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EXHIBIT 10.7
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WARRANT AGREEMENT
Dated as of September 29, 1997
by and among
MGC COMMUNICATIONS, INC.
and
MARINE MIDLAND BANK
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WARRANT AGREEMENT
TABLE OF CONTENTS*
Page
SECTION 1. Certain Definitions...................................................................................1
SECTION 2. Appointment of Warrant Agent..........................................................................3
SECTION 3. Issuance of Warrants: Warrant Certificates............................................................3
SECTION 4. Execution of Warrant Certificates.....................................................................3
SECTION 5. Separation of Warrants................................................................................4
SECTION 6. Registration and Countersignature.....................................................................4
SECTION 7. Registration of Transfers and Exchanges...............................................................4
(a) Transfer and Exchange of Global Warrants........................................................4
(b) Exchange of a Beneficial Interest
in a Global Warrant for a Definitive Warrant....................................................4
(c) Transfer and Exchange of Definitive Warrants....................................................5
(d) Restrictions on Exchange or Transfer of a
Definitive Warrant for a Beneficial Interest in a Global Warrant................................6
(e) Restrictions on Transfer and Exchange of Global Warrants........................................7
(f) Countersigning of Definitive Warrants in Absence of Depositary..................................7
(g) Legends.........................................................................................8
(h) Cancellation of Global Warrant..................................................................9
(i) Obligations with respect to Transfers and Exchanges of Warrants.................................9
SECTION 8. Terms of Warrants: Exercise of Warrants..............................................................10
SECTION 9. Payment of Taxes.....................................................................................11
SECTION 10. Mutilated or Missing Warrant Certificates...........................................................11
SECTION 11. Reservation of Warrant Shares.......................................................................12
SECTION 12. Obtaining Stock Exchange Listings...................................................................12
SECTION 13. Adjustment of Exercise Price and Number of Warrant Shares Issuable..................................12
(a) Stock Splits, Combinations, etc................................................................13
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* This Table of Contents does not constitute a part of this
Agreement or have any bearing upon the interpretation of any
of its terms or provisions.
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(b) Reclassification, Combinations, Mergers, etc...................................................13
(c) Issuance of Options or Convertible Securities..................................................13
(d) Dividends and Distributions....................................................................14
(e) Preferred Stock Offering and Common Stock Commitment...........................................15
(f) Current Market Price...........................................................................15
(g) Certain Distributions..........................................................................16
(h) Consideration Received.........................................................................16
(i) Deferral of Certain Adjustments................................................................16
(j) Changes in Options and Convertible Securities..................................................16
(k) Expiration of Options and Convertible Securities...............................................17
(l) Other Adjustments..............................................................................17
SECTION 14. Statement on Warrants...............................................................................17
SECTION 15. Fractional Interest.................................................................................17
SECTION 16. Notices to Warrant Holders..........................................................................17
SECTION 17. Merger, Consolidation or Change of Name of Warrant Agent............................................19
SECTION 18. Warrant Agent.......................................................................................19
SECTION 19. Resignation and Removal of Warrant Agent; Appointment of Successor..................................21
SECTION 20. Registration........................................................................................22
SECTION 21. Reports.............................................................................................22
SECTION 22. Rule 144A...........................................................................................22
SECTION 23. Notices to Company and Warrant Agent................................................................22
SECTION 24. Supplements and Amendments..........................................................................23
SECTION 25. Successors..........................................................................................23
SECTION 26. Termination.........................................................................................23
SECTION 27. Governing Law.......................................................................................23
SECTION 28. Benefits of This Agreement..........................................................................23
SECTION 29. Counterparts........................................................................................24
EXHIBIT A.......................................................................................................A-1
EXHIBIT B.......................................................................................................B-1
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WARRANT AGREEMENT dated as of September 29, 1997 (the "AGREEMENT")
between MGC Communications Inc., a Nevada corporation (the "COMPANY"), and
Marine Midland Bank, as warrant agent (the "WARRANT AGENT").
WHEREAS, the Company proposes to issue Common Stock Purchase Warrants,
as hereinafter described (the "WARRANTS"), to purchase up to an aggregate of
1,291,200 shares of Common Stock (as defined below), in connection with the
offering of an aggregate of $160,000,000.00 principal amount of the Company's
13% Senior Secured Notes due 2004 (the "NOTES") and 160,000 Warrants, each
Warrant entitling the holder thereof to purchase 8.07 shares of Common Stock.
The Notes and Warrants will be sold in Units (the "UNITS"), each Unit
consisting of $1,000 principal amount of Notes and one Warrant.
WHEREAS, the Company desires the Warrant Agent to act on behalf of the
Company, and the Warrant Agent is willing so to act, in connection with the
issuance of Warrant Certificates (as defined below) and other matters as
provided herein.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, and for the purpose of defining the respective
rights and obligations of the Company, the Warrant Agent and the Holders (as
defined below), the parties hereto agree as follows:
SECTION 1. Certain Definitions. As used in this Agreement, the
following terms shall have the following respective meanings:
"Affiliate" of any person means any person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such person. For purposes of this definition, "control" when used with respect
to any person means the power to direct the management and policies of such
person, directly or indirectly, whether through the ownership of voting
securities, by contract or otherwise, and the terms "controlling" and
"controlled" have meanings correlative to the foregoing.
"Commission" means the Securities and Exchange Commission.
"Common Equity Securities" means Common Stock and securities
convertible into, or exercisable or exchangeable for, Common Stock or rights or
options to acquire Common Stock or such other securities, excluding the
Warrants.
"Common Stock" means the common stock, par value $.001 per share, of
the Company, and any other capital stock of the Company into which such common
stock may be converted or reclassified or that may be issued in respect of, in
exchange for, or in substitution for, such common stock by reason of any stock
splits, stock dividends, distributions, mergers, consolidations or other like
events.
"Common Stock Commitment" means the binding commitment of certain
investors to purchase shares of Common Stock of the Company at a price to be
agreed upon between the Company and such investors, which price shall be not
less than $3.50 per share nor more than $5.00 per share, for an aggregate
purchase price of $15.0 million if the Preferred Stock Offering has not been
consummated before the sixtieth day after the date hereof.
"Company" means MGC Communications, Inc., a Nevada corporation, and
its successors and assigns.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exercisability Date" means any time on or after the earlier to occur
of (i) October 1, 1998 and (ii) in the event a Change of Control (as defined in
the Indenture) occurs, the date the Company mails notice thereof to holders of
Notes and to the Holders.
"Exercise Price" means the purchase price per share of Common Stock to
be paid upon the exercise of each Warrant in accordance with the terms hereof,
which price shall initially be $.01 per share, subject to adjustment from time
to time pursuant to Section 13 hereof.
"Expiration Date" means October 1, 2004.
"Holder" means a person who owns Registrable Securities (as defined in
Section 7).
"Indenture" means the indenture, dated the date hereof, between the
Company and Marine Midland Bank, as trustee.
"Initial Purchasers" means Bear, ▇▇▇▇▇▇▇ & Co. Inc. and ▇▇▇▇▇▇ ▇▇▇▇
LLC.
"person" means any individual, corporation, partnership, limited
liability company, joint venture, association, joint-stock company, trust,
unincorporated organization or government or any agency or political
subdivision thereof.
"Preferred Stock Offering" means the offering of shares of a new
series of preferred stock of the Company to generate an aggregate gross
proceeds of at least $15.0 million, which offering shall be consummated no more
than 60 days after the date hereof.
"Registrable Securities" means the Warrant Shares and any other
securities issued or issuable with respect to the Warrants or the Warrant
Shares by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise until such date as such security (i) is effectively
registered under the Securities Act and disposed of in accordance with a
registration statement or (ii) is distributed to the public pursuant to Rule
144 under the Securities Act.
"Registration Rights Agreement" means the registration rights
agreement, dated as of the date hereof by and among the Company and the Initial
Purchasers relating to the Notes.
"Securities Act" means the Securities Act of 1933, as amended.
"Separation Date" means the earlier of (i) 90 days after the issuance
of the Units, (ii) such date as the Initial Purchasers may, in their
discretion, deem appropriate for the Notes and the Warrants that comprise each
Unit to be transferred or exchanged separately, (iii) in the event a Change of
Control (as defined in the Indenture) occurs, the date the Company mails notice
thereof to holders of Notes and (iv) the date on which the Exchange Offer (as
defined in the Registration Rights Agreement) is consummated.
"Trustee" means the trustee under the Indenture.
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"Warrant Agent" means Marine Midland Bank or the successor or
successors of such Warrant Agent appointed in accordance with the terms hereof.
"Warrant Registration Rights Agreement" means the registration rights
agreement, dated as of September 29, 1997, by and among the Company and the
Initial Purchasers relating to the Warrants and the Warrant Shares.
"Warrant Shares" means the shares of Common Stock issued or issuable
upon the exercise of the Warrants.
SECTION 2. Appointment of Warrant Agent. The Company hereby appoints
the Warrant Agent to act as agent for the Company in accordance with the
instructions set forth hereinafter in this Agreement, and the Warrant Agent
hereby accepts such appointment.
SECTION 3. Issuance of Warrants: Warrant Certificates. The Warrants
will be issued in the form of one or more global certificates (the "GLOBAL
WARRANTS"), substantially in the form of Exhibit A (including footnotes 1 and 2
thereto). The Global Warrants shall be deposited on the Issue Date with, or on
behalf of, The Depositary Trust Company (the "Depositary") and registered in
the name of Cede & Co., as the Depositary's nominee. Each Global Warrant shall
represent such of the outstanding Warrants as shall be specified therein and
each shall provide that it shall represent the aggregate amount of outstanding
Warrants from time to time endorsed thereon and that the aggregate amount of
outstanding Warrants represented thereby may from time to time be reduced or
increased, as appropriate. Upon request, a Holder may receive from the
Depositary and the Warrant Agent Warrants in definitive form (the "DEFINITIVE
WARRANTS"), substantially in the form of Exhibit A (not including footnotes 1
and 2 thereto) as set forth in Section 7 below. Any certificates (the "WARRANT
CERTIFICATES") evidencing the Global Warrants or the Definitive Warrants to be
delivered pursuant to this Agreement shall be substantially in the form set
forth in Exhibit A attached hereto.
SECTION 4. Execution of Warrant Certificates. Warrant Certificates
shall be signed on behalf of the Company by its Chairman of the Board or its
President or a Vice President and by its Secretary or an Assistant Secretary
under its corporate seal. Each such signature upon the Warrant Certificates may
be in the form of a facsimile signature of the present or any future Chairman
of the Board, President, Vice President, Secretary or Assistant Secretary and
may be imprinted or otherwise reproduced on the Warrant Certificates and for
that purpose the Company may adopt and use the facsimile signature of any
person who shall have been Chairman of the Board, President, Vice President,
Secretary or Assistant Secretary, notwithstanding the fact that at the time the
Warrant Certificates shall be countersigned and delivered or disposed of such
person shall have ceased to hold such office. The seal of the Company may be in
the form of a facsimile thereof and may be impressed, affixed, imprinted or
otherwise reproduced on the Warrant Certificates.
In case any officer of the Company who shall have signed any of the
Warrant Certificates shall cease to be such officer before the Warrant
Certificates so signed shall have been countersigned by the Warrant Agent, or
disposed of by the Company, such Warrant Certificates nevertheless may be
countersigned and delivered or disposed of as though such person had not ceased
to be such officer of the Company; and any Warrant Certificate may be signed on
behalf of the Company by any person who, at the actual date of the execution of
such Warrant Certificate, shall be a proper officer of the Company to sign
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such Warrant Certificate, although at the date of the execution of this Warrant
Agreement any such person was not such officer.
Warrant Certificates shall be dated the date of
countersignature.
SECTION 5. Separation of Warrants. The Notes and Warrants
shall not be separately transferable prior to the Separation Date.
SECTION 6. Registration and Countersignature. The Warrant
Agent, on behalf of the Company, shall number and register the Warrant
Certificates in a register as they are issued by the Company.
Warrant Certificates shall be manually countersigned by the
Warrant Agent and shall not be valid for any purpose unless so countersigned.
The Warrant Agent shall, upon written instructions of the Chairman of the
Board, the President, a Vice President, the Treasurer or the Controller of the
Company, initially countersign, issue and deliver Warrants entitling the
Holders thereof to purchase not more than the number of Warrant Shares referred
to above in the first recital hereof and shall countersign and deliver Warrants
as otherwise provided in this Agreement.
The Company and the Warrant Agent may deem and treat the
Holder(s) of the Warrant Certificates as the absolute owner(s) thereof
(notwithstanding any notation of ownership or other writing thereon made by
anyone), for all purposes, and neither the Company nor the Warrant Agent shall
be affected by any notice to the contrary. Prior to a Separation Date, the
registered holder of the Unit shall be deemed the registered Holder of such
Warrants for all purposes hereunder.
SECTION 7. Registration of Transfers and Exchanges.
(a) Transfer and Exchange of Global Warrants. The transfer
and exchange of Global Warrants or beneficial interests therein shall be
effected through the Depositary, in accordance with this Warrant Agreement and
the procedures of the Depositary therefor.
(b) Exchange of a Beneficial Interest in a Global Warrant for
a Definitive Warrant.
(i) Any person having a beneficial interest in a Global Warrant
may upon request exchange such beneficial interest for a
Definitive Warrant. Upon receipt by the Warrant Agent of
written instructions or such other form of instructions as is
customary for the Depositary from the Depositary or its
nominee on behalf of any person having a beneficial interest
in a Global Warrant and, in the case of a Registrable
Security, the following additional information and documents
(all of which may be submitted by facsimile):
(A) if such beneficial interest is being delivered to
the person designated by the Depositary as being the
beneficial owner, a certification to that effect (in
substantially the form of Exhibit B hereto);
(B) if such beneficial interest is being transferred (1)
to a "qualified institutional buyer" (as defined in
Rule 144A under the Securities Act) in accordance
with Rule 144A under the Securities Act or (2)
pursuant to an exemption from registration in
accordance with Rule 144 under the Securities Act
(and based on an opinion of
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counsel if the Company so requests) or (3) pursuant
to an effective registration statement under the
Securities Act, a certification to that effect (in
substantially the form of Exhibit B hereto);
(C) if such beneficial interest is being transferred to
any institutional "accredited investor," within the
meaning of Rule 501(a)(1), (2), (3) and (7) under
the Securities Act pursuant to a private placement
exemption from the registration requirements of the
Securities Act (and based on an opinion of counsel
if the Company so requests), a certification to that
effect (in substantially the form of Exhibit B
hereto) and a certification from the applicable
transferee;
(D) if such beneficial interest is being transferred
pursuant to an exemption from registration in
accordance with Rule 904 under the Securities Act
(and based on an opinion of counsel if the Company
so requests), a certification to that effect (in
substantially the form of Exhibit B); or
(E) If such beneficial interest is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act (and based on an
opinion of counsel if the Company so requests), a
certification to that effect (in substantially the
form of Exhibit B hereto);
then the Warrant Agent shall cause, in accordance with the
standing instructions and procedures existing between the
Depositary and Warrant Agent, the number of Warrants and
Warrant Shares represented by the Global Warrant to be
reduced by the number of Warrants and Warrant Shares to be
represented by the Definitive Warrants to be issued in
exchange for the interest in the Global Warrant and,
following such reduction, the Company shall execute and the
Warrant Agent shall countersign and deliver to the
transferee, as the case may be, a Definitive Warrant.
(ii) Definitive Warrants issued in exchange for a beneficial
interest in a Global Warrant pursuant to this Section 7(d)
shall be registered in such names as the Depositary, pursuant
to instructions from its direct or indirect participants or
otherwise, shall instruct the Warrant Agent. The Warrant
Agent shall deliver such Definitive Warrants to the persons
in whose names such Warrants are so registered.
(c) Transfer and Exchange of Definitive Warrants. When
Definitive Warrants are presented to the Warrant Agent with a request:
(i) to register the transfer of the Definitive Warrants; or
(ii) to exchange such Definitive Warrants for an equal number of
Definitive Warrants of other authorized denominations,
the Warrant Agent shall register the transfer or make the exchange as requested
if its requirements for such transactions are met; provided, however, that the
Definitive Warrants presented or surrendered for registration of transfer or
exchange:
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(x) shall be duly endorsed or accompanied by a written
instruction of transfer in form satisfactory to the Warrant
Agent, duly executed by the Holder thereof or by his
attorney, duly authorized in writing; and
(y) in the case of Registrable Securities (as defined below),
such request shall be accompanied by the following additional
information and documents, as applicable:
(A) if such Registrable Security is being delivered to
the Warrant Agent by a Holder for registration in
the name of such Holder, without transfer, a
certification from such Holder to that effect (in
substantially the form of Exhibit B hereto);
(B) if such Registrable Security is being transferred
(1) to a "qualified institutional buyer" (as defined
in Rule 144A under the Securities Act) in accordance
with Rule 144A under the Securities Act or (2)
pursuant to an exemption from registration in
accordance with Rule 144 under the Securities Act
(and based on an opinion of counsel if the Company
so requests) or (3) pursuant to an effective
registration statement under the Securities Act, a
certification to that effect (in substantially the
form of Exhibit B hereto);
(C) if such Registrable Security is being transferred to
an institutional "accredited investor," within the
meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act pursuant to a private placement
exemption from the registration requirements of the
Securities Act (and based on an opinion of counsel
if the Company so requests), a certification to that
effect (in substantially the form of Exhibit B
hereto) and a certification from the applicable
transferee;
(D) if such Registrable Security is being transferred
pursuant to an exemption from registration in
accordance with Rule 904 under the Securities Act
(and based on an opinion of counsel if the Company
so requests), a certification to that effect (in
substantially the form of Exhibit B hereto); or
(E) if such Registrable Security is being transferred in
reliance on another exemption from the registration
requirements of the Securities Act (and based on an
opinion of counsel if the Company so requests), a
certification to that effect (in substantially the
form of Exhibit B hereto).
(d) Restrictions on Exchange or Transfer of a Definitive
Warrant for a Beneficial Interest in a Global Warrant. A Definitive Warrant may
not be exchanged for a beneficial interest in a Global Warrant except upon
satisfaction of the requirements set forth below. Upon receipt by the Warrant
Agent of a Definitive Warrant, duly endorsed or accompanied by appropriate
instruments of transfer, in form satisfactory to the Warrant Agent, together
with:
(i) if such Definitive Warrant is a Registrable Security,
certification from the Holder thereof (in substantially the
form of Exhibit B hereto) to the effect that such Definitive
Warrant is being transferred by such Holder either (A) to a
"qualified institutional buyer" (as defined in Rule 144A
under the Securities Act) in accordance with Rule 144A under
the Securities
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Act (B) outside the United States to a foreign person in a
transaction meeting the requirements of Rule 904 under the
Securities Act (and based on an opinion of counsel if the
Company so requests) or (C) to an institutional "accredited
investor" within the meaning of Rule 501(a)(1), (2), (3) or
(7) under the Securities Act pursuant to a private placement
exemption from the registration requirements of the
Securities Act who has provided a certification to that
effect (and based on an opinion of counsel if the Company so
requests) who wishes to take delivery thereof in the form of
a beneficial interest in a Global Warrant; and
(ii) whether or not such Definitive Warrant is a Registrable
Security, written instructions directing the Warrant Agent to
make, or to direct the Depositary to make, an endorsement on
the Global Warrant to reflect an increase in the number of
Warrants and Warrant Shares represented by the Global
Warrant,
then the Warrant Agent shall cancel such Definitive Warrant and cause, or
direct the Depositary to cause, in accordance with the standing instructions
and procedures existing between the Depositary and the Warrant Agent, the
number of Warrants and Warrant Shares represented by the Global Warrant to be
increased accordingly. If no Global Warrants are then outstanding, the Company
shall issue and the Warrant Agent shall countersign a new Global Warrant
representing the appropriate number of Warrants and Warrant Shares.
(e) Restrictions on Transfer and Exchange of Global Warrants.
Notwithstanding any other provisions of this Warrant Agreement (other than the
provisions set forth in subsection (f) of this Section 7), a Global Warrant may
not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) Countersigning of Definitive Warrants in Absence of
Depositary. If at any time:
(i) the Depositary for the Global Warrants notifies the Company
that the Depositary is unwilling or unable to continue as
Depositary for the Global Warrants and a successor Depositary
for the Global Warrants is not appointed by the Company
within 90 days after delivery of such notice; or
(ii) The Company, in its sole discretion, notifies the Warrant
Agent in writing that it elects to cause the issuance of
Definitive Warrants under this Warrant Agreement,
then the Company shall execute, and the Warrant Agent, upon written
instructions signed by two officers of the Company, shall countersign and
deliver Definitive Warrants, in an aggregate number equal to the number of
Warrants represented by Global Warrants, in exchange for such Global Warrants.
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(g) Legends.
(i) Except for any Registrable Security sold or transferred
(including any Registrable Security represented by a Global
Warrant) as discussed in clause (ii) below, each Warrant
Certificate evidencing the Global Warrants and the Definitive
Warrants (and all Warrants issued in exchange therefor or
substitution thereof) and each certificate representing the
Warrant Shares shall bear a legend in substantially the
following form:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY
WAS ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM
REGISTRATION UNDER ▇▇▇▇▇▇▇ ▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES
ACT"), AND THE SECURITY EVIDENCED HEREBY MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE
EXEMPTION THEREFROM. EACH PURCHASER OF THE SECURITY
EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER
MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS
OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY RULE
144A THEREUNDER. THE HOLDER OF THE SECURITY
EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE
ISSUER THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED
OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON
WHO THE SELLER REASONABLY BELIEVES IS A QUALIFIED
INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A , (b) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A
PERSON THAT IS NOT A U.S. PERSON (AS DEFINED IN RULE
902 UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 904 UNDER THE
SECURITIES ACT, (d), TO AN INSTITUTIONAL "ACCREDITED
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR
(7) OF REGULATION D UNDER THE SECURITIES ACT) THAT,
PRIOR TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE AND
WARRANT AGENT A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE
WARRANTS (THE FORM OF WHICH LETTER CAN BE OBTAINED
FROM THE WARRANT AGENT) OR (e) IN ACCORDANCE WITH
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT (IN THE CASE OF (b), (c), (d)
or (e), UPON AN OPINION OF COUNSEL IF THE ISSUER OR
WARRANT AGENT, REGISTRAR OR TRANSFER AGENT FOR THE
SECURITIES SO REQUESTS), (2) TO THE ISSUER OR (3)
PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND,
IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED
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STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B)
THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER FROM IT OF THE
SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS
SET FORTH IN (A) ABOVE."
(ii) Upon any sale or transfer of a Registrable Security
(including any Registrable Security represented by a Global
Warrant) pursuant to an effective registration statement
under the Securities Act, pursuant to Rule 144 under the
Securities Act or pursuant to an opinion of counsel
reasonably satisfactory to the Company that no legend is
required:
(A) in the case of any Registrable Security that is a
Definitive Warrant, the Warrant Agent shall permit
the Holder thereof to exchange such Registrable
Security for a Definitive Warrant that does not bear
the legend set forth in clause (i) above and rescind
any restriction on the transfer of such Registrable
Security; and
(B) in the case of any Registrable Security represented
by a Global Warrant, such Registrable Security shall
not be required to bear the legend set forth in
clause (i) above but shall continue to be subject to
the provisions of Section 7(c) hereof; provided,
however, that with respect to any request for an
exchange of a Registrable Security that is
represented by a Global Warrant for a Definitive
Warrant that does not bear the legend set forth in
clause (i) above, which request is made in reliance
upon Rule 144 (and based upon an opinion of counsel
if the Company so requests), the Holder thereof
shall certify in writing to the Warrant Agent that
such request is being made pursuant to Rule 144
(such certification to be substantially in the form
of Exhibit B hereto).
(h) Cancellation of Global Warrant. At such time as all
beneficial interests in Global Warrants have either been exchanged for
Definitive Warrants, redeemed, repurchased or cancelled, all Global Warrants
shall be returned to or retained and cancelled by the Warrant Agent.
(i) Obligations with respect to Transfers and Exchanges of
Warrants.
(i) To permit registrations of transfers and exchanges, the
Company shall execute and the Warrant Agent is hereby
authorized to countersign, in accordance with the provisions
of Section 6 and this Section 7, Definitive Warrants and
Global Warrants as required pursuant to the provisions of
this Section 7.
(ii) All Definitive Warrants and Global Warrants issued upon any
registration of transfer or exchange of Definitive Warrants
or Global Warrants shall be the valid obligations of the
Company, entitled to the same benefits under this Warrant
Agreement, as the Definitive Warrants or Global Warrants
surrendered upon such registration of transfer or exchange.
(iii) Prior to due presentment for registration of transfer of any
Warrant, the Warrant Agent and the Company may deem and treat
the person in whose name any Warrant is registered as the
absolute owner of such Warrant and neither the Warrant Agent,
nor the Company shall be affected by notice to the contrary.
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(iv) No service charge shall be made to a Holder for any
registration, transfer or exchange.
SECTION 8. Terms of Warrants: Exercise of Warrants. Subject
to the terms of this Agreement, each Warrant Holder shall have the right, which
may be exercised commencing at the opening of business on the Exercisability
Date and until 5:00 p.m., New York City time, on the Expiration Date to receive
from the Company the number of fully paid and nonassessable Warrant Shares
which the Holder may at the time be entitled to receive on exercise of such
Warrants and payment of the Exercise Price then in effect for such Warrant
Shares; provided, however, that no Warrant Holder shall be entitled to exercise
such Holder's Warrants at any time, unless, at the time of exercise, (i) a
registration statement under the Securities Act relating to the Warrant Shares
has been filed with, and declared effective by, the Commission, and no stop
order suspending the effectiveness of such registration statement has been
issued by the Commission or (ii) the issuance of the Warrant Shares is
permitted pursuant to an exemption from the registration requirements of the
Securities Act. Subject to the provisions of the following paragraph of this
Section 8, each Warrant not exercised prior to 5:00 p.m., New York City time,
on the Expiration Date shall become void and all rights thereunder and all
rights in respect thereof under this Agreement shall cease as of such time. No
adjustments as to dividends will be made upon exercise of the Warrants.
The Company shall give notice not less than 90, and not more
than 120, days prior to the Expiration Date to the Holders of all then
outstanding Warrants to the effect that the Warrants will terminate and become
void as of 5:00 p.m., New York City time, on the Expiration Date. If the
Company fails to give such notice, the Warrants will not expire until 90 days
after the Company gives such notice, provided, however, in no event will
Holders be entitled to any damages or other remedy for the Company's failure to
give such notice other than any such extension.
A Warrant may be exercised upon surrender to the Company at
the principal office of the Warrant Agent of the certificate or certificates
evidencing the Warrant to be exercised with the form of election to purchase on
the reverse thereof duly filled in and signed, which signature shall be
guaranteed by a bank or trust company having an office or correspondent in the
United States or a broker or dealer which is a member of a registered
securities exchange or the National Association of Securities Dealers, Inc.,
and upon payment to the Warrant Agent for the account of the Company of the
Exercise Price as adjusted as herein provided, for each of the Warrant Shares
in respect of which such Warrant is then exercised. Payment of the aggregate
Exercise Price shall be made in cash or by certified or official bank check,
payable to the order of the Company. In the alternative, each Holder may
exercise its right to receive Warrant Shares on a net basis, such that without
the exchange of any funds, the Holder receives that number of Warrant Shares
otherwise issuable upon exercise of its Warrants less that number of Warrant
Shares having a fair market value equal to the aggregate Exercise Price that
would otherwise have been paid by the Holder for the Warrant Shares being
issued. For purposes of the foregoing sentence, "fair market value" of the
Warrant Shares shall be the current market price of the Warrant Shares on the
date immediately preceding the date of payment of the Exercise Price as
determined by the procedures set forth in Section 13(f). The exercise of
Warrants by Holders of beneficial interest in Global Warrants shall be effected
in accordance with this Agreement and the procedures of the Depositary
therefor.
Subject to the provisions of Section 9 hereof, upon surrender
of Warrants and payment of the Exercise Price as provided above, the Warrant
Agent shall thereupon promptly notify the Company, and the Company shall
promptly transfer to the Holder of such Warrant Certificate a certificate or
certificates for the appropriate number of Warrant Shares or other securities
or property (including any money) to which the Holder is entitled, registered
or otherwise placed in, or payable to the order of, such name or names as
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may be directed in writing by the Holder, and shall deliver such certificate or
certificates representing the Warrant Shares and any other securities or
property (including any money) to the person or persons entitled to receive the
same, together with an amount in cash in lieu of any fraction of a share as
provided in Section 15. Any such certificate or certificates representing the
Warrant Shares shall be deemed to have been issued and any person so designated
to be named therein shall be deemed to have become a Holder of record of such
Warrant Shares as of the date of the surrender of such Warrants and payment of
the Exercise Price.
The Warrants shall be exercisable commencing on the
Exercisability Date, at the election of the Holders thereof, either in full or
from time to time in part and, in the event that a certificate evidencing
Warrants is exercised in respect of fewer than all of the Warrant Shares
issuable on such exercise at any time prior to the date of expiration of the
Warrants, a new certificate evidencing the remaining Warrant or Warrants will
be issued, and the Warrant Agent is hereby irrevocably authorized to
countersign and to deliver the required new Warrant Certificate or Certificates
pursuant to the provisions of this Section and of Section 4 hereof, and the
Company, whenever required by the Warrant Agent, will supply the Warrant Agent
with Warrant Certificates duly executed on behalf of the Company for such
purpose.
All Warrant Certificates surrendered upon exercise of
Warrants shall be cancelled by the Warrant Agent. Such cancelled Warrant
Certificates shall then be disposed of by the Warrant Agent in a manner
satisfactory to the Company. The Warrant Agent shall account promptly to the
Company with respect to Warrants exercised and concurrently pay to the Company
all monies received by the Warrant Agent for the purchase of the Warrant Shares
through the exercise of such Warrants.
The Warrant Agent shall keep copies of this Agreement and any
notices given or received hereunder by or from the Company available for
inspection by the Holders during normal business hours at its office. The
Company shall supply the Warrant Agent from time to time with such numbers of
copies of this Agreement as the Warrant Agent may request.
SECTION 9. Payment of Taxes. The Company will pay all
documentary stamp taxes attributable to the initial issuance of Warrant Shares
upon the exercise of Warrants or to any separation of the Warrants from the
Notes; provided, however, that the Company shall not be required to pay any tax
or taxes which may be payable in respect of any transfer involved in the issue
of any Warrant Certificates or any certificates for Warrant Shares in a name
other than that of the Holder of a Warrant Certificate surrendered upon the
exercise of a Warrant, and the Company shall not be required to issue or
deliver such Warrant Certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.
SECTION 10. Mutilated or Missing Warrant Certificates. In
case any of the Warrant Certificates shall be mutilated, lost, stolen or
destroyed, the Company may in its discretion issue and the Warrant Agent may
countersign, in exchange and substitution for and upon cancellation of the
mutilated Warrant Certificate, or in lieu of and substitution for the Warrant
Certificate lost, stolen or destroyed, a new Warrant Certificate of like tenor
and representing an equivalent number of Warrants, but only upon receipt of
evidence reasonably satisfactory to the Company and the Warrant Agent of such
loss, theft or destruction of such Warrant Certificate and indemnity, if
requested, also reasonably satisfactory to them. Applicants for such substitute
Warrant Certificates shall also comply with such other reasonable regulations
and pay such other reasonable charges as the Company or the Warrant Agent may
prescribe.
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SECTION 11. Reservation of Warrant Shares. The Company will
at all times reserve and keep available, free from preemptive rights, out of
the aggregate of its authorized but unissued Common Stock or its authorized and
issued Common Stock held in its treasury, for the purpose of enabling it to
satisfy any obligation to issue Warrant Shares upon exercise of Warrants, the
maximum number of shares of Common Stock which may then be deliverable upon the
exercise of all outstanding Warrants.
The transfer agent for the Common Stock (the "TRANSFER
AGENT") and every subsequent transfer agent for any shares of the Company's
capital stock issuable upon the exercise of any of the rights of purchase
aforesaid will be irrevocably authorized and directed at all times to reserve
such number of authorized shares as shall be required for such purpose. The
Company will keep a copy of this Agreement on file with the Transfer Agent and
with every subsequent transfer agent for any shares of the Company's capital
stock issuable upon the exercise of the rights of purchase represented by the
Warrants. The Warrant Agent is hereby irrevocably authorized to requisition
from time to time from such Transfer Agent the stock certificates required to
honor outstanding Warrants upon exercise thereof in accordance with the terms
of this Agreement. The Company will supply such Transfer Agent with duly
executed certificates for such purposes and will provide or otherwise make
available any cash which may be payable as provided in Section 15. The Company
will furnish such Transfer Agent a copy of all notices of adjustments and
certificates related thereto, transmitted to each Holder of the Warrants
pursuant to Section 16 hereof. Prior to the initial public offering of the
Common Stock of the Company, the Company may act as Transfer Agent for the
Common Stock. The Warrant Agent hereby agrees that it will not issue any stock
certificates delivered hereunder other than upon the exercise of Warrants in
accordance with the terms of this Agreement and, promptly after the issuance of
any such stock certificates, to notify the Transfer Agent of such issuance.
Before taking any action which would cause an adjustment
pursuant to Section 13 hereof that would reduce the Exercise Price below the
then par value (if any) of the Warrant Shares, the Company will take any
corporate action which may, in the opinion of its counsel (which may be counsel
employed by the Company), be necessary in order that the Company may validly
and legally issue fully paid and nonassessable Warrant Shares at the Exercise
Price as so adjusted.
The Company covenants that all Warrant Shares which may be
issued upon exercise of Warrants in accordance with the terms of this Agreement
(including the payment of the Exercise Price) will, upon issue, be duly and
validly issued, fully paid, nonassessable, free of preemptive rights and free
from all taxes, liens, charges and security interests with respect to the issue
thereof.
SECTION 12. Obtaining Stock Exchange Listings. The Company
will from time to time take all action which may be necessary so that the
Warrant Shares, immediately upon their issuance upon the exercise of Warrants,
will be listed on the principal securities exchanges and markets (including,
without limitation, the Nasdaq National Market) within the United States of
America, if any, on which other shares of Common Stock are then listed. Upon
the listing of such Warrant Shares, the Company shall notify the Warrant Agent
in writing. The Company will obtain and keep all required permits and records
in connection with such listing.
SECTION 13. Adjustment of Exercise Price and Number of
Warrant Shares Issuable. The number and kind of shares purchasable upon the
exercise of Warrants and the Exercise Price shall be subject to adjustment from
time to time as follows:
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(a) Stock Splits, Combinations, etc. In case the Company
shall hereafter (A) pay a dividend or make a distribution on its Common Stock
in shares of its capital stock (whether shares of Common Stock or of capital
stock of any other class), (B) subdivide its outstanding shares of Common
Stock, (C) combine its outstanding shares of Common Stock into a smaller number
of shares, or (D) issue by reclassification of its shares of Common Stock any
shares of capital stock of the Company, the Exercise Price in effect and the
number of Warrant Shares issuable upon exercise of each Warrant immediately
prior to such action shall be adjusted so that the Holder of any Warrant
thereafter exercised shall be entitled to receive the number of shares of
capital stock of the Company which such Holder would have owned immediately
following such action had such Warrant been exercised immediately prior
thereto. An adjustment made pursuant to this paragraph shall become effective
immediately after the record date in the case of a dividend and shall become
effective immediately after the effective date in the case of a subdivision,
combination or reclassification. If, as a result of an adjustment made pursuant
to this paragraph, the Holder of any Warrant thereafter exercised shall become
entitled to receive shares of two or more classes of capital stock of the
Company, the Board of Directors of the Company (whose determination shall be
conclusive) shall determine the allocation of the adjusted Exercise Price
between or among shares of such classes of capital stock.
(b) Reclassification, Combinations, Mergers, etc. In case of
any reclassification or change of outstanding shares of Common Stock issuable
upon exercise of the Warrants (other than as set forth in paragraph (a) above
and other than a change in par value, or from par value to no par value, or
from no par value to par value or as a result of a subdivision or combination),
or in case of any consolidation or merger of the Company with or into another
corporation (other than a merger in which the Company is the continuing
corporation and which does not result in any reclassification or change of the
then outstanding shares of Common Stock or other capital stock issuable upon
exercise of the Warrants) or in case of any sale or conveyance to another
corporation of the property of the Company as an entirety or substantially as
an entirety, then, as a condition of such reclassification, change,
consolidation, merger, sale or conveyance, the Company or such a successor or
purchasing corporation, as the case may be, shall forthwith make lawful and
adequate provision whereby the Holder of each Warrant then outstanding shall
have the right thereafter to receive on exercise of such Warrant the kind and
amount of shares of stock and other securities and property receivable upon
such reclassification, change, consolidation, merger, sale or conveyance by a
Holder of the number of shares of Common Stock issuable upon exercise of such
Warrant immediately prior to such reclassification, change, consolidation,
merger, sale or conveyance and enter into a supplemental warrant agreement so
providing. Such provisions shall include provision for adjustments which shall
be as nearly equivalent as may be practicable to the adjustments provided for
in this Section 13. If the issuer of securities deliverable upon exercise of
Warrants under the supplemental warrant agreement is an affiliate of the
formed, surviving or transferee corporation, that issuer shall join in the
supplemental warrant agreement. The above provisions of this paragraph (b)
shall similarly apply to successive reclassifications and changes of shares of
Common Stock and to successive consolidations, mergers, sales or conveyances.
(c) Issuance of Options or Convertible Securities. In the
event the Company shall, at any time or from time to time after the date
hereof, issue, sell, distribute or otherwise grant in any manner (including by
assumption) to all holders of the Common Stock any rights to subscribe for or
to purchase, or any warrants or options for the purchase of, Common Stock or
any stock or securities convertible into or exchangeable for Common Stock (any
such rights, warrants or options being herein called "OPTIONS" and any such
convertible or exchangeable stock or securities being herein called
"CONVERTIBLE SECURITIES") or any Convertible Securities (other than upon
exercise of any Option), whether or not such Options or the rights to convert
or exchange such Convertible Securities are immediately exercisable, and
the price per share at which Common Stock is issuable upon the exercise of such
Options or upon the conversion or
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exchange of such Convertible Securities (determined by dividing (i) the
aggregate amount, if any, received or receivable by the Company as
consideration for the issuance, sale, distribution or granting of such Options
or any such Convertible Security, plus the minimum aggregate amount of
additional consideration, if any, payable to the Company upon the exercise of
all such Options or upon conversion or exchange of all such Convertible
Securities, plus, in the case of Options to acquire Convertible Securities, the
minimum aggregate amount of additional consideration, if any, payable upon the
conversion or exchange of all such Convertible Securities, by (ii) the total
maximum number of shares of Common Stock issuable upon the exercise of all such
Options or upon the conversion or exchange of all such Convertible Securities
or upon the conversion or exchange of all Convertible Securities issuable upon
the exercise of all such Options) shall be less than the current market price
per share of Common Stock on the record date for the issuance, sale,
distribution or granting of such Options or Convertible Securities (any such
event being herein called a "Distribution"), then, effective upon such
Distribution, (I) the Exercise Price shall be reduced to the price (calculated
to the nearest 1/1,000 of one cent) determined by multiplying the Exercise
Price in effect immediately prior to such Distribution by a fraction, the
numerator of which shall be the sum of (i) the number of shares of Common Stock
outstanding (exclusive of any treasury shares) immediately prior to such
Distribution multiplied by the current market price per share of Common Stock
on the date of such Distribution plus (ii) the consideration, if any, received
by the Company upon such Distribution, and the denominator of which shall be
the product of (A) the total number of shares of Common Stock outstanding
(exclusive of any treasury shares) immediately after such Distribution
multiplied by (B) the current market price per share of Common Stock on the
record date for such Distribution and (II) the number of shares of Common Stock
purchasable upon the exercise of each Warrant shall be increased to a number
determined by multiplying the number of shares of Common Stock so purchasable
immediately prior to the record date for such Distribution by a fraction, the
numerator of which shall be the Exercise Price in effect immediately prior to
the adjustment required by clause (I) of this sentence and the denominator of
which shall be the Exercise Price in effect immediately after such adjustment.
For purposes of the foregoing, the total maximum number of shares of Common
Stock issuable upon exercise of all such Options or upon conversion or exchange
of all such Convertible Securities or upon the conversion or exchange of the
total maximum amount of the Convertible Securities issuable upon the exercise
of all such Options shall be deemed to have been issued as of the date of such
Distribution and thereafter shall be deemed to be outstanding and the Company
shall be deemed to have received as consideration therefor such price per
share, determined as provided above. Except as provided in paragraphs (j) and
(k) below, no additional adjustment of the Exercise Price shall be made upon
the actual exercise of such Options or upon conversion or exchange of the
Convertible Securities or upon the conversion or exchange of the Convertible
Securities issuable upon the exercise of such Options.
(d) Dividends and Distributions. In the event the Company
shall, at any time or from time to time after the date hereof, distribute to
all the holders of Common Stock any dividend or other distribution of cash,
evidences of its indebtedness, other securities or other properties or assets
(in each case other than (i) dividends payable in Common Stock, Options or
Convertible Securities and (ii) any cash dividend that, when added to all other
cash dividends paid in the one year prior to the declaration date of such
dividend (excluding any such other dividend included in a previous adjustment
of the Exercise Price pursuant to this paragraph (d) and excluding any cash
dividends or other cash distributions from current or retained earnings), does
not exceed 5% of the current market price per share of Common Stock on such
declaration date), or any options, warrants or other rights to subscribe for or
purchase any of the foregoing, then (A) the Exercise Price shall be decreased
to a price determined by multiplying the Exercise Price then in effect by a
fraction, the numerator of which shall be the current market price per
share of Common Stock on the record date for such distribution less the sum of
(X) the cash portion, if any, of such distribution per share of Common Stock
outstanding (exclusive of any treasury shares) on the record date for such
distribution plus
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(Y) the then fair market value (as determined in good faith by the Board of
Directors of the Company) per share of Common Stock outstanding (exclusive of
any treasury shares) on the record date for such distribution of that portion,
if any, of such distribution consisting of evidences of indebtedness, other
securities, properties, assets, options, warrants or subscription or purchase
rights, and the denominator of which shall be such current market price per
share of Common Stock and (B) the number of shares of Common Stock purchasable
upon the exercise of each Warrant shall be increased to a number determined by
multiplying the number of shares of Common Stock so purchasable immediately
prior to the record date for such distribution by a fraction, the numerator of
which shall be the Exercise Price in effect immediately prior to the adjustment
required by clause (A) of this sentence and the denominator of which shall be
the Exercise Price in effect immediately after such adjustment. The adjustments
required by this paragraph (d) shall be made whenever any such distribution
occurs retroactive to the record date for the determination of stockholders
entitled to receive such distribution.
(e) Preferred Stock Offering and Common Stock Commitment. If
(i) upon consummation of the Preferred Stock Offering the Company shall issue
Convertible Securities and the price per share at which the Common Stock is
issuable upon conversion of such Convertible Securities (as determined by the
procedures set forth in Section 13(c)) is less than $5.00 per share of Common
Stock; (ii) upon consummation of the Common Stock Commitment the Company shall
issue Common Stock at a price per share less than $5.00 per share or (iii) the
Company shall otherwise issue shares of Common Stock (other than upon the
exercise of Options outstanding upon the date of this Agreement) prior to
December 31, 1997, at less than $5.00 per share, then, effective upon the
consummation of the Preferred Stock Offering, the Common Stock Commitment or
such other issuance, as the case may be, the number of shares issuable upon
exercise of the Warrants shall be adjusted so that, after giving effect to the
consummation of the Preferred Stock Offering, the Common Stock Commitment or
such other issuance, as the case may be, the aggregate number of shares of
Common Stock issuable upon exercise of all of the Warrants issued hereunder is
equal to 6.4% of the outstanding Common Stock of the Company. For purposes of
the foregoing, the total maximum number of shares of Common Stock issuable upon
exercise of all outstanding Options or upon conversion or exchange of all
outstanding Convertible Securities less the aggregate number of shares which
could be purchased by the Company, at $5.00 per share, with the amount of
additional consideration, if any, payable to the Company upon exercise of such
Options or conversion of such Convertible Securities, shall be deemed to have
been issued as of the date of the consummation of such transaction and
thereafter shall be deemed to be outstanding. Except as provided in paragraphs
(j) and (k) below, no adjustment of the Exercise Price shall be made upon the
actual conversion or exchange of the Convertible Securities.
(f) Current Market Price. For the purpose of any computation
of current market price under this Section 13 and Section 15, the current
market price per share of Common Stock at any date shall be (x) for purposes of
Section 15, the closing price on the business day immediately prior to the
exercise of the applicable Warrant pursuant to Section 8 and (y) in all other
cases, the average of the daily closing prices for the shorter of (i) the 20
consecutive trading days ending on the last full trading day on the exchange or
market specified in the second succeeding sentence prior to the Time of
Determination (as defined below) and (ii) the period commencing on the date
next succeeding the first public announcement of the issuance, sale,
distribution or granting in question through such last full trading day prior
to the Time of Determination. The term "Time of Determination" as used herein
shall be the time and date of the earlier to occur of (A) the date as of which
the current market price is to be computed and (B) the last full trading day on
such exchange or market before the commencement of "ex-dividend" trading in the
Common Stock relating to the event giving rise to the adjustment required by
paragraph (a), (b), (c) or (d). The closing price for any day shall be the last
reported sale price regular way or, in case no such reported sale takes place
on
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such day, the average of the closing bid and asked prices regular way for such
day, in each case (1) on the principal national securities exchange on which
the shares of Common Stock are listed or to which such shares are admitted to
trading or (2) if the Common Stock is not listed or admitted to trading on a
national securities exchange, in the over-the-counter market as reported by
Nasdaq National Market or any comparable system or (3) if the Common Stock is
not listed on Nasdaq National Market or a comparable system, as furnished by
two members of the NASD selected from time to time in good faith by the Board
of Directors of the Company for that purpose. In the absence of all of the
foregoing, or if for any other reason the current market price per share cannot
be determined pursuant to the foregoing provisions of this paragraph (e), the
current market price per share shall be the fair market value thereof as
determined in good faith by the Board of Directors of the Company.
(g) Certain Distributions. If the Company shall pay a
dividend or make any other distribution payable in Options or Convertible
Securities, then, for purposes of paragraph (c) above, such Options or
Convertible Securities shall be deemed to have been issued or sold without
consideration.
(h) Consideration Received. If any shares of Common Stock,
Options or Convertible Securities shall be issued, sold or distributed for a
consideration other than cash, the amount of the consideration other than cash
received by the Company in respect thereof shall be deemed to be the then fair
market value of such consideration (as determined in good faith by the Board of
Directors of the Company). If any Options shall be issued in connection with
the issuance and sale of other securities of the Company, together comprising
one integral transaction in which no specific consideration is allocated to
such Options by the parties thereto, such Options shall be deemed to have been
issued without consideration; provided, however, that if such Options have an
exercise price equal to or greater than the current market price of the Common
Stock on the date of issuance of such Options, then such Options shall be
deemed to have been issued for consideration equal to such exercise price.
(i) Deferral of Certain Adjustments. No adjustment to the
Exercise Price (including the related adjustment to the number of shares of
Common Stock purchasable upon the exercise of each Warrant) shall be required
hereunder unless such adjustment, together with other adjustments carried
forward as provided below, would result in an increase or decrease of at least
one percent of the Exercise Price; provided that any adjustments which by
reason of this paragraph (h) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment. No adjustment need
be made for a change in the par value of the Common Stock. All calculations
under this Section shall be made to the nearest 1/1,000 of one cent or to the
nearest 1/1000 of a share, as the case may be.
(j) Changes in Options and Convertible Securities. If the
exercise price provided for in any Options referred to in paragraph (c) above,
the additional consideration, if any, payable upon the conversion or exchange
of any Convertible Securities referred to in paragraph (c) or (e) above, or the
rate at which any Convertible Securities referred to in paragraph (c) or (e)
above are convertible into or exchangeable for Common Stock shall change at any
time (other than under or by reason of provisions designed to protect against
dilution upon an event which results in a related adjustment pursuant to this
Section 13), the Exercise Price then in effect and the number of shares of
Common Stock purchasable upon the exercise of each Warrant shall forthwith be
readjusted (effective only with respect to any exercise of any Warrant after
such readjustment) to the Exercise Price and number of shares of Common Stock
so purchasable that would then be in effect had the adjustment made upon the
issuance, sale, distribution or granting of such Options or Convertible
Securities been made based upon such changed purchase price, additional
consideration or
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conversion rate, as the case may be, but only with respect to such Options and
Convertible Securities as then remain outstanding.
(k) Expiration of Options and Convertible Securities. If, at
any time after any adjustment to the number of shares of Common Stock
purchasable upon the exercise of each Warrant shall have been made pursuant to
paragraph (c), (e) or (j) above or this paragraph (k), any Options or
Convertible Securities shall have expired unexercised, the number of such
shares so purchasable shall, upon such expiration, be readjusted and shall
thereafter 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 shares of Common Stock deemed to have been issued in connection
with such Options or Convertible Securities were the shares of Common Stock, if
any, actually issued or sold upon the exercise of such Options or Convertible
Securities and (ii) such shares of Common Stock, if any, were issued or sold
for the consideration actually received by the Company upon such exercise plus
the aggregate consideration, if any, actually received by the Company for the
issuance, sale, distribution or granting of all such Options or Convertible
Securities, whether or not exercised; provided that no such readjustment shall
have the effect of decreasing the number of such shares so purchasable by an
amount (calculated by adjusting such decrease to account for all other
adjustments made pursuant to this Section 13 following the date of the original
adjustment referred to above) in excess of the amount of the adjustment
initially made in respect of the issuance, sale, distribution or granting of
such Options or Convertible Securities.
(l) Other Adjustments. In the event that at any time, as a
result of an adjustment made pursuant to this Section 13, the Holders shall
become entitled to receive any securities of the Company other than shares of
Common Stock, thereafter the number of such other securities so receivable upon
exercise of the Warrants and the Exercise Price applicable to such exercise
shall be subject to adjustment from time to time in a manner and on terms as
nearly equivalent as practicable to the provisions with respect to the shares
of Common Stock contained in this Section 13.
SECTION 14. Statement on Warrants. Irrespective of any
adjustment in the number or kind of shares issuable upon the exercise of the
Warrants or the Exercise Price, Warrants theretofore or thereafter issued may
continue to express the same number and kind of shares as are stated in the
Warrants initially issuable pursuant to this Agreement.
SECTION 15. Fractional Interest. The Company shall not be
required to issue fractional shares of Common Stock on the exercise of
Warrants. If more than one Warrant shall be presented for exercise in full at
the same time by the same Holder, the number of full shares of Common Stock
which shall be issuable upon such exercise shall be computed on the basis of
the aggregate number of shares of Common Stock acquirable on exercise of the
Warrants so presented. If any fraction of a share of Common Stock would, except
for the provisions of this Section, be issuable on the exercise of any Warrant
(or specified portion thereof), the Company shall direct the Transfer Agent to
pay an amount in cash calculated by it to equal the then current market price
per share multiplied by such fraction computed to the nearest whole cent. The
Holders, by their acceptance of the Warrant Certificates, expressly waive any
and all rights to receive any fraction of a share of Common Stock or a stock
certificate representing a fraction of a share of Common Stock.
SECTION 16. Notices to Warrant Holders. Upon any adjustment
of the Exercise Price pursuant to Section 13, the Company shall promptly
thereafter (i) cause to be filed with the Warrant Agent a certificate of a firm
of independent public accountants of recognized standing selected by the Board
of
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Directors of the Company (who may be the regular auditors of the Company)
setting forth the Exercise Price after such adjustment and setting forth in
reasonable detail the method of calculation and the facts upon which such
calculations are based and setting forth the number of Warrant Shares (or
portion thereof) issuable after such adjustment in the Exercise Price, upon
exercise of a Warrant and payment of the adjusted Exercise Price, which
certificate shall be conclusive evidence of the correctness of the matters set
forth therein, and (ii) cause to be given to each of the registered Holders of
the Warrant Certificates at his address appearing on the Warrant register
written notice of such adjustments by first-class mail, postage prepaid. The
Warrant Agent shall be entitled to rely on the above-referenced accountant's
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. The Warrant
Agent shall not at any time be under any duty or responsibility to any Holder
to determine whether any facts exist that may require any adjustment of the
number of shares of Common Stock or other stock or property issuable on
exercise of the Warrants or the Exercise Price, 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 shares of Common Stock or other stock or property which may be
issuable on exercise of the Warrants. The Warrant Agent shall not be
responsible for any failure of the Company to make any cash payment or to
issue, transfer or deliver any shares of Common Stock or stock certificates or
other common stock or property upon the exercise of any Warrant.
In case:
(a) the Company shall authorize the issuance to all holders
of shares of Common Stock of rights, options or warrants to subscribe
for or purchase shares of Common Stock or of any other subscription
rights or warrants; or
(b) the Company shall authorize the distribution to all
holders of shares of Common Stock of evidences of its indebtedness or
assets (other than cash dividends or cash distributions payable out of
consolidated earnings or earned surplus or dividends payable in shares
of Common Stock or distributions referred to in Section 13 hereof); or
(c) of any consolidation or merger to which the Company is a
party and for which approval of any shareholders of the Company is
required, or of the conveyance or transfer of the properties and
assets of the Company substantially as an entirety, or of any
reclassification or change of Common Stock issuable upon exercise of
the Warrants (other than a change in par value, or from par value to
no par value, or from no par value to par value, or as a result of a
subdivision or combination), or a tender offer or exchange offer for
shares of Common Stock; or
(d) of the voluntary or involuntary dissolution, liquidation
or winding up of the Company; or
(e) a Change of Control (as defined in the Indenture) occurs;
or
(f) the Company proposes to take any other action that would
require an adjustment of the Exercise Price or the number of Warrant
Shares pursuant to Section 13;
then the Company shall cause to be filed with the Warrant Agent and shall cause
to be given to each of the registered Holders of the Warrant Certificates at
such Holder's address appearing on the Warrant register,
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22
at least 20 days (or 10 days in any case specified in clauses (a) or (b) above)
prior to the applicable record date hereinafter specified, or promptly in the
case of events for which there is no record date, by first class mail, postage
prepaid, a written notice stating (i) the date as of which the holders of
record of shares of Common Stock to be entitled to receive any such rights,
options, warrants or distribution are to be determined, or (ii) the initial
expiration date set forth in any tender offer or exchange offer for shares of
Common Stock, or (iii) the date on which any such consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up or Change of
Control is expected to become effective or consummated, and the date as of
which it is expected that holders of record of shares of Common Stock shall be
entitled to exchange such shares for securities or other property, if any,
deliverable upon such reclassification, consolidation, merger, conveyance,
transfer, dissolution, liquidation or winding up or Change of Control. The
failure to give the notice required by this Section 16 or any defect therein
shall not affect the legality or validity of any distribution, right, option,
warrant, consolidation, merger, conveyance, transfer, dissolution, liquidation
or winding up, or Change of Control or the vote upon any action. Nothing
contained in this Agreement or in any of the Warrant Certificates shall be
construed as conferring upon the Holders thereof the right to vote or to
consent or to receive notice as shareholders in respect of the meetings of
shareholders or the election of Directors of the Company or any other matter,
or any rights whatsoever as shareholders of the Company.
SECTION 17. Merger, Consolidation or Change of Name of
Warrant Agent. Any corporation into which the Warrant Agent may be merged or
with which it may be consolidated, or any corporation resulting from any merger
or consolidation to which the Warrant Agent shall be a party, or any
corporation succeeding to the business of the Warrant Agent, shall be the
successor to the Warrant Agent hereunder without the execution or filing of any
paper or any further act on the part of any of the parties hereto, provided
that such corporation would be eligible for appointment as a successor warrant
agent under the provisions of Section 19. Any such successor Warrant Agent
shall promptly cause notice of its succession as Warrant Agent to be mailed (by
first class mail, postage prepaid) to each Holder at such Holder's last address
as shown on the register maintained by the Warrant Agent pursuant to this
Agreement. In case at the time such successor to the Warrant Agent shall
succeed to the agency created by this Agreement, and in case at that time any
of the Warrant Certificates shall have been countersigned but not delivered,
any such successor to the Warrant Agent may adopt the countersignature of the
original Warrant Agent; and in case at that time any of the Warrant
Certificates shall not have been countersigned, any successor to the Warrant
Agent may countersign such Warrant Certificates either in the name of the
predecessor Warrant Agent or in the name of the successor to the Warrant Agent;
and in all such cases such Warrant Certificates shall have the full force and
effect provided in the Warrant Certificates and in this Agreement.
In case at any time the name of the Warrant Agent shall be
changed and at such time any of the Warrant Certificates shall have been
countersigned but not delivered, the Warrant Agent whose name has been changed
may adopt the countersignature under its prior name, and in case at that time
any of the Warrant Certificates shall not have been countersigned, the Warrant
Agent may countersign such Warrant Certificates either in its prior name or in
its changed name, and in all such cases such Warrant Certificates shall have
the full force and effect provided in the Warrant Certificates and in this
Agreement.
SECTION 18. Warrant Agent. The Warrant Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the Holders of Warrants, by their
acceptance thereof, shall be bound:
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23
(a) The statements contained herein and in the Warrant
Certificates shall be taken as statements of the Company and the
Warrant Agent assumes no responsibility for the correctness of any of
the same except such as describe the Warrant Agent or action taken or
to be taken by it. The Warrant Agent assumes no responsibility with
respect to the distribution of the Warrant Certificates except as
herein otherwise provided.
(b) The Warrant Agent shall not be responsible for any
failure of the Company to comply with any of the covenants contained
in this Agreement or in the Warrant Certificates to be complied with
by the Company.
(c) The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company) and the
Warrant Agent shall incur no liability or responsibility to the
Company or to any Holder of any Warrant Certificate in respect of any
action taken, suffered or omitted by it hereunder in good faith and in
accordance with the opinion or the advice of such counsel.
(d) The Warrant Agent shall incur no liability or
responsibility to the Company or to any Holder of any Warrant
Certificate for any action taken in reliance on any Warrant
Certificate, certificate of shares, notice, resolution, waiver,
consent, order, certificate, or other paper, document or instrument
believed by it to be genuine and to have been signed, sent or
presented by the proper party or parties.
(e) The Company agrees to pay to the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the
execution of this Agreement, to reimburse the Warrant Agent for all
expenses, taxes and governmental charges and other charges of any kind
and nature reasonably incurred by the Warrant Agent in the execution
of this Agreement and to indemnify the Warrant Agent and save it
harmless against any and all liabilities, including judgments,
reasonable costs and counsel fees, for anything done or omitted by the
Warrant Agent in the execution of this Agreement except as a result of
its negligence or bad faith.
(f) The Warrant Agent shall be under no obligation to
institute any action, suit or legal proceeding or to take any other
action likely to involve expense unless the Company or one or more
Holders of Warrant Certificates shall furnish the Warrant Agent with
reasonable security and indemnity for any costs and expenses which may
be incurred, but this provision shall not affect the power of the
Warrant Agent to take such action as it may consider proper, whether
with or without any such security or indemnity. All rights of action
under this Agreement or under any of the Warrants may be enforced by
the Warrant Agent without the possession of any of the Warrant
Certificates or the production thereof at any trial or other
proceeding relative thereto, and any such action, suit or proceeding
instituted by the Warrant Agent shall be brought in its name as
Warrant Agent and any recovery of judgment shall be for the ratable
benefit of the Holders of the Warrants, as their respective rights or
interests may appear.
(g) The Warrant Agent, and any stockholder, director, officer
or employee of it, may buy, sell or deal in any of the Warrants or
other securities of the Company or become pecuniarily interested in
any transaction in which the Company may be interested, or contract
with or lend money to the Company or otherwise act as fully and freely
as though it were not Warrant Agent
20
24
under this Agreement. Nothing herein shall preclude the Warrant Agent
from acting in any other capacity for the Company or for any other
legal entity.
(h) The Warrant Agent shall act hereunder solely as agent for
the Company, and its duties shall be determined solely by the
provisions hereof. The Warrant Agent shall not be liable for anything
which it may do or refrain from doing in connection with this
Agreement except for its own negligence or bad faith.
(i) The Warrant Agent shall not at any time be under any duty
or responsibility to any Holder of any Warrant Certificate to make or
cause to be made any adjustment of the Exercise Price or number of the
Warrant Shares or other securities or property deliverable as provided
in this Agreement, or to determine whether any facts exist which may
require any of such adjustments, or with respect to the nature or
extent of any such adjustments, when made, or with respect to the
method employed in making the same. The Warrant Agent shall not be
accountable with respect to the validity or value or the kind or
amount of any Warrant Shares or of any securities or property which
may at any time be issued or delivered upon the exercise of any
Warrant or with respect to whether any such Warrant Shares or other
securities will when issued be validly issued and fully paid and
nonassessable, and makes no representation with respect thereto.
SECTION 19. Resignation and Removal of Warrant Agent;
Appointment of Successor. No resignation or removal of the Warrant Agent and no
appointment of a successor warrant agent shall become effective until the
acceptance of appointment by the successor warrant agent as provided herein.
The Warrant Agent may resign its duties and be discharged from all further
duties and liability hereunder (except liability arising as a result of the
Warrant Agent's own negligence or willful misconduct) after giving written
notice to the Company. The Company may remove the Warrant Agent upon written
notice, 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, at the Company's expense, cause to be mailed (by first class mail,
postage prepaid) to each Holder of a Warrant at his last address as shown on
the register of the Company maintained by the Warrant Agent 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 Warrant Agent or the
Holder of any Warrant may apply to any court of competent jurisdiction for the
appointment of a new warrant agent. Any new warrant agent, whether appointed by
the Company or by such a court, shall be a corporation 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 $50,000,000. 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; but 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
give notice thereof to the resigning or removed Warrant Agent. Failure to give
any notice provided for in this Section, however, or any defect therein, shall
not affect the legality or
21
25
validity of the resignation of the Warrant Agent or the appointment of a new
warrant agent, as the case may be.
SECTION 20. Registration. The Company and the Warrant Agent
acknowledge that Holders shall have the registration rights set forth in the
Warrant Registration Rights Agreement.
SECTION 21. Reports.
(a) So long as any of the Warrants remain outstanding, the
Company shall cause copies of all quarterly and annual financial reports and of
the information, documents, and other reports (or copies of such portions of
any of the foregoing as the Commission may by rules and regulations prescribe)
which the Company is required to file with the Commission pursuant to Section
13 or 15(d) of the Exchange Act ("SEC REPORTS") to be filed with the Warrant
Agent and mailed to the Holders of the Warrants at their addresses appearing in
the register of Warrant Holders maintained by the Warrant Agent, in each case,
within 15 days of filing with the Commission. If the Company is not subject to
the requirements of Section 13 or 15(d) of the Exchange Act, the Company shall
nevertheless continue to cause SEC Reports, comparable to those which it would
be required to file pursuant to Section 13 or 15(d) of the Exchange Act if it
were subject to the requirements of either such Section, to be so filed with
the Commission (but only if the Commission permits such filings) and with the
Warrant Agent and mailed to the Holders of the Warrants, in each case, within
the same time periods as would have applied (including under the preceding
sentence) had the Company been subject to the requirements of Section 13 or
15(d) of the Exchange Act.
(b) The Company shall provide the Warrant Agent with a
sufficient number of copies of all SEC Reports that the Warrant Agent may be
required to deliver to the Holders of the Warrants under this Section 21.
SECTION 22. Rule 144A. The Company hereby agrees with each
Holder, for so long as any Registrable Securities remain outstanding, to make
available, upon request of any Holder of Registrable Securities, to any Holder
or beneficial owner of Registrable Securities in connection with any sale
thereof and any prospective purchaser of such Registrable Securities designated
by such Holder or beneficial owner, the information required by Rule 144A(d)(4)
under the Securities Act in order to permit resales of such Registrable
Securities pursuant to Rule 144A.
SECTION 23. Notices to Company and Warrant Agent. Any notice
or demand authorized by this Agreement to be given or made by the Warrant Agent
or by the Holder of any Warrant Certificate to or on the Company shall be
sufficiently given or made when and if deposited in the mail, first class or
registered, postage prepaid, addressed (until another address is filed in
writing by the Company with the Warrant Agent), as follows:
MGC Communications, Inc.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
22
26
In case the Company shall fail to maintain such office or
agency or shall fail to give such notice of the location or of any change in
the location thereof, presentations may be made and notices and demands may be
served at the principal office of the Warrant Agent.
Any notice pursuant to this Agreement to be given by the
Company or by the Holder(s) of any Warrant Certificate to the Warrant Agent
shall be sufficiently given when and if deposited in the mail, first-class or
registered, postage prepaid, addressed (until another address is filed in
writing by the Warrant Agent with the Company) to the Warrant Agent as follows:
Marine Midland Bank
▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Corporate Trust Department
SECTION 24. Supplements and Amendments. The Company and the
Warrant Agent may from time to time supplement or amend this Agreement without
the approval of any Holders of Warrant Certificates in order to cure any
ambiguity or to correct or supplement any provision contained herein which may
be defective or inconsistent with any other provision herein, or to make any
other provisions in regard to matters or questions arising hereunder which the
Company and the Warrant Agent may deem necessary or desirable and which shall
not in any way adversely affect the interests of the Holders of Warrant
Certificates. Any amendment or supplement to this Agreement that has a material
adverse effect on the interests of Holders shall require the written consent of
Holders representing a majority of the then outstanding Warrants. The consent
of each Holder of a Warrant affected shall be required for any amendment
pursuant to which the Exercise Price would be increased or the number of
Warrant Shares purchasable upon exercise of Warrants would be decreased (other
than pursuant to adjustments provided for in Section 13 hereof). The Warrant
Agent shall be entitled to receive and, subject to Section 18, shall be fully
protected in relying upon, an officers' certificate and opinion of counsel as
conclusive evidence that any such amendment or supplement is authorized or
permitted hereunder, that it is not inconsistent herewith, and that it will be
valid and binding upon the Company in accordance with its terms.
SECTION 25. Successors. All the covenants and provisions of
this Agreement by or for the benefit of the Company or the Warrant Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.
SECTION 26. Termination. This Agreement (other than any
party's obligations with respect to Warrants previously exercised and with
respect to indemnification under Section 18) shall terminate at 5:00 p.m., New
York City time on the Expiration Date.
SECTION 27. Governing Law. THIS AGREEMENT AND EACH WARRANT
CERTIFICATE ISSUED HEREUNDER SHALL BE DEEMED TO BE A CONTRACT MADE UNDER THE
LAWS OF THE STATE OF NEW YORK AND FOR ALL PURPOSES SHALL BE CONSTRUED IN
ACCORDANCE WITH THE INTERNAL LAWS OF SAID STATE.
23
27
SECTION 28. Benefits of This Agreement.
(a) Nothing in this Agreement shall be construed to give to
any Person other than the Company, the Warrant Agent and the Holders of the
Warrant Certificates any legal or equitable right, remedy or claim under this
Agreement; but this Agreement shall be for the sole and exclusive benefit of
the Company, the Warrant Agent and the Holders of the Warrant Certificates.
(b) Prior to the 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 receive dividends
or subscription rights, the right to vote, to consent, to exercise any
preemptive right, to receive any notice of meetings of stockholders for the
election of directors of the Company or any other matter or to receive any
notice of any proceedings of the Company, except as may be specifically
provided for herein. The Holders of the Warrants are not entitled to share in
the assets of the Company in the event of the liquidation, dissolution or
winding up of the Company's affairs.
(c) All rights of action in respect of 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 Holder 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 rights
hereunder, including the right to exercise, exchange or surrender for purchase
such Holder's Warrants in the manner provided in this Agreement.
SECTION 29. Counterparts. This Agreement may be executed in
any number of counterparts and each of such counterparts shall for all purposes
be deemed to be an original, and all such counterparts shall together
constitute but one and the same instrument.
[Signature Page Follows]
24
28
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
MGC COMMUNICATIONS, INC.
By:
---------------------------------
Name:
Title:
[Seal]
Attest:
-------------------------------
Secretary
MARINE MIDLAND BANK
By:
---------------------------------
Name:
Title:
[Seal]
Attest:
--------------------------------
Secretary
29
EXHIBIT A
[Form of Warrant Certificate]
[Face]
EXERCISABLE ON OR AFTER THE EXERCISABILITY DATE (AS DEFINED HEREIN). THE
WARRANTS EVIDENCED BY THIS CERTIFICATE ARE NOT TRANSFERABLE SEPARATELY FROM THE
NOTES ORIGINALLY SOLD AS A UNIT WITH SUCH WARRANTS UNTIL THE EARLIER TO OCCUR
OF (i) 90 DAYS AFTER THE ISSUANCE OF THE UNITS, (ii) SUCH DATE AS BEAR, ▇▇▇▇▇▇▇
& CO. INC. AND ▇▇▇▇▇▇ ▇▇▇▇ LLC MAY, IN THEIR DISCRETION, DEEM APPROPRIATE,
(iii) IN THE EVENT A CHANGE OF CONTROL (AS DEFINED IN THE INDENTURE RELATING TO
THE NOTES) OCCURS, THE DATE THE COMPANY MAILS NOTICE THEREOF TO HOLDERS OF
NOTES AND WARRANTS AND (iv) THE DATE ON WHICH THE EXCHANGE OFFER (AS DEFINED IN
THE INDENTURE RELATING TO THE NOTES) IS CONSUMMATED.
No. Warrants
------ -----
Warrant Certificate
MGC COMMUNICATIONS, INC.
This Warrant Certificate certifies that , or its registered
assigns, is the registered holder of Warrants expiring October 1, 2004 (the
"WARRANTS") to purchase Common Stock, par value $.001 (the "COMMON STOCK"), of
MGC Communications, Inc., a Nevada corporation (the "COMPANY"). Each Warrant
entitles the registered holder upon exercise at any time from 9:00 a.m. on or
after the earlier to occur of (i) October 1, 1998 and (ii) in the event a
Change of Control (as defined in the Indenture) occurs, the date the Company
mails the notice thereof to holders of Notes and holders of Warrants (the
"EXERCISABILITY DATE") until 5:00 p.m. New York City Time on October 1, 2004,
to receive from the Company 8.07 fully paid and nonassessable shares of Common
Stock (the "WARRANT SHARES") at the initial exercise price (the "EXERCISE
PRICE") of $0.01 per share payable in lawful money of the United States of
America upon surrender of this Warrant Certificate and payment of the Exercise
Price at the office or agency of the Warrant Agent, but only subject to the
conditions set forth herein and in the Warrant Agreement referred to on the
reverse hereof. The Exercise Price and number of Warrant Shares issuable upon
exercise of the Warrants are subject to adjustment upon the occurrence of
certain events set forth in the Warrant Agreement.
No Warrant may be exercised before the Exercisability Date.
No Warrant may be exercised after 5:00 p.m., New York City Time on October 1,
2004, and to the extent not exercised by such time such Warrants shall become
void.
Reference is hereby made to the further provisions of this
Warrant Certificate set forth on the reverse hereof and such further provisions
shall for all purposes have the same effect as though fully set forth at this
place.
This Warrant Certificate shall not be valid unless
countersigned by the Warrant Agent, as such term is used in the Warrant
Agreement.
A-1
30
This Warrant Certificate shall be governed by and construed
in accordance with the internal laws of the State of New York.
IN WITNESS WHEREOF, MGC Communications, Inc. has caused this Warrant
Certificate to be signed by its President and by its Secretary, each by a
signature or a facsimile thereof, and has caused a facsimile of its corporate
seal to be affixed hereunto or imprinted hereon.
Dated:
---------------
MGC COMMUNICATIONS, INC.
By:
-------------------------------
Name:
Title: President
By:
-------------------------------
Name:
Title: Secretary
Countersigned:
MARINE MIDLAND BANK,
as Warrant Agent
By:
-----------------------
Authorized Signature
31
[Form of Warrant Certificate]
[Reverse]
[Unless and until it is exchanged in whole or in part for
Warrants in definitive form, this Warrant may not be transferred except
as a whole by the depositary to a nominee of the depositary or by a
nominee of the depositary to the depositary or another nominee of the
depositary or by the depositary or any such nominee to a successor
depositary or a nominee of such successor depositary. The Depository
Trust Company ("DTC"), (55 ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇) shall act as
the depositary until a successor shall be appointed by the Company and
the Warrant Agent. Unless this certificate is presented by an authorized
representative of DTC to the issuer or its agent for registration of
transfer, exchange or payment, and any certificate issued is registered
in the name of Cede & Co. or such other name as requested by an
authorized representative of DTC (and any payment is made to Cede & Co.
or such other entity as is requested by an authorized representative of
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner hereof,
Cede & Co., has an interest herein.](1)
THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS
ORIGINALLY ISSUED IN A TRANSACTION EXEMPT FROM REGISTRATION
UNDER ▇▇▇▇▇▇▇ ▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND THE SECURITY EVIDENCED
HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED IN
THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION
THEREFROM. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE
EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES
ACT PROVIDED BY RULE 144A THEREUNDER. THE HOLDER OF THE
SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE
ISSUER THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED ONLY (1)(a) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (b) IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A PERSON
THAT IS NOT A U.S. PERSON (AS DEFINED IN RULE 902 UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 904 UNDER THE SECURITIES ACT, (d) TO AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3)
OR (7) OF REGULATION D UNDER THE SECURITIES ACT) THAT, PRIOR
TO SUCH TRANSFER, FURNISHES TO THE TRUSTEE AND WARRANT AGENT
A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND
AGREEMENTS RELATING TO THE UNITS, NOTES AND WARRANTS (THE
FORM OF WHICH LETTER CAN BE OBTAINED FROM THE TRUSTEE OR
WARRANT AGENT) OR (e) IN ACCORDANCE WITH ANOTHER EXEMPTION
FROM THE
---------------------------
(1) This paragraph is to be included only if the Warrant is in global form.
A-3
32
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (IN THE CASE
OF (b), (c), (d) OR (e), UPON AN OPINION OF COUNSEL IF THE
ISSUER OR TRUSTEE, REGISTRAR OR TRANSFER AGENT FOR THE
SECURITIES SO REQUESTS), (2) TO THE ISSUER OR (3) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN
ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND
(B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED
TO NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED
HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN (A) ABOVE."
The Warrants evidenced by this Warrant
Certificate are part of a duly authorized issue of Warrants
expiring October 1, 2004 entitling the holder on exercise to
receive shares of Common Stock, par value $.001, of the
Company (the "COMMON STOCK"), and are issued or to be issued
pursuant to a Warrant Agreement dated as of September 29,
1997 (the "WARRANT AGREEMENT"), duly executed and delivered
by the Company to Marine Midland Bank, as warrant agent (the
"WARRANT AGENT"), which Warrant Agreement is hereby
incorporated by reference herein and made a part of this
instrument and is hereby referred to for a description of the
rights, limitation of rights, obligations, duties and
immunities thereunder of the Warrant Agent, the Company and
the holders (the words "holders" or "holder" meaning the
registered holders or registered holder) of the Warrants. A
copy of the Warrant Agreement may be obtained by the holder
hereof upon written request to the Company. Capitalized terms
used herein without definition shall have the meanings
ascribed to them in the Warrant Agreement.
Warrants may be exercised at any time from
9:00 a.m. on or after the Exercisability Date and until 5:00
p.m., New York City Time on October 1, 2004. The holder of
Warrants evidenced by this Warrant Certificate may exercise
them by surrendering this Warrant Certificate, with the form
of election to purchase set forth hereon properly completed
and executed, together with payment of the Exercise Price in
lawful money of the United States of America at the office of
the Warrant Agent. In the alternative, each Holder may
exercise its right to receive Warrant Shares on a net basis,
such that without the exchange of any funds, the Holder
receives that number of Warrant Shares otherwise issuable
upon exercise of its Warrants less that number of Warrant
Shares having a fair market value equal to the aggregate
Exercise Price that would otherwise have been paid by the
Holder for the Warrant Shares being issued. In the event that
upon any exercise of Warrants evidenced hereby the number of
Warrants exercised shall be less than the total number of
Warrants evidenced hereby, there shall be issued to the
holder hereof or his assignee a new Warrant Certificate
evidencing the number of Warrants not exercised. No
adjustment shall be made for any dividends on any Common
Stock issuable upon exercise of this Warrant.
The Warrant Agreement provides that upon
the occurrence of certain events the Exercise Price set forth
on the face hereof and/or the number of shares of Common
Stock issuable upon the exercise of each Warrant shall,
subject to certain conditions, be adjusted. No fractions of a
share of Common Stock will be issued upon the exercise of any
▇-▇
▇▇
▇▇▇▇▇▇▇, but the Company will pay the cash value thereof
determined as provided in the Warrant Agreement.
The Warrant Agreement provides that the
Company shall be bound by certain registration obligations
with respect to the Common Stock issuable upon exercise of
the Warrants as set forth in the Warrant Registration Rights
Agreement (as defined in the Warrant Agreement).
Warrant Certificates, when surrendered at
the office of the Warrant Agent by the registered holder
thereof in person or by legal representative or attorney duly
authorized in writing, may be exchanged, in the manner and
subject to the limitations provided in the Warrant Agreement,
but without payment of any service charge, for another
Warrant Certificate or Warrant Certificate's of like tenor
evidencing in the aggregate a like number of Warrants.
Upon due presentation for registration of
transfer of this Warrant Certificate at the office of the
Warrant Agent a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a
like number of Warrants shall be issued to the transferee(s)
in exchange for this Warrant Certificate, subject to the
limitations provided in the Warrant Agreement, without charge
except for any tax or other governmental charge imposed in
connection therewith.
The Company and the Warrant Agent may deem
and treat the registered holder(s) thereof as the absolute
owner(s) of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any
distribution to the holder(s) hereof, and for all other
purposes, and neither the Company nor the Warrant Agent shall
be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder
hereof to any rights of a stockholder of the Company.
A-5
34
[Form of Election to Purchase]
(To Be Executed Upon Exercise Of Warrant)
The undersigned hereby irrevocably elects to exercise the
right, represented by this Warrant Certificate, to receive________
shares of Common Stock and herewith makes payment therefor. The
undersigned requests that a certificate for such shares be registered
in the name of____________ , whose address is __________________ and
that such shares be delivered to , whose address is________________ .
If said number of shares is less than all of the shares of Common
Stock purchasable hereunder, the undersigned requests that a new
Warrant Certificate representing the remaining balance of such shares
be registered in the name of_________________ , whose address
is_________________, and that such Warrant Certificate be delivered
to ____________________, whose address is__________________.
___________________.
----------------------------------
Signature
Date:
----------------------------------
Signature Guaranteed
A-6
35
SCHEDULE OF EXCHANGES OF DEFINITIVE WARRANTS(2)
The following exchanges of a part of this Global Warrant have been made:
-----------------------
(2) This is to be included only if the Warrant is in global form.
A-7
36
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE OR REGISTRATION OF TRANSFER
OF WARRANTS
Re:__________Warrants to Purchase Common Stock (the "WARRANTS") of MGC
COMMUNICATIONS, INC.
This Certificate relates to_______ Warrants held in(1) _______
book-entry or__________ definitive form by_________ (the "TRANSFEROR").
The Transferor:
[ ] has requested the Warrant Agent by written order to
deliver in exchange for its beneficial interest in the Global Warrants
held by the depositary a Warrant or Warrants in definitive, registered
form equal to its beneficial interest in such Global Warrant (or the
portion thereof indicated above); or
[ ] has requested the Warrant Agent by written order to
exchange or register the transfer of a Warrant or Warrants.
In connection with such request and in respect of
each such Warrant, the Transferor does hereby certify that the
Transferor is familiar with the Warrant Agreement relating to the
above captioned Warrants and that the transfer of this Warrant does
not require registration under the Securities Act of 1933, as amended
(the "SECURITIES ACT") because:
[ ] Such Warrant is being acquired for the Transferor's
own account without transfer.
[ ] Such Warrant is being transferred (i) to a qualified
institutional buyer (as defined in Rule 144A under the Securities
Act), in reliance on Rule 144A or (ii) pursuant to an exemption from
registration in accordance with Rule 904 under the Securities Act
(and, in the case of clause (ii), based on an opinion of counsel if
the Company so requests).
[ ] Such Warrant is being transferred (i) in accordance
with Rule 144 under the Securities Act (and based on an opinion of
counsel if the Company so requests) or (ii) pursuant to an effective
registration statement under the Securities Act.
[ ] Such Warrant is being transferred to an institutional
accredited investor within the meaning of Rule 501(a)(1), (2), (3) or
(7) under the Securities Act pursuant to a private placement exemption
from the registration requirements of the Securities Act (and based on
an opinion of counsel if the Company so requests).
-----------------------
(1) Check applicable box.
B-1
37
[ ] Such Warrant is being transferred in reliance on
and in compliance with another exemption from the registration
requirements of the Securities Act (and based on an opinion of counsel
if the Company so requests).
[INSERT NAME OF TRANSFEROR]
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
Date:
B-2