Exhibit 4.1
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WARRANT AGREEMENT OF
MAI SYSTEMS CORPORATION
750,000 Shares
Dated as of March 3, 1997
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Common Stock Purchase Warrants
WARRANT AGREEMENT dated as of March 3, 1997, between MAI Systems
Corporation, a Delaware corporation (the "Company"), the Company as Warrant
Agent (in such capacity, "Warrant Agent"), and those persons signatory hereto
(collectively, the "Warrant Holder" or "Holder").
The Company proposes to issue Common Stock Purchase Warrants as hereinafter
described (collectively the "Warrants") to purchase an aggregate of up to
750,000 shares of its Common Stock, $0.01 par value per share (the shares of
Common Stock issuable on exercise of the Warrants being referred to herein as
the "Warrant Shares"), in favor of the Warrant Holder. Capitalized terms used
herein, if not otherwise defined, are defined in Section 8 hereof.
The Company and the Warrant Holder hereby agree as follows:
Section 1. Transferability; Notice of Corporate
Actions; Form of the Warrants.
1.1 Registration. The Warrants shall be numbered and shall be
registered on the books of the Company maintained at the principal office of the
Company in Irvine, California ("the Warrant Register"). The Company shall be
entitled to treat the Holder of the Warrants as the owner in fact thereof for
all purposes and shall not be bound to recognize any equitable or other claim to
or interest in such Warrants on the part of any other Person.
1.2 Transferability. The Warrants are freely transferable, subject
to applicable securities laws restrictions. The holder of any Warrants so
transferred shall continue to be bound by this Agreement. However, the minimum
denomination of any Warrant hereunder shall be a Warrant exchangeable for 10,000
Warrant Shares.
1.3 Transfer-General. Subject to the terms hereof, the Warrants
shall be transferable only on the books of the Company maintained at its
principal office upon delivery thereof duly endorsed by the Holder or by his
duly authorized attorney or representative, or accompanied by proper evidence of
succession, assignment or authority to transfer. In all cases of transfer by an
attorney, the original power of attorney, duly approved, or a copy thereof, duly
certified, shall be deposited and remain with the Company. In case of transfer
by executors, administrators, guardians or other legal representatives, duly
authenticated evidence of their authority shall be produced, and may be required
to be deposited and to remain with the Company in its discretion. Upon any
registration of transfer, the Company shall countersign and deliver new Warrants
to the Persons entitled thereto. The Company or the Warrant Agent may require
the payment of a sum sufficient to cover any tax or governmental charge that may
be imposed in connection with any such transfer.
1.4 Notices of Corporate Actions. In the event of: (a) any taking
by the Company of a record of the holders of the Common Stock for the purpose of
determining the holders thereof who are entitled to receive any extraordinary
dividend or distribution, (other than
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cash dividends representing a dividend payment on an annualized basis of not
more than 10% of the Company's Market Capitalization at the time of such
dividend) or any right to subscribe for, purchase or otherwise acquire any
shares of capital stock of any class or any other securities, (b) any capital
reorganization of the Company, any reclassification or recapitalization of the
capital stock of the Company or any consolidation or merger involving the
Company and any other Person or any transfer or other disposition of all or
substantially all the assets of the Company to another Person; (c) any voluntary
or involuntary dissolution, liquidation or winding-up of the Company, or (d) any
amendment of the Certificate of Incorporation of the Company, the Company shall
mail to each Warrant Holder in accordance with the provisions of Section 14
hereof a notice specifying (i) the date or expected date on which any such
record is to be taken for the purpose of such dividend, distribution or right,
and the amount and character of such dividend, distribution or right and (ii)
the date or expected date on which any such reorganization, reclassification,
recapitalization, consolidation, merger, transfer, disposition, dissolution,
liquidation or winding-up is to take place, the time, if any such time is to be
fixed, as of which the holders of record of Common Stock shall be entitled to
exchange their shares of Common Stock for the securities or Other Property
deliverable upon such reorganization, reclassification, recapitalization,
consolidation, merger, transfer, disposition, dissolution, liquidation or
winding-up and a description in reasonable detail of the transaction. Such
notice shall be mailed to the extent practicable at least thirty (30), but not
more than ninety (90) days prior to the date therein specified. In the event
that the Company at any time sends any notice to the holders of its Common
Stock, it shall concurrently send a copy of such notice to each Warrant Holder.
1.5 Form of the Warrants. The text of the Warrants and of the form
of election to purchase Warrant Shares (the "Purchase Form") shall be
substantially as set forth respectively in Exhibits A and B attached hereto. The
price per Warrant Share (the "Warrant Price") and the number of Warrant Shares
issuable upon exercise of each Warrant are subject to adjustment upon the
occurrence of certain events, all as hereinafter provided. The Warrants shall be
executed on behalf of the Company by its Chairman of the Board, its Chief
Executive Officer, President or one of its Vice Presidents.
The Warrants shall be dated as of the date of countersignature
thereof by the Company either upon initial issuance or upon transfer.
1.6 Restrictive Legend. Except as otherwise provided in this
Section 1.6, each Warrant and each certificate for Warrants or Warrant Shares
and each certificate for Warrant Shares issued to any subsequent transferee of
any such certificate, shall be stamped or otherwise imprinted with a legend in
substantially the following form:
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THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR
EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE
HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL
HAVE DELIVERED TO THE COMPANY AN OPINION OF COUNSEL (WHO MAY
BE AN EMPLOYEE OF SUCH HOLDER) REASONABLY ACCEPTABLE TO THE
COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH
TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT
AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE COMPANY A
CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE
TO THE PROPOSED TRANSFER.
1.7 Termination of Securities Laws Restrictions. The legend
requirements of Section 1.6 shall terminate as to any particular Warrant or
Warrant Shares when the Company shall have received from the Holder thereof an
opinion of counsel reasonably acceptable to the Company to the effect that such
legend is not required in order to ensure compliance with the Securities Act.
Whenever the restrictions imposed by this Agreement shall terminate as to the
Warrants, as hereinabove provided, the Holder hereof shall be entitled to
receive from the Company, at the expense of the Company, a new Warrant or
Warrant Shares bearing no legends.
Section 2. Term of the Warrants; Exercise of the Warrants; Warrant Price,
Etc.
2.1 Term of the Warrants. Subject to the terms of this Agreement,
the Holder shall have the right, which may be exercised from time to time, from
and through the dates set forth in the Warrants, to purchase from the Company
the number of fully paid and nonassessable Warrant Shares which the Holder may
at the time be entitled to purchase on exercise of such Warrant. If the last day
for the exercise of the Warrants shall not be a Business Day, then the Warrant
may be exercised on the next succeeding Business Day.
2.2 Vesting of the Warrants. The Warrants shall immediately vest
and may be exercised on or after the date hereof in accordance with the terms of
this Agreement and the Warrant Certificate.
2.3 Call Provisions. In the event that after the date that is six
months and one Business Day from the date of issuance of the Warrants, (i) the
daily market price (as
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included in the definition of Current Market Price below) of the Company's
Common Stock shall equal or exceed one hundred and fifty percent (150%) of the
Exercise Price for any ten trading days during the most recent consecutive
twenty trading-day period immediately prior to the commencement of the Notice
Period (as defined below), (ii) the Company is not in default of its obligations
hereunder or under the Registration Rights Agreement and (iii) all of the
Warrant Shares may be transferred in a public sale pursuant to a registration
statement filed under the Securities Act or in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(1) and pursuant to Sections 1.2 and 1.3 hereof, then the Company shall
have the right, for a purchase price of $1.00 per every ten thousand Warrant
Shares represented by the Warrants being called (rounded to the nearest cent),
to call the Warrants at the completion of the Notice Period. The Warrants shall
remain subject to prior exercise by the Holders during the Notice Period, but
not thereafter.
2.4 Exercise of the Warrants. The Warrants may be exercised upon
surrender to the Company, at its principal office, of the certificate evidencing
the Warrant to be exercised, together with the Purchase Form, in the form of
Exhibit B hereto, on the reverse thereof duly filled in and signed, and upon
payment to the Company, of the Warrant Price (as defined in and determined in
accordance with the provisions of Sections 2 and 6 hereof), for the number of
Warrant Shares in respect of which such Warrant is then exercised. Upon partial
exercise, a Warrant Certificate for the unexercised portion shall be delivered
to the Holder. Payment of the aggregate Warrant Price shall be payable in cash,
by certified or official bank check or wire transfer, or by delivery to the
Company of the Company's 11% Subordinated Notes due 2004, which shall be valued
for this purpose at the principal amount thereof so delivered plus the accrued
interest thereon.
Subject to Section 3 hereof, upon such surrender of the
Warrants and payment of the Warrant Price as aforesaid, the Company shall issue
and cause to be delivered with all reasonable dispatch to or upon the written
order of the Holder and in such name or names as the Holder may designate, a
certificate or certificates for the number of full Warrant Shares so purchased
upon the exercise of such Warrant, together with cash, as provided in Section 9
hereof, in respect of any fractional Warrant Shares otherwise issuable upon such
surrender. Such certificate or certificates shall be deemed to have been issued
and any Person so designated to be named therein shall be deemed to have become
a holder of record of such Warrant Shares as of the date of the surrender of
such Warrant and payment of the Warrant Price, as aforesaid; provided, however,
that if, at the date of surrender of such Warrant and payment of such Warrant
Price, the transfer books for the Warrant Shares or other class of stock
purchasable upon the exercise of such Warrant shall be closed, the certificates
for the Warrant Shares in respect of which such Warrant are then exercised shall
be issuable as of the date on which such books shall next be opened (whether
before or after the Expiration Date or the Notice Period) and until such date
the Company shall be under no duty to deliver any certificate for such Warrant
Shares; provided, further, that the transfer books of record, unless otherwise
required by law, shall not be closed at any one time for a period longer than 20
calendar days.
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2.5 Warrant Price. The price per share at which Warrant Shares
shall be purchasable upon exercise of the Warrant (the "Warrant Price") shall be
$8.00, subject to adjustment pursuant to Section 6 hereof.
Section 3. Payment of Taxes and Indemnification.
3.1 Payment of Taxes. The Company will pay all documentary stamp
taxes, if any, attributable to the issuance of Warrants and Warrant Shares upon
the exercise of the Warrants.
3.2 Indemnification. Warrant Holder hereby agrees to indemnify and
hold the Company harmless from any and all taxes on the Warrant Holder that may
result from the issuance of the Warrants or any subsequent exercise of the
Warrants and issuance of the Warrant Shares.
Section 4. Mutilated or Missing Warrants. In case the Warrants shall be
mutilated, lost, stolen or destroyed, the Company shall issue and deliver in
exchange and substitution for and upon cancellation of the mutilated Warrants,
or in lieu of and substitution for the Warrants lost, stolen or destroyed, a new
certificate of like tenor and representing an equivalent right or interest; but
only upon receipt of evidence reasonably satisfactory to the Company of such
loss, theft or destruction of such Warrant certificate and indemnity or bond, if
requested, also reasonably satisfactory to them. An applicant for such
substitute Warrant certificate shall also comply with such other reasonable
regulations and pay such other reasonable charges as the Company may prescribe.
Section 5. Reservation of Warrant Shares.
5.1 Reservation of Warrant Shares. There have been reserved, and
the Company shall at all times keep reserved, out of its authorized shares of
Common Stock, a number of shares of Common Stock sufficient to provide for the
exercise of the rights of purchase represented by the outstanding Warrants. The
transfer agent for the Common Stock ("Transfer Agent"), and every subsequent
transfer agent for any shares of the Company's capital stock issuable upon the
exercise of any of the rights of purchase aforesaid will be and are hereby
irrevocably authorized and directed at all times until the Expiration Date to
reserve such number of authorized shares as shall be requisite for such purpose.
The Company will keep a copy of this Agreement on file with the Transfer Agent
and with every subsequent transfer agent for any shares of the Company's capital
stock issuable upon the exercise of the rights of purchase represented by the
Warrants. The Company covenants that all Warrant Shares which may be issued upon
exercise of Warrants will, upon issue, be fully paid, nonassessable, free of
preemptive rights and free from all taxes, liens, charges and security interests
with respect to the issue thereof. The Company will supply such Transfer Agent
and any subsequent transfer agent with duly executed stock certificates for such
purpose and will itself provide or otherwise make available any cash which may
be payable as provided in Section 9 of this Agreement. The Company will furnish
to such Transfer Agent a copy of all notices of adjustments, and certificates
related thereto, transmitted to each Holder. The
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Warrants surrendered in the exercise of the rights thereby evidenced shall be
canceled by the Company.
5.2 Cancellation of the Warrants. In the event the Company shall
purchase or otherwise acquire the Warrants, the same shall be canceled and
retired.
Section 6. Adjustment of Warrant Price and Number of Warrant Shares. The
number and kind of securities purchasable upon the exercise of the Warrants and
the Warrant Price shall be subject to adjustment from time to time upon the
happening of certain events, as hereinafter defined.
6.1 Stock Dividends, Subdivisions and Combinations. If at any time
the Company shall:
(i) take a record of the holders of its Common Stock for the
purpose of entitling them to receive a dividend payable in, or other
distribution of, additional shares of Common Stock,
(ii) subdivide its shares of Common Stock Outstanding into a
larger number of shares of such Common Stock, or
(iii) combine its shares of Common Stock Outstanding into a
smaller number of shares of such Common Stock,
then the Exercise Price shall be adjusted to equal the product of the Exercise
Price in effect immediately prior to such event multiplied by a fraction the
numerator of which is equal to the number of shares of Common Stock Outstanding
immediately prior to the adjustment and the denominator of which is equal to the
number of shares of Common Stock Outstanding immediately after such adjustment.
6.2 Rights Offerings of Common Stock. (a) In case the Company shall
issue rights, options or warrants to all holders of its Common Stock entitling
them to subscribe for or purchase shares of Common Stock at a price per share
less than the Current Market Price per share (determined as provided below) of
the Common Stock on the date fixed for the determination of stockholders
entitled to receive such rights, options or warrants, the Exercise Price in
effect at the opening of business on the day following the date fixed for such
determination shall be decreased by multiplying such Exercise Price by a
fraction of which the numerator shall be the number of shares of Common Stock
outstanding at the close of business on the date fixed for such determination
plus the number of shares of Common Stock which the aggregate of the offering
price of the total number of shares of Common Stock so offered for subscription
or purchase would purchase at such Current Market Price and the denominator
shall be the number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination plus the number of shares of
Common Stock so offered for subscription or purchase, such decrease to become
effective immediately after the opening of business on the day following the
date fixed for such determination. For the purposes of this
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provision, the number of shares of Common Stock at any time outstanding shall
not include shares held in the treasury of the Company but shall include shares
issuable in respect of script certificates issued in lieu of fractions of shares
of Common Stock. The Company will not issue any rights, options or warrants in
respect of shares of Common Stock held in the treasury of the Company.
(b) The provisions of this Section 6.2 shall not apply to any
issuance of Common Stock for which an adjustment is provided for under Section
6.1.
6.3 Other Distributions. In case the Company shall, by dividend or
otherwise, distribute to all holders of its Common Stock evidences of its
indebtedness, shares of any class of capital stock, or other property (including
securities, but excluding (i) any rights, options or warrants referred to in
Section 6.2, (ii) any dividend or distribution paid exclusively in cash, (iii)
any dividend or distribution referred to in Section 6.1, and (iv) any merger or
consolidation or other transactions to which Section 6.5 or Section 6.7
applies), the Exercise Price shall be reduced by multiplying the Exercise Price
in effect immediately prior to the close of business on the date fixed for the
determination of stockholders entitled to receive such distribution by a
fraction of which the numerator shall be the Current Market Price per share of
the Common Stock on the date fixed for such determination (the "Reference Date")
less the then fair market value (as determined by the Board of Directors, whose
determination shall be conclusive and described in a Board Resolution filed with
the Warrant Agent) on the Reference Date of the portion assets, shares or
evidences of indebtedness of the Company so distributed applicable to one share
of Common Stock and the denominator shall be the Current Market Price per share
of the Common Stock on the Reference Date, such adjustment to become effective
immediately prior to the opening of business on the day following the Reference
Date.
6.4 Adjustment of Number of Shares Purchasable. Upon any adjustment
of the Exercise Price as provided in Section 6.1, 6.2 or 6.3 hereof, the Warrant
Holder shall thereafter be entitled to purchase upon the exercise of the
Warrants, at the Exercise Price resulting from such adjustment, the number of
shares of Common Stock (calculated to the nearest 1/100th of a share) obtained
by multiplying the Exercise Price in effect immediately prior to such adjustment
by the number of shares of Common Stock issuable on the exercise hereof
immediately prior to such adjustment and dividing the product thereof by the
Exercise Price resulting from such adjustment.
6.5 Reorganization, Reclassification, Merger, Consolidation or
Disposition of Assets. In case the Company shall reorganize its capital,
reclassify its capital stock, consolidate or merge with or into another
corporation (where the Company is not the surviving corporation or where there
is any change whatsoever in, or distribution with respect to, the Outstanding
Common Stock of the Company), or sell, transfer or otherwise dispose of all or
substantially all of its property, assets or business to another corporation
and, pursuant to the terms of such reorganization, reclassification, merger,
consolidation or disposition of assets, (i) shares of common stock of the
successor or acquiring corporation or of the Company (if it is the surviving
corporation) or (ii) any cash, shares of stock or other securities or
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property of any nature whatsoever (including warrants or other subscription or
purchase rights) in addition to or in lieu of common stock of the successor or
acquiring corporation ("Other Property") are to be received by or distributed to
the holders of Common Stock of the Company who are holders immediately prior to
such transaction, then the Warrant Holder shall have the right thereafter to
receive, upon exercise of the Warrants, the number of shares of common stock of
the successor or acquiring corporation or of the Company, if it is the surviving
corporation, and Other Property receivable upon or as a result of such
reorganization, reclassification, merger, consolidation or disposition of assets
by a holder of the number of shares of Common Stock for which the Warrants are
exercisable immediately prior to such event. In such event, the aggregate
Exercise Price otherwise payable for the shares of Common Stock issuable upon
exercise of the Warrants shall be allocated among the shares of common stock and
Other Property receivable as a result of such reorganization, reclassification,
merger, consolidation or disposition of assets in proportion to the respective
fair market values of such shares of common stock and Other Property as
determined in good faith by the Board of Directors of the Company. In case of
any such reorganization, reclassification, merger, consolidation or disposition
of assets, the successor or acquiring corporation (if other than the Company)
shall expressly assume the due and punctual observance and performance of each
and every covenant and condition of this Agreement to be performed and observed
by the Company and all the obligations and liabilities hereunder, subject to
such modifications as may be reasonably deemed appropriate (as determined by
resolution of the Board of Directors of the Company) in order to provide for
adjustments of any shares of the common stock of such successor or acquiring
corporation for which the Warrants thus become exercisable, which modifications
shall be as equivalent as practicable to the adjustments provided for in this
Section 6. For purposes of this Section 6.5, "common stock of the successor or
acquiring corporation" shall include stock of such corporation of any class that
is not preferred as to dividends or assets over any other class of stock of such
corporation and that is not subject to redemption and shall also include any
evidences of indebtedness, shares of stock or other securities that are
convertible into or exchangeable for any such stock, either immediately or upon
the arrival of a specified date or the happening of a specified event and any
warrants or other rights to subscribe for or purchase any such stock. The
foregoing provisions of this Section 6.5 shall similarly apply to successive
reorganizations, reclassification, mergers, consolidations or disposition of
assets.
6.6 Determination of Consideration. For purposes of Sections 6.1,
6.3 and 6.5 hereof, the consideration received and/or receivable by the Company
in connection with the issuance, sale, grant or exercise of additional shares of
Common Stock, Stock Purchase Rights or Convertible Securities, irrespective of
the accounting treatment of such consideration, shall be valued as follows:
(1) Securities or Other Property. In the case of securities or
other property, the fair market value thereof as of the date immediately
preceding such issuance, sale, grant or exercise as determined in good faith by
the Board of Directors of the Company.
(2) Dividends in Securities. In case the Company shall declare a
dividend or make any other distribution upon any stock of the Company payable in
either case
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in Common Stock or Convertible Securities, such Common Stock or Convertible
Securities, as the case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold without consideration.
(3) Merger, Consolidation or Sale of Assets. In case any shares of
Common Stock, Stock Purchase Rights or Convertible Securities shall be issued in
connection with any merger or consolidation in which the Company is the
surviving corporation, the amount of consideration therefor shall be deemed to
be the fair value of such portion of the assets and business of the
non-surviving corporation attributable to such Common Stock, Stock Purchase
Rights or Convertible Securities, as is determined in good faith by the
Company's Board of Directors.
6.7 Corporate Distribution Event.
(a) Price Adjustment. In the event that the Company shall subdivide
(a "Corporate Distribution Event") into two or more corporate entities which are
owned (at least initially) by shareholders of the Company or shall distribute to
its shareholders, without consideration, shares of one or more subsidiaries or
affiliated corporations or former divisions (the Company and each new entity a
"Constituent Corporation and collectively the "Constituent Corporations") then
the Warrants shall be divided into the right to purchase shares of common stock
of the Constituent Corporations based upon the number of shares of common stock
outstanding of each Constituent Corporation immediately after the Corporate
Distribution Event such that the Holders of the Warrants will receive upon
exercise of the Warrants in each of the Constituent Corporations a proportionate
share of such Constituent Corporations' common stock equal to that share of the
Company's Common Stock issuable upon exercise of the Warrants prior to the
Corporate Distribution Event, such that the new warrant price per share for each
warrant to purchase shares in each of the Constituent Corporations reflects the
relative Market Capitalization values of the Constituent Corporations after
completion of the Corporate Distribution Event (rated by the number of shares
received by the holder of a share of Company Common Stock) and such that the
total consideration to be paid by the Holders upon exercise of all of the
Warrants in all of the Constituent Corporations is equal to the total
consideration which would have been paid by the Holders prior to the Corporate
Distribution Event if they had exercised all the Warrants for the purchase of
Company Common Stock. Each Constituent Corporation shall become a party to a
successor warrant agreement similar hereto in form and substance reasonably
satisfactory to the Holders of the Warrants.
By way of example, if the Company had 7,500,000 shares of Common Stock
outstanding prior to the Corporate Distribution Event and the Company
distributed to each holder of its Common Stock two shares of common stock in a
newly formed Constituent Corporation ("Newco Common Stock") for each share of
Company Common Stock, and, during the twenty (20) trading days after the
completion of the Corporate Distribution Event, the shares of Newco Common Stock
traded at an average price of $6 per share and the shares of Company Common
Stock traded at an average price of $9 per share, then each Holder of Warrants
would be entitled to a reduction in his or her Exercise Price for the Warrants
which would continue to be exercisable for Company Common Stock to $3.43 per
share and the Holders of Warrants would receive in
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addition 1,500,000 warrants to purchase a like number of shares of Newco Common
Stock, each exercisable at $2.29 per share.
Adjustments made pursuant to this Section 6.7 shall be applied to successive
Corporate Distribution Events, the provisions of this Section 6 shall be
applicable to the warrants of all Constituent Corporations and the principles of
Sections 6.1 through 6.5 shall similarly apply to the Corporate Distribution
Event and the Constituent Corporations, if applicable.
(b) Registration Rights. Any common stock of the Constituent
Corporations shall be subject to equivalent Registration Rights as the
Registration Rights applicable to the Company Common Stock under the
Registration Rights Agreement.
6.8 Other Provisions Applicable to Adjustments Under this Section.
The following provisions shall be applicable to the adjustments provided for
pursuant to this Section 6:
(a) When Adjustments To Be Made. The adjustments required by this
Section 6 shall be made whenever and as often as any specified event requiring
such an adjustment shall occur. For the purpose of any such adjustment, any
specified event shall be deemed to have occurred at the close of business on the
date of its occurrence.
(b) Fractional Interests. In computing adjustments under this
Section 6, fractional interests in Common Stock shall be taken into account to
the nearest 1/100th of a share.
(c) When Adjustment Not Required. If the Company shall take a
record of the holders of its Common Stock for the purpose of entitling them to
receive a dividend or distribution to which the provisions of Section 6 would
apply, but shall, thereafter and before the distribution to stockholders
thereof, legally abandon its plan to pay or deliver such dividend or
distribution, then thereafter no adjustment shall be required by reason of the
taking of such record and any such adjustment previously made in respect thereof
shall be rescinded and annulled.
(d) Maximum Exercise Price. Except as provided in Section 6.1
above, at no time shall the Exercise Price per share of Common Stock exceed the
amount set forth in this Agreement.
(e) Certain Limitations. Notwithstanding anything herein to the
contrary, the Company agrees not to enter into any transaction that, by reason
of any adjustment under Section 6.1, 6.2 or 6.3 above, would cause the Exercise
Price to be less than the par value of the Common Stock, if any, unless the
Company first reduces the par value of the Common Stock to be less than the
Exercise Price that would result from such transaction.
(f) Notice of Adjustments. Whenever the number of shares of Common
Stock for which the Warrants are exercisable or the Exercise Price shall be
adjusted pursuant
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to this Section 6, the Company shall forthwith prepare a certificate to be
executed by the chief financial officer of the Company setting forth, in
reasonable detail, the event requiring the adjustment and the method by which
such adjustment was calculated, specifying the number of shares of Common Stock
for which the Warrants are exercisable and (if such adjustment was made pursuant
to Section 6.5) describing the number and kind of any other shares of stock or
Other Property for which the Warrants are exercisable, and any related change in
the Exercise Price, after giving effect to such adjustment or change. The
Company shall promptly cause a signed copy of such certificate to be delivered
to each Holder in accordance with Section 14. The Company shall keep at its
principal office copies of all such certificates and cause the same to be
available for inspection at said office during normal business hours by any
Holder or any prospective transferee of any Warrants designated by a Holder
thereof.
(g) Independent Application. Except as otherwise provided herein,
all subsections of this Section 6 are intended to operate independently of one
another (but without duplication). If an event occurs that requires the
application of more than one subsection, all applicable subsections shall be
given independent effect without duplication.
6.9 Disputes. In the event that there is any dispute as to the
computation of the price or the number of Warrant Shares required to be issued
upon exercise of Warrants or any other disputed calculation or adjustment under
Section 6 hereof, the Warrant Holders and the Company will retain an independent
and nationally recognized accounting firm to conduct at the expense of the
Company a special procedures engagement of the computations pursuant to the
terms hereof involved in such dispute, including the financial statements or
other information upon which such computations were based. The determination of
such nationally recognized accounting firm shall, in the absence of manifest
error, be binding upon the Warrant Holders and the Company. If there shall be a
dispute as to the selection of such nationally recognized accounting firm, such
firm shall be appointed by the American Institute of Certified Public
Accountants, if willing, otherwise the American Arbitration Association, upon
application by the Company or any holder or holders of at least 25% of the
outstanding Warrants with notice to the others.
Section 7. Registration.
(a) Company Registration. The Company shall register the Warrant
Shares pursuant to the Registration Rights Agreement under the Securities Act,
and the Company shall, at such time, promptly give all holders of Registrable
Securities written notice of such registration.
(b) Expenses. The Company shall pay all Registration Expenses
incurred in connection with the registration of Registrable Securities pursuant
to the Registration Rights Agreement.
Section 8. Definitions.
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As used in this Warrant Agreement, the following terms shall have
the following respective meanings:
Business Day shall mean any day that is not a Saturday or
Sunday or a day on which banks are required or permitted to be closed in the
State of California.
Commission means the Securities and Exchange Commission.
Common Stock means (except where the context indicates that it
means the Common Stock of another corporation such as a Constituent Corporation)
the Common Stock of the Company, par value $0.01 per share, as constituted on
its original date of issue by the Company, and any capital stock into which such
Common Stock may thereafter be changed, and shall also include (i) capital stock
of the Company of any other class (regardless of how denominated) issued to the
holders of shares of any Common Stock upon any reclassification thereof which is
also not preferred as to dividends or liquidation over any other class of stock
of the Company and which is not subject to redemption and (ii) shares of common
stock of any successor or acquiring corporation (as defined in Section 6.5
hereof) received by or distributed to the holders of Common Stock of the Company
in the circumstances contemplated by Section 6.5 hereof.
Convertible Securities shall mean evidences of indebtedness,
shares of stock or other securities that are convertible into or exchangeable
for, with or without payment of additional consideration in cash or property,
shares of Common Stock, either immediately or upon the occurrence of a specified
date or a specified event.
Current Market Price shall mean as of any specified date the
average of the daily market prices of the Common Stock of the Company for the
shorter of (x) the twenty (20) consecutive Business Days immediately preceding
such date or (y) the period commencing on the Business Day next following the
first public announcement of any event giving rise to an adjustment of the
Exercise Price pursuant to Section 6 and ending on such specified date. The
"daily market price" for each such Business Day shall be: (i) if the Common
Stock is then listed on a national securities exchange or is listed on NASDAQ
and is designated as a National Market System security, the last sale price,
regular way, on such day on the principal stock exchange or market system on
which such Common Stock is then listed or admitted to trading, or, if no such
sale takes place on such day, the average of the closing bid and asked prices
for the Common Stock on such day as reported on such stock exchange or market
system or (ii) if the Common Stock is not then listed or admitted to trading on
any national securities exchange or designated as a National Market System
security on NASDAQ but is traded over-the-counter, the average of the closing
bid and asked prices for the Common Stock as reported on NASDAQ or the
Electronic Bulletin Board or in the National Daily Quotation Sheets, as
applicable.
Exchange Act means the Securities Exchange Act of 1934, as
amended, or any successor act, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect at the time.
12
Exercise Price shall mean, in respect of a share of Common
Stock at any date herein specified, the initial Exercise Price set forth in this
Agreement as adjusted from time to time pursuant to Section 6 hereof.
Expiration Date means the seventh anniversary of the date of
this Agreement.
GAAP shall mean generally accepted accounting principles in
the United States of America as from time to time in effect.
Market Capitalization means a number which is the sum of the
number of shares of Outstanding Common Stock multiplied by the Current Market
Price of the corporation in question.
Notice Period shall mean the period of fifteen (15) days
commencing upon the delivery to the Holders of written notice of the Company's
intention to call the Warrants pursuant to Section 2.3, provided that conditions
(i), (ii) and (iii) of Section 2.3 have been satisfied and that such conditions
(ii) and (iii) continue to have been satisfied for such 15 days.
Outstanding shall mean, when used with reference to Common
Stock, at any date as of which the number of shares thereof is to be determined,
all issued shares of Common Stock, except shares then owned or held by or for
the account of the Company or any Subsidiary thereof, and shall include all
shares issuable in respect of outstanding scrip or any certificates representing
fractional interests in shares of Common Stock.
Original Issue Date shall mean the date on which the Warrants
were issued, as set forth on Exhibit B hereto.
Person shall mean any individual, sole proprietorship,
partnership, limited liability company, joint venture, trust, incorporated
organization, association, corporation, institution, public benefit corporation,
entity or government (whether federal, state, county, city, municipal or
otherwise, including, without limitation, any instrumentality, division, agency,
body or department thereof).
Registrable Securities shall have the meaning specified for
such term in the Registration Rights Agreement.
Registration Expenses shall have the meaning specified for
such term in the Registration Rights Agreement.
Registration Rights means the right of a Holder to have its
Registrable Securities registered pursuant to Section 7 of this Agreement and
pursuant to the Registration Rights Agreement.
Registration Rights Agreement means the Agreement dated as of
March 3, 1997 between the Company and the Holders.
13
Stock Purchase Rights shall mean any options, warrants or
other securities or rights to subscribe to or exercisable for the purchase of
shares of Common Stock or Convertible Securities, whether or not immediately
exercisable.
Securities Act means the Securities Act of 1933, as amended,
or any successor act thereto, and the rules and regulations of the Commission
promulgated thereunder, all as the same shall be in effect at the time.
Section 9. Fractional Interests. The Company shall not be required to
issue fractional Warrant Shares on the exercise of the Warrants. If any fraction
of a Warrant Share would, except for the provisions of this Section 8, be
issuable on the exercise of the Warrants (or specified portion thereof), the
Company shall pay an amount in cash equal to the closing price for one share of
the Common Stock on the trading day immediately preceding the date the Warrants
are presented for exercise, multiplied by such fraction.
Section 10. No Rights as Stockholder; Notices to Holder. Nothing contained
in this Agreement or in the Warrants shall be construed as conferring upon the
Holder or his permitted transferees the right to vote or to receive dividends or
to consent to or receive notice as a stockholder in respect of any meeting of
stockholders for the election of directors of the Company or any other matter,
or any rights whatsoever as a stockholder of the Company.
Section 11. Inspection of Warrant Agreement. The Company shall keep copies
of this Agreement and any notices given or received hereunder available for
inspection by the Holder during normal business hours at its principal office.
Section 12. Identity of Transfer and Warrant Agent. Forthwith upon the
appointment of any subsequent transfer agent for the Common Stock or Warrant
Agent, or any other shares of the Company's capital stock issuable upon the
exercise of the Warrants, the Company will notify the Holder of the name and
address of such subsequent transfer agent.
Section 13. Financial and Business Information. Until the Expiration Date,
the Company shall deliver to each Warrant Holder promptly upon their becoming
available, copies of all public financial statements, reports and filings,
notices and proxy statements sent or made available by the Company to the
holders of any class of its securities generally.
Section 14. Notices. Any notice pursuant to this Agreement by any Holder to
the Company, shall be in writing and shall be mailed first class, postage
prepaid, or delivered to the Company at its office at ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: General Counsel.
Each party hereto may from time to time change the address to
which notices to it are to be delivered or mailed hereunder by notice in writing
to the other party. Any notice mailed pursuant to this Agreement by the Company
or the Warrant Agent to the Holder shall be in writing and shall be mailed first
class, postage prepaid, or delivered to the Holder at
14
his address on the books of the Warrant Agent, and a copy thereof shall be
delivered to Canyon Capital Management c/o Canyon Partners Incorporated, ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
Section 15. Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF CALIFORNIA, WITHOUT GIVING
EFFECT TO PRINCIPLES OF CONFLICT OF LAWS. THE PARTIES HERETO AGREE TO SUBMIT TO
THE JURISDICTION OF THE COURTS OF THE STATE OF CALIFORNIA IN ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT.
Section 16. Supplements and Amendments. The Company and the Warrant Agent
may from time to time supplement or amend this Agreement in order to cure any
ambiguity or to correct or supplement any provision contained herein which may
be defective or inconsistent with any other provision herein, or to make any
other provisions in regard to matters or questions arising hereunder which the
Company and the Warrant Agent may deem necessary or desirable and which shall
not be inconsistent with the provisions of the Warrant and which shall not
adversely affect the interests of the Holder.
Section 17. Successors. All the covenants and provisions of this Agreement
by or for the benefit of the Company, the Warrant Agent or the Holders of the
Warrants shall bind and inure to the benefit of their respective successors and
assigns hereunder.
Section 18. Merger or Consolidation of the Company. So long as the Warrants
remain outstanding, the Company will not merge or consolidate with or into, or
sell, transfer or lease all or substantially all of its property to, any other
corporation unless the successor or purchasing corporation, as the case may be
(if not the Company), shall expressly assume, by supplemental agreement, the due
and punctual performance and observance of each and every covenant and condition
of this Agreement to be performed and observed by the Company.
Section 19. Benefits of this Agreement. Nothing in this Agreement shall be
construed to give to any Person other than the Company and the Holders of the
Warrants, any legal or equitable right, remedy or claim under this Agreement,
but this Agreement shall be for the sole and exclusive benefit of the Company
and the Holders.
Section 20. Captions. The captions of the Sections of this Agreement have
been inserted for convenience only and shall have no substantive effect.
Section 21. Counterparts. This Agreement may be executed in any number of
counterparts each of which so executed shall be deemed to be an original; but
such counterparts together shall constitute but one and the same instrument.
15
IN WITNESS WHEREOF, the Company has caused this Agreement to be duly
executed as of the day, month and year first above written.
THE COMPANY:
MAI SYSTEMS CORPORATION, a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President, Business Development
THE WARRANT AGENT:
MAI SYSTEMS CORPORATION, a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
---------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President, Business Development
16
The Value Realization Fund, L.P.,
a California limited partnership
By: Canpartners Investments III, L.P.,
a California limited partnership,
its general partner
By: Canyon Capital Management, L.P.,
a California limited partnership,
its general partner
By: Canpartners Incorporated,
a California corporation,
its general partner
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
Canyon Value Realization Fund (Cayman), Ltd.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Director
GRS Partners II
By: Grosvenor Capital Management L.P.,
its Administrator
By: Grosvenor Capital Management, Inc.,
its general partner
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇
Title: Vice President
17
CPI Securities L.P.,
a California limited partnership
By: Canpartners Incorporated,
a California corporation,
its general partner
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------
Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Vice President
18
EXHIBIT A
Form of Warrant Certificate
No. ___ _______ Shares
COMMON STOCK PURCHASE WARRANT
Void After 5:00 P.M.
Pacific Time on [_____________] __, 2004
THIS CERTIFIES THAT, for value received, _____________, the registered
holder of this Common Stock Purchase Warrant (the "Warrant") or permitted
assigns (the "Holder"), is entitled to purchase from MAI Systems Corporation, a
Delaware corporation (the "Company"), at any time until 5:00 p.m. Pacific Time
on _______, 2004 (the "Expiration Date"), unless this Warrant is earlier called
by the Company pursuant to Section 2.3 of the Warrant Agreement hereinafter
mentioned, at the Warrant Price of $8.00 per share (the "Warrant Price"), the
number of shares of Common Stock of the Company (the "Common Stock") which is
equal to the number of Shares set forth above. The number of shares purchasable
upon exercise of this Warrant and the Warrant Price per share shall be subject
to adjustment from time to time as set forth in the Warrant Agreement referred
to below.
This Warrant is issued under and in accordance with a Warrant Agreement,
dated as of March 3, 1997, between the Company, the Warrant Agent and the
Warrant Holders and is subject to the terms and provisions contained in the
Warrant Agreement, to all of which the Holder of this Warrant by acceptance
hereof consents. A copy of the Warrant Agreement may be obtained for inspection
by the Holder hereof upon written request to the Company.
This Warrant may be exercised in whole or in part by presentation of this
Warrant with the Purchase Form on the reverse side hereof duly executed and
simultaneous payment of the Warrant Price (subject to adjustment) at the
principal office of the Company in Irvine, California. Payment of such price
shall be payable at the option of the Holder hereof in cash or by certified or
official bank check or wire transfer or by delivery to the Company of the
Company's 11% Subordinated Notes due 2004, which shall be valued for this
purpose at the principal amount thereof so delivered plus the accrued interest
thereon. Terms relating to exercise of Warrant are set forth more fully in the
Warrant Agreement.
This Warrant may be exercised in whole or in part. Upon partial exercise, a
Warrant Certificate for the unexercised portion shall be delivered to the
Holder. No fractional shares will be issued upon the exercise of this Warrant
but the Company shall pay the cash value of any fraction upon the exercise of
the Warrant. This Warrant is transferable only in limited circumstances as
described in this Warrant Agreement at the office of the Company in Irvine,
California, in the manner and subject to the limitations set forth in the
Warrant Agreement.
1
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR ANY STATE SECURITIES LAW. NO TRANSFER OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE SHALL BE VALID OR
EFFECTIVE UNLESS (A) SUCH TRANSFER IS MADE PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT OR (B) THE
HOLDER OF THE SECURITIES PROPOSED TO BE TRANSFERRED SHALL
HAVE DELIVERED TO THE COMPANY AN OPINION OF COUNSEL (WHO MAY
BE AN EMPLOYEE OF SUCH HOLDER) REASONABLY ACCEPTABLE TO THE
COMPANY TO THE EFFECT THAT SUCH PROPOSED TRANSFER IS EXEMPT
FROM THE REGISTRATION REQUIREMENTS OF THE ACT OR (C) SUCH
TRANSFER IS PURSUANT TO RULE 144 OR RULE 144A UNDER THE ACT
AND SUCH HOLDER(S) SHALL HAVE DELIVERED TO THE COMPANY A
CERTIFICATE SETTING FORTH THE BASIS FOR APPLYING SUCH RULE
TO THE PROPOSED TRANSFER.
The Holder hereof may be treated by the Company and all other Persons
dealing with this Warrant as the absolute owner hereof for any purpose and as
the person entitled to exercise the rights represented hereby, or to the
transfer hereof on the books of the Company. Any notice to the contrary
notwithstanding, and until such transfer on which books, the Company may treat
the Holder hereof as the owner for all purposes.
This Warrant does not entitle any Holder hereof to any of the rights of a
stockholder of the Company.
MAI SYSTEMS CORPORATION
By:
-------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Vice President, Business Development
DATED: As of_________, 1997
2
Exhibit B
PURCHASE FORM
Mailing Address
--------------------------------------- ------------------------------------
--------------------------------------- ------------------------------------
--------------------------------------- ------------------------------------
The undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant for, and to purchase thereunder, _________
shares of the stock provided for therein, and tenders herewith payment of the
Warrant Price in full in the form of cash or by cashier's check in the amount of
$______________, or as otherwise provided in the Warrant.
The undersigned requests that certificates for such shares be issued in the
name of:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
(Please Print Name, Address and Social Security No.)
DATED: , ______
Name of Warrant Holder or Permitted Assignee:
--------------------------------------------------------------------------------
Address:
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Signature:
----------------------------------------------------------------------
Note: The above signature must correspond with the name as written upon the
face of this Warrant Certificate in every particular, without alteration
or enlargement or any change whatever, unless this Warrant has been
assigned.
Signature Guaranteed: