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Exhibit 10.5
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CHOICE ONE COMMUNICATIONS INC.
WARRANT FOR THE PURCHASE OF SHARES OF
COMMON STOCK OF CHOICE ONE COMMUNICATIONS INC.
No. 2 Warrant to Purchase 133,670 Shares
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD EXCEPT
IN COMPLIANCE THEREWITH,
FOR VALUE RECEIVED, CHOICE ONE COMMUNICATIONS INC., a Delaware corporation
(the "Company"), hereby certifies that MSDW IV 892 Investors, L.P., its
successors or permitted assigns (the "Holder"), is entitled, subject to the
provisions of this Warrant, to purchase from the Company, at the times specified
herein, a number of the fully paid and non-assessable shares of common stock of
the Company, par value $0.01 per share (the "Common Stock"), equal to the
Warrant Share Amount (as hereinafter defined) at a purchase price per share
equal to the Exercise Price (as hereinafter defined). The Warrant Share Amount
to be received upon the exercise of this Warrant is subject to adjustment from
time to time as hereinafter set forth.
This Warrant has been issued pursuant to the Securities Purchase Agreement
(as defined below). The Holder is entitled to certain benefits as set forth
therein. The Company shall keep a copy of the Securities Purchase Agreement and
any amendments thereto at its principal executive office and shall furnish,
without charge, copies thereof to the Holder upon request.
I. DEFINITIONS. (a) The following terms, as used herein, have the following
meanings:
"Affiliate" shall have the meaning given to such term in Rule 12b-2
promulgated under the Securities Exchange Act of 1934, as amended.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized by law to close.
"Certificate of Incorporation" means the Certificate of Incorporation of
the Company.
"Closing Date" means the date of the closing under the Securities Purchase
Agreement.
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"Closing Price" on any day means (i) if shares of Common Stock then are
listed and traded on the New York Stock Exchange, Inc. ("NYSE"), the Closing
Price on such day as reported on the NYSE Composite Transactions Tape; (ii) if
shares of Common Stock then are not listed and traded on the NYSE, the Closing
Price on such day as reported by the principal national securities exchange on
which shares of Common Stock are listed and traded; (iii) if shares of Common
Stock then are not listed and traded on any such securities exchange, the last
reported sale price on such day on the National Market of the NASD Automated
Quotation System ("NASDAQ"); or (iv) if shares of Common Stock then are not
traded on the NASDAQ National Market, the average of the highest reported bid
and the lowest reported asked price on such day as reported by NASDAQ.
"Common Share Equivalent" means, with respect to any security of the
Company and as of a given date, a number which is, (i) in the case of a share of
Common Stock, one, (ii) in the case of all or a portion of any right, warrant or
other security which may be exercised for a share or shares of Common Stock, the
number of shares of Common Stock receivable upon exercise of such security (or
such portion of such security) and (iii) in the case of any security convertible
or exchangeable into a share or shares of Common Stock, the number of shares of
Common Stock that would be received if such security were converted or exchanged
on such date.
"Common Stock" shall have the meaning set forth in the first paragraph
hereof.
"Duly Endorsed" means duly endorsed in blank by the Person or Persons in
whose name a stock certificate is registered or accompanied by a duly executed
stock assignment separate from the certificate with the signature(s) thereon
guaranteed by a commercial bank or trust company or a member of a national
securities exchange or of the National Association of Securities Dealers, Inc.
"Exercise Price" means $0.01 per share of Common Stock.
"Expiration Date" means the twelfth anniversary of the Closing Date.
"Fair Market Value" as at any date of determination means the fair market
value of the business, securities (and with respect to a share of Common Stock
if shares of Common Stock are not publicly traded, shall mean a proportionate
amount of the Fair Market Value of the Company), property or services in
question as of such date, as determined in good faith by a nationally recognized
firm of investment bankers (whose fees and expenses shall be payable by the
Company) reasonably acceptable to the Company and to the Principal Holder;
provided that if, at any date of determination of the Fair Market Value of the
Common Stock, shares of Common Stock are then publicly traded, the Fair Market
Value of a share of Common Stock outstanding on such date shall be the Market
Price.
"Market Price" as at any date of determination means the average of the
daily Closing Prices of a share of Common Stock for the twenty (20).consecutive
trading days ending on the most recent trading day prior to the date of
determination.
"Person" means an individual, partnership, limited liability company,
corporation, trust, joint stock company, association, joint venture, or any
other entity or organization, including a government or political subdivision or
an agency or instrumentality thereof.
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"Principal Holder" means the original Holder of this Warrant on the date of
issue, or if such original Holder so elects, any transferee of all or any
portion of this Warrant whom such original Holder shall have designated by
written notice to the Company as the successor Principal Holder. Any successor
Principal Holder designated pursuant to the immediately preceding sentence shall
also have the right upon any subsequent transfer to designate a successor
Principal Holder in the manner described above.
"Securities Purchase Agreement" means the Securities Purchase Agreement
dated as of August 1, 2000 between the Company and the Holder.
"Warrant Shares" means the shares of Common Stock deliverable upon exercise
of this Warrant, as adjusted from time to time.
"Warrant Share Amount" means One Hundred Thirty Three Thousand Six Hundred
and Seventy (133,670) shares of Common Stock, as such number may be adjusted
pursuant to Section 8 hereof.
(b) Capitalized terms used but not defined herein shall have the
meanings assigned to such terms in the Securities Purchase Agreement.
II. EXERCISE OF WARRANT.
(a) The Holder is entitled to exercise this Warrant in whole or in
part at any time, or from time to time, until the Expiration Date or, if
such day is not a Business Day, then on the next succeeding day that shall
be a Business Day. To exercise this Warrant, the Holder shall execute and
deliver to the Company a Warrant Exercise Notice substantially in the form
annexed hereto. Subject to paragraph 2(e) below, no earlier than ten days
after delivery of the Warrant Exercise Notice, the Holder shall deliver to
the Company this Warrant, including the Warrant Exercise Subscription Form
forming a part hereof duly executed by the Holder, together with payment of
the applicable Exercise Price. Upon such delivery and payment, the Holder
shall be deemed to be the holder of record of the Warrant Shares subject to
such exercise, notwithstanding that the stock transfer books of the Company
shall then be closed or that certificates representing such Warrant Shares
shall not then be actually delivered to the Holder.
(b) The Exercise Price may be paid in cash or by certified or official
bank check or bank cashier's check payable to the order of the Company or
by any combination of such cash or check. The Company shall pay any and
all documentary, stamp or similar issue or transfer taxes payable in
respect of the issue or delivery of the Warrant Shares.
(c) If the Holder exercises this Warrant in part, this Warrant shall
be surrendered by the Holder to the Company and a new Warrant of the same
tenor and for the unexercised number of Warrant Shares shall be executed by
the Company. The Company shall register the new Warrant in the name of the
Holder or in such name or names of its transferee pursuant to paragraph 6
hereof as may be directed in writing by the Holder and deliver the new
Warrant to the Person or Persons entitled to receive the same.
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(d) Upon surrender of this Warrant in conformity with the -foregoing
provisions, the Company shall transfer to the Holder of this Warrant
appropriate evidence of ownership of the shares of Common Stock or other
securities or property (including any money) to which the Holder is
entitled, registered or otherwise placed in, or payable to the order of,
the name or names of the Holder or such transferee as may be directed in
writing by the Holder, and shall deliver such evidence of ownership and any
other securities or property (including any money) to the Person or Persons
entitled to receive the same, together with an amount in cash in lieu of
any fraction of a share as provided in paragraph 5 below.
(e) In lieu of making the cash payment required to exercise the
Warrant pursuant to paragraph 2(a) (but in all other respects in accordance
with the exercise procedure set forth in paragraph 2(a)), the Holder may
elect to convert this Warrant into shares of Common Stock, in which event
the Company will issue to the Holder the number of shares of Common Stock
equal to the result obtained by (a) subtracting B from A, (b) multiplying
the difference by C, and (c) dividing the product by A as set forth in the
following equation:
X = (A - B) x C where:
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A
X = the number of shares of Common Stock issuable upon exercise
pursuant to this paragraph 2(e).
A = the Closing Price on the day immediately preceding the date
on which the Holder delivers written notice to the Company
pursuant to paragraph 2(a).
B = the Exercise Price.
C = the number of shares of Common Stock as to which this
Warrant is being exercised pursuant to paragraph 2(a).
If the foregoing calculation results in a negative number, then no
shares of Common Stock shall be issued upon exercise pursuant to this
paragraph 2(e).
III. RESTRICTIVE LEGEND. Except with respect to the shares of Common Stock
issued in connection with the sale of such stock pursuant to the Registration
Rights Agreement among the Company and certain of its stockholders dated as of
July 8, 1998, as amended from time to time, any certificates representing shares
of Common Stock issued pursuant to this Warrant shall bear a legend
substantially in the form of the legend set forth on the first page of this
Warrant.
IV. RESERVATION OF SHARES. The Company hereby agrees that at all times there
shall be reserved for issuance and delivery upon exercise of this Warrant such
number of its authorized but unissued shares of Common Stock or other securities
of the Company from time to time issuable upon exercise of this Warrant as will
be sufficient to permit the exercise in full of this Warrant. All such shares
shall be duly authorized and, when issued upon such exercise, shall be validly
issued, fully paid and non-assessable, free and clear of all liens, security
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interests, charges and other encumbrances or restrictions on sale and free and
clear of all preemptive rights.
V. FRACTIONAL SHARES. No fractional shares or scrip representing fractional
shares shall be issued upon the exercise of this Warrant and in lieu of delivery
of any such fractional share upon any exercise hereof, the Company shall pay to
the Holder an amount in cash equal to such fraction multiplied by the Fair
Market Value of a share of Common Stock at the date of such exercise.
VI. EXCHANGE, TRANSFER OR ASSIGNMENT OF WARRANT.
(a) Each taker and holder of this Warrant by taking or holding the
same, consents and agrees that the registered holder hereof may be treated
by the Company and all other persons dealing with this Warrant as the
absolute owner hereof for any purpose and as the person entitled to
exercise the rights represented hereby.
(b) The Holder of this Warrant shall be entitled, without obtaining
the consent of the Company, to assign and transfer this Warrant, at any
time in whole or from time to time in part, to any Person or Persons.
Subject to the preceding sentence, upon surrender of this Warrant to the
Company, together with the attached Warrant Assignment Form duly executed,
the Company shall, without charge, execute and deliver a new Warrant in
the name of the assignee or assignees named in such instrument of
assignment and, if the Holder's entire interest is not being assigned, in
the name of the Holder and this Warrant shall promptly be canceled.
VII. LOSS OR DESTRUCTION OF WARRANT. Upon receipt by the Company of evidence
satisfactory to it (in the exercise of its reasonable discretion) of the loss,
theft, destruction or mutilation of this Warrant, and (in the case of loss,
theft or destruction) of reasonably satisfactory indemnification, or upon
surrender and cancellation of this Warrant, if mutilated, the Company shall
execute and deliver a new Warrant of like tenor and date.
VIII. ANTI-DILUTION PROVISIONS. So long as any Warrants are outstanding, the
Warrant Share Amount shall be subject to change or adjustment as follows:
(a) Common Stock Dividends, Subdivisions, Combinations. In case the
Company shall (i) pay or make a dividend or other distribution to all
holders of its Common Stock in shares of Common Stock, (ii) subdivide or
split the outstanding shares of its Common Stock into a larger number of
shares or (iii) combine the outstanding shares of its Common Stock into a
smaller number of shares, then in each such case the Warrant Share Amount
shall be adjusted to equal the number of such shares to which the holder
of this Warrant would have been entitled upon the occurrence of such event
had this Warrant been exercised immediately prior to the happening of such
event or, in the case of a stock dividend or other distribution, prior to
the record date for determination of shareholders entitled thereto. An
adjustment made pursuant to this Section 8(a) shall become effective
immediately after the effective date of such event retroactive to the
record date, if any, for such event in the case of a dividend or
distribution and immediately after the effective date in the case of a
subdivision, split or combination.
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(b) Reorganization or Reclassification. In case of any capit al
reorganization or any reclassification of the capital stock of the Company
(whether pursuant to a merger or consolidation or otherwise), this Warrant
shall thereafter be exercisable for the number of shares of stock or other
securities or property receivable upon such capital reorganization or
reclassification of capital stock, as the case may be, by a holder of the
number of shares of Common Stock into which this Warrant was exercisable
immediately prior to such capital reorganization or reclassification of
capital stock; and, in any case, appropriate adjustment (as determined in
good faith by the Board of Directors of the Company) shall be made for the
application of the provisions herein set forth with respect to the rights
and interests thereafter of the Holder of this Warrant to the end that the
provisions set forth herein shall thereafter be applicable, as nearly as
reasonably practicable, in relation to any shares of stock or other
securities or property thereafter deliverable upon the exercise of this
Warrant.
(c) Distributions of Assets or Securities Other than Common Stock. In
case the Company shall, by dividend or otherwise, distribute to all holders
of its Common Stock shares of any of its capital stock (other than Common
Stock), rights or warrants to purchase any of its securities (other than
those referred to in Section 8(d) below), cash, other assets or evidences
of its indebtedness, then in each such case the Warrant Share Amount shall
be adjusted by multiplying the Warrant Share Amount immediately prior to
the date of such dividend or distribution by a fraction, of which the
numerator shall be the Fair Market Value per share of Common Stock at the
record date for determining shareholders entitled to such dividend or
distribution, and of which the denominator shall be such Fair Market Value
per share less the Fair Market Value of the portion of the securities,
cash, assets or evidences of indebtedness so distributed applicable to one
share of Common Stock.
(d) Below Market Distributions or Issuances of Common Stock. In case
the Company shall issue Common Stock (or options, rights or warrants to
purchase shares of Common Stock (collectively, "Options") or other
securities convertible into or exchangeable or exercisable for shares of
Common Stock (such other securities, collectively, "Convertible
Securities")) at a price per share (or having an effective exercise,
exchange or conversion price per share together with the purchase price
thereof) less than the Fair Market Value per share of Common Stock on the
date such Common Stock (or Options or Convertible Securities), is sold or
issued (provided that no sale of securities pursuant to an underwritten
public offering shall be deemed to be for less than Fair Market Value),
then in each such case the Warrant Share Amount shall thereafter be
adjusted by multiplying the Warrant Share Amount immediately prior to the
date of issuance of such Common Stock (or Options or Convertible
Securities) by a fraction, the numerator of which shall be (i) the sum (A)
of the number of Common Share Equivalents represented by all securities
outstanding immediately prior to such issuance and (B the number of
additional Common Share Equivalents represented by all securities so issued
multiplied by (ii) the Fair Market Value of a share of Common Stock
immediately prior to the date of such issuance, and the denominator of
which shall be (i) the product of (A) the Fair Market Value of a share of
Common Stock immediately prior to the date of such issuance and (B) the
number of Common Share Equivalents represented by all securities
outstanding immediately prior to such issuance plus (ii) the aggregate
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consideration received by the Company for the total number of securities so
issued plus, (iii) in the case of Options or Convertible Securities, the
additional consideration required to be received by the Company upon the
exercise, exchange or conversion of such securities; provided that no
adjustment shall be required in respect of issuances of Common Stock (or
options to purchase Common Stock) pursuant to stock option or other
employee benefit plans in effect on the date hereof, or restricted stock
grants issued to employees of US Xchange pursuant to employment, consulting
or other agreements to the extent reflected in Section 3.02 of the
Securities Purchase Agreement, or approved by the Board of Directors of the
Company after the date hereof. Notwithstanding anything herein to the
contrary, (x) no further adjustment to the Warrant Share Amount shall be
made upon the issuance or sale of Common Stock pursuant to the exercise of
any Options or the conversion or exchange of any Convertible Securities, if
in each case the adjustment in the Warrant Share Amount was made as
required hereby upon the issuance or sale of such Options or Convertible
Securities or no adjustment was required hereby at the time such Option or
Convertible Security was issued and (y) no adjustment to the Warrant Share
Amount shall be made upon the exercise of any Warrants.
(e) Below Market Distributions or Issuances of Preferred Stock or
Other Securities. In case the Company shall issue nonconvertible and
nonexchangeable preferred stock (or other securities of the Company other
than Common Stock or Options or Convertible Securities) at a price per
share (or other similar unit) less than the Fair Market Value per share (or
other similar unit) of such preferred stock (or other security) on the date
such preferred stock (or other security) is sold (provided that no sale of
preferred stock or other security pursuant to an underwritten public
offering shall be deemed to be for less than its fair market value), then
in each such case the Warrant Share Amount shall thereafter be adjusted by
multiplying the Warrant Share Amount immediately prior to the date of
issuance of such preferred stock (or other security) by a fraction, the
numerator of which shall be the product of (A) the number of Common Share
Equivalents represented by all securities outstanding immediately prior to
such issuance and (B) the Fair Market Value of a share of Common Stock
immediately prior to the date of such issuance, and the denominator of
which shall be (ii) the product of (A) the number of Common Share
Equivalents represented by all securities outstanding immediately prior to
such issuance and (B) the Fair Market Value of a share of the Common Stock
immediately prior to the date of such issuance minus (iii) the difference
between (A) the aggregate Fair Market Value of such preferred stock (or
other security) and (B) the aggregate consideration received by the Company
for such preferred stock (or other security). An adjustment made pursuant
to this Section 8(e) shall become effective immediately after the date such
preferred stock (or other security) is sold.
(f) Above Market Repurchases of Common Stock. If at any time or from
time to time the Company or any Subsidiary thereof shall repurchase, by
self-tender offer or otherwise, any shares of Common Stock of the Company
(or any Options or Convertible Security) at a weighted average purchase
price in excess of the Fair Market Value thereof, on the Business Day
immediately prior to the earliest of (i) the date of such repurchase, (ii)
the commencement of an offer to repurchase or (iii) the public announcement
of either (such date being referred to as the "Determination Date"), the
Warrant Share Amount shall be determined by multiplying the Warrant Share
Amount
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immediately prior to such Determination Date by a fraction, the numerator
of which shall be the product of (A) the number of Common Share Equivalents
represented by all securities outstanding immediately prior to such
Determination Date minus the number of Common Share Equivalents represented
by the securities repurchased or to be purchased by the Company or any
Subsidiary thereof in such repurchase and (B) the Fair Market Value of a
share of Common Stock immediately prior to such Determination Date, and the
denominator of which shall be (i) the product of (A) the number of Common
Share Equivalents represented by all securities outstanding immediately
prior to the Determination Date and (B) the Fair Market Value of a share of
Common Stock immediately prior to such Determination Date minus (ii) the
sum of (A) the aggregate consideration paid by the Company in connection
with such repurchase and (B) in the case of Options or Convertible
Securities, the additional consideration required to be received by the
Company upon the exercise, exchange or conversion of such securities.
(g) Above Market Repurchases of Preferred Stock or Other Securities.
If at any time or from time to time the Company or any Subsidiary thereof
shall repurchase, by self-tender offer or otherwise, any shares of
nonconvertible and nonexchangeable preferred stock (or other, securities of
the Company other than Common Stock or Options or Convertible Securities),
at a weighted average purchase price in excess of the Fair Market Value
thereof, on the Business Day immediately prior to the Determination Date,
the Warrant Share Amount shall be determined by multiplying the Warrant
Share Amount immediately prior to the Determination Date by a fraction, the
numerator of which shall be the product of (i) the number of Common Share
Equivalents represented by all securities outstanding immediately prior to
such Determination Date and (ii) the Fair Market Value of a share of Common
Stock immediately prior to such Determination Date, and the denominator of
which shall be (i) the product of (A) the number of Common Share
Equivalents represented by all securities outstanding immediately prior to
such Determination Date and (B) the Fair Market Value of a share of Common
Stock immediately prior to such Determination Date minus (ii) the
difference between (A) the aggregate consideration paid by the Company in
connection with such repurchase and (B) the aggregate Fair Market Value of
such preferred stock (or other security).
(h) Readjustment of Warrant Share Amount. If (i) the purchase price
provided for in any Option or the additional consideration, if any, payable
upon the conversion or exchange of any Convertible Securities or the rate
at which any Convertible Securities, in each case as referred to in
paragraphs (b) and (f) above, are convertible into or exchangeable for
Common Stock shall change at any time (other than under or by reason of
provisions designed to protect against dilution upon an event which results
in a related adjustment pursuant to this Section 8), or (ii) any of such
Options or Convertible Securities shall have irrevocably terminated, lapsed
or expired, the Warrant Share Amount then in effect shall forthwith be
readjusted (effective only with respect to any exercise of this Warrant
after such readjustment) to the Warrant Share Amount which would then be in
effect had the adjustment made upon the issuance, sale, distribution or
grant of such Options or Convertible Securities been made based upon such
changed purchase price, additional consideration or conversion rate, as the
case may be (in the case of any event referred to in clause (i) of this
paragraph (h)) or had such adjustment not been made (in the case of any
event referred to in clause (ii) of this paragraph (h)).
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(i) Consideration. If any shares of Common Stock, Options or
Convertible Securities shall be issued, sold or distributed for cash, the
consideration received in respect thereof shall be deemed to be the amount
received by the Company therefor, before deduction therefrom of any
reasonable, customary and adequately documented expenses incurred in
connection therewith. If any shares of Common Stock, Options or
Convertible Securities shall be issued, sold or distributed for a
consideration. other than cash, the amount of the consideration other than
cash received by the Company shall be deemed to be the Fair Market Value of
such consideration, before deduction of any reasonable, customary and
adequately documented expenses incurred in connection therewith. If any
shares of Common Stock, Options or Convertible Securities shall be issued
in connection with any merger in which the Company is the surviving
corporation, the amount of consideration therefor shall be deemed to be the
Fair Market Value of such portion of the assets and business of the non-
surviving corporation as shall be attributable to such Common Stock,
Options or Convertible Securities, as the case may be. If any Options
shall be issued in connection with the issuance and sale of other
securities of the Company, together comprising one integral transaction in
which no specific consideration is allocated to such Options by the parties
thereto, such Options shall be deemed to have been issued without
consideration.
(j) No Impairment. The Company will not, by amendment of its
Certificate of Incorporation or through any reorganization, transfer of
assets, consolidation, merger, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or
performance of any of the terms to be observed or performed hereunder by
the Company, but will at all times in good faith assist in the carrying out
of all the provisions of this Section 8 and in the taking of all such
action as may be necessary or appropriate in order to protect the
conversion rights of the Holder against impairment. Without limiting the
generality of the foregoing, the Company will not increase the par value of
any shares of Common Stock receivable on the exercise of the Warrants above
the amount payable therefor on such exercise.
(k) Certificate as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Warrant Share Amount pursuant to this
Section 8, the Company at its expense shall promptly compute such
adjustment or readjustment in accordance with the terms hereof and furnish
to the Holder a certificate setting forth such adjustment or readjustment
and showing in detail the facts upon which such adjustment or readjustment
is based. The Company shall, upon the written request at any time of the
Holder, furnish or cause to be furnished to the Holder a like certificate
setting forth (i) such adjustments and readjustments and (ii) the number of
shares of Common Stock and the amount, if any, of other property which at
the time would be received upon the exercise of this Warrant.
(l) Proceedings Prior to Any Action Requiring Adjustment. As a
condition precedent to the taking of any action which would require an
adjustment pursuant to this Section 8, the Company shall take any action
which may be necessary, including obtaining regulatory approvals or
exemptions, in order that the Company may thereafter validly and legally
issue as fully paid and nonassessable all shares of Common Stock which the
Holders are entitled to receive upon exercise thereof.
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(m) Notice of Adjustment. Not less than 10 nor more than 30 days
prior to the record date or effective date, as the case may be, of any
action which requires or might require an adjustment or readjustment
pursuant to this Section 8, the Company shall forthwith file in the custody
of its Secretary or an Assistant Secretary at its principal executive
office and with its stock transfer agent or its warrant agent, if any, an
officers' certificate showing the adjusted number of Warrant Shares
determined as herein provided, setting forth in reasonable detail the facts
requiring such adjustment and the manner of computing such adjustment.
Each such officers' certificate shall be signed by the chairman, president
or chief financial officer of the Company and by the secretary or any
assistant secretary of the Company. Each such officers' certificate shall
be made available at all reasonable times for inspection by the Holder and
the Company shall, forthwith after each such adjustment, mail a copy, by
first-class mail, of such certificate to the Holder.
(n) Payments in Lieu of Adjustment. The Holder shall, at its
election, be entitled to receive, in lieu of the adjustment pursuant to
Section 8(c) otherwise required thereof, promptly upon the delivery of the
written notice of such election, cash, property, evidences of indebtedness,
other securities or other assets which such Holder would have been entitled
to receive if it had exercised its Warrant for shares of Common Stock
immediately prior to the record date with respect to such distribution.
The Holder may exercise its option under this Section 8(n) by delivering to
the Company a written notice of such election within fourteen (14) days of
its receipt of the certificate of adjustment required pursuant to Section
8(m) to be delivered by the Company in connection with such distribution.
(o) Company to Prevent Dilution. In case at any time or from time to
time conditions arise by reason of action taken by the Company or any of
its subsidiaries, which are not adequately covered by the provisions of
this Section 8, or which might adversely affect the exercise rights of the
Holder, the Board of Directors of the Company shall appoint a firm of
independent certified public accountants of recognized national standing,
which shall give their opinion upon the adjustment, if any, necessary with
respect to the Exercise Price and the Warrant Share Amount, on a basis
consistent with the standards established in the other provisions of this
Section 8, so as to preserve, without dilution, the exercise rights of the
Holder. Upon receipt of such opinion, the Board of Directors of the
Company shall forthwith make the adjustments described therein.
IX. CONSOLIDATION, MERGER, OR SALE OF ASSET. In case of any consolidation of
the Company with, or merger of the Company into, any other Person, any merger of
another Person into the Company (other than a merger which does not result in
any reclassification, conversion, exchange or cancellation of outstanding shares
of Common Stock) or any sale or transfer of all or substantially all of the
assets of the Company or of the Person formed by such consolidation or resulting
from such merger or which acquires such assets, as the case may be, the Holder
shall have the right thereafter to exercise this Warrant for the kind and amount
of securities, cash and other property receivable upon such consolidation,
merger, sale or transfer by a holder of the number of shares of Common Stock for
which this Warrant may have been exercised immediately prior to such
consolidation, merger, sale or transfer, assuming (i) such
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holder of Common Stock is not a Person with which the Company consolidated or
into which the Company merged or which merged into the Company or to which such
sale or transfer was made, as the case may be ("constituent Person"), or an
Affiliate of a constituent Person and (ii) in the case of a consolidation
merger, sale or transfer which includes an election as to the consideration to
be received by the holders, such holder of Common Stock failed to exercise its
rights of election, as to the kind or amount of securities, cash and other
property receivable upon such consolidation, merger, sale or transfer (provided
that if the kind or amount of securities, cash and other property receivable
upon such consolidation, merger, sale or transfer is not the same for each share
of Common Stock held immediately prior to such consolidation, merger, sale or
transfer by other than a constituent Person or an Affiliate thereof and in
respect of which such rights of election shall not have been exercised ("non-
electing share"), then for the purpose of this paragraph 9 the kind and amount
of securities, cash and other property receivable upon such consolidation,
merger, sale or transfer by each non-electing share shall be deemed to be the
kind and amount so receivable per share by a plurality of the non-electing
shares). Adjustments for events subsequent to the effective date of such a
consolidation, merger and sale of assets shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Warrant. In any such event,
effective provisions shall be made in the certificate or articles of
incorporation of the resulting or surviving corporation, in any contract of
sale, conveyance, lease or transfer, or otherwise so that the provisions set
forth herein for the protection of the rights of the Holder shall thereafter
continue to be applicable; and any such resulting or surviving corporation shall
expressly assume the obligation to deliver, upon exercise, such shares of stock,
other securities, cash and property. The provisions of this paragraph 9 shall
similarly apply to successive consolidations, mergers, sales, leases or
transfers.
X. NOTICES. Any notice, demand or delivery authorized by this Warrant shall be
in writing and shall be given to the Holder or the Company, as the case may be,
at its address (or telecopier number) set forth below, or such other address (or
telecopier number) as shall have been furnished to the party giving or making
such notice, demand or delivery:
If to the Company:
Choice One Communications Inc.
100 Chestnut Street
Suite 700
Rochester, New York 14604
Attention: Steve M. Dubnik
Fax: (716) 530-2734
with a copy to:
Nixon Peabody LLP
1300 Clinton Square
Rochester, New York 14604
Attention: James A. Locke, III
Fax: (716) 263-1600
<PAGE>
-12-
If to the Holder:
c/o MSDW Capital Partners IV, LLC
1221 Avenue of the Americas
33'd Floor
New York, New York 10020
Attention: Kenneth E. Clifford
Fax: (212) 762-7951
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attention: Leonard Kreynin
Fax: (212) 450-4800
Each such notice, demand or delivery shall be effective (i) if given by
telecopy, when such telecopy is transmitted to the telecopy number specified
herein and the intended recipient confirms the receipt of such telecopy or (ii)
if given by any other means, when received at the address specified herein.
XI. RIGHTS OF THE HOLDER. Prior to the exercise of any Warrant, the Holder
shall not, by virtue hereof, be entitled to any rights of a shareholder of the
Company, including, without limitation, the right to vote, to receive dividends
or other distributions, to exercise any preemptive right or to receive any
notice of meetings of shareholders or any notice of any proceedings of the
Company except as may be specifically provided for herein.
XII. GOVERNING LAW. THIS WARRANT AND ALL RIGHTS ARISING HEREUNDER SHALL BE
CONSTRUED AND DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
NEW YORK, AND THE PERFORMANCE THEREOF SHALL BE -GOVERNED AND ENFORCED IN
ACCORDANCE WITH SUCH LAWS.
XIII. AMENDMENTS; WAIVERS. Any provision of this Warrant may be amended or
waived if, and only if, such amendment or waiver is in writing and signed, in
the case of an amendment, by the Holder and the Company, or in the case of a
waiver, by the party against whom the waiver is to be effective. No failure or
delay by either party in exercising any right, power or privilege hereunder
shall operate as a waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the exercise of any
other right, power or privilege. The lights and remedies herein provided shall
be cumulative and not exclusive of any rights or remedies provided by law.
<PAGE>
-13-
IN WITNESS WHEREOF, the Company has duly caused this Warrant to be signed
by its duly authorized officer and to be dated as of August 1, 2000.
CHOICE ONE COMMUNICATIONS INC.
By: /S/ John J. Zimmer
------------------
Name: John J. Zimmer
Title: Vice President - Finance
Acknowledged and Agreed:
MSDW IV 892 INVESTORS, L.P.
By: /S/ John Ehrenkranz
-------------------
Name: John Ehrenkranz
Title: Managing Director
<PAGE>
WARRANT EXERCISE NOTICE
(To be delivered prior to exercise of the Warrant
by execution of the Warrant Exercise Subscription Form)
To: Choice One Communications Inc.
The undersigned hereby notifies you of its intention to exercise the
Warrant to purchase shares of Common Stock, par value $0.01 per share, of Choice
One Communications Inc. The undersigned intends to exercise the Warrant to
purchase __________ shares (the "Shares") at $__________ per Share (the Exercise
Price currently in effect pursuant to the Warrant). The undersigned intends to
pay the aggregate Exercise Price for the Shares in cash, certified or official
bank or bank cashier's check (or a combination of cash and check) as indicated
below.
Date: ____________________________
________________________________________
(Signature of Owner)
________________________________________
(Street Address)
________________________________________
(City) (State) (Zip Code)
Payment: $_____________ cash
$_____________ check
<PAGE>
WARRANT EXERCISE SUBSCRIPTION FORM
(To be executed only upon exercise of the Warrant
after delivery of Warrant Exercise Notice)
To: Choice One Communications Inc.
The undersigned irrevocably exercises the Warrant for the purchase of
________ shares (the "Shares") of Common Stock, par value $.01 per share, of
Choice One Communications Inc. (the "Company") at $_________ per Share (the
Exercise Price currently in effect pursuant to the Warrant) and herewith makes
payment of $_______ (such payment being made in cash or by certified or official
bank or bank cashier's check payable to the order of the Company or by any
permitted combination of such cash or check), all on the terms and conditions
specified in the within Warrant, surrenders this War-rant and all right, title
and interest therein to the Company and directs that the Shares deliverable upon
the exercise of this Warrant be registered or placed in the name and at the
address specified below and delivered thereto.
Date: ________________________
________________________________________
(Signature of Owner)
________________________________________
(Street Address)
________________________________________
(City) (State) (Zip Code)
<PAGE>
Securities and/or check to be issued to: _______________________________________
Please insert social security or identifying number: ___________________________
Name: __________________________________________________________________________
Street Address: ________________________________________________________________
City, State and Zip Code: ______________________________________________________
Any unexercised portion of the Warrant evidenced by the within Warrant to be
issued to:
Please insert social security or identifying number: ___________________________
Name: __________________________________________________________________________
Street Address: ________________________________________________________________
City, State and Zip Code: ______________________________________________________
-2-
<PAGE>
WARRANT ASSIGNMENT FORM
Dated __________ ___, _____
FOR VALUE RECEIVED, ____________________________ hereby sells,
assigns and transfers unto ______________________________ (the "Assignee"),
(please type or print in block letters)
________________________________________________________________________________
(insert address)
its right to purchase up to _____ shares of Common Stock represented by this
Warrant and does hereby irrevocably constitute and appoint
_______________________ Attorney, to transfer the same on the books of the
Company, with full power of substitution in the premises.
Signature: _______________________________________
