WARRANT AGREEMENT
dated as of July 1, 1997
By and Between
STARTEC, INC.
(As Issuer of Warrants)
and
SIGNET BANK
(As Purchaser of Warrants)
Warrants to Purchase 538,083 Shares of
Class A Voting Common Stock of Company
(Representing 10% of the Issued and Outstanding Shares of
Capital Stock (on a Fully Diluted Basis, but Subject to Vesting)
TABLE OF CONTENTS
ARTICLE 1: GRANT OF WARRANTS
1.1. Grant of Warrants
1.2. Warrant Entitlement
1.3. Warrants as Additional Compensation
ARTICLE 2: PURCHASER'S REPRESENTATIONS AND AGREEMENTS
ARTICLE 3: COMPANY'S REPRESENTATIONS AND WARRANTIES
3.1. Legal Existence and Power
3.2. Authorization; Non-Contravention
3.3. Execution, Delivery and Binding Effect
3.4. Litigation
3.5. Compliance with Laws and Other Requirements
3.6. Broker and Finder Fees
3.7. Offering of Securities
3.8. Warrant Shares as a Percent of Capital Stock
3.9. Reservation and Issuance of Warrant Shares
ARTICLE 4: THE WARRANTS AND WARRANT SHARES
4.1. Warrant Certificates
4.2. Exercise of Warrants
4.3. Transfers of Warrants and Warrant Shares
4.4. Registration and Related Rights
4.5. Rights Upon Occurrence of Dispositions and Non-Surviving Combinations
4.6. Repurchase Offer
4.7. Cumulative Rights
4.8. Exercise of Rights Conditioned Upon Closing of Transaction
Involved
4.9. Payment of Taxes
4.10.Reservation and Issuance of Warrant Shares
4.11.Listing of Shares
4.12.Lists of Holders
4.13.Compliance with Approval Requirements
ARTICLE 5: ANTI-DILUTION PROVISIONS
5.1. Adjustments to Warrant Shares Purchasable and
Exercise Price
5.2. Notice of Adjustment
5.3. Preservation of Purchase Rights upon Certain
Transactions
ARTICLE 6: COMPANY'S COVENANTS
6.1. Information
6.2. Books and Records; Right of Inspection
6.3. Litigation; Defaults
6.4. No Amendments to Organic Documents
6.5. Reincorporation and Qualification
6.6. Existence and Good Standing
6.7. Conduct of Business
6.8. Broker and Finder Fees and Commissions
ARTICLE 7: DEFINITIONS
7.1. Definitions
7.2. General Construction
ARTICLE 8: MISCELLANEOUS
8.1. Compliance with FCC and State PUC Requirements
8.2. Compliance with Purchaser's Regulatory Requirements
8.3. Binding Effect and Governing Law
8.4. Survival
8.5. No Waiver; Delay
8.6. Modification
8.7. Headings
8.8. Notices
8.9. Time of Day
8.10.Prior Agreements Superseded
8.11.Severability
8.12.Counterparts
8.13.Waiver of Liability
▇.▇▇.▇▇▇▇▇ Selection; Consent to Jurisdiction
8.15.Waiver of Jury Trial
EXHIBIT A -- Articles of Incorporation
EXHIBIT B -- Authorizing Resolutions
EXHIBIT C -- Form of Warrant Certificate
EXHIBIT D -- Restrictive Legends
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WARRANT AGREEMENT
THIS WARRANT AGREEMENT (as defined in Article 7 along with all the other
defined terms, this "Agreement") is made and effective as of July 1, 1997 by and
between STARTEC, INC. (as more fully defined in Article 7, the "Company"), and
SIGNET BANK (as more fully defined in Article 7, the "Purchaser" or the
"Lender").
R E C I T A L S
WHEREAS, Company has requested Lender (and Lender has agreed) to enter into
the Credit Agreement and various related Loan Documents (as defined in the
Credit Agreement) pursuant to which Lender will provide Company with credit
facilities initially aggregating up to $15 million (subject to availability);
and
WHEREAS, to induce Lender to enter into the Credit Agreement and other Loan
Documents and as additional consideration for the credit to be provided
thereunder, Company has agreed to issue and deliver to Purchaser the Warrants
(evidenced by Warrant Certificates) to purchase up to an aggregate of 538,083
shares (subject to adjustment and Vesting) of Class A Voting Common Stock of
Company (which, as of the effective date hereof, represent 10% of the issued and
outstanding shares of Capital Stock and voting rights of Company, on a fully
diluted basis);
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration (receipt and sufficiency of which are hereby
acknowledged), and intending to be legally bound hereby, Company and Purchaser
hereby agree as follows:
ARTICLE 1: GRANT OF WARRANTS
1.1. Grant of Warrants. Company hereby grants to Purchaser warrants (the
"Warrants") to purchase up to an aggregate of 538,083 shares of Class A Voting
Common Stock (as such number may be adjusted from time to time as provided
herein). Each Warrant is exercisable as and when it Vests (as described in
Section 4.2).
1.2. Warrant Entitlement. Each Warrant (as and when it Vests) entitles
Purchaser or any subsequent registered Holder of such Warrant to purchase
(during the Exercise Period) one fully paid, nonassessable Warrant Share at a
price per share equal to the Exercise Price (as described in Section 4.2).
1.3. Warrants as Additional Compensation. The Warrants (and the grant
thereof hereunder) are additional compensation for the cost, expense and risk
incurred by Lender (and/or its Affiliates) associated with the underwriting and
establishment of the loan credit facilities to be provided for in the Credit
Agreement, but neither the grant nor the exercise of any Warrants in any way
affects or relieves Company (or any Affiliate thereof) of any of its obligations
to fully and timely perform and to fully and timely repay the entire
indebtedness due under the Credit Agreement and related Loan Documents.
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ARTICLE 2: PURCHASER'S REPRESENTATIONS AND AGREEMENTS
Purchaser represents and warrants that it is acquiring the Warrants (a)
solely for the purpose of investment and not with a view to any distribution of
the Warrants or any Warrant Shares within the meaning of the Securities Act, and
(b) with no present intention of selling or otherwise transferring the Warrants,
the Warrant Certificates or the Warrant Shares except as provided herein.
Purchaser further represents and warrants as follows: (1) it has such knowledge
and experience in financial and business matters as to be capable of evaluating
the merits and risks of its prospective investment in the Warrants, and (2) it
has the ability to bear the economic risks of its prospective investment, and
(3) it is able (without materially impairing its financial condition) to hold
the Warrants and Warrant Shares for an indefinite period of time and to suffer a
complete loss on its investment in such Warrants and Warrant Shares. Purchaser
agrees that it will not offer, sell, pledge, hypothecate or otherwise transfer
any Warrants, Warrant Certificates or Warrant Shares except in compliance with
this Agreement, any restrictive legends listed on such documents and the
Securities Act (and the regulations of the Commission thereunder), as well as in
compliance with any applicable laws, regulations and orders of and/or
administered by any State PUC (to the extent failure to so comply could
reasonably be expected to have or cause a material adverse effect on the
operations of Company or could otherwise reasonably be expected to result in the
imposition of a penalty in excess of $25,000) or the FCC.
ARTICLE 3: COMPANY'S REPRESENTATIONS AND WARRANTIES
Company represents and warrants that:
3.1. Legal Existence and Power. Company (a) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Maryland, and (b) has all requisite power to execute, deliver and perform this
Agreement, and (c) has all requisite power to issue and deliver the Warrants, to
execute, deliver and perform the Warrant Certificates (evidencing the Warrants),
and to issue and deliver the Warrant Shares (if and when any Warrants are
exercised). The Articles of Incorporation of Company (as amended from time to
time prior to the effective date hereof) are attached as Exhibit A.
3.2. Authorization: Non-Contravention. Company has duly authorized each of
the following by all requisite actions thereof: (a) the execution, delivery and
performance of this Agreement, and (b) the issuance and delivery of the
Warrants, and (c) the execution, delivery and performance of the Warrant
Certificates, and (d) the issuance and delivery of the Warrant Shares Upon any
exercise of the Warrants. None of the actions or activities by Company the
authorization of which is described in the first sentence of this Section (when
performed by Company)
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will violate, breach or cause a default under (or will require any consent that
has not been obtained under) any applicable law or regulation (including,
without limitation, the laws, regulations and orders of and/or administered by
the FCC or any State PUC), the Organic Documents of Company, any voting or other
equity-related agreements, any other material agreements or instruments, any
order, injunction or decree of any court or governmental authority, or any
permit, authorization or license that (with respect to each of the foregoing
items, as applicable) Company is a party to, Company is bound by or Company
operates pursuant to. The resolutions of Company's Board of Directors
authorizing the actions described in the first sentence of this Section are
attached as Exhibit B and are in full force and effect as of the effective date
hereof.
3.3. Execution, Delivery and Binding Effect. This Agreement and the Warrant
Certificates have been duly executed and delivered by Company. This Agreement,
the Warrant Certificates and the Warrants constitute valid and binding
obligations of Company enforceable against Company in accordance with their
terms except as (a) the enforceability hereof or thereof may be limited by
applicable bankruptcy, insolvency or similar laws affecting creditors' rights
generally and (b) the availability of equitable remedies may be limited by
equitable principles of general applicability.
3.4. Litigation. There is no action, suit, administrative proceeding,
arbitration, investigation or other legal proceeding pending against, or (to the
knowledge of Company, after due inquiry) threatened against, affecting or likely
to be asserted against, Company before any court, arbitrator or governmental
body (a) that, if adversely resolved, could reasonably be expected to have or
cause a materially adverse affect on the business, financial condition,
operations, properties or prospects of Company, or (b) that in any manner
challenges (or questions the validity of) this Agreement, the Warrants, the
Warrant Certificates or the Warrant Shares.
3.5. Compliance with Laws and Other Requirements. Company is in compliance
in all material respects with all applicable material laws and regulations
(including, without limitation, the laws, regulations and orders of and/or
administered by the FCC or any State PUC). Company is not in violation or breach
of or in default under its Organic Documents, or any voting or other
equity-related agreements, or (to the knowledge of Company, after due inquiry)
any material agreement or instrument, any order, injunction or decree of any
court or governmental authority, or any permit, authorization or license to
which Company is a party, by which Company is bound or pursuant to which Company
operates, other than (in each instance) those the violation, breach or default
of which cannot reasonably be expected to have or cause a
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materially adverse affect on (a) the business, financial condition, operations,
properties or prospects of Company, or (b) the ability of Company to perform its
obligations under this Agreement, its Organic Documents, the Warrants, the
Warrant Certificates or the Warrant Shares.
3.6. Broker and Finder Fees. Company has not dealt with any broker, finder,
investment bank or other advisor in connection with the issuance and sale of the
Warrants or Warrant Shares, and no broker, finder, investment banking or
advisory fee or commission has been or will be payable (or asserted to be
payable) by Company with respect the issuance and sale of the Warrants or the
Warrant Shares.
3.7. Offering of Securities. Company has not taken and will not take any
action that would cause the offer, issuance or sale of the Warrants or the
Warrant Shares to violate the Securities Act (including, without limitation,
Section 5 thereof) or any securities or "Blue Sky" law of any applicable
jurisdiction.
3.8. Warrant Shares as a Percent of Capital Stock. The Warrant Shares (as
of the effective date hereof, but subject to Vesting) represent 10% of the
issued and outstanding shares of Capital Stock and voting rights on a fully
diluted basis.
3.9. Reservation and Issuance of Warrant Shares. Company has reserved among
its currently authorized but unissued shares of Common Stock the full number of
Warrant Shares deliverable upon exercise of all of the Warrants. The Warrant
Shares (when and if issued upon exercise of the Warrants in accordance with the
terms hereof) will be duly authorized, validly issued, fully paid and
nonassessable.
ARTICLE 4: THE WARRANTS AND WARRANT SHARES
4.1. Warrant Certificates.
a. Form of Certificate: Registration Among Company's Records. The
Warrants shall be evidenced by one or more Warrant Certificates, each of which
will be substantially in the form of Exhibit C with the applicable legend
specified on Exhibit D (but shall incorporate such changes therein as may be
required from time to time to reflect any adjustments made pursuant to Article
5. Each Warrant Certificate shall be uniquely numbered, shall identify the
record Holder thereof, and shall be registered on the books and records of
Company in substantially the same manner as other equity interests of Company.
b. Exchange and Transfer of Certificates. A Warrant Certificate (and the
Warrants evidenced thereby) may be exchanged or (subject to compliance with the
applicable requirements
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hereof) may be transferred from time to time at the option of the Holder
thereof. Upon surrender of any such Warrant Certificate to Company, then Company
shall issue and deliver to (or in accordance with the written instructions of)
such Holder one or more new Warrant Certificates evidencing in the aggregate the
same number of Warrants.
c. Missing and Mutilated Certificates. If any Warrant Certificate is lost,
stolen, mutilated or destroyed, then Company (upon request of the registered
Holder thereof) shall issue and deliver to (or in accordance with the written
instructions of) such Holder one or more replacement Warrant Certificates
evidencing in the aggregate the same number of Warrants. Company's obligation
under this Clause is conditioned upon its receipt of reasonably satisfactory
evidence of such loss, theft, mutilation or destruction.
d. Authorization of Certificate Signer. Any Warrant Certificate may be
signed on behalf of Company (and delivered to the Holder entitled thereto) by
any person who, on the actual date of execution of such Warrant Certificate, is
a proper officer of Company to sign such Warrant Certificate even though (l) on
the date of execution of this Agreement such person was not such an officer,
and/or (2) on the date of delivery of such Warrant Certificate such person has
ceased to serve as such officer of Company.
4.2. Exercise of Warrants.
a. Exercise Period. The Warrants are exercisable (once they Vest) at any
time and from time to time after the effective date hereof and prior to 11:59
p.m. (Eastern Time) on July 1, 2002 ("Exercise Period"), at which time any
unexercised Warrants shall expire.
b. Exercise Price. The Exercise Price for a Warrant Share will be
determined (as of the date of Vesting for such Warrant) by dividing (1) the
applicable "Revenue Factor" as of the applicable "Establishment Date" by (2) the
number of shares of Capital Stock issued and outstanding on a fully diluted
basis (including outstanding rights, options and warrants to purchase and other
securities convertible or exchangeable into Capital Stock) as of such
Establishment Date (as such amount may be adjusted from time to time thereafter
as provided herein, the "Exercise Price"). For purposes of establishing the
Exercise Price, (i) the applicable "Revenue Factor" will be an amount 10 times
Company's monthly revenue for the month ending as of the applicable
Establishment Date, and (ii) the applicable "Establishment Date" will be the
last Business Day of the month in which a particular Warrant becomes Vested
(except that, with respect to the Warrants that Vest immediately as of the
effective
7
date hereof, the applicable Establishment Date will be the last Business Day of
April, 1997). With respect to the Warrants that Vest as of the effective date
hereof, the Exercise Price is $8.46 per share (subject to adjustment).
Notwithstanding the foregoing, if the price per share received by Company in any
Public Offering is less than the Exercise Price then in effect with respect to
any Warrant, then the Exercise Price for each such Warrant will be automatically
adjusted to be the per share price received by Company in connection with such
Public Offering.
c. Vesting. Vesting occurs with respect to any Warrant when such Warrant
becomes immediately exercisable. As of the effective date hereof, Warrants to
purchase up to an aggregate of 269,042 shares (subject to adjustment) of Class A
Voting Common Stock of Company will Vest (which, as of the effective date
hereof, upon exercise, will represent 5% of the issued and outstanding shares of
Capital Stock and voting Rights of Company, on a fully diluted basis). If
Company consummates an Initial Public Offering before 11:59:59 pm Eastern Time
("ET") on December 31, 1997, then no additional Warrants will Vest. As of and
after December 31, 1997, Warrants will Vest in accordance with the following
schedule:
If an Initial Public The Total Percentage Vested
Offering Does Not Occur as of Such Date and Time Will
Before 11:59:59 pm ET Be As Follows (exclusive of
on the Following Date Then anti-dilution protection)
December 31, 1997 6%
March 31, 1998 7%
June 30, 1998 8%
September 30, 1998 9%
December 31, 1998 10%
d. Method of Exercise: Cashless Exercise. A Holder of any Warrant
Certificate (evidencing any Warrants that have Vested) may exercise any such
Warrants from time to time during the Exercise Period to purchase Warrant Shares
upon (1) the surrender of such Warrant Certificate evidencing such Warrants, and
(2) the payment of the Exercise Price in cash, by certified or cashier's check
payable to the order of Company or by wire transfer to Company. As an
alternative to paying such Exercise Price (or any portion thereof), a Holder may
instead elect to effect a cashless exercise pursuant to which such Holder will
receive in exchange for such tendered Warrants an amount of Warrant Shares
determined by multiplying (a) the number of Warrant Shares into which such
Holder would otherwise be entitled as a result of such exercise by (b) a
fraction (i) the numerator of which is the difference between the then Current
Market Price per Warrant Share and the Exercise Price then in effect and (b) the
denominator of which is the then Current Market Price per Warrant Share. Such
surrender and payment must occur at an office of Company or at such other
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address as Company may specify in writing to the then registered Holder of such
Warrant Certificate.
e. Issuance of Warrant Shares Upon Exercise. Upon surrender of any Warrant
Certificate and payment of the applicable Exercise Price (as described above in
this Section), then Company shall issue, sell and deliver to or upon the
instructions of the Holder of such Warrant Certificate and/or its designee one
or more certificates evidencing in the aggregate the number of Warrant Shares
represented by such Warrant Certificate that are then being purchased (each of
which Warrant Shares shall be fully paid and nonassessable). Any persons so
designated to be named therein shall be deemed to have become a Holder of record
of such Warrant Shares as of the date of exercise of such Warrants. If less than
all of the Warrants evidenced by a Warrant Certificate are exercised at any time
prior to the last day of the Exercise Period, then Company shall issue to such
Holder (or its designee) one or more new Warrant Certificates evidencing the
remaining number of Warrants evidenced by such Warrant Certificate that are not
then exercised by Holder.
4.3. Transfers of Warrants and Warrant Shares. Except as otherwise
expressly provided herein, upon compliance with any applicable requirements
under the Securities Act and the laws, regulations and orders of and/or
administered by each State PUC (to the extent failure to so comply could
reasonably be expected to have or cause a material adverse effect on the
operations of Company or could otherwise reasonably be expected to result in the
imposition of a penalty in excess of $25,000) or the FCC, then the Warrants, the
corresponding Warrant Certificates and the Warrant Shares may be transferred by
Purchaser (or any other Holder thereof from time to time in whole or in part
upon giving written notice to Company (but without the necessity of any prior
written consent of Company). Notwithstanding the foregoing, prior to receiving
notice of any such transfer (either from such Holder or from such transferee),
Company shall be otherwise entitled to treat such known Holder thereof as the
Holder of record hereunder for purposes of giving and receiving notices and for
purposes of exercising rights hereunder.
4.4. Registration and Related Rights.
a. Incidental Registration in a Public Offering. Each Holder of
Warrant Shares and each Holder of Warrants shall have the right to require
Company to include all or (at such Holder's election) any portion of such
Warrant Shares and the Warrant Shares purchasable upon exercise of any such
Warrants that have then Vested in any Public Offering of Company's securities.
Company shall give written notice to each Holder of Warrants and each
Holder of Warrant Shares (at each such Holder's last
9
known address as it appears on Company's books and records) promptly after the
occurrence of any of the following events: (i) Company deciding to proceed with
any registration of securities that would constitute a Public Offering if
declared effective, or (ii) the initial filing of a registration statement with
the Commission pertaining to any Public Offering, or (iii) any amendment,
supplement or modification to any registration statement for a Public Offering
by Company (other than amendments, supplements and modifications that occur
automatically through incorporation by reference as a result of subsequently
prepared publicly available materials), or (iv) any withdrawal of any
registration statement for a Public Offering by Company, or (v) any delay of any
such Public Offering by Company (which, with respect to any Public Offering,
Company may elect to do in its discretion for a period not to exceed 90 calendar
days). Once any such registration statement is declared effective by the
Commission, then Company may not amend or modify it in any manner that affects
any rights, liabilities or benefits of Holders without providing each Holder of
Warrants and each Holder of Warrant Shares with written notice thereof at least
5 Business Days prior to filing any such amendment or modification with the
Commission.
In connection with any such Public Offering, Company shall enter into
an underwriting agreement with one or more underwriters that shall provide,
among other things, that the underwriters shall offer to purchase at the closing
of such Public Offering all of the Warrant Shares and all of the Warrants that
have then Vested (or such lesser portion thereof as any Holder may request) at
the price paid by the underwriters for the Capital Stock (or if a security
convertible into or exchangeable for, or rights to purchase, Capital Stock, then
the conversion, exchange or purchase price for the Capital Stock provided for by
such security less the conversion, exchange or exercise premium on the date of
such offering) sold by Company and/or any selling shareholders (less, with
respect to Warrants, the Exercise Price then in effect). Notwithstanding the
forgoing, if the underwriters shall advise Company in writing that, in their
experience and professional opinion arrived at in good faith, inclusion of such
number of Warrant Shares (together with the shares of Capital Stock requested
for registration by any other selling equityholders) will adversely affect the
price or distribution of the securities to be offered in such Public Offering
solely for the account of Company, then (1) Company shall promptly furnish each
such Holder with a copy of such written advice by the underwriters, and (2) such
Holders shall then have the right to include only such number of Warrant Shares
and Warrants that such advice by the underwriters indicates may be distributed
without adversely affecting the distribution of the securities solely for
Company's account. As among Holders of Warrant Shares and/or Warrants, such
availability for inclusion
10
in the registration for such Public Offering shall be allocated pro rata based
upon the total number of Warrant Shares owned or purchasable by such Holder. As
between such Holders and any other holders of Capital Stock requesting to be
included in such Public Offering, 60% of any required reduction in the number
shares includible in the registration for such Public Offering shall be
allocated pro rata among such other holders of Capital Stock and 40% of any
required reduction in the number shares includible in the registration for such
Public Offering shall be allocated pro rata among Holders.
In connection with an Initial Public Offering, provided that all other
holders of at least 2% of the issued and outstanding equity interests of Company
are subject to identical (or more restrictive) restrictions with respect to
their equity interests, then each Holder of Warrants and each Holder of Warrant
Shares shall agree to refrain from selling or otherwise transferring (other than
to a Purchaser-Affiliated Transferee) any Warrant Shares not included in such
Initial Public Offering for a period of time (not to exceed 180 calendar days
after the effective date of the registration statement for such Initial Public
Offering) as may be appropriate under the circumstances and reasonably requested
by Company and the underwriters for such offering.
b. Demand Registration Following an Initial Public Offering or Surviving
Public Combination. In addition to any other registration rights to which any
Holder is entitled, at any time and from time to time after closing of an
Initial Public Offering or a Surviving Public Combination, Company (upon each
request of Holders of at least 50% of the Warrant Shares and Warrants then
Vested) shall prepare, shall file with the Commission and shall use its best
efforts to cause to become effective as promptly as reasonably possible a
registration statement covering such number of Warrant Shares owned or then
purchasable as is requested by such Holders. Notwithstanding the forgoing,
Company shall not be required to so prepare and file upon the demand of such
Holders either (a) more than two (2) such registration statements that are
declared effective by the Commission and maintained in effect by Company for at
least 90 consecutive calendar days and are not on a Form S-3 (or any successor
form), or (b) any such registration statement within the first 90 calendar days
after the closing of an Initial Public Offering, or (c) any such registration
statement within the first 180 calendar days after the closing of a Public
Offering that was effective for at least 90 consecutive calendar days and in
which 50% or more of the Warrant Shares and Warrants then Vested were included.
In connection with any such demand registration, such Holders may
engage one or more underwriters to purchase the Warrant Shares, and if so
requested by such Holders, then Company will use commercially reasonable efforts
to assist and cooperate
11
with such Holders in identifying and engaging such underwriters. Moreover,
Company shall also use commercially reasonable efforts to assist and cooperate
with such underwriters once engaged by such Holders. The registration statement
shall also provide that sales of the Warrant Shares may be made by dealers, on
an exchange if listed, directly to purchasers or in any other manner. No such
registration statement filed pursuant to this demand registration provision
(without the consent of Holders of at least 50% of the total Warrant Shares and
Warrants that have then Vested) may relate to any securities other than the
Warrant Shares, and no other securities may be sold incidentally to any such
underwritten public offering of Warrant Shares so registered.
In connection with any such demand registration, Company shall keep
effective and maintain the registration, qualification, approval or listing
covering the Warrant Shares for a period of at least 90 consecutive calendar
days. Company from time to time shall amend or supplement the prospectus and
registration statement used in connection with any such registration to the
extent necessary to comply with applicable law (including, without limitation,
to reflect additional information relating to the plan of distribution), and
shall immediately advise each Holder if any such prospectus or registration
statement does not so comply and/or if any stop order or similar order is issued
or threatened or any request for amendment or supplement is received from any
regulatory agency. Company shall make every reasonable effort to prevent the
issuance of any stop order and, if any stop order is issued, to obtain the
lifting thereof at the earliest possible moment. Company shall comply with all
other applicable laws in connection with any offering of Warrant Shares and will
promptly make available an earnings statement in accordance with Section 11(a)
of the Securities Act and the regulations promulgated thereunder.
c. Other Registration Rights. If Company has otherwise granted or
hereafter grants to any Person any other or additional registration rights with
respect to any securities of Company (or similar registration rights with any
more favorable or less restrictive terms), then Company will promptly notify
each Holder of Warrants and each Holder of Warrant Shares, and such registration
rights (or the more favorable or less restrictive terms thereof) will be deemed
automatically to be incorporated into this Agreement as additional registration
rights that each Holder is entitled to exercise.
d. Sales Through Underwriters and Dealers. Company shall effect the
registration or qualification of the Warrant Shares registered pursuant to this
Section governing registration rights and such notification to or approval of
any governmental authority under any federal or state law, or listing with any
12
securities exchange on which the Common Stock is listed, as may be necessary to
permit the sale of Warrant Shares through underwriters, and, in the case of a
demand registration hereunder, also through dealers, on an exchange, directly to
purchasers or in any other manner.
e. Expenses of Registration. Any registration, qualification,
notification, approval or listing made or withdrawn pursuant to this Section
shall be at the sole expense of Company (excepting underwriter's or broker's
discounts and commissions). Notwithstanding the foregoing, in connection with
any such transaction, Company shall be obligated to pay the costs and expenses
of only one finn serving as legal counsel representing such Holders. In
connection with any demand registration by Holders, if such Holders withdraw the
registration prior to consummation (other than for reasons, in whole or in part,
based upon actions or inactions of Company or other third parties, operating
performance of Company, disclosure of material events by Company, or issues
raised by the Commission, the PCC or any State PUC), then such Holders (at their
election) either (1) will not be entitled to reimbursement from Company for
their expenses associated with such withdrawn registration or (2) will lose the
right to such demand registration (but not the right to any other demand
registrations to which such Holders may be entitled hereunder).
f. Certain Additional Agreements in Connection with Registrations. In
connection with any Public Offering, Company (1) shall enter into, execute and
deliver all agreements and other instruments and documents (including, without
limitation, opinions of counsel, comfort letters and underwriting agreements)
that are customary and appropriate with such public offerings, and (2) shall
cooperate with any underwriters to facilitate sales of the Warrant Shares to the
same extent as if such Warrant Shares were being offered directly by Company,
and (3) shall furnish each Holder such numbers of copies of registration
statements and prospectuses (and amendments and supplements thereto) as such
Holder may reasonably request, and (4) shall take all such other actions as are
necessary or advisable to facilitate the registration and sale of such Warrant
Shares. In connection with any Public Offering as to which any Holder is
requesting registration of Warrant Shares, each such Holder (i) shall provide
Company with such information regarding itself, himself or herself as may be
reasonably required by Company, and (ii) shall reasonably cooperate with Company
in the preparation of the registration statement, and (iii) shall enter into,
execute and deliver all agreements and other instruments and documents that are
customary and appropriate for selling equityholders to execute in connection
with a secondary public offering.
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g. Indemnification by Company. In connection with any offering of
Warrant Shares pursuant to the provisions of this Section, Company hereby
indemnifies and holds harmless each Holder of Warrants and each Holder of
Warrant Shares (and the directors, officers and controlling Persons of each such
Holder), each other Person (if any) who acts on behalf of or at the request of
any such Holder, each underwriter, and each other Person who participates in the
offering of Warrant Shares (collectively, for purposes of this Clause, the
"Indemnified Parties") against any losses, claims, damages or liabilities, joint
or several, to which such Indemnified Party may become subject under the
Securities Act or any other statute or at common law, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof arise out of or
are based upon either of the following:
(i) any untrue statement or alleged untrue statement of any
material fact contained (on the effective date thereof) in any registration
statement (or any amendment thereto) under which such Warrant Shares were
registered under the Securities Act, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading, or
(ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus or prospectus (or any
amendment or supplement thereto) or the omission or alleged omission therefrom
of a material fact necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
Company shall also reimburse each such Indemnified Party for any legal or any
other expenses reasonably incurred in connection with investigating or defending
any such loss, claim, damage, liability or action. Notwithstanding the forgoing,
Company shall not be liable to an Indemnified Party in any such case to the
extent that any such loss, claim, damage or liability arises out of or is based
upon any untrue or alleged untrue statement or omission or alleged omission made
in such registration statement, preliminary prospectus, prospectus, or amendment
or supplement in reliance upon and in conformity with written information
furnished to Company through an instrument duly executed by such Indemnified
Party specifically stating that it is expressly for use therein. Such indemnity
shall remain in full force and effect and shall survive the transfer of such
Warrants or Warrant Shares by any such Holder.
h. Indemnification by Holders. Each Holder whose Warrant Shares are
sold under any registration statement pursuant to this Section (by inclusion of
such Warrant Shares thereunder)
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shall indemnify and hold harmless Company (the officers, direction and
controlling Persons thereof), each other Holder of Warrants and each other
Holder of Warrant Shares (and the directors, officers and controlling Persons of
each such Holder), each other Person (if any) who acts on behalf of or at the
request of Company or such other Holder, each underwriter, and each other Person
who participates in the offering of Warrant Shares (collectively, for purposes
of this Clause, the "Indemnified Parties") against any losses, claims, damages
or liabilities, joint or several, to which such Indemnified Party may become
subject under the Securities Act or any other statute or at common law, insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon either of the following:
(i) any untrue statement or alleged untrue statement of any
material fact contained (on the effective date thereof in any registration
statement (or any amendment thereto) under which such Warrant Shares were
registered under the Securities Act at the request of such Holder, or the
omission or alleged omission therefrom of a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, or
(ii) any untrue statement or alleged untrue statement of a
material fact contained in any preliminary prospectus or prospectus (or any
amendment or supplement thereto) or the omission or alleged omission therefrom
of a material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
but only to the extent (with respect to either of the forgoing Clauses) that
such untrue statement or alleged untrue statement or omission or alleged
omission was made in such registration statement, preliminary prospectus,
prospectus, amendment or supplement in reliance upon and in conformity with
written information furnished to Company through an instrument duly executed by
such Holder specifically stating that it is expressly for use therein. Each such
Holder shall also reimburse each such Indemnified Party for any legal or any
other expenses reasonably incurred in connection with investigating or defending
any such loss, claim, damage, liability or action. Notwithstanding the forgoing,
no such Holder shall be liable to any Indemnified Party in any such instance to
the extent (a) such loss, claim, damage or liability relates to any untrue
statement or omission, or any alleged untrue statement or omission, made in a
preliminary prospectus but eliminated or remedied in a final prospectus, and (b)
a copy of the final prospectus was not delivered to the Person asserting the
claim at or prior to the time required by the Securities Act in an instance for
which delivery thereof
15
would have constituted a defense to the claim asserted by such Person.
i. Certain Notices and Other Rights Relating to Indemnification. A
party from whom indemnity may be sought pursuant to the provisions of this
Section shall not be liable for such indemnity with respect to any claim as to
which indemnity is sought unless the party seeking such indemnity shall have
notified such indemnifying party in writing of the nature of such claim promptly
after such indemnified party becomes aware of the assertion thereof.
Notwithstanding the forgoing, the failure to so notify such indemnifying party
shall not relieve such party from any liability which it may have to such
indemnified party otherwise than on account of the provisions of this Section or
if the failure to give such notice promptly shall not have been prejudicial to
such indemnifying party. No indemnifying party shall be liable for any
compromise or settlement of any such action effected without its consent. No
indemnifying party (in the defense of any such claim or suit), without the
consent of each indemnified party, shall consent to any compromise or settlement
that does not include as an unconditional term thereof the giving by the
claimant to such indemnified party of a complete release from all liability in
respect of such claim or suit.
j. Contribution. In order to provide for just and equitable contribution in
circumstances in which the indemnification provided for in this Section for any
reason is held to be unenforceable although applicable in accordance with its
terms, Company and the Holders, as amongst themselves, shall contribute to the
losses, claims, damages, liabilities and expenses described herein in such
proportions so that the portion thereof for which any Holder shall be
responsible shall be limited to the portion determined by a court or the parties
to any settlement to be directly attributable to an untrue statement of a
material fact or an omission to state a material fact in a registration
statement, preliminary prospectus, prospectus or amendment or supplement thereto
in specific reliance upon and in conformity with written information furnished
to Company through an instrument duly executed by such Holder specifically
stating that it is expressly for use therein, and Company shall be responsible
for the balance. Notwithstanding the foregoing, the liability of each Holder
shall be limited to the initial offering price of the Warrant Shares sold by it
thereunder. Company and the Holders agree that it would not be just and
equitable if there respective obligations to contribute were to be determined by
pro rata allocation, by reference to the proceeds realized by them or in any
manner which does not take into account the equitable considerations set forth
in this Clause.
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4.5 Rights Upon Occurrence of Dispositions and Non-surviving Combinations.
a. Offer to Purchase. In connection with any Disposition or any
Non-surviving Combination, Company or the acquiror in any Disposition or
Non-Surviving Combination shall also offer to purchase on the terms set forth
below all of the Warrant Shares and all of the Warrants then Vested. If a
Disposition is of less than all of the Capital Stock then outstanding, then the
number of Warrants and Warrant Shares subject to purchase under this Section
shall be reduced proportionately (to the nearest whole number), and such reduced
number will be available pro rata among all Holders desiring to tender Warrant
Shares or Warrants in connection with such transaction.
b. Notice of Proposed Transaction. Company shall give written notice
to each Holder of Warrants and each Holder of Warrant Shares (at each such
Holder's last known address as it appears on Company's books and records)
promptly after an agreement in principle is reached with respect to any
Disposition or any Non-Surviving Combination (but, in any event, at least 30
calendar days prior to the closing of any such transaction).
c. Purchase Price. As a condition to consummation of any Disposition
or any Non-surviving Combination, either Company or such acquiror shall purchase
(either before or concurrently with the consummation of such transaction) all
Warrants and Warrant Shares tendered by a Holder thereof at a cash price per
Warrant and Warrant Share equal to the greater of the following:
(i) the Target Valuation per Warrant Share, or
(ii) the result of the following formula:
(A) the product of (1) the aggregate consideration received by
all sellers and transferors in connection with such transaction or
series of related transactions (including the consideration to be
received by the holders of Warrants and Warrant Shares pursuant to
this provision) and (2) a fraction the numerator of which is the
number of Warrants and Warrant Shares tendered for purchase in
connection with such transaction or series of related transactions and
the denominator of which is the sum of the number of shares of Common
Stock outstanding immediately prior to such transaction or series of
related transactions plus the number of Warrants and Warrant Shares
tendered for purchase (which result is the amount of consideration
available for all Warrants and Warrant Shares tendered in connection
with such transaction), divided by
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(B) the number of Warrants and Warrant Shares tendered for
purchase in connection with such transaction (which result is the
amount of consideration available for each Warrant and Warrant Share
tendered in connection with such transaction), minus
(C) the Exercise Price then in effect (but only with respect to
Warrants and not Warrant Shares).
d. Payment of Purchase Price. Company (either before or concurrently
with the consummation of such transactions) shall distribute to the respective
Holders of Warrants and Warrant Shares (or to such other Person as such Holder
may direct Company in writing) the applicable purchase price for each tendered
Warrant Share and Warrant in cash, by certified or cashier's check, by wire
transfer or by any other means acceptable to such Holder. In addition, Company
shall also deliver to each such Holder (as and to the extent applicable) a
return or reissuance of Warrants and Warrant Shares not purchased in connection
with any such transaction.
e. Determination of "Aggregate Consideration". Unless the entire
consideration in such transaction consists of cash or unless otherwise agreed by
Holders of Warrants and Warrant Shares, then the fair value of the "aggregate
consideration" to be received by all sellers and transferors in connection with
a Disposition or Non-Surviving Combination shall be determined by an Independent
Appraiser selected by Holders of a majority of the Warrants and Warrant Shares
and approved by Company (which approval may not be unreasonably withheld or
delayed). Such Independent Appraiser shall use one or more valuation methods
that the Independent Appraiser (in its best professional judgment) determines to
be most appropriate under the circumstances; provided,that (i) such valuation
methods shall take into account any related agreements that result in personal
gain to any director, officer or equityholder of Company, and (ii) such
valuation methods shall not give effect to (1) any discount for any lack of
liquidity of the Capital Stock, or (2) the minority status of any holder of
Capital Stock, or (3) the fact that Company may have no class of equity
securities registered under the Securities Act. Such Independent Appraiser, as
promptly as is reasonably possible, will prepare and deliver to Company and to
each Holder of a Warrant or Warrant Share a written valuation report
indicating(a) the methods of valuation considered or used, and (b) the value of
the "aggregate consideration" paid by the acquiror in connection with the
particular Disposition or Non-Surviving Combination or otherwise received by the
sellers and transferors in connection therewith, and (c) the nature and scope of
the examination or investigation upon which the determination of value was made.
Unless the
18
valuation report is revised by the Independent Appraiser within 5 Business Days
after delivery thereof or unless Company and Holders otherwise mutually agree,
then the valuation report shall be deemed final at the end of such
5-Business-Day period. Company shall pay the fees and expenses associated with
the Independent Appraiser.
4.6. Repurchase Offer.
a. Offer to Repurchase. Within 30 calendar days following the
occurrence of any Repurchase Condition, Company shall make a written offer
(each, a "Repurchase Offer") to repurchase at the Repurchase Price up to all of
the Warrant Shares and Warrants then Vested. Each such Repurchase Offer (among
other things) shall indicate the date of occurrence of the relevant Repurchase
Condition and shall provide a calculation of the Target Valuation per Warrant
Share (together with a copy of documentation supporting such calculation). Each
such Repurchase Offer shall be delivered by Company to each such Holder entitled
thereto by first-class mail to the last known address of such Holder on the
books and records of Company.
b. "Repurchase Condition". A "Repurchase Condition" will be deemed to
occur (1) on March 1, 2002, which is approximately 120 calendar days prior to
the Maturity Date under the Credit Agreement (unless an Initial Public Offering,
Surviving Public Combination, Non-Surviving Combination or complete Disposition
shall have been consummated after the effective date.hereof and prior thereto),
and (2) upon the occurrence of any Event of Default under and as defined in the
Credit Agreement.
c. "Repurchase Price". The "Repurchase Price" for each Warrant and
Warrant Share in connection with any such Repurchase Offer (unless Company and
Holders otherwise mutually agree) will be the fair market value of a share of
Common Stock as of the date of occurrence of such Repurchase Condition as
determined by an Independent Appraiser, less in either instance with respect to
Warrants (but not Warrant Shares) the Exercise Price then in effect. Such
Independent Appraiser will be selected by Holders of a majority of the Warrants
and Warrant Shares and approved by Company (which approval may not be
unreasonably withheld or delayed). Such Independent Appraiser shall use one or
more valuation methods that the Independent Appraiser (in its best professional
judgment) determines to be most appropriate under the circumstances; provided,
that such valuation methods shall not give effect to (1) any discount for any
lack of liquidity of the Capital Stock, or (2) the minority status of any holder
of Common Stock, or (3) to the fact that Company may have no class of equity
securities registered under the Securities Act. Such Independent Appraiser, as
promptly as is reasonably possible,
19
will prepare and deliver to Company and to each Holder of a Warrant or Warrant
Share a written valuation report indicating (a) the methods of valuation
considered or used, and (b) the value of a share of Common Stock, and (c) the
nature and scope of the examination or investigation upon which the
determination of value was made. Unless the valuation report is revised by the
Independent Appraiser within 5 Business Days after delivery thereof or unless
Company and Holders otherwise mutually agree, then the valuation report shall be
deemed final at the end of such 5-Business-Day period. Company shall pay the
fees and expenses associated with the Independent Appraiser.
d. Acceptance of Repurchase Offer; Payment of Purchase Price. At any
time within 60 calendar days after a Holder receives the final written valuation
report of the Independent Appraiser, each such Holder may tender for repurchase
by Company all or any portion of such Holder's Warrant Shares and Warrants that
have vested. Within 30 calendar days of receiving any such tender of Warrant
Shares or Warrants, Company shall distribute to each such Holder (or to such
other Person as such Holder may direct Company in writing) the applicable
Repurchase Price for each such tendered Warrant Share and Warrant in cash, by
certified or cashier's check, by wire transfer or by any other means acceptable
to such Holder. In addition, Company shall also deliver to each such Holder (as
and to the extent applicable) a return or re-issuance of Warrants and Warrant
Shares not tendered for repurchased.
4.7. Cumulative Rights. The rights of Holders upon the occurrence of events
set forth in this Article 4 are cumulative. If more than one such event occurs
simultaneously (or the time period for exercising any such rights overlaps),
then each Holder can elect which rights (if any) to exercise and any prior
inclusion or surrender of Warrants or Warrant Shares with respect to a
transaction that has not yet closed may be rescinded by such Holder during such
overlapping period in order to exercise rights arising under any concurrently
occurring event.
4.8 Exercise of Rights conditioned Upon Closing of Transaction Involved.
The rights of Holders to have Warrants or Warrant Shares included and sold in
any Public Offering or purchased in any Disposition or Non-Surviving Combination
pursuant to this Article 4 are conditioned upon the consummation of the proposed
transaction. Neither Company nor any equityholder involved in any such proposed
transaction shall have any obligation to Holders to consummate any such proposed
transaction once an agreement in principle or decision to proceed with respect
thereto is reached, except as expressly provided in this Article 4.
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4.9. Payment of Taxes. Company will pay all expenses, taxes and charges
attributable to the issuance, transfer or repurchase of the Warrants, the
Warrant Certificates and the Warrant Shares.
4.10. Reservation and Issuance of Warrant Shares. Company at all times
shall reserve (and keep free from preemptive rights) among its authorized but
unissued shares of Capital Stock the full number of Warrant Shares deliverable
upon exercise of all of the Warrants. Company covenants that all Warrant Shares
(when and if issued upon exercise of the Warrants in accordance with the terms
hereof) will be duly authorized, validly issued, fully paid and nonassessable
(and will be free from all taxes, liens, charges and security interests with
respect to the issuance thereof). Before taking any action that could cause an
adjustment pursuant to Article 5, Company will take any corporate action that
(in the opinion of its counsel) may be necessary or appropriate in order that
company may validly and legally issue fully paid and nonassessable Warrant
Shares at the Exercise Price as so adjusted.
4.11. Listing of Shares. If Company lists any shares of Common Stock on any
national securities exchange, then Company (at its expense) will use its best
efforts to cause the Warrant Shares to be approved for listing, subject to
notice of issuance, and will provide prompt notice to each such exchange of the
issuance thereof from time to time.
4.12. Lists of Holders. Company (from time to time upon the request of any
Holder) will provide such Holder with a list of the registered Holders and their
respective addresses.
4.13. Compliance with Approval Requirements. If any Warrants or Warrant
Shares require registration or approval of the FCC, any State PUC or any other
governmental authority (or the taking of any other action under the laws of the
United States of America or any political subdivision thereof) before such
securities may be validly issued, then Company will use commercially reasonable
efforts to secure and maintain such registration or approval or to take such
other action as and when necessary.
ARTICLE 5: ANTI-DILUTION PROVISIONS
5.1. Adjustments to Warrant Shares Purchasable and Exercise Price.
a. General Intent Regarding Anti-Dilution. It is the intent of Company
and Purchaser that the Warrant Shares purchasable upon exercise of the Warrants
(subject to Vesting)
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will represent at least 10% of the issued and outstanding shares of Capital
Stock and voting rights from time to time on a fully diluted basis (exclusive,
however, of up to 750,000 shares of Excludible Shares). It is also the intent of
Company and Purchaser that the aggregate purchase price to acquire the
percentage interest represented by the Warrant Shares (on a fully diluted basis)
not exceed the aggregate Exercise Price for all Warrant Shares as of the
effective date hereof.
b. Equity Dividends, Restructuring and Reclassification. If Company at
any time (1) declares or pays a dividend on its outstanding Common Stock in
shares of Common Stock or other securities of Company, or (2) subdivides its
outstanding shares of Common Stock, or (3) combines its outstanding shares of
Common Stock into a smaller number of shares, or (4) issues by reclassification
of the Common Stock other securities of Company (including any such
reclassification in connection with a merger, consolidation or other business
combination in which Company is the surviving entity), then the number and kind
of Warrant Shares purchasable upon exercise of each Warrant shall be adjusted so
that each Holder of a Warrant upon exercise of such Warrant shall be entitled to
receive the aggregate number and kind of Warrant Shares or other securities of
Company that such Holder would have owned or would have been entitled to receive
after the occurrence of any such Event of Dilution had such Warrant been
exercised immediately prior to the occurrence of such event (or, if earlier, any
record date with respect thereto). Any adjustment required by this Clause (a)
shall become effective on the date of such Event of Dilution retroactive to the
record date with respect thereto (if any), and (b) shall be made successively
whenever any such event occurs.
c. Rights to Purchase Below Current Market Price. If Company issues to
all holders of its outstanding Common Stock rights, options or warrants to
subscribe for or purchase Common Stock (or securities convertible or
exchangeable into Common Stock) at a price per share (or having a conversion or
exchange price per share) less than the then Current Market Price per share of
Common Stock (as defined below) or without consideration, then the current
Exercise Price to be in effect after such issuance shall be reduced to a price
determined as follows:
multiply (1) the Exercise Price in effect immediately prior to such
issuance by (2) a fraction (i) the numerator of which is the number of
shares of Common Stock outstanding on the date of such issuance plus the
number of shares of Common Stock which the aggregate offering price of the
total number of shares of Common Stock so to be offered (or the aggregate
initial conversion or exchange price of the convertible or exchangeable
securities so to be offered)
22
would purchase at the Current Market Price and (ii) the denominator of
which is the number of shares of Common Stock outstanding on the date of
such issuance plus the number of additional shares of Common Stock to be
offered for subscription or purchase (or into which the convertible or
exchangeable securities so to be offered are initially convertible).
The provisions of this Clause, however, will not apply to any issuance of
Warrants or to any issuance of Warrant Shares upon exercise of any Warrants. If
such subscription price may be paid in a consideration any of which is in a form
other than cash, then the value of such consideration (unless Company and
Holders otherwise mutually agree) shall be as determined by an Independent
Appraiser, and the Board of Directors of Company shall cause the related shares
to be fully paid. Any adjustment required by this clause (a) shall become
effective on the date of issuance retroactive to the record date for determining
equityholders entitled to receive such issuance, and (b) shall be made
successively whenever any such event occurs.
d. Distributions of Indebtedness, Assets or Securities. If Company
distributes to all holders of Common Stock (including any such distribution in
connection with a merger or consolidation in which Company is the continuing
entity) evidences of indebtedness of Company, assets or securities other than
Common Stock (excluding dividends or distributions otherwise appropriately
covered under other Clauses of this Section 5.1), then the current Exercise
Price to be in effect after such distribution shall be reduced to a price
determined as follows:
multiply (1) the Exercise Price in effect immediately prior to such record
date by (2) a fraction (i) the numerator of which is the current Market
Price per share of Common Stock on such record date minus the fair value
(as determined by an Independent Appraiser, unless otherwise mutually
agreed by Company and Holders) of the portion of the assets, evidences of
indebtedness or other securities so to be distributed applicable to one
share of Common Stock and (ii) the denominator of which is the current
Market Price per share of Common Stock.
Any adjustment required by this Clause (a) shall become effective on the date of
issuance retroactive to the record date for determining equityholders entitled
to receive such distribution, and (b) shall be made successively whenever any
such event occurs.
e. Other Issuances Below Current Market Price. If Company issues or
sells any shares of Common Stock (or rights,
23
options, warrants or convertible or exchangeable securities containing a right
to subscribe for or purchase shares of Common Stock) (excluding (i) issuances or
sales with respect to transactions otherwise appropriately covered under other
Clauses of this Section 5.1 and (ii) any Warrant Shares), at a price per share
(determined for rights, options, warrants or convertible or exchangeable
securities, by dividing (A) the total amount received or receivable by Company
in consideration of such issuance or sale plus the total consideration payable
to Company upon exercise, conversion or exchange thereof by (B) the total number
of shares of Common Stock covered by such rights, options, warrants or
convertible or exchangeable securities) less than the then Current Market Price
per share of Common Stock in effect immediately prior to such sale or issuance,
then the number of Warrant Shares thereafter purchasable upon the exercise of
each Warrant shall be determined as follows:
multiply (1) the number of Warrant Shares theretofore purchasable upon the
exercise of each Warrant by (2) a fraction (i) the numerator of which shall
be the total number of shares of Common Stock outstanding immediately after
such issuance or sale and (ii) the denominator of which shall be an amount
equal to the sum of (A) the total number of shares of Common Stock
outstanding immediately prior to such issuance or sale plus (B) the number
of shares of Common Stock that the aggregate consideration received (as
determined below) for such issuance or sale would purchase at the then
Current Market Price per share of Common Stock in effect immediately prior
to such sale and issuance.
For purposes of such adjustments, the shares of Common Stock that the holder of
any such rights, options, warrants or convertible or exchangeable securities is
entitled to subscribe for or purchase shall be deemed to be issued and
outstanding as of the date of such issuance or sale, and the "consideration
received" by Company shall be deemed to be (a) the consideration received by
Company for such rights, options, warrants or convertible or exchangeable
securities plus (b) the consideration or premiums stated in such rights,
options, warrants or convertible or exchangeable securities to be paid for the
shares of Common Stock purchasable thereby. If Company (i) issues or sells
shares for consideration that includes any property other than cash or (ii)
issues or sells shares together with other securities as a part of a unit at a
price per unit, then the "price per share" and the "consideration received" by
Company for purposes of this Clause (unless Company and Holders otherwise
mutually agree) will be determined by an Independent Appraiser. Any adjustment
required by this Clause (a) shall become effective retroactive to the date of
issuance or sale of any such rights, options, warrants or
24
convertible or exchangeable securities, and (b) shall be made successively
whenever any such event occurs.
f. Dilution of Voting Rights. If Company otherwise issues or sells any
shares of Capital Stock (or rights, options, warrants or convertible or
exchangeable securities containing the right to subscribe for or purchase shares
of Common Stock) (excluding issuances or sales with respect to an Initial Public
Offering or with respect to transactions otherwise appropriately covered under
other Clauses of this Section 5.1) that have or may have any voting rights
associated therewith, then the number of Warrant Shares thereafter purchasable
upon the exercise of each Warrant shall be determined as follows:
multiply (1) the number of Warrant Shares theretofore purchasable upon the
exercise of each Warrant by (2) a fraction (i) the numerator of which shall
be the total amount of voting rights associated with Capital Stock
outstanding immediately after such issuance or sale and (ii) the
denominator of which shall be the total amount of voting rights associated
with Capital Stock outstanding immediately prior to such issuance or sale.
For purposes of such adjustments, the shares of Capital Stock that the holder of
any such rights, options, warrants or convertible or exchangeable securities
shall be entitled to subscribe for or purchase shall be deemed to be issued and
outstanding as of the date of such issuance or sale. To the extent that any
Holder prior to such date has exercised Warrants to acquire Warrant Shares, then
such Holder shall be entitled to acquire (at the lesser of the price paid such
acquiror of Capital Stock or the Current Market Price therefor) an amount of
additional shares of Capital Stock with voting rights that would entitle such
Holder to have the same aggregate percentage of voting rights as such Holder had
immediately prior to such transaction. Any adjustment required by this Clause
(a) shall become effective retroactive to the date of issuance or sale of any
such rights, options, warrants or convertible or exchangeable securities, and
(b) shall be made successively whenever any such event occurs.
g. Exchange of Class B Common Stock for Class A Common Stock.
Notwithstanding the forgoing Clauses of this Section, if Company at any time
consummates a transaction by which the 22,526 shares of non-voting Class B
Common Stock issued and outstanding as of the effective date of this Agreement
are exchanged for 22,526 (or less) shares of Common Stock, then such event shall
constitute an Event of Dilution. Upon the occurrence of such Event of Dilution,
the number of Vested and un-Vested Warrants and Warrant Shares shall be
appropriately increased, but the Exercise Price shall not be adjusted.
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h. Catchall Anti-Dilution Protection. If Company otherwise engages in
any transaction an effect of which is to dilute the economic value or voting
rights of any Holder's Warrants or Warrant Shares in a manner contrary to the
general intent expressed under Clause "a" of this Section, then Company and such
Holder will negotiate in good faith to implement an equitable adjustment to such
Holder's interest in Company in order to account for the effects of such
transaction. Any adjustment required by this Clause shall be made successively
whenever any such event occurs.
i. "Current Market Price". For the purposes of any computation under
this Section 5.1, the "Current Market Price" per share of Common Stock or any
other security at the date herein specified shall be as follows: (i) if Company
does not then have such securities registered under the Exchange Act, then the
Current Market Price per share of such security will be the greater of the
Exercise Price per Warrant Share then in effect and the Target Valuation per
Warrant Share, or alternatively (ii) if Company does then have such securities
registered under the Exchange Act, then the Current Market Price per share of
such security will be the greater of the Exercise Price per Warrant Share then
in effect and the average of the daily market prices of such security for 20
consecutive Business Days during the period commencing 30 Business Days before
such date (or, if Company has had a class of such securities registered under
the Exchange Act for less than 30 consecutive Business Days before such date,
then the average of the daily market prices for all of the Business Days before
such date for which daily market prices are available). The market price for
each such Business Day shall be as follows: (A) for a security listed or
admitted to trading on any securities exchange, then the closing price (regular
way) on such day (or if no sale takes place on such day, then the average of the
closing bid and asked prices on such day), and (B) for a security not then
listed or admitted to trading on any securities exchange, then the last reported
sale price on such day (or if no sale takes place on such day, then the average
of the closing bid and asked prices on such day, as reported by a reputable
quotation source designated by Company), and (C) for a security not then listed
or admitted to trading on any securities exchange and as to which no such
reported sale price or bid and asked prices are available, then the average of
the reported high bid and low asked prices on such day, as reported by a
reputable quotation service, or a newspaper of general circulation in Manhattan
Borough (New York, NY) customarily published on each business day, designated by
Company (or if there is no bid and asked prices on such day, then the average of
the high bid and low asked prices, as so reported, on the most recent day (not
more than 30 calendar days prior to the date in question) for which prices have
been so reported), and (D) if there are no bid and asked prices reported during
the 30 calendar days prior to
26
the date in question, then the Current Market Price per share of the security
shall be determined as if Company did not have a class of such securities
registered under the Exchange Act.
j. Rights Applicable to Shares Other than Common Stock. If at any time
(as a result of an adjustment made pursuant to this Section 5.1) a Holder
becomes entitled to receive any shares of Company other than shares of Common
Stock, then thereafter the number of such other shares so receivable upon
exercise of any Warrant shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Warrant Shares contained in this Section 5.1, and the provisions
of Article 4 with respect to the Warrant Shares shall apply on like terms to
such other shares.
k. Expiration of Rights Previously Subject to Adjustment. Upon the
expiration of any rights, options or warrants that resulted in adjustments
pursuant to this Section 5.1 that were not exercised, then the Exercise Price
and the number of Warrant Shares purchasable shall be readjusted and thereafter
shall be such as it would have been had it been originally adjusted (or had the
original adjustment not been required, as applicable) as if (A) the only shares
of Common Stock purchasable upon exercise of such rights, options or warrants
were the shares of Common Stock (if any) actually issued or sold upon the
exercise of such rights, options or warrants and (B) such shares of Common Stock
so issued or sold (if any) were issuable for the consideration actually received
by Company for the issuance, sale or grant of all such rights, options or
warrants whether or not exercised; provided that no such readjustment may have
the effect of increasing the Exercise Price or decreasing the number of Warrant
Shares purchasable upon the exercise of a Warrant by an amount in excess of the
amount of the adjustment initially made in respect to the issuance, sale or
grant of such rights, options or warrants.
l. Election to Adjust Warrants Rather than Exercise Price. Any Holder
may elect on or after the date of any adjustment to the Exercise Price to adjust
the number of Warrants (and Warrant Shares purchasable) instead of the Exercise
Price. Upon any such election, the number of Warrants (and Warrant Shares
purchasable) will be determined by multiplying the number of Warrants and
Warrant Shares purchasable by a fraction the numerator of which is the Exercise
Price in effect as a result of such adjustment and the denominator of which is
the Exercise Price in effect immediately prior to such adjustment.
5.2. Notice of Adjustment. Upon any adjustment required under this Article
5, Company (at its expense) shall mail (within 10 Business Days after such
adjustment) by first class mail, postage prepaid, to each Holder of Warrants and
each Holder of
27
Warrant Shares a notice of such adjustment. Such notice shall include the
following (each in reasonable detail): (i) the number of Warrant Shares
purchasable upon the exercise of each Warrant and the Exercise Price of such
Warrant after such adjustment, and (ii) a brief statement of the facts requiring
such adjustment, and (iii) the computation by which such adjustment was made.
5.3. Preservation of Purchase Rights upon Certain Transactions. In
connection with any merger, consolidation or combination of Company with or into
another Person (whether or not Company is the surviving entity), or any sale,
transfer or lease to another Person of all or substantially all the property of
Company, then Company (or such successor or purchasing Person) shall execute an
agreement in favor of each Holder of Warrants giving such Holder the right
thereafter upon payment of the Exercise Price in effect immediately prior to
such action to purchase upon exercise of each Warrant the kind and amount of
securities, cash and property that such Holder would have owned or would have
been entitled to receive after the happening of such merger, consolidation,
combination, sale, transfer or lease had such Warrant been exercised immediately
prior to such action. If any such successor or purchasing Person is not a
corporation, then such Person shall also provide appropriate tax indemnification
with respect to such shares and other securities and property so that, upon
exercise of the Warrants, each Holder thereof will have the same benefits such
Holder otherwise would have had if such successor or purchasing Person were a
corporation. Such agreement shall provide for adjustments that shall be as
nearly equivalent as may be practicable to the adjustments provided for in this
Article 5. The provisions of this Section shall similarly apply to successive
mergers, consolidations, combinations, sales, transfers or leases.
ARTICLE 6: COMPANY'S COVENANTS
6.1. Information.
a. So long as Company does not have a class of equity securities
registered under the Exchange Act, Company will prepare (or cause the
preparation of) the following financial reports: (i) on a quarterly basis
(including the fourth fiscal quarter of each year), unaudited financial
statements including (without limitation) a balance sheet and a statement of
income, together with all appropriate notes and schedules thereto (collectively,
the "Quarterly Reports"), and (ii) on an annual basis, audited financial
statements including (without limitation) a balance sheet, a statement of
income, a cash flow statement, a statement of income and equityholders'
accounts, and a statement of changes in financial position, together with all
appropriate notes and schedules (collectively, the "Annual Reports"). In
addition, each financial statement shall be
28
accompanied by a description of material transactions that have occurred in the
appropriate period covered by such financial statement. All financial statements
will be prepared in accordance with generally accepted accounting principles
consistently applied. At any time while Company has a class of equity securities
registered under the Exchange Act, then the terms "Quarterly Report" and "Annual
Report" will refer to the quarterly reports and annual reports required to be
prepared in accordance with the Exchange Act.
b. Company (i) will cause a copy of each Quarterly Report to be mailed
to each Holder within 45 calendar days after the last day of each fiscal
quarter, and (ii) will cause a copy of each Annual Report (together with a copy
of any management letters prepared by the accountants) to be mailed to each
Holder within 90 calendar days after the close of each fiscal year. Such reports
will be mailed to such Holder's last known address appearing on Company's books
and records.
c. Whether or not Company has a class of equity securities registered
under the Exchange Act, Company will provide each Holder with a copy of all
information (including, without limitation, financial information) and other
communications that are sent by or on behalf of Company (i) to any class of
Company's equityholders, or (ii) to the Commission. Company shall provide such
information and communications to Holders concurrently with providing it to such
third parties.
d. Company will also provide each Holder written notice of (and
describing in reasonable detail) the occurrence of any of the following events:
1. Company offers or issues to any Person any shares of Capital Stock
or securities convertible into or exchangeable for Capital Stock or any
right to subscribe for or purchase any thereof; or
2. A dissolution, liquidation or winding up of Company (other than in
connection with a consolidation, merger, sale, transfer or lease of all or
substantially all of its property, assets and business as an entirety); or
3. Company declares or makes (directly or indirectly) any payment or
distribution (in cash or otherwise) with respect to, or incurs any
liability for the purchase, acquisition, redemption or retirement of, any
Capital Stock or as a dividend, return of capital or other payment or
distribution of any kind to any equityholder.
Each such notice shall be mailed by Company to each Holder (at such Holder's
last known address on the books and records of
29
Company) at least 20 Business Days prior to the applicable record date of such
transaction.
6.2. Books and Records: Right of Inspection. Company and each of its
Subsidiaries will keep and maintain satisfactory and adequate books and records
of account in accordance with generally accepted accounting principles. At any
time and from time to time during normal business hours (upon reasonable prior
written notice) Company will permit any Holder (or any agent or representative
thereof, but at such Holder's cost and expense) (i) to visit, (ii) to examine
and make copies of and abstracts from the books and records of Company and its
Subsidiaries, and (iii) to discuss the affairs, finances, and accounts of
Company and its Subsidiaries with any of their respective officers, directors
and independent accountants.
6.3. Litigation: Defaults. Company will notify Holders in writing
immediately upon (i) the institution of any litigation, legal or administrative
proceeding, or labor controversy that could materially adversely affect the
business, financial condition, operations, properties or prospects of Company,
or (ii) the happening of any event or the assertion or threat of any claim that
could materially adversely affect the business, financial condition, operations,
properties or prospects of Company, or (iii) the occurrence of any material
default in respect of any material indebtedness of Company or its Subsidiaries.
6.4. No Amendments to Organic Documents. Without the prior written consent
of Holders representing a majority of Warrant Shares and Warrants then Vested
(which consent may not be unreasonably withheld), Company will not permit any
amendments to its Organic Documents that could adversely affect the rights and
interest of Holders.
6.5. Reincorporation and Qualification. Company will not at any time
reincorporate in any jurisdiction or qualify to do business as a foreign
corporation in any jurisdiction unless (in each such instance) Company shall
have received a favorable opinion of counsel to the effect that such
reincorporation or qualification shall impose no direct or contingent liability
on Holders under the laws of such jurisdiction. A copy of each such opinion
shall be provided to each Holder.
6.6. Existence and Good Standing. Company and each of its Subsidiaries will
preserve and maintain its existence as a organization under the laws of its
jurisdiction of incorporation, its good standing in all jurisdictions where it
conducts business, and the validity of all its authorizations and licenses
required in the conduct of its businesses.
30
6.7. Conduct of Business. Without the prior written consent of Holders
representing a majority of Warrant Shares and Warrants then Vested (which
consent may not be unreasonably withheld), Company (i) will continue to engage
in business of the same general type as now conducted by it, and (ii) will
maintain and cause each Subsidiary to maintain, insurance with such financially
sound and reputable insurance companies or associations in such amounts,
covering such risks and providing such deductabilities from coverage as are
usually carried by companies engaged in the same or a similar business and
similarly situated, and (iii) will comply, and cause each Subsidiary to comply,
in all material respects with all applicable material laws, regulations, and
orders, and (iv) will not sell, lease, transfer or otherwise dispose of any
material part or amount of its assets (real or personal) other than in
transactions in the normal and ordinary course of business with unrelated
parties for value received (or as otherwise contemplated by this Agreement).
6.8. Broker and Finder Fees and Commissions. Company agrees that any and
all broker, finder, investment banking, advisory or similar fees and commissions
with respect the issuance and sale of the Warrants or the Warrant Shares or any
other transaction contemplated hereby or thereby will be paid by Company, and
Company will hold Purchaser (and each Holder of Warrants or Warrant Shares)
harmless from any claim, demand or liability for any such fees or commissions
incurred (or alleged to have been incurred) in connection with any such
transaction.
ARTICLE 7: DEFINITIONS
7.1. Definitions. As used herein, the following terms have the following
respective meanings:
7. 1.1. "Affiliate" of any Person means any other Person directly or
indirectly controlling, controlled by or under direct or indirect common control
with such Person. A Person shall be deemed to "control" another Person if such
first Person possesses directly or indirectly the power to direct (or to cause
the direction of or to materially influence) the management and policies of the
second Person, whether through the ownership of voting securities, by contract
or otherwise.
7. 1.2. "Agreement" means this Warrant Agreement, as amended, modified
and supplemented from time to time.
7.1.3. "Business Day" means any day except a Saturday, Sunday or other
day on which commercial banks in Richmond, Virginia are authorized by law to
close.
7.1.4. "Capital Stock" means the Common Stock, and all other classes
of common stock (whether voting or non-voting), and
31
all other forms of capital stock or securities of Company (preferred or
otherwise) that have any voting rights.
7.1.5. "Commission" means the Securities and Exchange Commission or
any entity or agency that succeeds to any or all of its functions under the
Securities Act or the Exchange Act.
7.1.6. "Common Stock" means the Class A voting common stock of Company
(which has a par value of $0.01 per share), other than up to 750,000 shares of
Excludible Shares.
7.1.7. "Company" means STARTEC, Inc., a Maryland corporation, and its
successors and permitted assigns.
7.1.8. "Credit Agreement" means the Credit Facility Agreement dated as
of July 1, 1997 by and between Company and Lender, as the same may be amended,
modified or otherwise supplemented from time to time (including, without
limitation, any renewals, refinancings or extensions thereof or increases in the
credit extended thereunder).
7.1.9. "Current Market Price" has the meaning set forth in Section
5.1.
7.1.10. "Disposition" means the sale, transfer or other disposition of
Capital Stock (or securities convertible into, or exchangeable for, Capital
Stock or rights to acquire Capital Stock or such securities) to one or more
Persons through any transaction or series of related transactions (other than as
a result of a Public Offering) if, after such sale, transfer or disposition,
either (a) the Primary Shareholder no longer beneficially own in the aggregate
more than 50% of the Capital Stock and voting rights on a fully-diluted basis
(without giving effect to any Warrant Shares purchased or purchasable) then
outstanding or (b) the Initial Shareholders no longer beneficially own in the
aggregate more than 75% of the Capital Stock and voting rights on a
fully-diluted basis (without giving effect to any Warrant Shares purchased or
purchasable) then outstanding. For purposes of this definition, any transfer of
Capital Stock (or securities convertible into, or exchangeable for, Capital
Stock or rights to acquire Capital Stock or such securities) by a shareholder to
any member of his or her immediately family or to any trust for which he or she
is the trustee shall not constitute a "Disposition" provided that such
shareholder retains control over the voting rights associated with such Capital
Stock.
7.1.11. "Event of Dilution" means any of the events described in
Section 5.1 as to which anti-dilution rights are granted pursuant to Article 5.
32
7.1.12. "Exchange Act" means the Securities and Exchange Act of 1934,
as amended, or any similar Federal statute, as implemented by the Commission or
any court of competent jurisdiction.
7.1.13. "Excludible Shares" means the pool of up to 750,000 shares of
Class A voting common stock of Company, with a par value of $0.01 per share,
that Company may issue from time to time as incentive compensation for its
employees and directors, provided such issuances are reasonable in amount and
otherwise in accordance with normal and customary business practices within
Company's industry. Such issuances may be pursuant to option plans that either
have been established as of the effective date hereof or that are established
after the effective date hereof.
7.1.14. "Exercise Period" has the meaning set forth in Section 4.2.
7.1.15. "Exercise Price" has the meaning set forth in Section 4.2.
7.1.16. "FCC" means the Federal Communications Commission or any other
entity or agency that succeeds to its responsibilities and powers.
7.1.17. "Holder" means any owner or holder of any Warrant (and
corresponding Warrant Certificate) or any Warrant Share, and (with respect to
each) any successor, trustee, estate, heir, executor, administrator, or personal
representative thereof.
7.1.18. "Independent Appraiser" means a Person who (a) is with a
nationally recognized investment banking or appraisal firm, and (b) is qualified
in the valuation of businesses, transactions and securities of the general type
being analyzed, and (c) does not have a material direct or material indirect
financial interest in Company or any Holder.
7.1.19. "Initial Public Offering" means the first time (after the
effective date of this Agreement) that Company issues or otherwise offers for
sale any Capital Stock (or securities convertible into, or exchangeable for,
Capital Stock or rights to acquire Capital Stock or such securities) pursuant to
a registration statement filed with the Commission under the Securities Act.
7.1.20. "Initial Shareholders" means, collectively, the holders of
Capital Stock of Company as of the effective date of this Agreement.
33
7.1.21. "Lender" means SIGNET BANK, a Virginia-chartered, federally
insured commercial bank, and its successors, assigns and transferees.
7.1.22. "Non-Surviving Combination" means either (a) any merger,
consolidation or other business combination by Company with one or more Persons
in which the other Person effectively is the survivor or (b) any sale or
transfer of all or substantially all of the assets (or the economic benefits
thereof of Company to one or more other Persons through any transaction or
series of related transactions.
7.1.23. "Organic Document" means, relative to any entity, its
certificate and articles of incorporation, organization or formation, its
by-laws or operating agreements, and all equityholder agreements, voting
agreements and similar arrangements applicable to any of its authorized shares
of capital stock, its partnership interests or its equity interests, and any
other arrangements relating to the control or management of any such entity
(whether existing as a corporation, a partnership, an LLC or otherwise).
7.1.24. "Person" means an individual, an association, a partnership, a
corporation, a trust or an unincorporated organization or any other entity or
organization.
7.1.25. "Primary Shareholder" means Ram ▇▇▇▇▇▇▇.
7.1.26. "Public Offering" means any issuance or other sale by Company
of any Capital Stock (or securities convertible into, or exchangeable for,
Capital Stock or rights to acquire Capital Stock or such securities) pursuant to
a registration statement filed with the Commission under the Securities Act.
7.1.27. "Purchaser" means Lender, and its successors, assigns and
transferees with respect to the Warrants, corresponding Warrant Certificates
and/or Warrant Shares.
7.1.28. "Purchaser-Affiliated Transferee" means any Affiliate of
Purchaser and/or any current or former director, officer, employee or
successor-in-interest of Purchaser's Media Communications Group.
7.1.29. "Registration Rights" means the rights of the Holders of the
Warrant Certificates to have the Warrant Shares registered for sale under an
effective registration statement under the Securities Act.
34
7.1.30. "Repurchase Condition" has the meaning set forth in Section
4.6.
7.1.31. "Repurchase Offer" has the meaning set forth in Section 4.6.
7.1.32. "Repurchase Price" has the meaning set forth in Section 4.6.
7.1.33. "Securities Act" means the Securities Act of 1933, as amended,
or any similar Federal statute, as implemented by the Commission or any court of
competent jurisdiction.
7.1.34. "State Communications Acts" means the laws of any state in
which Company does business that govern the provision of communications services
offered or performed by Company within such state and are applicable to Company,
as amended from time to time, and as implemented by the rules, regulations, and
orders of the applicable State PUC or any court of competent jurisdiction.
7.1.35. "State PUC" means the public utility commission or other
regulatory agency of any state in which Company does business that is vested
with jurisdiction over Company and over State Communications Acts or the
provision of communication services within such state.
7.1.36. "Subsidiary" of any Person means (a) any other Person as to
which the first Person directly or indirectly owns or controls 50% or more of
the equity, voting rights or enterprise value thereof or (b) any other Person
the accounts of which would be consolidated with those of the first Person in
its consolidated or combined financial statements according to generally
accepted accounting principles.
7.1.37. "Surviving Public Combination" means any merger, consolidation
or other business combination by Company with one or more Persons in which
Company is the survivor (or a purchase of assets by Company from one or more
other Persons) if Company is thereafter required to file reports with respect to
any of its Capital Stock with the Commission pursuant to the Exchange Act.
7.1.38. "Target Valuation per Warrant Share" means, as of any relevant
date, an amount equal to the quotient of (a) the product of (1) 15 multiplied by
(2) the monthly gross revenues of Company for the calendar month immediately
preceding the relevant valuation date divided by (b) the aggregate number of
shares of Common Stock then outstanding.
35
7.1.39. "Vest" or "Vesting" has the meaning set forth in Section 4.2.
7.1.40. "Warrant Certificate" means a certificate (substantially in
the form of Exhibit C evidencing one or more Warrants.
7.1.41. "Warrant" means the irrevocable and unconditional right
(subject to the terms hereof) to acquire a fully paid and nonassessable Warrant
Share at a purchase price per share equal to the Exercise Price (and any other
right or warrant issued upon any exchange or transfer of any such Warrant or any
adjustment relating thereto).
7.1.42. "Warrant Share" means a share of Common Stock issuable upon
exercise of a Warrant (until such share is registered by Company and sold by the
Holder thereof to a third party in a public transaction).
7.2. General Construction. Unless otherwise expressly stated or the context
clearly indicates a different intention, all references to sections,
subsections, paragraphs, clauses, schedules and exhibits contained in this
Agreement are to be interpreted as references to sections, subsections,
paragraphs, clauses, schedules and exhibits of and to this Agreement. In
addition, the words "herein", "hereof", "hereunder, "hereto" and other words of
similar import refer to this Agreement as a whole), and not to any particular
section, subsection, paragraph or clause contained in this Agreement. Wherever
from the context it appears appropriate, each term stated either in the singular
or plural shall include the singular and the plural, and pronouns stated in the
masculine, feminine or neuter gender shall include the masculine, the feminine
and the neuter.
ARTICLE 8: MISCELLANEOUS
8.1. Compliance with FCC and State PUC Requirements. Company and Purchaser
each hereby acknowledge its intent that this Agreement, the Warrants, the
Warrant Certificates and the Warrant Shares (as well as the exercise of rights
hereunder) each comply with all of the laws, regulations and orders of and/or
administered by the FCC or any State PUC relating to Purchaser's ownership,
exercise and/or other realization of rights in connection herewith. If at any
time the terms and conditions of any such ownership, exercise or other ability
to realize upon rights violates, is in conflict with or requires any consent
under any such legal requirements, then Company and Purchaser (or any subsequent
Holder) will cooperate and negotiate in good faith to amend the underlying
documents (or the relevant rights therein) and/or to file and prosecute (or to
cause others to file and prosecute) applications for any such consent in order
to
36
enable Company and Purchaser (or such subsequent Holder) to be in compliance
with such legal requirements.
8.2. Compliance with Purchaser's Regulatory Requirements. Company and
Purchaser each hereby acknowledge its intent that this Agreement, the Warrants,
the Warrant Certificates and the Warrant Shares (as well as the exercise of
rights hereunder) each comply with all of the statutory and regulatory
requirements applicable to Purchaser (or any subsequent Holder) relating to its
ownership, exercise and/or other realization of rights in connection herewith.
If at any time the terms and conditions of any such ownership, exercise or other
ability to realize upon rights violates or is in conflict with any such
regulatory requirements applicable to Purchaser (or such subsequent Holder),
then Company and Purchaser (or such subsequent Holder) will cooperate and
negotiate in good faith to amend the underlying documents (or the relevant
rights therein) in order to enable Purchaser (or such subsequent Holder) to be
in compliance with such statutory and regulatory requirements.
8.3. Binding Effect and Governing Law. This Agreement (and the Warrants,
the Warrant Certificates and other documents in connection herewith) are binding
upon and inure to the benefit of the parties hereto and their respective
successors and assigns (to the extent authorized). This Agreement (and the
Warrants, the Warrant Certificates and other documents in connection herewith)
are governed as to their validity, interpretation, construction and effect by
the laws of the Commonwealth of Virginia (without giving effect to the conflicts
of law rules of Virginia) or, to the extent that the particular issue in
controversy involves Company's legal power or authorization in connection
herewith or matters of corporate law, then resolution of such issue shall be
governed by the corporate laws of the State of Maryland.
8.4. Survival. All agreements, representations, warranties and covenants of
Company contained herein or in any documentation required hereunder will survive
the execution and delivery of this Agreement and will continue in full force and
effect so long as this Agreement otherwise remains effective.
8.5. No Waiver: Delay. To be effective, any waiver by Purchaser must be
expressed in a writing executed by Purchaser. If Purchaser waives any power,
right or remedy arising hereunder or under any applicable law, then such waiver
will not be deemed to be a waiver upon the later occurrence or recurrence of any
events giving rise to the earlier waiver. No failure or delay by Purchaser to
insist upon the strict performance of any term, condition, covenant or agreement
hereunder, or to exercise any right, power or remedy hereunder, will constitute
a waiver of compliance with any such term, condition, covenant or agreement, or
preclude Purchaser from exercising any such right, power, or
37
remedy at any later time or times. The remedies provided herein are cumulative
and not exclusive of each other and the remedies provided by law.
8.6. Modification. Except as otherwise expressly provided in this
Agreement, no modification or amendment hereof will be effective unless made in
a writing signed by appropriate officers of the parties hereto.
8.7. Headings. The various headings in this Agreement are inserted for
convenience only and shall not affect the meaning or interpretation of this
Agreement or any provision hereof.
8.8. Notices. Unless otherwise provided in this Agreement, any notice,
request, consent, waiver or other communication required or permitted under or
in connection with this Agreement will be deemed satisfactorily given if it is
in writing and is delivered either personally to the addressee thereof, or by
prepaid registered or certified U.S. mail (return receipt requested), or by a
nationally recognized commercial courier service with next-day delivery charges
prepaid, or by telegraph, or by facsimile (voice confirmed), or by any other
reasonable means of personal delivery to the party entitled thereto at its
respective address set forth below:
If to Company [Party Entitled to Notice]
or its Affiliates: c/o STARTEC, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to the following listed counsel or such other counsel as
may be designated by Company from time to time (and which notice shall
not constitute notice to Company and failure to give such notice shall
not affect the effectiveness of notice to Company):
Shulman, Rogers, Gandal, Pordy & ▇▇▇▇▇, P.A.
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇, Esquire
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
If to Purchaser: Signet Bank
▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Vice President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
38
With a copy to the following listed counsel or such other counsel as
may be designated by Purchaser from time to time (and which notice
shall not constitute notice to Purchaser and failure to give such
notice shall not affect the effectiveness of notice to Purchaser):
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇, Esquire
▇▇▇▇▇ ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇.▇. ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Any party to this Agreement may change its address or facsimile number for
notice purposes by giving notice thereof to the other in accordance with this
Section, provided that such change shall not be effective until 2 calendar days
after notice of such change. All such notices and other communications will be
deemed given and effective (a) if by mail, then upon actual receipt or 5
calendar days after mailing as provided above (whichever is earlier), or (b) if
by facsimile, then upon successful transmittal to such party's designated
number, or (c) if by telegraph, then upon actual receipt or 2 Business Days
after delivery to the telegraph company (whichever is earlier), or (d) if by
nationally recognized commercial courier service, then upon actual receipt or 2
Business Days after delivery to the courier service (whichever is earlier), or
(e) if otherwise delivered, then upon actual receipt.
8.9. Time of Day. All time of day restrictions imposed herein shall be
calculated using Eastern Time.
8.10. Prior Agreements Superseded. This Agreement completely and fully
supersedes all oral agreements and all other and prior written agreements by and
between Company and Purchaser concerning the terms and conditions of this
Agreement.
8.11. Severability. If fulfillment of any provision of or any transaction
related to this Agreement or the Credit Agreement, the time performance of such
provision or transaction is due shall involve transcending the limit of validity
prescribed by law, then ipso facto, the obligation to be fulfilled shall be
reduced to the limit of such validity. If any clause or provision of this
Agreement operates or would prospectively operate to invalidate this Agreement
in whole or in part, then such clause or provision only shall be void, as though
not contained herein, and the remainder of this Agreement shall remain operative
and in full force and effect.
39
8.12. Counterparts. This Agreement may be executed in any number of
counterparts with the same effect as if all the signatures on such counterparts
appeared on one document. Each such counterpart will be deemed to be an original
but all counterparts together will constitute one and the same instrument.
8.13. Waiver of Liability. Company (a) agrees that Purchaser (and its
directors, officers, employees and agents) shall have no liability to Company
(whether sounding in tort, contract or otherwise) for losses or costs suffered
or incurred by Company in connection with or in any way related to the
transactions contemplated or the relationship established by this Agreement, or
any act, omission or event occurring in connection herewith, except for
foreseeable actual losses resulting directly and exclusively from Purchaser's
own willful misconduct or fraud and (b) waives, releases and agrees not to ▇▇▇
upon any claim against Purchaser (or its directors, officers, employees or
agents) whether sounding in tort, contract or otherwise, except for claims for
foreseeable actual losses resulting directly and exclusively from Purchaser's
own willful misconduct or fraud. Notwithstanding the foregoing, Purchaser (and
its directors, officers, employees and agents) shall have no liability with
respect to (and Company hereby waives, releases and agrees not to ▇▇▇ upon any
claim for) any special, indirect, consequential, punitive or non-foreseeable
damages suffered by Company in connection with or in any way related to the
transactions contemplated or the relationship established by this Agreement, or
any act, omission or event occurring in connection herewith.
8.14. Forum Selection: Consent to Jurisdiction. Any litigation in
connection with or in any way related to this Agreement, or any course of
conduct, course of dealing, statements (whether verbal or written), actions or
inactions of Purchaser or Company will be brought and maintained exclusively in
the courts of the Commonwealth of Virginia or in the United States District
Court for the Eastern District of Virginia; provided, however, that any suit
seeking enforcement against Company may also be brought (at Purchaser's option)
in the courts of any other jurisdiction where the collateral security of Company
committed to Lender pursuant to the Credit Agreement or other property of
Company may be found or where Purchaser may otherwise obtain personal
jurisdiction over Company. Company hereby expressly and irrevocably submits to
the jurisdiction of the courts of the Commonwealth of Virginia and of the United
States District Court for the Eastern District of Virginia for the purpose of
any such litigation as set forth above and irrevocably agrees to be bound by any
final and non-appealable judgment rendered thereby in connection with such
litigation. Company further irrevocably consents to the service of process by
registered or certified mail, postage prepaid, or by personal
40
service within or outside the Commonwealth of Virginia. Company hereby expressly
and irrevocably waives, to the fullest extent permitted by law, any objection
which it may have or hereafter may have to the laying of venue of any such
litigation brought in any such court referred to above and any claim that any
such litigation has been brought in an inconvenient forum. To the extent that
Company 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, then Company hereby irrevocably waives such immunity in respect
of its obligations under this Agreement.
8.15. Waiver of Jury Trial. Purchaser and Company each hereby knowingly,
voluntarily and intentionally waives any rights it may have to a trial by jury
in respect of any litigation (whether as claim, counter-claim, affirmative
defense or otherwise) in connection with or in any way related to this
Agreement, or any course of conduct, course of dealing, statements (whether
verbal or written), actions or inactions of Purchaser or Company. Company
acknowledges and agrees (a) that it has received full and sufficient
consideration for this provision, and (b) that it has been advised by legal
counsel in connection herewith, and (c) that this provision is a material
inducement for Purchaser entering into this Agreement.
[BALANCE OF PAGE INTENTIONALLY BLANK]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed,
as an instrument under seal (whether or not any such seals are physically
attached hereto) as of the date and year first above written.
ATTEST: STARTEC, INC. (Company)
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ By: /s/ Ram ▇▇▇▇▇▇▇
----------------------------- ---------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ Name:Ram ▇▇▇▇▇▇▇
Title: Secretary Title: President
[CORPORATE SEAL] Address: ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
WITNESS: SIGNET BANK (Purchaser)
/s/ By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
--------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
Address: ▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
42
EXHIBIT A Articles of Incorporation
43
EXHIBIT B -- Authorizing Resolutions
44
EXHIBIT C -- Form of Warrant Certificate
45
EXHIBIT D -- Restrictive Legends
FORM OF RESTRICTIVE LEGENDS FOR WARRANT CERTIFICATES
"The Warrants evidenced by this certificate have not been registered under the
Securities Act of 1933 or the securities laws of any state. Such Warrants may
not be sold, transferred, pledged or hypothecated in the absence of an effective
registration statement for such Warrants under the Securities Act of 1933 and
applicable state securities laws or an opinion of counsel satisfactory to
STARTEC, Inc. prior to the proposed transaction that such registration is not
required. "
FORM OF RESTRICTIVE LEGEND FOR WARRANT SHARES
"The shares evidenced by this certificate have been issued upon the exercise of
warrants issued pursuant to a Warrant Agreement dated as of June , 1997 (the
"Warrant Agreement") and have not been registered under the Securities Act of
1933 or the securities laws of any state. Such shares may not be sold,
transferred, pledged or hypothecated in the absence of an effective registration
statement for such shares under the Securities Act of 1933 and applicable state
securities laws or an opinion of counsel satisfactory to STARTEC, Inc. prior to
the proposed transaction that such registration is not required.
46