THIS WARRANT AND ANY SECURITIES ACQUIRED UPON EXERCISE OF THIS WARRANT HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES
LAWS OF ANY STATE AND MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT AND
APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION TO THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS. THIS WARRANT AND SUCH
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE CONDITIONS SPECIFIED IN THIS WARRANT, COPIES OF WHICH WILL
BE MADE AVAILABLE UPON REQUEST.
GENERAL DATACOMM INDUSTRIES, INC.
COMMON STOCK PURCHASE WARRANT
No. W-1 September 15, 2003
Warrant to Purchase Shares of Common Stock
GENERAL DATACOMM INDUSTRIES, INC., a Delaware corporation (the
"Corporation"), for value received, hereby certifies that ABLECO HOLDING LLC, a
Delaware limited liability company, or its registered assigns (the "Holder"), is
entitled to purchase from the Corporation the number of duly authorized, validly
issued, fully paid and nonassessable shares of Common Stock, par value $0.01 per
share, of the Corporation (the "Common Stock"), equal to the Warrant Quantity,
at a purchase price of $0.01 per share (the "Warrant"), at any time or from time
to time on and after December 31, 2004, if the Obligations have not been paid in
full by such date (the "Initial Exercise Date"), but prior to 5:00 P.M., New
York City time, on September 15, 2013 (the "Expiration Date"), subject to the
terms, conditions and adjustments set forth below in this Warrant; provided,
that if all of the Obligations under the Loan Agreement are paid in full on or
before December 31, 2007, (i) the Expiration Date shall be the date of such
payment and (ii) any Common Stock issued upon exercise of this Warrant shall be
cancelled and redeemed at the Corporation's option, at the price per share paid
by the Holder or its assignee for such Common Stock.
1. Definitions. As used herein, unless the context
otherwise requires, the following terms shall have the meanings indicated:
"Business Day" shall mean any day other than a Saturday or a
Sunday or any day on which national banks are authorized or required by law to
close. Any reference to "days" (unless Business Days are specified) shall mean
calendar days.
"Common Stock" shall have the meaning assigned to it in the
introduction to this Warrant, such term to include any stock into which such
Common Stock shall have been changed or any stock resulting from any
reclassification of such Common Stock, and all other stock of any class or
classes (however designated) of the Corporation the holders of which have the
right, without limitation as to amount, either to all or to a share of the
balance of current dividends and liquidating dividends after the payment of
dividends and distributions on any shares entitled to preference.
"Corporation" shall have the meaning assigned to it in the
introduction to this Warrant, such term to include any corporation or other
entity which shall succeed to or assume the obligations of the Corporation
hereunder in compliance with Section 4.
"Current Market Price" shall mean, on any date specified
herein, the average of the daily Market Price during the 10 consecutive trading
days commencing 15 trading days before such date, except that, if on any such
date the shares of Common Stock are not listed or admitted for trading on any
national securities exchange or quoted in the over-the-counter market, the
Current Market Price shall be the Market Price on such date.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended from time to time, and the rules and regulations thereunder, or any
successor statute.
"Expiration Date" shall have the meaning assigned to it in the
introduction to this Warrant.
"Fair Value" shall mean, on any date specified herein (i) in
the case of cash, the dollar amount thereof, (ii) in the case of a security, the
Current Market Price, and (iii) in all other cases, the fair value thereof (as
of a date which is within 20 days of the date as of which the determination is
to be made) determined jointly by the Corporation and the Holder; provided,
however, that if such parties are unable to reach agreement within a reasonable
period of time, the Fair Value shall be determined in good faith, by an
independent investment banking firm selected jointly by the Corporation and the
Holder or, if that selection cannot be made within ten days, by an independent
investment banking firm selected by the American Arbitration Association in
accordance with its rules, and provided further, that the Corporation shall pay
all of the fees and expenses of any third parties incurred in connection with
determining the Fair Value.
"Fully-Diluted Basis" shall mean, without duplication, the sum
of (a) all shares of Common Stock issued and outstanding at the date of
determination, (b) all shares of Common Stock issuable, as of the date of
determination, upon the exercise of this Warrant and any other option, warrant
or similar right outstanding at the time of determination, whether or not
presently exercisable, and (c) all shares of Common Stock issuable, as of the
date of determination, upon the exercise of any conversion or exchange right
contained in any security convertible into or exchangeable for shares of Common
Stock.
"Holder" shall have the meaning assigned to it in the
introduction to this Warrant.
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"Initial Exercise Date" shall have the meaning assigned to it
in the introduction to this Warrant.
"Loan Agreement" shall mean that certain Loan and Security
Agreement, dated as of the date hereof, by and among the Corporation, General
DataComm, Inc., DataComm Leasing Corporation, GDC Federal Systems, Inc., GDC
Naugatuck, Inc., GDC Holding Company, L.L.C., the lenders party thereto from
time to time and Ableco Finance LLC, as agent for such lenders.
"Market Price" shall mean, on any date specified herein, the
amount per share of the Common Stock, equal to (i) the last reported sale price
of such Common Stock, regular way, on such date or, in case no such sale takes
place on such date, the average of the closing bid and asked prices thereof
regular way on such date, in either case as officially reported on the principal
national securities exchange on which such Common Stock is then listed or
admitted for trading, (ii) if such Common Stock is not then listed or admitted
for trading on any national securities exchange but is designated as a national
market system security by the NASD, the last reported trading price of the
Common Stock on such date, (iii) if there shall have been no trading on such
date or if the Common Stock is not so designated, the average of the closing bid
and asked prices of the Common Stock on such date as shown by the NASD automated
quotation system, or (iv) if such Common Stock is not then listed or admitted
for trading on any national exchange or quoted in the over-the-counter market,
the fair value thereof (as of a date which is within 20 days of the date as of
which the determination is to be made) determined jointly by the Corporation and
the Holder; provided, however, if such parties are unable to reach agreement
within a reasonable period of time, the fair value shall be determined in good
faith by an independent investment banking firm selected jointly by the
Corporation and the Holder or, if that selection cannot be made within ten days,
by an independent investment banking firm selected by the American Arbitration
Association in accordance with its rules, and provided further, that the
Corporation shall pay all of the fees and expenses of any third parties incurred
in connection with determining the Market Price.
"NASD" shall mean the National Association of Securities
Dealers, Inc.
"Obligations" shall mean the Obligations (as defined in the
Loan Agreement).
"Other Securities" shall mean any stock (other than Common
Stock) and other securities of the Corporation or any other Person (corporate or
otherwise) which the holders of this Warrant at any time shall be entitled to
receive, or shall have received, upon the exercise of this Warrant, in lieu of
or in addition to Common Stock, or which at any time shall be issuable or shall
have been issued in exchange for or in replacement of Common Stock or Other
Securities pursuant to Section 4 or otherwise.
"Partial Exercise" shall mean any exercise of this Warrant for
less than the Warrant Quantity on the date of such exercise.
"Person" shall mean any individual, firm, partnership,
corporation, trust, joint venture, association, joint stock company, limited
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liability company, unincorporated organization or any other entity or
organization, including a government or agency or political subdivision thereof,
and shall include any successor (by merger or otherwise) of such entity.
"Purchase Price" shall mean $0.01 per share.
"Registration Rights Agreement" shall mean the Registration
Rights Agreement dated as of the date hereof between the Corporation and the
Holder.
"Restricted Securities" shall mean (i) any warrants bearing
the applicable legend set forth in Section 10.1, (ii) any shares of Common Stock
(or Other Securities) issued or issuable upon the exercise of this Warrant which
are (or, upon issuance, will be) evidenced by a certificate or certificates
bearing the applicable legend set forth in such Section, and (iii) any shares of
Common Stock (or Other Securities) issued subsequent to the exercise of this
Warrant as a dividend or other distribution with respect to, or resulting from a
subdivision of the outstanding shares of Common Stock (or Other Securities) into
a greater number of shares by reclassification, stock splits or otherwise, or in
exchange for or in replacement of the Common Stock (or Other Securities) issued
upon such exercise, which are evidenced by a certificate or certificates bearing
the applicable legend set forth in such Section.
"Securities Act" shall mean the Securities Act of 1933, as
amended from time to time, and the rules and regulations thereunder, or any
successor statute.
"Warrant" shall have the meaning assigned to it in the
introduction to this Warrant.
"Warrant Quantity" shall mean, at the time that the Holder
exercises the Warrant in whole or in part, or such other measurement date, 10%
of the total number of shares of Common Stock then outstanding, on a
Fully-Diluted Basis, subject to adjustment pursuant to Section 2.1(c).
2. Exercise of Warrant.
-------------------
2.1. Manner of Exercise; Payment of the Purchase Price;
Adjustment for Partial Exercise. (a) This Warrant may be exercised by the Holder
hereof, in whole or in part, at any time or from time to time after the Initial
Exercise Date through the Expiration Date, by surrendering to the Corporation at
its principal office this Warrant, with the form of Election to Purchase Shares
attached hereto as Exhibit A (or a reasonable facsimile thereof) duly executed
by the Holder and accompanied by payment of the Purchase Price for the number of
shares of Common Stock specified in such form.
(b) Payment of the Purchase Price may be made as follows (or
by any combination of the following): (i) in United States currency by cash or
delivery of a certified check or bank draft payable to the order of the
Corporation or by wire transfer to the Corporation, (ii) by cancellation of all
or any part of the unpaid principal amount of the then-outstanding Obligations
in an amount equal to the Purchase Price, (iii) by cancellation of such number
of the shares of Common Stock otherwise issuable to the Holder upon such
exercise as shall be specified in such Election to Purchase Shares, such that
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the excess of the aggregate Current Market Price of such specified number of
shares on the date of exercise over the portion of the Purchase Price
attributable to such shares shall equal the Purchase Price attributable to the
shares of Common Stock to be issued upon such exercise, in which case such
amount shall be deemed to have been paid to the Corporation and the number of
shares issuable upon such exercise shall be reduced by such specified number, or
(iv) by surrender to the Corporation for cancellation certificates representing
shares of Common Stock of the Corporation owned by the Holder (properly endorsed
for transfer in blank) having a Current Market Price on the date of Warrant
exercise equal to the Purchase Price.
(c) In the event of any Partial Exercise of this Warrant, the
Warrant Quantity shall be reduced, effective as of the effective date of such
Partial Exercise, by such number of shares of Common Stock equal to the
difference between (i) the Warrant Quantity on the date of such Partial Exercise
and (ii) the number of shares of Common Stock, on a Fully-Diluted Basis,
purchased by the Holder in connection with such Partial Exercise.
2.2. When Exercise Effective. Each exercise of this Warrant
shall be deemed to have been effected immediately prior to the close of business
on the Business Day on which this Warrant shall have been surrendered to, and
the Purchase Price shall have been received by, the Corporation as provided in
Section 2.1, and at such time the Person or Persons in whose name or names any
certificate or certificates for shares of Common Stock (or Other Securities)
shall be issuable upon such exercise as provided in Section 2.3 shall be deemed
to have become the holder or holders of record thereof for all purposes.
2.3. Delivery of Stock Certificates, etc.; Charges,
Taxes and Expenses. (a) As soon as practicable after each exercise of this
Warrant, in whole or in part, and in any event within five (5) Business Days
thereafter, the Corporation shall cause to be issued in the name of and
delivered to the Holder hereof or, subject to Section 10, as the Holder may
direct,
(i) a certificate or certificates for the number of
shares of Common Stock (or Other Securities) to which the Holder shall
be entitled upon such exercise plus, in lieu of issuance of any
fractional share to which the Holder would otherwise be entitled, if
any, a check for the amount of cash equal to the same fraction
multiplied by the Current Market Price per share on the date of Warrant
exercise, and
(ii) in case such exercise is a Partial Exercise, a
new Warrant or Warrants of like tenor, for the balance of the Warrant
Quantity, as adjusted pursuant to Section 2.1(c).
(b) Issuance of certificates for shares of Common Stock upon
the exercise of this Warrant shall be made without charge to the Holder hereof
for any issue or other incidental expense, in respect of the issuance of such
certificates, all of which such taxes and expenses shall be paid by the
Corporation.
2.4. Corporation to Reaffirm Obligations. The Corporation
shall, at the time of each exercise of this Warrant, upon the request of the
Holder hereof, acknowledge in writing its continuing obligation to afford to
such Holder all rights to which such Holder shall continue to be entitled after
such exercise in accordance with the terms of this Warrant, provided that if the
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Holder of this Warrant shall fail to make any such request, such failure shall
not affect the continuing obligation of the Corporation to afford such rights to
the Holder.
2.5. Tax Basis. The Corporation and the Holder hereby agree
that the tax basis of this Warrant for purposes of the Internal Revenue Code of
1986, as amended, shall be $1,000, and the treatment of this Warrant under such
Code by each of the Corporation and the Holder shall be consistent with such
agreement.
3. DIVIDENDS AND DISTRIBUTIONS.
---------------------------
3.1. General; Warrant Quantity. This Warrant evidences
the right to purchase a number of shares of Common Stock equal to the Warrant
Quantity, subject to adjustment as provided in Section 2.1(c).
3.2. Extraordinary Dividends and Distributions. In case the
Corporation at any time or from time to time after the date hereof shall
declare, order, pay or make a dividend or other distribution (including, without
limitation, (i) any distribution of other or additional stock, (ii) other
securities or property or (iii) rights, options or warrants to subscribe for
purchase or otherwise acquire either shares of Common Stock or securities
convertible into or exchangeable for shares of Common Stock, by way of dividend
or spin-off, reclassification, recapitalization or similar corporate
rearrangement) on the Common Stock other than (a) a dividend payable in shares
of Common Stock, then, in each such case, the Corporation shall pay to the
Holder of this Warrant, at the time such dividend or distribution is paid to the
holders of the Common Stock, an amount equal to the product of (i) the Warrant
Quantity and (ii) the Fair Value of such dividend or distribution, at the time
of such dividend or distribution, applicable to one share of Common Stock.
4. Consolidation, Merger, etc.
--------------------------
4.1. Adjustments for Consolidation, Merger, Sale of Assets,
Reorganization, etc. In case the Corporation after the date hereof (a) shall
consolidate with or merge into any other Person and shall not be the continuing
or surviving corporation of such consolidation or merger, (b) shall permit any
other Person to consolidate with or merge into the Corporation and the
Corporation shall be the continuing or surviving Person but, in connection with
such consolidation or merger, the 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, (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,
then, and in the case of each such transaction, proper provision shall be made
so that, upon the basis and the terms and in the manner provided in this
Warrant, the Holder of this Warrant, upon the exercise hereof at any time after
the consummation of such transaction, shall be entitled to receive (at the
aggregate Purchase Price in effect at the time of such consummation for all
Common Stock or Other Securities issuable upon such exercise immediately prior
to such consummation), in lieu of the 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 actually have been entitled as
a stockholder upon such consummation if such Holder had exercised this Warrant
immediately prior thereto, subject to adjustments (subsequent to such
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consummation) as nearly equivalent as possible to the adjustments provided for
in this Warrant.
4.2. Assumption of Obligations. Notwithstanding anything
contained in this Warrant or in the Loan Agreement to the contrary, the
Corporation shall not effect any of the transactions described in clauses (a)
through (d) of Section 4.1 unless, prior to the consummation thereof, each
Person (other than the Corporation) which may be required to deliver any stock,
securities, cash or property upon the exercise of this Warrant as provided
herein shall assume, by written instrument delivered to, and reasonably
satisfactory to, the Holder of this Warrant, (a) the obligations of the
Corporation under this Warrant (and if the Corporation shall survive the
consummation of such transaction, such assumption shall be in addition to, and
shall not release the Corporation from, any continuing obligations of the
Corporation under this Warrant), (b) the obligations of the Corporation under
the Registration Rights Agreement and (c) the obligation to deliver to the
Holder such shares of stock, securities, cash or property as, in accordance with
the foregoing provisions of this Section 4, the Holder may be entitled to
receive and such Person shall have similarly delivered to the Holder an opinion
of counsel for such Person, which counsel shall be reasonably satisfactory to
the Holder, stating that this Warrant shall thereafter continue in full force
and effect and the terms hereof (including, without limitation, all of the
provisions of this Section 4) shall be applicable to the stock, securities, cash
or property which such Person may be required to deliver upon any exercise of
this Warrant or the exercise of any rights pursuant hereto. Nothing in this
Section 4 shall be deemed to authorize the Corporation to enter into any
transaction not otherwise permitted by the Loan Agreement.
5. Other Dilutive Events. In case any event shall occur as to
which, the provisions of Section 3 or Section 4 hereof are not strictly
applicable or if strictly applicable would not fairly protect the purchase
rights of the Holder in accordance with the essential intent and principles of
such Sections, then, in each such case, the Board of Directors of the
Corporation shall make an adjustment in the application of such provisions, in
accordance with such essential intent and principles, so as to preserve, without
dilution, the purchase rights represented by this Warrant.
6. No Dilution or Impairment. The Corporation shall not, by
amendment of its certificate of incorporation or through any consolidation,
merger, reorganization, transfer of assets, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, 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 of this Warrant against dilution or other impairment.
Without limiting the generality of the foregoing, the Corporation (a) shall not
permit the par value of any shares of stock receivable upon the exercise of this
Warrant to exceed the amount payable therefor upon such exercise, (b) shall take
all such action as may be necessary or appropriate in order that the Corporation
may validly and legally issue fully paid and nonassessable shares of stock, free
from all taxes, liens, security interests, encumbrances, preemptive rights and
charges on the exercise of this Warrant from time to time outstanding, (c) shall
not take any action which results in any adjustment of the Warrant Quantity if
the total number of shares of Common Stock (or Other Securities) issuable after
the action upon the exercise of all of this Warrant would exceed the total
7
number of shares of Common Stock (or Other Securities) then authorized by the
Corporation's certificate of incorporation and available for the purpose of
issue upon such exercise, and (d) shall not issue any capital stock of any class
which is preferred as to dividends or as to the distribution of assets upon
voluntary or involuntary dissolution, liquidation or winding up, unless the
rights of the holders thereof shall be limited to a fixed sum or percentage of
par value or a sum determined by reference to a formula based on a published
index of interest rates, an interest rate publicly announced by a financial
institution or a similar indicator of interest rates in respect of participation
in dividends and to a fixed sum or percentage of par value in any such
distribution of assets.
7. ACCOUNTANTS' REPORT. At the reasonable request of the
Holder from time to time, the Corporation, at its sole expense, shall promptly
compute the number of shares of Common Stock issuable in accordance with the
terms of this Warrant and, at the reasonable request of the Holder, cause
independent certified public accountants of recognized national standing (which
may be the regular auditors of the Corporation) selected by the Corporation to
verify such computation (other than any computation of the Fair Value of
property) and prepare a report setting forth the number of shares of Common
Stock issuable in accordance with this Warrant and showing in reasonable detail
the method of calculation thereof and the facts upon which such calculation is
based. The Corporation shall forthwith mail a copy of each such report to each
holder of a Warrant and shall, upon the written request at any time of any
holder of a Warrant, furnish to such holder a like report. The Corporation shall
also keep copies of all such reports at its principal office and shall cause the
same to be available for inspection at such office during normal business hours
by any holder of a Warrant or any prospective purchaser of a Warrant designated
by the holder thereof.
8. Notices of Corporate Action. In the event of:
---------------------------
(a) any taking by the Corporation of a record of the holders
of any class of securities for the purpose of determining the holders thereof
who are entitled to receive any dividend or other distribution, or any right to
subscribe for, purchase or otherwise acquire any shares of stock of any class or
any other securities or property, or to receive any other right, or
(b) any capital reorganization of the Corporation, any
reclassification or recapitalization of the capital stock of the Corporation,
any consolidation or merger involving the Corporation and any other Person, any
transaction or series of transactions by the Corporation in which more than 50%
of the voting securities of the Corporation are transferred to another Person,
or any transfer, sale or other disposition of all or substantially all the
assets of the Corporation to any other Person, or
(c) any voluntary or involuntary dissolution, liquidation
or winding-up of the Corporation, the Corporation shall mail to each holder of a
Warrant a notice specifying (i) the date or expected date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and the amount and character of such dividend, distribution or right, and (ii)
the date or expected date on which any such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, sale, disposition,
dissolution, liquidation or winding-up is to take place and the time, if any
8
such time is to be fixed, as of which the holders of record of Common Stock (or
Other Securities) shall be entitled to exchange their shares of Common Stock (or
Other Securities) for the securities or other property deliverable upon such
reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up. Such notice shall be mailed at
least 30 days prior to the date therein specified.
9. Registration of Common Stock. If any shares of Common Stock
required to be reserved for purposes of exercise of this Warrant require
registration with or approval of any governmental authority under any federal or
state law (other than the Securities Act) before such shares may be issued upon
exercise, the Corporation shall, at its expense and as expeditiously as
possible, use its best efforts to cause such shares to be duly registered or
approved, as the case may be. At any such time as Common Stock is listed on any
national securities exchange, the Corporation shall, at its expense, obtain
promptly and maintain the approval for listing on each such exchange, upon
official notice of issuance, the shares of Common Stock issuable upon exercise
of the then outstanding warrants and maintain the listing of such shares after
their issuance; and the Corporation shall also list on such national securities
exchange, shall register under the Exchange Act and shall maintain such listing
of, any Other Securities that at any time are issuable upon exercise of the
warrants, if and at the time that any securities of the same class shall be
listed on such national securities exchange by the Corporation.
10. Restrictions on Transfer.
------------------------
10.1. Restrictive Legends. Except as otherwise
permitted by this Section 10, each Warrant (including each Warrant issued upon
the transfer of any Warrant) shall be stamped or otherwise imprinted with a
legend in substantially the following form:
"THIS WARRANT AND ANY SECURITIES ACQUIRED UPON THE EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR THE SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES
LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION TO THE REGISTRATION
REQUIREMENTS OF SUCH ACT AND SUCH LAWS. THIS WARRANT AND SUCH
SECURITIES MAY NOT BE SOLD, TRANSFERRED OR OTHERWISE DISPOSED OF EXCEPT
IN COMPLIANCE WITH THE CONDITIONS SPECIFIED IN THIS WARRANT, COPIES OF
WHICH WILL BE MADE AVAILABLE UPON REQUEST."
Except as otherwise permitted by this Section 10, each certificate for Common
Stock (or Other Securities) issued upon the exercise of any Warrant, and each
certificate issued upon the transfer of any such Common Stock (or Other
Securities), shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE, AND MAY NOT BE SOLD, TRANSFERRED OR
6
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR
PURSUANT TO AN APPLICABLE EXEMPTION TO THE REGISTRATION REQUIREMENTS OF
SUCH ACT AND SUCH LAWS. SUCH SECURITIES MAY NOT BE SOLD, TRANSFERRED OR
OTHERWISE DISPOSED OF EXCEPT IN COMPLIANCE WITH THE CONDITIONS
SPECIFIED IN THE COMMON STOCK PURCHASE WARRANT ISSUED BY GENERAL
DATACOMM INDUSTRIES, INC., A COMPLETE AND CORRECT COPY OF WHICH IS
AVAILABLE FOR INSPECTION AT THE PRINCIPAL OFFICE OF THE ISSUER HEREOF
AND WILL BE FURNISHED TO THE HOLDER OF SUCH SECURITIES UPON WRITTEN
REQUEST AND WITHOUT CHARGE."
10.2. Transfer to Comply With the Securities Act. Restricted
Securities may not be sold, assigned, pledged, hypothecated, encumbered or in
any manner transferred or disposed of, in whole or in part, except pursuant to
(i) an effective registration statement under the Securities Act and/or
applicable state securities or Blue Sky laws or (ii) an exemption from
registration under the Securities Act which is available.
10.3. Termination of Restrictions. The restrictions imposed by
this Section 10 on the transferability of Restricted Securities shall cease and
terminate as to any particular Restricted Securities (a) when a registration
statement with respect to the sale of such securities shall have been declared
effective under the Securities Act and such securities shall have been disposed
of in accordance with such registration statement, (b) when such securities are
sold pursuant to Rule 144 (or any similar provision then in force) under the
Securities Act, or (c) when, in the opinion of both counsel for the Holder and
counsel for the Corporation, such restrictions are no longer required or
necessary in order to protect the Corporation against a violation of the
Securities Act upon any sale or other disposition of such securities without
registration thereunder. Whenever such restrictions shall cease and terminate as
to any Restricted Securities, the Holder shall be entitled to receive from the
Corporation, without expense, new securities of like tenor not bearing the
applicable legends required by Section 10.1.
11. REPRESENTATIONS OF THE CORPORATION.
----------------------------------
11.1. Organization and Qualification. The Corporation is a
corporation duly organized and validly existing in good standing under the laws
of the jurisdiction in which it is incorporated, and has the requisite corporate
power to own its properties and to carry on its business as now being conducted.
The Corporation is duly qualified as a foreign corporation to do business and is
in good standing in every jurisdiction in which the nature of the business
conducted by it makes such qualification necessary.
11.2 Authorization; Enforcement; Compliance with Other
Instruments. (i) The Corporation has the requisite corporate power and authority
to enter into and perform its obligations under this Warrant and the
Registration Rights Agreement and to issue the shares of Common Stock issuable
upon exercise of this Warrant, (the "Warrant Shares") upon the exercise of this
Warrant, in accordance with the terms hereof, (ii) the execution and delivery of
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this Warrant and the Registration Rights Agreement by the Corporation and the
consummation by it of the transactions contemplated hereby and thereby,
including, without limitation, the issuance of this Warrant and the reservation
for issuance and the issuance of the Warrant Shares, upon exercise of this
Warrant, have been duly authorized by the Corporation's Board of Directors and
no further consent or authorization is required by the Corporation, its Board of
Directors or its stockholders, (iii) this Warrant and the Registration Rights
Agreement have been duly executed and delivered by the Corporation, and (iv)
this Warrant and the Registration Rights Agreement constitute valid and binding
obligations of the Corporation enforceable against the Corporation in accordance
with their terms, except as such enforceability may be limited by general
principles of equity or applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws relating to, or affecting generally, the
enforcement of creditors' rights and remedies.
11.3. Capitalization and Indebtedness. As of the date hereof,
the authorized capital stock of the Corporation consists of (i) 50,000,000
shares of Common Stock, par value $0.01 per share, of which, as of the date
hereof, 32,119,277 shares are issued and outstanding, (ii) 10,000,000 shares of
Class B Stock, par value $0.01 per share ("Class B Stock"), of which, as of the
date hereof, 2,057,103 shares are issued and outstanding (iii) 800,000 shares of
9% Cumulative Exchangeable Preferred Stock, par value $1.00 per share ("9%
Preferred Stock"), of which, as of the date hereof, 782,496 shares are issued
and outstanding, (iv) 200,000 shares of 5% Cumulative Convertible Preferred
Stock, $1.00 per share ("5% Preferred Stock"), of which, as of the date hereof,
no shares are issued and outstanding, as 113,000 shares were deemed converted
into Common Stock on July 31, 2002 (subject to dispute) and (v) 2,000,000 shares
of Preferred Stock, par value $1.00 per share, of which, as of the date hereof,
none are issued and outstanding. All of the outstanding shares of Common Stock
Class B Stock, 9% Preferred Stock, 5% Preferred Stock and Preferred Stock have
been validly issued and are fully paid and nonassessable. No shares of Common
Stock or Class B Stock are subject to preemptive rights or any other similar
rights or any liens or encumbrances suffered or permitted by the Corporation.
Except as set forth in the Loan Agreement and as contemplated by this Warrant,
as of the date hereof, (i) there are no outstanding options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Corporation or any of its subsidiaries, or contracts, commitments,
understandings or arrangements by which the Corporation or any of its
subsidiaries is or may become bound to issue additional shares of capital stock
of the Corporation or any of its subsidiaries or options, warrants, scrip,
rights to subscribe to, calls or commitments of any character whatsoever
relating to, or securities or rights convertible into, any shares of capital
stock of the Corporation or any of its subsidiaries, and (ii) there are no
agreements or arrangements under which the Corporation or any of its
subsidiaries is obligated to register the sale of any of their securities under
the Securities Act (except the Registration Rights Agreement). There are no
securities or instruments containing anti-dilution or similar provisions that
will be triggered by the issuance of this Warrant or, upon exercise of this
Warrant, the issuance of the Warrant Shares.
11.4 Issuance of Warrant and Warrant Shares. This Warrant is
duly authorized and shall not be subject to preemptive rights or other similar
rights of stockholders of the Corporation. The Warrant Shares have been duly
11
authorized and reserved for issuance upon exercise of this Warrant, and upon
such exercise, will be validly issued, fully paid and non-assessable, free from
all taxes, liens and charges with respect to the issue thereof, and will not be
subject to preemptive rights or other similar rights of stockholders of the
Corporation.
11.5 No Conflicts. The execution, delivery and performance of
this Warrant and the Registration Rights Agreement by the Corporation, and the
consummation by the Corporation of the transactions contemplated hereby and
thereby (including, without limitation, the issuance of the Warrant Shares) will
not (i) result in a violation of any organizational documents governing the
Corporation or (ii) violate or conflict with, or result in a breach of any
provision of, or constitute a default (or an event which with notice or lapse of
time or both would become a default) under, or give to others any rights of
termination, amendment, acceleration or cancellation of, any material agreement,
indenture or instrument to which the Corporation or any of its subsidiaries is a
party, or result in a violation of any law, rule, regulation, order, judgment or
decree applicable to the Corporation or any of its subsidiaries or by which any
property or asset of the Corporation or any of its subsidiaries is bound or
affected. The Corporation is not required to obtain any consent, authorization
or order of, or make any filing or registration with, any court or governmental
or regulatory or self-regulatory agency in order for it to execute, deliver or
perform any of its obligations under or contemplated by this Warrant or the
Registration Rights Agreement in accordance with the terms hereof or thereof.
All consents, authorizations, orders, filings and registrations which the
Corporation is required to obtain pursuant to the preceding sentence have been
obtained or effected on or prior to the date hereof.
11.6. Investment Company Status. The Corporation is not and,
upon issuance of this Warrant or the Warrant Shares, will not be an "investment
company," a company controlled by an "investment company" or an "affiliated
person" of, or "promoter" or "principal underwriter" for, an "investment
company" as such terms are defined in the Investment Company Act of 1940, as
amended.
12. Reservation of Stock, etc. The Corporation shall at all
times reserve and keep available, solely for issuance and delivery upon exercise
of this Warrant and any other warrants outstanding, the number of shares of
Common Stock (or Other Securities) from time to time issuable upon exercise of
this Warrant and any other warrants then outstanding. All shares of Common Stock
(or Other Securities) issuable upon exercise of this Warrant shall be duly
authorized and, when issued upon such exercise, shall be validly issued and, in
the case of shares, fully paid and nonassessable, with no liability on the part
of the holders thereof, and, in the case of all securities, shall be free from
all taxes, liens, security interests, encumbrances, preemptive rights and
charges. The transfer agent for the Common Stock, which may be the Corporation
("Transfer Agent"), and every subsequent Transfer Agent for any shares of the
Corporation's capital stock issuable upon the exercise of any of the purchase
rights represented by this Warrant, are hereby irrevocably authorized and
directed at all times until the Expiration Date to reserve such number of
authorized and unissued shares as shall be requisite for such purpose. The
Corporation shall keep copies of this Warrant on file with the Transfer Agent
for the Common Stock and with every subsequent Transfer Agent for any shares of
the Corporation's capital stock issuable upon the exercise of the rights of
purchase represented by this Warrant. The Corporation shall supply such Transfer
Agent with duly executed stock certificates for such purpose.
12
13. Registration and Transfer of Warrants, etc.
13.1. Warrant Register; Ownership of Warrants. Each Warrant
issued by the Corporation shall be numbered and shall be registered in a warrant
register (the "Warrant Register") as it is issued and transferred, which Warrant
Register shall be maintained by the Corporation at its principal office or, at
the Corporation's election and expense, by a Warrant Agent or the Transfer
Agent. The Corporation shall be entitled to treat the registered holder of any
Warrant on the Warrant Register as the owner in fact thereof for all purposes
and shall not be bound to recognize any equitable or other claim to or interest
in such Warrant on the part of any other Person, and shall not be affected by
any notice to the contrary, except that, if and when any Warrant is properly
assigned in blank, the Corporation may (but shall not be obligated to) treat the
bearer thereof as the owner of such Warrant for all purposes. Subject to Section
10, a Warrant, if properly assigned, may be exercised by a new holder without a
new Warrant first having been issued.
13.2. Transfer of Warrants. Except as provided below, this
Warrant and the Warrant Shares shall not be transferable by the Holder prior to
December 31, 2007. Notwithstanding the foregoing, subject to compliance with
Section 10, if applicable, this Warrant and all rights hereunder are
transferable, in whole or in part, without charge to the Holder hereof, upon
surrender of this Warrant with a properly executed Form of Assignment, attached
hereto as Exhibit B, at the principal office of the Corporation, to any
affiliate of the Holder (including any investment fund managed by the Holder or
any affiliate of the Holder and any entity controlled by or under common control
with the Holder). Upon any partial transfer, the Corporation shall, at its
expense, issue and deliver to the Holder a new Warrant of like tenor, in the
name of the Holder, which shall be exercisable for such number of shares of
Common Stock with respect to which rights under this Warrant were not so
transferred. Warrant Shares are transferable, in whole or in part, without
charge to the Holder thereof, to any affiliate of the Holder (including any
investment fund managed by the Holder or any affiliate of the Holder and any
entity controlled by or under common control with the Holder).
13.3. Replacement of Warrants. On receipt by the Corporation
of evidence reasonably satisfactory to the Corporation of the loss, theft,
destruction or mutilation of this Warrant and, in the case of any such loss,
theft or destruction of this Warrant, on delivery of an indemnity agreement
reasonably satisfactory in form and amount to the Corporation or, in the case of
any such mutilation, on surrender of such Warrant to the Corporation at its
principal office and cancellation thereof, the Corporation, at its expense,
shall execute and deliver, in lieu thereof, a new Warrant of like tenor.
13.4. Adjustments To Number of Shares. Notwithstanding the
number or percentage, or kind of shares of Common Stock purchasable upon
exercise of this Warrant, any Warrant theretofore or thereafter issued may
continue to express the same number or percentage, and kind of shares of Common
Stock as are stated in this Warrant, as initially issued.
13.5. Fractional Shares. Notwithstanding any adjustment in the
number of shares of Common Stock covered by this Warrant or any other provision
of this Warrant, the Corporation shall not be required to issue fractions of
shares upon exercise of this Warrant or to distribute certificates which
evidence fractional shares. In lieu of fractional shares, the Corporation shall
13
make payment to the Holder, at the time of exercise of this Warrant as herein
provided, in an amount in cash equal to such fraction (after aggregation of all
shares and fractional shares to be issued upon such exercise) multiplied by the
Current Market Price of a share of Common Stock on the date of Warrant exercise.
14. Remedies; Specific Performance. The Corporation stipulates
that there would be no adequate remedy at law to the Holder of this Warrant in
the event of any default or threatened default by the Corporation in the
performance of or compliance with any of the terms of this Warrant and
accordingly, the Corporation agrees that, in addition to any other remedy to
which the Holder may be entitled at law or in equity, the Holder shall be
entitled to seek to compel specific performance of the obligations of the
Corporation under this Warrant, without the posting of any bond, in accordance
with the terms and conditions of this Warrant in any court of the United States
or any State thereof having jurisdiction, and if any action should be brought in
equity to enforce any of the provisions of this Warrant, the Corporation shall
not raise the defense that there is an adequate remedy at law. Except as
otherwise provided by law, a delay or omission by the Holder hereto in
exercising any right or remedy accruing upon any such breach shall not impair
the right or remedy or constitute a waiver of or acquiescence in any such
breach. No remedy shall be exclusive of any other remedy. All available remedies
shall be cumulative.
15. No Liabilities as STOCKHOLDER. Nothing contained in this
Warrant shall be construed as imposing any obligation on the Holder to purchase
any securities or as imposing any liabilities on the Holder as a stockholder of
the Corporation, whether such obligation or liabilities are asserted by the
Corporation or by creditors of the Corporation.
16. Notices. All notices and other communications (and
deliveries) provided for or permitted hereunder shall be made in writing by hand
delivery, telecopier, any courier guaranteeing overnight delivery or first class
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Corporation: General DataComm Industries, Inc.
0 Xxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: Xx. Xxxxxxx Xxxxx,
Chief Financial Officer
Fax No.: (000) 000-0000
with copies to: Young Xxxxxxx Stargatt & Xxxxxx, LLP
The Brandywine Building
0000 Xxxx Xxxxxx, 00xx Xxxxx
Xxxxxxxxxx, Xxxxxxxx 00000
Attention: Xxxx Xxxxx, Esq.
Fax No.: (000) 000-0000
14
If to Holder: Ableco Holding LLC
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx Xxxxxxx
Fax No.: (000) 000-0000
with copies to: Xxxxxxx Xxxx & Xxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxx, Esq.
Fax No.: (000) 000-0000
All such notices and communications (and deliveries) shall be
deemed to have been duly given: at the time delivered by hand, if personally
delivered; when receipt is acknowledged, if telecopied; on the next Business
Day, if timely delivered to a courier guaranteeing overnight delivery; and five
days after being deposited in the mail, if sent first class registered or
certified mail, return receipt requested, postage prepaid; provided, that, the
exercise of any Warrant shall be effective in the manner provided in Section 2.
17. Amendments. This Warrant and any term hereof may not be
amended, modified, supplemented or terminated, and waivers or consents to
departures from the provisions hereof may not be given, except by written
instrument duly executed by the party against which enforcement of such
amendment, modification, supplement, termination or consent to departure is
sought.
18. Descriptive Headings, Etc. The headings in this Warrant
are for convenience of reference only and shall not limit or otherwise affect
the meaning of terms contained herein. Unless the context of this Warrant
otherwise requires: (1) words of any gender shall be deemed to include each
other gender; (2) words using the singular or plural number shall also include
the plural or singular number, respectively; (3) the words "hereof", "herein"
and "hereunder" and words of similar import when used in this Warrant shall
refer to this Warrant as a whole and not to any particular provision of this
Warrant, and Section and paragraph references are to the Sections and paragraphs
of this Warrant unless otherwise specified; (4) the word "including" and words
of similar import when used in this Warrant shall mean "including, without
limitation," unless otherwise specified; (5) "or" is not exclusive; and (6)
provisions apply to successive events and transactions.
19. CHOICE OF LAW AND VENUE; JURY TRIAL WAIVER. THE VALIDITY
OF THIS WARRANT, THE CONSTRUCTION, INTERPRETATION, AND ENFORCEMENT HEREOF, AND
THE RIGHTS OF THE PARTIES HERETO WITH RESPECT TO ALL MATTERS ARISING HEREUNDER
OR RELATED HERETO SHALL BE DETERMINED UNDER, GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
THE PARTIES AGREE THAT ALL ACTIONS OR PROCEEDINGS ARISING IN
CONNECTION WITH THIS WARRANT SHALL BE TRIED AND LITIGATED ONLY IN THE STATE AND
FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK. THE
15
CORPORATION AND HOLDER WAIVE, TO THE EXTENT PERMITTED UNDER APPLICABLE LAW, ANY
RIGHT EACH MAY HAVE TO ASSERT THE DOCTRINE OF FORUM NON CONVENIENS OR TO OBJECT
TO VENUE TO THE EXTENT ANY PROCEEDING IS BROUGHT IN ACCORDANCE WITH THIS SECTION
19.
THE CORPORATION AND HOLDER HEREBY WAIVE THEIR RESPECTIVE
RIGHTS TO A JURY TRIAL OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING OUT
OF THIS WARRANT OR ANY OF THE TRANSACTIONS CONTEMPLATED HEREIN, INCLUDING
CONTRACT CLAIMS, TORT CLAIMS, BREACH OF DUTY CLAIMS, AND ALL OTHER COMMON LAW OR
STATUTORY CLAIMS. THE CORPORATION AND HOLDER REPRESENT THAT EACH HAS REVIEWED
THIS WAIVER AND EACH KNOWINGLY AND VOLUNTARILY WAIVES ITS JURY TRIAL RIGHTS
FOLLOWING CONSULTATION WITH LEGAL COUNSEL. IN THE EVENT OF LITIGATION, A COPY OF
THIS WARRANT MAY BE FILED AS A WRITTEN CONSENT TO A TRIAL BY THE COURT.
20. Registration Rights Agreement. The shares of Common Stock
(and Other Securities) issuable upon exercise of this Warrant (or upon
conversion of any shares of Common Stock issued upon such exercise) shall
constitute Registrable Securities (as such term is defined in the Registration
Rights Agreement). Each holder of this Warrant shall be entitled to all of the
benefits afforded to a holder of any such Registrable Securities under the
Registration Rights Agreement and such holder, by its acceptance of this
Warrant, agrees to be bound by and to comply with the terms and conditions of
the Registration Rights Agreement applicable to such holder as a holder of such
Registrable Securities.
21. Costs and Attorneys' Fees. In the event that any action,
suit or other proceeding is instituted concerning or arising out of this
Warrant, the Corporation agrees and the Holder, by taking and holding this
Warrant agrees, that the prevailing party shall recover from the non-prevailing
party all of such prevailing party's costs and reasonable attorneys' fees
incurred in each and every such action, suit or other proceeding, including any
and all appeals or petitions therefrom.
[Remainder of page intentionally left blank]
16
IN WITNESS WHEREOF, the Corporation has executed and delivered
this Warrant as of the date first above written.
GENERAL DATACOMM INDUSTRIES, INC.
By: /s/ XXXXXX X. XXXXXX
Name: XXXXXX X. XXXXXX
Title: CHAIRMAN
[Signature page to the Warrant]
EXHIBIT A to
Common Stock Purchase Warrant
FORM OF
ELECTION TO PURCHASE SHARES
The undersigned hereby irrevocably elects to exercise the
Warrant to purchase ____ shares of Common Stock, par value $0.01 per share
("Common Stock"), of GENERAL DATACOMM INDUSTRIES, INC. and hereby [makes payment
of $________ therefor] [or] [makes payment therefor by application pursuant to
Section 2.1(b)(ii) of the Warrant of $_______ aggregate principal amount of the
then-outstanding Obligations (as defined in the Loan Agreement) [or] [makes
payment therefor by reduction pursuant to Section 2.1(b)(iii) of the Warrant of
the number of shares of Common Stock otherwise issuable to the Holder upon
Warrant exercise by ___ shares] [or] [makes payment therefor by delivery of the
following Common Stock Certificates of the Corporation (properly endorsed for
transfer in blank) for cancellation by the Corporation pursuant to Section
2.1(b)(iv) of the Warrant, certificates of which are attached hereto for
cancellation [list certificates by number and amount]]. The undersigned hereby
requests that certificates for such shares be issued and delivered as follows:
ISSUE TO: -------------------------------------------------------
(NAME)
(ADDRESS, INCLUDING ZIP CODE)
(SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER)
DELIVER TO: -------------------------------------------------------
(NAME)
(ADDRESS, INCLUDING ZIP CODE)
If the number of shares of Common Stock purchased (and/or
reduced) hereby is less than the number of shares of Common Stock covered by the
Warrant, the undersigned requests that a new Warrant representing the number of
shares of Common Stock not so purchased (or reduced) be issued and delivered as
follows:
ISSUE TO: ---------------------------------------------------------
(NAME OF HOLDER)
(ADDRESS, INCLUDING ZIP CODE)
DELIVER TO: -------------------------------------------------------
(NAME OF HOLDER)
(ADDRESS, INCLUDING ZIP CODE)
Dated: ____________, 20__ [NAME OF HOLDER]
By --------------
Name:
Title:
EXHIBIT B to
Common Stock Purchase Warrant
FORM OF ASSIGNMENT
FOR VALUE RECEIVED, the undersigned hereby sells, assigns, and
transfers unto the Assignee named below all of the rights of the undersigned to
purchase Common Stock, par value $0.01 per share ("Common Stock") of GENERAL
DATACOMM INDUSTRIES, INC. represented by the Warrant, with respect to the number
of shares of Common Stock set forth below:
Name of Assignee Address No. of Shares
and does hereby irrevocably constitute and appoint ________ Attorney to make
such transfer on the books of maintained for that purpose, with full power of
substitution in the premises.
Dated: _______________, 20__ [NAME OF HOLDER]
By
-------------------------
Name:
Title:
