Exhibit 4
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EXECUTION COPY
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WARRANT AGREEMENT
Between
SOLUTIA INC.
and
HSBC BANK USA
as
Warrant Agent
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Dated as of July 9, 2002
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TABLE OF CONTENTS
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Page
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SECTION 1. Appointment of Warrant Agent....................................4
SECTION 2. Warrant Certificates............................................4
SECTION 3. Execution of Warrant Certificates...............................5
SECTION 4. Registration and Countersignature...............................5
SECTION 5. Transfer and Exchange of Warrants...............................5
SECTION 6. Registration of Transfers and Exchanges.........................6
(a) Transfer and Exchange of Warrants........................6
(b) Restrictions on Transfer of a Definitive Warrant for a
Beneficial Interest in a Global Warrant................7
(c) Transfer or Exchange of Global Warrants..................8
(d) Transfer or Exchange of a Beneficial Interest in a
Global Warrant for a Definitive Warrant................8
(e) Restrictions on Transfer or Exchange of Global Warrants..9
(f) Countersignature of Definitive Warrants in Absence
of Depositary.........................................10
(g) Cancellation or Adjustment of a Global Warrant..........10
(h) Legends.................................................10
(i) Obligations with Respect to Transfers and Exchanges
of Definitive and Global Warrants.....................11
SECTION 7. Terms of Warrants; Exercise of Warrants........................11
SECTION 8. Payment of Taxes...............................................14
SECTION 9. Rules 144 and 144A.............................................14
SECTION 10. Mutilated or Missing Warrant Certificates......................14
SECTION 11. Reservation of Warrant Shares..................................14
SECTION 12. Obtaining Stock Exchange Listings..............................15
SECTION 13. Adjustment of Exercise Rate and Exercise Price.................15
(a) Adjustment for Change in Capital Stock..................15
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(b) Adjustment for Certain Sales of Common Stock Below
Current Market Value..................................16
(c) Adjustment upon Certain Distributions...................18
(d) Notice of Adjustment....................................20
(e) Reorganization of Company; Fundamental Transaction......20
(f) Other Events............................................21
(g) Company Determination Final.............................21
(h) Warrant Agent's Adjustment Disclaimer...................21
(i) Specificity of Adjustment...............................21
(j) Voluntary Adjustment....................................21
(k) Multiple Adjustments....................................22
(l) When De Minimis Adjustment May Be Deferred..............22
(m) Amendments of the Certificate of Incorporation..........22
SECTION 14. Fractional Interests...........................................22
SECTION 15. Notice of Certain Distributions; Certain Rights................22
SECTION 16. Notices to the Company and Warrant Agent.......................23
SECTION 17. Supplements and Amendments.....................................23
SECTION 18. Concerning the Warrant Agent...................................24
SECTION 19. Change of Warrant Agent........................................26
SECTION 20. Identity of Transfer Agent.....................................27
SECTION 21. SEC Reports and Other Information..............................27
SECTION 22. Successors.....................................................28
SECTION 23. Termination....................................................28
SECTION 24. Governing Law..................................................28
SECTION 25. Benefits of This Agreement.....................................28
SECTION 26. Counterparts...................................................28
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Exhibit A Common Stock Purchase Warrant of Solutia Inc.
Exhibit B(1) Global Warrant Legend
Exhibit B(2) Unit Legend
Exhibit C Certificate to be Delivered upon Exchange or
Registration of Transfer of Warrants
Exhibit D Form of Transferee Letter of Representation in
Connection with Transfers to Institutional
Accredited Investors
Exhibit E Form of Transferee Letter of Representation in
Connection with Transfers Pursuant to Regulation S
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WARRANT AGREEMENT (the "Agreement"), dated as of July 9,
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2002, between SOLUTIA INC., a Delaware corporation (together with any
successors and assigns, the "Company"), and HSBC BANK USA, a banking
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corporation and trust company organized under the laws of the State of New
York, as warrant agent (with any successor warrant agent, the "Warrant Agent").
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A. Pursuant to a purchase agreement (the "Purchase
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Agreement") dated July 2, 2002 among the Company, SOI Funding Corp., a
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Delaware Corporation ("Funding Corp.," and together with the Company, the
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"Unit Issuers"), the Guarantors named therein (the "Guarantors"), and
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Salomon Smith Barney Inc. and Banc of America Securities LLC, as
representatives of the Initial Purchasers, the Unit Issuers have agreed to
sell to the Initial Purchasers 223,000 units (the "Units"), each consisting
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of (i) $1,000 face amount of 11.25% Senior Secured Notes due 2009 (the
"Notes") of Funding Corp. and (ii) one warrant (collectively, the
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"Warrants"), each Warrant initially entitling the holder thereof to purchase
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24.814 shares of Common Stock (as defined herein) of the Company at the
Exercise Price (as defined herein).
B. The Notes and the Warrants comprising the Units
shall not be separately transferable before the Assumption Date (as defined
herein) and thereafter only on such date as shall constitute the Separation
Date (as defined herein).
C. The holders of the Warrants are entitled to the
benefits of a Warrant Registration Rights Agreement dated as of July 9, 2002
by and between the Company and the Initial Purchasers (the "Warrant
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Registration Rights Agreement").
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D. The Company desires the Warrant Agent as 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, in consideration of the premises and
mutual agreements herein, the Company and the Warrant Agent hereby agree as
follows:
Defined terms used in this Agreement shall, unless the
context otherwise requires, have the meanings specified below. Certain
additional terms are set forth elsewhere in this Agreement. Any reference to
any section of applicable law shall be deemed to include successor
provisions thereto.
"Affiliate" has the meaning given to it in the Indenture.
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"Assumption Date" means the date of the consummation of
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the Solutia Assumption.
"Business Day" means any day that is not a Saturday,
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Sunday or a day on which banking institutions in New York are authorized or
required by law to be closed.
"Capital Stock" means, with respect to any Person, any and
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all shares, interests, participations, rights in or other equivalents
(however designated and whether voting or non-voting) of
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such Person's capital stock, whether outstanding on the Issue Date or issued
after the Issue Date, and any and all rights (other than any evidence of
indebtedness), warrants or options exchangeable for or convertible into such
capital stock.
"class" means, when referring to any Capital Stock, any
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class or series of such Capital Stock.
"Clearstream" means Clearstream Banking, Societe Anonyme,
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Luxembourg.
"Common Stock" means the Common Stock of the Company, par
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value $0.01 per share.
"Convertible Security" means any securities convertible or
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exercisable or exchangeable into Common Stock of the Company of the same
class as Warrant Shares, whether outstanding on the Issue Date or thereafter
issued.
"Direct Participant" means, with respect to the Depositary
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(as defined in Section 2), Euroclear or Clearstream, a Person who has an
account with the Depositary, Euroclear or Clearstream, respectively (and,
with respect to The Depository Trust Company, shall include Euroclear and
Clearstream).
"Escrow Agreement" means the escrow and pledge agreement
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dated July 9, 2002 among Funding Corp., the Company, the Trustee and
Citibank, N.A. as securities intermediary and escrow agent.
"Escrow Funds" has the meaning given to it in the Escrow
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Agreement.
"Euroclear" means Morgan Guaranty Trust Company of New
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York, Brussels office, as operator of the Euroclear System.
"Exchange Act" means the Securities Exchange Act of 1934,
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as amended.
"Exchange Offer Registration Statement" means the
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registration statement to be filed by the Company and the Guarantors under
the Securities Act with respect to the exchange of the Notes for Exchange
Securities (as defined in the Notes Registration Rights Agreement).
"Guarantors" means Monchem International, Inc., Monchem,
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Inc., Solutia Systems, Inc., CPFilms Inc. and any other subsidiary of the
Company that guarantees the Company's obligations under the Company's credit
agreement that is to be amended, restated or entered into concurrently with
the Solutia Assumption.
"Indenture" means the indenture dated as of July 9, 2002
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between Funding Corp. and the Trustee, relating to the Notes.
"Independent Financial Expert" means a nationally
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recognized independent investment banking, appraisal or accounting firm.
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"Indirect Participant" means a person who holds a
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beneficial interest in a Global Warrant (as defined in Section 2) through a
Direct Participant.
"Initial Purchasers" means Salomon Smith Barney Inc., Banc
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of America Securities LLC, J.P. Morgan Securities Inc., Banc One Capital
Markets, Inc., HSBC Securities (USA), Inc., U.S. Bancorp Piper Jaffray Inc.
and SG Cowen Securities Corporation.
"Issue Date" means July 9, 2002, the date of the
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Indenture.
"Notes Registration Rights Agreement" means the
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Registration Rights Agreement dated as of July 9, 2002 among the Company,
the Guarantors and the Initial Purchasers relating to the registration of
the Notes.
"One Year Restricted Period" means the one year
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"distribution compliance period" as defined in rule 902(f) of Regulation S.
"Person" means any individual, corporation, limited
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liability company, partnership, joint venture, association, joint-stock
company, trust, unincorporated organization or government or any agency or
political subdivision thereof.
"SEC" means the Securities and Exchange Commission.
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"Securities Act" means the Securities Act of 1933, as
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amended.
"Separation Date" means the earliest to occur of:
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(1) 150 days after the Assumption Date; (2) the date on which a registration
statement for a registered exchange offer with respect to the Notes is
declared effective under the Securities Act; (3) the date a shelf
registration statement with respect to the Notes or the Warrants is declared
effective under the Securities Act; (4) such date on or after the Assumption
Date as Salomon Smith Barney Inc. and Banc of America Securities LLC in
their sole discretion shall determine; and (5) the date on which an Event of
Default (as defined in the Indenture) has occurred or, in the event of a
Change of Control (as defined in the Indenture), the date the Company mails
the requisite notice to the Holders.
"Solutia Assumption" has the meaning given to it in the
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Indenture.
"Time of Determination" means (i) in the case of any
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distribution of securities or other property to existing shareholders to
which Section 13(b) or 13(c) applies, the time and date of the determination
of shareholders entitled to receive such securities or property or (ii) in
the case of any other issuance and sale to which Section 13(b) or 13(c)
applies, the time and date of such issuance or sale.
"Trustee" means HSBC Bank USA, the trustee under the
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Indenture.
"Warrant Shares" means the shares of Common Stock issuable
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upon exercise of Warrants from time to time.
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SECTION 1. Appointment of Warrant Agent. The Company
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hereby appoints the Warrant Agent to act as agent for the Company in
accordance with the instructions hereinafter set forth in this Agreement,
and the Warrant Agent hereby accepts such appointment.
SECTION 2. Warrant Certificates. (a) The certificates
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representing the Warrants ("Warrant Certificates") will initially be issued
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in the form of one or more registered global warrants (the "Global
Warrants") substantially in the form of Exhibit A attached hereto, which
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shall be deposited with the Warrant Agent, as custodian for the Depositary
(as defined below), and registered in the name of DTC (as defined below) or
the nominee of DTC for credit to the accounts of DTC's Direct and Indirect
Participants. Any Global Warrants to be delivered pursuant to this Agreement
shall bear the legend set forth in Exhibit B(1) attached hereto. The Global
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Warrants shall represent such of the outstanding Warrants as shall be
specified therein, and each Global Warrant 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 the Depositary in accordance
with instructions given by the holder thereof. The Depository Trust Company
("DTC") shall act as the "Depositary" with respect to the Global Warrants
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until a successor shall be appointed by the Company and the Warrant Agent.
Upon written request, a holder of Warrants may receive from the Warrant
Agent or the Depositary definitive Warrant Certificates ("Definitive
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Warrants") as set forth in Section 6 hereof.
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(b) Warrants sold in offshore transactions in reliance on
Regulation S will initially be represented by one or more temporary,
registered, global book-entry Warrants (each, a "Regulation S Temporary
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Global Warrant") and shall bear a legend substantially to the effect set
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forth in Exhibit A, which shall be deposited with the Warrant Agent, as
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custodian for the Depositary, and registered in the name of a nominee of DTC
for credit to the accounts of Indirect Participants participating in DTC
through Euroclear and Clearstream. During the One Year Restricted Period
commencing on the day after the later of the offering date and the original
Issue Date of the Units in the case of transfers by an owner of a beneficial
interest in a Regulation S Temporary Global Warrant, beneficial interests in
the Regulation S Temporary Global Warrant may be held only through Euroclear
or Clearstream, and, pursuant to DTC's procedures, Indirect Participants
that hold a beneficial interest in the Regulation S Temporary Global Warrant
will not be able to transfer such interest to a person that takes delivery
thereof in the form of a beneficial interest in the Global Warrant. Within a
reasonable time after the expiration of the One Year Restricted Period, the
Regulation S Temporary Global Warrants will be exchanged for one or more
permanent global securities (the "Regulation S Permanent Global Warrants"),
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upon delivery to DTC of certification of compliance with the transfer
restrictions applicable to the Warrants and pursuant to Regulation S as
provided in this Agreement. After the One Year Restricted Period, (i)
beneficial interests in the Regulation S Permanent Global Warrants may be
transferred to a person that takes delivery in the form of an interest in
the Global Warrants and (ii) beneficial interests in the Global Warrants may
be transferred to a person that takes delivery in the form of an interest in
the Regulation S Permanent Global Warrants, provided, in each case, that the
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certification requirements described in Section 6 hereof are complied with.
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SECTION 3. Execution of Warrant Certificates. Warrant
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Certificates shall be signed on behalf of the Company by its Chairman of the
Board, President, Chief Executive Officer, a Vice President, Treasurer, an
Assistant Treasurer or Chief Financial Officer and by a Vice President, its
Secretary or an Assistant Secretary. Each such signature upon the Warrant
Certificates may be in the form of a facsimile signature of any such present
or future officer and may be imprinted or otherwise reproduced on the
Warrant Certificates.
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 Certificates so signed shall have been countersigned by the Warrant
Agent, or disposed of by the Company, such Warrant Certificates nevertheless
may be countersigned and delivered or disposed of as though such person had
not ceased to be such officer of the Company; and any Warrant Certificate
may be signed on behalf of the Company by any person who, at the actual date
of the execution of such Warrant Certificate, shall be a proper officer of
the Company to sign such Warrant Certificate, although at the date of the
execution of this Warrant Agreement any such person was not such officer.
Warrant Certificates shall be dated the date of
countersignature by the Warrant Agent.
SECTION 4. Registration and Countersignature. The Warrants
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shall be numbered and shall be registered on the books of the Company
maintained at the principal office of the Warrant Agent in the Borough of
Manhattan, City of New York (the "Warrant Register") as they are issued.
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Warrant Certificates shall be manually countersigned by
the Warrant Agent and shall not be valid for any purpose unless so
countersigned. The Warrant Agent shall, upon written instructions of the
Chairman of the Board, the President, Chief Executive Officer, a Vice
President, the Treasurer, an Assistant Treasurer, Chief Financial Officer,
Secretary or an Assistant Secretary of the Company, initially countersign
and deliver Warrants entitling the holders thereof to purchase not more than
the number of Warrant Shares referred to above in the first recital hereof
and shall thereafter countersign and deliver Warrants as otherwise provided
in this Agreement.
The Company and the Warrant Agent may deem and treat the
registered holders (the "Holders" or "Warrantholders") of the Warrant
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Certificates as the absolute owners thereof (notwithstanding any notation of
ownership or other writing thereon made by anyone) for all purposes, and
neither the Company nor the Warrant Agent shall be affected by any notice to
the contrary.
SECTION 5. Transfer and Exchange of Warrants. The Warrant
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Agent shall from time to time, subject to the limitations of Section 6,
register the transfer of any outstanding Warrants upon the records to be
maintained by it for that purpose, upon surrender thereof duly endorsed or
accompanied (if so required by it) by a written instrument or instruments of
transfer in form satisfactory to the Warrant Agent, duly executed by the
registered Holder or Holders thereof or by the duly appointed legal
representative thereof or by a duly authorized attorney. Subject to the
terms of this Agreement, each Warrant Certificate may be exchanged for
another certificate or certificates entitling the Holder thereof to purchase
a like aggregate number of Warrant Shares as the certificate or certificates
surrendered then entitle each Holder to purchase. Any Holder desiring to
exchange a Warrant
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Certificate or Certificates shall make such request in writing delivered to
the Warrant Agent, and shall surrender, duly endorsed or accompanied (if so
required by the Warrant Agent) by a written instrument or instruments of
transfer in form satisfactory to the Warrant Agent, the Warrant Certificate
or Certificates to be so exchanged.
Upon registration of transfer, the Company shall execute
and the Warrant Agent shall countersign and deliver by certified mail a new
Warrant Certificate or Certificates to the persons entitled thereto. The
Warrant Certificates may be exchanged at the option of the Holder thereof,
when surrendered at the office or agency of the Company maintained for such
purpose, which initially will be the corporate trust office of the Warrant
Agent in New York, New York for another Warrant Certificate, or other
Warrant Certificates of different denominations, of like tenor and
representing in the aggregate the right to purchase a like number of Warrant
Shares.
No service charge shall be made for any exchange or
registration of transfer of Warrant Certificates, but the Company may
require payment of a sum sufficient to cover any stamp or other tax or other
governmental charge that is imposed in connection with any such exchange or
registration of transfer.
SECTION 6. Registration of Transfers and Exchanges.
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(a) Transfer and Exchange of Warrants. When Warrants
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are presented to the Warrant Agent with a request:
(i) to register the transfer of the Warrants; or
(ii) to exchange such Definitive Warrants for an equal
number of Warrants of other authorized denominations,
the Warrant Agent shall register the transfer or make the exchange as
requested if (and may refuse to register any transfer or exchange unless)
the requirements under this Agreement as set forth in this Section 6 for
such transactions are met; provided, however, that the Warrants presented or
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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 or her 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, such
Warrants shall be accompanied, in the sole discretion of
the Company, by the following additional information and
documents, as applicable, it being understood, however,
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that the Warrant Agent need not determine which clause (A)
through (F) below is applicable:
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(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 C 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 ("Rule 144A"))
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(a "QIB") in accordance with Rule 144A or pursuant
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to an exemption from registration in accordance
with Rule 144 or Regulation S under the
Securities Act, a certification to that effect
(in substantially the form of Exhibit C hereto);
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or
(C) if such Warrant is being transferred to an
institutional accredited investor within the meaning
of subparagraph (a)(1), (a)(2), (a)(3) or (a)(7)
of Rule 501 under the Securities Act (an
"Institutional Accredited Investor"), delivery by
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the transferor of a certification to that effect
(in substantially the form of Exhibit C hereto), and
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delivery of a Transferee Letter of Representation
in connection with Transfers to Institutional
Accredited Investors (in substantially the form of
Exhibit D hereto) and an opinion of counsel and/or
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other information reasonably acceptable 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 Regulation S under the Securities Act,
delivery by the transferor of a certification to
that effect (in substantially the form of Exhibit C
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hereto), and a Transferee Letter of
Representation in connection with Transfers
pursuant to Regulation S in the form of Exhibit E
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hereto; or
(E) if such Warrant is being transferred in reliance
on Rule 144 under the Securities Act, delivery by
the transferor of (i) a certification from the
transferor to that effect (in substantially the
form of Exhibit C hereto), and (ii) an opinion of
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counsel reasonably satisfactory to the Company to
the effect that such transfer is in compliance
with the Securities Act; or
(F) if such Warrant 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 C hereto), and an opinion of counsel from
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the transferee or transferor 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
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for a Beneficial Interest in a Global Warrant. A Definitive Warrant may not
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be transferred by a holder for a 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:
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(i) certification from such holder (in substantially
the form of Exhibit C hereto) that such
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Definitive Warrant is being transferred to a QIB
in accordance with Rule 144A under the Securities
Act; and
(ii) 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 Warrant Shares 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 upon written instructions from the Company
authenticate a new Global Warrant in the appropriate amount.
(c) Transfer or Exchange of Global Warrants. The
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transfer or exchange of Global Warrants or beneficial interests therein
shall be effected through the Depositary, in accordance with this Section 6,
the Private Placement Legend set forth in Exhibit A, the other provisions of
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this Agreement (including the restrictions on transfer set forth herein) and
the procedures of the Depositary therefor.
(d) Transfer or Exchange of a Beneficial Interest in
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a Global Warrant for a Definitive Warrant.
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(i) Any Person having a beneficial interest in a
Global Warrant may transfer or 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,
including a written order containing registration
instructions and the following additional
information and documents:
(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 C); 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, a certification from the
transferor to that effect (in substantially the
form of Exhibit C); or
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(C) if such beneficial interest is being transferred
to an Institutional Accredited Investor, delivery
by the transferor of a certification to that
effect (in substantially the form of Exhibit C
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hereto), and delivery of a Transferee Letter of
Representation in connection with Transfers to
Institutional Accredited Investors to that effect
(in substantially the form of Exhibit D) and an
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opinion of
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counsel and/or other information reasonably
acceptable 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 Regulation S under the Securities
Act, delivery of (i) a certification to that
effect (in substantially the form of Exhibit C
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hereto) and (ii) a Transferee Letter of
Representation in connection with Transfers
pursuant to Regulation S in the form of Exhibit E
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hereto; or
(E) if such beneficial interest is being transferred
in reliance on Rule 144 under the Securities Act,
delivery by the transferor of (i) a certification
to that effect (in substantially the form of
Exhibit C hereto) and (ii) an opinion of counsel
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reasonably satisfactory to the Company to the
effect that such transfer is in compliance with
the Securities Act; or
(F) 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 C hereto) and
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an opinion of counsel and/or other information
reasonably acceptable to the Company to the effect
that such transfer is in compliance with the
Securities Act (if such transfer is made
specifically pursuant to Regulation S, the
transferor must also deliver a Letter of
Representation in connection with Transfers
pursuant to Regulation S in substantially the form
of Exhibit E hereto),
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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 a
countersignature order in the form of an officers' certificate (a
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"), the Warrant Agent will
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countersign 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 6 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 and adjust the Global
Warrant pursuant to paragraph (g) of this
Section 6.
(e) Restrictions on Transfer or Exchange of Global
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Warrants. Notwithstanding any other provisions of this Agreement (other than
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the provisions set forth in subsection (f) of this Section 6), a Global
Warrant may not be transferred or exchanged 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
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nominee of the Depositary or by the Depositary or any such nominee to a
successor Depositary or a nominee of such successor Depositary.
(f) Countersignature of Definitive Warrants in Absence
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of Depositary. If at any time:
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(i) the Depositary for the Global Warrants notifies
the Company that the Depositary is unwilling or
unable to continue as Depositary for the Global
Warrants 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 for all
Global Warrants under this Agreement,
then the Company will execute, and the Warrant Agent will, upon receipt of
an Officers' Certificate requesting the countersignature and delivery of
Definitive Warrants, countersign 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.
(g) Cancellation or Adjustment of a Global Warrant.
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At such time as all beneficial interests in a Global Warrant have either
been exchanged for Definitive Warrants, redeemed, repurchased or canceled,
such Global Warrant shall be returned to the Company or, upon written order
to the Warrant Agent in the form of an Officers' Certificate from the
Company, retained and canceled 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 canceled, 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.
(h) Legends.
-------
(i) Private Placement Legend. Except as permitted by
------------------------
the following sentence, each Warrant Certificate
evidencing the Warrants (and all Warrants issued
in exchange therefor or substitution thereof and,
if the Company deems appropriate, Warrant Shares
issuable upon exercise of the Warrants) shall bear
a legend substantially to the effect set forth in
Exhibit A. Upon any sale or transfer of a Warrant
---------
or Warrant Share pursuant to Rule 144 under the
Securities Act in accordance with this Section 6
or under an effective registration statement under
the Securities Act, the Warrant Agent shall permit
the holder of a Warrant to exchange such Warrant
for a Definitive Warrant and the Company shall
permit the holder of a Warrant Share to exchange
such Warrant Share for a share of Common Stock,
in each case, that does not bear the legend set
forth in Exhibit A.
---------
-11-
(ii) Unit Legend. Each Warrant issued prior to the
-----------
Separation Date shall bear a legend substantially
to the effect set forth in Exhibit B(2).
------------
(i) Obligations with Respect to Transfers and
-----------------------------------------
Exchanges of Definitive and Global Warrants.
- -------------------------------------------
(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 and Global
Warrants.
(ii) All Definitive and Global Warrants issued upon
any registration, transfer or exchange of
Definitive and Global Warrants shall be the valid
obligations of the Company, entitled to the same
benefits under this Agreement as the Definitive
and 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.
SECTION 7. Terms of Warrants; Exercise of Warrants.
---------------------------------------
Subject to the terms of this Agreement each Warrantholder shall have the
right, which may be exercised commencing on or after the Separation Date and
until the earlier of (1) the Deadline (as defined in the Indenture) if the
Solution Assumption has not been consummated on or before such date or
(2) 5:00 p.m., New York City time, on July 15, 2009 (the "Expiration Date"),
---------------
to receive from the Company upon the exercise of each Warrant the number of
fully paid and nonassessable Warrant Shares which the holder may at the time
be entitled to receive on exercise of such Warrants and payment of the
Exercise Price (as defined) for such Warrant Shares. Each Warrant not
exercised prior to the Expiration Date shall become void and all rights
thereunder and all rights in respect thereof under this Agreement shall
cease as of such time. No adjustments as to dividends will be made upon
exercise of the Warrants.
The price per share at which Warrant Shares shall be
purchasable upon exercise of Warrants (the "Exercise Price") shall be equal
--------------
to $7.59, subject to adjustment pursuant to Section 13. A Warrant may be
exercised upon surrender at the office or agency of the Company maintained
for such purpose, which initially will be at the principal office of the
Company, of the Warrant Certificate or Certificates evidencing the Warrants
to be exercised with the form of election to purchase on the reverse thereof
(the "Election to Exercise") duly filled in and signed, which signature
--------------------
shall be guaranteed in accordance with the provisions set forth in the
Warrant Certificate.
The "Exercise Date" for a Warrant shall be the date when
-------------
all of the items referred to in the immediately preceding sentence and the
next paragraph are received by the Warrant Agent at or prior to 9 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 such
sentence are received after 11 a.m.,
-12-
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, if all of the items referred to in such sentence are
received by the Warrant Agent at or prior to 5 p.m., New York City time, on
the Expiration Date, the exercise of the Warrants to which such items relate
will be effective on the Expiration Date.
The Warrants may be exercised by surrendering to the
Company the Warrants to be exercised with the accompanying form of election
to purchase properly completed and executed, together with payment of the
Exercise Price. Payment of the Exercise Price may be made at the Holder's
election (i) in cash in United States dollars by wire transfer or by
certified or official bank check to the order of the Company or (ii) by the
surrender of one or more Warrant Certificates (and without the payment of
the Exercise Price in cash) in exchange for a number of shares of the
Company's Common Stock equal to the product of (a) the number of shares of
the Company's Common Stock for which such Warrant is exercisable as of the
Exercise Date (if the Exercise Price were being paid in cash), and (b) the
Cashless Exercise Ratio (the "Cashless Exercise"). The "Cashless Exercise
----------------- -----------------
Ratio" shall equal a fraction, the numerator of which is the excess of the
- -----
Current Market Value per share of the Company's Common Stock on the Exercise
Date over the Exercise Price per share as of the Exercise Date and the
denominator of which is the Current Market Value per share of the Company's
Common Stock on the Exercise Date. Upon surrender of a Warrant Certificate
representing more than one Warrant, the number of shares of Common Stock
deliverable upon a Cashless Exercise shall be equal to the product of the
number of shares of the Company's Common Stock issuable in respect of those
Warrants that the Holder specifies are to be exercised pursuant to a
Cashless Exercise multiplied by the Cashless Exercise Ratio. All provisions
of this Agreement are 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.
"Current Market Value" per share of any class of Common
--------------------
Stock of the Company at any date shall mean:
(1) if no class of Common Stock is then registered under
the Exchange Act and traded on a national securities exchange or on
the Nasdaq National Market System,
(a) the value of such class of Common Stock,
determined in good faith by the board of directors of the
Company and certified in a board resolution, taking into
account the most recently completed arms-length
transaction between the Company and a Person other than an
Affiliate of the Company and the closing of which occurs
on such date or shall have occurred within the six-month
period preceding such date, or
(b) if no such transaction shall have occurred on
such date or within such six-month period, the fair market
value of the security as determined by a nationally
recognized Independent Financial Expert; provided,
--------
however, that, in the case of the calculation of Current
-------
Market Value for determining the cash value of fractional
shares, any such determination within six months that is,
in the good faith judgment of the board of directors, a
reasonable determination of value may be utilized, or
-13-
(2) (a) if any class of Common Stock is then registered
under the Exchange Act and traded on a national securities
exchange or on the Nasdaq National Market System, the
average of the daily closing sales prices of such class of
Common Stock for the 20 consecutive trading days
immediately preceding such date, or
(b) if such class of Common Stock has been
registered under the Exchange Act and traded on a national
securities exchange or on the Nasdaq National Market
System for less than 20 consecutive trading days before
such date, then the average of the daily closing sales
prices for all of the trading days before such date for
which closing sales prices are available, in the case of
each of (2)(a) and (2)(b), as certified to the Warrant
Agent by the Chief Executive Officer, the President, any
Executive Vice President or the Chief Financial Officer or
Treasurer of the Company. The closing sales price of each
such trading day shall be the closing sales price, regular
way, on such day or, if no sale takes place on such day,
the average of the closing bid and asked prices on such
day.
Subject to the provisions of Section 6 hereof, upon such
surrender of Warrants, the Company shall issue and cause to be delivered
with all reasonable dispatch to or upon the written order of the Holder and
in such name or names as the Warrantholder may designate a certificate or
certificates for the number of Warrant Shares issuable upon the exercise of
such Warrants. Such certificate or certificates shall be deemed to have been
issued and any Person so designated to be named therein shall be deemed to
have become a holder of record of such Warrant Shares as of the Exercise
Date. At the election of the Company with the consent of the holder of
record of the relevant Warrant Shares, Warrant Shares may initially be
issued in global form (the "Global Shares"). Such Global Shares shall
-------------
represent such of the outstanding Warrant Shares as shall be specified
therein and each Global Share shall provide that it represents the aggregate
amount of outstanding Warrant Shares from time to time endorsed thereon and
that the aggregate amount of outstanding Warrant Shares represented thereby
may from time to time be reduced or increased, as appropriate. Any
endorsement of a Global Share to reflect any increase or decrease in the
amount of outstanding Warrant Shares represented thereby shall be made by
the registrar for the Warrant Shares and the Depositary (referred to below)
in accordance with instructions given by the holder thereof. DTC shall (if
possible) act as the Depositary with respect to the Global Shares until a
successor shall be appointed by the Company and the registrar for the
Warrant Shares.
The Warrants shall be exercisable only in whole. In the
event that a certificate evidencing Warrants is exercised in respect of
fewer than all of the Warrants evidenced thereby at any time prior to the
date of expiration of the Warrants, a new certificate evidencing the
remaining Warrant or Warrants will be issued, and the Warrant Agent is
irrevocably authorized to countersign and to deliver the required new
Warrant Certificate or Certificates pursuant to this Agreement, and the
Company, whenever required by the Warrant Agent, will promptly supply the
Warrant Agent with Warrant Certificates duly executed on behalf of the
Company for such purpose. Holders of Warrants will be able to exercise their
Warrants only if a registration statement relating to the Warrant Shares
underlying the Warrants is then in effect, or the exercise of such Warrants
is exempt from the registration requirements of the Securities Act, and such
securities are qualified for sale or exempt from qualification under the
applicable securities laws of the states in which the various holders of
Warrants or
-14-
other persons to whom it is proposed that Warrant Shares be issued on
exercise of the Warrants reside.
All Warrant Certificates surrendered upon exercise of
Warrants shall be canceled by the Warrant Agent. Such canceled Warrant
Certificates shall then be disposed of by the Warrant Agent in a manner
consistent with the Warrant Agent's customary procedure for such disposal
and in a manner reasonably satisfactory to the Company. The Warrant Agent
shall account promptly to the Company with respect to Warrants exercised.
The Warrant Agent shall keep copies of this Agreement and
any notices given or received hereunder available for inspection by the
Holders during normal business hours at its office. The Company shall supply
the Warrant Agent from time to time with such numbers of copies of this
Agreement as the Warrant Agent may request.
SECTION 8. Payment of Taxes. The Company will pay all
----------------
documentary stamp taxes attributable to the initial issuance of Warrant
Shares upon the exercise of Warrants; provided, however, that the Company
-------- -------
shall not be required to pay any tax or taxes which may be payable in
respect of any transfer involved in the issue of any Warrant Certificates or
any certificates for Warrant 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.
SECTION 9. 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 SEC
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 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.
SECTION 10. Mutilated or Missing Warrant Certificates. In
-----------------------------------------
case any of the Warrant Certificates shall be mutilated, lost, stolen or
destroyed, the Company may at its discretion issue and the Warrant Agent may
countersign, in exchange and substitution for and upon cancellation of the
mutilated Warrant Certificate, or in lieu of and substitution for the
Warrant Certificate lost, stolen or destroyed, a new Warrant Certificate of
like tenor and representing an equivalent number of Warrants, but only upon
receipt of evidence satisfactory to the Company and the Warrant Agent of
such loss, theft or destruction of such Warrant Certificate and indemnity
also satisfactory to them.
SECTION 11. Reservation of Warrant Shares. The Company
-----------------------------
will at all times authorize and reserve and keep available, free from
preemptive rights and free from all taxes, liens, charges and security
interests, out of the aggregate of its authorized but unissued Common Stock
or its authorized and issued Common Stock held in its treasury, for the
purpose of enabling it to satisfy its obligation to issue Warrant Shares
upon exercise of Warrants, the maximum number of shares of Common Stock
which may then be deliverable upon the exercise of all outstanding Warrants.
-15-
The Company or, if appointed, the transfer agent for the
Common Stock (the "Transfer Agent") and every subsequent transfer agent for
--------------
any shares of the Company's Capital Stock issuable upon the exercise of any
of the rights of purchase aforesaid will be irrevocably authorized and
directed at all times to reserve such number of authorized shares as shall
be required for such purpose. The Company will keep a copy of this Agreement
on file with the Transfer Agent and with every subsequent transfer agent for
any shares of the Company's Capital Stock issuable upon the exercise of the
rights of purchase represented by the Warrants. The Warrant Agent is hereby
irrevocably authorized to (1) instruct such Transfer Agent to make the
appropriate book entries and (2) requisition from time to time from such
Transfer Agent the stock certificates, if any, required to honor outstanding
Warrants upon exercise thereof, in each case in accordance with the terms of
this Agreement. The Company will supply such Transfer Agent with duly
executed certificates for such purposes, if necessary, and will provide or
otherwise make available any cash which may be payable as provided in
Section 14. The Company will furnish such Transfer Agent a copy of all
notices of adjustments and certificates related thereto transmitted to each
holder pursuant to Section 15 hereof.
The Company covenants that all Warrant Shares which may be
issued upon exercise of Warrants made in accordance with the terms of this
Agreement will, upon issuance, be duly and validly authorized and issued,
fully paid, nonassessable, free of preemptive rights and free from all
taxes, liens, charges and security interests with respect to the issuance
thereof. The Company will take no action to increase the par value of the
Common Stock to an amount in excess of the Exercise Price, and the Company
will not enter into any agreements inconsistent with the rights of Holders
hereunder. The Company will use its reasonable best efforts to obtain all
such authorizations, exemptions or consents from any public regulatory body
having jurisdiction thereof as may be necessary to enable the Company to
perform its obligations under this Agreement.
SECTION 12. Obtaining Stock Exchange Listings. The Company
----------------------------------
will from time to time take all action which may be necessary so that the
Warrant Shares, immediately upon their issuance upon the exercise of
Warrants, will be listed on the principal securities exchanges and markets
within the United States of America (including the Nasdaq National Market
System), if any, on which the Company's Common Stock is then listed. In the
event that, at any time during the period in which the Warrants are
exercisable, the Common Stock is not listed on any principal securities
exchanges or markets within the United States of America, the Company will
use its best efforts to permit the Warrant Shares to be designated Portal
securities in accordance with the rules and regulations adopted by the
National Association of Securities Dealers, Inc. relating to trading in The
Portal Market.
SECTION 13. Adjustment of Exercise Rate and Exercise
----------------------------------------
Price. The number of Warrant Shares purchasable upon the exercise of each
- -----
Warrant (the "Exercise Rate") and the Exercise Price are subject to
-------------
adjustment from time to time upon the occurrence of the events enumerated in
this Section 13. The Exercise Rate shall initially be 24.814 to 1.
(a) Adjustment for Change in Capital Stock. If, after
--------------------------------------
the Issue Date, the Company:
(i) pays a dividend or makes a distribution on shares of
any class of its Common Stock payable in shares of its Common Stock
or other Capital Stock of the Company (except
-16-
to the extent any such dividend results in the grant, issuance, sale
or making of Distribution Rights or Distributions to holders of
Warrants pursuant to Section 13(c));
(ii) subdivides or splits any of its outstanding shares
of any class of Common Stock into a greater number of shares;
(iii) combines any of its outstanding shares of Common
Stock into a smaller number of shares; and
(iv) issues by reclassification of any class of its
Common Stock any shares of any of its Capital Stock,
then the Exercise Rate in effect immediately prior to such action for each
Warrant then outstanding shall be adjusted by multiplying the Exercise Rate
in effect immediately prior to such action by a fraction (A) the numerator
of which shall be the number of shares of Common Stock outstanding
immediately after such action and (B) the denominator of which shall be the
number of shares of Common Stock outstanding immediately prior to such
action or the record date applicable to such action, if any (regardless of
whether the Warrants then outstanding are then exercisable); and the
Exercise Price for each Warrant shall be adjusted to a number determined by
dividing the Exercise Price immediately prior to such event by such
fraction. 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 and Exercise Price shall again be adjusted to be
the Exercise Rate and Exercise Price which would then be in effect if such
record date or effective date had not been so fixed.
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 Section 13 with respect to the
Common Stock, on terms comparable to those applicable to Common Stock in
this Section 13.
(b) Adjustment for Certain Sales of Common Stock
--------------------------------------------
Below Current Market Value. If, after the Issue Date, the Company (i) grants
- --------------------------
or sells to any Affiliate of the Company (other than a subsidiary of the
Company) or (ii) grants, sells or offers to grant or sell to all holders of
Common Stock, any shares of Common Stock or any securities convertible into
or exchangeable or exercisable for Common Stock or of rights, options or
warrants entitling them to subscribe for the Company's Common Stock or
securities convertible into, or exchangeable or exercisable for, the
Company's Common Stock (other than (1) pursuant to the exercise of the
Warrants, (2) pursuant to any security convertible into, or exchangeable or
exercisable for, shares of Common Stock outstanding as of the Issue Date,
(3) upon the conversion, exchange or exercise of any convertible,
exchangeable or exercisable security as to which upon the issuance thereof
an adjustment pursuant to this Section 13 has been made or (4) upon the
conversion, exchange or exercise of convertible, exchangeable or exercisable
securities of the Company outstanding on the Issue Date (to the extent in
accordance with the terms of such securities as in effect on such date), at
a price below the then Current Market Value,
-17-
then the Exercise Rate for each Warrant then outstanding shall be adjusted
in accordance with the formula:
E1 = E x (O+N)
--------------
(O+(N x P/M))
and the Exercise Price shall be decreased (but not increased) in accordance
with the following formula:
EP1 = EP x E
-------
E1
where:
E1 = the adjusted Exercise Rate for each Warrant then
outstanding;
E = the then current Exercise Rate for each Warrant
then outstanding;
EP = the then current Exercise Price per share for each
Warrant then outstanding;
EP1 = the adjusted Exercise Price per share for each
Warrant then outstanding;
O = the number of shares of Common Stock outstanding
immediately prior to the sale of such Common Stock
or issuance of securities convertible, exchangeable
or exercisable for Common Stock;
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 proceeds per share of Common Stock received by
the Company, which (i) in the case of shares of Common
Stock is the amount received by the Company in
consideration for the sale and issuance of such
shares; and (ii) in the case of securities convertible
into or exchangeable or exercisable for shares of
Common Stock is the amount received by the Company in
consideration for the sale and issuance of such
convertible or exchangeable or exercisable securities,
plus the minimum aggregate amount of additional
consideration, other than the surrender of such
convertible or exchangeable securities, payable to
the Company upon exercise, conversion or exchange
thereof; and
M = the Current Market Value as of the Time of
Determination or at the time of sale, as the
case may be, of a share of Common Stock.
The adjustment shall become effective immediately after
the record date for the determination of shareholders 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
-18-
that shares of Common Stock are not delivered after the expiration of such
rights, warrants or options, the Exercise Rate and Exercise Price for each
Warrant then outstanding shall be readjusted to the Exercise Rate and
Exercise Price which would otherwise be in effect had the adjustment made
upon the issuance of such rights, warrants or options been made on the basis
of delivery of only the number of shares of Common Stock actually delivered.
In the event that such rights, warrants or options are not so issued, the
Exercise Rate and Exercise Price for each Warrant then outstanding shall
again be adjusted to be the Exercise Rate and Exercise Price which would
then be in effect if such date fixed for determination of shareholders
entitled to receive such rights, warrants or options had not been so fixed.
No adjustment shall be made under this paragraph (b) if
the application of the formula stated above in this paragraph (a) would
result in a value of E1 that is lower than the value of E.
No adjustment shall be made under this paragraph (b) for
any adjustment which is the subject of paragraphs (a) and (e) of this
Section 13.
Notwithstanding the foregoing, no adjustment in the
Exercise Price or Exercise Rate will be required in respect of: (a) the
grant of any stock option or other stock incentive award pursuant to any
stock option or stock incentive plan or arrangement in effect on the Issue
Date or as disclosed in the Final Memorandum, (b) the grant of any stock
option or stock incentive award at an exercise price at least equal to the
then Current Market Value, (c) the grant of any other stock option or stock
incentive award to any officer, director or employee of the Company or any
of its Subsidiaries pursuant to any compensatory plan or arrangement that
has been approved by the Company's board of directors, or (d) the exercise
of any such option or award.
(c) Adjustment upon Certain Distributions.
-------------------------------------
(i) If at any time after the Issue Date the Company
grants, issues or sells options, any Convertible Security, or rights to
purchase Capital Stock or other securities (other than Common Stock) pro
---
rata to the record holders of a series of Common Stock ("Distribution
- ---- ------------
Rights") or, without duplication, makes any distribution (other than a
- ------
distribution pursuant to a plan of liquidation) (a "Distribution") on shares
------------
of Common Stock (whether in cash, property, evidences of indebtedness, or
otherwise), then the Exercise Rate shall be adjusted in accordance with the
formula:
E1 = E x (M/(M-F))
and the Exercise Price shall be decreased (but not increased) in accordance
with the following formula:
EP1 = EP x E
------
E1
-19-
where:
E1 = the adjusted Exercise Rate for each Warrant then outstanding;
E = the current Exercise Rate for each Warrant then outstanding;
EP = the then current Exercise Price per share for each Warrant
then outstanding;
EP1 = the adjusted Exercise Price per share for each Warrant then
outstanding;
M = the Current Market Value per Warrant Share at the Time of
Determination;
F = the fair market value at the Time of Determination of
such portion of the options, Convertible Securities,
Capital Stock or other securities, cash, property or
assets distributable pursuant to such Distribution Rights
or Distribution per share of outstanding Common Stock.
The adjustment shall become effective immediately after
the Time of Determination with respect to the shareholders entitled to
receive the options, Convertible Securities, warrants, cash, property,
evidences of indebtedness or other securities or assets to which this
paragraph (c)(i) applies. No adjustment shall be made under this paragraph
(c) if the application of the formula stated above in this paragraph (c)(i)
would result in a value of E1 that is lower than the value of E. This
paragraph (c)(i) does not apply to any securities or distributions which
result in an adjustment pursuant to paragraphs (a) or (b) of this Section 13.
(ii) Notwithstanding the provisions of paragraph (c)(i)
of this Section 13, cash dividends paid by the Company on its Common Stock in
the ordinary course of business that would otherwise give rise to an
adjustment pursuant to Section 13(c)(i) shall not give rise to such
adjustment to the extent such dividends do not exceed the lower of
(x) $10 million per calendar year and (y) $0.04 per share.
(iii) Notwithstanding the provisions of paragraph (c)(i)
of this Section 13, an event which would otherwise give rise to an adjustment
pursuant to Section 13(c)(i) shall not give rise to such adjustment if the
Company grants, issues or sells Distribution Rights to the Holders of
Warrants or includes the holders of the Warrants in such Distribution, in
each case on a pro rata basis, assuming for the purpose of this Section
--- ----
13(c)(ii) that (x) all outstanding shares of Common Stock are of one class
and (y) the Warrants had been exercised.
(iv) Notwithstanding anything to the contrary set forth
in this Section 13(c), if, at any time, the Company makes any distribution
pursuant to any plan of liquidation (a "Liquidating Distribution") on shares
------------------------
of Common Stock (whether in cash, property, evidences of indebtedness or
otherwise), then, subject to applicable law, the Company shall make to each
Holder of Warrants the aggregate Liquidating Distribution which such Holder
would have acquired if such Holder had held the maximum number of shares of
Common Stock acquirable upon the complete exercise of each Holder's Warrants
(regardless of whether the Warrants are then exercisable) immediately before
the Time of Determination of shareholders entitled to receive Liquidating
Distributions.
-20-
(d) Notice of Adjustment. Whenever the Exercise Rate
--------------------
and Exercise Price are adjusted, the Company shall promptly mail to holders
of Warrants then outstanding at the addresses appearing on the Warrant
Register a notice of the adjustments. The Company shall file with the
Warrant Agent and any other registrar such notice, an Officers' Certificate
and a certificate from the Company's independent public accountants briefly
stating the facts requiring the adjustment and the manner of computing it.
The certificates shall be conclusive evidence that the adjustment is
correct, absent manifest error and the Warrant Agent may rely conclusively
on anything contained in this certificate. 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.
(e) Reorganization of Company; Fundamental Transaction.
---------------------------------------------------
(i) 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 sells, assigns, transfers, leases, conveys or otherwise
disposes of all or substantially all of its properties and assets to another
person or group of affiliated persons or is a party to a merger or binding
share exchange which reclassifies or changes its outstanding Common Stock (a
"Fundamental Transaction"), as a condition to consummating any such
-----------------------
transaction the person formed by or surviving any such consolidation or
merger if other than the Company or the person to whom such transfer has
been made (the "Surviving Person") shall enter into a supplemental warrant
----------------
agreement. The supplemental warrant agreement shall provide (a) that the
holder of a Warrant then outstanding may exercise the Warrant for the kind
and amount of securities, cash or other assets which such holder would have
received immediately after the Fundamental Transaction if such holder had
exercised the Warrant immediately before the effective date of the
transaction (regardless of whether the Warrants are 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, and (b) that the Surviving Person shall succeed to and
be substituted to every right and obligation of the Company in respect of
this Agreement and the Warrants. 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 Section 13. The
Surviving Person shall mail to holders of Warrants at the addresses
appearing on the Warrant Register a notice briefly describing the
supplemental warrant agreement. If the issuer of securities deliverable upon
exercise of Warrants is an affiliate of the Surviving Person, that issuer
shall join in the supplemental warrant agreement.
(ii) Notwithstanding the foregoing, if the Company enters
into a Fundamental Transaction with another Person (other than a subsidiary
of the Company) and consideration is payable to holders of shares of Capital
Stock (or other securities or property) issuable or deliverable upon
exercise of the Warrants that are exercisable in exchange for such shares in
connection with such Fundamental Transaction which consideration consists
solely of cash assuming (to the extent applicable) that each 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, then the holders
of Warrants shall be entitled to receive distributions on the date of such
event on an equal basis with holders of such shares (or other securities
issuable upon
-21-
exercise of the Warrants) as if the Warrants had been exercised immediately
prior to such event, less the aggregate Exercise Price therefor. Upon
receipt of such payment, if any, the rights of a holder of such Warrant
shall terminate and cease and such holder's Warrants shall expire.
(iii) If this paragraph (e) applies, it shall supersede
the application of paragraph (a) of this Section 13.
(f) Other Events. If any event occurs as to which the
------------
provisions of this Section 13 are not strictly applicable or, if strictly
applicable, would not, in the good faith judgment of the board of directors
of the Company, fairly and adequately protect the rights of the
Warrantholders in accordance with the essential intent and principles of
such provisions, then such board of directors shall make such adjustments in
the application of such provisions, in accordance with such essential intent
and principles, as shall be reasonably necessary, in the good faith opinion
of such board of directors, to protect such rights as aforesaid, but in no
event shall any such adjustment have the effect of decreasing the Exercise
Rate or decreasing the number of Warrant Shares issuable upon exercise of
the Warrants.
(g) Company Determination Final. Any determination
---------------------------
that the Company or the board of directors of the Company must make pursuant
to this Section 13 shall be conclusive, absent manifest error.
(h) Warrant Agent's Adjustment Disclaimer. The
-------------------------------------
Warrant Agent shall have no duty to determine when an adjustment under this
Section 13 should be made, how it should be made or what it should be. The
Warrant Agent shall have 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 Section 13.
(i) Specificity of Adjustment. Regardless of any
-------------------------
adjustment 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 Warrant Shares per Warrant
as are stated on the Warrant Certificates initially issuable pursuant to
this Agreement.
(j) Voluntary Adjustment. The Company from time to
--------------------
time may increase the Exercise Rate by any number and for any period of
time; provided, however, 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 shall not change or adjust
the Exercise Rate otherwise in effect as determined by this Section 13.
-22-
(k) Multiple Adjustments. After an adjustment to the
--------------------
Exercise Rate for outstanding Warrants under this Section 13, any subsequent
event requiring an adjustment under this Section 13 shall cause an
adjustment to the Exercise Rate for outstanding Warrants as so adjusted.
(l) When De Minimis Adjustment May Be Deferred. No
------------------------------------------
adjustment in the Exercise Rate or Exercise Price shall be required unless
such adjustment would require an increase or decrease of at least 1% in such
rate or price; provided, however, that any adjustments which by reason of
-------- -------
the foregoing are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations shall be made by
the Company and shall be rounded to the sixth decimal place. No adjustment
need be made for a change in the par value of the Common Stock and no
adjustment shall be deferred beyond the date on which a Warrant is
exercised.
(m) Amendments of the Certificate of Incorporation.
----------------------------------------------
The Company shall not amend its Certificate of Incorporation in a manner
that adversely affects the holders of Warrants, without the prior consent of
the holders of a majority of the Warrants outstanding (excluding Warrants
held by the Company or any of its Affiliates), as determined in good faith
by the Company's board of directors.
SECTION 14. Fractional Interests. The Company shall not be
--------------------
required to issue fractional Warrant Shares on the exercise of Warrants. If
more than one Warrant shall be presented for exercise in full at the same
time by the same holder, the number of full Warrant Shares which shall be
issuable upon the exercise thereof shall be computed on the basis of the
aggregate number of Warrant Shares purchasable on exercise of the Warrants
so presented. If any fraction of a Warrant Share would, except for the
provisions of this Section 14, be issuable on the exercise of any Warrants
(or specified portion thereof), the Company shall pay an amount in cash
equal to the Current Market Value per Warrant Share on the day immediately
preceding the date the Warrant is presented for exercise, multiplied by such
fraction.
SECTION 15. Notice of Certain Distributions; Certain
----------------------------------------
Rights. The Company shall give prompt written notice to the Warrant Agent
- ------
and shall cause the Warrant Agent, on behalf of and at the expense of the
Company to give to each Holder written notice of any determination to make a
distribution to the holders of its Common Stock of any cash dividends,
assets, debt securities, preferred stock, or any rights or warrants to
purchase debt securities, preferred stock, assets or other securities (other
than Common Stock, or rights, options, or warrants to purchase Common Stock)
of the Company the effect of which would require any adjustment pursuant to
Section 13 hereof, which notice shall state the nature and amount of such
planned dividend or distribution and the record date therefor, and shall be
received by the Holders at least 20 days prior to such record date therefor.
Except as expressly provided in this Agreement or in any
Warrant Certificate, the holders of unexercised Warrants shall have no right
to vote, to consent, to exercise any preemptive rights or to receive notice
as shareholders of the Company in respect of the meetings of shareholders or
the election of directors of the Company or any other matter, or to exercise
any rights whatsoever as shareholders of the Company.
-23-
SECTION 16. Notices to the Company and Warrant Agent. Any
----------------------------------------
notice or demand authorized by this Agreement to be given or made by the
Warrant Agent or by any Holder to or on the Company shall be sufficiently
given or made when received at the office of the Company expressly
designated by the Company as its office for purposes of this Agreement
(until the Warrant Agent is otherwise notified in accordance with this
Section 16 by the Company), as follows:
Solutia Inc. copies to:
575 Maryville Center Drive Winston & Strawn
P.O. Box 66760 35 West Wacker Drive
St. Louis, MO 63166-6760 Chicago, IL 60601-9903
(if by courier, 63141) Attn: R. Cabell Morris
Attn: General Counsel
Any notice pursuant to this Agreement to be given by the
Company or by any Holder(s) to the Warrant Agent shall be sufficiently given
when received by the Warrant Agent at the address appearing below (until the
Company is otherwise notified in accordance with this Section by the Warrant
Agent).
Mailing Address: Delivery Address:
HSBC Bank USA HSBC Bank USA
Issuer Services Issuer Services
452 Fifth Avenue 10 East 40th Street,14th Floor
New York, NY 10018 New York, New York 10016
Attn: Harriet Drandoff Attention: Harriet Drandoff
Facsimile: (212) 525-1300 Facsimile (212) 525-1300
Any notice or communication to a holder shall be mailed by
first class mail, postage prepaid, to its address shown on the register kept
by the Warrant Agent.
SECTION 17. Supplements and Amendments. (a) From time to
--------------------------
time, the Company and the Warrant Agent, without the consent of the Holders
of the Warrants, may amend or supplement this Agreement for certain
purposes, including curing ambiguities, defects or inconsistencies or making
any change that does not adversely affect the legal rights of any Holder.
Any amendment or supplement to this Agreement that adversely affects the
legal rights of the Holder of the Warrants will require the written consent
of the Holders of a majority of the then outstanding Warrants (excluding
Warrants held by the Company or any of its Affiliates). The consent of each
Holder of the Warrants affected will be required for any amendment pursuant
to which the Exercise Price would be increased or the number of Warrant
Shares purchasable upon exercise of Warrants would be decreased (other than
pursuant to adjustments provided in this Agreement) or any of the adjustment
provisions in this Agreement would be changed in a manner that would have
any such effect.
(b) After an amendment or modification under this
Section 17 becomes effective, the Company shall mail to the Holders affected
thereby a notice briefly describing such amendment or
-24-
modification. Any failure of the Company to mail such notice, or any defect
therein, shall not, however, in any way impair or affect the validity of any
such amendment or modification.
In connection with any amendment or modification under
this Section 17, the Company may offer, but shall not be obligated to offer,
to any Holder who consents to such amendment or modification, consideration
for such Holder's consent, so long as such consideration is offered to all
Holders.
(c) Executed or true and correct copies of any amendment
or modification effected pursuant to the provisions of this Section 17 shall
be delivered by the Company to each Holder of outstanding Warrants or
Warrant Shares forthwith following the date on which the same shall have
been executed and delivered by the Holder or Holders of the requisite
percentage of outstanding Warrant Shares (but only to the extent the Company
has been provided with the addresses for the Holders).
(d) Notwithstanding anything contained in this Agreement
to the contrary, the Warrant Agent may, but shall not be obligated to, enter
into any supplement or amendment that affects the Warrant Agent's own
rights, duties, obligations or immunities under this Agreement.
SECTION 18. Concerning the Warrant Agent. The Warrant
----------------------------
Agent undertakes the duties and obligations expressly imposed by this
Agreement (and no implied duties) upon the following terms and conditions,
by all of which the Company and the Holders, by their acceptance of
Warrants, shall be bound:
(a) The statements contained herein and in the Warrant
Certificate shall be taken as statements of the Company, and the
Warrant Agent assumes no responsibility for the correctness of any
of the same except such as describe the Warrant Agent or any action
taken by it. The Warrant Agent assumes no responsibility with
respect to the distribution of the Warrants except as herein
otherwise provided.
(b) The Warrant Agent shall be protected and shall not
be responsible for and shall incur no liability to the Company or any
Holder for any failure of the Company to comply with the covenants
contained in this Agreement or in the Warrants to be complied with
by the Company.
(c) The Warrant Agent may execute and exercise any of the
rights or powers hereby vested in it or perform any duty hereunder
either itself (through its employees) or by or through its
attorneys or agents (which shall not include its employees) and
shall not be responsible for the misconduct of any attorney or
agent appointed by it without gross negligence or willful
misconduct.
(d) The Warrant Agent may consult at any time with legal
counsel satisfactory to it (who may be counsel for the Company or
an employee of the Warrant Agent), and the Warrant Agent shall
incur no liability or responsibility to the Company or to any
Holder in respect of any action taken, suffered or omitted by it
hereunder in accordance with the opinion or the advice of such
counsel.
-25-
(e) 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 such evidence in respect thereof be herein
specifically prescribed) may be deemed conclusively to be proved
and established by a certificate signed by the Chairman of the
Board, the President, one of the Vice Presidents, the Treasurer or
the Secretary of the Company and delivered to the Warrant Agent;
and such certificate shall be full authorization to the Warrant
Agent for any action taken or suffered by it under the provisions
of this Agreement in reliance upon such certificate.
(f) The Company agrees to pay the Warrant Agent such
compensation for all services rendered by the Warrant Agent in the
performance of its duties under this Agreement as may be separately
agreed in writing, to reimburse the Warrant Agent for all expenses,
taxes and governmental charges and other charges of any kind and
nature incurred by the Warrant Agent in the performance of its
duties under this Agreement (including, without limitation,
reasonable fees and expenses of counsel), and to indemnify the
Warrant Agent and its agents, employees, directors, officers and
affiliates and save it and them harmless against any and all
liabilities, losses and expenses, including, without limitation,
judgments, costs and counsel fees, for anything done or omitted by
the Warrant Agent in the acceptance and performance of its duties
under this Agreement, except as a result of the Warrant Agent's
gross negligence or bad faith, including, without limitation, the
costs and expenses of defending against any claim (whether asserted
by the Company, a Holder or any other Person) of liability in the
premises including reasonable attorneys' fees and expenses. The
provisions of this paragraph shall survive the resignation or
removal of the Warrant Agent and the termination of this Agreement.
(g) The Warrant Agent shall be under no obligation to
institute any action, suit or legal proceeding or to take any other
action likely to involve expense unless the Company or one or more
holders shall furnish the Warrant Agent with reasonable security
and indemnity for any costs and expenses which may be incurred, but
this provision shall not affect the power of the Warrant Agent to
take such action as the Warrant Agent may consider proper, whether
with or without any such security or indemnity. All rights of
action under this Agreement or under any of the Warrants may be
enforced by the Warrant Agent without the possession of any of the
Warrants or the production thereof at any trial or other proceeding
relative thereto, and any such action, suit or proceeding
instituted by the Warrant Agent shall be brought in its name as
Warrant Agent, and any recovery of judgment shall be for the
ratable benefit of the holders, as their respective rights or
interests may appear.
(h) The Warrant Agent and any stockholder, director,
officer or employee ("Related Parties") of the Warrant Agent may
---------------
buy, sell or deal in any of the Warrants or other securities of the
Company or become pecuniarily interested in any transactions in
which the Company may be interested, or contract with or lend money
to the Company or otherwise act as fully and freely as though it
were not Warrant Agent under this Agreement or such director,
officer or employee. Nothing herein shall preclude the Warrant
Agent or any Related Party from acting in any other capacity for
the Company or for any other legal entity including,
-26-
without limitation, acting as Transfer Agent or as a lender to the
Company or an affiliate thereof.
(i) The Warrant Agent shall act hereunder solely as
agent, and its duties shall be determined solely by the provisions
thereof. The Warrant Agent shall not be liable for anything which
it may do or refrain from doing in connection with this Agreement
except for its own gross negligence or bad faith. No implied duties
or obligations shall be read into this Agreement against the
Warrant Agent.
(j) The Warrant Agent will be protected and will not
incur any liability or responsibility to the Company or to any holder
for any action taken, suffered or omitted by it in reliance on any
notice, resolution, waiver, consent, order, certificate, or other
paper, document or instrument reasonably believed by it to be
genuine and to have been signed, sent or presented by the proper
party or parties.
(k) The Warrant Agent is hereby authorized and directed
to accept instructions with respect to the performance of its duties
hereunder from the Chairman of the Board, the President, Chief
Financial Officer, Treasurer, any Vice President or the Secretary
of the Company, and to apply to such officers for advice or
instructions in connection with its duties, and shall not be liable
for any action taken or suffered to be taken by it without gross
negligence or bad faith in accordance with instructions of any such
officer or officers.
(l) By countersigning Warrant Certificates or by any
other act hereunder the Warrant Agent shall not be deemed to make any
representations as to validity or authorization of the Warrants or
the Warrant Certificates (except as to its countersignature
thereon) or of any securities or other property delivered upon
exercise or tender of any Warrant, or as to the accuracy of the
computation of the Exercise Price or the number or kind or amount
of stock or other securities or other property deliverable upon
exercise of any Warrant or the correctness of the representations
of the Company made in any certifications that the Warrant Agent
receives. The Warrant Agent shall not have any duty to calculate or
determine any adjustments with respect either to the Exercise Price
or the kind and amount of shares or other securities or any
property receivable by holders of Warrants upon the exercise or
tender of Warrants required from time to time, and the Warrant
Agent shall have no duty or responsibility in determining the
accuracy or correctness of any such calculation.
(m) No provision of this Agreement shall require the
Warrant Agent to expend or risk its own funds or otherwise incur
any financial liability in the performance of any of its duties
hereunder or in the exercise of its rights if there shall be
reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not
reasonably assured to it.
SECTION 19. Change of Warrant Agent. The Warrant Agent may
-----------------------
resign and be discharged from its duties under this Agreement by giving to
the Company 30 days' notice in writing. The Warrant Agent may be removed by
like notice to the Warrant Agent from the Company. If the Warrant Agent
shall resign or be removed or shall otherwise become incapable of acting,
the
-27-
Company shall appoint a successor to the Warrant Agent. If the Company
shall fail to make such appointment within a period of 30 days after such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Warrant Agent or by any holder
(who shall with such notice submit his Warrant for inspection by the
Company), then any holder or the resigning or removed Warrant Agent may
apply to any 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 court, the duties of the
Warrant Agent shall be carried out by the Company. Any successor warrant
agent, whether appointed by the Company or such 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 or the District of Columbia and
having at the time of its appointment as warrant agent a combined capital
and surplus of at least $50,000,000. After appointment, the successor
warrant agent shall be vested with the same powers, rights, duties and
responsibilities as if it had been originally named as Warrant Agent without
further act or deed; but the former Warrant Agent shall deliver and transfer
to the successor warrant agent any property at the time held by it
hereunder, and execute and deliver any further assurance, conveyance, act or
deed necessary for such purpose. Failure to file any notice provided for in
this Section 19, however, or any defect therein, shall not affect the
legality or validity of the resignation or removal of the Warrant Agent or
the appointment of the successor warrant agent, as the case may be. In the
event of such resignation or removal, the Company or the successor warrant
agent shall mail by first class mail, postage prepaid, to each Holder,
written notice of such removal or resignation and the name and address of
such successor warrant agent.
SECTION 20. Identity of Transfer Agent. Forthwith, the
--------------------------
Transfer Agent for the Common Stock, or any other shares of the Company's
Capital Stock issuable upon the exercise of the Warrants shall be Equiserve
Trust Company, N.A.
SECTION 21. SEC Reports and Other Information. Whether or
---------------------------------
not the Company and the Subsidiary Guarantors (as defined in the Indenture)
are then subject to Section 13(a) or 15(d) of the Exchange Act, from and
after the Assumption Date, the Company and the Subsidiary Guarantors will
electronically file with the SEC, so long as the Warrants are outstanding,
the annual reports, quarterly reports and other periodic reports that the
Company and the Subsidiary Guarantors would be required to file with the SEC
pursuant to Section 13(a) or 15(d) if the Company and the Subsidiary
Guarantors were so subject, and such documents will be filed with the SEC on
or prior to the respective dates (the "Required Filing Dates") by which the
---------------------
Company and the Subsidiary Guarantors would be required to file such
documents if the Company and the Subsidiary Guarantors were so subject,
unless, in any case, such files are not then permitted by the SEC.
If such filings with the SEC are not then permitted by the
SEC, or such filings are not generally available on the Internet free of
charge, from and after the Assumption Date, the Company and the Subsidiary
Guarantors will, without charge to the Holders, within 15 days of each
Required Filing Date, transmit by mail to Holders, as their names and
addresses appear in the note register, and file with the Warrant Agent
copies of the annual reports, quarterly reports and other periodic reports
that the Company and the Subsidiary Guarantors would be required to file
with the SEC pursuant to Section 13(a) or 15(d) of the Exchange Act if the
Company and the Subsidiary Guarantors were subject to such Section 13(a) or
15(d) and, promptly upon written request, supply copies of such documents to
any prospective Holder or beneficial owner at the Company's cost.
-28-
In addition, from and after the Solutia Assumption, the
Company and the Subsidiary Guarantors will, for so long as any Warrants
remain outstanding, furnish to the Holders of the Warrants and to securities
analysts and prospective investors, upon their request, the information, if
any, required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
SECTION 22. Successors. All the covenants and provisions
----------
of this Agreement by or for the benefit of the Company, the Warrant Agent or
any holder of Warrants shall bind and inure to the benefit of their
respective successors and assigns hereunder.
SECTION 23. Termination. This Agreement shall terminate on
-----------
the Expiration Date. Notwithstanding the foregoing, this Agreement will
terminate on any earlier date if all Warrants have been exercised or
redeemed pursuant to this Agreement or the Company's Certificate of
Incorporation.
SECTION 24. Governing Law. This Agreement and each Warrant
-------------
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of New York and shall be governed by and construed in
accordance with the laws of said State, without regard to the conflict of
law rules thereof.
SECTION 25. Benefits of This Agreement. Nothing in this
--------------------------
Agreement shall be construed to give to any person or corporation other than
the Company, the Warrant Agent and the registered holders of the Warrant
Certificates from time to time any legal or equitable right, remedy or claim
under this Agreement; but this Agreement shall be for the sole and exclusive
benefit of the Company, the Warrant Agent and the registered holders of the
Warrant Certificates.
SECTION 26. Counterparts. This Agreement may be executed
------------
in any number of counterparts and each of such counterparts shall for all
purposes be deemed to be an original, and all such counterparts shall
together constitute but one and the same instrument.
[Signature Page Follows]
S-1
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed, as of the day and year first above written.
SOLUTIA INC.
By:
------------------------------------
Name:
Title:
HSBC BANK USA,
as Warrant Agent
By:
------------------------------------
Name:
Title:
Exhibit A
THIS SECURITY (OR ITS PREDECESSOR) HAS NOT BEEN REGISTERED UNDER
THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND,
ACCORDINGLY, MAY NOT BE OFFERED, SOLD, PLEDGED OR OTHERWISE TRANSFERRED
WITHIN THE UNITED STATES OR TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S.
PERSONS, EXCEPT AS SET FORTH IN THE NEXT SENTENCE. BY ITS ACQUISITION HEREOF
OR OF A BENEFICIAL INTEREST HEREIN, THE HOLDER:
(1) REPRESENTS THAT (A) IT IS A "QUALIFIED INSTITUTIONAL
BUYER" (AS DEFINED IN RULE 144A UNDER THE SECURITIES ACT) (A
"QIB"), (B) IT HAS ACQUIRED THIS SECURITY IN AN OFFSHORE
TRANSACTION IN COMPLIANCE WITH REGULATION S UNDER THE SECURITIES
ACT OR (C) IT IS AN INSTITUTIONAL "ACCREDITED INVESTOR" (AS DEFINED
IN RULE 501(A)(1), (2), (3) OR (7) OF REGULATION D UNDER THE
SECURITIES ACT (AN "IAI")),
(2) AGREES THAT IT WILL NOT RESELL OR OTHERWISE TRANSFER
THIS SECURITY EXCEPT (A) TO THE COMPANY OR ANY OF ITS SUBSIDIARIES,
(B) TO A PERSON WHOM THE SELLER REASONABLY BELIEVES IS A QIB
PURCHASING FOR ITS OWN ACCOUNT OR FOR THE ACCOUNT OF A QIB IN A
TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A, (C) IN AN
OFFSHORE TRANSACTION MEETING THE REQUIREMENTS OF RULE 903 OR 904 OF
REGULATION S UNDER THE SECURITIES ACT, (D) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (E) TO AN
IAI THAT, PRIOR TO SUCH TRANSFER, FURNISHES THE WARRANT AGENT A
SIGNED LETTER CONTAINING CERTAIN REPRESENTATIONS AND AGREEMENTS
RELATING TO THE TRANSFER OF THE SECURITIES (THE FORM OF WHICH CAN
BE OBTAINED FROM THE WARRANT AGENT) AND AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY THAT SUCH TRANSFER IS IN COMPLIANCE WITH
THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL ACCEPTABLE
TO THE COMPANY), (F) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN
OPINION OF COUNSEL ACCEPTABLE TO THE COMPANY) OR (G) 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
(3) AGREES THAT IT WILL DELIVER TO EACH PERSON TO WHOM
THIS SECURITY OR AN INTEREST HEREIN IS TRANSFERRED A NOTICE
SUBSTANTIALLY TO THE EFFECT OF THIS LEGEND.
AS USED HEREIN, THE TERMS "OFFSHORE TRANSACTION" AND "UNITED
STATES" HAVE THE MEANINGS GIVEN TO THEM BY RULE 902 OF REGULATION S UNDER
THE SECURITIES ACT.
A-1
No. [ ] CUSIP # [ ]
FORM OF
COMMON STOCK PURCHASE WARRANT
OF
SOLUTIA INC.
THIS CERTIFIES THAT [ ], or its registered assigns,
is the registered holder of Warrants (the "Warrants"). Each
-------------- --------
Warrant entitles the holder thereof (the "Holder"), at its option at any
------
time on or after the Separation Date and subject to the provisions contained
herein and in the Warrant Agreement referred to below, to purchase from
Solutia Inc., a Delaware corporation (the "Company"), 24.814 shares of
-------
Common Stock, par value $0.01 per share, of the Company at an exercise price
per share equal to $7.59 (the "Exercise Price").
--------------
This Warrant Certificate shall terminate and become void
as of the close of business on the earlier of (1) the Deadline if the
Solutia Assumption does not occur on or before such date or (2) July 15,
2009 (the "Expiration Date") or, if earlier, upon the exercise hereof as to
---------------
all the shares of Common Stock subject hereto. The number of shares issuable
upon exercise of the Warrants shall be subject to adjustment from time to
time as set forth in the Warrant Agreement (as defined).
This Warrant Certificate is issued under and in accordance
with a Warrant Agreement dated as of July 9, 2002 (the "Warrant Agreement"),
-----------------
between the Company and HSBC Bank USA as Warrant Agent, and is subject to
the terms and provisions contained in the Warrant Agreement, to all of which
terms and provisions the Holder of this Warrant Certificate consents by
acceptance hereof. The Warrant Agreement is hereby incorporated herein by
reference and made a part hereof. Reference is hereby made to the Warrant
Agreement for a full statement of the respective rights, limitations of
rights, duties and obligations of the Company and the Warrantholders.
Capitalized terms used but not defined herein shall have the meanings
ascribed thereto in the Warrant Agreement. A copy of the Warrant Agreement
may be obtained for inspection by the Holder hereof upon written request to
the Company at Solutia Inc., 575 Maryville Center Drive, P.O. Box 66760,
St. Louis, MO 63166-6760, Attn: General Counsel.
Subject to the terms of the Warrant Agreement, the
Warrants may be exercised upon surrender at the office or agency of the
Company maintained for such purpose, which initially will be the issuer
services office of the Warrant Agent in New York, New York, of the
certificate or certificates evidencing the Warrants to be exercised with the
form of election to purchase on the reverse thereof duly filled in and
signed, and upon payment to the Warrant Agent for the account of the Company
of the Exercise Price for the number of Warrant Shares in respect of which
such Warrants are then exercised. The Exercise Price may be paid at the
holder's election (i) in cash in United States dollars by wire transfer or
by certified or official bank check to the order of the Company or (ii) by
the surrender of one or more Warrant Certificates (and without the payment
of the Exercise Price in cash) in exchange for a number of shares of the
Company's Common Stock equal to the product of (a) the number of shares of
the Company's Common Stock for which such Warrant is exercisable as of
A-2
the Exercise Date (if the Exercise Price were being paid in cash), and (b) the
Cashless Exercise Ratio. The "Cashless Exercise Ratio" shall equal a
fraction, the numerator of which is the excess of the Current Market Value
per share of the Company's Common Stock on the Exercise Date over the
Exercise Price per share as of the Exercise Date and the denominator of
which is the Current Market Value per share of the Company's Common Stock on
the Exercise Date. Upon surrender of a Warrant Certificate representing more
than one Warrant, the number of shares of the Company's Common Stock
deliverable upon a Cashless Exercise shall be equal to the product of the
number of shares of the Company's Common Stock issuable in respect of those
Warrants that the holder specifies are to be exercised pursuant to a
Cashless Exercise multiplied by the Cashless Exercise Ratio. All provisions
of the Warrant 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.
The Warrants shall be exercisable only in whole. In the
event that a certificate evidencing Warrants is exercised in respect of
fewer than all of the Warrants evidenced thereby at any time prior to the
date of expiration of the Warrants, a new certificate evidencing the
remaining Warrant or Warrants will be issued, and the Warrant Agent is
irrevocably authorized to countersign and to deliver the required new
Warrant Certificate or Certificates pursuant to the Warrant Agreement, and
the Company, whenever required by the Warrant Agent, will promptly supply
the Warrant Agent with Warrant Certificates duly executed on behalf of the
Company for such purpose.
This Warrant Certificate shall not be valid unless
countersigned by the Warrant Agent as such term is used in the Warrant
Agreement.
As provided in the Warrant Agreement, the Exercise Rate
and the Exercise Price are subject to adjustment upon the happening of
certain events.
The Company will pay all documentary stamp taxes
attributable to the initial issuance of Warrant Shares upon the exercise of
Warrants; provided, however, that the Company shall not be required to pay
-------- -------
any tax or taxes which may be payable in respect of any transfer involved in
the issue of any Warrant Certificates or any certificates for Warrant 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.
The Company shall not be required to issue fractional
Warrant Shares on the exercise of Warrants. If more than one Warrant shall
be presented for exercise in full at the same time by the same holder, the
number of full Warrant Shares which shall be issuable upon the exercise
thereof shall be computed on the basis of the aggregate number of Warrant
Shares purchasable on exercise of the Warrants so presented. If any fraction
of a Warrant Share would be issuable on the exercise of any Warrants (or
specified portion thereof), the Company shall pay an amount in cash equal to
the Current Market Value per Warrant Share on the day immediately preceding
the date the Warrant is presented for exercise, multiplied by such fraction.
All Warrant Shares issuable by the Company upon the
exercise of the Warrants shall, upon such issue, be duly and validly issued
and fully paid and non-assessable.
A-3
The Company and the Warrant Agent may deem and treat
Holders of the Warrant Certificates as the absolute owners thereof
(notwithstanding any notation of ownership or other writing thereon made by
anyone) for all purposes, and neither the Company nor the Warrant Agent
shall be affected by any notice to the contrary.
A-4
The Warrants do not entitle any Holder hereof to any of the
rights of a stockholder of the Company.
SOLUTIA INC.
By:
------------------------------------
Name:
Title:
By:
------------------------------------
Name:
Title:
DATED:
COUNTERSIGNED:
HSBC BANK USA,
as Warrant Agent
By:
------------------------------------
Authorized Signature
A-5
FORM OF ELECTION TO PURCHASE WARRANT SHARES
(to be executed only upon exercise of Warrants)
SOLUTIA INC.
The undersigned hereby irrevocably elects to exercise
Warrants on the terms and conditions specified in the
- ------------------
Warrant Certificate and the Warrant Agreement, surrenders this Warrant
Certificate and all right, title and interest therein to Solutia Inc. and
directs that the Warrant Shares deliverable upon the exercise of such
Warrants be registered or placed in the name and at the address specified
below and delivered thereto.
Date: ,
------------ ----
Your Signature.
--------------------------------------------------------------
(Sign exactly as your name appears on the face of this Warrant
Certificate)
- -----------------------------------------------------------------------------
(Street Address)
- -----------------------------------------------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed by:
- ----------------------------------------------------------
Signatures must be guaranteed by an "eligible guarantor
institution" meeting the requirements of the Registrar,
which requirements include membership or participation
in the Security Transfer Agent Medallion Program ("STAMP")
or such other "signature guarantee program" as may be
determined by the Registrar in addition to, or in
substitution for, STAMP, all in accordance with the
Securities Exchange Act of 1934, as amended.
Securities and/or check to be issued to:
Please insert social security or identifying number:
Name:
Street Address:
City, State and Zip Code:
-2-
ASSIGNMENT FORM
To assign this Warrant, fill in the form below:
I or we assign and transfer this Warrant to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this Warrant
on the books of the Company. The agent may substitute another to act for him.
- ------------------------------------------------------------------------------
Date:
------------------------
Your Signature:
--------------------------------------------------------------
(Sign exactly as your name appears on the face of this Warrant
Certificate)
Signature Guaranteed by:
- ------------------------------------------------
Signatures must be guaranteed by an "eligible
guarantor institution" meeting the requirements
of the Registrar, which requirements include
membership or participation in the Security
Transfer Agent Medallion Program ("STAMP") or
such other "signature guarantee program" as may
be determined by the Registrar in addition to,
or in substitution for, STAMP, all in accordance
with the Securities Exchange Act of 1934, as
amended.
Exhibit B(1)
[GLOBAL WARRANT LEGEND]
Any Global Warrant countersigned and delivered hereunder
shall bear a legend in substantially the following form:
THIS SECURITY IS A GLOBAL WARRANT WITHIN THE MEANING OF THE WARRANT
AGREEMENT HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF
A DEPOSITORY OR A SUCCESSOR DEPOSITORY. THIS SECURITY IS NOT
EXCHANGEABLE FOR SECURITIES REGISTERED IN THE NAME OF A PERSON
OTHER THAN THE DEPOSITORY OR ITS NOMINEE EXCEPT IN THE LIMITED
CIRCUMSTANCES DESCRIBED IN THE WARRANT AGREEMENT, AND NO TRANSFER
OF THIS SECURITY (OTHER THAN A TRANSFER OF THIS SECURITY AS A WHOLE
BY THE DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF
THE DEPOSITORY TO THE DEPOSITORY OR ANOTHER NOMINEE OF THE
DEPOSITORY) MAY BE REGISTERED EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE WARRANT AGREEMENT. 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 IN
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO 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.
B-1
Exhibit B(2)
[UNIT LEGEND]
Any Warrant issued on or after the Issue Date and prior to
the Separation Date shall bear the legend set forth in the following
paragraph:
THE WARRANTS EVIDENCED BY THIS CERTIFICATE ARE INITIALLY
ISSUED AS PART OF AN ISSUANCE OF UNITS, EACH OF WHICH CONSISTS OF $1,000
PRINCIPAL AMOUNT OF THE 11.25% SENIOR SECURED NOTES DUE 2009 OF SOI FUNDING
CORP., (THE "NOTES") AND ONE WARRANT (EACH, A "WARRANT" AND COLLECTIVELY,
THE "WARRANTS"), EACH WARRANT INITIALLY ENTITLING THE HOLDER THEREOF TO
PURCHASE 24.814 SHARES OF COMMON STOCK, $0.01 PAR VALUE, OF SOLUTIA INC.
(THE "COMMON STOCK"). PRIOR TO THE SEPARATION DATE, THE WARRANTS EVIDENCED
BY THIS CERTIFICATE MAY NOT BE TRANSFERRED OR EXCHANGED SEPARATELY FROM, AND
MAY BE TRANSFERRED OR EXCHANGED ONLY TOGETHER WITH, THE NOTES.
B-2
Exhibit C
CERTIFICATE TO BE DELIVERED UPON EXCHANGE
OR REGISTRATION OF TRANSFER OF WARRANTS
Re: Warrants to Purchase Common Stock (the "Warrants") of Solutia Inc.
--------
This Certificate relates to Warrants held by
----------
(the "Transferor").
- ---------------- ----------
The Transferor 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 hereby certifies that the Transferor is
familiar with the Warrant Agreement dated as of July 9, 2002, between
Solutia Inc., a Delaware corporation, and HSBC Bank USA, as warrant agent
(the "Warrant Agreement"), relating to the above captioned Warrants and the
-----------------
restrictions on transfers thereof as provided in Section 6 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 6(a)(y)(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 or is being transferred in accordance with Regulation S under the
Act.
/ / Such Warrant is being transferred in accordance
with Rule 144 under the Act.
/ / 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 or Regulation S under the Act. An
opinion of counsel to the effect that such transfer does not require
registration under the Act accompanies this Certificate.
C-1
---------------------------------
[INSERT NAME OF TRANSFEROR]
By:
-----------------------------
Date:
-----------------------------
<FN>
*Check applicable box.
C-2
Exhibit D
[Form of Transferee Letter of Representation
in Connection with Transfers to Institutional Accredited Investors]
HSBC Bank USA.
452 Fifth Avenue
New York, NY 10018
Attn: Harriet Drandoff
Ladies and Gentlemen:
In connection with our proposed purchase of warrants to
purchase Common Stock, par value $0.01 per share (the "Securities"), of
----------
Solutia Inc. (the "Company"), we confirm that:
-------
1. We 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 offered,
--------------
sold or otherwise transferred except as permitted in the following
sentence. We agree on our own behalf and on behalf of any investor
account for which we are purchasing Securities to offer, sell or
otherwise transfer such Securities prior to the date which is two
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 Securities) (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) for so long as the
Securities are eligible for resale pursuant to Rule 144A under the
Securities Act, to a person we reasonably believe is a qualified
institutional buyer as defined in 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 institutional "accredited investor"
within the meaning of subparagraph (a)(1), (a)(2), (a)(3) or (a)(7)
of Rule 501 under the Securities Act that is acquiring the
Securities for its own account or for the account of such an
institutional "accredited investor", 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, or (f) pursuant to
another 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
D-1
institutional "accredited investor" within the meaning of subparagraph
(a)(1), (a)(2), (a)(3) or (a)(7) of Rule 501 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 clause (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.
2. We are an institutional "accredited investor" (as
defined in Rule 501(a)(1), (a)(2), (a)(3) or (a)(7) of Regulation D
under the Securities Act) purchasing for our own account or for the
account of such an institutional "accredited investor", and we are
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 have such knowledge and
experience in financial and business matters as to be capable of
evaluating the merits and risks of our investment in the
Securities, and we and any accounts for which we are acting are
each able to bear the economic risk of our or its investment for an
indefinite period.
3. We are acquiring the Securities purchased by us for our
own account or for one or more accounts as to each of which we
exercise sole investment discretion.
D-2
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:
-------------------
D-3
Exhibit E
[Form of Transferee Letter of Representation
in Connection with Transfers Pursuant to Regulation S]
HSBC Bank USA.
452 Fifth Avenue
New York, NY 10018
Attn: Harriet Drandoff
Ladies and Gentlemen:
In connection with our proposed purchase of warrants (the
"Securities") to purchase Common Stock, par value $0.01 per share, of
----------
Solutia Inc. (the "Company"), we confirm that such sale has been effected
-------
pursuant to and in accordance with Regulation S under the Securities Act of
1933, as amended (the "Securities Act"), and, accordingly, we represent
--------------
that:
(1) The undersigned certifies that it is not a U.S.
person and is not acquiring the Securities for the
account or benefit of any U.S. person.
(2) The undersigned agrees to resell the Securities
only in accordance with the provisions of
Regulation S, pursuant to registration under the
Securities Act of 1933 or pursuant to an
available exemption from registration.
(3) The undersigned agrees not to engage in hedging
transactions with regard to the Securities unless
in compliance with the Securities Act.
You and your counsel are entitled to rely upon this letter
and are irrevocably authorized to produce this letter or a copy hereof to
any interested party in any administrative or legal proceedings or official
inquiry with respect to the matters covered hereby. Defined terms used
herein without definition have the respective meanings provided in
Regulation S under the Securities Act.
Very truly yours,
(Name of Purchaser)
By:
------------------------------------
E-1
Upon transfer the Securities would be registered in the name
of the new beneficial owner as follows:
Name:
---------------------------------
Address:
------------------------------
Taxpayer ID Number:
-------------------
E-2