EXHIBIT 4.6
WASTE SERVICES, INC.
WARRANT AGREEMENT
WARRANT AGREEMENT (this "AGREEMENT"), dated as of May 6, 2003
between Waste Services, Inc., a Delaware corporation (the "COMPANY"), and the
holders from time to time of the Warrants referred to herein (the "HOLDERS").
WHEREAS, the initial Holders and the Company have entered into a
Preferred Subscription Agreement, dated as of May 6, 2003 (the "SUBSCRIPTION
AGREEMENT"), providing, among other things, for the issuance by the Company of
warrants (the "WARRANTS") to purchase shares of Common Stock;
WHEREAS, the Company has agreed to issue the Warrants on the
terms set forth in this Agreement and the Subscription Agreement; and
WHEREAS, capitalized terms used herein without definition are
defined in SECTION 23.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained in the Subscription Agreement the parties hereto hereby
agree as follows:
1. ISSUANCE OF WARRANTS; NUMBER OF SHARES SUBJECT TO WARRANT; EXERCISE
PRICE. The Company shall issue and deliver a certificate or certificates
evidencing the Warrants substantially in the form attached hereto as EXHIBIT A
(the "WARRANT CERTIFICATES") pursuant to the terms of the Subscription
Agreement. Each Warrant Certificate shall be dated the date of issuance and
shall be signed by the Company's Chairman or Vice Chairman of the Board of
Directors of the Company, or the Chief Executive Officer, President or any Vice
President, and by the Company's Chief Financial Officer, Treasurer or any
Assistant Treasurer, or the Secretary or any Assistant Secretary by manual or
facsimile signature. Subject to the terms and conditions hereinafter set forth,
each Holder shall be entitled, upon surrender of the relevant Warrant
Certificate at the principal office of the Company, to purchase Shares from the
Company, at a per share price equal to the Exercise Price. Each Warrant shall
initially entitle the Holder thereof to purchase one duly authorized, validly
issued, fully paid and non-assessable share of Common Stock of the Company (a
"SHARE"), subject to adjustment as described in SECTION 6 below (as so adjusted,
the "NUMBER OF SHARES PER WARRANT"), for a price per share initially equal to
$3.00, subject to adjustment as described in SECTION 6 below (as so adjusted,
the "EXERCISE PRICE"). The Company shall issue an aggregate of 7,150,000
Warrants pursuant to this Agreement and the Subscription Agreement at Closing
(as defined in the Subscription Agreement) under the Subscription Agreement. The
Company may issue up to an aggregate of 5,850,000 additional Warrants pursuant
to the Subscription Agreement at Subsequent Closings (as defined in the
Subscription Agreement) under the Subscription Agreement.
2. EXERCISE PERIOD. Except as otherwise provided for herein, each
Warrant shall be exercisable, in whole or in part, at any time and from time to
time beginning (i) upon the earlier to occur of the consummation of a Migration
and the Sale Date and ending (ii) at 5:00 p.m. eastern time on the Expiration
Date.
3. METHOD OF EXERCISE.
(a) CASH EXERCISE. While any Warrant remains outstanding and
exercisable in accordance with SECTION 2 hereof, the purchase rights thereby
represented may be exercised in whole or in part, at the election of the Holder,
by the tender of the Notice of Exercise or Exchange in substantially the
form attached hereto as EXHIBIT B and the surrender of a Warrant Certificate at
the principal office of the Company and by the payment to the Company of an
amount equal to the then applicable Exercise Price multiplied by the number of
Shares then being purchased (i) in cash by wire transfer or (ii) by other form
of payment acceptable to the Company.
(b) CASHLESS EXCHANGE. In lieu of exercising any Warrant pursuant to
SECTION 3(a), at any time that the Exercise Price is less than the Fair Market
Value of one Share, a Holder may elect to receive, without the payment by such
Holder of any additional consideration, Shares equal to the value of such
Warrant (or the portion thereof being canceled), together with such Other
Securities and other consideration as otherwise provided herein, by surrender of
a Warrant Certificate at the principal office of the Company together with an
executed Notice of Exercise or Exchange in substantially the form attached
hereto as EXHIBIT B. In such event the number of Shares that the Company shall
issue to the Holder thereof shall be computed using the following formula:
Y (A - B)
X = -----------
A
Where: X = The adjusted number of Shares to be issued to
the Holder as a result of the cashless
exchange election under this SECTION 3(b);
Y = The number of Shares in respect of which the cashless
exchange election under this SECTION 3(b) is made;
A = The Fair Market Value of one Share at the time the
cashless exchange election is made; and
B = The Exercise Price.
4. CERTIFICATES FOR SHARES. Within three Business Days after the
exercise of the purchase rights evidenced by any Warrant, one or more
certificates for the number of Shares so purchased shall be issued to the Holder
of such Warrant or as the Holder may direct (with appropriate restrictive
legends, as applicable), along with such Other Securities and other
consideration as otherwise provided herein. In the event of a partial exercise
of any Warrant, a new warrant or warrants (dated the date hereof) of like tenor
shall be issued to the Holder of such Warrant or as the Holder may direct (with
appropriate restrictive legends, as applicable), calling in the aggregate on the
face or faces thereof for the number of Shares equal to the number of Shares
called for on the face of the Warrant being partially exercised minus the number
of Shares purchased by the Holder upon such partial exercise. For all purposes
of this Agreement other than SECTIONS 3(a) AND 3(b), any reference to the
exercise of any Warrant shall be deemed to include a reference to the cashless
exchange of such Warrant into Common Stock, Other Securities and any other
consideration in accordance with the terms of SECTIONS 3(a) AND 3(b) and this
SECTION 4. The Company shall pay all expenses associated with the issuance of
any Shares, Other Securities, other consideration and replacement Warrants in
accordance with the terms hereof, including, without limitation, any applicable
issue taxes.
5. ISSUANCE OF SHARES. The Company hereby covenants that it will take
all necessary actions to duly and validly reserve and keep available, free from
preemptive rights, the necessary number of Shares and Other Securities from time
to time issuable upon exercise of all Warrants at the time outstanding. The
Company covenants that the Shares and Other Securities will be duly authorized,
and when issued pursuant to the exercise of any Warrants, will be duly and
validly issued, fully paid and non-assessable and free from all preemptive
rights, taxes, liens, and charges with respect to the issuance
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thereof and all liens, charges and security interests created by the Company or
any of its affiliates, with no liability on the part of the holders thereof.
6. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. The number of and
kind of securities purchasable upon exercise of this Warrant and the Exercise
Price shall be subject to adjustment from time to time as follows:
(a) SUBDIVISIONS, COMBINATIONS AND OTHER ISSUANCES. Prior to the
exercise or expiration of any Warrant, if the Company shall: (i) subdivide its
outstanding shares of Common Stock into a larger number of shares of Common
Stock by stock split or otherwise, (ii) combine its outstanding shares of Common
Stock into a smaller number of shares of Common Stock by reverse stock split or
otherwise or (iii) issue additional shares of Common Stock or other capital
stock as a dividend or distribution on or with respect to its Common Stock, the
Exercise Price, and the trigger price set forth in Section 6(c) hereof, in
effect prior to such subdivision, combination or issuance shall forthwith be
proportionately decreased in the case of a subdivision or stock dividend or
distribution, or proportionately increased in the case of a combination. Any
adjustment under this SECTION 6(a) shall become effective at the close of
business on the date the subdivision, combination or reclassification becomes
effective, or as of the record date of such dividend or distribution, or in the
event that no record date is fixed, upon the making of such dividend or
distribution. For the avoidance of doubt, this provision shall not result in an
adjustment to the Exercise Price or the Number of Shares Per Warrant as a result
of the exchange of securities in the Canadian Company for securities of the
Company in connection with the consummation of the Migration (any such issuance
of securities, a "MIGRATION ISSUANCE").
(b) RECLASSIFICATION, REORGANIZATION, CONSOLIDATION, ETC. In the
event of any corporate reclassification, capital reorganization, consolidation,
spin-off, merger, transfer of all or a substantial portion of the Company's
properties or assets, any dissolution, liquidation or winding up of the Company,
or any other change in the Common Stock (other than as a result of a
subdivision, combination, dividend or distribution provided for in SECTION 6(a)
above including a Migration Issuance) (a "CORPORATE TRANSACTION"), then, as a
condition of such event, provision shall be made, and duly executed documents
evidencing the same from the Company and any surviving or acquiring Person (the
"SUCCESSOR COMPANY") shall be delivered to each Holder, so that each Holder
shall have the right to receive upon exercise of the Warrants held by such
Holder the kind and number of shares of Common Stock and Other Securities and
the amount of cash and other property as a holder of the number of Warrants held
by such Holder would have been entitled to receive upon such event had such
Warrants been exercised immediately prior to the effective date of such
Corporate Transaction. The Company shall provide that any Successor Company in
such Corporate Transaction shall enter into an agreement with the Company
confirming the Holders' rights pursuant to this Agreement, assuming the
Company's obligations under this Agreement, jointly and severally with the
Company if the Company shall survive such Corporate Transaction, and providing
after the date of such Corporate Transaction for adjustments, which shall be as
nearly equivalent as possible to the adjustments provided for in this SECTION 6.
The provisions of this SECTION 6(b) shall apply similarly to successive
Corporate Transactions involving any Successor Company. In the event of a
Corporate Transaction in which consideration payable to holders of Common Stock
and Other Securities is payable solely in cash, then the Holders shall be
entitled to receive in exchange for the Warrants cash in an amount equal to the
amount such Holder would have received had such Holder exercised its Warrants
immediately prior to such Corporate Transaction, less the aggregate Exercise
Price for such Warrants then in effect. In case of any Corporate Transaction
described in the immediately preceding sentence of this Section 6(b), the
Company or any Successor Company, as the case may be, shall make available any
funds necessary to pay to the Holders the amounts to which they are entitled as
described above in the same manner and at the same time as holders of Common
Stock would be entitled to such funds.
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(c) ISSUANCE OF ADDITIONAL SHARES OF COMMON STOCK. In the event the
Company at any time or from time to time shall, or shall be deemed to, issue or
sell Additional Shares of Common Stock, other than Excluded Stock, for
consideration per share received by the Company of less than $3.00, then, and in
each such case, the Exercise Price for any Warrant shall be decreased to an
amount determined by dividing the previously applicable Exercise Price by a
fraction, (A) the NUMERATOR of which shall be the SUM of (i) the number of
shares of Common Stock outstanding immediately prior to such issuance or sale,
PLUS (ii) the number of Additional Shares of Common Stock issued or sold or
deemed to be issued or sold, and (B) the DENOMINATOR of which shall be the SUM
of (x) the number of shares of Common Stock outstanding immediately prior to
such issuance or sale, PLUS (y) the number of shares of Common Stock which the
aggregate consideration received by the Company for the Additional Shares of
Common Stock so issued or sold or deemed to be issued or sold would purchase at
$3.00 per share of Common Stock; PROVIDED, HOWEVER, that if at such time or as a
result of such adjustment the Exercise Price for any Warrant is or would be, as
the case may be, equal to or less than $.01 per share, then the Number of Shares
Per Warrant shall be increased to a number determined by multiplying the
previously applicable Number of Shares Per Warrant by a fraction greater than 1,
if any, (A) the NUMERATOR of which shall be the SUM of (i) the number of shares
of Common Stock outstanding immediately prior to such issuance or sale, PLUS
(ii) the maximum number of Additional Shares of Common Stock issued or sold or
deemed to be issued or sold, and (B) the DENOMINATOR of which shall be the SUM
of (x) the number of shares of Common Stock outstanding immediately prior to
such issuance or sale, PLUS (y) the number of shares of Common Stock which the
aggregate consideration received by the Company for the Additional Shares of
Common Stock so issued or sold or deemed to be issued or sold would purchase at
$3.00 per share of Common Stock in effect immediately prior to such issuance or
sale. For the avoidance of doubt, this provision shall not result in an
adjustment to the Exercise Price or the Number of Shares Per Warrant as a result
of any Migration Issuance.
(d) OPTIONS AND CONVERTIBLE SECURITIES.
(i) In the event that the Company at any time or from time to
time issues, sells, grants or assumes, or fixes a record date for the
determination of holders of any class of securities entitled to receive, any
Options or Convertible Securities, other than Excluded Stock, then, and in each
such case, the number of shares of Common Stock at any time issuable upon the
exercise of such Options and/or the conversion or exchange of such Convertible
Securities, as the case may be, shall be deemed to be Additional Shares of
Common Stock issued as of the close of business on the date of the earliest of
such issuance, sale, grant, assumption or record date.
(ii) If any Options or Convertible Securities provide, with
the passage of time or otherwise, for any decrease or increase, as the case may
be, in (A) the consideration payable to the Company or for which such Options or
Convertible Securities are exercisable, convertible or exchangeable, or (B) the
number of Additional Shares of Common Stock issuable upon the exercise and/or
conversion or exchange thereof, then the Exercise Price for any Warrant shall be
adjusted upon any such decrease or increase becoming effective to reflect such
decrease or increase insofar as it affects any such Options or Convertible
Securities which are outstanding at such time, as if such Options or Convertible
Securities included such terms as adjusted upon their original issuance, sale,
grant, assumption or record date, as the case may be; PROVIDED, HOWEVER, that no
adjustments relating to any Options or Convertible Securities pursuant to this
subsection, individually or in the aggregate, shall increase the Exercise Price
for any Warrant by more than all previous reductions in the Exercise Price for
such Warrant relating to the same Options or Convertible Securities.
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(iii) In any case in which Additional Shares of Common Stock
are deemed to be issued, sold, granted or assumed, no further adjustment of the
Exercise Price shall be made upon the exercise of such Options or the conversion
or exchange of such Convertible Securities and the consequent issue or sale of
Convertible Securities or shares of Common Stock.
(iv) Upon (x) the expiration, or the repurchase and
cancellation or retirement by the Company, of any Options which have not been
exercised, or (y) the expiration of any rights of conversion or exchange under
any Convertible Securities which have not been exercised, or the repurchase and
cancellation or retirement by the Company of any such Convertible Securities the
rights of conversion or exchange of which have not been exercised, any
adjustments to the Exercise Price computed upon the original issuance, sale,
grant, assumption or record date, and upon any subsequent adjustments to such
Options or Convertible Securities, shall, effective as of such expiration,
cancellation or retirement, as the case may be, be recomputed as if: (i) the
only Additional Shares of Common Stock (including, without limitation, pursuant
to the issuance or sale of Convertible Securities) issued or sold were the
Additional Shares of Common Stock (including, without limitation, pursuant to
the issuance or sale of Convertible Securities), if any, actually issued or sold
upon the exercise of such Options or upon the conversion or exchange of such
Convertible Securities; (ii) in the case of Options, the consideration received
therefor was the consideration actually received by the Company for the
issuance, sale, grant or assumption of such Options, whether or not exercised,
plus the consideration actually received by the Company upon such exercise,
plus, in the case of Options for Convertible Securities, any additional
consideration deemed to be received by the Company upon the issuance of such
Convertible Securities for which Options were exercised; and (iii) in the case
of Convertible Securities, the consideration received therefor was the
consideration actually received by the Company for the issuance, sale, grant or
assumption of such Convertible Securities which were actually converted or
exchanged, plus the additional consideration, if any, actually received by the
Company upon such conversion or exchange; PROVIDED, HOWEVER, that no adjustments
relating to any Options or Convertible Securities pursuant to this subsection,
individually or in the aggregate, shall increase the Exercise Price by more than
all previous reductions in the Exercise Price relating to the same Options or
Convertible Securities.
(e) CONSIDERATION.
(i) For purposes of this SECTION 6, the consideration for the
issuance, sale, grant or assumption of any Additional Shares of Common Stock,
irrespective of the accounting treatment of such consideration, shall equal:
(1) insofar as it consists of cash, the amount of cash
paid in consideration for the issuance, sale, grant or assumption of such
Additional Shares of Common Stock, without giving effect to customary expenses,
commissions or other compensation paid by the Company and customary concessions
or discounts allowed by the Company to underwriters, dealers or others
performing similar services in connection with any such issuance, sale, grant or
assumption;
(2) insofar as it consists of property (including,
without limitation, securities) other than cash actually received by the Company
as direct consideration for the issuance, sale, grant or assumption or such
Additional Shares of Common Stock, the fair market value thereof (as reasonably
determined by the Board of Directors of the Company in good faith, as evidenced
by a written board resolution delivered to the Holders) at the time of such
issuance, sale, grant or assumption;
(3) insofar as it consists of other property or
consideration, including the provision of services to the Company, the fair
market value of such other property or consideration as reasonably determined by
the Board of Directors of the Company in good faith, as evidenced by a written
board resolution delivered to the Holders; and
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(4) in the event Additional Shares of Common Stock are
issued or sold together with other securities or property for a consideration
which covers both, the portion of such consideration so received, computed as
provided in clauses (1), (2) and (3) above, allocable to such Additional Shares
of Common Stock (as reasonably determined by the Board of Directors of the
Company in good faith, as evidenced by a written board resolution delivered to
the Holders).
(ii) Additional Shares of Common Stock deemed to have been
issued, sold, granted or assumed pursuant to SECTION 6(d) hereof shall be deemed
to have been issued, sold, granted or assumed for consideration per share equal
to the quotient of: (A) the total amount of cash and other property, if any,
received by the Company as direct consideration for the issuance, sale, grant or
assumption of the Options or Convertible Securities in question, PLUS the
aggregate amount of additional consideration (as set forth in the instruments
relating thereto) payable to the Company upon the exercise of such Options or
the conversion or exchange of such Convertible Securities or, in the case of
Options for Convertible Securities, the exercise of such Options and the
conversion or exchange of such Convertible Securities, DIVIDED by (B) the number
of shares of Common Stock (as set forth in the instruments relating thereto)
issuable upon the exercise of such Options and the conversion or exchange of
such Convertible Securities.
(f) DIVIDENDS AND DISTRIBUTIONS. In the event that the Company at
any time or from time to time declares, orders, pays or makes any dividend or
other distribution on the Common Stock, including, without limitation,
distributions of cash, evidence of its indebtedness, Options, Convertible
Securities, other securities or property or rights to subscribe for or purchase
any of the forgoing, and whether by way of dividend, spin-off, reclassification,
recapitalization, similar corporate reorganization or otherwise, other than a
dividend or distribution payable in Additional Shares of Common Stock that gives
rise to an adjustment pursuant to SECTION 6(a) hereof, then, and in each such
case, the Exercise Price of any Warrant shall be reduced to a number determined
by dividing the previously applicable Exercise Price by a fraction less than 1,
if any, (A) the NUMERATOR of which shall be the Fair Market Value per share of
Common Stock on the record date for such dividend or other distribution, and (B)
the DENOMINATOR of which shall be the EXCESS, if any, of (x) such Fair Market
Value per share of Common Stock, over (y) the sum of the amount of any cash
distributed per share of Common Stock plus the positive fair market value (as
reasonably determined by the Board of Directors of the Company in good faith, as
evidenced by a written board resolution delivered to the Holders), if any, per
share of Common Stock of any such evidences of indebtedness, Options,
Convertible Securities, other securities or property or rights to be so
distributed. Such adjustments shall be made whenever any such dividend or other
distribution is made and shall become effective as of the date of such
distribution, retroactive to the record date therefor.
(g) OTHER EVENTS. If any event occurs as to which the provisions of
this SECTION 6 are not strictly applicable but the failure to make any
adjustment would not fairly and adequately protect the purchase rights of the
Warrants in accordance with the intent and principles of such provisions, then
there shall be made such adjustments in the application of such provisions, in
accordance with such intent and principles, as shall be reasonably necessary to
protect such purchase rights of the Warrants, but in no event shall any such
adjustment have the effect of increasing the Exercise Price.
(h) MINIMUM ADJUSTMENT. The adjustments required by the preceding
subsections of this SECTION 6 shall be made whenever and as often as any
specified event requiring an adjustment shall occur, except that no adjustment
of the Exercise Price or the Number of Shares Per Warrant that would otherwise
be required shall be made unless and until such adjustment either by itself or
with other adjustments not previously made increases or decreases by at least 1%
the Exercise Price or the Number of Shares Per Warrant, as the case may be,
immediately prior to the making of such adjustment. Any adjustment representing
a change of less than such minimum amount shall be carried forward and made
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as soon as such adjustment, together with other adjustments required by this
SECTION 6 and not previously made, would result in the requisite minimum
adjustment.
(i) ACCOUNTANTS' REPORT AS TO ADJUSTMENTS. In each case of any
adjustment in the Number of Shares Per Warrant or the Exercise Price, the
Company, at its sole expense, shall promptly (i) compute such adjustment in
accordance with the terms of this Agreement and, if the Required Interest so
requests in writing from the Company within 30 days of receipt of such
computations from the Company, cause independent certified public accountants of
recognized national standing to verify such computation (other than any
determination of the Fair Market Value of Common Stock or Other Securities or
the fair market value of any other property); (ii) prepare a report setting
forth such adjustment and showing in reasonable detail the method of calculation
thereof and the facts upon which such adjustment is based, including, without
limitation, (a) the event or events giving rise to such adjustment; (b) the
consideration received by the Company for any Additional Shares of Common Stock
issued or sold or deemed to have been issued or sold; (c) the number of shares
of Common Stock outstanding or deemed to be outstanding prior and subsequent to
any such transaction; (d) the method by which any such adjustment was calculated
(including a description of the basis on which the Board of Directors of the
Company made any determination of Fair Market Value or fair market value
required thereby); and (e) the Number of Shares Per Warrant and the Exercise
Price in effect immediately prior to such event or events and as adjusted;
(iii) mail a copy of each such report to each Holder and, upon the request at
any time of any Holder, furnish to such Holder a like report setting forth
the Number of Shares Per Warrant and the Exercise Price at the time in effect
and showing in reasonable detail how they were calculated; and (iv) keep
copies of all such reports available at the principal office of the Company
for inspection during normal business hours by any Holder or any prospective
purchaser of any Warrant designated by the Holder thereof.
(j) ADJUSTMENT TO WARRANT CERTIFICATE. The form of Warrant
Certificate need not be changed as a result of any adjustment made pursuant to
this SECTION 6, and Warrant Certificates issued after such adjustment may state
the same Number of Shares Per Warrant and the same Exercise Price as is stated
in any Warrant Certificates issued prior to such adjustment. The Company,
however, may at any time make any change in the form of Warrant Certificate that
it may deem appropriate to give effect to any such adjustment and that does not
affect the substance of the Warrant Certificate or the rights represented
thereby, and any Warrant Certificate thereafter issued, whether in exchange or
substitution for an outstanding Warrant Certificate or otherwise, may be in the
form as so changed.
(k) NO DILUTION OR IMPAIRMENT. The Company shall not, by amendment
of its certificate of incorporation or other organizational document or through
any sale or other issuance of securities, capital reorganization,
reclassification, recapitalization, consolidation, merger, transfer of assets,
dissolution, liquidation, winding-up, any similar transaction or any other
voluntary action, avoid or seek to avoid the observance or performance of any of
the terms of this Agreement, but will at all times in good faith assist in the
carrying out of all such terms and in the taking of all such action as may be
necessary or appropriate in order to protect the rights of each Holder of
Warrants against dilution or other impairment. Without limiting the generality
of the foregoing, the Company (a) will not permit the par value of any shares of
Common Stock or Other Securities receivable upon the exercise of any Warrant to
exceed the Exercise Price, (b) will not take any action which results in any
adjustment to the Exercise Price if the number of shares of Common Stock or
Other Securities authorized by the Company's certificate of incorporation and
available for issuance upon the exercise of Warrants will be less than the
number of shares of Common Stock or Other Securities that Holders may be
entitled to receive upon the exercise of all outstanding Warrants and (c) will
take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable shares of
Common Stock or Other Securities upon the exercise by Holders of all outstanding
Warrants. Without limiting the generality of the foregoing, before taking any
action that would cause a reduction of the Exercise Price
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pursuant to SECTION 6 hereof below the then par value (if any) of the Common
Stock or Other Securities, the Company shall take any and all corporate action
(including, without limitation, a reduction in par value) which shall be
necessary to validly and legally issue fully paid and nonassessable shares of
Common Stock or Other Securities, as the case may be, at the Exercise Price as
so reduced.
(l) CONTEST AND APPRAISAL RIGHTS. If Holders of the Required
Interest shall, in good faith, disagree with any determination by the Board of
Directors of the Company of the Fair Market Value or the fair market value of
any property (including, without limitation, shares of Common Stock or any Other
Securities) made pursuant to this Agreement, and such disagreement is in respect
of securities or other property valued by the Board of Directors of the Company
at more than $10 million, then such Holders may by notice to the Company (an
"APPRAISAL NOTICE"), given within 30 days after notice to the Holders following
such determination, elect to contest such determination; provided, however, that
the Holders may not seek appraisal of any determination of Fair Market Value to
the extent that the Company has received a fairness opinion or other appraisal
from an Appraiser in connection with the transaction giving rise to such
determination. Within 20 days after an Appraisal Notice, the Company shall
engage an Appraiser to make an independent determination of such Fair Market
Value (the "APPRAISER'S DETERMINATION"), and to deliver to the Company and each
Holder a report describing its methodology and results in reasonable detail
within 30 days of such engagement. In arriving at its determination, the
Appraiser shall base any valuation upon: (i) in the case of the Fair Market
Value of shares of Common Stock or Other Securities, the fair market value of
the Company and its Subsidiaries or of such Other Securities, as the case may
be, on the basis of an arm's length sale of a going concern between an informed
and willing buyer and an informed and willing seller, under no compulsion to buy
or sell, taking into account all the relevant facts and circumstances then
prevailing, and without consideration of (x) the lack of an actively trading
public market for the Common Stock or Other Securities, (y) any restrictions on
the transfer of shares of Common Stock or such Other Securities, or (z) any
control premium or minority discount, and (ii) in the case of the Fair Market
Value of any other property, the fair market value of such other property
assuming that such other property was sold in an arm's length transaction
between an informed and willing buyer and an informed and willing seller, under
no compulsion to buy or sell, taking into account all the relevant facts and
circumstances then prevailing. The Holders shall be afforded reasonable
opportunities to discuss the appraisal with the Appraiser. The Appraiser's
Determination shall be final and binding on the Company and the Holders, absent
manifest error. The costs of conducting an appraisal shall be borne by the
Company.
(m) MIGRATION. Notwithstanding anything herein to the contrary, if
the Migration has not been consummated on or before the Migration Outside Date,
other than as the result of an Excusing Event, then on such date the Exercise
Price then in effect shall be reduced by $0.60 and at the end of each 30-day
period thereafter during which such Migration shall not have been consummated;
PROVIDED, that the Exercise Price shall not be so reduced unless and until the
Company can no longer issue additional Warrants pursuant to Section 6.7(c) of
the Subscription Agreement; and PROVIDED, further, that the Exercise Price shall
not be reduced to below $0.01 per share of Common Stock pursuant to this
sentence, and the final adjustment to the Exercise Price pursuant to this
sentence shall be in the amount (less than or equal to $0.60) necessary for such
final adjustment to reduce the Exercise Price to $0.01 per share. From and after
such time as the Exercise Price is reduced to $0.01 per share, at any time that
any adjustment is required to be made to the Exercise Price pursuant to this
Section 6 (without regard to whether the Exercise Price may not be reduced to
below $0.01 per share pursuant to the terms hereof or otherwise and including,
without limitation, any adjustment that would have reduced the Exercise Price
below $0.01 per share of Common Stock but for the first sentence of this
subsection (m)), the Number of Shares Per Warrant shall be inversely and
proportionately adjusted (i.e., by multiplying the Number of Shares Per Warrant
by the fraction that the Exercise Price would be divided by to reduce or
increase, as the case may be, the Exercise Price), except as otherwise provided
in Section 6(c). Any adjustment pursuant to this Section 6(m) shall be treated
as an adjustment to the purchase price of the Warrants.
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(n) CANADIAN COMPANY. Prior to the earlier of the Migration or an
Exchange Event (as defined in the Subscription Agreement), the adjustment
provisions of this Section 6 shall apply, MUTATIS MUTANDI, to any action taken
by the Canadian Company, which if taken by the Company would result in an
adjustment pursuant to this Section 6, to the same extent as if such action were
taken by the Company.
(o) WAIVER. Notwithstanding anything herein to the contrary, the
Required Interest may waive the application of any provision of this Section 6
that would increase the Number of Shares Per Warrant or decrease the Exercise
Price by providing written notice to the Company specifying the event or
adjustment and the Number of Shares Per Warrant, if any, to which such waiver
should apply. The Company shall provide written notice to the Holders at least 2
Business Days in advance of any such event or adjustment.
7. NOTICE OF CORPORATE ACTION. In the event the Company proposes to:
(i) pay, distribute, or take a record of the holders of any class of securities
for the purpose of determining the holders thereof who are entitled to receive,
any dividend or other distribution, or any right to subscribe for, purchase or
otherwise acquire any shares of capital stock or any other securities or
property; or (ii) consummate any capital reorganization, reclassification,
recapitalization, consolidation, merger, transfer of all or substantially all of
its assets, dissolution, liquidation or winding-up, or any similar transaction;
then, at least 10 days prior to the earlier of any applicable record date or
such event, as the case may be, the Company shall mail to each Holder a notice
specifying: (a) the date or expected date on which any such payment or
distribution is to be made or record is to be taken and the amount and character
of any such dividend, distribution or right; (b) the date or expected date on
which any such reorganization, reclassification, recapitalization,
consolidation, merger, transfer, dissolution, liquidation, winding-up or similar
transaction is to take effect and any record date therefor; (c) the time as of
which any holders of record of shares of Common Stock and/or any other class of
securities shall be entitled to exchange their shares of Common Stock and/or
other securities for the securities or other property deliverable upon such
reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation, winding-up or similar transaction and a
description in reasonable detail of such transaction; and (d) in each case, the
expected effect on the Number of Shares Per Warrant and the Exercise Price of
each such transaction or event. The Company shall update any such notice to
reflect any change in the foregoing information.
8. NO FRACTIONAL SHARES OR SCRIP. No fractional Shares or scrip
representing fractional Shares shall be issued upon the exercise of any Warrant,
but in lieu of such fractional Shares the Company shall make a cash payment
therefor on the basis of the Fair Market Value thereof.
9. OTHER ANTIDILUTION PROVISIONS. The Company covenants not to issue,
sell, grant or assume any securities (including, without limitation, any
Additional Shares of Common Stock or rights to acquire Additional Shares of
Common Stock) which, in the aggregate, provide for greater or more favorable
antidilution protection than the antidilution protection provided for in Section
6 hereof. For the avoidance of doubt, a different exercise price or trigger
price for the application of such rights (including any such price based on fair
market value) shall not by itself be considered more favorable; PROVIDED,
HOWEVER, that a trigger price for antidilution protection that is 115% or more
of the Fair Market Value of shares of Common Stock at the time of issuance of
such securities shall be considered more favorable in the aggregate.
10. NO STOCKHOLDER RIGHTS OR LIABILITIES. Prior to the exercise of any
Warrant, the Holder thereof shall not be entitled to any rights of a stockholder
with respect to the Shares, including (without limitation) the right to vote
such Shares or receive dividends or other distributions thereon, and such Holder
shall not be entitled to any notice or other communication concerning the
business or affairs of the
-9-
Company, other than as specifically required by this Agreement or the
Subscription Agreement. Nothing contained in this Agreement shall be construed
as imposing any obligation on any Holder to purchase any securities or as
imposing any liabilities on such Holder as a stockholder of the Company, whether
such obligation or liabilities are asserted by the Company or by creditors of
the Company or otherwise.
11. COMPLIANCE WITH SECURITIES ACT; TRANSFERABILITY OF WARRANT OR
SHARES, ETC.
(a) COMPLIANCE WITH SECURITIES ACT. The Holder, by acceptance
hereof, agrees that this Warrant, and the Shares issuable upon exercise of this
Warrant, are being acquired for investment and that such Holder will not offer,
sell or otherwise dispose of this Warrant, or any Shares issuable upon exercise
of this Warrant, except under circumstances which will not result in a violation
of the Securities Act or any applicable state securities laws. This Warrant and
all Shares issued upon exercise of this Warrant (unless registered under the
Securities Act and any applicable state securities laws) shall be stamped or
imprinted with a legend in substantially the following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY APPLICABLE STATE
SECURITIES LAWS. THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND
NOT WITH A VIEW TO DISTRIBUTION OR RESALE, AND MAY NOT BE SOLD OR
OTHERWISE TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR
QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS
OR APPLICABLE EXEMPTIONS THEREFROM."
Whenever the foregoing legend is no longer required in the opinion of counsel to
any Holder, upon request of any such Holder, the Company, at its sole expense
(including, without limitation, the payment of any applicable issue taxes),
shall issue or cause to be issued in the name of and delivered to such Holder or
as such Holder may direct new Warrant Certificates of like tenor, dated the date
hereof, and/or new certificates for shares of Common Stock or Other Securities,
as applicable.
(b) TRANSFERABILITY. Subject to compliance with applicable federal
and state securities laws, the Warrants and all rights thereunder are
transferable in whole or in part by any Holder to any Person. Any transfer of a
Warrant shall be recorded on the books of the Company upon the surrender of such
Warrant, properly endorsed for transfer by delivery of an Assignment Form in
substantially the form attached hereto as EXHIBIT C, to the Company at the
address set forth in SECTION 15 hereof. In the event of a partial transfer of a
Warrant, the Company shall issue to the Holder thereof one or more appropriate
new Warrants.
(c) REGISTRATION OF COMMON STOCK AND WARRANTS. If any shares of
Common Stock or Other Securities required to be issued upon exercise of any
Warrant require registration with or approval of any governmental authority
under any federal or state law before such shares of Common Stock or Other
Securities may be issued (other than registration under the Securities Act),
then the Company shall, at its sole expense and as expeditiously as possible,
use its best efforts to cause such shares of Common stock or Other Securities to
be duly registered and approved. If at any time the Common Stock or Other
Securities are listed on any national securities exchange, the Company, at its
sole expense, shall obtain promptly and maintain the approval for listing on
each such exchange of the shares of Common Stock and Other Securities issuable
upon exercise of the then outstanding Warrants and shall maintain such listing
after their issuance.
12. REPLACEMENT OF WARRANTS. Upon receipt of evidence reasonably
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant Certificate and, in the case of any
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such loss, theft or destruction of any Warrant Certificate held by any Person
other than an initial Holder thereof or any institutional investor, upon
delivery of an indemnity reasonably satisfactory to the Company or, in the case
of any such mutilation, upon surrender of such Warrant Certificate for
cancellation at the principal office of the Company, the Company, at the expense
of the Holder (including, without limitation, the payment of any applicable
issue taxes), shall execute and deliver, in lieu thereof, a new Warrant
Certificate of like tenor and dated the date hereof.
13. REMEDIES. The Company stipulates that the remedies at law available
to each Holder in the event of any default by the Company in the performance of
or compliance with any of the terms of this Agreement are not and will not be
adequate and that, to the fullest extent permitted by law, such terms may be
specifically enforced by a decree for the specific performance of any agreement
contained herein or by an injunction against a violation of any of the terms
hereof or otherwise. No failure or delay on the part of any Holder, in
exercising any right, power or remedy hereunder shall operate as a suspension or
waiver thereof; nor shall any single or partial exercise of any such right,
power or remedy preclude any other or further exercise thereof or the exercise
of any other right, power or remedy hereunder. The remedies herein provided are
in addition to and not exclusive of any other remedies provided at law or in
equity.
14. SUCCESSORS AND ASSIGNS. The terms and provisions of this Agreement
shall inure to the benefit of, and be binding upon, the Company and the Holders
from time to time of the Warrants and the Shares and Other Securities issuable
upon exercise of the Warrants.
15. AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended,
altered or modified and the observance of any term of this Agreement may be
waived (either generally or in a particular instance and either retroactively or
prospectively), upon the written consent of the Company and the Required
Interest; PROVIDED, HOWEVER, that no such amendment, alteration, modification or
waiver that would treat the Holder of any Warrant in a discriminatory manner may
be made without the prior written consent of such Holder. Any waiver or consent
shall be effective only in the specific instance and for the specific purpose
for which given.
16. NOTICES. All notices required under this Agreement shall be deemed
to have been given or made for all purposes (i) upon personal delivery, (ii)
upon confirmation receipt that the communication was successfully sent to the
applicable number if sent by facsimile, (iii) one day after being sent, when
sent by professional overnight courier service, or (iv) five days after posting
when sent by registered or certified mail. Notices to the Company shall be sent
to the address of the Company set forth below (or at such other place as the
Company shall notify the Holders hereof in writing) and notices to the Holder
shall be sent to the address of the Holder set forth on the signature page
hereto (or at such other place as the Holder shall notify the Company in
writing):
To the Company: Waste Services, Inc.
c/o Capital Environmental Resource Inc.
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, III
17. CAPTIONS. The section and subsection headings of this Agreement are
inserted for convenience only and shall not constitute a part of this Agreement
in construing or interpreting any provision hereof.
-11-
18. GOVERNING LAW. This Agreement and the rights and duties of the
parties hereto hereunder and (unless otherwise provided) all amendments and
supplements to, and all consents and waivers pursuant to, this Agreement shall
in all respects be governed by, and construed and enforced in accordance with,
the laws of the State of New York, without giving effect to its conflict of laws
principles or rules.
19. RESIDENCY. The residency of the initial Holders hereof shall be
presumed by the Company to be within the state as set forth for such Holder upon
the signature page hereof (or at such other place as the Holders hereof shall
notify the Company in writing).
20. WITHHOLDING. The Company shall be authorized to deduct and withhold
any withholding taxes actually imposed under the Code or any applicable
provision of state, local or foreign tax law as a result of the application of
the provisions of this Agreement, and any amounts so deducted and withheld shall
be treated as distributed by the Company to the Holders in accordance with the
terms hereof; PROVIDED, HOWEVER, that (i) no such withholding or deduction shall
be made unless the Company provides written notice to the Holders at least 10
days prior to such deduction and withholding and (ii) no such withholding or
deduction shall be made to the extent a Holder demonstrates, in a manner
reasonably satisfactory to the Company, that no such deduction and withholding
is required or that deduction and withholding is permitted at a reduced rate.
21. SEVERABILITY. If any provision of this Agreement is held to be
invalid or unenforceable for any reason, it shall be adjusted rather than
voided, if possible, to achieve the intent of the parties hereto to the maximum
extent possible. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or unenforceability in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction.
22. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which taken together shall be deemed to constitute one and
the same instrument.
23. DEFINED TERMS.
(a) DEFINITIONS. The following terms have the meanings indicated
below, unless the context otherwise requires:
"ADDITIONAL SHARES OF COMMON STOCK" means all shares, including
treasury shares, of Common Stock, issued or sold, or deemed to be issued or sold
pursuant to the terms hereof, by the Company after the date hereof, whether or
not subsequently reacquired or retired by the Company, other than the shares of
Common Stock issued upon the exercise of Warrants.
"APPRAISER" means an independent nationally recognized investment
bank or other qualified financial institution acceptable to the Company and the
Required Interest.
"BUSINESS DAY" means any day other than a Saturday or a Sunday or a
day on which commercial banking institutions in New York City are authorized or
required to be closed.
"COMMON STOCK" means the common stock of the Company, par value
$0.01 per share, any capital stock into which such Common Stock shall have been
changed or converted, any capital stock resulting from any reclassification of
such Common Stock, and all other capital stock of any class or classes of the
Company, other than preference stock, the holders of which share equally with
the Common
-12-
Stock in current dividends and liquidating dividends after the payment of
dividends and distributions on any shares entitled to preference.
"CONVERTIBLE SECURITIES" means any evidences of indebtedness, shares
of capital stock or any other securities convertible into or exchangeable for,
directly or indirectly, shares of Common Stock.
"EXCLUDED STOCK" means (1) shares of Common Stock sold to directors,
officers or employees, or options to acquire Common Stock and shares of Common
Stock issued or to be issued from time to time to directors, officers and
employees and to unaffiliated consultants, advisors and independent contractors
of the Company pursuant to stock option plans or other employee benefit plans,
in each case to the extent approved by the Board of Directors of the Company;
PROVIDED, HOWEVER, that in the case of directors, officers or employees,
individual grants may be approved by the Compensation Committee of the Board of
Directors of the Company to the extent such stock option plans or other employee
benefit plans have been approved by the Board of Directors of the Company; (2)
shares of Common Stock or other securities issued or issuable upon exercise of
this Warrant or issued or issuable pursuant to the Subscription Agreement; (3)
shares of Common Stock issued in exchange for services provided to the Company
by unaffiliated third parties, to the extent approved by the Board of Directors
of the Company.
"EXPIRATION DATE" means the seventh anniversary of the
date hereof.
"FAIR MARKET VALUE" means (i) with respect to any share of Common
Stock, including with respect to a Share for purposes of SECTION 3(b), or Other
Security, the closing sale price of such security on the trading date
immediately prior to the date of determination, as quoted on the Nasdaq Small
Cap Market or any United States automated quotation system or national
securities exchange or national market system on which such security is then
quoted or traded, as applicable; PROVIDED, that, if such security is not then so
quoted or traded, the fair market value shall be: (A) the value based on the
most recently completed arm's length transaction between the Company and a
Person other than an affiliate of the Company within the 3 month period prior to
the date of determination with respect to such security, or (B) if (A) does not
apply, the fair market value as most recently determined by an Appraiser within
such prior 3 month period, PROVIDED, that, any such appraisal was made within
the two month period following the date of the financial statements on which
such appraisal is based, or (C) if neither (A) nor (B) applies, the fair market
value as reasonably determined by the Board of Directors of the Company in good
faith, as evidenced by a written board resolution delivered to the Holders; and
(ii) with respect to any other property other than cash or Common Stock or Other
Securities, (A) the value based on the most recently completed arm's length
transaction between the Company and a Person other than an affiliate of the
Company within the 3 month period prior to the date of determination with
respect to such property, or (B) if (A) does not apply, the fair market value as
most recently determined by an Appraiser within such prior 3 month period,
PROVIDED, that, any such appraisal was made within the two month period
following the date of the financial statements on which such appraisal is based,
or (C) if neither (A) nor (B) applies, the fair market value as reasonably
determined by the Board of Directors of the Company in good faith, as evidenced
by a written board resolution delivered to the Holders. Any determination
pursuant to subsections (i) (B) or (C) or (ii) (B) or (C) shall be made on the
basis of an arm's length sale of a going concern between an informed and willing
buyer and an informed and willing seller, under no compulsion to buy or sell,
taking into account all the relevant facts and circumstances then prevailing and
without consideration of (v) the lack of an actively trading public market for
the Common Stock or Other Securities, (w) any restrictions on the transfer of
shares of Common Stock or Other Securities or (x) any control premium or
minority discount. For the avoidance of doubt, any determination pursuant to
subsections (i)(C) or (ii)(C) shall be subject to Section 6(l).
-13-
"OPTIONS" means rights, options or warrants to subscribe for,
purchase or otherwise acquire, directly or indirectly, shares of Common Stock,
including, without limitation, Convertible Securities.
"OTHER SECURITIES" means any stock (other than Common Stock) and
other securities of the Company or any other Person, which the Holders at any
time shall be entitled to receive, or shall have received, upon the exercise of
Warrants, in lieu of or in addition to Common Stock, or which at any time shall
be issuable or shall have been issued in exchange for or in replacement of
Common Stock or Other Securities.
"PERSON" means any individual, partnership, limited liability
company, unlimited liability company, corporation, association, joint stock
company, trust, joint venture, unincorporated organization or any federal,
state, county or municipal governmental or quasi-governmental agency,
department, commission, board, bureau, instrumentality or similar entity.
"REQUIRED INTEREST" shall mean the Holders of a majority of
the Warrants then outstanding.
"SALE DATE" has the meaning given to such term in the Certificate of
Designations for the Series A Preferred Stock issued pursuant to the
Subscription Agreement.
"SECURITIES ACT" means the Securities Act of 1933 and the rules and
regulations of the Securities and Exchange Commission thereunder, as amended
from time to time.
"SUBSIDIARY" means (i) a corporation of which 50% or more of the
combined voting power of the outstanding voting capital stock is owned, directly
or indirectly, by the Company, by one or more Subsidiaries, or by the Company
and one or more Subsidiaries, (ii) a partnership of which the Company, one or
more Subsidiaries, or the Company and one or more Subsidiaries, directly or
indirectly, is the general partner and/or has the power to direct the policies,
management and affairs of such partnership, or (iii) any other Person in which
the Company, one or more Subsidiaries, or the Company and one or more
Subsidiaries, directly or indirectly, has at least a 50% interest and/or power
to direct the policies, management and affairs thereof.
(b) OTHER DEFINITIONS. The following terms have the meanings given
to them in the Subscription Agreement or in the sections herein as indicated
below:
TERM REFERENCE
----------------------------------------------------------
"AGREEMENT".......................................Preamble
"APPRAISAL NOTICE" ...................................6(l)
"APPRAISER'S DETERMINATION"...........................6(l)
"CANADIAN COMPANY"..................Subscription Agreement
"CLOSING"...........................Subscription Agreement
"COMPANY".........................................Preamble
"CORPORATE TRANSACTION"...............................6(b)
"Excusing Event"....................Subscription Agreement
"EXERCISE PRICE".........................................1
"HOLDERS".........................................Preamble
"MIGRATION".........................Subscription Agreement
"MIGRATION ISSUANCE"..................................6(a)
"MIGRATION OUTSIDE DATE"............Subscription Agreement
"NUMBER OF SHARES PER WARRANT"...........................1
-14-
TERM REFERENCE
----------------------------------------------------------
"PURCHASER".........................Subscription Agreement
"SHARES".................................................1
"SUBSCRIPTION AGREEMENT"..........................Recitals
"SUCCESSOR COMPANY"...................................6(b)
"WARRANTS"........................................Recitals
"WARRANT CERTIFICATES"...................................1
-15-
IN WITNESS WHEREOF, the undersigned have caused this Warrant
Agreement to be duly executed as of the date first set forth above.
COMPANY
WASTE SERVICES, INC.
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
------------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ III
Title: Secretary
HOLDERS
▇▇▇▇▇ INVESTMENT ASSOCIATES VI, L.P.
By: ▇▇▇▇▇ ▇▇ VI, LLC,
its general partner
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------------------
Managing Member
c/o Kelso & Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇, Esq.
KEP VI, LLC
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
------------------------------------------------
Managing Member
c/o Kelso & Company
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇, Esq