EXHIBIT 10.6
EXERCISABLE ON OR BEFORE, AND VOID AFTER
5:00 P.M. MINNEAPOLIS TIME DECEMBER 31, 2000
Certificate for 4,157,500 Warrants
WARRANTS TO PURCHASE COMMON STOCK OF
NETCO COMMUNICATIONS CORPORATION
INCORPORATED UNDER THE LAWS OF THE STATE OF MINNESOTA
THIS CERTIFIES that WORLDCOM INC., ("Holder") or assigns, is the owner of
the number of Warrants set forth above, each of which represents the right to
purchase from Netco Communications Corporation, a Minnesota corporation (the
"Company"), at any time on or before 5:00 Minneapolis time, December 31, 2000,
upon compliance with and subject to the conditions set forth herein, one share
(subject to adjustments referred to below) of the Common Stock of the Company,
par value $.01 per share (such shares or other securities or property
purchasable upon exercise of the Warrants being herein called the "Shares").
Upon any exercise of less than all the Warrants evidenced by this Warrant
Certificate, there shall be issued to the Holder a new Warrant Certificate in
respect of the Warrants as to which this Warrant Certificate was not exercised.
This Warrant is subject to the following provisions, terms and conditions:
1. Exercise; Transferability. The rights represented by this Warrant may
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be exercised by the Holder hereof, in whole or in part (but not as to a
fractional share of Common Stock), by written notice of exercise delivered to
the Company ten (10) days prior to the intended date of exercise and by the
surrender of this Warrant (properly endorsed if required) at the principal
office of the Company and by paying in full, as provided herein, the purchase
price of $4.81 per share (the "Initial Exercise Price" subject to adjustments as
noted subsequently).
Payment upon exercise of the rights represented by this Warrant may be
made at the option of the Holder (a) in cash or by certified or official bank
check payable to the order of the Company, (b) by surrendering to the Company
for cancellation and retirement any number shares of Class A Preferred Shares,
par value $10.00 per share, which shares shall each be valued for purposes
hereof at
their par value of $10.00 plus the sum of any then accumulated and unpaid
dividends thereon, (c) by cancellation and discharge of the Company from all or
any portion of any debt in the amount then owed by the Company to the Holder on
a dollar for dollar basis, including principal whether or not then due and
payable together with any interest accrued and unpaid thereon, or (d) by any
combination of any or all of the foregoing.
This Warrant may not be transferred or divided into two or more Warrants of
smaller denominations, nor may any Common Stock issued pursuant to exercise of
this Warrant be transferred unless this Warrant or shares have been registered
under the Securities Act of 1933, as amended ("Securities Act") and applicable
state laws, or unless the Holder of the certificate obtains an opinion of
counsel satisfactory to the Company and its counsel that the proposed transfer
may be effected without registration pursuant to exemptions under the Securities
Act and applicable state laws.
2. Issuance of Shares. The Company agrees that the shares purchased
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hereby shall be deemed to be issued to the record Holder hereof as of the close
of business on the date on which this Warrant shall have been surrendered and
the payment made for such shares as aforesaid. Subject to the provisions of the
next succeeding paragraph, certificates for the shares of stock so purchased
shall be delivered to the Holder hereof within a reasonable time, not exceeding
ten (10) days after the rights represented by this Warrant shall have been so
exercised, and, unless this Warrant has expired, a new Warrant representing the
number of shares, if any, with respect to which this Warrant shall not then have
been exercised shall also be delivered to the Holder hereof within such time.
Notwithstanding the foregoing, however, the Company shall not be required
to deliver any certificate for shares of stock upon exercise of this Warrant,
except in accordance with the provisions, and subject to the limitations, of
paragraph 7 hereof.
3. Covenants of Company. The Company covenants and agrees that all
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shares which may be issued upon the exercise of the rights represented by this
Warrant will, upon issuance, be duly authorized and issued, fully paid,
nonassessable and free from all taxes, liens and charges with respect to the
issue thereof, and without limiting the generality of the foregoing, the Company
covenants and agrees that it will from time to time take all such action as may
be required to assure that the par value per share of the Common Stock is at all
times equal to or less than the then effective purchase price per share of the
Common Stock issuable pursuant to this Warrant. The Company further covenants
and agrees that 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 issue or transfer upon exercise of the subscription
rights evidenced by this Warrant, a sufficient number of shares of its
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Common Stock to provide for the exercise of the rights represented by this
Warrant.
4. Adjustments. The above provisions are, however, subject to the
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following provisions:
(a) The Initial Exercise Price of $4.81 per share shall increase to $4.91
per share on March 31, 1997, and shall thereafter increase by the
amount of $.08 per share on the last day of each calendar quarter
during the term of the Warrant, commencing with the calendar quarter
ending June 30, 1997 (such increases beginning with the calendar
quarter ending June 30, 1997, being referred to as the "Quarterly
Increase"); provided, that to encourage earlier partial exercise of
the Warrants, the amount of each Quarterly Increase shall be abated at
the rate of $.00875 per share (the "Abatement") for each incremental
purchase of aggregated amounts of Five Hundred Thousand (500,000)
shares upon partial exercise of this Warrant. Each Abatement shall
take effect on the last day of the calendar quarter during which such
partial exercise and purchase occurred, as illustrated by the
following examples: (i) the purchase of One Million Five Hundred
Thousand (1,500,000) shares during the second calendar quarter of 1998
would result in a reduction, commencing June 30, 1998, of the
Quarterly Increase to .05375 per share for each subsequent calendar
quarter; (ii) the further purchase of Five Hundred Thousand (500,000)
shares during the third calendar quarter of 1998 would result in a
further reduction, commencing September 30, 1998, of the Quarterly
Increase to $.045 per share for each subsequent calendar quarter. The
exercise price computed from time to time in accordance with this
provision shall be referred to as the "Current Exercise Price."
(d) In case the Company shall at anytime hereafter subdivide or combine
the outstanding shares of Common Stock or declare a dividend payable
in Common Stock, the exercise price of this Warrant in effect
immediately prior to the subdivision, combination or record date for
such dividend payable in Common Stock shall forthwith be
proportionately increased, in the case of combination, or decreased,
in the case of subdivision or dividend payable in Common Stock, and
each share of Common Stock purchasable upon exercise of the Warrant
shall be changed to the number determined by dividing the then Current
Exercise Price by the exercise price as adjusted after the
subdivision, combination, or dividend payable in Common Stock.
(e) No fractional shares of Common Stock are to be issued upon the
exercise of the Warrant, but the Company shall pay a cash
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adjustment in respect of any fraction of a share which would otherwise
be issuable in an amount equal to the same fraction of the market
price per share of Common Stock on the date of exercise as determined
in good faith by the Company.
(f) If any capital reorganization or reclassification of the capital stock
of the Company, or consolidation or merger of the Company with another
corporation, or the sale of all or substantially all of its assets to
another corporation shall be effected in such a way that holders of
Common Stock shall be entitled to receive stock, securities or assets
with respect to or in exchange for Common Stock then, as a condition
of such reorganization, reclassification, consolidation, merger or
sale, lawful and adequate provision shall be made whereby the Holder
hereof shall hereafter have the right to purchase and receive upon the
basis and upon the terms and conditions specified in this Warrant and
in lieu of the shares of the Common Stock of the Company immediately
theretofore purchasable and receivable upon the exercise of the rights
represented hereby, such shares of stock, securities or assets as may
be issued and payable with respect to or in exchange for a number of
outstanding shares of such Common Stock equal to the number of shares
of such stock immediately theretofore purchasable and receivable upon
the exercise of the rights represented hereby had such reorganization,
reclassification, consolidation, merger or sale not taken place, and
in any such case appropriate provisions shall be made with respect to
the rights and interests of the Holder of this Warrant to the end that
the provisions hereof (including without limitation provisions for
adjustments of the Warrant purchase price and of the number of shares
purchasable upon the exercise of this Warrant) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock,
securities or assets thereafter deliverable upon the exercise hereof.
The Company shall not effect any such consolidation, merger or sale,
unless prior to the consummation thereof the successor corporation (if
other than the Company) resulting from such consolidation, merger, or
the corporation purchasing such assets shall assume by written
instrument executed and mailed to the registered Holder hereof at the
last address of such holder appearing on the books of the Company, the
obligation to deliver to such holder such shares of stock, securities
or assets as, in accordance with the foregoing provisions, such holder
may be entitled to purchase.
(g) If the Company shall at any time or from time to time (i) distribute
(otherwise than as a dividend in cash or in Common Stock or securities
convertible into or exchangeable for Common Stock) to the holders of
Common Stock any property or other securities, or
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(ii) declare a dividend upon the Common Stock (to the extent payable
otherwise than out of earnings or earned surplus, as indicated by the
accounting treatment of such dividend in the books of the Company, and
otherwise than in Common Stock or securities convertible into or
exchangeable for Common Stock), the Company shall reserve and the
Holder of this Warrant shall thereafter upon exercise hereof be
entitled to receive, with respect to each share of Common Stock
purchased hereunder, without any change in, or payment in addition to,
the exercise price, the amount of any property or other securities
which would have been distributable to such holder had such holder
been a holder of one share of Common Stock on the record date of such
distribution or dividend (or if no record date was established by the
Company, the date such distribution or dividend was paid).
(h) Upon any adjustment of the Current Exercise Price, then and in each
such case, the Company shall give written notice thereof, by first
class mail, postage prepaid, addressed to the registered holder of
this Warrant at the address of such holder as shown on the books of
the Company, which notice shall state the exercise price resulting
from such adjustment and the increase or decrease, if any, in the
number of shares purchasable at such price upon the exercise of this
Warrant, setting forth in reasonable detail the method of calculation
and the facts upon which such calculation is based.
5. Common Stock. As used herein, the term "Common Stock" means the
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Company's presently authorized shares of Common Stock and shall also include any
capital stock of any class of the Company hereafter authorized which shall not
be limited to fixed sum or percentage in respect of the rights of the holders
thereof to participate in dividends or in the distribution of assets upon the
voluntary or involuntary liquidation, dissolution or winding up of the Company.
6. No Voting Rights. This Warrant shall not entitle the Holder hereof
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to any voting rights or other rights as a stockholder of the Company.
7. Notice of Transfer of Warrant or Resale of Shares. The Holder of this
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Warrant, by acceptance hereof, agrees to give written notice to the Company
before transferring this Warrant, or transferring any Common Stock issued upon
the exercise hereof, of such holder's intention to do so, describing briefly the
manner of any proposed transfer. Promptly upon receiving such written notice the
Company shall present copies thereof to the Company counsel and if in the
opinion of such counsel the proposed transfer complies with federal and state
securities laws and may be effected without registration or qualification (under
any Federal or State law), the Company, as promptly as practicable, shall notify
such holder of such opinion, whereupon such holder shall be entitled to transfer
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this Warrant or to dispose of shares of Common Stock received upon the previous
exercise of this Warrant, provided that an appropriate legend may be endorsed on
this Warrant or the certificates for such shares respecting restrictions upon
transfer thereof necessary or advisable in the opinion of counsel to the Company
to prevent further transfers which would be in violation of Section 5 of the
Securities Act of 1933.
If in the opinion of Company's counsel referred to in this paragraph 7
hereof, the proposed transfer or disposition of shares described in the written
notice given pursuant to this paragraph 7 may not be effected without
registration or qualification of this Warrant or the shares of Common Stock
issued on the exercise hereof, the Company shall promptly give written notice
thereof to the Holder hereof, and the Holder will limit its activities in
respect to such as, in the opinion of such counsel, are permitted by law.
8. Registration Rights. If the Company, at any time after three (3) years
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from the date hereof until two (2) years after the complete exercise of this
Warrant, but in any event no later March 31, 2003, proposes to claim an
exemption under Section 3(b) for a public offering of any of its securities or
to register under the Securities Act of 1933 (except by a Form S-8 or other
inappropriate Form for registration) any of its securities, it will give written
notice to all registered holders of Warrants, and all registered holders of
shares of Common Stock acquired upon the exercise of Warrants, of its intention
to do so and, on the written request of any registered holders given within
twenty (20) days after receipt of any such notice (which request shall specify
the Warrants or shares of Common Stock intended to be sold or disposed of by
such registered holder and describe the nature of any proposed sale or other
disposition thereof), the Company will use its best efforts to cause all such
Warrants and/or shares, the registered holders of which shall have requested the
registration or qualification thereof, to be included in such notification or
registration statement proposed to be filed by the Company; provided, however,
that no such inclusion shall be required (i) if the Shares may then be sold by
the holder thereof without limitation under Rule 144(k), or comparable successor
rule of the Securities and Exchange Commission, or (ii) if the managing
underwriter of such offering reasonably determines that including such Shares
would unreasonably interfere with such offering. The Company will pay all
expenses of registration. The Warrant holders shall pay all commissions or
discounts applicable to the sale of the included Shares, together with any
expenses of counsel retained by them in connection with their sale of the
Shares.
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IN WITNESS WHEREOF, Netco Communications Corporation, Inc. has caused this
Warrant to be signed by its duly authorized officer and this Warrant to be dated
December 16, 1996.
NETCO COMMUNICATIONS CORPORATION
By: /s/ Edward J. Driscoll, III
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Edward J. Driscoll, III
President
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