upon which
shares of Common Stock or other securities constituting Warrant Shares may be
listed (except for official notice of issuance which shall be immediately
delivered by the Company upon each such issuance) or any violation by the
Company of any agreement to which the Company or any of its assets or properties
may be subject. The Company will cause the Warrant Shares, immediately upon such
exercise, to be listed on each domestic securities exchange or quotation system
upon which shares of Common Stock or other securities constituting Warrant
Shares are listed or quoted at the time of such exercise.
(xi) If the Warrant Shares or New Preferred Shares issuable by
reason of exercise of this Warrant are convertible into or exchangeable for any
other stock or securities, then the Company shall, at the Purchaser's option and
upon surrender of this Warrant by such Purchaser as provided above together with
any notice, statement or payment required to effect such conversion or exchange
of Warrant Shares or New Preferred Shares, deliver to such Purchaser (or as
otherwise specified by such Purchaser) a certificate or certificates
representing the stock or securities into which the Warrant Shares or New
Preferred Shares issuable by reason of such conversion are convertible or
exchangeable, registered in such name or names and in such denomination or
denominations as such Purchaser has specified.
1C. Exercise Agreement. Upon any exercise of this Warrant, the Purchaser
shall deliver to the Company an Exercise Agreement in substantially the form set
forth in Exhibit I hereto, except that if the Warrant Shares or New Preferred
Shares are not to be issued in the name of the Registered Holder, the Exercise
Agreement shall also state the name of the Person to whom the certificates for
the Warrant Shares are to be issued, and if the number of Warrant Shares to be
issued does not include all of the Warrant Shares purchasable hereunder, it
shall also
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state the name of the Person to whom a new Warrant for the unexercised portion
of the rights hereunder is to be issued.
SECTION 2. Adjustment of Exercise Price and Number of Shares. In order
to prevent dilution of the rights granted under this Warrant, the Exercise Price
shall be subject to adjustment from time to time as provided in this Section 2,
and the number of Warrant Shares obtainable upon exercise of this Warrant shall
be subject to adjustment from time to time, as provided in this Section 2.
2A. Adjustment of Exercise Price and Number of Shares upon Issuance of
Common Stock. If and whenever, on or after the Date of Issuance, either (x) the
Company issues or sells, or in accordance with Section 2B is deemed to have
issued or sold, other than pursuant to a Permitted Issuance, other than upon the
exercise, exchange or conversion of Floating Price Securities and other than
pursuant to an event for which an adjustment is made pursuant to Section 2C, any
shares of Common Stock for a consideration per share less than the Exercise
Price in effect immediately prior to such issuance or sale or (y) the Company
issues or sells any shares of Common Stock upon exercise, exchange or conversion
of any Floating Price Securities for a consideration per share less than the
Deemed Issue Price in effect immediately prior to such issuance, then
immediately upon such issuance or sale (A) the Exercise Price shall be reduced
to equal the amount determined by multiplying the Exercise Price in effect
immediately prior to such issuance or sale by a fraction, the numerator of which
will be the sum of (1) the number of shares of Common Stock Deemed Outstanding
immediately prior to such issuance or sale multiplied by the Exercise Price in
effect immediately prior to such issuance or sale, plus (2) the consideration,
if any, received by the Company upon such issuance or sale, and the denominator
of which will be the product derived by multiplying the Exercise Price in effect
immediately prior to such issuance or sale by the number of shares of Common
Stock Deemed Outstanding immediately after such issuance or sale and (B) in the
case of an issuance described in (y) above, the Deemed Issue Price shall be
reduced in a manner proportional to the reduction to the Exercise Price pursuant
to clause (A) above. Upon each such adjustment of the Exercise Price hereunder,
the number of Warrant Shares acquirable upon exercise of this Warrant shall be
adjusted to equal the number of shares determined by multiplying the Exercise
Price in effect immediately prior to such adjustment by the number of Warrant
Shares acquirable (whether or not then acquirable or subject to a contingency)
upon exercise of this Warrant immediately prior to such adjustment and dividing
the product thereof by the Exercise Price resulting from such adjustment. For
purposes of this Section 2, the calculation of the number of shares of Common
Stock Deemed Outstanding shall exclude the number of Warrant Shares issuable
upon exercise of the Warrants.
2B. Effect on Exercise Price of Certain Events. For purposes of
determining the adjusted Exercise Price under Section 2A, the following shall be
applicable:
(i) Issuance of Rights or Options. If the Company in any manner
grants any rights or options to subscribe for or to purchase (including, without
limitation, the issuance of any notes or other debt instruments convertible into
or payable in) Common Stock or any stock or other securities convertible into or
exchangeable for Common Stock (including without limitation
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convertible common stock) (such rights or options being herein called "Options"
and such convertible or exchangeable stock or securities being herein called
"Convertible Securities") other than a Permitted Issuance, and the price per
share for which Common Stock is issuable upon the exercise of such Options or
upon conversion or exchange of such Convertible Securities is less than the
Exercise Price in effect immediately prior to such issuance or sale, then the
total maximum number of shares of Common Stock issuable upon the exercise of
such Options or upon conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such Options shall be
deemed to be outstanding and to have been issued and sold by the Company for
such price per share. For purposes of this paragraph, the "price per share for
which Common Stock is issuable upon exercise of such Options or upon conversion
or exchange of such Convertible Securities" is determined by dividing (A) the
total amount, if any, received or receivable by the Company as consideration for
the granting of such Options, plus the minimum aggregate amount of additional
consideration payable to the Company upon the exercise of all such Options, plus
in the case of such Options which are exercisable for Convertible Securities,
the minimum aggregate amount of additional consideration, if any, payable to the
Company upon the issuance or sale of such Convertible Securities and the
conversion or exchange thereof, by (B) the total maximum number of shares of
Common Stock issuable upon exercise of such Options or upon the conversion or
exchange of all such Convertible Securities issuable upon the exercise of such
Options. No further adjustment of the Exercise Price shall be made upon the
actual issuance of such Common Stock or of such Convertible Securities upon the
exercise of such Options or upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities.
(ii) Issuance of Convertible Securities. If the Company in any
manner issues or sells any Convertible Securities and the price per share for
which Common Stock is issuable upon such conversion or exchange is less than the
Exercise Price in effect immediately prior to such issuance or sale, then the
maximum number of shares of Common Stock issuable upon conversion or exchange of
such Convertible Securities shall be deemed to be outstanding and to have been
issued and sold by the Company for such price per share. For the purposes of
this paragraph, the "price per share for which Common Stock is issuable upon
such conversion or exchange" is determined by dividing (A) the total amount
received or receivable by the Company as consideration for the issue or sale of
such Convertible Securities, plus the minimum aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or exchange
thereof, by (B) the total maximum number of shares of Common Stock issuable upon
the conversion or exchange of all such Convertible Securities. No further
adjustment of the Exercise Price shall be made upon the actual issuance of such
Common Stock upon conversion or exchange of such Convertible Securities, and if
any such issuance or sale of such Convertible Securities is made upon exercise
of any Options for which adjustment of the Exercise Price has been or is to be
made pursuant to other provisions of this Section 2B, no further adjustment of
the Exercise Price shall be made by reason of such issuance or sale.
(iii) Change in Option Price or Conversion Rate. If either the
purchase price provided for in any Options, the additional consideration, if
any, payable upon the issue, conversion or exchange of any Convertible
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Securities, or the rate at which any Convertible Securities are convertible into
or exchangeable for Common Stock shall change at any time (other than with
respect to Options or Convertible Securities constituting Floating Price
Securities which are the subject of 2A(y)), the Exercise Price in effect at the
time of such change shall be adjusted to the Exercise Price which would have
been in effect at such time had such Options or Convertible Securities still
outstanding provided for such changed purchase price, additional consideration
or changed conversion rate, as the case may be, at the time initially granted,
issued or sold and the number of Warrant Shares shall be correspondingly
readjusted; provided, that no readjustment shall be made pursuant to this clause
(iii) in respect of any Warrant Shares which have been issued on or prior to the
occurrence of any action otherwise requiring such readjustment.
(iv) Treatment of Expired Options and Unexercised Convertible
Securities. Upon the expiration of any Option or the termination of any right to
convert or exchange any Convertible Securities, in either case without the
exercise of such Option or right, the Exercise Price then in effect and the
number of Warrant Shares acquirable hereunder (whether or not then acquirable or
subject to a contingency) shall be adjusted to the Exercise Price and number of
Warrant Shares which would have been in effect at the time of such expiration or
termination had such Option or Convertible Securities, to the extent not
exercised in full and outstanding immediately prior to such expiration or
termination, never been issued; provided, that no readjustment shall be made
under this clause (iv) in respect of any Warrant Shares which have been issued
on or prior to such expiration or termination.
(v) Calculation of Consideration Received. If any Common Stock,
Options or Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be deemed to
be the net amount received by the Company therefor. In case any Common Stock,
Options or Convertible Securities are issued or sold for a consideration other
than cash, the amount of the consideration other than cash received by the
Company shall be the fair value of such consideration, except where such
consideration consists of marketable securities, in which case the amount of
consideration received by the Company shall be the market price thereof as of
the date of receipt. In case any Common Stock, Options or Convertible Securities
are issued to the owners of the non-surviving entity in connection with any
merger or other business combination in which the Company is the surviving
entity, the amount of consideration therefor shall be deemed to be the fair
value of such portion of the net assets and business of the non-surviving entity
as is attributable to such Common Stock, Options or Convertible Securities, as
the case may be. The fair value of any consideration other than cash or
marketable securities shall be determined jointly by the Company and the
Required Holders. If such parties are unable to reach agreement within a
reasonable period of time, such fair value shall be determined by an independent
investment banking or appraisal firm jointly selected by the Company and the
Required Holders, whose determination shall be final and binding on the Company
and the Registered Holder. If the Required Holders and the Company are unable to
agree upon an independent investment banking or appraisal firm, then the
Required Holders shall select one such independent investment banking or
appraisal firm and the Company shall select another such firm, and the
calculation of fair value shall be made by a third independent investment
banking or appraisal firm that has been selected by the two firms so chosen by
the
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Required Holders and the Company. In each such case, the firm calculating
fair value shall submit to the Company and to each Registered Holder such firm's
written opinion addressed to each such Registered Holder setting forth such
determination of fair value. If the independent investment banking or appraisal
firm gives a range for its calculation of fair value, then fair value for
purposes of this paragraph shall be the midpoint of such range. The fees and
expenses of such firm shall be paid by the Company.
(vi) Integrated Transactions. In case any Option is issued in
connection with the issue or sale of other securities of the Company, together
comprising one integrated transaction in which no specific consideration is
allocated to such Options by the parties thereto, the Option shall be deemed to
have been issued for no consideration.
(vii) Treasury Shares. The number of shares of Common Stock
outstanding at any given time does not include shares owned or held by or for
the account of the Company or any direct or indirect subsidiary of the Company
and the disposition of any shares so owned or held shall be considered an issue
or sale of Common Stock.
(viii) Record Date. If the Company takes a record of the holders
of Common Stock for the purpose of entitling them (A) to receive a dividend or
other distribution payable in Common Stock, Options or Convertible Securities or
(B) to subscribe for or purchase Common Stock, Options or Convertible
Securities, then such record date shall be deemed to be the date of the issue or
sale of the shares of Common Stock deemed to have been issued or sold upon the
declaration of such dividend or the making of such other distribution or the
date of the granting of such right of subscription or purchase, as the case may
be.
2C. Subdivision or Combination of Common Stock. If the Company at any
time subdivides (by any stock split, stock dividend, recapitalization or
otherwise) the Common Stock into a greater number of shares or pays a dividend
or makes a distribution to holders of the Common Stock in the form of shares of
Common Stock, then the Exercise Price and Deemed Issue Price in effect
immediately prior to such subdivision shall be proportionately reduced and the
number of Warrant Shares obtainable upon exercise of this Warrant (whether or
not then acquirable or subject to a contingency), as the case may be, shall be
proportionately increased. If the Company at any time combines (by reverse stock
split or otherwise) the Common Stock into a smaller number of shares, then the
Exercise Price and Deemed Issue Price in effect immediately prior to such
combination shall be proportionately increased and the number of Warrant Shares
obtainable upon exercise of this Warrant (whether or not then acquirable or
subject to a contingency), as the case may be, shall be proportionately
decreased.
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2D. Organic Change. Any recapitalization, reorganization,
reclassification, consolidation, merger, sale of all or substantially all of the
Company's assets or other transaction which is effected in such a way that
holders of Common Stock are entitled to receive (either directly or upon
subsequent liquidation) stock, securities or assets with respect to or in
exchange for Common Stock is referred to herein as an "Organic Change". Prior to
the consummation of any Organic Change, the Company shall make appropriate
provision (in form and substance reasonably satisfactory to the Required
Holders) to ensure that such Registered Holder shall thereafter have the right
to acquire and receive upon exercise thereof, in lieu of or addition to (as the
case may be) the Warrant Shares immediately theretofore acquirable and
receivable upon exercise of such Registered Holder's Warrants (whether or not
then acquirable or subject to a contingency), such shares of stock, securities
or assets as may be issued or payable with respect to or in exchange for the
number of Warrant Shares immediately theretofore acquirable and receivable
(whether or not then acquirable or subject to a contingency) upon exercise of
such Registered Holder's Warrants had such Organic Change not taken place. In
any such case, the Company shall make appropriate provision (in form and
substance satisfactory to the Required Holders) with respect to such Registered
Holder's rights and interests to insure that the provisions hereof (including,
without limitation, Sections 2, 3 and 4) shall thereafter be applicable to the
Warrants (including, without limitation, in the case of any such Organic Change
in which the successor entity or purchasing entity is other than the Company, an
immediate adjustment of the Exercise Price to the product of the Exercise Price
immediately prior to such Organic Change multiplied by the ratio of such value
of the Common Stock reflected by the terms of such Organic Change divided by the
Fair Market Value of the Common Stock in effect immediately prior to such
Organic Change and a corresponding immediate adjustment to the number of Warrant
Shares acquirable and receivable upon exercise of the Warrants (whether or not
then acquirable or subject to a contingency), if the value so reflected is less
than the Fair Market Value of the Common Stock in effect immediately prior to
such Organic Change). The Company shall not effect any such Organic Change
unless, prior to the consummation thereof, the successor entity (if other than
the Company) resulting from such Organic Change (including a purchaser of all or
substantially all the Company's assets) assumes by written instrument (in form
and substance satisfactory to the Required Holders) the obligation to deliver to
such Registered Holder such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such Registered Holder may be entitled
to acquire upon exercise of Warrants.
2E. Certain Events. If any event occurs of the type contemplated by the
provisions of this Section 2 but not expressly provided for by such provisions
(including, without limitation, the granting of stock appreciation rights,
phantom stock rights or other rights with equity features but excluding any
Permitted Issuance), then the Company's Board of Directors shall make an
appropriate adjustment in the Exercise Price, the Deemed Issue Price and the
number of Warrant Shares obtainable upon exercise of this Warrant (whether or
not then acquirable or subject to a contingency) so as to protect the rights of
the Registered Holder of this Warrant; provided that no such adjustment shall
increase the Exercise Price or decrease the number of Warrant Shares issuable
upon exercise hereof other than as a readjustment in a manner consistent with
that contemplated by Section 2(B)(iv).
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2F. Notices.
(i) Immediately upon any adjustment of the Exercise Price, the
Company shall give written notice thereof to the Registered Holder, setting
forth in reasonable detail and certifying the calculation of such adjustment.
(ii) The Company shall give written notice to the Registered
Holder at least 30 days prior to the date on which the Company closes its books
or takes a record (A) with respect to any dividend or distribution upon the
Common Stock, (B) with respect to any pro rata subscription offer to holders of
Common Stock, or (C) for determining rights to vote with respect to any Organic
Change, dissolution or liquidation.
(iii) The Company shall also give written notice to the
Registered Holder at least 30 days prior to the date on which any Organic
Change, dissolution or liquidation shall take place.
SECTION 3. Purchase Rights. If at any time the Company grants, issues or
sells any Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of the Common Stock
(the "Purchase Rights"), then the Registered Holder shall be entitled to
acquire, upon the terms applicable to such Purchase Rights, the aggregate
Purchase Rights which such Registered Holder would have acquired if such
Registered Holder had held the maximum number of Warrant Shares acquirable
(whether or not then acquirable or subject to a contingency) upon complete
exercise of this Warrant immediately before the date on which a record is taken
for the grant, issuance or sale of such Purchase Rights or, if no such record is
taken, the date as of which the record holders of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights.
SECTION 4. Definitions. The following terms have the meanings set forth
below and terms not otherwise defined herein have the meaning assigned to them
in the Investment Agreement:
"Affiliate" means, as applied to any Person, (i) any other Person
directly or indirectly controlling, controlled by or under common control with,
that Person, (ii) any other Person that owns or controls 5% or more of any class
of equity securities (including any equity securities issuable upon the exercise
of any Option or the conversion or exchange of any Convertible Securities) of
that Person or any of its Affiliates, or (iii) any member, director, partner,
officer, agent, employee or relative of such Person or any of its direct or
indirect Affiliates. For the purposes of this definition, "control" (including
with correlative meanings, the terms "controlling", "controlled by", and "under
common control with") as applied to any Person, means the possession, directly
or indirectly, of the power to direct or cause the direction of the management
and policies of that Person, whether through ownership of voting securities or
by contract or otherwise. With respect to a natural person, the term "Affiliate"
also shall include such person's spouse and lineal descendants.
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"Aggregate Exercise Price" has the meaning ascribed to it in Section
1B(i)(d).
"Bankruptcy Law" means Title 11 of the United States Code and any
similar federal or state law for the relief of debtors.
"Block Trade" means the sale of shares of Common Stock in a "block" as
defined in Rule 10b-18(14) (without giving effect to the proviso thereto) of the
Rules and Regulations under the Securities Exchange Act of 1934, as in effect on
the Date of Issuance.
"Business Day" means a day other than Saturday, Sunday or any day on
which banks located in the States of New York, Nevada or California are
authorized or obligated to close.
"Business Plan" has the meaning ascribed thereto in the Investment
Agreement.
"Call Notice" has the meaning ascribed to it in Section 9.
"Call Price" has the meaning ascribed to it in Section 9.
"Common Stock" means the Common Stock, par value $.001 per share, of the
Company, any securities into which such Common Stock shall have been changed or
any securities resulting from any reclassification or recapitalization of such
Common Stock, and all other securities of any class or classes (however
designated) of the Company the holders of which have the right, without
limitation as to amount, after payment on any securities entitled to a
preference on dividends or other distributions upon any dissolution or winding
up, either to all or to a share of the balance of payments upon such
dissolution, liquidation or winding up.
"Common Stock Deemed Outstanding" means, at any given time, the number
of shares of all classes of the Company's Common Stock actually outstanding at
such time, plus the number of shares of the Company's common stock deemed to be
outstanding pursuant to Section 2B(i) or 2B(ii) hereof.
"Company" has the meaning ascribed to it in the first paragraph of this
Warrant.
"Convertible Securities" has the meaning ascribed to it in Section
2B(i).
"Date of Issuance" means May 1, 1998 the Company initially issues this
Warrant regardless of the number of times new certificates representing the
unexpired and unexercised rights formerly represented by this Warrant shall be
issued.
"Deemed Issue Price" means $0.50, as such price may be adjusted from
time to time pursuant to Section 2 hereof.
An "Event of Default" shall be deemed to have occurred if:
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(i) the Company materially defaults in the performance or
observance of any of its covenants or agreements contained in this Warrant, the
Investment Agreement or any other Operative Agreement (as defined in the
Investment Agreement) or a material breach of any representations or warranties
of the Company contained in such documents shall exist at the time such
representation or warranty was made or deemed to be made;
(ii) any breach or default occurs by the Company or any
Subsidiary (as defined in the Investment Agreement) under any agreement,
mortgage, indenture, instrument or other Contract (as defined in the Investment
Agreement) under which there is issued or by which there is secured or evidenced
any Indebtedness in excess of $100,000;
(iii) the Company or any Subsidiary (as defined in the Investment
Agreement) defaults in the performance or observance of any of its covenants or
agreements in the Company Management Agreements, the Management Agreement, the
SMR Licenses, the Loan Agreements or the FCC Licenses (as each such term is
defined in the Investment Agreement) and such default, either individually or
taken together with all or any other such defaults, would have a material
adverse effect on the Business or Condition of the Company or its Assets and
Properties;
(iv) (x) an Action or Proceeding is pending or, to the knowledge
of the Company and its Subsidiaries, threatened, or (y) an Order is outstanding
or, the Company or a Subsidiary has received notice of or knows of an Order, in
any case against, relating to or affecting the Business or Condition of the
Company (as defined in the Investment Agreement) which could reasonably be
expected to have a material adverse effect thereon;
(v) a final judgment for the payment of money (other than with
respect to the Notes) is entered by a court of competent jurisdiction against
the Company or any Subsidiary which remains undischarged for a period (during
which such judgment remains undischarged, unvacated, unbounded or unstayed) of
30 days, provided that such judgment (individually or together with all other
such judgments) exceeds $100,000;
(vi) the Company or any Subsidiary pursuant to or within the
meaning of any Bankruptcy Law (1) commences a voluntary case, (2) consents to
the entry of an order for relief against it in an involuntary case, (3) consents
to the appointment of a receiver, trustee, assignee, liquidator or similar
official under any Bankruptcy Law of it or for all or substantially all of its
property, (4) makes a general assignment for the benefit of its creditors, or
(5) generally is unable to pay its debts as the same become due; or
under any Bankruptcy Law that (1) is for relief against the Company or any
Subsidiary in an involuntary case, (2) appoints a receiver, trustee, assignee,
liquidator or similar official under any Bankruptcy Law of the Company or any
Subsidiary or for all or substantially all of its property, or (3) orders the
liquidation of the Company or any Subsidiary, and the order or decree remains
unstayed and in effect for 60 days.
12
"Exercise Period" has the meaning ascribed to it in Section 1A.
"Exercise Price" means $1.25 for each Warrant Share as such price may be
adjusted from time to time pursuant to Section 2 hereof.
"Exercise Time" has the meaning ascribed to it in Section 1B(i).
"Fair Market Value" means, with respect to each share of Common Stock as
of a particular date (i) the average of the closing sales prices on such date of
the Common Stock on all domestic securities exchanges on which the Common Stock
is listed, or (ii) if there have been no sales on any such exchange on any day,
the average of the highest bid and lowest asked prices on all such exchanges at
the end of such day, or (iii) if on any day the Common Stock is not so listed,
the sales price for the Common Stock as of 4:00 P.M., New York time, as reported
on the Nasdaq National Market, in each such case averaged over a period of 40
trading days consisting of the day before "Fair Market Value" is being
determined and the immediately prior 39 trading days prior to such day during
which the Common Stock was traded. Notwithstanding the foregoing, if at any time
of determination either (x) the Common Stock is not registered pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended, and either listed
on a national securities exchange or authorized for quotation in the Nasdaq
National Market, or (y) less than 25% of the outstanding Common Stock is held by
the public free of transfer restrictions under the Securities Act of 1933, as
amended, then Fair Market Value shall mean the price that would be paid per
share for the entire common equity interest in the Company in an orderly sale
transaction between a willing buyer and a willing seller, using valuation
techniques then prevailing in the securities industry and assuming full
disclosure of all relevant information and a reasonable period of time for
effectuating such sale, without discount for lack of liquidity, or minority
position. Fair Market Value shall be determined jointly by the Company's Board
of Directors in its good faith judgment and the Required Holders. If such
parties are unable to agree as to such a joint determination of Fair Market
Value within 15 days of notice by one party to the other of the necessity of
calculating Fair Market Value for purposes of this Warrant, then, such value
shall be determined by an independent investment banking or appraisal firm
mutually acceptable to the Company and the Required Holders. If the Required
Holders and the Company are unable to agree upon an independent investment
banking or appraisal firm, then the Required Holders shall select one such
independent investment banking or appraisal firm and the Company shall select
another such firm, and the calculation of Fair Market Value shall be made by a
third such independent investment banking or appraisal firm that has been
selected by the two firms so chosen by the Required Holders and the Company. In
each such case, the firm calculating Fair Market Value shall submit to the
Company and each Registered Holder such firm's written opinion addressed to each
such Registered Holder setting forth such determination. If the independent
investment banking or appraisal firm gives a range for its calculation of Fair
Market Value, then Fair Market Value shall be the midpoint of such range. The
fees and expenses of such firm will be borne by the Company, and the
determination of such firm will be final and binding upon all parties.
13
"Floating Price Securities" means the Securities listed in Section 2 of
Attachment A hereto and any other agreement, instrument, document or
understanding in existence on the Date of Issuance (other than the securities
listed in Sections 1 and 3 of Attachment A hereto) pursuant to which the Company
is either obligated or permitted to issue shares of Common Stock.
"Fully Diluted Basis" means, with respect to the calculation of the
number of shares of Common Stock, as of each date of determination thereof, the
sum of (i) all shares of Common Stock outstanding at the time of determination
and (ii) all shares of Common Stock issuable upon the exchange, exercise,
conversion or payment with respect to all Options and Convertible Securities
then outstanding.
"Identified Securities" means the securities listed in Attachment A
hereto.
"GAAP" means generally accepted accounting principles consistently
applied.
"Investment Agreement" means the Investment Agreement, dated as of the
date hereof, between the Company and REI (as such agreement may be amended,
supplemented or otherwise modified from time to time in accordance with the
provisions thereof).
"New Preferred Shares" has the meaning ascribed to it in Section
1B(iii).
"Options" has the meaning ascribed to it in Section 2B(i).
"Organic Change" has the meaning ascribed to it in Section 2D.
"Permitted Issuance" means (i) the issuance from time to time by the
Company of shares of Common Stock upon exercise of the Warrant, the Stock
Purchase Warrant, dated even date herewith, between the Company and REI for the
purchase of 10,119,614 shares of Common Stock (subject to adjustment), the Stock
Purchase Warrant, dated even date herewith, between the Company and REI for the
purchase of 14,612,796 shares of Common Stock (subject to adjustment) or any New
Warrant (as each such Warrant may be amended, supplemented or otherwise modified
from time to time in accordance with the provisions thereof) (and any
replacements thereof), (ii) the issuance from time to time by the Company of
Identified Securities and of shares of Common Stock upon the exercise of
Identified Securities other than Floating Price Securities, (iii) the issuance
from time to time by the Company of New Warrants and (iv) the issuance by the
Company of shares of Common Stock in accordance with Section 4.20 of the
Investment Agreement.
"Person" means any individual, corporation, joint stock corporation,
limited liability company or partnership, general partnership, limited
partnership, proprietorship, joint venture, other business organization, trust,
union, association or governmental or regulatory authority.
"Purchase Rights" has the meaning ascribed to it in Section 3.
14
"Purchaser" has the meaning ascribed to it in Section 1B(i)(a).
"Registered Holder" has the meaning ascribed thereto in the first
paragraph of this Warrant.
"REI" means Recovery Equity Investors II, L.P., a Delaware limited
partnership.
"Required Holders" means, at any time of determination, holders of
Warrants that represent more than 50% of all of the Warrant Shares then issuable
upon exercise of the Warrants then outstanding.
"Shareholders Agreement" means the Shareholders Agreement dated as of
May 1, 1998, among the Company, REI and the other parties thereto as such
agreement may be amended, supplemented or modified from time to time in
accordance with the terms thereof.
"Warrants" means this Stock Purchase Warrant and any other Warrants
issued pursuant to Section 7 or 8.
"Warrant Shares" means shares of Common Stock; provided, that if the
securities issuable upon exercise of the Warrants are issued by an entity other
than the Company or there is a change in the class of securities so issuable,
then the term "Warrant Shares" shall mean shares of the security issuable upon
exercise of the Warrants if such security is issuable in shares, or shall mean
the equivalent units in which such security is issuable if such security is not
issuable in shares.
SECTION 5. No Voting Rights; Limitations of Liability. This Warrant
shall not entitle the Registered Holder hereof to any voting rights or other
rights as a stockholder of the Company. No provision hereof, in the absence of
affirmative action by the Registered Holder to purchase Warrant Shares, and no
enumeration herein of the rights or privileges of the Registered Holder shall
give rise to any liability of such Registered Holder for the Exercise Price of
Warrant Shares acquirable by exercise hereof or as a stockholder of the Company.
SECTION 6. Warrant Transferable. Subject to the transfer conditions
referred to in the legend endorsed hereon, this Warrant and all rights hereunder
are transferable, in whole or in part, without charge to the Registered Holder
(subject to the provisions of paragraph 1B(iv) hereof), upon surrender of this
Warrant with a properly executed Assignment (in the form of Exhibit II hereto)
at the principal office of the Company. The Registered Holder shall not sell,
transfer or otherwise dispose of this Warrant or any Warrant Shares, in whole or
in part, except pursuant to an effective registration statement under the
Securities Act or an exemption from registration thereunder and then only in
accordance with the terms of the Shareholders Agreement.
Each certificate evidencing shares of Warrant Shares and each Warrant
issued upon such transfer shall bear the restrictive legends set forth on this
Warrant and those required by the Shareholders Agreement.
15
SECTION 7. Warrant Exchangeable for Different Denominations. This
Warrant is exchangeable, upon the surrender hereof by the Registered Holder at
the principal office of the Company, for new Warrants of like tenor representing
in the aggregate the purchase rights hereunder, and each of such new Warrants
shall represent such portion of such rights as is designated by the Registered
Holder at the time of such surrender. All Warrants representing portions of the
rights hereunder are also referred to herein as "Warrants."
SECTION 8. Replacement. Upon receipt of evidence reasonably satisfactory
to the Company (an affidavit of the Registered Holder shall be satisfactory) of
the ownership and the loss, theft, destruction or mutilation of any certificate
evidencing this Warrant, and in the case of any such loss, theft or destruction,
upon receipt of indemnity reasonably satisfactory to the Company (provided that
if the Registered Holder is a financial institution or other institutional
investor its own agreement shall be satisfactory) or, in the case of any such
mutilation upon surrender of such certificate, the Company shall (at its
expense) execute and deliver in lieu of such certificate a new certificate of
like kind representing the same rights represented by such lost, stolen,
destroyed or mutilated certificate and dated the date of such lost, stolen,
destroyed or mutilated certificate.
SECTION 9. Company Call Right. At any time after April 1, 1999, to the
extent this Warrant has not been exercised, the Company shall have the right to
purchase this Warrant from the Registered Holder, in whole but not in part, for
a purchase price equal to the product of the Exercise Price and the number of
Warrant Shares for which this Warrant is then exercisable (the "Call Price") in
each case as of the date of closing contemplated in the next sentence, by giving
written notice to the Registered Holder of the Company's desire to purchase this
Warrant (the "Call Notice") provided that on the date such Call Notice is given
(i) the Fair Market Value per share of the Company's Common Stock is at least
equal to $1.75 (appropriately adjusted for stock splits, stock dividends,
recapitalizations and similar events), (ii) at least 10% of the Company's
outstanding shares of Common Stock traded in the 40 trading day period during
which the Fair Market Value per share of the Company's Common Stock was
determined for purposes of clause (i); provided, however, that for purposes of
determining the number of shares traded during such period, Block Trades shall
be excluded, (iii) the Company's Common Stock is listed on the New York Stock
Exchange, American Stock Exchange or Nasdaq National Market and (iv) the Company
has not experienced a material shortfall from the Projections and no Event of
Default (or event which with notice or lapse of time or both would become an
Event of Default) has occurred and is continuing. The closing of the purchase
and sale of this Warrant shall take place on such date as is specified in the
Call Notice, which date shall be no sooner than 30 Business Days after receipt
of the Call Notice and no later than 60 days after receipt of the Call Notice,
at the Company's principal place of business. At such closing, the Registered
Holder shall transfer all right, title and interest in and to this Warrant to
the Company and the Company shall pay to the Registered Holder, by wire transfer
of immediately available funds, an amount equal to the Call Price.
Notwithstanding the foregoing, at any time prior to the closing contemplated by
this Section 9, this Warrant may be exercised in accordance with its terms.
16
SECTION 10. Notices. Except as otherwise expressly provided herein, all
notices and deliveries referred to in this Warrant shall be in writing, shall be
delivered personally, sent by registered or certified mail, return receipt
requested and postage prepaid or sent via nationally recognized overnight
courier or via facsimile, and shall be deemed to have been given when so
delivered (or when received, if delivered by any other method) if sent (i) to
the Company, at its principal executive offices and (ii) to a Registered Holder,
at such Registered Holder's address as it appears in the records of the Company
(unless otherwise indicated by any such Registered Holder).
SECTION 11. Amendment and Waiver. Except as otherwise provided herein,
the provisions of the Warrants may be amended and the Company may take any
action herein prohibited, or omit to perform any act herein required to be
performed by it, only if the Company has obtained the prior written consent of
the Required Holders.
SECTION 12a Warrant Register. The Company shall maintain at its
principal executive offices books for the registration and the registration of
transfer of Warrants. The Company may deem and treat the Registered Holder as
the absolute owner hereof (notwithstanding any notation of ownership or other
writing thereon made by anyone) for all purposes and shall not be affected by
any notice to the contrary.
SECTION 13a Descriptive Headings; Governing Law. The descriptive
headings of the several Sections and paragraphs of this Warrant are inserted for
convenience only and do not constitute a part of this Warrant. ALL QUESTIONS
CONCERNING THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE DOMESTIC LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE
OF LAW 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.
* * * * *
17
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed and
attested by its duly authorized officers under its corporate seal and to be
dated as of the date hereof.
CHADMOORE WIRELESS GROUP, INC.
By:
----------------------------------
Name:
Title:
Attest:
------------------------------
Name:
Title:
[Certificate No. 1]
EXHIBIT I
EXERCISE AGREEMENT
Dated:
To:
The undersigned, pursuant to the provisions set forth in the
attached Warrant (Certificate No. ), hereby agrees to subscribe for the
purchase of [all of the] [Insert number] Warrant Shares covered by such Warrant
and makes payment herewith in full therefor at the price per share and in the
manner provided by such Warrant.
Signature
------------------------------
Address
--------------------------------
EXHIBIT II
ASSIGNMENT
FOR VALUE RECEIVED, hereby
sells, assigns and transfers all of the rights of the undersigned under the
attached Warrant (Certificate No. ) with respect to [all of the] [Insert
number] Warrant Shares covered thereby set forth below, unto:
Names of Assignee Address No. of Shares
Dated: Signature
--------------------------------
Witness
--------------------------------
