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EXHIBIT 10.9
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WARRANT AGREEMENT
between
ALLEGIANCE TELECOM, INC.
and
THE BANK OF NEW YORK
Dated as of February 3, 1998
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TABLE OF CONTENTS
PAGE
ARTICLE I
CERTAIN DEFINITIONS
ARTICLE II
ORIGINAL ISSUE OF WARRANTS
Section 2.1. Form of Warrant Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Section 2.2. Restrictive Legends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Section 2.3. Execution and Delivery of Warrant Certificates . . . . . . . . . . . . . . . . . . . . . . . . . 11
Section 2.4. Certificated Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE III
EXERCISE PRICE, EXERCISE AND REPURCHASE OF WARRANTS
Section 3.1. Exercise Price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.2. Exercise; Restrictions on Exercise . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.3. Method of Exercise; Payment of Exercise Price . . . . . . . . . . . . . . . . . . . . . . . . . 12
Section 3.4. Repurchase Offers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
ARTICLE IV
ADJUSTMENTS
Section 4.1. Adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Section 4.2. Notice of Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.3. Statement on Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.4. Notice of Consolidation, Merger, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Section 4.5. Fractional Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
ARTICLE V
DECREASE IN EXERCISE PRICE
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ARTICLE VI
LOSS OR MUTILATION
ARTICLE VII
RESERVATION AND AUTHORIZATION
OF COMMON SHARES
ARTICLE VIII
WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER
Section 8.1. Transfer and Exchange . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Section 8.2. Book-Entry Provisions for the Global Warrants . . . . . . . . . . . . . . . . . . . . . . . . . 29
Section 8.3. Special Transfer Provisions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
Section 8.4. Surrender of Warrant Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE IX
WARRANT HOLDERS
Section 9.1. Warrant Holder Deemed Not a Stockholder . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Section 9.2. Right of Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
ARTICLE X
REMEDIES
Section 10.1. Defaults . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 10.2. Payment Obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 10.3. Remedies; No Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
ARTICLE XI
THE WARRANT AGENT
Section 11.1. Duties and Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
Section 11.2. Right to Consult Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 11.3. Compensation; Indemnification 38
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Section 11.4. No Restrictions on Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 11.5. Discharge or Removal; Replacement Warrant Agent . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 11.6. Successor Warrant Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
ARTICLE XII
MISCELLANEOUS
Section 12.1. Monies Deposited with the Warrant Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 12.2. Payment of Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 12.3. No Merger, Consolidation or Sale of Assets of the Company . . . . . . . . . . . . . . . . . . . 41
Section 12.4. Reports to Holders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 12.5. Notices; Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 41
Section 12.6. Binding Effect . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 12.7. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 12.8. Amendments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42
Section 12.9. Headings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 12.10. Common Shares Legend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Section 12.11. Third Party Beneficiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 44
Section 12.12. Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
Section 12.13. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45
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EXHIBIT A FORM OF WARRANT CERTIFICATE
EXHIBIT B FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH
TRANSFERS PURSUANT TO REGULATION S
EXHIBIT C-1 FORM OF CERTIFICATE TO BE DELIVERED BY TRANSFEROR IN CONNECTION
WITH TRANSFERS TO INSTITUTIONAL ACCREDITED INVESTORS
EXHIBIT C-2 FORM OF CERTIFICATE TO BE DELIVERED BY TRANSFEREES IN CONNECTION
WITH TRANSFERS TO INSTITUTIONAL ACCREDITED INVESTORS
EXHIBIT D FORM OF CERTIFICATE
APPENDIX A LIST OF FINANCIAL EXPERTS
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WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of February 3, 1998 (this
"Agreement"), between ALLEGIANCE TELECOM, INC., a Delaware corporation (the
"Company"), and THE BANK OF NEW YORK, a New York banking corporation (the
"Warrant Agent").
W I T N E S S E T H:
WHEREAS, pursuant to the terms of a Purchase Agreement dated
January 29, 1998 (the "Purchase Agreement"), among the Company and ▇▇▇▇▇▇
▇▇▇▇▇▇▇ & Co. Incorporated, Salomon Brothers Inc, Bear, ▇▇▇▇▇▇▇ & Co. Inc. and
▇▇▇▇▇▇▇▇▇, Lufkin & ▇▇▇▇▇▇▇▇ Securities Corporation as initial purchasers (the
"Initial Purchasers"), the Company has agreed to issue and sell to the Initial
Purchasers an aggregate of 445,000 warrants (each, a "Warrant" and
collectively, the "Warrants"), each Warrant initially entitling the holder
thereof to purchase .0034224719 shares of Common Stock (as defined below) of
the Company at an exercise price of $.01 per Common Share (as defined below) as
part of 445,000 units (the "Units"), each Unit consisting of one 11 3/4% Senior
Discount Note due 2008 of the Company (each a "Note" and collectively, the
"Notes") to be issued pursuant to the provisions of an Indenture, dated as of
the date hereof, between the Company and The Bank of New York, as trustee (the
"Indenture"), and one Warrant;
WHEREAS, the Notes and the Warrants included in each Unit will
become separately transferable at the close of business upon the earliest to
occur of (i) the date that is six months after the Closing Date (as defined
below), (ii) the commencement of an exchange offer with respect to the Notes
undertaken pursuant to the Notes Registration Rights Agreement (as defined
below) and (iii) the effectiveness of a shelf registration statement with
respect to resales of the Notes (the "Separation Date"); and
WHEREAS, the Company desires to engage the Warrant Agent to
act on the Company's behalf, and the Warrant Agent desires to act on behalf of
the Company, in connection with the issuance of the Warrant Certificates (as
defined below) and the other matters as provided herein, including, without
limitation, for the purpose of defining the terms and provisions of the
Warrants and the respective rights and obligations thereunder of the Company
and the record holders thereof (together with the holders of shares of Common
Stock (or other securities) received upon exercise thereof, the "Holders").
NOW, THEREFORE, in consideration of the foregoing and of the
mutual agreements contained herein and in the Purchase Agreement, the Company
and the Warrant Agent hereby agree as follows:
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ARTICLE I
CERTAIN DEFINITIONS
"Affiliate" means, as applied to any Person, any other Person
directly or indirectly controlling, controlled by, or under direct or indirect
common control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agent Members" has the meaning specified in Section 8.2
hereof.
"Auditors" means, at any time, the independent auditors of the
Company at such time.
"Beneficial Investors" means industry experts or other
individuals whose affiliation with the Company should, in the good faith
judgment of the Board, provide the Company with a strategic advantage.
"Board" means the board of directors of the Company from time
to time.
"Business Day" means a day except a Saturday, Sunday or other
day on which commercial banks in The City of New York, or in the city of the
corporate trust office of the Warrant Agent, are authorized by law to close.
"Cedel Bank" means Cedel Bank, societe anonyme.
"Certificated Warrants" has the meaning specified in Section
2.1 hereof.
"Certificate for Surrender" means the form on the reverse side
of the Warrant Certificate substantially in the form of Exhibit A hereto.
"Closing Date" means the date hereof.
"Commission" means the United States Securities and Exchange
Commission.
"Common Shares" means the shares of the Common Stock of the
Company.
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"Common Stock" means the Common Stock, par value $0.01 per
share, of the Company.
"Company" has the meaning specified in the preamble to this
Agreement.
"Current Market Value" has the meaning specified in Section
4.1(f) hereof.
"Default" has the meaning specified in Section 10.1 hereof.
"Depositary" means The Depository Trust Company, its nominees
and their respective successors.
"Euroclear" means ▇▇▇▇▇▇ Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear System.
"Exchange Act" means the United States Securities Exchange Act
of 1934, as amended.
"Exercise Price" has the meaning specified in Section 3.1
hereof.
"Expiration Date" means February 3, 2008.
"Final Surrender Time" has the meaning specified in Section
3.4 hereof.
"Financial Expert" means one of the Persons listed in Appendix
A hereto.
"Global Warrants" has the meaning specified in Section 2.1
hereof.
"Holders" has the meaning specified in the recitals to this
Agreement.
"IAI Certificated Warrants" has the meaning specified in
Section 2.1 hereof.
"Indenture" has the meaning specified in the recitals to this
Agreement.
"Independent Financial Expert" means a Financial Expert that
does not (and whose directors, executive officers and 5% stockholders do not)
have a direct or indirect financial interest in the Company or any of its
subsidiaries or affiliates, which has not been for at least five years and, at
the time that it is called upon to give independent financial advice to the
Company, is not (and none of its directors, executive officers or 5%
stockholders is) a promoter, director or officer of the Company or any of its
subsidiaries or Affiliates.
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"Institutional Accredited Investor" shall mean an institution
that is an "accredited investor" as that term is defined in Rule 501(a)(1),
(2), (3) or (7) of Regulation D under the Securities Act.
"Legended Regulation S Global Warrant" has the meaning
specified in Section 2.1 hereof.
"Non-U.S. Person" means a person who is not a U.S. person as
defined in Rule 902 of Regulation S.
"Notes" has the meaning specified in the recitals to this
Agreement.
"Notes Registration Rights Agreement" means the Notes
Registration Rights Agreement with respect to the Notes dated January 29, 1998
between the Company and the Initial Purchasers.
"Notice Date" has the meaning specified in Section 3.4(b)
hereof.
"Officer" means, with respect to the Company, (i) the Chairman
of the Board, any other Director, the Chief Executive Officer, the Chief
Financial Officer, the President, or any Vice President or (ii) the Treasurer
or any Assistant Treasurer, the Secretary or any Assistant Secretary.
"Officers' Certificate" means a certificate signed by one
Officer listed in clause (i) of the definition thereof and one Officer listed
in clause (ii) of the definition thereof; provided, however, that any such
certificate may be signed by any two of the Officers listed in clause (i) of
the definition thereof in lieu of being signed by one Officer listed in clause
(i) of the definition thereof and one Officer listed in clause (ii) of the
definition thereof.
"Offshore Certificated Warrants" has the meaning specified in
Section 2.1 hereof.
"Opinion of Counsel" means a written opinion signed by legal
counsel who may be an employee of or counsel to the Company.
"Person" means an individual, general partnership, limited
partnership, corporation, trust or any other entity or organization, including
a government or political subdivision or an agency or instrumentality thereof.
"Private Placement Legend" means the legend set forth on the
Warrant Certificates in the form set forth in Section 2.2(a) hereof.
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"Purchase Agreement" has the meaning specified in the recitals
to this Agreement.
"QIB" means a "qualified institutional buyer" as defined in
Rule 144A.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Warrant" has the meaning specified in
Section 2.1 hereof.
"Relevant Value" has the meaning specified in Section 3.4(d)
hereof.
"Repurchase Event" means, and shall be deemed to occur on, any
date when the Company (i) consolidates with or merges into or with another
person (but only where the holders of Common Stock receive consideration in
exchange for all or part of such Common Stock), if the Common Stock (or other
securities) thereafter issuable upon exercise of the Warrants is not registered
under the Exchange Act or (ii) sells all or substantially all of its assets to
another person, if the Common Stock (or other securities) thereafter issuable
upon exercise of the Warrants is not registered under the Exchange Act;
provided that, in each case, a "Repurchase Event" shall not be deemed to have
occurred if the consideration for such transaction consists solely of cash.
"Repurchase Notice" has the meaning specified in Section
3.4(a) hereof.
"Repurchase Obligation" has the meaning specified in Section
10.2 hereof.
"Repurchase Offer" means the Company's offer to repurchase the
Warrants in accordance with Section 3.4 hereof.
"Repurchase Price" has the meaning specified in Section 3.4(d)
hereof.
"Restricted Certificated Warrants" has the meaning specified
in Section 2.1 hereof.
"Restricted Global Warrant" has the meaning specified in
Section 2.1 hereof.
"Right" has the meaning specified in Section 4.1(c) hereof.
"Rule 144A" means Rule 144A under the Securities Act.
"Securities Act" means the United States Securities Act of
1933, as amended.
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"Separation Date" has the meaning specified in the recitals to
this Agreement.
"Spread" means, with respect to any Warrant, the Current
Market Value of the Common Shares subject to such Warrant, less the Exercise
Price of such Warrant, in each case as adjusted as provided herein.
"Subscription Form" means the form on the reverse side of the
Warrant Certificate substantially in the form of Exhibit A hereto.
"Underlying Securities" shall mean the Common Shares (or other
securities) issuable upon exercise of the Warrants.
"Units" has the meaning specified in the recitals to this
Agreement.
"U.S. Certificated Warrants" has the meaning specified in
Section 2.1 hereof.
"Unlegended Regulation S Global Warrant" has the meaning
specified in Section 2.1 hereof.
"Valuation Date" means the date five Business Days prior to
the Notice Date.
"Value Certificate" has the meaning specified in Section 3.4
hereof.
"Value Report" has the meaning specified in Section 4.1(k)
hereof.
"Warrant" has the meaning specified in the recitals to this
Agreement.
"Warrant Agent" has the meaning specified in the preamble to
this Agreement until a successor Warrant Agent replaces it in accordance with
the provisions of Section 11.5 and thereafter means such successor.
"Warrant Certificates" has the meaning specified in Section
2.1 hereof.
"Warrant Registration Rights Agreement" means the Warrant
Registration Rights Agreement, dated January 29, 1998, between the Company and
the Initial Purchasers.
"Warrant Registration Statement" has the meaning specified in
Section 3 of the Warrant Registration Rights Agreement.
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ARTICLE II
ORIGINAL ISSUE OF WARRANTS
Section 2.1. Form of Warrant Certificates. Certificates
representing the Warrants (the "Warrant Certificates") shall be substantially
in the form attached hereto as Exhibit A, shall be dated the date on which such
Warrant Certificates are countersigned by the Warrant Agent and 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 as
the Company may deem appropriate and as are not inconsistent with the
provisions of this Agreement, or as may be required to comply with any law or
with any rule or regulation pursuant thereto or with any rule or regulation of
any securities exchange on which the Warrants may be listed, or to conform to
usage.
Warrants offered and sold in reliance on Rule 144A shall be
issued initially in the form of one or more permanent global Warrant
Certificates in definitive, fully registered form, substantially in the form
set forth in Exhibit A (collectively, the "Restricted Global Warrant"),
deposited with the Warrant Agent, as custodian for, and registered in the name
of the nominee for, the Depositary, duly executed by the Company and
countersigned by the Warrant Agent as hereinafter provided. The aggregate
number of Warrants represented by the Restricted Global Warrant may from time
to time be increased or decreased by adjustments made on the records of the
Warrant Agent, as custodian for the Depositary, or its nominee, as provided in
Section 2.4 and Section 8.3 hereof.
Warrants offered and sold in offshore transactions in reliance
on Regulation S shall be issued initially in the form of one or more permanent
global Warrant Certificates in definitive, fully registered form, substantially
in the form set forth in Exhibit A (the "Legended Regulation S Global
Warrant"), deposited with the Warrant Agent, as custodian for, and registered
in the name of, the Depositary or its nominee for the accounts of Euroclear and
Cedel Bank, duly executed by the Company and countersigned by the Warrant Agent
as hereinafter provided. Prior to the date one year from the Closing Date,
beneficial interests in the Legended Regulation S Global Warrant may be only
held through Euroclear and Cedel Bank. At any time on or after the date one
year from the Closing Date, upon receipt by the Warrant Agent and the Company
of a certificate substantially in the form of Exhibit D hereto, one or more
global Warrant Certificates in registered form substantially in the form set
forth in Exhibit A (the "Unlegended Regulation S Global Warrant" and together
with the Legended Regulation S Global Warrant, the "Regulation S Global
Warrants") shall be deposited with the Warrant Agent, as custodian for, and
registered in the name of the nominee for, the Depositary, duly executed by the
Company and countersigned by the Warrant Agent as hereinafter provided, and the
Warrant Agent shall reflect on its books and records the date and a decrease in
the Legended Regulation S Global Warrant in an amount equal to the beneficial
interest in number of Warrants evidenced by the Legended Regulation S Global
Warrant
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transferred. The aggregate number of Warrants represented by the Regulation S
Global Warrant may from time to time be increased or decreased by adjustments
made on the records of the Warrant Agent, as custodian for the Depositary, or
its nominee, as provided in Section 2.4 and Section 8.3 hereof.
Warrants offered and sold to Institutional Accredited
Investors who are not QIBs shall be issued initially in registered form
substantially in the form set forth in Exhibit A ("IAI Certificated Warrants").
Warrants issued pursuant to Section 2.4 and Section 8.2(b) in
exchange for interests in the Restricted Global Warrant shall be issued in the
form of permanent Warrant Certificates in registered form, substantially in the
form set forth in Exhibit A (the "Restricted Certificated Warrants" and,
together with IAI Certificated Warrants, the "U.S. Certificated Warrants").
Warrants issued pursuant to Section 2.4 and Section 8.2(b) in exchange for
interests in the Regulation S Global Warrant shall be issued in the form of
permanent Warrant Certificates in registered form, substantially in the form
set forth in Exhibit A (the "Offshore Certificated Warrants"). The Offshore
Certificated Warrants and the U.S. Certificated Warrants are sometimes
collectively herein referred to as the "Certificated Warrants". The Restricted
Global Warrant and the Regulation S Global Warrant are sometimes herein
collectively referred to as the "Global Warrants."
The definitive Warrant Certificates shall be typed, printed,
lithographed or engraved or produced by any combination of these methods or may
be 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
executing such Warrant Certificates, as evidenced by their execution of such
Warrant Certificates.
Section 2.2. Restrictive Legends. (a) The Warrant
Certificates, other than the Unlegended Regulation S Global Warrants, shall
bear substantially the following legend on the face thereof:
THE WARRANTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE
TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR
BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING
SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1) REPRESENTS THAT
(A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL "ACCREDITED
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INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION
D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR")
OR (C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE WARRANTS
REPRESENTED BY THIS CERTIFICATE IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT, (2) AGREES THAT
IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144(k)
UNDER THE SECURITIES ACT AS IN EFFECT WITH RESPECT TO SUCH TRANSFER,
RESELL OR OTHERWISE TRANSFER THE WARRANTS REPRESENTED BY THIS
CERTIFICATE EXCEPT (A) TO ALLEGIANCE TELECOM, INC. (THE "COMPANY") OR
ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A QUALIFIED
INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE SECURITIES
ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE WARRANT AGENT
A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THE WARRANTS REPRESENTED
BY THIS CERTIFICATE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
WARRANT AGENT) AND IF SUCH TRANSFER IS IN RESPECT OF ANY WARRANTS
SUBSEQUENT TO THE DATE ON WHICH THE WARRANTS REPRESENTED HEREBY BECOME
SEPARATELY TRANSFERABLE, AN OPINION OF COUNSEL ACCEPTABLE TO THE
COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT,
(D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE
WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION
FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH
PERSON TO WHOM THE WARRANTS REPRESENTED BY THIS CERTIFICATE ARE
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THE WARRANTS REPRESENTED BY THIS
CERTIFICATE WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST
CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO
THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE WARRANT
AGENT. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED
INVESTOR, THE
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HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO EACH OF THE WARRANT
AGENT AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT. THE WARRANT AGREEMENT CONTAINS
A PROVISION REQUIRING THE WARRANT AGENT TO REFUSE TO REGISTER ANY
TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IN VIOLATION
OF THE FOREGOING RESTRICTIONS.
(b) Each Global Warrant shall also bear the following
legend on the face thereof:
UNLESS THIS WARRANT CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO ALLEGIANCE TELECOM,
INC. OR THE WARRANT AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE &
CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON
IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO
ANY PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO.,
HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR
TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF
PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN ARTICLE VIII OF THE
WARRANT AGREEMENT.
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(c) Each Warrant Certificate issued prior to the
Separation Date shall bear the following legend on the face thereof:
THE WARRANTS EVIDENCED BY THIS CERTIFICATE WERE ISSUED AS PART OF AN
ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF ONE 11 3/4% SENIOR
DISCOUNT NOTE DUE 2008 OF ALLEGIANCE TELECOM, INC. (COLLECTIVELY, THE
"NOTES") AND ONE WARRANT INITIALLY ENTITLING THE HOLDER THEREOF TO
PURCHASE .0034224719 SHARES OF COMMON STOCK, PAR VALUE $0.01 PER
SHARE, OF ALLEGIANCE TELECOM, INC. PRIOR TO THE CLOSE OF BUSINESS
UPON THE EARLIEST TO OCCUR OF (i) AUGUST 3, 1998, (ii) THE
COMMENCEMENT OF AN EXCHANGE OFFER WITH RESPECT TO THE NOTES, AND (iii)
THE EFFECTIVENESS OF A SHELF REGISTRATION STATEMENT WITH RESPECT TO
RESALES OF THE NOTES, THE WARRANTS EVIDENCED BY THIS CERTIFICATE MAY
NOT BE TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE
TRANSFERRED OR EXCHANGED ONLY TOGETHER WITH, THE NOTES.
Section 2.3. Execution and Delivery of Warrant Certificates.
Warrant Certificates evidencing 445,000 Warrants, each Warrant to purchase
initially .0034224719 Common Shares, may be executed, on or after the date of
this Agreement, by the Company and delivered to the Warrant Agent for
countersignature, and the Warrant Agent shall thereupon countersign and deliver
such Warrant Certificates upon the order and at the written direction of the
Company signed by its Chief Executive Officer or other duly authorized
executive officer to the purchasers thereof on the date of issuance. The
Warrant Agent is hereby authorized to countersign and deliver Warrant
Certificates as required by this Section 2.3 or by Section 3.3, Article VI or
Article VIII hereof.
The Warrant Certificates shall be executed on behalf of the
Company by its Chairman of the Board, Chief Executive Officer, any Vice
President or other duly authorized executive officer of the Company either
manually or by facsimile signature printed thereon. The Warrant Certificates
shall be countersigned by manual signature of the Warrant Agent and shall not
be valid for any purpose unless so countersigned. In case any officer or
director of the Company whose signature shall have been placed upon any of the
Warrant Certificates shall cease to be such officer or director of the Company
before countersignature by the Warrant Agent and the issuance and delivery
thereof, such Warrant Certificates may nevertheless be countersigned by the
Warrant Agent and issued and delivered with the same force and effect as though
such person had not ceased to be such officer or director of the Company.
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Section 2.4. Certificated Warrants. Beneficial owners of
interests in A Global Warrant may receive Certificated Warrants (which, except
as set forth in Section 8.3(d), shall bear the Private Placement Legend) in
accordance with the procedures of the Warrant Agent and the Depositary;
provided, however, that beneficial owners of interests in the Regulation S
Global Warrant may not receive Offshore Certificated Warrants in exchange for
such interests prior to the date one year from the Closing Date. In connection
with the execution and delivery of such Certificated Warrants, the Warrant
Agent shall reflect on its books and records the date and a decrease in the
number of Warrants represented by the relevant Global Warrant equal to the
number of such Certificated Warrants and the Company shall execute and the
Warrant Agent shall countersign and deliver to said beneficial owners one or
more Certificated Warrants in an equal aggregate number.
ARTICLE III
EXERCISE PRICE, EXERCISE AND REPURCHASE OF WARRANTS
Section 3.1. Exercise Price. Each Warrant Certificate shall,
when countersigned by the Warrant Agent, initially entitle the Holder thereof,
subject to the provisions of this Agreement, to purchase the number of Common
Shares indicated thereon at a purchase price (the "Exercise Price") of $.01 per
Common Share, subject to adjustment as provided in Section 4.1 and Article V
hereof.
Section 3.2. Exercise; Restrictions on Exercise. At any time
after one year after the Closing Date and on or before the Expiration Date, any
outstanding Warrants may be exercised on any Business Day; provided that the
Warrants will become exercisable in connection with the initial public offering
of equity securities (other than nonconvertible preferred shares or an offering
registered solely on Form S-4 or S-8 or any successor form thereto) of the
Company and provided further that the Warrant Registration Statement is, at the
time of exercise, effective and available for the exercise of the Warrants or
the exercise of such Warrants is exempt from the registration requirements of
the Securities Act. Any Warrants not exercised by 5:00 p.m., New York City
time, on the Expiration Date shall expire and all rights of the Holders of such
Warrants shall terminate. Additionally, pursuant to Section 4.1(j)(ii) hereof,
the Warrants shall expire and all rights of the Holders of such Warrants shall
terminate in the event the Company merges or consolidates with or sells all or
substantially all of its property and assets to a Person (other than an
Affiliate of the Company) if the consideration payable to holders of Common
Stock in exchange for their Common Stock in connection with such merger,
consolidation or sale consists solely of cash or in the event of the
dissolution, liquidation or winding up of the Company.
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Section 3.3. Method of Exercise; Payment of Exercise Price.
In order to exercise all or any of the Warrants represented by a Warrant
Certificate, the Holder thereof must surrender for exercise the Warrant
Certificate to the Warrant Agent at its corporate trust office address set
forth in Section 12.5 hereof, with the Subscription Form set forth on the
reverse of the Warrant Certificate duly executed, together with payment in full
of the Exercise Price then in effect for each Common Share (or other
securities) issuable upon exercise of the Warrants as to which a Warrant is
exercised; such payment may be made in cash or by certified or official bank or
bank cashier's check payable to the order of the Company and shall be made to
the Warrant Agent at its corporate trust office address set forth in Section
12.5 hereof prior to the close of business on the date the Warrant Certificate
is surrendered to the Warrant Agent for exercise. Notwithstanding the
foregoing, the Exercise Price may be paid by surrendering additional Warrants
to the Warrant Agent having an aggregate Spread equal to the aggregate Exercise
Price of the Warrants being exercised. All payments received upon exercise of
Warrants shall be delivered to the Company by the Warrant Agent as instructed
in writing by the Company. If less than all the Warrants represented by a
Warrant Certificate are exercised or surrendered (in connection with a cashless
exercise), 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 or surrendered shall be executed by the Company and delivered to the
Warrant Agent and the Warrant Agent shall countersign the new Warrant
Certificate, registered in such name or names as may be directed in writing by
the Holder, and shall make available for delivery the new Warrant Certificate
to the Person or Persons entitled to receive the same. Global Warrants will be
exercised by accordance with the procedures of the Warrant Agent and the
Depositary. Upon the exercise of any Warrants following the surrender of a
Warrant Certificate in conformity with the foregoing provisions, the Warrant
Agent shall instruct the Company to transfer promptly to the Holder or, upon
the written order of the Holder of such Warrant Certificate, appropriate
evidence of ownership of any Common Shares or other security or property to
which it is entitled, registered or otherwise placed in such name or names as
may be directed in writing by the Holder, and to deliver such evidence of
ownership to the Person or Persons entitled to receive the same and fractional
shares, if any, or an amount in cash, in lieu of any fractional shares, as
provided in Section 4.5 hereof; provided that the Holder of such Warrant shall
be responsible for the payment of any transfer taxes required as the result of
any change in ownership of such Warrants or the issuance of such Common Shares
other than to the Holder of such Warrants and any such transfer shall comply
with applicable law. Upon the exercise of a Warrant or Warrants, the Warrant
Agent is hereby authorized and directed to requisition from any transfer agent
of the Common Shares (and all such transfer agents are hereby irrevocably
authorized to comply with all such requests) certificates (bearing the legend
set forth in Section 12.10 hereof, if applicable, unless a registration
statement with the Commission relating to such Common Shares shall then be in
effect or the Company and the Holder exercising such Warrant or Warrants
otherwise agree) for the number of Common Shares to which said Holder may be
entitled. The Company shall enter, or shall cause any transfer agent of the
Common
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Shares to enter, the name of the Person entitled to receive the Common Shares
upon exercise of the Warrants into the Company's register of stockholders
within 14 days of such exercise. A Warrant shall be deemed to have been
exercised immediately prior to the close of business on the date of the
surrender for exercise, as provided above, of the Warrant Certificate
representing such Warrant and, for all purposes under this Agreement, the
Person entitled to receive any Common Shares deliverable upon such exercise
shall, as between such Person and the Company, be deemed to be the Holder of
such Common Shares of record as of the close of business on such date and shall
be entitled to receive, and the Warrant Agent shall make available for delivery
to such Person, any Common Shares to which such Person would have been entitled
had such Person been the registered holder on such date.
Section 3.4. Repurchase Offers. (a) Notice of Repurchase
Event. Within five Business Days following the occurrence of a Repurchase
Event, the Company shall give notice (a "Repurchase Notice") to the Holders of
the Warrants and the Warrant Agent that such event has occurred.
(b) Repurchase Offers Generally. Following the
occurrence of a Repurchase Event, the Company shall offer to repurchase for
cash all outstanding Warrants pursuant to the provisions of this Section 3.4 (a
"Repurchase Offer"). The Company shall give notice of a Repurchase Offer in
accordance with Section 3.4(f) hereof. Each date on which the Company gives
any such notice is referred to as the "Notice Date." The Repurchase Offer
shall commence on the Notice Date for such Repurchase Offer and shall expire at
5:00 p.m., New York City time, on a date determined by the Company (the "Final
Surrender Time") that is at least 30 but not more than 60 days after the Notice
Date. Once a Repurchase Event has occurred, there is no limit on the number of
Repurchase Offers that the Company may make.
(c) Repurchase Offers. (i) In any Repurchase Offer, the
Company shall offer to purchase for cash at the Repurchase Price all Warrants
outstanding on the Notice Date for such Repurchase Offer that are properly
tendered to the Warrant Agent on or prior to the Final Surrender Time for such
Repurchase Offer.
(ii) Each Holder may, but shall not be obligated to,
accept such Repurchase Offer by tendering to the Warrant Agent, on or prior to
the Final Surrender Time for such Repurchase Offer, the Warrant Certificates
evidencing the Warrants such Holder desires to have repurchased in such offer,
together with a completed Certificate for Surrender in substantially the form
attached to the Warrant Certificate. A Holder may withdraw all or a portion of
the Warrants tendered to the Warrant Agent at any time prior to the Final
Surrender Time for such Repurchase Offer. If less than all the Warrants
represented by a Warrant Certificate shall be tendered, such Warrant
Certificate shall be surrendered and a new Warrant Certificate of the same
tenor and for the number of Warrants which were not tendered shall be
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executed by the Company and delivered to the Warrant Agent and the Warrant
Agent shall countersign the new Warrant Certificate, registered in such name or
names as may be directed in writing by the Holder, and shall make available for
delivery the new Warrant Certificate to the Person or Persons entitled to
receive the same; provided that the Holder of such Warrants shall be
responsible for the payment of any transfer taxes required as the result of any
change in ownership of such Warrants and any such transfer shall comply with
applicable law.
(d) Repurchase Price. (i) The purchase price (the
"Repurchase Price") for each Warrant properly tendered to the Warrant Agent
pursuant to a Repurchase Offer shall be equal to the value (the "Relevant
Value") on the Valuation Date of the Common Shares issuable, and other
securities or property of the Company which would have been delivered, upon
exercise of Warrants had the Warrants been exercised (regardless of whether the
Warrants are then exercisable), less the Exercise Price in effect on the Notice
Date for such Repurchase Offer.
(ii) The Relevant Value of the Common Shares and other
securities or property issuable upon exercise of all the Warrants, on any
Valuation Date shall be:
(1) (A) If the Common Shares (or other securities) are
registered under the Exchange Act, deemed to be the average of the
daily market prices (on the stock exchange that is the primary trading
market for the Common Shares (or other securities)) of the Common
Shares (or other securities) for the 20 consecutive trading days
immediately preceding such Valuation Date or, (B) if the Common Shares
(or other securities) have been registered under the Exchange Act for
less than 20 consecutive trading days before such date, then the
average of the daily market prices for all of the trading days before
such date for which daily market prices are available, in the case of
each of (A) and (B), as certified to the Warrant Agent by the
President, any Vice President or the Chief Financial Officer of the
Company (the "Value Certificate"). The 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 on such day, or if no sale takes place on such day, the
average of the closing bid and asked prices on such day, (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 service, or a
newspaper of general circulation in the Borough of Manhattan, City and
State of New York customarily published on each Business Day,
designated by the Company, or, if there shall be no
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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 30
days prior to the date in question) for which prices have been so
reported and (D) if there are no bid and asked prices reported during
the 30 days prior to the date in question, the Relevant Value shall be
determined as if the Common Shares (or other securities) were not
registered under the Exchange Act; or
(2) If the Common Shares (or other securities) are not
registered under the Exchange Act or if the value cannot be computed
under clause (1) above, deemed to be equal to the value set forth in
the Value Report (as defined below) as determined by an Independent
Financial Expert, which shall be selected by the Board in accordance
with Section 3.4(e) hereof, and retained on customary terms and
conditions, using one or more valuation methods that the Independent
Financial Expert, in its best professional judgment, determines to be
most appropriate but without giving effect to any discount for lack of
liquidity, the fact that the Company has no class of equity securities
registered under the Exchange Act or the fact that the Common Shares
and other securities or property issuable upon exercise of the
Warrants represent a minority interest in the Company. The Company
shall cause the Independent Financial Expert to deliver to the
Company, with a copy to the Warrant Agent, within 45 days of the
appointment of the Independent Financial Expert in accordance with
Section 3.4(e) hereof, a value report (the "Value Report") stating the
Relevant Value of the Common Shares and other securities or property
of the Company, if any, being valued as of the Valuation Date and
containing a brief statement as to the nature and scope of the
methodologies upon which the determination of Relevant Value was made.
The Warrant Agent shall have no duty with respect to the Value Report
of any Independent Financial Expert, except to keep it on file and
available for inspection by the Holders. The determination as to
Relevant Value in accordance with the provisions of this Section
3.4(d) shall be conclusive on all Persons. The Independent Financial
Expert shall consult with management of the Company in order to allow
management to comment on the proposed Relevant Value prior to delivery
to the Company of any Value Report of the Independent Financial
Expert.
(e) Selection of Independent Financial Expert. If clause
(d)(ii)(2) of this Section 3.4 is applicable, the Board of Directors of the
Company shall select an Independent Financial Expert not more than five
Business Days following a Repurchase Event. Within seven Business Days
following a Repurchase Event, the Company shall deliver to the Warrant Agent a
notice setting forth the name of the Independent Financial Expert.
(f) Notice of Repurchase Offer. Each notice of a
Repurchase Offer (an "Offer Notice") given by the Company pursuant to Section
3.4(b) shall be given by the Company directly to all Holders of the Warrants,
with a copy to the Warrant Agent, shall be
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given simultaneously with the Repurchase Notice (or, in the event that the
Relevant Value of the Common Shares or other securities or property issuable
upon exercise of all the Warrants cannot be determined pursuant to Section
3.4(d)(ii)(1), then such Offer Notice shall be given within five Business Days
after the Company receives the Value Report with respect to such offer) and
shall specify (A) the Final Surrender Time for such Repurchase Offer, (B) the
manner in which Warrants may be surrendered to the Warrant Agent for repurchase
by the Company, (C) the Repurchase Price at which the Warrants will be
repurchased by the Company, (D) if applicable, the name of the Independent
Financial Expert whose valuation of the Common Shares and other securities or
property was utilized in connection with determining such Repurchase Price and
(E) that payment of the Repurchase Price will be made by the Warrant Agent.
Each such notice shall be accompanied by a Certificate for Surrender for
Repurchase Offer in substantially the form attached to the Warrant Certificate
and a copy of the Value Report, if any.
(g) Payment for Warrants. Upon surrender for repurchase
of any Warrants in conformity with the provisions of this Section 3.4, the
Warrant Agent shall thereupon promptly notify the Company of such surrender.
On or before the Final Surrender Time for any Repurchase Offer, the Company
shall deposit with the Warrant Agent funds sufficient to make payment for the
Warrants tendered to the Warrant Agent and not withdrawn. After receipt of
such deposit from the Company, the Warrant Agent shall make payment, by
delivering a check in such amount as is appropriate, to such Person or Persons
as it may be directed in writing by the Holder surrendering such Warrants, net
of any transfer taxes required to be paid in the event that the check is to be
delivered to a Person other than the Holder.
(h) Compliance with Laws. Notwithstanding anything
contained in this Section 3.4, if the Company is required to comply with laws,
rules, regulations and securities exchange or clearing procedures, in
connection with making any Repurchase Offer, such laws, rules, regulations and
procedures shall govern the making of such Repurchase Offer.
ARTICLE IV
ADJUSTMENTS
Section 4.1. Adjustments. The Exercise Price and the number
of Common Shares issuable upon exercise of each Warrant shall be subject to
adjustment from time to time as follows:
(a) Divisions; Consolidations; Reclassifications. In
case the Company shall, on or before the Expiration Date, (i) issue any Common
Shares in payment of a dividend or other distribution with respect to its
Common Stock, (ii) subdivide its issued and outstanding
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Common Shares, (iii) consolidate its issued and outstanding Common Shares into
a smaller number of shares, or (iv) reclassify or convert the Common Shares
(other than a reclassification in connection with a merger, consolidation or
other business combination which will be governed by Section 4.1(j)), then the
number of Common Shares purchasable upon exercise of each Warrant immediately
prior to the record date for such issue or distribution or the effective date
of such subdivision, consolidation, reclassification or conversion shall be
adjusted so that the Holder of each Warrant shall thereafter be entitled to
receive the kind and number of Common Shares which such Holder would have been
entitled to receive after the happening of any of the events described above
had such Warrant been exercised immediately prior to the happening of such
event or any record date with respect thereto. An adjustment made pursuant to
this Section 4.1(a) shall become effective immediately after the effective date
of such event retroactive to the record date, if any, for such event.
(b) Rights; Options; Warrants. In case the Company shall
issue rights, options, warrants or convertible or exchangeable securities
(other than an issuance of convertible or exchangeable securities subject to
Section 4.1(a)) to all holders of its Common Shares, entitling them to
subscribe for or purchase Common Shares at a price per share which is lower (at
the record date for such issuance) than the then Current Market Value per
Common Share, then the Company shall ensure that at the time of such issuance,
the same or a like offer or invitation is made to the Holders of the Warrants
as if their Warrants had been exercised on the day immediately preceding the
record date of such offer or invitation on the terms (subject to any adjustment
pursuant to Section 4.1(a) for a prior event) on which such Warrants could have
been exercised on such date; provided that if the Board so resolves, the
Company shall not be required to ensure that the same offer or invitation is
made to the Holders of the Warrants, but the number of Common Shares thereafter
purchasable upon the exercise of each Warrant shall instead be adjusted and
shall be determined by multiplying the number of Common Shares theretofore
purchasable upon exercise of each Warrant by a fraction, the numerator of which
shall be the sum of (i) the number of Common Shares outstanding immediately
prior to the issuance of such rights, options, warrants or convertible or
exchangeable securities plus (ii) the number of additional Common Shares which
may be purchased or subscribed for upon exercise, exchange or conversion of
such rights, options, warrants or convertible or exchangeable securities and
the denominator of which shall be the sum of (x) the number of Common Shares
outstanding immediately prior to the issuance of such rights, options, warrants
or convertible or exchangeable securities plus (y) the number of shares which
the total consideration received by the Company for such rights, options,
warrants or convertible or exchangeable securities so offered would purchase at
the then Current Market Value per Common Share. Except as otherwise provided
above, such adjustment shall be made whenever such rights, options, warrants or
convertible or exchangeable securities are issued, and shall become effective
retroactively immediately after
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the record date for the determination of stockholders entitled to receive such
rights, options, warrants or convertible or exchangeable securities.
(c) Issuance of Common Shares at Lower Values. In case
the Company shall sell and issue any Common Share or Right (as defined below)
(excluding (i) any Right issued in any of the transactions described in Section
4.1(a) or (b) above, (ii) Common Shares issued pursuant to (x) any Rights
outstanding on the date of this Agreement or any Right issued in any
transaction described in Section 4.1(a) or (b) above and (y) a Right, if on the
date such Right was issued, the exercise, conversion or exchange price per
Common Share with respect thereto was at least equal to the then Current Market
Value per Common Share and (iii) any Common Shares or Right issued as
consideration (A) when any corporation or business is acquired, merged into or
becomes part of the Company or a subsidiary of the Company or (B) in good faith
in connection with any other business collaboration, in each case in an
arm's-length transaction between the Company and a Person other than an
Affiliate of the Company) at a price per Common Share (determined in the case
of any such Right, by dividing (x) the total consideration receivable by the
Company in consideration of the sale and issuance of such Right, plus the total
consideration payable to the Company upon exercise, conversion or exchange
thereof, by (y) the total number of Common Shares covered by such Right) that
is lower than the Current Market Value per Common Share in effect immediately
prior to such sale or issuance, then the number of Common Shares thereafter
purchasable upon the exercise of each Warrant shall be determined by
multiplying the number of Common Shares theretofore purchasable upon exercise
of such Warrant by a fraction, the numerator of which shall be the number of
Common Shares outstanding immediately after such sale or issuance and the
denominator of which shall be the number of Common Shares outstanding
immediately prior to such sale or issuance plus the number of Common Shares
which the aggregate consideration received (determined as provided below) for
such sale or issuance would purchase at such Current Market Value per Common
Share. For purposes of this Section 4.1(c), the Common Shares which the holder
of any such Right shall be entitled to subscribe for or purchase shall be
deemed to be issued and outstanding as of the date of sale and issuance of such
Right and the consideration received by the Company therefor shall be deemed to
be the consideration received by the Company for such Right, plus the
consideration or premiums stated in such Right to be paid for the Common Shares
covered thereby. In case the Company shall sell and 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 Common Share" and the "consideration received by
the Company" for purposes of the first sentence of this Section 4.1(c), the
Board shall determine, in good faith, the fair value of the Right then being
sold as part of such unit. For purposes of this paragraph, a "Right" shall
mean any right, option, warrant or convertible or exchangeable security
containing the Right to subscribe for or acquire one or more Common Shares,
excluding the Warrants. This Section 4.1(c) shall not apply to: (i) the
exercise of Warrants, or the conversion or exchange of other securities
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convertible or exchangeable for Common Shares; or (ii) Common Shares issued
upon the exercise of Rights or warrants issued to all holders of Common Shares.
(d) Distributions of Debt, Assets, Subscription Rights or
Convertible Securities. In case the Company shall make a distribution to all
holders of its Common Shares of evidences of its indebtedness, or assets, or
other distributions (excluding any issuance of Common Shares referred to in
Section 4.1(a) above and excluding distributions in connection with the
dissolution, liquidation or winding-up of the Company which shall be governed
by Section 4.1(j) and distributions of securities referred to in Section
4.1(a), Section 4.1(b) or Section 4.1(c)), then, in each case, the number of
Common Shares purchasable after such record date upon the exercise of each
Warrant shall be determined by multiplying the number of Common 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 Common Share immediately prior to the record date for such distribution and
the denominator of which shall be the Current Market Value per Common Share
immediately prior to the record date for such distribution less the then fair
value (as determined in good faith by the Board) of the evidences of its
indebtedness, or assets or other distributions so distributed attributable to
one Common Share. Such adjustment shall be made whenever any such distribution
is made, and shall become effective on the date of distribution retroactive to
the record date for the determination of stockholders entitled to receive such
distribution.
(e) Expiration of Rights, Options and Conversion
Privileges. Upon the expiration of any rights, options, warrants or conversion
or exchange privileges (including, without limitation, any Rights) that have
previously resulted in an adjustment hereunder, if any thereof shall not have
been exercised, exchanged or converted, the Exercise Price and the number of
Common Shares issuable upon the exercise of each Warrant shall, upon such
expiration, be readjusted and shall thereafter, upon any future exercise, be
such as they would have been had they been originally adjusted (or had the
original adjustment not been required, as the case may be) as if (i) the only
Common Shares so issued were the Common Shares, if any, actually issued or sold
upon the exercise, exchange or conversion of such rights, options, warrants or
conversion or exchange rights (including, without limitation, any Rights) and
(ii) such Common Shares, if any, were issued or sold for the consideration
actually received by the Company upon such exercise, exchange or conversion
plus the consideration, if any, actually received by the Company for issuance,
sale or grant of all such rights, options, warrants or conversion or exchange
rights (including, without limitation, any Rights) whether or not exercised.
(f) Current Market Value. For the purposes of any
computation under this Article IV, the "Current Market Value" per Common Share
or of any other security (herein collectively referred to as a "security") at
any date herein specified shall be:
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(i) if the security is not registered under the Exchange
Act, the value of the security (1) most recently determined as of a
date within the six months preceding such date by an Independent
Financial Expert selected by the Company in accordance with the
criteria for such valuation set out in Section 4.1(k), or (2) if no
such determination shall have been made within such six-month period
or if the Company so chooses, determined as of such a date by an
Independent Financial Expert selected by the Company in accordance
with the criteria for such valuation set out in Section 4.1(k), 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, then the average of the
daily market prices for all of the trading days before such date for
which daily market prices are available. The 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, as determined by the Board, in good faith, (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 service, or a
newspaper of general circulation in the Borough of Manhattan, City and
State 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 30 days prior to
the date in question) for which prices have been so reported and (D)
if there are no bid and asked prices reported during the 30 days prior
to the date in question, the Current Market Value of the security
shall be determined as if the security were not registered under the
Exchange Act.
(g) Consideration Received. For purposes of any
computation respecting consideration received pursuant to this Section 4.1, the
following shall apply:
(i) in the case of the issuance of Common Shares for
cash, the consideration shall be the amount of such cash, provided
that in no case shall any deduction be made for any commissions,
discounts or other expenses incurred by the Company for any
underwriting of the issue or otherwise in connection therewith;
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(ii) in the case of the issuance of Common Shares for a
consideration in whole or in part other than cash, the consideration
other than cash shall be deemed to be the fair market value thereof as
determined in good faith by the Board (irrespective of the accounting
treatment thereof), whose determination shall be conclusive and
described in reasonable detail in a board resolution which shall be
provided as soon as practicable thereafter to the Warrant Agent; and
(iii) in the case of the issuance of rights, options,
warrants or securities convertible into or exchangeable for Common
Shares (including, without limitation, any Rights), the aggregate
consideration received therefor shall be deemed to be the
consideration received by the Company for the issuance of such rights,
options, warrants or securities convertible into or exchangeable for
Common Shares, plus the additional minimum consideration, if any, to
be received by the Company upon the exercise, conversion or exchange
thereof (the consideration in each case to be determined in the same
manner as provided in clauses (i) and (ii) of this Section 4.1(g)).
(h) De Minimis Adjustments. No adjustment in the number
of Common Shares purchasable hereunder shall be required unless such adjustment
would require an increase or decrease of at least one percent (1%) in the
number of Common Shares purchasable upon the exercise of each Warrant;
provided, however, that any adjustments which by reason of this Section 4.1(h)
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-ten-billionth of a share.
(i) Adjustment of Exercise Price. Whenever the number of
Common Shares purchasable upon the exercise of each Warrant is adjusted, as
herein provided, the Exercise Price per Common Share payable upon exercise of
such Warrant shall be adjusted (calculated to the nearest $.01) 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 Common Shares purchasable upon the exercise of each Warrant
immediately prior to such adjustment and the denominator of which shall be the
number of Common Shares so purchasable immediately thereafter. Following any
adjustment to the Exercise Price pursuant to this Article IV, the amount
payable, when adjusted, shall never be less than the par value per Common Share
at the time of such adjustment.
If after an adjustment, a Holder of a Warrant upon exercise of
it may receive shares of two or more classes in the capital of the Company, the
Company shall determine the allocation of the adjusted Exercise Price between
such classes of shares in a manner that the Board deems fair and equitable to
the Holders. After such allocation, the exercise privilege
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and the Exercise Price of each class of shares shall thereafter be subject to
adjustment on terms comparable to those applicable to Common Shares in this
Article IV.
Such adjustment shall be made successively whenever any event
listed above shall occur.
(j) Consolidation, Merger, Etc. (i) Subject to the
provisions of Subsection (ii) below of this Section 4.1(j), in case of
the consolidation of the Company with, or merger of the Company with
or into, or of the sale of all or substantially all of the properties
and assets of the Company to, any Person, and in connection therewith
consideration is payable to holders of Common Shares (or other
securities or property purchasable upon exercise of Warrants) in
exchange therefor, 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 to receive upon
exercise the number of shares in the capital or other securities or
property (including cash) of or from the 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 Common Shares if
such Holder's Warrants had been exercised immediately prior to such
merger, consolidation or sale (or, if applicable, the 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 in good faith so
as to be applicable, as nearly as may reasonably be, to any shares,
other securities or any property thereafter deliverable on the
exercise of the Warrants.
(ii) Notwithstanding the foregoing, (x) if the Company
merges or consolidates with, or sells all or substantially all of its
property and assets to, another Person (other than an Affiliate of the
Company) and consideration is payable to holders of Common Shares in
exchange for their Common Shares 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 Holders of Warrants shall be entitled to receive
distributions on the date of such event on an equal basis with holders
of Common Shares (or other securities issuable upon exercise of the
Warrants) as if the Warrants had been exercised immediately prior to
such event, less the Exercise Price. Upon receipt of such payment, if
any, the rights of a Holder shall terminate and cease and such
Holder's Warrants shall expire. If the Company has made a Repurchase
Offer that has not expired at the time of such transaction, the
holders of the Warrants will be entitled to receive the higher of (i)
the amount payable to the holders of the Warrants described above and
(ii) the Repurchase Price payable to the holders of the Warrants
pursuant to such Repurchase Offer. In case of any such merger,
consolidation or sale of assets, the surviving or acquiring Person
and, in the event of
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any dissolution, liquidation or winding up of the Company, the Company
shall deposit promptly with the Warrant Agent the funds, if any,
necessary to pay the Holders of the Warrants. After receipt of such
deposit from such Person or the Company and after receipt of
surrendered Warrant Certificates, the Warrant Agent shall make payment
by delivering a check in such amount as is appropriate (or, in the
case of consideration other than cash, such other consideration as is
appropriate) to such Person or Persons as it may be directed in
writing by the Holder surrendering such Warrants.
(k) If required pursuant to Section 4.1(f)(i), the
Current Market Value shall be deemed to be equal to the value set forth in the
Value Report (as defined below) as determined by an Independent Financial
Expert, which shall be selected by the Board in its sole discretion, and
retained on customary terms and conditions, using one or more valuation methods
that the Independent Financial Expert, in its professional judgment, determines
to be most appropriate. The Company shall cause the Independent Financial
Expert to deliver to the Company, with a copy to the Warrant Agent, within 45
days of the appointment of the Independent Financial Expert, a value report
(the "Value Report") stating the value of the Common Shares and other
securities or property of the Company, if any, being valued as of the Valuation
Date and containing a brief statement as to the nature and scope of the
examination or investigation upon which the determination of value was made.
The Warrant Agent shall have no duty with respect to the Value Report of any
Independent Financial Expert, except to keep it on file and available for
inspection by the Holders. The determination as to Current Market Value in
accordance with the provisions of this Section 4.1(k) shall be conclusive on
all Persons. The Independent Financial Expert shall consult with management of
the Company in order to allow management to comment on the proposed value prior
to delivery to the Company of any Value Report.
(l) When No Adjustment Required. Without limiting any
other exception contained in this Section 4.1, and in addition thereto, no
adjustment need be made for:
(i) grants or exercises of Rights granted to employees or
directors of the Company or any Beneficial Investors
or Common Shares issued or granted to such employees,
directors or Beneficial Investors, whether or not
upon the exercise, exchange or conversion of any such
Rights (to the extent that all such securities do not
represent an aggregate equity value in excess of 15%
(and all such securities issued or granted to
Beneficial Investors do not represent an aggregate
equity value in excess of 2%) of the equity value of
the Company on a fully diluted basis, as determined
in good faith by the Board);
(ii) options, warrants or other agreements or rights to
purchase capital stock of the Company existing on the
Closing Date;
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(iii) rights to purchase Common Shares pursuant to a
Company plan for reinvestment of dividends or
interest;
(iv) a change in the par value of the Common Shares
(including a change from par value to no par value or
vice versa);
(v) bona fide public offerings or private placements
pursuant to Section 4(2) of the Securities Act,
Regulation D thereunder or Regulation S, involving at
least one investment bank of national reputation, if
(i) in the case of any security trading on any
national securities exchange or in the over the
counter market, or of a security directly or
indirectly convertible or exchangeable for any such
security (the latter security being a "Reference
Security"), such security (or the Reference Security
as applicable) is sold to investors at a price at
least equal to the closing sale, bid or ask price
(whichever is customary) of such security (or the
Reference Security as applicable) on the date of the
public offering or private placement, or (ii) the
security or Reference Security is issued as part of a
public offering or a private placement of debt
securities.
To the extent the Warrants become convertible into cash, no
adjustment need be made thereafter as to the cash. Interest will not accrue on
the cash.
Section 4.2. Notice of Adjustment. Whenever the number of
Common Shares purchasable upon the exercise of each Warrant or the Exercise
Price is adjusted, as herein provided, the Company shall cause, so far as it is
able, the Warrant Agent promptly to mail, at the expense of the Company, to
each Holder notice of such adjustment or adjustments and shall deliver to the
Warrant Agent a certificate of the Auditors setting forth the number of Common
Shares purchasable upon the exercise of each Warrant and the Exercise Price
after such adjustment, setting forth a brief statement of the facts requiring
such adjustment and setting forth the computation by which such adjustment was
made. Such certificate shall be conclusive evidence of the correctness of such
adjustment except in the case of manifest error. The Warrant Agent shall be
entitled to rely on such certificate and shall be under no duty or
responsibility with respect to any such certificate, except to exhibit the
same, from time to time, to any Holder desiring an inspection thereof during
reasonable business hours upon reasonable notice. The Warrant Agent shall not
at any time be under any duty or responsibility to any Holders to determine
whether any facts exist which may require any adjustment of the Exercise Price
or the number of Common Shares purchasable on exercise of the Warrants or any
of the other adjustments set forth in Section 4.1, or with respect to the
nature or extent of any such adjustment when made, or with respect to the
method employed in making such adjustment, or the validity or value (or the
kind or amount) of any Common Shares which may be purchasable on exercise of
the Warrants. The Warrant Agent shall not
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be responsible for any failure of the Company to make any cash payment or to
issue, transfer or deliver any Common Shares or share certificates upon the
exercise of any Warrant.
Section 4.3. Statement on Warrants. Irrespective of any
adjustment in the Exercise Price or the number or kind of shares purchasable
upon the exercise of the Warrants, Warrants theretofore or thereafter issued
may continue to express the same price and number and kind of shares as are
stated in the Warrants initially issuable pursuant to this Agreement.
Section 4.4. Notice of Consolidation, Merger, Etc. In case
at any time after the date hereof and prior to 5:00 p.m., New York City time,
on 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, assets or business (except (1) a
merger or other reorganization in which the Company shall be the surviving
corporation and holders of Common Shares receive no consideration in respect of
their shares and (2) a merger of the Company into a wholly owned Subsidiary of
the Company, the principal purpose of which, in the good faith determination of
the Board, is to change the state of incorporation of the Company) or (ii) any
other transaction contemplated by Section 4.1(j)(ii) above then, in any one or
more of such cases, the Company shall cause to be mailed to the Warrant Agent
and shall cause the Warrant Agent to mail, at Company's expense, to each Holder
of a Warrant, at the earliest practicable time (and, in any event, not less
than 20 days before any date set for definitive action), notice of the date on
which such reorganization, sale, consolidation, merger, dissolution,
liquidation or winding up 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 the Common Shares and other securities, money
and other property deliverable upon exercise of the Warrants. Such notice
shall also specify the date as of which the holders of record of the Common
Shares or other securities or property issuable upon exercise of the Warrants
shall be entitled to exchange their shares for securities, money or other
property deliverable upon such reorganization, sale, consolidation, merger,
dissolution, liquidation or winding up, as the case may be.
Section 4.5. Fractional Interests. If more than one Warrant
shall be presented for exercise in full at the same time by the same Holder,
the number of full Common Shares which shall be issuable upon such exercise
thereof shall be computed on the basis of the aggregate number of Common Shares
purchasable on exercise of the Warrants so presented. The Company shall not be
required to issue fractional Common Shares upon the exercise of Warrants. If
any fraction of a Common Share would, except for the provisions of this Section
4.5, be issuable on the exercise of any Warrant (or specified portion thereof),
the Company may pay an amount in cash calculated by it to be equal to the then
Current Market Value per Common Share multiplied by such fraction computed to
the nearest whole cent.
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Section 4.6. When Issuance or Payment May Be Deferred. In
any case in which this Article IV shall require that an adjustment in the
Exercise Price be made effective as of a record date for a specified event, the
Company may elect to defer until the occurrence of such event (i) issuing to
the holder of any Warrant exercised after such record date the Common Shares
and other shares in the capital of the Company, if any, issuable upon such
exercise over and above the Common Shares and other shares in the capital of
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the Company, if any, issuable upon such exercise and (ii) paying such holder
any amount in cash in lieu of a fractional share; provided, however, that the
Company shall deliver to such Holder a due ▇▇▇▇ or other appropriate instrument
evidencing such Holder's right to receive such additional Common Shares, other
shares and cash upon the occurrence of the event requiring such adjustment.
Section 4.7. Initial Public Offering. Notwithstanding
anything to the contrary herein contained, if the Company conducts an initial
public offering of equity securities (other than nonconvertible preferred
shares or an offering registered solely on S-4 or S-8 or any successor forms
thereto), the Company will give the Holders the opportunity to convert such
Warrants into warrants to purchase such equity securities (other than
nonconvertible preferred shares) and such Common Shares or such other
securities that have been received by the Holders upon the exercise of Warrants
into such equity securities (other than nonconvertible preferred shares). Such
conversion opportunity will be on terms and conditions determined to be fair
and reasonable by the Board.
ARTICLE V
DECREASE IN EXERCISE PRICE
The Board, in its sole discretion, shall have the right at any
time, or from time to time, to decrease the Exercise Price of the Warrants
and/or increase the number of shares issuable upon the exercise of the
Warrants.
ARTICLE VI
LOSS OR MUTILATION
Upon receipt by the Company and the Warrant Agent of evidence
satisfactory to them of the ownership and the loss, theft, destruction or
mutilation of any Warrant Certificate and of indemnity or bond satisfactory to
them and (in the case of mutilation) upon surrender and cancellation thereof,
then, in the absence of notice to the Company or the Warrant Agent that the
Warrants represented thereby have been acquired by a bona fide purchaser, the
Company shall execute and the Warrant Agent shall countersign and make
available for delivery 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 Article
VI, 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
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(including the fees and expenses of the Warrant Agent) in connection therewith.
Every new Warrant Certificate executed and delivered pursuant to this Article
VI 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 Certificates 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 Certificates duly executed and
delivered hereunder. The provisions of this Article VI are exclusive and shall
preclude (to the extent lawful) all other rights or remedies with respect to
the replacement of mutilated, lost, stolen, or destroyed Warrant Certificates.
ARTICLE VII
RESERVATION AND AUTHORIZATION
OF COMMON SHARES
The Company shall at all times reserve and keep available such
number of its authorized but unissued Common Shares deliverable 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
Common Shares to be delivered to the Warrant Agent upon its request for
delivery thereof upon the exercise of the Warrants. The Company covenants that
all Common Shares of the Company that may be issued upon the exercise of the
Warrants will, upon issuance, be duly authorized, validly issued, fully paid
and not subject to any calls for funds and free from pre-emptive rights and all
taxes, liens, charges and security interests with respect to the issue thereof.
ARTICLE VIII
WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER
Section 8.1. Transfer and Exchange. The Warrant Certificates
shall be issued in registered form only. The Warrant Agent shall keep at its
office a register for the registration of Warrant Certificates and transfers or
exchanges of Warrant Certificates as herein provided and other appropriate data
as determined by the Warrant Agent. The Company shall, upon reasonable notice
to the Warrant Agent, have access to such register during the Warrant Agent's
regular business hours. All Warrant Certificates issued upon any registration
of transfer or exchange of Warrant Certificates shall be the valid obligations
of the Company, evidencing the same obligations, and entitled to the same
benefits under this Agreement, as the Warrant Certificates surrendered for such
registration of transfer or exchange.
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The Warrants shall initially be issued as part of the issuance
of the Units. Prior to the Separation Date, the Warrants may not be
transferred or exchanged separately from, but may be transferred or exchanged
only together with, the Notes issued as part of such Units.
A Holder may transfer its Warrants only by written application
to the Warrant Agent stating the name of the proposed transferee and otherwise
complying with the terms of this Agreement. No such transfer shall be effected
until, and such transferee shall succeed to the rights of a Holder only upon,
final acceptance and registration of the transfer by the Warrant Agent in the
register. Prior to the registration of any transfer of Warrants by a Holder as
provided herein, the Company, the Warrant Agent, and any agent of the Company
may treat the person in whose name the Warrants 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. Furthermore,
any holder of a Global Warrant shall, by acceptance of such Global Warrant,
agree that transfers of beneficial interests in such Global Warrant may be
effected only through a book-entry system maintained by the holder of such
Global Warrant (or its agent), and that ownership of a beneficial interest in
the Warrants represented thereby shall be required to be reflected in a
book-entry. When Warrant Certificates are presented to the Warrant Agent with
a request to register the transfer or to exchange them for an equal amount of
Warrants, the Warrant Agent shall register such transfer or make such exchange
as requested if its requirements for such transactions are met. To permit
registrations of transfers and exchanges, the Company shall execute Warrant
Certificates at the Warrant Agent's request. 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.
Section 8.2. Book-Entry Provisions for the Global Warrants.
(a) The Global Warrants initially shall (i) be registered in the name of the
Depositary for such Global Warrant or the nominee of such Depositary, (ii) be
delivered to the Warrant Agent as custodian for such Depositary and (iii) bear
legends as set forth in Section 2.2 hereof.
Members of, or participants in, the Depositary ("Agent
Members") shall have no rights under this Agreement with respect to the Global
Warrants held on their behalf by the Depositary or the Warrant Agent as its
custodian, and the Depositary may be treated by the Company, the Warrant Agent
and any agent of the Company or the Warrant Agent as the absolute owner of each
such Global Warrant for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Warrant Agent or any
agent of the Company or the Warrant Agent, from giving effect to any written
certification, proxy or other authorization furnished by the Depositary or
impair, as between the Depositary and its Agent Members, the operation of
customary practices governing the exercise of the rights of a Holder of any
Warrants.
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(b) Transfers of a Global Warrant shall be limited to
transfers of such Global Warrant in whole, but not in part, to the Depositary,
its successors or their respective nominees. Interests of beneficial owners in
the Global Warrants may be transferred in accordance with the rules and
procedures of the Depositary and the provisions of Section 8.3 hereof. U.S.
Certificated Warrants and Offshore Certificated Warrants shall be transferred
to beneficial owners in exchange for their beneficial interests in the
Restricted Global Warrant or the Regulation S Global Warrant, as the case may
be, (i) if the Depositary notifies the Company that it is unwilling or unable
to continue as Depositary for any such Global Warrant and a successor
depositary is not appointed by the Company within 90 days of such notice, (ii)
if there is a Default or (iii) upon the request of the beneficial owner in
accordance with the rules and procedures of the Depositary and the provisions
of Section 8.3 hereof; provided that Offshore Certificated Warrants shall not
be transferred in exchange for the Legended Regulation S Global Warrant prior
to one year after the Closing Date.
(c) Any beneficial interest in one of the Global Warrants
that is transferred to a person who takes delivery in the form of an interest
in any other Global Warrant will, upon transfer, cease to be an interest in the
first Global Warrant and become an interest in the other Global Warrant and,
accordingly, will thereafter be subject to all transfer restrictions, if any,
and other procedures applicable to beneficial interests in such other Global
Warrant for as long as it remains such an interest.
(d) In connection with the transfer of the entire
Restricted Global Warrant or Regulation S Global Warrant to beneficial owners
pursuant to paragraph (b) of this Section 8.2, the Restricted Global Warrant or
the Regulation S Global Warrant, as the case may be, shall be surrendered to
the Warrant Agent for cancellation, and the Company shall execute, and the
Warrant Agent shall countersign and deliver, to each beneficial owner
identified by the Depositary in exchange for its beneficial interest in the
Restricted Global Warrant or the Regulation S Global Warrant, as the case may
be, U.S. Certificated Warrants or Offshore Certificated Warrants, as the case
may be, representing, in the aggregate, the number of Warrants theretofore
represented by the Restricted Global Warrant or the Regulation S Global
Warrant, as the case may be.
(e) In connection with the transfer of a portion of the
beneficial interests in the Restricted Global Warrant or the Unlegended
Regulation S Global Warrant to beneficial owners pursuant to paragraph (b) of
this Section 8.2, the Warrant Agent shall reflect on its books and records the
date and a decrease in the amount of Warrants represented by the Restricted
Global Warrant or Unlegended Regulation S Global Warrant in an amount equal to
the amount of Warrants represented by the beneficial interest in the Restricted
Global Warrant or Unlegended Regulation S Global Warrant to be transferred, and
the Company shall execute, and the Warrant Agent shall countersign and deliver,
to each beneficial owner identified by the Depositary in exchange for its
beneficial interest in the Restricted Global Warrant or the
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Unlegended Regulation S Global Warrant, as the case may be, U.S. Certificated
Warrants or Offshore Certificated Warrants, as the case may be, of like tenor
and amount.
(f) Any Certificated Warrant delivered in exchange for an
interest in a Global Warrant pursuant to paragraph (b) or (e) of this Section
shall, except as otherwise provided by paragraph (d) of Section 8.3 hereof,
bear the legend regarding transfer restrictions set forth in Section 2.2
hereof.
(g) The registered holder of a Global Warrant may grant
proxies and otherwise authorize any person, including Agent Members and persons
that may hold interests through Agent Members, to take any action which a
Holder is entitled to take under this Agreement or the Warrants.
Section 8.3. Special Transfer Provisions. The following
provisions shall apply:
(a) Transfers to QIBs. The following provisions shall
apply with respect to the registration of any proposed transfer of Warrants to
a QIB (excluding non-U.S. Persons):
(i) If the Warrants to be transferred are represented by
Certificated Warrants, the Warrant Agent shall register the transfer
if such transfer is being made by a proposed transferor who has
checked the box provided for on the form of Warrant Certificate
stating, or has otherwise advised the Company and the Warrant Agent in
writing, that the sale has been made in compliance with the provisions
of Rule 144A to a transferee who has signed the certification provided
for on the form of Warrant Certificate stating, or has otherwise
advised the Company and the Warrant Agent in writing, that it is
purchasing the Warrants for its own account or an account with respect
to which it exercises sole investment discretion and that it and any
such account is a QIB within the meaning of Rule 144A, and is aware
that the sale to it is being made in reliance on Rule 144A and
acknowledges that it has received such information regarding the
Company as it has requested pursuant to Rule 144A or has determined
not to request such information and that it is aware that the
transferor is relying upon its foregoing representations in order to
claim the exemption from registration provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member, upon
receipt by the Warrant Agent of the documents referred to in clause
(i) above and instructions given in accordance with the Depositary's
and the Warrant Agent's procedures, the Warrant Agent shall reflect on
its books and records the date and an increase in the amount of
Warrants represented by the Restricted Global Warrant in an amount
equal to the
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amount of Warrants represented by the Certificated Warrants to be
transferred, and the Warrant Agent shall cancel the Certificated
Warrants.
(b) Transfers to Non-U.S. Persons at Any Time. The
following provisions shall apply with respect to the registration of any
proposed transfer of Warrants to a Non-U.S. Person:
(i) Prior to February 3, 1999, the Warrant Agent shall
register any proposed transfer of Warrants to a Non-U.S. Person only
upon receipt of a certificate substantially in the form of Exhibit B
from the proposed transferor.
(ii) On and after February 3, 1999, the Warrant Agent
shall register any proposed transfer to any Non-U.S. Person of the
Warrants to be transferred are U.S. Certificated Warrants or an
interest in the Restricted Global Warrants, upon receipt of a
certificate substantially in the form of Exhibit B from the proposed
transferor.
(iii) If the proposed transferee is an Agent Member and the
Warrants to be transferred are represented by Certificated Warrants or
an interest in the Restricted Global Warrant, upon receipt by the
Warrant Agent of the documents referred to in clause (i) or (ii) above
and instructions given in accordance with the Depositary's and the
Warrant Agent's procedures, the Warrant Agent shall reflect on its
books and records the date and an increase in the number of Warrants
represented by the Regulation S Global Warrant in an amount equal to
the number of Warrants represented by the Certificated Warrants or the
Restricted Global Warrant, as the case may be, to be transferred, and
the Warrant Agent shall cancel the Certificated Warrant or decrease
the amount of Warrants represented by the Restricted Global Warrant so
transferred.
(c) Transfers to Any Other Person. The following
provisions shall apply with respect to the registration of any proposed
transfer of Warrants to any Person not specified in paragraphs (a) and (b)
above (including any Institutional Accredited Investor which is not a QIB).
(i) The Warrant Agent shall register any proposed
transfer of Warrants to any such Person if (x) the transferor has
delivered to the Warrant Agent and the Company a certificate
substantially in the form of Exhibit C-1 hereto and, if required by
paragraph (d) thereof, an Opinion of Counsel to the effect set forth
therein and (y) the proposed transferee has delivered to the Warrant
Agent and the Company a certificate substantially in the form of
Exhibit C-2 hereto if such transferee is an Institutional Accredited
Investor that is not a QIB.
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(ii) If the proposed transferor is an Agent Member holding
a beneficial interest in the Restricted Global Warrant or the
Regulation S Global Warrant, upon receipt by the Warrant Agent and the
Company of the documents referred to in clause (i) above and
instructions given in accordance with the Depositary's and the Warrant
Agent's procedures, the Company shall execute and the Warrant Agent
shall countersign Certificated Warrants in an amount equal to the
number of Warrants represented by the Restricted Global Warrant or the
Regulation S Global Warrant, if any, as the case may be, to be
transferred and the Warrant Agent shall decrease the number of
Warrants represented by the Restricted Global Warrant or the
Regulation S Global Warrant so transferred.
(d) Private Placement Legend. Upon the transfer,
exchange or replacement of Warrant Certificates not bearing the Private
Placement Legend, the Warrant Agent shall make available for delivery Warrant
Certificates that do not bear the Private Placement Legend. Upon the transfer,
exchange or replacement of Warrant Certificates bearing the Private Placement
Legend, the Warrant Agent shall make available for delivery only Warrant
Certificates that bear the Private Placement Legend unless either (i) the
circumstances contemplated by the third sentence of the third paragraph of
Section 2.1 exist or (ii) there is delivered to the Warrant Agent an opinion of
counsel reasonably satisfactory to the Company and its counsel and the Warrant
Agent to the effect that neither such legend nor the related restrictions on
transfer are required in order to maintain compliance with the provisions of
the Securities Act.
(e) Transfers of Interests in the Legended Regulation S
Global Warrant. The following provisions shall apply with respect to
registration of any proposed transfer of interests in the Legended Regulation S
Global Warrant:
(i) The Registrar shall register the transfer of any
Warrant (x) if the proposed transferee is a Non-U.S. Person and the
proposed transferor has delivered to the Registrar a certificate
substantially in the form of Exhibit B hereto or (y) if the proposed
transferee is a QIB and the proposed transferor has checked the box
provided for on the form of Warrant stating, or has otherwise advised
the Company and the Warrant Agent in writing, that the sale has been
made in compliance with the provisions of Rule 144A to a transferee
who has signed the certification provided for on the form of Warrant
stating, or has otherwise advised the Company and the Warrant Agent in
writing, that it is purchasing the Warrant for its own account or an
account with respect to which it exercises sole investment discretion
and that it and any such account is a QIB within the meaning of Rule
144A, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information
regarding the Company as it has requested pursuant to Rule 144A or has
determined not to request such information and that it is aware that
the transferor is
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relying upon its foregoing representations in order to claim the
exemption from registration provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member, upon
receipt by the Warrant Agent of the documents referred to in clause
(i)(y) above and instructions given in accordance with the
Depositary's and the Warrant Agent's procedures, the Warrant Agent
shall reflect on its books and records the date and an increase in the
number of Warrants represented by the Restricted Global Warrant, in an
amount equal to the number of Warrants represented by the Legended
Regulation S Global Warrant to be transferred, and the Warrant Agent
shall decrease the number of Warrants represented by the Legended
Regulation S Global Warrant.
(f) Transfers of Interests in the Unlegended Regulation S
Global Warrant or Offshore Certificated Warrants. The following provisions
shall apply with respect to any transfer of interests in the Unlegended
Regulation S Global Warrant or Offshore Certificated Warrants: The Warrant
Agent shall register the transfer of any such Warrant without requiring any
additional certification.
(g) General. (i) By its acceptance of any Warrants
represented by a Warrant Certificate bearing the Private Placement Legend, each
Holder of such Warrants acknowledges the restrictions on transfer of such
Warrants set forth in this Agreement and in the Private Placement Legend and
agrees that it will transfer such Warrants only as provided in this Agreement.
The Warrant Agent shall not register a transfer of any Warrants unless such
transfer complies with the restrictions on transfer of such Warrants set forth
in this Agreement and is in compliance with applicable laws and applicable
rules, regulations and procedures of any securities exchange or clearing agency
in effect from time to time.. In connection with any transfer of Warrants,
each Holder agrees by its acceptance of Warrants to furnish the Warrant Agent
or the Company such certifications, legal opinions or other information as
either of them may reasonably require to confirm that such transfer is being
made pursuant to an exemption from, or a transaction not subject to, the
registration requirements of the Securities Act or any other applicable laws of
any foreign jurisdiction; provided that the Warrant Agent shall not be required
to determine (but may rely on a determination made by the Company with respect
to) the sufficiency of any such certifications, legal opinions or other
information.
(ii) The Warrant Agent shall retain copies of all letters,
notices and other written communications received pursuant to Section
8.2 hereof or this Section 8.3. The Company shall have the right to
inspect and make copies of all such letters, notices or other written
communications at any reasonable time upon the giving of reasonable
written notice to the Warrant Agent.
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Section 8.4. Surrender of Warrant Certificates. Any Warrant
Certificate surrendered for registration of transfer, exchange or exercise of
the Warrants represented thereby shall, if surrendered to the Company, be
delivered to the Warrant Agent, and all Warrant Certificates surrendered or so
delivered to the Warrant Agent shall be promptly cancelled by the Warrant Agent
and shall not be reissued by the Company and, except as provided in this
Article VIII in case of an exchange, Article III hereof in case of the exercise
of less than all the Warrants represented thereby or Article VI in case of a
mutilated Warrant Certificate, no Warrant Certificate shall be issued hereunder
in lieu thereof. The Warrant Agent shall deliver to the Company from time to
time or otherwise dispose of such cancelled Warrant Certificates as the Company
may direct in writing.
ARTICLE IX
WARRANT HOLDERS
Section 9.1. Warrant Holder Deemed Not a Stockholder. The
Company and the Warrant Agent may deem and treat the registered Holder(s) of
the Warrant Certificates as the absolute owner(s) thereof (notwithstanding any
notation of ownership or other writing thereon made by anyone), for the purpose
of any exercise thereof and for all other purposes, and neither the Company nor
the Warrant Agent shall be affected by any notice to the contrary.
Accordingly, the Company and/or the Warrant Agent shall not, except as ordered
by a court of competent jurisdiction as required by law, be bound to recognize
any equitable or other claim to or interest in the Warrants on the part of any
person other than such registered Holder, whether or not it shall have express
or other notice thereof. Prior to the valid exercise of the Warrants, no
Holder of a Warrant Certificate, as such, shall be entitled 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, to receive dividends or other
distributions, to exercise any preemptive right or to receive any notice of
meetings of stockholders and, except as otherwise provided in this Agreement,
shall not be entitled to receive any notice of any proceedings of the Company.
Section 9.2. 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, without the consent of the Warrant Agent or the Holders
of any other Warrant, may, on such Holder's own behalf and for such 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,
such Holder's right to exercise such Warrants in the manner provided in the
Warrant Certificate representing such Warrants and in this Agreement.
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ARTICLE X
REMEDIES
Section 10.1. Defaults. It shall be deemed to be a "Default"
with respect to the Company's (or its successor's) obligations under this
Agreement if:
(a) a Repurchase Event occurs and the Company (or its
successor) shall fail to make a Repurchase Offer pursuant to Section
3.4 hereof; or
(b) the Company (or its successor) shall fail to purchase
the Warrants pursuant to the Repurchase Offer in accordance with the
provisions of Section 3.4 hereof.
Section 10.2. Payment Obligations. Upon the happening of a
Default under this Agreement, the Company shall be obligated to increase the
amount otherwise payable pursuant to Section 3.4(d) hereof in respect of the
Repurchase Offer to which such Default relates by an amount equal to interest
thereon at a rate per annum equal to 11 3/4% from the date of the Default to
the date of payment, which interest shall compound quarterly (all such payment
obligations in respect of such Repurchase Offer, together with all such
increased amounts, being the "Repurchase Obligation").
Section 10.3. Remedies; No Waiver. Notwithstanding any other
provision of this Warrant Agreement, if a Default occurs and is continuing, the
Holders of the Warrants may pursue any available remedy to collect the
Repurchase Obligation or to enforce the performance of any provision of this
Warrant Agreement. A delay or omission by any Holder of a Warrant in
exercising, or a failure to exercise, any right or remedy arising out of a
Default shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Default. All remedies are cumulative to the extent
permitted by law.
ARTICLE XI
THE WARRANT AGENT
Section 11.1. Duties and Liabilities. The Warrant Agent
hereby accepts the agency established by this Agreement and agrees to perform
the same upon the terms and conditions herein set forth, by all of which the
Company and the Holders of Warrants, by their acceptance thereof, shall be
bound. The Warrant Agent shall not, by countersigning Warrant Certificates or
by any other act hereunder, be deemed to make any representations as to the
validity or authorization of the Warrants or the Warrant Certificates (except
as to its countersignature thereon) or of any Common Shares issued upon
exercise of any Warrant, or
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as to the accuracy of the computation of the Exercise Price or the number or
kind or amount of Common Shares deliverable upon exercise of any Warrant or the
correctness of the representations of the Company made in the certificates that
the Warrant Agent receives. The Warrant Agent shall not be accountable for the
use or application by the Company of the proceeds of the exercise of any
Warrant. The Warrant Agent shall not have any duty to calculate or determine
any adjustments with respect to either the Exercise Price or the kind and
amount of Common Shares receivable by Holders upon the exercise of Warrants
required from time to time and the Warrant Agent shall have no duty or
responsibility in determining the accuracy or correctness of such calculation.
The Warrant Agent shall not be (a) liable for any recital or statement of fact
contained herein or in the Warrant Certificates or for any action taken,
suffered or omitted by it in good faith without gross negligence in the belief
that any Warrant Certificate or any other documents or any signatures are
genuine or properly authorized, (b) responsible for any failure on the part of
the Company to comply with any of its covenants and obligations contained in
this Agreement or in the Warrant Certificates or (c) liable for any act or
omission in connection with this Agreement except for its own gross negligence,
bad faith or willful misconduct. The Warrant Agent is hereby authorized to
accept instructions with respect to the performance of its duties hereunder
from the Chairman of the Board, Chief Executive Officer, any Vice President or
other executive officer of the Company and to apply to any such officer for
instructions (which instructions will be promptly given in writing when
requested) and the Warrant Agent shall not be liable for any action taken or
suffered to be taken by it in good faith without gross negligence in accordance
with the instructions of any such officer; provided, however, that, in its
discretion, the Warrant Agent may, in lieu thereof, accept other evidence of
such or may require such further or additional evidence as it may deem
reasonable. The Warrant Agent shall not be liable for any action taken with
respect to any matter in the event it requests instructions from the Company as
to that matter and does not receive such instructions within a reasonable
period of time after the request therefor.
The Warrant Agent may execute and exercise any of the rights
and powers hereby vested in it or perform any duty hereunder either itself or
by or through attorneys, agents or employees of its selection, and the Warrant
Agent shall not be answerable or accountable for any act, default, neglect or
misconduct of any such attorneys, agents or employees; provided that reasonable
care has been exercised with respect to the retention of any such attorney,
agent or employee. The Warrant Agent shall not be under any obligation or duty
to institute, appear in or defend any action, suit or legal proceeding in
respect hereof, unless first indemnified to its reasonable satisfaction. The
Warrant Agent shall promptly notify the Company in writing of any claim made or
action, suit or proceeding instituted against it arising out of or in
connection with this Agreement.
The Company will perform, execute, acknowledge and deliver or
cause to be delivered all such further acts, instruments and assurances as are
consistent with this
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Agreement and as may reasonably be required by the Warrant Agent in order to
enable it to carry out or perform its duties under this Agreement.
The Warrant Agent shall act solely as agent of the Company
hereunder. The Warrant Agent shall not be liable except for the failure to
perform such duties as are specifically set forth herein, and no implied
covenants or obligations shall be read into this Agreement against the Warrant
Agent, whose duties and obligations shall be determined solely by the express
provisions hereof.
Section 11.2. Right to Consult Counsel. The Warrant Agent
may at any time consult with legal counsel of its selection (who may be legal
counsel for the Company), and the written opinion or advice of such counsel
shall be full and complete authorization and protection to the Warrant Agent
and the Warrant Agent shall incur no liability or responsibility to the Company
or to any Holder for any action taken, suffered or omitted by it in good faith
without gross negligence in accordance with the written opinion or advice of
such counsel.
Section 11.3. Compensation; Indemnification. The Company
agrees promptly to pay the Warrant Agent from time to time and in any case
within 30 days of receipt of an invoice, compensation for its services
hereunder as the Company and the Warrant Agent may agree from time to time, and
to reimburse it upon its request upon furnishing reasonable supporting
documentation for fees or expenses and reasonable counsel fees and expenses
incurred in connection with the execution and administration of this Agreement,
and further agrees to indemnify each of the Warrant Agent and any predecessor
Warrant Agent and save it harmless against any and all losses, claims, damages,
liabilities or reasonable expenses arising out of or in connection with the
acceptance and administration of this Agreement, including, without limitation,
the reasonable costs and expenses of investigating or defending any claim of
such liability, except that the Company shall have no liability hereunder to
the extent that any such loss, liability or expense results from the Warrant
Agent's own gross negligence, bad faith or willful misconduct. The obligations
of the Company under this Section 11.3 shall survive the exercise and the
expiration of the Warrants, the termination of this Agreement and the
resignation or removal of the Warrant Agent in respect of services or expenses
incurred in connection with the Warrants or this Agreement.
Section 11.4. No Restrictions on Actions. Nothing in this
Agreement shall be deemed to prevent the Warrant Agent and any stockholder,
director, officer or employee of the Warrant Agent from buying, selling or
dealing in any of the Warrants or other securities of the Company or becoming
pecuniarily interested in transactions in which the Company may be interested,
or contracting with or lending money to the Company or otherwise acting as
fully and freely as though it were not the Warrant Agent under this Agreement.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
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Section 11.5. Discharge or Removal; Replacement Warrant
Agent. The Warrant Agent may resign from its position as such and be
discharged from all further duties and liabilities hereunder (except liability
arising as a result of the Warrant Agent's own gross negligence, bad faith or
willful misconduct), after giving one month's prior written notice to the
Company. The Company may at any time remove the Warrant Agent upon one month's
written notice specifying the date when such discharge shall take effect, and
the Warrant Agent shall thereupon in like manner be discharged from all further
duties and liabilities hereunder, except as aforesaid. The Warrant Agent shall
mail to each Holder of a Warrant, at the Company's expense, a copy of said
notice of resignation or notice of removal, as the case may be. Upon such
resignation or removal the Company shall appoint in writing a new warrant
agent. If the Company shall fail to make such appointment within a period of
30 days after it has been notified in writing of such resignation by the
resigning Warrant Agent or after such removal, then the resigning or removed
Warrant Agent or the Holder of any Warrant may, at the expense of the Company,
apply to any court of competent jurisdiction for the appointment of a new
warrant agent. After 30 days from receipt of, or giving, notice, as the case
may be, and pending appointment of a successor to the original Warrant Agent,
either by the Company or by such a court, the duties of the Warrant Agent shall
be carried out by the Company. Any new warrant agent, whether appointed by the
Company or by such a court, shall be a bank or trust company doing business
under the laws of the United States or any state thereof, in good standing and
having a combined capital and surplus of not less than $25,000,000. The
combined capital and surplus of any such new warrant agent shall be deemed to
be the combined capital and surplus as set forth in the most recent annual
report of its condition published by such warrant agent prior to its
appointment, provided that such reports are published at least annually
pursuant to law or to the requirements of a federal or state supervising or
examining authority. After acceptance in writing of such appointment by the
new warrant agent, it shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named herein as the Warrant
Agent, without any further assurance, conveyance, act or deed; however, the
original Warrant Agent shall in all events deliver and transfer to the
successor Warrant Agent all property (including, without limitation, documents
and recorded information), if any, at the time held hereunder by the original
Warrant Agent and if for any reason it shall be necessary or expedient to
execute and deliver any further assurance, conveyance, act or deed, the same
shall be done at the expense of the Company and shall be legally and validly
executed and delivered by the resigning or removed Warrant Agent. Not later
than the effective date of any such appointment, the Company shall file notice
thereof with the resigning or removed Warrant Agent and shall forthwith cause a
copy of such notice to be mailed by the successor Warrant Agent to each Holder
of a Warrant. Failure to give any notice provided for in this Section 11.5,
however, or any defect therein, shall not affect the legality or validity of
the resignation of the Warrant Agent or the appointment of a new warrant agent,
as the case may be. No Warrant Agent hereunder shall be liable for any acts or
omissions of any successor Warrant Agent.
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Section 11.6. Successor Warrant Agent. Any corporation into
which the Warrant Agent or any new warrant agent may be merged or converted, or
any corporation resulting from any consolidation to which the Warrant Agent or
any new warrant agent shall be a party or any corporation succeeding to all or
substantially all the corporate agency business of the Warrant Agent, shall be
a successor Warrant Agent under this Agreement without any further act,
provided that such corporation would be eligible for appointment as successor
to the Warrant Agent under the provisions of Section 11.5 hereof. Any such
successor Warrant Agent shall promptly cause notice of its succession as
Warrant Agent to be mailed to each Holder of a Warrant.
ARTICLE XII
MISCELLANEOUS
Section 12.1. Monies Deposited with the Warrant Agent. The
Warrant Agent shall not be required to pay interest on any monies deposited
pursuant to the provisions of this Agreement except such as it shall agree in
writing with the Company to pay thereon. Any monies, securities or other
property which at any time shall be deposited by the Company or on its behalf
with the Warrant Agent pursuant to this Agreement shall be and are hereby
assigned, transferred and set over to the Warrant Agent in trust for the
purpose for which such monies, securities or other property shall have been
deposited; but such monies, securities or other property need not be segregated
from other funds, securities or other property except to the extent required by
law. Any monies, securities or other property deposited with the Warrant Agent
for payment or distribution to the Holders that remains unclaimed for one year
after the date the monies, securities or other property was deposited with the
Warrant Agent shall be delivered to the Company upon its request therefor.
Section 12.2. Payment of Taxes. Subject to Article VI
hereof, all Common Shares issuable upon the exercise of Warrants shall be
validly issued, fully paid and not subject to any calls for funds, and 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 thereof
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 Common Shares (including other securities or property issuable
upon the exercise of the Warrants) or payment of cash to any Person other than
the Holder of a Warrant Certificate surrendered upon the exercise of a Warrant
and in case of such transfer or payment, the Warrant Agent and the Company
shall not be required to issue any share certificate or pay any cash until such
tax or charge has been paid or it has been
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established to the Warrant Agent's and the Company's satisfaction that no such
tax or charge is due.
Section 12.3. No Merger, Consolidation or Sale of Assets of
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, by supplemental
agreement satisfactory in form to the Warrant Agent and executed and delivered
to the Warrant Agent, the due and punctual performance and observance of each
and every covenant and condition of this Agreement or contained in the Warrants
to be performed and observed by the Company.
Section 12.4. Reports to Holders. At all times from and
after August 3, 1998, whether or not the Company is then required to file
reports with the Commission, the Company shall file with the Commission all
such reports and other information it would be required to file with the
Commission by Section 13(a) or 15(d) under the Exchange Act if it were subject
thereto. The Company shall supply the Warrant Agent and each Holder or shall
supply to the Warrant Agent for forwarding to each such Holder, without cost to
such Holder, copies of such reports and other information. The Warrant Agent's
receipt of such reports and other information shall not constitute constructive
notice of any information contained therein or determinable from information
(including mathematical calculations) contained therein, including the
Company's compliance with any of its covenants hereunder (as to which the
Warrant Agent is entitled to rely exclusively on Officers' Certificates). In
addition, at all times prior to August 3, 1998, upon the request of any Holder
or any prospective purchaser of the Warrants designated by a Holder, the
Company shall supply to such Holder or such prospective purchaser the
information required under Rule 144A.
Section 12.5. Notices; Payment. (a) Except as otherwise
provided in Section 12.5(b) hereof, any notice, demand or delivery authorized
by this Agreement shall be sufficiently given or made when mailed, if sent by
first class mail, postage prepaid, addressed to any Holder of a Warrant at such
Holder's last known address appearing on the register of the Company maintained
by the Warrant Agent and to the Company or the Warrant Agent as follows:
To the Company:
Allegiance Telecom, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
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To the Warrant Agent:
The Bank of New York
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Administration
or such other address as shall have been furnished to the party giving or
making such notice, demand or delivery. Any notice that is mailed in the
manner herein provided shall be conclusively presumed to have been duly given
when mailed, whether or not the Holder receives the notice.
(b) Payment of the Exercise Price shall be made in
accordance with the provisions of this Agreement at the office of the Warrant
Agent set forth above, unless otherwise directed by the Warrant Agent and the
Company.
(c) Any notice required to be given by the Company to the
Holders shall be made by mailing, to the Holders at their last known addresses
appearing on the register maintained by the Warrant Agent. The Company hereby
irrevocably authorizes the Warrant Agent, in the name and at the expense of the
Company, to mail any such notice upon receipt thereof from the Company. Any
notice that is mailed in the manner herein provided shall be conclusively
presumed to have been duly given when mailed, whether or not the Holder
receives the notice.
Section 12.6. Binding Effect. This Agreement shall be
binding upon and inure to the benefit of the Company and the Warrant Agent and
their respective successors and assigns, and the Holders from time to time of
the Warrants. Nothing in this Agreement is intended or shall be construed to
confer upon any Person, other than the Company, the Warrant Agent and the
Holders of the Warrants, any right, remedy or claim under or by reason of this
Agreement or any part hereof.
Section 12.7. Counterparts. This Agreement may be executed
manually or by facsimile in any number of counterparts, each of which shall be
deemed an original, but all of which together constitute one and the same
instrument.
Section 12.8. Amendments. The Warrant Agent may, without the
consent or concurrence of the Holders of the Warrants, by supplemental
agreement or otherwise, join with the Company in making any changes or
corrections in this Agreement that (a) are required to cure any ambiguity or to
correct any defective or inconsistent provision or clerical omission or mistake
or manifest error herein contained or (b) add to the covenants and
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agreements of the Company in this Agreement further covenants and agreements of
the Company thereafter to be observed, or surrender any rights or power
reserved to or conferred upon the Company in this Agreement; provided that in
either case such changes or corrections do not and will not adversely affect,
alter or change the rights, privileges or immunities of the Holders of
Warrants. Upon the Warrant Agent's request, the Company shall promptly provide
an Officer's Certificate and Opinion of Counsel which provide all conditions
precedent to adoption of an amendment that have been satisfied.
Section 12.9. 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 12.10. Common Shares Legend. Unless and until the
Common Shares issuable upon the exercise of the Warrants are registered under
the Securities Act, or unless otherwise agreed by the Company and the Holder
thereof, such Common Shares will bear a legend substantially to the following
effect:
THE COMMON SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED
OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN
"INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON
AND IS ACQUIRING THE COMMON SHARES REPRESENTED BY THIS CERTIFICATE IN
AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD
REFERRED TO UNDER RULE 144(k), UNDER THE SECURITIES ACT AS IN EFFECT
WITH RESPECT TO SUCH TRANSFER, RESELL OR OTHERWISE TRANSFER THE COMMON
SHARES REPRESENTED BY THIS CERTIFICATE EXCEPT (A) TO ALLEGIANCE
TELECOM, INC. (THE "COMPANY") OR ANY SUBSIDIARY THEREOF, (B) INSIDE
THE UNITED STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE
WITH RULE 144A UNDER THE SECURITIES ACT, (C)
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INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED INVESTOR THAT,
PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRANSFER AGENT AND REGISTRAR
A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THE COMMON SHARES
REPRESENTED BY THIS CERTIFICATE (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM THE TRANSFER AGENT AND REGISTRAR) AND AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE
WITH THE SECURITIES ACT, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER
THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES THAT IT
WILL DELIVER TO EACH PERSON TO WHOM THE COMMON SHARES REPRESENTED BY
THIS CERTIFICATE ARE TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT
OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE COMMON SHARES
REPRESENTED BY THIS CERTIFICATE WITHIN THE TIME PERIOD REFERRED TO
ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE
REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
CERTIFICATE TO THE TRANSFER AGENT AND REGISTRAR. IF THE PROPOSED
TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST,
PRIOR TO SUCH TRANSFER, FURNISH TO EACH OF THE TRANSFER AGENT AND
REGISTRAR AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT
SUCH TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A
TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION,"
"UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY
REGULATION S UNDER THE SECURITIES ACT. THE COMPANY HAS INSTRUCTED THE
TRANSFER AGENT AND REGISTRAR TO REFUSE TO REGISTER ANY TRANSFER OF THE
SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE IN VIOLATION OF
THE FOREGOING RESTRICTIONS.
51
46
Section 12.11. Third Party Beneficiaries. The Holders shall
be third party beneficiaries to the agreements made hereunder between the
Company, on the one hand, and the Warrant Agent, on the other hand, and each
Holder shall have the right to enforce such agreements directly to the extent
it deems such enforcement necessary or advisable to protect its rights or the
rights of Holders hereunder. By acquiring Warrants, each Holder agrees to be
bound by the obligations of Holders generally as set forth herein and as such
obligations may be applicable to such Holder.
Section 12.12. Termination. Except as otherwise specified
herein, this Agreement shall terminate at 5:00 p.m. (New York City time) on the
tenth anniversary of the Closing Date. Notwithstanding the foregoing, this
Agreement shall terminate on any earlier date as of which all Warrants have
been exercised.
Section 12.13. Governing Law. This Agreement shall be
governed by the laws of the State of New York. The Warrant Agent, the Company
and the Holders agree to submit to the jurisdiction of the courts of the State
of New York in any action or proceeding arising out of or relating to this
Agreement or the Warrants.
52
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed, as of the day and year first above written.
ALLEGIANCE TELECOM, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Chief Executive Officer
THE BANK OF NEW YORK
By: /s/ ▇▇▇ ▇▇▇▇▇
-----------------------------------
Name: ▇▇▇ ▇▇▇▇▇
Title: Assistant Vice President
53
EXHIBIT A
FORM OF WARRANT CERTIFICATE
ALLEGIANCE TELECOM, INC.
CUSIP No. _________
No. _____
WARRANTS TO PURCHASE COMMON SHARES
This certifies that ______________, or its registered assigns,
is the owner of ___________ Warrants, each of which represents the right to
purchase from ALLEGIANCE TELECOM, INC., a Delaware corporation (the "Company"),
after February 3, 1999 (or in connection with the initial public offering of
equity securities (other than nonconvertible preferred stock) of the Company),
.0034224719 shares of the common stock, par value $.01 per share, of the
Company (the "Common Shares") at an exercise price (the "Exercise Price") of
$.01 per Common Share (subject to adjustment as provided in the Warrant
Agreement hereinafter referred to below), upon surrender hereof at the office
of The Bank of New York, or to its successor, as the warrant agent under the
Warrant Agreement (any such warrant agent being herein called the "Warrant
Agent"), or such other location contemplated by Section 12.5(b) of the Warrant
Agreement, with the Subscription Form on the reverse hereof duly executed, with
signature guaranteed as therein specified and simultaneous payment in full in
cash or by certified or official bank or bank cashier's check payable to the
order of the Company. Notwithstanding the foregoing, the Exercise Price may be
paid by surrendering additional Warrants to the Warrant Agent having an
aggregate Spread equal to the aggregate Exercise Price of the Warrants being
exercised. At any time after one year after the Closing Date and on or before
the Expiration Date, any outstanding Warrants may be exercised on any Business
Day; provided that the Warrant Registration Statement is, at the time of
exercise, effective and available for the exercise of Warrants or the exercise
of such Warrants is exempt from the registration requirements of the Securities
Act.
This Warrant Certificate is issued under and in accordance
with a Warrant Agreement dated as of February 3, 1998 (the "Warrant
Agreement"), between the Company and The Bank of New York, as Warrant Agent,
and a Registration Rights Agreement dated as of February 3, 1998 (the "Warrant
Registration Rights Agreement"), between the Company and The Bank of New York,
and is subject to the Certificate of Incorporation and Bylaws of the Company
and 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 terms of the Warrant Agreement and the Warrant Registration
Rights Agreement are hereby incorporated herein by reference and made a part
hereof. Reference is hereby made to the Warrant Agreement and the Warrant
Registration Rights Agreement for a full description of
54
A-2
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 and the Warrant Registration Rights Agreement
contained in this Warrant Certificate is qualified in its entirety by express
reference to the Warrant Agreement and the Warrant Registration Rights
Agreement. All terms used in this Warrant Certificate that are defined in the
Warrant Agreement and the Warrant Registration Rights Agreement shall have the
meanings assigned to them in such agreements.
Copies of the Warrant Agreement and the Warrant Registration
Rights Agreement are on file at the office of the Warrant Agent and may be
obtained by writing to the Warrant Agent at the following address:
The Bank of New York
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Administration
A "Repurchase Event", as defined in the Warrant Agreement,
shall be deemed to occur on any date when the Company (i) consolidates with or
merges into or with another person (but only where the holders of Common Stock
receive consideration in exchange for all or part of such Common Stock), if the
Common Stock (or other securities) thereafter issuable upon exercise of the
Warrants is not registered under the Exchange Act or (ii) sells all or
substantially all of its assets to another person, if the Common Stock (or
other securities) thereafter issuable upon exercise of the Warrants is not
registered under the Exchange Act; provided that, in each case, a "Repurchase
Event" shall not be deemed to have occurred if the consideration for such
transaction consists solely of cash.
Following a Repurchase Event, the Company must make an offer to
repurchase for cash all outstanding Warrants (a "Repurchase Offer"). If the
Company makes a Repurchase Offer, Holders may, until the expiration date of
such offer, surrender all or part of their Warrants for repurchase by the
Company.
Warrants received by the Warrant Agent in proper form during a
Repurchase Offer will, except as otherwise provided in the Warrant Agreement,
be repurchased by the Company at a price in cash (the "Repurchase Price") equal
to the value on the Valuation Date relating thereto of the Common Shares
issuable, and other securities or property of the Company which would have been
delivered upon exercise of the Warrants had the Warrants been exercised
(whether or not the Warrants are then exercisable), less the Exercise Price in
effect on the Notice Date for such Repurchase Offer. The value of such Common
Shares and other securities will be (i) if the Common Shares (or other
securities) are registered under the
55
A-3
Exchange Act, determined based upon the average of the daily market prices (as
determined pursuant to Section 3.4(d)(ii)(1) of the Warrant Agreement) of the
Common Shares (or other securities) for the 20 consecutive trading days
immediately preceding such Valuation Date or (ii) if the Common Shares (or
other securities) are not registered under the Exchange Act or if the value
cannot be computed under clause (i) above, determined by the Independent
Financial Expert (as defined in the Warrant Agreement), in each case as set
forth in the Warrant Agreement.
The "Valuation Date" as defined in the Warrant Agreement shall
be deemed to occur on the date five Business Days prior to the date notice of
the Repurchase Offer is first given.
If the Company fails to make or complete a Repurchase Offer (a
"Default") as required by the Warrant Agreement, it shall be obligated to
increase the amount otherwise payable pursuant to the Warrant Agreement in
respect of the Repurchase Offer by an amount equal to interest thereon at a
rate per annum of 11 3/4% from the date of the Default to the date of payment,
which interest shall compound quarterly.
If the Company merges or consolidates with or into, or sells
all or substantially all of its property and assets to, another Person and the
consideration received by holders of Common Shares consists solely of cash, the
Holders of Warrants shall be entitled to receive distributions on the date of
such event on an equal basis with holders of Common Shares (or other securities
issuable upon exercise of the Warrants) as if the Warrants had been exercised
immediately prior to such event (less the Exercise Price). Upon receipt of
such payment, if any, the rights of a Holder shall terminate and cease and such
Holder's Warrants shall expire.
The number of Common Shares purchasable upon the exercise of
each Warrant and the price per share are subject to adjustment as provided in
the Warrant Agreement. Except as stated in the immediately preceding paragraph
and in the Warrant Agreement, in the event the Company merges or consolidates
with, or sells all or substantially all of its assets to, another Person, each
Warrant will, upon exercise, entitle the Holder thereof to receive the number
of shares of capital stock or other securities or the amount of money and other
property which the holder of a Common Share (or other securities or property
issuable upon exercise of a Warrant) is entitled to receive upon completion of
such merger, consolidation or sale.
As to any final fraction of a share which the same Holder of
one or more Warrant Certificates would otherwise be entitled to purchase upon
exercise thereof in the same transaction, the Company may pay the cash value
thereof determined as provided in the Warrant Agreement.
56
A-4
Subject to Article VI of the Warrant Agreement, all Common
Shares issuable by the Company upon the exercise of Warrants shall be validly
issued, fully paid and not subject to any calls for funds, and 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 thereof 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
Common Shares (including other securities or property issuable upon the
exercise of the Warrants) or payment of cash to any Person other than the
Holder of a Warrant Certificate surrendered upon the exercise of a Warrant and
in case of such transfer or payment, the Warrant Agent and the Company shall
not be required to issue any share certificate or pay any cash until such tax
or charge has been paid or it has been established to the Warrant Agent's and
the Company's satisfaction that no such tax or charge is due.
Subject to the restrictions on and conditions to transfer set
forth in Articles II and VIII 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 the Warrant Agent's 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 and the
Warrant Agent 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 by such other documentation required pursuant to
the Warrant Agreement and upon payment of any necessary transfer tax or other
governmental charge imposed upon such transfer. Upon any partial transfer, the
Company will sign and issue and the Warrant Agent will countersign and deliver
to such Holder a new Warrant Certificate or Certificates with respect to any
portion not so transferred. 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. Accordingly, the Company and/or the Warrant Agent shall not,
except as ordered by a court of competent jurisdiction as required by law, be
bound to recognize any equitable or other claim to or interest in the Warrants
on the part of any person other than such Registered Holder, whether or not it
shall have express or other notice thereof.
This Warrant Certificate may be exchanged at the office of the
Warrant Agent maintained for such purpose in New York, New York, 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.
57
A-5
Prior to the exercise of the Warrants represented hereby, the
Holder of this Warrant Certificate, as such, shall not be entitled 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, to receive any
distributions, to exercise any pre-emptive 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 Certificate shall be void and all rights
evidenced hereby shall cease on February 3, 2008, unless sooner terminated by
the liquidation, dissolution or winding-up of the Company or as otherwise
provided in the Warrant Agreement upon the consolidation or merger of the
Company with, or sale of the Company to, another Person or unless such date is
extended as provided in the Warrant Agreement.
58
This Warrant Certificate shall not be valid for any purpose
until it shall have been countersigned by the Warrant Agent.
ALLEGIANCE TELECOM, INC.
By:
------------------------
Name:
Title:
By:
------------------------
Name:
Title:
Dated:
Countersigned:
THE BANK OF NEW YORK,
as Warrant Agent
By:
--------------------------------
Authorized Signatory
59
FORM OF REVERSE OF WARRANT CERTIFICATE
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
To: The Bank of New York,
as Warrant Agent
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Administration
The undersigned irrevocably exercises ________ of the Warrants
represented by this Warrant Certificate and herewith makes payment of $ _______
(such payment being in cash or by certified or official bank or bank cashier's
check payable to the order or at the direction of Allegiance Telecom, Inc. or
the exercise price may be paid by surrendering additional Warrants to the
Warrant Agent having an aggregate Spread equal to the aggregate exercise price
of the Warrants being exercised) all at the exercise price and on the terms and
conditions specified in this Warrant Certificate and in the Warrant Agreement
and the Warrant Registration Rights Agreement referred to herein and surrenders
this Warrant Certificate and all right, title and interest therein to and
directs that the common stock, par value $0.01 per share, of Allegiance
Telecom, Inc. (the "Common Shares") deliverable upon the exercise of such
Warrants be registered or placed in the name and at the address specified below
and delivered thereto.
[THE FOLLOWING PROVISION TO BE INCLUDED ONLY
ON OFFSHORE CERTIFICATED WARRANTS]
The undersigned certifies that:
Check One
[ ] (a) (i) it is not a U.S. person (as defined in Rule 902
of Regulation S under the U.S. Securities Act of 1933, as
amended) and the Warrants are not being exercised on
behalf of a U.S. person.
or
[ ] (ii) it is furnishing to the Warrant Agent a written
opinion of counsel to the effect that the Warrants and
the Common Shares issuable upon exercise of the Warrants
have been registered under the U.S. Securities Act of
1933, as amended, or are exempt from registration
thereunder.
60
A-8
and (b) if an opinion is not being furnished, the undersigned is located
outside the United States at the time of the exercise hereof.
Dated:
-----------------------------------
(Signature of Owner)
-----------------------------------
(Street Address)
-----------------------------------
(City) (State) (Zip Code)
Signature Guaranteed By:
-----------------------------------
Signatures must be guaranteed by an
"eligible guarantor institution"
meeting the requirements of the
Warrant Agent, which requirements
include membership or participation
in the Security Transfer Agent
Medallion Program ("STAMP") or such
other "signature guarantee program"
as may be determined by the Warrant
Agent in addition to, or in
substitution for, STAMP, all in
accordance with the Securities
Exchange Act of 1934, as amended.
Securities and/or check or other property to be issued or delivered to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
61
A-9
FORM OF CERTIFICATE FOR REPURCHASE OFFER
(To be executed only upon repurchase
of Warrant by Allegiance Telecom, Inc.)
To:
The undersigned, having received prior notice of the
consideration for which ALLEGIANCE TELECOM, INC. will repurchase the Warrants
represented by the within Warrant Certificate, hereby surrenders this Warrant
Certificate for repurchase by ALLEGIANCE TELECOM, INC. of the number of
Warrants specified below for the consideration set forth in such notice.
Dated:
-----------------------------------
(Number of Warrants)
-----------------------------------
(Signature of Owner)
-----------------------------------
(Street Address)
-----------------------------------
(City) (State) (Zip Code)
Signature Guaranteed By:
-----------------------------------
Signatures must be guaranteed by an
"eligible guarantor institution"
meeting the requirements of the
Warrant Agent, which requirements
include membership or participation
in the Security Transfer Agent
Medallion Program ("STAMP") or such
other "signature guarantee program"
as may be determined by the Warrant
Agent in addition to, or in
substitution for, STAMP, all in
accordance with the Securities
Exchange Act of 1934, as amended.
62
A-10
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
63
A-11
FORM OF ASSIGNMENT
In consideration of monies or other valuable consideration
received from the Assignee(s) named below, the undersigned registered Holder of
this 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 this Warrant Certificate not
being assigned hereby) all of the right of the undersigned under this 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 purposes, with full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED ON ALL CERTIFICATES EXCEPT UNLEGENDED
REGULATION S GLOBAL WARRANTS AND UNLEGENDED OFFSHORE CERTIFICATED WARRANTS]
In connection with any transfer of Warrants, the undersigned
confirms that without utilizing any general solicitation or general advertising
that:
Check One
[ ] (a) these Warrants are being transferred in compliance with the
exemption from registration under the U.S. Securities Act of 1933,
as amended, provided by Rule 144A thereunder.
or
[ ] (b) these Warrants are being transferred other than in accordance with
(a) above and documents are being furnished which comply with the
conditions of transfer set forth in this Warrant Certificate and
the Warrant Agreement.
or
[ ] (c) these Warrants are being transferred pursuant to an effective
registration statement under the U.S. Securities Act of 1933, as
amended.
If none of the foregoing boxes is checked, the Warrant Agent shall not be
obligated to register the Warrants in the name of any Person other than the
Holder hereof unless and until the
64
conditions to any such transfer of registration set forth herein and in Article
VIII of the Warrant Agreement shall have been satisfied.
Dated:
-----------------------------
(Signature of Owner)
-----------------------------
(Street Address)
-----------------------------
(City) (State) (Zip Code)
Signature Guaranteed By:
-----------------------------
Signatures must be guaranteed by an
"eligible guarantor institution" meeting the
requirements of the Warrant Agent, which
requirements include membership or
participation in the Security Transfer Agent
Medallion Program ("STAMP") or such
other "signature guarantee program" as may
be determined by the Warrant Agent in
addition to, or in substitution for, STAMP,
all in accordance with the Securities
Exchange Act of 1934, as amended.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing
the Warrant(s) for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
"qualified institutional buyer" within the meaning of Rule 144A under the U.S.
Securities Act of 1933, as amended, and is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has received such
information regarding Allegiance Telecom, Inc. as the undersigned has requested
pursuant to Rule 144A or has determined not to request such information and
that it is aware that the transferor is relying upon the undersigned's
foregoing representations in order to claim the exemption from registration
provided by Rule 144A.
Dated:
----------------
-------------------------------
65
A-13
[NOTE: To be executed by an executive officer]
66
EXHIBIT B
Form of Certificate to be Delivered
in Connection with
Transfers Pursuant to Regulation S
[Date]
Allegiance Telecom, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
The Bank of New York
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Floor ▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Administration
Re: Warrants (the "Warrants") to Purchase
Common Shares of Allegiance Telecom, Inc. (the "Company")
Ladies and Gentlemen:
In connection with our proposed sale of _______________ Warrants,
we hereby certify that such sale has been effected pursuant to and in
accordance with Regulation S under the U.S. Securities Act of 1933, as amended
(the "Securities Act"), and, accordingly, we represent that:
(1) the offer of the Warrants was not made to a person in the
United States and not to a U.S. Person (as defined in Regulation S
under the Securities Act);
(2) at the time the buy order was originated, the transferee was
outside the United States or we and any person acting on our behalf
reasonably believed that the transferee was outside the United
States;
(3) no directed selling efforts (as such term is defined in Rule
902(b) of Regulation S under the Securities Act) have been made by
us, any of our affiliates or any persons acting on our behalf in
the United States in contravention of the requirements of Rule
903(b) or Rule 904(b) of Regulation S under the Securities Act, as
applicable; and
67
B-2
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate
have the meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By:
---------------------------
Authorized Signature
68
EXHIBIT C-1
Form of Certificate to be
Delivered by Transferor in Connection with
Transfers to Institutional Accredited Investors
[Date]
Allegiance Telecom, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
The Bank of New York
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Floor ▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Administration
Re: Warrants (the "Warrants") to Purchase
Common Shares of Allegiance Telecom, Inc. (the "Company")
Ladies and Gentlemen:
We hereby certify that such transfer is being effected in
compliance with the transfer restrictions applicable to the Warrants or
interests therein transferred pursuant to and in accordance with the U.S.
Securities Act of 1933, as amended (the "Securities Act"), and accordingly we
hereby further certify that (check one):
(a) [ ] such transfer is being effected pursuant to and in
accordance with Rule 144 under the Securities Act;
or
(b) [ ] such transfer is being effected to the Company or a
subsidiary thereof;
or
(c) [ ] such transfer is being effected pursuant to an
effective registration statement under the Securities Act;
or
▇▇
▇▇-▇
(▇) [ ] such transfer is being effected pursuant to an
exemption from the registration requirements of the Securities Act other than
Rule 144A, Rule 144 or Rule 904 thereunder, and we hereby further certify that
such transfer complies with the transfer restrictions applicable to the
Warrants or interests therein transferred to Institutional Accredited Investors
and in accordance with the requirements of the exemption claimed, which
certification is supported by an Opinion of Counsel provided by us or the
transferee (a copy of which we have attached to this certification), to the
effect that such transfer is in compliance with the Securities Act. Upon
consummation of the proposed transfer in accordance with the terms of the
Warrant Agreement, the transferred Warrants or interests therein will be
subject to the restrictions on transfer enumerated in the Private Placement
Legend printed on the IAI Certificated Warrant and in the Warrant Agreement and
the Securities Act.
Very truly yours,
[Name of Transferor]
By:
-------------------------------
Authorized Signatory
70
EXHIBIT C-2
Form of Certificate to be
Delivered By Transferees in Connection with
Transfers to Institutional Accredited Investors
[Date]
Allegiance Telecom, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
The Bank of New York
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Floor ▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Administration
Re: Warrants (the "Warrants") to Purchase
Common Shares of Allegiance Telecom, Inc. (the "Company")
Dear Sirs:
In connection with our proposed purchase of ___________
aggregate number of Warrants, we confirm that:
1. We understand that any subsequent transfer of the
Warrants, any interest therein or the Common Shares issuable upon
exercise of any Warrant (the "Warrant Shares") is subject to certain
restrictions and conditions set forth in the Warrant Agreement dated as
of February 3, 1998 relating to the Warrants (the "Warrant Agreement")
and the Warrant Registration Rights Agreement dated as of February 3,
1998 relating to the Warrants (the "Warrant Registration Rights
Agreement") and the undersigned agrees to be bound by, and not to
resell, pledge or otherwise transfer the Warrants or Warrant Shares
except in compliance with, such restrictions and conditions and the U.S.
Securities Act of 1933, as amended (the "Securities Act").
2. We understand that the Warrants represented by this
Warrant Certificate and, as of the date this Warrant Certificate was
originally issued, the Warrant Shares have not been registered under the
Securities Act, and accordingly may not be offered, sold, pledged or
otherwise transferred within the United States or to, or for the account
or benefit of, U.S. Persons except as set forth in the following
sentence. We agree that
71
C2-2
we will not, within the time period referred to under Rule 144(k) of the
Securities Act (taking into account the provisions of Rule 144(d) under
the Securities Act, if applicable) under the Securities Act as in effect
on the date of the transfer of this Warrant, resell or otherwise
transfer the Warrants represented by this Warrant Certificate except (a)
to Allegiance Telecom, Inc. or any subsidiary thereof, (b) to a
qualified institutional buyer in compliance with Rule 144A under the
Securities Act, (c) outside the United States in an offshore transaction
in compliance with Rule 904 under the Securities Act, (d) pursuant to
the exemption from registration provided by Rule 144 under the
Securities Act (if available), (e) to an institutional accredited
investor that, prior to such transfer, furnishes to you, to the Company
and, in the case of the Warrant Shares, to the transfer agent and
registrar therefor, a signed letter containing certain representations
and agreements relating to the restrictions on transfer of the Warrants
represented by this Warrant Certificate (the form of which letter can be
obtained from the Warrant Agent) and an opinion of counsel acceptable to
Allegiance Telecom, Inc. and its counsel that such transfer is in
compliance with the Securities Act or (f) pursuant to an effective
registration statement under the Securities Act and, in each case, in
accordance with applicable state securities laws.
3. We understand that, on any proposed resale of any
Warrants, any interest therein or Warrant Shares, we will be required to
furnish to you and the Company such certifications, legal opinions and
other information as you and the Company may reasonably require to
confirm that the proposed sale complies with the foregoing restrictions.
We further understand that the Warrants purchased by us will bear a
legend to the foregoing effect.
4. We are an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) of Regulation D under the
Securities Act) and have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risks of
our investment in the Warrants, and we and any accounts for which we are
acting are each able to bear the economic risk of our or its investment
for an indefinite period of time.
5. We are acquiring the Warrants purchased by us for our
own account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which we exercise
sole investment discretion.
72
C2-3
You, the Company and, if applicable, the transfer agent
and registrar for the Warrant Shares are entitled to rely upon this
letter and are irrevocably authorized to produce this letter or a copy
hereof to any interested party in any administrative or legal
proceedings or official inquiry with respect to the matters covered
hereby.
Very truly yours,
[Name of Transferee]
By:
---------------------------
Authorized Signature
73
EXHIBIT D
Form of Certificate
[Date]
Allegiance Telecom, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
The Bank of New York
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Floor ▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Administration
Re: Warrants (the "Warrants") to Purchase
Common Shares of Allegiance Telecom, Inc. (the "Company")
Dear Sirs:
This letter relates to _______________ Warrants (the "Legended
Warrants") represented by a Warrant Certificate which bears a legend outlining
restrictions upon transfer of such Legended Warrants. Pursuant to Section 2.1
of the Warrant Agreement dated as of February 3, 1998 (the "Warrant Agreement")
relating to the Warrants, we hereby certify that we are (or we will hold such
securities on behalf of) a person outside the United States to whom the
Warrants could be transferred in accordance with Rule 904 of Regulation S
promulgated under the U.S. Securities Act of 1933, as amended. Accordingly,
you are hereby requested to exchange the legended certificate for an unlegended
certificate representing an identical number of Warrants, all in the manner
provided for in the Warrant Agreement.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official inquiry
with respect to the matters covered hereby. Terms used in this certificate
have the meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By:
----------------------------------
Authorized Signature
74
APPENDIX A
LIST OF FINANCIAL EXPERTS
Alex. ▇▇▇▇▇ & Sons
Bear, ▇▇▇▇▇▇▇ & Co. Inc.
Credit Suisse First Boston Corporation
▇▇▇▇▇▇, Read & Co. Inc.
▇▇▇▇▇▇▇▇▇, Lufkin & ▇▇▇▇▇▇▇▇ Securities Corporation
▇▇▇▇▇▇ ▇▇▇▇, LLP
▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co.
Lazard Freres & Co.
▇▇▇▇▇▇ Brothers
Merrill Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated
▇▇▇▇▇▇▇▇▇▇▇ & Co., Inc.
PaineWebber Incorporated
Prudential Securities Inc.
Salomon Brothers Inc