Exh. 10.38
Dated as of August 25, 1997
by and between
USN COMMUNICATIONS, INC.
and
XXXXXX TRUST AND SAVINGS BANK
as Warrant Agent
WARRANT AGREEMENT
TABLE OF CONTENTS*
Page
SECTION 1. Appointment of Warrant Agent................................... 1
SECTION 2. Issuance of Warrants........................................... 1
SECTION 3. Warrant Certificates........................................... 1
SECTION 4. Execution of Warrant Certificates.............................. 2
SECTION 5. Transfers of Warrants.......................................... 2
(a) [Intentionally Omitted.]....................................... 2
(b) Private Placement Legend....................................... 2
(c) [Intentionally Omitted.]....................................... 4
SECTION 6. Registration and Countersignature.............................. 4
SECTION 7. (a) Registration of Transfers and Exchanges................... 4
(b) [Intentionally Omitted.]....................................... 5
(c) Special Transfer Provisions.................................... 5
SECTION 8. Terms of Warrants; Exercise of Warrants........................ 6
SECTION 9. Reports........................................................ 7
SECTION 10. Payment of Taxes............................................... 8
SECTION 11. Mutilated or Missing Warrant Certificates...................... 8
SECTION 12. Reservation of Warrant Shares.................................. 8
SECTION 13. Obtaining Stock Exchange Listings.............................. 9
SECTION 14. Consolidations, Mergers and Sales of Assets.................... 9
SECTION 15. Adjustment of Number of Warrant Shares......................... 10
SECTION 16. [Intentionally Omitted.]....................................... 18
----------------
* This Table of Contents does not constitute a part of this Agreement or have
any bearing upon the interpretation of any of its terms or provisions.
i
SECTION 17. Fractional Interests......................................... 18
SECTION 18. Notices of Adjustments....................................... 18
SECTION 19. Warrant Agent................................................ 20
SECTION 20. Merger, Consolidation or Change of Name of Warrant Agent..... 21
SECTION 21. Change of Warrant Agent...................................... 22
SECTION 22. Notices to the Company and Warrant Agent..................... 23
SECTION 23. Supplements and Amendments................................... 23
SECTION 24. Successors................................................... 24
SECTION 25. Termination.................................................. 24
SECTION 26. Governing Law; Jurisdiction.................................. 24
SECTION 27. Benefits of This Agreement................................... 24
SECTION 28. Counterparts................................................. 25
SECTION 29. Further Assurances........................................... 25
EXHIBIT A................................................................. 27
EXHIBIT B................................................................. 34
ii
WARRANT AGREEMENT (this "Agreement") dated as of August 25, 1997 between
USN Communications, Inc., (the "Company"), and Xxxxxx Trust and Savings Bank, as
Warrant Agent (the "Warrant Agent").
WHEREAS, the Company has entered into an agreement, dated as of August
12, 1997, with Xxxxxxx Xxxxx Global Allocation Fund, Inc. and Xxxxxxx Xxxxx
Equity/Convertible Series (Global Allocation Portfolio) (collectively, "MLAM")
pursuant to which the Company has agreed to issue to MLAM warrants (the
"Warrants") to purchase up to an aggregate of 14,516 shares of the Company's
Class A Common Stock, par value $.01 per share (the "Class A Common Stock," and
together with the Company's Class B Common Stock, $.01 par value per share, the
"Common Stock"). Each Warrant entitles the holder thereof, upon exercise, to
purchase fully paid and nonassessable shares of Class A Common Stock at an
exercise price of $.01 per share (the "Exercise Price"). Each Warrant entitles
the holder thereof, upon exercise, to purchase one (1) fully paid and
nonassessable share of Class A Common Stock ("Number of Shares") at the Exercise
Price. The Number of Shares is subject to adjustment under certain circumstances
as provided in Section 15 hereof. The shares of Class A Common Stock issuable
upon exercise of Warrants are referred to herein as "Warrant Shares;" and
WHEREAS, the Warrants shall bear the legend (the "Warrant Legend") set
forth on the form of Warrant Certificate set forth in Exhibit A attached hereto
subject to the terms of this Agreement. Unless registered under the Securities
Act of 1933, as amended (the "Securities Act"), and any applicable state
securities laws, the Warrant Shares shall initially bear the legend set forth in
Exhibit B (the "Warrant Shares Legend"); and
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing so to act, in connection with the
issuance of Warrant Certificates and other matters as provided herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION 1. Appointment of Warrant Agent. The Company hereby appoints the
Warrant Agent to act as agent for the Company in accordance with the
instructions set forth hereinafter in this Agreement, and the Warrant Agent
hereby accepts such appointment.
SECTION 2. Issuance of Warrants. Warrants shall be originally issued in
satisfaction of the Company's obligations pursuant to Section 6.1 of the Consent
Agreement.
SECTION 3. Warrant Certificates. The certificates evidencing the Warrants
("Warrant Certificates") shall be substantially in the form annexed hereto as
Exhibit A with such changes as are as necessary to reflect the number of shares
of Class A Common Stock for which the Warrants are then exercisable.
The Warrants shall be evidenced initially in the form of one or more
permanent physical Warrants (each, a "Physical Warrant") evidenced by a Warrant
Certificate in definitive, fully registered form, substantially in the form set
forth in Exhibit A (each, a "Physical Warrant Certificate").
SECTION 4. Execution of Warrant Certificates. Warrant Certificates shall
be signed on behalf of the Company by any two of the following officers: its
Chairman of the Board, Chief Executive Officer, Chief Financial Officer,
President, any Vice President, Secretary or Assistant Secretary, under its
corporate seal. Each such signature upon the Warrant Certificates may be in the
form of a facsimile signature of the present or any future Chairman of the
Board, Chief Executive Officer, Chief Financial Officer, President or any Vice
President and Secretary or Assistant Secretary and may be imprinted or otherwise
reproduced on the Warrant Certificates and for that purpose the Company may
adopt and use the facsimile signature of any person who shall have been Chairman
of the Board, Chief Executive Officer, Chief Financial Officer, President, any
Vice President, Secretary or Assistant Secretary, notwithstanding the fact that
at the time the Warrant Certificates shall be countersigned and delivered or
disposed of he or she shall have ceased to hold such office. The seal of the
Company may be in the form of a facsimile thereof and may be impressed, affixed,
imprinted or otherwise reproduced on the Warrant Certificates.
In case any officer of the Company who shall have signed any of the
Warrant Certificates shall cease to be such officer before the Warrant
Certificates so signed shall have been countersigned by the Warrant Agent, or
disposed of by the Company, such Warrant Certificates nevertheless may be
countersigned and delivered or disposed of as though such person had not ceased
to be such officer of the Company; and any Warrant Certificate may be signed on
behalf of the Company by any person who, at the actual date of the execution of
such Warrant Certificate, shall be a proper officer of the Company to sign such
Warrant Certificate, although at the date of the execution of this Agreement any
such person was not such officer.
Warrant Certificates shall be dated the date of countersignature by the
Warrant Agent.
SECTION 5. Transfers of Warrants.
(a) [Intentionally Omitted.]
(b) Private Placement Legend. Except as otherwise provided in Section
7(c) (iii) hereof, each Warrant Certificate shall bear the following legend (the
"Private Placement Legend"):
THE WARRANTS REPRESENTED HEREBY ("WARRANTS") AND, AS OF THE DATE THIS
WARRANT CERTIFICATE WAS ORIGINALLY ISSUED, THE SHARES OF CLASS A COMMON
STOCK, $.01 PAR
2
VALUE PER SHARE, PURCHASABLE UPON THEIR EXERCISE (THE "WARRANT SHARES"
AND, TOGETHER WITH THE WARRANTS, THE "SECURITY"), HAVE NOT BEEN
REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED
(THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED
OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS
EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. THE HOLDER OF THIS SECURITY, BY ITS ACCEPTANCE HEREOF,
(1) REPRESENTS THAT IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), (2) AGREES THAT IT
WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH SHORTER PERIOD
OF TIME AS PERMITTED BY RULE 144(k) UNDER THE SECURITIES ACT OR ANY
SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUANCE
DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON
WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS
SECURITY OR ANY PREDECESSOR OF THIS SECURITY AND (Y) SUCH LATER DATE, IF
ANY, AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION
TERMINATION DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY
EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A
OR (D) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIRE-
3
MENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE
EFFECT OF THIS LEGEND. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF
THE HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE.
(c) [Intentionally Omitted.]
SECTION 6. Registration and Countersignature. The Warrant Agent, on
behalf of the Company, shall number and register the Warrant Certificates in a
register as they are issued by the Company.
Warrant Certificates shall be manually countersigned by the Warrant Agent
and shall not be valid for any purpose unless so countersigned. The Warrant
Agent shall, upon written instructions of the Chairman of the Board, Chief
Executive Officer, Chief Financial Officer, President, any Vice President or
Secretary of the Company, initially countersign and deliver Warrant Certificates
entitling the holders thereof to purchase not more than the number of Warrant
Shares referred to above in the first recital hereof and shall countersign and
deliver Warrant Certificates as otherwise provided in this Agreement. Such
written instructions shall specify the amount of the Warrants to be
countersigned and the date of countersignature.
The Company and the Warrant Agent may deem and treat the registered
holder(s) of the Warrant Certificates as the absolute owner(s) thereof
(notwithstanding any notation of ownership or other writing thereon made by
anyone), for all purposes, and neither the Company nor the Warrant Agent shall
be affected by any notice to the contrary.
SECTION 7. (a) Registration of Transfers and Exchanges. In accordance
with this Section 7, and subject to the provisions of Section 5 hereof, the
Warrant Agent shall from time to time register the transfer of any outstanding
Warrant Certificates upon the records to be maintained by it for that purpose,
upon surrender thereof accompanied by a written instrument or instruments of
transfer in form satisfactory to the Warrant Agent, duly executed by the
registered holder or holders thereof or by the duly appointed legal
representative thereof or by a duly authorized attorney. Upon any such
registration of transfer, a new Warrant Certificate shall be issued to the
transferee(s) and the surrendered Warrant Certificate shall be canceled by the
Warrant Agent. Canceled Warrant Certificates shall thereafter be disposed of by
the Warrant Agent in a manner consistent with the Warrant Agent's customary
procedure and in accordance with applicable law.
Warrant Certificates may be exchanged at the option of the holder(s)
thereof, when surrendered to the Warrant Agent at its office for another Warrant
Certificate or other Warrant Certificates of like tenor and representing in the
aggregate a
4
like number of Warrants. Warrant Certificates surrendered for exchange shall be
canceled by the Warrant Agent. Such canceled Warrant Certificates shall then be
disposed of by the Warrant Agent in a manner consistent with the Warrant Agent's
customary procedure and in accordance with applicable law.
No service charge shall be made for any transfer or exchange of Warrant
Certificates or any issuance of Warrant Certificates in connection with a
Separation, but the Company may require payment of a sum sufficient to cover any
stamp or other governmental charge or tax that may be imposed in connection with
any such transfer or exchange.
The Warrant Agent is hereby authorized to countersign, in accordance with
the provisions of this Section 7 and Section 5, the new Warrant Certificates
required pursuant to the provisions of this Section 7.
(b) [Intentionally Omitted.]
(c) Special Transfer Provisions.
(i) [Intentionally Omitted.]
(ii) Transfers to QIBs. If the Warrant to be transferred consists
of Physical Warrants, the Warrant Agent shall register the transfer if such
transfer is being made by a proposed transferor who has checked the box provided
for on the form of Warrant stating, or has otherwise advised the Company and the
Warrant Agent in writing, that the sale has been made in compliance with the
provisions of Rule 144A to a transferee who has signed the certification
provided for on the form of Warrant stating, or has otherwise advised the
Company and the Warrant Agent in writing, that it is purchasing the Warrant for
its own account or an account with respect to which it exercises sole investment
discretion and that it and any such account is a QIB within the meaning of Rule
144A, and is aware that the sale to it is being made in reliance on Rule 144A
and acknowledges that it has received such information regarding the Company as
it has requested pursuant to Rule 144A or has determined not to request such
information and that it is aware that the transferor is relying upon its
foregoing representations in order to claim the exemption from registration
provided by Rule 144A.
(iii) Private Placement Legend. Upon the transfer, exchange or
replacement of Warrant Certificates not bearing the Private Placement Legend,
the Warrant Agent shall deliver Warrant Certificates that do not bear the
Private Placement Legend. Upon the transfer, exchange or replacement of Warrant
Certificates bearing the Private Placement Legend, the Warrant Agent shall
deliver only Warrant Certificates that bear the Private Placement Legend unless
there is delivered to the Warrant Agent an opinion of counsel reasonably
satisfactory to the Company and the Warrant Agent to the effect that neither
such legend nor the related restrictions on transfer are required in order to
maintain compliance with the provisions of the Securities Act.
5
(iv) General. The provisions hereof shall be qualified in their
entirety by any applicable securities laws of the United States and any other
applicable jurisdiction and by the procedures of any applicable clearing agency,
in each case as in effect from time to time, and all such laws and clearing
procedures shall be deemed to be incorporated herein by reference. By its
acceptance of any Warrant Certificate bearing the Private Placement Legend, each
holder of such a Warrant Certificate shall be deemed to acknowledge the
restrictions on transfer of such Warrant Certificate set forth in this Warrant
Agreement and in the Private Placement Legend and agrees that it will transfer
such Warrant Certificate only as provided in this Warrant Agreement. The Warrant
Agent shall not register a transfer of any Warrant Certificate unless such
transfer complies with the restrictions on transfer of such Warrant Certificate
set forth in this Warrant Agreement. In connection with any transfer of Warrant
Certificates, each Warrant holder agrees by its acceptance of the Warrant
Certificates to furnish the Warrant Agent or the Company such certifications,
legal opinions or other information as either of them may reasonably require to
confirm that such transfer is being made pursuant to an exemption from, or a
transaction not subject to, the registration requirements of the Securities Act;
provided that the Warrant Agent shall not be required to determine (but may rely
on a determination made by the Company with respect to) the sufficiency of any
such certifications, legal opinions or other information.
SECTION 8. Terms of Warrants; Exercise of Warrants. Subject to the terms
of this Agreement, each Warrant holder shall have the right, which may be
exercised at any time on or after the date of the occurrence of the earliest of:
(i) immediately prior to the occurrence of a Change of Control (as defined in
the Indenture, dated as of August 15, 1997 (the "Indenture"), between the
Company and Xxxxxx Trust and Savings Bank, as Trustee, with respect to the
Company's 14 5/8% Senior Discount Notes due 2004 (the "Senior Notes")); (ii) the
60th day (or such earlier date as determined by the Company in its sole
discretion) following a Public Equity Offering (as defined in the Indenture); or
(iii) February 15, 1998 (each, an "Exercise Event") and on or prior to the close
of business on August 15, 2004 (the "Expiration Date") to exercise Warrants and
receive from the Company the number of fully paid and nonassessable Warrant
Shares which the holder may at the time be entitled to receive on exercise of
such Warrants and payment of the Exercise Price for such Warrant Shares;
provided that upon any such exercise no holder shall be entitled to sell or
transfer such holder's Warrants Shares at any time unless, at the time of such
sale or transfer, (i) a registration statement under the Securities Act covering
the offer and sale of the Warrant Shares has been filed with, and declared
effective by, the Securities and Exchange Commission (the "SEC"), and no stop
order suspending the effectiveness of such registration statement has been
issued by the SEC or (ii) the offer and sale of the Warrant Shares to the
Warrant holder are exempt from registration under the Securities Act and the
holder of the Warrants, if so requested by the Company, has delivered to the
Company an opinion of counsel to such effect. Each Warrant, when exercised, will
entitle the holder thereof to purchase one (1) fully paid and nonassessable
share of Class A Common Stock at the Exercise Price. The Number of Shares is
subject to adjustment under certain circumstances as provided herein by Section
15. Each Warrant not exercised prior to the Expiration Date shall become void
and all
6
rights thereunder and all rights in respect thereof under this Agreement shall
cease as of such time.
A Warrant may be exercised at any time on or after the occurrence of an
Exercise Event at the election of the holder thereof, either in full or from
time to time in part (in whole shares) upon surrender to the Company at the
principal office of the Warrant Agent of the Warrant Certificate or Certificates
to be exercised with the form of election to purchase on the reverse thereof
duly filled in and signed, which signature shall be guaranteed by an "eligible
guarantor" as defined in the regulations promulgated under the Exchange Act and
upon payment to the Warrant Agent for the account of the Company of the Exercise
Price, as adjusted as herein provided, for each Warrant then exercised. Payment
of the aggregate Exercise Price shall be made in the form of cash or a certified
or official bank or bank cashier's check payable to the order of the Company.
Subject to the provisions of Section 10 hereof, upon such surrender of
Warrants and payment of the Exercise Price, the Company shall issue and cause to
be delivered with all reasonable dispatch to or upon the written order of the
Warrant holder and in such name or names as the Warrant holder may designate, a
certificate or certificates for the number of whole Warrant Shares issuable upon
the exercise of such Warrants together with any cash which may be payable as
provided in Section 17 hereof. Such certificate or certificates shall be deemed
to have been issued and any person so designated to be named therein shall be
deemed to have become a holder of record of such Warrant Shares as of the date
of the surrender of such Warrants and payment of the aggregate Exercise Price.
No fractional shares shall be issued upon exercise of any Warrants in accordance
with Section 17 hereof.
In the event that a Warrant Certificate is exercised in respect of fewer
than all of the Warrant Shares issuable on such exercise at any time prior to
the Expiration Date, a new Warrant Certificate evidencing the remaining Warrant
or Warrants will be issued, and the Warrant Agent is hereby irrevocably
authorized to countersign and to deliver the required new Warrant Certificate or
Certificates pursuant to the provisions of this Section and of Section 4 hereof,
and the Company, whenever required by the Warrant Agent, will supply the Warrant
Agent with Warrant Certificates duly executed on behalf of the Company for such
purpose.
All Warrant Certificates surrendered upon exercise of Warrants shall be
canceled by the Warrant Agent. Such canceled Warrant Certificates shall then be
disposed of by the Company in accordance with applicable law. The Warrant Agent
shall account promptly to the Company with respect to Warrants exercised and
concurrently pay to the Company all monies received by the Warrant Agent for the
purchase of the Warrant Shares through the exercise of such Warrants.
The Warrant Agent shall keep copies of this Agreement and any notices
given or received hereunder available for inspection by the Warrant holders
during normal business hours at its office. The Company shall supply the Warrant
Agent from time to time with such numbers of copies of this Agreement as the
Warrant Agent may request.
7
SECTION 9. Reports. So long as any of the Warrants remain outstanding,
the Company shall cause copies of all quarterly and annual financial reports and
of the information, documents and other reports (or copies of such portions of
any of the foregoing as the SEC may by rules and regulations prescribe) that the
Company is required to file with the SEC pursuant to Section 13 or 15(d) of the
Exchange Act ("SEC Reports") to be filed with the Warrant Agent and mailed to
the holders of Warrants, in each case, within 15 days after filing with the SEC.
So long as any of the Warrants remain outstanding, if the Company is not subject
to the requirements of Section 13 or 15(d) of the Exchange Act, the Company
shall nevertheless continue to cause reports, comparable to those that it would
be required to file pursuant to Section 13 or 15(d) of the Exchange Act if it
were then subject to the requirements of either such Section, to be so filed
with the SEC for public availability (unless the SEC will not accept such a
filing) and with the Warrant Agent and mailed to the holders of Warrants, in
each case, within the same time periods as would have applied (including under
the preceding sentence) had the Company then been subject to the requirements of
Section 13 or 15(d) of the Exchange Act. The Company shall make available to
investors and prospective investors of the Warrants information that satisfies
the requirements of Rule 144A(d) (4) under the Securities Act.
SECTION 10. Payment of Taxes. No service charge shall be made to any
holder of a Warrant for any exercise, exchange or registration of transfer of
Warrant Certificates, and the Company will pay all documentary stamp taxes
attributable to the initial issuance of Warrant Shares upon the exercise of
Warrants or to any Separation; provided that the Company shall not be required
to pay any tax or taxes which may be payable in respect of any transfer involved
in the issue of any Warrant Certificates or any certificates for Warrant Shares
in a name other than that of the registered holder of a Warrant Certificate
surrendered upon the exercise of a Warrant, and the Company shall not be
required to issue or deliver such Warrant Certificates unless or until the
person or persons requesting the issuance thereof shall have paid to the Company
the amount of such tax or shall have established to the satisfaction of the
Company that such tax has been paid.
SECTION 11. Mutilated or Missing Warrant Certificates. If any of the
Warrant Certificates shall be mutilated, lost, stolen or destroyed, the Company
may in its discretion issue and the Warrant Agent may countersign, in exchange
and substitution for and upon cancellation of, the mutilated Warrant
Certificate, or in lieu of and substitution for the Warrant Certificate lost,
stolen or destroyed, a new Warrant Certificate of like tenor and representing an
equivalent number of Warrants, but only upon receipt of evidence satisfactory to
the Company and the Warrant Agent of such loss, theft or destruction of such
Warrant Certificate and indemnity and security therefor, if requested, also
satisfactory to them. Applicants for such substitute Warrant Certificates shall
also comply with such other reasonable regulations and pay such other reasonable
charges as the Company or the Warrant Agent may prescribe.
SECTION 12. Reservation of Warrant Shares. The Company will at all times
reserve and keep available, free of preemptive rights and free from all taxes,
liens, charges and security interests with respect to the issuance thereof, out
of the aggregate of its authorized but unissued Class A Common Stock, for the
purpose of enabling it to
8
satisfy any obligation to issue Warrant Shares upon the exercise of Warrants,
the maximum number of Class A Common Stock which may then be deliverable upon
the exercise of all outstanding Warrants.
The Company or the transfer agent for the Class A Common Stock (the
"Transfer Agent") and every subsequent transfer agent for any shares of the
Company's capital stock issuable upon the exercise of any of the rights of
purchase aforesaid will be irrevocably authorized and directed at all times to
reserve such number of authorized shares as shall be required for such purpose.
The Company will keep a copy of this Agreement on file with the Transfer Agent
and with every subsequent transfer agent for any shares of the Company's capital
stock issuable upon the exercise of the rights of purchase represented by the
Warrants. The Warrant Agent is hereby irrevocably authorized to requisition from
time to time from such Transfer Agent the stock certificates required to honor
outstanding Warrants upon exercise thereof in accordance with the terms of this
Agreement. The Company will supply such Transfer Agent with duly executed
certificates for such purposes and will provide or otherwise make available to
the Warrant Agent any cash which may be payable as provided in Section 17
hereof. The Company will furnish such Transfer Agent a copy of all notices of
adjustments and certificates related thereto transmitted to each holder pursuant
to Section 18 hereof.
The Company covenants that all Warrant Shares which may be issued upon
exercise of Warrants will be, upon payment of the Exercise Price and issuance
thereof, duly and validly issued, fully paid, nonassessable, free of preemptive
rights and free from all taxes, liens, charges and security interests with
respect to the issuance thereof.
SECTION 13. Obtaining Stock Exchange Listings. The Company shall from
time to time take all action necessary so that the Warrant Shares, immediately
upon their issuance upon the exercise of Warrants, will be listed on the
principal securities exchanges, interdealer quotation systems and markets, if
any, on which any shares of Common Stock are then listed or quoted.
SECTION 14. Consolidations, Mergers and Sales of Assets. In the event the
Company consolidates with, merges with or into, or sells all or substantially
all of its property and assets to another Person, and in connection therewith,
consideration to the holders of shares of Common Stock in exchange for their
shares is (a) not payable solely in cash, each Warrant thereafter shall entitle
the holder thereof to receive upon exercise thereof the number of shares of
capital stock or other securities or property which the holder of any shares of
Common Stock is entitled to receive upon completion of such consolidation,
merger or sale of assets ("Merger Consideration") or (b) payable solely in cash
("Cash Payment"), or in the event of the dissolution, liquidation or winding-up
of the Company, then the holders of the Warrants will receive distributions on
an equal basis with the holders of shares of Common Stock or other securities
issuable upon exercise of the warrants, as if the Warrants had been exercised
immediately prior to such event, less the Exercise Price. Upon receipt of such
Cash Payment, if any, the Warrants will expire and the rights of the holders
thereof will cease.
9
In the event the Company is required pursuant to the provisions of this
Section 14 to make a Cash Payment as a result of any such merger, consolidation
or sale of assets, the surviving or acquiring Person, and in the event of any
dissolution, liquidation or winding-up of the Company, the Company shall deposit
promptly with the Warrant Agent the funds, if any, necessary to pay the holders
of the Warrants. After such funds and the surrendered Warrant Certificate are
received, the Warrant Agent shall make payment by delivering a check in such
amount as is appropriate to such Person or Persons as it may be directed in
writing by the holders surrendering such Warrants.
SECTION 15. Adjustment of Number of Warrant Shares.
(a) In case the Company shall (i) make a dividend or other distribution
on the Common Stock exclusively in Common Stock, (ii) make a dividend or other
distribution on the Common Stock in shares of its capital stock other than
Common Stock, (iii) subdivide its outstanding shares of Common Stock or (iv)
combine its outstanding shares of Common Stock into a smaller number of shares
of Common Stock, the number and kind of shares of Common Stock or capital stock
of the Company issuable upon the exercise of a Warrant (as in effect immediately
prior to such dividend or distribution) shall be proportionately adjusted so
that the holder of any Warrant thereafter exercised may receive the aggregate
number and kind of shares of capital stock of the Company that such holder would
have owned immediately following such dividend or distribution if such Warrant
had been exercised immediately prior thereto.
(b) Subject to the last sentence of paragraph (g) of this Section, in
case the Company shall make a dividend or other distribution on the Common Stock
consisting exclusively of, or shall otherwise issue to all holders of the Common
Stock, rights, options or warrants entitling the holders thereof to subscribe
for or purchase Common Stock or securities convertible into or exchangeable for
Common Stock at a price per share (determined on an as-converted or as-exercised
basis if the rights, options or warrants pertain to securities convertible into
or exchangeable for shares of Common Stock) less than the Current Market Price
(determined as provided in paragraph (h) of this Section) on the date fixed for
the determination of shareholders entitled to receive such rights, options or
warrants, the Number of Shares shall be determined by multiplying the Number of
Shares purchasable immediately prior to the date so fixed by a fraction, of
which the numerator shall be the number of shares of Common Stock outstanding on
the date fixed for determining stockholders entitled to receive such rights,
options or warrants plus the number of additional shares of Common Stock offered
for subscription or purchase, and of which the denominator shall be the number
of shares of Common Stock outstanding on the date fixed for determining
stockholders entitled to receive such rights, options or warrants plus the
number of shares which the aggregate offering price of the total number of
shares of Common Stock so offered would purchase at the Current Market Price;
provided, however, that no further adjustment to the Number of Shares shall be
made upon the subsequent issue or sale of Common Stock pursuant to such options
or warrants. For the purposes of this paragraph (b), the number of shares of
Common Stock at any time outstanding shall not include shares held in the
treasury of the Company but shall include shares issuable in respect of scrip
certificates issued in lieu of fractions of Common Stock.
10
The Company shall not issue any rights, options or warrants in respect of Common
Stock held in the treasury of the Company.
(c) [Intentionally Omitted.]
(d) (i) Subject to the last sentence of this paragraph (d) (i) and the
last sentence of paragraph (g) of this Section, in case the Company shall, by
dividend or otherwise, distribute to all holders of Common Stock evidences of
its indebtedness, cash or other assets (including securities, but excluding any
rights, options or warrants referred to in paragraph (b) of this Section,
excluding any dividend or distribution paid exclusively in cash out of
consolidated current or retained earnings as shown on the books of the Company
prepared in accordance with GAAP (other than any Extraordinary Cash Dividend (as
hereinafter defined)) and excluding any dividend or distribution referred to in
paragraph (a) of this Section, the Number of Shares shall be increased by
multiplying the Number of Shares issuable immediately prior to the close of
business on the date fixed for the determination of shareholders entitled to
such distribution by a fraction of which the numerator shall be the Current
Market Price (determined as provided in paragraph (h) of this Section) on such
date and the denominator shall be the Current Market Price on such date less the
fair market value (as determined by the Board of Directors, whose determination
shall be conclusive and described in a resolution of the Board of Directors) on
such date of the portion of the evidences of indebtedness, shares of capital
stock, cash and other assets to be distributed applicable to one share of Common
Stock, such increase to become effective immediately prior to the opening of
business on the day following such date; provided, that, in the event that the
amount of such dividend as so determined is equal to or greater than 100% of
such Current Market Price, in lieu of the foregoing adjustment, adequate
provision shall be made so that the holder of a Warrant shall receive a pro rata
share of such dividend based upon the maximum number of shares of Common Stock,
at the time issuable to such holder (determined without regard to whether the
Warrant is exercisable at such time). If the Board of Directors determines the
fair market value of any distribution for purposes of this paragraph (d) (i) by
reference to the actual or when-issued trading market for any securities
comprising part or all of such distribution, it must in doing so consider the
prices in such market over the same period used in computing the Current Market
Price pursuant to paragraph (h) of this Section, to the extent possible. For
purposes of this paragraph (d) (i), an "Extraordinary Cash Dividend" shall be
that portion, if any, of the aggregate amount of all cash dividends paid in any
fiscal year which exceed $25,000,000. For purposes of this paragraph (d), any
dividend or distribution that includes Common Stock, rights, options or warrants
to subscribe for or purchase Common Stock or securities convertible into or
exchangeable for Common Stock shall be deemed to be (x) a dividend or
distribution of the evidences of indebtedness, cash, assets or shares of capital
stock other than such Common Stock, such rights, options or warrants or such
convertible or exchangeable securities (making any increase in the Number of
Shares required by this paragraph (d) (i) immediately followed by (y) in the
case of such Common Stock or such rights, options or warrants, a dividend or
distribution thereof (making any further adjustment to the Number of Shares
required by paragraph (a) and (b) of this Section, except any shares of Common
Stock included in such dividend or distribution shall not be deemed "outstanding
at the close of
11
business on the date fixed for such determination" within the meaning of
paragraph (a) of this Section), or (z) in the case of such convertible or
exchangeable securities, a dividend or distribution of the number of shares of
Common Stock as would then be issuable upon the exercise or exchange thereof,
whether or not the exercise or exchange of such securities is subject to any
conditions (making any further reduction in Number of Shares required by
paragraph (a) of this Section, except the shares deemed to constitute such
dividend or distribution shall not be deemed "outstanding at the close of
business on the date fixed for such determination" within the meaning of
paragraph (a) of this Section).
(ii) In case the Company shall issue Common Stock for a
consideration per share less than the Current Market Price (determined as
provided in paragraph (h) of this Section), the Number of Shares shall be
increased by multiplying the Number of Shares issuable immediately prior to the
close of business on the date on which the Company fixes the offering price of
such additional shares by a fraction of which the numerator shall be the number
of shares of Common Stock outstanding immediately after giving effect to such
issuance and the denominator of which shall be the number of shares of Common
Stock outstanding at the close of business on the date fixed for such
determination plus a fraction equal to the aggregate consideration received by
the Company from the issuance of such additional shares of Common Stock over the
Current Market Price on the date on which the Company fixes the offering price
of such additional shares (determined as provided in paragraph (h) of this
Section), and the increase in the Number of Shares provided for in the preceding
sentence shall not apply upon (i) the issuance of securities in transactions
described in paragraphs (a), (b), (d) (i), and d (iii), or (f) of this Section
or pursuant to the exercise, exchange or conversion of any such securities (to
the extent applicable, including the 9% Preferred Stock (as defined below) and
the New Equity (as defined below)); (ii) the issuance of Common Stock upon the
exercise or exchange of securities (including options) convertible or
exchangeable for shares of Common Stock outstanding on the date of this Warrant
Agreement, or issuable pursuant to binding agreements in effect on the date of
this Warrant Agreement as set forth on Schedule F hereto or subsequently issued
by the Company for a consideration per share equal to the Current Market Price
(determined as provided in paragraph (h) of this Section); (iii) the issuance of
Common Stock upon the exercise of options issued to the Company's directors,
officers and employees under bona fide employee benefit plans adopted by the
Board of Directors and approved by the holders of Common Stock when required by
law or otherwise where such issuances have been approved by the Board of
Directors (but only to the extent that the aggregate number of shares excluded
pursuant to this subclause (iii) and issued after the date of this Warrant
Agreement shall not exceed 3% of the Common Stock outstanding at the time of
issuance; provided, that options granted pursuant to this subclause (iii)
exercisable for no more than 2% of such outstanding Common Stock may have
exercise prices less than 50% of the price per share based on a valuation of the
Company, after the issuance of shares of New Equity for approximately $30
million, of $160,000,000); (iv) the issuance of Common Stock to shareholders of
any person that immediately or subsequently merges with or into the Company or
any subsidiary thereof in proportion to their stock holdings of such person
immediately prior to such merger, upon such merger; (v) the issuance of Common
Stock in a bona fide underwritten public offering; (vi) the issuance of Common
Stock in a bona
12
fide private placement through a placement agent that is a member firm of the
National Association of Securities Dealers, Inc. (except to the extent that any
discount from the Current Market Price (determined as provided in paragraph (h)
of this Section) attributable to restrictions on transferability of the Common
Stock, as determined in good faith by the Board of Directors and described in a
resolution thereof which shall be filed with the Warrant Agent, shall exceed
20%), or issuable pursuant to a binding agreement in effect on the date of this
Warrant Agreement; (vii) the issuance of Common Stock as a dividend on any
securities outstanding on the date of this Warrant Agreement required to be made
pursuant to the certificate of designation pertaining to such securities in
effect at the time such securities were issued; (viii) the issuance of Common
Stock upon the conversion of the New Convertible Notes (as defined below); (ix)
the issuance of Common Stock upon the exercise of warrants issued, and the
Contingent Warrants that may be issued, pursuant to the Warrant Agreement, dated
as of August 15, 1997, between the Company and Xxxxxx Trust and Savings Bank, in
connection with the offering of the Company's Senior Notes and the Indenture
(collectively, the "New Warrants"); or (x) the issuance of Common Stock upon the
exercise of Warrants.
(iii) In case the Company shall issue any securities convertible
into or exchangeable for Common Stock for a consideration per share of Common
Stock (including the minimum consideration per share payable upon exercise or
exchange of any securities convertible into or exchangeable for Common Stock)
initially deliverable upon exercise or exchange of such securities less than the
Current Market Price (determined as provided in paragraph (h) of this Section),
including, but not limited to, the issuance of any equity securities of the
Company after the date of original issuance of the Warrants (the "Issue Date")
and on or prior to September 15, 1997 resulting in net proceeds to the Company
of up to $20,000,000, the Number of Shares shall be increased by multiplying the
Number of Shares issuable immediately prior to the close of business on the date
on which the Company fixes the offering price of such additional shares by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding immediately prior to the issuance of such securities plus the
maximum number of shares of Common Stock deliverable upon exercise of or in
exchange for such securities at the initial exercise or exchange rate and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately prior to the issuance of such securities plus a fraction equal to
the aggregate consideration received for the issuance of such securities
(including the minimum consideration per share payable upon exercise or exchange
of any securities convertible into or exchangeable for Common Stock) over the
Current Market Price on the date on which the Company fixes the offering price
of such additional shares (determined as provided in paragraph (h) of this
Section). The increase in Number of Shares provided for in the preceding
sentence shall not apply to (i) (A) securities issued in transactions described
in paragraphs (a), (b), (d) (i) and (d) (ii) of this Section, (B) any shares of
9% Cumulative Convertible Pay-In-Kind Preferred Stock, par value $1.00 per share
(the "9% Preferred Stock"), received as a dividend on the 9% Preferred Stock or
(C) any shares of 9% Cumulative Convertible Pay-In-Kind Preferred Stock, Series
A (the "New Equity") received as a dividend thereon; (ii) convertible securities
issued to shareholders of any person that merges into the Company, or with a
Subsidiary of the Company, in proportion to their stock holdings of such person
13
immediately prior to such merger, upon such merger; (iii) convertible securities
issued in a bona fide underwritten public offering; (iv) convertible securities
issued in a bona fide private placement through a placement agent that is a
member firm of the National Association of Securities Dealers, Inc. (except to
the extent that any discount from the Current Market Price (determined as
provided in paragraph (h) of this Section) attributable to restrictions on
transferability of Common Stock issuable upon exercise, as determined in good
faith by the Board of Directors and described in a resolution thereof which
shall be filed with the Warrant Agent, shall exceed 20% of the then Current
Market Price), or issuable pursuant to a binding agreement in effect on the date
of this Warrant Agreement; (v) stock options issued to the Company's directors,
officers or employees; (vi) the grant of Contingent Warrants; (vii) convertible
notes issuable to MLAM (the "New Convertible Notes") upon the exercise of an
option granted pursuant to the Consent Agreement; (viii) the grant of New
Warrants; (ix) the issuance of warrants exercisable for up to 5% of the
Company's Common Stock (on a fully diluted basis) issued in connection with an
offering of the Company's debt securities; or (x) the grant of any securities
convertible into or exchangeable for Common Stock outstanding on the date of
this Warrant Agreement or issuable pursuant to binding agreements in effect on
the date of this Warrant Agreement as set forth on Schedule F hereto.
(e) In case the Company shall, by dividend or otherwise, at any time
distribute to all holders of Common Stock cash (excluding any cash that is
distributed as part of a distribution referred to in paragraph (d) (i) of this
Section or in connection with a transaction to which Section 14 applies) in an
aggregate amount that, together with (i) the aggregate amount of any other
distributions to all holders of Common Stock made exclusively in cash within the
12 months preceding the date fixed for the determination of shareholders
entitled to such distribution and in respect of which no adjustment in the
Number of Shares pursuant to paragraph (d) (i) or this paragraph (e) has been
made previously and (ii) the aggregate of any cash plus the fair market value
(as determined by the Board of Directors, whose determination shall be
conclusive and described in a resolution of the Board of Directors) as of such
date of determination of consideration payable in respect of any tender offer by
the Company or a Subsidiary for all or any portion of the Common Stock, and any
purchase by the Company of Common Stock in the open market, consummated within
the 12 months preceding such date of-determination and in respect of which no
adjustment in the Number of Shares pursuant to paragraph (f) of this Section has
been made previously, exceeds 12.5% of the product of the Current Market Price
(determined as provided in paragraph (h) of this Section) on such date of
determination times the number of shares of Common Stock outstanding on such
date, the Number of Shares shall be increased by multiplying the Number of
Shares issuable immediately prior to the close of business on such date of
determination by a fraction of which the numerator shall be such Current Market
Price and the denominator shall be the Current Market Price (determined as
provided in paragraph (h) of this Section) on such date less the amount of cash
to be distributed at such time applicable to one share of Common Stock, such
increase to become effective immediately prior to the opening of business on the
day after such date.
14
(f) In case a tender or exchange offer made by the Company or any
subsidiary for all or any portion of the Common Stock shall be consummated, or
in case the Company shall purchase Common Stock in the open market, the Number
of Shares shall be increased by multiplying the Number of Shares issuable
immediately prior to the Expiration Time by a fraction of which the numerator
shall be the sum of (A) the fair market value (determined as aforesaid) of the
aggregate consideration payable to shareholders upon consummation of such tender
or exchange offer, or upon such purchase, and (B) the product of such Current
Market Price times such number of outstanding shares at the Expiration Time
minus the number of shares accepted for payment in such tender or exchange
offer, or so purchased (the "Purchased Shares") and the denominator shall be the
product of the Current Market Price (determined as provided in paragraph (h) of
this Section) times the number of shares of Common Stock outstanding (including
any Shares of Common Stock tendered or submitted for exchange) at the Expiration
Time. For the purpose of this paragraph, "Expiration Time" means either the last
time that tenders may be made pursuant to a tender offer or exchanges may be
made pursuant to an exchange offer, or the time of an agreement to purchase
shares in the open market, as the case may be. Any increase in the Number of
Shares pursuant to this paragraph shall be made immediately following the close
of business on the last trading day used to compute Current Market Price;
provided, however, that, such increase shall be deemed to have become effective
immediately prior to the opening of business on the day following the Expiration
Time. To the extent that a holder exercises Warrants prior to the conclusion of
the period for which Current Market Price is to be calculated, any adjustment in
the number of shares of Common Stock issuable upon exercise of such Warrant
shall inure to the benefit of the holder of record of such Warrant at the close
of business on the first Trading Day following the Expiration Time. In no event
shall the Number of Shares be reduced as a result of the consummation of any of
the transactions contemplated by this paragraph (f).
(g) The reclassification of any class of Common Stock into securities
which include securities other than such class of Common Stock (other than any
reclassification upon a consolidation or merger to which Section 14 applies)
shall be deemed to involve (i) a distribution of such securities other than such
class of Common Stock to all holders of such class of Common Stock (and the
effective date of such reclassification shall be deemed to be "the date fixed
for the determination of shareholders entitled to such distribution" within the
meaning of paragraph (d) (i) of this Section), and (ii) a subdivision or
combination, as the case may be, of the number of shares of such class of Common
Stock outstanding prior to such reclassification into the number of such class
of Common Stock outstanding immediately thereafter (and the effective date of
such reclassification shall be deemed to be the day upon which such subdivision
becomes effective or the day upon which such combination becomes effective, as
the case may be, and the day upon which such subdivision or combination becomes
effective within the meaning of paragraph (a) of this Section). Rights, options
or warrants issued by the Company to all holders thereof to subscribe for or
purchase Common Stock entitling the holders thereof to subscribe for or purchase
Common Stock (either initially or under certain circumstances), which rights,
options or warrants (i) are deemed to be transferred with such Common Stock,
(ii) are not exercisable and (iii) are also issued in respect of
15
future issuances of Common Stock, in each case in clauses (i) through (iii)
until or upon the occurrence of a specified event or events ("Trigger Event"),
shall for purposes of this Section 15 not be deemed issued until the occurrence
of the earliest Trigger Event.
(h) For the purpose of any computation under this paragraph and
paragraphs (b), (d) and (e) of this Section, the current market price per share
of Common Stock (the "Current Market Price" per share of Common Stock of the
Company or any other security) on any date shall be deemed to be the average of
the daily Closing Prices for the 30 consecutive trading days commencing 45
trading days before the date in question. For the purpose of any computation
under paragraph (f) of this Section, the Current Market Price on any date shall
be deemed to be the average of the daily closing prices for the five consecutive
trading days commencing on the first trading day immediately following the
expiration time. Notwithstanding anything to the contrary contained in this
paragraph, (i) the "ex" date for any event (other than the issuance or
distribution requiring such computation) that requires an adjustment to the
conversion price pursuant to paragraph (a), (b), (d) or (e) above occurs on or
after the 15th trading day prior to the date in question and prior to the "ex"
date for the issuance or distribution requiring such computation, the closing
price for each trading day prior to the "ex" date for such other event shall be
adjusted by multiplying such closing price by the same fraction by which the
conversion price is so required to be adjusted as a result of such other event,
(ii) if the "ex" date for any event (other than the issuance or distribution
requiring such computation) that requires an adjustment to the conversion price
pursuant to paragraph (a), (b), (d), (e) or (f) above occurs on or after the
"ex" date for the issuance or distribution requiring such computation and on or
prior to the date in question, the closing price for each trading day on and
after the "ex" date for such other event shall be adjusted by multiplying such
closing price by the reciprocal of the fraction by which the conversion price is
so required to be adjusted as a result of such other event, and (iii) if the
"ex" date for the issuance or distribution requiring such computation is on or
prior to the date in question, after taking into account any adjustment required
pursuant to clause (ii) of this proviso, the closing price for each trading day
on or after such "ex" date shall be adjusted by adding thereto the amount of any
cash and the fair market value on the date in question (as determined by the
Board of Directors in a manner consistent with any determination of such value
for the purposes of paragraph (d) or (e) of this Section, whose determination
shall be conclusive and described in a resolution of the Board of Directors) of
the evidences of indebtedness, shares of Capital Stock or assets being
distributed applicable to one share of Common Stock of the Company as of the
close of business on the day before such "ex" date. If on any date there has not
been a Public Equity Offering or if there is no closing price available for the
Common Stock of the Company on any date, the Current Market Price shall be
determined (a) in good faith by the Board of Directors of the Company and
certified in a board resolution, based on the most recently completed arms
length transaction between the Company and a person other than an Affiliate (as
defined in Rule 405 of the Securities Act of 1933, as amended) of the Company
and the closing of which occurs on such date or within such six-month period of
(b) if no arms-length transaction shall have occurred with the six-month period
preceding such date or if the current transaction is in excess of $1 million, by
an
16
Independent Financial Expert appointed in the manner provided for in paragraph
(i) (i) of this Section 15.
(i) (i) If any event shall occur as to which the other provisions of
this Section 15 are not strictly applicable but the failure to make any
adjustment would have the effect of depriving holders of the benefit of all or a
portion of the exercise rights in respect of any Warrant in accordance with the
essential intent and principles of this Section 15, then, in each such case, the
Company shall appoint an Independent Financial Expert, which shall give its
opinion upon the adjustment, if any, on a basis consistent with the essential
intent and principles established in this Section 15 necessary to preserve,
without dilution, such exercise rights. Upon receipt of such opinion, the
Company will promptly mail a copy thereof to the holders and shall make the
adjustments described therein. As used herein, an "Independent Financial
Expert" is a firm (a) which does not, and whose directors, officers and
employees or affiliates do not have a direct or indirect financial interest in
the Company and (b) which, in the judgment of the Board of Directors, is
otherwise independent and qualified to perform the task for which it is to be
engaged.
(ii) The Company will not, by amendment of its articles 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 the
Warrants, 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 Holders thereof against
dilution or other impairment. Without limiting the generality of the foregoing,
the Company (i) will take all such action as may be necessary or appropriate in
order that the Company may validly and legally issue fully paid and
nonassessable shares of Class A Common Stock on the exercise of the Warrants
from time to time outstanding and (ii) will not take any action which results in
any adjustment of the Number of Shares if the total number of shares of Class A
Common Stock issuable after the action upon the exercise of all of the Warrants
would exceed the total number of shares of Class A Common Stock then authorized
by the Company's certificate of incorporation and available for the purposes of
issue upon such exercise.
(j) The Company may, but shall not be obligated to, make such increases
in the Number of Shares, in addition to those required by paragraphs (a), (b),
(d), (e), (f) and (g) of this Section, as it considers to be advisable in order
that any event treated for United States federal income tax purposes as a
dividend of stock or stock rights shall not be taxable to the recipients or if
that is not possible, to diminish any income taxes that are otherwise payable
because of such event.
(k) No adjustment in the Number of Shares shall be required unless such
adjustment (plus any other adjustments not previously made by reason of this
paragraph (k)) would require an increase or decrease of at least 1% in the
Number of Shares; provided, however, that any adjustments which by reason of
this paragraph (k) are not
17
required to be made shall be carried forward and taken into account in any
subsequent adjustment.
(l) In any case in which this Section 15 shall require that an
adjustment in the Number of Shares be made effective as of or immediately after
a record date for a specified event, the Company may elect to defer until the
occurrence of such event (i) issuing to the holder of any Warrant exercised
after such record date the shares of Common Stock and other capital stock of the
Company, if any, issuable upon such exercise over and above the shares of Common
Stock and other capital stock of the Company, if any, issuable upon such
exercise on the basis of the Number of Shares prior to such adjustment and (ii)
paying to such holder any amount in cash in lieu of a fractional share pursuant
to Section 17 hereof; provided, however, that the Company shall deliver to such
holder a due xxxx or other appropriate instrument evidencing such holder's right
to receive such additional shares of Common Stock, other capital stock and cash
upon the occurrence of the event requiring such adjustment.
(m) (i) No adjustment need be made for a transaction referred to in
subsections (a), (b), (e) or (f) of this Section 15 if holders are to
participate in the transaction on a basis and with notice that the Board of
Directors determines to be fair and appropriate in light of the basis and notice
on which holders of shares of Common Stock of the Company participate in the
transaction.
(ii) No adjustment need be made for (x) a transaction referred to in
subsections (b), (d) (ii) or (d) (iii) of this Section 15 if the below market
portion of such issuances, taken together with the below market portion of all
other below market issuances and with the above market portion of all above
market tender or exchange offers described in clause (y) of this paragraph made
on and after the date of this Warrant Agreement, is less than 2.0% of the
product of the Current Market Price and the number of outstanding shares ("Total
Capitalization") of the Company (determined by reference to the sum of the
percentages of Total Capitalization of the Company attributable to each such
transaction on the date thereof) and (y) a transaction referred to in subsection
(f) of this Section 15 if the above market portion of such tender or exchange
offers, taken together with the above market portion of all other above market
tender or exchange offers and with the below market portion of all below market
issuances described in clause (x) of this paragraph made on or after the date of
this Warrant Agreement, is less than 2.0% of the Total Capitalization of the
Company (determined by reference to the sum of the percentages of Total
Capitalization of the Company attributable to each such transaction on the date
thereof).
(iii) No adjustment need be made for a change in the par value, or
from par value to no par value, or from no par value to par value, of the Common
Stock.
SECTION 16. [Intentionally Omitted.]
18
SECTION 17. Fractional Interests. The Company shall not be required to
issue fractional Warrant Shares on the exercise of Warrants. If more than one
Warrant shall be presented for exercise in full at the same time by the same
holder, the number of full Warrant Shares which shall be issuable upon the
exercise thereof shall be computed on the basis of the aggregate number of
Warrant Shares purchasable on exercise of the Warrants so presented. If any
fraction of a Warrant Share would, except for the provisions of this Section 17,
be issuable on the exercise of any Warrants (or specified portion thereof), the
Company shall notify the Warrant Agent in writing of the amount to be paid in
lieu of the fraction of a Warrant Share and concurrently pay or provide to the
Warrant Agent for payment to the Warrant holder an amount in cash equal to the
product of (i) such fraction of a Warrant Share multiplied by (ii) the
difference of the Current Market Price of Class A Common Stock on the trading
day immediately preceding the date the Warrant is presented for exercise over
the Exercise Price, computed to the nearest whole cent.
SECTION 18. Notices of Adjustments.
(a) Whenever the Number of Shares is adjusted as herein provided:
(i) The Company shall compute the adjusted Number of Shares in
accordance with Section 15 and shall prepare a certificate signed by the
Treasurer or Chief Financial Officer of the Company setting forth the adjusted
Number of Shares and showing in reasonable detail the facts upon which such
adjustment is based, and such certificate shall within 15 days thereafter be
filed (with a copy to the Warrant Agent) at each office or agency maintained for
the purpose of exercise of Warrants pursuant to this Agreement; and
(ii) a notice stating that the Number of Shares has been adjusted
and setting forth the adjusted Number of Shares shall be prepared within 15 days
thereafter, and as soon as practicable after it is prepared, such notice shall
be furnished by the Company to the Warrant Agent and mailed by the Company at
its expense to all registered holders at their last addresses as they shall
appear in the Warrant register.
(b) In case:
(i) the Company shall declare a dividend (or any other
distribution) on its Common Stock payable (i) otherwise than exclusively in cash
or (ii) exclusively in cash in an amount that would require an adjustment in the
Number of Shares pursuant to paragraph (e) of Section 15; or
(ii) the Company shall authorize the granting to the holders of its
shares of Common Stock of rights, options or warrants to subscribe for or
purchase any shares of Capital Shares of any class or of any other rights
(excluding shares of Capital Shares or options for Capital Shares issued
pursuant to a benefit plan for employees, officers or directors of the Company);
or
19
(iii) of any reclassification of the shares of any class of Common
Stock of the Company (other than a subdivision or combination of the outstanding
shares of such class of Common Stock), or of any consolidation, merger or share
exchange to which the Company is a party and for which approval of any
shareholders of the Company is required, or of the sale or transfer of all or
substantially all of the assets of the Company; or
(iv) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(v) the Company or any subsidiary shall commence a tender or
exchange offer for all or a portion of the outstanding shares of Common Stock
(or shall amend any such tender or exchange offer to change the maximum number
of shares being sought or the amount or type of consideration being offered
(including by exchange) therefor); then the Company shall cause to be filed at
each office or agency maintained pursuant to this Agreement, and shall cause to
be mailed to all registered holders at their last addresses as they shall appear
in the Warrant register, at least 21 days (or 11 days in any case specified in
clause (a), (b) or (e) above) prior to the applicable record, effective or
expiration date hereinafter specified, a notice stating (x) the date on which a
record is to be taken for the purpose of such dividend, distribution or granting
of rights, options or warrants, or, if a record is not to be taken, the date as
of which the holders of its shares of Common Stock of record who will be
entitled to such dividend, distribution, rights, options or warrants are to be
determined, (y) the date on which such reclassification, consolidation, merger,
share exchange, sale, transfer, dissolution, liquidation or winding up is
expected to become effective, and the date as of which it is expected that
holders of its shares of Common Stock of record shall be entitled to exchange
their shares of Common Stock, for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, share exchange, sale,
transfer, dissolution, liquidation or winding up, or (z) the date on which such
tender or exchange offer (other than an exchange offer contemplated by clause
(y) above) commenced, the date on which such tender or exchange offer is
scheduled to expire unless extended, the consideration offered and the other
material terms thereof (or the material terms of any amendment thereto). Neither
the failure to give any such notice nor any defect therein shall affect the
legality or validity of any action described in clauses (a) through (e) of this
Section 18.
SECTION 19. Warrant Agent. The Warrant Agent undertakes the duties and
obligations imposed by this Agreement upon the following terms and conditions,
by all of which the Company and the holders of Warrants, by their acceptance
thereof, shall be bound.
(a) The statements contained herein and in the Warrant Certificates shall
be taken as statements of the Company. The Warrant Agent assumes no responsibil-
ity for the correctness of any of the same except such as describe the Warrant
Agent or action taken or to be taken by it. The Warrant Agent assumes no
responsibility with respect to the distribution of the Warrant Certificates
except as herein otherwise provided.
20
(b) The Warrant Agent shall not be responsible for any failure of the
Company to comply with any of the covenants contained in this Agreement or in
the Warrant Certificates to be complied with by the Company.
(c) The Warrant Agent may consult at any time with counsel satisfactory
to it (who may be counsel for the Company) and the Warrant Agent shall incur no
liability or responsibility to the Company or to any holder of any Warrant
Certificate in respect of any action taken, suffered or omitted by it here under
in good faith and in accordance with the opinion or the advice of such counsel.
(d) The Warrant Agent shall incur no liability or responsibility to the
Company or to any holder of any Warrant Certificate for any action taken in
reliance on any Warrant Certificate, certificate of shares, notice, resolution,
waiver, consent, order, certificate, or other paper, document or instrument
believed by it to be genuine and to have been signed, sent or presented by the
proper party or parties. The Warrant Agent shall not be bound by any notice or
demand, or any waiver, modification, termination or revision of this Agreement
or any of the terms hereof, unless evidenced by a writing between the Company
and the Warrant Agent.
(e) The Company agrees to pay to the Warrant Agent such reasonable
compensation from time to time as agreed between the Company and the Warrant
Agent for all services rendered by the Warrant Agent hereunder and in connection
with the execution of this Agreement, to reimburse the Warrant Agent for all
expenses, taxes (including withholding taxes and the reasonable fees and
expenses of its counsel and agents) and governmental charges and other charges
of any kind and nature incurred by the Warrant Agent in the execution, delivery
and performance of its responsibilities under this Agreement and to indemnify
the Warrant Agent and save harmless against any and all losses, liabilities, or
expenses, including judgments, costs and counsel fees, for anything done or
omitted by the Warrant Agent in the execution, delivery and performance of its
responsibilities under this Agreement except as a result of its negligence,
willful misconduct or bad faith. The provisions of this Section 19(e) shall
survive termination of this Agreement and the resignation or removal of the
Warrant Agent.
(f) The Warrant Agent shall be under no obligation to institute any
action, suit or legal proceeding or to take any other action likely to involve
expense unless the Company or one or more registered holders of Warrant
Certificates shall furnish the Warrant Agent with reasonable security and
indemnity for any costs and expenses which may be incurred, but this provision
shall not affect the power of the Warrant Agent to take such action as it may
consider proper, whether with or without any such security or indemnity. All
rights of action under this Agreement or under any of the Warrants may be
enforced by the Warrant Agent without the possession of any of the Warrant
Certificates or the production thereof at any trial or other proceeding relative
thereto, and any such action, suit or proceeding instituted by the Warrant Agent
shall be brought in its name as Warrant Agent and any recovery of judgment shall
be for the ratable benefit of the registered holders of the Warrants, as their
respective rights or interests may appear.
21
(g) Except as required by law, the Warrant Agent, and any stockholder,
director, officer or employee of the Warrant Agent, may buy, sell or deal in any
of the Warrants or other securities of the Company or become pecuniarily
interested in any transaction in which the Company may be interested, or
contract with or lend money to the Company or otherwise act as fully and freely
as though it were not Warrant Agent under this Agreement. Nothing herein shall
preclude the Warrant Agent from acting in any other capacity for the Company or
for any other legal entity.
(h) The Warrant Agent shall act hereunder solely as agent for the
Company, and its duties shall be determined solely by the provisions hereof. The
Warrant Agent shall not be liable for anything which it may do or refrain from
doing in connection with this Agreement except for its own negligence or bad
faith.
(i) The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of any Warrant Certificate to make or cause to be
made any adjustment of the Number of Shares or other securities or property
deliverable as provided in this Agreement, or to determine whether any facts
exist which may require any of such adjustments, or with respect to the nature
or extent of any such adjustments, when made, or with respect to the method
employed in making the same. The Warrant Agent shall not be accountable with
respect to the validity or value or the kind or amount of any Warrant Shares or
of any securities or property which may at any time be issued or delivered upon
the exercise of any Warrant or with respect to whether any such Warrant Shares
or other securities will when issued be validly issued and fully paid and
nonassessable, and makes no representation with respect thereto.
SECTION 20. Merger, Consolidation or Change of Name of Warrant Agent.
Any corporation into which the Warrant Agent may be merged or with which it may
be consolidated, or any corporation resulting from any merger or consolidation
to which the Warrant Agent shall be a party, or any corporation succeeding to
the business of the Warrant Agent, shall be the successor to the Warrant Agent
hereunder without the execution or filing of any paper or any further act on the
part of any of the parties hereto; provided that such corporation would be
eligible for appointment as a successor warrant agent under the provisions of
Section 21 hereof. To the extent practicable, the Warrant Agent shall provide
prior written notice to the Company of any such merger, consolidation,
succession or similar change with respect to the Warrant Agent; provided,
however, that the failure to deliver such notice will not affect the rights of
any of the parties hereto. In case at the time such successor to the Warrant
Agent shall succeed to the agency created by this Agreement, and in case at that
time any of the Warrant Certificates shall have been countersigned but not
delivered, any such successor to the Warrant Agent may adopt the
countersignature of the original Warrant Agent; and in case at that time any of
the Warrant Certificates shall not have been countersigned, any successor to the
Warrant Agent may countersign such Warrant Certificates either in the name of
the predecessor Warrant Agent or in the name of the successor to the Warrant
Agent; and in all such cases such Warrant Certificates shall have the full force
and effect provided in the Warrant Certificates and in this Agreement.
22
In case at any time the name of the Warrant Agent shall be changed and at
such time any of the Warrant Certificates shall have been countersigned but not
delivered, the Warrant Agent whose name has been changed may adopt the
countersignature under its prior name, and in case at that time any of the
Warrant Certificates shall not have been countersigned, the Warrant Agent may
countersign such Warrant Certificates either in its prior name or in its changed
name, and in all such cases such Warrant Certificates shall have the full force
and effect provided in the Warrant Certificates and in this Agreement.
SECTION 21. Change of Warrant Agent. If the Warrant Agent shall become
incapable of acting as Warrant Agent or shall resign as provided below, the
Company shall appoint a successor to such Warrant Agent. If the Company shall
fail to make such appointment within a period of 30 days after it has been
notified in writing of such incapacity by the Warrant Agent or by the registered
holders of a majority of Warrant Certificates, then the registered holder of any
Warrant Certificate may apply to any court of competent jurisdiction for the
appointment of a successor to the Warrant Agent. Pending appointment of a
successor to such Warrant Agent, either by the Company or by such a court, the
duties of the Warrant Agent shall be carried out by the Company. The holders of
a majority of the unexercised Warrants shall be entitled at any time to remove
the Warrant Agent and appoint a successor to such Warrant Agent. Such successor
to the Warrant Agent need not be approved by the Company or the former Warrant
Agent. After appointment the successor to the Warrant Agent shall be vested with
the same powers, rights, duties and responsibilities as if it had been
originally named as Warrant Agent without further act or deed; but the former
Warrant Agent shall deliver and transfer to the successor to the Warrant Agent
any property at the time held by it hereunder and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Failure to
give any notice provided for in Section 21, however, or any defect therein,
shall not affect the legality or validity of the appointment of a successor to
the Warrant Agent.
The Warrant Agent may resign at any time and be discharged from the
obligations hereby created by so notifying the Company in writing at least 30
days in advance of the proposed effective date of its resignation. If no
successor Warrant Agent accepts the engagement hereunder by such time, the
Company shall act as Warrant Agent.
SECTION 22. Notices to the Company and Warrant Agent. Any notice or
demand authorized by this Agreement to be given or made by the Warrant Agent or
by the registered holder of any Warrant Certificate to or on the Company shall
be sufficiently given or made when and if deposited in the mail, first class or
registered, postage prepaid, addressed (until another address is filed in
writing by the Company with the Warrant Agent), as follows:
USN Communications, Inc.
00 Xxxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxx, XX 00000-0000
Attention: General Counsel
23
with a copy to:
Skadden, Arps, Slate, Xxxxxxx & Xxxx
000 Xxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxxxx, XX 00000
Attention: Xxxx X. Xxxxxx
Any notice pursuant to this Agreement to be given by the Company or by
the registered holder(s) of any Warrant Certificate to the Warrant Agent shall
be sufficiently given when and if deposited in the mail, first-class or
registered, postage prepaid, addressed (until another address is filed in
writing by the Warrant Agent with the Company) to the Warrant Agent as follows:
Xxxxxx Trust and Savings Bank
000 Xxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Indenture Trust Division
Notice may also be given by facsimile transmission (effective when
receipt is acknowledged) (effective at the time of delivery) or by overnight
delivery service (effective the next business day).
SECTION 23. Supplements and Amendments. The Company and the Warrant
Agent may from time to time supplement or amend this Agreement without the
consent of any holders of Warrant Certificates in order to cure any ambiguity or
to correct or supplement any provision contained herein which may be defective
or inconsistent with any other provision herein, or to make any other provisions
in regard to matters or questions arising hereunder which the Company and the
Warrant Agent may deem necessary or desirable and which shall not in any way
materially adversely affect the interests of the holders of Warrant
Certificates. Any amendment or supplement to this Agreement that has a material
adverse effect on the interests of holders shall require the written consent of
registered holders of a majority of the then outstanding Warrants. The consent
of each holder of a Warrant affected shall be required for any amendment
pursuant to which the Exercise Price would be increased or the Number of Shares
purchasable upon exercise of Warrants would be decreased (other than in
accordance with Sections 15 or 17 hereof). In executing any amendment or
supplement, the Warrant Agent shall be entitled to receive an opinion of counsel
to the effect that such amendment or supplement is authorized and permitted by
this Agreement.
SECTION 24. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Warrant Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
SECTION 25. Termination. This Agreement shall terminate at 5:00 p.m.,
New York, New York time on August 15, 2004. Notwithstanding the foregoing, this
Agreement will terminate on such earlier date on which all outstanding Warrants
have
24
been exercised. The provisions of Sections 19 and 27 hereof shall survive
such termination.
SECTION 26. Governing Law; Jurisdiction. This Agreement and each
Warrant Certificate shall be governed by and construed in accordance with the
laws of the State of New York applicable to contracts made and to be performed
in the State of New York. The Company irrevocably consents to the jurisdiction
of any United States or State Court located in the State of New York in any suit
or proceeding based on or arising under this Agreement or the Warrant
Certificates and irrevocably agrees that all claims in respect of such suit or
proceeding may be determined in any such court. The Company irrevocably waives
the defense of an inconvenient forum to the maintenance of such suit or
proceeding. The Company hereby agrees to designate and appoint Corporation
Service Company, 000 Xxxxxxx Xxxxxx, Xxxxxx, Xxx Xxxx 00000 as an agent upon
whom process may be served in any suit or proceeding based on or arising under
this Agreement. The Company further agrees that service of process upon the
Company, or upon an agent appointed pursuant to the preceding sentence
accompanied with written notice of said service to the Company, as the case may
be, mailed by first class mail shall be deemed in every respect effective
service of process upon the Company in any such suit or proceeding. Nothing
herein shall affect the Warrant Agent's or any Warrant holder's right to serve
process in any other manner permitted by law. The Company agrees that a final
non-appealable judgment in any such suit or proceeding shall be conclusive and
may be enforced in other jurisdictions by suit on such judgment or in any other
lawful manner.
SECTION 27. Benefits of This Agreement. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Company, the
Warrant Agent and the registered holders of the Warrant Certificates any legal
or equitable right, remedy or claim under this Agreement; but this Agreement
shall be for the sole and exclusive benefit of the Company, the Warrant Agent
and the registered holders of the Warrant Certificates.
SECTION 28. Counterparts. This Agreement may be executed in any number
of counterparts and each of such counterparts shall for all purposes be deemed
to be an original, and all such counterparts shall together constitute but one
and the same instrument.
SECTION 29. Further Assurances. From time to time on and after the date
hereof, the Company shall deliver or cause to be delivered to the Warrant Agent
such further documents and instruments and shall do and cause to be done such
further acts as the Warrant Agent shall reasonably request (it being understood
that the Warrant Agent shall have no obligation to make such request) to carry
out more effectively the provisions and purposes of this Agreement, to evidence
compliance herewith or to assure itself that it is protected hereunder.
25
IN WITNESS WHEREOF, the parties here to have caused this Agreement to be
duly executed, as of the day and year first above written.
USN COMMUNICATIONS, INC.
By:
---------------------------
Name:
Title:
XXXXXX TRUST AND SAVINGS
BANK, as Warrant Agent
By:
---------------------------
Name:
Title:
EXHIBIT A
Form of Warrant Certificate
Face
No. _____
Warrant Certificate
USN COMMUNICATIONS, INC.
This Warrant Certificate certifies that ___________, or its registered
assigns, is the registered holder of __________ warrants expiring August 15,
2004 (the "Warrants") to purchase ______ shares of Class A Common Stock, par
value $.01 per share (the "Class A Common Stock"), of USN Communications, Inc.
("the Company"). Each Warrant entitles the holder upon exercise to receive from
the Company, at any time on or after 9:00 a.m., New York, New York time on or
after the occurrence of an Exercise Event (as defined in the Warrant Agreement,
dated as of August 15, 1997 (the "Warrant Agreement"), by and between USN
Communications, Inc. and Xxxxxx Trust and Savings Bank) and prior to the close
of business on a date seven years following the date of the Warrant Agreement,
one (1) fully paid and nonassessable share ("Number of Shares") of Class A
Common Stock (each a "Warrant Share") at the initial exercise price (the
"Exercise Price") of $.01 per share payable in the form of cash or certified
check, official bank check or bank cashier's check payable to the order of the
Company, upon surrender of this Warrant Certificate and payment of the aggregate
Exercise Price at the office or agency of the Warrant Agent, but only subject to
the conditions set forth herein and in the Warrant Agreement referred to herein.
The number of Warrant Shares issuable upon exercise of the Warrants is subject
to adjustment upon the occurrence of certain events set forth in the Warrant
Agreement. All capitalized terms not defined herein shall have the meaning
assigned to such terms in the Warrant Agreement.
No Warrant may be exercised after 5:00 p.m., New York, New York time on
August 15, 2004 and to the extent not exercised by such time such Warrants shall
become void.
Reference is hereby made to the further provisions of this Warrant
Certificate set forth on the reverse hereof and such further provisions shall
for all purposes have the same effect as though fully set forth at this place.
This Warrant Certificate shall not be valid unless countersigned by the
Warrant Agent, as such term is used in the Warrant Agreement.
This Warrant Certificate shall be governed and construed in accordance
with the internal laws of the State of New York.
27
IN WITNESS WHEREOF, USN Communications, Inc. has caused this Warrant
Certificate to be signed by its Chief Executive Officer and by its Secretary,
and has caused a facsimile its corporate seal to be affixed hereunto or
imprinted hereon.
Dated:
USN COMMUNICATIONS, INC.
By:
---------------------------
Chief Executive Officer
By:
---------------------------
Secretary
(seal)
Countersigned:
XXXXXX TRUST AND SAVINGS BANK,
as Warrant Agent
By:
---------------------------
Authorized Signatory
28
Form of Warrant Certificate
Reverse
THE WARRANTS REPRESENTED HEREBY AND, AS OF THE DATE THIS WARRANT
CERTIFICATE WAS ORIGINALLY ISSUED, THE SHARES OF CLASS A COMMON STOCK, $.01
PAR VALUE PER SHARE (THE "CLASS A COMMON STOCK") PURCHASABLE UPON THEIR
EXERCISE (THE "WARRANT SHARES" AND, TOGETHER WITH THE WARRANTS, THE
"SECURITY"), HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER
SECURITIES LAWS. NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION
HEREIN MAY BE REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED
OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION OR UNLESS THE
TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF THIS SECURITY, BY ITS
ACCEPTANCE HEREOF, (1) REPRESENTS THAT IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT ("RULE 144A"), (2)
AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR SUCH
SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) UNDER THE SECURITIES ACT
OR ANY SUCCESSOR PROVISIONS THEREUNDER) AFTER THE LATER OF THE ORIGINAL
ISSUE DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY
ON WHICH THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS
SECURITY OR ANY PREDECESSOR OF THIS SECURITY AND (Y) SUCH LATER DATE, IF
ANY, AS MAY BE REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION
TERMINATION DATE"), OFFER, SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT
(A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES ARE ELIGIBLE FOR RESALE
PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED
INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN
ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM
NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A OR
(D) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS SECURITY IS TRANS-
29
FERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. THIS LEGEND
WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE.
By accepting a Warrant Certificate bearing the legend above, each holder shall
be bound by all of the terms and provisions of the Warrant Agreement (a copy of
which is available on request to the Company or the Warrant Agent) as fully and
effectively as if such holder had signed the same.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring August 15, 2004, each entitling the holder
upon exercise to receive one (1) share of Class A Common Stock of the Company,
and are issued pursuant to the Warrant Agreement, duly executed and delivered by
the Company to the Warrant Agent, which Warrant Agreement is hereby incorporated
by reference in and made a part of this instrument and is hereby referred to for
a description of the rights, limitation of rights, obligations, duties and
immunities thereunder of the Warrant Agent, the Company and the holders (the
words "holders" or "holder" meaning the registered holders or registered holder)
of the Warrants.
Warrants may be exercised at any time on or after 9:00 a.m., New York,
New York time on or after the occurrence of an Exercise Event (as defined in the
Warrant Agreement) and prior to the close of business on August 15, 2004. The
holder of Warrants evidenced by this Warrant Certificate may exercise them by
surrendering this Warrant Certificate, with the form of election to purchase set
forth hereon properly completed and executed, together with payment of the
Exercise Price in the form of cash or certified or official bank check or
official bank cashier's check payable to the order of the Company, at the office
of the Warrant Agent. In the event that upon any exercise of Warrants evidenced
hereby the number of Warrants exercised shall be less than the total number of
Warrants evidenced hereby, there shall be issued to the holder hereof or his
assignee a new Warrant Certificate evidencing the number of Warrants not
exercised.
The Warrant Agreement provides that upon the occurrence of certain events
the Number of Shares set forth on the face hereof may, subject to certain
conditions, be adjusted. No fractional shares of Class A Common Stock will be
issued upon the exercise of any Warrant, but the Company will pay the cash value
thereof determined as provided in the Warrant Agreement.
Warrant Certificates, when surrendered at the office of the Warrant Agent
by the registered holder thereof in person or by a legal representative or
attorney duly authorized in writing, may be exchanged, in the manner and subject
to the limitations provided in the Warrant Agreement, but without payment of any
service charge, for another Warrant Certificate or Warrant Certificates of like
tenor evidencing in the aggregate a like number of Warrants.
30
Upon due presentation for registration of transfer of this Warrant
Certificate at the office of the Warrant Agent a new Warrant Certificate or
Warrant Certificates of like tenor and evidencing in the aggregate a like number
of Warrants shall be issued to the transferee(s) in exchange for this Warrant
Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
The Company and the Warrant Agent may deem and treat the registered
holder(s) thereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
31
Form of Election to Purchase
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive _______ shares of Class A
Common Stock and herewith tenders payment for such shares to the order of USN
Communications, Inc. in the amount of $____ in accordance with the terms hereof.
The undersigned requests that a certificate for such shares be registered
in the name of _______________________, whose address is _______________________
________________________ and that such shares be delivered to _________________,
whose address is _______________.
If said number of shares is less than all of the shares of Common Stock
purchasable hereunder, the undersigned requests that a new Warrant Certificate
representing the remaining balance of such shares be registered in the name of
__________________, whose address is _______________ and that such Warrant
Certificate be delivered to _________________, whose address is
__________________.
Date: _____________
Your Signature:___________________
(Sign exactly as your name appears on the face of this Warrant)
Signature Guarantee:
FORM OF TRANSFER NOTICE
FOR VALUE RECEIVED the undersigned registered holder hereby sell(s),
assign(s) and transfer(s) unto
Insert Taxpayer Identification No.
___________________________
___________________________
Please print or typewrite name and address including zip code of assignee
__________________________________________________________
the within Warrant Certificate and all rights thereunder, hereby irrevocably
constituting and appointing
___________________________
attorney to transfer the Warrants evidenced by said Warrant Certificate (the
"Warrants") on the books of the Company with full power of substitution in the
premises.
In connection with any transfer of the Warrants occurring prior to the
date which is the earlier of (i) the date of an effective Registration or (ii)
two years after the
32
later of the original issuance of the Warrants or the last date on which the
Warrants were held by an affiliate of the Company, the undersigned confirms,
that without utilizing any general solicitation or general advertising:
Check One
[_] (a) the Warrants are being transferred in compliance with the exemption
from registration under the Securities Act of 1933, as amended,
provided by Rule 144A thereunder.
or
[_] (b) the Warrants are being transferred other than in accordance with (a)
above and documents are being furnished which comply with the
conditions of transfer set forth in this Warrant Certificate and the
Warrant Agreement.
If none of the foregoing boxes is checked, the Warrant Agent shall not be
obligated to register the Warrants in the name of any Person other than the
holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Section 7 (c) of the Warrant Agreement
shall have been satisfied.
Date: NOTICE: The signature to this assignment must correspond with
the name as written upon the face of the within-
mentioned instrument in every particular, without
alteration or any change whatsoever.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing this
Warrant for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the Securities Act of
1933, as amended, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding the
Company as the undersigned has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the transferor is
relying upon the undersigned's foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
Dated:
NOTICE: To be executed by an executive officer
33
EXHIBIT B
FORM OF WARRANT SHARES LEGEND
THE SHARES OF CLASS A COMMON STOCK, $.01 PAR VALUE PER SHARE (THE
"SECURITY"), HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE OR OTHER SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED,
SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF SUCH REGISTRATION OR UNLESS THE TRANSACTION IS EXEMPT FROM, OR NOT
SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. THE HOLDER OF
THIS SECURITY, BY ITS ACCEPTANCE HEREOF (1) REPRESENTS THAT IT IS A "QUALIFIED
INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT ("RULE
144A"), (2) AGREES THAT IT WILL NOT PRIOR TO (X) THE DATE WHICH IS TWO YEARS (OR
SUCH SHORTER PERIOD OF TIME AS PERMITTED BY RULE 144(k) UNDER THE SECURITIES ACT
OR ANY SUCCESSOR PROVISION THEREUNDER) AFTER THE LATER OF THE ORIGINAL ISSUE
DATE HEREOF (OR OF ANY PREDECESSOR OF THIS SECURITY) OR THE LAST DAY ON WHICH
THE COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY OR
ANY PREDECESSOR OF THIS SECURITY AND (Y) SUCH LATER DATE, IF ANY, AS MAY BE
REQUIRED BY APPLICABLE LAWS (THE "RESALE RESTRICTION TERMINATION DATE"), OFFER,
SELL OR OTHERWISE TRANSFER THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY
SUBSIDIARY THEREOF, (B) PURSUANT TO REGISTRATION STATEMENT WHICH HAS BEEN
DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES
ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A, TO A PERSON IT REASONABLY
BELIEVES IS A "QUALIFIED INSTITUTIONAL BUYER" AS DEFINED IN RULE 144A THAT
PURCHASES FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL
BUYER TO WHOM NOTICE IS GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON
RULE 144A OR (D) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND (3) AGREES THAT IT WILL GIVE TO EACH
PERSON TO WHOM THIS SECURITY IS TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER
THE RESALE RESTRICTION TERMINATION DATE.
34
