EXHIBIT 10.8
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WARRANT AGREEMENT
Dated as of May 15, 1996
Between
DIVA SYSTEMS CORPORATION
and
THE BANK NEW YORK
as Warrant Agent
______________________
47,000
Warrants to Purchase Common Stock
Par Value $.001 Per Share
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TABLE OF CONTENTS
Page
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ARTICLE I. - ISSUANCE, FORM, EXECUTION, DELIVERY AND REGISTRATION
OF WARRANT CERTIFICATES AND ADDITIONAL WARRANT CERTIFICATES... 1
Section 1.01. Issuance of Warrants................................. 1
Section 1.02. Form of Warrant Certificates......................... 1
Section 1.03. Execution of Warrant Certificates.................... 2
Section 1.04. Authentication and Delivery.......................... 2
Section 1.05 Temporary Warrant Certificates....................... 3
Section 1.06. Additional Warrants.................................. 3
Section 1.07. Registration......................................... 3
Section 1.08. Registration of Transfers and Exchanges.............. 4
Section 1.09. Lost, Stolen, Destroyed, Defaced or Mutilated Warrant
Certificates........................................ 8
Section 1.10. Offices for Exercise, etc............................ 9
ARTICLE II. DURATION, EXERCISE OF WARRANTS AND EXERCISE PRICE.............. 9
Section 2.01. Duration of Warrants................................. 9
Section 2.02. Exercise, Exercise Price, Settlement and Delivery.... 10
Section 2.03 Cancellation of Warrant Certificates................. 12
Section 2.04. Notice of an Exercise Event.......................... 13
Section 2.05. Put Right............................................ 13
ARTICLE III. OTHER PROVISIONS RELATING TO RIGHTS OF HOLDERS OF WARRANTS.... 13
Section 3.01. Enforcement of Rights................................ 13
Section 3.02. Membership on the Board of Directors................. 14
Section 3.03. Rights on Proposed Change of Control................. 14
ARTICLE IV. CERTAIN COVENANTS OF THE COMPANY............................... 14
Section 4.01. Payment of Taxes..................................... 14
Section 4.02. Qualification Under the Securities Laws.............. 14
Section 4.03. Rules 144 and 144A................................... 15
ARTICLE V. ADJUSTMENTS..................................................... 15
Section 5.01. Adjustment of Exercise Rate; Notices................. 15
Section 5.02. Fractional Shares.................................... 19
Section 5.03. Certain Distributions................................ 19
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ARTICLE VI. CONCERNING THE WARRANT AGENT................................... 20
Section 6.01. Warrant Agent........................................ 20
Section 6.02. Conditions of Warrant Agent's Obligations............ 20
Section 6.03 Resignation and Appointment of Successor............. 23
ARTICLE VII. MISCELLANEOUS................................................. 24
Section 7.01. Amendment............................................ 24
Section 7.02. Notices and Demands to the Company and
Warrant Agent....................................... 25
Section 7.03. Addresses for Notices to Parties and for
Transmission of Documents........................... 25
Section 7.04. Notices to Holders................................... 25
Section 7.05. APPLICABLE LAW....................................... 25
Section 7.06. Persons Having Rights Under Agreement................ 25
Section 7.07. Headings............................................. 26
Section 7.08. Counterparts......................................... 26
Section 7.09. Inspection of Agreement.............................. 26
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EXHIBIT A - Form of Warrant Certificate
EXHIBIT B - Certificate To Be Delivered Upon Exchange or Registration of
Transfer of Warrants
EXHIBIT C - Transferee Letter of Representation
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INDEX OF DEFINED TERMS
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Defined Term Section
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Agreement........................................ Recitals
Business Day..................................... 2.01
Capital Stock.................................... 5.01(o)
Cashless Exercise................................ 2.02(c)
Cashless Exercise Ratio.......................... 2.02(c)
Change of Control................................ 2.02(a)
Common Stock..................................... Recitals
Company.......................................... Recitals
Current Market Value............................. 5.01(o)
Definitive Warrants.............................. 1.02
Distribution..................................... 5.03
Distribution Rights.............................. 5.03
Election To Exercise............................. 2.02(b)
Exchange Act..................................... 5.01(n)
Exercisability Date.............................. 2.02(a)
Exercise Date.................................... 2.02(d)
Exercise Event................................... 2.02(a)
Exercise Price................................... 2.02(a)
Exercise Price Per Share......................... 2.02(c)
Exercise Rate.................................... 2.02(a)
Expiration Date.................................. 2.01
Global Warrants.................................. 1.02
Indenture........................................ Recitals
Independent Financial Expert..................... 5.01(n)
Initial Purchaser................................ Recitals
Notes............................................ Recitals
Officers' Certificate............................ 1.08(f)
Prospectus....................................... 4.02
Public Equity Offering........................... 2.02(a)
Public Market.................................... 2.02(a)
Registrar........................................ 1.07
Related Parties.................................. 6.02(e)
Resale Restriction Termination Date.............. 1.08
Securities Act................................... 1.08
Shares........................................... 1.01
Time of Determination............................ 5.01(n)
Trustee.......................................... Recitals
Units............................................ Recitals
Warrant Agent.................................... Recitals
Warrant Agent Office............................. 1.10
Warrant Certificates............................. Recitals
Warrant Exercise Office.......................... 2.02(b)
Warrant Register................................. 1.07
Warrants......................................... Recitals
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WARRANT AGREEMENT
WARRANT AGREEMENT ("Agreement"), dated as of May 15, 1996 by DIVA SYSTEMS
CORPORATION, a Delaware corporation (together with any successor thereto, the
"Company"), and THE BANK OF NEW YORK, a New York banking corporation, not in its
individual capacity but solely as warrant agent (with any successor Warrant
Agent, the "Warrant Agent").
WHEREAS, the Company has entered into a purchase agreement dated May 24,
1996 with Smith Barney Inc. and Toronto Dominion Securities (USA) Inc.
(collectively, the "Initial Purchasers") in which the Company has agreed to sell
to the Initial Purchasers 47,000 units (the "Units") consisting in the aggregate
of (i) $47,000,000 aggregate principal amount at maturity (subject to increase
pursuant to certain conditions set forth in Section 3.07(c) of the Indenture) of
13% Subordinated Discount Notes due 2006 (the "Notes") of the Company to be
issued under an indenture dated as of May 15, 1996 (the "Indenture"), between
the Company and The Bank of New York, a New York banking corporation, as trustee
(in such capacity, the "Trustee"), and (ii) 47,000 Warrants (the "Warrants" and
the certificates evidencing the Warrants being hereinafter referred to as
"Warrant Certificates"), each representing the right to purchase initially 20.2
shares of Common Stock, par value $.001 per share, of the Company (the "Common
Stock"), subject to adjustment in accordance with the terms hereof; and
WHEREAS, the Company desires the Warrant Agent to assist the Company in
connection with the issuance, exchange, cancellation, replacement and exercise
of the Warrants, and in this Agreement wishes to set forth, among other things,
the terms and conditions on which the Warrants may be issued, exchanged,
canceled, replaced and exercised;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I.
ISSUANCE, FORM, EXECUTION, DELIVERY AND REGISTRATION
OF WARRANT CERTIFICATES AND ADDITIONAL WARRANT CERTIFICATES
SECTION 1.01. ISSUANCE OF WARRANTS. Warrants comprising part of the
Units shall be originally issued in connection with the issuance of the Units.
Each Warrant Certificate shall evidence the number of Warrants specified
therein, and each Warrant evidenced thereby shall represent the right, subject
to the provisions contained herein and therein, to purchase from the Company
(and the Company shall issue and sell to such holder of the Warrant) 20.2 fully
paid and non-assessable shares of the Company's Common Stock (the shares
purchasable upon exercise of a Warrant being hereinafter referred to as the
"Shares" and, where appropriate, such term shall also mean the other securities
or property purchasable and deliverable upon exercise of a Warrant as provided
in Article V) at the price specified herein and therein, in each case subject to
adjustment as provided herein and therein.
SECTION 1.02. FORM OF WARRANT CERTIFICATES. The Warrant Certificates
will initially be issued either in global form (the "Global Warrants"),
substantially in the form of Exhibit A hereto (including footnote 1 thereto). In
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the future, Warrant Certificates may be issued in registered form as definitive
Warrant certificates (the "Definitive Warrants"). The Warrant Certificates
evidencing the Global Warrants or the Definitive Warrants
to be delivered pursuant to this Agreement shall be substantially in the form
set forth in Exhibit A attached hereto. Such Global Warrants shall represent
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such of the outstanding Warrants as shall be specified therein and each shall
provide that it shall represent the aggregate amount of outstanding Warrants
from time to time endorsed thereon and that the aggregate amount of outstanding
Warrants represented thereby may from time to time be reduced or increased, as
appropriate. Any endorsement of a Global Warrant to reflect the amount of any
increase or decrease in the amount of outstanding Warrants represented thereby
shall be made by the Warrant Agent and Depositary (as defined below) in
accordance with instructions given by the holder thereof. The Depository Trust
Company shall act as the Depositary with respect to the Global Warrants until a
successor shall be appointed by the Company and the Warrant Agent. Upon written
request, a Warrant holder may receive from the Warrant Agent Definitive Warrants
as set forth in Section 1.08 hereof.
SECTION 1.03. EXECUTION OF WARRANT CERTIFICATES. The Warrant
Certificates shall be executed on behalf of the Company by the chairman of its
Board of Directors, its president or any vice president and attested by its
secretary or assistant secretary, under its corporate seal. Such signatures may
be the manual or facsimile signatures of the present or any future such
officers. The seal of the Company may be in the form of a facsimile thereof and
may be impressed, affixed, imprinted or otherwise reproduced on the Warrant
Certificates. Typographical and other minor errors or defects in any such
reproduction of the seal or any such signature shall not affect the validity or
enforceability of any Warrant Certificate that has been duly countersigned and
delivered by the Warrant Agent.
In case any officer of the Company who shall have signed any of the Warrant
Certificates shall cease to be such officer before the Warrant Certificate so
signed shall be countersigned and delivered by the Warrant Agent or disposed of
by the Company, such Warrant Certificate nevertheless may be countersigned and
delivered or disposed of as though the person who signed such Warrant
Certificate had not ceased to be such officer of the Company; and any Warrant
Certificate may be signed on behalf of the Company by such persons as, at the
actual date of the execution of such Warrant Certificate, shall be the proper
officers of the Company, although at the date of the execution and delivery of
this Agreement any such person was not such an officer.
SECTION 1.04. AUTHENTICATION AND DELIVERY. Subject to the immediately
following paragraph, Warrant Certificates shall be authenticated by manual
signature and dated the date of authentication by the Warrant Agent and shall
not be valid for any purpose unless so authenticated and dated. The Warrant
Certificates shall be numbered and shall be registered in the Warrant Register
(as defined in Section 1.07 hereof).
Upon the receipt by the Warrant Agent of a written order of the Company,
which order shall be signed by the chairman of its Board of Directors, its
president or any vice president and attested by its secretary or assistant
secretary, and shall specify the amount of Warrants to be authenticated, whether
the Warrants are to be Global Warrants or Definitive Warrants, the date of such
Warrants and such other information as the Warrant Agent may reasonably request,
without any further action by the Company, the Warrant Agent is authorized, upon
receipt from the Company at any time and from time to time of the Warrant
Certificates, duly executed as provided in Section 1.03 hereof, to authenticate
the Warrant Certificates and deliver them. Such authentication shall be by a
duly authorized signatory of the Warrant Agent (although it shall not be
necessary for the same signatory to sign all Warrant Certificates).
In case any authorized signatory of the Warrant Agent who shall have
authenticated any of the Warrant Certificates shall cease to be such authorized
signatory before the Warrant Certificate shall be disposed of by the Company,
such Warrant Certificate nevertheless may be delivered or disposed of as though
the person who authenticated such Warrant Certificate had not ceased to be such
authorized signatory of the Warrant Agent; and
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any Warrant Certificate may be authenticated on behalf of the Warrant Agent by
such persons as, at the actual time of authentication of such Warrant
Certificates, shall be the duly authorized signatories of the Warrant Agent,
although at the time of the execution and delivery of this Agreement any such
person is not such an authorized signatory.
The Warrant Agent's authentication on all Warrant Certificates shall be in
substantially the form set forth in Annex A hereto.
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SECTION 1.05 TEMPORARY WARRANT CERTIFICATES. Pending the preparation of
definitive Warrant Certificates, the Company may execute, and the Warrant Agent
shall authenticate and deliver, temporary Warrant Certificates, which are
printed, lithographed, typewritten or otherwise produced, substantially of the
tenor of the definitive Warrant Certificates in lieu of which they are issued
and with such appropriate insertions, omissions, substitutions and other
variations as the officers executing such Warrant Certificates may determine, as
evidenced by their execution of such Warrant Certificates.
If temporary Warrant Certificates are issued, the Company will cause
definitive Warrant Certificates to be prepared without unreasonable delay.
After the preparation of definitive Warrant Certificates, the temporary Warrant
Certificates shall be exchangeable for definitive Warrant Certificates upon
surrender of the temporary Warrant Certificates at any office or agency
maintained by the Company for that purpose pursuant to Section 1.10 hereof.
Subject to the provisions of Section 4.01 hereof, such exchange shall be without
charge to the holder. Upon surrender for cancellation of any one or more
temporary Warrant Certificates, the Company shall execute, and the Warrant Agent
shall authenticate and deliver in exchange therefor, one or more definitive
Warrant Certificates representing in the aggregate a like number of Warrants.
Until so exchanged, the holder of a temporary Warrant Certificate shall in all
respects be entitled to the same benefits under this Agreement as a holder of a
definitive Warrant Certificate.
SECTION 1.06. ADDITIONAL WARRANTS. In the event that the Company has not
consummated an Initial Public Offering prior to May 15, 2000, the Company shall
issue on May 15, 2000, to registered Holders of the Warrants on May 1, 2000, pro
rata in accordance with the ratio of the number of Warrants then held by each
such Holder to the aggregate number of Warrants then outstanding, additional
Warrants exercisable in the aggregate into shares of the Company's Common Stock
representing five percent (5%) of the outstanding Common Stock of the Company on
a fully-diluted basis, (calculated to include all granted options, vested
restricted stock and shares reserved under the Company's incentive stock plan
and all outstanding securities which are by their terms convertible,
exchangeable or exercisable into any of the foregoing) and otherwise on terms
and conditions identical to those of the Warrants.
SECTION 1.07. REGISTRATION. The Company will keep, at the office or
agency maintained by the Company for such purpose, a register or registers in
which, subject to such reasonable regulations as it may prescribe, the Company
shall provide for the registration of, and registration of transfer and exchange
of, Warrants as provided in this Article. Each person designated by the Company
from time to time as a person authorized to register the transfer and exchange
of the Warrants is hereinafter called, individually and collectively, the
"Registrar." The Company hereby initially appoints the Warrant Agent as
Registrar. Upon written notice to the Warrant Agent and any acting Registrar,
the Company may appoint a successor Registrar for such purposes.
The Company will at all times designate one person (who may be the Company
and who need not be a Registrar) to act as repository of a master list of names
and addresses of the holders of Warrants (the "Warrant
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Register"). The Warrant Agent will act as such repository unless and until some
other person is, by written notice from the Company to the Warrant Agent and the
Registrar, designated by the Company to act as such. The Company shall cause
each Registrar to furnish to such repository, on a current basis, such
information as to all registrations of transfer and exchanges effected by such
Registrar, as may be necessary to enable such repository to maintain the Warrant
Register on as current a basis as is practicable.
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SECTION 1.08. REGISTRATION OF TRANSFERS AND EXCHANGES.
(a) Transfer and Exchange of Definitive Warrants. When Definitive
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Warrants are presented to the Warrant Agent with a request:
(i) to register the transfer of the Definitive Warrants; or
(ii) to exchange such Definitive Warrants for an equal number of
Definitive Warrants of other authorized denominations,
the Warrant Agent shall register the transfer or make the exchange as requested
if the requirements under this Warrant Agreement as set forth in this Section
1.08 hereof for such transactions are met; provided, however, that the
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Definitive Warrants presented or surrendered for registration of transfer or
exchange:
(x) shall be duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Company and the Warrant Agent,
duly executed by the holder thereof or by his attorney, duly authorized
in writing; and
(y) in the case of Warrants the offer and sale of which have not been
registered under the Securities Act of 1933, as amended (the
"Securities Act"), and are presented for transfer or exchange prior to
(x) the date which is three years after the later of the date of
original issue and the last date on which the Company or any affiliate
of the Company was the owner of such Warrant, or any predecessor
thereto and (y) such other date, if any, as may be required by any
subsequent change in applicable law (the "Resale Restriction
Termination Date"), such Warrants shall be accompanied, in the sole
discretion of the Company, by the following additional information and
documents, as applicable, however, it being understood that the Warrant
Agent need not determine which clause (A) through (D) below is
applicable:
(A) if such Warrant is being delivered to the Warrant Agent by a holder
for registration in the name of such holder, without transfer, a
certification from such holder to that effect (in substantially the
form of Exhibit B hereto); or
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(B) if such Warrant is being transferred to a qualified institutional
buyer as defined in Rule 144A under the Securities Act (a "QIB") in
accordance with Rule 144A under the Securities Act or pursuant to
an exemption from registration in accordance with Rule 144 under
the Securities Act or pursuant to an effective registration
statement under the Securities Act, a certification to that effect
(in substantially the form of Exhibit B hereto); or
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(C) if such Warrant is being transferred to an "accredited investor"
within the meaning of Rule 501(a) under the Securities Act (an
"Accredited Investor"), delivery of a Certificate of Transfer in
the form of Exhibit C hereto and an opinion of counsel and/or other
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information satisfactory to the Company to the effect that such
transfer is in compliance with the Securities Act; or
(D) if such Warrant is being transferred in reliance on another
exemption from the registration requirements of the Securities Act,
a certification to that effect (in
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substantially the form of Exhibit B hereto) and an opinion of
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counsel reasonably acceptable to the Company to the effect that
such transfer is in compliance with the Securities Act.
(b) Restrictions on Transfer of a Definitive Warrant for a Beneficial
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Interest in a Global Warrant. A Definitive Warrant may not be exchanged for a
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beneficial interest in a Global Warrant except upon satisfaction of the
requirements set forth below. Upon receipt by the Warrant Agent of a Definitive
Warrant, duly endorsed or accompanied by appropriate instruments of transfer, in
form satisfactory to the Warrant Agent, together with:
(A) certification, substantially in the form of Exhibit B hereto, that
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such Definitive Warrant is being transferred to a QIB in accordance
with Rule 144A under the Securities Act or to an Accredited
Investor pursuant to another available exemption under such Act;
and
(B) written instructions directing the Warrant Agent to make, or to
direct the Depositary to make, an endorsement on the Global Warrant
to reflect an increase in the aggregate amount of the Warrants
represented by the Global Warrant,
then the Warrant Agent shall cancel such Definitive Warrant and cause, or direct
the Depositary to cause, in accordance with the standing instructions and
procedures existing between the Depositary and the Warrant Agent, the number of
Warrants represented by the Global Warrant to be increased accordingly. If no
Global Warrant is then outstanding, the Company shall issue and the Warrant
Agent shall authenticate a new Global Warrant in the appropriate amount.
(c) Transfer and Exchange of Global Warrants. The transfer and
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exchange of Global Warrants or beneficial interests therein shall be effected
through the Depositary, in accordance with this Warrant Agreement (including the
restrictions on transfer set forth herein) and the procedures of the Depositary
therefor.
(d) Transfer of a Beneficial Interest in a Global Warrant for a
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Definitive Warrant.
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(i) Any person having a beneficial interest in a Global Warrant may upon
request exchange such beneficial interest for a Definitive Warrant.
Upon receipt by the Warrant Agent of written instructions or such other
form of instructions as is customary for the Depositary from the
Depositary or its nominee on behalf of any person having a beneficial
interest in a Global Warrant and upon receipt by the Warrant Agent of a
written order or such other form of instructions as is customary for
the Depositary or the person designated by the Depositary as having
such a beneficial interest containing registration instructions and, in
the case of any such transfer or exchange prior to the Resale
Restriction Termination Date, the following additional information and
documents, however, it being understood that the Warrant Agent need not
determine which clause (A) through (D) below is applicable:
(A) if such beneficial interest is being transferred to the person
designated by the Depositary as being the beneficial owner, a
certification from such person to that effect (in substantially the
form of Exhibit B hereto); or
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(B) if such beneficial interest is being transferred to a QIB in
accordance with Rule 144A under the Securities Act or pursuant to
an exemption from registration in accordance
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with Rule 144 under the Securities Act or pursuant to an effective
registration statement under the Securities Act, a certification to
that effect from the transferee or transferor (in substantially the
form of Exhibit B hereto); or
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(C) if such beneficial interest is being transferred to an Accredited
Investor, delivery of a Certificate of Transfer in the form of
Exhibit C hereto and an opinion of counsel and/or other information
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satisfactory to the Company to the effect that such transfer is in
compliance with the Securities Act; or
(D) if such beneficial interest is being transferred in reliance on
another exemption from the registration requirements of the
Securities Act, a certification to that effect from the transferee
or transferor (in substantially the form of Exhibit B hereto) and
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an opinion of counsel from the transferee or transferor reasonably
acceptable to the Company to the effect that such transfer is in
compliance with the Securities Act,
then the Warrant Agent will cause, in accordance with the standing
instructions and procedures existing between the Depositary and the
Warrant Agent, the aggregate amount of the Global Warrant to be
reduced and, following such reduction, the Company will execute and,
upon receipt of an authentication order in the form of an Officers'
Certificate (as defined), the Warrant Agent will authenticate and
deliver to the transferee a Definitive Warrant.
(ii) Definitive Warrants issued in exchange for a beneficial interest in a
Global Warrant pursuant to this Section 1.08(d) shall be registered in
such names and in such authorized denominations as the Depositary,
pursuant to instructions from its direct or indirect participants or
otherwise, shall instruct the Warrant Agent in writing. The Warrant
Agent shall deliver such Definitive Warrants to the persons in whose
names such Warrants are so registered.
(e) Restrictions on Transfer and Exchange of Global Warrants.
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Notwithstanding any other provisions of this Warrant Agreement (other than the
provisions set forth in subsection (f) of this Section 1.08), a Global Warrant
may not be transferred as a whole except by the Depositary to a nominee of the
Depositary or by a nominee of the Depositary to the Depositary or another
nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) Authentication of Definitive Warrants in Absence of Depositary.
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If at any time:
(i) the Depositary for the Warrants notifies the Company that the
Depositary is unwilling or unable to continue as Depositary for the
Global Warrant and a successor Depositary for the Global Warrant is not
appointed by the Company within 90 days after delivery of such notice;
or
(ii) the Company, at its sole discretion, notifies the Warrant Agent in
writing that it elects to cause the issuance of Definitive Warrants
under this Warrant Agreement,
then the Company will execute, and the Warrant Agent, upon receipt of an
officers' certificate signed by two officers of the Company (one of whom must be
the principal executive officer, principal financial officer or principal
accounting officer) (an "Officers' Certificate") requesting the authentication
and delivery of Definitive Warrants, will authenticate and deliver Definitive
Warrants, in an aggregate number equal to the aggregate number of warrants
represented by the Global Warrant, in exchange for such Global Warrant.
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(g) Legends.
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(i) Except as permitted by the following paragraph (ii), each Warrant
Certificate evidencing the Global Warrants and the Definitive Warrants
(and all Warrants issued in exchange therefor or substitution thereof)
shall bear a legend substantially to the following effect:
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION PROVIDED BY RULE 144A UNDER THE
SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (1) (a) TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT
OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF
THE COMPANY SO REQUEST), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER OF THE SECURITY EVIDENCED HEREBY OF THE
RESALE RESTRICTIONS SET FORTH IN (1) ABOVE."
(ii) Upon any sale or transfer of a Warrant pursuant to Rule 144 under the
Securities Act in accordance with Section 1.08 hereof or under an
effective registration statement under the Securities Act:
(A) in the case of any Warrant that is a Definitive Warrant, the
Warrant Agent shall permit the holder thereof to exchange such
Warrant for a Definitive Warrant that does not bear the legends
set forth above and rescind any related restriction on the
transfer of such Warrant; and
(B) any such Warrant represented by a Global Warrant shall not be
subject to the provisions set forth in (i) above (such sales or
transfers being subject only to the provisions of Section 1.08(c)
hereof); provided, however, that with respect to any request for
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an exchange of a Warrant that is represented by a Global Warrant
for a Definitive Warrant
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that does not bear the legends set forth above, which request is made in
reliance upon Rule 144 under the Securities Act, the holder thereof shall
certify in writing to the Warrant Agent that such request is being made
pursuant to Rule 144 under the Securities Act (such certification to be
substantially in the form of Exhibit B hereto).
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(h) Cancellation and/or Adjustment of a Global Warrant. At such time
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as all beneficial interests in a Global Warrant have either been exchanged for
Definitive Warrants, redeemed, repurchased or cancelled, such Global Warrant
shall be returned to or retained and cancelled by the Warrant Agent. At any
time prior to such cancellation, if any beneficial interest in a Global Warrant
is exchanged for Definitive Warrants, redeemed, repurchased or cancelled, the
number of Warrants represented by such Global Warrant shall be reduced and an
endorsement shall be made on such Global Warrant, by the Warrant Agent to
reflect such reduction.
(i) Obligations with Respect to Transfers and Exchanges of Definitive
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Warrants.
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(i) To permit registrations of transfers and exchanges, the Company shall
execute, at the Warrant Agent's request, and the Warrant Agent shall
authenticate Definitive Warrants and Global Warrants.
(ii) All Definitive Warrants and Global Warrants issued upon any
registration, transfer or exchange of Definitive Warrants or Global
Warrants shall be the valid obligations of the Company, entitled to the
same benefits under this Warrant Agreement as the Definitive Warrants
or Global Warrants surrendered upon the registration of transfer or
exchange.
(iii) Prior to due presentment for registration of transfer of any Warrant,
the Warrant Agent and the Company may deem and treat the person in
whose name any Warrant is registered as the absolute owner of such
Warrant, and neither the Warrant Agent nor the Company shall be
affected by notice to the contrary.
(j) Payment of Taxes. The Company will pay all documentary stamp
----------------
taxes attributable to the initial issuance of the Shares upon the exercise of
Warrants; provided, however, that the Company shall not be required to pay any
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tax or taxes which may be payable in respect of any transfer involved in the
issue of any Warrant Certificates or any certificates for the Shares in a name
other than that of the registered holder of a Warrant Certificate surrendered
upon the exercise of a Warrant, and the Company shall not be required to issue
or deliver such Warrant Certificates unless or until the person or persons
requesting the issuance thereof shall have paid to the Company the amount of
such tax or shall have established to the satisfaction of the Company that such
tax has been paid.
(k) Indemnification. Each holder of a Warrant Certificate agrees to
---------------
indemnify the Company and the Warrant Agent against any liability that may
result from the transfer, exchange or assignment of such holder's Warrant
Certificate in violation of any provision of this Agreement and/or applicable
U.S. Federal or state securities law.
SECTION 1.09. LOST, STOLEN, DESTROYED, DEFACED OR MUTILATED WARRANT
CERTIFICATES. Upon receipt by the Company and the Warrant Agent (or any agent
of the Company or the Warrant Agent, if requested by the Company) of evidence
satisfactory to them of the loss, theft, destruction, defacement, or mutilation
of any Warrant Certificate and of indemnity satisfactory to them and, in the
case of mutilation or defacement, upon
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surrender thereof to the Warrant Agent for cancellation, then, in the absence of
notice to the Company or the Warrant Agent that such Warrant Certificate has
been acquired by a bona fide purchaser or holder in due course, the Company
shall execute, and an authorized signatory of the Warrant Agent shall manually
authenticate and deliver, in exchange for or in lieu of the lost, stolen,
destroyed, defaced or mutilated Warrant Certificate, a new Warrant Certificate
representing a like number of Warrants, bearing a number or other distinguishing
symbol not contemporaneously outstanding. Upon the issuance of any new Warrant
Certificate under this Section, the Company may require the payment from the
holder of such Warrant Certificate of a sum sufficient to cover any tax, stamp
tax or other governmental charge that may be imposed in relation thereto and any
other expenses (including the fees and expenses of the Warrant Agent and the
Registrar) in connection therewith. Every substitute Warrant Certificate
executed and delivered pursuant to this Section in lieu of any lost, stolen or
destroyed Warrant Certificate shall constitute an additional contractual
obligation of the Company, whether or not the lost, stolen or destroyed Warrant
Certificate shall be at any time enforceable by anyone, and shall be entitled to
the benefits of (but shall be subject to all the limitations of rights set forth
in) this Agreement equally and proportionately with any and all other Warrant
Certificates duly executed and delivered hereunder. The provisions of this
Section 1.09 are exclusive with respect to the replacement of lost, stolen,
destroyed, defaced or mutilated Warrant Certificates and shall preclude (to the
extent lawful) any and all other rights or remedies notwithstanding any law or
statute existing or hereafter enacted to the contrary with respect to the
replacement of lost, stolen, destroyed, defaced or mutilated Warrant
Certificates.
The Warrant Agent is hereby authorized to authenticate in accordance with
the provisions of this Agreement, and deliver the new Warrant Certificates
required pursuant to the provisions of this Section.
SECTION 1.10. OFFICES FOR EXERCISE, ETC. So long as any of the Warrants
remain outstanding, the Company will designate and maintain in the Borough of
Manhattan, The City of New York: (a) an office or agency where the Warrant
Certificates may be presented for exercise or for the exercise of a Put (as
defined in Section 2.05(a)), (b) an office or agency where the Warrant
Certificates may be presented for registration of transfer and for exchange
(including the exchange of temporary Warrant Certificates for definitive Warrant
Certificates pursuant to Section 1.05 hereof), and (c) an office or agency where
notices and demands to or upon the Company in respect of the Warrants or of this
Agreement may be served. The Company may from time to time change or rescind
such designation, as it may deem desirable or expedient; provided, however, that
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an office or agency shall at all times be maintained in the Borough of
Manhattan, The City of New York, as provided in the first sentence of this
Section. In addition to such office or offices or agency or agencies, the
Company may from time to time designate and maintain one or more additional
offices or agencies within or outside The City of New York, where Warrant
Certificates may be presented for exercise or for registration of transfer or
for exchange, and the Company may from time to time change or rescind such
designation, as it may deem desirable or expedient. The Company will give to
the Warrant Agent written notice of the location of any such office or agency
and of any change of location thereof. The Company hereby designates the
Warrant Agent at its principal corporate trust office in the Borough of
Manhattan, The City of New York (the "Warrant Agent Office"), as the initial
agency maintained for each such purpose. In case the Company shall fail to
maintain any such office or agency or shall fail to give such notice of the
location or of any change in the location thereof, presentations and demands may
be made and notice may be served at the Warrant Agent Office and the Company
appoints the Warrant Agent as its agent to receive all such presentations,
surrenders, notices and demands.
ARTICLE II.
DURATION, EXERCISE OF WARRANTS AND EXERCISE PRICE
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SECTION 2.01. DURATION OF WARRANTS. Subject to the terms and conditions
established herein, the Warrants shall expire at 5:00 p.m., New York City time,
on the earlier to occur of (i) 90 days after an Exercise Event which causes such
Warrants to become exercisable and (ii) May 15, 2006 (unless otherwise extended
pursuant to Section 2.05 hereof) (such earlier date, the "Expiration Date").
Each Warrant may be exercised on any Business Day (as defined below) on or after
the Exercisability Date (as defined below) and on or prior to the close of
business on the Expiration Date.
Any Warrant not exercised before the close of business on the Expiration
Date shall become void, and all rights of the holder under the Warrant
Certificate evidencing such Warrant and under this Agreement shall cease.
"Business Day" shall mean any day on which (i) banks in New York City, (ii)
the principal national securities exchange or market on which the Common Stock
is listed or admitted to trading and (iii) the principal national securities
exchange or market, if any, on which the Warrants are listed or admitted to
trading are open for business.
SECTION 2.02. EXERCISE, EXERCISE PRICE, SETTLEMENT AND DELIVERY. (a)
Subject to the provisions of this Agreement, a holder of Warrants shall have the
right to purchase from the Company on or after the occurrence of an Exercise
Event (the date of the occurrence of an Exercise Event, the "Exercisability
Date") and on or prior to the close of business on the Expiration Date one (1)
fully paid, registered and non-assessable Share, subject to adjustment in
accordance with Article V hereof, at the purchase price of $.01 for each Warrant
exercised (the "Exercise Price"). The number and kind of Shares for which a
Warrant may be exercised (the "Exercise Rate") shall be subject to adjustment
from time to time as set forth in Article V hereof.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its subsidiaries taken as a
whole to any "person" (as such term is used in Section 13(d)(3) of the Exchange
Act) other than the Principals or their Related Parties (as defined below), (ii)
the adoption of a plan relating to the liquidation or dissolution of the Company
and (iii) the consummation of any transaction (including any merger or
consolidation) the result of which is that any "person" (as defined above),
other than the Principals and their Related Parties, becomes the "beneficial
owner" (as such term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange
Act), directly or indirectly, of more than 50% of the Voting Stock of the
Company or (iv) during any consecutive two-year period, individuals who at the
beginning of such period constituted the Board of Directors of the Company
(together with any new directors whose election to such Board of Directors or
whose nomination for election by the stockholders of the Company was approved by
a vote of a majority of the directors of the Company then still in office who
were either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Board of Directors of the Company then in office.
For purposes of the foregoing definition of Change of Control, the transfer
(by lease, assignment, sale or otherwise, in a single transaction or series of
related transactions) of all or substantially all of the properties or assets of
one or more Subsidiaries of the Company, the Capital Stock of which constitutes
all or substantially all of the properties and assets of the Company, shall be
deemed to be the transfer of all or substantially all of the properties and
assets of the Company.
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"Exercise Event" means, with respect to each Warrant, the date of the
earliest of: (1) the seventh day prior to the occurrence of a Change of
Control, (2) the consummation of a Public Equity Offering, (3) 90 days prior to
May 15, 2006 (unless extended pursuant to Section 2.05 hereof) and (4) the
seventh day prior to Tag-Along Event.
"Initial Public Offering" means a Public Equity Offering, underwritten by
a nationally recognized underwriter pursuant to an effective registration
statement under the Securities Act (i) the aggregate gross proceeds of which at
least equal or exceed the greater of (A) $30,000,000 and (B) the fair market
value of shares of the Common Stock of the Company representing in the aggregate
five percent (5%) of the Common Stock of the Company on a fully-diluted basis,
after giving effect to the Public Equity Offering, and (ii) the Common Stock
offered thereby is registered on a national exchange.
"Person" means an individual, partnership, corporation, unincorporated
organization, trust or joint venture, or a governmental agency or political
subdivision thereof.
"Plan of Liquidation" means, with respect to any Person, a plan (including
by operation of law) that provides for, contemplates or the effectuation of
which is preceded or accompanied by (whether or not substantially
contemporaneously) (i) the sale, lease, conveyance or other disposition of all
or substantially all of the assets of such Person otherwise than as an entirety
or substantially as an entirety and (ii) the distribution of all or
substantially all of the proceeds of such sale, lease, conveyance or other
disposition and all or substantially all of the remaining assets of such Person
to holders of Capital Stock of such Person.
"Principal" means Paul M. Cook, Rufus W. Lumry or Alan H. Bushell.
"Public Equity Offering" means a primary public offering (whether or not
underwritten, but excluding any offering pursuant to Form S-4 or S-8 under the
Securities Act) of capital stock of the Company pursuant to an effective
registration statement under the Securities Act.
"Related Party" with respect to any Principal means (A) any spouse, parent
or child of such Principal or (B) any trust, corporation, partnership or other
entity, the beneficiaries, stockholders, partners, owners or Persons
beneficially holding an 80% or more controlling interest of which consist of
such Principal and/or such other Person referred to in the immediately preceding
clause (A).
"Tag-Along Event" means the triggering of a co-sale right of a holder of a
Warrant pursuant to Section 6 of the Stockholder Rights Agreement amended and
restated as of May 15, 1996.
"Voting Stock" means, with respect to any Person, securities of any class
or classes of Capital Stock of such Person entitling the holders thereof
(whether at all times or only so long as no senior class of stock has voting
power by reason of any contingency) to vote in the election of members of the
Board of Directors of such Person.
(b) Warrants may be exercised on or after the Exercisability Date by
(i) surrendering at any office or agency maintained for that purpose by the
Company pursuant to Section 1.10 (each a "Warrant Exercise Office") the Warrant
Certificate evidencing such Warrants with the form of election to purchase
Shares set forth on the reverse side of the Warrant Certificate (the "Election
to Exercise") duly completed and signed by the registered holder or holders
thereof or by the duly appointed legal representative thereof or by a duly
authorized attorney, and in the case of a transfer, such signature shall be
guaranteed by an eligible guarantor institution, and
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(ii) paying in full the Exercise Price for each such Warrant exercised and any
other amounts required to be paid pursuant to Section 1.08(j) hereof.
(c) Simultaneously with the exercise of each Warrant, payment in full
of the Exercise Price shall be made in cash or by certified or official bank
check to be delivered to the office or agency where the Warrant Certificate is
being surrendered. Notwithstanding the foregoing sentence, a Warrant may also
be exercised solely by the surrender of the Warrant, and without the payment of
the Exercise Price in cash, for such number of Shares equal to the product of
(1) the number of Shares for which such Warrant is exercisable with payment of
the Exercise Price as of the date of exercise and (2) the Cashless Exercise
Ratio. For purposes of this Agreement, the "Cashless Exercise Ratio" shall
equal a fraction, the numerator of which is the excess of the Current Market
Value of the Common Stock on the date of exercise (calculated as set forth in
Section 5.01(n) hereof) over the Exercise Price Per Share as of the date of
exercise and the denominator of which is the Current Market Value of the Common
Stock on the date of exercise (calculated as set forth in Section 5.01(n)
hereof). An exercise of a Warrant in accordance with the immediately preceding
sentences is herein called a "Cashless Exercise." Upon surrender of a Warrant
Certificate representing more than one Warrant in connection with the holder's
option to elect a Cashless Exercise, the number of Shares deliverable upon a
Cashless Exercise shall be equal to the number of Warrants that the holder
specifies is to be exercised pursuant to a Cashless Exercise multiplied by the
Cashless Exercise Ratio. All provisions of this Agreement shall be applicable
with respect to an exercise of a Warrant Certificate pursuant to a Cashless
Exercise for less than the full number of Warrants represented thereby.
"Exercise Price Per Share" means the Exercise Price divided by the number of
Shares for which a Warrant is then exercisable (without giving effect to the
Cashless Exercise option). No payment or adjustment shall be made on account of
any dividends on the Shares issued upon exercise of a Warrant.
(d) Upon such surrender of a Warrant Certificate and payment and
collection of the Exercise Price at any Warrant Exercise Office (other than any
Warrant Exercise Office that also is an office of the Warrant Agent), such
Warrant Certificate and payment shall be promptly delivered to the Warrant
Agent. The "Exercise Date" for a Warrant shall be the date when all of the
items referred to in the first sentence of paragraphs (b) and (c) of this
Section 2.02 are received by the Warrant Agent at or prior to 11:00 a.m., New
York City time, on a Business Day and the exercise of the Warrants will be
effective as of such Exercise Date. If any items referred to in the first
sentence of paragraphs (b) and (c) are received after 11:00 a.m., New York City
time, on a Business Day, the exercise of the Warrants to which such item relates
will be effective on the next succeeding Business Day. Notwithstanding the
foregoing, in the case of an exercise of Warrants on the Expiration Date (as
defined in Section 2.01), if all of the items referred to in the first sentence
of paragraphs (b) and (c) are received by the Warrant Agent at or prior to 5:00
p.m., New York City time, on such Expiration Date, the exercise of the Warrants
to which such items relate will be effective on the Expiration Date.
(e) Upon the exercise of a Warrant in accordance with the terms
hereof, the receipt of a Warrant Certificate and payment of the Exercise Price
(or election of the Cashless Exercise option), the Warrant Agent shall: (i)
except to the extent exercise of the Warrant has been effected through Cashless
Exercise, cause an amount equal to the Exercise Price to be paid to the Company
by crediting the same to the account designated by the Company in writing to the
Warrant Agent for that purpose; (ii) advise the Company immediately by telephone
of the amount so deposited to the Company's account and promptly confirm such
telephonic advice in writing; and (iii) as soon as practicable, advise the
Company in writing of the number of Warrants exercised in accordance with the
terms and conditions of this Agreement and the Warrant Certificates, the
instructions of each exercising holder of the Warrant Certificates with respect
to delivery of the Shares to which such holder is entitled upon such exercise,
and such other information as the Company shall reasonably request.
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(f) Subject to Section 5.02 hereof, as soon as practicable after the
exercise of any Warrant or Warrants in accordance with the terms hereof, the
Company shall issue or cause to be issued to or upon the written order of the
registered holder of the Warrant Certificate evidencing such exercised Warrant
or Warrants, a certificate or certificates evidencing the Shares to which such
holder is entitled, in fully registered form, registered in such name or names
as may be directed by such holder pursuant to the Election to Exercise, as set
forth on the reverse of the Warrant Certificate. Such certificate or
certificates evidencing the Shares shall be deemed to have been issued and any
persons who are designated to be named therein shall be deemed to have become
the holder of record of such Shares as of the close of business on the Exercise
Date. After such exercise of any Warrant or Warrants, the Company shall also
issue or cause to be issued to or upon the written order of the registered
holder of such Warrant Certificate, a new Warrant Certificate, countersigned by
the Warrant Agent pursuant to written instruction, evidencing the number of
Warrants, if any, remaining unexercised unless such Warrants shall have expired.
SECTION 2.03 CANCELLATION OF WARRANT CERTIFICATES. In the event the
Company shall purchase or otherwise acquire Warrants, the Warrant Certificates
evidencing such Warrants may thereupon be delivered to the Warrant Agent, and if
so delivered, shall at the Company's written instruction be canceled by it and
retired. The Warrant Agent shall cancel all Warrant Certificates properly
surrendered for exchange, substitution, transfer or exercise. The Warrant Agent
shall deliver such canceled Warrant Certificates to the Company.
SECTION 2.04. NOTICE OF AN EXERCISE EVENT. The Company shall, to the
extent reasonably practicable, not fewer than 30 days nor more than 60 days
prior to the occurrence of an Exercise Event, send to the Warrant Agent and each
holder of Warrants and to each beneficial owner of the Warrants to the extent
that the Warrants are held of record by a depositary or other agent, by first-
class mail, at the addresses appearing on the Warrant Register, a notice of the
Exercise Event to occur, which notice shall describe the type of Exercise Event
and the date of the proposed occurrence thereof and the date of expiration of
the right to exercise the Warrants prominently set forth in the face of such
notice.
SECTION 2.05. PUT RIGHT.
(a) In the event the Company has not consummated an Initial Public
Offering prior to May 15, 2006, each holder of a Warrant shall have the right,
at its election, (i) to require the Company to purchase the Warrants (the "Put")
at the fair market value of the underlying Common Stock as determined by a
nationally recognized investment banking firm selected by the Company (the "Put
Price") or (ii) to extend the Expiration Date to May 15, 2011. On the extended
Expiration Date, if applicable, each holder of a Warrant shall have the right to
exercise the Put at the Put Price as determined on such date.
(b) Any holder of a Warrant may require the Company to purchase such
Warrant pursuant to the terms of Section 2.05(a) upon not less than 30 days'
prior written notice by surrendering at any office or agency maintained for that
purpose by the Company pursuant to Section 1.10 of the Warrant Certificate
evidencing such Warrant.
(c) Payment in full of the Put Price to each surrendering holder of a
Warrant shall be made by the Company in immediately available funds, in cash or
by certified or official bank check to be delivered to the office or agency
where the Warrant Certificate is being surrendered no later than close of
business on June 15, 2006 or, if the Expiration Date has been extended pursuant
to Section 2.05(a)(ii), June 15, 2011. Warrants (i) outstanding on May 15,
2006, which are to be subject to a Put prior to or on June 15, 2006, shall
automatically be deemed to be extended through June 15, 2006, and (ii)
outstanding on May 15, 2011 shall automatically be
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deemed to be extended through June 15, 2011, in each such case, for the purpose
of enabling the holders thereof to exercise the Put.
ARTICLE III
OTHER PROVISIONS RELATING TO
RIGHTS OF HOLDERS OF WARRANTS
SECTION 3.01. ENFORCEMENT OF RIGHTS. (a) Notwithstanding any of the
provisions of this Agreement, any holder of any Warrant Certificate, without the
consent of the Warrant Agent, the holder of any Shares or the holder of any
other Warrant Certificate, may, in and for his own behalf, enforce, and may
institute and maintain any suit, action or proceeding against the Company
suitable to enforce, his right to exercise the Warrant or Warrants evidenced by
his Warrant Certificate in the manner provided in such Warrant Certificate and
in this Agreement.
(b) Except as set forth in this Article III or in the Stockholder
Rights Agreement amended and restated as of May 15, 1996, neither the Warrants
nor any Warrant Certificate shall entitle the holders thereof to any of the
rights of a holder of Shares, including, without limitation, the right to vote
or to receive any dividends or other payments or to consent or to receive notice
as stockholders in respect of the meetings of stockholders or for the election
of directors of the Company or any other matter, or any rights whatsoever as
stockholders of the Company.
SECTION 3.02. MEMBERSHIP ON THE BOARD OF DIRECTORS. The Company shall,
not later than June 30, 1996, cause a person designated to the Company in
writing by a representative of the holders of the Warrants to be elected to the
Company's Board of Directors. If such person ceases to serve as a director for
any reason, so long as at least forty-nine percent (49%) of the Warrants shall
be beneficially owned by the holders acquiring Warrants directly from the
Initial Purchasers, the Company shall include in the slate of nominees
recommended by the Company's Board of Directors or management to shareholders
for election as directors at each meeting of shareholders of the Company, at
which directors are elected, one person designated by the holders of the
Warrants holding a majority of the Warrants at the time of designation which
person is reasonably satisfactory to the Company. The Company shall use its
best efforts to cause to be voted in favor of the election of such designee, the
shares for which the Company's management or Board of Directors holds proxies or
is otherwise entitled to vote. In the event that any such designee shall cease
to serve as a director for any reason during the period that this Section 3.02
is in effect, the vacancy resulting thereby shall be filled by a designee of the
Warrant Holders reasonably acceptable to the Company. The Company shall
compensate such designee on the same terms as other outside directors generally
and shall provide all rights and benefits of indemnity to such designee as are
provided such directors; provided, that any independent director selected for
particular expertise in, or experience with, the Company's business or related
industries, may be compensated at a rate reflecting such expertise or
experience, without a requirement that the Company increase the compensation to
any other director, including the designee of the holders of the Warrants.
SECTION 3.03. RIGHTS ON PROPOSED CHANGE OF CONTROL. With respect to any
proposed Change of Control (as defined in Section 2.02) which would require the
approval of the Company's shareholders in accordance with the Company's
organizational documents or applicable law (any such Change in Control, an
"Approval Event"), the Company shall solicit the approval of the holders of the
Warrants contemporaneously with seeking the approval of its Shareholders. The
Company agrees not to consummate any proposed Approval
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Event unless it obtains the approval of the requisite percentage of its
shareholders, including the holders of the Warrants for the purpose of
determining such percentage as though the Warrants had already been exercised.
ARTICLE IV.
CERTAIN COVENANTS OF THE COMPANY
SECTION 4.01. PAYMENT OF TAXES. The Company will pay all documentary
stamp taxes attributable to the initial issuance of Warrants and of the Shares
upon the exercise of Warrants; provided, however, that the Company shall not be
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required to pay any tax or other governmental charge which may be payable in
respect of any transfer or exchange of any Warrant Certificates or any
certificates for Shares in a name other than the registered holder of a Warrant
Certificate surrendered upon the exercise of a Warrant. In any such case, no
transfer or exchange shall be made unless or until the person or persons
requesting issuance thereof shall have paid to the Company the amount of such
tax or other governmental charge or shall have established to the satisfaction
of the Company that such tax or other governmental charge has been paid or an
exemption is available therefrom.
SECTION 4.02. QUALIFICATION UNDER THE SECURITIES LAWS. Prior to the
occurrence of an Exercise Event arising as a result of a Public Equity Offering
the Company will, if permitted by applicable law, take all such action as is
necessary to cause the offer and sale by the Company of the Shares issuable upon
exercise of the Warrants to be registered or otherwise qualified under the
provisions of the Securities Act and pursuant to all applicable state securities
laws and to provide for the issuance of all Shares delivered upon exercise of
the Warrants pursuant to an effective registration statement under the
Securities Act. So long as any unexpired Warrants which have become exercisable
due to the occurrence of such an Exercise Event remain outstanding, the Company
will file such amendments and/or supplements to any registration statement under
the Securities Act or under any state securities laws covering the issuance of
such Shares and supplement and keep current any prospectus forming a part of
such registration statement as may be necessary to permit the Company to deliver
to each person exercising a Warrant a prospectus meeting the requirements of
Section 10(a)(3) of the Securities Act (a "Prospectus") and the regulations of
the Securities and Exchange Commission and otherwise complying with the
Securities Act and regulations thereunder, and as may be necessary to comply
with any applicable state securities laws. The Company shall, upon the request
of any holder of Warrants that may be required pursuant to the Securities Act to
deliver a prospectus in connection with any sale or other disposition of Shares,
include within the plan of distribution section of the Prospectus and in such
other places in the Prospectus as may be necessary, all information necessary
under the Securities Act to enable such holder to deliver such Prospectus in
connection with sales or other dispositions of such Shares, and the Company
shall also take such action as may be necessary under the Securities Act with
respect to the related registration statement to enable such holder to effect
such delivery in connection with such sale or other disposition. The Company
further agrees to provide any holder who may be required to deliver a prospectus
upon the sale or other disposition of such Shares, such number of copies of the
Prospectus as such holder reasonably requests. The Warrant Agent shall have no
duty to monitor when such registration or qualification is necessary nor shall
the Warrant Agent be responsible for the Company's failure to comply with this
Section 4.02.
SECTION 4.03. RULES 144 AND 144A. The Company covenants that it will
file the reports required to be filed by it under the Securities Act and the
Exchange Act and the rules and regulations adopted by the Securities and
Exchange Commission thereunder in a timely manner in accordance with the
requirements of the Securities Act and the Exchange Act and, if at any time the
Company is not required to file such reports, it will, upon the
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request of any holder or beneficial owner of Warrants, make available such
information necessary to permit sales pursuant to Rule 144A under the Securities
Act. The Company further covenants that it will take such further action as any
holder or beneficial owner of Warrants may reasonably request, all to the extent
required from time to time to enable such holder or beneficial owner to sell
Warrants without registration under the Securities Act within the limitation of
the exemptions provided by (a) Rule 144(k) and Rule 144A under the Securities
Act, as such Rules may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Securities and Exchange Commission (it being
expressly understood that the foregoing shall not create any obligation on the
part of the Company to file periodic or other reports under the Exchange Act at
any time that it is not then required to file such reports pursuant to the
Exchange Act).
ARTICLE V.
ADJUSTMENTS
SECTION 5.01. ADJUSTMENT OF EXERCISE RATE; NOTICES. The Exercise Rate is
subject to adjustment from time to time as provided in this Section.
(a) Adjustment for Change in Capital Stock. If, after the date
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hereof, the Company:
(i) pays a dividend or makes a distribution on its Common Stock
in shares of its Common Stock;
(ii) subdivides its outstanding shares of Common Stock into a
greater number of shares;
(iii) combines its outstanding shares of Common Stock into a
smaller number of shares;
(iv) pays a dividend or makes a distribution on its Common Stock
in shares of its Capital Stock (as defined below) (other than Common Stock
or rights, warrants, or options for its Common Stock to the extent such
issuance or distribution is covered by Section 5.03); or
(v) issues by reclassification of its Common Stock any shares of
its Capital Stock (other than rights, warrants or options for its Common
Stock);
then the Exercise Rate in effect immediately prior to such action shall be
adjusted so that the holder of a Warrant thereafter exercised may receive the
number of shares of Capital Stock of the Company which such holder would have
owned immediately following such action if such holder had exercised the Warrant
immediately prior to such action or immediately prior to the record date
applicable thereto, if any (regardless of whether the Warrants are then
exercisable and without giving effect to the Cashless Exercise option).
The adjustment shall become effective immediately after the record
date in the case of a dividend or distribution and immediately after the
effective date in the case of a subdivision, combination or reclassification. In
the event that such dividend or distribution is not so paid or made or such
subdivision, combination or reclassification is not effected, the Exercise Rate
shall again be adjusted to be the Exercise Rate which would then be in effect if
such record date or effective date had not been so fixed.
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If after an adjustment a holder of a Warrant upon exercise of such
Warrant may receive shares of two or more classes of Capital Stock of the
Company, the Exercise Rate shall thereafter be subject to adjustment upon the
occurrence of an action taken with respect to any such class of Capital Stock as
is contemplated by this Article V with respect to the Common Stock, on terms
comparable to those applicable to Common Stock in this Article V.
(b) Adjustment for Sale of Common Stock Below Current Market Value.
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If, after the date hereof, the Company sells any Common Stock or any securities
convertible into or exchangeable or exercisable for the Common Stock (other than
(1) pursuant to the exercise of the Warrants, (2) any security convertible into,
or exchangeable or exercisable for, the Common Stock as to which the issuance
thereof has previously been the subject of any required adjustment pursuant to
this Article V or (3) the issuance of Common Stock upon the conversion, exchange
or exercise of convertible, exchangeable or exercisable securities of the
Company outstanding on the date of this Agreement (to the extent in accordance
with the terms of such securities as in effect on the date of this Agreement) at
a price per share less than the Current Market Value, the Exercise Rate shall be
adjusted in accordance with the formula:
E' = E x (O + N)
---------------
(O + (N x P/M))
where:
E' = the adjusted Exercise Rate;
E = the current Exercise Rate;
O = the number of shares of Common Stock outstanding on the date of sale of
Common Stock at a price per share less than the Current Market Value to
which this paragraph (b) applies;
N = the number of shares of Common Stock so sold or the maximum stated number
of shares of Common Stock issuable upon the conversion, exchange, or
exercise of any such convertible, exchangeable or exercisable securities,
as the case may be;
P = the offering price per share pursuant to any such convertible,
exchangeable or exercisable securities so sold or the sale price of the
shares so sold, as the case may be; and
M = the Current Market Value as of the Time of Determination or at the time
of sale, as the case may be.
The adjustment shall become effective immediately after the record
date for the determination of stockholders entitled to receive the rights,
warrants or options to which this paragraph (b) applies or upon consummation of
the sale of Common Stock, as the case may be. To the extent that shares of
Common Stock are not delivered after the expiration of such rights or warrants,
the Exercise Rate shall be readjusted to the Exercise Rate which would otherwise
be in effect had the adjustment made upon the issuance of such rights or
warrants been made on the basis of delivery of only the number of shares of
Common Stock actually delivered. In the event that such rights or warrants are
not so issued, the Exercise Rate shall again be adjusted to be the Exercise Rate
which would then be in effect if such date fixed for determination of
stockholders entitled to receive such rights or warrants had not been so fixed.
-18-
No adjustment shall be made under this paragraph (b) if the
application of the formula stated above in this paragraph (b) would result in a
value of E' that is lower than the value of E.
(c) Notice of Adjustment. Whenever the Exercise Rate is adjusted, the
--------------------
Company shall promptly mail to holders of Warrants at the addresses appearing on
the Warrant Register a notice of the adjustment. The Company shall file with the
Warrant Agent and any other Registrar such notice and a certificate from the
Company's independent public accountants briefly stating the facts requiring the
adjustment and the manner of computing it. The certificate shall be conclusive
evidence that the adjustment is correct. Neither the Warrant Agent nor any such
Registrar shall be under any duty or responsibility with respect to any such
certificate except to exhibit the same during normal business hours to any
holder desiring inspection thereof.
(d) Reorganization of Company; Special Distributions. If the Company,
------------------------------------------------
in a single transaction or through a series of related transactions,
consolidates with or merges with or into any other person or transfers (by
lease, assignment, sale or otherwise) all or substantially all of its properties
and assets to another person or group of affiliated persons (other than a sale
of all or substantially all of the assets of the Company in a transaction in
which the holders of Common Stock immediately prior to such transaction do not
receive securities, cash, or other assets of the Company or any other person) or
is a party to a merger or binding share exchange which reclassifies or changes
its outstanding Common Stock, the person obligated to deliver securities, cash
or other assets upon exercise of Warrants shall enter into a supplemental
warrant agreement. If the issuer of securities deliverable upon exercise of
Warrants is an affiliate of the successor Company, that issuer shall join in the
supplemental warrant agreement.
The supplemental warrant agreement shall provide that the holder of a
Warrant may exercise it for the kind and amount of securities, cash or other
assets which such holder would have received immediately after the
consolidation, merger, binding share exchange or transfer if such holder had
exercised the Warrant immediately before the effective date of the transaction
(whether or not the Warrants were then exercisable and without giving effect to
the Cashless Exercise option), assuming (to the extent applicable) that such
holder (i) was not a constituent person or an affiliate of a constituent person
to such transaction; (ii) made no election with respect thereto; and (iii) was
treated alike with the plurality of non-electing holders. The supplemental
warrant agreement shall provide for adjustments which shall be as nearly
equivalent as may be practicable to the adjustments provided for in this Article
V. The successor Company shall mail to holders of Warrants at the addresses
appearing on the Warrant Register a notice briefly describing the supplemental
warrant agreement.
If this paragraph (d) applies paragraph (a) shall not apply.
(e) Company Determination Final. Any determination that the Company
---------------------------
or the Board of Directors of the Company must make pursuant to this Article V is
conclusive, in the absence of manifest error.
(f) Warrant Agent's Adjustment Disclaimer. The Warrant Agent has no
-------------------------------------
duty to determine when an adjustment under this Article V should be made, how it
should be made or what it should be. The Warrant Agent has no duty to determine
whether a supplemental warrant agreement under paragraph (e) need be entered
into or whether any provisions of any supplemental warrant agreement are
correct. The Warrant Agent shall not be accountable for and makes no
representation as to the validity or value of any securities or assets issued
upon exercise of Warrants. The Warrant Agent shall not be responsible for the
Company's failure to comply with this Article V.
-19-
(g) Adjustment for Tax Purposes. The Company may make such increases
---------------------------
in the Exercise Rate, in addition to those otherwise required by this Section,
as it considers to be advisable in order that any event treated for Federal
income tax purposes as a dividend of stock or stock rights shall not be taxable
to the recipients.
(h) Underlying Shares. The Company shall at all times reserve and
-----------------
keep available, free from preemptive rights, out of its authorized but unissued
Common Stock or Common Stock held in the treasury of the Company, for the
purpose of effecting the exercise of Warrants, the full number of Shares then
deliverable upon the exercise of all Warrants then outstanding, and the shares
so deliverable shall be fully paid and nonassessable and free from all liens and
security interests.
(i) Specificity of Adjustment. Irrespective of any adjustments in the
-------------------------
number or kind of shares purchasable upon the exercise of the Warrants, Warrant
Certificates theretofore or thereafter issued may continue to express the same
number and kind of Shares per Warrant as are stated on the Warrant Certificates
initially issuable pursuant to this Agreement.
(j) Adjustments to Par Value. The Company shall make such adjustments
------------------------
to the par value of the Common Stock in order that, upon exercise of the
Warrants, the Shares will be fully paid and non-assessable.
(k) Voluntary Adjustment. The Company from time to time may increase
--------------------
the Exercise Rate by any number and for any period of time (provided, that such
--------
period is not less than 20 Business Days). Whenever the Exercise Rate is so
increased, the Company shall mail to holders at the addresses appearing on the
Warrant Register and file with the Warrant Agent a notice of the increase. The
Company shall give the notice at least 15 days before the date the increased
Exercise Rate takes effect. The notice shall state the increased Exercise Rate
and the period it will be in effect. A voluntary increase in the Exercise Rate
does not change or adjust the Exercise Rate otherwise in effect as determined by
this Section 5.01.
(l) No Other Adjustment for Dividends. Except as provided in this
---------------------------------
Article V, no payment or adjustment will be made for dividends on any Common
Stock.
(m) Multiple Adjustments. After an adjustment to the Exercise Rate
--------------------
under this Article V, any subsequent event requiring an adjustment under this
Article V shall cause an adjustment to the Exercise Rate as so adjusted.
(n) Definitions.
-----------
"Capital Stock" means, with respect to any corporation, any and all
shares, interests, rights to purchase, warrants, options, participations or
other equivalents of or interests (however designated) in stock issued by that
corporation.
"Current Market Value" per share of Common Stock or of any other
security at any date shall be (1) if the security is not registered under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), (i) the value
of the security determined reasonably and in good faith by a disinterested
majority of the Board of Directors of the Company and certified in a board
resolution, or, if at the time there are not at least three disinterested
members of the Board of Directors, by a nationally recognized investment banking
firm or appraisal firm which is not an affiliate of the Company ("Independent
Financial Expert"), or (2) if the security is registered
-20-
under the Exchange Act, the average of the daily closing bid prices for each
Business Day during the period commencing 15 Business Days before such date and
ending on the date one day prior to such date or, if the security has been
registered under the Exchange Act for less than 15 consecutive Business Days
before such date, then the average of the daily closing bid prices for all of
the Business Days before such date for which daily closing bid prices are
available. If the closing bid is not determinable for at least 10 Business Days
in such period, the Current Market Value of the security shall be determined as
if the security were not registered under the Exchange Act.
"Time of Determination" means the time and date of the determination
of stockholders entitled to receive rights, warrants, or options or a
distribution, in each case, to which paragraph (b) applies.
SECTION 5.02. FRACTIONAL SHARES. The Company will not be required to
issue fractional Shares upon exercise of the Warrants or distribute Share
certificates that evidence fractional Shares. In lieu of fractional Shares,
there shall be paid to the registered holders of Warrant Certificates at the
time Warrants evidenced thereby are exercised as herein provided an amount in
cash equal to the same fraction of the Current Market Value, as defined in
paragraph (n) of Section 5.01 of this Agreement, per Share on the Business Day
preceding the date the Warrant Certificates evidencing such Warrants are
surrendered for exercise. Such payments will be made by check or by transfer to
an account maintained by such registered holder with a bank in The City of New
York. If any holder surrenders for exercise more than one Warrant Certificate,
the number of Shares deliverable to such holder may, at the option of the
Company, be computed on the basis of the aggregate amount of all the Warrants
exercised by such holder.
SECTION 5.03. CERTAIN DISTRIBUTIONS. If at any time the Company grants,
issues or sells options, convertible securities, or rights to purchase Capital
Stock, warrants or other securities pro rata to the record holders of the Common
Stock (the "Distribution Rights") or, without duplication, makes any dividend or
otherwise makes any distribution ("Distribution") on shares of Common Stock
(whether in cash, property, evidences of indebtedness or otherwise), then the
Company shall grant, issue, sell or make to each registered holder of Warrants
the aggregate Distribution Rights or Distribution, as the case may be, which
such holder would have acquired if such holder had held the maximum number of
Shares acquirable upon complete exercise of such holder's Warrants (regardless
of whether the Warrants are then exercisable and without giving effect to the
Cashless Exercise option) immediately before the record date for the grant,
issuance or sale of such Distribution Rights or Distribution, as the case may
be, or, if there is no such record date, the date as of which the record holders
of Common Stock are to be determined for the grant, issue or sale of such
Distribution Rights or Distribution, as the case may be.
ARTICLE VI.
CONCERNING THE WARRANT AGENT
SECTION 6.01. WARRANT AGENT. The Company hereby appoints The Bank of New
York as Warrant Agent of the Company in respect of the Warrants and the Warrant
Certificates upon the terms and subject to the conditions herein and in the
Warrant Certificates set forth; and The Bank of New York hereby accepts such
appointment. The Warrant Agent shall have the powers and authority specifically
granted to and conferred upon it in the Warrant Certificates and hereby and such
further powers and authority to act on behalf of the Company
-21-
as the Company may hereafter grant to or confer upon it and it shall accept in
writing. All of the terms and provisions with respect to such powers and
authority contained in the Warrant Certificates are subject to and governed by
the terms and provisions hereof.
SECTION 6.02. CONDITIONS OF WARRANT AGENT'S OBLIGATIONS. The Warrant
Agent accepts its obligations herein set forth upon the terms and conditions
hereof and in the Warrant Certificates, including the following, to all of which
the Company agrees and to all of which the rights hereunder of the holders from
time to time of the Warrant Certificates shall be subject:
(a) The Warrant Agent shall be entitled to compensation to be agreed
upon with the Company in writing for all services rendered by it and the Company
agrees promptly to pay such compensation and to reimburse the Warrant Agent for
its reasonable out-of-pocket expenses (including reasonable fees and expenses of
counsel) incurred without gross negligence or willful misconduct on its part in
connection with the services rendered by it hereunder. The Company also agrees
to indemnify the Warrant Agent and any predecessor Warrant Agent, their
directors, officers, affiliates, agents and employees for, and to hold them and
their directors, officers, affiliates, agents and employees harmless against,
any loss, liability or expense of any nature whatsoever (including, without
limitation, fees and expenses of counsel) incurred without gross negligence or
willful misconduct on the part of the Warrant Agent, arising out of or in
connection with its acting as such Warrant Agent hereunder and its exercise of
its rights and performance of its obligations hereunder. The obligations of the
Company under this Section 6.02 shall survive the exercise and the expiration of
the Warrant Certificates and the resignation and removal of the Warrant Agent.
(b) In acting under this Agreement and in connection with the Warrant
Certificates, the Warrant Agent is acting solely as agent of the Company and
does not assume any obligation or relationship of agency or trust for or with
any of the owners or holders of the Warrant Certificates.
(c) The Warrant Agent may consult with counsel of its selection and
any advice or written opinion of such counsel shall be full and complete
authorization and protection in respect of any action taken, suffered or
omitted by it hereunder in good faith and in accordance with such advice or
opinion.
(d) The Warrant Agent shall be fully protected and shall incur no
liability for or in respect of any action taken or omitted to be taken or thing
suffered by it in reliance upon any Warrant Certificate, notice, direction,
consent, certificate, affidavit, opinion of counsel, instruction, statement or
other paper or document reasonably believed by it to be genuine and to have been
presented or signed by the proper parties.
(e) The Warrant Agent, and its officers, directors, affiliates and
employees ("Related Parties"), may become the owners of, or acquire any interest
in, Warrant Certificates, shares or other obligations of the Company with the
same rights that it or they would have it if were not the Warrant Agent
hereunder and, to the extent permitted by applicable law, it or they may engage
or be interested in any financial or other transaction with the Company and may
act on, or as depositary, trustee or agent for, any committee or body of holders
of shares or other obligations of the Company as freely as if it were not the
Warrant Agent hereunder. Nothing in this Agreement shall be deemed to prevent
the Warrant Agent or such Related Parties from acting in any other capacity for
the Company.
(f) The Warrant Agent shall not be under any liability for interest
on, and shall not be required to invest, any monies at any time received by it
pursuant to any of the provisions of this Agreement or of the Warrant
Certificates.
-22-
(g) The Warrant Agent shall not be under any responsibility in respect
of the validity of this Agreement (or any term or provision hereof) or the
execution and delivery hereof (except the due execution and delivery hereof by
the Warrant Agent) or in respect of the validity or execution of any Warrant
Certificate (except its authentication thereof).
(h) The recitals and other statements contained herein and in the
Warrant Certificates (except as to the Warrant Agent's authentication thereon)
shall be taken as the statements of the Company and the Warrant Agent assumes no
responsibility for the correctness of the same. The Warrant Agent does not make
any representation as to the validity or sufficiency of this Agreement or the
Warrant Certificates, except for its due execution and delivery of this
Agreement; provided, however, that the Warrant Agent shall not be relieved of
-------- -------
its duty to authenticate the Warrant Certificates as authorized by this
Agreement. The Warrant Agent shall not be accountable for the use or
application by the Company of the proceeds of the exercise of any Warrant.
(i) Before the Warrant Agent acts or refrains from acting with respect
to any matter contemplated by this Warrant Agreement, it may require:
(1) an Officers' Certificate (as defined in the Indenture) stating on
behalf of the Company that, in the opinion of the signers, all conditions
precedent, if any, provided for in this Warrant Agreement relating to the
proposed action have been complied with; and
(2) if reasonably necessary in the sole judgment of the Warrant Agent,
an opinion of counsel for the Company stating that, in the opinion of such
counsel, all such conditions precedent have been complied with provided
that such matter is one customarily opined on by counsel.
Each Officers' Certificate or, if requested, an opinion of counsel
with respect to compliance with a condition or covenant provided for in this
Warrant Agreement shall include:
(1) a statement that the person making such certificate or opinion has
read such covenant or condition;
(2) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(3) a statement that, in the opinion of such person, he or she has
made such examination or investigation as is necessary to enable him or her
to express an informed opinion as to whether or not such covenant or
condition has been complied with; and
(4) a statement as to whether or not, in the opinion of such person,
such condition or covenant has been complied with.
(j) The Warrant Agent shall be obligated to perform such duties as are
herein and in the Warrant Certificates specifically set forth and no implied
duties or obligations shall be read into this Agreement or the Warrant
Certificates against the Warrant Agent. The Warrant Agent shall not be
accountable or under any duty or responsibility for the use by the Company of
any of the Warrant Certificates authenticated by the Warrant Agent and delivered
by it to the Company pursuant to this Agreement. The Warrant Agent shall have
no duty or responsibility in case of any default by the Company in the
performance of its covenants or agreements
-23-
contained in the Warrant Certificates or in the case of the receipt of any
written demand from a holder of a Warrant Certificate with respect to such
default, including, without limiting the generality of the foregoing, any duty
or responsibility to initiate or attempt to initiate any proceedings at law or
otherwise or, except as provided in Section 7.02 hereof, to make any demand upon
the Company.
(k) Unless otherwise specifically provided herein, any order,
certificate, notice, request, direction or other communication from the Company
made or given under any provision of this Agreement shall be sufficient if
signed by its chairman of the Board of Directors, its president, its treasurer,
its controller or any vice president or its secretary or any assistant
secretary.
(l) The Warrant Agent shall have no responsibility in respect of any
adjustment pursuant to Article V hereof.
(m) The Company agrees that it will perform, execute, acknowledge and
deliver, or cause to be performed, executed, acknowledged and delivered, all
such further and other acts, instruments and assurances as may reasonably be
required by the Warrant Agent for the carrying out or performing by the Warrant
Agent of the provisions of this Agreement.
(n) The Warrant Agent is hereby authorized and directed to accept
written instructions with respect to the performance of its duties hereunder
from any one of the chairman of the Board of Directors, the president, the
treasurer, the controller, any vice president or the secretary of the Company or
any other officer or official of the Company reasonably believed to be
authorized to give such instructions and to apply to such officers or officials
for advice or instructions in connection with its duties, and it shall not be
liable for any action taken or suffered to be taken by it in good faith in
accordance with instructions with respect to any matter arising in connection
with the Warrant Agent's duties and obligations arising under this Agreement.
Such application by the Warrant Agent for written instructions from the Company
may, at the option of the Warrant Agent, set forth in writing any action
proposed to be taken or omitted by the Warrant Agent with respect to its duties
or obligations under this Agreement and the date on or after which such action
shall be taken and the Warrant Agent shall not be liable for any action taken or
omitted in accordance with a proposal included in any such application on or
after the date specified therein (which date shall be not less than 10 Business
Days after the Company receives such application unless the Company consents to
a shorter period), provided that (i) such application includes a statement to
the effect that it is being made pursuant to this paragraph (m) and that unless
objected to prior to such date specified in the application, the Warrant Agent
will not be liable for any such action or omission to the extent set forth in
such paragraph (m) and (ii) prior to taking or omitting any such action, the
Warrant Agent has not received written instructions objecting to such proposed
action or omission.
(o) Whenever in the performance of its duties under this Agreement the
Warrant Agent shall deem it necessary or desirable that any fact or matter be
proved or established by the Company prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed on behalf of the Company by any one of the
chairman of the Board of Directors, the president, the treasurer, the
controller, any vice president or the secretary of the Company or any other
officer or official of the Company reasonably believed to be authorized to give
such instructions and delivered to the Warrant Agent; and such certificate shall
be full authorization to the Warrant Agent for any action taken or suffered in
good faith by it under the provisions of this Agreement in reliance upon such
certificate.
-24-
(p) The Warrant Agent shall not be required to risk or expend its own
funds in the performance of its obligations and duties hereunder.
SECTION 6.03 RESIGNATION AND APPOINTMENT OF SUCCESSOR.
(a) The Company agrees, for the benefit of the holders from time to
time of the Warrant Certificates, that there shall at all times be a Warrant
Agent hereunder.
(b) The Warrant Agent may at any time resign as Warrant Agent by
giving written notice to the Company of such intention on its part, specifying
the date on which its desired resignation shall become effective; provided,
--------
however, that such date shall be at least 60 days after the date on which such
- -------
notice is given unless the Company agrees to accept less notice. Upon receiving
such notice of resignation, the Company shall promptly appoint a successor
Warrant Agent, qualified as provided in Section 6.03(d) hereof, by written
instrument in duplicate signed on behalf of the Company, one copy of which shall
be delivered to the resigning Warrant Agent and one copy to the successor
Warrant Agent. As provided in Section 6.03(d) hereof, such resignation shall
become effective upon the earlier of (x) the acceptance of the appointment by
the successor Warrant Agent or (y) 60 days after receipt by the Company of
notice of such resignation. The Company may, at any time and for any reason,
and shall, upon any event set forth in the next succeeding sentence, remove the
Warrant Agent and appoint a successor Warrant Agent by written instrument in
duplicate, specifying such removal and the date on which it is intended to
become effective, signed on behalf of the Company, one copy of which shall be
delivered to the Warrant Agent being removed and one copy to the successor
Warrant Agent. The Warrant Agent shall be removed as aforesaid if it shall
become incapable of acting, or shall be adjudged a bankrupt or insolvent, or a
receiver of the Warrant Agent or of its property shall be appointed, or any
public officer shall take charge or control of it or of its property or affairs
for the purpose of rehabilitation, conservation or liquidation. Any removal of
the Warrant Agent and any appointment of a successor Warrant Agent shall become
effective upon acceptance of appointment by the successor Warrant Agent as
provided in Section 6.03(d). As soon as practicable after appointment of the
successor Warrant Agent, the Company shall cause written notice of the change in
the Warrant Agent to be given to each of the registered holders of the Warrants
in the manner provided for in Section 7.04 hereof.
(c) Upon resignation or removal of the Warrant Agent, if the Company
shall fail to appoint a successor Warrant Agent within a period of 60 days after
receipt of such notice of resignation or removal, then the holder of any Warrant
Certificate or the retiring Warrant Agent may apply to a court of competent
jurisdiction for the appointment of a successor to the Warrant Agent. Pending
appointment of a successor to the Warrant Agent, either by the Company or by
such a court, the duties of the Warrant Agent shall be carried out by the
Company.
(d) Any successor Warrant Agent, whether appointed by the Company or
by a court, shall be a bank or trust company in good standing, incorporated
under the laws of the United States of America or any State thereof and having,
at the time of its appointment, a combined capital surplus of at least $50
million. Such successor Warrant Agent shall execute and deliver to its
predecessor and to the Company an instrument accepting such appointment
hereunder and all the provisions of this Agreement, and thereupon such successor
Warrant Agent, without any further act, deed or conveyance, shall become vested
with all the rights, powers, duties and obligations of its predecessor
hereunder, with like effect as if originally named as Warrant Agent hereunder,
and such predecessor shall thereupon become obligated to (i) transfer and
deliver, and such successor Warrant Agent shall be entitled to receive, all
securities, records or other property on deposit with or held by such
predecessor as Warrant Agent hereunder and (ii) upon payment of the amounts then
due it pursuant to Section 6.02(a) hereof,
-25-
pay over, and such successor Warrant Agent shall be entitled to receive, all
monies deposited with or held by any predecessor Warrant Agent hereunder.
(e) Any corporation or bank into which the Warrant Agent hereunder may
be merged or converted, or any corporation or bank with which the Warrant Agent
may be consolidated, or any corporation or bank resulting from any merger,
conversion or consolidation to which the Warrant Agent shall be a party, or any
corporation or bank to which the Warrant Agent shall sell or otherwise transfer
all or substantially all of its corporate trust business, shall be the successor
to the Warrant Agent under this Agreement (provided that such corporation or
bank shall be qualified as aforesaid) without the execution or filing of any
document or any further act on the part of any of the parties hereto.
(f) No Warrant Agent under this Warrant Agreement shall be personally
liable for any action or omission of any successor Warrant Agent.
ARTICLE VII
MISCELLANEOUS
SECTION 7.01. AMENDMENT. This Agreement and the terms of the Warrants
may be amended by the Company and the Warrant Agent, without the consent of the
holder of any Warrant Certificate, for the purpose of curing any ambiguity, or
of curing, correcting or supplementing any defective or inconsistent provision
contained herein or therein, or to effect any assumptions of the Company's
obligations hereunder and thereunder by a successor corporation under the
circumstances described in Section 5.01(d) hereof or in any other manner which
the Company may deem necessary or desirable and which shall not adversely affect
the interests of the holders of the Warrant Certificates.
The Company and the Warrant Agent may modify this Agreement and the terms
of the Warrants with the consent of not less than a majority in number of the
then outstanding Warrants for the purpose of adding any provision to or changing
in any manner or eliminating any of the provisions of this Agreement or
modifying in any manner the rights of the holders of the outstanding Warrants;
provided, however, that no such modification that decreases the Exercise Rate,
- -------- -------
reduces the period of time during which the Warrants are exercisable hereunder,
otherwise materially and adversely affects the exercise rights of the holders of
the Warrants, reduces the percentage required for modification, or effects any
change to this Section 7.01 may be made with respect to an outstanding Warrant
without the consent of the holder of such Warrant. Notwithstanding any other
provision of this Agreement, the Warrant Agent's consent must be obtained
regarding any supplement or amendment which alters the Warrant Agent's rights or
duties (it being expressly understood that the foregoing shall not be in
derogation of the right of the Company to remove the Warrant Agent in accordance
with Section 6.03 hereof).
Any modification or amendment made in accordance with this Agreement will
be conclusive and binding on all present and future holders of Warrant
Certificates whether or not they have consented to such modification or
amendment or waiver and whether or not notation of such modification or
amendment is made upon such Warrant Certificates. Any instrument given by or on
behalf of any holder of a Warrant Certificate in connection with any consent to
any modification or amendment will be conclusive and binding on all subsequent
holders of such Warrant Certificate.
SECTION 7.02. NOTICES AND DEMANDS TO THE COMPANY AND WARRANT AGENT. If
the Warrant Agent shall receive any notice or demand addressed to the Company by
the holder of a Warrant Certificate pursuant
-26-
to the provisions hereof or of the Warrant Certificates, the Warrant Agent shall
promptly forward such notice or demand to the Company.
SECTION 7.03. ADDRESSES FOR NOTICES TO PARTIES AND FOR TRANSMISSION OF
DOCUMENTS. All notices hereunder to the parties hereto shall be deemed to have
been given when sent by certified or registered mail, postage prepaid, or by
facsimile transmission, confirmed by first class mail, postage prepaid,
addressed to any party hereto as follows:
To the Company:
DIVA Systems Corporation
Building 203
333 Ravenswood Avenue
Menlo Park, California 94025
Facsimile No.: (415) 859-6959
Attention: President
with copies to:
Wilson Sonsini Goodrich & Rosati
650 Page Mill Road
Palo Alto, California 94304-1050
Facsimile No.: (415) 493-6811
Attention: Barry E. Taylor, Esq.
To the Warrant Agent:
The Bank of New York
101 Barclay Street Floor 21 West
New York, New York 10286
Attention: Corporate Trust Trustee Administration
or at any other address of which either of the foregoing shall have notified the
other in writing.
SECTION 7.04. NOTICES TO HOLDERS. Notices to holders of Warrants shall
be mailed to such holders at the addresses of such holders as they appear in the
Warrant Register. Any such notice shall be sufficiently given if sent by first-
class mail, postage prepaid.
SECTION 7.05. APPLICABLE LAW. THE VALIDITY, INTERPRETATION AND
PERFORMANCE OF THIS AGREEMENT AND EACH WARRANT CERTIFICATE ISSUED HEREUNDER AND
OF THE RESPECTIVE TERMS AND PROVISIONS THEREOF SHALL BE GOVERNED BY THE LAWS OF
THE STATE OF NEW YORK, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS
THEREOF.
SECTION 7.06. PERSONS HAVING RIGHTS UNDER AGREEMENT. Nothing in this
Agreement expressed or implied and nothing that may be inferred from any of the
provisions hereof is intended, or shall be construed, to confer upon, or give
to, any person or corporation other than the Company, the Warrant Agent and the
holders
-27-
of the Warrant Certificates any right, remedy or claim under or by reason of
this Agreement or of any covenant, condition, stipulation, promise or agreement
hereof; and all covenants, conditions, stipulations, promises and agreements in
this Agreement contained shall be for the sole and exclusive benefit of the
Company and the Warrant Agent and their successors and of the holders of the
Warrant Certificates.
SECTION 7.07. HEADINGS. The descriptive headings of the several Articles
and 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 7.08. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which so executed shall be deemed to be an original;
but such counterparts shall together constitute but one and the same instrument.
SECTION 7.09. INSPECTION OF AGREEMENT. A copy of this Agreement shall be
available during regular business hours at the principal corporate trust office
of the Warrant Agent, for inspection by the holder of any Warrant Certificate.
The Warrant Agent may require such holder to submit his Warrant Certificate for
inspection by it.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-28-
IN WITNESS WHEREOF, this Agreement has been duly executed by the parties
hereto as of the day and year first above written.
DIVA SYSTEMS CORPORATION
By: /s/ Alan H. Bushell
--------------------
Name: Alan H. Bushell
Title: President and Chief Operating Officer
THE BANK OF NEW YORK,
as Warrant Agent
By: /s/ Vivian Georges
-------------------
Name: Vivian Georges
Title: Assistant Vice President
-29-
EXHIBIT A
[FORM OF WARRANT CERTIFICATE]
[FACE]
[Unless and until it is exchanged in whole or in part for Warrants in
certificated form, this Warrant may not be transferred except as a whole by the
Depositary to a nominee of the Depositary or by a nominee of the Depositary to
the Depositary or another nominee of the Depositary or by the Depositary or any
such nominee to a successor Depositary or a nominee of such successor
Depositary. Unless this certificate is presented by an authorized
representative of The Depository Trust Company, a New York corporation ("DTC"),
to the issuer or its agent for registration of transfer, exchange or payment,
and any certificate issued is registered in the name of Cede & Co. or such other
name as requested by an authorized representative of DTC (and any payment is
made to Cede & Co. or such other entity as is requested by an authorized
representative of DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL inasmuch as the registered owner
hereof, Cede & Co., has an interest herein.]/1/
"THE SECURITY (OR ITS PREDECESSOR) EVIDENCED HEREBY WAS ORIGINALLY ISSUED
IN A TRANSACTION EXEMPT FROM REGISTRATION UNDER SECTION 5 OF THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THE
SECURITY EVIDENCED HEREBY MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION OR AN APPLICABLE EXEMPTION THEREFROM.
EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION PROVIDED BY RULE 144A UNDER THE
SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES FOR THE
BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR
OTHERWISE TRANSFERRED, ONLY (1) (a) TO A PERSON WHO THE SELLER REASONABLY
BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER
THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A,
(b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE
SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT
OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF
THE COMPANY SO REQUEST), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH THE APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS
REQUIRED TO, NOTIFY ANY PURCHASER OF THE SECURITY EVIDENCED HEREBY OF THE
RESALE RESTRICTIONS SET FORTH IN (1) ABOVE."
___________
/1/ This paragraph is to be included only if the Warrant is in global form.
A-1
CUSIP #[ ]
A-2
No. [ ] [ ] Warrants
WARRANT CERTIFICATE
DIVA SYSTEMS CORPORATION
This Warrant Certificate certifies that [ ], or registered
assigns, is the registered holder of [ ] Warrants (the "Warrants") to
purchase shares of Common Stock, par value $.001 per share (the "Common Stock"),
of DIVA SYSTEMS CORPORATION, a Delaware corporation (the "Company"). Each
Warrant entitles the holder to purchase from the Company at any time from 9:00
a.m. New York City time on or after the occurrence of an Exercise Event until
5:00 p.m., New York City time, on the earlier to occur of (a) 90 days after an
Exercise Event and (b) May 15, 2006 (unless otherwise extended as provided for
herein) (the "Expiration Date"), 20.2 fully paid and nonassessable shares of
Common Stock (the "Shares," which may also include any other securities or
property purchasable upon exercise of a Warrant, such adjustment and inclusion
each as provided in the Warrant Agreement) at the exercise price (the "Exercise
Price") of $.01 per share upon surrender of this Warrant Certificate and payment
of the Exercise Price at any office or agency maintained for that purpose by the
Company (the "Warrant Agent Office"), subject to the conditions set forth herein
and in the Warrant Agreement. Notwithstanding the foregoing, a Warrant may also
be exercised solely by the surrender of the Warrant, and without the payment of
the Exercise Price in cash, for such number of Shares equal to the product of
(1) the number of Shares for which such Warrant is exercisable with payment of
the Exercise Price as of the date of exercise and (2) the Cashless Exercise
Ratio. For purposes of this Warrant, the "Cashless Exercise Ratio" shall equal
a fraction, the numerator of which is the excess of the Current Market Value of
the Common Stock on the date of exercise (calculated as set forth in Section
5.01(n) of the Warrant Agreement) over the Exercise Price Per Share as of the
date of exercise and the denominator of which is the Current Market Value of the
Common Stock on the date of exercise (calculated as set forth in Section 5.01(n)
of the Warrant Agreement). An exercise of a Warrant in accordance with the
immediately preceding sentences is herein called a "Cashless Exercise." Upon
surrender of a Warrant Certificate representing more than one Warrant in
connection with the Holder's option to elect a Cashless Exercise, the number of
Shares deliverable upon a Cashless Exercise shall be equal to the number of
Warrants that the Holder specifies is to be exercised pursuant to a Cashless
Exercise multiplied by the Cashless Exercise Ratio. All provisions of this
Agreement shall be applicable with respect to an exercise of a Warrant
Certificate pursuant to a Cashless Exercise for less than the full number of
Warrants represented thereby.
"Exercise Event" means, with respect to each Warrant, the date of the
earliest of: (1) the seventh day prior to the occurrence of a Change of
Control, (2) the consummation of a Public Equity Offering, (3) the 90th day
prior to May 15, 2006 (unless extended pursuant to Section 2.05 of the Warrant
Agreement) and (4) the seventh day prior to a Tag-Along Event as defined in the
Warrant Agreement.
"Initial Public Offering" means a public equity offering, underwritten by a
nationally recognized underwriter pursuant to an effective registration
statement under the Securities Act (i) the aggregate gross proceeds of which
equal or exceed the greater of (A) $30,000,000 and (B) the fair market value of
shares of the Common Stock of the Company representing in the aggregate five
percent (5%) of the Common Stock of the Company on a fully-diluted basis, after
giving effect to such Public Equity Offering and (ii) the Common Stock offered
thereby is registered on a national exchange.
A-3
To the extent an exercise of a Warrant is not effected through the Cashless
Exercise, the Exercise Price shall be payable by certified check or official
bank check or by such other means as is acceptable to the Company in the lawful
currency of the United States of America which as of the time of payment is
legal tender for payment of public or private debts. The Company has initially
designated the principal corporate trust office of the Warrant Agent in the
Borough of Manhattan, The City of New York, as the initial Warrant Agent Office.
The number of Shares issuable upon exercise of the Warrants ("Exercise Rate") is
subject to adjustment upon the occurrence of certain events set forth in the
Warrant Agreement.
Any Warrants not exercised on or prior to 5:00 p.m., New York City time, on
May 15, 2006 (unless otherwise extended as provided for herein) shall thereafter
be void.
In the event the Company has not consummated an Initial Public Offering
prior to May 15, 2006, each holder of a Warrant shall have the right, at its
election, (i) to require the Company to purchase the Warrants (the "Put") at the
fair market value of the underlying Common Stock as determined by a nationally
recognized investment banking firm selected by the Company (the "Put Price") or
(ii) to extend the Expiration Date to May 15, 2011. On the extended Expiration
Date, if applicable, each holder of a Warrant shall have the right to exercise
the Put at the Put Price as determined on such date.
Any holder of a Warrant may require the Company to purchase such Warrant
pursuant to the terms of Section 2.05(a) of the Warrant Agreement upon not less
than 30 days' prior written notice by surrendering the Warrant Certificate
evidencing such Warrant at any office or agency maintained for that purpose by
the Company pursuant to Section 1.10 of the Warrant Agreement.
Payment in full of the Put Price to each surrendering holder of a Warrant
shall be made by the Company in immediately available funds, in cash or by
certified or official bank check to be delivered to the office or agency where
the Warrant Certificate is being surrendered no later than close of business on
June 15, 2006 or, if the Expiration Date has been extended pursuant to Section
2.05(a)(ii) of the Warrant Agreement, June 15, 2011. Warrants (i) outstanding on
May 15, 2006, which are to be subject to a Put prior to or on June 15, 2006,
shall automatically be deemed to be extended through June 15, 2006, and (ii)
outstanding on May 15, 2011 shall automatically be deemed to be extended through
June 15, 2011, in each such case, for the purpose of enabling the holders
thereof to exercise the Put.
The Warrant Holder may require the Company to purchase the Warrant by (i)
surrendering at any office or agency maintained for that purpose by the Company
pursuant to Section 1.10 the Warrant Certificate evidencing such Warrants.
Payment in full of the Put Price to each surrendering Warrant Holder shall
be made by the Company in immediately available funds in cash or by certified or
official bank check to be delivered to the office or agency where the Warrant
Certificate is being surrendered.
Reference is hereby made to the further provisions on the reverse hereof
which provisions shall for all purposes have the same effect as though fully set
forth at this place.
This Warrant Certificate shall not be valid unless authenticated by the
Warrant Agent, as such term is used in the Warrant Agreement.
A-4
THIS WARRANT CERTIFICATE SHALL BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF
THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PROVISIONS
THEREOF.
WITNESS the facsimile seal of the Company and facsimile signatures of its
duly authorized officers.
DIVA SYSTEMS CORPORATION
By:
-----------------------------------------------
Name:
Title:
Attest:
By:
-------------------------------
Name:
Title:
Dated: May __, 1996
Certificate of Authentication:
This is one of the Warrants
referred to in the within
mentioned Warrant Agreement:
THE BANK OF NEW YORK,
as Warrant Agent
By:
-------------------------------
Authorized Signatory
Name:
Title:
A-5
[FORM OF WARRANT CERTIFICATE]
[REVERSE]
DIVA SYSTEMS CORPORATION
The Warrants evidenced by this Warrant Certificate are part of a duly
authorized issue of Warrants expiring at 5:00 p.m., New York City time, on the
earlier to occur of (a) 90 days after an Exercise Event which causes such
Warrants to become exercisable and (b) May 15, 2006 (unless otherwise extended
as provided for herein), each of which represents the right to purchase at any
time on or after the Exercisability Date (as defined in the Warrant Agreement)
and on or prior to such date 20.2 shares of Common Stock of the Company, subject
to adjustment as set forth in the Warrant Agreement. The Warrants are issued
pursuant to a Warrant Agreement dated as of May 15, 1996 (the "Warrant
Agreement"), duly executed and delivered by the Company to The Bank of New York
as Warrant Agent (the "Warrant Agent"), which Warrant Agreement is hereby
incorporated by reference in and made a part of this instrument and is hereby
referred to for a description of the rights, limitation of rights, obligations,
duties and immunities thereunder of the Warrant Agent, the Company and the
holders (the words "holders" or holder" meaning the registered holders or
registered holder) of the Warrants.
Warrants may be exercised by (i) surrendering at any Warrant Agent Office
this Warrant Certificate with the form of Election to Exercise set forth hereon
duly completed and executed and (ii) to the extent such exercise is not being
effected through a Cashless Exercise, paying in full the Warrant Exercise Price
for each such Warrant exercised and any other amounts required to be paid
pursuant to the Warrant Agreement.
If all of the items referred to in the last sentence of the preceding
paragraph are received by the Warrant Agent at or prior to 11:00 a.m., New York
City time, on a Business Day, the exercise of the Warrant to which such items
relate will be effective on such Business Day. If any items referred to in the
last sentence of the preceding paragraph are received after 11:00 a.m., New York
City time, on a Business Day, the exercise of the Warrants to which such item
relates will be deemed to be effective on the next succeeding Business Day.
Notwithstanding the foregoing, in the case of an exercise of Warrants on May 15,
2006, if all of the items referred to in the last sentence of the preceding
paragraph are received by the Warrant Agent at or prior to 5:00 p.m., New York
City time, on such Expiration Date, the exercise of the Warrants to which such
items relate will be effective on the Expiration Date.
As soon as practicable after the exercise of any Warrant or Warrants, the
Company shall issue or cause to be issued to or upon the written order of the
registered holder of this Warrant Certificate, a certificate or certificates
evidencing the Share or Shares to which such holder is entitled, in fully
registered form, registered in such name or names as may be directed by such
holder pursuant to the Election to Exercise, as set forth on the reverse of this
Warrant Certificate. Such certificate or certificates evidencing the Share or
Shares shall be deemed to have been issued and any persons who are designated to
be named therein shall be deemed to have become the holder of record of such
Share or Shares as of the close of business on the date upon which the exercise
of this Warrant was deemed to be effective as provided in the preceding
paragraph.
The Company will not be required to issue fractional shares of Common Stock
upon exercise of the Warrants or distribute Share certificates that evidence
fractional shares of Common Stock. In lieu of fractional shares of Common
Stock, there shall be paid to the registered Holder of this Warrant Certificate
at the time such Warrant Certificate is exercised an amount in cash equal to the
same fraction of the Current Market Value (as defined in the Warrant Agreement)
per share on the Business Day preceding the date this Warrant Certificate is
surrendered for exercise.
A-6
Warrant Certificates, when surrendered at any office or agency maintained
by the Company for that purpose by the registered holder thereof in person or by
legal representative or attorney duly authorized in writing, may be exchanged
for a new Warrant Certificate or new Warrant Certificates evidencing in the
aggregate a like number of Warrants, in the manner and subject to the
limitations provided in the Warrant Agreement, without charge except for any tax
or other governmental charge imposed in connection therewith.
Upon due presentment for registration of transfer of this Warrant
Certificate at any office or agency maintained by the Company for that purpose,
a new Warrant Certificate evidencing in the aggregate a like number of Warrants
shall be issued to the transferee in exchange for this Warrant Certificate,
subject to the limitations provided in the Warrant Agreement, without charge
except for any tax or other governmental charge imposed in connection therewith.
The Company and the Warrant Agent may deem and treat the registered holder
hereof as the absolute owner of this Warrant Certificate (notwithstanding any
notation of ownership or other writing hereon made by anyone) for the purpose of
any exercise hereof and for all other purposes, and neither the Company nor the
Warrant Agent shall be affected by any notice to the contrary.
The term "Business Day" shall mean any day on which (i) banks in New York
City, (ii) the principal national securities exchange or market on which the
Common Stock is listed or admitted to trading and (iii) the principal national
securities exchange or market on which the Warrants are listed or admitted to
trading are open for business.
A-7
(FORM OF ELECTION TO EXERCISE)
(To be executed upon exercise of Warrants on the Exercise Date)
The undersigned hereby irrevocably elects to exercise [ ] of the
Warrants represented by this Warrant Certificate and purchase the whole number
of Shares issuable upon the exercise of such Warrants and herewith tenders
payment for such Shares in the amount of $[ ] in cash or by certified or
official bank check, in accordance with the terms hereof. In lieu of payment of
the cash exercise price, the holder hereof is electing to exercise [ ]
Warrants pursuant to a Cashless Exercise (as defined in the Warrant Agreement)
for [ ] shares of Common Stock at the current Cashless Exercise Ratio. The
undersigned requests that a certificate representing such Shares be registered
in the name of ___________________ whose address is _________________________
and that such certificate be delivered to ___________________________ whose
address is __________________________. Any cash payments to be paid in lieu of a
fractional Share should be made to __________________ whose address is
________________________ and the check representing payment thereof should be
delivered to ______________________ whose address is ______________________.
Dated __________________, 19__
Name of holder of
Warrant Certificate: _______________________________
(Please Print)
Tax Identification or
Social Security Number: ____________________________
Address: ___________________________________________
___________________________________________
Signature: _________________________________________
Note: The above signature must correspond with the name
as written upon the face of this Warrant
Certificate in every particular, without
alteration or enlargement or any change whatever
and if the certificate representing the Shares or
any Warrant Certificate representing Warrants not
exercised is to be registered in a name other
than that in which this Warrant Certificate is
registered, or if any cash payment to be paid in
lieu of a fractional share is to be made to a
person other than the registered holder of this
Warrant Certificate, the signature of the holder
hereof must be guaranteed as provided in the
Warrant Agreement.
Dated ____________________, 19__
Signature:
___________________________________________________________
Note: The above signature must correspond with the name as
written upon the face of this Warrant Certificate in
every particular, without alteration or enlargement
or any change whatever.
Signature Guaranteed:
______________________________________________
A-8
FORM OF ASSIGNMENT
For value received _______________________ hereby sells, assigns and
transfers unto _____________________ the within Warrant Certificate, together
with all right, title and interest therein, and does hereby irrevocably
constitute and appoint __________________________ attorney, to transfer said
Warrant Certificate on the books of the within-named Company, with full power of
substitution in the premises.
Dated ____________________, 199__
Signature:
__________________________________________________________
Note: The above signature must correspond with the name as
written upon the face of this Warrant Certificate in
every particular, without alteration or enlargement or
any change whatever.
Signature Guaranteed:
_______________________________________________
A-9
SCHEDULE OF EXCHANGES OF CERTIFICATED WARRANTS/2/
----------------------------------------------
The following exchanges of a part of this Global Warrant for certificated
Warrants have been made:
Number of
Warrants of
Amount of Amount of this Global
decrease in increase in Warrant Signature of
Number of Number of following authorized
Date of Warrants of this Warrants of this such decrease signatory of
Exchange Global Warrant Global Warrant (or increase) Warrant Agent
- ---------- ---------------- ---------------- ------------- -------------
__________
/2/ This is to be included only if the Warrant is in global form.
A-10
EXHIBIT B
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF WARRANTS
Re: Warrants to Purchase Common Stock (the "Warrants")
of DIVA SYSTEMS CORPORATION
This Certificate relates to ____ Warrants held in* ___ book-entry or* _______
certificated form by ______ (the "Transferor").
The Transferor:*
[_] has requested the Warrant Agent by written order to deliver in
exchange for its beneficial interest in the Global Warrant held by the
Depositary a Warrant or Warrants in definitive, registered form of authorized
denominations and an aggregate number equal to its beneficial interest in such
Global Warrant (or the portion thereof indicated above); or
[_] has requested the Warrant Agent by written order to exchange or
register the transfer of a Warrant or Warrants.
In connection with such request and in respect of each such
Warrant, the Transferor does hereby certify that Transferor is familiar with the
Warrant Agreement relating to the above captioned Warrants and the restrictions
on transfers thereof as provided in Section 1.08 of such Warrant Agreement, and
that the transfer of this Warrant does not require registration under the
Securities Act of 1933, as amended (the "Act") because[*]:
[_] Such Warrant is being acquired for the Transferor's own account,
without transfer (in satisfaction of Section 1.08(a)(y)(A) or Section
1.08(d)(i)(A) of the Warrant Agreement).
[_] Such Warrant is being transferred to a qualified institutional
buyer (as defined in Rule 144A under the Act), in reliance on Rule 144A.
[_] Such Warrant is being transferred in accordance with Rule 144
under the Act.
B-1
[_] Such Warrant is being transferred in reliance on and in
compliance with an exemption from the registration requirements of the Act,
other than Rule 144A or Rule 144 under the Act. An opinion of counsel to the
effect that such transfer does not require registration under the Act
accompanies this Certificate.
______________________________
[INSERT NAME OF TRANSFEROR]
By: _________________________
Date: _____________
*Check applicable box.
B-2
EXHIBIT C
Transferee Letter of Representation
DIVA SYSTEMS CORPORATION
Building 203
333 Ravenswood Avenue
Menlo Park, California 94025
Ladies and Gentlemen:
In connection with [our] [my] proposed purchase of warrants to purchase
Common Stock, par value $.001 per share, (the "Securities") of DIVA Systems
Corporation (the "Company") we confirm that:
1. [We] [I] understand that the Securities have not been registered
under the Securities Act of 1933, as amended (the "Securities Act") and,
unless so registered, may not be sold except as permitted in the following
sentence. [We] [I] agree on [our] [my] own behalf and on behalf of any
investor account for which [we are] [I am] purchasing Securities to offer,
sell or otherwise transfer such Securities prior to the date which is three
years after the later of the date of original issue and the last date on
which the Company or any affiliate of the Company was the owner of such
Securities, or any predecessor thereto (the "Resale Restriction Termination
Date") only (a) to the Company, (b) pursuant to a registration statement
which has been declared effective under the Securities Act, (c) so long as
the Securities are eligible for resale pursuant to Rule 144A, under the
Securities Act, to a person [we] [I] reasonably believe is a qualified
institutional buyer under Rule 144A (a "QIB") that purchases for its own
account or for the account of a QIB and to whom notice is given that the
transfer is being made in reliance on Rule 144A, (d) pursuant to offers and
sales that occur outside the United States within the meaning of Regulation
S under the Securities Act, (e) to an "accredited investor" within the
meaning of Rule 501(a) under the Securities Act that is purchasing for his
own account or for the account of such another "accredited investor," or
(f) pursuant to any other available exemption from the registration
requirements of the Securities Act, subject in each of the foregoing cases
to any requirement of law that the disposition of our property or the
property of such investor account or accounts be at all times within our or
their control and to compliance with any applicable state securities laws.
The foregoing restrictions on resale will not apply subsequent to the
Resale Restriction Termination Date. If any resale or other transfer of
the Securities is proposed to be made pursuant to clause (e) above prior to
the Resale Restriction Termination Date, the transferor shall deliver a
letter from the transferee substantially in the form of this letter to the
warrant agent under the Warrant Agreement pursuant to which the Securities
were issued (the "Warrant Agent") which shall provide, among other things,
that the transferee is an institutional "accredited investor" within the
meaning of Rule 501(a) under the Securities Act and that it is acquiring
such Securities for investment purposes and not for distribution in
violation of the Securities Act. The Warrant Agent and the Company reserve
the right prior to any offer, sale or other transfer prior to the Resale
Restriction Termination Date of the Securities pursuant to clauses (c),
(d), (e) or (f) above to require the delivery of a written opinion of
counsel, certifications, and or other information satisfactory to the
Company and the Warrant Agent.
C-1
2. [We are] [I am] an "accredited investor" (as defined in Rule
501(a) of Regulation D under the Securities Act) purchasing for [our] [my]
own account or for the account of another "accredited investor," and [we
are] [I am] acquiring the Securities for investment purposes and not with a
view to, or for offer or sale in connection with, any distribution in
violation of the Securities Act and [we] [I] have such knowledge and
experience in financial and business matters as to be capable of evaluating
the merits and risks of [our] [my] investment in the Securities, and [we]
[I] and any accounts for which [we are] [I am] acting are each able to bear
the economic risk of our or its investment for an indefinite period.
3. [We are] [I am] acquiring the Securities purchased by [us] [me]
for [our] [my] own account or for one or more accounts as to each of which
[we] [I] exercise sole investment discretion.
4. You and your counsel are entitled to rely upon this letter and you
are irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceeding or official
inquiry with respect to the matters covered hereby.
Very truly yours,
--------------------------------------------------
(Name of Purchaser)
By:
-----------------------------------------------
Date:
---------------------------------------------
Upon transfer the Securities would be registered in the name of the
new beneficial owner as follows:
Name:
---------------------------
Address:
------------------------
Taxpayer ID Number:
-------------
C-2