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WARRANT AND INVESTOR RIGHTS AGREEMENT
among
PEGASUS COMMUNICATIONS CORPORATION
and
THE PARTIES SET FORTH ON SCHEDULE I HERETO
Dated as of April 2, 2003
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TABLE OF CONTENTS
Page
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ARTICLE I DEFINITIONS AND ACCOUNTING MATTERS.............................................................1
SECTION 1.1 Definitions...................................................................1
SECTION 1.2 Terms Generally...............................................................8
SECTION 1.3 Accounting Terms and Determinations...........................................8
ARTICLE II ISSUANCE OF WARRANTS..........................................................................9
SECTION 2.1 Issuance of Warrants..........................................................9
SECTION 2.2 Form of Warrant Certificates..................................................9
SECTION 2.3 Exercise of Warrants.........................................................10
ARTICLE III ADJUSTMENTS OF EXERCISE PRICE OR WARRANT STOCK ISSUABLE UPON EXERCISE.......................11
SECTION 3.1 Purchases and Redemptions....................................................11
SECTION 3.2 Stock Dividend, Subdivisions, Combinations and Reclassifications.............11
SECTION 3.3 Issuance of Common Stock or Common Stock Equivalent..........................12
SECTION 3.4 Certain Distributions........................................................13
SECTION 3.5 Tender or Exchange Offer.....................................................14
SECTION 3.6 Merger, Consolidation or Disposition of Assets...............................15
SECTION 3.7 Other Actions................................................................15
SECTION 3.8 Notice of Adjustments........................................................15
SECTION 3.9 Notice of Certain Corporate Action...........................................16
ARTICLE IV PURCHASE OR EXCHANGE OF WARRANT STOCK BY THE COMPANY.........................................16
SECTION 4.1 Company's Obligation to Purchase or Exchange Warrant Stock...................16
SECTION 4.2 Company Purchase Closing.....................................................17
SECTION 4.3 Warrant Stock Exchange Closing...............................................17
SECTION 4.4 Adjustment of Exchange Ratio.................................................18
ARTICLE V REPRESENTATIONS AND WARRANTIES................................................................18
SECTION 5.1 Existence; Qualification.....................................................18
SECTION 5.2 No Breach....................................................................19
SECTION 5.3 Corporate Action.............................................................19
SECTION 5.4 Approvals....................................................................19
SECTION 5.5 Capitalization...............................................................20
SECTION 5.6 Private Offering.............................................................21
SECTION 5.7 Brokers......................................................................21
SECTION 5.8 Loan Agreement...............................................................21
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ARTICLE VI REPRESENTATIONS AND WARRANTIES OF INITIAL HOLDER.............................................21
SECTION 6.1 Authorization; No Contravention..............................................21
SECTION 6.2 Binding Effect...............................................................22
SECTION 6.3 Purchase for Initial Holders' Account........................................22
SECTION 6.4 Securities Act Compliance....................................................22
ARTICLE VII REGISTRATION RIGHTS.........................................................................22
SECTION 7.1 Demand Registration..........................................................22
SECTION 7.2 Incidental or "Piggy-Back" Registration......................................25
SECTION 7.3 Form S-3 Registration........................................................26
SECTION 7.4 Hold-Back Agreements.........................................................27
SECTION 7.5 Registration Procedures......................................................28
SECTION 7.6 Registration Expenses........................................................32
SECTION 7.7 Agreement by Holders.........................................................32
SECTION 7.8 Indemnification..............................................................33
SECTION 7.9 Rule 144.....................................................................35
SECTION 7.10 Remedies.....................................................................36
SECTION 7.11 Recapitalizations, Exchanges, etc............................................36
ARTICLE VIII OTHER RIGHTS OF HOLDERS....................................................................36
SECTION 8.1 Dispositions of Warrants, Warrant Stock or Marketable Capital
Stock........................................................................36
SECTION 8.2 Delivery Expenses............................................................37
SECTION 8.3 Taxes........................................................................37
SECTION 8.4 Indemnification..............................................................37
SECTION 8.5 Inspection Rights............................................................38
SECTION 8.6 Board Observer...............................................................38
ARTICLE IX MISCELLANEOUS................................................................................39
SECTION 9.1 Waiver.......................................................................39
SECTION 9.2 Notices......................................................................39
SECTION 9.3 Expenses, Etc................................................................39
SECTION 9.4 Amendments, Etc..............................................................40
SECTION 9.5 Successors and Assigns.......................................................40
SECTION 9.6 Survival.....................................................................40
SECTION 9.7 Specific Performance; Good Faith.............................................40
SECTION 9.8 Captions.....................................................................41
SECTION 9.9 Counterparts.................................................................41
SECTION 9.10 GOVERNING LAW................................................................41
SECTION 9.11 CONSENT TO JURISDICTION......................................................41
SECTION 9.12 WAIVER OF JURY TRIAL.........................................................42
SECTION 9.13 Severability.................................................................42
SECTION 9.14 Entire Agreement.............................................................42
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SCHEDULE I - INITIAL HOLDERS
SCHEDULE II - PRO RATA PORTIONS
EXHIBIT A - FORM OF WARRANT CERTIFICATE
EXHIBIT B - FORM OF EXERCISE NOTICE
EXHIBIT C - FORM OF ASSIGNMENT
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WARRANT AND INVESTORS RIGHTS AGREEMENT
THIS WARRANT AND INVESTORS RIGHTS AGREEMENT (as amended, supplemented
or modified from time to time, the "Agreement"), dated as of April 2, 2003,
between PEGASUS COMMUNICATIONS CORPORATION, a Delaware corporation (the
"Company"), and the entities set forth on Schedule I hereto (each, an "Initial
Holder," and collectively, the "Initial Holders").
WHEREAS, Pegasus Satellite Communications, Inc. ("PSC"), a Delaware
corporation and a subsidiary of the Company, has formed a wholly owned
subsidiary, Pegasus Media & Communications Finance Corporation, a Delaware
corporation (the "Borrower").
WHEREAS, the Initial Holders and the Borrower are entering into a Term
Loan Agreement, dated as of the date hereof (as amended, supplemented or
modified from time to time, the "Loan Agreement"), pursuant to which the Initial
Holders are making one or more term loans to the Borrower from time to time in
an aggregate principal amount of up to $100,000,000, subject to the terms and
conditions thereof; and
WHEREAS, as a condition to the effectiveness of the Loan Agreement and
to induce the Initial Holders to make the term loans to the Borrower pursuant
thereto, the Company has agreed to enter into this Agreement that provides for
the Company to (i) issue Warrants (as defined herein) to the Initial Holders,
providing for the purchase of shares of Warrant Stock (as defined herein), and
(ii) provide Holders (as defined herein) certain other rights including
registration rights, upon the terms and conditions set forth herein.
NOW, THEREFORE, the parties hereto, intending to be legally bound, and
in consideration of the foregoing and the mutual covenants contained herein and
for other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, hereby agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING MATTERS
SECTION 1.1 Definitions. As used in this Agreement, the following terms
shall have the following meanings:
"Affiliate" means any Person who is an "affiliate" as defined in Rule
12b-2 of the General Rules and Regulations under the Exchange Act.
"Agreement" has the meaning specified in the preamble of this
Agreement.
"Approved S-3 Underwriter Amount" has the meaning specified in Section
7.3(c).
"Approved Underwriter" has the meaning specified in Section 7.1(e).
"Approved Underwriter Amount" has the meaning specified in Section
7.1(c).
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"Board of Directors" means the Board of Directors of the Company.
"Borrower" has the meaning specified in the recitals of this Agreement.
"Borrowing Date" has the meaning specified in the Loan Agreement.
"Business Day" means any day that is not a Saturday, Sunday or other
day on which commercial banks in New York City are authorized or required by law
to remain close.
"Cashless Exercise" has the meaning specified in Section 2.3(d).
"Class A Common Stock" means the Class A Common Stock, par value $0.01
per share, of the Company, or any other class of capital stock resulting from
successive changes, conversions or reclassifications of such Class A Common
Stock.
"Class B Common Stock" means the Class B Common Stock, par value $0.01
per share, of the Company, or any other class of capital stock resulting from
successive changes, conversions or reclassifications of such Class B Common
Stock
"Closing Date" has the meaning set forth in the Loan Agreement.
"Commission" means the Securities and Exchange Commission or any other
similar or successor agency of the Federal government administering the
Securities Act and/or the Exchange Act.
"Commitment Period" has the meaning specified in the Loan Agreement.
"Common Stock" means, collectively, (i) the Class A Common Stock, (ii)
the Class B Common Stock, (iii) the Non-Voting Common Stock, and (iv) any other
capital stock of the Company of any other class or series, which is not
preferred as to dividends or distributions of assets over any other class or
series of any other capital stock of the Company. References herein to the
Common Stock outstanding "on a fully diluted basis" at any time means the number
of shares of Common Stock then issued and outstanding, assuming full conversion,
exercise and exchange of all Common Stock Equivalents and other securities,
rights and options that are (or may become) exchangeable for, or exercisable or
convertible into, Common Stock or Common Stock Equivalents, including the
Warrants. All references to Common Stock herein shall be subject to appropriate
adjustment by reason of any stock dividend, split, reverse split, combination,
recapitalization or any similar corporate transaction.
"Common Stock Equivalent" means any security or obligation which is by
its terms convertible into shares of any class of Common Stock or another Common
Stock Equivalent, and any option, warrant or other subscription or purchase
right with respect to any class of Common Stock.
"Company" has the meaning specified in the preamble of this Agreement.
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"Company Indemnified Party" has the meaning assigned in Section 7.7(b).
"Company Purchase" has the meaning specified in Section 4.1(b).
"Company Purchase Price" has the meaning specified in Section 4.1(b).
"Company Underwriter" has the meaning specified in Section 7.2(a).
"Condition of the Company" means the condition (financial or other),
business, results of operations, prospects, or properties of the Company and its
Subsidiaries, taken as a whole.
"Current Market Value" means, with respect to any Equity Securities, as
of the date of determination, (a) the average of the Daily Market Prices for
each day during the 30 consecutive trading days beginning 45 trading days prior
to such date, or (b) if such Equity Securities are not publicly traded or are
not registered under the Exchange Act, a market price per share determined at
the Company's expense by an appraiser chosen by the Required Holders and
reasonably satisfactory to the Company, or, if no such appraiser is so chosen
more than ten (10) Business Days after notice of the necessity of such
calculation shall have been delivered by the Company to the Required Holders,
then by an appraiser chosen by the Company and reasonably satisfactory to the
Required Holders. Notwithstanding clause (b) of the preceding sentence, if the
Non-Voting Common Stock is not, but the Class A Common Stock is, publicly traded
or registered under the Exchange Act, the Current Market Value of the Non-Voting
Common Stock shall be equal to the Current Market Value of the Class A Common
Stock. Any determination of the market price by an appraiser shall be based on a
valuation of the Company as an entirety without regard to any discount for
minority interests or disparate voting rights among classes of Equity
Securities.
"Daily Market Price" means, for each Business Day and with respect to
any Equity Securities, the last sale price on such day as reported in the
Consolidated Last Sale Reporting System or as quoted in the Nasdaq National
Market, or if such last sale price is not available, the average of the closing
bid and asked prices as reported in either such system, or in any other case the
higher bid price quoted for such day as reported by The Wall Street Journal and
the National Quotation Bureau pink sheets.
"Demand Registration" has the meaning specified in Section 7.1(a).
"Equity Securities" means, with respect to any Person that is a
corporation, the authorized shares of such Person's capital stock, including all
classes of common, preferred, voting and nonvoting capital stock, and, as to any
Person that is not a corporation or an individual, the ownership interests in
such Person, including, without limitation, the right to share in profits and
losses, the right to receive distributions of cash and property, and the right
to receive allocations of items of income, gain, loss, deduction and credit and
similar items from such Person, whether or not such interests include voting or
similar rights entitling the holder thereof to exercise control over such
Person.
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"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Exchange Ratio" has the meaning specified in Section 4.1(b).
"Exchange Shares" has the meaning specified in Section 4.1(b).
"Excluded Transaction" means: (a) any issuance of shares of Common
Stock or options to purchase shares of Common Stock to employees, officers or
directors of the Company or any of its Subsidiaries pursuant to a stock option
plan or other employee benefit arrangement adopted by the Board of Directors and
approved by the holders of Common Stock when required by law, and the issuance
of shares of Common Stock upon exercise of such options, (b) the issuance of any
Common Stock or Common Stock Equivalent convertible or exercisable for any
Common Stock as consideration in connection with any bona fide acquisition or
other business combination by the Company approved by the Board of Directors, or
the issuance of any Common Stock or other Common Stock Equivalents upon the
conversion or exercise thereof, or (c) any issuance of Common Stock or other
Common Stock Equivalents upon the conversion or exercise of Common Stock
Equivalents outstanding on the Closing Date or the occurrence of a Triggering
Event.
"Exercise Notice" has the meaning specified in Section 2.3(a).
"Exercise Price" means $16.00, subject to adjustment pursuant to
Article III.
"Expiration Date" means the seventh anniversary date of the earlier to
occur of (x) the Closing Date or (y) a Triggering Event.
"Expiration Time" has the meaning specified in Section 3.5.
"GAAP" means generally accepted accounting principles in the U.S.,
consistently applied throughout the specified period.
"Governmental Authority" means the government of the United States of
America, any other nation or any political subdivision thereof, whether state or
local, and any agency, authority, instrumentality, regulatory body, court,
central bank or other entity exercising executive, legislative, judicial,
taxing, regulatory, monetary or administrative powers or functions of or
pertaining to government.
"Holder" means any Person (including each Initial Holder) who acquires
Warrants, Warrant Stock or Marketable Capital Stock (issued in a Warrant Stock
Exchange) pursuant to the provisions of this Agreement, including any
transferees of Warrants, Warrant Stock or Marketable Capital Stock (issued in a
Warrant Stock Exchange); provided, however, that a Holder of Warrants, Warrant
Stock or Marketable Capital Stock purchased pursuant to an effective
Registration Statement or pursuant to Rule 144 (other than Affiliates of the
Company) shall not be deemed a Holder.
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"Holder Indemnified Party" has the meaning specified in Section 7.7(a).
"Incidental Registration" has the meaning specified in Section 7.2(a).
"Indemnified Parties" has the meaning specified in Section 7.8(c).
"Indemnifying Party" has the meaning specified in Section 7.8(c).
"Indemnity Agreement" means the Indemnity Agreement, dated as of the
date hereof, by and among PSC, the Borrower and DBS Investors Agent, Inc.
"Initial Holder" and "Initial Holders" has the meaning specified in the
preamble of this Agreement.
"Initiating Holders" has the meaning specified in Section 7.1(a).
"Issue Date" means, with respect to a Warrant, the date upon which such
Warrant is issued by the Company, as evidenced by the Warrant Certificate for
such Warrant.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
For purposes of this Agreement, a Person shall be deemed to own subject to a
Lien any asset which it has acquired or holds subject to the interest of a
vendor or lessor under any conditional sale agreement, capital lease or other
title retention agreement relating to such asset.
"Loan Agreement" has the meaning specified in the recitals of this
Agreement.
"Loans" has the meaning specified in the Loan Agreement.
"Make-Whole Amount" has the meaning specified in Section 4.1(b).
"Marketable Capital Stock" means the Class A Common Stock, unless, with
respect to any Business Day, the Class A Common Stock is not the class of Common
Stock of the Company having the largest average aggregate market capitalization
or the greatest average trading volume, in each case for the 30 consecutive
trading days ending on such Business Day, as quoted in the Nasdaq National
Market, in which case the Marketable Capital Stock shall mean such class of
Common Stock which has the largest average aggregate market capitalization or
the greatest average trading volume, in each case for the 30 consecutive trading
days ending on such Business Day. If, for any such relevant 30-trading day
period, the class of Common Stock having the largest average aggregate market
capitalization is not the same as the class of Common Stock having the greatest
average trading volume, the Required Holders shall determine, in their sole
discretion, which class of Common Stock shall be the Marketable Capital Stock.
"NASD" means the National Association of Securities Dealers.
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"New Issue Date" has the meaning specified in Section 3.3(a).
"New Issue Price" has the meaning specified in Section 3.3(a).
"Non-Voting Common Stock" means the Non-Voting Common Stock of the
Company, par value $0.01 per share, or any other class of stock resulting from
successive changes, conversions or reclassification of such Non-Voting Common
Stock.
"Number Issuable" has the meaning specified in Section 3.2.
"Original Principal" has the meaning specified in the Loan Agreement.
"Pegasus Partners" has the meaning specified in Section 8.6(a).
"Person" means any natural person, corporation, limited liability
company, trust, joint venture, association, company, partnership, Governmental
Authority or other entity.
"Price Differential" has the meaning specified in Section 4.1(b).
"Pro Rata Portion" has the meaning specified in Section 2.1(a).
"Prospectus" means any preliminary or final prospectus included in a
Registration Statement.
"PSC" has the meaning specified in the recitals of this Agreement.
"Purchase or Exchange Closing Date" has the meaning specified in
Section 4.1(b).
"Registrable Securities" means each of the following: (a) any shares of
Warrant Stock issued or issuable upon exercise of the Warrants, (b) any shares
of Marketable Capital Stock issued or issuable upon an exchange of Warrant Stock
pursuant to Section 4.1, and (c) any shares of Common Stock issued or issuable
in respect of shares of Common Stock issued, issuable or held pursuant to clause
(a) or (b) above by way of a stock dividend or stock split or in connection with
a combination of shares, recapitalization, merger, consolidation or other
reorganization or otherwise.
"Registration Expenses" has the meaning specified in Section 7.6.
"Registration Statement" means any registration statement of the
Company in compliance with and effective under the Securities Act, which covers
any of the Registrable Securities pursuant to the provisions of this Agreement,
including the Prospectus, amendments and supplements to such Registration
Statement, including post-effective amendments, all exhibits and all material
incorporated by reference in such Registration Statement.
"Relevant Date" has the meaning specified in Section 3.3(a).
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"Required Holders" means at any time, the Holder or Holders of a
majority of the Warrant Stock issued or issuable upon exercise of the Warrants;
provided, that Required Holders shall include (i) DBS Investors, LLC, in the
event DBS Investors, LLC and its Affiliates collectively hold at such time at
least 66-2/3% of the aggregate Warrant Stock issued or issuable upon exercise of
the Warrants held by DBS Investors, LLC on the Closing Date (or upon the
occurrence of a Triggering Event); provided, however, that for the purposes of
this definition only, DBS Investors, LLC shall be deemed to own that portion of
the Warrants and Warrant Stock held by DBS Investors, LLC which is equal to the
ownership interest of Pegasus Partners II, L.P. and its Affiliates in DBS
Investors, LLC at such time) and (ii) Avenue Special Situations Fund II, LP, in
the event Avenue Special Situations Fund II, LP and its Affiliates collectively
hold at such time at least 25% of the aggregate Warrant Stock issued or issuable
upon exercise of the Warrants by all Holders on the Closing Date (or upon the
occurrence of a Triggering Event). For purposes of giving notices, waivers and
consents hereunder, Holders of Warrants shall be deemed holders of the Warrant
Stock issued on exercise thereof.
"Rule 144" means Rule 144 promulgated by the Commission under the
Securities Act (or any successor or similar rule then in force).
"Rule 144A" means Rule 144A promulgated by the Commission under the
Securities Act (or any successor or similar rule then in force).
"S-3 Registration" has the meaning specified in Section 7.3(a).
"Sale Notice" has the meaning specified in Section 4.1(a).
"Sale Shares" has the meaning specified in Section 4.1(a).
"Securities Act" means the Securities Act of 1933, as amended, or any
similar Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Holder" has the meaning specified in Section 4.1(a).
"Subsidiary" of a Person means (a) any corporation more than 50% of the
outstanding securities having ordinary voting power of which shall at the time
be owned or controlled, directly or indirectly, by such Person or by one or more
of its Subsidiaries or by such Person and one or more of its Subsidiaries, or
(b) any company, partnership, association, joint venture or similar business
organization more than 50% of the ownership interests having ordinary voting
power of which shall at the time be so owned or controlled. Unless otherwise
expressly provided, all references herein to a "Subsidiary" means a direct or
indirect Subsidiary of the Company.
"Transaction Documents" has the meaning specified in the Loan
Agreement.
"Transferred Securities" has the meaning specified in Section 8.1(a).
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"Triggering Event" has the meaning specified in the Indemnity
Agreement.
"Valid Business Reason" has the meaning specified in Section
7.1(f).
"Warrant" and "Warrants" means the Warrants issued by the
Company to the Initial Holders pursuant to this Agreement, each exercisable to
purchase, at a per share price equal to the Exercise Price, one (1) share of
Warrant Stock, subject to adjustment pursuant to Article III, and all Warrants
issued upon transfer, division or combination of, or in substitution for, any
thereof.
"Warrant Certificate" has the meaning specified in Section 2.2.
"Warrant Purchase Price" has the meaning set forth in Section 2.3(a).
"Warrant Stock" means all shares of Non-Voting Common Stock issued or
issuable from time to time upon exercise of the Warrants.
"Warrant Stock Exchange" has the meaning specified in Section 4.1(b).
SECTION 1.2 Terms Generally. The definitions of terms herein shall
apply equally to the singular and plural forms of the terms defined. Whenever
the context may require, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include", "includes" and "including" shall
be deemed to be followed by the phrase "without limitation". The word "will"
shall be construed to have the same meaning and effect as the word "shall".
Unless the context requires otherwise (a) any definition of or reference to any
agreement, instrument or other document herein shall be construed as referring
to such agreement, instrument or other document as from time to time amended,
supplemented or otherwise modified (subject to any restrictions on such
amendments, supplements or modifications set forth herein), (b) any reference
herein to any Person shall be construed to include such Person's successors and
assigns, (c) the words "herein", "hereof" and "hereunder", and words of similar
import, shall be construed to refer to this Agreement in its entirety and not to
any particular provision hereof, and (d) all references herein to Articles,
Sections, Exhibits, Annexes and Schedules shall be construed to refer to
Articles and Sections of, and Exhibits, Annexes and Schedules to, this
Agreement.
SECTION 1.3 Accounting Terms and Determinations. Except as otherwise
may be expressly provided herein, all accounting terms used herein shall be
interpreted, and all financial statements and certificates and reports as to
financial matters required to be delivered to the Holders hereunder shall be
prepared, in accordance with GAAP. All calculations made for the purposes of
determining compliance with the terms of this Agreement shall (except as
otherwise may be expressly provided herein) be made by application of GAAP.
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ARTICLE II
ISSUANCE OF WARRANTS
--------------------
SECTION 2.1 Issuance of Warrants. In consideration of the Initial
Holders entering into the Loan Agreement and making the Loans, the Company shall
issue to the Initial Holders an aggregate of up to 1,000,000 Warrants (subject
to stock splits, combinations, recapitalizations or similar transactions),
allocated among the Initial Holders (or their transferees) according to the pro
rata portions set forth in Schedule II hereto (the "Pro Rata Portions"), in
accordance with the following:
(i) on the Closing Date, the Company shall issue to the
Initial Holders an aggregate of 500,000 Warrants (subject to stock splits,
combinations, recapitalizations or similar transactions) for the first
$35,000,000 in Original Principal advanced to the Borrower on the Closing Date;
and
(ii) during the Commitment Period, on each Borrowing Date
(including, without limitation, the Closing Date), the Company shall issue to
the Initial Holders an additional aggregate of 10,000 Warrants (subject to stock
splits, combinations, recapitalizations or similar transactions) for each
$1,000,000 in aggregate Original Principal (in excess of the first $35,000,000
in Original Principal advanced to the Borrower on the Closing Date) advanced to
the Borrower on such Borrowing Date, up to an aggregate total of 500,000
additional Warrants (subject to stock splits, combinations, recapitalizations or
similar transactions).
In addition to the foregoing but without duplication of clauses (i) and
(ii) above, upon the occurrence of a Triggering Event (as defined in the
Indemnity Agreement), the Company shall issue at the time specified in Section
3(b) or (e) of the Indemnity Agreement, 500,000 Warrants (subject to stock
splits, combinations, recapitalization or similar transactions) to the Initial
Holders, allocated among the Initial Holders (or their transferees) in
accordance with their Pro Rata Portions. On the Closing Date (or upon the
occurrence of a Triggering Event) and on each Borrowing Date thereafter, the
Company shall be deemed to be making to the Holders the representations and
warranties set forth in Article V as of the Closing Date and such Borrowing Date
(except for representations and warranties set forth in Article V that relate to
a specified earlier date).
SECTION 2.2 Form of Warrant Certificates. The Warrants shall be
evidenced by certificates substantially in the form attached hereto as Exhibit A
(the "Warrant Certificate"). On each Issue Date, the Company shall deliver to
the Initial Holders Warrant Certificates for the Warrants issued on such date
pursuant to Section 2.1, registered in the names of the Initial Holders, except
that, if any Initial Holder shall notify the Company in writing prior to such
issuance that it desires Warrant Certificates for such Warrants to be issued in
other denominations or registered in the name or names of any other Person,
nominee or nominees, for its or their benefit, then the Warrant Certificates for
such Warrants shall be issued in the denominations and registered in the name or
names specified in such notice.
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SECTION 2.3 Exercise of Warrants.
(a) The Warrants may be exercised by the Holder thereof, in whole or in
part, at any time or from time to time after the Issue Date but on or prior to
5:00 P.M., New York City time, on the Expiration Date, at a price per share of
Warrant Stock equal to the Exercise Price, by surrendering to the Company, at
its principal executive office in the United States (i) the Warrant
Certificate(s) evidencing such Warrants, (ii) a written notice (the "Exercise
Notice"), substantially in the form attached hereto as Exhibit B, stating that
such Holder elects to exercise the Warrants evidenced by such Warrant
Certificate(s) and specifying the number of shares of Warrant Stock for which
the Warrants are being exercised and the name or names in which such Holder
wishes the certificate or certificates for shares of Warrant Stock to be issued
and (iii) payment of the aggregate purchase price (the "Warrant Purchase Price")
in an amount equal to the product of (x) the Exercise Price multiplied by (y)
the number of Warrants to be exercised as specified in such notice, which
payment shall be made in accordance with Section 2.3(b).
(b) The Warrant Purchase Price shall be payable, at the option of the
Holder, by any one or any combination of the following: (i) in cash or by
certified or official bank check payable to the order of the Company or by wire
transfer of immediately available funds to an account specified by the Company,
or (ii) by the surrender one or more Warrant Certificates to the Company for
cancellation in accordance with the following formula: in exchange for each
share of Warrant Stock issuable on exercise of each Warrant represented by such
Warrant Certificates that are being exercised, the Holder thereof shall receive
such number of shares of Warrant Stock as is equal to the product of (A) the
number of shares of Warrant Stock issuable upon exercise of the Warrants being
exercised at such time multiplied by (B) a fraction, the numerator or which is
the Daily Market Value per share of the Marketable Capital Stock at such time
minus the then effective Exercise Price, and the denominator of which is the
Daily Market Value per share of the Marketable Capital Stock at such time. An
exercise of Warrants in accordance with this Section 2.3(b)(ii) is herein
referred to as a "Cashless Exercise".
(c) As soon as practicable, and in any event within two (2) Business
Days after receipt of the Exercise Notice and the Warrant Purchase Price, the
Company shall deliver or cause to be delivered (a) certificates representing the
number of validly issued, fully paid and nonassessable shares of Warrant Stock
specified in the Exercise Notice, (b) if applicable, cash in lieu of any faction
of a share, as provided in the Warrant Certificate, and (c) if less than the
full number of Warrants evidenced by a Warrant Certificate are being exercised
or used in a Cashless Exercise, a new Warrant Certificate, less the number of
Warrants then being exercised or used in a Cashless Exercise. The exercise of
Warrants shall be deemed to have been effective at the close of business on the
date of delivery of the Exercise Notice and the Warrant Purchase Price, so that
the Person entitled to receive shares of Warrant Stock upon such exercise shall
be treated for all purposes as having become the record holder of such shares of
Warrant Stock at such time.
(d) Issuance of the shares of Warrant Stock upon the exercise of
Warrants shall be made without charge to the Holder thereof for any issue or
transfer tax or other incidental expenses, in respect of the issuance of such
Warrant Stock, all of which taxes and expenses shall be paid by the Company,
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provided that the Holder shall be responsible for any transfer tax payable on
account of the issuance of any shares of Warrant Stock to a Person other than
the Holder thereof.
ARTICLE III
ADJUSTMENTS OF EXERCISE PRICE OR WARRANT STOCK ISSUABLE UPON EXERCISE
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SECTION 3.1 Purchases and Redemptions. If at any time or from time to
time after the first Issue Date, the Company or any of its Affiliates shall
propose to purchase or redeem all or any portion of any class of its Common
Stock from all holders of such Common Stock on a pro rata basis for cash,
evidence of indebtedness or other property of any nature whatsoever, the Company
shall deliver to each Holder of Warrants a notice of such proposed purchase or
redemption, and each such Holder shall, at its option, have the right to require
the Company to at the same time purchase or redeem Warrants owned by such
Holder, pro-rata based on the number of shares of such other Common Stock to be
so purchased or redeemed, on the same terms and conditions as the proposed
purchase or redemption of such other Common Stock and for the same consideration
per Warrant as is paid to the holders of such other Common Stock for each share
of such other Common Stock so redeemed or purchased, minus the Exercise Price
per Warrant then in effect.
SECTION 3.2 Stock Dividend, Subdivisions, Combinations and
Reclassifications. If at any time or from time to time after the date hereof the
Company shall:
(a) make a dividend or a distribution on the outstanding shares of any
class of its Common Stock payable in any class of Equity Securities;
(b) subdivide or reclassify the outstanding shares of any class of its
Common Stock into a larger number of shares of such Common Stock;
(c) combine the outstanding shares of any class of its Common Stock
into a smaller number of shares of such Common Stock; or
(d) issue any shares of its Equity Securities in a reclassification of
any class of its Common Stock; provided that, the Company shall not effect a
reclassification of any class of its Common Stock without effecting a
simultaneous and identical (but proportionate) reclassification of its
Non-Voting Common Stock;
then, and in each such case, immediately after the occurrence of any such event,
the Exercise Price payable upon the exercise of each Warrant then issued and
outstanding or that is subsequently issued under Section 2.1 and the number of
shares of Warrant Stock issuable upon exercise of each Warrant then issued and
outstanding or that is subsequently issued under Section 2.1 (the "Number
Issuable") shall be adjusted so that the Holder of any Warrant exercised after
such event shall be entitled to receive, upon payment of the same aggregate
amount as would have been payable before such event, the aggregate number and
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kind of shares of Warrant Stock or other Equity Securities of the Company that
it would have owned or would have been entitled to receive upon or by reason of
any of the events described above, had such Warrant been exercised immediately
prior to the occurrence of such event and (i) as if such Warrant had been
exercisable for the class of Common Stock that received the dividend or
distribution or (ii) as if such subdivision, combination or reclassification had
been effected on an equal and proportionate basis with respect to the Non-Voting
Common Stock. An adjustment made pursuant to this Section 3.2 shall become
effective retroactively (x) in the case of any such dividend or distribution, to
a date immediately following the close of business on the record date for the
determination of holders of shares of Common Stock entitled to receive such
dividend or distribution or (y) in the case of any such subdivision, combination
or reclassification, to the close of business on the day upon which such action
becomes effective.
SECTION 3.3 Issuance of Common Stock or Common Stock Equivalent.
(a) If the Company shall, at any time or from time to time, after the
date hereof, issue or sell any shares of any class of its Common Stock or Common
Stock Equivalents (such issuance or sale, a "New Issue") at a price per share
(the "New Issue Price") that is less than the Exercise Price then in effect as
of the record date or New Issue Date (as defined below), as the case may be (the
"Relevant Date") (treating the price per share of such Common Stock, in the case
of the issuance of any Common Stock Equivalent, as equal to the quotient of (x)
the sum of the price for such Common Stock Equivalent plus any additional
consideration payable (without regard to any anti-dilution adjustments) upon the
conversion, exchange or exercise of such Common Stock Equivalent, divided by (y)
the number of shares of such Common Stock initially underlying such Common Stock
Equivalent), other than (1) issuances or sales for which an adjustment is made
pursuant to another Section of this Article III and (2) issuances of such Common
Stock or Common Stock Equivalent in connection with an Excluded Transaction,
then, and in each such case, (A) the Exercise Price payable upon the exercise of
each Warrant then issued and outstanding or that is subsequently issued under
Section 2.1 shall be adjusted by multiplying the Exercise Price in effect on the
day immediately prior to the Relevant Date by a fraction (which fraction shall
not be greater than one) (I) the numerator of which shall be the sum of the
number of shares of such Common Stock outstanding on the Relevant Date plus the
number of shares of such Common Stock which the aggregate consideration received
by the Company for the total number of such additional shares of such Common
Stock so issued would purchase at the Exercise Price on the Relevant Date (or,
in the case of Common Stock Equivalents, the number of shares of Common Stock
which the aggregate consideration received by the Company upon the issuance of
such Common Stock Equivalents and receivable by the Company upon the conversion,
exchange or exercise of such Common Stock Equivalents would purchase at the
Exercise Price on the Relevant Date) and (II) the denominator of which shall be
the sum of the number of shares of such Common Stock outstanding on the Relevant
Date plus the number of additional shares of such Common Stock issued or to be
issued (or, in the case of Common Stock Equivalents, the maximum number of
shares of such Common Stock into which such Common Stock Equivalents initially
may convert, exchange or be exercised), and (B) the Number Issuable shall be
increased by multiplying the Number Issuable immediately prior to the New
Issuance by a fraction (which fraction shall not be less than one), (I) the
numerator of which shall be the Exercise Price in effect on the day immediately
prior to the Relevant Date, and (II) the denominator of which shall be the
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Exercise Price in effect immediately after such adjustment. Any such adjustments
required hereunder shall be made whenever such shares of Common Stock or Common
Stock Equivalents are issued, and shall become effective retroactively (x) in
the case of an issuance to the stockholders of the Company, as such, to a date
immediately following the close of business on the record date for the
determination of stockholders entitled to receive such shares of Common Stock or
Common Stock Equivalents, and (y) in all other cases, on the date (the "New
Issue Date") of such issuance; provided, however, that the determination as to
whether adjustments are required to be made pursuant to this Section 3.3 shall
only be made upon the issuance of such shares of Common Stock or Common Stock
Equivalents, and not upon the issuance of any security into which the Common
Stock Equivalents convert, exchange or may be exercised; provided, further, that
if any Common Stock Equivalents (or any portions thereof) which shall have given
rise to adjustments pursuant to this Section 3.3 shall have expired or
terminated without the exercise thereof and/or if by reason of the terms of such
Common Stock Equivalents there shall have been an increase or increases, with
the passage of time or otherwise, in the price payable upon the exercise or
conversion thereof, then the Exercise Price and Number Issuable hereunder shall
be readjusted (but to no greater extent than originally adjusted) in order to
(1) eliminate from the computation any additional shares of such Common Stock
corresponding to such Common Stock Equivalents as shall have expired or
terminated, (2) treat the additional shares of such Common Stock, if any,
actually issued or issuable pursuant to the previous exercise of such Common
Stock Equivalents as having been issued for the consideration actually received
and receivable therefor, and (3) treat any of such Common Stock Equivalents
which remain outstanding as being subject to exercise or conversion on the basis
of such exercise or conversion price as shall be in effect at the time.
(b) In case at any time any shares of any class of the Company's Common
Stock or Common Stock Equivalents or any rights or options to purchase any
shares of such Common Stock or Common Stock Equivalents shall be issued or sold
for cash, the consideration received therefor shall be deemed to be the amount
received by the Company therefor, without deduction therefrom of any expenses
incurred or any underwriting commissions or concessions or discounts paid or
allowed by the Company in connection therewith. In case any shares of such
Common Stock or Common Stock Equivalents or any rights or options to purchase
any such Common Stock or Common Stock Equivalents shall be issued or sold for a
consideration other than cash, the amount of the consideration other than cash
received by the Company shall be deemed to be the fair market value of such
consideration, without deduction therefrom of any expenses incurred or any
underwriting commissions or concessions or discounts paid or allowed by the
Company in connection therewith, as determined by mutual agreement of the Board
of Directors and the Required Holders or, if the Board of Directors and the
Required Holders shall fail to agree, at the Company's expense by an appraiser
chosen by the Board of Directors and reasonably acceptable to the Required
Holders.
SECTION 3.4 Certain Distributions. If the Company shall, at any time or
from time to time, after the date hereof, distribute to all the holders of
shares of any class of its Common Stock (including any such distribution made in
connection with a merger or consolidation in which the Company is the resulting
or surviving Person and such Common Stock is not changed or exchanged), cash,
evidences of indebtedness of the Company or another issuer, Equity Securities of
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the Company or securities of another issuer or other assets or rights or
warrants to subscribe for or purchase Equity Securities of the Company
(excluding those distributions in respect of which an adjustment in the Number
Issuable or Exercise Price is made pursuant to Sections 3.2 or 3.3,
distributions in which the Holders of the Warrants are entitled to receive such
distributions and any distribution in connection with an Excluded Transaction),
then, and in each such case, (A) the Exercise Price payable upon exercise of
each Warrant then issued and outstanding or that is subsequently issued under
Section 2.1 shall be adjusted (and any other appropriate actions shall be taken
by the Company) by multiplying the Exercise Price in effect immediately prior to
the date of such distribution by a fraction (which fraction shall not be greater
than one) (x) the numerator of which shall be the Current Market Value per share
of such Common Stock immediately prior to the date of distribution minus the
then fair market value (as determined by the Board of Directors in the exercise
of their fiduciary duties) of the portion of the cash, evidences of
indebtedness, securities, other assets or rights or warrants so distributed
applicable to one share of such Common Stock, and (y) the denominator of which
shall be the Current Market Value per share of such Common Stock immediately
prior to the ex-dividend date of distribution, and (B) the Number Issuable shall
be increased by multiplying the Number Issuable immediately prior to the date of
such distribution by a fraction (which fraction shall not be less than one), (x)
the numerator of which shall be the Current Market Value per share of such
Common Stock immediately prior to the record date for such distribution and (ii)
the denominator of which shall be the Current Market Value per share of such
Common Stock immediately prior to such record date less the fair market value
(as determined by the Board of Directors in the exercise of their fiduciary
duties) of the portion of such cash, evidences of indebtedness, securities,
other assets or rights or warrants so distributed applicable to one share of
Common Stock. Such adjustment shall be made whenever any such distribution is
made and shall become effective retroactively to a date immediately following
the close of business on the record date for the determination of stockholders
entitled to receive such distribution.
SECTION 3.5 Tender or Exchange Offer. If at any time or from time to
time after the date hereof, a tender or exchange offer made by the Company or
any of its Subsidiaries for all or any portion of any class of the Company's
Common Stock shall expire, and such tender or exchange offer shall involve the
payment by the Company or such Subsidiary of consideration per share of such
Common Stock having a fair market value (as determined by the Board of Directors
in the exercise of their fiduciary duties) at the last time (the "Expiration
Time") tenders or exchanges may be made pursuant to such tender or exchange
offer (as it shall have been amended) that exceeds the Current Market Value per
share of such Common Stock on the day next succeeding the Expiration Time, then
the Exercise Price payable upon exercise of each Warrant then issued and
outstanding or that is subsequently issued under Section 2.1 shall be adjusted
(and any other appropriate actions shall be taken by the Company) by multiplying
the Exercise Price in effect immediately prior to the Expiration Time by a
fraction (which fraction shall not be greater than one) (x) the numerator of
which shall be the number of shares of such Common Stock outstanding (including
any tendered or exchanged shares) at the Expiration Time multiplied by the
Current Market Value per share of such Common Stock on the trading day next
succeeding the Expiration Time, and (y) the denominator of which shall be the
sum of (A) the fair market value (as determined by the Board of Directors in the
exercise of their fiduciary duties) of the aggregate consideration payable to
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holders of such Common Stock based on the number of shares of such Common Stock
accepted for payment in such tender or exchange offer, and (B) the product of
the number of shares of such Common Stock outstanding (less such shares accepted
for payment in such tender or exchange offer) on the Expiration Time multiplied
by the Current Market Value per share of the Common Stock on the trading day
next succeeding the Expiration Time. The adjustment required by this Section 3.5
shall be effective immediately prior to the opening of business on the day
following the Expiration Time.
SECTION 3.6 Merger, Consolidation or Disposition of Assets. If the
Company shall merge or consolidate with another Person, or shall sell, transfer
or otherwise dispose of all or substantially all of its assets to another Person
and pursuant to the terms of such merger, consolidation or disposition of
assets, cash, shares of common stock or other securities of the successor or
acquiring Person, or property of any nature is to be received by or distributed
to the holders of any class of Common Stock of the Company, then each Holder of
Warrants shall thereafter have the right to receive, upon exercise of each
Warrant then issued and outstanding or that is subsequently issued under Section
2.1, the amount of cash or other consideration it would have been entitled to
receive if such Holder had exercised such Warrant and received the Exchange
Shares in accordance with Section 4.1 of this Agreement immediately prior to the
occurrence of such merger, consolidation or disposition of assets. The foregoing
provisions shall similarly apply to successive mergers, consolidations and
dispositions of assets.
SECTION 3.7 Other Actions. If at any time or from time to time after
the date hereof the Company shall take any action affecting any class of its
Common Stock similar to or having an effect similar to any of the actions
described in the foregoing Sections of Article III (but not including any action
described in any such Section), and the Board of Directors in good faith
determines that it would be equitable in the circumstances to reduce the
Exercise Price payable upon exercise of each Warrant then issued and outstanding
or that is subsequently issued under Section 2.1 and/or increase the Number
Issuable as a result of such action, then, and in each such case, the Exercise
Price payable upon exercise of each Warrant then issued and outstanding or that
is subsequently issued under Section 2.1 shall be reduced and the Number
Issuable shall be increased in such manner and at such time as the Board of
Directors in good faith determines would be equitable in the circumstances (such
determination to be evidenced in a resolution, a certified copy of which shall
be mailed to each Holder of the Warrants).
SECTION 3.8 Notice of Adjustments. Whenever the Number Issuable and the
Exercise Price shall be adjusted pursuant to this Article III, the Company shall
forthwith obtain a certificate signed by a duly authorized officer of the
Company (or, if the Required Holders so request after delivery of a certificate
from such officer, signed by a firm of independent accountants of recognized
national standing selected by the Company), setting forth, in reasonable detail,
the event requiring the adjustment and the method by which such adjustment was
calculated and specifying the Number Issuable and the Exercise Price after
giving effect to such adjustment. The Company shall promptly cause a signed copy
of such certificate to be delivered to each Holder of Warrants. The Company
shall keep at its office copies of all such certificates and cause the same to
be available for inspection at said office during normal business hours by any
Holder of Warrants or any prospective purchaser of Warrants designated by the
registered Holder of such Warrants.
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SECTION 3.9 Notice of Certain Corporate Action. If the Company shall
propose (i) to pay any dividend to the holders of any class of its Common Stock
or to make any other distribution to the holders of any class of its Common
Stock; (ii) to offer to the holders of any class of its Common Stock rights to
subscribe for or to purchase any additional shares of such Common Stock or
Common Stock Equivalent; (iii) to effect any reclassification of any class of
its Common Stock; (iv) to otherwise issue any Common Stock or Common Stock
Equivalent that would result in any adjustment required under this Article III;
(v) to effect any capital reorganization; (vi) to effect any consolidation,
merger or sale, transfer or other disposition of all or substantially all of its
assets; (vii) to effect the liquidation, dissolution or winding up of the
Company, or (viii) any other transaction of the Company that would result in any
adjustment required under this Article III, then, in each such case, the Company
shall give to each Holder of Warrants a notice of such proposed action, which
shall specify the date on which a record is to be taken for the purposes of such
dividend, distribution or rights offer, or the date on which such
reclassification, issuance, reorganization, consolidation, merger, sale,
transfer, disposition, liquidation, dissolution or winding up is to take place
and the date of participation therein by the holders of the Company's Common
Stock, if any such date is to be fixed, and shall also set forth such facts with
respect thereto as shall be reasonably necessary to indicate the effect of such
action on any class of the Company's Common Stock, and the Number Issuable and
the Exercise Price after giving effect to any adjustment which will be required
as a result of such action. Such notice shall be so given in the case of any
action covered by clause (i) or (ii) above at least 10 days prior to the record
date for determining holders of any Common Stock for purposes of such action,
and in the case of any other such action, at least 10 days prior to the date of
the taking of such proposed action or the date of participation therein by the
holders of any Common Stock, whichever shall be the earlier.
ARTICLE IV
PURCHASE OR EXCHANGE OF WARRANT STOCK BY THE COMPANY
----------------------------------------------------
SECTION 4.1 Company's Obligation to Purchase or Exchange Warrant Stock.
(a) If, at any time or from time to time after the issuance of any
Warrant Stock, any Holder (each, a "Selling Holder") of such Warrant Stock
wishes to sell, in whole or in part, shares of such Warrant Stock (the "Sale
Shares"), the Selling Holder shall send a written notice to the Company (the
"Sale Notice") informing the Company of the Selling Holder's intention to sell
the Sale Shares.
(b) If any Selling Holder delivers the Sale Notice, on or prior to the
fifth (5th) Business Day after the date of the delivery of the Sale Notice (the
"Purchase or Exchange Closing Date"), the Company shall be required to either
(i) purchase (the "Company Purchase") the Sale Shares from such Selling Holder,
at an aggregate purchase price (the "Company Purchase Price") equal to the
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product of (x) the Daily Market Price of one share of the Marketable Capital
Stock of the Company on the trading day immediately preceding the date of the
delivery of the Sale Notice, multiplied by (y) the number of Sale Shares, or
(ii) exchange (the "Warrant Stock Exchange") shares of Marketable Capital Stock
(as of the date of the delivery of the Sale Notice) (the "Exchange Shares") for
the Sale Shares, at an exchange ratio (the "Exchange Ratio") of one (1) share of
the Marketable Capital Stock (as of the date of the delivery of the Sale Notice)
for one (1) share of the Sale Shares; provided that, the Company's right to
elect a Warrant Stock Exchange shall be subject to the condition (which
condition may be waived by each Selling Holder solely with respect to its
Exchange Shares) that the Exchange Shares be included at such time in an
effective Registration Statement filed pursuant to Article VII to the same
extent and in the same manner as the Sale Shares were at such time, or otherwise
be delivered together with an opinion of outside counsel of the Company,
addressed to and in form and substance satisfactory to such Selling Holder,
stating that the Exchange Shares may be freely sold, transferred or assigned
without restriction or limitation under any federal or state securities laws;
provided further, that if the Company elects a Warrant Stock Exchange, and the
Daily Market Price per share of the Marketable Capital Stock on the second
Business Day after the date of the delivery of the Sale Notice is higher than
the Daily Market Price per share of the Marketable Capital Stock on (x) the
trading day immediately prior to the Purchase or Exchange Closing Date, if the
Exchange Shares are delivered to the Selling Holders pursuant to Section 4.3
prior to 5:00 P.M., New York City time, on the Purchase or Exchange Closing
Date, or (y) the Purchase or Exchange Closing Date, if the Exchange Shares are
delivered to the Selling Holders pursuant to Section 4.3 after 5:00 P.M., New
York City time, on such date (such difference in Daily Market Price per share
(which shall not be less than 0), the "Price Differential"), then the Company
shall pay to the Selling Holder, in accordance with Section 4.3, an amount (the
"Make-Whole Amount") equal to the product of (A) the Price Differential times
(B) the number of Sale Shares. The Exchange Ratio shall be subject to adjustment
pursuant to Section 4.4 below.
SECTION 4.2 Company Purchase Closing. If a Company Purchase is elected,
the Company shall pay, on the Purchase or Exchange Closing Date, the Company
Purchase Price to the Selling Holders by wire transfer of immediately available
funds to the account or accounts designated by such Selling Holders in the Sale
Notice, against delivery by the Selling Holders to the Company of certificates
representing the Sale Shares, duly endorsed in blank or accompanied by stock
powers executed in blank.
SECTION 4.3 Warrant Stock Exchange Closing. If a Warrant Stock Exchange
is elected, on the Purchase or Exchange Closing Date, the Company shall (i)
deliver or cause to be delivered, in the names of the Selling Holders or any
other Persons designated by the Selling Holders, certificates for the number of
duly authorized, validly issued, fully paid and nonassessable shares of
Marketable Capital Stock issued in the Warrant Stock Exchange, and (ii) pay the
Make-Whole Amount, if any, to the Selling Holders by wire transfer of
immediately available funds to the account or accounts designated by such
Selling Holders in the Sale Notice, against delivery by the Selling Holders of
certificates representing the Sale Shares, duly endorsed in blank or accompanied
by stock powers executed in blank.
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SECTION 4.4 Adjustment of Exchange Ratio.
(a) If at any time or from time to time after the issuance of any
shares of Warrant Stock but prior to the consummation of a Company Purchase or
Warrant Stock Exchange with respect to such shares of Warrant Stock, the Company
shall take any action with respect to the Marketable Capital Stock described in
any Sections of Article III (unless such action is taken concurrently upon the
same terms and conditions and having the same proportionate effect with respect
to all shares of both the Non-Voting Common Stock and such Marketable Capital
Stock), then, in each such case, the Exchange Ratio shall be adjusted so that
each Selling Holder shall receive the number of shares of the Marketable Capital
Stock that such Selling Holder would have been entitled to receive if it had
owned the Warrants for which such Warrant Stock was exercised on the date any
such actions occurred.
(b) Whenever the Exchange Ratio shall be adjusted pursuant to this
Section 4.4, the Company shall forthwith obtain a certificate signed by a duly
authorized officer of the Company (or, if the Required Holders so request after
delivery of a certificate from such officer, signed by a firm of independent
accountants of recognized national standing selected by the Company), setting
forth, in reasonable detail, the event requiring the adjustment and the method
by which such adjustment was calculated and specifying the Exchange Ratio after
giving effect to such adjustment. The Company shall promptly cause a signed copy
of such certificate to be delivered to each Holder of Warrant Stock. The Company
shall keep at its office copies of all such certificates and cause the same to
be available for inspection at said office during normal business hours by any
Holder of Warrant Stock or any prospective purchaser of Warrant Stock designated
by the registered Holder of such Warrant Stock.
(c) If the Company shall propose to take any of the actions described
in Section 3.9 with respect to the Marketable Capital Stock, then, in each such
case, the Company shall give to each Holder of Warrant Stock a notice of such
proposed action, which shall specify the date on which a record of holders of
the Marketable Capital Stock is to be taken for the purposes of such action, or
the date on which such action is to take place and the date of participation
therein by the holders of the Marketable Capital Stock, if any such date is to
be fixed, and shall also set forth such facts with respect thereto as shall be
reasonably necessary to indicate the effect of such action on any class of the
Company's Common Stock, and the Exchange Ratio after giving effect to any
adjustment which will be required as a result of such action. Such notice shall
be so given to the Holders of Warrant Stock in the same manner as required by
Section 3.9.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
------------------------------
The Company represents and warrants as follows:
SECTION 5.1 Existence; Qualification. The Company is duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization. The Company is duly qualified, licensed or admitted to do business
and is in good standing as a foreign corporation in every jurisdiction where the
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failure to be so qualified would have a material adverse effect on the Condition
of the Company, and has all requisite corporate power and authority to transact
its business as now conducted in all such jurisdictions.
SECTION 5.2 No Breach. The execution, delivery and performance of this
Agreement and other Transaction Documents by the Company and the consummation by
it of the transactions contemplated hereby and thereby (including the issuance
of the Warrants, the Warrant Stock and the Exchange Shares) will not (a) violate
the certificate of incorporation or by-laws or any other instrument or document
of organization or governance of the Company, (b) violate, or result in a breach
of or default under, any other material instrument or agreement to which the
Company is a party or is bound, (c) violate any judgment, order, injunction,
decree or award against or binding upon the Company, (d) result in the creation
of any material Lien upon any of the properties or assets of the Company or (e)
violate any law, rule or regulation applicable to the Company.
SECTION 5.3 Corporate Action. The Company has all necessary corporate
power and authority to execute, deliver and perform its obligations under this
Agreement and the other Transaction Documents (including the issuance of the
Warrants, the Warrant Stock and the Exchange Shares); the execution, delivery
and performance by the Company of this Agreement and the other Transaction
Documents have been duly authorized by all necessary action (including all
stockholder action) on the part of the Company; this Agreement and the Warrants
being issued on the Closing Date (or upon the occurrence of a Triggering Event)
have been (and the Warrants issued after the Closing Date will be) duly executed
and delivered by the Company and constitute (or in the case of the Warrants
issued after the Closing Date, will constitute) the legal, valid and binding
obligations of the Company, enforceable against the Company in accordance with
their respective terms, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws affecting the
enforcement of creditors rights generally and by general equitable principles.
The Warrant Stock covered by the Warrants and the Marketable Capital Stock
issuable upon a Warrant Stock Exchange have been duly and validly authorized and
reserved for issuance and shall, when paid for, issued and delivered in
accordance with the provisions of this Agreement, be duly and validly issued,
fully paid and nonassessable and free and clear of any Liens. The Company is not
required to file and will not be required to file any agreement, note, lease,
mortgage, deed or other instrument entered into prior to the date hereof and to
which the Company is a party or by which the Company is bound which has not been
previously filed as an exhibit to its reports filed with the Commission under
the Exchange Act.
SECTION 5.4 Approvals. Except in connection with the registration of
the Registrable Securities pursuant to Article VII, no authorizations, approvals
or consents of, and no filings or registrations with, any Governmental Authority
or any other Person, including the Nasdaq National Market or any national
securities exchange or other automated quotation system, are necessary for the
execution, delivery or performance by the Company of this Agreement or the other
Transaction Documents or for the validity or enforceability hereof or thereof.
Any such action required to be taken as a condition to the execution and
delivery of this Agreement or any other Transaction Document, or the execution,
issuance and delivery of the Warrants, has been duly taken by all such
Governmental Authorities or other Persons, as the case may be.
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SECTION 5.5 Capitalization.
(a) As of the date hereof, the authorized capital stock of the Company
consists of (i) 250,000,000 shares of Class A Common Stock, of which 4,768,195
shares are issued and outstanding, (ii) 30,000,000 shares of Class B Common
Stock, of which 916,380 shares are issued and outstanding, (iii) 200,000,000
shares of Non-Voting Common Stock, of which no share is issued and outstanding,
and (iv) 5,000,000 shares of preferred stock, of which (A) 5,707 shares are
designated Series B Junior Convertible Exchangeable Preferred Stock of which no
shares are outstanding, (B) 2,650,300 shares are designated Series C Convertible
Preferred Stock of which 2,650,300 shares are issued and outstanding, (C) 22,500
shares are designated Series D Junior Convertible Participating Preferred Stock
of which 12,500 shares are issued and outstanding, and (D) 10,000 shares are
designated Series E Junior Convertible Participating Preferred Stock of which
10,000 shares are issued and outstanding. The Company has 428,004 shares of
Class A Common Stock held in treasury or by Subsidiaries. As of the Closing
Date, after giving effect to the transactions contemplated hereby and in the
other Transaction Documents, there will be: (A) 1,000,000 shares of Non-Voting
Common Stock reserved for issuance upon exercise of the Warrants and (B)
1,000,000 shares of Class A Common Stock reserved for issuance upon a Warrant
Stock Exchange; (C) 283,874 shares of Class A Common Stock reserved for issuance
upon conversion of the Series C Convertible Preferred Stock; (D) 108,875 shares
of Class A Common Stock reserved for issuance upon conversion of the Series D
Junior Convertible Participating Preferred Stock; (E) 16,000 shares of Class A
Common Stock reserved for issuance upon conversion of the Series E Junior
Convertible Participating Preferred Stock, and (F) 831,964 shares of Class A
Common Stock reserved for issuance pursuant to the exercise or conversion of
other Common Stock Equivalents set forth on Schedule 5.5(a). The Common Stock
Equivalents and all outstanding shares of capital stock of the Company have been
duly authorized by all necessary corporate action. All outstanding shares of
capital stock of the Company are, and the shares of Warrant Stock upon exercise
of the Warrants, and shares of Marketable Capital Stock issuable upon a Warrant
Stock Exchange, when issued, will be, validly issued, fully paid and
nonassessable and shall be free and clear of all Liens and the issuance of
foregoing has not been or will not be, as the case may be, subject to preemptive
rights in favor of any Person and will not result in the issuance of any
additional shares of Equity Securities of the Company or the triggering of any
anti-dilution or similar rights contained in any options, warrants, debentures
or other securities or agreements of the Company. As of the Closing Date, after
giving effect to the transactions contemplated hereby and in the other
Transaction Documents, except for (x) the Series C Convertible Preferred Stock,
the Series D Junior Convertible Participating Preferred Stock and the Series E
Junior Convertible Participating Preferred Stock, (y) the Common Stock
Equivalents set forth on Schedule 5.5(a), and (z) the Warrants, there will be no
outstanding securities convertible into or exchangeable for capital stock of the
Company or options, warrants or other rights to purchase or subscribe to Equity
Securities of the Company or contracts, commitments, agreements, understandings
or arrangements of any kind to which the Company is a party relating to the
issuance of any Equity Securities of the Company, any such convertible or
exchangeable securities or any such options, warrants or rights.
21
(b) Other than this Agreement or as otherwise disclosed in Schedule
5.5(b), there is not in effect on the date hereof any agreement by the Company
pursuant to which any holders of debt or Equity Securities of the Company have a
right to cause the Company to register such securities under the Securities Act.
None of the agreements listed on Schedule 5.5(b) contain any provision that
conflict or are inconsistent in any material respect with the rights granted
under Article VII of this Agreement. There is not in effect on the date hereof
any agreement by the Company or any of its stockholders or any other Person that
(i) restricts the transferability of the Warrants, the Warrant Stock or the
Marketable Capital Stock issuable upon a Warrant Stock Exchange, (ii) restricts
the transferability of the right of the Holder in this Agreement to any
transferee of all or a portion of the Holder's Warrant, Warrant Stock or the
Marketable Capital Stock issuable upon a Warrant Stock Exchange, or (iii)
requires any consent or other approval of any Person to the exercise of the
Warrant by the Holder, the issuance of Warrant Stock upon such exercise or the
issuance of the Marketable Capital Stock upon a Warrant Stock Exchange.
SECTION 5.6 Private Offering. Assuming the truth and accuracy of the
Initial Holders' representations and warranties contained in Sections 6.1 and
6.2, the issuance to the Initial Holders of the Warrants, the Warrant Stock
issuable upon exercise of the Warrants and the Marketable Capital Stock issuable
upon a Warrant Stock Exchange hereunder is exempt from the registration and
prospectus delivery requirements of the Securities Act.
SECTION 5.7 Brokers. Neither the Company nor any Affiliate of the
Company has dealt with any broker, finder, commission agent or other similar
Person in connection with the transactions contemplated by this Agreement or is
under any obligation to pay any broker's fee, finder's fee or commission in
connection with such transactions.
SECTION 5.8 Loan Agreement. The representations and warranties with
respect to the Company set forth in the Loan Agreement are incorporated by
reference herein and are true and correct.
ARTICLE VI
REPRESENTATIONS AND WARRANTIES OF INITIAL HOLDER
------------------------------------------------
Each Initial Holder severally but not jointly represents and warrants
as follows:
SECTION 6.1 Authorization; No Contravention. The execution, delivery
and performance by such Initial Holder of this Agreement: (a) is within its
power and authority and has been duly authorized by all necessary action; (b)
does not contravene the terms of its organizational documents or any amendment
thereof, and (c) does not violate any law, rule or regulation applicable to such
Initial Holder.
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SECTION 6.2 Binding Effect. This Agreement has been duly executed and
delivered by such Initial Holder and this Agreement constitutes its legal, valid
and binding obligation, enforceable against it in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting the enforcement of
creditors rights generally and by general equitable principles.
SECTION 6.3 Purchase for Initial Holders' Account.
(a) Such Initial Holder is acquiring the Warrants and the Warrant Stock
for investment for its own account, without a view to the distribution thereof
in violation of the Securities Act, all without prejudice, however, to the right
of such Initial Holder at any time, in accordance with this Agreement, lawfully
to sell or otherwise to dispose of all or any part of the Warrant or the Warrant
Stock held by it.
(b) Such Initial Holder is an "accredited investor" within the meaning of
Regulation D promulgated under the Securities Act.
SECTION 6.4. Securities Act Compliance. Such Initial Holder understands
that the Company has not registered the Warrant, the Warrant Stock or the
Exchange Shares under the Securities Act or applicable state securities laws,
and such Initial Holder agrees that none of the Warrant, the Warrant Stock or
the Exchange Shares shall be sold or transferred or offered for sale or transfer
without registration or qualification under the Securities Act or applicable
state securities laws or the availability of an exemption therefrom, and such
Initial Holder understands that the Warrant, the Warrant Stock or the Exchange
Shares will bear a legend to the following effect:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR
APPLICABLE STATE SECURITIES LAWS, AND ACCORDINGLY, SUCH
SECURITIES MAY NOT BE TRANSFERRED, SOLD OR OTHERWISE DISPOSED
OF EXCEPT IN COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION
PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR
APPLICABLE EXEMPTIONS THEREFROM."
ARTICLE VII
REGISTRATION RIGHTS
-------------------
SECTION 7.1 Demand Registration.
(a) Request for Demand Registration. At any time and from time to time
after the earlier to occur of (x) the Closing Date or (y) the occurrence of a
Triggering Event, the Holders holding at least a majority of the Registrable
Securities held by all Holders (the "Initiating Holders"), may make a written
23
request to the Company to register, and the Company shall register, under the
Securities Act and the securities or blue sky laws of any jurisdiction
designated by such Initiating Holders (each, a "Demand Registration"), the
number of Registrable Securities stated in such request; provided, however, that
the Company shall not be obligated to effect more than four (4) such Demand
Registrations and no more than one such Demand Registration in any 12-month
period; provided, further, that notwithstanding the foregoing, each registration
in respect to a Demand Registration must include Registrable Securities having
an aggregate market value of at least $10,000,000 (based on the Current Market
Value of such Registrable Securities to be included in such Demand Registration
on the date of filing of the registration statement). Each such request for a
Demand Registration by the Initiating Holders in respect thereof shall specify
the intended method of disposition thereof, the jurisdictions in which
registration is desired and that the request is for a Demand Registration under
this Section 7.1(a). Within five (5) days after the receipt of such request, the
Company shall give written notice thereof to all other Holders holding
Registrable Securities. Any such Holder may, within 10 days after such notice is
given, request in writing that all of such Holder's Registrable Securities, or
any portion thereof designated by such Holder, be included in the registration.
Each request from a Holder shall specify the number of Registrable Securities to
be registered and the jurisdictions in which registration is desired. The
failure of any Holder to respond within such 10-day period shall be deemed to be
a waiver of such Holder's rights under this Section 7.1(a) with respect to such
Demand Registration. Any Holder may waive its rights under this Section 7.1(a)
prior to the expiration of such 10-day period by giving written notice to the
Company, with a copy to the Initiating Holders. If a Holder sends the Company a
written request for inclusion of part or all of such Holder's Registrable
Securities in a registration, such Holder shall not be entitled to withdraw or
revoke such request without the prior written consent of the Company in its sole
discretion unless, as a result of facts or circumstances arising after the date
on which such request was made relating to the Company or to market conditions,
such Holder reasonably determines that participation in such registration would
have a material adverse effect on such Holder. Notwithstanding anything to the
contrary in this Section 7.1(a), at any time after the Company is, and for so
long as the Company continues to be, eligible to use Form S-3 (or any successor
form thereto) under the Securities Act for registration of the resale of
Registrable Securities, the Company shall not be obligated to effect more than
three (3) Demand Registrations under this Section 7.1(a). On the date that the
Company becomes so eligible to use Form S-3 (or any successor form thereto)
under the Securities Act, the Company shall notify each Holder in writing of
such eligibility, and shall represent and warrant to each Holder in writing
that, as of such date, the Company meets the requirements for use of Form S-3
(or any such successor form thereto) for registration of the resale of
Registrable Securities and does not have any knowledge or reason to believe that
it would not continue to meet such requirements or any actual knowledge of any
fact which would reasonably result in its not meeting such requirements. The
Company shall immediately notify each Holder in writing in the event that such
representation shall cease to be true and correct in any respect, whereupon the
number of Demand Registrations which the Company is obligated to effect under
this Section 7.1(a) shall be increased to four (4) (less any Demand
Registrations previously used).
(b) Effective Demand Registration. The Company shall use its best
efforts to cause any such Demand Registration pursuant to Section 7.1(a) to
become effective not later than ninety (90) days after it receives a request
24
under Section 7.1(a). A registration shall not constitute a Demand Registration
until it has become effective and remains continuously effective for the lesser
of (i) the period during which all Registrable Securities registered in the
Demand Registration are sold and (ii) 120 days; provided, however, that a
registration shall not constitute a Demand Registration if (x) after such Demand
Registration has become effective, such registration or the related offer, sale
or distribution of Registrable Securities thereunder is interfered with by any
stop order, injunction or other order or requirement of the Commission or other
Governmental Authority for any reason not attributable to the Initiating Holders
and such interference is not thereafter eliminated or (y) the conditions
specified in the underwriting agreement, if any, entered into in connection with
such Demand Registration are not satisfied or waived, other than by reason of an
act or omission by the Initiating Holder.
(c) Expenses. The Company shall pay all Registration Expenses in
connection with a Demand Registration, whether or not such Demand Registration
becomes effective, in accordance with Section 7.6 hereof.
(d) Underwriting Procedures. If the Initiating Holders holding a
majority of the Registrable Securities held by all Initiating Holders to which
the requested Demand Registration relates so elect, the Company shall use its
best efforts to cause such Demand Registration to be in the form of a firm
commitment underwritten offering and the managing underwriter or underwriters
selected for such offering shall be the Approved Underwriter selected in
accordance with Section 7.1(e). In connection with any Demand Registration under
this Section 7.1 involving an underwritten offering, none of the Registrable
Securities held by any Holder making a request for inclusion of such Registrable
Securities pursuant to Section 7.1(a) shall be included in such underwritten
offering unless such Holder accepts the terms of the offering as agreed upon by
the Company, the Initiating Holders and the Approved Underwriter, and then only
in such quantity as will not, in the opinion of the Approved Underwriter,
jeopardize the success of such offering by the Initiating Holders. If the
Approved Underwriter advises the Company that the aggregate amount of such
Registrable Securities requested to be included in such offering is sufficiently
large to have a material adverse effect on the success of or timing of such
offering, then the Company shall include in such registration only the aggregate
amount of Registrable Securities that the Approved Underwriter believes may be
sold without any such material adverse effect (the "Approved Underwriter
Amount"), and the Company shall include in such registration, to the extent of
the Approved Underwriter Amount, all Registrable Securities held by the Holders
equal to their pro rata portion (based on the amount of Registrable Securities
each has requested to be included) of the Approved Underwriter Amount.
(e) Selection of Underwriters. If any Demand Registration or S-3
Registration, as the case may be, of Registrable Securities is in the form of an
underwritten offering, the Initiating Holders shall select and obtain an
investment banking firm of national reputation reasonably acceptable to the
Company to act as the managing underwriter of the offering (the "Approved
Underwriter").
25
(f) Limitation on Demand Registration. If the Board of Directors, in
its good faith judgment, determines that a Demand Registration should not be
made or continued because it would materially interfere with any financing,
acquisition, corporate reorganization or merger or other transaction involving
the Company that is material to the business of the Company (a "Valid Business
Reason"), the Company may (x) postpone filing a registration statement relating
to a Demand Registration until such Valid Business Reason no longer exists, but
in no event for more than ninety (90) days, and (y) in case a registration
statement has been filed relating to a Demand Registration, the Company, upon
the approval of the Board of Directors, may cause such registration statement to
be withdrawn and its effectiveness terminated or may postpone amending or
supplementing such registration statement. The Company shall give written notice
of its determination to postpone or withdraw a registration statement and of the
fact that the Valid Business Reason for such postponement or withdrawal no
longer exists, in each case, promptly after the occurrence thereof.
Notwithstanding anything to the contrary contained herein, the Company may not
postpone or withdraw a filing under Section 7.1(a) more than once in any twelve
(12) month period.
SECTION 7.2 Incidental or "Piggy-Back" Registration.
(a) Request for Incidental Registration. At any time after the earlier
of (x) the Closing Date or (y) the occurrence of a Triggering Event, if the
Company proposes to file a Registration Statement under the Securities Act with
respect to an offering of securities by the Company for its own account (other
than a Registration Statement on Form S-4 or S-8 or any successor thereto) or
for the account of any stockholder of the Company other than the Holders, then
the Company shall give written notice of such proposed filing to each of the
Holders at least twenty (20) days before the anticipated filing date, and such
notice shall describe the proposed registration and distribution and offer such
Holders the opportunity to register the number of Registrable Securities as each
such Holder may request (an "Incidental Registration"). The Company shall use
its commercially reasonable efforts (within twenty (20) days of the notice
provided for in the preceding sentence) to cause the managing underwriter or
underwriters in the case of a proposed underwritten offering (the "Company
Underwriter") to permit each of the Holders who have requested in writing
(before the expiration of such 20-day period) to participate in the Incidental
Registration to include its or his Registrable Securities (specifying the number
of shares requested to be included) in such offering on the same terms and
conditions as the securities of the Company or the account of such other
stockholder, as the case may be, of the same class and series included therein.
In connection with any Incidental Registration under this Section 7.2(a)
involving an underwritten offering, the Company shall not be required to include
any Registrable Securities in such underwritten offering unless the Holders
thereof accept the terms of the underwritten offering as agreed upon between the
Company, such other stockholders, if any, and the Company Underwriter, and then
only in such quantity as the Company Underwriter believes will not jeopardize
the success of the offering by the Company. If the Company Underwriter
determines that the registration of all or part of the Registrable Securities
which the Holders have requested to be included would materially adversely
affect the success of such offering, then the Company shall be required to
include in such Incidental Registration, to the extent of the amount that the
Company Underwriter believes may be sold without causing such adverse effect,
first, all of the securities to be offered for the account of the Company or
26
holders exercising demand registration rights in such registration; second, the
Registrable Securities to be offered for the account of the Holders pursuant to
this Section 7.2, pro rata based on the number of Registrable Securities
requested to be included by each such Holder, and third, any other securities
requested to be included in such offering.
(b) Expenses. The Company shall bear all Registration Expenses in
connection with any Incidental Registration pursuant to this Section 7.2,
whether or not such Incidental Registration becomes effective, in accordance
with Section 7.6.
SECTION 7.3 Form S-3 Registration.
(a) Request for S-3 Registration. At any time and from time to time
after the Company becomes eligible to use Form S-3 (or any successor form
thereto) under the Securities Act in connection with a public offering of its
securities, the Initiating Holders may make a written request to the Company to
register, and the Company shall register, under the Securities Act on Form S-3
(or any successor form then in effect) (a "S-3 Registration"), all or a portion
of the Registrable Securities owned by such Initiating Holders; provided,
however, each registration in respect to a S-3 Registration must include
Registrable Securities having an aggregate market value of at least $5,000,000
(based on the Current Market Value of such Registrable Securities to be included
in such S-3 Registration on the date of filing of the Form S-3). Each such
request for a S-3 Registration by the Initiating Holders in respect thereof
shall specify the number of shares of Registrable Securities to be disposed of
in such S-3 Registration, the intended method of disposition thereof, the
jurisdictions in which registration is desired and that the request is for a S-3
Registration under this Section 7.3(a). Within five (5) days after the receipt
of such request, the Company shall give written notice thereof to all other
Holders holding Registrable Securities. Any such Holder may, within 10 days
after such notice is given, request in writing that all of such Holder's
Registrable Securities, or any portion thereof designated by such Holder, be
included in the registration. Each request from a Holder shall specify the
number of Registrable Securities to be registered and the jurisdictions in which
registration is desired. The failure of any Holder to respond within such 10-day
period shall be deemed to be a waiver of such Holder's rights under this Section
7.3(a) with respect to such S-3 Registration. Any Holder may waive its rights
under this Section 7.3(a) prior to the expiration of such 10-day period by
giving written notice to the Company, with a copy to the Initiating Holders. If
a Holder sends the Company a written request for inclusion of part or all of
such Holder's Registrable Securities in a registration, such Holder shall not be
entitled to withdraw or revoke such request without the prior written consent of
the Company in its sole discretion unless, as a result of facts or circumstances
arising after the date on which such request was made relating to the Company or
to market conditions, such Holder reasonably determines that participation in
such registration would have a material adverse effect on such Holder.
(b) Effective S-3 Registration. The Company shall use its best efforts
to cause any such S-3 Registration pursuant to Section 7.3(a) to become
effective as soon as practicable (but in no event later than forty-five (45)
days after it receives a request under Section 7.3(a)) and to remain
continuously effective for a period until all Registrable Securities registered
in such S-3 Registration are sold.
27
(c) Form S-3 Underwriting Procedures. If the Initiating Holders holding
a majority of the Registrable Securities held by all of the Initiating Holders
so elect, the Company shall use its best efforts to cause such S-3 Registration
pursuant to this Section 7.3 to be in the form of a firm commitment underwritten
offering and the managing underwriter or underwriters selected for such offering
shall be the Approved Underwriter selected in accordance with Section 7.1(e). In
connection with any S-3 Registration under Section 7.3(a) involving an
underwritten offering, the Company shall not be required to include any
Registrable Securities in such underwritten offering unless the Holders thereof
accept the terms of the underwritten offering as agreed upon between the
Company, the Approved Underwriter and the Initiating Holders, and then only in
such quantity as such underwriter believes will not jeopardize the success of
such offering by the Initiating Holders. If the Approved Underwriter believes
that the registration of all or part of the Registrable Securities which the
Initiating Holders and the other Holders have requested to be included would
materially adversely affect the success of such public offering, then the
Company shall be required to include in the underwritten offering, to the extent
of the amount that the Approved Underwriter believes may be sold without causing
such adverse effect (the "Approved S-3 Underwriter Amount"), then the Company
shall include in such registration, to the extent of the Approved Underwriter
Amount, all Registrable Securities held by the Holders equal to their pro rata
portion (based on the amount of Registrable Securities each has requested to be
included) of the Approved Underwriter Amount.
(d) Limitations on S-3 Registrations. If the Board of Directors has a
Valid Business Reason, the Company may (x) postpone filing a registration
statement relating to a S-3 Registration until such Valid Business Reason no
longer exists, but in no event for more than ninety (90) days, and (y) in case a
registration statement has been filed relating to a S-3 Registration, the
Company, upon the approval of the Board of Directors, may cause such
registration statement to be withdrawn and its effectiveness terminated or may
postpone amending or supplementing such registration statement. The Company
shall give written notice of its determination to postpone or withdraw a
registration statement and of the fact that the Valid Business Reason for such
postponement or withdrawal no longer exists, in each case, promptly after the
occurrence thereof. Notwithstanding anything to the contrary contained herein,
the Company may not postpone or withdraw a filing due to a Valid Business Reason
more than once in any twelve (12) month period.
(e) Expenses. The Company shall bear all Registration Expenses in
connection with any S-3 Registration pursuant to this Section 7.3, whether or
not such S-3 Registration become effective, in accordance with Section 7.6
hereof.
(f) No Demand Registration. No registration requested by any Holder
pursuant to this Section 7.3 shall be deemed a Demand Registration pursuant to
Section 7.1.
SECTION 7.4 Hold-Back Agreements.
(a) Restrictions on Public Sale by Holder of Registrable Securities. To
the extent requested by the Approved Underwriter or the Company Underwriter, as
the case may be, in the case of an underwritten public offering, each Holder of
Registrable Securities that has included Registrable Securities in such
underwritten public offering agrees (x) not to effect any public sale or
28
distribution of any Registrable Securities or of any securities convertible into
or exchangeable or exercisable for such Registrable Securities, including a sale
pursuant to Rule 144 under the Securities Act, and (y) not to make any request
for a Demand Registration or S-3 Registration under this Agreement, during the
10-day period prior to, and during the 180-day period (or such shorter or other
period, if any, mutually agreed upon by such Holder and the requesting party)
beginning on, the effective date of such Registration Statement (except as part
of such registration).
(b) Restrictions on Sale of Securities by the Company and Others. The
Company agrees (i) not to effect any public or private offer, sale or
distribution of any of its Common Stock or Common Stock Equivalents, including a
sale pursuant to Regulation D under the Securities Act (other than pursuant to
registrations on Forms S-4 or S-8 or any successor form to such registration
Forms), during the 10-day period prior to, and during the 90-day period
beginning with, the effectiveness of a Registration Statement filed under
Sections 7.1 or 7.3 hereof and (ii) during the aforementioned period to use
commercially reasonable efforts to cause each holder of each of its privately
placed Common Stock or Common Stock Equivalents purchased from the Company at
any time on or after the date of this Agreement to agree not to effect any
public sale or distribution of any such securities during such period, including
a sale pursuant to Rule 144 under the Securities Act.
SECTION 7.5 Registration Procedures. In connection with the Company's
obligations pursuant to Section 7.1 and 7.3 hereof, the Company will use its
commercially reasonable efforts to effect such registration to permit the sale
of such Registrable Securities in accordance with the intended method or methods
of distribution thereof (which methods may include, at the request of the
Initiating Holders, an underwritten offering), and pursuant thereto the Company
will, as expeditiously as reasonably possible:
(a) prepare and file with the SEC, within the time period provided in
Sections 7.1 and 7.3 hereof, a Registration Statement or Registration Statements
relating to the Demand Registration or S-3 Registration on any appropriate form
under the Securities Act, which form shall be available for the sale of the
Registrable Securities in accordance with the intended method or methods of
distribution thereof and shall include (i) all financial statements (including,
if applicable, financial statements of any Person which shall have guaranteed
any indebtedness of the Company) required by the SEC to be filed therewith and
(ii) if the sale is by means of an underwritten offering, any other information
that the managing underwriter reasonably believes to be of material importance
to the success of such offering, cooperate and assist in any filings required to
be made with the NASD, and use its best efforts to cause such Registration
Statement to become effective within such time period; provided that as far in
advance as practical before filing a Registration Statement or any amendments or
supplements thereto, the Company will furnish to the Holders of the Registrable
Securities covered by such Registration Statement and the underwriters, if any,
copies of all such documents proposed to be filed, which documents will be
subject to the review by such Holders and underwriters, and the Company will not
file any Registration Statement or any amendments or supplements thereto to
which the holders of a majority of the Registrable Securities or such managing
underwriters, if any, shall reasonably object within 14 days;
29
(b) prepare and file with the SEC such amendments and post-effective
amendments to the Registration Statement as may be necessary to keep the
Registration Statement effective for the periods required by Section 7.1(b) or
7.3(b), as applicable; cause the Prospectus to be supplemented by any required
Prospectus supplement, and as so supplemented to be filed pursuant to Rule 424
under the Securities Act; and comply with the provisions of the Securities Act
with respect to the disposition of all Registrable Securities covered by such
Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the sellers thereof set forth in
such Registration Statement or supplement to the Prospectus;
(c) notify the selling Holders of Registrable Securities and the
managing underwriters, if any, promptly, and (if requested by any such Person)
confirm such advice in writing, (i) when the Prospectus or any Prospectus
supplement or post-effective amendment has been filed, and, with respect to the
Registration Statement or any post-effective amendment, when the same has become
effective, (ii) of any request by the Commission for amendments or supplements
to the Registration Statement or the Prospectus or for additional information,
(iii) of the issuance by the Commission of any stop order of which the Company
or its counsel is aware suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose, (iv) if at any
time the representations and warranties of the Company contemplated by paragraph
(n) below cease to be true and correct in any material respect, (v) of the
receipt by the Company of any notification with respect to the suspension of the
qualification of the Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose and (vi) of the
Company's becoming aware that the Prospectus (including any document
incorporated therein by reference), as then in effect, includes an untrue
statement of material fact or omits to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing;
(d) make reasonable efforts to obtain the withdrawal of any order
suspending the effectiveness of the Registration Statement at the earliest
possible moment;
(e) if reasonably requested by the managing underwriter or underwriters
or a Holder of Registrable Securities being sold in connection with an
underwritten offering, promptly incorporate in a Prospectus supplement or
post-effective amendment such information as the managing underwriter or
underwriters or the Holders of a majority of the Registrable Securities being
sold agree should be included therein relating to the plan of distribution with
respect to such Registrable Securities, including, without limitation,
information with respect to the amount of Registrable Securities being sold to
such managing underwriter or underwriters, the purchase price being paid
therefor by such underwriters and any other terms of the underwritten (or best
efforts underwritten) offering of the Registrable Securities to be sold in such
offering; and make all required filings of such Prospectus supplement or
post-effective amendment as promptly as practicable upon being notified of the
matters to be incorporated in such Prospectus supplement or post-effective
amendment;
30
(f) furnish to each selling Holder of Registrable Securities and each
managing underwriter, if any, without charge, if requested, at least one signed
copy of the Registration Statement and any post-effective amendment thereto,
including financial statements and schedules, all documents incorporated therein
by reference and all exhibits (including those incorporated by reference);
(g) deliver to each selling Holder of Registrable Securities and the
underwriters, if any, without charge, if requested, as many copies of the
Prospectus (including each preliminary Prospectus) and any amendment or
supplement thereto as such Persons may reasonably request; the Company consents
to the use (subject to the limitations set forth in the last paragraph of this
Section 7.5) of the Prospectus or any amendment or supplement thereto by each of
the selling Holders of Registrable Securities and the underwriters, if any, in
connection with the offering and sale of the Registrable Securities covered by
the Prospectus or any amendment or supplement thereto;
(h) prior to any public offering of Registrable Securities, use its
best efforts to register or qualify or cooperate with the selling Holders of
Registrable Securities, the underwriters, if any, and their respective counsel
in connection with the registration or qualification of such Registrable
Securities for offer and sale under the securities or blue sky laws of such
jurisdictions as any such seller or underwriter reasonably requests in writing
and do any and all other acts or things necessary or advisable to enable the
disposition in such jurisdictions of such Registrable Securities; provided that
the Company will not be required to qualify generally to do business in any
jurisdiction where it is not then so qualified or to take any action which would
subject it to general service of process or taxation in any such jurisdiction
where it is not then so subject;
(i) cooperate with the selling Holders of Registrable Securities and
the managing underwriters, if any, to facilitate the timely preparation and
delivery of certificates representing such Registrable Securities to be sold and
not bearing any restrictive legends; and enable such Registrable Securities to
be in such denominations and registered in such names as such managing
underwriters may request at least two business days prior to any sale of such
Registrable Securities to the underwriters;
(j) use its best efforts to cause the Registrable Securities covered by
the applicable Registration Statement to be registered with or approved by such
other Governmental Authorities as may be necessary to enable the seller or
sellers thereof or the underwriters, if any, to consummate the disposition of
such Registrable Securities;
(k) upon the occurrence of any event contemplated by paragraph (c)(vi)
above, immediately prepare a supplement or post-effective amendment to the
related Registration Statement or the related Prospectus or any document
incorporated therein by reference or file any other required document so that,
as thereafter delivered to the holders of the Registrable Securities, the
Prospectus will not contain an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not misleading
in light of the circumstances then existing;
31
(l) use best efforts to cause all Registrable Securities covered by a
Registration Statement to be listed on each securities exchange on which
securities of the same class issued by the Company are then listed;
(m) not later than the effective date of the Demand Registration or S-3
Registration, provide a CUSIP number for all Registrable Securities and provide
the transfer agent with printed certificates for the Registrable Securities,
which are in a form eligible for deposit with The Depository Trust Company;
(n) enter into such agreements (including an underwriting agreement)
and take all such other appropriate actions in connection therewith in order to
expedite or facilitate the disposition of such Registrable Securities and in
such connection, whether or not an underwriting agreement is entered into and
whether or not the registration is an underwritten registration (i) make such
representations and warranties to the holders of such Registrable Securities and
the underwriters, if any, in form, substance and scope as are customarily made
by the Company to underwriters in primary underwritten offerings and covering
matters; (ii) obtain opinions of counsel to the Company (which counsel and
opinions (in form, scope and substance) shall be reasonably satisfactory to the
managing underwriters, if any, and the Holders of a majority of the Registrable
Securities included in the registration) addressed to each selling Holder and
the underwriters, if any, covering the matters customarily covered in opinions
requested in underwritten offerings and such other matters as may be reasonably
requested by such Holders and underwriters; (iii) obtain "cold comfort" letters
and updates thereof from the Company's independent certified public accountants
addressed to such Holders and underwriters, if any, such letters to be in
customary form and covering matters of the type customarily covered in "cold
comfort" letters by underwriters in connection with primary underwritten
offerings; (iv) if an underwriting agreement is entered into, if permitted by
the managing underwriter the same shall set forth in full the indemnification
provisions and procedures of Section 7.8 hereof with respect to all parties to
be indemnified pursuant to such Section; provided that the indemnification
provisions and procedures set forth in such underwriting agreement shall be no
less favorable to the selling Holders of Registrable Securities and the
underwriters than the indemnification provisions and procedures of Section 7.8
hereof; and (v) the Company shall deliver such documents and certificates as may
be requested by the holders of a majority of the Registrable Securities being
sold and the managing underwriters, if any, to evidence compliance with
paragraph (k) above and with any customary conditions contained in the
underwriting agreement or other agreement entered into by the Company. The above
shall be done at each closing under such underwriting or similar agreement or as
and to the extent required thereunder;
(o) make available for inspection by any Holder of Registrable
Securities or any underwriter participating in any disposition of Registrable
Securities pursuant to a Demand Registration or S-3 Registration, and any
attorney or accountant retained by such Holders or underwriters, if any, all
financial and other records, pertinent corporate documents and properties of the
Company as may be necessary to enable them to exercise their due diligence
responsibilities, and provide access to appropriate officers of the Company in
connection with such due diligence responsibilities;
32
(p) otherwise use its best efforts to comply with all applicable rules
and regulations of the Commission;
(q) make appropriate officers of the Company available to such Holders
and underwriters for meetings with prospective purchasers of the Registrable
Securities and prepare and present to potential investors customary "road show"
material in a manner consistent with other new issuances of other securities
similar to the Registrable Securities; and
(r) use commercially reasonable efforts to take all other steps
reasonably necessary to effect the registration of the Registrable Securities
contemplated hereby.
SECTION 7.6 Registration Expenses. Expenses in connection with
registrations pursuant to this Agreement shall be allocated and paid as follows
with respect to each Demand Registration, S-3 Registration or Incidental
Registration. The Company shall bear and pay all expenses incurred in connection
with any registration, filing, or qualification of Registrable Securities with
respect to such Demand Registration, S-3 Registration or Incidental Registration
for each Holder including, without limitation, (i) Commission, stock exchange
listing and NASD registration and filing fees, (ii) all fees and expenses
incurred in complying with securities or "blue sky" laws (including reasonable
fees and disbursements of counsel to any underwriter incurred in connection with
"blue sky" qualifications of the Registrable Securities as may be set forth in
any underwriting agreement), (iii) all printing, messenger and delivery
expenses, and (iv) the fees and disbursements of counsel to the Company and of
its independent public accountants and any other accounting fees, charges and
expenses incurred by the Company (including, without limitation, any expenses
arising from any "cold comfort" letters or any special audits incident to or
required by any registration or qualification) and, in the case of a Demand
Registration or an S-3 Registration, the Holders, regardless of whether such
Registration Statement is declared effective; provided, however, that the
Company shall not be required to pay for any expenses of any registration
proceeding begun pursuant to a Demand Registration or a S-3 Registration if the
registration is subsequently withdrawn at the request of the Initiating Holders
(unless such withdrawal results from facts or circumstances arising after the
date on which such request was made relating to the Company or to market
conditions), if and only if, in the case of a Demand Registration, such
withdrawn registration does not constitute a Demand Registration under Section
7.1(a). All of the expenses described in the preceding sentence of this Section
7.6 are referred to herein as "Registration Expenses." The Holders of
Registrable Securities sold pursuant to a Registration Statement shall bear the
expense of any broker's commission or underwriter's discount or commission
relating to registration and sale of such Holders' Registrable Securities and,
subject to clause (iv) above, shall bear the fees and expenses of their own
counsel.
SECTION 7.7 Agreement by Holders. In connection with any Registration
Statement in which a Holder is participating pursuant to Sections 7.1, 7.2 or
7.3, each such Holder agrees, as applicable:
(a) to execute the underwriting agreement, if any, pursuant to Section
7.1(d) or 7.3(c), as applicable;
33
(b) to furnish to the Company such information regarding the
distribution of such securities as the Company may from time to time reasonably
request;
(c) to promptly furnish to the Company in writing such information with
respect to such Holder as the Company may reasonably request or as may be
required by law for use in connection with any such Registration Statement,
including any preliminary or final Prospectus, and all information required to
be disclosed in order to make the information previously furnished to the
Company by such Holder not materially misleading or necessary to cause such
Registration Statement not to omit a material fact with respect to such Holder
necessary in order to make the statements therein not misleading;
(d) that it will not offer or sell its Registrable Securities under the
registration statement until it has received copies of the supplemented or
amended Prospectus contemplated by Section 7.5(b) hereof and receives notice
that any post-effective amendment (if required) has become effective; and
(e) that upon receipt of any notice from the Company of the happening
of any event of the kind described in Section 7.5(c)(iii), (v) or (vi) hereof,
such Holder shall forthwith discontinue disposition of Registrable Securities
pursuant to the Registration Statement covering such Registrable Securities
until such Holder's receipt of the copies of the supplemented or amended
Prospectus contemplated by Section 7.5(k) hereof and receives notice of any
post-effective amendment (if required) has become effective and, if so directed
by the Company, such Holder shall use its reasonable efforts to deliver to the
Company (at the Company's expense) all copies, other than permanent file copies
then in such Holder's possession, of the Prospectus covering such Registrable
Securities which is current at the time of receipt of such notice. If the
Company shall give any such notice, the Company shall extend the period during
which such Registration Statement shall be maintained effective pursuant to this
Agreement (including, without limitation, the period referred to in Section
7.5(b) hereof) by the number of days during the period from and including the
date of the giving of such notice pursuant to Section 7.5(c) hereof to and
including the date when sellers of such Registrable Securities under such
Registration Statement shall have received the copies of the supplemented or
amended Prospectus contemplated by and meeting the requirements of Section
7.5(b) hereof.
SECTION 7.8 Indemnification.
(a) Indemnification by the Company. The Company agrees to indemnify and
hold harmless, to the full extent permitted by law, each Holder of Registrable
Securities, its Affiliates and their respective officers, directors, agents,
employees, Subsidiaries, partners, members, attorneys, accountants and
controlling Persons (within the meaning of the Securities Act) (collectively,
the "Holder Indemnified Parties") against all losses, claims, damages,
liabilities and expenses incurred by any such Indemnified Parties in connection
with any actual or threatened action arising out of or based upon any untrue or
alleged untrue statement of a material fact contained in any Registration
Statement, Prospectus or preliminary Prospectus or any omission or alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein (in the case of a Prospectus or a
preliminary Prospectus, in light of the circumstances then existing) not
34
misleading, and the Company agrees to reimburse such Indemnified Parties for any
legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss or action or proceeding in respect
thereof, except insofar as the same arise out of or are based upon any such
untrue statement or omission made in reliance on and in conformity with any
information furnished in writing to the Company by such Holder expressly for use
therein. The Company shall also indemnify underwriters, their officers and
directors and controlling Persons (within the meaning of the Securities Act) to
the same extent as provided above with respect to the indemnification of the
Indemnified Parties, if requested.
(b) Indemnification by Holder of Registrable Securities. In connection
with any Demand Registration or S-3 Registration, each Holder of Registrable
Securities will furnish to the Company in writing such information and
affidavits as the Company reasonably requests for use in connection with any
Registration Statement or Prospectus and agrees, severally and not jointly, to
indemnify and hold harmless, to the full extent permitted by law, the Company,
its directors and officers and controlling Persons (within the meaning of the
Securities Act) (collectively, the "Company Indemnified Parties") against any
losses, claims, damages, liabilities and expenses resulting from any untrue
statement of a material fact contained in any Registration Statement or
Prospectus or any omission of a material fact required to be stated in the
Registration Statement or Prospectus or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading, to the extent, but only to the extent, that such untrue statement or
omission relates to such Holder and is made in reliance on and in conformity
with any information or affidavit furnished in writing by such Holder to the
Company specifically for inclusion in such Registration Statement or Prospectus.
In no event shall the liability of any selling Holder of Registrable Securities
hereunder be greater in amount than the dollar amount of the proceeds received
by such Holder upon the sale of the Registrable Securities giving rise to such
indemnification obligation. The Company shall be entitled to receive indemnities
from underwriters, selling brokers, dealer managers and similar securities
industry professionals participating in the distribution of such Registrable
Securities to the same extent above with respect to information or affidavit
furnished writing by such Persons as provided specifically for any Prospectus or
Registration Statement.
(c) Conduct of Indemnification Proceedings. Each Holder Indemnified
Party or Company Indemnified Party, as the case may be (in either case, as
applicable, an "Indemnified Party") will (i) give prompt notice to the Company
or Holder of Registrable Securities, as the case may be (in either case, as
applicable, an "Indemnifying Party"), of any claim with respect to which it
seeks indemnification and (ii) permit such Indemnifying Party to assume the
defense of such claim with counsel reasonably satisfactory to such Indemnified
Party; provided, however, that any Indemnified Party shall have the right to
employ separate counsel and to participate in the defense of such claim, but the
fees and expenses of such counsel shall be at the expense of such Indemnified
Party unless (a) the Indemnifying Party has agreed to pay such fees or expenses,
(b) the Indemnifying Party has failed to assume the defense of such claim or (c)
in the reasonable judgment of such Indemnified Party, based upon written advice
of its counsel, it would be inappropriate under applicable ethical standards for
counsel to the Indemnifying Party to represent such Indemnified Party in the
defense of such claim (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
35
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense of such claim on behalf of such Indemnified Party).
If such defense is not assumed by the Indemnifying Party, the Indemnifying Party
will not be subject to any liability for any settlement made without its consent
(but such consent will not be unreasonably withheld). No Indemnifying Party will
consent to entry of any judgment or enter into any settlement without the
consent of such Indemnified Party, 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 to such claim or litigation. Any
Indemnifying Party who is not entitled to, or elects not to, assume the defense
of a claim will not be obligated to pay the fees and expenses of more than one
counsel for all Indemnified Party with respect to such claim in any one
jurisdiction, unless in the reasonable judgment of any Indemnified Party a
conflict of interest may exist between such Indemnified Party and any other
Indemnified Party with respect to such claim, in which event the Indemnifying
Party shall be obligated to pay the fees and expenses of such additional counsel
or counsels, but only of one such additional counsel for each group of similarly
situated Indemnified Party in any one jurisdiction.
(d) Contribution. If for any reason the indemnification provided for in
the preceding paragraphs (a) and (b) is unavailable to an Indemnified Party or
is insufficient to hold it harmless as contemplated by the preceding paragraphs
(a) and (b), then the Indemnifying Party shall contribute to the amount paid or
payable by such Indemnified Party as a result of such loss, claim, damage or
liability in such proportion as is appropriate to reflect the relative fault of
such Indemnified Party and the Indemnifying Party, as well as any other relevant
equitable considerations, provided that no Holder of Registrable Securities
shall be required to contribute an amount greater than the dollar amount of the
proceeds received by such Holder of Registrable Securities with respect to the
sale of any securities. The relative fault shall be determined by reference to,
among other things, whether the untrue or alleged untrue statement of a material
fact or the omission or alleged omission to state a material fact relates to
information supplied by the Indemnifying Party or the Indemnified Party and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such untrue statement or omission. The parties hereto agree
that it would not be just and equitable if contribution pursuant to this
paragraph were to be determined by pro rata allocation or by any other method of
allocation, which does not take into account the equitable considerations
referred to in the first sentence of this 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
guilty of such fraudulent misrepresentation.
SECTION 7.9 Rule 144. The Company covenants that it will file the
reports required to be filed by it under the Securities Act and the Exchange Act
and the rules and regulations adopted by the Commission thereunder (or, if it is
not required to file such reports, it will, upon the request of any Holder of
Registrable Securities, make publicly available other information so long as
necessary to permit sales pursuant to Rule 144 under the Securities Act), and it
will take such further action as any Holder of Registrable Securities may
reasonably request, all to the extent required from time to time to enable such
Holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by (a) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (b) any
36
similar rule or regulation hereafter adopted by the Commission. Upon the request
of any Holder of Registrable Securities, the Company will deliver to such Holder
a written statement as to whether it has complied with such information and
filing requirements.
SECTION 7.10 Remedies. Each Holder of Registrable Securities, in
addition to being entitled to exercise all rights provided herein or granted by
law, including recovery of damages, in connection with the breach by the Company
of its obligations to register the Registrable Securities will be entitled to
specific performance of its 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 agrees to waive
the defense in any action for specific performance that a remedy at law would be
adequate.
SECTION 7.11 Recapitalizations, Exchanges, etc. The provisions of this
Article VII shall apply to the full extent set forth herein with respect to (i)
the shares of Registrable Securities, (ii) any and all shares of Common Stock of
the Company into which the shares of Registrable Securities are converted,
exchanged or substituted in any recapitalization or other capital reorganization
by the Company, and (iii) any and all Equity Securities of the Company or any
successor or assign of the Company (whether by merger, consolidation, sale of
assets or otherwise) which may be issued in respect of, in conversion of, in
exchange for or in substitution of, the shares of Registrable Securities and
shall be appropriately adjusted for any stock dividends, splits, reverse splits,
combinations, recapitalizations and the like occurring after the date hereof.
The Company shall cause any successor or assign (whether by merger,
consolidation, sale of assets or otherwise) to enter into a new registration
rights agreement with the Holders on terms substantially the same as this
Article VII as a condition of any such transaction.
ARTICLE VIII
OTHER RIGHTS OF HOLDERS
-----------------------
SECTION 8.1 Dispositions of Warrants, Warrant Stock or Marketable
Capital Stock.
(a) Notwithstanding anything in this Agreement to the contrary, but
subject to compliance with the Securities Act, applicable state securities laws
and the requirement as to placement of a legend on certificates specified in
Section 6.4, any Holder shall have the right to transfer any or all of its
Warrants, Warrant Stock or Marketable Capital Stock issued (or to be issued)
pursuant to this Agreement (collectively, the "Transferred Securities") to any
Person. The Person to which Transferred Securities are transferred pursuant to
the immediately preceding sentence shall be deemed to be a Holder of such
Transferred Securities and bound by the provisions of this Agreement applicable
to the Holders so long as such Person continues to own any of the Transferred
Securities so transferred to it. In the event that the Transferred Securities
(i) have been effectively registered under the Securities Act and applicable
state securities laws and sold by the Holder thereof in accordance with such
registration or (ii) are sold under and pursuant to Rule 144 or is eligible to
be sold under and pursuant to paragraph (k) of Rule 144, then the Holder thereof
37
shall, upon written request made to the Company, be entitled to receive from the
Company, without expense, a new certificate evidencing such Transferred
Securities not bearing the restrictive legend otherwise required to be borne by
a certificate evidencing such Transferred Securities, provided, that the Holder
thereof shall have furnished the Company with such certificates and opinions as
the Company shall have reasonably requested.
(b) In connection with any transfer of any Warrants, the Holder thereof
shall surrender such Warrants to the Company, together with a written assignment
of such Warrants duly executed by the Holder thereof or such Holder's agent or
attorney. Such written assignment shall be in the form of the Assignment
attached as Exhibit C. Upon such surrender and receipt by the Company of a
written agreement, in form reasonably satisfactory to the Company, of the
assignee agreeing to be bound by this Agreement to the same extent as such
Holder was so bound), the Company shall execute and deliver a new Warrant
Certificate in the name of the assignee and in the denominations specified in
such instrument of assignment, and the original Warrant Certificate shall
promptly be canceled.
(c) The Company shall maintain books for the registration and transfer
of the Warrants, and shall allow each Holder of Warrants to inspect such books
at such reasonable times as such Holder shall request.
SECTION 8.2 Delivery Expenses. If any Holder surrenders any Warrant
Certificate or certificates for Warrant Stock or Marketable Capital Stock to the
Company or a transfer agent of the Company for exchange for instruments of other
denominations or registered in another name or names, the Company shall cause
such new instruments to be issued and shall pay the cost of delivering to or
from the office of such Holder from or to the Company or its transfer agent,
duly insured, the surrendered instrument and any new instruments issued in
substitution or replacement for the surrendered instrument, but the Holder shall
be responsible for any transfer tax in connection therewith.
SECTION 8.3 Taxes. The Company shall pay all taxes (other than Federal,
state or local income taxes, or certain transfer tax pursuant to Sections 2.3(d)
and 8.2) which may be payable in connection with the execution and delivery of
this Agreement or the issuance of the Warrants, the Warrant Stock or the
Marketable Capital Stock hereunder or in connection with any modification of
this Agreement and shall hold each Holder harmless without limitation as to time
against any and all liabilities with respect to all such taxes. The obligations
of the Company under this Section 8.3 shall survive any redemption, repurchase
or acquisition of the Warrants, Warrant Stock or Marketable Capital Stock by the
Company, any termination of this Agreement, and any cancellation or termination
of the Warrants.
SECTION 8.4 Indemnification. The Company shall indemnify and hold
harmless each Holder Indemnified Party from and against any and all losses,
claims, damages, liabilities (or actions or other proceedings commenced or
threatened in respect thereof) and expenses that arise out of, result from, or
in any way relate to, this Agreement or in connection with the transactions
contemplated hereby, including as a result of any inaccuracy in or breach of any
representation or warranty of the Company made in this Agreement or any other
38
Transaction Document, and to reimburse each Holder Indemnified Party for any
reasonable legal or other expenses incurred in connection with investigating,
defending or participating in the defense of any such loss, claim, damage,
liability, action or other proceeding (whether or not such indemnified person is
a party to any action or proceeding out of which any such expenses arise), other
than any of the foregoing claimed by any indemnified person to the extent
incurred by reason of the gross negligence or willful misconduct of such
indemnified person. Any claim for indemnity in connection with or relating to a
registration of securities pursuant to Article VII shall be governed by Section
7.8, without regard to the provisions of this Section 8.4.
SECTION 8.5. Inspection Rights. The Company shall afford, and shall cause
its Subsidiaries to afford, any Holder or its authorized agents, access, at
reasonable times, upon reasonable prior notice and subject to customary
confidentiality obligations, (a) to inspect the books and records of the Company
and its Subsidiaries, (b) to discuss with management of the Company and its
Subsidiaries the business and affairs of the Company and its Subsidiaries and
(c) to inspect the properties of the Company and its Subsidiaries.
SECTION 8.6 Board Observer.
(a) Subject to Sections 8.6(b) and (c), during the period beginning on
the Closing Date and ending on the later to occur of (i) the date on which the
outstanding principal amount under the Loan Agreement (and the remaining undrawn
Commitments) owed to Pegasus Partners II, L.P. ("Pegasus Partners") and its
Affiliates, including DBS Investors, LLC) is less than $25,000,000 or (ii) the
last day of the Commitment Period, the Company shall give notice (in the same
manner as notice is given to directors) of all meetings of the Board of
Directors and all meetings of the board of directors of PSC to Pegasus Partners
and shall permit one Person designated by Pegasus Partners to attend all such
meetings of the Board of Directors and of the board of directors of PSC as an
observer. Subject to Sections 8.6(b) and (c), the Company shall, and shall cause
PSC to, provide to such observer the same information concerning the Company,
PSC, and their respective Subsidiaries and Affiliates and access thereto,
provided to members of the Board of Directors and board of directors of PSC. The
reasonable travel expenses incurred by any such observer in attending any
meetings of the Board of Directors meetings and the board of directors of PSC
shall be reimbursed by the Company to the extent consistent with the Company's
then existing policy of reimbursing directors generally for such expenses. In
addition, such observer shall be included and covered in the directors' and
officers' liability insurance policies of the Company and/or PSC to the maximum
extent permitted under applicable law.
(b) Pegasus Partners shall, and shall cause each of its Affiliates and
each Person designated by it as an observer under Section 8.6(a) to, (i)
maintain all information received by any of them as a result of having
designated an observer in confidence (provided, that as long as such information
does not constitute either market-sensitive, material non-public information,
sensitive information concerning the Company's competitive position and business
intention or material non-public information concerning the strategy and tactics
utilized or to be utilized in the Litigation (as such term is defined in the
Loan Agreement), such information may be shared with Affiliates or limited
partners of Pegasus Partners on a need-to-know basis so long as such Affiliates
39
or limited partners agree to keep such information in confidence to the same
extent as Pegasus Partners), and restrict their use of any such information, to
the same extent as they would be required to do if the observer were a member of
the Board of Directors or the board of directors of PSC, and (ii) comply with
the policies that apply to directors of the Company or PSC as in effect from
time to time relating to trading in the securities of the Company and its
Subsidiaries. In the event of any breach of any obligation under this Section
8.6(b), Pegasus Partners shall immediately cease to have the right specified in
Section 8.6(a).
(c) Notwithstanding Section 8.6(a), no observer designated thereunder
shall have the right to observe any portion of a meeting relating to any
deliberation or action concerning the relationships established by the Loan
Agreement, this Agreement, or any other Transaction Documents or to receive
information provided to the directors of the Company or PSC in connection
therewith.
ARTICLE IX
MISCELLANEOUS
-------------
SECTION 9.1 Waiver. No failure on the part of any Holder to exercise
and no delay in exercising, and no course of dealing with respect to, any right,
power or privilege under this Agreement or the Warrants shall operate as a
waiver thereof, nor shall any single or partial exercise of any right, power or
privilege under this Agreement or the Warrant preclude any other or further
exercise thereof or the exercise of any other right, power or privilege. The
remedies provided herein are cumulative and not exclusive of any remedies
provided by law.
SECTION 9.2 Notices.
(a) All notices, requests and other communications provided for herein
(including any waivers or consents under this Agreement) shall be given or made
in writing, (i) to any party hereto, delivered to the intended recipient at the
addresses specified in Section 13.03 of the Loan Agreement; or, as to any party,
at such other address as shall be designated by such party in a written notice
to each other party, or (ii) to any other Person who is the registered Holder of
any Warrants or Warrant Stock, to the address for such Holder as it appears in
the stock or warrant ledger of the Company.
(b) All such notices and communications shall be deemed to have been
duly given: when delivered by hand, if personally delivered; when delivered by
courier, if delivered by commercial overnight courier service; if mailed, five
Business Days after being deposited in the mail, postage prepaid; or if
telecopied, when receipt is acknowledged.
SECTION 9.3 Expenses, Etc. The Company agrees to pay or reimburse the
Holders for: (a) all reasonable out-of-pocket costs and expenses of Initial
Holders (including reasonable legal fees and expenses of one counsel to Pegasus
Partners), in connection with (i) the negotiation, preparation, execution and
delivery of this Agreement and the issuance of Warrants hereunder and (ii) any
amendment, modification or waiver of (or consents in respect of) any of the
terms of this Agreement and/or the Warrants; and (b) all costs and expenses of
40
the Holders (including reasonable legal fees and expenses) in connection with
(i) any default by the Company hereunder or under the Warrants or any
enforcement proceedings resulting therefrom and (ii) the enforcement of this
Section 9.3.
SECTION 9.4 Amendments, Etc. Except as otherwise expressly provided in
this Agreement, any provision of this Agreement may be amended or modified only
by an instrument in writing signed by the Company and the Required Holders.
SECTION 9.5 Successors and Assigns. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective
successors and permitted assigns. Subject to Section 8.1, each of the Holders
may transfer to any Person any Warrants, Warrant Stock or Marketable Capital
Stock (or the right to receive such securities) and all of its other rights and
obligations hereunder (including the registration rights set forth in Article
VII) and such transferee shall be deemed a Holder for all purposes of this
Agreement.
SECTION 9.6 Survival. All representations and warranties made by the
Company herein or in any certificate or other instrument delivered by it or on
its behalf under this Agreement shall be considered to have been relied upon by
the Holders and shall survive the issuance of the Warrants, the Warrant Stock or
the Marketable Capital Stock regardless of any investigation made by or on
behalf of the Holders. All statements in any such certificate or other
instrument so delivered shall constitute representations and warranties by the
Company hereunder. All representations and warranties made by the Holders herein
shall be considered to have been relied upon by the Company and shall survive
the issuance to the Holders of the Warrants, the Warrant Stock or the Marketable
Capital Stock regardless of any investigation made by the Company or on its
behalf.
SECTION 9.7 Specific Performance; Good Faith.
(a) Damages in the event of breach of this Agreement by a Holder or the
Company would be difficult, if not impossible, to ascertain, and it is therefore
agreed that each Holder and the Company, in addition to and without limiting any
other remedy or right it may have, will have the right to an injunction or other
equitable relief in any court of competent jurisdiction, enjoining any such
breach, and enforcing specifically the terms and provisions hereof, and each
Holder and the Company hereby waives any and all defenses it may have on the
ground of lack of jurisdiction or competence of the court to grant such an
injunction or other equitable relief. The existence of this right will not
preclude the Holders or the Company from pursuing any other rights and remedies
at law or in equity, which the Holders or the Company may have.
(b) If at any time or from time to time after the first Issue Date the
Company shall take any action affecting any class of its Common Stock similar to
or having an effect similar to any of the actions described in Article III and
Section 4.4 (but not including any action described in any such Article or
Section), and the Board of Directors in good faith determines that it would be
equitable in the circumstances to reduce the Exercise Price payable upon
exercise of each Warrant then issued and outstanding or that is subsequently
issued under Section 2.1(ii), increase the Number Issuable, and/or increase the
number of Marketable Capital Stock issuable upon a Warrant Stock Exchange as a
result of such action, then, and in each such case, the Exercise Price payable
upon exercise of each Warrant then issued and outstanding or that is
subsequently issued under Section 2.1(ii) shall be reduced and the Number
41
Issuable and the number of Marketable Capital Stock issuable upon a Warrant
Stock Exchange shall be increased in such manner and at such time as the Board
of Directors in good faith determines would be equitable in the circumstances
(such determination to be evidenced in a resolution, a certified copy of which
shall be mailed to each Holder of Warrants and each Holder of Warrant Stock).
SECTION 9.8 Captions. The captions and section headings appearing
herein are included solely for convenience of reference and are not intended to
affect the interpretation of any provision of this Agreement.
SECTION 9.9 Counterparts. This Agreement may be executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument and any of the parties hereto may execute this Agreement by signing
any such counterpart signature page or counterpart.
SECTION 9.10 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK
(WITHOUT GIVING EFFECT TO ANY CONFLICTS OR CHOICE OF LAWS PROVISIONS THAT WOULD
CAUSE THE APPLICATION OF THE DOMESTIC SUBSTANTIVE LAWS OF ANY OTHER
JURISDICTION).
SECTION 9.11 CONSENT TO JURISDICTION. EACH PARTY HERETO HEREBY CONSENTS
TO THE NON-EXCLUSIVE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK AND THE
UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK, AS WELL AS
TO THE JURISDICTION OF ALL COURTS TO WHICH AN APPEAL MAY BE TAKEN FROM SUCH
COURTS, FOR THE PURPOSE OF ANY SUIT, ACTION OR OTHER PROCEEDING ARISING OUT OF
ANY OF ITS OBLIGATIONS ARISING HEREUNDER OR UNDER THE WARRANTS OR WITH RESPECT
TO THE TRANSACTIONS CONTEMPLATED HEREBY, AND EXPRESSLY WAIVES ANY AND ALL
OBJECTIONS IT MAY HAVE AS TO VENUE, INCLUDING, WITHOUT LIMITATION, THE
INCONVENIENCE OF SUCH FORUM, IN ANY OF SUCH COURTS. IN ADDITION, TO THE EXTENT
THAT IT MAY LAWFULLY DO SO, EACH PARTY HERETO CONSENTS TO THE SERVICE OF PROCESS
BY PERSONAL SERVICE OR U.S. CERTIFIED OR REGISTERED MAIL, RETURN RECEIPT
REQUESTED, ADDRESSED TO SUCH PARTY AT THE ADDRESS PROVIDED HEREIN. TO THE EXTENT
THAT ANY PARTY HERETO HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY FROM
JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH SERVICE OR
NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION OR
OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, SUCH PARTY HEREBY IRREVOCABLY
WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT TO THE
MAXIMUM EXTENT PERMITTED BY LAW.
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SECTION 9.12 WAIVER OF JURY TRIAL. EACH PARTY HERETO HEREBY VOLUNTARILY
AND IRREVOCABLY WAIVES TRIAL BY JURY IN ANY ACTION BROUGHT ON OR WITH RESPECT TO
THIS AGREEMENT, THE WARRANTS, OR ANY OTHER AGREEMENTS EXECUTED IN CONNECTION
HEREWITH.
SECTION 9.13 Severability. If any provision of this Agreement is held
to be illegal, invalid or unenforceable under any present or future law, and if
the rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
SECTION 9.14 Entire Agreement. This Agreement supersedes all prior
discussions and agreements between the parties with respect to the subject
matter hereof and, together with the Warrants, contains the sole and entire
agreement between the parties hereto with respect to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Warrant Agreement as of the date first above written.
PEGASUS COMMUNICATIONS CORPORATION
By: /s/ ▇▇▇ ▇. Lodge
------------------------------------------
Name: ▇▇▇ ▇. Lodge
Title: President and Chief Operating Officer
DBS INVESTORS, LLC
By: /s/ ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Secretary
AVENUE SPECIAL SITUATIONS FUND II, LP
By: Avenue Capital Partners II, LLC,
General Partner
By: GLS Partners II, LLC,
Managing Member of the General Partner
By: /s/ ▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------------
Name: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Member
SPCP Group, LLC
By: /s/ ▇▇▇▇▇▇ ▇. Mule
------------------------------------------
Name: ▇▇▇▇▇▇ ▇. Mule
Title: Principal