Exhibit 4.1
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WARRANT AGREEMENT
Dated as of December 21, 2004
by and between
RCN CORPORATION
and
HSBC BANK USA, NATIONAL ASSOCIATION
as Warrant Agent
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WARRANT AGREEMENT
TABLE OF CONTENTS(1)
Page
SECTION 1. Appointment of Warrant Agent......................................1
SECTION 2. Warrant Certificates..............................................2
SECTION 3. Issuance of Warrants..............................................2
SECTION 4. Execution of Warrant Certificates.................................2
SECTION 5. Registration and Countersignature.................................2
SECTION 6. Registration of Transfers and Exchanges...........................3
SECTION 7. Terms of Warrants; Exercise of Warrants...........................3
SECTION 8. Payment of Taxes..................................................5
SECTION 9. Mutilated or Missing Warrant Certificates.........................6
SECTION 10. Reservation of Shares of the New Common Stock.....................6
SECTION 11. Obtaining Stock Exchange Listings.................................7
SECTION 12. Adjustment of Exercise Price and Number of Shares of the
New Common Stock Issuable.........................................7
(a) Adjustment for Change in Capital Stock......................7
(b) Adjustment for Rights Issue.................................8
(c) Adjustment for Other Distributions..........................9
(d) Current Market Price.......................................10
(e) When De Minimis Adjustment May Be Deferred.................10
(f) When No Adjustment Required................................10
(g) Notice of Adjustment.......................................11
(h) Consolidation, Merger, Sale, Recapitalization or
Reorganization of the Company..............................11
(i) The Company Determination Final............................12
(j) Warrant Agent's Disclaimer.................................12
(k) When Issuance or Payment May Be Deferred...................12
(l) Adjustment in Number of Shares.............................13
(m) Form of Warrants...........................................13
SECTION 13. Priority Adjustments, Further Actions............................14
SECTION 14. Fractional Interests.............................................14
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(1) This Table of Contents does not constitute a part of this Warrant
Agreement or have any bearing upon the interpretation of any of its terms
or provisions.
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SECTION 15. Notices to Warrant Holders.......................................14
SECTION 16. Merger, Consolidation or Change of Name of Warrant Agent.........16
SECTION 17. Warrant Agent....................................................16
SECTION 18. Expenses
SECTION 19. Change of Warrant Agent..........................................19
SECTION 20. Notices to the Company and Warrant Agent.........................20
SECTION 21. Supplements and Amendments.......................................21
SECTION 22. Successors.......................................................21
SECTION 23. Termination......................................................21
SECTION 24. Governing Law; Jurisdiction......................................21
SECTION 25. Benefits of this Warrant Agreement...............................21
SECTION 26. Counterparts.....................................................22
SECTION 27. Further Assurances...............................................22
SECTION 28. Entire Agreement.................................................22
EXHIBIT A - Form of Warrant Certificate......................................A-1
ii
WARRANT AGREEMENT (this "Warrant Agreement") dated as of December 21,
2004, between RCN CORPORATION, a Delaware corporation (the "Company"), and
HSBC BANK USA, NATIONAL ASSOCIATION, a national banking association, as
Warrant Agent (the "Warrant Agent").
WHEREAS, pursuant to the terms and conditions of the Joint
Reorganization Plan of RCN Corporation and Certain Subsidiaries, dated October
12, 2004, as may be amended and restated from time to time (the "Plan")
relating to the reorganization under Chapter 11 of the Bankruptcy Reform Act
of 1978, as codified in Title 11 of the United States Code, 11 U.S.C. ▇▇.▇▇.
101-1330 (the "Bankruptcy Code") of RCN Corporation, a Delaware corporation
("Old RCN") and certain of its subsidiaries, the holders of (i) the Series A
Preferred Stock and the Series B Preferred Stock (collectively, the "Old
Preferred Stock") issued by Old RCN and (ii) the common stock issued by Old
RCN (the "Old Common Stock") will receive warrants (the "Warrants") that are
exercisable, within the two-year period beginning on the date of consummation
of the Plan (the "Plan Effective Date"), into a number of shares of common
stock, par value $0.01 per share, of the Company (the "New Common Stock"),
representing, in the aggregate, 735,119 shares of New Common Stock;
WHEREAS, the Warrants are being offered pursuant to, and upon the
terms and conditions set forth in, the Plan in an offering in reliance on the
exemption afforded by section 1145 of the Bankruptcy Code from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and of any applicable state securities or "blue sky" laws;
WHEREAS, the Company desires the Warrant Agent to act on behalf of
the Company, and the Warrant Agent is willing so to act, in connection with
the issuance of Warrant certificates and other matters as provided herein; and
WHEREAS, for purposes of this Warrant Agreement, "person" shall be
interpreted broadly to include an individual, corporation, partnership, joint
venture, association, joint stock company, limited liability company, limited
liability partnership, national banking association, trust, trustee, estate,
unincorporated organization, government, governmental unit, agency, or
political subdivision thereof, or other entity.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereto agree as follows:
SECTION 1. Appointment of Warrant Agent. The Company hereby appoints
the Warrant Agent to act as warrant agent for the Company in accordance with
the express (and no implied) instructions set forth hereinafter in this
Warrant Agreement, and the Warrant Agent hereby accepts such appointment.
SECTION 2. Warrant Certificates. The certificates evidencing the
Warrants to be delivered pursuant to this Warrant Agreement shall be in
registered form only and shall be substantially in the form set forth in
Exhibit A attached hereto ("Warrant Certificates") and may have such letters,
numbers, or other marks of identification or designation and such legends or
endorsements printed, lithographed or engraved thereon as the officers of the
Company executing the same may approve (with execution thereof to be
conclusive evidence of such approval) and as are not inconsistent with the
provisions of this Warrant Agreement, or as may be required to comply with any
applicable law or with any rule or regulation made pursuant thereto or with
any rule or regulation of any exchange, inter-dealer quotation system or
regulated quotation service on which the Warrants may be listed or quoted, as
the case may be.
SECTION 3. Issuance of Warrants. Upon issuance in accordance with
Section 5, each Warrant Certificate shall evidence one or more Warrants. Each
Warrant evidenced thereby entitles the holder, upon proper exercise to receive
from the Company, as adjusted as provided herein, one share of the New Common
Stock at the Exercise Price.
SECTION 4. Execution of Warrant Certificates. Warrant Certificates
shall be signed on behalf of the Company by its Chairman of the Board, Chief
Executive Officer, President or any Vice President and by the Secretary or any
Assistant Secretary under its corporate seal. The seal of the Company may be
in the form of a facsimile thereof and may be impressed, affixed, imprinted or
otherwise reproduced on the Warrant Certificates. Each such signature upon any
Warrant Certificate may be in the form of a facsimile signature of the present
or any future Chairman of the Board, Chief Executive Officer, President, Vice
President, Secretary or Assistant Secretary and may be imprinted or otherwise
reproduced on the Warrant Certificates and for that purpose the Company may
adopt and use the facsimile signature of any person who shall have been
Chairman of the Board, Chief Executive Officer, President, Vice President,
Secretary or Assistant Secretary at the time of entering into this Warrant
Agreement, notwithstanding the fact that at the time any Warrant Certificate
shall be countersigned by the Warrant Agent and delivered or disposed of by
the Company he shall have ceased to hold such office, so long as, and the
Company hereby represents that, under the Company's charter and by-laws, any
Warrants or shares of the New Common Stock so issued would be validly issued.
Any Warrant Certificate may be signed on behalf of the Company by any person
who, at the actual date of the execution of such Warrant Certificate, shall be
a proper officer of the Company to sign such Warrant Certificate, although at
the date of the execution of this Warrant Agreement any such person was not
such officer, so long as, and the Company hereby represents that, under the
Company's charter and by-laws, any Warrants or shares of the New Common Stock
so issued would be validly issued.
Warrant Certificates shall be dated the date of countersignature by
the Warrant Agent and shall represent one or more whole Warrants.
SECTION 5. Registration and Countersignature. The Warrant Agent, on
behalf of the Company, shall number and register the Warrant Certificates in a
Warrant register as they are issued by the Company. The Warrant register will
show the names and addresses of the respective holders of the Warrants, the
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numbers of Warrants evidenced on the face of each Warrant Certificate and the
date of each Warrant Certificate.
Warrant Certificates shall be manually countersigned by the Warrant
Agent and shall not be valid for any purpose unless so countersigned. The
Warrant Agent shall, upon written instructions of the Chairman of the Board,
Chief Executive Officer, President, Vice President, Secretary or Assistant
Secretary of the Company, initially countersign and deliver Warrants entitling
the holders thereof to purchase not more, nor less, than the number of shares
of the New Common Stock referred to above in the first recital hereof (but
subject to adjustment as hereinafter provided) and shall countersign and
deliver Warrants as otherwise provided in this Warrant Agreement.
The Company and the Warrant Agent may deem and treat the registered
holder(s) of the Warrant Certificates as the absolute owner(s) thereof
(notwithstanding any notation of ownership or other writing thereon made by
anyone), for all purposes, and neither the Company nor the Warrant Agent shall
be affected by any notice to the contrary.
SECTION 6. Registration of Transfers and Exchanges. The Warrant Agent
shall from time to time register the transfer of any outstanding Warrant
Certificates upon the records to be maintained by it for that purpose, upon
surrender thereof accompanied by a written instrument or instruments of
transfer in form satisfactory to the Warrant Agent, duly executed by the
registered holder or holders thereof or by the duly appointed legal
representative thereof or by a duly authorized attorney. Upon any such
registration of transfer, a new Warrant Certificate shall be issued to the
transferee(s) and the surrendered Warrant Certificate shall be cancelled by
the Warrant Agent. Cancelled Warrant Certificates shall thereafter be disposed
of by or at the direction of the Company in accordance with applicable law.
Warrant Certificates may be exchanged at the option of the registered
holder(s) thereof, when surrendered to the Warrant Agent at the Warrant Agent
Office during normal business hours for another Warrant Certificate or other
Warrant Certificates of like tenor and representing in the aggregate a like
number of Warrants. Warrant Certificates surrendered for exchange shall be
cancelled by the Warrant Agent. Such cancelled Warrant Certificates shall then
be disposed of by or at the direction of the Company in accordance with
applicable law.
The Warrant Agent is hereby directed and authorized to countersign,
in accordance with the provisions of this Section 6, the new Warrant
Certificates issued pursuant to the provisions of this Section 6.
SECTION 7. Terms of Warrants; Exercise of Warrants. Subject to the
terms of this Warrant Agreement, each Warrant holder shall have the right,
which may be exercised from the date of original issuance of the Warrant
Certificates pursuant to the terms of this Warrant Agreement and prior to 5:00
p.m. New York City Time, on December 21, 2006 (the "Expiration Date"), to
exercise each Warrant and receive from the Company the number of fully paid
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and nonassessable shares of the New Common Stock which the holder may at the
time be entitled to receive on exercise of such Warrants and payment of the
aggregate Exercise Price then in effect for such shares of the New Common
Stock. In addition, prior to the delivery of any shares of the New Common
Stock that the Company shall be obligated to deliver upon proper exercise of
the Warrants, the Company shall comply with all applicable federal and state
laws, rules and regulations which require action to be taken by the Company.
Each Warrant, when exercised, will entitle the holder thereof to purchase one
share of the New Common Stock at the Exercise Price. Each Warrant not
exercised prior to the Expiration Date shall become void and all rights
thereunder and all rights in respect thereof under this Warrant Agreement
shall cease as of such time.
A Warrant may be exercised upon surrender to the Company at the
Warrant Agent Office referred to in Section 20 (the "Warrant Agent Office") of
the Warrant Certificate or Warrant Certificates evidencing the Warrants to be
exercised with the form of election to purchase on the reverse thereof (the
"Exercise Notice") duly and properly completed and signed, which signature
shall be guaranteed by an "Eligible Guarantor Institution" as defined in Rule
17Ad-15(2) promulgated under the Securities and Exchange Act of 1934, as
amended (the "Exchange Act"), and upon payment to the Warrant Agent for the
account of the Company of the exercise price of $34.16 (the "Exercise Price"),
as adjusted from time to time as herein provided, for each Warrant Share then
exercised. Payment of the aggregate Exercise Price for all shares of the New
Common Stock being exercised in respect of a Warrant shall be made (a) in
United States Dollars or (b) by certified or official bank check for United
States Dollars made payable to the order of "RCN Corporation". In lieu of
payment of the aggregate Exercise Price as aforesaid and subject to applicable
law, the holder of a Warrant may elect to receive from the Company a number of
shares of the New Common Stock equal to the "Spread" by indicating such
election in the Exercise Notice delivered by such Warrant holder. The "Spread"
shall, subject to Section 14, be paid by the Company by delivering to such
Warrant holder a number of shares of the New Common Stock equal to (a)(i) the
product of (x) the current market price per share of the New Common Stock (as
if the date of receipt of the Exercise Notice to the Company) multiplied by
(y) the number of shares of the New Common Stock underlying the Warrants being
exercised, minus (ii) the product of (x) the Exercise Price, multiplied by (y)
the number of shares of the New Common Stock underlying the Warrants being
exercised, divided by (b) the current market price per share of the New Common
Stock (as of the date of receipt of the Exercise Notice to the Company).
Subject to the provisions of Section 8, upon such surrender of
Warrants and payment of the aggregate Exercise Price, the Company shall issue
and cause to be delivered promptly to or upon the written order of the Warrant
holder and in such name or names, as the Warrant holder may designate, a
certificate or certificates for the number of full shares of the New Common
Stock issuable upon the exercise of such Warrants together with cash as
provided in Section 14; provided, however, that if any Fundamental Transaction
(as defined in Section 12(h)) is proposed to be effected by the Company or
there is pending any tender offer or an exchange offer for shares of the New
Common Stock, upon such surrender of Warrants and payment of the Exercise
Price as aforesaid, the Company shall, as soon as possible, but in any event
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not later than two business days thereafter, issue and cause to be delivered
the full number of shares of the New Common Stock issuable upon the exercise
of such Warrants in the manner described in this sentence together with any
cash as provided in Section 14. For purposes of this Warrant Agreement, a
"business day" means any day other than a Saturday, Sunday or a day on which
banking institutions in New York City are authorized or obligated by law,
regulation or executive order to close or remain closed. Such certificate or
certificates shall be deemed to have been issued and any person so designated
to be named therein shall be deemed to have become a holder of record of such
shares of the New Common Stock as of the close of business on the date of the
surrender of such Warrants and payment of the aggregate Exercise Price. No
fractional shares shall be issued upon exercise of any Warrants in accordance
with Section 14.
The Warrants shall be exercisable, at the election of the holders
thereof, either in full or from time to time in part (in whole shares of the
New Common Stock) and, in the event that a Certificate evidencing Warrants is
exercised in respect of fewer than all of the shares of the New Common Stock
issuable on such exercise at any time prior to the Expiration Date, a new
Certificate evidencing the remaining Warrant or Warrants will be promptly
issued, and the Warrant Agent is hereby irrevocably authorized and directed to
countersign and to deliver the required new Warrant Certificate or
Certificates pursuant to the provisions of this Section 7 and of Section 5,
and the Company, whenever required by the Warrant Agent or under this Warrant
Agreement, will supply the Warrant Agent with Warrant Certificates duly
executed on behalf of the Company for such purpose.
All Warrant Certificates surrendered upon exercise of Warrants shall
be cancelled by the Warrant Agent. Such cancelled Warrant Certificates shall
then be disposed of by or at the direction of the Company in accordance with
applicable law. The Warrant Agent shall (x) advise an authorized
representative of the Company as directed by the Company by the end of each
day on which Warrants were exercised (i) the number of shares of the New
Common Stock issued upon exercise of a Warrant, (ii) delivery of Warrant
Certificates evidencing the balance, if any, of the shares of the New Common
Stock issuable after such exercise of the Warrant and (iii) such other
information as the Company shall reasonably require and (y) concurrently pay
to the Company all funds received by it in payment of the aggregate Exercise
Price. The Warrant Agent shall promptly confirm such information to the
Company in writing.
The Warrant Agent shall keep copies of this Warrant Agreement and any
notices given or received hereunder available for inspection by the holders of
the Warrants during normal business hours at the Warrant Agent Office. The
Company shall supply the Warrant Agent from time to time with such numbers of
copies of this Warrant Agreement as the Warrant Agent may request.
SECTION 8. Payment of Taxes. No service charge shall be made to any
holder of a Warrant for any exercise, exchange or registration of transfer of
Warrant Certificates, and the Company will pay all documentary stamp taxes
attributable to the initial issuance of shares of the New Common Stock upon
the exercise of Warrants; provided, however, that neither the Company nor the
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Warrant Agent shall be required to pay any tax or taxes which may be payable
in respect of any transfer involved in the issue of any Warrant Certificates
or any certificates for shares of the New Common Stock in a name other than
that of the registered holder of a Warrant Certificate surrendered upon the
exercise of a Warrant, and the Company shall not be required to issue or
deliver such Warrant Certificates or the certificates representing the shares
of the New Common Stock unless or until the person or persons requesting the
issuance thereof shall have paid to the Company the amount of such tax or
shall have established to the satisfaction of the Company that such tax has
been paid.
SECTION 9. Mutilated or Missing Warrant Certificates. If any of the
Warrant Certificates shall be mutilated, lost, stolen or destroyed, the
Company shall issue and the Warrant Agent shall countersign, in exchange and
substitution for and upon cancellation of the mutilated Warrant Certificate,
or in lieu of and substitution for the Warrant Certificate lost, stolen or
destroyed, a new Warrant Certificate of like date and tenor and representing
an equivalent number of Warrants, but only upon receipt of evidence
satisfactory to the Company and the Warrant Agent of such loss, theft or
destruction of such Warrant Certificate and such indemnity and security
therefor as is customary and reasonably satisfactory to the Company and the
Warrant Agent. Applicants for such substitute Warrant shall also comply with
such other reasonable regulations and pay such other reasonable charges as the
Company or the Warrant Agent may prescribe.
SECTION 10. Reservation of Shares of the New Common Stock. The
Company will at all times reserve and keep available, free from preemptive
rights, out of the aggregate of its authorized but unissued shares of the New
Common Stock, for the purpose of enabling it to satisfy any obligation to
issue shares of the New Common Stock upon exercise of Warrants, the maximum
number of shares of the New Common Stock which may then be deliverable upon
the exercise of all outstanding Warrants.
The Company or the transfer agent for the New Common Stock and every
subsequent transfer agent for any shares of the Company's capital stock
issuable upon the exercise of any of the rights of purchase represented by the
Warrants as aforesaid (the "Transfer Agent") will be irrevocably authorized
and directed at all times to reserve such number of authorized shares as shall
be required for such purpose. The Company will keep a copy of this Warrant
Agreement on file with the Transfer Agent for any shares of the Company's
capital stock issuable upon the exercise of the rights of purchase represented
by the Warrants. The Warrant Agent is hereby irrevocably authorized and
directed to requisition from time to time from such Transfer Agent the stock
certificates required to honor outstanding Warrants upon exercise thereof in
accordance with the terms of this Warrant Agreement. The Company will supply
such Transfer Agent with duly executed certificates for such purposes and
will, upon request, provide or otherwise make available any cash which may be
payable as provided in Section 14. The Company will furnish such Transfer
Agent a copy of all notices of adjustments and certificates related thereto,
transmitted to the Warrant Agent and each holder pursuant to Section 15.
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Before taking any action which would cause an adjustment pursuant to
Section 12 to reduce the Exercise Price below the then par value per share (if
any) of a share of the New Common Stock, the Company will take all corporate
action necessary, in the opinion of its counsel (which may be counsel employed
by the Company), in order that the Company may validly and legally issue fully
paid and nonassessable shares of the New Common Stock at the Exercise Price as
so adjusted.
The Company covenants that all shares of the New Common Stock which
may be issued upon exercise of Warrants will be, upon payment of the aggregate
Exercise Price and issuance thereof, fully paid, nonassessable, free of
preemptive rights and free from all taxes, liens, charges and security
interests with respect to the issue thereof (other than any liens, charges and
security interests created by the Warrant holder or the person to which the
shares of the New Common Stock are to be issued).
SECTION 11. Obtaining Stock Exchange Listings. The Company shall also
from time to time take all action reasonably necessary so that the shares of
the New Common Stock, immediately upon their issuance upon the exercise of
Warrants, will be listed or quoted, as the case may be, on the primary
exchange, inter-dealer quotation system or regulated quotation service, if
any, on which shares of the New Common Stock are then listed or quoted,
subject to the rules and regulations thereof. If the shares of the New Common
Stock are not so listed or quoted, the Company shall not be obligated to
obtain or maintain a listing or quotation, as the case may be, of the shares
of the New Common Stock or shares of the New Common Stock issuable upon the
exercise of Warrants on any exchange, inter-dealer quotation system or
regulated quotation service.
SECTION 12. Adjustment of Exercise Price and Number of Shares of the
New Common Stock Issuable. The Exercise Price and the number of shares of the
New Common Stock issuable upon the exercise of each Warrant are subject to
adjustment from time to time upon the occurrence of the events enumerated in
this Section 12. For purposes of this Section 12, "the New Common Stock" means
the New Common Stock and any other stock of the Company, however designated,
for which the Warrants may be exercisable from time to time.
(a) Adjustment for Change in Capital Stock.
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If on or after the date of this Warrant Agreement and prior to
the Expiration Date, the Company:
(1) pays a dividend or makes a distribution on the New
Common Stock in shares of the New Common Stock;
(2) subdivides its outstanding shares of the New Common Stock
into a greater number of shares;
(3) combines its outstanding shares of the New Common Stock
into a smaller number of shares;
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(4) makes a distribution on its the New Common Stock in shares
of its capital stock other than the New Common Stock; or
(5) issues by reclassification of its the New Common Stock any
shares of its capital stock,
then the Exercise Price and the number and kind of shares of capital stock of
the Company issuable upon the exercise of a Warrant shall be proportionately
adjusted so that the holder of any Warrant thereafter exercised may receive
the aggregate number and kind of shares of capital stock of the Company which
he would have owned immediately following such action if such Warrant had been
exercised immediately prior to such action.
The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification.
If after an adjustment a holder of a Warrant upon exercise may
receive shares of two or more classes or series of capital stock of the
Company, the Company shall determine the allocation of the adjusted Exercise
Price between the classes or series of capital stock based on the relative
fair market values (determined by the Board of Directors of the Company) of
such class or classes of capital stock. After such allocation, the exercise
privilege and the Exercise Price of each class or series of capital stock
shall thereafter again be subject to adjustment on the terms applicable to the
New Common Stock in this Section 12.
Such adjustment shall be made successively whenever any event listed
above shall occur.
(b) Adjustment for Rights Issue.
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If on or after the date of this Warrant Agreement and prior to the
Expiration Date, the Company distributes any options, warrants or other rights
(however classified, except pursuant to any stockholder rights plan now
existing or hereafter adopted) to all holders of the New Common Stock
entitling them for a period expiring within 45 days after the record date
mentioned below to purchase shares of the New Common Stock or securities
convertible into, or exchangeable or exercisable for, the New Common Stock at
a price per share (or with an initial conversion, exchange or exercise price)
less than the current market price per share on that record date, the Exercise
Price shall be adjusted in accordance with the following formula:
N x P
O + -------
M
E' = E x -----------
O + N
where:
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E' = the adjusted Exercise Price.
E = the current Exercise Price.
O = the number of shares of the New Common Stock outstanding on
the record date.
N = the number of additional shares of the New Common Stock
offered.
P = the offering price per share of the additional shares.
M = the current market price per share of the New Common Stock on
the record date.
The adjustment shall be made successively whenever any such options,
warrants or other rights (however classified) are issued and shall become
effective immediately after the record date for the determination of
stockholders entitled to receive the options, warrants or other rights
(however classified). If at the end of the period during which such rights,
options or warrants are exercisable, not all options, warrants or other rights
(however classified) shall have been exercised, the Exercise Price shall be
immediately readjusted to what it would have been if "N" in the above formula
had been the number of shares actually issued.
(c) Adjustment for Other Distributions.
----------------------------------
If on or after the date of this Warrant Agreement and prior to the
Expiration Date, the Company distributes to all holders of the New Common
Stock any of its assets (other than cash dividends or distributions), debt
securities, preferred stock or any options, warrants or other rights to
purchase debt securities, assets or other securities of the Company, the
Exercise Price shall be adjusted in accordance with the following formula:
M - F
E' = E x -------
M
where:
E' = the adjusted Exercise Price.
E = the current Exercise Price.
M = the current market price per share of the New Common Stock on
the record date mentioned below.
F = the fair market value on the record date of the assets,
securities, rights or warrants to be distributed in respect of
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one share of the New Common Stock. The Board of Directors of
the Company shall determine the fair market value.
The adjustment shall be made successively whenever any such record
date is fixed and shall become effective immediately after the record date for
the determination of stockholders entitled to receive the distribution.
This Section 12(c) does not apply to: (i) options, warrants or other
rights referred to in Section 12(b); or (ii) a dividend payable in shares of
Common Stock referred to in Section 12(a).
(d) Current Market Price.
--------------------
All references in Section 12(b) or Section 12(c) and in Section 7 and
Section 14 to "the current market price per share of the New Common Stock" on
any date shall mean the last reported sale price for such security on the
principal exchange or quotation system on which such security is listed or
traded. If the security is not admitted for trading on any securities exchange
or the Nasdaq National or SmallCap Market, "current market price per share of
the New Common Stock" shall mean the average of the last reported closing bid
and asked prices reported by the Nasdaq Stock Market, Inc., the electronic
securities market regulated by the National Association of Securities Dealers,
Inc., as furnished by any member in good standing of the National Association
of Securities Dealers, Inc., selected from time to time by the Company for
that purpose or as quoted by the National Quotation Bureau Incorporated. In
the event that no such quotation is available for such day, the "current
market price per share of the New Common Stock" shall be the average of the
quotations for the last five trading days for which a quotation is available
within the last 30 trading days prior to such day. In the event that five such
quotations are not available within such 30-trading day period, the Board of
Directors of the Company shall be entitled to determine the "current market
price per share of the New Common Stock" on the basis of such quotations or
other information as it in good faith considers appropriate (without regard to
any illiquidity or minority discounts).
(e) When De Minimis Adjustment May Be Deferred.
------------------------------------------
No adjustment in the Exercise Price need be made unless the
adjustment would require an increase or decrease of at least one percent (l%)
in the Exercise Price on the date an adjustment would otherwise be required to
be made. Any adjustments that are not made shall be carried forward and taken
into account in any subsequent adjustment.
All calculations under this Section 12 shall be made to the nearest
cent or to the nearest 1/100th of a share, as the case may be.
(f) When No Adjustment Required.
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No adjustment need be made for a transaction referred to in Section
12(a), Section 12(b) or Section 12(c) if all Warrant holders participate in
such transaction on a basis and with notice that the Board of Directors of the
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Company determines to be fair and appropriate in light of the basis and notice
on which holders of the New Common Stock participate in the transaction.
No adjustment need be made for rights to purchase the New Common
Stock purchased at the fair market value thereof (determined by the Board of
Directors of the Company) pursuant to any of the Company's plans for
reinvestment of dividends or interest.
No adjustment need be made for a change in the par value, or from par
value to no par value, or from no par value to par value, of the Common Stock.
Notwithstanding any other provision of this Section 12, no adjustment
to the Exercise Price shall result in zero or in a negative number or shall
reduce the Exercise Price below the then par value per share of the New Common
Stock, and any such purported adjustment shall instead reduce the Exercise
Price to such par value (unless the New Common Stock then has no par value in
which case such purported adjustment shall instead reduce the Exercise Price
to $0.001 per share).
To the extent the Warrants become convertible into cash, no
adjustment need be made thereafter as to the cash. Interest will not accrue on
the cash.
(g) Notice of Adjustment.
--------------------
Whenever the Exercise Price is adjusted, the Company shall provide
the notices required by Section 15.
(h) Consolidation, Merger, Sale, Recapitalization or Reorganization
of the Company.
---------------------------------------------------------------
In case of any consolidation of the Company with, or merger of the
Company into, another person (other than a consolidation, amalgamation or
merger which does not result in any reclassification or exchange of the New
Common Stock), or in case of any sale or conveyance to another person of the
property of the Company as an entirety or substantially as an entirety (each a
"Fundamental Transaction"), the person formed by or surviving such Fundamental
Transaction or the persons which shall have acquired such assets, as the case
may be, shall execute and deliver to the Warrant Agent a supplemental warrant
agreement providing that each holder of a Warrant then outstanding shall have
the right thereafter (until the expiration of such Warrant) to receive, upon
exercise of such Warrant, solely the kind and amount of capital stock, shares
and other securities and property (or cash) receivable upon such Fundamental
Transaction for which such Warrant might have been exercised immediately prior
to such Fundamental Transaction, provided that (i) if the holders of shares of
the New Common Stock were entitled to exercise a right of election as to the
kind or amount of securities, cash or other assets receivable upon such
Fundamental Transaction, then the kind and amount of securities, cash or other
assets for which each Warrant shall become exercisable shall be deemed to be
the kind and amount so receivable per share by a plurality of the holders of
shares of the New Common Stock in such Fundamental Transaction, and (ii) if a
11
tender or exchange offer shall have been made to and accepted by the holders
of shares of the New Common Stock under circumstances in which, upon
completion of such tender or exchange offer, the maker thereof, together with
members of any group (within the meaning of Rule 13d-5(b)(1) under the
Securities and Exchange Act of 1934, as amended (the "Exchange Act")) of which
such maker is a part, and together with any affiliate or associate of such
maker (within the meaning of Rule 12b-2 under the Exchange Act) and any
members of any such group of which any such affiliate or associate is a part,
own beneficially (within the meaning of Rule 13d-3 under the Exchange Act)
more than 50% of the outstanding shares of the New Common Stock, each Warrant
shall become exercisable for the highest amount of cash, securities or other
property to which such Warrant holder would actually have been entitled as a
shareholder if such Warrant holder had exercised the Warrant prior to the
expiration of such tender or exchange offer, accepted such offer and all of
the shares of the New Common Stock issuable to such Warrant holder upon such
exercise had been purchased pursuant to such tender or exchange offer, subject
to adjustments (from and after the consummation of such tender or exchange
offer). Such supplemental warrant agreement shall provide for adjustments
which shall be as nearly equivalent as may be practicable to the adjustments
provided in this Section 12. The above provision of this Section 12(h) shall
similarly apply to successive consolidations, amalgamations, mergers, sales or
transfers. The Warrant Agent shall not be under any responsibility to
determine the correctness of any provision contained in any such supplemental
warrant agreement relating to either the kind or amount of capital stock,
shares or securities or property (or cash) purchasable by Warrant holders upon
the exercise of their Warrants after any such Fundamental Transaction, but
subject to the provisions of Section 17 hereof, may accept as conclusive
evidence of the correctness of any such provisions, and shall be protected in
relying upon, a certificate of a firm of independent certified public
accountants (who may be the accountants regularly employed by the Company)
with respect thereto.
(i) The Company Determination Final.
-------------------------------
Any determination that the Company or the Board of Directors of the
Company must make pursuant to this Section 12 is (absent manifest error)
conclusive if such determination is made in good faith.
(j) Warrant Agent's Disclaimer.
--------------------------
The Warrant Agent has no duty to determine when an adjustment under
this Section 12 should be made (if at all), how it should be made or what it
should be. The Warrant Agent has no duty to determine whether any provisions
of a supplemental Warrant Agreement under Section 12(h) are correct. The
Warrant Agent makes no representation as to the validity or value of any
securities or assets issued upon exercise of Warrants. The Warrant Agent shall
not be responsible for the Company's failure to comply with this Section 12.
The Warrant Agent shall not be deemed to have knowledge of any adjustment
under this Section 12 until it has received notice thereof pursuant to Section
15.
12
(k) When Issuance or Payment May Be Deferred.
----------------------------------------
In any case in which this Section 12 shall require that an adjustment
in the Exercise Price be made effective as of a record date for a specified
event, the Company may elect to defer until the occurrence of such event (i)
issuing to the holder of any Warrant exercised after such record date the
shares of the New Common Stock and other capital stock of the Company, if any,
issuable upon such exercise over and above the shares of the New Common Stock
and other capital stock of the Company, if any, issuable upon such exercise on
the basis of the Exercise Price and (ii) paying to such holder any amount in
cash in lieu of a fractional share pursuant to Section 14; provided, however,
that the Company shall deliver to such holder a due ▇▇▇▇ or other appropriate
instrument evidencing such holder's right to receive such additional shares of
the New Common Stock, other capital stock and cash (if any) upon the
occurrence of the event requiring such adjustment.
(l) Adjustment in Number of Shares.
------------------------------
Upon each adjustment of the Exercise Price pursuant to this Section
12, each Warrant outstanding prior to the making of the adjustment in the
Exercise Price shall thereafter evidence the right to receive upon payment of
the adjusted aggregate Exercise Price that number of shares of the New Common
Stock (calculated to the nearest hundredth) obtained from the following
formula:
E
N' = N x -----
E'
where:
N' = the adjusted number of shares of the New Common Stock issuable
upon exercise of a Warrant by payment of the adjusted
aggregate Exercise Price.
N = the number of shares of the New Common Stock previously
issuable upon exercise of a Warrant by payment of the
aggregate Exercise Price prior to adjustment.
E' = the adjusted Exercise Price.
E = the Exercise Price prior to adjustment.
(m) Form of Warrants.
----------------
The Company may, but shall not be required to, issue new certificates
or make a notation on any outstanding certificates to reflect any adjustment
under this Section 12. Irrespective of any adjustments in the Exercise Price
or the number or kind of shares purchasable upon the exercise of the Warrants,
Warrants theretofore or thereafter issued may continue to express the same
price and number and kind of shares as are stated in the Warrants initially
issuable pursuant to this Warrant Agreement.
13
SECTION 13. Priority Adjustments, Further Actions. (a) If any single
action would require adjustment of the Exercise Price pursuant to more than
one subsection of Section 12, only one adjustment shall be made and such
adjustment shall be the amount of adjustment that has the highest absolute
value.
(b) The Company will not, by amendment of its charter or through any
consolidation, merger, reorganization, transfer of assets, dissolution,
issue or sale of securities or any other voluntary action, avoid or seek
to avoid the observance or performance of any of the terms of the
Warrants, but will at all times in good faith assist in the carrying out
of all such terms. Without limiting the generality of the foregoing, the
Company (i) will take all such action as may be necessary or appropriate
in order that the Company may validly and legally issue fully paid and
nonassessable shares of the New Common Stock on the exercise of the
Warrants from time to time outstanding and (ii) will not take any action
which results in any adjustment of the Exercise Price if the total number
of shares of the New Common Stock issuable after the action upon the
exercise of all of the Warrants would exceed the total number of shares
of the New Common Stock then authorized by the Company's charter and
available for the purposes of issue upon such exercise. A consolidation,
merger, reorganization or transfer of assets involving the Company
covered by Section 12(h) shall not be prohibited by or require any
adjustment under this Section 13.
SECTION 14. Fractional Interests. The Company shall not be required
to issue fractional shares of the New Common Stock on the exercise of
Warrants. If more than one Warrant shall be presented for exercise in full at
the same time by the same holder, the number of full shares of the New Common
Stock which shall be issuable upon the exercise thereof shall be computed on
the basis of the aggregate number of shares of the New Common Stock
purchasable on exercise of all of the Warrants so presented. If any fraction
of a share of the New Common Stock would, except for the provisions of this
Section 14, be issuable on the exercise of any Warrants (or specified portion
thereof), the Company shall notify the Warrant Agent in writing of the amount
to be paid in lieu of the fraction of a share of the New Common Stock and
concurrently pay or provide to the Warrant Agent for repayment to the Warrant
holder an amount in cash equal to the product of (i) such fraction of a
Warrant Share and (ii) the excess of the current market price of a share of
the New Common Stock for the day the Warrant was presented for exercise over
the Exercise Price.
SECTION 15. Notices to Warrant Holders. Upon any adjustment of the
Exercise Price pursuant to Section 12, the Company shall within 25 days
thereafter (i) cause to be delivered to the Warrant Agent a certificate of a
firm of independent public accountants selected by the Board of Directors of
the Company or other knowledgeable expert selected by the Board of Directors
of the Company setting forth the Exercise Price after such adjustment and
setting forth in reasonable detail the method of calculation and the facts
upon which such calculations are based and setting forth the number of shares
of the New Common Stock (or portion thereof) issuable after such adjustment in
the Exercise Price, upon exercise of a Warrant and payment of the adjusted
aggregate Exercise Price, which certificate shall be conclusive evidence of
the correctness of the matters set forth therein and (ii) cause to be given to
14
each of the registered holders of the Warrant Certificates at such registered
holder's address appearing on the Warrant register written notice of such
adjustments by first-class mail, postage prepaid. Where appropriate, such
notice may be given in advance and included as a part of the notice required
to be mailed under the other provisions of this Section 15.
In case:
(a) the Company shall authorize the issuance to all holders of shares
of the New Common Stock of options, warrants or other rights (howsoever
classified) to subscribe for or purchase shares of the New Common Stock
or of any other subscription rights or warrants; or
(b) the Company shall authorize the distribution to all holders of
shares of the New Common Stock of evidences of its indebtedness or assets
(other than cash dividends or cash distributions payable out of
consolidated earnings or earned surplus or dividends payable in shares of
the New Common Stock or distributions referred to in Section 12(a)); or
(c) of any Fundamental Transaction or a tender offer or exchange
offer for shares of the New Common Stock; or
(d) of the voluntary or involuntary dissolution, liquidation or
winding up of the Company; or
(e) the Company proposes to take any action (other than actions of
the character described in Section 12(a)) which would require an
adjustment of the Exercise Price pursuant to Section 12;
then, in each case, the Company shall cause to be delivered to the
Warrant Agent and shall cause to be given to each of the registered holders of
the Warrant Certificates at his address appearing on the Warrant register, at
least 20 days (or 10 days in any case specified in clauses (a) or (b) above)
prior to the applicable record date hereinafter specified, or promptly in the
case of events for which there is no record date, by first-class mail, postage
prepaid, a written notice stating (i) the date as of which the holders of
record of shares of the New Common Stock to be entitled to receive any such
rights, options, warrants or distribution are to be determined or (ii) the
initial expiration date set forth in any tender offer or exchange offer for
shares of the New Common Stock or (iii) the date on which any such
consolidation, merger, conveyance, transfer, dissolution, liquidation or
winding up is expected to become effective or consummated, and the date as of
which it is expected that holders of record of shares of the New Common Stock
shall be entitled to exchange such shares for securities or other property, if
any, deliverable upon such reclassification, consolidation, merger,
conveyance, transfer, dissolution, liquidation or winding up. The failure to
give the notice required by this Section 15 or any defect therein shall not
affect the legality or validity of any distribution, right, option, warrant,
consolidation, merger, conveyance, transfer, lease, dissolution, liquidation
or winding up, or the vote upon any action.
15
Nothing contained in this Warrant Agreement or in any of the Warrant
Certificates shall be construed as conferring upon the holders thereof the
right to vote or to consent or to receive notice as stockholders in respect of
the meetings of stockholders or the election of Directors of the Company or
any other matter, or any rights whatsoever as stockholders of the Company.
SECTION 16. Merger, Consolidation or Change of Name of Warrant Agent.
Any person into which the Warrant Agent may be merged or converted or with
which it may be consolidated, or any person resulting from any merger,
conversion or consolidation to which the Warrant Agent shall be a party, or
any person succeeding to all or substantially all of the corporate trust or
agency business of the Warrant Agent, shall be the successor to the Warrant
Agent hereunder without the execution or filing of any paper or any further
act on the part of any of the parties hereto. If, at the time such successor
to the Warrant Agent by merger or consolidation succeeds to the agency created
by this Warrant Agreement, any of the Warrant Certificates shall have been
countersigned but not delivered, any such successor to the Warrant Agent may
adopt the countersignature of the original Warrant Agent; and if, at that time
any of the Warrant Certificates shall not have been countersigned, any such
successor to the Warrant Agent may countersign such Warrant Certificates
either in the name of the predecessor Warrant Agent or in the name of the
successor to the Warrant Agent; and in all such cases such Warrant
Certificates shall have the full force and effect provided in the Warrant
Certificates in this Warrant Agreement.
SECTION 17. Warrant Agent. The Warrant Agent undertakes only the
duties and obligations imposed by this Warrant Agreement upon the following
terms and conditions, by all of which the Company and the holders of Warrants,
by their acceptance thereof, shall be bound:
(a) The statements contained herein and in the Warrant Certificates
shall be taken as statements of the Company. The Warrant Agent assumes no
responsibility for the correctness of any of the same except such as
describe the Warrant Agent or action taken or to be taken by it. The
Warrant Agent assumes no responsibility with respect to the distribution
of the Warrant Certificates except as herein otherwise provided, or as
provided pursuant to the Exchange Agent Agreement, dated as of December
21, 2004, by and between the Company and the Warrant Agent (the "Exchange
Agent Agreement").
(b) Whenever in the performance of its duties under this Agreement
the Warrant Agent deems it necessary or desirable that any fact or matter
be proved or established by the Company prior to taking, suffering or
omitting to take any action hereunder, such fact or matter may be deemed
to be conclusively proved and established by a certificate signed by the
Company's Chairman of the Board, Chief Executive Officer, President or
any Vice President and delivered to the Warrant Agent; and in reliance
upon such certificate, the Warrant Agent shall take any action or omit to
take any action authorized under the provisions of this Agreement. In the
event the Warrant Agent reasonably believes any ambiguity or uncertainty
exists hereunder or in any notice, instruction, direction, request or
16
other communication, paper or document received by the Warrant Agent
hereunder, or is uncertain of any action to take hereunder, the Warrant
Agent, may, following prior written notice to the Company, refrain from
taking any action, and shall be fully protected and shall not be liable
in any way to the Company or any other person or entity for refraining
from taking such action, unless the Warrant Agent receives written
instructions signed by the Company which eliminates such ambiguity or
uncertainty to the reasonable satisfaction of the Warrant Agent.
(c) The Warrant Agent shall not be responsible for any failure of the
Company to comply with any of the covenants contained in this Warrant
Agreement (including, without limitation, any adjustment of Exercise
Price pursuant to Section 12, the authorization or reservation of shares
of New Common Stock pursuant to Section 10 or the due execution and
delivery by the Company of this Warrant Agreement or any Warrant
Certificate) or in the Warrant Certificates to be complied with by the
Company.
(d) The Warrant Agent may consult at any time with counsel
satisfactory to it (who may be counsel for the Company or an employee of
the Warrant Agent) and the Warrant Agent shall incur no liability or
responsibility to the Company or to any holder of any Warrant Certificate
in respect of any action taken, suffered or omitted by it hereunder in
good faith and in accordance with the opinion or the advice of such
counsel.
(e) The Warrant Agent shall incur no liability or responsibility to
the Company or to any holder of any Warrant Certificate for any action
taken in reliance on any Warrant Certificate, certificate of shares,
notice, resolution, waiver, consent, order, certificate, or other paper,
document or instrument believed by it to be genuine and to have been
signed, sent or presented by the proper party or parties. The Warrant
Agent shall not be bound by any notice or demand, or any waiver,
modification, termination or revision of this Warrant Agreement or any of
the terms hereof, unless evidenced by a writing between the Company and
the Warrant Agent. The Warrant Agent shall not be required to take
instructions or directions except those given in accordance with this
Warrant Agreement.
(f) The Warrant Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or
by or through its attorneys, accountants, agents or other experts, and
the Warrant Agent will not be answerable or accountable for any act,
default, neglect or unintentional misconduct of any such attorneys or
agents or for any loss to the Company or the holders of the Warrants
resulting from any such act, default, neglect or unintentional
misconduct, absent gross negligence, willful misconduct or bad faith (as
each is determined by a final non-appealable order of a court of
competent jurisdiction) in the selection and continued employment
thereof.
17
(g) The Warrant Agent will not be under any duty or responsibility to
insure compliance with any applicable federal or state securities laws in
connection with the issuance, transfer or exchange of Warrant
Certificates.
(h) The Warrant Agent shall not incur any liability for not
performing any act, duty, obligation or responsibility by reason of any
occurrence beyond the control of the Warrant Agent (including without
limitation any act or provision of any present or future law or
regulation or governmental authority, any act of God, war, civil disorder
or failure of any means of communication).
(i) The Company agrees to pay to the Warrant Agent reasonable
compensation for all services rendered by the Warrant Agent in the
execution of this Warrant Agreement, to reimburse the Warrant Agent for
all expenses (including reasonable counsel fees), taxes (including
withholding taxes) and governmental charges and other charges of any kind
and nature actually incurred by the Warrant Agent in the execution,
delivery and performance of its responsibilities under this Warrant
Agreement and to indemnify the Warrant Agent and save it harmless against
any and all liabilities, including judgments, costs and counsel fees, for
anything done or omitted by the Warrant Agent in the execution, delivery
and performance of its responsibilities under this Warrant Agreement
except as a result of its gross negligence, bad faith or willful
misconduct (as each is determined by a final non-appealable order of a
court of competent jurisdiction).
(j) The Warrant Agent, shall be under no obligation to institute any
action, suit or legal proceeding or to take any other action likely to
involve expense unless the Company or one or more registered holders of
Warrant Certificates shall furnish the Warrant Agent with reasonable
security and indemnity for any costs and expenses which may be incurred,
but this provision shall not affect the power of the Warrant Agent to
take such action as it may consider proper, whether with or without any
such security or indemnity. All rights of action under this Warrant
Agreement or under any of the Warrants may be enforced by the Warrant
Agent without the possession of any of the Warrant Certificates or the
production thereof at any trial or other proceeding relative thereto, and
any such action, suit or proceeding instituted by the Warrant Agent shall
be brought in its name as Warrant Agent and any recovery of judgment
shall be for the ratable benefit of the registered holders of the
Warrants, as their respective rights or interests may appear.
(k) Except as otherwise prohibited by applicable law, the Warrant
Agent, and any stockholder, director, officer or employee of the Warrant
Agent, may buy, sell or deal in any of the Warrants or other securities
of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to
the Company or otherwise act as fully and freely as though it were not
Warrant Agent under this Warrant Agreement. Nothing herein shall preclude
the Warrant Agent from acting in any other capacity for the Company or
for any other legal entity.
18
(l) The Warrant Agent shall act hereunder solely as agent for the
Company, and its duties shall be determined solely by the express
provisions hereof. The Warrant Agent shall not be liable for anything
which it may do or refrain from doing in connection with this Warrant
Agreement, except for its own gross negligence, bad faith or willful
misconduct (as each is determined by a final non-appealable order of a
court of competent jurisdiction); provided that in no event shall the
Warrant Agent be liable for special, indirect or consequential loss or
damage of any kind whatsoever (including but not limited to lost
profits), even if the Warrant Agent has been advised of the likelihood of
such loss or damage and regardless of the form of action.
(m) The Warrant Agent shall not at any time be under any duty or
responsibility to any holder of any Warrant Certificate to make or cause
to be made any adjustment of the Exercise Price or number of the shares
of the New Common Stock or other securities or property deliverable as
provided in this Warrant Agreement, or to determine whether any facts
exist which may require any of such adjustments, or with respect to the
nature or extent of any such adjustments, when made, or with respect to
the method employed in making the same. The Warrant Agent shall not be
accountable with respect to the validity or value or the kind or amount
of any shares of the New Common Stock or of any securities or property
which may at any time be issued or delivered upon the exercise of any
Warrant or with respect to whether any such shares of the New Common
Stock or other securities will when issued be validly issued and fully
paid and nonassessable, and makes no representation with respect thereto.
The Warrant Agent shall not be accountable with respect to the
calculation of the "Spread" pursuant to Section 7.
(n) All rights and obligations contained in this Section 17 and
Section 18 shall survive the termination of this Warrant Agreement and
the resignation or removal of the Warrant Agent.
SECTION 18. Expenses. All expenses incident to the Company's
performance of or compliance with this Warrant Agreement will be borne by the
Company, including without limitation: (i) all expenses of printing Warrant
Certificates; (ii) messenger and delivery services and telephone calls; (iii)
all fees and disbursements of counsel for the Company; (iv) all fees and
disbursements of independent certified public accountants or knowledgeable
experts selected by the Company; and (v) the Company's internal expenses
(including, without limitation, all salaries and expenses of their officers
and employees performing legal or accounting duties).
SECTION 19. Change of Warrant Agent. If the Warrant Agent shall
become incapable of acting as Warrant Agent or shall resign as provided below,
the Company shall appoint a successor to such Warrant Agent. If the Company
shall fail to make such appointment within a period of 30 days after it has
been notified in writing of such resignation or incapacity by the Warrant
Agent, then the registered holder of any Warrant Certificate may apply to any
court of competent jurisdiction for the appointment of a successor to the
Warrant Agent. Pending appointment of a successor to such Warrant Agent,
19
either by the Company or by such a court, the duties of the Warrant Agent
shall be carried out by the Company. The registered holders of a majority of
the unexercised Warrants shall be entitled at any time to remove the Warrant
Agent for cause and appoint a successor to such Warrant Agent; provided that
the Warrant Agent so appointed shall be acceptable to the Company. After
appointment, the successor to the Warrant Agent shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
as Warrant Agent without further act or deed; but the former Warrant Agent
shall deliver and transfer to the successor to the Warrant Agent any property
at the time held by it hereunder and execute and deliver any further
assurance, conveyance, act or deed necessary for the purpose. Failure to give
any notice provided for in this Section 19, however, or any defect therein,
shall not affect the legality or validity of the appointment of a successor to
the Warrant Agent.
The Warrant Agent may resign at any time and be discharged from the
obligations hereby created by so notifying the Company in writing at least 30
days in advance of the proposed effective date of its resignation. If no
successor Warrant Agent accepts the engagement hereunder by such time, the
Company shall act as Warrant Agent.
SECTION 20. Notices to the Company and Warrant Agent. Any notice or
demand authorized or permitted by this Warrant Agreement to be given or made
by the Warrant Agent or by the registered holder of any Warrant Certificate to
or on the Company shall be sufficiently given or made when and if deposited in
the mail, first class or registered, postage prepaid, addressed (until another
address is filed in writing by the Company with the Warrant Agent), as
follows:
RCN Corporation
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: General Counsel
with a copy to (which shall not constitute notice to the Company):
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telephone No.: (▇▇▇) ▇▇▇-▇▇▇▇
Facsimile No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq.
Any notice pursuant to this Warrant Agreement to be given by the
Company or by the registered holder(s) of any Warrant Certificate to the
Warrant Agent shall be sufficiently given when and if deposited in the mail,
first-class or registered, postage prepaid, addressed (until another address
is filed in writing by the Warrant Agent with the Company) to the Warrant
Agent at the Warrant Agent Office as follows:
20
HSBC Bank USA, National Association
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Facsimile No: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Corporate Trust
SECTION 21. Supplements and Amendments. The Company and the Warrant
Agent may from time to time supplement or amend this Warrant Agreement without
the approval of any holders of Warrant Certificates in order to cure any
ambiguity or to correct or supplement any provision contained herein which may
be defective or inconsistent with any other provision herein, or to make any
other provisions in regard to matters or questions arising hereunder which the
Company and the Warrant Agent may deem necessary or desirable and which shall
not in any way adversely affect the interests of the holders of Warrant
Certificates. Any amendment or supplement to this Warrant Agreement that has
an adverse effect on the interests of holders of the Warrants shall require
the written consent of registered holders of a majority of the then
outstanding Warrants (excluding Warrants held by the Company or any of its
controlled affiliates). The consent of each holder of a Warrant affected shall
be required for any amendment of this Warrant Agreement pursuant to which the
Exercise Price would be increased or the number of shares of the New Common
Stock purchasable upon exercise of the Warrants would be decreased. The
Warrant Agent shall have no duty to determine whether any such amendment would
have an adverse effect on the interests of the holders of the Warrants. The
Warrant Agent may, but shall not be obligated to, execute any amendment or
supplement which adversely affects the rights or increases the duties or
obligations of the Warrant Agent.
SECTION 22. Successors. All the covenants and provisions of this
Warrant Agreement by or for the benefit of the Company or the Warrant Agent
shall bind and inure to the benefit of their respective successors and assigns
hereunder.
SECTION 23. Termination. This Warrant Agreement shall terminate at
5:00 p.m., New York City time, on the Expiration Date. Notwithstanding the
foregoing, this Warrant Agreement will terminate on such earlier date on which
all outstanding Warrants have been exercised. The provisions of Section 17
shall survive such termination.
SECTION 24. Governing Law; Jurisdiction. This Warrant Agreement and
each Warrant Certificate issued hereunder shall be deemed to be a contract
made under the laws of the State of New York and for all purposes shall be
governed by and construed in accordance with the internal laws of said State.
The parties hereto irrevocably consent to the jurisdiction of the courts of
the State of New York and any federal court located in such state in
connection with any action, suit or proceeding arising out of or relating to
this Warrant Agreement.
SECTION 25. Benefits of this Warrant Agreement. Nothing in this
Warrant Agreement shall be construed to give to any person other than the
Company, the Warrant Agent and the registered holders of the Warrant
Certificates any legal or equitable right, remedy or claim under this Warrant
21
Agreement; but this Warrant Agreement shall be for the sole and exclusive
benefit of the Company, the Warrant Agent and the registered holders of the
Warrant Certificates.
SECTION 26. Counterparts. This Warrant Agreement may be executed in
any number of counterparts and each of such counterparts shall for all
purposes be deemed to be an original, and all such counterparts shall together
constitute but one and the same instrument.
SECTION 27. Further Assurances. From time to time on and after the
date hereof, the Company shall deliver or cause to be delivered to the Warrant
Agent such further documents and instruments and shall do and cause to be done
such further acts as the Warrant Agent shall reasonably request (it being
understood that the Warrant Agent shall have no obligation to make such
request) to carry out more effectively the provisions and purposes of this
Warrant Agreement, to evidence compliance herewith or to assure itself that it
is protected hereunder.
SECTION 28. Entire Agreement. This Warrant Agreement, the Warrant
Certificate and the Exchange Agent Agreement constitute the entire agreement
of the Company, the Warrant Agent and the registered holders of the Warrant
Certificates with respect to the subject matter hereof and supersedes all
prior agreements and undertakings, both written and oral, among the Company,
the Warrant Agent and the registered holders of the Warrant Certificates with
respect to the subject matter hereof.
22
IN WITNESS WHEREOF, the parties hereto have caused this Warrant
Agreement to be duly executed, as of the day and year first above written.
RCN CORPORATION, as the Company
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Senior Vice President, General
Counsel & Corporate Secretary
HSBC BANK USA, NATIONAL ASSOCIATION, as
Warrant Agent
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------
Name: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Vice President
23
EXHIBIT A
---------
Form of Warrant Certificate
[Face of Warrant Certificate]
EXERCISABLE ON OR AFTER THE DATE OF THIS CERTIFICATE AND
PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON [DATE](2), 2006 AND
ONLY IF COUNTERSIGNED BY THE WARRANT AGENT
RCN CORPORATION
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
No. NIW _____ CUSIP No. [ ] __________ Warrants
WARRANTS
This certifies that __________________________, or registered assigns,
is the registered holder of ____________ warrants (the "Warrants"), to purchase
shares of common stock, par value $0.01 per share (the "Common Stock"), of RCN
Corporation, a Delaware corporation (the "Company"). Each Warrant entitles the
holder upon exercise at any time on or after the date of this Warrant
Certificate and prior to 5:00 p.m., New York City Time, on [Date], 2006 to
receive from the Company its pro rata portion, as determined pursuant to the
Warrant Agreement (as defined below), of fully paid and nonassessable shares of
Common Stock for each Warrant at the initial exercise price (the "Exercise
Price") of $[ ] per share payable (i) in United States dollars or (ii) by
certified or official bank check for United States Dollars made payable to the
order of "RCN Corporation." In lieu of payment of the aggregate Exercise Price
as aforesaid and subject to applicable law, the holder of a Warrant may request
the payment by the Company of the "Spread", which shall, subject to Section 14
of the Warrant Agreement, dated as of [ ], 2004, by and between the Company and
[ ], as Warrant Agent (the "Warrant Agreement"), be delivered by the Company by
delivering to such Warrant holder a number of shares of Common Stock equal to
[(a)(i) the product of (x) the current market price per share of Common Stock
(as of the date of receipt of the request to the Company), multiplied by (y) the
number of shares of Common Stock underlying the Warrants being exercised, minus
(ii) the product of (x) the Exercise Price, multiplied by (y) the number of
shares of Common Stock underlying the Warrants being exercised, divided by (b)
the current market price per share of Common Stock (as of the date of receipt of
the request to the Company).] The Exercise Price and number of shares of Common
Stock issuable upon exercise of the Warrants are subject to adjustment upon the
occurrence of certain events set forth in the Warrant Agreement. No Warrant may
be exercised after 5:00 p.m., New York City Time, on [ ], 2006, and to the
extent not exercised by such time such Warrants shall become void. This Warrant
Certificate shall not be valid unless countersigned by the Warrant Agent, as
such term is used in the Warrant Agreement. Reference is made to the further
provisions of this Warrant Certificate set forth on the reverse hereof, which
further provisions shall for all purposes have the same effect as though fully
set forth at this place. This Warrant Certificate shall be governed and
construed in accordance with the internal laws of the State of New York.
----------
(2) Second anniversary of the date of consummation of the Plan.
A-1
IN WITNESS WHEREOF, RCN Corporation has caused this Warrant Certificate
to be signed by the undersigned President and the undersigned Secretary of the
Company and has caused its corporate seal to be imprinted hereon.
Dated:
RCN CORPORATION
[Corporate Seal]
By:
----------------------------------- -----------------------------------
President Secretary
Countersigned: (seal)
HSBC BANK USA, NATIONAL ASSOCIATION
[ ]
WARRANT AGENT
By:
--------------------------------
Authorized Officer
A-2
[Reverse of Warrant Certificate]
RCN CORPORATION (WARRANT)
By accepting a Warrant Certificate, each holder shall be bound by all
of the terms and provisions of the Warrant Agreement (a copy of which is
available on request to the Secretary of the Company) and any amendments thereto
as fully and effectively as if such holder had signed the same.
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants by the Company expiring at 5:00 p.m., New York City
Time, on [ ], 2006, entitling the holder upon proper exercise to receive shares
of Common Stock and are issued or to be issued pursuant to the Warrant
Agreement, which Warrant Agreement is hereby incorporated by reference in and
made a part of this instrument and is hereby referred to for a description of
the rights, limitation of rights, obligations, duties and immunities thereunder
of the Warrant Agent, the Company and the holders (the words "holders" or
"holder" meaning the registered holders or registered holder) of the Warrants.
The holder of the Warrants evidenced by this Warrant Certificate may
exercise them by surrendering this Warrant Certificate, with the form of
election to purchase set forth below on this Warrant Certificate properly
completed and executed, together with payment of the aggregate Exercise Price in
accordance with the provisions set forth on the face of this Warrant
Certificate. In the event that upon any exercise of Warrants evidenced hereby
the number of Warrants exercised shall be less than the total number of Warrants
evidenced hereby, there shall be issued to the holder hereof or his assignee a
new Warrant Certificate evidencing the number of Warrants not exercised.
The Warrant Agreement provides that upon the occurrence of certain
events the Exercise Price and the number of shares of Common Stock issuable upon
exercise of this Warrant, in each case, set forth on the face hereof may,
subject to certain conditions, be adjusted. If the Exercise Price is adjusted,
the Warrant Agreement provides that the number of shares of Common Stock
issuable upon the exercise of each Warrant may be adjusted. No fractions of a
share of Common Stock will be issued upon the exercise of any Warrant, but the
Company will pay the cash value in lieu thereof determined as provided in the
Warrant Agreement.
Warrant Certificates, when surrendered at the principal corporate trust
office of the Warrant Agent by the registered holder thereof in person or by
legal representative or attorney duly authorized in writing, may be exchanged,
in the manner and subject to the limitations provided in the Warrant Agreement,
but without payment of any service charge, for another Warrant Certificate or
Warrant Certificates of like tenor evidencing in the aggregate a like number of
Warrants.
Upon due presentation for registration of transfer of this Warrant
Certificate at the Warrant Agent Office, a new Warrant Certificate or Warrant
Certificates of like tenor and evidencing in the aggregate a like number of
Warrants shall be issued to the transferee(s) in exchange for this Warrant
A-3
Certificate, subject to the limitations provided in the Warrant Agreement,
without charge except for any tax or other governmental charge imposed in
connection therewith.
The Company and the Warrant Agent may deem and treat the registered
holder(s) hereof as the absolute owner(s) of this Warrant Certificate
(notwithstanding any notation of ownership or other writing hereon made by
anyone), for the purpose of any exercise hereof, of any distribution to the
holder(s) hereof, and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary. Neither the
Warrants nor this Warrant Certificate entitles any holder hereof to any rights
of a stockholder of the Company.
The Warrant Agreement permits, with certain exceptions therein
provided, the supplementing or amendment thereof at any time by the Company and
the Warrant Agent with the written consent of registered holders of a majority
of the then outstanding Warrants (excluding Warrants held by the Company or any
of its controlled affiliates). Any such consent by or on behalf of a holder of a
Warrant shall be conclusive and binding upon such holder and upon all future
holders of this Warrant and any Warrant issued upon the registration of transfer
thereof or in exchange thereof whether or not notation of such consent is made
upon such Warrant or any other Warrant.
A-4
Form of Assignment
[Form of Assignment to be Executed if Holder
Desires to Transfer Warrants Evidenced Hereby]
ASSIGNMENT
(To Be Executed by the Registered Holder in Order to Assign Warrants)
FOR VALUE RECEIVED the undersigned hereby sell(s), assign(s) and transfer(s)
unto ___________________________________________________________________________
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER OF ASSIGNEE
________________________________________________________________________________
(PLEASE PRINT OR TYPE NAME AND ADDRESS, INCLUDING POSTAL ZIP CODE OF ASSIGNEE)
of the Warrants represented by this Warrant Certificate, and hereby irrevocably
constitutes and appoints
________________________________________________________________ Attorney to
transfer this Warrant Certificate on the books of the Company, with full power
of substitution in the premises.
Dated: __________, ____ ___________________________________________________
Signature(s)*
___________________________________________________
___________________________________________________
(Social Security or Taxpayer Identification Number)
_______________________
Signature(s) Guaranteed*
A-5
Form of Election to Purchase
[To Be Executed Upon Exercise Of Warrant]
NOTICE OF EXERCISE
(To Be Executed by the Registered Holder in Order to Exercise Warrants)
The undersigned hereby irrevocably elects to exercise the right,
represented by this Warrant Certificate, to receive shares of the New Common
Stock and herewith tenders payment for such shares to the order of RCN
Corporation in the amount of $[ ] per share of the New Common Stock (subject to
adjustment) in accordance with the terms of the Warrant Agreement, in cash or by
certified or official bank check made payable to the order of the Company.
--------------------------------------------------------------------------------
REQUEST FOR PAYMENT OF SPREAD
[ ] Please check if the undersigned, in lieu of tendering the cash
payment, as aforesaid, hereby requests the payment of the "Spread"
within the meaning of Section 7 of the Warrant Agreement.
--------------------------------------------------------------------------------
The undersigned requests that a certificate for such shares be
registered in the name of:
________________________________________________________________________________
PLEASE INSERT SOCIAL SECURITY
OR OTHER IDENTIFYING NUMBER
and be delivered to:____________________________________________________________
(PLEASE PRINT OR TYPE NAME AND ADDRESS,
INCLUDING POSTAL ZIP CODE)
________________________________________________________________________________
and, if such number of Warrants shall not be all the Warrants evidenced by
this Warrant Certificate, that a new Warrant Certificate for the balance of
such Warrants be registered in the name of, and delivered to, the Registered
Holder at the address stated below:
________________________________________________________________________________
(PLEASE PRINT OR TYPE ADDRESS)
Dated: __________, ____ ___________________________________________________
Signature(s)*
___________________________________________________
___________________________________________________
(Social Security or Taxpayer Identification Number)
_______________________
Signature(s) Guaranteed*
* THE SIGNATURE TO THE ASSIGNMENT OR THE SUBSCRIPTION FORM MUST CORRESPOND TO
THE NAME AS WRITTEN UPON THE FACE OF THIS WARRANT CERTIFICATE IN EVERY
PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT OR ANY CHANGE WHATSOEVER, AND
MUST BEAR A SIGNATURE GUARANTEED BY AN "ELIGIBLE GUARANTOR INSTITUTION" AS
DEFINED IN RULE 17Ad-15(2) PROMULGATED UNDER THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.
A-6