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EXHIBIT 10.52
WARRANT AGREEMENT
AMONG
E.SPIRE COMMUNICATIONS, INC.,
THE ▇▇▇▇ ALTERNATIVE INCOME FUND, L.P.,
GREENWICH STREET CAPITAL PARTNERS II, L.P.,
GSCP OFFSHORE FUND, L.P.,
GREENWICH FUND, L.P.,
GREENWICH STREET EMPLOYEES FUND, L.P.,
TRV EXECUTIVE FUND, L.P. AND
SUCH OTHER PARTIES AS MAY BECOME SIGNATORIES HERETO
DATED AS OF MARCH 1, 2000
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TABLE OF CONTENTS
Page
ARTICLE I
CERTAIN DEFINITIONS......................................................................................2
Section 1.1. Certain Definitions.................................................................................2
ARTICLE II
ORIGINAL ISSUE OF WARRANTS...............................................................................8
Section 2.1. Form of Warrant Certificates and Dating.............................................................8
Section 2.2. Legends.............................................................................................8
ARTICLE III
EXERCISE OF WARRANTS.....................................................................................9
Section 3.1. Exercise Price......................................................................................9
Section 3.2. Exercise; Restrictions on Exercise; Expiration......................................................9
Section 3.3. Method of Exercise; Payment of Exercise Price......................................................10
ARTICLE IV
ADJUSTMENTS.............................................................................................12
Section 4.1 Adjustments........................................................................................12
Section 4.2. Notice of Adjustment...............................................................................18
Section 4.3. Statement on Warrants..............................................................................18
Section 4.4. Notice of Consolidation, Merger or Sale of Assets..................................................18
Section 4.5. Fractional Interests...............................................................................19
Section 4.6. No Dilution or Impairment..........................................................................19
Section 4.7. No Adjustments for Certain Issuances...............................................................19
ARTICLE V
DECREASE IN EXERCISE PRICE..............................................................................19
Section 5.1. Exercise Price.....................................................................................19
ARTICLE VI
RESERVATION AND AUTHORIZATION OF COMMON SHARES..........................................................20
Section 6.1. Reservation and Authorization......................................................................20
Section 6.2. Covenant Regarding Securities......................................................................20
Section 6.3. Registration.......................................................................................20
ARTICLE VII
WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER........................................................21
Section 7.1. Transfer and Exchange..............................................................................21
Section 7.2. Special Transfer Provisions........................................................................22
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Section 7.3. Surrender of Warrant Certificates..................................................................22
Section 7.4. Rule 144 and Rule 144A Information.................................................................23
ARTICLE VIII
HOLDERS.................................................................................................23
Section 8.1. Holder Not Deemed a Stockholder....................................................................23
Section 8.2. Right of Action....................................................................................23
ARTICLE IX
REGISTRATION RIGHTS.....................................................................................23
Section 9.1. Intentionally omitted..............................................................................23
Section 9.2. Warrant Shelf Registration Statement...............................................................24
(b) Subsequent Shelf Registrations........................................................................24
(d) Suspension of Shelf Registration......................................................................25
(e) Deferral Period.......................................................................................25
ARTICLE X
MISCELLANEOUS...........................................................................................35
Section 10.1. Loss or Mutilation................................................................................35
Section 10.2. Payment of Taxes..................................................................................35
Section 10.3. No Merger, Consolidation or Sale of Assets or the Company.........................................35
Section 10.4. Reports to Holders................................................................................36
Section 10.5. Notices...........................................................................................36
Section 10.6. Subsequent Purchaser..............................................................................37
Section 10.7. Governing Law.....................................................................................38
Section 10.8. Headings..........................................................................................38
Section 10.9. Severability......................................................................................38
Section 10.10. Amendment; Waiver................................................................................38
Section 10.11. No Inconsistent Agreements.......................................................................38
Section 10.12. Counterparts.....................................................................................38
EXHIBIT A
FORM OF WARRANT........................................................................................A-1
WARRANTS TO PURCHASE SHARES OF COMMON STOCK.....................................................................A-1
FORM OF REVERSE OF WARRANT......................................................................................A-4
FORM OF ASSIGNMENT..............................................................................................A-5
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WARRANT AGREEMENT
This WARRANT AGREEMENT (the "Agreement") is dated as of March 1,
2000, among e.spire Communications, Inc., a Delaware corporation (the
"Company"), The ▇▇▇▇ Alternative Income Fund, L.P. ("▇▇▇▇"), Greenwich Street
Capital Partners II, L.P., GSCP Offshore Fund, L.P., Greenwich Fund, L.P.,
Greenwich Street Employees Fund, L.P. and TRV Executive Fund, L.P.
(collectively, "Greenwich", and collectively with ▇▇▇▇, the "Initial
Purchasers") and such other parties who may be made a signatory hereto from time
to time (the "Subsequent Purchasers," and, collectively with the Initial
Purchasers, the "Purchasers").
WHEREAS, concurrently herewith, the Company has entered into the
(i) Purchase Agreement, dated the date hereof with ▇▇▇▇ (the "▇▇▇▇ Purchase
Agreement"), pursuant to which the Company has agreed to issue and sell to ▇▇▇▇
an aggregate of 100,000 Units (as defined herein), and (ii) Purchase Agreement,
dated the date hereof with Greenwich (the "Greenwich Purchase Agreement," and,
collectively with the ▇▇▇▇ Purchase Agreement, the "Purchase Agreements"),
pursuant to which the Company has agreed to issue and sell to Greenwich an
aggregate of 25,000 Units.
WHEREAS, each Unit consisting of (i) one (1) share of Series A
Convertible Preferred Stock, par value $1.00 per share (the "Initial Preferred
Stock"), initially convertible into 126.42225 shares of Common Stock (as defined
herein) at an initial conversion price of $7.91 per share, subject to
adjustments as set forth herein, and (ii) one (1) warrant (the "Initial
Warrant"), initially exercisable to purchase an aggregate of 44.1 shares of
Common Stock (the "Initial Warrant Shares"), at the Initial Warrant Exercise
Price (as defined herein) per Initial Warrant Share, subject to adjustment as
set forth herein. The Preferred Stock and the Initial Warrants will trade
separately at all times.
WHEREAS, in addition to the sale of the Units to the Initial
Purchasers, the Company has agreed to use its reasonable efforts to sell to
other purchasers (which purchasers will exclude the Initial Purchasers)
acceptable to the Company's Board of Directors up to $125 million of additional
Units consisting of preferred stock (the "Additional Preferred Stock, and,
collectively with the Initial Preferred Stock, the "Preferred Stock") and
warrants (the "Additional Warrants") on the same (or, as provided in the
Purchase Agreements, more favorable to the Company) terms and conditions set
forth in the Purchase Agreements.
WHEREAS, pursuant to Section 6 (d)(iv) of each of the Purchase
Agreements, ▇▇▇▇ and Greenwich may also be entitled to receive, without further
consideration, 25,000 and 6,250 additional warrants, respectively (collectively,
the "Change of Control Warrants"), upon the occurrence of certain conditions set
forth in each of the Purchase Agreements.
In consideration of the foregoing and of the agreements entered
into in connection with the Purchase Agreements, and for the purpose of defining
the term and provisions of the
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Warrants and the respective rights and obligations thereunder of the Company and
the Purchasers, the Company and the Purchasers hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Section 1.1. Certain Definitions. For all purposes of this
Agreement, except as otherwise expressly provided:
(1) the terms defined in this Article have the meanings
assigned to them in this Article, and include the plural as well as the
singular;
(2) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision;
(3) "or" is not exclusive; and
(4) "including" means including without limitation.
"Additional Preferred Stock" has the meaning set forth in the
recitals hereto.
"Additional Warrants" has the meaning set forth in the recitals
hereto.
"Additional Warrant Exercise Price" means the exercise price equal
to the Initial Warrant Exercise Price, subject to adjustment as set forth
herein.
"Additional Warrant Shares" means 44.1 shares of Common Stock
which a holder of one (1) Additional Warrant is entitled to purchase upon
exercise thereof, subject to adjustment as set forth herein.
"Advice" has the meaning set forth in Section 9.3 herein.
"Affiliate" means, as to any Person, any other Person which
directly or indirectly controls, or is under common control with, or is
controlled by, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "under common
control with" and "controlled by"), and as used with respect to any Person,
shall mean the possession, directly or indirectly, of the power to direct or
cause the direction of the management or policies of such Person, whether
through the ownership of voting stock, by agreement or otherwise; provided, that
beneficial ownership of 10% or more of the voting stock of a person shall be
deemed to be control.
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"Board of Directors" means the Board of Directors of the Company
or any committee thereof duly authorized to act on behalf of such Board.
"Board Resolution" means a duly adopted resolution of the Board of
Directors in full force and effect at the time of determination and certified as
such by the Secretary or any Assistant Secretary of the Company.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday or
Friday that is not a day on which banking institutions in The City of New York
are authorized or obligated by law, executive order or regulation to close.
"Cashless Exercise" has the meaning set forth in Section 3.3(a)
herein.
"Change of Control Warrants" has the meaning set forth in the
recitals hereto.
"Change of Control Warrant Exercise Price" means the exercise
price equal to the Initial Warrant Exercise Price, subject to adjustment as set
forth herein.
"Change of Control Warrant Shares" means 44.1 shares of Common
Stock which a holder of one (1) Change of Control Warrant is entitled to
purchase upon exercise thereof, subject to adjustment as set forth herein.
"Clearing Agency" has the meaning set forth in Section 3(a)(23) of
the Exchange Act.
"Commission" means the Securities and Exchange Commission.
"Common Stock" means the common stock, par value $.01 per share,
of the Company and any other capital stock into which shares of such common
stock may be converted or reclassified or that may be issued in respect of, in
exchange for, or in substitution of, such common stock by reason of any stock
splits, stock dividends, distributions, mergers, consolidations or other like
events.
"Company" means the party named as such in the preamble hereto
until a successor replaces it pursuant to the applicable provisions hereof and,
thereafter, means such successor.
"Current Market Value" has the meaning set forth in Section 4.1(f)
herein.
"Effectiveness Date" means the 90th day after the Filing Date.
"Effectiveness Period" has the meaning set forth in Section 9.2(a)
herein.
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"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission promulgated thereunder.
"Exercise Price" means, (i) in the case of the Initial Warrants,
the Initial Warrant Exercise Price, subject to adjustment as set forth herein,
(ii) in the case of the Additional Warrants, the Additional Warrant Exercise
Price, subject to adjustment as set forth herein, (iii) in the case of the
Change of Control Warrants, the Change of Control Warrant Exercise Price,
subject to adjustment as set forth herein.
"Expiration Date" means the earlier of (i) the tenth anniversary
of the Issue Date or (ii) the occurrence of an event which causes the
termination of the terms under this Agreement.
"Deferral Period" has meaning set forth in Section 9.2(e) herein.
"Fair Value" has the meaning set forth in Section 4.1(d) herein.
"Filing Date" means the later of (i) the 60th day after the Issue
Date and (ii) if Additional Preferred Stock is being sold by the Company, the
15th day after the Final Closing (as such term is defined in the Purchase
Agreements).
"Financial Expert" means a nationally recognized investment
banking firm.
"Greenwich" has the meaning set forth in the preamble herein.
"Greenwich Purchase Agreement" has the meaning set forth in the
recitals herein.
"Holder" means the Person in whose name a Warrant Certificate is
registered in the Warrant Register or, in the case of the Registrable Securities
in Article IX of this Agreement, the holder of a Warrant and/or Warrant Shares.
"▇▇▇▇" has the meaning set forth in the preamble herein.
"▇▇▇▇ Purchase Agreement" has the meaning set forth in the
recitals herein.
"Indemnified Person" has the meaning set forth in Section 9.5(c)
herein.
"Indemnifying Person" has the meaning set forth in Section 9.5(c)
herein.
"Independent Financial Expert" means, as of any date of
determination, a Financial Expert that has not been retained by the Company,
other than to perform an equity valuation, within the preceding twelve months of
such date of determination. The Independent Financial Expert may be compensated
and indemnified by the Company as customary for
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opinions or services it provides as an Independent Financial Expert. The Company
shall bear all of the fees and expenses of the Independent Financial Expert.
"Initial Preferred Stock" has the meaning set forth in the
recitals herein.
"Initial Purchasers" has the meaning set forth in the preamble
herein.
"Initial Shelf Registration" has the meaning set forth in Section
9.2(a) herein.
"Inspectors" has the meaning set forth in Section 9.3(n).
"Initial Warrant" has the meaning set forth in the recitals
herein.
"Initial Warrant Exercise Price" means the exercise price of
$9.89, subject to adjustment as set forth herein.
"Initial Warrant Shares" has the meaning set forth in the preamble
herein.
"Initial Sale" has the meaning set forth in Section 9.5(d) herein.
"Issue Date" means the date of the original issuance of the
Warrants as set forth on the face of the Warrant Certificate.
"Majority Holders" means, as of any date of determination, the
holders holding a majority of the Warrants (on an as-converted basis) and
Warrant Shares then outstanding, taken together as one class.
"Managing Underwriters" means the investment banker or investment
bankers and manager or managers that shall administer an underwritten offering
under a Registration Statement.
"NASD" means the National Association of Securities Dealers, Inc.
"National Securities Exchange" shall mean any national securities
exchange and shall include The Nasdaq Stock Market System or any successor
market thereto.
"Participant" has the meaning set forth in Section 9.5(a) herein.
"Person" means any individual, corporation, partnership, joint
venture, trust, limited liability company, unincorporated organization or
government or any agency or political subdivision thereof.
"Preferred Stock" has the meaning set forth in the preamble
herein.
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"Private Placement Legend" means the legend in the form set forth
in Section 2.2(a) herein.
"Prospectus" means the prospectus included in any Registration
Statement (including, without limitation, a prospectus that discloses
information previously omitted from a prospectus filed as part of an effective
registration statement in reliance upon Rule 430A under the Securities Act), as
amended or supplemented by any prospectus supplement, with respect to the terms
of the offering of any portion of the Warrants or the Warrant Shares covered by
such Registration Statement, and all amendments and supplements to the
Prospectus, including post-effective amendments.
"Purchase Agreements" has the meaning set forth in the recitals
herein.
"Purchasers" has the meaning set forth in the preamble herein.
"Records" has the meaning set forth in Section 9.3(n) herein.
"Registrable Securities" means the (A) Warrants and the Warrant
Shares and (B) any other securities issued by the Company in exchange for, as a
dividend on or in connection with a split of or other adjustment to the terms of
any such security in the foregoing clause (A); such securities shall cease to be
Registrable Securities on the date that is the earliest to occur of: (i) the
date on which any such security has been effectively registered under the
Securities Act and disposed of in accordance with a Registration Statement, (ii)
the date on which such security is distributed to the public pursuant to Rule
144 or is eligible for sale pursuant to Rule 144(k) under the Securities Act
(provided, however, that, for so long as (but only for so long as) a
Registration Statement remains in effect hereunder for Registrable Securities of
a Holder, no Registrable Securities of any other Holder shall cease to be
Registrable Securities solely because they are eligible for sale pursuant to
Rule 144(k)) and (iii) the date on which such security ceases to be outstanding.
"Registration Statement" means the Warrant Shelf Registration
Statement (or a successor registration statement thereto), amendments and
supplements to such registration statement, including post-effective amendments,
in each case including the Prospectus contained therein, all exhibits thereto,
and all material incorporated by reference therein.
"Rights" means rights, options or warrants for the purchase of, or
securities convertible into or exchangeable for, Common Stock.
"Rule 144" means Rule 144 under the Securities Act.
"Rule 144A" means Rule 144A under the Securities Act.
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"Rule 415" means Rule 415 promulgated under the Securities Act, as
amended from time to time, or any similar rule adopted by the Commission.
"Securities Act" means the Securities Act of 1933, as amended, and
the rules and regulations of the Commission promulgated thereunder.
"Shelf Registration" has the meaning set forth in Section 9.2(b)
herein.
"Stock Decline" has the meaning set forth in Section 6(d)(ii) of
each of the Purchase Agreements.
"Stockholder Approval" has the meaning set forth in the Purchase
Agreements.
"Subsequent Purchasers" has the meaning set forth in the preamble
herein.
"Subsequent Shelf Registration" has the meaning set forth in
Section 9.2(b) herein.
"Suspension Notice" has the meaning set forth in Section 9.2(d).
"Suspension Period" has the meaning set forth in Section 9.2(d)
herein.
"Transfer Agent" means the Transfer Agent for the Warrants and
Warrant Shares.
"Units" means the units of Preferred Stock and Initial Warrants
issued and sold in connection with the Purchase Agreements.
"Valuation Date" means a date specified herein as of which the
Current Market Value of a security or property must be determined by an
Independent Financial Expert.
"Value Report" means a report prepared by an Independent Financial
Expert and delivered to the Board of Directors in accordance with Section 4.l(k)
hereof.
"Warrant Certificate" has the meaning set forth in Section 2.1
herein.
"Warrant Register" has the meaning set forth in Section 7.l(a)
herein.
"Warrant Shares" means, collectively, (i) the shares of Common
Stock issued upon the exercise of the Initial Warrants, (ii) the shares of
Common Stock issued upon the exercise of the Additional Warrants, if any, and
(iii) the shares of Common Stock issued upon the exercise of the Change of
Control Warrants, if any.
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"Warrant Shelf Registration Period" has the meaning set forth in
Section 9.1(b) herein.
"Warrant Shelf Registration Statement" means a shelf registration
statement (or any successor registration statement thereto) relating to the
offer and sale of the Warrants and Warrant Shares by the holders thereof from
time to time in accordance with the methods of distribution elected by such
holders and set forth in such registration statement and Rule 415 under the
Securities Act.
"Warrants" means, collectively, (i) the Initial Warrants, (ii) the
Additional Warrants, if any, and (iii) the Change of Control Warrants, if any
and, more particularly, means any warrant(s) represented by a Warrant
Certificate and issued and delivered in connection with the Purchase Agreements
and this Agreement.
ARTICLE II
ORIGINAL ISSUE OF WARRANTS
Section 2.1. Form of Warrant Certificates and Dating. Any
certificate representing Warrants (each a "Warrant Certificate") shall have such
insertions as are appropriate or required or permitted by this Agreement and may
have such letters, numbers or other marks of identification and such legends and
endorsements stamped, printed, lithographed or engraved thereon, (i) as the
Company may deem appropriate and as are not inconsistent with the provisions of
this Agreement, (ii) such as may be required to comply with this Agreement, any
law or with any rule of any securities exchange on which the Warrants may be
listed, and (iii) such as may be necessary to conform to customary usage.
The Warrants shall be issued initially in the form of Warrant
Certificates in definitive, fully registered form, substantially in the form set
forth in Exhibit A hereto, which exhibit is hereby incorporated in and expressly
made a part of this Agreement. Upon issuance, all such Warrant Certificates
shall be duly executed by the Company and delivered, all as hereinafter
provided.
Definitive Warrant Certificates shall be typed, printed,
lithographed or engraved or produced by any combination of such methods or
produced in any other manner permitted by the rules of any securities exchange
on which the Warrants may be listed, all as determined by the officers of the
Company executing such Warrant Certificates, as evidenced by their execution
thereof.
Section 2.2. Legends. (1) Except as provided in Section 7.2(c)
hereof, each Warrant Certificate shall bear the following legend (the "Private
Placement Legend") on the face thereof:
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAWS OR THE SECURITIES LAWS OF ANY
COUNTRY OR OTHER JURISDICTION AND MAY NOT BE OFFERED, SOLD,
TRANSFERRED OR OTHERWISE DISPOSED OF OR PLEDGED OR HYPOTHECATED
UNLESS REGISTERED UNDER THE ACT AND ANY APPLICABLE SECURITIES LAWS
OR UNLESS AN EXEMPTION FROM REGISTRATION UNDER THE ACT AND ANY
SUCH LAWS IS AVAILABLE (AND, IN SUCH CASE, AN OPINION OF COUNSEL
REASONABLY ACCEPTABLE TO e.spire COMMUNICATIONS, INC. ("COMPANY"),
IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE COMPANY,
SHALL HAVE BEEN DELIVERED TO THE COMPANY TO THE EFFECT THAT THE
OFFER, SALE, TRANSFER, DISPOSITION, PLEDGE OR HYPOTHECATION
THEREOF IS EXEMPT FROM REGISTRATION UNDER THE ACT AND ANY SUCH
LAWS.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE THE BENEFITS
OF A WARRANT AGREEMENT DATED AS OF MARCH 1, 2000 AMONG THE
COMPANY, THE ▇▇▇▇ ALTERNATIVE INCOME FUND, L.P., GREENWICH STREET
CAPITAL PARTNERS II, L.P., GSCP OFFSHORE FUND, L.P., GREENWICH
FUND, L.P., GREENWICH STREET EMPLOYEES FUND, L.P., TRV EXECUTIVE
FUND, L.P. AND THE SUCH OTHER PARTIES WHO MAY BE MADE A SIGNATORY
THERETO FROM TIME TO TIME, A COPY OF WHICH IS ON FILE WITH THE
SECRETARY OF THE COMPANY. NO TRANSFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED
BY THIS CERTIFICATE MAY BE MADE EXCEPT IN ACCORDANCE WITH THE
PROVISIONS OF SUCH AGREEMENT.
ARTICLE III
EXERCISE OF WARRANTS
Section 3.1. Exercise Price. Each Warrant shall, when the Warrant
Certificate representing such Warrant is signed by the Company, entitle the
Holder thereof, subject to the
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provisions of this Agreement to purchase Warrant Shares at a purchase price per
share equal to the Exercise Price, subject to adjustment as provided in Article
IV and Article V hereof.
Section 3.2. Exercise; Restrictions on Exercise; Expiration. At
any time after the Issue Date and on or before the Expiration Date, Warrants may
be exercised on any Business Day; provided that Warrants may not be exercised if
the Warrant Shelf Registration Statement is not effective under the Securities
Act unless such exercise is a Cashless Exercise or the Company receives evidence
reasonably satisfactory to it that such exercise is exempt from the registration
and prospectus delivery requirements of the Securities Act. In addition,
Warrants may not be exercised unless, prior to such exercise (i) any applicable
▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Act waiting period shall have been expired; (ii) any consent,
approval, authorization or order of the United States Federal Communications
Commission necessary to allow such exercise shall have been obtained; and (iii)
any consent, approval, authorization or order of any U.S. state
telecommunications regulatory authority or commission necessary to allow such
exercise shall have been obtained, except where the absence of such state
telecommunications regulatory authority or commission consent, approval,
authorization or order would not be reasonably likely to have a material adverse
affect on the Company. Any Warrants not exercised by the Expiration Date shall
expire and all rights of the Holders of such Warrants hereunder and thereunder
shall terminate unless otherwise provided herein or therein.
Section 3.3. Method of Exercise; Payment of Exercise Price. (a) In
order to exercise all or any of the Warrants represented by a Warrant
Certificate, the Holder thereof is required to surrender to the Company the
Warrant Certificate with the Subscription Form duly filled in and signed, and
payment in full of the Exercise Price for each Warrant Share or other securities
or property issuable upon exercise of the Warrants as to which a Warrant is
exercised. The Exercise Price may be paid (i) by certified or official bank
check or by wire transfer to an account designated by the Company for such
purpose, (ii) by the surrender of shares of Preferred Stock (which surrender
shall be evidenced by cancellation of such shares) having an aggregate Current
Market Value (as defined herein) on the date of exercise equal to the product of
(1) Exercise Price per share as of the date of exercise and (2) the number of
Warrant Shares subscribed for, without the payment of the Exercise Price in
cash, together with a specification as to the number of Warrants to be
exercised, (iii) by surrender of publicly traded debt securities of the Company
(which surrender shall be evidenced by cancellation of such publicly traded debt
securities) having an aggregate Current Market Value (as defined herein) on the
date of exercise equal to the product of (1) Exercise Price per share as of the
date of exercise and (2) the number of Warrant Shares subscribed for, without
the payment of the Exercise Price in cash, together with a specification as to
the number of Warrants to be exercised or (iv) by the surrender (which surrender
shall be evidenced by cancellation of the number of Warrants represented by the
Warrant Certificate presented in connection with a Cashless Exercise) of a
Warrant or Warrants (represented by one or more relevant Warrant Certificates),
and without the payment of the Exercise Price in cash, for such number of
Warrant Shares equal to the product of (1) the number of Warrant Shares for
which such Warrant is exercisable as of the date of exercise (if the Exercise
Price were being paid in cash) and (2) the Cashless Exercise Ratio. An exercise
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referred to in clauses (ii), (iii) or (iv) of the preceding sentence shall be
referred to as a "Cashless Exercise." For purposes of this Agreement, the
"Cashless Exercise Ratio" shall equal a fraction, the numerator of which is the
excess of the Current Market Value (as defined herein) per share of Common Stock
on the date of exercise over the Exercise Price per share as of the date of
exercise and the denominator of which is the Current Market Value per share of
Common Stock on the date of exercise (calculated as set forth herein).
Upon surrender of a Warrant Certificate representing more than one
Warrant in connection with the Holder's option to elect a Cashless Exercise, the
number of Warrant Shares deliverable upon a Cashless Exercise shall be equal to
the number of Warrant Shares issuable upon the exercise of Warrants that the
Holder specifies are to be exercised pursuant to a Cashless Exercise multiplied
by the Cashless Exercise Ratio. All provisions of this Agreement shall be
applicable with respect to an exercise of a Warrant Certificate pursuant to a
Cashless Exercise for less than the full number of Warrants represented thereby.
Upon the exercise of any Warrants in accordance with this Agreement, the Company
will transfer promptly to or upon the written order of the Holder of such
Warrant Certificate appropriate evidence of ownership of any Warrant Shares or
other securities or property to which it is entitled, registered or otherwise,
to the Person or Persons entitled to receive the same. All Warrant Shares or
other securities issuable by the Company upon the exercise of the Warrants shall
be validly issued, fully paid and nonassessable.
(b) Upon exercise of any Warrant in conformity with the
foregoing provisions, the Company shall, (i) transfer promptly to, or upon the
written order of the Holder of such Warrant, appropriate evidence of ownership
of any Warrant Shares or other securities or property (including money) to which
it is entitled, registered or otherwise placed in such name or names as may be
directed in writing by the Holder, and (ii) deliver such evidence of ownership
and any other securities or property (including money) to the Person or Persons
entitled to receive the same, together with an amount in cash in lieu of any
fraction of a share as provided in Section 4.5 hereof, provided, however, that
the Holder of such Warrant shall be responsible for the payment of any transfer
taxes required as the result of any transfer of such Warrant, or the issuance of
such Warrant Shares or other securities or property, to a Person other than the
registered owner of such Warrant. Upon exercise of a Warrant and, in the case of
a Cashless Exercise, written direction of the Company as to the number of
Warrant Shares as to which the Holder is entitled, the Company shall requisition
from any transfer agent of the Warrant Shares or any other securities issuable
upon exercise of a Warrant (and all such transfer agents are hereby irrevocably
authorized to comply with all such requests) certificates for the necessary
number of Warrant Shares or other securities to which the Holder of such Warrant
may be entitled. A Warrant shall be deemed to have been exercised immediately
prior to the close of business on the date of the surrender for exercise of the
Warrant Certificate representing such Warrant and, for all purposes of this
Agreement, the Person entitled to receive any Warrant Shares or other securities
or property deliverable upon such exercise shall, as between such Person and the
Company, be deemed to be the holder of such Warrant Shares or other securities
or property of record as of the close of business on such date and shall be
entitled to receive, and the Company shall deliver to such Person, any Warrant
Shares or other securities or property (including money) to which such
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Person would have been entitled had such Person been the record holder of such
Warrant Shares or other securities or property on such date.
(c) If less than all the Warrants represented by a Warrant
Certificate are exercised, such Warrant Certificate shall be surrendered and a
new warrant certificate of the same tenor and for the number of Warrants which
were not exercised, registered in such name or names as may be directed in
writing by the Holder, shall be executed by the Company and the Company shall
deliver such new Warrant Certificate to the Person or Persons entitled to
receive the same.
(d) Without limiting the foregoing, if, at the date referred to
above, the transfer books for the Warrant Shares or other securities purchasable
upon the exercise of the Warrants shall be closed, the certificates for the
Warrant Shares or securities in respect of which such Warrants are then
exercised shall be issuable as of the date on which such books shall next be
opened, and until such date the Company shall be under no duty to deliver any
certificate for such Warrant Shares or other securities; provided, however, that
such transfer books, unless required by law, shall not be closed at any one time
for a period longer than 5 days.
ARTICLE IV
ADJUSTMENTS
Section 4.1. Adjustments. The Exercise Price and the number of
Warrant Shares purchasable upon exercise of each Warrant shall be subject to
adjustment from time to time as follows:
(a) Adjustments for Change in Common Stock. If the Company at
any time after the date of this Agreement:
(i) pays a dividend or makes any other distribution with
respect to shares of its Common Stock in shares of any class or series of
its capital stock, or other securities;
(ii) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(iii) combines its outstanding shares of Common Stock into a
smaller number of shares; or
(iv) issues any shares of its capital stock in a
reclassification of the shares of its Common Stock (other than a
reclassification in connection with a merger, consolidation or other
business combination governed by Section 4.1(i) hereof);
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the number and kind of Warrant Shares issuable upon exercise of each Warrant, at
the time of the record date for such dividend or of the effective date of such
subdivision, combination or reclassification, shall be proportionately adjusted
so that the Holder of any Warrant exercised after such time shall be entitled to
receive the aggregate number and kind of shares of Common Stock and/or shares of
other capital stock or other securities of the Company which, if such Warrant
had been exercised immediately prior to such date, such Holder would have owned
upon such exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification. An adjustment made pursuant to
this Section 4.1 (a) shall become effective immediately after the record date in
the case of a dividend or distribution and immediately after the effective date
in the case of a subdivision, combination or reclassification. Such adjustment
shall be made successively whenever any event listed above shall occur.
If at any time, as a result of an adjustment made pursuant to this
Section 4.1(a), the Holder of any Warrant thereafter exercised becomes entitled
to receive any securities other than shares of Common Stock, the number of such
other securities so receivable upon exercise of such Warrant shall be subject to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Warrant Shares contained in
this Section 4.1, and the provisions of this Agreement with respect to the
Warrant Shares shall apply on like terms to any such other securities.
(b) Rights; Options; Warrants. If, at any time after the date
of this Agreement, the Company shall issue or sell Rights (other than in an
issuance subject to Section 4.1(a) hereof and any Right referred to in Section
4.1(c)(v) below) to all holders of shares of Common Stock, which Rights entitle
the holders thereof to acquire shares of Common Stock at a price per share of
Common Stock (determined by dividing (x) the sum of (A) the total amount
receivable or received by the Company in consideration of the sale and issuance
of such Rights, plus (B) the total consideration payable to the Company upon
exercise, conversion or exchange thereof, by (y) the total number of shares of
Common Stock covered by such Rights) that is lower than the Current Market Value
per share of Common Stock as of the record date for such issuance, the number of
Warrant Shares thereafter purchasable upon the exercise of each Warrant shall be
determined by multiplying the number of Warrant Shares theretofore purchasable
upon the exercise of each Warrant by a fraction, the numerator of which shall be
the sum of (A) the number of shares of Common Stock outstanding immediately
prior to the issuance of such Rights, plus (B) the number of shares of Common
Stock offered for subscription or purchase pursuant to such Rights, and the
denominator of which shall be the sum of (A) the number of shares of Common
Stock outstanding immediately prior to the issuance of such Rights, plus (B) the
number of shares which the aggregate offering price of the total number of
shares of Common Stock offered pursuant to such Rights would purchase at the
then Current Market Value per share of Common Stock, as of the record date for
such issuance. Such adjustment shall be made successively whenever such Rights
are issued or sold and shall become effective on the date of issuance or sale
retroactive to the record date for the determination of shareholders entitled to
receive such Rights.
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(c) Issuance of Shares of Common Stock at Lower Values. If, at
any time after the date of this Agreement, the Company shall issue or sell any
share of Common Stock or Right (excluding (i) any Right issued or sold in any
transaction covered by Section 4.1 (a) or Section 4.1(b) hereof, (ii) any share
of Common Stock issued or sold pursuant to a Right outstanding on the date of
the Issue Date, (iii) any share of Common Stock issued or sold pursuant to a
Right, if on the date such Right was issued, the exercise, conversion or
exchange price per share of Common Stock with respect thereto was at least equal
to the Current Market Value per share of Common Stock, (iv) any shares of Common
Stock or Right issued or sold as consideration when any corporation or business
is acquired, merged into or becomes part of the Company or a subsidiary of the
Company in an arm's-length transaction between the Company and a Person other
than an Affiliate of the Company, (v) any Rights which may be issued under a
"shareholders' rights" plan and which trade with the Common Stock, (vi) any
share of Common Stock or Right issued by the Company to its directors, officers
or employees or any director, officer or employee of any of its subsidiaries in
the ordinary course of business in connection with any bona fide equity
compensation plan, including any stock grant plan, stock option plan, stock
purchase plan or pension or profit-sharing plan and (vii) any share of Common
Stock sold at the then-current market price thereof in a registered underwritten
offering), at a price per share of Common Stock (determined in the case of
Rights, by dividing (x) the sum of (A) the total amount receivable or received
by the Company in consideration of the sale and issuance of such Rights, plus
(B) the total consideration payable to the Company upon exercise, conversion or
exchange thereof, by (y) the total number of shares of Common Stock covered by
such Rights) that is lower than the Current Market Value per share of Common
Stock in effect immediately prior to such sale or issuance, the number of
Warrant Shares thereafter purchasable upon the exercise of each Warrant shall be
determined by multiplying the number of Warrant Shares theretofore purchasable
upon the exercise of each Warrant by a fraction, the numerator of which shall be
the number of shares of Common Stock outstanding immediately after such sale or
issuance (determined as provided below in this Section 4.1(c)), and the
denominator of which shall be the sum of (A) the number of shares of Common
Stock outstanding immediately prior to such sale or issuance, plus (B) the
number of shares of Common Stock which the aggregate consideration received by
the Company (determined as provided below in this Section 4.1(c)) for such sale
or issuance would purchase at such Current Market Value per share of Common
Stock. Such adjustment shall be made successively whenever such Rights are
issued or sold and shall be effective immediately after such issuance or sale.
For purposes of any adjustment made pursuant to this Section
4.1(c), the shares of Common Stock which the holder of any such Right shall be
entitled to subscribe for or purchase pursuant to such Right shall be deemed to
be issued and outstanding as of the date of the sale or issuance of such Right,
and the consideration received by the Company therefor shall be deemed to be the
consideration receivable or received by the Company for such Right, plus the
consideration or premiums stated in such Right to be paid for the shares of
Common Stock covered thereby. In case the Company shall sell and issue any share
of Common Stock or any Right for consideration consisting, in whole or in part,
of property other than cash or cash equivalents, then in determining the "price
per share of Common Stock" and the "consideration
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received by the Company" for purposes of the first sentence of this Section
4.1(c), the Board of Directors shall determine, in good faith, the fair value of
said property, which determination shall be determined by an Independent
Financial Expert selected by the Majority Holders, subject to the approval of
the Company, such approval not to be unreasonably withheld, and notice of such
determination shall promptly be distributed by the Company to each Holder. In
case the Company shall sell or issue any Right together with one or more other
securities as part of a unit at a price per unit, then in determining the "price
per share of Common Stock" and the "consideration received by the Company" for
purposes of the first sentence of this Section 4.1(c), the fair value of such
Right then being sold as part of such unit shall be determined by an Independent
Financial Expert selected by the Majority Holders, subject to the approval of
the Company, such approval not to be unreasonably withheld, and notice of such
determination shall be promptly distributed by the Company to each Holder.
(d) Adjustment for Extraordinary Dividends or Distributions. If
at any time after the Issue Date, the Company declares, orders, pays or makes a
dividend or other distribution (excluding dividends or distributions covered by
Section 4.1(a) hereof, cash dividends or distributions from current or retained
earnings, and distributions pursuant to Section 4.1(i)(B) hereof) of property,
assets, debt securities or Rights (excluding any Right issued in a transaction
covered by Section 4.1(a), Section 4.1(b) or Section 4.1(c) hereof) to all
holders of shares of Common Stock, the number of Warrant Shares purchasable upon
the exercise of each Warrant after the record date of such dividend or
distribution shall be determined by multiplying the number of Warrant Shares
purchasable upon the exercise of such Warrant immediately prior to such record
date by a fraction, the numerator of which shall be the Current Market Value per
share of Common Stock immediately prior to the record date for such
distribution, and the denominator of which shall be the difference between (A)
the Current Market Value per share of Common Stock immediately prior to the
record date for such distribution, minus (B) the then fair value (the "Fair
Value") of the portion of the property, assets, evidence of indebtedness, cash
dividends, distributions or securities so distributed applicable to one share of
Common Stock. Such adjustment shall be made successively whenever any such
distribution is made, and shall become effective on the date of distribution
retroactive to the record date for the determination of shareholders entitled to
receive such distribution. Fair Value shall be determined by the Board of
Directors, in good faith, and evidenced by a Board Resolution delivered to the
Holders and, in the case of a dividend in the form of property or assets, shall
be supported by a written opinion of an expert in valuing such type of property
or assets.
(e) Expiration of Rights, Options and Conversion Privileges.
Upon the expiration of any unexercised Rights the issuance of which previously
resulted in an adjustment hereunder, the Exercise Price and the number of
Warrant Shares purchasable upon the exercise of each Warrant shall, upon such
expiration, be readjusted so that thereafter the Exercise Price and the number
of Warrant Shares purchasable upon exercise of each Warrant shall be such as
they would have been had they originally been adjusted as if (i) the only shares
of Common Stock considered in the adjustment made with respect to such Rights
were the shares of Common Stock, if any, actually issued or sold upon the
exercise of such Rights and (ii) such shares of
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Common Stock, if any, were issued or sold for the consideration actually
received by the Company upon such exercise plus the consideration, if any,
actually received by the Company for issuance, sale or grant of all such Rights,
whether or not exercised; provided that no such readjustment shall have the
effect of increasing the Exercise Price by an amount, or decreasing the number
of Warrant Shares purchasable upon exercise of each Warrant by a number, in
excess of the amount or number, as the case may be, of the adjustment initially
made with respect to the issuance or sale of such Rights.
(f) Current Market Value. For the purposes of any computation
under this Agreement, the Current Market Value per share of Common Stock or of
any other security (such share of Common Stock or other security herein referred
to as a "security") at any date herein specified shall equal:
(i) if the security is not registered under the Exchange
Act, the value of the security determined as of such date by an
Independent Financial Expert selected by the Majority Holders,
subject to the approval of the Company, such approval not to be
unreasonably withheld, for the purpose of making such
determination; or
(ii) if the security is registered under the Exchange
Act, the average of the daily market prices of the security for
the 20 consecutive trading days immediately preceding such date
or, if the security has been registered under the Exchange Act
for less than 20 consecutive trading days before such date, the
average of the daily market prices for all trading days preceding
such date for which daily market prices are available. The daily
market price for each such trading day shall be: (A) in the case
of a security listed or admitted to trading on any National
Securities Exchange, the closing sales price, regular way, on
such day, or if no sale takes place on such day, the average of
the closing bid and asked prices on such day, on the principal
National Securities Exchange on which such security is listed or
admitted, (B) in the case of a security not then listed or
admitted to trading on any National Securities Exchange, the last
reported sale price on such day, or if no sale takes place on
such day, the average of the closing bid and asked prices on such
day, as reported by a reputable quotation source designated by
the Company, (C) in the case of a security not then listed or
admitted to trading on any National Securities Exchange and as to
which no such reported sale price or bid and asked prices are
available, the average of the reported high bid and low asked
prices on such day, as reported by a reputable quotation source
or a newspaper of general circulation in The City of New York
customarily published on each Business Day, designated by the
Company, or, if there shall be no bid and asked prices on such
day, the average of the high bid and low asked prices, as so
reported on the most recent day (not more than 10 days prior to
the date in question) for which prices have been so reported or
(D) if the prices specified in clause (A), (B) or (C) are not
available, the Current Market
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Value of a security shall be determined as if such security were
not registered under the Exchange Act.
(g) De Minimis Adjustments. No adjustment in the Exercise Price
or number of Warrant Shares purchasable upon exercise of any Warrant shall be
required unless such adjustment would require an increase or decrease of at
least one percent (1%) in the Exercise Price or number of Warrant Shares
purchasable upon the exercise of each Warrant, as the case may be; provided
however, that any adjustments which by reason of this Section 4.1(g) are not
required to be made shall be carried forward and taken into account in any
subsequent adjustment. All calculations shall be made to the nearest
one-thousandth of a share or nearest $.0001, as the case may be.
(h) Adjustment of Exercise Price. Whenever the number of Warrant
Shares purchasable upon the exercise of each Warrant is adjusted, as herein
provided, the Exercise Price per Warrant Share payable upon exercise of each
Warrant shall be adjusted (calculated to the nearest $.0001) so that it shall
equal the price determined by multiplying such Exercise Price immediately prior
to such adjustment by a fraction, the numerator of which shall be the number of
Warrant Shares purchasable upon the exercise of each Warrant immediately prior
to such adjustment, and the denominator of which shall be the number of Warrant
Shares so purchasable immediately thereafter.
(i) Consolidation, Merger or Sale of Assets; Liquidation. (A)
Subject to the provisions of subsection (B) of this Section 4.1(i), in the event
that, at any time after the Issue Date, the Company consolidates with, merges
with or into, or sells, transfers or otherwise disposes of all or substantially
all of its property and assets to, any Person, and in connection therewith
consideration is payable to holders of shares of Common Stock (or other
securities or property purchasable upon exercise of Warrants), the Warrants
shall remain subject to the terms and conditions set forth in this Agreement and
each Warrant shall, after such consolidation, merger or sale, entitle the Holder
thereof to receive, upon exercise, the number of shares of capital stock or
other securities or property (including cash) of the Company, or of such Person
resulting from such consolidation or surviving such merger or to which such sale
shall be made, or of the parent of such Person, as the case may be, that would
have been distributable or payable on account of the shares of Common Stock (or
other securities or property purchasable upon exercise of Warrants) if such
Holder's Warrants had been exercised immediately prior to such merger,
consolidation or sale (or, if applicable, any record date therefor); and, in any
such case, the provisions of this Agreement with respect to the rights and
interests thereafter of the Holders of Warrants shall be appropriately adjusted
by the Board of Directors, in good faith, as evidenced by a Board Resolution
delivered to the Holder, so as to be applicable, as nearly as reasonably
possible, to any shares of stock or other securities or any property thereafter
deliverable on the exercise of the Warrants.
(B) Notwithstanding the foregoing clause (A), (x) if the
Company consolidates with, merges with or into, or sells, transfers or otherwise
disposes of all or substantially all of its
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property and assets to, any Person, and consideration is payable to holders of
shares of Common Stock in exchange for their shares of Common Stock in
connection with such merger, consolidation or sale which consists solely of
cash, or (y) in the event of the dissolution, liquidation or winding-up of the
Company, then the Holder shall receive distributions at the same time as and on
an equal basis with holders of shares of Common Stock (or other securities
purchasable upon exercise of the Warrants) as if the Warrants had been exercised
immediately prior to such event (or, if applicable, any record date therefor),
less the Exercise Price. Upon receipt of such payment, with respect to the
Warrants in respect of which such payment was received, the rights of a Holder
hereunder shall terminate except as expressly provided herein or in the Warrant
Certificate and such Warrants shall expire. In the case of any such merger,
consolidation or sale of assets, the surviving or acquiring Person or, in the
event of any dissolution, liquidation or winding up of the Company, the Company,
shall deposit promptly in an escrow account established by each Holder the funds
or other consideration, if any, necessary to pay Holders pursuant to this
subsection.
(j) Adjustments by Board. In addition to the foregoing
adjustments, and subject to Article V hereof, the Board of Directors may make
any other adjustment, as evidenced by a Board Resolution delivered to the
Holders, to increase the number of Warrant Shares purchasable upon exercise of
Warrants or to decrease the Exercise Price as it may, in good faith, deem
desirable to protect the rights and benefits of Holders hereunder. Any
adjustments made by the Board of Directors pursuant to this Article IV shall be
conclusive absent manifest error.
(k) Value Determination. If required pursuant to Section
4.1(f), the Current Market Value shall be deemed to be equal to the value
determined by an Independent Financial Expert and set forth in a Value Report by
such Independent Financial Expert. In making any determination of Current Market
Value, such Independent Financial Expert shall (A) use one or more valuation
methods that, in its best professional judgment, it determines to be most
appropriate and (B) not take into account any discount for minority interests or
lack of liquidity of the relevant security. The Company shall cause such
Independent Financial Expert to deliver to the Company, within 25 days of the
appointment of such Independent Financial Expert, the Value Report which shall
state the Current Market Value of the Common Stock and/or any other securities
being valued, as of the Valuation Date, and shall contain a brief statement as
to the nature and scope of the examination or investigation upon which the
determination of value was made. The Company shall make available such Value
Report for inspection by the Holders. Any determination of Current Market Value
in accordance with the provisions of this Section 4.1(k) shall be conclusive as
to all Persons.
(l) Adjustments Pursuant to Purchase Agreements. Without
limiting the foregoing, the Exercise Price of the Warrants shall also be
adjusted in accordance with Section 6(d) of each of the Purchase Agreements in
the event of a Stock Decline.
(m) Shareholder Approval. Notwithstanding anything to the
contrary contained herein, in the event that Stockholder Approval is necessary
in order to permit the
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implementation of the provisions of this Sections 4.1(b), 4.1(c) or 4.1(d), as
applicable (or any adjustment to the Exercise Price under Section 4.1(h) above
triggered by an adjustment under Section 4.1(b), 4.1(c) or 4.1(d)) without
contravention of a NASDAQ Rule, (A) Sections 4.1(b), 4.1(c) and 4.1(d) (and any
adjustment to the Exercise Price under Section 4.1(h) triggered by an adjustment
under Section 4.1(b), 4.1(c) or 4.1(d)) shall not be effective until such
Stockholder Approval is obtained, and (B) the Company shall not (without the
affirmative vote of the Majority Holders) engage in any transaction which would
trigger an adjustment under Section 4.1(b), 4.1(c) or 4.1(d) until such
Stockholder Approval has been obtained.
Section 4.2. Notice of Adjustment. Whenever the number of Warrant
Shares or other securities or property purchasable upon the exercise of each
Warrant or the Exercise Price is adjusted or determined, as herein provided, the
Company shall promptly mail, at the expense of the Company, to each Holder, a
notice of such adjustment or adjustments, and shall deliver to each Holder a
certificate of a firm of independent public accountants selected by the Board of
Directors (who may be the regular accountants employed by the Company) setting
forth (i) the number of Warrant Shares or other securities or property
purchasable upon the exercise of each Warrant and the Exercise Price after such
adjustment, (ii) a brief statement of the facts requiring such adjustment and
(iii) the computation by which such adjustment was made.
Section 4.3. Statement on Warrants. Irrespective of any adjustment
in the Exercise Price or the number or kind of Warrant Shares purchasable upon
the exercise of the Warrants, Warrant Certificates theretofore or thereafter
issued may continue to express the same price and number and kind of shares as
are stated in the Warrant Certificate initially issued pursuant to this
Agreement.
Section 4.4. Notice of Consolidation, Merger or Sale of Assets. In
the event that, at any time after the Issue Date, and prior to the Expiration
Date, there shall be any (i) consolidation or merger involving the Company, or
sale, transfer or other disposition of all or substantially all of the Company's
property and assets (except a merger or other reorganization in which the
Company shall be the surviving corporation and holders of shares of Common Stock
(or other securities or property purchasable upon exercise of the Warrants)
receive no consideration in respect of their shares or property) or (ii) any
other transaction contemplated by Section 4.1(i)(B) above, then in any such
case, the Company shall cause to be mailed to each Holder, at the earliest
practicable time (and, in any event, not less than 25 days before any date set
for definitive action), notice of the date on which such reorganization, sale,
consolidation, merger, dissolution, liquidation or winding up or other such
transaction shall take place, as the case may be. Such notice shall also set
forth such facts as shall indicate the effect of such action (to the extent such
effect may be known at the date of such notice) on the Exercise Price and the
kind and amount of securities and property purchasable upon exercise of the
Warrants. Such notice shall also specify the date as of which the holders of
record of the shares of Common Stock or other securities or property purchasable
upon exercise of the Warrants shall be entitled to exchange their shares or
other securities or property for securities, money or other property deliverable
upon such reorganization, sale, consolidation, merger, dissolution, liquidation
or
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winding up or other such transaction, as the case may be. The delivery of any
notice pursuant to this Section 4.4 shall not in itself relieve the Company from
any obligation under Section 4.2 hereof.
Section 4.5. Fractional Interests. If more than one Warrant is
presented for exercise at the same time by the same Holder, the number of
Warrant Shares which shall be purchasable upon such exercise shall be computed
on the basis of the aggregate number of Warrant Shares purchasable on exercise
of all Warrants so presented. If any fraction of a Warrant Share would, except
for the provisions of this Section 4.5, be issued on the exercise of any Warrant
(or specified portion thereof), the Company, in lieu of issuing any such
fractional share, shall pay an amount in cash calculated by it to be equal to
the Current Market Value per Warrant Share on the date of exercise multiplied by
such fraction, computed to the nearest whole cent.
Section 4.6. No Dilution or Impairment. The Company shall not
amend its Certificate of Incorporation or participate in any reorganization,
transfer of assets, consolidation, merger, dissolution, issue or sale of
securities or any other voluntary action, for the purpose of avoiding or seeking
to avoid the observance or performance of any of the terms to be observed or
performed hereunder by the Company, but will at all times, in good faith, assist
in carrying out all such actions as may be reasonably necessary or appropriate
in order to protect the rights of the Holders of the Warrants against dilution
or other impairment.
Section 4.7. No Adjustments for Certain Issuances. The provisions
of Section 4.1(b) and Section 4.1(c) hereof shall not apply to the issuance of
any securities pursuant to this Agreement or the Preferred Stock.
ARTICLE V
DECREASE IN EXERCISE PRICE
Section 5.1. Exercise Price. Notwithstanding the provisions of
Section 4.1(j) hereof, the Board of Directors, in its sole discretion, shall
have the right at any time the Warrants are exercisable under Section 3.2
hereof, and from time to time during such period, to decrease the Exercise Price
of the Warrants, provided, such reduction of the Exercise Price is effective for
a period of not less than 30 days. Any exercise by the Board of Directors of any
rights granted in this Section 5.1 must be preceded by a written notice from the
Company to the Holders of Warrants setting forth the reduction in the Exercise
Price, which notice shall be mailed at least 30 days prior to the effective date
of such decrease in the Exercise Price. Any reduction of the Exercise Price
pursuant to provisions of this Article V shall not in itself result in an
adjustment of the number of Warrant Shares or other securities or property
purchasable upon the exercise of the Warrants.
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ARTICLE VI
RESERVATION AND AUTHORIZATION OF COMMON SHARES
Section 6.1. Reservation and Authorization. The Company shall at
all times reserve and keep available for issuance upon exercise of the Warrants
such number of its duly authorized but unissued shares of Common Stock or other
securities of the Company purchasable upon exercise of the Warrants as will be
sufficient to permit the exercise in full of all outstanding Warrants and will
cause appropriate evidence of ownership of such shares of Common Stock or other
securities to be delivered to the Holder upon its request for delivery of such,
and all such shares of Common Stock or other securities shall, reasonably
promptly after the date hereof and at all times thereafter, be duly approved for
listing, subject to official notice of issuance, on each securities exchange, if
any, on which such shares of Common Stock or other securities are then listed.
Section 6.2. Covenant Regarding Securities. The Company covenants
that all shares of Common Stock or other securities of the Company that may be
issued upon the exercise of the Warrants will, upon issuance, be (i) duly
authorized, validly issued, fully paid and nonassessable, (ii) free from
preemptive and any other similar rights, (iii) free from any taxes, liens,
charges or security interests with respect thereto and (iv) included for trading
on each securities exchange, if any, on which such shares of Common Stock or
other securities are then listed.
Section 6.3. Registration. If the Warrant Shares or other
securities of the Company purchasable upon the exercise of the Warrants require
registration with, or approval of, any governmental authority (in addition to
such as the Company is required to obtain pursuant to Article IX hereof), or the
taking of any other action (in addition to such as the Company is required to
take pursuant to Article IX hereof), under the laws of the United States of
America or any state or political subdivision thereof, before such securities
may be validly offered or sold in compliance with such laws, then the Company
covenants that it will, in good faith and as expeditiously as practicable, at
its expense, endeavor to secure and maintain such registration or approval or to
take such other action, as the case may be; provided that the Company will not
be required to qualify generally to do business in any jurisdiction where it is
not then so qualified or to take any action that would subject it to general
service of process or to taxation in any such jurisdiction where it is not then
so subject.
ARTICLE VII
WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER
Section 7.1. Transfer and Exchange. (a) The Warrant Certificates
shall be issued in registered form only. The Company shall cause to be kept at
its office a register (the "Warrant Register") in which, subject to such
reasonable regulations as it may prescribe, the Company shall provide for the
registration of Warrants and transfers or exchanges of Warrants as herein
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provided. All Warrants issued upon any registration of transfer or exchange of
Warrants shall be the valid obligations of the Company, evidencing the same
obligations, and entitled to the same benefits under this Agreement, as the
Warrants surrendered for such registration of transfer or exchange.
(b) The Warrants and Preferred Stock shall at all times after
the Issue Date be separately transferable, as will the Warrant Shares and any
shares of Common Stock issuable in connection with the Preferred Stock.
(c) Prior to the registration of any transfer of a Warrant
Certificate by a Holder as provided herein, the Company and any agent of the
Company may treat the Person in whose name the Warrants represented thereby are
registered as the owner thereof for all purposes and as the Person entitled to
exercise the rights represented thereby, any notice to the contrary
notwithstanding.
(d) Every Warrant presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company) be duly endorsed,
or be accompanied by a duly executed instrument of transfer in form satisfactory
to the Company, by the Holder or such Holder's attorney duly authorized in
writing.
(e) When Warrant Certificates are presented to the Company with
a request to register the transfer or to exchange the Warrant Certificate for
other Warrant Certificates representing an equal number of Warrants, the Company
shall register the transfer or make the exchange as requested if its
requirements for such transactions and any applicable requirements hereunder are
satisfied. To permit registrations of transfers and exchanges, the Company shall
execute Warrant Certificates and deliver such Warrant Certificates in accordance
with the provisions hereof. No service charge shall be made for any registration
of transfer or exchange of Warrants, but the Company may require payment of a
sum sufficient to cover any tax or other governmental charge that may be imposed
in connection with any registration of transfer of Warrants.
(f) Any Warrant Certificate when duly endorsed in blank shall
be deemed negotiable. The Holder of any Warrant Certificate duly endorsed in
blank may be treated by the Company and all other Persons dealing therewith as
the absolute owner thereof for any purpose and as the Person entitled to
exercise the rights represented hereby, or to the transfer thereof on the
Warrant Register maintained by the Company, any notice to the contrary
notwithstanding; but, until such transfer on such Warrant Register, the Company
may treat the registered Holder thereof as the owner for all purposes.
(g) If less than all the Warrants represented by a Warrant
Certificate are transferred or exchanged in accordance with this Agreement, the
Warrant Certificate shall be surrendered to the Company and a new Warrant
Certificate of the same tenor and for the number of Warrants which were not
transferred or exchanged, registered in such name or names as may
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be directed in writing by the surrendering Holder, shall be executed by the
Company and delivered to the Person or Persons entitled to receive the same.
Section 7.2. Special Transfer Provisions.
(a) Limitations on Transfer. By its acceptance of any Warrant
represented by a Warrant Certificate bearing the Private Placement Legend, each
Holder of, and beneficial owner of an interest in, such Warrant acknowledges the
restrictions on transfer of such Warrant set forth in the Private Placement
Legend and agrees that it will transfer such Warrant only in accordance with the
Private Placement Legend.
(b) Transfer of Restricted Warrants. In connection with any
transfer of a Warrant Certificate bearing the Private Placement Legend, each
Holder agrees to deliver to the Company, upon its request, such satisfactory
evidence, which may include an opinion of counsel licensed to practice law in
the State of New York, as reasonably may be requested by the Company to confirm
that such transfer is being made in accordance with the limitations set forth in
the Private Placement Legend.
(c) Private Placement Legend. Upon the registration of
transfer, exchange or replacement of this Warrant Certificate bearing the
Private Placement Legend, the Company shall deliver a Warrant Certificate
bearing the Private Placement Legend, unless such legend may be removed from
such Warrant Certificate as provided in the next sentence. The Private Placement
Legend may be removed from a Warrant Certificate if there is delivered to the
Company such satisfactory evidence, which may include an opinion of counsel
licensed to practice law in the State of New York, as reasonably may be
requested by the Company to confirm that neither such legend nor the
restrictions on transfer set forth therein are required to ensure that transfers
of such security will not violate the registration and prospectus delivery
requirements of the Securities Act or if the Warrant represented by such Warrant
Certificate has been registered under the Securities Act pursuant to Article 9
herein. Upon provision of such evidence, the Company shall sign and deliver in
exchange for such Warrant Certificate, a Warrant Certificate or Warrant
Certificates (representing, in the aggregate, the same number of Warrants) that
do not bear such legend. If the Private Placement Legend has been removed from
the Warrant Certificate, as provided above, no other Warrant Certificate issued
in exchange for all or any part of such Warrant Certificate shall bear such
legend, unless the Company has reasonable cause to believe that such other
Warrant Certificate is a "restricted security" within the meaning of Rule 144.
Section 7.3. Surrender of Warrant Certificates. Any Warrant
Certificate surrendered for registration of transfer, exchange or exercise of
the Warrants represented thereby shall be delivered to the Company and shall be
promptly canceled by the Company and shall not be reissued by the Company and,
except as provided in this Article VII in case of an exchange or transfer,
Article III hereof in case of the exercise of less than all the Warrants
represented thereby or Section 10.1 in case of mutilation, no Warrant
Certificate shall be issued hereunder in lieu
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thereof. The Company shall dispose of such canceled Warrant Certificates in
accordance with its customary procedures.
Section 7.4. Rule 144 and Rule 144A Information. Prior to the
effectiveness under the Securities Act of the Warrant Shelf Registration
Statement, or at any time during the suspension or following the termination
thereof, Holders of Warrants (or holders of interests therein) and prospective
purchasers designated by such Holders of Warrants (or such holders of interests
therein) shall have the right to obtain from the Company upon request by such
Holders (or such holders of interests) or prospective purchasers, during any
period in which the Company is not subject to Section 13 or 15(d) of the
Exchange Act, or exempt from reporting pursuant to 12g3-2(b) under the Exchange
Act, the information required by paragraph (c) of Rule 144 and paragraph
(d)(4)(i) of Rule 144A in connection with any transfer or proposed transfer of
such Warrants or interests.
ARTICLE VIII
HOLDERS
Section 8.1. Holder Not Deemed a Stockholder. Prior to the
exercise of a Warrant, the Holder thereof shall not be entitled, as such, to any
rights of a stockholder of the Company, including, without limitation, the right
to vote or to consent to any action of the stockholders of the Company, to
receive dividends or other distributions, to exercise any preemptive right or to
receive any notice of meetings of stockholders of the Company and, except as
otherwise provided in this Agreement, shall not be entitled to receive any
notice of any proceedings of the Company.
Section 8.2. Right of Action. All rights of action with respect to
this Agreement are vested in the Holders of the Warrants, and any Holder of any
Warrant may, in the Holder's own behalf and for the Holder's own benefit,
enforce, and may institute and maintain any suit, action or proceeding against
the Company suitable to enforce, or otherwise in respect of, the Holder's right
to exercise the Holder's Warrants in the manner provided in the Warrant
Certificate representing his Warrants.
ARTICLE IX
REGISTRATION RIGHTS
Section 9.1. Intentionally omitted..
Section 9.2. Warrant Shelf Registration Statement.
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(a) Shelf Registration. Subject to Section 9.2(e), the Company
shall as promptly as reasonably practicable (but in any event prior to the
Filing Date) file with the Commission a Registration Statement for an offering
to be made on a continuous basis pursuant to Rule 415 covering all of the
Registrable Securities (the "Initial Shelf Registration"). The Initial Shelf
Registration shall be on an appropriate form permitting registration of such
Registrable Securities for resale by Holders.
The Company shall use its reasonable best efforts to cause the
Initial Shelf Registration to be declared effective under the Securities Act on
or prior to the Effectiveness Date and to keep the Initial Shelf Registration
continuously effective under the Securities Act (the "Effectiveness Period") or
such shorter period ending when (i) all Registrable Securities have been sold in
the manner set forth and as contemplated in the Initial Shelf Registration or
(ii) a Subsequent Shelf Registration covering all of the Registrable Securities
has been declared effective under the Securities Act or (iii) there are no
longer any Registrable Securities outstanding.
(b) Subsequent Shelf Registrations. If the Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be effective for any
reason at any time during the Effectiveness Period (other than because of the
sale thereunder of all of the securities registered thereunder or there are no
longer any Registrable Securities outstanding), the Company shall use its
reasonable best efforts to obtain the prompt withdrawal of any order suspending
the effectiveness thereof, and in any event shall within 45 days of such
cessation of effectiveness amend the Initial Shelf Registration in a manner to
obtain the withdrawal of the order suspending the effectiveness thereof, or file
an additional "shelf" Registration Statement pursuant to Rule 415 covering all
of the Registrable Securities (a "Subsequent Shelf Registration"). If a
Subsequent Shelf Registration is filed, the Company shall use its reasonable
best efforts to cause the Subsequent Shelf Registration to be declared effective
under the Securities Act as soon as practicable after such filing and to keep
such Registration Statement continuously effective until the end of the
Effectiveness Period or such shorter period ending when (i) all Registrable
Securities have been sold in the manner set forth and as contemplated in the
Subsequent Shelf Registration or (ii) there are no longer any Registrable
Securities outstanding. As used herein the term "Shelf Registration" means the
Initial Shelf Registration and any Subsequent Shelf Registration.
(c) Supplements and Amendments. The Company shall use its
reasonable best efforts to supplement and amend the Shelf Registration if
required by the rules, regulations or instructions applicable to the
registration form used for such Shelf Registration, if required by the
Securities Act, or if reasonably requested by the Holders of a majority of the
shares of Registrable Securities covered by such Registration Statement (on an
as-exercised basis and taken together as a single class) or if reasonably
requested by an underwriter, if any, of such Registrable Securities.
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(d) Suspension of Shelf Registration. The Company's obligation
to keep the Shelf Registration effective and usable for offers and sales of the
Registrable Securities may be suspended by the Company if the Company, in good
faith and for valid business reasons, determines that, without such suspension,
the Company will suffer interference with any material financing, acquisition,
corporate reorganization or other material transaction or development involving
the Company. Any such period during which the Company fails to keep the Shelf
Registration effective and usable for offers and sales of Registrable Securities
is referred to as a "Suspension Period." A Suspension Period shall commence on
and include the date that the Company gives written notice (the "Suspension
Notice") to the Holders of Registrable Securities covered by the Shelf
Registration that the Shelf Registration is no longer effective or the
prospectus included therein is no longer usable for offers and sales of the
Registrable Securities shall end on the earliest of (A) 90 days from the
effective date of the Suspension Period or (B) the date the Holders of
Registrable Securities covered by such registration are advised in writing by
the Company that use of the prospectus may be resumed. During the pendency of
any Suspension Period, the Company may not issue any securities, whether or not
in a public offering, except for (i) issuances of Common Stock pursuant to an
acquisition or other business combination transaction or upon exercise of
options or warrants outstanding prior to such Suspension Period or (ii)
pay-in-kind dividends, to the extent permitted, in respect of preferred stock
outstanding prior to such Suspension Period. Each Holder agrees that, upon
receipt of any Suspension Notice, such Holder will forthwith discontinue during
the pendency of the Suspension Period disposition of the Registrable Securities
pursuant to the Shelf Registration. Notwithstanding anything to the contrary in
this Section 9.2(d), the Company may only suspend the effectiveness of the Shelf
Registration pursuant to this Section 9.2(d) if the Company suspends the
effectiveness of any and all other registration statements maintained by the
Company covering the Company's securities pursuant to Rule 415 or otherwise.
(e) Deferral Period. Notwithstanding anything to the contrary
herein, the Company shall have the right to defer the filing of the Initial
Shelf Registration pursuant to this Agreement for a period not to exceed 90 days
after the Filing Date (the "Deferral Period") if, in the good faith
determination of the Board of Directors of the Company, the filing of such
Initial Shelf Registration would interfere with any material financing,
acquisition, corporate reorganization or other material transaction or
development involving the Company; provided, that during the pendency of such
Deferral Period, the Company may not issue any securities, whether or not in a
public offering, except for (i) issuances of Common Stock pursuant to an
acquisition or other business combination transaction or upon exercise of
options or warranties outstanding prior to such Deferral Period or (ii)
pay-in-kind dividends, to the extent permitted, in respect of preferred stock
outstanding prior to such Deferral Period. In the event that the Company
exercises its deferral rights pursuant to this Section 9.2(e), the Effectiveness
Date shall be tolled for a period equal to the Deferral Period.
Section 9.3. Registration Procedures. In connection with the
filing of any Registration Statement pursuant to Article IX hereof, the Company
shall effect such registrations to permit the sale of the securities covered
thereby in accordance with the intended method or
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methods of disposition thereof, and pursuant thereto and in connection with any
Registration Statement filed by the Company hereunder the Company shall:
(a) Prepare and file with the Commission on or prior to the Filing
Date, a Registration Statement as prescribed by Article IX hereof, and use its
reasonable best efforts to cause such Registration Statement to become effective
and remain effective as provided herein; provided, however, that, before filing
any Registration Statement or Prospectus or any amendments or supplements
thereto, the Company shall furnish to and afford the Holders of the Registrable
Securities covered by such Registration Statement, their counsel and the
managing underwriters, if any, a reasonable opportunity to review copies of all
such documents (including, if requested in writing, copies of any documents to
be incorporated by reference therein and all exhibits thereto) proposed to be
filed (in each case at least five business days prior to such filing). The
Company shall not file any Registration Statement or Prospectus or any
amendments or supplements thereto if the Holders of a majority of the
Registrable Securities (on an as-converted basis and taken together as a single
class) covered by such Registration Statement, their counsel, or the managing
underwriters, if any, shall reasonably object within two business days after the
receipt thereof. Notwithstanding anything to the contrary contained in this
Agreement, the Company shall not be required to engage in more than one
underwritten offering, if any, pursuant to this Agreement.
(b) Prepare and file with the Commission such amendments and
post-effective amendments to each Shelf Registration as may be necessary to keep
such Registration Statement continuously effective for the Effectiveness Period
(or such shorter period as may be specified in Section 9.2(a) or 9.2(b)); cause
the related Prospectus to be supplemented by any Prospectus supplement required
by applicable law, and as so supplemented to be filed pursuant to Rule 424 (or
any similar provisions then in force) promulgated under the Securities Act; and
comply with the provisions of the Securities Act and the Exchange Act applicable
to it with respect to the disposition of all securities covered by such
Registration Statement as so amended or in such Prospectus as so supplemented.
(c) Notify the selling Holders of Registrable Securities, their
counsel and the managing underwriters, if any, reasonably promptly (but in any
event within five business days), and confirm such notice in writing, (i) when a
Prospectus or any Prospectus supplement or post-effective amendment has been
filed, and, with respect to a Registration Statement or any post-effective
amendment, when the same has become effective under the Securities Act, (ii) of
the issuance by the Commission of any stop order suspending the effectiveness of
a Registration Statement or of any order preventing or suspending the use of any
preliminary prospectus or the initiation of any proceedings for that purpose,
(iii) if at any time when a prospectus is required by the Securities Act to be
delivered in connection with sales of the Registrable Securities the
representations and warranties of the Company contained in any agreement,
including an underwriting agreement, if any, contemplated by 9.3(m) hereof cease
to be true and correct, (iv) of the receipt by the Company of any notification
with respect to the suspension of the qualification or exemption from
qualification of a Registration Statement or any of the
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Registrable Securities for offer or sale in any jurisdiction, or the initiation
or threatening of any proceeding for such purpose, (v) of the happening of any
event, the existence of any condition or any information becoming known that
makes any statement made in such Registration Statement or related Prospectus or
any document incorporated or deemed to be incorporated therein by reference
untrue in any material respect or that requires the making of any changes in or
amendments or supplements to such Registration Statement, Prospectus or
documents so that, in the case of the Registration Statement, it will not
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein
not misleading, and that in the case of the Prospectus, it will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading and (vi) of the
Company's determination that a post-effective amendment to a Registration
Statement would be appropriate.
(d) Use its reasonable best efforts to prevent the issuance of
any order suspending the effectiveness of a Registration Statement or of any
order preventing or suspending the use of a Prospectus or suspending the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, and, if any such order is issued, to
use its reasonable best efforts to obtain the withdrawal of any such order at
the earliest possible moment.
(e) If requested by the managing underwriter or underwriters
(if any), or the Holders of a majority of shares of Registrable Securities (on
an as-converted basis and taken together as a single class) being sold in
connection with an underwritten offering, if any, (i) promptly incorporate in a
prospectus supplement or post-effective amendment such information as the
managing underwriter or underwriters (if any), such holders, or its counsel
determine is reasonably necessary to be included therein and (ii) make all
required filings of such prospectus supplement or such post-effective amendment
as soon as practicable after the Company has received notification of the
matters to be incorporated in such prospectus supplement or post-effective
amendment.
(f) Furnish to each selling Holder of Registrable Securities
who so requests in writing and to counsel and each managing underwriter, if any,
at the sole expense of the Company, one conformed copy of the Registration
Statement or Registration Statements and each post-effective amendment thereto,
including financial statements and schedules, and, if requested in writing, all
documents incorporated or deemed to be incorporated therein by reference and all
exhibits.
(g) Deliver to each selling Holder of Registrable Securities,
its respective counsel, and the underwriters, if any, at the sole expense of the
Company, as many copies of the Prospectus (including each form of preliminary
prospectus) and each amendment or supplement thereto and any documents
incorporated by reference therein as such Persons may reasonably request in
writing; and, subject to the last paragraph of this Section 9.3, the Company
hereby
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consents to the use of such Prospectus and each amendment or supplement thereto
by each of the selling Holders of Securities and the underwriters or agents, if
any, and dealers (if any), in connection with the offering and sale of the
Registrable Securities covered by, such Prospectus and any amendment or
supplement thereto.
(h) Prior to any public offering of Registrable Securities, to
use its reasonable best efforts to register or qualify, and to cooperate with
the selling Holders of Registrable Securities, the managing underwriter or
underwriters, if any, and their respective counsel in connection with the
registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
any selling Holder, or the managing underwriter shall reasonably request;
provided, however, that where Registrable Securities are offered other than
through an underwritten offering, the Company agrees to cause the Company's
counsel to perform Blue Sky investigations, if necessary, and file registrations
and qualifications required to be filed pursuant to this Section 9.3(h); keep
each such registration or qualification (or exemption therefrom) effective
during the period such Registration Statement is required to be kept effective
and do any and all other acts or things reasonably necessary or advisable to
enable the disposition in such jurisdictions of the Registrable Securities
covered by the Registration Statement; provided, however, that the Company shall
not be required to qualify as a foreign corporation or to execute a general
consent to service of process in any jurisdiction or be subject to taxation in
any jurisdiction in which it is not so subject.
(i) Cooperate with the selling Holders of Registrable
Securities and the managing underwriter or underwriters, if any, to facilitate
the timely preparation and delivery of certificates representing Registrable
Securities to be sold, which certificates shall not bear any restrictive legends
and shall be in a form eligible for deposit with The Depository Trust Company;
and enable such Registrable Securities to be in such denominations and
registered in such names as the managing underwriter or underwriters, if any, or
Holders may reasonably request.
(j) Use its reasonable best efforts to cause the Registrable
Securities covered by the Registration Statement to be registered with or
approved by such other governmental agencies or authorities as may be necessary
to enable the seller or sellers thereof or the underwriter or underwriters, if
any, to consummate the disposition of such Registrable Securities in the United
States except as may be required solely as a consequence of the nature of such
selling Holder's business, in which case the Company will cooperate in all
reasonable respects with the filing of such Registration Statement and the
granting of such approvals.
(k) Upon the occurrence of any event contemplated by paragraph
9.3(c)(v) or 9.3(c)(vi) hereof, as promptly as practicable prepare and (subject
to Sections 9.3(d) and 9.3(a) hereof) file with the Commission, at the sole
expense of the Company, a supplement or post-effective amendment to the
Registration Statement or a supplement to the related Prospectus or any document
incorporated or deemed to be incorporated therein by reference, or file any
other
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required document so that, as thereafter delivered to the purchasers of the
Registrable Securities being sold thereunder, any such Prospectus will not
contain an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein, in
the light of the circumstances under which they were made, not misleading.
(l) Prior to the effective date of the first Registration
Statement relating to the Registrable Securities, (i) provide the Transfer Agent
(if any) with certificates for the Registrable Securities in a form eligible for
deposit with The Depository Trust Company and (ii) provide a CUSIP number for
the Warrants.
(m) In connection with an underwritten offering, if any, of
Registrable Securities pursuant to a Shelf Registration, enter into an
underwriting agreement as is customary for the managing underwriter or
underwriters in underwritten offerings of securities similar to the Warrant and
Warrant Shares and take all such other actions as are reasonably requested by
the managing underwriter or underwriters in order to expedite or facilitate the
registration or the disposition of such Registrable Securities and, in such
connection, (i) make such representations and warranties to, and covenants with,
the underwriters with respect to the business of the Company and its
subsidiaries (including any acquired business, properties or entity, if
applicable) and the Registration Statement, Prospectus and documents, if any,
incorporated or deemed to be incorporated by reference therein, in each case, as
are customarily requested by the managing underwriter or underwriters to be made
by issuers to underwriters in underwritten offerings of securities similar to
the Warrant and Warrant Shares, and confirm the same in writing if and when
requested; (ii) obtain the written opinion of counsel to the Company and written
updates thereof in form, scope and substance reasonably satisfactory to the
managing underwriter or underwriters, addressed to the underwriters covering the
matters customarily covered in opinions requested in underwritten offerings of
securities similar to the Warrant and Warrant Shares and such other matters as
may be reasonably requested by the managing underwriter or underwriters; (iii)
if entitled, obtain "cold comfort" letters and updates thereof in form, scope
and substance reasonably satisfactory to the managing underwriter or
underwriters from the independent certified public accountants of the Company
(and, if necessary, any other independent certified public accountants of any
subsidiary of the Company or of any business acquired by the Company for which
financial statements and financial data are, or are required to be, included or
incorporated by reference in the Registration Statement), addressed to each of
the underwriters, such letters to be in such underwriter's customary form and
covering matters of the type customarily covered in "cold comfort" letters in
connection with underwritten offerings of securities similar to the Warrant and
Warrant Shares and such other matters as reasonably requested by the managing
underwriter or underwriters; and (iv) if an underwriting agreement is entered
into, the same shall contain indemnification provisions and procedures in
customary form and covering matters customarily covered in connection with
underwritten offerings of securities similar to the Warrant and Warrant Shares
with respect to all parties to be indemnified pursuant to said Section. The
above shall be done at each closing under such underwriting agreement, or as and
to the extent required thereunder.
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(n) Make available for inspection by any selling Holder of the
Registrable Securities being sold, an underwriter, if any, participating in any
such disposition of Registrable Securities, and any attorney, accountant or
other agent retained by any such selling Holder or underwriter (collectively,
the "Inspectors"), at the offices where normally kept, during reasonable
business hours, all financial and other records, pertinent corporate documents
and instruments of the Company and its subsidiaries (collectively, the
"Records") as shall be reasonably necessary to enable them to exercise any
applicable due diligence responsibilities, and cause the officers, directors and
employees of the Company and its subsidiaries to supply all information
reasonably requested by any such Inspector in connection with such Registration
Statement; provided, however, that Records that the Company determines, in good
faith, to be confidential and which Records the Company notifies the Inspectors
are confidential shall not be disclosed by the Inspectors unless (A) the
Inspector provides five business days' prior written notice to the Company of
such disclosure and (B)(i) the disclosure of such Records is necessary to avoid
or correct a misstatement or omission in such Registration Statement, (ii) the
release of such Records is ordered pursuant to a subpoena or other order from a
court of competent jurisdiction, (iii) disclosure of such information is, in the
reasonable opinion of counsel for any Inspector, necessary or advisable in
connection with any action, claim, suit or proceeding, directly or indirectly,
involving or potentially involving such Inspector and arising out of, based
upon, relating to, or involving this Agreement or any transactions contemplated
hereby or arising hereunder or (iv) the information in such Records has been
made generally available to the public (other than as a result of an
impermissible disclosure or failure to safeguard by the Inspectors). Each
selling holder of Registrable Securities will be required to agree that
information obtained by it as a result of such inspections shall be deemed
confidential and shall not be used by it as the basis for any market
transactions in the securities of the Company unless and until such information
is generally available to the public (other than as a result of an impermissible
disclosure or failure to safeguard by such person). Each selling Holder of
Registrable Securities will be required to further agree that it will, upon
learning that disclosure of such Records is sought in a court of competent
jurisdiction, give notice to the Company and allow the Company to undertake
appropriate action to prevent disclosure of the Records deemed confidential at
the Company's sole expense.
(o) Comply with all applicable rules and regulations of the
Commission and make generally available to its securityholders earning
statements satisfying the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder (or any similar rule promulgated under the Securities Act)
no later than 45 days after the end of any 12-month period (or 90-days after the
end of any 12-month period if such period is a fiscal year) commencing on the
first day of the first fiscal quarter of the Company after the effective date of
a Registration Statement, which statements shall cover said 12-month periods.
(p) Cooperate with each seller of Registrable Securities
covered by any Registration Statement and each underwriter, if any,
participating in the disposition of such Registrable Securities and their
respective counsel in connection with the filings, if any, required to be made
with the National Association of Securities Dealers, Inc. (the "NASD").
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(q) Use its reasonable best efforts to take all other steps
necessary or advisable to effect the registration of the Registrable Securities
covered by a Registration Statement contemplated hereby.
(r) Use its reasonable best efforts to have the shares of
Common Stock issued upon exercise of the Warrants listed on any national
securities exchange or quotation system on or through which the Company's Common
Stock is then listed or admitted to trading.
In any underwritten public offering, the underwriters that will
administer the offering will be selected by ▇▇▇▇ (if it is participating in such
offering) or the Majority Holders participating in such offering (if ▇▇▇▇ is not
so participating in the offering) with the prior written consent of the Company
which consent shall not be unreasonably withheld. No Holder of Registrable
Securities may participate in an underwritten public offering hereunder unless
such Holder (a) agrees to sell such Holder's Registrable Securities on the basis
provided in any underwriting agreements approved by ▇▇▇▇ or the Majority Holders
participating in such offering, as applicable, included in such offering and (b)
completes and executes all customary and appropriate questionnaires, powers of
attorney, indemnities, underwriting agreements and other documents required
under the terms of such underwriting agreements.
The Company may require each seller of Registrable Securities as
to which any registration is being effected to furnish to the Company such
information regarding such seller and the distribution of such Registrable
Securities as the Company may, from time to time, reasonably request. The
Company may exclude from such registration the Registrable Securities of any
seller who fails to furnish such information within 20 business days after
receiving such request. Each seller as to which any Shelf Registration is being
effected agrees to furnish promptly to the Company all information required to
be disclosed in order to make the information previously furnished to the
Company by such seller not materially misleading.
Each Holder of Registrable Securities agrees by acquisition of
such Registrable Securities, that, upon actual receipt of any notice from the
Company of the happening of any event of the kind described in Section
9.3(c)(ii), 9.3(c)(iv), 9.3(c)(v), or 9.3(c)(vi) hereof, such Holder will
forthwith discontinue disposition of such Registrable Securities covered by such
Registration Statement or Prospectus to be sold by such Holder until such
Holder's receipt of the copies of the supplemented or amended Prospectus
contemplated by Section 9.3(k) hereof, or until it is advised in writing (the
"Advice") by the Company that the use of the applicable Prospectus may be
resumed, and has received copies of any amendments or supplements thereto.
Section 9.4. Registration Expenses (a) All fees and expenses
incident to the performance of or compliance with this Article IX by the Company
shall be borne by the Company whether or not a Shelf Registration is filed or
becomes effective. Notwithstanding the foregoing, the Holders of any shares of
Registrable Securities being registered shall pay all underwriting discounts,
commissions and placement agent fees attributable to the sale of their
securities.
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(b) The Company shall reimburse the Holders of the Registrable
Securities being registered in a Shelf Registration for the reasonable fees and
disbursements for one counsel (in addition to appropriate local counsel) chosen
by holders of a majority of the Registrable Securities (on an as-converted basis
and taken together as a single class), all such reasonable fees and expenses not
to exceed $50,000 in the aggregate.
Section 9.5. Indemnification
(a) The Company agrees to indemnify and hold harmless each
Holder of shares of Registrable Securities and its affiliates, the officers,
directors, employees, members, partners (whether general or limited) and agents
of each such Person, and each Person, if any, who controls any such Person
within the meaning of either Section 15 of the Securities Act or Section 20 of
the Exchange Act and the officers, directors, employees, members and
representatives of each such control Person (each, a "Participant"), from and
against any and all losses, claims, damages, expenses, penalties, costs of
investigation and other liabilities (including, without limitation, the
reasonable legal fees and other expenses actually incurred in connection with
any suit, action or proceeding or any claim asserted and whether or not such
Participant is a party to any action or proceeding out of which such expenses
arise) (collectively, "Losses") caused by, arising out of or based upon the
Company's breach of any material obligation or covenant in this Article IX, any
untrue statement or alleged untrue statement of a material fact contained in any
Registration Statement (or any amendment thereto) or Prospectus (as amended or
supplemented if the Company shall have furnished any amendments or supplements
thereto) or any preliminary prospectus, or caused by, arising out of or based
upon any omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, except insofar
as such Losses are caused by any untrue statement or omission or alleged untrue
statement or omission made in reliance upon and in conformity with information
relating to any Participant furnished to the Company in writing by such
Participant expressly for use therein; provided, however, that the Company will
not be required to indemnify a Participant (A) if such untrue statement or
omission or alleged untrue statement or omission was contained or made in any
preliminary prospectus and corrected in the Prospectus or any amendment or
supplement thereto and it is established in the related proceeding that such
Participant failed to deliver or provide a copy of the Prospectus (as amended or
supplemented) to such Person with or prior to the confirmation of the sale of
such Registrable Securities sold to such Person if required by applicable law,
unless such failure to deliver or provide a copy of the Prospectus (as amended
or supplemented) shall have been determined by a court of competent jurisdiction
by final and non-appealable judgment (or stipulated in a settlement agreement
reached by all parties involved in any action or proceeding related to such
claim) to have been the result of noncompliance by the Company with Section 9.3
of this Agreement or (B) if (i) such Participant disposed of Registrable
Securities to the Person asserting a claim (based on an untrue statement or
alleged untrue statement or omission or alleged omission) pursuant to a Shelf
Registration and sent or delivered, or was required by law to send or deliver, a
Prospectus to such
33
37
Person in connection with such disposition, and (ii) such Participant actually
received a Suspension Notice or other notice referred to in the penultimate
paragraph of Section 9.3 prior to the date of such disposition and (iii) such
untrue statement or alleged untrue statement or omission or alleged omission was
the reason for the Suspension Notice or other notice referred in such
penultimate paragraph of Section 9.3.
(b) Each Participant agrees, severally and not jointly, to
indemnify and hold harmless the Company, its directors and officers who sign the
Registration Statement and each Person who controls the Company within the
meaning of 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 each Participant,
but only (i) for Losses actually incurred by such Persons to the extent such
Losses are based on information relating to such Participant furnished to the
Company in writing by such Participant expressly for use in any Registration
Statement or Prospectus, any amendment or supplement thereto or any preliminary
prospectus or (ii) with respect to any untrue statement or representation made
by such Participant in writing to the Company. The liability of any Participant
under this paragraph shall in no event exceed the proceeds received by such
Participant from sales of its Registrable Securities under the relevant
Registration Statement or Prospectus.
(c) If any suit, action, proceeding (including any governmental
or regulatory investigation), claim or demand shall be brought or asserted
against any Person in respect of which indemnity may be sought pursuant to
either of the two preceding paragraphs, such Person (the "Indemnified Person")
shall promptly notify the Person against whom such indemnity may be sought (the
"Indemnifying Person") in writing, and the Indemnifying Person, upon request of
the Indemnified Person, shall retain counsel reasonably satisfactory to the
Indemnified Person to represent the Indemnified Person and any others the
Indemnifying Person may reasonably designate in such proceeding and shall pay
the reasonable fees and expenses actually incurred by such counsel related to
such proceeding; provided, however, that the failure to so notify the
Indemnifying Person shall not relieve it of any obligation or liability which it
may have hereunder or otherwise (unless and to the extent such Indemnifying
Person has been materially prejudiced by such failure, including, without
limitation, that such failure results in the forfeiture by the Indemnifying
Person of substantial rights and defenses). In any such proceeding, any
Indemnified Person shall have the right to retain its own counsel, but the fees
and expenses of such counsel shall be at the expense of such Indemnified Person
unless (i) the Indemnifying Person and the Indemnified Person shall have
mutually agreed in writing to the contrary, (ii) the Indemnifying Person has
failed to retain counsel reasonably satisfactory to the Indemnified Person and
has assumed the Indemnified Person's defense in a timely fashion or (iii) the
named parties in any such proceeding (including any impleaded parties) include
both the Indemnifying Person and the Indemnified Person and the Indemnified
Person shall have been advised by counsel that the Indemnified Person may have
available to it different defenses that those available to the Indemnifying
Person or that representation of both parties by the same counsel would be
inappropriate under applicable standards of professional conduct due to
differing interests between them. It is understood that, unless there exists a
conflict among Indemnified
34
38
Persons as described in the immediately preceding sentence, the Indemnifying
Person shall not, in connection with any one such proceeding or separate but
substantially similar related proceeding in the same jurisdiction arising out of
the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm (in addition to any local counsel) for
all Indemnified Persons, and that all such fees and expenses shall be advanced
or reimbursed promptly as they are incurred. Any such separate firm for the
Participants shall be designated in writing by Holders of a majority of the
Registrable Securities (on an as-converted basis and taken together as a single
class) and any such separate firm for the Company, its directors, its officers
and such control Persons of the Company shall be designated in writing by the
Company. The Indemnifying Person shall not be liable for any settlement of any
proceeding effected without its prior written consent (which consent shall not
be unreasonably withheld or delayed), but if settled with such consent or if
there be a final non-appealable judgment for the plaintiff for which the
Indemnified Person is entitled to indemnification pursuant to this Article IX,
the Indemnifying Person agrees to indemnify and hold harmless each Indemnified
Person from and against any loss or liability by reason of such settlement or
judgment. No Indemnifying Person shall, without the prior written consent of the
Indemnified Person, effect any settlement or compromise of any pending or
threatened proceeding in respect of which any Indemnified Person is or could
have been a party, or indemnity could have been sought hereunder by such
Indemnified Person, unless such settlement (A) includes an unconditional written
release of such Indemnified Person, in form and substance reasonably
satisfactory to such Indemnified Person, from all liability on claims that are
the subject matter of such proceeding and (B) does not include any statement as
to an admission of fault, culpability or failure to act by or on behalf of any
Indemnified Person.
(d) If the indemnification provided for in the first and second
paragraphs of this Section 9.5 is for any reason unavailable to, or insufficient
to hold harmless, an Indemnified Person in respect of any Losses referred to
therein, then each Indemnifying Person under such paragraphs, in lieu of
indemnifying such Indemnified Person thereunder and in order to provide for just
and equitable contribution, shall contribute to the amount paid or payable by
such Indemnified Person as a result of such Losses in such proportion as is
appropriate to reflect (i) the relative benefits received by the Indemnifying
Person or Persons on the one hand and the Indemnified Person or Persons on the
other from the offering of the Registrable Securities or (ii) if the allocation
provided by the foregoing clause (i) is not permitted by applicable law, not
only such relative benefits but also the relative fault of the Indemnifying
Person or Persons on the one hand and the Indemnified Person or Persons on the
other in connection with the statements or omissions or alleged statements or
omissions that resulted in such losses, claims, damages or liabilities (or
actions in respect thereof) as well as any other relevant equitable
considerations. The relative fault of the parties 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 the Company on the one hand or such
Participant or such other Indemnified Person in writing expressly for use in the
relevant Registration Statement, as the case may be, on the other, the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission, and any
35
39
other equitable considerations appropriate in the circumstances. The liability
of any Participant under this paragraph shall in no event exceed the proceeds
received by such Participant from sales of its Registrable Securities under the
relevant Registration Statement or Prospectus.
(e) The parties agree that it would not be just and equitable
if contribution pursuant to this Section 9.5 were determined by pro rata
allocation (even if the Participants 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 payable by an Indemnified Person as a result of the losses,
claims, damages and liabilities referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any reasonable legal or other expenses actually incurred by such
Indemnified Person in connection with investigating or defending any such action
or claim. Notwithstanding the provisions of this Section 9.5, in no event shall
a Participant be required to contribute any amount in excess of the amount by
which proceeds received by such Participant from sales of Registrable Securities
exceeds the amount of any Losses that such Participant has otherwise been
required to pay or has paid 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.
(f) The indemnity and contribution agreements contained in this
Section 9.5 will be in addition to any liability that the Indemnifying Persons
may otherwise have to the Indemnified Persons referred to above.
ARTICLE X
MISCELLANEOUS
Section 10.1. Loss or Mutilation. Upon receipt by the Company of
(i) evidence satisfactory to them of the ownership, and the loss, theft,
destruction or mutilation, of the Warrant Certificate and (ii) of indemnity
satisfactory to it or, in the case of mutilation, upon surrender and
cancellation of the mutilated Warrant Certificate, then, in the absence of
notice to the Company that the Warrant or Warrants represented thereby have been
acquired by a bona fide purchaser, the Company shall execute and deliver to the
registered Holder of the lost, stolen, destroyed or mutilated Warrant
Certificate, in exchange for or in lieu thereof, a new Warrant Certificate of
the same tenor and for a like aggregate number of Warrants. Upon the issuance of
any new Warrant Certificate under this Section 10.1, the Company may require the
payment of a sum sufficient to cover any tax or other governmental charge that
may be imposed in relation thereto and other expenses in connection therewith.
Every new Warrant Certificate executed and delivered pursuant to this Section
10.1 in lieu of any lost, stolen or destroyed Warrant Certificate shall
constitute a contractual obligation of the Company, whether or not the allegedly
lost, stolen or destroyed Warrant Certificate shall be at any time enforceable
by anyone, and shall be entitled to the benefits of this Agreement equally and
proportionately with any and all other Warrant
36
40
Certificates duly executed and delivered hereunder. The provisions of this
Section 10.1 are exclusive and shall preclude (to the extent lawful) all other
rights or remedies with respect to the replacement of the mutilated, lost,
stolen, or destroyed Warrant Certificate.
Section 10.2. Payment of Taxes. The Company shall pay any taxes
and other governmental charges that may be imposed under the laws of the United
States of America or any political subdivision or taxing authority thereof or
therein in respect of the issue or delivery of the Warrant or Warrant Shares or
of other securities or property deliverable upon exercise of Warrants (other
than income taxes imposed on the Holders). The Company shall not be required,
however, to pay any tax or other charge imposed in connection with any transfer
involved in the issue of any certificate for Warrant Shares or other securities
or property issuable upon the exercise of the Warrants or payment of cash to any
person other than the Holder of the Warrant Certificate surrendered upon
exercise of a Warrant and in case of such transfer or payment, the Company shall
not be required to issue any stock certificate or pay any cash until such tax or
charge has been paid or it has been established to the Company's satisfaction
that no such tax or charge is due.
Section 10.3. No Merger, Consolidation or Sale of Assets or the
Company. Except as otherwise provided herein, the Company will not merge into or
consolidate with any other Person, or sell or otherwise transfer its property,
assets and business substantially as an entirety to a successor of the Company,
unless the Person resulting from such merger or consolidation, or such successor
of the Company, shall expressly assume, the due and punctual performance and
observance of each and every covenant and condition of this Agreement to be
performed and observed by the Company.
Section 10.4. Reports to Holders. The Company shall file with the
Commission the annual, quarterly and other reports required by Section 13(a),
13(c) or 15(d) of the Exchange Act, regardless of whether such sections of the
Exchange Act are applicable to the Company, and shall provide copies of such
reports to each Holder, without cost to such Holder, within 30 days after the
date it would have been required to file such reports or other information with
the Commission had it been subject to such sections.
Section 10.5. Notices. All notices and other communications
provided for or permitted hereunder shall be made in writing by hand-delivery,
registered first-class mail, next-day air courier or facsimile:
1. if to a holder of Warrant and Warrant Shares, at the most
current address of such holder on the stock books of the Company with a
copy in like manner to the Initial Purchaser as follows:
The ▇▇▇▇ Alternative Income Fund L.P.
1776 On the Green
▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇
▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Esq.
with a copy to:
Proskauer Rose LLP
▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq.
- and -
Greenwich Street Capital Partners II, L.P.
GSCP Offshore Fund, L.P.
Greenwich Fund, L.P.
Greenwich Street Employees Fund, L.P.
TRV Executive Fund, L.P.
▇/▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Investments II, L.L.C.,
General Partner
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
with a copy to:
Weil, Gotshal & ▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ Nissan, Esq.
2. if to the Company, at the address as follows:
e.spire Communications, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
with a copy to:
38
▇▇
▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, Esq.
All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; one business day
after being timely delivered to a next-day air courier; and when receipt is
acknowledged by the addressee, if sent by facsimile.
Section 10.6. Subsequent Purchaser. Each party who enters into a
purchase agreement from time to time with the Company as an additional purchaser
of Preferred Stock and Additional Warrants shall execute a counterpart to this
Agreement and shall be deemed a Subsequent Purchaser. Such party shall be bound
by all relevant terms and provisions contained herein pertaining to a Subsequent
Purchaser and shall have all the rights and privileges contained herein granted
to a Subsequent Purchaser; notwithstanding the foregoing, such party may also be
a Holder bound by all relevant terms and provisions pertaining hereto and having
all the rights and privileges pertaining hereto.
39
43
Section 10.7. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT
GIVING EFFECT TO ANY CONFLICTS OF LAW PROVISIONS.
Section 10.8. Headings. The descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
Section 10.9. Severability. In the event that any one or more of
the provisions contained herein, or the application thereof in any circumstances
is held invalid, illegal or unenforceable in any respect for any reason, the
validity, legality and enforceability of any such provision in every other
respect and of the remaining provisions hereof shall not be in any way impaired
or affected thereby, it being intended that all of the rights and privileges of
the parties shall be enforceable to the fullest extent permitted by law.
Section 10.10. Amendment; Waiver. Any provision of this Agreement
may be amended only with the written consent of the Company and the Majority
Holders. The observance of any provision of this Agreement may be waived (either
generally or in a particular instance and either retroactively or prospectively)
only with the written consent of the party to be charged, provided that the
Majority Holders may act on behalf of all such Holders. Notwithstanding anything
to the contrary contained herein, no modification, amendment or supplement may
be made to this Agreement without the consent of each Holder of the then
outstanding Warrants affected thereby if such modification, amendment or
supplement adversely affects the Exercise Price or the Expiration Date. No
modification, amendment or supplement of the preceding sentence may be made
without the consent of each Holder of the then outstanding Warrants. Any
amendment or waiver effected in accordance with this Section 10.10 shall be
binding upon each Holder of a Warrant at the time outstanding, each future
holder of all such securities, and the Company. Any amendment, modification or
supplement to this Agreement which is favorable to ▇▇▇▇ and does not treat all
Holders uniformly shall apply equally to Greenwich.
Section 10.11. No Inconsistent Agreements. The Company has not, as
of the date hereof, entered into, nor shall it, on or after the date hereof,
enter into, any agreement that is inconsistent with the rights granted to the
Holders herein or that otherwise conflicts with the provisions hereof.
Section 10.12. Counterparts. This Agreement may be executed in any
number of counterparts and by the parties hereto in separate counterparts, each
of which when so executed shall be deemed to be an original and all of which
taken together shall constitute one and the same agreement. Any counterpart
executed by a Subsequent Purchaser shall, when so executed, be deemed to be an
original and, taken together with all other counterparts executed in connection
with this Agreement, shall constitute one and the same agreement.
40
44
IN WITNESS WHEREOF, the undersigned parties have caused this
Agreement to be duly executed, their respective corporate seals to be hereunto
affixed, all as of the date on the face hereto.
E.SPIRE COMMUNICATIONS, INC.
By: [SIG]
---------------------------------------
Name:
Title:
THE ▇▇▇▇ ALTERNATIVE INCOME FUND, L.P.
By:
---------------------------------------
Name:
Title:
GREENWICH STREET CAPITAL PARTNERS II, L.P.
By: Greenwich Street Investors II, L.L.C.,
general partner
By:
---------------------------------------
Name:
Title:
GSCP OFFSHORE FUND L.P.
By: Greenwich Street Investors II, L.L.C.,
general partner
By:
---------------------------------------
Name:
Title:
GREENWICH FUND, L.P.
By: Greenwich Street Investors II, L.L.C.,
general partner
By:
---------------------------------------
Name:
Title:
45
IN WITNESS WHEREOF, the undersigned parties have caused this
Agreement to be duly executed, their respective corporate seals to be hereunto
affixed, all as of the date on the face hereto.
E.SPIRE COMMUNICATIONS, INC.
By:
---------------------------------------
Name:
Title:
THE ▇▇▇▇ ALTERNATIVE INCOME FUND, L.P.
By: /s/ Ed Beaks
---------------------------------------
Name: ED BEAKS
Title: Investment Officer
GREENWICH STREET CAPITAL PARTNERS II, L.P.
By: Greenwich Street Investors II, L.L.C.,
general partner
By:
---------------------------------------
Name:
Title:
GSCP OFFSHORE FUND L.P.
By: Greenwich Street Investors II, L.L.C.,
general partner
By:
---------------------------------------
Name:
Title:
GREENWICH FUND, L.P.
By: Greenwich Street Investors II, L.L.C.,
general partner
By:
---------------------------------------
Name:
Title:
46
IN WITNESS WHEREOF, the undersigned parties have caused this
Agreement to be duly executed, their respective corporate seals to be hereunto
affixed, all as of the date on the face hereto.
E.SPIRE COMMUNICATIONS, INC.
By:
---------------------------------------
Name:
Title:
THE ▇▇▇▇ ALTERNATIVE INCOME FUND, L.P.
By:
---------------------------------------
Name:
Title:
GREENWICH STREET CAPITAL PARTNERS II, L.P.
By: Greenwich Street Investors II, L.L.C.,
general partner
By: [SIG]
---------------------------------------
Name:
Title:
GSCP OFFSHORE FUND L.P.
By: Greenwich Street Investors II, L.L.C.,
general partner
By: [SIG]
---------------------------------------
Name:
Title:
GREENWICH FUND, L.P.
By: Greenwich Street Investors II, L.L.C.,
general partner
By: [SIG]
---------------------------------------
Name:
Title:
▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ EMPLOYEES FUND, L.P.
By: Greenwich Street Investors II, L.L.C.,
general partner
By: [SIG]
---------------------------------------
Name:
Title:
TRV EXECUTIVE FUND, L.P.
By: Greenwich Street Investors II, L.L.C.,
general partner
By: [SIG]
---------------------------------------
Name:
Title:
Subsequent Purchaser:
By:
---------------------------------------
Name:
Title:
48
Subsequent Purchaser: THE HONEYWELL INTERNATIONAL INC.
MASTER RETIREMENT TRUST
By: Northern Trust Company,
as trustee
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: SENIOR VICE PRESIDENT
& DIVISION HEAD
THE NORTHERN TRUST COMPANY EXECUTES THIS
INSTRUMENT AS TRUSTEE OF AFORESAID, AND IS NOT
TO BE HELD LIABLE IN ITS INDIVIDUAL CAPACITY
IN ANY WAY BY REASON OF THIS INSTRUMENT
23
49
EXHIBIT A
FORM OF WARRANT
E.SPIRE COMMUNICATIONS, INC.
[CUSIP] [CINS] No.____
No. ___________ ___________Warrants
Date:__________
WARRANTS TO PURCHASE SHARES OF COMMON STOCK
This certifies that __________________, or its registered assigns,
is the owner of the number of Warrants set forth above, each of which initially
represents the right to purchase, e.spire COMMUNICATIONS, INC., a Delaware
corporation ("the Company"), _______ shares of Common Stock (each a "Warrant
Share"), par value $.01 per share, of the Company (the "Common Stock"), at the
purchase price equal to the Exercise Price (as defined in the Warrant Agreement)
per share of Common Stock (subject to adjustment as set forth in the Warrant
Agreement) (as defined herein), upon surrender hereof at the offices of the
Company, with the Subscription Form on the reverse hereof duly executed, with
signature guaranteed as therein specified and simultaneous payment in full (by
Fedwire or by certified or official bank or bank cashier's check payable to the
order of the Company, or by a Cashless Exercise (as defined in the Warrant
Agreement) equal to the Exercise Price of the Warrants being exercised) of the
purchase price for the share(s) as to which the Warrant(s) represented by this
Warrant Certificate are exercised, all subject to the terms and conditions
hereof and of the Warrant Agreement.
This Warrant Certificate is issued under and in accordance with a
Warrant Agreement dated as of March 1, 2000 (the "Warrant Agreement"), among
e.spire Communications, Inc., a Delaware corporation, The ▇▇▇▇ Alternative
Income Fund, L.P., Greenwich Street Capital Partners II, L.P., GSCP Offshore
Fund, L.P., Greenwich Fund, L.P., Greenwich Street Employees Fund, L.P. and TRV
Executive Fund, L.P. and such other parties who may be made a signatory hereto
from time to time and is subject to the terms and provisions contained therein,
to all of which terms and provisions the Holder of this Warrant Certificate
consents by acceptance hereof. The Warrant Agreement is hereby incorporated
herein by reference and made a part thereof. Reference is hereby made to the
Warrant Agreement for a full description of the rights, limitations of rights,
obligations, duties and immunities thereunder of the Company and the Holders of
the Warrants. The summary of the terms of the Warrant Agreement contained in
this Warrant Certificate is qualified in its entirety by express reference to
the Warrant Agreement. All terms used in this Warrant Certificate that are
defined in the Warrant Agreement shall have the meanings assigned to them in the
Warrant Agreement.
Copies of the Warrant Agreement are on file at the offices of the
Company at the following address:
50
A-2
e.spire Communications, Inc.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
All shares of Common Stock or other securities issuable by the
Company upon the exercise of Warrants shall be validly issued, fully paid and
nonassessable, and the Company shall pay all taxes and other governmental
charges that may be imposed under the laws of the United States of America or
any political subdivision or taxing authority thereof or therein in respect of
the issue or delivery of such shares or of other securities deliverable upon
exercise of Warrants. The Company shall not be required, however, to pay any tax
or other charge imposed in connection with any transfer involved in the issue of
any certificate for Common Stock, and in such case the Company shall not be
required to issue or deliver any stock certificate until such tax or other
charge has been paid or it has been established to the Warrant Agent's and the
Company's satisfaction that no tax or other charge is due.
Subject to the restrictions on transfer set forth in Article VII
of the Warrant Agreement, this Warrant Certificate and all rights hereunder are
transferable by the registered Holder hereof, in whole or in part, on the
register of the Company maintained by the Warrant Agent for such purpose at its
office in New York, New York, upon surrender of this Warrant Certificate duly
endorsed, or accompanied by a written instrument of transfer in form
satisfactory to the Company duly executed, with signatures guaranteed as
specified in the attached Form of Assignment, by the registered Holder hereof or
his attorney duly authorized in writing and upon payment of any necessary
transfer tax or other governmental charge imposed upon such transfer. Upon any
partial transfer, the Company will issue and will deliver to such Holder a new
Warrant Certificate or Certificates with respect to any portion not so
tramferred. Each taker and Holder of this Warrant Certificate, by taking and
holding the same, consents and agrees that prior to the registration of transfer
as provided in the Warrant Agreement, the Company and the Warrant Agent may
treat the person in whose name the Warrants are registered as the absolute owner
hereof for any purpose and as the person entitled to exercise the rights
represented hereby, any notice to the contrary notwithstanding.
This Warrant Certificate may be exchanged at the office of the
Company for Warrant Certificates representing the same aggregate number of
Warrants, each new Warrant Certificate to represent such number of Warrants as
the Holder hereof shall designate at the time of such exchange.
Prior to the exercise of the Warrants represents hereby, the
Holder of this Warrant Certificate, as such, shall not be entitled to any rights
of a stockholder of the Company,
51
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including, without limitation, the right to vote or to consent to any action of
the stockholders, to receive dividends or other distributions, to exercise any
preemptive right or to receive any notice of meetings of stockholders, and shall
not be entitled to receive any notice of any proceedings of the Company except
as provided in the Warrant Agreement.
This Warrant shall be void and all rights evidenced hereby shall
cease at 5:00 p.m., New York time, on March 1, 2010, unless sooner terminated by
the liquidation, dissolution or winding-up of the Company.
This Warrant Certificate shall not be valid for any purpose until
it shall have been countersigned by the Warrant Agent.
Dated:
E.SPIRE COMMUNICATIONS, INC.
By:
--------------------------------
Name:
Title:
▇▇
▇-▇
▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇▇▇
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
To:
The undersigned irrevocably exercise [________________] of the
Warrants represented by the Warrant Certificate for the purchase of _____
(subject to adjustment) shares of Common Stock, par value $.01 per share, of E.
SPIRE COMMUNICATIONS, INC. and herewith makes payment of $[__________] (such
payment being by Fedwire or by certified or official bank or bank cashier's
check payable to the order or at the direction of E. Spire Communications, Inc.,
or by a Cashless Exercise (as defined in the Warrant Certificate) equal to the
Exercise Price per share of the date of exercise of the Warrants being
exercised), all at the exercise price and on the terms and conditions specified
in the within Warrant Certificate therein referred to, surrenders this Warrant
Certificate and all right, title and interest therein to and directs that the
shares of Common Stock deliverable upon the exercise of such Warrants be
registered or placed in the name and at the address specified below and
delivered thereto.
Dated:
------------------------
(Signature of Owner)
------------------------
(Street Address)
------------------------
(City) (State) (Zip Code)
Signature Guaranteed By:
------------------------
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
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A-5
FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned registered holder of the within
Warrant Certificate hereby sells, assigns, and transfers unto the Assignee(s)
named below (including the undersigned with respect to any Warrants constituting
a part of the Warrants evidenced by the within Warrant Certificate not being
assigned hereby) all of the right of the undersigned under the within Warrant
Certificate, with respect to the number of Warrants set forth below:
Name(s) of Assignee(s):
------------------------------
Address:
---------------------------------------------
No. of Warrants:
------------------------------------
Please insert social security or other identifying number of assignee(s):
and does hereby irrevocably constitute and appoint ____________________ the
undersigned's attorney to make such transfer on the books of
_____________________ maintained for the purpose, with full power of
substitution in the premises.
Dated:
--------------------------
(Signature of Owner)
--------------------------
(Street Address)
--------------------------
(City) (State) (Zip Code)
Signature Guaranteed By:
--------------------------