Exhibit 4.7
EXECUTION COPY
WARRANT AGREEMENT
between
ECONOPHONE, INC.
and
THE BANK OF NEW YORK
Dated as of July 1, 1997
i
TABLE OF CONTENTS
PAGE
ARTICLE I
CERTAIN DEFINITIONS
ARTICLE II
ORIGINAL ISSUE OF WARRANTS
Section 2.1. Form of Warrant Certificates................................... 7
Section 2.2. Restrictive Legends............................................ 8
Section 2.3. Execution and Delivery of Warrant Certificates................. 11
Section 2.4. Certificated Warrants.......................................... 12
ARTICLE III
EXERCISE PRICE, EXERCISE AND REPURCHASE OF WARRANTS
Section 3.1. Exercise Price................................................. 12
Section 3.2. Exercise; Restrictions on Exercise............................. 12
Section 3.3. Method of Exercise; Payment of Exercise Price.................. 12
Section 3.4. Repurchase Offers.............................................. 14
ARTICLE IV
ADJUSTMENTS
Section 4.1. Adjustments.................................................... 17
Section 4.2. Notice of Adjustment........................................... 24
Section 4.3. Statement on Warrants.......................................... 25
Section 4.4. Notice of Consolidation, Merger, Etc........................... 25
Section 4.5. Fractional Interests........................................... 26
ARTICLE V
DECREASE IN EXERCISE PRICE
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ARTICLE VI
LOSS OR MUTILATION
ARTICLE VII
RESERVATION AND AUTHORIZATION OF COMMON SHARES
ARTICLE VIII
WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER
Section 8.1. Transfer and Exchange.......................................... 28
Section 8.2. Book-Entry Provisions for the Global Warrants.................. 29
Section 8.3. Special Transfer Provisions.................................... 31
Section 8.4. Surrender of Warrant Certificates.............................. 34
ARTICLE IX
WARRANT HOLDERS
Section 9.1. Warrant Holder Deemed Not a Shareholder........................ 34
Section 9.2. Right of Action................................................ 35
ARTICLE X
REMEDIES
Section 10.1. Defaults...................................................... 35
Section 10.2. Payment Obligations........................................... 35
Section 10.3. Remedies; No Waiver........................................... 35
ARTICLE XI
THE WARRANT AGENT
Section 11.1. Duties and Liabilities........................................ 36
Section 11.2. Right to Consult Counsel...................................... 37
Section 11.3. Compensation; Indemnification................................. 37
Section 11.4. No Restrictions on Actions.................................... 38
Section 11.5. Discharge or Removal; Replacement Warrant Agent............... 38
Section 11.6. Successor Warrant Agent....................................... 39
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ARTICLE XII
MISCELLANEOUS
Section 12.1. Monies Deposited with the Warrant Agent....................... 39
Section 12.2. Payment of Taxes.............................................. 40
Section 12.3. No Merger, Consolidation or Sale of Assets of the Company..... 40
Section 12.4. Reports to Holders............................................ 40
Section 12.5. Notices; Payment.............................................. 41
Section 12.6. Binding Effect................................................ 42
Section 12.7. Counterparts.................................................. 42
Section 12.8. Amendments.................................................... 42
Section 12.9. Headings...................................................... 42
Section 12.10. Common Shares Legend.......................................... 42
Section 12.11. Third Party Beneficiaries..................................... 44
Section 12.12. Termination................................................... 44
Section 12.13. Governing Law................................................. 44
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EXHIBIT A FORM OF WARRANT CERTIFICATE
EXHIBIT B FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH
TRANSFERS PURSUANT TO REGULATION S
EXHIBIT C-1 FORM OF CERTIFICATE TO BE DELIVERED BY TRANSFEROR IN
CONNECTION WITH TRANSFERS TO INSTITUTIONAL ACCREDITED
INVESTORS
EXHIBIT C-2 FORM OF CERTIFICATE TO BE DELIVERED BY TRANSFEREES IN
CONNECTION WITH TRANSFERS TO INSTITUTIONAL ACCREDITED
INVESTORS
EXHIBIT D FORM OF CERTIFICATE
APPENDIX A LIST OF FINANCIAL EXPERTS
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of July 1, 1997 (this "AGREEMENT"),
between ECONOPHONE, INC., a New York corporation (the "COMPANY"), and THE BANK
OF NEW YORK, a New York banking corporation (the "WARRANT AGENT").
W I T N E S S E T H:
WHEREAS, pursuant to the terms of a Placement Agreement dated June 26,
1997 (the "PLACEMENT AGREEMENT"), between the Company and ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co.
Incorporated, as placement agent (the "PLACEMENT AGENT"), the Company has agreed
to issue and sell to the Placement Agent an aggregate of 155,000 warrants (each,
a "WARRANT" and collectively, the "WARRANTS"), each Warrant initially entitling
the holder thereof to purchase 8.167 shares of Common Stock (as defined below)
of the Company at an exercise price of $.01 per Common Share (as defined below),
as part of 155,000 units (the "UNITS"), each Unit consisting of one 131/2%
Senior Note due 2007 of the Company (each a "NOTE" and collectively, the
"NOTES") to be issued pursuant to the provisions of an Indenture, dated as of
the date hereof, between the Company and The Bank of New York, as trustee (the
"INDENTURE"), and one Warrant;
WHEREAS, the Notes and the Warrants included in each Unit will become
separately transferable at the close of business upon the earliest to occur of
(i) the date that is 180 days after the Closing Date (as defined below),
(ii) the commencement of an exchange offer with respect to the Notes undertaken
pursuant to the Notes Registration Rights Agreement (as defined below) and (iii)
the effectiveness of a shelf registration statement with respect to resales of
the Notes (the "SEPARATION DATE"); and
WHEREAS, the Company desires to engage the Warrant Agent to act on the
Company's behalf, and the Warrant Agent desires to act on behalf of the Company,
in connection with the issuance of the Warrant Certificates (as defined below)
and the other matters as provided herein, including, without limitation, for the
purpose of defining the terms and provisions of the Warrants and the respective
rights and obligations thereunder of the Company and the record holders thereof
(together with the holders of shares of Common Stock (or other securities)
received upon exercise thereof, the "HOLDERS").
NOW, THEREFORE, in consideration of the foregoing and of the mutual
agreements contained herein and in the Placement Agreement, the Company and the
Warrant Agent hereby agree as follows:
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ARTICLE I
CERTAIN DEFINITIONS
"Affiliate" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agent Members" has the meaning specified in Section 8.2 hereof.
"Auditors" means, at any time, the independent auditors of the Company
at such time.
"Board" means the board of directors of the Company from time to time.
"Business Day" means a day except a Saturday, Sunday or other day on
which commercial banks in The City of New York, or in the city of the corporate
trust office of the Warrant Agent, are authorized by law to close.
"Cedel Bank" means Cedel Bank, society anonyme.
"Certificated Warrants" has the meaning specified in Section 2.1
hereof.
"Certificate for Surrender" means the form on the reverse side of the
Warrant Certificate substantially in the form of Exhibit A hereto.
"Closing Date" means the date hereof.
"Commission" means the United States Securities and Exchange
Commission.
"Common Shares" means the shares of the Common Stock of the Company.
"Common Stock" means the Voting Common Stock, par value $0.0001 per
share, of the Company.
"Company" has the meaning specified in the preamble to this Agreement.
"Current Market Value" has the meaning specified in Section 4.1(f)
hereof.
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"Default" has the meaning specified in Section 10.1 hereof.
"Depositary" means The Depository Trust Company, its nominees and
their respective successors.
"Euroclear" means ▇▇▇▇▇▇ Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear System.
"Exchange Act" means the United States Securities Exchange Act of
1934, as amended.
"Exercise Price" has the meaning specified in Section 3.1 hereof.
"Expiration Date" means July 1, 2007.
"Final Surrender Time" has the meaning specified in Section 3.4
hereof.
"Financial Expert" means one of the Persons listed in Appendix A
hereto.
"Flexible Incentive Plan" means the Company's employee stock option
plan known as the "Econophone, Inc. 1996 Flexible Incentive Plan," effective as
of October 31, 1996, as amended or restated from time to time.
"Global Warrants" has the meaning specified in Section 2.1 hereof.
"Holders" has the meaning specified in the recitals to this Agreement.
"IAI Certificated Warrants" has the meaning specified in Section 2.1
hereof.
"Indenture" has the meaning specified in the recitals to this
Agreement.
"Independent Financial Expert" means a Financial Expert that does not,
and whose directors, executive officers and 5% stockholders do not, have a
direct or indirect financial interest in the Company or any of its subsidiaries
or Affiliates, which has not been for at least five years and, at the time it is
called upon to give independent financial advice to the Company, is not (and
none of its directors, executive officers or 5% stockholders is) a promoter,
director, or officer of the Company or any of its subsidiaries or Affiliates.
The Independent Financial Expert may be compensated and indemnified by the
Company for opinions or services it provides as an Independent Financial Expert.
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"Institutional Accredited Investor" shall mean an institution that is
an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or
(7) of Regulation D under the Securities Act.
"Legended Regulation S Global Warrant" has the meaning specified in
Section 2.1 hereof.
"Non-U.S. Person" means a person who is not a U.S. person as defined
in Rule 902 of Regulation S.
"Notes" has the meaning specified in the recitals to this Agreement.
"Notes Registration Rights Agreement" means the Registration Rights
Agreement with respect to the Notes dated July 1, 1997 between the Company and
the Placement Agent.
"Notice Date" has the meaning specified in Section 3.4 hereof.
"Officer" means, with respect to the Company, (i) the Chairman of the
Board, the President, any Vice President, the Chief Financial Officer, and (ii)
the Treasurer or any Assistant Treasurer, the Secretary or any Assistant
Secretary.
"Officers' Certificate" means a certificate signed by one Officer
listed in clause (i) of the definition thereof and one Officer listed in clause
(ii) of the definition thereof; PROVIDED, HOWEVER, that any such certificate may
be signed by any two of the Officers listed in clause (i) of the definition
thereof in lieu of being signed by one Officer listed in clause (i) of the
definition thereof and one Officer listed in clause (ii) of the definition
thereof.
"Offshore Certificated Warrants" has the meaning specified in Section
2.1 hereof.
"Opinion of Counsel" means a written opinion signed by legal counsel
who may be an employee of or counsel to the Company.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Placement Agreement" has the meaning specified in the recitals to
this Agreement.
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"Private Placement Legend" means the legend set forth on the Warrant
Certificates in the form set forth in Section 2.2(a) hereof.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Warrant" has the meaning specified in Section 2.1
hereof.
"Relevant Value" has the meaning specified in Section 3.4(d) hereof.
"Repurchase Event" means, and shall be deemed to occur on, any date
when the Company consolidates with or merges into or with (but only where
holders of the Common Stock receive consideration in exchange for all or part of
such Common Stock), or sells all or substantially all of its assets to, another
Person which does not have a class of equity securities registered under the
Exchange Act or a wholly owned subsidiary of such Person, if the consideration
for such transaction does not consist solely of cash or such merger or
consolidation is not effected solely for the purpose of changing the Company's
state of incorporation.
"Repurchase Notice" has the meaning specified in Section 3.4(a)
hereof.
"Repurchase Obligation" has the meaning specified in Section 10.2
hereof.
"Repurchase Offer" means the Company's offer to repurchase the
Warrants in accordance with Section 3.4 hereof.
"Repurchase Price" has the meaning specified in Section 3.4(d) hereof.
"Restricted Certificated Warrants" has the meaning specified in
Section 2.1 hereof.
"Restricted Global Warrant" has the meaning specified in Section 2.1
hereof.
"Right" has the meaning specified in Section 4.1(c) hereof.
"Rule 144A" means Rule 144A under the Securities Act.
"Securities Act" means the United States Securities Act of 1933, as
amended.
"Separation Date" has the meaning specified in the recitals to this
Agreement.
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"Series A Warrants" means warrants issued to the holders of the
Company's 12% Redeemable Convertible Preferred Stock, Series A in accordance
with the Securityholders Agreement, dated as of November 1, 1996, among the
Company, ▇▇. ▇▇▇▇▇▇ ▇▇▇▇ and Princes Gate Investors II, L.P.
"Spread" means, with respect to any Warrant, the Current Market Value
of the Common Shares subject to such Warrant, less the Exercise Price of such
Warrant, in each case as adjusted as provided herein.
"Subscription Form" means the form on the reverse side of the Warrant
Certificate substantially in the form of Exhibit A hereto.
"Underlying Securities" shall mean the Common Shares (or other
securities) issuable upon exercise of the Warrants.
"Units" has the meaning specified in the recitals to this Agreement.
"U.S. Certificated Warrants" has the meaning specified in Section 2.1
hereof.
"Unlegended Regulation S Global Warrant" has the meaning specified in
Section 2.1 hereof.
"Valuation Date" means the date five Business Days prior to the Notice
Date.
"Value Certificate" has the meaning specified in Section 3.4 hereof.
"Value Report" has the meaning specified in Section 4.1(k) hereof.
"Warrant" has the meaning specified in the recitals to this Agreement.
"Warrant Agent" has the meaning specified in the preamble to this
Agreement.
"Warrant Certificates" has the meaning specified in Section 2.1
hereof.
"Warrant Registration Rights Agreement" means the Warrant Registration
Rights Agreement, dated as of July 1, 1997, between the Company and the Warrant
Agent.
"Warrant Registration Statement" has the meaning specified in Section
3 of the Warrant Registration Rights Agreement.
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ARTICLE II
ORIGINAL ISSUE OF WARRANTS
SECTION 2.1. FORM OF WARRANT CERTIFICATES. Certificates representing
the Warrants (the "WARRANT CERTIFICATES") shall be substantially in the form
attached hereto as Exhibit A, shall be dated the date on which such Warrant
Certificates are countersigned by the Warrant Agent and shall have such
insertions as are appropriate or required or permitted by this Agreement and may
have such letters, numbers or other marks of identification and such legends and
endorsements stamped, printed, lithographed or engraved thereon as the Company
may deem appropriate and as are not inconsistent with the provisions of this
Agreement, or as may be required to comply with any law or with any rule or
regulation pursuant thereto or with any rule or regulation of any securities
exchange on which the Warrants may be listed, or to conform to usage.
Warrants offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more permanent global Warrant Certificates in
definitive, fully registered form, substantially in the form set forth in
Exhibit A (the "RESTRICTED GLOBAL WARRANT"), deposited with the Warrant Agent,
as custodian for, and registered in the name of the nominee for, the Depositary,
duly executed by the Company and countersigned by the Warrant Agent as
hereinafter provided. The aggregate number of Warrants represented by the
Restricted Global Warrant may from time to time be increased or decreased by
adjustments made on the records of the Warrant Agent, as custodian for the
Depositary, or its nominee, as provided in Section 2.4 and Section 8.3 hereof.
Warrants offered and sold in offshore transactions in reliance on
Regulation S shall be issued initially in the form of one or more permanent
global Warrant Certificates in definitive, fully registered form, substantially
in the form set forth in Exhibit A (the "LEGENDED REGULATION S GLOBAL WARRANT"),
deposited with the Warrant Agent, as custodian for, and registered in the name
of, the Depositary or its nominee for the accounts of Euroclear and Cedel Bank,
duly executed by the Company and countersigned by the Warrant Agent as
hereinafter provided. Prior to July 1, 1998, beneficial interests in the
Legended Regulation S Global Warrant may be only held through Euroclear and
Cedel Bank. At any time on or after July 1, 1998, upon receipt by the Warrant
Agent and the Company of a certificate substantially in the form of Exhibit D
hereto, one or more global Warrants in registered form substantially in the form
set forth in Exhibit A (the "UNLEGENDED REGULATION S GLOBAL WARRANT" and
together with the Legended Regulation S Global Warrant, the "REGULATION S GLOBAL
WARRANTS") shall be deposited with the Warrant Agent, as custodian for, and
registered in the name of the nominee for, the Depositary, duly executed by the
Company and countersigned by the Warrant Agent as hereinafter provided, and the
Warrant Agent shall reflect on its books and records the date and a decrease in
the Legended Regulation S Global Warrant in an amount equal to the beneficial
interest in number of
8
Warrants evidenced by the Legended Regulation S Global Warrant transferred. The
aggregate number of Warrants represented by the Regulation S Global Warrant may
from time to time be increased or decreased by adjustments made on the records
of the Warrant Agent, as custodian for the Depositary, or its nominee, as
provided in Section 2.4 and Section 8.3 hereof.
Warrants offered and sold to Institutional Accredited Investors who
are not QIBs shall be issued initially in registered form substantially in the
form set forth in Exhibit A ("IAI CERTIFICATED WARRANTS").
Warrants issued pursuant to Section 2.4 and Section 8.2(b) in exchange
for interests in the Restricted Global Warrant shall be issued in the form of
permanent Warrant Certificates in registered form, substantially in the form set
forth in Exhibit A (the "RESTRICTED CERTIFICATED WARRANTS" and, together with
IAI Certificated Warrants, the "U.S. CERTIFICATED WARRANTS"). Warrants issued
pursuant to Section 2.4 and Section 8.2(b) in exchange for interests in the
Regulation S Global Warrant shall be issued in the form of permanent Warrant
Certificates in registered form, substantially in the form set forth in Exhibit
A (the "OFFSHORE CERTIFICATED WARRANTS"). The Offshore Certificated Warrants
and the U.S. Certificated Warrants are sometimes collectively herein referred to
as the "CERTIFICATED WARRANTS". The Restricted Global Warrant and the
Regulation S Global Warrant are sometimes herein collectively referred to as the
"GLOBAL WARRANTS".
The definitive Warrant Certificates shall be typed, printed,
lithographed or engraved or produced by any combination of these methods or may
be produced in any other manner permitted by the rules of any securities
exchange on which the Warrants may be listed, all as determined by the officers
executing such Warrant Certificates, as evidenced by their execution of such
Warrant Certificates.
SECTION 2.2. RESTRICTIVE LEGENDS. (a) The Warrant Certificates,
other than the Unlegended Regulation S Global Warrants, shall bear substantially
the following legend on the face thereof:
THE WARRANTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS EXCEPT AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION
HEREOF, THE HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED
9
INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2), (3) OR (7) OF REGULATION D
UNDER THE SECURITIES ACT) (AN "INSTITUTIONAL ACCREDITED INVESTOR") OR
(C) IT IS NOT A U.S. PERSON AND IS ACQUIRING THE WARRANTS REPRESENTED BY
THIS CERTIFICATE IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S
UNDER THE SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME
PERIOD REFERRED TO UNDER RULE 144(k) TAKING INTO ACCOUNT THE PROVISIONS OF
RULE 144(d), IF APPLICABLE, UNDER THE SECURITIES ACT AS IN EFFECT WITH
RESPECT TO SUCH TRANSFER, RESELL OR OTHERWISE TRANSFER THE WARRANTS
REPRESENTED BY THIS CERTIFICATE EXCEPT (A) TO ECONOPHONE, INC. (THE
"COMPANY") OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED STATES TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN INSTITUTIONAL ACCREDITED
INVESTOR THAT, PRIOR TO SUCH TRANSFER, FURNISHES TO THE WARRANT AGENT A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO
THE RESTRICTIONS ON TRANSFER OF THE WARRANTS REPRESENTED BY THIS
CERTIFICATE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE WARRANT
AGENT) AND IF SUCH TRANSFER IS IN RESPECT OF ANY WARRANTS SUBSEQUENT TO THE
DATE ON WHICH THE WARRANTS REPRESENTED HEREBY BECOME SEPARATELY
TRANSFERABLE, AN OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY THAT SUCH
TRANSFER IS IN COMPLIANCE WITH THE SECURITIES ACT, (D) OUTSIDE THE UNITED
STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904 UNDER THE
SECURITIES ACT, (E) PURSUANT TO THE EXEMPTION FROM REGISTRATION PROVIDED BY
RULE 144 UNDER THE SECURITIES ACT (IF AVAILABLE) OR (F) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND (3) AGREES
THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE WARRANTS REPRESENTED BY
THIS CERTIFICATE ARE TRANSFERRED A NOTICE SUBSTANTIALLY TO THE EFFECT OF
THIS LEGEND. IN CONNECTION WITH ANY TRANSFER OF THE WARRANTS REPRESENTED
BY THIS CERTIFICATE WITHIN THE TIME PERIOD REFERRED TO ABOVE, THE HOLDER
MUST CHECK THE APPROPRIATE BOX SET FORTH ON THE REVERSE HEREOF RELATING TO
THE MANNER OF SUCH TRANSFER AND SUBMIT THIS CERTIFICATE TO THE WARRANT
AGENT. IF THE PROPOSED
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TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER MUST, PRIOR
TO SUCH TRANSFER, FURNISH TO EACH OF THE WARRANT AGENT AND THE COMPANY SUCH
CERTIFICATIONS, LEGAL OPINIONS OR OTHER INFORMATION AS EITHER OF THEM MAY
REASONABLY REQUIRE TO CONFIRM THAT SUCH TRANSFER IS BEING MADE PURSUANT TO
AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO
THEM BY REGULATION S UNDER THE SECURITIES ACT. THE WARRANT AGREEMENT
CONTAINS A PROVISION REQUIRING THE WARRANT AGENT TO REFUSE TO REGISTER ANY
TRANSFER OF THE WARRANTS REPRESENTED BY THIS CERTIFICATE IN VIOLATION OF
THE FOREGOING RESTRICTIONS.
(b) Each Global Warrant shall also bear the following legend on
the face thereof:
UNLESS THIS WARRANT CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO ECONOPHONE, INC. OR THE
WARRANT AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER
ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY
TRUST COMPANY (AND ANY PAYMENT HEREON IS MADE TO CEDE & CO. OR TO SUCH
OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF THE
DEPOSITORY TRUST COMPANY), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL SINCE THE REGISTERED
OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN WHOLE,
BUT NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR TO A
SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF PORTIONS OF
THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN ACCORDANCE WITH
THE RESTRICTIONS SET FORTH IN ARTICLE VIII OF THE WARRANT AGREEMENT.
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(c) Each Warrant Certificate issued prior to the Separation Date
shall bear the following legend on the face thereof:
THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE INITIALLY ISSUED AS PART OF
AN ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF ONE 131/2% SENIOR NOTE DUE
2007 OF ECONOPHONE, INC. (COLLECTIVELY, THE "NOTES") AND ONE WARRANT
INITIALLY ENTITLING THE HOLDER THEREOF TO PURCHASE 8.167 SHARES OF VOTING
COMMON STOCK, PAR VALUE $0.0001 PER SHARE, OF ECONOPHONE, INC. PRIOR TO
THE CLOSE OF BUSINESS UPON THE EARLIEST TO OCCUR OF (i) DECEMBER 28, 1997,
(ii) THE COMMENCEMENT OF AN EXCHANGE OFFER WITH RESPECT TO THE NOTES, AND
(iii) THE EFFECTIVENESS OF A SHELF REGISTRATION STATEMENT WITH RESPECT TO
THE NOTES, THE WARRANTS EVIDENCED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE TRANSFERRED OR
EXCHANGED ONLY TOGETHER WITH, THE NOTES.
SECTION 2.3. EXECUTION AND DELIVERY OF WARRANT CERTIFICATES. Warrant
Certificates evidencing 155,000 Warrants, each Warrant to purchase initially
8.167 Common Shares, may be executed, on or after the date of this Agreement, by
the Company and delivered to the Warrant Agent for countersignature, and the
Warrant Agent shall thereupon countersign and deliver such Warrant Certificates
upon the order and at the written direction of the Company signed by its Chief
Executive Officer or other duly authorized executive officer to the purchasers
thereof on the date of issuance. The Warrant Agent is hereby authorized to
countersign and deliver Warrant Certificates as required by this Section 2.3 or
by Section 3.3, Article VI or Article VIII hereof.
The Warrant Certificates shall be executed on behalf of the Company by
its Chairman of the Board, Chief Executive Officer, any Vice President or other
duly authorized executive officer of the Company either manually or by facsimile
signature printed thereon. The Warrant Certificates shall be countersigned by
manual signature of the Warrant Agent and shall not be valid for any purpose
unless so countersigned. In case any officer or director of the Company whose
signature shall have been placed upon any of the Warrant Certificates shall
cease to be such officer or director of the Company before countersignature by
the Warrant Agent and the issuance and delivery thereof, such Warrant
Certificates may nevertheless be countersigned by the Warrant Agent and issued
and delivered with the same force and effect as though such person had not
ceased to be such officer or director of the Company.
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SECTION 2.4. CERTIFICATED WARRANTS. Beneficial owners of interests
in a Global Warrant may receive Certificated Warrants (which, except as set
forth in Section 8.3(d), shall bear the Private Placement Legend) in accordance
with the procedures of the Warrant Agent and the Depositary; PROVIDED, HOWEVER,
that beneficial owners of interests in the Regulation S Global Warrant may not
receive Offshore Certificated Warrants in exchange for such interests prior to
the date one year from the Closing Date. In connection with the execution and
delivery of such Certificated Warrants, the Warrant Agent shall reflect on its
books and records the date and a decrease in the number of Warrants represented
by the relevant Global Warrant equal to the number of such Certificated Warrants
and the Company shall execute and the Warrant Agent shall countersign and
deliver to said beneficial owners one or more Certificated Warrants in an equal
aggregate number.
ARTICLE III
EXERCISE PRICE, EXERCISE AND REPURCHASE OF WARRANTS
SECTION 3.1. EXERCISE PRICE. Each Warrant Certificate shall, when
countersigned by the Warrant Agent, initially entitle the Holder thereof,
subject to the provisions of this Agreement, to purchase the number of Common
Shares indicated thereon at a purchase price (the "EXERCISE PRICE") of $.01 per
Common Share, subject to adjustment as provided in Section 4.1 and Article V
hereof.
SECTION 3.2. EXERCISE; RESTRICTIONS ON EXERCISE. At any time after
one year after the Closing Date and on or before the Expiration Date, any
outstanding Warrants may be exercised on any Business Day; PROVIDED that the
Warrant Registration Statement is, at the time of exercise, effective and
available for the exercise of the Warrants or the exercise of such Warrants is
exempt from the registration requirements of the Securities Act. Any Warrants
not exercised by 5:00 p.m., New York City time, on the Expiration Date shall
expire and all rights of the Holders of such Warrants shall terminate.
Additionally, pursuant to Section 4.1(j)(ii) hereof, the Warrants shall expire
and all rights of the Holders of such Warrants shall terminate in the event the
Company merges or consolidates with or sells all or substantially all of its
property and assets to a Person (other than an Affiliate of the Company) if the
consideration payable to holders of Common Stock in exchange for their Common
Stock in connection with such merger, consolidation or sale consists solely of
cash or in the event of the dissolution, liquidation or winding up of the
Company.
SECTION 3.3. METHOD OF EXERCISE; PAYMENT OF EXERCISE PRICE. In order
to exercise all or any of the Warrants represented by a Warrant Certificate, the
Holder thereof must surrender for exercise the Warrant Certificate to the
Warrant Agent at its corporate trust office address set forth in Section 12.5
hereof, with the Subscription Form set forth on the reverse of the Warrant
Certificate duly executed, together with payment in full of the
13
Exercise Price then in effect for each Common Share (or other securities)
issuable upon exercise of the Warrants as to which a Warrant is exercised; such
payment may be made in cash or by certified or official bank or bank cashier's
check payable to the order of the Company and shall be made to the Warrant Agent
at its corporate trust office address set forth in Section 12.5 hereof prior to
the close of business on the date the Warrant Certificate is surrendered to the
Warrant Agent for exercise. Notwithstanding the foregoing, the Exercise Price
may be paid by surrendering additional Warrants to the Warrant Agent having an
aggregate Spread equal to the aggregate Exercise Price of the Warrants being
exercised. All payments received upon exercise of Warrants shall be delivered
to the Company by the Warrant Agent as instructed in writing by the Company. If
less than all the Warrants represented by a Warrant Certificate are exercised or
surrendered (in connection with a cashless exercise), such Warrant Certificate
shall be surrendered and a new Warrant Certificate of the same tenor and for the
number of Warrants which were not exercised or so surrendered shall be executed
by the Company and delivered to the Warrant Agent and the Warrant Agent shall
countersign the new Warrant Certificate, registered in such name or names as may
be directed in writing by the Holder, and shall deliver the new Warrant
Certificate to the Person or Persons entitled to receive the same. Global
Warrants will be exercised by accordance with the procedures of the Warrant
Agent and the Depositary. Upon the exercise of any Warrants following the
surrender of a Warrant Certificate in conformity with the foregoing provisions,
the Warrant Agent shall instruct the Company to transfer promptly to the Holder
or, upon the written order of the Holder of such Warrant Certificate,
appropriate evidence of ownership of any Common Shares or other security or
property to which it is entitled, registered or otherwise placed in such name or
names as may be directed in writing by the Holder, and to deliver such evidence
of ownership to the Person or Persons entitled to receive the same and
fractional shares, if any, or an amount in cash, in lieu of any fractional
shares, as provided in Section 4.5 hereof; PROVIDED that the Holder of such
Warrant shall be responsible for the payment of any transfer taxes required as
the result of any change in ownership of such Warrants or the issuance of such
Common Shares other than to the Holder of such Warrants and any such transfer
shall comply with applicable law. Upon the exercise of a Warrant or Warrants,
the Warrant Agent is hereby authorized and directed to requisition from any
transfer agent of the Common Shares (and all such transfer agents are hereby
irrevocably authorized to comply with all such requests) certificates (bearing
the legend set forth in Section 12.10 hereof, if applicable, unless a
registration statement with the Commission relating to such Common Shares shall
then be in effect or the Company and the Holder exercising such Warrant or
Warrants otherwise agree) for the necessary number of Common Shares to which
said Holder may be entitled. The Company shall enter, or shall cause any
transfer agent of the Common Shares to enter, the name of the Person entitled to
receive the Common Shares upon exercise of the Warrants into the Company's
register of shareholders within 14 days of such exercise. A Warrant shall be
deemed to have been exercised immediately prior to the close of business on the
date of the surrender for exercise, as provided above, of the Warrant
Certificate representing such Warrant and, for all purposes under this
Agreement, the Person entitled to receive any
14
Common Shares deliverable upon such exercise shall, as between such Person and
the Company, be deemed to be the Holder of such Common Shares of record as of
the close of business on such date and shall be entitled to receive, and the
Warrant Agent shall deliver to such Person, any Common Shares to which such
Person would have been entitled had such Person been the registered holder on
such date.
SECTION 3.4. REPURCHASE OFFERS. (a) NOTICE OF REPURCHASE EVENT.
Within five Business Days following the occurrence of a Repurchase Event, the
Company shall give notice (a "REPURCHASE NOTICE") to the Holders of the Warrants
and the Warrant Agent that such event has occurred.
(b) REPURCHASE OFFERS GENERALLY. Following the occurrence of a
Repurchase Event, the Company shall offer to repurchase for cash all outstanding
Warrants pursuant to the provisions of this Section 3.4 (a "REPURCHASE OFFER").
The Company shall give notice of a Repurchase Offer in accordance with Section
3.4(f) hereof. Each date on which the Company gives any such notice is referred
to as the "NOTICE DATE." The Repurchase Offer shall commence on the Notice Date
for such Repurchase Offer and shall expire at 5:00 p.m., New York City time, on
a date determined by the Company (the "FINAL SURRENDER TIME") that is at least
30 but not more than 60 days after the Notice Date. Once a Repurchase Event has
occurred, there is no limit on the number of Repurchase Offers that the Company
may make.
(c) REPURCHASE OFFERS. (i) In any Repurchase Offer, the Company
shall offer to purchase for cash at the Repurchase Price all Warrants
outstanding on the Notice Date for such Repurchase Offer that are properly
tendered to the Warrant Agent on or prior to the Final Surrender Time for such
Repurchase Offer.
(ii) Each Holder may, but shall not be obligated to, accept such
Repurchase Offer by tendering to the Warrant Agent, on or prior to the Final
Surrender Time for such Repurchase Offer, the Warrant Certificates evidencing
the Warrants such Holder desires to have repurchased in such offer, together
with a completed Certificate for Surrender in substantially the form attached to
the Warrant Certificate. A Holder may withdraw all or a portion of the Warrants
tendered to the Warrant Agent at any time prior to the Final Surrender Time for
such Repurchase Offer. If less than all the Warrants represented by a Warrant
Certificate shall be tendered, such Warrant Certificate shall be surrendered and
a new Warrant Certificate of the same tenor and for the number of Warrants which
were not tendered shall be executed by the Company and delivered to the Warrant
Agent and the Warrant Agent shall countersign the new Warrant Certificate,
registered in such name or names as may be directed in writing by the Holder,
and shall deliver the new Warrant Certificate to the Person or Persons entitled
to receive the same; PROVIDED that the Holder of such Warrants shall be
responsible for the payment of any transfer taxes required
15
as the result of any change in ownership of such Warrants and any such transfer
shall comply with applicable law.
(d) REPURCHASE PRICE. (i) The purchase price (the "REPURCHASE
PRICE") for each Warrant properly tendered to the Warrant Agent pursuant to a
Repurchase Offer shall be equal to the value (the "RELEVANT VALUE") on the
Valuation Date of the Common Shares issuable, and other securities or property
of the Company which would have been delivered, upon exercise of Warrants had
the Warrants been exercised (regardless of whether the Warrants are then
exercisable), less the Exercise Price in effect on the Notice Date for such
Repurchase Offer.
(ii) The Relevant Value of the Common Shares and other securities
or property issuable upon exercise of all the Warrants, on any Valuation Date
shall be:
(1) (A) If the Common Shares (or other securities) are registered
under the Exchange Act, deemed to be the average of the daily market prices
(on the stock exchange that is the primary trading market for the Common
Shares (or other securities)) of the Common Shares (or other securities)
for the 20 consecutive trading days immediately preceding such Valuation
Date or, (B) if the Common Shares (or other securities) have been
registered under the Exchange Act for less than 20 consecutive trading days
before such date, then the average of the daily market prices for all of
the trading days before such date for which daily market prices are
available, in the case of each of (A) and (B), as certified to the Warrant
Agent by the President, any Vice President or the Chief Financial Officer
of the Company (the "VALUE CERTIFICATE"). The market price for each such
trading day shall be: (A) in the case of a security listed or admitted to
trading on any national securities exchange, the closing sales price on
such day, or if no sale takes place on such day, the average of the closing
bid and asked prices on such day, (B) in the case of a security not then
listed or admitted to trading on any national securities exchange, the last
reported sale price on such day, or if no sale takes place on such day, the
average of the closing bid and asked prices on such day, as reported by a
reputable quotation source designated by the Company, (C) in the case of a
security not then listed or admitted to trading on any national securities
exchange and as to which no such reported sale price or bid and asked
prices are available, 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 the Borough of Manhattan, City and
State of New York customarily published on each Business Day, designated by
the Company, or, if there shall be no bid and asked prices on such day, the
average of the high bid and low asked prices, as so reported, on the most
recent day (not more than 30 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 days prior to the date in question, the
16
Relevant Value shall be determined as if the Common Shares (or other
securities) were not registered under the Exchange Act; or
(2) If the Common Shares (or other securities) are not registered
under the Exchange Act or if the value cannot be computed under clause (1)
above, deemed to be equal to the value set forth in the Value Report (as
defined below) as determined by an Independent Financial Expert, which
shall be selected by the Board in accordance with Section 3.4(e) hereof,
and retained on customary terms and conditions, using one or more valuation
methods that the Independent Financial Expert, in its best professional
judgment, determines to be most appropriate but without giving effect to
any discount for lack of liquidity, the fact that the Company has no class
of equity securities registered under the Exchange Act or the fact that the
Common Shares and other securities or property issuable upon exercise of
the Warrants represent a minority interest in the Company. The Company
shall use its best efforts to cause the Independent Financial Expert to
deliver to the Company, with a copy to the Warrant Agent, within 45 days of
the appointment of the Independent Financial Expert in accordance with
Section 3.4(e) hereof, a value report (the "VALUE REPORT") stating the
Relevant Value of the Common Shares and other securities or property of the
Company, if any, being valued as of the Valuation Date and containing a
brief statement as to the nature and scope of the methodologies upon which
the determination of Relevant Value was made. The Warrant Agent shall have
no duty with respect to the Value Report of any Independent Financial
Expert, except to keep it on file and available for inspection by the
Holders. The determination as to Relevant Value in accordance with the
provisions of this Section 3.4(d) shall be conclusive on all Persons. The
Independent Financial Expert shall be requested to consult with management
of the Company in order to allow management to comment on the proposed
Relevant Value prior to delivery to the Company of any Value Report of the
Independent Financial Expert.
(e) SELECTION OF INDEPENDENT FINANCIAL EXPERT. If clause
(d)(ii)(2) of this Section 3.4 is applicable, the Board of Directors of the
Company shall select an Independent Financial Expert not more than five Business
Days following a Repurchase Event. Within seven Business Days following a
Repurchase Event, the Company shall deliver to the Warrant Agent a notice
setting forth the name of the Independent Financial Expert.
(f) NOTICE OF REPURCHASE OFFER. Each notice of a Repurchase Offer
(an "OFFER NOTICE") given by the Company pursuant to Section 3.4(b) shall be
given by the Company directly to all Holders of the Warrants, with a copy to the
Warrant Agent, shall be given simultaneously with the Repurchase Notice (or, in
the event that the Relevant Value of the Common Shares or other securities or
property issuable upon exercise of all the Warrants cannot be determined
pursuant to Section 3.4(d)(ii)(1), then such Offer Notice shall be given within
five Business Days after the Company receives the Value Report with respect to
such
17
offer) and shall specify (A) the Final Surrender Time for such Repurchase Offer,
(B) the manner in which Warrants may be surrendered to the Warrant Agent for
repurchase by the Company, (C) the Repurchase Price at which the Warrants will
be repurchased by the Company, (D) if applicable, the name of the Independent
Financial Expert whose valuation of the Common Shares and other securities or
property was utilized in connection with determining such Repurchase Price and
(E) that payment of the Repurchase Price will be made by the Warrant Agent.
Each such notice shall be accompanied by a Certificate for Surrender for
Repurchase Offer in substantially the form attached to the Warrant Certificate
and a copy of the Value Report, if any.
(g) PAYMENT FOR WARRANTS. Upon surrender for repurchase of any
Warrants in conformity with the provisions of this Section 3.4, the Warrant
Agent shall thereupon promptly notify the Company of such surrender. On or
before the Final Surrender Time for any Repurchase Offer, the Company shall
deposit with the Warrant Agent funds sufficient to make payment for the Warrants
tendered to the Warrant Agent and not withdrawn. After receipt of such deposit
from the Company, the Warrant Agent shall make payment, by delivering a check in
such amount as is appropriate, to such Person or Persons as it may be directed
in writing by the Holder surrendering such Warrants, net of any transfer taxes
required to be paid in the event that the check is to be delivered to a Person
other than the Holder.
(h) COMPLIANCE WITH LAWS. Notwithstanding anything contained in
this Section 3.4, if the Company is required to comply with laws, regulations
and securities exchange or clearing procedures, rules or regulations in
connection with making any Repurchase Offer, such laws, regulations, procedures
or rules shall govern the making of such Repurchase Offer.
ARTICLE IV
ADJUSTMENTS
SECTION 4.1. ADJUSTMENTS. The Exercise Price and the number of
Common Shares issuable upon exercise of each Warrant shall be subject to
adjustment from time to time as follows:
(a) DIVISIONS; CONSOLIDATIONS; RECLASSIFICATIONS. In case the
Company shall, on or before the Expiration Date, (i) issue any Common Shares in
payment of a dividend or other distribution with respect to its Common Stock,
(ii) subdivide its issued and outstanding Common Shares, (iii) consolidate its
issued and outstanding Common Shares into a smaller number of shares, or
(iv) reclassify or convert the Common Shares (other than a reclassification in
connection with a merger, consolidation or other business combination which will
be governed by Section 4.1(j)), then the number of Common Shares purchasable
18
upon exercise of each Warrant immediately prior to the record date for such
issue or distribution or the effective date of such subdivision, consolidation,
reclassification or conversion shall be adjusted so that the Holder of each
Warrant shall thereafter be entitled to receive the kind and number of Common
Shares which such Holder would have been entitled to receive after the happening
of any of the events described above had such Warrant been exercised immediately
prior to the happening of such event or any record date with respect thereto.
An adjustment made pursuant to this Section 4.1(a) shall become effective
immediately after the effective date of such event retroactive to the record
date, if any, for such event.
(b) RIGHTS; OPTIONS; WARRANTS. In case the Company shall issue
rights, options, warrants (including Series A Warrants) or convertible or
exchangeable securities (other than an issuance of convertible or exchangeable
securities subject to Section 4.1(a)) to all holders of its Common Shares,
entitling them to subscribe for or purchase Common Shares at a price per share
which is lower (at the record date for such issuance) than the then Current
Market Value per Common Share, then the Company shall ensure that at the time of
such issuance, the same or a like offer or invitation is made to the Holders of
the Warrants as if their Warrants had been exercised on the day immediately
preceding the record date of such offer or invitation on the terms (subject to
any adjustment pursuant to Section 4.1(a) for a prior event) on which such
Warrants could have been exercised on such date; PROVIDED that if the Board so
resolves, the Company shall not be required to ensure that the same offer or
invitation is made to the Holders of the Warrants, but the number of Common
Shares thereafter purchasable upon the exercise of each Warrant shall instead be
adjusted and shall be determined by multiplying the number of Common Shares
theretofore purchasable upon exercise of each Warrant by a fraction, the
numerator of which shall be the sum of (i) the number of Common Shares
outstanding immediately prior to the issuance of such rights, options, warrants
or convertible or exchangeable securities plus (ii) the number of additional
Common Shares which may be purchased or subscribed for upon exercise, exchange
or conversion of such rights, options, warrants or convertible or exchangeable
securities and the denominator of which shall be the sum of (x) the number of
Common Shares outstanding immediately prior to the issuance of such rights,
options, warrants or convertible or exchangeable securities plus (y) the number
of shares which the total consideration received by the Company for such rights,
options, warrants or convertible or exchangeable securities so offered would
purchase at the then Current Market Value per Common Share. Except as otherwise
provided above, such adjustment shall be made whenever such rights, options,
warrants or convertible or exchangeable securities are issued, and shall become
effective retroactively immediately after the record date for the determination
of shareholders entitled to receive such rights, options, warrants or
convertible or exchangeable securities.
(c) ISSUANCE OF COMMON SHARES AT LOWER VALUES. In case the
Company shall sell and issue any Common Share or Right (as defined below)
(excluding (i) any Right issued in any of the transactions described in
Section 4.1(a) or (b) above, (ii) Common
19
Shares issued pursuant to (x) any Rights outstanding on the date of this
Agreement or any Right issued in any transaction described in Section 4.1(a) or
(b) above and (y) a Right, if on the date such Right was issued, the exercise,
conversion or exchange price per Common Share with respect thereto was at least
equal to the then Current Market Value per Common Share and (iii) any Common
Shares or Right issued as consideration (A) when any corporation or business is
acquired, merged into or becomes part of the Company or a subsidiary of the
Company or (B) in good faith in connection with any other business
collaboration, in each case in an arm's-length transaction between the Company
and a Person other than an Affiliate of the Company) at a price per Common Share
(determined in the case of any such Right, by dividing (x) the total
consideration receivable by the Company in consideration of the sale and
issuance of such Right, plus the total consideration payable to the Company upon
exercise, conversion or exchange thereof, by (y) the total number of Common
Shares covered by such Right) that is lower than the Current Market Value per
Common Share in effect immediately prior to such sale or issuance, then the
number of Common Shares thereafter purchasable upon the exercise of each Warrant
shall be determined by multiplying the number of Common Shares theretofore
purchasable upon exercise of such Warrant by a fraction, the numerator of which
shall be the number of Common Shares outstanding immediately after such sale or
issuance and the denominator of which shall be the number of Common Shares
outstanding immediately prior to such sale or issuance plus the number of Common
Shares which the aggregate consideration received (determined as provided below)
for such sale or issuance would purchase at such Current Market Value per Common
Share. For purposes of this Section 4.1(c), the Common Shares which the holder
of any such Right shall be entitled to subscribe for or purchase shall be deemed
to be issued and outstanding as of the date of such sale and issuance and the
consideration received by the Company therefor shall be deemed to be the
consideration received by the Company for such Right, plus the consideration or
premiums stated in such Right to be paid for the Common Shares covered thereby.
In case the Company shall sell and issue any Right together with one or more
other securities as part of a unit at a price per unit, then in determining the
"price per Common Share" and the "consideration received by the Company" for
purposes of the first sentence of this Section 4.1(c), the Board shall
determine, in good faith, the fair value of the Right then being sold as part of
such unit. For purposes of this paragraph, a "RIGHT" shall mean any right,
option, warrant or convertible or exchangeable security containing the Right to
subscribe for or acquire one or more Common Shares, excluding the Warrants.
This Section 4.1(c) shall not apply to: (i) the exercise of Warrants, or the
conversion or exchange of other securities convertible or exchangeable for
Common Shares; or (ii) Common Shares issued upon the exercise of Rights or
warrants issued to all holders of Common Shares.
(d) DISTRIBUTIONS OF DEBT, ASSETS, SUBSCRIPTION RIGHTS OR
CONVERTIBLE SECURITIES. In case the Company shall make a distribution to all
holders of its Common Shares of evidences of its indebtedness, or assets, or
other distributions (excluding any issuance of Common Shares referred to in
Section 4.1(a) above and excluding distributions
20
in connection with the dissolution, liquidation or winding-up of the Company
which shall be governed by Section 4.1(j) and distributions of securities
referred to in Section 4.1(a), Section 4.1(b) or Section 4.1(c)), then, in each
case, the number of Common Shares purchasable after such record date upon the
exercise of each Warrant shall be determined by multiplying the number of Common
Shares purchasable upon the exercise of such Warrant immediately prior to such
record date by a fraction, the numerator of which shall be the Current Market
Value per Common Share immediately prior to the record date for such
distribution and the denominator of which shall be the Current Market Value per
Common Share immediately prior to the record date for such distribution less the
then fair value (as determined in good faith by the Board) of the evidences of
its indebtedness, or assets or other distributions so distributed attributable
to one Common Share. Such adjustment shall be made whenever any such
distribution is made, and shall become effective on the date of distribution
retroactive to the record date for the determination of shareholders entitled to
receive such distribution.
(e) EXPIRATION OF RIGHTS, OPTIONS AND CONVERSION PRIVILEGES. Upon
the expiration of any rights, options, warrants or conversion or exchange
privileges (including, without limitation, any Rights) that have previously
resulted in an adjustment hereunder, if any thereof shall not have been
exercised, exchanged or converted, the Exercise Price and the number of Common
Shares issuable upon the exercise of each Warrant shall, upon such expiration,
be readjusted and shall thereafter, upon any future exercise, be such as they
would have been had they been originally adjusted (or had the original
adjustment not been required, as the case may be) as if (i) the only Common
Shares so issued were the Common Shares, if any, actually issued or sold upon
the exercise, exchange or conversion of such rights, options, warrants or
conversion or exchange rights (including, without limitation, any Rights) and
(ii) such Common Shares, if any, were issued or sold for the consideration
actually received by the Company upon such exercise, exchange or conversion plus
the consideration, if any, actually received by the Company for issuance, sale
or grant of all such rights, options, warrants or conversion or exchange rights
(including, without limitation, any Rights) whether or not exercised.
(f) CURRENT MARKET VALUE. For the purposes of any computation
under this Article IV, the "CURRENT MARKET VALUE" per Common Share or of any
other security (herein collectively referred to as a "security") at any date
herein specified shall be:
(i) if the security is not registered under the Exchange Act, the
value of the security (1) most recently determined as of a date within the
six months preceding such date by an Independent Financial Expert selected
by the Company in accordance with the criteria for such valuation set out
in Section 4.1(k), provided that during the six months following the date
hereof, in the discretion of the Company, the Current Market Value per
Common Share shall be deemed to be the value ascribed to the Common Shares
on July 1, 1997, or (2) if no such determination shall have been
21
made within such six-month period or if the Company so chooses, determined
as of such a date by an Independent Financial Expert selected by the
Company in accordance with the criteria for such valuation set out in
Section 4.1(k), or
(ii) if the security is registered under the Exchange Act, the
average of the daily market prices of the security for the 20 consecutive
trading days immediately preceding such date or, if the security has been
registered under the Exchange Act for less than 20 consecutive trading days
before such date, then the average of the daily market prices for all of
the trading days before such date for which daily market prices are
available. The market price for each such trading day shall be: (A) in
the case of a security listed or admitted to trading on any national
securities exchange, the closing sales price, regular way, on such day, or
if no sale takes place on such day, the average of the closing bid and
asked prices on such day on the principal national securities exchange on
which such security is listed or admitted, as determined by the Board, in
good faith, (B) in the case of a security not then listed or admitted to
trading on any national securities exchange, the last reported sale price
on such day, or if no sale takes place on such day, the average of the
closing bid and asked prices on such day, as reported by a reputable
quotation source designated by the Company, (C) in the case of a security
not then listed or admitted to trading on any national securities exchange
and as to which no such reported sale price or bid and asked prices are
available, 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 the Borough of Manhattan, City and State of New York
customarily published on each Business Day, designated by the Company, or,
if there shall be no bid and asked prices on such day, the average of the
high bid and low asked prices, as so reported, on the most recent day (not
more than 30 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 days prior to the date in question, the Current Market Value of the
security shall be determined as if the security were not registered under
the Exchange Act.
(g) CONSIDERATION RECEIVED. For purposes of any computation
respecting consideration received pursuant to this Section 4.1, the following
shall apply:
(i) in the case of the issuance of Common Shares for cash, the
consideration shall be the amount of such cash, PROVIDED that in no case
shall any deduction be made for any commissions, discounts or other
expenses incurred by the Company for any underwriting of the issue or
otherwise in connection therewith;
(ii) in the case of the issuance of Common Shares for a
consideration in whole or in part other than cash, the consideration other
than cash shall be deemed to be the fair market value thereof as determined
in good faith by the Board
22
(irrespective of the accounting treatment thereof), whose determination
shall be conclusive and described in reasonable detail in a board
resolution which shall be provided as soon as practicable thereafter to the
Warrant Agent; and
(iii) in the case of the issuance of rights, options, warrants or
securities convertible into or exchangeable for Common Shares (including,
without limitation, any Rights), the aggregate consideration received
therefor shall be deemed to be the consideration received by the Company
for the issuance of such rights, options, warrants or securities
convertible into or exchangeable for Common Shares, plus the additional
minimum consideration, if any, to be received by the Company upon the
exercise, conversion or exchange thereof (the consideration in each case to
be determined in the same manner as provided in clauses (i) and (ii) of
this Section 4.1(g)).
(h) DE MINIMIS ADJUSTMENTS. No adjustment in the number of Common
Shares purchasable hereunder shall be required unless such adjustment would
require an increase or decrease of at least one percent (1%) in the number of
Common Shares purchasable upon the exercise of each Warrant; PROVIDED, HOWEVER,
that any adjustments which by reason of this Section 4.1(h) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations shall be made to the nearest one-thousandth of a
share.
(i) ADJUSTMENT OF EXERCISE PRICE. Whenever the number of Common
Shares purchasable upon the exercise of each Warrant is adjusted, as herein
provided, the Exercise Price per Common Share payable upon exercise of such
Warrant shall be adjusted (calculated to the nearest $.01) so that it shall
equal the price determined by multiplying such Exercise Price immediately prior
to such adjustment by a fraction the numerator of which shall be the number of
Common Shares purchasable upon the exercise of each Warrant immediately prior to
such adjustment and the denominator of which shall be the number of Common
Shares so purchasable immediately thereafter. Following any adjustment to the
Exercise Price pursuant to this Article IV, the amount payable, when adjusted,
shall never be less than the par value per Common Share at the time of such
adjustment.
If, after an adjustment, a Holder of a Warrant upon exercise of it may
receive shares of two or more classes in the capital of the Company, the Company
shall determine the allocation of the adjusted Exercise Price between such
classes of shares in a manner that the Board deems fair and equitable to the
Holders. After such allocation, the exercise privilege and the Exercise Price
of each class of shares shall thereafter be subject to adjustment on terms
comparable to those applicable to Common Shares in this Article IV.
Such adjustment shall be made successively whenever any event listed
above shall occur.
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(j) CONSOLIDATION, MERGER, ETC. (i) Subject to the provisions of
Subsection (ii) below of this Section 4.1(j), in case of the consolidation
of the Company with, or merger of the Company with or into, or of the sale
of all or substantially all of the properties and assets of the Company to,
any Person, and in connection therewith consideration is payable to holders
of Common Shares (or other securities or property purchasable upon exercise
of Warrants) in exchange therefor, the Warrants shall remain subject to the
terms and conditions set forth in this Agreement and each Warrant shall,
after such consolidation, merger or sale, entitle the Holder to receive
upon exercise the number of shares in the capital or other securities or
property (including cash) of or from the Person resulting from such
consolidation or surviving such merger or to which such sale shall be made
or of the parent of such Person, as the case may be, that would have been
distributable or payable on account of the Common Shares if such Holder's
Warrants had been exercised immediately prior to such merger, consolidation
or sale (or, if applicable, the record date therefor); and in any such case
the provisions of this Agreement with respect to the rights and interests
thereafter of the Holders of Warrants shall be appropriately adjusted by
the Board in good faith so as to be applicable, as nearly as may reasonably
be, to any shares, other securities or any property thereafter deliverable
on the exercise of the Warrants.
(ii) Notwithstanding the foregoing, (x) if the Company merges or
consolidates with, or sells all or substantially all of its property and
assets to, another Person (other than an Affiliate of the Company) and
consideration is payable to holders of Common Shares in exchange for their
Common Shares in connection with such merger, consolidation or sale which
consists solely of cash, or (y) in the event of the dissolution,
liquidation or winding up of the Company, then the Holders of Warrants
shall be entitled to receive distributions on the date of such event on an
equal basis with holders of Common Shares (or other securities issuable
upon exercise of the Warrants) as if the Warrants had been exercised
immediately prior to such event, less the Exercise Price. Upon receipt of
such payment, if any, the rights of a Holder shall terminate and cease and
such Holder's Warrants shall expire. If the Company has made a Repurchase
Offer that has not expired at the time of such transaction, the holders of
the Warrants will be entitled to receive the higher of (i) the amount
payable to the holders of the Warrants described above and (ii) the
Repurchase Price payable to the holders of the Warrants pursuant to such
Repurchase Offer. In case of any such merger, consolidation or sale of
assets, the surviving or acquiring Person and, in the event of any
dissolution, liquidation or winding up of the Company, the Company shall
deposit promptly with the Warrant Agent the funds, if any, necessary to pay
the Holders of the Warrants. After receipt of such deposit from such
Person or the Company and after receipt of surrendered Warrant
Certificates, the Warrant Agent shall make payment by delivering a check in
such amount as is appropriate (or, in the case of consideration other than
cash, such other
24
consideration as is appropriate) to such Person or Persons as it may be
directed in writing by the Holder surrendering such Warrants.
(k) If required pursuant to Section 4.1(f)(i), the Current Market
Value shall be deemed to be equal to the value set forth in the Value Report (as
defined below) as determined by an Independent Financial Expert, which shall be
selected by the Board in its sole discretion, and retained on customary terms
and conditions, using one or more valuation methods that the Independent
Financial Expert, in its professional judgment, determines to be most
appropriate. The Company shall use its best efforts to cause the Independent
Financial Expert to deliver to the Company, with a copy to the Warrant Agent,
within 45 days of the appointment of the Independent Financial Expert, a value
report (the "VALUE REPORT") stating the value of the Common Shares and other
securities or property of the Company, if any, being valued as of the Valuation
Date and containing a brief statement as to the nature and scope of the
examination or investigation upon which the determination of value was made.
The Warrant Agent shall have no duty with respect to the Value Report of any
Independent Financial Expert, except to keep it on file and available for
inspection by the Holders. The determination as to Current Market Value in
accordance with the provisions of this Section 4.1(k) shall be conclusive on all
Persons. The Independent Financial Expert shall consult with management of the
Company in order to allow management to comment on the proposed value prior to
delivery to the Company of any Value Report.
(l) WHEN NO ADJUSTMENT REQUIRED. Without limiting any other
exception contained in this Section 4.1, and in addition thereto, no adjustment
need be made for:
(i) grants or exercises of Rights granted to employees of the
Company or any of its subsidiaries or Common Shares issued or
granted to such employees under the Flexible Incentive Plan or
otherwise, whether or not upon the exercise, exchange or
conversion of any such Rights (to the extent that all such
securities do not have an aggregate value in excess of 15% of
the equity value of the Company on a fully diluted basis, as
determined in good faith by the Board);
(ii) options, warrants or other agreements or rights to purchase
capital stock of the Company entered into prior to the date of
the issuance of the Warrants and any issuance of Common Shares
in connection therewith;
(iii) rights to purchase Common Shares pursuant to a Company plan
for reinvestment of dividends or interest;
(iv) a change in the par value of the Common Shares (including a
change from par value to no par value or VICE VERSA); and
25
(v) bona fide public offerings or private placements pursuant to
Section 4(2) of the Securities Act, Regulation D thereunder or
Regulation S of any security trading on any national
securities exchange or in the over the counter market, or of a
security directly or indirectly convertible or exchangeable
for any such security (the latter security being a "Reference
Security"), involving at least one investment bank of national
reputation, if such security is sold to investors at a price
equal to the closing sale, bid or ask price (whichever is
customary) of such security or the Reference Security on the
date of the public offering or private placement.
To the extent the Warrants become convertible into cash, no adjustment
need be made thereafter as to the cash. Interest will not accrue on the cash.
SECTION 4.2. NOTICE OF ADJUSTMENT. Whenever the number of Common
Shares purchasable upon the exercise of each Warrant or the Exercise Price is
adjusted, as herein provided, the Company shall cause, so far as it is able, the
Warrant Agent promptly to mail, at the expense of the Company, to each Holder
notice of such adjustment or adjustments and shall deliver to the Warrant Agent
a certificate of the Auditors setting forth the number of Common Shares
purchasable upon the exercise of each Warrant and the Exercise Price after such
adjustment, setting forth a brief statement of the facts requiring such
adjustment and setting forth the computation by which such adjustment was made.
Such certificate shall be conclusive evidence of the correctness of such
adjustment except in the case of manifest error. The Warrant Agent shall be
entitled to rely on such certificate and shall be under no duty or
responsibility with respect to any such certificate, except to exhibit the same,
from time to time, to any Holder desiring an inspection thereof during
reasonable business hours upon reasonable notice. The Warrant Agent shall not
at any time be under any duty or responsibility to any Holders to determine
whether any facts exist which may require any adjustment of the Exercise Price
or the number of Common Shares purchasable on exercise of the Warrants or any of
the other adjustments set forth in Section 4.1, or with respect to the nature or
extent of any such adjustment when made, or with respect to the method employed
in making such adjustment, or the validity or value (or the kind or amount) of
any Common Shares which may be purchasable on exercise of the Warrants. The
Warrant Agent shall not be responsible for any failure of the Company to make
any cash payment or to issue, transfer or deliver any Common Shares or share
certificates upon the exercise of any Warrant.
SECTION 4.3. STATEMENT ON WARRANTS. Irrespective of any adjustment
in the Exercise Price or the number or kind of shares purchasable upon the
exercise of the Warrants, Warrants theretofore or thereafter issued may continue
to express the same price and number and kind of shares as are stated in the
Warrants initially issuable pursuant to this Agreement.
26
SECTION 4.4. NOTICE OF CONSOLIDATION, MERGER, ETC. In case at any
time after the date hereof and prior to 5:00 p.m., New York City time, on the
Expiration Date, there shall be any (i) consolidation or merger involving the
Company or sale, transfer or other disposition of all or substantially all of
the Company's property, assets or business (except (1) a merger or other
reorganization in which the Company shall be the surviving corporation and
holders of Common Shares receive no consideration in respect of their shares and
(2) a merger of the Company into a wholly owned Subsidiary of the Company, the
principal purpose of which, in the good faith determination of the Board, is to
change the state of incorporation of the Company) or (ii) any other transaction
contemplated by Section 4.1(j)(ii) above, then, in any one or more of such
cases, the Company shall cause to be mailed to the Warrant Agent and shall cause
the Warrant Agent to mail, at Company's expense, to each Holder of a Warrant, at
the earliest practicable time (and, in any event, not less than 20 days before
any date set for definitive action), notice of the date on which such
reorganization, sale, consolidation, merger, dissolution, liquidation or winding
up shall take place, as the case may be. Such notice shall also set forth such
facts as shall indicate the effect of such action (to the extent such effect may
be known at the date of such notice) on the Exercise Price and the kind and
amount of the Common Shares and other securities, money and other property
deliverable upon exercise of the Warrants. Such notice shall also specify the
date as of which the holders of record of the Common Shares or other securities
or property issuable upon exercise of the Warrants shall be entitled to exchange
their shares for securities, money or other property deliverable upon such
reorganization, sale, consolidation, merger, dissolution, liquidation or winding
up, as the case may be.
SECTION 4.5. FRACTIONAL INTERESTS. If more than one Warrant shall be
presented for exercise in full at the same time by the same Holder, the number
of full Common Shares which shall be issuable upon such exercise thereof shall
be computed on the basis of the aggregate number of Common Shares purchasable on
exercise of the Warrants so presented. The Company shall not be required to
issue fractional Common Shares upon the exercise of Warrants. If any fraction
of a Common Share would, except for the provisions of this Section 4.5, be
issuable on the exercise of any Warrant (or specified portion thereof), the
Company may pay an amount in cash calculated by it to be equal to the then
Current Market Value per Common Share multiplied by such fraction computed to
the nearest whole cent.
SECTION 4.6. WHEN ISSUANCE OR PAYMENT MAY BE DEFERRED. In any case
in which this Article IV shall require that an adjustment in the Exercise Price
be made effective as of a record date for a specified event, the Company may
elect to defer until the occurrence of such event (i) issuing to the holder of
any Warrant exercised after such record date the Common Shares and other shares
in the capital of the Company, if any, issuable upon such exercise over and
above the Common Shares and other shares in the capital of the Company, if any,
issuable upon such exercise and (ii) paying such holder any amount in cash in
lieu of a fractional share; PROVIDED, HOWEVER, that the Company shall deliver to
such
27
Holder a due ▇▇▇▇ or other appropriate instrument evidencing such Holder's right
to receive such additional Common Shares, other shares and cash upon the
occurrence of the event requiring such adjustment.
SECTION 4.7. INITIAL PUBLIC OFFERING. Notwithstanding anything to
the contrary herein contained, if the Company conducts an initial public
offering of equity securities (other than Common Shares or nonconvertible
preferred shares), the Company will give the Holders the opportunity to convert
such Warrants into warrants to purchase such equity securities (other than
nonconvertible preferred shares) and such Common Shares or such other securities
that have been received by the Holders upon the exercise of Warrants into such
equity securities (other than nonconvertible preferred shares). Such conversion
opportunity will be on terms and conditions determined to be fair and reasonable
by the Board.
ARTICLE V
DECREASE IN EXERCISE PRICE
The Board, in its sole discretion, shall have the right at any time,
or from time to time, to decrease the Exercise Price of the Warrants and/or
increase the number of shares issuable upon the exercise of the Warrants.
ARTICLE VI
LOSS OR MUTILATION
Upon receipt by the Company and the Warrant Agent of evidence
satisfactory to them of the ownership and the loss, theft, destruction or
mutilation of any Warrant Certificate and of indemnity or bond satisfactory to
them and (in the case of mutilation) upon surrender and cancellation thereof,
then, in the absence of notice to the Company or the Warrant Agent that the
Warrants represented thereby have been acquired by a bona fide purchaser, the
Company shall execute and the Warrant Agent shall countersign and deliver to the
registered Holder of the lost, stolen, destroyed or mutilated Warrant
Certificate, in exchange for or in lieu thereof, a new Warrant Certificate of
the same tenor and for a like aggregate number of Warrants. Upon the issuance
of any new Warrant Certificate under this Article VI, the Company may require
the payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in relation thereto and other expenses (including the fees
and expenses of the Warrant Agent) in connection therewith. Every new Warrant
Certificate executed and delivered pursuant to this Article VI in lieu of any
lost, stolen or destroyed Warrant Certificate shall constitute a contractual
obligation of the
28
Company whether or not the allegedly lost, stolen or destroyed Warrant
Certificates shall be at any time enforceable by anyone and shall be entitled to
the benefits of this Agreement equally and proportionately with any and all
other Warrant Certificates duly executed and delivered hereunder. The
provisions of this Article VI are exclusive and shall preclude (to the extent
lawful) all other rights or remedies with respect to the replacement of
mutilated, lost, stolen, or destroyed Warrant Certificates.
ARTICLE VII
RESERVATION AND AUTHORIZATION
OF COMMON SHARES
The Company shall at all times reserve and keep available such number
of its authorized but unissued Common Shares deliverable upon exercise of the
Warrants as will be sufficient to permit the exercise in full of all outstanding
Warrants and will cause appropriate evidence of ownership of such Common Shares
to be delivered to the Warrant Agent upon its request for delivery thereof upon
the exercise of the Warrants. The Company covenants that all Common Shares of
the Company that may be issued upon the exercise of the Warrants will, upon
issuance, be duly authorized, validly issued, fully paid and not subject to any
calls for funds and free from pre-emptive rights and all taxes, liens, charges
and security interests with respect to the issue thereof.
ARTICLE VIII
WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER
Section 8.1. TRANSFER AND EXCHANGE. The Warrant Certificates shall
be issued in registered form only. The Warrant Agent shall keep at its office a
register for the registration of Warrant Certificates and transfers or exchanges
of Warrant Certificates as herein provided and other appropriate data as
determined by the Warrant Agent. The Company shall, upon reasonable notice to
the Warrant Agent, have access to such register during the Warrant Agent's
regular business hours. All Warrant Certificates issued upon any registration
of transfer or exchange of Warrant Certificates shall be the valid obligations
of the Company, evidencing the same obligations, and entitled to the same
benefits under this Agreement, as the Warrant Certificates surrendered for such
registration of transfer or exchange.
The Warrants shall initially be issued as part of the issuance of the
Units. Prior to the Separation Date, the Warrants may not be transferred or
exchanged separately
29
from, but may be transferred or exchanged only together with, the Notes issued
as part of such Units.
A Holder may transfer its Warrants only by written application to the
Warrant Agent stating the name of the proposed transferee and otherwise
complying with the terms of this Agreement. No such transfer shall be effected
until, and such transferee shall succeed to the rights of a Holder only upon,
final acceptance and registration of the transfer by the Warrant Agent in the
register. Prior to the registration of any transfer of Warrants by a Holder as
provided herein, the Company, the Warrant Agent, and any agent of the Company
may treat the person in whose name the Warrants are registered as the owner
thereof for all purposes and as the person entitled to exercise the rights
represented thereby, any notice to the contrary notwithstanding. Furthermore,
any holder of a Global Warrant shall, by acceptance of such Global Warrant,
agree that transfers of beneficial interests in such Global Warrant may be
effected only through a book-entry system maintained by the holder of such
Global Warrant (or its agent), and that ownership of a beneficial interest in
the Warrants represented thereby shall be required to be reflected in a
book-entry. When Warrant Certificates are presented to the Warrant Agent with a
request to register the transfer or to exchange them for an equal amount of
Warrants, the Warrant Agent shall register such transfer or make such exchange
as requested if its requirements for such transactions are met. To permit
registrations of transfers and exchanges, the Company shall execute Warrant
Certificates at the Warrant Agent's request. No service charge shall be made
for any registration of transfer or exchange of Warrants, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge that may be imposed in connection with any registration of transfer of
Warrants.
SECTION 8.2. BOOK-ENTRY PROVISIONS FOR THE GLOBAL WARRANTS. (a) The
Restricted Global Warrant and the Legended Regulation S Global Warrant initially
shall (i) be registered in the name of the Depositary for such Global Warrant or
the nominee of such Depositary, (ii) be delivered to the Warrant Agent as
custodian for such Depositary and (iii) bear legends as set forth in Section 2.2
hereof.
Members of, or participants in, the Depositary ("AGENT MEMBERS") shall
have no rights under this Agreement with respect to the Global Warrants held on
their behalf by the Depositary or the Warrant Agent as its custodian, and the
Depositary may be treated by the Company, the Warrant Agent and any agent of the
Company or the Warrant Agent as the absolute owner of each such Global Warrant
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Company, the Warrant Agent or any agent of the Company or the
Warrant Agent, from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between the Depositary
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Warrants.
30
(b) Transfers of a Global Warrant shall be limited to transfers of
such Global Warrant in whole, but not in part, to the Depositary, its successors
or their respective nominees. Interests of beneficial owners in the Global
Warrants may be transferred in accordance with the rules and procedures of the
Depositary and the provisions of Section 8.3 hereof. U.S. Certificated Warrants
and Offshore Certificated Warrants shall be transferred to beneficial owners in
exchange for their beneficial interests in the Restricted Global Warrant or the
Regulation S Global Warrant, as the case may be, (i) if the Depositary notifies
the Company that it is unwilling or unable to continue as Depositary for any
such Global Warrant and a successor depositary is not appointed by the Company
within 90 days of such notice, (ii) if there is a Default or (iii) upon the
request of the beneficial owner in accordance with the rules and procedures of
the Depositary and the provisions of Section 8.3 hereof; PROVIDED that Offshore
Certificated Warrants shall not be transferred in exchange for the Legended
Regulation S Global Warrant prior to one year after the Closing Date.
(c) Any beneficial interest in one of the Global Warrants that is
transferred to a person who takes delivery in the form of an interest in any
other Global Warrant will, upon transfer, cease to be an interest in the first
Global Warrant and become an interest in the other Global Warrant and,
accordingly, will thereafter be subject to all transfer restrictions, if any,
and other procedures applicable to beneficial interests in such other Global
Warrant for as long as it remains such an interest.
(d) In connection with the transfer of the entire Restricted
Global Warrant or Regulation S Global Warrant to beneficial owners pursuant to
paragraph (b) of this Section 8.2, the Restricted Global Warrant or the
Regulation S Global Warrant, as the case may be, shall be surrendered to the
Warrant Agent for cancellation, and the Company shall execute, and the Warrant
Agent shall countersign and deliver, to each beneficial owner identified by the
Depositary in exchange for its beneficial interest in the Restricted Global
Warrant or the Regulation S Global Warrant, as the case may be, U.S.
Certificated Warrants or Offshore Certificated Warrants, as the case may be,
representing, in the aggregate, the number of Warrants theretofore represented
by the Restricted Global Warrant or the Regulation S Global Warrant, as the case
may be.
(e) In connection with the transfer of a portion of the beneficial
interests in the Restricted Global Warrant or the Unlegended Regulation S Global
Warrant to beneficial owners pursuant to paragraph (b) of this Section 8.2, the
Warrant Agent shall reflect on its books and records the date and a decrease in
the amount of Warrants represented by the Restricted Global Warrant or
Unlegended Regulation S Global Warrant in an amount equal to the amount of
Warrants represented by the beneficial interest in the Restricted Global Warrant
or Unlegended Regulation S Global Warrant to be transferred, and the Company
shall execute, and the Warrant Agent shall countersign and deliver, to each
beneficial owner identified by the Depositary in exchange for its beneficial
interest in the Restricted Global Warrant or the Unlegended Regulation S Global
Warrant, as the case may be, U.S.
31
Certificated Warrants or Offshore Certificated Warrants, as the case may be, of
like tenor and amount.
(f) Any Certificated Warrant delivered in exchange for an interest
in a Global Warrant pursuant to paragraph (b) or (e) of this Section shall,
except as otherwise provided by paragraph (d) of Section 8.3 hereof, bear the
legend regarding transfer restrictions set forth in Section 2.2 hereof.
(g) The registered holder of a Global Warrant may grant proxies
and otherwise authorize any person, including Agent Members and persons that may
hold interests through Agent Members, to take any action which a Holder is
entitled to take under this Agreement or the Warrants.
SECTION 8.3. SPECIAL TRANSFER PROVISIONS. The following provisions
shall apply:
(a) TRANSFERS TO QIBS. The following provisions shall apply with
respect to the registration of any proposed transfer of Warrants to a QIB
(excluding non-U.S. Persons):
(i) If the Warrants to be transferred are represented by
Certificated Warrants or by an interest in the Regulation S Global Warrant,
the Warrant Agent shall register the transfer if such transfer is being
made by a proposed transferor who has checked the box provided for on the
form of Warrant Certificate stating, or has otherwise advised the Company
and the Warrant Agent in writing, that the sale has been made in compliance
with the provisions of Rule 144A to a transferee who has signed the
certification provided for on the form of Warrant Certificate stating, or
has otherwise advised the Company and the Warrant Agent in writing, that it
is purchasing the Warrants for its own account or an account with respect
to which it exercises sole investment discretion and that it and any such
account is a QIB within the meaning of Rule 144A, and is aware that the
sale to it is being made in reliance on Rule 144A and acknowledges that it
has received such information regarding the Company as it has requested
pursuant to Rule 144A or has determined not to request such information and
that it is aware that the transferor is relying upon its foregoing
representations in order to claim the exemption from registration provided
by Rule 144A.
(ii) If the proposed transferee is an Agent Member, and the
Warrants to be transferred are represented by Certificated Warrants or an
interest in the Regulation S Global Warrant, upon receipt by the Warrant
Agent of the documents referred to in clause (i) above and instructions
given in accordance with the Depositary's and the Warrant Agent's
procedures, the Warrant Agent shall reflect on its books and records
32
the date and an increase in the amount of Warrants represented by the
Restricted Global Warrant in an amount equal to the amount of Warrants
represented by the Certificated Warrants or the interest in the Regulation
S Global Warrant, as the case may be, to be transferred, and the Warrant
Agent shall cancel the Certificated Warrants or decrease the amount of the
Regulation S Global Warrant so transferred.
(b) TRANSFERS TO NON-U.S. PERSONS AT ANY TIME. The following
provisions shall apply with respect to the registration of any proposed transfer
of Warrants to a Non-U.S. Person:
(i) The Warrant Agent shall register any proposed transfer of
Warrants to a Non-U.S. Person only upon receipt of a certificate
substantially in the form of Exhibit B from the proposed transferor.
(ii) If the proposed transferee is an Agent Member and the Warrants
to be transferred are represented by Certificated Warrants or an interest
in the Restricted Global Warrant, upon receipt by the Warrant Agent of the
documents referred to in clause (i) above and instructions given in
accordance with the Depositary's and the Warrant Agent's procedures, the
Warrant Agent shall reflect on its books and records the date and an
increase in the number of Warrants represented by the Regulation S Global
Warrant in an amount equal to the number of Warrants represented by the
Certificated Warrants or the Restricted Global Warrant, as the case may be,
to be transferred, and the Warrant Agent shall cancel the Certificated
Warrant or decrease the amount of Warrants represented by the Restricted
Global Warrant so transferred.
(c) TRANSFERS TO ANY OTHER PERSON. The following provisions shall
apply with respect to the registration of any proposed transfer of Warrants to
any Person not specified in paragraphs (a) and (b) above (including any
Institutional Accredited Investor which is not a QIB).
(i) The Warrant Agent shall register any proposed transfer of
Warrants to any such Person if (x) the transferor has delivered to the
Warrant Agent and the Company a certificate substantially in the form of
Exhibit C-1 hereto and, if required by paragraph (d) thereof, an Opinion of
Counsel to the effect set forth therein and (y) the proposed transferee has
delivered to the Warrant Agent and the Company a certificate substantially
in the form of Exhibit C-2 hereto if such transferee is an Institutional
Accredited Investor that is not a QIB.
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the Restricted Global Warrant or the Regulation S
Global Warrant, upon receipt by the Warrant Agent and the Company of the
documents referred to in clause (i) above and instructions given in
accordance with the Depositary's and the Warrant
33
Agent's procedures, the Company shall execute and the Warrant Agent shall
countersign Certificated Warrants in an amount equal to the number of
Warrants represented by the Restricted Global Warrant or the Regulation S
Global Warrant, if any, as the case may be, to be transferred and the
Warrant Agent shall decrease the number of Warrants represented by the
Restricted Global Warrant or the Regulation S Global Warrant so
transferred.
(d) PRIVATE PLACEMENT LEGEND. Upon the transfer, exchange or
replacement of Warrant Certificates not bearing the Private Placement Legend,
the Warrant Agent shall deliver Warrant Certificates that do not bear the
Private Placement Legend. Upon the transfer, exchange or replacement of Warrant
Certificates bearing the Private Placement Legend, the Warrant Agent shall
deliver only Warrant Certificates that bear the Private Placement Legend unless
either (i) the circumstances contemplated by the third sentence of the third
paragraph of Section 2.1 exist or (ii) there is delivered to the Warrant Agent
an opinion of counsel reasonably satisfactory to the Company and its counsel and
the Warrant Agent to the effect that neither such legend nor the related
restrictions on transfer are required in order to maintain compliance with the
provisions of the Securities Act.
(e) TRANSFERS OF INTERESTS IN THE LEGENDED REGULATION S GLOBAL
WARRANT. The following provisions shall apply with respect to registration of
any proposed transfer of interests in the Legended Regulation S Global Warrant:
(i) The Registrar shall register the transfer of any Warrant (x)
if the proposed transferee is a Non-U.S. Person and the proposed transferor
has delivered to the Registrar a certificate substantially in the form of
Exhibit B hereto or (y) if the proposed transferee is a QIB and the
proposed transferor has checked the box provided for on the form of Warrant
stating, or has otherwise advised the Company and the Warrant Agent in
writing, that the sale has been made in compliance with the provisions of
Rule 144A to a transferee who has signed the certification provided for on
the form of Warrant stating, or has otherwise advised the Company and the
Warrant Agent in writing, that it is purchasing the Warrant for its own
account or an account with respect to which it exercises sole investment
discretion and that it and any such account is a QIB within the meaning of
Rule 144A, and is aware that the sale to it is being made in reliance on
Rule 144A and acknowledges that it has received such information regarding
the Company as it has requested pursuant to Rule 144A or has determined not
to request such information and that it is aware that the transferor is
relying upon its foregoing representations in order to claim the exemption
from registration provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member, upon receipt by
the Warrant Agent of the documents referred to in clause (i)(y) above and
instructions given in accordance with the Depositary's and the Warrant
Agent's procedures, the
34
Warrant Agent shall reflect on its books and records the date and an
increase in the number of Warrants represented by the Restricted Global
Warrant, in an amount equal to the number of Warrants represented by the
Legended Regulation S Global Warrant to be transferred, and the Warrant
Agent shall decrease the number of Warrants represented by the Legended
Regulation S Global Warrant.
(f) TRANSFERS OF INTERESTS IN THE UNLEGENDED REGULATION S GLOBAL
WARRANT OR OFFSHORE CERTIFICATED WARRANTS. The following provisions shall apply
with respect to any transfer of interests in the Unlegended Regulation S Global
Warrant or Offshore Certificated Warrants: The Warrant Agent shall register the
transfer of any such Warrant without requiring any additional certification.
(g) GENERAL. (i) By its acceptance of any Warrants represented
by a Warrant Certificate bearing the Private Placement Legend, each Holder of
such Warrants acknowledges the restrictions on transfer of such Warrants set
forth in this Agreement and in the Private Placement Legend and agrees that it
will transfer such Warrants only as provided in this Agreement. The Warrant
Agent shall not register a transfer of any Warrants unless such transfer
complies with the restrictions on transfer of such Warrants set forth in this
Agreement and is in compliance with applicable laws and applicable rules,
regulations and procedures of any securities exchange or clearing agency in
effect from time to time. In connection with any transfer of Warrants, each
Holder agrees by its acceptance of Warrants to furnish the Warrant Agent or the
Company such certifications, legal opinions or other information as either of
them may reasonably require to confirm that such transfer is being made pursuant
to an exemption from, or a transaction not subject to, the registration
requirements of the Securities Act or any other applicable laws of any foreign
jurisdiction; PROVIDED that the Warrant Agent shall not be required to determine
(but may rely on a determination made by the Company with respect to) the
sufficiency of any such certifications, legal opinions or other information.
(ii) The Warrant Agent shall retain copies of all letters, notices
and other written communications received pursuant to Section 8.2 hereof or
this Section 8.3. The Company shall have the right to inspect and make
copies of all such letters, notices or other written communications at any
reasonable time upon the giving of reasonable written notice to the Warrant
Agent.
SECTION 8.4. SURRENDER OF WARRANT CERTIFICATES. Any Warrant
Certificate surrendered for registration of transfer, exchange or exercise of
the Warrants represented thereby shall, if surrendered to the Company, be
delivered to the Warrant Agent, and all Warrant Certificates surrendered or so
delivered to the Warrant Agent shall be promptly cancelled by the Warrant Agent
and shall not be reissued by the Company and, except as provided in this Article
VIII in case of an exchange, Article III hereof in case of the exercise of less
than all the Warrants represented thereby or Article VI in case of a mutilated
Warrant
35
Certificate, no Warrant Certificate shall be issued hereunder in lieu thereof.
The Warrant Agent shall deliver to the Company from time to time or otherwise
dispose of such cancelled Warrant Certificates as the Company may direct in
writing.
ARTICLE IX
WARRANT HOLDERS
SECTION 9.1. WARRANT HOLDER DEEMED NOT A SHAREHOLDER. The Company
and the Warrant Agent may deem and treat the registered Holder(s) of the Warrant
Certificates as the absolute owner(s) thereof (notwithstanding any notation of
ownership or other writing thereon made by anyone), for the purpose of any
exercise thereof and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary. Accordingly, the
Company and/or the Warrant Agent shall not, except as ordered by a court of
competent jurisdiction as required by law, be bound to recognize any equitable
or other claim to or interest in the Warrants on the part of any person other
than such registered Holder, whether or not it shall have express or other
notice thereof. Prior to the valid exercise of the Warrants, no Holder of a
Warrant Certificate, as such, shall be entitled to any rights of a shareholder
of the Company, including, without limitation, the right to vote or to consent
to any action of the shareholders, to receive dividends or other distributions,
to exercise any preemptive right or to receive any notice of meetings of
shareholders and, except as otherwise provided in this Agreement, shall not be
entitled to receive any notice of any proceedings of the Company.
SECTION 9.2. RIGHT OF ACTION. All rights of action with respect to
this Agreement are vested in the Holders of the Warrants, and any Holder of any
Warrant, without the consent of the Warrant Agent or the Holders of any other
Warrant, may, on such Holder's own behalf and for such Holder's own benefit,
enforce, and may institute and maintain any suit, action or proceeding against
the Company suitable to enforce, or otherwise in respect of, such Holder's right
to exercise such Warrants in the manner provided in the Warrant Certificate
representing such Warrants and in this Agreement.
ARTICLE X
REMEDIES
SECTION 10.1. DEFAULTS. It shall be deemed to be a "DEFAULT" with
respect to the Company's (or its successor's) obligations under this Agreement
if:
(a) a Repurchase Event occurs and the Company (or its successor)
shall fail to make a Repurchase Offer pursuant to Section 3.4 hereof; or
36
(b) the Company (or its successor) shall fail to purchase the
Warrants pursuant to the Repurchase Offer in accordance with the provisions
of Section 3.4 hereof.
SECTION 10.2. PAYMENT OBLIGATIONS. Upon the happening of a Default
under this Agreement, the Company shall be obligated to increase the amount
otherwise payable pursuant to Section 3.4(d) hereof in respect of the Repurchase
Offer to which such Default relates by an amount equal to interest thereon at a
rate per annum equal to 131/2% from the date of the Default to the date of
payment, which interest shall compound quarterly (all such payment obligations
in respect of such Repurchase Offer, together with all such increased amounts,
being the "REPURCHASE OBLIGATION").
SECTION 10.3. REMEDIES; NO WAIVER. Notwithstanding any other
provision of this Warrant Agreement, if a Default occurs and is continuing, the
Holders of the Warrants may pursue any available remedy to collect the
Repurchase Obligation or to enforce the performance of any provision of this
Warrant Agreement. A delay or omission by any Holder of a Warrant in
exercising, or a failure to exercise, any right or remedy arising out of a
Default shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Default. All remedies are cumulative to the extent permitted
by law.
ARTICLE XI
THE WARRANT AGENT
SECTION 11.1. DUTIES AND LIABILITIES. The Warrant Agent hereby
accepts the agency established by this Agreement and agrees to perform the same
upon the terms and conditions herein set forth, by all of which the Company and
the Holders of Warrants, by their acceptance thereof, shall be bound. The
Warrant Agent shall not, by countersigning Warrant Certificates or by any other
act hereunder, be deemed to make any representations as to the validity or
authorization of the Warrants or the Warrant Certificates (except as to its
countersignature thereon) or of any Common Shares issued upon exercise of any
Warrant, or as to the accuracy of the computation of the Exercise Price or the
number or kind or amount of Common Shares deliverable upon exercise of any
Warrant or the correctness of the representations of the Company made in the
certificates that the Warrant Agent receives. The Warrant Agent shall not be
accountable for the use or application by the Company of the proceeds of the
exercise of any Warrant. The Warrant Agent shall not have any duty to calculate
or determine any adjustments with respect to either the Exercise Price or the
kind and amount of Common Shares receivable by Holders upon the exercise of
Warrants required from time to time and the Warrant Agent shall have no duty or
responsibility in determining the accuracy or correctness of such calculation.
The Warrant Agent shall not be (a) liable for any recital or statement of fact
contained herein or in the Warrant Certificates
37
or for any action taken, suffered or omitted by it in good faith without gross
negligence in the belief that any Warrant Certificate or any other documents or
any signatures are genuine or properly authorized, (b) responsible for any
failure on the part of the Company to comply with any of its covenants and
obligations contained in this Agreement or in the Warrant Certificates or (c)
liable for any act or omission in connection with this Agreement except for its
own gross negligence, bad faith or willful misconduct. The Warrant Agent is
hereby authorized to accept instructions with respect to the performance of its
duties hereunder from the Chairman of the Board, Chief Executive Officer, any
Vice President or other executive officer of the Company and to apply to any
such officer for instructions (which instructions will be promptly given in
writing when requested) and the Warrant Agent shall not be liable for any action
taken or suffered to be taken by it in good faith without gross negligence in
accordance with the instructions of any such officer; PROVIDED, HOWEVER, that,
in its discretion, the Warrant Agent may, in lieu thereof, accept other evidence
of such or may require such further or additional evidence as it may deem
reasonable. The Warrant Agent shall not be liable for any action taken with
respect to any matter in the event it requests instructions from the Company as
to that matter and does not receive such instructions within a reasonable period
of time after the request therefor.
The Warrant Agent may execute and exercise any of the rights and
powers hereby vested in it or perform any duty hereunder either itself or by
or through its attorneys, agents or employees, and the Warrant Agent shall
not be answerable or accountable for any act, default, neglect or misconduct
of any such attorneys, agents or employees; PROVIDED that reasonable care has
been exercised with respect to the retention of any such attorney, agent or
employee. The Warrant Agent shall not be under any obligation or duty to
institute, appear in or defend any action, suit or legal proceeding in
respect hereof, unless first indemnified to its reasonable satisfaction.
The Warrant Agent shall promptly notify the Company in writing of any claim
made or action, suit or proceeding instituted against it arising out of or in
connection with this Agreement.
The Company will perform, execute, acknowledge and deliver or cause to
be delivered all such further acts, instruments and assurances as are consistent
with this Agreement and as may reasonably be required by the Warrant Agent in
order to enable it to carry out or perform its duties under this Agreement.
The Warrant Agent shall act solely as agent of the Company hereunder.
The Warrant Agent shall not be liable except for the failure to perform such
duties as are specifically set forth herein, and no implied covenants or
obligations shall be read into this Agreement against the Warrant Agent, whose
duties and obligations shall be determined solely by the express provisions
hereof.
SECTION 11.2. RIGHT TO CONSULT COUNSEL. The Warrant Agent may at any
time consult with legal counsel of its selection (who may be legal counsel for
the Company), and
38
the written opinion or written advice of such counsel shall be full and complete
authorization and protection to the Warrant Agent and the Warrant Agent shall
incur no liability or responsibility to the Company or to any Holder for any
action taken, suffered or omitted by it in good faith without gross negligence
in accordance with the written opinion or advice of such counsel.
SECTION 11.3. COMPENSATION; INDEMNIFICATION. The Company agrees
promptly to pay the Warrant Agent from time to time and in any case within 30
days of receipt of an invoice, compensation for its services hereunder as the
Company and the Warrant Agent may agree from time to time, and to reimburse it
upon its request upon furnishing reasonable supporting documentation for
reasonable fees or expenses and reasonable counsel fees and expenses incurred in
connection with the execution and administration of this Agreement, and further
agrees to indemnify the Warrant Agent and save it harmless against any losses,
liabilities or reasonable expenses arising out of or in connection with the
acceptance and administration of this Agreement, including, without limitation,
the reasonable costs and expenses of investigating or defending any claim of
such liability, except that the Company shall have no liability hereunder to the
extent that any such loss, liability or expense results from the Warrant Agent's
own gross negligence, bad faith or willful misconduct. The obligations of the
Company under this Section 11.3 shall survive the exercise and the expiration of
the Warrants, the termination of this Agreement and the resignation or removal
of the Warrant Agent in respect of services or expenses incurred in connection
with the Warrants or this Agreement.
SECTION 11.4. NO RESTRICTIONS ON ACTIONS. Nothing in this Agreement
shall be deemed to prevent the Warrant Agent and any shareholder, director,
officer or employee of the Warrant Agent from buying, selling or dealing in any
of the Warrants or other securities of the Company or becoming pecuniarily
interested in transactions in which the Company may be interested, or
contracting with or lending money to the Company or otherwise acting as fully
and freely as though it were not the Warrant Agent under this Agreement.
Nothing herein shall preclude the Warrant Agent from acting in any other
capacity for the Company or for any other legal entity.
SECTION 11.5. DISCHARGE OR REMOVAL; REPLACEMENT WARRANT AGENT. The
Warrant Agent may resign from its position as such and be discharged from all
further duties and liabilities hereunder (except liability arising as a result
of the Warrant Agent's own gross negligence, bad faith or willful misconduct),
after giving one month's prior written notice to the Company. The Company may
at any time remove the Warrant Agent upon one month's written notice specifying
the date when such discharge shall take effect, and the Warrant Agent shall
thereupon in like manner be discharged from all further duties and liabilities
hereunder, except as aforesaid. The Warrant Agent shall mail to each Holder of
a Warrant, at the Company's expense, a copy of said notice of resignation or
notice of removal, as the case may be. Upon such resignation or removal the
Company shall appoint in writing a new
39
warrant agent. If the Company shall fail to make such appointment within a
period of 30 days after it has been notified in writing of such resignation by
the resigning Warrant Agent or after such removal, then the resigning or removed
Warrant Agent or the Holder of any Warrant may apply to any court of competent
jurisdiction for the appointment of a new warrant agent. After 30 days from
receipt of, or giving, notice, as the case may be, and pending appointment of a
successor to the original Warrant Agent, either by the Company or by such a
court, the duties of the Warrant Agent shall be carried out by the Company. Any
new warrant agent, whether appointed by the Company or by such a court, shall be
a bank or trust company doing business under the laws of the United States or
any state thereof, in good standing and having a combined capital and surplus of
not less than $25,000,000. The combined capital and surplus of any such new
warrant agent shall be deemed to be the combined capital and surplus as set
forth in the most recent annual report of its condition published by such
warrant agent prior to its appointment, PROVIDED that such reports are published
at least annually pursuant to law or to the requirements of a federal or state
supervising or examining authority. After acceptance in writing of such
appointment by the new warrant agent, it shall be vested with the same powers,
rights, duties and responsibilities as if it had been originally named herein as
the Warrant Agent, without any further assurance, conveyance, act or deed;
however, the original Warrant Agent shall in all events deliver and transfer to
the successor Warrant Agent all property (including, without limitation,
documents and recorded information), if any, at the time held hereunder by the
original Warrant Agent and if for any reason it shall be necessary or expedient
to execute and deliver any further assurance, conveyance, act or deed, the same
shall be done at the expense of the Company and shall be legally and validly
executed and delivered by the resigning or removed Warrant Agent. Not later
than the effective date of any such appointment, the Company shall file notice
thereof with the resigning or removed Warrant Agent and shall forthwith cause a
copy of such notice to be mailed by the successor Warrant Agent to each Holder
of a Warrant. Failure to give any notice provided for in this Section 11.5,
however, or any defect therein, shall not affect the legality or validity of the
resignation of the Warrant Agent or the appointment of a new warrant agent, as
the case may be. No Warrant Agent hereunder shall be liable for any acts or
omissions of any successor Warrant Agent.
SECTION 11.6. SUCCESSOR WARRANT AGENT. Any corporation into which
the Warrant Agent or any new warrant agent may be merged or converted, or any
corporation resulting from any consolidation to which the Warrant Agent or any
new warrant agent shall be a party or any corporation succeeding to all or
substantially all the corporate agency business of the Warrant Agent, shall be a
successor Warrant Agent under this Agreement without any further act, PROVIDED
that such corporation would be eligible for appointment as successor to the
Warrant Agent under the provisions of Section 11.5 hereof. Any such successor
Warrant Agent shall promptly cause notice of its succession as Warrant Agent to
be mailed to each Holder of a Warrant.
40
ARTICLE XII
MISCELLANEOUS
SECTION 12.1. MONIES DEPOSITED WITH THE WARRANT AGENT. The Warrant
Agent shall not be required to pay interest on any monies deposited pursuant to
the provisions of this Agreement except such as it shall agree in writing with
the Company to pay thereon. Any monies, securities or other property which at
any time shall be deposited by the Company or on its behalf with the Warrant
Agent pursuant to this Agreement shall be and are hereby assigned, transferred
and set over to the Warrant Agent in trust for the purpose for which such
monies, securities or other property shall have been deposited; but such monies,
securities or other property need not be segregated from other funds, securities
or other property except to the extent required by law. Any monies, securities
or other property deposited with the Warrant Agent for payment or distribution
to the Holders that remains unclaimed for one year after the date the monies,
securities or other property was deposited with the Warrant Agent shall be
delivered to the Company upon its request therefor.
SECTION 12.2. PAYMENT OF TAXES. Subject to Article VI hereof, all
Common Shares issuable upon the exercise of Warrants shall be validly issued,
fully paid and not subject to any calls for funds, and the Company shall pay any
taxes and other governmental charges that may be imposed under the laws of the
United States of America or any political subdivision or taxing authority
thereof or therein in respect of the issue or delivery thereof upon exercise of
Warrants (other than income taxes imposed on the Holders). The Company shall
not be required, however, to pay any tax or other charge imposed in connection
with any transfer involved in the issue of any certificate for Common Shares
(including other securities or property issuable upon the exercise of the
Warrants) or payment of cash to any Person other than the Holder of a Warrant
Certificate surrendered upon the exercise of a Warrant and in case of such
transfer or payment, the Warrant Agent and the Company shall not be required to
issue any share certificate or pay any cash until such tax or charge has been
paid or it has been established to the Warrant Agent's and the Company's
satisfaction that no such tax or charge is due.
SECTION 12.3. NO MERGER, CONSOLIDATION OR SALE OF ASSETS OF THE
COMPANY. Except as otherwise provided herein, the Company will not merge into
or consolidate with any other Person, or sell or otherwise transfer its
property, assets and business substantially as an entirety to a successor of the
Company, unless the Person resulting from such merger or consolidation, or such
successor of the Company, shall expressly assume, by supplemental agreement
satisfactory in form to the Warrant Agent and executed and delivered to the
Warrant Agent, the due and punctual performance and observance of each and every
covenant and condition of this Agreement or contained in the Warrants to be
performed and observed by the Company.
41
SECTION 12.4. REPORTS TO HOLDERS. At all times from and after
January 15, 1998, whether or not the Company is then required to file reports
with the Commission, the Company shall deliver for filing to the Commission all
such reports and other information it would be required to file with the
Commission by Section 13(a) or 15(d) under the Exchange Act if it were subject
thereto. The Company shall supply the Warrant Agent and each Holder or shall
supply to the Warrant Agent for forwarding to each such Holder, without cost to
such Holder, copies of such reports and other information. The Warrant Agent's
receipt of such reports and other information shall not constitute constructive
notice of any information contained therein or determinable from information
contained therein, including the Company's compliance with any of its covenants
hereunder (as to which the Warrant Agent is entitled to rely exclusively on
Officers' Certificates). In addition, at all times, upon the request of any
Holder or any prospective purchaser of the Warrants designated by a Holder, the
Company shall supply to such Holder or such prospective purchaser the
information required under Rule 144A.
SECTION 12.5. NOTICES; PAYMENT. (a) Except as otherwise provided in
Section 12.5(b) hereof, any notice, demand or delivery authorized by this
Agreement shall be sufficiently given or made when mailed, if sent by first
class mail, postage prepaid, addressed to any Holder of a Warrant at such
Holder's last known address appearing on the register of the Company maintained
by the Warrant Agent and to the Company or the Warrant Agent as follows:
To the Company:
Econophone, Inc.
▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Chief Financial Officer and Controller
To the Warrant Agent:
The Bank of New York
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Administration
or such other address as shall have been furnished to the party giving or making
such notice, demand or delivery. Any notice that is mailed in the manner herein
provided shall be conclusively presumed to have been duly given when mailed,
whether or not the Holder receives the notice.
42
(b) Payment of the Exercise Price shall be made in accordance with
the provisions of this Agreement at the office of the Warrant Agent set forth
above, unless otherwise directed by the Warrant Agent and the Company.
(c) Any notice required to be given by the Company to the Holders
shall be made by mailing, to the Holders at their last known addresses appearing
on the register maintained by the Warrant Agent. The Company hereby irrevocably
authorizes the Warrant Agent, in the name and at the expense of the Company, to
mail any such notice upon receipt thereof from the Company. Any notice that is
mailed in the manner herein provided shall be conclusively presumed to have been
duly given when mailed, whether or not the Holder receives the notice.
SECTION 12.6. BINDING EFFECT. This Agreement shall be binding upon
and inure to the benefit of the Company and the Warrant Agent and their
respective successors and assigns, and the Holders from time to time of the
Warrants. Nothing in this Agreement is intended or shall be construed to confer
upon any Person, other than the Company, the Warrant Agent and the Holders of
the Warrants, any right, remedy or claim under or by reason of this Agreement or
any part hereof.
SECTION 12.7. COUNTERPARTS. This Agreement may be executed manually
or by facsimile in any number of counterparts, each of which shall be deemed an
original, but all of which together constitute one and the same instrument.
SECTION 12.8. AMENDMENTS. The Warrant Agent may, without the consent
or concurrence of the Holders of the Warrants, by supplemental agreement or
otherwise, join with the Company in making any changes or corrections in this
Agreement that (a) are required to cure any ambiguity or to correct any
defective or inconsistent provision or clerical omission or mistake or manifest
error herein contained or (b) add to the covenants and agreements of the Company
in this Agreement further covenants and agreements of the Company thereafter to
be observed, or surrender any rights or power reserved to or conferred upon the
Company in this Agreement; PROVIDED that in either case such changes or
corrections do not and will not adversely affect, alter or change the rights,
privileges or immunities of the Holders of Warrants. Upon the Warrant Agent's
request, the Company shall promptly provide an Officer's Certificate and Opinion
of Counsel which provide all conditions precedent to adoption of an amendment
that have been satisfied.
SECTION 12.9. HEADINGS. The descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
SECTION 12.10. COMMON SHARES LEGEND. Unless and until the Common
Shares issuable upon the exercise of the Warrants are registered under the
Securities Act, or
43
unless otherwise agreed by the Company and the Holder thereof, such Common
Shares will bear a legend substantially to the following effect:
THE COMMON SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT"), AND ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED
OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES OR TO, OR FOR THE
ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET FORTH IN THE
FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER (1)
REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1),
(2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT) (AN
"INSTITUTIONAL ACCREDITED INVESTOR") OR (C) IT IS NOT A U.S. PERSON
AND IS ACQUIRING THE COMMON SHARES REPRESENTED BY THIS CERTIFICATE IN
AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT, (2) AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD
REFERRED TO UNDER RULE 144(k), TAKING INTO ACCOUNT THE PROVISIONS OF
RULE 144(d), IF APPLICABLE, UNDER THE SECURITIES ACT AS IN EFFECT WITH
RESPECT TO SUCH TRANSFER, RESELL OR OTHERWISE TRANSFER THE COMMON
SHARES REPRESENTED BY THIS CERTIFICATE EXCEPT (A) TO ECONOPHONE, INC.
(THE "COMPANY") OR ANY SUBSIDIARY THEREOF, (B) INSIDE THE UNITED
STATES TO A QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A
UNDER THE SECURITIES ACT, (C) INSIDE THE UNITED STATES TO AN
INSTITUTIONAL ACCREDITED INVESTOR THAT, PRIOR TO SUCH TRANSFER,
FURNISHES TO THE TRANSFER AGENT AND REGISTRAR A SIGNED LETTER
CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS RELATING TO THE
RESTRICTIONS ON TRANSFER OF THE COMMON SHARES REPRESENTED BY THIS
CERTIFICATE (THE FORM OF WHICH LETTER CAN BE OBTAINED FROM THE
TRANSFER AGENT AND REGISTRAR) AND AN OPINION OF COUNSEL ACCEPTABLE TO
THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH THE SECURITIES
ACT, (D) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (E) PURSUANT TO THE
EXEMPTION FROM REGISTRATION PROVIDED BY RULE 144 UNDER THE SECURITIES
44
ACT (IF AVAILABLE) OR (F) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE SECURITIES ACT AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON
TO WHOM THE COMMON SHARES REPRESENTED BY THIS CERTIFICATE ARE TRANSFERRED A
NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND. IN CONNECTION WITH ANY
TRANSFER OF THE COMMON SHARES REPRESENTED BY THIS CERTIFICATE WITHIN THE
TIME PERIOD REFERRED TO ABOVE, THE HOLDER MUST CHECK THE APPROPRIATE BOX
SET FORTH ON THE REVERSE HEREOF RELATING TO THE MANNER OF SUCH TRANSFER AND
SUBMIT THIS CERTIFICATE TO THE TRANSFER AGENT AND REGISTRAR. IF THE
PROPOSED TRANSFEREE IS AN INSTITUTIONAL ACCREDITED INVESTOR, THE HOLDER
MUST, PRIOR TO SUCH TRANSFER, FURNISH TO EACH OF THE TRANSFER AGENT AND
REGISTRAR AND THE COMPANY SUCH CERTIFICATIONS, LEGAL OPINIONS OR OTHER
INFORMATION AS EITHER OF THEM MAY REASONABLY REQUIRE TO CONFIRM THAT SUCH
TRANSFER IS BEING MADE PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION
NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT. AS
USED HEREIN, THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S.
PERSON" HAVE THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE
SECURITIES ACT. THE WARRANT AGREEMENT CONTAINS A PROVISION REQUIRING THE
TRANSFER AGENT AND REGISTRAR TO REFUSE TO REGISTER ANY TRANSFER OF THE
SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE IN VIOLATION OF THE
FOREGOING RESTRICTIONS.
SECTION 12.11. THIRD PARTY BENEFICIARIES. The Holders shall be third
party beneficiaries to the agreements made hereunder between the Company, on the
one hand, and the Warrant Agent, on the other hand, and each Holder shall have
the right to enforce such agreements directly to the extent it deems such
enforcement necessary or advisable to protect its rights or the rights of
Holders hereunder. By acquiring Warrants, each Holder agrees to be bound by the
obligations of Holders generally as set forth herein and as such obligations may
be applicable to such Holder.
SECTION 12.12. TERMINATION. Except as otherwise specified herein,
this Agreement shall terminate at 5:00 p.m. (New York City time) on the tenth
anniversary of the Closing Date. Notwithstanding the foregoing, this Agreement
shall terminate on any earlier date as of which all Warrants have been
exercised.
45
SECTION 12.13. GOVERNING LAW. This Agreement shall be governed by
the laws of the State of New York, without regard to the conflicts of laws
provisions thereof. The Warrant Agent, the Company and the Holders agree to
submit to the jurisdiction of the courts of the State of New York in any action
or proceeding arising out of or relating to this Agreement or the Warrants.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed, as of the day and year first above written.
ECONOPHONE, INC.
By: _____________________________________________
Name:
Title:
THE BANK OF NEW YORK
By: _____________________________________________
Name:
Title:
EXHIBIT A
FORM OF WARRANT CERTIFICATE
ECONOPHONE, INC.
CUSIP] [CINS] [ISIN] No. _____
No. _____
WARRANTS TO PURCHASE COMMON SHARES
This certifies that ______________, or its registered assigns, is the
owner of ___________ Warrants, each of which represents the right to purchase,
after July 1, 1998, from ECONOPHONE, INC., a New York corporation (the
"COMPANY"), 8.167 shares of the Common Stock, par value $.0001 per share, of the
Company (the "COMMON SHARES") at an exercise price (the "EXERCISE PRICE") of
$.01 per Common Share (subject to adjustment as provided in the Warrant
Agreement hereinafter referred to below), upon surrender hereof at the office of
The Bank of New York, or to its successor, as the warrant agent under the
Warrant Agreement (any such warrant agent being herein called the "WARRANT
AGENT"), or such other location contemplated by Section 12.5(b) of the Warrant
Agreement, with the Subscription Form on the reverse hereof duly executed, with
signature guaranteed as therein specified and simultaneous payment in full in
cash or by certified or official bank or bank cashier's check payable to the
order of the Company. Notwithstanding the foregoing, the Exercise Price may be
paid by surrendering additional Warrants to the Warrant Agent having an
aggregate Spread equal to the aggregate Exercise Price of the Warrants being
exercised. At any time after one year after the Closing Date and on or before
the Expiration Date, any outstanding Warrants may be exercised on any Business
Day; PROVIDED that the Warrant Registration Statement is, at the time of
exercise, effective and available for the exercise of Warrants or the exercise
of such Warrants is exempt from the registration requirements of the Securities
Act.
This Warrant Certificate is issued under and in accordance with a
Warrant Agreement dated as of July 1, 1997 (the "WARRANT AGREEMENT"), between
the Company and The Bank of New York, as Warrant Agent, and a Warrant
Registration Rights Agreement dated as of July 1, 1997 (the "WARRANT
REGISTRATION RIGHTS AGREEMENT"), between the Company and The Bank of New York,
as Warrant Agent, and is subject to the Certificate of Incorporation and Bylaws
of the Company and to the terms and provisions contained therein, to all of
which terms and provisions the Holder of this Warrant Certificate consents by
acceptance hereof. The terms of the Warrant Agreement and the Warrant
Registration Rights Agreement are hereby incorporated herein by reference and
made a part hereof. Reference is hereby made to the Warrant Agreement and the
Warrant Registration Rights Agreement for a full description of the rights,
limitations of rights, obligations, duties and immunities thereunder of the
Company and the Holders of the Warrants. The summary of
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the terms of the Warrant Agreement and the Warrant Registration Rights Agreement
contained in this Warrant Certificate is qualified in its entirety by express
reference to the Warrant Agreement and the Warrant Registration Rights
Agreement. All terms used in this Warrant Certificate that are defined in the
Warrant Agreement and the Warrant Registration Rights Agreement shall have the
meanings assigned to them in such agreements.
Copies of the Warrant Agreement and the Warrant Registration Rights
Agreement are on file at the office of the Warrant Agent and may be obtained by
writing to the Warrant Agent at the following address:
The Bank of New York
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: Corporate Trust Administration
A "REPURCHASE EVENT", as defined in the Warrant Agreement, shall be
deemed to occur on any date when the Company consolidates with or merges into or
with (but only where holders of the Common Stock receive consideration in
exchange for all or part of such Common Stock), or sells all or substantially
all of its assets to, another Person which does not have a class of equity
securities registered under the Exchange Act or a wholly owned subsidiary of
such Person, if the consideration for such transaction does not consist solely
of cash or such merger or consolidation is not effected solely for the purpose
of changing the Company's state of incorporation.
Following a Repurchase Event, the Company must make an offer to repurchase
for cash all outstanding Warrants (a "REPURCHASE OFFER"). If the Company makes
a Repurchase Offer, Holders may, until the expiration date of such offer,
surrender all or part of their Warrants for repurchase by the Company.
Warrants received by the Warrant Agent in proper form during a
Repurchase Offer will, except as otherwise provided in the Warrant Agreement, be
repurchased by the Company at a price in cash (the "REPURCHASE PRICE") equal to
the value on the Valuation Date relating thereto of the Common Shares issuable,
and other securities or property of the Company which would have been delivered,
upon exercise of the Warrants had the Warrants been exercised (whether or not
the Warrants are then exercisable), less the Exercise Price in effect on the
Notice Date for such Repurchase Offer. The value of such Common Shares and
other securities will be, to the extent not otherwise provided in the Warrant
Agreement, (i) if the Common Shares (or other securities) are registered under
the Exchange Act, determined based upon the average of the daily market prices
(as determined pursuant to Section 3.4(d)(ii)(1) of the Warrant Agreement) of
the Common Shares (or other securities) for the 20 consecutive trading days
immediately preceding such Valuation Date or (ii) if the
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Common Shares (or other securities) are not registered under the Exchange Act or
if the value cannot be computed under clause (i) above, determined by the
Independent Financial Expert (as defined in the Warrant Agreement), in each case
as set forth in the Warrant Agreement.
The "VALUATION DATE" as defined in the Warrant Agreement shall be
deemed to occur on the date five Business Days prior to the date notice of the
Repurchase Offer is first given.
If the Company fails to make or complete a Repurchase Offer (a
"DEFAULT") as required by the Warrant Agreement, it shall be obligated to
increase the amount otherwise payable pursuant to the Warrant Agreement in
respect of the Repurchase Offer by an amount equal to interest thereon at a rate
per annum of 131/2% from the date of the Default to the date of payment, which
interest shall compound quarterly.
If the Company merges or consolidates with or into, or sells all or
substantially all of its property and assets to, another Person and the
consideration received by holders of Common Shares consists solely of cash, the
Holders of Warrants shall be entitled to receive distributions on the date of
such event on an equal basis with holders of Common Shares (or other securities
issuable upon exercise of the Warrants) as if the Warrants had been exercised
immediately prior to such event (less the Exercise Price). Upon receipt of such
payment, if any, the rights of a Holder shall terminate and cease and such
Holder's Warrants shall expire.
The number of Common Shares purchasable upon the exercise of each
Warrant and the price per share are subject to adjustment as provided in the
Warrant Agreement. Except as stated in the immediately preceding paragraph and
in the Warrant Agreement, in the event the Company merges or consolidates with,
or sells all or substantially all of its assets to, another Person, each Warrant
will, upon exercise, entitle the Holder thereof to receive the number of shares
of capital stock or other securities or the amount of money and other property
which the holder of a Common Share (or other securities or property issuable
upon exercise of a Warrant) is entitled to receive upon completion of such
merger, consolidation or sale.
As to any final fraction of a share which the same Holder of one or
more Warrant Certificates would otherwise be entitled to purchase upon exercise
thereof in the same transaction, the Company may pay the cash value thereof
determined as provided in the Warrant Agreement.
Subject to Article VI of the Warrant Agreement, all Common Shares
issuable by the Company upon the exercise of Warrants shall be validly issued,
fully paid and not subject to any calls for funds, and the Company shall pay any
taxes and other governmental
A-4
charges that may be imposed under the laws of the United States of America or
any political subdivision or taxing authority thereof or therein in respect of
the issue or delivery thereof upon exercise of Warrants (other than income taxes
imposed on the Holders). The Company shall not be required, however, to pay any
tax or other charge imposed in connection with any transfer involved in the
issue of any certificate for Common Shares (including other securities or
property issuable upon the exercise of the Warrants) or payment of cash to any
Person other than the Holder of a Warrant Certificate surrendered upon the
exercise of a Warrant and in case of such transfer or payment, the Warrant Agent
and the Company shall not be required to issue any share certificate or pay any
cash until such tax or charge has been paid or it has been established to the
Warrant Agent's and the Company's satisfaction that no such tax or charge is
due.
Subject to the restrictions on and conditions to transfer set forth in
Articles II and VIII of the Warrant Agreement, this Warrant Certificate and all
rights hereunder are transferable by the registered Holder hereof, in whole or
in part, on the register of the Company maintained by the Warrant Agent for such
purpose at the Warrant Agent's office in New York, New York, upon surrender of
this Warrant Certificate duly endorsed, or accompanied by a written instrument
of transfer in form satisfactory to the Company and the Warrant Agent duly
executed, with signatures guaranteed as specified in the attached Form of
Assignment, by the registered Holder hereof or his attorney duly authorized in
writing and by such other documentation required pursuant to the Warrant
Agreement and upon payment of any necessary transfer tax or other governmental
charge imposed upon such transfer. Upon any partial transfer, the Company will
sign and issue and the Warrant Agent will countersign and deliver to such Holder
a new Warrant Certificate or Certificates with respect to any portion not so
transferred. Each taker and Holder of this Warrant Certificate, by taking and
holding the same, consents and agrees that prior to the registration of transfer
as provided in the Warrant Agreement, the Company and the Warrant Agent may
treat the person in whose name the Warrants are registered as the absolute owner
hereof for any purpose and as the Person entitled to exercise the rights
represented hereby, any notice to the contrary notwithstanding. Accordingly,
the Company and/or the Warrant Agent shall not, except as ordered by a court of
competent jurisdiction as required by law, be bound to recognize any equitable
or other claim to or interest in the Warrants on the part of any person other
than such Registered Holder, whether or not it shall have express or other
notice thereof.
This Warrant Certificate may be exchanged at the office of the Warrant
Agent maintained for such purpose in New York, New York, for Warrant
Certificates representing the same aggregate number of Warrants, each new
Warrant Certificate to represent such number of Warrants as the Holder hereof
shall designate at the time of such exchange.
Prior to the exercise of the Warrants represented hereby, the Holder
of this Warrant Certificate, as such, shall not be entitled to any rights of a
shareholder of the
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Company, including, without limitation, the right to vote or to consent to any
action of the shareholders, to receive any distributions, to exercise any
pre-emptive right or to receive any notice of meetings of shareholders, and
shall not be entitled to receive any notice of any proceedings of the Company
except as provided in the Warrant Agreement.
This Warrant Certificate shall be void and all rights evidenced hereby
shall cease on July 1, 2007, unless sooner terminated by the liquidation,
dissolution or winding-up of the Company or as otherwise provided in the Warrant
Agreement upon the consolidation or merger of the Company with, or sale of the
Company to, another Person or unless such date is extended as provided in the
Warrant Agreement.
This Warrant Certificate shall not be valid for any purpose until it
shall have been countersigned by the Warrant Agent.
ECONOPHONE, INC.
By: _________________________
Name:
Title:
Dated:
Countersigned:
THE BANK OF NEW YORK,
as Warrant Agent
By: __________________________
Authorized Signatory
FORM OF REVERSE OF WARRANT CERTIFICATE
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
To: The Bank of New York,
as Warrant Agent
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Attention: Corporate Trust Administration
The undersigned irrevocably exercises ________ of the Warrants
represented by this Warrant Certificate and herewith makes payment of $ _______
(such payment being in cash or by certified or official bank or bank cashier's
check payable to the order or at the direction of Econophone, Inc. or, the
exercise price may be paid by surrendering additional Warrants to the Warrant
Agent having an aggregate Spread equal to the aggregate exercise price of the
Warrants being exercised) all at the exercise price and on the terms and
conditions specified in this Warrant Certificate and in the Warrant Agreement
and the Warrant Registration Rights Agreement referred to herein and surrenders
this Warrant Certificate and all right, title and interest therein to and
directs that the Voting Common Stock, par value $0.0001 per share, of
Econophone, Inc. (the "COMMON SHARES") deliverable upon the exercise of such
Warrants be registered or placed in the name and at the address specified below
and delivered thereto.
[THE FOLLOWING PROVISION TO BE INCLUDED ONLY
ON OFFSHORE CERTIFICATED WARRANTS]
The undersigned certifies that:
CHECK ONE
/ / (a) (i) it is not a U.S. person (as defined in Rule 902 of
Regulation S under the U.S. Securities Act of 1933, as
amended) and the Warrants are not being exercised on behalf of
a U.S. person.
OR
/ / (ii) it is furnishing to the Warrant Agent a written opinion
of counsel to the effect that the Warrants and the Common
Shares issuable upon exercise of the Warrants have been
registered under the U.S. Securities Act of 1933, as amended,
or are exempt from registration thereunder.
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and (b) if an opinion is not being furnished, the undersigned is located outside
the United States at the time of the exercise hereof.
Dated: _______________________________________________________
(Signature of Owner)
_______________________________________________________
(▇▇▇▇▇▇ ▇▇▇▇▇▇▇)
_______________________________________________________
(City) (State) (Zip Code)
Signature Guaranteed By:
_______________________________________________________
Signatures must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Warrant
Agent, which requirements include membership or
participation in the Security Transfer Agent Medallion
Program ("STAMP") or such other "signature guarantee
program" as may be determined by the Warrant Agent in
addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as
amended.
Securities and/or check or other property to be issued or delivered to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
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FORM OF CERTIFICATE FOR REPURCHASE OFFER
(To be executed only upon repurchase
of Warrant by Econophone, Inc.)
To:
The undersigned, having received prior notice of the consideration for
which ECONOPHONE, INC. will repurchase the Warrants represented by the within
Warrant Certificate, hereby surrenders this Warrant Certificate for repurchase
by ECONOPHONE, INC. of the number of Warrants specified below for the
consideration set forth in such notice.
Dated:
_________________________
(Number of Warrants)
_________________________
(Signature of Owner)
_________________________
(▇▇▇▇▇▇ ▇▇▇▇▇▇▇)
_________________________
(City) (State) (Zip Code)
Signature Guaranteed By:
_______________________________________________________
Signatures must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Warrant
Agent, which requirements include membership or
participation in the Security Transfer Agent Medallion
Program ("STAMP") or such other "signature guarantee
program" as may be determined by the Warrant Agent in
addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as
amended.
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Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
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FORM OF ASSIGNMENT
In consideration of monies or other valuable consideration received
from the Assignee(s) named below, the undersigned registered Holder of this
Warrant Certificate hereby sells, assigns, and transfers unto the Assignee(s)
named below (including the undersigned with respect to any Warrants constituting
a part of the Warrants evidenced by this Warrant Certificate not being assigned
hereby) all of the right of the undersigned under this Warrant Certificate, with
respect to the number of Warrants set forth below:
Name(s) of Assignee(s): _____________________________________
Address: __________________________________________________
No. of Warrants: ___________________________________________
Please insert social security or other identifying number of assignee(s):
and does hereby irrevocably constitute and appoint ________________________ the
undersigned's attorney to make such transfer on the books of __________________
maintained for the purposes, with full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED ON ALL CERTIFICATES EXCEPT UNLEGENDED
REGULATION S GLOBAL WARRANTS AND UNLEGENDED OFFSHORE CERTIFICATED WARRANTS]
In connection with any transfer of Warrants, the undersigned confirms
that without utilizing any general solicitation or general advertising that:
[CHECK ONE]
/ / (a) these Warrants are being transferred in compliance with the exemption
from registration under the U.S. Securities Act of 1933, as amended,
provided by Rule 144A thereunder.
OR
/ / (b) these Warrants are being transferred other than in accordance with (a)
above and documents are being furnished which comply with the
conditions of transfer set forth in this Warrant Certificate and the
Warrant Agreement.
OR
/ / (c) these Warrants are being transferred pursuant to an effective
registration statement under the U.S. Securities Act of 1933, as
amended.
If none of the foregoing boxes is checked, the Warrant Agent shall not be
obligated to register the Warrants in the name of any Person other than the
Holder hereof unless and until the conditions to any such transfer of
registration set forth herein and in Article VIII of the Warrant Agreement shall
have been satisfied.
Dated:
__________________________________________________
(Signature of Owner)
__________________________________________________
(▇▇▇▇▇▇ ▇▇▇▇▇▇▇)
__________________________________________________
(City) (State) (Zip Code)
Signature Guaranteed By:
__________________________________________________
Signatures must be guaranteed by an "eligible
guarantor institution" meeting the requirements of
the Warrant Agent, which requirements include
membership or participation in the Security
Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be
determined by the Warrant
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Agent in addition to, or in substitution for,
STAMP, all in accordance with the Securities
Exchange Act of 1934, as amended.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing the
Warrant(s) for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the U.S. Securities
Act of 1933, as amended, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding Econophone, Inc. as the undersigned has requested pursuant to Rule
144A or has determined not to request such information and that it is aware that
the
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transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated:________________
_______________________________________________
[NOTE: To be executed by an executive officer]
APPENDIX A
LIST OF FINANCIAL EXPERTS
▇▇▇▇ ▇▇▇▇▇ & Sons
Bear, ▇▇▇▇▇▇▇ & Co., Inc.
Credit Suisse First Boston Corporation
▇▇▇▇▇▇, Read & Co. Inc.
▇▇▇▇▇▇▇▇▇, Lufkin & ▇▇▇▇▇▇▇▇ Securities Corporation
▇▇▇▇▇▇ ▇▇▇▇, LLP
▇▇▇▇▇▇▇, ▇▇▇▇▇ & Co.
▇▇▇▇▇▇ Freres & Co.
▇▇▇▇▇▇ Brothers
Merrill Lynch, Pierce, ▇▇▇▇▇▇ & ▇▇▇▇▇ Incorporated
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & Co. Incorporated
▇▇▇▇▇▇▇▇▇▇▇ & Co., Inc.
PaineWebber Incorporated
Prudential Securities Inc.
Salomon Brothers Inc
▇▇▇▇▇ ▇▇▇▇▇▇ Inc.