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EXHIBIT 10.17
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PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
BY AND AMONG
AVAYA INC.
AND
THE PURCHASERS LISTED ON SCHEDULE 1 HERETO
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Dated as of
August 8, 2000
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TABLE OF CONTENTS
Page
ARTICLE I
Definitions .................................................................... 2
ARTICLE II
Sale and Purchase
SECTION 2.01. Agreement to Sell and to Purchase;
Purchase Price .............................................................. 10
SECTION 2.02. Initial Conditions.............................................................. 11
SECTION 2.03. Escrow Funding.................................................................. 12
SECTION 2.04. Release of Escrowed Funds and
Securities...................................................................... 13
ARTICLE III
Representations and Warranties
of the Company
SECTION 3.01. Organization and Standing....................................................... 13
SECTION 3.02. Capital Stock................................................................... 14
SECTION 3.03. Authorization; Enforceability................................................... 15
SECTION 3.04. No Violation; Consents.......................................................... 16
SECTION 3.05. Form 10; Financial Statements................................................... 17
SECTION 3.06. Material Adverse Change......................................................... 17
SECTION 3.07. Assets.......................................................................... 17
SECTION 3.08. Intellectual Property........................................................... 18
SECTION 3.09. No Undisclosed Material Liabilities............................................. 18
SECTION 3.10. Compliance with Laws............................................................ 19
SECTION 3.11. No Litigation................................................................... 19
SECTION 3.12. Compliance with Constituent Documents........................................... 19
SECTION 3.13. Environmental Matters........................................................... 20
SECTION 3.14. Interim Changes................................................................. 21
SECTION 3.15. The Contribution and Distribution............................................... 21
ARTICLE IV
Representations and Warranties of the Purchasers
SECTION 4.01. Organization; Authorization;
Enforceability............................................................... 22
SECTION 4.02. Private Placement............................................................... 22
SECTION 4.03. No Violation; Consents.......................................................... 23
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SECTION 4.04. No Litigation................................................................... 24
SECTION 4.05. Financing....................................................................... 24
SECTION 4.06. Ownership of Securities......................................................... 25
SECTION 4.07. Future Acquisitions............................................................. 25
ARTICLE V
Covenants of the Company
SECTION 5.01. Access to Books and Records..................................................... 25
SECTION 5.02. Compliance with Conditions;
Commercially Reasonable Efforts ............................................. 26
SECTION 5.03. HSR Act Notification............................................................ 26
SECTION 5.04. Consents and Approvals.......................................................... 26
SECTION 5.05. Filing of Certificate of Designation............................................ 27
SECTION 5.06. Reservation of Shares........................................................... 27
SECTION 5.07. Listing of Shares............................................................... 27
SECTION 5.08. Use of Proceeds................................................................. 27
SECTION 5.09. Warburg Group Director and Observer............................................. 27
SECTION 5.10. Registration Rights............................................................. 28
SECTION 5.11. Preemptive Rights............................................................... 29
SECTION 5.12. Escrow Agreement................................................................ 33
ARTICLE VI
Covenants of the Purchasers
SECTION 6.01. Compliance with Conditions;
Commercially Reasonable Efforts ............................................. 33
SECTION 6.02. HSR Act Notification............................................................ 33
SECTION 6.03. Consents and Approvals.......................................................... 34
SECTION 6.04. Restrictions on Transfer........................................................ 34
SECTION 6.05. Standstill...................................................................... 34
SECTION 6.06. Confidentiality; Information.................................................... 36
SECTION 6.07. Compliance with Section 355..................................................... 37
SECTION 6.08. IPO Lock-up..................................................................... 37
SECTION 6.09. Prohibition on Solicitation and Hiring.......................................... 38
SECTION 6.10. Escrow Agreement................................................................ 38
ARTICLE VII
Conditions Precedent to Initial
Conditions Date and Funding
SECTION 7.01. Conditions to the Company's
Obligations in Respect of the Initial
Conditions .......................................................................... 39
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SECTION 7.02. Conditions to Each Purchasers'
Obligations in Respect of the Initial
Conditions ..................................................................... 39
SECTION 7.03. Conditions to Each Party's
Obligations In Respect of the
Funding ........................................................................ 40
SECTION 7.04. Conditions to the Company's
Obligations in Respect of the
Funding ........................................................................ 41
SECTION 7.05. Conditions to Each Purchaser's
Obligations in Respect of the
Funding ........................................................................ 41
SECTION 7.06. Conditions to Each Party's
Obligations In Respect of the
Release of Escrowed Funds and
Securities ..................................................................... 41
ARTICLE VIII
Miscellaneous
SECTION 8.01. Survival ......................................................................... 42
SECTION 8.02. Legends .......................................................................... 42
SECTION 8.03. Notices .......................................................................... 43
SECTION 8.04. Termination ...................................................................... 44
SECTION 8.05. GOVERNING LAW .................................................................... 45
SECTION 8.06. WAIVER OF JURY TRIAL ............................................................. 45
SECTION 8.07. Attorney Fees .................................................................... 45
SECTION 8.08. Entire Agreement ................................................................. 45
SECTION 8.09. Modifications and Amendments ..................................................... 46
SECTION 8.10. Waivers and Extensions ........................................................... 46
SECTION 8.11. Titles and Headings; Rules of
Construction .................................................................. 46
SECTION 8.12. Exhibits and Schedules ........................................................... 46
SECTION 8.13. Expenses; Brokers ................................................................ 47
SECTION 8.14. Press Releases and Public
Announcements ................................................................. 47
SECTION 8.15. Assignment; No Third Party
Beneficiaries ................................................................. 47
SECTION 8.16. Severability ..................................................................... 48
SECTION 8.17. Counterparts ..................................................................... 48
Schedules
Schedule 1 List of Purchasers
Schedule 3.01 Organization and Standing
Schedule 3.02 Capital Stock
Schedule 3.04 No Violation; Consents
Schedule 3.05 Form 10; Financial Statements
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Schedule 3.07 Assets
Schedule 3.08 Intellectual Property
Schedule 3.09 Undisclosed Liabilities
Schedule 3.11 No Litigation
Schedule 3.13 Environmental Matters
Schedule 3.14 Interim Changes
Schedule 3.15 The Contribution and Distribution
Schedule 5.01 Access to Books and Records
Exhibits
Exhibit A Form of Certificate of Designation
Exhibit B Form of Series A and Series B Warrant
Certificate
Exhibit C Form of Cravath, Swaine & ▇▇▇▇▇ Opinion
Exhibit D Registration Rights Provisions
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PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT dated
as of August 8, 2000, by and among Avaya Inc., a Delaware
corporation (the "Company"), and each of the purchasers listed
on Schedule 1 hereto (individually, a "Purchaser" and
collectively, the "Purchasers").
WHEREAS, Lucent Technologies Inc., a Delaware corporation
("Lucent"), and the Company expect to enter into a Contribution and Distribution
Agreement (as defined herein) whereby subject to the terms and conditions
thereof, Lucent will contribute (the "Contribution") to the Company
substantially all the assets and liabilities of its Enterprise Communications
Business (as defined herein) and, following the Contribution, distribute (the
"Distribution"), subject to the terms and conditions of the Contribution and
Distribution Agreement, to Lucent's stockholders all the shares of the Company's
Common Stock;
WHEREAS, the Company proposes, subject to the terms and
conditions set forth herein, to issue and sell to the Purchasers 4,000,000
shares (the "Preferred Shares") of its 6-1/2% Series B Convertible Participating
Preferred Stock, par value $1.00 per share (the "Series B Preferred Stock"),
having an initial liquidation preference equal to $100 per share;
WHEREAS, the Company proposes, subject to the terms and
conditions set forth herein, to issue and sell to the Purchasers the Series A
Warrants (as defined herein) and the Series B Warrants (as defined herein);
WHEREAS, the Purchasers desire, subject to the terms and
conditions set forth herein, to purchase the Securities (as defined herein) from
the Company; and
WHEREAS, the Preferred Shares, the Series A Warrants and the
Series B Warrants shall not be issued by the Company or purchased by the
Purchasers unless the Distribution is consummated.
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NOW, THEREFORE, the parties hereto, intending to be legally
bound, hereby agree as follows.
ARTICLE I
Definitions
(a) As used in this Agreement, the following terms shall have
the following meanings:
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under direct or
indirect common control with, such Person. For the purposes of this definition,
"control" when used with respect to any Person means the power to direct the
management and policies of such Person, directly or indirectly, whether through
the ownership of voting securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to the foregoing.
"Applicable Law" means (a) any United States Federal, state,
local or foreign law, statute, rule, regulation, order, writ, injunction,
judgment, decree or permit of any Governmental Authority and (b) any rule or
listing requirement of any national stock exchange or Commission recognized
trading market on which securities issued by the Company or any of the
Subsidiaries are listed or quoted.
"Business Day" means any day other than a Saturday, a Sunday,
or a day when banks in The City of New York are authorized by Applicable Law to
be closed.
"Capital Stock" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations, rights or other
equivalents (however designated) of corporate stock and (ii) with respect to any
other Person, any and all partnership or other equity interests of such Person.
"Certificate of Designation" means the Certificate of
Designation of the Powers, Preferences and Relative, Participating, Optional and
Other Special Rights and Qualifications, Limitations and Restrictions thereof
relating to the Series B Preferred Stock, in the form attached hereto as Exhibit
A.
"Commission" means the United States Securities and Exchange
Commission.
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"Common Stock" means the Common Stock of the Company, par
value $0.01 per share, and, unless the context otherwise requires, includes the
associated Series A Junior Participating Preferred Stock purchase rights
issuable in respect of such shares pursuant to the Rights Agreement.
"Common-Stock-Equivalent Security" means securities of the
Company more than 50% of the principal amount, liquidation preference or stated
value of which is convertible into or exchangeable or exercisable for, shares of
Common Stock. Any offerings of units of multiple securities, one or more of
which securities is Common Stock or a Common-Stock-Equivalent Security, shall
not constitute an offering of Common Stock-Equivalent Securities unless more
than 50% of the aggregate principal amount, liquidation preference and/or stated
value of all securities comprising such unit is attributable to Common Stock or
is convertible into or exchangeable or exercisable for, shares of Common Stock.
"Confidentiality Agreement" means the Confidentiality
Agreement dated June 1, 2000 between Lucent Technologies Inc. and Warburg.
"Contract" means any contract, lease, loan agreement,
mortgage, security agreement, trust indenture, note, bond, or other agreement
(whether written or oral) or instrument.
"Contribution and Distribution Agreement" means the
Contribution and Distribution Agreement between the Company and Lucent to be
entered into in connection with the Distribution, substantially in the form
included in the Distribution Documentation Annex.
"Conversion Shares" means the shares of Common Stock issuable
upon the conversion of the Series B Preferred Stock in accordance with the terms
of the Certificate of Designation.
"Development Project Agreement" means the Development Project
Agreement between the Company and Lucent to be entered into in connection with
the Distribution, substantially in the form included in the Distribution
Documentation Annex.
"Distribution Agreements" means the Contribution and
Distribution Agreement, the Interim Services and Systems Replication Agreement,
the Employee Benefits Agreement, the Tax Sharing Agreement, the Patent and
Technology License Agreement, the Trademark License Agreement, the Technology
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Assignment and Joint Ownership Agreement and the Development Project Agreement.
"Distribution Documentation Annex" means the Annex delivered
to the Purchasers as of the date hereof containing the Draft Form 10 and the
Distribution Agreements.
"Draft Form 10" means the registration statement on Form 10
filed by the Company with the Commission in connection with the Distribution
(and all exhibits and schedules thereto and documents incorporated by reference
therein), in the form included in the Distribution Documentation Annex.
"Effective Date" means the date the Form 10 is first declared
effective by the Commission.
"Employee Benefits Agreement" means the Employee Benefits
Agreement between the Company and Lucent to be entered into in connection with
the Contribution and the Distribution, substantially in the form included in the
Distribution Documentation Annex.
"Enterprise Communications Business" means the business of
providing enterprise voice communications systems and software, communications
applications, professional services for customer and enterprise relationship
management, multiservice networking products and product installation services,
maintenance and other value-added services in respect of the foregoing and the
manufacture of structured cabling systems and electronic cabinets, to be
conducted by the Company and its Subsidiaries following the Contribution, all as
described in the Draft Form 10.
"Equity Documents" means this Agreement, the Escrow Agreement,
the Warrants and the Certificate of Designation.
"Escrow Agent" means the party identified as such in the
Escrow Agreement.
"Escrow Agreement" means the escrow agreement among the
Purchasers, the Company and the Escrow Agent to be entered into in connection
with the Issuance.
"Exchange Act" means the Securities Exchange Act of 1934, as
from time to time amended, and the rules and regulations of the Commission
promulgated thereunder.
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"Form 10" means the registration statement on Form 10 filed by
the Company with the Commission in connection with the Distribution (and all
exhibits and schedules thereto and documents incorporated by reference therein),
as amended through the Effective Date.
"GAAP" means United States generally accepted accounting
principles, consistently applied.
"Governmental Authority" means (i) any foreign, Federal, state
or local court or governmental or regulatory agency or authority, (ii) any
arbitration board, tribunal or mediator and (iii) any national stock exchange or
Commission recognized trading market on which securities issued by the Company
or any of the Subsidiaries are listed or quoted.
"HSR Act" means the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements
Act of 1976, as amended, and applicable rules and regulations and any similar
state acts.
"Intellectual Property" means any patent (including all
reissues, divisions, continuations and extensions thereof), patent application,
patent right, trademark, trademark registration, trademark application,
servicemark, trade name, business name, brand name, copyright, copyright
registration, design, design registration, software, firmware, trade secret,
license, customer list, proprietary technology, know-how, invention, discovery,
improvement, process or formula or any right to any of the foregoing, and all
other forms of intellectual property.
"Interim Services and Systems Replication Agreement" means the
Interim Services and Systems Replication Agreement between the Company and
Lucent to be entered into in connection with the Contribution and the
Distribution, substantially in the form included in the Distribution
Documentation Annex.
"Lien" means any mortgage, pledge, lien, security interest,
claim, restriction, charge or encumbrance of any kind.
"Material Adverse Effect" means a material adverse effect on
the business, condition (financial or otherwise), operations, performance or
properties of the Enterprise Communications Business, taken as a whole.
"Patent and Technology Agreement" means the Patent and
Technology Agreement between the Company and Lucent to be entered into in
connection with the Distribution,
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substantially in the form included in the Distribution Documentation Annex.
"Permitted Liens" means (i) mechanics', carriers', workmen's,
repairmen's or other like Liens arising or incurred in the ordinary course of
business, Liens arising under original purchase price conditional sales
contracts and equipment leases with third parties entered into in the ordinary
course of business and liens for taxes that are not due and payable or that may
thereafter be paid without penalty, (ii) Liens that secure obligations that are
reflected as liabilities in the Company Financial Statements or Liens the
existence of which is referred to in the notes to the Company Financial
Statements, (iii) other leases, subleases and similar agreements, imperfections
of title or easements, covenants, rights-of-way and encumbrances, if any, that,
individually or in the aggregate, do not materially impair, and could not
reasonably be expected materially to impair, the continued use and operation of
the assets to which they relate in the conduct of the Enterprise Communications
Business as presently conducted, (iv) (A) zoning, building and other similar
legal restrictions, (B) Liens that have been placed by any developer, landlord
or other third party on property over which the Company or any Subsidiary has
easement rights or on any leased property and subordination or similar
agreements relating thereto and (C) unrecorded easements, covenants,
rights-of-way and other similar restrictions and (v) other Liens that would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
"Permitted Transferee" means, with respect to any Purchaser or
any Permitted Transferee of any Purchaser, any member of the Warburg Group,
Warburg or any subsidiary of Warburg (but excluding any portfolio company of any
member of the Warburg Group); provided, however, that each Permitted Transferee
must agree in writing to be bound by the terms of this Agreement to the same
extent, and in the same manner, as the transferring Purchaser prior to the
transfer of any Preferred Shares, Warrants or Common Stock to such Permitted
Transferee; and provided further, however, that the transfer of Preferred
Shares, Warrants or Common Stock to such Permitted Transferee is in compliance
with all applicable securities laws.
"Person" means any individual, partnership, corporation,
limited liability company, joint venture, association, joint-stock company,
trust, unincorporated organization, government or agency or political
subdivision thereof, or other entity.
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"Private Letter Ruling" means the private letter ruling dated
August 3, 2000, from the Internal Revenue Service that the Distribution
qualifies as a tax-free distribution under Section 355.
"Purchasers' Ownership Interest" means, as of any date, a
percentage equal to the quotient of (x) the sum of (i) the aggregate number of
shares of Common Stock then issuable upon conversion in accordance with the
terms of the Certificate of Designation of the aggregate number of shares of
Series B Preferred Stock owned as of such date by the Purchasers and the
Permitted Transferees and (ii) the aggregate number of shares of Common Stock
owned as of such date by the Purchasers and the Permitted Transferees by (y) the
number of shares of Common Stock as of such date determined in accordance with
GAAP utilizing the treasury stock method.
A "Qualifying Ownership Interest" shall be deemed to exist at
any time the Purchasers and the Permitted Transferees own a number of shares of
Series B Preferred Stock and shares of Common Stock that in the aggregate
represent (assuming conversion of any such shares of Series B Preferred Stock
into shares of Common Stock in accordance with the terms of the Certificate of
Designation) not less than 50% of the number of shares of Common Stock that
would be issuable at such time upon conversion of all the Preferred Shares
initially acquired by the Purchasers pursuant to this Agreement (without regard
to whether such Preferred Shares are then outstanding).
"Qualified Equity Offering" means a public or nonpublic
offering of Common Stock or a Common Stock-Equivalent Security (collectively,
"New Stock") solely for cash in a capital-raising transaction; provided,
however, that none of the following offerings shall constitute a Qualified
Equity Offering: (i) any offering pursuant to any stock purchase plan, stock
ownership plan, stock option plan or other similar plan where stock is being
issued or offered to a trust, other entity or otherwise, for the benefit of any
employees, officers, consultants or directors of the Company, (ii) any offering
made as part of or in connection with any non-capital-raising transaction
(including, without limitation, a partnership or joint venture or strategic
alliance or investment) and (iii) any offering that would result in an
antidilution adjustment to the Series B Preferred Stock pursuant to Section 7 of
the Certificate of Designation.
"Representatives" means, collectively, with respect to any
Person, such Person's directors, partners,
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officers, employees, financial advisors, lenders, accountants, attorneys,
agents, equity investors, controlled Affiliates and controlling persons of such
Person or its controlled Affiliates.
"Rights Agreement" means the Rights Agreement to be dated as
of September 30, 2000 between the Company and The Bank of New York, as Rights
Agent.
"Section 355" means Section 355 of the Internal Revenue Code
of 1986, as amended.
"Securities" means the Preferred Shares and the Warrants.
"Securities Act" means the Securities Act of 1933, as from
time to time amended, and the rules and regulations of the Commission
promulgated thereunder.
"Series A Warrants" means the four-year warrants to purchase
shares of Common Stock representing 2.0% of the Total Shares Outstanding (as
defined in the Series A Warrant) substantially in the form attached hereto as
Exhibit B.
"Series B Preferred Stock" has the meaning set forth in the
second recital to this Agreement. The Series B Preferred Stock has the
designation, powers, preferences and rights, and qualifications, limitations and
restrictions thereof set forth in the Certificate of Designation.
"Series B Warrants" means the five-year warrants to purchase
shares of Common Stock representing 1.6% of the Total Shares Outstanding (as
defined in the Series B Warrant) substantially in the form attached hereto as
Exhibit B.
"subsidiary" means, with respect to any Person (i) a
corporation a majority of whose capital stock with voting power, under ordinary
circumstances, to elect directors is at the time, directly or indirectly, owned
by such Person, by a subsidiary of such Person, or by such Person and one or
more subsidiaries of such Person, (ii) a partnership in which such Person or a
subsidiary of such Person is, at the date of determination, a general partner of
such partnership and has the power to direct the policies and management of such
partnership, or (iii) any other Person (other than a corporation) in which such
Person, a subsidiary of such Person or such Person and one or more subsidiaries
of such Person, directly or indirectly, at the date of determination thereof,
has (A) at least a majority
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ownership interest or (B) the power to elect or direct the election of a
majority of the directors or other governing body of such Person.
"Subsidiary" means a subsidiary of the Company, including
subsidiaries of Lucent that will be transferred to the Company in connection
with the Contribution.
"Tax Sharing Agreement" means the Tax Sharing Agreement
between the Company and Lucent to be entered into in connection with the
Contribution and the Distribution, substantially in the form included in the
Distribution Documentation Annex.
"Technology Assignment and Joint Ownership Agreement" means
the Technology Assignment and Joint Ownership Agreement between the Company and
Lucent to be entered into in connection with the Distribution, substantially in
the form included in the Distribution
Documentation Annex.
"Trademark License Agreement" means the Trademark License
Agreement between the Company and Lucent to be entered into in connection with
the Distribution, substantially in the form included in the Distribution
Documentation Annex.
"Transactions" means the transactions contemplated by the
Equity Documents.
"Warburg" means the general partner of Warburg, ▇▇▇▇▇▇ Equity
Partners, L.P.
"Warburg Group" means, collectively, any investment fund that
is an Affiliate of Warburg.
"Warrants" means the Series A Warrants and the Series B
Warrants.
"Warrant Shares" means the shares of Common Stock issuable
upon exercise of the Warrants in accordance with the terms of the applicable
Warrants.
(b) As used in this Agreement, the following terms shall have
the meanings given thereto in the Sections set forth opposite such terms:
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Term Section
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Closing 2.04
Company Preamble
Company Financial Statements 3.05(c)
Contribution Recitals
Contribution and Distribution Agreement Recitals
DGCL 3.02(d)
Distribution Recitals
Environmental Law 3.13(b)
Funding 2.03
Funding Date 2.03
Hazardous Substance 3.13(c)
Initial Conditions 2.02
Initial Conditions Date 2.02
Issuance 2.01
Lucent Recitals
New Stock 5.11(a)
Notices 8.03
Preferred Shares Recitals
Purchaser; Purchasers Preamble
Purchase Price 2.01
Qualifying Ownership Interest 5.11(a)
Registrable Securities 5.10
Registration Rights Provisions 5.10
Registration Statement 5.10
Warburg Group Director 5.09(a)
Warburg Group Observer 5.09(a)
ARTICLE II
Sale and Purchase
SECTION 2.01. Agreement to Sell and to Purchase; Purchase
Price. Immediately following the consummation of the Distribution and upon the
terms and subject to the conditions set forth in this Agreement and the Escrow
Agreement, the Company shall issue and sell (in accordance with the terms of the
Escrow Agreement) to each Purchaser, and each Purchaser, severally and not
jointly, shall purchase and accept (in accordance with the terms of the Escrow
Agreement) from the Company, such number of Preferred Shares and fractional
interests in the Warrants as is
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indicated on Schedule 1 hereto (the "Issuance"), for an aggregate purchase
price, payable (in accordance with the terms of the Escrow Agreement) by wire
transfer of immediately available funds to a bank account or bank accounts
designated by the Company, equal to $100.00 for one Preferred Share, and the
corresponding fractional interest in the Series A Warrants and the Series B
Warrants (the "Purchase Price"). The aggregate purchase price for all the
Preferred Shares and Warrants to be issued and sold to all the Purchasers is
$400.0 million. The Company shall not be required to issue and sell Preferred
Shares and Warrants to any Purchaser unless the conditions set forth in Article
VII to the issuance and sale to all Purchasers shall have been satisfied or
waived.
SECTION 2.02. Initial Conditions. The initial conditions in
respect of the Issuance (the "Initial Conditions") shall be satisfied on the
Effective Date, which is expected to be September 1, 2000, or at such other time
and date as the parties hereto shall agree in writing (such date and time, the
"Initial Conditions Date"), at the offices of Cravath, Swaine & ▇▇▇▇▇, located
at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ or at such other place as the
parties hereto shall agree in writing.
On the Initial Conditions Date:
(a) Each Purchaser shall deliver to the Company:
(i) the officer's certificate of such Purchaser contemplated
by Section 7.01(c); and
(ii) a copy of the Escrow Agreement executed by such
Purchaser.
(b) The Company shall deliver to each Purchaser:
(i) an opinion of Cravath, Swaine & ▇▇▇▇▇, dated the Initial
Conditions Date in the form attached hereto as Exhibit D;
(ii) the officer's certificate of the Company contemplated by
Section 7.02(e); and
(iii) a copy of the Escrow Agreement executed by the Company.
(c) The Escrow Agent shall deliver to the Company and each
Purchaser a copy of the Escrow Agreement executed by the
Escrow Agent.
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SECTION 2.03. Escrow Funding. The funding into escrow of the
Issuance (the "Funding") shall take place on the date of the Distribution or, if
such date is not a Business Day, on the Business Day immediately preceding the
date of the Distribution, or at such other time and date as the parties hereto
shall agree in writing (such date and time, the "Funding Date"), at the offices
of Cravath, Swaine & ▇▇▇▇▇, located at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇ or at such other place as the parties hereto shall agree in writing. The
Funding Date currently is expected to be September 29, 2000.
At the Funding:
(a) Each Purchaser shall deliver:
(i) to the Escrow Agent, an amount equal to the aggregate
Purchase Price of the Preferred Shares and fractional interest
in the Warrants being purchased by such Purchaser pursuant to
Section 2.01 via wire transfer of immediately available funds
to such bank account as the Escrow Agent shall designate not
later than two Business Days prior to the Funding Date; and
(ii) to the Company, the officer's certificate of such
Purchaser contemplated by Section 7.04.
(b) The Company shall deliver:
(i) to the Escrow Agent, certificates representing the
Preferred Shares and fractional interest in the Warrants being
purchased by each Purchaser pursuant to Section 2.01, which
shall be in definitive form and registered in the name of such
Purchaser or its nominee or designee and in such denominations
as such Purchaser shall request not later than two Business
Days prior to the Funding Date; and
(ii) to each Purchaser, the officer's certificate of the
Company contemplated by Section 7.05.
SECTION 2.04. Release of Escrowed Funds and Securities. The
Escrow Agent shall release the escrowed funds and securities in accordance with
the terms of the Escrow Agreement, and the closing of the issuance and sale of
the Preferred Shares and the Warrants (the "Closing") shall occur immediately
following the satisfaction of the condition set forth in Section 7.06; provided,
however, that if such condition has not been satisfied prior to the second
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Business Day immediately succeeding the Funding Date, the escrowed funds and
securities, plus any earnings thereon (as specified in the Escrow Agreement),
shall be returned to the parties who placed them in escrow on the third Business
Day immediately succeeding the Funding Date.
ARTICLE III
Representations and Warranties
of the Company
The Company hereby represents and warrants to each Purchaser
on the date hereof and on and as of the Initial Conditions Date and, in the case
of Sections 3.02, 3.14 and 3.15, on and as of the Funding Date as follows:
SECTION 3.01. Organization and Standing. (a) The Company is
duly incorporated, validly existing and in good standing under the laws of the
State of Delaware and has all requisite corporate power and authority to own its
properties and assets and to carry on its business as it is now being conducted
and as proposed to be conducted immediately following the Distribution. The
Company has furnished to the Purchasers true and correct copies of the Company's
certificate of incorporation and by-laws as amended through the date of this
Agreement and true and correct copies of the Company's certificate of
incorporation and by-laws in substantially the form as will be in effect as of
the Distribution (exclusive of the certificate of designation to be filed in
connection with the Rights Agreement).
(b) Each direct and indirect material Subsidiary will, at the
time of the Distribution, be duly incorporated, validly existing and, where
applicable, in good standing under the laws of its jurisdiction of incorporation
and have all requisite power and authority to own its properties and assets and
to carry on its business as it is proposed to be conducted immediately following
the Distribution, and each such material Subsidiary will be qualified to
transact business, and will be in good standing, in each jurisdiction in which
the properties owned, leased or operated by it or the nature of the business
conducted by it makes such qualification necessary; except in all cases as would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. Except as set forth in Schedule 3.01, (i) all of the outstanding
shares of capital stock of each such material Subsidiary are validly issued,
fully paid, nonassessable and free of preemptive rights and upon consummation of
the Contribution will be owned directly
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or indirectly by the Company and (ii) there are no subscriptions, options,
warrants, rights, calls, contracts, voting trusts, proxies or other commitments,
understandings, restrictions or arrangements relating to the issuance, sale,
voting or transfer of any shares of capital stock of any such material
Subsidiary, including any right of conversion or exchange under any outstanding
security, instrument or agreement.
SECTION 3.02. Capital Stock. (a) The authorized Capital Stock
of the Company immediately following the Distribution will consist solely of (i)
1,500,000,000 shares of Common Stock, of which a number of shares equal to a
number calculated based on the number of shares of Lucent common stock
outstanding on the record date established by Lucent for the Distribution and
the distribution ratio for the Distribution which shall be not less than one
share of Common Stock for every 10 shares of Lucent common stock and not more
than one share of Common Stock for every 20 shares of Lucent common stock will
be issued and outstanding immediately following the Distribution, and (ii)
200,000,000 shares of preferred stock, par value $1.00 per share, of which,
prior to the issuance of the Preferred Shares on the Funding Date as
contemplated by this Agreement, no more than 15,000,000 shares will have been
designated as Series A Junior Participating Preferred Stock and no shares are
issued or outstanding. Each share of Capital Stock of the Company that will be
issued and outstanding immediately following the Funding, including without
limitation the Preferred Shares, will be duly authorized and validly issued and
fully paid and nonassessable, and the issuance thereof will not have been
subject to any preemptive rights or made in violation of any Applicable Law.
(b) Except as set forth on Schedule 3.02, there are (i) no
outstanding options, warrants, agreements, conversion rights, exchange rights,
preemptive rights or other rights (whether contingent or not) to subscribe for,
purchase or acquire any issued or unissued shares of Capital Stock of the
Company or any Subsidiary or any Lucent options that will be converted into
options to purchase Common Stock, and (ii) no restrictions upon, or Contracts or
understandings of the Company or any Subsidiary with respect to, the voting or
transfer of any shares of Capital Stock of the Company or any Subsidiary.
(c) Prior to the Initial Conditions Date, the Conversion
Shares and Warrant Shares will have been duly authorized and adequately reserved
in contemplation of the conversion of the Series B Preferred Stock and the
exercise
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of the Warrants, respectively, and, when issued and delivered in accordance with
the terms of the Certificate of Designation or the Warrants, as the case may be,
will have been validly issued and will be fully paid and nonassessable, and the
issuance thereof will not have been subject to any preemptive rights or made in
violation any Applicable Law.
(d) The holders of the Series B Preferred Stock will, upon
issuance thereof, have the rights set forth in the Certificate of Designation
(subject to the limitations and qualifications set forth therein and under the
General Corporation Law of the State of Delaware (the "DGCL")).
SECTION 3.03. Authorization; Enforceability. The Company has
the power and authority to execute, deliver and perform the terms and provisions
of each of the Equity Documents, and, as of the Initial Conditions Date, will
have taken all action necessary to authorize the execution, delivery and
performance by it of each of such Equity Documents and to consummate the
Transactions. As of the Initial Conditions Date, no other corporate proceeding
on the part of the Company will be necessary for such authorization, execution,
delivery and consummation. The Company has duly executed and delivered this
Agreement and, on the Initial Conditions Date, the Company will have duly
executed and delivered each of the other Equity Documents to be executed and
delivered on or prior to Initial Conditions Date. This Agreement constitutes,
and each of the other Equity Documents, when executed and delivered by the
Company, will constitute, a legal, valid and binding obligation of the Company,
enforceable against the Company in accordance with its terms.
SECTION 3.04. No Violation; Consents. (a) Subject to the
governmental filings and other matters referred to in Section 3.04(b), the
execution, delivery and performance by the Company of each of the Equity
Documents and the consummation by the Company of the Transactions do not and
will not contravene any Applicable Law, except for any such contravention that
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect. Except as set forth on Schedule 3.04, the execution,
delivery and performance by the Company of each of the Equity Documents and the
consummation of the Transactions (i) will not (A) violate, result in a breach of
or constitute (with or without due notice or lapse of time or both) a default
(or give rise to any right of termination, cancellation or acceleration) under
any Contract to which the Company or any Subsidiary is a party or by which the
Company or any Subsidiary is bound or to
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which any of the assets of the Enterprise Communications Business will be
subject immediately following the Distribution, or (B) result in the creation or
imposition of any Lien upon any of the assets of the Enterprise Communications
Business, except for any such violations, breaches, defaults or Liens that would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect; and (ii) will not conflict with or violate any provision of the
certificate of incorporation or bylaws or other governing documents of the
Company or any Subsidiary.
(b) Except for (i) the filings by Lucent and the Company, if
any, required by the HSR Act and the expiration or termination of the applicable
waiting period with respect thereto, (ii) applicable filings, if any, with the
Commission pursuant to the Exchange Act, (iii) filings under state securities or
"blue sky" laws, (iv) filing of the Certificate of Designation with the
Secretary of State of the State of Delaware, and (v) such customary items as may
be required in connection with the registration of securities for public offer
and sale pursuant to the Registration Rights Provisions, no consent,
authorization or order of, or filing or registration with, any Governmental
Authority or other Person is required to be obtained or made by the Company,
Lucent or any Subsidiary for the execution, delivery and performance of any of
the Equity Documents or the consummation of the Transactions, except where the
failure to obtain such consents, authorizations or orders, or make such filings
or registrations, would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
SECTION 3.05. Form 10; Financial Statements. (a) Except as set
forth on Schedule 3.05, the Draft Form 10 does not contain any untrue statement
of a material fact or omit to state a material fact required to be stated
therein or necessary to make the statements made therein, in the light of the
circumstances under which they were made, not misleading and, to the Company's
knowledge, complies in all material respects with the applicable provisions of
the Exchange Act; it being understood that the fact that information is added,
deleted or changed in response to comments from the Commission is not evidence
that the Draft Form 10 (i) contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements made therein, in light of the circumstances under which they
were made, not misleading, or (ii) failed to comply with the applicable
provisions of the Exchange Act.
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(b) As of the Effective Date, the Form 10 will comply in all
material respects with the applicable provisions of the Exchange Act and will
not contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements made
therein, in the light of the circumstances under which they were made, not
misleading.
(c) The historical financial statements of the Company and the
Subsidiaries (including any related notes or schedules) included in the Draft
Form 10 (the "Company Financial Statements") were prepared in accordance with
GAAP (except as may be disclosed therein). The Company Financial Statements
fairly present, on the basis set forth in Note 1 of the audited Company
Financial Statements, the combined financial position of the Company and the
Subsidiaries as of the dates thereof and the results of operations, cash flows
and changes in invested equity for the periods then ended (subject, in the case
of the unaudited interim financial statements, to normal year-end audit
adjustments on a basis comparable with past periods). The Company Financial
Statements do not necessarily reflect the financial position, results of
operations, changes in invested equity and cash flows of the Company if the
Company had been a stand-alone entity, independent of Lucent.
SECTION 3.06. Material Adverse Change. Except as disclosed in
the Draft Form 10, since June 30, 2000, there has not been any material adverse
change in the business condition (financial or otherwise), operations,
performance or properties of the Enterprise Communications Business, taken as a
whole, but excluding any such effect resulting from changes in general economic
conditions or the industry described under "Industry Opportunity" in the Draft
Form 10 that do not have a materially disproportionate effect on the business
condition (financial or otherwise), operations, performance or properties of the
Enterprise Communications Business.
SECTION 3.07. Assets. Except as set forth in Schedule 3.07,
the Company and the Subsidiaries own and have or, immediately following the
Distribution will own and have, good and valid title to, or a valid leasehold
interest in, or otherwise have or, immediately following the Distribution will
have, sufficient rights to use, all of the properties and assets (real, personal
or mixed, tangible or intangible) reasonably necessary to conduct the Enterprise
Communications Business, free and clear of all Liens, except for Permitted
Liens. This Section 3.07 does not apply to intellectual property (for which
Section 3.08 is applicable).
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SECTION 3.08. Intellectual Property. Except as set forth in
Schedule 3.08 and except as would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect, (i) immediately
following the Distribution, the Company or a Subsidiary will have sufficient
rights to use all the Intellectual Property reasonably necessary to conduct the
Enterprise Communications Business (the "Company Intellectual Property") and the
consummation of the Transactions will not conflict with, alter or impair any
such rights; (ii) to the knowledge of the Company, the use of any licensed
Company Intellectual Property by the Company and the Subsidiaries, as licensee
and the use of any other Company Intellectual Property the use of which by the
Company or any Subsidiary is governed by a Contract with a third-party, will,
immediately following the Distribution, be in accordance in all material
respects with the applicable license or Contract pursuant to which the entities
conducting the Enterprise Communications Business acquired the right to use such
Company Intellectual Property; and (iii) since January 1, 1999, neither the
Company nor any of its Subsidiaries nor, to the knowledge of the Company, after
due inquiry of Lucent, Lucent nor any of its subsidiaries has received any
written notification that the Enterprise Communications Business has infringed
upon or violated the Intellectual Property rights of others, and to the
Company's knowledge no Company Intellectual Property is being used or enforced
by the Enterprise Communications Business in a manner that would reasonably be
expected to result in the abandonment, cancellation or unenforceability of any
Company Intellectual Property.
SECTION 3.09. No Undisclosed Material Liabilities. Except as
disclosed on Schedule 3.09 or in the Draft Form 10, there are no liabilities of
the Enterprise Communications Business, the Company or the Subsidiaries of any
kind whatsoever, whether accrued, contingent, absolute, determined, determinable
or otherwise, other than (i) liabilities disclosed, reflected or reserved
against in the balance sheet of the Company and the Subsidiaries dated as of
June 30, 2000 (and the notes thereto) included in the Draft Form 10 or in the
"Management's Discussion and Analysis of Financial Condition and Results of
Operation" section of the Draft Form 10, including, without limitation, the
section therein captioned "Review of Operations and Related Charge", (ii)
liabilities incurred in the ordinary course consistent with past practice since
June 30, 2000, (iii) liabilities arising under the Equity Documents, (iv)
liabilities not required by GAAP to be recognized or disclosed on a consolidated
balance sheet of the Company and its consolidated Subsidiaries or in the notes
thereto,
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(v) liabilities to be retained by Lucent and (vi) such other liabilities as
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
SECTION 3.10. Compliance with Laws. The Enterprise
Communications Business, the Company and the Subsidiaries are in compliance in
all material respects with all Applicable Laws, except for instances of
noncompliance that, individually or in the aggregate, have not had and would not
reasonably be expected to have a Material Adverse Effect.
SECTION 3.11. No Litigation. Except as disclosed in the Draft
Form 10 or Schedule 3.11, there are not any (a) outstanding judgments, orders or
decrees against or affecting the Company or any of the Subsidiaries, (b)
proceedings pending or, to the knowledge of the Company, threatened against or
affecting the Enterprise Communications Business, the Company or any of the
Subsidiaries or (c) investigations by any Governmental Authority that are, to
the knowledge of the Company, pending or threatened against or affecting the
Enterprise Communications Business, the Company or any of the Subsidiaries that,
in any case, individually or in the aggregate, would reasonably be expected to
have a Material Adverse Effect or a material adverse effect on the ability of
the Company to timely perform its obligations under this Agreement.
SECTION 3.12. Compliance with Constituent Documents. None of
the Company or any material Subsidiary is in breach or violation of or in
default in the performance or observance of any term or provision of, and no
event has occurred which, with lapse of time or action by a third party, would
result in a default under the respective articles or certificate of
incorporation, bylaws or similar organizational instruments of such entities.
SECTION 3.13. Environmental Matters. (a) Except as set forth
on Schedule 3.13 and except for such matters as would not, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect, (i) the
Enterprise Communications Business is conducted in compliance with all
Environmental Laws, including, without limitation, having all permits, licenses
and other approvals and authorizations necessary for the operation of their
respective businesses as presently conducted, (ii) since January 1, 1999,
neither the Company nor any Subsidiary nor, to the knowledge of the Company,
after due inquiry of Lucent, neither Lucent nor any of its subsidiaries has
received any written notices, demand letters or written
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requests for information from any federal, state, local or foreign governmental
entity indicating that any of the entities conducting the Enterprise
Communications Business may be in violation of, or liable under, any
Environmental Law in connection with the ownership or operation of the
Enterprise Communications Business, (iii) there are no civil, criminal or
administrative actions, suits, demands, claims, hearings, investigations or
proceedings pending against the Company or any Subsidiary or, to the knowledge
of the Company, Lucent or any of its subsidiaries or, to the knowledge of the
Company, threatened against such entities relating to any violation, or alleged
violation, of any Environmental Law related to the Enterprise Communications
Business, and (iv) to the knowledge of the Company, no Hazardous Substance has
been disposed of, released or transported in violation of any Environmental Law,
or in a manner giving rise to any liability under Environmental Law, from any
properties owned or operated by the Company or the entities conducting the
Enterprise Communications Business as a result of any activity of the Enterprise
Communications Business.
(b) As used herein, "Environmental Law" means any applicable
federal, state, local or foreign law, statute, ordinance, rule, regulation,
code, license, permit, authorization, approval, consent, judgment, decree,
injunction, requirement or enforceable agreement with any governmental entity
relating to (x) the protection, preservation or restoration of the environment
(including, without limitation, air, water vapor, surface water, groundwater,
drinking water supply, surface land, subsurface land, plant and animal life or
any other natural resource) or (y) the exposure to, or the use, storage,
recycling, treatment, generation, transportation, processing, handling,
labeling, production, release or disposal of Hazardous Substances, in each case
as amended and as in effect at the date hereof.
(c) As used herein, "Hazardous Substance" means any substance
presently listed, defined, designated or classified as hazardous, toxic,
radioactive, or dangerous, or otherwise regulated, under any Environmental Law.
SECTION 3.14. Interim Changes. (a) Since June 30, 2000, except
for (i) actions taken to prepare the Company to be an independent public company
(e.g., the incorporation of the Company and its Subsidiaries, the retention of
additional employees and the creation of a corporate infrastructure), (ii)
actions taken to transfer the Enterprise Communications Business from Lucent and
its subsidiaries to the Company and the Subsidiaries,
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(iii) actions taken to pursue the business and strategy of the Company and the
Subsidiaries as described in the Draft Form 10 and (iv) actions taken to pursue
the restructuring as contemplated by the charge to be incurred in connection
with the company-wide restructuring plan and one-time expenses to be incurred in
connection with the Company's reorganization plans and separation from Lucent
described in the Draft Form 10, the Enterprise Communications Business has been
operated in all material respects in the ordinary course of business. Without
limiting the foregoing, except to the extent consistent with the business and
strategy of the Company and the Subsidiaries as described in the Draft Form 10
or as otherwise described in the Draft Form 10, since June 30, 2000, neither the
Company nor, with respect to the Enterprise Communications Business, any
Subsidiary has entered into any material new lines of business or terminated any
existing material lines of business or agreed in writing or otherwise to do so.
(b) The Company has not terminated the employment or
materially reduced the responsibilities of the individuals identified in
Schedule 3.14.
SECTION 3.15. The Contribution and Distribution. Assuming
Lucent enters into each of the Distribution Agreements, the Company will enter
into each of the Distribution Agreements in substantially the same form included
in the Distribution Documentation Annex with only such changes (a) as would not
increase the burdens or decrease the benefits of such agreements to the Company
in a manner that would, individually or in the aggregate, have a material
adverse effect on the business, condition (financial or otherwise), operations,
performance, properties or prospects of the Enterprise Communications Business,
taken as a whole, (b) as are modifications to schedules to the Distribution
Agreements to reflect claims made, or actions, suits, demands, claims, hearings,
investigations or proceedings initiated, in each case after the date hereof,
against or affecting the Enterprise Communications Business, the Company or any
Subsidiary (including with respect to any violation of any Environmental Law)
and (c) as are set forth on Schedule 3.15.
ARTICLE IV
Representations and Warranties of the Purchasers
Each Purchaser severally as to itself only, and not jointly,
hereby represents and warrants to the Company
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on the date hereof and as of the Initial Conditions Date and, in the case of
Sections 4.02, 4.06 and 4.07, on and as of the Funding Date, as follows:
SECTION 4.01. Organization; Authorization; Enforceability.
Such Purchaser is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its organization and has all requisite power and
authority to own its properties and assets and to carry on its business as it is
now being conducted and as currently proposed to be conducted. Such Purchaser
has the power to execute, deliver and perform its obligations under each of the
Equity Documents to which it is a party and has taken all necessary action to
authorize the execution, delivery and performance by it of such Equity Documents
and to consummate the Transactions. No other proceedings on the part of such
Purchaser are necessary for such authorization, execution, delivery and
consummation. Such Purchaser has duly executed and delivered this Agreement and,
on the Initial Conditions Date, such Purchaser will have duly executed and
delivered each of the other Equity Documents to be executed and delivered by it
on or prior to the Initial Conditions Date. This Agreement constitutes, and each
of the other Equity Documents to which such Purchaser is a party, when executed
and delivered by such Purchaser, will constitute, a legal, valid and binding
obligation of such Purchaser, enforceable against such Purchaser in accordance
with its terms.
SECTION 4.02. Private Placement. (a) Such Purchaser
understands that (i) the offering and sale of the Securities, the Conversion
Shares and the Warrant Shares in the Issuance by the Company is intended to be
exempt from registration under the Securities Act pursuant to Section 4(2)
thereof, and (ii) there is no existing public or other market for the Preferred
Shares, the Warrants or the Common Stock.
(b) Such Purchaser (i) is a "qualified institutional buyer",
as such term is defined in Rule 144A under the Securities Act or (ii) is an
institutional "accredited investor", as such term is defined in Rule 501(a) of
Regulation D under the Securities Act.
(c) Such Purchaser is acquiring the Securities to be acquired
hereunder (and will acquire the Conversion Shares and the Warrant Shares) for
its own account (or for accounts over which it exercises investment authority),
for investment and not with a view to the resale or distribution thereof in
violation of any securities law.
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(d) Such Purchaser understands that the Securities, the
Conversion Shares and the Warrant Shares will be issued in a transaction exempt
from the registration or qualification requirements of the Securities Act and
applicable state securities laws, and that such securities must be held
indefinitely unless a subsequent disposition thereof is registered or qualified
under the Securities Act and such laws or is exempt from such registration or
qualification.
(e) Such Purchaser (A) has been furnished with or has had full
access to all the information that it considers necessary or appropriate to make
an informed investment decision with respect to the Securities, the Conversion
Shares and the Warrant Shares and that it has requested from the Company, (B)
has had an opportunity to discuss with management of the Company the intended
business and financial affairs of the Company and to obtain information (to the
extent the Company possessed such information or could acquire it without
unreasonable effort or expense) necessary to verify any information furnished to
it or to which had access, and (C) can bear the economic risk of (x) an
investment in the Securities, the Conversion Shares and the Warrant Shares
indefinitely and (y) a total loss in respect of such investment, has such
knowledge and experience in business and financial matters so as to enable it to
understand and evaluate the risks of and form an investment decision with
respect to its investment in the Securities, the Conversion Shares and the
Warrant Shares and to protect its own interest in connection with such
investment.
SECTION 4.03. No Violation; Consents. (a) Subject to the
governmental filings and other matters referred to in Section 4.03(b), the
execution, delivery and performance by such Purchaser of each of the Equity
Documents to which it is a party and the consummation by such Purchaser of the
Transactions do not and will not contravene any Applicable Law, except for any
such contravention that would not, individually or in the aggregate, reasonably
be expected to have a material adverse effect on the ability of such Purchaser
to timely perform its obligations under the Equity Documents. The execution,
delivery and performance by such Purchaser of each of the Equity Documents to
which it is a party and the consummation of the Transactions (i) will not (A)
violate, result in a breach of or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under any Contract to which such Purchaser is
party or by which such Purchaser is bound or to which any of its assets is
subject,
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or (B) result in the creation or imposition of any Lien upon any of the assets
of such Purchaser, except for any such violations, breaches, defaults or Liens
that would not, individually or in the aggregate, reasonably be expected to have
a material adverse effect on the ability of such Purchaser to timely perform its
obligations under this Agreement; and (ii) will not conflict with or violate any
provision of the certificate of incorporation or bylaws or other governing
documents of such Purchaser.
(b) Except for (i) the filings by such Purchaser, if any,
required by the HSR Act and the expiration or termination of the applicable
waiting period with respect thereto and (ii) applicable filings, if any, with
the Commission pursuant to the Exchange Act, no consent, authorization or order
of, or filing or registration with, any Governmental Authority or other Person
is required to be obtained or made by such Purchaser for the execution, delivery
and performance of any of the Equity Documents or the consummation of any of the
Transactions, except where the failure to obtain such consents, authorizations
or orders, or make such filings or registrations, would not, individually or in
the aggregate, reasonably be expected to have a material adverse effect on the
ability of such Purchaser to timely perform its obligations under the Equity
Documents.
SECTION 4.04. No Litigation. There are not any (a) outstanding
judgments, orders or decrees against or affecting the Purchaser or any of its
subsidiaries, (b) proceedings pending or, to the knowledge of the Purchaser,
threatened against or affecting the Purchaser or any of its subsidiaries or (c)
investigations by any Governmental Authority that are, to the knowledge of the
Purchaser, pending or threatened against or affecting the Purchaser or any of
its subsidiaries that, in any case, individually or in the aggregate, would
reasonably be expected to have a material adverse effect on the ability of such
Purchaser to timely perform its obligations under the Equity Documents.
SECTION 4.05. Financing. Such Purchaser has on call and will
have on the Funding Date available funds to consummate the purchase of the
Securities to be purchased by it on the Funding Date.
SECTION 4.06. Ownership of Securities. Such Purchaser does not
own, directly or indirectly, or have any option or right to acquire, any
securities of Lucent or the Company other than the Preferred Shares and the
Warrants being purchased by it hereunder.
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SECTION 4.07. Future Acquisitions. Such Purchaser has no
present plan or intention to acquire, directly or indirectly, 50% or more of the
total voting power or total fair market value (as such terms are interpreted for
purposes of Section 355) of all shares of outstanding Capital Stock of the
Company.
ARTICLE V
Covenants of the Company
SECTION 5.01. Access to Books and Records. The Company shall
afford to each of the Purchasers and the Purchasers' accountants, counsel and
representatives full access during normal business hours throughout the period
prior to the Initial Conditions Date (or the earlier termination of this
Agreement pursuant to Section 8.04) to all properties, books, Contracts,
commitments and records related to the Enterprise Communications Business and,
during such period, shall, upon request, furnish promptly to each of the
Purchasers all other information concerning the Enterprise Communications
Business as the Purchasers may reasonably request, provided that no
investigation or receipt of information pursuant to this Section 5.01 shall
affect any representation or warranty of the Company or the conditions to the
obligations of the Purchasers. Following the Initial Conditions Date and
throughout the period prior to the Funding Date (or the earlier termination of
this Agreement pursuant to Section 8.04), the Company shall (i) afford to each
of the Purchasers and the Purchasers' accountants, counsel and representatives
such access as may be reasonably necessary to validate the satisfaction of the
conditions to the Funding set forth in Article VII and (ii) provide to the
Purchasers copies of the execution copies of the Distribution Agreements no
later than five Business Days before the Funding Date. All requests pursuant to
this Section 5.01 shall be made to the persons designated from time to time by
the Company for this purpose, who shall initially be the individuals listed on
Schedule 5.01.
SECTION 5.02. Compliance with Conditions; Commercially
Reasonable Efforts. The Company shall use all commercially reasonable efforts to
cause all conditions precedent to the obligations of the Company and the
Purchasers to be satisfied. Upon the terms and subject to the conditions of this
Agreement, the Company will use all commercially reasonable efforts to take, or
cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable consistent with
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Applicable Law to consummate and make effective in the most expeditious manner
practicable the Issuance in accordance with the terms of the Equity Documents.
SECTION 5.03. HSR Act Notification. To the extent required by
the HSR Act, the Company shall (a) use all commercially reasonable efforts to
file or cause to be filed, as promptly as practicable after the execution and
delivery of this Agreement (and, in any event, within two Business Days of such
execution and delivery), with the United States Federal Trade Commission and the
Antitrust Division of the United States Department of Justice, all reports and
other documents required to be filed by it under the HSR Act concerning the
transactions contemplated hereby and (b) use all commercially reasonable efforts
to promptly comply with or cause to be complied with any requests by the United
States Federal Trade Commission or the Antitrust Division of the United States
Department of Justice for additional information concerning such transactions,
in each case so that the waiting period applicable to this Agreement and the
transactions contemplated hereby under the HSR Act shall expire as soon as
practicable after the execution and delivery of this Agreement. The Company
agrees to request, and to cooperate with the Purchasers in requesting, early
termination of any applicable waiting period under the HSR Act.
SECTION 5.04. Consents and Approvals. The Company (a) shall
use all commercially reasonable efforts to obtain all necessary consents,
waivers, authorizations and approvals of all Governmental Authorities (other
than as expressly set forth in Section 5.03 regarding the HSR Act) and of all
other Persons required in connection with the execution, delivery and
performance of this Agreement or the consummation of the Transactions and (b)
shall diligently assist and cooperate with the Purchasers in preparing and
filing all documents required to be submitted by the Purchasers to any
Governmental Authority in connection with the Issuance (which assistance and
cooperation shall include, without limitation, timely furnishing to the
Purchasers all information concerning the Company and its Subsidiaries that
counsel to the Purchasers reasonably determines is required to be included in
such documents or would be helpful in obtaining any such required consent,
waiver, authorization or approval).
SECTION 5.05. Filing of Certificate of Designation. Prior to
the Initial Conditions Date, the Company shall file the Certificate of
Designation with the Secretary of State of the State of Delaware pursuant to
Section 151(g) of the ▇▇▇▇.
▇▇
▇▇
SECTION 5.06. Reservation of Shares. The Company shall (a)
cause to be authorized and reserve and keep available at all times during which
any of the Securities remain outstanding, free from preemptive rights, out of
its treasury stock or authorized but unissued shares of Capital Stock, or both,
solely for the purpose of effecting the conversion of the Preferred Shares and
exercise of the Warrants pursuant to the terms of the Certificate of Designation
and the Warrants, respectively, sufficient shares of Common Stock (including any
related rights issuable in respect thereof pursuant to the Rights Agreement) to
provide for the issuance of the maximum number of shares issuable upon
conversion of outstanding Preferred Shares and exercise of outstanding Warrants;
and (b) issue and cause the transfer agent to deliver such shares of Common
Stock (including any related rights issuable in respect thereof pursuant to the
Rights Agreement) as required upon conversion of the Shares or exercise of the
Warrants, and take all actions necessary to ensure that all such shares will,
when issued and paid for pursuant to the conversion of the Preferred Shares or
exercise of the Warrants, be duly and validly issued, fully paid and
nonassessable.
SECTION 5.07. Listing of Shares. The Company shall use all
commercially reasonable efforts to cause the shares of Common Stock issuable
upon conversion of the Preferred Shares or exercise of the Warrants to be listed
or otherwise eligible for trading on the New York Stock Exchange or other
national securities exchange.
SECTION 5.08. Use of Proceeds. The Company shall use the
proceeds from the Issuance for payment of expenses incurred in connection with
the Transactions and for working capital and general corporate purposes.
SECTION 5.09. Warburg Group Director and Observer. (a) The
Warburg Group shall be entitled to designate for election to the Board of
Directors one person reasonably acceptable to the Board of Directors (the
"Warburg Group Director") for so long as the Purchasers and the Permitted
Transferees own a Qualifying Ownership Interest. The Company and the Purchasers
agree that the initial Warburg Group Director shall be ▇▇▇▇▇▇▇ ▇▇▇▇▇▇.
(b) In addition, during such time as the Warburg Group shall
have the right to designate for nomination a Warburg Group Director, the Company
shall permit an authorized representative of Warburg reasonably acceptable to
the Board of Directors (the "Warburg Group Observer") to attend all meetings of
the Board of Directors (but not
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(i) meetings of any committees of the Board of Directors or (ii) executive
sessions of the Board of Directors) as an observer, without authority to vote.
The Company and the Purchasers agree that the initial Warburg Group Observer
shall be ▇▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇.
(c) Immediately following the closing, the initial Warburg
Group Director shall be appointed to the Board of Directors to a class of
directors whose term expires not earlier than 2002. If a vacancy shall exist in
the office of a Warburg Group Director, the Warburg Group shall be entitled to
designate a successor and the Board of Directors shall elect such successor and,
in connection with the meeting of shareholders of the Company next following
such election, nominate such successor for election as director by the
shareholders and use its commercially reasonable efforts to cause the successor
to be elected. Each Purchaser agrees that Warburg shall identify the individuals
proposed to serve as Warburg Group Director and Warburg Group Observer, and that
the Company shall be entitled to rely solely and exclusively on information
provided by Warburg in connection with the exercise of the Purchasers' rights
pursuant to this Section 5.09.
(d) At any time the Purchasers and the Permitted Transferees
cease to have the right to appoint a Warburg Group Director, any Warburg Group
Director shall resign promptly and the Warburg Group Observer shall no longer be
permitted to attend meetings of the Board of Directors.
(e) Any Warburg Group Director shall be entitled to such
compensation as is customarily paid by the Company to the Company's outside
directors. The compensation and expenses of any Warburg Group Observer shall be
solely the responsibility of the Purchasers.
SECTION 5.10. Registration Rights. The Company shall use all
commercially reasonable efforts to file a registration statement (together with
any registration statement in respect of the Warrants and the Warrant Shares,
the "Registration Statement") covering the Registrable Securities (other than
the Warrants and the Warrant Shares) on behalf of the Purchasers and any
Permitted Transferees with the Commission by March 31, 2001, and a registration
statement covering the Warrants and the Warrant Shares on behalf of the
Purchasers and the Permitted Transferees with the Commission by June 30, 2001.
The expenses of the preparation and filing of such Registration Statement shall
be borne by the Company. Upon filing the Registration Statement, the Company
will use its commercially reasonable efforts to cause the Registration Statement
to be declared
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effective by the Commission and to keep the Registration Statement effective
with the Commission so long as any Registrable Securities remain outstanding.
Provisions relating to the registration rights set forth in this Section 5.10
are included in Exhibit E hereto (the "Registration Rights Provisions").
"Registrable Securities" means the Securities, the Warrant Shares and the
Conversion Shares. As to any particular Registrable Securities, such Registrable
Securities shall cease to be Registrable Securities as soon as they (i) have
been sold or otherwise disposed of pursuant to the Registration Statement or any
other registration statement that was filed with the Commission and declared
effective under the Securities Act, (ii) are eligible for sale pursuant to Rule
144 without being subject to the volume and manner of sale limitations
thereunder, (iii) have been otherwise sold, transferred or disposed of by a
Purchaser to any Person that is not a Permitted Transferee, or (iv) have ceased
to be outstanding. All communications with the Company by the Purchasers and the
Permitted Transferees with respect to the registration rights granted pursuant
to this Section 5.10 shall be made by and through Warburg.
SECTION 5.11. Preemptive Rights. (a) So long as the Purchasers
and the Permitted Transferees own a Qualifying Ownership Interest, if at any
time prior to the fifth anniversary of the Distribution, the Company makes a
Qualified Equity Offering, the Purchasers and the Permitted Transferees who own
the securities constituting the Qualifying Ownership Interest (the "Eligible
Purchasers") shall be afforded the opportunity to acquire for the same price
(net of any underwriting discounts or sales commissions) and on the same terms
as such securities are proposed to be offered to others, in the aggregate, up to
the lesser of (x) the amount of New Stock that, if purchased by all the Eligible
Purchasers, would result in the Purchasers' Ownership Interest after giving pro
forma effect to the sale of New Stock being equal to the Purchasers' Ownership
Interest before giving effect to such sale of New Stock and (y) 5.0% of the New
Stock. The amount of New Stock to be made available to the Eligible Purchasers
calculated in accordance with the preceding sentence is referred to herein as
the "Designated Stock". The Eligible Purchasers may allocate among themselves
the aggregate amount of Designated Stock made available to them for purchase
pursuant to this Section 5.11.
(b) (i) If the Company proposes to make a Qualified Equity
Offering that is an underwritten public offering or a private offering made to
financial institutions for resale pursuant to Rule 144A, no later than
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five Business Days after the initial filing of a registration statement with the
Commission with respect to such underwritten public offering or the commencement
of such Rule 144A offering, it shall give the Eligible Purchasers written notice
of its intention (including in the case of a registered public offering, a copy
of the prospectus contained in the registration statement filed in respect of
such offering) describing, to the extent possible, the anticipated amount of
securities, price, timing and other terms of such offering. Each Eligible
Purchaser shall have five Business Days from the date of receipt of any such
notice to notify the Company in writing that it wishes to be offered the
opportunity to exercise its preemptive purchase rights. Such notice shall
constitute a non-binding indication of interest of the Eligible Purchaser to
exercise its preemptive rights. The failure to respond during such five Business
Day period shall constitute a waiver of the preemptive rights in respect of such
offering.
(ii) If any Eligible Purchaser indicates an interest in
participating in such underwritten public offering or Rule 144A offering, the
Company shall offer the Eligible Purchasers who have indicated an interest in
participating in such offering, if such underwritten offering or Rule 144A
offering is consummated, the Designated Stock (as adjusted to reflect the actual
size of such offering when priced) on the same terms as the New Stock is offered
to the underwriters. Each Eligible Purchaser exercising its preemptive rights
shall enter into a binding commitment to purchase the Designated Stock to be
acquired contemporaneously with the execution of any underwriting agreement or
purchase agreement entered into between the Company and the underwriters of such
underwritten public offering or Rule 144A offering, and the failure to enter
into such an agreement at or prior to such time shall constitute a waiver of the
preemptive rights in respect of such offering. Any offers and sales pursuant to
this Section 5.11 in the context of a registered public offering shall be
conditioned on reasonably acceptable representations and warranties of each
Eligible Purchaser regarding its status as the type of offeree to whom a private
sale can be made concurrently with a registered public offering in compliance
with applicable securities laws. If an Eligible Purchaser elects not to or fails
to consummate any purchase, the Company shall thereafter be entitled for a
period of 90 days to sell or enter into an agreement to sell the Designated
Stock not purchased at a price and upon terms no more favorable to the purchaser
of such securities than were provided to the underwriters.
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(c) (i) If the Company proposes to make a Qualified Equity
Offering that it is not an underwritten public offering or Rule 144A offering (a
"Private Placement"), it shall give the Eligible Purchasers written notice of
its intention, describing, to the extent possible, the anticipated amount of
securities, price and other terms upon which the Company proposes to offer the
same. Each Eligible Purchaser shall have five Business Days from the date of
receipt of any such notice to notify the Company in writing that it intends to
exercise such preemptive purchase rights and as to the amount of Designated
Stock such Purchaser desires to purchase, up to the maximum amount calculated
pursuant to Section 5.11(a). Such notice shall constitute a binding agreement of
the Purchaser to purchase the amount of Designated Stock so specified (or a
proportionally lesser amount if the amount of New Stock is subsequently reduced)
upon the price and other terms set forth in the Company's notice to it. The
failure to respond during such five Business Day period shall constitute a
waiver of the preemptive rights in respect of such offering.
(ii) If the Purchaser exercises its preemptive purchase rights
in respect of a Private Placement, the closing of the purchase of the New Stock
with respect to which such right has been exercised shall take place within 30
calendar days after the giving of notice of such exercise, which period of time
shall be extended for a maximum of 135 days in order to comply with applicable
laws and regulations; provided, however, that (i) such closing shall be
conditioned on consummation of the closing of the sale of shares of New Stock in
the transaction giving rise to the preemptive rights and (ii) the actual amount
of Designated Stock to be sold to such Eligible Purchaser shall be reduced if
the aggregate number of shares of New Stock sold in the transaction giving rise
to the preemptive rights is reduced and, at the option of such Eligible
Purchaser, may be proportionally increased if the aggregate number of shares of
New Stock sold in such transaction is increased. Each of the Company and each
Eligible Purchaser agrees to use its commercially reasonable efforts to secure
any regulatory approvals or other consents, and to comply with any law or
regulation necessary in connection with the offer, sale and purchase of, such
New Stock.
(iii) In the event an Eligible Purchaser fails to exercise its
preemptive purchase rights provided in respect of a Private Placement within
said five Business Day period or, if so exercised, such Eligible Purchaser does
not consummate such purchase, the Company shall thereafter be entitled during
the period of 90 days following the conclusion of the applicable period to sell
or enter into an
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agreement (pursuant to which the sale of the New Stock covered thereby shall be
consummated, if at all, within 30 days from the date of such agreement) to sell
the Designated Stock not purchased pursuant to this Section 5.11, at a price and
upon terms no more favorable to the purchaser of such securities than were
specified in the Company's notice to the Eligible Purchasers. In the event the
Company has not sold the New Stock or entered into an agreement to sell the New
Stock within said 90-day period, the Company shall not thereafter offer, issue
or sell such Designated Stock without first offering such securities to the
Eligible Purchasers in the manner provided above.
(iv) The Eligible Purchasers shall not have any rights to
participate in the negotiation of the proposed terms of any Private Placement
and shall be passive investors with respect to such Private Placement, provided
that they shall have the same economic rights (including, without limitation,
preemptive rights and rights relating to closing conditions and indemnification,
if any) as, but, unless agreed to by the Company and the lead purchaser in such
Private Placement, not the corporate governance or other rights granted to, the
other investors in such Private Placement.
(d) If registration rights are granted to the investors in any
Private Placement, the Company shall provide registration rights to the Eligible
Purchasers that exercised their preemptive rights on a pari passu basis with
such other investors in such Private Placement. In all other instances, the
Company will provide for the registration, on terms consistent with Section
5.10, for any shares of Common Stock acquired (or issuable upon conversion,
exercise or exchange of any other security acquired) within six months after (i)
the closing of the applicable acquisition (with respect to any Common Stock
acquired) or (ii) the earliest date on which such other securities can be
converted, exercised or exchanged for Common Stock (with respect to any other
security acquired).
(e) The Company and the Eligible Purchasers shall cooperate in
good faith to facilitate the exercise of the Eligible Purchasers' preemptive
rights in a manner that does not jeopardize the timing, marketing or execution
of such offering.
SECTION 5.12. Escrow Agreement. The Company shall use its
commercially reasonable efforts to enter into an Escrow Agreement having such
terms as are necessary or proper to implement the issuance and purchase of the
Securities as contemplated by Article II.
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ARTICLE VI
Covenants of the Purchasers
SECTION 6.01. Compliance with Conditions; Commercially
Reasonable Efforts. Each Purchaser will use all commercially reasonable efforts
to cause all conditions precedent to the obligations of the Company and the
Purchasers to be satisfied. Upon the terms and subject to the conditions of this
Agreement, each Purchaser will use all commercially reasonable efforts to take,
or cause to be taken, all action, and to do, or cause to be done, all things
necessary, proper or advisable consistent with applicable law to consummate and
make effective in the most expeditious manner practicable the Transactions to
such Purchaser in accordance with the terms of the Equity Documents.
SECTION 6.02. HSR Act Notification. To the extent required by
the HSR Act, each Purchaser shall, (a) use all commercially reasonable efforts
to file or cause to be filed, as promptly as practicable after the execution and
delivery of this Agreement (and, in any event, within two Business Days of such
execution and delivery), with the United States Federal Trade Commission and the
Antitrust Division of the United States Department of Justice, all reports and
other documents required to be filed by it under the HSR Act concerning the
transactions contemplated hereby and (b) use all commercially reasonable efforts
to promptly comply with or cause to be complied with any requests by the United
States Federal Trade Commission or the Antitrust Division of the United States
Department of Justice for additional information concerning such transactions,
in each case so that the waiting period applicable to this Agreement and the
transactions contemplated hereby under the HSR Act shall expire as soon as
practicable after the execution and delivery of this Agreement. Each Purchaser
agrees to request, and to cooperate with the Company in requesting, early
termination of any applicable waiting period under the HSR Act.
SECTION 6.03. Consents and Approvals. Each Purchaser (a) shall
use all commercially reasonable efforts to obtain all necessary consents,
waivers, authorizations and approvals of all Governmental Authorities (other
than as expressly set forth in Section 6.02 regarding the HSR Act) and of all
other Persons required in connection with the execution, delivery and
performance of the Equity Documents or the consummation of the Transactions and
(b) shall diligently assist and cooperate with the Company in
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preparing and filing all documents required to be submitted by the Company to
any Governmental Authority in connection with the Transactions (which assistance
and cooperation shall include, without limitation, timely furnishing to the
Company all information concerning such Purchaser that counsel to the Company
reasonably determines is required to be included in such documents or would be
helpful in obtaining any such required consent, waiver, authorization or
approval).
SECTION 6.04. Restrictions on Transfer. The Purchasers and the
Permitted Transferees shall not knowingly sell, assign, transfer, pledge,
hypothecate, deposit in a voting trust or otherwise dispose of Preferred Shares,
Warrants or shares of Common Stock that would represent (giving effect to the
conversion of any Preferred Shares and the exercise of any Warrants) in the
aggregate 5% or more of the issued and outstanding shares of Common Stock to any
Person or group (as defined for purposes of Rule 13d under the Exchange Act) in
a single transaction or series of related transactions.
(b) If the Purchasers are not in violation of this Section
6.04, the restrictions set forth in Section 6.04(a) shall not apply to any
transfer of the Preferred Shares, Warrants or shares of Common Stock (i)
pursuant to a tender offer, exchange offer or any other business combination
available to all stockholders of the Company or (ii) as part of a distribution
of such Preferred Shares, Warrants or shares of Common Stock to the limited
partners of the applicable Purchaser or Permitted Transferee.
SECTION 6.05. Standstill. Each Purchaser agrees that, prior to
the fifth anniversary of the date hereof, it will not and will not permit any
member of the Warburg Group or any other controlled Affiliate to, in any manner,
whether publicly or otherwise, directly or indirectly, without the prior written
consent of the Company, (i) acquire, agree to acquire or make any public
proposal to acquire, directly or indirectly, beneficial ownership of any voting
securities or assets of the Company or any Subsidiary, (ii) enter into or
publicly propose to enter into, directly or indirectly, any merger or other
business combination or similar transaction or change of control involving the
Company or any Subsidiary, (iii) make, or in any way participate, directly or
indirectly, in any "solicitation" of "proxies" (as such terms are used in the
proxy rules of the Commission) to vote, or seek to advise or influence any
Person with respect to the voting of, any securities of the Company or any
Subsidiary, (iv) call, or seek to call, a meeting of the Company's stockholders
or initiate any stockholder proposal
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for action by stockholders of the Company, (v) bring any action or otherwise act
to contest the validity of this Section 6.05 or seek a release of the
restrictions contained herein, (vi) form, join or in any way participate in a
"group" (within the meaning of Sections 13(d)(3) of the Exchange Act) with
respect to any securities of the Company or any Subsidiary, (vii) other than any
seat on the Board of Directors expressly granted to the Warburg Group in Section
5.09, seek representation on the Board of Directors of the Company, the removal
of any directors from the Board of Directors of the Company or a change in the
size or composition of the Board of Directors of the Company (including, without
limitation, voting for any directors not nominated by the Board of Directors of
the Company), (viii) enter into any discussions, negotiations, arrangements,
understandings or agreements (whether written or oral) with any other Person
regarding any possible purchase of sale of any securities or assets of the
Company or any Subsidiary, (ix) disclose any intention, plan or arrangement
inconsistent with the foregoing, (x) take, or solicit, propose to or agree with
any other Person to take, any similar actions designed to influence the
management or control of the Company or (xi) advise, assist or encourage any
other persons in connection with any of the foregoing.
Nothing in this Section 6.05 shall (i) limit any action taken
by a Warburg Group Director in his or her capacity as a member of the Board of
Directors of the Company, (ii) prohibit or restrict any Purchaser, any member of
the Warburg Group or any other controlled Affiliate of any Purchaser from
responding to any inquiries from any shareholders of the Company as to such
Person's intention with respect to the voting of shares of Common Stock or any
other voting securities of the Company beneficially owned by such Purchaser, any
member of the Warburg Group or any other controlled Affiliate of any Purchaser
so long as such response is consistent with the terms of this Agreement, (iii)
prohibit or restrict a purchase, sale, merger, consolidation or other business
combination transaction involving any portfolio company of any Purchaser, any
member of the Warburg Group or any controlled Affiliate of any Purchaser so long
as the purpose of such transaction is not the acquisition of voting securities
or assets of the Company or any Subsidiary, (iv) prohibit the purchase or other
acquisition of beneficial ownership of (A) any of the Securities, the Conversion
Shares or the Warrant Shares, (B) any New Stock offered to the Eligible
Purchasers pursuant to Section 5.11 or (C) in an amount that, when taken
together with the number of shares of Common Stock beneficially owned by the
Purchasers, the Warburg Group and the Purchasers' controlled Affiliates
(excluding any Warrant
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Shares issuable with respect to any then unexercised Warrants) and the number of
shares of Common Stock issuable upon conversion of Preferred Shares beneficially
owned by the Warburg Group (assuming the liquidation value of such Preferred
Shares had accreted until the fifth anniversary of their date of issuance in
accordance with Section 4 of the Certificate of Designation), would not exceed
9.9% of the then outstanding Common Stock, (v) prohibit or restrict any
agreement, arrangement, understanding, negotiation, discussion, disclosure or
other action exclusively involving Warburg, its controlled Affiliates (other
than any portfolio companies), the Purchasers, any member of the Warburg Group,
and any employee, officer or director thereof or (vi) prohibit any notice to
limited partners of a Warburg Group member in respect of a proposed distribution
of securities of the Company to such limited partners.
SECTION 6.06. Confidentiality; Information. (a) Each Purchaser
shall keep all information received by it from the Company or its
Representatives confidential and shall not, without the Company's prior written
consent, disclose such information in any manner whatsoever, in whole or in
part. The Purchasers shall cause any Warburg Group Director and any observer to
the Board of Directors permitted to the Purchasers to comply with the foregoing
requirement.
(b) Section 6.06(a) shall not apply to any such information as
(i) is or becomes generally available to the public other than as a result of
any disclosure or other action or inaction by such Purchaser or any of its
Representatives or (ii) is or becomes known or available to such Purchaser on a
non-confidential basis from a source (other than the Company or its
Representatives) that, to the best of such Purchaser's knowledge, is not under a
legal obligation not to disclose such information to such Purchaser or (iii) was
independently developed by such Purchaser or its Representatives without
reference to any information provided by the Company or its Representatives
(except pursuant to clauses (i), (ii) or (iv)) or (iv) was known to such
Purchaser prior to such disclosure by the Company or its Representatives.
(c) In the event that such Purchaser or its Representatives
become legally compelled (by oral questions, interrogatories, requests for
information or documents, subpoenas, civil investigative demands or otherwise),
to disclose any information received from the Company or its Representatives,
such Purchaser shall provide the Company with prompt written notice so that the
Company may seek a protective order or other appropriate remedy, or if the
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Company so directs, such Purchaser shall, and shall cause its Representatives
to, exercise its reasonable best efforts to obtain a protective order or other
appropriate remedy at the Company's reasonable expense. Failing the entry of a
protective order or other appropriate remedy or receipt of a waiver hereunder,
such Purchaser shall furnish only that portion of the information which it is
advised by its counsel is legally required to be furnished and shall exercise
its reasonable best efforts to obtain reliable assurance that confidential
treatment shall be accorded such information.
(d) The Purchasers shall cause any Warburg Group Director and
any observer to the Board of Directors designated by the Purchasers to provide
such information to the Company as may reasonably be required in connection with
the Form 10 (if designated prior to the Effective Time) or any other filings
with the Commission or any other Governmental Authority in connection with the
Distribution or the Transactions.
SECTION 6.07. Compliance with Section 355. No Purchaser shall
take any action or omit to take any action reasonably available to it and not
materially burdensome to it that could reasonably be expected to materially
contribute to a determination that the Contribution or the Distribution would
result in the recognition of gain to Lucent or the Company by virtue of the
Contribution or the Distribution failing to qualify under Section 355.
SECTION 6.08. IPO Lock-up. In connection with any initial
public offering of the Common Stock, so long as (i) the Purchasers beneficially
own in the aggregate at least 5% of the Common Stock (calculated in accordance
with Rule 13d under the Exchange Act) (ii) the Purchasers are requested by the
managing underwriter of such initial public offering and (iii) each other
director who beneficially owns Common Stock enters into a "lock-up" agreement of
at least 90 days, each Purchaser agrees to enter into a similar "lock-up"
agreement with the underwriters of such offering containing customary terms and
conditions and restricting sales of Common Stock and other securities
convertible into or exercisable for Common Stock and certain other transactions
having an equivalent economic effect for a period of up to 90 days following the
date of such offering.
SECTION 6.09. Prohibition on Solicitation and Hiring. (a) No
Purchaser or Permitted Transferee shall, nor shall it permit any Affiliate
(other than a portfolio company) to, for a period of two years from the date
hereof, directly or indirectly, solicit for employment or hire any
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senior management employee or senior technical employee of the Enterprise
Communications Business, the Company or any Subsidiary, with whom such Purchaser
or Permitted Transferee came into contact as a result of either the due
diligence process in respect of the Transactions or the exercise of the Warburg
Group's director and observer rights in Section 5.09, whether or not such person
would commit a breach of his or her contract of service in leaving such
employment; provided, however, that the foregoing shall not prohibit any
Purchaser, Permitted Transferee or Affiliate from making general solicitations
of employment (or engaging search firms to make such solicitations) not
specifically directed toward employees of the Company or any of its subsidiaries
and/or hiring any employee who responds to any such general solicitation or
initiates contact with any Purchaser, Permitted Transferee or Affiliate without
solicitation.
(b) No Purchaser or Permitted Transferee shall, nor shall it
permit any Affiliate (other than a portfolio company) to, for a period of two
years from the date hereof, directly or indirectly, assist (including, without
limitation, through identification, introduction or otherwise for the purpose of
inducing employment) a portfolio company of such Purchaser, Permitted Transferee
or Affiliate in soliciting for employment any senior management employee or
senior technical employee of the Enterprise Communications Business the Company
or any Subsidiary, with whom such Purchaser or Permitted Transferee came into
contact as a result of either the due diligence process in respect of the
Transactions or the exercise of the Warburg Group's director and observer rights
in Section 5.09, whether or not such person would commit a breach of his or her
contract of service in leaving such employment; provided, however, that the
foregoing shall not prohibit any portfolio company from making general
solicitations of employment (or engaging search firms to make such
solicitations) not specifically directed toward employees of the Company or any
of its subsidiaries.
SECTION 6.10. Escrow Agreement. Each Purchaser shall use its
commercially reasonable efforts to enter into an Escrow Agreement having such
terms as are necessary or proper to implement the issuance and purchase of the
Securities as contemplated by Article II.
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ARTICLE VII
Conditions Precedent to Initial Conditions Date and Funding
SECTION 7.01. Conditions to the Company's Obligations in
Respect of the Initial Conditions Date. The obligations of the Company to issue
and sell the Securities hereunder shall be subject, at the election of the
Company, to the satisfaction or waiver, on the Initial Conditions Date, of the
following conditions:
(a) The representations and warranties of each Purchaser
contained in this Agreement shall have been true and correct when made and, in
addition, shall be repeated and true and correct in all material respects on and
as of the Initial Conditions Date with the same force and effect as though made
on and as of the Initial Conditions Date.
(b) Each Purchaser shall have performed in all material
respects all obligations and agreements, and complied in all material respects
with all covenants contained in this Agreement to be performed and complied with
by such Purchaser on the Initial Conditions Date.
(c) Each Purchaser shall have delivered to the Company a
certificate executed by it or on its behalf by a duly authorized representative,
dated the Initial Conditions Date, to the effect that each of the conditions
specified in paragraph (a) and (b) of this Section 7.01 has been satisfied.
(d) The Form 10 shall have been declared effective by the
Commission on the Initial Conditions Date.
SECTION 7.02. Conditions to Each Purchasers' Obligations in
Respect of the Initial Conditions Date. The obligations of each Purchaser to
purchase the Securities hereunder shall be subject to the satisfaction or
waiver, on the Initial Conditions Date, of the following conditions:
(a) The representations and warranties of the Company
contained in this Agreement (i) shall have been true and correct when made and
(ii) shall be (A) in the case of representations and warranties that are
qualified as to materiality or Material Adverse Effect, true and correct and (B)
in all other cases, true and correct in all material respects, in the case of
clauses (A) and (B), as of the Initial Conditions Date with the same force and
effect as though made on and as of the Initial Conditions Date.
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(b) The Company shall have performed in all material respects
all of its obligations, agreements and covenants contained in this Agreement to
be performed and complied with at or prior to the Initial Conditions Date.
(c) The Company shall have entered into the Registration
Rights Agreement.
(d) The Company shall have filed the Certificate of
Designation with the Secretary of State of the State of Delaware.
(e) The Company shall have delivered to the Purchasers a
certificate executed by it or on its behalf by a duly authorized representative,
dated the Initial Conditions Date, to the effect that each of the conditions
specified in paragraph (a) through (d) of this Section 7.02 has been satisfied.
(f) The Purchasers shall have received the opinion of counsel
to the Company, dated the Initial Conditions Date, and addressed to the
Purchasers, substantially in the form attached hereto as Exhibit D.
(g) The Form 10 shall have been declared effective by the
Commission on the Initial Conditions Date.
SECTION 7.03. Conditions to Each Party's Obligations In
Respect of the Funding. The respective obligations of the Company and each
Purchaser hereunder required to be performed on the Funding Date shall be
subject, to the satisfaction or waiver, at the Funding, of the following
conditions:
(a) Any applicable waiting period under the HSR Act shall have
expired or been terminated.
(b) No provision of any Applicable Law, injunction, order or
decree of any Governmental Entity shall be in effect which has the effect of
making the Transactions or the ownership by any Purchaser (other than as a
result of such Purchaser not being a U.S. person) of the Securities, the
Conversion Shares or the Warrant Shares illegal or shall otherwise prohibit the
consummation of the Transactions.
(c) The Private Letter Ruling shall not have been withdrawn.
(d) Lucent shall have declared a dividend distributing all the
shares of Common Stock owned by Lucent
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to holders of Lucent common stock and not revoked such dividend.
SECTION 7.04. Conditions to the Company's Obligations in
Respect of the Funding. The obligations of the Company hereunder to be performed
on the Funding Date shall be subject, at the election of the Company, to the
satisfaction or waiver at the Funding, of the following condition: the
representations and warranties of each Purchaser in Section 4.02, 4.06 and 4.07
shall be true and correct as of the Funding Date as though made on and as of the
Funding Date and each Purchaser shall have delivered to the Company a
certificate executed by it or on its behalf by a duly authorized representative,
dated the Funding Date, to such effect.
SECTION 7.05. Conditions to Each Purchaser's Obligations in
Respect of the Funding. The obligations of each Purchaser hereunder to be
performed on the Funding Date shall be subject, at the election of such
Purchaser, to the satisfaction or waiver at the Funding, of the following
condition:
(a) The representations and warranties of the Company in
Sections 3.02, 3.14 and 3.15 shall be true and correct as of the
Funding Date as though made on and as of the Funding Date and the
Company shall have delivered to such Purchaser a certificate executed
by it or on its behalf by a duly authorized representative, dated the
Funding Date, to such effect.
(b) Warburg shall be reasonably satisfied that the
consolidated indebtedness for borrowed money of the Company and the
Subsidiaries at the time of the Distribution will not exceed the sum of
(i) $700.0 million, (ii) an amount equal to the aggregate restructuring
and separation costs and expenses of the Enterprise Communications
Business incurred by Lucent and its subsidiaries, to the extent such
costs and expenses exceed $50.0 million (all calculated on a pre-tax
basis), and (iii) increases in working capital received by the Company
and the Subsidiaries from Lucent and its subsidiaries pursuant to the
Contribution and Distribution Agreement in excess of the Company's
business plan.
SECTION 7.06. Conditions to Each Party's Obligations In
Respect of the Release of Escrowed Funds and Securities. The release of the
escrowed funds and securities shall be subject to the consummation of the
Distribution.
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ARTICLE VIII
Miscellaneous
SECTION 8.01. Survival. Only those representations,
warranties, agreements and covenants of the parties contained in Sections 2.01
and 2.03, 2.04, 3.02, 3.14, 3.15, 4.02, 4.06 and 4.07, Article V, Article VI and
Article VIII shall survive the Initial Conditions Date. Only those
representations, warranties, agreements and covenants of the parties contained
in Sections 2.01 and 2.03, 2.04, Article V, Article VI and Article VIII and
requiring performance after the Initial Conditions Date or the Funding Date
shall survive the Initial Conditions Date or the Funding Date, as the case may
be. All other representations, warranties, agreements and covenants of the
parties shall not survive the Initial Conditions Date.
SECTION 8.02. Legends. (a) So long as applicable, each
certificate representing any portion of the Preferred Shares or the Warrants
shall be stamped or otherwise imprinted with a legend in the following form (in
addition to any legend required under applicable state securities laws):
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT") OR
THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES. SUCH SHARES MAY
NOT BE OFFERED, SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION PURSUANT TO AN
EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS AND DELIVERY TO THE
ISSUER OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT TO THE
EFFECT THAT SUCH TRANSFER IS EXEMPT FROM REGISTRATION UNDER THOSE
LAWS."
(b) In addition, so long as applicable, each certificate
representing any portion of the Preferred Shares or the Warrants shall be
stamped or otherwise imprinted with a legend in the following form:
"THE SECURITIES EVIDENCED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AS SET FORTH IN A PREFERRED STOCK AND WARRANT
PURCHASE AGREEMENT, DATED AS OF THE 8TH DAY OF AUGUST, 2000, AS IT MAY
BE AMENDED FROM TIME TO TIME, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL EXECUTIVE OFFICES OF THE ISSUER. NO REGISTRATION OF TRANSFER
OF SUCH SECURITIES WILL BE MADE ON THE BOOKS OF THE ISSUER UNLESS AND
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UNTIL SUCH RESTRICTIONS SHALL HAVE BEEN COMPLIED WITH.
ANY TRANSFER NOT IN COMPLIANCE WITH SUCH AGREEMENT
SHALL BE VOID."
The legend referred to in this paragraph (b) shall be removed at such time as
such security is transferred to a Person other than a Purchaser or a Permitted
Transferee.
SECTION 8.03. Notices. All notices, demands, requests,
consents, approvals or other communications (collectively, "Notices") required
or permitted to be given hereunder or which are given with respect to this
Agreement shall be in writing and shall be personally served, delivered by
reputable air courier service with charges prepaid, or transmitted by hand
delivery, telegram, telex or facsimile, addressed as set forth below, or to such
other address as such party shall have specified most recently by written
notice. Notice shall be deemed given on the date of service or transmission if
personally served or transmitted by telegram, telex or facsimile. Notice
otherwise sent as provided herein shall be deemed given on the next business day
following delivery of such notice to a reputable air courier service.
To the Company:
Avaya Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
with copies to:
Avaya Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
and
Cravath, Swaine & ▇▇▇▇▇
Worldwide Plaza
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
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To the Purchasers:
To the address specified on Schedule 1 hereto,
with a copy to:
Wachtell, Lipton, ▇▇▇▇▇ & ▇▇▇▇
▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
SECTION 8.04. Termination. (a) This Agreement may be
terminated: (i) at any time prior to the Funding by mutual written agreement of
the Company and the Purchasers, (ii) if the Funding shall not have occurred on
or prior to November 15, 2000, by either the Company or the Purchasers, at any
time after November 15, 2000, provided that the right to terminate this
Agreement under this Section 8.04(ii) shall not be available to any party whose
failure to fulfill any obligation under this Agreement was the cause of or
resulted in the failure of the Funding to occur on or before such date, (iii) if
any Governmental Authority shall have issued a nonappealable final order, decree
or ruling or taken any other action having the effect of permanently
restraining, enjoining or otherwise prohibiting the Contribution, the
Distribution or the transactions contemplated by this Agreement, by either the
Company or the Purchasers, provided that the right to terminate this Agreement
pursuant to this Section 8.04(iii) shall not be available to any party whose
failure to fulfill any obligation under this Agreement was the cause of, or
resulted in, such final order, decree or ruling, (iv) by the Purchasers if the
Company shall make (A) any amendment to any Distribution Agreement after the
Initial Conditions Date without the Purchasers' consent that is not referenced
on Schedule 3.15 or that, individually or in the aggregate, would increase the
burdens or decrease the benefits of such agreements to the Company in a manner
that would, individually or in the aggregate, have a material adverse effect on
the business, condition (financial or otherwise), operations, performance,
properties or prospects of the Enterprise Communications Business, taken as a
whole other than modifications to schedules to the Distribution Agreements to
reflect claims made, or actions, suits, demands, claims, hearings,
investigations or proceedings initiated, in each case after the date hereof,
against or affecting the Enterprise Communications Business, the Company or any
Subsidiary (including with respect to any
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violation of any Environmental Law) or (B) any amendment to the Employee
Benefits Agreement that would result in a material decrease in the Pension
Transfer Amount (as such term is defined in the Employee Benefits Agreement),
(v) if the conditions set forth in Sections 7.01 and 7.02 have not been
satisfied or waived on or prior to the Effective Date, by the Purchasers on (but
not after) the third Business Day immediately succeeding the Effective Date
(provided that such conditions have not been satisfied prior to such third
Business Day) or (vi) if the escrowed funds and securities have been returned to
the Purchasers and the Company, respectively, pursuant to Section 2.04, by
either the Company or the Purchasers.
(b) In the event of termination of this Agreement, written
notice thereof shall be given to the other parties specifying the provision
hereof pursuant to which such termination is made, and this Agreement (except
for the provisions of this Section 8.04, and Sections 8.03, 8.05, 8.06, 8.07,
8.08, 8.13, 8.14, and 8.15 which shall survive such termination) shall become
null and void. The Confidentiality Agreement shall survive any termination of
this Agreement.
SECTION 8.05. GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED
BY, INTERPRETED UNDER, AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF
DELAWARE, REGARDLESS OF THE LAWS THAT MIGHT OTHERWISE GOVERN UNDER APPLICABLE
PRINCIPLES OF CONFLICTS OF LAW THEREOF.
SECTION 8.06. WAIVER OF JURY TRIAL. EACH PARTY HEREBY WAIVES
TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY RIGHT IT MAY HAVE TO A
TRIAL BY JURY IN RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT
OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT, ANY OTHER EQUITY DOCUMENT OR ANY
TRANSACTION CONTEMPLATED HEREBY OR THEREBY. EACH PARTY (A) CERTIFIES THAT NO
REPRESENTATIVE OF ANY OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT
SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE
FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT AND THE OTHER PARTIES HERETO HAVE
BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE OTHER EQUITY DOCUMENTS, AS
APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN
THIS SECTION 8.06.
SECTION 8.07. Attorney Fees. A party in breach of this
Agreement shall, on demand, indemnify and hold harmless the other party for and
against all reasonable out-of-pocket expenses, including legal fees, incurred by
such other party by reason of the enforcement and protection of its rights under
this Agreement. The payment of such
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expenses is in addition to any other relief to which such other party may be
entitled.
SECTION 8.08. Entire Agreement. (a) This Agreement and the
Equity Documents (including all agreements entered into pursuant hereto and
thereto and all certificates and instruments delivered pursuant hereto and
thereto) constitute the entire agreement of the parties with respect to the
subject matter hereof and supersede all prior and contemporaneous agreements,
representations, understandings, negotiations and discussions between the
parties, whether oral or written, with respect to the subject matter hereof.
(b) Without limiting the foregoing, the Purchasers and the
Company agree that insofar as such agreement relates to Avaya, the
Confidentiality Agreement shall be deemed terminated effective as of the
Closing.
SECTION 8.09. Modifications and Amendments. No amendment,
modification or termination of this Agreement shall be binding upon any other
party unless executed in writing by the parties hereto intending to be bound
thereby.
SECTION 8.10. Waivers and Extensions. Any party to this
Agreement may waive any condition, right, breach or default that such party has
the right to waive, provided that such waiver will not be effective against the
waiving party unless it is in writing, is signed by such party, and specifically
refers to this Agreement. Waivers may be made in advance or after the right
waived has arisen or the breach or default waived has occurred. Any waiver may
be conditional. No waiver of any breach of any agreement or provision herein
contained shall be deemed a waiver of any preceding or succeeding breach thereof
nor of any other agreement or provision herein contained. No waiver or extension
of time for performance of any obligations or acts shall be deemed a waiver or
extension of the time for performance of any other obligations or acts.
SECTION 8.11. Titles and Headings; Rules of Construction.
Titles and headings of sections of this Agreement are for convenience only and
shall not affect the construction of any provision of this Agreement. Unless the
context otherwise requires:
(a) a term has the meaning assigned to it;
(b) "or" is not exclusive;
(c) "including" means including without limitation; and
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(d) words in the singular include the plural and words
in the plural include the singular.
SECTION 8.12. Exhibits and Schedules. Each of the exhibits and
schedules referred to herein and attached hereto is an integral part of this
Agreement and is incorporated herein by reference.
SECTION 8.13. Expenses; Brokers. All costs and expenses
incurred in connection with this Agreement shall be paid by the party incurring
such cost or expense; provided, however, that the Company will reimburse the
Purchasers for all documented fees and expenses reasonably incurred by them
through the Funding (or earlier termination of this Agreement) related to due
diligence and the negotiation, execution and consummation of the Transactions.
Other than the use of ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ & Co. Incorporated by the Company, each of
the parties represents to the others that neither it nor any of its Affiliates
has used a broker or other intermediary in connection with the Transactions for
whose fees or expenses any other party will be liable. Each party agrees to
indemnify and hold the other parties to this Agreement harmless from and against
any and all claims, liabilities or obligations with respect to any such fees or
expenses asserted by any Person on the basis of any act or statement alleged to
have been made by such party or any of its Affiliates.
SECTION 8.14. Press Releases and Public Announcements. All
public announcements or public disclosures relating to the Transactions (other
than the Form 10) shall be made only if mutually agreed upon by the Company and
the Purchasers, except to the extent such disclosure is, in the opinion of
counsel, required by law or by stock exchange regulation, provided that (a) any
such required disclosure shall only be made, to the extent consistent with law
and stock exchange regulation, after consultation with the Purchasers, (b) no
such announcement or disclosure (except as required by law or by stock exchange
regulation) shall identify any Purchaser without such Purchaser's prior consent
and (c) the Company hereby consents to the publication by Warburg, on one
occasion following the Funding but in as many periodicals as Warburg may elect,
of a customary "tombstone" advertisement announcing the investment made pursuant
to this Agreement.
SECTION 8.15. Assignment; No Third Party Beneficiaries. This
Agreement and the rights, duties and obligations hereunder may not be assigned
or delegated by the Company without the prior written consent of the Purchasers,
and may not assigned or delegated by any
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48
Purchaser without the Company's prior written consent, except that without such
consent, prior to the Initial Conditions Date, this Agreement may be assigned or
delegated, in whole or in part, by any Purchaser (or by any assignee referred to
in this provision) to any Permitted Transferee. Except as set forth above, any
assignment or delegation of rights, duties or obligations hereunder made without
the prior written consent of the Purchasers, shall be void and of no effect.
This Agreement and the provisions hereof shall be binding upon and shall inure
to the benefit of each of the parties and their respective successors and
permitted assigns. This Agreement is not intended to confer any rights or
benefits on any Persons other than as expressly set forth in this Section 8.15.
SECTION 8.16. Severability. This Agreement shall be deemed
severable, and the invalidity or unenforceability of any term or provision
hereof shall not affect the validity or enforceability of this Agreement or of
any other term or provision hereof. Furthermore, in lieu of any such invalid or
unenforceable term or provision, the parties hereto intend that there shall be
added as a part of this Agreement a provision as similar in terms to such
invalid or unenforceable provision as may be possible and be valid and
enforceable.
SECTION 8.17. Counterparts. This Agreement may be executed in
counterparts, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
AVAYA INC.,
by
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Financial
Officer
WARBURG, ▇▇▇▇▇▇ NETHERLANDS EQUITY PARTNERS I, C.V.
by: WARBURG, ▇▇▇▇▇▇ & CO.,
its General Partner
by
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Partner
WARBURG, ▇▇▇▇▇▇ NETHERLANDS EQUITY PARTNERS II, C.V.
by: WARBURG, ▇▇▇▇▇▇ & CO.,
its General Partner
by
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Partner
WARBURG, ▇▇▇▇▇▇ NETHERLANDS EQUITY PARTNERS III, C.V.
by: WARBURG, ▇▇▇▇▇▇ & CO.,
its General Partner
by
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Partner
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WARBURG, ▇▇▇▇▇▇ EQUITY PARTNERS, L.P.
by: WARBURG, ▇▇▇▇▇▇ & CO.,
its General Partner
by
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Partner
56
Schedule 1
WARBURG, ▇▇▇▇▇▇ NETHERLANDS EQUITY PARTNERS I, C.V.
Number of Preferred Shares
being purchased from the Company: 120,000 shares
Fractional Interest in Series A Warrants: 3%
Fractional Interest in Series B Warrants: 3%
Address for Notice:
Warburg, ▇▇▇▇▇▇ & Co.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
WARBURG, ▇▇▇▇▇▇ NETHERLANDS EQUITY PARTNERS II, C.V.
Number of Preferred Shares
being purchased from the Company: 80,000 shares
Fractional Interest in Series A Warrants: 2%
Fractional Interest in Series B Warrants: 2%
Address for Notice:
Warburg, ▇▇▇▇▇▇ & Co.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
WARBURG, ▇▇▇▇▇▇ NETHERLANDS EQUITY PARTNERS III, C.V.
Number of Preferred Shares
being purchased from the Company: 20,000 shares
Fractional Interest in Series A Warrants: 0.5%
Fractional Interest in Series B Warrants: 0.5%
Address for Notice:
Warburg, ▇▇▇▇▇▇ & Co.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
57
2
WARBURG, ▇▇▇▇▇▇ EQUITY PARTNERS, L.P.
Number of Preferred Shares
being purchased from the Company: 3,780,000 shares
Fractional Interest in Series A Warrants: 94.5%
Fractional Interest in Series B Warrants: 94.5%
Address for Notice:
Warburg, ▇▇▇▇▇▇ & Co.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
58
Exhibit A
Form of Certificate of Designation
CERTIFICATE OF DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES B CONVERTIBLE PARTICIPATING PREFERRED STOCK
OF
AVAYA INC.
Pursuant to Section 151 of the
General Corporation Law of the State of Delaware
The undersigned, pursuant to the provisions of Sections 103 and 151 of
the General Corporation Law of the State of Delaware, do hereby certify that,
pursuant to the authority expressly vested in the Board of Directors of Avaya
Inc., a Delaware corporation (the "CORPORATION"), by the Corporation's
Certificate of Incorporation, the Board of Directors has duly provided for the
issuance of and created a series of Preferred Stock of the Corporation, par
value $1.00 per share (the "PREFERRED STOCK"), and in order to fix the
designation and amount and the voting powers, designations, preferences and
relative, participating, optional and other special rights, and the
qualifications, limitations and restrictions, of a series of Preferred Stock,
has duly adopted this Certificate of Designations, Preferences and Rights of
Preferred Stock (the "CERTIFICATE").
Each share of such series of Preferred Stock shall rank equally in all
respects and shall be subject to the following provisions:
1. NUMBER OF SHARES AND DESIGNATION. 4,000,000 shares of Preferred
Stock of the Corporation shall constitute a series of Preferred Stock designated
as Series B Convertible Participating Preferred Stock (the "SERIES B PREFERRED
STOCK"). The number of shares of Series B Preferred Stock may be increased (to
the extent of the Corporation's authorized and unissued Preferred Stock) or
decreased (but not below the number of shares of Series B Preferred Stock then
outstanding) by further resolution duly adopted by the Board of Directors and
the filing of a certificate of increase or decrease, as the case may be, with
the Secretary of State of Delaware.
2. RANK. The Series B Preferred Stock shall, with respect to payment of
dividends, redemption payments, rights upon liquidation, dissolution or winding
up of the affairs of the Corporation, or otherwise (i) rank senior and prior to
the Common Stock, and each other class or series of equity securities of the
Corporation, whether currently issued or issued in the future, that by its terms
ranks junior to the Series B Preferred Stock (whether with respect to payment of
dividends, redemption payments, rights upon liquidation, dissolution or winding
up of the affairs of the Corporation, or otherwise) (all of such equity
securities, including the Common Stock, are collectively referred to herein as
the "JUNIOR SECURITIES"), (ii) rank on a parity with each other class or series
of equity securities of the Corporation, whether currently issued or issued in
the future, that does not by its terms expressly provide that it ranks senior to
or junior to the Series B Preferred Stock (whether with respect to payment of
dividends, redemption payments, rights upon liquidation, dissolution or winding
up of the affairs of the Corporation, or otherwise) (all of such equity
securities are collectively referred to herein as the "PARITY SECURITIES"), and
(iii) rank junior to each other class or series of equity securities of the
Corporation, whether currently issued or issued in the future, that by its terms
ranks senior to the Series B Preferred Stock (whether with respect to payment of
dividends, redemption payments, rights upon liquidation, dissolution or winding
up of the affairs of the Corporation, or otherwise) (all of such equity
securities are collectively referred to herein as the "SENIOR SECURITIES"). The
respective definitions of Junior Securities, Parity Securities and Senior
Securities shall also include any rights or options exercisable or exchangeable
for or convertible into any of the Junior Securities, Parity Securities or
Senior Securities, as the case may be.
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3. DIVIDENDS.
(a) The holders of shares of Series B Preferred Stock shall be entitled
to receive, when, as and if declared by the Board of Directors, out of funds
legally available for the payment of dividends, dividends on the terms described
below:
(i) Holders of shares of Series B Preferred Stock shall be
entitled to participate equally and ratably with the holders of shares
of Common Stock in all dividends and distributions paid (whether in the
form of cash, stock or otherwise) on the shares of Common Stock as if
immediately prior to each record date for the Common Stock, shares of
Series B Preferred Stock then outstanding were converted into shares of
Common Stock (in the manner described in Section 7); provided, however,
that the holders of shares of Series B Preferred Stock shall not be
entitled to participate in such dividend or distribution if an
adjustment to the Conversion Price shall be required with respect to
such dividends or distributions pursuant to Section 7(c) hereof;
(ii) In addition to any dividends paid pursuant to Section
3(a)(i), in respect of each fiscal quarter beginning with the
thirteenth (13th) fiscal quarter following the Original Issue Date
through the twentieth (20th) fiscal quarter following the Original
Issue Date, the Corporation may, at its option, pay a cash dividend on
each share of Series B Preferred Stock at an annual rate equal to 3.25%
(compounded quarterly) of the Liquidation Value then in effect;
(iii) In addition to any dividends paid pursuant to Section
3(a)(i), in respect of each fiscal quarter beginning with the twenty
first (21st) fiscal quarter following the Original Issue Date through
the fortieth (40th) fiscal quarter following the Original Issue Date,
the Corporation may, at its option, pay a cash dividend on each share
of Series B Preferred Stock at an annual rate equal to 6.5% (compounded
quarterly) of the Liquidation Value then in effect; and
(iv) In addition to any dividends paid pursuant to Section
3(a)(i), in respect of each fiscal quarter beginning with the forty
first (41st) fiscal quarter following the Original Issue Date, and
thereafter, the Corporation shall pay a cash dividend on each share of
Series B Preferred Stock at an annual rate equal to 12.0% (compounded
quarterly) of the Liquidation Value then in effect.
For purposes of this Section 3, the first fiscal quarter shall be the period
beginning on the Original Issue Date and ending on the last day of the
Corporation's fiscal quarter in which the Original Issue Date occurs. Dividends
payable pursuant to Section 3(a)(i) shall be payable on the same date that such
dividends are payable to holders of shares of Common Stock. Dividends payable
pursuant to Sections 3(a)(ii) and (iii) shall be payable quarterly in arrears on
March 31, June 30, September 30 and December 31 of each year (unless such day is
not a Business Day (as
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defined below), in which event such dividends shall be payable on the next
succeeding Business Day) (each such payment date being a "DIVIDEND PAYMENT DATE"
and the period from the third anniversary of the Original Issue Date until the
first Dividend Payment Date and each such quarterly period thereafter being a
"DIVIDEND PERIOD"). The amount of dividends payable on the Series B Preferred
Stock for the initial Dividend Period, or for any other period shorter or longer
than a full Dividend Period, shall be computed on the basis of a 360-day year of
twelve 30-day months. As used herein, the term "BUSINESS DAY" means any day
except a Saturday, Sunday or day on which banking institutions are legally
authorized to close in the City of New York.
(b) Each dividend shall be payable to the holders of record of shares
of Series B Preferred Stock as they appear on the stock records of the
Corporation at the close of business on such record dates (each, a "DIVIDEND
PAYMENT RECORD DATE"), which shall be not more than 60 days nor less than 10
days preceding the Dividend Payment Date thereof, as shall be fixed by the Board
of Directors.
(c) From and after the time, if any, as the Corporation fails to pay to
the holder of any shares of Series B Preferred Stock, on the date specified for
redemption in accordance with Section 6(b), the redemption price calculated
pursuant to Section 5 after such holder has delivered notice to the Corporation
pursuant to Section 6(a) of its intention to exercise its redemption rights
under Section 5, (a) no dividends shall be declared or paid or set apart for
payment, or other distribution declared or made, upon any Junior Securities, nor
shall any Junior Securities be redeemed, purchased or otherwise acquired (other
than a redemption, purchase or other acquisition of shares of Common Stock made
for purposes of any employee or director incentive or benefit plans or
arrangements of the Corporation or any subsidiary of the Corporation or the
payment of cash in lieu of fractional shares in connection therewith) for any
consideration (nor shall any moneys be paid to or made available for a sinking
fund for the redemption of any shares of any such Junior Securities) by the
Corporation, directly or indirectly (except by conversion into or exchange for
Junior Securities or the payment of cash in lieu of fractional shares in
connection therewith) and (b) the Corporation shall not, directly or indirectly,
make any payment on account of any purchase, redemption, retirement or other
acquisition of any Parity Securities (other than for consideration payable
solely in Junior Securities or the payment of cash in lieu of fractional shares
in connection therewith); provided, however, that this Section 3(c) shall not be
applicable at any time that the Corporation has paid, in accordance with Section
6(b), the redemption price to each holder that has exercised its redemption
right pursuant to Section 6(a).
4. LIQUIDATION PREFERENCE.
(a) The initial liquidation preference for the shares of Series B
Preferred Stock shall be $100.00 per share, which amount shall accrete, (x) from
the Original Issue Date until the tenth anniversary of the Original Issue Date,
at an annual rate of 6.5%, compounded quarterly, and (y) from and after the
tenth anniversary of the Original Issue Date, at an annual rate of 12.0%,
compounded quarterly, in each case, computed on the basis of a 360 day year of
twelve 30 day months (such accreted amount being the "LIQUIDATION VALUE"). The
Liquidation Value shall be calculated on each Dividend Payment Date and the
accretion for the Dividend Period ending on the applicable Dividend Payment Date
shall be reduced by the amount of any cash dividend paid on such Dividend
Payment Date pursuant to Sections 3(a)(ii), 3(a)(iii) or 3(a)(iv); provided,
however, that in the event of a Change in Control within five years after the
Original Issue Date,
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(A) the Liquidation Value upon such Change in Control shall be increased by the
difference between (i) the Accelerated Amount (as defined below) minus (ii) the
Accelerated Cash Payment (as defined below) (to the extent paid pursuant to the
following proviso) and (B) only the portion of such increased Liquidation Value
equal to the Non-Accelerated Amount (as defined below) shall accrete (in the
manner set forth in Section 4(a)(x)) upon such Change in Control until the fifth
anniversary of the Original Issue Date, upon which anniversary and thereafter
all of the Liquidation Value then in effect (as increased pursuant to Section
4(a)(A) and accreted pursuant to Section 4(a)(B)) shall accrete (in the manner
set forth in Sections 4(a)(x) and 4(a)(y)); provided, further, however, that in
the circumstances described below, the Corporation shall have the option to pay
the Accelerated Cash Payment. The "ACCELERATED CASH PAYMENT" shall mean the
product of (x) EP (as defined below) and (y) (i) in the case of a Change in
Control after the third anniversary of the Original Issue Date, if a cash
dividend was paid on the Dividend Payment Date immediately preceeding such
Change in Control pursuant to Section 3(a)(ii) hereof, the amount of cash
dividends payable pursuant to Section 3(a)(ii) in respect of the fiscal quarter
in which such Change in Control occurs and each fiscal quarter thereafter
through the twentieth (20th) fiscal quarter following the Original Issue Date
and (ii) in the case of a Change in Control prior to the third anniversary of
the Original Issue Date, 100% of the amount of cash dividends payable at the
option of the Corporation pursuant to Section 3(a)(ii) in respect of the
seventeenth (17th) through twentieth (20th) fiscal quarters following the
Original Issue Date, assuming in each case full accretion (as adjusted for
payment of such cash dividends) prior to the date of payment of each dividend.
The "ACCELERATED AMOUNT" shall be: (FV-LV) x EP; and the "NON-ACCELERATED
AMOUNT" shall be: LV x (1-EP), in each case where:
(i) FV is the amount of the Liquidation Value had it fully
accreted from the date of the Change in Control through the fifth
anniversary of the Original Issue Date,
(ii) LV is the Liquidation Value in effect prior to the
adjustment pursuant to this section, and
(iii) EP is (A) in the context of a Change in Control effected
pursuant to a transaction or series of related transactions that
constitute a Business Combination, the percentage of consideration paid
to shareholders of the Corporation in such Business Combination that is
not paid in common stock of the Corporation or of the surviving
corporation of the Business Combination or its ultimate parent company
into or for which shares of common stock of the Corporation were
converted or exchanged pursuant to the Business Combination (other than
cash in lieu of fractional shares which shall be deemed to be common
stock for purposes of this clause (A)); and (B) in the event of any
other Change in Control, 100%.
(b) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series B
Preferred Stock shall be entitled to receive the greater of (i) the Liquidation
Value of such shares in effect on the date of such liquidation, dissolution or
winding up, plus an amount equal to (A) except to the extent that a dividend
pursuant to Section 3(a)(ii), (iii) or (iv) has been declared in respect of the
Dividend Period during which such liquidation, dissolution or winding up occurs
and such liquidation, dissolution or winding up occurs after the relevant
Dividend Payment Record Date, the unrecognized accretion from the immediately
preceding Dividend Payment Date up to but not including the date of such
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liquidation, dissolution or winding up and (B) the dividends accrued and unpaid
thereon, whether or not declared, up to but not including the date of such
liquidation, dissolution or winding up or (ii) the payment such holders would
have received had such holders, immediately prior to such liquidation,
dissolution or winding up, converted their shares of Series B Preferred Stock
into shares of Common Stock (pursuant to, and at a conversion rate described in,
Section 7).
(c) In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the Corporation, the holders of shares of Series B
Preferred Stock (i) shall not be entitled to receive the Liquidation Value of
such shares until payment in full or provision has been made for the payment in
full of all claims of creditors of the Corporation and the liquidation
preferences for all Senior Securities, and (ii) shall be entitled to receive the
Liquidation Value of such shares before any payment or distribution of any
assets of the Corporation shall be made or set apart for holders of any Junior
Securities. Subject to clause (i) above, if the assets of the Corporation are
not sufficient to pay in full the Liquidation Value payable to the holders of
shares of Series B Preferred Stock and the liquidation preference payable to the
holders of any Parity Securities, then such assets, or the proceeds thereof,
shall be distributed among the holders of shares of Series B Preferred Stock and
any such other Parity Securities ratably in accordance with the Liquidation
Value for the Series B Preferred Stock and the liquidation preference for the
Parity Securities, respectively.
(d) Neither a consolidation or merger of the Corporation with or into
any other entity, nor a merger of any other entity with or into the Corporation,
nor a sale or transfer of all or any part of the Corporation's assets for cash,
securities or other property shall be considered a liquidation, dissolution or
winding up of the Corporation within the meaning of this Section 4.
5. REDEMPTION.
The holder of shares of Series B Preferred Stock shall have the right
to require the Corporation to redeem such shares of Series B Preferred Stock, in
whole or in part, at such holder's option, (i) upon the Corporation's delivery
of notice of exercise of its conversion rights pursuant to Section 7(a)(ii), at
a cash redemption price equal to the Liquidation Value in effect on the
Redemption Date plus an amount equal to (A) except to the extent that a dividend
pursuant to Section 3(a)(ii), (iii) or (iv) has been declared in respect of the
Dividend Period during which such Redemption Date occurs and the Redemption Date
occurs after the relevant Dividend Payment Record Date, the unrecognized
accretion from the immediately preceding Dividend Payment Date up to but not
including the Redemption Date and (B) the dividends accrued and unpaid thereon,
whether or not declared, up to but not including the Redemption Date or (ii)
within 60 days of a Change in Control, at a cash redemption price equal to 101%
of the Liquidation Value in effect on the Redemption Date, plus an amount equal
to (A) except to the extent that a dividend pursuant to Section 3(a)(ii), (iii)
or (iv) has been declared in respect of the Dividend Period during which such
Redemption Date occurs and the Redemption Date occurs after the relevant
Dividend Payment Record Date, the unrecognized accretion from the immediately
preceding Dividend Payment Date up to but not including the Redemption Date and
(B) the dividends accrued and unpaid thereon, whether or not declared, up to but
not including the Redemption Date. In the event that the Corporation does not
pay the redemption price on the Redemption Date, the redemption price shall be
calculated as if the Redemption Date were the later of the Redemption Date and
the date on which such payment is made.
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6. PROCEDURES FOR REDEMPTION.
(a) In the event of a redemption of shares of Series B Preferred Stock
pursuant to Section 5, notice of such redemption shall be given by first class
mail, postage prepaid, mailed not less than 15 days nor more than 60 days prior
to the Redemption Date, to the office of the Corporation. Such notice shall
state: (i) the date on which the holder is to surrender to the Corporation the
certificates for any shares to be redeemed (such date, or if such date is not a
Business Day, the first Business Day thereafter, the "REDEMPTION DATE") and (ii)
the number of shares of Series B Preferred Stock to be redeemed and, if fewer
than all the shares held by such holder are to be redeemed, the number of shares
to be redeemed from such holder. Any notice mailed in the manner herein provided
shall be conclusively presumed to have been duly given whether or not the
Corporation receives the notice.
(b) Upon surrender in accordance with the notice of redemption of the
certificates for any shares so redeemed, such shares shall be redeemed by the
Corporation at the redemption price aforesaid. In case fewer than all the shares
represented by any such certificate are redeemed, a new certificate shall be
issued representing the unredeemed shares without cost to the holder thereof.
7. CONVERSION.
(a) Right to Convert.
(i) Subject to the provisions of this Section 7, each holder
of shares of Series B Preferred Stock shall have the right, at any time
and from time to time, at such holder's option, to convert any or all
of such holder's shares of Series B Preferred Stock, in whole or in
part, into fully paid and non-assessable shares of Common Stock at the
conversion price equal to the "INITIAL CONVERSION PRICE" per share of
Common Stock (as defined below), subject to adjustment as described in
Section 7(c) (as adjusted, the "CONVERSION PRICE"). The number of
shares of Common Stock into which a share of the Series B Preferred
Stock shall be convertible (calculated as to each conversion to the
nearest 1/1,000,000th of a share) shall be determined by dividing the
Liquidation Value in effect at the time of conversion by the Conversion
Price in effect at the time of conversion; provided, however, that,
except to the extent that a dividend pursuant to Section 3(a)(ii),
(iii) or (iv) has been declared in respect of the Dividend Period
during which conversion occurs and conversion occurs after the relevant
Dividend Payment Record Date, the Liquidation Value in respect of the
shares of Series B Stock to be converted shall be increased by an
amount equal to the unrecognized accretion from the immediately
preceding Dividend Payment Date up to but not including the date of
conversion. The "INITIAL CONVERSION PRICE" shall be an amount equal to
the quotient of $7,600,000,000, divided by (y) the Initial Fully
Diluted Shares Outstanding (as defined below). The Corporation will
prepare a schedule calculating the Initial Conversion Price and present
this schedule to the initial holders within 15 Business Days after
December 31, 2000. If the initial holders concur with such schedule as
prepared by the Corporation or otherwise do not respond within 10
Business Days following receipt, the Initial Conversion Price will be
as set forth therein. If the initial holders dispute the calculation of
the Initial Conversion
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Price pursuant to such schedule as proposed by the Corporation, the
initial holders will note such dispute in writing to the Corporation
within 10 Business Days following receipt of Schedule 7(a)(i) from the
Corporation. If the Corporation and the initial holders cannot agree on
calculation of the Initial Conversion Price within 5 Business Days
following the initial holders' written response noting its dispute,
then the Corporation and the initial holders will chose a mutually
agreeable investment banking or accounting firm to compute the Initial
Conversion Price in accordance with this definition, and such
computation shall be final. The fees and expenses of such firm shall be
borne equally by the Corporation and the initial holders disputing such
calculation. "INITIAL FULLY DILUTED SHARES OUTSTANDING" means the sum
of (x) all issued and outstanding shares of Common Stock of the
Corporation as of the time immediately following the Distribution (as
defined in the Purchase Agreement), (y) all shares of Common Stock
issuable upon exercise or conversion of all options and convertible
securities issued and outstanding as of the time immediately following
the Distribution that are held by employees, officers and directors of
the Corporation and with respect to which the exercise price is less
than or equal to the Twenty Day Average Price (in each case after
giving effect to the deemed receipt by the Corporation of the aggregate
exercise or conversion price of all such options or convertible
securities and the deemed application of such amount to acquire shares
of Common Stock at the Twenty Day Average Price of the Common Stock)
and (z) all shares and restricted shares of Common Stock and all shares
of Common Stock issuable upon exercise or conversion of all options and
convertible securities issued, sold or granted following the
Distribution (other than those referred to in clause (y) above) to
employees, officers and directors of the Corporation and with respect
to which the exercise price (or in the case of shares or restricted
shares, the purchase price) is less than or equal to the Twenty Day
Average Price (in each case after giving effect to the deemed receipt
by the Corporation of the aggregate exercise or conversion (or
purchase) price of all such shares, options or convertible securities
and the deemed application of such amount to acquire shares of Common
Stock at the Twenty Day Average Price of the Common Stock). The "TWENTY
DAY AVERAGE PRICE" shall mean the average of the Market Prices of the
Common Stock during the twenty consecutive trading days ending on the
90th day (or if such day is not a business day, the next preceding
business day) after the Original Issue Date. The calculation of Initial
Fully Diluted Shares Outstanding shall not take into account Series B
Preferred Stock or Warrants or the shares of Common Stock into which
such shares of Series B Preferred Stock are convertible or the shares
of Common Stock issuable upon exercise of such Warrants. The Initial
Conversion Price and the Initial Fully Diluted Shares Outstanding shall
be determined as of December 31, 2000. Following the determination of
the Initial Conversion Price as set forth herein, the Corporation shall
amend this Certificate of Designation to set forth the amount thereof.
(ii) From and after the fifth anniversary of the Original
Issue Date, subject to the provisions of this Section 7, the
Corporation shall have the right to require the holder of shares of
Series B Preferred Stock, from time to time, at the Corporation's
option, to convert any or all of such holder's shares of Series B
Preferred Stock, in whole or in part, into fully paid and
non-assessable shares of Common Stock at the Conversion Price. The
number of shares of Common Stock into which a share of the Series B
Preferred Stock shall be convertible (calculated as to each conversion
to the nearest 1/1,000,000th of a
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share) shall be determined by dividing the Liquidation Value in effect
at the time of conversion by the Conversion Price in effect at the time
of conversion.
(b) Mechanics of Conversion.
(i) A holder of shares of Series B Preferred Stock or the
Corporation, as the case may be, that elects to exercise its conversion
rights pursuant to Section 7(a) shall provide notice to the other party
as follows:
(A) Holder's Notice and Surrender. To exercise its
conversion right pursuant to Section 7(a)(i), the holder of
shares of Series B Preferred Stock to be converted shall
surrender the certificate or certificates representing such
shares at the office of the Corporation (or any transfer agent
of the Corporation previously designated by the Corporation to
the holders of Series B Preferred Stock for this purpose) with
a written notice of election to convert, completed and signed,
specifying the number of shares to be converted.
(B) Corporation's Notice. To exercise its conversion
right pursuant to Section 7(a)(ii), the Corporation shall
deliver written notice to such holder, at least 30 days and no
more than 75 days prior to the Conversion Date, specifying:
(i) the number of shares of Series B Preferred Stock to be
converted and, if fewer than all the shares held by such
holder are to be converted, the number of shares to be held by
such holder; (ii) the Conversion Date; (iii) the number of
shares of Common Stock to be issued in respect of each share
of Series B Preferred Stock that is converted; (iv) the place
or places where certificates for such shares are to be
surrendered for issuance of certificates representing shares
of Common Stock; and (v) that dividends on the shares to be
converted will cease to accrue on such Conversion Date.
Unless the shares issuable upon conversion are to be issued in the same
name as the name in which such shares of Series B Preferred Stock are
registered, each share surrendered for conversion shall be accompanied
by instruments of transfer, in form satisfactory to the Corporation,
duly executed by the holder or the holder's duly authorized attorney
and an amount sufficient to pay any transfer or similar tax in
accordance with Section 7(b)(vi). As promptly as practicable after the
surrender by the holder of the certificates for shares of Series B
Preferred Stock as aforesaid, the Corporation shall issue and shall
deliver to such holder, or on the holder's written order to the
holder's transferee, a certificate or certificates for the whole number
of shares of Common Stock issuable upon the conversion of such shares
and a check payable in an amount corresponding to any fractional
interest in a share of Common Stock as provided in Section 7(b)(vii).
(ii) Each conversion shall be deemed to have been effected
immediately prior to the close of business on (x) in the case of
conversion pursuant to Section 7(a)(i), the first Business Day on which
the certificates for shares of Series B Preferred Stock shall have been
surrendered and such notice received by the Corporation as aforesaid
and (y) in the case of conversion pursuant to Section 7(a)(ii), the
date specified as the Conversion Date in the Corporation's notice of
conversion delivered to each holder pursuant to Sec-
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tion 7(b)(i)(B) (in either case, the "CONVERSION DATE"). At such time
on the Conversion Date:
(A) the person in whose name or names any certificate
or certificates for shares of Common Stock shall be issuable
upon such conversion shall be deemed to have become the holder
of record of the shares of Common Stock represented thereby at
such time; and
(B) such shares of Series B Preferred Stock so
converted shall no longer be deemed to be outstanding, and all
rights of a holder with respect to such shares (x) in the
event of conversion pursuant to Section 7(a)(i), surrendered
for conversion and (y) in the event of conversion pursuant to
Section 7(a)(ii), covered by the Corporation's notice of
conversion, shall immediately terminate except the right to
receive the Common Stock and other amounts payable pursuant to
this Section 7.
All shares of Common Stock delivered upon conversion of the Series B
Preferred Stock will, upon delivery, be duly and validly authorized and
issued, fully paid and nonassessable, free from all preemptive rights
and free from all taxes, liens, security interests and charges (other
than liens or charges created by or imposed upon the holder or taxes in
respect of any transfer occurring contemporaneously therewith).
(iii) Holders of shares of Series B Preferred Stock at the
close of business on a Dividend Payment Record Date shall be entitled
to receive the dividend payable on such shares on the corresponding
Dividend Payment Date notwithstanding the conversion thereof following
such Dividend Payment Record Date and prior to such Dividend Payment
Date. A holder of shares of Series B Preferred Stock on a Dividend
Payment Record Date who (or whose transferee) tenders any such shares
for conversion into shares of Common Stock on such Dividend Payment
Date will receive the dividend payable by the Corporation on such
shares of Series B Preferred Stock if and when paid, and the converting
holder need not include payment of the amount of such dividend upon
surrender of shares of Series B Preferred Stock for conversion.
(iv) Except as provided in clause (iii) above and in Section
7(c), the Corporation shall make no payment or adjustment for accrued
and unpaid dividends on shares of Series B Preferred Stock, whether or
not in arrears, on conversion of such shares or for dividends in cash
on the shares of Common Stock issued upon such conversion.
(v) The Corporation will at all times reserve and keep
available, free from preemptive rights, out of its authorized but
unissued Common Stock, solely for the purpose of effecting conversions
of the Series B Preferred Stock, the aggregate number of shares of
Common Stock issuable upon conversion of the Series B Preferred Stock.
The Corporation will procure, at its sole expense, the listing of the
shares of Common Stock, subject to issuance or notice of issuance on
the principal domestic stock exchange on which the Common Stock is then
listed or traded. The Corporation will take all commercially reasonable
action as may be necessary to ensure that the shares of Common Stock
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may be issued without violation of any applicable law or regulation or
of any requirement of any securities exchange on which the shares of
Common Stock are listed or traded.
(vi) Issuances of certificates for shares of Common Stock upon
conversion of the Series B Preferred Stock shall be made without charge
to the holder of shares of Series B Preferred Stock for any issue or
transfer tax (other than taxes in respect of any transfer occuring
contemporaneously therewith or as a result of the holder being a
non-U.S. person) or other incidental expense in respect of the issuance
of such certificates, all of which taxes and expenses shall be paid by
the Corporation; provided, however, that the Corporation shall not be
required to pay any tax which may be payable in respect of any transfer
involved in the issuance or delivery of shares of Common Stock in a
name other than that of the holder of the Series B Preferred Stock to
be converted, and no such issuance or delivery shall be made unless and
until the person requesting such issuance or delivery has paid to the
Corporation the amount of any such tax or has established, to the
satisfaction of the Corporation, that such tax has been paid.
(vii) In connection with the conversion of any shares of
Series B Preferred Stock, no fractions of shares of Common Stock shall
be issued, but in lieu thereof the Corporation shall pay a cash
adjustment in respect of such fractional interest in an amount equal to
such fractional interest multiplied by the Market Price per share of
Common Stock on the Conversion Date.
(viii) If fewer than all of the outstanding shares of Series B
Preferred Stock are to be converted pursuant to Section 7(a)(ii), the
shares shall be redeemed on a pro rata basis (according to the number
of shares of Series B Preferred Stock held by each holder, with any
fractional shares rounded to the nearest whole share or in such other
manner as the Board of Directors may determine, as may be prescribed by
resolution of the Board of Directors).
(ix) Notwithstanding anything to the contrary in this
Certificate, if a notice of conversion has been given by the
Corporation pursuant to Section 7(b)(ii) and any holder of shares of
Series B Preferred Stock shall, prior to the close of business on the
Business Day preceding the Conversion Date, give written notice to the
Corporation pursuant to Section 6 of the redemption of any or all of
the shares to be converted held by the holder that would otherwise be
converted on such Conversion Date, then such conversion shall not
become effective as to such shares to be redeemed and such redemption
shall become effective as provided in Section 5.
(c) Adjustments to Conversion Price. The Conversion Price shall be
adjusted from time to time as follows:
(i) Common Stock Issued at Less than Market Value. If the
Corporation issues or sells any Common Stock other than Excluded Stock
without consideration or for consideration per share less than the
Market Price of the Common Stock, as of the day of such issuance or
sale, the Conversion Price in effect immediately prior to each such
issuance or sale will immediately (except as provided below) be reduced
to the price determined by multiplying (A) the Conversion Price at
which shares of Series B Preferred
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Stock were theretofore convertible by (B) a fraction of which the
numerator shall be the sum of (1) the number of shares of Common Stock
outstanding immediately prior to such issuance or sale and (2) the
number of additional shares of Common Stock that the aggregate
consideration received by the Corporation for the number of shares of
Common Stock so offered would purchase at the Market Price per share of
Common Stock on the last trading day immediately preceding such
issuance or sale, and of which the denominator shall be the number of
shares of Common Stock outstanding immediately after such issuance or
sale. For the purposes of any adjustment of the Conversion Price
pursuant to this Section 7(c), the following provisions shall be
applicable:
(A) In the case of the issuance of Common Stock for
cash, the amount of the consideration received by the
Corporation shall be deemed to be the amount of the cash
proceeds received by the Corporation for such Common Stock
before deducting therefrom any discounts or commissions
allowed, paid or incurred by the Corporation for any
underwriting or otherwise in connection with the issuance and
sale thereof.
(B) In the case of the issuance of Common Stock
(otherwise than upon the conversion of shares of Capital Stock
or other securities of the Corporation) for a consideration in
whole or in part other than cash, including securities
acquired in exchange therefor (other than securities by their
terms so exchangeable), the consideration other than cash
shall be deemed to be the fair value thereof as determined by
the Board of Directors, provided, however, that such fair
value as determined by the Board of Directors shall not exceed
the aggregate Market Price of the shares of Common Stock being
issued as of the date the Board of Directors authorizes the
issuance of such shares.
(C) In the case of the issuance of (a) options,
warrants or other rights to purchase or acquire Common Stock
(whether or not at the time exercisable) or (b) securities by
their terms convertible into or exchangeable for Common Stock
(whether or not at the time so convertible or exchangeable) or
options, warrants or rights to purchase such convertible or
exchangeable securities (whether or not at the time
exercisable):
(1) the aggregate maximum number of shares
of Common Stock deliverable upon exercise of such
options, warrants or other rights to purchase or
acquire Common Stock shall be deemed to have been
issued at the time such options, warrants or rights
are issued and for a consideration equal to the
consideration (determined in the manner provided in
Section 7(c)(i) (A) and (B), if any, received by the
Corporation upon the issuance of such options,
warrants or rights plus the minimum purchase price
provided in such options, warrants or rights for the
Common Stock covered thereby;
(2) the aggregate maximum number of shares
of Common Stock deliverable upon conversion of or in
exchange for any such convertible or exchangeable
securities, or upon the exercise of options, war-
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rants or other rights to purchase or acquire such
convertible or exchangeable securities and the
subsequent conversion or exchange thereof, shall be
deemed to have been issued at the time such
securities were issued or such options, warrants or
rights were issued and for a consideration equal to
the consideration, if any, received by the
Corporation for any such securities and related
options, warrants or rights (excluding any cash
received on account of accrued interest or accrued
dividends), plus the additional consideration
(determined in the manner provided in Section 7(c)(i)
(A) and (B), if any, to be received by the
Corporation upon the conversion or exchange of such
securities, or upon the exercise of any related
options, warrants or rights to purchase or acquire
such convertible or exchangeable securities and the
subsequent conversion or exchange thereof;
(3) on any change in the number of shares of
Common Stock deliverable upon exercise of any such
options, warrants or rights or conversion or exchange
of such convertible or exchangeable securities or any
change in the consideration to be received by the
Corporation upon such exercise, conversion or
exchange, but excluding changes resulting from the
anti-dilution provisions thereof (to the extent
comparable to the anti-dilution provisions contained
herein), the Conversion Price as then in effect shall
forthwith be readjusted to such Conversion Price as
would have been obtained had an adjustment been made
upon the issuance of such options, warrants or rights
not exercised prior to such change, or of such
convertible or exchangeable securities not converted
or exchanged prior to such change, upon the basis of
such change;
(4) on the expiration or cancellation of any
such options, warrants or rights (without exercise),
or the termination of the right to convert or
exchange such convertible or exchangeable securities
(without exercise), if the Conversion Price shall
have been adjusted upon the issuance thereof, the
Conversion Price shall forthwith be readjusted to
such Conversion Price as would have been obtained had
an adjustment been made upon the issuance of such
options, warrants, rights or such convertible or
exchangeable securities on the basis of the issuance
of only the number of shares of Common Stock actually
issued upon the exercise of such options, warrants or
rights, or upon the conversion or exchange of such
convertible or exchangeable securities; and
(5) if the Conversion Price shall have been
adjusted upon the issuance of any such options,
warrants, rights or convertible or exchangeable
securities, no further adjustment of the Conversion
Price shall be made for the actual issuance of Common
Stock upon the exercise, conversion or exchange
thereof.
(ii) Stock Splits, Subdivisions, Reclassifications or
Combinations. If the Corporation shall (1) declare a dividend or make a
distribution on its Common Stock in shares of Common Stock, (2)
subdivide or reclassify the outstanding shares of Common
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Stock into a greater number of shares, or (3) combine or reclassify the
outstanding Common Stock into a smaller number of shares, the
Conversion Price in effect at the time of the record date for such
dividend or distribution or the effective date of such subdivision,
combination or reclassification shall be adjusted to the number
obtained by multiplying the Conversion Price at which the shares of
Series B Preferred Stock were theretofore convertible by a fraction,
the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such action, and the denominator of
which shall be the number of shares of Common Stock outstanding
immediately following such action.
(iii) Other Distributions. In case the Corporation shall fix a
record date for the making of a distribution to all holders of shares
of its Common Stock (i) of shares of any class or of any Person other
than shares of the Corporation's Common Stock or (ii) of evidence of
indebtedness of the Corporation or any Subsidiary or (iii) of assets
(excluding Ordinary Cash Dividends, and dividends or distributions
referred to in Section 7(c)(ii)), or (iv) of rights or warrants, in
each such case the Conversion Price in effect immediately prior thereto
shall be reduced immediately thereafter to the price determined by
multiplying (A) the Conversion Price in effect immediately prior
thereto by (B) a fraction, the numerator of which shall be the Market
Price per share of Common Stock on such record date less the then fair
market value (as determined by the Board of Directors, whose good faith
determination shall be conclusive) as of such record date of the
shares, assets, evidences of indebtedness, rights or warrants so paid
with respect to one share of Common Stock, and the denominator of which
shall be the Market Price per share of Common Stock on such record
date; provided, however, that in the event the then fair market value
(as so determined) so paid with respect to one share of Common Stock is
equal to or greater than the Market Price per share of Common Stock on
such record date, in lieu of the foregoing adjustment, adequate
provision shall be made so that each holder of shares of Series B
Preferred Stock shall have the right to receive the amount and kind of
shares, assets, evidences of indebtedness, rights or warrants such
holder would have received had such holder converted each such share of
Series B Preferred Stock immediately prior to record date for such
distribution. In the event that such distribution is not so made, the
Conversion Price then in effect shall be readjusted, effective as of
the date when the Board of Directors determines not to distribute such
shares, evidences of indebtedness, assets, rights or warrants, as the
case may be, to the Conversion Price that would then be in effect if
such record date had not been fixed.
(iv) Certain Repurchases of Common Stock. In case the
Corporation effects a Pro Rata Repurchase of Common Stock, then the
Conversion Price shall be reduced to the price determined by
multiplying the Conversion Price in effect immediately prior to the
effective date of such Pro Rata Repurchase by a fraction of which the
numerator shall be the product of (x) the number of shares of Common
Stock outstanding (including any tendered or exchanged shares) at such
effective date, multiplied by the Market Price per share of Common
Stock on the trading day next succeeding such effective date, and the
denominator of which shall be the sum of (A) the fair market value of
the aggregate consideration payable to stockholders based upon the
acceptance (up to any maximum specified in the terms of the tender or
exchange offer) of all shares validly tendered or exchanged and not
withdrawn as of such effective date (the shares deemed so accepted,
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up to any maximum, being referred to as the "Purchased Shares") and (B)
the product of the number of shares of Common Stock outstanding (less
any Purchased Shares) at such effective date and the Market Price per
share of Common Stock on the trading day next succeeding such effective
date, such reduction to become effective immediately prior to the
opening of business on the day following such effective date.
(v) Business Combinations. In case of any Business Combination
or reclassification of Common Stock (other than a reclassification of
Common Stock referred to in Section 7(c)(ii)), lawful provision shall
be made as part of the terms of such Business Combination or
reclassification whereby the holder of each share of Series B Preferred
Stock then outstanding shall have the right thereafter to convert such
share only into the kind and amount of securities, cash and other
property receivable upon the Business Combination or reclassification
by a holder of the number of shares of Common Stock of the Corporation
into which a share of Series B Preferred Stock would have been
convertible immediately prior to the Business Combination or
reclassification. The Corporation, the Person formed by the
consolidation or resulting from the merger or which acquires such
assets or which acquires the Corporation's shares, as the case may be,
shall make provisions in its certificate or articles of incorporation
or other constituent documents to establish such rights and to ensure
that the dividend, voting and other rights of the holders of Series B
Preferred Stock established herein are unchanged, except as permitted
by Section 9 or as required by applicable law. The certificate or
articles of incorporation or other constituent documents shall provide
for adjustments, which, for events subsequent to the effective date of
the certificate or articles of incorporation or other constituent
documents, shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Section 7.
(vi) Successive Adjustments. Successive adjustments in the
Conversion Price shall be made, without duplication, whenever any event
specified in Sections 7(c)(i), (ii), (iii), (iv) and (v) shall occur.
(vii) Rounding of Calculations; Minimum Adjustments. All
calculations under this Section 7(c) shall be made to the nearest
one-tenth (1/10th) of a cent. No adjustment in the Conversion Price is
required if the amount of such adjustment would be less than $0.01;
provided, however, that any adjustments which by reason of this Section
7(c)(vii) are not required to be made will be carried forward and given
effect in any subsequent adjustment.
(viii) Adjustment for Unspecified Actions. If the Corporation
takes any action affecting the Common Stock, other than action
described in this Section 7(c), which in the opinion of the Board of
Directors would materially adversely affect the conversion rights of
the holders of shares of Series B Preferred Stock, the Conversion Price
may be adjusted, to the extent permitted by law, in such manner, if
any, and at such time, as such Board of Directors may determine in good
faith to be equitable in the circumstances. Failure of the Board of
Directors to provide for any such adjustment prior to the effective
date of any such action by the Corporation affecting the Common Stock
will be evidence that the Board of Directors has determined that it is
equitable to make no adjustments in the circumstances.
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(ix) Voluntary Adjustment by the Corporation. The Corporation
may at its option, at any time during the term of the Series B
Preferred Stock, reduce the then current Conversion Price to any amount
deemed appropriate by the Board of Directors; provided, however, that
if the Corporation elects to make such adjustment, such adjustment will
remain in effect for at least a 15-day period, after which time the
Corporation may, at its option, reinstate the Conversion Price in
effect prior to such reduction, subject to any interim adjustments
pursuant to this Section 7(c).
(x) Statement Regarding Adjustments. Whenever the Conversion
Price shall be adjusted as provided in this Section 7(c), the
Corporation shall forthwith file, at the principal office of the
Corporation, a statement showing in reasonable detail the facts
requiring such adjustment and the Conversion Price that shall be in
effect after such adjustment and the Corporation shall also cause a
copy of such statement to be sent by mail, first class postage prepaid,
to each holder of shares of Series B Preferred Stock at the address
appearing in the Corporation's records.
(xi) Notices. In the event that the Corporation shall give
notice or make a public announcement to the holders of Common Stock of
any action of the type described in this Section 7(c) (but only if the
action of the type described in this Section 7(c) would result in an
adjustment in the Conversion Price or a change in the type of
securities or property to be delivered upon conversion of the Series B
Preferred Stock), the Corporation shall, at the time of such notice or
announcement, and in the case of any action which would require the
fixing of a record date, at least 10 days prior to such record date,
give notice to the holder of shares of Series B Preferred Stock, in the
manner set forth in Section 7(c)(x), which notice shall specify the
record date, if any, with respect to any such action and the
approximate date on which such action is to take place. Such notice
shall also set forth the facts with respect thereto as shall be
reasonably necessary to indicate the effect on the Conversion Price and
the number, kind or class of shares or other securities or property
which shall be deliverable upon conversion of the Series B Preferred
Stock. Failure to give such notice, or any defect therein, shall not
affect the legality or validity of any such action.
(xii) Miscellaneous. Except as provided in Section 7(c), no
adjustment in respect of any dividends or other payments or
distributions made to holders of Series B Preferred Stock of securities
issuable upon the conversion of the Series B Preferred Stock will be
made during the term of the Series B Preferred Stock or upon the
conversion of the Series B Preferred Stock. In addition,
notwithstanding any of the foregoing, no such adjustment will be made
for the issuance or conversion of (a) any Securities (as defined in the
Purchase Agreement) or (b) any rights under the Rights Agreement or any
successor agreement unless such rights become exercisable (in which
case they will be deemed for purposes of this Certificate to have been
issued at the time they become exercisable).
8. STATUS OF SHARES. All shares of Series B Preferred Stock that are at
any time redeemed pursuant to Section 5 or converted pursuant to Section 7 and
all shares of Series B Preferred Stock that are otherwise reacquired by the
Corporation shall (upon compliance with any applicable provisions of the laws of
the State of Delaware) have the status of authorized but unis-
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73
sued shares of Common Stock, without designation as to series, subject to
reissuance by the Board of Directors as shares of any one or more other series.
9. VOTING RIGHTS.
(a) The holders of record of shares of Series B Preferred Stock shall
not be entitled to any voting rights except as hereinafter provided in this
Section 9 or as otherwise provided by law.
(b) The holders of the shares of Series B Preferred Stock (i) shall be
entitled to vote with the holders of the Common Stock on all matters submitted
for a vote of holders of Common Stock (voting together with the holders of
Common Stock as one class), (ii) shall be entitled to a number of votes equal to
the number of votes to which shares of Common Stock issuable upon conversion of
such shares of Series B Preferred Stock would have been entitled if such shares
of Common Stock had been outstanding at the time of the applicable vote and
related record date and (iii) shall be entitled to notice of any stockholders'
meeting in accordance with the Certificate of Incorporation and Bylaws of the
Corporation.
(c) So long as any shares of Series B Preferred Stock are outstanding:
(i) the Corporation shall not, without the written consent or
affirmative vote at a meeting called for that purpose by holders of at
least a majority of the outstanding shares of Series B Preferred Stock,
voting as a single class, amend, alter or repeal any provision of the
Corporation's Certificate of Incorporation (by merger or otherwise) so
as to adversely affect the preferences, rights or powers of the Series
B Preferred Stock; provided that any such amendment, alteration or
repeal to create, authorize or issue any Junior Securities, or any
security convertible into, or exchangeable or exercisable for, shares
of Junior Securities, shall not be deemed to have any such adverse
effect;
(ii) the Corporation shall not, without the written consent or
affirmative vote at a meeting called for that purpose by holders of at
least a majority of the outstanding shares of Series B Preferred Stock,
voting as a single class, create, authorize or issue any Senior
Securities, or any security convertible into, or exchangeable or
exercisable for, shares of Senior Securities; and
(iii) the Corporation shall not, without the written consent
or affirmative vote at a meeting called for that purpose by holders of
at least a majority of the outstanding shares of Series B Preferred
Stock, voting as a single class, create, authorize or issue any new
class of Parity Securities or increase the issued and authorized number
of shares of Series B Preferred Stock to the extent that (A) the
creation, authorization or issuance of such new class of Parity
Securities would adversely affect the class voting rights of the Series
B Preferred Stock or (B) the aggregate liquidation preference of the
issued and outstanding Parity Securities and Series B Preferred Stock
could be increased in excess of $400,000,000 as a result of the
creation, authorization or issuance of such new class of Parity
Securities or such increased shares of Series B Preferred Stock;
provided that no such consent or vote of the holders of Series B Preferred Stock
shall be required if at or prior to the time when such amendment, alteration or
repeal is to take effect, or when the
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issuance of any such securities is to be made, as the case may be, all shares of
Series B Preferred Stock at the time outstanding shall have been called for
redemption by the Corporation and the funds necessary for such redemption shall
have been set aside in accordance with Sections 5 and 6.
(d) The consent or votes required in Section 9(c) shall be in addition
to any approval of stockholders of the Corporation which may be required by law
or pursuant to any provision of the Corporation's Certificate of Incorporation
or Bylaws, which approval shall be obtained by vote of the stockholders of the
Corporation in the manner provided in Section 9(b).
10. DEFINITIONS.
Unless the context otherwise requires, when used herein the following
terms shall have the meaning indicated.
"Affiliate" means with respect to any Person, any other Person
directly, or indirectly through one or more intermediaries,
controlling, controlled by or under common control with such Person.
For purposes of this definition, the term "control" (and correlative
terms "controlling," "controlled by" and "under common control with")
means possession of the power, whether by contract, equity ownership or
otherwise, to direct the policies or management of a Person.
"Beneficially Own" or "Beneficial Ownership" is defined in Rules 13d-3
and 13d-5 of the Exchange Act, but without taking into account any
contractual restrictions or limitations on voting or other rights.
"Business Combination" means (i) any reorganization, consolidation,
merger, share exchange or similar business combination transaction
involving the Corporation with any Person or (ii) the sale, assignment,
conveyance, transfer, lease or other disposition by the Corporation of
all or substantially all of its assets.
"Capital Stock" means (i) with respect to any Person that is a
corporation or company, any and all shares, interests, participations
or other equivalents (however designated) of capital or capital stock
of such Person and (ii) with respect to any Person that is not a
corporation or company, any and all partnership or other equity
interests of such Person.
"Change in Control" shall mean the happening of any of the following
events:
(a) The acquisition by any Person of Beneficial Ownership of 50% or
more of either (A) the then-outstanding shares of Common Stock of the
Corporation (the "Outstanding Corporation Common Stock") or (B) the combined
voting power of the then-outstanding voting securities of the Corporation
entitled to vote generally in the election of directors (the "Outstanding
Corporation Voting Securities"); provided, however, that, for purposes of this
definition, the following acquisitions shall not constitute a Change in Control:
(i) any acquisition directly from the Corporation, (ii) any acquisition by the
Corporation, (iii) any acquisition by any employee benefit plan (or related
trust) sponsored or maintained by the Corporation or any company that is an
Affiliate of the Corporation or (iv) any acquisition by any corporation pursuant
to a transaction that complies with (c)(A) and (c)(B) in this definition; or
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75
(b) Individuals who, as of the date hereof, constitute the Board of
Directors (the "Incumbent Board") cease for any reason to constitute at least a
majority of the Board of Directors; provided, however, that any individual
becoming a director subsequent to the date hereof whose election, or nomination
for election by the Corporation's shareholders, was approved by a vote of at
least a majority of the directors then comprising the Incumbent Board shall be
considered as though such individual were a member of the Incumbent Board; or
(c) Consummation of a Business Combination, in each case, unless,
following such Business Combination, (A) all or substantially all of the
individuals and entities that were the Beneficial Owners of the Outstanding
Corporation Common Stock and the Outstanding Corporation Voting Securities
immediately prior to such Business Combination Beneficially Own, directly or
indirectly, more than 50% of the then-outstanding shares of common stock and the
combined voting power of the then-outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of the corporation
resulting from such Business Combination (including, without limitation, a
corporation that, as a result of such transaction, owns the Corporation or all
or substantially all of the Corporation's assets either directly or through one
or more subsidiaries) in substantially the same proportions as their ownership
immediately prior to such Business Combination of the Outstanding Corporation
Common Stock and the Outstanding Corporation Voting Securities, as the case may
be, and (B) no Person (excluding any corporation resulting from such Business
Combination or any employee benefit plan (or related trust) of the Corporation
or such corporation resulting from such Business Combination) beneficially owns,
directly or indirectly, 50% or more of, respectively, the then-outstanding
shares of common stock of the corporation resulting from such Business
Combination or the combined voting power of the then-outstanding voting
securities of such corporation; or
(d) Approval by the shareholders of the Corporation of a complete
liquidation or dissolution of the Corporation.
"Common Stock" means the Common Stock of the Corporation, par value
$0.01 per share.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor statute, and the rules and regulations promulgated
thereunder.
"Excluded Stock" means (i) shares of Common Stock issued by the
Corporation as a stock dividend payable in shares of Common Stock, or
upon any subdivision or split-up of the outstanding shares of Capital
Stock in each case which is subject to the provisions of Section
7(c)(ii), or upon conversion of shares of Capital Stock (but not the
issuance of such Capital Stock which will be subject to the provisions
of Section 7(c)(i)(C)), (ii) the issuance of shares of Common Stock in
any bona fide underwritten public offering, (iii) the issuance of
Common Stock in connection with any debt financing from or with one or
more unaffiliated third parties approved by the Board of Directors
(including upon the exercise of any warrants issued in connection with
such financings), (iv) the issuance of shares of Common Stock
(including upon exercise of options) to directors, advisors, employees
or consultants of the Corporation pursuant to a stock option plan,
restricted stock plan or other agreement approved by the Board of
Directors, (v) the issuance of shares of Common Stock in connection
with acquisitions of assets or securities of another Person
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(other than issuances to affiliates of the Corporation), and (vi) the
issuance of shares of Common Stock upon exercise of the Series B
Preferred Stock and the Warrants.
"Market Price" means, with respect to a particular security, on any
given day, the average of the highest and lowest reported sale prices
regular way or, in case no such reported sales takes place on such day,
the average of the highest asked and lowest bid prices regular way, in
either case on the principal national securities exchange on which the
applicable securities is listed or admitted to trading, or if not
listed or admitted to trading on any national securities exchange, (i)
the average of the highest and lowest sale prices for such day reported
by the Nasdaq Stock Market if such security is traded over-the-counter
and quoted in the Nasdaq Stock Market, or (ii) if such security is so
traded, but not so quoted, the average of the highest reported asked
and lowest reported bid prices of such security as reported by the
Nasdaq Stock Market or any comparable system, or (iii) if such security
is not listed on the Nasdaq Stock Market or any comparable system, the
average of the highest asked and lowest bid prices as furnished by two
members of the National Association of Securities Dealers, Inc.
selected from time to time by the Corporation for that purpose. If such
security is not listed and traded in a manner that the quotations
referred to above are available for the period required hereunder, the
Market Price per share of Common Stock shall be deemed to be the fair
value per share of such security as determined in good faith by the
Board of Directors.
"Ordinary Cash Dividends" means any cash dividend or cash distribution
which, when combined on a per share of Common Stock basis with the per
share amounts of all other cash dividends and cash distributions paid
on the Common Stock during the 365-day period ending on the Dividend
Payment Record Date of such dividend or distribution (as adjusted to
appropriately reflect any of the events referred to in Section 7(c) and
excluding (a) cash dividends or cash distributions that resulted in an
adjustment to the Conversion Price, (b) cash dividends paid on the
Common Stock in which the Preferred Stock participates, and (c) cash
dividends or cash distributions paid on the Series B Preferred Stock),
does not exceed 7.5% of the Market Price of a share of Common Stock on
the trading day immediately preceding the date of declaration of such
dividend or distribution.
"Original Issue Date" means the date upon which the initial shares of
Series B Preferred Stock were originally issued by the Corporation.
"Person" means an individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act).
"Pro Rata Repurchases" means any purchase of shares of Common Stock by
the Corporation or any Affiliate thereof pursuant to any tender offer
or exchange offer subject to Section 13(e) of the Exchange Act, or
pursuant to any other offer available to substantially all holders of
Common Stock, whether for cash, shares of capital stock of the
Corporation, other securities of the Corporation, evidences of
indebtedness of the Corporation or any other person or any other
property (including, without limitation, shares of capital stock, other
securities or evidences of indebtedness of a Subsidiary of the
Corporation), or any combination thereof, effected while the Series B
Preferred Stock
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is outstanding; provided, however, that "Pro Rata Repurchase" shall not
include any purchase of shares by the Corporation or any Affiliate
thereof made in accordance with the requirements of Rule 10b-18 as in
effect under the Exchange Act. The "Effective Date" of a Pro Rata
Repurchase shall mean the date of acceptance of shares for purchase or
exchange under any tender or exchange offer which is a Pro Rata
Repurchase or the date of purchase with respect to any Pro Rata
Repurchase that is not a tender or exchange offer.
"Purchase Agreement" means the Purchase Agreement, dated as of August
8, 2000, among the Corporation and the purchasers named therein,
including all schedules and exhibits thereto.
"Rights Agreement" means the Rights Agreement, to be dated as of
September 30, 2000, between the Corporation and the Bank of New York,
as Rights Agent, as amended.
"Subsidiary" of a Person means (i) a corporation, a majority of whose
stock with voting power, under ordinary circumstances, to elect
directors is at the time of determination, directly or indirectly,
owned by such Person or by one or more Subsidiaries of such Person, or
(ii) any other entity (other than a corporation) in which such Person
or one or more Subsidiaries of such Person, directly or indirectly, at
the date of determination thereof has at least a majority ownership
interest.
"Warrants" means collectively the warrants which were issued to the
purchasers named in the Purchase Agreement pursuant to the Purchase
Agreement.
11. MERGER OR CONSOLIDATION OF THE CORPORATION.
Unless approved pursuant to Section 9(c)(i), the Corporation will not
merge or consolidate into, or sell, transfer or lease all or substantially all
of its property to, any other corporation unless the successor, transferee or
lessee corporation, as the case may be (if not the Corporation), (a) expressly
assumes the due and punctual performance and observance of each and every
covenant and condition of this Certificate to be performed and observed by the
Corporation and (b) expressly agrees to exchange, at the holder's option, shares
of Series B Preferred Stock for shares of the surviving corporation's capital
stock on terms substantially similar to the terms under this Certificate.
12. NO OTHER RIGHTS.
The shares of Series B Preferred Stock shall not have any relative,
participating, optional or other special rights and powers except as set forth
herein or as may be required by law.
This Certificate shall become effective at _____ p.m. Eastern Standard
Time on _____ __, 2000.
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IN WITNESS WHEREOF, the Corporation has caused this Certificate to be
duly executed and acknowledged by its undersigned duly authorized officer this
____ day of _____, 2000.
AVAYA INC.
By: ___________________________________
Name:
Title:
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Exhibit B
Form of Warrant
FORM OF SERIES [_________] WARRANT*
THE WARRANTS REPRESENTED BY THIS INSTRUMENT AND THE SECURITIES ISSUABLE
UPON EXERCISE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR SECURITIES LAWS OF ANY STATE AND MAY NOT BE TRANSFERRED, SOLD OR
OTHERWISE DISPOSED OF EXCEPT WHILE A REGISTRATION STATEMENT RELATING THERETO IS
IN EFFECT UNDER SUCH ACT AND APPLICABLE STATE SECURITIES LAWS OR PURSUANT TO AN
EXEMPTION FROM REGISTRATION UNDER SUCH ACT OR SUCH LAWS.
THE WARRANTS REPRESENTED BY THIS INSTRUMENT ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER AS SET FORTH IN A PREFERRED STOCK AND WARRANT PURCHASE
AGREEMENT, DATED AS OF THE 8TH DAY OF AUGUST, 2000, AS IT MAY BE AMENDED FROM
TIME TO TIME, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE OFFICES OF
THE ISSUER. NO REGISTRATION OF TRANSFER OF SUCH WARRANTS WILL BE MADE ON THE
BOOKS OF THE ISSUER UNLESS AND UNTIL SUCH RESTRICTIONS SHALL HAVE BEEN COMPLIED
WITH. ANY TRANSFER NOT IN COMPLIANCE WITH SUCH AGREEMENT SHALL BE VOID. [THIS
PARAGRAPH TO BE DELETED WHEN THIS WARRANT IS NO LONGER HELD BY A PURCHASER (AS
DEFINED IN THE PURCHASE AGREEMENT) OR A PERMITTED TRANSFEREE (AS DEFINED IN THE
PURCHASE AGREEMENT)]
SERIES [________] WARRANT
No. __ October ___, 2000
TO PURCHASE SHARES OF COMMON STOCK, PAR VALUE $0.01
PER SHARE, OF AVAYA INC.
1. Definitions. Unless the context otherwise requires, when used herein
the following terms shall have the meaning indicated.
"Affiliate" means with respect to any Person, any other Person
directly, or indirectly through one or more intermediaries,
controlling, controlled by or under common control with such Person.
For purposes of this definition, the term "control" (and correlative
terms "controlling," "controlled by" and "under common control with")
means possession of the power, whether by contract, equity ownership or
otherwise, to direct the policies or management of a Person.
"Board" means the Board of Directors of the Company.
"Business Combination" means (i) any reorganization, consolidation,
merger, share exchange or similar business combination transaction
involving the Company with any Per-
--------
* This is the Form of Warrant for both Series A and Series B.
80
son or (ii) the sale, assignment, conveyance, transfer, lease or other
disposition by the Company of all or substantially all of its assets.
"Business Day" means any day except Saturday, Sunday and any day which
shall be a legal holiday or a day on which banking institutions in New
York City, New York generally are authorized or required by law or
other governmental actions to close.
"Capital Stock" means (i) with respect to any Person that is a
corporation or company, any and all shares, interests, participations
or other equivalents (however designated) of capital or capital stock
of such Person and (ii) with respect to any Person that is not a
corporation or company, any and all partnership or other equity
interests of such Person.
"Certificate of Designation" means the Certificate of Designation
relating to the Preferred Stock filed with the Secretary of State of
Delaware on September __, 2000.
"Common Stock" means the Company's common stock, par value $0.01 per
share.
"Company" means Avaya Inc., a Delaware corporation.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor statute, and the rules and regulations promulgated
thereunder.
"Excluded Stock" means (i) shares of Common Stock issued by the Company
as a stock dividend payable in shares of Common Stock, or upon any
subdivision or split-up of the outstanding shares of Capital Stock in
each case which is subject to Section 13(B), or upon conversion of
shares of Capital Stock (but not the issuance of such Capital Stock
which will be subject to the provisions of Section 13(A)(iii)), (ii)
the issuance of shares of Common Stock in any bona fide underwritten
public offering, (iii) the issuance of Common Stock in connection with
any debt financing from or with one or more unaffiliated third parties
approved by the Board (including upon the exercise of any warrants
issued in connection with such financings), (iv) the issuance of shares
of Common Stock (including upon exercise of options) to directors,
advisors, employees or consultants of the Company pursuant to a stock
option plan, employee stock purchase plan, restricted stock plan or
other agreement approved by the Board, (v) the issuance of shares of
Common Stock in connection with acquisitions of assets or securities of
another Person (other than issuances to Affiliates of the Company), and
(vi) the issuance of shares of Common Stock upon conversion of the
Preferred Stock and exercise of the Warrants.
"Exercise Price" has the meaning given to it in Section 2(A).
"Expiration Time" has the meaning given to it in Section 3.
"Initial Conversion Price" shall have the meaning set forth in Section
7 of the Certificate of Designation.
"Market Price" means, with respect to a particular security, on any
given day, the average of the highest and lowest reported sale prices
regular way or, in case no such reported sales takes place on such day,
the average of the highest asked and lowest bid prices
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regular way, in either case on the principal national securities
exchange on which the applicable securities is listed or admitted to
trading, or if not listed or admitted to trading on any national
securities exchange, (i) the average of the highest and lowest sale
prices for such day reported by the Nasdaq Stock Market if such
security is traded over-the-counter and quoted in the Nasdaq Stock
Market, or (ii) if such security is so traded, but not so quoted, the
average of the highest reported asked and lowest reported bid prices of
such security as reported by the Nasdaq Stock Market or any comparable
system, or (iii) if such security is not listed on the Nasdaq Stock
Market or any comparable system, the average of the highest asked and
lowest bid prices as furnished by two members of the National
Association of Securities Dealers, Inc. selected from time to time by
the Company for that purpose. If such security is not listed and traded
in a manner that the quotations referred to above are available for the
period required hereunder, the Market Price per share of Common Stock
shall be deemed to be the fair value per share of such security as
determined in good faith by the Board.
"Ordinary Cash Dividends" means any cash dividend or cash distribution
which, when combined on a per share of Common Stock basis with the per
share amounts of all other cash dividends and cash distributions paid
on the Common Stock during the 365-day period ending on the date of
declaration of such dividend or distribution (as adjusted to
appropriately reflect any of the events referred to in Section 13 and
excluding (a) cash dividends or cash distributions that resulted in an
adjustment to the Exercise Price, (b) cash dividends paid on the Common
Stock in which the Preferred Stock participates pursuant to Section
3(a)(i) of the Certificate of Designation and (c) cash dividends or
cash distributions paid on the Preferred Stock), does not exceed 7.5%
of the Market Price of a share of Common Stock on the trading day
immediately preceding the date of declaration of such dividend or
distribution.
"Original Issue Date" means the date on which the Warrants of this
Series were first issued.
"Person" means an individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act).
"Preferred Stock" means the Series B Convertible Participating
Preferred Stock of the Company or successor preferred stock as
contemplated by the Certificate of Designation.
"Pro Rata Repurchases" means any purchase of shares of Common Stock by
the Company or any Affiliate thereof pursuant to any tender offer or
exchange offer subject to Section 13(e) of the Exchange Act, or
pursuant to any other offer available to substantially all holders of
Common Stock, whether for cash, shares of capital stock of the Company,
other securities of the Company, evidences of indebtedness of the
Company or any other person or any other property (including, without
limitation, shares of capital stock, other securities or evidences of
indebtedness of a subsidiary of the Company), or any combination
thereof, effected while this Warrant is outstanding; provided, however,
that "Pro Rata Repurchase" shall not include any purchase of shares by
the Company or any Affiliate thereof made in accordance with the
requirements of Rule 10b-18 as in effect under the Exchange Act. The
"Effective Date" of a Pro Rata Repurchase shall mean the
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date of acceptance of shares for purchase or exchange under any tender
or exchange offer which is a Pro Rata Repurchase or the date of
purchase with respect to any Pro Rata Repurchase that is not a tender
or exchange offer.
"Purchase Agreement" means the Preferred Stock and Warrant Purchase
Agreement, dated as of August 8, 2000, among the Company and the
purchasers named therein, including all schedules and exhibits thereto.
"Rights Agreement" means the Rights Agreement to be dated as of
September 30, 2000 between the Company and the Bank of New York, as
Rights Agent, as amended.
"Rights" is defined in Section 14.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute, and the rules and regulations promulgated
thereunder.
"Shares" is defined in Section 2(A).
"Subsidiary" of a Person means (i) a corporation, a majority of whose
stock with voting power, under ordinary circumstances, to elect
directors is at the time of determination, directly or indirectly,
owned by such Person or by one or more Subsidiaries of such Person, or
(ii) any other entity (other than a corporation) in which such Person
or one or more Subsidiaries of such Person, directly or indirectly, at
the date of determination thereof has at least a majority ownership
interest.
"Warrantholder" has the meaning given to it in Section 2(A).
"Warrants" means collectively the warrants represented hereby (and by
any instrument replacing, in whole or in part, this instrument) which
were issued to the purchasers named in the Purchase Agreement pursuant
to the Purchase Agreement.
2. Number of Shares; Exercise Price.
(A) This certifies that, for value received, [NAME OF WARBURG,
▇▇▇▇▇▇ ENTITY] or its registered assigns (the "Warrantholder")
is entitled, upon the terms and subject to the conditions
hereinafter set forth, to acquire from the Company, in whole
or in part, up to an aggregate of the Applicable Number of
fully paid and nonassessable shares of Common Stock, par value
$0.01 per share, (the "Shares") of the Company, at a per Share
purchase price (the "Exercise Price") equal to 1.3 times the
Initial Conversion Price. The number and type of Shares and
the Exercise Price are subject to adjustment as provided
herein, and all references to "Shares", "Common Stock" and
"Exercise Price" herein shall be deemed to include any such
adjustment or series of adjustments. The "Applicable Number"
means [2.0%/1.6%]+ of the Total Shares Outstanding. "Total
Shares Outstanding" means the quotient of (x) the sum of (a)
all issued and outstanding shares of Common Stock as of the
Original Issue Date (the "Initial Outstanding Amount"),
-----------
+ Series A = 2.0%; Series B = 1.6%.
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and (b) the Option Amount, divided by (y) 0.964. "Option
Amount" means the lesser of (a) the sum of (1) all shares of
Common Stock issuable upon exercise or conversion of all
options and convertible securities granted, sold or issued to
directors, officers or employees of the Company as of the
Original Issue Date which at such date had an exercise or
conversion price less than or equal to the Exercise Price at
the Original Issue Date, whether such shares are vested or
unvested and without regard to the relationship of the
exercise or conversion price thereof to the Market Price of
the Common Stock and (2) all shares and restricted shares of
Common Stock and all shares of Common Stock issuable upon
exercise or conversion of all options and convertible
securities granted, sold or issued to directors, officers or
employees of the Company after the Original Issue Date and on
or prior to the end of the 90th day following the Original
Issue Date which had at the date of grant, sale or issuance an
exercise price (or in the case of shares or restricted shares,
a purchase price) less than or equal to the Exercise Price at
such date of grant, sale or issuance, whether such shares are
vested or unvested and without regard to the relationship of
the exercise or conversion price thereof to the Market Price
of the Common Stock and (b) the product of (1) the Initial
Outstanding Amount and (2) 0.1765.
(B) The Company will prepare a schedule calculating the Applicable
Number and the Total Shares Outstanding and present this
schedule to the initial holders of Warrants of this Series
within 15 Business Days after the 90th day following the
Original Issue Date. If the initial holders concur with such
schedule as prepared by the Company or otherwise do not
respond within 10 Business Days following receipt, the
Applicable Number and the Total Shares Outstanding will be as
set forth therein. If the initial holders dispute the
calculation of the Applicable Number or the Total Shares
Outstanding pursuant to such schedule as proposed by the
Company, the initial holders will note such dispute in writing
to the Company within 10 Business Days following receipt of
such schedule from the Company. If the Company and the initial
holders cannot agree on the calculation of the Applicable
Number and the Total Shares Outstanding within 5 Business Days
following the initial holders' written response noting its
dispute, then the Company and the initial holders will chose a
mutually agreeable investment banking or accounting firm to
compute the Applicable Amount and the Total Shares Outstanding
in accordance with this Warrant, and such computation shall be
final. The fees and expenses of such firm shall be borne
equally by the Company and the initial holders disputing such
calculations. The calculation of the Applicable Number and the
Total Shares Outstanding shall not take into account shares of
Preferred Stock or shares of Common Stock into which the
shares of Preferred Stock are convertible. The Applicable
Number and the Total Shares Outstanding shall be determined as
of the 90th day following the Original Issue Date. Following
the determination of the Applicable Number and the Total
Shares Outstanding the Company and the Warrantholder shall
amend this Warrant to set forth the amount thereof.
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3. Exercise Rights.
(A) Exercise of Warrant; Term. The right to purchase the Shares
represented by this Warrant is exercisable, in whole or in
part, by the Warrantholder, at any time or from time to time
but in no event later than 11:59 p.m. New York City Time, on
[insert fourth/fifth anniversary of the date of issuance of
Warrant]++ (the "Expiration Time"), by (a) the surrender of
this Warrant and Notice of Exercise annexed hereto, duly
completed and executed on behalf of the Warrantholder, at the
office of the Company in Basking Ridge, New Jersey (or such
other office or agency of the Company in the United States as
it may designate by notice in writing to the Warrantholder at
the address of the Warrantholder appearing on the books of the
Company), and (b) payment of the Exercise Price for the Shares
thereby purchased at the election of the Warrantholder in one
of the following manners:
(i) by tendering in cash, by certified or cashier's check or by
wire transfer payable to the order of the Company; or
(ii) by having the Company withhold shares of Common Stock issuable
upon exercise of this Warrant equal in value to the aggregate
Exercise Price as to which this Warrant is so exercised based
on the Market Price of the Common Stock on the trading day
prior to the date on which this Warrant and the Notice of
Exercise are delivered to the Company.
(B) Mandatory Exercise. At any time beginning on the later of (x)
the date that is six months after the Original Issue Date or
(y) the date that the Warrant Registration Statement shall
have become effective under the Securities Act, and continuing
until the second anniversary of the Original Issue Date, at
the Company's option, the Warrantholder shall be required to
exercise this Warrant with respect to up to 50% of the
Applicable Number, but only if the average of the Market
Prices of the Common Stock has been at least [2.0/2.25]$ times
the Initial Conversion Price over a period of 20 consecutive
trading days, ending on a trading day with respect to which
the Market Price is at least [2.0/2.25]** times the Initial
Conversion Price and which is no more than five trading days
prior to the date on which the Company delivered written
notice thereof to the Warrantholder, which notice shall state
the number of Shares subject to such exercise and the date of
exercise (which date must be no fewer than 10 days after, and
no more than 20 days after, the date of the notice) (the
"Exercise Deadline Date"). If the Warrantholder is required to
exercise this Warrant pursuant to this Section 3(B), the
method of exercise shall be the same as the method described
in Section 3(A); provided, however, that if the Warrantholder
fails to exercise this Warrant on or prior to the Exercise
Deadline Date, the Company shall effect the exercise of this
Warrant on the next succeeding day by withholding shares of
Common Stock in the manner described in Section 3(A)(ii) based
on the Market Price of the Common Stock on the
++ Series A= 4th Anniversary; Series B= 5th Anniversary
$ Series A = 2.0 times; Series B = 2.25 times.
** Series A = 2.0 times; Series B = 2.25 times.
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Exercise Deadline Date. The Company shall deliver, in
accordance with Section 4, the shares of Common Stock (and any
cash in lieu of fractional shares) issued as a result of any
exercise pursuant to the proviso to the immediately preceding
sentence to the Warrantholder who failed to exercise in the
name and at the address of the Warrantholder appearing on the
books of the Company and such Warrantholder's Warrant shall
thereafter be null and void with respect to the portion of the
Warrant so exercised. "Warrant Registration Statement" shall
mean a registration statement filed by the Company under the
Securities Act registering the sale by the initial purchasers
and Permitted Transferees (as defined in the Purchase
Agreement) of the Warrants and the shares of Common Stock
issuable upon exercise of this Warrant, in accordance with
Section 5.10 of the Purchase Agreement.
(C) Replacement of Warrant. If the exercising (or selling, as the
case may be) Warrantholder does not exercise (or sell, as the
case may be) this Warrant in its entirety, the Warrantholder
will be entitled to receive from the Company within a
reasonable time, not exceeding three (3) Business Days, a new
warrant in substantially identical form for the purchase of
that number of Shares equal to the difference between the
number of Shares subject to this Warrant and the number of
Shares as to which this Warrant is so exercised (or sold, as
the case may be); provided, however, that if the Warrantholder
is required to deliver this Warrant to the Company pursuant to
Section 3(B) and fails to do so, the Warrantholder shall not
be entitled to receive a new warrant from the Company until
the Warrantholder delivers this Warrant to the Company and
then only in respect of the portion of the Warrant not
exercised pursuant to Section 3(B).
4. Issuance of Shares; Authorization; Listing. Subject to the next
sentence, certificates for Shares issued upon exercise of this Warrant
will be issued in such name or names as the Warrantholder may designate
and will be delivered to such named Person or Persons within a
reasonable time, not to exceed three (3) Business Days after the date
on which this Warrant has been duly exercised in accordance with the
terms of this Warrant. In the event this Warrant is exercised prior to
the final determination of the Exercise Price and the number of shares
of Common Stock issuable upon exercise of this Warrant, such exercise
shall be effective when made but payment of the exercise price shall be
made and certificates for Shares shall be issued, three (3) Business
Days after final determination of the Exercise Price. The Company
hereby represents and warrants that any Shares issued upon the exercise
of this Warrant in accordance with the provisions of Section 3 will,
upon issuance and payment therefor, be duly and validly authorized and
issued, fully paid and nonassessable, free from all preemptive rights
and free from all taxes, liens, security interests and charges (other
than liens or charges created by or imposed upon the Warrantholder or
taxes in respect of any transfer occurring contemporaneously
therewith). The Company agrees that the Shares so issued will be deemed
to have been issued to the Warrantholder as of the close of business on
the date on which this Warrant and payment of the Exercise Price are
delivered to the Company in accordance with the terms of this Warrant,
notwithstanding that the stock transfer books of the Company may then
be closed or certificates representing such Shares may not be actually
delivered on such date. The Company will at all times reserve and keep
available, free from preemptive
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rights, out of its authorized but unissued Common Stock, solely for the
purpose of providing for the exercise of this Warrant, the aggregate
number of shares of Common Stock issuable upon exercise of this
Warrant. The Company will procure, at its sole expense, the listing of
the Shares, subject to issuance or notice of issuance on the principal
domestic stock exchange on which the Common Stock is then listed or
traded. The Company will take all commercially reasonable action as may
be necessary to ensure that the Shares may be issued without violation
of any applicable law or regulation or of any requirement of any
securities exchange on which the Shares are listed or traded.
5. No Fractional Shares or Scrip. No fractional Shares or scrip
representing fractional Shares shall be issued upon any exercise of
this Warrant. In lieu of any fractional Share to which the
Warrantholder would otherwise be entitled, the Warrantholder shall be
entitled to receive a cash payment equal to the Market Price per share
of Common Stock computed as of the trading day immediately preceding
the date the Warrant is presented for exercise, multiplied by such
fraction of a Share.
6. No Rights as Shareholders. This Warrant does not entitle the
Warrantholder to any voting rights or other rights as a shareholder of
the Company prior to the date of exercise hereof.
7. Charges, Taxes and Expenses. Issuance of certificates for shares of
Common Stock upon the exercise of this Warrant shall be made without
charge to the Warrantholder or such designated Persons for any issue or
transfer tax (other than taxes in respect of any transfer occurring
contemporaneously therewith or as a result of the holder being a
non-U.S. person) or other incidental expense in respect of the issuance
of such certificates, all of which taxes and expenses shall be paid by
the Company; provided, however, that the Company shall not be required
to pay any tax which may be payable in respect of any transfer involved
in the issuance or delivery of shares of Common Stock in a name other
than that of the Warrantholder or such designated Persons, and no such
issuance or delivery shall be made unless and until the person
requesting such issuance or delivery has paid to the Company the amount
of any such tax or has established, to the satisfaction of the Company,
that such tax has been paid.
8. Transfer/Assignment. This Warrant and any rights hereunder are not
transferable by the Warrantholder, in whole or in part, in the absence
of any effective registration statement related to this Warrant or an
opinion of counsel, satisfactory in form and substance to the Company,
that such registration is not required under the Securities Act and any
applicable state securities laws. Subject to compliance with the
preceding sentence, this Warrant and all rights hereunder are
transferable, in whole or in part, upon the books of the Company by the
registered holder hereof in person or by duly authorized attorney, and
a new warrant shall be made and delivered by the Company, of the same
tenor as this Warrant but registered in the name of the transferee,
upon surrender of this Warrant, duly endorsed, to the office or agency
of the Company described in Section 3. All expenses, taxes (other than
stock transfer taxes or taxes imposed because the transferee is a
non-U.S. Person) and other charges payable in connection with the
preparation, execution and delivery of the new warrants pursuant to
this Section 8 shall be paid by the Company. The restrictions imposed
by the first sentence of this Section 8 shall terminate as to the
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Warrant (i) when such security has been effectively registered under
the Securities Act and disposed of in accordance with the registration
statement covering such security, except with respect to securities
held following such disposition by Affiliates of the Company, or (ii)
when, in the opinion of counsel for the Company, such restrictions are
no longer required in order to achieve compliance with the Securities
Act.
9. Exchange and Registry of Warrant. This Warrant is exchangeable, upon
the surrender hereof by the Warrantholder at the office or agency of
the Company described in Section 3, for a new warrant or warrants of
like tenor representing the right to purchase in the aggregate a like
number of shares. The Company shall maintain at the office or agency
described in Section 3 a registry showing the name and address of the
Warrantholder as the registered holder of this Warrant. This Warrant
may be surrendered for exchange or exercise, in accordance with its
terms, at the office of the Company, and the Company shall be entitled
to rely in all respects, prior to written notice to the contrary, upon
such registry.
10. Loss, Theft, Destruction or Mutilation of Warrant. If this Warrant is
mutilated, lost, stolen or destroyed, the Company will issue and
deliver in substitution for and upon cancellation of the mutilated
Warrant, or in substitution for the Warrant lost, stolen or destroyed,
a new warrant or warrants of like tenor and representing an equivalent
right or interest, but only upon, in the case of a lost, stolen or
destroyed certificate, receipt of evidence satisfactory to the Company
of such loss, theft or destruction. If required by the Company, the
Warrantholder shall furnish an indemnity bond sufficient to protect the
Company from any out-of-pocket loss which it may suffer if a Warrant is
replaced. The Company may charge the Warrantholder for its reasonable
expenses in replacing a Warrant.
11. Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
taking of any action or the expiration of any right required or granted
herein shall not be a Business Day, then such action may be taken or
such right may be exercised on the next succeeding day that is a
Business Day.
12. Rule 144 Information. The Company covenants that it will file the
reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations promulgated thereunder (or,
if the Company is not required to file such reports, it will, upon the
request of any Warrantholder, make publicly available such information
as is described in Rule 144(c)(2) under the Securities Act). Upon the
request of any Warrantholder, the Company will deliver to such
Warrantholder a written statement that it has complied with such
requirements.
13. Adjustments and Other Rights. The Exercise Price and the number of
Shares issuable upon exercise of this Warrant shall be subject to
adjustment from time to time as follows:
(A) Common Stock Issued at Less than Market Value. If the Company
issues or sells any Common Stock other than Excluded Stock
without consideration or for consideration per share less than
the Market Price of the Common Stock, as of the day of such
issuance or sale, the Exercise Price in effect immediately
prior to each
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such issuance or sale will immediately (except as provided
below) be reduced to the price determined by multiplying the
Exercise Price, in effect immediately prior to such issuance
or sale, by a fraction, (1) the numerator of which shall be
(x) the number of shares of Common Stock outstanding
immediately prior to such issuance or sale plus (y) the number
of shares of Common Stock which the aggregate consideration
received by the Company for the total number of such
additional shares of Common Stock so issued or sold would
purchase at the Market Price on the last trading day
immediately preceding such issuance or sale and (2) the
denominator of which shall be the number of shares of Common
Stock outstanding immediately after such issue or sale. In
such event, the number of shares of Common Stock issuable upon
the exercise of this Warrant shall be increased to the number
obtained by dividing (i) the product of (a) the number of
Shares issuable upon the exercise of this Warrant before such
adjustment, and (b) the Exercise Price in effect immediately
prior to the issuance giving rise to this adjustment by (ii)
the new Exercise Price determined in accordance with the
immediately preceding sentence. For the purposes of any
adjustment of the Exercise Price and the number of Shares
issuable upon exercise of this Warrant pursuant to this
Section 13(A), the following provisions shall be applicable:
(i) In the case of the issuance of Common Stock for cash, the
amount of the consideration received by the Company shall be
deemed to be the amount of the cash proceeds received by the
Company for such Common Stock before deducting therefrom any
discounts or commissions allowed, paid or incurred by the
Company for any underwriting or otherwise in connection with
the issuance and sale thereof.
(ii) In the case of the issuance of Common Stock (otherwise than
upon the conversion of shares of Capital Stock or other
securities of the Company) for a consideration in whole or in
part other than cash, including securities acquired in
exchange therefor (other than securities by their terms so
exchangeable), the consideration other than cash shall be
deemed to be the fair value thereof as determined by the
Board, provided, however, that such fair value as determined
by the Board shall not exceed the aggregate Market Price of
the shares of Common Stock being issued as of the date the
Board authorizes the issuance of such shares.
(iii) In the case of the issuance of (a) options, warrants or other
rights to purchase or acquire Common Stock (whether or not at
the time exercisable) or (b) securities by their terms
convertible into or exchangeable for Common Stock (whether or
not at the time so convertible or exchangeable) or options,
warrants or rights to purchase such convertible or
exchangeable securities (whether or not at the time
exercisable):
(a) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options, warrants or other
rights to purchase or acquire Common Stock shall be deemed to
have been issued at the time such options, warrants or rights
are issued and for a consideration equal to the consideration
(determined in the manner provided in Section 13(A)(i) and
(ii)), if any, received by the Com-
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pany upon the issuance of such options, warrants or rights
plus the minimum purchase price provided in such options,
warrants or rights for the Common Stock covered thereby;
(b) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any such
convertible or exchangeable securities, or upon the exercise
of options, warrants or other rights to purchase or acquire
such convertible or exchangeable securities and the subsequent
conversion or exchange thereof, shall be deemed to have been
issued at the time such securities were issued or such
options, warrants or rights were issued and for a
consideration equal to the consideration, if any, received by
the Company for any such securities and related options,
warrants or rights (excluding any cash received on account of
accrued interest or accrued dividends), plus the additional
consideration (determined in the manner provided in Section
13(A)(i) and (ii)), if any, to be received by the Company upon
the conversion or exchange of such securities, or upon the
exercise of any related options, warrants or rights to
purchase or acquire such convertible or exchangeable
securities and the subsequent conversion or exchange thereof;
(c) on any change in the number of shares of Common Stock
deliverable upon exercise of any such options, warrants or
rights or conversion or exchange of such convertible or
exchangeable securities or any change in the consideration to
be received by the Company upon such exercise, conversion or
exchange, but excluding changes resulting from the
anti-dilution provisions thereof (to the extent comparable to
the anti-dilution provisions contained herein), the Exercise
Price and the number of Shares issuable upon exercise of this
Warrant as then in effect shall forthwith be readjusted to
such Exercise Price and number of Shares as would have been
obtained had an adjustment been made upon the issuance of such
options, warrants or rights not exercised prior to such
change, or of such convertible or exchangeable securities not
converted or exchanged prior to such change, upon the basis of
such change;
(d) on the expiration or cancellation of any such options,
warrants or rights (without exercise), or the termination of
the right to convert or exchange such convertible or
exchangeable securities (without exercise), if the Exercise
Price and the number of Shares issuable upon exercise of this
Warrant shall have been adjusted upon the issuance thereof,
the Exercise Price and the number of Shares issuable upon
exercise of this Warrant shall forthwith be readjusted to such
Exercise Price and number of Shares as would have been
obtained had an adjustment been made upon the issuance of such
options, warrants, rights or such convertible or exchangeable
securities on the basis of the issuance of only the number of
shares of Common Stock actually issued upon the exercise of
such options, warrants or rights, or upon the conversion or
exchange of such convertible or exchangeable securities; and
(e) if the Exercise Price and the number of Shares issuable upon
exercise of this Warrant shall have been adjusted upon the
issuance of any such options, warrants,
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rights or convertible or exchangeable securities, no further
adjustment of the Exercise Price and the number of Shares
issuable upon exercise of this Warrant shall be made for the
actual issuance of Common Stock upon the exercise, conversion
or exchange thereof.
(B) Stock Splits, Subdivisions, Reclassifications or Combinations.
If the Company shall (1) declare a dividend or make a
distribution on its Common Stock in shares of Common Stock,
(2) subdivide or reclassify the outstanding shares of Common
Stock into a greater number of shares, or (3) combine or
reclassify the outstanding Common Stock into a smaller number
of shares, the number of Shares issuable upon exercise of this
Warrant at the time of the record date for such dividend or
distribution or the effective date of such subdivision,
combination or reclassification shall be proportionately
adjusted so that the Warrantholder after such date shall be
entitled to purchase the number of shares of Common Stock
which such holder would have owned or been entitled to receive
after such date had this Warrant been exercised immediately
prior to such date. In such event, the Exercise Price in
effect at the time of the record date for such dividend or
distribution or the effective date of such subdivision,
combination or reclassification shall be adjusted to the
number obtained by dividing (i) the product of (a) the number
of Shares issuable upon the exercise of this Warrant before
such adjustment and (b) the Exercise Price in effect
immediately prior to the issuance giving rise to this
adjustment by (ii) the new number of Shares issuable upon
exercise of the Warrant determined pursuant to the immediately
preceding sentence.
(C) Other Distributions. In case the Company shall fix a record
date for the making of a distribution to all holders of shares
of its Common Stock (i) of shares of any class or of any
Person other than shares of the Company's Common Stock or (ii)
of evidence of indebtedness of the Company or any Subsidiary
or (iii) of assets (excluding Ordinary Cash Dividends, and
dividends or distributions referred to in Section 13(B)), or
(iv) of rights or warrants, in each such case the number of
Shares issuable upon exercise of this Warrant shall be
multiplied by a fraction, the numerator of which is the Market
Price per share of Common Stock on such record date and the
denominator of which is the Market Price per share of Common
Stock on such record date less the fair market value (as
reasonably determined by the Board, which amount shall be the
cash amount in the case of a distribution in cash) of said
shares or evidences of indebtedness or assets or rights or
warrants to be so distributed per share of Common Stock; such
adjustment shall take effect on the record date for such
distribution. In such event, the Exercise Price shall be
multiplied by a fraction, the numerator of which is the number
of Shares issuable upon the exercise of this Warrant before
such adjustment, and the denominator of which is the new
number of Shares issuable upon exercise of this Warrant
determined in accordance with the immediately preceding
sentence. Notwithstanding the foregoing, in the event that the
fair market value (as determined above) of the shares or
evidences of indebtedness or assets or rights or warrants to
be so distributed with respect to one share of Common Stock is
equal to or greater than the Market Price per share of Common
Stock on such record date, then proper provision shall be made
such that upon exercise of the Warrant, the holder shall
receive
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the amount and kind of such shares, assets, evidences of
indebtedness, rights or warrants such holders would have
received had such holders exercised this Warrant immediately
prior to such record date. In the event that such distribution
is not so made, the Exercise Price and the number of Shares
issuable upon exercise of this Warrant then in effect shall be
readjusted, effective as of the date when the Board determines
not to distribute such shares, evidences of indebtedness,
assets, rights or warrants, as the case may be, to the
Exercise Price that would then be in effect and the number of
Shares that would then be issuable upon exercise of this
Warrant if such record date had not been fixed.
(D) Certain Repurchases of Common Stock. In case the Company
effects a Pro Rata Repurchase of Common Stock, then the
Exercise Price shall be reduced to the price determined by
multiplying the Exercise Price in effect immediately prior to
the effective date of such Pro Rata Repurchase by a fraction
of which the numerator shall be (i) the product of (x) the
number of shares of Common Stock outstanding immediately
before such Pro Rata Repurchase and (y) the Market Price of a
share of Common Stock on the trading day immediately preceding
the first public announcement by the Company or any of its
Affiliates of the intent to effect such Pro Rata Repurchase,
minus (ii) the aggregate purchase price of the Pro Rata
Repurchase, and of which the denominator shall be the product
of (i) the number of shares of Common Stock outstanding
immediately prior to such Pro Rata Repurchase minus the number
of shares of Common Stock so repurchased and (ii) the Market
Price per share of Common Stock on the trading day immediately
preceding the first public announcement of such Pro Rata
Repurchase. In such event, the number of shares of Common
Stock issuable upon the exercise of this Warrant shall be
increased to the number obtained by dividing (i) the product
of (a) the number of Shares issuable upon the exercise of this
Warrant before such adjustment, and (b) the Exercise Price in
effect immediately prior to the Pro Rata Repurchase giving
rise to this adjustment by (ii) the new Exercise Price
determined in accordance with the immediately preceding
sentence.
(E) Business Combinations. In case of any Business Combination or
reclassification of Common Stock (other than a
reclassification of Common Stock referred to in Section
13(B)), any Shares issued or issuable upon exercise of this
Warrant after the date of such Business Combination or
reclassification will be exchangeable for the number of shares
of stock or other securities or property (including cash) to
which the Common Stock issuable (at the time of such Business
Combination or reclassification) upon exercise of this Warrant
immediately prior to such Business Combination or
reclassification would have been entitled upon such Business
Combination or reclassification; and in any such case, if
necessary, the provisions set forth herein with respect to the
rights and interests thereafter of the Warrantholder shall be
appropriately adjusted so as to be applicable, as nearly as
may reasonably be, to any shares of stock or other securities
or property thereafter deliverable on the exercise of this
Warrant. In determining the kind and amount of stock,
securities or the property receivable upon consummation of
such Business Combination or reclassification, if the holders
of Common Stock have the right to elect the kind or amount of
consideration receivable upon consummation of such
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Business Combination, then the Warrantholder shall have the
right to make a similar election upon exercise of this Warrant
with respect to the number of shares of stock or other
securities or property which the Warrantholder will receive
upon exercise of this Warrant.
(F) Successive Adjustments. Successive adjustments in the Exercise
Price and the number of shares of Common Stock issuable upon
exercise of this Warrant shall be made, without duplication,
whenever any event specified in Sections 13(A), (B), (C), (D)
and (E) shall occur.
(G) Rounding of Calculations; Minimum Adjustments. All
calculations under this Section 13 shall be made to the
nearest one-tenth (1/10th) of a cent or to the nearest
one-hundreth (1/100th) of a share, as the case may be. No
adjustment in the Exercise Price or the number of Shares into
which this Warrant is exercisable is required if the amount of
such adjustment would be less than $0.01 or one-tenth (1/10th)
of a share of Common Stock, as the case may be; provided,
however, that any adjustments which by reason of this Section
13(G) are not required to be made will be carried forward and
given effect in any subsequent adjustment.
(H) Timing of Issuance of Additional Common Stock Upon Certain
Adjustments. Notwithstanding the foregoing, in any case in
which the provisions of this Section 13 shall require that an
adjustment shall become effective immediately after a record
date for an event, the Company may defer until the occurrence
of such event (i) issuing to the Warrantholder of this Warrant
exercised after such record date and before the occurrence of
such event the additional shares of Common Stock issuable upon
such exercise by reason of the adjustment required by such
event over and above the shares of Common Stock issuable upon
such exercise before giving effect to such adjustment and (ii)
paying to such Warrantholder any amount of cash in lieu of a
fractional share of Common Stock; provided, however, that the
Company upon request shall deliver to such Warrantholder a due
▇▇▇▇ or other appropriate instrument evidencing such
Warrantholder's right to receive such additional shares, and
such cash, upon the occurrence of the event requiring such
adjustment.
(I) Adjustment for Unspecified Actions. If the Company takes any
action affecting the Common Stock, other than action described
in this Section 13, which in the opinion of the Board would
materially adversely affect the exercise rights of the
Warrantholders, the Exercise Price for the Warrants and/or the
number of Shares received upon exercise of the Warrant may be
adjusted, to the extent permitted by law, in such manner, if
any, and at such time, as such Board may determine in good
faith to be equitable in the circumstances. Failure of the
Board to provide for any such adjustment prior to the
effective date of any such action by the Company affecting the
Common Stock will be evidence that the Board has determined
that it is equitable to make no adjustments in the
circumstances.
(J) Voluntary Adjustment by the Company. The Company may at its
option, at any time during the term of the Warrants, reduce
the then current Exercise Price or in-
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crease the number of Shares for which the Warrant may be
exercised to any amount deemed appropriate by the Board;
provided, however, that if the Company elects to make such
adjustment, such adjustment will remain in effect for at least
a 15-day period, after which time the Company may, at its
option, reinstate the Exercise Price or number of Shares in
effect prior to such reduction, subject to any interim
adjustments pursuant to this Section 13.
(K) Statement Regarding Adjustments. Whenever the Exercise Price
or the number of Shares into which this Warrant is exercisable
shall be adjusted as provided in this Section 13, the Company
shall forthwith file, at the principal office of the Company a
statement showing in reasonable detail the facts requiring
such adjustment and the Exercise Price that shall be in effect
and the number of Shares into which this Warrant shall be
exercisable after such adjustment and the Company shall also
cause a copy of such statement to be sent by mail, first class
postage prepaid, to each Warrantholder at the address
appearing in the Company's records.
(L) Notices. In the event that the Company shall give notice or
make a public announcement to the holders of Common Stock of
any action of the type described in this Section 13 (but only
if the action of the type described in this Section 13 would
result in an adjustment in the Exercise Price or the number of
Shares into which this Warrant is exercisable or a change in
the type of securities or property to be delivered upon
exercise of this Warrant), the Company shall, at the time of
such notice or announcement, and in the case of any action
which would require the fixing of a record date, at least 10
days prior to such record date, give notice to the
Warrantholder, in the manner set forth in Section 13(K), which
notice shall specify the record date, if any, with respect to
any such action and the approximate date on which such action
is to take place. Such notice shall also set forth the facts
with respect thereto as shall be reasonably necessary to
indicate the effect on the Exercise Price and the number, kind
or class of shares or other securities or property which shall
be deliverable upon exercise of this Warrant. Failure to give
such notice, or any defect therein, shall not affect the
legality or validity of any such action.
(M) Miscellaneous. Except as provided in Section 13, no adjustment
in respect of any dividends or other payments or distributions
made to Warrantholders of securities issuable upon exercise of
Warrants will be made during the term of a Warrant or upon the
exercise of a Warrant. In addition, notwithstanding any of the
foregoing, no such adjustment will be made for the issuance or
conversion of (a) any Securities (as defined in the Purchase
Agreement) or (b) any rights under the Rights Agreement or any
successor agreement unless such rights become exercisable (in
which case they will be deemed for purposes of this Warrant to
have been issued at the time they become exercisable).
(N) No Impairment. The Company will not, by amendment of its
Articles or through any reorganization, transfer of assets,
consolidation, merger, 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 to be
observed or performed hereunder
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by the Company, but will at all times in good faith assist in
the carrying out of all the provisions of this Warrant and in
taking of all such action as may be necessary or appropriate
in order to protect the rights of the Warrantholder.
14. Rights. Whenever the Company shall issue shares of Common Stock upon
exercise of this Warrant, the Company shall issue, together with each
such share of Common Stock, one right to purchase Series A Junior
Participating Preferred Stock, $1.00 par value per share, of the
Company (or other securities in lieu thereof) pursuant to the Rights
Agreement, or any similar rights issued to holders of Common Stock in
addition thereto or in the replacement therefor (such rights, together
with any additional or replacement rights, being collectively referred
to as the "Rights"), whether or not such Rights shall be exercisable at
such time, but only if such Rights are issued and outstanding and held
by the other holders of Common Stock (or evidenced by outstanding share
certificates representing Common Stock) at such time and have not
expired or been redeemed.
15. Merger or Consolidation of the Company. The Company will not merge or
consolidate into, or sell, transfer or lease all or substantially all
of its property to, any other corporation unless the successor,
transferee or lessee corporation, as the case may be (if not the
Company), (a) expressly assumes the due and punctual performance and
observance of each and every covenant and condition of this Warrant to
be performed and observed by the Company and (b) expressly agrees to
exchange, at the Warrantholder's option, this Warrant for a warrant or
warrants on such surviving corporation's common stock on terms
substantially similar to the terms under this Warrant.
16. GOVERNING LAW. THIS WARRANT SHALL BE BINDING UPON ANY SUCCESSORS OR
ASSIGNS OF THE COMPANY. THIS WARRANT SHALL CONSTITUTE A CONTRACT UNDER
THE LAWS OF THE STATE OF DELAWARE AND FOR ALL PURPOSES SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
DELAWARE, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES.
17. Attorneys' Fees. A party in breach of this Warrant shall, on demand,
indemnify and hold harmless the other party for and against all
reasonable out-of-pocket expenses, including legal fees, incurred by
such other party by reason of the enforcement and protection of its
rights under this Warrant. The payment of such expenses is in addition
to any other relief to which such other party may be entitled.
18. Amendments. This Warrant may be amended and the observance of any term
of this Warrant may be waived only with the written consent of the
Company and the Warrantholder.
19. Notice. All notices hereunder shall be in writing and shall be
effective (a) on the day on which delivered if delivered personally or
transmitted by telex or telegram or telecopier with evidence of
receipt, (b) one Business Day after the date on which the same is
delivered to a nationally recognized overnight courier service with
evidence of receipt, or (c) five Business Days after the date on which
the same is deposited, postage prepaid, in the U.S. mail, sent by
certified or registered mail, return receipt requested, and addressed
to the party to be notified at the address indicated below for the
Company, or at the address
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for the Warrantholder set forth in the registry maintained by the
Company pursuant to Section 9, or at such other address and/or telecopy
or telex number and/or to the attention of such other person as the
Company or the Warrantholder may designate by ten-day advance written
notice.
20. Entire Agreement. This Warrant and the forms attached hereto contain
the entire agreement between the parties with respect to the subject
matter hereof and supersede all prior and contemporaneous arrangements
or undertakings with respect thereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
by a duly authorized officer.
Dated: October ___, 2000
AVAYA INC.
By: __________________________________
Name:
Title:
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[FORM OF NOTICE OF EXERCISE]
Date: ______________
TO: Avaya Inc.
RE: Election to Subscribe for and Purchase Common Stock
The undersigned, pursuant to the provisions set forth in the attached
Warrant, hereby agrees to subscribe for and purchase the number of shares of the
Common Stock set forth below covered by such Warrant. The undersigned, in
accordance with Section 3 of the Warrant, hereby agrees to pay the aggregate
Exercise Price for such shares of Common Stock in the manner set forth below. A
new warrant evidencing the remaining shares of Common Stock covered by such
Warrant, but not yet subscribed for and purchased, should be issued in the name
set forth below. If the new warrant is being transferred, an opinion of counsel
is attached hereto with respect to the transfer of such warrant.
Number of Shares of Common Stock: ______________________________
Method of Payment of Exercise Price: ___________________________
Name and Address of Person to be
Issued New Warrant: ____________________________________________
____________________________________________
____________________________________________
____________________________________________
Holder: ______________________________
By: ___________________________________
Name: _________________________________
Title: ________________________________
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Exhibit C
Form of Cravath, Swaine & ▇▇▇▇▇ Opinion
1. Based solely on a certificate from the Secretary of State
of the State of Delaware, the Company is a corporation validly existing and in
good standing under the laws of the State of Delaware.
2. Each of the Purchase Agreement and the Escrow Agreement has
been duly authorized, executed and delivered by the Company, and constitutes a
legal, valid and binding obligation of the Company, enforceable against the
Company in accordance with its terms (subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer and other similar
laws relating or affecting creditors' rights generally from time to time in
effect and to general principles of equity, including, without limitation,
concepts of materiality, reasonableness, good faith and fair dealing, regardless
of whether considered in a proceeding in equity or at law). With respect to the
foregoing opinion, (i) insofar as provisions contained in the Registration
Rights Provisions provide for indemnification, the enforceability thereof may be
limited by public policy considerations, (ii) the availability of a decree for
specific performance or an injunction is subject to the discretion of the court
requested to issue any such decree or injunction and (iii) we express no opinion
as to the enforceability of Section 5.09 of the Purchase Agreement.
3. The Certificate of Designation has been duly authorized and
executed by the Company, and, based solely upon advice from Corporation Trust
Company, has been filed with the Secretary of State of the State of Delaware.
4. The Series B Preferred Shares have been duly and validly
authorized, and, when issued and delivered to and paid for by the Purchasers
pursuant to the Purchase Agreement, will be validly issued, fully paid, and
nonassessable.
5. The Warrants have been duly authorized, executed, issued
and delivered and, when delivered to and paid for by the Purchasers pursuant to
the Purchase Agreement, will constitute valid and legally binding obligations of
the Company.
6. The shares of Common Stock into which the Series B
Preferred Shares are convertible and for which the Warrants are exercisable have
been duly and validly authorized and, when issued and delivered upon conversion
of the Series B Preferred Shares, as contemplated in the Certificate of
Designation, or exercise of the Warrants will be validly issued, fully paid, and
nonassessable.
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Exhibit D
Registration Rights Provisions
1. Suspension of Registration Statement. Anything in this
Agreement to the contrary notwithstanding, it is understood and agreed that the
Company shall not be required to keep any shelf registration effective or
useable for offers and sales of the Registrable Securities, file a post
effective amendment to a shelf registration statement or prospectus supplement
or to supplement or amend any registration statement, if (A) the Registration
Statement, any prospectus or prospectus supplement constituting a part thereof,
or any document incorporated by reference in any of the foregoing contains an
untrue statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not misleading,
in the light of the circumstances under which they are made; (B) the Company is
in possession of material information that it deems advisable not to disclose in
a Registration Statement; (C) the Company has determined to proceed with a
public offering of its equity securities and, in the judgment of the managing
underwriter thereof or the Company (if such offering is not underwritten), sales
under the Registration Statement would have a material adverse effect on such
offering; or (D) the Company is engaged in any program for the purchase of
shares of its own Common Stock, unless such repurchase program and the requested
sale may proceed concurrently pursuant to an exemption under the Commission's
Regulation M or any other applicable exemption (it being understood that, to the
extent consistent with any such program, the Company will use commercially
reasonable efforts to make an exemption available to the beneficiaries of these
registration rights (the "Beneficiaries") or to otherwise open up a sufficient
window period under Regulation M to enable the Beneficiary to obtain the
liquidity it desires hereunder). The Company shall provide notice of any such
suspension to the Warburg Group Director, or if there is then no Warburg Group
Director, to Warburg and each Beneficiary in accordance with Section 8.03 of
this Agreement. Upon receipt by a Beneficiary of notice of an event of the kind
described in this Section 1, such Beneficiary shall forthwith discontinue such
Beneficiary's disposition of Registrable Securities until the Company has
provided notice that such disposition may continue and of any supplemented or
amended prospectus indicated in such notice. The Company agrees that any period
in which sales, transfers or dispositions must be discontinued as a result of a
given occurrence of a circumstance referred to in the preceding sentence shall
not exceed 60 days, and shall not exceed 120 days in the aggregate over any
12-month period.
2. Indemnification by the Company. The Company agrees to
indemnify and hold harmless each Beneficiary, its officers and directors, and
each person, if any, who
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controls such Beneficiary, within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages and liabilities (including, without limitation, any
legal or other expenses reasonably incurred by such Beneficiary, any of its
officers or directors or any such controlling person in connection with
defending or investigating any such action or claim) caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or any prospectus relating to Registrable Securities (as
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) or any preliminary prospectus, or caused by any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading, except insofar as such losses, claims,
damages or liabilities are caused by any such untrue statement or omission or
alleged untrue statement or omission based upon information furnished by such
Beneficiary or the plan of distribution furnished in writing to the Company by
or on behalf of such Beneficiary expressly for use therein; provided, however,
that the foregoing indemnity agreement with respect to any prospectus shall not
inure to the benefit of such Beneficiary if a copy of the most current
prospectus at the time of the delivery of the securities was made available to
such Beneficiary but was not provided by the Beneficiary or any Underwriter to
the buyer of such securities and such current prospectus would have cured the
defect giving rise to such loss, claim, damage or liability. The Company also
agrees to indemnify any Underwriters of any Registrable Securities, their
officers and directors and each person who controls such Underwriters on
substantially the same basis as that of the indemnification of Beneficiary
provided in this Section 2. As used throughout this Exhibit, "Underwriter" means
a securities dealer who purchases any Registrable Securities as principal and
not as part of such dealer's market-making activities.
3. Indemnification by Each Beneficiary. Each Beneficiary
agrees, severally and not jointly, to indemnify and hold harmless the Company,
its officers and directors, and each person, if any, who controls the Company
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act to the same extent as the foregoing indemnity from the Company
to such Beneficiary, but only with reference to information furnished by such
Beneficiary or the plan of distribution furnished in writing by or on behalf of
such Beneficiary expressly for use in the Registration Statement or any
prospectus relating to the
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Registrable Securities, or any amendment or supplement thereto or any
preliminary prospectus. Each Beneficiary also agrees, severally and not jointly,
to indemnify and hold harmless any Underwriters of the Registrable Securities,
their officers and directors and each person who controls such Underwriters on
substantially the same basis as that of the indemnification of the Company
provided in this Section 3. Notwithstanding anything to the contrary contained
in this Exhibit, the obligations of any Beneficiary pursuant to this Section 3
shall not exceed the amount of proceeds received by such Beneficiary for the
relevant Registrable Securities.
4. Conduct of Indemnification Proceedings. In case any
proceeding (including any governmental investigation) shall be instituted
involving any person in respect of which indemnity may be sought pursuant to
Section 2 or 3 of this Exhibit, such person (the "Indemnified Party") shall
promptly notify the person against whom such indemnity may be sought (the
"Indemnifying Party") in writing and the Indemnifying Party, upon the request of
the Indemnified Party, shall retain counsel reasonably satisfactory to such
Indemnified Party to represent such Indemnified Party and any others the
Indemnifying Party may designate in such proceeding and shall pay the fees and
disbursements of such counsel related to such proceeding. In any such
proceeding, any Indemnified Party shall have the right to retain its own counsel
(which counsel shall be reasonably accountable to the Indemnifying Party), but
the fees and expenses of such counsel shall be at the expense of such
Indemnified Party unless (a) the Indemnifying Party and the Indemnified Party
shall have mutually agreed in writing to the retention of such counsel or (b)
the named parties to any such proceeding (including any impleaded parties)
include both the Indemnified Party and the Indemnifying Party and, in the
written opinion of counsel for the Indemnified Party, representation of both
parties by the same counsel would be inappropriate due to actual or potential
conflicts of interests between them. It is understood that the Indemnifying
Party shall not, in connection with any proceeding or related proceedings
involving one or more Indemnified Parties in the same jurisdiction, be liable
for the fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel required under the circumstances) at any time for
all such Indemnified Parties, and that all such fees and expenses shall be
reimbursed as they are submitted in writing for payment. In the case of any such
separate firm for the Indemnified Parties, such firm shall be designated in
writing by the Indemnified Parties or, if the Indemnified Parties are
exclusively Beneficiaries, by Warburg. The
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Indemnifying Party shall not be liable for any settlement of any proceeding
effected without its written consent, but if settled with such consent, or if
there be a final judgment for the plaintiff, the Indemnifying Party shall
indemnify and hold harmless such Indemnified Parties from and against any loss
or liability (to the extent stated above) by reason of such settlement or
judgment.
5. Contribution. If the indemnification provided for in this
Exhibit is unavailable to an Indemnified Party in respect of any losses, claims,
damages or liabilities referred to herein, then each such Indemnifying Party, in
lieu of indemnifying such Indemnified Party, shall contribute to the amount paid
or payable by such Indemnified Party as a result of such losses, claims, damages
or liabilities (a) in such proportion as is appropriate to reflect the relative
benefits received by the Company, Beneficiary and the Underwriters from the
offering of the securities, or (b) if the allocation provided by clause (a)
above is not permitted by applicable law, in such proportion as is appropriate
to reflect not only the relative benefits referred to in clause (a) above but
also the relative fault of the Company, such Beneficiary and the Underwriters in
connection with the statements or omissions that resulted in such losses,
claims, damages or liabilities, as well as any other relevant equitable
considerations. The relative benefits received by the Company, such Beneficiary
and the Underwriters shall be deemed to be in the same respective proportions as
the total proceeds from the offering (net of underwriting discounts and
commissions but before deducting expenses) received by each of the Company and
such Beneficiary and the total underwriting discounts and commissions received
by the Underwriters, in each case as set forth in the table on the cover page of
the prospectus, bear to the aggregate public offering price of the securities.
The relative fault of the Company, such Beneficiary and the Underwriters shall
be determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission or alleged omission to state
a material fact relates to information supplied by such party and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission.
The Company and each Beneficiary agrees that it would not be
just and equitable if contribution pursuant to this Section 5 were determined by
pro rata allocation (even if the Underwriters were treated as one entity for
such purpose) or by any other method of allocation that does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
The amount paid or
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payable by an Indemnified Party as a result of the losses, claims, damages or
liabilities referred to in the immediately preceding paragraph shall be deemed
to include, subject to the limitations set forth above, any legal or other
expenses reasonably incurred by such Indemnified Party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 5, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the securities
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission, and each Beneficiary shall not be required to contribute
any amount in excess of the amount by which the net proceeds of the offering
(before deducting expenses) received by such Beneficiary exceeds the amount of
any damages which such Beneficiary has otherwise been required to pay by reason
of such untrue or alleged untrue statement or omission or alleged omission. No
person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
6. Survival. The indemnity and contribution agreements
contained in this Exhibit shall remain operative and in full force and effect
regardless of (a) any termination of this Agreement or any underwriting
agreement, (b) any investigation made by or on behalf of any Indemnified Person
or by or on behalf of the Company and (c) the consummation of the sale or
successive resales of the Registrable Securities.
7. Registration Expenses. In connection with the Registrable
Securities, the Company shall pay the following reasonable expenses incurred in
connection with such registration: (a) registration and filing fees with the
Commission, (b) fees and expenses of compliance with securities or blue sky laws
(including reasonable fees and disbursements of counsel in connection with blue
sky qualifications of the Registrable Securities), (c) printing expenses, (d)
fees and expenses incurred in connection with the listing of the Registrable
Securities on the stock exchanges, if any, on which the applicable class of
Registrable Securities is then listed or, if such class of Registrable
Securities is not then listed, on the principal national stock exchange on which
the Common Stock is then listed, (e) fees and expenses of counsel and
independent certified public accountants for the Company (including the
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expenses of any comfort letters reasonably required by any Underwriters), (f)
the fees and expenses of any additional experts retained by the Company in
connection with such registration and (g) fees and expenses in connection with
any review of underwriting arrangements by the National Association of
Securities Dealers, Inc. Each Beneficiary shall pay any underwriting fees,
discounts or commissions attributable to the sale of Registrable Securities by
it and any out-of-pocket expenses of such Beneficiary, including its counsel
fees, accountant fees and expenses. The Company shall pay internal Company
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties).