1
Exhibit 10.4
================================================================================
WARRANT AGREEMENT
STUDENT ADVANTAGE, INC.
and
THE HOLDERS REFERRED TO HEREIN
Dated as of June 25, 2001
================================================================================
2
TABLE OF CONTENTS
PAGE
----
SECTION 1. DEFINITIONS, ACCOUNTING TERMS AND DETERMINATIONS.............................................. 1
1.01 DEFINITIONS................................................................................... 1
1.02 ACCOUNTING TERMS AND DETERMINATIONS........................................................... 8
SECTION 2. PURCHASE, SALE AND EXERCISE OF WARRANTS....................................................... 8
2.01 AUTHORIZATION AND ISSUANCE OF SHARES AND WARRANTS............................................. 8
2.02 THE CLOSING................................................................................... 8
2.03 INITIAL HOLDER REPRESENTATIONS, WARRANTIES AND AGREEMENTS..................................... 9
2.04 SECURITIES ACT COMPLIANCE..................................................................... 9
2.05 EXERCISE OF WARRANTS.......................................................................... 9
SECTION 3. REPRESENTATIONS AND WARRANTIES................................................................ 11
3.01 ISSUANCE OF WARRANTS AND WARRANT STOCK........................................................ 11
3.02 REGISTRATION RIGHTS........................................................................... 11
3.03 PRIVATE OFFERING.............................................................................. 11
SECTION 4. TRANSFERS GENERALLY; SECURITIES ACT COMPLIANCE................................................ 12
4.01 TRANSFERS GENERALLY........................................................................... 12
4.02 TRANSFERS OF RESTRICTED SECURITIES PURSUANT TO REGISTRATION STATEMENTS AND RULE 144, ETC...... 12
4.03 NOTICE OF CERTAIN TRANSFERS................................................................... 12
4.04 RESTRICTIVE LEGEND............................................................................ 12
4.05 TERMINATION OF RESTRICTIONS................................................................... 13
SECTION 5. ADDITIONAL PROVISIONS RELATING TO TRANSFERS................................................... 13
5.01 DISPOSITION OF SECURITIES..................................................................... 13
5.02 CANCELLATION AND REISSUANCE................................................................... 13
5.03 TRANSFER, DIVISION AND COMBINATION............................................................ 13
SECTION 6. PUT RIGHTS.................................................................................... 14
6.01 PUT RIGHTS.................................................................................... 14
6.02 CLOSING....................................................................................... 15
6.03 RESTRICTIVE AGREEMENTS........................................................................ 16
SECTION 7. [RESERVED].................................................................................... 17
SECTION 8. ADJUSTMENT OF STOCK UNIT...................................................................... 17
8.01 STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS................................................ 17
8.02 ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK................................................. 17
8.03 ISSUANCE OF CONVERTIBLE SECURITIES............................................................ 18
8.04 SUPERSEDING ADJUSTMENT OF STOCK UNIT.......................................................... 19
8.05 OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS SECTION 8............................... 20
(i)
3
PAGE
----
SECTION 9. CONSOLIDATION, MERGER, SHARE EXCHANGE, ETC.; DISTRIBUTIONS.................................... 22
9.01 CONSOLIDATION, MERGER, SHARE EXCHANGE, ETC.................................................... 22
9.02 DISTRIBUTIONS UPON DECLARATION OF DIVIDEND OR OTHER DISTRIBUTION.............................. 23
9.03 DILUTION IN CASE OF OTHER SECURITIES.......................................................... 23
SECTION 10. NOTICE TO WARRANT HOLDERS.................................................................... 23
10.01 NOTICE OF ADJUSTMENT OF STOCK UNIT OR EXERCISE PRICE......................................... 23
10.02 NOTICE OF CERTAIN CORPORATE ACTIONS.......................................................... 23
10.03 LIMITATION ON HOLDERS' RIGHTS................................................................ 24
SECTION 11. RESERVATION AND AUTHORIZATION OF COMMON STOCK................................................ 24
SECTION 12. TAKING OF RECORD; STOCK AND WARRANT TRANSFER BOOKS........................................... 25
SECTION 13. HOLDERS' SPECIAL RIGHTS...................................................................... 25
13.01 REPLACEMENT OF INSTRUMENTS................................................................... 25
13.02 RESTRICTIONS ON CERTAIN ACTION............................................................... 26
13.03 RESERVED..................................................................................... 26
13.04 BOARD ATTENDANCE............................................................................. 26
13.05 CONFIDENTIALITY.............................................................................. 27
13.06 TRANSACTIONS WITH AFFILIATES OF THE COMPANY.................................................. 28
13.07 INDEMNIFICATION.............................................................................. 28
SECTION 14. REGISTRATION RIGHTS.......................................................................... 28
14.01 GRANT OF RIGHT............................................................................... 28
14.02 CERTAIN DEFINITIONS.......................................................................... 29
14.03 [RESERVED]................................................................................... 30
14.04 PIGGYBACK REGISTRATION....................................................................... 30
14.05 EXPENSES OF REGISTRATION..................................................................... 31
14.06 OBLIGATIONS OF THE COMPANY................................................................... 32
14.07 INDEMNIFICATION.............................................................................. 35
14.08 INFORMATION BY GRANTEE....................................................................... 37
14.09 TRANSFER OF REGISTRATION RIGHTS.............................................................. 38
14.10 FORM S-3 REGISTRATION........................................................................ 38
14.11 DELAY OF REGISTRATION........................................................................ 39
14.12 RULE 144 REPORTING........................................................................... 39
14.13 MARKET STAND-OFF AGREEMENT................................................................... 39
14.14 AMENDMENT OF REGISTRATION RIGHTS............................................................. 40
14.15 TERMINATION OF REGISTRATION RIGHTS........................................................... 40
SECTION 15. MISCELLANEOUS................................................................................ 40
15.01 WAIVER....................................................................................... 40
15.02 NOTICES...................................................................................... 40
15.03 OFFICE OF THE COMPANY........................................................................ 40
15.04 EXPENSES, TRANSFER TAXES AND OTHER CHARGES................................................... 41
15.05 AMENDMENTS, ETC.............................................................................. 41
15.06 SUCCESSORS AND ASSIGNS....................................................................... 42
(ii)
4
PAGE
----
15.07 SURVIVAL..................................................................................... 42
15.08 CAPTIONS..................................................................................... 42
15.09 COUNTERPARTS................................................................................. 42
15.10 GOVERNING LAW................................................................................ 42
15.11 SEVERABILITY................................................................................. 42
15.12 ENTIRE AGREEMENT............................................................................. 42
15.13 NO THIRD PARTY BENEFICIARY................................................................... 42
15.14 SPECIFIC PERFORMANCE......................................................................... 43
15.15 WAIVER OF JURY TRIAL......................................................................... 43
15.16 ADMINISTRATIVE AGENT......................................................................... 43
SCHEDULE 1 - Warrants to be issued to the Initial Holders with respect to the
Term Loans
SCHEDULE 2 - Excluded Shares of Common Stock
ANNEX 1 - Form of Term Warrant
ANNEX 2 - Form of Revolving Warrant
ANNEX 3 - Form of Default Warrant
(iii)
5
WARRANT AGREEMENT
WARRANT AGREEMENT dated as of June 25, 2001 among STUDENT
ADVANTAGE, INC., a corporation duly organized and validly existing under the
laws of the State of Delaware (the "COMPANY"), and each of the investors
signatory hereto (individually, an "INITIAL HOLDER" and, collectively, the
"INITIAL HOLDERS").
WHEREAS, the Company and the Initial Holders are parties to a
Loan Agreement dated as of the date hereof (as modified and supplemented and in
effect from time to time, the "LOAN AGREEMENT"), providing for extensions of
credit to be made by the Initial Holders thereunder in the aggregate amount of
$15,000,000.
WHEREAS, as an inducement for the Initial Holders entering
into the Loan Agreement and making the extensions of credit thereunder, the
Company has agreed to issue Warrants to the Initial Holders providing for the
purchase of shares of Common Stock of the Company, in the manner hereinafter
provided.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth in this Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto agree as follows:
Section 1. DEFINITIONS, ACCOUNTING TERMS AND DETERMINATIONS.
1.01 DEFINITIONS. Except as expressly provided herein, the
following terms shall have the following meanings (all terms in this Section 1
or in other provisions of this Agreement in the singular to have the same
meanings in the plural and vice versa):
"ACCRUING LIABILITY" shall have the meaning assigned to such
term in SECTION 6.02.
"ACQUISITION AGREEMENT" means that certain Agreement and Plan
of Merger dated June 25, 2001 by and among the Company, Orion Acquisition Corp.
and OCM Enterprises, Inc. and its stockholders, as amended and in effect from
time to time.
"ADDITIONAL SHARES OF COMMON STOCK" shall mean all shares
(including treasury shares) of Common Stock issued or sold by the Company on or
after the date hereof, other than (a) the shares of Common Stock described as
being issued and outstanding in Section 4.14 of the Loan Agreement, (b) the
shares of Common Stock to be issued upon exercise or conversion of the Warrants,
(c) the Option Stock, (d) the shares of Common Stock issued or issuable upon
conversion or exchange of shares or other securities directly or indirectly
convertible into or exchangeable for Common Stock outstanding on the date hereof
and listed on SCHEDULE 2 hereto, (e) the shares of Common Stock issued or
issuable upon exercise of any rights, options or warrants to subscribe for,
purchase or otherwise acquire Common Stock outstanding on the date
6
- 2 -
hereof and listed on SCHEDULE 2 hereto, (f) the shares of Common Stock to
be issued pursuant to the Acquisition Agreement, (g) shares of Common Stock
issued or issuable by reason of a dividend, stock split, splitup or other
distribution on shares of Common Stock that are covered by Section 8.01 and (h)
any shares of Common Stock issued or issuable with the prior written consent of
the Majority Holders.
"AFFILIATE" shall have the meaning assigned thereto in Rule
12b-2 of the Exchange Act.
"APPLICABLE PRICE" shall mean, with respect to the issuance of
securities by the Company to any Person, the higher of (i) the Current Warrant
Price per share of Common Stock and (ii) 90% of the Current Market Price per
share of Common Stock.
"BOARD" shall mean the Board of Directors of the Company.
"BUSINESS DAY" shall mean any day that is not a Saturday,
Sunday or other day on which commercial banks in New York City are authorized or
required by law to remain closed.
"CODE" shall mean the Internal Revenue Code of 1986, as
amended.
"COMMENCEMENT DATE" shall mean the date specified in a Warrant
on and after which such Warrant shall be exercisable.
"COMMISSION" shall mean the Securities and Exchange Commission
or any other similar or successor agency of the Federal government with primary
responsibility for administering the Securities Act.
"COMMON STOCK" shall mean the Company's authorized Common
Stock, par value $0.01 per share, and any stock into which such Common Stock may
thereafter be changed, including any subdivisions, combinations, consolidation,
splits or reclassifications thereof, and also shall include stock of the Company
of any other class (including, without limitation, any future class(es) of such
Common Stock), which is not preferred as to dividends or assets over any class
of stock of the Company.
"COMPANY" shall have the meaning assigned to such term in the
forepart of this Agreement, and shall include any successors and permitted
assigns of the Company.
"COMPANY NOTICE DATE" shall have the meaning assigned to such
term in SECTION 6.01.
"CONVERTIBLE SECURITIES" shall mean evidences of indebtedness,
shares of stock or other securities which are convertible into or exchangeable
or exercisable for Additional Shares of Common Stock or Convertible Securities,
either immediately or upon the arrival of a specified date or the happening of a
specified event, and any warrant, option or other rights to subscribe for or
purchase Additional Shares of Common Stock or Convertible Securities.
7
- 3 -
"CURRENT MARKET PRICE", per share of Common Stock, for the
purposes of any provision hereof or of a Warrant at the date herein or therein
specified, shall be deemed to be the average of the daily market prices for each
day during the 20 consecutive trading days immediately preceding such date as of
which such a price can be established in the manner set forth in the next
sentence. The market price for each such trading day shall be the last sale
price on such day as reported in the Consolidated Last Sale Reporting System, or
as quoted by the Nasdaq National Market System, or if such last sale price is
not available or if the Common Stock is listed on a securities exchange then the
last reported sales price of the Common Stock on such exchange which shall be
for consolidated trading if applicable to such exchange, or if not so reported,
quoted or listed, the average of the closing bid and asked prices as reported in
either such system. If the Current Market Price per share of Common Stock cannot
be ascertained by any of the foregoing methods, the Current Market Price per
share of Common Stock shall be deemed to be the Fair Value of the Common Stock.
"CURRENT WARRANT PRICE", for the purpose of any provision
hereof or of a Warrant at the date herein or therein specified, shall mean the
amount per share of Common Stock equal to the quotient resulting from dividing
the Exercise Price per Stock Unit in effect on such date by the number of shares
(including any fractional share) of Common Stock comprising a Stock Unit on such
date.
"DEFAULT WARRANTS" shall mean the warrant certificates
covering the purchase of Stock Units, each in the form of Annex 3 to this
Agreement, originally issued by the Company pursuant to SECTION 2 hereof, and
all Default Warrants issued upon transfer, division or combination of, or in
substitution for, any thereof.
"EVENT OF DEFAULT" has the meaning assigned to such term in
Article VIII of the Loan Agreement.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934,
as amended, and the rules and regulations of the Commission thereunder, all as
the same shall be in effect at the time or any replacement act.
"EXERCISE NOTICE" shall have the meaning assigned to such term
in SECTION 2.05 hereof.
"EXERCISE PERIOD" shall have the meaning assigned to such term
in SECTION 2.05 hereof.
"EXERCISE PRICE" shall mean $0.01 per Stock Unit, as adjusted
from time to time in accordance with Section 11.
"EXPIRATION DATE" shall mean June 25, 2005.
"FAIR VALUE" per share of Common Stock (or other property as
the case may be) shall be the fair market value as determined in good faith by
the Board, provided that if the Majority Holders disagree with such
determination (in the case of valuing other property, such
8
- 4 -
disagreement to be communicated in writing to the Company within 30 days
of the later of the date on which the Company enters into an agreement to
acquire such other property and the date on which the Holders receive from the
Company information reasonably sufficient to enable them to determine the
accuracy of the Board's determination of Fair Value including any certificate
required pursuant to Section 10.01), then the Company and the Majority Holders
shall each designate a representative, and such representatives will meet and
use their best efforts to reach an agreement on the Fair Value. If the
representatives designated by the Company and the Majority Holders are unable to
reach such an agreement, then the Majority Holders will submit a list of at
least three independent appraisers each of which is a recognized independent
expert experienced in valuing businesses similar or related to the principal
business of the Company and its Subsidiaries (or other property, as the case may
be). The Company shall select one of the independent appraisers set forth on
such list. The independent appraiser so selected by the Company will determine
the fair market value of a share of Common Stock (or other property, as the case
may be) and its determination thereof will be final and binding on all parties
concerned. The Company will provide the independent appraiser so selected by the
Company with all information about the Company and its Subsidiaries (or other
property, as the case may be) which such independent appraiser reasonably deems
necessary for determining the Fair Value. The fees and expenses of the appraisal
process (including those of the independent appraiser) will be paid by the
Company, PROVIDED that, with respect to the Board's determination of the Fair
Value of other property, if the fair market value of such other property as
determined by the independent appraiser is equal to or exceeds the Board's
determination of fair market value and (if the appraisal process is initiated
before the Loans have been repaid and the Commitments terminated (as those terms
are defined in the Loan Agreement)) a court of competent jurisdiction determines
in a final and nonappealable judgment that a Holder who is one of the Majority
Holders, in disagreeing with the Board's determination, was guilty of gross
negligence or willful misconduct, then such Holder shall reimburse the Company
for such fees and expenses. The Company may require that the independent
appraiser keep confidential any non-public information received as a result of
this paragraph pursuant to reasonable confidentiality arrangements.
"GAAP" shall mean generally accepted accounting principles
applied on a consistent basis.
"GOVERNMENT AUTHORITY" shall mean any nation or government,
any state or other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to any such government.
"HOLDER" shall mean any Person who acquires Warrants or
Warrant Stock pursuant to the provisions of this Agreement, including any
transferees of Warrants or Warrant Stock in accordance with the terms of this
Agreement or shares of Interest Stock pursuant to the Loan Agreement, including
any transferees of shares of Interest Stock; PROVIDED, HOWEVER, that a holder of
Warrant Stock or Interest Stock purchased pursuant to an effective registration
statement or pursuant to paragraph (k) of Rule 144 shall not be deemed a Holder.
"INITIAL HOLDER" shall have the meaning assigned to such term
in the forepart of this Agreement.
- 5 -
9
- 5 -
"INTEREST STOCK" shall mean the shares of Common Stock of the
Company, if any, issued to the Lenders party to the Loan Agreement pursuant to
SECTION 2.09(c) of the Loan Agreement.
"LIEN" shall mean any pledge, assignment, hypothecation,
mortgage, security interest, deposit arrangement, conditional sale or title
retaining contract, sale and leaseback transaction, financing statement filing,
or any other type of lien, charge, encumbrance or preferential arrangement.
"LOAN AGREEMENT" shall have the meaning assigned to such term
in the forepart of this Agreement.
"MAJORITY HOLDERS" shall mean Holders of a majority of the
Warrant Stock issued or issuable upon exercise of the Warrants. For purposes of
giving notices hereunder, Holders of Warrants shall be deemed holders of Warrant
Stock issued upon the exercise thereof.
"OPTION STOCK" shall mean shares of Common Stock issued or
issuable in accordance with the stock option plans, stock incentive plans, stock
purchase plans or other arrangements for the benefit of employees, directors or
consultants of the Company or any of its Subsidiaries existing at the date
hereof, including any such plans of a target company assumed by the Company or
any of its Subsidiaries in connection with an acquisition of such target
company, PROVIDED that such plans are existing at the date of such acquisition
and were not adopted or modified to increase the number of shares issuable
thereunder in anticipation of such acquisition, or under successor plans that do
not permit the issuance of Common Stock, including notional Common Stock
underlying "phantom" stock, in an amount greater than would be permitted under
plans existing at the date hereof (or on the date of acquisition of such target
company), provided further that from and after the later of (i) December 25,
2002 and (ii) the date the Loans (as defined in the Loan Agreement) are paid in
full and the Commitments (as defined in the Loan Agreement) are terminated,
"Option Stock" shall mean shares of Common Stock issued or issuable in
accordance with the stock option plans, stock incentive plans, stock purchase
plans or other arrangements for the benefit of employees, directors or
consultants of the Company or any of its Subsidiaries approved by the Board .
"OTHER SECURITIES" shall mean any stock (other than Warrant
Stock) and other securities of the Company or any other Person (corporate or
otherwise) which a Holder at any time shall be entitled to receive, or shall
have received, upon exercise of the Warrants held by such Holder or pursuant to
SECTION 9 hereof, in lieu of or in addition to Warrant Stock, or which at any
time shall be issuable or shall have been issued in exchange for or in
replacement of Warrant Stock or Other Securities received in an earlier
exchange, exercise or replacement of Warrant Stock.
"PARTICIPATING SECURITY" shall mean any security (other than
Common Stock as constituted on the date hereof or a Convertible Security) the
rights of the holders of which are not limited to (i) a fixed sum or percentage
of liquidation preference or principal amount, (ii) a sum determined by
reference to a formula based on a published index of interest rates, (iii) an
10
- 6 -
interest rate publicly announced by a financial institution or a similar index
of interest rates in respect of interest or dividends or (iv) a fixed sum or
percentage of principal amount or liquidation preference in any distribution of
assets.
"PERMITTED CONTRACTUAL RESTRICTION" shall have the meaning
assigned to such term in SECTION 6.02.
"PERMITTED TRANSFEREE" shall mean (a) an "Affiliate" or
"Subsidiary" of such Holder as those terms are defined in Rule 405 under the
Securities Act, (b) a spouse (other than pursuant to any divorce or separation
proceedings or settlement), parent, child (natural or adopted), stepchild or
grandchild or a trust or a family limited partnership for the benefit of any one
or more of such persons in the case of a transferring holder that is an
individual, (c) any person receiving Restricted Securities pursuant to a
distribution without consideration by an Initial Holder (or a Permitted
Transferee thereof) that is a partnership to any of its partners, retired
partners, or to the estate of any of its partners, and (d) any person receiving
Restricted Securities pursuant to a distribution without consideration by an
Initial Holder (or a Permitted Transferee thereof) that is a corporation or
limited liability company to any of its shareholders or members, as applicable.
"PERSON" shall mean a corporation, an association, a limited
liability company, a partnership, a joint venture, an organization, a business,
an individual or a Government Authority.
"PUT NOTICE" shall have the meaning assigned to such term in
SECTION 6.01.
"PUT POSTPONEMENT" shall have the meaning assigned to such
term in SECTION 6.02.
"PUT RESPONSE NOTICE" shall have the meaning assigned to such
term in SECTION 6.02.
"PUT RIGHT" shall have the meaning assigned to such term in
SECTION 6.01.
"PUT WITHDRAWAL NOTICE" shall have the meaning assigned to
such term in SECTION 6.02.
"REPRESENTATIVE" shall have the meaning assigned to such term
in SECTION 13.04 of this Agreement.
"REGISTRABLE SECURITIES" shall have the meaning assigned to
such term in SECTION 14.02.
"RESTRICTED CERTIFICATE" shall mean a certificate for Common
Stock, Warrants or Other Securities bearing the restrictive legend set forth in
SECTION 4.04 hereof.
"RESTRICTED SECURITIES" shall mean Restricted Stock and
Restricted Warrants.
11
- 7 -
"RESTRICTED STOCK" shall mean Common Stock evidenced by a
Restricted Certificate.
"RESTRICTED WARRANTS" shall mean Warrants evidenced by a
Restricted Certificate.
"REVOLVING WARRANTS" shall mean the warrant certificates
covering the purchase of Stock Units, each in the form of Annex 2 to this
Agreement, originally issued by the Company pursuant to SECTION 2 hereof, and
all Revolving Warrants issued upon transfer, division or combination of, or in
substitution for, any thereof.
"RULE 144" shall mean Rule 144 as promulgated by the
Commission under the Securities Act and any successor provision thereto, all as
the same shall be in effect at the time.
"SECURITIES ACT" shall mean the Securities Act of 1933, as
amended, and the rules and regulations of the Commission thereunder, all as the
same shall be in effect at the time or any replacement act.
"STOCKHOLDER" shall mean any Person who directly or indirectly
owns any shares of Common Stock of the Company.
"STOCK UNIT" shall mean one share of Common Stock, as such
Common Stock is constituted on the date hereof and any stock into which such
Common Stock may thereafter be changed, and thereafter shall mean such number of
shares (including any fractional shares) of Common Stock and Other Securities,
cash or other property as shall result from the adjustments specified in
SECTIONS 8 and 9 hereof.
"SUBSIDIARY" shall mean, for any Person, any corporation or
other entity of which at least a majority of the securities or other ownership
interests having by the terms thereof ordinary voting power to elect a majority
of the board of directors or other persons performing similar functions of such
corporation or other entity is at the time directly or indirectly owned or
controlled by such Person and/or one or more Subsidiaries of such Person.
"TERM WARRANTS" shall mean the warrant certificates covering
the purchase of Stock Units, each in the form of Annex 1 to this Agreement,
originally issued by the Company pursuant to SECTION 2 hereof, and all Term
Warrants issued upon transfer, division or combination of, or in substitution
for, any thereof.
"TRANSFER" shall mean any disposition of any Restricted
Securities, or of any interest in any thereof, which would constitute a sale
thereof within the meaning of the Securities Act.
"TRANSFERRED WARRANT" shall have the meaning assigned to such
term in SECTION 5.03.
"WARRANTS" shall mean, collectively, the Term Warrants,
Revolving Warrants and Default Warrants.
12
- 8 -
"WARRANT STOCK" shall mean the shares of Common Stock of the
Company purchasable or purchased upon the exercise of Warrants issued by the
Company, including any such Common Stock into which such Common Stock may
thereafter be changed.
1.02 ACCOUNTING TERMS AND DETERMINATIONS. Except as otherwise
may be expressly provided herein, all accounting terms used herein shall be
interpreted, and all certificates and reports as to financial matters required
to be delivered to the Holders hereunder and under the Warrants shall be
prepared, in accordance with GAAP. All calculations made for purposes of
determining compliance with the terms of this Agreement and the Warrants shall
(except as may be expressly provided herein) be made by application of GAAP.
Section 2. PURCHASE, SALE AND EXERCISE OF WARRANTS.
2.01 AUTHORIZATION AND ISSUANCE OF SHARES AND WARRANTS. The
Company has authorized: (a) the issue of the Warrants for issuance to the
Initial Holders pursuant to this Agreement; and (b) the reservation for issuance
of such number of shares of its Common Stock as shall be issuable upon exercise
of the Term Warrants and Revolving Warrants.
2.02 THE CLOSING.
(a) The Company shall issue to each Initial Holder, on the
date hereof and for no cash consideration, Term Warrants covering such number of
Stock Units as is specified opposite the name of such Initial Holder in SCHEDULE
1 hereto and a Revolving Warrant. The number of shares of Common Stock
comprising each Stock Unit covered by the Warrants issued under this Agreement
shall be subject to adjustment as provided in SECTIONS 8 and 9 hereof.
(b) On the date hereof the Company shall deliver to each
Initial Holder (i) a single certificate for the Term Warrants representing the
number of Stock Units as is specified opposite the name of such Initial Holder
in COLUMN A OF SCHEDULE 1 hereto, (ii) a single certificate for the Term
Warrants representing the number of Stock Units as is specified opposite the
name of such Initial Holder in COLUMN B OF SCHEDULE 1 hereto, (iii) a single
certificate for the Term Warrants representing the number of Stock Units as is
specified opposite the name of such Initial Holder in COLUMN C OF SCHEDULE 1
hereto, and (iv) a single certificate for the Revolving Warrant, each such
certificate registered in the name of such Person, except that, if such Person
shall notify the Company in writing prior to such issuance that it desires
certificates for such Warrants to be issued in other denominations or registered
in the name or names of any Person or Persons referred to in SECTION 5.01(a)(i)
or (ii) hereof or any nominee or nominees for its or their benefit, then if
permitted under applicable law the certificates for such Warrants to be issued
by the Company shall be issued to such Person in the denominations and
registered in the name or names specified in such notice.
(c) Within three Business Days after receipt of written notice
from the Administrative Agent under the Loan Agreement of the occurrence of an
Event of Default (as defined therein), the Company shall deliver to each Lender
at such time a single certificate for the Default Warrants representing the
number of Stock Units equal to the sum of (i) such Lender's outstanding
Revolving Loans (as defined therein) including accrued interest at such
13
- 9 -
time divided by $1,000 plus (ii) the product of 10,000 and a fraction the
numerator of which is such Lender's outstanding Term Loans (as defined
therein) including capitalized interest and accrued interest at such time and
the denominator of which is $10,000,000, each such certificate registered in the
name of such Person, except that, if such Person shall notify the Company in
writing prior to such issuance that it desires certificates for such Warrants to
be issued in other denominations or registered in the name or names of any
Person or Persons referred to in Section 5.01(a)(i) or (ii) hereof or any
nominee or nominees for its or their benefit, then if permitted under applicable
law the certificates for such Warrants to be issued by the Company shall be
issued to such Person in the denominations and registered in the name or names
specified in such notice.
2.03 INITIAL HOLDER REPRESENTATIONS, WARRANTIES AND
AGREEMENTS. Each Initial Holder represents and warrants to, and agrees with the
Company that (a) such Initial Holder is purchasing for its own account, and not
with a view to the resale or distribution of such Warrants or the Warrant Stock
or any part thereof, and such Initial Holder is prepared to bear the economic
risk of retaining such Warrants and the Warrant Stock for an indefinite period,
all without prejudice, however, to the right of such Initial Holder at any time,
in accordance with this Agreement, lawfully to sell or otherwise to dispose of
all or any part of such Warrants or the Warrant Stock held by it, (b) such
Initial Holder is experienced in evaluating and investing in securities, and
understands that the Warrants and the Warrant Stock will be restricted
securities, and that a legend to that effect shall be placed on the Restricted
Securities, and no public market shall exist for the disposition or transfer of
such Restricted Securities, (c) the acquisition, holding and any transfer of any
Restricted Securities by an Initial Holder shall be in compliance with all laws
applicable to such Initial Holder and (d) such Initial Holder is an "accredited
investor" as defined in Rule 501(a) under the Securities Act.
2.04 SECURITIES ACT COMPLIANCE. Each Initial Holder
understands that the Company has not registered or qualified the Warrants or the
Warrant Stock under the Securities Act or any applicable state securities laws
and each Initial Holder agrees that neither the Warrants nor the Warrant Stock
shall be sold or offered for sale without registration under the Securities Act
or the availability of an exemption therefrom, all as more fully provided in
SECTION 4 hereof.
2.05 EXERCISE OF WARRANTS. Each Warrant shall be exercisable
beginning on the Commencement Date specified in such Warrant and until 5:00
p.m., New York City time, on the Expiration Date (the "EXERCISE PERIOD"). On and
after the date hereof, each Holder may, on one or more occasions, on any
Business Day, in whole or in part:
(a) exercise for cash all or some of the Warrants held by it
which are exercisable on such date pursuant to their terms; and
(b) convert all or some of the Warrants held by it which are
exercisable on such date pursuant to their terms into the number of
shares of Common Stock for each Stock Unit evidenced by such Warrant
which is being so converted, equal to (a)(i) the product of (x) the
number of shares of Common Stock comprising a Stock Unit at the time of
such conversion and (y) the Current Market Price per share of Common
Stock at the time of such conversion MINUS (ii) the Exercise Price per
Stock Unit at the time of
14
- 10 -
such conversion, DIVIDED BY (b) the Current Market Price per share of
Common Stock at the time of such conversion,
in each case by delivering to the Company, at its office maintained for such
purpose pursuant to SECTION 15.03 hereof:
(i) a written notice (the "EXERCISE NOTICE") of such Holder's
election to exercise such Warrant or convert such Warrant, as the case
may be, in the form of the Exercise Form set out at the end thereof (or
a reasonable facsimile thereof), which notice shall specify the number
of Stock Units to be purchased or converted, as the case may be; and
(ii) such Warrant,
and, in the case of an exercise of such Warrant, a certified or bank check or
checks payable to the Company in an aggregate amount equal to the aggregate
Exercise Price for the number of Stock Units as to which such Warrant is being
exercised. Upon receipt thereof, the Company shall, as promptly as practicable
and in any event within five Business Days thereafter, execute or cause to be
executed and deliver or cause to be delivered to such Holder a stock certificate
or certificates representing the aggregate number of shares of Warrant Stock and
Other Securities issuable upon such exercise or conversion and any other
property to which such Holder is entitled by virtue of the exercise of any
Warrants.
The stock certificate or certificates for Warrant Stock so
delivered shall be in such denominations as may be specified in the Exercise
Notice and shall be registered in the name of such Holder or such name or names
as shall be designated in such Exercise Notice. Such stock certificate or
certificates shall be deemed to have been issued and such Holder or any other
Person so designated to be named therein shall be deemed to have become a holder
of record of such shares, including, to the extent permitted by law, the right
to vote such shares or to consent or to receive notice as a Stockholder, as of
the date on which the last of the Exercise Notice, payment of the Exercise Price
and the Warrant to which such exercise relates is received by the Company as
aforesaid, and all taxes required to be paid by Holder, if any, pursuant to
SECTION 15.04(C) hereof, prior to the issuance of such shares have been paid. If
such Warrant shall have been exercised or converted only in part, the Company
shall, at the time of delivery of the certificate or certificates representing
Warrant Stock and Other Securities, execute and deliver to such Holder a new
Warrant evidencing the rights of such Holder to purchase (or convert) the
unpurchased (or unconverted) Stock Units called for by such Warrant (including
Stock Units that may become purchasable in the future with the passage of time
or as a result of adjustments pursuant to the terms of such Warrant), which new
Warrant shall in all other respects be identical with the surrendered Warrant.
The Company shall not be required to issue a fractional share
of Common Stock or Other Securities upon exercise or conversion of any Warrant.
As to any fraction of a share of Common Stock or Other Securities which a Holder
would otherwise be entitled to purchase upon such exercise or conversion, the
Company may in lieu of the issuance of a fractional share either (i) pay a cash
adjustment in respect of such final fraction in an amount equal to the same
fraction
15
- 11 -
of the Current Market Price per share of Common Stock or Other Securities on
the date of exercise or (ii) issue a number of shares rounded up to the next
higher whole share.
Section 3. REPRESENTATIONS AND WARRANTIES. The Company
represents and warrants to the Initial Holders that:
3.01 ISSUANCE OF WARRANTS AND WARRANT STOCK. The Warrant Stock
initially covered by the Warrants will, when issued and delivered against
payment therefor in accordance with the Warrants, be duly and validly issued,
fully paid and nonassessable and free and clear of all Liens; and none of the
Warrant Stock issued pursuant to the terms hereof will be in violation of any
preemptive rights.
3.02 REGISTRATION RIGHTS. There is not in effect on the date
hereof any agreement by the Company pursuant to which any holders of securities
of the Company have a right to cause the Company to register such securities
under the Securities Act other than (i) a registration relating solely to
employee benefit plans, (ii) the Investor Rights Agreement, dated as of October
20, 1998, among the Company and the other parties named therein (the "Investor
Rights Agreement"), (iii) the Registration Rights Agreement, among the Company
and the stockholders of OCM Enterprises, Inc., entered into in connection with
the transactions contemplated by the Acquisition Agreement, (iv) the
Registration Rights Agreement, dated as of October 27, 2000, between the Company
and At Home Corporation, (v) the Registration Rights Agreement, dated as of
October 27, 2000, between the Company and Hare & Co. f/b/o ▇▇▇▇ ▇▇▇▇▇▇▇ Small
Cap Value Fund, (vi) the Registration Rights Agreement, dated as of May 1, 2001,
between the Company and Baystar Capital, L.P., (vii) the Registration Rights
Agreement, dated as of May 1, 2001, between the Company and Baystar
International, Ltd., (viii) the Registration Rights Agreement, dated as of May
1, 2001, between the Company and ▇▇▇▇▇▇▇▇ Associates LLC as subadviser for the
Prudential Small Company Fund, Inc., (ix) the Registration Rights Agreement,
dated as of May 1, 2001, between the Company and ▇▇▇▇▇▇▇▇ Associates LLC as
subadviser for The Prudential Insurance Company of America Variable Contract
Account-6, (x) the Registration Rights Agreement, dated as of May 1, 2001,
between the Company and Greylock IX Limited Partnership, and (xi) the Asset
Purchase Agreement, dated as of August 21, 2000, among the Company,
▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc., Campus 24, Inc., and ▇▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇, Inc. The
execution and delivery of this Agreement by the Company, the performance by the
Company of its obligations hereunder and the consummation of the transactions
contemplated hereby will not (in each such case, without regard to the
parenthetical at the end of the second sentence of the second paragraph of
Section 14.04(b) hereof), result in a violation or breach of or default under
any of such registration rights agreements or give rise to a right thereunder to
require any payment to be made by the Company or any of its Subsidiaries except
for the Investor Rights Agreement.
3.03 PRIVATE OFFERING. Assuming the truth and accuracy of the
Initial Holders' representations and warranties contained in SECTION 2.03, the
issuance and sale of the Warrants to the Initial Holder hereunder are exempt
from the registration requirements of the Securities Act. The Company agrees
that neither it nor anyone acting on its behalf has offered or will offer the
Warrants or the Warrant Stock, or any part thereof, or any similar securities
for issue or sale to,
16
- 12 -
or has solicited or will solicit any offer to acquire any of the same from,
anyone so as to bring the issuance and sale of the Warrants within the
provisions of Section 5 of the Securities Act.
Section 4. TRANSFERS GENERALLY; SECURITIES ACT COMPLIANCE.
4.01 TRANSFERS GENERALLY. Except as otherwise permitted by
SECTION 5 hereof, the Restricted Securities shall be transferable only upon the
conditions specified in this SECTION 4, which conditions are intended to insure
compliance with the provisions of the Securities Act in respect of the transfer
of any Restricted Securities. Any Holder shall, by its acceptance of any Warrant
hereunder, be deemed to have made the representations, warranties and agreements
set forth in SECTION 2.03 hereof on the date of such acceptance.
4.02 TRANSFERS OF RESTRICTED SECURITIES PURSUANT TO
REGISTRATION STATEMENTS AND RULE 144, ETC. The Restricted Securities may be
offered or sold by the Holder thereof pursuant to (a) an effective registration
statement under the Securities Act, (b) to the extent applicable, Rule 144 or
(c) subject to SECTION 4.03 hereof, any other applicable exemption from the
Securities Act.
4.03 NOTICE OF CERTAIN TRANSFERS. If any Holder of any
Restricted Security desires to transfer such Restricted Security other than
pursuant to an effective registration statement, Rule 144 under the Securities
Act or in accordance with SECTION 5.01 hereof, such Holder shall deliver to the
Company at least three Business Days' prior written notice with respect to the
proposed transfer, together with an opinion (obtained at such Holder's expense)
of Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP, or other counsel reasonably satisfactory
to the Company, to the effect that an exemption from registration under the
Securities Act is available and specifying the applicable exemption.
4.04 RESTRICTIVE LEGEND. Until otherwise permitted by this
SECTION 4, each certificate for Warrants issued under this Agreement, each
certificate for any Warrants issued to any subsequent transferee of any such
certificate, each certificate for any Warrant Stock issued upon exercise of any
Warrant, each certificate for any Warrant Stock issued to any subsequent
transferee of any such certificate, each certificate for any Other Securities
issued in connection with the exercise of any Warrant, each certificate for any
Other Securities issued to any subsequent transferee of any such certificate in
respect thereof, each certificate for Interest Stock issued pursuant to the Loan
Agreement and each certificate for Interest Stock issued to any subsequent
transferee of any such certificate in respect thereof, shall be stamped or
otherwise imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, AND ACCORDINGLY, SUCH
SECURITIES MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED
OF EXCEPT IN COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION
PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR
UNLESS AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO THE
17
- 13 -
COMPANY IS OBTAINED TO THE EFFECT THAT SUCH REGISTRATION AND
QUALIFICATION IS NOT REQUIRED."
4.05 TERMINATION OF RESTRICTIONS. The restrictions imposed by
this SECTION 4 upon the transferability of the Restricted Securities shall cease
and terminate as to any particular Restricted Security when such Restricted
Security shall have been effectively registered under the Securities Act and
sold by the Holder thereof in accordance with such registration or sold under
and pursuant to Rule 144 or is eligible to be sold pursuant to paragraph (k) of
Rule 144. Whenever the restrictions imposed by this SECTION 4 shall terminate as
to any Restricted Security as hereinabove provided, the Holder thereof shall,
upon written request, be entitled to receive from the Company, without expense,
a new certificate evidencing such Restricted Security not bearing the
restrictive legend otherwise required to be borne by a certificate evidencing
such Restricted Security.
Section 5. ADDITIONAL PROVISIONS RELATING TO TRANSFERS.
5.01 DISPOSITION OF SECURITIES.
(a) Subject to compliance with the provisions of SECTION 4
hereof (except with respect to the requirement in SECTION 4.03 for an opinion of
counsel to the Holder, which shall not be required under this SECTION 5.01(a)),
any Holder shall have the right to transfer any Restricted Securities:
(i) to a Permitted Transferee; or
(ii) to another Holder.
5.02 CANCELLATION AND REISSUANCE. Subject to compliance with
the provisions of SECTION 4 hereof, if any Initial Holder or any of its
Affiliates assigns or otherwise transfers any or all of its loans and/or
commitments (including by selling participations therein) arising pursuant to
the Loan Agreement, or assigns or otherwise transfers any of its rights or
obligations under the Loan Agreement to any Person, such Initial Holder may
request (upon five Business Days' prior notice to the Company) that a number of
Warrants held by such Initial Holder be cancelled on the date of such assignment
and transfer and that a like number of Warrants be issued by the Company to the
Person to whom such loans and/or commitments, or such rights or obligations, are
being assigned or otherwise transferred. Upon the date specified in such
request, the Company shall issue, and the Initial Holder shall deliver to the
Company for cancellation, such number of Warrants as aforesaid and the Company
and such Person shall execute and deliver an instrument pursuant to which such
Person becomes a "Holder" hereunder entitled to all the benefits accorded to a
Holder under, and subject to all of the obligations imposed upon a Holder
pursuant to, this Agreement and the Warrants.
5.03 TRANSFER, DIVISION AND COMBINATION. Subject to SECTIONS 4
and 5 hereof, transfer of a Warrant and all rights thereunder, in whole or in
part (the "TRANSFERRED WARRANT"), shall be registered on the books of the
Company to be maintained for such purpose, upon surrender of such Transferred
Warrant at the office of the Company maintained for such purpose
18
- 14 -
pursuant to SECTION 15.03 hereof, together with a written assignment
substantially in the form set out at the end of such Transferred Warrant, duly
executed by the relevant Holder and payment of funds sufficient to pay any
transfer taxes payable upon the making of such transfer. Upon such surrender
and, if required, such payment, the Company shall, subject to SECTIONS 4 and 5
hereof and the second following sentence, (a) execute and deliver a new Warrant
or Warrants in the name of the assignee or assignees and in the denominations
specified in such instrument of assignment, (b) issue to the assignor a new
Warrant evidencing the portion of such Transferred Warrant not so assigned or
transferred and (c) promptly cancel such Transferred Warrant. A Warrant, if
properly assigned in compliance with SECTIONS 4 and 5 hereof, may be exercised
by an assignee for the purchase of shares of Common Stock without having a new
Warrant or Warrants issued. Notwithstanding any provision herein to the
contrary, the Company shall not be required to register the transfer of Warrants
or Warrant Stock in the name of any Person who acquired such Warrant (or part
thereof) or any Warrant Stock otherwise than in accordance with this Agreement.
The Company shall maintain with its transfer agent or at its
aforesaid office, books for the registration and transfer of the Warrants.
Section 6. PUT RIGHTS.
6.01 PUT RIGHTS.
(a) Whenever the Term Loans (as defined in the Loan Agreement)
are paid or become due, then at any time and from time to time thereafter any
Holder or Holders will have the right to require the Company to purchase all or
any part of the Term Warrants (to the extent then exercisable) owned by such
Holder or Holders. The right of a Holder to require the Company to purchase all
or any part of the Warrants owned by such Holder shall be referred to herein as
a "Put Right." If only a portion of the Term Loans is paid or becomes due, then
the Put Right will exist only with respect to a number of exercisable Term
Warrants equal to the same percentage by which the Term Loans were so paid or
became due. Whenever the Revolving Loan Commitment (as defined in the Loan
Agreement) is reduced or terminated, then at any time and from time to time
thereafter any Holder or Holders will have the right to require the Company to
purchase all or any part of the Revolving Warrants (to the extent then
exercisable) owned by such Holder or Holders. If the Revolving Loan Commitment
is reduced and not terminated, then the Put Right will exist only with respect
to a number of exercisable Revolving Warrants equal to the same percentage by
which the Revolving Loan Commitment was so reduced. Upon issuance of a Default
Warrant, any Holder or Holders will have the right to require the Company to
purchase all or any part of the Default Warrants owned by such Holder or
Holders.
(b) A Put Right shall be exercised by such Holders by sending
a notice to the Company that such Holder wishes to sell the Warrants specified
in such notice. Any notice given pursuant to the first sentence of this SECTION
6.01(b) is herein called a "PUT NOTICE". Within five days after the date such
Put Notice shall be received by the Company, the Company shall give a notice to
the Holders of Warrants of the type specified in the Put Notice (other than the
Holder who gave such Put Notice) advising them of the receipt by the Company of
such Put Notice, together with a copy of such Put Notice. The date upon which
the Company shall so
19
- 15 -
advise the other Holders is herein called the "COMPANY NOTICE DATE".
Within 15 days after the Company Notice Date, such Holders also may give Put
Notices to the Company and such Put Notices shall be deemed given as of the date
the Put Notice was given by the Holder initially exercising the Put Right. The
failure so to give a Put Notice by a Holder within such 15-day period shall be
without prejudice to the right of such Holder to give thereafter a Put Notice
pursuant to this SECTION 6.
(c) It shall be a condition to the exercise of a Put Right
that the Company not be prohibited from purchasing all Warrants put to it
pursuant to a Put Notice as a result of a contractual restriction contained in
the Loan Agreement restricting, directly or indirectly, the payment to the
Holder under this Section 6 on account of the exercise by such Holder of the
applicable Put Right (such restriction being herein called the "Permitted
Contractual Restriction") that has not been waived.
6.02 CLOSING.
(a) The purchase and sale of the Warrants to be purchased from
the Holders giving Put Notices shall be consummated on a date selected by the
Company upon at least 10 days' prior notice to such Holders, which date shall be
no later than 45 days after the date the Put Notice was given by the Holder
initially exercising the Put Right. On such date, the Company shall purchase
from the Holder which has given such Put Notice, and such Holder shall sell to
the Company, (i) each of the Term Warrants and Revolving Warrants specified in
such Put Notice at a price per Stock Unit for which such Warrant is then
exercisable as follows: (A) if the Put Notice is delivered to the Company prior
to the first anniversary of the date hereof, the price per Stock Unit shall be
$2.50, and (B) if the Put Notice is delivered to the Company on or after the
first anniversary of the date hereof, the price per Stock Unit shall be $2.50
plus interest commencing on the first anniversary of the date hereof through the
date on which the related Warrants are purchased by the Company, calculated on
the basis of a 360-day year and the number of actual days elapsed, at a rate per
annum equal to 27% per annum and (ii) each of the Default Warrants specified in
such Put Notice at a price per Stock Unit for which such Default Warrant is then
exercisable of $2.50 plus interest commencing on the Commencement Date for such
Default Warrant through the date on which the Default Warrant is purchased by
the Company, calculated on the basis of a 360-day year and the number of actual
days elapsed, at a rate per annum equal to 27% per annum. Payment of the
purchase price for the Warrants so purchased by the Company shall be made in
immediately available funds.
(b) If the Company is prohibited from purchasing all Warrants
put to it pursuant to a Put Notice as a result of the Company's not having funds
legally available under Delaware corporate law, then the Company shall give
notice (a "PUT RESPONSE NOTICE") to each Holder which has delivered such Put
Notice of the aggregate amount of such Warrants, if any, which the Company will
be able to purchase, which Put Response Notice shall be delivered at the time of
the notice given by the Company pursuant to the first sentence of SECTION
6.02(a). Each such Holder shall have the right to withdraw its Put Notice by
delivering a notice (a "PUT WITHDRAWAL NOTICE") to the Company not later than 15
days after the giving of the Put Response Notice. If any such Holders have not
timely delivered Put Withdrawal Notices, the Company thereupon shall purchase
from such Holders the aggregate number of Warrants, if any, it may
20
- 16 -
purchase on such date with funds legally available under Delaware
corporate law for such purpose. Such purchase shall be allocated among the
Holders which have not timely delivered Put Withdrawal Notices PRO RATA, based
on the ratio of the number of Warrants put to the Company by each such Holder to
the number of Warrants put to the Company by all such Holders.
If the Company is prohibited from purchasing any Warrants upon
the exercise by a Holder of a Put Right for the reason described in the first
sentence of this SECTION 6.02(b), then the Company shall use its best efforts to
increase its legally available funds under Delaware law to an amount sufficient
to enable it to purchase legally all Warrants put to it pursuant to a Put
Notice, whether by means of obtaining additional financing, realizing on the
assets of the Company or its Subsidiaries in part or in whole, effecting a
refinancing of some or all of its then outstanding indebtedness (including any
indebtedness outstanding pursuant to the Loan Agreement), or otherwise.
(c) If the Company is prohibited from purchasing some of or
all Warrants upon the exercise by a Holder of a Put Right for the reason
described in the first sentence of SECTION 6.02(b) and such Holder shall not
have timely delivered a Put Withdrawal Notice, then: (i) the amount to be paid
to such Holder pursuant to SECTION 6.02(a) herein shall become an accruing
liability of the Company with interest thereon commencing on the date of
exercise of such Put Right through the date on which the related Warrants are
purchased by the Company, compounded quarterly and calculated on the basis of a
360-day year, at a rate per annum equal to 27% per annum (such liability and
interest being herein called the "ACCRUING LIABILITY"); and (ii) such obligation
of the Company to purchase shall otherwise be deemed suspended for so long as
and to the extent that the Company is unable to repurchase such Warrants after
taking all the action described in the last paragraph of SECTION 6.02(b) (a "PUT
POSTPONEMENT"). At any time after the delivery of a Put Response Notice when
additional funds of the Company are legally available, such funds shall
immediately be used to (x) purchase the balance of the Warrants which the
Company has become obligated to purchase pursuant to a Put Notice but which it
has not purchased and (y) pay the interest accruing on such Warrants pursuant to
this SECTION 6.02(c).
(d) If the Company does not purchase any Warrants upon the
exercise by a Holder of a Put Right for any reason other than (i) a Permitted
Contractual Restriction that has not been waived or (ii) the reason described in
the first sentence of SECTION 6.02(b), then the amount to be paid to such Holder
pursuant to SECTION 6.02(a) herein shall become an accruing liability of the
Company with interest thereon commencing on the date of exercise of such Put
Right through the date on which the related Warrants are purchased by the
Company, compounded monthly and calculated on the basis of a 360-day year, at a
rate per annum equal to 30% per annum.
6.03 RESTRICTIVE AGREEMENTS. The Company will not, directly or
indirectly, enter into, incur or permit to exist any agreement or other
arrangement that prohibits, restricts or imposes any condition upon the ability
of the Company to satisfy its obligations under this SECTION 6 upon the exercise
of a Put Right by a Holder; PROVIDED that the foregoing shall not apply to
restrictions and conditions imposed by law, by the Loan Agreement or by this
Agreement or with the prior written consent of the Majority Holders.
21
- 17 -
Section 7. [RESERVED].
Section 8. ADJUSTMENT OF STOCK UNIT. The number of shares of
Common Stock comprising a Stock Unit shall be subject to adjustment from time to
time as set forth in this SECTION 8. All of the adjustments referred to in this
SECTION 8 shall apply only to Warrants which have not yet been exercised.
8.01 STOCK DIVIDENDS, SUBDIVISIONS AND COMBINATIONS. If at
any time the Company shall:
(a) declare or pay a dividend payable in Additional Shares of
Common Stock, or
(b) subdivide or reclassify its outstanding shares of Common
Stock into a larger number of shares of Common Stock, or
(c) combine its outstanding shares of Common Stock into a
smaller number of shares of Common Stock,
then immediately after the occurrence of any such event the number of shares of
Common Stock comprising a Stock Unit shall be adjusted to equal the number of
shares of Common Stock which such Holder would have been entitled to receive if
such holder had exercised the Warrant immediately prior to the occurrence of
such event. Any adjustment under this Section 8.01 shall become effective at the
close of business on the record date for such dividend or the date the
subdivision or combination becomes effective.
8.02 ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. If at any
time the Company shall (except as hereinafter provided) issue or sell any
Additional Shares of Common Stock and the consideration per Additional Share of
Common Stock to be paid is less than the Applicable Price, then the number of
shares of Common Stock thereafter comprising a Stock Unit shall be adjusted to
that number determined by multiplying the number of shares of Common Stock
comprising a Stock Unit immediately prior to such adjustment by a fraction (a)
the numerator of which shall be the number of shares of Common Stock outstanding
immediately prior to the issuance of such Additional Shares of Common Stock PLUS
the number of such Additional Shares of Common Stock so issued, and (b) the
denominator of which shall be the number of shares of Common Stock outstanding
immediately prior to the issuance of such Additional Shares of Common Stock PLUS
the number of shares of Common Stock which the aggregate consideration for the
total number of such Additional Shares of Common Stock so issued would purchase
at the Applicable Price. For purposes of this SECTION 8.02, for all issuances of
shares of Common Stock, the date as of which the Applicable Price shall be
computed shall be the earlier of (i) the date on which the Company shall enter
into a firm contract for the issuance of such Additional Shares of Common Stock
(provided that the number of shares of Common Stock comprising a Stock Unit
shall not be adjusted unless and until such shares are actually issued) and (ii)
the date of actual issuance of such Additional Shares of Common Stock.
22
- 18 -
Aggregate consideration for purposes of clause (b) in the
preceding paragraph shall be determined as follows: in case any Additional
Shares of Common Stock shall be issued or sold for cash, the consideration
received therefor shall be deemed to be the amount payable to the Company
therefor, after deduction of any accrued interest or dividends and before
deducting any expenses incurred or any underwriting commissions or concessions
or discounts or, in the case of a private placement thereof, finders' fees or
commissions paid or allowed by the Company in connection therewith; in case any
Additional Shares of Common Stock shall be issued or sold for a consideration
other than cash payable to the Company, the consideration received therefor
shall be deemed to be the Fair Value of such consideration, after deduction of
any accrued interest or dividends and before deducting any expenses incurred or
any underwriting commissions or concessions or discounts paid or allowed by the
Company in connection therewith.
Subject to SECTION 8.05 hereof, no further adjustment of the
number of shares of Common Stock comprising a Stock Unit shall be made under
this SECTION 8.02 upon the issuance of any Additional Shares of Common Stock:
(a) for which an adjustment is provided under SECTION 8.01
hereof;
(b) which are issued pursuant to the conversion, exchange or
exercise of any Convertible Securities, if any such adjustment shall
previously have been made upon the issuance of such Convertible
Securities pursuant to SECTION 8.03 hereof; or
(c) as a distribution or a dividend which is distributed or
declared and paid in accordance with SECTION 9.02 hereof.
8.03 ISSUANCE OF CONVERTIBLE SECURITIES. If at any time the
Company shall issue or sell any Convertible Securities and the consideration per
share for which Additional Shares of Common Stock are deliverable upon exercise
conversion or exchange of such Convertible Securities (determined by dividing
(x) the total amount received or receivable by the Company in consideration of
the issuance of or subscription for such Convertible Securities, plus the
minimum aggregate amount of premiums (if any) payable to the Company upon such
exercise, conversion or exchange, by (y) the total maximum number of Additional
Shares of Common Stock (as set forth in the instrument relating thereto without
regard to any provision contained therein for a subsequent amendment of such
number) necessary to effect the exercise, conversion or exchange of all such
Convertible Securities) shall be less than the Applicable Price per share of
Common Stock, then the number of shares of Common Stock thereafter comprising a
Stock Unit shall be adjusted to that number determined by multiplying the number
of shares of Common Stock comprising a Stock Unit immediately prior to such
adjustment by a fraction (a) the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to the issuance of such
Additional Shares of Common Stock PLUS the total maximum number of Additional
Shares of Common Stock (as set forth in the instrument relating thereto without
regard to any provision contained therein for a subsequent amendment of such
number) outstanding after giving effect to the assumed exercise or conversion of
all such Convertible Securities, and (b) the denominator of which shall be the
number of shares of
23
- 19 -
Common Stock outstanding immediately before such date PLUS the number of
shares of Common Stock which the aggregate consideration (as calculated
pursuant to clause (x) and (y) above) for the total number of such Convertible
Securities so issued or sold would purchase at the Applicable Price. For
purposes of this Section 8.03, but without limiting the effect of SECTION 8.04,
for all issuances of Convertible Securities, the date as of which the Applicable
Price shall be computed shall be the date of actual issuance of such Convertible
Securities.
Aggregate consideration for purposes of clause (b) in the
preceding paragraph shall be determined as follows: in case any Convertible
Securities shall be issued or sold, or exercisable, convertible or exchangeable
for cash, the consideration received therefor shall be deemed to be the amount
payable to the Company (as calculated pursuant to clauses (x) and (y) above)
therefor, after deduction of any accrued interest or dividends and before
deducting any expenses incurred or any underwriting commissions or concessions
or discounts or, in the case of a private placement thereof, finders' fees or
commissions paid or allowed by the Company in connection therewith; in case any
such Convertible Securities shall be issued or sold, or exercisable, convertible
or exchangeable for a consideration other than cash payable to the Company, the
consideration received therefor (calculated pursuant to clauses (x) and (y)
above) shall be deemed to be the Fair Value of such consideration, after
deduction of any accrued interest or dividends and before deducting any expenses
incurred or any underwriting commissions or concessions or discounts paid or
allowed by the Company in connection therewith.
No further adjustment of the number of shares of Common Stock
comprising a Stock Unit shall be made under this SECTION 8.03 upon the issuance
or sale of any Convertible Securities or the conversion or exchange of such
Convertible Securities into Additional Shares of Common Stock:
(A) if any such adjustment in respect thereof shall previously
have been made upon the setting of a record date therefor, or upon any
deemed issuance or sale of such options, rights or convertible or
exchangeable securities; or
(B) as a distribution or a dividend which is distributed or
declared and paid in accordance with SECTION 9.02 hereof.
8.04 SUPERSEDING ADJUSTMENT OF STOCK UNIT. If, at any time
after any adjustment of the number of shares of Common Stock comprising a Stock
Unit shall have been made pursuant to SECTION 8.03 hereof as a result of the
issuance of any Convertible Securities, or after any new adjustment of the
number of shares of Common Stock comprising a Stock Unit shall have been made
pursuant to this SECTION 8.04, (a) such Convertible Securities shall expire, and
all or a portion of such Convertible Securities shall not have been exercised or
treated as having been exercised or otherwise cancelled or acquired by the
Company in connection with any settlement (including, without limitation, any
cash settlement) of such Convertible Securities, or (b) there has been any
change (whether by the passage of time or otherwise) in the number of shares
issuable upon exercise, conversion or exchange of such Convertible Securities
(including as a result of the operation of antidilution provisions applicable
thereto), or (c) the consideration per share for which Additional Shares of
Common Stock are issuable pursuant to the terms of
24
- 20 -
any Convertible Securities, or the maturity thereof, shall be changed
(whether by the passage of time or otherwise), then such previous adjustment
shall be rescinded and annulled and the Additional Shares of Common Stock which
were deemed to have been issued by virtue of the computation made in connection
with the adjustment so rescinded and annulled shall no longer be deemed to have
been issued by virtue of such computation. Thereupon, a recomputation shall be
made of the effect of such Convertible Securities on the basis of:
(i) treating the number of Additional Shares of Common Stock,
if any, theretofore actually issued or issuable pursuant to the
previous exercise, conversion or exchange of such Convertible
Securities as having been issued on the date or dates of such issuance
as determined for purposes of such previous adjustment and for the
consideration actually received and receivable therefor;
(ii) treating the maximum number of Additional Shares of
Common Stock (as set forth in the instrument relating thereto as may
have been changed pursuant to the terms thereof through the date of the
recomputation required by this Section 8.04, but without regard to any
provision contained therein for a subsequent amendment of such number)
necessary to effect the exercise, conversion or exchange of all
Convertible Securities which then remain outstanding, as having been
issued (subject, however, to further adjustment under this SECTION
8.04); and
(iii) making the computations called for in SECTION 8.03
hereof on the basis of the revised terms of such Convertible Securities
as if the options, rights or securities being subject to recomputation
were newly issued as of the relevant recomputation date and, if and to
the extent called for by the foregoing provisions of this SECTION 8 on
the basis aforesaid, a new adjustment of the number of shares of Common
Stock comprising a Stock Unit shall be made, and such new adjustment
shall supersede the previous adjustment so rescinded and annulled.
No readjustment of the number of shares of Common Stock comprising a
Stock Unit pursuant to this SECTION 8.04 shall increase or decrease the
applicable number of shares by an amount in excess of the adjustment originally
made to the number of shares of Common Stock comprising a Stock Unit in respect
of the issue, sale or grant of the applicable Convertible Securities.
8.05 OTHER PROVISIONS APPLICABLE TO ADJUSTMENTS UNDER THIS
SECTION 8. The following provisions shall be applicable to the making of
adjustments of the number of shares of Common Stock comprising a Stock Unit
hereinbefore provided for in this SECTION 8, irrespective of the accounting
treatment of any consideration described below:
(a) COMPUTATION OF CONSIDERATION FOR DIVIDENDS. In case of the
issuance at any time of any Additional Shares of Common Stock in
payment or satisfaction of any dividend upon any class of stock other
than Common Stock, the Company shall be deemed to have received for
such Additional Shares of Common Stock consideration equal to the
amount of such dividend so paid or satisfied.
25
- 21 -
(b) WHEN ADJUSTMENTS TO BE MADE. The adjustments required by
this SECTION 8 shall be made whenever and as often as any specified
event requiring an adjustment shall occur except that any adjustment of
the number of shares of Common Stock comprising a Stock Unit that would
otherwise be required may be postponed (except in the case of a
subdivision or combination of shares of the Common Stock, as provided
for in SECTION 8.01 hereof) if such adjustment either by itself or with
other adjustments not previously made adds or subtracts less than 1% of
the aggregate Exercise Price for all Warrants then outstanding. Any
adjustment representing a change of less than such minimum percent
(except as aforesaid) shall be carried forward and made as soon as such
adjustment, together with other adjustments required by this SECTION 8
and not previously made, would result in such a minimum adjustment. For
the purpose of any adjustment, any specified event shall be deemed to
have occurred at the close of business on the date of its occurrence.
(c) FRACTIONAL INTERESTS. In computing adjustments under this
SECTION 8, fractional interests in Common Stock shall be taken into
account to the nearest one-hundredth of a share.
(d) WHEN ADJUSTMENT NOT REQUIRED. (i) 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 or subscription or
purchase rights and shall, thereafter and before the distribution
thereof to Stockholders, legally abandon its plan to pay or deliver
such dividend, distribution, subscription or purchase rights, then 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, and no adjustment in the number of shares of
Common Stock thereafter comprising a Stock Unit under SECTION 8.02 or
8.03 hereof shall be made in respect of the Warrants held by such
Holder.
(e) OTHER ACTION AFFECTING COMMON STOCK. In the case at any
time or from time to time the Company shall take any action affecting
its Common Stock or any Subsidiary of the Company shall take any action
affecting the capital stock of such Subsidiary, other than an action
described in any of the foregoing SECTIONS 8.01 through 8.04
(inclusive), or in SECTION 9, then, unless in the reasonable opinion of
the Board such action will not have an adverse effect upon the rights
of the Holders of the Warrants, the number of shares of Common Stock or
Other Securities comprising a Stock Unit shall be adjusted in such
manner and at such time as the Board may reasonably determine in good
faith to be equitable in the circumstances (it being agreed that such
adjustment shall be subject to the reasonable approval of the holders
of Warrants entitled to purchase a majority of the Stock Units covered
by all the Warrants).
(f) NO ADJUSTMENT OF STOCK UNITS. Notwithstanding anything to
the contrary in this Agreement, but subject to the terms set forth
within the Warrants themselves, the number of Stock Units covered by
each Warrant shall remain fixed at the number specified on the warrant
certificates originally issued by the Company pursuant to SECTION 2
hereof and shall not be subject to any adjustment under this Agreement.
26
- 22-
Section 9. CONSOLIDATION, MERGER, SHARE EXCHANGE, ETC.;
DISTRIBUTIONS. The provisions set forth in this SECTION 9 shall apply only to
Warrants which have not yet been exercised.
9.01 CONSOLIDATION, MERGER, SHARE EXCHANGE, ETC. In case a
consolidation, merger or share exchange of the Company shall be effected with
another Person after the date hereof and the Company shall not be the surviving
entity, or the Company shall be the surviving entity but its Common Stock shall
be changed into securities or other property of another Person, or the sale,
lease or transfer of all or substantially all of its assets to another Person
shall be effected after the date hereof, or the Company effects a
recapitalization, then, as a condition of such consolidation, merger, share
exchange, sale, lease, recapitalization or transfer, lawful and adequate
provision shall be made whereby each Holder shall thereafter have the right to
purchase and receive, upon the exercise of its Warrants, on the basis and the
terms and conditions specified herein (and in lieu of each Stock Unit
immediately theretofore purchasable and receivable upon the exercise of the
Warrants), the highest amount of cash, securities or other property to which
such Holder would actually have been entitled as a Stockholder upon such
consummation if such Holder had exercised its Warrants immediately prior to such
event (taking into account the availability of any election available to
Stockholders in connection with such consolidation, merger, share exchange,
sale, lease, recapitalization or transfer), subject to adjustments (subsequent
to such consummation) as nearly equivalent as possible to the adjustments
provided for in SECTION 8 and this SECTION 9.01. The Company shall not effect
any such consolidation, merger, share exchange, sale, lease or transfer unless
prior to or simultaneously with the consummation thereof the successor Person
(if other than the Company) resulting from such consolidation, merger or share
exchange or the Person purchasing, leasing or otherwise acquiring such assets
shall assume, by written instrument, the obligation to deliver to such Holder,
upon the exercise of its Warrants, such shares of stock, securities, cash or
other property as, in accordance with the foregoing provisions, such Holder may
be entitled to upon the exercise of its Warrants. The above provisions of this
SECTION 9.01 shall similarly apply to successive consolidations, mergers, share
exchanges, sales, leases, recapitalizations or transfers.
9.02 DISTRIBUTIONS UPON DECLARATION OF DIVIDEND OR OTHER
DISTRIBUTION. So long as any Warrants remain outstanding, the Company shall pay,
upon the declaration and payment of any dividend or distribution (whether such
dividend or distribution is in the form of cash, debt securities, equity
securities or other property) on any class of Common Stock, to each Holder the
dividend or distribution that such Holder would be otherwise entitled to receive
had such Holder exercised the Warrants held by it in full immediately prior to
the taking of record of those holders of Common Stock entitled to any such
dividend or distribution. If such dividend or distribution is in the form of a
voting equity security, such Holder will be entitled to receive, at its option,
in its stead non-voting equity securities otherwise identical to and convertible
at such Holder's option into the equity securities to which such Holder is
otherwise entitled thereunder and continuing benefiting from antidilution
provisions similar to those herein. If a Warrant is not then exercisable, such
payment shall be postponed until such Warrant becomes exercisable. This
provision shall not apply to stock dividends of Additional Shares of Common
Stock, or to a reclassification or recapitalization, PROVIDED that the Company
adjusts the number of shares of Common Stock comprising a Stock Unit pursuant to
SECTION 8.01 hereof.
27
- 23 -
9.03 DILUTION IN CASE OF OTHER SECURITIES. In case any Other
Securities shall be issued or sold or shall become subject to issue or sale upon
the conversion or exchange of any stock (or Other Securities) of the Company (or
any issuer of Other Securities or any other Person referred to in SECTION 9.01
hereof) or to subscription, purchase or other acquisition pursuant to any
rights, options, warrants to subscribe for, purchase or otherwise acquire either
Additional Shares of Common Stock or securities directly or indirectly
convertible into or exchangeable for Additional Shares of Common Stock, issued
or granted by the Company (or any such other issuer or Person) for a
consideration such as to dilute, on a basis consistent with the standards
established in the other provisions of SECTION 8 hereof, the purchase rights
granted by the Warrants, then, and in each such case, the computations,
adjustments and readjustments provided for in said SECTION 8 with respect to the
Stock Units shall be made as nearly as reasonably possible in the manner so
provided and applied to determine the amount of Other Securities from time to
time receivable upon the exercise of the Warrants, so as to protect the Holders
against the effect of such dilution in a similar manner.
Section 10. NOTICE TO WARRANT HOLDERS.
10.01 NOTICE OF ADJUSTMENT OF STOCK UNIT OR EXERCISE PRICE. So
long as any Warrant remains outstanding, whenever the number of shares of Common
Stock comprising a Stock Unit shall be adjusted pursuant to SECTION 8 or 9
hereof, the Company shall forthwith obtain a certificate signed 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
(including a statement of the Applicable Price of Additional Shares of Common
Stock or other securities issued or sold and, if the consideration therefor was
other than cash, a description of how such consideration was valued), specifying
the number of shares of Common Stock comprising a Stock Unit and (if such
adjustment was made pursuant to SECTION 9 hereof) describing the number and kind
of any other securities comprising a Stock Unit, and any change in the Exercise
Price, after giving effect to such adjustment or change. The Company shall
promptly and in any case within 10 days after the making of such adjustments
cause a signed copy of such certificate to be delivered to each Holder in
accordance with SECTION 15.02 hereof. The Company shall keep at its office or
agency, maintained for the purpose pursuant to SECTION 15.03 hereof, 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 permitted
purchaser of a Warrant designated by a holder thereof.
10.02 NOTICE OF CERTAIN CORPORATE ACTIONS. So long as any
Warrant remains outstanding, in case the Company shall propose (a) to pay any
dividend to the holders of its Common Stock or to make any other distribution to
the holders of its Common Stock, or (b) to offer to the holders of its Common
Stock rights to subscribe for or to purchase any Additional Shares of Common
Stock or Other Securities, rights or options, or (c) to effect any
reclassification of its Common Stock (other than a reclassification involving
only the subdivision, or combination, of outstanding shares of Common Stock), or
(d) to effect any capital reorganization, or (e) to effect any consolidation,
merger or share exchange, or any sale, lease, transfer or other disposition of
all or substantially all of its assets (other than a transaction in which the
Company is the surviving entity and the Common Stock is not converted into or
exchanged for any other securities or property), or (f) to effect the
liquidation, dissolution or
28
- 24 -
winding up of the Company, then, in each such case, the Company shall give
to each Holder, in accordance with SECTION 15.02 hereof, a notice of such
proposed action, which shall specify the date on which a record is to be taken
for the purposes of such stock dividend, distribution or offering of rights, or
the date on which such reclassification, reorganization, consolidation, merger,
share exchange, sale, lease, transfer, disposition, liquidation, dissolution or
winding up is to take place and the date of participation therein by the holders
of Common Stock, if any such date is to be fixed and shall also set forth such
facts with respect thereto as shall be reasonably necessary to indicate the
effect of such action on the Common Stock, if any, and the number and kind of
any other shares of stock which will comprise a Stock Unit, and the purchase
price or prices thereof, after giving effect to any adjustment, if any, which
will be required as a result of such action. Such notice shall be so given in
the case of any action covered by clause (a) or (b) above at least 10 days prior
to the record date for determining holders of the Common Stock for purposes of
such action, and in the case of any other such action, at least 10 days prior to
the date of the taking of such proposed action or the date of participation
therein by the holders of Common Stock, whichever shall be the earlier.
10.03 LIMITATION ON HOLDERS' RIGHTS. Prior to the exercise of
any Warrant, the Holder thereof shall not be entitled to any rights of a
Stockholder (subject to SECTION 9.02 hereof with respect to dividends and
distributions), including, without limitation, the right to vote or receive
dividends or other distributions, or any notice of any proceedings of the
Company except as expressly provided in this Agreement.
Section 11. RESERVATION AND AUTHORIZATION OF COMMON STOCK. The
Company shall at all times reserve and keep available for issue upon the
exercise or conversion of Warrants such number of its authorized but unissued
shares of Common Stock (or any stock into which such Common Stock shall be
changed) as will be sufficient to permit the exercise in full of all outstanding
Warrants from time to time. All shares of Common Stock (or any stock into which
such Common Stock shall be changed) which shall be so issuable, when issued upon
exercise of any Warrant and payment of the applicable Exercise Price therefor in
accordance with the terms hereof and of the Warrants, and all shares of Interest
Stock issued pursuant to the Loan Agreement, shall be duly and validly issued by
the Company, fully paid and nonassessable and free and clear of all Liens.
Before taking any action which would result in an adjustment
in the number of shares of Common Stock comprising a Stock Unit which would
cause an adjustment reducing the Current Warrant Price per share of Common Stock
below the then par value, if any, of the shares of Common Stock issuable upon
exercise of the Warrants, the Company shall, in its sole and absolute
discretion, (i) take any corporate action which is necessary in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock free and clear of all Liens upon the exercise of all the Warrants
immediately after the taking of such action or (ii) by written notice to each
Holder, increase the Exercise Price per Stock Unit so that the Exercise Price
per Stock Unit equals the aggregate par value of the capital stock contained in
a Stock Unit after such adjustment in the number of shares comprising a Stock
Unit, and pay to each Holder a fee equal to the result obtained by multiplying
(A) the number of Stock Units issuable upon the exercise of Warrants then held
by such Holder or by (B) the result obtained by subtracting the aggregate par
value of the capital stock in a Stock Unit immediately
29
- 25 -
prior to such adjustment from the aggregate par value of the capital stock in a
Stock Unit after such adjustment.
Before taking any action which would result in an adjustment
in the number of shares of Common Stock comprising a Stock Unit or in the
Current Warrant Price per share of Common Stock, the Company shall obtain all
such authorizations or exemptions thereof, or consents thereto, as may be
necessary from any public regulatory body or bodies having jurisdiction thereof.
The Company will list on each national securities exchange on
which any Common Stock may at any time be listed, subject to official notice of
issuance upon exercise of the Warrants, and will maintain such listing of, all
shares of Common Stock from time to time issuable upon the exercise of the
Warrants. The Company will also so list on each national securities exchange,
and will maintain such listing of, any Other Securities and Interest Stock if at
the time any securities of the same class shall be listed on such national
securities exchange by the Company.
Section 12. TAKING OF RECORD; STOCK AND WARRANT TRANSFER
BOOKS.
(a) In the case of all dividends or other distributions by the
Company to the holders of its Common Stock with respect to which any provision
of SECTION 8 and SECTION 9.02 hereof refers to the taking of a record of such
holders, the Company shall in each such case take such a record as of the close
of business on a Business Day.
(b) The Company shall not at any time, except upon complete
dissolution, liquidation and winding up, close its stock transfer books or
Warrant transfer books so as to result in preventing or delaying the exercise,
conversion or transfer of any Warrant, unless otherwise required by any
applicable federal, state or local law.
Section 13. HOLDERS' SPECIAL RIGHTS.
13.01 REPLACEMENT OF INSTRUMENTS. Upon receipt by the Company
of evidence reasonably satisfactory to it of the ownership of and the loss,
theft, destruction or mutilation of any certificate or instrument evidencing any
Warrants issued by the Company, and
(a) in the case of loss, theft or destruction, of an indemnity
reasonably satisfactory to it, PROVIDED that, if the owner of the same
is an Initial Holder, its own agreement of indemnity shall be deemed to
be satisfactory, or if the owner of the same is a Holder the Company
may require a bond, or
(b) in the case of mutilation, upon surrender or cancellation
thereof,
the Company, at its expense, shall execute, register and deliver, in lieu
thereof, a new certificate or instrument for (or covering the purchase of) an
equal number of Warrants or Warrant Stock.
30
- 26 -
13.02 RESTRICTIONS ON CERTAIN ACTION.
(a) The Company shall not at any time enter into an agreement
or other instrument limiting in any manner its ability to perform its
obligations under this Agreement or the Warrants or making such performance or
the issuance of shares of Common Stock upon the exercise of any Warrant issued
by it a default under any such agreement or instrument.
(b) So long as any Warrant remains outstanding that is
exercisable or may become exercisable in the future with the passage of time or
as a result of adjustments pursuant to the terms of such Warrant, neither the
Company nor any of its Subsidiaries shall (i) issue any Participating Security
or securities convertible into or exercisable for a Participating Security or
(ii) make or agree to make payments to any Person, such as any "phantom" stock
payments, where the amount thereof is calculated with reference to fair market
or equity value of the Company or any of the Subsidiaries, except for such
payments pursuant to the stock incentive plans, stock option plans, stock
purchase plans or other arrangements for the benefit of employees, directors or
consultants of the Company or any of its Subsidiaries existing at the date
hereof, including any such plans of a target company assumed by the Company or
any of its Subsidiaries in connection with an acquisition of such target
company, provided that such plans are existing at the date of such acquisition
and were not adopted or modified to increase the number of shares issuable
thereunder in anticipation of such acquisition, or under successor plans that do
not permit the issuance of Common Stock, including notional Common Stock
underlying "phantom" stock, in an amount greater than would be permitted under
plans existing at the date hereof (or on the date of acquisition of such target
company).
(c) So long as any Warrant remains outstanding that is
exercisable or may become exercisable in the future with the passage of time or
as a result of adjustments pursuant to the terms of such Warrant, without the
written consent of the Majority Holders the Company will not, nor will it permit
any of its Subsidiaries to, create, incur, assume or permit to exist any
Indebtedness (as defined in the Loan Agreement) in an aggregate amount in excess
of $25,000,000.
13.03 RESERVED.
13.04 BOARD ATTENDANCE. Until such time as the Loans (as
defined in the Loan Agreement) are paid in full and the Commitments (as defined
in the Loan Agreement) are terminated, ▇▇▇▇▇ ▇▇▇▇ or ▇▇▇▇▇ ▇▇▇▇▇▇▇ or if neither
of them is affiliated with Reservoir Capital Group L.L.C. another representative
(the "REPRESENTATIVE") appointed by the Majority Holders shall be entitled to
attend all meetings of (i) the Board, (ii) the board of directors of any
Subsidiary of the Company and (iii) any committee of (i) and (ii) above,
PROVIDED, HOWEVER, that the Representative shall not be entitled to vote at any
such meeting; PROVIDED, FURTHER, that in the event that the Initial Holders or
their Affiliates do not constitute the Majority Holders, such Representative
shall be subject to the prior written consent of the Company, such consent not
to be unreasonably withheld. The Company shall give each Representative notice
of all such meetings at the same time and in the same manner as notice is given
to members of the Board and of the board of directors of each Subsidiary of the
Company. Each Representative shall be entitled to receive all written materials
and other information given to the directors of the Company and the directors of
each Subsidiary of the Company in connection with such meetings
31
- 27 -
at the same time and in the same manner and form as such materials and
information are given to the directors; PROVIDED that the Company reserves the
right to withhold any information and to exclude the Representative from any
meeting or portion thereof if, in the reasonable judgment of the Chairman of the
Board of Directors or the Board of Directors of the Company, (i) attendance of
the Representative would result in loss of the Company's attorney-client
privilege with respect to communications by counsel at the meeting, or (ii) such
information or the agenda for such meeting relate to matters concerning the
business relationship between the Company on the one hand and the Initial
Holders solely in their capacity as lenders to the Company on the other hand,
where such matters present a conflict of business interests between the Company
and the Initial Holders in their capacities as lenders (it being understood that
general discussions concerning the repayment or refinancing of any amounts owing
under the Loan Agreement and similar matters shall not generally present
conflicts of business interests). Each of the Holders agrees to cause the
Representative to comply with the provisions of this Section, and each
Representative shall be deemed to have agreed to comply with the provisions of
this Section by accepting any Information (as defined below) or attending a
meeting described above in this Section.
13.05 CONFIDENTIALITY. Each of the Holders agrees to maintain
the confidentiality of the Information (as defined below) and not to disclose or
divulge the Information, except that Information may be disclosed (i) to its
Affiliates (it being understood that such Affiliates to whom such disclosure is
made will be informed of the confidential nature of such Information and
instructed to keep such Information confidential), (ii) to its and its
Affiliates' directors, officers, employees and agents, including accountants,
legal counsel and other advisors (it being understood that the Persons to whom
such disclosure is made will be informed of the confidential nature of such
Information and instructed that acceptance of such Information or attendance at
a Board meeting will constitute acceptance of the provisions of this Section),
(iii) to the extent requested by any regulatory authority, following notice to
the Company to the extent such notice is reasonably practicable (provided such
Holder takes reasonable steps as requested by and at the expense of the Company
to minimize the extent of any such required disclosure), (iv) to the extent
required by applicable laws or regulations or by any subpoena or similar legal
process (provided such Holder takes reasonable steps as requested by and at the
expense of the Company to minimize the extent of any such required disclosure),
(v) in connection with the exercise of any remedies hereunder or any suit,
action or proceeding relating to this Agreement or the enforcement of rights
hereunder, (vi) with the prior written consent of the Borrower or (vii) to the
extent such Information (A) becomes publicly available other than as a result of
a breach of this paragraph or (B) becomes available to the Holder on a
nonconfidential basis from a source other than the Company. For the purposes of
this paragraph, "INFORMATION" means all information received from the Company or
its Subsidiaries relating to the Company, its Subsidiaries or its business
(including information received pursuant to SECTION 13.04 above), other than any
such information that is available to such Holder on a nonconfidential basis
prior to disclosure by the Company or such Subsidiary; PROVIDED that, in the
case of information received from the Company or any of its Subsidiaries after
the date hereof, such information is clearly identified at the time of delivery
as confidential; and PROVIDED, FURTHER, that (x) all information provided to the
Representatives (as defined herein) at or in connection with any meeting
described in SECTION 13.04 hereof shall be deemed Information for purposes
hereof and (y) the Holder may from time to time by delivery of a written notice
to the Holders designate specific categories of information as Information.
32
- 28 -
13.06 TRANSACTIONS WITH AFFILIATES OF THE COMPANY. So long as
any Warrant remains outstanding that is exercisable or may become exercisable in
the future with the passage of time or as a result of adjustments pursuant to
the terms of such Warrant, the Company will not, nor will it permit any of its
Subsidiaries to, sell, lease or otherwise transfer any property or assets to, or
purchase, lease or otherwise acquire any property or assets from, or otherwise
engage in any other transactions with, any of its Affiliates, except (a)
transactions in the ordinary course of business at prices and on terms and
conditions not less favorable to the Company or such Subsidiary than could be
obtained on an arm's-length basis from unrelated third parties, (b) transactions
between or among the Company and its wholly owned Subsidiaries not involving any
other Affiliate, (c) any Restricted Payment (as defined in the Loan Agreement)
permitted by Section 7.06 of the Loan Agreement and (d) transactions consented
to in writing by the Majority Holders.
13.07 INDEMNIFICATION. The Company will defend and indemnify
each of the Initial Holders and their officers, directors, managers, members,
partners, stockholders, attorneys, representatives, agents, and employees
against, and hold each such person harmless from, all losses (including any
diminution in value of the shares of Common Stock or other securities of the
Company hereafter acquired by the Initial Holders under this Agreement),
demands, actions, causes of action, assessments, damages, liabilities, costs or
expenses, including without limitation, interest, penalties, fines, fees,
deficiencies, claims of damage, reasonable attorneys' and other professional
fees and expenses incurred in the investigation, prosecution, defense or (with
the consent of the Company, which consent shall not be unreasonably withheld)
settlement thereof arising out of or based on any breach of any warranty,
representation or agreement of the Company set forth in this Agreement or the
Warrants, other than any of such amounts resulting from any breach of any
warranty or representation of the Initial Holders set forth in SECTION 2.03
herein or any action on the part of such indemnified party that is finally
determined in such proceeding to be primarily and directly a result of such
party's gross negligence or willful misconduct. The Company shall not be liable
for any settlement entered into without its consent, which it shall not
unreasonably withhold. Each Initial Holder shall reimburse the Company for any
payments made by the Company to it pursuant to this paragraph for any such
losses that are finally determined in such proceeding to result primarily and
directly from the breach of any warranty of representation of the Initial
Holders set forth in SECTION 2.03 herein or the gross negligence or willful
misconduct of the Initial Holders. Nothing contained in this SECTION 13.07 shall
limit in any manner any remedy at law or in equity to which a party hereunder
shall be entitled against the others as a result of fraud or intentional
misrepresentation by such others or any of their representatives or agents.
Section 14. REGISTRATION RIGHTS.
14.01 GRANT OF RIGHT. The Company hereby grants to each
Grantee (as defined below) the registration rights set forth in this SECTION 14,
with respect to the Registrable Securities (as defined below) owned by such
Grantee. The Company and the Grantees agree that the registration rights
provided herein set forth the sole and entire agreement, and supersede any prior
agreement, between the Company and the Grantees with respect to registration
rights for the Company's Registrable Securities.
33
- 29 -
14.02 CERTAIN DEFINITIONS. As used in this SECTION 14:
(a) The terms "REGISTER," "REGISTERED" and "REGISTRATION"
refer to a registration effected by filing with the Commission a registration
statement (the "REGISTRATION STATEMENT") in compliance with the Securities Act,
and the declaration or ordering by the Commission of the effectiveness of such
Registration Statement.
(b) The term "REGISTRABLE SECURITIES" means (i) shares of the
Warrant Stock (whether or not the related Warrant is then exercisable), (ii)
shares of Common Stock issued or issuable upon exercise or conversion of the
Warrants held by any Holder or any transferee through a Section 14 Permitted
Transfer (as defined in SECTION 14.09(b)), (iii) shares of Interest Stock if
such shares are actually issued and outstanding at the time of determination of
the Registrable Securities and (iv) any shares of Common Stock issued as (or
issuable upon the conversion or exercise of any warrant, right or other security
that is issued as) a dividend or other distribution with respect to, or in
exchange or in replacement of, such Registrable Securities; PROVIDED, HOWEVER,
that shares of Common Stock or other securities shall be treated as Registrable
Securities only if and so long as (A) they have not been sold to or through a
broker or dealer or underwriter in a public distribution or a public securities
transaction, (B) they have not been sold in a transaction exempt from the
registration and prospectus delivery requirements of the Securities Act under
Section 4(l) thereof so that all transfer restrictions and restrictive legends
with respect thereto are removed upon the consummation of such sale, and (C)
they are held by a Grantee who cannot then sell all Registrable Securities held
by such Grantee (including Registrable Securities that may become issuable under
the Warrants in the future with the passage of time or as a result of
adjustments pursuant to the terms of the Warrants) in any three-month period
pursuant to Rule 144 or any successor rule promulgated under the Securities Act,
PROVIDED, HOWEVER, that (x) such shares of Common Stock or other securities
shall continue to be treated as Registrable Securities with respect to any
Grantee owning, together with its Affiliates, more than 1% (assuming the
issuance of Registrable Securities that may become issuable under the Warrants
in the future with the passage of time or as a result of adjustments pursuant to
the terms of the Warrants) of the Company's outstanding Common Stock until such
time as such Grantee owns, together with its Affiliates, less than 1% (assuming
the issuance of Registrable Securities that may become issuable under the
Warrants in the future with the passage of time or as a result of adjustments
pursuant to the terms of the Warrants) of the outstanding Common Stock and (y)
each Grantee agrees to notify the Company in writing of the first date on which
to its knowledge it owns less than 1% of the Company's outstanding Common Stock
on such basis.
(c) The term "GRANTEE" (collectively, "GRANTEES") means any
Holder (and any transferee as permitted by SECTION 14.09 hereof) holding
Registrable Securities, securities exercisable or convertible into Registrable
Securities or securities exercisable for securities convertible into Registrable
Securities.
14.03 [RESERVED].
14.04 PIGGYBACK REGISTRATION.
(a) COMPANY REGISTRATION. If at any time or from time to time
the Company shall determine to register any of its securities, either for its
own account or for the account of
34
- 30 -
security holders, other than a registration relating solely to employee
benefit plans, a registration on Form S-4 relating solely to Rule 145
transaction or a registration pursuant to SECTION 14.10 hereof, the Company
will:
(i) promptly (but in any event within 10 days) give to each
Grantee written notice thereof, except as set forth in this Section
below; and
(ii) include in such registration (and any related
qualification under state securities laws or other compliance), and in
any underwriting involved therein, all the Registrable Securities
specified in a written request or requests, made within 15 days after
receipt of such written notice from the Company, by any Grantee or
Grantees, except as set forth in this Section or SECTION 14.04(b)
below.
Such Registrable Securities shall only be included to the
extent that inclusion will not diminish the number of securities included by the
Company. The Company shall not be required to include any Registrable Securities
in a registration pursuant to this Section (nor give any Grantee notice thereof)
if and so long as (i) the registration does not relate to a registered public
offering involving an underwriting, and (ii) all Registrable Securities
consisting of (A) shares issued or issuable upon exercise or conversion of the
Term Warrants and Revolving Warrants, (B) shares of Interest Stock then eligible
to be registered for resale and (C) shares issued or issuable upon exercise or
conversion of Default Warrants then eligible to be registered for resale are
included in an effective Registration Statement filed pursuant to Section 14.10
and with respect to which no stop order has been issued and remains outstanding,
the prospectus remains current and any suspension of effectiveness by the
Company pursuant to Section 14.06 is not continuing.
(b) UNDERWRITING. If the registration of which the Company
gives notice is for a registered public offering involving an underwriting, the
Company shall so advise the Grantees as part of the written notice given
pursuant to Section 14.04(a)(i). In such event, the right of any Grantee to
registration pursuant to this SECTION 14.04 shall be conditioned upon such
Grantee's participation in such underwriting and the inclusion of such Grantee's
Registrable Securities in the underwriting to the extent provided herein.
All Grantees proposing to distribute their Registrable
Securities through such underwriting shall, together with the Company and the
other parties distributing their securities through such underwriting, enter
into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by the Company. Notwithstanding any
other provision of this SECTION 14.04, if the underwriter determines that
marketing factors require a limitation of the number of shares to be
underwritten, the underwriter may limit the number of Registrable Securities to
be included in the registration and underwriting, or may exclude Registrable
Securities entirely from such registration and underwriting subject to the terms
of this SECTION 14.04. The Company shall so advise all holders of the Company's
securities that would otherwise be registered and underwritten pursuant hereto,
and the number of shares of such securities, including Registrable Securities,
that may be included in the registration and underwriting shall be allocated in
the following manner: shares, other than Registrable Securities and other
securities the holders of which have contractual rights with
35
- 31 -
respect to registration similar to those provided for in this SECTION 14.04
(provided that such rights existed prior to the date of this agreement
including the Investor Rights Agreement or the holders of Registrable Securities
shall have consented to the granting of such registration rights pursuant to
SECTION 14.14 hereof), requested to be included in such registration by
shareholders shall be excluded, and if a limitation on the number of shares is
still required, the number of Registrable Securities and other securities the
holders of which have contractual rights with respect to registration that may
be included shall be allocated among the holders thereof in proportion, as
nearly as practicable, to the respective number of shares of Common Stock which
they held at the time the Company gives the notice specified in SECTION
14.04(a)(i) (except that to the extent the foregoing would violate the rights of
any such holders as of the date hereof, Registrable Securities will be excluded
before shares held by such other holders). No securities excluded from the
underwriting by reason of the underwriter's marketing limitation shall be
included in such registration. Nothing in this SECTION 14.04(b) is intended to
diminish the number of securities to be included by the Company in the
underwriting.
If any Grantee disapproves of the terms of the underwriting,
it may elect to withdraw therefrom by written notice to the Company and the
underwriter. The Registrable Securities so withdrawn shall also be withdrawn
from registration.
(c) RIGHT TO TERMINATE REGISTRATION. The Company shall have
the right to terminate or withdraw any registration initiated by it under this
SECTION 14.04 prior to the effectiveness of such registration whether or not any
Grantee has elected to include securities in such registration.
14.05 EXPENSES OF REGISTRATION. All Registration Expenses (as
defined below) incurred in connection with all registrations effected pursuant
to SECTIONS 14.04 and 14.10 shall be borne by the Company; PROVIDED, HOWEVER,
that the Company shall not be required to pay stock transfer taxes or
underwriters' discounts or selling commissions relating to Registrable
Securities; PROVIDED, FURTHER, that with respect to underwritten public
offerings registered pursuant to SECTION 14.10, the holders of the Registrable
Securities to which such Registration Statement relates shall pay all
Registration Expenses incident to such registration incurred by such holders and
all other reasonable Registration Expenses PRO RATA on the basis of the number
of Registrable Securities requested to be included by such holders.
"REGISTRATION EXPENSES" means any and all expenses incident to performance of or
compliance with this Agreement, including, without limitation, (a) all
registration and filing fees of the Commission, a stock exchange or the National
Association of Securities Dealers, Inc., (b) all reasonable fees and expenses of
complying with securities or blue sky laws (including reasonable fees and
disbursements of counsel for the underwriters in connection with blue sky
qualifications of the Registrable Securities) unless paid by the underwriters,
(c) all printing, messenger and delivery expenses, (d) all fees and expenses
incurred in connection with the listing of the Registrable Securities on any
securities exchange, (e) the reasonable fees and disbursements of counsel for
the Company and of its independent public accountants, including the expenses of
any special audits and/or "cold comfort" letters required by or incidental to
such performance and compliance, (f) the reasonable fees and disbursements of
one counsel selected by the Grantees holding a majority of the Registrable
Securities being registered to represent all Grantees that hold the Registrable
Securities being registered in connection with each such registration, (g) any
36
- 32 -
fees and disbursements of underwriters customarily paid by the issuers or
sellers of securities, including fees and disbursements of counsel for the
underwriters, but excluding underwriting discounts and commissions, (h)
liability insurance if the Company so desires or in the case of a registration
under SECTION 14.04 if the underwriters so require, and (i) the fees and
expenses of any special experts retained by the Company in connection with the
requested registration.
14.06 OBLIGATIONS OF THE COMPANY. Whenever required under this
SECTION 14 to effect the registration of any Registrable Securities, the Company
shall, as expeditiously as reasonably possible:
(a) use its reasonable best efforts to cause such Registration
Statement to become effective, and keep such Registration Statement
effective until the Grantee or Grantees have completed the distribution
relating thereto (or in the case of a Registration Statement under
SECTION 14.04(a), 180 days if less);
(b) prepare and file with the Commission such amendments and
supplements to such Registration Statement and the prospectus used in
connection with such Registration Statement as may be necessary to keep
such Registration Statement effective and to comply with the provisions
of the Securities Act with respect to the disposition of all securities
covered by such registration statement in accordance with the intended
methods of disposition by the seller or sellers thereof set forth in
such Registration Statement; PROVIDED, that before filing a
Registration Statement or prospectus, or any amendments or supplements
thereto, the Company will furnish to one counsel selected by the
Grantees that hold a majority of the Registrable Securities covered by
such Registration Statement to represent all Grantees of Registrable
Securities covered by such Registration Statement, copies of all
documents proposed to be filed, which documents will be subject to the
review of such counsel;
(c) furnish to the Grantees such numbers of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents as they
may reasonably request in order to facilitate the disposition of
Registrable Securities owned by them;
(d) use its reasonable best efforts to register or otherwise
qualify the securities covered by such Registration Statement under
such other securities laws of such states and other jurisdictions as
shall be reasonably requested by the Grantees or the managing
underwriter, PROVIDED that the Company shall not be required in
connection therewith or as a condition thereto to qualify to do
business or to file a general consent to service of process in any such
states or jurisdictions where, but for the requirements of this
paragraph (d), it would not be obligated to be so qualified;
(e) in the event of any underwritten public offering, enter
into and perform its obligations under an underwriting agreement, in
usual and customary form, with the managing underwriter of such
offering (each Grantee participating in such underwriting shall also
enter into and perform its obligations under such an agreement);
37
- 33 -
(f) notify each Grantee that holds Registrable Securities
covered by such Registration Statement, at any time when a prospectus
relating thereto is required to be delivered under the Securities Act,
of the happening of any event as a result of which the prospectus
included in such Registration Statement, as then in effect, includes an
untrue statement of a material fact or omits to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then existing
and at the request of any such seller, promptly prepare and promptly
furnish to such seller a reasonable number of copies of an amended or
supplemental prospectus as may be necessary so that, as thereafter
delivered to the sellers of such Registrable Securities, such
prospectus shall not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading in the light of
the circumstances then existing;
(g) otherwise use its reasonable best efforts to comply with
all applicable rules and regulations of the Commission, and make
available to its security holders, as soon as reasonably practicable
after the effective date of the Registration Statement, an earnings
statement that shall satisfy the provisions of Section 11(a) of the
Securities Act and the rules and regulations promulgated thereunder;
(h) obtain a "cold comfort" letter or letters from the
Company's independent public accountants in customary form and covering
matters of the type customarily covered by "cold comfort" letters as
the seller or sellers of a majority of such Registrable Securities
shall reasonably request;
(i) obtain an opinion of counsel for the Company in customary
form and covering matters of the type customarily covered in opinions
of issuer's counsel as the sellers shall reasonably request;
(j) use its best efforts to list the Registrable Securities
covered by such Registration Statement with any securities exchange or
Nasdaq on which the Common Stock is then listed;
(k) make available for inspection by each Grantee including
Registrable Securities in such registration, any underwriter
participating in any distribution pursuant to such registration, and
any attorney, accountant or other agent retained by such Grantee or
underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, as such parties may reasonably
request, and cause the Company's officers, directors and employees to
supply all information reasonably requested by any such Grantee,
underwriter, attorney, accountant or agent in connection with such
Registration Statement;
(l) cooperate with Grantees including Registrable Securities
in such registration and the managing underwriters, if any, to
facilitate the timely preparation and delivery of certificates
representing Registrable Securities to be sold, such certificates to be
in such denominations and registered in such names as such Grantees or
the managing
38
- 34 -
underwriters may request at least two Business Days prior to any sale
of Registrable Securities;
(m) permit any Grantee, which Grantee, in the sole and
exclusive judgment, exercised in good faith, of such Grantee, might be
deemed to be a controlling person of the Company, to participate in
good faith in the preparation of such Registration Statement and to
require the insertion therein of material concerning such Grantee,
furnished to the Company in writing, that in the reasonable judgment of
such Grantee and its counsel should be included; and
(n) promptly notify each Grantee including Registrable
Securities in such registration and the underwriters, if any, (i) when
the Registration Statement, any pre-effective amendment, the prospectus
or any prospectus supplement or post-effective amendment to the
Registration Statement has been filed and, with respect to the
registration statement or any post-effective amendment, when the same
has become effective, (ii) of any written request by the Commission for
amendments or supplements to the Registration Statement or prospectus,
(iii) of any the notification to the Company by the Commission of its
initiation of any proceedings with respect to the issuance by the
Commission of, or the issuance of by the Commission of, any stop order
suspending the effectiveness of the Registration Statement, and (iv) of
the receipt by the Company of any notification with respect to the
suspension of the qualification of any Registrable Securities for sale
under the applicable securities or blue-sky laws of any jurisdiction.
The Company may, by written notice to the Grantees signed by
the Chief Executive Officer or Chief Financial Officer of the Company, (i) delay
the filing or effectiveness of a Registration Statement for a period of not more
than 120 days or (ii) suspend a Registration Statement after effectiveness and
require that the Grantees immediately cease sales of shares pursuant to the
Registration Statement, in the event that (A) the Company files a registration
statement (other than a registration statement on Form S-8 or its successor
form) with the Commission for a public offering of its securities, (B) the
Company is engaged in any activity or transaction or preparations or
negotiations for any activity or transaction that the Company desires to keep
confidential for business reasons, if the Board determines in good faith that it
would be detrimental to the Company for such Registration Statement to be filed
in the near future and that it is, therefore, essential to defer the filing of
or suspend such Registration Statement, or (C) any financial statements required
to be included in the Registration Statement, due to a merger, acquisition or
other transaction entered into by the Company, are not available despite
reasonable best efforts by the Company to obtain such financial statements;
provided that the Company in exercising its rights under this sentence will not
discriminate against the Grantees vis-a-vis other holders of registration
rights. If the Company grants registration rights that have, or modifies
existing registration rights to have, provisions concerning delay and suspension
more favorable than these, the Company shall offer the Holders the benefit of
such provisions. If the Company delays or suspends a Registration Statement or
requires the Grantees to cease sales of shares pursuant to this paragraph, the
Company shall, as promptly as practicable following the termination of the
circumstance which entitled the Company to do so, notify the Grantees of such
termination and take such actions as may be necessary to file or reinstate the
effectiveness of the Registration Statement and/or give written notice to the
Grantees authorizing
39
- 35 -
them to resume sales pursuant to the Registration Statement. If, as a
result thereof, the prospectus included in the Registration Statement has been
amended to comply with the requirements of the Securities Act, the Company shall
enclose such revised prospectus with the notice to the Grantees given pursuant
to this paragraph, and the Grantees shall make no offers or sales of shares
pursuant to the Registration Statement other than by means of such revised
prospectus.
14.07 INDEMNIFICATION.
(a) The Company will, and does hereby undertake to, indemnify
and hold harmless each Grantee that holds Registrable Securities, each of such
Grantee's officers, directors, partners and agents, and each person controlling
such Grantee, and each underwriter, if any, and each person who controls any
underwriter, with respect to any registration, qualification or compliance
effected pursuant to this SECTION 14 of the Registrable Securities held by or
issuable to such Grantee, against all claims, losses, damages and liabilities
(or actions in respect thereto) to which they may become subject under the
Securities Act, the Exchange Act, or other federal or state law arising out of
or based on (i) any untrue statement (or alleged untrue statement) of a material
fact contained in any prospectus, offering circular or other similar document
(including any related Registration Statement, notification, or the like)
incident to any such registration, qualification or compliance, or based on any
omission (or alleged omission) to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances in which they were made, (ii) any violation or
alleged violation by the Company of any federal, state or common law rule or
regulation applicable to the Company in connection with any such registration,
qualification or compliance, or (iii) any failure to register or qualify
Registrable Securities in any state where the Company or its agents have
affirmatively undertaken or agreed in writing that the Company (the undertaking
of any underwriter chosen by the Company being attributed to the Company) will
undertake such registration or qualification on behalf of the Grantees that hold
such Registrable Securities (PROVIDED that in such instance the Company shall
not be so liable if it has undertaken its reasonable best efforts to so register
or qualify such Registrable Securities) and will reimburse, as incurred, each
such Grantee, each such underwriter and each such director, officer, partner,
agent and controlling person, for any legal and any other expenses reasonably
incurred in connection with investigating or defending any such claim, loss,
damage, liability or action in accordance with SECTION 14.07(c); PROVIDED, that
the Company will not be liable in any such case to the extent that any such
claim, loss, damage, liability or expense arises out of or is based on any
untrue statement or omission (or alleged untrue statement or omission) made in
conformity with written information furnished to the Company by such Grantee or
underwriter specifically for use therein; PROVIDED, FURTHER, that this indemnity
agreement shall not inure to the benefit of any Grantee that holds Registrable
Securities, each of such Grantees, officers, directors, partners and agents and
each person controlling such Grantee, or to the benefit of any Underwriter and
any person who controls any Underwriter in connection with any claim, loss,
damage or liability arising out of or based upon any untrue statement (or
alleged untrue statement) of a material fact contained in any prospectus,
offering circular or other similar document or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statement therein not misleading in light of the
circumstances under which they were made if each such Grantee (to the extent
such Grantee is required to deliver a
40
- 36 -
prospectus) or Underwriter failed to send or give a copy of the prospectus,
offering circular or similar document, as the same may be amended or
supplemented, in a timely manner and the untrue statement or alleged untrue
statement of a material fact or omission (or alleged omission) to state a
material fact in such earlier prospectus, offering circular or similar document,
was corrected in the final prospectus, offering circular or similar document,
unless such failure resulted from non-compliance by the Company with its
obligation to prepare and deliver a final prospectus.
(b) Each Grantee will, and if Registrable Securities held by
or issuable to such Grantee are included in such registration, qualification or
compliance pursuant to this SECTION 14, does hereby undertake to indemnify and
hold harmless the Company, each of its directors, partners, agents, officers,
and each person controlling the Company, each underwriter, if any, and each
person who controls any underwriter, of the Company's securities covered by such
a Registration Statement, and each other Grantee, each of such other Grantee's
officers, partners, directors and agents and each person controlling such other
Grantee, against all claims, losses, damages and liabilities (or actions in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any such Registration
Statement, prospectus, offering circular or other document, or any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances in which they were made, and will reimburse, as incurred, the
Company, each such underwriter, each such other Grantee, and each such director,
officer, agent, partner and controlling person of the foregoing, for any legal
or any other expenses reasonably incurred in connection with investigating or
defending any such claim, loss, damage, liability or action in accordance with
SECTION 14.07(c), in each case to the extent, but only to the extent, that such
untrue statement (or alleged untrue statement) or omission (or alleged omission)
was made in such Registration Statement, prospectus, offering circular or other
document, in reliance upon and in conformity with written information furnished
to the Company by such Grantee specifically for use therein; PROVIDED, HOWEVER,
that the liability of each Grantee hereunder shall be limited to the proportion
of any such claim, loss, damage or liability that is equal to the proportion
that the public offering price of the shares sold by such Grantee under such
Registration Statement bears to the total public offering price of all
securities sold thereunder, but in any event not to exceed the net proceeds
received by such Grantee from the sale of securities under such Registration
Statement.
(c) Each party entitled to indemnification under this SECTION
14.07 (the "INDEMNIFIED PARTY") shall give notice to the party required to
provide such indemnification (the "INDEMNIFYING PARTY") of any claim as to which
indemnification may be sought promptly after such Indemnified Party has actual
knowledge thereof, and shall permit the Indemnifying Party to assume the defense
of any such claim or any litigation resulting therefrom; PROVIDED, that counsel
for the Indemnifying Party, who shall conduct the defense of such claim or
litigation, shall be subject to approval by the Indemnified Party (whose
approval shall not be unreasonably withheld) and the Indemnified Party may
participate in such defense at the Indemnifying Party's expense if
representation of such Indemnified Party would be inappropriate due to actual or
potential differing interests between such indemnified party and any other party
represented by such counsel in such proceeding (provided that in no event shall
the Indemnifying Party be required to pay the expenses of more than one law
firm, which shall be selected by a majority-in-
41
- 37 -
interest of the Grantees, plus appropriate local counsel); and PROVIDED,
FURTHER, that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this SECTION 14, except to the extent that such failure to give notice
shall materially adversely affect the Indemnifying Party in the defense of any
such claim or any such litigation. An Indemnifying Party, in the defense of any
such claim or litigation, may, without the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement that includes as
an unconditional term thereof the giving by the claimant or plaintiff therein,
to such Indemnified Party, of a release from all liability with respect to such
claim or litigation.
(d) In order to provide for just and equitable contribution to
joint liability under the Securities Act in any case in which either (i) such
indemnification may not be enforced in such case notwithstanding the fact that
this SECTION 14.07 provides for indemnification in such case, or (ii)
contribution under the Securities Act may be required on the part of any such
Grantee or any such controlling person in circumstances for which
indemnification is provided under this SECTION 14.07; then, and in each such
case, the Company and such Grantee will contribute to the aggregate claims,
losses, damages or liabilities to which they may be subject (after contribution
from others) in such proportion as is appropriate to reflect the relative fault
of the Indemnifying Party on the one hand and of the Indemnified Party on the
other hand in connection with the statements or omissions which resulted in such
claim, loss, damage liability or expense as well as any other relevant equitable
considerations. The relative fault of the Indemnifying Party and the Indemnified
Party shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
Indemnifying Party or by the Indemnified Party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission. Notwithstanding anything to the contrary in this
Agreement, (A) no Grantee will be required to contribute any amount in excess of
the public offering price of all securities offered by it pursuant to such
Registration Statement, after deduction of underwriting discounts and
commissions; and (B) no person or entity guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) will be entitled to
contribution from any person or entity who was not guilty of such fraudulent
misrepresentation.
(e) The indemnities provided in this SECTION 14.07 shall
survive the transfer of any Registrable Securities by such Grantee.
14.08 INFORMATION BY GRANTEE. The Company shall not be
required to include any Registrable Shares in the Registration Statement unless:
(a) the Grantee or Grantees of Registrable Securities included in any
registration shall furnish to the Company in writing such information regarding
such Grantee or Grantees and the distribution proposed by such Grantee or
Grantees as the Company may reasonably request in writing and as shall be
required in connection with any registration, qualification or compliance
referred to in this SECTION 14; and (b) the Grantee shall promptly report to the
Company sales made pursuant to the Registration Statement.
42
- 38 -
14.09 TRANSFER OF REGISTRATION RIGHTS.
(a) The rights, contained in SECTIONS 14.04 and 14.10 hereof,
to cause the Company to register the Registrable Securities, may be assigned or
otherwise conveyed to a transferee or assignee of Registrable Securities, who
shall be considered a "Grantee" for purposes of this SECTION 14; PROVIDED, that
(i) any such transfer is effected in compliance with SECTIONS 4 and 5 hereof;
and (ii) such transfer is a "Section 14 Permitted Transfer" as defined below.
(b) For purposes of this Agreement, a "SECTION 14 PERMITTED
TRANSFER" shall mean: (i) a transaction not involving a change in beneficial
ownership; (ii) transactions involving distribution without consideration by a
shareholder that is a partnership to any of its partners, retired partners, or
to the estate of any of its partners; (iii) transactions involving distribution
without consideration by a shareholder that is a corporation or limited
liability company to any of its shareholders or members, as applicable; (iv)
transfers by any shareholder who is an individual to a trust for the benefit of
such shareholder or his family; (v) a transfer in which the transferee acquires
at least 100,000 shares of Registrable Securities, or securities convertible
into or exercisable for such number of shares, subject to adjustment for
combinations, consolidations, recapitalizations, stock splits, stock dividends
and the like; (vi) transfers by gift, will or intestate succession to the
spouse, lineal descendants or ancestors of any shareholder or spouse of a
shareholder; or (vii) transfer by any Grantee to any of its Affiliates.
14.10 FORM S-3 REGISTRATION.
(a) The Company will file with the Commission within 90 days
of the date hereof a Registration Statement on Form S-3 covering the resale to
the public of all Registrable Securities consisting of (i) shares issued or
issuable upon exercise or conversion of the Term Warrants and Revolving
Warrants, (ii) shares of Interest Stock to the extent then eligible to be
registered for resale and (iii) shares issued or issuable upon exercise or
conversion of Default Warrants to the extent then eligible to be registered for
resale and will use its reasonable best efforts to cause such Registration
Statement to be declared effective by the Commission as soon as practicable. To
the extent shares in clauses (ii) and (iii) cannot then be registered for
resale, the Company will promptly file and use its reasonable best efforts to
cause become effective additional Registration Statements on Form S-3 covering
such shares as promptly as practicable after they are eligible to be registered
for resale. Except as provided in Section 14.04, nothing herein shall restrict,
prohibit, or limit in any way a Grantee's ability to exercise its registration
rights under SECTION 14.04 hereof.
(b) In the event that the offering to which such registration
relates is to be an underwritten public offering, then to the extent that either
the holders of a majority of the Registrable Securities to which such
registration relates or the managing underwriter notifies the Company in writing
that, in the judgment of such holders or such managing underwriter, the
inclusion of additional information in the Registration Statement is of material
importance to the success of the offering, then the Company shall be obligated
to include such additional information in the registration statement to the
reasonable satisfaction of the holders of a
43
- 39 -
majority of the Registrable Securities to which such registration relates
or such managing underwriter, as the case may be.
14.11 DELAY OF REGISTRATION. No Grantee shall have any right
to obtain or seek an injunction restraining or otherwise delaying any such
registration as the result of any controversy that might arise with respect to
the interpretation or implementation of this SECTION 14.
14.12 RULE 144 REPORTING. With a view to making available to
the Grantees the benefits of certain rules and regulations of the Commission
that may permit the sale of the Registrable Securities to the public without
registration, the Company agrees to:
(a) make and keep current public information about the Company
available, within the meaning of Rule 144 or any similar or analogous
rule promulgated under the Securities Act;
(b) file with the Commission, in a timely manner, all reports
and other documents required of the Company under the Securities Act
and the Exchange Act;
(c) so long as a Grantee owns any Registrable Securities,
furnish to such Grantee forthwith upon request a written statement by
the Company as to its compliance with the reporting requirements of
Rule 144, the Securities Act and the Exchange Act; a copy of the most
recent annual or quarterly report of the Company; and such other
reports and documents as a Grantee may reasonably request in availing
itself of any rule or regulation of the Commission allowing it to sell
any such securities without registration.
14.13 MARKET STAND-OFF AGREEMENT. Each Holder that is a "One
Percent Stockholder" (as defined below) hereby agrees that during a period, not
to exceed 90 days, following the effective date of a registration statement of
the Company filed under the Securities Act, it shall not, to the extent
requested by the Company and any underwriter, sell, pledge, transfer, make any
short sale of, loan, grant any option for the purchase of, or otherwise transfer
or dispose of (other than to donees who agree to be similarly bound) any Common
Stock held by it at any time during such period except Common Stock included in
such registration; PROVIDED, HOWEVER, that all other One Percent Stockholders
with registration rights (whether or not pursuant to this Agreement) and all
officers and directors of the Company enter into similar agreements.
For purposes of this SECTION 14.13, the term "One Percent
Stockholder" shall mean a Stockholder of the Company who holds at least one
percent of the outstanding Common Stock of the Company (assuming conversion of
all Warrants which are exercisable on such date pursuant to their terms).
In order to enforce the foregoing covenant, the Company may
impose stop-transfer instructions with respect to the Registrable Securities of
each Holder (and the shares or securities of every other person subject to the
foregoing restriction) until the end of such period.
44
- 40 -
14.14 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this
SECTION 14 may be amended and the observance thereof may be waived (either
generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the Grantees
that hold at least 75% of the Registrable Securities then outstanding
(determined as provided in Section 14.02(d)). Any amendment or waiver effected
in accordance with this SECTION 14.14 shall be binding upon each Grantee, each
future Grantee that holds Registrable Securities and the Company.
14.15 TERMINATION OF REGISTRATION RIGHTS. The rights of any
particular Grantee to cause the Company to register securities under SECTIONS
14.04 and 14.10 hereof shall terminate as to any Grantee on the date such
Grantee together with its Affiliates is able to dispose of all of its
Registrable Securities (including Registrable Securities that may become
issuable under the Warrants in the future with the passage of time or as a
result of adjustments pursuant to the terms of the Warrants) in any three-month
period pursuant to Rule 144 (or any similar or analogous rule promulgated under
the Securities Act); PROVIDED, HOWEVER, that such rights shall not terminate
with respect to any Grantee owning more than 1% (including Registrable
Securities that may become issuable under the Warrants in the future with the
passage of time or as a result of adjustments pursuant to the terms of the
Warrants) of the Company's outstanding Common Stock of the Company until such
time as such Grantee owns less than 1% of the outstanding Common Stock of the
Company on such basis.
Section 15. MISCELLANEOUS.
15.01 WAIVER. No failure on the part of any Holder to exercise
and no delay in exercising, and no course of dealing with respect to, any right,
power or privilege under this Agreement shall operate as a waiver thereof, nor
shall any single or partial exercise of any right, power or privilege under this
Agreement preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The remedies provided herein are cumulative and
not exclusive of any remedies provided by law.
15.02 NOTICES. All notices and other communications provided
for herein and the Warrants (including, without limitation, any modifications
of, or waivers or consents under, this Agreement) shall be given or made in
writing (including, without limitation, by telecopy), if to (a) any party
hereto, delivered to the intended recipient at the "Address for Notices"
specified below its name on the signature pages hereof; or, as to any party, at
such other address as shall be designated by such party in a written notice to
each other party, or (b) any other Person who is the registered Holder of any
Warrants, Warrant Stock or Interest Stock, to the address for such Holder as it
appears in the stock or warrant ledger of the Company. Except as otherwise
provided in this Agreement, all such communications shall be deemed to have been
duly given when transmitted by telecopier (followed by a hard copy to such party
by any of the methods under this SECTION 15.02) or personally delivered, or, in
the case of a mailed notice, upon receipt, in each case given or addressed as
aforesaid. The Company agrees to deliver to each Holder in the manner prescribed
by this SECTION 15.02 any notices or other communications delivered to the
stockholders of the Company.
15.03 OFFICE OF THE COMPANY. So long as any of the Warrants
remains outstanding, the Company shall maintain an office in the continental
United States of America where the Warrants may be presented for exercise,
transfer, division or combination provided
45
- 41 -
herein and in the Warrants. Such office shall be at ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇▇▇, unless and until the Company shall designate and maintain
some other office for such purposes and give notice thereof to all Holders.
15.04 EXPENSES, TRANSFER TAXES AND OTHER CHARGES.
(a) EXPENSES, ETC. The Company agrees to pay or reimburse each
of the Initial Holders for paying: (i) all reasonable out-of-pocket costs and
expenses of the Initial Holders (including, without limitation, the reasonable
fees and expenses of Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP), in connection with
(x) the negotiation, preparation, execution and delivery of this Agreement and
the issuance of Warrants hereunder and (y) any amendment, modification or waiver
of any of the terms of this Agreement or the Warrants initiated at the request
of or consented to by the Company (whether or not consummated); and (ii) all
reasonable fees, costs and expenses of the Holders (including reasonable fees of
a single counsel appointed by the Majority Holders) in connection with any
default by the Company hereunder or under any Warrant or in connection with any
enforcement action or other proceedings relating hereto or thereto (including,
without limitation, the enforcement of this SECTION 15.04). In the event that a
court of competent jurisdiction determines in a final and nonappealable judgment
that a Holder, in bringing an enforcement action or other proceeding as
specified in clause (ii) of this SECTION 15.04(a), was guilty of gross
negligence or willful misconduct, then such Holder shall reimburse the Company
for all costs and expenses which the Company paid on behalf of the Initial
Holders or reimbursed the Initial Holders for paying as required by this SECTION
15.04 and not be entitled to any further reimbursement thereof.
(b) CERTAIN TAXES, ETC. Except as otherwise provided in
SECTION 15.04(c), the Company shall pay all taxes (other than Federal, state or
local income taxes) which may be payable in connection with the execution and
delivery of this Agreement or the issuance and sale of the Warrants hereunder or
in connection with any modification of this Agreement or the Warrants and shall
hold each Holder harmless without limitation as to time against any and all
liabilities with respect to all such taxes. The obligations of the Company under
this SECTION 15.04(b) shall survive any redemption, repurchase or acquisition of
Warrants by the Company and the termination of this Agreement.
(c) TRANSFER TAXES, ETC. The Company shall pay any and all
expenses, transfer taxes and other charges, including all costs associated with
the preparation, issue and delivery of stock or warrant certificates, that are
incurred in respect of the issuance or delivery of shares of Common Stock upon
exercise or conversion of the Warrants pursuant to SECTION 2 thereof or in
connection with any transfer, division or combination of Warrants pursuant to
SECTION 3 thereof. The Company shall not, however, be required to pay any tax
which may be payable in respect of any transfer involved in the issue and
delivery of shares of Common Stock in a name other than that in which the
relevant Warrant is registered, and no such issue or delivery shall be made
unless and until the Person requesting such issue has paid to the Company the
amount of any such tax, or has established, to the satisfaction of the Company,
that such tax has been paid.
15.05 AMENDMENTS, ETC. Except as otherwise expressly provided
in this Agreement, any provision of this Agreement may be amended or modified
only by an instrument in writing signed by the Company and the Holders of at
least 66 2/3% of the Warrant Stock (including Warrant Stock issuable on exercise
of Warrants); PROVIDED that (a) the consent of the
46
- 42 -
Holders shall not be required with respect to any amendment or waiver which
does not affect the rights or benefits of such Holders under this
Agreement, (b) the consent of the Holders of Registrable Securities shall be
required with respect to any amendment or waiver of SECTION 14, and (c) no such
amendment or waiver shall, without the written consent of all Holders of Warrant
Stock (including Warrant Stock issuable on exercise of Warrants) at the time
outstanding, amend this SECTION 15.05.
15.06 SUCCESSORS AND ASSIGNS. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
15.07 SURVIVAL. All representations and warranties made by the
Company herein or in any certificate or other instrument delivered by it or on
its behalf under this Agreement shall be considered to have been relied upon by
each Initial Holder and shall survive the execution and delivery of this
Agreement and the issuance of the Warrants or the Warrant Stock regardless of
any investigation made by or on behalf of any Initial Holder. All
representations and warranties made by the Initial Holders herein or in any
certificate or instrument delivered by it or on its behalf under this Agreement
shall be considered to have been relied upon by the Company and shall survive
the execution and delivery of this Agreement and the issuance to the Initial
Holders of the Warrants, the Warrant Stock and any Other Securities regardless
of any investigation made by or on behalf of the Company.
15.08 CAPTIONS. The captions and section headings appearing
herein are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.
15.09 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, all of which taken together shall constitute one and the
same instrument and any of the parties hereto may execute this Agreement by
signing any such counterpart.
15.10 GOVERNING LAW. This Agreement and the Warrants shall be
governed by, and construed in accordance with, the internal law of the State of
New York, except as to those provisions which are mandatorily governed by the
General Corporation Law of the State of Delaware.
15.11 SEVERABILITY. In the event that any one or more of the
provisions contained herein, or the application thereof in any circumstance, is
held invalid, illegal or unenforceable, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions contained herein shall not be affected or impaired thereby.
15.12 ENTIRE AGREEMENT. This Agreement supersedes all prior
discussions and agreements between the parties with respect to the subject
matter hereof, and (together with the Warrants) contains the sole and entire
agreement among the parties hereto with respect to the subject matter hereof.
15.13 NO THIRD PARTY BENEFICIARY. The terms and provisions of
this Agreement are intended solely for the benefit of each party hereto, their
respective successors and permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any other Person other
than any Person entitled to indemnification under SECTIONS 13.07 or 14.07
herein.
47
- 43 -
15.14 SPECIFIC PERFORMANCE. Damages in the event of breach of
this Agreement by a Holder or the Company would be difficult, if not impossible,
to ascertain, and it is therefore agreed that each Holder and the Company, in
addition to and without limiting any other remedy or right it may have, will
have the right to an injunction or other equitable relief in any court of
competent jurisdiction, enjoining any such breach, and enforcing specifically
the terms and provisions hereof, and each Holder and the Company hereby waives
any and all defenses it may have on the ground of lack of jurisdiction or
competence of the court to grant such an injunction or other equitable relief.
The existence of this right will not preclude the Holders or the Company from
pursuing any other rights and remedies at law or in equity which the Holders or
the Company may have.
15.15 WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO
IRREVOCABLY AND UNCONDITIONALLY WAIVES THE RIGHT TO TRAIL BY JURY IN ANY LEGAL
OR EQUITABLE ACTION, SUIT OR PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT, ANY OTHER RELEVANT DOCUMENT OR THE WARRANTS OR ANY TRANSACTION
CONTEMPLATED HEREBY OR THEREBY OR THE SUBJECT MATTER OF ANY OF THE FOREGOING.
15.16 ADMINISTRATIVE AGENT. Each Holder acknowledges that the
provisions of Article IX of the Loan Agreement shall apply to the Administrative
Agent (as that term is defined in the Loan Agreement in performing its duties
under the Security Agreement (as that term is defined in the Loan Agreement)
insofar as the Security Agreement secures obligations of the Company hereunder,
and to the Holders as if they were "Lenders". However, the Holders shall not be
counted for purposes of the definition of Required Lenders. This SECTION 15.16
is included in this Agreement for the sole purpose of defining the rights and
obligations among the Holders and the Administrative Agent, and shall not bind
the Company in any respect.
48
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the date first above written.
STUDENT ADVANTAGE, INC.
By /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
--------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, ▇▇.
Title: President
Address for Notices:
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
WITH A COPY TO:
▇▇▇▇ and ▇▇▇▇ LLP
▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
49
- 2 -
RESERVOIR CAPITAL PARTNERS, L.P.,
By: Reservoir Capital Group, L.L.C.,
General Partner
By /s/ ▇▇▇▇▇ ▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
Title: Managing Director
RESERVOIR CAPITAL ASSOCIATES L.P.
By: Reservoir Capital Group, L.L.C.,
General Partner
By /s/ ▇▇▇▇▇ ▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
Title: Managing Director
RESERVOIR CAPITAL MASTER FUND, L.P.
By: Reservoir Capital Group, L.L.C.,
General Partner
By /s/ ▇▇▇▇▇ ▇▇▇▇
--------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇
Title: Managing Director
Addresses for Notices:
c/o Reservoir Capital Group, L.L.C.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
WITH A COPY TO:
Milbank, Tweed, ▇▇▇▇▇▇ & ▇▇▇▇▇▇ LLP
▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
50
- 3 -
[The following schedule to this Warrant Agreement have been omitted and will be
provided to the Commission upon request to the Company:
Schedule 2: EXCLUDED SHARES OF COMMON STOCK]
SCHEDULE 1
WARRANTS TO BE ISSUED TO THE INITIAL HOLDERS
WITH RESPECT TO THE TERM LOAN
COLUMN A COLUMN B COLUMN C
Warrants Exercisable Warrants Exercisable
Name of Warrants Exercisable if Term Loan Outstanding if Term Loan Outstanding
Initial Holder Immediately Upon First Anniversary Upon Second Anniversary
-------------- ----------- ---------------------- ------------------------
Reservoir Capital
Partners, L.P. 427,150 427,150 427,150
Reservoir Capital Master
Fund, L.P. 71,800 71,800 71,800
Reservoir Capital Associates
L.P. 1,050 1,050 1,050
TOTAL 500,000 Stock Units 500,000 Stock Units 500,000 Stock Units
=================== =================== ===================
51
- 4 -
ANNEX 1 TO
WARRANT AGREEMENT
[Form of Term Warrant]
TERM WARRANT
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, AND ACCORDINGLY, SUCH SECURITIES
MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF
APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR UNLESS AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY IS OBTAINED TO THE
EFFECT THAT SUCH REGISTRATION AND QUALIFICATION IS NOT REQUIRED.
No. of Stock Units: _____ Warrant No. ______
WARRANT
to Purchase Shares of Common Stock of
STUDENT ADVANTAGE, INC.
THIS IS TO CERTIFY THAT [NAME OF INITIAL HOLDER], or its
registered assigns, is entitled to purchase in whole or in part from STUDENT
ADVANTAGE, INC., a Delaware corporation (the "COMPANY"), at any time and from
time to time on or after the Commencement Date (as defined below), but not later
than 5:00 p.m., New York City time, on June 25, 2005 (the "EXPIRATION DATE"),
[__] Stock Units (as defined in the Warrant Agreement referred to below) at a
purchase price of $0.01 per Stock Unit (the "EXERCISE PRICE"); PROVIDED, that
such purchase price shall not be less than the aggregate par value of the
capital stock contained in a Stock Unit, subject to the terms and conditions set
forth herein and in the Warrant Agreement, each such purchase of a Stock Unit to
be made, and to be deemed effective for the purpose of determining the date of
exercise, only upon surrender of this Warrant to the Company at its office
referred to in SECTION 15.03 of the Warrant Agreement, with the Form of Exercise
attached hereto (or a reasonable facsimile thereof) duly completed and signed,
and upon payment in full to the Company of the Exercise Price (i) in cash or
(ii) by certified or official bank check or (iii) by any combination of the
foregoing, all as provided in the Warrant Agreement and upon compliance with and
subject to the conditions set forth herein and in the Warrant Agreement.
For the purposes of this Warrant, the "COMMENCEMENT DATE"
shall be the [[first/second] anniversary of] the date hereof[. The number of
Stock Units for which this
52
- 5 -
Warrant shall be exercisable shall be adjusted on the Commencement Date to
equal the result obtained by multiplying the original number of Stock Units
for which this Warrant is exercisable by a fraction the numerator of which is
the outstanding principal balance of Term Loans on the Commencement Date
(excluding capitalized interest unless an Event of Default exists on such date)
and the denominator of which is $10,000,000. If there is no outstanding
principal balance of Term Loans on the Commencement Date or if the Term Loans
are paid in full prior to the Commencement Date, this Warrant shall be cancelled
on the earlier of the Commencement Date or the date of payment in full and the
Holder shall relinquish all rights herein. If the Company prepays Term Loans
pursuant to SECTION 2.07(b) of the Loan Agreement during the one year period
following the Commencement Date, the number of Stock Units for which this
Warrant shall be exercisable shall equal (i) the number of Stock Units for which
this Warrant otherwise would have been exercisable on the Commencement Date
minus (ii) the result obtained by multiplying (A) the number of Stock Units for
which this Warrant would have otherwise been exercisable on the Commencement
Date by (B) a fraction (x) the numerator of which is the product of (1) the
amount of Term Loans (including capitalized and accrued interest) so prepaid and
(2) the number of days remaining until the next anniversary of the Commencement
Date and (y) the denominator of which is the product of (1) 365 and (2) the
amount of Term Loans (including capitalized and accrued interest) outstanding on
the Commencement Date. If prior to the Commencement Date the Company has
received a Call Notice (as defined in the Loan Agreement) pursuant to SECTION
2.07(d) of the Loan Agreement, the number of Stock Units for which this Warrant
shall be exercisable as of the Commencement Date shall be one-fourth (1/4) of
the amount for which it otherwise would have been exercisable on the
Commencement Date. If prior to the Commencement Date the Company has received
such Call Notice and any Term Loans remain outstanding on the 90th day after the
Commencement Date, the number of Stock Units for which this Warrant shall be
exercisable shall be one-third (1/3) of the amount for which it otherwise would
have been exercisable on the Commencement Date, plus a number (the "ENHANCED
UNIT NUMBER") of Stock Units equal to the product of (1) 10,000 and (2) a
fraction, the numerator of which is the number of Stock Units for which this
Warrant is exercisable on the Commencement Date and the denominator of which is
the aggregate number of Stock Units for which all Term Warrants then outstanding
having the same Commencement Date are exercisable on the Commencement Date. If
prior to the Commencement Date the Company has received such Call Notice and any
Term Loans remain outstanding on the 120th day after the Commencement Date, the
number of Stock Units for which this Warrant shall be exercisable shall be the
amount for which it otherwise would have been exercisable on the Commencement
Date (including in such calculation any capitalized interest) plus the Enhanced
Unit Number. If prior to such 90th or 120th day the Company pays all or any
portion of the amounts required to be paid pursuant to such SECTION 2.07(d), the
number of Stock Units for which this Warrant is exercisable shall be reduced in
proportion to the amount so prepaid and the number of days remaining until such
90th or 120th day, as the case may be.
If following prior exercises or conversions of this Warrant any
adjustment under the immediately preceding paragraph would reduce the remaining
number of Stock Units for which this Warrant is exercisable below zero (such
number of Stock Units below zero, the "Shortfall"), then the Holder shall
transfer to the Company at such Holder's option within three Business Days of
such adjustment either (i) a number of Stock Units equal to the Shortfall or
(ii) an amount in cash equal to $2.50 plus interest commencing on the
Commencement Date through
53
- 6 -
the date of payment calculated on the basis of a 360-day year and the number
of actual days elapsed, at a rate per annum equal to 27% per annum
multiplied by the Shortfall.]
On and after the Commencement Date and on or prior to the
Expiration Date, this Warrant may be converted, in whole or in part, at the
Holder's option, into the number of shares of Common Stock for each Stock Unit
evidenced hereby which is being so converted, equal to (a)(i) the product of (x)
the number of shares of Common Stock comprising a Stock Unit at the time of such
conversion and (y) the Current Market Price per share of Common Stock at the
time of such conversion MINUS (ii) the Exercise Price per Stock Unit at the time
of such conversion, DIVIDED BY (b) the Current Market Price per share of Common
Stock at the time of such conversion, all as provided in the Warrant Agreement
and upon compliance with and subject to the conditions set forth herein and in
the Warrant Agreement.
This Warrant is issued under and in accordance with the
Warrant Agreement dated as of June 25, 2001 between the Company and certain
holders (as the same may be modified and supplemented in accordance with its
terms and as in effect from time to time, the "WARRANT AGREEMENT"), and is
subject to the terms and provisions of the Warrant Agreement, which terms and
provisions are hereby incorporated by reference herein and made a part hereof.
Every Holder of this Warrant consents to all of the terms contained in the
Warrant Agreement by acceptance hereof.
The number of shares of Common Stock or other securities
of the Company constituting one "Stock Unit" are subject to adjustment in
certain events as provided in the Warrant Agreement.
The Company shall not be required to issue a fractional
share of Common Stock upon exercise of this Warrant. As to any fraction of a
share which the Holder hereof would otherwise be entitled to purchase upon such
exercise, the Company may pay a cash adjustment in respect of such final
fraction in an amount equal to the same fraction of the Current Market Price per
share of Common Stock on the date of exercise or may be round up to the next
whole number of shares.
This Warrant may be exchanged either separately or in
combination with other Warrants at the office of the Company referred to in
SECTION 15.03 of the Warrant Agreement for new Warrants representing the same
aggregate number of Warrants evidenced by the Warrant or Warrants exchanged,
upon surrender of this and any other Warrant being exchanged and upon compliance
with and subject to the conditions set forth herein and in the Warrant
Agreement.
The Warrants and the Warrant Stock shall be transferable
only upon compliance with the conditions specified in SECTIONS 4 AND 5 of the
Warrant Agreement, which conditions are intended, among other things, to ensure
compliance with the provisions of the Securities Act in respect of the transfer
of any Warrant or any Warrant Stock, and any Holder hereof shall be bound by the
provisions of (and entitled to the benefits of) said SECTIONS 4 AND 5. Upon any
such transfer effected in compliance with said SECTIONS 4 AND 5, a new Warrant
or new Warrants of different denominations, representing in the aggregate a like
number of Warrants, will be issued to the transferee. Every Holder hereof, by
accepting this Warrant, consents and
54
- 7 -
agrees with the Company and with every subsequent Holder of this Warrant
that until due presentation for the registration of transfer of this
Warrant on the Warrant register maintained by the Company, the Company may deem
and treat the Person in whose name this Warrant is registered as the absolute
and lawful owner for all purposes whatsoever and the Company shall not be
affected by any notice to the contrary.
Nothing contained in the Warrant Agreement or in this
Warrant shall be construed as conferring on the holder of any Warrants or his or
her transferee any rights whatsoever as a stockholder of the Company.
No provision hereof, in the absence of affirmative action
by the Holder hereof to purchase shares of Common Stock, and no mere
enumeration herein of the rights or privileges of such Holder, shall give rise
to any liability of such Holder for the Exercise Price or as a Stockholder of
the Company, whether such liability is asserted by the Company, by any creditor
of the Company or any other Person.
Any notices and other communications pursuant to the
provisions hereof shall be sent in accordance with SECTION 15.02 of the Warrant
Agreement.
Each term used herein without definition shall have the
meaning assigned thereto in the Warrant Agreement.
55
- 8 -
IN WITNESS WHEREOF, the Company has duly executed this
Warrant.
Dated: June 25, 2001
STUDENT ADVANTAGE, INC.
By ________________________________
Name:
Title:
56
FORM OF EXERCISE
(To be executed by the registered holder hereof) The
undersigned registered owner of this Warrant hereby
SELECT ONE OF THE FOLLOWING TWO CHOICES:
[irrevocably exercises this Warrant for the purchase of Stock Units
of STUDENT ADVANTAGE, INC., a Delaware corporation, and herewith
makes payment therefor in the amount of $_____________, all at the
price and on the terms and conditions specified in this Warrant,]
OR
[irrevocably converts this Warrant into shares of Common Stock of
STUDENT ADVANTAGE, INC., a Delaware corporation, all in the manner
and on the terms and conditions specified in this Warrant,]
and requests that (i) certificates and/or other instruments covering such Stock
Units be issued in accordance with the instructions given below and (ii) if such
Stock Units shall not include all of the Stock Units to which the Holder is
entitled under this Warrant, that a new Warrant of like tenor and date for the
balance of the Stock Units issuable hereunder be delivered to the undersigned.
Dated: ___________, ____
--------------------------------
(Signature of Registered Holder)
57
- 2 -
Instructions for issuance and registration of Stock Units:
Name of Registered Holder:____________________________________________
(Please print)
Social Security or Other Identifying Number:__________________________
Please deliver certificate to the following address:
----------------------------------------
----------------------------------------
----------------------------------------
58
FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned registered owner of
this Warrant hereby sells, assigns and transfers unto the assignee named below
all the rights of the undersigned under this Warrant with respect to the number
of Stock Units covered thereby set forth hereinbelow unto:
NUMBER OF
NAME OF ASSIGNEE ADDRESS STOCK UNITS
---------------- ------- -----------
Dated:__________________
------------------------------
Signature of Registered Holder
------------------------------
Name of Registered Holder
(Please Print)
Witness:
--------------------------------------------------------------------------------
59
ANNEX 2 TO
WARRANT AGREEMENT
[Form of Revolving Warrant]
REVOLVING WARRANT
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, AND ACCORDINGLY, SUCH SECURITIES
MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF
APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR UNLESS AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY IS OBTAINED TO THE
EFFECT THAT SUCH REGISTRATION AND QUALIFICATION IS NOT REQUIRED.
Warrant No. _____
WARRANT
to Purchase Shares of Common Stock of
STUDENT ADVANTAGE, INC.
THIS IS TO CERTIFY THAT [NAME OF INITIAL HOLDER], or its
registered assigns, is entitled to purchase in whole or in part from STUDENT
ADVANTAGE, INC., a Delaware corporation (the "COMPANY"), at any time and from
time to time, but not later than 5:00 p.m., New York City time, on June 25, 2005
(the "EXPIRATION DATE"), the number of Stock Units (as defined in the Warrant
Agreement referred to below) specified below at a purchase price of $0.01 per
Stock Unit (the "EXERCISE PRICE"); PROVIDED, that such purchase price shall not
be less than the aggregate par value of the capital stock contained in a Stock
Unit, subject to the terms and conditions set forth herein and in the Warrant
Agreement, each such purchase of a Stock Unit to be made, and to be deemed
effective for the purpose of determining the date of exercise, only upon
surrender of this Warrant to the Company at its office referred to in SECTION
15.03 of the Warrant Agreement, with the Form of Exercise attached hereto (or a
reasonable facsimile thereof) duly completed and signed, and upon payment in
full to the Company of the Exercise Price (i) in cash or (ii) by certified or
official bank check or (iii) by any combination of the foregoing, all as
provided in the Warrant Agreement and upon compliance with and subject to the
conditions set forth herein and in the Warrant Agreement.
The number of Stock Units for which this Warrant is
exercisable shall initially be zero but shall be adjusted on the 25th day of
each month following the date hereof to equal (i) the number of Stock Units for
which it was previously exercisable plus (ii) (A) [insert pro rata
60
- 2 -
portion of Revolving Loan Commitment by Holder (aggregate is 20,833
1/3)] times (B) a fraction (x) the numerator of which is the average daily
outstanding balance during such month of the Revolving Loans (as defined under
the Loan Agreement) (including accrued interest) and (y) the denominator of
which is $5,000,000. The number of Stock Units for which this Warrant shall be
exercisable shall not be adjusted from and after the date of termination of the
Revolving Loan Commitments (as defined in the Loan Agreement).
On or prior to the Expiration Date, this Warrant may be
converted, in whole or in part, at the Holder's option, into the number of
shares of Common Stock for each Stock Unit evidenced hereby which is being so
converted, equal to (a)(i) the product of (x) the number of shares of Common
Stock comprising a Stock Unit at the time of such conversion and (y) the Current
Market Price per share of Common Stock at the time of such conversion MINUS (ii)
the Exercise Price per Stock Unit at the time of such conversion, DIVIDED BY (b)
the Current Market Price per share of Common Stock at the time of such
conversion, all as provided in the Warrant Agreement and upon compliance with
and subject to the conditions set forth herein and in the Warrant Agreement.
This Warrant is issued under and in accordance with the
Warrant Agreement dated as of June 25, 2001 between the Company and certain
holders (as the same may be modified and supplemented in accordance with its
terms and as in effect from time to time, the "WARRANT AGREEMENT"), and is
subject to the terms and provisions of the Warrant Agreement, which terms and
provisions are hereby incorporated by reference herein and made a part hereof.
Every Holder of this Warrant consents to all of the terms contained in the
Warrant Agreement by acceptance hereof.
The number of shares of Common Stock or other securities
of the Company constituting one "Stock Unit" are subject to adjustment in
certain events as provided in the Warrant Agreement.
The Company shall not be required to issue a fractional
share of Common Stock upon exercise of this Warrant. As to any fraction of a
share which the Holder hereof would otherwise be entitled to purchase upon such
exercise, the Company may pay a cash adjustment in respect of such final
fraction in an amount equal to the same fraction of the Current Market Price per
share of Common Stock on the date of exercise or may be round up to the next
whole number of shares.
This Warrant may be exchanged either separately or in
combination with other Warrants at the office of the Company referred to in
SECTION 15.03 of the Warrant Agreement for new Warrants representing the same
aggregate number of Warrants evidenced by the Warrant or Warrants exchanged,
upon surrender of this and any other Warrant being exchanged and upon compliance
with and subject to the conditions set forth herein and in the Warrant
Agreement.
The Warrants and the Warrant Stock shall be transferable
only upon compliance with the conditions specified in SECTIONS 4 AND 5 of the
Warrant Agreement, which conditions are intended, among other things, to ensure
compliance with the provisions of the Securities Act in respect of the transfer
of any Warrant or any Warrant Stock, and any Holder
61
- 3 -
hereof shall be bound by the provisions of (and entitled to the benefits
of) said SECTIONS 4 AND 5. Upon any such transfer effected in compliance
with said SECTIONS 4 AND 5, a new Warrant or new Warrants of different
denominations, representing in the aggregate a like number of Warrants,
will be issued to the transferee. Every Holder hereof, by accepting this
Warrant, consents and agrees with the Company and with every subsequent
Holder of this Warrant that until due presentation for the registration of
transfer of this Warrant on the Warrant register maintained by the Company, the
Company may deem and treat the Person in whose name this Warrant is registered
as the absolute and lawful owner for all purposes whatsoever and the Company
shall not be affected by any notice to the contrary.
Nothing contained in the Warrant Agreement or in this
Warrant shall be construed as conferring on the holder of any Warrants or his or
her transferee any rights whatsoever as a stockholder of the Company.
No provision hereof, in the absence of affirmative action
by the Holder hereof to purchase shares of Common Stock, and no mere
enumeration herein of the rights or privileges of such Holder, shall give rise
to any liability of such Holder for the Exercise Price or as a Stockholder of
the Company, whether such liability is asserted by the Company, by any creditor
of the Company or any other Person.
Any notices and other communications pursuant to the
provisions hereof shall be sent in accordance with SECTION 15.02 of the Warrant
Agreement.
Each term used herein without definition shall have the
meaning assigned thereto in the Warrant Agreement.
62
- 4 -
IN WITNESS WHEREOF, the Company has duly executed this
Warrant.
Dated: June 25, 2001
STUDENT ADVANTAGE, INC.
By________________________________
Name:
Title:
63
FORM OF EXERCISE
(To be executed by the registered holder hereof) The
undersigned registered owner of this Warrant hereby
SELECT ONE OF THE FOLLOWING TWO CHOICES:
[irrevocably exercises this Warrant for the purchase of Stock Units
of STUDENT ADVANTAGE, INC., a Delaware corporation, and herewith
makes payment therefor in the amount of $_____________, all at the
price and on the terms and conditions specified in this Warrant,]
OR
[irrevocably converts this Warrant into shares of Common Stock of
STUDENT ADVANTAGE, INC., a Delaware corporation, all in the manner
and on the terms and conditions specified in this Warrant,]
and requests that (i) certificates and/or other instruments covering such Stock
Units be issued in accordance with the instructions given below and (ii) if such
Stock Units shall not include all of the Stock Units to which the Holder is
entitled under this Warrant, that a new Warrant of like tenor and date for the
balance of the Stock Units issuable hereunder be delivered to the undersigned.
Dated: ___________, ____
--------------------------------
(Signature of Registered Holder)
64
- 2 -
Instructions for issuance and registration of Stock Units:
Name of Registered Holder:____________________________________________
(Please print)
Social Security or Other Identifying Number:__________________________
Please deliver certificate to the following address:
----------------------------------------
----------------------------------------
----------------------------------------
65
FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned registered owner of
this Warrant hereby sells, assigns and transfers unto the assignee named below
all the rights of the undersigned under this Warrant with respect to the number
of Stock Units covered thereby set forth hereinbelow unto:
NUMBER OF
NAME OF ASSIGNEE ADDRESS STOCK UNITS
---------------- ------- -----------
Dated:__________________
-------------------------------
Signature of Registered Holder
-------------------------------
Name of Registered Holder
(Please Print)
Witness:
--------------------------------------------------------------------------------
66
ANNEX 3 TO
WARRANT AGREEMENT
[Form of Default Warrant]
DEFAULT WARRANT
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, AND ACCORDINGLY, SUCH SECURITIES
MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED OF EXCEPT IN
COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF
APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR UNLESS AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY IS OBTAINED TO THE
EFFECT THAT SUCH REGISTRATION AND QUALIFICATION IS NOT REQUIRED.
No. of Stock Units: ________ Warrant No. ______
WARRANT
to Purchase Shares of Common Stock of
STUDENT ADVANTAGE, INC.
THIS IS TO CERTIFY THAT [NAME OF INITIAL HOLDER], or its
registered assigns, is entitled to purchase in whole or in part from STUDENT
ADVANTAGE, INC., a Delaware corporation (the "COMPANY"), at any time and from
time to time on or after the date hereof, but not later than 5:00 p.m., New York
City time, on June 25, 2005 (the "EXPIRATION DATE"), [__] Stock Units (as
defined in the Warrant Agreement referred to below) at a purchase price of $0.01
per Stock Unit (the "EXERCISE PRICE"); PROVIDED, that such purchase price shall
not be less than the aggregate par value of the capital stock contained in a
Stock Unit, subject to the terms and conditions set forth herein and in the
Warrant Agreement, each such purchase of a Stock Unit to be made, and to be
deemed effective for the purpose of determining the date of exercise, only upon
surrender of this Warrant to the Company at its office referred to in SECTION
15.03 of the Warrant Agreement, with the Form of Exercise attached hereto (or a
reasonable facsimile thereof) duly completed and signed, and upon payment in
full to the Company of the Exercise Price (i) in cash or (ii) by certified or
official bank check or (iii) by any combination of the foregoing, all as
provided in the Warrant Agreement and upon compliance with and subject to the
conditions set forth herein and in the Warrant Agreement.
For the purposes of this Warrant, the "COMMENCEMENT DATE"
shall be the date on which an Event of Default (as defined in the Loan
Agreement) shall occur. For each day thereafter during which an Event of Default
shall be continuing, the number of Stock Units for
67
- 2 -
which this Warrant is exercisable shall be increased by one-thirtieth
(1/30) of the original number of Stock Units for which this Warrant was
exercisable multiplied by a fraction the numerator of which is the outstanding
balance of the Term Loan (as defined in the Loan Agreement) (including
capitalized and accrued interest) as of the close of business on such day plus
the amount of outstanding Revolving Loans (as defined in the Loan Agreement)
(including accrued interest) as of the close of business on such day and the
denominator of which is the outstanding balance of the Term Loan (excluding
capitalized interest) on the Commencement Date plus the amount of outstanding
Revolving Loans on the Commencement Date. The number of Stock Units for which
this Warrant shall be exercisable shall not be adjusted from and after the date
on which the Loans (as defined in the Loan Agreement) are paid in full and the
Commitments (as defined in the Loan Agreement) are terminated.
On or prior to the Expiration Date, this Warrant may be
converted, in whole or in part, at the Holder's option, into the number of
shares of Common Stock for each Stock Unit evidenced hereby which is being so
converted, equal to (a)(i) the product of (x) the number of shares of Common
Stock comprising a Stock Unit at the time of such conversion and (y) the Current
Market Price per share of Common Stock at the time of such conversion MINUS (ii)
the Exercise Price per Stock Unit at the time of such conversion, DIVIDED BY (b)
the Current Market Price per share of Common Stock at the time of such
conversion, all as provided in the Warrant Agreement and upon compliance with
and subject to the conditions set forth herein and in the Warrant Agreement.
This Warrant is issued under and in accordance with the
Warrant Agreement dated as of June 25, 2001 between the Company and certain
holders (as the same may be modified and supplemented in accordance with its
terms and as in effect from time to time, the "WARRANT AGREEMENT"), and is
subject to the terms and provisions of the Warrant Agreement, which terms and
provisions are hereby incorporated by reference herein and made a part hereof.
Every Holder of this Warrant consents to all of the terms contained in the
Warrant Agreement by acceptance hereof.
The number of shares of Common Stock or other securities
of the Company constituting one "Stock Unit" are subject to adjustment in
certain events as provided in the Warrant Agreement.
The Company shall not be required to issue a fractional
share of Common Stock upon exercise of this Warrant. As to any fraction of a
share which the Holder hereof would otherwise be entitled to purchase upon such
exercise, the Company may pay a cash adjustment in respect of such final
fraction in an amount equal to the same fraction of the Current Market Price per
share of Common Stock on the date of exercise or may be round up to the next
whole number of shares.
This Warrant may be exchanged either separately or in
combination with other Warrants at the office of the Company referred to in
SECTION 15.03 of the Warrant Agreement for new Warrants representing the same
aggregate number of Warrants evidenced by the Warrant or Warrants exchanged,
upon surrender of this and any other Warrant being exchanged and upon compliance
with and subject to the conditions set forth herein and in the Warrant
Agreement.
68
- 3 -
The Warrants and the Warrant Stock shall be transferable
only upon compliance with the conditions specified in SECTIONS 4 AND 5 of the
Warrant Agreement, which conditions are intended, among other things, to ensure
compliance with the provisions of the Securities Act in respect of the transfer
of any Warrant or any Warrant Stock, and any Holder hereof shall be bound by the
provisions of (and entitled to the benefits of) said SECTIONS 4 AND 5. Upon any
such transfer effected in compliance with said SECTIONS 4 AND 5, a new Warrant
or new Warrants of different denominations, representing in the aggregate a like
number of Warrants, will be issued to the transferee. Every Holder hereof, by
accepting this Warrant, consents and agrees with the Company and with every
subsequent Holder of this Warrant that until due presentation for the
registration of transfer of this Warrant on the Warrant register maintained by
the Company, the Company may deem and treat the Person in whose name this
Warrant is registered as the absolute and lawful owner for all purposes
whatsoever and the Company shall not be affected by any notice to the contrary.
Nothing contained in the Warrant Agreement or in this
Warrant shall be construed as conferring on the holder of any Warrants or his or
her transferee any rights whatsoever as a stockholder of the Company.
No provision hereof, in the absence of affirmative action
by the Holder hereof to purchase shares of Common Stock, and no mere
enumeration herein of the rights or privileges of such Holder, shall give rise
to any liability of such Holder for the Exercise Price or as a Stockholder of
the Company, whether such liability is asserted by the Company, by any creditor
of the Company or any other Person.
Any notices and other communications pursuant to the
provisions hereof shall be sent in accordance with SECTION 15.02 of the Warrant
Agreement.
Each term used herein without definition shall have the
meaning assigned thereto in the Warrant Agreement.
69
- 4 -
IN WITNESS WHEREOF, the Company has duly executed this
Warrant.
Dated: June 25, 2001
STUDENT ADVANTAGE, INC.
By___________________________
Name:
Title:
70
FORM OF EXERCISE
(To be executed by the registered holder hereof) The
undersigned registered owner of this Warrant hereby
SELECT ONE OF THE FOLLOWING TWO CHOICES:
[irrevocably exercises this Warrant for the purchase of Stock Units
of STUDENT ADVANTAGE, INC., a Delaware corporation, and herewith
makes payment therefor in the amount of $_____________, all at the
price and on the terms and conditions specified in this Warrant,]
OR
[irrevocably converts this Warrant into shares of Common Stock of
STUDENT ADVANTAGE, INC., a Delaware corporation, all in the manner
and on the terms and conditions specified in this Warrant,]
and requests that (i) certificates and/or other instruments covering such Stock
Units be issued in accordance with the instructions given below and (ii) if such
Stock Units shall not include all of the Stock Units to which the Holder is
entitled under this Warrant, that a new Warrant of like tenor and date for the
balance of the Stock Units issuable hereunder be delivered to the undersigned.
Dated: ___________, ____
--------------------------------
(Signature of Registered Holder)
71
- 2 -
Instructions for issuance and registration of Stock Units:
Name of Registered Holder:____________________________________________
(Please print)
Social Security or Other Identifying Number:__________________________
Please deliver certificate to the following address:
----------------------------------------
----------------------------------------
----------------------------------------
72
FORM OF ASSIGNMENT
FOR VALUE RECEIVED the undersigned registered owner of
this Warrant hereby sells, assigns and transfers unto the assignee named below
all the rights of the undersigned under this Warrant with respect to the number
of Stock Units covered thereby set forth hereinbelow unto:
NUMBER OF
NAME OF ASSIGNEE ADDRESS STOCK UNITS
---------------- ------- -----------
Dated:__________________
------------------------------
Signature of Registered Holder
------------------------------
Name of Registered Holder
(Please Print)
Witness:
--------------------------------------------------------------------------------