EXHIBIT 10.8
________________________________________________________________________________
WARRANT AGREEMENT
between
LOUDCLOUD, INC.
and
STATE STREET BANK AND TRUST COMPANY
OF CALIFORNIA, N.A.
Dated as of February 9, 2000
________________________________________________________________________________
TABLE OF CONTENTS
ARTICLE I
CERTAIN DEFINITIONS
ARTICLE II
ORIGINAL ISSUE OF WARRANTS
Page
Section 2.1. Form of Warrant Certificates.............................................................. 6
Section 2.2. Restrictive Legends....................................................................... 7
Section 2.3. Execution and Delivery of Warrant Certificates............................................ 10
Section 2.4. Certificated Warrants..................................................................... 10
ARTICLE III
EXERCISE PRICE, EXERCISE AND REPURCHASE OF WARRANTS
Section 3.1. Exercise Price............................................................................ 11
Section 3.2. Exercise; Restrictions on Exercise........................................................ 11
Section 3.3. Method of Exercise; Payment of Exercise Price............................................. 11
Section 3.4. Repurchase Offers......................................................................... 13
ARTICLE IV
ADJUSTMENTS
Section 4.1. Adjustments............................................................................... 16
Section 4.2. Notice of Adjustment...................................................................... 20
Section 4.3. Statement on Warrants..................................................................... 21
Section 4.4. Notice of Consolidation, Merger, Etc...................................................... 21
Section 4.5. Fractional Interests...................................................................... 21
Section 4.6. When Issuance or Payment May Be Deferred.................................................. 22
Section 4.7. Initial Public Offering................................................................... 22
ARTICLE V
DECREASE IN EXERCISE PRICE
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ARTICLE VI
LOSS OR MUTILATION
ARTICLE VII
RESERVATION AND AUTHORIZATION
OF COMMON SHARES
ARTICLE VIII
WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER
Section 8.1. Transfer and Exchange..................................................................... 24
Section 8.2. Book-Entry Provisions for the Restricted Global Warrants.................................. 25
Section 8.3. Special Transfer Provisions............................................................... 26
Section 8.4. Surrender of Warrant Certificates......................................................... 28
ARTICLE IX
WARRANT HOLDERS
Section 9.1. Warrant Holder Deemed Not a Stockholder................................................... 29
Section 9.2. Right of Action........................................................................... 29
ARTICLE X
REMEDIES
Section 10.1. Defaults................................................................................. 29
Section 10.2. Payment Obligations...................................................................... 30
Section 10.3. Remedies; No Waiver...................................................................... 30
ARTICLE XI
THE WARRANT AGENT
Section 11.1. Duties and Liabilities................................................................... 30
Section 11.2. Right to Consult Counsel................................................................. 32
Section 11.3. Compensation; Indemnification............................................................ 32
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Section 11.4. No Restrictions on Actions............................................................... 32
Section 11.5. Discharge or Removal; Replacement Warrant Agent.......................................... 32
Section 11.6. Successor Warrant Agent.................................................................. 33
ARTICLE XII
MISCELLANEOUS
Section 12.1. Market Stand-off Agreement............................................................... 34
Section 12.2. Monies Deposited with the Warrant Agent.................................................. 35
Section 12.3. Payment of Taxes......................................................................... 35
Section 12.4. No Merger, Consolidation or Sale of Assets of the Company................................ 35
Section 12.5. Reports to Holders....................................................................... 36
Section 12.6. Notices; Payment......................................................................... 36
Section 12.7. Binding Effect........................................................................... 37
Section 12.8. Counterparts............................................................................. 37
Section 12.9. Amendments............................................................................... 37
Section 12.10. Headings................................................................................. 38
Section 12.11. Common Shares Legend..................................................................... 38
Section 12.12. Third Party Beneficiaries................................................................ 39
Section 12.13. Termination.............................................................................. 40
Section 12.14. Governing Law............................................................................ 40
ARTICLE XIII
RIGHTS OF PARTICIPATION
Section 13.1. Subsequent Offerings..................................................................... 40
Section 13.2. Exercise of Rights....................................................................... 40
Section 13.3. Issuance of Equity Securities to Other Persons........................................... 41
Section 13.4. Termination of Rights of Participation................................................... 41
Section 13.5. Excluded Securities...................................................................... 41
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EXHIBIT A FORM OF WARRANT CERTIFICATE
EXHIBIT B-1 FORM OF CERTIFICATE TO BE DELIVERED BY TRANSFEROR IN CONNECTION
WITH TRANSFERS TO INSTITUTIONAL ACCREDITED INVESTORS
EXHIBIT B-2 FORM OF CERTIFICATE TO BE DELIVERED BY TRANSFEREES IN CONNECTION
WITH TRANSFERS TO INSTITUTIONAL ACCREDITED INVESTORS
APPENDIX A LIST OF FINANCIAL EXPERTS
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of February 9, 2000 (this "Agreement"),
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between LOUDCLOUD, INC., a Delaware corporation (the "Company"), and STATE
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STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., a national banking
association (the "Warrant Agent").
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W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to the terms of a Unit Purchase Agreement dated as
of the date hereof (the "Purchase Agreement"), between the Company and ▇▇▇▇▇▇
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▇▇▇▇▇▇▇ & Co. Incorporated ("MS&Co."), the Company has agreed to issue and sell
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to MS&Co. an aggregate of 66,000 warrants (each, a "Warrant" and collectively,
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the "Warrants"), each Warrant initially entitling the holder thereof to purchase
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35.39448485 shares of Common Stock (as defined below) of the Company at an
exercise price of $.01 per Common Share (as defined below) as part of 66,000
units (the "Units"), each Unit consisting of one 13% Senior Discount Note due
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2005 of the Company (each a "Note" and collectively, the "Notes") to be issued
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pursuant to the provisions of an Indenture, dated as of the date hereof, between
the Company and State Street Bank and Trust Company of California, N.A., (the
"Indenture"), and one Warrant;
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WHEREAS, the Notes and the Warrants included in each Unit will become
separately transferable at the close of business upon the earliest to occur of
(i) the date that is six months after the Closing Date (as defined below), (ii)
the commencement of an exchange offer with respect to the Notes undertaken
pursuant to the Notes Registration Rights Agreement (as defined below), (iii)
the effectiveness of a shelf registration statement with respect to resales of
the Notes, (iv) a Redemption Date (as defined in the Indenture) and (v) such
date as determined by MS&Co. in its sole discretion (the "Separation Date"); and
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WHEREAS, the Company desires to engage the Warrant Agent to act on the
Company's behalf, and the Warrant Agent desires to act on behalf of the Company,
in connection with the issuance of the Warrant Certificates (as defined below)
and the other matters as provided herein, including, without limitation, for the
purpose of defining the terms and provisions of the Warrants and the respective
rights and obligations thereunder of the Company and the record holders thereof
(together with the holders of shares of Common Stock (or other securities)
received upon exercise thereof, the "Holders").
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NOW, THEREFORE, in consideration of the foregoing and of the mutual
agreements contained herein and in the Purchase Agreement, the Company and the
Warrant Agent hereby agree as follows:
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ARTICLE I
CERTAIN DEFINITIONS
"Affiliate" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agent Members" has the meaning specified in Section 8.2 hereof.
"Auditors" means, at any time, the independent auditors of the Company
at such time.
"Board" means the board of directors of the Company from time to time.
"Business Day" means a day except a Saturday, Sunday or other day on
which commercial banks in The City of New York, or in the city of the corporate
trust office of the Warrant Agent, are authorized by law to close.
"Certificate for Surrender" means the form on the reverse side of the
Warrant Certificate substantially in the form of Exhibit A hereto.
"Certificated Warrants" has the meaning specified in Section 2.1
hereof .
"Change of Control" has the meaning specified in Section 13.4 hereof.
"Closing Date" means the date hereof.
"Commission" means the United States Securities and Exchange
Commission.
"Common Shares" means the shares of the Common Stock of the Company.
"Common Stock" means the Common Stock, par value $0.001 per share, of
the Company.
"Company" has the meaning specified in the preamble to this Agreement.
"Current Market Value" has the meaning specified in Section 4.1(f)
hereof.
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"Default" has the meaning specified in Section 10.1 hereof.
"Depositary" means The Depository Trust Company, its nominees and
their respective successors.
"Equity Securities" has the meaning specified in Section 13.1 hereof.
"Exchange Act" means the United States Securities Exchange Act of
1934, as amended.
"Exercise Price" has the meaning specified in Section 3.1 hereof.
"Expiration Date" means February 9, 2010.
"Final Surrender Time" has the meaning specified in Section 3.4
hereof.
"Financial Expert" means one of the Persons listed in Appendix A
hereto.
"Holders" has the meaning specified in the recitals to this Agreement.
"Indenture" has the meaning specified in the recitals to this
Agreement.
"Independent Financial Expert" means a Financial Expert that does not
(and whose directors, executive officers and 5% stockholders do not) have a
direct or indirect financial interest in the Company or any of its subsidiaries
or affiliates, which has not been for at least five years and, at the time that
it is called upon to give independent financial advice to the Company, is not
(and none of its directors, executive officers or 5% stockholders is) a
promoter, director or officer of the Company or any of its subsidiaries or
Affiliates.
"Institutional Accredited Investor" shall mean an institution that is
an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or
(7) of Regulation D under the Securities Act.
"Notes" has the meaning specified in the recitals to this Agreement.
"Notes Registration Rights Agreement" means the Notes Registration
Rights Agreement with respect to the Notes dated February 9, 2000 between the
Company and the Trustee.
"Notice Date" has the meaning specified in Section 3.4(b) hereof.
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"Officer" means, with respect to the Company, (i) the Chairman of the
Board, any other Director, the Chief Executive Officer, the Chief Financial
Officer, the President, or any Vice President or (ii) the Treasurer or any
Assistant Treasurer, the Secretary or any Assistant Secretary.
"Officers' Certificate" means a certificate signed by one Officer
listed in clause (i) of the definition thereof and one Officer listed in clause
(ii) of the definition thereof; provided, however, that any such certificate may
be signed by any two of the Officers listed in clause (i) of the definition
thereof in lieu of being signed by one Officer listed in clause (i) of the
definition thereof and one Officer listed in clause (ii) of the definition
thereof.
"Opinion of Counsel" means a written opinion signed by legal counsel
who may be an employee of or counsel to the Company.
"Person" means an individual, general partnership, limited
partnership, corporation, trust or any other entity or organization, including a
government or political subdivision or an agency or instrumentality thereof.
"Private Placement Legend" means the legend set forth on the Warrant
Certificates in the form set forth in Section 2.2(a) hereof.
"Purchase Agreement" has the meaning specified in the recitals to this
Agreement.
"Qualified Public Offering" has the meaning specified in Section 13.4
hereof.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Relevant Value" has the meaning specified in Section 3.4(d) hereof.
"Repurchase Event" means, and shall be deemed to occur on, any date
when the Company (i) consolidates with or merges into or with another person
that results in the transfer of fifty percent (50%) or more of the voting power
of the Company (but only where the holders of Common Stock receive consideration
in exchange for all or part of such Common Stock), if the Common Stock (or other
securities) thereafter issuable upon exercise of the Warrants is not registered
under the Exchange Act or (ii) sells all or substantially all of its assets to
another person, if the Common Stock (or other securities) thereafter issuable
upon exercise of the Warrants is not registered under the Exchange Act; provided
that, in each case, a "Repurchase Event" shall not be deemed to have occurred if
the consideration for such transaction consists of at least eighty percent (80%)
of cash.
"Repurchase Notice" has the meaning specified in Section 3.4(a)
hereof.
5
"Repurchase Obligation" has the meaning specified in Section 10.2
hereof.
"Repurchase Offer" means the Company's offer to repurchase the
Warrants in accordance with Section 3.4 hereof.
"Repurchase Price" has the meaning specified in Section 3.4(d) hereof.
"Restricted Global Warrant" has the meaning specified in Section 2.1
hereof.
"Rule 144A" means Rule 144A under the Securities Act.
"Rule 144A Availability Date" means the date on which the offering
memorandum is available in accordance with Section 7.2(a) of the Unit Purchase
Agreement dated as of February 6, 2000 by and between the Company and MS&Co.
"Securities Act" means the United States Securities Act of 1933, as
amended.
"Separation Date" has the meaning specified in the recitals to this
Agreement.
"Spread" means, with respect to any Warrant, the Current Market Value
of the Common Shares subject to such Warrant, less the Exercise Price of such
Warrant, in each case as adjusted as provided herein.
"Subscription Form" means the form on the reverse side of the Warrant
Certificate substantially in the form of Exhibit A hereto.
"Underlying Securities" shall mean the Common Shares (or other
securities) issuable upon exercise of the Warrants.
"Units" has the meaning specified in the recitals to this Agreement.
"Valuation Date" means the date five Business Days prior to the Notice
Date.
"Value Certificate" has the meaning specified in Section 3.4 hereof.
"Value Report" has the meaning specified in Section 4.1(j) hereof.
"Warrant" has the meaning specified in the recitals to this Agreement.
"Warrant Agent" has the meaning specified in the preamble to this
Agreement until a successor Warrant Agent replaces it in accordance with the
provisions of Section 11.5 and thereafter means such successor.
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"Warrant Certificates" has the meaning specified in Section 2.1
hereof.
"Warrant Registration Rights Agreement" means the Warrant Registration
Rights Agreement, dated February 9, 2000, between the Company and the Warrant
Agent.
"Warrant Registration Statement" has the meaning specified in Section
3 of the Warrant Registration Rights Agreement.
ARTICLE II
ORIGINAL ISSUE OF WARRANTS
Section 2.1. Form of Warrant Certificates. Certificates representing
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the Warrants (the "Warrant Certificates") shall be substantially in the form
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attached hereto as Exhibit A, shall be dated the date on which such Warrant
Certificates are countersigned by the Warrant Agent and shall have such
insertions as are appropriate or required or permitted by this Agreement and may
have such letters, numbers or other marks of identification and such legends and
endorsements stamped, printed, lithographed or engraved thereon as the Company
may deem appropriate and as are not inconsistent with the provisions of this
Agreement, or as may be required to comply with any law or with any rule or
regulation pursuant thereto or with any rule or regulation of any securities
exchange on which the Warrants may be listed, or to conform to usage.
Warrants issued and sold to MS&Co. pursuant to the terms of the Unit
Purchase Agreement by and between the Company and MS&Co. dated February 6, 2000
and Warrants transferred to Institutional Accredited Investors in accordance
with Section 8.3(b) or issued pursuant to Section 2.4 in exchange for interest
in the Restricted Global Warrant, shall be issued in the form of permanent
certificated Warrants in registered form substantially in the form set forth in
Exhibit A ("Certificated Warrants").
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Warrants transferred in reliance on Rule 144A in accordance with
Section 8.3(a) shall be issued in the form of one or more permanent global
Warrant Certificates in definitive, fully registered form, substantially in the
form set forth in Exhibit A (collectively, the "Restricted Global Warrant"),
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deposited with the Warrant Agent, as custodian for, and registered in the name
of the nominee for, the Depositary, duly executed by the Company and
countersigned by the Warrant Agent as hereinafter provided. The aggregate number
of Warrants represented by the Restricted Global Warrant may from time to time
be increased or decreased by adjustments made on the records of the Warrant
Agent, as custodian for the Depositary, or its nominee, as provided in Section
2.4 and Section 8.3 hereof.
The definitive Warrant Certificates shall be typed, printed,
lithographed or engraved or produced by any combination of these methods or may
be produced in any other
7
manner permitted by the rules of any securities exchange on which the Warrants
may be listed, all as determined by the officers executing such Warrant
Certificates, as evidenced by their execution of such Warrant Certificates.
Section 2.2. Restrictive Legends. (a) The Warrant Certificates shall
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bear substantially the following legend on the face thereof:
THE WARRANTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO,
OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET
FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B)
IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES
ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR"), (2) AGREES THAT IT
WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144(k)
UNDER THE SECURITIES ACT AS IN EFFECT WITH RESPECT TO SUCH
TRANSFER, RESELL OR OTHERWISE TRANSFER THE WARRANTS REPRESENTED
BY THIS CERTIFICATE EXCEPT (A) TO LOUDCLOUD, INC. (THE "COMPANY")
OR ANY SUBSIDIARY THEREOF, (B) FOLLOWING THE RULE 144A
AVAILABILITY DATE, TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHES TO THE WARRANT AGENT A SIGNED LETTER CONTAINING CERTAIN
REPRESENTATIONS AND AGREEMENTS RELATING TO THE RESTRICTIONS ON
TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE (THE
FORM OF WHICH LETTER CAN BE OBTAINED FROM THE WARRANT AGENT) AND
IF SUCH TRANSFER IS IN RESPECT OF ANY WARRANTS SUBSEQUENT TO THE
DATE ON WHICH THE WARRANTS REPRESENTED HEREBY BECOME SEPARATELY
TRANSFERABLE, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY
THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D)
PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144
UNDER THE SECURITIES ACT (IF AVAILABLE) OR (E) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3)
AGREES THAT IT WILL DELIVER TO EACH PERSON TO
8
WHOM THE WARRANTS REPRESENTED BY THIS CERTIFICATE ARE TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY TRANSFER
OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE WITHIN THE TIME PERIOD
REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX SET FORTH ON
THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND SUBMIT THIS
CERTIFICATE TO THE WARRANT AGENT. IF THE PROPOSED TRANSFEREE IS AN
INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER,
FURNISH TO EACH OF THE WARRANT AGENT AND THE COMPANY SUCH CERTIFICATIONS,
LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY REASONABLY
REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO AN
EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "UNITED
STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S
UNDER THE SECURITIES ACT. THE WARRANT AGREEMENT CONTAINS A PROVISION
REQUIRING THE WARRANT AGENT TO REFUSE TO REGISTER ANY TRANSFER OF THE
WARRANTS REPRESENTED BY THIS CERTIFICATE IN VIOLATION OF THE FOREGOING
RESTRICTIONS. THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO CERTAIN
RESTRICTIONS ON TRANSFER INCLUDING A 180-DAY LOCKUP IN CONNECTION WITH AN
INITIAL PUBLIC OFFERING AS SET FORTH IN THE WARRANT AGREEMENT, A COPY OF
WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE COMPANY. SUCH TRANSFER
RESTRICTIONS ARE BINDING ON TRANSFEREES OF THIS WARRANT CERTIFICATE.
(b) Each Restricted Global Warrant shall also bear the following
legend on the face thereof:
UNLESS THIS WARRANT CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO LOUDCLOUD, INC.
OR THE WARRANT AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT
HEREON IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY), ANY TRANSFER, PLEDGE OR
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OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS
WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS
IN WHOLE, BUT NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST
COMPANY OR TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND
TRANSFERS OF PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO
TRANSFERS MADE IN ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN
ARTICLE VIII OF THE WARRANT AGREEMENT.
(c) Each Warrant Certificate issued prior to the Separation Date
shall bear the following legend on the face thereof:
THE WARRANTS EVIDENCED BY THIS CERTIFICATE WERE ISSUED AS PART OF
AN ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF ONE 13% SENIOR
DISCOUNT NOTE DUE 2005 OF LOUDCLOUD, INC. (COLLECTIVELY, THE
"NOTES") AND ONE WARRANT INITIALLY ENTITLING THE HOLDER THEREOF
TO PURCHASE 35.39448485 SHARES OF COMMON STOCK, PAR VALUE $0.001
PER SHARE, OF LOUDCLOUD, INC. PRIOR TO THE CLOSE OF BUSINESS UPON
THE EARLIEST TO OCCUR OF (i) AUGUST 9, 2000, (ii) THE
COMMENCEMENT OF AN EXCHANGE OFFER WITH RESPECT TO THE NOTES,
(iii) THE EFFECTIVENESS OF A SHELF REGISTRATION STATEMENT WITH
RESPECT TO RESALES OF THE NOTES, (iv) A REDEMPTION DATE AND (v)
SUCH DATE AS DETERMINED BY ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & CO. INCORPORATED IN
ITS SOLE DISCRETION, THE WARRANTS EVIDENCED BY THIS CERTIFICATE
MAY NOT BE TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE
TRANSFERRED OR EXCHANGED ONLY TOGETHER WITH, THE NOTES.
Section 2.3. Execution and Delivery of Warrant Certificates. Warrant
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Certificates evidencing 66,000 Warrants, each Warrant to purchase 35.39448485
Common Shares, may be executed, on or after the date of this Agreement, by the
Company and delivered to the Warrant Agent for countersignature, and the Warrant
Agent shall thereupon countersign and deliver such Warrant Certificates upon the
order and at the written direction of the Company signed by its Chief Executive
Officer or other duly authorized executive officer to the purchasers thereof on
the date of issuance. The Warrant Agent is hereby authorized to countersign and
deliver Warrant Certificates as required by this Section 2.3 or by Section 3.3,
Article VI or Article VIII hereof.
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The Warrant Certificates shall be executed on behalf of the Company by
its Chairman of the Board, Chief Executive Officer, any Vice President or other
duly authorized executive officer of the Company either manually or by facsimile
signature printed thereon. The Warrant Certificates shall be countersigned by
manual signature of the Warrant Agent and shall not be valid for any purpose
unless so countersigned. In case any officer or director of the Company whose
signature shall have been placed upon any of the Warrant Certificates shall
cease to be such officer or director of the Company before countersignature by
the Warrant Agent and the issuance and delivery thereof, such Warrant
Certificates may nevertheless be countersigned by the Warrant Agent and issued
and delivered with the same force and effect as though such person had not
ceased to be such officer or director of the Company.
Section 2.4. Certificated Warrants. Beneficial owners of interests in
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a Restricted Global Warrant may receive Certificated Warrants (which, except as
set forth in Section 8.3(c), shall bear the Private Placement Legend) in
accordance with the procedures of the Warrant Agent and the Depositary. In
connection with the execution and delivery of such Certificated Warrants, the
Warrant Agent shall reflect on its books and records the date and a decrease in
the number of Warrants represented by the relevant Restricted Global Warrant
equal to the number of such Certificated Warrants and the Company shall execute
and the Warrant Agent shall countersign and deliver to said beneficial owners
one or more Certificated Warrants in an equal aggregate number.
ARTICLE III
EXERCISE PRICE, EXERCISE AND REPURCHASE OF WARRANTS
Section 3.1. Exercise Price. Each Warrant Certificate shall, when
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countersigned by the Warrant Agent, initially entitle the Holder thereof,
subject to the provisions of this Agreement, to purchase the number of Common
Shares indicated thereon at a purchase price (the "Exercise Price") of $.01 per
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Common Share, subject to adjustment as provided in Section 4.1 and Article V
hereof.
Section 3.2. Exercise; Restrictions on Exercise. At any time after the
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Closing Date and on or before the Expiration Date, any outstanding Warrants may
be exercised on any Business Day; provided that the Warrants will be exercisable
in connection with the initial public offering of equity securities (other than
nonconvertible preferred shares or an offering registered solely on Form S-4 or
S-8 or any successor form thereto) of the Company if the Holders are entitled to
include their Common Shares in such offering and provided further that the
Warrant Registration Statement is, at the time of exercise, effective and
available for the exercise of the Warrants or the exercise of such Warrants is
exempt from the registration requirements of the Securities Act. Any Warrants
not exercised by 5:00 p.m., New York City time, on the Expiration Date shall
expire and all rights of the Holders of such Warrants shall terminate.
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Additionally, pursuant to Section 4.1(f)(ii) hereof, the Warrants shall expire
and all rights of the Holders of such Warrants shall terminate in the event the
Company merges or consolidates with or sells all or substantially all of its
property and assets to a Person (other than an Affiliate of the Company) if the
consideration payable to holders of Common Stock in exchange for their Common
Stock in connection with such merger, consolidation or sale consists solely of
cash or in the event of the dissolution, liquidation or winding up of the
Company.
Section 3.3. Method of Exercise; Payment of Exercise Price. In order
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to exercise all or any of the Warrants represented by a Warrant Certificate, the
Holder thereof must surrender for exercise the Warrant Certificate to the
Warrant Agent at its corporate trust office address set forth in Section 12.6
hereof, with the Subscription Form set forth on the reverse of the Warrant
Certificate duly executed, together with payment in full of the Exercise Price
then in effect for each Common Share (or other securities) issuable upon
exercise of the Warrants as to which a Warrant is exercised; such payment may be
made in cash or by certified or official bank or bank cashier's check payable to
the order of the Company and shall be made to the Warrant Agent at its corporate
trust office address set forth in Section 12.6 hereof prior to the close of
business on the date the Warrant Certificate is surrendered to the Warrant Agent
for exercise. Notwithstanding the foregoing, the Exercise Price may be paid by
surrendering additional Warrants to the Warrant Agent having an aggregate Spread
equal to the aggregate Exercise Price of the Warrants being exercised. All
payments received upon exercise of Warrants shall be delivered to the Company by
the Warrant Agent as instructed in writing by the Company. If less than all the
Warrants represented by a Warrant Certificate are exercised or surrendered (in
connection with a cashless exercise), such Warrant Certificate shall be
surrendered and a new Warrant Certificate of the same tenor and for the number
of Warrants which were not exercised or surrendered shall be executed by the
Company and delivered to the Warrant Agent and the Warrant Agent shall
countersign the new Warrant Certificate, registered in such name or names as may
be directed in writing by the Holder, and shall make available for delivery the
new Warrant Certificate to the Person or Persons entitled to receive the same.
Restricted Global Warrants will be exercised in accordance with the procedures
of the Warrant Agent and the Depositary. Upon the exercise of any Warrants
following the surrender of a Warrant Certificate in conformity with the
foregoing provisions, the Warrant Agent shall instruct the Company to transfer
promptly to the Holder or, upon the written order of the Holder of such Warrant
Certificate, appropriate evidence of ownership of any Common Shares or other
security or property to which it is entitled, registered or otherwise placed in
such name or names as may be directed in writing by the Holder, and to deliver
such evidence of ownership to the Person or Persons entitled to receive the same
and fractional shares, if any, or an amount in cash, in lieu of any fractional
shares, as provided in Section 4.5 hereof; provided that the Holder of such
Warrant shall be responsible for the payment of any transfer taxes required as
the result of any change in ownership of such Warrants or the issuance of such
Common Shares other than to the Holder of such Warrants and any such transfer
shall comply with applicable law. Upon the exercise of a Warrant or Warrants,
the Warrant Agent is hereby authorized and directed to requisition from any
transfer agent of the Common Shares (and all such transfer agents are
12
hereby irrevocably authorized to comply with all such requests) certificates
(bearing the legend set forth in Section 12.11 hereof, if applicable, unless a
registration statement with the Commission relating to such Common Shares shall
then be in effect or the Company and the Holder exercising such Warrant or
Warrants otherwise agree) for the number of Common Shares to which said Holder
may be entitled. The Company shall enter, or shall cause any transfer agent of
the Common Shares to enter, the name of the Person entitled to receive the
Common Shares upon exercise of the Warrants into the Company's register of
stockholders within 14 days of such exercise. A Warrant shall be deemed to have
been exercised immediately prior to the close of business on the date of the
surrender for exercise, as provided above, of the Warrant Certificate
representing such Warrant and, for all purposes under this Agreement, the Person
entitled to receive any Common Shares deliverable upon such exercise shall, as
between such Person and the Company, be deemed to be the Holder of such Common
Shares of record as of the close of business on such date and shall be entitled
to receive, and the Warrant Agent shall make available for delivery to such
Person, any Common Shares to which such Person would have been entitled had such
Person been the registered holder on such date.
Section 3.4. Repurchase Offers. (a) Notice of Repurchase Event. Within
----------- ----------------- --------------------------
five Business Days following the occurrence of a Repurchase Event, the Company
shall give notice (a "Repurchase Notice") to the Holders of the Warrants and the
-----------------
Warrant Agent that such event has occurred.
(b) Repurchase Offers Generally. Following the occurrence of a
---------------------------
Repurchase Event, the Company shall offer to repurchase for cash all outstanding
Warrants pursuant to the provisions of this Section 3.4 (a "Repurchase Offer").
----------------
The Company shall give notice of a Repurchase Offer in accordance with Section
3.4(f) hereof. Each date on which the Company gives any such notice is referred
to as the "Notice Date." The Repurchase Offer shall commence on the Notice Date
-----------
for such Repurchase Offer and shall expire at 5:00 p.m., New York City time, on
a date determined by the Company (the "Final Surrender Time") that is at least
--------------------
30 but not more than 60 days after the Notice Date. Once a Repurchase Event has
occurred, there is no limit on the number of Repurchase Offers that the Company
may make.
(c) Repurchase Offers. (i) In any Repurchase Offer, the Company shall
-----------------
offer to purchase for cash at the Repurchase Price all Warrants outstanding on
the Notice Date for such Repurchase Offer that are properly tendered to the
Warrant Agent on or prior to the Final Surrender Time for such Repurchase Offer.
(ii) Each Holder may, but shall not be obligated to, accept such
Repurchase Offer by tendering to the Warrant Agent, on or prior to the Final
Surrender Time for such Repurchase Offer, the Warrant Certificates evidencing
the Warrants such Holder desires to have repurchased in such offer, together
with a completed Certificate for Surrender in substantially the form attached to
the Warrant Certificate. A Holder may withdraw all or a portion of the Warrants
tendered to the Warrant Agent at any time prior to the Final Surrender Time for
such
13
Repurchase Offer. If less than all the Warrants represented by a Warrant
Certificate shall be tendered, such Warrant Certificate shall be surrendered and
a new Warrant Certificate of the same tenor and for the number of Warrants which
were not tendered shall be executed by the Company and delivered to the Warrant
Agent and the Warrant Agent shall countersign the new Warrant Certificate,
registered in such name or names as may be directed in writing by the Holder,
and shall make available for delivery the new Warrant Certificate to the Person
or Persons entitled to receive the same; provided that the Holder of such
Warrants shall be responsible for the payment of any transfer taxes required as
the result of any change in ownership of such Warrants and any such transfer
shall comply with applicable law.
(d) Repurchase Price. (i) The purchase price (the "Repurchase Price")
---------------- ----------------
for each Warrant properly tendered to the Warrant Agent pursuant to a Repurchase
Offer shall be equal to the value (the "Relevant Value") on the Valuation Date
--------------
of the Common Shares issuable, and other securities or property of the Company
which would have been delivered, upon exercise of Warrants had the Warrants been
exercised (regardless of whether the Warrants are then exercisable), less the
Exercise Price in effect on the Notice Date for such Repurchase Offer.
(ii) The Relevant Value of the Common Shares and other securities or
property issuable upon exercise of all the Warrants, on any Valuation Date shall
be:
(1) (A) If the Common Shares (or other securities) are registered
under the Exchange Act, deemed to be the average of the daily market prices
(on the stock exchange that is the primary trading market for the Common
Shares (or other securities)) of the Common Shares (or other securities)
for the 20 consecutive trading days immediately preceding such Valuation
Date or, (B) if the Common Shares (or other securities) have been
registered under the Exchange Act for less than 20 consecutive trading days
before such date, then the average of the daily market prices for all of
the trading days before such date for which daily market prices are
available, in the case of each of (A) and (B), as certified to the Warrant
Agent by the President, any Vice President or the Chief Financial Officer
of the Company (the "Value Certificate"). The market price for each such
-----------------
trading day shall be: (A) in the case of a security listed or admitted to
trading on any national securities exchange, the closing sales price on
such day, or if no sale takes place on such day, the average of the closing
bid and asked prices on such day, (B) in the case of a security not then
listed or admitted to trading on any national securities exchange, the last
reported sale price on such day, or if no sale takes place on such day, the
average of the closing bid and asked prices on such day, as reported by a
reputable quotation source designated by the Company, (C) in the case of a
security not then listed or admitted to trading on any national securities
exchange and as to which no such reported sale price or bid and asked
prices are available, the average of the reported high bid and low asked
prices on such day, as reported by a reputable quotation service, or a
newspaper of general circulation in the Borough of Manhattan, City and
State of New York customarily published on each Business Day, designated by
14
the Company, or, if there shall be no bid and asked prices on such day, the
average of the high bid and low asked prices, as so reported, on the most
recent day (not more than 30 days prior to the date in question) for which
prices have been so reported and (D) if there are no bid and asked prices
reported during the 30 days prior to the date in question, the Relevant
Value shall be determined as if the Common Shares (or other securities)
were not registered under the Exchange Act; or
(2) If the Common Shares (or other securities) are not registered
under the Exchange Act or if the value cannot be computed under clause (1)
above, deemed to be equal to the value set forth in the Value Report (as
defined below) as determined by an Independent Financial Expert, which
shall be selected by the Board in accordance with Section 3.4(e) hereof,
and retained on customary terms and conditions, using one or more valuation
methods that the Independent Financial Expert, in its best professional
judgment, determines to be most appropriate but without giving effect to
any discount for lack of liquidity, the fact that the Company has no class
of equity securities registered under the Exchange Act or the fact that the
Common Shares and other securities or property issuable upon exercise of
the Warrants represent a minority interest in the Company. The Company
shall cause the Independent Financial Expert to deliver to the Company,
with a copy to the Warrant Agent, within 45 days of the appointment of the
Independent Financial Expert in accordance with Section 3.4(e) hereof, a
value report (the "Value Report") stating the Relevant Value of the Common
------------
Shares and other securities or property of the Company, if any, being
valued as of the Valuation Date and containing a brief statement as to the
nature and scope of the examination, investigation and methodologies upon
which the determination of Relevant Value was made. The Warrant Agent shall
have no duty with respect to the Value Report of any Independent Financial
Expert, except to keep it on file and available for inspection by the
Holders. The determination as to Relevant Value in accordance with the
provisions of this Section 3.4(d) shall be conclusive on all Persons. The
Independent Financial Expert shall consult with management of the Company
in order to allow management to comment on the proposed Relevant Value
prior to delivery to the Company of any Value Report of the Independent
Financial Expert.
(e) Selection of Independent Financial Expert. If clause (d)(ii)(2)
-----------------------------------------
of this Section 3.4 is applicable, the Board of Directors of the Company shall
select an Independent Financial Expert not more than five Business Days
following a Repurchase Event. Within seven Business Days following a Repurchase
Event, the Company shall deliver to the Warrant Agent a notice setting forth the
name of the Independent Financial Expert.
(f) Notice of Repurchase Offer. Each notice of a Repurchase Offer (an
---------------------------
"Offer Notice") given by the Company pursuant to Section 3.4(b) shall be given
----- ------
by the Company directly to all Holders of the Warrants, with a copy to the
Warrant Agent, shall be given simultaneously with the Repurchase Notice (or, in
the event that the Relevant Value of the
15
Common Shares or other securities or property issuable upon exercise of all the
Warrants cannot be determined pursuant to Section 3.4(d)(ii)(1), then such Offer
Notice shall be given within five Business Days after the Company receives the
Value Report with respect to such offer) and shall specify (A) the Final
Surrender Time for such Repurchase Offer, (B) the manner in which Warrants may
be surrendered to the Warrant Agent for repurchase by the Company, (C) the
Repurchase Price at which the Warrants will be repurchased by the Company, (D)
if applicable, the name of the Independent Financial Expert whose valuation of
the Common Shares and other securities or property was utilized in connection
with determining such Repurchase Price and (E) that payment of the Repurchase
Price will be made by the Warrant Agent. Each such notice shall be accompanied
by a Certificate for Surrender for Repurchase Offer in substantially the form
attached to the Warrant Certificate and a copy of the Value Report, if any.
(g) Payment for Warrants. Upon surrender for repurchase of any
--------------------
Warrants in conformity with the provisions of this Section 3.4, the Warrant
Agent shall thereupon promptly notify the Company of such surrender. On or
before the Final Surrender Time for any Repurchase Offer, the Company shall
deposit with the Warrant Agent funds sufficient to make payment for the Warrants
tendered to the Warrant Agent and not withdrawn. After receipt of such deposit
from the Company, the Warrant Agent shall make payment, by delivering a check in
such amount as is appropriate, to such Person or Persons as it may be directed
in writing by the Holder surrendering such Warrants, net of any transfer taxes
required to be paid in the event that the check is to be delivered to a Person
other than the Holder.
(h) Compliance with Laws. Notwithstanding anything contained in this
--------------------
Section 3.4, if the Company is required to comply with laws, rules, regulations
and securities exchange or clearing procedures, in connection with making any
Repurchase Offer, such laws, rules, regulations and procedures shall govern the
making of such Repurchase Offer.
ARTICLE IV
ADJUSTMENTS
Section 4.1. Adjustments. The Exercise Price and the number of Common
----------- -----------
Shares issuable upon exercise of each Warrant shall be subject to adjustment
from time to time as follows:
(a) Divisions; Consolidations; Reclassifications. In case the Company
--------------------------------------------
shall, on or before the Expiration Date, (i) issue any Common Shares in
payment of a dividend or other distribution with respect to its Common
Stock, (ii) subdivide its issued and outstanding Common Shares, (iii)
consolidate its issued and outstanding Common Shares into a smaller number
of shares, or (iv) reclassify or convert the Common Shares (other than a
reclassification in connection with a merger, consolidation or other
business
16
combination which will be governed by Section 4.1(f)), then the number of
Common Shares purchasable upon exercise of each Warrant immediately prior
to the record date for such issue or distribution or the effective date of
such subdivision, consolidation, reclassification or conversion shall be
adjusted so that the Holder of each Warrant shall thereafter be entitled to
receive the kind and number of Common Shares which such Holder would have
been entitled to receive after the happening of any of the events described
above had such Warrant been exercised immediately prior to the happening of
such event or any record date with respect thereto. An adjustment made
pursuant to this Section 4.1(a) shall become effective immediately after
the effective date of such event retroactive to the record date, if any,
for such event.
(b) Distributions of Debt or Assets. In case the Company shall make a
-------------------------------
distribution to all holders of its Common Shares of evidences of its
indebtedness, or assets, or other distributions (excluding any issuance of
Common Shares referred to in Section 4.1(a) above and excluding
distributions in connection with the dissolution, liquidation or winding-up
of the Company which shall be governed by Section 4.1(f) and distributions
of securities referred to in Section 4.1(a), then provision shall be made
so that the Holders shall receive upon exercise of their warrants the
amount of such evidences of Indebtedness, assets or other distributions
that they would have received had their Warrants been exercised on the date
of such event (or the record date thereof), subject to all other
adjustments called for with respect to the rights of the Holders of the
Warrants or with respect to such other securities by their terms.
(c) Current Market Value. For the purposes of any computation under
--------------------
this Article IV, the "Current Market Value" per Common Share or of any
--------------------
other security (herein collectively referred to as a "security") at any
--------
date herein specified shall be:
(i) if the security is not registered under the Exchange Act,
the value of the security determined in good faith by the Board and
certified in a Board resolution, which shall not be lower than the
most recently completed arms-length transaction between the Company
and a Person other than an Affiliate of the Company or the most
recently determined fair market value of the security as determined by
an Independent Financial Expert selected by the Company in accordance
with the criteria for such valuation set out in Section 4.1(c)(iii) or
(ii) if the security is registered under the Exchange Act, the
average of the daily market prices of the security for the 20
consecutive trading days immediately preceding such date or, if the
security has been registered under the Exchange Act for less than 20
consecutive trading days before such date, then the average of the
daily market prices for all of the trading days before such date for
which daily market prices are available. The market price for each
such trading day shall be: (A) in the case of a security listed or
admitted to trading on any
17
national securities exchange, the closing sales price, regular way, on
such day, or if no sale takes place on such day, the average of the
closing bid and asked prices on such day on the principal national
securities exchange on which such security is listed or admitted, as
determined by the Board, in good faith, (B) in the case of a security
not then listed or admitted to trading on any national securities
exchange, the last reported sale price on such day, or if no sale
takes place on such day, the average of the closing bid and asked
prices on such day, as reported by a reputable quotation source
designated by the Company, (C) in the case of a security not then
listed or admitted to trading on any national securities exchange and
as to which no such reported sale price or bid and asked prices are
available, the average of the reported high bid and low asked prices
on such day, as reported by a reputable quotation service, or a
newspaper of general circulation in the Borough of Manhattan, City and
State of New York customarily published on each Business Day,
designated by the Company, or, if there shall be no bid and asked
prices on such day, the average of the high bid and low asked prices,
as so reported, on the most recent day (not more than 30 days prior to
the date in question) for which prices have been so reported and (D)
if there are no bid and asked prices reported during the 30 days prior
to the date in question, the Current Market Value of the security
shall be determined as if the security were not registered under the
Exchange Act.
(iii) If required pursuant to Section 4.1(c)(i), the Current
Market Value shall be deemed to be equal to the value set forth in the
Value Report (as defined below) as determined by an Independent
Financial Expert, which shall be selected by the Board in its sole
discretion, and retained on customary terms and conditions, using one
or more valuation methods that the Independent Financial Expert, in
its professional judgment, determines to be most appropriate. The
Company shall cause the Independent Financial Expert to deliver to the
Company, with a copy to the Warrant Agent, within 45 days of the
appointment of the Independent Financial Expert, a value report (the
"Value Report") stating the value of the Common Shares and other
------------
securities or property of the Company, if any, being valued as of the
Valuation Date and containing a brief statement as to the nature and
scope of the examination, investigation and methodologies upon which
the determination of value was made. The Warrant Agent shall have no
duty with respect to the Value Report of any Independent Financial
Expert, except to keep it on file and available for inspection by the
Holders. The determination as to Current Market Value in accordance
with the provisions of this Section 4.1(c)(iii) shall be conclusive on
all Persons. The Independent Financial Expert shall consult with
management of the Company in order to allow management to comment on
the proposed value prior to delivery to the Company of any Value
Report.
18
(d) De Minimis Adjustments. No adjustment in the number of Common
----------------------
Shares purchasable hereunder shall be required unless such adjustment would
require an increase or decrease of at least one percent (1%) in the number
of Common Shares purchasable upon the exercise of each Warrant; provided,
however, that any adjustments which by reason of this Section 4.1(d) are
not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations shall be made to the nearest
one-thousandth of a share.
(e) Adjustment of Exercise Price. Whenever the number of Common
----------------------------
Shares purchasable upon the exercise of each Warrant is adjusted, as herein
provided, the Exercise Price per Common Share payable upon exercise of such
Warrant shall be adjusted (calculated to the nearest $.0001) so that it
shall equal the price determined by multiplying such Exercise Price
immediately prior to such adjustment by a fraction the numerator of which
shall be the number of Common Shares purchasable upon the exercise of each
Warrant immediately prior to such adjustment and the denominator of which
shall be the number of Common Shares so purchasable immediately thereafter.
If after an adjustment, a Holder of a Warrant upon exercise of it may
receive shares of two or more classes in the capital of the Company, the
Company shall determine the allocation of the adjusted Exercise Price
between such classes of shares in a manner that the Board deems fair and
equitable to the Holders. After such allocation, the exercise privilege and
the Exercise Price of each class of shares shall thereafter be subject to
adjustment on terms comparable to those applicable to Common Shares in this
Article IV.
Such adjustment shall be made successively whenever any event listed
above shall occur.
(f) Consolidation, Merger, Etc. (i) Subject to the provisions of
--------------------------
Subsection (ii) below of this Section 4.1(f), in case of the consolidation
of the Company with, or merger of the Company with or into, or of the sale
of all or substantially all of the properties and assets of the Company to,
any Person, and in connection therewith consideration is payable to holders
of Common Shares (or other securities or property purchasable upon exercise
of Warrants) in exchange therefor, the Warrants shall remain subject to the
terms and conditions set forth in this Agreement and each Warrant shall,
after such consolidation, merger or sale, entitle the Holder to receive
upon exercise the number of shares in the capital or other securities or
property (including cash) of or from the Person resulting from such
consolidation or surviving such merger or to which such sale shall be made
or of the parent of such Person, as the case may be, that would have been
distributable or payable on account of the Common Shares if such Holder's
Warrants had been exercised immediately prior to such merger, consolidation
or sale (or, if applicable, the record date therefor); and in any such case
the provisions of this
19
Agreement with respect to the rights and interests thereafter of the
Holders of Warrants shall be appropriately adjusted by the Board in good
faith so as to be applicable, as nearly as may reasonably be, to any
shares, other securities or any property thereafter deliverable on the
exercise of the Warrants.
(ii) Notwithstanding the foregoing, (x) if the Company merges or
consolidates with, or sells all or substantially all of its property and
assets to, another Person (other than an Affiliate of the Company) and
consideration is payable to holders of Common Shares in exchange for their
Common Shares in connection with such merger, consolidation or sale which
consists solely of cash, or (y) in the event of the dissolution,
liquidation or winding up of the Company, then the Holders of Warrants
shall be entitled to receive distributions on the date of such event on an
equal basis with holders of Common Shares (or other securities issuable
upon exercise of the Warrants) as if the Warrants had been exercised
immediately prior to such event, less the Exercise Price. Upon receipt of
such payment, if any, the rights of a Holder shall terminate and cease and
such Holder's Warrants shall expire. If the Company has made a Repurchase
Offer that has not expired at the time of such transaction, the holders of
the Warrants will be entitled to receive the higher of (i) the amount
payable to the holders of the Warrants described above and (ii) the
Repurchase Price payable to the holders of the Warrants pursuant to such
Repurchase Offer. In case of any such merger, consolidation or sale of
assets, the surviving or acquiring Person and, in the event of any
dissolution, liquidation or winding up of the Company, the Company shall
deposit promptly with the Warrant Agent the funds, if any, necessary to pay
the Holders of the Warrants. After receipt of such deposit from such Person
or the Company and after receipt of surrendered Warrant Certificates, the
Warrant Agent shall make payment by delivering a check in such amount as is
appropriate (or, in the case of consideration other than cash, such other
consideration as is appropriate) to such Person or Persons as it may be
directed in writing by the Holder surrendering such Warrants.
Section 4.2. Notice of Adjustment. Whenever the number of Common
----------- --------------------
Shares purchasable upon the exercise of each Warrant or the Exercise Price is
adjusted, as herein provided, the Company shall cause, so far as it is able, the
Warrant Agent promptly to mail, at the expense of the Company, to each Holder
notice of such adjustment or adjustments and shall deliver to the Warrant Agent
a certificate of the Auditors setting forth the number of Common Shares
purchasable upon the exercise of each Warrant and the Exercise Price after such
adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was made.
Such certificate shall be conclusive evidence of the correctness of such
adjustment except in the case of manifest error. The Warrant Agent shall be
entitled to rely on such certificate and shall be under no duty or
responsibility with respect to any such certificate, except to exhibit the same,
from time to time, to any Holder desiring an inspection thereof during
reasonable business hours upon reasonable notice. The Warrant Agent shall not at
any time be under any duty or responsibility to any Holders to
20
determine whether any facts exist which may require any adjustment of the
Exercise Price or the number of Common Shares purchasable on exercise of the
Warrants or any of the other adjustments set forth in Section 4.1, or with
respect to the nature or extent of any such adjustment when made, or with
respect to the method employed in making such adjustment, or the validity or
value (or the kind or amount) of any Common Shares which may be purchasable on
exercise of the Warrants. The Warrant Agent shall not be responsible for any
failure of the Company to make any cash payment or to issue, transfer or deliver
any Common Shares or share certificates upon the exercise of any Warrant.
Section 4.3. Statement on Warrants. Irrespective of any adjustment in
----------- ---------------------
the Exercise Price or the number or kind of shares purchasable upon the exercise
of the Warrants, Warrants theretofore or thereafter issued may continue to
express the same price and number and kind of shares as are stated in the
Warrants initially issuable pursuant to this Agreement.
Section 4.4. Notice of Consolidation, Merger, Etc. In case at any time
----------- ------------------------------------
after the date hereof and prior to 5:00 p.m., New York City time, on the
Expiration Date, there shall be any (i) consolidation or merger involving the
Company or sale, transfer or other disposition of all or substantially all of
the Company's property, assets or business (except (1) a merger or other
reorganization in which the Company shall be the surviving corporation and
holders of Common Shares receive no consideration in respect of their shares and
(2) a merger of the Company into a wholly owned Subsidiary of the Company, the
principal purpose of which, in the good faith determination of the Board, is to
change the state of incorporation of the Company) or (ii) any other transaction
contemplated by Section 4.1(f)(ii) above then, in any one or more of such cases,
the Company shall cause to be mailed to the Warrant Agent and shall cause the
Warrant Agent to mail, at Company's expense, to each Holder of a Warrant, at the
earliest practicable time (and, in any event, not less than 20 days before any
date set for definitive action), notice of the date on which such
reorganization, sale, consolidation, merger, dissolution, liquidation or winding
up shall take place, as the case may be. Such notice shall also set forth such
facts as shall indicate the effect of such action (to the extent such effect may
be known at the date of such notice) on the Exercise Price and the kind and
amount of the Common Shares and other securities, money and other property
deliverable upon exercise of the Warrants. Such notice shall also specify the
date as of which the holders of record of the Common Shares or other securities
or property issuable upon exercise of the Warrants shall be entitled to exchange
their shares for securities, money or other property deliverable upon such
reorganization, sale, consolidation, merger, dissolution, liquidation or winding
up, as the case may be.
Section 4.5. Fractional Interests. If more than one Warrant shall be
----------- --------------------
presented for exercise in full at the same time by the same Holder, the number
of full Common Shares which shall be issuable upon such exercise thereof shall
be computed on the basis of the aggregate number of Common Shares purchasable on
exercise of the Warrants so presented. The Company shall not be required to
issue fractional Common Shares upon the exercise of Warrants. If any fraction of
a Common Share would, except for the provisions of this Section 4.5, be issuable
on
21
the exercise of any Warrant (or specified portion thereof), the Company may pay
an amount in cash calculated by it to be equal to the then Current Market Value
per Common Share multiplied by such fraction computed to the nearest whole cent.
Section 4.6. When Issuance or Payment May Be Deferred. In any case in
----------- ----------------------------------------
which this Article IV shall require that an adjustment in the Exercise Price be
made effective as of a record date for a specified event, the Company may elect
to defer until the occurrence of such event (i) issuing to the holder of any
Warrant exercised after such record date the Common Shares and other shares in
the capital of the Company, if any, issuable upon such exercise over and above
the Common Shares and other shares in the capital of the Company, if any,
issuable upon such exercise and (ii) paying such holder any amount in cash in
lieu of a fractional share; provided, however, that the Company shall deliver to
such Holder a due ▇▇▇▇ or other appropriate instrument evidencing such Holder's
right to receive such additional Common Shares, other shares and cash upon the
occurrence of the event requiring such adjustment.
Section 4.7. Initial Public Offering. Notwithstanding anything to the
----------- -----------------------
contrary herein contained, if the Company or any of its subsidiaries or any
parent of the Company conducts an initial public offering of equity securities
(other than nonconvertible preferred shares or an offering registered solely on
Form S-4 or Form S-8 or any successor forms thereto), the Company will give, or
will cause its subsidiary or parent to give the Holders the opportunity to
convert their Warrants into warrants to purchase such equity securities (other
than nonconvertible preferred shares) and their Common Shares or such other
securities that have been received by the Holders upon the exercise of Warrants
into such equity securities (other than nonconvertible preferred shares). Such
conversion opportunity will be on terms and conditions determined to be fair and
reasonable by the Board.
ARTICLE V
DECREASE IN EXERCISE PRICE
The Board, in its sole discretion, shall have the right at any time,
or from time to time, to decrease the Exercise Price of the Warrants and/or
increase the number of shares issuable upon the exercise of the Warrants.
ARTICLE VI
LOSS OR MUTILATION
Upon receipt by the Company and the Warrant Agent of evidence
satisfactory to them of the ownership and the loss, theft, destruction or
mutilation of any Warrant Certificate and of indemnity or bond satisfactory to
them and (in the case of mutilation) upon surrender and
22
cancellation thereof, then, in the absence of notice to the Company or the
Warrant Agent that the Warrants represented thereby have been acquired by a bona
fide purchaser, the Company shall execute and the Warrant Agent shall
countersign and make available for delivery to the registered Holder of the
lost, stolen, destroyed or mutilated Warrant Certificate, in exchange for or in
lieu thereof, a new Warrant Certificate of the same tenor and for a like
aggregate number of Warrants. Upon the issuance of any new Warrant Certificate
under this Article VI, the Company may require the payment of a sum sufficient
to cover any tax or other governmental charge that may be imposed in relation
thereto and other expenses (including the fees and expenses of the Warrant
Agent) in connection therewith. Every new Warrant Certificate executed and
delivered pursuant to this Article VI in lieu of any lost, stolen or destroyed
Warrant Certificate shall constitute a contractual obligation of the Company
whether or not the allegedly lost, stolen or destroyed Warrant Certificates
shall be at any time enforceable by anyone and shall be entitled to the benefits
of this Agreement equally and proportionately with any and all other Warrant
Certificates duly executed and delivered hereunder. The provisions of this
Article VI are exclusive and shall preclude (to the extent lawful) all other
rights or remedies with respect to the replacement of mutilated, lost, stolen,
or destroyed Warrant Certificates.
ARTICLE VII
RESERVATION AND AUTHORIZATION
OF COMMON SHARES
The Company shall at all times reserve and keep available such number
of its authorized but unissued Common Shares deliverable upon exercise of the
Warrants as will be sufficient to permit the exercise in full of all outstanding
Warrants and will cause appropriate evidence of ownership of such Common Shares
to be delivered to the Warrant Agent upon its request for delivery thereof upon
the exercise of the Warrants. The Company covenants that all Common Shares of
the Company that may be issued upon the exercise of the Warrants will, upon
issuance, be duly authorized, validly issued, fully paid and not subject to any
calls for funds and free from pre-emptive rights and all taxes, liens, charges
and security interests with respect to the issue thereof.
ARTICLE VIII
WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER
Section 8.1. Transfer and Exchange. The Warrant Certificates shall be
----------- ---------------------
issued in registered form only. The Warrant Agent shall keep at its office a
register for the registration of Warrant Certificates and transfers or exchanges
of Warrant Certificates as herein provided and other appropriate data as
determined by the Warrant Agent. The Company shall, upon
23
reasonable notice to the Warrant Agent, have access to such register during the
Warrant Agent's regular business hours. All Warrant Certificates issued upon any
registration of transfer or exchange of Warrant Certificates shall be the valid
obligations of the Company, evidencing the same obligations, and entitled to the
same benefits under this Agreement, as the Warrant Certificates surrendered for
such registration of transfer or exchange.
The Warrants shall initially be issued as part of the issuance of the
Units. Prior to the Separation Date, the Warrants may not be transferred or
exchanged separately from, but may be transferred or exchanged only together
with, the Notes issued as part of such Units.
A Holder may transfer its Warrants only by written application to the
Warrant Agent stating the name of the proposed transferee and otherwise
complying with the terms of this Agreement. No such transfer shall be effected
until, and such transferee shall succeed to the rights of a Holder only upon,
final acceptance and registration of the transfer by the Warrant Agent in the
register. Prior to the registration of any transfer of Warrants by a Holder as
provided herein, the Company, the Warrant Agent, and any agent of the Company
may treat the person in whose name the Warrants are registered as the owner
thereof for all purposes and as the person entitled to exercise the rights
represented thereby, any notice to the contrary notwithstanding. Furthermore,
any holder of a Restricted Global Warrant shall, by acceptance of such
Restricted Global Warrant, agree that transfers of beneficial interests in such
Warrant may be effected only through a book-entry system maintained by the
holder of such Restricted Global Warrant (or its agent), and that ownership of a
beneficial interest in the Warrants represented thereby shall be required to be
reflected in a book-entry. When Warrant Certificates are presented to the
Warrant Agent with a request to register the transfer or to exchange them for an
equal amount of Warrants, the Warrant Agent shall register such transfer or make
such exchange as requested if its requirements for such transactions are met. To
permit registrations of transfers and exchanges, the Company shall execute
Warrant Certificates at the Warrant Agent's request. No service charge shall be
made for any registration of transfer or exchange of Warrants, but the Company
may require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer of
Warrants.
Section 8.2. Book-Entry Provisions for the Restricted Global Warrants.
----------- --------------------------------------------------------
(a) The Restricted Global Warrants initially shall (i) be registered in the name
of the Depositary for such Restricted Global Warrant or the nominee of such
Depositary, (ii) be delivered to the Warrant Agent as custodian for such
Depositary and (iii) bear legends as set forth in Section 2.2 hereof.
Members of, or participants in, the Depositary ("Agent Members") shall
-------------
have no rights under this Agreement with respect to the Restricted Global
Warrants held on their behalf by the Depositary or the Warrant Agent as its
custodian, and the Depositary may be treated by the Company, the Warrant Agent
and any agent of the Company or the Warrant Agent as the absolute owner of each
such Restricted Global Warrant for all purposes whatsoever. Notwithstanding the
foregoing, nothing herein shall prevent the Company, the Warrant Agent or
24
any agent of the Company or the Warrant Agent, from giving effect to any written
certification, proxy or other authorization furnished by the Depositary or
impair, as between the Depositary and its Agent Members, the operation of
customary practices governing the exercise of the rights of a Holder of any
Warrants.
(b) Transfers of a Restricted Global Warrant shall be limited to
transfers of such Restricted Global Warrant in whole, but not in part, to the
Depositary, its successors or their respective nominees. Interests of beneficial
owners in the Restricted Global Warrants may be transferred in accordance with
the rules and procedures of the Depositary and the provisions of Section 8.3
hereof. Certificated Warrants shall be transferred to beneficial owners in
exchange for their beneficial interests in the Restricted Global Warrant, (i) if
the Depositary notifies the Company that it is unwilling or unable to continue
as Depositary for the Restricted Global Warrant and a successor depositary is
not appointed by the Company within 90 days of such notice, (ii) if there is a
Default or (iii) upon the request of the beneficial owner in accordance with the
rules and procedures of the Depositary and the provisions of Section 8.3 hereof.
(c) In connection with the transfer of the entire Restricted Global
Warrant to beneficial owners pursuant to paragraph (b) of this Section 8.2, the
Restricted Global Warrant shall be surrendered to the Warrant Agent for
cancellation, and the Company shall execute, and the Warrant Agent shall
countersign and deliver, to each beneficial owner identified by the Depositary
in exchange for its beneficial interest in the Restricted Global Warrant
Certificated Warrants, representing, in the aggregate, the number of Warrants
theretofore represented by the Restricted Global Warrant.
(d) In connection with the transfer of a portion of the beneficial
interests in the Restricted Global Warrant to beneficial owners pursuant to
paragraph (b) of this Section 8.2, the Warrant Agent shall reflect on its books
and records the date and a decrease in the amount of Warrants represented by the
Restricted Global Warrant in an amount equal to the amount of Warrants
represented by the beneficial interest in the Restricted Global Warrant to be
transferred, and the Company shall execute, and the Warrant Agent shall
countersign and deliver, to each beneficial owner identified by the Depositary
in exchange for its beneficial interest in the Restricted Global Warrant,
Certificated Warrants or of like tenor and amount.
(e) Any Certificated Warrant delivered in exchange for an
interest in a Restricted Global Warrant pursuant to paragraph (b) or (d) of this
Section shall, except as otherwise provided by paragraph (c) of Section 8.3
hereof, bear the legend regarding transfer restrictions set forth in Section 2.2
hereof.
(f) The registered holder of a Restricted Global Warrant may grant
proxies and otherwise authorize any person, including Agent Members and persons
that may hold
25
interests through Agent Members, to take any action which a Holder is entitled
to take under this Agreement or the Warrants.
Section 8.3. Special Transfer Provisions. The following provisions
----------- ---------------------------
shall apply:
(a) Transfers to QIBs. The following provisions shall apply with
-----------------
respect to the registration of any proposed transfer of Warrants to a QIB:
(i) Following the Rule 144A Availability Date, if the Warrants
to be transferred are represented by Certificated Warrants, the
Warrant Agent shall register the transfer if such transfer is being
made by a proposed transferor who has checked the box provided for on
the form of Warrant Certificate stating, or has otherwise advised the
Company and the Warrant Agent in writing, that the sale has been made
in compliance with the provisions of Rule 144A to a transferee who has
signed the certification provided for on the form of Warrant
Certificate stating, or has otherwise advised the Company and the
Warrant Agent in writing, that it is purchasing the Warrants for its
own account or an account with respect to which it exercises sole
investment discretion and that it and any such account is a QIB within
the meaning of Rule 144A, and is aware that the sale to it is being
made in reliance on Rule 144A and acknowledges that it has received
such information regarding the Company as it has requested pursuant to
Rule 144A or has determined not to request such information and that
it is aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from registration
provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member, upon receipt
by the Warrant Agent of the documents referred to in clause (i) above
and instructions given in accordance with the Depositary's and the
Warrant Agent's procedures, the Warrant Agent shall reflect on its
books and records the date and an increase in the amount of Warrants
represented by the Restricted Global Warrant in an amount equal to the
amount of Warrants represented by the Certificated Warrants to be
transferred, and the Warrant Agent shall cancel the Certificated
Warrants.
(b) Transfers to Institutional Accredited Investor. The following
----------------------------------------------
provisions shall apply with respect to the registration of any proposed
transfer of Warrants to any Person not specified in paragraphs (a) above.
(i) The Warrant Agent shall register any proposed transfer of
Warrants to any such Person if (x) the transferor has delivered to the
Warrant Agent and the Company a certificate substantially in the form
of Exhibit B-1 hereto and, if required by paragraph (d) thereof, an
Opinion of Counsel to the effect set forth therein and (y) the
proposed transferee has delivered to the
26
Warrant Agent and the Company a certificate substantially in the form
of Exhibit B-2 hereto.
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the Restricted Global Warrant, upon receipt by
the Warrant Agent and the Company of the documents referred to in
clause (i) above and instructions given in accordance with the
Depositary's and the Warrant Agent's procedures, the Company shall
execute and the Warrant Agent shall countersign Certificated Warrants
in an amount equal to the number of Warrants represented by the
Restricted Global Warrant, to be transferred and the Warrant Agent
shall decrease the number of Warrants represented by the Restricted
Global Warrant so transferred.
(c) Private Placement Legend. Upon the transfer, exchange or
------------------------
replacement of Warrant Certificates not bearing the Private Placement
Legend, the Warrant Agent shall make available for delivery Warrant
Certificates that do not bear the Private Placement Legend. Upon the
transfer, exchange or replacement of Warrant Certificates bearing the
Private Placement Legend, the Warrant Agent shall make available for
delivery only Warrant Certificates that bear the Private Placement Legend
unless there is delivered to the Warrant Agent an opinion of counsel
reasonably satisfactory to the Company and its counsel and the Warrant
Agent to the effect that neither such legend nor the related restrictions
on transfer are required in order to maintain compliance with the
provisions of the Securities Act.
(d) General. (i) By its acceptance of any Warrants represented by a
-------
Warrant Certificate bearing the Private Placement Legend, each Holder of
such Warrants acknowledges the restrictions on transfer of such Warrants
set forth in this Agreement and in the Private Placement Legend and agrees
that it will transfer such Warrants only as provided in this Agreement. The
Warrant Agent shall not register a transfer of any Warrants unless such
transfer complies with the restrictions on transfer of such Warrants set
forth in this Agreement and is in compliance with applicable laws and
applicable rules, regulations and procedures of any securities exchange or
clearing agency in effect from time to time. In connection with any
transfer of Warrants, each Holder agrees by its acceptance of Warrants to
furnish the Warrant Agent or the Company such certifications, legal
opinions or other information as either of them may reasonably require to
confirm that such transfer is being made pursuant to an exemption from, or
a transaction not subject to, the registration requirements of the
Securities Act or any other applicable laws of any foreign jurisdiction;
provided that the Warrant Agent shall not be required to determine (but may
rely on a determination made by the Company with respect to) the
sufficiency of any such certifications, legal opinions or other
information.
27
(ii) The Warrant Agent shall retain copies of all letters, notices and
other written communications received pursuant to Section 8.2 hereof or
this Section 8.3. The Company shall have the right to inspect and make
copies of all such letters, notices or other written communications at any
reasonable time upon the giving of reasonable written notice to the Warrant
Agent.
Section 8.4. Surrender of Warrant Certificates. Any Warrant
----------- ---------------------------------
Certificate surrendered for registration of transfer, exchange or exercise of
the Warrants represented thereby shall, if surrendered to the Company, be
delivered to the Warrant Agent, and all Warrant Certificates surrendered or so
delivered to the Warrant Agent shall be promptly cancelled by the Warrant Agent
and shall not be reissued by the Company and, except as provided in this Article
VIII in case of an exchange, Article III hereof in case of the exercise of less
than all the Warrants represented thereby or Article VI in case of a mutilated
Warrant Certificate, no Warrant Certificate shall be issued hereunder in lieu
thereof. The Warrant Agent shall deliver to the Company from time to time or
otherwise dispose of such cancelled Warrant Certificates as the Company may
direct in writing.
ARTICLE IX
WARRANT HOLDERS
Section 9.1. Warrant Holder Deemed Not a Stockholder. The Company and
----------- ---------------------------------------
the Warrant Agent may deem and treat the registered Holder(s) of the Warrant
Certificates as the absolute owner(s) thereof (notwithstanding any notation of
ownership or other writing thereon made by anyone), for the purpose of any
exercise thereof and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary. Accordingly, the
Company and/or the Warrant Agent shall not, except as ordered by a court of
competent jurisdiction as required by law, be bound to recognize any equitable
or other claim to or interest in the Warrants on the part of any person other
than such registered Holder, whether or not it shall have express or other
notice thereof. Prior to the valid exercise of the Warrants, no Holder of a
Warrant Certificate, as such, shall be entitled to any rights of a stockholder
of the Company, including, without limitation, the right to vote or to consent
to any action of the stockholders, to receive dividends or other distributions,
to exercise any preemptive right or to receive any notice of meetings of
stockholders and, except as otherwise provided in this Agreement, shall not be
entitled to receive any notice of any proceedings of the Company.
Section 9.2. Right of Action. All rights of action with respect to
----------- ---------------
this Agreement are vested in the Holders of the Warrants, and any Holder of any
Warrant, without the consent of the Warrant Agent or the Holders of any other
Warrant, may, on such Holder's own behalf and for such Holder's own benefit,
enforce, and may institute and maintain any suit, action or proceeding against
the Company suitable to enforce, or otherwise in respect of, such Holder's
28
right to exercise such Warrants in the manner provided in the Warrant
Certificate representing such Warrants and in this Agreement.
ARTICLE X
REMEDIES
Section 10.1. Defaults. It shall be deemed to be a "Default" with
------------ -------- -------
respect to the Company's (or its successor's) obligations under this Agreement
if:
(a) a Repurchase Event occurs and the Company (or its successor)
shall fail to make a Repurchase Offer pursuant to Section 3.4 hereof; or
(b) the Company (or its successor) shall fail to purchase the
Warrants pursuant to the Repurchase Offer in accordance with the provisions
of Section 3.4 hereof.
Section 10.2. Payment Obligations. Upon the happening of a Default
------------ -------------------
under this Agreement, the Company shall be obligated to increase the amount
otherwise payable pursuant to Section 3.4(d) hereof in respect of the Repurchase
Offer to which such Default relates by an amount equal to interest thereon at a
rate per annum equal to 13% from the date of the Default to the date of payment,
which interest shall compound quarterly (all such payment obligations in respect
of such Repurchase Offer, together with all such increased amounts, being the
"Repurchase Obligation").
---------------------
Section 10.3. Remedies; No Waiver. Notwithstanding any other provision
------------ -------------------
of this Warrant Agreement, if a Default occurs and is continuing, the Holders of
the Warrants may pursue any available remedy to collect the Repurchase
Obligation or to enforce the performance of any provision of this Warrant
Agreement. A delay or omission by any Holder of a Warrant in exercising, or a
failure to exercise, any right or remedy arising out of a Default shall not
impair the right or remedy or constitute a waiver of or acquiescence in the
Default. All remedies are cumulative to the extent permitted by law.
ARTICLE XI
THE WARRANT AGENT
Section 11.1. Duties and Liabilities. The Warrant Agent hereby accepts
------------ ----------------------
the agency established by this Agreement and agrees to perform the same upon the
terms and conditions herein set forth, by all of which the Company and the
Holders of Warrants, by their acceptance thereof, shall be bound. The Warrant
Agent shall not, by countersigning Warrant
29
Certificates or by any other act hereunder, be deemed to make any
representations as to the validity or authorization of the Warrants or the
Warrant Certificates (except as to its countersignature thereon) or of any
Common Shares issued upon exercise of any Warrant, or as to the accuracy of the
computation of the Exercise Price or the number or kind or amount of Common
Shares deliverable upon exercise of any Warrant or the correctness of the
representations of the Company made in the certificates that the Warrant Agent
receives. The Warrant Agent shall not be accountable for the use or application
by the Company of the proceeds of the exercise of any Warrant. The Warrant Agent
shall not have any duty to calculate or determine any adjustments with respect
to either the Exercise Price or the kind and amount of Common Shares receivable
by Holders upon the exercise of Warrants required from time to time and the
Warrant Agent shall have no duty or responsibility in determining the accuracy
or correctness of such calculation. The Warrant Agent shall not be (a) liable
for any recital or statement of fact contained herein or in the Warrant
Certificates or for any action taken, suffered or omitted by it in good faith
without gross negligence in the belief that any Warrant Certificate or any other
documents or any signatures are genuine or properly authorized, (b) responsible
for any failure on the part of the Company to comply with any of its covenants
and obligations contained in this Agreement or in the Warrant Certificates or
(c) liable for any act or omission in connection with this Agreement except for
its own gross negligence, bad faith or willful misconduct. In no event shall the
Warrant Agent be liable for consequential damages. The Warrant Agent is hereby
authorized to accept instructions with respect to the performance of its duties
hereunder from the Chairman of the Board, Chief Executive Officer, any Vice
President or other executive officer of the Company and to apply to any such
officer for instructions (which instructions will be promptly given in writing
when requested) and the Warrant Agent shall not be liable for any action taken
or suffered to be taken by it in good faith without gross negligence in
accordance with the instructions of any such officer; provided, however, that,
in its discretion, the Warrant Agent may, in lieu thereof, accept other evidence
of such or may require such further or additional evidence as it may deem
reasonable. The Warrant Agent shall not be liable for any action taken with
respect to any matter in the event it requests instructions from the Company as
to that matter and does not receive such instructions within a reasonable period
of time after the request therefor.
The Warrant Agent may execute and exercise any of the rights and
powers hereby vested in it or perform any duty hereunder either itself or by or
through attorneys, agents or employees of its selection, and the Warrant Agent
shall not be answerable or accountable for any act, default, neglect or
misconduct of any such attorneys, agents or employees; provided that reasonable
care has been exercised with respect to the retention of any such attorney,
agent or employee. The Warrant Agent shall not be under any obligation or duty
to institute, appear in or defend any action, suit or legal proceeding in
respect hereof, unless first indemnified to its reasonable satisfaction. The
Warrant Agent shall promptly notify the Company in writing of any claim made or
action, suit or proceeding instituted against it arising out of or in connection
with this Agreement.
30
The Company will perform, execute, acknowledge and deliver or cause to
be delivered all such further acts, instruments and assurances as are consistent
with this Agreement and as may reasonably be required by the Warrant Agent in
order to enable it to carry out or perform its duties under this Agreement.
The Warrant Agent shall act solely as agent of the Company hereunder.
The Warrant Agent shall not be liable except for the failure to perform such
duties as are specifically set forth herein, and no implied covenants or
obligations shall be read into this Agreement against the Warrant Agent, whose
duties and obligations shall be determined solely by the express provisions
hereof.
Section 11.2. Right to Consult Counsel. The Warrant Agent may at any
------------ ------------------------
time consult with legal counsel of its selection (who may be legal counsel for
the Company), and the written opinion or advice of such counsel shall be full
and complete authorization and protection to the Warrant Agent and the Warrant
Agent shall incur no liability or responsibility to the Company or to any Holder
for any action taken, suffered or omitted by it in good faith without gross
negligence in accordance with the written opinion or advice of such counsel.
Section 11.3. Compensation; Indemnification. The Company agrees
------------ -----------------------------
promptly to pay the Warrant Agent from time to time and in any case within 30
days of receipt of an invoice, compensation for its services hereunder as the
Company and the Warrant Agent may agree from time to time, and to reimburse it
upon its request upon furnishing reasonable supporting documentation for fees or
expenses and reasonable counsel fees and expenses incurred in connection with
the execution and administration of this Agreement, and further agrees to
indemnify each of the Warrant Agent and any predecessor Warrant Agent and save
it harmless against any and all losses, claims, damages, liabilities or
reasonable expenses arising out of or in connection with the acceptance and
administration of this Agreement, including, without limitation, the reasonable
costs and expenses of investigating or defending any claim of such liability,
except that the Company shall have no liability hereunder to the extent that any
such loss, liability or expense results from the Warrant Agent's own gross
negligence, bad faith or willful misconduct. The obligations of the Company
under this Section 11.3 shall survive the exercise and the expiration of the
Warrants, the termination of this Agreement and the resignation or removal of
the Warrant Agent in respect of services or expenses incurred in connection with
the Warrants or this Agreement.
Section 11.4. No Restrictions on Actions. Nothing in this Agreement
------------ --------------------------
shall be deemed to prevent the Warrant Agent and any stockholder, director,
officer or employee of the Warrant Agent from buying, selling or dealing in any
of the Warrants or other securities of the Company or becoming pecuniarily
interested in transactions in which the Company may be interested, or
contracting with or lending money to the Company or otherwise acting as fully
and freely as though it were not the Warrant Agent under this Agreement. Nothing
herein shall
31
preclude the Warrant Agent from acting in any other capacity for the Company or
for any other legal entity.
Section 11.5. Discharge or Removal; Replacement Warrant Agent.
------------ -----------------------------------------------
The Warrant Agent may resign from its position as such and be discharged from
all further duties and liabilities hereunder (except liability arising as a
result of the Warrant Agent's own gross negligence, bad faith or willful
misconduct), after giving one month's prior written notice to the Company. The
Company may at any time remove the Warrant Agent upon one month's written notice
specifying the date when such discharge shall take effect, and the Warrant Agent
shall thereupon in like manner be discharged from all further duties and
liabilities hereunder, except as aforesaid. The Warrant Agent shall mail to each
Holder of a Warrant, at the Company's expense, a copy of said notice of
resignation or notice of removal, as the case may be. Upon such resignation or
removal the Company shall appoint in writing a new warrant agent. If the Company
shall fail to make such appointment within a period of 30 days after it has been
notified in writing of such resignation by the resigning Warrant Agent or after
such removal, then the resigning or removed Warrant Agent or the Holder of any
Warrant may, at the expense of the Company, apply to any court of competent
jurisdiction for the appointment of a new warrant agent. After 30 days from
receipt of, or giving, notice, as the case may be, and pending appointment of a
successor to the original Warrant Agent, either by the Company or by such a
court, the duties of the Warrant Agent shall be carried out by the Company. Any
new warrant agent, whether appointed by the Company or by such a court, shall be
a bank or trust company doing business under the laws of the United States or
any state thereof, in good standing and having (or, in the case of a subsidiary
of a bank holding company, its parent having) a combined capital and surplus of
not less than $25,000,000. The combined capital and surplus of any such new
warrant agent shall be deemed to be the combined capital and surplus as set
forth in the most recent annual report of its condition published by such
warrant agent (or parent) prior to its appointment, provided that such reports
are published at least annually pursuant to law or to the requirements of a
federal or state supervising or examining authority. After acceptance in writing
of such appointment by the new warrant agent, it shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
herein as the Warrant Agent, without any further assurance, conveyance, act or
deed; however, the original Warrant Agent shall in all events deliver and
transfer to the successor Warrant Agent all property (including, without
limitation, documents and recorded information), if any, at the time held
hereunder by the original Warrant Agent and if for any reason it shall be
necessary or expedient to execute and deliver any further assurance, conveyance,
act or deed, the same shall be done at the expense of the Company and shall be
legally and validly executed and delivered by the resigning or removed Warrant
Agent. Not later than the effective date of any such appointment, the Company
shall file notice thereof with the resigning or removed Warrant Agent and shall
forthwith cause a copy of such notice to be mailed by the successor Warrant
Agent to each Holder of a Warrant. Failure to give any notice provided for in
this Section 11.5, however, or any defect therein, shall not affect the legality
or validity of the resignation of the Warrant Agent or the appointment of a new
32
warrant agent, as the case may be. No Warrant Agent hereunder shall be liable
for any acts or omissions of any successor Warrant Agent.
Section 11.6. Successor Warrant Agent. Any corporation into which
------------ -----------------------
the Warrant Agent or any new warrant agent may be merged or converted, or any
corporation resulting from any consolidation to which the Warrant Agent or any
new warrant agent shall be a party or any corporation succeeding to all or
substantially all the corporate trust business of the Warrant Agent (including
the administration of this Agreement), shall be a successor Warrant Agent under
this Agreement without any further act, provided that such corporation would be
eligible for appointment as successor to the Warrant Agent under the provisions
of Section 11.5 hereof. Any such successor Warrant Agent shall promptly cause
notice of its succession as Warrant Agent to be mailed to each Holder of a
Warrant.
ARTICLE XII
MISCELLANEOUS
Section 12.1. Market Stand-off Agreement. Each Holder hereby
------------ --------------------------
agrees that such Holder shall not sell, transfer, make any short sale of, grant
any option for the purchase of, or enter into any hedging or similar transaction
with the same economic effect as a sale of any Warrants or Common Stock of the
Company held by such Holder (other than those included in the registration) for
a period specified by the representative of the underwriters of Common Stock of
the Company not to exceed one hundred eighty (180) days following the effective
date of a registration statement of the Company filed under the Securities Act;
provided that:
(i) such agreement shall apply only to the Company's first firm
commitment underwritten public offering of its Common Stock registered
under the Securities Act, which is either the subject of a firm
underwriting commitment or an on-line offering pursuant to the Dutch
auction process (the "Initial Offering");
----------------
(ii) all officers and directors of the Company who hold capital
stock or rights to acquire capital stock of the Company and greater
than five percent (5%) stockholders of the Company enter into similar
agreements; and
(iii) such agreement shall not apply to any shares of Common
Stock (or other securities) purchased in the Initial Offering or
purchased in the open market following the Initial Offering.
Each Holder agrees to execute and deliver such other agreements
as may be reasonably requested by the Company or the underwriter which are
consistent with the foregoing or which are necessary to give further effect
thereto. In addition, if requested by the Company or
33
the representative of the underwriters of Common Stock (or other securities) of
the Company, each Holder shall provide, within ten (10) days of such request,
such information as may be required by the Company or such representative in
connection with the completion of any public offering of the Company's
securities pursuant to a registration statement filed under the Securities Act.
The obligations described in this Section 12.1 shall not apply to a registration
relating solely to employee benefit plans on Form S-1 or Form S-8 or similar
forms that may be promulgated in the future, or a registration relating solely
to a Rule 145 transaction on Form S-4 or similar forms that may be promulgated
in the future. The Company may impose stop-transfer instructions with respect to
the Warrants or shares of Common Stock subject to the foregoing restriction
until the end of said one hundred eighty (180) day period.
Section 12.2. Monies Deposited with the Warrant Agent. The
------------ ---------------------------------------
Warrant Agent shall not be required to pay interest on any monies deposited
pursuant to the provisions of this Agreement except such as it shall agree in
writing with the Company to pay thereon. Any monies, securities or other
property which at any time shall be deposited by the Company or on its behalf
with the Warrant Agent pursuant to this Agreement shall be and are hereby
assigned, transferred and set over to the Warrant Agent in trust for the purpose
for which such monies, securities or other property shall have been deposited;
but such monies, securities or other property need not be segregated from other
funds, securities or other property except to the extent required by law. Any
monies, securities or other property deposited with the Warrant Agent for
payment or distribution to the Holders that remains unclaimed for one year after
the date the monies, securities or other property was deposited with the Warrant
Agent shall be delivered to the Company upon its request therefor.
Section 12.3. Payment of Taxes. Subject to Article VI hereof, all
------------ ----------------
Common Shares issuable upon the exercise of Warrants shall be validly issued,
fully paid and nonassessable, and the Company shall pay any taxes and other
governmental charges that may be imposed under the laws of the United States of
America or any political subdivision or taxing authority thereof or therein in
respect of the issue or delivery thereof upon exercise of Warrants (other than
income taxes imposed on the Holders). The Company shall not be required,
however, to pay any tax or other charge imposed in connection with any transfer
involved in the issue of any certificate for Common Shares (including other
securities or property issuable upon the exercise of the Warrants) or payment of
cash to any Person other than the Holder of a Warrant Certificate surrendered
upon the exercise of a Warrant and in case of such transfer or payment, the
Warrant Agent and the Company shall not be required to issue any share
certificate or pay any cash until such tax or charge has been paid or it has
been established to the Warrant Agent's and the Company's satisfaction that no
such tax or charge is due.
Section 12.4. No Merger, Consolidation or Sale of Assets of the
------------ -------------------------------------------------
Company. Except as otherwise provided herein, the Company will not merge into or
-------
consolidate with any other Person, or sell or otherwise transfer its property,
assets and business substantially as an entirety to a successor of the Company,
unless the Person resulting from such merger or
34
consolidation, or such successor of the Company, shall expressly assume, by
supplemental agreement satisfactory in form to the Warrant Agent and executed
and delivered to the Warrant Agent, the due and punctual performance and
observance of each and every covenant and condition of this Agreement or
contained in the Warrants to be performed and observed by the Company.
Section 12.5. Reports to Holders. At all times from and after the
------------ ------------------
earlier of (i) the date of the commencement of a registered exchange offer for
the Notes by the Company or the effectiveness of the Registration Statement
pursuant to and in accordance with the terms of the Notes Registration Rights
Agreement (the "Registration") and (ii) the date that is 24 months from the
------------
Closing Date, in either case, whether or not the Company is then required to
file reports with the Commission, the Company shall file with the Commission all
such reports and other information as it would be required to file with the
Commission by Sections 13(a) or 15(d) under the Securities Exchange Act of 1934
if it were subject thereto. The Company shall supply the Warrant Agent and each
Holder or shall supply to the Warrant Agent for forwarding to each such Holder,
without cost to such Holder, copies of such reports and other information. In
addition, at all times prior to the earlier of the date of the Registration and
the date that is 24 months from the Closing Date, the Company shall, at its
cost, deliver to each Holder of the Warrants quarterly and annual financial
statements substantially equivalent to those which would be included in reports
required to be filed under the Exchange Act. In addition, after the Rule 144A
Availability Date and at all times prior to the Registration, upon the request
of any Holder or any prospective purchaser of the Warrants designated by a
Holder, the Company shall supply to such Holder or such prospective purchaser
the information required under Rule 144A under the Securities Act. The Company
shall notify the Warrant Agent and each Holder upon the occurrence of the Rule
144A Availability Date.
Section 12.6. Notices; Payment. (a) Except as otherwise provided
------------ ----------------
in Section 12.6(b) hereof, any notice, demand or delivery authorized by this
Agreement shall be sufficiently given or made when faxed or mailed, if sent by
first class mail, postage prepaid, addressed to any Holder of a Warrant at such
Holder's last known address or telecopier number appearing on the register of
the Company maintained by the Warrant Agent and to the Company or the Warrant
Agent as follows:
To the Company:
Loudcloud, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
35
To the Warrant Agent:
State Street Bank and Trust Company of California, N.A.
▇▇▇ ▇▇▇▇ ▇/▇▇/ ▇▇▇▇▇▇, ▇▇/▇▇/ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Corporate Trust Administration (Loudcloud, Inc. 13%
Senior Discount Notes due 2005)
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
or such other address as shall have been furnished to the party giving or making
such notice, demand or delivery. Any notice that is mailed in the manner herein
provided shall be conclusively presumed to have been duly given when mailed,
whether or not the Holder receives the notice.
(b) Payment of the Exercise Price shall be made in accordance
with the provisions of this Agreement at the office of the Warrant Agent set
forth above, unless otherwise directed by the Warrant Agent and the Company.
(c) Any notice required to be given by the Company to the
Holders shall be made by mailing, to the Holders at their last known addresses
appearing on the register maintained by the Warrant Agent. The Company hereby
irrevocably authorizes the Warrant Agent, in the name and at the expense of the
Company, to mail any such notice upon receipt thereof from the Company. Any
notice that is mailed in the manner herein provided shall be conclusively
presumed to have been duly given when mailed, whether or not the Holder receives
the notice.
Section 12.7. Binding Effect. This Agreement shall be binding
------------ --------------
upon and inure to the benefit of the Company and the Warrant Agent and their
respective successors and assigns, and the Holders from time to time of the
Warrants. Nothing in this Agreement is intended or shall be construed to confer
upon any Person, other than the Company, the Warrant Agent and the Holders of
the Warrants, any right, remedy or claim under or by reason of this Agreement or
any part hereof.
Section 12.8. Counterparts. This Agreement may be executed
------------ ------------
manually or by facsimile in any number of counterparts, each of which shall be
deemed an original, but all of which together constitute one and the same
instrument.
Section 12.9. Amendments. The Warrant Agent may, without the
------------ ----------
consent or concurrence of the Holders of the Warrants, by supplemental agreement
or otherwise, join with the Company in making any changes or corrections in this
Agreement that (a) are required to cure any ambiguity or to correct any
defective or inconsistent provision or clerical omission or mistake or manifest
error herein contained or (b) add to the covenants and agreements of the
36
Company in this Agreement further covenants and agreements of the Company
thereafter to be observed, or surrender any rights or power reserved to or
conferred upon the Company in this Agreement; provided that in either case such
changes or corrections do not and will not adversely affect, alter or change the
rights, privileges or immunities of the Holders of Warrants. Upon the Warrant
Agent's request, the Company shall promptly provide an Officer's Certificate and
Opinion of Counsel which provide all conditions precedent to adoption of an
amendment that have been satisfied.
The rights of participation established by Article XIII herein
may be waived with respect to any issuance of Equity Securities by a majority of
the Holders.
Section 12.10. Headings. The descriptive headings of the several
------------- --------
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
Section 12.11. Common Shares Legend. Unless and until the Common
------------- --------------------
Shares issuable upon the exercise of the Warrants are registered under the
Securities Act, or unless otherwise agreed by the Company and the Holder
thereof, such Common Shares will bear a legend substantially to the following
effect:
THE COMMON SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED
OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN INSTITUTIONAL
"ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF
REGULATION D UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED
INVESTOR"), (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD
REFERRED TO UNDER RULE 144(k), UNDER THE SECURITIES ACT AS IN EFFECT
WITH RESPECT TO SUCH TRANSFER, RESELL OR OTHERWISE TRANSFER THE COMMON
SHARES REPRESENTED BY THIS CERTIFICATE EXCEPT (A) TO LOUDCLOUD, INC.
(THE "COMPANY") OR ANY SUBSIDIARY THEREOF, (B) FOLLOWING THE RULE 144A
AVAILABILITY DATE, TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE
WITH RULE 144A UNDER THE SECURITIES ACT, (C) TO AN INSTITUTIONAL
ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE
TRANSFER AGENT AND ▇▇▇▇▇▇▇▇▇
▇▇
A SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE RESTRICTIONS ON TRANSFER OF THE COMMON SHARES
REPRESENTED BY THIS CERTIFICATE (THE FORM OF WHICH LETTER CAN BE
OBTAINED FROM THE TRANSFER AGENT AND REGISTRAR) AND AN OPINION OF
COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE
WITH THE SECURITIES ACT, (D) PURSUANT TO THE EXEMPTION FROM
REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES ACT (IF
AVAILABLE) OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON
TO WHOM THE COMMON SHARES REPRESENTED BY THIS CERTIFICATE ARE
TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN
CONNECTION WITH ANY TRANSFER OF THE COMMON SHARES REPRESENTED BY THIS
CERTIFICATE WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST
CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO
THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE TRANSFER
AGENT AND REGISTRAR. IF THE PROPOSED TRANSFEREE IS AN INSTITUTIONAL
ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH
TO EACH OF THE TRANSFER AGENT AND REGISTRAR AND THE COMPANY SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM
MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE
PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE
TERMS "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO THEM
BY REGULATION S UNDER THE SECURITIES ACT. THE COMPANY HAS INSTRUCTED
THE TRANSFER AGENT AND REGISTRAR TO REFUSE TO REGISTER ANY TRANSFER OF
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE IN VIOLATION
OF THE FOREGOING RESTRICTIONS.
Section 12.12. Third Party Beneficiaries. The Holders shall be
------------- -------------------------
third party beneficiaries to the agreements made hereunder between the Company,
on the one hand, and the Warrant Agent, on the other hand, and each Holder shall
have the right to enforce such agreements directly to the extent it deems such
enforcement necessary or advisable to protect its rights or the rights of
Holders hereunder. By acquiring Warrants, each Holder agrees to be bound by the
obligations of Holders generally as set forth herein and as such obligations may
be applicable to such Holder.
38
Section 12.13. Termination. Except as otherwise specified herein,
------------- -----------
this Agreement shall terminate at 5:00 p.m. (New York City time) on the tenth
anniversary of the Closing Date. Notwithstanding the foregoing, this Agreement
shall terminate on any earlier date as of which all Warrants have been
exercised.
Section 12.14. Governing Law. This Agreement shall be governed by
------------- -------------
the laws of the State of New York. The Warrant Agent, the Company and the
Holders agree to submit to the jurisdiction of the courts of the State of New
York in any action or proceeding arising out of or relating to this Agreement or
the Warrants.
ARTICLE XIII
RIGHTS OF PARTICIPATION
Section 13.1. Subsequent Offerings. Each Holder who is an
------------ --------------------
"accredited investor" within the meaning of Rule 501(a) of the Securities Act
shall have a right of participation to purchase its pro rata share of all Equity
Securities, as defined below, that the Company may, from time to time, propose
to sell and issue after the date of this Agreement, other than the Equity
Securities excluded by Section 13.5 hereof. Each Holder's pro rata share is
equal to the ratio of (a) the number of shares of the Common Stock (including
all shares of Common Stock issued or issuable upon exercise of the Warrants) of
which such Holder is deemed to be a holder immediately prior to the issuance of
such Equity Securities to (b) the total number of shares of the Company's
outstanding Common Stock (including all shares of Common Stock issued or
issuable upon conversion of the Company's Series A Preferred Stock and Series B
Preferred Stock or upon the exercise of any outstanding warrants or options)
immediately prior to the issuance of the Equity Securities. The term "Equity
------
Securities" shall mean (i) any Common Stock, preferred stock or other security
----------
of the Company, (ii) any security convertible, with or without consideration,
into any Common Stock, preferred stock or other security (including any option
to purchase such a convertible security), (iii) any security carrying any
warrant or right to subscribe to or purchase any Common Stock, preferred stock
or other security or (iv) any such warrant or right.
Section 13.2. Exercise of Rights. If the Company proposes to
------------ ------------------
issue any Equity Securities, it shall give each Holder written notice of its
intention, describing the Equity Securities, the price and the terms and
conditions upon which the Company proposes to issue the same. Each Holder shall
have fifteen (15) days from the giving of such notice to agree to purchase its
pro rata share of the Equity Securities for the price and upon the terms and
conditions specified in the notice by giving written notice to the Company and
stating therein the quantity of Equity Securities to be purchased.
Notwithstanding the foregoing, the Company shall not be required to offer or
sell such Equity Securities to any Holder who would cause the Company to be in
violation of applicable federal securities laws by virtue of such offer or sale.
39
Section 13.3. Issuance of Equity Securities to Other Persons. If
------------ ----------------------------------------------
not all of the Holders elect to purchase their pro rata share of the Equity
Securities, then the Company shall promptly notify in writing the Holders who do
so elect and shall offer such Holders the right to acquire such unsubscribed
shares. The Holders shall have five (5) days after receipt of such notice to
notify the Company of its election to purchase all or a portion thereof of the
unsubscribed shares. If the Holders fail to exercise in full the rights of first
refusal, the Company shall have ninety (90) days thereafter to sell the Equity
Securities in respect of which the Holder's rights were not exercised, at a
price and upon general terms and conditions materially no more favorable to the
purchasers thereof than specified in the Company's notice to the Investors
pursuant to Section 13.2 hereof. If the Company has not sold such Equity
Securities within ninety (90) days of the notice provided pursuant to Section
13.2, the Company shall not thereafter issue or sell any Equity Securities,
without first offering such securities to the Holders in the manner provided
above.
Section 13.4. Termination of Rights of Participation. The rights
------------ --------------------------------------
of participation established by this Article XIII shall not apply to, and shall
terminate upon the earlier of (i) the effective date of the registration
statement pertaining to the Company's Qualified Offering and (ii) a Change in
Control. The term "Qualified Public Offering" shall mean a firmly underwritten
-------------------------
public offering of shares of Common Stock for a total offering of not less than
$20 million (before deduction of underwriters' commissions and expenses). The
term "Change in Control" shall mean (A) the acquisition of the Company by
-----------------
another entity by means of any transaction or series of related transactions
(including, without limitation, any reorganization, merger or consolidation)
that results in the transfer of fifty percent (50%) or more of the outstanding
voting power of the Company or (B) a sale of all or substantially all of the
assets of the Company.
Section 13.5. Excluded Securities. The rights of participation
------------ -------------------
established by this Article XIII shall have no application to any of the
following Equity Securities:
(a) any Equity Securities issued or to be issued to employees,
officers or directors of, or consultants or advisors to the Company or
any subsidiary, pursuant to stock purchase or stock option plans or
other arrangements that are approved by the Board of Directors;
(b) any Equity Securities issued pursuant to any rights,
agreements, options and warrants outstanding or issued as of the date
of this Agreement; and any Equity Securities issued pursuant to any
rights, agreements, options or warrants granted after the date of this
Agreement; provided that either the rights of participation established
by this Article XIII applied with respect to the initial sale or grant
by the Company of such rights, agreements, options or warrants or such
rights, agreements, options or warrants constituted Excluded Securities
pursuant to this Section 13.5 at the time of issuance;
40
(c) any Equity Securities issued for consideration other than
cash pursuant to a merger, consolidation, acquisition or similar
business combination;
(d) any Equity Securities issued in connection with any stock
split, stock dividend or recapitalization by the Company;
(e) shares of Common Stock issued upon conversion of the
Company's Series A Preferred Stock and Series B Preferred Stock;
(f) any Equity Securities issued pursuant to any equipment
leasing arrangement, real estate transaction or commercial credit
arrangement from a bank or similar financial institution or any Equity
Securities issued as part of a unit including debt of the Company or
its subsidiaries and in each case such issuances are primarily for
other than non-equity financing purposes;
(g) any Equity Securities that are issued by the Company
pursuant to a registration statement filed under the Securities Act;
(h) any Equity Securities issued in connection with strategic
transactions that include a commercial relationship involving the
Company and other entities, including (i) joint ventures,
manufacturing, marketing or distribution arrangements or (ii)
technology transfer or development arrangements; provided that such
strategic transactions and the issuance of Equity Securities pursuant
thereto has been approved by the Company's Board of Directors; and
(i) any Equity Securities issued in a transaction in which the
consideration received by the Company is determined by the
disinterested members of the Board to be at least equal to the fair
market value of the Equity Securities.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
duly executed, as of the day and year first above written.
LOUDCLOUD, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
Title: Executive Vice President
▇▇
▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ AND TRUST COMPANY OF
CALIFORNIA, N.A.
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
---------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Warrant Agent
EXHIBIT A
FORM OF WARRANT CERTIFICATE
LOUDCLOUD, INC.
CUSIP No. _________
No. _____
WARRANTS TO PURCHASE COMMON SHARES
This certifies that ______________, or its registered assigns, is
the owner of ___________ Warrants, each of which represents the right to
purchase from LOUDCLOUD, INC., a Delaware corporation (the "Company"), after
-------
February 9, 2000 (or in connection with the initial public offering of equity
securities (other than nonconvertible preferred stock) of the Company),
35.39448485 shares of the common stock, par value $0.001 per share, of the
Company (the "Common Shares") at an exercise price (the "Exercise Price") of
------------- --------------
$.01 per Common Share (subject to adjustment as provided in the Warrant
Agreement hereinafter referred to below), upon surrender hereof at the office of
STATE STREET BANK AND TRUST COMPANY OF CALIFORNIA, N.A., or to its successor, as
the warrant agent under the Warrant Agreement (any such warrant agent being
herein called the "Warrant Agent"), or such other location contemplated by
-------------
Section 12.6(b) of the Warrant Agreement, with the Subscription Form on the
reverse hereof duly executed, with signature guaranteed as therein specified and
simultaneous payment in full in cash or by certified or official bank or bank
cashier's check payable to the order of the Company. Notwithstanding the
foregoing, the Exercise Price may be paid by surrendering additional Warrants to
the Warrant Agent having an aggregate Spread equal to the aggregate Exercise
Price of the Warrants being exercised. At any time after February 9, 2000 and on
or before the Expiration Date, any outstanding Warrants may be exercised on any
Business Day; provided that the Warrant Registration Statement is, at the time
of exercise, effective and available for the exercise of Warrants or the
exercise of such Warrants is exempt from the registration requirements of the
Securities Act.
This Warrant Certificate is issued under and in accordance with a
Warrant Agreement dated as of February 9, 2000 (the "Warrant Agreement"),
-----------------
between the Company and State Street Bank and Trust Company of California, N.A.
and a Registration Rights Agreement dated as of February 9, 2000 (the "Warrant
-------
Registration Rights Agreement"), between the Company and the Warrant Agent and
-----------------------------
is subject to the Amended and Restated Certificate of Incorporation and Bylaws
of the Company and to the terms and provisions contained therein, to all of
which terms and provisions the Holder of this Warrant Certificate consents by
acceptance hereof. The terms of the Warrant Agreement and the Warrant
Registration Rights Agreement are hereby incorporated herein by reference and
made a part hereof. Reference is hereby made to the Warrant Agreement and the
Warrant Registration Rights Agreement for a full description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Company
A-2
and the Holders of the Warrants. The summary of the terms of the Warrant
Agreement and the Warrant Registration Rights Agreement contained in this
Warrant Certificate is qualified in its entirety by express reference to the
Warrant Agreement and the Warrant Registration Rights Agreement. All terms used
in this Warrant Certificate that are defined in the Warrant Agreement and the
Warrant Registration Rights Agreement shall have the meanings assigned to them
in such agreements.
Copies of the Warrant Agreement and the Warrant Registration
Rights Agreement are on file at the office of the Warrant Agent and may be
obtained by writing to the Warrant Agent at the following address:
State Street Bank and Trust Company of California, N.A.
▇▇▇ ▇▇▇▇ ▇/▇▇/ ▇▇▇▇▇▇, ▇▇/▇▇/ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Corporate Trust Administration (Loudcloud, Inc. 13%
Senior Discount Notes due 2005)
A "Repurchase Event", as defined in the Warrant Agreement, shall
----------------
be deemed to occur on any date when the Company (i) consolidates with or merges
into or with another person (but only where the holders of Common Stock receive
consideration in exchange for all or part of such Common Stock), if the Common
Stock (or other securities) thereafter issuable upon exercise of the Warrants is
not registered under the Exchange Act or (ii) sells all or substantially all of
its assets to another person, if the Common Stock (or other securities)
thereafter issuable upon exercise of the Warrants is not registered under the
Exchange Act; provided that, in each case, a "Repurchase Event" shall not be
deemed to have occurred if the consideration for such transaction consists
solely of cash.
Following a Repurchase Event, the Company must make an offer to
repurchase for cash all outstanding Warrants (a "Repurchase Offer"). If the
----------------
Company makes a Repurchase Offer, Holders may, until the expiration date of such
offer, surrender all or part of their Warrants for repurchase by the Company.
Warrants received by the Warrant Agent in proper form during a
Repurchase Offer will, except as otherwise provided in the Warrant Agreement, be
repurchased by the Company at a price in cash (the "Repurchase Price") equal to
----------------
the value on the Valuation Date relating thereto of the Common Shares issuable,
and other securities or property of the Company which would have been delivered
upon exercise of the Warrants had the Warrants been exercised (whether or not
the Warrants are then exercisable), less the Exercise Price in effect on the
Notice Date for such Repurchase Offer. The value of such Common Shares and other
securities will be (i) if the Common Shares (or other securities) are registered
under the Exchange Act, determined based upon the average of the daily market
prices (as determined pursuant to Section 3.4(d)(ii)(1) of the Warrant
Agreement) of the Common Shares (or other securities) for the 20
A-3
consecutive trading days immediately preceding such Valuation Date or (ii) if
the Common Shares (or other securities) are not registered under the Exchange
Act or if the value cannot be computed under clause (i) above, determined by the
Independent Financial Expert (as defined in the Warrant Agreement), in each case
as set forth in the Warrant Agreement.
The "Valuation Date" as defined in the Warrant Agreement shall be
--------------
deemed to occur on the date five Business Days prior to the date notice of the
Repurchase Offer is first given.
If the Company fails to make or complete a Repurchase Offer (a
"Default") as required by the Warrant Agreement, it shall be obligated to
-------
increase the amount otherwise payable pursuant to the Warrant Agreement in
respect of the Repurchase Offer by an amount equal to interest thereon at a rate
per annum of 13% from the date of the Default to the date of payment, which
interest shall compound quarterly.
If the Company merges or consolidates with or into, or sells all
or substantially all of its property and assets to, another Person and the
consideration received by holders of Common Shares consists solely of cash, the
Holders of Warrants shall be entitled to receive distributions on the date of
such event on an equal basis with holders of Common Shares (or other securities
issuable upon exercise of the Warrants) as if the Warrants had been exercised
immediately prior to such event (less the Exercise Price). Upon receipt of such
payment, if any, the rights of a Holder shall terminate and cease and such
Holder's Warrants shall expire.
The number of Common Shares purchasable upon the exercise of each
Warrant and the price per share are subject to adjustment as provided in the
Warrant Agreement. Except as stated in the immediately preceding paragraph and
in the Warrant Agreement, in the event the Company merges or consolidates with,
or sells all or substantially all of its assets to, another Person, each Warrant
will, upon exercise, entitle the Holder thereof to receive the number of shares
of capital stock or other securities or the amount of money and other property
which the holder of a Common Share (or other securities or property issuable
upon exercise of a Warrant) is entitled to receive upon completion of such
merger, consolidation or sale.
As to any final fraction of a share which the same Holder of one
or more Warrant Certificates would otherwise be entitled to purchase upon
exercise thereof in the same transaction, the Company may pay the cash value
thereof determined as provided in the Warrant Agreement.
Subject to Article VI of the Warrant Agreement, all Common Shares
issuable by the Company upon the exercise of Warrants shall be validly issued,
fully paid and not subject to any calls for funds, and the Company shall pay any
taxes and other governmental charges that may be imposed under the laws of the
United States of America or any political subdivision or taxing authority
thereof or therein in respect of the issue or delivery thereof upon exercise of
Warrants (other than income taxes imposed on the Holders). The Company shall not
be required, however, to pay any tax or other charge imposed in connection with
any transfer involved in the issue of any certificate for Common Shares
(including other securities or property issuable upon the exercise of
the Warrants) or payment of cash to any Person other than the Holder of a
Warrant Certificate surrendered upon the exercise of a Warrant and in case of
such transfer or payment, the Warrant Agent and the Company shall not be
required to issue any share certificate or pay any cash until such tax or charge
has been paid or it has been established to the Warrant Agent's and the
Company's satisfaction that no such tax or charge is due.
Subject to the restrictions on and conditions to transfer set
forth in Articles II and VIII of the Warrant Agreement, this Warrant Certificate
and all rights hereunder are transferable by the registered Holder hereof, in
whole or in part, on the register of the Company maintained by the Warrant Agent
for such purpose at the Warrant Agent's office in New York, New York upon
surrender of this Warrant Certificate duly endorsed, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Warrant Agent
duly executed, with signatures guaranteed as specified in the attached Form of
Assignment, by the registered Holder hereof or his attorney duly authorized in
writing and by such other documentation required pursuant to the Warrant
Agreement and upon payment of any necessary transfer tax or other governmental
charge imposed upon such transfer. Upon any partial transfer, the Company will
sign and issue and the Warrant Agent will countersign and deliver to such Holder
a new Warrant Certificate or Certificates with respect to any portion not so
transferred. Each taker and Holder of this Warrant Certificate, by taking and
holding the same, consents and agrees that prior to the registration of transfer
as provided in the Warrant Agreement, the Company and the Warrant Agent may
treat the person in whose name the Warrants are registered as the absolute owner
hereof for any purpose and as the Person entitled to exercise the rights
represented hereby, any notice to the contrary notwithstanding. Accordingly, the
Company and/or the Warrant Agent shall not, except as ordered by a court of
competent jurisdiction as required by law, be bound to recognize any equitable
or other claim to or interest in the Warrants on the part of any person other
than such Registered Holder, whether or not it shall have express or other
notice thereof.
This Warrant Certificate may be exchanged at the office of the
Warrant Agent maintained for such purpose in New York, New York, for Warrant
Certificates representing the same aggregate number of Warrants, each new
Warrant Certificate to represent such number of Warrants as the Holder hereof
shall designate at the time of such exchange.
Each Holder hereby agrees that such Holder shall not sell,
transfer, make any short sale of, grant any option for the purchase of, or enter
into any hedging or similar transaction with the same economic effect as a sale
of any Warrants or Common Stock of the Company held by such Holder (other than
those included in the registration) for a period specified by the representative
of the underwriters of Common Stock of the Company not to exceed one hundred
eighty (180) days following the effective date of a registration statement of
the Company filed under the Securities Act; provided that:
A-5
(i) such agreement shall apply only to the Company's first firm
commitment underwritten public offering of its Common Stock registered
under the Securities Act, which is either the subject of a firm
underwriting commitment or an on-line offering pursuant to the Dutch-
auction process (the "Initial Offering");
----------------
(ii) all officers and directors of the Company who hold capital
stock or rights to acquire capital stock of the Company and greater than
five percent (5%) stockholders of the Company enter into similar
agreements; and
(iii) such agreement shall not apply to any shares of Common Stock
(or other securities) purchased in the Initial Offering or purchased in the
open market following the Initial Offering.
Prior to the exercise of the Warrants represented hereby, the Holder
of this Warrant Certificate, as such, shall not be entitled to any rights of a
stockholder of the Company, including, without limitation, the right to vote or
to consent to any action of the stockholders, to receive any distributions, to
exercise any pre-emptive right or to receive any notice of meetings of
stockholders, and shall not be entitled to receive any notice of any proceedings
of the Company except as provided in the Warrant Agreement.
This Warrant Certificate shall be void and all rights evidenced hereby
shall cease on February 9, 2010, unless sooner terminated by the liquidation,
dissolution or winding-up of the Company or as otherwise provided in the Warrant
Agreement upon the consolidation or merger of the Company with, or sale of the
Company to, another Person or unless such date is extended as provided in the
Warrant Agreement.
This Warrant Certificate shall not be valid for any purpose until it
shall have been countersigned by the Warrant Agent.
LOUDCLOUD, INC.
By: _______________________________
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: President and Chief Executive
Officer
By: _______________________________
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: Executive Vice President
Dated:
Countersigned:
STATE STREET BANK AND TRUST COMPANY
OF CALIFORNIA, N.A.,
as Warrant Agent
By: ________________________
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Warrant Agent
A-7
FORM OF REVERSE OF WARRANT CERTIFICATE
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
To: State Street Bank and Trust Company of California, N.A.
▇▇▇ ▇▇▇▇ ▇/▇▇/ ▇▇▇▇▇▇, ▇▇/▇▇/ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Corporate Trust Administration (Loudcloud, Inc. 13% Senior
Discount Notes due 2005)
The undersigned irrevocably exercises ________ of the Warrants
represented by this Warrant Certificate and herewith makes payment of $ _______
(such payment being in cash or by certified or official bank or bank cashier's
check payable to the order or at the direction of Loudcloud, Inc. or the
exercise price may be paid by surrendering additional Warrants to the Warrant
Agent having an aggregate Spread equal to the aggregate exercise price of the
Warrants being exercised) all at the exercise price and on the terms and
conditions specified in this Warrant Certificate and in the Warrant Agreement
and the Warrant Registration Rights Agreement referred to herein and surrenders
this Warrant Certificate and all right, title and interest therein to and
directs that the common stock, par value $0.001 per share, of Loudcloud, Inc.
(the "Common Shares") deliverable upon the exercise of such Warrants be
registered or placed in the name and at the address specified below and
delivered thereto.
A-8
Dated: _______________________________
(Signature of Owner)
_______________________________
(▇▇▇▇▇▇ ▇▇▇▇▇▇▇)
_______________________________
(City) (State) (Zip Code)
Signature Guaranteed By:
_______________________________
Signatures must be guaranteed by an "eligible
guarantor institution" meeting the
requirements of the Warrant Agent, which
requirements include membership or
participation in the Security Transfer Agent
Medallion Program ("STAMP") or such other
"signature guarantee program" as may be
determined by the Warrant Agent in addition
to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act
of 1934, as amended.
Securities and/or check or other property to be issued or delivered to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
A-9
FORM OF CERTIFICATE FOR REPURCHASE OFFER
(To be executed only upon repurchase
of Warrant by Loudcloud, Inc.)
To:
The undersigned, having received prior notice of the consideration for
which LOUDCLOUD, INC. will repurchase the Warrants represented by the within
Warrant Certificate, hereby surrenders this Warrant Certificate for repurchase
by LOUDCLOUD, INC. of the number of Warrants specified below for the
consideration set forth in such notice.
Dated:
________________________________________
(Number of Warrants)
________________________________________
(Signature of Owner)
________________________________________
(▇▇▇▇▇▇ ▇▇▇▇▇▇▇)
________________________________________
(City) (State) (Zip Code)
Signature Guaranteed By:
________________________________________
Signatures must be guaranteed by an "eligible
guarantor institution" meeting the requirements of
the Warrant Agent, which requirements include
membership or participation in the Security
Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be
determined by the Warrant Agent in addition to, or
in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
Securities and/or check to be issued to:
A-10
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
A-11
FORM OF ASSIGNMENT
In consideration of monies or other valuable consideration
received from the Assignee(s) named below, the undersigned registered Holder of
this Warrant Certificate hereby sells, assigns, and transfers unto the
Assignee(s) named below (including the undersigned with respect to any Warrants
constituting a part of the Warrants evidenced by this Warrant Certificate not
being assigned hereby) all of the right of the undersigned under this Warrant
Certificate, with respect to the number of Warrants set forth below:
Name(s) of Assignee(s): _____________________________________
Address: ____________________________________________________
No. of Warrants: ____________________________________________
Please insert social security or other identifying number of assignee(s):
and does hereby irrevocably constitute and appoint ________________________ the
undersigned's attorney to make such transfer on the books of __________________
maintained for the purposes, with full power of substitution in the premises.
In connection with any transfer of Warrants, the undersigned
confirms that without utilizing any general solicitation or general advertising
that:
Check One
---------
[_] (a) these Warrants are being transferred in compliance with the exemption
from registration under the U.S. Securities Act of 1933, as amended,
provided by Rule 144A thereunder.
or
--
[_] (b) these Warrants are being transferred other than in accordance with (a)
above and documents are being furnished which comply with the
conditions of transfer set forth in this Warrant Certificate and the
Warrant Agreement.
or
--
[_] (c) these Warrants are being transferred pursuant to an effective
registration statement under the U.S. Securities Act of 1933, as
amended.
A-12
If none of the foregoing boxes is checked, the Warrant Agent shall not be
obligated to register the Warrants in the name of any Person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Article VIII of the Warrant Agreement shall
have been satisfied.
Dated:
____________________________________
(Signature of Owner)
____________________________________
(▇▇▇▇▇▇ ▇▇▇▇▇▇▇)
____________________________________
(City) (State) (Zip Code)
Signature Guaranteed By:
____________________________________
Signatures must be guaranteed by an "eligible
guarantor institution" meeting the
requirements of the Warrant Agent, which
requirements include membership or
participation in the Security Transfer Agent
Medallion Program ("STAMP") or such other
"signature guarantee program" as may be
determined by the Warrant Agent in addition
to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act
of 1934, as amended.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing the
Warrant(s) for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the U.S. Securities
Act of 1933, as amended, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding Loudcloud, Inc. as the undersigned has requested pursuant to Rule 144A
or has determined not to request such information and that it is aware that the
transferor is relying upon the undersigned's
A-13
foregoing representations in order to claim the exemption from registration
provided by Rule 144A.
Dated:________________
_______________________________________________
[NOTE: To be executed by an executive officer]
EXHIBIT B-1
Form of Certificate to Be
Delivered by Transferor in Connection with
Transfers to Institutional Accredited Investors
-----------------------------------------------
[Date]
Loudcloud, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
State Street Bank and Trust Company of California, N.A.
▇▇▇ ▇▇▇▇ ▇/▇▇/ ▇▇▇▇▇▇, ▇▇/▇▇/ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Corporate Trust Administration (Loudcloud, Inc. 13% Senior
Discount Notes due 2005)
Re: Warrants (the "Warrants") to Purchase
--------
Common Shares of Loudcloud, Inc. (the "Company")
-------
Ladies and Gentlemen:
We hereby certify that such transfer is being effected in compliance
with the transfer restrictions applicable to the Warrants or interests therein
transferred pursuant to and in accordance with the U.S. Securities Act of 1933,
as amended (the "Securities Act"), and accordingly we hereby further certify
--------------
that (check one):
(a) [_] such transfer is being effected pursuant to and in accordance
with Rule 144 under the Securities Act;
or
(b) [_] such transfer is being effected to the Company or a subsidiary
thereof;
or
(c) [_] such transfer is being effected pursuant to an effective
registration statement under the Securities Act;
or
B1-2
(d) [_] such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A or Rule 144
thereunder, and we hereby further certify that such transfer complies with the
transfer restrictions applicable to the Warrants or interests therein
transferred to Institutional Accredited Investors and in accordance with the
requirements of the exemption claimed, which certification is supported by an
Opinion of Counsel provided by us or the transferee (a copy of which we have
attached to this certification), to the effect that such transfer is in
compliance with the Securities Act. Upon consummation of the proposed transfer
in accordance with the terms of the Warrant Agreement, the transferred Warrants
or interests therein will be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the Certificated Warrant and in the
Warrant Agreement and the Securities Act.
Very truly yours,
[Name of Transferor]
By: __________________________________
Authorized Signatory
EXHIBIT B-2
Form of Certificate to Be
Delivered by Transferees in Connection with
Transfers to Institutional Accredited Investors
-----------------------------------------------
[Date]
Loudcloud, Inc.
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
State Street Bank and Trust Company of California, N.A.
▇▇▇ ▇▇▇▇ ▇/▇▇/ ▇▇▇▇▇▇, ▇▇/▇▇/ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Corporate Trust Administration (Loudcloud, Inc. 13% Senior
Discount Notes due 2005)
Re: Warrants (the "Warrants") to Purchase
--------
Common Shares of Loudcloud, Inc. (the "Company")
-------
Dear Sirs:
In connection with our proposed purchase of ___________ aggregate
number of Warrants, we confirm that:
1. We understand that any subsequent transfer of the Warrants, any
interest therein or the Common Shares issuable upon exercise of any Warrant
(the "Warrant Shares") is subject to certain restrictions and conditions
--------------
set forth in the Warrant Agreement dated as of February 9, 2000 relating to
the Warrants (the "Warrant Agreement") and the Warrant Registration Rights
-----------------
Agreement dated as of February 9, 2000 relating to the Warrants (the
"Warrant Registration Rights Agreement") and the undersigned agrees to be
-------------------------------------
bound by, and not to resell, pledge or otherwise transfer the Warrants or
Warrant Shares except in compliance with, such restrictions and conditions
and the U.S. Securities Act of 1933, as amended (the "Securities Act").
--------------
2. We understand that the Warrants represented by this Warrant
Certificate and, as of the date this Warrant Certificate was originally
issued, the Warrant Shares have not been registered under the Securities
Act, and accordingly may not be offered, sold, pledged or otherwise
transferred within the United States or to, or for the account or benefit
of, U.S. Persons except as set forth in the following sentence. We agree
that we will not, within the time period referred to under Rule 144(k) of
the Securities Act (taking into
B2-2
account the provisions of Rule 144(d) under the Securities Act, if
applicable) under the Securities Act as in effect on the date of the
transfer of this Warrant, resell or otherwise transfer the Warrants
represented by this Warrant Certificate except (a) to Loudcloud, Inc. or
any subsidiary thereof, (b) following, the Rule 144A Availability Date, to
a qualified institutional buyer in compliance with Rule 144A under the
Securities Act, (c) pursuant to the exemption from registration provided by
Rule 144 under the Securities Act (if available), (d) to an institutional
accredited investor that, prior to such transfer, furnishes to you, to the
Company and, in the case of the Warrant Shares, to the transfer agent and
registrar therefor, a signed letter containing certain representations and
agreements relating to the restrictions on transfer of the Warrants
represented by this Warrant Certificate (the form of which letter can be
obtained from the Warrant Agent) and an opinion of counsel acceptable to
Loudcloud, Inc. and its counsel that such transfer is in compliance with
the Securities Act or (e) pursuant to an effective registration statement
under the Securities Act and, in each case, in accordance with applicable
state securities laws.
3. We understand that, on any proposed resale of any Warrants, any
interest therein or Warrant Shares, we will be required to furnish to you
and the Company such certifications, legal opinions and other information
as you and the Company may reasonably require to confirm that the proposed
sale complies with the foregoing restrictions. We further understand that
the Warrants purchased by us will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in the
Warrants, and we and any accounts for which we are acting are each able to
bear the economic risk of our or its investment for an indefinite period of
time.
5. We are acquiring the Warrants purchased by us for our own account
or for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion,
without a view to distribution in violation of the Securities Act.
B2-3
You, the Company and, if applicable, the transfer agent and registrar
for the Warrant Shares are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceedings or official inquiry with respect to the
matters covered hereby.
Very truly yours,
[Name of Transferee]
By: _________________________________
Authorized Signature
APPENDIX A
LIST OF FINANCIAL EXPERTS
-------------------------
Deutsche Bank Alex. ▇▇▇▇▇
Bear, ▇▇▇▇▇▇▇ & Co. Inc.
Credit Suisse First Boston Corporation
Warburg Dillon Read LLC
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ Securities Corporation
▇▇▇▇▇▇ ▇▇▇▇, LLP
▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co.
Lazard Freres & Co.
▇▇▇▇▇▇ Brothers Inc.
▇▇▇▇▇▇▇ Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated
PaineWebber Incorporated
Prudential Securities Inc.
▇▇▇▇▇▇▇ ▇▇▇▇▇ Barney Inc
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇ Partners
Banc of America Securities LLC
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ LLC
Broadview Associates LLC
CIBC ▇▇▇▇▇▇▇▇▇▇▇ Corp.
▇▇▇▇▇ & Company