EXECUTION COPY
WARRANT
TORONTO DOMINION (TEXAS), INC.
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO SALE OR DISPOSITION
MAY BE EFFECTED WITHOUT (i) AN EFFECTIVE REGISTRATION STATEMENT RELATED THERETO,
(ii) AN OPINION OF COUNSEL FOR THE HOLDER, REASONABLY SATISFACTORY TO THE
COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED, (iii) OTHERWISE COMPLYING WITH
THE PROVISIONS OF SECTION 7 OF THE WARRANT UNDER WHICH THESE SECURITIES WERE
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ISSUED DIRECTLY OR INDIRECTLY."
CTC COMMUNICATIONS CORP.
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WARRANT TO PURCHASE 69,216 SHARES
OF COMMON STOCK
CTC COMMUNICATIONS CORP., a Massachusetts corporation (the "Company"),
hereby certifies that, for value received, Toronto Dominion (Texas), Inc., a
Delaware corporation or its registered transferees, successors or assigns (each,
a "holder"), is the registered holder of warrants (the "Warrants") to subscribe
for and purchase Sixty-Nine Thousand Two Hundred and Sixteen (69,216) shares of
the fully paid and nonassessable Common Stock (as adjusted pursuant to Section 4
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hereof, the "Warrant Shares") of the Company, at a purchase price per share
equal to Eleven Dollars and Eighty-One and 25/100 Cents ($11.8125) (such price,
as adjusted pursuant to Section 4 hereof, the "Warrant Price"), subject to the
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provisions and upon the terms and conditions hereinafter set forth. As used
herein, (a) the term "Common Stock" shall mean the Company's presently
authorized Common Stock, par value $0.01 per share, and any stock into or for
which such Common Stock may hereafter be converted or exchanged, (b) the term
"Date of Grant" shall mean March 24, 1999, and (c) the term "Other Warrants"
shall mean any warrant issued upon transfer or partial exercise of this Warrant.
The term "Warrant" as used herein shall be deemed to include Other Warrants
unless the context hereof or thereof clearly requires otherwise.
This Warrant is being issued pursuant to that certain Loan Agreement
(the "Loan Agreement") dated as of March 15, 1999 by and among the Company, TD
Securities (USA) Inc. and Toronto Dominion (Texas), Inc. As used herein the
term "Loan Warrants" shall mean this Warrant together with any other warrants
issued pursuant to the Loan Agreement and the term "Loan Warrant Shares" shall
mean all of the shares of Common Stock issued or issuable upon the exercise of
the Loan Warrants.
In connection with any consents or amendments of the Loan Warrants,
from the Date of Grant to and including September 24, 1999, 643,129 Loan Warrant
Shares (comprised of 69,216 Loan Warrant Shares purchasable under this Warrant
and 573,913 Warrant Shares purchasable under the Class A Contingent Warrant (as
defined in the Loan Agreement)) shall be deemed to be outstanding. In
connection with any consents or amendments of the Loan Warrants after September
24, 1999, the actual number of Loan Warrants and Loan Warrant Shares outstanding
shall be considered outstanding.
1. Term. The purchase right represented by this Warrant is
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exercisable, in whole or in part, at any time and from time to time from the
Date of Grant through and including the close of business on March 24, 2009 (the
"Expiration Date"); provided, however, that in the event any portion of this
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Warrant is unexercised as of the Expiration Date, the terms of Section 2(b)
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below shall apply.
2. Exercise.
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a. Method of Exercise; Payment; Issuance of New Warrant.
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Subject to Section 1 hereof, the purchase right represented by this Warrant may
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be exercised by the holder hereof, in whole or in part and from time to time, by
the surrender of this Warrant (with the notice of exercise form attached hereto
as Exhibit A duly executed) at the principal office of the Company, except as
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otherwise provided for herein, and by the payment to the Company of an amount
equal to the then applicable Warrant Price multiplied by the number of Warrant
Shares then being purchased. The person or persons in whose name(s) any
certificate(s) representing shares of Common Stock shall be issuable upon
exercise of this Warrant shall be deemed to have become the holder(s) of record
of, and shall be treated for all purposes as the record holder(s) of, the shares
represented thereby (and such shares shall be deemed to have been issued)
immediately prior to the close of business on the date or dates upon which this
Warrant is exercised if exercised prior to the close of business on such date;
otherwise, the date of record shall be the next business day. In the event of
any exercise of the rights represented by this Warrant, certificates for the
shares of Common Stock so purchased shall be delivered to the holder hereof as
soon as possible and in any event within thirty (30) days after such exercise
and, unless this Warrant has been fully exercised (including without limitation,
exercise pursuant to Section 2(b) below), a new Warrant representing the portion
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of the Warrant Shares, if any, with respect to which this Warrant shall not then
have been exercised shall also be issued to the holder hereof as soon as
possible and in any event within such thirty (30)-day period.
b. Automatic Exercise. In the event that any portion of this
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Warrant remains unexercised as of the Expiration Date and the fair market value
(determined in accordance with Section 4(h) below) of one share of Common Stock
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as of the Expiration Date is greater than the applicable Warrant Price as of the
Expiration Date, then this Warrant shall be deemed to have been exercised
automatically immediately prior to the close of business on the Expiration Date
(or, in the event that the Expiration Date is not a business day, the
immediately preceding business day) (the "Automatic Exercise Date"), and the
person entitled to receive the shares of Common Stock issuable upon such
exercise shall be treated for all purposes as the holder of record of such
Warrant Shares as of the close of business on such Automatic Exercise Date.
This Warrant shall be deemed to be surrendered to the Company on the Automatic
Exercise Date by virtue of this Section 2(b) and without any action by the
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holder of this Warrant or any other person, and payment to the Company of the
then applicable Warrant Price multiplied by the number of Warrant Shares then
being purchased shall be deemed to be made pursuant to the terms of Section 2(c)
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below (without payment by the holder of any exercise price or any cash or other
consideration). As promptly as practicable on or after the Automatic Exercise
Date and in any event within thirty (30) days thereafter, the Company at its
expense shall issue and deliver to the person or persons entitled to receive the
same a certificate or certificates for the number of Warrant Shares issuable
upon such exercise.
c. Right to Convert Warrant into Common Stock; Net Issuance.
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(1) Right to Convert. In addition to and without limiting
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the rights of the holder hereof under the terms of this Warrant, the holder
shall have the right to convert this Warrant or any portion thereof (the
"Conversion Right") into shares of Common Stock as provided in this Section 2(c)
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at any time or from time to time during the term of this Warrant. Upon exercise
of the Conversion Right with respect to all or a specified portion of shares
subject to this Warrant
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(the "Converted Warrant Shares"), the Company shall deliver to the holder
(without payment by the holder of any exercise price or any cash or other
consideration) that number of shares of fully paid and nonassessable Common
Stock equal to the quotient obtained by dividing (i) the value of this Warrant
(or the specified portion hereof) on the Conversion Date (as defined in Section
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2(c)(2) hereof), which value shall be equal to (A) the aggregate fair market
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value of the Converted Warrant Shares issuable upon exercise of this Warrant (or
the specified portion hereof) on the Conversion Date less (B) the aggregate
Warrant Price of the Converted Warrant Shares immediately prior to the exercise
of the Conversion Right by (ii) the fair market value of one (1) share of Common
Stock on the Conversion Date.
Expressed as a formula, such conversion shall be computed as follows:
X = A - B
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Y
Where: X = the number of shares of Common Stock that may be
issued to the holder
Y = the fair market value (FMV) of one (1) share of
Common Stock
A = the aggregate FMV (i.e., FMV x Converted Warrant
Shares)
B = the aggregate Warrant Price (i.e., Converted
Warrant Shares x Warrant Price)
No fractional shares shall be issuable upon exercise of the Conversion
Right, and, if the number of shares to be issued determined in accordance with
the foregoing formula is other than a whole number, the Company shall pay to the
holder an amount in cash equal to the fair market value of the resulting
fractional share on the Conversion Right. For purposes of Section 9 of this
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Warrant, shares issued pursuant to the Conversion Right shall be treated as if
they were issued upon the exercise of this Warrant.
(2) Method of Exercise. The Conversion Right may be exercised by
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the holder by the surrender of this Warrant at the principal office of the
Company together with a written statement specifying that the holder thereby
intends to exercise the Conversion Right and indicating the number of shares
subject to this Warrant which are being surrendered (referred to in Section
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2(c)(l) hereof as the Converted Warrant Shares) in exercise of the Conversion
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Right. Such conversion shall be effective upon receipt by the Company of this
Warrant together with the aforesaid written statement, or on such later date as
is specified therein (the "Conversion Date"). Certificates for the shares
issuable upon exercise of the Conversion Date, and, if applicable, a new warrant
evidencing the balance of the shares remaining subject to the Warrant shall be
issued as of the Conversion Date and shall be delivered to the holder, within
thirty (30) days following the Conversion Date.
(3) Determination of Fair Market Value. For purposes of this
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Section 2(c) "fair market value" of a share of Common Stock shall have the
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meaning set forth in Section 4(h) below.
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3. Stock Fully Paid; Reservation of Shares. All Warrant Shares that
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may be issued upon the exercise of the rights represented by this Warrant will,
upon issuance pursuant to the terms and
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conditions herein, be fully paid and nonassessable, and free from all taxes,
liens, charges, and pre-emptive rights with respect to the issue thereof. The
Company shall pay all transfer taxes, if any, attributable to the issuance of
the Warrant Shares upon the exercise of this Warrant. During the period within
which the rights represented by this Warrant may be exercised, the Company will
at all times have authorized, and reserved for the purpose of the issue upon
exercise of the purchase rights evidenced by this Warrant, a sufficient number
of shares of its Common Stock to provide for the exercise of the rights
represented by this Warrant.
4. Adjustment of Warrant Price and Number of Shares. The number
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and kind of securities purchasable upon the exercise of this Warrant and the
Warrant Price shall be subject to adjustment from time to time upon the
occurrence of certain events, as follows:
a. Adjustment for Initial Errors. The Company hereby
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acknowledges that the number of Warrant Shares constituting the initial number
of securities purchasable upon the exercise of this Warrant (the "Exercise
Quantity") was calculated based upon the Company's representation that the
number of outstanding shares of Common Stock of the Company, calculated on a
fully diluted basis using the treasury stock method as contemplated by the
Accounting Principles Board Opinion No.15 (as referred to in Statement of
Financial Accounting Standards No. 128) (such shares as calculated on any date,
the "Fully Diluted Shares"), as of the Date of Grant using a fair market value
equal to the Average Price (as defined in the Loan Agreement) as of March 11,
1999 of $11.8125 per share of Common Stock and before giving effect to the
issuance of any of the Loan Warrants or the Loan Warrant Shares, totaled
13,773,901 shares. The calculation used by the Company in determining such
amount is set forth in Exhibit B hereto. If for any reason it shall hereafter
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be determined that the actual number of Fully Diluted Shares as of the Date of
Grant differed from such amount, then the Company or the holder (whichever shall
discover such error) shall notify the other of such determination and the
Company shall forthwith reissue all of the outstanding Warrants with an
appropriate proportional adjustment in said number to be effective from the Date
of Grant, provided that such adjustment shall be made only if it results in an
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increase in the number of Warrant Shares hereunder.
b. Merger, Sale, Reclassification. In case of any (i)
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consolidation or merger (including a merger in which the Company is the
surviving entity), (ii) sale or other disposition of all or substantially all of
the Company's assets or distribution of property to Stockholders (other than
distributions payable out of earnings or retained earnings), or (iii)
reclassification, change or conversion of securities of the class issuable upon
exercise of this Warrant (other than a change in par value, or from par value to
no par value, or from no par value to par value, or as a result of a subdivision
or combination), then the Company shall take all necessary actions to ensure
that thereafter the holder of this Warrant shall have the right to receive, at a
total purchase price not to exceed that payable upon the exercise of this
unexercised portion of this Warrant, and in lieu of the shares of Common Stock
theretofore issuable upon exercise of this Warrant, the kind and amount of
shares of stock, other securities, money and property receivable upon such
consolidation, merger, sale or other disposition, reclassification, change or
conversion by a holder of the number of shares of Common Stock then purchasable
under this Warrant. Such new Warrant shall provide for adjustments that shall
be as nearly equivalent as may be practicable to the adjustments provided for in
this Section 4. The provisions of this Section 4(b) shall similarly apply to
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successive reclassifications, changes and conversions.
c. Subdivision or Combination of Shares. If the Company at any
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time while this Warrant remains outstanding and unexpired shall subdivide or
combine its outstanding shares of Common Stock, the Warrant Price shall be
proportionately decreased in the case of a subdivision or
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increased in the case of a combination, effective at the close of business on
the date the subdivision or combination becomes effective.
d. Stock Dividends and Other Distributions. If the Company at
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any time while this Warrant is outstanding and unexpired shall (i) pay a
dividend with respect to Common Stock payable in Common Stock, or (ii) make any
other distribution with respect to Common Stock (except any distribution
specifically provided for in Section 4(b), Section 4(c), or Section 4(e) hereof)
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of Common Stock, then the Warrant Price shall be adjusted, from and after the
date of determination of stockholders entitled to receive such dividend or
distribution, to that price determined by multiplying the Warrant Price in
effect immediately prior to such date of determination by a fraction (i) the
numerator of which shall be the total number of Fully Diluted Shares outstanding
immediately prior to such dividend or distribution, and (ii) the denominator of
which shall be the total number of Fully Diluted Shares outstanding immediately
after such dividend or distribution.
e. Special Distributions. In case the Company shall make
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any distribution (other than dividends and distributions referred to in Section
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4(c) or Section 4(d) above and other than cash dividends) to all holders of
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shares of Common Stock (including any such distribution made in connection with
a consolidation or merger in which the Company is the surviving corporation) of
evidences of indebtedness, assets or subscription rights, options, warrants, or
exchangeable or convertible securities containing the right to subscribe for or
purchase shares of any class of equity securities of the Company, the Warrant
Price to be in effect on and after the date of such distribution shall be
adjusted by multiplying the Warrant Price in effect immediately prior to such
record date by a fraction (i) the numerator of which shall be the fair market
value per share of Common Stock on such record date (determined in accordance
with Section 4(h) below), less the fair market value (as determined by the Board
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of Directors of the Company in good faith as set forth in a duly adopted board
resolution certified by the Company's Clerk or Assistant Clerk) of the portion
of the assets or evidences of indebtedness so to be distributed or of such
subscription tights, options, warrants, or exchangeable or convertible
securities applicable to one (1) share of the Common Stock outstanding as of
such record date, provided, that in the event the Board of Directors is unable
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to make such a determination or holders of at least a majority of the Loan
Warrant Shares issuable under the outstanding Loan Warrants disagree in writing
with such determination (as the manner provided in Section 4(h) below), then the
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fair market value of such consideration shall be determined in the same manner
as a Valuation under Section 4(h) below, and (ii) the denominator of which shall
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be such fair market value per share of Common Stock as determined in the manner
set forth under Section 4(h) below. Such adjustment shall be made successively
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whenever a distribution is made. If the holder hereof has exercised all or any
portion of this Warrant after the record date for a distribution covered by this
paragraph, but prior to the date distribution is made by the Company, then the
Company shall make a distribution to the holder, concurrent with the
distribution to stockholders, of such consideration that the holder would have
been entitled to receive in connection with such distribution with respect to
the shares issued on such exercise, had the holder exercised all or such portion
of this Warrant immediately prior to such record date.
f. Other Issuances of Securities.
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(1) In case the Company or any subsidiary thereof shall, at any
time after the Date of Grant, issue shares of Common Stock, or rights, options,
warrants or convertible or exchangeable securities containing the right to
subscribe for or purchase shares of Common Stock (excluding (i) shares, rights,
options, warrants, or convertible or exchangeable securities outstanding on the
Date of Grant, or issued in any of the transactions described in Section 4(c),
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4(d) and 4(e) above, (ii) shares issued upon the exercise of such rights,
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options or warrants or upon conversion or exchange of
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such convertible or exchangeable securities, (iii) the Loan Warrants and any
shares issued upon exercise thereof, (iv) up to Three Million Fifty-Eight
Thousand Five Hundred Twenty-Six (3,058,526) shares of Common Stock issued or
issuable to directors, officers, employees or consultants of the Company or any
subsidiary in connection with their service as directors, officers, employees or
consultants pursuant to any stock grant, stock option, warrant or other right
(the "Employee Shares")), at a price per share of Common Stock (determined in
the case of such rights, options, warrants, or convertible or exchangeable
securities by dividing (x) the total amount received and/or receivable by the
Company in consideration of the sale and issuance of such rights, options,
warrants, or convertible or exchangeable securities, plus the total minimum
consideration payable to the Company upon exercise, conversion, or exchange
thereof by (y) the total maximum number of shares of Common Stock covered by
such rights, options, warrants, or convertible or exchangeable securities) less
than the fair market value per share of Common Stock (determined in accordance
with Section 4(h) below) on the date the Company fixes the offering price of
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such shares, rights, options, warrants, or convertible or exchangeable
securities, then the Warrant Price shall be adjusted so that it shall equal the
price determined by multiplying the Warrant Price in effect immediately prior
thereto by a fraction (i) the numerator of which shall be the sum of (A) the
number of Fully Diluted Shares outstanding immediately prior to such sale and
issuance plus (B) the number of shares of Common Stock which the aggregate
consideration received (determined as provided above and below) for such sale or
issuance would purchase at such fair market value per share, and (ii) the
denominator of which shall be the total number of Fully Diluted Shares
outstanding immediately after such sale and issuance. Such adjustment shall be
made successively whenever such an issuance is made.
(2) For the purposes of an adjustment under Section 4(f)(1), the
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maximum number of shares of Common Stock which the holder of any such rights,
options, warrants or convertible or exchangeable securities shall be entitled to
subscribe for or purchase shall be deemed to be issued and outstanding as of the
date of such sale and issuance; furthermore, the consideration received by the
Company therefor shall be deemed to be equal to the price per share of Common
Stock (determined in the case of such rights, options, warrants, or convertible
or exchangeable securities by dividing (x) the total amount received and/or
receivable by the Company in consideration of the sale and issuance of such
rights, options, warrants, or convertible or exchangeable securities, plus the
total minimum consideration payable to the Company upon exercise, conversion, or
exchange thereof by (y) the total maximum number of shares of Common Stock
covered by such rights, options, warrants, or convertible or exchangeable
securities) multiplied by the number of shares deemed issued and outstanding in
this sentence. In case the Company shall issue shares of Common Stock, or
rights, options, warrants, or convertible or exchangeable securities containing
the right to subscribe for or purchase shares of Common Stock, for a
consideration consisting, in whole or in part, of consideration other than cash
or its equivalent, then in determining the price per share of Common Stock and
the consideration received by the Company for purposes of the first sentence or
Section 4(f)(1), the Board of Directors of the Company shall determine, in good
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faith, the fair market value of said property, and such determination shall be
described in a duly adopted board resolution certified by the Company's Clerk or
Assistant Clerk, provided, that in the event the Board of Directors is unable to
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make such a determination or, in the case of, and solely to the extent that, any
issuance constitutes an Affiliated Transaction as defined in Section 4(f)(3)
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below, holders of at least a majority of the Loan Warrant Shares issuable under
the outstanding Loan Warrants disagree in writing with such determination (in
the manner provided in Section 4(h) below), then the fair market value of such
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consideration shall be determined in the same manner as a Valuation under
Section 4(h) below. In case the Company shall issue shares of Common Stock, or
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rights, options, warrants, or convertible or exchangeable securities containing
the right to subscribe for or purchase shares of Common Stock, together with one
(1) or more other securities as a part of a unit at a price per unit, then in
determining the price per share of Common Stock and the consideration received
by the Company for purposes of the first sentence of Section 4(f)(l), the Board
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of
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Directors of the Company shall determine, in good faith, which determination
shall be described in a duly adopted board resolution certified by the Company's
Clerk or Assistant Clerk, the fair market value of the rights, options,
warrants, or convertible or exchangeable securities then being sold as part of
such unit, provided, that in the event the Board of Directors is unable to make
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such a determination or, in the case of, and solely to the extent that, any
issuance constitutes an Affiliated Transaction as defined in Section 4(f)(3)
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below, holders of at least a majority of the Loan Warrant Shares issuable under
the outstanding Loan Warrants disagree in writing with such determination (in
the manner provided in Section 4(h) below), then the fair market value of such
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consideration shall be determined in the same manner as a Valuation under
Section 4(h) below.
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(3) For purposes of this Section 4(f), an "Affiliated Transaction"
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shall mean any issuance of shares of Common Stock, or rights, options, warrants
or convertible or exchangeable securities containing the right to subscribe for
or purchase shares of Common Stock, to (i) any officer or director of the
Company or any member of the immediate family of such a person or (ii) any 10%
or greater beneficial stockholder of the Company or any person who, to the
Company's knowledge, is a member of the immediate family of such a stockholder
(if such stockholder is a natural person), or to any partnership, corporation,
limited liability company, business trust, joint stock company, trust,
unincorporated association or joint venture which, directly or indirectly, is in
control of, is controlled by, or is under common control with, (i) any officer
or director of the Company or any member of the immediate family of such a
person or (ii) any 10% or greater beneficial stockholder of the Company or any
person who, to the Company's knowledge, is a member of the immediate family of
such a stockholder (if such stockholder is a natural person). For purposes of
the preceding sentence, the term "control" shall mean the power, directly or
indirectly, to (i) vote 51% or more of the voting securities of an entity, or
(ii) direct or cause the direction of the management or policies of an entity as
the trustee, general partner or managing member of such entity. Notwithstanding
the foregoing, no transaction or part thereof shall be considered an "Affiliated
Transaction" if the securities or rights issued to any person described in the
first sentence of this Section 4(f)(3) constitutes less than three percent (3%)
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of the aggregate securities and rights issued in such transaction.
g. Adjustment of Number of Shares. Upon each adjustment in the
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Warrant Price, the number of Warrant Shares purchasable hereunder shall be
adjusted, to the nearest whole share, to the product obtained by multiplying the
number of Warrant Shares purchasable immediately prior to such adjustment in the
Warrant Price by a fraction, the numerator of which shall be the Warrant Price
immediately prior to such adjustment and the denominator of which shall be the
Warrant Price immediately thereafter.
h. Determination of Fair Market Value. For purposes of those
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provisions of this Warrant requiring a determination in accordance with this
Section 4(h), "fair market value" as of a particular date (the "Determination
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Date") shall mean (i) for any security if such security is traded on a national
securities exchange (an "Exchange"), the weighted average (based on daily
trading volume) of the mid-point between the daily high and low trading prices
of the security on each of the last five (5) trading days prior to the
Determination Date reported on such Exchange, (ii) for any security that is not
traded on an Exchange but trades in the over-the-counter market and such
security is quoted on the Nasdaq Stock Market ("NASDAQ"), (A) the weighted
average (based on daily trading volume) of the mid-point between the daily high
and low trading prices reported on NASDAQ on each of the last five (5) trading
days (or if the relevant price or quotation did not exist on any of such days,
the relevant price or quotation on the next preceding business day on which
there was such a price or quotation) prior to the Determination Date, or (iii)
for any security or any other asset, if no price can be determined on the basis
of the above methods of valuation, then the judgment of valuation shall be
determined in good faith by
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the Board of Directors of the Company, which determination shall be described in
a duly adopted board resolution certified by the Company's Clerk or Assistant
Clerk. If the Board of Directors of the Company is unable to determine any
Valuation (as defined below), or if (except in the case of a fair market value
determination to the extent in connection with a non-Affiliated Transaction
under Section 4(f)(2) above), the holders of at least a majority of all of the
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Loan Warrant Shares issuable under the outstanding Loan Warrants (collectively,
the "Requesting Holders") disagree with the Board's determination of any
Valuation by written notice delivered to the Company within five (5) business
days after the determination thereof by the Board of Directors of the Company is
communicated to holders of the Warrants affected thereby, which notice specifies
a majority-in-interest of the Requesting Holders' determination of such
Valuation, then, unless the Company accepts the Valuation so proposed and the
Company and a majority-in-interest of the Requesting Holders agree upon a
valuation within five (5) business days thereafter, the Company and (in the
event of a disagreement by the Requesting Holders) a majority-in-interest of the
Requesting Holders shall select a mutually acceptable investment banking firm of
national reputation which has not had a material relationship with the Company
or any officer of the Company within the preceding two (2) years, which shall
determine such Valuation. Such investment banking firm's determination of such
Valuation shall be final, binding and conclusive on the Company and the holders
of all of the Warrants issued hereunder and then outstanding, to the extent of
the issuance or distribution to which such Valuation applies. If the Board of
Directors of the Company was unable to determine such Valuation, all costs and
fees of such investment banking firm shall be borne by the Company. If the
Requesting Holders disagreed with the Board's determination of such Valuation,
the party whose determination of such Valuation differed from the Valuation
determined by such investment banking firm by the greatest amount shall bear all
costs and fees of such investment banking firm. For purposes of this Section
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4(h), the term "Valuation" shall mean the determination, to be made initially by
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the Board of Directors of the Company, of the fair market value of any asset
pursuant to clause (iii) above.
5. Notice of Adjustments. Whenever the Warrant Price or the number
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of Warrant Shares purchasable hereunder shall be adjusted pursuant to
Section 4 hereof, the Company shall make a certificate signed by its chief
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financial officer setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated, and the Warrant Price and the number of Warrant Shares
purchasable hereunder after giving effect to such adjustment, which shall be
mailed (without regard to Section 13 hereof, by first class mail, postage
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prepaid) to the holder of this Warrant.
6. Fractional Shares. No fractional shares of Common Stock will
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be issued in connection with any exercise hereunder, but in lieu of such
fractional shares the Company shall make a cash payment therefor based on the
fair market value (as determined in accordance with Section 4(h) above) of a
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share of Common Stock on the date of exercise.
7. Compliance with Securities Act; Disposition of Warrant or Warrant
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Shares.
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a. Compliance with Securities Act. The holder of this Warrant,
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by acceptance hereof, agrees that this Warrant and the shares of Common Stock to
be issued upon exercise hereof, are being acquired for investment and that such
holder will not offer, sell or otherwise dispose of this Warrant, or any shares
of Common Stock to be issued upon exercise hereof except under circumstances
which will not result in a violation of the Securities Act of 1933, as amended
(the "Act"). Upon exercise of this Warrant, the holder hereof shall confirm in
writing, by executing the form attached as Schedule 1 to Exhibit A hereto, that
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the shares of Common Stock so purchased are being acquired for investment and
not with a view toward distribution or resale. This Warrant and all shares of
Common
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Stock issued upon exercise of this Warrant (unless registered under the Act)
shall be stamped or imprinted with a legend in substantially the following form:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS. NO
SALE OR DISPOSITION MAY BE EFFECTED WITHOUT (i) AN EFFECTIVE
REGISTRATION STATEMENT RELATED THERETO, (ii) AN OPINION OF COUNSEL FOR
THE HOLDER, REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED, (iii) OTHERWISE COMPLYING WITH THE
PROVISIONS OF SECTION 7 OF THE WARRANT UNDER WHICH THESE SECURITIES
---------
WERE ISSUED DIRECTLY OR INDIRECTLY."
In addition, in connection with the issuance of this Warrant, the
holder specifically represents to the Company by acceptance of this Warrant as
follows:
(1) The holder is aware of the Company's business affairs and
financial condition, and has acquired information about the Company sufficient
to reach an informed and knowledgeable decision to acquire this Warrant. The
holder is acquiring this Warrant for its own account for investment purposes
only and not with a view to, or for resale in connect on with any "distribution"
thereof for purposes of the Act.
(2) The holder understands that this Warrant and the Warrant
Shares have not been registered under the Act in reliance upon a specific
exemption therefrom, which exemption depends upon, among other things, the bona
fide nature of the holder's investment intent as expressed herein. In this
connection, the holder understands that, in the view of the Securities and
Exchange Commission (the "SEC"), the statutory basis for such exemption may be
unavailable if the holder's representation was predicated solely upon a present
intention to hold the Warrant and the Warrant Shares for the minimum capital
gains period specified under applicable tax laws, for a deferred sale, for or
until an increase or decrease in the market price of the Warrant and the Warrant
Shares, or for a period of one (1) year or any other fixed period in the future.
(3) The holder further understands that this Warrant and the
Warrant Shares must be held indefinitely unless subsequently registered under
the Act and any applicable state securities laws, or unless exemptions from
registration are otherwise available.
(4) The holder is aware of the provisions of Rule 144 and 144A,
promulgated under the Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions, if applicable, including, among other
things: the availability of certain public information about the Company, the
resale occurring not less than one (1) year after the party has purchased and
paid for the securities to be sold; the sale being made through a broker in an
unsolicited "broker's transaction" or in transactions directly with a market
maker (as said term is defined under the Securities Exchange Act of 1934, as
amended) and the amount of securities being sold during any three-month period
not exceeding the specified limitations stated therein.
(5) The holder further understands that at the time it wishes to
sell this Warrant and the Warrant Shares there may be no public market upon
which to make such a sale, and
9
that, even if such a public market then exists, the Company may not be
satisfying the current public information requirements of Rule 144 and 144A, and
that, in such event, the holder may be precluded from selling this Warrant and
the Warrant Shares under Rule 144 and 144A even if the one (1)-year minimum
holding period had been satisfied.
(6) The holder further understands that in the event all of the
requirements of Rule 144 and 144A are not satisfied, registration under the Act,
compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 and 144A is not
exclusive, the Staff of the SEC has expressed its opinion that persons proposing
to sell private placement securities other than in a registered offering and
otherwise than pursuant to Rule 144 and 144A will have a substantial burden of
proof in establishing that an exemption from registration is available for such
offers or sales, and that such persons and their respective brokers who
participate in such transactions do so at their own risk.
b. Disposition of Warrant or Warrant Shares. This Warrant and the
----------------------------------------
Warrant Shares may be detached and transferred, in whole or in part, separately
from the Loan Agreement. With respect to any offer, sale or other disposition of
this Warrant, or any Warrant Shares acquired pursuant to the exercise of this
Warrant prior to the sale or disposition of such Warrant or Warrant Shares, the
holder hereof and each subsequent holder of this Warrant agrees to give written
notice to the Company prior thereto, describing briefly the manner thereof,
together with a written opinion of such holder's counsel, if reasonably
requested by the Company, to the effect that such offer, sale or other
disposition may be effected without registration or qualification (under the Act
as then in effect or any federal or state law then in effect) of this Warrant or
such Warrant Shares and indicating whether or nor under the Act certificates for
this Warrant or such Warrant Shares to be sold or otherwise disposed of require
any restrictive legend as to applicable restrictions on transferability in order
to ensure compliance with applicable law. Promptly upon receiving such written
notice and reasonably satisfactory opinion, if so requested, the Company, as
promptly as practicable, shall notify such holder that such holder may sell or
otherwise dispose of this Warrant or such Warrant Shares, all in accordance with
the terms of the notice delivered to the Company. If a determination has been
made pursuant to this Section 7(b) that the opinion of counsel for the holder
------------
is not reasonably satisfactory to the Company, the Company shall so notify the
holder promptly after such determination has been made. The foregoing
notwithstanding, this Warrant or such Warrant Shares may, as to such federal
laws, be offered, sold or otherwise disposed of in accordance with Rule 144 and
144A under the Act, provided that the Company shall have been furnished with
such information as the Company may reasonably request to provide a reasonable
assurance, including, where reasonably required, an opinion of counsel, that the
provisions of Rule 144 and 144A have been satisfied. Each certificate
representing this Warrant or the Warrant Shares thus transferred (except a
transfer pursuant to Rule 144) shall bear a legend as to the applicable
restrictions on transferability in order to ensure compliance with such laws,
unless in the aforesaid opinion of counsel for the holder, such legend is not
required in order to ensure compliance with such laws. The Company may issue
stop transfer instructions to its transfer agent or, if acting as its own
transfer agent, the Company may stop transfer on its corporate books, in
connection with such restrictions.
8. Rights as Stockholders; Information. Except as provided in
-----------------------------------
Section 10.2 below, no holder of this Warrant, as such, shall be entitled
- ------------
to vote or receive dividends or be deemed the holder of Common Stock or any
other securities of the Company which may at any time be issuable on the
exercise hereof for any purpose, nor shall anything contained herein be
construed to confer upon the holder of this Warrant, as such, any of the rights
of a stockholder of the Company or any right to vote for the election of the
directors or upon any matter submitted to stockholders at any meeting thereof,
or to
10
receive notice of meetings, or to receive dividends or subscription rights
or otherwise, until this Warrant shall have been exercised and the Warrant
Shares purchasable upon the exercise hereof shall have become deliverable, as
provided herein. The foregoing notwithstanding, the Company will transmit to
the holder of this Warrant such information, documents and reports as are
generally distributed to the holders of any class or series of the securities of
the Company concurrently with the distribution thereof to the stockholders.
9. Registration Rights.
-------------------
9.1. Demand Registration Rights.
--------------------------
a. Shelf Registration. The Company covenants and agrees
------------------
that at any time after receipt of a written request (a "Shelf Registration
Request") from the holder(s) of the Loan Warrants and/or the Loan Warrant Shares
(collectively, the "Securityholders") constituting at least thirty percent (30%)
of the Loan Warrant Shares (determined on an as-exercised basis) not already
sold pursuant to Section 9 of any Loan Warrant or Rule 144 under the Act, to
---------
have the Company register the Loan Warrant Shares for sale on a continuous basis
pursuant to Rule 415 under the Act, then the Company shall: (i) promptly deliver
written notice (the "Shelf Registration Notice") to all other Securityholders of
the Company's receipt of the Shelf Registration Request; (ii) file with the SEC
a registration statement on Form S-3 or any successor form or registration to
such form, or, if the Company is ineligible for Form S-3, Form S-1 or any
successor form of registration to such form, for an offering to be made on a
continuous basis pursuant to Rule 415 (the "Shelf Registration Statement"),
covering all of the outstanding Loan Warrant Shares (determined on an as-
exercised basis) (the "Registrable Securities"), within forty-five (45) days of
delivery of the Shelf Registration Request, (iii) shall use its best efforts to
cause such registration statement to be declared effective within one hundred
and twenty (120) days of delivery of the Shelf Registration Notice and (iv)
shall use its best efforts, including but not limited to the filing of any and
all supplements and amendments to the Shelf Registration Statement required
under applicable rules, regulations or instructions or reasonably requested by
the holders of a majority of the shares then registered under the Shelf
Registration Statement, to keep the Shelf Registration Statement continuously
effective under the Act for 12 months or such shorter period as may be requested
by Securityholders representing a majority of the shares included in such
registration. The Company shall be obligated to effect only one registration
under Section 9.1(a) of all of the Loan Warrants. Notwithstanding the
--------------
foregoing, the Company shall not be obligated to effect any registration
pursuant to Section 9.l(a) of any Loan Warrant if it has already effected two
--------------
registrations under Section 9.1(b) of the Loan Warrants.
--------------
b. Other Demand Registrations. The Company covenants and
--------------------------
agrees that at any time after receipt of a written request (a "Demand
Registration Request") from Securityholders holding at least thirty percent
(30%) of the Registrable Securities not already sold pursuant to Section 9 of
---------
any Loan Warrant or Rule 144 under the Act, stating that such Securityholders
desire and intend to have the Company register all or a portion of the
Registrable Securities held by them on Form S-3, or any successor form of
registration to such form, or, if the Company is ineligible therefore, Form S-1,
or any successor form of registration to such form, the Company shall give
notice (the "Registration Notice") to all of the Securityholders (30) days of
the Company's receipt of such registration request, the Company shall to be
included in such registration all Registrable Securities requested to be
included herein by any such Securityholder within fifteen (15) days after such
Registration Notice is (subject to the provisions of the final sentence of this
Section 9.1(b). After such fifteen (15)-day period, the Company shall file as
- --------------
promptly as practicable a registration statement and use its reasonable best
efforts to cause such registration statement to become effective under the Act
and remain effective for six (6)
11
months or such shorter period as may be required if all such Registrable
Securities covered by such registration statement are sold prior to the
expiration of six (6)-month period; provided, however, that the Company shall
-------- -------
not be obligated to effect any such registration pursuant to this Section 9.1(b)
-------------
after the Company has effected (i) two (2) registrations pursuant to Section
-------
9.1(b) of any of the Loan Warrants or (ii) one (1) registration pursuant to
- ------
Section 9.1(a) of any Loan Warrant and one (1) registration pursuant to Section
- -------------- -------
9.1(b) of any Loan Warrant. For purposes of this Section 9, a registration shall
- ------
not be deemed to have been effected unless a requested registration statement
has been declared effective and, subject to Section 9.3(b) hereof, remained
--------------
effective for a period of six (6) months (or such shorter period as is permitted
in the second sentence of this Section 9.1(b)). The foregoing notwithstanding,
---------------
in the event of an underwritten offering pursuant to this Section 9.1(b), if the
--------------
managing underwriter of such offering shall advise the Securityholders in
writing that, in its opinion, the distribution of a specified portion of the
securities requested to be included in the registration would materially
adversely affect the distribution of such securities by increasing the aggregate
amount of the offering in excess of the maximum amount of securities which such
managing underwriter believes can reasonably be sold in the contemplated
distribution, then the securities to be included in the registration shall be
reduced in the following order: (i) first, securities proposed to be included by
the Company and securities that are not Registrable Securities shall be excluded
as determined by the Company and (ii) second, Registrable Securities will be
excluded pro rata among all of the Registrable Securities requested to be
included therein. For purposes of this Section 9.1(b), the Securityholders who
--------------
have requested registration of Common Stock to be acquired upon the exercise of
Warrants not theretofore exercised shall furnish the Company with an undertaking
that they or the underwriters or other persons to whom such Warrants will be
transferred have undertaken to exercise such Warrants and to sell, transfer or
otherwise dispose of the Warrant Shares received upon exercise of such Warrants
in such registration.
9.2. Incidental Registration
-----------------------
a. Subject to Section 9.2(b) below, the Company covenants
--------------
and agrees that in the event the Company proposes after the Date of Grant to
file a registration statement under the Act with respect to any of its equity
securities (other than pursuant to registration statements on Form S-4 or Form
S-8 or any successor or similar forms and other than registrations pursuant to
Section 9.1), whether or not for its own account, then the Company shall give
- -----------
written notice of such proposed filing to all Securityholders promptly (and in
any event at least twenty (20) days before the anticipated filing date). Such
notice shall offer to such Securityholders, together with others who, have
similar rights, the opportunity to include in such Statement such number of
Registrable Securities as they may request (other than Registration Securities
already registered pursuant to a Shelf Registration Statement). The Company
shall direct and use its reasonable best efforts to cause the managing
underwriter of a proposed underwritten offering (unless the offering is an
underwritten offering of a class of the Company's equity securities other than
Common Stock and the managing underwriter has advised Company in writing that,
in its opinion, the inclusion in such offering of Common Stock would materially
adversely affect the distribution of such offering) to permit the holders of
Registrable Securities requested to be included in the registration to include
such Registrable Securities in the proposed offering and the Company shall use
its reasonable best efforts to include such Registrable Securities in such
proposed offering on the same terms and conditions as any similar securities of
the Company included therein. If the offering of which the Company gives notice
is a public offering involving an underwriter, the right of a Securityholder to
registration pursuant to this Section 9.2 shall be conditioned upon (i) such
-----------
Securityholder's participation in such underwriting and the inclusion of the
Registrable Securities to be sold by such securityholder in the underwriting and
(ii) such Securityholder executing the underwriting agreement entered into by
the Company which includes customary terms and conditions relating to sales by
shareholders. The foregoing notwithstanding, in the case of an underwritten
offering, if the managing
12
underwriter of such offering shall advise the Company in writing that, in its
opinion, the distribution of all or a specified portion of the Registrable
Securities requested to be included in the registration concurrently with the
securities being registered by the Company would materially adversely affect the
distribution of such securities, then the securities to be included in a
registration which is a primary underwritten offering on behalf of the Company
shall be reduced in the following order: (i) first, Registrable Securities and
such other securities requested to be included by holders of such other
securities shall be excluded pro rata and (ii) second the securities the Company
proposes to include therein shall be excluded.
b. In the event that a holder or holders of the Company's
securities (other than a Securityholder or Securityholders) requests, pursuant
to rights granted to such holder or holders, that the Company file a
registration statement for the public offering of securities and the Company and
the other holders of the Company's securities (including the Securityholders)
who have rights to be included in such registration, request to be included in
such registration and the managing underwriter of such offering shall advise the
Company and the holders requesting inclusion in the offering that, in its
opinion, the distribution of a specified portion of the securities requested to
be included in the registration would materially adversely affect the
distribution of such securities then, the securities to be included in the
registration shall be reduced in the following order: (i) first, any securities
requested to be included therein by the holders of such other securities in such
a manner as determined by the Company, (ii) second, Registrable Securities shall
be excluded pro rata, (iii) third, securities issued or issuable upon exercise
of securities issued pursuant to that certain Loan and Security Agreement dated
as of September 1, 1998 by and among the Company, Goldman Sachs Credit Partners
L.P. and Fleet National Bank if the holders thereof have requested that the
registration shall be included, (iv) fourth, securities proposed to be included
by the Company shall be excluded and, (v) fifth, securities requested to be
included therein by the holder or holders making the initial request for the
registration.
9.3. Company's Obligations
---------------------
a. In connection with the registration of Registrable
Securities on behalf of the holders thereof (such Securityholders being referred
to herein as "Sellers") in accordance with Section 9.1 or Section 9.2 above, and
----------- -----------
in addition to its other obligations under this Section 9, the Company agrees
---------
to:
(i) with respect to any registration pursuant to Section
-------
9.1(a) or Section 9.1(b), prepare and file with the SEC a registration statement
- ------ --------------
on the form specified in such section, with respect to the Registrable
Securities to be registered pursuant to such section, and to use its best
efforts to cause such registration statement to become and remain effective as
provided in such section;
(ii) enter into a cross-indemnity agreement, in customary
form, with each underwriter, if any, and each Seller;
(iii) subject to the provisions of Section 9.1 and Section
----------- -------
9.2 regarding reductions in Registrable Securities to be included in a
- ---
registration, include in the registration statement filed with the SEC, the
Registrable Securities for which requests for registration have been made (or,
in the case of a registration under Section 9.l(a), all such Registrable
--------------
Securities), promptly after filing of such a registration statement or
prospectus or any amendments or supplements thereto, furnish to each Seller
copies of all such documents filed including, if requested, documents
incorporated
13
by reference in the registration statement, and notify each Seller of any stop
order issued or threatened by the SEC and use its best efforts to prevent the
entry of such stop order or to remove it if entered;
(iv) subject to Section 9.3(b), prepare and file with the SEC
--------------
such amendments of and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep such
registration statement effective (A) with respect to a registration statement
under Section 9.1(b) or Section 9.2 for a period of six (6) months or such
-------------- -----------
shorter period as may be required if all such Registrable Securities covered by
such registration statement are sold prior to the expiration of such period or
(B) with respect to a Shelf Registration Statement, until all the Registrable
Securities covered by such registration statement are sold, and to otherwise
comply with the provisions of the Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the Sellers set forth in
such registration statement;
(v) furnish to each Seller and each underwriter, if any,
without charge, such number of copies of the registration statement, each
amendment and supplement thereto (in each case including all exhibits thereto),
the prospectus included in such registration statement (including each
preliminary prospectus) and such other documents as such Seller may reasonably
request in order to facilitate the disposition of the Registrable Securities
proposed to be sold by such Seller;
(vi) use its reasonable best efforts to register or qualify
such Registrable Securities under such other securities or Blue Sky laws of such
jurisdictions as any Seller or any such underwriter reasonably requests in
writing and keep such registrations or qualifications in effect for so long as
such registration statement remains in effect and do any and all acts and things
which may be reasonably necessary or advisable to enable such Seller to
consummate the disposition in such jurisdictions of the Registrable Securities
owned by such Seller, provided, however, that the Company shall not be required
-------- -------
to (A) qualify generally to do business in any jurisdiction where it would not
otherwise be required to qualify but for this Subsection 9.3(a)(vi), or (B)
---------------------
consent to general service of process in any such jurisdiction;
(vii) notify each Seller, at any time when the Company
becomes aware that a prospectus relating to such Seller's Registrable Securities
is required to be delivered under the Act, of the occurrence of any event as a
result of which the prospectus in such registration statement contains an untrue
statement of a material fact or omits to state any material fact necessary to
make the statements therein not misleading, and as soon as practicable prepare a
supplement or amendment to such prospectus so that, as thereafter to the
purchasers of such Registrable Securities, such prospectus will not contain an
untrue statement of a material fact or omit to state any material fact necessary
to make the statements therein not misleading;
(viii) cause all such Registrable Securities to be listed on
any Exchange or NASDAQ on which similar securities issued by the Company are
then listed;
(ix) provide a transfer agent, registrar and CUSIP number for
all such Registrable Securities not later than the effective date of such
registration statement;
(x) enter into such customary agreements (including an
underwriting agreement in customary form) and take all such other customary
actions that a majority in interest of the Sellers or the underwriters, if any,
reasonably request in order to expedite or facilitate the disposition of such
Registrable Securities;
14
(xi) with respect to any underwritten offering, use its
reasonable best efforts to obtain a "cold comfort" letter from the Company's
independent public accountants in customary form and covering such matters of
the type customarily covered by "cold comfort" letters as a majority in interest
of the Sellers or any underwriter may reasonably request;
(xii) with respect to an underwritten offering, use its
reasonable best efforts to obtain an opinion of counsel to the Company,
addressed to the Sellers and any underwriter, in customary form and including
such matters as are customarily covered by such opinions in underwritten
registered offerings of equity securities as a majority in interest of the
Sellers or any underwriter may reasonably request, such opinion to be in form
and substance reasonably satisfactory to a majority in interest of the Sellers;
and
(xiii) otherwise use its best efforts to comply with all
applicable rules and regulations of the SEC, and make available to its
securityholders, as soon as reasonably practicable, an earnings statement
covering the period of at least twelve (12) months subsequent to the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Act and Rule 158 thereunder.
b. Any other provisions of this Section 9 notwithstanding,
---------
upon receipt by the Securityholders of a written notice signed by the chief
executive officer or chief financial officer of the Company to the effect set
forth below, the Company shall not be obligated during a reasonable period of
time (not to exceed ninety (90) days) thereafter (i) to effect any registrations
pursuant to this Section 9 or (ii) with respect to an effective Shelf
---------
Registration Statement, may suspend the effectiveness of such registration
statement, at any time at which, in the Company's reasonable judgment, (i) there
is a development involving the Company or any of its affiliates which is
material but which has not yet been publicly disclosed or (ii) sales pursuant to
the registration statement would materially and adversely affect an underwritten
public offering for the account of the Company or any other financing project or
a proposed or pending merger or other acquisition or business combination or
disposition of the Company's assets, to which the Company or any of its
affiliates is, or is expected to be, a party. In the event a registration is
postponed in accordance with this Section 9.3(b), (x) the Company must (unless
--------------
otherwise instructed by those holders who requested such registration) file the
requested registration within nine (9) months from the date the Company first
received the request of the holders, (y) the Company may not suspend the
effectiveness of a Shelf Registration Statement pursuant to this Section 9.3(b)
--------------
more than ninety days in the aggregate during in any eighteen (18)-month period,
and (z) there shall be added to any period during which the Company is obligated
to keep a effective the number of days for which the effectiveness thereof was
suspended pursuant to this Section 9.3(b).
--------------
c. If, but only if, the Company obtains a similar agreement with
respect to a registration from each holder of 3% or more of the Company's Common
Stock on a Fully Diluted Basis that acquired such shares directly or indirectly
from the Company in a transaction not involving a public offering and on the
date of determination the Loan Warrant Shares purchasable under the Loan
Warrants are 3% or more of the Company's Common Stock on a Fully Diluted Basis
the holder agrees, if so reasonably required by the managing underwriter in a
registration pursuant to this Section 9, not to effect any public sale or
---------
distribution of Registrable Securities or sales of such Registrable Securities
pursuant to Rule 144 or Rule 144A under the Securities Act, during the seven (7)
days prior to and 180 days after any firm commitment underwritten registration
pursuant to Section 9 has become effective (except as part of such underwritten
---------
registration) or, if the managing underwriter advises the Company that, in its
opinion, no such public sale or distribution should be effected for a period of
not more than 180 days after such underwritten registration in order to complete
the sale and distribution of securities
15
included in such registration and the Company gives notice to such effect to the
Holders of such advice, the holder shall not effect any public sale or
distribution of Registrable Securities or sales of such Registrable Securities
pursuant to Rule 144 or Rule 144A under the Securities Act during such period
after such underwritten registration, except as part of such underwritten
registration, whether or not such holder participates in such registration.
d. The Company may require that each Seller, as a condition to
registering his, her or its Registrable Securities pursuant hereto, furnish the
Company with such information regarding such Seller and the distribution of the
Registrable Securities proposed to be sold by such Seller as the Company may
from time to time reasonably request in writing.
e. Each Seller agrees that, upon receipt of any notice from the
Company of the occurrence of any event of the kind described in Section
-------
9.3(a)(vii) above, such Seller shall forthwith discontinue disposition of
- -----------
Registrable Securities pursuant to the registration statement covering such
Registrable Securities until such Seller's receipt of copies of the supplemented
or amended prospectus contemplated by Section 9.3(a)(vii) above and, if so
-------------------
directed by the Company, such Seller will deliver to the Company (at the
Company's expense) all copies, other than permanent file copies in such Seller's
possession, of the prospectus covering such Registrable Securities current at
the time of receipt of such notice. In the event the Company shall give any such
notice, the period mentioned in Section 9.3(a)(iv) above shall be extended by
------------------
the number of days during the period from and including the date of giving of
such notice to and including the date when each Seller shall have received the
copies of the supplemented or amended prospectus contemplated by Section
-------
9.3(a)(vii) above.
- -----------
f. The Company shall not file or permit the filing of any
registration or comparable statement which refers to any Seller by name or
otherwise as the Seller of any securities of the Company unless such reference
to such Seller is agreed to by the Seller or is, specifically required by the
Act or any similar federal statute then in force.
9.4. All expenses incident to the Company's performance of or
compliance with this Warrant, including without limitation all registration
and filing fees, fees and expenses relating to filings with any Exchange, fees
and expenses of compliance with securities or Blue Sky laws in jurisdictions
reasonably requested by any Seller or underwriter pursuant to Section 9.3(a)(vi)
------------------
(including reasonable fees and disbursements of counsel in connection with Blue
Sky qualifications of the Registrable Securities), all word processing,
duplicating and printing expenses, messenger and delivery expenses, fees and
disbursements of counsel for the Company and one (1) counsel for the Sellers
(selected by those Sellers owning a majority of the Registrable Securities),
independent public accountants (including the expenses of any special audit or
"cold comfort" letters required by or incident to such performance), all the
Company's internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting duties),
the expense of any annual audit, the expense of any liability insurance (if the
Company determines to obtain such insurance) and the fees and expenses incurred
in connection with the listing of the securities to be registered on any
Exchange and/or NASDAQ on which such securities issued by the Company are then
listed, the reasonable fees and expenses of any special experts (including
attorneys) retained by the Company (if it so desires) in connection with such
registration and fees and expenses of other persons retained by the Company (all
such expenses being herein called "Registration Expenses"), shall be borne by
the Company. In no event shall the Company be obligated for any discounts,
commissions or fees of underwriters, selling brokers, dealer managers or similar
securities industry professionals attributable to the securities being
registered (which discounts, commissions or fees with respect to any Seller's
16
respective shares shall be paid by such Seller) and legal expenses of any person
other than the Company and the Sellers.
9.5. Participation
-------------
a. In connection with the preparation and filing of each
registration statement under the Act pursuant to this Section 9 in connection
---------
with an underwritten offering, the Company shall give the underwriters under
such registration statement and such underwriters' counsel and their respective
accountants, the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with the SEC,
and each amendment thereof or supplement thereto, and will give each of them
such access to its books and records and such opportunities to discuss the
business of the Company with its officers and the independent public accountants
who have certified its financial statements as shall be necessary, in the
opinion of such underwriters' counsel, to conduct a reasonable investigation
within the meaning of the Act.
b. In connection with the preparation and filing of each
registration statement under the Act pursuant to this Section 9 not involving an
---------
underwritten offering, the Company shall give the Sellers under such
registration statement and such Sellers' counsel and their respective
accountants, the opportunity to participate in the preparation of such
registration statement, each prospectus included therein or filed with the SEC,
and each amendment thereof or supplement thereto, and will give each of them
such access to its books and records and such opportunities to discuss the
business of the Company with its officers and the independent public who have
certified its financial statements as shall be necessary, in the opinion of such
Sellers' counsel, to conduct a reasonable investigation within the meaning of
the Act. Each Seller agrees to keep confidential and not use, and to ensure
that its representatives keep confidential and not use, any non-public
information of the Company made available in such investigation.
9.6. Indemnification
---------------
a. In the event of any registration of any securities of the
Company under the Act, the Company shall, and hereby does, indemnify and hold
harmless in the case of any registration statement filed pursuant to
Section 9.1 or Section 9.2 above, the Seller of any Registrable Securities
- ----------- -----------
covered by such registration statement, its directors, officers, employees and
agents, each other person who participates as an underwriter in the offering or
sale of such Registrable Securities and each other person, if any, who controls
such Seller or any such underwriter within the meaning of the Act against any
losses, claims, damages, or liabilities (or actions or proceedings whether
commenced or threatened in respect thereof), joint or several, to which such
Seller or any such director or officer or employee or agent or underwriter or
controlling person may become subject under the Act or otherwise, insofar as
such losses, claims, damages, or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such Registrable Securities were
registered under the Act, any preliminary prospectus, final prospectus or
summary prospectus contained therein, or any amendment or supplement thereto, or
any omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
the Company shall reimburse such Seller and each such director, officer,
employee, agent, underwriter and controlling person for any legal or any other
expenses reasonably incurred by them in connection with investigating or
defending any such loss, claim, liability, action, or proceeding; provided,
--------
however, that the Company shall not be liable in any such case to the extent
- -------
that any such loss, claim, damage, liability (or action or proceeding in respect
thereof), or expense arises out of or is based upon an untrue
17
statement or alleged untrue statement or omission or alleged omission made in
such registration statement, any such preliminary prospectus, final prospectus,
summary prospectus, amendment, or supplement in reliance upon and in conformity
with written information furnished to the Company by such Seller for the express
purpose of use in the preparation thereof and, provided, further, that the
Company shall nor be liable in any such ease to the extent that any such loss,
claim, damage, liability (or action or proceeding, whether commenced or
threatened, in respect thereof), or expense arises out of such person's failure
to send or give a copy of the final prospectus, as the same may be then
supplemented or amended, within the time required by the Act to the person
asserting an untrue Statement or alleged untrue statement or omission or alleged
omission if such statement or omission was corrected in such final prospectus.
Such indemnity shall remain in full force and effect regardless of any
investigation made by or on behalf of such Seller or any such director, officer,
employee, agent, underwriter or controlling person and shall survive the
transfer of such Registrable Securities by such Seller.
b. In the event that the Company includes any Registrable
Securities of a prospective Seller in any registration statement filed pursuant
to Section 9.1 or Section 9.2, above such prospective Seller shall, and hereby
----------- -----------
does, indemnify and hold harmless the Company, its directors, officers,
employees and agents, each other person who participates as an underwriter in
the offering or sale of such Registrable Securities and each other person, if
any, who controls the Company or any such underwriter within the meaning of the
Act against any losses, claims, damages, or liabilities (or actions or
proceedings in respect thereof), joint or several, to which the Company or any
such director or officer or employee or underwriter or controlling person may
become subject under the Act or otherwise, insofar as such losses, claims,
damages, or liabilities (or actions or proceedings, in respect thereof) arise
out of or are based upon any untrue statement or alleged untrue statement of any
material fact contained in any registration statement under which such
Registrable Securities were registered under the Act, any preliminary
prospectus, final prospectus or summary prospectus contained therein, or any
amendment or supplement thereto, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and such prospective Seller shall reimburse
the Company and any such director, officer, employee, agent, underwriter or
controlling person for any legal or any other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
liability, action, or proceeding if, and only if, such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by such Seller specifically stating that it is for use
in the preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment, or supplement. In no event shall the
liability of any Seller hereunder be greater in amount than the dollar amount of
the proceeds received by such Seller upon the sale of the Registrable Securities
giving rise to such indemnification obligation. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
the Company or any such director, officer, employee, agent, underwriter or
controlling person and shall survive the transfer of such Registrable Securities
by such Seller.
c. The Company shall be entitled to receive indemnities from
underwriters, selling brokers, dealer managers, and similar securities industry
professionals participating in the distribution to the same extent as provided
above with respect to information so furnished in writing by such persons
specifically for inclusion in any prospectus or registration statement.
d. Promptly after receipt by an indemnified party of notice of the
commencement of any action or proceeding involving a claim referred to in this
Section 9.6, such indemnified party shall, if a claim in respect thereof is to
- -----------
be made against an indemnifying party, give
18
written notice to the latter of the commencement of such action; provided,
--------
however, that the failure of any indemnified party to give notice as provided
- -------
herein shall not relieve the indemnifying party of its obligations under the
preceding subdivisions of this Section 9.6, except to the extent that the
-----------
indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified, to the
extent that the indemnifying party may wish, with counsel reasonably
satisfactory to such indemnified, and after notice from the indemnifying party
to such indemnified party of election so to assume the defense thereof, the
indemnifying party shall not be liable to such indemnified party for any legal
or other expenses subsequently incurred by the latter in connection with the
defense thereof. If, in the indemnified party's reasonable judgment a conflict
of interest between such indemnified and indemnifying parties may exist in
respect of such claim, the indemnified party may assume the defense of such
claim, jointly with any other indemnified party that reasonably determines such
conflict of interest to exist, and the indemnifying party shall be liable to
such indemnified parties for the reasonable legal fees and expenses of one
counsel for all such indemnified parties and for other expenses reasonably
incurred in connection with the defense, thereof incurred by the indemnified
party. No indemnifying party shall, without the consent of the indemnified
party, consent to entry of any judgment or enter into any settlement of any such
action which does not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all liability,
or a covenant not to sue, in respect of such claim or litigation. No indemnified
party shall consent to entry of any judgment or enter into any settlement of any
such action the defense of which has been assumed by an indemnifying party
without the consent of such indemnifying party.
e. Indemnification and contribution similar to that specified in
this Section 9.6 (with appropriate modifications) shall be given by the Company
-----------
and each Seller with respect to any required registration or other qualification
of Registrable Securities under any Federal or state law or regulation of any
governmental authority, other than the Act.
f. The indemnification required by this Section 9.6 shall be
-----------
made by periodic payments of the amount thereof during the course of the
investigation or defense, as and when bills are received or expense, loss,
damage or liability is incurred.
g. If the indemnification provided for in this Section 9.6 from
-----------
the indemnifying party is unavailable to an indemnified party hereunder in
respect of any losses, claims, damages, liabilities, or expenses referred to
herein, then the indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result, of losses, claims, damages, liabilities, or expenses in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party and indemnified party in connection with the actions which resulted in
such losses, claims, damages, liabilities, or expenses, as well as any other
relevant equitable considerations. The relative fault of such indemnifying
party and indemnified party shall be determined by reference to, among other
things, whether any action in question, including any untrue or alleged untrue
statement of a material fact or omission or alleged omission to state a material
fact, has been made by, or relates to information supplied by, such indemnifying
party or indemnified party, and the parties' relative intent, knowledge, access
to information, and opportunity to correct or prevent such action. The amount
paid or payable by a party as a result of the losses, claims, damages,
liabilities, and expenses referred to above shall be deemed to include any legal
or other fees or expenses reasonably incurred by such party in connection with
any investigation or proceeding. In no event shall the liability of any Seller
hereunder be greater in amount than the dollar amount of the proceeds received
by such
19
Seller upon the sale of the Registrable Securities giving rise to such
contribution obligation. The parties hereto agree that it would not be just and
equitable if contribution pursuant to this Section 9.6(g) were determined by pro
--------------
rata allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in this Section 9.6(g). No
--------------
person guilty of fraudulent misrepresentation (within the meaning of Section
11(g) of the Act) shall be entitled to contribution from any person or entity
who was not guilty of such fraudulent misrepresentation.
9.7. Assignment of Rights; Termination. The rights granted
---------------------------------
under this Section 9 may be assigned to any transferee of at least 10,000 Loan
---------
Warrants, Loan Warrant Shares or any combination thereof, and upon (a) prior
written notice to the Company of the assignment, and (b) the transferee's
agreement to be bound by the relevant terms and conditions of this Section 9 and
---------
the Warrant. The rights of the holder and any transferee under this Section 9
---------
will terminate on the five (5) year anniversary of the Expiration Date.
10. Additional Rights.
-----------------
10.1. Notice of Sale. In the event that the Company
--------------
undertakes to effect a Sale, the Company will use its best efforts to provide to
the holder at least thirty (30) days notice of the terms and conditions of the
proposed transaction. The Company will cooperate with the holder in
consummating the sale of this Warrant in connection with any such transaction.
11. Representations and Warranties. The Company represents and
------------------------------
warrants to the holder of this Warrant as follows:
a. This Warrant has been duly authorized and executed by
the Company and is a valid and binding obligation of the Company enforceable in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and the rules of law or
principles at equity governing specific performance, injunctive relief and other
equitable remedies;
b. The Warrant Shares have been duly authorized and reserved
for issuance by the Company and, when issued in accordance with the terms
hereof, will be validly issued, fully paid and nonassessable;
c. The rights, preferences, privileges and restrictions
granted to or imposed upon the Common Stock and the holders thereof are as set
forth in the Articles of Organization of the Company, as amended to the Date of
Grant (as so amended, the "Charter"), a true and complete copy of which has been
delivered to the original holder of this Warrant;
d. The execution and delivery of this Warrant are not, and
the issuance of the Warrant Shares upon exercise of this Warrant in accordance
with the terms hereof will not be, inconsistent with the Charter or by-laws of
the Company, do not and will not contravene, in any material respect, any
governmental rule or regulation, judgment or order applicable to the Company,
and do not and will not conflict with or contravene any provision of, or
constitute a default under, any indenture, mortgage, contract or other
instrument of which the Company is a party or by which it is bound or require
the consent or approval of, the giving of notice to, the registration or filing
with or the taking of any action in respect of or by, any Federal, state or
local government authority or agency or other person, except for the filing of
notices pursuant to federal and state securities laws, which filings will be
effected by the time required thereby;
20
e. There are no actions, suits, audits, investigations or
proceedings pending or, to the knowledge of the Company, threatened against the
Company in any court or before any governmental commission, board or authority
which, if adversely determined, will have a material adverse effect on the
ability of the Company to perform its obligations under this Warrant;
f. The authorized capital stock of the Company and the
capital stock issued and outstanding, or reserved for issuance, are as set forth
on Schedule 4.1 to the Loan Agreement. All of the outstanding shares of the
Company have been validly issued and are fully nonassessable shares and have not
been issued in violation of any applicable preemptive rights;
g. Except as set forth on Schedule 4.1 to the Loan
Agreement, there are no subscriptions, rights, options, warrants, or calls
relating to any shares of the Company's capital stock, including any right of
conversion or exchange under any outstanding security or other instrument; and
12. Modification and Waiver. This Warrant and any
-----------------------
provision hereof may be changed, waived, discharged or terminated only by an
instrument in writing signed by the party against which enforcement of the same
is sought.
13. Notices. Unless otherwise specifically provided herein,
-------
all communications under this Warrant shall be in writing and shall be
deemed to have been duly given (i) on the date of service if served personally
on the party to whom notice is to be given, (ii) on the day of transmission if
sent by facsimile transmission to a telephone number provided by a party for
such purposes, and telephonic confirmation of receipt is obtained promptly after
completion of transmission, (iii) on the day after delivery to Federal Express
or similar overnight courier, or (iv) on the fifth day after mailing, if mailed
to the patty to whom notice is to be given, by first class mail, registered or
certified, postage prepaid, and properly addressed, return receipt requested, to
each such holder at its address as shown on the books of the Company or to the
Company at the address indicated therefor on the signature page of this Warrant.
Any party hereto may change its address for purposes of this Section 13 by
----------
giving the other party written notice of the new address in the manner set forth
herein.
14. Binding Effect on Successors. This Warrant shall be binding
----------------------------
upon any corporation succeeding the Company by merger, consolidation or
acquisition of all or substantially all of the Company's assets, and all of the
obligations of the Company relating to the Common Stock issuable upon the
exercise or conversion of this Warrant shall survive the exercise, conversion
and termination of this Warrant and all of the covenants and agreements of the
Company shall inure to the benefit of the successors and assigns of the holder
hereof. The Company will, at the time of the exercise or conversion of this
Warrant, in whole or in part, upon request of the holder hereof but at the
Company's expense, acknowledge in writing its continuing obligation to the
holder hereof in respect of any rights to which the holder hereof shall continue
to be entitled after such exercise or conversion in accordance with this
Warrant; provided, that the failure of the holder hereof to make any such
--------
request shall not affect the continuing obligation of the Company to the holder
hereof in respect of such rights.
15. Lost Warrants or Stock Certificates. The Company covenants
-----------------------------------
to the holder hereof that, upon receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of this Warrant or any
stock certificate and, in the case of any loss, theft or destruction, upon
receipt of an executed lost securities bond or indemnity reasonably satisfactory
to the Company, or in the case of any such mutilation upon surrender and
cancellation of such Warrant or stock certificate, the Company will make and
deliver a new Warrant or stock certificate, of like tenor, in lieu of the lost,
stolen, destroyed or mutilated Warrant or stock certificate.
21
16. Descriptive Headings. The descriptive headings of the several
--------------------
paragraphs of this Warrant are inserted for convenience only and do not
constitute a part of this Warrant.
17. Governing Law. This Warrant shall be construed and enforced
-------------
in accordance with, and the rights of the parties shall be governed by, the laws
of the State of New York.
18. Survival of Representations, Warranties and Agreements. Each
------------------------------------------------------
of the respective representations and warranties of the Company and the holder
hereof contained herein shall survive the Date of Grant, the exercise or
conversion of this Warrant (or any part hereof) and the termination or
expiration of any rights hereunder. Each of the respective agreements of each of
the Company and the holder hereof contained herein shall survive indefinitely
until, by their respective terms, they are no longer operative. Without limiting
the generality of the foregoing sentence, the registration rights contained in
Section 9 above shall survive the exercise or conversion of this Warrant (or any
- ---------
part hereof) and the termination or expiration of any other rights hereunder.
19. Remedies. In case any one (1) or more of the covenants and
--------
agreements contained in this Warrant shall have been breached, the holders
hereof (in the case of a breach by the Company), or the Company (in the case of
a breach by a holder), may proceed to protect and enforce their or its rights
either by suit in equity and/or by action at law, including, but not limited to,
an action for damages as a result of any such breach and/or an action for
specific performance of any such covenant or agreement contained in this
Warrant.
20. Acceptance. Receipt of this Warrant by the holder hereof
----------
shall constitute acceptance of and agreement to the foregoing terms and
conditions.
21. No Impairment of Rights. The Company will not, by amendment
-----------------------
of its Charter or through any other means, avoid or seek to avoid the observance
or performance of any of the terms of this Warrant, but will at all times in
good faith assist in the carrying out of all such terms and in the taking of all
such action as may be necessary or appropriate in order to protect the rights of
the holder of this Warrant against material impairment.
22. Amendment. This Warrant may be amended by written agreement
---------
of the Company and holders of at least a majority of the Loan Warrant Shares,
collectively on an as-exercised basis, and such amendment shall be binding on
all holders of this Warrant or Warrant Shares.
[Signature page follows.]
22
IN WITNESS WHEREOF, the Company has caused this Warrant to be executed
on its behalf by one of its officers thereunto duly authorized.
CTC COMMUNICATIONS CORP.
By:
--------------------------------
Name:
--------------------------------
Title:
--------------------------------
Address: 360 Second Avenue
Waltham, Massachusetts 02154
Dated: as of March 24, 1999
S-1
EXHIBIT A
---------
NOTICE OF EXERCISE
To: CTC COMMUNICATIONS CORP.
1. The undersigned hereby elects to purchase _____ shares of
Common Stock of CTC COMMUNICATIONS CORP. pursuant to the terms of the attached
Warrant, and lenders herewith payment of the purchase price of such shares in
full.
2. Please issue a certificate or certificates representing said
shares in the name of the undersigned or in such other name or names as are
specified below:
-------------------------
(Name)
-------------------------
-------------------------
(Address)
3. The undersigned represents that the aforesaid shares are being
acquired for the account of the undersigned for investment and not with a view
to, or for resale in connection with, the distribution thereof and that the
undersigned has no present intention of distributing or reselling such shares,
in support thereof, the undersigned has executed an Investment Representation
Statement attached hereto as Schedule 1.
-------------------------
(Signature)
- -------------------------
(Date)
Schedule I
----------
INVESTMENT REPRESENTATION STATEMENT
Purchaser:
Company: CTC COMMUNICATIONS CORP.
Security: Common Stock
Amount:
Date:
In connection with the purchase of the above-listed securities (the
"Registrable Securities"), the undersigned (the "Purchaser") represents to the
Company as follows:
(a) The Purchaser is aware of the Company's business affairs and
financial condition, and has acquired sufficient information about the Company
to reach an informed and knowledgeable decision to acquire the Registrable
Securities. The Purchaser is purchasing the Registrable Securities for its own
account for investment purposes only and not with a view to, or for the resale
in connection with, any "distribution" thereof for purposes of the Registrable
Securities Act of 1933, as amended (the "Act").
(b) The Purchaser understands that the Registrable Securities have not
been registered under the Act in reliance upon a specific exemption therefrom,
which exemption depends upon, among other things, the bona fide nature of the
Purchaser's investment intent as expressed herein. In this connection, the
Purchaser understands that, in the view of the Registrable Securities and
Exchange Commission ("SEC"), the statutory basis for such exemption may be
unavailable if the Purchaser's representation was predicated solely upon a
present intention to hold these Registrable Securities for the minimum capital
gains period specified under applicable tax laws, for a deferred sale, for or
until an increase or decrease in the market price of the Registrable Securities,
or for a period of one year or any other fixed period in the future.
(c) The Purchaser further understands that the Registrable Securities
must be held indefinitely unless subsequently registered under the Act or unless
an exemption from registration is otherwise available. In addition, the
Purchaser understands that the certificate evidencing the Registrable Securities
will be imprinted with the legend referred to in the Warrant under which the
Registrable Securities are being purchased.
(d) The Purchaser is aware of the provisions of Rule 144 and 144A,
promulgated under the Act, which, in substance, permit limited public resale of
"restricted securities" acquired, directly or indirectly, from the issuer
thereof (or from an affiliate of such issuer), in a non-public offering subject
to the satisfaction of certain conditions, if applicable, among other things:
The availability of certain public information about the resale occurring not
less than one (1) year after the party has purchased and paid securities to be
sold; the sale being made through a broker in an unsolicited "broker's
transaction" or in transactions directly with a market maker (as said term is
defined under the Registrable Securities Exchange Act of 1934, as amended) and
the amount of securities being sold during any three-month period not exceeding
the specified limitations stated therein.
(e) The Purchaser further understands that at the time it wishes to
sell the Registrable Securities there may be no public market upon which to make
such a sale, and that, even if such a public market then exists, the Company may
not be satisfying the current public information requirements of Rule 144 and
144A, and that, in such event, the Purchaser may be precluded from selling the
Registrable Securities under Rule 144 and 144A even if the one-year minimum
holding period had been satisfied.
(f) The Purchaser further understands that in the event all of the
requirements of Rule 144 and 144A are not satisfied, registration under the Act,
compliance with Regulation A, or some other registration exemption will be
required; and that, notwithstanding the fact that Rule 144 is not exclusive, the
Staff of the SEC has expressed its opinion that persons proposing to sell
private placement securities other than in a registered offering and otherwise
than pursuant to Rule 144 will have a substantial burden or proof in
establishing that an exemption from registration is available for such offers or
sales, and that such persons and their respective brokers who participate in
such transactions do so at their own risk.
Purchaser:
-------------------------
EXHIBIT B
---------
Analysis Based on Average Price (as defined in Loan Agreement) on 3/11/99 of: $11.8125
Total Primary Shares Outstanding 10,308,348
Outstanding Options:
Employee Options in the Money 3,679,495
Proceeds from Options $25,282,017
Average exercise price $6.87
Shares to be purchased 2,140,277
Incremental Shares 1,539,218
-----------
Total Shares outstanding pre warrants and convertibles 11,847,566
Spectrum warrants in the money 188,888
Goldman/Fleet Warrants (struck at $6.75) 974,412
Relational Warrants (struck at $9.00) 55,555
Proceeds from Warrant Exercise $ 8,777,268
Shares to be Purchased 743,049
Incremental warrant shares 475,806
-----------
Total Shares outstanding pre-Convertibles 12,323,372
Spectrum Convertible Preferred Stock 1,333,333
Spectrum shares from 9% dividend accreted to 3/24/99 117,196
-----------
Total Convertibles 1,450,529
Total Shares outstanding Pre Loan Warrants (on a Fully Diluted Basis) 13,773,901
===========
Warrants % of Fully Diluted Shares 0.5%
Incremental Warrant Shares 69,216