SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): MAY 22, 1995
ACC CORP.
(Exact Name of Registrant as specified in its Charter)
DELAWARE 0-14567 16-1175232
(State or other (Commission (IRS Employer
jurisdiction File Number) Identification No.)
of incorporation)
400 WEST AVENUE, ROCHESTER, NEW YORK 14611
(Address of Principal Executive Offices)
Telephone Number, including area code: (716) 987-3000
NOT APPLICABLE
(Former name or former address, if changed since last report.)
<PAGE>
ITEM 5. OTHER EVENTS.
On May 22, 1995, an investment group composed of Fleet Venture
Resources, Inc., Fleet Equity Partners VI, L.P., and Chisholm Partners II,
L.P. (collectively the "Fleet Investors") completed a $10,000,000
investment in the Company by purchasing $10,000,000 in principal amount of
the Company's 12% subordinated convertible notes (the "Notes") and certain
warrants to acquire shares of the Company's Common Stock. Pursuant to the
terms of the Note and Warrant Purchase Agreement under which the Notes were
purchased (the "Purchase Agreement"), if at their Annual Meeting on July
19, 1995 the Company's shareholders authorize the creation of a class of
Preferred Stock, the Notes will automatically be converted into 10,000
shares of Series A Preferred Stock upon the Company's filing with the
Delaware Secretary of State of a Certificate of Designation authorizing the
issuance of this series of Preferred Stock. This Series A Preferred Stock
would have the following rights and preferences:
(1) a liquidation value of $1,000 per share;
(2) convertible into shares of Common Stock (Class A Common
Stock, if this Proposal 4 is approved in full) at an initial
conversion price of $16.00 per share, subject to certain
antidilution adjustments;
(3) dividends payable at the rate of 12% per annum,
cumulative and compounded quarterly and extinguished upon
conversion into shares of Common Stock;
(4) senior to all other classes and series of Preferred
Stock and Common Stock as to the payment of dividends and
redemptions, and upon liquidation at liquidation value, senior to
all other classes of the Company's capital stock;
(5) subject to mandatory redemption on the seventh
anniversary of the closing of the transaction at the greater of
liquidation value (plus all accrued but unpaid dividends) or the
then-fair market value of the underlying Common Stock into which
the Series A Preferred Stock is convertible, and subject to
redemption at the greater of such amounts at the request of the
holders of the Series A Preferred Stock in the event of a change
in control of the Company;
(6) mandatory conversion of the Series A Preferred Stock
into shares of Common Stock upon the occurrence of certain
events;
(7) the Series A Preferred Stock will vote on an as-
converted basis with the shares of Common Stock outstanding on
all matters to be voted on by the Company's shareholders,
including the election of Directors, and the holders of the
Series A Preferred Stock, voting as a separate class, shall be
entitled to elect one Director so long as more than 33% of the
Series A Preferred shares issued in this transaction remain
issued and outstanding;
(8) so long as any shares of the Series A Preferred Stock
remain outstanding, the Company will not be able to take any of
the following actions without obtaining the prior written consent
of the holders of a majority of the Series A Preferred Stock:
(a) declare dividends on any class of capital stock other than
the Series A Preferred Stock; (b) redeem any capital stock other
than Series A Preferred Stock; (c) make any amendment to the
Company's Certificate of Incorporation or Bylaws that would
include or make any changes to any anti-takeover provisions in
the Company's Certificate of Incorporation or Bylaws; (d) make
any amendment to the Company's Certificate of Incorporation or
Bylaws that would have an adverse effect on or impair the rights
or relative priority of the Series A Preferred Stock; (e) make
any changes in the nature of the Company's business beyond the
telecommunications field; or (f) engage in any transactions with
affiliates (other than subsidiaries) (except for compensation and
benefit matters approved by the Executive Compensation Committee
of the Company's Board or other transactions approved by an
independent committee of the Board); and
(9) preemptive rights to purchase, on an as-converted basis,
a pro-rata portion of any issuance by the Company of any Common
Stock or securities containing options or rights to acquire
shares of Common Stock, except for issuances of Common Stock in
connection with any of the following matters, in which events
such preemptive rights would not apply: (a) option exercises
under any stock option plans of the Company; (b) conversion of
the Notes or the Series A Preferred Stock into shares of Common
Stock; (c) exercise of the warrants issued in this transaction;
(d) an acquisition of another business or company; (e) a public
offering of securities registered under the Securities Act of
1933; (f) the provision or extension of senior debt financing to
the Company; or (g) strategic investments by other entities in
the telecommunications field.
If the proposal to authorize the creation of Preferred Stock is not
approved by the shareholders, the Notes will remain outstanding and will
have and be subject to the Common Stock conversion rights, mandatory
repayment provisions, mandatory conversion provisions, rights to approve
certain transactions and preemptive rights which are the same as or
substantially similar to those applicable to the Series A Preferred Stock
as described in paragraphs (2), (5), (6), (8) and (9) above through May 22,
2002. In addition, so long as more than 33% of the original principal
amount of the Notes remains outstanding, the Noteholders will have the
right to designate a representative to be elected to the Company's Board of
Directors, whom the Board will nominate for election to the Board and will
solicit proxies from the Company's shareholders in favor of such
representative's election to the Board.
At their present conversion price of $16.00 per share, the $10,000,000
in principal amount of the Notes is convertible into 625,000 shares of the
Company's Common Stock, of which total Fleet Venture Resources, Inc. has
the right to acquire 450,000 shares, Fleet Equity Partners VI, L.P. has the
right to acquire 112,500 shares, and Chisholm Partners II, L.P. has the
right to acquire 62,500 shares. Additionally, at the closing of this
transaction, the Company issued the Fleet Investors warrants to purchase a
total of 100,000 shares of the Company's Common Stock at a current exercise
price of $16.00 per share, subject to adjustment, all of which warrants are
presently exercisable. Of this total, Fleet Venture Resources, Inc. holds
warrants to purchase 72,000 shares, Fleet Equity Partners VI, L.P. holds
warrants to acquire 18,000 shares, and Chisholm Partners II, L.P. holds
warrants to acquire 10,000 shares. Therefore, at present, Fleet Venture
Resources, Inc. has the right to acquire a total of 522,000 shares or 6.1%
of the Company's currently outstanding Common Stock, Fleet Equity Partners
VI, L.P. has the right to acquire a total of 130,500 shares or 1.5% of the
Company's currently outstanding Common Stock, and Chisholm Partners II,
L.P. has the right to acquire a total of 72,500 shares or 0.9% of the
Company's currently outstanding Common Stock. At present, however, none of
these Notes or warrants have been converted into shares of the Company's
Common Stock.
Also in connection with the closing of this transaction, pursuant to
the terms of the Purchase Agreement, Robert M. Van Degna was elected a
Director of the Company as the representative of the Noteholders on the
Company's Board. As indicated in its proxy materials for its 1995 Annual
Meeting, the Board of Directors also intends to nominate Mr. Van Degna for
election to the Board at the Company's upcoming Annual Meeting and is
soliciting proxies in favor of his election to the Board.
The material agreements with respect to this transaction are attached
as exhibits to this filing.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) EXHIBITS. See Exhibit Index.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by
the undersigned thereunto duly authorized.
ACC CORP.
(Registrant)
Date: June 22, 1995 By: /s/ John J. Zimmer
Title: Vice President-Finance
<PAGE>
EXHIBIT INDEX
Exhibit
NUMBER DESCRIPTION
4-1 Note and Warrant Purchase Agreement, dated as of May 22, 1995, by
and among ACC Corp., Fleet Venture Resources, Inc., Fleet Equity
Partners VI, L.P. and Chisholm Partners II, L.P.
4-2(a) $7,200,000 ACC Corp. Convertible Subordinated Promissory Note
Issued to Fleet Venture Resources, Inc. on May 22, 1995
4-2(b) $1,800,000 ACC Corp. Convertible Subordinated Promissory Note
Issued to Fleet Equity Partners VI, L.P. on May 22, 1995
4-2(c) $1,000,000 ACC Corp. Convertible Subordinated Promissory Note
Issued to Chisholm Partners II, L.P. on May 22, 1995
4-3(a) Closing Stock Purchase Warrant to Purchase 72,000 Shares of ACC
Corp. Common Stock Issued to Fleet Venture Resources, Inc. on May
22, 1995
4-3(b) Closing Stock Purchase Warrant to Purchase 18,000 Shares of ACC
Corp. Common Stock Issued to Fleet Equity Partners VI, L.P. on
May 22, 1995
4-3(c) Closing Stock Purchase Warrant to Purchase 10,000 Shares of ACC
Corp. Common Stock Issued to Chisholm Partners II, L.P. on May
22, 1995
4-4 Form of Proposed Amendment to ACC Corp. Certificate of
Incorporation
4-5 Form of Proposed Certificate of Designation Regarding Series A
Preferred Stock
4-6 Registration Agreement dated May 22, 1995 between ACC Corp.,
Fleet Venture Resources, Inc., Fleet Equity Partners VI, L.P.,
and Chisholm Partners II, L.P.
4-7 Participation Agreement dated May 22, 1995 among Richard T. Aab,
Fleet Venture Resources, Inc., Fleet Equity Partners VI, L.P.,
Chisholm Partners II, L.P. and ACC Corp.
4-8(a) Springing Stock Purchase Warrant to Purchase Shares of ACC Corp.
Common Stock Issued to Fleet Venture Resources, Inc. on May 22,
1995
4-8(b) Springing Stock Purchase Warrant to Purchase Shares of ACC Corp.
Common Stock Issued to Fleet Equity Partners VI, L.P. on May 22,
1995
4-8(c) Springing Stock Purchase Warrant to Purchase Shares of ACC Corp.
Common Stock Issued to Chisholm Partners II, L.P. on May 22, 1995
EXHIBIT 4-1
NOTE AND WARRANT PURCHASE AGREEMENT
DATED MAY 22, 1995
BY AND AMONG ACC CORP.,
FLEET VENTURE RESOURCES, INC.,
FLEET EQUITY PARTNERS VI, L.P.,
AND
CHISHOLM PARTNERS II, L.P.
<PAGE>
TABLE OF CONTENTS
Page
1. Authorization and Closing..................................1
1A. Authorization of the Notes and the Warrants...........1
1B. Purchase and Sale of the Notes and the Warrants.......1
1C. The Closing...........................................2
2. Conditions of Each Purchaser's Obligation at the Closing...2
2A. Representations and Warranties; Covenants.............2
2B. Amendment of Certificate of Incorporation.............2
2C. Certificate of Designation............................3
2D. Registration Agreement................................3
2E. Participation Agreement...............................3
2F. Securities Law Compliance.............................3
2G. Opinion of the Company's Counsel......................3
2H. Closing Documents.....................................3
2I. Proceedings...........................................4
2J. Waiver................................................4
2K. Expenses..............................................4
2L. Compliance with Applicable Laws.......................5
3. Covenants..................................................5
3A. Financial Statements and Other Information............5
3B. Inspection Rights.....................................9
3C. Attendance at Board Meetings..........................9
3D. Designation of Director..............................10
3E. Amendment to Certificate ............................11
3F. Restrictive Covenants................................11
3G. Affirmative Covenants................................13
3H. Use of Proceeds......................................14
3I. Current Public Information...........................14
3J. First Offer Rights...................................15
3K. SBIC Regulatory Provisions...........................16
3L. Regulatory Compliance Cooperation....................17
3M. Springing Warrants...................................18
3N. Consultant's Report..................................18
4. Transfer of Restricted Securities.........................19
4A. General Provisions...................................19
4B. Opinion Delivery.....................................19
4C. Rule 144A............................................19
4D. Legend Removal.......................................19
4E. Foreign Ownership Restrictions.......................20
5. Representations and Warranties of the Company.............20
5A. Organization, Corporate Power and Licenses...........20
5B. Capital Stock and Related Matters....................20
5C. Material Subsidiaries; Investments...................21
5D. Authorization; No Breach.............................22
5E. Financial Statements.................................23
5F. Absence of Undisclosed Liabilities...................23
5G. No Material Adverse Change...........................24
5H. Absence of Certain Developments......................24
5I. Assets...............................................25
5J. Tax Matters..........................................26
5K. Contracts and Commitments............................28
5L. Intellectual Property Rights.........................30
5M. Litigation, etc......................................31
5N. Brokerage............................................32
5O. Governmental Consent, etc............................32
5P. Insurance............................................33
5Q. Employees............................................33
5R. ERISA................................................33
5S. Compliance with Laws.................................35
5T. Small Business Matters...............................36
5U. Affiliated Transactions..............................36
5V. Investment Company...................................37
5W. Margin Securities....................................37
5X. Disclosure...........................................37
5Y. Reports with the Securities and Exchange Commission..37
5Z. Knowledge............................................38
Section 6. Representations and Warranties of the Purchasers...38
6A. Organization, Power and Licenses.....................38
6B. Authorization; No Breach.............................38
7. Definitions................................................39
7A. Definitions..........................................39
8. Miscellaneous..............................................44
8A. Expenses.............................................44
8B. Remedies.............................................44
8C. Purchaser's Investment Representations...............44
8D. Consent to Amendments................................45
8E. Survival of Representations and Warranties...........46
8F. Successors and Assigns...............................46
8G. Capital and Surplus; Special Reserves................46
8H. Severability.........................................46
8I. Counterparts.........................................47
8J. Descriptive Headings; Interpretation.................47
8K. Governing Law........................................47
8L. Notices..............................................47
8M. Consideration for Warrants...........................48
8N. Understanding Among the Purchasers...................48
8O. No Strict Construction...............................48
8P. Indemnification......................................49
8Q. Payment Set Aside....................................49
8R. Subordination........................................50
SCHEDULES AND EXHIBITS
Schedule of Purchasers
List of Exhibits
List of Disclosure Schedules
<PAGE>
ACC CORP.
NOTE AND WARRANT PURCHASE AGREEMENT
THIS AGREEMENT is made as of May 22, 1995, by and among ACC
Corp., a Delaware corporation (the "Company"), and the Persons listed on
the Schedule of Purchasers attached hereto (collectively referred to herein
as the "Purchasers" and individually as a "Purchaser"). Except as
otherwise indicated herein, capitalized terms used herein are defined in
Section 7 hereof.
The parties hereto agree as follows:
Section 1 AUTHORIZATION AND CLOSING.
A. AUTHORIZATION OF THE NOTES AND THE WARRANTS. The Company shall
authorize the issuance and sale to the Purchasers of (i) its 12%
Subordinated Convertible Notes in an aggregate principal amount of
$10,000,000 and containing the terms and conditions and in the form set
forth in EXHIBIT A attached hereto (the "Notes"), (ii) its Stock Purchase
Warrants to acquire an aggregate of 100,000 shares of the Company's Common
Stock, par value $.015 per share (the "Common Stock"), containing the terms
and conditions and in the form set forth in EXHIBIT B attached hereto (the
"Closing Warrants"), and (iii) the Warrants referred to in paragraph 3M
hereof (the "Springing Stock Purchase Warrants" and, together with the
Closing Warrants, the "Warrants"). The Notes are convertible into shares
Common Stock at the Conversion Price (as defined in the Notes), and are
also automatically convertible into shares of the Company's Series A
Preferred Stock, par value $1.00 per share (the "Series A Preferred"), upon
authorization of such class by the Company's stockholders.
B. PURCHASE AND SALE OF THE NOTES AND THE WARRANTS. At the Closing,
the Company shall sell to each Purchaser and, subject to the terms and
conditions set forth herein, each Purchaser shall purchase from the Company
(i) a Note in the aggregate principal amount set forth opposite such
Purchaser's name on the Schedule of Purchasers attached hereto at a price
equal to the price set forth opposite such Purchaser's name on the Schedule
of Purchasers and (ii) a Closing Warrant to purchase the number of shares
of Common Stock set forth opposite such Purchaser's name on the Schedule of
Purchasers at a price equal to the price set forth opposite such
Purchaser's name on the Schedule of Purchasers. In addition, at the
Closing, each Purchaser shall pay the Company the amount set forth opposite
such Purchaser's name on the Schedule of Purchasers in consideration for
the issuance of the Springing Warrants. The sale of the Notes and the
Warrants to each Purchaser shall constitute a separate sale hereunder.
C. THE CLOSING. The closing of the separate purchases and sales of
the Notes and the Warrants (the "Closing") shall take place at the offices
of Kirkland & Ellis in Chicago, Illinois, at 10:00 a.m. on May 22, 1995, or
at such other place or on such other date as may be mutually agreeable to
the Company and each Purchaser. At the Closing, the Company shall deliver
to each Purchaser instruments evidencing the Note and the Warrants to be
purchased by such Purchaser, payable to the order of such Purchaser or its
nominee or registered in such Purchaser's or its nominee's name,
respectively, upon payment of the purchase price thereof by a cashier's or
certified check, or by wire transfer of immediately available funds to the
Company's account at Marine Midland Bank, N.A., in the aggregate amount set
forth opposite such Purchaser's name on the Schedule of Purchasers.
Section 2. CONDITIONS OF EACH PURCHASER'S OBLIGATION AT THE
CLOSING. The obligation of each Purchaser to purchase and pay for the
Notes and the Warrants at the Closing is subject to the satisfaction as of
the Closing of the following conditions:
A. REPRESENTATIONS AND WARRANTIES; COVENANTS. The representations
and warranties contained in Section 5 hereof shall be true and correct in
all material respects at and as of the Closing as though then made, except
to the extent of changes caused by the transactions expressly contemplated
herein, and the Company shall have performed in all material respects all
of the covenants required to be performed by it hereunder at or prior to
the Closing.
B. AMENDMENT OF CERTIFICATE OF INCORPORATION. The amendment to the
Company's Certificate of Incorporation (the "Certificate of Incorporation")
set forth in EXHIBIT C attached hereto (the "Amendment") shall have been
authorized by the Company's board of directors for submission to the
Company's stockholders at the Company's next annual meeting of
stockholders.
C. CERTIFICATE OF DESIGNATION. A certificate of designation
containing the terms set forth in EXHIBIT D attached hereto (the
"Certificate of Designation") shall have been approved by the Company's
board of directors to be effective upon the filing of the Amendment with
the Delaware Secretary of State.
D. REGISTRATION AGREEMENT. The Company and the Purchasers shall have
entered into a registration agreement in form and substance as set forth in
EXHIBIT E attached hereto (the "Registration Agreement"), and the
Registration Agreement shall be in full force and effect as of the Closing.
E. PARTICIPATION AGREEMENT. The Purchasers and Richard T. Aab shall
have entered into a participation agreement in form and substance set forth
in EXHIBIT F attached hereto (the "Participation Agreement"), and the
Participation Agreement shall be in full force and effect as of the
Closing.
F. SECURITIES LAW COMPLIANCE. The Company shall have made all
filings under all applicable federal and state securities laws necessary to
consummate the issuance of the Notes and the Warrants pursuant to this
Agreement in compliance with such laws.
G. OPINION OF THE COMPANY'S COUNSEL. Each Purchaser shall have
received from Underberg & Kessler, counsel for the Company, an opinion with
respect to the matters set forth in EXHIBIT G attached hereto, which shall
be addressed to each Purchaser, dated the date of the Closing and in form
and substance reasonably satisfactory to each Purchaser.
H. CLOSING DOCUMENTS. The Company shall have delivered to each
Purchaser all of the following documents:
(i) an Officer's Certificate, dated the date of the Closing,
stating that the conditions specified in Section 1 and paragraphs 2A
through 2F, inclusive, have been fully satisfied;
(ii) certified copies of the resolutions duly adopted by the
Company's board of directors authorizing the execution, delivery and
performance of this Agreement, the Registration Agreement and each of
the other agreements contemplated hereby, the Amendment, the issuance
and sale of the Notes, the issuance and sale of the Warrants, the
reservation for issuance upon conversion of the Notes or (when
authorized and issued) the Series A Preferred or the exercise of the
Springing Warrants and the exercise of the Closing Warrants an
aggregate of 725,000 shares of Common Stock and the consummation of
all other transactions contemplated by this Agreement;
(iii) certified copies of the Company's Certificate of
Incorporation and bylaws, each as in effect at the Closing;
(iv) copies of all third party and governmental consents,
approvals and filings required in connection with the consummation of
the transactions hereunder (including all blue sky law filings and
waivers of all preemptive rights and rights of first refusal);
(v) for the Purchasers which are SBICs, duly completed and
executed SBA Forms 480, 652 and 1031 (Part A) together with a 5-year
business plan showing the Company's financial projections and a
written statement from the Company regarding its intended use of
proceeds; and
(vi) such other documents relating to the transactions
contemplated by this Agreement as any Purchaser or its special counsel
may reasonably request.
I. PROCEEDINGS. All corporate and other proceedings taken or
required to be taken by the Company in connection with the transactions
contemplated hereby to be consummated at or prior to the Closing and all
documents incident thereto shall be reasonably satisfactory in form and
substance to each Purchaser and its special counsel.
J. WAIVER. Any condition specified in this Section 2 may be waived
if consented to by each Purchaser; provided that no such waiver shall be
effective against any Purchaser unless it is set forth in a writing
executed by such Purchaser.
K. EXPENSES. At the Closing, the Company shall have reimbursed the
Purchasers for fees and expenses to the extent provided in paragraph 8A
hereof.
L. COMPLIANCE WITH APPLICABLE LAWS. The purchase of the Notes and
the Warrants by each Purchaser hereunder shall not be prohibited by any
applicable law or governmental rule or regulation and shall not subject
such Purchaser to any penalty, liability or, in such Purchaser's sole
judgment, other onerous condition under or pursuant to any applicable law
or governmental rule or regulation, and the purchase of the Notes and the
Warrants by each Purchaser hereunder shall be permitted by laws, rules and
regulations of the jurisdictions and governmental authorities and agencies
to which such Purchaser is subject.
Section 3. COVENANTS.
A. FINANCIAL STATEMENTS AND OTHER INFORMATION. The Company shall
deliver to each Purchaser (so long as such Purchaser holds at least 2.5% of
the outstanding principal amount of the Notes or at least 2.5% of the
outstanding shares of Series A Preferred) and to each holder of at least
10% of the outstanding principal amount of the Notes and each holder of at
least 10% of the outstanding shares of Series A Preferred:
(i) as soon as available but in any event within 30 days after
the end of each monthly accounting period in each fiscal year,
unaudited consolidated statements of income and cash flows of the
Company and its Subsidiaries and of each of the U.S., Canadian and
U.K. long distance operations and its U.S. local service operations
for such monthly period and for the period from the beginning of the
fiscal year to the end of such month, and unaudited consolidated
balance sheets of the Company and its Subsidiaries as of the end of
such monthly period, setting forth in each case comparisons to the
Company's annual budget and to the corresponding period in the
preceding fiscal year, and all such statements shall be prepared in
accordance with generally accepted accounting principles, consistently
applied, subject to the absence of footnote disclosures and to normal
year-end adjustments for recurring accruals, and shall be certified by
the Company's chief financial officer; in addition to the foregoing,
such financial statements shall set forth total billable minutes,
revenue per minute and network cost per minute for such period for the
Company and each of its U.S., Canadian and U.K. long distance
operations;
(ii) as soon as available but in any event within 45 days after
the end of each quarterly accounting period in each fiscal year,
unaudited consolidating and consolidated statements of income and cash
flows of the Company and its Subsidiaries and of each of the U.S.,
Canadian and U.K. long distance operations and the U.S. local service
operations for such quarter and for the period from the beginning of
the fiscal year to the end of such quarter, and unaudited
consolidating and consolidated balance sheets of the Company and its
Subsidiaries as of the end of such quarter, setting forth in each case
comparisons to the Company's annual budget and to the corresponding
period in the preceding fiscal year, and all such statements shall be
prepared in accordance with generally accepted accounting principles,
consistently applied, subject to the absence of footnote disclosures
and to normal year-end adjustments for recurring accruals, and shall
be certified by the Company's chief financial officer;
(iii) accompanying the financial statements referred to in
subparagraph (i) an Officer's Certificate stating that there is no
Event of Default, Potential Event of Default, Event of Noncompliance
or Potential Event of Noncompliance in existence and that neither the
Company nor any of its Subsidiaries is in default under any of its
other material agreements or, if any Event of Default, Potential Event
of Default, Event of Noncompliance or Potential Event of Noncompliance
or any such default exists, specifying the nature and period of
existence thereof and what actions the Company and its Subsidiaries
have taken and propose to take with respect thereto;
(iv) within 90 days after the end of each fiscal year,
consolidating and consolidated statements of income and cash flows of
the Company and its Subsidiaries for such fiscal year, and
consolidating and consolidated balance sheets of the Company and its
Subsidiaries as of the end of such fiscal year, setting forth in each
case comparisons to the Company's annual budget and to the preceding
fiscal year, all prepared in accordance with generally accepted
accounting principles, consistently applied, and accompanied by (a)
with respect to the consolidated portions of such statements, an
opinion containing no exceptions or qualifications (except for
qualifications regarding specified contingent liabilities) of an
independent accounting firm of recognized national standing, and (b) a
certificate from such accounting firm, addressed to the Company's
board of directors, stating that in the course of its examination in
connection with its customary annual audit nothing came to its
attention that caused it to believe that there was an Event of
Default, Potential Event of Default, Event of Noncompliance or
Potential Event of Noncompliance in existence or that there was any
other default by the Company or any Subsidiary in the fulfillment of
or compliance with any of the terms, covenants, provisions or
conditions of any other material agreement to which the Company or any
Subsidiary is a party or, if such accountants have reason to believe
any Event of Default, Potential Event of Default, Event of
Noncompliance or Potential Event of Noncompliance or other default by
the Company or any Subsidiary exists, a certificate specifying the
nature and period of existence thereof;
(v) within 120 days after the end of each fiscal year, a copy of
the annual management letter from the Company's independent accounting
firm to the board of directors;
(vi) promptly upon receipt thereof, any additional reports,
management letters or other detailed information concerning
significant aspects of the Company's operations or financial affairs
given to the Company by its independent accountants (and not otherwise
contained in other materials provided hereunder);
(vii) at least 30 days but not more than 90 days prior to the
first fiscal year end following the Closing, a budget prepared on a
monthly basis for the Company and its Subsidiaries for the next
succeeding fiscal year and on an annual basis for the second through
the fifth succeeding fiscal years (displaying in each case anticipated
statements of income and cash flows and balance sheets), and promptly
upon preparation thereof any other significant budgets prepared by the
Company and any revisions of such budget, and within 30 days after any
monthly period in which there is a material adverse deviation from the
annual budget, a written explanation of such deviation;
(viii) promptly (but in any event within five business days)
after the discovery or receipt of notice of any Event of Default,
Potential Event of Default, Event of Noncompliance or Potential Event
of Noncompliance, any default under any other material agreement to
which it or any of its Subsidiaries is a party, any condition or event
which has resulted in or is reasonably likely to result in any
material liability under any federal, state or local statute or
regulation relating to public health and safety, worker health and
safety or pollution or protection of the environment or any other
material adverse change, event or circumstance affecting the Company
or any Subsidiary (including the filing of any material litigation
against the Company or any Subsidiary or the existence of any dispute
with any Person which involves a reasonable likelihood of such
litigation being commenced), an Officer's Certificate specifying the
nature and period of existence thereof and what actions the Company
and its Subsidiaries have taken and propose to take with respect
thereto;
(ix) within ten days after transmission thereof, copies of all
financial statements, proxy statements, reports and any other general
written communications which the Company sends to its stockholders or
to its Subsidiaries' stockholders and copies of all registration
statements and all regular, special or periodic reports which it or
its Subsidiaries file, or any of its officers or directors file with
respect to the Company, with the Securities and Exchange Commission or
with any securities exchange on which any of its securities are then
listed, and copies of all press releases and other statements made
available generally by the Company to the public concerning material
developments in the Company's and its Subsidiaries' businesses; and
(x) with reasonable promptness, such other information and
financial data concerning the Company and its Subsidiaries as any
Person entitled to receive information under this paragraph 3A may
reasonably request (including separate financial statements for the
U.S., Canadian and U.K. operations of the Company and its
Subsidiaries).
Each of the financial statements referred to in subparagraph (i) and (iii)
shall be true and correct in all material respects as of the dates and for
the periods stated therein, subject in the case of the unaudited financial
statements to changes resulting from normal year-end adjustments for
recurring accruals (none of which would, alone or in the aggregate, be
materially adverse to the financial condition, operating results, assets,
operations or business prospects of the Company and its Subsidiaries taken
as a whole).
B. INSPECTION RIGHTS. The Company shall permit any representatives
designated by any Purchaser (so long as such Purchaser holds at least 2.5%
of the outstanding principal amount of the Notes or at least 2.5% of the
outstanding shares of Series A Preferred) or any holder of at least 10% of
the outstanding principal amount of the Notes or at least 10% of the
outstanding shares of Series A Preferred, upon reasonable notice and during
normal business hours to (i) visit and inspect any of the properties of the
Company and its Subsidiaries, (ii) examine the corporate and financial
records of the Company and its Subsidiaries and make copies thereof or
extracts therefrom and (iii) discuss the affairs, finances and accounts of
any such corporations with the directors, officers and key employees of the
Company and its Subsidiaries. Upon the reasonable request of any such
Purchaser or any such holder of Notes or shares of Series A Preferred, the
Company shall permit its independent accountants to participate in
discussions with such Persons regarding the Company and its Subsidiaries.
Each holder of Notes, Series A Preferred or Underlying Common Stock which
is a "venture capital operating company" for purpose of Department of Labor
Regulation Section 2510.3-101 shall in addition to all other rights
granted under this Agreement have the right, at reasonable times and upon
reasonable notice, to consult with and advise the officers of the Company
with respect to the management of the Company and its Subsidiaries.
C. ATTENDANCE AT BOARD MEETINGS. The Company shall give each holder
of at least $5,000,000 of the outstanding principal amount of the Notes and
each holder of at least 5,000 shares of Series A Preferred written notice
of each meeting of its or any of its non-wholly-owned Subsidiaries' board
of directors, and each committee thereof at the same time notice of such
meeting is given to directors and the Company shall permit a representative
of each such Person to attend as an observer all meetings of its and its
non-wholly-owned Subsidiaries' board of directors and all committees
thereof; provided that in the case of telephonic meetings conducted in
accordance with the Company's or any such Subsidiaries' bylaws and
applicable law, each such Person's representative shall be given the
opportunity to listen to such telephonic meetings. Each representative
shall be entitled to receive all written materials and other information
(including copies of meeting minutes) given to directors in connection with
such meetings at the same time such materials and information are given to
the directors. If the Company or any of its non-wholly-owned Subsidiaries
proposes to take any action by written consent in lieu of a meeting of its
board of directors or of any committee thereof, the Company shall give
written notice thereof to each such Person prior to the effective date of
such consent describing in reasonable detail the nature and substance of
such action. In the event that the director designated by the holders of
Notes or Series A Preferred pursuant to paragraph 3D hereof or the director
elected by the holder of the Series A Preferred pursuant to the Certificate
of Designation, as applicable, does not attend any board or committee
meeting, the Company shall pay the reasonable out-of-pocket expenses of one
representative of such holders (to be determined by the holders a majority
of the outstanding principal amount of the Notes or a majority of the
outstanding shares of the Series A Preferred, as applicable) incurred in
connection with attending such board and committee meetings.
D. DESIGNATION OF DIRECTOR. So long as more than 33% of the
original principal amount of the Notes remains outstanding, the holders of
the Notes shall have the right to select a representative to be elected to
the Company's board of directors, and the Company shall nominate such
representative for election to the board of directors and solicit proxies
from the Company's stockholders in favor of the election of such
representative. Such representative shall initially be Robert Van Degna.
The Company shall use its best efforts to cause such representative to be
elected to the board of directors (including voting all unrestricted
proxies in favor of such representation) and shall not take any action
which would diminish the prospects of such representatives being elected to
the board of directors. The Company shall appoint such representative or,
if applicable, the director elected by the holders of the Series A
Preferred pursuant to the Certificate of Designation, to be a member of the
Executive Committee, the Compensation Committee and the Independent
Committee of the Company's board of directors and, upon the request of such
representative, to any other board committee of the Company and shall vote
its securities of any non-wholly owned Subsidiary to elect such
representative to the board of directors (or any similar body) of any non-
wholly owned Subsidiary and any board committee of any non-wholly owned
Subsidiary. All out-of-pocket expenses of each board member incurred in
connection with attending regular and special board meetings and any
meeting of any board committee shall be paid by the Company. The board
representative designated hereunder or elected by the holders of the Series
A Preferred shall be entitled to fees and other compensation paid to board
members who are not employees of the Company or its Subsidiaries.
E. AMENDMENT TO CERTIFICATE OF INCORPORATION AND FILING OF
CERTIFICATE OF DESIGNATION. The Company shall submit the Amendment to the
Company's stockholders for approval at the Company's next annual meeting
and shall solicit proxies from the Company's stockholders in favor of the
approval of the Amendment. The Company shall use its best efforts to cause
the Amendment to be approved by the Company's stockholders (including
recommending approval and voting all unrestricted proxies in favor of the
Amendment) and shall not take any action which would diminish the prospects
of the Amendment being so approved. Upon such approval, the Company shall
cause the Amendment and the Certificate of Designation to be filed with the
Delaware Secretary of State.
F. RESTRICTIVE COVENANTS. So long as any of the Notes or any shares
of Series A Preferred remain outstanding, the Company shall not, without
the prior written consent of the holders of a majority of the outstanding
principal amount of the Notes or the holders of a majority of the
outstanding shares of Series A Preferred:
(i) directly or indirectly declare or pay any dividends or make
any distributions upon any shares of its capital stock or other equity
securities, except for (a) dividends on the Series A Preferred and (b)
dividends payable in shares of Common Stock issued upon the
outstanding shares of Common Stock, or permit any non-wholly-owned
Subsidiary to directly or indirectly declare or pay any dividends or
make any distributions upon any shares of its capital stock or other
equity securities;
(ii) directly or indirectly redeem, purchase or otherwise
acquire, or permit any Subsidiary to redeem, purchase or otherwise
acquire, any of the Company's or any Subsidiary's capital stock or
other equity securities (including warrants, options and other rights
to acquire such capital stock or other equity securities) other than
the Series A Preferred or directly or indirectly redeem, purchase or
make any payments with respect to any stock appreciation rights,
phantom stock plans or similar rights or plans;
(iii) enter into, or permit any Subsidiary to enter into, the
ownership, active management or operation of any business other than
the businesses of providing telecommunications services and plant and
equipment related thereto;
(iv) make any amendment to the Certificate of Incorporation
or the Company's bylaws, or file any resolution of the board of
directors with the Delaware Secretary of State containing any
provisions, which would (a) adversely affect or otherwise impair the
rights or relative priority of the holders of the Series A Preferred
under this Agreement, the Certificate of Incorporation or the
Company's bylaws or (b) change or include anti-takeover provisions in
the Certificate of Incorporation or the Company's bylaws;
(v) become subject to, or permit any of its Subsidiaries to
become subject to, (including by way of amendment to or modification
of) any agreement or instrument which by its terms would (under any
circumstances) restrict (a) the right of any Subsidiary to make loans
or advances or pay dividends to, transfer property to, or repay any
Indebtedness owed to, the Company or another Subsidiary (except with
respect to any indebtedness or credit facility which is senior in
right of payment to the Notes and the Series A Preferred) or (b) the
Company's right to perform the provisions of this Agreement, the
Notes, the Amendment or the Registration Agreement (including
provisions relating to the payment of principal and interest on the
Notes and the redemption of, and payment of dividends with respect to,
the Series A Preferred);
(vi) enter into, amend, modify or supplement, or permit any
Subsidiary to enter into, amend, modify or supplement, any agreement,
transaction, commitment or arrangement with any of its or any
Subsidiary's officers, directors or Affiliates or with any individual
related by blood, marriage or adoption to any such individual or with
any entity in which any such Person or individual owns a beneficial
interest (other than any such agreements, transactions, commitments or
arrangements between the Company and any Subsidiary), except for
compensation, options and benefit programs approved by the
Compensation Committee of the Company's board of directors or other
transactions approved by an independent committee of the Company's
board of directors and except as otherwise expressly contemplated by
this Agreement.
G. AFFIRMATIVE COVENANTS. So long as any of the Notes or any shares
of Series A Preferred remain outstanding, the Company shall, and shall
cause each Subsidiary to, unless it has received the prior written consent
of the holders of a majority of the outstanding principal amount of the
Notes and the holders of a majority of the outstanding shares of Series A
Preferred:
(i) at all times cause to be done all things necessary to
maintain, preserve and renew its corporate existence (except that a
wholly-owned Subsidiary may be merged or liquidated into the Company
or another Subsidiary) and all material licenses, authorizations and
permits necessary to the conduct of its businesses;
(ii) maintain and keep its material properties in good repair,
working order and condition, and from time to time make all necessary
or desirable repairs, renewals and replacements to its properties so
that its businesses may be properly and advantageously conducted at
all times in all material respects;
(iii) pay and discharge when payable all material taxes,
assessments and governmental charges imposed upon its properties or
upon the income or profits therefrom (in each case before the same
becomes delinquent and before penalties accrue thereon) and all
material claims for labor, materials or supplies which if unpaid would
by law become a Lien upon any of its property unless and to the extent
that the same are being contested in good faith and by appropriate
proceedings and adequate reserves (as determined in accordance with
generally accepted accounting principles, consistently applied) have
been established on its books with respect thereto;
(iv) comply with all other material obligations which it incurs
pursuant to any contract or agreement, whether oral or written,
express or implied, as such obligations become due, unless and to the
extent that the same are being contested in good faith and by
appropriate proceedings and adequate reserves (as determined in
accordance with generally accepted accounting principles, consistently
applied) have been established on its books with respect thereto;
(v) comply with all applicable laws, rules and regulations of
all governmental authorities, the violation of which would reasonably
be expected to have a material adverse effect upon the financial
condition, operating results, assets, operations or business prospects
of the Company and its Subsidiaries taken as a whole;
(vi) continue in force the insurance coverages existing as of the
date hereof, with such additional or supplemental insurance as is
customary for corporations of similar size engaged in similar lines of
business; and
(vii) maintain proper books of record and account which
present fairly in all material respects its financial condition and
results of operations and make provisions on its financial statements
for all such proper reserves as in each case are required in
accordance with generally accepted accounting principles, consistently
applied.
H. USE OF PROCEEDS. The Company shall not, nor shall it permit any
Subsidiary to, use any proceeds from the sale of the Notes hereunder,
directly or indirectly, for the purposes of purchasing or carrying any
"margin securities" within the meaning of Regulation G or T promulgated by
the Board of Governors of the Federal Reserve Board or for the purpose of
arranging for the extension of credit secured, directly or indirectly, in
whole or in part by collateral that includes any "margin securities."
I. CURRENT PUBLIC INFORMATION. The Company shall file all reports
required to be filed by it under the Securities Act and the Securities
Exchange Act and the rules and regulations adopted by the Securities and
Exchange Commission thereunder and shall take such further action as any
holder or holders of Restricted Securities may reasonably request, all to
the extent required to enable such holders to sell Restricted Securities
pursuant to (i) Rule 144 adopted by the Securities and Exchange Commission
under the Securities Act (as such rule may be amended from time to time) or
any similar rule or regulation hereafter adopted by the Securities and
Exchange Commission or (ii) a registration statement on Form S-2 or S-3 or
any similar registration form hereafter adopted by the Securities and
Exchange Commission. Upon request, the Company shall deliver to any holder
of Restricted Securities a written statement as to whether it has complied
with such requirements.
J. FIRST OFFER RIGHTS.
(i) Except for issuances of Common Stock (a) pursuant to options for
Common Stock granted to the employees of the Company or any Subsidiary, (b)
upon the conversion of the Notes or the Series A Preferred or upon the
exercise of the Warrants, (c) in connection with the acquisition (however
effected) of another company or business, (d) pursuant to a public offering
registered under the Securities Act, (e) to the Company's lenders in
connection with the provision or extension of senior debt financing to the
Company or any Subsidiary or (f) for strategic investment by any entity
which directly or through one or more subsidiaries is engaged in the
business of providing telecommunication services or other utility services
as a material portion of its business, if the Company proposes the issuance
or sale of any shares of Common Stock or any securities containing options
or rights to acquire any shares of Common Stock (other than as a dividend
on the outstanding Common Stock), the Company shall first offer to sell to
each holder of Underlying Common Stock a portion of such stock or
securities equal to the quotient determined by dividing (1) the number of
shares of Underlying Common Stock held by such holder by (2) the sum of the
total number of shares of Underlying Common Stock and the number of shares
of Common Stock outstanding which are not shares of Underlying Common
Stock. Each holder of Underlying Common Stock shall be entitled to
purchase such stock or securities at the most favorable price and on the
most favorable terms as such stock or securities are to be offered to any
other Persons; provided that if all Persons entitled to purchase or receive
such stock or securities are required to also purchase other securities of
the Company, the holders of Underlying Common Stock exercising their rights
pursuant to this paragraph shall also be required to purchase the same
strip of securities (on the same terms and conditions) that such other
Persons are required to purchase. The purchase price for all stock and
securities offered to the holders of the Underlying Common Stock shall be
payable in cash or, to the extent otherwise required hereunder, notes
issued by such holders.
(ii) In order to exercise its purchase rights hereunder, a holder of
Underlying Common Stock must within 15 days after receipt of written notice
from the Company describing in reasonable detail the stock or securities
being offered, the purchase price thereof, the payment terms and such
holder's percentage allotment deliver a written notice to the Company
describing its election hereunder. If all of the stock and securities
offered to the holders of Underlying Common Stock is not fully subscribed
by such holders, the remaining stock and securities shall be reoffered by
the Company to the holders purchasing their full allotment upon the terms
set forth in this paragraph, except that such holders must exercise their
purchase rights within five days after receipt of such reoffer.
(iii) Upon the expiration of the offering periods described above,
the Company shall be entitled to sell such stock or securities which the
holders of Underlying Common Stock have not elected to purchase during the
90 days following such expiration at a price no less than 90% of the price
at which such stock or securities were offered to such holders and on other
terms and conditions no more favorable in any material respect to the
purchasers thereof than those offered to such holders. Any stock or
securities offered or sold by the Company after such 90-day period must be
reoffered to the holders of Underlying Common Stock pursuant to the terms
of this paragraph.
K. SBIC REGULATORY PROVISIONS.
(i) Within 75 days after the Closing and at the end of each month
thereafter until all of the proceeds from the Financing hereunder have been
used by the Company and its Subsidiaries, the Company shall deliver to each
SBIC Holder a written statement certified by the Company's president or
chief financial officer describing in reasonable detail the use of the
proceeds of the Financing hereunder by the Company and its Subsidiaries.
In addition to any other rights granted hereunder, the Company shall grant
each SBIC Holder and the United States Small Business Administration (the
"SBA") access to the Company's records for the purpose of verifying the use
of such proceeds.
(ii) Upon the occurrence of a Regulatory Violation or in the event
that any SBIC Holder determines in its reasonable good faith judgment that
a Regulatory Violation has occurred, in addition to any other rights and
remedies to which it may be entitled as a holder of Notes, Series A
Preferred or Underlying Common Stock (whether under this Agreement, the
Certificate of Incorporation or otherwise), each SBIC Holder shall have the
right to the extent required under the SBIC Regulations to demand the
immediate repurchase of all of the Notes, Series A Preferred and Underlying
Common Stock owned by such SBIC Holder at a price equal to the aggregate
unpaid principal amount of the Notes and all accrued and unpaid interest
thereon and the amount paid for such stock hereunder, plus all accrued or
declared and unpaid dividends thereon, by delivering written notice of such
demand to the Company. The Company shall pay the purchase price for such
securities by a cashier's or certified check or by wire transfer of
immediately available funds to each SBIC Holder demanding repurchase within
30 days after the Company's receipt of the demand notice, and upon such
payment, each such SBIC Holder shall deliver the instruments and
certificates evidencing the Notes, Series A Preferred and Underlying Common
Stock to be repurchased duly endorsed for transfer or accompanied by duly
executed forms of assignment.
(iii) The Company shall use the proceeds of the Financing
hereunder to repay Indebtedness in the United States, to acquire capital
assets in the United States, to provide working capital to its U.S.
operations and for other purposes complying with the SBA Regulations.
(iv) For purposes of this paragraph, "REGULATORY VIOLATION" means,
with respect to any SBIC Holder providing Financing under this Agreement,
(a) a diversion of the proceeds of such Financing from the reported use
thereof on the use of proceeds statement delivered by the Company on SBA
Form 1031 delivered at the Closing, if such diversion was effected without
obtaining the prior written consent of the SBIC Holders (which may be
withheld in their sole discretion) or (b) a change in the principal
business activity of the Company and its Subsidiaries to an ineligible
business activity (within the meaning of the SBIC Regulations) if such
change occurs within one year after the date of the initial Financing
hereunder; and the term "FINANCING" shall have the meaning set forth in the
SBIC Regulations.
L. REGULATORY COMPLIANCE COOPERATION. In the event that any SBIC
Holder determines that it has a Regulatory Problem (as defined below), the
Company shall take all such actions as are reasonably requested by such
SBIC Holder in order to effectuate and facilitate any transfer by such SBIC
Holder of any securities of the Company then held by such SBIC Holder to
any Person designated by such SBIC Holder to alleviate such Regulatory
Problem. For purposes of this Agreement, a "REGULATORY PROBLEM" means any
set of facts or circumstances wherein it has been asserted by any
governmental regulatory agency (or such SBIC Holder believes that there is
a substantial risk of such assertion) that such SBIC Holder and its
Affiliates are not entitled to hold, or exercise any significant right with
respect to, the Series A Preferred or the Common Stock.
M. SPRINGING WARRANTS.
(i) At the Closing, the Company shall issue to each Purchaser of
Notes a Springing Warrant substantially in the form of EXHIBIT G hereto for
the consideration set forth in paragraph 1B hereof. Each Springing Warrant
shall provide that upon any Optional Prepayment of the Notes or Optional
Redemption of the Series A Preferred, the holders of the Notes and the
holders of the Series A Preferred shall have the right to acquire initially
the same number of shares of Common Stock into which the portion of such
holder's Note or such holder's shares of Series A Preferred, the case may
be, being repaid (the "Repaid Amount") is convertible as of the payment
date. The initial exercise price for each share of Common Stock under the
Springing Warrant shall be equal to the Conversion Price under the Notes or
the Series A Preferred as of the payment date, and the Springing Warrant
shall be exercisable at any time thereafter and shall expire (unless
previously exercised) on the seventh anniversary of the Closing, but in no
event shall the Springing Warrants be exercisable after the sixth
anniversary of the prepayment of all of the SBIC Holder's Notes.
(ii) Terms used in this paragraph 3M and not otherwise defined herein
have the meanings set forth in the Notes or the Amendment, as applicable.
N. CONSULTANT'S REPORT. Within 30 days after the Closing, the
Company shall retain Somerville & Company, Inc. and cause it to prepare and
deliver an organizational study of the Company's senior management team;
provided that the cost of such study is not reasonably projected to exceed
the amount equal to (i) $400,000 LESS (ii) the amount of expenses payable
by the Company pursuant to paragraph 8A(i) below.
Section 4. TRANSFER OF RESTRICTED SECURITIES.
A. GENERAL PROVISIONS. Restricted Securities are transferable only
pursuant to (i) public offerings registered under the Securities Act, (ii)
Rule 144 or Rule 144A of the Securities and Exchange Commission (or any
similar rule or rules then in force) if such rule is available and (iii)
subject to the conditions specified in paragraph 4B below, any other
legally available means of transfer.
B. OPINION DELIVERY. In connection with the transfer of any
Restricted Securities (other than a transfer described in paragraph 4A(i)
or (ii) above), the holder thereof shall deliver written notice to the
Company describing in reasonable detail the transfer or proposed transfer,
together with an opinion of Kirkland & Ellis or other counsel which (to the
Company's reasonable satisfaction) is knowledgeable in securities law
matters to the effect that such transfer of Restricted Securities may be
effected without registration of such Restricted Securities under the
Securities Act. In addition, if the holder of the Restricted Securities
delivers to the Company an opinion of Kirkland & Ellis or such other
counsel that no subsequent transfer of such Restricted Securities shall
require registration under the Securities Act, the Company shall promptly
upon such contemplated transfer deliver new certificates for such
Restricted Securities which do not bear the Securities Act legend set forth
in paragraph 8C. If the Company is not required to deliver new
certificates for such Restricted Securities not bearing such legend, the
holder thereof shall not transfer the same until the prospective transferee
has confirmed to the Company in writing its agreement to be bound by the
conditions contained in this paragraph and paragraph 8C.
C. RULE 144A. Upon the request of any Purchaser, the Company shall
promptly supply to such Purchaser or its prospective transferees all
information regarding the Company required to be delivered in connection
with a transfer pursuant to Rule 144A of the Securities and Exchange
Commission.
D. LEGEND REMOVAL. If any Restricted Securities become eligible for
sale pursuant to Rule 144(k), the Company shall, upon the request of the
holder of such Restricted Securities, remove the legend set forth in
paragraph 8C from the certificates for such Restricted Securities.
E. FOREIGN OWNERSHIP RESTRICTIONS. Any holder of Restricted
Securities shall not transfer any Restricted Securities if such transfer
results in the violation by the Company of the provisions of 42 U.S.C.
Section 310(b)(4).
Section 5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. As
a material inducement to the Purchasers to enter into this Agreement and
purchase the Notes and the Warrants hereunder, the Company hereby
represents and warrants that:
A. ORGANIZATION, CORPORATE POWER AND LICENSES. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of Delaware and is qualified to do business in every jurisdiction in
which its ownership of property or conduct of business requires it to
qualify, except where the failure to so qualify would not have a material
adverse effect on the Company. The Company possesses all requisite
corporate power and authority and all material licenses, permits and
authorizations necessary to own and operate its properties, to carry on its
businesses as now conducted and presently proposed to be conducted and to
carry out the transactions contemplated by this Agreement. The copies of
the Company's and each Material Subsidiary's charter documents and bylaws
which have been furnished to the Purchasers' special counsel reflect all
amendments made thereto at any time prior to the date of this Agreement and
are correct and complete.
B. CAPITAL STOCK AND RELATED MATTERS.
(i) As of the Closing and immediately thereafter, the authorized
capital stock of the Company shall consist of 50,000,000 shares of Common
Stock, of which 7,756,584 shares shall be issued and outstanding and
725,000 shares shall be reserved for issuance upon conversion of the Notes
or the Series A Preferred or exercise of the Warrants. As of the Closing,
neither the Company nor any Subsidiary shall have outstanding any stock or
securities convertible or exchangeable for any shares of its capital stock
or containing any profit participation features, nor shall it have
outstanding any rights or options to subscribe for or to purchase its
capital stock or any stock or securities convertible into or exchangeable
for its capital stock or any stock appreciation rights or phantom stock
plans, except for the Notes and the Warrants and except as set forth on the
attached "Capitalization Schedule." The Capitalization Schedule accurately
sets forth the following information with respect to all outstanding
options and rights to acquire the Company's capital stock: the holder, the
number of shares covered, the exercise price and the expiration date. As
of the Closing, neither the Company nor any Subsidiary shall be subject to
any obligation (contingent or otherwise) to repurchase or otherwise acquire
or retire any shares of its capital stock or any warrants, options or other
rights to acquire its capital stock, except for the Notes and except as set
forth on the Capitalization Schedule. As of the Closing, all of the
outstanding shares of the Company's capital stock shall be validly issued,
fully paid and nonassessable.
(ii) There are no statutory or, to the best of the Company's
knowledge, contractual stockholders preemptive rights or rights of refusal
with respect to the issuance of the Notes or the Warrants hereunder, the
issuance of the Series A Preferred upon conversion of the Notes or the
issuance of the Common Stock upon conversion of the Notes or the Series A
Preferred or upon exercise of the Warrants. The Company has not violated
any applicable federal or state securities laws in connection with the
offer, sale or issuance of any of its capital stock, and the offer, sale
and issuance of the Notes or the Warrants hereunder do not require
registration or qualification under the Securities Act or any applicable
state securities laws. To the best of the Company's knowledge, there are
no agreements between the Company's stockholders with respect to the voting
or transfer of the Company's capital stock or with respect to any other
aspect of the Company's affairs, except for the Participation Agreement.
C. MATERIAL SUBSIDIARIES; INVESTMENTS. The attached "Material
Subsidiary Schedule" correctly sets forth the name of each Material
Subsidiary, the jurisdiction of its incorporation and the Persons owning
the outstanding capital stock of such Material Subsidiary. Each Material
Subsidiary is duly organized, validly existing and in good standing under
the laws of the jurisdiction of its incorporation, possesses all requisite
corporate power and authority and all material licenses, permits and
authorizations necessary to own its properties and to carry on its
businesses as now being conducted and as presently proposed to be conducted
and is qualified to do business in every jurisdiction in which its
ownership of property or the conduct of business requires it to qualify,
except where the failure to so qualify would not have a material adverse
effect on the Company or such Material Subsidiary. Except as set forth on
the Material Subsidiary Schedule, all of the outstanding shares of capital
stock of each Material Subsidiary are validly issued, fully paid and
nonassessable, and all such shares are owned by the Company or another
Subsidiary free and clear of any Lien and not subject to any option or
right to purchase any such shares. Except as set forth on the Material
Subsidiary Schedule, neither the Company nor any Material Subsidiary owns
or holds the right to acquire any shares of stock or any other security or
interest in any other Person.
D. AUTHORIZATION; NO BREACH. The execution, delivery and
performance of this Agreement, the Notes, the Registration Agreement, the
Warrants and all other agreements and instruments contemplated hereby to
which the Company is a party, have been duly authorized by the Company.
This Agreement, the Registration Agreement, the Notes, the Warrants, the
Certificate of Incorporation and all other agreements and instruments
contemplated hereby to which the Company is a party each constitutes a
valid and binding obligation of the Company, enforceable in accordance with
its terms. Except as set forth on the attached "Restrictions Schedule," the
execution and delivery by the Company of this Agreement, the Notes, the
Registration Agreement, the Warrants, and all other agreements and
instruments contemplated hereby to which the Company is a party, the
offering, sale and issuance of the Notes and the Warrants hereunder, the
issuance of the Series A Preferred upon conversion of the Notes, the
issuance of the Common Stock upon conversion of the Notes or the Series A
Preferred, the issuance of Common Stock upon exercise of Warrants, the
amendment of the Certificate of Incorporation and the fulfillment of and
compliance with the respective terms hereof and thereof by the Company, do
not and shall not (i) conflict with or result in a breach of the terms,
conditions or provisions of, (ii) constitute a default under, (iii) result
in the creation of any lien, security interest, charge or encumbrance upon
the Company's or any Subsidiary's capital stock or assets pursuant to, (iv)
give any third party the right to modify, terminate or accelerate any
obligation under, (v) result in a violation of, or (vi) require any
authorization, consent, approval, exemption or other action by or notice or
declaration to, or filing with, any court or administrative or governmental
body or agency pursuant to, the charter or bylaws of the Company or any
Material Subsidiary, or any law, statute, rule or regulation to which the
Company or any Material Subsidiary is subject (including, without
limitation, any usury laws applicable to the Notes), or any material
agreement, instrument, order, judgment or decree to which the Company or
any Material Subsidiary is subject. Except as set forth on the
Restrictions Schedule, none of the Material Subsidiaries are subject to any
restrictions upon making loans or advances or paying dividends to,
transferring property to, or repaying any Indebtedness owed to, the Company
or another Subsidiary.
E. FINANCIAL STATEMENTS. The Company has previously furnished to
each Purchaser true and complete copies of the following financial
statements:
(i) the audited consolidated balance sheets of the Company and
its Subsidiaries as of December 31, 1994 (the "Latest Balance Sheet"),
December 31, 1993, and December 31, 1992, and the related statements
of income and cash flows (or the equivalent) for the respective
twelve-month periods then ended; and
(ii) the unaudited consolidated balance sheet of the Company and
its Subsidiaries as of March 31, 1995, and the related statements of
income and cash flows (or the equivalent) for the three-month period
then ended.
Each of the foregoing financial statements (including in all cases the
notes thereto, if any) is accurate and complete in all material respects,
is consistent with the books and records of the Company and its
Subsidiaries (which, in turn, are accurate and complete in all material
respects) and has been prepared in accordance with generally accepted
accounting principles, consistently applied, subject in the case of the
unaudited financial statements to the absence of footnote disclosure and
changes resulting from normal year-end adjustments for recurring accruals
(none of which would, alone or in the aggregate, be materially adverse to
the financial condition, operating results, assets, operations or business
prospects of the Company and its Subsidiaries taken as a whole).
F. ABSENCE OF UNDISCLOSED LIABILITIES. Except as set forth on the
attached "Liabilities Schedule," the Company and its Subsidiaries do not
have any material obligation or liability (whether accrued, absolute,
contingent, unliquidated or otherwise, whether or not known to the Company
or any Subsidiary, whether due or to become due and regardless of when
asserted) arising out of transactions entered into at or prior to the
Closing, or any action or inaction at or prior to the Closing, or any state
of facts existing at or prior to the Closing other than: (i) liabilities
set forth on the Latest Balance Sheet (including any notes thereto), (ii)
liabilities and obligations which have arisen after the date of the Latest
Balance Sheet in the ordinary course of business (none of which is a
liability resulting from breach of contract, breach of warranty, tort,
infringement, claim or lawsuit) and (iii) other liabilities and obligations
expressly disclosed in the other Schedules to this Agreement.
G. NO MATERIAL ADVERSE CHANGE. Since the date of the Latest Balance
Sheet, there has been no material adverse change in the financial
condition, operating results, assets, operations, employee relations or
customer or supplier relations of the Company and its Subsidiaries taken as
a whole.
H. ABSENCE OF CERTAIN DEVELOPMENTS.
(i) Except as expressly contemplated by this Agreement or as set
forth on the attached "Developments Schedule," since the date of the Latest
Balance Sheet, neither the Company nor any Material Subsidiary have
(a) issued any notes, bonds or other debt securities or any
capital stock or other equity securities or any securities
convertible, exchangeable or exercisable into any capital stock or
other equity securities;
(b) borrowed any amount or incurred or become subject to any
material liabilities, except current liabilities incurred in the
ordinary course of business and liabilities under contracts entered
into in the ordinary course of business;
(c) discharged or satisfied any material Lien or paid any
material obligation or liability, other than current liabilities paid
in the ordinary course of business;
(d) declared or made any payment or distribution of cash or
other property to its stockholders with respect to its capital stock
or other equity securities or purchased or redeemed any shares of its
capital stock or other equity securities (including any warrants,
options or other rights to acquire its capital stock or other equity
securities);
(e) mortgaged or pledged any of its properties or assets or
subjected them to any material Lien, except Liens for current property
taxes not yet due and payable;
(f) sold, assigned or transferred any of its tangible assets,
except in the ordinary course of business, or canceled any material
debts or claims;
(g) sold, assigned or transferred any patents or patent
applications, trademarks, service marks, trade names, corporate names,
copyrights or copyright registrations, trade secrets or other
intangible assets, or disclosed any material proprietary confidential
information to any Person;
(h) suffered any material extraordinary losses or waived any
rights of material value, whether or not in the ordinary course of
business or consistent with past practice;
(i) made capital expenditures or commitments therefor that
aggregate in excess of $250,000;
(j) made any loans or advances to, guarantees for the benefit
of, or any Investments in, any Persons in excess of $50,000 in the
aggregate;
(k) made any charitable contributions or pledges in excess of
$50,000 in the aggregate;
(l) suffered any damage, destruction or casualty loss exceeding
in the aggregate $50,000, whether or not covered by insurance;
(m) made any Investment in or taken steps to incorporate any
Subsidiary; or
(n) entered into any other material transaction other than in
the ordinary course of business.
(ii) Neither the Company nor any Subsidiary has at any time made any
bribes, kickback payments or other illegal payments.
I. ASSETS. Except as set forth on the attached "Assets Schedule,"
the Company and each Material Subsidiary have good and marketable title to,
or a valid leasehold interest in, the material properties and assets used
by them, located on their premises or shown on the Latest Balance Sheet or
acquired thereafter, free and clear of all Liens, except for properties and
assets disposed of in the ordinary course of business since the date of the
Latest Balance Sheet and except for Liens disclosed on the Latest Balance
Sheet (including any notes thereto) and Liens for current property taxes
not yet due and payable. Except as described on the Assets Schedule, the
Company's and each Material Subsidiary's buildings, equipment and other
tangible assets are in good operating condition in all material respects
and are fit for use in the ordinary course of business. The Company and
each Material Subsidiary own, or have a valid leasehold interest in, all
material tangible assets necessary for the conduct of their respective
businesses as presently conducted and as presently proposed to be
conducted.
J. TAX MATTERS.
(i) Except as set forth on the attached "Taxes Schedule": the Company
and each Subsidiary have filed all material Tax Returns which they are
required to file under applicable laws and regulations; all such Tax
Returns are complete and correct in all material respects and have been
prepared in compliance with all applicable laws and regulations in all
material respects; the Company and each Subsidiary in all material respects
have paid all Taxes due and owing by them (whether or not such Taxes are
required to be shown on a Tax Return) and have withheld and paid over to
the appropriate taxing authority all Taxes which they are required to
withhold from amounts paid or owing to any employee, stockholder, creditor
or other third party; neither the Company nor any Subsidiary has waived any
statute of limitations with respect to any material Taxes or agreed to any
extension of time with respect to any material Tax assessment or
deficiency; the accrual for Taxes on the Latest Balance Sheet would be
adequate to pay all Tax liabilities of the Company and its Subsidiaries if
their current tax year were treated as ending on the date of the Latest
Balance Sheet (excluding any amount recorded which is attributable solely
to timing differences between book and Tax income); since the date of the
Latest Balance Sheet, the Company and its Subsidiaries have not incurred
any material liability for Taxes other than in the ordinary course of
business; the assessment of any additional Taxes for periods for which Tax
Returns have been filed by the Company and each Subsidiary shall not exceed
the recorded liability therefor on the Latest Balance Sheet (excluding any
amount recorded which is attributable solely to timing differences between
book and Tax income); the federal income Tax Returns of the Company and its
Subsidiaries have been audited and closed for all tax years through 1989;
except as set forth on the Tax Audit Schedule, no foreign, federal, state
or local tax audits or administrative or judicial proceedings are pending
or being conducted with respect to the Company, any Subsidiary nor
information related to Tax matters has been requested by any foreign,
federal, state or local taxing authority and no written notice indicating
an intent to open an audit or other review has been received by the Company
from any foreign, federal, state or local taxing authority; and there are
no material unresolved questions or claims concerning the Company's, any
Subsidiary's Tax liability.
(ii) Neither the Company nor any of its Subsidiaries has made an
election under Section 341(f) of the Internal Revenue Code of 1986, as
amended. Neither the Company nor any Subsidiary has been or is currently a
member of an Affiliated Group, except for the Affiliated Group in which the
Company is the parent. Neither the Company nor any Subsidiary is liable
for the Taxes of another Person that is not a Subsidiary in a material
amount under (a) Treas. Reg. Section 1.1502-6 (or comparable provisions
of state, local or foreign law), (b) as a transferee or successor, (c) by
contract or indemnity or (d) otherwise. Neither the Company nor any
Subsidiary is a party to any tax sharing agreement. The Company, each
Subsidiary have disclosed on their federal income Tax Returns any position
taken for which substantial authority (within the meaning of IRC
Section 6662(d)(2)(B)(i)) did not exist at the time the return was filed.
Neither the Company nor any Subsidiary has made any payments, is obligated
to make payments or is a party to an agreement that could obligate it to
make any payments that would not be deductible under IRC Section 280G.
(iii) "TAX" or "TAXES" means federal, state, county, local,
foreign or other income, gross receipts, ad valorem, franchise, profits,
sales or use, transfer, registration, excise, utility, environmental,
communications, real or personal property, capital stock, license, payroll,
wage or other withholding, employment, social security, severance, stamp,
occupation, alternative or add-on minimum, estimated and other taxes of any
kind whatsoever (including, without limitation, deficiencies, penalties,
additions to tax, and interest attributable thereto) whether disputed or
not. "Tax Return" means any return, information report or filing with
respect to Taxes, including any schedules attached thereto and including
any amendment thereof. "AFFILIATED GROUP" means any affiliated group as
defined in IRC Section 1504 that has filed a consolidated return for
federal income tax purposes (or any similar group under state, local or
foreign law) for a period during which any of the Company or any of its
Subsidiaries was a member.
K. CONTRACTS AND COMMITMENTS.
(i) Except as expressly contemplated by this Agreement or as set
forth on the attached "Contracts Schedule" or the attached "Employee
Benefits Schedule," neither the Company nor any Subsidiary is a party to or
bound by any written or oral:
(a) pension, profit sharing, stock option, employee stock
purchase or other plan or arrangement providing for deferred or other
compensation to employees or any other employee benefit plan or
arrangement, or any collective bargaining agreement or any other
contract with any labor union, or severance agreements, programs,
policies or arrangements;
(b) contract for the employment of any officer, individual
employee or other Person on a full-time, part-time, consulting or
other basis providing annual compensation in excess of $50,000 or
contract relating to loans to officers, directors or Affiliates;
(c) contract under which the Company or Subsidiary has advanced
or loaned any other Person amounts in the aggregate exceeding $50,000;
(d) agreement or indenture relating to borrowed money or other
Indebtedness or the mortgaging, pledging or otherwise placing a Lien
on any material asset or material group of assets of the Company and
its Subsidiaries;
(e) guarantee of any obligation in excess of $50,000 (other than
by the Company of a wholly-owned Subsidiary's debts or a guarantee by
a Subsidiary of the Company's debts or another Subsidiary's debts);
(f) lease or agreement under which the Company or any Subsidiary
is lessee of or holds or operates any property, real or personal,
owned by any other party, except for any lease of real or personal
property under which the aggregate annual rental payments do not
exceed $50,000;
(g) lease or agreement under which the Company or any Subsidiary
is lessor of or permits any third party to hold or operate any
property, real or personal, owned or controlled by the Company or any
Subsidiary;
(h) contract or group of related contracts with the same party
or group of affiliated parties the performance of which involves
consideration in excess of $100,000;
(i) assignment, license, indemnification or agreement with
respect to any intangible property (including any Intellectual
Property);
(j) warranty agreement with respect to its services rendered or
its products sold or leased;
(k) agreement under which it has granted any Person any
registration rights (including demand and piggyback registration
rights);
(l) sales, distribution or franchise agreement;
(m) agreement with a term of more than six months which is not
terminable by the Company or any Subsidiary upon 30 days' or less
notice without material penalty;
(n) contract or agreement prohibiting it from freely engaging in
any business or competing anywhere in the world; or
(o) any other agreement which is material to its operations and
business prospects or involves a consideration in excess of $100,000
annually.
(ii) All of the contracts, agreements and instruments set forth on the
Contracts Schedule are valid, binding and enforceable against the Company
or the Subsidiary that is a party thereto in accordance with their
respective terms. The Company and each Subsidiary have performed all
material obligations required to be performed by them under the contracts,
agreements and instruments listed on the Contracts Schedule and are not in
material default under or in material breach of nor in receipt of any claim
of default or breach under any contract, agreement or instrument listed on
the Contracts Schedule; no event has occurred which with the passage of
time or the giving of notice or both would result in a material default,
breach or event of noncompliance by the Company or any Subsidiary under any
contract, agreement or instrument listed on the Contracts Schedule; neither
the Company nor any Subsidiary has any present expectation or intention of
not fully performing all such material obligations; neither the Company nor
any Subsidiary has knowledge of any material breach or anticipated material
breach by the other parties to any contract, agreement, instrument or
commitment listed on the Contracts Schedule.
(iii) The Purchasers' special counsel has been supplied with a
true and correct copy of each of the written instruments, plans, contracts
and agreements and an accurate description of each of the oral
arrangements, contracts and agreements which are referred to on the
Contracts Schedule, together with all amendments, waivers or other changes
thereto.
L. INTELLECTUAL PROPERTY RIGHTS.
(i) The attached "Intellectual Property Schedule" contains a complete
and accurate list of all (a) material patented or registered Intellectual
Property Rights owned or used by the Company or any Subsidiary, (b)
material pending patent applications and applications for registrations of
other Intellectual Property Rights filed by the Company or any Subsidiary,
(c) material unregistered trade names and corporate names owned or used by
the Company or any Subsidiary and (d) material unregistered trademarks,
service marks, copyrights, mask works and computer software owned or used
by the Company or any Subsidiary. The Intellectual Property Schedule also
contains a complete and accurate list of all licenses and other rights
granted by the Company or any Subsidiary to any third party with respect to
any material Intellectual Property Rights and all licenses and other rights
granted by any third party to the Company or any Subsidiary with respect to
any material Intellectual Property Rights, in each case identifying the
subject Intellectual Property Rights. Except as set forth on the
Intellectual Property Schedule, the Company or one of its Subsidiaries owns
all right, title and interest to, or has the right to use pursuant to a
valid license, all Intellectual Property Rights necessary for the operation
of the businesses of the Company and its Subsidiaries as presently
conducted and as presently proposed to be conducted, free and clear of all
Liens. Except as set forth on the Intellectual Property Schedule, the loss
or expiration of any Intellectual Property Right or related group of
Intellectual Property Rights owned or used by the Company or any Subsidiary
has not had and would not reasonably be expected to have a material adverse
effect on the conduct of the Company's and its Subsidiaries' respective
businesses, and no such loss or expiration is, to the best of the Company's
knowledge, threatened, pending or reasonably foreseeable. The Company and
its Subsidiaries have taken all reasonably necessary and desirable actions
to maintain and protect the material Intellectual Property Rights which
they own.
(ii) Except as set forth on the Intellectual Property Schedule, (a)
the Company and its Subsidiaries own all right, title and interest in and
to all of the Intellectual Property Rights listed on such schedule, free
and clear of all Liens, (b) there have been no claims made against the
Company or any Subsidiary asserting the invalidity, misuse or
unenforceability of any of such Intellectual Property Rights, (c) neither
the Company nor any Subsidiary has received any notices of any infringement
or misappropriation by, or conflict with, any third party with respect to
such Intellectual Property Rights (including, without limitation, any
demand or request that the Company or any Subsidiary license any rights
from a third party), (d) the conduct of the Company's and each Subsidiary's
business has not infringed, misappropriated or conflicted with and does not
infringe, misappropriate or conflict with any material Intellectual
Property Rights of other Persons, nor would any future conduct as presently
contemplated infringe, misappropriate or conflict with any material
Intellectual Property Rights of other Persons and (e) to the best of the
Company's knowledge, the Intellectual Property Rights owned by or licensed
to the Company or any Subsidiary have not been materially infringed,
misappropriated or conflicted by other Persons in any material respect.
Except as set forth in the Intellectual Property Schedule, the transactions
contemplated by this Agreement will have no material adverse effect on the
Company's or any Subsidiary's right, title and interest in and to the
Intellectual Property Rights listed on the Intellectual Property Schedule.
M. LITIGATION, ETC. Except as set forth on the attached "Litigation
Schedule," there are no actions, suits, proceedings, orders, investigations
or claims pending or, to the best of the Company's knowledge, threatened
against or affecting the Company or any Material Subsidiary (or to the best
of the Company's knowledge, pending or threatened against or affecting any
of the officers, directors or employees of the Company and its Material
Subsidiaries with respect to their businesses or proposed business
activities), or pending or threatened by the Company or any Material
Subsidiary against any third party, at law or in equity, or before or by
any governmental department, commission, board, bureau, agency or
instrumentality (including any actions, suit, proceedings or investigations
with respect to the transactions contemplated by this Agreement); there are
no other actions, suits, proceedings, orders, investigations or claims
pending or, to the Company's knowledge, threatened against or affecting the
Company or any Subsidiary which if adversely determined would have a
material adverse effect on the Company and its Subsidiaries, taken as a
whole; and neither the Company nor any Material Subsidiary is subject to
any arbitration proceedings under collective bargaining agreements or
otherwise or, to the best of the Company's knowledge, any governmental
investigations or inquiries (including inquiries as to the qualification to
hold or receive any license or permit). Neither the Company nor any
Subsidiary is subject to any material judgment, order or decree of any
court or other governmental agency.
N. BROKERAGE. Except as set forth on the attached "Brokerage
Schedule," there are no claims for brokerage commissions, finders' fees or
similar compensation in connection with the transactions contemplated by
this Agreement based on any arrangement or agreement binding upon the
Company or any Subsidiary. The Company shall pay, and hold each Purchaser
harmless against, any liability, loss or expense (including reasonable
attorneys' fees and out-of-pocket expenses) arising in connection with any
such claim.
O. GOVERNMENTAL CONSENT, ETC. No permit, consent, approval or
authorization of, or declaration to or filing by the Company with, any
governmental authority is required in connection with the execution,
delivery and performance by the Company of this Agreement or the other
agreements contemplated hereby, or the consummation by the Company of any
other transactions contemplated hereby or thereby, except as set forth on
the attached "Consents Schedule" and except as expressly contemplated
herein or in the exhibits hereto.
P. INSURANCE. The attached "Insurance Schedule" contains a
description of each insurance policy maintained by the Company and its
Material Subsidiaries with respect to its properties, assets and
businesses, and each such policy is in full force and effect as of the
Closing. Neither the Company nor any Material Subsidiary is in material
default with respect to its obligations under any insurance policy
maintained by it, and neither the Company nor any Material Subsidiary has
been denied insurance coverage in the past five years. The insurance
coverage of the Company and its Material Subsidiaries is customary for
corporations of similar size engaged in similar lines of business. Except
as set forth on the Insurance Schedule, the Company and its Material
Subsidiaries do not have any self-insurance or co-insurance programs, and
the reserves set forth on the Latest Balance Sheet are adequate to cover
all anticipated liabilities with respect to any such self-insurance or co-
insurance programs.
Q. EMPLOYEES. Except as set forth on the attached "Employees
Schedule," the Company is not aware that any executive or key employee of
the Company or any Material Subsidiary or any group of employees of the
Company or any Material Subsidiary has any plans to terminate employment
with the Company or any Material Subsidiary. The Company and each Material
Subsidiary have complied in all material respects with all laws relating to
the employment of labor (including provisions thereof relating to wages,
hours, equal opportunity, collective bargaining and the payment of social
security and other taxes), and the Company is not aware that it or any
Material Subsidiary has any material labor relations problems (including
any union organization activities, threatened or actual strikes or work
stoppages or material grievances). Neither the Company, its Material
Subsidiaries nor, to the best of the Company's knowledge, any of their
employees is subject to any noncompete, nondisclosure, confidentiality,
employment, consulting or similar agreements relating to, affecting or in
conflict with the present or proposed business activities of the Company
and its Material Subsidiaries, except for agreements between the Company
and its present and former employees.
R. ERISA.
(i) MULTIEMPLOYER PLANS. The Company does not have any obligation to
contribute to (or any other liability, including current or potential
withdrawal liability, with respect to) any "multiemployer plan" (as defined
in Section 3(37) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")).
(ii) RETIREE WELFARE PLANS. The Company does not maintain or have any
obligation to contribute to (or any other liability with respect to) any
plan or arrangement whether or not terminated, which provides medical,
health, life insurance or other welfare-type benefits for current or future
retired or terminated employees (except for limited continued medical
benefit coverage required to be provided under Section 4980B of the IRC or
as required under applicable state law).
(iii) DEFINED BENEFIT PLANS. The Company does not maintain,
contribute to or have any liability under (or with respect to) any employee
plan which is a tax-qualified "defined benefit plan" (as defined in Section
3(35) of ERISA), whether or not terminated.
(iv) DEFINED CONTRIBUTION PLANS. The Company does not maintain,
contribute to or have any liability under (or with respect to) any employee
plan which is a tax-qualified "defined contribution plan" (as defined in
Section 3(34) of ERISA), whether or not terminated, other than the ACC
Corp. Savings and Retirement Plan (the "Profit Sharing Plan").
(v) OTHER PLANS. Except as set forth in the "Employee Benefits
Schedule", the Company does not maintain, contribute to or have any
liability under (or with respect to) any plan or arrangement providing
benefits to current or former employees, including any bonus plan, plan for
deferred compensation, employee health or other welfare benefit plan or
other arrangement, whether or not terminated. Such plans and other
arrangements are referred to as the "Other Plans."
(vi) THE COMPANY. For purposes of this paragraph 5R, the term
"Company" includes all organizations under common control with the Company
pursuant to Section 414(b) or (c) of the IRC.
(vii) PAYMENTS AND ACCRUALS. With respect to the Profit Sharing
Plan and the Other Plans (the "Plans"), all required or recommended (in
accordance with historical practices) payments, premiums, contributions,
reimbursements or accruals for all periods (or partial periods) ending
prior to or as of the Closing shall have been made or properly accrued on
the Latest Balance Sheet. None of the Plans has any material unfunded
liabilities which are not reflected on the Latest Balance Sheet.
(viii) COMPLIANCE. The Plans and all related trusts, insurance
contracts and funds have been maintained, funded and administered in
compliance in all material respects with the applicable provisions of
ERISA, the IRC and other applicable laws. Neither the Company nor any
trustee or administrator of any Plan has engaged in any transaction with
respect to the Plans which could subject the Company or any trustee or
administrator or the Plans, or any party dealing with any such Plan, nor do
the transactions contemplated by this Agreement constitute transactions
which could subject any such party, to either a civil penalty assessed
pursuant to Section 502(i) of ERISA or the tax or penalty on prohibited
transactions imposed by Section 4975 of the IRC. No actions, suits or
claims with respect to the assets of the Plans (other than routine claims
for benefits) are pending or threatened which could result in or subject
the Company to any liability, and there are no circumstances which could
give rise to or be expected to give rise to any such actions, suits or
claims.
(ix) TAX QUALIFICATION. A favorable determination letter from the IRS
has been received by the Company with respect to the Profit Sharing Plan as
amended to comply with the IRS as in effect up to the Tax Reform Act of
1986 stating that it is a qualified plan under Section 401(a) of the IRC
and there are no circumstances which would cause the Profit Sharing Plan to
lose such qualified status.
(x) CORRECT COPIES. The Company has provided the Purchasers with
true and complete copies of all documents pursuant to which the Plans are
maintained and administered and the most recent annual reports (Form 5500
and attachments) for the Plans.
S. COMPLIANCE WITH LAWS. Except as set forth on the attached
"Compliance Schedule," neither the Company nor any Subsidiary has violated
any law or any governmental regulation or requirement which violation has
had or would reasonably be expected to have a material adverse effect upon
the financial condition, operating results, assets, operations or business
prospects of the Company and its Subsidiaries taken as a whole, and neither
the Company nor any Subsidiary has received notice of any such violation.
Except as set forth on the Compliance Schedule, neither the Company nor any
Subsidiary is subject to, or has reason to believe it may become subject
to, any material liability (contingent or otherwise) or corrective or
remedial obligation arising under any federal, state, local or foreign law,
rule or regulation (including the common law) relating to or regulating
health, safety, pollution or the protection of the environment
("Environmental Laws"). Without limiting the generality of the foregoing,
(i) the Company and each Subsidiary have obtained all material permits,
licenses and authorizations required under, and have complied in all
material respects with, all Environmental Laws, (ii) no notice has been
received by the Company or any Subsidiary regarding any material violation
of, or any material claim, liability or corrective or remedial obligation
under, any Environmental Laws and (iii) to the Company's knowledge, no
facts or circumstances exist with respect to the past or present operations
or facilities of the Company or any Subsidiary which would give rise to a
material liability or corrective or remedial obligation under any
Environmental Laws.
T. SMALL BUSINESS MATTERS. The Company, together with its
"affiliates" (as that term is defined in Title 13, Code of Federal
Regulations, Section 121.401), is a "small business concern" within the
meaning of the Small Business Investment Act of 1958 and the regulations
thereunder, including Title 13, Code of Federal Regulations,
Section 121.802. The information regarding the Company and its affiliates
set forth in the Small Business Administration Form 480, Form 652 and Part
A of Form 1031 delivered at the Closing is accurate and complete. Copies
of such forms shall have been completed and executed by the Company and
delivered to each SBIC Holder at the Closing together with a written
statement of the Company regarding its planned use of the proceeds from the
sale of the Notes and the Warrants. Neither the Company nor any Subsidiary
presently engages in, and it shall not hereafter engage in, any activities,
nor shall the Company or any Subsidiary use directly or indirectly the
proceeds from the sale of the Notes and the Warrants hereunder for any
purpose, for which an SBIC is prohibited from providing funds by the Small
Business Investment Act of 1958 and the regulations thereunder (including
Title 13, Code of Federal Regulations, Section 107.901).
U. AFFILIATED TRANSACTIONS. Except as set forth on the attached
"Affiliated Transactions Schedule," no officer, director, employee, or
Affiliate of the Company or any Subsidiary or any individual related by
blood, marriage or adoption to any such individual or any entity in which
any such Person or individual owns any beneficial interest, is a party to
any agreement, contract, commitment or transaction with the Company or any
Subsidiary or has any material interest in any material property used by
the Company or any Subsidiary.
V. INVESTMENT COMPANY. Neither the Company nor any of its
Subsidiaries is an "investment company" as defined under the Investment
Company Act of 1940.
W. MARGIN SECURITIES. Neither the Company nor any of its
Subsidiaries is engaged in the business of extending credit for the purpose
of buying or carrying "margin securities" within the meaning of Regulations
G, T, U or X promulgated by the Board of Governors of the Federal Reserve
Board, and no part of the proceeds realized from the sale of the Note shall
be used to buy or carry any such margin securities or used in violation of
Regulations G, T, U or X.
X. DISCLOSURE. To the Company's knowledge, neither this Agreement
nor any of the exhibits, schedules, attachments or certificates required to
be delivered with respect to the transactions contemplated hereby contain
any untrue statement of a material fact or omit a material fact necessary
to make each statement contained herein or therein not misleading; provided
that with respect to the financial projections furnished to the Purchasers
by the Company, the Company represents and warrants only that such
projections were based upon assumptions reasonably believed by the Company
to be reasonable and fair as of the date the projections were prepared in
the context of the Company's history and current and reasonably foreseeable
business conditions. There is no fact (other than general economic
conditions) which the Company has not disclosed to the Purchasers in
writing and which, to the Company's knowledge, has had or would reasonably
be expected to have a material adverse effect on the Company and its
Subsidiaries taken as a whole.
Y. REPORTS WITH THE SECURITIES AND EXCHANGE COMMISSION. The Company
has furnished the Purchasers with complete and accurate copies of its
annual report on Form 10-K for its three most recent fiscal years, all
other reports or documents required to be filed by the Company pursuant to
Section 13(a) or 15(d) of the Securities Exchange Act since the filing of
the most recent annual report on Form 10-K and its most recent annual
report to its stockholders. As of their respective filing dates, such
reports and filings did not contain any material false statements or any
misstatement of any material fact and did not omit to state any fact
necessary to make the statements set forth therein not misleading. The
Company has made all filings with the Securities and Exchange Commission
which it is required to make, and the Company has not received any request
from the Securities and Exchange Commission to file any amendment or
supplement to any of the reports described in this paragraph.
Z. KNOWLEDGE. For purposes of this Agreement, the "knowledge" of
the Company means the actual knowledge, after reasonable inquiry, of
Richard T. Aab, Francis D.R. Coleman, Michael R. Daley, Arunas A. Chesonis,
Michael L. LaFrance, Steve M. Dubnik and Christopher Bantoft.
Section 6. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS. The
Purchasers hereby represent and warrant that:
A. ORGANIZATION, POWER AND LICENSES. Each Purchaser is duly
organized, validly existing and in good standing under the laws of its
state of organization. Each Purchaser possesses all requisite power and
authority and all material licenses, permits and authorizations necessary
to carry out the transactions contemplated by this Agreement.
B. AUTHORIZATION; NO BREACH. The execution, delivery and
performance of this Agreement, the Registration Agreement and all other
agreements and instruments contemplated hereby to which the Purchasers are
parties, have been duly authorized by each such Purchaser. This Agreement,
the Registration Agreement and all other agreements and instruments
contemplated hereby to which the Purchasers are parties each constitutes a
valid and binding obligation of each such Purchaser, enforceable in
accordance with its terms. The execution and delivery by the Purchasers of
this Agreement, the Registration Agreement and all other agreements and
instruments contemplated hereby to which the Purchasers are parties and the
fulfillment of and compliance with the respective terms hereof and thereof
by the Purchasers, do not and shall not conflict with or result in a
breach of the terms, conditions or provisions of any law, statute, rule or
regulation to which any Purchaser is subject, or any material order,
judgment or decree to which any Purchaser is subject.
Section 7. DEFINITIONS.
A. DEFINITIONS. For the purposes of this Agreement, the following
terms have the meanings set forth below:
"AFFILIATE" of any particular Person means any other Person
controlling, controlled by or under common control with such particular
Person, where "control" means the possession, directly or indirectly, of
the power to direct the management and policies of a Person whether through
the ownership of voting securities, contract or otherwise.
"EVENT OF DEFAULT" has the meaning set forth in the Notes.
"EVENT OF NONCOMPLIANCE" has the meaning set forth in the
Amendment.
"INDEBTEDNESS" means at a particular time, without duplication,
(i) any indebtedness for borrowed money or issued in substitution for or
exchange of indebtedness for borrowed money, (ii) any indebtedness
evidenced by any note, bond, debenture or other debt security, (iii) any
indebtedness for the deferred purchase price of property or services with
respect to which a Person is liable, contingently or otherwise, as obligor
or otherwise (other than trade payables and other current liabilities
incurred in the ordinary course of business), (iv) any commitment by which
a Person assures a creditor against loss (including contingent
reimbursement obligations with respect to letters of credit), (v) any
indebtedness guaranteed in any manner by a Person (including guarantees in
the form of an agreement to repurchase or reimburse), (vi) any obligations
under capitalized leases with respect to which a Person is liable,
contingently or otherwise, as obligor, guarantor or otherwise, or with
respect to which obligations a Person assures a creditor against loss,
(vii) any indebtedness secured by a Lien on a Person's assets and (viii)
any unsatisfied obligation for "withdrawal liability" to a "multiemployer
plan" as such terms are defined under ERISA.
"INTELLECTUAL PROPERTY RIGHTS" means all (i) patents, patent
applications, patent disclosures and inventions, (ii) trademarks, service
marks, trade dress, trade names, logos and corporate names and
registrations and applications for registration thereof together with all
of the goodwill associated therewith, (iii) copyrights (registered or
unregistered) and copyrightable works and registrations and applications
for registration thereof, (iv) mask works and registrations and
applications for registration thereof, (v) computer software, data, data
bases and documentation thereof, (vi) trade secrets and other confidential
information (including, without limitation, ideas, formulas, compositions,
inventions (whether patentable or unpatentable and whether or not reduced
to practice), know-how, manufacturing and production processes and
techniques, research and development information, drawings, specifications,
designs, plans, proposals, technical data, copyrightable works, financial
and marketing plans and customer and supplier lists and information), (vii)
other intellectual property rights and (viii) copies and tangible
embodiments thereof (in whatever form or medium).
"INVESTMENT" as applied to any Person means (i) any direct or
indirect purchase or other acquisition by such Person of any notes,
obligations, instruments, stock, securities or ownership interest
(including partnership interests and joint venture interests) of any other
Person and (ii) any capital contribution by such Person to any other
Person.
"IRC" means the Internal Revenue Code of 1986, as amended, and
any reference to any particular IRC section shall be interpreted to include
any revision of or successor to that section regardless of how numbered or
classified.
"IRS" means the United States Internal Revenue Service.
"LIEN" means any mortgage, pledge, security interest,
encumbrance, lien or charge of any kind (including any conditional sale or
other title retention agreement or lease in the nature thereof), any sale
of receivables with recourse against the Company, any Subsidiary or any
Affiliate, any filing or agreement to file a financing statement as debtor
under the Uniform Commercial Code or any similar statute other than to
reflect ownership by a third party of property leased to the Company or any
Subsidiaries under a lease which is not in the nature of a conditional sale
or title retention agreement, or any subordination arrangement in favor of
another Person (other than any subordination arising in the ordinary course
of business).
"MATERIAL SUBSIDIARY" means each Subsidiary of the Company set
forth on the Material Subsidiary Schedule and any other Subsidiary of the
Company which at the time of determination has more than $500,000 of
stockholders equity (as determined in accordance with generally accepted
accounting principles) or more than $500,000 of intercompany Indebtedness
owing to the Company or another Subsidiary.
"OFFICER'S CERTIFICATE" means a certificate signed by the
Company's president or its chief financial officer, stating that (i) the
officer signing such certificate has made or has caused to be made such
investigations as are necessary in order to permit him to verify the
accuracy of the information set forth in such certificate and (ii) to the
best of such officer's knowledge, such certificate does not misstate any
material fact and does not omit to state any fact necessary to make the
certificate not misleading.
"PERSON" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust,
a joint venture, an unincorporated organization and a governmental entity
or any department, agency or political subdivision thereof.
"POTENTIAL EVENT OF DEFAULT" means any event or occurrence which
with the passage of time or the giving of notice or both would constitute
an Event of Default.
"POTENTIAL EVENT OF NONCOMPLIANCE" means any event or occurrence
which with the passage of time or the giving of notice or both would
constitute an Event of Noncompliance.
"RESTRICTED SECURITIES" means (i) the Notes and the Warrants
issued hereunder, (ii) the Series A Preferred issued upon conversion of the
Notes, (iii) the Common Stock issued upon conversion of Notes or the Series
A Preferred or upon exercise of the Warrants and (iv) any securities issued
with respect to the securities referred to in clauses (i), (ii) or (iii)
above by way of a stock dividend or stock split or in connection with a
combination of shares, recapitalization, merger, consolidation or other
reorganization. As to any particular Restricted Securities, such
securities shall cease to be Restricted Securities when they have (a) been
effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them, (b) been
distributed to the public through a broker, dealer or market maker pursuant
to Rule 144 (or any similar provision then in force) under the Securities
Act or become eligible for sale pursuant to Rule 144(k) (or any similar
provision then in force) under the Securities Act or (c) been otherwise
transferred and new certificates for them not bearing the Securities Act
legend set forth in paragraph 8C have been delivered by the Company in
accordance with paragraph 4(ii). Whenever any particular securities cease
to be Restricted Securities, the holder thereof shall be entitled to
receive from the Company, without expense, new securities of like tenor not
bearing a Securities Act legend of the character set forth in paragraph 8C.
"SBIC" means a small business investment company licensed under
the Small Business Investment Act of 1958, as amended.
"SBIC HOLDER" means any holder of Notes, Series A Preferred or
Underlying Common Stock that is an SBIC.
"SBIC REGULATIONS" means the Small Business Investment Company
Act of 1958, as amended, and the regulations issued by the Small Business
Administration thereunder, 13 CFR 107 and 121, as amended.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or
any similar federal law then in force.
"SECURITIES AND EXCHANGE COMMISSION" includes any governmental
body or agency succeeding to the functions thereof.
"SECURITIES EXCHANGE ACT" means the Securities Exchange Act of
1934, as amended, or any similar federal law then in force.
"SUBORDINATION AGREEMENT" means the Subordination Agreement,
dated as of May 22, 1995, by and among each of the Purchasers, the Company,
Manufacturers and Traders Trust Company and Marine Midland Bank.
"SUBSIDIARY" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business
entity of which (i) if a corporation, 50% or more of the total voting power
of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a
combination thereof, or (ii) if a limited liability company, partnership,
association, joint venture or other business entity, 50% or more of the
partnership or other similar ownership interest thereof is at the time
owned or controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof,
a Person or Persons shall be deemed to have a 50% or more ownership
interest in a limited liability company, partnership, association or other
business entity if such Person or Persons shall be allocated 50% or more of
limited liability company, partnership, association, joint venture or other
business entity gains or losses or shall be or control any managing
director or general partner of such limited liability company, partnership,
association or other business entity.
"UNDERLYING COMMON STOCK" means (i) the Common Stock issued or
issuable upon conversion of the Notes or the Series A Preferred or upon
exercise of the Warrants and (ii) any Common Stock issued or issuable with
respect to the securities referred to in clause (i) above by way of stock
dividend or stock split or in connection with a combination of shares,
recapitalization, merger, consolidation or other reorganization. For
purposes of this Agreement, any Person who holds Notes, Series A Preferred
or Warrants shall be deemed to be the holder of the Underlying Common Stock
obtainable upon conversion of the Notes or Series A Preferred or exercise
of the Warrants in connection with the transfer thereof or otherwise
regardless of any restriction or limitation on the conversion of the Notes
or the Series A Preferred or exercise of the Warrants, such Underlying
Common Stock shall be deemed to be in existence, and such Person shall be
entitled to exercise the rights of a holder of Underlying Common Stock
hereunder. As to any particular shares of Underlying Common Stock, such
shares shall cease to be Underlying Common Stock when they have been (a)
effectively registered under the Securities Act and disposed of in
accordance with the registration statement covering them, (b) distributed
to the public through a broker, dealer or market maker pursuant to Rule 144
under the Securities Act (or any similar provision then in force) or (c)
repurchased by the Company or any Subsidiary.
Section 8. MISCELLANEOUS.
A. EXPENSES. The Company shall pay, and hold each Purchaser and all
holders of Notes, Warrants and Underlying Common Stock harmless against
liability for the payment of, (i) all reasonable documented out-of-pocket
expenses incurred by the Purchasers in connection with the transactions
contemplated hereby (including the fees and expenses of their special
counsel arising in connection with the negotiation and execution of this
Agreement and the consummation of the transactions contemplated by this
Agreement and fees and expenses of their accountants and consultants in
connection therewith) which shall be payable at the Closing or, if the
Closing does not occur, payable upon demand, it being understood that such
reasonable documented out-of-pocket expenses shall not exceed $400,000 in
the aggregate, (ii) the reasonable fees and expenses incurred with respect
to any amendments or waivers (whether or not the same become effective)
under or in respect of this Agreement, the Notes, the agreements and
instruments contemplated hereby, the Certificate of Incorporation
(including in connection with any proposed merger, sale or recapitalization
of the Company), (iii) stamp and other taxes which may be payable in
respect of the execution and delivery of this Agreement or the issuance,
delivery or acquisition of any Notes, any shares of Series A Preferred
issuance upon conversion of the Notes or any shares of Common Stock
issuable upon conversion of Notes or the Series A Preferred or exercise of
the Warrants and (iv) the reasonable fees and expenses incurred with
respect to the enforcement of the rights granted under this Agreement, the
Notes, the agreements or instruments contemplated hereby, the Certificate
of Incorporation, or the Warrants.
B. REMEDIES. Each holder of Notes, Series A Preferred and
Underlying Common Stock shall have all rights and remedies set forth in
this Agreement, the Notes and the Amendment and all rights and remedies
which such holders have been granted at any time under any other agreement
or contract and all of the rights which such holders have under any law.
Any Person having any rights under any provision of this Agreement shall be
entitled to enforce such rights specifically (without posting a bond or
other security), to recover damages by reason of any breach of any
provision of this Agreement and to exercise all other rights granted by
law.
C. PURCHASER'S INVESTMENT REPRESENTATIONS. Each Purchaser hereby
represents that it is acquiring the Restricted Securities purchased
hereunder or acquired pursuant hereto for its own account with the present
intention of holding such securities for purposes of investment, and that
it has no intention of selling such securities in a public distribution in
violation of the federal securities laws or any applicable state securities
laws; provided that nothing contained herein shall prevent any Purchaser
and subsequent holders of Restricted Securities from transferring such
securities in compliance with the provisions of Section 4 hereof. Each
certificate or instrument representing Restricted Securities shall be
imprinted with a legend in substantially the following form:
"The securities represented by this certificate were originally
issued on May 22, 1995, and have not been registered under the
Securities Act of 1933, as amended. The transfer of the
securities represented by this certificate is subject to the
conditions specified in the Note and Warrant Purchase Agreement,
dated as of May 22, 1995 and as amended and modified from time to
time, between the issuer (the "Company") and certain investors,
and the Company reserves the right to refuse the transfer of such
securities until such conditions have been fulfilled with respect
to such transfer. A copy of such conditions shall be furnished
by the Company to the holder hereof upon written request and
without charge."
D. CONSENT TO AMENDMENTS. Except as otherwise expressly provided
herein, the provisions of this Agreement may be amended and the Company may
take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company has obtained the
written consent of the holders of a majority of the outstanding principal
amount of the Notes and a majority of the outstanding shares of Series A
Preferred; provided that if there are no Notes or shares of Series A
Preferred outstanding, the provisions of this Agreement may be amended and
the Company may take any action herein prohibited, only if the Company has
obtained the written consent of the holders of a majority of the Underlying
Common Stock. No other course of dealing between the Company and the
holder of any Notes, Series A Preferred, Warrants or Underlying Common
Stock or any delay in exercising any rights hereunder or under the Notes,
the Warrants or the Certificate of Incorporation shall operate as a waiver
of any rights of any such holders. For purposes of this Agreement, Notes,
Series A Preferred or Underlying Common Stock held by the Company or any
Subsidiaries shall not be deemed to be outstanding. If the Company pays
any consideration to any holder of Notes, Series A Preferred or Underlying
Common Stock for such holder's consent to any amendment, modification or
waiver hereunder, the Company shall also pay each other holder granting its
consent hereunder equivalent consideration computed on a pro rata basis.
E. SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All representations
and warranties contained herein or made in writing by any party in
connection herewith shall survive the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby,
regardless of the knowledge of any Purchaser or any investigation made by
any Purchaser or on its behalf, and neither the knowledge of, nor any
investigation by, any Purchaser shall affect the occurrence or existence of
a breach of any representation or warranty contained herein as of the
Closing.
F. SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, all covenants and agreements contained in this Agreement by or on
behalf of any of the parties hereto shall bind and inure to the benefit of
the respective successors and assigns of the parties hereto whether so
expressed or not. In addition, and whether or not any express assignment
has been made, the provisions of this Agreement which are for any
Purchaser's benefit as a purchaser or holder of Notes, Series A Preferred,
Warrants or Underlying Common Stock are also for the benefit of, and
enforceable by, any subsequent holder of such Notes, such Series A
Preferred, such Warrants or such Underlying Common Stock.
G. CAPITAL AND SURPLUS; SPECIAL RESERVES. The Company agrees that
the capital of the Company (as such term is used in Section 154 of the
General Corporation Law of Delaware) in respect of the Series A Preferred
issued upon conversion of the Notes shall be equal to the aggregate par
value of such shares and that it shall not increase the capital of the
Company with respect to any shares of the Company's capital stock at any
time on or after the date of this Agreement. The Company also agrees that
it shall not create any special reserves under Section 171 of the General
Corporation Law of Delaware without the prior written consent of the
holders of a majority of the outstanding Series A Preferred.
H. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
I. COUNTERPARTS. This Agreement may be executed simultaneously in
two or more counterparts, any one of which need not contain the signatures
of more than one party, but all such counterparts taken together shall
constitute one and the same Agreement.
J. DESCRIPTIVE HEADINGS; INTERPRETATION. The descriptive headings
of this Agreement are inserted for convenience only and do not constitute a
substantive part of this Agreement. The use of the word "including" in
this Agreement shall be by way of example rather than by limitation.
K. GOVERNING LAW. The corporate law of the State of Delaware shall
govern all issues and questions concerning the relative rights and
obligations of the Company and its stockholders. All other issues and
questions concerning the construction, validity, enforcement and
interpretation of this Agreement and the exhibits and schedules hereto
shall be governed by, and construed in accordance with, the laws of the
State of New York, without giving effect to any choice of law or conflict
of law rules or provisions (whether of the State of New York or any other
jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York.
L. NOTICES. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement
shall be in writing and shall be deemed to have been given when delivered
personally to the recipient, sent to the recipient by reputable overnight
courier service (charges prepaid) or five days after being mailed to the
recipient by certified or registered mail, return receipt requested and
postage prepaid. Such notices, demands and other communications shall be
sent to each Purchaser at the address indicated on the Schedule of
Purchasers and to the Company at the address indicated below:
ACC Corp.
400 West Avenue
Rochester, NY 14611
Attention: Chief Executive Officer
or to such other address or to the attention of such other person as the
recipient party has specified by prior written notice to the sending party.
M. CONSIDERATION FOR WARRANTS. The Purchasers and the Company
acknowledge and agree that the fair market value of the Notes issued
hereunder is $9,790,000 and the fair market value of the Closing Warrants
issued hereunder is $200,000 and that, for all purposes (including tax and
accounting), the consideration for the issuance of the Springing Warrants
shall be allocated as set forth in paragraph 1B hereof. Each Purchaser and
the Company shall file their respective federal, state and local tax
returns in a manner which is consistent with such valuation and allocation
and shall not take any contrary position with any taxing authority.
N. UNDERSTANDING AMONG THE PURCHASERS. The determination of each
Purchaser to purchase the Notes and the Warrants pursuant to this Agreement
has been made by such Purchaser independent of any other Purchaser and
independent of any statements or opinions as to the advisability of such
purchase or as to the properties, business, prospects or condition
(financial or otherwise) of the Company and its Subsidiaries which may have
been made or given by any other Purchaser or by any agent or employee of
any other Purchaser. In addition, it is acknowledged by each of the other
Purchasers that Fleet Equity Partners has not acted as an agent of such
Purchaser in connection with making its investment hereunder and that Fleet
Equity Partners shall not be acting as an agent of such Purchaser in
connection with monitoring its investment hereunder.
O. NO STRICT CONSTRUCTION. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement
shall be construed as if drafted jointly by the parties hereto, and no
presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any of the provisions of this
Agreement.
P. INDEMNIFICATION. In consideration of the Purchaser's execution
and delivery of this Agreement and acquiring the Notes and Warrants
hereunder and in addition to all of the Company's other obligations under
this Agreement, the Company shall defend, protect, indemnify and hold
harmless each Purchaser and each other holder of Notes or Warrants and all
of their officers, directors, employees and agents (including, without
limitation, those retained in connection with the transactions contemplated
by this Agreement) (collectively, the "Indemnitees") from and against any
and all actions, causes of action, suits, claims, losses, costs, penalties,
fees, liabilities and damages, and expenses in connection therewith
(irrespective of whether any such Indemnitee is a party to the action for
which indemnification hereunder is sought), and including reasonable
attorneys' fees and disbursements (the "Indemnified Liabilities"), incurred
by the Indemnitees or any of them as a result of, or arising out of, or
relating to (a) any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of the issuance of the
Notes and Warrants or (b) the execution, delivery, performance or
enforcement of this Agreement and any other instrument, document or
agreement executed pursuant hereto by any of the Indemnitees, except for
any such Indemnified Liabilities arising on account of the particular
Indemnitee's gross negligence or willful misconduct. To the extent that
the foregoing undertaking by the Company may be unenforceable for any
reason, the Company shall make the maximum contribution to the payment and
satisfaction of each of the Indemnified Liabilities which is permissible
under applicable law.
Q. PAYMENT SET ASIDE. To the extent that the Company makes a
payment or payments to the Purchasers hereunder or under the Notes or the
Purchasers enforce or exercise their rights hereunder or thereunder, and
such payment or payments or the proceeds of such enforcement or exercise or
any part thereof are subsequently invalidated, declared to be fraudulent or
preferential, set aside, recovered from, disgorged by or are required to be
refunded, repaid or otherwise restored to the Company, a trustee, receiver
or any other Person under any law (including, without limitation, any
bankruptcy law, state or federal law, common law or equitable cause of
action), then to the extent of any such restoration the obligation or part
thereof originally intended to be satisfied shall be revived and continued
in full force and effect as if such payment had not been made or such
enforcement or setoff had not occurred.
R. SUBORDINATION. The Purchasers and all other holders of the Notes
agree to enter into any new subordination agreement in replacement of or
substitution for the Subordination Agreement in connection with the
refunding or refinancing of the Indebtedness owing the Senior Creditors (as
defined in the Subordination Agreement) so long as such new subordination
agreement is substantially similar to the Subordination Agreement.
* * * * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first written above.
ACC CORP.
By /s/ Michael R. Daley
Its EVP and CFO
FLEET VENTURE RESOURCES, INC.
By /s/ Robert M. Van Degna
Its President
FLEET EQUITY PARTNERS VI, L.P.
By Silverado IV Corp.
Its General Partner
By /s/ Robert M. Van Degna
Its President
CHISHOLM PARTNERS II, L.P.
By Silverado II, L.P.
Its General Partner
By Silverado II, Corp.
Its General Partner
By /s/ Robert M. Van Degna
Its President
<PAGE>
SCHEDULE OF PURCHASERS
<TABLE>
<CAPTION>
Number of
Purchase Shares Under Purchase Purchase
Principal Price Closing Price for Price for Total
Names and Amount of for WARRANTS Closing Springing Purchase
ADDRESSES NOTES NOTES WARRANTS WARRANTS PRICE
<S> <C> <C> <C> <C> <C> <C>
Fleet Venture Resources, Inc. $ 7,200,000 $ 7,048,800 72,000 $144,000 $ 7,200 $ 7,200,000
c/o Fleet Equity Partners
Mail Stop: RI MO 227
111 Westminster Street
Providence, RI 02903
Attn: Robert Van Degna
Fleet Equity Partners VI, L.P. $ 1,800,000 $ 1,762,200 18,000 36,000 $ 1,800 1,800,000
c/o Fleet Equity Partners
Mail Stop: RI MO 227
111 Westminster Street
Providence, RI 02903
Attn: Robert Van Degna
Chisholm Partners II, L.P. $ 1,000,000 $ 979,000 10,000 20,000 $ 1,000 1,000,000
c/o Fleet Equity Partners
Mail Stop: RI MO 227
111 Westminster Street
Providence, RI 02903
Attn: Robert Van Degna
TOTAL $10,000,000 $ 9,790,000 100,000 $200,000 $10,000 $10,000,000
</TABLE>
<PAGE>
LIST OF EXHIBITS
Exhibit A - Form of Note
Exhibit B - Form of Closing Warrant
Exhibit C - Form of Amendment to Certificate of Incorporation
Exhibit D - Form of Certificate of Designation
Exhibit E - Form of Registration Agreement
Exhibit F - Form of Participation Agreement
Exhibit G - Form of Opinion of Company's Counsel
Exhibit H - Form of Springing Warrant
The Registrant agrees to furnish supplementally to the Commission a copy of any
omitted schedules or exhibits to this agreement upon request.
<PAGE>
LIST OF DISCLOSURE SCHEDULES
Capitalization Schedule
Material Subsidiary Schedule
Restrictions Schedule
Liabilities Schedule
Developments Schedule
Assets Schedule
Taxes Schedule
Tax Audit Schedule
Contracts Schedule
Intellectual Property Schedule
Litigation Schedule
Brokerage Schedule
Consents Schedule
Insurance Schedule
Employees Schedule
Employee Benefits Schedule
Compliance Schedule
Affiliated Transactions Schedule
The Registrant agrees to furnish supplementally to the Commission a copy of any
omitted schedules or exhibits to this agreement upon request.
EXHIBIT 4-2(a)
The security represented by this instrument was originally issued
on May 22, 1995, and has not been registered under the Securities
Act of 1933, as amended. The transfer of such security is
subject to the conditions specified in the Note and Warrant
Purchase Agreement, dated as of May 22, 1995, as amended and
modified from time to time, between the issuer (the "Company")
and certain investors, and the Company reserves the right to
refuse the transfer of such security until such conditions have
been fulfilled with respect to such transfer. Upon written
request, a copy of such conditions shall be furnished by the
Company to the holder hereof without charge.
Payment of this Note is subject to the terms and conditions of a
Subordination Agreement, dated May 22, 1995, by and among the
original Holder of this Note, Manufacturers and Traders Trust
Company, Marine Midland Bank and certain other Investors, and any
other subordination agreement referred to in paragraph 4 hereof.
ACC CORP.
CONVERTIBLE SUBORDINATED
PROMISSORY NOTE
May 22, 1995 $7,200,000
ACC Corp., a Delaware corporation (the "Company"), hereby
promises to pay to the order of Fleet Venture Resources, Inc. the principal
amount of $7,200,000 together with interest thereon calculated from the
date hereof in accordance with the provisions of this Note.
This Note was issued pursuant to a Note and Warrant Purchase
Agreement, dated as of May 22, 1995 (as amended and modified from time to
time, the "Purchase Agreement"), between the Company and certain investors,
and this Note is one of the "Notes" referred to in the Purchase Agreement.
The Purchase Agreement contains terms governing the rights of the holder of
this Note, and all provisions of the Purchase Agreement are hereby
incorporated herein in full by reference. Except as defined in paragraph
10 hereof or unless otherwise indicated herein, capitalized terms used in
this Note have the same meanings set forth in the Purchase Agreement.
1. PAYMENT OF INTEREST. Except as otherwise expressly
provided in paragraph 5(b) hereof, interest shall accrue at the rate of
twelve percent (12%) per annum on the unpaid principal amount of this Note
outstanding from time to time, or (if less) at the highest rate then
permitted under applicable law. The Company shall pay to the holder of
this Note all accrued interest on the last day of each March, June,
September and December, beginning June 30, 1995. Unless prohibited under
applicable law, any accrued interest which is not paid on the date on which
it is due and payable shall bear interest at the same rate at which
interest is then accruing on the principal amount of this Note until such
interest is paid. Any accrued interest which for any reason has not
theretofore been paid shall be paid in full on the date on which the final
principal payment on this Note is made. Interest shall accrue on any
principal payment due under this Note and, to the extent permitted by
applicable law, on any interest which has not been paid on the date on
which it is due and payable until such time as payment therefor is actually
delivered to the holder of this Note.
2. PAYMENT OF PRINCIPAL ON NOTE.
(a) PREPAYMENTS. The Company may, at any time and from time to
time without premium or penalty, prepay all or any portion of the
outstanding principal amount of the Notes, pro rata among the holders of
the Notes on the basis of the outstanding principal amount of the Note held
by each holder; provided that (i) such prepayment is not prohibited by the
provisions of paragraph 4 hereof, (ii) the Company has paid all interest on
the Notes accrued through the immediately preceding scheduled interest
payment date and (iii) the minimum principal amount so prepaid shall be the
lesser of $100,000 or the amount of principal outstanding on the Notes. In
connection with each prepayment of principal hereunder, the Company shall
also pay all accrued and unpaid interest on the principal amount of the
Notes being repaid.
(b) PRINCIPAL REPAYMENT. On May 22, 2002 (the "Scheduled
Repayment Date"), the Company shall repay all outstanding principal and
interest on the Notes, or if such amount is greater, the Market Price (on
the date which is five trading days prior to the Scheduled Repayment Date)
of the Common Stock into which such Notes are convertible on the Scheduled
Repayment Date (the "Alternative Amount"); provided that to the extent that
the Alternative Amount exceeds the amount of principal and interest
outstanding on the Notes on the Scheduled Repayment Date, all or a portion
of such excess may, at the Company's option, be paid in the form of Common
Stock (valued at the Market Price of the Common Stock on the date which is
five trading days prior to the Scheduled Repayment Date) up to and not
exceeding a number of shares of Common Stock equal to 20 multiplied by the
average daily trading volume of the Common Stock in the public markets for
a period of 45 consecutive trading days ending five days prior to the
Scheduled Repayment Date and the remainder shall be paid in cash. Such
shares of Common Stock shall be applied first to the repayment of
principal, then to interest. Upon issuance, such shares of Common Stock
shall be validly issued, fully paid and nonassessable.
(c) SPECIAL PRINCIPAL REPAYMENTS.
(i) If a Change in Control has occurred or the Company
obtains knowledge that a Change in Control is proposed to occur, the
Company shall give prompt written notice of such Change in Control
describing in reasonable detail the material terms and date of consummation
thereof to the holder of this Note, but in any event such notice shall not
be given later than five days after the occurrence of such Change in
Control, and the Company shall give the holder of this Note prompt written
notice of any material change in the terms or timing of such transaction.
The holder of this Note may require the Company to repay all or any portion
of the principal amount remaining on this Note at an amount equal to the
greater of (1) the principal amount requested to be repaid plus all unpaid
accrued interest with respect to such principal amount, (2) the Market
Price (as of the date which is five trading days prior to the occurrence of
such Change in Control) of the Common Stock into which such principal
amount is convertible on such date or (3) the value of the Common Stock
into which such principal amount is convertible as of the consummation of
the Change in Control reflected by the Change in Control transaction, by
giving written notice to the Company of such election prior to the later of
(a) 21 days after receipt of the Company's notice and (b) five days prior
to the consummation of the Change in Control (the "Expiration Date"). The
Company shall give prompt written notice of any such election to all other
holders of Notes within five days after the receipt thereof, and each such
holder shall have until the later of (a) the Expiration Date or (b) ten
days after receipt of such second notice to request repayment hereunder (by
giving written notice to the Company) of all or any portion of the Notes
owned by such holder.
(ii) Upon receipt of such election(s), the Company shall be
obligated to pay the amount set forth in subparagraph (i) above with
respect to the Change in Control. If any proposed Change in Control does
not occur, all requests for repayment in connection therewith shall be
automatically rescinded, or if there has been a material change in the
terms or the timing of the transaction, any holder of Notes may rescind
such holder's request for repayment by giving written notice of such
rescission to the Company.
(iii) A "Change in Control" shall be deemed to have occurred
at such time as any of the following events shall occur: (a) any sale,
transfer or issuance or series of sales, transfers and/or issuances of
Common Stock by the Compnay or any holders thereof which results in any
Person or group of Persons (as the term "group" is used under the
Securities Exchange Act of 1934) owning more than 40% of the Common Stock
outstanding immediately after such sale, transfer or issuance or series of
sales, transfers and/or issuances or (b) during any 12-month period,
individuals who at the beginning of such period constituted the Company's
Board of Directors (together with any new directors whose election by such
Board of Directors or whose nomination for election by the stockholders of
the Company was approved by a majority vote of the directors who were
either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Company's Board of Directors then in office.
(iv) If a Fundamental Change is proposed to occur, the
Company shall give written notice of such Fundamental Change describing in
reasonable detail the material terms and date of consummation thereof to
the holder of this Note not more than 45 days nor less than 20 days prior
to the consummation of such Fundamental Change, and the Company shall give
the holder of this Note prompt written notice of any material change in the
terms or timing of such transaction. The holder of this Note may require
the Company to repay all or any portion of this Note at an amount equal to
the greater of (1) the principal amount requested to be prepaid plus all
unpaid accrued interest with respect to such principal amount, (2) the
Market Price (as of the date which is five trading days prior to the
occurrence of such Fundamental Change) of the Common Stock into which such
principal amount is convertible on such date or (3) the value of the Common
Stock into which such principal amount is convertible as of the
consummation of the Fundamental Change reflected by the Fundamental Change
transaction, by giving written notice to the Company of such election prior
to the later of (a) ten days prior to the consummation of the Fundamental
Change or (b) ten days after receipt of notice from the Company. The
Company shall give prompt written notice of such election to all other
holders of Notes (but in any event within five days prior to the
consummation of the Fundamental Change), and each such holder shall have
until two days after the receipt of such notice to request redemption (by
written notice given to the Company) of all or any portion of the Notes
owned by such holder.
(v) Upon receipt of such election(s), the Company shall be
obligated to repay the amount set forth in subparagraph (iv) above upon the
consummation of such Fundamental Change. If any proposed Fundamental
Change does not occur, all requests for repayment in connection therewith
shall be automatically rescinded, or if there has been a material change in
the terms or the timing of the transaction, any holder of Notes may rescind
such holder's request for redemption by delivering written notice thereof
to the Company prior to the consummation of the transaction.
(vi) The term "Fundamental Change" means (a) any sale or
transfer of more than 50% of the assets of the Company and its Subsidiaries
on a consolidated basis (measured either by book value in accordance with
generally accepted accounting principles consistently applied or by fair
market value determined in the reasonable good faith judgment of the
Company's board of directors) in any transaction or series of transactions
(other than sales in the ordinary course of business) and (b) any merger or
consolidation to which the Company is a party, except for a merger in which
the Company is the surviving corporation, and after giving effect to such
merger, no Person or group of Persons (as the term "group" is used under
the Securities Act of 1934) owns more than 40% of the Common Stock
outstanding immediately after such merger.
(d) CONVERSION. Notwithstanding any provision contained in this
paragraph 2, the holder of this Note may convert all or any portion of the
outstanding principal amount of this Note until such time as such amount
has been deemed to have been paid.
3. PRO RATA PAYMENT. Except as otherwise expressly provided in
this Note, all payments to the holders of the Notes (whether for principal,
interest or otherwise) shall be made pro rata among such holders based upon
the aggregate unpaid principal amount of the Notes held by each such
holder. If any holder of a Note obtains any payment (whether voluntary,
involuntary or otherwise) of principal, interest or other amount with
respect to any Note in excess of such holder's pro rata share of such
payments obtained by all holders of the Notes (other than as expressly
provided herein), by acceptance of a Note each such holder agrees to
purchase from the other holders of the Notes a participation in the Notes
held by them as is necessary to cause such holders to share the excess
payment ratably among each of them as provided in this paragraph.
4. SUBORDINATION. This Note is subordinated to the extent set
forth in the Subordination Agreement, dated May 22, 1995, by and among the
original Holder of this Note, Manufacturers and Traders Trust Company,
Marine Midland Bank and the holders of the other Notes. This Note shall
also be subordinated to the extent set forth in any other subordination
agreement entered into by the holders of the Notes.
5. EVENTS OF DEFAULT.
(a) DEFINITION. For purposes of this Note, an Event of Default
shall be deemed to have occurred if
(i) the Company fails to pay when due and payable (whether
at maturity or otherwise) the full amount of interest then accrued on any
Note or the full amount of any principal due on any Note, and such failure
to pay is not cured within five days after the occurrence thereof;
(ii) the Company fails to perform or observe any other
material covenant or agreement in the Notes or in the Purchase Agreement,
and such failure is not cured within 30 days after the earlier of (A) the
receipt of notice thereof by the holder of this Note or (B) the discovery
thereof by the Company;
(iii) any representation, warranty or information contained
in the Purchase Agreement or required to be furnished to any holder of the
Notes pursuant to the Purchase Agreement, is false or misleading in any
material respect on the date made or furnished and such false or misleading
representation, warranty or information relates to a material adverse
effect on the Company and its Subsidiaries, taken as a whole, or fails to
disclose a material adverse change on the Company and its Subsidiaries,
taken as a whole; provided that, notwithstanding the foregoing, in the case
of paragraph 5J of the Purchase Agreement, any occurrence, event,
transaction or claim which results in any loss, damage or injury to the
Company and its Subsidiaries in excess of $4,000,000 shall conclusively be
deemed to have material adverse effect and be a material adverse change
hereunder;
(iv) the Company or any Material Subsidiary makes an
assignment for the benefit of creditors or admits in writing its inability
to pay its debts generally as they become due; or an order, judgment or
decree is entered adjudicating the Company or any Material Subsidiary
bankrupt or insolvent; or any order for relief with respect to the Company
or any Material Subsidiary is entered under the Federal Bankruptcy Code; or
the Company or any Material Subsidiary petitions or applies to any tribunal
for the appointment of a custodian, trustee, receiver or liquidator of the
Company or any Material Subsidiary, or of any substantial part of the
assets of the Company or any Material Subsidiary, or commences any
proceeding (other than a proceeding for the voluntary liquidation and
dissolution of any Material Subsidiary) relating to the Company or any
Material Subsidiary under any bankruptcy reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law of any
jurisdiction; or any such petition or application is filed, or any such
proceeding is commenced, against the Company or any Material Subsidiary and
either (A) the Company or any such Material Subsidiary by any act indicates
its approval thereof, consent thereto or acquiescence therein or (B) such
petition, application or proceeding is not dismissed within 60 days;
(v) a judgment in excess of $500,000 is rendered against
the Company or any Material Subsidiary and, within 60 days after entry
thereof, such judgment is not discharged in full or execution thereof
stayed pending appeal, or within 60 days after the expiration of any such
stay, such judgment is not discharged in full; or
(vi) the Company or any Material Subsidiary defaults in the
performance of any obligation if the effect of such default is to cause an
amount exceeding $500,000 to become due prior to its stated maturity or to
permit the holder or holders of such obligation to cause an amount
exceeding $500,000 to become due prior to its stated maturity.
The foregoing shall constitute Events of Default whatever the
reason or cause for any such Event of Default and whether it is voluntary
or involuntary or is effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body.
(b) CONSEQUENCES OF EVENTS OF DEFAULT.
(i) If any Event of Default of the type described in
subparagraph 5(a)(i), 5(a)(ii) or 5(a)(iii) (with respect to paragraphs 5J
and 5X of the Purchase Agreement only) has occurred and is continuing, the
interest rate on the Notes shall increase immediately to 15% or (if less)
to the highest rate permitted by law and any increase of the interest rate
resulting from the operation of this subparagraph shall terminate as of the
close of business on the date on which no Event of Default of the type
described in subparagraph 5(a)(i) or 5(a)(ii) exists (subject to subsequent
increases pursuant to this subparagraph).
(ii) If any Event of Default of the type described in
subparagraph 5(a)(i), 5(a)(ii) or 5(a)(iii) (with respect to 5J and 5X of
the Purchase Agreement only) has occurred, the Conversion Price on the
Notes shall be reduced immediately by 1/3 of the Conversion Price in effect
immediately prior to such adjustment. In no event shall such Conversion
Price adjustment be rescinded, and in no event shall there be more than one
adjustment pursuant to this subparagraph.
(iii) If an Event of Default of the type described in
subparagraph 5(a)(iv) has occurred, the aggregate principal amount of the
Notes (together with all accrued interest thereon and all other amounts due
and payable with respect thereto) shall become immediately due and payable
without any action on the part of the holders of the Notes, and the Company
shall immediately pay to the holders of the Notes all amounts due and
payable with respect to the Notes.
(iv) If any Event of Default (other than an Event of Default
of the type described in subparagraph 5(a)(iv)) has occurred and is
continuing, the holder or holders of Notes representing a majority of the
aggregate principal amount of Notes then outstanding may declare all or any
portion of the outstanding principal amount of the Notes (together with all
accrued interest thereon and all other amounts due and payable with respect
thereto) to be immediately due and payable and may demand immediate payment
of all or any portion of the outstanding principal amount of the Notes
(together with all such other amounts then due and payable) owned by such
holder or holders. The Company shall give prompt written notice of any
such demand to the other holders of Notes, each of which may demand
immediate payment of all or any portion of such holder's Note. If any
holder or holders of the Notes demand immediate payment in accordance with
the terms hereof of all or any portion of the Notes, the Company shall
immediately pay to such holder or holders all amounts due and payable with
respect to such Notes. The amount payable hereunder with respect to the
Notes shall be the greater of (1) all of the outstanding principal and
accrued interest on such Notes and (2) the Market Price (as of the date
which is five trading days prior to the date of payment); provided that to
the extent that the amount in clause (2) above exceeds the amount in clause
(1) above, all or a portion of such excess may, at the Company's option, be
paid in the form of Common Stock (valued at the Market Price of the Common
Stock on such date) up to and not exceeding a number of shares of Common
Stock equal to 20 multiplied by the average daily trading volume of the
Common Stock in the public markets for a period of 45 consecutive trading
days ending on such date and the remainder shall be paid in cash. Such
shares of Common Stock shall be applied first to the repayment of
principal, then to interest. Upon issuance, such shares of Common Stock
shall be validly issued, fully paid and nonassessable.
(v) Each holder of the Notes shall also have any other
rights which such holder may have been afforded under any contract or
agreement at any time and any other rights which such holder may have
pursuant to applicable law.
(vi) The Company hereby waives diligence, presentment,
protest and demand and notice of protest and demand, dishonor and
nonpayment of this Note and expressly agrees that this Note, or any payment
hereunder, may be extended from time to time and that the holder hereof may
accept security for this Note or release security for this Note, all
without in any way affecting the liability of the Company hereunder.
6. CONVERSION.
(a) CONVERSION PROCEDURE.
(i) At any time and from time to time prior to the payment in
full of this Note the holder of this Note may convert all or any portion of
the outstanding principal amount of this Note into a number of shares of
Conversion Stock (excluding any fractional share) determined by dividing
the principal amount designated by such holder to be converted by the
Conversion Price then in effect.
(ii) Except as otherwise provided herein, each conversion of this
Note shall be deemed to have been effected as of the close of business on
the date on which this Note has been surrendered for conversion at the
principal office of the Company. At the time any such conversion has been
effected, the rights of the holder of this Note as such holder to the
extent of the conversion shall cease and the Person or Persons in whose
name or names any certificate or certificates for shares of Conversion
Stock are to be issued upon such conversion shall be deemed to have become
the holder or holders of record of the shares of Conversion Stock
represented thereby.
(iii) Notwithstanding any other provision hereof, if a conversion
of any portion of this Note is to be made in connection with a Public
Offering, a Change in Control, a Fundamental Change or other transaction
affecting the Company, the conversion of any portion of this Note may, at
the election of the holder hereof, be conditioned upon the consummation of
such transaction, in which case such conversion shall not be deemed to be
effective until such transaction has been consummated.
(iv) As soon as possible after a conversion has been effected,
the Company shall deliver to the converting holder:
(1) a certificate or certificates representing the number
of shares of Conversion Stock issuable by reason of such conversion in
such name or names and such denomination or denominations as the
converting holder has specified;
(2) payment in an amount equal to the sum of all accrued
interest with respect to the principal amount converted, which has not
been paid prior thereto; and
(3) a new Note representing any portion of the principal
amount which was represented by the Note surrendered to the Company in
connection with such conversion but which was not converted.
(v) The issuance of certificates for shares of Conversion Stock
upon conversion of this Note shall be made without charge to the holder
hereof for any issuance tax in respect thereof or other cost incurred by
the Company in connection with such conversion and the related issuance of
shares of Conversion Stock. Upon conversion of this Note, the Company
shall take all such actions as are necessary in order to insure that the
Conversion Stock issuable with respect to such conversion shall be validly
issued, fully paid and nonassessable, free and clear of all taxes, liens,
charges and encumbrances with respect to the issuance thereof.
(vi) The Company shall not close its books against the transfer
of Conversion Stock issued or issuable upon conversion of this Note. The
Company shall assist and cooperate with any holder of this Note required to
make any governmental filings or obtain any governmental approval prior to
or in connection with the conversion of this Note (including making any
filings required to be made by the Company).
(vii) The Company shall at all times reserve and keep available
out of its authorized but unissued shares of Conversion Stock, solely for
the purpose of issuance upon the conversion of the Notes, such number of
shares of Conversion Stock issuable upon the conversion of all outstanding
Notes. All shares of Conversion Stock which are so issuable shall, when
issued, be duly and validly issued, fully paid and nonassessable and free
from all taxes, liens and charges. The Company shall take all such actions
as may be necessary to assure that all such shares of Conversion Stock may
be so issued without violation of any applicable law or governmental
regulation or any requirements of any domestic securities exchange upon
which shares of Conversion Stock may be listed (except for official notice
of issuance which shall be immediately delivered by the Company upon each
such issuance).
(viii) If any fractional interest in a share of Conversion Stock
would, except for the provisions of this subparagraph, be delivered upon
any conversion of this Note, the Company, in lieu of delivering the
fractional share therefor, shall pay an amount to the holder thereof equal
to the Market Price of such fractional interest as of the date of
conversion.
(b) CONVERSION PRICE.
(i) The initial Conversion Price shall be $16.00. In order to
prevent dilution of the conversion rights granted under the Notes, the
Conversion Price shall be subject to adjustment from time to time pursuant
to this paragraph (b).
(ii) If and whenever the Company issues or sells, or in
accordance with paragraph 6(c) is deemed to have issued or sold, any share
of Common Stock for a consideration per share less than the Conversion
Price in effect immediately prior to such time, then immediately upon such
issue or sale or deemed issue or sale the Conversion Price shall be reduced
to the lowest net price per share (as determined pursuant to paragraph
6(c)(v) below) at which any such share of Common Stock has been issued or
sold or is deemed to have been issued or sold.
(iii) Notwithstanding the foregoing, there shall be no adjustment
to the Conversion Price hereunder with respect to the granting of stock
options to employees or directors of the Company and its Subsidiaries or
the exercise thereof or the granting of stock appreciation rights, phantom
stock rights or other similar rights to employees or directors of the
Company for (or rights relating to) an aggregate of 1,586,702 shares of
Common Stock (976,594 options being currently outstanding) (as such number
of shares is equitably adjusted for subsequent stock splits, stock
combinations, stock dividends and recapitalizations and such number shall
include all stock options outstanding as of the date of the Purchase
Agreement).
(c) EFFECT ON CONVERSION PRICE OF CERTAIN EVENTS. For purposes
of determining the adjusted Conversion Price under paragraph 6(b), the
following shall be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any manner
grants or sells any Option and the lowest price per share for which any one
share of Common Stock is issuable upon the exercise of any such Option, or
upon conversion or exchange of any Convertible Security issuable upon
exercise of any such Option, is less than the Conversion Price in effect
immediately prior to the time of the granting or sale of such Option, then
such share of Common Stock shall be deemed to be outstanding and to have
been issued and sold by the Company at the time of the granting or sale of
such Option for such price per share. For purposes of this paragraph, the
"lowest price per share for which any one share of Common Stock is
issuable" shall be equal to the sum of the lowest amounts of consideration
(if any) received or receivable by the Company with respect to any one
share of Common Stock upon the granting or sale of the Option, upon
exercise of the Option and upon conversion or exchange of any Convertible
Security issuable upon exercise of such Option. No further adjustment of
the Conversion Price shall be made upon the actual issue of such Common
Stock or such Convertible Security upon the exercise of such Options or
upon the actual issue of such Common Stock upon conversion or exchange of
such Convertible Security.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any
manner issues or sells any Convertible Security and the lowest price per
share for which any one share of Common Stock is issuable upon conversion
or exchange thereof is less than the Conversion Price in effect immediately
prior to the time of such issue or sale, then such share of Common Stock
shall be deemed to be outstanding and to have been issued and sold by the
Company at the time of the issuance or sale of such Convertible Securities
for such price per share. For the purposes of this paragraph, the "lowest
price per share for which any one share of Common Stock is issuable" shall
be equal to the sum of the lowest amounts of consideration (if any)
received or receivable by the Company with respect to any one share of
Common Stock upon the issuance or sale of the Convertible Security and upon
the conversion or exchange of such Convertible Security. No further
adjustment of the Conversion Price shall be made upon the actual issue of
such Common Stock upon conversion or exchange of any Convertible Security,
and if any such issue or sale of such Convertible Security is made upon
exercise of any Options for which adjustments of the Conversion Price had
been or are to be made pursuant to other provisions of this Section 6, no
further adjustment of the Conversion Price shall be made by reason of such
issue or sale.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If the purchase
price provided for in any Option, the additional consideration (if any)
payable upon the issue, conversion or exchange of any Convertible Security
or the rate at which any Convertible Security is convertible into or
exchangeable for Common Stock changes at any time, the Conversion Price in
effect at the time of such change shall be adjusted immediately to the
Conversion Price which would have been in effect at such time had such
Option or Convertible Security originally provided for such changed
purchase price, additional consideration or conversion rate, as the case
may be, at the time initially granted, issued or sold. For purposes of
paragraph 6(c), if the terms of any Option or Convertible Security which
was outstanding as of the date of issuance of this Note are changed in the
manner described in the immediately preceding sentence, then such Option or
Convertible Security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed to have been issued as of
the date of such change; provided that no such change shall at any time
cause the Conversion Price hereunder to be increased.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. Upon the expiration of any Option or the termination of any
right to convert or exchange any Convertible Security without the exercise
of any such Option or right, the Conversion Price then in effect hereunder
shall be adjusted immediately to the Conversion Price which would have been
in effect at the time of such expiration or termination had such Option or
Convertible Security, to the extent outstanding immediately prior to such
expiration or termination, never been issued; provided that if such
expiration or termination would result in an increase in the Conversion
Price then in effect, such increase shall not be effective until 30 days
after written notice thereof has been given to all holders of the Notes.
For purposes of paragraph 6(c), the expiration or termination of any Option
or Convertible Security which was outstanding as of the date of issuance of
the Notes shall not cause the Conversion Price hereunder to be adjusted
unless, and only to the extent that, a change in the terms of such Option
or Convertible Security caused it to be deemed to have been issued after
the date of issuance of the Notes.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any Common Stock,
Option or Convertible Security is issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be
deemed to be the amount received by the Company therefor (net of discounts,
commissions and related expenses). If any Common Stock, Option or
Convertible Security is issued or sold for a consideration other than cash,
the amount of the consideration other than cash received by the Company
shall be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of
consideration received by the Company shall be the Market Price thereof as
of the date of receipt. If any Common Stock, Option or Convertible
Security is issued to the owners of the non-surviving entity 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 value of
such portion of the net assets and business of the non-surviving entity as
is attributable to such Common Stock, Option or Convertible Security, as
the case may be. The fair value of any consideration other than cash and
securities shall be determined jointly by the Company and the holders of a
majority of the principal amount of the Notes then outstanding. If such
parties are unable to reach agreement within a reasonable period of time,
the fair value of such consideration shall be determined by an independent
appraiser experienced in valuing such type of consideration jointly
selected by the Company and the holders of a majority of the principal
amount of the Notes then outstanding. The determination of such appraiser
shall be final and binding upon the parties, and the fees and expenses of
such appraiser shall be borne by the Company.
(vi) INTEGRATED TRANSACTIONS. In case any Option is issued in
connection with the issue or sale of other securities of the Company,
together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the
Option shall be deemed to have been issued for a consideration of $.01.
(vii) TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or
for the account of the Company or any Subsidiary, and the disposition of
any shares so owned or held shall be considered an issue or sale of Common
Stock.
(viii) RECORD DATE. If the Company takes a record of the holders
of Common Stock for the purpose of entitling them (a) to receive a dividend
or other distribution payable in Common Stock, Options or in Convertible
Securities or (b) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date shall be deemed to be the
date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or upon the making of
such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
(d) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company
at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding
shares of Common Stock into a greater number of shares, the Conversion
Price in effect immediately prior to such subdivision shall be
proportionately reduced, and if the Company at any time combines (by
reverse stock split or otherwise) one or more classes of its outstanding
shares of Common Stock into a smaller number of shares, the Conversion
Price in effect immediately prior to such combination shall be
proportionately increased.
(e) REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's
assets or other transaction, in each case which is effected in such a
manner that the holders of Common Stock are entitled to receive (either
directly or upon subsequent liquidation) stock, securities or assets with
respect to or in exchange for Common Stock, is referred to herein as an
"Organic Change". Prior to the consummation of any Organic Change, the
Company shall make lawful and adequate provision (in form and substance
satisfactory to the holders of a majority of the principal amount of the
Notes then outstanding) to insure that each of the holders of the Notes
shall thereafter have the right to acquire and receive, in lieu of or in
addition to (as the case may be) the shares of Conversion Stock immediately
theretofore acquirable and receivable upon the conversion of such holder's
Note, such shares of stock, securities or assets as such holder would have
received in connection with such Organic Change if such holder had
converted its Note immediately prior to such Organic Change. In each such
case, the Company shall also make appropriate provisions (in form and
substance satisfactory to the holders of a majority of the principal amount
of the Notes then outstanding) to insure that the provisions of this
Section 6 and Sections 7 and 8 hereof shall thereafter be applicable to the
Notes in relation to any shares of stock, securities or assets thereafter
deliverable upon conversion of the Notes (including, in the case of any
such consolidation, merger or sale in which the successor entity or
purchasing entity is other than the Company, an immediate adjustment of the
Conversion Price to the value for the Common Stock reflected by the terms
of such consolidation, merger or sale, and a corresponding immediate
adjustment in the number of shares of Conversion Stock acquirable and
receivable upon conversion of Notes, if the value so reflected is less than
the Conversion Price in effect immediately prior to such consolidation,
merger or sale). The Company shall not effect any such consolidation,
merger or sale, unless prior to the consummation thereof, the successor
entity (if other than the Company) resulting from consolidation or merger
or the entity purchasing such assets assumes by written instrument (in form
and substance satisfactory to the holders of a majority of the principal
amounts of the Notes then outstanding), the obligation to deliver to each
such holder such shares of stock, securities or assets as, in accordance
with the foregoing provisions, such holder may be entitled to acquire.
(f) CERTAIN EVENTS. If any event occurs of the type
contemplated by the provisions of this Section 6 but not expressly provided
for by such provisions (including the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then
the Company's board of directors shall make an appropriate adjustment in
the Conversion Price so as to protect the rights of the holders of Notes;
provided that no such adjustment shall increase the Conversion Price as
otherwise determined pursuant to this Section 6 or decrease the number of
shares of Conversion Stock issuable upon conversion of the Notes then
outstanding.
(g) NOTICES.
(i) Immediately upon any adjustment of the Conversion Price, the
Company shall give written notice thereof to the holder of this Note,
setting forth in reasonable detail and certifying the calculation of such
adjustment.
(ii) The Company shall give written notice to the holder of this
Note at least 20 days prior to the date on which the Company closes its
books or takes a record (a) with respect to any dividend or distribution
upon Common Stock, (b) with respect to any pro rata subscription offer to
holders of Common Stock or (c) for determining rights to vote with respect
to any Organic Change, dissolution or liquidation.
(iii) The Company shall also give written notice to the holders of
Series A Preferred at least 20 days prior to the date on which any Organic
Change shall take place.
(h) MANDATORY CONVERSION. The outstanding principal amount of
this Note will be automatically converted to Common Stock at the Conversion
Price then in effect without any further action on the part of the Company
or the holder hereof if, at any time after May 22, 1997, (i) the daily
trading volume of the Common Stock in the public markets exceeds 5% of the
number of shares of Common Stock issuable upon conversion of all
outstanding Notes for each of 45 consecutive trading days, (ii) no holder
of any Note is subject to any underwriters lockup agreement restricting the
transferability of the shares of Conversion Stock issuable upon conversion
of such Notes and (iii) the Market Price of the Common Stock on any of the
anniversary dates of the issuance of the Notes set forth below equals or
exceeds the corresponding price set forth below (subject to adjustment for
stock splits, stock consolidations and stock dividends):
2nd Anniversary $32.00
3rd Anniversary $32.00
4th Anniversary $39.06
5th Anniversary $39.81
6th Anniversary $47.78
7th Anniversary $57.33
In the event that any measurement of the market price of the
Common Stock is to occur on a date between two anniversary dates, the share
price amounts above shall be prorated (based upon the number of days
elapsed between such anniversary dates).
(i) AUTOMATIC CONVERSION TO SERIES A PREFERRED.
(a) Upon filing of the Certificate of Designation authorizing
the Company's Series A Preferred Stock, par value $1.00 (the "Series A
Preferred") with the Secretary of State of Delaware, the Notes shall
automatically convert (without any further action on the part of the
Company or the holders of the Notes) to the number of shares of Series A
Preferred determined by dividing the principal amount then outstanding by
$1,000. Any fraction thereof shall be converted to a corresponding
fractional share of Series A Preferred. At the time of such conversion,
the rights of the holder of this Note shall cease and the Person or Persons
in whose name or names any certificate or certificates for shares of Series
A Preferred are to be issued upon such conversion shall be deemed to have
become the holder or holders of record of the shares of Series A Preferred
represented thereby.
(b) As soon as possible after such conversion has been effected,
the Company shall deliver to the converting holder in exchange for such
holder's Note:
(1) a certificate or certificates representing the number
of shares of Series A Preferred issuable by reason of such conversion
in such name or names and such denomination or denominations as the
holder has specified; and
(2) payment in an amount equal to the sum of all accrued
interest with respect to the Note which has not been paid prior
thereto.
(c) The issuance of a certificate or certificates for shares of
Series A Preferred upon conversion of this Note shall be made without
charge to the holder hereof for any issuance tax in respect thereof or
other cost incurred by the Company in connection with such conversion and
the related issuance of Series A Preferred. Upon conversion of this Note,
the Company shall take all such actions as are necessary in order to insure
that the Series A Preferred issuable with respect to such conversion shall
be validly issued, full, paid and nonassessable, free and clear of all
taxes, liens, changes and encumbrances with respect to the issuance
thereof.
(d) Upon conversion, the holder of this Note shall promptly
surrender this Note to the Company for cancellation.
(e) The Company shall assist and cooperate with any holder of
this Note required to make any governmental filings or obtain any
governmental approval prior to or in connection with the conversion of this
Note into Series A Preferred (including making any filings required to be
made by the Company).
7. LIQUIDATING DIVIDENDS. If the Company declares a dividend
upon the Common Stock payable otherwise than in cash out of earnings or
earned surplus (determined in accordance with generally accepted accounting
principles, consistently applied) except for a stock dividend payable in
shares of Common Stock (a "Liquidating Dividend"), then the Company shall
pay to the holder of this Note at the time of payment thereof the
Liquidating Dividend which would have been paid to the holder of this Note
on the Conversion Stock had this Note been fully converted immediately
prior to the date on which a record is taken for such Liquidating Dividend
or, if no record is taken, the date as of which the record holders of
Common Stock entitled to such dividends are to be determined.
8. PURCHASE RIGHTS. If at any time the Company grants, issues
or sells any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of
Common Stock (the "Purchase Rights"), then each holder of the Notes shall
be entitled to acquire, upon the terms applicable to such Purchase Rights,
the aggregate Purchase Rights which such holder could have acquired if such
holder had held the number of shares of Conversion Stock acquirable upon
conversion of such holder's Note immediately before the date on which a
record is taken for the grant, issuance or sale of such Purchase Rights or,
if no such record is taken, the date as of which the record holders of
Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights.
9. AMENDMENT AND WAIVER. Except as otherwise expressly
provided herein, the provisions of the Notes may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company has obtained the
written consent of the holders of a majority of the outstanding principal
amount of the Notes; provided that no such action shall change (i) the rate
at which or the manner in which interest accrues on the Notes or the times
at which such interest becomes payable, (ii) any provision relating to the
scheduled payments or prepayments of principal on the Notes or (iii) the
Conversion Price of the Notes or the number of shares or the class of stock
into which the Notes are convertible, without the written consent of the
holders at least 66% of the outstanding principal amount of the Notes.
10. DEFINITIONS. For purposes of the Notes, the following
capitalized terms have the following meaning.
"COMMON STOCK" means the Company's Common Stock, par value $.015
per share, and any capital stock of any class of the Company which is not
limited to a fixed sum or percentage of par or stated value in respect to
the rights of the holders thereof to participate in dividends or in the
distribution of assets upon any liquidation, dissolution or winding up of
the Company.
"CONVERTIBLE SECURITIES" means any stock or securities (other
than Options) directly or indirectly convertible into or exchangeable for
Common Stock.
"CONVERSION STOCK" means shares of the Company's authorized but
unissued Common Stock, par value $.015 per share; provided that if there is
a change such that the securities issuable upon conversion of the Notes are
issued by an entity other than the Company or there is a change in the
class of securities so issuable, then the term "Conversion Stock" shall
mean one share of the security issuable upon conversion of this Note if
such security is issuable in shares, or shall mean the smallest unit in
which such security is issuable if such security is not issuable in shares.
"MARKET PRICE" of any publicly traded security means the average
of the closing prices of such security's sales on all securities exchanges
on which such security may at the time be listed, or, if there has been no
sales on any such exchange on any day, the average of the highest bid and
lowest asked prices on all such exchanges at the end of such day, or, if on
any day such security is not so listed, the average of the representative
bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York
time, or, if on any day such security is not quoted in the NASDAQ System,
the average of the highest bid and lowest asked prices on such day in the
domestic over-the-counter market as reported by the National Quotation
Bureau, Incorporated, or any similar successor organization, in each such
case averaged over a period of 15 days consisting of the day as of which
"Market Price" is being determined and the 14 consecutive business days
prior to such day. "MARKET PRICE" of any security which is not publicly
traded means the fair value thereof determined jointly by the Company and
the holders of a majority of the outstanding principal amount of the Notes;
provided that if such parties are unable to reach agreement within a
reasonable period of time, such fair value shall be determined by an
appraiser jointly selected by the Company and the holders of a majority of
the outstanding principal amount of the Notes without application of any
minority or blockage discounts. The determination of such appraiser shall
be final and binding upon the parties, and the fees and expenses of such
appraiser shall be borne by the Company.
"OPTIONS" means any rights or options to subscribe for or
purchase Common Stock or Convertible Securities.
"PERSON" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust,
a joint venture, an unincorporated organization and a governmental entity
or any department, agency or political subdivision thereof.
"PUBLIC OFFERING" means any offering by the Company of its
capital stock or equity securities to the public pursuant to an effective
registration statement under the Securities Act of 1933, as then in effect,
or any comparable statement under any similar federal statute then in
force.
"SUBSIDIARY" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business
entity of which (i) if a corporation, a majority of the total voting power
of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a
combination thereof, or (ii) if a limited liability company, partnership,
association or other business entity, a majority of the partnership or
other similar ownership interest thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof,
a Person or Persons shall be deemed to have a majority ownership interest
in a limited liability company, partnership, association or other business
entity if such Person or Persons shall be allocated a majority of limited
liability company, partnership, association or other business entity gains
or losses or shall be or control any managing director or general partner
of such limited liability company, partnership, association or other
business entity.
11. CANCELLATION. After all principal and accrued interest at
any time owed on this Note has been paid in full, this Note shall be
surrendered to the Company for cancellation and shall not be reissued.
12. PAYMENTS. Unless otherwise expressly provided herein, all
payments to be made to the holders of the Notes shall be made in the lawful
money of the United States of America in immediately available funds.
13. PLACE OF PAYMENT. Payments of principal and interest shall
be delivered to ______ at the following address:
c/o Fleet Equity Partners
Mail Stop: RI MO 227
111 Westminster Street
Providence, RI 02903
Attention: Robert Van Degna
or to such other address or to the attention of such other person as
specified by prior written notice to the Company.
14. BUSINESS DAYS. If any payment is due, or any time period
for giving notice or taking action expires, on a day which is a Saturday,
Sunday or legal holiday in the State of New York or the State of Rhode
Island, the payment shall be due and payable on, and the time period shall
automatically be extended to, the next business day immediately following
such Saturday, Sunday or legal holiday, and interest shall continue to
accrue at the required rate hereunder until any such payment is made.
15. USURY LAWS. It is the intention of the Company and the
holder of this Note to conform strictly to all applicable usury laws now or
hereafter in force, and any interest payable under this Note shall be
subject to reduction to the amount not in excess of the maximum legal
amount allowed under the applicable usury laws as now or hereafter
construed by the courts having jurisdiction over such matters. If the
maturity of this Note is accelerated by reason of an election by the holder
hereof resulting from an Event of Default, voluntary prepayment by the
Company or otherwise, then earned interest may never include more than the
maximum amount permitted by law, computed from the date hereof until
payment, and any interest in excess of the maximum amount permitted by law
shall be canceled automatically and, if theretofore paid, shall at the
option of the holder hereof either be rebated to the Company or credited on
the principal amount of this Note, or if this Note has been paid, then the
excess shall be rebated to the Company. The aggregate of all interest
(whether designated as interest, service charges, points or otherwise)
contracted for, chargeable or receivable under this Note shall under no
circumstances exceed the maximum legal rate upon the unpaid principal
balance of this Note remaining unpaid from time to time. If such interest
does exceed the maximum legal rate, it shall be deemed a mistake and such
excess shall be canceled automatically and, if theretofore paid, rebated to
the Company or credited on the principal amount of this Note, or if this
Note has been repaid, then such excess shall be rebated to the Company.
16. NOTICES. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Note shall
be given in accordance with paragraph 7L of the Purchase Agreement.
* * * * *
<PAGE>
IN WITNESS WHEREOF, the Company has executed and delivered this
Note on May 22, 1995.
ACC CORP.
Attest By /s/ Michael R. Daley
/s/ Francis D.R. Coleman Its EVP and CFO
EXHIBIT 4-2(b)
The security represented by this instrument was originally issued
on May 22, 1995, and has not been registered under the Securities
Act of 1933, as amended. The transfer of such security is
subject to the conditions specified in the Note and Warrant
Purchase Agreement, dated as of May 22, 1995, as amended and
modified from time to time, between the issuer (the "Company")
and certain investors, and the Company reserves the right to
refuse the transfer of such security until such conditions have
been fulfilled with respect to such transfer. Upon written
request, a copy of such conditions shall be furnished by the
Company to the holder hereof without charge.
Payment of this Note is subject to the terms and conditions of a
Subordination Agreement, dated May 22, 1995, by and among the
original Holder of this Note, Manufacturers and Traders Trust
Company, Marine Midland Bank and certain other Investors, and any
other subordination agreement referred to in paragraph 4 hereof.
ACC CORP.
CONVERTIBLE SUBORDINATED
PROMISSORY NOTE
May 22, 1995 $1,800,000
ACC Corp., a Delaware corporation (the "Company"), hereby
promises to pay to the order of Fleet Equity Partners VI, L.P. the
principal amount of $1,800,000 together with interest thereon calculated
from the date hereof in accordance with the provisions of this Note.
This Note was issued pursuant to a Note and Warrant Purchase
Agreement, dated as of May 22, 1995 (as amended and modified from time to
time, the "Purchase Agreement"), between the Company and certain investors,
and this Note is one of the "Notes" referred to in the Purchase Agreement.
The Purchase Agreement contains terms governing the rights of the holder of
this Note, and all provisions of the Purchase Agreement are hereby
incorporated herein in full by reference. Except as defined in paragraph
10 hereof or unless otherwise indicated herein, capitalized terms used in
this Note have the same meanings set forth in the Purchase Agreement.
1. PAYMENT OF INTEREST. Except as otherwise expressly
provided in paragraph 5(b) hereof, interest shall accrue at the rate of
twelve percent (12%) per annum on the unpaid principal amount of this Note
outstanding from time to time, or (if less) at the highest rate then
permitted under applicable law. The Company shall pay to the holder of
this Note all accrued interest on the last day of each March, June,
September and December, beginning June 30, 1995. Unless prohibited under
applicable law, any accrued interest which is not paid on the date on which
it is due and payable shall bear interest at the same rate at which
interest is then accruing on the principal amount of this Note until such
interest is paid. Any accrued interest which for any reason has not
theretofore been paid shall be paid in full on the date on which the final
principal payment on this Note is made. Interest shall accrue on any
principal payment due under this Note and, to the extent permitted by
applicable law, on any interest which has not been paid on the date on
which it is due and payable until such time as payment therefor is actually
delivered to the holder of this Note.
2. PAYMENT OF PRINCIPAL ON NOTE.
(a) PREPAYMENTS. The Company may, at any time and from time to
time without premium or penalty, prepay all or any portion of the
outstanding principal amount of the Notes, pro rata among the holders of
the Notes on the basis of the outstanding principal amount of the Note held
by each holder; provided that (i) such prepayment is not prohibited by the
provisions of paragraph 4 hereof, (ii) the Company has paid all interest on
the Notes accrued through the immediately preceding scheduled interest
payment date and (iii) the minimum principal amount so prepaid shall be the
lesser of $100,000 or the amount of principal outstanding on the Notes. In
connection with each prepayment of principal hereunder, the Company shall
also pay all accrued and unpaid interest on the principal amount of the
Notes being repaid.
(b) PRINCIPAL REPAYMENT. On May 22, 2002 (the "Scheduled
Repayment Date"), the Company shall repay all outstanding principal and
interest on the Notes, or if such amount is greater, the Market Price (on
the date which is five trading days prior to the Scheduled Repayment Date)
of the Common Stock into which such Notes are convertible on the Scheduled
Repayment Date (the "Alternative Amount"); provided that to the extent that
the Alternative Amount exceeds the amount of principal and interest
outstanding on the Notes on the Scheduled Repayment Date, all or a portion
of such excess may, at the Company's option, be paid in the form of Common
Stock (valued at the Market Price of the Common Stock on the date which is
five trading days prior to the Scheduled Repayment Date) up to and not
exceeding a number of shares of Common Stock equal to 20 multiplied by the
average daily trading volume of the Common Stock in the public markets for
a period of 45 consecutive trading days ending five days prior to the
Scheduled Repayment Date and the remainder shall be paid in cash. Such
shares of Common Stock shall be applied first to the repayment of
principal, then to interest. Upon issuance, such shares of Common Stock
shall be validly issued, fully paid and nonassessable.
(c) SPECIAL PRINCIPAL REPAYMENTS.
(i) If a Change in Control has occurred or the Company
obtains knowledge that a Change in Control is proposed to occur, the
Company shall give prompt written notice of such Change in Control
describing in reasonable detail the material terms and date of consummation
thereof to the holder of this Note, but in any event such notice shall not
be given later than five days after the occurrence of such Change in
Control, and the Company shall give the holder of this Note prompt written
notice of any material change in the terms or timing of such transaction.
The holder of this Note may require the Company to repay all or any portion
of the principal amount remaining on this Note at an amount equal to the
greater of (1) the principal amount requested to be repaid plus all unpaid
accrued interest with respect to such principal amount, (2) the Market
Price (as of the date which is five trading days prior to the occurrence of
such Change in Control) of the Common Stock into which such principal
amount is convertible on such date or (3) the value of the Common Stock
into which such principal amount is convertible as of the consummation of
the Change in Control reflected by the Change in Control transaction, by
giving written notice to the Company of such election prior to the later of
(a) 21 days after receipt of the Company's notice and (b) five days prior
to the consummation of the Change in Control (the "Expiration Date"). The
Company shall give prompt written notice of any such election to all other
holders of Notes within five days after the receipt thereof, and each such
holder shall have until the later of (a) the Expiration Date or (b) ten
days after receipt of such second notice to request repayment hereunder (by
giving written notice to the Company) of all or any portion of the Notes
owned by such holder.
(ii) Upon receipt of such election(s), the Company shall be
obligated to pay the amount set forth in subparagraph (i) above with
respect to the Change in Control. If any proposed Change in Control does
not occur, all requests for repayment in connection therewith shall be
automatically rescinded, or if there has been a material change in the
terms or the timing of the transaction, any holder of Notes may rescind
such holder's request for repayment by giving written notice of such
rescission to the Company.
(iii) A "Change in Control" shall be deemed to have occurred
at such time as any of the following events shall occur: (a) any sale,
transfer or issuance or series of sales, transfers and/or issuances of
Common Stock by the Compnay or any holders thereof which results in any
Person or group of Persons (as the term "group" is used under the
Securities Exchange Act of 1934) owning more than 40% of the Common Stock
outstanding immediately after such sale, transfer or issuance or series of
sales, transfers and/or issuances or (b) during any 12-month period,
individuals who at the beginning of such period constituted the Company's
Board of Directors (together with any new directors whose election by such
Board of Directors or whose nomination for election by the stockholders of
the Company was approved by a majority vote of the directors who were
either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Company's Board of Directors then in office.
(iv) If a Fundamental Change is proposed to occur, the
Company shall give written notice of such Fundamental Change describing in
reasonable detail the material terms and date of consummation thereof to
the holder of this Note not more than 45 days nor less than 20 days prior
to the consummation of such Fundamental Change, and the Company shall give
the holder of this Note prompt written notice of any material change in the
terms or timing of such transaction. The holder of this Note may require
the Company to repay all or any portion of this Note at an amount equal to
the greater of (1) the principal amount requested to be prepaid plus all
unpaid accrued interest with respect to such principal amount, (2) the
Market Price (as of the date which is five trading days prior to the
occurrence of such Fundamental Change) of the Common Stock into which such
principal amount is convertible on such date or (3) the value of the Common
Stock into which such principal amount is convertible as of the
consummation of the Fundamental Change reflected by the Fundamental Change
transaction, by giving written notice to the Company of such election prior
to the later of (a) ten days prior to the consummation of the Fundamental
Change or (b) ten days after receipt of notice from the Company. The
Company shall give prompt written notice of such election to all other
holders of Notes (but in any event within five days prior to the
consummation of the Fundamental Change), and each such holder shall have
until two days after the receipt of such notice to request redemption (by
written notice given to the Company) of all or any portion of the Notes
owned by such holder.
(v) Upon receipt of such election(s), the Company shall be
obligated to repay the amount set forth in subparagraph (iv) above upon the
consummation of such Fundamental Change. If any proposed Fundamental
Change does not occur, all requests for repayment in connection therewith
shall be automatically rescinded, or if there has been a material change in
the terms or the timing of the transaction, any holder of Notes may rescind
such holder's request for redemption by delivering written notice thereof
to the Company prior to the consummation of the transaction.
(vi) The term "Fundamental Change" means (a) any sale or
transfer of more than 50% of the assets of the Company and its Subsidiaries
on a consolidated basis (measured either by book value in accordance with
generally accepted accounting principles consistently applied or by fair
market value determined in the reasonable good faith judgment of the
Company's board of directors) in any transaction or series of transactions
(other than sales in the ordinary course of business) and (b) any merger or
consolidation to which the Company is a party, except for a merger in which
the Company is the surviving corporation, and after giving effect to such
merger, no Person or group of Persons (as the term "group" is used under
the Securities Act of 1934) owns more than 40% of the Common Stock
outstanding immediately after such merger.
(d) CONVERSION. Notwithstanding any provision contained in this
paragraph 2, the holder of this Note may convert all or any portion of the
outstanding principal amount of this Note until such time as such amount
has been deemed to have been paid.
3. PRO RATA PAYMENT. Except as otherwise expressly provided in
this Note, all payments to the holders of the Notes (whether for principal,
interest or otherwise) shall be made pro rata among such holders based upon
the aggregate unpaid principal amount of the Notes held by each such
holder. If any holder of a Note obtains any payment (whether voluntary,
involuntary or otherwise) of principal, interest or other amount with
respect to any Note in excess of such holder's pro rata share of such
payments obtained by all holders of the Notes (other than as expressly
provided herein), by acceptance of a Note each such holder agrees to
purchase from the other holders of the Notes a participation in the Notes
held by them as is necessary to cause such holders to share the excess
payment ratably among each of them as provided in this paragraph.
4. SUBORDINATION. This Note is subordinated to the extent set
forth in the Subordination Agreement, dated May 22, 1995, by and among the
original Holder of this Note, Manufacturers and Traders Trust Company,
Marine Midland Bank and the holders of the other Notes. This Note shall
also be subordinated to the extent set forth in any other subordination
agreement entered into by the holders of the Notes.
5. EVENTS OF DEFAULT.
(a) DEFINITION. For purposes of this Note, an Event of Default
shall be deemed to have occurred if
(i) the Company fails to pay when due and payable (whether
at maturity or otherwise) the full amount of interest then accrued on any
Note or the full amount of any principal due on any Note, and such failure
to pay is not cured within five days after the occurrence thereof;
(ii) the Company fails to perform or observe any other
material covenant or agreement in the Notes or in the Purchase Agreement,
and such failure is not cured within 30 days after the earlier of (A) the
receipt of notice thereof by the holder of this Note or (B) the discovery
thereof by the Company;
(iii) any representation, warranty or information contained
in the Purchase Agreement or required to be furnished to any holder of the
Notes pursuant to the Purchase Agreement, is false or misleading in any
material respect on the date made or furnished and such false or misleading
representation, warranty or information relates to a material adverse
effect on the Company and its Subsidiaries, taken as a whole, or fails to
disclose a material adverse change on the Company and its Subsidiaries,
taken as a whole; provided that, notwithstanding the foregoing, in the case
of paragraph 5J of the Purchase Agreement, any occurrence, event,
transaction or claim which results in any loss, damage or injury to the
Company and its Subsidiaries in excess of $4,000,000 shall conclusively be
deemed to have material adverse effect and be a material adverse change
hereunder;
(iv) the Company or any Material Subsidiary makes an
assignment for the benefit of creditors or admits in writing its inability
to pay its debts generally as they become due; or an order, judgment or
decree is entered adjudicating the Company or any Material Subsidiary
bankrupt or insolvent; or any order for relief with respect to the Company
or any Material Subsidiary is entered under the Federal Bankruptcy Code; or
the Company or any Material Subsidiary petitions or applies to any tribunal
for the appointment of a custodian, trustee, receiver or liquidator of the
Company or any Material Subsidiary, or of any substantial part of the
assets of the Company or any Material Subsidiary, or commences any
proceeding (other than a proceeding for the voluntary liquidation and
dissolution of any Material Subsidiary) relating to the Company or any
Material Subsidiary under any bankruptcy reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law of any
jurisdiction; or any such petition or application is filed, or any such
proceeding is commenced, against the Company or any Material Subsidiary and
either (A) the Company or any such Material Subsidiary by any act indicates
its approval thereof, consent thereto or acquiescence therein or (B) such
petition, application or proceeding is not dismissed within 60 days;
(v) a judgment in excess of $500,000 is rendered against
the Company or any Material Subsidiary and, within 60 days after entry
thereof, such judgment is not discharged in full or execution thereof
stayed pending appeal, or within 60 days after the expiration of any such
stay, such judgment is not discharged in full; or
(vi) the Company or any Material Subsidiary defaults in the
performance of any obligation if the effect of such default is to cause an
amount exceeding $500,000 to become due prior to its stated maturity or to
permit the holder or holders of such obligation to cause an amount
exceeding $500,000 to become due prior to its stated maturity.
The foregoing shall constitute Events of Default whatever the
reason or cause for any such Event of Default and whether it is voluntary
or involuntary or is effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body.
(b) CONSEQUENCES OF EVENTS OF DEFAULT.
(i) If any Event of Default of the type described in
subparagraph 5(a)(i), 5(a)(ii) or 5(a)(iii) (with respect to paragraphs 5J
and 5X of the Purchase Agreement only) has occurred and is continuing, the
interest rate on the Notes shall increase immediately to 15% or (if less)
to the highest rate permitted by law and any increase of the interest rate
resulting from the operation of this subparagraph shall terminate as of the
close of business on the date on which no Event of Default of the type
described in subparagraph 5(a)(i) or 5(a)(ii) exists (subject to subsequent
increases pursuant to this subparagraph).
(ii) If any Event of Default of the type described in
subparagraph 5(a)(i), 5(a)(ii) or 5(a)(iii) (with respect to 5J and 5X of
the Purchase Agreement only) has occurred, the Conversion Price on the
Notes shall be reduced immediately by 1/3 of the Conversion Price in effect
immediately prior to such adjustment. In no event shall such Conversion
Price adjustment be rescinded, and in no event shall there be more than one
adjustment pursuant to this subparagraph.
(iii) If an Event of Default of the type described in
subparagraph 5(a)(iv) has occurred, the aggregate principal amount of the
Notes (together with all accrued interest thereon and all other amounts due
and payable with respect thereto) shall become immediately due and payable
without any action on the part of the holders of the Notes, and the Company
shall immediately pay to the holders of the Notes all amounts due and
payable with respect to the Notes.
(iv) If any Event of Default (other than an Event of Default
of the type described in subparagraph 5(a)(iv)) has occurred and is
continuing, the holder or holders of Notes representing a majority of the
aggregate principal amount of Notes then outstanding may declare all or any
portion of the outstanding principal amount of the Notes (together with all
accrued interest thereon and all other amounts due and payable with respect
thereto) to be immediately due and payable and may demand immediate payment
of all or any portion of the outstanding principal amount of the Notes
(together with all such other amounts then due and payable) owned by such
holder or holders. The Company shall give prompt written notice of any
such demand to the other holders of Notes, each of which may demand
immediate payment of all or any portion of such holder's Note. If any
holder or holders of the Notes demand immediate payment in accordance with
the terms hereof of all or any portion of the Notes, the Company shall
immediately pay to such holder or holders all amounts due and payable with
respect to such Notes. The amount payable hereunder with respect to the
Notes shall be the greater of (1) all of the outstanding principal and
accrued interest on such Notes and (2) the Market Price (as of the date
which is five trading days prior to the date of payment); provided that to
the extent that the amount in clause (2) above exceeds the amount in clause
(1) above, all or a portion of such excess may, at the Company's option, be
paid in the form of Common Stock (valued at the Market Price of the Common
Stock on such date) up to and not exceeding a number of shares of Common
Stock equal to 20 multiplied by the average daily trading volume of the
Common Stock in the public markets for a period of 45 consecutive trading
days ending on such date and the remainder shall be paid in cash. Such
shares of Common Stock shall be applied first to the repayment of
principal, then to interest. Upon issuance, such shares of Common Stock
shall be validly issued, fully paid and nonassessable.
(v) Each holder of the Notes shall also have any other
rights which such holder may have been afforded under any contract or
agreement at any time and any other rights which such holder may have
pursuant to applicable law.
(vi) The Company hereby waives diligence, presentment,
protest and demand and notice of protest and demand, dishonor and
nonpayment of this Note and expressly agrees that this Note, or any payment
hereunder, may be extended from time to time and that the holder hereof may
accept security for this Note or release security for this Note, all
without in any way affecting the liability of the Company hereunder.
6. CONVERSION.
(a) CONVERSION PROCEDURE.
(i) At any time and from time to time prior to the payment in
full of this Note the holder of this Note may convert all or any portion of
the outstanding principal amount of this Note into a number of shares of
Conversion Stock (excluding any fractional share) determined by dividing
the principal amount designated by such holder to be converted by the
Conversion Price then in effect.
(ii) Except as otherwise provided herein, each conversion of this
Note shall be deemed to have been effected as of the close of business on
the date on which this Note has been surrendered for conversion at the
principal office of the Company. At the time any such conversion has been
effected, the rights of the holder of this Note as such holder to the
extent of the conversion shall cease and the Person or Persons in whose
name or names any certificate or certificates for shares of Conversion
Stock are to be issued upon such conversion shall be deemed to have become
the holder or holders of record of the shares of Conversion Stock
represented thereby.
(iii) Notwithstanding any other provision hereof, if a conversion
of any portion of this Note is to be made in connection with a Public
Offering, a Change in Control, a Fundamental Change or other transaction
affecting the Company, the conversion of any portion of this Note may, at
the election of the holder hereof, be conditioned upon the consummation of
such transaction, in which case such conversion shall not be deemed to be
effective until such transaction has been consummated.
(iv) As soon as possible after a conversion has been effected,
the Company shall deliver to the converting holder:
(1) a certificate or certificates representing the number
of shares of Conversion Stock issuable by reason of such conversion in
such name or names and such denomination or denominations as the
converting holder has specified;
(2) payment in an amount equal to the sum of all accrued
interest with respect to the principal amount converted, which has not
been paid prior thereto; and
(3) a new Note representing any portion of the principal
amount which was represented by the Note surrendered to the Company in
connection with such conversion but which was not converted.
(v) The issuance of certificates for shares of Conversion Stock
upon conversion of this Note shall be made without charge to the holder
hereof for any issuance tax in respect thereof or other cost incurred by
the Company in connection with such conversion and the related issuance of
shares of Conversion Stock. Upon conversion of this Note, the Company
shall take all such actions as are necessary in order to insure that the
Conversion Stock issuable with respect to such conversion shall be validly
issued, fully paid and nonassessable, free and clear of all taxes, liens,
charges and encumbrances with respect to the issuance thereof.
(vi) The Company shall not close its books against the transfer
of Conversion Stock issued or issuable upon conversion of this Note. The
Company shall assist and cooperate with any holder of this Note required to
make any governmental filings or obtain any governmental approval prior to
or in connection with the conversion of this Note (including making any
filings required to be made by the Company).
(vii) The Company shall at all times reserve and keep available
out of its authorized but unissued shares of Conversion Stock, solely for
the purpose of issuance upon the conversion of the Notes, such number of
shares of Conversion Stock issuable upon the conversion of all outstanding
Notes. All shares of Conversion Stock which are so issuable shall, when
issued, be duly and validly issued, fully paid and nonassessable and free
from all taxes, liens and charges. The Company shall take all such actions
as may be necessary to assure that all such shares of Conversion Stock may
be so issued without violation of any applicable law or governmental
regulation or any requirements of any domestic securities exchange upon
which shares of Conversion Stock may be listed (except for official notice
of issuance which shall be immediately delivered by the Company upon each
such issuance).
(viii) If any fractional interest in a share of Conversion Stock
would, except for the provisions of this subparagraph, be delivered upon
any conversion of this Note, the Company, in lieu of delivering the
fractional share therefor, shall pay an amount to the holder thereof equal
to the Market Price of such fractional interest as of the date of
conversion.
(b) CONVERSION PRICE.
(i) The initial Conversion Price shall be $16.00. In order to
prevent dilution of the conversion rights granted under the Notes, the
Conversion Price shall be subject to adjustment from time to time pursuant
to this paragraph (b).
(ii) If and whenever the Company issues or sells, or in
accordance with paragraph 6(c) is deemed to have issued or sold, any share
of Common Stock for a consideration per share less than the Conversion
Price in effect immediately prior to such time, then immediately upon such
issue or sale or deemed issue or sale the Conversion Price shall be reduced
to the lowest net price per share (as determined pursuant to paragraph
6(c)(v) below) at which any such share of Common Stock has been issued or
sold or is deemed to have been issued or sold.
(iii) Notwithstanding the foregoing, there shall be no adjustment
to the Conversion Price hereunder with respect to the granting of stock
options to employees or directors of the Company and its Subsidiaries or
the exercise thereof or the granting of stock appreciation rights, phantom
stock rights or other similar rights to employees or directors of the
Company for (or rights relating to) an aggregate of 1,586,702 shares of
Common Stock (976,594 options being currently outstanding) (as such number
of shares is equitably adjusted for subsequent stock splits, stock
combinations, stock dividends and recapitalizations and such number shall
include all stock options outstanding as of the date of the Purchase
Agreement).
(c) EFFECT ON CONVERSION PRICE OF CERTAIN EVENTS. For purposes
of determining the adjusted Conversion Price under paragraph 6(b), the
following shall be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any manner
grants or sells any Option and the lowest price per share for which any one
share of Common Stock is issuable upon the exercise of any such Option, or
upon conversion or exchange of any Convertible Security issuable upon
exercise of any such Option, is less than the Conversion Price in effect
immediately prior to the time of the granting or sale of such Option, then
such share of Common Stock shall be deemed to be outstanding and to have
been issued and sold by the Company at the time of the granting or sale of
such Option for such price per share. For purposes of this paragraph, the
"lowest price per share for which any one share of Common Stock is
issuable" shall be equal to the sum of the lowest amounts of consideration
(if any) received or receivable by the Company with respect to any one
share of Common Stock upon the granting or sale of the Option, upon
exercise of the Option and upon conversion or exchange of any Convertible
Security issuable upon exercise of such Option. No further adjustment of
the Conversion Price shall be made upon the actual issue of such Common
Stock or such Convertible Security upon the exercise of such Options or
upon the actual issue of such Common Stock upon conversion or exchange of
such Convertible Security.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any
manner issues or sells any Convertible Security and the lowest price per
share for which any one share of Common Stock is issuable upon conversion
or exchange thereof is less than the Conversion Price in effect immediately
prior to the time of such issue or sale, then such share of Common Stock
shall be deemed to be outstanding and to have been issued and sold by the
Company at the time of the issuance or sale of such Convertible Securities
for such price per share. For the purposes of this paragraph, the "lowest
price per share for which any one share of Common Stock is issuable" shall
be equal to the sum of the lowest amounts of consideration (if any)
received or receivable by the Company with respect to any one share of
Common Stock upon the issuance or sale of the Convertible Security and upon
the conversion or exchange of such Convertible Security. No further
adjustment of the Conversion Price shall be made upon the actual issue of
such Common Stock upon conversion or exchange of any Convertible Security,
and if any such issue or sale of such Convertible Security is made upon
exercise of any Options for which adjustments of the Conversion Price had
been or are to be made pursuant to other provisions of this Section 6, no
further adjustment of the Conversion Price shall be made by reason of such
issue or sale.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If the purchase
price provided for in any Option, the additional consideration (if any)
payable upon the issue, conversion or exchange of any Convertible Security
or the rate at which any Convertible Security is convertible into or
exchangeable for Common Stock changes at any time, the Conversion Price in
effect at the time of such change shall be adjusted immediately to the
Conversion Price which would have been in effect at such time had such
Option or Convertible Security originally provided for such changed
purchase price, additional consideration or conversion rate, as the case
may be, at the time initially granted, issued or sold. For purposes of
paragraph 6(c), if the terms of any Option or Convertible Security which
was outstanding as of the date of issuance of this Note are changed in the
manner described in the immediately preceding sentence, then such Option or
Convertible Security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed to have been issued as of
the date of such change; provided that no such change shall at any time
cause the Conversion Price hereunder to be increased.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. Upon the expiration of any Option or the termination of any
right to convert or exchange any Convertible Security without the exercise
of any such Option or right, the Conversion Price then in effect hereunder
shall be adjusted immediately to the Conversion Price which would have been
in effect at the time of such expiration or termination had such Option or
Convertible Security, to the extent outstanding immediately prior to such
expiration or termination, never been issued; provided that if such
expiration or termination would result in an increase in the Conversion
Price then in effect, such increase shall not be effective until 30 days
after written notice thereof has been given to all holders of the Notes.
For purposes of paragraph 6(c), the expiration or termination of any Option
or Convertible Security which was outstanding as of the date of issuance of
the Notes shall not cause the Conversion Price hereunder to be adjusted
unless, and only to the extent that, a change in the terms of such Option
or Convertible Security caused it to be deemed to have been issued after
the date of issuance of the Notes.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any Common Stock,
Option or Convertible Security is issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be
deemed to be the amount received by the Company therefor (net of discounts,
commissions and related expenses). If any Common Stock, Option or
Convertible Security is issued or sold for a consideration other than cash,
the amount of the consideration other than cash received by the Company
shall be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of
consideration received by the Company shall be the Market Price thereof as
of the date of receipt. If any Common Stock, Option or Convertible
Security is issued to the owners of the non-surviving entity 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 value of
such portion of the net assets and business of the non-surviving entity as
is attributable to such Common Stock, Option or Convertible Security, as
the case may be. The fair value of any consideration other than cash and
securities shall be determined jointly by the Company and the holders of a
majority of the principal amount of the Notes then outstanding. If such
parties are unable to reach agreement within a reasonable period of time,
the fair value of such consideration shall be determined by an independent
appraiser experienced in valuing such type of consideration jointly
selected by the Company and the holders of a majority of the principal
amount of the Notes then outstanding. The determination of such appraiser
shall be final and binding upon the parties, and the fees and expenses of
such appraiser shall be borne by the Company.
(vi) INTEGRATED TRANSACTIONS. In case any Option is issued in
connection with the issue or sale of other securities of the Company,
together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the
Option shall be deemed to have been issued for a consideration of $.01.
(vii) TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or
for the account of the Company or any Subsidiary, and the disposition of
any shares so owned or held shall be considered an issue or sale of Common
Stock.
(viii) RECORD DATE. If the Company takes a record of the holders
of Common Stock for the purpose of entitling them (a) to receive a dividend
or other distribution payable in Common Stock, Options or in Convertible
Securities or (b) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date shall be deemed to be the
date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or upon the making of
such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
(d) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company
at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding
shares of Common Stock into a greater number of shares, the Conversion
Price in effect immediately prior to such subdivision shall be
proportionately reduced, and if the Company at any time combines (by
reverse stock split or otherwise) one or more classes of its outstanding
shares of Common Stock into a smaller number of shares, the Conversion
Price in effect immediately prior to such combination shall be
proportionately increased.
(e) REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's
assets or other transaction, in each case which is effected in such a
manner that the holders of Common Stock are entitled to receive (either
directly or upon subsequent liquidation) stock, securities or assets with
respect to or in exchange for Common Stock, is referred to herein as an
"Organic Change". Prior to the consummation of any Organic Change, the
Company shall make lawful and adequate provision (in form and substance
satisfactory to the holders of a majority of the principal amount of the
Notes then outstanding) to insure that each of the holders of the Notes
shall thereafter have the right to acquire and receive, in lieu of or in
addition to (as the case may be) the shares of Conversion Stock immediately
theretofore acquirable and receivable upon the conversion of such holder's
Note, such shares of stock, securities or assets as such holder would have
received in connection with such Organic Change if such holder had
converted its Note immediately prior to such Organic Change. In each such
case, the Company shall also make appropriate provisions (in form and
substance satisfactory to the holders of a majority of the principal amount
of the Notes then outstanding) to insure that the provisions of this
Section 6 and Sections 7 and 8 hereof shall thereafter be applicable to the
Notes in relation to any shares of stock, securities or assets thereafter
deliverable upon conversion of the Notes (including, in the case of any
such consolidation, merger or sale in which the successor entity or
purchasing entity is other than the Company, an immediate adjustment of the
Conversion Price to the value for the Common Stock reflected by the terms
of such consolidation, merger or sale, and a corresponding immediate
adjustment in the number of shares of Conversion Stock acquirable and
receivable upon conversion of Notes, if the value so reflected is less than
the Conversion Price in effect immediately prior to such consolidation,
merger or sale). The Company shall not effect any such consolidation,
merger or sale, unless prior to the consummation thereof, the successor
entity (if other than the Company) resulting from consolidation or merger
or the entity purchasing such assets assumes by written instrument (in form
and substance satisfactory to the holders of a majority of the principal
amounts of the Notes then outstanding), the obligation to deliver to each
such holder such shares of stock, securities or assets as, in accordance
with the foregoing provisions, such holder may be entitled to acquire.
(f) CERTAIN EVENTS. If any event occurs of the type
contemplated by the provisions of this Section 6 but not expressly provided
for by such provisions (including the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then
the Company's board of directors shall make an appropriate adjustment in
the Conversion Price so as to protect the rights of the holders of Notes;
provided that no such adjustment shall increase the Conversion Price as
otherwise determined pursuant to this Section 6 or decrease the number of
shares of Conversion Stock issuable upon conversion of the Notes then
outstanding.
(g) NOTICES.
(i) Immediately upon any adjustment of the Conversion Price, the
Company shall give written notice thereof to the holder of this Note,
setting forth in reasonable detail and certifying the calculation of such
adjustment.
(ii) The Company shall give written notice to the holder of this
Note at least 20 days prior to the date on which the Company closes its
books or takes a record (a) with respect to any dividend or distribution
upon Common Stock, (b) with respect to any pro rata subscription offer to
holders of Common Stock or (c) for determining rights to vote with respect
to any Organic Change, dissolution or liquidation.
(iii) The Company shall also give written notice to the holders of
Series A Preferred at least 20 days prior to the date on which any Organic
Change shall take place.
(h) MANDATORY CONVERSION. The outstanding principal amount of
this Note will be automatically converted to Common Stock at the Conversion
Price then in effect without any further action on the part of the Company
or the holder hereof if, at any time after May 22, 1997, (i) the daily
trading volume of the Common Stock in the public markets exceeds 5% of the
number of shares of Common Stock issuable upon conversion of all
outstanding Notes for each of 45 consecutive trading days, (ii) no holder
of any Note is subject to any underwriters lockup agreement restricting the
transferability of the shares of Conversion Stock issuable upon conversion
of such Notes and (iii) the Market Price of the Common Stock on any of the
anniversary dates of the issuance of the Notes set forth below equals or
exceeds the corresponding price set forth below (subject to adjustment for
stock splits, stock consolidations and stock dividends):
2nd Anniversary $32.00
3rd Anniversary $32.00
4th Anniversary $39.06
5th Anniversary $39.81
6th Anniversary $47.78
7th Anniversary $57.33
In the event that any measurement of the market price of the
Common Stock is to occur on a date between two anniversary dates, the share
price amounts above shall be prorated (based upon the number of days
elapsed between such anniversary dates).
(i) AUTOMATIC CONVERSION TO SERIES A PREFERRED.
(a) Upon filing of the Certificate of Designation authorizing
the Company's Series A Preferred Stock, par value $1.00 (the "Series A
Preferred") with the Secretary of State of Delaware, the Notes shall
automatically convert (without any further action on the part of the
Company or the holders of the Notes) to the number of shares of Series A
Preferred determined by dividing the principal amount then outstanding by
$1,000. Any fraction thereof shall be converted to a corresponding
fractional share of Series A Preferred. At the time of such conversion,
the rights of the holder of this Note shall cease and the Person or Persons
in whose name or names any certificate or certificates for shares of Series
A Preferred are to be issued upon such conversion shall be deemed to have
become the holder or holders of record of the shares of Series A Preferred
represented thereby.
(b) As soon as possible after such conversion has been effected,
the Company shall deliver to the converting holder in exchange for such
holder's Note:
(1) a certificate or certificates representing the number
of shares of Series A Preferred issuable by reason of such conversion
in such name or names and such denomination or denominations as the
holder has specified; and
(2) payment in an amount equal to the sum of all accrued
interest with respect to the Note which has not been paid prior
thereto.
(c) The issuance of a certificate or certificates for shares of
Series A Preferred upon conversion of this Note shall be made without
charge to the holder hereof for any issuance tax in respect thereof or
other cost incurred by the Company in connection with such conversion and
the related issuance of Series A Preferred. Upon conversion of this Note,
the Company shall take all such actions as are necessary in order to insure
that the Series A Preferred issuable with respect to such conversion shall
be validly issued, full, paid and nonassessable, free and clear of all
taxes, liens, changes and encumbrances with respect to the issuance
thereof.
(d) Upon conversion, the holder of this Note shall promptly
surrender this Note to the Company for cancellation.
(e) The Company shall assist and cooperate with any holder of
this Note required to make any governmental filings or obtain any
governmental approval prior to or in connection with the conversion of this
Note into Series A Preferred (including making any filings required to be
made by the Company).
7. LIQUIDATING DIVIDENDS. If the Company declares a dividend
upon the Common Stock payable otherwise than in cash out of earnings or
earned surplus (determined in accordance with generally accepted accounting
principles, consistently applied) except for a stock dividend payable in
shares of Common Stock (a "Liquidating Dividend"), then the Company shall
pay to the holder of this Note at the time of payment thereof the
Liquidating Dividend which would have been paid to the holder of this Note
on the Conversion Stock had this Note been fully converted immediately
prior to the date on which a record is taken for such Liquidating Dividend
or, if no record is taken, the date as of which the record holders of
Common Stock entitled to such dividends are to be determined.
8. PURCHASE RIGHTS. If at any time the Company grants, issues
or sells any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of
Common Stock (the "Purchase Rights"), then each holder of the Notes shall
be entitled to acquire, upon the terms applicable to such Purchase Rights,
the aggregate Purchase Rights which such holder could have acquired if such
holder had held the number of shares of Conversion Stock acquirable upon
conversion of such holder's Note immediately before the date on which a
record is taken for the grant, issuance or sale of such Purchase Rights or,
if no such record is taken, the date as of which the record holders of
Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights.
9. AMENDMENT AND WAIVER. Except as otherwise expressly
provided herein, the provisions of the Notes may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company has obtained the
written consent of the holders of a majority of the outstanding principal
amount of the Notes; provided that no such action shall change (i) the rate
at which or the manner in which interest accrues on the Notes or the times
at which such interest becomes payable, (ii) any provision relating to the
scheduled payments or prepayments of principal on the Notes or (iii) the
Conversion Price of the Notes or the number of shares or the class of stock
into which the Notes are convertible, without the written consent of the
holders at least 66% of the outstanding principal amount of the Notes.
10. DEFINITIONS. For purposes of the Notes, the following
capitalized terms have the following meaning.
"COMMON STOCK" means the Company's Common Stock, par value $.015
per share, and any capital stock of any class of the Company which is not
limited to a fixed sum or percentage of par or stated value in respect to
the rights of the holders thereof to participate in dividends or in the
distribution of assets upon any liquidation, dissolution or winding up of
the Company.
"CONVERTIBLE SECURITIES" means any stock or securities (other
than Options) directly or indirectly convertible into or exchangeable for
Common Stock.
"CONVERSION STOCK" means shares of the Company's authorized but
unissued Common Stock, par value $.015 per share; provided that if there is
a change such that the securities issuable upon conversion of the Notes are
issued by an entity other than the Company or there is a change in the
class of securities so issuable, then the term "Conversion Stock" shall
mean one share of the security issuable upon conversion of this Note if
such security is issuable in shares, or shall mean the smallest unit in
which such security is issuable if such security is not issuable in shares.
"MARKET PRICE" of any publicly traded security means the average
of the closing prices of such security's sales on all securities exchanges
on which such security may at the time be listed, or, if there has been no
sales on any such exchange on any day, the average of the highest bid and
lowest asked prices on all such exchanges at the end of such day, or, if on
any day such security is not so listed, the average of the representative
bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York
time, or, if on any day such security is not quoted in the NASDAQ System,
the average of the highest bid and lowest asked prices on such day in the
domestic over-the-counter market as reported by the National Quotation
Bureau, Incorporated, or any similar successor organization, in each such
case averaged over a period of 15 days consisting of the day as of which
"Market Price" is being determined and the 14 consecutive business days
prior to such day. "MARKET PRICE" of any security which is not publicly
traded means the fair value thereof determined jointly by the Company and
the holders of a majority of the outstanding principal amount of the Notes;
provided that if such parties are unable to reach agreement within a
reasonable period of time, such fair value shall be determined by an
appraiser jointly selected by the Company and the holders of a majority of
the outstanding principal amount of the Notes without application of any
minority or blockage discounts. The determination of such appraiser shall
be final and binding upon the parties, and the fees and expenses of such
appraiser shall be borne by the Company.
"OPTIONS" means any rights or options to subscribe for or
purchase Common Stock or Convertible Securities.
"PERSON" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust,
a joint venture, an unincorporated organization and a governmental entity
or any department, agency or political subdivision thereof.
"PUBLIC OFFERING" means any offering by the Company of its
capital stock or equity securities to the public pursuant to an effective
registration statement under the Securities Act of 1933, as then in effect,
or any comparable statement under any similar federal statute then in
force.
"SUBSIDIARY" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business
entity of which (i) if a corporation, a majority of the total voting power
of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a
combination thereof, or (ii) if a limited liability company, partnership,
association or other business entity, a majority of the partnership or
other similar ownership interest thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof,
a Person or Persons shall be deemed to have a majority ownership interest
in a limited liability company, partnership, association or other business
entity if such Person or Persons shall be allocated a majority of limited
liability company, partnership, association or other business entity gains
or losses or shall be or control any managing director or general partner
of such limited liability company, partnership, association or other
business entity.
11. CANCELLATION. After all principal and accrued interest at
any time owed on this Note has been paid in full, this Note shall be
surrendered to the Company for cancellation and shall not be reissued.
12. PAYMENTS. Unless otherwise expressly provided herein, all
payments to be made to the holders of the Notes shall be made in the lawful
money of the United States of America in immediately available funds.
13. PLACE OF PAYMENT. Payments of principal and interest shall
be delivered to ______ at the following address:
c/o Fleet Equity Partners
Mail Stop: RI MO 227
111 Westminster Street
Providence, RI 02903
Attention: Robert Van Degna
or to such other address or to the attention of such other person as
specified by prior written notice to the Company.
14. BUSINESS DAYS. If any payment is due, or any time period
for giving notice or taking action expires, on a day which is a Saturday,
Sunday or legal holiday in the State of New York or the State of Rhode
Island, the payment shall be due and payable on, and the time period shall
automatically be extended to, the next business day immediately following
such Saturday, Sunday or legal holiday, and interest shall continue to
accrue at the required rate hereunder until any such payment is made.
15. USURY LAWS. It is the intention of the Company and the
holder of this Note to conform strictly to all applicable usury laws now or
hereafter in force, and any interest payable under this Note shall be
subject to reduction to the amount not in excess of the maximum legal
amount allowed under the applicable usury laws as now or hereafter
construed by the courts having jurisdiction over such matters. If the
maturity of this Note is accelerated by reason of an election by the holder
hereof resulting from an Event of Default, voluntary prepayment by the
Company or otherwise, then earned interest may never include more than the
maximum amount permitted by law, computed from the date hereof until
payment, and any interest in excess of the maximum amount permitted by law
shall be canceled automatically and, if theretofore paid, shall at the
option of the holder hereof either be rebated to the Company or credited on
the principal amount of this Note, or if this Note has been paid, then the
excess shall be rebated to the Company. The aggregate of all interest
(whether designated as interest, service charges, points or otherwise)
contracted for, chargeable or receivable under this Note shall under no
circumstances exceed the maximum legal rate upon the unpaid principal
balance of this Note remaining unpaid from time to time. If such interest
does exceed the maximum legal rate, it shall be deemed a mistake and such
excess shall be canceled automatically and, if theretofore paid, rebated to
the Company or credited on the principal amount of this Note, or if this
Note has been repaid, then such excess shall be rebated to the Company.
16. NOTICES. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Note shall
be given in accordance with paragraph 7L of the Purchase Agreement.
* * * * *
<PAGE>
IN WITNESS WHEREOF, the Company has executed and delivered this
Note on May 22, 1995.
ACC CORP.
Attest By /s/ Michael R. Daley
/s/ Francis D.R. Coleman Its EVP and CFO
EXHIBIT 4-2(c)
The security represented by this instrument was originally issued
on May 22, 1995, and has not been registered under the Securities
Act of 1933, as amended. The transfer of such security is
subject to the conditions specified in the Note and Warrant
Purchase Agreement, dated as of May 22, 1995, as amended and
modified from time to time, between the issuer (the "Company")
and certain investors, and the Company reserves the right to
refuse the transfer of such security until such conditions have
been fulfilled with respect to such transfer. Upon written
request, a copy of such conditions shall be furnished by the
Company to the holder hereof without charge.
Payment of this Note is subject to the terms and conditions of a
Subordination Agreement, dated May 22, 1995, by and among the
original Holder of this Note, Manufacturers and Traders Trust
Company, Marine Midland Bank and certain other Investors, and any
other subordination agreement referred to in paragraph 4 hereof.
ACC CORP.
CONVERTIBLE SUBORDINATED
PROMISSORY NOTE
May 22, 1995 $1,000,000
ACC Corp., a Delaware corporation (the "Company"), hereby
promises to pay to the order of Chisholm Partners II, L.P. the principal
amount of $1,000,000 together with interest thereon calculated from the
date hereof in accordance with the provisions of this Note.
This Note was issued pursuant to a Note and Warrant Purchase
Agreement, dated as of May 22, 1995 (as amended and modified from time to
time, the "Purchase Agreement"), between the Company and certain investors,
and this Note is one of the "Notes" referred to in the Purchase Agreement.
The Purchase Agreement contains terms governing the rights of the holder of
this Note, and all provisions of the Purchase Agreement are hereby
incorporated herein in full by reference. Except as defined in paragraph
10 hereof or unless otherwise indicated herein, capitalized terms used in
this Note have the same meanings set forth in the Purchase Agreement.
1. PAYMENT OF INTEREST. Except as otherwise expressly
provided in paragraph 5(b) hereof, interest shall accrue at the rate of
twelve percent (12%) per annum on the unpaid principal amount of this Note
outstanding from time to time, or (if less) at the highest rate then
permitted under applicable law. The Company shall pay to the holder of
this Note all accrued interest on the last day of each March, June,
September and December, beginning June 30, 1995. Unless prohibited under
applicable law, any accrued interest which is not paid on the date on which
it is due and payable shall bear interest at the same rate at which
interest is then accruing on the principal amount of this Note until such
interest is paid. Any accrued interest which for any reason has not
theretofore been paid shall be paid in full on the date on which the final
principal payment on this Note is made. Interest shall accrue on any
principal payment due under this Note and, to the extent permitted by
applicable law, on any interest which has not been paid on the date on
which it is due and payable until such time as payment therefor is actually
delivered to the holder of this Note.
2. PAYMENT OF PRINCIPAL ON NOTE.
(a) PREPAYMENTS. The Company may, at any time and from time to
time without premium or penalty, prepay all or any portion of the
outstanding principal amount of the Notes, pro rata among the holders of
the Notes on the basis of the outstanding principal amount of the Note held
by each holder; provided that (i) such prepayment is not prohibited by the
provisions of paragraph 4 hereof, (ii) the Company has paid all interest on
the Notes accrued through the immediately preceding scheduled interest
payment date and (iii) the minimum principal amount so prepaid shall be the
lesser of $100,000 or the amount of principal outstanding on the Notes. In
connection with each prepayment of principal hereunder, the Company shall
also pay all accrued and unpaid interest on the principal amount of the
Notes being repaid.
(b) PRINCIPAL REPAYMENT. On May 22, 2002 (the "Scheduled
Repayment Date"), the Company shall repay all outstanding principal and
interest on the Notes, or if such amount is greater, the Market Price (on
the date which is five trading days prior to the Scheduled Repayment Date)
of the Common Stock into which such Notes are convertible on the Scheduled
Repayment Date (the "Alternative Amount"); provided that to the extent that
the Alternative Amount exceeds the amount of principal and interest
outstanding on the Notes on the Scheduled Repayment Date, all or a portion
of such excess may, at the Company's option, be paid in the form of Common
Stock (valued at the Market Price of the Common Stock on the date which is
five trading days prior to the Scheduled Repayment Date) up to and not
exceeding a number of shares of Common Stock equal to 20 multiplied by the
average daily trading volume of the Common Stock in the public markets for
a period of 45 consecutive trading days ending five days prior to the
Scheduled Repayment Date and the remainder shall be paid in cash. Such
shares of Common Stock shall be applied first to the repayment of
principal, then to interest. Upon issuance, such shares of Common Stock
shall be validly issued, fully paid and nonassessable.
(c) SPECIAL PRINCIPAL REPAYMENTS.
(i) If a Change in Control has occurred or the Company
obtains knowledge that a Change in Control is proposed to occur, the
Company shall give prompt written notice of such Change in Control
describing in reasonable detail the material terms and date of consummation
thereof to the holder of this Note, but in any event such notice shall not
be given later than five days after the occurrence of such Change in
Control, and the Company shall give the holder of this Note prompt written
notice of any material change in the terms or timing of such transaction.
The holder of this Note may require the Company to repay all or any portion
of the principal amount remaining on this Note at an amount equal to the
greater of (1) the principal amount requested to be repaid plus all unpaid
accrued interest with respect to such principal amount, (2) the Market
Price (as of the date which is five trading days prior to the occurrence of
such Change in Control) of the Common Stock into which such principal
amount is convertible on such date or (3) the value of the Common Stock
into which such principal amount is convertible as of the consummation of
the Change in Control reflected by the Change in Control transaction, by
giving written notice to the Company of such election prior to the later of
(a) 21 days after receipt of the Company's notice and (b) five days prior
to the consummation of the Change in Control (the "Expiration Date"). The
Company shall give prompt written notice of any such election to all other
holders of Notes within five days after the receipt thereof, and each such
holder shall have until the later of (a) the Expiration Date or (b) ten
days after receipt of such second notice to request repayment hereunder (by
giving written notice to the Company) of all or any portion of the Notes
owned by such holder.
(ii) Upon receipt of such election(s), the Company shall be
obligated to pay the amount set forth in subparagraph (i) above with
respect to the Change in Control. If any proposed Change in Control does
not occur, all requests for repayment in connection therewith shall be
automatically rescinded, or if there has been a material change in the
terms or the timing of the transaction, any holder of Notes may rescind
such holder's request for repayment by giving written notice of such
rescission to the Company.
(iii) A "Change in Control" shall be deemed to have occurred
at such time as any of the following events shall occur: (a) any sale,
transfer or issuance or series of sales, transfers and/or issuances of
Common Stock by the Compnay or any holders thereof which results in any
Person or group of Persons (as the term "group" is used under the
Securities Exchange Act of 1934) owning more than 40% of the Common Stock
outstanding immediately after such sale, transfer or issuance or series of
sales, transfers and/or issuances or (b) during any 12-month period,
individuals who at the beginning of such period constituted the Company's
Board of Directors (together with any new directors whose election by such
Board of Directors or whose nomination for election by the stockholders of
the Company was approved by a majority vote of the directors who were
either directors at the beginning of such period or whose election or
nomination for election was previously so approved) cease for any reason to
constitute a majority of the Company's Board of Directors then in office.
(iv) If a Fundamental Change is proposed to occur, the
Company shall give written notice of such Fundamental Change describing in
reasonable detail the material terms and date of consummation thereof to
the holder of this Note not more than 45 days nor less than 20 days prior
to the consummation of such Fundamental Change, and the Company shall give
the holder of this Note prompt written notice of any material change in the
terms or timing of such transaction. The holder of this Note may require
the Company to repay all or any portion of this Note at an amount equal to
the greater of (1) the principal amount requested to be prepaid plus all
unpaid accrued interest with respect to such principal amount, (2) the
Market Price (as of the date which is five trading days prior to the
occurrence of such Fundamental Change) of the Common Stock into which such
principal amount is convertible on such date or (3) the value of the Common
Stock into which such principal amount is convertible as of the
consummation of the Fundamental Change reflected by the Fundamental Change
transaction, by giving written notice to the Company of such election prior
to the later of (a) ten days prior to the consummation of the Fundamental
Change or (b) ten days after receipt of notice from the Company. The
Company shall give prompt written notice of such election to all other
holders of Notes (but in any event within five days prior to the
consummation of the Fundamental Change), and each such holder shall have
until two days after the receipt of such notice to request redemption (by
written notice given to the Company) of all or any portion of the Notes
owned by such holder.
(v) Upon receipt of such election(s), the Company shall be
obligated to repay the amount set forth in subparagraph (iv) above upon the
consummation of such Fundamental Change. If any proposed Fundamental
Change does not occur, all requests for repayment in connection therewith
shall be automatically rescinded, or if there has been a material change in
the terms or the timing of the transaction, any holder of Notes may rescind
such holder's request for redemption by delivering written notice thereof
to the Company prior to the consummation of the transaction.
(vi) The term "Fundamental Change" means (a) any sale or
transfer of more than 50% of the assets of the Company and its Subsidiaries
on a consolidated basis (measured either by book value in accordance with
generally accepted accounting principles consistently applied or by fair
market value determined in the reasonable good faith judgment of the
Company's board of directors) in any transaction or series of transactions
(other than sales in the ordinary course of business) and (b) any merger or
consolidation to which the Company is a party, except for a merger in which
the Company is the surviving corporation, and after giving effect to such
merger, no Person or group of Persons (as the term "group" is used under
the Securities Act of 1934) owns more than 40% of the Common Stock
outstanding immediately after such merger.
(d) CONVERSION. Notwithstanding any provision contained in this
paragraph 2, the holder of this Note may convert all or any portion of the
outstanding principal amount of this Note until such time as such amount
has been deemed to have been paid.
3. PRO RATA PAYMENT. Except as otherwise expressly provided in
this Note, all payments to the holders of the Notes (whether for principal,
interest or otherwise) shall be made pro rata among such holders based upon
the aggregate unpaid principal amount of the Notes held by each such
holder. If any holder of a Note obtains any payment (whether voluntary,
involuntary or otherwise) of principal, interest or other amount with
respect to any Note in excess of such holder's pro rata share of such
payments obtained by all holders of the Notes (other than as expressly
provided herein), by acceptance of a Note each such holder agrees to
purchase from the other holders of the Notes a participation in the Notes
held by them as is necessary to cause such holders to share the excess
payment ratably among each of them as provided in this paragraph.
4. SUBORDINATION. This Note is subordinated to the extent set
forth in the Subordination Agreement, dated May 22, 1995, by and among the
original Holder of this Note, Manufacturers and Traders Trust Company,
Marine Midland Bank and the holders of the other Notes. This Note shall
also be subordinated to the extent set forth in any other subordination
agreement entered into by the holders of the Notes.
5. EVENTS OF DEFAULT.
(a) DEFINITION. For purposes of this Note, an Event of Default
shall be deemed to have occurred if
(i) the Company fails to pay when due and payable (whether
at maturity or otherwise) the full amount of interest then accrued on any
Note or the full amount of any principal due on any Note, and such failure
to pay is not cured within five days after the occurrence thereof;
(ii) the Company fails to perform or observe any other
material covenant or agreement in the Notes or in the Purchase Agreement,
and such failure is not cured within 30 days after the earlier of (A) the
receipt of notice thereof by the holder of this Note or (B) the discovery
thereof by the Company;
(iii) any representation, warranty or information contained
in the Purchase Agreement or required to be furnished to any holder of the
Notes pursuant to the Purchase Agreement, is false or misleading in any
material respect on the date made or furnished and such false or misleading
representation, warranty or information relates to a material adverse
effect on the Company and its Subsidiaries, taken as a whole, or fails to
disclose a material adverse change on the Company and its Subsidiaries,
taken as a whole; provided that, notwithstanding the foregoing, in the case
of paragraph 5J of the Purchase Agreement, any occurrence, event,
transaction or claim which results in any loss, damage or injury to the
Company and its Subsidiaries in excess of $4,000,000 shall conclusively be
deemed to have material adverse effect and be a material adverse change
hereunder;
(iv) the Company or any Material Subsidiary makes an
assignment for the benefit of creditors or admits in writing its inability
to pay its debts generally as they become due; or an order, judgment or
decree is entered adjudicating the Company or any Material Subsidiary
bankrupt or insolvent; or any order for relief with respect to the Company
or any Material Subsidiary is entered under the Federal Bankruptcy Code; or
the Company or any Material Subsidiary petitions or applies to any tribunal
for the appointment of a custodian, trustee, receiver or liquidator of the
Company or any Material Subsidiary, or of any substantial part of the
assets of the Company or any Material Subsidiary, or commences any
proceeding (other than a proceeding for the voluntary liquidation and
dissolution of any Material Subsidiary) relating to the Company or any
Material Subsidiary under any bankruptcy reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law of any
jurisdiction; or any such petition or application is filed, or any such
proceeding is commenced, against the Company or any Material Subsidiary and
either (A) the Company or any such Material Subsidiary by any act indicates
its approval thereof, consent thereto or acquiescence therein or (B) such
petition, application or proceeding is not dismissed within 60 days;
(v) a judgment in excess of $500,000 is rendered against
the Company or any Material Subsidiary and, within 60 days after entry
thereof, such judgment is not discharged in full or execution thereof
stayed pending appeal, or within 60 days after the expiration of any such
stay, such judgment is not discharged in full; or
(vi) the Company or any Material Subsidiary defaults in the
performance of any obligation if the effect of such default is to cause an
amount exceeding $500,000 to become due prior to its stated maturity or to
permit the holder or holders of such obligation to cause an amount
exceeding $500,000 to become due prior to its stated maturity.
The foregoing shall constitute Events of Default whatever the
reason or cause for any such Event of Default and whether it is voluntary
or involuntary or is effected by operation of law or pursuant to any
judgment, decree or order of any court or any order, rule or regulation of
any administrative or governmental body.
(b) CONSEQUENCES OF EVENTS OF DEFAULT.
(i) If any Event of Default of the type described in
subparagraph 5(a)(i), 5(a)(ii) or 5(a)(iii) (with respect to paragraphs 5J
and 5X of the Purchase Agreement only) has occurred and is continuing, the
interest rate on the Notes shall increase immediately to 15% or (if less)
to the highest rate permitted by law and any increase of the interest rate
resulting from the operation of this subparagraph shall terminate as of the
close of business on the date on which no Event of Default of the type
described in subparagraph 5(a)(i) or 5(a)(ii) exists (subject to subsequent
increases pursuant to this subparagraph).
(ii) If any Event of Default of the type described in
subparagraph 5(a)(i), 5(a)(ii) or 5(a)(iii) (with respect to 5J and 5X of
the Purchase Agreement only) has occurred, the Conversion Price on the
Notes shall be reduced immediately by 1/3 of the Conversion Price in effect
immediately prior to such adjustment. In no event shall such Conversion
Price adjustment be rescinded, and in no event shall there be more than one
adjustment pursuant to this subparagraph.
(iii) If an Event of Default of the type described in
subparagraph 5(a)(iv) has occurred, the aggregate principal amount of the
Notes (together with all accrued interest thereon and all other amounts due
and payable with respect thereto) shall become immediately due and payable
without any action on the part of the holders of the Notes, and the Company
shall immediately pay to the holders of the Notes all amounts due and
payable with respect to the Notes.
(iv) If any Event of Default (other than an Event of Default
of the type described in subparagraph 5(a)(iv)) has occurred and is
continuing, the holder or holders of Notes representing a majority of the
aggregate principal amount of Notes then outstanding may declare all or any
portion of the outstanding principal amount of the Notes (together with all
accrued interest thereon and all other amounts due and payable with respect
thereto) to be immediately due and payable and may demand immediate payment
of all or any portion of the outstanding principal amount of the Notes
(together with all such other amounts then due and payable) owned by such
holder or holders. The Company shall give prompt written notice of any
such demand to the other holders of Notes, each of which may demand
immediate payment of all or any portion of such holder's Note. If any
holder or holders of the Notes demand immediate payment in accordance with
the terms hereof of all or any portion of the Notes, the Company shall
immediately pay to such holder or holders all amounts due and payable with
respect to such Notes. The amount payable hereunder with respect to the
Notes shall be the greater of (1) all of the outstanding principal and
accrued interest on such Notes and (2) the Market Price (as of the date
which is five trading days prior to the date of payment); provided that to
the extent that the amount in clause (2) above exceeds the amount in clause
(1) above, all or a portion of such excess may, at the Company's option, be
paid in the form of Common Stock (valued at the Market Price of the Common
Stock on such date) up to and not exceeding a number of shares of Common
Stock equal to 20 multiplied by the average daily trading volume of the
Common Stock in the public markets for a period of 45 consecutive trading
days ending on such date and the remainder shall be paid in cash. Such
shares of Common Stock shall be applied first to the repayment of
principal, then to interest. Upon issuance, such shares of Common Stock
shall be validly issued, fully paid and nonassessable.
(v) Each holder of the Notes shall also have any other
rights which such holder may have been afforded under any contract or
agreement at any time and any other rights which such holder may have
pursuant to applicable law.
(vi) The Company hereby waives diligence, presentment,
protest and demand and notice of protest and demand, dishonor and
nonpayment of this Note and expressly agrees that this Note, or any payment
hereunder, may be extended from time to time and that the holder hereof may
accept security for this Note or release security for this Note, all
without in any way affecting the liability of the Company hereunder.
6. CONVERSION.
(a) CONVERSION PROCEDURE.
(i) At any time and from time to time prior to the payment in
full of this Note the holder of this Note may convert all or any portion of
the outstanding principal amount of this Note into a number of shares of
Conversion Stock (excluding any fractional share) determined by dividing
the principal amount designated by such holder to be converted by the
Conversion Price then in effect.
(ii) Except as otherwise provided herein, each conversion of this
Note shall be deemed to have been effected as of the close of business on
the date on which this Note has been surrendered for conversion at the
principal office of the Company. At the time any such conversion has been
effected, the rights of the holder of this Note as such holder to the
extent of the conversion shall cease and the Person or Persons in whose
name or names any certificate or certificates for shares of Conversion
Stock are to be issued upon such conversion shall be deemed to have become
the holder or holders of record of the shares of Conversion Stock
represented thereby.
(iii) Notwithstanding any other provision hereof, if a conversion
of any portion of this Note is to be made in connection with a Public
Offering, a Change in Control, a Fundamental Change or other transaction
affecting the Company, the conversion of any portion of this Note may, at
the election of the holder hereof, be conditioned upon the consummation of
such transaction, in which case such conversion shall not be deemed to be
effective until such transaction has been consummated.
(iv) As soon as possible after a conversion has been effected,
the Company shall deliver to the converting holder:
(1) a certificate or certificates representing the number
of shares of Conversion Stock issuable by reason of such conversion in
such name or names and such denomination or denominations as the
converting holder has specified;
(2) payment in an amount equal to the sum of all accrued
interest with respect to the principal amount converted, which has not
been paid prior thereto; and
(3) a new Note representing any portion of the principal
amount which was represented by the Note surrendered to the Company in
connection with such conversion but which was not converted.
(v) The issuance of certificates for shares of Conversion Stock
upon conversion of this Note shall be made without charge to the holder
hereof for any issuance tax in respect thereof or other cost incurred by
the Company in connection with such conversion and the related issuance of
shares of Conversion Stock. Upon conversion of this Note, the Company
shall take all such actions as are necessary in order to insure that the
Conversion Stock issuable with respect to such conversion shall be validly
issued, fully paid and nonassessable, free and clear of all taxes, liens,
charges and encumbrances with respect to the issuance thereof.
(vi) The Company shall not close its books against the transfer
of Conversion Stock issued or issuable upon conversion of this Note. The
Company shall assist and cooperate with any holder of this Note required to
make any governmental filings or obtain any governmental approval prior to
or in connection with the conversion of this Note (including making any
filings required to be made by the Company).
(vii) The Company shall at all times reserve and keep available
out of its authorized but unissued shares of Conversion Stock, solely for
the purpose of issuance upon the conversion of the Notes, such number of
shares of Conversion Stock issuable upon the conversion of all outstanding
Notes. All shares of Conversion Stock which are so issuable shall, when
issued, be duly and validly issued, fully paid and nonassessable and free
from all taxes, liens and charges. The Company shall take all such actions
as may be necessary to assure that all such shares of Conversion Stock may
be so issued without violation of any applicable law or governmental
regulation or any requirements of any domestic securities exchange upon
which shares of Conversion Stock may be listed (except for official notice
of issuance which shall be immediately delivered by the Company upon each
such issuance).
(viii) If any fractional interest in a share of Conversion Stock
would, except for the provisions of this subparagraph, be delivered upon
any conversion of this Note, the Company, in lieu of delivering the
fractional share therefor, shall pay an amount to the holder thereof equal
to the Market Price of such fractional interest as of the date of
conversion.
(b) CONVERSION PRICE.
(i) The initial Conversion Price shall be $16.00. In order to
prevent dilution of the conversion rights granted under the Notes, the
Conversion Price shall be subject to adjustment from time to time pursuant
to this paragraph (b).
(ii) If and whenever the Company issues or sells, or in
accordance with paragraph 6(c) is deemed to have issued or sold, any share
of Common Stock for a consideration per share less than the Conversion
Price in effect immediately prior to such time, then immediately upon such
issue or sale or deemed issue or sale the Conversion Price shall be reduced
to the lowest net price per share (as determined pursuant to paragraph
6(c)(v) below) at which any such share of Common Stock has been issued or
sold or is deemed to have been issued or sold.
(iii) Notwithstanding the foregoing, there shall be no adjustment
to the Conversion Price hereunder with respect to the granting of stock
options to employees or directors of the Company and its Subsidiaries or
the exercise thereof or the granting of stock appreciation rights, phantom
stock rights or other similar rights to employees or directors of the
Company for (or rights relating to) an aggregate of 1,586,702 shares of
Common Stock (976,594 options being currently outstanding) (as such number
of shares is equitably adjusted for subsequent stock splits, stock
combinations, stock dividends and recapitalizations and such number shall
include all stock options outstanding as of the date of the Purchase
Agreement).
(c) EFFECT ON CONVERSION PRICE OF CERTAIN EVENTS. For purposes
of determining the adjusted Conversion Price under paragraph 6(b), the
following shall be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any manner
grants or sells any Option and the lowest price per share for which any one
share of Common Stock is issuable upon the exercise of any such Option, or
upon conversion or exchange of any Convertible Security issuable upon
exercise of any such Option, is less than the Conversion Price in effect
immediately prior to the time of the granting or sale of such Option, then
such share of Common Stock shall be deemed to be outstanding and to have
been issued and sold by the Company at the time of the granting or sale of
such Option for such price per share. For purposes of this paragraph, the
"lowest price per share for which any one share of Common Stock is
issuable" shall be equal to the sum of the lowest amounts of consideration
(if any) received or receivable by the Company with respect to any one
share of Common Stock upon the granting or sale of the Option, upon
exercise of the Option and upon conversion or exchange of any Convertible
Security issuable upon exercise of such Option. No further adjustment of
the Conversion Price shall be made upon the actual issue of such Common
Stock or such Convertible Security upon the exercise of such Options or
upon the actual issue of such Common Stock upon conversion or exchange of
such Convertible Security.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any
manner issues or sells any Convertible Security and the lowest price per
share for which any one share of Common Stock is issuable upon conversion
or exchange thereof is less than the Conversion Price in effect immediately
prior to the time of such issue or sale, then such share of Common Stock
shall be deemed to be outstanding and to have been issued and sold by the
Company at the time of the issuance or sale of such Convertible Securities
for such price per share. For the purposes of this paragraph, the "lowest
price per share for which any one share of Common Stock is issuable" shall
be equal to the sum of the lowest amounts of consideration (if any)
received or receivable by the Company with respect to any one share of
Common Stock upon the issuance or sale of the Convertible Security and upon
the conversion or exchange of such Convertible Security. No further
adjustment of the Conversion Price shall be made upon the actual issue of
such Common Stock upon conversion or exchange of any Convertible Security,
and if any such issue or sale of such Convertible Security is made upon
exercise of any Options for which adjustments of the Conversion Price had
been or are to be made pursuant to other provisions of this Section 6, no
further adjustment of the Conversion Price shall be made by reason of such
issue or sale.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If the purchase
price provided for in any Option, the additional consideration (if any)
payable upon the issue, conversion or exchange of any Convertible Security
or the rate at which any Convertible Security is convertible into or
exchangeable for Common Stock changes at any time, the Conversion Price in
effect at the time of such change shall be adjusted immediately to the
Conversion Price which would have been in effect at such time had such
Option or Convertible Security originally provided for such changed
purchase price, additional consideration or conversion rate, as the case
may be, at the time initially granted, issued or sold. For purposes of
paragraph 6(c), if the terms of any Option or Convertible Security which
was outstanding as of the date of issuance of this Note are changed in the
manner described in the immediately preceding sentence, then such Option or
Convertible Security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed to have been issued as of
the date of such change; provided that no such change shall at any time
cause the Conversion Price hereunder to be increased.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. Upon the expiration of any Option or the termination of any
right to convert or exchange any Convertible Security without the exercise
of any such Option or right, the Conversion Price then in effect hereunder
shall be adjusted immediately to the Conversion Price which would have been
in effect at the time of such expiration or termination had such Option or
Convertible Security, to the extent outstanding immediately prior to such
expiration or termination, never been issued; provided that if such
expiration or termination would result in an increase in the Conversion
Price then in effect, such increase shall not be effective until 30 days
after written notice thereof has been given to all holders of the Notes.
For purposes of paragraph 6(c), the expiration or termination of any Option
or Convertible Security which was outstanding as of the date of issuance of
the Notes shall not cause the Conversion Price hereunder to be adjusted
unless, and only to the extent that, a change in the terms of such Option
or Convertible Security caused it to be deemed to have been issued after
the date of issuance of the Notes.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any Common Stock,
Option or Convertible Security is issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be
deemed to be the amount received by the Company therefor (net of discounts,
commissions and related expenses). If any Common Stock, Option or
Convertible Security is issued or sold for a consideration other than cash,
the amount of the consideration other than cash received by the Company
shall be the fair value of such consideration, except where such
consideration consists of securities, in which case the amount of
consideration received by the Company shall be the Market Price thereof as
of the date of receipt. If any Common Stock, Option or Convertible
Security is issued to the owners of the non-surviving entity 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 value of
such portion of the net assets and business of the non-surviving entity as
is attributable to such Common Stock, Option or Convertible Security, as
the case may be. The fair value of any consideration other than cash and
securities shall be determined jointly by the Company and the holders of a
majority of the principal amount of the Notes then outstanding. If such
parties are unable to reach agreement within a reasonable period of time,
the fair value of such consideration shall be determined by an independent
appraiser experienced in valuing such type of consideration jointly
selected by the Company and the holders of a majority of the principal
amount of the Notes then outstanding. The determination of such appraiser
shall be final and binding upon the parties, and the fees and expenses of
such appraiser shall be borne by the Company.
(vi) INTEGRATED TRANSACTIONS. In case any Option is issued in
connection with the issue or sale of other securities of the Company,
together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the
Option shall be deemed to have been issued for a consideration of $.01.
(vii) TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or
for the account of the Company or any Subsidiary, and the disposition of
any shares so owned or held shall be considered an issue or sale of Common
Stock.
(viii) RECORD DATE. If the Company takes a record of the holders
of Common Stock for the purpose of entitling them (a) to receive a dividend
or other distribution payable in Common Stock, Options or in Convertible
Securities or (b) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date shall be deemed to be the
date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or upon the making of
such other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
(d) SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company
at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding
shares of Common Stock into a greater number of shares, the Conversion
Price in effect immediately prior to such subdivision shall be
proportionately reduced, and if the Company at any time combines (by
reverse stock split or otherwise) one or more classes of its outstanding
shares of Common Stock into a smaller number of shares, the Conversion
Price in effect immediately prior to such combination shall be
proportionately increased.
(e) REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's
assets or other transaction, in each case which is effected in such a
manner that the holders of Common Stock are entitled to receive (either
directly or upon subsequent liquidation) stock, securities or assets with
respect to or in exchange for Common Stock, is referred to herein as an
"Organic Change". Prior to the consummation of any Organic Change, the
Company shall make lawful and adequate provision (in form and substance
satisfactory to the holders of a majority of the principal amount of the
Notes then outstanding) to insure that each of the holders of the Notes
shall thereafter have the right to acquire and receive, in lieu of or in
addition to (as the case may be) the shares of Conversion Stock immediately
theretofore acquirable and receivable upon the conversion of such holder's
Note, such shares of stock, securities or assets as such holder would have
received in connection with such Organic Change if such holder had
converted its Note immediately prior to such Organic Change. In each such
case, the Company shall also make appropriate provisions (in form and
substance satisfactory to the holders of a majority of the principal amount
of the Notes then outstanding) to insure that the provisions of this
Section 6 and Sections 7 and 8 hereof shall thereafter be applicable to the
Notes in relation to any shares of stock, securities or assets thereafter
deliverable upon conversion of the Notes (including, in the case of any
such consolidation, merger or sale in which the successor entity or
purchasing entity is other than the Company, an immediate adjustment of the
Conversion Price to the value for the Common Stock reflected by the terms
of such consolidation, merger or sale, and a corresponding immediate
adjustment in the number of shares of Conversion Stock acquirable and
receivable upon conversion of Notes, if the value so reflected is less than
the Conversion Price in effect immediately prior to such consolidation,
merger or sale). The Company shall not effect any such consolidation,
merger or sale, unless prior to the consummation thereof, the successor
entity (if other than the Company) resulting from consolidation or merger
or the entity purchasing such assets assumes by written instrument (in form
and substance satisfactory to the holders of a majority of the principal
amounts of the Notes then outstanding), the obligation to deliver to each
such holder such shares of stock, securities or assets as, in accordance
with the foregoing provisions, such holder may be entitled to acquire.
(f) CERTAIN EVENTS. If any event occurs of the type
contemplated by the provisions of this Section 6 but not expressly provided
for by such provisions (including the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then
the Company's board of directors shall make an appropriate adjustment in
the Conversion Price so as to protect the rights of the holders of Notes;
provided that no such adjustment shall increase the Conversion Price as
otherwise determined pursuant to this Section 6 or decrease the number of
shares of Conversion Stock issuable upon conversion of the Notes then
outstanding.
(g) NOTICES.
(i) Immediately upon any adjustment of the Conversion Price, the
Company shall give written notice thereof to the holder of this Note,
setting forth in reasonable detail and certifying the calculation of such
adjustment.
(ii) The Company shall give written notice to the holder of this
Note at least 20 days prior to the date on which the Company closes its
books or takes a record (a) with respect to any dividend or distribution
upon Common Stock, (b) with respect to any pro rata subscription offer to
holders of Common Stock or (c) for determining rights to vote with respect
to any Organic Change, dissolution or liquidation.
(iii) The Company shall also give written notice to the holders of
Series A Preferred at least 20 days prior to the date on which any Organic
Change shall take place.
(h) MANDATORY CONVERSION. The outstanding principal amount of
this Note will be automatically converted to Common Stock at the Conversion
Price then in effect without any further action on the part of the Company
or the holder hereof if, at any time after May 22, 1997, (i) the daily
trading volume of the Common Stock in the public markets exceeds 5% of the
number of shares of Common Stock issuable upon conversion of all
outstanding Notes for each of 45 consecutive trading days, (ii) no holder
of any Note is subject to any underwriters lockup agreement restricting the
transferability of the shares of Conversion Stock issuable upon conversion
of such Notes and (iii) the Market Price of the Common Stock on any of the
anniversary dates of the issuance of the Notes set forth below equals or
exceeds the corresponding price set forth below (subject to adjustment for
stock splits, stock consolidations and stock dividends):
2nd Anniversary $32.00
3rd Anniversary $32.00
4th Anniversary $39.06
5th Anniversary $39.81
6th Anniversary $47.78
7th Anniversary $57.33
In the event that any measurement of the market price of the
Common Stock is to occur on a date between two anniversary dates, the share
price amounts above shall be prorated (based upon the number of days
elapsed between such anniversary dates).
(i) AUTOMATIC CONVERSION TO SERIES A PREFERRED.
(a) Upon filing of the Certificate of Designation authorizing
the Company's Series A Preferred Stock, par value $1.00 (the "Series A
Preferred") with the Secretary of State of Delaware, the Notes shall
automatically convert (without any further action on the part of the
Company or the holders of the Notes) to the number of shares of Series A
Preferred determined by dividing the principal amount then outstanding by
$1,000. Any fraction thereof shall be converted to a corresponding
fractional share of Series A Preferred. At the time of such conversion,
the rights of the holder of this Note shall cease and the Person or Persons
in whose name or names any certificate or certificates for shares of Series
A Preferred are to be issued upon such conversion shall be deemed to have
become the holder or holders of record of the shares of Series A Preferred
represented thereby.
(b) As soon as possible after such conversion has been effected,
the Company shall deliver to the converting holder in exchange for such
holder's Note:
(1) a certificate or certificates representing the number
of shares of Series A Preferred issuable by reason of such conversion
in such name or names and such denomination or denominations as the
holder has specified; and
(2) payment in an amount equal to the sum of all accrued
interest with respect to the Note which has not been paid prior
thereto.
(c) The issuance of a certificate or certificates for shares of
Series A Preferred upon conversion of this Note shall be made without
charge to the holder hereof for any issuance tax in respect thereof or
other cost incurred by the Company in connection with such conversion and
the related issuance of Series A Preferred. Upon conversion of this Note,
the Company shall take all such actions as are necessary in order to insure
that the Series A Preferred issuable with respect to such conversion shall
be validly issued, full, paid and nonassessable, free and clear of all
taxes, liens, changes and encumbrances with respect to the issuance
thereof.
(d) Upon conversion, the holder of this Note shall promptly
surrender this Note to the Company for cancellation.
(e) The Company shall assist and cooperate with any holder of
this Note required to make any governmental filings or obtain any
governmental approval prior to or in connection with the conversion of this
Note into Series A Preferred (including making any filings required to be
made by the Company).
7. LIQUIDATING DIVIDENDS. If the Company declares a dividend
upon the Common Stock payable otherwise than in cash out of earnings or
earned surplus (determined in accordance with generally accepted accounting
principles, consistently applied) except for a stock dividend payable in
shares of Common Stock (a "Liquidating Dividend"), then the Company shall
pay to the holder of this Note at the time of payment thereof the
Liquidating Dividend which would have been paid to the holder of this Note
on the Conversion Stock had this Note been fully converted immediately
prior to the date on which a record is taken for such Liquidating Dividend
or, if no record is taken, the date as of which the record holders of
Common Stock entitled to such dividends are to be determined.
8. PURCHASE RIGHTS. If at any time the Company grants, issues
or sells any Options, Convertible Securities or rights to purchase stock,
warrants, securities or other property pro rata to the record holders of
Common Stock (the "Purchase Rights"), then each holder of the Notes shall
be entitled to acquire, upon the terms applicable to such Purchase Rights,
the aggregate Purchase Rights which such holder could have acquired if such
holder had held the number of shares of Conversion Stock acquirable upon
conversion of such holder's Note immediately before the date on which a
record is taken for the grant, issuance or sale of such Purchase Rights or,
if no such record is taken, the date as of which the record holders of
Common Stock are to be determined for the grant, issue or sale of such
Purchase Rights.
9. AMENDMENT AND WAIVER. Except as otherwise expressly
provided herein, the provisions of the Notes may be amended and the Company
may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company has obtained the
written consent of the holders of a majority of the outstanding principal
amount of the Notes; provided that no such action shall change (i) the rate
at which or the manner in which interest accrues on the Notes or the times
at which such interest becomes payable, (ii) any provision relating to the
scheduled payments or prepayments of principal on the Notes or (iii) the
Conversion Price of the Notes or the number of shares or the class of stock
into which the Notes are convertible, without the written consent of the
holders at least 66% of the outstanding principal amount of the Notes.
10. DEFINITIONS. For purposes of the Notes, the following
capitalized terms have the following meaning.
"COMMON STOCK" means the Company's Common Stock, par value $.015
per share, and any capital stock of any class of the Company which is not
limited to a fixed sum or percentage of par or stated value in respect to
the rights of the holders thereof to participate in dividends or in the
distribution of assets upon any liquidation, dissolution or winding up of
the Company.
"CONVERTIBLE SECURITIES" means any stock or securities (other
than Options) directly or indirectly convertible into or exchangeable for
Common Stock.
"CONVERSION STOCK" means shares of the Company's authorized but
unissued Common Stock, par value $.015 per share; provided that if there is
a change such that the securities issuable upon conversion of the Notes are
issued by an entity other than the Company or there is a change in the
class of securities so issuable, then the term "Conversion Stock" shall
mean one share of the security issuable upon conversion of this Note if
such security is issuable in shares, or shall mean the smallest unit in
which such security is issuable if such security is not issuable in shares.
"MARKET PRICE" of any publicly traded security means the average
of the closing prices of such security's sales on all securities exchanges
on which such security may at the time be listed, or, if there has been no
sales on any such exchange on any day, the average of the highest bid and
lowest asked prices on all such exchanges at the end of such day, or, if on
any day such security is not so listed, the average of the representative
bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York
time, or, if on any day such security is not quoted in the NASDAQ System,
the average of the highest bid and lowest asked prices on such day in the
domestic over-the-counter market as reported by the National Quotation
Bureau, Incorporated, or any similar successor organization, in each such
case averaged over a period of 15 days consisting of the day as of which
"Market Price" is being determined and the 14 consecutive business days
prior to such day. "MARKET PRICE" of any security which is not publicly
traded means the fair value thereof determined jointly by the Company and
the holders of a majority of the outstanding principal amount of the Notes;
provided that if such parties are unable to reach agreement within a
reasonable period of time, such fair value shall be determined by an
appraiser jointly selected by the Company and the holders of a majority of
the outstanding principal amount of the Notes without application of any
minority or blockage discounts. The determination of such appraiser shall
be final and binding upon the parties, and the fees and expenses of such
appraiser shall be borne by the Company.
"OPTIONS" means any rights or options to subscribe for or
purchase Common Stock or Convertible Securities.
"PERSON" means an individual, a partnership, a corporation, a
limited liability company, an association, a joint stock company, a trust,
a joint venture, an unincorporated organization and a governmental entity
or any department, agency or political subdivision thereof.
"PUBLIC OFFERING" means any offering by the Company of its
capital stock or equity securities to the public pursuant to an effective
registration statement under the Securities Act of 1933, as then in effect,
or any comparable statement under any similar federal statute then in
force.
"SUBSIDIARY" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business
entity of which (i) if a corporation, a majority of the total voting power
of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a
combination thereof, or (ii) if a limited liability company, partnership,
association or other business entity, a majority of the partnership or
other similar ownership interest thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof,
a Person or Persons shall be deemed to have a majority ownership interest
in a limited liability company, partnership, association or other business
entity if such Person or Persons shall be allocated a majority of limited
liability company, partnership, association or other business entity gains
or losses or shall be or control any managing director or general partner
of such limited liability company, partnership, association or other
business entity.
11. CANCELLATION. After all principal and accrued interest at
any time owed on this Note has been paid in full, this Note shall be
surrendered to the Company for cancellation and shall not be reissued.
12. PAYMENTS. Unless otherwise expressly provided herein, all
payments to be made to the holders of the Notes shall be made in the lawful
money of the United States of America in immediately available funds.
13. PLACE OF PAYMENT. Payments of principal and interest shall
be delivered to ______ at the following address:
c/o Fleet Equity Partners
Mail Stop: RI MO 227
111 Westminster Street
Providence, RI 02903
Attention: Robert Van Degna
or to such other address or to the attention of such other person as
specified by prior written notice to the Company.
14. BUSINESS DAYS. If any payment is due, or any time period
for giving notice or taking action expires, on a day which is a Saturday,
Sunday or legal holiday in the State of New York or the State of Rhode
Island, the payment shall be due and payable on, and the time period shall
automatically be extended to, the next business day immediately following
such Saturday, Sunday or legal holiday, and interest shall continue to
accrue at the required rate hereunder until any such payment is made.
15. USURY LAWS. It is the intention of the Company and the
holder of this Note to conform strictly to all applicable usury laws now or
hereafter in force, and any interest payable under this Note shall be
subject to reduction to the amount not in excess of the maximum legal
amount allowed under the applicable usury laws as now or hereafter
construed by the courts having jurisdiction over such matters. If the
maturity of this Note is accelerated by reason of an election by the holder
hereof resulting from an Event of Default, voluntary prepayment by the
Company or otherwise, then earned interest may never include more than the
maximum amount permitted by law, computed from the date hereof until
payment, and any interest in excess of the maximum amount permitted by law
shall be canceled automatically and, if theretofore paid, shall at the
option of the holder hereof either be rebated to the Company or credited on
the principal amount of this Note, or if this Note has been paid, then the
excess shall be rebated to the Company. The aggregate of all interest
(whether designated as interest, service charges, points or otherwise)
contracted for, chargeable or receivable under this Note shall under no
circumstances exceed the maximum legal rate upon the unpaid principal
balance of this Note remaining unpaid from time to time. If such interest
does exceed the maximum legal rate, it shall be deemed a mistake and such
excess shall be canceled automatically and, if theretofore paid, rebated to
the Company or credited on the principal amount of this Note, or if this
Note has been repaid, then such excess shall be rebated to the Company.
16. NOTICES. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Note shall
be given in accordance with paragraph 7L of the Purchase Agreement.
* * * * *
<PAGE>
IN WITNESS WHEREOF, the Company has executed and delivered this
Note on May 22, 1995.
ACC CORP.
Attest By /s/ Michael R. Daley
/s/ Francis D.R. Coleman Its EVP and CFO
EXHIBIT 4-3(a)
This Warrant was originally issued on May 22, 1995, and
such issuance was not registered under the Securities
Act of 1933, as amended. The transfer of this Warrant
and the securities obtainable upon exercise thereof is
subject to the conditions on transfer specified in the
Purchase Agreement, dated as of May 22, 1995 (as
amended and modified from time to time), between the
issuer hereof (the "Company") and the initial holder
hereof, and the Company reserves the right to refuse
the transfer of such security until such conditions
have been fulfilled with respect to such transfer.
Upon written request, a copy of such conditions shall
be furnished by the Company to the holder hereof
without charge.
ACC CORP.
STOCK PURCHASE WARRANT
Date of Issuance: May 22, 1995 Certificate No. CW-1
FOR VALUE RECEIVED, ACC Corp., a Delaware corporation (the
"Company"), hereby grants to Fleet Venture Resources, Inc. or its
registered assigns (the "Registered Holder") the right to purchase from the
Company 72,000 shares of the Company's Common Stock at a price per share of
$16.00 (as adjusted from time to time hereunder, the "Exercise Price").
This Warrant is one of several Closing Warrants (collectively referred to
herein as the "Warrants") issued by the Company to certain investors
pursuant to the Purchase Agreement, dated as of May 22, 1995 (the "Purchase
Agreement"). Certain capitalized terms used herein are defined in Section
5 hereof. The amount and kind of securities obtainable pursuant to the
rights granted hereunder and the purchase price for such securities are
subject to adjustment pursuant to the provisions contained in this Warrant.
This Warrant is subject to the following provisions:
Section 1. EXERCISE OF WARRANT.
A. EXERCISE PERIOD. The Registered Holder may exercise, in
whole or in part (but not as to a fractional share of Common Stock), the
purchase rights represented by this Warrant at any time and from time to
time after the Date of Issuance to and including the earlier of (i) the
seventh anniversary thereof or (ii) the date which is six years after the
first date upon which no Notes or Series A Preferred remain outstanding
(the "Exercise Period"). The Company shall give the Registered Holder
written notice of the expiration of the rights hereunder at least 30 days
but not more than 90 days prior to the end of the Exercise Period.
B. EXERCISE PROCEDURE.
(i) This Warrant shall be deemed to have been exercised when the
Company has received all of the following items (the "Exercise Time"):
(a) a completed Exercise Agreement, as described in paragraph 1C
below, executed by the Person exercising all or part of the purchase
rights represented by this Warrant (the "Purchaser");
(b) this Warrant;
(c) if this Warrant is not registered in the name of the
Purchaser, an Assignment or Assignments in the form set forth in
EXHIBIT II hereto evidencing the assignment of this Warrant to the
Purchaser, in which case the Registered Holder shall have complied
with the provisions set forth in Section 8 hereof; and
(d) either (1) a check payable to the Company (in the case of
the original Holder of this Warrant only), a certified check payable
to the Company or a wire transfer of immediately available funds to an
account designated by the Company in an amount equal to the product of
the Exercise Price multiplied by the number of shares of Common Stock
being purchased upon such exercise (the "Aggregate Exercise Price"),
(2) the surrender to the Company of debt or equity securities of the
Company having a Market Price equal to the Aggregate Exercise Price of
the Common Stock being purchased upon such exercise (provided that for
purposes of this subparagraph, the Market Price of any note or other
debt security or any preferred stock shall be deemed to be equal to
the aggregate outstanding principal amount or liquidation value
thereof plus all accrued and unpaid interest thereon or accrued or
declared and unpaid dividends thereon) or (3) a written notice to the
Company that the Purchaser is exercising the Warrant (or a portion
thereof) by authorizing the Company to withhold from issuance a number
of shares of Common Stock issuable upon such exercise of the Warrant
which when multiplied by the Market Price of the Common Stock is equal
to the Aggregate Exercise Price (and such withheld shares shall no
longer be issuable under this Warrant).
(ii) Certificates for shares of Common Stock purchased upon
exercise of this Warrant shall be delivered by the Company to the Purchaser
within five business days after the date of the Exercise Time. Unless this
Warrant has expired or all of the purchase rights represented hereby have
been exercised, the Company shall prepare a new Warrant, substantially
identical hereto, representing the rights formerly represented by this
Warrant which have not expired or been exercised and shall within such
five-day period, deliver such new Warrant to the Person designated for
delivery in the Exercise Agreement.
(iii) The Common Stock issuable upon the exercise of this Warrant
shall be deemed to have been issued to the Purchaser at the Exercise Time,
and the Purchaser shall be deemed for all purposes to have become the
record holder of such Common Stock at the Exercise Time.
(iv) The issuance of certificates for shares of Common Stock upon
exercise of this Warrant shall be made without charge to the Registered
Holder or the Purchaser for any issuance tax in respect thereof or other
cost incurred by the Company in connection with such exercise and the
related issuance of shares of Common Stock. Each share of Common Stock
issuable upon exercise of this Warrant shall upon payment of the Exercise
Price therefor, be fully paid and nonassessable and free from all liens and
charges with respect to the issuance thereof.
(v) The Company shall not close its books against the transfer
of this Warrant or of any share of Common Stock issued or issuable upon the
exercise of this Warrant in any manner which interferes with the timely
exercise of this Warrant. The Company shall from time to time take all
such action as may be necessary to assure that the par value per share of
the unissued Common Stock acquirable upon exercise of this Warrant is at
all times equal to or less than the Exercise Price then in effect.
(vi) The Company shall assist and cooperate with any Registered
Holder or Purchaser required to make any governmental filings or obtain any
governmental approvals prior to or in connection with any exercise of this
Warrant (including making any filings required to be made by the Company).
(vii) Notwithstanding any other provision hereof, if an exercise
of any portion of this Warrant is to be made in connection with a
registered public offering or the sale of the Company, the exercise of any
portion of this Warrant may, at the election of the holder hereof, be
conditioned upon the consummation of the public offering or sale of the
Company in which case such exercise shall not be deemed to be effective
until the consummation of such transaction.
(viii) The Company shall at all times reserve and keep available
out of its authorized but unissued shares of Common Stock solely for the
purpose of issuance upon the exercise of the Warrants, such number of
shares of Common Stock issuable upon the exercise of all outstanding
Warrants. All shares of Common Stock which are so issuable shall, when
issued, be duly and validly issued, fully paid and nonassessable and free
from all taxes, liens and charges. The Company shall take all such actions
as may be necessary to assure that all such shares of Common Stock may be
so issued without violation of any applicable law or governmental
regulation or any requirements of any domestic securities exchange upon
which shares of Common Stock may be listed (except for official notice of
issuance which shall be immediately delivered by the Company upon each such
issuance). The Company shall not take any action which would cause the
number of authorized but unissued shares of Common Stock to be less than
the number of such shares required to be reserved hereunder for issuance
upon exercise of the Warrants.
C .EXERCISE AGREEMENT. Upon any exercise of this Warrant,
the Exercise Agreement shall be substantially in the form set forth in
EXHIBIT I hereto, except that if the shares of Common Stock are not to be
issued in the name of the Person in whose name this Warrant is registered,
the Exercise Agreement shall also state the name of the Person to whom the
certificates for the shares of Common Stock are to be issued, and if the
number of shares of Common Stock to be issued does not include all the
shares of Common Stock purchasable hereunder, it shall also state the name
of the Person to whom a new Warrant for the unexercised portion of the
rights hereunder is to be delivered. Such Exercise Agreement shall be
dated the actual date of execution thereof.
D. FRACTIONAL SHARES. If a fractional share of Common
Stock would, but for the provisions of paragraph 1A, be issuable upon
exercise of the rights represented by this Warrant, the Company shall,
within five business days after the date of the Exercise Time, deliver to
the Purchaser a check payable to the Purchaser in lieu of such fractional
share in an amount equal to the difference between Market Price of such
fractional share as of the date of the Exercise Time and the Exercise Price
of such fractional share.
Section 2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES.
In order to prevent dilution of the rights granted under this Warrant, the
Exercise Price shall be subject to adjustment from time to time as provided
in this Section 2, and the number of shares of Common Stock obtainable upon
exercise of this Warrant shall be subject to adjustment from time to time
as provided in this Section 2.
A. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES UPON
ISSUANCE OF COMMON STOCK. If and whenever on or after the Date of Issuance
of this Warrant, the Company issues or sells, or in accordance with
paragraph 2B is deemed to have issued or sold, any share of Common Stock
for a consideration per share less than the Exercise Price in effect
immediately prior to such time, then immediately upon such issue or sale
the Exercise Price shall be reduced to the lowest net price per share (as
determined pursuant to paragraph 2B(v) below) at which such share of Common
Stock has been issued or sold or is deemed to have been issued or sold.
Upon each such adjustment of the Exercise Price hereunder, the number of
shares of Common acquirable upon exercise of this Warrant shall be adjusted
to the number of shares determined by multiplying the Exercise Price in
effect immediately prior to such adjustment by the number of shares of
Common acquirable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting
from such adjustment. Notwithstanding the foregoing, there shall be no
adjustment to the Exercise Price hereunder with respect to the granting of
stock options to employees or directors of the Company and its Subsidiaries
or the exercise thereof or the granting of stock appreciation rights,
phantom stock rights or other similar rights to employees or directors of
the Company for (or rights relating to) an aggregate of 1,586,702 shares of
Common Stock (976,594 options being currently outstanding) (as such number
of shares is equitably adjusted for subsequent stock splits, stock
combinations, stock dividends and recapitalizations and such number shall
include all stock options outstanding as of the date of the Purchase
Agreement).
B. EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes
of determining the adjusted Exercise Price under paragraph 2A, the
following shall be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any manner
grants or sells any Options and the lowest price per share for which any
one share of Common Stock is issuable upon the exercise of any such Option,
or upon conversion or exchange of any Convertible Security issuable upon
exercise of such Option, is less than the Exercise Price in effect
immediately prior to the time of the granting or sale of such Option, then
such share of Common Stock shall be deemed to have been issued and sold by
the Company at such time for such price per share. For purposes of this
paragraph, the "lowest price per share for which any one share of Common
Stock is issuable" shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect
to any one share of Common Stock upon the granting or sale of the Option,
upon exercise of the Option and upon conversion or exchange of the
Convertible Security. No further adjustment of the Exercise Price shall be
made upon the actual issue of such Common Stock or of such Convertible
Security upon the exercise of such Options or upon the actual issue of such
Common Stock upon conversion or exchange of such Convertible Security.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any
manner issues or sells any Convertible Security and the lowest price per
share for which any one share of Common Stock is issuable upon conversion
or exchange thereof is less than the Exercise Price in effect immediately
prior to the time of such issue or sale, then such share or shares of
Common Stock shall be deemed to have been issued and sold by the Company at
such time for such price per share. For the purposes of this paragraph,
the "lowest price per share for which any one share of Common Stock is
issuable" shall be equal to the sum of the lowest amounts of consideration
(if any) received or receivable by the Company with respect to any one
share of Common Stock upon the issuance of the Convertible Security and
upon the conversion or exchange of such Convertible Security. No further
adjustment of the Exercise Price shall be made upon the actual issue of
such Common Stock upon conversion or exchange of any Convertible Security,
and if any such issue or sale of such Convertible Security is made upon
exercise of any Options for which adjustments of the Exercise Price had
been or are to be made pursuant to other provisions of this Section 2, no
further adjustment of the Exercise Price shall be made by reason of such
issue or sale.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If the purchase
price provided for in any Options, the additional consideration, if any,
payable upon the issue, conversion or exchange of any Convertible
Securities, or the rate at which any Convertible Securities are convertible
into or exchangeable for Common Stock changes at any time, the Exercise
Price in effect at the time of such change shall be adjusted immediately to
the Exercise Price which would have been in effect at such time had such
Options or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or changed conversion
rate, as the case may be, at the time initially granted, issued or sold and
the number of shares of Common Stock issuable hereunder shall be
correspondingly adjusted; provided that if such adjustment would result in
an increase of the Exercise Price then in effect, such adjustment shall not
be effective until 30 days after written notice thereof has been given by
the Company to all holders of the Warrants. For purposes of this paragraph
2B, if the terms of any Option or Convertible Security which was
outstanding as of the date of issuance of this Warrant are changed in the
manner described in the immediately preceding sentence, then such Option or
Convertible Security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed to have been issued as of
the date of such change; provided that no such change shall at any time
cause the Exercise Price hereunder to be increased.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. Upon the expiration of any Option or the termination of any
right to convert or exchange any Convertible Securities without the
exercise of such Option or right, the Exercise Price then in effect shall
be adjusted immediately to the Exercise Price which would have been in
effect at the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
expiration or termination, never been issued; provided that if such
expiration or termination would result in an increase in the Exercise Price
then in effect, such increase shall not be effective until 30 days after
written notice thereof has been given to all holders of the Warrants. For
purposes of this paragraph 2B, the expiration or termination of any Option
or Convertible Security which was outstanding as of the date of issuance of
this Warrant shall not cause the Exercise Price hereunder to be adjusted
unless, and only to the extent that, a change in the terms of such Option
or Convertible Security caused it to be deemed to have been issued after
the date of issuance of this Warrant.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any Common Stock,
Options or Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be
deemed to be the net amount received by the Company therefor. In case any
Common Stock, Options or Convertible Securities are issued or sold for a
consideration other than cash, the amount of the consideration other than
cash received by the Company shall be the fair value of such consideration,
except where such consideration consists of securities, in which case the
amount of consideration received by the Company shall be the Market Price
thereof as of the date of receipt. In case any Common Stock, Options or
Convertible Securities are issued to the owners of the non-surviving entity
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 value of such portion of the net assets and business of the non-
surviving entity as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities shall be determined jointly by
the Company and the Registered Holders of Warrants representing a majority
of the shares of Common Stock obtainable upon exercise of such Warrants.
If such parties are unable to reach agreement within a reasonable period of
time, such fair value shall be determined by an appraiser jointly selected
by the Company and the Registered Holders of Warrants representing a
majority of the shares of Common Stock obtainable upon exercise of such
Warrants. The determination of such appraiser shall be final and binding
on the Company and the Registered Holders of the Warrants, and the fees and
expenses of such appraiser shall be paid by the Company.
(vi) INTEGRATED TRANSACTIONS. In case any Option is issued in
connection with the issue or sale of other securities of the Company,
together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the
Options shall be deemed to have been issued for consideration of $.01.
(vii) TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time does not include shares owned or held by or
for the account of the Company or any Subsidiary, and the disposition of
any shares so owned or held shall be considered an issue or sale of Common
Stock.
(viii) RECORD DATE. If the Company takes a record of the holders
of Common Stock for the purpose of entitling them (A) to receive a dividend
or other distribution payable in Common Stock, Options or in Convertible
Securities or (B) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date shall be deemed to be the
date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
C. SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company
at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding
shares of Common Stock into a greater number of shares, the Exercise Price
in effect immediately prior to such subdivision shall be proportionately
reduced and the number of shares of Common Stock obtainable upon exercise
of this Warrant shall be proportionately increased. If the Company at any
time combines (by reverse stock split or otherwise) one or more classes of
its outstanding shares of Common Stock into a smaller number of shares, the
Exercise Price in effect immediately prior to such combination shall be
proportionately increased and the number of shares of Common Stock
obtainable upon exercise of this Warrant shall be proportionately
decreased.
D. REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's
assets or other transaction, in each case which is effected in such a way
that the holders of Common Stock are entitled to receive (either directly
or upon subsequent liquidation) stock, securities or assets with respect to
or in exchange for Common Stock is referred to herein as "Organic Change."
Prior to the consummation of any Organic Change, the Company shall make
appropriate provision (in form and substance satisfactory to the Registered
Holders of the Warrants representing a majority of the Common Stock
obtainable upon exercise of all Warrants then outstanding) to insure that
each of the Registered Holders of the Warrants shall thereafter have the
right to acquire and receive, in lieu of or addition to (as the case may
be) the shares of Common Stock immediately theretofore acquirable and
receivable upon the exercise of such holder's Warrant, such shares of
stock, securities or assets as may be issued or payable with respect to or
in exchange for the number of shares of Common Stock immediately
theretofore acquirable and receivable upon exercise of such holder's
Warrant had such Organic Change not taken place. In any such case, the
Company shall make appropriate provision (in form and substance
satisfactory to the Registered Holders of the Warrants representing a
majority of the Common Stock obtainable upon exercise of all Warrants then
outstanding) with respect to such holders' rights and interests to insure
that the provisions of this Section 2 and Sections 3 and 4 hereof shall
thereafter be applicable to the Warrants (including, in the case of any
such consolidation, merger or sale in which the successor entity or
purchasing entity is other than the Company, an immediate adjustment of the
Exercise Price to the value for the Common Stock reflected by the terms of
such consolidation, merger or sale, and a corresponding immediate
adjustment in the number of shares of Common Stock acquirable and
receivable upon exercise of the Warrants, if the value so reflected is less
than the Exercise Price in effect immediately prior to such consolidation,
merger or sale). The Company shall not effect any such consolidation,
merger or sale, unless prior to the consummation thereof, the successor
entity (if other than the Company) resulting from consolidation or merger
or the entity purchasing such assets assumes by written instrument (in form
and substance satisfactory to the Registered Holders of Warrants
representing a majority of the Common Stock obtainable upon exercise of all
of the Warrants then outstanding), the obligation to deliver to each such
holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such holder may be entitled to acquire.
E. CERTAIN EVENTS. If any event occurs of the type
contemplated by the provisions of this Section 2 but not expressly provided
for by such provisions (including the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then
the Company's board of directors shall make an appropriate adjustment in
the Exercise Price and the number of shares of Common Stock obtainable upon
exercise of this Warrant so as to protect the rights of the holders of the
Warrants; provided that no such adjustment shall increase the Exercise
Price or decrease the number of shares of Common Stock obtainable as
otherwise determined pursuant to this Section 2.
F. NOTICES.
(i) Immediately upon any adjustment of the Exercise Price, the
Company shall give written notice thereof to the Registered Holder, setting
forth in reasonable detail and certifying the calculation of such
adjustment.
(ii) The Company shall give written notice to the Registered
Holder at least 20 days prior to the date on which the Company closes its
books or takes a record (A) with respect to any dividend or distribution
upon the Common Stock, (B) with respect to any pro rata subscription offer
to holders of Common Stock or (C) for determining rights to vote with
respect to any Organic Change, dissolution or liquidation.
(iii) The Company shall also give written notice to the Registered
Holders at least 20 days prior to the date on which any Organic Change,
dissolution or liquidation shall take place.
Section 3. LIQUIDATING DIVIDENDS. If the Company declares or
pays a dividend upon the Common Stock payable otherwise than in cash out of
earnings or earned surplus (determined in accordance with generally
accepted accounting principles, consistently applied) except for a stock
dividend payable in shares of Common Stock (a "Liquidating Dividend"), then
the Company shall pay to the Registered Holder of this Warrant at the time
of payment thereof the Liquidating Dividend which would have been paid to
such Registered Holder on the Common Stock had this Warrant been fully
exercised immediately prior to the date on which a record is taken for such
Liquidating Dividend, or, if no record is taken, the date as of which the
record holders of Common Stock entitled to such dividends are to be
determined.
Section 4. PURCHASE RIGHTS. If at any time the Company grants,
issues or sells any Options, Convertible Securities or rights to purchase
stock, warrants, securities or other property pro rata to the record
holders of any class of Common Stock (the "Purchase Rights"), then the
Registered holder of this Warrant shall be entitled to acquire, upon the
terms applicable to such Purchase Rights, the aggregate Purchase Rights
which such holder could have acquired if such holder had held the number of
shares of Common Stock acquirable upon complete exercise of this Warrant
immediately before the date on which a record is taken for the grant,
issuance or sale of such Purchase Rights, or, if no such record is taken,
the date as of which the record holders of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights.
Section 5. DEFINITIONS. The following terms have meanings set
forth below:
"COMMON STOCK" means the Company's Common Stock, $.015 par value,
and except for purposes of the shares obtainable upon exercise of this
Warrant, any capital stock of any class of the Company which is not limited
to a fixed sum or percentage of par or stated value in respect to the
rights of the holders thereof to participate in dividends or in the
distribution of assets upon any liquidation, dissolution or winding up of
the Company; provided that where such term refers to the security
receivable upon exercise of this Warrant and there is a change such that
the securities issuable upon exercise of this Warrant are issued by an
entity other than the Company or there is a change in the type or class of
securities so issuable, the term "Common Stock" shall mean one share of the
security issuable upon conversion of this Warrant if such security is
issuable in shares, or shall mean the smallest unit in which such security
is issuable if such security is not issuable in shares.
"CONVERTIBLE SECURITIES" means any stock or securities (directly
or indirectly) convertible into or exchangeable for Common Stock.
"FUNDAMENTAL CHANGE" has the meaning set forth in the Amendment.
"MARKET PRICE" means as to any security the average of the
closing prices of such security's sales on all domestic securities
exchanges on which such security may at the time be listed, or, if there
have been no sales on any such exchange on any day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of
such day, or, if on any day such security is not so listed, the average of
the representative bid and asked prices quoted in the NASDAQ System as of
4:00 P.M., New York time, on such day, or, if on any day such security is
not quoted in the NASDAQ System, the average of the highest bid and lowest
asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of 15 days
consisting of the day as of which "Market Price" is being determined and
the 14 consecutive business days prior to such day; provided that if such
security is listed on any domestic securities exchange the term "business
days" as used in this sentence means business days on which such exchange
is open for trading. If at any time such security is not listed on any
domestic securities exchange or quoted in the NASDAQ System or the domestic
over-the-counter market, the "Market Price" shall be the fair value thereof
determined jointly by the Company and the Registered Holders of Warrants
representing a majority of the Common Stock purchasable upon exercise of
all the Warrants then outstanding; provided that if such parties are unable
to reach agreement within a reasonable period of time, such fair value
shall be determined by an appraiser jointly selected by the Company and the
Registered Holders of Warrants representing a majority of the Common Stock
purchasable upon exercise of all the Warrants then outstanding. The
determination of such appraiser shall be final and binding on the Company
and the Registered Holders of the Warrants, and the fees and expenses of
such appraiser shall be paid by the Company.
"OPTIONS" means any rights or options to subscribe for or
purchase Common Stock or Convertible Securities.
"PERSON" means an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization and a government or any department or agency thereof.
Other capitalized terms used in this Warrant but not defined
herein shall have the meanings set forth in the Purchase Agreement.
Section 6. NO VOTING RIGHTS; LIMITATIONS OF LIABILITY. This
Warrant shall not entitle the holder hereof to any voting rights or other
rights as a stockholder of the Company. No provision hereof, in the
absence of affirmative action by the Registered Holder to purchase Common
Stock, and no enumeration herein of the rights or privileges of the
Registered Holder shall give rise to any liability of such holder for the
Exercise Price of Common Stock acquirable by exercise hereof or as a
stockholder of the Company.
Section 7. WARRANT TRANSFERABLE. Subject to the transfer
conditions referred to in the legend endorsed hereon, this Warrant and all
rights hereunder are transferable, in whole or in part, without charge to
the Registered Holder, upon surrender of this Warrant with a properly
executed Assignment (in the form of EXHIBIT II hereto) at the principal
office of the Company.
Section 8. WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS.
This Warrant is exchangeable, upon the surrender hereof by the Registered
Holder at the principal office of the Company, for new Warrants of like
tenor representing in the aggregate the purchase rights hereunder, and each
of such new Warrants shall represent such portion of such rights as is
designated by the Registered Holder at the time of such surrender. The
date the Company initially issues this Warrant shall be deemed to be the
"Date of Issuance" hereof regardless of the number of times new
certificates representing the unexpired and unexercised rights formerly
represented by this Warrant shall be issued. All Warrants representing
portions of the rights hereunder are referred to herein as the "Warrants."
Section 9. REPLACEMENT. Upon receipt of evidence reasonably
satisfactory to the Company (an affidavit of the Registered Holder shall be
satisfactory) of the ownership and the loss, theft, destruction or
mutilation of any certificate evidencing this Warrant, and in the case of
any such loss, theft or destruction, upon receipt of indemnity reasonably
satisfactory to the Company (provided that if the holder is a financial
institution or other institutional investor its own agreement shall be
satisfactory), or, in the case of any such mutilation upon surrender of
such certificate, the Company shall (at its expense) execute and deliver in
lieu of such certificate a new certificate of like kind representing the
same rights represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate.
Section 10. NOTICES. Except as otherwise expressly provided
herein, all notices referred to in this Warrant shall be given in
accordance with paragraph 7L of the Purchase Agreement.
Section 11. AMENDMENT AND WAIVER. Except as otherwise provided
herein, the provisions of the Warrants may be amended and the Company may
take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company has obtained the
written consent of the Registered Holders of Warrants representing a
majority of the shares of Common Stock obtainable upon exercise of the
Warrants; provided that no such action may change the Exercise Price of the
Warrants or the number of shares or class of stock obtainable upon exercise
of each Warrant without the written consent of the Registered Holders of
Warrants representing at least 66% of the shares of Common Stock obtainable
upon exercise of the Warrants.
Section 12. DESCRIPTIVE HEADINGS; GOVERNING LAW. The
descriptive headings of the several Sections and paragraphs of this Warrant
are inserted for convenience only and do not constitute a part of this
Warrant. The corporation laws of the State of Delaware shall govern all
issues concerning the relative rights of the Company and its Stockholders.
All other questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be governed by the internal law of the
State of New York, without giving effect to any choice of law or conflict
of law provision or rule (whether of the State of New York or any other
jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.
* * * * * *
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed and attested by its duly authorized officers under its corporate
seal and to be dated the Date of Issuance hereof.
ACC CORP.
By /s/ Michael R. Daley
Its EVP and CFO
[Corporate Seal]
Attest:
/s/ Francis D.R. Coleman
Title: Secretary
<PAGE>
EXHIBIT I
EXERCISE AGREEMENT
To: Dated:
The undersigned, pursuant to the provisions set forth in the
attached Warrant (Certificate No. CW-____), hereby agrees to subscribe for
the purchase of ______ shares of the Common Stock covered by such Warrant
and makes payment herewith in full therefor at the price per share provided
by such Warrant.
Signature ____________________
Address ______________________
EXHIBIT II
ASSIGNMENT
FOR VALUE RECEIVED, ______________________________ hereby sells,
assigns and transfers all of the rights of the undersigned under the
attached Warrant (Certificate No. CW-_____) with respect to the number of
shares of the Common Stock covered thereby set forth below, unto:
NAMES OF ASSIGNEE ADDRESS NO. OF SHARES
Signature ____________________
____________________
Witness ____________________
EXHIBIT 4-3(b)
This Warrant was originally issued on May 22, 1995, and
such issuance was not registered under the Securities
Act of 1933, as amended. The transfer of this Warrant
and the securities obtainable upon exercise thereof is
subject to the conditions on transfer specified in the
Purchase Agreement, dated as of May 22, 1995 (as
amended and modified from time to time), between the
issuer hereof (the "Company") and the initial holder
hereof, and the Company reserves the right to refuse
the transfer of such security until such conditions
have been fulfilled with respect to such transfer.
Upon written request, a copy of such conditions shall
be furnished by the Company to the holder hereof
without charge.
ACC CORP.
STOCK PURCHASE WARRANT
Date of Issuance: May 22, 1995 Certificate No. CW-2
FOR VALUE RECEIVED, ACC Corp., a Delaware corporation (the
"Company"), hereby grants to Fleet Equity Partners VI, L.P. or its
registered assigns (the "Registered Holder") the right to purchase from the
Company 18,000 shares of the Company's Common Stock at a price per share of
$16.00 (as adjusted from time to time hereunder, the "Exercise Price").
This Warrant is one of several Closing Warrants (collectively referred to
herein as the "Warrants") issued by the Company to certain investors
pursuant to the Purchase Agreement, dated as of May 22, 1995 (the "Purchase
Agreement"). Certain capitalized terms used herein are defined in Section
5 hereof. The amount and kind of securities obtainable pursuant to the
rights granted hereunder and the purchase price for such securities are
subject to adjustment pursuant to the provisions contained in this Warrant.
This Warrant is subject to the following provisions:
Section 1. EXERCISE OF WARRANT.
A. EXERCISE PERIOD. The Registered Holder may exercise, in
whole or in part (but not as to a fractional share of Common Stock), the
purchase rights represented by this Warrant at any time and from time to
time after the Date of Issuance to and including the earlier of (i) the
seventh anniversary thereof or (ii) the date which is six years after the
first date upon which no Notes or Series A Preferred remain outstanding
(the "Exercise Period"). The Company shall give the Registered Holder
written notice of the expiration of the rights hereunder at least 30 days
but not more than 90 days prior to the end of the Exercise Period.
B. EXERCISE PROCEDURE.
(i) This Warrant shall be deemed to have been exercised when the
Company has received all of the following items (the "Exercise Time"):
(a) a completed Exercise Agreement, as described in paragraph 1C
below, executed by the Person exercising all or part of the purchase
rights represented by this Warrant (the "Purchaser");
(b) this Warrant;
(c) if this Warrant is not registered in the name of the
Purchaser, an Assignment or Assignments in the form set forth in
EXHIBIT II hereto evidencing the assignment of this Warrant to the
Purchaser, in which case the Registered Holder shall have complied
with the provisions set forth in Section 8 hereof; and
(d) either (1) a check payable to the Company (in the case of
the original Holder of this Warrant only), a certified check payable
to the Company or a wire transfer of immediately available funds to an
account designated by the Company in an amount equal to the product of
the Exercise Price multiplied by the number of shares of Common Stock
being purchased upon such exercise (the "Aggregate Exercise Price"),
(2) the surrender to the Company of debt or equity securities of the
Company having a Market Price equal to the Aggregate Exercise Price of
the Common Stock being purchased upon such exercise (provided that for
purposes of this subparagraph, the Market Price of any note or other
debt security or any preferred stock shall be deemed to be equal to
the aggregate outstanding principal amount or liquidation value
thereof plus all accrued and unpaid interest thereon or accrued or
declared and unpaid dividends thereon) or (3) a written notice to the
Company that the Purchaser is exercising the Warrant (or a portion
thereof) by authorizing the Company to withhold from issuance a number
of shares of Common Stock issuable upon such exercise of the Warrant
which when multiplied by the Market Price of the Common Stock is equal
to the Aggregate Exercise Price (and such withheld shares shall no
longer be issuable under this Warrant).
(ii) Certificates for shares of Common Stock purchased upon
exercise of this Warrant shall be delivered by the Company to the Purchaser
within five business days after the date of the Exercise Time. Unless this
Warrant has expired or all of the purchase rights represented hereby have
been exercised, the Company shall prepare a new Warrant, substantially
identical hereto, representing the rights formerly represented by this
Warrant which have not expired or been exercised and shall within such
five-day period, deliver such new Warrant to the Person designated for
delivery in the Exercise Agreement.
(iii) The Common Stock issuable upon the exercise of this Warrant
shall be deemed to have been issued to the Purchaser at the Exercise Time,
and the Purchaser shall be deemed for all purposes to have become the
record holder of such Common Stock at the Exercise Time.
(iv) The issuance of certificates for shares of Common Stock upon
exercise of this Warrant shall be made without charge to the Registered
Holder or the Purchaser for any issuance tax in respect thereof or other
cost incurred by the Company in connection with such exercise and the
related issuance of shares of Common Stock. Each share of Common Stock
issuable upon exercise of this Warrant shall upon payment of the Exercise
Price therefor, be fully paid and nonassessable and free from all liens and
charges with respect to the issuance thereof.
(v) The Company shall not close its books against the transfer
of this Warrant or of any share of Common Stock issued or issuable upon the
exercise of this Warrant in any manner which interferes with the timely
exercise of this Warrant. The Company shall from time to time take all
such action as may be necessary to assure that the par value per share of
the unissued Common Stock acquirable upon exercise of this Warrant is at
all times equal to or less than the Exercise Price then in effect.
(vi) The Company shall assist and cooperate with any Registered
Holder or Purchaser required to make any governmental filings or obtain any
governmental approvals prior to or in connection with any exercise of this
Warrant (including making any filings required to be made by the Company).
(vii) Notwithstanding any other provision hereof, if an exercise
of any portion of this Warrant is to be made in connection with a
registered public offering or the sale of the Company, the exercise of any
portion of this Warrant may, at the election of the holder hereof, be
conditioned upon the consummation of the public offering or sale of the
Company in which case such exercise shall not be deemed to be effective
until the consummation of such transaction.
(viii) The Company shall at all times reserve and keep available
out of its authorized but unissued shares of Common Stock solely for the
purpose of issuance upon the exercise of the Warrants, such number of
shares of Common Stock issuable upon the exercise of all outstanding
Warrants. All shares of Common Stock which are so issuable shall, when
issued, be duly and validly issued, fully paid and nonassessable and free
from all taxes, liens and charges. The Company shall take all such actions
as may be necessary to assure that all such shares of Common Stock may be
so issued without violation of any applicable law or governmental
regulation or any requirements of any domestic securities exchange upon
which shares of Common Stock may be listed (except for official notice of
issuance which shall be immediately delivered by the Company upon each such
issuance). The Company shall not take any action which would cause the
number of authorized but unissued shares of Common Stock to be less than
the number of such shares required to be reserved hereunder for issuance
upon exercise of the Warrants.
C. EXERCISE AGREEMENT. Upon any exercise of this Warrant,
the Exercise Agreement shall be substantially in the form set forth in
EXHIBIT I hereto, except that if the shares of Common Stock are not to be
issued in the name of the Person in whose name this Warrant is registered,
the Exercise Agreement shall also state the name of the Person to whom the
certificates for the shares of Common Stock are to be issued, and if the
number of shares of Common Stock to be issued does not include all the
shares of Common Stock purchasable hereunder, it shall also state the name
of the Person to whom a new Warrant for the unexercised portion of the
rights hereunder is to be delivered. Such Exercise Agreement shall be
dated the actual date of execution thereof.
D. FRACTIONAL SHARES. If a fractional share of Common
Stock would, but for the provisions of paragraph 1A, be issuable upon
exercise of the rights represented by this Warrant, the Company shall,
within five business days after the date of the Exercise Time, deliver to
the Purchaser a check payable to the Purchaser in lieu of such fractional
share in an amount equal to the difference between Market Price of such
fractional share as of the date of the Exercise Time and the Exercise Price
of such fractional share.
Section 2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES.
In order to prevent dilution of the rights granted under this Warrant, the
Exercise Price shall be subject to adjustment from time to time as provided
in this Section 2, and the number of shares of Common Stock obtainable upon
exercise of this Warrant shall be subject to adjustment from time to time
as provided in this Section 2.
A. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES UPON
ISSUANCE OF COMMON STOCK. If and whenever on or after the Date of Issuance
of this Warrant, the Company issues or sells, or in accordance with
paragraph 2B is deemed to have issued or sold, any share of Common Stock
for a consideration per share less than the Exercise Price in effect
immediately prior to such time, then immediately upon such issue or sale
the Exercise Price shall be reduced to the lowest net price per share (as
determined pursuant to paragraph 2B(v) below) at which such share of Common
Stock has been issued or sold or is deemed to have been issued or sold.
Upon each such adjustment of the Exercise Price hereunder, the number of
shares of Common acquirable upon exercise of this Warrant shall be adjusted
to the number of shares determined by multiplying the Exercise Price in
effect immediately prior to such adjustment by the number of shares of
Common acquirable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting
from such adjustment. Notwithstanding the foregoing, there shall be no
adjustment to the Exercise Price hereunder with respect to the granting of
stock options to employees or directors of the Company and its Subsidiaries
or the exercise thereof or the granting of stock appreciation rights,
phantom stock rights or other similar rights to employees or directors of
the Company for (or rights relating to) an aggregate of 1,586,702 shares of
Common Stock (976,594 options being currently outstanding) (as such number
of shares is equitably adjusted for subsequent stock splits, stock
combinations, stock dividends and recapitalizations and such number shall
include all stock options outstanding as of the date of the Purchase
Agreement).
B. EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes
of determining the adjusted Exercise Price under paragraph 2A, the
following shall be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any manner
grants or sells any Options and the lowest price per share for which any
one share of Common Stock is issuable upon the exercise of any such Option,
or upon conversion or exchange of any Convertible Security issuable upon
exercise of such Option, is less than the Exercise Price in effect
immediately prior to the time of the granting or sale of such Option, then
such share of Common Stock shall be deemed to have been issued and sold by
the Company at such time for such price per share. For purposes of this
paragraph, the "lowest price per share for which any one share of Common
Stock is issuable" shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect
to any one share of Common Stock upon the granting or sale of the Option,
upon exercise of the Option and upon conversion or exchange of the
Convertible Security. No further adjustment of the Exercise Price shall be
made upon the actual issue of such Common Stock or of such Convertible
Security upon the exercise of such Options or upon the actual issue of such
Common Stock upon conversion or exchange of such Convertible Security.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any
manner issues or sells any Convertible Security and the lowest price per
share for which any one share of Common Stock is issuable upon conversion
or exchange thereof is less than the Exercise Price in effect immediately
prior to the time of such issue or sale, then such share or shares of
Common Stock shall be deemed to have been issued and sold by the Company at
such time for such price per share. For the purposes of this paragraph,
the "lowest price per share for which any one share of Common Stock is
issuable" shall be equal to the sum of the lowest amounts of consideration
(if any) received or receivable by the Company with respect to any one
share of Common Stock upon the issuance of the Convertible Security and
upon the conversion or exchange of such Convertible Security. No further
adjustment of the Exercise Price shall be made upon the actual issue of
such Common Stock upon conversion or exchange of any Convertible Security,
and if any such issue or sale of such Convertible Security is made upon
exercise of any Options for which adjustments of the Exercise Price had
been or are to be made pursuant to other provisions of this Section 2, no
further adjustment of the Exercise Price shall be made by reason of such
issue or sale.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If the purchase
price provided for in any Options, the additional consideration, if any,
payable upon the issue, conversion or exchange of any Convertible
Securities, or the rate at which any Convertible Securities are convertible
into or exchangeable for Common Stock changes at any time, the Exercise
Price in effect at the time of such change shall be adjusted immediately to
the Exercise Price which would have been in effect at such time had such
Options or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or changed conversion
rate, as the case may be, at the time initially granted, issued or sold and
the number of shares of Common Stock issuable hereunder shall be
correspondingly adjusted; provided that if such adjustment would result in
an increase of the Exercise Price then in effect, such adjustment shall not
be effective until 30 days after written notice thereof has been given by
the Company to all holders of the Warrants. For purposes of this paragraph
2B, if the terms of any Option or Convertible Security which was
outstanding as of the date of issuance of this Warrant are changed in the
manner described in the immediately preceding sentence, then such Option or
Convertible Security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed to have been issued as of
the date of such change; provided that no such change shall at any time
cause the Exercise Price hereunder to be increased.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. Upon the expiration of any Option or the termination of any
right to convert or exchange any Convertible Securities without the
exercise of such Option or right, the Exercise Price then in effect shall
be adjusted immediately to the Exercise Price which would have been in
effect at the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
expiration or termination, never been issued; provided that if such
expiration or termination would result in an increase in the Exercise Price
then in effect, such increase shall not be effective until 30 days after
written notice thereof has been given to all holders of the Warrants. For
purposes of this paragraph 2B, the expiration or termination of any Option
or Convertible Security which was outstanding as of the date of issuance of
this Warrant shall not cause the Exercise Price hereunder to be adjusted
unless, and only to the extent that, a change in the terms of such Option
or Convertible Security caused it to be deemed to have been issued after
the date of issuance of this Warrant.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any Common Stock,
Options or Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be
deemed to be the net amount received by the Company therefor. In case any
Common Stock, Options or Convertible Securities are issued or sold for a
consideration other than cash, the amount of the consideration other than
cash received by the Company shall be the fair value of such consideration,
except where such consideration consists of securities, in which case the
amount of consideration received by the Company shall be the Market Price
thereof as of the date of receipt. In case any Common Stock, Options or
Convertible Securities are issued to the owners of the non-surviving entity
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 value of such portion of the net assets and business of the non-
surviving entity as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities shall be determined jointly by
the Company and the Registered Holders of Warrants representing a majority
of the shares of Common Stock obtainable upon exercise of such Warrants.
If such parties are unable to reach agreement within a reasonable period of
time, such fair value shall be determined by an appraiser jointly selected
by the Company and the Registered Holders of Warrants representing a
majority of the shares of Common Stock obtainable upon exercise of such
Warrants. The determination of such appraiser shall be final and binding
on the Company and the Registered Holders of the Warrants, and the fees and
expenses of such appraiser shall be paid by the Company.
(vi) INTEGRATED TRANSACTIONS. In case any Option is issued in
connection with the issue or sale of other securities of the Company,
together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the
Options shall be deemed to have been issued for consideration of $.01.
(vii) TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time does not include shares owned or held by or
for the account of the Company or any Subsidiary, and the disposition of
any shares so owned or held shall be considered an issue or sale of Common
Stock.
(viii) RECORD DATE. If the Company takes a record of the holders
of Common Stock for the purpose of entitling them (A) to receive a dividend
or other distribution payable in Common Stock, Options or in Convertible
Securities or (B) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date shall be deemed to be the
date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
C. SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company
at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding
shares of Common Stock into a greater number of shares, the Exercise Price
in effect immediately prior to such subdivision shall be proportionately
reduced and the number of shares of Common Stock obtainable upon exercise
of this Warrant shall be proportionately increased. If the Company at any
time combines (by reverse stock split or otherwise) one or more classes of
its outstanding shares of Common Stock into a smaller number of shares, the
Exercise Price in effect immediately prior to such combination shall be
proportionately increased and the number of shares of Common Stock
obtainable upon exercise of this Warrant shall be proportionately
decreased.
D. REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's
assets or other transaction, in each case which is effected in such a way
that the holders of Common Stock are entitled to receive (either directly
or upon subsequent liquidation) stock, securities or assets with respect to
or in exchange for Common Stock is referred to herein as "Organic Change."
Prior to the consummation of any Organic Change, the Company shall make
appropriate provision (in form and substance satisfactory to the Registered
Holders of the Warrants representing a majority of the Common Stock
obtainable upon exercise of all Warrants then outstanding) to insure that
each of the Registered Holders of the Warrants shall thereafter have the
right to acquire and receive, in lieu of or addition to (as the case may
be) the shares of Common Stock immediately theretofore acquirable and
receivable upon the exercise of such holder's Warrant, such shares of
stock, securities or assets as may be issued or payable with respect to or
in exchange for the number of shares of Common Stock immediately
theretofore acquirable and receivable upon exercise of such holder's
Warrant had such Organic Change not taken place. In any such case, the
Company shall make appropriate provision (in form and substance
satisfactory to the Registered Holders of the Warrants representing a
majority of the Common Stock obtainable upon exercise of all Warrants then
outstanding) with respect to such holders' rights and interests to insure
that the provisions of this Section 2 and Sections 3 and 4 hereof shall
thereafter be applicable to the Warrants (including, in the case of any
such consolidation, merger or sale in which the successor entity or
purchasing entity is other than the Company, an immediate adjustment of the
Exercise Price to the value for the Common Stock reflected by the terms of
such consolidation, merger or sale, and a corresponding immediate
adjustment in the number of shares of Common Stock acquirable and
receivable upon exercise of the Warrants, if the value so reflected is less
than the Exercise Price in effect immediately prior to such consolidation,
merger or sale). The Company shall not effect any such consolidation,
merger or sale, unless prior to the consummation thereof, the successor
entity (if other than the Company) resulting from consolidation or merger
or the entity purchasing such assets assumes by written instrument (in form
and substance satisfactory to the Registered Holders of Warrants
representing a majority of the Common Stock obtainable upon exercise of all
of the Warrants then outstanding), the obligation to deliver to each such
holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such holder may be entitled to acquire.
E. CERTAIN EVENTS. If any event occurs of the type
contemplated by the provisions of this Section 2 but not expressly provided
for by such provisions (including the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then
the Company's board of directors shall make an appropriate adjustment in
the Exercise Price and the number of shares of Common Stock obtainable upon
exercise of this Warrant so as to protect the rights of the holders of the
Warrants; provided that no such adjustment shall increase the Exercise
Price or decrease the number of shares of Common Stock obtainable as
otherwise determined pursuant to this Section 2.
F. NOTICES.
(i) Immediately upon any adjustment of the Exercise Price, the
Company shall give written notice thereof to the Registered Holder, setting
forth in reasonable detail and certifying the calculation of such
adjustment.
(ii) The Company shall give written notice to the Registered
Holder at least 20 days prior to the date on which the Company closes its
books or takes a record (A) with respect to any dividend or distribution
upon the Common Stock, (B) with respect to any pro rata subscription offer
to holders of Common Stock or (C) for determining rights to vote with
respect to any Organic Change, dissolution or liquidation.
(iii) The Company shall also give written notice to the Registered
Holders at least 20 days prior to the date on which any Organic Change,
dissolution or liquidation shall take place.
Section 3. LIQUIDATING DIVIDENDS. If the Company declares or
pays a dividend upon the Common Stock payable otherwise than in cash out of
earnings or earned surplus (determined in accordance with generally
accepted accounting principles, consistently applied) except for a stock
dividend payable in shares of Common Stock (a "Liquidating Dividend"), then
the Company shall pay to the Registered Holder of this Warrant at the time
of payment thereof the Liquidating Dividend which would have been paid to
such Registered Holder on the Common Stock had this Warrant been fully
exercised immediately prior to the date on which a record is taken for such
Liquidating Dividend, or, if no record is taken, the date as of which the
record holders of Common Stock entitled to such dividends are to be
determined.
Section 4. PURCHASE RIGHTS. If at any time the Company grants,
issues or sells any Options, Convertible Securities or rights to purchase
stock, warrants, securities or other property pro rata to the record
holders of any class of Common Stock (the "Purchase Rights"), then the
Registered holder of this Warrant shall be entitled to acquire, upon the
terms applicable to such Purchase Rights, the aggregate Purchase Rights
which such holder could have acquired if such holder had held the number of
shares of Common Stock acquirable upon complete exercise of this Warrant
immediately before the date on which a record is taken for the grant,
issuance or sale of such Purchase Rights, or, if no such record is taken,
the date as of which the record holders of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights.
Section 5. DEFINITIONS. The following terms have meanings set
forth below:
"COMMON STOCK" means the Company's Common Stock, $.015 par value,
and except for purposes of the shares obtainable upon exercise of this
Warrant, any capital stock of any class of the Company which is not limited
to a fixed sum or percentage of par or stated value in respect to the
rights of the holders thereof to participate in dividends or in the
distribution of assets upon any liquidation, dissolution or winding up of
the Company; provided that where such term refers to the security
receivable upon exercise of this Warrant and there is a change such that
the securities issuable upon exercise of this Warrant are issued by an
entity other than the Company or there is a change in the type or class of
securities so issuable, the term "Common Stock" shall mean one share of the
security issuable upon conversion of this Warrant if such security is
issuable in shares, or shall mean the smallest unit in which such security
is issuable if such security is not issuable in shares.
"CONVERTIBLE SECURITIES" means any stock or securities (directly
or indirectly) convertible into or exchangeable for Common Stock.
"FUNDAMENTAL CHANGE" has the meaning set forth in the Amendment.
"MARKET PRICE" means as to any security the average of the
closing prices of such security's sales on all domestic securities
exchanges on which such security may at the time be listed, or, if there
have been no sales on any such exchange on any day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of
such day, or, if on any day such security is not so listed, the average of
the representative bid and asked prices quoted in the NASDAQ System as of
4:00 P.M., New York time, on such day, or, if on any day such security is
not quoted in the NASDAQ System, the average of the highest bid and lowest
asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of 15 days
consisting of the day as of which "Market Price" is being determined and
the 14 consecutive business days prior to such day; provided that if such
security is listed on any domestic securities exchange the term "business
days" as used in this sentence means business days on which such exchange
is open for trading. If at any time such security is not listed on any
domestic securities exchange or quoted in the NASDAQ System or the domestic
over-the-counter market, the "Market Price" shall be the fair value thereof
determined jointly by the Company and the Registered Holders of Warrants
representing a majority of the Common Stock purchasable upon exercise of
all the Warrants then outstanding; provided that if such parties are unable
to reach agreement within a reasonable period of time, such fair value
shall be determined by an appraiser jointly selected by the Company and the
Registered Holders of Warrants representing a majority of the Common Stock
purchasable upon exercise of all the Warrants then outstanding. The
determination of such appraiser shall be final and binding on the Company
and the Registered Holders of the Warrants, and the fees and expenses of
such appraiser shall be paid by the Company.
"OPTIONS" means any rights or options to subscribe for or
purchase Common Stock or Convertible Securities.
"PERSON" means an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization and a government or any department or agency thereof.
Other capitalized terms used in this Warrant but not defined
herein shall have the meanings set forth in the Purchase Agreement.
Section 6. NO VOTING RIGHTS; LIMITATIONS OF LIABILITY. This
Warrant shall not entitle the holder hereof to any voting rights or other
rights as a stockholder of the Company. No provision hereof, in the
absence of affirmative action by the Registered Holder to purchase Common
Stock, and no enumeration herein of the rights or privileges of the
Registered Holder shall give rise to any liability of such holder for the
Exercise Price of Common Stock acquirable by exercise hereof or as a
stockholder of the Company.
Section 7. WARRANT TRANSFERABLE. Subject to the transfer
conditions referred to in the legend endorsed hereon, this Warrant and all
rights hereunder are transferable, in whole or in part, without charge to
the Registered Holder, upon surrender of this Warrant with a properly
executed Assignment (in the form of EXHIBIT II hereto) at the principal
office of the Company.
Section 8. WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS.
This Warrant is exchangeable, upon the surrender hereof by the Registered
Holder at the principal office of the Company, for new Warrants of like
tenor representing in the aggregate the purchase rights hereunder, and each
of such new Warrants shall represent such portion of such rights as is
designated by the Registered Holder at the time of such surrender. The
date the Company initially issues this Warrant shall be deemed to be the
"Date of Issuance" hereof regardless of the number of times new
certificates representing the unexpired and unexercised rights formerly
represented by this Warrant shall be issued. All Warrants representing
portions of the rights hereunder are referred to herein as the "Warrants."
Section 9. REPLACEMENT. Upon receipt of evidence reasonably
satisfactory to the Company (an affidavit of the Registered Holder shall be
satisfactory) of the ownership and the loss, theft, destruction or
mutilation of any certificate evidencing this Warrant, and in the case of
any such loss, theft or destruction, upon receipt of indemnity reasonably
satisfactory to the Company (provided that if the holder is a financial
institution or other institutional investor its own agreement shall be
satisfactory), or, in the case of any such mutilation upon surrender of
such certificate, the Company shall (at its expense) execute and deliver in
lieu of such certificate a new certificate of like kind representing the
same rights represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate.
Section 10. NOTICES. Except as otherwise expressly provided
herein, all notices referred to in this Warrant shall be given in
accordance with paragraph 7L of the Purchase Agreement.
Section 11. AMENDMENT AND WAIVER. Except as otherwise provided
herein, the provisions of the Warrants may be amended and the Company may
take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company has obtained the
written consent of the Registered Holders of Warrants representing a
majority of the shares of Common Stock obtainable upon exercise of the
Warrants; provided that no such action may change the Exercise Price of the
Warrants or the number of shares or class of stock obtainable upon exercise
of each Warrant without the written consent of the Registered Holders of
Warrants representing at least 66% of the shares of Common Stock obtainable
upon exercise of the Warrants.
Section 12. DESCRIPTIVE HEADINGS; GOVERNING LAW. The
descriptive headings of the several Sections and paragraphs of this Warrant
are inserted for convenience only and do not constitute a part of this
Warrant. The corporation laws of the State of Delaware shall govern all
issues concerning the relative rights of the Company and its Stockholders.
All other questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be governed by the internal law of the
State of New York, without giving effect to any choice of law or conflict
of law provision or rule (whether of the State of New York or any other
jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.
* * * * * *
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed and attested by its duly authorized officers under its corporate
seal and to be dated the Date of Issuance hereof.
ACC CORP.
By /s/ Michael R. Daley
Its EVP and CFO
[Corporate Seal]
Attest:
/s/ Francis D.R. Coleman
Title: Secretary
<PAGE>
EXHIBIT I
EXERCISE AGREEMENT
To: Dated:
The undersigned, pursuant to the provisions set forth in the
attached Warrant (Certificate No. CW-____), hereby agrees to subscribe for
the purchase of ______ shares of the Common Stock covered by such Warrant
and makes payment herewith in full therefor at the price per share provided
by such Warrant.
Signature ____________________
Address ______________________
EXHIBIT II
ASSIGNMENT
FOR VALUE RECEIVED, ______________________________ hereby sells,
assigns and transfers all of the rights of the undersigned under the
attached Warrant (Certificate No. CW-_____) with respect to the number of
shares of the Common Stock covered thereby set forth below, unto:
NAMES OF ASSIGNEE ADDRESS NO. OF SHARES
Signature ____________________
____________________
Witness ____________________
EXHIBIT 4-3(c)
This Warrant was originally issued on May 22, 1995, and
such issuance was not registered under the Securities
Act of 1933, as amended. The transfer of this Warrant
and the securities obtainable upon exercise thereof is
subject to the conditions on transfer specified in the
Purchase Agreement, dated as of May 22, 1995 (as
amended and modified from time to time), between the
issuer hereof (the "Company") and the initial holder
hereof, and the Company reserves the right to refuse
the transfer of such security until such conditions
have been fulfilled with respect to such transfer.
Upon written request, a copy of such conditions shall
be furnished by the Company to the holder hereof
without charge.
ACC CORP.
STOCK PURCHASE WARRANT
Date of Issuance: May 22, 1995 Certificate No. CW-3
FOR VALUE RECEIVED, ACC Corp., a Delaware corporation (the
"Company"), hereby grants to Chisholm Partners II, L.P. or its registered
assigns (the "Registered Holder") the right to purchase from the Company
10,000 shares of the Company's Common Stock at a price per share of $16.00
(as adjusted from time to time hereunder, the "Exercise Price"). This
Warrant is one of several Closing Warrants (collectively referred to herein
as the "Warrants") issued by the Company to certain investors pursuant to
the Purchase Agreement, dated as of May 22, 1995 (the "Purchase
Agreement"). Certain capitalized terms used herein are defined in Section
5 hereof. The amount and kind of securities obtainable pursuant to the
rights granted hereunder and the purchase price for such securities are
subject to adjustment pursuant to the provisions contained in this Warrant.
This Warrant is subject to the following provisions:
Section 1. EXERCISE OF WARRANT.
A. EXERCISE PERIOD. The Registered Holder may exercise, in
whole or in part (but not as to a fractional share of Common Stock), the
purchase rights represented by this Warrant at any time and from time to
time after the Date of Issuance to and including the earlier of (i) the
seventh anniversary thereof or (ii) the date which is six years after the
first date upon which no Notes or Series A Preferred remain outstanding
(the "Exercise Period"). The Company shall give the Registered Holder
written notice of the expiration of the rights hereunder at least 30 days
but not more than 90 days prior to the end of the Exercise Period.
B. EXERCISE PROCEDURE.
(i) This Warrant shall be deemed to have been exercised when the
Company has received all of the following items (the "Exercise Time"):
(a) a completed Exercise Agreement, as described in paragraph 1C
below, executed by the Person exercising all or part of the purchase
rights represented by this Warrant (the "Purchaser");
(b) this Warrant;
(c) if this Warrant is not registered in the name of the
Purchaser, an Assignment or Assignments in the form set forth in
EXHIBIT II hereto evidencing the assignment of this Warrant to the
Purchaser, in which case the Registered Holder shall have complied
with the provisions set forth in Section 8 hereof; and
(d) either (1) a check payable to the Company (in the case of
the original Holder of this Warrant only), a certified check payable
to the Company or a wire transfer of immediately available funds to an
account designated by the Company in an amount equal to the product of
the Exercise Price multiplied by the number of shares of Common Stock
being purchased upon such exercise (the "Aggregate Exercise Price"),
(2) the surrender to the Company of debt or equity securities of the
Company having a Market Price equal to the Aggregate Exercise Price of
the Common Stock being purchased upon such exercise (provided that for
purposes of this subparagraph, the Market Price of any note or other
debt security or any preferred stock shall be deemed to be equal to
the aggregate outstanding principal amount or liquidation value
thereof plus all accrued and unpaid interest thereon or accrued or
declared and unpaid dividends thereon) or (3) a written notice to the
Company that the Purchaser is exercising the Warrant (or a portion
thereof) by authorizing the Company to withhold from issuance a number
of shares of Common Stock issuable upon such exercise of the Warrant
which when multiplied by the Market Price of the Common Stock is equal
to the Aggregate Exercise Price (and such withheld shares shall no
longer be issuable under this Warrant).
(ii) Certificates for shares of Common Stock purchased upon
exercise of this Warrant shall be delivered by the Company to the Purchaser
within five business days after the date of the Exercise Time. Unless this
Warrant has expired or all of the purchase rights represented hereby have
been exercised, the Company shall prepare a new Warrant, substantially
identical hereto, representing the rights formerly represented by this
Warrant which have not expired or been exercised and shall within such
five-day period, deliver such new Warrant to the Person designated for
delivery in the Exercise Agreement.
(iii) The Common Stock issuable upon the exercise of this Warrant
shall be deemed to have been issued to the Purchaser at the Exercise Time,
and the Purchaser shall be deemed for all purposes to have become the
record holder of such Common Stock at the Exercise Time.
(iv) The issuance of certificates for shares of Common Stock upon
exercise of this Warrant shall be made without charge to the Registered
Holder or the Purchaser for any issuance tax in respect thereof or other
cost incurred by the Company in connection with such exercise and the
related issuance of shares of Common Stock. Each share of Common Stock
issuable upon exercise of this Warrant shall upon payment of the Exercise
Price therefor, be fully paid and nonassessable and free from all liens and
charges with respect to the issuance thereof.
(v) The Company shall not close its books against the transfer
of this Warrant or of any share of Common Stock issued or issuable upon the
exercise of this Warrant in any manner which interferes with the timely
exercise of this Warrant. The Company shall from time to time take all
such action as may be necessary to assure that the par value per share of
the unissued Common Stock acquirable upon exercise of this Warrant is at
all times equal to or less than the Exercise Price then in effect.
(vi) The Company shall assist and cooperate with any Registered
Holder or Purchaser required to make any governmental filings or obtain any
governmental approvals prior to or in connection with any exercise of this
Warrant (including making any filings required to be made by the Company).
(vii) Notwithstanding any other provision hereof, if an exercise
of any portion of this Warrant is to be made in connection with a
registered public offering or the sale of the Company, the exercise of any
portion of this Warrant may, at the election of the holder hereof, be
conditioned upon the consummation of the public offering or sale of the
Company in which case such exercise shall not be deemed to be effective
until the consummation of such transaction.
(viii) The Company shall at all times reserve and keep available
out of its authorized but unissued shares of Common Stock solely for the
purpose of issuance upon the exercise of the Warrants, such number of
shares of Common Stock issuable upon the exercise of all outstanding
Warrants. All shares of Common Stock which are so issuable shall, when
issued, be duly and validly issued, fully paid and nonassessable and free
from all taxes, liens and charges. The Company shall take all such actions
as may be necessary to assure that all such shares of Common Stock may be
so issued without violation of any applicable law or governmental
regulation or any requirements of any domestic securities exchange upon
which shares of Common Stock may be listed (except for official notice of
issuance which shall be immediately delivered by the Company upon each such
issuance). The Company shall not take any action which would cause the
number of authorized but unissued shares of Common Stock to be less than
the number of such shares required to be reserved hereunder for issuance
upon exercise of the Warrants.
C. EXERCISE AGREEMENT. Upon any exercise of this Warrant,
the Exercise Agreement shall be substantially in the form set forth in
EXHIBIT I hereto, except that if the shares of Common Stock are not to be
issued in the name of the Person in whose name this Warrant is registered,
the Exercise Agreement shall also state the name of the Person to whom the
certificates for the shares of Common Stock are to be issued, and if the
number of shares of Common Stock to be issued does not include all the
shares of Common Stock purchasable hereunder, it shall also state the name
of the Person to whom a new Warrant for the unexercised portion of the
rights hereunder is to be delivered. Such Exercise Agreement shall be
dated the actual date of execution thereof.
D. FRACTIONAL SHARES. If a fractional share of Common
Stock would, but for the provisions of paragraph 1A, be issuable upon
exercise of the rights represented by this Warrant, the Company shall,
within five business days after the date of the Exercise Time, deliver to
the Purchaser a check payable to the Purchaser in lieu of such fractional
share in an amount equal to the difference between Market Price of such
fractional share as of the date of the Exercise Time and the Exercise Price
of such fractional share.
Section 2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES.
In order to prevent dilution of the rights granted under this Warrant, the
Exercise Price shall be subject to adjustment from time to time as provided
in this Section 2, and the number of shares of Common Stock obtainable upon
exercise of this Warrant shall be subject to adjustment from time to time
as provided in this Section 2.
A. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES UPON
ISSUANCE OF COMMON STOCK. If and whenever on or after the Date of Issuance
of this Warrant, the Company issues or sells, or in accordance with
paragraph 2B is deemed to have issued or sold, any share of Common Stock
for a consideration per share less than the Exercise Price in effect
immediately prior to such time, then immediately upon such issue or sale
the Exercise Price shall be reduced to the lowest net price per share (as
determined pursuant to paragraph 2B(v) below) at which such share of Common
Stock has been issued or sold or is deemed to have been issued or sold.
Upon each such adjustment of the Exercise Price hereunder, the number of
shares of Common acquirable upon exercise of this Warrant shall be adjusted
to the number of shares determined by multiplying the Exercise Price in
effect immediately prior to such adjustment by the number of shares of
Common acquirable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting
from such adjustment. Notwithstanding the foregoing, there shall be no
adjustment to the Exercise Price hereunder with respect to the granting of
stock options to employees or directors of the Company and its Subsidiaries
or the exercise thereof or the granting of stock appreciation rights,
phantom stock rights or other similar rights to employees or directors of
the Company for (or rights relating to) an aggregate of 1,586,702 shares of
Common Stock (976,594 options being currently outstanding) (as such number
of shares is equitably adjusted for subsequent stock splits, stock
combinations, stock dividends and recapitalizations and such number shall
include all stock options outstanding as of the date of the Purchase
Agreement).
B. EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes
of determining the adjusted Exercise Price under paragraph 2A, the
following shall be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any manner
grants or sells any Options and the lowest price per share for which any
one share of Common Stock is issuable upon the exercise of any such Option,
or upon conversion or exchange of any Convertible Security issuable upon
exercise of such Option, is less than the Exercise Price in effect
immediately prior to the time of the granting or sale of such Option, then
such share of Common Stock shall be deemed to have been issued and sold by
the Company at such time for such price per share. For purposes of this
paragraph, the "lowest price per share for which any one share of Common
Stock is issuable" shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect
to any one share of Common Stock upon the granting or sale of the Option,
upon exercise of the Option and upon conversion or exchange of the
Convertible Security. No further adjustment of the Exercise Price shall be
made upon the actual issue of such Common Stock or of such Convertible
Security upon the exercise of such Options or upon the actual issue of such
Common Stock upon conversion or exchange of such Convertible Security.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any
manner issues or sells any Convertible Security and the lowest price per
share for which any one share of Common Stock is issuable upon conversion
or exchange thereof is less than the Exercise Price in effect immediately
prior to the time of such issue or sale, then such share or shares of
Common Stock shall be deemed to have been issued and sold by the Company at
such time for such price per share. For the purposes of this paragraph,
the "lowest price per share for which any one share of Common Stock is
issuable" shall be equal to the sum of the lowest amounts of consideration
(if any) received or receivable by the Company with respect to any one
share of Common Stock upon the issuance of the Convertible Security and
upon the conversion or exchange of such Convertible Security. No further
adjustment of the Exercise Price shall be made upon the actual issue of
such Common Stock upon conversion or exchange of any Convertible Security,
and if any such issue or sale of such Convertible Security is made upon
exercise of any Options for which adjustments of the Exercise Price had
been or are to be made pursuant to other provisions of this Section 2, no
further adjustment of the Exercise Price shall be made by reason of such
issue or sale.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If the purchase
price provided for in any Options, the additional consideration, if any,
payable upon the issue, conversion or exchange of any Convertible
Securities, or the rate at which any Convertible Securities are convertible
into or exchangeable for Common Stock changes at any time, the Exercise
Price in effect at the time of such change shall be adjusted immediately to
the Exercise Price which would have been in effect at such time had such
Options or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or changed conversion
rate, as the case may be, at the time initially granted, issued or sold and
the number of shares of Common Stock issuable hereunder shall be
correspondingly adjusted; provided that if such adjustment would result in
an increase of the Exercise Price then in effect, such adjustment shall not
be effective until 30 days after written notice thereof has been given by
the Company to all holders of the Warrants. For purposes of this paragraph
2B, if the terms of any Option or Convertible Security which was
outstanding as of the date of issuance of this Warrant are changed in the
manner described in the immediately preceding sentence, then such Option or
Convertible Security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed to have been issued as of
the date of such change; provided that no such change shall at any time
cause the Exercise Price hereunder to be increased.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. Upon the expiration of any Option or the termination of any
right to convert or exchange any Convertible Securities without the
exercise of such Option or right, the Exercise Price then in effect shall
be adjusted immediately to the Exercise Price which would have been in
effect at the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
expiration or termination, never been issued; provided that if such
expiration or termination would result in an increase in the Exercise Price
then in effect, such increase shall not be effective until 30 days after
written notice thereof has been given to all holders of the Warrants. For
purposes of this paragraph 2B, the expiration or termination of any Option
or Convertible Security which was outstanding as of the date of issuance of
this Warrant shall not cause the Exercise Price hereunder to be adjusted
unless, and only to the extent that, a change in the terms of such Option
or Convertible Security caused it to be deemed to have been issued after
the date of issuance of this Warrant.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any Common Stock,
Options or Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be
deemed to be the net amount received by the Company therefor. In case any
Common Stock, Options or Convertible Securities are issued or sold for a
consideration other than cash, the amount of the consideration other than
cash received by the Company shall be the fair value of such consideration,
except where such consideration consists of securities, in which case the
amount of consideration received by the Company shall be the Market Price
thereof as of the date of receipt. In case any Common Stock, Options or
Convertible Securities are issued to the owners of the non-surviving entity
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 value of such portion of the net assets and business of the non-
surviving entity as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities shall be determined jointly by
the Company and the Registered Holders of Warrants representing a majority
of the shares of Common Stock obtainable upon exercise of such Warrants.
If such parties are unable to reach agreement within a reasonable period of
time, such fair value shall be determined by an appraiser jointly selected
by the Company and the Registered Holders of Warrants representing a
majority of the shares of Common Stock obtainable upon exercise of such
Warrants. The determination of such appraiser shall be final and binding
on the Company and the Registered Holders of the Warrants, and the fees and
expenses of such appraiser shall be paid by the Company.
(vi) INTEGRATED TRANSACTIONS. In case any Option is issued in
connection with the issue or sale of other securities of the Company,
together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the
Options shall be deemed to have been issued for consideration of $.01.
(vii) TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time does not include shares owned or held by or
for the account of the Company or any Subsidiary, and the disposition of
any shares so owned or held shall be considered an issue or sale of Common
Stock.
(viii) RECORD DATE. If the Company takes a record of the holders
of Common Stock for the purpose of entitling them (A) to receive a dividend
or other distribution payable in Common Stock, Options or in Convertible
Securities or (B) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date shall be deemed to be the
date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
C. SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company
at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding
shares of Common Stock into a greater number of shares, the Exercise Price
in effect immediately prior to such subdivision shall be proportionately
reduced and the number of shares of Common Stock obtainable upon exercise
of this Warrant shall be proportionately increased. If the Company at any
time combines (by reverse stock split or otherwise) one or more classes of
its outstanding shares of Common Stock into a smaller number of shares, the
Exercise Price in effect immediately prior to such combination shall be
proportionately increased and the number of shares of Common Stock
obtainable upon exercise of this Warrant shall be proportionately
decreased.
D. REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's
assets or other transaction, in each case which is effected in such a way
that the holders of Common Stock are entitled to receive (either directly
or upon subsequent liquidation) stock, securities or assets with respect to
or in exchange for Common Stock is referred to herein as "Organic Change."
Prior to the consummation of any Organic Change, the Company shall make
appropriate provision (in form and substance satisfactory to the Registered
Holders of the Warrants representing a majority of the Common Stock
obtainable upon exercise of all Warrants then outstanding) to insure that
each of the Registered Holders of the Warrants shall thereafter have the
right to acquire and receive, in lieu of or addition to (as the case may
be) the shares of Common Stock immediately theretofore acquirable and
receivable upon the exercise of such holder's Warrant, such shares of
stock, securities or assets as may be issued or payable with respect to or
in exchange for the number of shares of Common Stock immediately
theretofore acquirable and receivable upon exercise of such holder's
Warrant had such Organic Change not taken place. In any such case, the
Company shall make appropriate provision (in form and substance
satisfactory to the Registered Holders of the Warrants representing a
majority of the Common Stock obtainable upon exercise of all Warrants then
outstanding) with respect to such holders' rights and interests to insure
that the provisions of this Section 2 and Sections 3 and 4 hereof shall
thereafter be applicable to the Warrants (including, in the case of any
such consolidation, merger or sale in which the successor entity or
purchasing entity is other than the Company, an immediate adjustment of the
Exercise Price to the value for the Common Stock reflected by the terms of
such consolidation, merger or sale, and a corresponding immediate
adjustment in the number of shares of Common Stock acquirable and
receivable upon exercise of the Warrants, if the value so reflected is less
than the Exercise Price in effect immediately prior to such consolidation,
merger or sale). The Company shall not effect any such consolidation,
merger or sale, unless prior to the consummation thereof, the successor
entity (if other than the Company) resulting from consolidation or merger
or the entity purchasing such assets assumes by written instrument (in form
and substance satisfactory to the Registered Holders of Warrants
representing a majority of the Common Stock obtainable upon exercise of all
of the Warrants then outstanding), the obligation to deliver to each such
holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such holder may be entitled to acquire.
E. CERTAIN EVENTS. If any event occurs of the type
contemplated by the provisions of this Section 2 but not expressly provided
for by such provisions (including the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then
the Company's board of directors shall make an appropriate adjustment in
the Exercise Price and the number of shares of Common Stock obtainable upon
exercise of this Warrant so as to protect the rights of the holders of the
Warrants; provided that no such adjustment shall increase the Exercise
Price or decrease the number of shares of Common Stock obtainable as
otherwise determined pursuant to this Section 2.
F. NOTICES.
(i) Immediately upon any adjustment of the Exercise Price, the
Company shall give written notice thereof to the Registered Holder, setting
forth in reasonable detail and certifying the calculation of such
adjustment.
(ii) The Company shall give written notice to the Registered
Holder at least 20 days prior to the date on which the Company closes its
books or takes a record (A) with respect to any dividend or distribution
upon the Common Stock, (B) with respect to any pro rata subscription offer
to holders of Common Stock or (C) for determining rights to vote with
respect to any Organic Change, dissolution or liquidation.
(iii) The Company shall also give written notice to the Registered
Holders at least 20 days prior to the date on which any Organic Change,
dissolution or liquidation shall take place.
Section 3. LIQUIDATING DIVIDENDS. If the Company declares or
pays a dividend upon the Common Stock payable otherwise than in cash out of
earnings or earned surplus (determined in accordance with generally
accepted accounting principles, consistently applied) except for a stock
dividend payable in shares of Common Stock (a "Liquidating Dividend"), then
the Company shall pay to the Registered Holder of this Warrant at the time
of payment thereof the Liquidating Dividend which would have been paid to
such Registered Holder on the Common Stock had this Warrant been fully
exercised immediately prior to the date on which a record is taken for such
Liquidating Dividend, or, if no record is taken, the date as of which the
record holders of Common Stock entitled to such dividends are to be
determined.
Section 4. PURCHASE RIGHTS. If at any time the Company grants,
issues or sells any Options, Convertible Securities or rights to purchase
stock, warrants, securities or other property pro rata to the record
holders of any class of Common Stock (the "Purchase Rights"), then the
Registered holder of this Warrant shall be entitled to acquire, upon the
terms applicable to such Purchase Rights, the aggregate Purchase Rights
which such holder could have acquired if such holder had held the number of
shares of Common Stock acquirable upon complete exercise of this Warrant
immediately before the date on which a record is taken for the grant,
issuance or sale of such Purchase Rights, or, if no such record is taken,
the date as of which the record holders of Common Stock are to be
determined for the grant, issue or sale of such Purchase Rights.
Section 5. DEFINITIONS. The following terms have meanings set
forth below:
"COMMON STOCK" means the Company's Common Stock, $.015 par value,
and except for purposes of the shares obtainable upon exercise of this
Warrant, any capital stock of any class of the Company which is not limited
to a fixed sum or percentage of par or stated value in respect to the
rights of the holders thereof to participate in dividends or in the
distribution of assets upon any liquidation, dissolution or winding up of
the Company; provided that where such term refers to the security
receivable upon exercise of this Warrant and there is a change such that
the securities issuable upon exercise of this Warrant are issued by an
entity other than the Company or there is a change in the type or class of
securities so issuable, the term "Common Stock" shall mean one share of the
security issuable upon conversion of this Warrant if such security is
issuable in shares, or shall mean the smallest unit in which such security
is issuable if such security is not issuable in shares.
"CONVERTIBLE SECURITIES" means any stock or securities (directly
or indirectly) convertible into or exchangeable for Common Stock.
"FUNDAMENTAL CHANGE" has the meaning set forth in the Amendment.
"MARKET PRICE" means as to any security the average of the
closing prices of such security's sales on all domestic securities
exchanges on which such security may at the time be listed, or, if there
have been no sales on any such exchange on any day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of
such day, or, if on any day such security is not so listed, the average of
the representative bid and asked prices quoted in the NASDAQ System as of
4:00 P.M., New York time, on such day, or, if on any day such security is
not quoted in the NASDAQ System, the average of the highest bid and lowest
asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of 15 days
consisting of the day as of which "Market Price" is being determined and
the 14 consecutive business days prior to such day; provided that if such
security is listed on any domestic securities exchange the term "business
days" as used in this sentence means business days on which such exchange
is open for trading. If at any time such security is not listed on any
domestic securities exchange or quoted in the NASDAQ System or the domestic
over-the-counter market, the "Market Price" shall be the fair value thereof
determined jointly by the Company and the Registered Holders of Warrants
representing a majority of the Common Stock purchasable upon exercise of
all the Warrants then outstanding; provided that if such parties are unable
to reach agreement within a reasonable period of time, such fair value
shall be determined by an appraiser jointly selected by the Company and the
Registered Holders of Warrants representing a majority of the Common Stock
purchasable upon exercise of all the Warrants then outstanding. The
determination of such appraiser shall be final and binding on the Company
and the Registered Holders of the Warrants, and the fees and expenses of
such appraiser shall be paid by the Company.
"OPTIONS" means any rights or options to subscribe for or
purchase Common Stock or Convertible Securities.
"PERSON" means an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization and a government or any department or agency thereof.
Other capitalized terms used in this Warrant but not defined
herein shall have the meanings set forth in the Purchase Agreement.
Section 6. NO VOTING RIGHTS; LIMITATIONS OF LIABILITY. This
Warrant shall not entitle the holder hereof to any voting rights or other
rights as a stockholder of the Company. No provision hereof, in the
absence of affirmative action by the Registered Holder to purchase Common
Stock, and no enumeration herein of the rights or privileges of the
Registered Holder shall give rise to any liability of such holder for the
Exercise Price of Common Stock acquirable by exercise hereof or as a
stockholder of the Company.
Section 7. WARRANT TRANSFERABLE. Subject to the transfer
conditions referred to in the legend endorsed hereon, this Warrant and all
rights hereunder are transferable, in whole or in part, without charge to
the Registered Holder, upon surrender of this Warrant with a properly
executed Assignment (in the form of EXHIBIT II hereto) at the principal
office of the Company.
Section 8. WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS.
This Warrant is exchangeable, upon the surrender hereof by the Registered
Holder at the principal office of the Company, for new Warrants of like
tenor representing in the aggregate the purchase rights hereunder, and each
of such new Warrants shall represent such portion of such rights as is
designated by the Registered Holder at the time of such surrender. The
date the Company initially issues this Warrant shall be deemed to be the
"Date of Issuance" hereof regardless of the number of times new
certificates representing the unexpired and unexercised rights formerly
represented by this Warrant shall be issued. All Warrants representing
portions of the rights hereunder are referred to herein as the "Warrants."
Section 9. REPLACEMENT. Upon receipt of evidence reasonably
satisfactory to the Company (an affidavit of the Registered Holder shall be
satisfactory) of the ownership and the loss, theft, destruction or
mutilation of any certificate evidencing this Warrant, and in the case of
any such loss, theft or destruction, upon receipt of indemnity reasonably
satisfactory to the Company (provided that if the holder is a financial
institution or other institutional investor its own agreement shall be
satisfactory), or, in the case of any such mutilation upon surrender of
such certificate, the Company shall (at its expense) execute and deliver in
lieu of such certificate a new certificate of like kind representing the
same rights represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate.
Section 10. NOTICES. Except as otherwise expressly provided
herein, all notices referred to in this Warrant shall be given in
accordance with paragraph 7L of the Purchase Agreement.
Section 11. AMENDMENT AND WAIVER. Except as otherwise provided
herein, the provisions of the Warrants may be amended and the Company may
take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company has obtained the
written consent of the Registered Holders of Warrants representing a
majority of the shares of Common Stock obtainable upon exercise of the
Warrants; provided that no such action may change the Exercise Price of the
Warrants or the number of shares or class of stock obtainable upon exercise
of each Warrant without the written consent of the Registered Holders of
Warrants representing at least 66% of the shares of Common Stock obtainable
upon exercise of the Warrants.
Section 12. DESCRIPTIVE HEADINGS; GOVERNING LAW. The
descriptive headings of the several Sections and paragraphs of this Warrant
are inserted for convenience only and do not constitute a part of this
Warrant. The corporation laws of the State of Delaware shall govern all
issues concerning the relative rights of the Company and its Stockholders.
All other questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be governed by the internal law of the
State of New York, without giving effect to any choice of law or conflict
of law provision or rule (whether of the State of New York or any other
jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.
* * * * * *
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed and attested by its duly authorized officers under its corporate
seal and to be dated the Date of Issuance hereof.
ACC CORP.
By /s/ Michael R. Daley
Its EVP and CFO
[Corporate Seal]
Attest:
/s/ Francis D.R. Coleman
Title: Secretary
<PAGE>
EXHIBIT I
EXERCISE AGREEMENT
To: Dated:
The undersigned, pursuant to the provisions set forth in the
attached Warrant (Certificate No. CW-____), hereby agrees to subscribe for
the purchase of ______ shares of the Common Stock covered by such Warrant
and makes payment herewith in full therefor at the price per share provided
by such Warrant.
Signature ____________________
Address ______________________
EXHIBIT II
ASSIGNMENT
FOR VALUE RECEIVED, ______________________________ hereby sells,
assigns and transfers all of the rights of the undersigned under the
attached Warrant (Certificate No. CW-_____) with respect to the number of
shares of the Common Stock covered thereby set forth below, unto:
NAMES OF ASSIGNEE ADDRESS NO. OF SHARES
Signature ____________________
____________________
Witness ____________________
EXHIBIT 4-4
PROPOSED AMENDMENT TO ACC CORP. CERTIFICATE OF INCORPORATION
______________________
. . . . . . . . . .
ARTICLE FOUR
The total number of shares of stock which the Corporation shall have
authority to issue is 77,000,000 shares, divided into the following
classes: (1) 50,000,000 shares shall be Class A Common Stock having a par
value of $.015 per share; (2) 25,000,000 shares shall be Class B Common
Stock having a par value of $.015 per share; and (3) 2,000,000 shares shall
be Preferred Stock having a par value of $1.00 per share. The following is
a statement of the designations of the authorized classes of stock or any
series thereof, and the powers, preferences and relative, participating,
optional or other special rights and qualifications, limitations or
restrictions thereof, or of the authority of the Board of Directors to fix
by resolution(s) such designations and other terms:
CLASS A COMMON STOCK
Subject to all of the preferences and rights of both the Preferred
Stock or a series thereof and of the Class B Common Stock, all of which may
be fixed by resolution(s) of the Board of Directors, (i) dividends may be
paid on the Class A Common Stock of the Corporation as and when declared by
the Board of Directors, out of funds of the Corporation legally available
for the payment of such dividends, and (ii) each share of Class A Common
Stock shall be entitled to one vote on all matters on which such stock is
entitled to vote. The 50,000,000 shares of Common Stock, par value $.015
per share, previously authorized for issuance hereunder are hereby
redesignated as 50,000,000 shares of Class A Common Stock, and all
references in this Certificate of Incorporation to Common Stock are hereby
changed to refer to Class A Common Stock.
CLASS B COMMON STOCK
Subject to all of the preferences and rights of the Preferred Stock or
a series thereof that may be fixed by resolution(s) of the Board of
Directors, the Class B Common Stock shall have such preferences and
relative, participating, optional or other special rights, and
qualifications, limitations or restrictions thereof, as shall be
established in the resolution(s) providing for the issuance of such stock
adopted by the Board of Directors, EXCEPT THAT the shares of Class B Common
Stock shall not be entitled to vote on any matters brought before the
stockholders of the Corporation, nor shall the holders of the Class B
Common Stock be entitled to vote as a class upon any proposed increase or
decrease in the aggregate number of authorized shares of Class B Common
Stock.
PREFERRED STOCK
The shares of Preferred Stock may be issued from time to time in one
or more series. The Board of Directors is expressly authorized to fix by
resolution(s) the designation of each series of Preferred Stock and the
powers, preferences and relative, participating, optional or other special
rights and qualifications, limitations or restrictions thereof, including,
without limitation, such provisions as may be desired concerning the
dividend rights, the dividend rate, conversion rate, conversion rights,
voting rights, rights in terms of redemption (including sinking fund
provisions), the redemption price or prices, the liquidation preferences
and such other subjects or matters as may be fixed by resolution(s) of the
Board of Directors under the General Corporation Law of Delaware; and to
fix the number of shares constituting any such series, and to increase or
decrease the number of shares of any such series (but not below the number
of shares of any such series then outstanding). In the event that the
number of shares of any such series shall be so decreased, the shares
constituting such decrease shall resume the status that they had prior to
the adoption of the resolution(s) originally fixing the number of shares of
such series. All Preferred Stock of the same series shall be identical in
all respects, except for the dates from which dividends, if any, shall be
cumulative.
. . . . . . . . . .
EXHIBIT 4-5
PREFERRED STOCK TERMS
Section 1. DIVIDENDS.
A. GENERAL OBLIGATION. When and as declared by the
Corporation's Board of Directors and to the extent permitted under the
General Corporation Law of Delaware, the Corporation shall pay preferential
dividends in cash to the holders of the Series A Preferred Stock (the
"Series A Preferred") as provided in this Section 1. Except as otherwise
provided herein, dividends on each share of the Series A Preferred (a
"Share") shall accrue on a daily basis at the rate of 12% per annum of the
sum of the Liquidation Value thereof plus all accumulated and unpaid
dividends thereon from and including the date of issuance of such Share to
and including the first to occur of (i) the date on which the Liquidation
Value of such Share (plus all accrued and unpaid dividends thereon) is paid
to the holder thereof in connection with the liquidation of the Corporation
or the redemption of such Share by the Corporation, (ii) the date on which
such Share is converted into shares of Conversion Stock hereunder or (iii)
the date on which such share is otherwise acquired by the Corporation.
Such dividends shall accrue whether or not they have been declared and
whether or not there are profits, surplus or other funds of the Corporation
legally available for the payment of dividends. The date on which the
Corporation initially issues any Share shall be deemed to be its "date of
issuance" regardless of the number of times transfer of such Share is made
on the stock records maintained by or for the Corporation and regardless of
the number of certificates which may be issued to evidence such Share.
B. DIVIDEND REFERENCE DATES. To the extent not paid on March
31, June 30, September 30 and December 31 of each year, beginning June 30,
1995 (the "Dividend Reference Dates"), all dividends which have accrued on
each Share outstanding during the three-month period (or other period in
the case of the initial Dividend Reference Date) ending upon each such
Dividend Reference Date shall be accumulated and shall remain accumulated
dividends with respect to such Share until paid to the holder thereof.
C. DISTRIBUTION OF PARTIAL DIVIDEND PAYMENTS. Except as
otherwise provided herein, if at any time the Corporation pays less than
the total amount of dividends then accrued with respect to the Series A
Preferred, such payment shall be distributed pro rata among the holders
thereof based upon the number of Shares held by each such holder.
Section 2. LIQUIDATION.
Upon any liquidation, dissolution or winding up of the
Corporation (whether voluntary or involuntary), each holder of Series A
Preferred shall be entitled to be paid, before any distribution or payment
is made upon any Junior Securities, an amount in cash equal to the
aggregate Liquidation Value of all Shares held by such holder (plus all
accrued and unpaid dividends thereon), and the holders of Series A
Preferred shall not be entitled to any further payment. If upon any such
liquidation, dissolution or winding up of the Corporation the Corporation's
assets to be distributed among the holders of the Series A Preferred are
insufficient to permit payment to such holders of the aggregate amount
which they are entitled to be paid under this Section 2, then the entire
assets available to be distributed to the Corporation's stockholders shall
be distributed pro rata among such holders based upon the aggregate
Liquidation Value (plus all accrued and unpaid dividends) of the Series A
Preferred held by each such holder. Prior to the liquidation, dissolution
or winding up of the Corporation, the Corporation shall declare for payment
all accrued and unpaid dividends with respect to the Series A Preferred,
but only to the extent of funds of the Corporation legally available for
the payment of dividends. Not less than 60 days prior to the payment date
stated therein, the Corporation shall mail written notice of any such
liquidation, dissolution or winding up to each record holder of Series A
Preferred, setting forth in reasonable detail the amount of proceeds to be
paid with resect to each Share and each share of Common Stock in connection
with such liquidation, dissolution or winding up. Neither the
consolidation or merger of the Corporation into or with any other entity or
entities (whether or not the Corporation is the surviving entity), nor the
sale or transfer by the Corporation of all or any part of its assets, nor
the reduction of the capital stock of the Corporation nor any other form of
recapitalization or reorganization affecting the Corporation shall be
deemed to be a liquidation, dissolution or winding up of the Corporation
within the meaning of this Section 2.
Section 3. PRIORITY OF SERIES A PREFERRED ON DIVIDENDS AND
REDEMPTIONS.
So long as any Series A Preferred remains outstanding, without
the prior written consent of the holders of a majority of the outstanding
shares of Series A Preferred, the Corporation shall not, nor shall it
permit any Subsidiary to, redeem, purchase or otherwise acquire directly or
indirectly any Junior Securities, nor shall the Corporation directly or
indirectly pay or declare any dividend or make any distribution upon any
Junior Securities.
Section 4. REDEMPTIONS.
A. SCHEDULED REDEMPTION. On May 19, 2002 (the "Scheduled
Redemption Date"), the Corporation shall redeem all outstanding Shares of
Series A Preferred at a price per Share equal to the greater of (i) the
Liquidation Value thereof (plus accrued and unpaid dividends thereon) or
(ii) the Market Price of the Common Stock into which such Shares of Series
A Preferred (on the date which is five days prior to the Scheduled
Redemption Date) are convertible on the Schedule Redemption Date.
B. OPTIONAL REDEMPTIONS. The Corporation may at any time and
from time to time redeem all or any portion of the Shares of Series A
Preferred then outstanding; provided that the minimum number of shares
subject to such redemption shall be the lesser of 100 shares or the number
of shares outstanding as of such redemption. Upon any such redemption, the
Corporation shall pay a price per Share equal to the Liquidation Value
thereof (plus all accrued and unpaid dividends thereon).
C. REDEMPTION PAYMENTS. For each Share which is to be redeemed
hereunder, the Corporation shall be obligated on the Redemption Date to pay
to the holder thereof (upon surrender by such holder at the Corporation's
principal office of the certificate representing such Share) an amount in
cash equal to the Liquidation Value of such Share (plus all accrued and
unpaid dividends thereon); provided that, in the case of a redemption
pursuant to paragraph 4A, to the extent the amount in subparagraph 4A(ii)
exceeds the amount in subparagraph 4A(i), all or a portion of such excess
may, at the option of the Corporation's Board of Directors, be paid in the
form of Common Stock (valued at the Market Price of the Common Stock on the
date which is five trading days prior to the Scheduled Redemption Date) up
to and not exceeding a number of shares of Common Stock equal to 20
multiplied by the average daily trading volume of the Common Stock in the
public markets for a period of 45 consecutive trading days ending five days
prior to the Scheduled Redemption Date and the remainder shall be paid in
cash. Such shares of Common Stock shall be applied first to the repayment
of Liquidation Value, then to accrued but unpaid dividends. If the funds
of the Corporation legally available for redemption of Shares on the
Scheduled Redemption Date are insufficient to redeem the total number of
Shares to be redeemed on such date, those funds which are legally available
shall be used to redeem the maximum possible number of Shares pro rata
among the holders of the Shares to be redeemed based upon the aggregate
Liquidation Value of such Shares held by each such holder (plus all accrued
and unpaid dividends thereon). At any time thereafter when additional
funds of the Corporation are legally available for the redemption of
Shares, such funds shall immediately be used to redeem the balance of the
Shares which the Corporation has become obligated to redeem on the
Scheduled Redemption Date but which it has not redeemed. Prior to any
redemption of Series A Preferred, the Corporation shall declare for payment
all accrued and unpaid dividends with respect to the Shares which are to be
redeemed, but only to the extent of funds of the Corporation legally
available for the payment of dividends.
D. NOTICE OF REDEMPTION. Except as otherwise provided herein,
the Corporation shall mail written notice of each redemption of any Series
A Preferred (other than a redemption at the request of a holder or holders
of Series A Preferred) to each record holder thereof not more than 60 nor
less than 30 days prior to the date on which such redemption is to be made.
Upon mailing any notice of redemption which relates to a redemption at the
Corporation's option, the Corporation shall become obligated to redeem the
total number of Shares specified in such notice at the time of redemption
specified therein. In case fewer than the total number of Shares
represented by any certificate are redeemed, a new certificate representing
the number of unredeemed Shares shall be issued to the holder thereof
without cost to such holder within five business days after surrender of
the certificate representing the redeemed Shares.
E. DETERMINATION OF THE NUMBER OF EACH HOLDER'S SHARES TO BE
REDEEMED. Except as otherwise provided herein, the number of Shares of
Series A Preferred to be redeemed from each holder thereof in redemptions
hereunder shall be the number of Shares determined by multiplying the total
number of Shares to be redeemed times a fraction, the numerator of which
shall be the total number of Shares then held by such holder and the
denominator of which shall be the total number of Shares then outstanding.
F. DIVIDENDS AFTER REDEMPTION DATE. No Share shall be entitled
to any dividends accruing after the date on which the Liquidation Value of
such Share (plus all accrued and unpaid dividends thereon) is paid to the
holder of such Share. On such date, all rights of the holder of such Share
shall cease, and such Share shall no longer be deemed to be issued and
outstanding.
G. REDEEMED OR OTHERWISE ACQUIRED SHARES. Any Shares which are
redeemed or otherwise acquired by the Corporation shall be canceled and
retired to authorized but unissued shares and shall not be reissued, sold
or transferred.
H. OTHER REDEMPTIONS OR ACQUISITIONS. The Corporation shall
not, nor shall it permit any Subsidiary to, redeem or otherwise acquire any
Shares of Series A Preferred, except as expressly authorized herein or
pursuant to a purchase offer made pro rata to all holders of Series A
Preferred on the basis of the number of Shares owned by each such holder.
I. PAYMENT OF ACCRUED DIVIDENDS. Except as provided in
paragraph 4J, the Corporation may not redeem any Series A Preferred, unless
all dividends accrued on the outstanding Series A Preferred through the
immediately preceding Dividend Reference Date have been declared and paid
in full.
J. SPECIAL REDEMPTIONS.
(i) If a Change in Control has occurred or the Corporation
obtains knowledge that a Change in Control is proposed to occur, the
Corporation shall give prompt written notice of such Change in Control
describing in reasonable detail the material terms and date of consummation
thereof to each holder of Series A Preferred, but in any event such notice
shall not be given later than five days after the occurrence of such Change
in Control, and the Corporation shall give each holder of Series A
Preferred prompt written notice of any material change in the terms or
timing of such transaction. Any holder of Series A Preferred may require
the Corporation to redeem all or any portion of the Series A Preferred
owned by such holder or holders at a price per Share equal to the greater
of (1) the Liquidation Value thereof (plus all accrued and unpaid dividends
thereon), (2) the Market Price (as of the date which is five trading days
prior to the occurrence of such Change in Control) of the Common Stock into
which such Shares of Series A Preferred are convertible on such date or (3)
the value of the Common Stock into which such Shares of Series A Preferred
are convertible as of the consummation of the Change in Control reflected
by the Change in Control transaction, by giving written notice to the
Corporation of such election prior to the later of (a) 21 days after
receipt of the Corporation's notice and (b) five days prior to the
consummation of the Change in Control (the "Expiration Date"). The
Corporation shall give prompt written notice of any such election to all
other holders of Series A Preferred within five days after the receipt
thereof, and each such holder shall have until the later of (a) the
Expiration Date or (b) ten days after receipt of such second notice to
request redemption hereunder (by giving written notice to the Corporation)
of all or any portion of the Series A Preferred owned by such holder.
(ii) Upon receipt of such election(s), the Corporation shall be
obligated to redeem the aggregate number of Shares specified therein on the
occurrence of the Change in Control. If any proposed Change in Control
does not occur, all requests for redemption in connection therewith shall
be automatically rescinded, or if there has been a material change in the
terms or the timing of the transaction, any holder of Series A Preferred
may rescind such holder's request for redemption by giving written notice
of such rescission to the Corporation.
(iii) A "Change in Control" shall be deemed to have occurred at
such time as any of the following events shall occur: (a) any sale,
transfer or issuance or series of sales, transfers and/or issuances of
Common Stock by the Corporation or any holders thereof which results in any
Person or group of Persons (as the term "group" is used under the
Securities Exchange Act of 1934) owning more than 40% of the Common Stock
outstanding immediately after such sale, transfer or issuance or series of
sales, transfers and/or issuances or (b) during any 12-month period,
individuals who at the beginning of such period constituted the
Corporation's Board of Directors (together with any new directors whose
election by such Board of Directors or whose nomination for election by the
stockholders of the Corporation was approved by a majority vote of the
directors who were either directors at the beginning of such period or
whose election or nomination for election was previously so approved) cease
for any reason to constitute a majority of the Corporation's Board of
Directors then in office.
(iv) If a Fundamental Change is proposed to occur, the
Corporation shall give written notice of such Fundamental Change describing
in reasonable detail the material terms and date of consummation thereof to
each holder of Series A Preferred not more than 45 days nor less than 20
days prior to the consummation of such Fundamental Change, and the
Corporation shall give each holder of Series A Preferred prompt written
notice of any material change in the terms or timing of such transaction.
Any holder of Series A Preferred may require the Corporation to redeem all
or any portion of the Series A Preferred owned by such holder at a price
per Share equal to the greater of (1) Liquidation Value thereof (plus all
accrued and unpaid dividends thereon), (2) the Market Price (as of the date
which is five trading days prior to the occurrence of such Fundamental
Change) of the Common Stock into which such Shares of Series A Preferred
are convertible on such date or (3) the value of the Common Stock into
which such Shares of Series A Preferred are convertible as of the
consummation of the Fundamental Change reflected by the Fundamental Change
transaction, by giving written notice to the Corporation of such election
prior to the later of (a) ten days prior to the consummation of the
Fundamental Change or (b) ten days after receipt of notice from the
Corporation. The Corporation shall give prompt written notice of such
election to all other holders of Series A Preferred (but in any event
within five days prior to the consummation of the Fundamental Change), and
each such holder shall have until two days after the receipt of such notice
to request redemption (by written notice given to the Corporation) of all
or any portion of the Series A Preferred owned by such holder.
(v) Upon receipt of such election(s), the Corporation shall be
obligated to redeem the aggregate number of Shares specified therein upon
the consummation of such Fundamental Change. If any proposed Fundamental
Change does not occur, all requests for redemption in connection therewith
shall be automatically rescinded, or if there has been a material change in
the terms or the timing of the transaction, any holder of Series A
Preferred may rescind such holder's request for redemption by delivering
written notice thereof to the Corporation prior to the consummation of the
transaction.
(vi) The term "Fundamental Change" means (a) any sale or transfer
of more than 50% of the assets of the Corporation and its Subsidiaries on a
consolidated basis (measured either by book value in accordance with
generally accepted accounting principles consistently applied or by fair
market value determined in the reasonable good faith judgment of the
Corporation's Board of Directors) in any transaction or series of
transactions (other than sales in the ordinary course of business) and (b)
any merger or consolidation to which the Corporation is a party, except for
a merger in which the Corporation is the surviving corporation, the terms
of the Series A Preferred are not changed and the Series A Preferred is not
exchanged for cash, securities or other property, and after giving effect
to such merger, no Person or group of Persons (as the term "group" is used
under the Securities Act of 1934) owns more than 40% of the Common Stock
outstanding immediately after such merger.
Section 5. VOTING RIGHTS.
A. ELECTION OF DIRECTORS. So long as at least 3,300 Shares of
the Series A Preferred remain outstanding, in the election of directors of
the Corporation, the holders of the Series A Preferred, voting separately
as a single class to the exclusion of all other classes of the
Corporation's capital stock and with each Share of Series A Preferred
entitled to one vote, shall be entitled to elect one director to serve on
the Corporation's Board of Directors until his successor is duly elected by
the holders of the Series A Preferred or he is removed from office by the
holders of the Series A Preferred. If the holders of the Series A
Preferred for any reason fail to elect anyone to fill any such
directorship, such position shall remain vacant until such time as the
holders of the Series A Preferred elect a director to fill such position
and shall not be filled by resolution or vote of the Corporation's Board of
Directors or the Corporation's other stockholders.
B. OTHER VOTING RIGHTS. The holders of the Series A Preferred
shall be entitled to notice of all stockholders meetings in accordance with
the Corporation's bylaws, and the holders of the Series A Preferred shall
be entitled to vote on all matters submitted to the stockholders for a vote
together with the holders of the Common Stock voting together as a single
class with each share of Common Stock entitled to one vote per share and
each Share of Series A Preferred entitled to one vote for each share of
Common Stock issuable upon conversion of the Series A Preferred as of the
record date for such vote or, if no record date is specified, as of the
date of such vote.
Section 6. CONVERSION.
A. CONVERSION PROCEDURE.
(i) At any time and from time to time, any holder of Series A
Preferred may convert all or any portion of the Series A Preferred
(including any fraction of a Share) held by such holder into a number of
shares of Conversion Stock computed by multiplying the number of Shares to
be converted by $1,000 and dividing the result by the Conversion Price then
in effect.
(ii) Except as otherwise provided herein, each conversion of
Series A Preferred shall be deemed to have been effected as of the close of
business on the date on which the certificate or certificates representing
the Series A Preferred to be converted have been surrendered for conversion
at the principal office of the Corporation. At the time any such
conversion has been effected, the rights of the holder of the Shares
converted as a holder of Series A Preferred shall cease and the Person or
Persons in whose name or names any certificate or certificates for shares
of Conversion Stock are to be issued upon such conversion shall be deemed
to have become the holder or holders of record of the shares of Conversion
Stock represented thereby.
(iii) The conversion rights of any Share subject to redemption
hereunder shall terminate on the Redemption Date for such Share unless the
Corporation has failed to pay to the holder thereof the Liquidation Value
of such Share (plus all accrued and unpaid dividends thereon).
(iv) Notwithstanding any other provision hereof, if a conversion
of Series A Preferred is to be made in connection with a Public Offering, a
Change in Control, a Fundamental Change or other transaction affecting the
Corporation, the conversion of any Shares of Series A Preferred may, at the
election of the holder thereof, be conditioned upon the consummation of
such transaction, in which case such conversion shall not be deemed to be
effective until such transaction has been consummated.
(v) As soon as possible after a conversion has been effected
(but in any event within five business days in the case of subparagraph (a)
below), the Corporation shall deliver to the converting holder:
(a) a certificate or certificates representing the number
of shares of Conversion Stock issuable by reason of such conversion in
such name or names and such denomination or denominations as the
converting holder has specified; and
(b) a certificate representing any Shares of Series A
Preferred which were represented by the certificate or certificates
delivered to the Corporation in connection with such conversion but
which were not converted.
(vi) Upon conversion, the accrued and unpaid dividends on the
Series A Preferred being converted shall be extinguished and shall no
longer be deemed payable.
(vii) The issuance of certificates for shares of Conversion Stock
upon conversion of Series A Preferred shall be made without charge to the
holders of such Series A Preferred for any issuance tax in respect thereof
or other cost incurred by the Corporation in connection with such
conversion and the related issuance of shares of Conversion Stock. Upon
conversion of each Share of Series A Preferred, the Corporation shall take
all such actions as are necessary in order to insure that the Conversion
Stock issuable with respect to such conversion shall be validly issued,
fully paid and nonassessable, free and clear of all taxes, liens, charges
and encumbrances with respect to the issuance thereof.
(viii) The Corporation shall not close its books against the
transfer of Series A Preferred or of Conversion Stock issued or issuable
upon conversion of Series A Preferred in any manner which interferes with
the timely conversion of Series A Preferred. The Corporation shall assist
and cooperate with any holder of Shares required to make any governmental
filings or obtain any governmental approval prior to or in connection with
any conversion of Shares hereunder (including, without limitation, making
any filings required to be made by the Corporation).
(ix) The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Conversion Stock,
solely for the purpose of issuance upon the conversion of the Series A
Preferred, such number of shares of Conversion Stock issuable upon the
conversion of all outstanding Series A Preferred. All shares of Conversion
Stock which are so issuable shall, when issued, be duly and validly issued,
fully paid and nonassessable and free from all taxes, liens and charges.
The Corporation shall take all such actions as may be necessary to assure
that all such shares of Conversion Stock may be so issued without violation
of any applicable law or governmental regulation or any requirements of any
domestic securities exchange upon which shares of Conversion Stock may be
listed (except for official notice of issuance which shall be immediately
delivered by the Corporation upon each such issuance). The Corporation
shall not take any action which would cause the number of authorized but
unissued shares of Conversion Stock to be less than the number of such
shares required to be reserved hereunder for issuance upon conversion of
the Series A Preferred.
(x) If any fractional interest in a share of Conversion Stock
would, except for the provisions of this subparagraph, be delivered upon
any conversion of the Series A Preferred, the Corporation, in lieu of
delivering the fractional share therefor, shall pay an amount to the holder
thereof equal to the Market Price of such fractional interest as of the
date of conversion.
B. CONVERSION PRICE.
(i) The initial Conversion Price shall be $16.00. In order to
prevent dilution of the conversion rights granted under this Section 6, the
Conversion Price shall be subject to adjustment from time to time pursuant
to this paragraph 6B.
(ii) If and whenever the Corporation issues or sells, or in
accordance with paragraph 6C is deemed to have issued or sold, any share of
Common Stock for a consideration per share less than the Conversion Price
in effect immediately prior to such time, then immediately upon such issue
or sale or deemed issue or sale the Conversion Price shall be reduced to
the lowest net price per share (as determined pursuant to paragraph 6C(v)
below) at which any such share of Common Stock has been issued or sold or
is deemed to have been issued or sold.
(iii) Notwithstanding the foregoing, there shall be no adjustment
to the Conversion Price hereunder with respect to the granting of stock
options to employees or directors of the Corporation and its Subsidiaries
or the exercise thereof or the granting of stock appreciation rights,
phantom stock rights or other similar rights to employees or directors of
the Corporation for (or rights relating to) an aggregate of 1,596,702
shares of Common Stock (976,594 options being currently outstanding) (as
such number of shares is equitably adjusted for subsequent stock splits,
stock combinations, stock dividends and recapitalizations and such number
shall include all stock options outstanding as of the date of the Purchase
Agreement).
C. EFFECT ON CONVERSION PRICE OF CERTAIN EVENTS. For purposes
of determining the adjusted Conversion Price under paragraph 6B, the
following shall be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Corporation in any
manner grants or sells any Option and the lowest price per share for which
any one share of Common Stock is issuable upon the exercise of any such
Option, or upon conversion or exchange of any Convertible Security issuable
upon exercise of any such Option, is less than the Conversion Price in
effect immediately prior to the time of the granting or sale of such
Option, then such share of Common Stock shall be deemed to be outstanding
and to have been issued and sold by the Corporation at the time of the
granting or sale of such Option for such price per share. For purposes of
this paragraph, the "lowest price per share for which any one share of
Common Stock is issuable" shall be equal to the sum of the lowest amounts
of consideration (if any) received or receivable by the Corporation with
respect to any one share of Common Stock upon the granting or sale of the
Option, upon exercise of the Option and upon conversion or exchange of any
Convertible Security issuable upon exercise of such Option. No further
adjustment of the Conversion Price shall be made upon the actual issue of
such Common Stock or such Convertible Security upon the exercise of such
Options or upon the actual issue of such Common Stock upon conversion or
exchange of such Convertible Security.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Corporation in
any manner issues or sells any Convertible Security and the lowest price
per share for which any one share of Common Stock is issuable upon
conversion or exchange thereof is less than the Conversion Price in effect
immediately prior to the time of such issue or sale, then such share of
Common Stock shall be deemed to be outstanding and to have been issued and
sold by the Corporation at the time of the issuance or sale of such
Convertible Securities for such price per share. For the purposes of this
paragraph, the "lowest price per share for which any one share of Common
Stock is issuable" shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Corporation with
respect to any one share of Common Stock upon the issuance or sale of the
Convertible Security and upon the conversion or exchange of such
Convertible Security. No further adjustment of the Conversion Price shall
be made upon the actual issue of such Common Stock upon conversion or
exchange of any Convertible Security, and if any such issue or sale of such
Convertible Security is made upon exercise of any Options for which
adjustments of the Conversion Price had been or are to be made pursuant to
other provisions of this Section 6, no further adjustment of the Conversion
Price shall be made by reason of such issue or sale.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If the purchase
price provided for in any Option, the additional consideration (if any)
payable upon the issue, conversion or exchange of any Convertible Security
or the rate at which any Convertible Security is convertible into or
exchangeable for Common Stock changes at any time, the Conversion Price in
effect at the time of such change shall be adjusted immediately to the
Conversion Price which would have been in effect at such time had such
Option or Convertible Security originally provided for such changed
purchase price, additional consideration or conversion rate, as the case
may be, at the time initially granted, issued or sold. For purposes of
paragraph 6C, if the terms of any Option or Convertible Security which was
outstanding as of May 19, 1995 are changed in the manner described in the
immediately preceding sentence, then such Option or Convertible Security
and the Common Stock deemed issuable upon exercise, conversion or exchange
thereof shall be deemed to have been issued as of the date of such change;
provided that no such change shall at any time cause the Conversion Price
hereunder to be increased.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. Upon the expiration of any Option or the termination of any
right to convert or exchange any Convertible Security without the exercise
of any such Option or right, the Conversion Price then in effect hereunder
shall be adjusted immediately to the Conversion Price which would have been
in effect at the time of such expiration or termination had such Option or
Convertible Security, to the extent outstanding immediately prior to such
expiration or termination, never been issued; provided that if such
expiration or termination would result in an increase in the Conversion
Price then in effect, such increase shall not be effective until 30 days
after written notice thereof has been given to all holders of the Series A
Preferred. For purposes of paragraph 6C, the expiration or termination of
any Option or Convertible Security which was outstanding as of May 19, 1995
shall not cause the Conversion Price hereunder to be adjusted unless, and
only to the extent that, a change in the terms of such Option or
Convertible Security caused it to be deemed to have been issued after such
date.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any Common Stock,
Option or Convertible Security is issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be
deemed to be the amount received by the Corporation therefor (net of
discounts, commissions and related expenses). If any Common Stock, Option
or Convertible Security is issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by the
Corporation shall be the fair value of such consideration, except where
such consideration consists of securities, in which case the amount of
consideration received by the Corporation shall be the Market Price thereof
as of the date of receipt. If any Common Stock, Option or Convertible
Security is issued to the owners of the non-surviving entity in connection
with any merger in which the Corporation is the surviving corporation, the
amount of consideration therefor shall be deemed to be the fair value of
such portion of the net assets and business of the non-surviving entity as
is attributable to such Common Stock, Option or Convertible Security, as
the case may be. The fair value of any consideration other than cash and
securities shall be determined jointly by the Corporation and the holders
of a majority of the outstanding Series A Preferred. If such parties are
unable to reach agreement within a reasonable period of time, the fair
value of such consideration shall be determined by an independent appraiser
experienced in valuing such type of consideration jointly selected by the
Corporation and the holders of a majority of the outstanding Series A
Preferred. The determination of such appraiser shall be final and binding
upon the parties, and the fees and expenses of such appraiser shall be
borne by the Corporation.
(vi) INTEGRATED TRANSACTIONS. In case any Option is issued in
connection with the issue or sale of other securities of the Corporation,
together comprising one integrated transaction in which no specific
consideration is allocated to such Option by the parties thereto, the
Option shall be deemed to have been issued for a consideration of $.01.
(vii) TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or
for the account of the Corporation or any Subsidiary, and the disposition
of any shares so owned or held shall be considered an issue or sale of
Common Stock.
(viii) RECORD DATE. If the Corporation takes a record of the
holders of Common Stock for the purpose of entitling them (a) to receive a
dividend or other distribution payable in Common Stock, Options or in
Convertible Securities or (b) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date shall be deemed to
be the date of the issue or sale of the shares of Common Stock deemed to
have been issued or sold upon the declaration of such dividend or upon the
making of such other distribution or the date of the granting of such right
of subscription or purchase, as the case may be.
D. SUBDIVISION OR COMBINATION OF COMMON STOCK. If the
Corporation at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding
shares of Common Stock into a greater number of shares, the Conversion
Price in effect immediately prior to such subdivision shall be
proportionately reduced, and if the Corporation at any time combines (by
reverse stock split or otherwise) one or more classes of its outstanding
shares of Common Stock into a smaller number of shares, the Conversion
Price in effect immediately prior to such combination shall be
proportionately increased.
E. REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the
Corporation's assets or other transaction, in each case which is effected
in such a manner that the holders of Common Stock are entitled to receive
(either directly or upon subsequent liquidation) stock, securities or
assets with respect to or in exchange for Common Stock, is referred to
herein as an "Organic Change". Prior to the consummation of any Organic
Change, the Corporation shall make appropriate provisions (in form and
substance satisfactory to the holders of a majority of the Series A
Preferred then outstanding) to insure that each of the holders of Series A
Preferred shall thereafter have the right to acquire and receive, in lieu
of or in addition to (as the case may be) the shares of Conversion Stock
immediately theretofore acquirable and receivable upon the conversion of
such holder's Series A Preferred, such shares of stock, securities or
assets as such holder would have received in connection with such Organic
Change if such holder had converted its Series A Preferred immediately
prior to such Organic Change. In each such case, the Corporation shall
also make appropriate provisions (in form and substance satisfactory to the
holders of a majority of the Series A Preferred then outstanding) to insure
that the provisions of this Section 6 and Sections 7 and 8 hereof shall
thereafter be applicable to the Series A Preferred (including, in the case
of any such consolidation, merger or sale in which the successor entity or
purchasing entity is other than the Corporation, an immediate adjustment of
the Conversion Price to the value for the Common Stock reflected by the
terms of such consolidation, merger or sale, and a corresponding immediate
adjustment in the number of shares of Conversion Stock acquirable and
receivable upon conversion of Series A Preferred, if the value so reflected
is less than the Conversion Price in effect immediately prior to such
consolidation, merger or sale). The Corporation shall not effect any such
consolidation, merger or sale, unless prior to the consummation thereof,
the successor entity (if other than the Corporation) resulting from
consolidation or merger or the entity purchasing such assets assumes by
written instrument (in form and substance satisfactory to the holders of a
majority of the Series A Preferred then outstanding), the obligation to
deliver to each such holder such shares of stock, securities or assets as,
in accordance with the foregoing provisions, such holder may be entitled to
acquire.
F. CERTAIN EVENTS. If any event occurs of the type
contemplated by the provisions of this Section 6 but not expressly provided
for by such provisions (including the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then
the Corporation's Board of Directors shall make an appropriate adjustment
in the Conversion Price so as to protect the rights of the holders of
Series A Preferred; provided that no such adjustment shall increase the
Conversion Price as otherwise determined pursuant to this Section 6 or
decrease the number of shares of Conversion Stock issuable upon conversion
of each Share of Series A Preferred.
G. NOTICES.
(i) Immediately upon any adjustment of the Conversion Price, the
Corporation shall give written notice thereof to all holders of Series A
Preferred, setting forth in reasonable detail and certifying the
calculation of such adjustment.
(ii) The Corporation shall give written notice to all holders of
Series A Preferred at least 20 days prior to the date on which the
Corporation closes its books or takes a record (a) with respect to any
dividend or distribution upon Common Stock, (b) with respect to any pro
rata subscription offer to holders of Common Stock or (c) for determining
rights to vote with respect to any Organic Change, dissolution or
liquidation.
(iii) The Corporation shall also give written notice to the
holders of Series A Preferred at least 20 days prior to the date on which
any Organic Change shall take place.
H. MANDATORY CONVERSION. All of the Shares of issued and
outstanding Series A Preferred will be automatically converted to Common
Stock at the Conversion Price then in effect without any further action on
the part of the Corporation or the holders thereof if, at any time after
May 19, 1997, (i) the daily trading volume of the Common Stock in the
public markets exceeds 5% of the number of shares of Common Stock issuable
upon conversion of all Shares of Series A Preferred for each of 45
consecutive trading days, (ii) no holder of Series A Preferred is subject
to any underwriters lockup agreement restricting the transferability of the
shares of Conversion Stock issuable upon conversion of such Series A
Preferred and (iii) the Market Price of the Common Stock on any of the
anniversary dates of the issuance of the Notes set forth below equals or
exceeds the corresponding price set forth below (subject to adjustment for
stock splits, stock consolidations and stock dividends):
2nd Anniversary $32.00
3rd Anniversary $32.00
4th Anniversary $39.06
5th Anniversary $39.81
6th Anniversary $47.78
7th Anniversary $57.33
In the event that any measurement of the market price of the
Common Stock is to occur on a date between two anniversary dates, the share
price amounts above shall be prorated (based upon the number of days
elapsed between such anniversary dates).
Section 7. LIQUIDATING DIVIDENDS.
If the Corporation declares or pays a dividend upon the Common
Stock payable otherwise than in cash out of earnings or earned surplus
(determined in accordance with generally accepted accounting principles,
consistently applied) except for a stock dividend payable in shares of
Common Stock (a "Liquidating Dividend"), then the Corporation shall pay to
the holders of Series A Preferred at the time of payment thereof the
Liquidating Dividends which would have been paid on the shares of
Conversion Stock had such Series A Preferred been converted immediately
prior to the date on which a record is taken for such Liquidating Dividend,
or, if no record is taken, the date as of which the record holders of
Common Stock entitled to such dividends are to be determined.
Section 8. PURCHASE RIGHTS.
If at any time the Corporation grants, issues or sells any
Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (the "Purchase Rights"), then each holder of Series A
Preferred shall be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such holder could have
acquired if such holder had held the number of shares of Conversion Stock
acquirable upon conversion of such holder's Series A Preferred immediately
before the date on which a record is taken for the grant, issuance or sale
of such Purchase Rights, or if no such record is taken, the date as of
which the record holders of Common Stock are to be determined for the
grant, issue or sale of such Purchase Rights.
Section 9. EVENTS OF NONCOMPLIANCE.
A. DEFINITION. An Event of Noncompliance shall have occurred
if:
(i) the Corporation fails to make any redemption payment with
respect to the Series A Preferred which it is required to make hereunder,
whether or not such payment is legally permissible or is prohibited by any
agreement to which the Corporation is subject, and such failure is not
cured within 5 days after the occurrence thereof;
(ii) the Corporation breaches or otherwise fails to perform or
observe any other material covenant or agreement set forth herein or in the
Purchase Agreement, and such failure is not cured within 30 days after the
earlier of (A) the receipt of notice thereof by the holders of the Series A
Preferred or (B) the discovery thereof by the Corporation;
(iii) any representation or warranty contained in the Purchase
Agreement or required to be furnished to any holder of Series A Preferred
pursuant to the Purchase Agreement, is false or misleading in any material
respect on the date made or furnished and such false or misleading
representation, warranty or information relates to a material adverse
effect on the Corporation and its Subsidiaries, taken as a whole, or fails
to disclose a material adverse change on the Corporation and its
Subsidiaries, taken as a whole; provided that, notwithstanding the
foregoing, in the case of paragraph 5J of the Purchase Agreement, any
occurrence, event, transaction or claim which results in any loss, damage
or injury to the Corporation and its Subsidiaries in excess of $4,000,000
shall conclusively be deemed to have material adverse effect and be a
material adverse change hereunder;
(iv) the Corporation or any Subsidiary makes an assignment for
the benefit of creditors or admits in writing its inability to pay its
debts generally as they become due; or an order, judgment or decree is
entered adjudicating the Corporation or any Material Subsidiary bankrupt or
insolvent; or any order for relief with respect to the Corporation or any
Material Subsidiary is entered under the Federal Bankruptcy Code; or the
Corporation or any Material Subsidiary petitions or applies to any tribunal
for the appointment of a custodian, trustee, receiver or liquidator of the
Corporation or any Material Subsidiary or of any substantial part of the
assets of the Corporation or any Material Subsidiary, or commences any
proceeding (other than a proceeding for the voluntary liquidation and
dissolution of a Subsidiary) relating to the Corporation or any Material
Subsidiary under any bankruptcy, reorganization, arrangement, insolvency,
readjustment of debt, dissolution or liquidation law of any jurisdiction;
or any such petition or application is filed, or any such proceeding is
commenced, against the Corporation or any Material Subsidiary and either
(a) the Corporation or any such Material Subsidiary by any act indicates
its approval thereof, consent thereto or acquiescence therein or (b) such
petition, application or proceeding is not dismissed within 60 days;
(v) a judgment in excess of $500,000 is rendered against the
Corporation or any Material Subsidiary and, within 60 days after entry
thereof, such judgment is not discharged or execution thereof stayed
pending appeal, or within 60 days after the expiration of any such stay,
such judgment is not discharged; or
(vi) the Corporation or any Material Subsidiary defaults in the
performance of any obligation or agreement if the effect of such default is
to cause an amount exceeding $500,000 to become due prior to its stated
maturity or to permit the holder or holders of any obligation to cause an
amount exceeding $500,000 to become due prior to its stated maturity.
The foregoing shall constitute Events of Noncompliance whatever the
reason or cause for any such Event of Noncompliance and whether it is
voluntary or involuntary or is effected by operation of law or pursuant to
any judgment, decree or order of any court or any order, rule or regulation
of any administrative or governmental body.
B. CONSEQUENCES OF EVENTS OF NONCOMPLIANCE.
(i) If an Event of Noncompliance of the type described in
subparagraph 9A(i), 9A(ii) or 9A(iii) (with respect to paragraphs 5J and 5X
of the Purchase agreement only) has occurred and is continuing, the
dividend rate on the Series A Preferred shall increase immediately to 15%.
Any increase of the dividend rate resulting from the operation of this
subparagraph shall terminate as of the close of business on the date on
which no Event of Noncompliance of the type described in subparagraph 9A(i)
or 9A(ii) exists, subject to subsequent increases pursuant to this
paragraph.
(ii) If any Event of Noncompliance of the type described in
subparagraph 9A(i), 9A(ii) or 9A(iii) (with respect to paragraphs 5J and 5X
of the Purchase Agreement only) has occurred, the Conversion Price on the
Series A Preferred shall be reduced immediately by 1/3 of the Conversion
Price in effect immediately prior to such adjustment. In no event shall
such Conversion Price adjustment be rescinded, and in no event shall there
be more than one adjustment pursuant to this subparagraph.
(iii) If an Event of Noncompliance (other than an Event of
Noncompliance of the type described in subparagraph 9A(iv)) has occurred
and is continuing, the holder or holders of a majority of the Series A
Preferred then outstanding may demand (by written notice delivered to the
Corporation) immediate redemption of all or any portion of the Series A
Preferred owned by such holder or holders at a price per Share equal to the
Liquidation Value thereof (plus all accrued and unpaid dividends thereon).
The Corporation shall give prompt written notice of such election to the
other holders of Series A Preferred (but in any event within five days
after receipt of the initial demand for redemption), and each such other
holder may demand immediate redemption of all or any portion of such
holder's Series A Preferred by giving written notice thereof to the
Corporation within seven days after receipt of the Corporation's notice.
The Corporation shall redeem all Series A Preferred as to which rights
under this paragraph have been exercised within 15 days after receipt of
the initial demand for redemption. The amounts payable hereunder with
respect to the Series A Preferred shall be the greater of (1) the
Liquidation Value of such Series A Preferred and (2) the Market Price (on
the date which is five trading days prior to the date of payment) of the
Common Stock into which such Series A Preferred is convertible; provided
that to the extent the amount in clause (2) above exceeds the amount in
clause (1) above, all or a portion of such excess may, at the option of the
Corporation's Board of Directors, be paid in the form of Common Stock
(valued at the Market Price of the Common Stock on such date) up to and not
exceeding a number of shares of Common Stock equal to 20 multiplied by the
average daily trading volume of the Common Stock in the public markets for
a period of 45 consecutive trading days ending on such date and the
remainder shall be paid in cash.
(iv) If an Event of Noncompliance of the type described in
subparagraph 9A(iv) has occurred, all of the Series A Preferred then
outstanding shall be subject to immediate redemption by the Corporation
(without any action on the part of the holders of the Series A Preferred)
at a price per Share equal to the Liquidation Value thereof (plus all
accrued and unpaid dividends thereon). The Corporation shall immediately
redeem all Series A Preferred upon the occurrence of such Event of
Noncompliance.
(v) If any Event of Noncompliance exists, each holder of Series
A Preferred shall also have any other rights which such holder is entitled
to under any contract or agreement at any time and any other rights which
such holder may have pursuant to applicable law.
Section 10. REGISTRATION OF TRANSFER.
The Corporation shall keep at its principal office a register for
the registration of Series A Preferred. Upon the surrender of any
certificate representing Series A Preferred at such place, the Corporation
shall, at the request of the record holder of such certificate, execute and
deliver (at the Corporation's expense) a new certificate or certificates in
exchange therefor representing in the aggregate the number of Shares
represented by the surrendered certificate. Each such new certificate
shall be registered in such name and shall represent such number of Shares
as is requested by the holder of the surrendered certificate and shall be
substantially identical in form to the surrendered certificate, and
dividends shall accrue on the Series A Preferred represented by such new
certificate from the date to which dividends have been fully paid on such
Series A Preferred represented by the surrendered certificate.
Section 11. REPLACEMENT.
Upon receipt of evidence reasonably satisfactory to the
Corporation (an affidavit of the registered holder shall be satisfactory)
of the ownership and the loss, theft, destruction or mutilation of any
certificate evidencing Shares of Series A Preferred, and in the case of any
such loss, theft or destruction, upon receipt of indemnity reasonably
satisfactory to the Corporation (provided that if the holder is a financial
institution or other institutional investor its own agreement shall be
satisfactory), or, in the case of any such mutilation upon surrender of
such certificate, the Corporation shall (at its expense) execute and
deliver in lieu of such certificate a new certificate of like kind
representing the number of Shares of such class represented by such lost,
stolen, destroyed or mutilated certificate and dated the date of such lost,
stolen, destroyed or mutilated certificate, and dividends shall accrue on
the Series A Preferred represented by such new certificate from the date to
which dividends have been fully paid on such lost, stolen, destroyed or
mutilated certificate.
Section 12. DEFINITIONS.
"CHANGE IN CONTROL" has the meaning set forth in paragraph 4J
hereof.
"COMMON STOCK" means, collectively, the Corporation's Common
Stock, par value $.015, and any capital stock of any class of the
Corporation which is not limited to a fixed sum or percentage of par or
stated value in respect to the rights of the holders thereof to participate
in dividends or in the distribution of assets upon any liquidation,
dissolution or winding up of the Corporation.
"CONVERSION STOCK" means shares of the Corporation's Common
Stock, par value $.015 per share; provided that if there is a change such
that the securities issuable upon conversion of the Series A Preferred are
issued by an entity other than the Corporation or there is a change in the
type or class of securities so issuable, then the term "Conversion Stock"
shall mean one share of the security issuable upon conversion of the Series
A Preferred if such security is issuable in shares, or shall mean the
smallest unit in which such security is issuable if such security is not
issuable in shares.
"CONVERTIBLE SECURITIES" means any stock or securities (other
than Options) directly or indirectly convertible into or exchangeable for
Common Stock.
"FUNDAMENTAL CHANGE" has the meaning set forth in paragraph 4J
hereof.
"JUNIOR SECURITIES" means any capital stock or other equity
securities of the Corporation, except for the Series A Preferred.
"LIQUIDATION VALUE" of any Share as of any particular date shall
be equal to $1,000.
"MARKET PRICE" of any publicly traded security means the average
of the closing prices of such security's sales on all securities exchanges
on which such security may at the time be listed, or, if there has been no
sales on any such exchange on any day, the average of the highest bid and
lowest asked prices on all such exchanges at the end of such day, or, if on
any day such security is not so listed, the average of the representative
bid and asked prices quoted in the NASDAQ System as of 4:00 P.M., New York
time, or, if on any day such security is not quoted in the NASDAQ System,
the average of the highest bid and lowest asked prices on such day in the
domestic over-the-counter market as reported by the National Quotation
Bureau, Incorporated, or any similar successor organization, in each such
case averaged over a period of 15 days consisting of the day as of which
"Market Price" is being determined and the 14 consecutive business days
prior to such day. "MARKET PRICE" of any security which is not publicly
traded means the fair value of such security determined jointly by the
Corporation and the holders of a majority of the Series A Preferred;
provided that if such parties are unable to reach agreement within a
reasonable period of time, such fair value shall be determined by an
independent appraiser experienced in valuing securities jointly selected by
the Corporation and the holders of a majority of the Series A Preferred
without application of any minority or blockage discounts. The
determination of such appraiser shall be final and binding upon the
parties, and the Corporation shall pay the fees and expenses of such
appraiser.
"OPTIONS" means any rights, warrants or options to subscribe for
or purchase Common Stock or Convertible Securities.
"PERSON" means an individual, a partnership, a corporation, a
limited liability company, a limited liability, an association, a joint
stock company, a trust, a joint venture, an unincorporated organization and
a governmental entity or any department, agency or political subdivision
thereof.
"PUBLIC OFFERING" means any offering by the Corporation of its
capital stock or equity securities to the public pursuant to an effective
registration statement under the Securities Act of 1933, as then in effect,
or any comparable statement under any similar federal statute then in
force.
"PURCHASE AGREEMENT" means the Note and Warrant Purchase
Agreement, dated as of May 19, 1995 by and among the Corporation and
certain investors, as such agreement may from time to time be amended in
accordance with its terms.
"REDEMPTION DATE" as to any Share means the date specified in the
notice of any redemption at the Corporation's option or the applicable date
specified herein in the case of any other redemption; provided that no such
date shall be a Redemption Date unless the Liquidation Value of such Share
(plus all accrued and unpaid dividends thereon and any required premium
with respect thereto) is actually paid in full on such date, and if not so
paid in full, the Redemption Date shall be the date on which such amount is
fully paid.
"SUBSIDIARY" means, with respect to any Person, any corporation,
limited liability company, partnership, association or other business
entity of which (i) if a corporation, a majority of the total voting power
of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by that
Person or one or more of the other Subsidiaries of that Person or a
combination thereof, or (ii) if a limited liability company, partnership,
association or other business entity, a majority of the partnership or
other similar ownership interest thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes hereof,
a Person or Persons shall be deemed to have a majority ownership interest
in a limited liability company, partnership, association or other business
entity if such Person or Persons shall be allocated a majority of limited
liability company, partnership, association or other business entity gains
or losses or shall be or control any managing director or general partner
of such limited liability company, partnership, association or other
business entity.
Section 13. AMENDMENT AND WAIVER.
No amendment, modification or waiver shall be binding or
effective with respect to any provision of Sections 1 to 14 hereof without
the prior written consent of the holders of a majority of the Series A
Preferred outstanding at the time such action is taken; provided that no
such action shall change (a) the rate at which or the manner in which
dividends on the Series A Preferred accrue or the times at which such
dividends become payable or the amount payable on redemption of the Series
A Preferred or the times at which redemption of Series A Preferred is to
occur, without the prior written consent of the holders of at least 66% of
the Series A Preferred then outstanding, (b) the Conversion Price of the
Series A Preferred or the number of shares or class of stock into which the
Series A Preferred is convertible, without the prior written consent of the
holders of at least 66% of the Series A Preferred then outstanding or (c)
the percentage required to approve any change described in clauses (a) and
(b) above, without the prior written consent of the holders of at least 66%
of the Series A Preferred then outstanding; and provided further that no
change in the terms hereof may be accomplished by merger or consolidation
of the Corporation with another corporation or entity unless the
Corporation has obtained the prior written consent of the holders of the
applicable percentage of the Series A Preferred then outstanding.
Section 14. NOTICES. Except as otherwise provided hereunder,
all notices referred to herein shall be in writing and shall be deemed to
have been given when delivered personally to the recipient, sent to the
recipient by reputable overnight carrier service (charges prepaid) or five
days after being mailed to the recipient by certified or registered mail,
return receipt requested and postage prepaid. Such notices, demands and
other communications shall be sent (i) to the Corporation, at its principal
executive offices and (ii) to any stockholder, at such holder's address as
it appears in the stock records of the Corporation (unless otherwise
indicated by any such holder).
EXHIBIT 4-6
ACC CORP.
REGISTRATION AGREEMENT
THIS AGREEMENT is made as of May 22, 1995, between ACC Corp., a
Delaware corporation (the "Company"), Fleet Venture Resources, Inc. ("Fleet
Venture"), Fleet Equity Partners VI, L.P. ("Fleet Equity") and Chisholm
Partners II, L.P. ("Chisholm").
The parties to this Agreement are parties to a Note and Warrant
Purchase Agreement of even date herewith (the "Purchase Agreement"). In
order to induce Fleet Venture, Fleet Equity and Chisholm (the "Investors")
to enter into the Purchase Agreement, the Company has agreed to provide the
registration rights set forth in this Agreement. The execution and
delivery of this Agreement is a condition to the Closing under the Purchase
Agreement. Unless otherwise provided in this Agreement, capitalized terms
used herein shall have the meanings set forth in paragraph 8 hereof.
The parties hereto agree as follows:
1. DEMAND REGISTRATIONS.
(a) REQUESTS FOR REGISTRATION. At any time, the holders of a
majority of the Registrable Securities may request registration under the
Securities Act of all or any portion of their Registrable Securities on
Form S-1 or any similar long-form registration ("Long-Form Registrations"),
and the holders of a majority of the Registrable Securities may request
registration under the Securities Act of all or any portion of their
Registrable Securities on Form S-2 or S-3 or any similar short-form
registration ("Short-Form Registrations") if available. All registrations
requested pursuant to this paragraph 1(a) are referred to herein as "Demand
Registrations". Each request for a Demand Registration shall specify the
approximate number of Registrable Securities requested to be registered and
the anticipated per share price range for such offering. Within ten days
after receipt of any such request, the Company shall give written notice of
such requested registration to all other holders of Registrable Securities
and shall include in such registration all Registrable Securities with
respect to which the Company has received written requests for inclusion
therein within 15 days after the receipt of the Company's notice.
(b) LONG-FORM REGISTRATIONS. The holders of Registrable
Securities shall be entitled to request two Long-Form Registrations in
which the Company shall pay all Registration Expenses; provided that the
aggregate offering value of the Registrable Securities requested to be
registered in any Long-Form Registration must equal at least $7,500,000. A
registration shall not count as one of the permitted Long-Form
Registrations until it has become effective; provided that in any event the
Company shall pay all Registration Expenses in connection with any
registration initiated as a Long-Form Registration whether or not it has
become effective. All Long-Form Registrations shall be underwritten
registrations.
(c) SHORT-FORM REGISTRATIONS. In addition to the Long-Form
Registrations provided pursuant to paragraph 1(b), the holders of the
Registrable Securities shall be entitled to request five Short-Form
Registrations in which the Company shall pay all Registration Expenses;
provided that the aggregate offering value of the Registrable Securities
requested to be registered in any Short-Form Registration must equal at
least $5,000,000. Demand Registrations shall be Short-Form Registrations
whenever the Company is permitted to use any applicable short form. The
Company shall use its best efforts to make Short-Form Registrations
available for the sale of Registrable Securities. A registration shall not
count as one of the permitted Short-Form Registrations until it has become
effective; provided that in any event the Company shall pay all
Registration Expenses in connection with any registration initiated as a
Short-Form Registration whether or not it has become effective.
(d) PRIORITY ON DEMAND REGISTRATIONS. The Company shall not
include in any Demand Registration any securities which are not Registrable
Securities without the prior written consent of the holders of a majority
of the Registrable Securities included in such registration. If a Demand
Registration is an underwritten offering and the managing underwriters
advise the Company in writing that in their opinion the number of
Registrable Securities and, if permitted hereunder, other securities
requested to be included in such offering exceeds the number of Registrable
Securities and other securities, if any, which can be sold in an orderly
manner in such offering within a price range acceptable to the holders of a
majority of the Registrable Securities initially requesting registration,
the Company shall include in such registration prior to the inclusion of
any securities which are not Registrable Securities the number of
Registrable Securities requested to be included which in the opinion of
such underwriters can be sold in an orderly manner within the price range
of such offering, pro rata among the respective holders thereof on the
basis of the amount of Registrable Securities owned by each such holder.
Any Persons other than holders of Registrable Securities who participate in
Demand Registrations which are not at the Company's expense must pay their
share of the Registration Expenses as provided in paragraph 5 hereof.
(e) RESTRICTIONS ON LONG-FORM REGISTRATIONS. The Company shall
not be obligated to effect any Long-Form Registration within 180 days after
the effective date of a previous Long-Form Registration.
(f) SELECTION OF UNDERWRITERS. The holders of a majority of the
Registrable Securities included in any Demand Registration shall have the
right to select the investment banker(s) and manager(s) to administer the
offering, subject to the Company's approval which shall not be unreasonably
withheld.
2. PIGGYBACK REGISTRATIONS.
(a) RIGHT TO PIGGYBACK. Whenever the Company proposes to
register any of its securities under the Securities Act (other than
pursuant to a Demand Registration and other than for employee benefit
plans, stock purchase plan, or shares issuable upon conversion of
Convertible Securities) and the registration form to be used may be used
for the registration of Registrable Securities (a "Piggyback
Registration"), the Company shall give prompt written notice (in any event
within three business days after its receipt of notice of any exercise of
demand registration rights other than under this Agreement) to all holders
of Registrable Securities of its intention to effect such a registration
and shall include in such registration all Registrable Securities with
respect to which the Company has received written requests for inclusion
therein within 20 days after the receipt of the Company's notice.
(b) PIGGYBACK EXPENSES. The Registration Expenses of the
holders of Registrable Securities shall be paid by the Company in all
Piggyback Registrations.
(c) PRIORITY ON PRIMARY REGISTRATIONS. If a Piggyback
Registration is an underwritten primary registration on behalf of the
Company, and the managing underwriters advise the Company in writing that
in their opinion the number of securities requested to be included in such
registration exceeds the number which can be sold in an orderly manner in
such offering within a price range acceptable to the Company, the Company
shall include in such registration (i) first, the securities the Company
proposes to sell, (ii) second, the Registrable Securities requested to be
included in such registration, pro rata among the holders of such
Registrable Securities on the basis of the number of shares owned by each
such holder, and (iii) third, other securities requested to be included in
such registration.
(d) PRIORITY ON SECONDARY REGISTRATIONS. If a Piggyback
Registration is an underwritten secondary registration on behalf of holders
of the Company's securities, and the managing underwriters advise the
Company in writing that in their opinion the number of securities requested
to be included in such registration exceeds the number which can be sold in
an orderly manner in such offering within a price range acceptable to the
holders initially requesting such registration, the Company shall include
in such registration (i) first, the securities requested to be included
therein by the holders requesting such registration and the Registrable
Securities requested to be included in such registration, pro rata among
the holders of such securities on the basis of the number of securities so
requested to be included therein, and (ii) second, other securities
requested to be included in such registration.
(e) OTHER REGISTRATIONS. If the Company has previously filed a
registration statement with respect to Registrable Securities pursuant to
paragraph 1 or pursuant to this paragraph 2, and if such previous
registration has not been withdrawn or abandoned, the Company shall not
file or cause to be effected any other registration of any of its equity
securities or securities convertible or exchangeable into or exercisable
for its equity securities under the Securities Act (except on Form S-8 or
any successor form), whether on its own behalf or at the request of any
holder or holders of such securities, until a period of at least 90 days
has elapsed from the effective date of such previous registration.
3. HOLDBACK AGREEMENTS.
(a) Each holder of Registrable Securities shall not effect any
public sale or distribution (including sales pursuant to Rule 144) of
equity securities of the Company, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days
prior to and the 90-day period beginning on the effective date of any
underwritten registration of the Company's Common Stock (except as part of
such underwritten registration), unless the underwriters managing the
registered public offering otherwise agree.
(b) The Company shall not effect any public sale or distribution
of its equity securities, or any securities convertible into or
exchangeable or exercisable for such securities, during the seven days
prior to and during the 90-day period beginning on the effective date of
any underwritten Demand Registration or any underwritten Piggyback
Registration (except as part of such underwritten registration or pursuant
to registrations on Form S-8 or any successor form), unless the
underwriters managing the registered public offering otherwise agree.
4. REGISTRATION PROCEDURES. Whenever the holders of
Registrable Securities have requested that any Registrable Securities be
registered pursuant to this Agreement, the Company shall use its best
efforts to effect the registration of such Registrable Securities in
accordance with the intended method of disposition thereof and pursuant
thereto the Company shall as expeditiously as possible:
(a) prepare and file with the Securities and Exchange Commission
a registration statement with respect to such Registrable Securities and
use its best efforts to cause such registration statement to become
effective (provided that before filing a registration statement or
prospectus or any amendments or supplements thereto, the Company shall
furnish to the counsel selected by the holders of a majority of the
Registrable Securities covered by such registration statement copies of all
such documents proposed to be filed, which documents shall be subject to
the review and comment of such counsel);
(b) notify each holder of Registrable Securities of the
effectiveness of each registration statement filed hereunder and prepare
and file with the Securities and Exchange Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective for a period of not less than 90 days and comply with
the provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement during such period in
accordance with the intended methods of disposition by the sellers thereof
set forth in such registration statement;
(c) furnish to each seller of Registrable Securities such number
of copies of such registration statement, each amendment and supplement
thereto, the prospectus included in such registration statement (including
each preliminary prospectus) and such other documents as such seller may
reasonably request in order to facilitate the disposition of the
Registrable Securities owned by such seller;
(d) use its best efforts to register or qualify such Registrable
Securities under such other securities or blue sky laws of such
jurisdictions as any seller reasonably requests and do any and all other
acts and things which may be reasonably necessary or advisable to enable
such seller to consummate the disposition in such jurisdictions of the
Registrable Securities owned by such seller (provided that the Company
shall not be required to (i) qualify generally to do business in any
jurisdiction where it would not otherwise be required to qualify but for
this subparagraph, (ii) subject itself to taxation in any such jurisdiction
or (iii) consent to general service of process in any such jurisdiction);
(e) notify each seller of such Registrable Securities, at any
time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement contains an untrue
statement of a material fact or omits any fact necessary to make the
statements therein not misleading, and, at the request of any such seller,
the Company shall prepare a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Registrable
Securities, such prospectus shall not contain an untrue statement of a
material fact or omit to state any fact necessary to make the statements
therein not misleading;
(f) cause all such Registrable Securities to be listed on each
securities exchange on which similar securities issued by the Company are
then listed and, if not so listed, to be listed on the NASD automated
quotation system and, if listed on the NASD automated quotation system, use
its best efforts to secure designation of all such Registrable Securities
covered by such registration statement as a NASDAQ "national market system
security" within the meaning of Rule 11Aa2-1 of the Securities and Exchange
Commission or, failing that, to secure NASDAQ authorization for such
Registrable Securities and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register as such
with respect to such Registrable Securities with the NASD;
(g) provide a transfer agent and registrar for all such
Registrable Securities not later than the effective date of such
registration statement;
(h) enter into such customary agreements (including underwriting
agreements in customary form for a firm commitment underwriting) and take
all such other actions as the holders of a majority of the Registrable
Securities being sold or the underwriters, if any, reasonably request in
order to expedite or facilitate the disposition of such Registrable
Securities (including effecting a stock split or a combination of shares);
(i) make available for inspection by any seller of Registrable
Securities, any underwriter participating in any disposition pursuant to
such registration statement and any attorney, accountant or other agent
retained by any such seller or underwriter, all financial and other
records, pertinent corporate documents and properties of the Company, and
cause the Company's officers, directors, employees and independent
accountants to supply all information reasonably requested by any such
seller, underwriter, attorney, accountant or agent in connection with such
registration statement;
(j) otherwise use its best efforts to comply with all applicable
rules and regulations of the Securities and Exchange Commission, and make
available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months beginning
with the first day of the Company's first full calendar quarter after the
effective date of the registration statement, which earnings statement
shall satisfy the provisions of Section 11(a) of the Securities Act and
Rule 158 thereunder;
(k) permit any holder of Registrable Securities which holder, in
its sole and exclusive judgment, might be deemed to be an underwriter or a
controlling person of the Company, to participate in the preparation of
such registration or comparable statement and to require the insertion
therein of material, furnished to the Company in writing, which in the
reasonable judgment of such holder and its counsel should be included; and
(l) in the event of the issuance of any stop order suspending
the effectiveness of a registration statement, or of any order suspending
or preventing the use of any related prospectus or suspending the
qualification of any common stock included in such registration statement
for sale in any jurisdiction, the Company shall use its best efforts
promptly to obtain the withdrawal of such order.
5. REGISTRATION EXPENSES.
(a) All expenses incident to the Company's performance of or
compliance with this Agreement, including all registration and filing fees,
fees and expenses of compliance with securities or blue sky laws, printing
expenses, messenger and delivery expenses, fees and disbursements of
custodians, and fees and disbursements of counsel for the Company and all
independent certified public accountants, underwriters (excluding discounts
and commissions) and other Persons retained by the Company (all such
expenses being herein called "Registration Expenses"), shall be borne as
provided in this Agreement, except that the Company shall, in any event,
pay its internal expenses (including, without limitation, all salaries and
expenses of its officers and employees performing legal or accounting
duties), the expense of any annual audit or quarterly review, the expense
of any liability insurance and the expenses and fees for listing the
securities to be registered on each securities exchange on which similar
securities issued by the Company are then listed or on the NASD automated
quotation system.
(b) In connection with each Demand Registration and each
Piggyback Registration, the Company shall reimburse the holders of
Registrable Securities included in such registration for the reasonable
fees and disbursements of one counsel chosen by the holders of a majority
of the Registrable Securities included in such registration.
(c) To the extent Registration Expenses are not required to be
paid by the Company, each holder of securities included in any registration
hereunder shall pay those Registration Expenses allocable to the
registration of such holder's securities so included, and any Registration
Expenses not so allocable shall be borne by all sellers of securities
included in such registration in proportion to the aggregate selling price
of the securities to be so registered.
6. INDEMNIFICATION.
(a) The Company agrees to indemnify, to the extent permitted by
law, each holder of Registrable Securities, its officers and directors and
each Person who controls such holder (within the meaning of the Securities
Act) against all losses, claims, damages, liabilities and expenses caused
by any untrue or alleged untrue statement of material fact contained in any
registration statement, prospectus or preliminary prospectus or any
amendment thereof or supplement thereto or any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as the same are caused by
or contained in any information furnished in writing to the Company by such
holder expressly for use therein or by such holder's failure to deliver a
copy of the registration statement or prospectus or any amendments or
supplements thereto after the Company has furnished such holder with a
sufficient number of copies of the same. In connection with an
underwritten offering, the Company shall indemnify such underwriters, their
officers and directors and each Person who controls such underwriters
(within the meaning of the Securities Act) to the same extent as provided
above with respect to the indemnification of the holders of Registrable
Securities.
(b) In connection with any registration statement in which a
holder of Registrable Securities is participating, each such holder shall
furnish to the Company in writing such information and affidavits as the
Company reasonably requests for use in connection with any such
registration statement or prospectus and, to the extent permitted by law,
shall indemnify the Company, its directors and officers and each Person who
controls the Company (within the meaning of the Securities Act) against any
losses, claims, damages, liabilities and expenses resulting from any untrue
or alleged untrue statement of material fact contained in the registration
statement, prospectus or preliminary prospectus or any amendment thereof or
supplement thereto or any omission or alleged omission of a material fact
required to be stated therein or necessary to make the statements therein
not misleading, but only to the extent that such untrue statement or
omission is contained in any information or affidavit so furnished in
writing by such holder; provided that the obligation to indemnify shall be
individual, not joint and several, for each holder and shall be limited to
the net amount of proceeds received by such holder from the sale of
Registrable Securities pursuant to such registration statement.
(c) Any Person entitled to indemnification hereunder shall (i)
give prompt written notice to the indemnifying party of any claim with
respect to which it seeks indemnification (provided that the failure to
give prompt notice shall not impair any Person's right to indemnification
hereunder to the extent such failure has not prejudiced the indemnifying
party) and (ii) unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and indemnifying parties may
exist with respect to such claim, permit such indemnifying party to assume
the defense of such claim with counsel reasonably satisfactory to the
indemnified party. If such defense is assumed, the indemnifying party
shall not be subject to any liability for any settlement made by the
indemnified party without its consent (but such consent shall not be
unreasonably withheld). An indemnifying party who is not entitled to, or
elects not to, assume the defense of a claim shall not be obligated to pay
the fees and expenses of more than one counsel for all parties indemnified
by such indemnifying party with respect to such claim, unless in the
reasonable judgment of any indemnified party a conflict of interest may
exist between such indemnified party and any other of such indemnified
parties with respect to such claim.
(d) The indemnification provided for under this Agreement shall
remain in full force and effect regardless of any investigation made by or
on behalf of the indemnified party or any officer, director or controlling
Person of such indemnified party and shall survive the transfer of
securities. The Company also agrees to make such provisions, as are
reasonably requested by any indemnified party, for contribution to such
party in the event the Company's indemnification is unavailable for any
reason.
7. PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Person may
participate in any registration hereunder which is underwritten unless such
Person (i) agrees to sell such Person's securities on the basis provided in
any underwriting arrangements approved by the Person or Persons entitled
hereunder to approve such arrangements and (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements
and other documents required under the terms of such underwriting
arrangements; provided that no holder of Registrable Securities included in
any underwritten registration shall be required to make any representations
or warranties to the Company or the underwriters (other than
representations and warranties regarding such holder and such holder's
intended method of distribution) or to undertake any indemnification
obligations to the Company or the underwriters with respect thereto, except
as otherwise provided in paragraph 6 hereof.
8. DEFINITIONS.
(a) "REGISTRABLE SECURITIES" means (i) any Common Stock issued
upon the conversion of any Notes issued pursuant to the Purchase Agreement,
(ii) any Common Stock issued upon conversion of any Class A Preferred
issued upon conversion of any Notes issued pursuant to the Purchase
Agreement, (iii) any Common Stock issued upon exercise of any Warrants
issued pursuant to the Purchase Agreement, (iv) any Common Stock issued in
connection with a repayment of the Notes or a redemption of Class A
Preferred and (v) any Common Stock issued or issuable with respect to the
securities referred to in clauses (i), (ii), (iii) and (iv) above by way of
a stock dividend or stock split or in connection with a combination of
shares, recapitalization, merger, consolidation or other reorganization.
As to any particular Registrable Securities, such securities shall cease to
be Registrable Securities when they have been distributed to the public
pursuant to a offering registered under the Securities Act or sold to the
public through a broker, dealer or market maker in compliance with Rule 144
under the Securities Act (or any similar rule then in force). For purposes
of this Agreement, a Person shall be deemed to be a holder of Registrable
Securities, and the Registrable Securities shall be deemed to be in
existence, whenever such Person has the right to acquire directly or
indirectly such Registrable Securities (upon conversion or exercise in
connection with a transfer of securities or otherwise, but disregarding any
restrictions or limitations upon the exercise of such right), whether or
not such acquisition has actually been effected, and such Person shall be
entitled to exercise the rights of a holder of Registrable Securities
hereunder.
(b) Unless otherwise stated, other capitalized terms contained
herein have the meanings set forth in the Purchase Agreement.
9. MISCELLANEOUS.
(a) NO INCONSISTENT AGREEMENTS. The Company shall not hereafter
enter into any agreement with respect to its securities which is
inconsistent with or violates the rights granted to the holders of
Registrable Securities in this Agreement.
(b) ADJUSTMENTS AFFECTING REGISTRABLE SECURITIES. The Company
shall not take any action, or permit any change to occur, with respect to
its securities which would materially and adversely affect the ability of
the holders of Registrable Securities to include such Registrable
Securities in a registration undertaken pursuant to this Agreement or which
would materially and adversely affect the marketability of such Registrable
Securities in any such registration (including, without limitation,
effecting a stock split or a combination of shares).
(c) REMEDIES. Any Person having rights under any provision of
this Agreement shall be entitled to enforce such rights specifically to
recover damages caused by reason of any breach of any provision of this
Agreement and to exercise all other rights granted by law. The parties
hereto agree and acknowledge that money damages may not be an adequate
remedy for any breach of the provisions of this Agreement and that any
party may in its sole discretion apply to any court of law or equity of
competent jurisdiction (without posting any bond or other security) for
specific performance and for other injunctive relief in order to enforce or
prevent violation of the provisions of this Agreement.
(d) AMENDMENTS AND WAIVERS. Except as otherwise provided
herein, the provisions of this Agreement may be amended or waived only upon
the prior written consent of the Company and holders of a majority of the
Registrable Securities.
(e) SUCCESSORS AND ASSIGNS. All covenants and agreements in
this Agreement by or on behalf of any of the parties hereto shall bind and
inure to the benefit of the respective successors and assigns of the
parties hereto whether so expressed or not. In addition, whether or not
any express assignment has been made, the provisions of this Agreement
which are for the benefit of purchasers or holders of Registrable
Securities are also for the benefit of, and enforceable by, any subsequent
holder of Registrable Securities.
(f) SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating the remainder of this Agreement.
(g) COUNTERPARTS. This Agreement may be executed simultaneously
in two or more counterparts, any one of which need not contain the
signatures of more than one party, but all such counterparts taken together
shall constitute one and the same Agreement.
(h) DESCRIPTIVE HEADINGS. The descriptive headings of this
Agreement are inserted for convenience only and do not constitute a part of
this Agreement.
(i) GOVERNING LAW. The corporate law of the State of Delaware
shall govern all issues and questions concerning the relative rights of the
Company and its stockholders. All other issues and questions concerning
the construction, validity, interpretation and enforcement of this
Agreement and the exhibits and schedules hereto shall be governed by, and
construed in accordance with, the laws of the State of New York, without
giving effect to any choice of law or conflict of law rules or provisions
(whether of the State of New York or any other jurisdiction) that would
cause the application of the laws of any jurisdiction other than the State
of New York.
(j) NOTICES. All notices, demands or other communications to be
given or delivered under or by reason of the provisions of this Agreement
shall be given in accordance with paragraph 7L of the Purchase Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date first written above.
ACC CORP.
By /s/ Michael R. Daley
Its EVP and CFO
FLEET VENTURE RESOURCES, INC.
By /s/ Robert M. Van Degna
Its President
FLEET EQUITY PARTNERS VI, L.P.
By Silverado IV Corp.
Its General Partner
By /s/ Robert M. Van Degna
Its President
CHISHOLM PARTNERS II, L.P.
By Silverado II, L.P.
Its General Partner
By Silverado II, Corp.
Its General Partner
By /s/ Robert M. Van Degna
Its President
EXHIBIT 4-7
PARTICIPATION AGREEMENT
THIS AGREEMENT is made as of May 22, 1995, between Fleet Venture
Resources, Inc., Fleet Equity Partners VI, L.P. and Chisholm Partners II,
L.P. (collectively, the "Investors") and Richard T. Aab ("Executive").
The execution and delivery of this Agreement by the Executive is
a condition to the purchase of Notes and Warrants by the Investors pursuant
to a Note and Warrant Purchase Agreement dated as of the date hereof (the
"Purchase Agreement"). Capitalized terms not otherwise defined herein
shall have the meanings set forth in the Purchase Agreement.
The parties hereto agree as follows:
1. RESTRICTIONS ON TRANSFER.
(a) TRANSFER OF EXECUTIVE STOCK. Executive shall not sell,
transfer, assign, pledge or otherwise dispose of (whether with or without
consideration any interest in any shares of Common Stock (a "Transfer"),
except pursuant to the provisions of this paragraph 1; provided that in no
event shall any Transfer of Common Stock pursuant to this paragraph 1 be
made for any consideration other than cash payable upon consummation of
such Transfer or in installments over time (other than in a transaction in
which all shares of the Company's capital stock are sold, transferred or
exchanged for new consideration). Prior to making any Transfer, Executive
shall deliver written notice (the "Sale Notice") to Investors. The Sale
Notice shall disclose in reasonable detail the identity of the prospective
transferee(s), the number of shares to be transferred and the terms and
conditions of the proposed transfer. Executive shall not consummate any
Transfer until 30 days after the Sale Notice has been given to the
Investors, unless the parties to the Transfer have been finally determined
pursuant to this paragraph 1 prior to the expiration of such 30-day period.
The date of the first to occur of such events is referred to herein as the
"Authorization Date".
(b) PARTICIPATION RIGHTS. Each Investor may elect to
participate in the contemplated transfer by delivering written notice to
Executive and the Company within 20 days after receipt by the Investor of
the Sale Notice. If any Investor has elected to participate in such sale,
Executive and the electing Investors shall be entitled to sell in the
contemplated sale, at the same price and on the same terms, a number of
shares of the Company's Common Stock equal to the product of (i) the
quotient determined by dividing the percentage of the Common Stock (on a
fully-diluted basis) held by such person, by the aggregate percentage of
the Common Stock (on a fully-diluted basis) owned by Executive and all
electing Investors and (ii) the number of shares of Common Stock to be sold
in the contemplated sale.
For example, if the Sale Notice contemplated a sale of 100 shares
of Common Stock, and if Executive was at such time the owner of
30% of the Company's Common Stock (on a fully-diluted basis) and
if one Investor elected to participate and the Investor owned 20%
of the Company's Common Stock (on a fully-diluted basis),
Executive would be entitled to sell 60 shares (30% <divide> 50% x
100 shares) and the Investor would be entitled to sell 40 shares
(20% <divide> 50% x 100 shares).
Executive shall use his best efforts to obtain the agreement of the
prospective transferee(s) to the participation of the Investors in the
contemplated transfer and shall not transfer any Common Stock to the
prospective transferee(s) if such transferee(s) refuses to allow the
participation of the Investors. Any Investor may participate in a sale of
Common Stock pursuant to this paragraph by tendering the number of shares
of Series A Preferred or the principal amount of any Note convertible into
the appropriate number of shares of Common Stock or by tendering a Warrant
for the purchase of the appropriate number of shares of Common Stock with
the exercise price thereof to be subtracted from the final purchase price
of the Warrants hereunder.
(c) CERTAIN PERMITTED TRANSFERS. The restrictions contained in
this paragraph 1 shall not apply with respect to transfers of shares of
Common Stock (i) to the public pursuant to an offering registered under the
Securities Act or to the public through a broker, dealer or market maker
pursuant to the provisions of Rule 144 adopted under the Securities Act,
(ii) during any one-year period, in an amount less than 1% of the number of
shares of Common Stock that Executive owns as of the date hereof, (iii)
contributions to Executive's charitable family trust or foundation
totalling not more than $500,000 worth of Common Stock in the aggregate
(valued at Market Price on the date of transfer) and (iv) resulting from
the foreclosure of shares pledged by Executive.
(d) PLEDGES. Executive may pledge shares of Common Stock;
notwithstanding the foregoing, Executive may pledge shares of Common Stock
only pursuant to bona fide pledges to banks or financial institutions
(including brokerage firms) in connection with the borrowing of funds.
(e) TERMINATION OF RESTRICTIONS. The restrictions on the
transfer of any share of Executive's Common Stock set forth in this
paragraph 1 shall terminate upon the earlier to occur of (i) the Transfer
of such share in accordance with the provisions hereof, (ii) the date upon
which Executive is no longer an officer, director or employee of the
Company or of its Subsidiaries and (iii) the date upon which neither the
Notes, the Series A Preferred, nor the Springing Warrants remain
outstanding.
2. HOLDBACK AGREEMENT. Executive shall not effect any public
sale or distribution (including sales pursuant to Rule 144) of any shares
of Executive's Common Stock or any other equity securities of the Company,
or any securities convertible into or exchangeable or exercisable for such
securities, during the seven days prior to and the 90-day period beginning
on the effective date of any underwritten Demand Registration or any
underwritten Piggyback Registration (except as part of such underwritten
registration), unless the underwriters managing the registered public
offering otherwise agree. The terms Demand Registration and Piggyback
Registration have the meanings set forth in the Registration Agreement
dated May 22, 1995 between the Company and the Investors.
3. LEGEND. Each certificate representing shares of Common
Stock held by Executive (exclusive of those subject to pledge pursuant to
paragraph 1(d) above) shall bear a legend in substantially the following
form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO RESTRICTIONS ON TRANSFER SET FORTH IN A
PARTICIPATION AGREEMENT BETWEEN THE CERTAIN INVESTORS
IN THE COMPANY, DATED AS OF MAY 22, 1995, AS AMENDED
AND MODIFIED FROM TIME TO TIME. A COPY OF SUCH
AGREEMENT MAY BE OBTAINED BY THE HOLDER HEREOF AT THE
COMPANY'S PRINCIPAL PLACE OF BUSINESS WITHOUT CHARGE.
NOTWITHSTANDING THE FOREGOING, THE SECURITIES
REPRESENTED BY THIS CERTIFICATE SHALL BE TRANSFERRABLE
PURSUANT TO SEC RULE 144 OR REGISTRATION UNDER THE
SECURITIES ACT."
The above legend shall be removed in connection with any transfer described
in paragraph 1(c) above.
4. NOTICES. Any notice provided for in this Agreement must be
in writing and must be either personally delivered, mailed by first class
mail (postage prepaid and return receipt requested) sent by reputable
overnight courier service (charges prepaid) or sent via facsimile
transmission (acknowledged by written confirmation of receipt or followed
with hard copy via certified mail or reputable overnight courier) to the
recipient at the address below indicated:
To the Investors:
c/o Fleet Equity Partners
Mail Stop: RI MO 227
111 Westminster Street
Providence, Rhode Island 02903
Attention: Robert Van Degna
Telecopy: (401) 278-6387
To Executive:
c/o ACC Corp.
400 West Avenue
Rochester, NY 14611
Telecopy: (716) 987-3335
or such other address or to the attention of such other person as the
recipient party shall have specified by prior written notice to the sending
party. Any notice under this Agreement shall be deemed to have been given
when so delivered or sent or, if mailed, five days after deposit in the
U.S. mail.
5. GENERAL PROVISIONS.
(a) TRANSFERS IN VIOLATION OF AGREEMENT. Any Transfer or
attempted Transfer of any Common Stock in violation of any provision of
this Agreement shall be void, and the Company shall not record such
Transfer on its books or treat any purported transferee of such Executive
Stock as the owner of such stock for any purpose.
(b) SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid
under applicable law, but if any provision of this Agreement is held to be
invalid, illegal or unenforceable in any respect under any applicable law
or rule in any jurisdiction, such invalidity, illegality or
unenforceability shall not affect any other provision or any other
jurisdiction, but this Agreement shall be reformed, construed and enforced
in such jurisdiction as if such invalid, illegal or unenforceable provision
had never been contained herein.
(c) COMPLETE AGREEMENT. This Agreement, those documents
expressly referred to herein and other documents of even date herewith
embody the complete agreement and understanding among the parties and
supersede and preempt any prior understandings, agreements or
representations by or among the parties, written or oral, which may have
related to the subject matter hereof in any way.
(d) COUNTERPARTS. This Agreement may be executed in separate
counterparts, each of which is deemed to be an original and all of which
taken together constitute one and the same agreement.
(e) SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein, this Agreement shall bind and inure to the benefit of and be
enforceable by Executive, the Investors and their respective successors and
assigns.
(f) GOVERNING LAW. The corporate law of the State of Delaware
shall govern all issues and questions concerning the relative rights and
obligations of the Company and its stockholders. All other issues and
questions concerning the construction, validity, enforcement and
interpretation of this Agreement and the exhibits and schedules hereto
shall be governed by, and construed in accordance with, the laws of the
State of New York, without giving effect to any choice of law or conflict
of law rules or provisions (whether of the State of New York or any other
jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York.
(g) REMEDIES. Each of the parties to this Agreement shall be
entitled to enforce its rights under this Agreement specifically, to
recover damages and costs (including reasonable attorney's fees) caused by
any breach of any provision of this Agreement and to exercise all other
rights existing in its favor. The parties hereto agree and acknowledge
that money damages would not be an adequate remedy for any breach of the
provisions of this Agreement and that any party may in its sole discretion
apply to any court of law or equity of competent jurisdiction (without
posting any bond or deposit) for specific performance and/or other
injunctive relief in order to enforce or prevent any violations of the
provisions of this Agreement.
(h) AMENDMENT AND WAIVER. The provisions of this Agreement may
be amended and waived only with the prior written consent of the Executive
and the Investors owning a majority of the Common Stock on a fully-diluted
basis held by all Investors.
(i) BUSINESS DAYS. If any time period for giving notice or
taking action hereunder expires on a day which is a Saturday, Sunday or
legal holiday in the state in which the Company's chief executive office is
located, the time period shall be automatically extended to the business
day immediately following such Saturday, Sunday or holiday.
* * * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the date first written above.
/s/ Richard T. Aab
Richard T. Aab
FLEET VENTURE RESOURCES, INC.
By /s/ Robert M. Van Degna
Its President
FLEET EQUITY PARTNERS VI, L.P.
By Silverado IV Corp.
Its General Partner
By /s/ Robert M. Van Degna
Its President
CHISHOLM PARTNERS II, L.P.
By Silverado II, L.P.
Its General Partner
By Silverado II, Corp.
Its General Partner
By /s/ Robert M. Van Degna
Its President
Agreed and Accepted:
ACC CORP.
By /s/ Michael R. Daley
Its EVP and CFO
EXHIBIT 4-8(a)
This Warrant was originally issued on May 22, 1995, and
has not been registered under the Securities Act of
1933, as amended. The transfer of this Warrant is
subject to the conditions specified in the Purchase
Agreement, dated as of May 22, 1995 (as amended and
modified from time to time), between the issuer hereof
(the "Company") and the initial holder hereof, and the
Company reserves the right to refuse the transfer of
such security until such conditions have been fulfilled
with respect to such transfer. Upon written request, a
copy of such conditions shall be furnished by the
Company to the holder hereof without charge.
ACC CORP.
STOCK PURCHASE WARRANT
Date of Issuance: May 22, 1995 Certificate No. SW-1
This Warrant is being issued simultaneously with the issuance of
a Convertible Subordinated Promissory Note issued by the Company in the
principal amount of $7,200,000 (the "Note"), to Fleet Venture Resources,
Inc. pursuant to the Note and Warrant Purchase Agreement dated as of May
22, 1995 (the "Purchase Agreement"), between ACC Corp., a Delaware
corporation (the "Company"), and certain investors.
For value received, the Company hereby grants to Fleet Venture
Resources, Inc. or its registered assigns (the "Registered Holder") the
right to purchase from the Company after an Optional Repayment of any
Subject Securities a number of shares of the Company's Common Stock equal
to the aggregate number of shares of Common Stock into which the Repaid
Securities were convertible as of the respective Repayment Dates thereof at
a price per share equal to $16.00 (such price as adjusted and readjusted
from time to time in accordance with Section 2 hereof, the "Exercise
Price").
This Warrant is one of several Springing Warrants (collectively
referred to herein as the "Warrants") issued pursuant to the Purchase
Agreement, and certain capitalized terms used herein are defined in Section
5 hereof. The amount and kind of securities obtainable pursuant to the
rights granted hereunder and the purchase price for such securities are
subject to adjustment pursuant to the provisions contained in this Warrant.
This Warrant is subject to the following provisions:
Section 1. EXERCISE OF WARRANT.
A. EXERCISE PERIOD. The Registered Holder may exercise, in
whole or in part (but not as to a fractional share of Common Stock), the
purchase rights represented by this Warrant at any time and from time to
time on and after the Repayment Date of the Repaid Securities to which such
rights relate to and including the Scheduled Repayment Date of the Repaid
Securities to which such purchase rights relate up to and including and
including the earlier of (i) the seventh anniversary of the Closing Date or
(ii) the date which is six years after the first date upon which no Notes
or Series A Preferred remain outstanding (the "Exercise Period"). The
Company shall give the Registered Holder written notice of the expiration
of the Exercise Period at least 30 days but not more than 90 days prior to
the end of the Exercise Period.
B. EXERCISE PROCEDURE.
(i) This Warrant shall be deemed to have been exercised when the
Company has received all of the following items (the "Exercise Time"):
(a) a completed Exercise Agreement, as described in paragraph 1C
below, executed by the Person exercising all or part of the purchase
rights represented by this Warrant (the "Purchaser");
(b) this Warrant;
(c) if this Warrant is not registered in the name of the
Purchaser, an Assignment or Assignments in the form set forth in
EXHIBIT II hereto evidencing the assignment of this Warrant to the
Purchaser, in which case the Registered Holder shall have complied
with the provisions set forth in Section 7 hereof; and
(d) either (1) a check payable to the Company (in the case of
the original Holder of this Warrant only), a certified check payable
to the Company or a wire transfer of immediately available funds to an
account designated by the Company in an amount equal to the product of
the Exercise Price multiplied by the number of shares of Common Stock
being purchased upon such exercise (the "Aggregate Exercise Price"),
(2) the surrender to the Company of debt or equity securities of the
Company having a Market Price equal to the Aggregate Exercise Price of
the Common Stock being purchased upon such exercise (provided that for
purposes of this subparagraph, the Market Price of any note or other
debt security or any preferred stock shall be deemed to be equal to
the aggregate outstanding principal amount or liquidation value
thereof plus all accrued and unpaid interest thereon or accrued or
declared and unpaid dividends thereon) or (3) a written notice to the
Company that the Purchaser is exercising the Warrant (or a portion
thereof) by authorizing the Company to withhold from issuance a number
of shares of Common Stock issuable upon such exercise of the Warrant
which when multiplied by the Market Price of the Common Stock is equal
to the Aggregate Exercise Price (and such withheld shares shall no
longer be issuable under this Warrant).
(ii) Certificates for shares of Common Stock purchased upon
exercise of this Warrant shall be delivered by the Company to the Purchaser
within five business days after the date of the Exercise Time. Unless this
Warrant has expired or all of the purchase rights represented hereby have
been exercised, the Company shall prepare a new Warrant, substantially
identical hereto, representing the rights formerly represented by this
Warrant which have not expired or been exercised and shall, within such
five-day period, deliver such new Warrant to the Person designated for
delivery in the Exercise Agreement.
(iii) The Common Stock issuable upon the exercise of this Warrant
shall be deemed to have been issued to the Purchaser at the Exercise Time,
and the Purchaser shall be deemed for all purposes to have become the
record holder of such Common Stock at the Exercise Time.
(iv) The issuance of certificates for shares of Common Stock upon
exercise of this Warrant shall be made without charge to the Registered
Holder or the Purchaser for any issuance tax in respect thereof or other
cost incurred by the Company in connection with such exercise and the
related issuance of shares of Common Stock. Each share of Common issuable
upon exercise of this Warrant shall, upon payment of the Exercise Price
therefor, be fully paid and nonassessable and free from all liens and
charges with respect to the issuance thereof.
(v) The Company shall not close its books against the transfer
of this Warrant or of any share of Common Stock issued or issuable upon the
exercise of this Warrant in any manner which interferes with the timely
exercise of this Warrant. The Company shall from time to time take all
such action as may be necessary to assure that the par value per share of
the unissued Common Stock acquirable upon exercise of this Warrant is at
all times equal to or less than the Exercise Price then in effect.
(vi) The Company shall assist and cooperate with any Registered
Holder or Purchaser required to make any governmental filings or obtain any
governmental approvals prior to or in connection with any exercise of this
Warrant (including making any filings required to be made by the Company).
(vii) Notwithstanding any other provision hereof, if an exercise
of any portion of this Warrant is to be made in connection with a
registered public offering or the sale of the Company, the exercise of any
portion of this Warrant may, at the election of the holder hereof, be
conditioned upon the consummation of the public offering or sale of the
Company in which case such exercise shall not be deemed to be effective
until the consummation of such transaction.
(viii) The Company shall at all times reserve and keep available
out of its authorized but unissued shares of Common Stock solely for the
purpose of issuance upon the exercise of the Warrants, such number of
shares of Common Stock issuable upon the exercise of all outstanding
Warrants. All shares of Common Stock which are so issuable shall, when
issued, be duly and validly issued, fully paid and nonassessable and free
from all taxes, liens and charges. The Company shall take all such actions
as may be necessary to assure that all such shares of Common Stock may be
so issued without violation of any applicable law or governmental
regulation or any requirements of any domestic securities exchange upon
which shares of Common Stock may be listed (except for official notice of
issuance which shall be immediately delivered by the Company upon each such
issuance). The Company shall from time to time take all such action as may
be necessary to assure that the par value of the unissued Common Stock
acquirable upon exercise of this Warrant is at all times equal to or less
than the Exercise Price. The Company shall not take any action which would
cause the number of authorized but unissued shares of Common Stock to be
less than the number of such shares required to be reserved hereunder for
issuance upon exercise of the Warrant.
C. EXERCISE AGREEMENT. Upon any exercise of this Warrant, the
Exercise Agreement shall be substantially in the form set forth in EXHIBIT
I hereto, except that if the shares of Common Stock are not to be issued in
the name of the Person in whose name this Warrant is registered, the
Exercise Agreement shall also state the name of the Person to whom the
certificates for the shares of Common Stock are to be issued, and if the
number of shares of Common Stock to be issued does not include all the
shares of Common Stock purchasable hereunder, it shall also state the name
of the Person to whom a new Warrant for the unexercised portion of the
rights hereunder is to be delivered. Such Exercise Agreement shall be
dated the actual date of execution thereof.
D. FRACTIONAL SHARES. If a fractional share of Common Stock
would, but for the provisions of paragraph 1A, be issuable upon exercise of
the rights represented by this Warrant, the Company shall, within five
business days after the date of the Exercise Time, deliver to the Purchaser
a check payable to the Purchaser in lieu of such fractional share in an
amount equal to the difference between the Market Price of such fractional
share as of the date of the Exercise Time and the Exercise Price of such
fractional share.
Section 2.ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. In
order to prevent dilution of the rights granted under this Warrant, the
Exercise Price shall be subject to adjustment from time to time as provided
in this Section 2, and the number of shares of Common Stock obtainable upon
exercise of this Warrant shall be subject to adjustment from time to time
as provided in this Section 2.
A. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES UPON
ISSUANCE OF COMMON STOCK. If and whenever on or after the Date of Issuance
of this Warrant, the Company issues or sells, or in accordance with
paragraph 2B is deemed to have issued or sold, any share of Common Stock
for a consideration per share less than the Exercise Price in effect
immediately prior to such time, then immediately upon such issue or sale
the Exercise Price shall be reduced to the lowest net price per share (as
determined pursuant to paragraph 2B(v) below) at which such share of Common
Stock has been issued or sold or is deemed to have been issued or sold.
Upon each such adjustment of the Exercise Price hereunder, the number of
shares of Common acquirable upon exercise of this Warrant shall be adjusted
to the number of shares determined by multiplying the Exercise Price in
effect immediately prior to such adjustment by the number of shares of
Common acquirable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting
from such adjustment. Notwithstanding the foregoing, there shall be no
adjustment to the Exercise Price hereunder with respect to the granting of
stock options to employees or directors of the Company and its Subsidiaries
or the exercise thereof or the granting of stock appreciation rights,
phantom stock rights or other similar rights to employees or directors of
the Company for (or rights relating to) an aggregate of 1,586,702 shares of
Common Stock (976,594 options being currently outstanding) (as such number
of shares is equitably adjusted for subsequent stock splits, stock
combinations, stock dividends and recapitalizations and such number shall
include all stock options outstanding as of the date of the Purchase
Agreement).
B. EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes
of determining the adjusted Exercise Price under paragraph 2A, the
following shall be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any manner
grants or sells any Options and the lowest price per share for which any
one share of Common Stock is issuable upon the exercise of any such Option,
or upon conversion or exchange of any Convertible Security issuable upon
exercise of such Option, is less than the Exercise Price in effect
immediately prior to the time of the granting or sale of such Option, then
such share of Common Stock shall be deemed to have been issued and sold by
the Company at such time for such price per share. For purposes of this
paragraph, the "lowest price per share for which any one share of Common
Stock is issuable" shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect
to any one share of Common Stock upon the granting or sale of the Option,
upon exercise of the Option and upon conversion or exchange of the
Convertible Security. No further adjustment of the Exercise Price shall be
made upon the actual issue of such Common Stock or of such Convertible
Security upon the exercise of such Options or upon the actual issue of such
Common Stock upon conversion or exchange of such Convertible Security.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any
manner issues or sells any Convertible Security and the lowest price per
share for which any one share of Common Stock is issuable upon conversion
or exchange thereof is less than the Exercise Price in effect immediately
prior to the time of such issue or sale, then such share or shares of
Common Stock shall be deemed to have been issued and sold by the Company at
such time for such price per share. For the purposes of this paragraph,
the "lowest price per share for which any one share of Common Stock is
issuable" shall be equal to the sum of the lowest amounts of consideration
(if any) received or receivable by the Company with respect to any one
share of Common Stock upon the issuance of the Convertible Security and
upon the conversion or exchange of such Convertible Security. No further
adjustment of the Exercise Price shall be made upon the actual issue of
such Common Stock upon conversion or exchange of any Convertible Security,
and if any such issue or sale of such Convertible Security is made upon
exercise of any Options for which adjustments of the Exercise Price had
been or are to be made pursuant to other provisions of this Section 2, no
further adjustment of the Exercise Price shall be made by reason of such
issue or sale.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If the purchase
price provided for in any Options, the additional consideration, if any,
payable upon the issue, conversion or exchange of any Convertible
Securities, or the rate at which any Convertible Securities are convertible
into or exchangeable for Common Stock changes at any time, the Exercise
Price in effect at the time of such change shall be adjusted immediately to
the Exercise Price which would have been in effect at such time had such
Options or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or changed conversion
rate, as the case may be, at the time initially granted, issued or sold and
the number of shares of Common Stock issuable hereunder shall be
correspondingly adjusted; provided that if such adjustment would result in
an increase of the Exercise Price then in effect, such adjustment shall not
be effective until 30 days after written notice thereof has been given by
the Company to all holders of the Warrants. For purposes of this paragraph
2B, if the terms of any Option or Convertible Security which was
outstanding as of the date of issuance of this Warrant are changed in the
manner described in the immediately preceding sentence, then such Option or
Convertible Security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed to have been issued as of
the date of such change; provided that no such change shall at any time
cause the Exercise Price hereunder to be increased.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. Upon the expiration of any Option or the termination of any
right to convert or exchange any Convertible Securities without the
exercise of such Option or right, the Exercise Price then in effect shall
be adjusted immediately to the Exercise Price which would have been in
effect at the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
expiration or termination, never been issued; provided that if such
expiration or termination would result in an increase in the Exercise Price
then in effect, such increase shall not be effective until 30 days after
written notice thereof has been given to all holders of the Warrants. For
purposes of this paragraph 2B, the expiration or termination of any Option
or Convertible Security which was outstanding as of the date of issuance of
this Warrant shall not cause the Exercise Price hereunder to be adjusted
unless, and only to the extent that, a change in the terms of such Option
or Convertible Security caused it to be deemed to have been issued after
the date of issuance of this Warrant.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any Common Stock,
Options or Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be
deemed to be the net amount received by the Company therefor. In case any
Common Stock, Options or Convertible Securities are issued or sold for a
consideration other than cash, the amount of the consideration other than
cash received by the Company shall be the fair value of such consideration,
except where such consideration consists of securities, in which case the
amount of consideration received by the Company shall be the Market Price
thereof as of the date of receipt. In case any Common Stock, Options or
Convertible Securities are issued to the owners of the non-surviving entity
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 value of such portion of the net assets and business of the non-
surviving entity as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities shall be determined jointly by
the Company and the Registered Holders of Warrants representing a majority
of the shares of Common Stock obtainable upon exercise of such Warrants.
If such parties are unable to reach agreement within a reasonable period of
time, such fair value shall be determined by an appraiser jointly selected
by the Company and the Registered Holders of Warrants representing a
majority of the shares of Common Stock obtainable upon exercise of such
Warrants. The determination of such appraiser shall be final and binding
on the Company and the Registered Holders of the Warrants, and the fees and
expenses of such appraiser shall be paid by the Company.
(vi) INTEGRATED TRANSACTIONS. In case any Option is issued in
connection with the issue or sale of other securities of the Company,
together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the
Options shall be deemed to have been issued for consideration of $.01.
(vii) TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time does not include shares owned or held by or
for the account of the Company or any Subsidiary, and the disposition of
any shares so owned or held shall be considered an issue or sale of Common
Stock.
(viii) RECORD DATE. If the Company takes a record of the holders
of Common Stock for the purpose of entitling them (A) to receive a dividend
or other distribution payable in Common Stock, Options or in Convertible
Securities or (B) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date shall be deemed to be the
date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
C. SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company
at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding
shares of Common Stock into a greater number of shares, the Exercise Price
in effect immediately prior to such subdivision shall be proportionately
reduced and the number of shares of Common Stock obtainable upon exercise
of this Warrant shall be proportionately increased. If the Company at any
time combines (by reverse stock split or otherwise) one or more classes of
its outstanding shares of Common Stock into a smaller number of shares, the
Exercise Price in effect immediately prior to such combination shall be
proportionately increased and the number of shares of Common Stock
obtainable upon exercise of this Warrant shall be proportionately
decreased.
D. REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's
assets or other transaction, in each case which is effected in such a way
that the holders of Common Stock are entitled to receive (either directly
or upon subsequent liquidation) stock, securities or assets with respect to
or in exchange for Common Stock is referred to herein as "Organic Change."
Prior to the consummation of any Organic Change, the Company shall make
appropriate provision (in form and substance satisfactory to the Registered
Holders of the Warrants representing a majority of the Common Stock
obtainable upon exercise of all Warrants then outstanding) to insure that
each of the Registered Holders of the Warrants shall thereafter have the
right to acquire and receive, in lieu of or addition to (as the case may
be) the shares of Common Stock immediately theretofore acquirable and
receivable upon the exercise of such holder's Warrant, such shares of
stock, securities or assets as may be issued or payable with respect to or
in exchange for the number of shares of Common Stock immediately
theretofore acquirable and receivable upon exercise of such holder's
Warrant had such Organic Change not taken place. In any such case, the
Company shall make appropriate provision (in form and substance
satisfactory to the Registered Holders of the Warrants representing a
majority of the Common Stock obtainable upon exercise of all Warrants then
outstanding) with respect to such holders' rights and interests to insure
that the provisions of this Section 2 and Sections 3 and 4 hereof shall
thereafter be applicable to the Warrants (including, in the case of any
such consolidation, merger or sale in which the successor entity or
purchasing entity is other than the Company, an immediate adjustment of the
Exercise Price to the value for the Common Stock reflected by the terms of
such consolidation, merger or sale, and a corresponding immediate
adjustment in the number of shares of Common Stock acquirable and
receivable upon exercise of the Warrants, if the value so reflected is less
than the Exercise Price in effect immediately prior to such consolidation,
merger or sale). The Company shall not effect any such consolidation,
merger or sale, unless prior to the consummation thereof, the successor
entity (if other than the Company) resulting from consolidation or merger
or the entity purchasing such assets assumes by written instrument (in form
and substance satisfactory to the Registered Holders of Warrants
representing a majority of the Common Stock obtainable upon exercise of all
of the Warrants then outstanding), the obligation to deliver to each such
holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such holder may be entitled to acquire.
E. CERTAIN EVENTS. If any event occurs of the type
contemplated by the provisions of this Section 2 but not expressly provided
for by such provisions (including the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then
the Company's board of directors shall make an appropriate adjustment in
the Exercise Price and the number of shares of Common Stock obtainable upon
exercise of this Warrant so as to protect the rights of the holders of the
Warrants; provided that no such adjustment shall increase the Exercise
Price or decrease the number of shares of Common Stock obtainable as
otherwise determined pursuant to this Section 2.
F. NOTICES.
(i) Immediately upon any adjustment of the Exercise Price, the
Company shall give written notice thereof to the Registered Holder, setting
forth in reasonable detail and certifying the calculation of such
adjustment.
(ii) The Company shall give written notice to the Registered
Holder at least 20 days prior to the date on which the Company closes its
books or takes a record (A) with respect to any dividend or distribution
upon the Common Stock, (B) with respect to any pro rata subscription offer
to holders of Common Stock or (C) for determining rights to vote with
respect to any Organic Change, dissolution or liquidation.
(iii) The Company shall also give written notice to the Registered
Holders at least 20 days prior to the date on which any Organic Change,
dissolution or liquidation shall take place.
Section 3. LIQUIDATING DIVIDENDS. If at any time on or after
the date this Warrant becomes exercisable the Company declares or pays a
dividend upon the Common Stock payable otherwise than in cash out of
earnings or earned surplus (determined in accordance with generally
accepted accounting principles, consistently applied) except for a stock
dividend payable in shares of Common Stock (a "Liquidating Dividend"), then
the Company shall pay to the Registered Holder of this Warrant at the time
of payment thereof the Liquidating Dividend which would have been paid to
such Registered Holder on the Common Stock had this Warrant been fully
exercised immediately prior to the date on which a record is taken for such
Liquidating Dividend, or, if no record is taken, the date as of which the
record holders of Common Stock entitled to such dividends are to be
determined.
Section 4. PURCHASE RIGHTS. If at any time on or after the date
this Warrant becomes exercisable the Company grants, issues or sells any
Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (the "Purchase Rights"), then the Registered Holder of this
Warrant shall be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such holder could have
acquired if such holder had held the number of shares of Common Stock
acquirable upon complete exercise of this Warrant immediately before the
date on which a record is taken for the grant, issuance or sale of such
Purchase Rights, or, if no such record is taken, the date as of which the
record holders of Common Stock are to be determined for the grant, issue or
sale of such Purchase Rights.
Section 5. DEFINITIONS. The following terms have meanings set
forth below:
"COMMON STOCK" means, the Company's Common Stock, par value $.015
and any capital stock of any class of the Company hereafter authorized
which is not limited to a fixed sum or percentage of par or stated value in
respect to the rights of the holders thereof to participate in dividends or
in the distribution of assets upon any liquidation, dissolution or winding
up of the Company; provided that where such term refers to the security
receivable upon exercise of this Warrant and there is a change such that
the securities issuable upon exercise of this Warrant are issued by an
entity other than the Company or there is a change in the type or class of
securities so issuable, the term "Common Stock" shall mean one share of the
security issuable upon conversion of this Warrant if such security is
issuable in shares, or shall mean the smallest unit in which such security
is issuable if such security is not issuable in shares.
"CONVERTIBLE SECURITIES" means any stock or securities (other
than Options) directly or indirectly convertible into or exchangeable for
Common Stock.
"MARKET PRICE" means as to any security the average of the
closing prices of such security's sales on all domestic securities
exchanges on which such security may at the time be listed, or, if there
have been no sales on any such exchange on any day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of
such day, or, if on any day such security is not so listed, the average of
the representative bid and asked prices quoted in the NASDAQ System as of
4:00 P.M., New York time, on such day, or, if on any day such security is
not quoted in the NASDAQ System, the average of the highest bid and lowest
asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of 15 days
consisting of the day as of which "Market Price" is being determined and
the 14 consecutive business days prior to such day; provided that if such
security is listed on any domestic securities exchange the term "business
days" as used in this sentence means business days on which such exchange
is open for trading. If at any time such security is not listed on any
domestic securities exchange or quoted in the NASDAQ System or the domestic
over-the-counter market, the "Market Price" shall be the fair value thereof
determined jointly by the Company and the Registered Holders of Warrants
representing a majority of the Common Stock purchasable upon exercise of
all the Warrants then outstanding; provided that if such parties are unable
to reach agreement within a reasonable period of time, such fair value
shall be determined by an appraiser jointly selected by the Company and the
Registered Holders of Warrants representing a majority of the Non-Voting
Common purchasable upon exercise of all the Warrants then outstanding. The
determination of such appraiser shall be final and binding on the Company
and the Registered Holders of the Warrants, and the fees and expenses of
such appraiser shall be paid by the Company.
"OPTIONAL REPAYMENT" means a repayment of all or any portion of
the Subject Securities pursuant to paragraph 4B of the Amendment or
paragraph 2(a) of the Notes, as applicable.
"OPTIONS" means any rights or options to subscribe for or
purchase Common Stock or Convertible Securities.
"PERSON" means an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization and a government or any department or agency thereof.
"REDEMPTION DATE" and "SCHEDULED REDEMPTION DATE" shall have the
meanings set forth in the terms of the Series A Preferred in the Amendment
and shall also include, respectively, "Repayment Date" and "Scheduled
Repayment Date", as defined in the Note.
"REPAID SECURITIES" means the aggregate amount or number of
Subject Securities repaid by the Company pursuant to any Optional
Repayment.
"SUBJECT SECURITIES" means the Note and the Series A Preferred
issued in respect of the Note.
Other capitalized terms used in this Warrant but not defined
herein shall have the meanings set forth in the Purchase Agreement.
Section 6. NO VOTING RIGHTS; LIMITATIONS OF LIABILITY. This
Warrant shall not entitle the holder hereof to any voting rights or other
rights as a stockholder of the Company. No provision hereof, in the
absence of affirmative action by the Registered Holder to purchase Common
Stock, and no enumeration herein of the rights or privileges of the
Registered Holder shall give rise to any liability of such holder for the
Exercise Price of Common Stock acquirable by exercise hereof or as a
stockholder of the Company.
Section 7. WARRANT TRANSFERABLE. Subject to the transfer
conditions referred to in the legend endorsed hereon, this Warrant and all
rights hereunder are transferable, in whole or in part, without charge to
the Registered Holder, upon surrender of this Warrant with a properly
executed Assignment (in the form of EXHIBIT II hereto) at the principal
office of the Company.
Section 8. WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS.
This Warrant is exchangeable, upon the surrender hereof by the Registered
Holder at the principal office of the Company, for new Warrants of like
tenor representing in the aggregate the purchase rights hereunder, and each
of such new Warrants shall represent such portion of such rights as is
designated by the Registered Holder at the time of such surrender; provided
that, as long as any Subject Securities remain outstanding, this Warrant
shall only be exchangeable in connection with the exchange of the
certificate representing such Subject Securities pursuant to the Company's
Certificate of Incorporation. The date the Company initially issues this
Warrant shall be deemed to be the "Date of Issuance" hereof regardless of
the number of times new certificates representing the unexpired and
unexercised rights formerly represented by this Warrant shall be issued.
All Warrants representing portions of the rights hereunder are referred to
herein as the "Warrants."
Section 9. REPLACEMENT. Upon receipt of evidence reasonably
satisfactory to the Company (an affidavit of the Registered Holder shall be
satisfactory) of the ownership and the loss, theft, destruction or
mutilation of any certificate evidencing this Warrant, and in the case of
any such loss, theft or destruction, upon receipt of indemnity reasonably
satisfactory to the Company (provided that if the holder is a financial
institution or other institutional investor its own agreement shall be
satisfactory), or, in the case of any such mutilation upon surrender of
such certificate, the Company shall (at its expense) execute and deliver in
lieu of such certificate a new certificate of like kind representing the
same rights represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate.
Section 10. NOTICES. Except as otherwise expressly provided
herein, all notices referred to in this Warrant shall be in writing and
shall be given in accordance with paragraph 7L of the Purchase Agreement.
Section 11. AMENDMENT AND WAIVER. Except as otherwise provided
herein, the provisions of the Warrants may be amended and the Company may
take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company has obtained the
written consent of the Registered Holders of Warrants representing a
majority of the shares of Common Stock obtainable upon exercise of the
Warrants; provided that no such action may change the Exercise Price of the
Warrants or the number of shares or class of stock obtainable upon exercise
of each Warrant without the written consent of the Registered Holders of
Warrants representing at least 66% of the shares of Common Stock obtainable
upon exercise of the Warrants.
Section 12. DESCRIPTIVE HEADINGS; GOVERNING LAW. The
descriptive headings of the several Sections and paragraphs of this Warrant
are inserted for convenience only and do not constitute a part of this
Warrant. The corporation laws of the State of Delaware shall govern all
issues concerning the relative rights of the Company and its stockholders.
All other questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be governed by the internal law of the
State of New York, without giving effect to any choice of law or conflict
of law provision or rule (whether of the State of New York or any other
jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.
* * * *
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed and attested by its duly authorized officers under its corporate
seal and to be dated the Date of Issuance hereof.
ACC CORP.
By /s/ Michael R. Daley
Its EVP and CFO
[Corporate Seal]
Attest:
/s/ Francis D.R. Coleman
Secretary
<PAGE>
EXHIBIT I
EXERCISE AGREEMENT
To: Dated:
The undersigned, pursuant to the provisions set forth in the
attached Warrant (Certificate No. SW-____), hereby agrees to subscribe for
the purchase of ______ shares of the Non-Voting Common covered by such
Warrant and makes payment herewith in full therefor at the price per share
provided by such Warrant.
Signature ____________________
Address ______________________
EXHIBIT II
ASSIGNMENT
FOR VALUE RECEIVED, _____________________________ hereby sells,
assigns and transfers all of the rights of the undersigned under the
attached Warrant (Certificate No. SW-_____) with respect to the number of
shares of the Non-Voting Common covered thereby set forth below, unto:
NAMES OF ASSIGNEE ADDRESS NO. OF SHARES
Dated: Signature _______________________
_______________________
Witness _______________________
EXHIBIT 4-8(b)
This Warrant was originally issued on May 22, 1995, and
has not been registered under the Securities Act of
1933, as amended. The transfer of this Warrant is
subject to the conditions specified in the Purchase
Agreement, dated as of May 22, 1995 (as amended and
modified from time to time), between the issuer hereof
(the "Company") and the initial holder hereof, and the
Company reserves the right to refuse the transfer of
such security until such conditions have been fulfilled
with respect to such transfer. Upon written request, a
copy of such conditions shall be furnished by the
Company to the holder hereof without charge.
ACC CORP.
STOCK PURCHASE WARRANT
Date of Issuance: May 22, 1995 Certificate No. SW-2
This Warrant is being issued simultaneously with the issuance of
a Convertible Subordinated Promissory Note issued by the Company in the
principal amount of $1,800,000 (the "Note"), to Fleet Equity Partners VI,
L.P. pursuant to the Note and Warrant Purchase Agreement dated as of May
22, 1995 (the "Purchase Agreement"), between ACC Corp., a Delaware
corporation (the "Company"), and certain investors.
For value received, the Company hereby grants to Fleet Equity
Partners VI, L.P. or its registered assigns (the "Registered Holder") the
right to purchase from the Company after an Optional Repayment of any
Subject Securities a number of shares of the Company's Common Stock equal
to the aggregate number of shares of Common Stock into which the Repaid
Securities were convertible as of the respective Repayment Dates thereof at
a price per share equal to $16.00 (such price as adjusted and readjusted
from time to time in accordance with Section 2 hereof, the "Exercise
Price").
This Warrant is one of several Springing Warrants (collectively
referred to herein as the "Warrants") issued pursuant to the Purchase
Agreement, and certain capitalized terms used herein are defined in Section
5 hereof. The amount and kind of securities obtainable pursuant to the
rights granted hereunder and the purchase price for such securities are
subject to adjustment pursuant to the provisions contained in this Warrant.
This Warrant is subject to the following provisions:
Section 1. EXERCISE OF WARRANT.
A. EXERCISE PERIOD. The Registered Holder may exercise, in
whole or in part (but not as to a fractional share of Common Stock), the
purchase rights represented by this Warrant at any time and from time to
time on and after the Repayment Date of the Repaid Securities to which such
rights relate to and including the Scheduled Repayment Date of the Repaid
Securities to which such purchase rights relate up to and including and
including the earlier of (i) the seventh anniversary of the Closing Date or
(ii) the date which is six years after the first date upon which no Notes
or Series A Preferred remain outstanding (the "Exercise Period"). The
Company shall give the Registered Holder written notice of the expiration
of the Exercise Period at least 30 days but not more than 90 days prior to
the end of the Exercise Period.
B. EXERCISE PROCEDURE.
(i) This Warrant shall be deemed to have been exercised when the
Company has received all of the following items (the "Exercise Time"):
(a) a completed Exercise Agreement, as described in paragraph 1C
below, executed by the Person exercising all or part of the purchase
rights represented by this Warrant (the "Purchaser");
(b) this Warrant;
(c) if this Warrant is not registered in the name of the
Purchaser, an Assignment or Assignments in the form set forth in
EXHIBIT II hereto evidencing the assignment of this Warrant to the
Purchaser, in which case the Registered Holder shall have complied
with the provisions set forth in Section 7 hereof; and
(d) either (1) a check payable to the Company (in the case of
the original Holder of this Warrant only), a certified check payable
to the Company or a wire transfer of immediately available funds to an
account designated by the Company in an amount equal to the product of
the Exercise Price multiplied by the number of shares of Common Stock
being purchased upon such exercise (the "Aggregate Exercise Price"),
(2) the surrender to the Company of debt or equity securities of the
Company having a Market Price equal to the Aggregate Exercise Price of
the Common Stock being purchased upon such exercise (provided that for
purposes of this subparagraph, the Market Price of any note or other
debt security or any preferred stock shall be deemed to be equal to
the aggregate outstanding principal amount or liquidation value
thereof plus all accrued and unpaid interest thereon or accrued or
declared and unpaid dividends thereon) or (3) a written notice to the
Company that the Purchaser is exercising the Warrant (or a portion
thereof) by authorizing the Company to withhold from issuance a number
of shares of Common Stock issuable upon such exercise of the Warrant
which when multiplied by the Market Price of the Common Stock is equal
to the Aggregate Exercise Price (and such withheld shares shall no
longer be issuable under this Warrant).
(ii) Certificates for shares of Common Stock purchased upon
exercise of this Warrant shall be delivered by the Company to the Purchaser
within five business days after the date of the Exercise Time. Unless this
Warrant has expired or all of the purchase rights represented hereby have
been exercised, the Company shall prepare a new Warrant, substantially
identical hereto, representing the rights formerly represented by this
Warrant which have not expired or been exercised and shall, within such
five-day period, deliver such new Warrant to the Person designated for
delivery in the Exercise Agreement.
(iii) The Common Stock issuable upon the exercise of this Warrant
shall be deemed to have been issued to the Purchaser at the Exercise Time,
and the Purchaser shall be deemed for all purposes to have become the
record holder of such Common Stock at the Exercise Time.
(iv) The issuance of certificates for shares of Common Stock upon
exercise of this Warrant shall be made without charge to the Registered
Holder or the Purchaser for any issuance tax in respect thereof or other
cost incurred by the Company in connection with such exercise and the
related issuance of shares of Common Stock. Each share of Common issuable
upon exercise of this Warrant shall, upon payment of the Exercise Price
therefor, be fully paid and nonassessable and free from all liens and
charges with respect to the issuance thereof.
(v) The Company shall not close its books against the transfer
of this Warrant or of any share of Common Stock issued or issuable upon the
exercise of this Warrant in any manner which interferes with the timely
exercise of this Warrant. The Company shall from time to time take all
such action as may be necessary to assure that the par value per share of
the unissued Common Stock acquirable upon exercise of this Warrant is at
all times equal to or less than the Exercise Price then in effect.
(vi) The Company shall assist and cooperate with any Registered
Holder or Purchaser required to make any governmental filings or obtain any
governmental approvals prior to or in connection with any exercise of this
Warrant (including making any filings required to be made by the Company).
(vii) Notwithstanding any other provision hereof, if an exercise
of any portion of this Warrant is to be made in connection with a
registered public offering or the sale of the Company, the exercise of any
portion of this Warrant may, at the election of the holder hereof, be
conditioned upon the consummation of the public offering or sale of the
Company in which case such exercise shall not be deemed to be effective
until the consummation of such transaction.
(viii) The Company shall at all times reserve and keep available
out of its authorized but unissued shares of Common Stock solely for the
purpose of issuance upon the exercise of the Warrants, such number of
shares of Common Stock issuable upon the exercise of all outstanding
Warrants. All shares of Common Stock which are so issuable shall, when
issued, be duly and validly issued, fully paid and nonassessable and free
from all taxes, liens and charges. The Company shall take all such actions
as may be necessary to assure that all such shares of Common Stock may be
so issued without violation of any applicable law or governmental
regulation or any requirements of any domestic securities exchange upon
which shares of Common Stock may be listed (except for official notice of
issuance which shall be immediately delivered by the Company upon each such
issuance). The Company shall from time to time take all such action as may
be necessary to assure that the par value of the unissued Common Stock
acquirable upon exercise of this Warrant is at all times equal to or less
than the Exercise Price. The Company shall not take any action which would
cause the number of authorized but unissued shares of Common Stock to be
less than the number of such shares required to be reserved hereunder for
issuance upon exercise of the Warrant.
C. EXERCISE AGREEMENT. Upon any exercise of this Warrant, the
Exercise Agreement shall be substantially in the form set forth in EXHIBIT
I hereto, except that if the shares of Common Stock are not to be issued in
the name of the Person in whose name this Warrant is registered, the
Exercise Agreement shall also state the name of the Person to whom the
certificates for the shares of Common Stock are to be issued, and if the
number of shares of Common Stock to be issued does not include all the
shares of Common Stock purchasable hereunder, it shall also state the name
of the Person to whom a new Warrant for the unexercised portion of the
rights hereunder is to be delivered. Such Exercise Agreement shall be
dated the actual date of execution thereof.
D. FRACTIONAL SHARES. If a fractional share of Common Stock
would, but for the provisions of paragraph 1A, be issuable upon exercise of
the rights represented by this Warrant, the Company shall, within five
business days after the date of the Exercise Time, deliver to the Purchaser
a check payable to the Purchaser in lieu of such fractional share in an
amount equal to the difference between the Market Price of such fractional
share as of the date of the Exercise Time and the Exercise Price of such
fractional share.
Section 2.ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. In
order to prevent dilution of the rights granted under this Warrant, the
Exercise Price shall be subject to adjustment from time to time as provided
in this Section 2, and the number of shares of Common Stock obtainable upon
exercise of this Warrant shall be subject to adjustment from time to time
as provided in this Section 2.
A. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES UPON
ISSUANCE OF COMMON STOCK. If and whenever on or after the Date of Issuance
of this Warrant, the Company issues or sells, or in accordance with
paragraph 2B is deemed to have issued or sold, any share of Common Stock
for a consideration per share less than the Exercise Price in effect
immediately prior to such time, then immediately upon such issue or sale
the Exercise Price shall be reduced to the lowest net price per share (as
determined pursuant to paragraph 2B(v) below) at which such share of Common
Stock has been issued or sold or is deemed to have been issued or sold.
Upon each such adjustment of the Exercise Price hereunder, the number of
shares of Common acquirable upon exercise of this Warrant shall be adjusted
to the number of shares determined by multiplying the Exercise Price in
effect immediately prior to such adjustment by the number of shares of
Common acquirable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting
from such adjustment. Notwithstanding the foregoing, there shall be no
adjustment to the Exercise Price hereunder with respect to the granting of
stock options to employees or directors of the Company and its Subsidiaries
or the exercise thereof or the granting of stock appreciation rights,
phantom stock rights or other similar rights to employees or directors of
the Company for (or rights relating to) an aggregate of 1,586,702 shares of
Common Stock (976,594 options being currently outstanding) (as such number
of shares is equitably adjusted for subsequent stock splits, stock
combinations, stock dividends and recapitalizations and such number shall
include all stock options outstanding as of the date of the Purchase
Agreement).
B. EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes
of determining the adjusted Exercise Price under paragraph 2A, the
following shall be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any manner
grants or sells any Options and the lowest price per share for which any
one share of Common Stock is issuable upon the exercise of any such Option,
or upon conversion or exchange of any Convertible Security issuable upon
exercise of such Option, is less than the Exercise Price in effect
immediately prior to the time of the granting or sale of such Option, then
such share of Common Stock shall be deemed to have been issued and sold by
the Company at such time for such price per share. For purposes of this
paragraph, the "lowest price per share for which any one share of Common
Stock is issuable" shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect
to any one share of Common Stock upon the granting or sale of the Option,
upon exercise of the Option and upon conversion or exchange of the
Convertible Security. No further adjustment of the Exercise Price shall be
made upon the actual issue of such Common Stock or of such Convertible
Security upon the exercise of such Options or upon the actual issue of such
Common Stock upon conversion or exchange of such Convertible Security.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any
manner issues or sells any Convertible Security and the lowest price per
share for which any one share of Common Stock is issuable upon conversion
or exchange thereof is less than the Exercise Price in effect immediately
prior to the time of such issue or sale, then such share or shares of
Common Stock shall be deemed to have been issued and sold by the Company at
such time for such price per share. For the purposes of this paragraph,
the "lowest price per share for which any one share of Common Stock is
issuable" shall be equal to the sum of the lowest amounts of consideration
(if any) received or receivable by the Company with respect to any one
share of Common Stock upon the issuance of the Convertible Security and
upon the conversion or exchange of such Convertible Security. No further
adjustment of the Exercise Price shall be made upon the actual issue of
such Common Stock upon conversion or exchange of any Convertible Security,
and if any such issue or sale of such Convertible Security is made upon
exercise of any Options for which adjustments of the Exercise Price had
been or are to be made pursuant to other provisions of this Section 2, no
further adjustment of the Exercise Price shall be made by reason of such
issue or sale.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If the purchase
price provided for in any Options, the additional consideration, if any,
payable upon the issue, conversion or exchange of any Convertible
Securities, or the rate at which any Convertible Securities are convertible
into or exchangeable for Common Stock changes at any time, the Exercise
Price in effect at the time of such change shall be adjusted immediately to
the Exercise Price which would have been in effect at such time had such
Options or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or changed conversion
rate, as the case may be, at the time initially granted, issued or sold and
the number of shares of Common Stock issuable hereunder shall be
correspondingly adjusted; provided that if such adjustment would result in
an increase of the Exercise Price then in effect, such adjustment shall not
be effective until 30 days after written notice thereof has been given by
the Company to all holders of the Warrants. For purposes of this paragraph
2B, if the terms of any Option or Convertible Security which was
outstanding as of the date of issuance of this Warrant are changed in the
manner described in the immediately preceding sentence, then such Option or
Convertible Security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed to have been issued as of
the date of such change; provided that no such change shall at any time
cause the Exercise Price hereunder to be increased.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. Upon the expiration of any Option or the termination of any
right to convert or exchange any Convertible Securities without the
exercise of such Option or right, the Exercise Price then in effect shall
be adjusted immediately to the Exercise Price which would have been in
effect at the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
expiration or termination, never been issued; provided that if such
expiration or termination would result in an increase in the Exercise Price
then in effect, such increase shall not be effective until 30 days after
written notice thereof has been given to all holders of the Warrants. For
purposes of this paragraph 2B, the expiration or termination of any Option
or Convertible Security which was outstanding as of the date of issuance of
this Warrant shall not cause the Exercise Price hereunder to be adjusted
unless, and only to the extent that, a change in the terms of such Option
or Convertible Security caused it to be deemed to have been issued after
the date of issuance of this Warrant.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any Common Stock,
Options or Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be
deemed to be the net amount received by the Company therefor. In case any
Common Stock, Options or Convertible Securities are issued or sold for a
consideration other than cash, the amount of the consideration other than
cash received by the Company shall be the fair value of such consideration,
except where such consideration consists of securities, in which case the
amount of consideration received by the Company shall be the Market Price
thereof as of the date of receipt. In case any Common Stock, Options or
Convertible Securities are issued to the owners of the non-surviving entity
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 value of such portion of the net assets and business of the non-
surviving entity as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities shall be determined jointly by
the Company and the Registered Holders of Warrants representing a majority
of the shares of Common Stock obtainable upon exercise of such Warrants.
If such parties are unable to reach agreement within a reasonable period of
time, such fair value shall be determined by an appraiser jointly selected
by the Company and the Registered Holders of Warrants representing a
majority of the shares of Common Stock obtainable upon exercise of such
Warrants. The determination of such appraiser shall be final and binding
on the Company and the Registered Holders of the Warrants, and the fees and
expenses of such appraiser shall be paid by the Company.
(vi) INTEGRATED TRANSACTIONS. In case any Option is issued in
connection with the issue or sale of other securities of the Company,
together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the
Options shall be deemed to have been issued for consideration of $.01.
(vii) TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time does not include shares owned or held by or
for the account of the Company or any Subsidiary, and the disposition of
any shares so owned or held shall be considered an issue or sale of Common
Stock.
(viii) RECORD DATE. If the Company takes a record of the holders
of Common Stock for the purpose of entitling them (A) to receive a dividend
or other distribution payable in Common Stock, Options or in Convertible
Securities or (B) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date shall be deemed to be the
date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
C. SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company
at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding
shares of Common Stock into a greater number of shares, the Exercise Price
in effect immediately prior to such subdivision shall be proportionately
reduced and the number of shares of Common Stock obtainable upon exercise
of this Warrant shall be proportionately increased. If the Company at any
time combines (by reverse stock split or otherwise) one or more classes of
its outstanding shares of Common Stock into a smaller number of shares, the
Exercise Price in effect immediately prior to such combination shall be
proportionately increased and the number of shares of Common Stock
obtainable upon exercise of this Warrant shall be proportionately
decreased.
D. REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's
assets or other transaction, in each case which is effected in such a way
that the holders of Common Stock are entitled to receive (either directly
or upon subsequent liquidation) stock, securities or assets with respect to
or in exchange for Common Stock is referred to herein as "Organic Change."
Prior to the consummation of any Organic Change, the Company shall make
appropriate provision (in form and substance satisfactory to the Registered
Holders of the Warrants representing a majority of the Common Stock
obtainable upon exercise of all Warrants then outstanding) to insure that
each of the Registered Holders of the Warrants shall thereafter have the
right to acquire and receive, in lieu of or addition to (as the case may
be) the shares of Common Stock immediately theretofore acquirable and
receivable upon the exercise of such holder's Warrant, such shares of
stock, securities or assets as may be issued or payable with respect to or
in exchange for the number of shares of Common Stock immediately
theretofore acquirable and receivable upon exercise of such holder's
Warrant had such Organic Change not taken place. In any such case, the
Company shall make appropriate provision (in form and substance
satisfactory to the Registered Holders of the Warrants representing a
majority of the Common Stock obtainable upon exercise of all Warrants then
outstanding) with respect to such holders' rights and interests to insure
that the provisions of this Section 2 and Sections 3 and 4 hereof shall
thereafter be applicable to the Warrants (including, in the case of any
such consolidation, merger or sale in which the successor entity or
purchasing entity is other than the Company, an immediate adjustment of the
Exercise Price to the value for the Common Stock reflected by the terms of
such consolidation, merger or sale, and a corresponding immediate
adjustment in the number of shares of Common Stock acquirable and
receivable upon exercise of the Warrants, if the value so reflected is less
than the Exercise Price in effect immediately prior to such consolidation,
merger or sale). The Company shall not effect any such consolidation,
merger or sale, unless prior to the consummation thereof, the successor
entity (if other than the Company) resulting from consolidation or merger
or the entity purchasing such assets assumes by written instrument (in form
and substance satisfactory to the Registered Holders of Warrants
representing a majority of the Common Stock obtainable upon exercise of all
of the Warrants then outstanding), the obligation to deliver to each such
holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such holder may be entitled to acquire.
E. CERTAIN EVENTS. If any event occurs of the type
contemplated by the provisions of this Section 2 but not expressly provided
for by such provisions (including the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then
the Company's board of directors shall make an appropriate adjustment in
the Exercise Price and the number of shares of Common Stock obtainable upon
exercise of this Warrant so as to protect the rights of the holders of the
Warrants; provided that no such adjustment shall increase the Exercise
Price or decrease the number of shares of Common Stock obtainable as
otherwise determined pursuant to this Section 2.
F. NOTICES.
(i) Immediately upon any adjustment of the Exercise Price, the
Company shall give written notice thereof to the Registered Holder, setting
forth in reasonable detail and certifying the calculation of such
adjustment.
(ii) The Company shall give written notice to the Registered
Holder at least 20 days prior to the date on which the Company closes its
books or takes a record (A) with respect to any dividend or distribution
upon the Common Stock, (B) with respect to any pro rata subscription offer
to holders of Common Stock or (C) for determining rights to vote with
respect to any Organic Change, dissolution or liquidation.
(iii) The Company shall also give written notice to the Registered
Holders at least 20 days prior to the date on which any Organic Change,
dissolution or liquidation shall take place.
Section 3. LIQUIDATING DIVIDENDS. If at any time on or after
the date this Warrant becomes exercisable the Company declares or pays a
dividend upon the Common Stock payable otherwise than in cash out of
earnings or earned surplus (determined in accordance with generally
accepted accounting principles, consistently applied) except for a stock
dividend payable in shares of Common Stock (a "Liquidating Dividend"), then
the Company shall pay to the Registered Holder of this Warrant at the time
of payment thereof the Liquidating Dividend which would have been paid to
such Registered Holder on the Common Stock had this Warrant been fully
exercised immediately prior to the date on which a record is taken for such
Liquidating Dividend, or, if no record is taken, the date as of which the
record holders of Common Stock entitled to such dividends are to be
determined.
Section 4. PURCHASE RIGHTS. If at any time on or after the date
this Warrant becomes exercisable the Company grants, issues or sells any
Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (the "Purchase Rights"), then the Registered Holder of this
Warrant shall be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such holder could have
acquired if such holder had held the number of shares of Common Stock
acquirable upon complete exercise of this Warrant immediately before the
date on which a record is taken for the grant, issuance or sale of such
Purchase Rights, or, if no such record is taken, the date as of which the
record holders of Common Stock are to be determined for the grant, issue or
sale of such Purchase Rights.
Section 5. DEFINITIONS. The following terms have meanings set
forth below:
"COMMON STOCK" means, the Company's Common Stock, par value $.015
and any capital stock of any class of the Company hereafter authorized
which is not limited to a fixed sum or percentage of par or stated value in
respect to the rights of the holders thereof to participate in dividends or
in the distribution of assets upon any liquidation, dissolution or winding
up of the Company; provided that where such term refers to the security
receivable upon exercise of this Warrant and there is a change such that
the securities issuable upon exercise of this Warrant are issued by an
entity other than the Company or there is a change in the type or class of
securities so issuable, the term "Common Stock" shall mean one share of the
security issuable upon conversion of this Warrant if such security is
issuable in shares, or shall mean the smallest unit in which such security
is issuable if such security is not issuable in shares.
"CONVERTIBLE SECURITIES" means any stock or securities (other
than Options) directly or indirectly convertible into or exchangeable for
Common Stock.
"MARKET PRICE" means as to any security the average of the
closing prices of such security's sales on all domestic securities
exchanges on which such security may at the time be listed, or, if there
have been no sales on any such exchange on any day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of
such day, or, if on any day such security is not so listed, the average of
the representative bid and asked prices quoted in the NASDAQ System as of
4:00 P.M., New York time, on such day, or, if on any day such security is
not quoted in the NASDAQ System, the average of the highest bid and lowest
asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of 15 days
consisting of the day as of which "Market Price" is being determined and
the 14 consecutive business days prior to such day; provided that if such
security is listed on any domestic securities exchange the term "business
days" as used in this sentence means business days on which such exchange
is open for trading. If at any time such security is not listed on any
domestic securities exchange or quoted in the NASDAQ System or the domestic
over-the-counter market, the "Market Price" shall be the fair value thereof
determined jointly by the Company and the Registered Holders of Warrants
representing a majority of the Common Stock purchasable upon exercise of
all the Warrants then outstanding; provided that if such parties are unable
to reach agreement within a reasonable period of time, such fair value
shall be determined by an appraiser jointly selected by the Company and the
Registered Holders of Warrants representing a majority of the Non-Voting
Common purchasable upon exercise of all the Warrants then outstanding. The
determination of such appraiser shall be final and binding on the Company
and the Registered Holders of the Warrants, and the fees and expenses of
such appraiser shall be paid by the Company.
"OPTIONAL REPAYMENT" means a repayment of all or any portion of
the Subject Securities pursuant to paragraph 4B of the Amendment or
paragraph 2(a) of the Notes, as applicable.
"OPTIONS" means any rights or options to subscribe for or
purchase Common Stock or Convertible Securities.
"PERSON" means an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization and a government or any department or agency thereof.
"REDEMPTION DATE" and "SCHEDULED REDEMPTION DATE" shall have the
meanings set forth in the terms of the Series A Preferred in the Amendment
and shall also include, respectively, "Repayment Date" and "Scheduled
Repayment Date", as defined in the Note.
"REPAID SECURITIES" means the aggregate amount or number of
Subject Securities repaid by the Company pursuant to any Optional
Repayment.
"SUBJECT SECURITIES" means the Note and the Series A Preferred
issued in respect of the Note.
Other capitalized terms used in this Warrant but not defined
herein shall have the meanings set forth in the Purchase Agreement.
Section 6. NO VOTING RIGHTS; LIMITATIONS OF LIABILITY. This
Warrant shall not entitle the holder hereof to any voting rights or other
rights as a stockholder of the Company. No provision hereof, in the
absence of affirmative action by the Registered Holder to purchase Common
Stock, and no enumeration herein of the rights or privileges of the
Registered Holder shall give rise to any liability of such holder for the
Exercise Price of Common Stock acquirable by exercise hereof or as a
stockholder of the Company.
Section 7. WARRANT TRANSFERABLE. Subject to the transfer
conditions referred to in the legend endorsed hereon, this Warrant and all
rights hereunder are transferable, in whole or in part, without charge to
the Registered Holder, upon surrender of this Warrant with a properly
executed Assignment (in the form of EXHIBIT II hereto) at the principal
office of the Company.
Section 8. WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS.
This Warrant is exchangeable, upon the surrender hereof by the Registered
Holder at the principal office of the Company, for new Warrants of like
tenor representing in the aggregate the purchase rights hereunder, and each
of such new Warrants shall represent such portion of such rights as is
designated by the Registered Holder at the time of such surrender; provided
that, as long as any Subject Securities remain outstanding, this Warrant
shall only be exchangeable in connection with the exchange of the
certificate representing such Subject Securities pursuant to the Company's
Certificate of Incorporation. The date the Company initially issues this
Warrant shall be deemed to be the "Date of Issuance" hereof regardless of
the number of times new certificates representing the unexpired and
unexercised rights formerly represented by this Warrant shall be issued.
All Warrants representing portions of the rights hereunder are referred to
herein as the "Warrants."
Section 9. REPLACEMENT. Upon receipt of evidence reasonably
satisfactory to the Company (an affidavit of the Registered Holder shall be
satisfactory) of the ownership and the loss, theft, destruction or
mutilation of any certificate evidencing this Warrant, and in the case of
any such loss, theft or destruction, upon receipt of indemnity reasonably
satisfactory to the Company (provided that if the holder is a financial
institution or other institutional investor its own agreement shall be
satisfactory), or, in the case of any such mutilation upon surrender of
such certificate, the Company shall (at its expense) execute and deliver in
lieu of such certificate a new certificate of like kind representing the
same rights represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate.
Section 10. NOTICES. Except as otherwise expressly provided
herein, all notices referred to in this Warrant shall be in writing and
shall be given in accordance with paragraph 7L of the Purchase Agreement.
Section 11. AMENDMENT AND WAIVER. Except as otherwise provided
herein, the provisions of the Warrants may be amended and the Company may
take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company has obtained the
written consent of the Registered Holders of Warrants representing a
majority of the shares of Common Stock obtainable upon exercise of the
Warrants; provided that no such action may change the Exercise Price of the
Warrants or the number of shares or class of stock obtainable upon exercise
of each Warrant without the written consent of the Registered Holders of
Warrants representing at least 66% of the shares of Common Stock obtainable
upon exercise of the Warrants.
Section 12. DESCRIPTIVE HEADINGS; GOVERNING LAW. The
descriptive headings of the several Sections and paragraphs of this Warrant
are inserted for convenience only and do not constitute a part of this
Warrant. The corporation laws of the State of Delaware shall govern all
issues concerning the relative rights of the Company and its stockholders.
All other questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be governed by the internal law of the
State of New York, without giving effect to any choice of law or conflict
of law provision or rule (whether of the State of New York or any other
jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.
* * * *
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed and attested by its duly authorized officers under its corporate
seal and to be dated the Date of Issuance hereof.
ACC CORP.
By /s/ Michael R. Daley
Its EVP and CFO
[Corporate Seal]
Attest:
/s/ Francis D.R. Coleman
Secretary
<PAGE>
EXHIBIT I
EXERCISE AGREEMENT
To: Dated:
The undersigned, pursuant to the provisions set forth in the
attached Warrant (Certificate No. SW-____), hereby agrees to subscribe for
the purchase of ______ shares of the Non-Voting Common covered by such
Warrant and makes payment herewith in full therefor at the price per share
provided by such Warrant.
Signature ____________________
Address ______________________
EXHIBIT II
ASSIGNMENT
FOR VALUE RECEIVED, _____________________________ hereby sells,
assigns and transfers all of the rights of the undersigned under the
attached Warrant (Certificate No. SW-_____) with respect to the number of
shares of the Non-Voting Common covered thereby set forth below, unto:
NAMES OF ASSIGNEE ADDRESS NO. OF SHARES
Dated: Signature _______________________
_______________________
Witness _______________________
EXHIBIT 4-8(c)
This Warrant was originally issued on May 22, 1995, and
has not been registered under the Securities Act of
1933, as amended. The transfer of this Warrant is
subject to the conditions specified in the Purchase
Agreement, dated as of May 22, 1995 (as amended and
modified from time to time), between the issuer hereof
(the "Company") and the initial holder hereof, and the
Company reserves the right to refuse the transfer of
such security until such conditions have been fulfilled
with respect to such transfer. Upon written request, a
copy of such conditions shall be furnished by the
Company to the holder hereof without charge.
ACC CORP.
STOCK PURCHASE WARRANT
Date of Issuance: May 22, 1995 Certificate No. SW-3
This Warrant is being issued simultaneously with the issuance of
a Convertible Subordinated Promissory Note issued by the Company in the
principal amount of $1,000,000 (the "Note"), to Chisholm Partners II, L.P.
pursuant to the Note and Warrant Purchase Agreement dated as of May 22,
1995 (the "Purchase Agreement"), between ACC Corp., a Delaware corporation
(the "Company"), and certain investors.
For value received, the Company hereby grants to Chisholm
Partners II, L.P. or its registered assigns (the "Registered Holder") the
right to purchase from the Company after an Optional Repayment of any
Subject Securities a number of shares of the Company's Common Stock equal
to the aggregate number of shares of Common Stock into which the Repaid
Securities were convertible as of the respective Repayment Dates thereof at
a price per share equal to $16.00 (such price as adjusted and readjusted
from time to time in accordance with Section 2 hereof, the "Exercise
Price").
This Warrant is one of several Springing Warrants (collectively
referred to herein as the "Warrants") issued pursuant to the Purchase
Agreement, and certain capitalized terms used herein are defined in Section
5 hereof. The amount and kind of securities obtainable pursuant to the
rights granted hereunder and the purchase price for such securities are
subject to adjustment pursuant to the provisions contained in this Warrant.
This Warrant is subject to the following provisions:
Section 1. EXERCISE OF WARRANT.
A. EXERCISE PERIOD. The Registered Holder may exercise, in
whole or in part (but not as to a fractional share of Common Stock), the
purchase rights represented by this Warrant at any time and from time to
time on and after the Repayment Date of the Repaid Securities to which such
rights relate to and including the Scheduled Repayment Date of the Repaid
Securities to which such purchase rights relate up to and including and
including the earlier of (i) the seventh anniversary of the Closing Date or
(ii) the date which is six years after the first date upon which no Notes
or Series A Preferred remain outstanding (the "Exercise Period"). The
Company shall give the Registered Holder written notice of the expiration
of the Exercise Period at least 30 days but not more than 90 days prior to
the end of the Exercise Period.
B. EXERCISE PROCEDURE.
(i) This Warrant shall be deemed to have been exercised when the
Company has received all of the following items (the "Exercise Time"):
(a) a completed Exercise Agreement, as described in paragraph 1C
below, executed by the Person exercising all or part of the purchase
rights represented by this Warrant (the "Purchaser");
(b) this Warrant;
(c) if this Warrant is not registered in the name of the
Purchaser, an Assignment or Assignments in the form set forth in
EXHIBIT II hereto evidencing the assignment of this Warrant to the
Purchaser, in which case the Registered Holder shall have complied
with the provisions set forth in Section 7 hereof; and
(d) either (1) a check payable to the Company (in the case of
the original Holder of this Warrant only), a certified check payable
to the Company or a wire transfer of immediately available funds to an
account designated by the Company in an amount equal to the product of
the Exercise Price multiplied by the number of shares of Common Stock
being purchased upon such exercise (the "Aggregate Exercise Price"),
(2) the surrender to the Company of debt or equity securities of the
Company having a Market Price equal to the Aggregate Exercise Price of
the Common Stock being purchased upon such exercise (provided that for
purposes of this subparagraph, the Market Price of any note or other
debt security or any preferred stock shall be deemed to be equal to
the aggregate outstanding principal amount or liquidation value
thereof plus all accrued and unpaid interest thereon or accrued or
declared and unpaid dividends thereon) or (3) a written notice to the
Company that the Purchaser is exercising the Warrant (or a portion
thereof) by authorizing the Company to withhold from issuance a number
of shares of Common Stock issuable upon such exercise of the Warrant
which when multiplied by the Market Price of the Common Stock is equal
to the Aggregate Exercise Price (and such withheld shares shall no
longer be issuable under this Warrant).
(ii) Certificates for shares of Common Stock purchased upon
exercise of this Warrant shall be delivered by the Company to the Purchaser
within five business days after the date of the Exercise Time. Unless this
Warrant has expired or all of the purchase rights represented hereby have
been exercised, the Company shall prepare a new Warrant, substantially
identical hereto, representing the rights formerly represented by this
Warrant which have not expired or been exercised and shall, within such
five-day period, deliver such new Warrant to the Person designated for
delivery in the Exercise Agreement.
(iii) The Common Stock issuable upon the exercise of this Warrant
shall be deemed to have been issued to the Purchaser at the Exercise Time,
and the Purchaser shall be deemed for all purposes to have become the
record holder of such Common Stock at the Exercise Time.
(iv) The issuance of certificates for shares of Common Stock upon
exercise of this Warrant shall be made without charge to the Registered
Holder or the Purchaser for any issuance tax in respect thereof or other
cost incurred by the Company in connection with such exercise and the
related issuance of shares of Common Stock. Each share of Common issuable
upon exercise of this Warrant shall, upon payment of the Exercise Price
therefor, be fully paid and nonassessable and free from all liens and
charges with respect to the issuance thereof.
(v) The Company shall not close its books against the transfer
of this Warrant or of any share of Common Stock issued or issuable upon the
exercise of this Warrant in any manner which interferes with the timely
exercise of this Warrant. The Company shall from time to time take all
such action as may be necessary to assure that the par value per share of
the unissued Common Stock acquirable upon exercise of this Warrant is at
all times equal to or less than the Exercise Price then in effect.
(vi) The Company shall assist and cooperate with any Registered
Holder or Purchaser required to make any governmental filings or obtain any
governmental approvals prior to or in connection with any exercise of this
Warrant (including making any filings required to be made by the Company).
(vii) Notwithstanding any other provision hereof, if an exercise
of any portion of this Warrant is to be made in connection with a
registered public offering or the sale of the Company, the exercise of any
portion of this Warrant may, at the election of the holder hereof, be
conditioned upon the consummation of the public offering or sale of the
Company in which case such exercise shall not be deemed to be effective
until the consummation of such transaction.
(viii) The Company shall at all times reserve and keep available
out of its authorized but unissued shares of Common Stock solely for the
purpose of issuance upon the exercise of the Warrants, such number of
shares of Common Stock issuable upon the exercise of all outstanding
Warrants. All shares of Common Stock which are so issuable shall, when
issued, be duly and validly issued, fully paid and nonassessable and free
from all taxes, liens and charges. The Company shall take all such actions
as may be necessary to assure that all such shares of Common Stock may be
so issued without violation of any applicable law or governmental
regulation or any requirements of any domestic securities exchange upon
which shares of Common Stock may be listed (except for official notice of
issuance which shall be immediately delivered by the Company upon each such
issuance). The Company shall from time to time take all such action as may
be necessary to assure that the par value of the unissued Common Stock
acquirable upon exercise of this Warrant is at all times equal to or less
than the Exercise Price. The Company shall not take any action which would
cause the number of authorized but unissued shares of Common Stock to be
less than the number of such shares required to be reserved hereunder for
issuance upon exercise of the Warrant.
C. EXERCISE AGREEMENT. Upon any exercise of this Warrant, the
Exercise Agreement shall be substantially in the form set forth in EXHIBIT
I hereto, except that if the shares of Common Stock are not to be issued in
the name of the Person in whose name this Warrant is registered, the
Exercise Agreement shall also state the name of the Person to whom the
certificates for the shares of Common Stock are to be issued, and if the
number of shares of Common Stock to be issued does not include all the
shares of Common Stock purchasable hereunder, it shall also state the name
of the Person to whom a new Warrant for the unexercised portion of the
rights hereunder is to be delivered. Such Exercise Agreement shall be
dated the actual date of execution thereof.
D. FRACTIONAL SHARES. If a fractional share of Common Stock
would, but for the provisions of paragraph 1A, be issuable upon exercise of
the rights represented by this Warrant, the Company shall, within five
business days after the date of the Exercise Time, deliver to the Purchaser
a check payable to the Purchaser in lieu of such fractional share in an
amount equal to the difference between the Market Price of such fractional
share as of the date of the Exercise Time and the Exercise Price of such
fractional share.
Section 2.ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES. In
order to prevent dilution of the rights granted under this Warrant, the
Exercise Price shall be subject to adjustment from time to time as provided
in this Section 2, and the number of shares of Common Stock obtainable upon
exercise of this Warrant shall be subject to adjustment from time to time
as provided in this Section 2.
A. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF SHARES UPON
ISSUANCE OF COMMON STOCK. If and whenever on or after the Date of Issuance
of this Warrant, the Company issues or sells, or in accordance with
paragraph 2B is deemed to have issued or sold, any share of Common Stock
for a consideration per share less than the Exercise Price in effect
immediately prior to such time, then immediately upon such issue or sale
the Exercise Price shall be reduced to the lowest net price per share (as
determined pursuant to paragraph 2B(v) below) at which such share of Common
Stock has been issued or sold or is deemed to have been issued or sold.
Upon each such adjustment of the Exercise Price hereunder, the number of
shares of Common acquirable upon exercise of this Warrant shall be adjusted
to the number of shares determined by multiplying the Exercise Price in
effect immediately prior to such adjustment by the number of shares of
Common acquirable upon exercise of this Warrant immediately prior to such
adjustment and dividing the product thereof by the Exercise Price resulting
from such adjustment. Notwithstanding the foregoing, there shall be no
adjustment to the Exercise Price hereunder with respect to the granting of
stock options to employees or directors of the Company and its Subsidiaries
or the exercise thereof or the granting of stock appreciation rights,
phantom stock rights or other similar rights to employees or directors of
the Company for (or rights relating to) an aggregate of 1,586,702 shares of
Common Stock (976,594 options being currently outstanding) (as such number
of shares is equitably adjusted for subsequent stock splits, stock
combinations, stock dividends and recapitalizations and such number shall
include all stock options outstanding as of the date of the Purchase
Agreement).
B. EFFECT ON EXERCISE PRICE OF CERTAIN EVENTS. For purposes
of determining the adjusted Exercise Price under paragraph 2A, the
following shall be applicable:
(i) ISSUANCE OF RIGHTS OR OPTIONS. If the Company in any manner
grants or sells any Options and the lowest price per share for which any
one share of Common Stock is issuable upon the exercise of any such Option,
or upon conversion or exchange of any Convertible Security issuable upon
exercise of such Option, is less than the Exercise Price in effect
immediately prior to the time of the granting or sale of such Option, then
such share of Common Stock shall be deemed to have been issued and sold by
the Company at such time for such price per share. For purposes of this
paragraph, the "lowest price per share for which any one share of Common
Stock is issuable" shall be equal to the sum of the lowest amounts of
consideration (if any) received or receivable by the Company with respect
to any one share of Common Stock upon the granting or sale of the Option,
upon exercise of the Option and upon conversion or exchange of the
Convertible Security. No further adjustment of the Exercise Price shall be
made upon the actual issue of such Common Stock or of such Convertible
Security upon the exercise of such Options or upon the actual issue of such
Common Stock upon conversion or exchange of such Convertible Security.
(ii) ISSUANCE OF CONVERTIBLE SECURITIES. If the Company in any
manner issues or sells any Convertible Security and the lowest price per
share for which any one share of Common Stock is issuable upon conversion
or exchange thereof is less than the Exercise Price in effect immediately
prior to the time of such issue or sale, then such share or shares of
Common Stock shall be deemed to have been issued and sold by the Company at
such time for such price per share. For the purposes of this paragraph,
the "lowest price per share for which any one share of Common Stock is
issuable" shall be equal to the sum of the lowest amounts of consideration
(if any) received or receivable by the Company with respect to any one
share of Common Stock upon the issuance of the Convertible Security and
upon the conversion or exchange of such Convertible Security. No further
adjustment of the Exercise Price shall be made upon the actual issue of
such Common Stock upon conversion or exchange of any Convertible Security,
and if any such issue or sale of such Convertible Security is made upon
exercise of any Options for which adjustments of the Exercise Price had
been or are to be made pursuant to other provisions of this Section 2, no
further adjustment of the Exercise Price shall be made by reason of such
issue or sale.
(iii) CHANGE IN OPTION PRICE OR CONVERSION RATE. If the purchase
price provided for in any Options, the additional consideration, if any,
payable upon the issue, conversion or exchange of any Convertible
Securities, or the rate at which any Convertible Securities are convertible
into or exchangeable for Common Stock changes at any time, the Exercise
Price in effect at the time of such change shall be adjusted immediately to
the Exercise Price which would have been in effect at such time had such
Options or Convertible Securities still outstanding provided for such
changed purchase price, additional consideration or changed conversion
rate, as the case may be, at the time initially granted, issued or sold and
the number of shares of Common Stock issuable hereunder shall be
correspondingly adjusted; provided that if such adjustment would result in
an increase of the Exercise Price then in effect, such adjustment shall not
be effective until 30 days after written notice thereof has been given by
the Company to all holders of the Warrants. For purposes of this paragraph
2B, if the terms of any Option or Convertible Security which was
outstanding as of the date of issuance of this Warrant are changed in the
manner described in the immediately preceding sentence, then such Option or
Convertible Security and the Common Stock deemed issuable upon exercise,
conversion or exchange thereof shall be deemed to have been issued as of
the date of such change; provided that no such change shall at any time
cause the Exercise Price hereunder to be increased.
(iv) TREATMENT OF EXPIRED OPTIONS AND UNEXERCISED CONVERTIBLE
SECURITIES. Upon the expiration of any Option or the termination of any
right to convert or exchange any Convertible Securities without the
exercise of such Option or right, the Exercise Price then in effect shall
be adjusted immediately to the Exercise Price which would have been in
effect at the time of such expiration or termination had such Option or
Convertible Securities, to the extent outstanding immediately prior to such
expiration or termination, never been issued; provided that if such
expiration or termination would result in an increase in the Exercise Price
then in effect, such increase shall not be effective until 30 days after
written notice thereof has been given to all holders of the Warrants. For
purposes of this paragraph 2B, the expiration or termination of any Option
or Convertible Security which was outstanding as of the date of issuance of
this Warrant shall not cause the Exercise Price hereunder to be adjusted
unless, and only to the extent that, a change in the terms of such Option
or Convertible Security caused it to be deemed to have been issued after
the date of issuance of this Warrant.
(v) CALCULATION OF CONSIDERATION RECEIVED. If any Common Stock,
Options or Convertible Securities are issued or sold or deemed to have been
issued or sold for cash, the consideration received therefor shall be
deemed to be the net amount received by the Company therefor. In case any
Common Stock, Options or Convertible Securities are issued or sold for a
consideration other than cash, the amount of the consideration other than
cash received by the Company shall be the fair value of such consideration,
except where such consideration consists of securities, in which case the
amount of consideration received by the Company shall be the Market Price
thereof as of the date of receipt. In case any Common Stock, Options or
Convertible Securities are issued to the owners of the non-surviving entity
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 value of such portion of the net assets and business of the non-
surviving entity as is attributable to such Common Stock, Options or
Convertible Securities, as the case may be. The fair value of any
consideration other than cash or securities shall be determined jointly by
the Company and the Registered Holders of Warrants representing a majority
of the shares of Common Stock obtainable upon exercise of such Warrants.
If such parties are unable to reach agreement within a reasonable period of
time, such fair value shall be determined by an appraiser jointly selected
by the Company and the Registered Holders of Warrants representing a
majority of the shares of Common Stock obtainable upon exercise of such
Warrants. The determination of such appraiser shall be final and binding
on the Company and the Registered Holders of the Warrants, and the fees and
expenses of such appraiser shall be paid by the Company.
(vi) INTEGRATED TRANSACTIONS. In case any Option is issued in
connection with the issue or sale of other securities of the Company,
together comprising one integrated transaction in which no specific
consideration is allocated to such Options by the parties thereto, the
Options shall be deemed to have been issued for consideration of $.01.
(vii) TREASURY SHARES. The number of shares of Common Stock
outstanding at any given time does not include shares owned or held by or
for the account of the Company or any Subsidiary, and the disposition of
any shares so owned or held shall be considered an issue or sale of Common
Stock.
(viii) RECORD DATE. If the Company takes a record of the holders
of Common Stock for the purpose of entitling them (A) to receive a dividend
or other distribution payable in Common Stock, Options or in Convertible
Securities or (B) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date shall be deemed to be the
date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of
subscription or purchase, as the case may be.
C. SUBDIVISION OR COMBINATION OF COMMON STOCK. If the Company
at any time subdivides (by any stock split, stock dividend,
recapitalization or otherwise) one or more classes of its outstanding
shares of Common Stock into a greater number of shares, the Exercise Price
in effect immediately prior to such subdivision shall be proportionately
reduced and the number of shares of Common Stock obtainable upon exercise
of this Warrant shall be proportionately increased. If the Company at any
time combines (by reverse stock split or otherwise) one or more classes of
its outstanding shares of Common Stock into a smaller number of shares, the
Exercise Price in effect immediately prior to such combination shall be
proportionately increased and the number of shares of Common Stock
obtainable upon exercise of this Warrant shall be proportionately
decreased.
D. REORGANIZATION, RECLASSIFICATION, CONSOLIDATION, MERGER OR
SALE. Any recapitalization, reorganization, reclassification,
consolidation, merger, sale of all or substantially all of the Company's
assets or other transaction, in each case which is effected in such a way
that the holders of Common Stock are entitled to receive (either directly
or upon subsequent liquidation) stock, securities or assets with respect to
or in exchange for Common Stock is referred to herein as "Organic Change."
Prior to the consummation of any Organic Change, the Company shall make
appropriate provision (in form and substance satisfactory to the Registered
Holders of the Warrants representing a majority of the Common Stock
obtainable upon exercise of all Warrants then outstanding) to insure that
each of the Registered Holders of the Warrants shall thereafter have the
right to acquire and receive, in lieu of or addition to (as the case may
be) the shares of Common Stock immediately theretofore acquirable and
receivable upon the exercise of such holder's Warrant, such shares of
stock, securities or assets as may be issued or payable with respect to or
in exchange for the number of shares of Common Stock immediately
theretofore acquirable and receivable upon exercise of such holder's
Warrant had such Organic Change not taken place. In any such case, the
Company shall make appropriate provision (in form and substance
satisfactory to the Registered Holders of the Warrants representing a
majority of the Common Stock obtainable upon exercise of all Warrants then
outstanding) with respect to such holders' rights and interests to insure
that the provisions of this Section 2 and Sections 3 and 4 hereof shall
thereafter be applicable to the Warrants (including, in the case of any
such consolidation, merger or sale in which the successor entity or
purchasing entity is other than the Company, an immediate adjustment of the
Exercise Price to the value for the Common Stock reflected by the terms of
such consolidation, merger or sale, and a corresponding immediate
adjustment in the number of shares of Common Stock acquirable and
receivable upon exercise of the Warrants, if the value so reflected is less
than the Exercise Price in effect immediately prior to such consolidation,
merger or sale). The Company shall not effect any such consolidation,
merger or sale, unless prior to the consummation thereof, the successor
entity (if other than the Company) resulting from consolidation or merger
or the entity purchasing such assets assumes by written instrument (in form
and substance satisfactory to the Registered Holders of Warrants
representing a majority of the Common Stock obtainable upon exercise of all
of the Warrants then outstanding), the obligation to deliver to each such
holder such shares of stock, securities or assets as, in accordance with
the foregoing provisions, such holder may be entitled to acquire.
E. CERTAIN EVENTS. If any event occurs of the type
contemplated by the provisions of this Section 2 but not expressly provided
for by such provisions (including the granting of stock appreciation
rights, phantom stock rights or other rights with equity features), then
the Company's board of directors shall make an appropriate adjustment in
the Exercise Price and the number of shares of Common Stock obtainable upon
exercise of this Warrant so as to protect the rights of the holders of the
Warrants; provided that no such adjustment shall increase the Exercise
Price or decrease the number of shares of Common Stock obtainable as
otherwise determined pursuant to this Section 2.
F. NOTICES.
(i) Immediately upon any adjustment of the Exercise Price, the
Company shall give written notice thereof to the Registered Holder, setting
forth in reasonable detail and certifying the calculation of such
adjustment.
(ii) The Company shall give written notice to the Registered
Holder at least 20 days prior to the date on which the Company closes its
books or takes a record (A) with respect to any dividend or distribution
upon the Common Stock, (B) with respect to any pro rata subscription offer
to holders of Common Stock or (C) for determining rights to vote with
respect to any Organic Change, dissolution or liquidation.
(iii) The Company shall also give written notice to the Registered
Holders at least 20 days prior to the date on which any Organic Change,
dissolution or liquidation shall take place.
Section 3. LIQUIDATING DIVIDENDS. If at any time on or after
the date this Warrant becomes exercisable the Company declares or pays a
dividend upon the Common Stock payable otherwise than in cash out of
earnings or earned surplus (determined in accordance with generally
accepted accounting principles, consistently applied) except for a stock
dividend payable in shares of Common Stock (a "Liquidating Dividend"), then
the Company shall pay to the Registered Holder of this Warrant at the time
of payment thereof the Liquidating Dividend which would have been paid to
such Registered Holder on the Common Stock had this Warrant been fully
exercised immediately prior to the date on which a record is taken for such
Liquidating Dividend, or, if no record is taken, the date as of which the
record holders of Common Stock entitled to such dividends are to be
determined.
Section 4. PURCHASE RIGHTS. If at any time on or after the date
this Warrant becomes exercisable the Company grants, issues or sells any
Options, Convertible Securities or rights to purchase stock, warrants,
securities or other property pro rata to the record holders of any class of
Common Stock (the "Purchase Rights"), then the Registered Holder of this
Warrant shall be entitled to acquire, upon the terms applicable to such
Purchase Rights, the aggregate Purchase Rights which such holder could have
acquired if such holder had held the number of shares of Common Stock
acquirable upon complete exercise of this Warrant immediately before the
date on which a record is taken for the grant, issuance or sale of such
Purchase Rights, or, if no such record is taken, the date as of which the
record holders of Common Stock are to be determined for the grant, issue or
sale of such Purchase Rights.
Section 5. DEFINITIONS. The following terms have meanings set
forth below:
"COMMON STOCK" means, the Company's Common Stock, par value $.015
and any capital stock of any class of the Company hereafter authorized
which is not limited to a fixed sum or percentage of par or stated value in
respect to the rights of the holders thereof to participate in dividends or
in the distribution of assets upon any liquidation, dissolution or winding
up of the Company; provided that where such term refers to the security
receivable upon exercise of this Warrant and there is a change such that
the securities issuable upon exercise of this Warrant are issued by an
entity other than the Company or there is a change in the type or class of
securities so issuable, the term "Common Stock" shall mean one share of the
security issuable upon conversion of this Warrant if such security is
issuable in shares, or shall mean the smallest unit in which such security
is issuable if such security is not issuable in shares.
"CONVERTIBLE SECURITIES" means any stock or securities (other
than Options) directly or indirectly convertible into or exchangeable for
Common Stock.
"MARKET PRICE" means as to any security the average of the
closing prices of such security's sales on all domestic securities
exchanges on which such security may at the time be listed, or, if there
have been no sales on any such exchange on any day, the average of the
highest bid and lowest asked prices on all such exchanges at the end of
such day, or, if on any day such security is not so listed, the average of
the representative bid and asked prices quoted in the NASDAQ System as of
4:00 P.M., New York time, on such day, or, if on any day such security is
not quoted in the NASDAQ System, the average of the highest bid and lowest
asked prices on such day in the domestic over-the-counter market as
reported by the National Quotation Bureau, Incorporated, or any similar
successor organization, in each such case averaged over a period of 15 days
consisting of the day as of which "Market Price" is being determined and
the 14 consecutive business days prior to such day; provided that if such
security is listed on any domestic securities exchange the term "business
days" as used in this sentence means business days on which such exchange
is open for trading. If at any time such security is not listed on any
domestic securities exchange or quoted in the NASDAQ System or the domestic
over-the-counter market, the "Market Price" shall be the fair value thereof
determined jointly by the Company and the Registered Holders of Warrants
representing a majority of the Common Stock purchasable upon exercise of
all the Warrants then outstanding; provided that if such parties are unable
to reach agreement within a reasonable period of time, such fair value
shall be determined by an appraiser jointly selected by the Company and the
Registered Holders of Warrants representing a majority of the Non-Voting
Common purchasable upon exercise of all the Warrants then outstanding. The
determination of such appraiser shall be final and binding on the Company
and the Registered Holders of the Warrants, and the fees and expenses of
such appraiser shall be paid by the Company.
"OPTIONAL REPAYMENT" means a repayment of all or any portion of
the Subject Securities pursuant to paragraph 4B of the Amendment or
paragraph 2(a) of the Notes, as applicable.
"OPTIONS" means any rights or options to subscribe for or
purchase Common Stock or Convertible Securities.
"PERSON" means an individual, a partnership, a joint venture, a
corporation, a limited liability company, a trust, an unincorporated
organization and a government or any department or agency thereof.
"REDEMPTION DATE" and "SCHEDULED REDEMPTION DATE" shall have the
meanings set forth in the terms of the Series A Preferred in the Amendment
and shall also include, respectively, "Repayment Date" and "Scheduled
Repayment Date", as defined in the Note.
"REPAID SECURITIES" means the aggregate amount or number of
Subject Securities repaid by the Company pursuant to any Optional
Repayment.
"SUBJECT SECURITIES" means the Note and the Series A Preferred
issued in respect of the Note.
Other capitalized terms used in this Warrant but not defined
herein shall have the meanings set forth in the Purchase Agreement.
Section 6. NO VOTING RIGHTS; LIMITATIONS OF LIABILITY. This
Warrant shall not entitle the holder hereof to any voting rights or other
rights as a stockholder of the Company. No provision hereof, in the
absence of affirmative action by the Registered Holder to purchase Common
Stock, and no enumeration herein of the rights or privileges of the
Registered Holder shall give rise to any liability of such holder for the
Exercise Price of Common Stock acquirable by exercise hereof or as a
stockholder of the Company.
Section 7. WARRANT TRANSFERABLE. Subject to the transfer
conditions referred to in the legend endorsed hereon, this Warrant and all
rights hereunder are transferable, in whole or in part, without charge to
the Registered Holder, upon surrender of this Warrant with a properly
executed Assignment (in the form of EXHIBIT II hereto) at the principal
office of the Company.
Section 8. WARRANT EXCHANGEABLE FOR DIFFERENT DENOMINATIONS.
This Warrant is exchangeable, upon the surrender hereof by the Registered
Holder at the principal office of the Company, for new Warrants of like
tenor representing in the aggregate the purchase rights hereunder, and each
of such new Warrants shall represent such portion of such rights as is
designated by the Registered Holder at the time of such surrender; provided
that, as long as any Subject Securities remain outstanding, this Warrant
shall only be exchangeable in connection with the exchange of the
certificate representing such Subject Securities pursuant to the Company's
Certificate of Incorporation. The date the Company initially issues this
Warrant shall be deemed to be the "Date of Issuance" hereof regardless of
the number of times new certificates representing the unexpired and
unexercised rights formerly represented by this Warrant shall be issued.
All Warrants representing portions of the rights hereunder are referred to
herein as the "Warrants."
Section 9. REPLACEMENT. Upon receipt of evidence reasonably
satisfactory to the Company (an affidavit of the Registered Holder shall be
satisfactory) of the ownership and the loss, theft, destruction or
mutilation of any certificate evidencing this Warrant, and in the case of
any such loss, theft or destruction, upon receipt of indemnity reasonably
satisfactory to the Company (provided that if the holder is a financial
institution or other institutional investor its own agreement shall be
satisfactory), or, in the case of any such mutilation upon surrender of
such certificate, the Company shall (at its expense) execute and deliver in
lieu of such certificate a new certificate of like kind representing the
same rights represented by such lost, stolen, destroyed or mutilated
certificate and dated the date of such lost, stolen, destroyed or mutilated
certificate.
Section 10. NOTICES. Except as otherwise expressly provided
herein, all notices referred to in this Warrant shall be in writing and
shall be given in accordance with paragraph 7L of the Purchase Agreement.
Section 11. AMENDMENT AND WAIVER. Except as otherwise provided
herein, the provisions of the Warrants may be amended and the Company may
take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company has obtained the
written consent of the Registered Holders of Warrants representing a
majority of the shares of Common Stock obtainable upon exercise of the
Warrants; provided that no such action may change the Exercise Price of the
Warrants or the number of shares or class of stock obtainable upon exercise
of each Warrant without the written consent of the Registered Holders of
Warrants representing at least 66% of the shares of Common Stock obtainable
upon exercise of the Warrants.
Section 12. DESCRIPTIVE HEADINGS; GOVERNING LAW. The
descriptive headings of the several Sections and paragraphs of this Warrant
are inserted for convenience only and do not constitute a part of this
Warrant. The corporation laws of the State of Delaware shall govern all
issues concerning the relative rights of the Company and its stockholders.
All other questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be governed by the internal law of the
State of New York, without giving effect to any choice of law or conflict
of law provision or rule (whether of the State of New York or any other
jurisdictions) that would cause the application of the laws of any
jurisdictions other than the State of New York.
* * * *
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed and attested by its duly authorized officers under its corporate
seal and to be dated the Date of Issuance hereof.
ACC CORP.
By /s/ Michael R. Daley
Its EVP and CFO
[Corporate Seal]
Attest:
/s/ Francis D.R. Coleman
Secretary
<PAGE>
EXHIBIT I
EXERCISE AGREEMENT
To: Dated:
The undersigned, pursuant to the provisions set forth in the
attached Warrant (Certificate No. SW-____), hereby agrees to subscribe for
the purchase of ______ shares of the Non-Voting Common covered by such
Warrant and makes payment herewith in full therefor at the price per share
provided by such Warrant.
Signature ____________________
Address ______________________
EXHIBIT II
ASSIGNMENT
FOR VALUE RECEIVED, _____________________________ hereby sells,
assigns and transfers all of the rights of the undersigned under the
attached Warrant (Certificate No. SW-_____) with respect to the number of
shares of the Non-Voting Common covered thereby set forth below, unto:
NAMES OF ASSIGNEE ADDRESS NO. OF SHARES
Dated: Signature _______________________
_______________________
Witness _______________________
