EXHIBIT 10.5
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WARRANT AGREEMENT
between
DIVA SYSTEMS CORPORATION
and
THE BANK OF NEW YORK
Dated as of February 19, 1998
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TABLE OF CONTENTS
PAGE
ARTICLE I
CERTAIN DEFINITIONS
ARTICLE II
ORIGINAL ISSUE OF WARRANTS
Section 2.1. Form of Warrant Certificates................................ 7
Section 2.2. Restrictive Legends......................................... 9
Section 2.3. Execution and Delivery of Warrant Certificates.............. 11
Section 2.4. Certificated Warrants....................................... 12
ARTICLE III
EXERCISE PRICE, EXERCISE AND REPURCHASE OF WARRANTS
Section 3.1. Exercise Price.............................................. 12
Section 3.2. Exercise; Restrictions on Exercise.......................... 12
Section 3.3. Method of Exercise; Payment of Exercise Price............... 13
Section 3.4. Repurchase Offers........................................... 14
ARTICLE IV
ADJUSTMENTS
Section 4.1. Adjustments................................................. 18
Section 4.2. Notice of Adjustment........................................ 25
Section 4.3. Statement on Warrants....................................... 26
Section 4.4. Notice of Consolidation, Merger, Etc........................ 26
Section 4.5. Fractional Interests........................................ 26
Section 4.6. Initial Public Offering..................................... 27
ARTICLE V
DECREASE IN EXERCISE PRICE
ARTICLE VI
LOSS OR MUTILATION
ARTICLE VII
RESERVATION AND AUTHORIZATION OF COMMON SHARES
ARTICLE VIII
WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER
Section 8.1. Transfer and Exchange....................................... 28
Section 8.2. Book-Entry Provisions for the Global Warrants............... 29
Section 8.3. Special Transfer Provisions................................. 31
Section 8.4. Surrender of Warrant Certificates........................... 34
ARTICLE IX
WARRANT HOLDERS
Section 9.1. Warrant Holder Deemed Not a Shareholder..................... 34
Section 9.2. Right of Action............................................. 35
ARTICLE X
REMEDIES
Section 10.1. Defaults................................................... 35
Section 10.2. Payment Obligations........................................ 35
Section 10.3. Remedies; No Waiver........................................ 35
ARTICLE XI
THE WARRANT AGENT
Section 11.1. Duties and Liabilities..................................... 36
Section 11.2. Right to Consult Counsel................................... 37
Section 11.3. Compensation; Indemnification.............................. 37
Section 11.4. No Restrictions on Actions................................. 38
Section 11.5. Discharge or Removal; Replacement Warrant Agent............ 38
Section 11.6. Successor Warrant Agent.................................... 39
ARTICLE XII
MISCELLANEOUS
Section 12.1. Monies Deposited with the Warrant Agent.................... 39
Section 12.2. Payment of Taxes........................................... 40
Section 12.3. No Merger, Consolidation or Sale of Assets of the Company.. 40
Section 12.4. Reports to Holders......................................... 40
Section 12.5. Notices; Payment........................................... 41
Section 12.6. Binding Effect............................................. 42
Section 12.7. Counterparts............................................... 42
Section 12.8. Amendments................................................. 42
Section 12.9. Headings................................................... 42
Section 12.10. Common Shares Legend....................................... 42
Section 12.11. Third Party Beneficiaries.................................. 44
Section 12.12. Termination................................................ 44
Section 12.13. Governing Law.............................................. 44
Section 12.14. Registration Rights........................................ 45
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EXHIBIT A FORM OF WARRANT CERTIFICATE
EXHIBIT B FORM OF CERTIFICATE TO BE DELIVERED IN CONNECTION WITH TRANSFERS
PURSUANT TO REGULATION S
EXHIBIT C-1 FORM OF CERTIFICATE TO BE DELIVERED BY TRANSFEROR IN CONNECTION
WITH TRANSFERS OTHER THAN TO QIBS OR NON-US PERSONS
EXHIBIT C-2 FORM OF CERTIFICATE TO BE DELIVERED BY TRANSFEREES IN CONNECTION
WITH TRANSFERS TO INSTITUTIONAL ACCREDITED INVESTORS
EXHIBIT D FORM OF CERTIFICATE
APPENDIX A LIST OF FINANCIAL EXPERTS
WARRANT AGREEMENT
WARRANT AGREEMENT, dated as of February 19, 1998 (this "Agreement"),
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between DIVA Systems Corporation, a Delaware corporation (the "Company"), and
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THE BANK OF NEW YORK, a New York banking corporation (the "Warrant Agent").
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W I T N E S S E T H:
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WHEREAS, pursuant to the terms of a Units Purchase Agreement dated
February 11, 1998 (the "Purchase Agreement"), among the Company and Merrill
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Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated ("Merrill
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Lynch") and the other purchasers named on Schedule A to the Purchase Agreement
(collectively, the "Initial Purchasers"), the Company has agreed to issue and
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sell to the Initial Purchasers an aggregate of 1,214,994 warrants (the "Initial
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Purchaser Warrants"), each warrant (a "Warrant") initially entitling the holder
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thereof to purchase one share of Common Stock (as defined below) of the Company
at an exercise price of $.01 per Common Share (as defined below), as part of
404,998 units (the "Units"), each Unit consisting of one 12 5/8% Senior Discount
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Note due 2008 of the Company (each a "Note" and collectively, the "Notes") to be
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issued pursuant to the provisions of an Indenture, dated as of February 19,
1998, between the Company and The Bank of New York, as trustee (the
"Indenture"), and three Warrants;
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WHEREAS, pursuant to the terms of an exchange offer memorandum and
accompanying Transmittal Form from the Company to the holders of the Company's
outstanding 1996 Notes (the "Exchange Noteholders"), the Company has agreed to
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issue to the Exchange Noteholders an aggregate of 174,006 Warrants (the
"Exchange Warrants" and, together with the Initial Purchaser Warrants, the
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"Warrants"), as part of 58,002 Units;
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WHEREAS, the Notes and the three Warrants included in each Unit will
automatically become separately transferable at the close of business upon the
earliest to occur of (i) the date that is six months after the Closing Date (as
defined below), (ii) the commencement of an exchange offer with respect to the
Notes undertaken pursuant to the Notes Registration Rights Agreement (as defined
below), (iii) the effectiveness of a shelf registration statement with respect
to resales of the Notes, (iv) the commencement of an Offer to Purchase the Notes
(as defined below), and (v) such earlier date as determined by Merrill Lynch in
its sole discretion (the "Separation Date"); and
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WHEREAS, the Company desires to engage the Warrant Agent to act on the
Company's behalf, and the Warrant Agent desires to act on behalf of the Company,
in connection with the issuance of the Warrant Certificates (as defined below)
and the other matters as provided herein, including, without limitation, for the
purpose of defining the terms and provisions of the Warrants and the respective
rights and obligations thereunder of the
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Company and the record holders thereof (together with the holders of shares of
Common Stock (or other securities) received upon exercise thereof, the
"Holders").
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NOW, THEREFORE, in consideration of the foregoing and of the mutual
agreements contained herein and in the Purchase Agreement, the Company and the
Warrant Agent hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
"Actual SRTC Shares" means the total number of (i) Common Shares which
may be purchased or subscribed for upon exercise, exchange or conversion of
rights, options, warrants or convertible or exchangeable securities (including
the Company's Series AA Preferred Stock) issued or issuable in connection with
the SRTC Transaction and (ii) Common Shares issued or issuable in connection
with the SRTC Transaction.
"Additional SRTC Shares" means the number of Actual SRTC Shares, if
any, in excess of 1,969,112 shares.
"Affiliate" means, as applied to any Person, any other Person directly
or indirectly controlling, controlled by, or under direct or indirect common
control with, such Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as applied to any Person, means the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of such Person, whether through the
ownership of voting securities, by contract or otherwise.
"Agent Members" has the meaning specified in Section 8.2 hereof.
"Auditors" means, at any time, the independent auditors of the Company
at such time.
"Board" means the board of directors of the Company from time to time.
"Business Day" means a day except a Saturday, Sunday or other day on
which commercial banks in The City of New York, or in the city of the corporate
trust office of the Warrant Agent, are authorized by law to close.
"Cedel Bank" means Cedel Bank, societe anonyme.
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"Certificated Warrants" has the meaning specified in Section 2.1
hereof.
"Certificate for Surrender" means the form on the reverse side of the
Warrant Certificate substantially in the form of Exhibit A hereto.
"Closing Date" means the date hereof.
"Commission" means the United States Securities and Exchange
Commission.
"Common Shares" means the shares of the Common Stock of the Company.
"Common Stock" means the Common Stock, par value $0.001 per share, of
the Company.
"Company" has the meaning specified in the preamble to this Agreement.
"Current Market Value" has the meaning specified in Section 4.1(f)
hereof.
"Default" has the meaning specified in Section 10.1 hereof.
"Depositary" means The Depository Trust Company, its nominees and
their respective successors.
"Euroclear" means Morgan Guaranty Trust Company of New York, Brussels
office, as operator of the Euroclear System.
"Exchange Act" means the United States Securities Exchange Act of
1934, as amended.
"Exchange Noteholders" has the meaning specified in the recitals to
this Agreement.
"Exercise Price" has the meaning specified in Section 3.1 hereof.
"Expiration Date" means March 1, 2008.
"Final Surrender Time" has the meaning specified in Section 3.4
hereof.
"Financial Expert" means one of the Persons listed in Appendix A
hereto; provided, however, that solely for purposes of valuing Common Shares or
Rights to be issued
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to employees, directors or consultants under plans approved by the Board,
Financial Expert shall also include a Valuation Advisor.
"Global Warrants" has the meaning specified in Section 2.1 hereof.
"Holders" has the meaning specified in the recitals to this Agreement.
"IAI Certificated Warrants" has the meaning specified in Section 2.1
hereof.
"Indenture" has the meaning specified in the recitals to this
Agreement.
"Independent Financial Expert" means a Financial Expert that does not,
and whose directors, executive officers and 5% stockholders do not, have a
direct or indirect financial interest in the Company or any of its subsidiaries
or Affiliates, which has not been for at least five years and, at the time it is
called upon to give independent financial advice to the Company, is not (and
none of its directors, executive officers or 5% stockholders is) a promoter,
director, or officer of the Company or any of its subsidiaries or Affiliates.
The Independent Financial Expert may be compensated and indemnified by the
Company for opinions or services it provides as an Independent Financial Expert.
"Institutional Accredited Investor" shall mean an institution that is
an "accredited investor" as that term is defined in Rule 501(a)(1), (2), (3) or
(7) of Regulation D under the Securities Act.
"Legended Regulation S Global Warrant" has the meaning specified in
Section 2.1 hereof.
"Non-U.S. Person" means a person who is not a U.S. person as defined
in Rule 902 of Regulation S.
"Notes" has the meaning specified in the recitals to this Agreement.
"Notice Date" has the meaning specified in Section 3.4(b) hereof.
"Offer to Purchase the Notes" means an Offer to Purchase (as defined
in the Indenture) the Notes pursuant to the Indenture.
"Officer" means, with respect to the Company, (i) the Chairman of the
Board, the Chief Executive Officer, the President, any Vice President, the Chief
Operating Officer, the Chief Financial Officer, and (ii) the Treasurer or any
Assistant Treasurer, the Secretary or any Assistant Secretary.
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"Officers' Certificate" means a certificate signed by one Officer
listed in clause (i) of the definition thereof and one Officer listed in clause
(ii) of the definition thereof; provided, however, that any such certificate may
be signed by any two of the Officers listed in clause (i) of the definition
thereof in lieu of being signed by one Officer listed in clause (i) of the
definition thereof and one Officer listed in clause (ii) of the definition
thereof.
"Offshore Certificated Warrants" has the meaning specified in Section
2.1 hereof.
"Opinion of Counsel" means a written opinion signed by legal counsel
who may be an employee of or counsel to the Company.
"Person" means an individual, a corporation, a partnership, a limited
liability company, an association, a trust or any other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Private Placement Legend" means the legend set forth on the Warrant
Certificates in the form set forth in Section 2.2(a) hereof.
"Purchase Agreement" has the meaning specified in the recitals to this
Agreement.
"QIB" means a "qualified institutional buyer" as defined in Rule 144A.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Global Warrant" has the meaning specified in Section 2.1
hereof.
"Relevant Value" has the meaning specified in Section 3.4(d) hereof.
"Repurchase Event" means, and shall be deemed to occur on, any date
when the Company (i) consolidates with or merges into or with another Person
(but only where holders of the Common Stock receive consideration in exchange
for all or part of such Common Stock) if the Common Stock (or other securities)
thereafter issuable upon exercise of the Warrants are not registered under the
Exchange Act, provided, that a "Repurchase Event" shall not be deemed to have
occurred if the holders of at least 50% of the Company's Common Stock
immediately prior to the consummation of such merger or consolidation, together
with their affiliates, continue to hold at least 50% of the Company's Common
Stock immediately after such consummation or (ii) sells all or substantially all
of its assets to, another Person, if the Common Stock (or other securities)
thereafter issuable upon exercise of the Warrants are not
6
registered under the Exchange Act; provided that in each case a "Repurchase
Event" shall not be deemed to have occurred if the consideration for such
transaction consists solely of cash.
"Repurchase Notice" has the meaning specified in Section 3.4(a)
hereof.
"Repurchase Obligation" has the meaning specified in Section 10.2
hereof.
"Repurchase Offer" has the meaning specified in Section 3.4(b) hereof.
"Repurchase Price" has the meaning specified in Section 3.4(d) hereof.
"Restricted Certificated Warrants" has the meaning specified in
Section 2.1 hereof.
"Restricted Global Warrant" has the meaning specified in Section 2.1
hereof.
"Right" means any right, option, warrant or convertible or
exchangeable security entitling the holder to subscribe for or acquire one or
more Common Shares, excluding the Warrants.
"Rule 144A" means Rule 144A under the Securities Act.
"Securities Act" means the United States Securities Act of 1933, as
amended.
"Separation Date" has the meaning specified in the recitals to this
Agreement.
"Spread" means, with respect to any Warrant, the Current Market Value
of the Common Shares subject to such Warrant, less the Exercise Price of such
Warrant, in each case as adjusted as provided herein.
"SRTC" means Sarnoff Real Time Corp., a Delaware corporation.
"SRTC Transaction" means the merger of SRTC with and into the Company
pursuant to the Agreement and Plan of Reorganization dated January 15, 1998
between the Company and SRTC.
"Subscription Form" means the form on the reverse side of the Warrant
Certificate substantially in the form of Exhibit A hereto.
"Underlying Securities" shall mean the Common Shares (or other
securities) issuable upon exercise of the Warrants.
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"Units" has the meaning specified in the recitals to this Agreement.
"Unlegended Regulation S Global Warrant" has the meaning specified in
Section 2.1 hereof.
"Valuation Advisor" means a Person engaged in the business of valuing
the common stock of non-public companies that has made at least 10 such
valuations within the two years prior to such Person's selection by the Company.
"Valuation Date", for any Repurchase Offer, means the date five
Business Days prior to the Notice Date for such Repurchase Offer.
"Value Certificate" has the meaning specified in Section 3.4(d)
hereof.
"Value Report" has the meaning specified in Section 4.1(k) hereof.
"Warrant" has the meaning specified in the recitals to this Agreement.
"Warrant Agent" has the meaning specified in the preamble to this
Agreement.
"Warrant Certificates" has the meaning specified in Section 2.1
hereof.
"Warrant Registration Rights Agreement" means the Warrant Registration
Rights Agreement, dated as of February 19, 1998, between the Company and the
Initial Purchasers named therein.
"Warrant Registration Statement" has the meaning specified in Section
3 of the Warrant Registration Rights Agreement.
"1996 Notes" means the Company's 13% Subordinated Discount Notes due
2006.
ARTICLE II
ORIGINAL ISSUE OF WARRANTS
Section 2.1. Form of Warrant Certificates. Certificates
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representing the Warrants (the "Warrant Certificates") shall be substantially in
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the form attached hereto as
8
Exhibit A, shall be dated the date on which such Warrant Certificates are
countersigned by the Warrant Agent and shall have such insertions as are
appropriate or required or permitted by this Agreement and may have such
letters, numbers or other marks of identification and such legends and
endorsements stamped, printed, lithographed or engraved thereon as the Company
may deem appropriate and as are not inconsistent with the provisions of this
Agreement, or as may be required to comply with any law or with any rule or
regulation pursuant thereto or with any rule or regulation of any securities
exchange on which the Warrants may be listed, or to conform to usage.
Warrants offered and sold in reliance on Rule 144A shall be issued
initially in the form of one or more permanent global Warrant Certificates in
definitive, fully registered form, substantially in the form set forth in
Exhibit A (the "Restricted Global Warrant"), deposited with the Warrant Agent,
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as custodian for, and registered in the name of the nominee for, the Depositary,
duly executed by the Company and countersigned by the Warrant Agent as
hereinafter provided. The aggregate number of Warrants represented by the
Restricted Global Warrant may from time to time be increased or decreased by
adjustments made on the records of the Warrant Agent, as custodian for the
Depositary, or its nominee, as provided in Section 2.4 and Section 8.3 hereof.
Warrants offered and sold in offshore transactions in reliance on
Regulation S shall be issued initially in the form of one or more permanent
global Warrant Certificates in definitive, fully registered form, substantially
in the form set forth in Exhibit A (the "Legended Regulation S Global Warrant"),
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deposited with the Warrant Agent, as custodian for, and registered in the name
of, the Depositary or its nominee for the accounts of Euroclear and Cedel Bank,
duly executed by the Company and countersigned by the Warrant Agent as
hereinafter provided. Prior to February 19, 1999, beneficial interests in the
Legended Regulation S Global Warrant may be only held through Euroclear and
Cedel Bank. At any time on or after February 19, 1999, upon receipt by the
Warrant Agent and the Company of a certificate substantially in the form of
Exhibit D hereto, one or more global Warrants in registered form substantially
in the form set forth in Exhibit A (the "Unlegended Regulation S Global Warrant"
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and together with the Legended Regulation S Global Warrant, the "Regulation S
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Global Warrants") shall be deposited with the Warrant Agent, as custodian for,
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and registered in the name of the nominee for, the Depositary, duly executed by
the Company and countersigned by the Warrant Agent as hereinafter provided, and
the Warrant Agent shall reflect on its books and records the date and a decrease
in the Legended Regulation S Global Warrant in an amount equal to the beneficial
interest in number of Warrants evidenced by the Legended Regulation S Global
Warrant transferred. The aggregate number of Warrants represented by the
Regulation S Global Warrant may from time to time be increased or decreased by
adjustments made on the records of the Warrant Agent, as custodian for the
Depositary, or its nominee, as provided in Section 2.4 and Section 8.3 hereof.
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Warrants delivered to Institutional Accredited Investors who are not
QIBs shall be in registered form substantially in the form set forth in Exhibit
A ("IAI Certificated Warrants").
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Warrants issued pursuant to Section 2.4 and Section 8.2(b) in exchange
for interests in the Restricted Global Warrant shall be issued in the form of
permanent Warrant Certificates in registered form, substantially in the form set
forth in Exhibit A (the "Restricted Certificated Warrants" and, together with
--------------------------------
IAI Certificated Warrants, the "U.S. Certificated Warrants"). Warrants issued
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pursuant to Section 2.4 and Section 8.2(b) in exchange for interests in the
Regulation S Global Warrant shall be issued in the form of permanent Warrant
Certificates in registered form, substantially in the form set forth in Exhibit
A (the "Offshore Certificated Warrants"). The Offshore Certificated Warrants
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and the U.S. Certificated Warrants are sometimes collectively herein referred to
as the "Certificated Warrants". The Restricted Global Warrant and the
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Regulation S Global Warrant are sometimes herein collectively referred to as the
"Global Warrants".
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The definitive Warrant Certificates shall be typed, printed,
lithographed or engraved or produced by any combination of these methods or may
be produced in any other manner permitted by the rules of any securities
exchange on which the Warrants may be listed, all as determined by the officers
executing such Warrant Certificates, as evidenced by their execution of such
Warrant Certificates.
Section 2.2. Restrictive Legends. (a) The Warrant Certificates,
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other than the Unlegended Regulation S Global Warrants, shall bear substantially
the following legend, as applicable, on the face thereof:
THE WARRANTS REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT")
OR ANY STATE OR OTHER SECURITIES LAWS, AND, ACCORDINGLY, MAY NOT BE
OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE UNITED STATES
OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT AS SET
FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE HOLDER
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S.
PERSON AND IS ACQUIRING THE WARRANTS REPRESENTED BY THIS CERTIFICATE IN
AN OFFSHORE TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE
SECURITIES ACT OR (C) IT ACQUIRED THIS CERTIFICATE DIRECTLY FROM DIVA
SYSTEMS CORPORATION (THE "COMPANY") IN A
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TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT, OR (D) PROVIDED THAT THIS CERTIFICATE HAS NOT BEEN ACQUIRED BY SUCH
HOLDER IN THE INITIAL DISTRIBUTION OF THE WARRANTS, IT IS AN
INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE 501(a)(1), (2),
(3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT); (2) AGREES THAT IT
WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE 144(k) TAKING
INTO ACCOUNT THE PROVISIONS OF RULE 144(d), IF APPLICABLE (THE "RESALE
RESTRICTION TERMINATION DATE"), RESELL OR OTHERWISE TRANSFER THE
WARRANTS REPRESENTED BY THIS CERTIFICATE EXCEPT (A) TO THE COMPANY OR
ANY SUBSIDIARY THEREOF, (B) TO A QUALIFIED INSTITUTIONAL BUYER IN
COMPLIANCE WITH RULE 144A UNDER THE SECURITIES ACT, (C) OUTSIDE THE
UNITED STATES IN AN OFFSHORE TRANSACTION IN COMPLIANCE WITH RULE 904
UNDER THE SECURITIES ACT, (D) PURSUANT TO ANOTHER AVAILABLE EXEMPTION
FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OR (E) PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT; (3)
AGREES THAT THE WARRANTS REPRESENTED BY THIS CERTIFICATE MAY NOT BE
EXERCISED DURING THE 180-DAY PERIOD BEGINNING ON THE DAY OF THE
COMPANY'S INITIAL PUBLIC OFFERING SUBJECT TO CERTAIN EXCEPTIONS; AND (4)
AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM THE WARRANTS
REPRESENTED BY THIS CERTIFICATE ARE TRANSFERRED A NOTICE SUBSTANTIALLY
TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE COMPANY AND THE WARRANT
AGENT SHALL HAVE THE RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER (I)
PURSUANT TO CLAUSE (C) OR (D) TO REQUIRE THE DELIVERY OF ANY OPINION OF
COUNSEL, CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF
THEM, AND (II) IN EACH OF THE FOREGOING CASES, TO REQUIRE THAT A
CERTIFICATION OF TRANSFER IN THE FORM APPEARING ON THE OTHER SIDE OF
THIS SECURITY IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE
WARRANT AGENT. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE
HOLDER AFTER THE RESALE RESTRICTION TERMINATION DATE. AS USED HEREIN,
THE TERMS "OFFSHORE TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE
THE MEANINGS GIVEN TO THEM BY REGULATION S UNDER THE SECURITIES ACT. THE
WARRANT AGREEMENT CONTAINS A PROVISION REQUIRING THE WARRANT
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AGENT TO REFUSE TO REGISTER ANY TRANSFER OF THE WARRANTS REPRESENTED BY
THIS CERTIFICATE IN VIOLATION OF THE FOREGOING RESTRICTIONS.
(b) Each Global Warrant shall also bear the following legend on the
face thereof:
UNLESS THIS WARRANT CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY TO DIVA SYSTEMS
CORPORATION OR THE WARRANT AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE
OR PAYMENT AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE
& CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (AND ANY PAYMENT HEREON
IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL SINCE THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN
INTEREST HEREIN.
TRANSFERS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS IN
WHOLE, BUT NOT IN PART, TO NOMINEES OF THE DEPOSITORY TRUST COMPANY OR
TO A SUCCESSOR THEREOF OR SUCH SUCCESSOR'S NOMINEE AND TRANSFERS OF
PORTIONS OF THIS GLOBAL SECURITY SHALL BE LIMITED TO TRANSFERS MADE IN
ACCORDANCE WITH THE RESTRICTIONS SET FORTH IN ARTICLE VIII OF THE
WARRANT AGREEMENT.
(c) Each Warrant Certificate issued prior to the Separation Date shall
bear the following legend on the face thereof:
THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE INITIALLY ISSUED AS PART
OF AN ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF ONE 12 5/8% SENIOR
DISCOUNT NOTE DUE 2008 OF DIVA SYSTEMS CORPORATION (COLLECTIVELY, THE
"NOTES") AND THREE WARRANTS EACH INITIALLY ENTITLING THE HOLDER THEREOF
TO PURCHASE ONE SHARE OF VOTING COMMON STOCK, PAR VALUE $0.001 PER
SHARE, OF DIVA SYSTEMS CORPORATION. PRIOR TO THE CLOSE OF BUSINESS UPON
THE EARLIEST TO OCCUR
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OF (i) AUGUST 19, 1998, (ii) THE COMMENCEMENT OF AN EXCHANGE OFFER WITH
RESPECT TO THE NOTES, (iii) THE EFFECTIVENESS OF A SHELF REGISTRATION
STATEMENT WITH RESPECT TO THE NOTES, (iv) THE COMMENCEMENT OF AN OFFER
TO PURCHASE THE NOTES (AS SUCH TERM IS DEFINED IN THE WARRANT AGREEMENT
REFERRED TO HEREIN), AND (v) SUCH EARLIER DATE AS DETERMINED BY MERRILL
LYNCH & CO., MERRILL LYNCH, PIERCE, FENNER & SMITH INCORPORATED IN ITS
SOLE DISCRETION. THE WARRANTS EVIDENCED BY THIS CERTIFICATE MAY NOT BE
TRANSFERRED OR EXCHANGED SEPARATELY FROM, BUT MAY BE TRANSFERRED OR
EXCHANGED ONLY TOGETHER WITH, THE NOTES.
Section 2.3. Execution and Delivery of Warrant Certificates.
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Warrant Certificates evidencing 1,389,000 Warrants, each Warrant to purchase
initially one Common Share, may be executed, on or after the date of this
Agreement, by the Company and delivered to the Warrant Agent for
countersignature, and the Warrant Agent shall thereupon countersign and deliver
such Warrant Certificates upon the order and at the written direction of the
Company signed by its Chief Executive Officer or other duly authorized executive
officer to the purchasers thereof on the date of issuance. The Warrant Agent is
hereby authorized to countersign and deliver Warrant Certificates as required by
this Section 2.3 or by Section 3.3, Article VI or Article VIII hereof.
The Warrant Certificates shall be executed on behalf of the Company by
its Chairman of the Board, Chief Executive Officer, President, any Vice
President or other duly authorized executive officer of the Company either
manually or by facsimile signature printed thereon. The Warrant Certificates
shall be countersigned by manual signature of the Warrant Agent and shall not be
valid for any purpose unless so countersigned. In case any officer or director
of the Company whose signature shall have been placed upon any of the Warrant
Certificates shall cease to be such officer or director of the Company before
countersignature by the Warrant Agent and the issuance and delivery thereof,
such Warrant Certificates may nevertheless be countersigned by the Warrant Agent
and issued and delivered with the same force and effect as though such person
had not ceased to be such officer or director of the Company.
Section 2.4. Certificated Warrants. Beneficial owners of interests
------------ ---------------------
in a Global Warrant may receive Certificated Warrants (which, except as set
forth in Section 8.3(d), shall bear the Private Placement Legend) in accordance
with the procedures of the Warrant Agent and the Depositary; provided, however,
that beneficial owners of interests in the Regulation S Global Warrant may not
receive Offshore Certificated Warrants in exchange for such interests prior to
the date one year from the Closing Date. In connection with the execution and
13
delivery of such Certificated Warrants, the Warrant Agent shall reflect on its
books and records the date and a decrease in the number of Warrants represented
by the relevant Global Warrant equal to the number of such Certificated Warrants
and the Company shall execute and the Warrant Agent shall countersign and
deliver to said beneficial owners one or more Certificated Warrants in an equal
aggregate number.
ARTICLE III
EXERCISE PRICE, EXERCISE AND REPURCHASE OF WARRANTS
Section 3.1. Exercise Price. Each Warrant Certificate shall, when
------------ --------------
countersigned by the Warrant Agent, initially entitle the Holder thereof,
subject to the provisions of this Agreement, to purchase the number of Common
Shares indicated thereon at a purchase price of $.01 per Common Share, subject
to adjustment as provided in Section 4.1 and Article V hereof (the "Exercise
--------
Price").
- -----
Section 3.2. Exercise; Restrictions on Exercise. At any time after
------------ ----------------------------------
one year after the Closing Date and on or before the Expiration Date, any
outstanding Warrants may be exercised on any Business Day; provided that the
Warrant Registration Statement is, at the time of exercise, effective and
available for the exercise of the Warrants or the exercise of such Warrants is
exempt from the registration requirements of the Securities Act; provided
further that, to the extent required by the managing underwriter of the Initial
Public Offering, no Warrants may be exercised or transferred during the period
from the date of the final prospectus for such Initial Public Offering until the
date that is 180-days after such date. Any Warrants not exercised by 5:00 p.m.,
New York City time, on the Expiration Date shall expire and all rights of the
Holders of such Warrants shall terminate. Additionally, pursuant to Section
4.1(j)(ii) hereof, the Warrants shall expire and all rights of the Holders of
such Warrants shall terminate in the event the Company merges or consolidates
with or sells all or substantially all of its property and assets to a Person
(other than an Affiliate of the Company) if the consideration payable to holders
of Common Stock in exchange for their Common Stock in connection with such
merger, consolidation or sale consists solely of cash or in the event of the
dissolution, liquidation or winding up of the Company.
Section 3.3. Method of Exercise; Payment of Exercise Price. In
------------ ---------------------------------------------
order to exercise all or any of the Warrants represented by a Warrant
Certificate, the Holder thereof must surrender for exercise the Warrant
Certificate to the Warrant Agent at its corporate trust office address set forth
in Section 12.5 hereof, with the Subscription Form set forth on the reverse of
the Warrant Certificate duly executed, together with payment in full of the
Exercise Price then in effect for each Common Share (or other securities)
issuable upon exercise of the Warrants as to which the Warrant Certificate is
surrendered for exercise; such payment may be made in cash or by certified or
official bank or bank cashier's check payable to the order of the
14
Company and shall be made to the Warrant Agent at its corporate trust office
address set forth in Section 12.5 hereof prior to the close of business on the
date the Warrant Certificate is surrendered to the Warrant Agent for exercise.
Notwithstanding the foregoing, the Exercise Price may be paid by surrendering
additional Warrants to the Warrant Agent having an aggregate Spread equal to the
aggregate Exercise Price of the Warrants being exercised. All payments received
upon exercise of Warrants shall be delivered to the Company by the Warrant Agent
as instructed in writing by the Company. If less than all the Warrants
represented by a Warrant Certificate are exercised or surrendered (in connection
with a cashless exercise), such Warrant Certificate shall be surrendered and a
new Warrant Certificate of the same tenor and for the number of Warrants which
were not exercised or so surrendered shall be executed by the Company and
delivered to the Warrant Agent and the Warrant Agent shall countersign the new
Warrant Certificate, registered in such name or names as may be directed in
writing by the Holder, and shall deliver the new Warrant Certificate to the
Person or Persons entitled to receive the same. Global Warrants will be
exercised by accordance with the procedures of the Warrant Agent and the
Depositary. Upon the exercise of any Warrants following the surrender of a
Warrant Certificate in conformity with the foregoing provisions, the Warrant
Agent shall instruct the Company to transfer promptly to the Holder or, upon the
written order of the Holder of such Warrant Certificate, appropriate evidence of
ownership of any Common Shares or other security or property to which it is
entitled as a result of such exercise, registered or otherwise placed in such
name or names as may be directed in writing by the Holder, and to deliver such
evidence of ownership to the Person or Persons entitled to receive the same and
fractional shares, if any, or an amount in cash, in lieu of any fractional
shares, if any, as provided in Section 4.5 hereof; provided that the Holder of
such Warrant shall be responsible for the payment of any transfer taxes required
as the result of any change in ownership of such Warrants or the issuance of
such Common Shares other than to the Holder of such Warrants and any such
transfer shall comply with applicable law. Upon the exercise of a Warrant or
Warrants, the Warrant Agent is hereby authorized and directed to requisition
from any transfer agent of the Common Shares (and all such transfer agents are
hereby irrevocably authorized to comply with all such requests) certificates
(bearing the legend set forth in Section 12.10 hereof, if applicable, unless a
registration statement with the Commission relating to such Common Shares shall
then be in effect or the Company and the Holder exercising such Warrant or
Warrants otherwise agree) for the necessary number of Common Shares to which
said Holder may be entitled. The Company shall enter, or shall cause any
transfer agent of the Common Shares to enter, the name of the Person entitled to
receive the Common Shares upon exercise of the Warrants into the Company's
register of shareholders within 14 days of such exercise. A Warrant shall be
deemed to have been exercised immediately prior to the close of business on the
date of the surrender for exercise, as provided above, of the Warrant
Certificate representing such Warrant and, for all purposes under this
Agreement, the Person entitled to receive any Common Shares deliverable upon
such exercise shall, as between such Person and the Company, be deemed to be the
Holder of such Common Shares of record as of the close of
15
business on such date and shall be entitled to receive, and the Warrant Agent
shall deliver to such Person, any Common Shares to which such Person would have
been entitled had such Person been the registered holder on such date.
Section 3.4. Repurchase Offers. (a) Notice of Repurchase Event.
------------ ----------------- --------------------------
Within five Business Days following the occurrence of a Repurchase Event, the
Company shall give notice (a "Repurchase Notice") to the Holders of the Warrants
-----------------
and the Warrant Agent that such event has occurred.
(b) Repurchase Offers Generally. Following the occurrence of a
---------------------------
Repurchase Event, the Company shall offer to repurchase for cash all outstanding
Warrants pursuant to the provisions of this Section 3.4 (a "Repurchase Offer").
----------------
The Company shall give notice of a Repurchase Offer in accordance with Section
3.4(f) hereof. Each date on which the Company gives any such notice is referred
to as the "Notice Date." The Repurchase Offer shall commence on the Notice Date
-----------
for such Repurchase Offer and shall expire at 5:00 p.m., New York City time, on
a date determined by the Company (the "Final Surrender Time") that is at least
--------------------
30 but not more than 60 days after the Notice Date. Once a Repurchase Event has
occurred, there is no limit on the number of Repurchase Offers that the Company
may make.
(c) Repurchase Offers. (i) In any Repurchase Offer, the Company
-----------------
shall offer to purchase for cash at the Repurchase Price all Warrants
outstanding on the Notice Date for such Repurchase Offer that are properly
tendered to the Warrant Agent on or prior to the Final Surrender Time for such
Repurchase Offer.
(ii) Each Holder may, but shall not be obligated to, accept such
Repurchase Offer by tendering to the Warrant Agent, on or prior to the Final
Surrender Time for such Repurchase Offer, the Warrant Certificates evidencing
the Warrants such Holder desires to have repurchased in such offer, together
with a completed Certificate for Surrender in substantially the form attached to
the Warrant Certificate. A Holder may withdraw all or a portion of the Warrants
tendered to the Warrant Agent at any time prior to the Final Surrender Time for
such Repurchase Offer. If less than all the Warrants represented by a Warrant
Certificate shall be tendered, such Warrant Certificate shall be surrendered and
a new Warrant Certificate of the same tenor and for the number of Warrants which
were not tendered shall be executed by the Company and delivered to the Warrant
Agent and the Warrant Agent shall countersign the new Warrant Certificate,
registered in such name or names as may be directed in writing by the Holder,
and shall deliver the new Warrant Certificate to the Person or Persons entitled
to receive the same; provided that the Holder of such Warrants shall be
responsible for the payment of any transfer taxes required as the result of any
change in ownership of such Warrants and any such transfer shall comply with
applicable law.
16
(d) Repurchase Price. (i) The purchase price (the "Repurchase
---------------- ----------
Price") for each Warrant properly tendered to the Warrant Agent pursuant to a
Repurchase Offer shall be equal to the value (the "Relevant Value") on the
--------------
Valuation Date relating thereto of the Common Shares issuable, and other
securities or property of the Company which would have been delivered, upon
exercise of Warrants had the Warrants been exercised (regardless of whether the
Warrants are then exercisable), less the Exercise Price in effect on the Notice
Date for such Repurchase Offer.
(ii) The Relevant Value of the Common Shares and other securities or
property issuable upon exercise of all the Warrants, on any Valuation Date shall
be:
(1) (A) If the Common Shares (or other securities) are registered
under the Exchange Act, the average of the daily market prices (on the
stock exchange that is the primary trading market for the Common Shares (or
other securities)) of the Common Shares (or other securities) for the 20
consecutive trading days immediately preceding such Valuation Date or, (B)
if the Common Shares (or other securities) have been registered under the
Exchange Act for less than 20 consecutive trading days before such date,
then the average of the daily market prices for all of the trading days
before such date for which daily market prices are available, in the case
of each of (A) and (B), as certified to the Warrant Agent by the Chief
Executive Officer, the President, any Vice President or the Chief Financial
Officer of the Company (the "Value Certificate"). The market price for
-----------------
each such trading day shall be: (A) in the case of a security listed or
admitted to trading on any national securities exchange, the closing sales
price on such day, or if no sale takes place on such day, the average of
the closing bid and asked prices on such day, (B) in the case of a security
not then listed or admitted to trading on any national securities exchange,
the last reported sale price on such day, or if no sale takes place on such
day, the average of the closing bid and asked prices on such day, as
reported by a reputable quotation source designated by the Company, (C) in
the case of a security not then listed or admitted to trading on any
national securities exchange and as to which no such reported sale price or
bid and asked prices are available, the average of the reported high bid
and low asked prices on such day, as reported by a reputable quotation
service, or a newspaper of general circulation in the Borough of Manhattan,
City and State of New York customarily published on each Business Day,
designated by the Company, or, if there shall be no bid and asked prices on
such day, the average of the high bid and low asked prices, as so reported,
on the most recent day (not more than 30 days prior to the date in
question) for which prices have been so reported and (D) if there are no
bid and asked prices reported during the 30 days prior to the date in
question, the Relevant Value shall be determined as if the Common Shares
(or other securities) were not registered under the Exchange Act; or
17
(2) If the Common Shares (or other securities) are not registered
under the Exchange Act or if the value cannot be computed under clause (1)
above, the value set forth in the Value Report (as defined below) as
determined by an Independent Financial Expert, which shall be selected by
the Board in accordance with Section 3.4(e) hereof, and retained on
customary terms and conditions, using one or more valuation methods that
the Independent Financial Expert, in its best professional judgment,
determines to be most appropriate but without giving effect to any discount
for lack of liquidity, the fact that the Company has no class of equity
securities registered under the Exchange Act or the fact that the Common
Shares and other securities or property issuable upon exercise of the
Warrants represent a minority interest in the Company. The Company shall
use its best efforts to cause the Independent Financial Expert to deliver
to the Company, with a copy to the Warrant Agent, within 45 days of the
appointment of the Independent Financial Expert in accordance with Section
3.4(e) hereof, a value report (the "Value Report") stating the Relevant
------------
Value of the Common Shares and other securities or property of the Company,
if any, being valued as of the Valuation Date and containing a brief
statement as to the nature and scope of the methodologies upon which the
determination of Relevant Value was made. The Warrant Agent shall have no
duty with respect to the Value Report of any Independent Financial Expert,
except to keep it on file and available for inspection by the Holders. The
determination as to Relevant Value in accordance with the provisions of
this Section 3.4(d) shall be conclusive on all Persons.
(e) Selection of Independent Financial Expert. If clause (d)(ii)(2)
-----------------------------------------
of this Section 3.4 is applicable, the Board of Directors of the Company shall
select an Independent Financial Expert not more than five Business Days
following a Repurchase Event. Within two Business Days following its selection
of an Independent Financial Expert, the Company shall deliver to the Warrant
Agent a notice setting forth the name of the Independent Financial Expert.
(f) Notice of Repurchase Offer. Each notice of a Repurchase Offer (an
--------------------------
"Offer Notice") given by the Company pursuant to Section 3.4(b) shall be given
------------
by the Company directly to all Holders of the Warrants, with a copy to the
Warrant Agent, shall be given simultaneously with the Repurchase Notice (or, in
the event that the Relevant Value of the Common Shares or other securities or
property issuable upon exercise of all the Warrants cannot be determined
pursuant to Section 3.4(d)(ii)(1), then such Offer Notice shall be given within
five Business Days after the Company receives the Value Report with respect to
such offer) and shall specify (A) the Final Surrender Time for such Repurchase
Offer, (B) the manner in which Warrants may be surrendered to the Warrant Agent
for repurchase by the Company, (C) the Repurchase Price at which the Warrants
will be repurchased by the Company, (D) if applicable, the name of the
Independent Financial Expert whose valuation of the Common Shares and other
securities or property was utilized in connection with
18
determining such Repurchase Price and (E) that payment of the Repurchase Price
will be made by the Warrant Agent. Each such notice shall be accompanied by a
Certificate for Surrender for Repurchase Offer in substantially the form
attached to the Warrant Certificate and a copy of the Value Report, if any.
(g) Payment for Warrants. Upon surrender for repurchase of any
--------------------
Warrants in conformity with the provisions of this Section 3.4, the Warrant
Agent shall thereupon promptly notify the Company of such surrender. On or
before the Final Surrender Time for any Repurchase Offer, the Company shall
deposit with the Warrant Agent funds sufficient to make payment for the Warrants
tendered to the Warrant Agent and not withdrawn. After receipt of such deposit
from the Company, the Warrant Agent shall make payment, by delivering a check in
such amount as is appropriate, to such Person or Persons as it may be directed
in writing by the Holder surrendering such Warrants, net of any transfer taxes
required to be paid in the event that the check is to be delivered to a Person
other than the Holder.
(h) Compliance with Laws. Notwithstanding anything contained in this
--------------------
Section 3.4, if the Company is required to comply with laws, regulations and
securities exchange or clearing procedures, rules or regulations in connection
with making any Repurchase Offer, such laws, regulations, procedures or rules
shall govern the making of such Repurchase Offer.
ARTICLE IV
ADJUSTMENTS
Section 4.1. Adjustments. The Exercise Price and the number of
------------ -----------
Common Shares issuable upon exercise of each Warrant shall be subject to
adjustment from time to time as follows:
(a) Divisions; Consolidations; Reclassifications. In case the Company
--------------------------------------------
shall, on or before the Expiration Date, (i) issue shares of any class or series
of its capital stock in payment of a dividend or other distribution with respect
to its Common Stock, (ii) subdivide its issued and outstanding Common Shares,
(iii) consolidate its issued and outstanding Common Shares into a smaller number
of shares, or (iv) issue shares of any class or series of its capital stock in a
reclassification or conversion of its Common Shares (other than a
reclassification in connection with a merger, consolidation or other business
combination which will be governed by Section 4.1(j)), then the number of Common
Shares purchasable upon exercise of each Warrant immediately prior to the record
date for such issue or distribution or the effective date of such subdivision,
consolidation, reclassification or conversion shall be adjusted so that the
Holder of each Warrant shall thereafter be entitled to
19
receive the kind and number of Common Shares or other securities which such
Holder would have been entitled to receive after the happening of any of the
events described above had such Warrant been exercised immediately prior to the
happening of such event or any record date with respect thereto. An adjustment
made pursuant to this Section 4.1(a) shall become effective immediately after
the effective date of such event retroactive to the record date, if any, for
such event.
(b) Rights; Options; Warrants. (i) In case the Company shall issue
-------------------------
Rights (other than an issuance of convertible or exchangeable securities subject
to Section 4.1(a) or of Additional SRTC Shares subject to clause (ii) below) to
all holders of its Common Shares, entitling them to subscribe for or purchase
Common Shares at a price per share which is lower (at the record date for such
issuance) than the then Current Market Value per Common Share, then the number
of Common Shares thereafter purchasable upon the exercise of each Warrant shall
be adjusted and shall be determined by multiplying the number of Common Shares
theretofore purchasable upon exercise of each Warrant by a fraction, the
numerator of which shall be the sum of (A) the number of Common Shares
outstanding immediately prior to the issuance of such Rights, plus (B) the
number of additional Common Shares which may be purchased or subscribed for upon
exercise, exchange or conversion of such Rights, and the denominator of which
shall be the sum of (x) the number of Common Shares outstanding immediately
prior to the issuance of such Rights, plus (y) the number of shares which the
total consideration received by the Company for such Rights so offered would
purchase at the then Current Market Value per Common Share. Except as otherwise
provided above, such adjustment shall be made whenever such Rights are issued,
and shall become effective retroactively immediately after the record date for
the determination of shareholders entitled to receive such Rights.
(ii) In case the Company shall issue Additional SRTC Shares, then
the number of Common Shares thereafter purchasable upon the exercise of
each Warrant shall be adjusted and shall be determined by adding to the
number of Common Shares theretofore purchasable upon the exercise of each
Warrant a number of Common Shares equal to the Existing Fraction multiplied
by (A) the number of Additional SRTC Shares divided by (B) one minus the
Existing Fraction. For purposes of this clause (ii), the term "Existing
Fraction" shall mean a fraction, the numerator of which is the number of
Common Shares purchasable upon the exercise of each Warrant and the
denominator of which is the number of Common Shares outstanding, in each
case immediately prior to the issuance of the Additional SRTC Shares.
(c) Issuance of Common Shares at Lower Values. In case the Company
-----------------------------------------
shall sell and issue any Common Share or Right (excluding (i) any Right issued
in any of the transactions described in Section 4.1(a) or (b) above, (ii) Common
Shares issued pursuant to any Right issued in any transaction described in
Section 4.1(a) or (b) above, (iii) any Common
20
Shares or Rights issued as consideration (A) when any corporation or business is
acquired, merged into or becomes part of the Company or a subsidiary of the
Company or (B) in good faith in connection with any other business
collaboration, in each case in an arm's-length transaction between the Company
and a Person other than an Affiliate of the Company and (iv) Common Shares
issued upon the exercise of Rights outstanding on the Closing Date and disclosed
in the Offering Memorandum) at a price per Common Share (determined in the case
of any such Right, by dividing (x) the total consideration receivable by the
Company in consideration of the sale and issuance of such Right, plus the total
consideration payable to the Company upon exercise, conversion or exchange
thereof, by (y) the total number of Common Shares covered by such Right) that is
lower than the Current Market Value per Common Share in effect immediately prior
to such sale or issuance, then the number of Common Shares thereafter
purchasable upon the exercise of each Warrant shall be adjusted and shall be
determined by multiplying the number of Common Shares theretofore purchasable
upon exercise of such Warrant by a fraction, the numerator of which shall be the
number of Common Shares outstanding immediately after such sale or issuance and
the denominator of which shall be the number of Common Shares outstanding
immediately prior to such sale or issuance plus the number of Common Shares
which the aggregate consideration received (determined as provided below) for
such sale or issuance would purchase at such Current Market Value per Common
Share. For purposes of this Section 4.1(c), the Common Shares which the holder
of any such Right shall be entitled to subscribe for or purchase shall be deemed
to be issued and outstanding as of the date of such sale and issuance and the
consideration received by the Company therefor shall be deemed to be the
consideration received by the Company for such Right, plus the consideration or
premiums stated in such Right to be paid for the Common Shares covered thereby.
No adjustment in the number of Common Shares purchasable upon the exercise of
each Warrant shall be made upon the subsequent issue of shares of Common Stock
upon the exercise or conversion of a Right. In case the Company shall sell and
issue any Right together with one or more other securities as part of a unit at
a price per unit, then in determining the "price per Common Share" and the
"consideration received by the Company" for purposes of the first sentence of
this Section 4.1(c), the Board shall determine, in good faith, the fair value of
the Right then being sold as part of such unit.
(d) Distributions of Debt, Assets, Subscription Rights or Convertible
-----------------------------------------------------------------
Securities. In case the Company shall make a distribution to all holders of its
- ----------
Common Shares of evidences of its indebtedness, or assets, or other
distributions (excluding distributions or dividends referred to in Section
4.1(a) above and excluding distributions in connection with the dissolution,
liquidation or winding-up of the Company which shall be governed by Section
4.1(j) and distributions of securities referred to in Section 4.1(a), Section
4.1(b) or Section 4.1(c)), then, in each case, the number of Common Shares
purchasable after such record date upon the exercise of each Warrant shall be
determined by multiplying the number of Common Shares purchasable upon the
exercise of such Warrant immediately prior to such
21
record date by a fraction, the numerator of which shall be the Current Market
Value per Common Share immediately prior to the record date for such
distribution and the denominator of which shall be the Current Market Value per
Common Share immediately prior to the record date for such distribution less the
then fair value (as determined in good faith by the Board) of the evidences of
its indebtedness, or assets or other distributions so distributed attributable
to one Common Share. Such adjustment shall be made whenever any such
distribution is made, and shall become effective on the date of distribution
retroactive to the record date for the determination of shareholders entitled to
receive such distribution.
(e) Expiration of Rights, Options and Conversion Privileges. Upon the
-------------------------------------------------------
expiration of any rights, options, warrants or conversion or exchange privileges
(including, without limitation, any Rights) that have previously resulted in an
adjustment hereunder, if any such right, option, warrant or conversion or
exchange privilege shall not have been exercised, exchanged or converted, the
Exercise Price and the number of Common Shares issuable upon the exercise of
each Warrant shall, upon such expiration, be readjusted and shall thereafter,
upon any future exercise, be such as they would have been had they been
originally adjusted (or had the original adjustment not been required, as the
case may be) as if (i) the only Common Shares so issued were the Common Shares,
if any, actually issued or sold upon the exercise, exchange or conversion of
such rights, options, warrants or conversion or exchange rights (including,
without limitation, any Rights) and (ii) such Common Shares, if any, were issued
or sold for the consideration actually received by the Company upon such
exercise, exchange or conversion plus the consideration, if any, actually
received by the Company for issuance, sale or grant of all such rights, options,
warrants or conversion or exchange rights (including, without limitation, any
Rights) whether or not exercised.
(f) Current Market Value. For the purposes of any computation under
--------------------
this Article IV, the "Current Market Value" per Common Share or of any other
--------------------
security (herein collectively referred to as a "security") at any date herein
specified shall be:
(i) if the security is not registered under the Exchange Act, the
value of the security (1) most recently determined as of a date within the
six months (one year with respect to issuances to employees, directors or
consultants under plans approved by the Board) preceding such date by an
Independent Financial Expert selected by the Company in accordance with the
criteria for such valuation set out in Section 4.1(k), or (2) if no such
determination shall have been made within such six-month (or one-year)
period or if the Company so chooses, determined as of such a date by an
Independent Financial Expert selected by the Company in accordance with the
criteria for such valuation set out in Section 4.1(k), or
(ii) if the security is registered under the Exchange Act, the average
of the daily market prices of the security for the 20 consecutive trading
days immediately
22
preceding such date or, if the security has been registered under the
Exchange Act for less than 20 consecutive trading days before such date,
then the average of the daily market prices for all of the trading days
before such date for which daily market prices are available; provided,
however, that with respect to issuances to employees, directors or
consultants under plans approved by the Board, Current Market Value for
purposes of this clause (ii) shall be the market price of the security for
such date or the trading day immediately preceding such date. The market
price for each such trading day shall be: (A) in the case of a security
listed or admitted to trading on any national securities exchange or a
national market system, including without limitation the Nasdaq National
Market, the closing sales price, regular way, on such day, or if no sale
takes place on such day, the average of the closing bid and asked prices on
such day on the principal national securities exchange on which such
security is listed or admitted, as determined by the Board, in good faith,
(B) in the case of a security not then listed or admitted to trading on any
national securities exchange, the last reported sale price on such day, or
if no sale takes place on such day, the average of the closing bid and
asked prices on such day, as reported by a reputable quotation source
designated by the Company, (C) in the case of a security not then listed or
admitted to trading on any national securities exchange and as to which no
such reported sale price or bid and asked prices are available, the average
of the reported high bid and low asked prices on such day, as reported by a
reputable quotation service, or a newspaper of general circulation in the
Borough of Manhattan, City and State of New York customarily published on
each Business Day, designated by the Company, or, if there shall be no bid
and asked prices on such day, the average of the high bid and low asked
prices, as so reported, on the most recent day (not more than 30 calendar
days prior to the date in question) for which prices have been so reported
and (D) if there are no bid and asked prices reported during the 30
calendar days prior to the date in question, the Current Market Value of
the security shall be determined as if the security were not registered
under the Exchange Act.
(g) Consideration Received. For purposes of any computation
----------------------
respecting consideration received pursuant to this Section 4.1, the following
shall apply:
(i) in the case of the issuance of Common Shares for cash, the
consideration shall be the amount of such cash, provided that in no case
shall any deduction be made for any commissions, discounts or other
expenses incurred by the Company for any underwriting of the issue or
otherwise in connection therewith;
(ii) in the case of the issuance of Common Shares for a consideration
in whole or in part other than cash, the consideration other than cash
shall be deemed to be the fair market value thereof as determined in good
faith by the Board (irrespective of the accounting treatment thereof),
whose determination shall be conclusive and
23
described in reasonable detail in a board resolution which shall be
provided as soon as practicable thereafter to the Warrant Agent; and
(iii) in the case of the issuance of rights, options, warrants or
securities convertible into or exchangeable for Common Shares (including,
without limitation, any Rights), the aggregate consideration received
therefor shall be deemed to be the consideration received by the Company
for the issuance of such rights, options, warrants or securities
convertible into or exchangeable for Common Shares, plus the additional
minimum consideration, if any, to be received by the Company upon the
exercise, conversion or exchange thereof (the consideration in each case to
be determined in the same manner as provided in clauses (i) and (ii) of
this Section 4.1(g)).
(h) De Minimis Adjustments. No adjustment in the number of Common
----------------------
Shares purchasable hereunder shall be required unless such adjustment would
require an increase or decrease of at least one percent (1%) in the number of
Common Shares purchasable upon the exercise of each Warrant; provided, however,
that any adjustments which by reason of this Section 4.1(h) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations shall be made to the nearest one-thousandth of a
share.
(i) Adjustment of Exercise Price. Whenever the number of Common
----------------------------
Shares purchasable upon the exercise of each Warrant is adjusted, as herein
provided, the Exercise Price per Common Share payable upon exercise of such
Warrant shall be adjusted (calculated to the nearest $.0001) so that it shall
equal the price determined by multiplying such Exercise Price immediately prior
to such adjustment by a fraction the numerator of which shall be the number of
Common Shares purchasable upon the exercise of each Warrant immediately prior to
such adjustment and the denominator of which shall be the number of Common
Shares so purchasable immediately thereafter. Following any adjustment to the
Exercise Price pursuant to this Article IV, the amount payable, when adjusted,
shall never be less than the par value per Common Share at the time of such
adjustment.
If, after an adjustment, a Holder of a Warrant upon exercise of it may
receive shares of two or more classes in the capital of the Company, the Company
shall determine the allocation of the adjusted Exercise Price between such
classes of shares in a manner that the Board deems fair and equitable to the
Holders. After such allocation, the exercise privilege and the Exercise Price
of each class of shares shall thereafter be subject to adjustment on terms
comparable to those applicable to Common Shares in this Article IV.
Such adjustment shall be made successively whenever any event listed
above shall occur.
24
(j) Consolidation, Merger, Etc. (i) Subject to the provisions of
--------------------------
subsection (ii) below of this Section 4.1(j), in case of the consolidation
of the Company with, or merger of the Company with or into, or of the sale
of all or substantially all of the properties and assets of the Company to,
any Person, and in connection therewith consideration is payable to holders
of Common Shares (or other securities or property purchasable upon exercise
of Warrants) in exchange therefor, the Warrants shall remain subject to the
terms and conditions set forth in this Agreement and each Warrant shall,
after such consolidation, merger or sale, entitle the Holder to receive
upon exercise the number of shares in the capital or other securities or
property (including cash) of or from the Person resulting from such
consolidation or surviving such merger or to which such sale shall be made
or of the parent of such Person, as the case may be, that would have been
distributable or payable on account of the Common Shares (or other
securities purchasable upon exercise of Warrants) if such Holder's Warrants
had been exercised immediately prior to such merger, consolidation or sale
(or, if applicable, the record date therefor); and in any such case the
provisions of this Agreement with respect to the rights and interests
thereafter of the Holders of Warrants shall be appropriately adjusted by
the Board in good faith so as to be applicable, as nearly as may reasonably
be, to any shares, other securities or any property thereafter deliverable
on the exercise of the Warrants.
(ii) Notwithstanding the foregoing, (x) if the Company merges or
consolidates with, or sells all or substantially all of its property and
assets to, another Person (other than an Affiliate of the Company) and
consideration is payable to holders of Common Shares in exchange for their
Common Shares in connection with such merger, consolidation or sale which
consists solely of cash, or (y) in the event of the dissolution,
liquidation or winding up of the Company, then the Holders of Warrants
shall be entitled to receive distributions on the date of such event on an
equal basis with holders of Common Shares (or other securities issuable
upon exercise of the Warrants) as if the Warrants had been exercised
immediately prior to such event, less the Exercise Price. Upon receipt of
such payment, if any, the rights of a Holder shall terminate and cease and
such Holder's Warrants shall expire. If the Company has made a Repurchase
Offer that has not expired at the time of such transaction, the holders of
the Warrants will be entitled to receive the higher of (i) the amount
payable to the holders of the Warrants described above and (ii) the
Repurchase Price payable to the holders of the Warrants pursuant to such
Repurchase Offer. In case of any such merger, consolidation or sale of
assets, the surviving or acquiring Person and, in the event of any
dissolution, liquidation or winding up of the Company, the Company shall
deposit promptly with the Warrant Agent the funds, if any, necessary to pay
the Holders of the Warrants. After receipt of such deposit from such
Person or the Company and after receipt of surrendered Warrant
Certificates, the Warrant Agent shall make payment by
25
delivering a check in such amount as is appropriate (or, in the case of
consideration other than cash, such other consideration as is appropriate)
to such Person or Persons as it may be directed in writing by the Holder
surrendering such Warrants.
(k) If required pursuant to Section 4.1(f)(i), the Current Market
Value shall be deemed to be equal to the value set forth in the Value Report (as
defined below) as determined by an Independent Financial Expert, which shall be
selected by the Board not more than ten Business Days following the occurrence
of any event referred to in Sections 4(b), 4(c) or 4(d), and retained on
customary terms and conditions, using one or more valuation methods that the
Independent Financial Expert, in its professional judgment, determines to be
most appropriate. The Company shall cause the Independent Financial Expert to
deliver to the Company, with a copy to the Warrant Agent, within 45 days of the
appointment of the Independent Financial Expert, a value report (the "Value
-----
Report") stating the value of the Common Shares and other securities or property
- ------
of the Company, if any, being valued as of the Valuation Date and containing a
brief statement as to the nature and scope of the examination or investigation
upon which the determination of value was made. The Warrant Agent shall have no
duty with respect to the Value Report of any Independent Financial Expert,
except to keep it on file and available for inspection by the Holders. The
determination as to Current Market Value in accordance with the provisions of
this Section 4.1(k) shall be conclusive on all Persons. The Independent
Financial Expert shall consult with management of the Company in order to allow
management to comment on the proposed value prior to delivery to the Company of
any Value Report.
(l) When No Adjustment Required. Without limiting any other exception
---------------------------
contained in this Section 4.1, and in addition thereto, no adjustment need be
made for:
(i) exercises or conversions of any Rights outstanding on the date
hereof;
(ii) issuances of Actual SRTC Shares to the extent the number of
such shares does not exceed 1,969,112;
(iii) issuances of Rights or Common Shares to employees, directors or
consultants of the Company or any of its subsidiaries (to the
extent that all such securities issued after the date hereof do
not represent an aggregate equity value in excess of 15% of the
equity value of the Company on a fully diluted basis at such
time, as determined in good faith by the Board) and any such
Rights have an exercise price at least equal to the fair market
value of the Common Shares on the date of issuance, as
determined in good faith by the Board;
26
(iv) rights to purchase Common Shares pursuant to a Company plan for
reinvestment of dividends or interest;
(v) a change in the par value of the Common Shares (including a
change from par value to no par value or vice versa);
(vi) issuances of Rights or Common Shares in bona fide public
offerings or private placements pursuant to Section 4(2) of the
Securities Act, Regulation D thereunder or Regulation S,
involving at least one investment bank of national reputation
(provided any such private placement is to 10 or more
beneficial holders); and
(vii) issuances of Rights or Common Stock in connection with the
establishment of commercial bank facilities.
To the extent the Warrants become convertible into cash, no adjustment
need be made thereafter as to the cash. Interest will not accrue on the cash.
Section 4.2. Notice of Adjustment. Whenever the number of Common
------------ --------------------
Shares purchasable upon the exercise of each Warrant or the Exercise Price is
adjusted, as herein provided, the Company shall cause the Warrant Agent promptly
to mail, by first-class mail, postage prepaid, at the expense of the Company, to
each Holder notice of such adjustment or adjustments and shall deliver to the
Warrant Agent a certificate of the Auditors setting forth the number of Common
Shares (or other securities) purchasable upon the exercise of each Warrant and
the Exercise Price after such adjustment, setting forth a brief statement of the
facts requiring such adjustment and setting forth the computation by which such
adjustment was made. Such certificate shall be conclusive evidence of the
correctness of such adjustment except in the case of manifest error. The
Warrant Agent shall be entitled to rely on such certificate and shall be under
no duty or responsibility with respect to any such certificate, except to
exhibit the same, from time to time, to any Holder desiring an inspection
thereof during reasonable business hours upon reasonable notice. The Warrant
Agent shall not at any time be under any duty or responsibility to any Holders
to determine whether any facts exist which may require any adjustment of the
Exercise Price or the number of Common Shares purchasable on exercise of the
Warrants or any of the other adjustments set forth in Section 4.1, or with
respect to the nature or extent of any such adjustment when made, or with
respect to the method employed in making such adjustment, or the validity or
value (or the kind or amount) of any Common Shares (or other securities) which
may be purchasable on exercise of the Warrants. The Warrant Agent shall not be
responsible for any failure of the Company to make any cash payment or to issue,
transfer or deliver any Common Shares or share certificates (or other
securities) upon the exercise of any Warrant.
27
Section 4.3. Statement on Warrants. Irrespective of any adjustment
------------ ---------------------
in the Exercise Price or the number or kind of shares purchasable upon the
exercise of the Warrants, Warrants theretofore or thereafter issued may continue
to express the same price and number and kind of shares as are stated in the
Warrants initially issuable pursuant to this Agreement.
Section 4.4. Notice of Consolidation, Merger, Etc. In case at any
------------ ------------------------------------
time after the date hereof and prior to 5:00 p.m., New York City time, on the
Expiration Date, there shall be any (i) consolidation or merger involving the
Company or sale, transfer or other disposition of all or substantially all of
the Company's property, assets or business (except a merger or other
reorganization in which the Company shall be the surviving corporation and
holders of Common Shares (or other securities purchasable upon exercise of the
Warrants) receive no consideration in respect of their shares) or (ii) any other
transaction contemplated by Section 4.1(j)(ii) above, then, in any one or more
of such cases, the Company shall cause to be mailed to the Warrant Agent and
shall cause the Warrant Agent to mail, at the Company's expense, to each Holder
of a Warrant, at the earliest practicable time (and, in any event, not less than
20 days before any date set for definitive action), notice of the date on which
such reorganization, sale, consolidation, merger, dissolution, liquidation or
winding up shall take place, as the case may be. Such notice shall also set
forth such facts as shall indicate the effect of such action (to the extent such
effect may be known at the date of such notice) on the Exercise Price and the
kind and amount of the Common Shares and other securities, money and other
property deliverable upon exercise of the Warrants. Such notice shall also
specify the date as of which the holders of record of the Common Shares or other
securities or property issuable upon exercise of the Warrants shall be entitled
to exchange their shares for securities, money or other property deliverable
upon such reorganization, sale, consolidation, merger, dissolution, liquidation
or winding up, as the case may be.
Section 4.5. Fractional Interests. If more than one Warrant shall
------------ --------------------
be presented for exercise in full at the same time by the same Holder, the
number of full Common Shares which shall be issuable upon such exercise thereof
shall be computed on the basis of the aggregate number of Common Shares
purchasable on exercise of the Warrants so presented. The Company shall not be
required to issue fractional Common Shares upon the exercise of Warrants. If
any fraction of a Common Share would, except for the provisions of this Section
4.5, be issuable on the exercise of any Warrant (or specified portion thereof),
the Company may pay an amount in cash calculated by it to be equal to the then
Current Market Value per Common Share multiplied by such fraction computed to
the nearest whole cent.
Section 4.6. Initial Public Offering. Notwithstanding anything to
------------ -----------------------
the contrary herein contained, if the Company conducts an initial public
offering of equity securities (other than Common Shares), the Company will give
the Holders the opportunity to convert such Warrants into warrants to purchase
such equity securities and such Common Shares or such other securities that have
been received by the Holders upon the exercise of Warrants into such
28
equity securities. Such conversion opportunity will be on terms and conditions
determined to be fair and reasonable by the Board.
ARTICLE V
DECREASE IN EXERCISE PRICE
The Board, in its sole discretion, shall have the right at any time,
or from time to time, to decrease the Exercise Price of the Warrants and/or
increase the number of shares issuable upon the exercise of the Warrants.
ARTICLE VI
LOSS OR MUTILATION
Upon receipt by the Company and the Warrant Agent of evidence
satisfactory to them of the ownership and the loss, theft, destruction or
mutilation of any Warrant Certificate and of indemnity or bond satisfactory to
them and (in the case of mutilation) upon surrender and cancellation thereof,
then, in the absence of notice to the Company or the Warrant Agent that the
Warrants represented thereby have been acquired by a bona fide purchaser, the
Company shall execute and the Warrant Agent shall countersign and deliver to the
registered Holder of the lost, stolen, destroyed or mutilated Warrant
Certificate, in exchange for or in lieu thereof, a new Warrant Certificate of
the same tenor and for a like aggregate number of Warrants. Upon the issuance
of any new Warrant Certificate under this Article VI, the Company may require
the payment of a sum sufficient to cover any tax or other governmental charge
that may be imposed in relation thereto and other expenses (including the fees
and expenses of the Warrant Agent) in connection therewith. Every new Warrant
Certificate executed and delivered pursuant to this Article VI in lieu of any
lost, stolen or destroyed Warrant Certificate shall constitute a contractual
obligation of the Company whether or not the allegedly lost, stolen or destroyed
Warrant Certificates shall be at any time enforceable by anyone and shall be
entitled to the benefits of this Agreement equally and proportionately with any
and all other Warrant Certificates duly executed and delivered hereunder. The
provisions of this Article VI are exclusive and shall preclude (to the extent
lawful) all other rights or remedies with respect to the replacement of
mutilated, lost, stolen, or destroyed Warrant Certificates.
29
ARTICLE VII
RESERVATION AND AUTHORIZATION
OF COMMON SHARES
The Company shall at all times reserve and keep available such number
of its authorized but unissued Common Shares deliverable upon exercise of the
Warrants as will be sufficient to permit the exercise in full of all outstanding
Warrants and will cause appropriate evidence of ownership of such Common Shares
to be delivered to the Warrant Agent upon its request for delivery thereof upon
the exercise of the Warrants. The Company covenants that all Common Shares of
the Company that may be issued upon the exercise of the Warrants will, upon
issuance, be duly authorized, validly issued, fully paid and not subject to any
calls for funds and free from pre-emptive rights and all taxes, liens, charges
and security interests with respect to the issue thereof.
ARTICLE VIII
WARRANT TRANSFER BOOKS; RESTRICTIONS ON TRANSFER
Section 8.1. Transfer and Exchange. The Warrant Certificates shall
---------------------
be issued in registered form only. The Warrant Agent shall keep at its office a
register for the registration of Warrant Certificates and transfers or exchanges
of Warrant Certificates as herein provided and other appropriate data as
determined by the Warrant Agent. The Company shall, upon reasonable notice to
the Warrant Agent, have access to such register during the Warrant Agent's
regular business hours. All Warrant Certificates issued upon any registration
of transfer or exchange of Warrant Certificates shall be the valid obligations
of the Company, evidencing the same obligations, and entitled to the same
benefits under this Agreement, as the Warrant Certificates surrendered for such
registration of transfer or exchange.
The Warrants shall initially be issued as part of the issuance of the
Units. Prior to the Separation Date, the Warrants may not be transferred or
exchanged separately from, but may be transferred or exchanged only together
with, the Notes issued as part of such Units.
A Holder may transfer its Warrants only by complying with the terms of
this Agreement. No such transfer shall be effected until, and such transferee
shall succeed to the rights of a Holder only upon, final acceptance and
registration of the transfer by the Warrant Agent in the register. Prior to the
registration of any transfer of Warrants by a Holder as provided herein, the
Company, the Warrant Agent, and any agent of the Company may treat the person in
whose name the Warrants are registered as the owner thereof for all purposes
30
and as the person entitled to exercise the rights represented thereby, any
notice to the contrary notwithstanding. Furthermore, any holder of a Global
Warrant shall, by acceptance of such Global Warrant, agree that transfers of
beneficial interests in such Global Warrant may be effected only through a book-
entry system maintained by the holder of such Global Warrant (or its agent), and
that ownership of a beneficial interest in the Warrants represented thereby
shall be required to be reflected in a book-entry. When Warrant Certificates are
presented to the Warrant Agent with a request to register the transfer or to
exchange them for an equal amount of Warrants, the Warrant Agent shall register
such transfer or make such exchange as requested if its requirements for such
transactions are met. To permit registrations of transfers and exchanges, the
Company shall execute Warrant Certificates at the Warrant Agent's request. No
service charge shall be made for any registration of transfer or exchange of
Warrants, but the Company may require payment of a sum sufficient to cover any
tax or other governmental charge that may be imposed in connection with any
registration of transfer of Warrants.
Section 8.2. Book-Entry Provisions for the Global Warrants. (a)
------------ ---------------------------------------------
The Restricted Global Warrant and the Legended Regulation S Global Warrant
initially shall (i) be registered in the name of the Depositary for such Global
Warrant or the nominee of such Depositary, (ii) be delivered to the Warrant
Agent as custodian for such Depositary and (iii) bear legends as set forth in
Section 2.2 hereof.
Members of, or participants in, the Depositary ("Agent Members") shall
-------------
have no rights under this Agreement with respect to the Global Warrants held on
their behalf by the Depositary or the Warrant Agent as its custodian, and the
Depositary may be treated by the Company, the Warrant Agent and any agent of the
Company or the Warrant Agent as the absolute owner of each such Global Warrant
for all purposes whatsoever. Notwithstanding the foregoing, nothing herein
shall prevent the Company, the Warrant Agent or any agent of the Company or the
Warrant Agent, from giving effect to any written certification, proxy or other
authorization furnished by the Depositary or impair, as between the Depositary
and its Agent Members, the operation of customary practices governing the
exercise of the rights of a Holder of any Warrants.
(b) Transfers of a Global Warrant shall be limited to transfers of
such Global Warrant in whole, but not in part, to the Depositary, its successors
or their respective nominees. Interests of beneficial owners in the Global
Warrants may be transferred in accordance with the rules and procedures of the
Depositary and the provisions of Section 8.3 hereof. U.S. Certificated Warrants
and Offshore Certificated Warrants shall be transferred to beneficial owners in
exchange for their beneficial interests in the Restricted Global Warrant or the
Regulation S Global Warrant, as the case may be, (i) if the Depositary notifies
the Company that it is unwilling or unable to continue as Depositary for any
such Global Warrant and a successor depositary is not appointed by the Company
within 90 days of such notice,
31
(ii) if there is a Default or (iii) upon the request of the beneficial owner in
accordance with the rules and procedures of the Depositary and the provisions of
Section 8.3 hereof; provided that Offshore Certificated Warrants shall not be
transferred in exchange for the Legended Regulation S Global Warrant prior to
one year after the Closing Date.
(c) Any beneficial interest in one of the Global Warrants that is
transferred to a person who takes delivery in the form of an interest in any
other Global Warrant will, upon transfer, cease to be an interest in the first
Global Warrant and become an interest in the other Global Warrant and,
accordingly, will thereafter be subject to all transfer restrictions, if any,
and other procedures applicable to beneficial interests in such other Global
Warrant for as long as it remains such an interest.
(d) In connection with the transfer of the entire Restricted Global
Warrant or Regulation S Global Warrant to beneficial owners pursuant to
paragraph (b) of this Section 8.2, the Restricted Global Warrant or the
Regulation S Global Warrant, as the case may be, shall be surrendered to the
Warrant Agent for cancellation, and the Company shall execute, and the Warrant
Agent shall countersign and deliver, to each beneficial owner identified by the
Depositary in exchange for its beneficial interest in the Restricted Global
Warrant or the Regulation S Global Warrant, as the case may be, U.S.
Certificated Warrants or Offshore Certificated Warrants, as the case may be,
representing, in the aggregate, the number of Warrants theretofore represented
by the Restricted Global Warrant or the Regulation S Global Warrant, as the case
may be.
(e) In connection with the transfer of a portion of the beneficial
interests in the Restricted Global Warrant or the Unlegended Regulation S Global
Warrant to beneficial owners pursuant to paragraph (b) of this Section 8.2, the
Warrant Agent shall reflect on its books and records the date and a decrease in
the amount of Warrants represented by the Restricted Global Warrant or
Unlegended Regulation S Global Warrant in an amount equal to the amount of
Warrants represented by the beneficial interest in the Restricted Global Warrant
or Unlegended Regulation S Global Warrant to be transferred, and the Company
shall execute, and the Warrant Agent shall countersign and deliver, to each
beneficial owner identified by the Depositary in exchange for its beneficial
interest in the Restricted Global Warrant or the Unlegended Regulation S Global
Warrant, as the case may be, U.S. Certificated Warrants or Offshore Certificated
Warrants, as the case may be, of like tenor and amount.
(f) Any Certificated Warrant delivered in exchange for an interest in
a Global Warrant pursuant to paragraph (b) or (e) of this Section shall, except
as otherwise provided by paragraph (d) of Section 8.3 hereof, bear the Private
Placement Legend.
(g) The registered holder of a Global Warrant may grant proxies and
otherwise authorize any person, including Agent Members and persons that may
hold interests
32
through Agent Members, to take any action which a Holder is entitled to take
under this Agreement or the Warrants.
Section 8.3. Special Transfer Provisions. The following provisions
------------ ---------------------------
shall apply:
(a) Transfers to QIBs. The following provisions shall apply with
-----------------
respect to the registration of any proposed transfer of Warrants to a QIB
(excluding non-U.S. Persons):
(i) If the Warrants to be transferred are represented by Restricted
Certificated Warrants or by an interest in the Restricted Global Warrant or
the Legended Regulation S Global Warrant, the Warrant Agent shall register
the transfer if such transfer is being made by a proposed transferor who
has checked the box provided for on the form of Warrant Certificate
stating, or has otherwise advised the Company and the Warrant Agent in
writing, that the sale has been made in compliance with the provisions of
Rule 144A to a transferee who has signed the certification provided for on
the form of Warrant Certificate stating, or has otherwise advised the
Company and the Warrant Agent in writing, that it is purchasing the
Warrants for its own account or an account with respect to which it
exercises sole investment discretion and that it and any such account is a
QIB within the meaning of Rule 144A, and is aware that the sale to it is
being made in reliance on Rule 144A and acknowledges that it has received
such information regarding the Company as it has requested pursuant to Rule
144A or has determined not to request such information and that it is aware
that the transferor is relying upon its foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
(ii) If the proposed transferee is an Agent Member, and the Warrants
to be transferred are represented by Restricted Certificated Warrants or by
an interest in the Regulation S Global Warrant, upon receipt by the Warrant
Agent of the documents referred to in clause (i) above, as applicable, and
instructions given in accordance with the Depositary's and the Warrant
Agent's procedures, the Warrant Agent shall reflect on its books and
records the date and an increase in the amount of Warrants represented by
the Restricted Global Warrant in an amount equal to the amount of Warrants
represented by the Certificated Warrants or the interest in the Legended
Regulation S Global Warrant, as the case may be, to be transferred, and the
Warrant Agent shall cancel the Certificated Warrants or decrease the amount
of the Regulation S Global Warrant so transferred.
(b) Transfers to Non-U.S. Persons at Any Time. The following
-----------------------------------------
provisions shall apply with respect to the registration of any proposed transfer
of Warrants to a Non-U.S. Person:
33
(i) The Warrant Agent shall register any proposed transfer of Warrants
to a Non-U.S. Person only upon receipt of a certificate substantially in
the form of Exhibit B from the proposed transferor.
(ii) If the proposed transferee is an Agent Member and the Warrants to
be transferred are represented by Certificated Warrants or an interest in
the Restricted Global Warrant, upon receipt by the Warrant Agent of the
documents referred to in clause (i) above and instructions given in
accordance with the Depositary's and the Warrant Agent's procedures, the
Warrant Agent shall reflect on its books and records the date and an
increase in the number of Warrants represented by the Regulation S Global
Warrant in an amount equal to the number of Warrants represented by the
Certificated Warrants or the Restricted Global Warrant, as the case may be,
to be transferred, and the Warrant Agent shall cancel the Certificated
Warrant or decrease the amount of Warrants represented by the Restricted
Global Warrant so transferred.
(c) Transfers to Any Other Person. The following provisions shall
-----------------------------
apply with respect to the registration of any proposed transfer of Warrants to
any Person not specified in paragraphs (a) and (b) above (including any
Institutional Accredited Investor which is not a QIB).
(i) The Warrant Agent shall register any proposed transfer of Warrants
to any such Person if (x) the transferor has delivered to the Warrant Agent
and the Company a certificate substantially in the form of Exhibit C-1
hereto and, if required by paragraph (d) thereof, an Opinion of Counsel to
the effect set forth therein and (y) the proposed transferee has delivered
to the Warrant Agent and the Company a certificate substantially in the
form of Exhibit C-2 hereto if such transferee is an Institutional
Accredited Investor that is not a QIB.
(ii) If the proposed transferor is an Agent Member holding a
beneficial interest in the Restricted Global Warrant or the Regulation S
Global Warrant, upon receipt by the Warrant Agent and the Company of the
documents referred to in clause (i) above and instructions given in
accordance with the Depositary's and the Warrant Agent's procedures, the
Company shall execute and the Warrant Agent shall countersign Certificated
Warrants in an amount equal to the number of Warrants represented by the
Restricted Global Warrant or the Regulation S Global Warrant, if any, as
the case may be, to be transferred and the Warrant Agent shall decrease the
number of Warrants represented by the Restricted Global Warrant or the
Regulation S Global Warrant so transferred.
(d) Private Placement Legend. Upon the transfer, exchange or
------------------------
replacement of Warrant Certificates not bearing the Private Placement Legend,
the Warrant Agent shall
34
deliver Warrant Certificates that do not bear the Private Placement Legend. Upon
the transfer, exchange or replacement of Warrant Certificates bearing the
Private Placement Legend, the Warrant Agent shall deliver only Warrant
Certificates that bear the Private Placement Legend unless either (i) the
circumstances contemplated by the third sentence of the third paragraph of
Section 2.1 exist or (ii) there is delivered to the Warrant Agent an opinion of
counsel reasonably satisfactory to the Company and its counsel and the Warrant
Agent to the effect that neither such legend nor the related restrictions on
transfer are required in order to maintain compliance with the provisions of the
Securities Act.
(e) Transfers of Interests in the Legended Regulation S Global
----------------------------------------------------------
Warrant. The Registrar shall register the transfer of any interest in the
Legended Regulation S Global Warrant (x) if the proposed transferee is a Non-
U.S. Person and the proposed transferor has delivered to the Registrar a
certificate substantially in the form of Exhibit B hereto or (y) if the proposed
transferee is a QIB and the proposed transferor has complied with the provisions
of Section 8.3(a) hereof.
(f) Transfers of Interests in the Unlegended Regulation S Global
------------------------------------------------------------
Warrant or Offshore Certificated Warrants. The Warrant Agent shall register the
- -----------------------------------------
transfer of any interest in the Unlegended Regulation S Global Warrant or any
Offshore Certificated Warrants without requiring any additional certification.
(g) General. (i) By its acceptance of any Warrants represented by a
-------
Warrant Certificate bearing the Private Placement Legend, each Holder of such
Warrants acknowledges the restrictions on transfer of such Warrants set forth in
this Agreement and in the Private Placement Legend and agrees that it will
transfer such Warrants only as provided in this Agreement. The Warrant Agent
shall not register a transfer of any Warrants unless such transfer complies with
the restrictions on transfer of such Warrants set forth in this Agreement and is
in compliance with applicable laws and applicable rules, regulations and
procedures of any securities exchange or clearing agency in effect from time to
time. In connection with any transfer of Warrants, each Holder agrees by its
acceptance of Warrants to furnish the Warrant Agent or the Company such
certifications, legal opinions or other information as either of them may
reasonably require to confirm that such transfer is being made pursuant to an
exemption from, or a transaction not subject to, the registration requirements
of the Securities Act or any other applicable laws of any foreign jurisdiction;
provided that the Warrant Agent shall not be required to determine (but may rely
on a determination made by the Company with respect to) the sufficiency of any
such certifications, legal opinions or other information.
(ii) The Warrant Agent shall retain copies of all letters, notices and
other written communications received pursuant to Section 8.2 hereof or
this Section 8.3. The Company shall have the right to inspect and make
copies of all such letters, notices
35
or other written communications at any reasonable time upon the giving of
reasonable written notice to the Warrant Agent.
Section 8.4. Surrender of Warrant Certificates. Any Warrant
------------ ---------------------------------
Certificate surrendered for registration of transfer, exchange or exercise of
the Warrants represented thereby shall, if surrendered to the Company, be
delivered to the Warrant Agent, and all Warrant Certificates surrendered or so
delivered to the Warrant Agent shall be promptly canceled by the Warrant Agent
and shall not be reissued by the Company and, except as provided in this Article
VIII in case of an exchange, Article III hereof in case of the exercise of less
than all the Warrants represented thereby or Article VI in case of a mutilated
Warrant Certificate, no Warrant Certificate shall be issued hereunder in lieu
thereof. The Warrant Agent shall deliver to the Company from time to time or
otherwise dispose of such canceled Warrant Certificates as the Company may
direct in writing.
ARTICLE IX
WARRANT HOLDERS
Section 9.1. Warrant Holder Deemed Not a Shareholder. The Company
------------ ---------------------------------------
and the Warrant Agent may deem and treat the registered Holder(s) of the Warrant
Certificates as the absolute owner(s) thereof (notwithstanding any notation of
ownership or other writing thereon made by anyone), for the purpose of any
exercise thereof and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary. Accordingly, the
Company and/or the Warrant Agent shall not, except as ordered by a court of
competent jurisdiction as required by law, be bound to recognize any equitable
or other claim to or interest in the Warrants on the part of any person other
than such registered Holder, whether or not it shall have express or other
notice thereof. Prior to the valid exercise of the Warrants, no Holder of a
Warrant Certificate, as such, shall be entitled to any rights of a shareholder
of the Company, including, without limitation, the right to vote or to consent
to any action of the shareholders, to receive dividends or other distributions,
to exercise any preemptive right or to receive any notice of meetings of
shareholders and, except as otherwise provided in this Agreement, shall not be
entitled to receive any notice of any proceedings of the Company.
Section 9.2. Right of Action. All rights of action with respect to
------------ ---------------
this Agreement are vested in the Holders of the Warrants, and any Holder of any
Warrant, without the consent of the Warrant Agent or the Holders of any other
Warrant, may, on such Holder's own behalf and for such Holder's own benefit,
enforce, and may institute and maintain any suit, action or proceeding against
the Company suitable to enforce, or otherwise in respect of,
36
such Holder's right to exercise such Warrants in the manner provided in the
Warrant Certificate representing such Warrants and in this Agreement.
ARTICLE X
REMEDIES
Section 10.1. Defaults. It shall be deemed to be a "Default" with
------------- -------- -------
respect to the Company's (or its successor's) obligations under this Agreement
if:
(a) a Repurchase Event occurs and the Company (or its successor) shall
fail to make a Repurchase Offer pursuant to Section 3.4 hereof; or
(b) the Company (or its successor) shall fail to purchase the Warrants
pursuant to the Repurchase Offer in accordance with the provisions of
Section 3.4 hereof.
Section 10.2. Payment Obligations. Upon the happening of a Default
------------- -------------------
under this Agreement, the Company shall be obligated to increase the amount
otherwise payable pursuant to Section 3.4(d) hereof in respect of the Repurchase
Offer to which such Default relates by an amount equal to interest thereon at a
rate per annum equal to 12 5/8% from the date of the Default to the date of
payment, which interest shall compound quarterly (all such payment obligations
in respect of such Repurchase Offer, together with all such increased amounts,
being the "Repurchase Obligation").
---------------------
Section 10.3. Remedies; No Waiver. Notwithstanding any other
------------- -------------------
provision of this Warrant Agreement, if a Default occurs and is continuing, the
Holders of the Warrants may pursue any available remedy to collect the
Repurchase Obligation or to enforce the performance of any provision of this
Warrant Agreement. A delay or omission by any Holder of a Warrant in
exercising, or a failure to exercise, any right or remedy arising out of a
Default shall not impair the right or remedy or constitute a waiver of or
acquiescence in the Default. All remedies are cumulative to the extent permitted
by law.
ARTICLE XI
THE WARRANT AGENT
Section 11.1. Duties and Liabilities. The Company hereby appoints
------------- ----------------------
the Warrant Agent to act as agent of the Company as set forth in this Agreement.
The Warrant
37
Agent hereby accepts the agency established by this Agreement and agrees to
perform the same upon the terms and conditions herein set forth, by all of which
the Company and the Holders of Warrants, by their acceptance thereof, shall be
bound. The Warrant Agent shall not, by countersigning Warrant Certificates or by
any other act hereunder, be deemed to make any representations as to the
validity or authorization of the Warrants or the Warrant Certificates (except as
to its countersignature thereon) or of any Common Shares issued upon exercise of
any Warrant, or as to the accuracy of the computation of the Exercise Price or
the number or kind or amount of Common Shares deliverable upon exercise of any
Warrant or the correctness of the representations of the Company made in the
certificates that the Warrant Agent receives. The Warrant Agent shall not be
accountable for the use or application by the Company of the proceeds of the
exercise of any Warrant. The Warrant Agent shall not have any duty to calculate
or determine any adjustments with respect to either the Exercise Price or the
kind and amount of Common Shares receivable by Holders upon the exercise of
Warrants required from time to time and the Warrant Agent shall have no duty or
responsibility in determining the accuracy or correctness of such calculation.
The Warrant Agent shall not be (a) liable for any recital or statement of fact
contained herein or in the Warrant Certificates or for any action taken,
suffered or omitted by it in good faith without gross negligence in the belief
that any Warrant Certificate or any other documents or any signatures are
genuine or properly authorized, (b) responsible for any failure on the part of
the Company to comply with any of its covenants and obligations contained in
this Agreement or in the Warrant Certificates or (c) liable for any act or
omission in connection with this Agreement except for its own gross negligence,
bad faith or willful misconduct. The Warrant Agent is hereby authorized to
accept instructions with respect to the performance of its duties hereunder from
the Chairman of the Board, Chief Executive Officer, any Vice President or other
executive officer of the Company and to apply to any such officer for
instructions (which instructions will be promptly given in writing when
requested) and the Warrant Agent shall not be liable for any action taken or
suffered to be taken by it in good faith without gross negligence in accordance
with the instructions of any such officer; provided, however, that, in its
discretion, the Warrant Agent may, in lieu thereof, accept other evidence of
such or may require such further or additional evidence as it may deem
reasonable. The Warrant Agent shall not be liable for any action taken with
respect to any matter in the event it requests instructions from the Company as
to that matter and does not receive such instructions within a reasonable period
of time after the request therefor.
The Warrant Agent may execute and exercise any of the rights and
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys, agents or employees, and the Warrant Agent shall not be
answerable or accountable for any act, default, neglect or misconduct of any
such attorneys, agents or employees; provided that reasonable care has been
exercised with respect to the retention of any such attorney, agent or employee.
The Warrant Agent shall not be under any obligation or duty to institute, appear
in or defend any action, suit or legal proceeding in respect hereof, unless
first indemnified to its
38
reasonable satisfaction. The Warrant Agent shall promptly notify the Company in
writing of any claim made or action, suit or proceeding instituted against it
arising out of or in connection with this Agreement.
The Company will perform, execute, acknowledge and deliver or cause to
be delivered all such further acts, instruments and assurances as are consistent
with this Agreement and as may reasonably be required by the Warrant Agent in
order to enable it to carry out or perform its duties under this Agreement.
The Warrant Agent shall act solely as agent of the Company hereunder.
The Warrant Agent shall not be liable except for the failure to perform such
duties as are specifically set forth herein, and no implied covenants or
obligations shall be read into this Agreement against the Warrant Agent, whose
duties and obligations shall be determined solely by the express provisions
hereof.
Section 11.2. Right to Consult Counsel. The Warrant Agent may at
------------- ------------------------
any time consult with legal counsel of its selection (who may be legal counsel
for the Company), and the opinion or advice of such counsel shall be full and
complete authorization and protection to the Warrant Agent and the Warrant Agent
shall incur no liability or responsibility to the Company or to any Holder for
any action taken, suffered or omitted by it in good faith without gross
negligence in accordance with the written opinion or advice of such counsel.
Section 11.3. Compensation; Indemnification. The Company agrees
------------- -----------------------------
promptly to pay the Warrant Agent from time to time and in any case within 30
days of receipt of an invoice, compensation for its services hereunder as the
Company and the Warrant Agent may agree from time to time, and to reimburse it
upon its request upon furnishing reasonable supporting documentation for
reasonable fees or expenses and reasonable counsel fees and expenses incurred in
connection with the execution and administration of this Agreement, and further
agrees to indemnify the Warrant Agent and save it harmless against any losses,
liabilities or reasonable expenses arising out of or in connection with the
acceptance and administration of this Agreement, including, without limitation,
the reasonable costs and expenses of investigating or defending any claim of
such liability, except that the Company shall have no liability hereunder to the
extent that any such loss, liability or expense results from the Warrant Agent's
own gross negligence, bad faith or willful misconduct. The obligations of the
Company under this Section 11.3 shall survive the exercise and the expiration of
the Warrants, the termination of this Agreement and the resignation or removal
of the Warrant Agent in respect of services or expenses incurred in connection
with the Warrants or this Agreement.
Section 11.4. No Restrictions on Actions. Nothing in this Agreement
------------- --------------------------
shall be deemed to prevent the Warrant Agent and any shareholder, director,
officer or employee of the
39
Warrant Agent from buying, selling or dealing in any of the Warrants or other
securities of the Company or becoming pecuniarily interested in transactions in
which the Company may be interested, or contracting with or lending money to the
Company or otherwise acting as fully and freely as though it were not the
Warrant Agent under this Agreement. Nothing herein shall preclude the Warrant
Agent from acting in any other capacity for the Company or for any other legal
entity.
Section 11.5. Discharge or Removal; Replacement Warrant Agent. The
------------- -----------------------------------------------
Warrant Agent may resign from its position as such and be discharged from all
further duties and liabilities hereunder (except liability arising as a result
of the Warrant Agent's own negligence, bad faith or willful misconduct), after
giving one month's prior written notice to the Company. The Company may at any
time remove the Warrant Agent upon one month's written notice specifying the
date when such discharge shall take effect, and the Warrant Agent shall
thereupon in like manner be discharged from all further duties and liabilities
hereunder, except as aforesaid. The Warrant Agent shall mail to each Holder of a
Warrant, at the Company's expense, a copy of said notice of resignation or
notice of removal, as the case may be. Upon such resignation or removal the
Company shall appoint in writing a new warrant agent. If the Company shall fail
to make such appointment within a period of 30 days after it has been notified
in writing of such resignation by the resigning Warrant Agent or after such
removal, then the resigning or removed Warrant Agent or the Holder of any
Warrant may apply to any court of competent jurisdiction for the appointment of
a new warrant agent. After 30 days from receipt of, or giving, notice, as the
case may be, and pending appointment of a successor to the original Warrant
Agent, either by the Company or by such a court, the duties of the Warrant Agent
shall be carried out by the Company. Any new warrant agent, whether appointed
by the Company or by such a court, shall be a bank or trust company doing
business under the laws of the United States or any state thereof, in good
standing and having a combined capital and surplus of not less than $25,000,000.
The combined capital and surplus of any such new warrant agent shall be deemed
to be the combined capital and surplus as set forth in the most recent annual
report of its condition published by such warrant agent prior to its
appointment, provided that such reports are published at least annually pursuant
to law or to the requirements of a federal or state supervising or examining
authority. After acceptance in writing of such appointment by the new warrant
agent, it shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named herein as the Warrant Agent,
without any further assurance, conveyance, act or deed; however, the original
Warrant Agent shall in all events deliver and transfer to the successor Warrant
Agent all property (including, without limitation, documents and recorded
information), if any, at the time held hereunder by the original Warrant Agent
and if for any reason it shall be necessary or expedient to execute and deliver
any further assurance, conveyance, act or deed, the same shall be done at the
expense of the Company and shall be legally and validly executed and delivered
by the resigning or removed Warrant Agent. Not later than the effective date of
any such appointment, the Company shall file notice thereof with the resigning
or removed
40
Warrant Agent and shall forthwith cause a copy of such notice to be mailed by
the successor Warrant Agent to each Holder of a Warrant. Failure to give any
notice provided for in this Section 11.5, however, or any defect therein, shall
not affect the legality or validity of the resignation of the Warrant Agent or
the appointment of a new warrant agent, as the case may be.
Section 11.6. Successor Warrant Agent. Any corporation into which
------------- -----------------------
the Warrant Agent or any new warrant agent may be merged or converted, or any
corporation resulting from any consolidation to which the Warrant Agent or any
new warrant agent shall be a party or any corporation succeeding to all or
substantially all the corporate agency business of the Warrant Agent, shall be a
successor Warrant Agent under this Agreement without any further act, provided
that such corporation would be eligible for appointment as successor to the
Warrant Agent under the provisions of Section 11.5 hereof. Any such successor
Warrant Agent shall promptly cause notice of its succession as Warrant Agent to
be mailed to each Holder of a Warrant.
ARTICLE XII
MISCELLANEOUS
Section 12.1. Monies Deposited with the Warrant Agent. The Warrant
------------- ---------------------------------------
Agent shall not be required to pay interest on any monies deposited pursuant to
the provisions of this Agreement except such as it shall agree in writing with
the Company to pay thereon. Any monies, securities or other property which at
any time shall be deposited by the Company or on its behalf with the Warrant
Agent pursuant to this Agreement shall be and are hereby assigned, transferred
and set over to the Warrant Agent in trust for the purpose for which such
monies, securities or other property shall have been deposited; but such monies,
securities or other property need not be segregated from other funds, securities
or other property except to the extent required by law. The Warrant Agent shall
distribute any money deposited with it for payment and distribution to the
Holders by mailing by first-class mail a check in such amount as is required by
this Agreement to each such Holder at the address shown on the Warrant register
of the Company, or as it may be otherwise directed in writing by such Holder, in
accordance with the terms and conditions hereof. Any monies, securities or
other property deposited with the Warrant Agent for payment or distribution to
the Holders that remains unclaimed for two years after the date the monies,
securities or other property was deposited with the Warrant Agent shall be
delivered to the Company upon its request therefor.
Section 12.2. Payment of Taxes. All Common Shares issuable upon the
------------- ----------------
exercise of Warrants shall be validly issued, fully paid and not subject to any
calls for funds, and the Company shall pay any taxes and other governmental
charges that may be imposed
41
under the laws of the United States of America or any political subdivision or
taxing authority thereof or therein in respect of the issue or delivery thereof
upon exercise of Warrants (other than income taxes imposed on the Holders). The
Company shall not be required, however, to pay any tax or other charge imposed
in connection with any transfer involved in the issue of any certificate for
Common Shares (including other securities or property issuable upon the exercise
of the Warrants) or payment of cash to any Person other than the Holder of a
Warrant Certificate surrendered upon the exercise of a Warrant and in case of
such transfer or payment, the Warrant Agent and the Company shall not be
required to issue any share certificate or pay any cash until such tax or charge
has been paid or it has been established to the Warrant Agent's and the
Company's satisfaction that no such tax or charge is due.
Section 12.3. No Merger, Consolidation or Sale of Assets of the
------------- -------------------------------------------------
Company. Except as otherwise provided herein, the Company will not merge into or
- -------
consolidate with any other Person, or sell or otherwise transfer its property,
assets and business substantially as an entirety to a successor of the Company,
unless the Person resulting from such merger or consolidation, or such successor
of the Company, shall expressly assume, by supplemental agreement satisfactory
in form to the Warrant Agent and executed and delivered to the Warrant Agent,
the due and punctual performance and observance of each and every covenant and
condition of this Agreement or contained in the Warrants to be performed and
observed by the Company.
Section 12.4. Reports to Holders. At all times from and after the
------------- ------------------
earlier of (i) a consummation of a registered exchange offer or the
effectiveness of a shelf registration statement with respect to the Notes and
(ii) February 19, 1999 (such earlier date, the "Exchange Act Reporting Date"),
whether or not the Company is then required to file reports with the Commission,
the Company shall deliver for filing to the Commission all such reports and
other information it would be required to file with the Commission by Section
13(a) or 15(d) under the Exchange Act if it were subject thereto. The Company
shall supply the Warrant Agent and each Holder or shall supply to the Warrant
Agent for forwarding to each such Holder, without cost to such Holder, copies of
such reports and other information. At all times prior to the Exchange Act
Reporting Date, the Company shall supply the Warrant Agent and each Holder or
shall supply to the Warrant Agent for forwarding to each such Holder, without
cost to such Holder, quarterly and annual reports substantially equivalent to
those which would be required by the Exchange Act. In addition, at all times,
upon the request of any Holder or any prospective purchaser of the Warrants
designated by a Holder, the Company shall supply to such Holder or such
prospective purchaser the information required under Rule 144A.
Section 12.5. Notices; Payment. (a) Except as otherwise provided
------------- ----------------
in Section 12.5(b) hereof, any notice, demand or delivery authorized by this
Agreement shall be sufficiently given or made when mailed, if sent by first
class mail, postage prepaid, addressed
42
to any Holder of a Warrant at such Holder's last known address appearing on the
register of the Company maintained by the Warrant Agent and to the Company or
the Warrant Agent as follows:
To the Company:
DIVA Systems Corporation
333 Ravenswood Avenue, Building 205
Menlo Park, California 94025
Attention: Vice President and Treasurer
To the Warrant Agent:
The Bank of New York
101 Barclay Street
21 West
New York, New York 10286
Attention: Corporate Trust Administration
or such other address as shall have been furnished to the party giving or making
such notice, demand or delivery. Any notice that is mailed in the manner herein
provided shall be conclusively presumed to have been duly given when mailed,
whether or not the Holder receives the notice.
(b) Payment of the Exercise Price shall be made in accordance with the
provisions of this Agreement at the office of the Warrant Agent set forth above,
unless otherwise directed by the Warrant Agent and the Company.
(c) Any notice required to be given by the Company to the Holders
shall be made by mailing, to the Holders at their last known addresses appearing
on the register maintained by the Warrant Agent. The Company hereby irrevocably
authorizes the Warrant Agent, in the name and at the expense of the Company, to
mail any such notice upon receipt thereof from the Company. Any notice that is
mailed in the manner herein provided shall be conclusively presumed to have been
duly given when mailed, whether or not the Holder receives the notice.
Section 12.6. Binding Effect. This Agreement shall be binding upon
------------- --------------
and inure to the benefit of the Company and the Warrant Agent and their
respective successors and assigns, and the Holders from time to time of the
Warrants. Nothing in this Agreement is intended or shall be construed to confer
upon any Person, other than the Company, the Warrant Agent and the Holders of
the Warrants, any right, remedy or claim under or by reason of this Agreement or
any part hereof.
43
Section 12.7. Counterparts. This Agreement may be executed manually
------------- ------------
or by facsimile in any number of counterparts, each of which shall be deemed an
original, but all of which together constitute one and the same instrument.
Section 12.8. Amendments. The Warrant Agent may, without the
------------- ----------
consent or concurrence of the Holders of the Warrants, by supplemental agreement
or otherwise, join with the Company in making any changes or corrections in this
Agreement that (a) are required to cure any ambiguity or to correct any
defective or inconsistent provision or clerical omission or mistake or manifest
error herein contained or (b) add to the covenants and agreements of the Company
in this Agreement further covenants and agreements of the Company thereafter to
be observed, or surrender any rights or power reserved to or conferred upon the
Company in this Agreement; provided that in either case such changes or
corrections do not and will not adversely affect, alter or change the rights,
privileges or immunities of the Holders of Warrants. Upon the Warrant Agent's
request, the Company shall promptly provide an Officer's Certificate and Opinion
of Counsel which provide all conditions precedent to adoption of an amendment
that have been satisfied.
Section 12.9. Headings. The descriptive headings of the several
------------- --------
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
Section 12.10. Common Shares Legend. Unless and until the Common
-------------- --------------------
Shares issuable upon the exercise of the Warrants are registered under the
Securities Act, or unless otherwise agreed by the Company and the Holder
thereof, such Common Shares will bear a legend substantially to the following
effect:
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE
"SECURITIES ACT") OR ANY STATE OR OTHER SECURITIES LAWS, AND ACCORDINGLY,
MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHIN THE
UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS EXCEPT
AS SET FORTH IN THE FOLLOWING SENTENCE. BY ITS ACQUISITION HEREOF, THE
HOLDER (1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL BUYER" (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) OR (B) IT IS NOT A U.S.
PERSON AND IS ACQUIRING THE SHARES OF COMMON STOCK REPRESENTED BY THIS
CERTIFICATE IN AN OFFSHORE TRANSACTION IN
44
COMPLIANCE WITH REGULATION S UNDER THE SECURITIES ACT OR (C) IT ACQUIRED
THIS CERTIFICATE DIRECTLY FROM DIVA SYSTEMS CORPORATION (THE "COMPANY") IN
A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OR (D) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED IN RULE
501(a)(1), (2), (3) OR (7) OF REGULATION D UNDER THE SECURITIES ACT); (2)
AGREES THAT IT WILL NOT, WITHIN THE TIME PERIOD REFERRED TO UNDER RULE
144(k), TAKING INTO ACCOUNT THE PROVISIONS OF RULE 144(d), IF APPLICABLE,
UNDER THE SECURITIES ACT (THE "RESALE RESTRICTION TERMINATION DATE"),
RESELL OR OTHERWISE TRANSFER THE COMMON SHARES REPRESENTED BY THIS
CERTIFICATE EXCEPT (A) TO THE COMPANY OR ANY SUBSIDIARY THEREOF, (B) TO A
QUALIFIED INSTITUTIONAL BUYER IN COMPLIANCE WITH RULE 144A UNDER THE
SECURITIES ACT, (C) OUTSIDE THE UNITED STATES IN AN OFFSHORE TRANSACTION IN
COMPLIANCE WITH RULE 904 UNDER THE SECURITIES ACT, (D) PURSUANT TO ANOTHER
AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES
ACT OR (E) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE
SECURITIES ACT; AND (3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM
THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE ARE TRANSFERRED
A NOTICE SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND; PROVIDED THAT THE
COMPANY AND THE TRANSFER AGENT AND REGISTRAR SHALL HAVE THE RIGHT PRIOR TO
ANY SUCH OFFER, SALE OR TRANSFER (I) PURSUANT TO CLAUSE (C) OR (D) TO
REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND (II) IN EACH OF THE FOREGOING
CASES, TO REQUIRE THAT THE OTHER SIDE OF THIS SECURITY IS COMPLETED AND
DELIVERED BY THE TRANSFEROR TO THE TRANSFER AGENT AND REGISTRAR. THIS
LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE
RESTRICTION TERMINATION DATE. AS USED HEREIN, THE TERMS "OFFSHORE
TRANSACTION," "UNITED STATES" AND "U.S. PERSON" HAVE THE MEANINGS GIVEN TO
THEM BY REGULATION S UNDER THE SECURITIES ACT. THE TRANSFER AGENT AND
REGISTRAR HAS BEEN INSTRUCTED TO REFUSE TO REGISTER ANY TRANSFER OF THE
SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE IN VIOLATION OF THE
FOREGOING RESTRICTIONS.
45
Section 12.11. Third Party Beneficiaries. The Holders shall be
-------------- -------------------------
third party beneficiaries to the agreements made hereunder between the Company,
on the one hand, and the Warrant Agent, on the other hand, and each Holder shall
have the right to enforce such agreements directly to the extent it deems such
enforcement necessary or advisable to protect its rights or the rights of
Holders hereunder. By acquiring Warrants, each Holder agrees to be bound by the
obligations of Holders generally as set forth herein and as such obligations may
be applicable to such Holder.
Section 12.12. Termination. Except as otherwise specified herein,
-------------- -----------
this Agreement shall terminate at 5:00 p.m. (New York City time) on the tenth
anniversary of the Closing Date. Notwithstanding the foregoing, this Agreement
shall terminate on any earlier date as of which all Warrants have been
exercised.
Section 12.13. Governing Law. This Agreement shall be governed by
-------------- -------------
the laws of the State of New York. The Warrant Agent, the Company and the
Holders agree to submit
to the jurisdiction of the courts of the State of New York in any action or
proceeding arising out of or relating to this Agreement or the Warrants.
Section 12.14. Registration Rights. Each Warrant will be entitled to
------------- -------------------
the benefits, and subject to the term and conditions, of the Warrant
Registration Rights Agreement, and each Holder shall be deemed to be a "Holder"
as defined in the Warrant Registration Rights Agreement.
46
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed, as of the day and year first above written.
DIVA SYSTEMS CORPORATION
By: /s/ Alan H. Bushell
---------------------------------------------------
Name: Alan H. Bushell
Title: President, Chief Operating Officer, Chief
Financial Officer and Secretary
THE BANK OF NEW YORK
By: /s/ Vivian Georges
---------------------------------------------------
Name: Vivian Georges
Title: Assistant Vice President
EXHIBIT A
FORM OF WARRANT CERTIFICATE
DIVA SYSTEMS CORPORATION
[CUSIP] [CINS] [ISIN] No. _____
No. _____
WARRANTS TO PURCHASE COMMON SHARES
This certifies that ______________, or its registered assigns, is the
owner of ___________ Warrants, each of which represents the right to purchase,
after February 19, 1999, from DIVA Systems Corporation (the "Company"), one
-------
share of the Common Stock, par value $.001 per share, of the Company (the
"Common Shares") at an exercise price (the "Exercise Price") of $.01 per Common
- -------------- --------------
Share (subject to adjustment as provided in the Warrant Agreement hereinafter
referred to below), upon surrender hereof at the office of The Bank of New York,
or to its successor, as the warrant agent under the Warrant Agreement (any such
warrant agent being herein called the "Warrant Agent"), or such other location
-------------
contemplated by Section 12.5(b) of the Warrant Agreement, with the Subscription
Form on the reverse hereof duly executed, with signature guaranteed as therein
specified and simultaneous payment in full in cash or by certified or official
bank or bank cashier's check payable to the order of the Company.
Notwithstanding the foregoing, the Exercise Price may be paid by surrendering
additional Warrants to the Warrant Agent having an aggregate Spread equal to the
aggregate Exercise Price of the Warrants being exercised. At any time after one
year after the Closing Date and on or before the Expiration Date, any
outstanding Warrants may be exercised on any Business Day; provided that the
Warrant Registration Statement is, at the time of exercise, effective and
available for the exercise of Warrants or the exercise of such Warrants is
exempt from the registration requirements of the Securities Act.
This Warrant Certificate is issued under and in accordance with a
Warrant Agreement dated as of February 19, 1998 (the "Warrant Agreement"),
-----------------
between the Company and The Bank of New York, as Warrant Agent, and a Warrant
Registration Rights Agreement dated as of February 19, 1998 (the "Warrant
-------
Registration Rights Agreement"), between the Company and The Bank of New York,
- -----------------------------
as Warrant Agent, and is subject to the Certificate of Incorporation and Bylaws
of the Company and to the terms and provisions contained therein, to all of
which terms and provisions the Holder of this Warrant Certificate consents by
acceptance hereof. The terms of the Warrant Agreement and the Warrant
Registration Rights Agreement are hereby incorporated herein by reference and
made a part hereof. Reference is hereby made to the Warrant Agreement and the
Warrant Registration Rights Agreement for a full description of the rights,
limitations of rights, obligations, duties and immunities
A-2
thereunder of the Company and the Holders of the Warrants. The summary of the
terms of the Warrant Agreement and the Warrant Registration Rights Agreement
contained in this Warrant Certificate is qualified in its entirety by express
reference to the Warrant Agreement and the Warrant Registration Rights
Agreement. All terms used in this Warrant Certificate that are defined in the
Warrant Agreement and the Warrant Registration Rights Agreement shall have the
meanings assigned to them in such agreements.
A "Repurchase Event", as defined in the Warrant Agreement, shall be
----------------
deemed to occur on any date when the Company (i) consolidates with or merges
into or with another Person (but only where holders of the Common Stock receive
consideration in exchange for all or part of such Common Stock) if the Common
Stock (or other Securities) thereafter issuable upon exercise of the Warrants
are not registered under the Exchange Act, provided, that a "Repurchase Event"
shall not be deemed to have occurred if the holders of at least 50% of the
Company's Common Stock immediately prior to the consummation of such merger or
consolidation, together with their affiliates, continue to hold at least 50% of
the Company's Common Stock immediately after such consummation, or (ii) sells
all or substantially all of its assets to another Person if the Common Stock (or
other securities) thereafter issuable upon exercise of the Warrants are not
registered under the Exchange Act, provided that in each case a "Repurchase
Event" shall not be deemed to have occurred if the consideration for such
transaction consists solely of cash.
Following a Repurchase Event, the Company must make an offer to
repurchase for cash all outstanding Warrants (a "Repurchase Offer"). If the
----------------
Company makes a Repurchase Offer, Holders may, until the expiration date of such
offer, surrender all or part of their Warrants for repurchase by the Company.
Warrants received by the Warrant Agent in proper form during a
Repurchase Offer will, except as otherwise provided in the Warrant Agreement, be
repurchased by the Company at a price in cash (the "Repurchase Price") equal to
----------------
the value on the Valuation Date relating thereto of the Common Shares issuable,
and other securities or property of the Company which would have been delivered,
upon exercise of the Warrants had the Warrants been exercised (whether or not
the Warrants are then exercisable), less the Exercise Price in effect on the
Notice Date for such Repurchase Offer. The value of such Common Shares and
other securities will be, to the extent not otherwise provided in the Warrant
Agreement, (i) if the Common Shares (or other securities) are registered under
the Exchange Act, determined based upon the average of the daily market prices
(as determined pursuant to Section 3.4(d)(ii)(1) of the Warrant Agreement) of
the Common Shares (or other securities) for the 20 consecutive trading days
immediately preceding such Valuation Date or (ii) if the Common Shares (or other
securities) are not registered under the Exchange Act or if the value cannot be
computed under clause (i) above, determined by the Independent Financial Expert
(as defined in the Warrant Agreement), in each case as set forth in the Warrant
Agreement.
A-3
The "Valuation Date" as defined in the Warrant Agreement shall be
--------------
deemed to occur on the date five Business Days prior to the date notice of the
Repurchase Offer is first given.
If the Company fails to make or complete a Repurchase Offer (a
"Default") as required by the Warrant Agreement, it shall be obligated to
- --------
increase the amount otherwise payable pursuant to the Warrant Agreement in
respect of the Repurchase Offer by an amount equal to interest thereon at a rate
per annum of 12 5/8% from the date of the Default to the date of payment, which
interest shall compound quarterly.
If the Company merges or consolidates with or into, or sells all or
substantially all of its property and assets to, another Person and the
consideration received by holders of Common Shares consists solely of cash, the
Holders of Warrants shall be entitled to receive distributions on the date of
such event on an equal basis with holders of Common Shares (or other securities
issuable upon exercise of the Warrants) as if the Warrants had been exercised
immediately prior to such event (less the Exercise Price). Upon receipt of such
payment, if any, the rights of a Holder shall terminate and cease and such
Holder's Warrants shall expire.
The number of Common Shares purchasable upon the exercise of each
Warrant and the price per share are subject to adjustment as provided in the
Warrant Agreement. Except as stated in the immediately preceding paragraph and
in the Warrant Agreement, in the event the Company merges or consolidates with,
or sells all or substantially all of its assets to, another Person, each Warrant
will, upon exercise, entitle the Holder thereof to receive the number of shares
of capital stock or other securities or the amount of money and other property
which the holder of the number of Common Shares (or other securities or property
issuable upon exercise of a Warrant) purchasable upon the exercise of the
Warrant is entitled to receive upon completion of such merger, consolidation or
sale.
As to any final fraction of a share which the same Holder of one or
more Warrant Certificates would otherwise be entitled to purchase upon exercise
thereof in the same transaction, the Company may pay the cash value thereof
determined as provided in the Warrant Agreement.
All Common Shares issuable by the Company upon the exercise of
Warrants shall be validly issued, fully paid and not subject to any calls for
funds, and the Company shall pay any taxes and other governmental charges that
may be imposed under the laws of the United States of America or any political
subdivision or taxing authority thereof or therein in respect of the issue or
delivery thereof upon exercise of Warrants (other than income taxes imposed on
the Holders). The Company shall not be required, however, to pay any tax or
A-4
other charge imposed in connection with any transfer involved in the issue of
any certificate for Common Shares (including other securities or property
issuable upon the exercise of the Warrants) or payment of cash to any Person
other than the Holder of a Warrant Certificate surrendered upon the exercise of
a Warrant and in case of such transfer or payment, the Warrant Agent and the
Company shall not be required to issue any share certificate or pay any cash
until such tax or charge has been paid or it has been established to the Warrant
Agent's and the Company's satisfaction that no such tax or charge is due.
Subject to the restrictions on and conditions to transfer set forth in
Articles II and VIII of the Warrant Agreement, this Warrant Certificate and all
rights hereunder are transferable by the registered Holder hereof, in whole or
in part, on the register of the Company maintained by the Warrant Agent for such
purpose at the Warrant Agent's office in New York, New York, upon surrender of
this Warrant Certificate duly endorsed, or accompanied by a written instrument
of transfer in form satisfactory to the Company and the Warrant Agent duly
executed, with signatures guaranteed as specified in the attached Form of
Assignment, by the registered Holder hereof or his attorney duly authorized in
writing and by such other documentation required pursuant to the Warrant
Agreement and upon payment of any necessary transfer tax or other governmental
charge imposed upon such transfer. Upon any partial transfer, the Company will
sign and issue and the Warrant Agent will countersign and deliver to such Holder
a new Warrant Certificate or Certificates with respect to any portion not so
transferred. Each taker and Holder of this Warrant Certificate, by taking and
holding the same, consents and agrees that prior to the registration of transfer
as provided in the Warrant Agreement, the Company and the Warrant Agent may
treat the person in whose name the Warrants are registered as the absolute owner
hereof for any purpose and as the Person entitled to exercise the rights
represented hereby, any notice to the contrary notwithstanding. Accordingly,
the Company and/or the Warrant Agent shall not, except as ordered by a court of
competent jurisdiction as required by law, be bound to recognize any equitable
or other claim to or interest in the Warrants on the part of any person other
than such Registered Holder, whether or not it shall have express or other
notice thereof.
This Warrant Certificate may be exchanged at the office of the Warrant
Agent maintained for such purpose in New York, New York, for Warrant
Certificates representing the same aggregate number of Warrants, each new
Warrant Certificate to represent such number of Warrants as the Holder hereof
shall designate at the time of such exchange.
Prior to the exercise of the Warrants represented hereby, the Holder
of this Warrant Certificate, as such, shall not be entitled to any rights of a
shareholder of the Company, including, without limitation, the right to vote or
to consent to any action of the shareholders, to receive any distributions, to
exercise any pre-emptive right or to receive any notice of meetings of
shareholders, and shall not be entitled to receive any notice of any proceedings
of the Company except as provided in the Warrant Agreement.
A-5
This Warrant Certificate shall be void and all rights evidenced hereby
shall cease on February 19, 2008, unless sooner terminated by the liquidation,
dissolution or winding-up of the Company or as otherwise provided in the Warrant
Agreement upon the consolidation or merger of the Company with, or sale of the
Company to, another Person or unless such date is extended as provided in the
Warrant Agreement.
This Warrant Certificate shall not be valid for any purpose until it
shall have been countersigned by the Warrant Agent.
DIVA SYSTEMS CORPORATION
By:
-----------------------------------------
Name:
Title:
Dated:
Countersigned:
THE BANK OF NEW YORK,
as Warrant Agent
By:
--------------------------------
Authorized Signatory
FORM OF REVERSE OF WARRANT CERTIFICATE
SUBSCRIPTION FORM
(To be executed only upon exercise of Warrant)
To: The Bank of New York,
as Warrant Agent
101 Barclay Street
21 West
New York, New York 10286
Attention: Corporate Trust Administration
The undersigned irrevocably exercises ________ of the Warrants
represented by this Warrant Certificate and herewith makes payment of $ _______
(such payment being in cash or by certified or official bank or bank cashier's
check payable to the order or at the direction of DIVA Systems Corporation or,
the exercise price may be paid by surrendering additional Warrants to the
Warrant Agent having an aggregate Spread equal to the aggregate exercise price
of the Warrants being exercised) all at the exercise price and on the terms and
conditions specified in this Warrant Certificate and in the Warrant Agreement
and the Warrant Registration Rights Agreement referred to herein and surrenders
this Warrant Certificate and all right, title and interest therein to and
directs that the Common Stock, par value $0.001 per share, of DIVA Systems
Corporation (the "Common Shares") deliverable upon the exercise of such Warrants
-------------
be registered or placed in the name and at the address specified below and
delivered thereto.
[THE FOLLOWING PROVISION TO BE INCLUDED ONLY
ON OFFSHORE CERTIFICATED WARRANTS]
The undersigned certifies that:
Check One
---------
[_] (a) (i) it is not a U.S. person (as defined in Rule 902 of
Regulation S under the U.S. Securities Act of 1933, as amended)
and the Warrants are not being exercised on behalf of a U.S.
person.
or
--
[_] (ii) it is furnishing to the Warrant Agent a written opinion of
counsel to the effect that the Warrants and the Common Shares
issuable upon exercise of
the Warrants have been registered under the U.S. Securities Act
of 1933, as amended, or are exempt from registration thereunder.
and (b) if an opinion is not being furnished, the undersigned is located outside
the United States at the time of the exercise hereof.
Dated:
------------------------------------------------
(Signature of Owner)
------------------------------------------------
(Street Address)
------------------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed By:
------------------------------------------------
Signatures must be guaranteed by an "eligible
guarantor institution" meeting the requirements
of the Warrant Agent, which requirements include
membership or participation in the Security
Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may
be determined by the Warrant Agent in addition
to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of
1934, as amended.
Securities and/or check or other property to be issued or delivered to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
A-8
FORM OF CERTIFICATE FOR REPURCHASE OFFER
(To be executed only upon repurchase
of Warrant by DIVA Systems Corporation)
To:
The undersigned, having received prior notice of the consideration for
which DIVA SYSTEMS CORPORATION will repurchase the Warrants represented by the
within Warrant Certificate, hereby surrenders this Warrant Certificate for
repurchase by DIVA SYSTEMS CORPORATION of the number of Warrants specified below
for the consideration set forth in such notice.
Dated:
_________________________________
(Number of Warrants)
_________________________________
(Signature of Owner)
_________________________________
(Street Address)
_________________________________
(City) (State) (Zip Code)
Signature Guaranteed By:
____________________________________________________
Signatures must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Warrant
Agent, which requirements include membership or
participation in the Security Transfer Agent Medallion
Program ("STAMP") or such other "signature guarantee
program" as may be determined by the Warrant Agent in
addition to, or in substitution for, STAMP, all in
accordance with the Securities Exchange Act of 1934, as
amended.
A-9
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
A-10
FORM OF ASSIGNMENT
In consideration of monies or other valuable consideration received
from the Assignee(s) named below, the undersigned registered Holder of this
Warrant Certificate hereby sells, assigns, and transfers unto the Assignee(s)
named below (including the undersigned with respect to any Warrants constituting
a part of the Warrants evidenced by this Warrant Certificate not being assigned
hereby) all of the right of the undersigned under this Warrant Certificate, with
respect to the number of Warrants set forth below:
Name(s) of Assignee(s): _____________________________________
Address: ____________________________________________________
No. of Warrants: ____________________________________________
Please insert social security or other identifying number of assignee(s):
and does hereby irrevocably constitute and appoint ________________________ the
undersigned's attorney to make such transfer on the books of __________________
maintained for the purposes, with full power of substitution in the premises.
[THE FOLLOWING PROVISION TO BE INCLUDED ON ALL CERTIFICATES EXCEPT UNLEGENDED
REGULATION S GLOBAL WARRANTS AND UNLEGENDED OFFSHORE CERTIFICATED WARRANTS]
In connection with any transfer of Warrants, the undersigned confirms
that without utilizing any general solicitation or general advertising that:
[Check One]
-----------
[_] (a) these Warrants are being transferred in compliance with the exemption
from registration under the U.S. Securities Act of 1933, as amended,
provided by Rule 144A thereunder.
or
--
[_] (b) these Warrants are being transferred other than in accordance with (a)
above and documents are being furnished which comply with the
conditions of transfer set forth in this Warrant Certificate and the
Warrant Agreement.
or
--
[_] (c) these Warrants are being transferred pursuant to an effective
registration statement under the U.S. Securities Act of 1933, as
amended.
If none of the foregoing boxes is checked, the Warrant Agent shall not be
obligated to register the Warrants in the name of any Person other than the
Holder hereof unless and until the
conditions to any such transfer of
registration set forth herein and in Article VIII of the Warrant Agreement shall
have been satisfied.
Dated:
_________________________________
(Signature of Owner)
_________________________________
(Street Address)
_________________________________
(City) (State) (Zip Code)
Signature Guaranteed By:
__________________________________________________
Signatures must be guaranteed by an "eligible
guarantor institution" meeting the requirements of
the Warrant Agent, which requirements include
membership or participation in the Security
Transfer Agent Medallion Program ("STAMP") or such
other "signature guarantee program" as may be
determined by the Warrant Agent in addition to, or
in substitution for, STAMP, all in accordance with
the Securities Exchange Act of 1934, as amended.
TO BE COMPLETED BY PURCHASER IF (a) ABOVE IS CHECKED.
The undersigned represents and warrants that it is purchasing the
Warrant(s) for its own account or an account with respect to which it exercises
sole investment discretion and that it and any such account is a "qualified
institutional buyer" within the meaning of Rule 144A under the U.S. Securities
Act of 1933, as amended, and is aware that the sale to it is being made in
reliance on Rule 144A and acknowledges that it has received such information
regarding Econophone, Inc. as the undersigned has requested pursuant to Rule
144A or has determined not to request such information and that it is aware that
the
A-12
transferor is relying upon the undersigned's foregoing representations in order
to claim the exemption from registration provided by Rule 144A.
Dated:________________
_______________________________________________
[NOTE: To be executed by an executive officer]
EXHIBIT B
Form of Certificate to be Delivered
in Connection with
Transfers Pursuant to Regulation S
----------------------------------
[Date]
DIVA Systems Corporation
333 Ravenswood Avenue, Building 205
Menlo Park, California 94025
Attention: Vice President and Treasurer
The Bank of New York
101 Barclay Street
21 West
New York, New York 10286
Attention: Corporate Trust Administration
Re: Warrants (the "Warrants") to Purchase
--------
Common Shares of DIVA Systems Corporation (the "Company")
-------
Ladies and Gentlemen:
In connection with our proposed sale of _______________ Warrants, we
hereby certify that such sale has been effected pursuant to and in accordance
with Regulation S under the U.S. Securities Act of 1933, as amended (the
"Securities Act"), and, accordingly, we represent that:
- ---------------
(1) the offer of the Warrants was not made to a person in the United
States and not to a U.S. Person (as defined in Regulation S under the
Securities Act);
(2) at the time the buy order was originated, the transferee was outside
the United States or we and any person acting on our behalf reasonably
believed that the transferee was outside the United States;
(3) no directed selling efforts (as such term is defined in Rule 902(b)
of Regulation S under the Securities Act) have been made by us, any of
our affiliates or any persons
acting on our behalf in the United States in contravention of the
requirements of Rule 903(b) or Rule 904(b) of Regulation S under the
Securities Act, as applicable; and
(4) the transaction is not part of a plan or scheme to evade the
registration requirements of the Securities Act.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Transferor]
By: ____________________________
Authorized Signature
EXHIBIT C-1
Form of Certificate to be
Delivered by Transferor in Connection with
Transfers other than to QIBs or Non-US Persons
----------------------------------------------
[Date]
DIVA Systems Corporation
333 Ravenswood Avenue, Building 205
Menlo Park, California 94025
Attention: Vice President and Treasurer
The Bank of New York
101 Barclay Street
21 West
New York, New York 10286
Attention: Corporate Trust Administration
Re: Warrants (the "Warrants") to Purchase
--------
Common Shares of DIVA Systems Corporation (the "Company")
-------
Ladies and Gentlemen:
We hereby certify that such transfer is being effected in compliance
with the transfer restrictions applicable to the Warrants or interests therein
transferred pursuant to and in accordance with the U.S. Securities Act of 1933,
as amended (the "Securities Act"), and accordingly we hereby further certify
--------------
that (check one):
(a) [_] such transfer is being effected pursuant to and in accordance with
Rule 144 under the Securities Act;
or
(b) [_] such transfer is being effected to the Company or a subsidiary
thereof;
or
(c) [_] such transfer is being effected pursuant to an effective
registration statement under the Securities Act;
or
(d) [_] such transfer is being effected pursuant to an exemption from the
registration requirements of the Securities Act other than Rule 144A, Rule 144
or Rule 904 thereunder, and we hereby further certify that such transfer
complies with the transfer restrictions applicable to the Warrants or interests
therein transferred to Institutional Accredited Investors and in accordance with
the requirements of the exemption claimed, which certification is supported by
an Opinion of Counsel provided by us or the transferee (a copy of which we have
attached to this certification), to the effect that such transfer is in
compliance with the Securities Act. Upon consummation of the proposed transfer
in accordance with the terms of the Warrant Agreement, the transferred Warrants
or interests therein will be subject to the restrictions on transfer enumerated
in the Private Placement Legend printed on the IAI Certificated Warrant and in
the Warrant Agreement and the Securities Act.
Very truly yours,
[Name of Transferor]
By:_____________________________________
Authorized Signature
EXHIBIT C-2
Form of Certificate to be
Delivered By Transferees in Connection with
Transfers to Institutional Accredited Investors
-----------------------------------------------
[Date]
DIVA Systems Corporation
333 Ravenswood Avenue, Building 205
Menlo Park, California 94025
Attention: Vice President and Treasurer
The Bank of New York
101 Barclay Street
21 West
New York, New York 10286
Attention: Corporate Trust Administration
Re: Warrants (the "Warrants") to Purchase
--------
Common Shares of DIVA Systems Corporation (the "Company")
-------
Dear Sirs:
In connection with our proposed purchase of ___________ aggregate
number of Warrants, we confirm that:
1. We understand that any subsequent transfer of the Warrants, any
interest therein or the Common Shares issuable upon exercise of any Warrant
(the "Warrant Shares") is subject to certain restrictions and conditions set
--------------
forth in the Warrant Agreement dated as of February 19, 1998 relating to the
Warrants (the "Warrant Agreement") and the Warrant Registration Rights
-----------------
Agreement dated as of February 19, 1998 relating to the Warrants (the
"Warrant Registration Rights Agreement") and the undersigned agrees to be
--------------------------------------
bound by, and not to resell, pledge or otherwise transfer the Warrants or
Warrant Shares except in compliance with, such restrictions and conditions
and the U.S. Securities Act of 1933, as amended (the "Securities Act").
--------------
2. We understand that the Warrants represented by this Warrant
Certificate and, as of the date this Warrant Certificate was originally
issued, the Warrant Shares have not been registered under the Securities
Act, and accordingly may not be offered,
sold, pledged or otherwise transferred within the United States or to, or
for the account or benefit of, U.S. Persons except as set forth in the
following sentence. We agree that we will not, within the time period
referred to under Rule 144(k) of the Securities Act (taking into account the
provisions of Rule 144(d) under the Securities Act, if applicable) under the
Securities Act as in effect on the date of the transfer of this Warrant,
resell or otherwise transfer the Warrants represented by this Warrant
Certificate except (a) to DIVA Systems Corporation or any subsidiary
thereof, (b) to a qualified institutional buyer in compliance with Rule 144A
under the Securities Act, (c) outside the United States in an offshore
transaction in compliance with Rule 904 under the Securities Act, (d) to an
institutional accredited investor that, prior to such transfer, furnishes to
you, to the Company and, in the case of the Warrant Shares, to the transfer
agent and registrar therefor, a signed letter containing certain
representations and agreements relating to the restrictions on transfer of
the Warrants represented by this Warrant Certificate (the form of which
letter can be obtained from the Warrant Agent) and an opinion of counsel
acceptable to DIVA Systems Corporation and its counsel that such transfer is
in compliance with the Securities Act) (e) pursuant to another exemption
from the registration requirements of the Securities Act, provided that the
transferee furnishes to you, to the Company and, in the case of the Warrant
Shares, to the transfer agent and registrar therefor, as requested by you,
the Company or the transfer agent and registrar, an opinion of counsel,
certification and/or other information satisfactory to each such party (f)
pursuant to an effective registration statement under the Securities Act
and, in each case, in accordance with applicable state securities laws.
3. We understand that, on any proposed resale of any Warrants, any
interest therein or Warrant Shares, we will be required to furnish to you
and the Company such certifications, legal opinions and other information as
you and the Company may reasonably require to confirm that the proposed sale
complies with the foregoing restrictions. We further understand that the
Warrants purchased by us will bear a legend to the foregoing effect.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in the
Warrants, and we and any accounts for which we are acting are each able to
bear the economic risk of our or its investment for an indefinite period of
time.
5. We are acquiring the Warrants purchased by us for our own account
or for one or more accounts (each of which is an institutional "accredited
investor") as to each of which we exercise sole investment discretion.
C2-3
You, the Company and, if applicable, the transfer agent and registrar
for the Warrant Shares are entitled to rely upon this letter and are irrevocably
authorized to produce this letter or a copy hereof to any interested party in
any administrative or legal proceedings or official inquiry with respect to the
matters covered hereby.
Very truly yours,
[Name of Transferee]
By: ______________________________]
Authorized Signature
EXHIBIT D
Form of Certificate
-------------------
[Date]
DIVA Systems Corporation
333 Ravenswood Avenue, Building 205
Menlo Park, California 94025
Attention: Vice President and Treasurer
The Bank of New York
101 Barclay Street
21 West
New York, New York 10286
Attention: Corporate Trust Administration
Re: Warrants (the "Warrants") to Purchase
--------
Common Shares of DIVA Systems Corporation (the "Company")
-------
Dear Sirs:
This letter relates to _______________ Warrants (the "Legended Warrants")
-----------------
represented by a Warrant Certificate which bears a legend outlining restrictions
upon transfer of such Legended Warrants. Pursuant to Section 2.1 of the Warrant
Agreement dated as of February 19, 1998 (the "Warrant Agreement") relating to
-----------------
the Warrants, we hereby certify that we are (or we will hold such securities on
behalf of) a person outside the United States to whom the Warrants could be
transferred in accordance with Rule 904 of Regulation S promulgated under the
U.S. Securities Act of 1933, as amended. Accordingly, you are hereby requested
to exchange the legended certificate for an unlegended certificate representing
an identical number of Warrants, all in the manner provided for in the Warrant
Agreement.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any interested
party in any administrative or legal proceedings or official inquiry with
respect to the matters covered hereby. Terms used in this certificate have the
meanings set forth in Regulation S.
Very truly yours,
[Name of Holder]
By:____________________________________________
Authorized Signature
APPENDIX A
LIST OF FINANCIAL EXPERTS
- -------------------------
BankAmerica Robertson Stephens
Bear, Stearns & Co., Inc.
Broadview Associates LLC
BT Alex.Brown
CIBC Oppenheimer Corp.
Cowen & Company
Credit Suisse First Boston Corporation
Deutsche Morgan Grenfell Inc.
Dillon, Read & Co. Inc.
Donaldson, Lufkin & Jenrette Securities Corporation
Furman Selz, LLP
Goldman, Sachs & Co.
Hambrecht & Quist LLC
Lazard Freres & Co.
Lehman Brothers
Merrill Lynch, Pierce, Fenner & Smith Incorporated
Morgan Stanley & Co. Incorporated
NationsBanc Montgomery Securities
PaineWebber Incorporated
Prudential Securities Inc.
Salomon Brothers Inc
Smith Barney Inc.