EXHIBIT 10.40
CEPIII
SECURITIES PURCHASE AGREEMENT
between
INTERLIANT, INC.
and
THE PURCHASERS NAMED IN SCHEDULE I
Dated as of April 16, 2001
TABLE OF CONTENTS
Page
ARTICLE I. THE PURCHASED COMMON SHARES AND THE WARRANTS ..................... 1
Section 1.1 Agreement to Purchase. ....................................... 1
Section 1.2 Warrants not Issued as Compensation. ......................... 1
Section 1.3 Closing. ..................................................... 2
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF THE COMPANY ................... 2
Section 2.1 Organization, Qualifications and Corporate Power. ............ 2
Section 2.2 Authorization of Agreements, Etc. ............................ 2
Section 2.3 Validity. .................................................... 3
Section 2.4 Certain Securities Matters. .................................. 4
Section 2.5 Brokers. ..................................................... 4
Section 2.6 Private Offering. ............................................ 4
Section 2.7 Demand Registration Rights. .................................. 5
ARTICLE III. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS ............... 5
Section 3.1 Accredited Investor. ......................................... 5
Section 3.2 Certain Securities Matters. .................................. 5
Section 3.3 Brokers. ..................................................... 6
ARTICLE IV. CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS AND THE COMPANY . 6
Section 4.1 Conditions to the Obligation of the Purchasers. .............. 6
ARTICLE V. CERTAIN AGREEMENTS ............................................... 8
Section 5.1 Insolvency. .................................................. 8
Section 5.2 Stockholder Approval. ........................................ 9
Section 5.3 Restrictions on Transfers Generally. ......................... 9
Section 5.4 Transferees Subject to Agreement. ............................ 9
Section 5.5 Price Protection. ............................................ 9
Section 5.6 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. ........................................... 10
ARTICLE VI. MISCELLANEOUS ................................................... 10
Section 6.1 Expenses. .................................................... 10
Section 6.2 Survival of Agreements. ...................................... 10
Section 6.3 Brokerage. ................................................... 10
Section 6.4 Parties in Interest. ......................................... 10
Section 6.5 Notices. ..................................................... 10
Section 6.6 Governing Law. ............................................... 11
Section 6.7 Entire Agreement. ............................................ 11
Section 6.8 Counterparts. ................................................ 11
Section 6.9 Amendments. .................................................. 11
Section 6.10 Severability. ................................................ 11
Section 6.11 Titles and Subtitles. ........................................ 11
INDEX TO EXHIBITS
EXHIBIT 1 Purchasers
EXHIBIT 2 Form of Convertible Notes
EXHIBIT 3 Form of Warrant
EXHIBIT 4 Form of Rights Agreement
EXHIBIT 5 Capitalization
THIS SECURITIES PURCHASE AGREEMENT (the "Agreement") is made as of April
16, 2001 between Interliant, Inc., a Delaware corporation (the "Company"), and
the purchasers named in the attached Exhibit 1 (each individually a "Purchaser"
---------
and, collectively, the "Purchasers").
WHEREAS, the Company wishes to issue and sell to the Purchasers up to an
aggregate of 190 Units (with each Unit consisting of $100,000 Principal Amount
of Convertible Notes, in the form annexed hereto as Exhibit 2 (the "Convertible
---------
Notes"), and 27,273 warrants, in the form annexed hereto as Exhibit 3 (the
---------
"Warrants") for the purchase of shares of Common Stock of the Company, par value
$.01 per share (the "Common Stock)); and
WHEREAS, the Purchasers wish to purchase the Units on the terms and subject
to the conditions set forth in this Agreement;
NOW, THEREFORE, in consideration of the promises and mutual covenants
contained in this Agreement, the parties hereby agree as follows:
ARTICLE I.
THE PURCHASED COMMON SHARES AND THE WARRANTS
Section 1.1 Agreement to Purchase. Upon the terms and subject to the
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conditions of this Agreement, each Purchaser hereby agrees, severally and not
jointly, to purchase up to the aggregate number of Units set forth opposite the
name of such Purchaser on Exhibit 1 annexed hereto at a price of $100,000 per
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Unit. The Company shall have the right, at any time or from time to time, prior
to the first to occur of (i) the date that 190 Units (the "Maximum Number of
Units") have been sold or (ii) April 17, 2002 to deliver a notice to each
Purchaser (the "Purchase Notice") setting forth the aggregate number of Units it
then wishes to sell (the "Aggregate Unit Amount") as well as the aggregate
purchase price for such Units (the "Aggregate Price"); provided, however, that
in no event may the Aggregate Unit Amount set forth in any Purchase Notice
exceed the difference between (i) the Maximum Number of Units and (ii) the
aggregate number of Units theretofore sold by the Company. Each Purchaser shall
then be required, on or before the twentieth day following such Purchaser's
receipt of the Purchase Notice, to Purchase such Purchasers Pro Rata Portion (as
such term is hereinafter defined) of the Aggregate Unit Amount for a purchase
price equal to such Purchaser's Pro Rata Portion of the Aggregate Price. For
purposes of this Agreement, the term "Pro Rata Portion" shall mean the
percentage set forth opposite the name of such Purchaser on Exhibit 1 annexed
hereto.
Section 1.2 Warrants not Issued as Compensation. The Company and the
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Purchasers, having adverse interests and as a result of arm's length bargaining,
agree that (i) the Warrants are being issued in consideration of certain
financial accommodations provided by the Purchasers to the Company, (ii) neither
the Purchasers nor any of their affiliates or associates has rendered or agreed
to render any services to
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the Company in connection with this Agreement or the issuance of the Warrants,
and (iii) the Warrants are not being issued to the Purchasers as compensation
for services.
Section 1.3 Closing. The closing of each purchase of Units pursuant to
--------------------
Section 1.1 above shall take place at the office of Proskauer Rose LLP, ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇, or at such other location as may be agreed
upon between the Purchasers and the Company, or via facsimile at such date and
time as may be agreed upon between the Purchasers and the Company (each such
closing being called a "Closing"). At each Closing, the Company shall issue and
deliver to each Purchaser a Convertible Note issued in the name of such
Purchaser representing the aggregate principal amount of the Convertible Notes
being acquired by such Purchaser as part of the Units being purchased by it at
such Closing. The Company shall also issue and deliver to each Purchaser
Warrants issued in the name of such Purchaser, representing the number of
Warrants being acquired by such Purchaser as part of the Units being purchased
by it at such Closing. As payment in full for the Units being purchased by it at
such Closing, and against delivery of the items set forth in the preceding two
sentences, each Purchaser shall deliver to the Company by wire transfer such
Purchaser's Pro Rata Portion of the Aggregate Price.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each Purchaser, subject to Section
5.2 herein, that:
Section 2.1 Organization, Qualifications and Corporate Power. The Company
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is a corporation duly incorporated, validly existing and in good standing under
the laws of the State of Delaware and is duly licensed or qualified to transact
business as a foreign corporation and is in good standing in each jurisdiction
in which the nature of the business transacted by it or the character of the
properties owned or leased by it requires such licensing or qualification,
except where such failure to qualify or be in good standing would not have a
material adverse effect on the Company. The Company has the corporate power and
authority to own and hold its properties and to carry on its business as now
conducted and as proposed to be conducted, to execute, deliver and perform this
Agreement, the Registration Rights Agreement in the form of Exhibit 4 (the
"Rights Agreement"), to issue, sell and deliver the Convertible Notes and the
Warrants and the shares of Common Stock issueable upon exercise of the Warrants
(the "Warrant Shares")and upon conversion of the Convertible Notes (the
"Conversion Shares").
Section 2.2 Authorization of Agreements, Etc.
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(a) The execution and delivery by the Company of this Agreement, the
Convertible Notes, the Warrants and the Rights Agreement, the
performance by the Company of its obligations hereunder and
thereunder, the issuance, sale and delivery
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of the Convertible Notes and the Warrants, and the reservation,
issuance and delivery of the Warrant Shares and the Conversion Shares
(i) have been duly authorized by all requisite corporate action, (ii)
will not violate any provision of law, any order of any court or other
agency of government, the Certificate of Incorporation, as amended
(the "Charter") or the By-laws of the Company, as amended, or any
provision of any indenture, agreement or other instrument to which the
Company or any of its properties or assets is bound, or conflict with,
result in a breach of, constitute (with due notice or lapse of time or
both) a default under, accelerate or terminate any such indenture,
agreement or other instrument, or result in the creation or imposition
of any lien, charge, restriction, claim or encumbrance of any nature
whatsoever upon any of the properties or assets of the Company and
(iii) will not require any notice, consent or waiver under any
material indenture, agreement or other instrument to which the Company
is a party or by which any of its properties or assets are bound,
other than such notice, consent or waiver as shall have previously
been obtained.
(b) When issued in accordance with this Agreement, the Convertible Notes
will be duly authorized and validly issued, and will be free and clear
of all liens, charges, restrictions, preemptive or similar rights,
claims and encumbrances imposed by or through the Company except as
set forth in this Agreement, the Rights Agreement and the Charter.
When issued in accordance with this Agreement, the Warrants will be
duly authorized and validly issued and will be free and clear of all
liens, charges, restrictions, claims and encumbrances imposed by or
through the Company except as set forth in this Agreement, the Rights
Agreement, the Warrants and the Charter. The Warrant Shares and the
Conversion Shares have been duly reserved, and shall remain reserved
out of the authorized but unissued shares of Common Stock, for
issuance upon exercise of the Warrants and upon conversion of the
Convertible Notes and, when so issued, will be duly authorized,
validly issued, fully paid and nonassessable shares of Common Stock
and will be free and clear of all liens, charges, restrictions,
preemptive or similar rights, claims and encumbrances imposed by or
through the Company except as set forth in this Agreement. Neither the
issuance, sale or delivery of the Convertible Notes or the Warrants
nor the issuance or delivery of the Warrant Shares or the Conversion
Shares is subject to any preemptive right of stockholders of the
Company, or to any right of first refusal or other right in favor of
any person, which have not been duly and validly waived.
Section 2.3 Validity. This Agreement, the Convertible Notes, the Rights
---------------------
Agreement and the Warrants constitute the legal, valid and binding obligations
of the Company, enforceable in accordance with their respective terms.
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Section 2.4 Certain Securities Matters.
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(a) Disclosure Materials. The Company has delivered to each Purchaser a
---------------------
copy of its Annual Report on Form 10-K in the form filed April 17,
2001, (the "Form 10-K"). The Form 10-K did not, as of the time of its
filing, include any untrue statement of a material fact or omit to
state a material fact necessary in order to make the statements
therein, in light of the circumstances in which they were made, not
misleading. No event has occurred since the date of such filing which
requires the Company to amend the Form 10-K or to file a current
report on Form 8-K. Each of the Company's financial statements
included in the Form 10-K (including the related notes and schedules)
have been prepared in accordance with GAAP applied on a consistent
basis and as of its respective date and for the period then ended,
fairly presents the consolidated financial position and results of
operations of the Company and its consolidated subsidiaries.
(b) Capitalization. The authorized, issued and outstanding share capital
---------------
of the Company is as set forth in Exhibit 5. Except as set forth on
Exhibit 5, there are no existing option, warrant, call, commitment or
other agreements to which the Company is a party or bound requiring,
and there are no convertible securities of the Company outstanding
which upon conversion would require, the issuance of any additional
shares of Common Stock or other securities convertible into Common
Stock or redemption of any shares of Common Stock.
(c) No Material Adverse Change. Except as set forth in the Company's
---------------------------
Current Report on Form 8-K dated April 4, 2001, since the date of the
financial statements included in the Form 10-K, there has been no
material adverse change in the financial condition or results of
operation of the Company and its consolidated subsidiaries.
Section 2.5 Brokers. The Company has no contract, arrangement or
--------------------
understanding with any broker, finder or similar agent with respect to the
transactions contemplated by this Agreement.
Section 2.6 Private Offering. Assuming the correctness of the
-----------------------------
representations and warranties set forth in Article III hereof, the offer and
sale of the Convertible Notes and the Warrants to the Purchasers hereunder is
exempt from registration under the Securities Act of 1933, as amended (the
"Securities Act"). The Company has complied and will comply with all applicable
federal and state securities laws in connection with the offer, issuance and
sale of the Convertible Notes, the Warrants, the Warrant Shares and the
Conversion Shares.
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Section 2.7 Demand Registration Rights. No Person has Form S-1 demand
---------------------------------------
registration rights with respect to the Company's securities other than (x) Web
Hosting Organization, L.L.C., (y) Softbank Technology Ventures IV, L.P. and (z)
Softbank Technology Advisors Fund, L.P.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
Each Purchaser, severally, and not jointly, represents and warrants to the
Company that:
Section 3.1 Accredited Investor. It is an "accredited investor" within the
--------------------------------
meaning of Rule 501 under the Securities Act and was not organized for the
specific purpose of acquiring the Convertible Notes or Warrants.
Section 3.2 Certain Securities Matters.
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(a) It has sufficient knowledge and experience in investing in companies
similar to the Company in terms of the Company's stage of development
so as to be able to evaluate the risks and merits of its investment in
the Company and it is able financially to bear the risks thereof;
(b) It has had an opportunity to discuss the Company's business,
management and financial affairs with the Company's management;
(c) The Convertible Notes and the Warrants being purchased by it are being
acquired for its own account for the purpose of investment and not
with a view to or for sale in connection with any distribution
thereof, except in accordance with the Securities Act and the rules
and regulations promulgated thereunder and all applicable state
securities or blue sky laws;
(d) It understands that (i) the Convertible Notes, the Warrants, the
Warrant Shares and the Conversion Shares have not been registered
under the Securities Act by reason of their issuance in a transaction
exempt from the registration requirements of the Securities Act and
the Company's reliance on such exemption is predicated upon the
Purchaser's representations set forth in this Article III, (ii) the
Convertible Notes, the Warrants, the Warrant Shares and the
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Conversion Shares must be held indefinitely unless a subsequent
disposition thereof is registered under the Securities Act and all
applicable state securities and "blue sky" laws or unless such
disposition is exempt from such registration, (iii) the Convertible
Notes, the Warrants, the Warrant Shares and the Conversion Shares will
bear a legend to such effect and (iv) the Company will make a notation
on its transfer books to such effect;
(e) If it sells any Convertible Notes or Warrant Shares pursuant to Rule
144A promulgated under the Securities Act, it will take all necessary
steps in order to perfect the exemption from registration provided
thereby, including (i) obtaining on behalf of the Company information
to enable the Company to establish a reasonable belief that the
purchaser is a qualified institutional buyer and (ii) advising such
purchaser that Rule 144A is being relied upon with respect to such
resale;
(f) It acknowledges and agrees that it had reasonable time and opportunity
to ask questions and receive answers concerning the business and
affairs of the Company and to obtain any additional information from
the Company that was necessary for it to evaluate the risks and merits
of an investment in the Company, provided, that such investigation
shall not impair Purchaser's ability to rely on the Company's
representations and warranties contained in this Agreement.
(g) It acknowledges and agrees that the stock certificate representing the
Convertible Notes, the Conversion Shares and the Warrant Shares shall
bear the following legend:
The securities represented by this certificate have not been registered under
the Securities Act of 1933, as amended, or under any applicable state securities
laws and neither the securities nor any interest therein may be sold,
transferred, pledged or otherwise disposed of in the absence of such
registration or an exemption from registration under such Act and the rules and
regulations thereunder and in the absence of registration or an exemption from
registration under any applicable state securities laws.
Section 3.3 Brokers. It has no contract, arrangement or understanding with
--------------------
any broker, finder or similar agent with respect to the transactions
contemplated by this Agreement.
ARTICLE IV.
CONDITIONS TO THE OBLIGATIONS OF THE PURCHASERS AND THE COMPANY
Section 4.1 Conditions to the Obligation of the Purchasers. The obligation
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of each Purchaser to purchase and pay for the Units being purchased by it at any
Closing is, at its option, subject to the satisfaction, on or before the date of
such Closing, of the following conditions:
6
(a) Opinion of Company's Counsel. The Purchaser shall have received from
-----------------------------
the general counsel of the Company, one or more opinions dated as of
the date of such Closing, in form and scope satisfactory to the
Purchaser and its counsel, to the effect that, subject to Section 5.2:
(i) The Company is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation. The Company has
the corporate power and authority to execute, deliver and perform this Agreement
the Convertible Notes and the Rights Agreement, (a) to issue, sell and deliver
the Convertible Notes and the Warrants, (b) upon exercise of the Warrants, to
issue and deliver the Warrant Shares, and (c) upon conversion of the Convertible
Notes, to issue and deliver the Conversion Shares. The Company has the corporate
power and authority to own and hold its properties and to conduct its business
as it is presently being conducted.
(ii) This Agreement, the Warrants the Convertible Notes and the Rights Agreement
have been duly authorized, executed and delivered by the Company and constitute
the legal, valid and binding obligations of the Company, enforceable in
accordance with their respective terms (subject, as to enforcement of remedies,
to the discretion of courts in awarding equitable relief and to applicable
bankruptcy, reorganization, insolvency, moratorium and similar laws affecting
the rights of creditors generally), except that such counsel need not express
any opinion as to the validity or enforceability of the indemnification and
contribution provisions of the Rights Agreement.
(iii) The execution and delivery by the Company of this Agreement, the
Convertible Notes, the Warrants and the Rights Agreement, the performance by the
Company of its obligations hereunder and thereunder, the issuance, sale and
delivery of the Convertible Notes and the Warrants, the issuance and delivery of
the Warrant Shares upon exercise of the Warrants and the issuance and delivery
of the Conversion Shares upon conversion of the Convertible Notes will not (x)
violate any provision of law applicable to the Company, the Charter or By-laws,
as amended, of the Company, (y) to the knowledge of such counsel, violate any
order of any court or other agency of government specifically applicable to the
Company or its property or any agreement of the Company, or conflict with,
result in a breach of or constitute (with due notice or lapse of time or both) a
material default under, accelerate or terminate any such indenture, agreement or
other instrument, or result in the creation or imposition of any lien, charge,
restriction, claim or encumbrance of any nature whatsoever upon any of the
properties or assets of the Company.
(iv) The Convertible Notes, the Warrants, the Warrant Shares and the Conversion
Shares have been duly authorized. The issuance, sale and delivery of the
Convertible Notes and the Warrants and the issuance and delivery of the Warrant
Shares upon the exercise of the Warrants and the issuance and delivery of the
Conversion Shares upon the Conversion of the Convertible Notes have been duly
authorized by all required corporate action; the Convertible Notes have been
validly issued, with no personal liability attaching to the ownership thereof;
the Warrants have been validly issued and the Warrant Shares and the Conversion
Shares have been duly reserved for issuance upon
7
exercise of the Warrants and conversion of the Convertible Notes and, when
issued in accordance with the terms of this Agreement and the Company's Charter,
as amended, will be validly issued, fully paid and nonassessable with no
personal liability attaching to the ownership thereof.
(v) Assuming the accuracy of the representations and warranties of the Purchaser
set forth in Article III, the offer and sale of the Convertible Notes and the
Warrants pursuant to the terms of this Agreement are exempt from the
registration requirements of Section 5 of the Securities Act, as amended, and,
under such securities laws as they presently exist, the issuance of Warrant
Shares upon exercise of the Warrants and the issuance of the Conversion Shares
upon the conversion of the Convertible Notes will also be exempt from such
registration and qualification requirements.
(b) Performance. The Company shall have performed and complied in all
------------
material respects with all agreements contained herein required to be
performed or complied with by it prior to or at such Closing, and an
authorized officer of the Company shall have certified to the
Purchaser in writing to such effect and to the further effect that all
of the conditions set forth in this Article IV have been satisfied.
ARTICLE V.
CERTAIN AGREEMENTS
Section 5.1 Insolvency. Notwithstanding anything in this Agreement to the
-----------------------
Contrary, the obligations of each Purchaser to purchase Units, Convertible Notes
or Warrants pursuant to this Agreement shall immediately cease and be of no
further force or effect upon the occurrence of any of the following events:
(a) An involuntary proceeding shall be commenced or an involuntary
petition shall be filed in a court of competent jurisdiction seeking
(i) relief in respect of the Company or any Significant Subsidiary (as
such term is defined in Regulation SX under the Rules and Regulations
of the Securities and Exchange Commission), or of a substantial part
of the property or assets of the Company or a Significant Subsidiary,
under Title 11 of the United States code, as now constituted or
hereafter amended, or any other Federal, state or foreign bankruptcy,
insolvency, receivership or similar law, or (ii) the appointment of a
receiver, trustee, custodian, sequestrator, conservator or similar
official for the Company or any Significant Subsidiary or for a
substantial part of the property or assets of the Company or any
Significant Subsidiary; provided, however, that if such proceeding
shall be dismissed within 60 calendar days after the date of filing,
then this Agreement shall remain valid from and after the date of the
dismissal; or
8
(b) The Company or any Significant Subsidiary shall (i) voluntarily
commence any proceeding or file any petition seeking relief under
Title 11 of the United States Code, as now constituted or hereafter
amended, or any other Federal, state or foreign bankruptcy,
insolvency, receivership or similar law, (ii) consent to the
institution of, or fail to contest in a timely and appropriate manner,
any proceeding or the filing of any petition described in clause (a),
(iii) apply for or consent to the appointment of a receiver trustee,
custodian, sequestrator, conservator or similar official for the
Company or any subsidiary, (iv) file an answer admitting the material
allegations of a petition filed against it in any such proceeding, or
(v) make a general assignment for the benefit of creditors.
Section 5.2 Stockholder Approval. The Company shall take all action
---------------------------------
necessary in accordance with applicable law, to duly call, give notice of,
convene and hold a meeting of the Company's stockholders for the purposes of
approving the issuance, pursuant to this Agreement, of securities convertible
into or exercisable for 20% or more of the Common Stock of the Company
outstanding on the date of this Agreement (the "20% Issuance"). Notwithstanding
anything herein to the contrary, until the Company's stockholders have approved
the 20% Issuance, the Company shall not issue and sell any Units which, when
aggregated with all Units theretofore issued and sold by the Company, would be
convertible into or exercisable for 20% or more of the Common Stock of the
Company outstanding on the date of this Agreement.
Section 5.3 Restrictions on Transfers Generally. The Purchaser hereby
------------------------------------------------
agrees that it shall not, directly or indirectly, transfer, sell or otherwise
dispose of, any Convertible Notes, the Warrants, the Warrant Shares or the
Conversion Shares other than (i) pursuant to an effective registration statement
under the Securities Act or (ii) pursuant to an exemption from registration
under the Securities Act and any state securities or "blue sky" laws.
Section 5.4 Transferees Subject to Agreement. In the event of any transfer
---------------------------------------------
of any of the Convertible Notes, Warrants, Warrant Shares or the Conversion
Shares by the Purchaser pursuant to this Agreement, the transferee shall hold
such securities so acquired with all the rights conferred by, and subject to all
of the restrictions imposed by, this Agreement applicable to the transferor of
such securities. Any transferee of any such securities shall, as a condition of
the consummation of such transfer, agree to be subject to the terms of this
Agreement.
Section 5.5 Price Protection. The Purchasers will be entitled to
-----------------------------
appropriate adjustments in the event the Company effects one or more private
placements of its securities prior to October 17, 2001 at an effective price
less than the effective price of the private placement effected pursuant to this
Agreement. The provisions of this Section 5.5 shall not apply to any private
placements of the Company's securities (i) to any of the Purchasers, (ii) in
connection with an acquisition of a business by the Company, or (iii) in an
aggregate amount of $2,500,000 or less.
9
Section 5.6 ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇. If it should be determined that a filing is
------------------------------
required under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of 1976, as
amended, and the rules and regulations promulgated thereunder, then the parties
required to file shall promptly do so. All fees and expenses related thereto
shall be paid by the Company.
ARTICLE VI.
MISCELLANEOUS
Section 6.1 Expenses. The Company will pay its own fees and expenses as
---------------------
well as the reasonable fees and expenses of Purchasers in connection with the
transactions contemplated hereby, whether or not such transactions shall be
consummated.
Section 6.2 Survival of Agreements. All covenants, agreements,
-----------------------------------
representations and warranties made herein shall survive the execution and
delivery of this Agreement, the issuance, sale and delivery of the Convertible
Notes and the Warrants and the issuance and delivery of the Warrant Shares and
the Conversion Shares.
Section 6.3 Brokerage. Each party hereto will indemnify and hold harmless
----------------------
the other against and in respect of any claim for brokerage or other commissions
relative to this Agreement or to the transactions contemplated hereby, based in
any way on agreements, arrangements or understandings made or claimed to have
been made by such party with any third party.
Section 6.4 Parties in Interest. Unless otherwise provided to the contrary,
--------------------------------
all representations, covenants and agreements contained in this Agreement by or
on behalf of either of the parties hereto shall bind and inure to the benefit of
the respective successors and assigns of the parties hereto whether so expressed
or not.
Section 6.5 Notices. All notices, requests, consents and other
--------------------
communications hereunder shall be in writing and shall be delivered in person,
mailed by certified or registered mail, return receipt requested, or sent by
telecopier or telex, addressed as follows:
(a) if to the Company, at Two Manhattanville Road, Purchase, New York
10577, Attention: General Counsel.
(b) if to any Purchaser, at the address of such Purchaser set forth in
Exhibit 1, with copies to
(i) ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇, Esq., Proskauer Rose LLP, ▇▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇
▇▇▇▇ ▇▇▇▇▇;
(ii) ▇▇▇▇ ▇▇▇▇▇▇, Esq., Cooley Godward LLP, 5 Palo Alto Square, ▇▇▇▇ ▇▇ ▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇; and
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(iii) Softbank Venture Capital, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention: General Counsel;
(c) or, in any such case, at such other address or addresses as shall have
been furnished in writing by such party to the others.
Each such notice, request, consent or other communication shall be treated as
having been given when delivered if delivered personally, or upon confirmation
of receipt if sent by facsimile, mail or overnight courier.
Section 6.6 Governing Law. This Agreement shall be governed by and
--------------------------
construed in accordance with the laws of the State of New York.
Section 6.7 Entire Agreement. This Agreement, including the Schedules and
-----------------------------
Exhibits hereto, constitutes the sole and entire agreement of the parties with
respect to the subject matter hereof.
Section 6.8 Counterparts. This Agreement may be executed in two or more
-------------------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
Section 6.9 Amendments. This Agreement may not be amended or modified, and
-----------------------
no provisions hereof may be waived, without the written consent of the Company
and each Purchaser.
Section 6.10 Severability. If any provision of this Agreement shall be
--------------------------
declared void or unenforceable by any judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.
Section 6.11 Titles and Subtitles. The titles and subtitles used in this
----------------------------------
Agreement are for convenience only and are not to be considered in construing or
interpreting any term or provision of this Agreement.
11
IN WITNESS WHEREOF, the Company and the Purchaser have executed this
Securities Purchase Agreement as of the day and year first above written.
INTERLIANT, INC.
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇
--------------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇
Title: SR. VICE PRES., FINANCE &
ACCOUNTING
CHARTERHOUSE EQUITY PARTNERS III, L.P.
By: CHUSA EQUITY INVESTORS III, L.P.,
General Partner
By: CHARTERHOUSE EQUITY III, INC.,
General Partner
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇
---------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇
Title: SENIOR VICE PRESIDENT
CHEF NOMINEES LIMITED
By: CHARTERHOUSE GROUP
INTERNATIONAL, INC.,
Attorney-in-Fact
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇
------------------------------------
Name: ▇▇▇ ▇. ▇▇▇▇▇
Title: SENIOR VICE PRESIDENT
SOFTBANK TECHNOLOGY VENTURES VI L.P.
By: SBTV VI LLC, General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
Name:
Title:
12
SOFTBANK U.S. VENTURES VI L.P.
By: SBTV VI LLC, General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
Name:
Title:
SOFTBANK TECHNOLOGY VENTURES
ADVISORS FUND VI L.P.
By: SBTV VI LLC, General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
Name:
Title:
SOFTBANK TECHNOLOGY VENTURES
SIDE FUND VI L.P.
By: SBTV VI LLC, General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
------------------------------------
Name:
Title:
13
EXHIBIT 1
---------
Purchasers
---------------------------------- ------------------------- ------------------------ -----------------------
Aggregate Number of
Name and Address of Purchaser Units to be Purchased Purchase Price Pro Rata Portion
---------------------------------- ------------------------- ------------------------ -----------------------
Charterhouse Equity Partners, 104.93442 $10,493,441.60 55.22864%
III, L.P. c/o Charterhouse
Group International,
Inc., ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇
▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: Executive Vice
President
---------------------------------- ------------------------- ------------------------ -----------------------
Chef Nominees Limited c/o 0.06558 $6,558.40 0.03452%
Charterhouse Group
International, Inc., ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇
▇▇▇▇▇ Attention: Executive Vice
President
---------------------------------- ------------------------- ------------------------ -----------------------
SOFTBANK Technology Ventures VI 39.49100 $3,949,100.00 20.78474%
L.P. c/o Softbank Venture
Capital, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, Attention:
General Counsel
---------------------------------- ------------------------- ------------------------ -----------------------
SOFTBANK U.S. Ventures VI L.P. 42.35550 $4,235,550.00 22.29237%
c/o Softbank Venture Capital,
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: General Counsel
---------------------------------- ------------------------- ------------------------ -----------------------
SOFTBANK Technology Ventures 1.53850 $153,850.00 0.80974%
Advisors Fund VI L.P. c/o
Softbank Venture Capital, ▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇
---------------------------------- ------------------------- ------------------------ -----------------------
---------------------------------- ------------------------- ------------------------ -----------------------
200, ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇, Attention: General Counsel
---------------------------------- ------------------------- ------------------------ -----------------------
SOFTBANK Technology Ventures 1.61500 161,500.00 0.85000%
Side Fund VI L.P. c/o Softbank
Venture Capital, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇,
Attention: General Counsel
---------------------------------- ------------------------- ------------------------ -----------------------
TOTAL 190 $19,000,000.00 100%
---------------------------------- ------------------------- ------------------------ -----------------------
EXHIBIT 2
---------
Form of Convertible Notes
INTERLIANT, INC.
8% CONVERTIBLE SUBORDINATED
NOTE DUE JUNE 30, 2003
[Issuance Date]
No.___
$_____
FOR VALUE RECEIVED, the undersigned, INTERLIANT, INC. (the "Company"),
hereby promises to pay to __________, or its assigns (the "Holder") the
principal sum of _______ DOLLARS on June 30, 2003, and to pay interest (computed
on the basis of a 360-day year of twelve 30-day months) on said principal sum
quarterly on March 31, June 30, September 30 and December 31 of each year (each
an "Interest Payment Date") commencing on the first Interest Payment Date
following the date of issuance hereof (the "Issuance Date"), at the rate of 8%
per annum, until the principal hereof is paid in full. From the Issuance Date
until the Interest Payment Date immediately preceding the date on which the
principal hereof is paid in full (the "Repayment Date"), such interest shall be
paid on each Interest Payment Date by the issuance to the Holder of additional
8% Convertible Subordinated Notes due June 30, 2003 having the same terms and
conditions (other than principal amount and Issuance Date) as this note (such
additional notes, together with this note, are hereinafter individually referred
to as a "Security" and collectively referred to as the "Securities") in the
principal amount of the interest payable on such Interest Payment Date. Interest
for the period from the Interest Payment Date immediately preceding the
Repayment Date through the Repayment Date shall be paid in cash on the Repayment
Date.
This Security shall also have the following additional terms and
conditions:
ARTICLE 1
DEFINITIONS AND OTHER PROVISIONS OF GENERAL APPLICATION
Section 1.01. Definitions. For all purposes of this Security, except as
otherwise expressly provided or unless the context otherwise requires:
(1) the terms defined in this Article have the meanings assigned to
them in this Article and include the plural as well as the singular, and
references to he or him or she or her are intended to be gender neutral;
(2) the word "including" means "including without limitation," and
(3) the words "herein," "hereof" and "hereunder" and other words of
similar import refer to this Security as a whole and not to any particular
Article, Section or other subdivision.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For the purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Bankruptcy Law" has the meaning specified in Section 3.01.
----
"Board of Directors" means the board of directors of the Company, the
executive committee of that board or any committee of that board duly authorized
to act hereunder.
"Board Resolution" means a copy of a resolution certified by the Secretary
or an Assistant Secretary of the Company to have been duly adopted by the Board
of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday and Friday
which is not a day on which banking institutions in the City of New York are
authorized or obligated by law, regulation or executive order to close.
"Commission" means the Securities and Exchange Commission, as from time to
time constituted, created under the Securities Exchange Act of 1934.
"Common Stock" means the common stock of the Company, $0.01 par value, as
it exists on the date of this Security and any shares of any class or classes of
capital stock of the Company resulting from any reclassification or
reclassifications thereof.
"Company" has the meaning set forth in the first paragraph of this Security
until a successor corporation shall have become such pursuant to the applicable
provisions of this Security, and thereafter "Company" shall mean such successor
corporation.
"Company Request" and "Company Order" mean, respectively, a written request
or order signed in the name of the Company by the Chairman of the Board of
Directors, any Co-Chairman of the Board of Directors, the Chief Executive
Officer, the President, the Chief Financial Officer or a Vice President of the
Company and any of the foregoing or any Assistant Vice President, the Treasurer,
an Assistant Treasurer, the Secretary or an Assistant Secretary of the Company,
and delivered to the Trustee.
"corporation" means a corporation, association, partnership, company
(including limited liability company), joint-stock company or business trust.
"Default" means any event that is, or after notice or passage of time or
both would be, an Event of Default.
"Dollar" or "$" means a dollar or other equivalent unit in such coin or
currency of the United States of America as at the time shall be legal tender
for the payment of public and private debts.
2
"Holder" has the meaning set forth in the first paragraph of this Security.
"Indebtedness" means, with respect to any Person, and without duplication,
(a) all indebtedness, obligations and other liabilities, contingent or
otherwise, of such Person for borrowed money (including obligations of such
Person in respect of overdrafts, foreign exchange contracts, currency exchange
or similar agreements, interest rate protection, hedging or similar agreements,
and any loans or advances from banks, whether or not evidenced by notes or
similar instruments) or evidenced by bonds, debentures, notes or similar
instruments (whether or not the recourse of the holder is to the whole of the
assets of such Person or to only a portion thereof), other than any account
payable or other accrued current liability or current obligation, in each case
not constituting indebtedness, obligations or other liabilities for borrowed
money and incurred in the ordinary course of business in connection with the
obtaining of materials or services; (b) all reimbursement obligations and other
liabilities, contingent or otherwise, of such Person with respect to letters of
credit, bank guarantees, bankers' acceptances, security purchase facilities or
similar credit transactions; (c) all obligations and liabilities, contingent or
otherwise, in respect of deferred and unpaid balances on any purchase price of
any property; (d) all obligations and liabilities (contingent or otherwise) in
respect of leases of such Person required, in conformity with generally accepted
accounting principles, to be accounted for as capitalized lease obligations on
the balance sheet of such Person and all obligations and other liabilities,
contingent or otherwise, under any lease or related document, including, without
limitation, the balance deferred and unpaid on any purchase price of any
property and a purchase agreement in connection with the lease of real property
that provides that such Person is contractually obligated to purchase or cause a
third party to purchase the leased property and thereby guarantee a minimum
residual value of the leased property to the lessor and the obligations of such
Person under such lease or related document to purchase or to cause a third
party to purchase such leased property; (e) all obligations of such Person,
contingent or otherwise, with respect to an interest rate or other swap, cap or
collar agreement or other similar instrument or agreement or foreign currency
hedge, exchange, purchase or similar instrument or agreement; (f) all direct or
indirect guarantees or similar agreements by such Person in respect of, and
obligations or liabilities, contingent or otherwise, of such Person to purchase
or otherwise acquire or otherwise assure a creditor against loss in respect of,
indebtedness, obligations or liabilities of another Person of the kind described
in clauses (a) through (e); (g) recourse or repurchase obligations arising in
connection with sales of assets in transactions that are in the nature of
asset-based financings, whether or not such transactions are treated as sales
under generally accepted accounting principles or bankruptcy, tax or other
applicable laws, where such recourse or repurchase obligations arise out of the
failure of such assets to provide the economic benefit to which the purchaser is
entitled under the agreements relating to such transactions; (h) any
indebtedness or other obligations described in clauses (a) through (g) secured
by any mortgage, pledge, lien or other encumbrance existing on property that is
owned or held by such Person, regardless of whether the indebtedness or other
obligation secured thereby shall have been assumed by such Person; and (i) any
and all deferrals, renewals, extensions, refinancing, replacements, restatements
and refundings of, or amendments, modifications or supplements to, or any
indebtedness or obligation issued in exchange for, any indebtedness, obligation
or liability of the kind described in clauses (a) through (h).
"Interest Payment Date" has the meaning set forth in the first paragraph of
this Security.
3
"Issuance Date" has the meaning set forth in the first paragraph of this
Security.
"Maturity" means the date on which the principal of this Security becomes
due and payable as herein provided, whether at the Stated Maturity or upon
conversion or by declaration of acceleration, notice of redemption, notice of
option to elect repayment or otherwise.
"Officers' Certificate" means a certificate signed by the Chairman of the
Board of Directors, any Co-Chairman of the Board of Directors, the President or
a Vice President and by any of the foregoing or the Treasurer, an Assistant
Treasurer, the Secretary or an Assistant Secretary of the Company, and delivered
to the Trustee.
"Opinion of Counsel" means a written opinion of counsel, who may be counsel
for the Company or who may be an employee of or other counsel for the Company
and who shall be reasonably satisfactory to the Holder.
"Permitted Holders" shall mean Web Hosting Organization LLC, Charterhouse
Group International, Inc., SOFTBANK Technology Ventures IV, L.P., WHO Management
LLC and SOFTBANK Technology Advisors Fund, L.P., and their respective controlled
Affiliates (other than their other portfolio companies), including any Person
(other than their other portfolio companies) in which any of the foregoing,
individually or collectively, owns beneficially more than 50% of the total
voting power of the shares, interests, participations or other equivalents of
corporate stock, partnership or limited liability company interests or any other
participation, right or other interest in the nature of an equity interest of
such Person.
"Person" means any individual, corporation, partnership, limited liability
company, joint venture, association, joint-stock company, trust, unincorporated
organization or government or any agency or political subdivision thereof.
"Predecessor Security" means, with respect to any Security, every previous
Security evidencing all or a portion of the same debt as that evidenced by such
Security; and, for the purposes of this definition, any Security delivered in
exchange for or in lieu of a mutilated, destroyed, lost or stolen Security shall
be deemed to evidence the same debt as the mutilated, destroyed, lost or stolen
Security.
"Repayment Date" has the meaning set forth in the first paragraph of this
Security.
"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
"Security" has the meaning set forth in the first paragraph of this
Security.
"Senior Indebtedness" means the principal of, premium, if any, interest
(including all interest accruing subsequent to the commencement of any
bankruptcy or similar proceeding, whether or not a claim for post-petition
interest is allowable as a claim in any such proceeding) and all other amounts
owed in respect of all Indebtedness of the Company, whether outstanding on the
date of this Indenture or thereafter created, incurred, assumed, guaranteed or
in effect guaranteed by the Company (including all deferrals, renewals,
extensions, refinancings, replacements, restatements or
4
refundings of, or amendments, modifications or supplements to, the foregoing);
except for (a) any Indebtedness that is by its terms subordinated to or ranking
equal with the Securities; (b) Indebtedness representing the Securities and the
payment of the principal of (and premium, if any) and interest on and all other
amounts payable under the Securities; and (c) Indebtedness between or among the
Company and any of its Subsidiaries or its Affiliates, including all other debt
securities and guarantees in respect of those debt securities issued to any
trust, or trustees of any trust, partnership or other entity affiliated with the
Company that is, directly or indirectly, a financing vehicle used by the Company
in connection with the issuance by that financing vehicle of preferred
securities or other securities that rank equal with, or junior to, the
Securities.
"Significant Subsidiary" means any Subsidiary that is a "significant
subsidiary" (as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
under the Securities Act) of the Company.
"Stated Maturity" means the date specified in this Security as the fixed
date on which the principal of, or interest on, this Security is due and
payable.
"Subsidiary" means a corporation a majority of the outstanding voting
securities of which is owned, directly or indirectly, by the Company or by one
or more other Subsidiaries of the Company, or by the Company and one or more
other Subsidiaries. For the purposes of this definition, "voting securities"
means shares, interests, participations or other equivalents of corporate stock,
partnership or limited liability company interests or any other participation,
right or other interest in the nature of an equity interest that ordinarily have
voting power for the election of directors, managers or trustees, whether at all
times or only so long as no senior class of equity interest has such voting
power by reason of any contingency.
"United States" means the United States of America (including the states
and the District of Columbia), its territories, its possessions and other areas
subject to its jurisdiction.
Section 1.02. Other Definitions.
Defined in
Term Section
"Average Sale Price" 8.04
----
"Change in Control" 7.05
----
"Change in Control Purchase Notice" 7.03
----
"Closing Price" 8.03
----
"Commencement Date" 8.04
----
"Company Notice" 7.03
----
"Conversion Price" 8.01
----
"Conversion Rate" 8.01
----
"Current Event" 8.04
----
"Custodian" 3.01
----
"Event of Default" Article 3
---------
"Ex-Dividend Time" 8.04
----
"Expiration Time" 8.04
----
"Material Adverse Effect" 5.02
----
5
"Notice of Default" 3.01
----
"Other Event" 8.04
----
"Purchased Shares" 8.04
----
"Redeemable Capital Stock" 7.05
----
"Reference Date" 8.04
----
"Repurchase Date" 7.01
----
"Repurchase Price" 7.01
----
"Restricted Securities" 2.01
----
"Senior Indebtedness Default Notice" 9.03
----
"Time of Determination" 8.04
----
"Trading Day" 8.03
----
Section 1.03. Notice to Holder; Waiver. Where this Security provides for
notice of any event to the Holder by the Company, such notice shall be
sufficiently given (unless otherwise herein expressly provided) if in writing
and mailed, first-class postage prepaid, to the Holder, at its address as it
appears in the Company's records, not later than the latest date, and not
earlier than the earliest date, prescribed for the giving of such notice. Any
notice mailed to the Holder in the manner herein prescribed shall be
conclusively deemed to have been received by such Holder, whether or not such
Holder actually receives such notice.
Section 1.04. Effect of Headings and Table of Contents. The Article and
Section headings herein and the Table of Contents are for convenience only and
shall not affect the construction hereof.
Section 1.05. Successors and Assigns. All covenants and agreements in this
Security by the Company shall bind its successors and assigns, whether so
expressed or not.
Section 1.06. Separability Clause. In case any provision in this Security
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
Section 1.07. Benefits of Security. Nothing in this Security, express or
implied, shall give to any Person, other than the parties hereto, and their
successors hereunder and the Holder any benefit or any legal or equitable right,
remedy or claim under this Indenture.
Section 1.08. Governing Law This Security shall be governed by and
construed in accordance with the law of the State of New York without regard to
conflict of laws principles.
Section 1.09. Legal Holidays. In any case where any Interest Payment Date,
Repurchase Date, Stated Maturity or Maturity of this Security or the last date
on which the Holder has the right to convert this Security shall not be a
Business Day, then (notwithstanding any other provision of this Security),
payment of Repurchase Price, interest or principal (and premium, if any), or
conversion of this Security, need not be made on such date, but may be made on
the next succeeding Business Day with the same force and effect as if made on
the Interest Payment Date, Repurchase Date or at the Stated Maturity or Maturity
or on such last day for conversion; provided that no interest shall accrue on
the amount so payable for the period from and after such Interest
6
Payment Date, Repurchase Date, Stated Maturity or Maturity or on such last day
for conversion, as the case may be.
Section 1.10. Personal Immunity from Liability for Incorporators,
Stockholders, Etc. No recourse shall be had for the payment of the principal of
or premium, if any, or interest, if any, on this Security, or for any claim
based thereon, or otherwise in respect of this Security, against any
incorporator, or against any past, present or future stockholder, director or
officer, as such, of the Company or of any successor corporation, whether by
virtue of any constitution, statute or rule of law, or by the enforcement of any
assessment or penalty or otherwise, all such liability being expressly waived
and released as a condition of, and as consideration for, the execution of this
Security.
ARTICLE 2
THE SECURITIES
Section 2.01. Securities Act.
(a) So long as this Security bears or is required under this Section
2.01(a) to bear the legend set forth in this Section 2.01(a) (together with
------- -------
any Common Stock issued upon conversion or exchange of this Security (including
any exchange constituting payment of the Repurchase Price for Securities
pursuant to Article 7) and required to bear the legend set forth in Section
2.01(b), collectively, the "Restricted Securities") shall be subject to the
-------
restrictions on transfer set forth in this Section 2.01(a) (including one of
-------
the legends set forth below), unless such restrictions on transfer shall be
waived by written consent of the Company, and the holder of each such Restricted
Security, by such holder's acceptance thereof, agrees to be bound by all such
restrictions on transfer. As used in Sections 2.01(a) and 2.01(b), the term
------- -------
"transfer" encompasses any sale, pledge, transfer or other disposition
whatsoever of any Restricted Security. Upon the effectiveness of a filed
registration statement covering this Security, the Company shall deliver an
Officers' Certificate to the Holder of the effectiveness of such registration
and instructing the Holder regarding the issuance and delivery of unlegended
Securities.
Until two years after the original issuance date of this Security, any
certificate evidencing this Security (and all securities issued in exchange
therefor or substitution thereof, other than Common Stock, if any, issued upon
conversion thereof or upon payment of the Repurchase Price therefor pursuant to
Article 7, which shall bear the legend set forth in Section 2.01(b), if
-------
applicable) shall bear a legend in substantially the following form (unless such
Security has been transferred pursuant to a registration statement that has been
declared effective under the Securities Act (and which continues to be effective
at the time of such transfer), pursuant to the exemption from registration
provided by Rule 144 under the Securities Act, or unless otherwise agreed by the
Company in writing, with notice thereof to the Holder in the form of an
Officers' Certificate):
THE SECURITY EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS AND
MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS
ACQUISITION HEREOF, THE HOLDER; (1) AGREES THAT IT WILL NOT WITHIN TWO YEARS
AFTER THE ORIGINAL ISSUANCE OF
7
THE SECURITY EVIDENCED HEREBY RESELL OR OTHERWISE TRANSFER THE SECURITY
EVIDENCED HEREBY OR THE COMMON STOCK ISSUABLE UPON CONVERSION OR EXCHANGE OF
SUCH SECURITY EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) PURSUANT
TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT (IF AVAILABLE) OR (C)
PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED EFFECTIVE UNDER THE
SECURITIES ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH
TRANSFER); AND (2) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE
SECURITY EVIDENCED HEREBY IS TRANSFERRED (OTHER THAN A TRANSFER PURSUANT TO
CLAUSE 2(C) ABOVE). THIS LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER
OF THE SECURITY EVIDENCED HEREBY PURSUANT TO CLAUSE 2(B) OR 2(C) ABOVE OR THE
EXPIRATION OF TWO YEARS FROM THE ORIGINAL ISSUANCE OF THE SECURITY EVIDENCED
HEREBY.
At such time as such restrictions on transfer shall have expired in
accordance with their terms, this Security may be exchanged for a new Security,
of like tenor and aggregate principal amount, which shall not bear the
restrictive legend required by this Section 2.01(a).
-------
(b) Until two years after the original issuance date of this Security,
any stock certificate representing Common Stock issued upon conversion or
exchange of such Security (including any exchange constituting payment of the
Repurchase Price for any Securities pursuant to Article 11) of such Security
shall bear a legend in substantially the following form (unless such Common
Stock has been sold pursuant to the exemption from registration under the
Securities Act or pursuant to a registration statement that has been declared
effective under the Securities Act, and which continues to be effective at the
time of such transfer, or such Common Stock has been issued upon conversion or
exchange of Securities that have been transferred pursuant to a registration
statement that has been declared effective under the Securities Act, or unless
otherwise agreed by the Company with written notice thereof to the Holder (in
the form of an Officers' Certificate) and any transfer agent for the Common
Stock):
THE COMMON STOCK EVIDENCED HEREBY HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE
SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. THE HOLDER HEREOF AGREES THAT UNTIL THE EXPIRATION OF TWO
YEARS AFTER THE ORIGINAL ISSUANCE OF THE SECURITY UPON THE CONVERSION OR
EXCHANGE OF WHICH THE COMMON STOCK EVIDENCED HEREBY WAS ISSUED, (1) IT WILL NOT
RESELL OR OTHERWISE TRANSFER THE COMMON STOCK EVIDENCED HEREBY EXCEPT (A) TO THE
COMPANY OR ANY SUBSIDIARY THEREOF, (B) PURSUANT TO THE EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT (IF AVAILABLE) OR (C) PURSUANT TO A
REGISTRATION STATEMENT WHICH HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES
ACT (AND WHICH CONTINUES TO BE EFFECTIVE AT THE TIME OF SUCH TRANSFER). THIS
LEGEND WILL BE REMOVED UPON THE EARLIER OF THE TRANSFER OF THE COMMON STOCK
EVIDENCED HEREBY PURSUANT TO CLAUSE 1(B) OR 1(C) ABOVE OR THE EXPIRATION OF TWO
YEARS FROM THE ORIGINAL
8
ISSUANCE OF THE SECURITY UPON THE CONVERSION OR EXCHANGE OF WHICH THE COMMON
STOCK EVIDENCED HEREBY WAS ISSUED.
Any such Common Stock as to which such restrictions on transfer shall have
expired in accordance with their terms may, upon surrender of the certificates
representing such shares of Common Stock for exchange in accordance with the
procedures of the transfer agent for the Common Stock, be exchanged for a new
certificate or certificates for a like aggregate number of shares of Common
Stock, which shall not bear the restrictive legend required by this Section
2.01(b).
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(c) This Security or Common Stock issued upon the conversion or
exchange of this Security that, prior to the expiration of the holding period
applicable to sales thereof under Rule 144(k) under the Securities Act (or any
successor provision), is purchased or owned by the Company or any Affiliate
thereof may not be resold by the Company or such Affiliate unless registered
under the Securities Act or resold pursuant to an exemption from the
registration requirements of the Securities Act in a transaction that results in
such Securities or Common Stock, as the case may be, no longer being "restricted
securities" (as defined under Rule 144).
(d) Notwithstanding any provision of Section 2.01 to the contrary, in
----
the event Rule 144(k) as promulgated under the Securities Act (or any successor
rule) is amended to change the two-year period under Rule 144(k) (or the
corresponding period under any successor rule), from and after the effective
date of such amendment or change, (i) each reference in Section 2.01(a) to "two
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years" and in the restrictive legend set forth in such paragraph to "TWO YEARS"
shall be deemed for all purposes hereof to be references to such changed period,
(ii) each reference in Section 2.01(b) to "two years" and in the restrictive
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legend set forth in such paragraph to "TWO YEARS" shall be deemed for all
purposes hereof to be references to such changed period and (iii) all
corresponding references in this Security and the restrictive legends thereon
shall be deemed for all purposes hereof to be references to such changed period,
provided that such changes shall not become effective if they are otherwise
prohibited by, or would otherwise cause a violation of, the then-applicable
federal securities laws. This Section 2.01(e) shall apply to successive
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amendments to Rule 144(k) (or any successor rule) changing the holding
period thereunder.
ARTICLE 3
REMEDIES
Section 3.01. Events of Default. "Event of Default," wherever used herein
with respect to this Security, means any one of the following events (whatever
the reason for such Event of Default and whether or not it shall be occasioned
by the provisions of Article 9 or be voluntary or involuntary or be effected by
-
operation of law or pursuant to any judgment, decree or order of any court or
any order, rule or regulation of any administrative or governmental body):
(a) default in the payment of any interest upon this Security, when
such interest becomes due and payable, and continuance of such default for
a period of 30 days (whether or not such payment is prohibited by the
provisions of Article 9); or
-
9
(b) default in the payment of the principal of (or premium, if any,
on) this Security when it becomes due and payable at its Maturity (whether or
not such payment is prohibited by the provisions of Article 9); or
-
(c) default in the payment of the Repurchase Price in respect of this
Security on the Repurchase Date therefor (whether or not such payment is
prohibited by the provisions of Article 9 and whether or not a Person other than
the Company has offered to repurchase this Security as contemplated by Section
7.03(h)); or
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(d) failure by the Company to give the Company Notice in accordance
with Section 7.03(a) to the Holder, or failure by the Company to comply with its
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covenants set forth in Section 7.03(b); or
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(e) failure by the Company to deliver shares of Common Stock (together
with cash in lieu of fractional shares) when such Common Stock (or cash in lieu
of fractional shares) is required to be delivered following conversion of a
Security and continuation of such default for a period of 10 days; or
(f) default in the performance, or breach, of any covenant or warranty
of the Company in this Security (other than a covenant or warranty a default in
whose performance or whose breach is elsewhere in this Section specifically
dealt with) and continuance of such default or breach for a period of 60 days
after there has been given, by registered or certified mail, to the Company by
the Holder a written notice specifying such default or breach and requiring it
to be remedied and stating that such notice is a "Notice of Default" hereunder;
or
(g) a default under any bonds, debentures, notes or other evidences of
indebtedness for money borrowed of the Company or under any mortgages,
indentures or instruments under which there may be issued or by which there may
be secured or evidenced any indebtedness for money borrowed by the Company,
whether such indebtedness now exists or shall hereafter be created, which
indebtedness, individually or in the aggregate, has a principal amount
outstanding in excess of $10,000,000, which default shall have resulted in such
indebtedness becoming or being declared due and payable prior to the date on
which it would otherwise have become due and payable, without such indebtedness
having been discharged, or such acceleration having been rescinded or annulled,
within a period of 60 days after there shall have been given, by registered or
certified mail, to the Company by the Holder a written notice specifying such
default and requiring the Company to cause such indebtedness to be discharged or
cause such acceleration to be rescinded or annulled and stating that such notice
is a "Notice of Default" hereunder (unless such default has been cured or
waived); or
(h) the Company or any Significant Subsidiary pursuant to or within
the meaning of any Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in
an involuntary case,
10
(iii) consents to the appointment of a Custodian of it or for all
or substantially all of its property, or
(iv) makes a general assignment for the benefit of its creditors;
or
(i) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(i) is for relief against the Company or any Significant
Subsidiary in an involuntary case,
(ii) appoints a Custodian of the Company or any Significant
Subsidiary or for all or substantially all of the property of any of
them, or
(iii) orders the winding up or liquidation of the Company or any
Significant Subsidiary,
and the order or decree remains unstayed and in effect for 60 days.
As used in this Section 3.01 only, the term "Bankruptcy Law" means title
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11, U.S. Code or any similar Federal or State law for the relief of debtors and
the term "Custodian" means any receiver, trustee, assignee, liquidator or other
similar official under any Bankruptcy Law.
SECTION 3.02. Acceleration of Maturity. If an Event of Default with respect
to this Security occurs and is continuing, then and in every such case the
Holder may declare the principal of this Security and accrued interest thereon
to the date of such declaration, to be due and payable immediately, by a notice
in writing to the Company and upon any such declaration such principal shall
become immediately due and payable. If an Event of Default specified in Section
3.01(h) or 3.01(i) occurs, the principal of, and accrued interest on, all the
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Securities shall automatically, and without any declaration or other action on
the part of the Trustee or any Holder, become immediately due and payable.
SECTION 3.03. Collection of Indebtedness and Suits for Enforcement. The
Company covenants that if:
(a) default is made in the payment of any installment of interest on
this Security when such interest becomes due and payable and such default
continues for a period of 30 days, or
(b) default is made in the payment of the principal of (or premium, if
any, on) this Security at its Maturity,
then the Company shall, upon demand of the Holder, pay to the Holder the
whole amount then due and payable on such Security for principal (and premium,
if any) and interest, with interest upon any overdue principal (and premium, if
any) and, to the extent that payment of such interest shall be legally
enforceable, upon any overdue installments of interest, at the rate or rates
borne by or provided for in such Security, and, in addition thereto, such
further amount as shall be sufficient
11
to cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Holder, its agents and
counsel.
If the Company fails to pay such amounts forthwith upon such demand, the
Holder may institute a judicial proceeding for the collection of the sums so due
and unpaid, and may prosecute such proceeding to judgment or final decree, and
may enforce the same against the Company or any other obligor upon such Security
and collect the monies adjudged or decreed to be payable in the manner provided
by law out of the property of the Company or any other such obligor upon such
Security, wherever situated.
If an Event of Default occurs and is continuing, the Holder may in its
discretion proceed to protect and enforce its rights by such appropriate
judicial proceedings as the Holder shall deem most effectual to protect and
enforce any such rights, whether for the specific enforcement of any covenant or
agreement in this Security or in aid of the exercise of any power granted
herein, or to enforce any other proper remedy.
SECTION 3.04. Intentionally Omitted.
SECTION 3.05. Unconditional Right of Holder to Receive Principal, Premium,
If Any, and Interest. Notwithstanding any other provision in this Security, the
Holder shall have the right, which is absolute and unconditional, to receive
payment of the principal of, and premium, if any, the Repurchase Price pursuant
to Article 7 and interest on this Security on the respective due dates expressed
in this Security (or, in the case of repurchase, on the Repurchase Date, as the
case may be) and to convert this Security in accordance with its provisions and
to institute suit for the enforcement of any such payment and right to convert,
and such rights shall not be impaired or adversely affected without the consent
of the Holder.
SECTION 3.06. Restoration of Rights and Remedies. If the Holder has
instituted any proceeding to enforce any right or remedy under this Security and
such proceeding has been discontinued or abandoned for any reason, or has been
determined adversely to the Holder, then and in every such case, the Company and
the Holder shall, subject to any determination in such proceeding, be restored
severally and respectively to their former positions hereunder and thereafter
all rights and remedies of the Holder shall continue as though no such
proceeding had been instituted.
SECTION 3.07. Rights and Remedies Cumulative. No right or remedy herein
conferred upon or reserved to the Holder is intended to be exclusive of any
other right or remedy, and every right and remedy shall, to the extent permitted
by law, be cumulative and in addition to every other right and remedy given
hereunder or now or hereafter existing at law or in equity or otherwise. The
assertion or employment of any right or remedy hereunder, or otherwise, shall
not prevent the concurrent assertion or employment of any other appropriate
right or remedy.
SECTION 3.08. Delay or Omission Not Waiver. No delay or omission of the
Holder to exercise any right or remedy accruing upon any Event of Default shall
impair any such right or remedy or constitute a waiver of any such Event of
Default or an acquiescence therein. Every right
12
and remedy given by this Article or by law to the Holder may be exercised from
time to time, and as often as may be deemed expedient, by the Holder.
SECTION 3.09. Waiver of Usury, Stay or Extension Laws. The Company
covenants (to the extent that it may lawfully do so) that it shall not at any
time insist upon, or plead, or in any manner whatsoever claim or take the
benefit or advantage of, any usury, stay or extension law wherever enacted, now
or at any time hereafter in force, which may affect the covenants or the
performance of this Security; and the Company (to the extent that it may
lawfully do so) hereby expressly waives all benefit or advantage of any such
law, and covenants that it shall not hinder, delay or impede the execution of
any power herein granted to the Holder, but will suffer and permit the execution
of every such power as though no such law had been enacted.
SECTION 3.10. Undertaking for Costs. The Holder of this Security by his
acceptance thereof shall be deemed to have agreed, that any court may in its
discretion require, in any suit for the enforcement of any right or remedy under
this Security, the filing by any party litigant in such suit of an undertaking
to pay the costs of such suit, and that such court may in its discretion assess
reasonable costs, including reasonable attorneys' fees, against any party
litigant in such suit having due regard to the merits and good faith of the
claims or defenses made by such party litigant; but the provisions of this
Section shall not apply to any suit instituted by the Company or to any suit
instituted by the Holder for the enforcement of the payment of the principal of
(or premium, if any) or interest on this Security on or after the Stated
Maturities expressed in this Security (or, in the case of repurchase, on or
after the Repurchase Date), or the right to convert this Security in accordance
with Article 8.
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ARTICLE 4
CONSOLIDATION, MERGER, SALE, LEASE OR CONVEYANCE
SECTION 4.01. Consolidations and Mergers of Company and Sales, Leases and
Conveyances Permitted Subject to Certain Conditions. The Company may consolidate
with, or sell, lease, transfer, convey or otherwise dispose of all or
substantially all of its assets to, or merge with or into any other Person,
provided however, that in any such case, (1) either the Company shall be the
continuing corporation, or the Person (if other than the Company) formed by such
consolidation or into which the Company is merged or the Person (if other than a
Subsidiary of the Company) that acquires or leases the Company's assets
substantially as an entirety is a corporation organized and existing under the
laws of any United States jurisdiction and expressly assumes the due and
punctual payment of the principal of (and premium, if any) and any interest
payable pursuant to this Security, and the due and punctual performance and
observance of all of the covenants and conditions of this Security to be
performed by the Company and shall have provided for conversion rights, if
applicable, in accordance with the provisions of Article 8 hereof, and (2)
immediately after giving effect to such transaction, no Default or Event of
Default, shall have occurred and be continuing. For purposes of the foregoing,
the transfer (by lease, assignment, sale or otherwise) of the properties and
assets of one or more Subsidiaries (other than to the Company or another
Subsidiary), which, if such assets were owned by the Company, would constitute
all or substantially all of the properties and assets of the Company, shall be
deemed to be the transfer of all or substantially all of the properties and
assets of the Company.
13
SECTION 4.02. Rights and Duties of Successor Corporation. In case of any
such consolidation, merger, sale, lease, conveyance or other disposition and
upon any such assumption by the successor Person, such successor Person shall
succeed to and be substituted for the Company, with the same effect as if it had
been named herein as the party of the first part, and the predecessor
corporation, except in the event of a lease, shall be relieved of any further
obligation under this Security.
In case of any such consolidation, merger, sale, lease, conveyance or other
disposition, such changes in phraseology and form (but not in substance) may be
made in this Security thereafter to be issued as may be appropriate.
SECTION 4.03. Officers' Certificate and Opinion of Counsel. Any
consolidation, merger, sale, lease, transfer, conveyance or other disposition
permitted under Section 4.01 is also subject to the condition that the Holder
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receive an Officers' Certificate and an Opinion of Counsel to the effect that
any such consolidation, merger, sale, lease, transfer, conveyance or other
disposition complies with the provisions of this Article.
ARTICLE 5
COVENANTS
SECTION 5.01. Payment of Principal, Premium, If Any, and Interest. The
Company covenants and agrees for the benefit of the Holder that it shall duly
and punctually pay the principal of (and premium, if any), interest on, and the
Repurchase Price with respect to this Security in accordance with the terms of
this Security. The conversion of this Security pursuant to Article 8 hereof and
-
payment of the Repurchase Price by delivery of shares of Common Stock in
accordance with Article 7, together with the making of any cash payments
-
required to be made in accordance with the terms of this Security, shall satisfy
the Company's obligations under this Section 5.01 with respect to this Security.
----
SECTION 5.02. Existence. Subject to Article 4, the Company shall do or
-
cause to be done all things necessary to preserve and keep in full force and
effect the corporate existence of the Company and its Subsidiaries, and their
respective rights (charter and statutory) and franchises, except to the extent
that the Board of Directors shall determine that the failure to do so would not
have a material adverse effect on the business, assets, financial condition or
results of operation of the Company (a "Material Adverse Effect"); provided,
however, that the Company shall not be required to preserve any right or
franchise if the Board of Directors shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
that the loss thereof is not disadvantageous in any material respect to the
Holder.
SECTION 5.03. Payment of Taxes and Other Claims. The Company shall pay or
discharge, or cause to be paid or discharged, before the same shall become
delinquent, (1) all taxes, assessments and governmental charges levied or
imposed upon it or any Subsidiary or upon the income, profits or property of the
Company or any Subsidiary, and (2) all lawful claims for labor, materials and
supplies which, if unpaid, might by law become a lien upon the property of the
Company or any Subsidiary and have a Material Adverse Effect; provided, however,
that the Company shall not be required to pay or discharge or cause to be paid
or discharged any such tax,
14
assessment, charge or claim, the amount, applicability or validity of which is
being contested in good faith by appropriate proceedings.
ARTICLE 6
PROHIBITION ON REDEMPTION OF SECURITIES
SECTION 6.01. No Redemption by the Company. This Security may not be
redeemed by the Company.
ARTICLE 7
REPURCHASE AT OPTION OF HOLDERS UPON CHANGE IN CONTROL
SECTION 7.01. Right to Require Repurchase. In the event that a Change in
Control shall occur, the Holder shall have the right, at the Holder's option, to
require the Company to repurchase (subject to the provisions of Section 9.03)
----
the Security, or any portion of the principal amount thereof, on the date (the
"Repurchase Date") that is 45 Business Days after the date of the occurrence of
a Change in Control at a purchase price equal to 100% of the principal amount
plus interest accrued and unpaid to the Repurchase Date (the "Repurchase
Price"). At the option of the Company, the Repurchase Price may be paid in cash
or, subject to the fulfillment by the Company of the conditions set forth in
Section 7.02, by delivery of that number of shares of Common Stock equal to the
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quotient of (i) the Repurchase Price divided by (ii) 95% of the average of the
Closing Prices of the Common Stock for the five consecutive Trading Days ending
on and including the third Trading Day immediately preceding the date of the
occurrence of the Change in Control.
SECTION 7.02. Conditions to the Company's Election to Pay the Repurchase
Price in Common Stock.
The Company may elect to pay the Repurchase Price by delivery of shares of
Common Stock pursuant to Section 7.01 if and only if the following conditions
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have been satisfied:
(a) The shares of Common Stock delivered in payment of the Repurchase
Price are listed for trading on a U.S. national securities exchange or approved
for trading in the NASDAQ National Market; and
(b) All shares of Common Stock delivered in payment of the Repurchase
Price are issued out of the Company's authorized but unissued Common Stock and
shall, upon issue, be duly and validly issued and fully paid and non-assessable
and free of any preemptive rights.
If all of the conditions set forth in this Section 7.02 are not satisfied
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in accordance with the terms hereof, the Repurchase Price shall be paid by the
Company only in cash.
SECTION 7.03. Notices; Method of Exercising Repurchase Right, Etc.
(a) On or before the date that is 30 Business Days after the
occurrence of a Change in Control, the Company shall give notice to the Holder
(the "Company Notice") of the occurrence of the Change in Control and of the
repurchase right set forth herein arising as a result thereof.
15
Each Company Notice shall state:
(i) the date of such Change in Control and, briefly, the events
causing such Change in Control;
(ii) the date by which the Change in Control Purchase Notice (as
defined below) must be delivered;
(iii) the Repurchase Date;
(iv) the Repurchase Price, and whether the Repurchase Price shall be
paid by the Company in cash or by delivery of shares of Common Stock; and
(v) a description of the procedure that a Holder must follow to
exercise a repurchase right.
(b) If any Senior Indebtedness is outstanding at the time of the occurrence
of a Change in Control, and such Senior Indebtedness prohibits by its terms the
Company's repurchase of its Securities upon the occurrence of a Change in
Control, the Company shall prior to giving the Company Notice either:
(i) repay in full all obligations and terminate all commitments under
or in respect of all such Senior Indebtedness or offer to repay in full all
obligations and terminate all commitments under or in respect of all such
Senior Indebtedness and repay such Senior Indebtedness owed to each holder
thereof who has accepted such offer; or
(ii) obtain the requisite consents under all such Senior Indebtedness
to permit the Company to repurchase the Securities in accordance herewith.
(c) To exercise a repurchase right, the Holder must deliver to the Company,
prior to the close of business on or before the Repurchase Date, (i) written
notice of the Holder's exercise of such right (the "Change in Control Purchase
Notice"), which notice shall set forth (A) the name of the Holder, (B) the
certificate numbers of the Security with respect to which the repurchase right
is being exercised, (C) the principal amount of the Security to be repurchased
(and, if the Security is to be repurchased in part, the portion of the principal
amount thereof to be repurchased) and (D) a statement that an election to
exercise the repurchase right is being made thereby pursuant to the applicable
provisions of the Security and (ii) surrender the Security subject to the Change
in Control Purchase Notice.
(d) If the Security (or portion thereof) surrendered for repurchase shall
not have been repurchased on the Business Day following the Repurchase Date, the
Repurchase Price in respect of the Security shall, until paid, bear interest
from the Business Day following the Repurchase Date at the rate borne by the
Security and such Security shall remain convertible into Common Stock until the
Repurchase Price and any such accrued interest shall have been paid or duly
provided for.
16
(e) Any issuance of shares of Common Stock in respect of the Repurchase
Price shall be deemed to have been effected immediately prior to the close of
business on the Repurchase Date and the person or persons in whose name or names
any certificate or certificates for shares of Common Stock shall be issuable
upon such repurchase shall be deemed to have become on the Repurchase Date the
holder or holders of record of the shares represented thereby.
(f) No fractional shares of Common Stock or scrip representing fractional
shares shall be issued upon repurchase of the Security. If any fractional share
of stock otherwise would be issuable upon repurchase of the Security, the
Company shall make an adjustment therefor by paying to the Holder thereof an
amount of cash calculated at the price per share at which the Common Stock is
valued for purposes of Section 7.01.
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(g) The issue of stock certificates on repurchase of the Security shall be
made without charge to the Holder for any tax in respect of the issue thereof.
The Company shall not, however, be required to pay any tax that may be payable
in respect of any transfer involved in the issue and delivery of stock in any
name other than that of the Holder, and the Company shall not be required to
issue or deliver any such stock certificate unless and until the person or
persons requesting the issue 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.
(h) Notwithstanding anything to the contrary in this Section 7.03, the
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Company shall not be required to give the Company Notice following the
occurrence of a Change in Control if, in the manner, at the time and otherwise
in compliance with the requirements set forth herein regarding the Company's
obligation to offer to repurchase the Security following the occurrence of a
Change in Control, (A) another Person makes an offer to repurchase the Security
by giving a notice containing the information set forth in clauses (i) through
(v) of Section 7.03(a) to the Holder, (B) such Person repurchases the Security,
and (C) such Person makes all payments with respect thereto. This Section
7.03(h) shall not relieve the Company of any of its obligations under this
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Security; provided, however, that if another Person makes the offer to
repurchase this Security as set forth in this Section, the Company shall not be
obligated to give the Company Notice.
SECTION 7.04. Certain Definitions. For purposes of this Article 7:
-
(a) the terms "beneficial owner" and "beneficial ownership" shall be
determined in accordance with Rules 13d-3 and 13d-5 promulgated by the
Commission pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), except that a Person shall be deemed to have "beneficial
ownership" of all securities that such Person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time; and
(b) the term "Person" shall include any syndicate or group that would
be deemed to be a "person" under Section 13(d)(3) or Section 14(d)(2) of the
Exchange Act.
SECTION 7.05. Change in Control. A "Change in Control" shall be deemed to
have occurred at such time after the original issuance of this Security as:
17
(a) any Person acquires the beneficial ownership, directly or indirectly,
through a purchase, merger or other acquisition transaction, of more than 50% of
the total voting power of the total outstanding voting stock of the Company
other than an acquisition by the Company, any of its Subsidiaries, any of its
employee benefit plans or one or more Permitted Holders;
(b) the Company shall consolidate with, or merge with or into, another
Person or convey, transfer, lease or otherwise dispose of all or substantially
all of its assets to any Person, or any Person consolidates with or merges with
or into the Company, in any such event pursuant to a transaction in which the
Company's outstanding voting stock is converted into or exchanged for cash,
securities or other property, other than any such transactions where:
(i) the Company's voting stock is not converted or exchanged at all
(except to the extent necessary to reflect a change in the Company's
jurisdiction of incorporation) or is converted into or exchanged for voting
stock (other than Redeemable Capital Stock) of the surviving or transferee
corporation, and
(ii) immediately after such transaction, no Person, other than one or
more Permitted Holders or one or more Persons who were the beneficial
owner, directly or indirectly, of more than 50% of the total voting power
of all of the Company's voting stock immediately before such transaction,
is the beneficial owner, directly or indirectly, of more than 50% of the
total outstanding voting stock of the surviving or transferee corporation;
(c) during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors (but not a committee
thereof), together with (i) any new directors whose election to such Board of
Directors (but not a committee thereof), or whose nomination for election by the
Company's stockholders, was approved by a vote of a majority of the directors
then still in office who were either directors at the beginning of such period
or whose election or nomination for election was previously so approved and (ii)
any representative of a Permitted Holder, cease for any reason to constitute a
majority of the Board of Directors (but not a committee thereof) then in office;
(d) a special resolution is passed by the Company's stockholders approving
a plan of liquidation or dissolution of the Company (other than in a transaction
that complies with the provisions described in Article 4), and no additional
-
approvals of the Company's stockholders are required under applicable law to
cause such a liquidation or dissolution.
"Redeemable Capital Stock" means any class or series of capital stock that,
either by its terms, by the terms of any security into which it is convertible
or exchangeable or by contract or otherwise, is, or upon the happening of an
event or passage of time would be, required to be redeemed prior to the Stated
Maturity of the Security or is redeemable at the option of the holder thereof at
any time prior to such Stated Maturity, or is convertible into or exchangeable
for debt securities at any time prior to such Stated Maturity; provided,
however, that Redeemable Capital Stock shall not include any Common Stock which
the holder may cause the Company to repurchase or redeem upon termination of
such holder's employment.
18
ARTICLE 8
CONVERSION
SECTION 8.01. Conversion Privilege, Conversion Rate and Conversion Price.
Subject to and upon compliance with the provisions of this Article 8, at the
option of the Holder thereof, this Security or any portion of the principal
amount hereof that is $1,000 or an integral multiple of $1,000 may be converted
at any time through the close of business on June 30, 2003 into that number of
fully paid and non-assessable shares of Common Stock obtained by multiplying the
Conversion Rate then in effect by each $1,000 principal amount of Securities
surrendered for conversion. If the Holder has delivered a Change in Control
Purchase Notice (as defined in Article 7 hereof) exercising the option of such
-
Holder to require the Company to purchase such Security, this Security may be
converted if such notice and the Security is withdrawn by a written notice of
withdrawal delivered by the Holder to the Company prior to the close of business
on the Repurchase Date.
The price at which shares of Common Stock shall be delivered upon
conversion (herein called the "Conversion Price") shall be initially $1.10 per
share of Common Stock, which is equal to a conversion rate of 909.0909 shares
per $1,000 principal amount of this Security (the "Conversion Rate"). The
Conversion Rate shall be adjusted in certain instances as provided in Section
8.04 and, in every instance in which an adjustment is made to the Conversion
----
Rate, a corresponding adjustment shall be made to the Conversion Price. The
adjusted Conversion Price shall equal at any time 1,000 divided by the then
adjusted Conversion Rate.
SECTION 8.02. Exercise of Conversion Privilege. In order to exercise the
conversion privilege with respect to this Security, the Holder shall surrender
this Security, duly endorsed or assigned to the Company or in blank, accompanied
by (a) written notice to the Company in substantially the form of conversion
notice attached as Exhibit A hereto or, if less than the entire principal amount
hereof is to be converted, the portion hereof to be converted, (b) the funds, if
any, required by this Section 8.02, and (c) if shares or any portion of this
----
Security not to be converted are to be issued in the name of a Person other than
the Holder, the name of the Person in which to issue such shares and the
transfer taxes, if any, required to be paid by the Holder pursuant to Section
8.08.
----
As promptly as practicable after satisfaction of the requirements for
conversion set forth above, the Company shall issue and shall deliver to such
Holder a certificate or certificates for the number of full shares of Common
Stock issuable upon the conversion of this Security or portion thereof in
accordance with the provisions of this Article and a check or cash in respect of
any fractional interest in respect of a share of Common Stock arising upon such
conversion, as provided in Section 8.03.
----
Each conversion shall be deemed to have been effected on the date on which
the requirements set forth above in this Section 8.02 have been satisfied, and
----
the Person in whose name any certificate or certificates for shares of Common
Stock shall be issuable upon such conversion shall be deemed to have become on
said date the holder of record of the shares represented thereby; provided
however that any such surrender on any date when the stock transfer books of the
Company shall be closed shall constitute the Person in whose name the
certificates are to be issued as the record holder thereof for all purposes on
the next succeeding day on which such stock transfer books
19
are open, but such conversion shall be at the Conversion Rate in effect on the
date upon which this Security shall be surrendered.
SECTION 8.03. Fractions of Shares. No fractional shares of Common Stock
shall be issued upon conversion of this Security. Instead of any fractional
share of Common Stock that would otherwise be issuable upon conversion of this
Security (or specified portions thereof), the Company shall pay a cash
adjustment in respect of such fraction in an amount equal to the same fraction
of the Closing Price per share of the Common Stock at the close of business on
the Trading Day immediately preceding such day.
"Trading Day" shall mean each day on which the primary securities exchange
or quotation system that is used to determine the Closing Price is open for
trading or quotation.
"Closing Price" of a single share of Common Stock on any Trading Day shall
mean the closing sale price per share for the Common Stock (or if no closing
sale price is reported, the average of the bid and ask prices) on such Trading
Day on the principal United States national securities exchange on which the
Common Stock is traded or, if the Common Stock is not listed on a United States
national stock exchange, as reported by the Nasdaq National Market.
SECTION 8.04. Adjustment of Conversion Rate.
(a) In case the Company shall pay or make a dividend or other distribution
on its Common Stock exclusively in Common Stock, the Conversion Rate in effect
at the opening of business on the earlier of the day next following such
dividend or other distribution or the date fixed for the determination of
stockholders entitled to receive such dividend or other distribution shall be
adjusted so that the Holder upon conversion shall be entitled to receive that
number of shares of Common Stock it would have been entitled to after such
dividend or other distribution if it had converted this Security immediately
prior to such dividend or other distribution.
(b) In case the Company shall pay or make a dividend or other distribution
on its Common Stock consisting exclusively of, or shall otherwise issue to all
holders of its Common Stock, rights, warrants or options entitling the holders
thereof, for a period not exceeding 45 days, to subscribe for or purchase shares
of Common Stock at a price per share less than the current market price per
share (determined as provided in Section 8.04(g)) of the Common Stock on the
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date fixed for the determination of stockholders entitled to receive such
rights, warrants or options, the Conversion Rate in effect at the opening of
business on the day following the date fixed for such determination shall be
increased by multiplying such Conversion Rate by a fraction of which the
numerator shall be the number of shares of Common Stock outstanding at the close
of business on the date fixed for such determination plus the number of shares
of Common Stock so offered for subscription or purchase and the denominator
shall be the number of shares of Common Stock outstanding at the close of
business on the date fixed for such determination plus the number of shares of
Common Stock which the aggregate price of the total number of shares so offered
would purchase at the current market price per share (determined as provided in
Section 8.04(g)), such increase to become effective immediately after the
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opening of business on the day following the date fixed for such determination.
20
(c) In case outstanding shares of Common Stock shall be subdivided into a
greater number of shares of Common Stock, the Conversion Rate in effect at the
opening of business on the day following the day upon which such subdivision
becomes effective shall be proportionately increased, and, conversely, in case
outstanding shares of Common Stock shall each be combined into a smaller number
of shares of Common Stock, the Conversion Rate in effect at the opening of
business on the day following the day upon which such combination becomes
effective shall be proportionately reduced, such increase or reduction, as the
case may be, to become effective immediately after the opening of business on
the day following the day upon which such subdivision or combination becomes
effective.
(d) In case the Company shall, by dividend or otherwise, distribute to all
holders of its Common Stock evidences of its indebtedness, shares of any class
of capital stock, securities, cash or assets (excluding any rights, warrants or
options referred to in Section 8.04(b), any dividend or distribution paid
-------
exclusively in cash and any dividend or distribution referred to in Section
8.04(a)), the Conversion Rate shall be adjusted by multiplying the Conversion
-------
Rate in effect immediately prior to the earlier of such distribution or the
determination of stockholders entitled to receive such distribution by a
fraction of which the numerator shall be the current market price per share
(determined as provided in Section 8.04(g)) and the denominator shall be such
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current market price less the fair market value (as determined in good faith by
the Board of Directors, whose determination shall be conclusive and described in
a Board Resolution), on the date of such effectiveness, of the portion of the
evidences of indebtedness, shares of capital stock, securities, cash and assets
so distributed applicable to one share of Common Stock, such adjustment to
become effective immediately prior to the opening of business on the day next
following the later of (i) the date fixed for the payment of such distribution
and (ii) the date 20 days after the notice relating to such distribution is
given pursuant to Section 8.06 (such later date of (i) and (ii) being referred
----
to as the "Reference Date"). The provisions of this Section 8.04(d) shall not be
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applicable to an event covered by Section 8.04(j). For purposes of this Section
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8.04(d) and Sections 8.04(a) and 8.04(b), any dividend or distribution for which
------- ------- -------
an adjustment is being made pursuant to this Section 8.04(d) that also includes
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shares of Common Stock or rights, warrants or options to subscribe for or
purchase shares of Common Stock shall be deemed instead to be (A) a dividend or
distribution of the evidences of indebtedness, cash, property, shares of capital
stock or securities other than such shares of Common Stock or such rights,
warrants or options (making any Conversion Rate adjustment required by this
Section 8.04(d)) immediately followed by (B) a dividend or distribution of such
-------
shares of Common Stock or such rights (making any further Conversion Rate
adjustment required by Sections 8.04(a) or 8.04(b)), except (1) the record date
------- -------
of such dividend or distribution as defined in this Section 8.04(d) shall be
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substituted as "the date fixed for the determination of stockholders entitled to
receive such dividend or other distributions", "the date fixed for the
determination of stockholders entitled to receive such rights, warrants or
options" and "the date fixed for such determination" within the meaning of
Sections 8.04(a) and 8.04(b) and (2) any shares of Common Stock included in such
------- -------
dividend or distribution shall not be deemed "outstanding at the close of
business on the date fixed for such determination" within the meaning of this
8.04(d).
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(e) In case the Company shall, by dividend or otherwise, make a
distribution to all holders of its Common Stock exclusively in cash in an
aggregate amount that, together with (i) the aggregate amount of any other
distributions to all holders of its Common Stock made exclusively in cash within
the 12 months preceding the date of payment of such distribution and in
21
respect of which no Conversion Rate adjustment pursuant to this Section 8.04(e)
-------
has been made and (ii) the aggregate of any cash plus the fair market value (as
determined in good faith by the Board of Directors, whose determination shall be
conclusive and described in a Board Resolution), as of the expiration of the
tender or exchange offer referred to below, of consideration payable in respect
of any tender or exchange offer by the Company or a Subsidiary for all or any
portion of the Common Stock concluded within the 12 months preceding the date of
payment of such distribution and in respect of which no Conversion Rate
adjustment pursuant to this Section 8.04(e) has been made, exceeds 10% of the
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product of the current market price per share (determined as provided in Section
8.04(g)) of the Common Stock as of the Trading Day immediately preceding the
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record date fixed for stockholders entitled to receive such distribution times
the number of shares of Common Stock outstanding on such record date, the
Conversion Rate shall be increased so that the same shall equal the price
determined by multiplying the Conversion Rate in effect immediately prior to the
close of business on the date fixed for the determination of the stockholders of
record entitled to such distribution by a fraction of which (i) the denominator
shall be the current market price per share (determined as provided in Section
8.04(g)) on such date less an amount equal to the quotient of (x) the excess of
-------
such combined amount over such 10% and (y) the number of shares of Common Stock
outstanding on the record date and (ii) the numerator shall be equal to the
current market price on such date, such adjustment to become effective
immediately prior to the opening of business on the day following the record
date fixed for the payment of such distribution.
(f) In case a successful tender or exchange offer, other than an odd lot
offer, made by the Company or any Subsidiary for all or any portion of the
Common Stock shall involve an aggregate consideration having a fair market value
(as determined in good faith by the Board of Directors, whose determination
shall be conclusive and described in a Board Resolution) at the last time (the
"Expiration Time") tenders or exchanges may be made pursuant to such tender or
exchange offer (as it may be amended) that, together with (i) the aggregate of
the cash plus the fair market value (as determined in good faith by the Board of
Directors, whose determination shall be conclusive and described in a Board
Resolution), as of the expiration of the other tender or exchange offer referred
to below, of consideration payable in respect of any other tender or exchange
offer by the Company or a Subsidiary for all or any portion of the Common Stock
concluded within the preceding 12 months and in respect of which no Conversion
Rate adjustment pursuant to this Section 8.04(f) has been made and (ii) the
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aggregate amount of any distributions to all holders of the Common Stock made
exclusively in cash within the preceding 12 months and in respect of which no
Conversion Rate adjustment pursuant to Section 8.04(e) has been made, exceeds
-------
10% of the product of the current market price per share (determined as provided
in Section 8.04(d)) of the Common Stock outstanding (including any tendered
-------
shares) on the Expiration Time, the Conversion Rate shall be adjusted by
multiplying the Conversion Rate in effect immediately prior to the Expiration
Time by a fraction of which (i) the denominator shall be (x) the product of the
current market price per share (determined as provided in Section 8.04(g)) of
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the Common Stock on the Trading Day next succeeding the Expiration Time times
the number of shares of Common Stock outstanding (including any tendered or
exchanged shares) at the Expiration Time minus (y) the fair market value
(determined as aforesaid) of the aggregate consideration payable to stockholders
based on the acceptance (up to any maximum specified in the terms of the tender
or exchange offer) of all shares validly tendered or exchanged and not withdrawn
as of the Expiration Time (the shares deemed so accepted, up to any such
maximum, being referred to as the "Purchased Shares") and (ii) the numerator
shall be the product of (x) such current market price per share (determined in
accordance
22
with Section 8.04(g)) on the Trading Day next succeeding the Expiration Time
-------
times (y) such number of outstanding shares at the Expiration Time less the
number of Purchased Shares, such increase to become effective immediately prior
to the opening of business on the day following the Expiration Time.
(g) For the purpose of any computation under Sections 8.04(b), (d) and (e),
------- --- ---
the current market price per share of Common Stock on any date in question shall
be deemed to be the average of the daily Closing Prices per share of Common
Stock for the ten consecutive Trading Days immediately prior to the date in
question; provided, however, that (i) if the "ex" date (as hereinafter defined)
for any event (other than the issuance or distribution requiring such
computation) that requires an adjustment to the Conversion Rate pursuant to
Section 8.04(a), (b), (c), (d), (e) or (f) ("Other Event") occurs on or after
------- --- --- --- --- ---
the 20th Trading Day prior to the date in question and prior to the "ex" date
for the issuance or distribution requiring such computation (the "Current
Event"), the Closing Price for each Trading Day prior to the "ex" date for such
Other Event shall be adjusted by multiplying such Closing Price by the
reciprocal of the fraction by which the Conversion Rate is so required to be
adjusted as a result of such Other Event, (ii) if the "ex" date for any Other
Event occurs after the "ex" date for the Current Event and on or prior to the
date in question, the Closing Price for each Trading Day on and after the "ex"
date for such Other Event shall be adjusted by multiplying such Closing Price by
the fraction by which the Conversion Rate is so required to be adjusted as a
result of such Other Event, (iii) if the "ex" date for any Other Event occurs on
the "ex" date for the Current Event, one of those events shall be deemed for
purposes of clauses (i) and (ii) of this proviso to have an "ex" date occurring
prior to the "ex" date for the Other Event, and (iv) if the "ex" date for the
Current Event is on or prior to the date in question, after taking into account
any adjustment required pursuant to clause (ii) of this proviso, the Closing
Price for each Trading Day on or after such "ex" date shall be adjusted by
adding thereto the amount of any cash and the fair market value on the date in
question (as determined in good faith by the Board of Directors in a manner
consistent with any determination of such value for purposes of Section 8.04(d)
-------
or (e), whose determination shall be conclusive and described in a Board
---
Resolution) of the portion of the rights, warrants, options, evidences of
indebtedness, shares of capital stock, securities, cash or property being
distributed applicable to one share of Common Stock. For the purpose of any
computation under Section 8.04(f), the current market price per share of Common
-------
Stock on any date in question shall be deemed to be the average of the daily
Closing Prices for the five consecutive Trading Days selected by the Company
commencing on or after the latest (the "Commencement Date") of (i) the date 20
Trading Days before the date in question, (ii) the date of commencement of the
tender or exchange offer requiring such computation and (iii) the date of the
last amendment, if any, of such tender or exchange offer involving a change in
the maximum number of shares for which tenders are sought or a change in the
consideration offered, and ending not later than the Trading Day next succeeding
the Expiration Time of such tender or exchange offer (or, if such Expiration
Time occurs before the close of trading on a Trading Day, not later than the
Trading Day during which the Expiration Time occurs); provided, however, that if
the "ex" date for any Other Event (other than the tender or exchange offer
requiring such computation) occurs on or after the Commencement Date and on or
prior to the Trading Day next succeeding the Expiration Time for the tender or
exchange offer requiring such computation, the Closing Price for each Trading
Day prior to the "ex" date for such Other Event shall be adjusted by multiplying
such Closing Price by the reciprocal of the same fraction by which the
Conversion Rate is so required to be adjusted as a result of such other event.
For purposes of this paragraph, the term "ex" date, (i) when used with
23
respect to any issuance or distribution, means the first date on which the
Common Stock trades regular way on the relevant exchange or in the relevant
market from which the Closing Price was obtained without the right to receive
such issuance or distribution, (ii) when used with respect to any subdivision or
combination of shares of Common Stock, means the first date on which the Common
Stock trades regular way on such exchange or in such market after the time at
which such subdivision or combination becomes effective, and (iii) when used
with respect to any tender or exchange offer means the first date on which the
Common Stock trades regular way on such exchange or in such market after the
Expiration Time of such tender or exchange offer.
(h) The Company may make such increases in the Conversion Rate, in addition
to those required by paragraphs (a), (b), (c), (d), (e) and (f) of this Section
--- --- --- --- --- ---
8.04, as it considers to be advisable.
----
(i) No adjustment in the Conversion Rate shall be required unless such
adjustment would require an increase or decrease of at least 1% in the
Conversion Rate; provided, however, that any adjustments, which by reason of
this Section 8.04(i) are not required to be made, shall be carried forward and
-------
taken into account in any subsequent adjustment.
(j) In the event that the Company distributes assets, debt securities,
rights, warrants or options (other than those referred to in Section 8.04(b) pro
-------
rata to holders of Common Stock, and the fair market value of the portion of
assets, debt securities, rights, warrants or options applicable to one share of
Common Stock distributed to holders of Common Stock exceeds the Average Sale
Price (as defined below) per share of Common Stock, or such Average Sale Price
exceeds such fair market value by less than $1.00, then so long as any such
assets, debt securities, rights, options or warrants have not expired or been
redeemed by the Company, the Company shall make proper provision so that the
Holder of any Security upon conversion, rather than being entitled to an
adjustment in the Conversion Rate, will be entitled to receive upon such
conversion, in addition to the shares of Common Stock otherwise issuable upon
conversion, the kind and amount of assets, debt securities, rights, warrants and
options such Holder would have received had such Holder converted its Security
immediately prior to the date of determination of the holders entitled to such
distribution.
"Average Sale Price" means the average of the Closing Prices of the Common
Stock for the shorter of (i) 30 consecutive Trading Days ending on the last full
Trading Day prior to the Time of Determination (as defined below) with respect
to the rights, options, warrants or distribution in respect of which the Average
Sale Price is being calculated, or (ii) the period (x) commencing on the date
next succeeding the first public announcement of (a) the issuance of rights,
options or warrants or (b) the distribution, in each case, in respect of which
the Average Sale Price is being calculated and (y) proceeding through the last
full Trading Day prior to the Time of Determination with respect to the rights,
options, warrants or distribution in respect of which the Average Sale Price is
being calculated, or (iii) the period, if any, (x) commencing on the date next
succeeding the Ex-Dividend Time (as defined below) with respect to the next
preceding (a) issuance of rights, warrants or options or (b) distribution, in
each case, for which an adjustment is required by the provisions of Section
8.04(b) or Section 8.04(j) and (y) proceeding through the last full Trading Day
------- -------
prior to the Time of Determination with respect to the rights, options,
warrants, or distribution in respect of which the Average Sale Price is being
calculated. If the Ex-Dividend Time (or in the case of a subdivision,
24
combination or reclassification, the effective date with respect thereto) with
respect to a dividend, subdivision, combination or reclassification to which
Section 8.04(a), (b) or (c) applies occurs during the period applicable for
------- --- ---
calculating "Average Sale Price" pursuant to the definition in the preceding
sentence, "Average Sale Price" shall be calculated for such period in a manner
determined in good faith by the Board of Directors to reflect the impact of such
dividend, subdivision, combination or reclassification on the Closing Price of
the Common Stock during such period.
"Time of Determination" means the time and date of the earlier of (i) the
determination of stockholders entitled to receive rights, warrants or options or
a distribution, in each case, to which this Section 8.04 applies and (ii) the
----
time ("Ex-Dividend Time") immediately prior to the commencement of "ex-dividend"
trading for such rights, options, warrants or distribution on the New York Stock
Exchange or such other national or regional exchange or market on which the
shares of Common Stock are listed or quoted.
SECTION 8.05. Notice of Adjustments of Conversion Rate. Whenever the
Conversion Rate and Conversion Price are adjusted as herein provided, the
Company shall compute the adjusted Conversion Rate and Conversion Price in
accordance with Section 8.04 and shall prepare a certificate signed by the Chief
----
Financial Officer of the Company setting forth the adjusted Conversion Rate and
Conversion Price and showing in reasonable detail the facts upon which such
adjustment is based, and such certificate shall forthwith be mailed, first class
postage prepaid, to the Holder.
SECTION 8.06. Notice of Certain Corporate Action. In case:
(a) the Company shall declare a dividend (or any other distribution) on its
Common Stock that would require a Conversion Rate adjustment pursuant to Section
8.04(e); or
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(b) the Company shall authorize the granting to all holders of its Common
Stock of rights, warrants or options to subscribe for or purchase any shares of
capital stock of any class or of any other rights (excluding rights distributed
pursuant to any stockholder rights plan); or
(c) of any reclassification of the Common Stock of the Company (other than
a subdivision or combination of its outstanding shares of Common Stock), or of
any consolidation or merger to which the Company is a party and for which
approval of any stockholders of the Company is required, or of the sale or
transfer of all or substantially all of the assets of the Company; or
(d) of the voluntary or involuntary dissolution, liquidation or winding up
of the Company; or
(e) the Company or any Subsidiary of the Company shall commence a tender or
exchange offer for all or a portion of the Company's outstanding shares of
Common Stock (or shall amend any such tender or exchange offer);
then the Company shall cause to be mailed to the Holder, at least 20 days
(or 10 days in any case specified in clause 8.06(a) or 8.06(b) above) prior to
------- -------
the applicable record, effective or expiration date hereinafter specified, a
notice stating (x) the date on which a record is to be taken for the purpose of
such dividend, distribution or granting of rights, warrants or options, or, if a
record is
25
not to be taken, the date as of which the holders of Common Stock of record to
be entitled to such dividend, distribution, rights, warrants or options are to
be determined, or (y) the date on which such reclassification, consolidation,
merger, sale, transfer, dissolution, liquidation or winding up is expected to
become effective, and the date as of which it is expected that holders of Common
Stock of record shall be entitled to exchange their shares of Common Stock for
securities, cash or other property deliverable upon such reclassification,
consolidation, merger, sale, transfer, dissolution, liquidation or winding up,
or (z) the date on which such tender offer commenced, the date on which such
tender offer is scheduled to expire unless extended, the consideration offered
and the other material terms thereof (or the material terms of any amendment
thereto).
SECTION 8.07. Company's Obligation Regarding Common Stock. The Company
shall at all times reserve and keep available, free from preemptive rights, out
of its authorized but unissued Common Stock, solely for the purpose of effecting
the conversion of this Security, the whole number of shares of Common Stock then
issuable upon the conversion in full of this Security.
Before taking any action which would cause an adjustment reducing the
Conversion Price below the then par value, if any, of the shares of Common Stock
issuable upon conversion of this Security, the Company shall take all corporate
action that may, in the opinion of its counsel, be necessary in order that the
Company may validly and legally issue shares of such Common Stock at such
adjusted Conversion Price.
The Company covenants that if any shares of Common Stock to be provided for
the purpose of conversion of this Security hereunder require registration with
or approval of any governmental authority under any federal or state law before
such shares may be validly issued upon conversion, the Company shall in good
faith and as expeditiously as practicable endeavor to secure such registration
or approval, as the case may be.
The Company further covenants that so long as the Common Stock shall be
listed or quoted on the New York Stock Exchange, the Nasdaq Stock Market
(National Market), or any other national securities exchange the Company shall,
if permitted by the rules of such exchange, list and keep listed so long as the
Common Stock shall be so listed on such market or exchange, all Common Stock
issuable upon conversion of this Security.
SECTION 8.08. Taxes on Conversions. The Company shall pay any and all taxes
that may be payable in respect of the issue or delivery of shares of Common
Stock on conversion of this Security pursuant hereto. The Company shall not,
however, be required to pay any tax that 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 of the Holder to be converted, 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.
SECTION 8.09. Covenant as to Common Stock. The Company covenants that all
shares of Common Stock that may be issued upon conversion of this Security shall
upon issue be newly issued (and not treasury shares) and shall be duly
authorized, validly issued, fully paid and nonassessable and, except as provided
in Section 8.08, the Company shall pay all taxes, liens and charges with respect
----
to the issue thereof.
26
SECTION 8.10. Provisions in Case of Reclassification, Consolidation, Merger
or Sale of Assets. In the event that the Company shall be a party to any
transaction (including any (i) recapitalization or reclassification of the
Common Stock (other than a change in par value, or from par value to no par
value, or from no par value to par value, or as a result of a subdivision or
combination of the Common Stock), (ii) any consolidation of the Company with, or
merger of the Company into, any other person, any merger of another person into
the Company (other than a merger that does not result in a reclassification,
conversion, exchange or cancellation of outstanding shares of Common Stock of
the Company), (iii) any sale, lease, transfer, conveyance or other disposition
of all or substantially all of the assets of the Company or (iv) any compulsory
share exchange) pursuant to which the Common Stock is converted into the right
to receive other securities, cash or other property, then lawful provision shall
be made as part of the terms of such transaction whereby the Holder shall have
the right thereafter to convert this Security only into (subject to funds being
legally available for such purpose under applicable law at the time of such
conversion) the kind and amount of securities, cash and other property
receivable upon such transaction by a holder of the number of shares of Common
Stock into which this Security might have been converted immediately prior to
such transaction. The above provisions of this Section 8.10 shall similarly
----
apply to successive transactions of the foregoing type.
ARTICLE 9
SUBORDINATION
SECTION 9.01. Security Subordinate to Senior Indebtedness. The Company
covenants and agrees, and the Holder of this Security, by Holder's acceptance
thereof, likewise covenants and agrees, that, to the extent and in the manner
hereinafter set forth in this Article 9, the indebtedness represented by this
-
Security and the payment of the principal of (and premium, if any), and interest
on and all other amounts payable under this Security are hereby expressly made
subordinate and subject in right of payment to the prior payment in full of all
Senior Indebtedness.
SECTION 9.02. Payment over of Proceeds upon Dissolution, Etc. In the event
of any payment by, or distribution of the assets of, the Company in connection
with (a) any insolvency or bankruptcy case or proceeding, or any receivership,
liquidation, reorganization or other similar case or proceeding in connection
therewith, relative to the Company or its assets, (b) any liquidation,
dissolution or other winding-up of the Company, whether voluntary or involuntary
and whether or not involving insolvency or bankruptcy, or (c) any assignment for
the benefit of creditors or any other marshaling of assets and liabilities of
the Company, then and in any such event the holders of Senior Indebtedness shall
be entitled to receive payment in full of all amounts due in respect of all
Senior Indebtedness, or provision shall be made for such payment in cash or cash
equivalents or otherwise in a manner satisfactory to the holders of Senior
Indebtedness, before the Holder is entitled to receive any payment on account of
principal of (or premium, if any), or interest on or any other amount payable
under this Security, and to that end, the holders of Senior Indebtedness shall
be entitled to receive, for application to the payment of such Senior
Indebtedness, ratably according to the aggregate amounts remaining unpaid on
account of such Senior Indebtedness held by them after giving effect to any
concurrent payment or distribution, or provision therefor, to the holders of
such Senior Indebtedness, any payment or distribution of any kind or character,
whether in cash, property or securities, that may be payable or deliverable in
respect of this Security in any such case, proceeding, dissolution, liquidation
or other winding-up or event.
27
In the event that, notwithstanding the foregoing provisions of this Section
9.02, the Holder shall have received any payment or distribution of assets of
----
the Company prohibited by the foregoing paragraph of any kind or character,
whether in cash, property or securities, before all Senior Indebtedness is paid
in full or payment thereof provided for, and if, at or prior to the time of such
payment or distribution, written notice that such payment or distribution is
prohibited by the foregoing paragraph shall have been actually given to the
Holder, then and in such event such payment or distribution shall be paid over
or delivered forthwith to holders of such Senior Indebtedness remaining unpaid
or their representatives, ratably according to the aggregate amounts remaining
unpaid on account of the Senior Indebtedness held by them, for application to
the payment thereof to the extent necessary to pay all Senior Indebtedness in
full after giving effect to any concurrent payment or distribution, or provision
therefor, to the holders of such Senior Indebtedness.
For purposes of this Article 9 only, the words "cash, property or
-
securities" shall not be deemed to include shares of capital stock of the
Company as reorganized or readjusted, or securities of the Company or any other
corporation provided for by a plan of reorganization or readjustment that in
either case are subordinated in right of payment to all Senior Indebtedness that
may at the time be outstanding to substantially the same extent as, or to a
greater extent than, this Security is so subordinated as provided in this
Article 9. The consolidation of the Company with, or the merger of the Company
-
into, another Person or the liquidation or dissolution of the Company following
the sale, lease, conveyance, transfer or other disposition of its properties and
assets substantially as an entirety to another Person upon the terms and
conditions set forth in Article 4 shall not be deemed a dissolution, winding-up,
-
liquidation, reorganization, assignment for the benefit of creditors or
marshaling of assets and liabilities of the Company for the purposes of this
Section 9.02 if the Person formed by such consolidation or into which the
----
Company is merged or that acquires by sale, lease, conveyance, transfer or other
disposition such properties and assets substantially as an entirety, as the case
may be, shall, as a part of such consolidation, merger, sale, lease, conveyance,
transfer or other disposition, comply with the conditions set forth in Article
4.
-
SECTION 9.03. No Payment When Senior Indebtedness in Default. (a) In the
event and during the continuation of any default in the payment of principal of
(or premium, if any) or interest on any Senior Indebtedness beyond any
applicable grace period with respect thereto (unless and until such payment
default shall have been cured or waived in writing by the holders of such Senior
Indebtedness), including any payment default arising from the acceleration of
any Senior Indebtedness, or (b) any default (other than a payment default) with
respect to Senior Indebtedness occurs and is continuing that permits the
acceleration of the maturity thereof and judicial proceedings shall be pending
with respect to any such default or the Company receives written notice of such
default (a "Senior Indebtedness Default Notice"), then no payment shall be made
by the Company on account of principal of (or premium, if any) or interest on
this Security or on account of all other amounts payable under this Security.
Notwithstanding the foregoing, payments with respect to this Security may
resume, and the Company may acquire this Security for cash or property, when (x)
the default with respect to the Senior Indebtedness is cured or waived or ceases
to exist or (y) in the case of a default described in clause (b) of this Section
9.03, 179 or more days pass after the Senior Indebtedness Default Notice is
----
received by the Company, provided that the terms hereof otherwise permit such
payment or acquisition of this Security at such time. If the Company receives a
Senior Indebtedness Default Notice, then a similar notice received within nine
months
28
thereafter relating to the default that was the basis of such Senior
Indebtedness Default Notice, on the same issue of Senior Indebtedness, shall not
be effective to prevent the payment or acquisition of this Security as described
in the first sentence of this Section 9.03(a). In addition, no payment may be
made on this Security, in respect of principal, premium, interest or any other
amount, and no acquisition of this Security for cash or property may be
effected, if this Security is declared due and payable prior to its Stated
Maturity by reason of the occurrence of an Event of Default until the earlier of
(i) 120 days after the date of such acceleration of the maturity of this
Security or (ii) the payment in full of all Senior Indebtedness, provided that
such payment or acquisition of this Security may be made then only if the terms
hereof otherwise permit such payment or acquisition of this Security at such
time.
In the event that, notwithstanding the foregoing, the Company shall make
any payment to the Holder prohibited by the foregoing provisions of this Section
9.03 before all Senior Indebtedness is paid in full, or effective provisions
----
made for its payment, and if, at or prior to the time of such payment, written
notice that such payment is prohibited by the foregoing paragraph shall have
been actually given to the Holder, then and in such event (but subject to the
provisions of Section 9.09) such payment shall be paid over and delivered
----
forthwith to the holders of such Senior Indebtedness remaining unpaid or their
representatives, ratably on account of the Senior Indebtedness held by them, for
application to the payment thereof to the extent necessary to pay all Senior
Indebtedness in full after giving effect to any concurrent payment or
distribution, or provision therefor, to the holders of such Senior Indebtedness.
The provisions of this Section 9.03 shall not apply to any payment with
----
respect to which Section 9.02 would be applicable.
----
SECTION 9.04. Payment Permitted If No Default. Nothing contained in this
Article 9 or elsewhere in this Security shall prevent (a) the Company, at any
-
time except during the pendency of any case, proceeding, dissolution,
liquidation or other winding-up, assignment for the benefit of creditors or
other marshaling of assets and liabilities of the Company referred to in Section
9.02, except under the conditions described in Section 9.03, from making
---- ----
payments at any time of principal of (and premium, if any), or interest on, or
any other amount payable under this Security.
SECTION 9.05. Subrogation to Rights of Holders of Senior Indebtedness. Upon
payment in full of all Senior Indebtedness, the Holder shall be subrogated
(equally and ratably with the holders of all Indebtedness of the Company that by
its express terms is subordinated to Indebtedness of the Company to
substantially the same extent as this Security is subordinated to Senior
Indebtedness) to the rights of the holders of such Senior Indebtedness to
receive payments and distributions of cash, property and securities applicable
to the Senior Indebtedness to the extent that payments and distributions
otherwise payable to the Holder have been applied to the payment of Senior
Indebtedness as provided by this Article 9. For purposes of such subrogation, no
-
payments or distributions to the holders of the Senior Indebtedness of any
cash, property or securities to which the Holder would be entitled, except for
the provisions of this Article 9, and no payments over pursuant to the
-
provisions of this Article 9 to the holders of Senior Indebtedness by the
-
Holder, shall, as among the Company, its creditors other than holders of
Senior Indebtedness and the Holder, be deemed to be a payment or distribution by
the Company to or on account of the Senior Indebtedness.
29
SECTION 9.06. Provisions Solely to Define Relative Rights. The provisions
of this Article 9 are and are intended solely for the purpose of defining the
-
relative rights of the Holder on the one hand and the holders of Senior
Indebtedness on the other hand. Nothing contained in this Article 9 or elsewhere
-
herein or in this Security relating to the subordination of this Security is
intended to or shall:
(a) impair, as among the Company, its creditors other than holders of
Senior Indebtedness and the Holder, the obligation of the Company, which is
absolute and unconditional (and which, subject to the rights under this Article
9 of the holders of Senior Indebtedness, is intended to rank equally with all
other general obligations of the Company), to pay to the Holder the principal of
(and premium, if any), and interest on, and any other amount payable under this
Security, as and when the same shall become due and payable in accordance with
its terms;
(b) affect the relative rights against the Company of the Holder and
other creditors of the Company, other than Holder's rights in relation to the
holders of Senior Indebtedness; or
(c) prevent the Holder from exercising all remedies available upon a
Default or Event of Default under this Security, subject to the rights, if any,
under this Article 9 of the holders of Senior Indebtedness to receive cash,
property and securities otherwise payable or deliverable to the Holder.
SECTION 9.07. No Waiver of Subordination Provisions. No right of any
present or future holder of any Senior Indebtedness to enforce subordination as
herein provided shall at any time in any way be prejudiced or impaired by any
act or failure to act on the part of the Company or by any act or failure to
act, in good faith, by any such holder, or by any noncompliance by the Company
with the terms, provisions and covenants of this Security, regardless of any
knowledge thereof any such holder may have or be otherwise charged with.
Without in any way limiting the generality of the foregoing paragraph, the
holders of Senior Indebtedness may, at any time and from time to time, without
the consent of or notice to the Holder, without incurring responsibility to the
Holder and without impairing or releasing the subordination provided in this
Article 9 or the obligations hereunder of the Holder to the holders of Senior
Indebtedness, do any one or more of the following:
(a) change the manner, place or terms of payment or extend the time of
payment of, or renew or alter, Senior Indebtedness, or otherwise amend or
supplement in any manner Senior Indebtedness or any instrument evidencing the
same or any agreement under which Senior Indebtedness is outstanding;
(b) sell, exchange, release or otherwise deal with any property
pledged, mortgaged or otherwise securing Senior Indebtedness;
(c) release any Person liable in any manner for the collection of
Senior Indebtedness; and
30
(d) exercise or refrain from exercising any rights against the Company
and any other Person.
SECTION 9.08. Reliance on Judicial Order or Certificate of Liquidating
Agent. Upon any payment or distribution of assets of the Company referred to in
this Article 9, the Holder shall be entitled to rely upon any order or decree
-
entered by any court of competent jurisdiction in which such insolvency,
bankruptcy, receivership, liquidation, reorganization, dissolution, winding up
or similar case or proceeding is pending, or a certificate of the trustee in
bankruptcy, receiver, liquidating trustee, custodian, assignee for the benefit
of creditors, agent or other Person making such payment or distribution,
delivered to the Holder, for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of the Senior
Indebtedness and other indebtedness of the Company, the amount thereof or
payable thereon, the amount or amounts paid or distributed thereon and all other
facts pertinent thereto or to this Article 9.
-
SECTION 9.09. Certain Conversions Deemed Payment. For the purposes of this
Article 9 only, (1) the issuance and delivery of junior securities upon
-
conversion of this Security in accordance with Article 8 or in respect to the
-
Repurchase Price in accordance with Article 7 shall not be deemed to constitute
-
a payment or distribution on account of the principal of, premium or interest
on, or other amount payable with respect to, this Security or on account of the
purchase or other acquisition of this Security, and (2) the payment, issuance or
delivery of cash, property or securities (other than junior securities) upon
conversion of this Security shall be deemed to constitute payment on account of
the principal of, premium or interest on, or other amount payable with respect
to, this Security. For the purposes of this Section 9.09, the term "junior
----
securities" means (a) shares of any stock of any class of the Company and (b)
securities of the Company that are subordinated in right of payment to the prior
payment in full of all Senior Indebtedness that may be outstanding at the time
of issuance or delivery of such securities to substantially the same extent as,
or to a greater extent than, the Securities are so subordinated as provided in
this Article 9. Nothing contained in this Article 9 or elsewhere in this
- -
Security is intended to or shall impair, as among the Company, its creditors
other than holders of Senior Indebtedness and the Holder, the right, which is
absolute and unconditional, of the Holder to convert this Security in accordance
with Article 8.
-
ARTICLE 10
AMENDMENT
SECTION 10.01. This Security may not be amended or modified, and no
provisions hereof may be waived, without the written consent of the Company and
the Holder.
31
IN WITNESS WHEREOF, the undersigned has executed this Security as of the
day and year first above written.
INTERLIANT, INC.
By: ______________________________
Name: ____________________________
Title: ___________________________
EXHIBIT A
---------
CONVERSION NOTICE
To: INTERLIANT, INC.
The undersigned Holder of this Security hereby irrevocably exercises the
option to convert this Security, or the portion hereof (which is $1,000 or an
integral multiple thereof) below designated, at any time following the date of
original issuance thereof, into shares of Common Stock in accordance with its
terms, and directs that the shares issuable and deliverable upon conversion,
together with any check in payment for a fractional share and any Security
representing any unconverted principal amount hereof, be issued and delivered to
the registered owner hereof unless a different name has been provided below. If
shares or any portion of this Security not converted are to be issued in the
name of a person other than the undersigned, the undersigned will pay all
transfer taxes payable with respect thereto and is delivering herewith a
certificate in proper form certifying that the applicable restrictions on
transfer have been complied with. Any amount required to be paid by the
undersigned on account of interest accompanies this Security.
Dated: By: ______________________________
Signature of Holder
If shares or Securities are to be Principal amount to be converted
registered in the name of a Person other (if less than all): $______,000
than the Holder, please print such
Person's name and address:
__________________________________________
Name
__________________________________________
Social Security or Taxpayer Identification
Number
__________________________________________
Street Address
__________________________________________
City, State and Zip Code
EXHIBIT 3
---------
Form of Warrant
COMMON STOCK PURCHASE WARRANT
THIS WARRANT AND THE SHARES OF COMMON STOCK WHICH MAY BE PURCHASED
PURSUANT TO THE EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), AND NEITHER
SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE SOLD, TRANSFERRED,
PLEDGED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF SUCH REGISTRATION
OR AN EXEMPTION UNDER THE ACT AND THE RULES AND REGULATIONS THEREUNDER
AND IN THE ABSENCE OF REGISTRATION UNDER ANY APPLICABLE STATE
SECURITIES LAWS. SUCH SECURITIES ARE SUBJECT TO, AND ARE TRANSFERABLE
ONLY UPON COMPLIANCE WITH, THE PROVISIONS OF THE SECURITIES PURCHASE
AGREEMENT DATED AS OF APRIL __, 2001 AMONG INTERLIANT, INC., THE
HOLDER AND CERTAIN OTHER PARTIES. A COPY OF THE ABOVE-REFERENCED
AGREEMENT IS ON FILE AT THE OFFICE OF INTERLIANT, INC.
No. W-______ Void After Expiration Date
(as defined below)
WARRANT
TO PURCHASE ________ SHARES OF COMMON STOCK OF
INTERLIANT, INC.
Dated: _______ __, 200_
THIS WARRANT CERTIFIES THAT, for value received, [_________] or its
transferees or assigns (the "Holder") is entitled to purchase from Interliant,
Inc., a Delaware corporation (the "Company"), up to _________ fully paid and
nonassessable shares (the "Shares") (as adjusted pursuant to Section 2 below) of
common stock, $.01 par value ("Common Stock"), of the Company, at the price of
$1.25 per share (the "Exercise Price") (as adjusted pursuant to Section 2
below), subject to the provisions and
1
upon the terms and conditions set forth below. This Warrant shall expire on
_____ __, 200__ [fifth anniversary of date of issuance] (the "Expiration Date").
Capitalized terms used and not otherwise defined in this warrant shall have
the meanings assigned in the Securities Purchase Agreement, dated as of April
__, 2001 among the Company, the Holder and certain other parties (the "Purchase
Agreement").
1. Exercise and Payment.
--------------------
(a) Exercise. On or after the date of this Warrant, the purchase rights
--------
represented by this Warrant may be exercised by the Holder, in whole or in part,
by the surrender of this Warrant (together with a duly executed exercise notice
(the "Notice of Exercise") in the form attached hereto as Exhibit A) at the
---------
principal office of the Company, and, except as provided in Section 1(b) below,
by the payment to the Company, by wire transfer, of an amount equal to the
aggregate Exercise Price of the Shares being purchased.
(b) Net Issuance Election. The Holder may elect to receive, without the
---------------------
payment by the Holder of any additional consideration, shares of Common Stock
equal to the value of this Warrant or any portion hereof by the surrender of
this Warrant or such portion to the Company, with the net issue election notice
annexed hereto as Exhibit B duly executed. Thereupon, the Company shall issue to
---------
the Holder such number of fully paid and nonassessable shares of Common Stock as
is computed using the following formula:
X = Y (A - B)
--------
A
where
X = the number of shares of Common Stock to be issued to the Holder
pursuant to this Section 1.2(b);
Y = the number of shares of Common Stock covered by this Warrant in respect
of which the net issue election is made pursuant to this Section 1.2(b);
A = the fair market value of one share of Common Stock which shall be the
closing price of one share of Common Stock (on the last trading date preceding
the date the net issue election notice is received by the Company) on any
national securities exchange or automated quotation system on which the Common
Stock is listed or traded; provided that if the Common Stock is not so listed or
traded, the fair market value shall be the as determined in good faith by the
Board of Directors of the Company, at the time the net issue election is made
pursuant to this Section 1.2(b); and
B = the Exercise Price in effect under this Warrant at the time the net
issue election notice is received by the Company pursuant to this Section
1.2(b).
The Board shall promptly respond in writing to an inquiry by the Holder as
to the fair market value of one share of Common Stock.
2
(c) Stock Certificates. In the event of the exercise of all or any portion
------------------
of this Warrant, certificates for the shares of Common Stock so purchased shall
be delivered to the Holder by the Company at its own expense (including the
payment by the Company of any applicable issue taxes or governmental charges
imposed in connection with the issuance or delivery of the Common Stock) within
a reasonable time, which shall in no event be later than ten (10) days
thereafter (or such later time as the transfer agent requires, assuming prompt
notice by the Company) and, unless this Warrant has been fully exercised or has
expired, a new Warrant representing the Shares with respect to which this
Warrant shall not have been exercised shall also be issued to the Holder within
such time.
If this Warrant shall be surrendered for exercise within any period during
which the transfer books for shares of the Common Stock or other securities
purchasable upon the exercise of this Warrant are closed for any purpose, the
Company shall not be required to make delivery of certificates for the
securities purchasable upon such exercise until the date of the reopening of
said transfer books.
2. Adjustment of Exercise Price and Number of Shares. The number and kind
-------------------------------------------------
of securities purchasable upon the exercise of this Warrant and the Exercise
Price therefor shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:
(a) Adjustments for Subdivisions of Common Stock. If the number of shares
--------------------------------------------
of Common Stock outstanding at any time is increased by a stock dividend payable
in shares of Common Stock or by a subdivision or split up of stock, then
concurrently with the effectiveness of such dividend, subdivision or split up,
(i) the Exercise Price then in effect shall be proportionately decreased and
(ii) the number of shares of Common Stock issuable upon exercise of this Warrant
shall be increased in proportion to such increase of outstanding shares of
Common Stock.
(b) Adjustments for Combinations of Common Stock. If the number of shares
--------------------------------------------
of Common Stock outstanding at any time is decreased by a combination of the
outstanding shares of Common Stock, then concurrently with the effectiveness of
such combination, (i) the Exercise Price then in effect shall be proportionately
increased and (ii) the number of shares of Common Stock issuable upon exercise
of this Warrant shall be decreased in proportion to such decrease in outstanding
shares of Common Stock.
(c) Adjustments for Stock Dividends and Other Distributions. In the event
-------------------------------------------------------
the Company at any time or from time to time makes or fixes a record date for
the determination of holders of Common Stock entitled to receive any
distribution (excluding any repurchases of securities by the Company not made on
a pro rata basis from all holders of any class of the Company securities)
payable in property or in securities of the Company other than shares of Common
Stock, then and in each such event the Holder of this Warrant shall receive at
the time of such distribution, the amount of property or the
3
number of securities of the Company that the Holder would have received had it
exercised this Warrant on the date of such event.
(d) Adjustments for Reclassification, Exchange and Substitution. Except as
-----------------------------------------------------------
provided in Section 4 upon a Notice Event, if the Common Stock issuable upon
exercise of this Warrant shall be changed into the same or a different number of
shares of any other class or classes of stock, whether by capital
reorganization, reclassification or otherwise (other than a subdivision or
combination of shares provided for above), this Warrant shall thereafter be
exercisable for the purchase of, in lieu of the number of shares of Common Stock
which the Holder would otherwise have been entitled to receive, a number of
shares of such other class or classes of stock equivalent to the number of
shares of Common Stock that would have been received by the Holder upon exercise
of this Warrant immediately before that change. In addition, to the extent
applicable in any reorganization or recapitalization, provision shall be made by
the Company with the successor or surviving entity, if not the Company, so that
the Holder of this Warrant shall thereafter be entitled to receive upon exercise
of this Warrant the number of shares of stock or other securities or property of
the Company or otherwise, to which the Holder would have been entitled on such
reorganization or recapitalization had the Holder exercised the Warrant in its
entirety immediately prior to such change.
(e) Notification. Upon any increase or decrease in the number of Shares
------------
purchasable upon the exercise of this Warrant or the Exercise Price, the Company
shall, within a reasonable period thereafter, deliver written notice thereof to
the Holder, which notice shall state the increased or decreased number of Shares
purchasable upon the exercise of this Warrant and the adjusted Exercise Price,
setting forth in reasonable detail the method of calculation and the facts upon
which such calculations are based.
3. Merger, Consolidation, or Liquidation.
-------------------------------------
(i) If (A) the Company consolidates with or merges into another entity and
is not the survivor, or sells or conveys substantially all of its property, and
(B) in connection therewith, shares of stock, other securities, property, or
cash (collectively, "Merger Consideration") are issuable or deliverable in
exchange for the Company's capital stock, then (C) the Company shall give the
Holder at least 10 days prior written notice of the consummation of such
transaction and (D) the Holder may thereafter, at its option, exercise the
Warrant or acquire in lieu of the shares of Common Stock issuable upon exercise
of this Warrant the Merger Consideration which the Holder could have received
had the Holder exercised this Warrant in its entirety, immediately prior to such
merger, sale or conveyance.
(ii) If the Company receives notice that a purchase, tender or exchange
offer has been made to the holders of more than 50% of the outstanding Common
Stock (on an as converted basis), the Company shall give the Holder reasonable
notice thereof.
4. Notice of Certain Events. In the event (a "Notice Event"): (a) the
------------------------
Company authorizes the issuance to all holders of any class of its capital stock
rights or warrants to
4
subscribe for or purchase shares of its capital stock, or any other subscription
rights or warrants; (b) the Company authorizes the distribution to all holders
of any class of its capital stock evidences of indebtedness or assets; (c) of
any capital reorganization or reclassification of the Warrant Shares or the
Company's Common Stock, other than a subdivision or combination of the
outstanding Common Stock and other than a change in par value of the Common
Stock; (d) of any liquidation or merger to which the Company is a party and for
which approval of any of the Company's stockholders is required, other than a
consolidation or merger in which the Company is a continuing corporation and
that does not result in any reclassification or change of the shares of Common
Stock issuable upon the exercise of this Warrant; (e) of the conveyance or
transfer of the Company's properties and assets, substantially as an entirety;
or (f) of the Company's voluntary or involuntary dissolution, liquidation or
winding-up; then the Company shall cause to be mailed by certified mail to the
Holder, at least 10 days prior to the applicable record or effective date
hereinafter specified, a notice stating the dates as of which (x) the holders of
capital stock of record to be entitled to receive any such rights, warrants or
distributions or to be entitled to vote on such Notice Event are to be
determined, (y) such Notice Event is expected to become effective, and (z) it is
expected that Holders of record of Warrants shall be entitled to exchange or
sell their shares of Common Stock issuable upon the exercise of this Warrant for
securities or other property, if any, deliverable upon such Notice Event.
5. Fractional Shares. No fractional shares of Common Stock will be issued
-----------------
in connection with any exercise hereunder. In lieu of such fractional shares the
Company shall make a cash payment therefor based upon the Fair Market Value (as
defined below) of the Common Stock on the date of exercise. For the purposes
hereof "Fair Market Value" of a share of Common Stock as of a particular date
means: (a) if traded on an exchange or the over-the-counter market, quoted on
the Nasdaq National Market or reported by the National Quotation Bureau, then
the most recently reported closing or bid price, (b) if conversion or exercise
is simultaneous with an underwritten public offering registered under the Act,
the public offering price (before deducting commissions, discounts or expenses)
per share sold in such offer, and (c) otherwise, the price, not less than book
value, determined in good faith and in such reasonable manner as prescribed by a
majority of Company's Directors who are not Company officers or employees (the
"Outside Directors"); provided, however that (i) Company shall notify the Holder
of such price within ten days; (ii) the Holder shall have ten days after receipt
of such notice to dispute such price by written notice to Company; (iii) the
Holder and Company shall thereafter mutually agree upon an appraiser to
determine a Fair Market Value binding upon the Holder and Company; and (iv)
Company and the Holder shall split equally the costs of such appraisal unless
the Fair Market Value determined thereby is 110% or more of that determined by
the Outside Directors, in which case Company shall bear the full costs of such
appraisal.
5
6. Restrictions on Transfer.
------------------------
(a) Restrictive Legend. Each certificate representing (i) the Shares and
------------------
(ii) any other securities issued in respect of the Shares upon any stock split,
stock dividend or recapitalization (collectively, the "Restricted Securities"),
shall be endorsed as described in the Purchase Agreement.
(b) Ownership of Warrant. The Company may deem and treat the person in
--------------------
whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by any person
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until presentation of this Warrant for registration of transfer
as provided in this Section 6.
(c) Transfer of the Warrant. This Warrant shall not be transferred except
-----------------------
in accordance with provisions of the Purchase Agreement. Upon transfer of the
Warrant pursuant to this Section 6(c), the Company shall at the request of
Holder and upon surrender of the Warrant to the Company, with a duly executed
Assignment Form in the form of Exhibit C promptly issue new Warrants in the
names and amounts requested by the Holder to replace the surrendered Warrant.
7. Miscellaneous.
-------------
(a) No Rights of Stockholders. This Warrant does not entitle the Holder to
-------------------------
any voting rights as a stockholder of the Company prior to the exercise of the
Warrant; further, the Holder has no liability as to the Exercise Price.
(b) No Impairment. The Company will not, by amendment of its Certificate of
-------------
Incorporation, as amended, or through any reorganization, transfer of assets,
consolidation, merger, 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 to be observed or performed hereunder by the Company, but it will at
all times in good faith assist in the carrying out of all of the provisions of
this Warrant and in the taking of all such action as may be necessary or
appropriate in order to protect the rights of the holder of this Warrant against
impairment.
(c) Loss, Theft, Destruction or Mutilation of Warrant. Upon receipt by the
-------------------------------------------------
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
surrender and cancellation of this Warrant, if mutilated, the Company will make
and deliver a new Warrant of like tenor and dated as of such cancellation, in
lieu of this Warrant.
(d) Saturdays, Sundays, Holidays, etc. If the last or appointed day for the
---------------------------------
taking of any action or the expiration of any right required or granted herein
shall be a Saturday or a Sunday or shall be a legal holiday, then such action
may be taken or such
6
right may be exercised on the next succeeding day that is not a Saturday or a
Sunday or a legal holiday.
(e) Expiration of Warrant. Notwithstanding any other provision of this
---------------------
Warrant, this Warrant shall expire and shall no longer be exercisable at 12:00
a.m., New York time, on the Expiration Date.
(f) Governing Law. This Warrant shall be governed by and construed in all
-------------
respects in accordance with the laws of the State of New York without giving
effect to the conflicts of laws provisions thereof.
(g) Entire Agreement; Amendment. This Warrant constitutes the full and
---------------------------
entire understanding and agreement between the parties with regard to the
subjects hereof, except as may be provided in the Purchase Agreement. Neither
this Warrant nor any term hereof may be amended, waived, discharged, or
terminated other than by a written instrument signed by the party against whom
enforcement of any such amendment, waiver, discharge or termination is sought.
(h) Successors and Assigns. Except as otherwise provided herein, the
----------------------
provisions hereof shall inure to the benefit of, and be binding upon, the
permitted successors and assigns, heirs, executors, and administrators of the
Company and the Holder.
(i) Notices, etc. All notices and other communications required or
------------
permitted hereunder shall be in writing and shall be mailed by registered or
certified mail, postage prepaid, by overnight courier, or otherwise delivered by
hand or by messenger or sent by facsimile and confirmed by mail, addressed (a)
if to the Company, at Two ▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇,
Attention: General Counsel, and (b) if to the Holder, at the address of the
Holder set forth on the signature page of this Warrant. Each such notice or
other communication shall for all purposes of this Warrant be treated as
effective or having been given when delivered if delivered personally, or, if
sent by facsimile, mail or by Federal Express or other reputable overnight
carrier, upon receipt.
[The remainder of this page has been intentionally left blank.]
7
EXHIBIT 3
---------
Form of Warrant
Issued this ____ day of_____, 200_
INTERLIANT, INC.
By: ______________________________
Title:
Address: Two ▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
WARRANT HOLDER:
_______________________________________
By:____________________________________
Title:_________________________________
Address:
_______________________________________
_______________________________________
_______________________________________
Attention:_____________________________
with a copy to:
_______________________________________
_______________________________________
_______________________________________
Attention:_____________________________
8
EXHIBIT 3
---------
Form of Warrant
EXHIBIT A
---------
NOTICE OF EXERCISE
------------------
TO: INTERLIANT, INC.
Two ▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
The undersigned hereby elects to purchase _________ shares of Common Stock
of INTERLIANT, INC. pursuant to the terms of this Warrant, and tenders herewith
payment of the purchase price of such shares in full.
Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
------------------------------
(Name)
------------------------------
------------------------------
(Address)
The undersigned hereby represents and warrants that the aforesaid shares of
Common Stock are being acquired for the account of the undersigned for
investment and not with a view to, or for resale, in connection with the
distribution thereof, and that the undersigned has no present intention of
distributing or reselling such shares.
------------------------------------
(Signature)
Title:
------------------------------
------------------------
(Date)
EXHIBIT B
---------
NET ISSUE ELECTION NOTICE
-------------------------
TO: INTERLIANT, INC.
Two ▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇,
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
The undersigned hereby elects to receive _________ shares of Common Stock
of INTERLIANT, INC. pursuant to the terms of Section 1.2(b) of this Warrant, by
surrender of the applicable portion of this Warrant.
Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
------------------------------
(Name)
------------------------------
------------------------------
(Address)
The undersigned hereby represents and warrants that the aforesaid shares of
Common Stock are being acquired for the account of the undersigned for
investment and not with a view to, or for resale, in connection with the
distribution thereof, and that the undersigned has no present intention of
distributing or reselling such shares.
------------------------------------
(Signature)
Title:
------------------------------------
------------------------
(Date)
EXHIBIT C
---------
ASSIGNMENT FORM
(To be signed only upon transfer of Warrant)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto ______________________________, whose address is _____________________, the
right represented by the attached Warrant to purchase _________ shares of Common
Stock of INTERLIANT, INC., to which the attached Warrant relates.
Dated:____________________
------------------------------------
(Signature must conform in all respects to
name of Holder as specified on the face of
the Warrant)
------------------------------------
(Address)
Signed in the presence of:
------------------------
EXHIBIT 4
---------
REGISTRATION RIGHTS AGREEMENT
AMONG
INTERLIANT, INC.,
AND THE
INVESTORS
Dated as of April 16, 2001
TABLE OF CONTENTS
Page
1. Definitions. .............................................................1
2. Required Registration. ...................................................2
3. Incidental Registration. .................................................4
4. Registration Procedures. .................................................6
5. Expenses. ................................................................7
6. Indemnification and Contribution. ........................................7
7. Market Stand-Off Agreement. ..............................................9
8. Miscellaneous. ...........................................................9
i
REGISTRATION RIGHTS AGREEMENT
Registration Rights Agreement, dated as of April 16, 2001, among
INTERLIANT, INC., a Delaware corporation (the "Company") and the INVESTORS (as
hereinafter defined).
WITNESSETH:
----------
WHEREAS, the Company and the Investors have entered into a Securities
Purchase Agreement (the "Purchase Agreement"), dated of even date herewith,
------------------
pursuant to which the Company may issue and sell to the Investors, and the
Investors may purchase from the Company, Convertible Notes (as such term is
defined in the Purchase Agreement) in the aggregate principal amount of
$19,000,000 and warrants (the "Warrants") to purchase shares of the Company's
--------
Common Stock, par value $.01 per share (the "Common Stock"); and
------------
WHEREAS, in order to induce the Investors to enter into the Purchase
Agreement (and to purchase such Convertible Notes and Warrants) the Company has
agreed to provide certain registration rights with respect thereto;
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants and
agreements contained herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, it is agreed as
follows:
1. Definitions. The following terms shall have (unless other wise provided
-----------
elsewhere in this Registration Rights Agreement) the following respective
meanings (such meanings being equally applicable to both the singular and plural
form of the terms defined):
"Agreement" means this Registration Rights Agreement, including all
amendments, modifications and supplements and any exhibits or schedules to any
of the foregoing, and shall refer to the Agreement as the same may be in effect
at the time such reference becomes operative.
"Charter Investors" means Charterhouse Equity Partners III, L.P. and Chef
-----------------
Nominees Limited.
"Charter Registration Request" has the meaning given to it in Section 2(a).
----------------------------
"Commission" means the United States Securities and Exchange Commission.
----------
"Common Stock" has the meaning given to it in the recitals hereto.
------------
"Convertible Notes" has the meaning given to it in the Purchase Agreement.
----------------
"Demand Investor" has the meaning given in Section 3(c)(i).
"Investors" means the Charter Investors and the Softbank Investors.
"Maximum Offering Size" has the meaning given to it in Section 2(d).
"NASD" means the National Association of Securities Dealers, Inc., or any
successor corporation thereto.
"Parity Piggyback Registration Securities" means those securities of the
Company that have "Piggyback Registration Rights" pursuant to the Registration
Rights Agreement dated as of January 27, 2000 among the Company and the other
parties thereto.
"Purchase Agreement" has the meaning given to it in the recitals hereto.
"Registering Security Holder" has the meaning given to it in Section 3.
"Registrable Securities" means, collectively, (i) the shares of Common
Stock issuable upon conversion of the Convertible Notes, (ii) any shares of
Common Stock issuable upon exercise of Warrants, (iii) any shares of Common
Stock hereafter acquired by the Investors (excluding any shares of Common Stock
acquired by any Investor prior to the date hereof) or (iv) any shares of Common
Stock hereafter distributed to the Investors by the Company as a stock dividend,
stock split, recapitalization, reclassification or otherwise with respect to the
Convertible Notes, the Warrants or the shares of Common Stock covered by clauses
(i) (ii) or (iii) above; provided, however, that any such securities shall cease
to be Registrable Securities when (i) such securities shall have been registered
under the Securities Act, the registration statement with respect to the sale of
such securities shall have become effective under the Securities Act and such
securities shall have been disposed of pursuant to such effective registration
statement, (ii) such securities shall have been otherwise transferred, if new
certificates or other evidences of ownership for them not bearing a legend
restricting further transfer and not subject to any stop transfer order or other
restrictions on transfer shall have been delivered by the Company and subsequent
disposition of such securities shall not require registration or qualification
of such securities under the Securities Act or any state securities law then in
force, (iii) such securities shall cease to be outstanding or (iv) such
securities shall be eligible for sale pursuant to Rule 144(k) under the
Securities Act or any successor rule which permits resale of such securities
without restriction.
"Securities Act" has the meaning given to it in Section 2(a).
"Softbank Investors" means the entities set forth on the signature page
hereto under the caption "Softbank Investors".
"Softbank Registration Request" has the meaning given to it in Section
2(a).
"Warrants" has the meaning given to it in the recitals hereto.
2. Required Registration. (a) Upon receipt of a written request (x) from
---------------------
the Charter Investors (a "Charter Registration Request") or (y) from the
Softbank Investors (a "Softbank Registration Request" and, collectively with a
Charter Registration Request, a "Registration Request"), requesting that the
Company effect the registration of Registrable Securities under the Securities
Act of 1933, as amended (the "Securities Act"), the Company shall, as
expeditiously as is possible, use its best efforts to effect the registration
under the Securities Act of all shares of Registrable Securities which the
Company has been so requested to register by the Charter Investors or the
Softbank Investors, as applicable; provided, however,
2
that, subject to the provisions of the immediately following sentence, the
Company shall not be required to effect more than four registrations of
Registrable Securities on Form S-1 or Form S-2 pursuant to this Section 2 for
the Charter Investors or more than four registrations of Registrable Securities
on Form S-1 or Form S-2 pursuant to this Section 2 for the Softbank Investors.
The Company shall be obligated to file an unlimited number of registration
statements on Form S-3 (or any successor form) pursuant to any request therefor
received from a Charter Investor or a Softbank Investor. In order to count as an
"effected" registration statement, such registration statement shall not have
been withdrawn and all Registrable Securities registered pursuant to it
(excluding any overallotment shares) shall have been sold. The Company shall
have the right to defer the filing of any registration statement requested
pursuant to this Section 2 for a period not to exceed ninety (90) days if in the
good faith determination of the Board of Directors of the Company the filing of
such registration statement would be seriously detrimental to the Company.
(b) If the Charter Investors or the Softbank Investors, as applicable,
shall have delivered a Registration Request to the Company, the Company shall
give written notice thereof to the Charter Investors (in the case of a Softbank
Registration Request) and the Softbank Investors (in the case of a Charter
Registration Request) at least 20 days before the initial filing with the
Commission of the Registration Statement relating thereto, which notice shall
set forth the intended method of disposition of the securities proposed to be
registered by the Company. The notice shall offer to include in such filing the
aggregate number of shares of Registrable Securities as the Charter Investors
(in the case of a Softbank Registration Request) or the Softbank Investors (in
the case of a Charter Registration Request) may request. If the Charter
Investors (in the case of a Softbank Registration Request) or the Softbank
Investors (in the case of a Charter Registration Request) shall desire to have
Registrable Securities registered under this Section 2(b), they shall advise the
Company in writing within 10 days after the date of receipt of such offer from
the Company, setting forth the amount of such Registrable Securities for which
registration is requested. The Company shall thereupon include in such filing
the number of shares of Registrable Securities for which registration is so
requested, subject to Section 2(d)(i), and shall use its best efforts to effect
registration under the Securities Act of such shares.
(c) Underwriters. The managing underwriter or underwriters of any public
offering effected pursuant to this Section 2 shall be reasonably acceptable to
the Charter Investors (in the case of a Charter Registration Request) or the
Softbank Investors (in the case of a Softbank Registration Request) and the
Company.
(d) Priority in Requested Registration. If the managing underwriter of a
registration pursuant to this Section 2 shall advise the Company in writing
that, in its view, the number or proposed mix of securities requested to be
included in such registration (including securities which the Company requests
to be included ) exceeds the largest number of securities which can be sold
without having a material adverse effect on such offering (the "Maximum Offering
Size"), including the price at which such securities can be sold, the Company
will include in such registration:
(i) first, the Registrable Securities requested to be included in such
registration by the Charter Investors or by the Softbank Investors, as
3
applicable, pursuant to Section 2(a), and the Registrable Securities
requested to be included in such registration by the Charter Investors (in
the case of a Softbank Registration Request) or the Softbank Investors (in
the case of a Charter Registration Request) pursuant to Section 2(b),
allocated (if necessary) pro rata among the Charter Investors and the
Softbank Investors on the basis of the relative number of Registrable
Securities each of the Charter Investors and the Softbank Investors, as
applicable, has requested to be included in such registration;
(ii) second, securities of the Company to be sold for the account of
the Company; and
(iii) third, securities of the Company to be sold for the account of
other persons, with such priorities among them as the Company shall
determine.
3. Incidental Registration.
-----------------------
(a) If the Company at any time proposes to file on its behalf and/or on
behalf of any of its security holders (the "Registering Security Holders") a
Registration Statement under the Securities Act on any form (other than a
Registration Statement on Form S-4 or S-8 or any successor form for securities
to be offered in a transaction of the type referred to in Rule 145 under the
Securities Act or to employees of the Company pursuant to any employee benefit
plan, respectively) for the registration of shares of Common Stock of the
Company, it will give written notice to all holders of Registrable Securities at
least 30 days before the initial filing with the Commission of such Registration
Statement, which notice shall set forth the intended method of disposition of
the securities proposed to be registered by the Company. The notice shall offer
to include in such filing the aggregate number of shares of Registrable
Securities as such holders may request.
(b) Each holder of any such Registrable Securities desiring to have
Registrable Securities registered under this Section 3 shall advise the Company
in writing within 20 days after the date of receipt of such offer from the
Company, setting forth the amount of such Registrable Securities for which
registration is requested. The Company shall thereupon include in such filing
the number of shares of Registrable Securities for which registration is so
requested, subject to Section 3(c), and shall use its best efforts to effect
registration under the Securities Act of such shares.
(c) Priority In Incidental Registrations. If the managing underwriter of a
registration pursuant to this Section 3 shall advise the Company in writing
that, in its view, the number or mix of securities (including all Registrable
Securities) which the Company, the Charter Investors, the Softbank Investors and
any other persons intend to include in such registration exceeds the Maximum
Offering Size:
(i) If such registration was initiated by the Company, and not by any
other shareholder holding demand registration rights (a "Demand
4
Investor"), then the Company will include in such registration, in the priority
listed below, securities up to the Maximum Offering Size:
(A) first, securities of the Company to be sold for the account of the
Company;
(B) second, (x) the Registrable Securities requested to be included in
such registration pursuant to Section 3 hereof by any Charter Investor or
Softbank Investor holding such Registrable Securities and (y) the
securities requested to be included in such registration by any holder of
Parity Piggyback Registration Securities and by any Demand Investor,
allocated (if necessary) pro rata among such Charter Investors, Softbank
Investors, holders of Parity Piggyback Registration Securities and Demand
Investors on the basis of the relative number of (I) Registrable Securities
held by the Charter Investors and the Softbank Investors, and (II) Parity
Piggyback Registration Securities held by the holders of Parity Piggyback
Registration Securities; and
(C) third, securities of the Company to be sold for the account of
other persons, with such priorities among them as the Company shall
determine.
or
(ii) If such registration was initiated by a Demand Investor, then the
Company will include in such registration, in the priority listed below,
securities up to the Maximum Offering Size:
(A) first, the securities requested to be registered by such Demand
Investor;
(B) second, the Registrable Securities requested to be included in
such registration by the Charter Investors, the Softbank Investors and the
holders of Parity Piggyback Registration Securities pursuant to Section 3
hereof, allocated (if necessary) pro rata among all of such Charter
Investors, Softbank Investors and holders of Parity Piggyback Registration
Securities on the basis of the relative number of securities of the Company
held by each such Charter Investor, Softbank Investor or holder of
Piggyback Registration Securities;
(C) third, securities of the Company to be sold for the account of the
Company; and
(D) fourth, securities of the Company to be sold for the account of
other persons, with such priorities among them as the Company shall
determine.
5
4. Registration Procedures. If the Company is required by the provisions of
-----------------------
Section 2 or 3 to use its best efforts to effect the registration of any of its
securities under the Securities Act, the Company will, as expeditiously as
possible:
(a) prepare and file with the Commission a Registration Statement with
respect to such securities and use its best efforts to cause such Registration
Statement to become and remain effective for a period of time required for the
disposition of such securities by the holders thereof, but not to exceed 180
days;
(b) prepare and file with the Commission such amendments and supplements to
such Registration Statement and the prospectus used in connection therewith as
may be necessary to keep such Registration Statement effective and to comply
with the provisions of the Securities Act with respect to the sale or other
disposition of all securities covered by such Registration Statement until the
earlier of such time as all of such securities have been disposed of in a public
offering or the expiration of 180 days;
(c) furnish to the Investors such number of copies of a summary prospectus
or other prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents, as such selling
security holders may reasonably request;
(d) use its best efforts to register or qualify the securities covered by
such Registration Statement under such other securities or blue sky laws of such
jurisdictions within the United States and Puerto Rico as each holder of such
securities shall request (provided, however, that the Company shall not be
obligated to qualify as a foreign corporation to do business under the laws of
any jurisdiction in which it is not then qualified or to file any general
consent to service of process), and do such other reasonable acts and things as
may be required of it to enable such holder to consummate the disposition in
such jurisdiction of the securities covered by such Registration Statement;
(e) furnish, in connection with any registration of Registrable Securities,
on the date that such shares of Registrable Securities are delivered to the
underwriters for sale pursuant to such registration or, if such Registrable
Securities are not being sold through underwriters, on the date that the
Registration Statement with respect to such shares of Registrable Securities
becomes effective, (1) an opinion, dated such date, of the counsel representing
the Company for the purposes of such registration, addressed to the
underwriters, if any, and if such Registrable Securities are not being sold
through underwriters, then to the Investors, in customary form and covering
matters of the type customarily covered in such legal opinions; and (2) a
comfort letter dated such date, from the independent certified public
accountants of the Company, addressed to the underwriters, if any, and if such
Registrable Securities are not being sold through underwriters, then to the
Investors and, if such accountants refuse to deliver such letter to the
Investors, then to the Company in a customary form and covering matters of the
type customarily covered by such comfort letters and as the underwriters or such
holder(s) shall reasonably request;
(f) enter into customary agreements (including an underwriting agreement in
customary form with customary indemnification provisions) and take such other
6
actions as are reasonably required in order to expedite or facilitate the
disposition of such Registrable Securities; and
(g) otherwise use its 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, but not later than 18 months after the effective
date of the Registration Statement, an earnings statement covering the period of
at least 12 months beginning with the first full month after the effective date
of such Registration Statement, which earnings statements shall satisfy the
provisions of Section 11(a) of the Securities Act.
It shall be a condition precedent to the obligation of the Company to take
any action pursuant to this Agreement in respect of the securities which are to
be registered at the request of the Investors that (i) the Investors shall
furnish to the Company such information regarding the securities held by the
Investors and the intended method of disposition thereof as the Company shall
reasonably request and as shall be required under the Securities Act in
connection with the action taken by the Company and (ii) that the Investors
shall deliver and perform under such underwriting agreement as may be reasonably
requested by the underwriters.
5. Expenses. All expenses incurred in complying with this Agreement,
--------
including, without limitation, all registration and filing fees (including all
expenses incident to filing with the NASD), printing expenses, fees and
disbursements of counsel for the Company and counsel for the Investors, expenses
of any special audits incident to or required by any such registration and
expenses of complying with the securities or blue sky laws of any jurisdictions
pursuant to Section 4(d), shall be paid by the Company, except that the Company
shall not be liable for any fees, discounts or commissions to any underwriter in
respect of the securities sold by the Investors.
6. Indemnification and Contribution. (a) In the event of any registration
--------------------------------
of any Registrable Securities under the Securities Act pursuant to this
Agreement, the Company shall indemnify and hold harmless each Investor, its
directors and officers, and each other Person (including each underwriter) who
participated in the offering of such Registrable Securities and each other
Person, if any, who controls the Investor or such participating Person within
the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, the Investor or any such director or officer or
participating Person or controlling Person may become subject under the
Securities Act, the Securities Exchange Act, state securities or blue sky laws
or any other statute or at common law, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are based upon
(i) any untrue or alleged untrue statement of any material fact contained in any
Registration Statement under which such securities were registered under the
Securities Act, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, (ii) 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 or (iii) any violation
or alleged violation by the Company of the Securities Act, the Securities
Exchange Act, state securities or blue sky laws, any other statute or common
law; and the Company shall reimburse the Investor or such director, officer or
participating Person or controlling Person for any legal or any other expenses
reasonably incurred by the Investor or such director, officer or participating
Person or controlling Person in connection with investigating or defending any
such loss, claim, damage, liability or action;
7
provided, however, that the Company shall not be liable in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon any untrue statement or omission made in such Registration Statement,
preliminary prospectus, prospectus or amendment or supplement in reliance upon
and in conformity with written information furnished to the Company by the
Investor specifically for use therein. Such indemnity shall remain in full force
and effect regardless of any investigation made by or on behalf of the Investor
or such director, officer or participating Person or controlling Person, and
shall survive the transfer of such securities by the Investor.
(b) In the event of any registration of any Registrable Securities under
the Securities Act pursuant to this Agreement, each Investor shall indemnify and
hold harmless the Company, its directors and officers, and each other Person
(including each underwriter) who participated in the offering of such
Registrable Securities and each other Person, if any, who controls the Company
or such participating Person within the meaning of the Securities Act, against
any losses, claims, dam ages or liabilities, joint or several, to which the
Company or any such director or officer or participating Person or controlling
Person may become subject under the Securities Act, the Securities Exchange Act,
state securities or blue sky laws or any other statute or at common law, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon any untrue or alleged untrue statement of any
material fact contained in any Registration Statement under which such
securities were registered under the Securities Act, any preliminary prospectus
or final prospectus contained therein, or any amendment or supplement thereto,
or arise out of or are based upon 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 each case where such statement or omission
is in conformity with written information provided by the Investor expressly for
use therein, and shall reimburse the Company or such director, officer or
participating Person or controlling Person for any legal or any other expenses
reasonably incurred by the Company or such director, officer or participating
Person or controlling Person in connection with investigating or defending any
such loss, claim, damage, liability or action; provided, however, that the
Investor shall not be liable for any amounts in excess of the net proceeds
received by it for the sale of its shares. Such indemnity shall remain in full
force and effect regardless of any investigation made by or on behalf of the
Company or such director, officer or participating Person or controlling Person,
and shall survive the transfer of such securities by the Investor.
(c) Each party entitled to indemnification under this Section 6 shall give
notice to the party required to provide indemnification promptly after such
indemnified party has actual knowledge of any claim as to which indemnity may be
sought, 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 approved by the indemnified party (whose approval shall not be
unreasonably withheld); 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 6. The indemnified
party may participate in such defense at such party's expense; provided,
however, that the indemnifying party shall pay such expense if representation of
such indemnified party by the counsel retained by the indemnifying party would
be inappropriate due to actual or potential differing interests between the
indemnified party and any other party represented by such counsel in such
proceeding. No indemnifying party, in the defense of any
8
such claim or litigation shall, except with the consent of each indemnified
party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such indemnified party of a release from all liability in respect
of such claim or litigation, and no indemnified party shall consent to entry of
any judgment or settle such claim or litigation without the prior written
consent of the indemnifying party.
(d) If the indemnification provided for in this Section 6 is unavailable to
an indemnified party hereunder in respect of any losses, claims, damages,
liabilities or expenses referred to therein, then the indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities or expenses in such proportion as is appropriate to reflect
the relative fault of the indemnifying party and indemnified parties in
connection with the actions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations;
provided that in the case of the Investor, such contribution shall not exceed
any amounts in excess of the net proceeds received by the Investor for the sale
of its shares. The relative fault of such indemnifying party and indemnified
parties shall be determined by reference to, among other things, whether any
action in question, including any untrue or alleged untrue statement of a
material fact or omission or alleged omission to state a material fact, has
been made by, or relates to information supplied by, such indemnifying party or
indemnified parties, and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such action. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include any legal or other
fees or expenses reason ably incurred by such party in connection with any
investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by pro rata
allocation or by any other method of allocation which does not take account of
the equitable considerations referred to in the immediately preceding paragraph.
No Person guilty of fraudulent misrepresentation (within the meaning of Section
11(f) of the Securities Act) shall be entitled to contribution from any Person
who was not also guilty of such fraudulent misrepresentation.
(e) The obligations of the Company and the Investors under this Section 6
shall survive the completion of any offering of Registrable Shares in a
registration statement under Sections 2 and 3, and otherwise.
7. Market Stand-Off Agreement. If requested by an underwriter of securities
--------------------------
of the Company the Investors shall not sell or otherwise transfer or dispose of
any securities held by them during the one hundred twenty (120) day period
following the effective date of a Registration Statement; provided, that all
officers and directors of the Company, as well as all beneficial owners of
greater than 10% of the Company's Common Stock, enter into similar agreements.
8. Miscellaneous.
-------------
9
(a) Remedies. The Investors, in addition to being entitled to exercise all
rights granted by law, including recovery of damages, will be entitled to
specific performance of their rights under this Agreement. The Company agrees
that monetary damages would not be adequate compensation for any loss incurred
by reason of a breach by it of the provisions of this Agreement and hereby
agrees to waive the defense in any action for specific performance that a remedy
at law would be adequate.
(b) Amendments and Waivers. Except as otherwise provided herein, the
provisions of this Agreement may not be amended, modified or supplemented, and
waivers or consents to departure from the provisions hereof may not be given
unless the Company and the Investors have approved the same in writing.
(c) Notices. Any notice, demand, request, con sent, approval, declaration,
delivery or other communication hereunder to be made pursuant to the provisions
of this Agreement shall be sufficiently given or made if in writing and (i)
delivered in person with receipt acknowledged, (ii) sent by registered or
certified mail, return receipt requested, postage prepaid, (iii) sent by
overnight courier with guaranteed next-day delivery, or (iv) sent by telex or
telecopier, in each case addressed as follows:
(i) If to the Charter Investors, to them at:
c/o Charterhouse Group International, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Fax: (▇▇▇) ▇▇▇-▇▇▇▇
(ii) If to the Softbank Investors, to them at:
c/o Softbank Venture Capital
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
(iii) If to the Company, to it at:
Interliant, Inc.
Two ▇▇▇▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: General Counsel
or at such other address as may be substituted by notice given as
hereinprovided. The giving of any notice required hereunder may be waived in
writing by the party entitled to receive such notice. Every notice, demand,
request, consent, approval, declaration, delivery or other communication
hereunder shall be deemed to have been duly given or served on the date on which
personally delivered, with receipt acknowledged, or three (3) Business Days
after the
10
same shall have been deposited in the United States mail, one business day after
sent by overnight courier or on the day telexed or telecopied.
(d) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon (i) the successors of each of the parties hereto and (ii)
the assigns of each of the Investors, including any Person to whom Registrable
Securities are transferred if the transferee or assignee acquires at least
twenty- five percent (25%) of the then outstanding Registrable Securities held
by such Investor or if the transferee or assignee of Registrable Securities is a
member, general partner, limited partner, retired partner or other affiliate of
any Investor; provided that any such transferee or assignee shall execute a
counterpart of, or shall otherwise become bound in writing by the requirements
of, this Agreement and be considered an "Investor" for purposes of this
Agreement.
(e) Mergers, Etc. The Company shall not, directly or indirectly, enter into
any merger, consolidation or reorganization in which the Company shall not be
the surviving corporation unless the proposed surviving corporation shall, prior
to such merger, consolidation or reorganization, agree in writing to assume the
obligations of the Company under this Agreement, and for that purpose references
hereunder to "Registrable Securities" shall be deemed to be references to the
securities which holders of then Registrable Securities would be entitled to
receive in exchange for Registrable Securities under any such merger,
consolidation or reorganization; provided, however, that the provisions of this
Section 8(f) shall not apply in the event of any merger, consolidation or
reorganization in which the Company is not the surviving corporation if all
holders of then Registrable Shares are entitled to receive in exchange for such
Registrable Securities consideration consisting solely of (i) cash, (ii)
securities of the acquiring corporation which may be immediately sold to the
public without registration under the Securities Act, or (iii) securities of the
acquiring corporation which the acquiring corporation has agreed to register
within 90 days of completion of the transaction for resale to the public
pursuant to the Securities Act.
(f) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or other wise affect the meaning hereof.
(g) Governing Law. This Agreement shall be governed by and construed in
accordance with the internal laws of the State of New York (i.e., without regard
to its conflicts of law rules).
(h) Severability. Wherever possible, each pro vision of this Agreement
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any pro vision of this Agreement shall be prohibited by
or invalid under applicable law, such provision shall be ineffective to the
extent of such prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Agreement.
[END OF TEXT]
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IN WITNESS WHEREOF, the Company and the Purchaser have executed this
Registration Rights Agreement as of the day and year first above written.
INTERLIANT, INC.
By:_________________________________
Name:
Title:
CHARTERHOUSE EQUITY PARTNERS III, L.P.
By: CHUSA EQUITY INVESTORS III, L.P.,
General Partner
By: CHARTERHOUSE EQUITY III, L.P.,
General Partner
By:____________________________
Name:
Title:
CHEF NOMINEES LIMITED
By: CHARTERHOUSE GROUP
INTERNATIONAL, INC.,
Attorney-in-Fact
By:______________________________________
Name:
Title:
12
Softbank Investors: SOFTBANK TECHNOLOGY VENTURES VI L.P.
By: SBTV VI LLC, General Partner
By:____________________________
Name:
Title:
SOFTBANK U.S. VENTURES VI L.P.
By: SBTV VI LLC, General Partner
By:____________________________
Name:
Title:
SOFTBANK TECHNOLOGY VENTURES
ADVISORS FUND VI L.P.
By: SBTV VI LLC, General Partner
By:____________________________
Name:
Title:
SOFTBANK TECHNOLOGY VENTURES
SIDE FUND VI L.P.
By: SBTV VI LLC, General Partner
By:____________________________
Name:
Title:
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EXHIBIT 5
Interliant, Inc. captialization summary as of 16 April 2001
Shares Outstanding Q4 00 48,796,218
Shares issued since 12/31/00 898,990
---------------
Shares Outstanding 4/16/01 49,695,208
Potential New Shares
Options Outstanding (1) 5,053,428
CEO options 2,500,000
EVP Sales/Marketing Options 400,000
▇▇▇▇ Warrants Outstanding (2) 180,000
Potential from Convertible Debt (3) 3,104,049
---------------
Total Potential New Shares 11,237,477
Potential Fully Diluted Shares (4) 60,932,685
===============
(1) May not include all cancelled options of employees terminated since 4/1/01
as well as options granted on 4/10/01 to new hires (approx. 50,000)
(2) Issued to The ▇▇▇▇ Group on 10 August 2000, expiring on 31 July 2003, and
have a strike of $13.06
(3) Microsoft and 7% Conv. Subord. Notes (Q2/2000 transactions)
(4) Note - analysis does not consider if options or warrants are "in the money"
and does not conform to Treasury Method.
Analysis does include securities contemplated to be issued pursuant to this
agreement.